THE IMPACT OF DOMESTIC ANTI-NEOLIBERAL CONTENTION ON THE
THE IMPACT OF DOMESTIC ANTI-NEOLIBERAL CONTENTION ON THE
NEGOTIATION OUTCOME OF THE FREE TRADE AREA OF THE AMERICAS
(FTAA)
A Thesis
Presented to the faculty of the Department of Government
California State University, Sacramento
Submitted in partial satisfaction of the requirements for the degree of
MASTER OF ARTS in
International Affairs by
Michaela Bruckmayer
SPRING
2012
THE IMPACT OF DOMESTIC ANTI-NEOLIBERAL CONTENTION ON THE
NEGOTIATION OUTCOME OF THE FREE TRADE AREA OF THE AMERICAS
(FTAA)
A Thesis by
Michaela Bruckmayer
Approved by:
__________________________________, Committee Chair
David R. Andersen, PhD.
__________________________________, Second Reader
Nancy Lapp, PhD.
____________________________
Date ii
Student: Michaela Bruckmayer
I certify that this student has met the requirements for format contained in the University format manual, and that this thesis is suitable for shelving in the Library and credit is to be awarded for the thesis.
__________________________, Graduate Coordinator ___________________
David R. Andersen, PhD Date
Department of International Affairs iii
Abstract of
THE IMPACT OF DOMESTIC ANTI-NEOLIBERAL CONTENTION ON THE
NEGOTIATION OUTCOME OF THE FREE TRADE AREA OF THE AMERICAS
(FTAA) by
Michaela Bruckmayer
At the summit of American nations in 1994, thirty- four countries in the western hemisphere agreed to form the Free Trade Area of the Americas (FTAA), an agreement that would include all democratic nations on the American continent. However, despite promising progress made during the first rounds of negotiations the deadline of January
1, 2005 was missed and no agreement has been reached. This study examines the possibility that negotiators were unable to reach an agreement because the application of free trade and other neoliberal policies in the western hemisphere, while encouraged by international institutions, created dissatisfaction among the general population, especially in Latin American countries. Eventually, this dissatisfaction manifested itself in the form of social movements protesting the implementation of further neoliberal reforms, in some cases eventually threatening the political stability of nations. This thesis asks the question whether the anti-neoliberal movements in Latin America influenced their respective government’s decision to support or abandon the FTAA.
In order to address this question, this study analyzes the cases of Argentina, Chile,
Nicaragua, and Bolivia. Each of these cases will undergo a three-step analysis. First, the iv
countries’ economic performance between 1994 and 2005 will be evaluated through the analysis of economic indicators, which are derived from datasets provided by the World
Bank and the United Nations, as well as news and secondary sources. Second, each case will be studied for episodes of contention and social movements protesting free trade and neoliberal reforms occurring during the FTAA negotiations. The data for this methodological step mostly stems from secondary sources and news articles reporting about the events. The third step of the analysis identifies each country’s position on the
FTAA by reviewing news accounts and press releases that quote country officials or trade representatives expressing their respective government’s intention and position in regards to the status of the FTAA negotiations. The data was obtained through the LexisNexis
News database, the Google News search engine and from secondary sources.
The results of the study indicate that countries experiencing strong social movements were less likely to support the FTAA than countries experiencing weak anti-neoliberal contention. These results point towards a relationship between national social movements and the outcome of international negotiations.
_________________________, Committee Chair
David R. Andersen, PhD.
_______________________
Date v
ACKNOWLEDGEMENTS
I would like to thank Dr. David Andersen for giving me the opportunity to conduct this thesis research. Completing this study has been a challenging, yet very rewarding experience and I am very grateful for Dr. Andersen’s guidance, feedback, and support. I would also like to thank Dr. Nancy Lapp for agreeing to serve as my second reader and for her valuable and much appreciated suggestions. Many thanks go out to my family for their unconditional support throughout my entire educational journey. vi
TABLE OF CONTENTS
Acknowledgements ............................................................................................................ vi
List of Tables ..................................................................................................................... ix
List of Figures ..................................................................................................................... x
Chapter
1. INTRODUCTION .......................................................................................................... 1
Relevance of this Study .................................................................................................. 4
Historic Background ....................................................................................................... 7
2. LITERATURE REVIEW ............................................................................................. 11
Civil Society and International Negotiations ................................................................ 11
Free Trade: A World of Winners and Losers ............................................................... 14
Contentious Politics in Latin America .......................................................................... 21
3. THE ARGUMENT ....................................................................................................... 27
Argument and Hypotheses ............................................................................................ 27
Case Selection ............................................................................................................... 29
Method of Analysis and its Underlying Concepts ........................................................ 31
4. CASE STUDIES ........................................................................................................... 35
Introduction ................................................................................................................... 35
The Case of Argentina .................................................................................................. 36
Argentina’s Economic Performance ......................................................................... 36
Anti-Neoliberal Contention in Argentina ................................................................. 40
Argentina and the FTAA .......................................................................................... 47
The Case of Chile ......................................................................................................... 48
Chile’s Neoliberal Road ............................................................................................ 49
Chile’s Economic Performance ................................................................................ 53
Contentious Politics in Chile .................................................................................... 55
Chile and the FTAA .................................................................................................. 58
The Case of Nicaragua .................................................................................................. 59 vii
Nicaragua’s Path to Democracy ................................................................................ 60
Radical Neoliberalism in Nicaragua ......................................................................... 61
Contentious Politics in Nicaragua ............................................................................. 67
Nicaragua and the FTAA .......................................................................................... 74
The Case of Bolivia ...................................................................................................... 76
Bolivia’s Economy .................................................................................................... 77
Contentious Politics in Bolivia ................................................................................. 81
Bolivia and the FTAA ............................................................................................... 88
5. CONCLUSION ............................................................................................................. 90
Results ........................................................................................................................... 90
Implications for the Literature ...................................................................................... 92
Concluding Remarks ..................................................................................................... 94
Appendix ........................................................................................................................... 95
Bibliography ..................................................................................................................... 99 viii
LIST OF TABLES
Tables Page
ix
LIST OF FIGURES
Figures Page
1. Theoretical Foundation ............................................................................................. 27
x
1
Chapter One
INTRODUCTION
At the summit of American nations in 1994, thirty- four countries in the western hemisphere agreed to undertake the ambitious project of forming a free trade agreement that would include all democratic nations on the American continent. The only American nation excluded from the negotiation was non-democratic Cuba (Rynerson 2007: 183).
The Free Trade Area of the Americas (FTAA) negotiations were formally launched at the
Summit of the Americas meeting in 1998 at Santiago, Chile and were scheduled to be completed by 2005. However, despite promising progress made during the first rounds of negotiations the deadline of January 1, 2005 was missed and no agreement has been reached (Goldstein 2007: 88).
The objective of this study is to identify and evaluate a possible reason for the abandonment of what has been referred to as “the most ambitious free trade initiative in the postwar trading system” (Schott 2005: 1). Since the failure of the negotiations, many countries have negotiated bilateral trade agreements with other nations on the continent, indicating that American nations are still interested in negotiating free trade agreements.
Considering this, the fact that the continent wide free trade zone failed to be realized provides an interesting puzzle.
There are various factors that shape the outcome of international negotiations.
According to Robert D. Putnam, negotiations outcomes are a combination of international pressures and domestic preferences (Putnam 1988: 430). These domestic
2 preferences are influenced by countries’ governmental structure and the influence of civil society and interest groups (Putnam 1988: 434). When it comes to free trade negotiations an important aspect for the domestic constituents are the impacts of the agreements on the population. According to the theory of free trade, countries involved in the agreements should experience economic growth and modernization (Dornbusch 1992: 80; Irwin
2009: 29; Rodrik 1992: 89). At the same time, however, free trade can also increase income inequalities and can have negative impacts on the wealth of individuals. Free trade therefor leads to the creation of economic winners and losers. But since engaging in free trade is supposed to increase a country’s standard of living, the theory of free trade assumes that the gains obtained will “trickle-down” to society as a whole, eventually compensating the losers in the long-run (Farmer 2006: 67, Garrett 2004). However, whether this actually occurs is a major point of contestation, among academia and policy makers alike.
As pointed out by Sidney Tarrow, when people perceive a threat to their livelihood, as is often the case for the losers of free trade, they are likely to mobilize and use methods that will demand the attention of the government (Tarrow 2011: 44). If the
FTAA had been realized, it would have led to the creation of a single market covering approximately 850 million people (Rynerson 2007: 183). Because of the extent of the agreement and the large number of people that could have been subjected to potential negative impacts, people across the continent mobilized and participated in transnational anti-globalization movements, protesting the FTAA. Much of the literature regarding the
role of civil society in the FTAA negotiations has focused on this contentious politics
3 phenomenon.
However, in connection to the FTAA, the literature pays little attention to the domestic social movements that occurred simultaneously to the transnational movements.
Social movements protesting the impacts of neoliberal reforms in their respective countries have characterized the political landscape in Latin America ever since nations first transitioned to free market societies, in some cases eventually bearing a threat to the political stability of the nations (Stahler-Sholk et al. 2007: 5). Since leaders of democratic countries are dependent on their public’s favor, this particular study asks the question whether the domestic anti-neoliberal movements in Latin America influenced their respective government’s decision to support or abandon the FTAA.
Given that the governments participating in the FTAA negotiations believed that free trade would raise society’s standard of living and that the losers would eventually be compensated, this study argues that the government’s decision to support or oppose the formation of the FTAA depended on the strength of the domestic social movements protesting the agreement. Further, this study assumes that nations that were still recording weak economic performance after the initiation of the FTAA negotiations despite their transition towards a neoliberal market economy years earlier are even less likely to support the formation of the FTAA. Accordingly, this study is going to analyze the strength of the economic performance and the strength of contentious politics occurring in four Latin American countries during the time of the FTAA negotiations. The results
4 of this study indicate that countries experiencing strong social movements opposing free trade and the further implementation of neoliberal policies were less likely to support the continuation of the FTAA negotiations.
In order to evaluate the above outlined assessment, this thesis consists of the following chapters. The remainder of the introductory chapter points out the relevance and scope of this study followed by a brief history of continent wide trade relations and the FTAA negotiations. Chapter two provides an overview of the relevant literatures including the role of civil society in international negotiations, the aspects of free trade that gave rise to the movements, and the principles of social movement theory and contentious politics. Chapter three outlines this study’s argument and hypotheses and introduces the methods used in the attempt to answer this study’s research question. The case studies in chapter four provide an analysis of the strength of the economic performance and anti-neoliberal contentious politics in Argentina, Chile, Nicaragua, and
Bolivia during the time period of the FTAA negotiations from 1994 until 2005. In addition, the hypotheses proposed in chapter three are going to be tested by assessing the aforementioned governments’ position on the FTAA. The final chapter summarizes the results of this study and the conclusions reached.
Relevance of this Study
As pointed out by Victor M. Sergeev, “the study of negotiation processes is one of the most complicated fields of political science” (Sergeev 2002: 65) and “one of the most complex human activities” (Sergeev 2002: 64). However, in our increasingly
5 interdependent world nations are often communicating through the means of a negotiation. In many cases the outcome of an international negotiation can have significant impacts on the future of millions of people. As Starkey et al. point out,
“sometimes a negotiation is all that stands between war and peace” (Starkey et al. 2005:
1; Raiffa 2002: 9). Considering the extent of the impacts negotiation outcomes can have, we must continue to explore the dimensions of international negotiations despite some conceptual and methodological difficulties.
In addition, as pointed out by Victor A. Kremenyuk, negotiations have become more complex due to the increasing interdependence between nations’ economies and issue areas. This has encouraged an increase in the number of actors involved in negotiations and to the development of what Kremenyuk refers to as “public diplomacy”
(Kremenyuk 2002: 24). This includes the involvement of: “international organizations, business and industrial units, political parties and movements, and social and religious communities” (Kremenyuk 2002: 24) that now have a stake in international negotiations and are especially impacted by economic agreements and therefore are starting to play a more active role in the negotiations (Kremenyuk 2002: 24). Given the high number of people that would be affected by a continent wide free trade agreement, the case of the
FTAA negotiations provides a great opportunity to study how civil society can influence the outcome of multilateral negotiations. During the FTAA negotiations, many civil society groups opposing the agreement took the initiative to try to influence their governments’ decision to support the formation of the FTAA. This study argues that the
6 reason for the public’s opposition to the FTAA lies within the functionality and the paradox of the neoliberal paradigm, which provides the foundation for free trade. As will be explained in further detail in the following chapters, neoliberal economics and free trade policies promise to raise a country’s standard of living and lead to economic development and modernization (Dornbusch 1992: 80; Rodrik 1992: 89; Irwin 2009: 29).
But in order to implement neoliberal policies, Latin American nations had to undertake the reconstruction of their government and economy, which can negatively impact the livelihood of thousands of people (Dornbusch 1992: 74; Garrett 2004: 84).
Neoliberalism, however, provides for the creation of winners and losers while assuming that the gains earned by engaging in free trade will eventually “trickle-down” to the rest of society and compensate the losers in the long-run (Farmer 2006: 67, Garrett 2004).
Nevertheless, this study challenges the assumption of the neoliberal paradigm by analyzing nations’ economic performance and argues that the losers of free trade mobilized in an attempt to stop the institutionalization of neoliberalism in the region that would have resulted from the creation of the FTAA (Roberts 2008; Carranza 2004: 324).
This study is going to evaluate whether, depending on the strength of the movement, the civil society organizations were able to influence their respective government’s decision to support or abandon the formation of the FTAA. Therefore, the results of this thesis may contribute to the study of the relationship between domestic actors and the international negotiation setting. In addition, analyzing the relationship between countries’ economic performance and the strength of anti-neoliberal contentious politics
can contribute to the debate surrounding free trade, and the emergence, facilitation and
7 effects of social movements and contentious politics.
Historic Background
The vision of a continent wide free trading system is nothing new. While the idea of a continent wide free trade zone did not take form until the launch of the FTAA negotiations in 1994, it has been in the mind of policy makers for almost two hundred years. In 1889, at the First International Conference of the American States, U.S.
Secretary of State James G. Blaine suggested the establishment of a customs union between nations in the western hemisphere (Maryse 2007: 2). However, at that time, the idea of opening economies did not find its way into countries’ trade policies. The United
States for example, instead entered into a period of a protectionist foreign policy. This included the passing of protectionist legislation such as the McKinney Tariff Act of 1890 and the Smoot-Hawley Act of 1930, which substantially increased duties on imports
(Maryse 2007: 4). However, as a reaction to the great depression, the United States started to look for ways of increasing exports abroad, as well as strengthening relations with key allies (Maryse 2007: 4). Accordingly, the U.S. Congress passed the Reciprocal
Trade Agreement Act in 1934, increasing the executive office’s trade negotiation power in the hope to ease the facilitation of trade agreements (Ehrlich 2008: 428). By the end of
World War II, the United States was steadily shifting towards becoming the world’s most powerful nation, and following the example set by the precedent hegemonic power, Great
8
Britain, the United States started to move toward a more liberal foreign trade policy
(Feinberg 2003: 1020).
While approaches varied from nation to nation, Latin American countries applied protectionist policies as their primary trading model since the 1930s (Dornbusch 1992:
70). This faith in this economic policy was enhanced by the ideas of the Argentine economist Raúl Prebisch, who advocated for an import substitution model through the doctrine from the United Nations Economic Commission for Latin America (ECLAC)
(Dornbusch 1992: 71). The model was based on the idea that domestic industries should be developed by protecting them from international competition through high tariffs or quotas (Dornbusch 1992: 72). The model strongly contrasted with the general economic liberalization trend set forth by the international community and by industrialized nations.
However, during the 1950s and 1960s the predecessor of the World Trade Organization
(WTO), the General Agreement on Tariffs and Trade (GATT), and the newly developed
UN Conference on Trade and Development (UNCTAD) still provided room for developing countries to maintain their protectionist policies (Dornbusch 1992: 72).
By the 1980s, the import-substitution model resulted in radical macro-economic instability and in the sovereign debt crisis (Grilli 2005: 18). Latin American nations were faced with pressure from the world’s leading economies and international institutions to place greater emphasis on economic openness, reduced government intervention in the economy, market incentives, and enhanced competition (Grilli 2005: 18). Eventually, nations in Latin America started to pursue liberal economic policies in order to receive
9 debt assistance from international financial institutions (Grilli 2005: 18). Accordingly, by the beginning of the 1990s, most Latin American nations had transitioned to a neoliberal market economy.
