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.

Ignoring MERCOSUR and UNASUR at Your Peril

By Thomas Andrew O’Keefe*

Mercosur map

Participating countries in MERCOSUR. Image Credit: Immanuel Giel (modified) / Wikimedia / Creative Commons

Pundits who dismiss MERCOSUR and the Union of South American Nations (UNASUR) as failed attempts at Latin American economic integration should look again.  MERCOSUR has presided over an explosion in intra-regional trade among its four original member states (Argentina, Brazil, Paraguay, and Uruguay) from just over US$ 5 billion at its launch in 1991 to US$ 43 billion by 2014.  UNASUR, for its part, is credited with thwarting a coup attempt against Evo Morales in 2008 and putting a damper on continental arms races.

  • MERCOSUR and UNASUR member countries have taken additional important steps toward convergence since 2014, when MERCOSUR’s highest governing body adopted “CMC Decision 32,” which allows initiatives pursued by either collective to be binding on both if they arise from a set of goals and objectives common to both. The document reaffirms the UNASUR founding treaty stipulation that “South American integration shall be achieved through an innovative process that includes all of the achievements and advances by the processes of MERCOSUR and CAN [Andean Community].”  Chile has spearheaded this effort as a means of reducing duplication of efforts, and is also attempting to bridge ideological differences between the Pacific Alliance (Chile, Colombia, Mexico, and Peru) and MERCOSUR to further build Latin American unity.

Given the relentless negative assessment of both integration projects, multinational pharmaceutical companies were caught off guard when MERCOSUR and UNASUR forced them late last year to make substantial price cuts for public-sector purchases of Darunavir, an antiretroviral to combat HIV-AIDS, as well as Sofosbuvir, used with other medications to treat Hepatitis C.  Both drugs are on the World Health Organization’s List of Essential Medicines.  As a result of CMC Decision 32/14, the Ministers of Health of all the South American nations met in Montevideo on September 11, 2015, and launched a joint MERCOSUR/UNASUR committee to negotiate with multinational pharmaceutical companies on the prices for bulk purchases of certain high-priced drugs.  The committee, made up of representatives from each government’s agency responsible for purchasing medicines, won major price cuts last November – a steep reduction for Darunavir from Hetero Labs as well as lower prices with Gilead for Sofosbuvir.  The new costs were premised on the lowest amount charged to any one of the member governments, and enabled Chile’s Ministry of Health to pay 90 percent less than what it previously paid for Darunavir.  The South American governments as a whole are expected to save US$ 20 million in 2016 on purchases of this anti-retroviral.  A proposed 14 percent reduction in the cost of the combination Sofosbuvir-Ledispaver drug for Hepatitis C – if accepted by the MERCOSUR/UNASUR committee – would enable further savings.

The South American governments have their eyes set on several additional high-priced medications, with a particular focus on drugs used to treat cancer.  In order to aid the committee’s work, UNASUR is creating a data bank of the prices charged by the multinationals for specified medicines purchased by the public health sector in each member state.  The fact that the purchases are made jointly through the Pan American Health Organization’s already existing Strategic Fund opens the possibility that countries in Central America and the Caribbean can benefit as well.  It also means that all these countries can access the Fund’s capital account and do not need to have the cash in hand to acquire medications required to address public health emergencies.  MERCOSUR and UNASUR – often dismissed as ineffective – are demonstrating that integration produces tangible results.

February 11, 2016

* Thomas Andrew O’Keefe is President of San Francisco-based Mercosur Consulting Group, Ltd. and is former chair of Western Hemisphere Area Studies at the U.S. State Department’s Foreign Service Institute (2011-15).

Correction: Due to an editing error, an earlier version of this post mistakenly stated that “a 14 percent reduction in the cost of its combination Sofosbuvir-Ledispaver drug for Hepatitis C will enable Chile’s Ministry of Health to pay 90 percent less than what it previously paid for Darunavir.”  The outcomes of the cost negotiations for the two medications are unconnected.

What Does Macri’s Victory Mean for Latin America’s Left Turns?

