Political corruption. Violent confrontations with narco-trafficers. Brutal kidnappings and murders. Such was the grim reality that has long been associated with Colombia. Now, after decades of turmoil, the country is improving its international image as a politically and economically stable nation. It's been a multi-pronged battle, launched and largely won during the eight-year presidency of álvaro Uribe. In a Wharton Leadership Lecture during the recent Wharton Latin America Conference, Uribe described the important elements of democracy in the region and argued that private investment is critical in solving long-term social problems.

Security, he argued, is essential for democracy. Uribe, who served as Colombia’s president from 2002 to 2010, said Latin America's political leaders have believed that safety would come with the alleviation of poverty, poor education and other social problems. “I said to my fellow Colombians, ‘We cannot prosper, we cannot advance in investment, if we continue being a country with a high level of insecurity,” recalled Uribe at the conference titled, "Latin America: The New Land of Opportunity."

Uribe campaigned for his first term as president on a strong anti-crime, anti-corruption platform. Prior to winning his bid for president, he had earned a reputation as a tough crime-fighter in earlier government posts, including mayor and city councillor of his native city, Medellin. As Colombia’s second-largest city, Medellin was notorious in the 1980s and 1990s as an extremely dangerous haven for drug traffickers. Uribe’s father, a cattle rancher, had been kidnapped and murdered by members of the guerilla group, Fuerzas Armadas Revolucionarias de Colombia (FARC). Uribe also was governor of the department of Antioquia, whose capital is Medellin, from 1995 to 1997. As governor, he introduced health and education reforms along with programs to curb crime and corruption.

During Uribe’s presidency, Colombia’s homicide rate dropped 70% and kidnappings declined 84%. Meanwhile, annual GDP grew from 1.8% to 4.4% and the inflation rate, which had been running at nearly 7% annually, fell to an average 2.25%.

Progressive or Regressive

Latin America is enjoying a new era of growth, said Uribe, but the region still faces challenges when it comes to creating and preserving democratic governments that support sustainable private investment. Uribe added that thinking about Latin American countries as left or right politically is outdated. It is more meaningful to think of governments as progressive or regressive democracies, since nations up and down the political spectrum have the key traits of democracies, such as open elections, but might fail on other fronts. For example, during the election process they might corral the media, suppress opposing political parties and restrict other day-to-day activities of a free society — which are all critical in a progressive democracy and for what he called “freedoms.”

"To some degree, we are being misled in some Latin American countries because the leaders say, ‘We respect the rule of law. We have permanent elections,'" Uribe said. "But we have to know that democracy is more than elections."

Beyond open elections in an environment encouraging freedom of the press and opposition, another essential for building a progressive democracy is security, according to Uribe. In the past, he said, Latin American dictators have maintained that to achieve a secure nation, a country first must solve its social problems, often at a high human cost. Uribe recalled a lecture he attended recently by a member of Venezuelan President Hugo Chávez’s government. “She came up with the old-fashioned answer that it is necessary to solve all the social problems of the country to be safe," Uribe noted. "This is what many people used to say in my country. But [over] many years, I have seen that while people justify violence and blame it on social problems, the violence makes things worse.”

To alleviate poverty and other social problems today, he said, Latin America needs to encourage private investment, an impossible feat in violent, crime-ridden countries. One of the most important achievements of his administration was to use the power of the state to fight criminal activity, Uribe continued. Backed by American aid, Uribe forged an agreement with paramilitaries, reducing their stranglehold over the country. “Today in Colombia, you still see guerillas involved with narco-trafficking," he conceded. "But you no longer see the state without the monopoly power to apply its strength against any criminals.”

Checks and Balances

Today's record-high commodity prices, including oil, are also having a profound effect not only on Colombia, but also the entire region, for better or for worse. Uribe singled out Venezuela, which has been using its national oil wealth to subsidize programs for the poor at the expense of private enterprise. Long term, he said, the Venezuelan approach is not sustainable. He also added that the Venezuelan standard of living is already declining.

Some Latin American leaders avoid making security a priority because they fear for their own safety, according to Uribe. Meanwhile, citizens are often wary of leaders who focus heavily on security, fearing a dictatorship that clings to power through excessive military or police might. Uribe himself has been criticized by human rights groups for supporting overly aggressive tactics while trying to reduce the level of violence and crime in the country. He also came under criticism in late 2009, when he unsuccessfully sought to change Colombia's constitution so that he could run for a third consecutive term as president. At Georgetown University, where Uribe was a guest scholar this past year, activists launched a campaign against him called "Adios, Uribe!"

