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St Comp Int Dev (2009) 44:296317

DOI 10.1007/s12116-009-9050-3

New Paths: Globalization in Historical Perspective


Fernando Henrique Cardoso

Published online: 11 August 2009


# Springer Science + Business Media, LLC 2009

Abstract This essay argues that the historicalstructural framework of analysis is


still useful to describe the transformations generated by globalization in the
underdeveloped countries, provided that it is employed with the subtlety needed to
avoid reductionism. Globalization, in the same way as dependency, is nothing more
than an unfolding of the capitalist system in today's historical conditions. The
structural starting point conditionsbut does not determinethe shape taken by
economic and political processes. Political strategies for integrating into the global
economy have a certain margin of autonomy. Still, the range of feasible strategies
depends on factors that differ from country to country, such as the local capacity of
income accumulation, the presence of foreign direct investment, the mix between
nationally controlled production and production controlled by multinationals, the
participation of the public sector in production, the capacity of the leadership, the
prevailing ideologies, and so forth. In other words, there are alternative paths.
Keywords Globalization . Developing countries . Latin America
Forty years ago, in 1967, I completed with Enzo Faletto in Santiago de Chile the
draft of Dependency and Development in Latin America. The book discussed the
main interpretations of social and economic development. At that time, both of us
worked at the Economic Commission for Latin America (ECLA)better known in
the region by its Spanish acronym CEPALthe UN institution that proposed an
approach to the studies on economic development known as Latin American
structuralism. The main architect of this theory was the Argentine economist Raul
Prebisch, but his argument underwent several permutations.
Prebisch defined the region's underdevelopment as being structural. Based on the
statistical analysis by Hans Singer, an important UN economist, Prebisch highlighted a
process of recurring loss in international trade that limited the chances of growth for
underdeveloped countries. This happened because the international trade of underdePresident of Brazil (19952003)
F. H. Cardoso (*)
Instituto Fernando Henrique Cardoso, Rua Formosa, 367, 6 andar, Centro So Paulo, So Paulo,
Brazil CEP 01049-000
e-mail: ifhc@ifhc.org.br

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veloped countries was limited to imports of manufactured goods and exports of raw
materials and agricultural products, the so-called commodities. These commodities had
low technological content, and the wages paid to the workers for their production were
also low. On the other hand, despite the high technological content of manufactured
goods, which should make them cheaper, unions and other organized sectors of the
developed countries withheld the productivity gains. These were the social and political
foundations for the emergence of a growing gap between the developed countries in
the center and the underdeveloped countries in the periphery. This gap was structural
and could not be explained solely by short-term factors linked to price fluctuations.
In the periphery, the new technologies incorporated by the export sector did not
spill over to the economy as a whole, not even to the agrarian sector. The situation
was sharply different in the central countries. There, the productivity gains in one
sector were quickly shared across the whole economy. Even though developed
economies were diversified, they were homogeneous in terms of their capacity to
absorb technological innovation. Conversely, in the periphery, productivity gains
were concentrated in the export sector, giving birth to specialized and heterogeneous
economies. This divergence took shape since the rise of commercial capitalism when
underdeveloped countries in the periphery became linked through the international
market to countries with more advanced economic structures and technology.
I mention the theory of Latin American structuralism for two reasons. First, I wish
to show that CEPAL's economic thinking had nothing to do with the simplifications
intrinsic to a vulgar version of the theory of imperialism, which was quick to reduce
everything to political coercion imposed by the central countries on the periphery.
Second, and foremost, I want to underscore that Latin American structuralism always
sought to combine economic analysis with political analysis. Prebisch never forgot
that the development process has an inescapable component of productivity gains,
which are impossible to achieve without scientific and technological innovation and
without capital accumulation. Moreover, he elucidated the reasons that economic
analysis based on classical theory no longer worked: trade unions in industrialized
countries struggled for a greater share of the national product; their states wanted to
increase tax revenues to build a better society; and the concentration on the agroexporting sector profoundly distorted the structure of peripheral economies.
What was to be done to reverse such a situation? The answer was complex. The
state had to do what the market had not: achieve capital accumulation through taxation
and enlarge the technological component of production. In other words, it would be
necessary to industrialize the underdeveloped countries, releasing them from the
straitjacket of agrarian, pastoral, and mining production. Instead of directing
production to the external market, it would be directed primarily to the domestic
market. Since the constant deterioration of the terms of trade led to cyclical crises in
the balance of payments, foreign exchange controls had to be imposed. To stimulate
the reorientation of the economy hacia adentro, some planning would be required. It
was essential to attract foreign and domestic capital to spur economic growth. All
this implied improving the efficiency of the state apparatus and of public policies.
In Dependency and Development in Latin America, Faletto and I expanded the
structuralist argument. Revisiting the classic tradition of an integrated social
science, we proposed simultaneous political, economic, and social analysis to
understand the paths to economic growth and development. We included historical

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and political aspects that conditioned the development of peripheral economies.


Instead of considering all economies as homogeneous, we showed that in each one,
social groups and classes interacted in a particular way with each other and with the
central countries. There were two basic types of insertion for the Latin American
economies in the international system: one where export-oriented production
remained under the control of domestic producers and the other where foreign
investment was the dominant force in the export sector. Historically, this distinction
depended on many factors, such as the availability of land or mineral resources. It
also depended, since colonial times, on the size of the population, on the political
capacity of groups and classes to build effective power structures, on their capacity
to negotiate with the external sectors, and so forth. In all cases, there was no single
and inevitable specific form of dependency insofar as it was not the outcome of an
external imposition, but the consequence of a combination of internal and external
factors, and of their ensuing alliances.
In some cases, as a result of direct foreign investment in the export sector, the socalled enclave economies were formed. Domestic groups had rarely taken part in this
type of economic exploitation. In general, local agricultural and mining producers
played a secondary role in the enclaves throughout the nineteenth century. The
middle classes benefited only marginally from the system using the local state as
collector and redistributor of the taxes levied in the enclaves. The workers in enclave
economies were directly dependent on them, whereas the rural masses of the
traditional sector were marginalized, especially in the countries with huge indigenous
populations, as in Bolivia and Central America and, to a lesser extent, Chile and
Mexico. In other cases, local owners devoted themselves to agricultural activities,
generating their own capital accumulation, given the abundance of land and a cheap
labor force, when not outright slave labor. Later on, this enabled them to diversify
their capital toward industrial production, as was the case in Argentina and Brazil.
The emphasis of the book was not, therefore, on dependency, even though it was
read through this prism because the theory of dependency was then fashionable
despite our explicit opposition to this simplified version of the theory of imperialism.
The emphasis was on the variability of the forms of integration into the world market
and on the existing alternatives for Latin American countries to achieve economic
growth even when in situations of dependency.
In the 1960s, a trend toward a growing association between domestic and
foreign capital in local production was already discernible, particularly in
industry and services, with transport and financial services having strong
foreign participation, especially from Britain since the nineteenth century.
Taking advantage of the boom in the production of manufactured goods after
the Second World War, foreign capital became prominent in industrial
investment, especially in Brazil and, to a lesser extent, in Mexico. In other
words, what we then called the new form of dependency was actually the
beginning of a process that would fully unfold later and be known as
globalization. At the timethe end of the 1960swe were far from foreseeing the
broad meaning of the current globalization. The effects in the financial world of
the technological advancements in communicationswith microcomputers and the
Internetwere not yet manifest. Still, we were, without a clear awareness of it,
trying to comprehend the initial steps of globalization.