By Eric Hershberg and Fulton Armstrong

South America right

Photo Credits: Douglas Fernandes and _Butte_ / Flickr / Creative Commons

Argentine President-elect Mauricio Macri’s actions since his historic victory last week indicate a rightward shift in domestic and foreign policy that some observers are tempted to proclaim as part of a broader Latin American trend.  He has reiterated promises of broad economic reforms and appointed a cabinet – including former JP Morgan executive and ex-Central Bank chief Alfonso Prat-Gay as his finance minister – to implement them.  He has further pledged to reverse outgoing President Fernández de Kirchner’s protectionist trade policies.  (During the campaign, advocates of unbound capitalism cheered when he named Ayn Rand’s “The Fountainhead” as one of his favorite books.)  Macri has named Susana Malcorra, a senior aide to UN Secretary General Ban Ki-moon with strong diplomatic credentials, to be his foreign minister and, for starters, directed her to reverse policies he judged to coddle Venezuela. The President-elect, who takes office on December 10, is speaking with the confidence of a President elected with more than a 3-point margin over Kirchnerista candidate Daniel Scioli and with control over more than the 91 seats (one third of the total 257 seats) that his Cambiemos coalition won in the lower house of Congress.  (His party is the first, however, to control simultaneously the Province of Buenos Aires, the City of Buenos Aires, and presidency.)

The temptation in some quarters to declare Macri’s victory as the beginning of the end for Latin America’s “Left Turns” is understandable but nonetheless premature.  To be sure, the Argentine electoral results coincide with other major setbacks for various currents of the Latin American left:  The Chavista project in Venezuela is crashing; Brazilian President Rousseff and her party are mired in a corruption morass and economic crisis whose combined effects may cut short her time in office; President Correa, facing a dire economic situation in Ecuador, is increasingly talking about abandoning efforts to run yet again in 2017.  Chilean President Bachelet’s low popularity and declining public support for the Vázquez government in Uruguay may be additional signs that the prospects for the “pink tide” are very much in doubt.

But in Argentina and beyond, the jury is still out.  Through no action of its own, the South American left enjoyed the multiple benefits of the decade-long commodity boom that began in 2003.  Just as its electoral successes did not indicate wholesale shifts to the left in the region – indeed political scientists have long questioned whether the evidence supports claims of a leftward shift in popular preferences – today’s parallel crises may reflect the end of of the boom rather than a rejection of left-leaning governments.  Many of the policies advanced by various currents of the “pink tide” may remain highly popular, even while they are no longer affordable.  Another tempting explanation is that Latin Americans are rejecting leaders who they perceive as corrupt, irrespective of their placement on the left-right spectrum.  In Argentina, notably, Macri hasn’t rejected the Kirchneristas’ redistributive agenda but has instead emphasized the confusing, corrupt way it has been pursued for the past 12 years.  (Never before has an Argentine rightist portrayed eliminating poverty as a core priority.)  It may well be that voters understand economic slowdowns and dysfunction as a product of corruption rather than the fallout from declines in historically high commodity prices.

Regardless of the underlying drivers of electoral change and public disillusion with incumbents, it’s fair to ask if the left’s current travails and the right’s resurgence will open the way toward more accountable political leadership, whatever its ideological proclivities, or just signal an alternation of power.  Like Macri in Argentina, a new cohort of Latin American leaders will have to prove that they are more than outsiders drawing on sentiment to throw out the incumbent rascals.  The question is whether they pursue policies that make democracy more transparent, expand meaningful political participation, and sustain the social gains that have been achieved by the pink tide governments that now appear to be on the ropes.

