During the past year Reagan administration officials and the us press have pointed with frequency and enthusiasm to a resurgence of democracy in Latin America. Secretary of State George Schultz, for example, has spoken of ‘more people voting in more elections in more countries than ever before in the history of this hemisphere’; while Alan Riding, writing in the New York Times of 11 November 1984, expressed the new vision under the byline: ‘A Latin Spring: Democracy in Flower’. This spate of publicity fits excellently with public relations requirements. Urgently needing to counteract the widespread negative responses to its Central American policies, the Reagan administration has itself sponsored elections in delicate situations (El Salvador, Grenada, Guatemala) as legitimizing projects, and asserted its devotion to democracy as a major reason for its anti-Sandinista policies. In relation to Nicaragua, however, Washington has suffered a number of setbacks: the 1984 elections resulted in an impressive victory for the Sandinistas; the Contadora initiative, now supported by Managua, has become a thorn in the side of us foreign policy; and the World Court’s ruling against the mining of Nicaraguan harbours has necessitated a costly rejection of its legitimacy. All the more useful, then, are press verdicts such as Alan Riding’s that ‘given the United States’ enormous weight in the area, the administration’s public preference for democracy proved influential.’ Beside the general resurgence of democracy, it is implied, such foibles as the overthrow of one or two small backyard defectors from ‘democracy’ can surely be overlooked.

A second hallmark of the new publicity is its superficiality and neglect of context. The scope and substance of changes are often grossly exaggerated, important exceptions are played down, and the administration’s own role is misrepresented. The news reports in question share a breezily optimistic view that the democratic ‘contagion’ is spreading and likely to continue into the indefinite future. ‘Democracy’, defined in a loose way, is assumed to prevail if the formal machinery of elections is put in place and civilians are allowed to occupy high office. There are no detailed analyses of the economic and political conditions that underlie the military retreat, nor of the extent to which the military establishments may retain effective power by securing their prerogatives in ‘security’ matters and their control of key instrumentalities of the state. Finally, no distinction is made between nearby Central America, where political conditions have been steadily deteriorating under active us intervention, and South America, where some kind of resurgence may really be occurring.

In the beginning, the Reagan administration openly proclaimed its support for friendly (‘non-totalitarian’) military dictatorships. Now it claims to have fathered the upsurge of democratic regimes. What has happened in the interim? From whence come these born-again democrats? Jeane Kirkpatrick is already insisting that she was ‘misunderstood’, her position distorted. She too is strong for Brazilian democracy. But the fact is that the resurgence of democracy in South America took the Reaganites quite by surprise and has turned out of office some of their closest and most reliable allies.footnote¹ They are making the best of a bad situation.

It should be noted that the return to civilian rule is taking place in states which had earlier abandoned democratic institutions with us assistance and approval. The overthrow of the Goulart government of Brazil was greeted enthusiastically in Washington, as was the military coup in Chile. The satisfaction of the us establishment with the ruling junta in Argentina was best captured in David Rockefeller’s pronouncement that that country finally had a government that ‘understands the private enterprise system’. A further mark of approval was the enormous flow of credit, aid and investment which the United States lavished on the military regimes as they erected an economic model serving the interests of a small stratum of local business and foreign capital. While the army kept the masses disorganized by terror, imposing low wages in a no-strike environment, huge subsidies were provided to business, public assets sold off to the private sector at favourable prices, and foreign lenders promised that interest payments would be met. The suspension of parliamentary government assured the banking and multinational corporate community that unruly legislatures would not interfere with the freedom of business.

This system of ‘supply-side economics with machine-guns’ did not work even on its own terms. Argentinian, Chilean and Uruguayan rates of savings and investment never reached their pre-coup averages, and foreign capital failed to rush in to invest in industry, instead confining itself largely to finance, trade and agribusiness. All three of these countries suffered from sharply increased concentration of ownership and control, denationalization and economic stagnation, among other problems. Only in Brazil did savings and investment eventually nose ahead of pre-coup levels, although for the entire period of military rule—up to the 1980s collapse—the gdp rates of growth were not superior to those of the preceding years. The rapid growth of 1968–74 was fueled by massive foreign credits, and when the ‘miracle’ petered out in default and increased dependence, none of the country’s basic problems had been addressed.

The oil price rises of the 1970s were devastating blows to the fragile, dependent economies of Latin America, and the recession and soaring interest rates of the early 1980s finished off a system of growth which had come to involve borrowing to pay interest on previous loans. Real gdp in Latin America increased from $257bn to $336bn between 1975 and 1984, or by 31 per cent;footnote² in the same period the gross external debt rose from $89.4bn to $360.2bn, while net payments of interest and profits rocketed from $5.6bn to $37.3bn. Interest charges, at a rate of nine per cent, would amount to $32.4bn on a debt of $360bn—a sizeable bite out of Latin American gdp and the equivalent of some 40 per cent of merchandise export earnings.

The extent of the collapse is still not fully appreciated. The gdp of Latin America (exclusive of Cuba), which had increased by 4.8 per cent a year in 1975–78, and 6.1 per cent in 1979–80, fell to an average of 0 per cent for 1981–84. Given the rapid population growth, then, per capita gdp fell by an annual average of 2.2 per cent in the latter period. Unemployment, already high, reached new peaks in the early 1980s, while the inflation rate shot up from a weighted average of about 50 per cent a year in 1976–81 to 84.5 per cent in 1981, 130.8 per cent in 1983 and 175.4 percent in 1984.