Eventually, the paradigm’s status and its advocacy by the international community caused the spread of free trade agreements across the globe, including the western hemisphere. With the implementation of North American Free Trade Agreement
(NAFTA) in 1994, Mexico gained unrestricted access to the largest market in the world
(Feinberg 2003: 1021). Wanting a piece of the pie, nations in the hemisphere approached the idea of forming a hemisphere wide trade agreement at the Summit of the Americas in
1994 (Feinberg 2003: 1021).
Accordingly, in December 1994, at the Summit of the Americas, the United States agreed with thirty three Latin American nations to form a Free Trade Area of the
Americas (FTAA) by 2005 (Feinberg 2003: 1021). The decision to initiate FTAA negotiations corresponded with the demands of the international system and seemed a profitable option to Latin American nations (Feinberg 2003: 1025). The FTAA was supposed to eliminate any barriers to trade and investment between the thirty-four democratic nations. In addition, according to Paul Rynerson, the objectives of the FTAA included: strengthening democracy in the region, promoting prosperity through free trade, eliminating poverty and discrimination, and promoting environmental standards
(Rynerson 2007: 184). The nations agreed to achieve substantial progress towards building the FTAA by 2000 and to complete negotiations by the year of 2005 (Martinez
et al. 2003: 4). When the negotiations were first launched in 1994, enthusiasm for the
10 project was widespread (Hornbeck 2001: 183). The nations’ confidence in the theory of free trade was so strong that at first the thirty-four countries committed to draft an agreement that was to be adapted by all countries, on all terms (Hornbeck 2001: 183).
Over the next few years, negotiations were conducted through eight ministerial meetings and four American Summit meetings at different locations throughout the western hemisphere (Hornbeck 2005: 2). But by the FTAA meeting in November of 2003 in
Miami, negotiators abandoned the idea that all countries had to accept and implement all negotiated conditions of the agreement at once (Goldfarb 2004: 3). Instead, the negotiators agreed on a two-tier version of the agreement, which became known as the
FTAA-lite. Based on the FTAA-lite, countries were to agree to a minimum set of conditions and could implement further aspects of the FTAA at their own discretion
(Goldfarb 2004: 3; Hornbeck 2005: 5). But the negotiators never finalized the minimum set of conditions or made plans at what rates the countries would adapt and implement the remaining terms of the agreement. Eventually, the deadline of January 1, 2005 was missed and no agreement had been reached. It is the objective of this thesis to evaluate whether the contentious politics in Latin America opposing the formation of the FTAA were able to influence their respective government’s position on the FTAA and therefore indirectly prevented the realization of the FTAA agreement.
11
Chapter Two
LITERATURE REVIEW
Civil Society and International Negotiations
International negotiations and diplomacy are always characterized by an intermingling of domestic and international affairs. A prominent approach for accounting for this relationship between nation’s domestic conditions and international policy outcomes has been created by game-theorists (Starkey et al. 2005: 5). A significant contribution has been made by Robert D. Putnam when he published his article
“Diplomacy and Domestic Politics: the Logic of Two-level Games” in 1988. In this article, Putnam introduces a framework that can explain the mechanisms of the interaction between diplomacy and domestic politics (Putnam 1988: 430). By analyzing different international negotiations, including the Bonn summit conference of 1978,
Putnam illustrates that the outcomes of negotiations are a combination of international pressures and domestic preferences (Putnam 1988: 430). According to Putnam, negotiators are responsible for achieving what is in the best interest of their respective nations. These interests are shaped by domestic factors, such as the structure of the state, and the influence of civil society and interest groups. In addition, the national ratification process of international agreements influences the negotiator’s bargaining power (Putnam
1988: 434). Based on Putnam’s theory, international agreements are reached through the intermingling of negotiators’ preferences and the pressures on the international level as to
what can get ratified at home, as well as in the other country. Putnam illustrates this
12 intermingling as a two-level game (Putnam 1988: 434).
Putnam’s two-level game theory provides a framework for how civil society can influence international negotiations by putting pressure on their respective governments.
Negotiations at the international level are usually prone to high visibility by the respected domestic and international realm, which encourages the participation of non-state actors
(Starkey et al. 2005: 3). This aspect should be viewed in a positive light because participation of all impacted groups increases the chance of reaching a democratic agreement. Therefore, as pointed out by Paul Rynerson, the FTAA negotiations encouraged feedback in all possible forms, including from labor unions, the private sector, and non-governmental organizations (NGOs) (Rynerson 2007: 185). Negotiators hoped that universal participation would help ensure the public’s acceptance of the FTAA
(Rynerson 2007: 185). However, others have exposed the negotiators’ attempts to hear the public’s side as a mere façade that was supposed to prevent further public criticism of free trade. As stated by Stahler-Sholk et al, the FTAA’s “civil society participation committee” (ftaa-alca.org) can be compared to “Powerpoint-ready workshops” created by financial institutions and “so-called development agencies” to instruct the leaders of civil-society groups in the benefits of free trade agreements (Stahler-Sholk et. al 2007:
12). This marginalization of the public in the negotiation of an agreement that may negatively impact the lives of thousands of people could have encouraged the emergence of contentious politics opposing the formation of a continent wide free trade zone.
13
In addition, the structure of the FTAA negotiations encouraged further marginalization of the population. Traditionally, international negotiations are conducted by sovereign states, often through their political leaders or a designated diplomat (Starkey et al. 2005). However, international negotiations have shifted away from the “traditional” actors to include a wider variety of negotiators. In recent years, it has become more and more common for governments to delegate negotiation authority to known experts on the respective negotiation issue, such as economists or trade specialists instead of government officials (Starkey et al. 2005: 60). This can have important implications for the contents and outcome of negotiations. Government officials and head of states are more dependent on reelection, and therefore are more inclined to listen to the needs of the public. Issue experts, however, are more likely to overlook the human implications an economic decision can have (Starkey et al. 2005: 60). The content of the FTAA negotiations was conducted through nine different working groups (Hornbeck 2005: 2;
Rynerson 2007). Therefore, the likelihood that the continent wide free trade agreement could threaten the livelihood of individuals was further increased by the structure of the
FTAA negotiations, facilitating the rise of social movements.
Since leaders of democratic nations are dependent on their public’s favor, this study argues that social movements can indirectly influence the outcome of an international negotiation, even if not present at the negotiation table itself. As outlined by
Putnam, negotiation outcomes and foreign policies are a combination of international pressures as well as domestic conditions, including the pressures exercised by civil
14 society groups. In order to assess what factors influence the character of a social movement, this thesis is going to rely on the concepts established in the social movement and contentious politics literature. Before outlining these principles, the following section is going to provide an overview of the debate surrounding free trade and the issues that caused the social movements to emerge as an actor in the international negotiations. As chapter three is going to illustrate in further detail, all three literatures are relevant in terms of understanding the relationship between anti-neoliberal contentious politics and the outcome of the FTAA negotiations.
Free Trade: A World of Winners and Losers
As previously outlined in chapter one, after the failure of the import substitution model, Latin America adopted neoliberalism as its primary economic model, which according to the view of international institutions and the industrialized world was the favored way to achieve economic growth and sustainable development (Rodrik 1992:
89). In addition, according to Rudiger Dornbusch, trade liberalization facilitates the transfer of resources and know-how, and diversifies goods available to consumers, consequently empowering the workforce and increasing productivity (Dornbusch 1992:
74). This eventually leads to economic growth and modernization, which are important objectives for developing countries (Dornbusch 1992: 80). Accordingly, the theory of free trade promises economic gains to every country involved in trade and an increase in the population’s standard of living (Irwin 2009: 29).
15
These assumptions were apparently confirmed by the success of the East Asian
Newly Developed Countries, who are often identified as the role models of neoliberal development strategies. As pointed out by Anne Krueger in her book, Trade Policies and
Developing Nations, the so-called “Asian Tigers” were able to advance their economies by developing their export sector, focusing on an “outer-oriented trade strategy” (Krueger
1995: 16). An important aspect of this strategy was the deregulation of the labor market, for example through the elimination of minimum wages, which eventually led to an increase in industrial employment (Krueger 1995: 20). Krueger emphasizes that the
“outer-oriented” neoliberal trade strategy employed in East Asia is a more viable development strategy than the import substitution model often employed in Latin
America during the 1980s (Krueger 1995: 36). Inspired by the successes of the East
Asian economies, Latin American countries followed the lead of the Asian tigers and adopted the neoliberal paradigm as their primarily economic model. While her analysis is thorough, Krueger’s biggest shortcoming is that she does not sufficiently prove that the
East Asian nations’ strategy was indeed neoliberal. As pointed out by Ha-Joon Chang in his book Bad Samaritans. The Myth of Free Trade and the Secret History of Capitalism , the opening of the Asian economies required a strong role of the state. According to
Chang, the East Asian countries were only able to reach the next level of development due to targeted government intervention and regulation (Chang 2008). This strongly contradicts the neoliberal paradigm, as well as the standards of the global multilateral trading system, which both call for the state’s role to be very limited and insists on
minimal government spending, regulation, taxation, and minimal interference in the
16 economy (Goldstein 2007: 30).
Krueger and Chang provide only two, although very influential, examples of how heavily contested neoliberalism as a development strategy is among academia and policy makers alike. A major point of contestation is that the neoliberal paradigm in itself provides for the creation of economic winners and loser. As the example of the deregulation of the labor market and the consequent elimination of minimum wage in the
East Asian countries showed, radical deregulation and minimal government interference are the foundation of neoliberalism (Goldstein 2007: 29). As explained by Dornbusch, in order to facilitate the transition to a free market society, nations need to adjust their economy and their production system so that they are able to compete in the international trading regime (Dornbusch 1992: 74). These domestic policy changes can have various impacts on the population. For example, as explained by Geoffrey Garret, one of these impacts can be an increase in income inequality and a consequent reduction of the middle class (Garrett 2004: 84). In his article, “Globalization’s Missing Middle” Garrett emphasizes that while globalization benefits many, it has special implications for middle income countries. According to Garrett, middle income countries have seen the least amount of gains from the neoliberal economic order, and often experienced the highest amounts of losses (Garrett 2004: 86). The author explains this phenomenon by stating that in order to compete in a liberalized international trading system, nations have to be able to offer something of value to other nations, or as Garret expresses it, find a niche
17 within that system (Garrett 2004: 85). However, middle income countries are faced with the challenge that they can neither provide the high skilled know-how traded by industrialized nations, nor the low-skilled labor offered by poor nations (Garrett 2004:
88). Because middle income countries do not have the necessary capabilities and resources to compete with the industrialized nations, they are left with the only option of
“dumbing-down” their economies and compete with the low income nations (Garrett
2004). Accordingly, the free market concept, while promising to raise the standard of living for society as a whole, creates income inequalities and has negative effects on the wealth of individuals (Farmer 2006: 67).
Since most of Latin America can be classified as middle-income countries,
Garrett’s argument bears important implications for the countries that participated in the
FTAA negotiations. However, the theory of free trade does not account for the possibility that parties involved in free trade agreements have various degrees of capabilities.
Instead, the neoliberal paradigm assumes that all individuals exist under the same economic conditions and capabilities, have equal resources and have “perfect” information available to make rational decisions (Goldstein 2007: 30). Since this does not correspond with the real world, critics have voiced the concern that the concept of free trade is a rather oversimplified model that shows no connection to the well-being of a population (Goldstein 2007: 30). Yet, international institutions and the industrialized world insisted that adopting the neoliberalism as their primary economic model is the best option for Latin American nations.
18
A possible explanation for this paradox could be the fact that even though the neoliberal paradigm does not account for various degrees of capabilities and development of members of a free trade agreement, the theory does provide for the creation of economic winners and losers. Neoliberals accept the fact that the talented can rise to the top, and that therefore as a consequence, always has to be a “bottom class” (Farmer 2006:
67). The greatest misconception about this argument is that this bottom class does not consist of common outsiders of society, such as criminals, who according to Adam
Smith, the founding father of free trade theory, deserve to be where they are at. Rather, this “bottom class” consists of people who lack the necessary resources to compete within the free trade system, either because of location, lack of education, lack of capital, or lack of technology (Farmer 2006: 67). However, supporters of neoliberalism further assume that the benefits obtained through free trade should eventually “trickle-down” to everybody in the nation and compensate losers in the long-run.
Testing this argument, David E. Hojman assesses Chile’s situation after its transition to neoliberal market policies and democracy. Hojman’s article, “Poverty and
Inequality in Chile: Are Democratic Politics and Neoliberal Economics Good for You?” investigates how the shift to democracy and the adoption of neoliberal policies in Chile have impacted the nation’s distribution of income and the alleviation of poverty (Hojman
1996: 73). Often credited as the economic role model of South America, recording some of the best social and economic indicators of the region, Hojman states that Chile is still characterized by a large income inequality, and not showing any significant
19 improvements since the transition to neoliberalism (Hojman 1996: 76). Hojman believes that causes can be found in two reasons (Hojman 1996: 73). According to Hojman, after the transition to neoliberalism the Chilean economy has become less labor intensive, requiring a higher-skilled labor force that the low education system in Chile was unable to provide. The second cause of the persistent income inequality can be found in the appreciation of the Chilean currency (Hojman 1996: 80). By reviewing the exchange rates with Chile’s main trading partners between 1987 and 1994, Hojman finds that the appreciation of the Chilean peso could have either led to an increase of poverty by damaging exports and jobs, but at the same time it helped alleviating poverty by reducing domestic prices (Hojman 1996: 81). Hojman concludes that while poverty fell after the transition to democracy and neoliberal market policies, income inequality visibly increased, reducing the size of the middle class. Hojman attributes this to the fact that while Chile’s social spending packages comprised about two-thirds of total expenditures; his regression analysis shows that the bottom quintile of the population only received about ten percent of the expenses. Hojman therefore argues that through well-targeted social spending, Chile could eventually improve poverty rates and decrease the large income inequality (Hojman 1996: 88). Although Hojman does not explicitly state it, his argument could be interpreted in a way that suggests that government intervention is needed in order for the gains promised by free trade to “trickle-down” to the ones at the bottom of society. However, since the theory itself preaches that the role of the government needs to be reduced to only facilitating smooth economic operations and that
the market will provide the “trickle-down” effect, one could argue that neoliberalism
20 does not bring the promised gains and that a continental free trade zone could increase income inequality and have a negative effect on the development of the region, especially in the case of nations which level of development does not equip them to effectively respond to the changes free trade may bring. This was made evident by Hojman’s analysis of Chile’s change in the demand in labor and the relationship to the educational system that was not sufficiently developed to respond.
When countries first agreed to initiate the FTAA negotiations in 1994, their faith in the neoliberal paradigm was strong and enthusiasm for the FTAA was widespread.
However, as the case studies in this thesis will show, after years of following the neoliberal paradigm, the gains did not always “trickle-down” to the losers of free trade.
While the segment of society that has the necessary resources and capabilities to compete in a free trade system may still support the idea of the FTAA, society in Latin America mobilized and demanded that public officials pay attention to their concerns (Carranza
2004; Roberts 2008). It is the objective of this study to evaluate whether these domestic social movements had an impact on governments’ decisions to support or oppose the formation of the agreement. In order to successfully evaluate the impact of the social movements on the outcome of the FTAA negotiations, one must consider the literature of social movements and contentious politics. Therefore, the following section is going to outline basic concepts of social movement theory and what factors contribute to the emergence, facilitation, and impacts of social mobilization in Latin America.
Contentious Politics in Latin America
In the book, Power in Movement: Social Movement and Contentious Politics,
Sidney Tarrow defines contentious politics as “collective actors united to fight elites, authorities and opponents” (Tarrow 2011: 4). According to Tarrow, collective action
21 becomes contentious when actors seek to influence institutions and introduce new policy ideas or claims through methods that challenge authority (Tarrow 2011: 7). Once these challenges of authority become more frequent and start to incorporate a sense of solidarity and common purpose among its members, it becomes a social movement
(Tarrow 2011: 9).
The method used for challenging authority is referred to as a “repertoire of contention,” which Tarrow defines as “the ways people act together in pursuit of shared interest” (Tarrow 2011: 39). Tarrow observes that a population tends to stick to a specific method of contention, be it sit-ins or road barricades, throughout generations. For example, people in Argentina have been relying on roadblocks for their repertoire of contention for several decades (Silva 2009: 74). A repertoire of contention that has been used before throughout a country’s history is well known to everyone and therefore, the opposed group will immediately recognize the movement’s action as a protest (Tarrow
2011: 39). However, a repertoire may change when a country experiences changes in its governmental or economic structure (Tarrow 2011: 39).
