What Latin America needs

Mary Anastasia O'Grady:

Latin America has had its share of political instability and economic turmoil in recent years, and both Barack Obama and John McCain promise remedies. Sen. McCain's plans for the region don't come with a price tag. But Sen. Obama's blueprint includes "doubling foreign assistance to $50 billion by 2012."

Americans may wonder why taxpayer funds should be poured into a bucket as leaky as Latin America if the goal is curing underdevelopment. The region needs secure contract and property rights. If local leaders won't defend those rights, programs like Mr. Obama's $2 billion "global education fund" won't amount to a hill of frijoles.

A lesson in this reality is now playing out in El Salvador, where a $77 million investment by Pacific Rim Mining Corp., in one of the poorest parts of the country, has been stalled by the government of President Tony Saca.

Pacific Rim says that its El Dorado gold mine will create 500 jobs and another 2,500 indirectly. But for now it has had to lay off workers. And Pacific Rim is not the only investor alleging difficulties with Mr. Saca's government. A number of other projects, including much-needed energy investments, are also on indefinite hold.

Investors have come to expect antibusiness practices from Venezuelan President Hugo Chávez. But Mr. Saca is no Chávez, at least not by label. He is Salvador's fourth consecutive president from the center-right Arena party. That party, which has been in power since 1989, put Salvador on the investment map in the late 1990s and the early part of this decade by implementing the most aggressive free-market reforms the region had seen since Chile in the 1970s and 1980s.

Investors around the world took notice. Pacific Rim was among them. It says it was encouraged in 2002 by the government to purchase the old El Dorado gold mine in rural Cabañas (near the Honduran border) with the goal of restarting production.

In 2004, after working with the local community to ensure that its concerns were addressed, the company filed the environmental impact study required to secure an exploitation permit. Pacific Rim says that by the end of 2006 it "had addressed every technical issue raised by the ministry of environment and natural resources." The company says the project exceeds all mining safety and environmental standards.

But when it came to issuing the permit the Saca government balked and, according to the company, the reason has nothing to do with a failure to meet regulations. Instead, it says that Mr. Saca is worried that mining is a political liability in the March presidential elections.

If so, it is absurd. Yes, nongovernmental organizations and the Catholic Church have been trying to drum up opposition to reopening El Dorado. A local NGO called Ades, which receives funding from Oxfam, is particularly militant against the project. This is consistent with Oxfam's antidevelopment bias all over the world.

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Other countries are also chasing away investments. Besides Venezuela, Bolivia is making direct threats against the property rights of its most productive people. It is the same sad story in much of Latin America government keeps doing the things that made them poor to begin with and the people do too.

Bolivia under Morales is headed toward a debacle of Cuban proportions. Not respecting property rights and using the command economy has been a recipe for disaster where ever it has been tried. As Cuba has found, free health care can't keep people from wanting to take desperate measures to leave their mess of an economy.