A REVIEW OF ALLIANCE FOR PROGRESS GOALS

(A Report by the Bureau for Latin America, Agency for International Development)

PART I. INTRODUCTION

The Committee on Government Operations requested a study to determine whether the goals of the Alliance for Progress as they apply to each country are currently realistic or attainable in light of the experience of the past 7 years. The committee asked that the findings and recommendations resulting from this reassessment be reported to the Committee on Government Operations and other appropriate committees of the Congress.

Our review of experience of the past 7 years indicates that total accomplishment of the ambitious Alliance goals within the decade 196171, as contemplated in the Charter of Punta del Este, is not possible. The framers of the charter erected a goal structure which anticipated too much too soon, and in recognition of this, the time frame of the Alliance has been extended beyond 1971.

Our review also indicates, however, that achievement has been substantial. We conclude from this review that despite the initial unrealistic 10-year time frame, the goal structure still affords an attainable set of priority guideposts for development of the hemisphere. The development progress and momentum generated under the Alliance justify promise for the future and merit continued U.S. support.

This report does not attempt to treat the many, and still not fully understood, variables involved in modernization and development, but instead, is addressed to the formal goal structure of the Charter of Punta del Este. The formal objectives omit some critical elements which bear particular mention.

Major among these is the critical variable of population growth. Although omitted from Alliance goals because of its political volatility, this factor has been central to what has transpired since. In most Latin American countries, the birth rate is staggeringly high. The number of schoolage children not in school tends to grow at the very moment when new schools are being built at a record rate. Substantially increased food production and remarkably expanded educational facilities barely keep pace with population increase. High economic growth rates are largely canceled out in per capita terms, as the economic pie must be shared by a rapidly increasing number of claimants. The population question is now increasingly being faced up to in Latin America, but much remains to be done as elsewhere in the world.

The United States has made known its willingness to assist, where requested, as the countries of Latin America come to recognize the population issue as a matter of priority concern. While there are increasing signs of this growing recognition throughout the hemisphere,

there are few countries in which the issue is yet being squarely met. Until these problems are better recognized and addressed in most of the hemisphere's countries, the question of attaining a satisfactory level of development remains uncertain.

Another vital development priority not specifically identified as a formal charter goal was the need for all countries to couple their firm general commitment to develop with vastly improved competence, efficiency, and vigor in governmental operations. Development requires not only that the Latin American governments perform their tradi tional functions more efficiently and effectively, but also that they prepare themselves for a broad range of innovative, technically complex, and managerially demanding developmental undertakings. In the preAlliance period one of the major roadblocks to progress and development was the inability of most Latin American governments to formulate effective policies and to manage their affairs and programs efficiently. Pervasive scarcity of technical and managerial competence. coupled with archaic and unserviceable procedures and organizational structures were characteristic of most governments of the hemisphere. The Alliance years have left an imprint of new commitment, competence, and confidence throughout governments in the hemisphere. Thousands of public servants have received essential training, and keygovernmental policymaking and executing agencies in most countries have been or have begun to be-strengthened. At the same time, the Alliance has also been an essential factor in the new sense of commitment to development, and in the realistic perception of the means for its attainment, which appear everywhere in the hemisphere. Whereas few governments in Latin America had even given lipservice to the key issues of development prior to the Alliance, development is now everywhere the byword of national political life. No government or political party can ignore it. This, in itself, is a momentous achievement of the Alliance.

The tangible evidence of this intensified commitment and growing competence is evident throughout the hemisphere. The adroit management of complex stabilization programs in Brazil, Chile, and Colombia reflect newly achieved sophistication and discipline in policy management and coordination. Tax collections, reflecting in large part improved administrative techniques and organization, have been increased for the hemisphere as a whole (on real terms) since 1961 by 30 percent. In Brazil they have risen some 26 percent since 1964, and since 1961 in Colombia, Peru, and Chile by 80 percent, 56 percent, and 64 percent, respectively. In six other countries, taxes have increased over 60 percent. Of equal importance, impressive new energies, methods of doing business, new organizational forms, and commitment in ministries of health, education, agriculture, transportation, and finance. are amply reflected throughout the hemisphere in the indicators of achievement and assessments of progress discussed in the body of the report.

