Ball – Latin America’s Bumpy Road to Capitalism

Carlos Ball

Editor of AIPE

"Latin America’s Bumpy Road to Capitalism"

The Philadelphia Society

San Antonio, Texas

October 4, 1997

(Permission to quote this speech must be granted by the Author)

I would like to thank Stan Evans and Bill Campbell for asking me to speak to you here today. They
are brave men for inviting a wetback and a journalist, not exactly the most popular combination
among American conservatives now-a-days.

Let me begin by saying that, contrary to what Pat Buchanan may have told you, my name is not
José and I did not come to the United States to live off welfare.

According to the program, my topic is Latin America’s bumpy road to capitalism. The best way I
can explain how bumpy is by telling you a personal story.

In the 1980s I was editor of El Diario de Caracas. To be editor of a major independent daily in
Latin America is tough. Among my major headaches was dealing with a journalists’ union controlled
by communists. They never heard of Queensberry rules. And, in my third year as editor, the
presidential palace started an even more dishonest warfare, paying some of our reporters under the
table more than they received in salaries.

I knew who the corrupt reporters were, but the union in combination with the Labor Ministry
would not let me fire them. The best I could do was to reassign some of them to the sports and
cultural sections of the newspaper, thus minimizing the damage.

I also had a problem with the head of the translation department. I would manage to get permission
from the likes of Milton Friedman or Paul Johnson to reprint some of their columns, but then I
would read a very different version in my own paper. My translator was a socialist, and he thought
that his duties included not only translations but also editing, so I had to check his work all the time.
Luckily, one of his brothers was a general in the Venezuelan army and another a top leader of the
socialist party, so he soon was appointed ambassador somewhere, and I was able to hire a real
translator.

Then came the day that the managing editor was put in jail. Soon we were told that the only way to
get him out was by firing a couple of columnists President Lusinchi specially disliked. That was my
single most difficult ordeal at El Diario de Caracas. I thought I should resign, but that would have
given total victory to the government. So on a Friday afternoon I called the two distinguished
columnists to my office (one had been a cabinet minister in a previous administration and the other
had been a presidential candidate) and told them why they would have to be suspended. Three
days later, the managing editor was set free.

Another distinctive landmark was reached when the board of directors of the Venezuelan
Publishers Association, of which I was treasurer, was summoned to the Presidential Palace. The
topic to be discussed was supposed to be the difficulty we faced importing newsprint, since the
office of exchange controls had virtually made it impossible to obtain dollars without paying off
some bureaucrat. It took about 15 minutes for President Lusinchi, with the benevolent tone of the
very powerful, to say that newspaper publishers would no longer confront the same difficulties with
exchange controls as the rest of the private sector. I was appalled, but my colleagues were all
smiles. And then, for the next three hours, with the entire economic cabinet sitting there, the
President of Venezuela rebuked El Diario de Caracas for criticizing his administration.

The following day, when I reported to the owners what had happened, I was reprimanded for
daring to contest a few of the most outrageous accusations made by President Lusinchi, in whose
face I saw his great surprise at being contradicted.

My phones were tapped. I was often followed by strange cars driven by goons. Shots were fired
late at night at my brother’s house. Income tax agents would come knocking at my door at
midnight. Government money was paid to the union that controls the distribution of newspapers in
the capital, to make sure that we had mounting returns of unsold copies, but our circulation more
than tripled during my watch.

The government cut off its advertising. That is not a minor concern in a country where the state
owns most of the big industries. And then, one after the other, we lost the advertising from several
of the larger Venezuelan and international corporations that did a lot of business with the
government. Those willing to back up their beliefs with their wallets were mostly small businessmen.
In Latin America, the left has often risked their lives for an ideal, while businessmen are seldom
willing to even sign their names.

The end for me came when it was time to renew the broadcasting license of the television network
that owned El Diario de Caracas.

I had been invited to speak at a meeting of Foundation Francisco Marroquin’s Foro
Latinoamericano, in Key Biscayne, Florida on how market liberals can more effectively use the
media to get the message out. On my way home, at the Miami airport, I saw my boss and he
openly avoided me.

