Latin America: Perspective from Peru on Politics and Economics

>> H. R. McMaster: America and other free and open societies face crucial challenges and opportunities abroad that affect security and prosperity at home. This is a series of conversations with guests who bring deep understanding of today's battlegrounds and creative ideas about how to compete, overcome challenges, capitalize on opportunities, and secure a a better future.

I am HR McMaster, this is Battlegrounds.

>> Speaker 2: On today's episode of Battlegrounds, our focus is on Peru, a prominent South American country and strategic partner of the United States. Our guest is Doctor Julio Guzman, the founder of Peru's centrist Partido Morado, or the Purple Party. Doctor Guzman began his career as an economist at the Inter-American Development Bank in Washington, DC and taught at Georgetown University and the University of Maryland.

In 2011, he served as Perus deputy minister of labor. The following year, Doctor Guzman became the secretary general of the office of the prime minister. Doctor Guzman was a Peruvian presidential candidate in 2016 and 2021. He holds a PhD in economics from the University of Maryland. Ancient Americans migrated to Norte Chico roughly 5,000 years ago and formed the oldest known civilization in the Americas.

The ancient Peruvian Inca civilization was the largest empire in the western hemisphere from the 13th to the 16th century CE. Inca rulers subjugated and relocated populations to agricultural and military hotspots in order to fuel the empire's economy and solidify their rule. Spanish conquistadors arrived in Peru in 1526, when a protracted civil war had weakened the Inca empire's defenses.

Led by Francisco Pizarro, the Spaniards took the victorious Inca king Atahualpa hostage. The Spaniards executed Atahualpa on trumped up charges despite accepting a ransom for his release, and chose a new king. Pizarro, allied with enemies of the Incas, marched south and occupied the Inca capital of Cuzco. The Spaniards plundered Peru's economy and sent hordes of Peru's gold, silver and valuable goods back to Spain.

Conquest was protracted, and Peruvian viceroy Francisco de Toledo finally established an uneasy peace in the 1570s. Toledo adopted indigenous institutions to impose forced labor to fund the Spanish empire's exploits. Through the 18th century, the Viceroyalty of Peru included much of South America. Reforms in the 18th century divided the territories into the viceroyalties of Peru, New Grenada, and Rio de la Platae.

Peruvians declared independence in 1821 and achieved complete independence in 1824 under Simon Bolivar, the president of Gran Colombia, who became dictator of Peru until 1826. The struggle for territorial integrity lasted decades. In 1866, Peru defeated Spain in a war over the Chincha islands. The victory bolstered Peruvian national pride and unity.

Peru improved its infrastructure and modernized its economy. Across the subsequent century, Peru experienced territorial losses and gains, including a loss in the 1879 to 1883 Pacific War with Chile and a gain following its 1941 border war with Ecuador. The United states established diplomatic relations with Peru in 1827.

Today, the US and Peru partner over shared interests, including democracy, security, mutually beneficial trade and human rights. Despite positive political reforms in the 20th century, close to 15 successful and 10 unsuccessful coups resulted in an often unstable political, military and economic atmosphere. The century ended with conflict under President Fujimori, who initiated a self coup that dissolved the Peruvian Congress.

Peru continues to face significant challenges to its democratic values. In December of 2022, former president Pedro Castillo attempted a self coup to dissolve Peru's legislature and announce an emergency government ahead of a vote to impeach him. Peruvian authorities ousted and arrested Castillo and violent protests erupted. Governments across the Americas remained divided over their support for Castillo or the current president, Dina Boluarde.

We welcome Doctor Guzman to discuss Peruvian politics, increasing Chinese influence in Latin America, and political security and economic trends in the region.

>> H. R. McMaster: Doctor Julio Guzman, Bienvenido. Welcome to Battlegrounds. It's great to have you on to talk about a really important subject.

>> Doctor Julio Guzman: Thank you so much. Thank you so much for having me here.

Thank you for Stanford University, Hoover Institution, and you, general. Thank you so much.

>> H. R. McMaster: Well, we couldn't have anybody better with us to talk about Peru and the Western hemisphere, broadly, all of Latin America. And as you know, I love Peru, my experience there was tremendous. I was an exchange cadet at the Academia Militar de Chirios in Lima and had the opportunity to travel to Arequipa, to Cusco, to Iquitos.

And I saw that this beautiful country of desert, mountains, coastline and the Amazon region. And of course, I was there a long time ago, in the early 1980s, and it was a really pivotal moment for Peru. It was in the midst of an insurgency, a counter insurgency against Cinderella Luminoso.