December 2, 2015

OAS: Almagro’s Challenges

By Fulton Armstrong and Eric Hershberg

Photo Credit: OEA – OAS / Flickr / Creative Commons

Photo Credit: OEA – OAS / Flickr / Creative Commons

The OAS’s new Secretary General, Luis Almagro Lemes, appears to be steering his organization toward a coordinating role that, he hopes, places it above the fray of hemispheric tensions.  He has not chafed at Washington’s version of democracy promotion, and indeed has embraced elements of it.  He has readily admitted the “inexorable conclusion” that the OAS needs to be “revamped and modernized”; that it needs to “reinforce its legitimacy”; and that its structure and resources need to be better realigned with the four pillars of its mission—democracy, human rights, security, and integral development.  His promises of internal reform so far have not been radically different from those put forth by his beleaguered predecessor, José Miguel Insulza, or even diverged from proposals embodied in U.S. legislation passed in 2013.  They have been articulated, however, in the sort of Washington consultancy language that might help his cause in the U.S. capital, such as references to evolving “from the OAS’s traditional command and control toward an organization that operates like a matrix geared to results in which the hemispheric and national dimensions feed into and enrich each other.”  Elected in March and inaugurated in May, in June Almagro received a mandate from the OAS General Assembly to restructure the General Secretariat, reorganize old offices into new ones, and implement other aspects of his plan.

Regional reactions to Almagro’s election and reform plan have been positive if sometimes not overly enthusiastic.  At the General Assembly meeting, U.S. Deputy Secretary of State Blinken spoke of a “new chapter … in the history of the OAS” and said, “We have a new secretary general, a new strategic vision statement, and renewed attention to genuine reform.”  South America’s preeminent power has been generally aloof toward the OAS, but the Brazilian Senate in mid-July approved a new OAS permanent representative, and last week Brasilia paid $3 million of its $18 million in late dues—modest relief from the slow strangulation caused by dire cash-flow issues because of non-payment by several key countries.  Almagro has also won support in Latin America through his repeated signals of a desire to work more closely with other hemispheric bodies—even CELAC, which was created in 2011 as a direct challenge to the OAS and supposed U.S. influence over it.  He pledged to “seek out areas where we can complement the work of other bodies,” citing by name CELAC, UNASUR, SICA, CARICOM, and MERCOSUR.  According to press reports, his close cooperation with UNASUR as Foreign Minister of Uruguay in 2010‑15 lends credibility to that promise.  Almagro also has won regional praise for pledging to continue efforts for bring Cuba back into the OAS as a full member—building on the success of the Summit of the Americas in April driven by the Washington-Havana rapprochement.

Outgoing Secretary General Insulza was a relatively easy act to follow because, often unfairly, his image was tattered after 10 years in the crossfire between Washington and the countries pushing to undermine U.S. influence in Latin America.  Almagro appears eager to push the re-set button, and the success of the Summit of the Americas and his pledges on democracy, reform, and hemispheric cooperation have given him a good start.  But leading the OAS is going to take more than artful rhetoric, internal restructuring, and a few reforms.  President Obama’s move on Cuba removes one major irritant from hemispheric relations, but an effective Secretary General is going to have to navigate the shoals of longstanding North-South tensions.  The “spirit of genuine and equal partnership” that Deputy Secretary Blinken spoke of wanting with the OAS will be difficult to achieve, and the supporters of CELAC, UNASUR, and other alternatives to the OAS will find it equally tough to accept the OAS as a valid venue for debate and compromise.  Almagro will also have to show that he can run the organization in a professional and modern way to overcome the perception left by his predecessor of weak management of the institution.  He has declared himself a man of practical solutions, not ideology, but pleasing everyone—trying to be a coordinator who threatens no one’s interests—may not be a workable strategy for long.  If the OAS is to fulfill its mission, moreover, the United States and others will have to give Almagro the space to do his job.