An analysis of progress toward goals raises the question of relative priorities. Viewed broadly, each of the charter goals theoretically represents an equally high priority objective for each Alliance country. Again, theoretically, it is only through the eventual achievement of all the goals that a country can be said to have succeeded in providing access to its citizens to meaningful productive opportunity and a

greater share of the benefits of progress. Yet realistically, simultaneous progress toward each of the goals cannot be expected and the priority significance of progress toward any goal or group of goals, in terms of development strategy, varies widely among countries and within the same country over time. There are great differences between one country and the next in the development bottlenecks that require early resolution as a precondition to progress on other fronts. Also, the countries of the Hemisphere differ markedly in their capacities to achieve political commitment and consensus behind various policies and goals, or to mobilize technical, financial and institutional resources behind the programs leading to the goals. While every country needs to base its development strategy on its unique development problems, priority setting for operational programs must also take account of the art of the possible within that country's political, economic, technical, and administrative constraints.

The charter specifies as a goal for the hemisphere as a whole, the maintenance or establishment of that degree of monetary and fiscal stability required to encourage increased private and public sector savings and investment. Private sector growth and the rational allocation of increased public investments to such other priority requirements as education and agriculture require, as a precondition, the establishment and maintenance of a stable economy. They cannot be sustained in a setting of uncontrolled or hyperinflation and recurring foreign exchange crises. Thus, as a necessary precondition to growth and development, the achievement and maintenance of financial stability is a clear first priority Alliance objective. Apart from the inequities of inflation falling most heavily on those least able to afford it, financial and monetary instability clearly frustrate progress toward the social goals of the Alliance in such fields as education, employment, health and agricultural reform.

Progress toward this goal has been impressive during the Alliance years. Despite intensifying demands for substantially augmented public sector expenditures, most countries have avoided destabilizing fiscal and monetary policies by collecting more taxes and by following more disciplined budgetary practices. Thus, for all of Central America, Bolivia, Venezuela, Ecuador, and Mexico, inflation has been minimal, although public sector investments have risen substantially. Bolivia's performance in the Alliance years may be contrasted with the twentyfivefold increase in price levels during the 1950's, with a record 179 percent inflation rate in 1955–56.

Inflation has been most serious in Argentina, Brazil, Chile, Colombia, and Uruguay, and has called for highest priority attention in those countries, even though stabilization measures sometimes have short-term depressive effects on growth. The well-managed stabilization programs in Chile, Brazil, and Colombia, with strong support from the United States, the IBRD, and the IMF, have not only curbed the profound inflationary surges in their economies, but also appear to have restored these countries to visible and promising growth paths. Whereas per capita GNP declined and the rate of inflation reached 80-90 percent in the 1963-1964 period in Brazil, the per capita growth in 1968 was 2.9 percent, and the price rise 24 percent. Colombia's 16 to 17 percent-average inflation rate in the early Alliance years has declined to a current rate of 6.5 percent, and GNP growth, though ir

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regular, showed a healthy 6.17 percent increase in 1968. Chile's 39 percent price rise in 1964 has been moderated in recent years, although drought and other conditions have kept growth down. In Argentina, cost of living increases were annually above 20 percent throughout the mid-60's, but following stringent economic stabilization measures, 1968 price rises were kept to 10-11 percent.

A second and closely related priority goal in the charter is the achievement of regional economic integration. While of potentially immense significance to all countries, the priority of this goal within their development strategies is quite different from one country to the

next.

For the small countries of Central America with a combined output of less than $5 billion, growth and development in the short- and longterm are closely tied to their ability to integrate their economies. The perfection of the regional market has been, and remains, among their highest immediate priorities. Progress toward this goal, strongly supported by U.S. assistance, has been notable, with integration increasingly operating as the catalyst to internal growth in these economies, and giving Central America some of the highest rates of growth of production and trade in the region.