The Soviet presence was leaving. Wherever we visited, we saw Soviet soldiers and advisors trying to hide from us. And there was a big shift going on in terms of much better relations with the United States. I wondered if you might just share some history with us, the history from that period through what's been a pretty turbulent time of presidents accused and convicted of corruption, and now the social unrest and polarization.

Could you explain to our viewers your view of recent Peruvian history?

>> Doctor Julio Guzman: Of course, first of all, I'm very glad that you like Peru, it means you have a very good taste of my country, has an amazing history, and of course, a lot of diversity, geographic diversity, cultural, ethnical, it's a beautiful country.

But as you said, it has many challenges. And just to put it in one idea, I believe that the difference between the 70s and the 80s and now in Peru is not about the structural problems. The structural problems are still there, which is inequalities, lack of opportunities, discrimination, racism, and all those kinds of things that are really structural.

I believe that the difference now are because of two factors. The first one is that the world has changed and has affected the economy, the country, and the region in general. But the second one is that we, as Peruvians, has lacked of political reform, an electoral reform, that is something that we can talk about later.

But I believe there are these two factors, the world that has changed and also a series of reforms that we were not able to do.

>> H. R. McMaster: Well, you know, our viewers heard and saw in the opening about Pedro Castillo's self coup. And so that would bring us to the present and seems to be maybe a manifestation of this lack of political reform.

And I think there's a poll in December where 44% of Peruvians supported this kind of self coup, the effort to dissolve the legislature, despite it being unconstitutional. So can you kind of explain the dynamics in Peru today, maybe as the result of what you've already cited as a lack of political reform?

 

>> Doctor Julio Guzman: Yes, well, first, I think that analyzing Pedro Castillo former government is not gonna give us holistic look about what's going on in Peru. I believe that Castillo is just a manifestation, is a manifestation of many changes that has interacted over these last two decades. I will say that Castillo is the result in the outcome of the combination of external factors and internal factors in Peru.

The external factors are those structural changes, like technological change, globalization, that has made people wonder what's gonna be the future. I mean, I don't have even my job secure. I don't have my way of life have changed. The communication, the way I'm living day by day, has changed because of technological change, but also globalization that has even created more inequality.

So, first, we don't need to lose these external factors that has affected the whole world. And also Covid, because Covid washing deep down, Covid was an emotional shock, aside from being a pandemic, was an emotional shock to people, telling them, you are very vulnerable. And because of those conditions, my impression is that most people in the world, and particularly in the developing world, they have been thinking their lives in a different way.

They want different things, and their priorities have changed. And when the priorities of people change, then political preferences change also. And finally, in the external side, I believe that also that the United States has contributed with this problem. Because the United States has abandoned multilateralism, and the United States used to be the top defender of democracy in the world.

So, first, the external factors and then the internal factors in Peru are, first of all, huge inequalities. Incredible I will point it out that Peru is one of the most unequal countries in the world. It's one of the 20 most unequal countries in the world. Aside from that, we have that in Peru.

We don't have strong political institutions. Put in a very simple way, we don't have strong political parties. We don't have people who really take politics very seriously. And in addition to that, we don't have political reform and electoral reform. What it means political reform means that it's very important to give a stability to the guy who is administrating the power, in this case, the president.

In Peru, the balance of power is not very well defined in the constitution. Examples of that is that Congress can take out the president in a couple of days why? Because in the constitution, there is not single explanation of what are the reasons why you can take out a president in Peru.

So what I'm telling you is that if Congress oppose the president, it's very easy for the Congress to create this political instability. Another example that is really weird that happened in Peru is that once the president is elected, when the president creates a cabinet, he needs to go to Congress to get the approval of the whole cabinet to govern.

Which is very contradictory because we are living in a presidential political system, and in terms of electoral forms. We have incentives for people that come in from illegal activities, and people who are looking for money and investing in politics get involved in the whole process. Just to clarify, one thing, most people ask me, but if the constitution comes from the beginning of the 90s and it's exactly the same as now, why didn't happen in the past, and now it's happening with Castillo.

Well, my reaction to that is, first of all, none of the presidents, with the exclusion of Fujimori, that was a dictator, none of them were able to govern the country for what? For the same reasons. Because a president under that constitution cannot display the power in order to make reform and to be isolated from political noise.

So, first of all, I want to remember that all this time, non president has the ability to do it. But the difference with Castillo is political fragmentation. What I'm saying is that this is the first time in peruvian recent history in which six consecutive presidents did not have a number of congressmen in Congress who can protect them from this instability.

