FORUM ON DEMOCRATIC
ALTERNATIVES TO STRUCTURAL ADJUSTMENT IN THE AMERICAS
Hosted by the Inter-American Development Bank Tuesday, 21 May 1996
1:45-5:30 PM
Washington, DC
Organized by The Development GAP in conjunction with Equipo PUEBLO
of Mexico
Funded by the United Nations Development Programme
Participants Introduction "The Oaxaca Initiative" "The Liberty
Referendum: An Alternative Economic Strategy For Mexico" "The
Popular Alternative": A Basis For a New Economic Plan For El
Salvador
PROGRAM
Opening Remarks
Steve Quick, Manager, Strategic Planning and Operational Policy
Inter- American Development Bank Steve Hellinger, Executive
Director, The Development GAP Chair Ottón Solís, Chair of the
Economic Committee National Assembly of Costa Rica Presentations
"The Oaxaca Initiative": A Framework for Equitable and Sustainable
Development in the Americas Atherton Martin, Chair of the
Development and Planning Corporation Government of Dominica Maria
Clara Couto Soares, Economist Brazilian Institute for Social and
Economic Analysis (IBASE) "The Liberty Referendum": An Alternative
Economic Strategy for Mexico Alejandro Nadal, Professor of
Economics, Center for Economic Studies, El Colegio de Mexico "The
Popular Alternative": A Basis for a New Economic Plan for El
Salvador Roberto Rubio, Research Director, National Development
Foundation (FUNDE) of El Salvador Discussion
PARTICIPANTS
Ottón Solís is a Member of the Costa Rican National Assembly and
Chair of its Economic Committee, as well as an advisor to President
Figueres. Formerly Minister of Economic Planning in the government
of President Arias, he subsequently served as President of the
Economic and Social Council of the Organization of American States
and as United Nations advisor to the Nicaraguan government.
Atherton Martin is Chair of Dominica's Development and Planning
Corporation, President of the Dominica Conservation Association and
Director of The Development Institute, a sustainable-development
resource organization. An agronomist, he has also served as General
Secretary of the Dominica Farmers Union and as Minister of
Agriculture. In 1987-89, he led a broad-based consultative exercise
in the Caribbean that yielded an alternative development assistance
proposal adopted by the U.S. House of Representatives. Maria Clara
Couto Soares is an economist at IBASE (Brazilian Institute for
Social and Economic Analyses), a leading Brazilian non-governmental
organization, where she is in charge of research on economic
globalization issues. She previously worked on trade matters at
Brazil's Ministry of Economy and on national development plans at
the Ministry of Science and Technology. Alejandro Nadal is a
professor of economics at the Center for Economic Studies and
Coordinator of the Science and Technology Program at the Colegio de
Mexico. In 1994, he was a Distinguished Visitor at the John D. and
Catherine T. MacArthur Foundation in Chicago. On behalf of eight
Mexican civic organizations and networks, he coordinated a team of
economists that has developed an alternative national economic plan.
Roberto Rubio Fabián is Research Director of the National
Development Foundation (FUNDE), a non-governmental organization in
El Salvador led by a Board composed of representatives of 22 popular
organizations. FUNDE works actively with these popular groups on a
number of initiatives, including the formulation and promotion of
alternative development strategies. He recently served as a visiting
fellow at the University of Louvrain, Belgium.
INTRODUCTION
Over the past decade there has been a rising chorus of voices in the
Americas challenging the uniform application of structural
adjustment programs (SAPs) and demanding that new sets of policies
designed to achieve equitable and sustainable development be
considered. These voices were amplified when Mexico, which had been
held out as a model for other countries to emulate, fell into
economic and political disarray in the aftermath of the massive
devaluation of the peso in December 1994, sending ripples of crises
through other parts of the region.
These calls for change began in the 1980s with a series of popular
protests over falling wages, increased unemployment and poverty, and
diminishing social services. In country after country, organizations
representing workers, small and medium-scale farmers, and women
organized demonstrations, road blockages and other mobilizations
intended to pressure their governments to cease the implementation
of adjustment policies. At the same time, policymakers counseled
patience, contending that the benefits of restoring macroeconomic
balance and growth would eventually trickle down to the majority of
the population, even if there were short-term transitional costs
that had to be borne by many sectors. Official and academic
institutions have since joined the chorus, however, adding their
critiques to those of popular organizations. Most recently, the
United Nations Economic Commission for Latin America and the
Caribbean (ECLAC) released Strengthening Development: The Interplay
of Macro and Microeconomics. In that report, ECLAC notes that the
reform process pursued in the region, geared to achieving
macroeconomic stabilization and international competitiveness
through fiscal discipline, trade liberalization and financial
deregulation, the freer functioning of market mechanisms, greater
reliance on private investment and new incentives and regulatory
frameworks, has succeeded in reducing inflation and attracting new
foreign investment. "On the other hand," ECLAC reports, "most of the
region's economies have grown at ... rates which... are lower than
in the past and insufficient to redress technological and social
lags." The report notes that these policies have "failed to generate
enough job opportunities or sufficient progress in reducing social
inequalities."
