Latin American Future

An Interview with Jorge Quiroga

OR: Are there any bright spots amid this somewhat dark picture?

Quiroga: I think, notwithstanding everything I mentioned, there's been progress. Had you told somebody in Latin America 20 years ago that we were going to have three seats out of 20 at the G20 and that most of the discussions were going to center on the European crisis, they would not have believed you. We have reduced poverty almost to half of what it was 20 years ago. As a region, inflation in our countries is as low as in any European or developed country. And I would venture to say that our fiscal deficit and macroeconomic management is probably more solid. So that is on the positive side.

Beyond the things that were done right by a lot of countries in macroeconomics and management of fiscal deficits and current accounts, issuing debt in local currency and not foreign currency — beyond those things it is clear that the second very positive thing for South America is China.

South of the Panama Canal, we're all Chinese. Central America, the Caribbean, and Mexico are clearly more under the influence of the United States in terms of remittances, access to manufactured products, tourism. But south of the Panama Canal, our number-one economic partner is — by far — China.

If you add China as a market and a buyer of our commodities to China loans to China investment — in particular in the Pacific Rim-based countries like Peru, Chile, and Ecuador — it is by far the number-one economic partner for South America. The reason is simple. South America is endowed with surplus food, energy, and minerals — and that's what the Chinese have been buying at increasing prices at ever higher volumes. Whether it's oil from Venezuela, coal from Colombia, copper gold, zinc, or tin from Andean countries, or soybeans and wheat and sugar and coffee from Mercosur countries. That has been broadly positive.

Within that sphere, notwithstanding the renewed protectionism from the U.S. and the demise of the Trans-Pacific and Trans-Atlantic Partnerships, there is clearly an impetus towards that good kind of integration. Probably the best integration mechanism that we've had the last few years has been the Pacific Alliance — Mexico, Colombia, Chile, Peru, now Ecuador — capitalizing on the importance of China and the Asian economic links that I've described.

I used to say that Mercosur only works in Barcelona. It's the only place where people from Chile, Argentina, and Brazil play well together. So whether it's the Pacific Alliance countries with Asia or the Mercosur countries with the Atlantic, I think it's good for us from a regional standpoint to show that we are not standing still despite the protectionist waves coming from the north. We are strengthening the Pacific links that have been so useful for us this century. We are modernizing the trans-Atlantic links with countries that we have roots with.

Generally speaking, with the exceptions of Argentina and Venezuela, we have sound macroeconomic frameworks in the Latin American countries.

OR: What lessons does Bolivia have to teach the region?

Quiroga: When we were in government, we were in the pre-China bonanza days. The Chinese bonanza for South America started around 2004 or 2005. And every South American country enjoyed that boom. Everybody quadrupled or quintupled exports. In the case of my country, we were able to reap the benefits from a lot of the work we had done. And I think that beyond a lot of the domestic internal issues that we had to deal with — education reform, health issues — we pressed two things that were very beneficial.

Bolivia in the '80s and '90s was a deadbeat when it came to credit. We couldn't pay our commercial loans. We couldn't pay our bilateral debts. We had trouble paying our multilateral debts. But we had a very aggressive program of debt reduction. And I would venture to say that we are probably the only country on the planet that was able to take our three “credit cards” — commercial, bilateral, and multilateral — and drive down the balances to zero on all three.

Yes, our debt was not of the magnitude of Argentina or Brazil, but we took all our credit-card balances down to zero. The commercial debt, the first one, was bought back at 11 cents on the dollar through the late '80s until the mid '90s. All the bilateral debt and the Paris Club arrangements — we went there like the Rocky movies, one, two, three, four, five, six, seven times until we finally reduced all that bilateral debt. And the proscribed territory for debt reduction was supposed to be multilateral, but in the year 2000 there was impetus from the Pope on the Jubilee debt reductions for a lot of African countries and a few in Latin America — Honduras, Bolivia, Guatemala — and we were able to take the lead role in that. We did three rounds in the year 2000. There was a legacy round in 2005 or 2006. But the only requirement for the last legacy round was to have participated in the first two. So that was a no-brainer.

Between those three, by March 2006 we owed zero to the IMF World Bank and zero to the Inter-American Development Bank. The timing was outstanding, because when times were tough in the '90s and the early 2000’s we were able to again wipe our credit cards clean and eliminate them all down to zero. That allowed us to enjoy and reap the benefits of the Chinese bonanza, which manifested itself particularly in energy and minerals in my country. We sold a lot of minerals and gas. We don't sell gas directly to China, we're landlocked. But we're the energy provider for the ones that furnished China all the commodities: Argentina, Brazil. And that allowed us to do very aggressive poverty reduction programs in rural areas, to make sure there were more teachers, more nurses.

The second big thing was gas. It would be extremely selfish and untrue to say it was my government. But it was a longstanding work that we were able to crystallize in the late '90s and early 2000’s in terms of having my country become the vital gas heart of South America. We re-engaged Argentina, a longstanding customer that had stopped buying from us, and when they fixed their economy we were able to sell back to them again. We built a pipeline: the biggest single project in the history of my country was the pipeline from the the gas fields in the south of Bolivia all the way to the San Pablo market. That was a very large enterprise, a multi-billion dollar enterprise. We opened the valves in 1999 on a 20-year contract. Bolivia had the best economic run of its life between 2005 and 2015 thanks to the pipelines and gas reserves and contracts and tax legislation that we put in place.