July 27, 2015

OAS: New Leadership, Old Challenges

By Aaron Bell and Fulton Armstrong

José Miguel Insulza and Luis Almagro Lemes Photo Credit: OEA - OAS / Flickr / Creative Commons

José Miguel Insulza and Luis Almagro Lemes Photo Credit: OEA – OAS / Flickr / Creative Commons

Uruguayan diplomat Luis Almagro, elected secretary general of the Organization of American States (OAS) last week, says he wants to revitalize the hemispheric organization – a herculean, if not impossible, task.  Almagro was the only candidate remaining after Guatemalan Eduardo Stein and Peruvian Diego García-Sayán withdrew from the race – the former for health concerns, and the latter due to a perceived lack of support from his government.  Almagro previously served as Foreign Minister under former president José Mujica and is a member of his Movimiento de Participación Popular, whose left-leaning sympathies led observers to wonder whether Almagro could draw sufficient backing even running unopposed.  But Almagro received formal support from several prominent nations ahead of time, including Brazil, Argentina, Mexico, and the United States, and he got 33 of 34 votes (Guyana abstained) to secure his election.  Following the election, U.S. Deputy Secretary of State Antony Blinken called for the new Secretary General to “lead the OAS through this genuine reform process by helping to refocus the OAS on its core pillars – democracy, human rights, sustainable development, and citizen security,” all while resolving its fiscal challenges.  “We look to [him] for his leadership, but we want him to know that he does not stand alone.”  His five-year term begins in May.

In his acceptance speech, Almagro stated that he intends to rise above the role of crisis manager and facilitate “the emergence of a revitalized OAS,” but major challenges await him:

  • The political crisis in Venezuela has long challenged the OAS, and an escalation in sanctions and rhetoric from the United States has made its balancing act harder. Current Secretary General José Miguel Insulza criticized the Obama administration’s national security warnings while also calling out the Maduro government for the arrest of opposition leader Antonio Ledezma and its resistance to dialogue with the opposition.  Almagro has been critical of U.S. sanctions as well, and quietly worked behind the scenes to encourage negotiations between political opponents in Venezuela, but his public silence on abuses by the Maduro government worries his critics.
  • The Cuba issue will also put Almagro in a tight spot. Havana’s participation in the Summit of the Americas is likely to build pressures for its readmission to the OAS, and Almagro’s record shows he’ll be sympathetic.  But the process could be fraught with risks for the new Secretary General.  Outgoing Secretary General Insulza bears scars attesting to U.S. Senators’ penchant for personalizing attacks when the OAS doesn’t go their way.
  • Any reform agenda is going to get battered from both sides. The OAS mandates are broad and expensive, and members don’t agree on priorities.  As Deputy Secretary Blinken’s comments suggest, Washington wants the organization to focus on its agenda, but much of South America, particularly the ALBA countries, wants the OAS to pull away from U.S. influence.  Nor do differences lie strictly along North-South lines, as made clear by protests during last year’s general assembly against Brazil’s resolution condemning discrimination based on sexual orientation and gender identity.

Almagro seems to have the experience and temperament to be an excellent choice for the job, and his coming from Uruguay, whose good offices have credibility virtually everywhere, may serve the OAS well.  But the challenges will be daunting.  He faces several ongoing crises, particularly in Venezuela, and ongoing splits within the region over the OAS’s role.  One tempting option would be for Almagro to try to distance himself and the organization from Washington – a difficult task at best.  Not only is his headquarters several hundred meters from the White House and the State Department, but the United States government (and to a lesser extent Canada) provides substantially more funding for the OAS’s general fund and through special donations than any other member state.  Almagro’s actions will also be watched closely by U.S. conservatives who, stung by President Obama’s move toward diplomatic relations with Cuba, are looking for a fight over Venezuela, Ecuador, Argentina, and even on some issues with Brazil.  Whatever Almagro does, it will be with the black cloud of the OAS’s financial difficulties over him, and the possibility that failing to successfully balance all of these issues may weaken the OAS and benefit regional organizations like CELAC and UNASUR, which are smaller and less well established, but independent of North American influence.

March 23, 2015

Pension Reform: Uneven Progress

By Christina Ewig*

Two Women

Nathan Gibbs / Flickr / Creative Commons

Recent pension reforms in Latin America show promise for greater gender equity across the region, but progress remains uneven in coverage and generosity.  Since 2007, 13 countries have either introduced or expanded some form of non-contributory pension, offered to defined groups as a social right, while others have made reforms to their existing pension systems that specifically compensate for gender inequalities.  These reforms in several instances were conceived with the participation of gender equity advocates.

