Conclusion

Is Latin America moving to the left? The chief executives of most of the seven largest Latin American countries are either members of political parties with “socialist” or “workers” in their names or have begun to reduce the market orientation of their policies.

Even so, the broad indicators of actual change in market orientation over the present decade seem only to apply to Argentina and Venezuela.

The Venezuelan case offers much evidence of a policy shift away from markets, but some of this evidence does not reflect changes made during the present decade. The reason is that Venezuela’s current president has been in office since 1998, and had time to reverse prior policies before the beginning of the sample period (2000 to as close to the present as possible) that I apply. I chose to start at 2000 because that year marked the beginning of most of the perceived political changes toward the left, while earlier periods were more clearly market-oriented.

There appears to be a close association between declining rates of GDP growth and a slowdown in the march toward market orientation. Comparatively slower growth over 1997-2000 is negatively associated with changes in market orientation from 2000. In sum, while general statements about Latin America’s shifts to the left do not seem applicable to the seven largest Latin American countries, some negative association between rates of change in GDP growth and rates of change in market-oriented policies may exist, although data are insufficient to create a well-specified model to make any definitive statement.

So far, I have offered details to suggest that the often cited decline in market orientation in the seven largest Latin American countries has not actually occurred to the degree that many commentators have described. 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 result from frustrations over the low growth that had occurred in the wake of moves toward market orientation.

Chart 4 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. As can be seen, lower GDP growth (including declines) in 1997-2000 is associated with either greater market-unfriendly increases or with slower moves towards market-friendly policies.

In summary, 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. There is insufficient evidence to show that Latin America is singularly and strongly moving to the left.