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Expert Panel: Michael Shifter, Inter-American Dialogue; Cynthia Arnson, Wilson Institute; Riordan Roett, SAIS-Johns Hopkins University and Ariel Armony, University of Pittsburgh.
Monday, January 26, 2015
Special Reports

Latin America 2015: Political Outlook Q&A

Latinvex asks leading experts about the political outlook in Latin America.

BY LATINVEX STAFF

How do you view Latin America’s overall political outlook in 2015? In Mexico, Brazil and Venezuela? And will the October 2015 presidential elections in Argentina result in a more business-friendly president?

Our panel:

Ariel Armony, Senior Director of International Programs and Director of the University Center for International Studies at the University of Pittsburgh (as of March 2015).

Cynthia J. Arnson, Director, Latin American Program, Woodrow Wilson International Center for Scholars.

Michael Shifter, President of the Inter-American Dialogue.

Riordan Roett,
Professor and Director, Latin American Studies Program, Western Hemisphere Studies, SAIS-Johns Hopkins University.

Latinvex: How would you describe Latin America's overall political outlook in 2015?

Armony: Overall, there are no major reasons to expect political uncertainty in Latin America in 2015, with the exception of Venezuela. This is going to be a year with new challenges in the economic domain, so a number of governments in the region will be forced to make adjustments to their economies.

Roett: Uncertain – the drop in oil prices will impact countries differently; China growth slowing down and less demand for commodities and raw materials; growth is estimated to be low creating budgetary pressures.

Arnson: The “super cycle” of elections in 2014 is over, and the presidents of Bolivia, Brazil, Chile, Colombia, Costa Rica, El Salvador, and Uruguay have (or will, in the case of Uruguay’s Tabaré Vázquez) set about the task of governing amidst a regional and global economic slowdown.  Internal politics will be marked by the increased difficulties in governing as slow or declining growth confronts newly-mobilized sectors who have only recently escaped poverty.  The greater expectations of government performance may be difficult to meet in the new economic circumstances, but not so much so that incumbent survival is threatened.  A successful peace deal this year in Colombia would be the region’s bright spot.  It is hard to imagine that the burgeoning economic and political crisis in Venezuela—and the prospects for instability and violence--will not affect its closest neighbors.   

Shifter: The region's political outlook in 2015 is uncertain and complicated.   It is hard to predict the political impact of the projected economic slowdown and the difficulty in sustaining social strides.   It may be that the overall effect will be negligible.   But surely the economic deceleration and shrinking fiscal space in many countries are unlikely to result in greater political stability.   Happily, there are no signs on the horizon of political reversals and a return to authoritarian government.  The question, however, is whether the political forces in several key countries will be able to reach consensus to pursue badly needed and major reforms.  That is the only way to bolster competitiveness and productivity.  After a decade of a relatively benign environment and solid progress on several fronts, the region will now confront a more challenging agenda.  Political leaders cannot afford to be complacent.      

The prospects for the Colombian government and the FARC reaching a peace agreement remain, on balance, pretty good.  The problem is that the process is taking a lot longer than anticipated -- and the clock is running.    The FARC are not in any hurry, while the government is keen to reach a deal, and really needs to do so in 2015.  Otherwise, the Santos administration, which has promised that any accord will be submitted to some mechanism of a popular vote, runs the risk that the Colombian people's patience could reach its limit.   There is widespread frustration and mistrust of the FARC within Colombia, so the government needs to demonstrate final results.   Progress has been made, but the most sensitive and complicated items on the agenda -- which go to the question of whether the FARC will end up paying for their crimes -- remain unresolved.    For Colombia’s peace process, 2015 will be a defining year.  Politically, the current situation can’t drag on much longer.       

MEXICO

Latinvex: How do you view the political outlook in Mexico in 2015?

Roett: Stable.  Peña Nieto will continue to face criticism over security issues but the liberalization of the oil industry should proceed as planned. The new investment in that sector over the next few years will prove to be positive for mid-term stability.

Armony: There is a strong demand on the part of the Mexican population for the authorities to address deeply rooted problems of corruption, violence, and lack of accountability in the country. The political outlook in 2015 will be tightly linked to the response of the government to this citizen demand.

