The Rio 2016 games will be a disaster for Brazil, and so was the World Cup

Despite majorf43342b886d89f64b6d92581c183775c concerns heading into the tournament, most observers concluded that, apart from the 7-1 semifinal disaster against Germany, the 2014 World Cup in Brazil proved to be a success. At least in the sense that the games all started on time, and the visitors and media were able to make it all the games without incident. Nevertheless, much like the Brazilian national team’s by the skin of their teeth journey to the semifinals of that tournament, the relative success of the World Cup and the fact that, in the end, Brazil will likely pull of the Rio 2016 Olympic Games smoothly, has masked serious problems with the way Brazil had prepared for the two mega-events. And even if it doesn’t end with a spectacular collapse like defeat to Germany, even if the games come off well for those that compete and attend them, they, like the World Cup, will be a disaster on par with the 7-1 loss.

The important starting point when judging mega-events like the World Cup or Olympics is that they are always a massive waste of money. The general economic consensus indicates that whatever benefit a city or country gets from the event is massively outweighed by the costs of preparing for it. This is particularly acute with the Olympics, where it’s necessary to have venues available for sports that might not even be popular in the country hosting the games (i.e. baseball stadiums in Greece). The one argument in favor of hosting a World Cup or Olympics in spite of this fact is that, while the event is not worth the money in strict monetary terms, hosting a prestige event that will draw in lots of foreigners can help cities overcome bottlenecks to push through necessary infrastructure projects that might otherwise get bogged down. Accordingly, while it might be a waste to build that giant new soccer stadium, at least you’ll finally be able to overcome the NIMBYs and get that new public transit line built.

To a certain degree, this is what happened
with the 2012 London Olympics. It served as a catalyst to redevelop an underdeveloped part of east London more quickly than would have happened otherwise. It’s still unclear how beneficial this actually was compared to the baseline, but it’s not a ridiculous idea on its face. With its diffuse geographic nature, the benefits of the World Cup were never going to be easy to parse, but in a soccer-mad country like Brazil, having a handful of new or renovated stadiums around the country didn’t seem like totally ridiculous waste of money, especially since whatever money the Brazilian government spent was supposed to be spent on infrastructure improvements and not on the stadiums themselves. The Rio games, on the other hand, were billed as a catalyst for a massive improvement opportunity for the city.

Juliana Barbassa’s fantastic new book, Dancing with the Devil in the City of God: Rio de Janeiro on the Brink casts into relief Rio’s failure, and Brazil’s failure in general, to achieve even this modicum of success. Written in the first person and full of personal reflections about her relationship with the city of her childhood upon moving back as an adult, Dancing with the Devil’s reporting focuses on the changes occurring in Rio beginning around the time Brazil won both the World Cup and Olympic Games. Throughout the book, Barbassa draws the reader back to the failures in governance that force huge portions of the population to live in the crossfire of gang and police violence, often at risk of losing their homes, while raw sewage runs through the streets of their neighborhoods.

Much of the early part of the book focuses on Rio’s sprawling favelas, within which live SOME percent of the city’s 12 million residents. The most affecting part of the book deals with the invasion of Vila Cruzeiro, a favela in the northern part of the city which served, along with the neighboring Compleixo do Alemão, as a locus for the most violent criminal gangs in Rio. The gangs inside the favela were so well fortified and so well armed, that the Brazilian Navy had to be brought in to provide support to the police. Barbassa details the harrowing military operation that eventually brought both Vila Cruzeiro and the Compleixo do Alemão under police control under the mandate of the Pacifying Police Units (Unidades de Polícia Pacificadora, UPP). This was treated as a major triumph by the police and government in Rio, but, in Barbassa’s words, it was reminiscent of “George W. Bush’s “Mission Accomplished” speech in 2003, when he made an action figure landing aboard an aircraft carrier and declared” victory.

