---

Latin America

My Lords, I, too, congratulate the noble Viscount on having initiated this debate. By that I mean a bit more than the ritual that one usually goes through—in my short time in your Lordships’ House, this is the first time that I can recall on which there has been a debate on any aspect of Latin America. Given the importance of Latin America in the world community, this debate is only to be welcomed. As the noble Viscount said, Latin America is a big place and I will concentrate mainly on one small bit of it. Recently there were two elections very close to one another. In one country to which reference has been made several times, Bolivia, Evo Morales was elected. By the way, Bolivia is the third poorest country in Latin America. In Chile, which along with Mexico is the richest country in Latin America in terms of GDP, President Michelle Bachelet was elected. I will say some things about Chile and its implications for the rest of Latin America. Michelle Bachelet is Chile’s first female president. In fact, she is the first female president in Latin America who was not married to a president before; so this is a notable breakthrough. I do not know whether any noble Lords heard President Bachelet’s inaugural speech, which was quite charming. She said, ““Who would have thought that someone like me—a woman; a mother of two children but separated from her partner; an agnostic—could have been elected in a country like Chile?””. Indeed, who would have thought it? Chile is a male-dominated society, in which divorce was only legalised two years ago, and abortion is still illegal. One of President Bachelet’s first acts was to introduce a 50:50 gender divide in her Cabinet and among the country’s governors; that has not exactly happened in the UK. President Bachelet will continue the policies of her predecessor Ricardo Lagos, in my view quite rightly so. President Lagos had a 70 per cent approval rating when he stepped down, and with very good reason. It was President Lagos, before he was President Lagos, who on television pointed his finger at General Pinochet and said, ““You promised you would not stand again in 1989. Are we to have eight more years of torture? Eight more years of oppression? Eight more years of human rights violations?””. Many people thought that Mr Lagos would disappear overnight. Fortunately, he did not, and President Lagos did a marvellous job of handling the transition from Chile’s fractured past to its seemingly stable present. Most noble Lords will know that there was a truth commission in Chile. Some 28,000 people who had been in prison, many of whom had been tortured, gave evidence at the truth commission. The result was a country kind of coming to terms with its past. Just before this debate, I was reading President Lagos’s recent book, The 21st Century: A View from the South, where he says this nice thing: ““no tomorrow without yesterday””. Chile, as at least one other noble Lord has mentioned, has had consistent growth rates of up near 7 per cent over the past few years. Inflation is low; and one must remember that inflation was 27 per cent in the early 1990s. What is particularly remarkable is the drop in the poverty rate. Poverty was at 38.5 per cent in 1990, and it has dropped to 18.8 per cent in 2004. Chile looks like a European country in that respect. That poverty rate is lower than that of Italy and is about the same as that of the UK. Chile opened its markets, and that is the basis of its success. You cannot succeed in the modern world as a developing country if you do not embrace the wider world market. I do not say that one should embrace it in a na&-uml;ve fashion, because you must have the right institutions. But no country that has closed itself off from world markets has prospered. Only those countries that have successfully engaged with those markets have done well. Chile is often seen as a triumph of the so-called ““Chicago boys””, that is, free market philosophy, but it is not like that at all. Chile is now a social democratic country. President Lagos got a balance between an open economy and social policy. It is social policy that has improved the level of poverty; and it is social policy that has begun to establish the basis of a welfare state in Chile. Inward investment in Chile is much higher per head than it is in any other Latin American country. What lessons can be learnt? There are four lessons. First, you must have growth if you are going to leverage people out of poverty. The only way that we know of getting many people out of poverty is economic growth in which the poor participate. They do not always participate, especially in the history of Latin America. Secondly, you must have fiscal discipline, and I therefore approve of what President Lula is doing in Brazil. I wrote an article for a Brazilian newspaper saying that, and I got a whole host of hostile e-mails from the left, saying that he must spend more. As with President Kirchner in Argentina, you need fiscal prudence if you are to invest in growth. In both cases, they have managed to pay off a significant amount of their IMF loans, and so have saved quite a lot of money per year. The third lesson is the crucial importance of the empowerment of women. That is one of the main things holding Latin America back. There is a direct correlation between economic prosperity and the involvement of women in the labour force and in wider political systems across the world, whether in rich or poor countries. Chile is perhaps the first country where this will take effect in Latin America. Fourthly, you must conquer the problem of the state. The difficulty of economic development in Latin America is not markets; it is that the state is often over-bureaucratic, corrupt and over-extended. One worries when one sees President Morales send in the troops to nationalise industries as he did yesterday. Unless you reform the state, and run things to the state when it is corrupt, you will not get anywhere. An American vice-president who shall go nameless said, when he visited Latin America, that it,"““is on an irreversible trend towards more freedom and democracy—but that could change””." That is supposed to be a joke. He is also reputed to have said that he was surprised that people did not speak Latin down there, but that is probably apocryphal. Everyone is lobbing questions at the Minister and I will lob a couple, too. Do you believe that education can play a major role in promoting trade? I do, and we made a lot of effort at the LSE to expand our connections with Latin America. Secondly, are you prepared to spend more money on it?