Carlos Ball *

Latin America’s Bumpy Road to Capitalism

04 Oct 1997

The Philadelphia Society, San Antonio, Texas.

I would like to thank Stan Evans and Bill Campbell for asking me to speak to you here today. They are brave men for inviting a wetback and a journalist, not exactly the most popular combination among American conservatives now-a-days.

Let me begin by saying that, contrary to what Pat Buchanan may have told you, my name is not José and I did not come to the United States to live off welfare.

According to the program, my topic is Latin America's bumpy road to capitalism. The best way I can explain how bumpy is by telling you a personal story.

In the 1980s I was editor of El Diario de Caracas. To be editor of a major independent daily in Latin America is tough. Among my major headaches was dealing with a journalists' union controlled by communists. They never heard of Queensberry rules. And, in my third year as editor, the presidential palace started an even more dishonest warfare, paying some of our reporters under the table more than they received in salaries.

I knew who the corrupt reporters were, but the union in combination with the Labor Ministry would not let me fire them. The best I could do was to reassign some of them to the sports and cultural sections of the newspaper, thus minimizing the damage.

I also had a problem with the head of the translation department. I would manage to get permission from the likes of Milton Friedman or Paul Johnson to reprint some of their columns, but then I would read a very different version in my own paper. My translator was a socialist, and he thought that his duties included not only translations but also editing, so I had to check his work all the time. Luckily, one of his brothers was a general in the Venezuelan army and another a top leader of the socialist party, so he soon was appointed ambassador somewhere, and I was able to hire a real translator.

Then came the day that the managing editor was put in jail. Soon we were told that the only way to get him out was by firing a couple of columnists President Lusinchi specially disliked. That was my single most difficult ordeal at El Diario de Caracas. I thought I should resign, but that would have given total victory to the government. So on a Friday afternoon I called the two distinguished columnists to my office (one had been a cabinet minister in a previous administration and the other had been a presidential candidate) and told them why they would have to be suspended. Three days later, the managing editor was set free.

Another distinctive landmark was reached when the board of directors of the Venezuelan Publishers Association, of which I was treasurer, was summoned to the Presidential Palace. The topic to be discussed was supposed to be the difficulty we faced importing newsprint, since the office of exchange controls had virtually made it impossible to obtain dollars without paying off some bureaucrat. It took about 15 minutes for President Lusinchi, with the benevolent tone of the very powerful, to say that newspaper publishers would no longer confront the same difficulties with exchange controls as the rest of the private sector. I was appalled, but my colleagues were all smiles. And then, for the next three hours, with the entire economic cabinet sitting there, the President of Venezuela rebuked El Diario de Caracas for criticizing his administration.

The following day, when I reported to the owners what had happened, I was reprimanded for daring to contest a few of the most outrageous accusations made by President Lusinchi, in whose face I saw his great surprise at being contradicted.

My phones were tapped. I was often followed by strange cars driven by goons. Shots were fired late at night at my brother's house. Income tax agents would come knocking at my door at midnight. Government money was paid to the union that controls the distribution of newspapers in the capital, to make sure that we had mounting returns of unsold copies, but our circulation more than tripled during my watch.

The government cut off its advertising. That is not a minor concern in a country where the state owns most of the big industries. And then, one after the other, we lost the advertising from several of the larger Venezuelan and international corporations that did a lot of business with the government. Those willing to back up their beliefs with their wallets were mostly small businessmen. In Latin America, the left has often risked their lives for an ideal, while businessmen are seldom willing to even sign their names.

The end for me came when it was time to renew the broadcasting license of the television network that owned El Diario de Caracas.

I had been invited to speak at a meeting of Foundation Francisco Marroquin's Foro Latinoamericano, in Key Biscayne, Florida on how market liberals can more effectively use the media to get the message out. On my way home, at the Miami airport, I saw my boss and he openly avoided me.

During the last weeks, I was asked to read over the telephone our editorial every night to an executive vice-president of the group, that would censor out any criticism of the government. Then, on a Wednesday afternoon, this same fellow walked into my office and fired me; saying that I should be out of the building by Friday, when President Lusinchi would come to a breakfast the newspaper was giving in his honor.

That Friday, a beaming president, surrounded by smiling union and company officials, sat in the middle of the newsroom and typed a phrase that appeared on the front page, the following day: "It's a sin to speak evil of the government." That same morning, I was in a court of law, where a somewhat confused judge told me: "I don't see very much in the proceedings, but please understand Mr. Ball that I have instructions from upstairs." That night, my wife said to me: "Let's get out of here; it would be foolish to stay now that you don't have a newspaper backing you up."

The television-broadcasting license was indeed renewed, but I am sad to say El Diario de Caracas folded two years ago.

After a short interval working with the Heritage Foundation in Washington, in 1989 an unemployed journalist and his wife were traveling in Europe, thinking that we might want to settle in Spain. I had just turned 50 when the Berlin Wall collapsed, and suddenly I realized that if information is so much more powerful than Soviet tanks, then there is indeed hope for Latin America, and it was just about the right time to try and do throughout the hemisphere, what I had tried and failed to do in my own country.