While the reduction in violence, in and of itself, represented a dramatic improvement in the quality of life for the favela dwellers, the improvement of government services was halting and uneven. While the Compleixo do Alemão was supposed to be administered by the specially-trained UPP officers, a lack of trained officers meant that the military remained for several years instead. The same issues of police violence and drug trafficking, with it associated criminal violence remained, although diminished and changed. Recently, it bubbled back to the surface as a national issue when Rio police were caught on video committing what were, in effect, executions. In early October, Mac Margolis wrote about how the extra-official slayings threaten the real gains achieved in the pacified zones. He cited the fact that there are not enough trained UPP officers to work all of the necessary posts, leaving them to other officers more accustomed to the Brazilian police forces’ “shoot first, ask questions later” mentality summed up so well in the common Brazilian phrase bandido bon é bandido morto (a good criminal is a dead criminal). In fact, despite the high expectations generated by the UPPs, the murder rate in Brazil has actually risen in recent years, focused heavily on the country’s poorest urban residents.

Later on, Barbassa travels to find the source of the Rio Carioca, whose name gives the residents of Rio their demonym. Until the 20th Century, the river was the main water source for the city, but as Barbassa describes, is now more easily identified with one’s nose than one’s eyes. The section running through the heart of the city is mostly paved over, and where it’s exposed, has concrete banks. As such, Cariocas “could be forgiven for assuming that his gray, dead discharge is part of the wastewater treatment system, and not the stream born less than three miles away at the feet of Cristo, among granite boulders and lush forests.” Of course, upon arriving at its source, where there “was something that looked and smelled like a mountain creek,” Barbassa hardly has to look more than a few hundred feet to see “PVC tubing snaked down the hillsides, each contributing one home’s worth of waste to the stream.”

However, it is not not just the poor, lacking any other option, who end up just dumping their waste into whatever waterway will take it away from their homes. In the rapidly developing western part of the city, where much of the Olympic infrastructure is under construction, newly built apartment complexes catering to upper middle and upper class Cariocas, often dispatch their wastewater directly into the marshes nearby. Unlike favela dwellers, these apartments don’t dispatch their wastewater wherever they can because they lack other options. Rather, it is easier and cheaper for developers to build pipes that dump into nearby waterways than to get them linked into the sewage system. And since no one stops them or punishes them if they don’t, there is little downside relative to the cost savings. In a telling anecdote, while accompanying researchers studying the caimans that inhabit that region, Barbassa learns from one of the researchers that they face more danger from sewage-borne diseases in the water than from the caimans themselves.

When Rio won the games in 2010, two important tenets of the preparations were going to be integrating the favelas into the urban fabric of the city, and cleaning up the polluted waterways in and around the city. Integration included linking the favelas to public services like the power grid, water and sewage systems, but also helping link favela dwellers to jobs through improvements to the public transportation system. Virtually none of this has happened. The choice to put the main venues where they did, away from the city center in the suburban frontier, meant that the infrastructure improvements were geared toward the residents middle and upper class residents of that part of the city, meaning highways. Transportation within the city center has barely improved–the World Cup was supposed to contribute to this as well–and new highways do little to link the urban poor to the new growth center miles away. There were some plans drafted to integrate the favelas into Rio’s public service network, many of which were praised by urban design experts for their forward thinking. However, Barbassa details how most of these were quietly tabled, and in a disturbing number of cases, residents were instead informed that their communities would be destroyed.

In the end, little was done to integrate the favelas into the rest of the urban fabric. The omnipresent smell of human feces Barbassa describes in her visits to those communities remains. So does the threat that in bad weather, whatever makeshift sewage system does exist will be overwhelmed and people will find their homes flooded with sewage. The upshot of this is that the water pollution in Rio remains as bad as ever. A report by the AP in July, based on a study they commissioned, showed that the water in the areas of the city designated for various outdoor water events, such as long distance swimming and sailing, was so polluted with fecal coliforms and other bacteria that it poses a serious health risk to the athletes, including in the water just off Rio’s famous Copacabana Beach. Despite this, just a couple of weeks ago, the organizers of Rio 2016 announced that there will not be any testing of the waters at the Games. A breathtaking decision to simply ignore the problem.

