Toledo's Broken Promises

The Scene of the Crime

Peru privatization
Arequipa, southern Peru, June 20, 2002: The writing on the wall says "Toledo is a servant to the IMF." Protests gripped the city after Toledo privatized two electric companies (Photo: AFP).

In the 1990s the term “governability” became a catchword used by international financial institutions. With the arrival of elected civilian governments on the Latin American scene, and the quiet return of dictatorial armies to their barracks, it was necessary to accommodate everything within an esoteric doctrine that would permit emerging democracies to become effective in their economic and social development. None of this would be possible, however, if the governments that came to power through the ballet box were incapable of governing— or in other words, of establishing governability.

The first step was to put the house in order, balance the books, and pay back the foreign debt—an inheritance accumulated through decades of economic crises and distortions. Good advice. To achieve this kind of governability, it was necessary to comply with the strictest catalogs of adjustment measures proposed in exactly the same way for all Latin American countries: for barely surviving economies, such as those in Central America—where the agro-export model had fallen apart long before—and for the economies of past splendor that have since fallen into bankruptcy, such as in Argentina.

However, the concept of governability was based also on other fundamental components: specifically, the impartial functioning of democratic institutions and the ability of governments to confront the daily problems caused by marginalization and poverty and develop a long-term vision for creating a model of sustainable development. And last but not least, it is necessary for an essential connecting thread to be woven into this complex fabric—specifically, transparency in the use of public funds. In other words, an end to corruption.

Ironically, with the arrival of elected governments, we have witnessed the aggressive, disproportionate growth of corruption, to the degree that it has become the main obstacle to governability. The other barrier has been the failure of adjustment programs, which have instead provoked protest in the streets in response to wage cuts, tariff hikes, and the lack of access to loans for collapsing agricultural sectors, but also, and increasingly so, the privatization of public companies, which in the eyes of citizens is increasingly linked to corruption.

In a fiery campaign speech in Arequipa’s public plaza, Peruvian President Alejandro Toledo promised that the electricity companies in southern Peru would never be privatized.

This helped him to win thousands of votes. But when he made this promise, he failed to remember two important things: First, privatization is one of the sacred principles of adjustment programs, and any decision to the contrary would severely clash with the iron will of international financial institutions—the exclusive providers of fresh resources for economies in crisis. And second, during the Alberto Fujimori-Vladimiro Montesinos era, the privatization of more than 300 state-owned companies represented one of the most formidable ways to illegally accumulate wealth in the country’s history. [When Toledo broke his promise], the result was a popular uprising in Arequipa that left dead and injured, and a serious toll of destruction that forced the Peruvian president to reverse his decision.

These same financial institutions and the community of donor nations that support countries with high-risk economies have failed on a fundamental point. They have tolerated the proliferation of corruption at the highest levels of power, allowing resources from the sale of public companies to be used for personal gain. This has taken place in Argentina just as it has in Peru and Nicaragua. And when corruption is tolerated in high places, it spills over the entire society, contaminating all its fibers.

This means that fresh resources designated for supporting the balance of payments are transferred to personal accounts in foreign countries; emergency disaster funds are slipped into the pockets of a few, and the privatization of state-owned companies has become a matter of commonplace racketeering. And so, instead of taking the path toward governability, we are headed down the road to collapse and demoralization. With scandal after scandal the notion of governability boils down to nothing more than it was in the beginning: a neologism.

It’s one scandal after another, like in Nicaragua, where every day there is more evidence that our country is in worse shape than we thought—as a consequence of corruption. We already knew that funds from foreign aid for those left homeless by Hurricane Mitch were used to build a beach mansion for a close associate of former Nicaraguan President Arnoldo Alemán. And now we know that a credit card—paid off with funds allocated by the Treasury Ministry to the president’s office—was used by Alemán and his family over the course of five years.

As long as our courts are not integrated into the democratic system and until they truly serve to punish acts of corruption, it will be impossible to advance on the road to development or governability—even if the very air we breathe is privatized. If the financial institutions believe they know what our countries need, then neither they nor the community of donor countries should calmly walk away from the scene of the crime, as if they didn’t see the thieves jumping out the window with bags of money slung over their shoulders.

The author is a Nicaraguan novelist and essayist.