Arnson: Mexico’s economic reforms, particularly in the energy sector, hold great medium- and long-term promise.  But unless the country resolves the ongoing, and in some respects deepening security crisis, the opening of the Mexican economy will constitute a pyrrhic victory.  The issue is not only to overhaul the police and other internal security forces, but to tackle the corruption, cronyism, and rule of law deficits that have allowed the security situation to deteriorate to such a great degree.

Shifter: Peña Nieto had a very rough and rocky 2014.  The luster surrounding his ambitious reform agenda, at least outside of Mexico, faded. That agenda proceeded, but the country’s stubborn, underlying security and human rights problems came to the surface with a vengeance, exemplified by the massacre of 43 students at Iguala. The tragedy was compounded by other serious allegations of corruption that raised doubts about the rosy narrative of a transformed, more modern PRI that accompanied the Peña Nieto administration. The government has not responded to the crisis with great deftness. For a while the administration appeared that it was just hoping the crisis would pass or somehow resolve itself, but an awakened and aroused Mexican society was not prepared to go along with that notion. Peña Nieto’s poll numbers are low and declining oil prices are a serious concern and could further slow real results from the energy reform. The outlook is complicated, and 2015 will be critical for the PRI and Peña Nieto. July’s legislative elections will be a test and should help reveal the standing of the three main parties. It is doubtful that the PAN, punished in the last presidential election, will benefit much from the PRI’s current troubles, and the PRD is badly fractured and also negatively affected by Iguala.  

BRAZIL

Latinvex: How do you view the political outlook in Brazil in 2015?

Arnson:
President Dilma Rousseff begins her second term with a bleak economic outlook, a burgeoning corruption scandal at Petrobras, and a powerful private sector increasingly frustrated with twelve years of Worker’s Party statist economic policy.  The appointment of a respected new Finance Minister, Joaquim Levy, who enjoys domestic and international backing, has raised hopes that the Brazilian economy will slowly recover.  President Rousseff must deftly and resolutely handle the fallout of the Petrobras scandal and make a credible commitment to investigate and punish corruption in all public entities.  She must also deal with the demands of emergent middle classes at a time of economic stagnation, or at best, slow recovery.  These will test her governing skills.

Roett: Uncertain.  The Petrobras scandal is not over.  Growth will be low.  Levy and team have an uphill battle with Congress – especially the PT – over fiscal adjustment.  The preparation for the 2016 Olympics could spark protests again over the cost and the inability of the government to find funds for improving public education and health facilities.

Armony: Brazilians are interested in deepening the country's economic gains. It is expected that Dilma's administration will make the necessary adjustments toward this goal. One of the open questions in the political realm concerns Brazil's foreign policy: Will Dilma be able to balance her strong focus on domestic issues with a more assertive emphasis on Brazil's international role?

Shifter:  Dilma Rousseff will not have the luxury of wasting any time at the outset of her second term.  She will need to show positive results – and quickly.  Her chief, overriding task is to regain a measure of confidence in the Brazilian economy, which has been stagnating in recent years. To deliver on the promising, more market friendly measures she announced in his second inaugural address, Rousseff will need to forge political pacts and construct coalitions, while retaining the PT’s backing.  Her political and negotiating skills will be severely tested. There is a certain fatigue with 12 years of PT rule, and her reelection can be interpreted less as enthusiasm for her leadership than concern that the social gains than many Brazilians have seen might be reversed. Not surprisingly, Rousseff identified fighting corruption as one of her main priorities. Still, as more information comes to light, the Petrobras scandal could well be extremely debilitating for her second term. The controversy risks consuming enormous energy and drawing attention away from the economic changes that Brazil desperately needs to get back on track. The concern politically in Brazil is simply heightened cynicism and frustration, which could reignite some of the discontent on display with street protests in the summer of 2013. 

VENEZUELA

Latinvex: How do you view the political outlook in Venezuela in 2015?

Roett: Potentially disastrous.  Oil prices will not recover enough to meet budget projections.  Petrocaribe may be scaled back creating serious fiscal problems for the smaller Caribbean islands.  The country remains evenly divided between the opposition(s) and the government.  Inflation is almost out of control. And the political leadership appears helpless to address any of the important policy questions.