The Olympics, even with the extra attention from the World Cup, was never going to be enough impetus to fix all the problems affecting urban Brazil. However, from the beginning, Brazilian politicians talked about the positive legacy the events would have for the country. The World Cup came off despite the concerns in no small part because of Brazilians’ ability to improvise and make due with adverse situations (a skill called jetiinho in Brazil), and it’s not ridiculous to imagine a similar thing occurring next summer with the Olympics. However, simply pulling off the events without embarrassing the country cannot be the point. When Brazil won both events in quick succession at the end of the last decade, President Lula declared that, “All those people who thought we had no ability to govern this country will now learn that we can host the Olympics.”

The World Cup and Olympics were supposed to leave a legacy long after the athletes went home and the cameras were turned off. And yet, sixteen months after the end of the World Cup, and ten months out from the opening ceremonies of the Olympics, and it’s difficult to see how that legacy will be a positive one. Crime may have been contained such that tourists in the country for a few weeks wouldn’t perceive it as an issue. Yet, just miles away, police and drug traffickers wage open war in the favelas, with police summarily killing “criminals” and the traffickers committing heinous acts of retribution. Brazil’s government may be capable of ensuring that all the venues are completed on time, but at the cost of spending money meant for public works projects like infrastructure improvements, such cleaning up the filthy waters around Rio de Janeiro. Brazil will remain a country without adequate infrastructure, with one of the highest murder rates in the world, where a significant portion of the residents of its richest cities have raw sewage running through their neighborhoods and whose children are constantly at risk of being struck by a stray bullet.

Brazil may succeed in pulling off the Olympics as well as it did the World Cup; sufficient so that everyone could get to the games on time and without incident. But Brazil’s Olympics will still be a disaster, just like the World Cup was. Because if you can’t point to anything useful the games helped facilitate, it becomes impossible to even justify them as a means to an end; breaking down obstacles impeding necessary improvements. Instead, Brazil is left having spent billions of dollars building stadiums–despite pledges not to spend public money on them–while millions of people living in its biggest, richest cities still live without access to basic services and the rich and poor alike flush their toilets straight into the water they live along. Brazil’s World Cup and Olympics didn’t just cost the money they spent building the venues, it also cost all the money that could have been spent improving the lives of Brazilians instead.

No matter how nice the games look on TV, they have been an unmitigated disaster.

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Brazil’s Election: Seeing Triple

...four Krustys!

…four Krustys!

At work on Monday, I hosted an event with BrazilWorks director Mark Langevin where he spoke on the platforms of the three top candidates in October’s presidential election. The talk was useful in highlighting some if the important differences between the candidates, but was also illuminating because it demonstrated just how similar their platforms all are. All three favor an important role for the state in the economy, particularly in industrial policy, none is particularly enthusiastic about liberalizing the country’s protectionist trade regime, and all are vague about the contours of the fiscal adjustment they’d likely have to undertake once in office. This presents two problems for Brazil; one immediate and the other more structural.

Having three candidates whose platforms vary mostly on the margins or simply in tone is not necessarily a bad thing; it can be indicative of a broad national consensus about the direction the country should go. One could argue that this was the case in 2002, when Luiz Ignacio Lula da Silva and José Serra were running on a platform of continuity with the policy framework instituted by Fernando Henrique Cardoso. However, in 2002, the sentiment was that Brazil had found the right policy mix and that the best route forward was building on what Cardoso had started. The arguments were over more ancillary policies and the rhetorical emphasis of each candidate.

