Privileges Obstruct Economic Development (2006)

Josino Moraes
Latin America Economic Researcher

Why does Latin America export people? Because there are no job opportunities here.
And people become crazy when they have nothing to do, no way to make a living.
The United States can raise as many walls as possible on their borders, but it still
would not solve this problem.

American authorities can arrest illegal Latinos as well as fine their employers or use
other law-enforcement measures as much as possible, but it still would not solve
the problem. In the end, they can even deport people. But as President Bush
recently said, this is not a police matter.

The Minutemen can multiply several times, but their efficiency still would be
doubtful. Complicating the scenario, Americans are very religious, and churches do
not care about borders and nations. America has to understand what the Romans
discovered: Sublata causa, tollitur effectus (once the cause is eliminated, the effect

The main question is why Latin America does not create job opportunities. Creating
jobs depends on the working of a free-market economy and other premises. China,
with just one political party, the Communist Party, has a much more of free-market
economy than Latin America. So, first of all, we have to distinguish between a
political democracy and an economic democracy. If you are looking for the economic
welfare of a population, the fact is that an economic democracy is much more
important than a political democracy, or something that comes close to this idea.

The most important evidence of an economic democracy is the labor market. As said
by a Chinese economist, ''China is the most capitalistic country all over the world if
you look at its labor market.'' In this sense, China is much more a free-market
economy than France.

Recently, a few measures to ''free'' the labor market in France were defeated. In
Latin America, these issues are much more serious than in France. France suffers the
consequences of its past social-democracy predominance and the accompanying
culture of unions, etc. Latin America suffers the influence of ideas of the Italian
fascism of Benito Mussolini.

Besides that, in Latin America, we have the state-owned monopolies, and worse, the
most important are in the energy sectors, the main input in the chain of production
-- Pemex in Mexico, Petroleos de Venezuela (PDVSA), Petrobras in Brazil, etc. They
are what I call ''The Untouchable.'' This is one of the reasons for the current oil
crisis. I believe that there is much more crude under Latin America's soil. But,
because these companies give origin to immense benefits and privileges for their
employees, including unbelievable high salaries, they are a source of unbelievable

Besides that they are source of corruption due to the high prices of goods or services
that they provide. It is the origin of one of the most important segments of the local
nomenklatura. The motto ''El Petróleo Es Nuestro'' (the oil is ours) that President
Lázaro Cárdenas of Mexico launched in the 1930s is a lie. The oil is for the huge
privileges of their employees and retirement funds

What remains incredible is that, due to the disgraceful mental state of the local
populations and with the help of mass media, the politicians can defend these
monopolies -- true economic monsters -- in the beginning of the 21st century.

If the tragedy of Latin America had to be summed up in just one word, it would be
privileges. They are everywhere in these societies. They obstruct any possibility of
economic development. The existence of these privileges imposes a tax burden that
is unsustainable for the rest of society. The consequences include, among others,
the existence of a huge public debt. And the resulting enormous interest rates
hinder a normal working of free-market economic processes.