A Populist ‘Pink Tide’ Is Ebbing in South America, Argentine Vote SuggestsThe presidential victory of center-right politician Mauricio Macri marks potential change in fortunes of populist movements across the continent
By
DAVID LUHNOW in Mexico City and
JUAN FORERO in Buenos Aires
November 23, 2015
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The presidential victory of center-right politician Mauricio Macri in Argentina marks a potential turning of the so-called pink tide of populist political movements that swept South America sharply leftward over the past 17 years.
While some populists, such as Bolivia’s Evo Morales, remain popular and firmly entrenched in power, others are now fading thanks to the decline in commodity prices that fuels the region’s exports, a string of corruption scandals, economic mismanagement and voters’ desire for change.
Mr. Macri’s win in Buenos Aires on Sunday ends 12 years of “Kirchnerismo,” a populist brand of leftist politics embodied by President Cristina Kirchner and her late husband, Néstor. Together, the pair nationalized industries, stripped the central bank of independence, and ramped up spending and subsidies. Those policies lifted incomes temporarily but hurt investment and stoked inflation.
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In Brazil, leftist Dilma Rousseff, a former guerrilla who belongs to the Workers’ Party, is struggling with a 10% approval rating amid the country’s biggest economic slump in 25 years and a long-running corruption scandal involving state-oil giant Petrobras.
On Dec. 6, Venezuelans are expected to hand President Nicolás Maduro, the heir to the late leftist firebrand Hugo Chávez, a big loss in midterm elections there. Polls show the opposition winning by at least 20 percentage points, likely giving it control over congress and giving momentum to a possible recall vote on Mr. Maduro.
“What happened in Argentina yesterday was the first change in Latin America,” said Maílson da Nóbrega, former Brazilian finance minister and partner in the consultancy Tendências Consultoria in São Paulo. “It may be the start of a downfall in populist governments. I think the next one should be Venezuela…And I think Brazil will follow suit in 2018.”
‘When there’s no money, there’s no populism. ’
—Martha Lagos, head of the Chile-based polling firm Latinobarómetro
An economic downturn explains part of the desire for change by voters. Venezuela is undergoing its worst economic contraction since its independence from Spain two centuries ago. After shrinking by 4% last year, the economy is expected to contract by 10% this year and a further 6% next year, according to the International Monetary Fund.
The IMF forecasts a 3% contraction for Brazil this year, followed by another 1% decline next year. In Argentina, the economy grew just 0.5% last year, and is seen growing just 0.4% this year followed by a 0.7% recession next year.
“When there’s no money, there’s no populism,” said Martha Lagos, head of the Chile-based Latinobarómetro polling firm. Ms. Lagos said the end of the commodity boom will hurt all governments in South America, from left to right, but that the populist left will pay the highest price because they managed their economies the worst.
A shift to the center could have profound consequences for the region, opening the door to a more pragmatic brand of politics, but also raising risks of instability if the poor see no benefit. Countries struggling to pay their bills amid the commodity downturn may open up more to foreign investment and trade. Ties will likely improve with Washington.
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Mr. Macri has already signaled his intention to take a much harder line on Venezuela, the U.S.’s biggest opponent in the region. The government there has largely rolled back democratic freedoms in the past few years, stacking the courts and jailing opponents like Leopoldo López , the country’s most popular opposition leader.
Until now, Argentina has been Venezuela’s most influential unconditional ally in South America. But Mr. Macri said last week that as a member of Mercosur, the South American customs union, Argentina would ask for Venezuela to be suspended from the organization for violating the so-called democratic clause, citing “abuses in the persecution of opponents and freedom of speech.”
Mr. Lopez’s wife, Lilian Tintori, was with Mr. Macri and his team on Sunday night in Buenos Aires.
Pressed by China’s slowdown and the decline of commodity prices, some countries like Argentina could become more open to trade and foreign investment.
‘They spent like they were going to develop, without planning for a rainy day.’
—Eduardo Gamarra, professor of international relations at Florida International University
In recent weeks, the U.S. Chamber of Commerce organized its first formal visit to Argentina in at least a decade. Representatives from U.S. companies in sectors ranging from agriculture to banking met with Mr. Macri’s team to bring up issues like resolving the country’s dispute with creditors and ending capital controls.
“We were really pleased to receive their assurances they would be addressing all these points early in his term,” said Jodi Bond, vice president for the Americas at the chamber, who was on the trip.
At around the same time, Mr. Morales, the Bolivian president, went to New York trying to drum up investment in his country. Even Cuba, the hemisphere’s lone Communist regime, is opening up by restoring diplomatic relations with the U.S. and cautiously seeking foreign investment.
A shift in Argentina to greater trade and openness could prod Brazil, its biggest trade partner, to move faster to engage in trade agreements with the outside world, according to former Brazilian Finance Minister Rubens Ricupero.