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At that time, not even the notion of multinational corporations was in use. Those
were called trusts; the expression multinational corporation was coined only
later, in 1971, by Raymond Vernon (Vernon 1971). What about globalization? Using
another term, internationalization of the domestic market, we were actually dealing
with the dawn of the globalization process. We showed, furthermore, that foreign
capital investment to produce industrial goods required the expansion of the
domestic market, with a host of ensuing political consequences. We went as far as
foreseeing that sustainable development in the periphery was feasible, contrary to the
widespread belief at the time that this was impossible within the capitalist system.
We argued that to maintain future expansion of production, it would be necessary to
gain the international market for manufactured goods by exporting differently than in
primary-export economies. The external market would become the condition for the
continuity of economic growth, thus turning around the argument that the domestic
market was the driver of development.
In this essay, I do not wish to follow, step-by-step, the relation between center and
periphery as we saw it in the past compared with today's relationship between
advanced and emerging economies, to use the currently fashionable term. I just want
to emphasize that in the 1960s, ECLA had a vision that stressed the structural
differences between center and periphery, and my book with Faletto did not deviate
from this position. We added the historical dimension to show how the diverse
situations of dependency came into being. We did this through an integrated
approach that considered the economic, social, and political factors in the formation
of capitalism in the periphery. And more importantly, the book revealed that there
were differences between countries concerning the opportunities for growth and
integration into the international market. It downplayed the relative weight of
external factors in the interplay of the indigenous social classes among themselves
and in their relations with the countries of the center. It also analyzed the changes
that occurred in the countries of Latin America as the overall conditions of capitalism
evolved. We stressed that strategies and political decisions count considerably.
Despite being made under historical and structural conditions, these decisions can,
under certain circumstances, influence or even change those conditions.
We were concerned with the degrees of national autonomy and, therefore, with the
role the state could play in development decisions. It was not yet possible to anticipate
the relative autonomy of multinational corporations vis--vis states, not even in
countries in the center. Nor could we envision a situation in which the great
organizations created at Bretton Woods to stabilize the economic order and to provide
greater opportunities for growth to underdeveloped countries, like the International
Monetary Fund (IMF) and the World Bank, would reveal their fragility. Today, they
are clearly incapable of managing the dynamism of the global economy and the
multinational corporations as well as balancing the growth of emerging economies.

A New World
Forty years later, where do we stand? After the fall of the Berlin wall, signaling the
end of the bipolarity between the Soviet Union and the USA, or the free world, as
the Western bloc presumptuously called itself, and after the technological advances

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leading to a prevalence of high-technology and the revolution in the means of


communication and transport, we live in another world. Neither better nor worse, but
different. The ongoing technological innovations that changed the mode of
production and, above all, the rise of financial capital redesigned the global order.
International trade has been growing at a higher rate than gross domestic product
(GDP). Still, scarcity of jobs and inequalities keep hurting the poor countries while
the global population continues to grow.
The discussions about another globalization, non-asymmetric and not producing
income and employment concentration, inflame hearts and some minds. They may
have a denouncing power, but they do not change the predictable course of events.
Quoting a famous statement uttered at the end of the 1970s by the then Secretary for
International Affairs of the Italian Communist Party and now President of Italy,
Giorgio Napolitano: Either we internationalize ourselves or they will internationalize us. This may seem like a play on words, but it is not.
The idea behind this notion of internationalizing ourselves is not that every
developing country at every point in time can make political decisions to integrate
into the global market. The possibilities for integration depend on previous historical
developments and are not the same for all countries. Strategic, politically supported
decisions to strengthen national economies and local business are required to prevent
the dynamism and structural power of global business from prevailing over national
interests. Moreover, institutional capacity to cope with the global environment is also
crucial for a nation to succeed in the process of globalization. In order to preserve
degrees of autonomy, domestic markets need to be opened adequately. This
requires increasing the productivity and competitiveness of local business.
Nowadays, global financial markets tend to be the main constraint for developing
economies. The formation and consolidation of a local financial sector, both public
and private, is therefore a crucial condition to avoid the capture of a specific
country by international market forces. Because the global economy is increasingly
based on knowledge economies, policies to improve the educational system and to
expand social programs are other examples of instruments relatively independent
from international structural constraints that could be put in place by emerging
nations.
In the final chapter of Dependency and Development, which describes the new
dependency, we stressed that some countries like China and the Soviet Union took
political decisions that allowed them greater autonomy in the international market
and in the forms of economic development. The price paid for this outcome was the
initial closure of the economy, an omnipresent state, suppression of civil liberties,
and the concentration of human and technical resources in the pursuit of strategic
objectives of economic growth and military power. Today, such a path seems
excluded from the horizon of the Western world and also from the majority of the
countries of Latin America, the region that some have called the Far West. With
the exception of Cuba, a few other failed attempts to ensure autonomy through
isolation, the majority of the countries of the region followed another path. On the
other hand, in the context of the Cold War, any misbehavior was soon construed as a
dangerous threat to the Western world. Even so, it is impossible to understand the
political environment and the intellectual viewpoints of that period without recalling
that the Soviet Union, Cuba, and China represented a counterpoint to the Western

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style of capitalist development and influenced the decisions and intellectual analyses
made in the region.
What is the situation today, after the end of bipolarity? The infeasibility of a path
to autonomy1 at the price of freedom does not imply the non-existence of forms of
international integration that safeguard national interests and ensure better standards
of living, even though the global economy is determinant, as becomes evident in
times of financial crisis. This is what Napolitano's statement refers to: it deems
possible the search for alternative paths that do not entail the automatic repetition of
the recipes prescribed by the ideologues of globalization, for there is no one single
path to development.
The opportunities for a more favorable economic integration are not the same for
all. As in the past, there were different forms of integration into commercial
capitalism and, later, of reintegration into the world order under the aegis of
industrial capitalism. Now, with globalization anchored to the technological and
financial advantages of countries in the center, each country in the old periphery will
follow paths of variable success. I say the old periphery for the following reasons:
insofar as the expansion of globalized capitalism is based on the planetary
distribution of world production and on the interconnection and power of financial
capital, the notion of national property is undermined in the same way that the
capacity of national mechanisms of control to deal with capital mobility became
weaker. Global networks were created, incorporating across borders segments of the
old peripheral countries. Simultaneously, with migration and with the continuing
marginalization of industrial and commercial segments, provoked by technological
innovation, sectors of the central countries are now facing situations that make them
closer to what occurs in less developed countries and vice versa. New Orleans is
farther from New York than Sao Paulo despite the fact that, taken as a whole,
Brazilian economy and society are underdeveloped when compared to the USA.
We have to place this qualification between quotes, however, because it is now much
more difficult to evaluate countries as a whole given their interconnection within
global networks. Even in the case of China, while Shanghai pulses to the beat of
globalization, a large part of the Chinese countryside remains submerged in
underdevelopment.
Thus, the reaction mechanisms of national states became more fragile, yet
remain available. In certain circumstances, they are capable of protecting the
specific interests of their countries and peoples. It is not, therefore, a matter of
dissolving the nation-states into the global market networks but a matter of
taking them into account to reassess the room for political maneuver of each
country.
Who could envision that the outcome of the end of bipolarity would be not the
Pax Americana but the end of any possibility for Global Empire? Today, after the
deadlock in Iraq and the tensions in the Middle East and the Islamic world in
general, it would be more fitting for world diplomacy to focus on rebuilding what
the United Nations was supposed to be: a forum to avoid war, with enforcement
capacity. For such a mechanism to be viable, it is imperative that the hegemonic
1

In the analysis of Latin America, the active presence of the national state was seen as the condition to
achieve autonomy and economic growth at the same time.