 

>> H. R. McMaster: And that's a key point. The last six presidents in Peru did not have enough protection in Congress. I mean, number of congressmen who can protect them in the 90s and the early 2000 yes, that happened at least. So you have this like we do in the United States.

I would say, to a certain extent, this need for important reform and a political situation, this fragmentation that you described, that is preventing any kind of reform from happening. And it seems that maybe what I would anticipate is your disappointment in this situation is shared kind of across the region.

I know that you're soon gonna give a talk at the Latin American Political Science Association in Vancouver about the degree to which Peru maybe represents as representative of other problems across the region, across Latin America. Could you maybe talk about that and maybe describe for our viewers what some are calling this sort of pink wave of socialist movements, maybe socialist authoritarianism?

I mean, I'm thinking, of course, what happened in Chile in terms of the effort to rewrite the constitution, which failed under the Bork government in September of last year. I'm thinking of Colombia, which has, President Petro ran with the message of politics, of love to move Colombia toward peace.

But is also now consolidating some power within institutions in a way that is much more milder but replicates a little bit what President Lopez Obrador is doing in Mexico, for example. So we have Lula da Silva in Brazil now. So there's been a movement maybe to the far left that seems to be a trend in the region.

So could you maybe just explain what you're going to tell your colleagues at the conference coming up in Vancouver about the region more broadly?

>> Doctor Julio Guzman: Yes, I think as a Peru, and I am very interested of what's going on in Peru, but. A more ample perspective. I believe that Peru, it's just an example of what could happen in the whole Latin American region in the next years.

What I just said about Castillo is that the political chaos that was created was the combination of a mess in international context and also very difficult conditions internally. When those conditions are not favorable, you have an explosion. And that's exactly what is gonna happen in Latin America. Empirical evidence show that the countries that has been able to confront these external changes are the ones that have strong institutions and rules that are respected.

What is gonna happen in the next years, I believe, is that this political instability is gonna spread in the region because the regions share exactly the same conditions. I'm gonna go deep in this point, what are the consequences of a person like Castillo? Because for me, it's just a manifestation.

It's political chaos, which means total improvisation, no plan of government, no ideology. I'm gonna even explain why I think that way. No technical team, nothing, no experience in government. So this situation in the whole region, it's creating the perfect conditions for this kind of person to emerge politically.

One of my main ideas about Latin America is that I believe we are making a mistake thinking politics in the region, in the left and right axis. In the left and right political axis. We used to do that in the 70s and 80s, and we are prone to do that and say, this is happening because governments are on the left or are on the right.

I believe that this is not the right way to see it, why? Because if you see the region, you're gonna see governments on the right and on the left that are exactly in the same problems and they have exactly the same challenges. I'm gonna put some examples in Brazil, we have Lula now, but just few years ago, the same people that voted for Lula voted for Bolsonaro.

The same people, the same people that voted for Boric in Chile just less than two years ago yesterday, voted for the far right in Chile. In Peru, Castillo, that is considered extreme left. In Peru, the Mayor of Lima, who is 30% of total votes in the country, is a far right guy who won the elections only months after Castillo's election.

Guatemala, Guatemala is a country that is gonna have election these years. You know who is leading the polls? Extreme far political candidate, Rios, extreme far. What is happening in Paraguay just days ago, again, a very conservative right, a candidate from the right, winning the election. So when people talk about Nicaragua, Venezuela, Bolivia, what is going on in Argentina?

In Chile, they used to forget, general, that there are other cases in Latin America that is telling you a different story? Supposedly, like Guatemala, Paraguay, as I said, what happened yesterday in Chile, so on. So my conclusion is that, we don't need to see what is happening in Latin America in the political axis, left and right, because I believe that there are other factors that are explaining what is going on now in Latin America that is having a democratic recession.

What are those factors? And I gonna end here, I believe that the axis of political preference has changed from left to the right, has changed to the old establishment and the new people and the new ideas, why? Because the priorities of Latin Americans are no longer, if the state is big or just small, more taxes, less taxes.

I believe that now they are priorities, who is gonna solve my problems that are completely new? I'm not accustomed to these problems, the pandemic, all these things. And I need new people, fresh people, because the old political establishment has done nothing in order to help my family, in order to give me answers to my problems.

So I believe that's the new access.

>> H. R. McMaster: Julio, I think you see this even in a small country like El Salvador, where you have a cult of personality really taking over because of the terrible crime problems that el Salvador experienced. There's this political crisis across the region. Region, which is depressing enough, but I think it's gonna get worse, isn't it, Julio?