Armony: This situation in Venezuela is complicated. Support for Chavismo is at a record low and support for the Maduro administration is in the low 20's. Coupled with the array of economic troubles and the falling price of oil, the political situation in Venezuela is likely to become more unstable during 2015.

Shifter: All signs point to 2015 being the year when Venezuela’s mounting troubles will come to a head. The trends are uniformly negative and it is hard to see how any of them are going to abate in the short term. The economy, aggravated by declining oil prices, appears to be in free fall, with the government being either unable or unwilling to take corrective measures. The most crucial political dynamics will play out within the ruling Chavista coalition, and less in the opposition. The Maduro administration has been on shaky ground from the outset, but with sinking poll numbers (he's currently at 22 percent), his standing in 2015 will be even more precarious. The situation appears increasingly unsustainable. It is doubtful Maduro has the wherewithal politically to hold things together.   The scenarios are highly uncertain. The government does not seem to face imminent collapse, but given the downward spiral Maduro may not be able to maintain himself in power, and ruling factions, including the military, could well be looking for other options. The US-Cuba thaw further hurts Maduro. His aggressive stance against Washington will not get much sympathy from Latin America. The region, after all, is applauding what Obama did on Cuba policy. 

Arnson: It is difficult to see political and economic outlook in Venezuela as anything but bleak.  The rapid and steep decline in oil prices—which constitute 95 percent of the country’s export revenues—has made it impossible to mask the years (if not decades) of economic mismanagement and corruption.  Expropriations and exchange controls and volatility have virtually strangled the private sector, making the dysfunction of the state sector even more stark.  Shortages of basic consumer goods and rolling power outages, not to mention astronomical rates of crime and violence, make daily life a constant challenge for Venezuelan citizens.  President Nicolás Maduro’s approval ratings are at an all-time low, around 22 percent even as repression of the opposition has grown harsher.  Venezuela may manage to bumble along in 2015, escaping greater violence or further implosion of the economy, but neither of those scenarios can be ruled out.    

ARGENTINA

Latinvex: Will the October 2015 presidential elections in Argentina result in a more business-friendly president?

Armony: I expect so. Despite all the problems, there is a strong interest among businesspeople in different countries to invest in Argentina. Expectations are high, thus all candidates have the strong incentive to announce concrete measures to create a more business-friendly environment.

Roett: The outcome could not be worse than the present administration.  Macri certainly more friendly;  Massa probably so; Acioli is a wild card.  Who will Cristina endorse, if anyone?  Increasing uncertainty as Cristina settles into lame duck status.

Arnson: The main contenders in the October elections come from within Peronism, but with different degrees of confrontation with the current government.  It is hard to imagine that there will be any movement towards resolving the stand-off between the Argentine government and holdouts over levels of bond compensation stemming from the 2001 default.  It is equally hard to imagine that whomever is elected as the next president will not make it a serious priority to reestablish the confidence of the international financial community by forging some agreement with the bondholders.  Should that occur, the government will gain the greater confidence of both Argentine and international investors.  But the many forms of state intervention in the economy will not disappear overnight. 

The question indicating the death – murder or suicide -- of prosecutor Alberto Nisman threatens to mushroom into a full-blown political scandal implicating the President, Foreign Ministry, and intelligence services.  How the government handles the investigation into his death—whether there is lingering cynicism and doubt or whether voters feel that the case has been openly clarified—could have important implications for the October 2015 elections.

Shifter: Argentina’s 2015 elections are critical and mark the end of the Kirchner era.   There will be a fresh political environment, with new opportunities.   It is likely whatever government follows will be more business friendly than that of Cristina Fernandez, though perhaps only marginally so.   Ambitious and dramatic market oriented reforms should not be expected, no matter who wins.  Such an agenda would not be politically supported in Argentina.  But there appears to be a consensus among the leading contenders for the presidency that a more pragmatic approach to economic questions and foreign investment makes sense, in light of the country’s current economic difficulties.   How fast the change will happen – and to what extent -- remains to be seen.   Certainly, foreign investors are eager and ready to take advantage of possibly more propitious conditions.  In any case, it is hard to imagine that the next government in Argentina will be less hospitable to business interests than the current one.  


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