That is not the case this year. Brazilians and non-Brazilian observers alike seem to agree that the country needs a change. To be fair, the change Brazilians seem to be looking for is poorly defined and is exemplified by the protests in June 2013, which expressed Brazilians’ broad disillusionment with the state of things in their country, but was unable to coalesce around many concrete proposals. Considering that there is a strong, if amorphous desire for a change in the country, it would be encouraging to see more variety in the platforms. Instead, what you mainly see is a bit of tinkering with Dilma’s governing philosophy by her and her two opponents, former Lula minister Marina Silva and Aecio Neves a senator from Minas Gerais. Considering Brazil’s economy is already stagnating, inflation is persistently at or above the Central Bank’s ceiling and China, the engine of the spurt of growth during the Lula years, is settling into a slower-growth equilibrium, this seems wholly insufficient for the situation, yet Brazilians have no alternative.

The threat in the longer term for Brazil is that the Workers Party (PT) becomes a political force that effectively gobbles up the center and center left of the country, leaving the opposition to form as an awkward coalition of far left and right—a coalition that would have difficulty forming coherent policy alternatives and would be inherently unstable. It would also be electorally unviable, acting more as a rump opposition and transferring the real competition for government into the PT. This has been one of the legacies of peronismo in Argentina, where many of the most important power struggles in the country happen within peronismo instead of between the various political parties, limiting democratic accountability. Silva and Dilma—the two frontrunners—both were members of the Lula administration, and Silva, while having left the PT, doesn’t differ with the PT on many policies. In effect, this is an election that could end in a runoff between the PT and a dissident PT, not a major clash of different governing philosophies.

I was recently discussing Darren Acemoglu and James Robinson’s Why Nations Fail with a Brazilian professor. He said that he liked the book, but felt that the chapter that dealt with Brazil was overly optimistic and that whatever improvement Brazilian institutions had made since the end of the dictatorship was being undone. I am less pessimistic, but as Brazil approaches this election needing fresh ideas and no candidates presenting them, while the two candidates most likely to win have both come from the same party (and the Lula administration), it’s difficult to imagine the country taking a big step forward in the next presidential term. Moreover, it’s increasingly possible to imagine a scenario where the only viable candidates in future elections are from the PT or are dissident PT members. That would point toward a degradation in the quality of Brazil’s institutions and an empowering of the most destructive tendencies in the Brazilian political system.

Potential is not destiny

Brazil’s 7-1 semi-final loss to Germany last week followed by an uninspired 3-0 defeat against the Netherlands in the World Cup’s vestigial third place match on Saturday cast into stark relief the national team’s deficiencies relative to other world powers. Obviously, the 7-1 result was a sort of “black swan” event—a highly unlikely worst-case scenario—but no one watching Brazil’s first five matches in the tournament should have been arguing that Brazil, even with Neymar and Thiago Silva, was a better soccer team than Germany then. Except many were. And many spent the tournament treating Brazil like a team that was far more dangerous than the one actually on the field playing.

I mention this because it struck me throughout the tournament how similar a phenomenon the systematic overrating of Brazil’s national team was to the declarations in 2009-2010 that Brazil had finally “arrived” as an economic power. Saying that the Brazilian team is overrated or that it has not “arrived” as an economic power is a relative discussion; Brazil finished 4th at a tournament in which more than 200 countries try to qualify and its economy is the 6th largest in the world by certain measures. Brazil’s national team is among the best in the world, and with a couple more breaks, could have lifted the trophy this year. Similarly, Brazil’s economy is huge and dynamic, even as growth lags and inflation pushes up.

The problem in both instances was the process of evaluation. In 2010, Brazil’s GDP grew by 7.5 percent after a barely perceptible recession in 2009 following the Financial Crisis and the world decided this was the new norm. This analysis downplayed or completely ignored the structural problems like poor infrastructure and education as well as an inefficient bureaucracy and a rigid labor market, none of which was being adequately addressed and treated the commodity boom generated by China’s industrialization as something which would never end. A perfect example of this would be Larry Rohter’s Brazil on the Rise: The Story of a Country Transformed. While talking up Brazil’s future Rohter acknowledges many of issues that have come to mire Brazil in 1 percent GDP growth the past two years, but simply brushes them off, assuming that they would be resolved. Commentary during the World Cup followed a similar pattern; an acknowledgement that Brazil had not played well, followed by an assertion that Brazil would make the necessary changes and a declaration that they were still definitely the favorites.

