Image Source: https://edition.cnn.com/2019/12/03/americas/five-keys-latin-america-protests-romo-intl/index.html
By: Paula Arrus
DISCLAIMER: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of the KCL Latin American Society or El Cortao.
A trip down memory lane
Alfonso Quiroz in his book ‘Corrupt Circles’ examines the history of Peruvian corruption dating back to the arrival of the Conquistadors and the subsequent colonial period, creating a microcosm of the history of Latin America. As colonialists took over different territories and established their own conception of ‘states’, they also installed a mindset in the elites that politics was a zero-sum game that favoured the state over the population. Quiroz reveals that corruption has been inherent to Peru’s state institutions, transmitting a lack of public confidence and discontent on how democracy has been implemented. Even though Quiroz contends that corruption has been perpetrated by Peruvians and the international community’s inaction to confront it, recent protests in Latin America demonstrate that change will not be achieved without a fundamental overhaul of the region’s state institutions. Meanwhile, the latter will continue to be tainted by scandals and deceit: two features Latin Americans have become familiar with over time. Recent protests embody these ‘forgotten populations’ and have resulted in large sections of Latin Americans being continuously spurned by the same state institutions that dishonestly claim to represent them.
Latin America’s current political and economic environment has a taste of its first ‘lost decade’ in the 1980s Debt Crisis. With the rise of neoliberalism in the 1960s and 70s, various Latin American countries borrowed large amounts of money from international financial organisations such as the IMF and World Bank in order to industrialize. These loans were allowed due to rising commodity prices which induced economic growth and increased revenues for Latin American states. However, during the late 1970s and early 80s, the region’s debt to commercial banks soared and a vicious borrowing cycle materialized, with external debt reaching over 50% of the region’s total GDP in 1983 of $315bn, quadruple from the $75bn in 1975.
Latin America had embarked in an economic rollercoaster that started and ended with a vertical drop. Increased oil prices incited countries to borrow more money in order to cover rising costs. However, high interest rates in the US and Europe plus worsening exchange rates with the US dollar reduced Latin American states’ purchasing power: they began to owe more than what they initially borrowed. The numerous sovereign debt defaults that occurred in the following years resulted in the interventionist period by the IMF who created conditional loans to Latin American states in exchange for alterations in their domestic policies. A substantial change was a significant reduction in government spending despite unemployment and inflation rising to high levels, and real wages reducing dramatically. Consequently, the inequality gap extended as poverty increased and countries became more preoccupied with paying what they owed, making it difficult to save turbulent economies.
Latin America’s history for the second half of the 20th century built considerable social discontent that is resounding of the protests we see today. The IMF was increasingly seen as the neo-imperialist power acting on self-interest as their reforms produced large social costs and consolidated Latin America’s dependency on the developed states. In 2014, commodity prices dropped again and Latin America’s economic activity declined. The middle class stopped receiving new members and decreasing social upgrading reduced overall confidence in the economies, driving away investments and growth.
Latin Americans have had enough
2019 has not been the year for Latin American countries. The progressive awareness that Latin America’s failed institutions were not delivering the Western promise of democracy and increased socioeconomic opportunities has afflicted the region with nation-wide social protests. Argentina is back with a Peronist-Kirschner government while Mexico continues to suffer from drug cartel violence and populism. Ecuador has reacted strongly against pro-IMF policies adopted by President Lenin Moreno that effectively got rid of an oil subsidy to receive a loan. Six month-long protests in Haiti erupted from high inflation and general discontent over redundant government corruption. With protests diffusing into Colombia in late November, it is clear to say that populations in Latin America have been emboldened by their neighbouring counterparts, forming their very own domino effect permeated with anger and intolerance against failing governments.
Left and right protests have smeared the region in response to weak economic growths, rising inequalities and overall discontent with states’ ‘democratic’ institutions. GDP per capital and living standards have declined substantially as real GDP growth has been a mere 0.8% over the last 6 years. Latin America remains the most unequal region in the world as their legacy of colonialism built enduring political and economic structures designed to benefit only a few. Monica de Bolle, a senior fellow at the Peterson Institute for International Economics, conceptualised social protests in the region as clear reactions to changing tolerances for socioeconomic inequalities. While many Latin Americans see their elite counterparts get richer, they also expect an improvement in their living standards. It is this unfulfilled prospect that has driven them to the streets.
Violent protests, particularly in Chile, are reminiscent of failed promises by governments to enlarge social spending, reinstate public confidence and increase political transparency. Rising inequalities and unsuccessful economic policies enticed Chileans to protest against President Sebastián Piñera’s right-wing government. Moreover, Bolivia’s nation-wide uprising protesting the fraudulent presidential election forced Evo Morales to renounce the presidency after 14 years in power. Despite the contrasting differences in both countries’ economies and political systems, these protests can be traced back to broader discontents that have swamped Latin American populations.
After the end of the commodities’ boom in 2014, Latin American governments could not keep spending on welfare systems, programs to reduce poverty and on redistributing incomes. Rather, all the issues they failed to tackle during their prosperous incumbencies are now the factors that are hampering Latin American development, such as the lack of investment on education and infrastructure to improve long-term economic competitiveness. These protests embody Latin Americans’ dissatisfaction with the social contracts they reluctantly live in. While protests may have emerged by triggering causes such as raising metro fares in Chile, these movements encapsulate everything that is wrong with their societies and political systems.
What’s next?
Peru, Colombia, Bolivia and Chile are still on path to achieve growth rates between 2-3%, while Bolsonaro’s economic reform in Brazil gives hope to the country. Nevertheless, Michael Stott from the Financial Times argued that Latin America will face stronger challenges in the nearby future as IMF world economic forecasts showed that the region will only grow 0.2% in the following year. Similarly, James Bosworth, founder of political-risk consultancy Hxagon, claims that ‘governments are trapped and there will be more violent protests in 2020’ (Bosworth, 2019) as new administrations gaining power will face increased pressured to achieve quick positive change while being constrained by a lack of resources.
The near term future looks grim mainly because Latin American countries in the past were able to discourage protests by maintaining stable economic performances thanks to a strong global economy which is not the case anymore. Alberto Ramos, head of Latin American economics at Goldman Sachs, stated that Latin America is nearly missing everything a region would need to prosper in the nearby future: ‘it doesn’t invest enough, save enough nor educate well enough’ (Stott, 2019). The discontent and blatant anger will prevail until change is enacted. The future will likely bring new elections for many countries, yet it can be expected most populations will vote for the party who promises to do exactly the opposite of what current governments are providing. And this is far from reassuring.
However, due to the social unrest and the extraordinary formation of a middle class, there is a strong need for institutional reform and better public infrastructure in terms of transportation, education and basic health services, or the region will face more and more unrest. There is a very good opportunity for a new generation of politicians to take control and restore public confidence by overhauling the existing political structures. Peru will be the first in line with congressional elections in January 2020.
It looks like Latin America won’t be the ‘forgotten continent’ after all and let’s hope that the region can be restored in the years to come.
Paula is a second year IR student from Peru with a strong interest in Latin American politics and economics. She enjoys writing thought-provoking pieces about current affairs and the future of our world.
