The country now counts on a wide range of institutional stabilizers. Economic pragmatism became the alphabet of nearly all politicians. Fiscal and monetary anchoring became the alpha and omega of past governments. While the central bank was accumulating a reserve of US$80 billion, Mexico’s inflation rate fell from 5.2 percent in 2004 to 3.3 percent in 2005 – the lowest ever for the Mexican economy over the past four decades. It converged again in 2006 to levels below the US inflation rate. The public finances remain balanced now, with deficits reduced to a minimum and foreign direct investments again climbing to levels of more than US$20 billion in 2006.

The independence of the Central Bank of Mexico is reflected not only in orthodox monetary policy but also in the decoupling of the institution from the political cycle: the mandate of the Governor does not coincide with that of the President. In the political field, the creation of the Federal Election Institute (IFE) constitutes an institutional innovation that allows the independent supervision of democratic elections in the country, consolidating the democratic dream of Francisco Madero. The reduction of foreign debt and inflation, combined with fiscal balance and a flexible exchange rate regime became institutional stanchions in the shaping of the Central Bank and the IFE, after the achievement of investment grade status.

The example of Brazil

Likewise, recent governments in Brazil carried out important pragmatic adjustments. The most spectacular of these was, without doubt, that of Luis Lula’s government. In 2002, the financial markets feared his rise to power but his monetary and fiscal orthodoxy came as a surprise to everyone. In 2004, Lula managed to increase the country’s economic growth rate to around 5 percent. At the same time, similar to Chile and Mexico, Brazil engaged its economy in a solid trade anchoring process, boosting its exports overseas. In 2005, while the exchange rate appreciated by almost 15 percent, the trade surplus reached a record high (US$45 billion) with total exports breaking the US$100 billion frontier. In 2006, they reached even higher levels, with exports topping nearly US$140 billion and the trade surplus increasing again to more than US$45 billion, all while the exchange rate kept its appreciation trend.

During the first years of the Lula administration, the reforming impulse has been very strong and several important fiscal, pension, and banking reforms managed to overcome the "test of fire" of the Parliament. His social programs and investment in infrastructure, although criticized, were in line with the promises made by the government for more just, efficient, and better-distributed growth levels. Beyond the political noise of 2006 in Brazil, what draws one’s attention in recent years is the combination of fiscal and monetary orthodoxy with social policies.

This pragmatic combination not only drew the attention of the financial markets and foreign investors, but also that of Latin American politicians and, in particular, those belonging to the left wing, as can be seen in Uruguay where a left-wing government claiming this pragmatism came into power. With Lula elected again in 2006, the pragmatic and gradual course did not change. The anchoring of the political economy of the possible in Brazil could be contagious throughout the continent, leading to the spread of pragmatic and gradualist economic policies. In a continent that has become dizzy from so many changes in ideological paths, this would be without doubt a great piece of news.

Conclusion

In 2005 and again in 2006, the stars were lined up for Latin America and it seems that 2007 will be another good year. Moreover, countries such as Chile, Brazil, and Mexico now also have powerful compasses that help them keep their bearings and sail away from the rocky coastlines where the populist sirens sing. This trio could be an inspiration to others, offering a very different option than the one that prevails in countries like Venezuela, Bolivia, or Ecuador, which is dominated by phraseologies mixing nationalism, populism, and what Hirschman would have called "impossibilism." Beyond the 2006 elections, with most countries having elected their new leaders, one could only hope that such emulation will not fade away and the stars of the possible will continue to shine firmly and brightly in the Latin American sky.