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Democratic and authoritarian responses to the debt issue: Argentina, Brazil, Mexico

  • Robert R. Kaufman

For Latin American governments, mediating between their national societies and the international economy, the contemporary debt issue poses some excruciating dilemmas. On the one side, these governments are under intense pressure to arrive at satisfactory formulas for settling their debts–satisfactory, that is, to the banks and creditor agencies that control access to international financial markets. Loss of such access would threaten vital capital and trade flows, and for this reason virtually every Latin American government has so far placed a high priority on meeting its external obligations. But governmental elites, if they are to remain in power, must also answer to (or repress) their own populations. And the price to be paid for external help with “liquidity problems” has typically involved politically dangerous stabilization measures (devaluations, wage and credit restrictions, and fiscal deficit reductions)–measures that often arouse the strong opposition of major social forces.

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1. As I argue in Kaufman, Robert R., “Mexico and Latin American Authoritarianism,” in Reyna, Jose Luis and Weinert, Richard S., eds., Authoritarianism in Mexico (Philadelphia: Institute for the Study of Human Issues, 1977). More broadly, I draw on the literature represented in O'Donnell, Guillermo, Modernization and Bureaucratic Authoritarianism (Berkeley: Institute of International Studies, University of California, 1973); Collier, David, ed., The New Authoritarianism in Latin America (Princeton: Princeton University Press, 1979); and Stepan, Alfred, The State and Society: Peru in Comparative Perspective (Princeton: Princeton University Press, 1978).

2. Skidmore, Thomas E., “The Politics of Economic Stabilization in Post War Latin America,” in Malloy, James M., ed., Authoritarianism and Corporatism in Latin America (Pittsburgh: Pittsburgh University Press, 1977).

3. On the general concept and analysis of “sustainability” I draw heavily on the work of Joan M. Nelson, “The Political Economy of Stabilization in Small, Low-Income, Trade-Dependent Nations” (ms., Overseas Development Council, January 1984), and Haggard, Stephan, “The Politics of Adjustment: Lessons from the IMFs Extended Fund Facility,” International Organization 39 (Summer 1985). For recent work on other aspects of the problems, see Cohen, Benjamin J., “International Debt and Linkage Strategies: Some Foreign-Policy Implications for the United States,” International Organization 39 (Autumn 1985); Philip A. Wellons, “International Debt: The Behavior of Banks in a Politicized Environment,” ibid. (Summer 1985); Charles Lipson, “International Debt and International Institutions,” and Kahler, Miles, “Conclusion: Dilemmas and Proposals for Reform” (The Lehrman Institute: Politics and International Debt Series, 21 03 1984 and 7 06 1984).

4. Nelson, “Political Economy of Stabilization,” and Haggard, “Politics of Adjustment.”

5. Poulantzas, Nicos, Political Power and Social Classes (London: NLB and Sheed & Ward, 1973).

6. Sheahan, John, “Market-oriented Economic Policies and Political Repression in Latin America,” Economic Development and Cultural Change 28 (01 1980); Robert R. Kaufman, “Industrial Change and Authoritarian Rule in Latin America: A Concrete Review of the Bureaucratic-Authoritarian Model,” in Collier, The New Authoritarianism.

7. On the failure of neoconservative options see especially Foxley, Alejandro, Latin American Experiments in Neoconservative Economics (Berkeley: University of California Press, 1983).

8. Olson, Mancur, The Logic of Collective Action (Cambridge: Harvard University Press, 1965).

9. Olson, Mancur, The Rise and Decline of Nations (New Haven: Yale University Press, 1983), p. 43.

10. Lindblom, Charles, Politics and Markets: The World's Political Economic Systems (New York: Harper & Row, 1977).

11. See O'Donnell, Modernization and Bureaucratic Authoritarianism.

12. See especially the work by Ruth, and Collier, David, “Inducements versus Constraints: Disaggregating Corporatism,” American Political Science Review 73 (12 1979), and their “Unions, Parties, and Regimes in Latin America: An Introduction” (Rutgers University Political Science/Political Economy Workshop, March 1984).

13. Skidmore, “Politics of Economic Stabilization”; on the 1976 Mexico case see Whitehead, Laurence, “Mexico from Bust to Boom: A Political Evaluation of the 1976–1979 Stabilization Programme,” World Development 8 (11 1980); Thorp, Rosemary and Whitehead, Laurence, eds., Inflation and Stabilization in Latin America (New York: Holmes & Meier, 1979).

14. On the Mexican model see Hansen, Roger D., The Politics of Mexican Development (Baltimore: Johns Hopkins University Press, 1971); Solis, Leopoldo, Economic Policy Reform in Mexico: A Case Study for Developing Countries (Elmsford, N.Y.: Pergamon, 1981); Felix, David, “On Financial Blowups and Authoritarian Regimes in Latin America,” Department of Economics, Washington University, Working Paper no. 60 (1 10 1983). Data are from Felix, pp. 32–33.

