"Popular disenchantment with reforms and disenchantment with democracy are both increasing while many countries are mired in economic stagnation or outright recession," he added.
Latin America 'may see more calls for protectionism' By Richard Lapper and Raymond Colitt in Fortaleza, Brazil Published: March 10 2002 20:05 | Last Updated: March 11 2002 08:41
Rising popular frustration with US trade policy and the results of more than a decade of market-friendly economic policies could lead to greater protectionism and state intervention in Latin America, top economists told the annual conference of the Inter-American Development Bank this weekend.
Although the region escaped relatively unscathed from last week's imposition by the US administration of tariffs on steel exports, the move was widely condemned. "The US is giving us the worst possible example," said Eliane Cardoso, a visiting professor at Georgetown University in Washington.
"It's a tremendous step backwards that should worry us greatly," said Sebastian Edwards, professor of economics at the University of California in Los Angeles. "I only hope it is an isolated case."
Mexican and Argentine steel producers were exempt from the new tariff, and Brazil was allocated roughly half of a new import quota for imports of semi-processed steel slabs. The quota marginally exceeds its existing exports of those slabs, although Brazilian officials estimated revenue losses at about $100m a year and said the tariff would adversely affect expansion plans by local companies. Venezuelan steel producers could also lose revenue.
The move comes at a time when privatisation, free trade and the other liberal reforms of the last 10-15 years are coming under sustained criticism following the crisis in Argentina, whose economy was previously regarded as a model for the continent by policymakers at the International Monetary Fund and other multilateral institutions.
Much of the IADB conference was dedicated to a soul-searching examination of the reasons for Argentina's failure and for growing popular opposition to free-market reforms elsewhere. "Latin America is suffering its worst crisis in various decades and both governments and public opinion in the region are searching for a way to deal with it," said Eduardo Lora, head of research at the IADB.
"Popular disenchantment with reforms and disenchantment with democracy are both increasing while many countries are mired in economic stagnation or outright recession," he added.
Speakers at a series of conference sessions noted the growing support for greater state intervention and heavier social spending. However, a return to the populist approach that dominated Latin America during the first decades after the second world war is seen as unlikely. "Macro-economic populism is dead," said Mr Edwards.
However, continuing US and European protectionism could tempt Latin American leaders away from a free trade strategy that has seen average tariff levels fall from above 40 per cent in the mid-1980s to around 10 per cent. "There is a danger of an insidious populism in the form of industrial protectionism," warned Ms Cardoso.
Mr Edwards said it was vital for emerging economies to have access to markets of industrialised nations in reward for adopting market-friendly economics, a point of view widely shared by attendants.
"What good is it working to increase competitiveness of our products, when they then face trade barriers in developing countries?" asked one woman working for the Brazilian government's agricultural research agency, Embrapa.
"How can we believe in competitiveness when the macro-economic conditions impede us?" complained one Ecuadorean small business owner.
In a visit to Brazil next week, Robert Zoellick, the US Trade Representative, is expected to defend the steel tariffs and will seek to bolster fading enthusiasm for the Free Trade Area of the Americas (FTAA).