The point is not to denigrate Brazil or to argue for blanket pessimism (just look how silly all those doom and gloom projections for the World Cup turned out). Simply to acknowledge the tendency to project what we think Brazil should be onto what Brazil actually is. Brazil has the potential to be among the most powerful countries in the world and to challenge for the World Cup every time. The key is to not treat potential as destiny.

What mattered this year in Latin America

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 (Photo credit: ®Dave)

As it’s New Year’s Eve, I thought I would take a stab at a best-of list for a post, if only because this gives me a chance to write about several different topics at once. So, without further ado, and in no particular order, here are five of the most important things that happened in Latin America this year.

1. Hugo Chávez dies

This is probably the most obvious choice because of the preeminent role that Chávez played over the previous 14 years in Latin American politics. Chávez’s death in March to a still-undisclosed cancer created a vacuum both in Venezuela’s domestic politics and on the Left in Latin America. Nicolás Maduro has attempted, and to some degree succeeded, in filling both gaps. Internationally, he has probably been less successful; he is not the leading voice among leftist politicians in the region, but at the same time, neither has anyone else seized the mantle. Domestically, Maduro has been surprisingly adept at solidifying himself in power.  Chavismo has lined up behind him and Diosdado Cabello—the man perceived to be his biggest rival for power—has, at least for now, dutifully played the role of attack dog rather than potential challenger.

Economically, the inevitable fruits of populism have begun to blossom in earnest this year, and Maduro has proven thoroughly incapable of dealing with Chávez’s biggest legacy. The Central Bank only finally published its November inflation figures yesterday. And they were ugly: 4.8 percent for the month, which works out to an annual inflation over 50 percent. Moreover, the scarcity index remained well over 20 percent, meaning that there were shortages of more than 1 in 5 products. There is little reason to believe either number will fall in the months to come—well, they might, but that’s just because the BCV is considering changing its methodology à la argentine—as the deficit continues to be covered by printing money and the government implements more price controls.

Economic distress in Venezuela is important for two reasons. One is that Venezuela has the fourth largest economy in Latin America and economic contraction, and especially crisis, would affect the whole region. Perhaps more important, though, is that Venezuela is a major giver of aid to the Caribbean and Central America through PetroCaribe. PetroCaribe offers oil to a majority of Caribbean and Central American countries at preferential terms and often in exchange for other commodities or with extremely long-term payment plans with very low rates. For the energy poor countries participating in the program, PetroCaribe is an important economic policy that helps shield them from high and volatile energy prices. However, as the situation in Venezuela worsens, its willingness to be generous with its neighbors will likely dissipate. Guatemala has already left, citing increasingly unappealing conditions and major revisions to the terms for other countries are certainly possible. This could be devastating for several countries. Jamaica, is particularly vulnerable, as it gets most of its power from imported oil and its economic situation is so fragile that a sudden increase in the price it pays for oil could mean an economic crisis.

2. El Pacto por México

This could be formulated in several different ways, focusing on the presidency of Enrique Peña Nieto in general or the series of reforms passed in the latter half of this year. The Pacto por México is best, however, because it encapsulates the important reforms that were passed and represents an important moment of civic responsibility from Mexico’s political class.

The Pacto was an agreement signed by all of Mexico’s three major political parties, the Partido Revolucionario Institucional (PRI), Peña Nieto’s party and the dominant force of Mexican politics from the end of the Mexican Revolution until 2000; the Partido Acción Nacional (PAN), the center-right opposition party which broke the PRI’s stranglehold on power by winning the presidency in 2000 and 2006; and the Partido Revolucionario Democrático (PRD) a left-wing part which finished second the past two presidential elections. The three parties agreed to work together to pass a series of reforms relating to education, telecommunications, taxes and the sacred cow of Mexican politics, the energy sector. This agreement came after two sexenios in which the PRI did everything it could to stymie the legislative agendas of the PAN presidents. For the three parties to agree to work together was momentous. Even more momentous was that the Pacto held together and passed all of the reforms plus a political reform despite often acrimonious negotiations—the PAN nearly abandoned the Pacto after the tax reform was passed, potentially killing chances for energy reform, and the PRD eventually abandoned it during the energy reform process.