During the last weeks, I was asked to read over the telephone our editorial every night to an
executive vice-president of the group, that would censor out any criticism of the government. Then,
on a Wednesday afternoon, this same fellow walked into my office and fired me; saying that I
should be out of the building by Friday, when President Lusinchi would come to a breakfast the
newspaper was giving in his honor.

That Friday, a beaming president, surrounded by smiling union and company officials, sat in the
middle of the newsroom and typed a phrase that appeared on the front page, the following day:
"It’s a sin to speak evil of the government." That same morning, I was in a court of law, where a
somewhat confused judge told me: "I don’t see very much in the proceedings, but please
understand Mr. Ball that I have instructions from upstairs." That night, my wife said to me: "Let’s get
out of here; it would be foolish to stay now that you don’t have a newspaper backing you up."

The television-broadcasting license was indeed renewed, but I am sad to say El Diario de Caracas
folded two years ago.

After a short interval working with the Heritage Foundation in Washington, in 1989 an unemployed
journalist and his wife were traveling in Europe, thinking that we might want to settle in Spain. I had
just turned 50 when the Berlin Wall collapsed, and suddenly I realized that if information is so much
more powerful than Soviet tanks, then there is indeed hope for Latin America, and it was just about
the right time to try and do throughout the hemisphere, what I had tried and failed to do in my own
country.

In January of 1990, Muso Ayau organized a regional meeting of the Mont Pèlerin Society in
Guatemala. There I met again with several of my friends whom I had persuaded to write columns
for El Diario de Caracas because I was unhappy with the fact that we got our Latin American
information mostly from government wire services, UPI, and Associated Press.

Those conversations convinced me that we had the intellectual support to launch a
hemisphere-wide news organization, not to compete in hot news, but to provide the best political
commentary and economic analysis, something newspapers find increasingly more important as
television and radio have taken over reporting the breaking news.

So, in 1990 we sold our home in Caracas, packed our books, and bought a house in South
Florida, from where Anita and I started AIPE.

We then faced the long and difficult process of signing up newspapers, traveling from country to
country to visit editors and publishers I knew from years of fighting for freedom of the press at the
Inter American Press Association.

Finally, on April 4, 1991 we sent out by fax to eleven newspapers our first packet, consisting of
nine articles. That first night I spent six hours in my old fax machine, getting busy signals and
interrupted connections to Mexico, El Salvador, Panama, Dominican Republic, Venezuela, Peru,
Ecuador, Chile, Argentina, and Paraguay.

That first year, we already had as writers some of the very best classical liberal columnists in Latin
America, people like Luis Pazos, Alberto Benegas-Lynch, Manuel Ayau, Enrique Ghersi, Federico
Salazar Bustamante, Arturo Fontaine Aldunate, and Roberto Salinas-León.

Before the days of electronic mail and scanners, Anita would type-up every article we wanted to
use, so I could edit them in my computer; later she would (and still does) proofread them, and once
a week they are sent out to our subscribers. It sounds simple, but our standard of excellence was
set very high, as the only way to compete with the far more popular writings of the left, and it
became a bit like publishing a quality weekly magazine. We then had to wait a month or so before
seeing the clippings that our stringers mail back to us. Now, every morning, I check in the Internet
to see what came out in the bigger newspapers around the continent.

Our editorial policy has been clear and simple since day one: we strongly support individual
freedom, free markets, property rights, the rule of law, limited government, trade rather than aid,
the free flow of capital, goods, services and labor, as well as low taxes, the flatter, the better.

It has been hard work, but today we reach some 2.8 million readers every week, in 14 countries,
through big national newspapers, business magazines, regional papers, electronic publications, and
even some weeklies in places like California.