There are three popular modern repertoires used in contentious politics: disruption, violence, and a combination of these two (Tarrow 2011: 99). According to
22
Tarrow, “disruption is one of the strongest weapons of social movements” (Tarrow 2011:
103). But in order for disruption to sustain, it needs deeply dedicated participants that are willing to commit for a long period of time, which often proves to be difficult (Tarrow
2011: 104). In addition, the nature of disruptive action usually compels the reaction of the authorities, challenging the necessary long-term commitment of participants and eventually causing the movement to fail without it having achieved the desired results
(Tarrow 2011: 104). Authorities can react to the emergence of contentious politics by repression, facilitation, or a combination of these two. In general, the opponents’ reaction often depends on what type of contentious politics is allowed or considered illegal by the respective government (Tarrow 2011: 110).
On the other hand, if a disruptive movement manages to survive for too long, it runs into the risk of becoming institutionalized. A movement becomes institutionalized when the disruptive activity continues for so long that authorities and opponents eventually learn to work around the disruption, diminishing the movement’s effectiveness
(Tarrow 2011: 104). Contentious politics can also be violent. While this is a very risky and damaging form of contention, its advantage is that it usually receives the most international attention, which might increase its effectiveness (Tarrow 2011: 105).
There are a variety of factors that can contribute to the emergence of a social movement. According to Tarrow, contentious politics can be triggered when there are changes in the governmental structure or the national system that alters the opportunities for the public to interact with authority and events occur that compel actors to make
23 demands for people or groups of people that do not have proper resources to participate in the political realm (Tarrow 2011: 6). Accordingly, a country’s political opportunity structure, which “refers to features of regimes or institutions that facilitate or inhibit a political actor’s collective action and to changes in those features” (Tarrow, Tilly 2007:
49) can have important implication for the character of a social movement. Especially governmental capacity and the degree of democracy can have a significant impact on contentious politics (Tarrow, Tilly 2007: 55). Tarrow and Tilly define governmental capacity as “the extent to which governmental action affects the character and distribution of population, activity and resources within the governments’ territory”
(Tarrow, Tilly 2007: 55). Whether a country is democratic or not influences institutions which may again direct which movements may emerge by encouraging the existence of some groups while prohibiting the formation of others (Tarrow, Tilly 2007: 60). Tarrow points out, that democratic regimes have a greater tendency to recognize civil society’s right to express their contention and usually provide some means or channels for contentious politics to exist. Undemocratic or authoritarian regimes, however, might prohibit any type of public expression and may respond with persecution and violent repression of any mobilization, making even wide-spread contention difficult to sustain
(Tarrow, Tilly 2007: 113). Given the relevance the literature attributes to the relationship between a country’s regime and the character of contentious politics in said country, this study is going to take the political opportunity structure of the cases analyzed into consideration.
24
In addition, contentious politics commonly emerge when people feel deprived of their most basic rights, such as access to food, land, or water (Tarrow 2011: 44). The availability of these factors usually strongly depends on a country’s economic performance. The success and failures of a country’s economic policy have therefore important implications for contentious politics. In addition, civil society has a tendency to emerge as a political actor if people are unable to sustain a living and see a decrease in their access to food, housing, and sanitation, but the government fails to take action or is perceived to not adequately respond to a crisis (Starkey et al. 2005: 68).
However, the public does not necessarily mobilize solely because it is discontented with public policy. An important factor for mobilization is the public’s perception of policies being unfair (Tarrow 2011: 25). According to Tarrow, the idea of someone unfairly claiming land that actually belongs to someone else, or keeping a pantry full of bread while everybody else is starving usually greatly contributes to the mobilization and the severance of the episodes of contention. This idea of a “moral economy” was developed by E.P. Thompson (1971) and adds an interesting aspect to anti-neoliberal contention, especially in the case of Latin America, where free trade is known to create winners and losers, exacerbating the region’s already large income inequality.
But in the case of anti-neoliberal contention in Latin America, Kenneth M.
Roberts asserts that the reduction of the state and the accompanying elimination of channels of political participation for the economic less powerful, as well as the structural
25 manifestation of opportunities for the market-participants was one of the root causes for the anti-neoliberal uprisings in the region (Roberts 2008: 330). In a neoliberal market society, political participation is not defined in terms of citizenship, but rather in terms of market participation (Stahler-Sholk et al. 2007: 8). This ultimately leads to the economic and political marginalization of the losers of free trade. Ensuring rights and equal participation for all, and not just the economic powerful, is a large aspect of the social movements protesting neoliberal reforms. Eduardo Silva summarizes the motives for anti-neoliberal mobilization in Latin America as:
“socioeconomic grievances against free-market economic reforms; ethnic and cultural rights crystallizing into demands for plurinational societies and some degree of ethnic autonomy; and political claims for greater participation in democratic decision making and less corruption in politics.” (Silva 2009: 16).
However, social contention and mass mobilization has always been a part of political life in Latin America. What differs about Latin America’s anti-neoliberal mobilization as opposed to previous uprisings in the region is that movements protesting neoliberal policies are not necessarily interested in seizing power (Stahler-Sholk et al.
2007: 5). Instead, the most desirable outcomes for these “new” social movements are direct impacts on public policies (Tarrow, Tilly 2007: 86).
Another noteworthy characteristic of the new social movements during the FTAA regards the movements’ participants and actors of contentious politics. Whereas most recorded uprisings are driven by members of lower social standing, protesters during the
FTAA negotiations belonged to a variety of different social groups (Stahler-Sholk et al.
2007: 6). Participants in Latin American movements included the poorest segments of
26 society, the unemployed, self-employed and the traditional movement organizer such as labor unionists. In addition, people from the middle-class, teachers, professors, accountants, etc. joined forces with the laborers and the poor to voice their opposition to neoliberalism and free trade (Silva 2009: 77; Stahler- Sholk et al. 2007: 6).
In regards to the demands of the movement, Silva believes that the social movements did not contest capitalism itself, but specifically the neoliberal version of capitalism (Silva 2009: 3). Kenneth M. Roberts, however, points out that the source of the anti-neoliberal mobilization does not necessarily confirm the failure of the neoliberal paradigm. Rather, Roberts proposes that the imposed neoliberal market reforms failed to provide necessary social services and programs (Roberts 2008: 330). But had the neoliberal model actually led to the desired economic results, civil society would not have felt the need to mobilize and demonstrate their dissatisfaction with their current living situation. As the evidence presented in thesis is going to demonstrate, the introduction of the neoliberal market economy and the consequent reconstruction efforts had severe impacts on several sectors of the populations. However, as the cases presented in this study are going to show, the promised economic gains were relative and did not necessarily trickle-down. Accordingly, civil society started to demand the attention of their leaders and consequently started to become a relevant actor in the political realm.
While not directly present at the negotiation table, this study is going to assess whether domestic social movements were able to influence the outcome of an international free trade negotiation.
27
Chapter Three
THE ARGUMENT
Argument and Hypotheses
At the First Summit of the Americas in Miami, Florida in 1994, thirty-four
“Heads of State and Government” in the western hemisphere signed the Declaration of
Principles. In this declaration, the nations announced that,
“Free trade and increased economic integration are key factors for raising standards of living, improving the working conditions of people in the Americas and better protecting the environment. We, therefore, resolve to begin immediately to construct the "Free
Trade Area of the Americas" (FTAA), […].” (Summit-americas.org/miamiplan 1994).
As this quote shows, countries that liberalize their economies should experience economic growth and modernization, as promised by the theory of free trade. The theory further holds that while free trade only initially benefits the top segment of society, the gains obtained would eventually trickle-down to
Free Trade society as a whole. While free trade leads to the creation of economic winners and losers, the market would compensate the losers in the long-run. In the
Social
Movements case that this does not hold true, the social movements and contentious politics literature argues that people
International
Negotiations who feel deprived of their most basic rights and are unable to sustain a living are likely to mobilize against
Figure 1 Theoretical Foundation authorities. Since the public’s wellbeing is interlinked with a country’s economic conditions, this study assumes that the likelihood of the
28 public’s mobilization against the FTAA connects to a country’s economic performance.
Accordingly, in order to test whether the gains actually trickled-down to the losers of free trade, this thesis is first going to evaluate the economic performance of Latin American nations.
However, while contentious politics may be more likely to arise in nations with weak economic performance, this study assumes that the failure of the neoliberal paradigm alone was not sufficient to cause the head of states to abandon the FTAA negotiations. After all, the theory of free trade does not only provide for the creation of economic losers, but also of economic winners. What is questioned here is the assumption that the gains will eventually trickle-down, not that neoliberalism does not lead to any gains at all. Accordingly, since the sector of society that is able to compete within the free market system had an incentive to continue the negotiations, this argues that the government’s position on the FTAA related to the strength of domestic social movements and contentious politics. Therefore, after reviewing the economic performance of Latin American nations, the countries will be reviewed for the occurrence and characteristics of episodes of contention. After that, this study is going to assess country’s position on the FTAA.
Based on the above outlined assumptions, the following four hypotheses were drafted:
1.
Countries recording strong economic performance and weak social movements are most likely to support the FTAA.
2.
Countries recording strong economic performance and strong social movements are less likely to support the FTAA.
29
3.
Countries recording weak economic performance and strong social movements are least likely to support the FTAA.
4.
Countries recording weak economic performance and weak social movements are more likely to support the FTAA.
Case Selection
In order to test the above outlined hypotheses, the case study approach was chosen as method of analysis. Given that thirty-four countries participated in the FTAA negotiations, there are technically thirty-four possible case studies. But considering that this study’s general argument addresses contentious politics protesting neoliberal policies in Latin America, the United States, Canada and the small Caribbean nations can be excluded as possible case studies. The remaining options range from Brazil, one of the largest countries in the world, to the much smaller economies in Central America. Due to time and space constraints, it is not possible to analyze all Latin American nations in this study. To ease the application of this study’s methods and results to other cases, four medium size Latin American economies were selected to represent the Latin American nations engaged in the FTAA negotiations. In order to cover all possible scenarios, this study is going to select one country for each of the four categories described in figure 2.
30
Economic
Performance strong economic performance weak social movements weak economic performance weak social movements strong economic performance strong social movements weak economic performance strong social movements
Social Movements
Figure 2 : Possible Scenarios
Based on the above mentioned criteria, the cases selected include Argentina,
Chile, Nicaragua and Bolivia. All four Latin American nations participated in the FTAA negotiations between 1994 and 2005. Therefore, this is the set time frame used for analysis. The cases are assigned as followed. Chile was selected as a case study for a nation experiencing strong economic performance but weak social movements during the time of the FTAA negotiations. Argentina represents countries with strong economic performance and strong movements protesting the implementation of neoliberal reforms.
The cases of Bolivia and Nicaragua both represent nations with weak economic performance. However, while Bolivia experienced very strong contentious politics,
Nicaragua’s political landscape experienced comparatively weak episodes of antineoliberal contention. The data and analysis in chapter four is going to demonstrate how each of the cases fit the specific scenario in figure 2. This demonstration and the testing of this study’s hypotheses will be completed through a three-step analysis. The following
section outlines each of the three steps and the factors used in this thesis to determine
31 what constitutes ‘strong’ economic performance and social movements versus ‘weak’ economic performance and social movements.
Method of Analysis and its Underlying Concepts
As mentioned above, contentious politics most commonly arise when people feel deprived of their most basic rights, such as access to food, water, work, or housing.
However, the governments in the western hemisphere agreed in 1994 to form a continent wide free trade agreement that may negatively affect the lives of thousands of people.
Yet, in the case of nations that have indeed seen an increase in their standard of living and experienced modernization and economic growth, people should not have a reason to mobilize against further free trade agreements, unless the economic gains did not trickledown to the rest of society. In order to evaluate that claim, as a first step of the analysis in this thesis, the countries’ economic performance between 1994 and 2005 will be evaluated through the analysis of economic indicators including but not limited to GDP, rate of inflation, unemployment rate, and percent of population living under US$2/day.
These indicators are derived from datasets provided by the World Bank, the Economic
Commission for Latin America and the Caribbean (ECLAC)
, and the United Nations. A more detailed list of the indicators used is included in the appendix. In order to paint a comprehensive picture of the situation of the population and the economic conditions in the analyzed countries, some of the data stems from news and secondary sources providing additional insights and background information. As the analysis will show, out
of the medium size Latin American economies, Chile recorded one of the strongest
32 performances in the region. Similar, as the data provided in chapter four demonstrates, despite the economic meltdown in 2001, the Argentine enjoyed a higher standard of living than most countries in the region. Bolivia and Nicaragua, however, are two of the weakest economies in the western hemisphere. Chapter four will provide a more detailed evaluation of this assessment.
Second, each case will be studied for episodes of contention, social movements or unrests targeting free trade and neoliberal reforms occurring during the FTAA negotiations. Due to the lack of a database tracking domestic social movements, the data for this methodological step mostly stems from secondary sources, such as books and journal articles. Frequently, these works are part of the social movement and contentious politics literature and address more prominent topics such as the emergence and organization of the movement, the formation of its identity, and leadership. However, these sources are used for data regarding the occurrence and frequency of episodes of contention in the respective countries, descriptions of the actors involved and their demands, as well as an account of the events and the repertoire of contention used during these events. In addition, news articles reporting about the events will be reviewed for descriptive evidence.
In order to determine what constitutes strong contentious politics versus weak contentious politics, this study is going to rely on the concepts outlined in the literature review. As pointed out in the previous chapter, the social movements and contentious
politics literature is concerned with what factors lead to the rise of a social movement,
33 what channels and repertoire of contentions are used by the actors, and the impacts of the movement. Other important considerations are who the actors are, how and for how long the movement was able to sustain itself, and how authorities reacted to the public’s mobilization. Episodes of contention in the four countries used as case studies in this thesis will be analyzed and evaluated based on the aforementioned factors, as shown in figure 3. In addition, the analysis will take into consideration the extent of the mobilization in the individual countries. The extent will be assessed by analyzing how many and what types of segments of society participated in the mobilization efforts and whether contention in one sector or one area in the country was able to spark resistance in another. Another indicator for the extent of the mobilization is the participants’ demands.
For example, cases in which the protestors demand the reversal or change of a specific policy in a particular sector, as for example in the education sector in Nicaragua are categorized as weak cases. Countries where the public moved from forming resistance in one particular area to demanding an overall change in the country’s economic policy direction represent cases with strong movements. As the next chapter will demonstrate, this has been the case in Bolivia, where the fight over the country’s natural resources turned into a campaign against the neoliberal economic model itself. Accordingly,
Bolivia represents a case with strong social movements but the contentious politics in
Nicaragua can be classified as weak contentious politics. Further examinations of these
34 factors will be provided in chapter four. This methodological step marks the second part of this study’s three-step analysis.
The third step of the analysis is going to identify each country’s position on the
FTAA. In order to achieve this, news accounts and press releases that quote country officials or trade representatives expressing their respective government’s intention and position in regards to the status of the FTAA negotiations will be reviewed. The data will be gathered through the LexisNexis News database, as well as through the Google News search engine. In order to put the data into context, some of the information will be obtained from secondary sources.
Strong
Movement includes numerous actors; from different paths of lives causes disruption, receives attention and triggers reaction demands radical change in overall policy direction or leadership
Weak
Movement occurs in a specifc area or sector, fails to spark contentious in other areas, consists of small, individual protests; or uses non-disruptive methods demands specific policy changes; does not challenge overall economic model or country's direction
Figure 3: Factors Determining Strength of Contentious Politics
35
Chapter Four
CASE STUDIES
Introduction
The purpose of this chapter is to complete the analysis of the four selected case studies according to the principles and methods outlined in the previous section. In order to achieve this objective, each country is going to be evaluated through the following steps. First, the economic performance of the selected countries during the time of the
FTAA negotiation will be assessed. As explained in more detail in chapter three, this step is undertaken in order to assess whether neoliberal policies led to the promised gains, in which case the public would not have had a reason to mobilize against the FTAA. This step is also based on the assumption identified in the literature review that people are more likely to mobilize when they are deprived of their ability to sustain a livelihood, which again closely relates to countries’ economic conditions. The analysis is also going to establish what constitutes ‘strong’ and what constitutes ‘weak’ economic performance for the purpose of this study. After reviewing the countries’ economic performance, this chapter is going to undertake the second step of the analysis outlined in chapter three.
Accordingly, episodes of contention in each of the countries will be analyzed and evaluated according to the criteria outlined in chapter three. The last part of each case study is dedicated to country’s positions on the FTAA. This third step of the analysis will be completed by analyzing claims and statements made by the countries’ governments as
36 reported by international news sources. The final chapter of this thesis provides a comparison of the cases and presents the results obtained in chapter four.