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countries revise their global political objectives. It will be necessary to design and
enforce a policy more of containment than of aggressionpreemptive or not
forsaking the dream of westernizing the world and of raising the American
democratic institutions to the status of a universal paradigm. We must act as if we
were in the post-Napoleonic period, though without the restoration ideals. We need
new democratic Metternichs capable of strengthening peace through the inclusion of
more partners, not through the entente among superpowers. There is no military
might or moral convening power capable of upholding a world controlled neither by
a single hyper-power nor by a coalition of a few superpowers.
If the great powers fail to acknowledge the need for a new global contract, we
will witness, in silence and complicity, the emergence from the shadows of new
gladiators, unconstrained by any rules, with profound risks of global confrontations.
The most salient of these new actors is, of course, China, with a growing influence
in Asia and Africa. But it is not the only one. Great Russia is also repositioning itself
as a powerful player in Central Asia and the Middle East. The Islamic world is
seeking to affirm its unity in response to foreign interventionist folliesalbeit not
exempt from committing their own. Meanwhile, Europe hesitates about how far to
expand its Unionwill it encompass Islamic Turkey?and about the role it should
play in the world. Latin America is divided between a regressive populism and the
fear of becoming once more the vassal of an exhausted empire, reliving the fate of
some Latin American countries that remained attached to English interests when
Britannia no longer ruled the waves. Not to mention Africa, still seen uniformly by
the West as a continent of tragedy in spite of the many advances made and the
growing alliances of sub-Saharan African countries with China and, in some cases,
with other countries in the Global South.
From the political standpoint, globalizationin contrast to the Cold War period
did not shrink the options available to underdeveloped countries. It acts more like a
fragmenting force than a leveling force that would render the world homogeneous. It
disconnects and reconnects segments of countries locally and internationally as
economic growth produces more inequality, within and across countries, in spite of
reducing poverty levels. The very dynamics of the globalized economy hamper
unilateral impositions. There is always a lack of consent, and the monopoly of the
use of force is undermined as an increasing number of countries manage to acquire
powerful weapons, nuclear or not, thanks to the existence of a global black market in
addition to the proliferation of new weapons of terror such as suicide bombers.
At the same time, the expansion of the technological revolution in communications, the same one that paved the way for globalization, hammers in the minds and
concerns of the richest countries the persistent inequality between classes and
nations. The challenge of poverty is permanently at the core of the global agenda not
just because inequalities increase but also because new communication technologies
allow for greater awareness of differences among and within nations and because the
available instruments to reduce poverty are ever more numerous. The world as a
whole also faces new challenges that affect both the rich and the poor. One example
is global warming which, together with the energy issue, has had an impact on
national and international policy decisions on an unprecedented scale. In this
context, developing countries are playing a new strategic role in global discussions.
Some have become polluters due to their model of economic growth; others are at

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the forefront of attractive energy alternatives, such as ethanol. These factors enlarge
the scope of action for some underdeveloped countries to negotiate and defend their
interests on the global stage.
In what way may a new global pact or a new contract among nations be
shaped? It is hard to answer. The United Nations resulted from the alliance between
the winners of the Second World War that united in order to maintain their
domination and to secure peace. The latter, despite being punctuated by local
conflicts, was maintained among the Big Powers, albeit in the context of the Cold
War. With the ending of the Cold War and the fall of the Soviet Empire, it was
inevitable that areas of instability would emerge. Conflicts occurred and continue to
occur in the Balkans, in the Middle East, along the Russian Federation borders, in
Iraq, in Afghanistan, in IndiaPakistan relations, in the most troubling remainders of
the past, like North Koreaand, until very recently, Libya, with its rhetoric
menacing the Big Powers. The military power of the winners of World War II and
their veto power in the UN Security Council continue to grant those countries
mainly the USA and Russiaa predominant role. Recently, this predominance has
been weakened by the practical impossibility of using nuclear weapons and by the
strength of the ideological and religious movements that undervalue human life,
rendering even the most powerful adversaries an easy target.
In the economic realm, the domination by the USA and by what a united Europe
might represent becomes more difficult to maintain. The emergence of China and
even of the BRICs (Brazil, Russia, India, and China)a metaphor to save the
reference to many other emerging economies such as Mexico, South Africa, and oilproducing countriesand the current financial crisis have debilitated American
domination and limited Europe ever more in exerting a leading role in the world
scene. Nor is it clear which strategies emerging economies will develop in the face
of Chinese economic expansion: will they be willing and prepared to compete with
China in its own markets? Will they have the capacity and the disposition to accept
the challenge of producing and trading in the Chinese market? And what about
India, when its economy rises? Will it be an alternative to China as a consumer
market or a fierce competitor because of its cheap labor? Who knows whether
Vietnam is following a similar path?
How and through which institutions can these emerging actors play a more active
role in a new global order? With no broad coalition to push for a reform of the
Bretton Woods system and the UN, and without the World Trade Organization being
able to take bolder steps toward increasing world tradethe failure of the Doha
Round has accentuated this difficultythere will probably be a slow infiltration of
the presence and the relevance of these new actors in global organizations. Thus, the
emerging powers will press toward additional steps capable of enlarging their role in
the reconstruction and control of a better world order.
The impasses at the World Trade Organization, the creation of the G20, the
possible expansion of the G8, the vital negotiation of a broader agreement over
climate change, the coincidence of energy issues and the restructuring of the
financial order post-crisis will require greater activism from emerging economies.
The role of non-governmental organizations and global streams of public opinion in
making a new global contract should not be underestimated. The pressure from
global civil society can already be felt, for instance, in UN bodies.

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There are two key questions that challenge the imagination and the action of
world leaders: how to stabilize relations with the Islamic world and how to reduce
poverty, especially in Africa. The capacity and interest that the Chinese leadership
demonstrates to interfere in the new global issues, the disposition of the Russian
government to make its strength felt as well as Europe's eventual moderating role,
and the international activism of India and Brazil will all count in shaping a new
global order in the twenty-first century. Not to mention the momentous questions
concerning how to rebuild the international financial system: are the existing and
emerging powers ready and able to cooperate in formulating and enforcing rules to
deal with the banking system, including the control of tax havens? Do they have the
political will and organizational imagination to create a kind of new Bank for
International Settlements with a mandate to supervise national banks and enforce
rules globally? Will those rules be subtle enough to avoid, at the end of the day,
killing the creativity and expansion of capitalism?
Initial steps to remold the global financial order were taken at the London G20
meeting in April 2009. The capital boost to the IMF as well as the reduction of the
conditionalities and requirements for concessions attached to its loans are positive
signals. Still, the IMF's decision-making process and its formal control remain in the
hands of a few governments, including the USA's. The same is true with respect to
the World Bank. These institutions were the cornerstone of the post-1945 global
order. Will they remain untouched or can they be reformed following ideals more in
line with the cooperation among nations to overcome poverty, the energy imbalance,
environmental issues, and to reduce inequalities?
These are the issues that will develop in the next 15 to 20 years and in which
some new actors, including from Latin America, will be involved.

