At the Kellogg Institute's conference "Democratic Governance in Latin America," scholars gathered to look at the policies that could foster success in trying times. The participants set out to address two fundamental questions, one specifically about Latin America and the other a broader methodological debate about how to analyze pathways to success in the contemporary world.

Why have some policies and countries in Latin America been more successful than others? There have been many failures in democratic governance in Latin America since the 1980s, but failure is not inevitable: there is considerable cross-national variance in success, and it might be possible to systematize a few lessons about what policies, practices and institutions are favorable to success.

Is it possible to generalize lessons about what policies and institutions foster success in democratic governance? That is, are some policies or institutions more likely to promote success or failure?

One intellectually defensible position is that "success" is idiosyncratic, perhaps so much so that it is not worth thinking about "lessons." Conversely, other social scientists believe that some policies and institutions are generally more likely to be successful.

Conference participants examined variation in three policy areas crucial to the future of Latin America: economic and social policy and state capacity, specifically in prosecuting human rights abusers.

In addition, papers by ALAN ANGELL, university lecturer in Latin American politics at Oxford, MITCHELL SELIGSON, Centennial Professor of Political Science at Vanderbilt University, and JULIANA MARTENEZ, researcher at the Institute of Social Research at the University of Costa Rica, looked at Chile and Costa Rica, countries widely regarded as most successful in Latin America over the past 15 years.

They examined the reasons for their relative success and analyzed whether these country experiences offer lessons for other countries. The conference organizers believed that looking at the question of what accounts for variance in success through different prisms would be more fruitful than one more iteration of a detailed examination of speci?c social or economic policies.

JOSE DE GREGORIO, vice-governor and board member of the Central Bank of Chile, and FRANCISCO RODRIGUEZ, assistant professor of economics and Latin American studies at Wesleyan University, presented papers on reasons for economic success in contemporary Latin America.

EVELYNE HUBER and JOHN STEPHENS, both professors at the University of North Carolina, Chapel Hill, and JOAN NELSON, senior scholar at the Woodrow Wilson Center of the Smithsonian Institution and scholar in residence at the School of International Service at American University, wrote on varying degrees of success in social policy. DANIEL BRINKS, assistant professor of Government at the University of Texas at Austin, examined variance in state capacity, particularly in prosecuting human rights violations.

What Explains Success?

The debate about economic policies in contemporary Latin America began the conference. The two papers on economic policy manifested diverging views both about what accounts for success in contemporary Latin America and about the wisdom of generalizing about ingredients for success.

"Policy thinking should start from considering the country-speci?c characteristics that are likely to make certain policies work rather than trying to draw lists of reforms to be applied to large groups of countries."

In "Economic Growth in Latin America: From the Failure of the 20th Century to the Hopes of the 21st," José de Gregorio presented a quantitative analysis of economic growth to explain why Latin America's development has lagged.

"Being macro-economically stable, having an open economy, developing institutions oriented to the protection of property rights and the rule of law, and good human resources, among others, are key to sustain growth," concluded de Gregorio at the conference.

Central to de Gregorio's policy agenda is the need for opening economies and freer trade- something he regards as "nearly undisputed."

In looking at what other factors contributed to, or detracted from, growth among developing nations, he suggest that institutional factors account for almost half the lower growth. When comparing Latin America to Asian economies, de Gregorio noted that the two most important factors explaining the difference in growth performance were "low investment and openness in the region.

"It is a fact that more open economies grow faster than closed ones. This lesson is especially valid for small economies. I have not been able to find an example of a relatively high-income small economy that is not integrated with the rest of the world."

Furthermore, he said, openness is associated with poverty reduction in the long run, and there is even a strong presumption that this association holds in the short run.

"Therefore, trade liberalization is good for the economy, and it is advisable to undertake it right away."

A frequent source of debate in policy circles is the role good institutions play in fueling economic growth. While few debate the essential role of the strong rule of law and low levels of corruption, de Gregorio said that his data points to trade openness being a catalyst for the development of strong institutions.

"Hence, openness has not only direct effects on growth, but also helps to strengthen institutions," said de Gregorio.

Macroeconomic instability similarly plays a signi?cant role in the region's underperformance. "Crises may be triggered by external developments, but the economies affected are never entirely innocent, because crises do not occur at random," noted de Gregorio.

"Most crises in the region have been associated to fiscal imbalances. Stable low inflation is a summary statistic for a good macroeconomic environment, which also is the basis for strong institutions at the macro level."

When you have instability, he argues, financial markets work less efficiently; it rewards speculation and signals incompetent policymakers and institutions, he observed.

"Fiscal discipline is key," added de Gregorio. "Countries that were able to recover strongly from their crisis-like Chile in 1982 and Mexico in 1994, and also most

Asian countries in 1997-98-were those that had a strong fiscal position before the crisis."

De Gregorio noted an important factor in policy success: the need for support among a populace that is deeply suspicious of purported bene?ts and fearful of the costs.

"It is necessary to build support for reforms and it is important for their bene?ts to reach all of the population," said de Gregorio.

"Reforms and transformation have their costs. However, they must at least be perceived as fair, and those who bear the costs should not always be the same; those who enjoy the bene?ts should not always be the same minority either.