So far in 1997, we have had articles written by over 100 different market liberals, and in the past
six an a half years, we have edited and distributed just over 3,000 articles by more than 350
writers. About 70% of our material is written in Spanish specially for us, and the rest are my own
translations of some of the very best North Americans writers, such as Gary Becker, Walter
Williams, Paul Craig Roberts, John Rutledge, Father Sirico, Bruce Bartlett, Irwin Stelzer, Mark
Falcoff, Richard Rahn, Ian Vásquez, Bill Ratliff, Ed Feulner, Filip Palda, Stephen Moore, Jim
Bovard, Julian Simon, Michael Novak, Lew Rockwell, Jim Dorn, Henry Miller, Fred Singer, Mark
Skousen, etc.

As an indication of our moderate success, I can tell you the following story: the head of the New
York Times syndicated service for Latin America used to make jokes every time we met
somewhere. But about three years ago, he stopped being friendly. That could only mean that we
had become a real competitor.

But the bad news is that we stopped growing about a year or so ago, and to me that is a clear sign
of the change of climate, as if free markets had been tried but found unsuitable by Latin Americans.

The purpose of telling you this personal story is that I realize the difficulty for Americans living in a
country with a First Amendment, civil liberties, and an independent judiciary to understand the
institutional barriers to economic development faced by your next-door neighbors.

We journalists are at the forward trench, so it is somewhat easier for us to see how the war of
ideas is going. There is no doubt that the wind has been changing again in Latin America lately.
Market reform is increasingly linked to the very high taxes imposed by the International Monetary
Fund. Privatization has often meant the change of a public monopoly for a private one that
improves service but charges much higher prices, while the new owners are often the friends and
relatives of presidents and members of the local nomenklatura.

I believe it is a bad mistake that governments try to sell state corporations at the highest possible
price, when the greatest benefit from privatization is the opening of markets to real competition. The
top price is paid for a government asset only if the buyer gets some preferential treatment in future
operations, that is, if some monopoly features are transferred to the new owners.

My Peruvian friend, Enrique Ghersi, says that he prefers state monopolies to private monopolies
every time, since the first can only discredit the bureaucrats, while the latter discredits the private
sector.

For me, the big question is whether the United States will help or hinder the spread of capitalism in
Latin America. I am old enough to remember that aid under President Kennedy’s "Alliance for
Progress" was subject to steep tax increases. Today, the ideology behind State Department
diplomacy is even more alarming.

The war on drugs in Latin America cannot possibly succeed simply because demand creates its
own supply. Prohibition gave birth to organized crime, just as this American jihad has nurtured the
Colombian cartels, and the corruption of our police and judicial systems. United Fruit and the oil
companies are no longer the big multinationals in our part of the world. The really big guys now are
the drug traffickers, with huge real estate investments and money laundering operations throughout
Latin America, and they are starting to make a difference during presidential campaigns. The
Chinese connection in the last American election was kindergarten stuff compared to drug money in
Latin American politics, thanks mainly to the high stakes and high prices that result from
interdiction.

After an U.S. Marine killed this summer a young Texan tending his goats near the Mexican border,
the drug Czar, General Barry McCaffrey, said that the United States "should not use military
personnel for law enforcement." I agree 100%. It took my own country 137 years after the war of
independence to get the soldiers back to their barracks; I don’t want the military used in law
enforcement, either.

The Wall Street Journal’s editorial of August 28 asked: "Whose Drug Problem?" It said: "it is
almost comical to think of our nation’s leadership sitting in a room and thinking hard about how
many more helicopters we should send to Colombia to keep drugs off American streets."

Why do I think that the war on drugs is a barrier to capitalism in Latin America? Simply because
free markets do not function without rule of law and secure property rights, principles that never
were very strong in Latin America, but that now are being literally swept away by this war.

The next barrier is the new Green Diplomacy of the State Department. In April 1996, Secretary of
State Warren Christopher announced that environmental concerns would become co-equal with
national security and economic issues in U.S. foreign relations.

I am aware that several distinguished members of our society are former ambassadors who know a
lot more than I do about American diplomacy. But I’m concerned with the new "Environmental
Diplomacy," which sees as part of the duties of the State Department, the Pentagon, and the CIA
the preservation of rain forests and the regulation of the so-called greenhouse gases.

