Latin America shifts to the Left
FROM THE ECONOMIST INTELLIGENCE UNIT
Latin America’s political scene is moving decidedly leftwards, with a Socialist having won the first round of presidential elections in Chile on December 11th and a radical indigenous leader winning outright in Bolivia on December 18th. Several elections to be held in 2006 could consolidate this shift in regional politics. But the leaders in the region are not monolithic. They range from pragmatists more in the social-democratic mould, as in Chile, to populist firebrands in Bolivia and Venezuela. While they will share some policies and thinking, they will by no means all toe the same ideological line. Yet greater independence from the US, and from the economic policies it espouses, will no doubt be among the dominant traits of many Latin American governments in the next several years.
The region’s drift is largely the result of a rethinking, if not outright rejection, of the market-oriented economic policies that were embraced by most countries in the 1980s. Such policies, often referred to as the “neoliberal model” or the “Washington Consensus”, have lost credibility throughout Latin America. In many countries market reforms, including privatisation and a welcoming of foreign capital, have failed to improve the lot of the lowest income groups. Even where economic growth has been robust and trade liberalisation has expanded commercial flows, there has been relatively little trickle-down effect. The reforms are also widely perceived to have been forced upon the region by Washington and by multilateral lenders such as the IMF and the World Bank, which has further fuelled popular resentment.
Left-leaning or populist leaders who are critical of such reforms—or who at least want to inject them with a good dose of social policy—rose to prominence in several countries in recent years. These include the president of Brazil, Luiz Inácio Lula da Silva, and those of Argentina, Néstor Kirchner, and of Uruguay, Tabaré Vázquez. Chile has had several consecutive governments led by left-of-centre politicians (Ricardo Lagos is completing his term as present). Today nearly 300m of South America’s 365m inhabitants live under leftist governments.
Many of these governments, such as those of Chile, Brazil and Uruguay, have strived to maintain good working relations with the US and with multilateral lenders. They have not eschewed market-oriented policies completely, but have tried to simultaneously address the problems of the rural and urban poor. They are also attempting to drive harder bargains in free-trade talks, such as those to create a Free-Trade Area of the Americas (FTAA, now stalled) and the Doha round of the World Trade Organisation (barely making progress), without rejecting trade liberalisation outright.
Morales's big jump
However, the election Evo Morales, a leader of the coca growers’ movement and of Movimiento al Socialismo, in Bolivia on December 18th has ushered in a much more radical government. He, together with Venezuela’s Hugo Chávez, constitutes a different breed of leftist in the region, with little interest in collaborating with Washington. Mr Morales, the first ethnically indigenous leader ever to have been elected in the region, favours much greater state control of natural resources, and some of his supporters are calling for nationalisation of private holdings in the hydrocarbons sector. He also wants to legalise the production of coca leaf, the raw material for cocaine, thereby breaking with years of co-operation with the US on a coca eradication programme. Mr Morales has even suggested that he would be a “nightmare” for the US.
His rise to prominence is not surprising. Bolivia is the poorest country in South America, and though it is the one that has pursued market-oriented policies for the longest time, it has little to show in benefits for its masses of poor, largely Indian citizens. The country’s 9m inhabitants generate a gross domestic product of US$2,600 per person, compared with US$10,200 in Argentina and US$7,600 in Brazil. But income distribution is so skewed that the income of most Bolivians is substantially lower. The country’s 5m or so Aymara and Quechua Indians, in particular, have so far been excluded from the benefits of development of Bolivia’s abundant natural resources.
Mr Morales’s close relationship with Mr Chávez is of particular concern to the US. Washington has hostile relations with Mr Chávez, and believes he will have much influence on Bolivia. Mr Chávez’s administration has been growing ever more radical. He now controls most political institutions in the country and has been increasingly threatening private property. He is poised to win re-election again in December 2006 elections.
Reason the panic?
Other left-leaning candidates are also in good position for elections next year. Andrés Manuel López Obrador has long been the frontrunner ahead of July 2006 elections in Mexico, although his prospects have dimmed recently and the election could be a tight one. Another populist, Ollanta Humala, is enjoying a sudden surge in support in Peru, which will hold general elections in April. Daniel Ortega, a former revolutionary president in Nicaragua, now stands a solid chance of winning that office again after several unsuccessful tries.
Only in Colombia is a conservative administration widely expected to prevail next year. The current president, Alvaro Uribe, who is also Washington’s closest ally in Latin America, is still extremely popular and should easily win a second term in May.