Because of the economic outlook, could you share your perspective on the economic outlook? I mean, I was optimistic I thought when we're beginning this sort of selective decoupling from China. I thought the big benefactor could be countries in the western hemisphere, as we endeavor to make supply chains more resilient and to diversify more broadly in areas like rare earths and other minerals, for example.

Or various forms of manufacturing, where western hemisphere countries are very competitive in terms of labor costs and so forth. But your perspective is different, you see an economic crisis coming. Could you explain that to our viewers?

>> Doctor Julio Guzman: Yes, of course. The economic crisis is gonna make the situation worse.

This new access in which people are deciding their political authorities are leading to populist guys, dictators guys, as I already said, that they have no plan, no ideas, improvisation. So this situation that is now called democratic recession is gonna become a democratic depression, why? I believe that is gonna happen really soon.

In the next, I would say three or four years. There are eleven elections in the next year and a half or so. Three years, yeah. In the next three years, there are eleven elections just to have an idea of how the brutal changes could occur in Latin America if the trend is not changed.

What I was saying is that in the next future, two factors are gonna be combined that will create a situation in which Latin America will face extremely challenging steps of keeping democracy under rule of law. The first one is an economic crisis in the making. One of the things that Latin America did in the last 30 years was to maintain macroeconomic stability order in the House, but at the same time growing permanently, why?

Because international conditions were great for Latin America. First of all, interest rates were on the floor. Second, commodity prices were at historical highs. And finally, China and the world economy was expanding. And of course, the demand for Latin American products increased. If we remember that 80% of Latin American GDP depends on those external factors, is good news and bad news.

Good news because all this period we have been benefit for that, but bad news because we don't have control of our destiny. We are a natural resource oriented region, why this is important in the analysis that we are doing in the next years? It's important because. Cuz those three conditions that I already explained have completely changed.

Interest rates now are increasing very significantly, then commodity prices are really volatile, we don't know where are going, and the global economy is in recession and it's a recession. So what is already happening when you see the economic figures across Latin America? This is not only a few countries, but across Latin America, is that debt rates has increased very high, they are really high, and it's very worrisome.

The situation of Latin America could manage external debt, but at the same time, fiscal revenues has decreased and the ability of the government to provide more services, why? Because the COVID destroy national savings across the region, so we have one, a scenario in which the economy used to have a not very promising trend.

But the second factor, and this is more related with foreign policy, is China, and why? Because China is gonna have the plate serve in Latin America.

>> H. R. McMaster: It's gonna be a fire sale, right? For China.

>> Doctor Julio Guzman: Of course, I always say China is the pound shop of Latin America, why?

Because Latin America will need fast money, quick money, and no question asked money, in this situation in which we have under fiscal stress. And no commercial banks, no inter American development bank or the IMF or the World Bank are able to do that. China is able to do that because it's a dictatorship, they have vertical institutions and they can make decisions very quickly.

The presence of China in Latin America has been increased incredible in the last 15 years. And China, because of challenges that China has in his own economy, China is forced to move resources from China to the developing world. So in the next three or four years, the result is gonna be a region that is gonna be under economic stress.

But at the same time, pressures of illiberal values and illiberal ideas coming from countries like China and Russia, that will keep trying to increase their presence and their ideology in the region.

>> H. R. McMaster: And for our viewers, I would like to tell them to read more about this in your excellent foreign affairs piece recently on China, what's in the region, and just a few statistics to continue in this conversation.

Trade between China and economies in Latin America grew 26 fold from the year 2000 to the year 2020, and is expected to double by 2035. From 2018 to 2022 year period, China invested $16 billion in overseas mining, including investing in South America's lithium triangle, this is the area of Argentina, Bolivia and Chile.

And those countries, of course, account for 56% of the world's lithium resources, which, of course, is a mineral in very high demand because of batteries and electrification and so forth. The PRC is the largest investor in Peru's mining sector, as I'm sure you know, controlling seven of Peru's largest mines, and so you have the influence growing, but in a way that's predatory.

I mean, I look at countries like Ecuador and the huge dam that was built in Ecuador that when it was turned on, the turbines we're turned on they got clogged with silt, they blew out the power grid. And Ecuador is indebted for many generations to China for this expensive and ineffective project.

But despite that record, it seems like their political influence is growing along with their economic influence. I'm thinking of Lula da Silva, this is the president of Brazil meeting with Xi Jinping and then tweeting, we will work to expand trade and balance world geopolitics, which he means balance against the United States.

Da Silva has said that, hey, Zelenskyy, he's just as responsible for the war in Ukraine as Putin. So I'm really concerned about this movement toward China because of China's illiberal practices, the setting of the debt trap, the effort to create servile relationships. And then use those relationships for geopolitical influence and really against US interests.

