Chile: Between Stability and Uncertainty

By Eduardo Silva and Kenneth Roberts*

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Students protest in Santiago, May 2016. A highly-mobilized Chilean civil society has beset Michelle Bachelet’s second term as president. / Francisco Osorio / Flickr / Creative Commons

With national elections looming at the end of 2017, President Michelle Bachelet’s startling reversal of fortune raises the question of whether the traditional parties’ failure to win broad popular support could give rise to an anti-establishment populist leader.  At the end of her first government in 2010, Bachelet was the most popular president in post-democratic transition Chile.  This go-around, high-profile corruption scandals involving party financing and real estate deals implicating her family (along with both governing and opposition parties) have cut into her support.  Irregularities in the electoral registry before the 2016 municipal elections, an ineffective response to devastating forest fires, concessions over major reforms, and a slowing economy have also hurt her approval ratings, which are hovering near 20 percent, the lowest of any president since 1990.  Her administration has been beset by protests over education reform, labor relations reform, and the private pension system that the military government established in the 1980s.  Tensions and violence flare up continuously over land rights in the south between Mapuche communities and extractive industries.  All of this is occurring in a context of marked secular decline in voter participation and political party identification.

The trend of volatile approval ratings and a mobilized civil society now spans three administrations – Bachelet, Sebastián Piñera (2010-2014), and Bachelet again – from 2006 to 2017.  Unlike in Brazil and Argentina, where “middle class” revolts demanding clean, efficient government and economic growth signified a rightward turn after prolonged center-left rule, most of the protests in Chile come from the left flank, rather than the right.  Moreover, the mainstream parties appear seriously detached from the most active groups in civil society and, as seen in declining levels of party identification, from the citizenry at large.  This raises questions about the future of Chile’s party system, whether its center-left and center-right coalitions can hold together, and the chances for outsider populists.

All things considered, Chile has been a case of exceptional partisan and electoral stability in Latin America since 1990.  The dominant parties and coalitions have won all the elections, without the rise of a major “outsider” populist or a major new “movement party.”  But the next elections may provide a sort of “in between” outcome.  Ex-President Piñera, who has independent tendencies on the right, and a center-left alternative, Alejandro Guillier, are the current frontrunners in presidential primaries scheduled for July.  Guillier is a type of insider, nominated by a small party in a large coalition, with outsider credentials who does not really belong to Chile’s traditional casta política.  At this early point, if Piñera and Guillier win their respective primaries, both would appear to have a shot at winning in November or in December’s runoff – with neither outcome representing a breakdown of the system, nor a widespread electoral protest against mainstream parties.  This suggests, for now, the continuation of a system that is on the surface highly stable in institutional terms, but in reality highly detached from society at large and in particular from youth and the more active, mobilized sectors of civil society.  Neither political coalition shows many signs of significant internal renovation, although Guillier represents at least some change in leadership of the Nueva Mayoría.  However, political systems have been known to limp along under these conditions in the absence of major economic meltdowns, and that may be the most likely outcome of the next electoral cycle in Chile.

February 13, 2017

*Eduardo Silva is Professor of Political Science at Tulane University, and Kenneth Roberts is Professor of Government at Cornell University.

Intense Electoral Year in Latin America

By Carlos Malamud*

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Chilean President Michelle Bachelet with the leaders of her coalition, Nueva Mayoría. The Chilean presidential election of 2017 will determine the legacy of the Nueva Mayoría. / Gobierno de Chile / Flickr / Creative Commons

The new year will be an intense one for Latin American elections.  Although perhaps not as important as those taking place in 2018, this year’s elections will have a significant impact on the countries holding them and, in some cases, the region as a whole.

