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On Wednesday, March 28, 2007, Nancy Birdsall testified before the U.S. House of Representatives Subcommittee on the Western Hemisphere of the House Foreign Affairs Committee. Dr. Birdsall, who leads CGD's initiative on Globalization and Inequality, took this opportunity to explain how the U.S. can improve efforts to attack poverty and inequality in Latin America.
For the first time in the last two or more decades, and in marked contrast to the situation in the 1990s, there is now a risk that several countries will become more statist and protectionist in their approach to economic policy. Worse with the spread of populist demagoguery there is the risk that the region's democracies will founder. And Chavez's willingness to use his oil spoils to buy new strategic allies in (and outside the region) is a larger problem for the U.S. Though it would be wrong to exaggerate his appeal in the region, he is clever and oil makes him rich, at least for now. His anti-American campaign raises the risk that unless the U.S. responds, some of its key allies in the region will see their domestic political position deteriorate, and the U.S. could lose their support on geostrategic issues and in the global battles against terror, drug trafficking, money laundering and other illicit activities. U.S. investors and exporters could also lose out, if more leaders try to satisfy voters with renationalization of industries and trade protection. The basic problem is that his "model" of a more socialist system with more emphasis on the needs of the poor, for all its fundamental flaws, falls on grounds made fertile by voters’ growing awareness that their existing social and economic systems are fundamentally unfair.1