So what is your assessment of the situation, what is your prognosis? I mean, is there a way out of this? You mentioned, one of the factors contributing to it is, I think, US disengagement from the region. I had the opportunity to visit Panama, for example, last year, and we hadn't had an ambassador there for six years.

So could you maybe share with our viewers what your assessment is of chinese influence in the hemisphere and what the trajectory is and what we can maybe do about it?

>> Doctor Julio Guzman: Yes Well, first of all, I'm gonna talk, as a Peruvian and Latin American, who my objective is to look at the region and my country development and why I am against, or I am worried about Chinese presence in the region, why?

Because, first of all, any investment is welcome, it creates jobs, new technology, of course, increased productivity, a new culture, exchange of information, that's great. But if that kind of intervention is gonna affect the rule of law, it's gonna affect their respect for national constitutions. It's gonna affect political sovereignty, sovereignty in countries, and also at the same time, it's gonna affect democratic values, then that kind of intervention needs to be regulated.

Of course, nobody is here talking about against Chinese investment. No, what I'm talking about is the corrosive Chinese influence in the region. The good one, we need to say, okay, that's great, the good one, but unfortunately, Chinese presence, a big part of Chinese presence is eroding rule of law, institutions, the constitution and democracy.

Let's put some example for people to understand what I'm saying. Loan contracts, Chinese are lending money to many Latin-American countries, and what are the conditions of those contracts? For instance, one condition is that the contract should be absolutely confidential. The governments cannot publish, cannot make public, that is against our own rules, and at the same time, it takes degrees of freedom from ministers of finance to manage debt.

At the same time, for instance, these kind of contracts also force Latin-American countries to pay, first China in relation to the other creditors if something goes bad. This violates international standards and finally, most of Chinese loans to Latin-American countries include a clause in which said this country is going to pay the whole debt immediately if the country creates a public policy that is against China.

Not a public policy related with the contract, a public policy in general. This is just one example, of how. Chinese intervention that we can see, it's good for the country, indeed is eroding rule of law and institutions. I'm gonna end with this, why the rule of law and institutions over investment of that kind?

Why, because empirical evidence across the world said conclusively the two most important factors to achieve human progress and economic development are the rule of law and the quality of institutions. That's why I'm worried.

>> H. R. McMaster: And of course, there's no transparency associated with these agreements either. And I think it's a setup, it's a setup for a catastrophe, potentially.

And some things in life are black swans, unanticipated events with unforeseen consequences and other things, I think we could call them pink flamingos. They're right in front of you, and they're quite obvious. And I'm thinking about maybe potential geostrategic crises like we saw with the reinvasion of Ukraine in February of last year.

But also, what about something like even more aggression toward Taiwan or in the South China Sea? What would the impact be on Latin America of a geostrategic crisis precipitated by Chinese aggression? What happens after China blockades Taiwan or even maybe tries a cross-strait invasion?

>> Doctor Julio Guzman: Well, what China is doing is transiting from a different kind of presence in the region.

At the very beginning, some years ago, China invested a lot in natural resources, in particular projects, some infrastructure, utilities. So they concentrated their investment in hardware, we'll say hardware. But now, over the years, the Chinese has transit from hardware control to software control. What it means, software control in the region means that China is trying to take control over the networks, of how the economy works.

For instance, telecommunications, value change, important military posts, a strategic critical infrastructure in the region, like mega ports. So what we are seeing is that China is updating its strategy in Latin America, it's no longer hardware and mining and natural resources and food stuff. Now China is taking control of the design, of the architecture.

And now in the 21st century, is much more important to have control over the solar, of the rules, than over the hardware or the concrete things. And this is the way they are doing this in Latin America. What is gonna happen, for instance, Chinese invasion in Taiwan that nobody's talking about this.

Is gonna have critical consequences the next day, not in the next two months, but the next day, why? Because one of the things that are gonna happen is that the next day, Latin American countries will receive a lot of political pressure from both China and the United States to take sides.

In the case of the United States, to help or to complement efforts for economic sanctions, they're gonna be there. We know they're gonna be there. But on the other hand, China that is gonna push not to do that because of the incredible economic interdependence and the dependence that China has created in Latin America to its economy.

But economically also, it's gonna be effects in the next day if China invades Taiwan. And the reason is pretty simple, China is gonna be limited in the value change production of technology and also industrial stuff. And guess who are the most important providers of those kind of natural resources, Latin America.

