Latin Amer­ica’s ris­ing right

Financial Mirror (Cyprus) - - FRONT PAGE -

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 anaemic 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 anti­estab­lish­ment 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.

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 sig­nalling 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 sig­nalling 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-glob­al­i­sa­tion 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 neigh­bour­ing 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 catal­yse 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 eco­nomicpol­icy adap­ta­tion.

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