The Case of Argentina
Some readers may wonder why Argentina was chosen as a case study for a country with strong economic performance. The country at the Rio del la Plata has made international news for economic collapses, debt crises, and depressions. Argentina’s economic environment is especially known for its extreme, often unpredictable, fluctuations and volatility (Corcoran 2011). True, Argentina experiences a major economic crisis about once every decade (Corcoran 2011). But as devastating as some of
Argentina’s economic lows might have been, the country’s highs showed characteristics of some of the strongest developing economies (Cline 2004: 1). Throughout most of the
1990s, Argentina recorded episodes of strong economic growth, which created a society with a higher standard of living than in most other countries in the region (Cline 2004: 1).
Argentina’s Economic Performance
Under the rule of President Alfonsín during the 1980s, Argentina experienced high rates of poverty, extreme hyperinflation, corruption, and social exclusion (Salvochea
2008: 296). In order to address these issues, Carlos Saúl Menem turned to implementing the internationally prominent neoliberal economic model after his election in 1989
(Salvochea 2008, Veigel 2009; Silva 2009). Menem became such an advocate for neoliberalism that the country’s new economic policy would become known as
Menemism (Silva 2009: 84). Policies of Menemism included strong structural reforms,
37
“including privatization of state-owned companies, reduction of state-related employment, reform of the welfare system, administrative decentralization, deregulation of economic activities, and the opening of the domestic market to foreign trade and investment” (Villalón 2007: 140).
During the 1990s, Argentina experienced the lowest average rates of inflation and the highest rates of economic growth since the end of World War I (Veigel 2009: 185). This improved economic climate led to a desperately needed increase in foreign direct investment (Veigel 2009: 188). Argentina received more than US$60 billion in gross foreign direct investment, and overall approximately US$100 billion in net capital inflows (Veigel 2009: 188). For the first time in years, Argentina was able to record strong economic growth, high investment rates, and financial stability (Villalón 2007:
140). Because of the improvement in Argentina’s economic performance after the implementation of neoliberal policies, the International Monetary Fund (IMF) declared
Argentina as a role model for so-called emerging economies in 1998 (Veigel 2009: 188).
But around the same time as the IMF and international investors were praising
Argentina’s new trustworthy investment climate that had been created by the neoliberal market policy, domestic organizations started to pay the price of liberalization. Whereas some had declared relief over Argentina’s stable performance during the Mexican crisis that shook the continent during 1994 and 1995, Argentina started to record more than two thousand bankruptcies per year until the ultimate national collapse in 2001 (Veigel 2009:
192). In addition, as the data collected by the IMF shows, unemployment remained high, increasing from seven percent in 1992 (Veigel 2009: 192) to 17.9 percent in 2002
(worldbank.org: GDP growth).
38
In addition, while Argentina recorded some success in battling inflation and the stagnation in economic growth, the country’s performance was lacking when it came to the fight against debt. According to Veigel, public foreign debt significantly increased from US$50 billion in 1994 to more than US$90 billion in 1999, putting a significant damper on the achieved success in terms of economic growth (Veigel 2009: 187). To reduce the country’s deficit, the government started out the new millennium with a sharp tax increase and spending cuts, exacerbating the already desperate situation of the
Argentine people. The decrease in Argentina’s economic performance changed investors’ perception of the country, making it even harder to overcome the acute challenges
(Veigel 2009: 193). Eventually, Argentina experienced its worst economic crisis during
2001 and 2002, notably in the middle of the FTAA negotiations. Klaus F. Veigel provides a snapshot of the state of Argentina at that time:
“Over the course of two years, output fell by more than 15 percent, the Argentine peso lost three-quarters of its value, registered unemployment exceeded 25 percent, and more than half of the population of the once rich country had fallen below the poverty line” (Veigel 2009: 183).
In an attempt to save the poster-child of neoliberal development of the 1990’s from complete collapse, the IMF decided to sit down with the Argentine government and discuss available options (Veigel 2009: 194). The fruit of this collaboration was a stabilization program in which Argentina was to receive US$20 billion, a sum that was meant to display the IMF’s confidence in the nation, hopefully restoring other investors’ trust (Veigel 2009: 194). However, the price did not come without conditions. Argentina had to commit to strong austerity measures in order to cut spending (Veigel 2009: 194).
39
Only a few days after taking office on January 1, 2001, president Eduardo
Duhalde passed the “Economic Emergency Law” which caused many Argentine to see their life savings diminished into a fraction of what it used to be (Veigel 2009: 199).
Simultaneously, inflation rates increased sharply (Veigel 2009: 199). The country recorded a debt of a staggering US$132 billion, marking the largest debt the world has ever seen at that point of time (Corcoran 2011). Given this enormous sum, Argentina’s new administration eventually engaged in debt negotiations with the IMF, achieving that the debt was reduced by one third (Veigel 2009: 200).
After following the neoliberal economic paradigm for a decade, the country experienced complete political, economic, and social collapse at the end of 2001. Even though Argentina is known for its fluctuating economy, the crisis of 2001 marked one of the worst in its history and occurred right after a decade of internationally pushed neoliberal policies. Accordingly, Duhalde and his successor Nestor Kirchner made an effort to break with Menemism (Veigel 2009:200). According to Veigel, this included:
“the proposed nationalization of previously privatized industries, price controls on utilities and public services, and a more active involvement of the state in the economy”
(Veigel 2009:200). Starting in 2003, under the administration of Nestor Kirchner,
Argentina’s economy grew again at the fastest rate since the end of World War I, demonstrating overall strong economic performance (Veigel 2009: 12).
40
Anti-Neoliberal Contention in Argentina
Within a few years, the population could feel significant impacts, economically as well as politically, of Menemism . Argentina was swept by waves of social movements protesting the reconstruction of the state required by the neoliberal paradigm (Silva 2009:
56-68; Villalón 2007: 139). Often referenced as the beginning of the new social movements in Argentina is the Santiagazo town revolt of 1993 (Villalón 2007: 143). That year, on December 16 th , between 3000 and 5000 protesters took the streets in the province of Santiago del Estero, protesting the structural adjustment programs and ongoing governmental corruption. Joining their forces were people from all paths of lives, including teachers, students, union leaders, and government employees. The episode of contention lasted for two days and resulted in the invasion, looting, and burning down of three government buildings and the residents of local officials and politicians (Auyero 2003: 37). Over the next few years, similar town revolts occurred throughout the country. In 1994, the episodes of contention occurred in the provinces of
La Roja, Salta, Chaco, Entre Rios, and Tucuman. Similar events have been recorded in
1995, in San Juan, Cordoba, and Rio Negron and in 1999 in Corrientes (Villalón 2007:
143). According to Villalón, the contention was mostly driven by “public-sector workers
[responding to] the reduction of state employment by provincial and municipal governments under structural reform policies” (Villalón 2007: 143). Villalón points out that none of these events had been organized by traditional contentions politics representatives such as unions or political parties (Villalón 2007: 144). Whereas
traditional social movements in Argentina were usually organized events driven by
41 unions or other labor groups, episodes of anti-neoliberal contention in Argentina frequently emerged without leadership contesting specific policies or policy impacts
(Villalón 2007: 140). The social movements occurring in Argentina during the 1990s therefore fulfill the description of the “new social movement” as identified in the literature review.
Despite the revolts, the Argentine government continued to follow the neoliberal paradigm. Accordingly, the Argentine people moved toward more sustainable methods of protest, such as organizing roadblocks and picketing (Villalón 2007: 144). This included preventing normal traffic to and from major cities, causing the disruption of the free movement of people, goods and services. Frequently, this was achieved through the use of objects that were difficult to move, such as burning tires or large vehicles, alongside masses of protestors (Villalón 2007: 144).
Similar as during the town revolts, the roadblocks were organized by people who were unable to participate in the competitive market-driven, neoliberal economic system, such as displaced laborers, under- or unemployed, or people who were forced into the informal sector in order to survive (Villalón 2007: 144). This is another example of a
“new” social movement, which was primarily driven by people outside the economic and political structure, who did not have the representation and organization of unions or parties, the traditional drivers of mobilization in Argentina (Villalón 2007: 144).
42
Choosing roadblocks as the repertoire of contention had multiple advantages. On one hand, by preventing the free movement of goods and services, roadblocks disrupted the increased economic activity that the increased free trade had targeted, directly affecting the lives of the people who favored neoliberal market policies. On the other hand, roadblocks did not only affect the locals, but also prevented tourists from freely venturing through the country (Villalón 2007: 142). Therefore, in addition to forcing the local officials to pay attention to their demands, the piqueteros raised international awareness regarding their conditions (Villalón 2007: 142). Their demands included job creation for the ones driven out of their profession by government reconstruction and increased international competition, improvement and protection of labor conditions for people who had experienced a lowering in wages due to free trade “dumbing-down” effects as outlined by Garret’s “Globalizations’ Missing Middle”, and the creation of a safety net for people who had been pushed below the poverty line (Villalón 2007: 144).
However, despite the disruptive and enduring nature of the roadblocks, the government did not take actions to meet the population’s demands. The administration’s continuing refusal to respond to the public’s increasing desperation forced them to continue their efforts, and reportedly by 1997, about 70 percent of Argentina’s provinces experienced at least one episode of picketing and roadblocks (Villalón 2007: 144).
Finally, the passage of Plan Trabajar , an emergency employment program supposed to fight unemployment, marked one of the first actions of the government to the public’s
outcries.
1
Created in 1996, the Plan Trabajar program entailed the hiring of unskilled
43 laborers by the state for public infrastructure programs for a modest salary (Salvochea
2008: 297). Because of President Menem’s faith in the market and its promise to compensate the losers of free trade in the long-term, his administration failed to address the needs of members of the population who were unable to participate in the competitive free market society (Lodola 2006: 2). Accordingly, by the time the Argentine government finally took action seven years after the transition to neoliberalism, the plan was not sufficient to reduce the public’s despair.
Contention spread with the decrease in economic performance during the late 1990s and early 2000s, when especially the middle class was hit worse than ever (Silva 2009:
88). According to Silva, social exclusion reached its peak, leading to the formation of more radical forms of contention and groups that not only asked for a reform of the implemented neoliberal policies, but rather demanded a radical change in direction (Silva
2009: 88). The following months were characterized by massive strikes, roadblocks, and protests throughout the entire country. Repression of the movements by the government was very violent (Silva 2009: 98). Despite the confrontations, the Argentine government did not make any concessions. Instead, in March 2001 more neoliberal policies, worsening the conditions for students, retirees, and public sector workers, were implemented (Silva 2009: 90). The additional cuts and reductions in social services
1
While the Menem administration slightly increased social spending, the expenses were primarily targeted toward education and health reform and very little was done to compensate the loss of jobs due to structural adjustments, doing very little for the unemployed. In addition, almost no expenses were made to specifically address the needs of the poor (Lodola 2006: 3).
turned dissatisfaction of unemployment and the feeling of social exclusion into acute
44 hunger, poverty and consequent desperation (Silva 2009: 92).
Public display of contention eventually reached a state of emergency after economic minister Cavallo addressed the nation on November 30, 2001 ensuring that there was nothing to fear, everything was under control, and most importantly, their savings were safe (Veigel 2009: 198). The next day, the government announced that people were unable to withdraw more than 250 pesos per week from their own bank accounts. The government withholding money from Argentines’ personal accounts threw the country into an uncontrollable rage (Veigel 2009: 198). Starting on December 19, 2001, potbanging protestors, also known as cacerolazos took the streets of Buenos Aires (Villalón
2007: 145). According to Villalón, “[t]he cacerolero/as were mostly middle-class and included a heterogeneous array of people, from impoverished unemployed small business people to working professionals” (Villalón 2007: 145). While Argentina’s capital was taken by hundreds of protestors banging pots and pans in the street, contention in the suburbs was taken to a higher, more violent level. Supermarkets and stores became victims of looters. According to Veigel, desperation even pushed a father of two children to commit suicide in front of cameras in the street (Veigel 2009: 198). The same day, martial law was declared (Veigel 2009: 198). The civil liberties the citizens of Argentina had achieved only a decade earlier when their regime transitioned to democracy were suspended, and confrontations between police and the public became increasingly more violent, claiming the lives of sixteen protestors (Veigel 2009: 198). Eventually, the peak
of the public’s contention occurred on December 20, 2001 with the ousting of the government (Silva 2009: 94; Veigel 2009: 198).
Given the sudden resignation of Cavallo and De la Rua, congress moved towards electing a new head of government. However, given the acute chaos of the country’s
45 economy, this was quite a challenge. Over the next two weeks, five different presidents were elected.
The fifth president, Eduardo Duhalde took office on January 1, 2001
(Veigel 2009: 199).
During the first few months of Duhalde’s leadership, cacerolazos continued. During the final two weeks of the year of 2001, Argentina had experienced 859 cacerolazos
(Villalón 2007: 145). After Duhalde took office, the number continuously dropped to
706 in January, 310 in February, and eventually arrived at 139 in March (Villalón 2007:
146). While the first episode of the cacerolazos was unorganized and without leadership, the whole country walking out on the 19 th
of December in 2001 protesting the government, fostered a sense of community and common identity among the protestors
(Villalón 2007: 145). The cacerolazos occurring during the first months of the Duhalde administration became organized, primarily through the use of the Internet and social media (Villalón 2007: 145). Accordingly, the number of caceroleros banging their pots and pans in the streets decreased and the movement became more organized and evolved to holding regular meetings in the form of neighborhood assemblies (Villalón 2007: 146).
These asambleas vecinales marked the first step towards the institutionalization of
Argentina’s anti-neoliberal social movements in that they moved into the direction of
46 using traditional channels available to contentious politics (Silva 2009). These channels were made available through Argentina’s transition to democracy in 1983. But once
Menem turned the country towards economic liberalization and free trade as soon as he took office in 1989, political power was shifted away from civil society and increasingly rewarded to the economic powerful who were able to participate in the free market.
According to Silva, this increasing political and social exclusion that resulted from the continued implementation of neoliberal policies was one of the main causes of the
Argentine social movement, whose participants feared that they were about to lose the right to political participation for which they had so desperately fought for before the country’s regime change in 1983 (Silva 2009: 94).
However, Argentina’s democratic structure allowed for civil liberties, such as freedom of speech and freedom of assembly. This greatly facilitated the spread of asambleas vecinales. The assemblies were open to anyone and attracted members from all paths of lives. But while the poor, unemployed and underemployed participated, more meetings were held in wealthier neighborhoods than in poor barrios. In order to ensure that the asambleas vecinales did not fall into the wrong hands, the meetings remained non-partisan (Villalón 2007: 146). The different assemblies communicated with each other through the Internet and then started organizing asambleas interbarriales . The network facilitated the rise of such strong social movements.
47
Argentina and the FTAA
When Argentina was still the IMF poster child during the 1990s the country agreed to follow the trend of neoliberalism. It was not until the debt crisis of 2001 that
Argentina adapted a slightly different stance. The pro-neoliberal administrations during the 1990s actively sought great relations with the most advanced economies, especially the United States. But after the disappointing performance of neoliberalism, there was a policy vacuum to be filled (Veigel 2009: 201). As it turned out, the alternative would come from the Latin American continent itself. Argentina decided to align itself with anti-American powers such as Venezuela’s Hugo Chavez and Cuba’s Fidel Castro
(Veigel 2009: 201). However, the country did not dare to declare their departure from neoliberalism as openly as the other two presidents (Veigel 2009: 201). By January 2004,
Danielle Goldfarb describes Argentina’s position on the FTAA as one of “cautious acquiescence” (Goldfarb 2004: 5). This means that, according to Goldfarb, only one year prior to the deadline of the agreement, Argentina was “neither opposed to moving the negotiation agenda forward nor will [the country] uncritically endorse whatever is proposed” (Goldfarb 2004: 5). The FTAA negotiations came to an official halt at the
Summit meeting in Argentina in November 2005 when the heads of government cancelled a lunch that was meant to provide an opportunity for further negotiation and left the summit meeting prematurely (Rohter, Bumiller 2005). According to a senior negotiation official of the United States, the situation was regrettable, considering that 29 countries had reported to support continuing the negotiation (Rohter, Bumiller 2005;
BBC Nov. 15, 2005). In regards to Argentina’s position at that point in time, the New
48
York Times reported that, “Brazil and Argentina, the leaders of Mercosur, the thirdlargest trading bloc in the world, do not oppose the concept of free trade, but they do oppose Washington's version” (Rohter, Bumiller 2005). In other words, Argentina was one of the five countries that no longer fully supported the realization of the FTAA agreement. Argentina’s support for neoliberalism declined after the massive social mobilizations in 2001 that eventually caused the ousting of the government. Even though
Argentina did not express full opposition to a hemisphere-wide free trade zone and also did not openly announce a departure from neoliberalism, withdrawing its support for the
FTAA confirms the first hypothesis posted by this study. The evidence presented in the case of Argentina indicates that countries with strong economic performance and strong social movements are less likely to support the FTAA.