  • In Ecuador’s presidential and legislative elections on February 19, the PAIS Alliance will run a slate of nominees for the first time without Rafael Correa heading its slate. The President said he’s stepping down for family reasons, but Ecuador’s economic problems, aggravated by the decline in oil prices, apparently convinced him to seal his legacy on a high note now rather than end his time in office in defeat.  The party’s presidential candidate, former Vice President Lenin Moreno, has a 10-point lead in polls over his closest competitor and has the advantage of facing an opposition divided among seven candidates, but his leadership remains uncertain.
  • In Mexico, the state governors of México, Nayarit, and Coahuila and mayor of Veracruz are up for election on June 4. The race in México state will measure the popular backing of the four parties in contention – PRI, PAN, PRD, and López Obrador’s new Movimiento Regeneración Nacional (Morena) – in the 2018 presidential election.  The older parties will begin to weed out the weaker pre-candidates.
  • Elections for half of the Argentine Congress and a third of its Senate in October will define the second half of President Mauricio Macri’s presidency. The government is confident that economic recovery will strengthen its election prospects.  A weak showing will strengthen the Peronista opposition and complicate Macri’s agenda.  The Peronistas are currently divided into three big factions – that of Sergio Massa; the “orthodox” wing headed by some provincial governors, and corruption-plagued Kircherismo grouping headed by former President Cristina Fernández.  Open, simultaneous, and obligatory primaries (known by the Spanish acronym PASO) in August will be an important test for all.
  • Chile will elect a successor to President Michelle Bachelet on November 19. Primaries in July will reveal whether the country’s two big coalitions – the center-left (including the President’s Nueva Mayoría) and the center-right – are holding, as well as the presidential candidates’ identity.  The names of former Presidents Sebastián Piñera and Ricardo Lagos are in the air, but it’s too early to know how things will play out in the environment of growing popular disaffection with politics and politicians.
  • Honduras will hold elections on November 26. Due to a Supreme Court decision permitting reelection, incumbent President Juan Orlando Hernández could face a challenge from ex-President Manuel “Mel” Zelaya, who was removed from office by the Army in June 2009, running as head of the Libertad y Refundación (Libre) Party.
  • Also in November, Bolivia will elect members of various high courts, including the Constitutional, Supreme, and Agro-Environmental Tribunals and the Magistracy Council. These elections will reveal the support President Evo Morales will have as he tries to reform the Constitution to allow himself to run for yet another term in office.

These elections in 2017 have a heavy national component but will shed light on the region’s future direction.  The success or failure of the populist projects in Ecuador and Honduras, or of President Bachelet’s Nueva Mayoría in Chile, will tell us where we are and, above all, help us discern where we’re headed.

January 17, 2017

*Carlos Malamud is Senior Analyst for Latin America at the Elcano Royal Institute, and Professor of Latin American History at the Universidad Nacional de Educación a Distancia (UNED), Madrid.  This article was originally published in Infolatam.

Latin America: Wait-and-See Reaction to Trump – For Now

By Catie Prechtel and Carlos Díaz Barriga*

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An effigy of Donald Trump in Mexico City. / Sequence News Media / Daniel Becerril / Wikimedia / Creative Commons

Most Latin American leaders publicly reacted with caution to Republican presidential candidate Donald Trump’s victory in last week’s U.S. elections, but reactions will sharpen quickly if Trump tries to make his campaign rhetoric about the region and Latino immigrants into policy.  Mexico and Central America showed clear anxiety over the implications for their economies and regional migration pressures.  Some South American presidents expressed mild enthusiasm and voiced hope for a positive relationship with the new administration, although Trump’s avowed opposition to the Trans-Pacific Partnership trade accord – under discussion at the APEC summit in Lima this week – has fueled concerns about the future of free trade.  Fear that the new U.S. President, who takes office on January 20, will deport millions of undocumented migrants from Mexico and Central America and force U.S. firms to shut factories in those countries has seized the media there.

  • Mexican newspapers headlines screamed “Be afraid!” and warned of a “Global shakedown.” Reports recited the many promises Trump had made against Mexico, including his proposal to build a border wall (and make Mexico pay for it); revising NAFTA and raising taxes on Mexican imports, putting conditions on remittances, and charging more for visas. The peso suffered three consecutive days of losses before recovering slightly following interviews by Trump and his team suggesting a softer stand on the wall and free trade.  President Peña Nieto phoned Trump with congratulations and agreed to meet soon to discuss bilateral issues, including presumably the wall.
  • Guatemala’s Prensa Libre reported businessmen are worried Trump’s rejection of free trade could have a direct impact on the economy and described the possible mass deportations as a “social bomb” for the country. In Nicaragua, newspapers speculated that Trump’s victory will give a boost to U.S. legislation, the Nicaragua Investment Conditionality Act (NICA), which calls for economic sanctions if President Daniel Ortega doesn’t take “effective steps” to hold free and fair elections.  In El Salvador, the main concern is the deep economic stresses of mass deportations of Salvadorans in the United States.  Honduras shares those concerns but apparently was more wrapped up in President Juan Orlando Hernández’s announcement confirming his intention to make a controversial bid for reelection.
  • Venezuelan President Nicolas Maduro, often given to bombastic rhetoric, has focused on working with Washington in the closing months of the Obama Administration. In a phone conversation with Secretary of State John Kerry, he stressed the need to establish an agenda with the next administration that favors bilateral relationships, but he specifically called on Obama to “leave office with a message of peace for Venezuela” and rescind a determination that Venezuela is a “threat to the United States.” Obama himself last April said the designation was exaggerated.
  • Media in Colombia speculated that Trump will be less committed to aid and support for finalizing and implementing a peace accord with the FARC. Argentina, Brazil, and Chile offered calm reactions to the news.  For Buenos Aires and Santiago, the biggest concern was potentially strained commercial relationships and free trade agreements with the United States, according to press reports.  Brazil offered little reaction to the news, but Trump’s win brought four consecutive days of losses for the real – weakening 7.6 percent since the election.