The first duty would assign to international bureaucrats key decisions concerning which forests can
be turned into agricultural lands; that is nothing less than the power of deciding which nation can
feed itself. And while the intention of the second duty is to control the growth of energy
consumption worldwide, that really means controlling the growth of national economies. The new
green imperialism sounds to me a lot more terrifying than Teddy Roosevelt’s soft voice and big
stick.

The July 7th editorial of the Investors Business Daily, talked of glorified park rangers and of "the
soldiers in the U.S. Southern Command being dispatched to 32 Latin American and Caribbean
countries to help catch poachers, work on conservation projects and defend endangered species."

Also, private foundations with very deep pockets, like the Sierra Club, have decided that we Latins
cannot be trusted with taking care of our lands and waters. They are doing their best to turn small
countries like Costa Rica into their environmental playlands, while preventing investments of 1.5
billion dollars in Chile alone, in the past year. "Sustainable development" is a new green code
phrase that really means zero growth.

North / South trade talks have not advanced since the glorious days of the Miami Presidential
Summit of December 1994. In August, a big textile company, Fruit of the Loom, almost
single-handedly stopped the proposed extension to Central America and the Caribbean of the
same trade benefits enjoyed by Mexico under NAFTA, and which have put great pressure on the
small manufacturing base of those very poor countries to move to Mexico, in order to have an entry
into the huge North American market.

It’s a bad omen that the Clinton administration plans to promote Ms. Rita Hayes, the chief textile
negotiator, to be the next U.S. ambassador to the World Trade Organization. I doubt that a
well-known protectionist is the right choice for representing the largest economic power in a
multilateral organization created for the purpose of expanding trade.

When we were in school, it was not the biggest boy in class who ran to the teacher crying because
some little guy was hurting him. But now-a-days, the United States has more dumping complaints
with the World Trade Organization than the rest of the world. The latest is against Chilean salmon,
and Chileans have not forgotten that the discovery by U.S. Customs officers of three poisoned
grapes in 1989 cost them $200 million, and the bankruptcy of several growers.

The Venezuelan tuna industry was wiped out when greens blamed our fishermen of killing dolphins.
They had become efficient and prosperous, and thus a threat to American interests. Venezuelan
tuna was embargoed by the U.S. and our fishing fleet was soon sailing again under Panamanian
flag, but that affected our coastal towns, for the American authorities made sure those boats were
manned by Panamanian citizens and sailed from Panamanian ports. Old images of the ugly
American suddenly reappeared, and perhaps more than a few of the 6,000 unemployed
Venezuelan fishermen found out how much more profitable is to use their knowledge of the sea for
shipping cocaine to supply the population of North American inner cities, which the greens certainly
do not consider to be members of a specie worth preserving.

Another protectionist weapon is the sudden interest in the well-being of Latin workers, and
denunciations of the maquilas and of child labor. This is tied to the union-supported, Clinton
administration concept of a "level playing field."

What would have been the reaction of American 19th Century pioneers to England’s and
Germany’s trying to impose European work standards, or saying that children could not work in the
farm but had to go to school? Ridiculous. The whole purpose of international trade is to take
advantage of different conditions and resources among different countries. This new propaganda
war against foreign competition can only hurt the standard of living of the American family as it
closes the door to economic growth and development in Latin America. It is central planning at its
worst. American diplomacy no longer tries to extend the Welfare State south of the border, but
rather its new version of the regulatory state.

To most American politicians Latin America means little more than drugs and illegal immigration,
but last year the United States sold to Latin America 51.8 billion dollars, twice the exports to the
European Community.

Let me finish by asking you to think about this:

For half a century, Latin American politicians and intellectuals foolishly blamed the United States for
the backwardness of our region, thinking the road to prosperity was built by nationalism, hostility
towards foreigners, industrial policy, subsidizing infant industries, import substitution, and minimum
wage laws. Please be aware that today environmentalists, union leaders, populists of the left and
right, as well as bureaucrats are singing a very similar tune from within the Washington beltway.

Thank you.