The reforms passed via the Pacto were also largely considered to be successful. Apart from the tax reform—which has been criticized for failing to raise sufficient new revenue, among other things—the reforms were viewed by analysts as being significant positive changes which will make Mexico’s economy more productive in dynamic both in the short and long term. There remains significant secondary legislation to be passed in 2014 that will really define the scope of the reforms. But as it stands now, Mexico’s monopolistic and uncompetitive telecommunications sector will be opened in earnest to outsiders and subject to real regulatory scrutiny, the quality of primary and secondary education should improve dramatically in the coming years and the moribund energy sector will be liberalized more than all but the most optimistic dared hope six months ago.

Through the Pacto por México, Mexico proved that the different political parties in the country can work together productively and in the process passed a series of structural reforms that could power the Mexican economy in the future. Considering that Mexico already has the second largest, and by many measures, most dynamic economy in the region, this could be historically significant as the moment Mexico pulled away from the rest of Latin America economically.

3. Street Protests in Brazil

The massive street protests that erupted during the Confederations Cup over the summer likely marked a turning point for governance in Brazil. The protests initially stemmed from a hike in bus fares but quickly morphed into generalized protests against many of the perceived failings of the state, including corruption, misplaced spending priorities (World Cup and Olympics instead of hospitals, for instance) and the poor quality of government services. Many observers have celebrated the protests, arguing that they mark a maturation of Brazilian society into one with middle class attitudes which demands a higher standard from its government. This is probably the best way to interpret it (and also similar protests in Chile and Colombia) but also underscores the difficulty that the government in Brazil will face going forward. These protests arrived right as the bonanza of the past decade looks to be ending. The commodity supercycle which benefited Brazil so much looks to be ending and commodity prices will rise much more slowly in the coming years than they did since 2002, if they rise at all. Indeed, Brazil’s leaders are going to be representing an increasingly demanding society at a time when they will have much less room to maneuver than they did. Coupled with major structural issues with the economy that must be addressed and which will require unpopular measures to correct, Brazil’s leaders will have a much more difficult decade ahead of them than the one they left behind.

4. Honduras’s presidential election

Honduras itself is a small, impoverished and politically weak country in Latin America, but following its most recent presidential elections, it continues to be a flashpoint in the region over what exactly counts as democracy and political legitimacy. Since Manuel Zelaya was removed from power in a coup in 2009, Honduras has served as the main battleground over the various ways that democracy is understood in the region. For many on the right, particularly in the United States, Zelaya’s flirtations with Hugo Chávez and his disregard for a Supreme Court ruling saying he could not push forward with a non-binding referendum over allowing future presidents to seek reelection made him a threat to democracy and his removal from power an act to protect democracy. For others, particularly the leftist presidents of the region, Zelaya’s removal was a gross injustice and invalidated the legitimacy of the already scheduled elections that brought conservative Porfirio Lobo to the presidency in November, 2009. These same debates played out in Honduras as well, and Lobo limped through his term with little support, domestically or internationally, while violence continued to spiral out of control.

The most recent elections last month did little to ameliorate the situation. Juan Orlando Hernández of the conservative National Party was declared the winner with 36.89 percent of the votes while left-wing candidate Xiomara Castro of the LIBRE party—and Manuel Zelaya’s wife—finished second with 28.78 percent and the Liberal party and Anti-Corruption Party received 20.30 and 13.43 percent respectively. The results have been met with suspicion by many on the left, and Castro has disputed the results saying that there was massive fraud, intimidation and vote-buying that cost her the election. Zelaya, for his part, won a seat in the National Congress and has announced his intentions to pass a series of major reforms to strengthen the opposition parties in the legislature.