The political leaders’ cautious reactions conceal a broad and deep rejection for President-elect Trump’s values and intentions as he stated them during the campaign.  Former Mexican President Vicente Fox once again tweeted his disapproval for Trump, while José Mujica, former President of Uruguay, expressed dismay on Twitter, summing up the situation in one word: “Help!”  Press reports and anecdotal information indicate, moreover, that large segments of Latin American society have shown a widespread distaste for Trump’s win.  Their general wait-and-see attitude will end when and if Trump proves himself the unpredictable and reactionary he seemed on the campaign trail.  Latin American leaders have a lot of work ahead as they navigate a new relationship with the United States.

November 15, 2016

* Catie Prechtel and Carlos Díaz Barriga are CLALS Graduate Assistants.

NiUnaMenos Gains Momentum

By Brenda Werth* and Fulton Armstrong

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Protesters gather in Buenos Aires, Argentina as part of the NiUnaMenos movement, which has sparked mobilizations across the country and in many other Latin American cities. / Wikimedia / Creative Commons

Protesters have taken to the streets in Argentina and elsewhere in Latin America to raise awareness about violence against women and girls, pushing for an end to machista culture.  News media estimate that a demonstration under the banner of NiUnaMenos – “not one less woman” due to femicide – in Buenos Aires last Wednesday drew tens of thousands of supporters dressed in black, despite freezing rain.  Other banners declared “We want to live” and demanded “No more machista violence.”  The immediate issue driving the protest was the brutal attack earlier this month on a schoolgirl in Mar del Plata – 16-year-old Lucía Pérez – who was drugged, raped, and tortured to the point of suffering cardiac arrest and died from internal injuries.

  • Argentina passed laws between 2008 and 2012 protecting a range of rights relating to human trafficking, violence against women, marriage equality, and gender and sexual identity, creating new space for discussion of the issue. But the Casa del Encuentro, an NGO that helps victims of gender violence, says that data through 2015 indicate that somewhere in Argentina a woman is killed every 30 hours.  The government’s Secretariat of Human Rights says that 19 women and girls were murdered in the first 18 days of October.  Argentine President Macri, challenged since early days of his administration to address the problem, has reiterated pledges to push legislation that would establish a hotline for reporting abuse and create more shelters for abused women as well as better ways of monitoring abusers.

Similar protests were held in Peru, Mexico, Bolivia, Chile, Paraguay, Uruguay, and El Salvador – with thousands of protesters in capital cities demanding an end to the systematic violation of women’s rights.  Chilean President Michelle Bachelet announced last week that she was joining the NiUnaMenos movement.  She condemned the murder of a 10-year-old girl asphyxiated, burned, and buried by her step-father.  Movement organizers cite research showing that violence against women is a serious problem in much of Latin America.  The Mapa da Violencia published by FLACSO Brazil last year shows that seven of the 10 countries with the highest female murder rate are in this region – with El Salvador (8.9 homicides per 100,000 women), Colombia (6.3), Guatemala (6.2), and Brazil (4.8) near the top of the list.