15. Hansen, Politics of Mexican Development.

16. Felix, , “On Financial Blowups,” p. 32.

17. Kaufman, “Mexico and Latin American Authoritarianism,” and “Industrial Change and Authoritarian Rule.”

18. Buira, Ariel, “The Exchange Crisis and Adjustment Program in Mexico,” in Williamson, John, ed., Prospects for Adjustment in Argentina, Brazil, and Mexico: Responding to the Debt Crisis (Washington, D.C.: Institute for International Economics, 06 1983).

19. Susan Kaufman Purcell, “The Future of the Mexican System,” in Reyna and Weinert, Authoritarianism in Mexico.

20. Coleman, Kenneth M. and Davis, Charles L., “Preemptive Reform and the Mexican Working Class,” Latin American Research Review 18, 1 (1983).

21. On tax reforms see Solis, Economic Policy Reform in Mexico.

22. See Guillermo O'Donnell, “Tensions in the Bureaucratic-Authoritarian State and the Question of Democracy,” in Collier, The New Authoritarianism; Stepan, State and Society; Linz, Juan J., “The Future of an Authoritarian Situation or the Institutionalization of an Authoritarian Regime: The Case of Brazil,” in Stepan, Alfred, ed., Authoritarian Brazil (New Haven: Yale University Press, 1973).

23. See Wynia, Gary, Argentina in the Postwar Era: Politics and Economic Policy Making in a Divided Society (Albuquerque: University of New Mexico Press, 1978).

24. José Maria Dagnino Pastore, “Progress and Prospects for the Adjustment Program in Argentina,” in Williamson, Prospects for Adjustment; Felix, “On Financial Blowups.”

25. Albert Fishlow, “Some Reflections on Post-1964 Brazilian Economic Policy,” in Stepan, Authoritarian Brazil.

26. Edmar L. Bacha, “The IMF and the Prospects for Adjustment in Brazil,” in Williamson, Prospects for Adustment.

27. Felix, , “On Financial Blowups,” p. 52.

28. My primary source is Skidmore, , “Politics of Economic Stabilization.” The relevant programs are: Argentina: Frondizi (19591960), Perón (1973–75); Brazil: Vargas (1953), Kubitschek (1957–58), Quadros (1961), and Goulart (1963).

29. Wynia, Argentina in the Postwar Era.

30. See Cameron, David R., “The Politics and Economics of the Business Cycle,” in Ferguson, Thomas and Rogers, Joel, eds., The Political Economy: Readings in the Politics and Economics of American Public Policy (Armonk, N.Y.: Sharpe, 1984); Schmitter, Philippe C., “Interest Intermediation and Regime Governability in Contemporary Western Europe and North America,” in Berger, Suzanne, ed., Organizing Interests in Western Europe: Pluralism, Corporatism, and the Transformation of Politics (Cambridge: Cambridge University Press, 1981).

31. Telia, Guido Di, “The Economic Policies of Argentina's Labour-based Government (1973–76),” in Thorp, and Whitehead, , Inflation and Stabilization in Latin America, p. 199.

32. Wynia, , Argentina in the Postwar Era, p. 220.

33. It remains to be seen in this connection whether Venezuela might be an exception that proves the rule. The close articulation between urban and rural unions and the governing AD party might provide a more solid basis for gaining the cooperation of working-class organizations through social pact arrangements. For similar reasons, social pacts might conceivably be viable in a future Chilean democratic system, although the profound ideological divisions in the traditional Chilean party system would probably make this more problematic than in Venezuela.

34. For a general discussion of the containment option, see Nelson, , “Political Economy of Stabilization,” pp. 2526.

35. Wynia, Argentina in the Postwar Era. Alvaro Alsogaray, the cabinet chief charged with implementing the program, was appointed only after a military ultimatum that threatened to depose Frondizi (p. 94).

36. See Skidmore, Thomas E., Politics in Brazil, 1930–1964 (New York: Oxford University Press, 1967).

37. Wallerstein, Michael, “The Collapse of Democracy in Brazil: Its Economic Determinants,” Latin American Research Review 15, 3 (1980), p. 34.

38. Ibid.

39. Cline, William R., International Debt and the Stability of the World Economy (Washington, D.C.: Institute for International Economics, 09 1983), p. 131.

40. Comisión Económica para America Latina (CEPAL), Sentesis preliminar de la economia latinoamericana durante 1983, E/CEPAL/G. 1279, 20 December 1983 (n.p.), p. 32.

41. Cline, , International Debt, p. 89.

42. CEPAL, Sentesis preliminar, p. 33.

43. Cline, , International Debt, pp. 4473.

44. Ibid., p. 56.

45. Buira, “Exchange Crisis and Adjustment Program in Mexico.”

46. Diaz-Alejandro, Carlos F., Essays on the Economic History of the Argentine Republic (New Haven: Yale University Press, 1970).

47. The characterization is from Cecco, Marcello de, “The International Debt Problem in the Interwar Period” (The Lehrman Institute: Politics and International Debt Series, 13 04 1984).

48. Cohen, “International Debt and Linkage Strategies.”

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International Organization
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