The Case of Chile
While Argentina may have been the IMF’s poster- child for neoliberalism during the 1990s, Chile may be the one of the 21 st
century. Despite some initial struggles with the impacts of the debt crisis and some decline in growth rates during the 1990s, Chile was able to achieve a higher level of development than other countries in the region.
The international community officially recognized Chile’s efforts. In January
2010, Chile was the first South American nation - and the second Latin American nation after Mexico - to become a member of the Organization for Economic Cooperation and
Development (OECD) (OECD 2010). Chile is therefore often referred to as the role
model of the region, and its market-based policies earned it the nickname “jaguar” of
49
South America, in relation to the growing economies of the Asian “tigers” (Oppenheim
2007: 169).
Indeed, according to the World Bank, Chile has been the fastest growing Latin
American economy within the past 15 years, with an average annual per capita growth rate of 4.4 percent (worldbank.org). The BBC country profile also declares Chile as “one of Latin America’s strongest economies” (BBC News 2012).
Chile’s Neoliberal Road
Unlike Argentina, Chile transitioned to a neoliberal market society decades before the launch of the FTAA negotiations. Starting with the military coup and the seizure of power by General Augusto Pinochet in 1973, Chile was governed by an oppressive, authoritarian regime until 1989. In addition to installing a military dictatorship, Pinochet applied a very literal and radical form of neoliberalism and free market policies during the first eight years of his reign (Ffrench-Davis 2010: 10). According to Ffrench-Davis, some of the most significant neoliberal reforms included,
“the abolition of price controls; across-the-board import liberalization; sharp deregulation of the domestic financial market, […]; privatization of the pension system and part of the national health service; […]; privatization of traditional public enterprises; […].”
(Ffrench-Davis 2010: 11).
In addition, due to the authoritarian nature of the regime, Pinochet ordered a suspension of union labor rights and radically restricted the activities of the already reduced state and the few remaining public enterprises (Ffrench-Davis 2010: 11).
50
The transition to neoliberalism, and especially the radical privatizations, laid the fundamental building stone for the large income inequality in Chile that still persists until this day. Because the sale of existing public enterprises to private investors occurred during a domestic economic crisis and consequent high domestic interest rates, very few people were in the position of acquiring enterprises (Ffrench-Davis 2010: 11). Thus, a large majority of Chile’s wealth was distributed only among a very small, and often already rich and powerful, segment of society, causing inevitably the marginalization of the public and a persistent income inequality (Ffrench-Davis 2010: 11).
But despite contrary promises made by the IMF, the neoliberal policies failed to prevent the severe economic crashes that occurred in 1975, and again in 1982 (Ffrench-
Davis 2010: 19). By 1983, Chile’s GDP had dropped by 14 percent and unemployment rates increased drastically (Ffrench-Davis 2010: 19). Accordingly, the Pinochet regime moved away from the very literal approach to neoliberalism and adapted some changes to the previously implemented policies. The administration decided to increase previously almost-eliminated import tariffs, created some subsidies for non-traditional exports, and fostered state involvement in the financial market and private debt (Ffrench-Davis 2010:
20).
While these policies steered away from the very radical approach to neoliberal policy little changed for the previously marginalized population. The Pinochet administration did not pass any legislation that addressed the needs of the poor or reduced the burden of the unemployed, further exacerbating existing income inequality (Ffrench-
51
Davis 2010: 20). According to data gathered by Ricardo Ffrench-Davis, “the share of the poorest quintile in total expenditure had been reduced from 7.6 percent in 1969, to 5.2 percent in 1978 and 4.4 percent in 1988” (Ffrench-Davis 2010: 24).
In addition to the increase in income inequality and the suffering of the economic weak, the authoritarian regime under Pinochet held on to its suppressive approach to union activities and civil disobedience. In response, Chileans started to organize social movements and political parties in the hopes of creating political opposition to Pinochet.
Because of growing domestic opposition and the international community pressuring for democratization, the government allowed democratic elections in 1989. In March of
1990, Patricio Aylwin became Chile’s first democratically elected president since 1973
(Ffrench-Davis 2010: 24).
Neoliberalism and Democracy: Chile in the 1990s
The years after its transition to democracy, Chile issued a number of policies affecting investment, corruption, fiscal affairs, corporate governance, and the environment. The first step toward democracy was a radical reconstruction and decentralization of the state (Ahumada 2000: 93-117). This undertaking spread from the national government to the subnational, municipal, and local governmental entities.
Given the country’s authoritarian past, this objective was not easily obtained. Counties and local entities lacked experience in leadership and political participation necessary to facilitate smooth democratic operations (Ahumada 2000: 96). However, the national government implemented several projects and laws to strengthen regional and provincial
52 administrations (Ahumada 2000: 97)
2
. By 1993, shortly before the birth of the FTAA, local councils and regional governments all throughout Chile were headed by democratically elected or appointed leaders (Ahumada 2000: 98).
Chile’s decentralization process and the creation of democratic institutions all occurred in a neoliberal environment. Because free-market societies favor the strongest members of society, the democratic character of Chile’s reconstruction and decentralization process was soon compromised. Regions with greater natural and economic resources were more frequently targeted for public funds and private investors
(Ahumada 2000: 99). Consequently, the already stronger regions and communities received disproportional more services and support than the regions that were characterized by poverty and the lack of basic resources (Ahumada 2000: 99).
Accordingly, “almost fifty percent of Chile’s GNP is concentrated in the Metropolitan
Region. If the regions of Bio-Bio and Valparaiso are added to this figure, the total represents some 70 percent of GNP concentrated in these three of the country’s 13 regions” (Ahumada 2000: 100).
In other words, the transition to democracy in a free-market framework was accompanied by great problems and challenges. However, Chile’s reconstruction efforts did record some accomplishments. In addition to the neoliberal approach, Chile utilized a combination of structural and neo-Marxist policies in order to better deal with social
2 For a more detailed list of laws and reforms implemented, please see Jaime Ahumada: “The decentralization process” in Chile in the Nineties, ed. by Cristian Toloza and Eugenio Lahera (2000). 93-
117.
problems (Santiso 2006: 97). Those policies included advancement in education, unemployment and pension systems. Chile created a policy mix that encouraged free
53 markets, but government involvement in social policies, the construction of a social safety net, and the strengthening of institutions and legal enforcement (Oppenheim 2007:
173; Santiso 2006: 97). Consequently, Chile was able to create independent democratic institutions and law enforcement, as well as an independent banking system that is stronger than some Southern European nations (Edwards 2010: 118).
Chile’s Economic Performance
An important objective of Chile’s economic policy during the 1990s was to reduce inflation and unemployment, while simultaneously maintaining high levels of economic growth and productivity (Oppenheim 2007: 173). The policy was successful, showing a dramatic inflation rate decline from 27.3 percent in 1990 to 6 percent by 1997,
(Oppenheim 2007: 173). There has been a continuous decline in inflation rate between
1997 and 2007 averaging between 2 and 4.5 percent a year (Oppenheim 2007: 173).
There were also improvements in unemployment, although the rate tended to show some fluctuations. But thus far, the rate was always lower under the democratic rule than it had been during the military regime, showing an average of 7.8 percent between
1990 and 2005 (Oppenheim 2007: 173). Chile’s economic performance and commitment to democratic values while maintaining a free-market society quickly led to an increase in foreign direct investment (FDI) (van Klaveren 2000: 128).
54
During most of the 1990s, average economic growth rate reached about 7 percent
(Vial 2000: 185; Oppenheim 2007: 173), almost doubling the average growth rate of the military governance between 1974 and 1989 of 3.38 percent (Oppenheim 2007: 173).
While Chile is still plagued by great inequality, improvements in the population’s standard of living have been recorded. According to Joaquin Vial, “income levels for the poorest Chileans have been rising at a rate equal to or greater than overall income. The proportion of the population living beneath the poverty line dropped from 45 percent in
1987 to 23 percent in 1996” (Vial 2000: 185).
In addition to the economic growth record in the 1990s, Chile also recorded success in other areas. According to Joaquin Vial,
“domestic savings rates as a percentage of GDP have doubled compared to earlier decades; the fixed capital investment rate is close to 30 percent of GDP; foreign debt is falling; and direct investment as a percentage of all foreign capital flows is very high, compared to historic levels in Chile as well as rates in the rest of Latin America.” (Vial
2000: 186).
The country’s record growth persisted until the year of 1998. By 1999, Chile experienced a drop in economic growth rates (Ffrench-Davis 2010: 236). This is often attributed to the international impacts of the Asian crisis that attacked the global economy at the time.
Around the time of the Argentinean economic meltdown, economic growth slowed down to 4.5 percent in 2000, and continued to drop until it arrived at the lowest growth rate of
3.7 in 2003 (Oppenheim 2007: 174). However, since Chile had invested in stable institutions and built its domestic capital and financial markets, the country was able to reduce the economy’s vulnerability to external shocks (Bartók, Onodera 2007:4). Starting
in 2004, Chile’s economy revived and recorded an average growth rate of 6.2 percent,
55 faster and steadier than any other nation in the region (Oppenheim 2007: 173). Overall, within 15 years after democratization, Chile’s economic growth averaged 5.6 percent a year, continuously exceeding the average growth rate of the military governance between
1974 and 1989 by 2.22 percent (Oppenheim 2007: 173). As pointed out by scholar
Ricardo Ffrench-Davis, growth rate of per capita GDP slowed down to an average of 2.6 percent between the years of 1999 and 2008 (Ffrench-Davis 2010: 236). But despite this slowdown in growth rates, Chile still recorded the highest level of economic growth in the region (Ffrench-Davis 2010: 236).
3
Contentious Politics in Chile
The military government had the freedom of implementing its free market policies without having to compromise with the preferences of other political actors, such as social movements or corporations (Valenzuela 1997: 2). However, as mentioned above, Chile did experience episodes of contention in the early 1980s. Since the redemocratization of the country in the late 1980s, the government continued the neoliberal policies that had been implemented during the second half of Pinochet’s administration, especially in terms of public policies. However state involvement in the economy increased (Silva 2009: 231). Eduardo Silva, argues that Chile’s shift away from the extreme radical application of neoliberalism led to fewer and milder contentious politics during the time of the FTAA negotiations (Silva 2009: 231).
3 According to Ffrench-Davis, the average growth rate of Latin America and the Caribbean between 1999 and 2008 was 2 percent, and that of the United States 1.6 percent (Ffrench-Davis 2010: 236).
56
However, as mentioned in the section on Argentina, one motivation for the rise of contentious politics in Argentina was that the Argentine were worried about the increased political and economic marginalization that resulted from Menemism and the potential threat this bared for civil rights, liberties, and voices just recently regained after years of brutal suppression. Similarly, Chile had suffered severe suppression of civil society under the Pinochet regime and had to wait six years longer than Argentina to finally return to a democratic regime. This raises the interesting question as to why Chileans did not fear for the loss of their just recently re-acquired civil rights when the country entered the FTAA negotiations.
Some may argue that Chile’s lack of or at least reduced number of social movements protesting the FTAA stems from Chilean government’s attempt to dampen the impacts of neoliberalism through the creation of a social safety net. As the data provided in the previous section shows, Argentina’s refusal to address the needs of the losers of free trade was one major source for the public’s contention. But while the
Chilean government reacted to the public’s demanded compensation for the losers of neoliberalism, the created safety measures did not guarantee the sustainability of civil liberties. Accordingly, Chileans should have felt similarly threatened by the possibility of a hemisphere wide free trade zone. However, Chile experienced an interestingly weak anti-free trade social movement during the FTAA negotiations.
As previously mentioned, civil liberties and contentious politics were severely repressed during the time the military regime implemented most of the neoliberal reforms (Silva 2009: 252). But
57 during the second half of his administration, Pinochet drafted a new constitution, building up to the elections in 1989 that were supposed to legitimize his rule (Silva 2009: 252).
These changes paved the way for the emergence of political opposition that started to drive the reorganization of rural unions and organizations in shantytowns, which later emerged as important actors of anti-neoliberal mobilization (Silva 2009: 252).
Starting in 1983, Chile experienced many episodes of contention and mass mobilization that often led to violent clashes between civilians and Pinochet’s forces
(Silva 2009: 252-256). It was not until the Concertación de Partidos por la Democracia
(CPD) defeated Pinochet during the 1988 elections that a democratic rule was established which allowed the public to express their opinions, mobilize, and participate in politics without fear of violent persecution.
However, despite the CPD’s continuation of the free market principles and its enthusiasm for free trade agreements, Chileans did not experience an emergence of the
“new social movements” demanding economic inclusion and security of their just recently gained democratic rights as was the case in Argentina and Bolivia (Silva 2009).
Instead, with the transition to democracy, Chile’s contentious politics quickly moved from the streets to utilizing the available channels created by democracy (Silva 2009).
This supports Tarrow’s finding that a country’s political opportunity structure greatly influences that country’s contentious politics. The question as to why anti-neoliberal contention was less severe in Chile around the millennium, whereas other countries ousted their governments in order to finally achieve a departure from neoliberalism bears
a fascinating puzzle. However, the reasons for the lack of mass mobilizations in Chile
58 during the time of the FTAA negotiations are beyond the scope of this study. The following section is going to analyze whether Chile, a country with strong economic performance but weak social movements supported or opposed the formation of the
FTAA.
Chile and the FTAA
Chile’s democratic leadership heavily focused on trade liberalization.
Accordingly, Chile was the first Latin American nation to sign a free trade agreement with Mexico in 1991 (van Klaveren 2000: 125). Other free trade agreements soon followed, including with Central America (1999), the Republic of Korea (2003), EFTA, the United States (2004) and China (2005) (OAS SICE). Chile only agreed to a partial membership to MERCOSUR, the customs union that regulates trade among Argentina,
Brazil, Uruguay and Paraguay. While Chile’s economic policy in the 1990s encouraged economic integration in the Latin American regions, becoming a full member of
MERCOSUR would have conditioned Chile to raise some of its tariff levels to match the other members in the union, compromising Chile’s commitment to economic liberalization (van Klaveren 2000: 127). This is one example of Chile’s deep commitment to free trade. Chile has negotiated more trade agreements with FTAA nations than any other country in the western hemisphere (van Klaveren 2000: 128). The author van Klaveren points out that Chile’s most important trading partners are actually outside the region, such as the United States, Europe, and later on even Asia. However,
59 van Klaveren explains that Chile’s active integration with other Latin American nations, especially with Brazil, were a fundamental part of Chile’s foreign policy (van Klaveren
2000: 134).
Chile therefore welcomed the FTAA negotiations (Goldfarb 2004: 8). Chilean
President Frei emphasized the importance of advancing free trade during the opening ceremony at the second summit of the Americas (BBC 1998). Addressing governments of the American states, he further stated that, “We should undertake the [FTAA] negotiations in a dynamic and enthusiastic manner” (BBC 1998). But even after the formation of the bilateral free trade agreement with the United States, Chile’s foreign affairs minister Soledad Alvear publicly reaffirmed the country’s deep commitment to the creation of the FTAA and Chile’s desire to meet the deadline (MercoPress 2003).
Accordingly, the case in this study that experienced the least amount of social mobilization protesting the impacts of neoliberal policies or the FTAA negotiations is the most likely to support the FTAA.
The Case of Nicaragua
Nicaragua is one of the poorest nations, not only in Latin America, but also in the world (Gómez, Soloaga 2007: 200). Similar to other nations in the region, Nicaragua moved towards democracy after years of brutal conflict (Brown, Cloke 2005: 602).
However, Nicaragua’s non-democratic past includes some unique aspects. In order to better understand the country’s implementation of neoliberal policies this section is going to include a short overview of Nicaragua’s struggle on the road to democracy.
60
Nicaragua’s Path to Democracy
Nicaragua’s experiences throughout the twentieth century were unique in that the country was ruled by a “dynastic dictatorship” as referred to by Walker and Wade
(Walker, Wade 2011: viii, 26-34). From 1933 to 1979, Anastasio Somoza García, followed consecutively by his two sons, first Luís Somoza and then his younger brother
Anastasio Somoza, ruled the country for over forty years (Walker, Wade 2011: viii, 26-
34). The repressive regime was overthrown in 1979, after an eighteen yearlong civil war.
During this period, massive public resistance and efforts of the Sandinista National
Revolution Front (
Frente Sandinista Liberación Nacional
- FSLN) fought to oust the
Somoza regime, eventually succeeding on July 19, 1979 (Walker, Wade 2011: 40).
Much to the concern of the United States, many of the Sandinistas party openly identified as Marxist or Marxist-Leninist (Walker, Wade 2011: 43). Therefore, the rule of the Sandinistas represented a departure of the policies advocated by the United States.