  • The introduction of non-contributory pensions has equalized pension coverage between women and men in the region, according to a comprehensive study by the Organización Iberoamericana de Seguridad Social.
  • The equalization of men’s and women’s retirement age in the Dominican Republic, Mexico, and Uruguay makes it easier for women to attain the minimum number of working years for eligibility for a minimum pension.
  • The use of gender-neutral mortality tables in Bolivia and a return to the state-run defined-benefit system that treats men and women equally in Argentina, are also improvements.
  • More innovatively, in the 2007 expansion of the non-contributory pension in Bolivia and the 2008 reforms of the traditional pension systems in Chile and Uruguay, women were given credit toward their pensions for children born or adopted, to compensate for time out of the labor market.

The need for such reforms is great globally and in Latin America.  Women face much greater risks than men of poverty in old age due to workplace discrimination and gender imbalances in family carework responsibilities – the “motherhood wage gap” – during their working years.  Women are employed in smaller numbers than men in the formal economy, and they are often concentrated in the lower-paid and less-stable informal sector.  Domestic workers, primarily women, are in a sector notorious for employers’ evasion of pension payments.  Women in Latin America are also more likely than men to be found among the ranks of the unemployed or partially employed.  When employed full time in the formal sector, they face a diminishing but still substantial wage gap, earning 17 percent less on average than similarly educated men, according to the Inter-American Development Bank.  While the original pay-as-you-go pension systems were based on a male-breadwinner model that envisioned women as “dependents,” the 1990s push toward pensions that relied entirely on individual earnings magnified the effects of these discriminatory employment contexts and carework imbalances.  Moreover, in the individual capital account model, practices such as the use of differential mortality tables to determine monthly payments further reduced women’s income in old age, due to their greater expected longevity.

Despite the progress toward greater gender equity in pension policy, the issue deserves wider attention because advances have been uneven.  For example, while most countries in the region have adopted some form of non-contributory pensions, the percentage of the population eligible for these varies dramatically – as does the monthly payment.  Moreover, while the gap in pension coverage between men and women has narrowed, the compensation levels remain dramatically unequal.  Reforms, like those of Bolivia, Uruguay and Chile, that build-in compensation for market and carework inequalities deserve wider replication. 

February 26, 2015

*Dr. Ewig is Associate Professor of Gender and Women’s Studies and Political Science at the University of Wisconsin-Madison.  She is the author of Second-Wave Neoliberalism: Gender, Race and Health Sector Reform in Peru.

The Impact of Falling Oil Prices on the Western Hemisphere

By Thomas Andrew O’Keefe*

L.C. Nøttaasen / Flickr / CC BY-NC 2.0

L.C. Nøttaasen / Flickr / CC BY-NC 2.0

The sharp drop in the benchmark Brent crude price of oil from just under US$115 per barrel in June 2014 to its current perch around US$50 has important ramifications for the Western Hemisphere.  For Venezuela, which earns some 95 percent of its foreign exchange from petroleum exports, it is a potential disaster.  Underlying political tensions will be exacerbated if there is no money to continue funding social welfare programs or heavily subsidizing gasoline.  It probably also spells the end of PetroCaribe’s generous repayment holidays and what are in essence below-market interest loans for Caribbean and Central American nations.  Sharply lower oil prices also put at risk major energy projects such as the development of Brazil’s pre-salt reserves, which require a minimum price of $50 to $55 to be economically viable.  Equally tenuous are Argentine efforts to regain energy self-sufficiency by exploiting its vast shale oil and gas reserves and Mexican plans to attract foreign investors to participate in deep-water oil exploration and drilling.  The minimum price for a barrel of oil below which new investment projects in Canada’s oil sands are no longer attractive is around $65.  Shale oil producers in the United States are also being squeezed by low petroleum prices.

