Latin American Progress and Frustration

In Latin America the first Development Decade proclaimed by the United Nations overlapped almost exactly with the first 10 years of the Alliance for Progress, thus making 1970 an obvious year of evaluation. The 1960s were marked both by significant advances toward UN and Alliance goals and by rising frustration. At the end of the 60s, it was the latter that attracted most attention. Elected governments had been toppled in Brazil, Argentina, Peru, and Bolivia, and replaced by military regimes which, although varying widely in political hue, were as one in their professed determination to move their countries more rapidly down the development road. In Chile the first freely elected Marxist government in history had taken office, ousting a strongly reformist regime with almost unprecedented social and economic advances to its credit. In Uruguay, long the pride of liberal democrats throughout the Americas, an increasingly bold terrorist organization defied all efforts to stamp it out, while in Colombia an aged former dictator came within an ace of upsetting the political compromise which ended la violencia, the period of violence which racked the country in the 1950s. Small wonder that the rhetoric of hope which accompanied the birth of the Alliance was muted, and men throughout the hemisphere were asking if economic advance dampens or stimulates political unrest.

In launching the Development Decade, the UN set 5 percent annual growth in income as a major goal for the developing countries. In Latin America that goal was achieved. Other standard bench marks also indicated a robust economic performance in the region. Gross investment averaged about 18.5 percent of gross domestic product, a ratio considerably higher than that achieved in the developing countries of Africa and Asia; and 92 percent of gross investment was financed by domestic saving, a substantially higher percentage than that reached by the other less developed countries around the world. Saving by central governments increased sharply over the decade, reflecting significant improvements in tax structures and collection procedures, and marking genuine progress toward an important Alliance objective. Net capital flows to the region averaged about $1.5 billion annually from 1961 to 1968, rising from an average of $980 million in 1961-62 to $2,157 million in 1967-68. Exports increased at more than 5 percent annually, and the trade surplus rose from an average of $1,050 million in 1961-62 to $1,685 million in 1967-68.

While net payments from the region for various services—particularly returns on investment income —also rose steeply, this increase was more than offset by the improvement in the trade balance and the rise in net capital inflows; hence the region's international monetary reserves rose from $2,617 million in 1961 to $3,869 million in 1968. Whereas in 1961-62 reserves had averaged about 28.5 percent of imports, in 1967-68 they were 32.6 percent, despite the fact that imports increased by 40 percent in this period. These are impressive figures. They leave no doubt that the overall balance of payments position of Latin America was strong and healthy in the 1960s.

Other indicators of welfare also showed marked improvement. Mortality rates declined significantly throughout the region, life expectancy increased, and numbers of doctors and dentists per capita rose, although not by much. Literacy rates improved in all countries of the region, rising from two-thirds of the population over 15 in 1960 to almost three-fourths in 1970. The number of children in school, in primary through university grades, rose by 6.6 percent annually, more than twice as fast as the increase in the school age population.

These general indicators of vigorous economic and social progress do not fully depict Latin American experience in the 1960s, however. They mask other, less happy, aspects of performance, some of which may explain, at least in part, the concurrence of economic growth and political upheaval. Much of the rise in production over the decade, for example, was absorbed by the world's highest rate of population increase—almost 3 percent per annum. Consequently per capita income growth fell well short of the Alliance goal of 2.5 percent annually. At the end of the decade average per capita GNP was still only around $450 compared with over $4,300 in the United States. Even more frustrating from the Latin standpoint, the income gap between Anglo and Latin America was larger at the end than at the beginning of the decade.

Both the low level of per capita income and its failure to rise more rapidly could be attributed in large measure to agriculture. Output per worker in agriculture was abysmally low, as indicated by the fact that agricultural production accounted for only about 17 percent of total Latin output in the 1960s while absorbing some 44 percent of the labor force. Hence, low productivity in agriculture seriously depressed productivity in the economy as a whole. Moreover, the failure of agriculture to grow more rapidly acted as a heavy drag on the growth of total production. There were some notable exceptions, particularly in Mexico and Venezuela where agricultural performance was outstanding, but in the region as a whole agricultural production barely kept pace with population growth. Clearly, most Latin American countries still had not learned how to harness the powerful productive forces of modern agricultural technology.

By comparison with agriculture, urban-centered activities performed well. Production in manufacturing, construction, public utilities, particularly electricity generation, and service industries increased much faster than in agriculture, and productivity in these activities far surpassed that on the farm. This is evident from the available production and employment data, and it can also be inferred from the large and ever-growing stream of people flowing from rural to urban areas. Between 1960 and 1970 rural population grew at an average annual rate of about 1.5 percent (well under the natural rate of increase in rural areas), while in urban places population increased by 4.3 percent annually. By 1970 over 54 percent of Latin Americans were urban dwellers, an increase from 47 percent in 1960. Obviously something was going on in the cities that made it hard to keep them "down on the farm." That something was rising economic opportunity: more jobs and higher wages, reinforced by the pull of urban amenities, access to public assistance, and higher political visibility.

Still, many a transplanted farm boy must have begun to wonder if, after all, the promise of the good life in the city were not a fraud. Jobs were indeed more plentiful than in the countryside, but so were the applicants for them. Consequently, increasing numbers found themselves unemployed or engaged in low-paying "service" activities which contributed little to their incomes and perhaps even less to their sense of personal worth. Construction of urban housing, water and sewage systems, and transport facilities failed to keep up with the rapidly rising demand for them. As a result, mounting numbers of people were crowded into the cintunines de miseria, the "belts of misery" found in virtually every major Latin American city. For these people, the impressive figures tracing GNP growth, strength in the balance of payments, improvements in mortality and literacy rates, and all the rest must have had little if any significance.

Thus Latin America entered the 1970s in full awareness that despite genuine achievements the high promise of the Alliance for Progress had not been fulfilled, and that its realization might be far more difficult than had been anticipated a decade earlier. Yet there were encouraging signs. A consensus was emerging that the modernization of agriculture must be far higher up on the list of development priorities than in the past. There also was a clear awareness of the importance of expanding markets for Latin exports of manufactured goods, both in Latin America itself and in the developed countries. This was a major theme of the so-called "Consensus of Viña del Mar," which emerged from a meeting of Latin political and economic leaders held in Chile in the spring of 1969. There was no mistaking the obstacles confronting this policy, however. Among the Latin American countries themselves the drive toward economic integration had made little real headway in the sixties and its prospects in the new decade did not look promising. Perhaps, more grave, the 1970s opened with signs that the United States might be moving into an era of increased protectionism. This approach to assisting ailing U.S. industries would have the most serious consequences for efforts of the Latins to expand their exports of manufactured goods. Seldom had the importance of U.S. economic policies for Latin American development been more evident. It was clear that the race between frustration and progress still was undecided and that the posture of the United States toward its southern neighbors would powerfully affect the outcome.