A group of Guatemalan women sell handmade blankets at a market.
Photo © Linda Ruth Paskell

he giant leap forward will not take place until we understand how critical the need is and we have the right kind of leadership,” says Alvaro Vargas Llosa, assessing the prospects for Latin America fully embracing the free market reform on which its future prosperity depends. Vargas Llosa is director of the new Center on Global Prosperity, created by the Independent Institute, of which he is also a senior fellow, with the help of a $500,000 grant from Templeton Foundation.
Vargas Llosa is uniquely qualified to critique the resistance to free market reform in Latin America from interest groups on both the political left and right. A prominent Peruvian political journalist, son of the distinguished writer Mario Vargas Llosa, he had to go underground and smuggle his family out of the country after denouncing the corruption of President Toledo’s administration. David Theroux, founder and president of the Independent Institute, recalls what ensued, “We were able to arrange for a fellowship for him to come and join us at the Institute and the Templeton Foundation generously provided a grant for Alvaro to write a book on Latin America.”
That book was Liberty for Latin America: Undoing Five Hundred Years of State Oppression, a meticulously researched and formidably articulated indictment of the dead hand of state control and its frustration of potential prosperity. Notably, it categorized “five principles of oppression”: corporatism, state mercantilism, privilege, bottom-up wealth redistribution, and politicized law. The Center now employs these as benchmarks of economic and civil freedom in studying individual countries.
The success of the book was followed by a triumphant tour of Latin American countries by Vargas Llosa, when he gained unprecedented media access to publicize his ideas on market reforms. He had achieved heroic status, says Theroux, “because he stood up to corruption and risked his own life and livelihood, based on principle.” That personal credibility has undoubtedly helped the Center to propagate its message of free market reform throughout Latin America.
On his return, he and Theroux were invited to submit a competitive RFP to the Templeton Foundation for research on enterprise-based solutions to poverty. This was successful and the new Center on Global Prosperity launched a study of local entrepreneurship in the developing world. The research findings, based on field work, will be published in a number of volumes. “We have one volume coming out soon,” says Vargas Llosa, “a series of five case studies in Latin American and African nations of entrepreneurial success: companies that were founded by very poor people in deprived communities that have been successful over a relatively short period of time.”
This book, called Lessons from the Poor: Triumph of the Entrepreneurial Spirit, in contrast to his previous work on Latin America, looks at microeconomics, the emergence of small-scale enterprises in case studies. “We are not trying to paint a broad picture of the developing world, we are trying to do exactly the opposite, look at it in a much more focused way through specific companies and people whose stories we tell in detail.”
Some of those stories are extra­ordinary. Vargas Llosa cites as an example the creation of a soft drinks company in the Andes of Peru at a time when the Shining Path, a Maoist terrorist group, was very powerful in the area, in an environment that epitomized the five principles of oppression. Yet by resourcefulness and audacity, these primitive entrepreneurs negotiated very unfavorable circumstances and survived. Theroux, too, is hugely impressed by the tenacity and resilience of entrepreneurs around the developing world, “starting out with absolutely nothing, with every possible set of handicaps you can imagine, and still being able to create successful enterprises that directly serve and uplift entire communities.”
This contrasts with the mindset of people in the developed world who still imagine intergovernmental aid and state intervention are the solutions to poverty. “If you look at the intellectual classes in the West, most of them for decades have bought into this view of central planning,” says Theroux. “Their view is to create a global welfare state.”
The Center on Global Prosperity, by undertaking cutting-edge research on global poverty and publishing its findings through every accessible medium, aims to redirect the debate on poverty. In that discussion, Latin America is a crucial forum. What are the prospects for a full-blooded free market reform there? “It will eventually happen,” insists Vargas Llosa. “But before we get there, we are going to have to go through turbulence.”
He refuses to underestimate the obstruction to market reform that Marxist or populist regimes can pose. “I think it’s more dangerous than some people would admit.” He sees a coalition of doctrinaire radicals, nationalists, cultural chauvinists or “indigenists” opposed to globalization, and economic protectionists supplying a constituency for populist governments that could obstruct reform and perpetuate poverty. The catalyst could be if Cuba, post-Castro, were to abandon Marxism and deprive Hugo Chavez and his like of their ideological icon.
At all events, he does not believe full market reform in Latin America can be delayed for more than a decade. He sees no reason why Latin America should not become as enterprising as India or China. “I would hope that a book like the one we are going to publish would be able to provide further arguments for would-be reformers in the region.”