Many of the region’s traditional elites and business sectors—in addition to the Bush administration—are concerned about the drift away from orthodox policy. Yet the example of Mr da Silva in Brazil illustrates the moderating impact of actually holding office and having to deal with myriad economic and financial pressures. Mr da Silva has so far followed conservative monetary and fiscal policies that have stabilised the economy and earned him the respect of financial markets. Still, criticism of these policies—and approaching elections in October—may lead his government to hike spending early next year to court votes.
Chile’s Michelle Bachelet easily won the first round of elections on December 11th. She will face a tough battle on January 15th, when the right is expected to unite in the runoff to support conservative Sebastián Piñera. Even if Mr Bachelet wins, however, Chile’s conservative economic policy management is expected to continue. Social policy would be more important in a Bachelet administration, but this will not damage local or foreign investor confidence.
There is also a chance that Brazil’s President da Silva will have a moderating effect on Bolivia’s new head of state. Although Mr Morales will no doubt have friendly relations with Mr Chávez, Argentina and Brazil are his more natural allies. Bolivia’s trade links with those neighbouring countries are strong, and it is a supplier of energy to both through long-term supply agreements. Energy integration with Argentina and Brazil will become still more important if Mr Morales follows through with his pledge to put the sector under greater state control.
Constraints on governing
Moreover, as the case of Brazil illustrates, most leftist governments will have to govern under substantial constraints that prevent radical shifts in policy or complete abandonment of fiscal and monetary discipline. With few exceptions, most notably that of Venezuela, they will not have majority control of their legislatures, making passage of laws difficult without compromise, pact-making and a moderation of radical proposals. Many will also have to consider the potential reaction of international lenders and investors. Most Latin American countries continue to depend on foreign capital to fill their financing needs, and will risk losing access to this capital if their policies become irresponsible. Such moderating influences should help to contain to some extent the adoption of far-left or radical solutions to the region’s problems.
On the other hand, newly elected left-leaning governments will have substantially raised the expectations of their supporters, mostly the poor, and will have to work to deliver on their electoral promises. Failure to do so could trigger new rounds of social unrest in countries such as Bolivia and Peru. With two presidents having been ousted in Bolivia since 2003, the future stability of Mr Morales’s government, despite his strong mandate at the polls, is uncertain.
SOURCE: ViewsWire Latin America
Latin America’s political scene is moving decidedly leftwards, with a Socialist having won the first round of presidential elections in Chile on December 11th and a radical indigenous leader winning outright in Bolivia on December 18th. Several elections to be held in 2006 could consolidate this shift in regional politics. But the leaders in the region are not monolithic. They range from pragmatists more in the social-democratic mould, as in Chile, to populist firebrands in Bolivia and Venezuela. While they will share some policies and thinking, they will by no means all toe the same ideological line. Yet greater independence from the US, and from the economic policies it espouses, will no doubt be among the dominant traits of many Latin American governments in the next several years.
The region’s drift is largely the result of a rethinking, if not outright rejection, of the market-oriented economic policies that were embraced by most countries in the 1980s. Such policies, often referred to as the “neoliberal model” or the “Washington Consensus”, have lost credibility throughout Latin America. In many countries market reforms, including privatisation and a welcoming of foreign capital, have failed to improve the lot of the lowest income groups. Even where economic growth has been robust and trade liberalisation has expanded commercial flows, there has been relatively little trickle-down effect. The reforms are also widely perceived to have been forced upon the region by Washington and by multilateral lenders such as the IMF and the World Bank, which has further fuelled popular resentment.
Left-leaning or populist leaders who are critical of such reforms—or who at least want to inject them with a good dose of social policy—rose to prominence in several countries in recent years. These include the president of Brazil, Luiz Inácio Lula da Silva, and those of Argentina, Néstor Kirchner, and of Uruguay, Tabaré Vázquez. Chile has had several consecutive governments led by left-of-centre politicians (Ricardo Lagos is completing his term as present). Today nearly 300m of South America’s 365m inhabitants live under leftist governments.
Many of these governments, such as those of Chile, Brazil and Uruguay, have strived to maintain good working relations with the US and with multilateral lenders. They have not eschewed market-oriented policies completely, but have tried to simultaneously address the problems of the rural and urban poor. They are also attempting to drive harder bargains in free-trade talks, such as those to create a Free-Trade Area of the Americas (FTAA, now stalled) and the Doha round of the World Trade Organisation (barely making progress), without rejecting trade liberalisation outright.