The demonstrations reflect growing global awareness of gender violence as a violation of human rights and that legislation, while helpful, is not enough.  NiUnaMenos and other groups are also rewriting the traditional definition of violence against women as attacks perpetrated by strangers rather than boyfriends, husbands, or family members – just as coverage of femicide in Mexico in the 1990s raised public awareness of gender violence as systematic and deeply structural as opposed to “every-day,” “familial,” and “private.”  NiUnaMenos is challenging “the culture of violence against women” in machista societies and condemning “the men who think that a woman is their property and they have rights over her and can do whatever they want.”  In Argentina, the mainstream media have stimulated much of the backlash, with reporting that exploits private details of victims’ lives and portrays victims in a manner that suggests responsibility for the crimes committed against them.  This recycling of the “algo habrá hecho” logic that circulated freely during the dictatorship coincides with a renewed focus in Argentine society on cases of torture during those years, treating them specifically as acts of sexual violence.  A week or two of protests obviously will not change ingrained culture, but the burgeoning movement highlighted by NiUnaMenos offers hope of continued progress in protecting the fundamental rights of women throughout the hemisphere.

October 24, 2016

* Brenda Werth is Associate Professor of World Languages and Cultures at American University.

What does “Canada is back” mean in the Americas?

By Stephen Baranyi*

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Mexican President Enrique Peña Nieto and Canadian Prime Minister Justin Trudeau during the “Tres Amigos Summit” in Ottawa, June 2016. / Presidencia de la República Mexicana / Flickr / Creative Commons

Canadian Prime Minster Justin Trudeau and his cabinet ministers’ statements following their election in October 2015 that “Canada is back” reflect a global strategy that is likely to give a boost to Canada-Latin America relations.  Canada never “left” the Americas during the decade of Conservative governments led by Prime Minister Harper, but the new administration is patching up its predecessors’ mixed record.  Building on the Americas Strategy launched in 2007, Ottawa signed new bilateral free trade agreements with Colombia, Peru and others; broadened its engagement in regional security affairs; and greatly increased its whole-of-government engagement in Haiti.  Canada played a major role at the Summit of the Americas in Panama (April 2015) and hosted the Pan American Games (July 2015).  Yet the revelation of Canada’s espionage in Brazil, visa restrictions on Mexicans, the poor reputation of some Canadian mining firms in the region, and its inability to reach a trade agreement with the Caribbean Community fed a growing desencanto in Canada’s relations with the region.

Through mandate letters issued to ministers in late 2015, the Trudeau government made clear that the Americas would remain an important priority, despite renewed emphasis on Asia and Africa, and that inclusive growth, the responsible governance of Canadian extractive activities abroad, and women’s and indigenous peoples’ rights would get emphasis in the region.  In June, Canada hosted the “Tres Amigos Summit” with NAFTA partners United States and Mexico.  Ottawa also announced that by December, Mexican citizens would no longer need visas to enter Canada, removing a big irritant in Canada-Mexico relations.  The government reaffirmed its partnership with Colombia by indicating its desire to make bilateral free trade more inclusive and announcing projects to support the implementation of peace accords.

  • Ottawa has opportunities for deeper involvement in these countries. In Mexico, Canadian interests will be served through a better balance between pursuing economic opportunities in sectors like petroleum and supporting Mexicans struggling to strengthen rule of law in a system compromised by corruption.  Colombia also requires a sophisticated whole-of-Canada engagement strategy, particularly since the failure of its referendum on the peace accords on Sunday.  Ottawa has signaled interest in continuing to support the rule of law and broader development in Haiti, but Trudeau’s ability to justify large expenditures there will depend on the completion of legitimate elections by February 2017.

Ottawa’s appointment of a new Ambassador to the Organization of American States (OAS) and commitment to revitalizing it as “the premier multilateral organization of the Americas” points to broader engagement on a regional level.  The Trudeau administration could join the Latin American and Caribbean trend on drug policy by decriminalizing the sale of marijuana at home and supporting reforms to OAS and UN counterdrug programs.  Assisting the implementation of the UN Small Arms Treaty, which Ottawa is poised to ratify, could also contribute to rule of law and security in the Americas.  Canada will also find many partners (from Chile to Costa Rica) to promote gender equality.  With regard to First Nations, Ottawa may be tempted to focus on funding new aid projects; yet Canada’s credibility will remain suspect until it ratifies the American Convention on Human Rights and ensures that all Canadian mining firms respect the rights of indigenous communities to free and prior informed consent in large-scale extractive activities.  The Trudeau government will probably monitor the multi-dimensional crisis in Venezuela, the situation in Brazil, and other challenges in the region – over which it probably lacks the leverage to make a significant difference but can lend moral authority to solutions.  Given its clear commitment to a global, rather than regional, strategy, the current administration is wise to carefully select entry points on which its thematic priorities align with opportunities in particular countries.

