Buenos Aires Consensus

 Some documents are meant to make history, like the Magna Carta or the Declaration of Human Rights. Countless more are lost in the beaurocratic limbo of history. Only time will tell which of these will be the fate of the Buenos Aires Consensus, a 20-point declaration signed by the Lula da Silva and Néstor Kirchner, presidents of Brazil and Argentina.

This document was presented to the public during Lula´s October visit to Argentina,  and it consists of a list of common views on issues such as payment of the foreign debt and social equity, growth and wealth distribution, education, and the future of the economic block of Mercosur (formed by both countries together with Uruguay and Paraguay, with Chile and Peru as commercial partners) in the face of the FTAA negotiations taking place in Miami in November. It represents a formalization of the strategic alliance that Argentina and Brazil are aiming for, now facilitated by the empathy between both administrations.

 As heads of the two largest countries (and economies) in South America, Lula and Kirchner have given priority to strengthening the Mercosur as the way to reinforce their negotiating capability both in terms of world trade – as an alternative to the U.S.-driven FTAA – and in their negotiations with the IMF. Therefore, the main function of the Buenos Aires Consensus is to act as a line in the sand marking both countries’ common negotiating position, bringing them into the FTAA meeting in Miami as partners. However, this relationship is full of difficulties; businessmen from each country are more used to considering their neighbouring counterparts as competitors, and there is a silent mistrust at the lower levels of both administrations.

 The name of the document seems to aim at presenting a progressive counterpoint to the Washington Consensus of 1989, which outlined the neoliberal recipe that was to be applied all over the Americas during the following decade. However, no one has officially drawn that comparison, as both countries are trying to walk a fine line betweeen autonomy and diplomacy in their relationship with the international financial institutions and the Bush administration.

 Will the Consensus turn out to be the starting point for a more independent Latin America, marking the agenda of the continent in the next decade? It could be. But only if both administrations turn those vague words into real actions, something which would imply making bold decisions affecting powerful interests. Otherwise, it will fade away from memory, another inflated burst of rhetoric attempting to disguise their governments´  lack of determination to provoke profound changes. Lula raised expectations and hopes before taking office, Kirchner did so with his first measures as president. The possibilities for change are there, the chances for dissapointment are too.

 The 21 items in the document form a compendium of abstract progressive statements, with few specifications on how they would be made real. The issues are grouped around five main areas:
– economic development and social equity: Argentina and Brazil are comitted to the growth of their economies through “the development of autonomous policies” and “a more equitable distribution of wealth”.  Both countries have experienced the polarization and growing gap between rich and poor brought about by the neoliberal policies of  the nineties, even during periods of increasing Gross Domestic Prowth . Unlike the Washington Consensus which called for the deregulation and removal of the state from the economy, there is a call for a far more active role from public institutions “that encourage sustainable growth and equitable distribution of its benefits”. However, multinational CEOs need not fear a return to a state-driven economy: the best way to achieve these goals, they declare, is the creation of “a favorable development of business and productive investment”. Another public instrument is “a more fair tax and fiscal system”, a pending task in two countries with very regressive income taxation.

– Payment of the debt: one of the thorniest issues in the document, which almost did not make it into the final version, the question of Argentina and Brazil´s debts has been both the greatest motivation for their mutual approach and the cause of the two administrations’ gravest incident so far (when Brazil failed to issue statements of support during Argentina’s tense negotiations with the IMF in September). But in the Consensus, both state the idea that payment of the debt is impossible without “the creation of wealth and jobs, the reduction of poverty, the promotion of education and health”. This concept is taken from Argentina´s recent agreement with the IMF, where the Argentine team forced the inclusion of this “social clause” in the final draft, a departure from previous agreements as it subordinates the fiscal surplus used for debt payment to social variables such as poverty rates and wealth distribution. Brazil is currently in negotiations with the IMF for a new agreement, and after closely following Argentina´s process, intends to use that precedent to force better terms out of the IMF.

– The demands of globalization: the document declares that the process of globalization has “generated unprecedented modes of economic concentration”.  Therefore, there is a call for integration beyond the borders of the Mercosur to include the rest of the South American countries, enabling them to “more efficiently confront the unstabilizing movements of speculative financial capital”, which were free to enter and exit national economies at will thanks to the deregulation of financial markets applied following the Washington Consensus in the nineties.

– The FTAA and U.S. protectionism: the rhetoric about integration within South America does not mean that both presidents are willing to confront the U.S. directly regarding the FTAA: they reaffirm their disposition to “reach a satisfactory agreement in January 2005”. The only mention of the reservations that both governments have towards the dangers of  American supremacy in a unified hemisphere is the mention of their will to reach “a balanced agreement which respects the disparate interests of participants”. One of the most conflictive points in the Miami meetings will probably be the asymmetry between the barriers put up by the U.S. against foreign agricultural products and its own demands for the opening up of Latin American markets to U.S. products.

– The role of the UN and unilateralism: this is the issue that closes the document. Although the United States is never mentioned directly, there is a clear criticism of its hegemonic policies and the invasion of Irak in the rejection of “any exercise of unilateral power that is incompatible with the principles and purposes of the Organization of the United Nations.” The same idea closes the consensus, where both reaffirm “the need to combat threats to international peace and security and terrorism according to the rules of the United Nations”.