The Challenges of Globalization in Latin America


Given this new constellation, what are the opportunities for Latin American
countries to position themselves in the new global environment? At the domestic
level, the first challenge that Latin America had to confront after the end of the Cold
War and the ensuing withering away of the two opposing blocs was the full-fledged
adoption of democracy. There was neither space for the survival of military
dictatorships in the region nor any support for them from the dominant poles. The
transition to democracy, in one way or another, has been accomplished.
This happened, however, without the strengthening of the very foundations of
democracy. I refer here to greater social and economic equality, at least in terms of
opportunities, and to the existence of a truly democratic civic culture. Many sectors
of Latin America still lack the cornerstone of a capitalistdemocratic culture, so
eloquently praised by Tocqueville: the communal solidarity of protestant inspiration
and the Americans' sense of personal responsibility. But the architecture of
democracy is present. Political parties, elections, and even an essential component
of the democratic idealsthe taste of freedomhave spread throughout the region
with one caveat: freedom is confused with defiance of the law and the arbitrariness
of the powerful that follow the popular dictum, for my enemies, the law; for my
friends, everything. We created the infrastructure of democracy but the soul is

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missing: we still lack respect for the due process of law and the prevalence of the
rule of law. We keep moving back and forth between institutions and personalism.
Charisma threatens compliance with the rules, and the citizen still runs the risk of
being treated as a client, as a dependent, entitled to receive gifts rather than to
exercise rights.
The second challenge that globalization brought to the region was insertion into
the competitive global capitalism. It is essential to consider these two challenges
togetherbuilding a democracy, albeit incomplete, and coming to grips with
globalizationto grasp what is currently taking place. Integration into the global
market implied breaking with high protective tariffs and limiting state interventions
in the domestic market. These traditional instruments of protection against external
competition and of promotion of development hacia adentro had become
insufficient. On the other hand, the rules for attracting international capital are
clear: respect for contracts and reduced arbitrariness in interpretation of the law. To
these conditions should be added economic predictability, avoiding inflationary
indulgencies and, hence, greater control over public spending. If we recall that in the
1980s oil crises affected many countries of the region and, combined with inflation,
left treasuries on the verge of bankruptcy or with huge debts, we have another factor
leading to drastic change in the action of states: the time for privatization had come.
Privatization was undertaken less as the consequence of a neoliberal-inspired
ideological decision and more to help the adjustment of government accounts and to
provide market mobility to the large, previously state-run, corporations as well as to
build the modern infrastructure needed for economic development. Even the
companies that by political decision remained under state control started to operate
in the market as large private corporations, having in the quest for profit, compliance
with the law and transparency in decisions an ideal that, even when not fully
attained, did limit the level of interference by political and partisan interests.
The third challenge was a consequence of the previous two: with greater
economic dynamism and more abundant freedoms, as well as with the flow of
information about social conditions around the world, social demands soared with
great strength. It is not enough, thus, to have democratization in the institutional
arena of politics: people must also be integrated in the social arena.
These overlapping processes generated a contradiction or, at least, an ambiguity
between traditional corporatist and patrimonial interests rooted in the political
system, with influence on the state apparatus, and the rules of the market. Those
rules became increasingly more homogeneous at the international level due to global
standards of quality required for the operation of the productive system, especially in
the case of exports of industrial goods, whereas the political institutions walk at a
different pace. Moreover, the slow resumption of economic growth, which only from
2003 onwards received incentives from the international market,2 and the increasing
demands from the masses created a cauldron of pressures. This situation led several
2

Comparatively, Latin America was not the region with the highest rates of growth in the world. In 2006,
it grew around 5% and the forecasts by ECLA and the World Bank point toward a decrease to 4.5% and
less than 4%, respectively, in 2007 and 2008. These figures are lower than the forecasts for the average
developing countries, expected to grow beyond 6%, not to speak of China, with an estimated rate
estimated at more than 9% and India at more than 7%.

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countries to political crises or, at least, to the electoral defeat of proponents of the
modernization required for adjustment to the global economy. In some cases,
democracy itself, not just the economy, was blamed for the failure to promptly
respond to popular demands.
Not all countries of the region had the conditions for an insertion in the new
world order that would expand opportunities for economic development and offer
improved well-being for the people. It is indisputable, however, that redemocratization has brought the third challenge to all of them: the need to deepen poverty
reduction and incorporate the marginalized.3
In a nutshell, the hurricane of macroeconomic adjustments that swept the
continent in the last decade of the past century, known, unjustly, as the application of
the Washington Consensus agenda, took different forms and met with different
political, economic, and social situations. By and large, countries with a less
diversified economy, especially those with characteristics similar to the old enclave
economies (Bolivia, Ecuador, Venezuela, and some countries of Central America)
experienced greater difficulty adjusting positively than countries whose economies
and societies had undergone processes of diversification and had created an urban
industrial base that complemented the agro-exporting sector. Similarly, countries that
lacked a more solid political system, that is, strong political institutions based on an
independent judiciary, a tradition of respecting the relative autonomy between
executive and legislative powers, and so on, and, above all, a more efficient state
structure, capable of counteracting the particularism of market interests in the social
and the economic realms, had more difficulty adjusting effectively to the challenges
of globalization.
To render the argument even clearer: the greater the degree of prior diversification
of the productive sectors, the more likely a country was able to respond successfully
to globalization, enjoying continuity of urbanindustrial growth and agrarian
modernization as well as a strengthening of the modern service sector. This
diversification, in turn, was generally greater in countries where a large share of
production had historically remained under the control of domestic producers. By
contrast, in enclave economies, there were fewer chances for responding
successfully to globalization, although some of these countries have managed to
diversify and become more dynamic.
Apart from those historicalstructural differences, in some countries, the classes
and social groups managed to establish effective institutional norms, and the national
states not only attained greater legitimacy but also stronger capacity to implement
policies of economic growth and social integration, whereas others were less
successful. The combination of those factors resulted in a complex array of situations
with different shapes and opportunities for integrating into the globalized world.
Regardless of the structural aspects, the climate of political freedom and the
continuity of elections enabled previously marginalized sectors gradually to enter the
stage and new issues to be added to the national agenda. There was a resurgence,
3

As we did in Dependency and Development in Latin America, it is necessary to reconstruct, in an indepth way, the historicalstructural situations through which each country came to grips with the
challenges of globalization. On the diversity of the Latin American response to global challenges, see
Carlos Prez Llana (2007).