In January of 1990, Muso Ayau organized a regional meeting of the Mont Pèlerin Society in Guatemala. There I met again with several of my friends whom I had persuaded to write columns for El Diario de Caracas because I was unhappy with the fact that we got our Latin American information mostly from government wire services, UPI, and Associated Press.

Those conversations convinced me that we had the intellectual support to launch a hemisphere-wide news organization, not to compete in hot news, but to provide the best political commentary and economic analysis, something newspapers find increasingly more important as television and radio have taken over reporting the breaking news.

So, in 1990 we sold our home in Caracas, packed our books, and bought a house in South Florida, from where Anita and I started AIPE.

We then faced the long and difficult process of signing up newspapers, traveling from country to country to visit editors and publishers I knew from years of fighting for freedom of the press at the Inter American Press Association.

Finally, on April 4, 1991 we sent out by fax to eleven newspapers our first packet, consisting of nine articles. That first night I spent six hours in my old fax machine, getting busy signals and interrupted connections to Mexico, El Salvador, Panama, Dominican Republic, Venezuela, Peru, Ecuador, Chile, Argentina, and Paraguay.

That first year, we already had as writers some of the very best classical liberal columnists in Latin America, people like Luis Pazos, Alberto Benegas-Lynch, Manuel Ayau, Enrique Ghersi, Federico Salazar Bustamante, Arturo Fontaine Aldunate, and Roberto Salinas-León.

Before the days of electronic mail and scanners, Anita would type-up every article we wanted to use, so I could edit them in my computer; later she would (and still does) proofread them, and once a week they are sent out to our subscribers. It sounds simple, but our standard of excellence was set very high, as the only way to compete with the far more popular writings of the left, and it became a bit like publishing a quality weekly magazine. We then had to wait a month or so before seeing the clippings that our stringers mail back to us. Now, every morning, I check in the Internet to see what came out in the bigger newspapers around the continent.

Our editorial policy has been clear and simple since day one: we strongly support individual freedom, free markets, property rights, the rule of law, limited government, trade rather than aid, the free flow of capital, goods, services and labor, as well as low taxes, the flatter, the better.

It has been hard work, but today we reach some 2.8 million readers every week, in 14 countries, through big national newspapers, business magazines, regional papers, electronic publications, and even some weeklies in places like California.

So far in 1997, we have had articles written by over 100 different market liberals, and in the past six an a half years, we have edited and distributed just over 3,000 articles by more than 350 writers. About 70% of our material is written in Spanish specially for us, and the rest are my own translations of some of the very best North Americans writers, such as Gary Becker, Walter Williams, Paul Craig Roberts, John Rutledge, Father Sirico, Bruce Bartlett, Irwin Stelzer, Mark Falcoff, Richard Rahn, Ian Vásquez, Bill Ratliff, Ed Feulner, Filip Palda, Stephen Moore, Jim Bovard, Julian Simon, Michael Novak, Lew Rockwell, Jim Dorn, Henry Miller, Fred Singer, Mark Skousen, etc.

As an indication of our moderate success, I can tell you the following story: the head of the New York Times syndicated service for Latin America used to make jokes every time we met somewhere. But about three years ago, he stopped being friendly. That could only mean that we had become a real competitor.

But the bad news is that we stopped growing about a year or so ago, and to me that is a clear sign of the change of climate, as if free markets had been tried but found unsuitable by Latin Americans.

The purpose of telling you this personal story is that I realize the difficulty for Americans living in a country with a First Amendment, civil liberties, and an independent judiciary to understand the institutional barriers to economic development faced by your next-door neighbors.

We journalists are at the forward trench, so it is somewhat easier for us to see how the war of ideas is going. There is no doubt that the wind has been changing again in Latin America lately. Market reform is increasingly linked to the very high taxes imposed by the International Monetary Fund. Privatization has often meant the change of a public monopoly for a private one that improves service but charges much higher prices, while the new owners are often the friends and relatives of presidents and members of the local nomenklatura.

I believe it is a bad mistake that governments try to sell state corporations at the highest possible price, when the greatest benefit from privatization is the opening of markets to real competition. The top price is paid for a government asset only if the buyer gets some preferential treatment in future operations, that is, if some monopoly features are transferred to the new owners.

My Peruvian friend, Enrique Ghersi, says that he prefers state monopolies to private monopolies every time, since the first can only discredit the bureaucrats, while the latter discredits the private sector.

For me, the big question is whether the United States will help or hinder the spread of capitalism in Latin America. I am old enough to remember that aid under President Kennedy's "Alliance for Progress" was subject to steep tax increases. Today, the ideology behind State Department diplomacy is even more alarming.

The war on drugs in Latin America cannot possibly succeed simply because demand creates its own supply. Prohibition gave birth to organized crime, just as this American jihad has nurtured the Colombian cartels, and the corruption of our police and judicial systems. United Fruit and the oil companies are no longer the big multinationals in our part of the world. The really big guys now are the drug traffickers, with huge real estate investments and money laundering operations throughout Latin America, and they are starting to make a difference during presidential campaigns. The Chinese connection in the last American election was kindergarten stuff compared to drug money in Latin American politics, thanks mainly to the high stakes and high prices that result from interdiction.

