LAGUNA BEACH – From changes in government in Argentina and Brazil to mid-course policy corrections in Chile, Latin American politics appears to be undergoing a rightward shift. But rather than being “pulled” by the attractiveness of the economic policies that the right is advocating, this complex phenomenon is predominantly a reflection of the “push” implied by anemic growth and the disappointing provision of public goods, especially social services.
Indeed, we can think of the shift as a Latin American variant of the West’s blossoming romance with anti-establishment movements. And that means that the region’s governments must be seen to deliver to their citizens. Otherwise, the shift will prove to be only a stop on an uncertain path – politically more complicated and economically harder to navigate – toward an even less stable destination.
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The evidence of the ongoing political change comes in many forms. After years of fiscally irresponsible populist rule by the Kirchner family, Argentina has opted for Mauricio Macri, a former businessman running on a right-wing platform. In Brazil, and pending final consideration by the Senate, President Dilma Rousseff has been sidelined by a “temporary impeachment,” with her replacement signaling a shift away from the policies of the leftist Workers’ Party.
Even incumbent governments in the region are altering their course. In Chile, President Michelle Bachelet was reelected, but her government is signaling a move to the right on economic policy. Cuba, under President Raúl Castro, is enlarging the legal scope for private businesses.
And in Venezuela, a country tragically flirting with “failed state” status, President Nicolás Maduro’s government confronts mounting economic and financial challenges stemming from fiscally unanchored policies begun under his predecessor, Hugo Chávez. Facing widespread shortages of goods and malfunctioning markets, including for foreign exchange, his government has already lost control of the National Assembly, and the opposition is now seeking to shorten his term by constitutional means.
Several key factors are driving the region’s political dynamics. The sharp drop in international prices for commodities, such as oil and copper, together with a slowing Chinese economy, has reduced the region’s export earnings and accentuated domestic economic challenges. This has been aggravated by a more volatile environment for financial flows to emerging countries, more tentative foreign direct investment, and concern about the potential fallout for international trade from rising anti-globalization rhetoric in the unusual presidential race in the United States.
The resulting deterioration in economic performance, including deep recessions in Brazil and Venezuela, has accentuated popular dissatisfaction with public services and amplified long-standing worries about inequality and misappropriation of public funds. Popular dissatisfaction is evident even in traditionally well-managed countries, such as Chile, where lower-income groups have done relatively well in recent years and where the scale of official fraud – documented and alleged – pales in comparison to neighboring countries.
For now, rightist parties and policy agendas are the main beneficiaries of the region’s economic and social disillusion. The hope for many in the region is that political change can catalyze faster growth, by revamping existing policies and pursuing more effective anti-corruption campaigns. But, again, unless today’s political winners deliver notably higher and significantly more inclusive growth, their electorates are likely to move on.
Viewed from a global perspective, the shift in Latin America is part of a broader rise in discontent with the “establishment.” And it is not limited to governments. It also extends to private-sector elites, particularly banks and multinational companies.
In the US, the result has been a significant shift away from establishment politics, including the unanticipated emergence of Donald Trump as the presumptive Republican candidate and Bernie Sanders’s unexpectedly powerful challenge to Hillary Clinton on the Democratic side. In Europe, anti-establishment parties have been gaining ground in local, regional, and national elections, complicating government formation (for example, in Spain) and influencing major policy decisions (such as the UK Conservative Party’s decision to hold the upcoming “Brexit” referendum).
With the exception of countries like the Philippines, where voters opted in last month’s presidential election for a blatantly anti-establishment candidate in Rodrigo Duterte, the tendency in the emerging world has been for adaptations within the confines of existing political elites. That may well be the best way to characterize what is happening in much of Latin America.
Now it is up to these elites to respond effectively to the causes of popular anger, or risk facing the eventual emergence of anti-establishment movements, like their American and European counterparts. That outcome, by seriously complicating the region’s political landscape, would further reduce governments’ scope for timely economic-policy adaptation.
By Mohamed A. El-Erian