October 5, 2016

* Stephen Baranyi is an Associate Professor at the University of Ottawa’s School of International Development and Global Studies.  He also chairs the Latin America and Caribbean Group (LACG) of the Canadian International Council.  The author acknowledges his LACG colleagues’ input into this blog, while taking responsibility for its limitations.

Can Latin America Escape the Middle-Income Trap?

By Rick Doner and Ben Ross Schneider*

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Photo Credit: Inter-American Development Bank / CLALS / Edited 

Most literature on the “middle-income trap,” widely understood as a core obstacle to sustained development in Latin America, focuses solely on economic dynamics and understates the importance and challenges of political coalition-building.  That literature, largely generated by economists in academe and international financial institutions, argues convincingly that in Latin America, as well as Southeast Asia, once countries achieve some degree of success in economic development, they get stuck.  They are unable to compete with low-cost producers in traditional sectors – initial development success brings higher wages and other costs – while they also have failed to gain the capacity to compete with developed economies in frontier industries, where technological capabilities and productivity levels are far higher.  These analysts stress that Argentina, Brazil, Chile and Mexico – or for that matter Indonesia, Malaysia and Thailand – need to build on their achievements over the past half century in order to make the leap into the ranks of the world’s most prosperous nations.  They highlight the trap’s proximate origins in productivity slowdowns and recommend policy solutions that focus on improving human capital through investment in education and vocational training.  But identifying problems and potential solutions does not explain why leaders fail to adopt the solutions.  In other words, it’s not clear from existing writings why the trap is actually a trap.

The literature does not acknowledge that fundamental political obstacles, especially lack of effective demand and pressure for these solutions, are at the heart of the problem.  As is evident from the history of failed programs to improve education and R&D, political will to invest in such public goods is in short supply.  Politicians are rarely willing to forgo the short-term political benefits of satisfying entrenched interest groups for the long-term developmental benefits of creating institutions capable of helping the broader citizenry to upgrade its capacity for technology absorption.  A core reason for this lack of political will is the weakness of the societal constituencies that might demand the necessary policies and effective institutions.  Our research indicates that relations among key societal actors in middle-income countries are less amenable to building the consensus that economists advocate. In a recent article, we argue that the same conditions that facilitated or accompanied movement to middle-income status – such as foreign investment, low-skilled and low-paid work, inequality, and informality – have generated political cleavages that impede upgrading policies and the construction of institutions necessary to implement them.  This fragmentation is why the trap is a trap. Three lines of fragmentation are key:

  • Big business is divided between foreign and domestic firms. The former can undertake productivity-improving measures in-house and/or at their home headquarters, whereas local firms tend to focus in non-tradeable services and commodities whose demand for better training and R&D is lower than in manufacturing.
  • Labor is fractured between formal and large, growing informal sectors. Enjoying longer job tenure and on-the-job training for specific skills, formal workers have little interest in broader skills development.  Informal workers, on the other hand, constantly shift jobs and would prefer investments in vocational institutions offering general training.
  • These societies remain overall less equal and, as is now well known, inequality undermines the will and capacity to provide broad public goods such as quality universal education and support for technology development.

 Pro-growth coalitions of various types have been key to productivity improvements in now-high income East Asian countries, such as Korea and Taiwan.  The fact that these countries had stronger (and more autocratic) governments does not preclude developing or building on such coalitions in countries with messier political systems and weaker bureaucracies.  First, leaders can build on sectoral pockets of high productivity, such as aquaculture in Chile, wine in Argentina (and rubber in Malaysia).  Second, international and regional institutions can help supplement demands for skills by supporting programs that focus on technical and vocational institutions that actually meet and are linked to employers’ needs.  Third, organizations such as the ILO can promote business associations that represent the local firms for whom collective technical training and R&D are especially important.

August 22, 2016

* Rick Doner and Ben Ross Schneider teach political science at Emory University and MIT, respectively.

Political Upheaval in South America

By Eric Hershberg

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Thousands of protesters in Maracaibo, Venezuela. Photo Credit: Google Images / Creative Commons

2016 is proving to be this century’s most complicated year to date for South American political systems, and the coming months will be critical to assessing how well the region’s democracies can govern amid declining economic conditions and spiraling corruption scandals.  Brazil and Venezuela – two very different systems with very different problems – are suffering the most visible crises.