After an U.S. Marine killed this summer a young Texan tending his goats near the Mexican border, the drug Czar, General Barry McCaffrey, said that the United States "should not use military personnel for law enforcement." I agree 100%. It took my own country 137 years after the war of independence to get the soldiers back to their barracks; I don't want the military used in law enforcement, either.

The Wall Street Journal's editorial of August 28 asked: "Whose Drug Problem?" It said: "it is almost comical to think of our nation's leadership sitting in a room and thinking hard about how many more helicopters we should send to Colombia to keep drugs off American streets."

Why do I think that the war on drugs is a barrier to capitalism in Latin America? Simply because free markets do not function without rule of law and secure property rights, principles that never were very strong in Latin America, but that now are being literally swept away by this war.

The next barrier is the new Green Diplomacy of the State Department. In April 1996, Secretary of State Warren Christopher announced that environmental concerns would become co-equal with national security and economic issues in U.S. foreign relations.

I am aware that several distinguished members of our society are former ambassadors who know a lot more than I do about American diplomacy. But I'm concerned with the new "Environmental Diplomacy," which sees as part of the duties of the State Department, the Pentagon, and the CIA the preservation of rain forests and the regulation of the so-called greenhouse gases.

The first duty would assign to international bureaucrats key decisions concerning which forests can be turned into agricultural lands; that is nothing less than the power of deciding which nation can feed itself. And while the intention of the second duty is to control the growth of energy consumption worldwide, that really means controlling the growth of national economies. The new green imperialism sounds to me a lot more terrifying than Teddy Roosevelt's soft voice and big stick.

The July 7th editorial of the Investors Business Daily, talked of glorified park rangers and of "the soldiers in the U.S. Southern Command being dispatched to 32 Latin American and Caribbean countries to help catch poachers, work on conservation projects and defend endangered species."

Also, private foundations with very deep pockets, like the Sierra Club, have decided that we Latins cannot be trusted with taking care of our lands and waters. They are doing their best to turn small countries like Costa Rica into their environmental playlands, while preventing investments of 1.5 billion dollars in Chile alone, in the past year. "Sustainable development" is a new green code phrase that really means zero growth.

North / South trade talks have not advanced since the glorious days of the Miami Presidential Summit of December 1994. In August, a big textile company, Fruit of the Loom, almost single-handedly stopped the proposed extension to Central America and the Caribbean of the same trade benefits enjoyed by Mexico under NAFTA, and which have put great pressure on the small manufacturing base of those very poor countries to move to Mexico, in order to have an entry into the huge North American market.

It's a bad omen that the Clinton administration plans to promote Ms. Rita Hayes, the chief textile negotiator, to be the next U.S. ambassador to the World Trade Organization. I doubt that a well-known protectionist is the right choice for representing the largest economic power in a multilateral organization created for the purpose of expanding trade.

When we were in school, it was not the biggest boy in class who ran to the teacher crying because some little guy was hurting him. But now-a-days, the United States has more dumping complaints with the World Trade Organization than the rest of the world. The latest is against Chilean salmon, and Chileans have not forgotten that the discovery by U.S. Customs officers of three poisoned grapes in 1989 cost them $200 million, and the bankruptcy of several growers.

The Venezuelan tuna industry was wiped out when greens blamed our fishermen of killing dolphins. They had become efficient and prosperous, and thus a threat to American interests. Venezuelan tuna was embargoed by the U.S. and our fishing fleet was soon sailing again under Panamanian flag, but that affected our coastal towns, for the American authorities made sure those boats were manned by Panamanian citizens and sailed from Panamanian ports. Old images of the ugly American suddenly reappeared, and perhaps more than a few of the 6,000 unemployed Venezuelan fishermen found out how much more profitable is to use their knowledge of the sea for shipping cocaine to supply the population of North American inner cities, which the greens certainly do not consider to be members of a specie worth preserving.

Another protectionist weapon is the sudden interest in the well-being of Latin workers, and denunciations of the maquilas and of child labor. This is tied to the union-supported, Clinton administration concept of a "level playing field."

What would have been the reaction of American 19th Century pioneers to England's and Germany's trying to impose European work standards, or saying that children could not work in the farm but had to go to school? Ridiculous. The whole purpose of international trade is to take advantage of different conditions and resources among different countries. This new propaganda war against foreign competition can only hurt the standard of living of the American family as it closes the door to economic growth and development in Latin America. It is central planning at its worst. American diplomacy no longer tries to extend the Welfare State south of the border, but rather its new version of the regulatory state.

To most American politicians Latin America means little more than drugs and illegal immigration, but last year the United States sold to Latin America 51.8 billion dollars, twice the exports to the European Community.

Let me finish by asking you to think about this:

For half a century, Latin American politicians and intellectuals foolishly blamed the United States for the backwardness of our region, thinking the road to prosperity was built by nationalism, hostility towards foreigners, industrial policy, subsidizing infant industries, import substitution, and minimum wage laws. Please be aware that today environmentalists, union leaders, populists of the left and right, as well as bureaucrats are singing a very similar tune from within the Washington beltway.

Thank you.