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across the continent, of peasant demands as well as growing pressure by urban


masses for jobs, income, and welfare. In the first stages of globalization, there were
protest movements of Cuban or Maoist inspiration. In one case, Allende's Chile, a
coalition in search of profound social change, was supported by the popular vote and
gained power. After the downfall of Allende, a process that had the participation
of the international forces fighting the Soviet bloc, and after either the smothering of
the strongest guerrilla movements, such as Sendero Luminoso, the Tupamaros, and
the Montoneros, or their containment, as in Colombia, the high-pitched rhetoric for
change was not followed by transformative action. The nonexistence of another
bloc after the demise of the Soviet Union limited the transfer of the revolutionary
myth into reality.
This does not mean that the revolutionary myth has disappeared from the
ideological amalgam of political movements active in many parts of the region. The
appeal of a radical structural transformation remains alive in many movements, from
the neo-zapatistas of subcomandante Marcos, through the bolivarianistas proclamations of the Venezuelan leadership, to the Bolivian indigenismo and the rebel
movements in Guatemala. The same is true for Colombia, where the narcoguerrilleros still see themselves as revolutionaries. In other cases, like the Landless
Movement (MST) in Brazil, the overall situation of the country is so removed from
the revolutionary rhetoric that it is hard to embrace it publicly, even though the
dream of another society remains alive.
More recently, the political challenge to the established order has taken a new
shape. Many have used the notion of populism, or neo-populism, to characterize the
policy of countries like Venezuela, Bolivia, or even Argentina, given the charisma of
the leader and the distributivism of these countries' social policies. What emerges
from these experiences, however, is above all the mistrust of markets and the return
to statism. The new populist situations emerged in reaction to the economic
adjustment policies, blamed for all the evils of the present, hence the regressive
component of the rhetoric that supports them. Their leaders do not propose new
forms of social or economic organization. Their rhetoric is negativist. They give
voice to anti-American and anti-globalization rhetoric yet abstain from defining the
utopian way toward a future of greater equality and economic prosperity. Pari passu
with the messianic attitude of the Bush government that imposes political regime
change and sustains the legitimacy of preventive wars, anti-Americanism is the
magnet for the new Latin American Zeitgeist, an anti-establishment one. An external
enemy is singled out to justify the national-statist rhetoric in a way that is
immediately understood and supported by the masses, increasingly disgusted with
the arrogance of Bush's America.4
Though these patterns of political behavior have been qualified as populist, even
in the case of Lula's Brazil there are those who, from time to time, define it in those
terms, they differ significantly from classical populism. We are living through
situations that are different from former populist processes of a varguista or
peronista type or whatever other name they may have had. Those appealed directly

For a stimulating analysis of what anti-Americanism and the national-statist vision have meant for Latin
America, see Eduardo Graeff (2006).

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to the masses, partially incorporating them into the political arena. They despised
representative democracy and promoted the redistribution of resources but did not
seek to change the prevailing social and economic order. Anti-Americanism was
strong with Pern, but was not characteristic of Vargas. Moreover, neither Pern nor
Vargas entertained an anti-market stance. Their statism, especially in Vargas's
democratic period, was more pragmaticlike today's privatizing wavethan
ideological. The new populismof Chvez or Moraleshas in common with their
predecessors the policies of income redistribution. However, it is much more anti
than pro, and it does not hide its hostility toward the markets. In Morales's case,
there is an indigenista component that drives the rhetoric toward the proposal of
another society based on non-Western values.
Responses to Globalization in Enclave Economies
Anti-Globalization and the Fraying of Democratic Institutions in Bolivia, Ecuador,
Peru, and Venezuela The adjustments to globalization unfolded differently as a
consequence of the interplay among political, social, and economic factors. In
countries with an economy with little differentiation and dependency on one basic
export commodity, like Bolivia, the consequences of adjustment were traumatic.
There was an outright crisis of the political system and the rise of a leadership with
indigenous roots strongly influenced by the negativism typical of the antiglobalization reaction. In Ecuador, the same conditions generated a situation of
profound instability, with indigenous communities playing an active role in
generating political pressure. It would, therefore, be simplistic to explain the
dynamics of these countries just as the result of a lack of economic alternatives in the
globalized world. These factors interacted with the demands of cultural identity
expressed by indigenous masses, previously marginalized from influence in society.5
The same is true of other countries where the original populations conserved their
cultures and are in sufficient number to exercise political power in times of
democratic affirmation.
The difficulty of accommodating democratic demands to the macroeconomic
adjustments in countries with few productive alternatives characterized Venezuela
already under president Caldera. This paved the way for Hugo Chvez's successive
armed or electoral victories. Of course, Venezuela is distinguished from the other
cases with weakly diversified economies because it controls an important tool for
success in the global world, oil. Peru under Alberto Fujimori, who governed at the
time of Sendero Luminoso's revolutionary illusions and before the end of bipolarity,
escaped this dilemma. Thanks to the liberalizing reforms subsequently pursued by
President Alejandro Toledo and his predecessor, Peru achieved high rates of
economic growth and a certain differentiation of its productive base. This opened
space for a modest incorporation of segments of the impoverished masses, although
without the vigor of the anti-poverty and social integration policies of Brazil and
Chile or even of Mexico and Colombia.

In Bolivia, for instance, more than 60% of the population declares itself to be indigenous.

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309

Let me again restate the importance of avoiding simplifications. It was not just the
incongruence between the modernizing pressures of the globalized economy and the
scant economic diversification of these countries that led them to political crises.
There was also a fraying of preexisting democratic institutions, undermined by
corruption and inefficiency, as occurred in Venezuela prior to Caldera, in Peru, and in
Ecuador. It was not an accident that in both Venezuela and Peru, what happened was a
tearing down of relatively old democratic experiences, not military dictatorships.
Despite the varied responses to the challenge of integrating the poor, it is
particularly revealing that the tensions that led to attempts at a more profound
rupture with the traditional democratic order occurred in countries where an enclave
economy dominated. When government and state institutions were unable to
respond to social demands with consistent, active public policies, the climate was
conducive to political solutions that relied tenuously on the rules of representative
democracy. Peru, Venezuela, Bolivia, and Ecuador have, in some instances,
constituted illustrative cases of this phenomenon.
Globalized Social Democracy in Chile Chile represents a different and specific case.
Since the pre-globalization period, Chile, although crucially dependent on the export
of copper, had a more diversified economy. On the other hand, the beginnings of
Chile's adjustment to globalization took place (without the reward of economic
growth) during Pinochet's government and inspired by the Washington Consensus in
its extreme form, the radicalized neoliberal policies of the Chicago boys. Later,
with redemocratization, Chile achieved what few countries could, a convergent
agenda supported by both government and opposition. Moreover, this consensual
economic policy was embedded in society itself, correcting the neoliberal excesses,
maintaining the democratic game, and invigorating social policies. This led to the
strengthening of democratic institutions and the promotion of economic growth.
Pinochet's violence produced antibodies in a society with a history of deeply rooted
values of respect for the institutions.
Nothing was pre-ordained, of course. Political options depend on leadership,
and Chile had competent leaders who were capable of understanding that in the
global economy the brand, the design, and the marketing, together with
efficiency and compliance with the rules, are as important as abundant natural
resources, labor, and capital to achieve a full economic circuit in the framework
of the national frontiers. In other words, we no longer live in a time where the
Prussian economic model a la Frederich Lizt, or even the model of import
substitution industrialization, is seen as the only path toward GDP growth.
Exporting oysters, salmon, wine, or fruitsprovided that it is done in accordance
with the quality requirements of the global marketadds value to products and
leads to an international insertion appropriate for a country with a relatively small
economy and population.
The case of Chile highlights the value of a political model that might be called
globalized social democracy, one which does not fear the external market. Rather,
this form of social democracy acknowledges that the stability of the democratic
process depends on some measure of economic progress. But a great deal also
depends on active policies geared to reducing poverty and enhancing social wellbeing. These principles, referred to in Europe as social market economy, were