Looking forward, Uribe stressed the importance of independent institutions in creating a successful democracy. He said progressive democracies safeguard people with checks on power. In some countries, he pointed out, it is difficult to gauge the level of independence of public bodies. For example, he said the government in Bolivia under President Evo Morales has free elections and claims to have an independent Supreme Court of Justice. However, Uribe said government officials in Bolivia point out they are not really free to disagree with the president.

Nicaragua is another example of the blurring of political lines. “Apparently in Nicaragua, there is an independent executive branch, but there exists some kind of cronyism between the executive branch and the justice administration,” Uribe observed. “There is a great difference between appearance and reality.” He said Nicaragua isn't an isolated case — other countries in the region appear to have independent institutions yet conceal “very subtle links” to the government, which create a web of cronyism.

What's Mine Is Yours?

The former president said yet another way to tell whether a democracy is progressive or regressive is to consider the level of participation in the government. Uribe said that the business community is increasingly concerned that Venezuela's government will continue its expropriation of private sector companies and assets. He said some executives are reluctant to draw attention to their businesses by voicing those concerns publicly, which is unfortunate. Uribe urged a different tactic. “The only way to defend the rights of private investors is by participation, by being vocal,” he argued.

He referred to the metaphor used by U.S. President John F. Kennedy in his 1961 inaugural address. Kennedy warned the U.S. and its allies against trying to reason and go along with the Communist powers of the day. “In the past, those who foolishly sought power by riding the back of the tiger ended up inside," Kennedy stated. With that in mind, speaking up against governments that might expropriate property or discourage private enterprise is important, whatever the repercussions. “It is better to be hunted by the tiger than to be the victim of the tiger,” Uribe argued. “It is necessary to speak loudly against these dictators rather than to be quiet.”

It's not just physical security that's important for a democracy. Investment security is also a prerequisite, Uribe noted. That includes “legal security,” to bolster private sector confidence that long-term investments will not be eroded by unexpected, arbitrary government rules. As for political security, he said, “no one will invest in a country where early in the morning you have to think, ‘Who is my president going to be today?’ You have to give clear signals of credibility for the private sector to feel political security.”

Finding the Right Mix

Uribe stressed that in the context of today’s booming commodity markets, the next generation of Latin Americans need to find a way to integrate commodities-based and knowledge-based economies. “It is not one or the other today. It is: how can we mix both?” Uribe said. To find the answer, Latin America needs a “revolution in education.” He noted that investment in research and development in the region remains low, although a program in Colombia designates 10% of government mining royalties for promoting research and development.

The former president also advised Latin American countries to avoid creating a chasm between large corporations and small enterprises because, he said, the two are interconnected. “The more investment in big corporations, the more opportunities for small, micro-enterprises." Colombia, he added, has developed projects with banks and non-governmental organizations to encourage micro-lending. “We need institutions that are committed to teaching micro-enterprises. We need institutions in the public and private sector ready to supervise them."

One on-going problem in Latin American economies, he continued, is the friction between employers and trade unions. In Colombia, links between guerillas and some labor groups have created tension. “In some sectors, there is hate for employers and employers [have] distrust for the workers,” according to Uribe. He said his government tried to improve cooperation between workers and businesses, and during a speech in Spain last year, Uribe pointed out that 2010 was the first time in more than 20 years that Colombia was not included on the International Labor Organization's list of sanctioned countries.

Overall, Uribe is more optimistic about the future of Latin America than he was five years ago. In Mexico, despite problems with narco-trafficking, Uribe said he does not see a shift toward more socialist-oriented politics in the country’s next national elections, which are scheduled for 2012. And anti-business, “Chávez-like” policies are not taking hold in the majority of countries. He noted that Ecuador's president, Rafael Correa, has made speeches espousing Chávez-oriented policies, but has not put any of them into action after more than four years in office. Even President Daniel Ortega of Nicaragua has not advanced far in expropriating business assets. Uribe said business leaders in that country have indicated that Ortega is afraid of risking a political backlash. Yet Uribe’s optimism does not extend to every country. “Bolivia is another case,” he noted.

A lesson that the past has taught Uribe is that successful governments are those that respond to their people. Historians looking back on the collapse of the Berlin Wall or China’s transition to a more business-oriented society, he said, “will recognize in all these cases that people were against the old regimes because the people realized how cruel they were.”