  • In Venezuela, where the Bolivarian project has descended into an incompetent Putinism in the tropics, is collapsing under the weight of monumental mismanagement of the economy. Many of the ills of the Venezuelan petrostate predate Chavismo, but during a collapse in oil prices President Maduro has doubled-down on profligate economic policies introduced by Hugo Chávez, bringing the country to catastrophe made worse by increasingly draconian repression of loyal and disloyal opposition alike.
  • President Dilma Rousseff’s mismanagement of coalitions in a presidential system predicated on coalition-building has opened the way to political and economic implosion in Brazil.  Contrary to the fervent assertions of important segments of the Workers Party (PT), her impeachment does not precisely constitute a coup, but it may indeed amount to an ill-advised bending of institutional mechanisms by cynical legislators and aggressive judges, egged on by rightist sectors whose commitment to democracy is in fact dubious.  Dilma didn’t invent the corruption and footloose budgetary practices that have been her undoing, but her fall does respond to overwhelming popular rejection of her performance.  Interim President Temer’s appointment of an entirely white male cabinet that includes representatives of some of the country’s most retrograde interests suggests abandonment of many of the most laudable achievements of more than a decade under PT rule – and more backlash as well.

Other institutional crises may be on the horizon.  Ecuadoran President Rafael Correa pursued a high-risk strategy of debt-driven expansion of the state, which is not sustainable amid economic contraction.  Argentine President Mauricio Macri’s honeymoon may prove short-lived.  Much-needed economic reforms are likely to provoke even greater inflation and have already stoked resistance from the Peronist opposition.  Macri enjoys some unprecedented assets – for the first time non-Peronists also control the city and province of Buenos Aires– but Argentine public opinion overwhelmingly favors statist economic policies that he aims to dismantle, and no non-Peronist elected president has completed his term in office since the rise of Peronism as a political force.  Chilean President Michelle Bachelet, wounded by a drop in mineral export revenues and comparatively minor corruption allegations involving her daughter-in-law, reshuffled her cabinet earlier this month but continues to tank in the polls.  Latinobarómetro reports that 70 percent of Chileans believe their political system doesn’t work.

It’s not hard to envision other relatively stable South American democracies facing hard times ahead.  The June 5 presidential runoff in Peru could leave the country deeply polarized, especially if Keiko Fujimori, heiress to the country’s darkest episode in recent history, wins.  It is not a foregone conclusion that Colombian President Juan Manuel Santos, who has staked his second term on a long-awaited and much-needed peace accord, will secure its ratification, risking lameduck status for the remainder of his administration.  If the presidents elsewhere appear to be weathering the storm, democratic governance nonetheless faces important challenges.  It would be rash to predict that democracy will fail the test – and that such failure will give rise to a new era of authoritarian rule – but it’s clear that the region will witness widespread instability during the coming years.

May 26, 2016

Structural Reforms in Chile: Moving Forward in Midst of Political Crisis

By Claudia Heiss*

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Photo Credit: Chile Ayuda a Chile / Flickr / Creative Commons

Chilean President Michelle Bachelet has done well pushing her reform agenda despite a series of scandals regarding the illegal financing of political campaigns and abuse of power by her daughter-in-law.  Bachelet started with 58 percent support and the highest electoral margin of victory since Chile’s return to democracy in 1990.  Her New Majority coalition incorporated the Communist Party and replaced the Concertación, the center-left coalition defeated in 2010 at the end of her first period, and after 20 years in power.  Bachelet’s current program reflected a left-turn and an intention to correct perceived flaws of a transition criticized for assuming too many features of the model imposed by the dictatorship.  The program included a tax plan to finance education reform introducing free university in a commoditized market of superior education.  This project was the offspring of massive student protests in 2011.  Another proposal was to replace the dictatorship-era 1980 Constitution through an “institutional, democratic, and participatory” process.

The scandals have hurt Bachelet’s popularity – she ended her first term in 2010 with 80 percent support and is now at historical lows below 30 percent – undermined the legitimacy of the political parties and Congress, and prompted a surge of social mobilizations.  (Slower economic growth, owing to the low price of copper, has contributed to the government’s unpopularity.)  But the President has scored some big wins.  In addition to the tax and education reforms she sought, the government has achieved important advances in the direction of its political program:

  • In 2015, a proportional system replaced the Binomial electoral system, which severely distorted popular will in the election of representatives and granted veto power in Congress to the political heirs of the dictatorship.
  • The campaign finance scandals led to the recent approval of a “Probity Agenda,” including higher transparency, forbidding corporate donations to political campaigns, and establishing a new law to regulate political parties.
  • A bill to make the main regional authority, the Intendente, elective rather than appointed by the President – a major step toward decentralization – has passed the Senate.
  • The decriminalization of therapeutic abortion, currently punished in only five countries, was approved by the Chamber of Deputies.
  • Congress is in the final steps of approving a labor reform meant to increase the negotiating power of workers towards their employers.
  • A complex constitutional reform process was launched last year, and this month the government selected 216 “facilitators” to assist the process and initiated a series of local meetings to discuss constitutional principles, rights, duties, and institutions. The process, the first of its kind ever in Chile, will lead to a presidential proposal to be presented to Congress.