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realized in our continent under other conditions. Besides respecting the rules of the
local market, there is an engagement with the global market and the promotion of
social and economic policies that stimulate social action by governments and society.
In countries like ours, marked by an Iberian cultural tradition, possessive
individualism and the belief in market competition as an instrument of the common
good have never been assimilated. This facilitates the acceptance of the new version
of social democracy. It promotes economic modernization and, at the same time,
paves the way for action by government in the social and economic arenas. It also
stimulates an active civil society. Far from praising individualism, this philosophy
values people's engagement in society, giving them responsibilities especially in the
struggle against poverty and inequality.

Responses to Globalization in Diversified Economies


Globalized Social Democracy in Brazil Globalized social democracy was also the path
followed by Brazil, a country with a greater degree of economic diversification than any
other in the region yet also facing obstacles like none other to overcoming poverty and
social inequality. Brazil underwent the opening of its economy, the reforms of the state,
which are still incomplete, and the advance of democratization despite relatively low
growth rates of domestic product over the last 15 years. The resilience of economic
structures and democratic institutions, combined with the existence of a vibrant civil
society, led to better responses to the challenge of building democracy and extending the
country's participation in the global market. In contrast to the Chilean experience,
which was based on consensus, in Brazil, political disputes occurred between the two
polarized parties, Partido dos Trabalhadores (PT) and Partido da Social Democracia
Brasileira (PSDB). Yet these disputes did not hinder the pursuit of democratization and
integration into the global market, and the differences between the parties finally
proved to be less ideological than linked to the struggle for political power. Still, there
is one fundamental difference: the belief in the values and practices of democracy is
stronger in the PSDB, whereas the Leninist visionof the political party leading to a
state controlled by militants with the goal, or excuse, of promoting far-reaching
reformsremains alive, even though somewhat faded, in the PT. Once in government,
the PT pursued the general guidelines of policies adopted by PSDB. The PT may
eventually introduce changes here and there but nothing that undermines the path
followed since the previous government, insofar as that path was not chosen arbitrarily
by one government but embodied what was needed to adapt the country to the
challenges of reality.
What I said earlier about Chile can therefore be extended to Brazil. Much more
than following a neoliberal model, the policy adopted in Brazil followed the model
of a globalized social democracy, that is, one that takes into account the power of
markets, but counterbalances their abuses by controlling them whenever possible
and that also develops social policies capable of fighting poverty and reducing
inequality. In the economic realm, Brazil seized the opportunities made available by
the global market, deepened the structural transformations that came from previous
decades, and, as a result, what seemed an impossibility in the past is today a reality.
The country became an exporter of sophisticated goods, such as airplanes and cell

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phones, developed autonomous technologies,6 for instance, deepwater oil drilling,


revolutionized its agro-industry with new technologies, and is seeing some of its
companies7 become global players.
The productive sector became globalized in Brazil, Chile, and also Mexico not
only because of the presence of multinationals8 but also because of the
transformation of local firms into big exporters and investors in the international
market. Local firms competed with foreign ones in the main sectors of the economy,
and there was not a savage privatization, as occurred in Argentina. The financial
sector, of crucial importance for a more autonomous insertion in the globalization
process, remained strong. In Brazil, roughly 50% of the financial sector consists of
state-owned banks, 25% of domestic private banks, and 25% of foreign ones. Public
debt is formed in the domestic financial system, which also finances consumption
and investment, the latter mainly via a public development bank (BNDES).
Simultaneously, Brazil launched ambitious social programs, some with a universal
scope, as in health and education, and others targeted to specific groups, as in land
reform, social protection networks, and direct cash transfers. The decline in the levels of
poverty, and even inequality, started, incipiently, in the 1990s9, gained strength at the
turn of the century, and continues to this day. After the redemocratization in the 1980s
and the new Constitution in 1988, economic reforms corrected the monopolistic and
nationalizing excesses that the Constitution contained, allowing a partial privatization
of state-owned enterprises. These reforms and the incremental expansion of social
policies, including Bolsa Escola, transformed by Lula's administration into Bolsa
Famlia, and other mechanisms of direct cash transfer, as well as measures that led to
universal access to public education and health, were created through a dialogue
between the Executive and the Legislative, with the oversight of the Judiciary.
Although this process of consultation across the three branches may have slowed the
pace of the reforms, these policies became more institutionalized and, as a
consequence, more durable despite changes in government.
The case of Brazil thus highlights again the importance of adding the political
dimension to the framework for explaining paths of development that emphasizes
the differences between enclave and more diversified economies as well as between
countries that have capable, well-designed state institutions and those that lack these
6

In the case of the agro-industry, the role played by EMBRAPA, the state agency for agricultural and
cattle-raising research, was prominent. With its more than 1,000 PhD's, it developed new techniques
enabling the adaptation of seeds to savanna areas previously deemed unproductive, like the Brazilian
cerrado.
7
There are around three dozen Brazilian corporations, including the state-owned oil company, that
through mergers and acquisitions are expanding on a global basis. Companhia Vale do Rio Doce (renamed
Vale) is the second largest global mining corporation, and Embraer has plants even in China. The steel,
beverages, textiles, and citric industries are also becoming globalized.
8
In Brazil, after the Real Plan, there were more than $200 billion of FDI in production, and it continues to
flow at high rates. Note that on average, FDI amounts to no more than 25% of the total investments in a
year. The country's productive base, in agriculture, industry, and services, has experienced a strong
qualitative change as a consequence despite many years of modest GDP growth.
9
A recent study by IMF economists recalculated the impact of the Plano Real on the income of the
poorest. They concluded that instead of a 1.5% annual increase in income, it would be more correct to
speak of 4.5%, which accounts for an immense cumulative effect (Ferreira et al. 2007). Moreover, the
minimum wage has been growing, in real terms, at an average rate of 4% a year since 1993. As for
inequality, measured by the Gini coefficient, it has also decreased, as outlined in the World Bank's report
for the decade of the 1990s, and has continued to decrease in the current decade.

