Latin America’s new leaders turn to old ideas
Statist and protectionist policies are being embraced by a new generation of leaders, writes Kimberly Breier, senior adviser at Covington & Burling.
On 7 August, Gustavo Petro received Colombia’s presidential sash from the daughter of Carlos Pizarro, a former guerrilla leader who was assassinated while running for president in 1990. It was a watershed moment for Colombia, a country that has long suffered from guerrilla warfare and terrorism. Petro, himself a former guerrilla, rode a wave of discontent that grew with the Covid-19 pandemic and had already carried anti-establishment candidates to the presidencies of Peru and Chile in 2021.
Like Pedro Castillo in Peru and Gabriel Boric in Chile, Petro has promised sweeping changes to his country’s economic model. While campaigning, he promised to raise tariffs to protect the country’s agricultural sector and renegotiate Colombia’s free trade agreement with the US. These recent elections have furthered the trend, seen as early as 2018 when Mexicans elected Andrés Manuel López Obrador, who ran promising a Mexican revival under nothing less than his ‘fourth transformation’.
The geopolitical situation, however, creates tough headwinds for these leaders. With the US economy in a technical recession, regional recovery from the pandemic slowing, the war in Ukraine spiking food and energy prices, rising inflation, fiscal constraints and increasingly unhappy voters, all these Latin American leaders face daunting challenges. At the same time, they all promise dramatic, not incremental change, in the form of a ‘new’ model. But can they pull it off and what do we know we so far about these new models that they pledge to implement?
‘If Chile was the cradle of neoliberalism, it will also be its grave,’ Gabriel Boric told a crowd after becoming the candidate of Chile’s leftist bloc last year. His words neatly sum up the mood of Latin America’s new leaders towards the ideas of previous generations. Early signs, however, are that the new model contemplated in several countries is not actually very new at all, but rather, in most cases, a return to statist and protectionist policies that have been tried in the past without success.
In Colombia, Petro has called for a ‘new’ industrial policy. However, it is a model that was widely used in the 1960s and 1970s in Latin America. Governments had a leading role in developing national industrial champions, often by protecting them from foreign competition and directing investment. In Mexico, López Obrador has made restoring Mexican energy sovereignty a cornerstone of his administration. In an effort to strengthen state-owned Petróleos Mexicanos (PEMEX) and the Comisión Federal de Electricidad, he has rolled back his predecessor’s reforms that had opened up Mexico’s energy sector to private investment and competition. López Obrador is also leading the charge on nationalising lithium. In August, he announced the creation of an entity that will control lithium exploration and production.
‘The region’s history is full of examples of how these models of state influence and control have failed to deliver results.’
Boric has also made the creation of a public-private lithium company a priority in Chile. He continues to pledge to rewrite the rules in the country and to freshly draft a new constitution, following the overwhelming rejection of a current draft by a referendum on 4 September. In Peru, Castillo made reforming the constitution central to his agenda, primarily to renegotiate constitutionally protected stability contracts for the mining industry.
The region’s history is full of examples of how these models of state influence and control have failed to deliver results, at least in part because the region has struggled to develop strong, competent, efficient and transparent government institutions. Giving more power and resources to governments that lack transparency and competence in the past has been a recipe for failure. It is difficult to see how this time will be different. If the previous economic model of globalisation – opening to foreign investment, privatisation and market-orientated policies – failed to address the chronic inequality and corruption in the region, it is far from clear that the current batch of policies will constitute an improvement.
The ability of Latin America’s new group of outsider leaders to find a recipe that delivers results for everyday citizens has never been so urgent. Successive government failures to deliver improvements in people’s lives have begun to erode trust in democracy itself across the region. Support for democracy as the best form of government in Latin America fell to 48% from 63% between 2010-18, according to Latinobarómetro, marking a double digit percentage point decline in one of the world’s most democratic regions. While the figures have levelled off since 2020, at around 49% in support, the idea that more than half of those polled across Latin America question whether democracy is the best form of government is ominous.
The drop in support for democracy across the region has also coincided with an actual erosion in democratic rule in the three outlier countries whose democracies have faltered: Venezuela, Nicaragua and Cuba. Daniel Ortega accelerated the dismantling of democratic institutions in Nicaragua, to the point where his government has shut down non-governmental organisations and arrested clergy. In 2019, Nicolás Maduro secured an additional term in office after a fraudulent election in 2018 that led to close to 60 nations refusing to recognise him as the legitimate president of Venezuela. In Cuba, the ‘transition’ after the death of Fidel Castro in 2016 led to a perpetuation of that country’s authoritarian one-party model. The Cuban government crackdown on protestors calling for liberty in 2021 was brutal even by its own standards.
Failure of new leaders in the region to improve people’s lives could fuel further discontent and open the door to greater erosion of democratic rule. Indeed, there is already talk in policy circles of another ‘lost decade’ of growth, alongside the risk of democratic backsliding. Recent events, however, may provide a harbinger of a different future. There has been discussion in recent years on how the ‘Chilean model’ had lost its prominence as the region’s much-heralded example. The September vote to resoundingly reject a radical new constitution, however, may suggest Chile is still one to watch.
While voters are clamoring for change all across Latin America, the decisive vote in Chile shows the change voters there are seeking is not the dramatic, ideologically-charged type some leaders promise. Voters seem less interested in upending existing models of governance than in measures that actually improve their conditions. Chilean voters just made a clear statement that not all change is for the better. Will the new group of leaders in Latin America heed the message?