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Venezuela

Latin America's "Magic Realism" Economics

Leaders in Venezuela, Argentina and Brazil refuse to face the reality that the days of easy money are over, and the time is now for real reform.

A slum in Caracas, Venezuela — Photo: Charles Mostoller/ZUMA
A slum in Caracas, Venezuela — Photo: Charles Mostoller/ZUMA
Susan Kaufman*

-OpEd-

MIAMI — Colombia's Gabriel García Márquez, who died last month, was one of Latin America's greatest novelists. His writing helped to popularize what became known as "magic realism," which mixes realistic narratives with magical thinking.

Recent events in Latin America make me wonder whether the magic quality is restricted to the continent's novels, or characterizes a vision of both politics and economics espoused by leaders of several crucial Latin American countries.

I am thinking specifically of Venezuela, Argentina and Brazil. While they are very different places, their governments do not seem to accept the fact that we are coming to the end of both the raw materials boom fueled by China and low interest rates in the United States. This should force them to change the policies they have followed so far. Without the easy money they had been able to access, they will now have to implement the reforms they have postponed, to avoid the political consequences of a slowdown of growth.

The Venezuelan government led by Nicolás Maduro appears to be the one furthest removed from reality. When he took office last year, the billions of U.S. dollars that flowed into Venezuela under his predecessor Hugo Chávez had disappeared. A relatively small portion had been spent to help the poor, and the rest to buy political support for Chávez policies — but also to enrich the new "Bolivarian" elite.

Nicolás Maduro "furthest removed from reality" — Photo: Avn/Xinhua/ZUMA

Despite declining oil production and the absence of new investments and loans, Maduro has maintained his predecessor's generous spending levels, generating an inflation rate of 56% that could reach 75% later this year. Maduro seems to believe that the poor will continue to back him despite a rapid deterioration of their own economic conditions.

Brazil's former president "Lula" da Silva, a friend of Venezuela's Bolivarian revolution, disagrees, which is why he has edged Maduro toward starting a "dialogue with the opposition." It is unlikely Maduro could survive for long without introducing reforms to stop the Venezuelan economy spiralling into a slump, despite thousands of Cubans helping him maintain order with increasingly repressive methods.

Argentina too appears to have fallen into its own brand of magic realism. President Cristina Fernández de Kirchner thought she could keep spending as freely as she did during the raw materials boom, despite steeper inflation, a drastic fall in foreign investment, falling dollar reserves and exacerbated capital flight.

There are signs recently that her government is adjusting itself to reality. It allowed an 18% devaluation of the peso, cut gas subsidies and agreed to pay Spain's Repsol $5 billion as compensation for nationalizing its Argentine subsidiary YPF. Some have noted that Kirchner had no options, as Argentina was running out of money. Whatever the reason, the new policies are once more attracting investment.

Finally we have Brazil, working hard to avoid the reforms needed to generate growth. The economy that grew 7.5% in 2010, grew less than 2% in 2013, and the outlook appears to be similar for the next two years. The country's vast oil reserves have not been efficiently exploited, in part because of protectionist rules imposed that require the use of drills and ships made in Brazil. The country has not significantly reduced the credit boom that stimulated consumer spending during the high-growth years, nor has it rid itself of Mercosur, the dysfunctional trading pact that has discouraged competitiveness among its members.

In contrast with Kirchner, who will not seek another term, President Dilma Rousseff hopes to be reelected this year. She is in a race against time, trying to postpone the necessary reforms until after the elections. But if she wins, it is not clear whether would truly reconsider the ways the state can better encourage growth and development of Brazil's economy.

*Kauffman is director of the Center for Hemispheric Policy at the University of Miami.

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Society

In Northern Kenya, Where Climate Change Is Measured In Starving Children

The worst drought in 40 years, which has deepened from the effects of climate change, is hitting the young the hardest around the Horn of Africa. A close-up look at the victims, and attempts to save lives and limit lasting effects on an already fragile region in Kenya.

Photo of five mothers holding their malnourished children

At feeding time, nurses and aides encourage mothers to socialize their children and stimulate them to eat.

Georgina Gustin

KAKUMA — The words "Stabilization Ward" are painted in uneven black letters above the entrance, but everyone in this massive refugee camp in Kakuma, Kenya, calls it ya maziwa: The place of milk.

Rescue workers and doctors, mothers and fathers, have carried hundreds of starving children through the doors of this one-room hospital wing, which is sometimes so crowded that babies and toddlers have to share beds. A pediatric unit is only a few steps away, but malnourished children don’t go there. They need special care, and even that doesn’t always save them.

In an office of the International Rescue Committee nearby, Vincent Opinya sits behind a desk with figures on dry-erase boards and a map of the camp on the walls around him. “We’ve lost 45 children this year due to malnutrition,” he says, juggling emergencies, phone calls, and texts. “We’re seeing a significant increase in malnutrition cases as a result of the drought — the worst we’ve faced in 40 years.”

From January to June, the ward experienced an 800 percent rise in admissions of children under 5 who needed treatment for malnourishment — a surge that aid groups blame mostly on a climate change-fueled drought that has turned the region into a parched barren.

Opinya, the nutrition manager for the IRC here, has had to rattle off these statistics many times, but the reality of the numbers is starting to crack his professional armor. “It’s a very sad situation,” he says, wearily. And he believes it will only get worse. A third year of drought is likely on the way.

More children may die. But millions will survive malnutrition and hunger only to live through a compromised future, researchers say. The longer-term health effects of this drought — weakened immune systems, developmental problems — will persist for a generation or more, with consequences that will cascade into communities and societies for decades.

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