“It means that Brazil will almost certainly have to take a different approach to trade negotiations,” he said.
The pink tide began in late 1998 with the election of Mr. Chávez, a former tank commander and failed coup leader. From then until 2008, seven more left-of-center leaders took office in South America, from giant Brazil and relatively affluent Argentina to poverty-stricken Bolivia. In all, nearly 300 million of South America’s 365 million people were living in countries governed by leftist leaders in the late 2000s.
In 2005, Argentina, Venezuela and Brazil teamed up to block President George W. Bush’s plans for a hemisphere-wide trade pact.
Not all the leftists were populists. Those in Chile and Uruguay, for instance, have pursued free-market policies while boosting social welfare programs.
Argentina and Venezuela, however, turned to nationalizing foreign companies and printing money to fund cash transfers to the poor, moves that stoked high inflation but ensured the loyalty of millions come election day.
The leaders of Venezuela, Ecuador and Bolivia also amended constitutions to lengthen their terms, while staking out positions that Washington considered hostile, such as forging ties to Iran.
The populists took power at the beginning of a decadelong commodity boom. Venezuela, with the world’s largest oil reserves, got hundreds of billions of dollars in outsize oil profits during the time of Mr. Chávez. Brazil became a world leader in products ranging from chickens and orange juice to iron ore. Cash transfer programs in countries like Brazil helped lift millions out of poverty.
But many governments didn’t save for a rainy day. Brazil built up reserves of some $371 billion, but Argentina has less than $30 billion and Venezuela less than $20 billion. And even Brazil failed to run a budget surplus during any of the boom years.
Today, all three countries are struggling with rising inflation and growing red ink. Now Brazil’s budget deficit, including interest payments on foreign debt, is 9.3% of annual economic output, according to government figures. The IMF estimates Argentina’s budget gap at 2.5% and Venezuela’s at 21.3%.
“They spent like they were going to develop, without planning for a rainy day,” said Eduardo Gamarra, a professor of international relations at Florida International University. “Blinded by commodities, they forgot about doing the kinds of things you have to do, like diversify exports and invest more in people than commodities.”
The difference in recent economic performance between countries governed by the populists and more moderate leaders in the region is stark. Economic output in South America’s Mercosur trade bloc, which consists of Venezuela, Argentina, Brazil, Uruguay, and Paraguay, declined 0.4% last year and is expected to fall a further 2.3% this year.
‘In the end, it’s all about the ability of governments to deliver....Ideology is just the gift-wrap. The content is what matters.’
—Thiago de Aragão, political analyst in Brasília
Those in the so-called Pacific Alliance, a bloc that is far more trade-oriented and made up of Mexico, Peru, Colombia and Chile, grew 2.6% last year and are expected to grow 2.3% this year, according to estimates by BBVA bank.
As the money flowed in during the commodity boom, corruption scandals spread. Brazil has been embroiled in a scandal involving kickbacks at state oil firm Petrobras that have implicated the ruling party. In Argentina, Mrs. Kirchner’s former vice president, Amado Boudou, has been indicted in two separate corruption cases. He denies any wrongdoing. And Mrs. Kirchner and her son are being investigated on money laundering accusations. They deny any wrongdoing and claim that courts are politically motivated.
Venezuela, meanwhile, is considered the most corrupt country in the Americas. Transparency International, the group that tracks citizen perceptions of corruption around the world, has Venezuela near the bottom of the 174 countries it cataloged for corruption in 2014. Venezuela is perceived as being more corrupt than Syria, Guinea-Bissau or Zimbabwe.
In the U.S., federal prosecutors are now investigating several officials in the upper echelon of the Venezuelan government for drug trafficking and the pilfering of billions of dollars from the state oil company, investigators and people close to the investigation have told The Wall Street Journal.
“These new leaders were icons of social movements. They were supposed to be different from the traditional politicians. But they demonstrated they behaved exactly like traditional politicians, if not worse,” said Ms. Lagos at Latinobarómetro.
The rising incomes of the poor in the region have made them more demanding of results from their politicians, and growing connectivity allows voters to compare themselves to other countries more easily, said Thiago de Aragão, a political analyst in Brasília.
“In the end, it’s all about the ability of governments to deliver,” he said. “I believe Hugo Chávez was the one most responsible to kill the logic of populism in Latin America. It became clear he was all speech and no deliverables.”
Increasingly, he said, Latin America is likely to finally leave behind the old ideological divides between left and right and focus on what works. “Ideology is just the gift-wrap. The content is what matters.”
Write to David Luhnow at david.luhnow@wsj.com and Juan Forero at Juan.Forero@wsj.com
Corrections & Amplifications: Nearly 300 million of South America’s 365 million people were living in countries governed by leftist leaders in the late 2000s. An earlier version of this article incorrectly stated that 300 of them were. (Nov. 24, 2015) |
