Before beginning to characterize these countries statistically, it may be useful to outline the bases for what looks like widespread journalistic fretfulness about them. In 1992, Lieutenant Colonel Hugo Chavez led an attempted military takeover of Venezuela because he was dissatisfied with President Carlos Andres Perez’s free market economic policies. In 1998, Chavez was elected president. He has since been re-elected. As described above, Chavez has pursued policies almost universally described as populist.

In Chile, Socialist Party candidate Ricardo Lagos took office as president in 2000. Lagos’s successor, Michelle Bachelet, also a member of the Socialist Party, took office in 2006. In 2002, Workers Party candidate Luiz Inacio “Lula” da Silva became president of Brazil. Nestor Kirchner, part of the left wing of Argentina’s Peronist Party, became his country’s chief executive in 2003. Fidel Castro was a welcomed guest at his inauguration. Of the seven largest Latin American countries only Peru, Mexico, and Colombia had presidents who were not in some way associated with the left. It is easy to find pro-socialist websites that present the election results I summarize as prima facie evidence of a welcomed shift to the left. Some conservative websites find these same elections as prima facie evidence of an unwelcome shift to the left. But metrics are still needed to characterize a nation as “populist.”

Summary Statistics as a First Pass

The first two statistics that I present are intended to summarize overall market orientation. They include the Fraser Institute’s Economic Freedom of the World summary statistic and a portion of the Heritage Foundation’s Index of Economic Freedom. To create a metric focused on domestic policy, I delete measures of trade and capital account openness from the Heritage Foundation.

Chart 1 presents a statistic, based on the Fraser Institute’s measure, which depicts changes in market orientation over time for Latin America’s seven biggest countries. For this indicator, a higher value means greater market orientation. A glance at Chart 1 shows that these measures go in every direction: growth, decline, and no change. The chart indicates that Mexico and Brazil moved markedly toward greater market orientation. In contrast, Argentina and Venezuela made strong moves in the opposite direction. These are moves, it could be argued, to the left.

The remaining countries – Chile, Colombia, and Peru - show essentially no change. Chile and Colombia’s indices slip a little. Peru’s edges up a bit but not much. In sum, this broadest of all statistical measures shows either moves toward market orientation—or essentially no change—for five of the seven most populous Latin American countries. The story these metrics tell—that Latin America does not seem to be going to hell in a hand basket—is quite different from the one that many commentators espouse.

Even though the purpose of this discussion is to identify shifts toward or away from market orientation, the actual values of measures of market orientation can also tell us something about countries that did not change much. By the Fraser Institute’s 2003 (which is the most recent available) overall chain link statistic, Chile and Peru are by far the most market-oriented countries of the seven in the group– despite the lack of movement in their indices.

Note that the absence of any move at all contradicts those who perceive a leftward move in policy. That is, no change in policy means no actual change in policy towards the left. There may still be a hand basket but where it is going is hard to say. Of the seven most populous Latin American countries, only Argentina and Venezuela have really moved to the left.

Just as in Chart 1, Chart 2 indicates that Argentina and Venezuela show marked erosions (in this chart, upward moves) in market orientation. The remaining countries show either scarcely any change or moves toward market orientation signifying a move away from populism. These measures indicate, as do those of the Fraser Institute, that the popular wisdom that most of the seven selected countries are headed leftward is not correct.

In sum, both Chart 1 and Chart 2 indicate either no change or improving market orientation in all countries surveyed except Argentina and Venezuela.

Does Low Growth Lead to Reductions in Market Orientation?

So far, I have offered evidence to suggest that the oft-discussed declines in market orientation in the seven largest Latin American countries have not in fact taken place to the degree that many commentators seem to think they have. But reductions in market orientation since the year 2000 have taken place in Argentina and Venezuela. Some analysts have argued that these turnarounds in policy orientation were results of frustrations over the low growth that had occurred in the wake of moves toward market orientation.

Even though aggregate reductions in market orientation were focused in Argentina and Venezuela, it is still possible for countries with slower economic growth to have subsequently followed the path of economic liberalization, but simply more slowly than countries with high growth. In point of fact this pattern may have occurred.

Chart 3 uses the domestic market-orientation measure that I calculated based on Heritage Foundation data, together with growth in GDP to examine this relationship. The chart relates each of the seven countries’ GDP growth from 1997 through 2000 to subsequent (2000-2006) changes in market orientation. Lower GDP growth (including declines) in 1997-2000 is associated with either declining market-friendliness in the Heritage Foundation Index of Economic Freedom-based measure or with slower moves toward market-friendly policies. Recall that increases in the Heritage Foundation indices constitute reductions in market orientation and that lower values represent greater market orientation.

On one hand, calculations using components of the Heritage Foundation index show that critics who argue that a reduction in market orientation has occurred through a broad swath of Latin America are wrong, at least with respect to the largest set of Latin American countries. However, the argument that there is some negative association between 1997-2000 GDP growth and 2000-2006 reductions in market orientation (as represented by increases in the domestic market orientation measure that I constructed from the Heritage Foundation indices) may have some substantiation.