The “Political Risk Latin America 2022” index of the UC Center for International Studies (CEIUC) this week yielded a clear conclusion: political risk will increase in the region. We must prepare for another year of cloudy times, characterized by high levels of uncertainty, volatility, polarization and, indeed, political risk.
The index identified ten risks in this order of importance: 1) erosion of the quality of democracy; 2) climate change and water scarcity; 3) resurgence of social protests and violence; 4) worsening of the migratory crisis, which rises two places from last year; 5) increase in illicit economies; 6) political polarization and fake news; 7) drop in foreign investment; 8) growing regional irrelevance; 9) increase in cybercrime; and 10) greater presence of China in the region.
Although the region is closing a year on 6% GDP growth, after the brutal collapse of the previous year (6.8%, World Bank), the rebound appears to be insufficient and unsustainable. The projections for this year are timid and heterogeneous among countries, with growth of around 3% (ECLAC). Thus, Latin America would become the region with the lowest growth in the world and, if the estimates are maintained by 2023, it is heading towards a new lost decade as it was in the 1980s. Added to this is the growing political risk, which not only It meant in 2021 a decrease in the arrival of foreign investment, but also a massive capital outflow: 128 billion dollars (Institute of International Finance).
With the triumph of Gabriel Boric in Chile, the question is how the political map will be reconfigured after the elections in Colombia and Brazil, where the candidates leading the polls today are both from the left (Gustavo Petro and Lula). If the regional tendency to vote to punish the officialdom on duty is confirmed (12 of 13 elections have changed their political sign since 2019), the right would see its presence reduced to three countries: Uruguay, Ecuador and Paraguay.
Thus, this 2022 will be marked by high levels of uncertainty and political risk, with increasing citizen demands and expectations, after the profound impact of the pandemic. This constitutes a triple challenge for Latin American governments.
The first, of governance. The index warns of an erosion of the quality of democracy and a greater tolerance for “undemocratic” governments, as long as they solve problems (51% according to Latinobarómetro). The second, of expectations. Frequent social protests, many of them violent and led by young people, are related to the frustrated expectations of a generation that waits longer, but with a stagnant economy and governments unable to process the profound social change of the last two decades. And finally, a challenge of certainties. The unknown about the impact of the new variants of the pandemic, the macroeconomic imbalances led by inflation and the lower fiscal margin raise the levels of uncertainty.
Responding positively to these ‘tough times’ will not be an easy task. The leaders – mostly with low levels of popularity and in a minority in Congresses – will have to govern in times of high complexity, volatility and political risk. Something that applies to the Chilean case, which will be marked by the orientation taken by its new government and by the fate of the constitutional process.
Fuente: Newswep