What is gonna happen with China? Its gonna adjust GDP growth immediately in that year. And what is gonna happen in Brazil, Argentina, Paraguay, who export foodstuff? They are gonna be affected. So the invasion of Taiwan is gonna create political instability and is gonna have an effect on economic growth immediately, of course, affecting jobs, affecting poverty and so on.

But this is plus the idea that we already discussed, so the situation is not very promising. General said, why the United States or the western world are not talking about this? I talked to many, many people here in Washington. I met maybe more than 100, not only expert but also international organizations to raise awareness about this issue.

And my guess why they are not talking about this is in part inertia. Inertia, the fact that over so many years the priorities of the state has been in other parts of the world. Second, I believe that people took for granted Latin America. They believe that because we share cultural ties and we have been sharing liberal values, there is not gonna change, and there was a mistake.

But I think there is another reason, and I believe that within the United States, leaders has start losing faith in their own values. And it's sad, but it's true. You see how US politics is going and there are people who are really rejecting American values and rejecting Western values.

And I believe that this has a huge impact of the decision of the US government to have a strong, a solid foreign policy based on a couple of democracy and the rule of law. And I think that has been important in this situation.

>> H. R. McMaster: Yeah, I think you make a really important point, right?

We have to have a competent foreign policy and economic policy in the hemisphere, but we also have to be confident. Confident in our democratic principles and institutions and processes. And I think our confidence is shaken for a number of factors, which we could talk about another time. But I think it is immensely important to restore competence as well as confidence.

I wonder if you might talk about the effect that Chinese influence is already having in the region. And I'm thinking in particular about the Pacific Alliance and how we took that for granted for many years. Could you explain to our viewers what the Pacific Alliance is, why it's important and what's happening to it?

 

>> Doctor Julio Guzman: Yes, of course. The Pacific Alliance used to be the group of countries that were pretty aligned to Western values. What are Western values? Free markets, the protection of human rights, the protection of minorities, democracy, freedom. Those countries, Mexico, Colombia, Peru and Chile, indeed joined many years ago, not only to create an economic block, to take advantage of their capabilities to export to the world, but fundamentally to create a political platform, why?

To make sure that the advance of non-democratic initiatives could take over the region, starting by Venezuela. Truela Cuba, and now Nicaragua, so that was the idea. And the Pacific Alliance was important because there was stability in that position. If you put in a graph, the political position of the Pacific Alliance over these decades in terms of foreign policy and the ideology of the governments.

You're gonna see that the political position in foreign affairs is the same, but the governments changed center, left, right. At the end of the day, those countries look pretty strong in spite of changes that could occur politically, internally in those countries. Now, that situation generally has changed, and that is a breaking point, is an alarm for the democratic countries in the world about what is gonna happen in Latin America.

The balance of power between this illiberal left, dictatorial left, and the democratic group, this power of balance has been broken. For the first time in some decades we have the case of Mexico. We are seeing how AMLO is taking over institutions. We are seeing this in the case of Petro, who is not only negotiating but also make Maduro a very good friend of his.

And also, we are seeing this in the attitudes that these countries had. In the case of Peru, for example, AMLO has been protecting, has been defending Castillo all of this time. When the international opinion, all of them agree, and of course, Peruvians agree, that Castillo broke the law.

He violated the constitutions more than one time in only five minutes of talking. So you see that, but also in Colombia, there is information that people don't know about Petro. Petro received Castillo lawyer in Bogota. Petro met the lawyer of former President Castillo to talk about the situation of a president that was taken out from power because he violated the constitution.

So what is the message that the Pacific Alliance, and particularly, Mexico and Colombia is giving to the region, the United States, and the western world? You know what, I don't care about the constitution. I don't care about the nature of a constitution, and I don't care about the rules.

So if in the next two years something happened here, I am anticipating how I'm going to react. And that's dangerous. And that's pretty dangerous. You could anticipate something from, in the case of instability of Bolivia or maybe Honduras or maybe even Argentina. But it was really difficult to anticipate these kind of reactions for those countries.

And I think the Pacific Alliance is a great example of why we need to work really hard and we need to start recognizing that there is a problem. If we do not recognize that there is a problem, we are not gonna do anything. And that is what I am feeling now.

 

>> H. R. McMaster: And this is an area that has been neglected for too long. I do think we did take it for granted, the trends were in a positive direction less than five, six, seven years ago. This has happened pretty quickly in terms of this movement toward what you call in your excellent essay in Time Magazine, democratic depression.

