Chapter 7 Latin America: Dependency, Neoliberalism and New Patterns of Development From the 1970s onwards, the neoliberal model of development expanded throughout Latin America. It started with local experiences in Chile, Argentina and Uruguay before gaining momentum in the 1980s. By the 1990s the model dominated the region as the Washington Consensus took hold. It then entered into decline in the first decade of the 21st Century. Nationalism reemerged un- der new forms, ranging from powerful popular organising and mobilisation to state capitalism. Nonetheless, periods of decline are drawn out and develop in fits and starts. It is therefore too soon to call time on this paradigm as long as it retains strongholds in Mexico, Colombia, Peru and Chile and conditions mac- roeconomic policy in countries like Brazil, ruled by a Third Way left.1 Neoliberalism reshaped relations of dependency, undid import-substitution policies and created new relationships between Latin America and the world economy. It did this in two main stages. The first was in the 1980s, when the hegemonic power, in the grip of a long-term crisis, drained the world economy of its surpluses without offering Latin America any reorganised division of la- bour or pathway to development. The second stage got underway in the early 1990s. As the United States prepared for a fresh expansive cycle it designed a new project of international insertion for the region, which it condensed into a set of public policies known as the Washington Consensus. We can also lo- cate a third stage, of decline, in the first decade of the 2000s. In this period, the still-dominant neoliberal project was modified in light of (1) China’s ascent in the world economy; (2) the popular anti-neoliberal consensus driving political change in Latin America and represented by resurgent popular or state- bureaucratic nationalisms, and (3) Third Way approaches which adapted the neoliberal macroeconomy to independent foreign policies, social domestic 1 Note to the English edition: The 2016 coup in Brazil marked a rupture with the experience of centre-left governments and the end of the New Republic, which since its inception in 1985 had overseen the transition from the military dictatorship of big capital to democracy. A new regime is now taking shape; it combines political liberalism with fascism in order to limit the former without formally eliminating it and violating popular sovereignty. © koninklijke brill nv, leiden, ���� | doi:10.1163/9789004415546_009 <UN> 280 Chapter 7 compensatory policies, and industrial policies such as the one Brazil pursued via the bndes.2 In the first two periods the structuring of Latin America took its cue from the hegemonic centre. During the 1980s neoliberalism in the region was main- ly experienced through the effects of US policy on the world economy. Actual neoliberal experiments took place in isolation in authoritarian fascistic envi- ronments such as Chile and Argentina, and for the most part a sturdy protec- tionist structure was maintained to help generate the surpluses needed to service and pay interest on the external debt. But in the 1990s the regional mac- roeconomic architecture began to change. Protectionist structures were dis- solved in favour of trade and financial liberalisation and exchange rate fixing or appreciation. A new and unsustainable macroeconomic architecture trans- formed surpluses into deficits. The crises in Mexico (1995), Brazil (1998) and Argentina (2001) led to fixed (or semi-fixed and strengthened) exchange rates being replaced by fluctuating rates in the neoliberal political economy. In cri- ses during the cyclical movements specific to dependent capitalism, when capital outflows predominate, this serves to encourage extreme currency de- valuation as a means of restoring trade balances and equilibrium in the balance of payments. Over the decade fluctuating exchange rates became a dominant feature both where neoliberal policies prevailed (Mexico, Colombia, Peru) and where Third Way policies were implemented (Brazil, Chile, Uruguay). At the 2 Note to the English edition: We can also identify a fourth phase of the neoliberal offensive – one ushered in by the coups in Paraguay (2012) and Brazil (2016); the earlier coup in Hondu- ras (2008); the electoral defeat of Kircherism in Argentina (2015); the dismantling of UN- ASUR; the isolation of national-popular experiences in Venezuela, Bolivia and Ecuador, and the election of Piñera in Chile or Bolsonaro in Brazil. This fourth phase is linked to the desta- bilisation strategies pursued by US imperialism and local oligarchies, and to the cycles of the world economy. Key factors include the oil price-cutting policies accompanying OPEC’s ex- pansion of production; the development of shale gas and the transformation of the US into an oil power; capital flight; the falling price of raw materials since 2014; the reversal of the 2010–15 cycle of foreign capital inflows to the region, causing a balance-of-payments bottle- neck in countries such as Venezuela and Argentina; the limitations of centre-left policies in countries like Brazil, which adopted stabilisation policies at the expense of popular support, and of national-popular policies like those of Venezuela, which paved the way for large-scale capital flight by failing to intervene in the financial sector and centralise the exchange rate; and the limited application of sovereign regional integration policies, as seen in the failure to to set up the Banco del Sur or create a stabilisation fund or regional anchor currency. The fourth phase articulates neoliberalism with the mobilisation of a fascist mass base in order to overthrow democratically elected centre-left governments and legitimise new ones based on violence against an internal / external enemy (Latin American communism, Bolivarianism, workers and minorities). The 2018 victory of Manuel Lopez Obrador in Mexico with a large Congressional majority gives an idea of the extent of political polarisation and the strength of the Latin American left. <UN>.