On the other hand, net energy importers such as Chile, Paraguay and Uruguay benefit from sharply lower oil prices.  Although being weaned off  PetroCaribe will be painful for the Caribbean and Central America in the short term, they will be able to seek oil at the lower prices elsewhere.  The pressure on the Obama administration to lift the ban on U.S. crude oil exports, in response to a glut of domestic shale oil production, could also redound in favor of the Caribbean and Central America by lowering international oil prices further through increased global supply.  Already, 2015 began with U.S. companies authorized to export an ultralight crude called condensate.

In hopes of rallying OPEC to stabilize oil prices, Venezuelan President Maduro last weekend rushed off to lobby Saudi Arabia, which just two months ago refused to decrease production in order to raise prices, but oil industry sources say there’s little chance of a policy change.  Meanwhile, the environment may turn out to be among the biggest beneficiaries of lower oil prices.  Less investment in shale oil production reduces the risk of leaks of methane, a potent greenhouse gas, as well as decreases flaring.  Similarly, slowing down oil sands production in Alberta and Saskatchewan means that the very high levels of greenhouse gas emissions associated with extracting crude oil from bitumen (not to mention the negative impact on water resources) is diminished.  Although lower fossil fuel prices traditionally have undermined incentives to move to greater reliance on renewable and non-traditional energy resources, this may no longer be true.  For one thing many governments around the world are now embarked on ambitious efforts to reduce carbon emissions by, among other things, raising the costs associated with petroleum usage through cap and trade regimes that force companies to buy government-issued pollution permits.  Still others have enacted outright carbon taxes on utilities and large factories per metric ton of carbon dioxide emissions.  In addition, the heavy initial capital investment that was previously associated with things like wind, solar and geothermal power are falling.  For example, a combination of technological advances and Chinese overproduction have resulted in much lower prices for solar panels so that the cost of generation from a large photovoltaic solar plant is now almost 80 percent less than five years ago.  Geothermal energy may be the renewable that most benefits as drilling rigs idled by lower oil prices are now available at a lower cost for geothermal projects.  

*Thomas Andrew O’Keefe is President of San Francisco-based Mercosur Consulting Group, Ltd. and teaches at the Villanova University School of Law.

January 13, 2015

Uruguay: Another Center-Left Victory

By Aaron Bell

Frente Amplio Uruguay / Flickr / CC BY-NC 2.0

Frente Amplio Uruguay / Flickr / CC BY-NC 2.0

The Frente Amplio (FA) emerged from Sunday’s general elections in Uruguay looking stronger than observers had forecast – and signaling Latin Americans’ confidence in the center-left.  Despite a rough campaign season, which included polls showing the FA’s support stuck in the low 40s, and public sniping between the party’s leaders – candidate Tabaré Vázquez and current president José Mujica – just days before the election, the FA gained last-minute momentum in the polls and won 47.9 percent of the vote.  As expected, Vázquez received less than the outright majority needed to avoid a second round of voting on November 30 against the candidate of the Partido Nacional (PN), Luis Lacalle Pou, who won 31 percent of the vote.  But the FA preserved its majority in the lower chamber of parliament, and it can have the edge in the senate if Vázquez wins in November, as his vice president, Raúl Séndic, would hold the deciding vote.  The Partido Colorado (PC) candidate, Pedro Bordaberry, won only 12.9 percent of the vote and placed third in every department.

The elections revolved around Vázquez and Lacalle Pou’s leadership identity and policies; neither candidate argued for substantial structural changes.  In exit interviews, those who voted for the FA credited it with positive changes in its decade at the helm.  The 41-year-old Lacalle Pou has run as a youthful leadership alternative to the 74-year-old former president Vázquez, and he promised fresh ideas for taking on crime and education, considered leading concerns for Uruguayan voters.  While exit interviews suggest that this message appealed to his party’s voters, it did not translate into substantial youth support.  Polling by Factum prior to the election showed that 51 percent of voters aged 18-37 preferred the FA.  Public security has been the leading concern for Uruguayan voters, and both traditional center-right parties, the PN and PC, supported a referendum (also held on Sunday) that would have lowered the age of criminal responsibility for major crimes from 18 to 16.  But long-term polling trends have shown a decrease in the number of Uruguayans prioritizing security from its peak last year, and indeed the referendum failed with 47 percent of the vote; almost the entirety of undecided voters ultimately chose to oppose it.