And so I wonder if you could take a projection into the future, as that essay did. And we're gonna get a little bit more, we're gonna get depressed here, I think, as you talk about this. But maybe talk about where you see the trends going in the region over the next five years or so, or maybe even go country by country.

We have, Guatemala has elections on June 25th, Argentinian presidential elections are in October, of course, you mentioned all the problems in Mexico. I mean, during the last election in Mexico, the midterm elections, over 100 politicians were killed, were assassinated in the lead up to the elections. Its homicide rate is 28 intentional homicides per 100,000 people.

We have border issues there, obviously, that Americans are concerned about, and the fentanyl issues, and that election is coming up in July of 2024. So could you maybe summarize your essay about the democratic depression that's coming and then maybe make some predictions about some of these near-term important political milestones?

 

>> Doctor Julio Guzman: Yes, I believe that the final shot, the final bullet is gonna be the economy. Because everything that we are talking now, political crisis and all these problems during all these years, happened in a context of continuous economic growth. And now, from now, that growth is not gonna happen.

So what is new in this new era for the region? What is new is that political instability and crisis for the first time in more than 20 years is gonna be combined with an economic situation that most people are not gonna be able to confront. That is the news, the economy is gonna be the last bullet in Latin America in the last three years.

And this is pretty scary, this is very scary because it is telling us that maybe this decade is going to be the second lost decade in Latin America. The first one was the 80s, but it looks like it's gonna be the second lost decade in Latin America. In the business as usual scenario, of course, is nothing, it is done.

But I have half hope. I have hope why? Because there are ways of doing something. In my article in Time Magazine, I propose ten commandments that the western world, particularly the United States, should follow in order to start thinking about designing a plan. A plan that, of course, doesn't exist right now.

I'm not gonna go to the ten, but I'm gonna mention just a couple of them. And the first one is honesty, you cannot do something if you do not believe on that.

>> H. R. McMaster: Well, I think what you wrote is that the battle for Latin America is more about principles than economic need.

 

>> Doctor Julio Guzman: Yeah, that's another commandment which is focus in which is important. And here there is a huge confusion, even here in Washington, that people believe that the way to go is to play the Chinese game, is to fight dollar by dollar, the competition of who pours more money in Latin America.

And that's a mistake. It's a mistake for different reasons. It's a mistake because the United States cannot compete with the amount of resources. But also, the United States doesn't have the kind of institutions in order to do that like China. But also, it's a mistake because political liberalization does not follow economic growth.

Economic growth does not end, finally, in democracies in general. And the other reason, which is the point, In my article is that here we are not fighting for money, here we are fighting for principles and values and a misfit security. That's the main point, a misfit security, values and principles.

Let's think, how could you build the rule of law and institutions? How do you build that? With values and ideas, not with money, countries has excel in history, particularly in modern history, because they have been able to convert their ideas and values into institutions. And those institutions are the ones who created wealth and economic progress, not on the other way around.

So if we need to fight or to win the battle in terms of ideas and principles, then we don't need to invest in physical capital, we need to invest in human capital. If the Chinese invest in mines, we need to invest in minds. And I think that's the difference.

If we train leaders, if we work at the base of the social pyramid, training people, make them understand how democracy and how the rule of law is important for them and for their children and for their family, then we're gonna have in the future, a new generation of people that are gonna have stronger values and they're gonna make better decisions.

This is the way to go. This is the way to go, to focus on human capital and to engage with Latin America in order to do that. I talk about how to do that, but I'm not gonna go deep in that issue here.

>> H. R. McMaster: Well, you mentioned education prominently in this essay.

Could you maybe just say a little bit more about that in terms of what you think could be done in a concrete way to improve education, which, of course, in turn would help strengthen institutions and governance and economic policies, for example?

>> Doctor Julio Guzman: Yes, there are a couple of ideas.

The first idea is we need to be sure that more Latin Americans are engaged in the western democratic educational system. If you, for instance, just put in an example, if you look at the number of Latin Americans in terms of students, faculty, and researchers in United States campuses, they are the minority.

We are underrepresented on those campuses. We are not there. How can we expect that the future leaders who used to be the people who study abroad, they are not being engaged of embrace? How can we expect that in the future they could think like us in terms of democratic values.

So when I went to different US campuses, I saw many, many people from Asia. And I think that's great. But I don't think that the number of people from Asia is just the result of economic growth and the market and just spontaneity, it was political decisions from the universities to attract students from there.

So it's important to create incentives, fiscal incentives, for instance, to private universities, and other kind of incentives for public universities here in the United States to be able to attract more young people that in the future, in the next ten years, are gonna make decisions on the political level, and also on the private sector level, in their localities, but also nationally.

