The Andean Region at a Crossroads: Economic, Political, and Security Prospects

• Fernando Bustamante, Minister of Government and the Police, Republic of Ecuador (Keynote Speaker)
• Luis Oganes, Head for Latin America, Emerging Markets Research Group, JP Morgan Chase & Co.
• Russell Crandall, Assistant Professor of Politics, Davidson College
• Christopher Sabatini, Senior Director of Policy, AS/COA and Editor-in-Chief, Americas Quarterly (Moderator)

Summary

As part of the JP Morgan Latin American Series, AS/COA hosted a panel on the Andean region to discuss economic, political, and security prospects and challenges in the region. The roundtable featured a keynote address by Ecuador’s Minister of Government and the Police Fernando Bustamante, who discussed the current political reform process in Ecuador as well as his country’s relationship with Colombia and the United States. JPMorgan’s Luis Oganes gave a thorough overview of the current economic situation in the Andean countries, including the impact of soaring food and oil prices. Davidson College Professor Russell Crandall focused on the present political state of affairs and raised important questions regarding the efficacy of current political reforms in the Andes.

Opportunities for Change

In his opening remarks, Minister Bustamante outlined the political views of the government of President Rafael Correa’s government with a special focus on the constitutional reform process. Ecuador’s constitutional assembly set the end of July as a deadline for producing a draft of a new constitution, and Bustamente suggested the country will vote on the document by October 2008. He reminded the audience of the political instability marking Ecuador’s political history and the burden of social inequality, saying the intention of the current reform process to build a more equitable society. Furthermore, the Minister said that the Correa administration views “21st Century Socialism” as a flexible idea still under debate and with “fairness and justice” as a goal.

Bustamante also addressed Ecuador’s national security, speaking directly to the matter of relations with Colombia and the United States. He disagreed with Colombian President Álvaro Uribe’s way of dealing with the rebel group Revolutionary Armed Forces of Colombia (more commonly known as the FARC), saying security militarization cannot buy security. Bustamemte said a better way to achieve security is through delivering fairness and justice to the general public, because “security is the child of justice.” The minister also voiced support for the proposed creation of a South American security system and remarked that such a defense coalition would enhance the region’s ability to cooperate with the United States.

Commodity-Driven Regional Economic Growth

JP Morgan’s Luis Oganes highlighted the fact that South American countries are not immune to the global economic downturn. Yet he also noted that the commodity bonanza has helped shield the economies of Andean countries, accounting for 41 percent of the region’s exports. Without the increase in commodity prices since 2002, Latin America as a region would have a $25 billion trade deficit, he noted. Oganes also said that high investment rates help boost the economies of Peru and Colombia, differentiating the two countries from Venezuela and Ecuador, where investment rates are lower.

In his discussion of inflation, Oganes warned that increasing food prices account for a large portion of inflation facing much of the region; roughly 45 percent of Latin American inflation can be explained by the food crisis and the rate reaches as high as 90 percent in the case of Peru. He warned that, while monetary appreciation has been a successful tool in mitigating inflation’s effects in some countries, that method is about to reach its limit.    

New Rules, New Game?

Professor Russell Crandall began by citing Samuel Huntington’s The Third Wave and said that—contrary to theory proposed by Francis Fukuyama—the era of electoral democracies has not brought about the end of history. Nowadays, political swings are embedded within the democratic electoral system. Randall raised questions about the efficacy and fairness of the various constitutional reform processes taking place in the Andean region. The process of writing new rules, he said, can result in polarization
And deepen preexisting problems, as demonstrate in the cases of Venezuela and Bolivia.
Randall closed his remarks by questioning whether Ecuador can undergo this political reform process without limiting democratic activity, liberties, and the presence of a broad opposition.