The FA now has momentum and is well positioned to win the second round and enjoy the support of a parliamentary majority.  A likely PN-PC voting bloc in the second round once held a slight lead over the FA but now appears likely to fall short because of tensions between them.  The PC’s underwhelming performance at the polls has been compounded by Bordaberry’s decision on Sunday night to support Lacalle Pou without consulting PC officials, and his offensive off-the-cuff verbal attack on the Vázquez camp during a conversation with a PN official that same night, for which he has since apologized.  The left-leaning Partido Independiente, which came in fourth place with 3.1 percent of the vote, will make a decision on which candidate to support this week; their votes alone would be enough to push the FA over the top.  As a result, barring a major turn of events, it appears as though the incumbent pink tide will prevail in Uruguay – with implications, perhaps, beyond.  Indeed, a second-round FA victory will be the sixth this year for a left-leaning party, following the pattern set by Chile, Costa Rica, El Salvador, Bolivia, and Brazil.  While the citizenry may be impatient with the pace of progress in Latin America following nearly a decade of left-leaning governance, voters seem to be eschewing the right and maintaining the modestly but consistently leftward tilt that has characterized the region’s politics for much of the 21st century.

October 30, 2014

 

Bolivia: Evo Wins Again

By Fulton Armstrong

Photo credit: Eneas / Foter / CC BY

Photo credit: Eneas / Foter / CC BY

President Evo Morales’s landslide election to a third term – fueled by a combination of moderate policies and fiery leftist rhetoric – portends continued stability in the near term, with still no indication of how his party will continue its project after him.  Although official results have yet to be announced, and some preliminary data show Evo garnering around 54 percent of the vote, exit poll estimates gave Evo a massive lead of 60 to 25 percent over the next closest candidate, a wealthy cement magnate named Samuel Doria Medina.  Regardless, the enormous margin separating Evo from his competitors precludes a runoff race.  Doria, who also ran against Evo in 2005 and 2009, claimed that OAS praise for the elections before the polls closed was “not normal,” but he is not disputing the results and has conceded defeat.  Congratulations to Evo poured in first from his left-leaning allies – Presidents Maduro (Venezuela), Mujica (Uruguay), Fernández de Kirchner (Argentina), and Sánchez Cerén (El Salvador) – but other voices soon followed.  The victory set Evo on track to be the longest-serving president in Bolivian history since national founder Andrés de Santa Cruz lost power in 1839.  His party, the Movement Toward Socialism (MAS), is also reported to have expanded its control of the Chamber of Deputies and the Senate, although vote tallies are not final.

Evo has achieved things his domestic and foreign detractors said were impossible.  While his rhetoric has been stridently leftist and anti-U.S. – he even dedicated his “anti-imperialist triumph” to Hugo Chávez and Fidel Castro – his policies have been decidedly pragmatic and disciplined, and the results have curried favor for him among foes.  His economic czar has emphasized Bolivia’s commitment to “have socialist policies with macroeconomic equilibrium … applying economic science.”  The economy grew 6.8 percent last year and is on course to grow another 5 percent this year.  Foreign reserves have skyrocketed; Bolivia’s are proportionately the largest in the world.  Poverty has declined; one in five Bolivians now lives in extreme poverty, as compared to one in three eight years ago.  IMF and World Bank officials, whose policies Evo largely rejected, have grudgingly conceded he has managed the economy well.  Some of his projects, such as a teleférico cable car system linking La Paz with the sprawling city of El Alto, have garnered praise for their economic and political vision.  He even won in the province of Santa Cruz, a cradle of anti-Evo conspiracy several years ago.  In foreign policy, he has good ties across the continent, but strains with Washington continue.  The two countries have been without ambassadors in each other’s capital since 2008, and talks to resolve differences over the activities of DEA and USAID failed and led to their expulsion from Bolivia.