ECLAC's reporting is consistent with what many others in the region
have been saying for years: that adjustment measures have especially
hurt small and medium-sized firms producing for the domestic market;
that economies in the region have become vulnerable as they increase
their dependency on volatile capital to finance chronic
balance-of-payments deficits; and that there are latent problems of
"deprivations and marginalization" that "may make it difficult to
sustain the development process."
In their overwhelming emphasis on production for export and
international competitiveness based on low wages and weak labor
standards, SAPs have dramatically weakened local productive capacity
and local markets. In Bolivia, trade-liberalization measures
abruptly opened the economy to competition from cheap imports,
resulting in the bankruptcy of more than 120 factories since 1985.
Many Mexican small and medium-sized firms, which employ over 80
percent of the workforce have been forced to become retailers of
U.S. imports or to close their doors due to a flood of imports and
skyrocketing interest rates. Drastic reductions in the availability
of credit and technical assistance to small farmers in Costa Rica
have resulted in the nation moving from near self-sufficiency in
food production in the early 1980s to importing more than a half of
the basic food grains consumed domestically today.
Countries that have implemented adjustment programs have also been
marked by falling wages and deteriorating working conditions. Real
wages in Bolivia, Mexico and Nicaragua, for example, have declined
substantially in the last decade. In Chile, a country with high
economic growth and low unemployment rates and hailed as a model for
the rest of the Americas, more than 45 percent of workers have
incomes that are lower than the minimum required to maintain a
family.
Women have been especially hard hit by adjustment programs. In Costa
Rica and Nicaragua, they have often been the first fired in
public-sector cutbacks, including those associated with
privatization programs. The lack of job opportunities in Mexico, El
Salvador and throughout the rest of Central America, coupled with
the need to increase declining family incomes, has forced many young
women into employment in the maquiladoras and informal sector, where
labor-rights abuses and precarious working conditions are common.
These factors have contributed to a growing sense of hopelessness
and social disintegration in many countries in the region. At the
same time, however, civil society throughout the Americas has risen
to the challenge posed by these economic and social problems. After
years of providing crisis assistance and popular education on the
nature of the economic-reform programs implemented in the region and
supporting broad-based challenges to these programs, many NGOs and
other organizations representing civil society have moved "from
protest to proposal." They have initiated a bold search for new sets
of policies designed to achieve equitable and sustainable
development through processes of consensus building among affected
sectors. The alternative proposals included in this paper have
emerged from a series of such consultations among NGOs, academics,
businesspeople, unions and other popular organizations in Latin
America and the Caribbean.
Although there is not, nor should there be, a single recipe for
development, there are common elements that emerge in these
alternative proposals. Each recognizes the importance of
macroeconomic growth and stability, but emphasizes that improvements
in macroeconomic indicators do not necessarily guarantee improvement
in the welfare of the majority population. El Salvador, for example,
has, over the past few years, enjoyed strong growth rates fueled by
large inflows of remittances and foreign assistance. FUNDE stresses,
however, in the proposal it has shaped in consultation with other
Salvadoran groups as a basis for a new national economic plan that,
unless those inflows are channeled into productive rather than
speculative uses, their benefits could vanish as those sources dry
up.
Similarly, the Mexican "Liberty Referendum" -- an alternative
economic strategy developed by a wide array of Mexican organizations
and endorsed by hundreds of thousands of citizens -- recommends
measures to expand local production and the domestic market in
contrast to the recent overwhelming focus on generating export
earnings and attracting foreign investment. The "Oaxaca Initiative",
which brings together proposals from a dozen NGOs located throughout
the Americas, emphasizes the development of integrated production
systems and the balancing of agricultural production for home
consumption, the domestic market and export. In contrast, again, to
prevailing policies geared to driving wages and working conditions
down in order to attract foreign investment, these proposals
advocate increasing real wages in order to reduce poverty and
increase the ability of local citizens to purchase the goods they
produce.
Each proposal emphasizes the importance of balance: among the
particular needs and contributions of small, medium- and large-scale
producers; between the interests of local and foreign investors; and
between the short-term need to generate foreign exchange and the
longer-term imperative to protect local ecosystems. This kind of
balance simply cannot be achieved through programs shaped by finance
ministers and representatives of international financial
institutions alone. Program formulation must also involve
representatives of all affected sectors.
Alternative proposals are emerging every day in many countries. What
has been lacking is the space necessary to implement strategies that
can generate equitable and sustainable development. The time has
come for policymakers in the North and South to take a new, more
democratic approach to development that puts equity and
environmental sustainability at its center.
We hope that this public dialogue on alternatives to structural
adjustment programs will help open this space and engender
critically important change. In this regard, we are grateful for,
and encouraged by, the involvement of the Inter-American Development
Bank and the United Nations Development Programme in this endeavor
and by the growing willingness of official institutions to begin to
re-examine current policies and explore new economic options. The
development of the "Oaxaca Initiative " and of this forum would not
have been possible without the support provided by the Presbyterian
Church (USA), NOVIB (Holland), Oxfam UKI, Oxfam America and the
Jenifer Altman Foundation. The Development GAP would also like to
thank the General Service Foundation, Max and Anna Levinson
Foundation, Moriah Fund, Charles Stewart Mott Foundation, Threshold
Foundation and Tortuga Foundation for their contributions to its
ongoing work on economic policy in the hemisphere.
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