However tainted the election results were—and for their part, the OAS and UN say it was fair enough—it is virtually impossible to imagine that Castro won more than 35 percent of the vote. Similarly, the leading party in the National Congress won only 31 percent of the vote to win 48 of the 128 seats. In fact, no political force in the country won more than a third of the votes, yet both Castro and Hernández behave as though they won a resounding majority. It is here that the competing ideas of democracy play out most strongly. Most salient is the amount of power winning an election gives you. In many places in Latin America, the perception is that if you win 50 percent plus 1 of the votes (or in some cases just a plurality) you are given carte blanche to govern however you chose without having to listen to or respect the voices of the rest. This stands in stark contrast to the idea of democracy epitomized by the Pacto por México, where the opposition is given a real say in governing. Honduras certainly seems to be opting for the former understanding, with both sides claiming victory and attempting to impose their will upon the other side, though successfully achieving such an outcome in such a heavy polarized country will be difficult without resorting to strongly anti-democratic measures.

5. Uruguay legalizes marijuana

During the presidency of José “Pepe” Mujica, Uruguay has emerged as the most socially progressive country in Latin America. Mujica has signed laws that decriminalized abortion during the first 12 weeks, allowed for gay couples to marry and, most controversially, he signed a law earlier this month that legalized marijuana for Uruguayans through the state control of the industry. Legalization of marijuana, and perhaps other narcotics, has become a cause célèbre among Latin American former presidents and those opposed to the drug war. However, no state had ever legalized its sale and consumption—though two states in the US have and several other places have decriminalized possession and consumption, though not its sale. Within official circles in the United States, Europe, Latin America and the UN, legalization has been viewed as a radical idea. Uruguay’s decision, therefore, represents a very direct challenge to the conventional wisdom that has governed drug policy around the world for the past century and, if it proves reasonably successful, could serve as a model for other countries who increasingly are frustrated with the negative externalities of drug prohibition.

The Crux of Rural Development

The last two days, I’ve seen two really interesting sets of maps that really highlight the importance of geography and population density when it comes to development in Latin America.

The first is two maps of Brazil that the Wilson Center’s Brazil Institute retweeted comparing Brazil’s Human Development Index scores by what appears to be municipality in 1991 and 2010.

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The most striking thing is the huge leap forward Brazil has made in terms of quality of life in two decades. Nearly everywhere there has been a substantial improvement in their HDI scores, with much of the country (especially when accounting for population) now living in areas with “high” HDI scores. The second thing that jumps out is the tremendous regional differences that still exist. Some of this is explainable by geography; many of the lowest scoring regions are in Brazil’s Amazon Rainforest, where transport is difficult and therefore access to many important services. Much of this can be explained by population density. Comparing these maps with a map of Brazil’s population density shows that the green areas are almost all in the most densely populated parts of the country, which also happen to be its most economically dynamic. The exception to this is the Northeast, which has been persistently poorer and less developed than Brazil’s south, even in its large cities.

The other piece is an extended article from Venezuelan news website Prodavinci (in Spanish) examining the demographics of illiteracy across the country. Essentially, Venezuela has a literacy rate of roughly 95 percent, yet only five states and the Federal District of Caracas have a literacy rate at or above that level. The author breaks down the 2011 Census data at various levels down to parroquia (roughly akin to a county) to show how the inequality is geographically distributed. At that level, one can see clearly that cities and towns have much higher literacy rates while rural areas have lower ones, with the most geographically isolated being the most illiterate.