Sixty-plus percent in a clean election for a third term – rare if your initials aren’t FDR – signals that Evo, like Roosevelt, is a transformative figure.  No matter how brilliantly Evo has led the country, however, the big gap between his MAS party and the opposition suggests political imbalances that could threaten progress over time if he doesn’t move to spread out the power.  Evo has given the MAS power to implement his agenda, but he has not given space to rising potential successors.  He has said he will “respect the Constitution” regarding a now-disallowed fourth term, but it would take great discipline not to encourage his two-thirds majority in the Senate to go ahead with an amendment allowing him yet another term.  It would be naïve, moreover, to dismiss out of hand the opposition’s allegations of corruption by Evo’s government, but his ability to grow his base above the poor and well into the middle class suggests that, for now, the fraud and abuse do not appear to be very debilitating … yet.  Washington, for its part, seems content with a relationship lacking substance rather than joining the rest of the hemisphere in cooperating with Bolivia where it can.

Other AULABLOG posts on this and related topics:  ALBA Governments and Presidential Succession; Lessons from the MAS; and Will Bolivia’s Half Moon Rise Again?

October 14, 2014

Elections in Uruguay: A Bellwether for the Latin American Left?

By Aaron T. Bell

Photo credit: Frente Amplio (FA) / Foter / CC BY-NC-SA

Photo credit: Frente Amplio (FA) / Foter / CC BY-NC-SA

Uruguay’s elections on October 26 – once seen as a sure bet for the ruling Frente Amplio’s presidential candidate, former president Tabaré Vázquez (2005-2010) – have become a tight race, perhaps signaling challenges for other left-leaning Latin American governments as well.  The FA’s slight slip in the polls since the beginning of 2014 has been matched by sustained growth by the Partido Nacional, led by Luis Lacalle Pou, the son of a former president.  While Vázquez still holds a ten-point lead, he’s well below the absolute majority needed to avoid a run-off election, whose numbers look even bleaker for the ruling party.  In February, Lacalle Pou was running twenty-five points behind Vázquez in a head-to-head matchup, but the latest polls now show him only two points back.  Lacalle Pou will need the support of his party’s long-time rival, the Colorado Party, to win a second round against the FA, but Colorado candidate Pedro Bordaberry has thus far refused to concede the first round to the PN despite trailing them by 17 points.  Nonetheless, Vázquez was defeated by just such a second-round alliance in 1999.  Complicating things for him, polling strongly suggests that FA could lose control of both houses of the national legislature this fall.

The Lacalle Pou campaign has focused on public security and education.  Uruguay’s homicide rate remains one of the lowest in the region, but a modest increase in crime in recent years has spurred both urban and rural Uruguayans to rank security as the principal problem facing the nation – well ahead of the second leading concern, education.  The October elections will coincide with a referendum on lowering the age of criminal responsibility from 18 to 16 for serious offensives, with polls showing Uruguayans closely divided but leaning toward approval.  On the education front, the FA’s Plan Ceiba has helped provide laptops to every student, but 2012 assessment data from the Organization for Economic Cooperation and Development still place Uruguay’s students well below the international average in math, science, and reading.

The FA’s political situation is paradoxical: it has presided over major socioeconomic improvements in the last decade and won international acclaim, but earned a more tepid response at home.  Uruguay’s decision to legalize marijuana was widely celebrated abroad as a step toward a more progressive drug policy in the region, but polls continue to show that a majority of Uruguayans oppose legalization, and it has not won the FA much support even among proponents of cannabis, who have resisted the creation of a registry of buyers.  (Vázquez recently suggested the registry would be used to develop rehabilitation programs.)  The FA seems to have not yet figured out how to respond effectively to the perception of insecurity, nor has it overseen a decided improvement in education, which is central to long-term development prospects.  With Brazil’s Partido dos Trabalhadores facing an uncertain future, and political crises in Argentina and Venezuela simmering, the FA may be the first case of a larger regional rollback of the first wave of 21st century leftwing movements.

September 30, 2014