 This progressive agenda can be seen as further evidence in support of an analysis that sees South America shifting towards the left, as a reaction to the orthodox neoliberal policies applied during the nineties. Those who favor this view point to the leftist origins of both Kirchner and Lula, together with the presence of Chávez in Venezuela, socialist Lagos in Chile, plus the recent downfall of Sánchez Lozada in Bolivia and the strong likelihood of a victorious left in Uruguay. This shift would imply a growing resistance in the continent to penetration of U.S.-driven policies such as the FTAA. 

However, there are many signs showing that this is not yet a clear direction. In Colombia, for example, conservative Alvarez Uribe´s administration is heavily dependent on U.S. financial and military aid, and its political autonomy is almost nonexistant. In Ecuador and Peru, where both governments came out of popular reaction against the neoliberal models of Bucaram and Fujimori, they are following orthodox policies that have caused disappointment and growing opposition from the majority of their population. 

 A similar process is beginning to plague Lula, who was elected on a platform of agrarian reform and redistribution of wealth in a country with some of the greatest disparities between rich and poor in the continent. Lula´s lack of audacity in his 11 months as president have already caused tension and opposition from within his own workers’ party, the PT, and other initial supporters such as the landless movement of the MST. Lula´s administration is restricted in its capacity to carry out the social reforms of its campaign by the strict terms in the agreement with the IMF, inherited from the preceeding Cardoso presidency. However, there doesn´t seem to be a very firm decision by Lula to go against these limitations and carry out more radical reforms; the administration seems more concerned about winning over the support of the financial establishment than carrying out the platform on which it was elected. And negotiations with the IMF are well under way to renew last year’s agreement, although there might be some favorable changes after Argentina´s deal has lowered the standards.

 As for Kirchner’s presidency, while there has been a remarkable shift in the country’s political climate, so far there are few economic changes that are not a logical consequence of currency devaluation but active measures from the government. The Kirchner administration certainly has a more confrontational style than all his predecessors in its relationship with foreign companies in charge of privatized commodities and powerful economic groups, but the power base of these privileges remains unchallenged. And the recent signing of an agreement with the IMF appears to demonstrate that there won´t be any radical departures from orthodox economic policies.


 Things are not going so smoothly between both signers of the BA Consensus either. Although both presidents declare mutual friendship, their relationship was tensed during the last days of Argentina´s negotiations with the IMF. Other Latin American presidencies declared their public support for Argentina´s position, including Chile, Mexico and even George W. Bush, but Brazil´s silence was the loudest sound in those crucial days. Kirchner tried to hide his resentment for Brazil´s failure to back its partner, but it was only after a head-to-head apology by Lula that the relationship appeared to return to better conditions. Lula had chosen not to seem rebellious before the IMF, knowing that Brazil´s own delicate negotiations would soon be under way. 

 Kirchner can afford to be more confrontational with the Argentinean establishment and multinationals since he inherited the presidency post-default, while the Lula administration is more worried about avoiding it. This explains the apparent contradiction between their political origins, when Lula was the boogeyman in the eyes of Brazil´s economic elite, and the present situation where Kirchner seems to be the one urging Lula to be bolder in his measures. The Buenos Aires Consensus can also be seen as an attempt to correct this political distortion, without the need to make any real changes that could destabilize their programs. 

A more long-term difficulty comes from the disparities between both economies: even when their currencies are presently almost level, Brazil´s labour costs are still cheaper than Argentina´s, so as the Argentine economy began to recover, so did the shipments of imported Brazilian products, specially textiles. Brazil´s industry did not suffer the debacle that affected its neighbor´s, when the high exchange rate of the peso encouraged imports and shut down a large number of factories, so the commercial exchange is far from equal. At the same time, while Argentina is recovering from its economic crash, Brazil´s economy is sagging, so there isn´t enough of a market for Argentinean products. Therefore, Argentinean bussinessman are not as enthusiastic about intensifying the Mercosur as the presidents; these economic tensions present difficult obstacles for the integration being promoted at the political level.

 The Buenos Aires Consensus shows that the economic recipes of the Washington Consensus are undoubtedly no longer predominant, and there is a clear change in the continent’s political atmosphere. But the rhetoric appears far ahead of the actual events, as there is still no clear alternative model to be adopted by these Latin American governments that were elected with a mandate to repair the damage done by neoliberal policies. The balances of power have not suffered major changes: the United States’ unilateralism in military and economic matters is far from being challenged, and the demands of the IMF still predominate over the development of more autonomous policies. No country apart from Venezuela has yet dared to walk out of the FTAA process, even though the dangers inherent to this agreement are of public debate. The meeting in Miami will be a good test of the strength developed by these tendencies within the continent.

 Most important of all, the potential of these changes in the continent will not be fully realized while pending discussions are swept under the rug: the burden of an eternal foreign debt that stops short any possibility for real independence and development; the debate on the legimitacy of this debt and its usurious interests, in many cases originated during undemocratic governments; whether the actual consequences of going against the interests of financial capital would be as grave as the black omens issued by orthodox consultants and economic gurus. And the most essential question facing South America, the urgent need for policies of wealth distribution to correct its unacceptable inequalities, remains at the back of public priorities. This is the change that would truly signify the beginning  of a new era in Latin America.

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