Latin America: in a hectic electoral year, political risk skyrockets

This year will be challenging for Latin America. A non-stop pandemic, mediocre growth, widespread social unrest, an electoral agenda marked by fragmentation and polarization, increased uncertainty and political risk, a growing democratic erosion together with governance under pressure anticipate the complex and challenging scenario, but also full of expectations and opportunities, which the region will face during the next twelve months. Recommendation: fasten your seat belt. We will cross an area of ​​strong turbulence.

The brutal impact of Covid in Latin America during 2020 and 2021 left a cursed legacy: a third of global deaths from the virus (more than 1.5 million), the worst contraction in regional GDP in the last century (6.8%, Cepal), the destruction of more than 25 million jobs, all aggravated by the increase in informality, inequality and poverty that today affects one in three Latin Americans.

The pandemic also served as an excuse for several presidents to illegally concentrate power through the abusive use of states of emergency, weakening the division of powers and the rule of law, and restricting human rights.

These days, the pandemic is entering its third year, powered by the omicron variant. Therefore, the ability to obtain vaccines and administer them to the largest possible number of people is critical to control the health crisis, reactivate the economy and create jobs.

In the economic field, the news is worrying. ECLAC projects a sharp slowdown in regional GDP, which would go from 6.2% in 2021 to a mediocre 2.1% in 2022, although with a lot of heterogeneity between regions (Caribbean 6.1%, Central America 4.5% and South America 1.4%) and among the countries in a range that goes from 0.5% in Brazil to 7.3% in Panama; Argentina, 2.2%. If these projections are confirmed, Latin America will be the region of the world with the lowest growth. Inflation is also expected to be higher and less transitory than expected, which will translate into higher interest rates, currency depreciations and possible deterioration in sovereign credit ratings.

The 2022 electoral calendar will be hectic and with a strong regional political impactl. It starts on February 6 with general elections in Costa Rica, continues in Colombia, which has legislative and primaries in March and presidential elections on May 29, and culminates in Brazil with the presidential elections on October 2. There will also be three referendums: in Uruguay (March), revocation of the mandate in Mexico (April), and a plebiscite to exit the new Constitution in Chile (second semester). The midterm elections in the United States (November) must also be included, the results of which, in addition to being crucial for the last two years of the Biden administration, will have regional repercussions.

In Costa Rica, of the 27 presidential candidates (unprecedented and absurd level of atomization) former president José María Figueres (National Liberation Party) and Lineth Saborío (Social Christian Unity Party) lead the polls. There will be a need to go to a second round and whoever becomes president will not have their own majority in a highly fragmented Legislative Assembly.

In Colombia, Gustavo Petro –former guerrilla and former mayor of Bogotá–, candidate of the left-wing coalition Historical Pact, although he leads all the polls, would not manage to win in the first round. Right-wing President Iván Duque is barred from re-election and his low popularity complicates candidates from his sector (Team for Colombia coalition). The most likely scenario is Petro competing in the second round (June 19), with the candidate chosen by the Centro Esperanza coalition between Sergio Fajardo, Juan Manuel Galán and Alejandro Gaviria.

Brazil instead anticipates a polarized election between former President Lula (PT, left) and President Jair Bolsonaro (extreme right). Nine months after the election on October 2, Lula leads the polls with a difference of between 20 and 30 points, but victory in the first round is not guaranteed. At the moment, none of the candidates who seek to compete from the center (Sergio Moro, João Doria) would go to the ballotage.

If the regional tendency to punish the ruling party is confirmed (since 2019, the ruling party has lost in 11 of the 12 presidential elections; the only exception was the Nicaraguan electoral farce), a victory for Petro and Lula would give a new impetus to the left Latin America and would produce a reconfiguration of the South American political map, a kind of new pink tide, but with important political differences between the radical and the moderate left, in less favorable economic conditions than in the previous period and, perhaps, with shorter political cycles.

The regional political scenario is projected to be volatile and polarized. Populism, anti-elite sentiment and xenophobic nativism are still present. We will have to be aware of the serious crisis in Haiti and the authoritarian drift of El Salvador; the democratic deterioration in Guatemala and the course of the new leftist government of Xiomara Castro in Honduras. We must focus on the evolution of the dictatorships of Nicaragua, Cuba and Venezuela without ruling out any surprises. In Nicaragua, Daniel Ortega has just started his fourth consecutive term without legitimacy, internationally isolated and with a country in crisis. In Venezuela, it will be necessary to see what impact the victory of the opposition will have, at the beginning of January, in the State of Barinas -the cradle of Chavismo- and if it will seek to launch the recall referendum and reactivate the dialogue with the ruling party in Mexico. . In Cuba, the main question is whether the protests that took the Díaz-Canel regime by surprise last year and were harshly repressed will return. In Ecuador, the government of Guillermo Lasso shows governability problems, while in Peru the presidency of Pedro Castillo loses support and faces the permanent threat of a vacancy motion. In Mexico, we must monitor the gradual process of democratic erosion that the country is experiencing; in Argentina put a magnifying glass on the negotiations with the IMF, while in Chile there is great expectation with the orientation that the new government of Gabriel Boric takes and the future of the constitutional process.

Our Index (Political Risk Latin America 2022, CEI-UC, Chile) warns about a sharp increase in political risk, uncertainty and volatility, and identifies the ten main risks in the following order of importance: 1) democratic erosion; 2) climate change and water scarcity; 3) social protests and violence; 4) the migration crisis; 5) illicit economies; 6) political polarization; 7) drop in foreign investment; 8) the growing regional irrelevance; 9) increase in cybercrime; and 10) the rise of China in the region.

The combination of these risks creates a triple challenge for Latin American governments. The first, governance. More than half of the countries show signs of democratic erosion, along with a greater tolerance for “undemocratic” governments while they solve problems (51%) and a growing indifference between authoritarian and democratic governments (27%), according to Latinobarómetro.

The second, of expectations. The frequent social protests (several of them violent), led mostly by young people, are related to the frustrated expectations of a citizenry that expects more from an economy, a development model and a State incapable of processing the profound social change of recent decades and Give answer. In this scenario, the risk of a new wave of social unrest increases.

The third, of certainty. The unknown about the impact of the new variants of the pandemic, the macroeconomic imbalances and the lower fiscal margin increase the levels of uncertainty and political risk.

In order to respond positively to this triple challenge, the presidents – most of them with low levels of popularity and a minority in Congress – will have to better listen to their citizens and regain trust, reduce uncertainty and political risk, make strategic alliances with the private sector and civil society, manage expectations, generate hope, strengthen governance and give concrete results to people’s real problems.

Zovatto is a senior researcher at the CEI-UC and editor of the Political Risk Report, (@zovatto55);

Sahd is director of the CEI-UC and editor of the Report

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