The road ahead will not be easy for President Bachelet and her allies.  The political climate is pessimistic, and China’s economic troubles suggest the commodity bubble is over – to the detriment of the Chilean economy.  While rejected by conservatives, the changes appear as insufficient to those who want more radical reforms.  The labor bill has been criticized by union leaders as not allowing enough collective bargaining, and the proposal for constitutional change falls short of a binding participatory process like a Constituent Assembly or a referendum would be.  Bachelet, however, has deftly channeled anger about the scandals into the constructive reforms of the Probity Agenda, and she changed the perception of what is achievable in Chile in terms of progressive political and social transformations.  While public opinion is currently harsh with the government and with political elites, her second term, which ends in 2018, could in the long run consolidate her legacy as an effective reformer even in the face of adversity.

April 14, 2016

*Claudia Heiss is Assistant Professor at Universidad de Chile’s Instituto de Asuntos Públicos and researcher at the Centre for Social Conflict and Cohesion Studies, COES.

The Panama Papers: Damning Evidence Against Latin American Elites?

By Emma Fawcett* and Fulton Armstrong

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Photo Credit: Pixabay / CC0 Public Domain

The “Panama Papers” have revealed the reputed secret accounts and tax-evasion strategies of a number of Latin American leaders, but preexisting widespread perceptions that political and economic elites are corrupt may reduce the immediate shock value of the revelations.  More than 11 million documents leaked from the Panama-based law firm Mossack Fonseca – given an initial review by the Süddeutsche Zeitung and International Consortium of Investigative Journalists (ICIJ) – provide evidence of 215,000 arrangements by which 14,153 powerful and wealthy clients from around the world hid their money from the prying eyes of the media, tax collectors, and public-accountability experts.  Early reports already indicate Latin Americans – small-time players compared to the Russians and some Europeans – are among those mentioned.

  • The Petrobras scandal that has paralyzed Brazil will find further fuel in these files. Investigators in Operation Car Wash apparently had no knowledge of many accounts held by Petrobras officials.  A secret company linked to House Speaker Eduardo Cunha, who’s leading the charge to impeach President Rousseff, reportedly figures prominently.
  • Argentine President Macri, his father, and brother reportedly had an offshore company for 10 years. They closed it in 2009, two years into Macri’s term as Buenos Aires mayor, but he did not report it.  The government says he was only “circumstantially” the CEO.
  • The president of the Chilean branch of Transparency International, Gonzalo Delaveau, resigned because he was linked to at least five offshore companies.
  • Mexican President Peña Nieto’s association with tycoon-contractor Juan Armando Hinojosa, who reportedly had a massive array of shelters worth US$100 million, is once again a liability. The President was dragged through the mud – and eventually exonerated of personal involvement – over a mansion that Hinojosa allegedly gave to his wife.  The Mexican government is investigating several dozen others named in the documents.
  • Many other cases are in the wings. Pedro Delgado (former governor of Ecuadorian Central Bank and cousin of President Correa); financial backers of Peruvian Presidential candidate Keiko Fujimori; and an array of former central bank and intelligence officials – Peruvians, Venezuelans, Panamanians, and others – are all being looked at.  In El Salvador, the Attorney General, already criticized for his investigative zeal, has raided Mossack Fonseca’s offices, suggesting more revelations to come.

Allegations of tax evasion, hidden income, and other forms of corruption are a mainstay of Latin American political lifeand the Panama revelations will only aggravate the oft-held opinion that rich, powerful people play by their own rules to maintain wealth and power.  Ramón Fonseca, one of the founders of the law firm, claims that the publicity is part of “an international campaign against privacy,” which he called “a sacred human right [and] there are people in the world who do not understand that.”  The backlash against someone like Argentine President Macri may not be too great, especially because his family ended the tax haven years ago.  But what makes the allegations potentially disruptive is the number of people implicated – across public and private sectors – in so many countries, in an investigation that has only just begun.  Further revelations are sure to come and, although themselves a sign of transparency, challenge people’s faith that leaders will come clean.  The revelations will fuel popular cynicism and discontent in the short term, but renewed demands for transparency may eventually help rekindle popular confidence in government.

