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Analysis: After Chavez, Latin America's ideological battle may ease

Photos of the late President Hugo Chavez are hung out for sale outside of the Military Academy, where the funeral service of Chavez is being
Photos of the late President Hugo Chavez are hung out for sale outside of the Military Academy, where the funeral service of Chavez is being

By Terry Wade

CARACAS (Reuters) - Hugo Chavez's exit from the world stage may take the sting out of an ideological battle that has enveloped Latin America since a new batch of leftists started taking power about 15 years ago to challenge U.S. "imperialism".

Fans say Chavez's hyperkinetic energy is irreplaceable, and even before his death last Tuesday the appeal of his boisterous, hard line approach to economic and foreign policy had faded.

Instead, momentum has moved towards the more pragmatic leftist model led by Brazil that welcomes private investment or, in case of a handful of aggressive free traders in the region, a free-market one associated with Washington but with additional social welfare spending to fight poverty.

Both paths are converging around a broad center.

Brazil, always having seen itself as the "natural leader" of South America, has the most to gain in the post-Chavez era. Though the socialist Chavez generally got along well with his Brazilian peers, his combative style sometimes upstaged them.

"Chavez's death changes things. He occupied an important space within the Latin American left and now there will be a political realignment," one Brazilian diplomat told Reuters, insisting on anonymity.

"The death of Chavez could eventually lead to the end of radicalism on the continent," said another Brazilian diplomat.

Since Chavez's death, Brazilian President Dilma Rousseff has said she "did not always agree" with the Venezuelan leader. Officials said that was part of an effort to draw a distinction between Brazil and Venezuela in the eyes of the international community and business leaders.

"Changes will likely take place, starting with the diminishing role of Venezuela as a regional power, to the benefit of Brazil," said Irene Mia of the Economist Intelligence Unit.

U.S. COULD BENEFIT

There is also a secondary beneficiary from the demise of Chavez: the United States.

Throughout his 14 years in power, Chavez was a constant thorn in Washington's side. He lambasted "Yankee imperialism," kicked out U.S. diplomats, took over private companies, rattled oil markets and built alliances with other anti-American leaders such as Iranian Mahmoud Ahmadinejad and Syrian President Bashar al-Assad.

Even if Venezuelans elect Chavez's choice to succeed him, Nicolas Maduro, and he continues to challenge U.S. influence in Latin America, Chavez was the clear leader of anti-U.S. sentiment.

"The departure of Chavez from the Latin American political scene could usher in a new period of enhanced diplomacy and improved relations with the U.S.," wrote Heather Berkman of the Eurasia Group.

She said the voices of Brazil's Rousseff and Mexico's new centrist president, Enrique Pena Nieto, could strengthen on regional issues "as Chavez's fiery rhetoric fades from memory."

To be sure, U.S. influence in the region has declined over the last decade. Two forums set up to solve "local" problems without outside help - the Union of South American Nations, and the Community of Latin American and Caribbean States - deliberately excluded the United States.

But, as U.S. diplomats tell it, this is healthy: there is less need for Washington to get involved nowadays because the region is more stable than ever before.

And despite strident rhetoric from Latin American leaders over the need for "regional integration," there are bitter internal differences over trade policy.

BUFFER AGAINST CHAVEZ

Before he left office in 2011, former Peruvian President Alan Garcia set up the "Pacific Alliance" of committed fast-growing free traders Chile, Peru, Colombia and Mexico. Other associates include Panama, Costa Rica and Uruguay.

His idea was to counter Chavez's left-wing ALBA group that includes Cuba, Venezuela, Ecuador and Bolivia and, at the same time, Argentina and Brazil, which the open economies regard as protectionist.

The gambit flowed from Garcia's view that "South America looks like it's in a type of Cold War, like the big ideological blocs of the 20th century." He said that in 2008 while wearing a tie clasp with the Great Seal of the United States on it.

Although there is growing consensus around centrist policies that encourage private enterprise while boosting social spending, divisions over trade policies still run deep.

Brazil is the most closed major economy to trade in the Western Hemisphere. It has raised targeted tariffs on several goods and is accused of slow-pedaling most trade talks it is a part of, including one between South American trade bloc Mercosur and the European Union.

With Chavez's death, close allies such as Cuba, Ecuador, Bolivia and Ecuador could face tougher times. They have all relied heavily on him for economic aid, and Argentina received some $5 billion in financing from Chavez when it was locked out of bond markets.

Without Chavez and his resources as the glue that held them together, those nations may need to look for other alliances.

Some were already tweaking their own economic policies, diverging from the path set out by Chavez.

Bolivian President Evo Morales has nationalized private companies but he has also won plaudits from Wall Street rating agencies for sound fiscal management and record central bank reserves.

Ecuadorean President Rafael Correa was another close ally of the Venezuelan leader and his policies of extending state control over the economy scared away investors. But when he won re-election in February, he told Reuters he would strike a $1.2 billion mining deal with Canadian firm Kinross this year to lure more foreign investment.

Even Cuba is making adjustments, with President Raul Castro pushing through cautious reforms aimed at boosting private enterprise.

LIMITS OF CHAVISMO

The only current Latin American leader who could possibly take the place of Chavez is Ecuador's Correa.

But Ecuador, though a member of OPEC, lacks the vast oil reserves of Venezuela that Chavez used to spread influence. And Correa lacks his charisma and zeal.

"Internationally, I really like Correa of Ecuador and I think he has a lot of charisma, but nobody has what Chavez had," said Juan Carlos Villamizar, a 'Chavista' neighborhood activist who lives in a Caracas slum.

In 2006, Peru's Ollanta Humala, a former army officer, ran for president as a left-wing, nationalist acolyte of Chavez and narrowly lost.

Five years later, Humala publicly criticized Chavez and won by reinventing himself as a moderate leftist like Lula who would twin private investment with more generous social spending.

Humala has ramped up social spending but he has also ushered in a free-trade pact with the European Union and, with U.S. help, he has intensified anti-drug operations in one of the world's top coca growers.

"There is no clearer measure of how Chavez's stock dwindled after 2006 than the striking change of heart of Humala," Michael Shifter of the Inter-American Dialogue said in a Reuters column. ( http://link.reuters.com/zux56t )

(Additional reporting By Esteban Israel and Pablo Garibian; Editing by Simon Gardner, Kieran Murray and Claudia Parsons)

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