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institutions. I brought attention to the possibility of a social democratic alternative,


for lack of a better term, that is being developed in some countries at the same time
that their economies are being dynamically integrated into the global market. What
characterizes this globalized social democracy is not only the respect for the general
rules of the market but also the fact that labor unions, in contrast to what took place
in social democracies in Europe, are not the driving force. In Latin America, social
democracy is a political response to the need for fast integration of poor masses,
conducted through a broad and dynamic partnership between state and civil society,
energized by an active public opinion that is expressed through both the traditional
and, more recently, the electronic media. It is this diffuse public opinion, more than
political parties or specific social classes, that stimulates government action and
holds it accountable for reducing poverty and inequality. Social democratic
governments are skilled at acting on social issues, but are not isolated in the
bureaucratic structure. On the contrary, they foster and accept cooperation from nongovernmental organizations, including groups from the middle classes and even
private entrepreneurs who embed themselves into public policies.
This phenomenon does not occur solely in the most populated countries, such as
Brazil and Mexico, where the presence of the poor masses could be perceived as
threatening to the elite, nor only in the economically dynamic ones, such as Chile.
It can be seen in Costa Rica for some time now, in Uruguay with the Broad Front
(Frente Amplio), and even in the Dominican Republic and Panama. The parties in
power in these countries vary in the degree to which they are leftist as well as in
their posture toward globalization. Particular social processes and structural
characteristics, in addition to the diffuse ideological climate of non-acceptance of
the striking social differences in the region, lead the governments of these countries
to pursue a new social democratic style, in contraposition both to the neoliberal
vision and to the verbal rupturing of the bolivariano style.10
Integration via Agriculture in Argentina In Argentina, events took a different course.
There was no correlation between the economic advances in the period prior to
globalization and an effort aimed at economic diversification. Preexisting industrial
investment was thus not the basis for the country's integration in the new phase of
the world market. Since the nineteenth century, the Argentine economy was
internationally integrated through agriculture. With globalization, these agricultural
linkages were deepened. The adjustment carried out by President Menem and
Minister Cavallo, indeed, a truly neoliberal one, did not prevent Argentina from
being hit more severely than other countries by the consequences of the global
financial crises. The way government controlled inflation, by pegging the peso to the
dollar, in addition to the fiscal disequilibrium, led the economy to default as soon as
the speculative international tornado turned against the local currency. Argentine
democracy, however, remained afoot, even though reeling, as De la Ra resigned the
presidency, leading to a succession of interim presidents until Eduardo Duhalde took
power. With the election of President Nestor Kirchner in 2003, the government
managed, due to the action of the Minister of Finance Roberto Lavagna, to control
10

For the cases of Chile and Costa Rica, see Richard Sandbrook, Marc Edelman, Patrick Heller, and
Judith Teichman (2007). See also Manuel Castells (2005).

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313

the crisis without having to accept the negotiation of the foreign debt on the
traditional terms proposed by the IMF. Having reestablished control over
the economy, the Kirchner government opted for an intermediary path between the
neoliberal position of its predecessors and the strengthening of the domestic market
to stimulate industrialization and growth of domestic product. It raised custom
tariffs, imposed price controls and, fearful of Brazilian competition, reneged on some
integrationist measures that Mercosul had adopted.
Argentina remained, therefore, to a certain extent on the sidelines of the more
dynamic international market while continuing to be an important exporter of
agricultural products. The circumstantial successes of the adopted policies are based
on the high rates of economic growth, allowing the current government to mitigate
the demands of the masses, highly repressed in the previous period. It is important to
remember that Argentina had historically higher levels of social welfare than its
regional peers and that recent poverty levels, mitigated by the economic recovery
during Kirchner's administration, were the result of extreme neoliberal adjustment
policies. These rates of economic growth were achieved by the expansion of
international agricultural commerce, accelerated by China's entry to the market, and
by measures protecting local production. It was in this context that Kirschner
asserted his populist leadership, even though without the fiery anti-Americanism
of early Peronism.
Asymmetric Integration in Mexico If there were a country that was especially hardpressed to rebuild its policies and institutions in response to the dual challenge of
globalization and democracy, it would be Mexico. Heir to a political system stemming
from a popular revolution which had withered away in bureaucratism dominated by a
single ruling party and in strong state interventions in the economy, Mexico did not
seem poised to engage constructively with the changing times. The regime of the
Institutionalized Revolution11 had achieved marked economic progress yet had also
created all kinds of difficulties for the flourishing of a competitive market, opening
of the economy, political power alternatives, and democratic transparency.
I recall a conversation I had with the Italian Prime Minister Romano Prodi before the
effective entrance of Italy in the Maastricht agreement when stifling bureaucratic
regulation and fiscal disorder prevailed in the country. I asked him how it would be
possible for Italy to fulfill the obligations in terms of fiscal and budgetary control
required to integrate into the European Union. He answered: there is only one wayto
sign the agreements and impose the discipline from the outside in. This is what
happened with Mexico. By signing the integration agreements with the USA and
Canada, the country entered into a straitjacket. The North American Free Trade
Agreement (NAFTA) can be contested by the opposition but, for better or worse, it set
the parameters for the Mexican economy and opened new perspectives for the country.
Mexico's economic diversification prior to NAFTA already pointed in the
direction of an industrialization complementary to the American economy. The
maquila was already in place based on the local assembly of components of
durable consumption goods geared to the North American market. This production
11
The reference is to the Institutional Revolutionary Party (PRI), which governed Mexico from 1929 until
2000.

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expanded and became differentiated. Today, Monterrey, the center of the area of
greatest industrial dynamism in the country, is an important pole, hosting Mexican
companies with a global reach, for example, in the cement sector. Moreover, there was a
partial privatization of public companies, as in telecommunications, with less emphasis
on regulatory agencies and competition than in Brazil, power companies stayed in
government hands, and the financial system, contrary to Brazil, was denationalized.
In the Mexican case, it seems there was a one-way integration into the North
American market. Statistics show the enormous proportion of export products going
to the USA and Canada (around 90%).12 Economic growth accelerated in the initial
phase of globalization, lost impetus later on and, as in Brazil until very recently,
employment demand did not match employment supply, which explains the
persistence of the migratory flow to the USA. Mexico still has indigenous populations
with low levels of integration into the national society and lacks transparency in the
political system despite the democratizing efforts that started with electoral reforms in
the 1970s and were deepened during President Ernesto Zedillo's government. The
Mexican response to the challenges of globalization generated a significant level of
economic growth, but this was obtained thanks to the growing links with a single
large market. The political process, even though advancing, has not yet fully
consolidated the democratic practices. This is reflected in the electoral rhetoric that
keeps emphasizing nationalist values, to warn against the risks of an umbilical link
with the American economy, and has not yet disassociated itself from the antiglobalization and anti-American debate, as expressed in the recent campaign by
Lpez Obrador, defeated by President Caldern by a slim margin of votes.

Responses to Globalization in Small Economies


Because the purpose of this essay is not to analyze exhaustively each country, I will
abstain from making specific references to many of them. Some, given the small size of
their economies, keep looking for a trade agreement that could open space for their
exports. This is the case in Uruguay and Paraguay. They respond to the challenges of
democracy according to their history and tradition. Uruguay, for instance, ruled today by
a Left coalition, preserved its democratic tradition. The Uruguayan political system
seems closer to the Chilean-style contemporary social democracy than to the anti-market
and anti-globalization positions adopted by many of the countries with enclave
economies. Paraguay, in turn, characterized by a political system with a strong
patrimonial and clientelistic tradition, has not moved away from this pattern and has not
found a way toward economic growth that would release it from the grip of
underdevelopment. Paraguay is therefore more likely to follow the path of today's
anti-liberal and anti-American populism than to attempt a different alternative.
The countries of Central America represent a fairly specific case. In all of them,
representative democracy exists in its traditional form, that is, without the
complement of active civil societies capable of stimulating citizen social participa12

By contrast, Brazilian exports have always been more diversified. In 2006, 18% were exported to the
USA, 22% to the European Union, 23% to Latin America, and 37% to other parts of the world. Sixty
percent of the exports are industrialized goods.