Morales's big jump
However, the election Evo Morales, a leader of the coca growers’ movement and of Movimiento al Socialismo, in Bolivia on December 18th has ushered in a much more radical government. He, together with Venezuela’s Hugo Chávez, constitutes a different breed of leftist in the region, with little interest in collaborating with Washington. Mr Morales, the first ethnically indigenous leader ever to have been elected in the region, favours much greater state control of natural resources, and some of his supporters are calling for nationalisation of private holdings in the hydrocarbons sector. He also wants to legalise the production of coca leaf, the raw material for cocaine, thereby breaking with years of co-operation with the US on a coca eradication programme. Mr Morales has even suggested that he would be a “nightmare” for the US.
His rise to prominence is not surprising. Bolivia is the poorest country in South America, and though it is the one that has pursued market-oriented policies for the longest time, it has little to show in benefits for its masses of poor, largely Indian citizens. The country’s 9m inhabitants generate a gross domestic product of US$2,600 per person, compared with US$10,200 in Argentina and US$7,600 in Brazil. But income distribution is so skewed that the income of most Bolivians is substantially lower. The country’s 5m or so Aymara and Quechua Indians, in particular, have so far been excluded from the benefits of development of Bolivia’s abundant natural resources.
Mr Morales’s close relationship with Mr Chávez is of particular concern to the US. Washington has hostile relations with Mr Chávez, and believes he will have much influence on Bolivia. Mr Chávez’s administration has been growing ever more radical. He now controls most political institutions in the country and has been increasingly threatening private property. He is poised to win re-election again in December 2006 elections.
Reason the panic?
Other left-leaning candidates are also in good position for elections next year. Andrés Manuel López Obrador has long been the frontrunner ahead of July 2006 elections in Mexico, although his prospects have dimmed recently and the election could be a tight one. Another populist, Ollanta Humala, is enjoying a sudden surge in support in Peru, which will hold general elections in April. Daniel Ortega, a former revolutionary president in Nicaragua, now stands a solid chance of winning that office again after several unsuccessful tries.
Only in Colombia is a conservative administration widely expected to prevail next year. The current president, Alvaro Uribe, who is also Washington’s closest ally in Latin America, is still extremely popular and should easily win a second term in May.
Many of the region’s traditional elites and business sectors—in addition to the Bush administration—are concerned about the drift away from orthodox policy. Yet the example of Mr da Silva in Brazil illustrates the moderating impact of actually holding office and having to deal with myriad economic and financial pressures. Mr da Silva has so far followed conservative monetary and fiscal policies that have stabilised the economy and earned him the respect of financial markets. Still, criticism of these policies—and approaching elections in October—may lead his government to hike spending early next year to court votes.
Chile’s Michelle Bachelet easily won the first round of elections on December 11th. She will face a tough battle on January 15th, when the right is expected to unite in the runoff to support conservative Sebastián Piñera. Even if Mr Bachelet wins, however, Chile’s conservative economic policy management is expected to continue. Social policy would be more important in a Bachelet administration, but this will not damage local or foreign investor confidence.
There is also a chance that Brazil’s President da Silva will have a moderating effect on Bolivia’s new head of state. Although Mr Morales will no doubt have friendly relations with Mr Chávez, Argentina and Brazil are his more natural allies. Bolivia’s trade links with those neighbouring countries are strong, and it is a supplier of energy to both through long-term supply agreements. Energy integration with Argentina and Brazil will become still more important if Mr Morales follows through with his pledge to put the sector under greater state control.
Constraints on governing
Moreover, as the case of Brazil illustrates, most leftist governments will have to govern under substantial constraints that prevent radical shifts in policy or complete abandonment of fiscal and monetary discipline. With few exceptions, most notably that of Venezuela, they will not have majority control of their legislatures, making passage of laws difficult without compromise, pact-making and a moderation of radical proposals. Many will also have to consider the potential reaction of international lenders and investors. Most Latin American countries continue to depend on foreign capital to fill their financing needs, and will risk losing access to this capital if their policies become irresponsible. Such moderating influences should help to contain to some extent the adoption of far-left or radical solutions to the region’s problems.
On the other hand, newly elected left-leaning governments will have substantially raised the expectations of their supporters, mostly the poor, and will have to work to deliver on their electoral promises. Failure to do so could trigger new rounds of social unrest in countries such as Bolivia and Peru. With two presidents having been ousted in Bolivia since 2003, the future stability of Mr Morales’s government, despite his strong mandate at the polls, is uncertain.
SOURCE: ViewsWire Latin America
posted by Marko at 12/27/2005 09:10:00 AM
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