The upshot of these is that it illustrates the big quandary of rural development: it’s really hard. Because populations are more spread out in rural areas it is harder and more expensive to provide educational and health services. Similarly, cities are almost by definition more economically dynamic and richer than rural areas thanks to the benefits denser population allows in terms of specialization and economies of scale. Combine this with brain drain from rural to urban area and policy makers are left trying to provide expensive services to areas that are economically static where many of those who become educated leave for the cities, exacerbating the problem. None of this is unique to these countries or even Latin America as a whole—though the physical vastness of Latin America relative to its population doesn’t help—a few weeks ago there was some furor in the United States over a study that showed that many rural counties in the US have life expectancies lower than in many third world countries.

Merco-sucks, continued

Today I attended an event put on by the Americas Program at CSIS that was very provocatively called “Paraguay- Leaving Mercosur?” where the Paraguayan ambassador the United States Fernando Pfannl Caballero spoke. The short answer, is that, no Paraguay is not going to abandon Mercosur. However, the underlying subtext of his comments is that while Paraguay isn’t eager to leave, it also isn’t all that committed to the project and is deeply frustrated with its co-member states.

Paraguayan ambiguity regarding its membership is threefold. Legally, Paraguay feels—justifiably—that it never should have been suspended in the first place. Ambassador Pfannl complained that, notwithstanding the fact that Fernando Lugo’s impeachment was carried out within the constitutional framework and therefore not a constitutional breach, Paraguay was not given a chance to defend itself in the process whereby it was suspended from Mercosur. Moreover, while Paraguay was suspended for violating the democratic clause, a far more egregiously undemocratic regime in Venezuela was allowed in as a result of removing Paraguay and thereby negating its two-year refusal to ratify Venezuela’s entrance. The Paraguayan government feels that the whole process was illegal under international law, and feels that, as a small country in a club of big countries, it needs assurance that there are legal processes that will protect it in the future before it rejoins.

Economically, Paraguay perceives Mercosur as not providing enough economic benefit to justify the restrictions it puts on its ability to conduct bilateral and multilateral economic policy outside of the organization. Since Mercosur’s bylaws technically restrict member states from negotiating trade agreements outside of Mercosur, Paraguay is hamstrung in its ability to expand its trading options. In theory, this shouldn’t matter, as Mercosur would be actively perusing these types of agreements as a unit. However, in practice, Brazil and Argentina have been intransigent in these processes, particularly as protectionist impulses have gained prominence within each government. In this light, Paraguay sees its suspension as a way to explore other avenues economically and perhaps gain leverage to carve out exceptions for itself upon returning, in a similar way to Uruguay being allowed to negotiate a free trade agreement with Mexico. So far, this has manifested in trade talks with Mexico and observer status in the Pacific Alliance.

Finally, there is a large degree of nationalism at play in Paraguay’s behavior. Though largely unknown outside Latin America, the War of the Triple Alliance, which devastated Paraguay, remains salient to this day and Paraguayans are extremely sensitive to any perception that Brazil, Argentina and Uruguay might be ganging up on them. On top of that, Paraguayan relations with Venezuela are extremely tense. Paraguay has accused Venezuela of supporting terrorist groups in Paraguay’s northern departments through its connections with the FARC and Nicolás Maduro was declared persona non grata by both houses of the Paraguayan Congress following the Lugo impeachment, when he was filmed speaking with Paraguayan generals and accused of encouraging the military to step in on Lugo’s behalf. In effect, Paraguay feels deeply wronged by Brazil, Uruguay and Argentina, in a way that evoked painful memories of the War of the Triple Alliance and also allowed a country that Paraguay has accused on meddling in its internal affairs into the group.

All of this reinforces the points I already made about Mercosur last week. Namely, it is an organization with a clear goal—to establish a customs union on the path toward creating a common market—whose most important members are ambivalent or worse toward that idea. There are tremendous economic gains from liberalizing within the bloc—something that Paraguay in particular, and Uruguay to a lesser extent seem eager to pursue—yet the trend is away from liberalization, with an institutional framework that prevents member states from striking out on their own. The fact that the poorest member of the bloc—who presumably had a lot to gain from access to Brazil and Argentina’s giant markets—is dragging its feet on returning to Mercosur says a lot about how effective it has been.