Utilizing a mixed-economy approach and implementing ambitious social programs, the
Sandinistas encouraged civil society participation (Walker, Wade 2011: 45). The
Sandinistas eventually legitimized their rule with the election of Daniel Ortega in 1984
(Walker, Wade 2011: 45).
However, the country was far away from enjoying peace. Because of the
Sandinistas’ departure of U.S. favored policies, the Reagan administration in the United
States started an active campaign against the Sandinista government (Leogrande 1996:
329). This campaign included a variety of economic sanctions and sponsorship of the
contra war, which lasted for nine years and cost approximately 30,856 lives (Walker,
61
Wade 2011: 56).
As this discussion shows, Nicaragua experienced one of the hardest and most extensive U.S. interference in Latin America (Leogrande 1996: 329; Walker, Wade 2011: vii). This interference eventually yielded to a significant decrease in economic performance, eliminating much of the progress achieved by the Sandinistas. Walker and
Wade point out that by 1988, “the annual inflation rate had reached 33,602 percent […] while real per capita income was sharply reduced” (Walker, Wade 2011: 55). In an attempt to control inflation, the Sandinista government issued several austerity measures, causing thousands of government employees to lose their jobs. While recording a significant reduction by 1989, the inflation rate was still at about 1,690 percent (Walker,
Wade 2011: 55).
In the light of the economic devastation and bloody civil war before the elections of 1990, the FSLN was defeated by Violeta Barrios de Chamorro who had been openly sponsored by the United States (Almeida, Walker 2006: 183; Walker, Wade 2011: 5).
Radical Neoliberalism in Nicaragua
Nicaragua experienced full immersion into the international dominant neoliberal paradigm during the presidency of Violeta Chamorro from 1990 to 1996 (Muhr 2008:
150; Brown, Cloke 2005: 603). Having been sponsored by the United States, Chamorro radically followed the ideals of the IMF and the United States. Chamorro undertook the reconstruction of the state and initiated the massive privatization of land and companies
(Robinson 1997: 31). Of the approximately 370 state enterprises existing prior to
Chamorro’s administration, 289 were privatized by Chamorro’s third year in office
62
(Rodgers 2008: 3). While the impacts of the reconstruction process of the firms on the employment situation of the population was severe, this radical privatization had additional, country wide implications. Since there was no reason to invest in the development of the services, the privatization of the utility companies led to acute power shortages and blackouts. Meanwhile, rates drastically increased (Rodgers 2008: 4).
But to make matters worse, the Chamorro administration did not only fail to implement some social programs or services to compensate the losers of neoliberalism, it actually reversed many of the social and welfare programs in health care, education, housing, and land reform programs that had been implemented by the Sandinistas
(Walker, Wade 2011: 63). The Chamorro administration eliminated subsidies on basic consumption (Robinson 1997: 31) and drastically reduced social spending, basically eliminating any possible version of a safety net for the already struggling population
(Muhr 2008: 150). The trend of reversing Sandinista initiatives, including the ones that had been successful, was continued by the two following administrations (Walker, Wade
2011: 63).
By the middle of the 1990s, Nicaragua eventually was able to record some economic growth. However, it came at a significant social cost. After Nicaragua negotiated an Enhanced Structural Adjustment Facility (ESAF) loan with the IMF in
1994, Nicaragua experienced an economic growth rate of 3.2 percent, and about 4 percent
63 in 1995 (Arana 1997: 84, 91). However, the country’s growth potential was hindered due to a combination of expensive basic services and low labor productivity (Arana 1997:
84). Nicaragua is primarily viewed as a labor intensive society, and is not associated with active consumerism. Therefore, any gains or wealth remained within the small elite
(Walker, Wade 2011: 3). At the same time, Nicaragua officially became “the world’s most heavily indebted country on a per capita basis, reaching its highest levels in 1994, when its foreign debt climbed to the staggering figure of US$11.695 billion” (Rios-
Morales 2006: 9).
In addition to the rather disappointing economic results, Nicaragua did not fully commit to providing a democratic environment for the implemented free market principles. For example, even though Chamorro emphasized the privatization of enterprises as recommended by the international community, some observed a lack of transparency in regards to privatization processes. So it was observed by Mario Arana that,
“[b]usiness relations were still based more on personal contacts than on the norms and the laws of institutions, which resulted in the lags in governability and economic and social inefficiency and, in turn, added uncertainty and risk to investment decisions”
(Arana 1997: 85).
By 1995, the country was unable to meet the targets set by the IMF. While this again shook the trust of investors, the IMF decided to provide one more assistance package known as the “Bridge Plan” (Arana 1997: 93). Altogether, the IMF granted
Nicaragua four large loans during the 1990s alone (Rios-Morales 2006: 9). While the country was in need, its increasing reliance on foreign assistance forced it to comply with
64 policies and requirements of international institutions (Arana 1997: 93). Listening to the conditions of the foreign investors became more important to the Nicaraguan administration than hearing the voices of Nicaraguans, leading to extreme marginalization of the population.
The impacts of the reconstruction process on the general population soon became evident. Jobs were lost, but without any government intervention attempting to compensate the losers, there was little hope for the poor. In early 1995, the unemployment rate reached a staggering 20.2 percent, twice as high as it had been just five years earlier (Arana 1997: 84). At the same time, around 53.9 percent of people were faced with chronic underemployment, further discouraging productivity (Arana 1997:
84). Nicaragua is an example of a case that challenges the assertion by the neoliberal paradigm that the gains will eventually “trickle-down”. As pointed out by Walker and
Wade, while a growth in GNP occurs, little has improved for Nicaraguans on the ground, significantly hindering the country’s development (Walker, Wade 2011: 3).
Despite these impacts, the Nicaraguan government did not intervene, but instead fully trusted that the market would compensate the losers in the long-term, as was promised by the neoliberal paradigm. The lack of social services specifically addressing the needs of the poor and the victims of the country’s reconstruction led to an overall
poverty rate of 53 percent, of which a staggering 20 percent lived in extreme poverty
65
(Arana 1997: 86).
4
In their already difficult situation, the Nicaraguan people were the victims of the most devastating natural disaster in the country’s history (Metoyer 2001: 402). Within four days in October of 1998, Hurricane Mitch swept through Nicaragua and Honduras, taking an estimate of 2,400 Nicaraguan lives (Walker, Wade 2011: 72). The destruction of the Hurricane was severe, and an estimated one fifth of the population lost everything.
The already poor nation suffered an economic damage of approximately US$1.5 billion
(Walker, Wade 2011: 72). The devastating impact of Hurricane Mitch provided a tragic example of the consequences of almost a decade of radical neoliberal reconstruction in
Nicaragua. Because the state had been reduced to its smallest possible size and most services had been relinquished into the invisible hand of the market, the government was utterly incapable to deal with a natural disaster (Walker, Wade 2011: 72). The damage of
Hurricane Mitch was exacerbated due to the government’s slow and inadequate response
(Walker, Wade 2011: 72).
Whereas Nicaragua ranked number 60 on the United Nations Human
Development Index when Chamorro took office in 1990, the country dropped to rank 116 by 2000 (Walker, Wade 2011: viii). By the time Bolaños took office in 2001, Nicaragua’s economic performance was catastrophic and its population desperate. Even in the case
4 Please note: While Nicaragua did provide some social services and programs to its citizens, the criticism here is that the programs available did not, as pointed out by Mario Arana, “discriminate between the poor
– especially the very poor- and the nonpoor”, meaning that there was a lack of alternatives for the victims of the structural adjustment programs (Arana 1997: 85-86).
66 that the country’s elite wanted to attempt to improve the population’s situation, the cuts of social programs, privatization, and reconstruction of the state had created a national government that was “utterly incapable of dealing with the dire human condition of the impoverished majority” (Walker, Wade 2011: 74).
By 2001, approximately 68 percent of people living in the rural areas of
Nicaragua fell below the poverty line (Gómez, Soloaga 2007: 203). Of this group, approximately 70 percent lacked basic access to electricity, 37 percent had no sanitation, and about four-fifth of the rural population lacked access to safe drinking water (Gómez,
Soloaga 2007: 203). While the amount of people living in urban areas falling under the poverty line was significantly lower than in the rural areas, the number still reached a staggering 30 percent (Gómez, Soloaga 2007: 203).
In 2002, Enrique Bolaños became president (Muhr 2008: 150). By that time,
Nicaragua’s gross national income per capita constituted only about US$710 (Gómez,
Soloaga 2007: 200). In addition, the nation recorded a very large trade deficit (Gómez,
Soloaga 2007: 201). Unfortunately, these trends continued for the remainder of the
Bolaños administration. As observed by William Grigsby in 2005:
“The governments of the last 16 years have docilely submitted to the neoliberal prescriptions of the international financial organizations, with terrifying results: 72 percent of the population forced to survive on less than US$2 a day, a deficit of over half a million houses, unemployment of over 40 percent, a million children left out of school, and around 1.3 million Nicaraguans forced to abandon the country to seek out an existence, at least, in Costa Rica or the United States.” (Grigsby 2005: digital).
67
Contentious Politics in Nicaragua
As the above discussion shows, Nicaragua’s economic performance over the last two decades was one of the worst in the region. The case therefore represents a great fit for the purpose of this study. However, some may be surprised that Nicaragua has not only been selected as a case for weak economic performance, but also for weak contentious politics. Some readers may find it astonishing that one of the few countries in the region that, as pointed out by Walker and Wade, actually experienced a “real social revolution” is presented in this thesis as a case study recording weak social movements
(Walker, Wade 2011: 1). The popular sector organizations, including peasants and labor movements were certainly a wide-spread, fundamental aspect of the FSLN during the late
1970s and 1980s (Polakoff, La Ramée 1997: 185). However, the contentious politics landscape in Nicaragua took on a new, and significantly weaker, look during the time of the FTAA negotiations.
Characteristics of Nicaraguan Contentious Politics
Nicaragua developed a visible civil society during the Sandinista area, in which the government actively supported and encouraged civil society organizations to participate in politics (Kampwirth 1997: 115). This caused many of the mass organizations to have substantial ties to the Sandinistas (Bochgrevink 2006: 20). Usually, only the groups connected to the Sandinistas were able to actually participate in government or influence policy (Borchgrevink 2006: 8). The influence of other parties,
not affiliated with the Sandinistas, usually varied significantly (Borchgrevink 2006: 8;
68
Kampwirth 1997: 115).
When the Sandinistas lost power to Chamorro in 1990, the civil society organizations that did have some influence were presented with significant changes.
Many of the influential organizations lost the funding they had enjoyed when the
Sandinistas had still been in power and were now facing a government that viewed them mostly as enemies (Borchgrevink 2006: 20). Therefore, the organizations experienced several changes in leadership and membership. As pointed out by Axel Borchgrevink in his report, the organizations’ leaders who used to be appointed by the Sandinistas, had to be elected by the organizations themselves (Borchgrevink 2006: 20). The radical polarization in the country of Sandinista vs. non-Sandinista, led to a reorganization of membership in which some of the organizations further distanced themselves from the
FSLN. This again had a significant impact on civil society’s governmental influences
(Borchgrevink 2006: 20). The organizations that maintained a party platform actually made it into parliament, increasing the ability of influencing politics. Some of these grassroots organizations, such as the Rural Worker’s Association, the National Union of
Farmers and Ranchers, were able to participate in some of the privatization negotiation processes (Walker, Wade 2011: 66). But their influence clearly declined under the new regime (Borchgrevink 2006: 21). In an attempt to direct government policy according to their wishes, “these and other groups staged marches, demonstrations, and strikes” in the
69 early 1990s (Walker, Wade 2011: 66), however, the population and civil society groups were unable to deter the government from continuing their neoliberal policy program.
Especially the union organizations were significantly weakened by those developments. As pointed out by Axel Borchgrevink, the labor movement, traditional motivator of social mobilization in Latin America, was severely hurt by the “[o]verall processes of globalization, neo-liberal policies and the establishment of tax-free maquiladora zones” (Borchgrevink 2006: 21). Despite some organized strikes,
Nicaraguans were unable to halt the deteriorations of salaries and worker’s rights
(Borchgrevink 2006: 21). Instead, the confrontations led to the fragmentations of several union organizations, significantly weakening Nicaragua’s potential labor movement
(Borchgrevink 2006: 21).
With former Sandinistas employees losing their jobs, many of them turned to founding NGOs in an attempt to regain participation rights in the government, drastically increasing the number of NGOs in the country (Borchgrevink 2006: 8). Were there about
150 registered NGOs in Nicaragua in 1980, the number exploded to about 1,729 in 1997
(Borchgrenink 2006: 22).
Given these developments, one would think that the large and newly extended network of NGOs that disagreed with the administrations’ politics would act as a facilitator for mass resistance against policies and free trade agreements that further damaged the socio-economic development of the country. However, as the following data
70 and its discussion will show, Nicaragua experienced relative weak mass resistance during the time of the FTAA negotiations.
Social Mobilization during the FTAA Negotiations
During the 1990s, the Chamorro government administered several cuts to social services and programs. This included cutting funding for higher education. The
Sandinista government had allocated six percent of the overall budget to higher education
(Almeida, Walker 2006: 183). In 1995, university students, faculty and staff united in massive street demonstrations demanding the reinstallation of six percent of the national budget contribution to higher education (Almeida, Walker 2006: 183). At first, Chamorro agreed to negotiate with the IMF that six percent of the domestically generated income be granted to universities, which would only amount to 4.2 percent of the national budget
(Almeida, Walker 2006: 183). Demanding the full six percent, the university community increased its efforts. Nicaragua had a student population of approximately 40,000 who expressed their discontent in several street demonstrations, “hunger strikes, occupations of the international airport and the ministries of finance and external relations, as well as several roadblocks in Managua and of the national highways” (Almeida, Walker 2006:
183).
Confrontations between the protesters and authorities turned violent on December
13, 1995. The university community organized a march to the legislative assembly on the day the university budget was up for debate (Almeida, Walker 2006: 183). The violent response by the police caused the death of two, and severely injured forty-three
71 protesters. Meanwhile, the assembly decided not to return to the six percent of the national budget contribution (Almeida, Walker 2006: 183). Mass protests by the university community continued over the next two years. However, the students and university organizations were unable to increase funding for the university to their desired six percent of the national budget for the remainder of Chamorro’s time in office
(Almeida, Walker 2006: 183).
Under the new Alemán administration, funding for the universities was eventually raised to six percent, excluding the international aid (Almeida, Walker 2006: 184). The university community, who had continued their protests and disruptive methods of contention under frequently brutal repression, did therefore only reach their goal partially. The reasons for the movement’s ineffectiveness are beyond the scope of this study. However, some authors suggest one reason for the weakness of Nicaragua’s civil society is the country’s weak economic performance (Walker, Wade 2011: 55). Because of the large number of people living in absolute poverty, Walker and Wade suggest, referring to the decline of civil society participation in the late 1980s, that “the increasingly desperate economic situation made it even more difficult for ordinary citizens to devote time to anything but the fulfillment of personal and family needs”
(Walker, Wade 2011: 55). What held true in the 1980s may still have been the case during the FTAA negotiations. Since no promised gains from neoliberalism and free trade have trickled-down to the Nicaraguan society, a large segment of society is struggling to survive. As shown in the previous section, many Nicaraguans still lack basic
necessities, including access to education, electricity, sanitation, and health care. In
72 addition, the increased economic marginalization that occurred as a result of the creation of the free market society made matters worse for many laborers and their families.
Therefore, it is not surprising that people lack the necessary resources to raise their voices.
President Alemán continued on the path of neoliberalism, even though he had been elected based on a platform that appealed to the large segment of society. Walker and Wade compared his administration to the one of other neopopulists in Latin America, including Argentina’s Menem (Walker, Wade 2011: 69). Just like Menem, Alemán was elected based on anti-neoliberal rhetoric, but then followed the paradigm once in office
(Walker, Wade 2011: 69). Alemán introduced a variety of reforms, including the “1994
Military Code, the 1995 amendments to the 1987 constitution, and the 1996 Property
Stabilization Law 209” (Walker, Wade 2011: 70). But Alemán even took it a step further.
Not only did he continue down the neoliberal path, he also tried to increase marginalization by depriving Sandinista politicians from their seats in the executive body in the National Assembly (Walker, Wade 2011: 71). As a response, the National Union of
Farmers and Ranchers and other grassroots organizations initiated a series of strikes and demonstrations in an attempt to save their during the 1980s hard-earned property. When international pressures to return the country to normalcy added to the domestic disruption
Alemán eventually agreed to compromise. In November of 1997, the Law of Urban and
Rural Reformed Property Act was passed (Walker, Wade 2011: 71). While the remaining
73 unions and FSLN organizations had used their influence to realize the above mentioned act their efforts started to decline as the new millennium approached. The leadership of the organization developed a reputation for wanting a piece of the neoliberal pie –of which apparently not a crumble was “trickling down” – and becoming largely agenda driven (Walker, Wade 2011: 73). This decline of the potential leadership for social mobilization made mass resistance to neoliberal policies in Nicaragua even more difficult.
