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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 historical

structural framework of analysis isstill 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 betweennationally 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 usworked 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 underde-

St Comp Int Dev (2009) 44:296317

DOI 10.1007/s12116-009-9050-3

President 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: [email protected]


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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 thedeveloped countries withheld the productivity gains. These were the social and political

foundations for the emergence of a growing gap between the developed countries in

thecenterand 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 toabsorb 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 agro-

exporting 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 economyhacia 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 productionremained 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 so-

called 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 andMexico. 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, ondependency, 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 (Vernon1971). 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 foreigncapital 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 therewere 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 internation-

alize 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.

Thisrequires 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 standardsof 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 andfinancial advantages of countries in the center, each country in the old periphery will

follow paths of variable success. I say the oldperiphery 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 technologicalinnovation, 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 neednew 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 itselfas 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 thegrowing 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 communica-

tions, 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 betweenthe 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 andtheir 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 oil-producing 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. Tothese 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 thecompanies 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 newworld order that would expand opportunities for economic development and offer

improved well-being for the people. It is indisputable, however, that redemocratiza-

tion 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 enclaveeconomies (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 challengesof 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 in-

depth 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 participationof 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, fromthe neo-zapatistas of subcomandante Marcos, through the bolivarianistas procla-

mations of the Venezuelan leadership, to the Bolivian indigenismo and the rebel

movements in Guatemala. The same is true for Colombia, where the narco-

guerrillerosstill 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 thepolicy 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

peronistatype or whatever other name they may have had. Those appealed directly

4 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'sdemocratic 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 anti-

globalization reaction. In Ecuador, the same conditions generated a situation of

profound instability, with indigenous communities playing an active role ingenerating 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.

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

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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 inEcuador. 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 convergentagenda 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 well-

being. 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 commongood 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 BrazilGlobalized 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 thecountry'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 thetransformation 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 universalscope, 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 touniversal 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

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 RealPlan, 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 strongqualitative 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.

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.

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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 placein 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 non-governmental 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

threateningto 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 structuralcharacteristics, 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 democraticstyle, 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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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 customtariffs, 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 recoveryduring 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 hard-

pressed to rebuild its policies and institutions in response to the dual challenge ofglobalization 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 ingovernment 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 inthe 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 anti-

globalization 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 participa-

12 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 theworld 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 Salvadoranslives 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 financialintegration. 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 multina-

tionals, 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 themajority, 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 otherresources 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 mega-

financial 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).14 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.

316 St Comp Int Dev (2009) 44:296317


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References

Castells M. Globalizacin, desarrollo y democracia: Chile en el contexto mundial. Santiago de Chile:

Fondo de Cultura Econmica; 2005.

Ferreira F, Leite P, Lichtfeld J. The rise and fall of Brazilian inequality. Development Department,International Monetary Fund; 2007.

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).

St Comp Int Dev (2009) 44:296317 317

cardoso f h new paths

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