So this is one big ambitious policy that we need to do and is doable. Why is doable? Because we are seeing that in the case of Asia. And the second idea is to create these centers for democratic leadership in Latin America, across the region. How they work in Latin America?

You have a huge dispersion of many organizations, political organizations, particularly young people, but are despairs, they are not connected, they do not coordinate, and they have a great heart, but they don't have a very solid liberal ideology. So we need to go there in order not to create them from scratch, but give them the tools, what it means that create networks among them, start understanding lessons learned, give them tools for mobilization and organization, training them in why democracy and the rule of law is important, helping them in order to express their ideas in the locality and national level political dynamics.

What I'm saying is that these centers could be very powerful if we manage it well. And finally, with these centers, my idea is these centers should not focus the elites, the democratic elites. These centers should focus the base of the social pyramid, where the fight for democracy is more intense than at the top.

 

>> H. R. McMaster: And just to help give people agency, right, authorship over their future, to help them recognize that in a democracy, you do have a say in how you're governed. If you can organize and come up with these ideas and turn these ideas into improved policies and actions. Well, I really appreciate your kind of ending on a higher note there.

But for those who are still depressed about the democratic depression, I think they might enjoy a cocktail at this point of this episode of Battlegrounds. So Julio, I'd like to ask you, what is your favorite recipe for a pisco sour?

>> Doctor Julio Guzman: Well, there are several ones, I should admit, but mine is one, one, one, which means one cup of lemon, one cup of pisco, and one cup of ice.

That's my favorite. That's my favorite. But anyone who goes to Peru must have a pisco sour, which is in my, I visited many, many, many countries in the world, but honestly and transparently, there is no better than Peruvian food and Peruvian pisco, nothing.

>> H. R. McMaster: You know when I traveled in Chile, I heard something similar, but I didn't believe it.

I didn't believe it. My early days in Peru convinced me that the best pisco sours are indeed in Peru, as well as the best ceviche, I would say.

>> Doctor Julio Guzman: Yes, yes, of course. Peru is the best place to eat in the world, I'm sure.

>> H. R. McMaster: Can I ask you just for some final words to our viewers?

What message would you like to leave them with, especially your American and international audience, who might want to know what they can do to help address some of the problems we've talked about today?

>> Doctor Julio Guzman: Yes, I think as a reflection, I think we need to learn from history.

And what history is telling us is that important things take time, marriage, friendship, education, human progress, the most important things in your life takes time. When we talk about what is going on in Latin America, we need to have this tranquility to understand that this is gonna take time, that maybe this is not gonna be solved in the next three or five years but, But I assure that if we work ten years, we are gonna see some results.

The Chinese has done everything that we are talking here in 15 years. So why we don't have that patience and that perspective to do things constantly and believe on that, this is one. And the second idea that I would like to share is that, for international policymakers, is that Latin America is no longer, Latin America of the 80s.

Sometimes when I talk to officials and I talk to people interested in the region, they believe that they can treat Latin America like 20 years ago. No, the dynamics of politics has completely changed, starting for we are in a multipolar world. There is no in the past that the only door that we can knock was the United States, now we have others.

But at the same time, 20 years ago, Latin American countries were very depressed, no economic growth. Now, you have countries that the situation have changed. And fundamentally, the difference now is that you have a romance that is in the making, and that romance is Latin America and Chinese romance.

There is Latin America used to be the partner of the western world. A rocky relationship, of course, a rocky relationship. But at the end of the day, everybody was aligned with democracy, with freedom, with rights, right? Now, that past relationship is being threatened and is being challenged by a new contender, but a new prince that is telling stories, and they can finally get a solid relationship that will in the long run, damage everybody of us, particularly Peruvians and Latin Americans.

Well, I can't thank you enough, and I hope that maybe there will be some kind of a Bolivarian reaction to Chinese influence and malign influence in particular in the hemisphere.

>> H. R. McMaster: Dr. Julio Guzman, in your recent essay in foreign affairs and today, I really appreciated everything you had to say.

But I really like this idea of investing in minds Correct. And of course, that's what we endeavor to do with the Battleground series. On behalf of the Hoover Institution, I can't thank you enough for helping us learn more about a critical and sadly, a neglected battleground important to building a future of peace and prosperity for generations to come.

Thank you so much for being with us.

>> Doctor Julio Guzman: Thank you so much Jenny Lev, thank you very much.

>> Speaker 2: Battlegrounds is a production of the Hoover Institution, where we advance ideas that define a free society. For more information about our work, to hear more of our podcasts or view our video content, please visit hoover.org.