Mass resistance also did not increase when Nicaragua announced its participation in the Central American Free Trade Agreement (CAFTA) negotiations in 2001 (ustr.gov :
CAFTA-DR; OAS CAFTA). The free trade agreement is between the United States and the Central American nations of Nicaragua, Honduras, Costa Rica, El Salvador,
Guatemala and was later joined by the Dominican Republic (ustr.gov: CAFTA-DR). The agreement was the first free trade zone between the United States and small developing economies (ustr.gov: CAFTA-DR), and marks “the first regional trade agreement between such vastly unequal trading partners” (Witness for Peace 2009). Peter E.
Marchetti cynically accused the United States of using Central America as “the FTAA guinea pig” (Marchetti 2002: digital). After fifteen years of neoliberal policies, about 78 percent of Nicaraguans were still living on less than US$ 2 a day (Harman 2005).
Accordingly, members of the NGO community voiced their objection to the agreement and called upon the public to protest the formation of CAFTA in front of congress in the
September of 2005 (Harman 2005). But of the 20,000 protestors expected at a trade
74 meeting in Managua, however, the number of actual participants only amounted to approximately 4,000 (Harman 2005). Again, civil society efforts were unable to translate objection to further neoliberal policies into a movement with the strength necessary in order to successfully influence policy. Accordingly, CAFTA was approved by the
Nicaraguan government in October of 2005 (OAS CAFTA).
As the above mentioned examples show, Nicaragua’s social mobilization against neoliberalism and free trade was relatively weak during the years of the FTAA negotiations, especially in terms of effectiveness. This is especially true when comparing the extent and impacts of the social movements in Argentina and Bolivia, where the mass protests eventually accumulated to the ousting of pro-neoliberal leadership. However, it is also true in itself, that Nicaragua experienced relatively little mass mobilization given the radical transformation the country underwent and the significant impacts on the population.
Nicaragua and the FTAA
As the previous section showed, Nicaragua radically followed neoliberalism.
Accordingly, the Nicaraguan government supported free trade. When the United States,
Canada and Mexico agreed to enter into the North American Free Trade Agreement
(NAFTA) President Chamorro publicly declared her support for the agreement
(Associated Press 1993). She further declared that NAFTA is going to, as quoted by the
Associate Press, “guarantee our (Central American) societies will be brought into an eventual free trade zone of the (entire) western hemisphere – to benefit all Americans”
75
(Associated Press 1993). This statement illustrates Chamorro’s faith in free trade as well as her enthusiasm for the formation of the FTAA.
While Chamorro did not see Nicaragua become a member of NAFTA or her desired FTAA, the country did get a chance to become a member of a larger free trade bloc. In 2005, Nicaragua intensified its relationship with the United States by signing the
Central American Free Trade Agreement (CAFTA). The agreement was ratified in
Nicaragua under President Ortega, an aspect that astonished many, considering that the
United States used to openly oppose Ortega (Llana, Schmidt 2007). The agreement was modeled after NAFTA, indicating Nicaragua’s support for a U.S. version of free trade, which Argentina had come to reject (Rohter, Bumiller 2005).
Accordingly, Nicaragua remained at the side of the United States throughout the
FTAA negotiations. In February 2004, President Bolaños endorsed Miami to serve as the permanent seat of the FTAA secretariat (Jewell 2004). With this endorsement, Bolaños sided with the United States and decided against Panama (Jewell 2004). As reported by
Suzanne Jewell, Bolaños stated in a press conference that,
"When the FTAA begins, which we hope will be soon, Nicaragua will be delighted if the headquarters for the organization is located in the great state of Florida. We have many reasons for taking this position. One of the most important, however, is the fact that
Floridians have welcomed, in a very warm and genuine way, more than 200,000
Nicaraguans arriving in Miami looking for freedom and opportunity." (Jewell 2004).
In this statement, Bolaños expressed clearly that he was looking forward to the formation of the FTAA. In addition, this statement also indicates the importance of gaining the favor of external constituencies, such as the United States and Nicaraguans
76 living abroad. Just as had been the case during the negotiations with the IMF during the
1990s, Nicaragua was still more interested in gaining the favor of international constituents rather than focusing on the needs of its own population. While the head of government held meetings with the United States (Jewell 2004) and expressed its support for the FTAA, members of the extensive Nicaraguan NGO network voiced harsh criticisms and objection to Nicaragua’s continuous pursuit of free trade. However, without the force created by mass mobilization, the Nicaraguan government did not change course. Despite the country’s weak economic performance, just like Chile, the other case analyzed in this study that experienced weak social movements during the
FTAA negotiations, Nicaragua intensified its relationship with the U.S. backed free trade model and supported the continuation of the FTAA negotiations.
The Case of Bolivia
Bolivia is the poorest and least developed nation in South America (Silva 2009:
103; Lara, Soloaga 2007: 174; U.S. State Department 2011, The CIA World Factbook
2011; Webber 2011: 15). While neighboring Chile records a GDP per capita of
US$6,121, Bolivia only records a GDP per capita of US$974 (Webber 2011: 16).
Accordingly, Bolivia fulfills the case selection criteria for a participant in the FTAA negotiations recording weak economic performance. The following pages are going to provide an overview of the data justifying this assessment. After that, this section is going to analyze anti-neoliberal social movements and contentious politics in Bolivia and identify the country’s position on the FTAA.
77
Bolivia’s Economy
Many academics organize Bolivia’s neoliberal journey into three rounds (Silva
2009; Webber 2011; Kohl 2006). Bolivia’s adaption of the economic liberalization started in 1985 with the adoption of the “New Economic Policy” (NEP) (Webber 2011:
18, Silva 2009: 107). The NEP consisted of an “orthodox neoliberal structural adjustment program” (Webber 2011: 18) - or as Eduardo Silva calls it - an “orthodox shock economic stabilization program” meant to lead Bolivia toward neoliberalism while creating substantial political exclusion (Silva 2009: 107,109). By implementing several austerity and privatization measures, the government under the National Revolutionary
Movement (MNR) attempted to improve the country’s weak economic performance.
Within one year of adopting the NPE, the inflation rate indeed dropped from 8170 percent to 9 percent (Perreault 2006: 155). However, this improvement in economic performance came at a terrible social cost. By the end of 1980s, “[o]ver 20,000 miners were left unemployed and some 35,000 manufacturing jobs were lost, while the informal sector accounted for 70 percent of the working population” (Perreault 2006: 155).
A key aspect of this reconstruction effort was the privatization of the most important industries in Bolivia. The major mining company COMIBOLD and the oil and gas company YPFB had been in control of the state since 1952 (Webber 2011: 18).
However, during the 1990s, Bolivia’s “water, oil and gas, telecommunications, airlines, smelter, power generations, and railroad enterprises [were sold] to a series of multinational corporations” (Webber 2011: 18).
The literature surrounding Bolivia’s reconstruction has termed these processes
“accumulation of dispossession” (Webber 2011: x; Perreault 2006: 153). According to this concept: “resources, such as water are no longer conceived of as public goods that
78 individuals have rights to as citizens, but rather as scarce commodities whose access for consumers is mediated by the market” (Perreault 2006: 153). The redistribution of governance from the state to private enterprises that restricted universal access was a major source of popular contention, which grew so strong that it eventually resulted in ousting the leadership in 2003.
In addition to depriving citizens of their right to govern their own resources, these reconstruction efforts had a far-reaching impact on the nation’s employment record. Ten years after the implementation of the NEP, the percentage of the workforce employed in the public sector had dropped from 25 percent to 13 percent in 1995 (Webber 2011: 22).
According to the neoliberal paradigm, the market should have compensated the losers created by the reconstruction of the state and eventually increase the standard of living of the entire population. But similar to the Nicaraguan case, the Bolivian market did not fulfill this promise. While the employment rate in the urban public sector had decreased by 12 percent, the percentage of workforce employed in the private sector rose by merely
2.4 percent over the course of a decade, from 16 percent in 1985 to 18.4 percent in 1995
(Webber 2011: 22). Despite these numbers, Bolivia, as pointed out by Jeffery Webber in his most recent work, recorded official unemployment rates of less than five percent during the same time period. However, as Webber continues to explain, this number does
not account for the people who were pushed into underemployment due to economic
79 liberalization and state reconstruction. Accordingly, in 1997 a staggering 53 percent were estimated to be underemployed (Webber 2011: 23). Similarly, the informal employment sector had expanded from 60-68 percent (Webber 2011: 23). So while the NPE was able to stabilize the economy, eventually recording annual GDP growth by about 4 percent and kept inflation rates low, the policy did not address any of the underlying causes of the country’s poor economic performance (Kohl 2006: 312).
Despite these developments, the Bolivian government did not abstain from adopting more neoliberal policies. During the mid-1990s, President Gonzalo Sánchez de
Lozada (commonly referred to as “Goni”) created a very comprehensive reform package fundamentally based on the neoliberal paradigm. The Plan de Todos (Plan for Everyone) is often referred to as the second wave of Bolivia’s neoliberal reforms (Silva 2009; Kohl
2006). Under this legislation, Goni sold 50 percent of state-owned industries, which had provided almost 60 percent of state revenue, to multinational corporations (Kohl 2006:
313). This awarded international firms nearly unlimited access to Bolivia’s natural resources, among them water and petroleum (Perreault 2006: 156, Spronk, Webber 2008:
80). In addition, Goni made changes to the constitution and undertook great decentralization processes in which about 20 percent of state revenues were distributed to municipal governments (Kohl 2006: 305). Many criticized the transfer of authority from the national government to the local level as an attempt to limit national social programs.
While this may have been the case, the increase in authority at the local level provided a
platform for more civil society participation. This allowed some indigenous political
80 actors to increase their platform, opening the door for the rise of indigenous politicians in the 2000s (Kohl 2006: 315).
The ultimate goal of the Plan de Todos was to attract foreign investment, which was meant to bring new technology and know-how, foster the country’s modernization and stabilize economic growth (Kohl 2006). While the country did record some economic growth during the period, the government was unable to make up for the loss of 60 percent of state revenue which had been lost due to the privatization of the state enterprises (Kohl 2006). Therefore the state ended up increasing their deficit spending, countering the anticipated economic stabilization (Kohl 2006: 314). “From 1997 to 2002,
Bolivia’s budget borrowing increased from 3.3 to 8.6 percent of its GNI” (Spronk,
Webber 2008: 81). In addition, the invitation issued to foreign companies did not have the desired impact on employment. Instead of creating new jobs, Bolivia’s informal sector continued to grow (Kohl 2006: 314). In an attempt to compensate for the lost revenue, the government continued cutting social programs and services (Spronk,
Webber 2008: 81).
By 2002, the situation for the poor had become even more desperate. According to Gabriel Lara and Isidro Soloaga, “[i]n 2002 almost two-thirds of the population (64.3 percent) were living in poverty and just over one-third (36.6 percent) were in extreme poverty” (Lara, Soloaga 2007: 175). In the more urban regions of the country, Lara and
Soloaga estimate that approximately 53.5 percent of people classified as “living in
poverty”. Tragically, the authors believe that in rural areas that number rose to a staggering 80 percent (Lara, Soloaga 2007: 175). Many poor citizens, especially in the
81 rural areas, lacked access to education, health care services, and often lived without access to electricity or proper sanitation (Lara, Soloaga 2007: 176). According to the authors, “Bolivia’s per capita gross national income is $920 – half as large as income in
Peru and a third as large as income in Argentina, Brazil, or Chile” (Lara, Soloaga 2007:
175).
Contentious Politics in Bolivia
When the first set of neoliberal reconstruction efforts occurred in Bolivia in the mid-1980s to early 1990s, the public did not respond with immediate protest. In fact, as pointed out by Benjamin Kohl “the memory of 17 years of military rule followed by three years of inflationary chaos served to convince the majority of the population that the stability of neoliberal restructuring promised was the best available option” (Kohl 2006:
313). However, things changed with the very comprehensive Plan de Todos reform. In addition to the prior mentioned decentralization and privatization efforts, the reform also affected other sectors, for example in education (Kohl 2006: 313). In order to fill the demand of the international corporations for skilled labor, the previously universal education system was changed to target globally competitive education in 1995 (Kohl
2006: 315). The reform was met with great resistance from the teachers’ union, who traditionally, next to labor unions, played a very large role in contentious politics in
Bolivia (Kohl 2006: 315). Social movements protesting the education and other
neoliberal reforms would become part of Bolivia’s daily lives for the next ten years,
82 simultaneously to the FTAA negotiations.
Especially when it became obvious that the promised improvements in economic performance did not happen, the public took their anger to the streets. No new jobs had been created, the Bolivian economy still depended greatly on their limited exports which were closely interlinked to the international market, and Bolivians felt excluded from politics, social services, and education. They had no longer control over their own natural resources, but many lived without reoccurring electricity and water shortages (Kohl 2006:
316). As expressed by Jeffrey Webber, “at the end of the 1990s the neoliberal oligarchic regime of accumulation entered into crisis opening up a period of massive left-indigenous rebellion that sought to resign neoliberalism to the dustbin of history” (Webber 2011: 19).
Consequently, when an American organization took over the water services in the city of Cochabamba in 2000, the protests grew to an extent that they would become known as wars. The company increased water rates by 200 percent (Perreault 2006: 158).
In response, Bolivian campesino organizations initiated roadblocks and general strikes in
April 2000. This episode of contention, in which tens of thousands of people took to the streets, would become known as el Guerra Del Agua (Water War) (Perreault 2006: 158).
The protestors demanded the removal of the foreign company, as well as an overall policy change by the government which facilitated the transfer of ownership and was therefore to blame for the rate increase. At the same time, movement organizers and the public wanted to avoid future transfers of ownership and wanted to be able to participate
83 in decision-making when it comes to the communal resources and their ownership. Other than in Nicaragua, Bolivia’s anti-neoliberal contention was more compressive and more far reaching. For example, whereas the student movement of 1997 in Nicaragua was a response to a particular austerity measure affecting education, the Agua War in Bolivia in
2000 demanded that the Bolivian government adapt a new economic policy approach overall, not just a revision of the ownership transfer of water service in Cochabamba. In addition, the movement had spread from Cochabamba to different cities and attracted participants from all paths of lives,
“including indigenous peoples, students, workers, artists, intellectuals, neighborhood associations, religious groups, and sectors of the middle class out of a common frustration with the promises and failures of neoliberalism” (Arce, Rice 2009: 91).
Most of the participants in the Nicaraguan student movement of 1997 were members of the university community. Even though the protests therefore occurred in several locations throughout the country, the spark of contention did not ignite movement in other sectors and cities, as was the case in Bolivia. This more comprehensive antineoliberal contention in Bolivia had therefore a more far-reaching and stronger character than it had in Chile or Nicaragua.
The Bolivian social movement was met with great repression from the Hugo
Banzer administration. Protestors were assaulted by police with tear gas and rubber bullets (N.Y. Times 2000). The assaults caused numerous protestors to suffer injuries and three protestors to lose their lives. After the protestors started to fight back by attacking the police by throwing rocks and Molotov cocktails, Banzer officially declared a State of
84
Emergency for 90 days (N.Y. Times 2000). The road blocks and strikes had led to food shortages in La Paz and other cities. Under declared state of emergency, Banzer sent the military into the streets, causing yet another death, numerous arrests, and the establishment of a curfew (Perreault 2006: 158; N.Y. Times 2000). Finally, Banzer gave in to the protestors’ demands. The contract of the American based company was cancelled and ownership of Cochabamba’s water resources was transferred back to the original local firm (Perrault 2006: 158). In addition, Banzer revised the legal situation of drinking water in the region. The movement had successfully reversed local policy.
However, the movement in 2000 did not halt Bolivia’s neoliberal direction. When
Goni took office for a second time in 2002, he continued his harsh neoliberal program.
During his first six months in office, several riots occurred causing the death of about 27 people (Jeter 2003). The protestors had many demands. They opposed the austerity measures and cuts in social spending, the lack of jobs, and the formation of the FTAA
(Livingstone 2003). But when the government decided to sell Bolivia’s natural gas to the
United States through Chilean ports the population had enough. As quoted by Jon Jeter in the Washington Post on September 27, 2003, Peredo Leigue, member of Morales
Socialist Party, summarized the public’s sentiment as:” The people don’t need patches; they need a whole new coat” (Jeter 2003), meaning that the public wanted an overall departure from the neoliberal paradigm, not just a few policy changes.
