Latin America: Respecting the Rules of the Game, the Basis for the Development of its People

Latin America is a region of extraordinary potential. The opportunities that it presents, the incredible talent of its peoples and the wealth of its lands are proportional to the institutional crises that cross its nations from time to time. And these crises, which should not alarm anyone, have a common factor that comes from Latin America’s history: change of the established norms and rules. Respecting the law means following the rules of the game, acknowledging the norms, and keeping intact the previously agreed upon regulatory framework. The Spanish Royal Language Academy Dictionary defines the word “law” as “…Precept dictated by the competent authorities, which approves or prohibits something in agreement with the judicial system and for the good of the governed [sic]. A soccer fan should understand the importance of respecting the law given that it is impossible to play and compete in soccer, as in society in general, by disobeying the basic norms and rules.

This article presents two goals: first, to reflect on this concept and attempt to understand the consequences of modifying the established rules; and second, to strive to describe by means of a popular example (soccer) the connection between “respect for the law” and the economic development of the average Latin American citizen.

Respect for law

The Anglo-Saxon cultures define this question as “rule of law,” which can be translated as “government by norms and rules.” This is connected with “state of law” and the general concept of “legal security” used by Spanish speakers. On this final thought, when we mention the term “legal security” we are speaking about the confidence level that the nation-state generates. The word “security” is synonymous with tranquility, calm, and certitude. This concept is used to judge the established institutional level of a nation and the level of respect for the law that a country offers its citizens and the international community.

Perhaps the best way to comprehend the concept and the different levels of “respect for the law” that a nation-state offers is to define the environment under which rule of law does not operate. That is, the insecurity that arises when, in any society, a community does not consciously follow the agreed upon norms and rules. Insecurity is a synonym of instability, which, in turn, leads to frustrations in any moment or stage of life.

We all have sad experiences and understand what it means to loose confidence in a friend or an acquaintance. From a coworker who failed us, to family members who surprised us with inappropriate behavior and to friends who did not honor their promises. These are all examples that have a common thread: they generate future uncertainty. And, among other things, insecurity creates paralysis, slowdowns, stoppages, and the rupture of relationships. It is natural that this failure turns into mistrust. Some recent events, where rules of the game were modified by ignoring signed contracts and disobeying the laws themselves, are extremely dangerous and can lead to worse results than the sickness that they tried to cure. Let us see why and take a closer look.

The connection between rule of law and economic development for the average citizen

Douglass North, the 1993 Nobel Prize winner in Economics, provides us with a real life example to understand this connection. North, a brilliant economist educated at the University of California, Berkeley, was a declared Marxist in his youth. After serving in World War II, North dedicated a good part of his life to understanding the groundwork and foundations that allow a society to grow and develop. After many studies, he published Institutions, Institutional Change, and Economic Performance, a 1990 book that proposes that the wealth of nations is not made by human or natural resources but rather by two factors that form the pillars of the average citizen’s development: a strong will to respect a country’s institutions and an unbreakable call to keep the rules of the game crystal clear.

The respect for law is a basic rule for all human beings. An entire set of rules exists that, framed in different ways, motivates citizens to obey these same rules. Similarly, direct consequences exist that motivate the average citizen to follow the established arrangements. For example, if a borrower of a bank loan tries to unilaterally modify his agreement and resolves not to pay the financial obligation, such conduct becomes registered in a database and the loan default follows him for the rest of his life, keeping him out of the country’s credit system. There are many similar and graver examples of violations of the law. This is precisely why, with the power of criminal records, society’s condemnation keeps on punishing a person; innumerable examples exist of people that have criminal records and end up never being able to land a decent job. Society does not want to interact with these people, and in some cases, their community no longer trusts them.

Yet an even more opportune example exists, closer to the international context, which will let the average Latin American citizen reflect on the consequences of lack of respect for the law. This example is soccer. Soccer is a sport that generates deep passion in South America. Argentina, Brazil and Uruguay were world champions on more than one occasion, home-grown players from the region are stars on the world’s best teams, and on Sundays stadiums fill to capacity in the majority of cities and towns. All these facts demonstrate that soccer is a beloved sport in Latin America. Indeed, it would not occur to anyone in South America to disrespect the rules of this game. How would people react if, by a unilateral decree, it were established that in some South American countries soccer would be played with an oval ball? Or in a similar manner, if it were stated that “from now on all teams from abroad that come to play in South America may only field five players and may only score a goal if they kick the ball with both legs at the same time.” Citizens would be in an uproar. Changed ground rules would deprive them of the beauty of international soccer, of the television broadcasts, and of the possibility that their players would be known abroad. The players would also lose out on the opportunity to play in foreign markets where they can earn a fortune. In short, it would deprive all of development.

A country not respecting the institutionally established norms is exactly the same as not respecting the rules of a game like soccer. But in this case we speak of a “game” that contributes specifically to the future welfare of the citizens of a nation, who should react with the same intensity as if the rules of their favorite sport were changed. And it should be understood that the consequences would be the same: turning a deaf ear to the rules and disobeying the law both lead to a lack of international participation. This contributes to a decline in both quality and, similar to soccer, the competitiveness of regional economies. In this same way, disrespect for the rules of the game can generate a crisis for private “clubs” that practice the sport or the companies of a particular country. This can lead to failure for the local “players” and for the average citizen in places where rules are modified and they “play” under another set of rules.

The connection between ignoring the law and the failure of personal spirit and vigor is evident. Today, the world, as Thomas Friedman of the The New York Times explains, is flatter than ever. We are all interconnected and breaking established rules has its price. In short, the inhabitants of this region must define what they want to do, while being conscious that changing the established rules of the “game” is an undesired path for their personal future.

This is what happens with countries that break the rules: unilateral changes and modifications to agreements and disrespect for established laws remain etched in investors’ memories, both domestic and international. While not all investors have the same memory, the truly relevant ones, those that influence gross domestic product, do not forget a country’s past conduct. Proof is found in the millions of dollars, property of South Americans, that they have not invested domestically but rather deposited and invested abroad. This is because of a lack of confidence in their own countries, a result of a history of nationalizations and confiscations. A clear and instructive example of the opposite type of behavior comes from Latin American. As the former Chilean President Lagos stated recently, Chile’s great virtue has been to understand, over the past 20 years, the importance of continuity in a country’s strategy. His message can be summarized as follows: “No politician wants to re-create Chile, but rather continue, with different degrees, the same type of development.” Indeed, Chileans have understood that respecting the rules of the game is the basis for their personal development, in economics just as in soccer . . .

*By Manuel Álvarez-Trongé (General Secretary of Telefónica International of Argentina, Inc. – The present article represents exclusively the author’s personal views).

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