"Policies that promote competition and openness bring better living conditions for the whole population."

Underlying de Gregorio's analysis is the view that many of these lessons are generalizable.

Does One Size Fit All?

Yet some social scientists wonder whether this generalized economic recipe can effectively deliver stability and growth. One of the critics of this school of thought is Francisco Rodríguez, who along with Dani Rodrick of Harvard University has argued that a careful analysis fails to support general policy prescriptions and should instead be country speci?c.

"I have not been able to find an example of a relatively high-income small economy that is not integrated with the rest of the world."

Like de Gregorio, Rodríguez has a policy-making background, having served as director of the Economic and Financial Advisory Council of the Venezuelan National Assembly.

"There appears to be implicit agreement that such a list [of reforms] exists, in the sense that there is a set of policy prescriptions that, if applied in any Latin American country, would generate at the very least the basic conditions necessary for sustained economic growth," said Rodríguez, who is a former visiting fellow of the Kellogg Institute.

As Rodríguez points out, even countries that have similar economic dimensions such as Peru and Ecuador can experience dramatically different economic growth. Both countries have similar savings rates, industrial profiles, urban populations, debt service and tariff levels.

However, since 1990, Peru has experienced a moderately high growth rate of 1.9 percent in its per capita GDP. Ecuador, in contrast, has stagnated and experienced a negative growth rate of -0.13 percent of GDP. Even though both countries are growing today at relatively high rates, the consensus appears to be that Ecuador's growth is linked with high oil prices and will likely fall if these prices stabilize.

Moreover, the fact that Peru's president, Alejandro Toledo, is deeply unpopular, and Ecuador's leader, Lucio Gutiérrez, was ousted from power in April 2005, casts further doubt on the political bene?ts of this reform agenda.

In a carefully argued critique, Rodríguez used a standard cross-sectional data set of economy-wide measures of growth and its potential determinants from 1975-2000. His calculations make use of data covering government consumption as a percent of GDP, the average tax on imports and exports, inflation rates and black market premiums. To capture the role of institutions, he used common indicators to measure the rule of law, political instability, an index of economic freedom and the effectiveness of government spending.

"The cross-national data displays wide divergences in the growth performances of countries that have carried out similar policies," said Rodriguez. "It also shows numerous cases of countries that have found alternative pathways to high growth.

"Policy thinking should start from considering the country-speci?c characteristics that are likely to make certain policies work rather than trying to draw lists of reforms to be applied to large groups of countries."

In wondering why closer attention hasn't been paid to the data, Rodríguez advocated new methods to understand the effectiveness of these policies.

"There is a wealth of methods that can be used to attempt to understand the growth process at the level of speci?c economies," said Rodriguez.

"It is regrettably rare to see serious attempts at putting these different pieces of a country's growth puzzle together.

"Perhaps it is time to start."

The Chilean Blueprint?

Whether Chile's democratic governance experience holds broadly applicable lessons was something that the esteemed Latin Americanist from Oxford's Latin American Centre, Alan Angell, explored in his paper. Angell detailed many of Chile's remarkable successes over the past 15 years, including rapid economic growth and a plunge in poverty.

In his view, however, the country's economic and political experience is unique enough that it fails to provide a blueprint for the rest of the region.

"... some big questions still lie before us ... Unemployment continues high, there are many heavily indebted countries, foreign investment is lower than expected."

"This is an area where one has to proceed with extreme caution," argued Angell. "Social and economic reform is only partly about the design of the reform, but much more about the politics of implementation and that is contingent upon the speci?c political and institutional structure of each country."

‘Inequalities have widened'

JOSƒ MIGUEL INSULZA, general secretary of the Organization of American States and an old friend to the Kellogg Institute, gave the keynote address before a full auditorium.

"After almost 15 years of predominantly democratic rule in our region, we face a major challenge," said Insulza, who has held a number of offices in the Chilean government, most recently as Chile's Minister of the Interior. "If we want our people to continue believing in and supporting democracy all over the continent we must, first, improve the stability and quality of democratic governments; and, second, deliver the bene?ts of democracy to the vast majority of Latin Americans."

The year 2004 brought exciting news in terms of economic activity in Latin America and the Caribbean, noted Insulza.

GDP grew 5.7 percent in 2004, its strongest growth in 25 years, and estimates indicate that the region will continue to expand in 2005 and 2006, although at more sustainable levels.

"But some big questions still lie before us," cautioned Insulza. "Unemployment continues high, there are many heavily indebted countries, foreign investment is lower than expected."

In Latin America, the statistics point to a citizenry that is mostly poorer, more disenfranchised and less enthusiastic about democracy than at any time in the last 15 years.

Per capita income in most of the region has been slow since 1982. Only Chile has experienced robust economic growth in the 1990s. Every country in the Andean region is struggling. Inequalities have widened in most countries and the absolute number of people living in poverty in the region has grown.

"Small wonder," said Insulza, "if you consider that this region has 224 million poor (40 percent of its population) and 96 million of them are extremely poor, which means that they live with less than a dollar a day."

The impact has been felt acutely by the fragile democracies in the region.

"In the last 15 years, 11 elected presidents have failed to finish their constitutional terms, and six of their replacements, chosen according to their countries' constitutions, have also been unable to do the same," said Insulza.