But there were other motivations that caused the social contention in Bolivia to grow so strong. For example, the massive uprisings in the gas war confirm the
85 phenomenon of contentious politics, as identified by Tarrow, in which the public takes the streets in the case of perceived inequality. As pointed out by Susan Spronk and
Jeffery R. Webber, Bolivia is one of the wealthiest countries in terms of natural resources
(Spronk, Webber 2008: 83). However, Bolivia is the poorest country in South America.
The country’s natural gas reserves, especially since new discoveries have been made in
1997, are the second largest in Latin America (Spronk, Webber 2008: 80). The earnings of this industry were very valuable, if not vital to Bolivia’s economy. But because of the
Plan de Todos, these earnings were transferred to multinational companies, away from
Bolivian’s, while the national elite would profit from the agreement (Spronk, Webber
2008). In order to protest this injustice, Bolivians arose in what would become known as the Gas War of 2003 to 2005.
While selling the rights to natural gas had been on the country’s political agenda for quite some time, it was not until October 2003 that a social movement occurred that paralyzed the country. By that time, the National Coordinator for the Defense of Gas had emerged (Perreault 2006: 161). The organization made it its goal to defeat the
“accumulation of dispossession” and together with well-coordinated neighborhood organizations in the Altiplano city of El Alto and Bolivia’s major labor unions, mass protests, street barricades, and hunger strikes were organized (Perreault 2006: 161). By
September 27, about 100,000 protestors successfully shut down five cities throughout the country for almost a week, including the capital city La Paz (Jeter 2003). On September
28 th
, trade unions announced limitless strikes (Livingstone 2003). The ongoing road
blockades caused several tourists to be trapped, increasing international attention. In
86 order to escort the 800 tourists into safety, Goni sent in the military, which resulted in violent clashes with the protestors, claiming seven lives, including a soldier and an eight year old girl (Livingstone 2003; Perreault 2006: 161). Outraged, Bolivian peasants and campesinos strengthened their commitment to the movement.
By the end of September, the Movimiento al Socialismo (MAS) leader Evo
Morales gave the president an ultimatum: Recover the gas or resign (Lewinger 2003). At that point, the episodes of contention were ready to transform into civil war (Lewinger
2003). However, Goni vowed that he would not step down. The city blockades and strikes persisted throughout October, and supplies started to run low. In order to remove the blockades in the suburb of El Alto outside La Paz, Goni sent a military operation backed by tanks, claiming more than 20 lives and leaving many injured (Perreault 2006:
163). The violent protests continued, demanding the president’s resignation. On October
13 th
, thousands of protestors marched into La Paz. The government responded violently with tear gas, the Gas War’s death toll rose to about 43 (Rohter 2003). In an attempt to sooth the public and prevent the country from falling into civil war, President Gonzales
Sanches de Lozada suspended the gas export contract with the United States on October
13, 2003 (Villegas 2003). However, it was just a little too late and the protestors vowed to continue until President Sanches de Lozada resigns. After the US embassy and “the high command of the armed forces” announced that they would no longer support the president, Goni eventually fled to Miami and consequently resigned as president on
October 17, 2003. The Vice President Carlos Mesa assumed the presidency (Perreault
87
2006: 164). The protestors had achieved their goal.
There were many additional factors that facilitated the great strength of the
Bolivian anti-neoliberal social movements. Fist, the economic marginalization that occurred as a consequence of neoliberal policies was not only a matter of economic class, but also of race. More than half of Bolivians identify as indigenous (U.S. Department of
State 2011). But the opportunities for the indigenous population to participate in politics had always been limited. But with the country’s transition to democracy and the before mentioned decentralization process, new possibilities for indigenous leaders emerged
(Kohl 2006: 315). By the time of the Gas War, many had been elected into parliament, strengthening the character and facilitation of the social movement (Perreault 2006: 162).
Second, another aspect of the Gas War, as well as the Water War, was a newly found nationalism which united the Bolivians in their overall war against neoliberal economic policy. The social movements in Bolivia between 1994 and 2005 were comprised of people from all paths of life, eventually even including some police and military officers (Rohter 2003). This might have been due to the fact that foreigners received access to national resources, all while Bolivians were sinking further and further into poverty. Bolivians, including the poor, the middle class, and even some members of the police and military forces, did not want to see their Bolivian property enrich someone else. In the case of the Gas War, some journalists also reference Bolivia’s 120 year old grief with Chile over the loss of the coast line as a reason for the wide-spread nationalism
88 that characterized the population between 2003 and 2005, because the gas was to be sold to the United States through Chilean ports (Villegas 2003).
The climax of the anti-neoliberal contention in Bolivia occurred on June 6, 2005, when President Carlos Mesa resigned and the Gas war ended (Spronk, Webber 2008: 77).
The country sealed the start of a new era with the election of the MAS on December 18,
2005 (Spronk, Webber 2008: 83). Since then, the country has taken a more left-wing approach to economics (Webber 2011: 1). Bolivians successfully put the government into a new coat.
Bolivia and the FTAA
In the mid- 1980s, Bolivia transitioned from an intensively government regulated to a free market society overnight through the implementation of its economic shock program (Yergin, Stanislaw 2002: 232). An important aspect of the New Economic
Policy was rapid trade liberalization (Jenkins 1997: 314). As shown in chapter five,
Bolivia remained on the road of economic liberalization until the public started to protest the accumulation of dispossession in the early 2000s. However, after the water and gas wars, Bolivia changed course in its trade policy, seeking a departure from the values advocated by the United States and international institutions. As Evo Morales stated before the Mexican congress in November of 2003: “I dream of boosting this antiimperialist message with a great summit including Fidel, Lula and Chávez, to show that we are united, and to make the North American imperialists think twice” (Saytanides
2003). Bolivia made its opposition to the free trade promoted by the United States official
in April 2006 by signing an alternative trade pact with Venezuela and Cuba (Smith,
89
Pearson 2006). According to the New York Times, the Bolivarian Alternative for the
Americas (ALBA) was supposed to represent a “socialist version of regional commerce and cooperation” (Smith, Pearson 2006). The pact had been established the year before by Venezuelan President Hugo Chavez and Cuban President Fidel Castro (Smith, Pearson
2006). Cuba had been the only nation in the western hemisphere to be excluded from the
FTAA negotiations. Hugo Chavez led the nations opposing the FTAA at the summit meeting in Argentina in 2005 that ended in the premature departure of negotiators (BBC
Nov. 15, 2005). Therefore, Bolivia’s signature to ALBA can be viewed as Bolivia’s official opposition to the FTAA. But in addition, given that the first published descriptions of ALBA emphasized the agreement’s “socialist” character, Bolivia’s alignment with Cuba and Venezuela represents an overall rejection of the neoliberal values of free trade. Therefore, the case analyzed in this study that experienced weak economic performance and some of the strongest social movements declared the strongest opposition and was the least likely to support the FTAA.
90
Chapter Five
CONCLUSION
Results
The objective of this study was to evaluate whether domestic anti-neoliberal social movements in Latin America influenced their respective governments’ decision to support or oppose the formation of the Free Trade Area of the Americas (FTAA). In order to address this question, this study analyzed the economic performance of
Argentina, Chile, Bolivia, and Nicaragua during the time of the FTAA negotiations between 1994 and 2004. In addition, this study analyzed the strength of episodes of antineoliberal contention occurring in said countries during the same time period. Based on the data presented in this study, the results show that countries experiencing strong antineoliberal social movements were less likely to support the formation of the FTAA.
Bolivia, the country with the strongest social movements in this study also expressed the strongest opposition to the formation of the FTAA during the final phase of the negotiations. Bolivia’s social movements achieved an extent that the international media described them as “wars” rather than just as mobilizations. The social movements spread across several sectors and expressed many different sentiments, marking them as the strongest anti-neoliberal contention in the region. With the alignment with Venezuela and Cuba shortly after the official halt of the FTAA negotiations, Bolivia’s policy also showed the strongest departure from the neoliberal paradigm.
91
Social movements in Argentina were strong enough to cause the ousting of the government in 2001. By 2004, Argentina had chosen to withdraw support for the FTAA.
However, other than Bolivia, Argentina did not publicly declare their opposition to free trade; but instead, the country neither officially opposed nor endorsed the facilitation of the agreement. Chile, the country with the strongest economic performance but the weakest anti-neoliberal contention supported the continuation of the FTAA negotiation.
Even today, Chile continues to actively pursue a neoliberal trade policy and has supported the continuation of the FTAA negotiations until the end. This even happened after Chile had already implemented a bilateral free trade agreement with the United
States, showing the country’s strong commitment to free trade.
Despite strictly following the neoliberal paradigm, Nicaragua remains one of the poorest countries in the western hemisphere. However, Nicaragua’s government was in favor of the FTAA and did not break with economic liberalization, as the signing of
CAFTA showed. Given the fact that Nicaragua experienced relatively weak and ineffective social movements during the time of the FTAA negotiations, it can be concluded that nations’ domestic social movements influenced their respective governments’ decisions to support or oppose the formation of the FTAA. Accordingly, all four hypotheses proposed in this study have been confirmed.
However, the results of this study have additional implications. Overall, there is evidence that the stronger the movement the greater the overall policy change. Nicaragua, the country with the weakest social mobilization and the weakest economic performance
signed a regional free trade agreement with the United States, strengthening its commitment to the values of the free trade paradigm advocated by the United States.
92
Chile, which recorded strong economic performance but weak contentious politics remained on the path of trade liberalization. Argentina, experiencing strong social movements, withdrew support for the FTAA but did not want to officially declare its opposition to free trade. Bolivia, the country with the strongest movements, started to look for economic alternatives to neoliberalism, showing the strongest change in trade policy direction.
Implications for the Literature
As outlined in the literature review of this thesis, free trade is subject to a lot of debate. While the economic policy is supposed to lead to economic growth and modernization, it also leads to the creation of winners and losers. However, this study does not confirm that the gains eventually trickle-down to society as a whole and that the market alone compensates the losers, as predicted by the neoliberal paradigm. Nicaragua and Bolivia radically followed the neoliberal paradigm and yet both countries are still among the poorest in the region. Chile on the other hand, the country that has seen the most improvement in its economic performance and social conditions has also adapted a more managed approach to the free market economy. Accordingly, this study does not confirm the assumption that the losers of free trade will be eventually compensated by the market in the long run. Rather, this study confirms the assumption of the contentious politics literature that the losers of free trade mobilize when they perceive a threat to their
livelihood and the government fails to respond to their problems or does nothing to
93 protect them. In addition, this study confirms the literature’s assumption of unfairness playing an important factor in the formation of social movements. As was the case in
Bolivia, international newspapers reported about the anger the public felt that so many
Bolivians spend their lives in poverty when it is one of the countries with the most natural resources in the world.
The results of this study also bear important implications for the study of international negotiations. As outlined in the literature review, civil society has emerged as a relevant actor in the international negotiation realm over the last few years. However, in the case of the FTAA negotiations, civil society participation was rather limited. As pointed out by Stahler-Sholk et al. and Roberts, this marginalization of the public in the creation of an agreement that could negatively impact the lives of thousands of people further prompted the public to mobilize. However, the results obtained in this thesis indicate that domestic anti-neoliberal contention influenced the outcome of the FTAA negotiations, showing that civil society is an important actor of an international negotiation, even if not present at the negotiation table itself. Therefore, in order to facilitate the successful outcome of an international agreement, it is important that the public agrees with the principles and values that provide the foundation of the negotiation.
Concluding Remarks
This study was conducted at a time when “new” social movements in regions other than Latin America are making headlines. Ranging from the Occupy Wall street
Movement (OWM) in the United States to the anti-austerity strikes in Greece, people
94 across the globe are demanding the attention of their leaders (Stiglitz 2011; Donadio,
Kitsantonis 2011). With slogans such as, “we are the 99 percent!” protestors are expressing their discontent with the ruling elite and society’s “winners” (Stiglitz 2011).
As this thesis suggests, there is a relationship between domestic social mobilization and the outcome of multilateral negotiations. The results of this study are especially applicable for contentious politics and international negotiations in Europe, where government’s decisions and policies are now closely intermingled with other member states of the European Union, making almost any policy decision an international negotiation. Accordingly, in order to ensure the facilitation of future projects, it is important for nations to listen to their people and ensure substantial societal participation.
95
Table 1 Argentina: Economic Indicators le
Argentina GDP per capita
Year
1994
1995
1996
(current US$)
7479.29
7402.98
7712.44
1997
1998
1999
2000
2001
2002
2003
2004
2005
8199.90
8273.18
7759.03
7695.59
7203.26
2709.71
3410.34
3993.91
4735.98
GDP per capita growth (annual %)
4.49
-4.06
4.23
6.82
2.64
-4.46
-1.84
-5.36
-11.74
7.85
8.06
8.22
Table 2 Argentina: Poverty Indicators
APPENDIX
5
Inflation, consumer prices (annual %)
4.18
3.38
0.16
0.53
0.92
-1.17
-0.94
-1.07
25.87
13.44
4.42
9.64
Unemployment, total
(% of total labor force)
12.1
18.8
17.2
14.9
12.8
14.1
15
18.3
17.9
16.1
12.6
10.6
Argentina
Year
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
Income share
held by highest 10%
33.88
36.34
36.06
35.95
37.83
37.01
37.54
39.48
40.46
41.55
36.66
36.08
Income share held by lowest 10%
1.5
1.17
1.06
1.08
1.07
1.09
1.01
0.67
0.92
0.77
0.98
1.07
5 Tables 1 through 8 were created by the Databank of the World Bank available at: http://databank.worldbank.org/ddp/home.do?Step=1&id=4.
Poverty headcount ratio at $2/day
(PPP) (% of population)
4.34
7.06
7.9
7.49
8
8.52
10.53
14.91
23.05
17.92
12.35
9.41
96
Chile
Year
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
Table 3 Chile: Economic Indicators
Chile GDP per capita
Year (current US$)
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
3890.98
4951.57
5178.74
5580.11
5277.79
4792.37
4877.52
4394.22
4261.62
4636.00
5929.30
7253.81
GDP per capita growth (annual %)
3.88
8.83
5.79
5.10
1.86
-2.01
3.21
2.16
1.02
2.77
4.91
4.46
Table 4 Chile: Poverty Indicators
Income share held by highest 10%
44.6
Inflation, consumer prices (annual %)
Income share held by lowest 10%
1.29
Unemployment, total
(% of total labor force)
6.3
9.8
9.2
9.1
5.9
4.7
6.3
6.1
8.9
8.5
8.8
8
Poverty headcount ratio at $2/day
(PPP) (% of population)
8.91
44.44
44.97
45.31
44.98
1.33
1.25
1.31
1.37
6.52
6.15
5.6
4.94
97
Nicaragua
Year
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
Table 5 Nicaragua: Economic Indicators
Nicaragua GDP per capita
Year (current US$)
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
656.43
688.19
701.55
701.26
727.32
749.27
775.83
796.84
771.38
775.70
833.97
898.35
Table 6 Nicaragua: Poverty Indicators
GDP per capita
growth (annual %)
0.93
3.60
4.18
1.99
1.87
5.26
2.48
1.46
-0.62
1.19
3.98
2.97
Income share held by highest 10%
36.12
33.87
31.51
Inflation, consumer Unemployment, total
prices (annual %) (% of total labor force)
Income share held by lowest 10%
2.18
2.3
2.61
7.07
5.99
3.75
5.30
8.47
9.60
31.4
34.38
31.74
16.9
14.9
13.3
13.2
10.9
9.8
6.4
12.2
8
6.7
5.6
Poverty headcount ratio at $2/day
(PPP) (% of population)
98
Bolivia
Year
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
Table 7 Bolivia: Economic Indicators
Bolivia
Year
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
GDP per capita
(current US$)
818.87
898.84
968.49
1015.56
1066.02
1017.97
1010.91
960.46
914.28
916.80
976.68
1044.01
Table 8 Bolivia: Poverty Indicators
GDP per capita growth (annual %)
2.288
2.343
2.084
2.712
2.830
-1.641
0.429
-0.349
0.471
0.739
2.237
2.552
Income share
held by highest 10%
Inflation, consumer
prices (annual %)
7.87
10.19
12.43
4.71
7.67
2.16
4.61
1.59
0.93
3.34
4.44
5.39
Unemployment, total
(% of total labor force)
3.1
3.6
5.2
3.7
4.3
4.8
5.4
5.4
4.3
5.4
Income share held by lowest 10%
Poverty headcount ratio at $2/day
(PPP) (% of population)
45.41
42.37
48.78
45.11
47.08
44.33
0.47
0.27
0.14
0.35
0.28
0.46
27.14
33.48
37.88
31.64
32.91
27.96
99
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