A second group of countries-Colombia, Ecuador, Venezuela, Peru, and Bolivia-for which integration is also clearly essential but not quite so clearly an immediate precondition to growth as in Central America, have also begun to move toward this goal. The "Andean Group" arrangements, which have been under negotiation over the past few years have laid some of the basic groundwork for important results in the coming few years. On the other hand, relatively large internal markets in such countries as Argentina, Brazil, and Mexico, with gross national products of $15 to $30 billion equivalent or more, tend to reduce the short-term urgency of this goal in these countries, as compared to the goal of integrating internal markets and achieving the immediate potentials of internal growth.

Related closely to the stabilization and integration goals are the twin Alliance objectives of export diversification and industrial growth. The first of these objectives is of highest priority for most countries in the Hemisphere, since the economies of almost all are highly dependent upon the export earning of a very narrow range of primary commodities-coffee, tin, bananas, copper, and so on. Export diversification is essential as a means of increasing exports, out of whose earnings the foreign exchange requirements of development must be financed. It is also essential in order to insulate the Latin American economies from the impact of volatile or unfavorable movements in world markets of the prices of their major export commodities. Even a small drop in world prices for any of the major Latin American commodities can seriously derail development programs by reducing the availabilities of foreign exchange required to finance machinery, raw materials, and technology required for development. For example, a one cent drop in the world market price of coffee, reduces Brazil's foreign exchange earnings by some $23 million. Even though there has been considerable progress over the past 7 years toward regularizing world supply and demand for some of the key Latin American export commodities through international trade agreements, emphasis must remain on diversification. Progress here, which is closely related to

industrial diversification, increased intraregional and world exports, and intense efforts to maximize agricultural export opportunities, is encouragingly reflected in the data. Decline in reliance on coffee as an export commodity has been significant in such major coffee growing countries as Brazil (coffee down from 53 to 44 percent of total exports), Colombia (74 to 65 percent), Costa Rica (56 to 40 percent) and Guatemala (67 to 31 percent).1 Latin America exports of manufactured goods have increased from 9 to 13 percent of total exports over the period. Brazil's exports of manufactures in 1966 were almost four times their 1962 level, and iron ore exports have grown importantly. In Colombia, exports of chemicals, textiles and paper goods have gone up. Central American trade in manufactures and other nontraditional exports has been greatly stimulated by the Common Market.

The framers of the charter were concerned with growth and increased productivity. But they also recognized that the substance of development is more far-reaching, its core being the creation of widened access for all segments of the population to participation in the benefits of increased productivity. They therefore wisely combined the clear "productivity goals" of the Alliance with objectives for increased educational opportunity, agragian reform, and health and housing programs. Taken together, these goals are clearly means to, and preconditions for, what must be the primary development objective of the Alliance; that is, the attainment of a more ample and equitable distribution of income.

In this context the educational goal is not only fundamental as a means of increasing the productive efficiency of the Latin American peoples, but of the highest order of importance as the vehicle through which vast numbers of economically and politically disenfranchised people can acquire access to productive opportunity and a stake in development. Thus, for those countries with reasonable growth and stability, the priority need is to open up "access," through greater educational opportunity, which the economic preconditions make possible. Even for Brazil and Colombia, where the attainment of stabilization and growth have been the major preoccupation of governmental policy, it would seem that priority attention can now be (and apparently is being) given to educational goals. While this goal is of lesser consequence for such countries as Uruguay, Costa Rica, Argentina and Chile, where literacy rates are 85 percent or more and over two-thirds of all school-age children are enrolled, improvement in educational quality, particularly on the secondary and university levels, remains an important priority. For such countries as Bolivia, Honduras, and Guatemala, where less than a third are literate, but where more than half of the primary school-age children are now enrolled, the transcendent importance of the priority is evident.

Our analysis below demonstrates that there have been remarkable educational successes, but for most countries, when measured against the priority and the needs, progress is not yet adequate. Thus, for example, the number of children 5 to 14 years of age who were enrolled in school increased from 24.2 million in 1960 to 35.8 million in 1967, an increase in the percentage of that age group enrolled in school of from 47.8 to 56.8. At the same time, the absolute number of children not enrolled in school increased from 26.5 million in 1960 to 27.3 million in 1967.

1 Data between 1962 and 1967.