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tion and reducing clientelism. This happens, of course, at varying levels. In Costa
Rica as well as in Panama and the Dominican Republic, the landscape is more
dynamic. In other countries, like Nicaragua, we are witnessing the return to power of
leaders that, in the past, seemed closer to the Cuban ideals. If, today, they still cling
to them, it is in a watered-down way, given the changes that have taken place in the
world and in their own local economies. As a whole, the Central American countries
have found some relief thanks to commercial agreements with the USA that opened
markets to their few export products while deepening the traditional links of
dependency. Globalization here, more than in Mexico, which has at its disposal a
larger array of productive resources, is synonymous with a growing, yet
asymmetrical, relationship with the USA.
There are, however, some trends that qualify the Central American situation. The
main one is migration to the USA, which generates a huge volume of remittances to
the families that stayed in their countries of origin. One out of three Salvadorans
lives abroad, with 2.5 million in the USA alone. The same pattern can be seen in
Mexico, with many millions living in the USA and sending money back to their
families, even though the overall impact of these remittances is smaller in Mexico
given the size of its economy and population. In addition to Salvadorans,
Colombians, Ecuadorians, many of whom are in Spain, and also Dominicans
migrate and create bonds of a different nature with the host country. Their
remittances have a huge economic impact in the countries of origin. It is easy to
imagine the complexity of the relationship thus established between them and the
USA, manifesting, at the same time, nationalistic reaction and cultural and financial
integration. All this leads to a scenario that is quite different from what happens in
the relations between the Southern cone of the Americas and the USA.

Conclusion
I tried to demonstrate in this essay that the historicalstructural framework of
analysis is still useful to describe the transformations generated by globalization in
the underdeveloped countries, provided that it is employed with the subtlety needed
to avoid reductionism. Globalization, in the same way as dependencia, is nothing
more than an unfolding of the capitalist system in today's historical conditions.
The structural starting point conditionsbut does not determinethe shape taken
by economic and political processes. Political strategies for integrating into the
global economy have a certain margin of autonomy. Still, the range of feasible
strategies depends on factors that differ from country to country, such as the local
capacity of income accumulation, the presence of foreign direct investment, the mix
between nationally controlled production and production controlled by multinationals, the participation of the public sector in production, the capacity of the
leadership, the prevailing ideologies, and so forth. In other words, there are
alternative paths. Not all and any of them are possible, of course, nor with the same
chances of success in every country. The choice of the alternatives and their ultimate
success depend as much on the structural basis of the economy, and even on
domestic institutions and political culture in the broad sense, as on the political
capacity of the leadership.

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In the recent history of Latin America, at least three countriesChile, Brazil, and
Mexicoachieved a more favorable integration into the globalized market and
devised responses to the challenges of globalization that, even though still
insufficient, are oriented toward the demands of their populations. Other countries,
such as Argentina, developed a strategy more of exit and withdrawal, while the
majority, like Uruguay, Paraguay, and the countries of Central America, lacking the
resources to accelerate the transformation of the economy necessary to achieve a
qualitative leap, devised survival strategies by looking for niches in the global
market for their traditional production. Some of those countries, most notably Costa
Rica, the Dominican Republic, and Uruguay, despite the small size of their domestic
markets, were capable of designing dynamic social policies that attempted to address
the challenge brought by democracy and globalization: to create models of
government rooted in a strong social commitment. Then there are the countries
that possess a commodity of high global value, like oil or gas, yet lack the other
resources needed for bolder globalizing leaps. These countries, exemplified by
Bolivia, Ecuador, and Venezuela, chose a strategy of voice: they vocalized their
discontent with globalization and, in less clear terms, also with representative
democracy. Finally, countries like Peru and Colombia, although they have less
resources than the three frontrunners in terms of responding successfully to
globalization, enjoy enough resources to give them, in time, better chances to meet
the challenges of the new world order.13
The failure to take into account these multiple paths and alternatives would be
akin to not acknowledging the structural limits, even though changeable across time,
imposed on developing countries. Globalization, as I have insisted, represents an
extension to the planetary scale of the financial links and the rapid diffusion of new
productive techniques that create the so-called knowledge economy. Both processes
remain, by and large, under the control of great multinational corporations or megafinancial organizations based in a handful of countries. These are still the dominant
players in the global economy. However, the number of leading players is not static;
one just has to see what is happening in China. It is clear that expanding the chances
for the creation and diffusion of new technologies and access to capital is an arduous
process. Still, to mention just the countries with the largest populations, Brazil,
Russia, and India, not to speak of China, which has taken the leadthe so-called
BRIC countriesare now engaged in a race against time to see who gets there.
Everything will depend not only on the economy but also on the world political
scene and mainly on the capacity of local societies and their leaders to frame
policies, consensual as much as possible, that seize opportunitiesand not only
economic onesthat make the effects of globalization and democracy more
favorable to the developing countries and their peoples, reducing poverty and
inequality, and giving the less privileged stratum greater access to the spheres of
power.14
13

For an analysis of the different strategies of insertion in the global order, see Santiago, Javier (2006).
A recent study by Kristalina Georgieva, of the World Bank, compares along different dimensions the
BRIC's relative participation in the global economy. It reveals that, depending on the dimension under
consideration, one of the four countriesBrazil, Russia, India or Chinaemerges as better positioned to
make the leap to the condition of a relevant player in the global scene.

14

St Comp Int Dev (2009) 44:296317

317

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Ferreira F, Leite P, Lichtfeld J. The rise and fall of Brazilian inequality. Development Department,
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Graeff E. Nossa Amrica e a deles. Draft, Brasilia, July 2006.
Prez Llana C. Modelos polticos internos y alianzas externas. Universidad Siglo 21 y Torcuato di Tella,
draft; 2007.
Sandbrook R, Edelman M, Heller P, Teichman J. Social democracy in the global periphery: origins,
challenges, prospects. Cambridge: Cambridge University Press; 2007.
Santiago J. Latin America as a political economy of the possible. Cambridge: MIT University Press; 2006.
Vernon R. Sovereignty at bay: the multinational spread of U.S. enterprises. New York: Basic Books; 1971.

Fernando Henrique Cardoso former President of Brazil (19952003) for two consecutive terms, is
currently president of the Instituto Fernando Henrique Cardoso (Sao Paulo, Brazil) and honorary president
of the Party of the Brazilian Social Democracy (PSDB). He is a member of the board of directors of the
Club of Madrid (Madrid, Spain) and of the board of directors of the Inter-American Dialogue (Washington
D.C.). He is also a member of the Clinton Global Initiative (New York), of the World Resources Institute
(Washington D.C.), of the Thomas J. Watson Jr. Institute for International Studies of Brown University
(Providence) and of the United Nations Foundation (New York).