Recent elections have led to a shift in power and ideology across Latin America. Newly elected leaders have brought a new outlook for their countries, the region, and global affairs. On November 14, the Stigler Center, home to ProMarket, hosted a panel to discuss these political developments.
The presidential election of Luiz Inácio Lula da Silva on October 30 has placed all of Latin America’s major economies – including Mexico, Colombia, Chile, and Argentina – in the hands of left-leaning governments. However, cautioned Daniel Matamala, a Chilean journalist with CHV Noticias, the current pink tide of leftist governments is neither as homogenous nor ideological as it may first seem.
Matamala was one of three Latin American journalists who participated in the Stigler Center’s November 14 panel, “Populism and Economics in Latin America.” Matamala was joined by Gabriel Baldocchi of Brazil’s Agencia Estado and Stephanie Tondo, a Brazilian freelance journalist. All three panelists are alumni of the Stigler Center Journalists in Residence Program. Hal Weitzman, a professor of behavioral science at the University of Chicago Booth School of Business, moderated the panel.
“What’s happened in most of the recent elections in Latin America is more a rejection of the incumbents [than] an ideological preference for the left,” continued Matamala. He provided Chile as an example, where the incumbent has lost each of the last four presidential elections, and Argentina, where former center-right President Mauricio Macri lost to the current president, Alberto Fernández of the leftist Justicialist Party, in 2019. Over the last decade, democratic governments have been unable to deliver public goods and satisfy the needs of citizens, regardless of ideology, Matamala said. Underdelivery has led to protests and riots and a rejection of incumbent governments often in favor of more radical leaders.
One such example is Brazil, said Tondo. The country shifted toward more radical politics after the 2013 protests over public transportation fare prices, government corruption, and police brutality. However, unlike other countries in Latin America, the left did not take up the radical mantle because they were already in power under former President Dilma Rousseff. Instead, the right, under current President Jair Bolsonaro, assumed the more populist position to win power in 2018. Bolsonaro’s position included promises of economic liberalization reminiscent of the policies Augusto Pinochet enacted in Chile following his coup in 1973. In the 2022 Brazilian election, both the left and right took populist stances.
The question now, said Baldocchi, is whether Lula will govern with the more centrist coalition with which he won the election or if he will be the same president he was during his first go as president from 2003-2011 and tack left. The tight election–in fact the closest presidential election in Brazil’s history–means that Brazil is a divided country and a centrist governance might help unify the populace. However, the fact is that “there is not much room for [Lula] to be that different to what he was in the past,” said Baldocchi. It will be very intriguing to see how Lula’s coalition-building plays out, Baldocchi continued.
Lula’s election also has implications for its foreign affairs, said Tondo. Lula is expected to be both a regional and global leader as head of Latin America’s largest population and economy. Both Russian President Vladimir Putin and Ukrainian President Volodymyr Zelenskyy congratulated Lula on his election, which could open up interesting diplomatic opportunities, continued Tondo. There is also a general feeling that the positive global reception to Lula’s election will return Brazil to the global stage after taking a step away under Bolsonaro. Foreign leaders and businesses are excited to engage with Brazil again, said Tondo.
However, many of the diplomatic points of contention between Brazil and the rest of the world that arose over the last few years during the Bolsonaro administration remain, including the protection of the Amazon rainforest. During his previous tenure as president, conservation of the Amazon was not an important issue for Lula. This time around, Lula has promised to make sustainability a fundamental tenet in his administration and policymaking, but any results, including reforestation and the reduction of carbon emissions, will take years to show. Sustainability will also require contributions from global stakeholders beyond Brazil, said Tondo. Furthermore, investment from global stakeholders and diplomatic pressure will not be the only factor in Brazil’s efforts to protect the Amazon, added Baldocchi. So will Brazil’s powerful agribusiness, which profits from converting the Amazon into farmland.
Another obstacle to Brazil’s sustainable development is the sizable role mining plays in the economy, said Tondo. Mining has contributed 2-4% of GDP to Brazil’s economy over the last decade, and high commodity prices helped Lula tackle poverty during his first stint as president, including funding his signature Bolsa Familia cash-transfer program. Brazil’s dependence on extractive industries poses one of the biggest obstacles to Brazil’s shift to sustainable growth, said Tondo.
Brazil is hardly the only Latin American country that depends on extractive industries. Chile’s dependence on copper exports has also not changed over the years, said Matamala. In many Latin American countries, Matamala continued, there have been talks about moving the economy towards research and development and the incubation of an autochthonous tech industry. These changes have not yet come to fruition.
There are reasons to hope that the region will participate in the green revolution, though. Latin America faces huge gains from the transition to clean energy, including the export of lithium for batteries and the generation of green hydrogen and solar energy, said Baldocchi. The OECD estimates that with a successful green transition, Latin America and the Caribbean could add 10.5% more new jobs by the end of the decade.
Diplomacy, not just from the Global North but also from other countries in the region, will be necessary for overcoming the reluctance and obstacles to developing sustainable economies in Latin America. However, despite shared language and political ideologies, Latin America has not achieved the same political and economic integration seen in the European Union, said Baldocchi. The political and economic vagaries of each country that Matamala referred to earlier have historically scuppered efforts at integration. “Talks were being blurred by the urgencies of each country’s own reality,” said Baldocchi. Instead, contemporary intra-regional diplomacy depends on the personal and ideological ties between the region’s leaders.
Such leadership is not always forthcoming. Under Bolsonaro, it receded. Mexico’s president,
Andrés Manuel López Obrador, has also shown little interest in Latin American integration or international leadership, said Matamala. Obrador’s authoritarian tendencies have also cast a shadow.
But another reason for optimism is that democracy appears to be on the rise again in the region. The return of Lula has seized democratic backsliding in Brazil for now. The same institutional constraints that prevented Bolsonaro from entrenching authoritarian rule will also likely prevent Lula’s own excesses, said Tondo. Matamala seconded Tondo’s sentiment, adding that the pall of authoritarianism that Brazil and Venezuela have cast over the region is receding.
Despite all that has happened, Matamala said, “democracy is fighting back.”