April 11, 2016

*Emma Fawcett is a PhD candidate in International Relations at American University.   Her doctoral thesis focuses on the political economy of tourism and development in four Caribbean case studies: Haiti, Dominican Republic, Cuba, and the Mexican Caribbean.

How are the Americas Faring in an Era of Lower Oil Prices?

By Thomas Andrew O’Keefe*

Gas Station Guatemala

Photo Credit: Josué Goge / Flickr / Creative Commons

The sharp drop in global oil prices – caused by a combination of a slowing Chinese economy hurting commodities sales and efforts by Saudi Arabia to retain market share – has both downsides and advantages for Latin America and the Caribbean.  By keeping production levels steady, despite decreased demand, so that a barrel of crude remains below US$40, the Saudis’ hope is to put U.S. shale oil producers and Canadian tar sands producers out of business.  The drop in oil prices has had a varied impact elsewhere in the Americas:

  • The effect in Venezuela, already reeling from over a decade of economic mismanagement, has been catastrophic. The ripple effect is being felt in those Caribbean and Central American countries that grew to depend on PetroCaribe’s generous repayment terms for oil imports that allowed savings to be used for other needs.  In 2015, for example, this alternative funding mechanism in Belize was slashed in half from the previous year.  The threat of interest rate hikes on money that must eventually be repaid for oil imports also pushed the Dominican Republic and Jamaica to use funds raised on international capital markets to reduce their debt overhang with Venezuela.  (For those weening themselves off PetroCaribe dependency, however, the lower prices are a silver lining.)
  • Low oil prices have also knocked the wind out of Mexico’s heady plans to overhaul its petroleum sector by encouraging more domestic and foreign private-sector investment.
  • In South America, the decline has undermined Rafael Correa’s popularity in Ecuador because the government has been forced to implement austerity measures. The Colombian state petroleum company, Ecopetrol, will likely have to declare a loss for 2015, the first time since the public trading of its shares began nine years ago.  In Brazil, heavily indebted Petrobras has seen share prices plummet 90 percent since 2008, although that is as much the result of the company being at the center of a massive corruption scandal that has discredited the country’s political class.
  • On the other hand, lower petroleum prices have benefitted net energy importers such as Chile, Costa Rica, Paraguay, and Uruguay.

The one major oil producer in the Americas that has not cut back on production and new investment is Argentina – in part because consumers are subsidizing production and investment by the state petroleum firm YPF, which was renationalized in 2012 and now dominates domestic end sales of petroleum products.  Prices at the pump remain well above real market values.  While successive Argentine governments froze energy prices following the 2001-02 implosion of the Argentine economy, this time policy is keeping some energy prices high.  This encourages conservation and efficiency and spurs greater use of renewable alternatives, but it becomes unsustainable during a prolonged dip because it will, among other things, make the country’s manufacturers uncompetitive.  The Argentine example underscores that predictions of a pendulum shift in Latin America in favor of private-sector investment in the hydrocarbons sector over state oil production are still premature.

The lower prices do not appear likely to harm the region’s continuing substitution of natural gas for coal and oil as a transitional fossil fuel to greener sources of energy.  Natural gas prices remain at their lowest levels in over a decade, and the expansion of liquefied natural gas plants allows for easier transport of natural gas to markets around the world.  They are also unlikely to dent the global shift to greater reliance on renewable energy resources driven by the international consensus that climate change can no longer be ignored and something must be done to address it.  At the UN climate change talks in Paris last December, for example, countries agreed to keep temperature increases “well below” 2 degrees centigrade above pre-industrial levels and made a specific commitment “to pursue efforts” to achieve the much more ambitious target of limiting warming to no more than 1.5 degrees centigrade.  The year 2015 was the second consecutive year in which energy-related carbon emissions remained flat in spite of 3 percent economic growth in both years. 

March 24, 2016

*The author is the President of San Francisco-based Mercosur Consulting Group, Ltd.  He chaired the Western Hemisphere Area Studies program at the U.S. State Department’s Foreign Service Institute between July 2011 and November 2015.