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President Dilma Rousseff greets Colombian President Juan Manuel Santos, while Presidents Michelle Bachelet (Chile), Ollanta Humala (Peru) and Rafael Correa (Ecuador) look on. (Photo: Roberto Stuckert Filho/PR)
Latin America 2016, the new Latinvex in-depth report on the region's outlook this year.
Wednesday, January 20, 2016
Special Reports

Latin America: Uncertain Political Outlook


With or without impeachment, Brazil’s President Rousseff will remain weakened this year.

 

BY JOACHIM BAMRUD

 

Although there are only a few presidential elections scheduled this year, Latin America faces a year of political uncertainty, experts warn. At the top: Brazil, where the deeply unpopular President Dilma Rousseff faces a possible impeachment, and Venezuela, where the opposition-controlled national assembly is flexing its muscles against the beleaguered government of President Nicolas Maduro.


“The region's political outlook in 2016 is uncertain and could well prove quite turbulent,” says Michael Shifter, President of the Inter-American Dialogue.

Venezuela represents the most profound crisis of governance in the hemisphere, says Cynthia J. Arnson, Director, Latin American Program, Woodrow Wilson International Center for Scholars. “Political polarization is likely to deepen once the opposition-controlled Assembly attempts changes that impact how power is wielded, including by putting in motion a recall referendum against President Maduro,” she says.

BRAZIL: A VERY TOUGH YEAR


Brazil is also facing a showdown between the opposition and the government, but appears even more complicated as both the ruling coalition and the opposition are split amidst an ever-growing corruption scandal that is tainting both – all in the midst of a major economic crisis.


2016 Brazil is disastrous economically, financially, and politically,” says Riordan Roett, Professor and Director, Latin American Studies Program, Western Hemisphere Studies, SAIS-Johns Hopkins University. “2016 may see the impeachment of Dilma.  Even if that process, fails, her ability to govern will remain deeply impaired.”

Arnson and Shifter concur. “Whether or not she manages to avoid impeachment, Rousseff is unlikely to be able to restore confidence in her ability to govern or to manage the economy,” Arnson says.  

The coalition that brought Rousseff – and her mentor Lula - to power is crumbling, and the president is widely unpopular, Shifter points out. “It remains to be seen if Rousseff has enough political capital and legislative support to keep her job and reform a struggling economy,” he says.

The opposition has not been particularly constructive, which has made achieving at least some  measure of consensus elusive, Shifter says. 

“The dual blow has revealed a structural crisis of governance, which will not be easily resolved whether or not Rousseff remains in office,” he says. “The political gridlock, in turn, is making it very difficult to implement fiscal adjustments and liberalizing reforms that are fundamental for Brazil to restore its economic health.”

Meanwhile, fears of further downgrades continue to pose new challenges, while the corruption probe widens, Roett says. 

“Federal prosecutors will continue to prosecute the various corruption scandals, more private sector and public sector leaders will be arrested,” he says.  “Plea bargaining is the name of the new game in Brazilian politics.”

And the upcoming Olympic Summer Games may also spark protests in Brazil, as the spending on the games was one of the banner causes of the widespread protests last year.

 “President Dilma Rousseff appears incapable of unifying her own coalition around spending cuts and measures to increase revenues, and the corruption scandal surrounding Petrobras continues to fester, shaking political and economic elites alike, “ Arnson says. 

ECONOMIC SLOWDOWN WITH MORE PROTESTS?


While Brazil and Venezuela may be the more extreme cases of political problems, Latin America in general is facing political uncertainty tied to the economic slowdown, Shifter points out.

 

“In the context of Latin America’s slowdown, governments will have far less fiscal space to maneuver to satisfy growing demands and expectations of new middle classes,” he says. “To sustain a positive trajectory, tough reforms and adjustments will be necessary, but they will be unpopular and politically difficult to manage.  It would not be surprising to see mounting frustration and discontent among citizens who will not accept any slippage to their newly acquired economic position.   During this period of contraction, Latin Americans will have far less tolerance for corruption than during the good economic times. Governing is likely to be more difficult and complicated than during the previous decade.  We shouldn’t expect to see long stretches of political continuity as we’ve seen in the recent past.”

 

Arnson agrees. “The politics of the region in 2016 will be shaped overall by the sharply reduced levels of growth in most countries, and the outright recession in some,” she says.  “Countries have different institutional and political capacities for managing the potential conflicts that will arise from curtailed budgets and reduced social spending.”

 

In fact, last year’s election victories of the opposition in Argentina and Venezuela were clearly motivated by discontent with the economy and government corruption.

The pink tide is in retreat,” Roett says.  “The election results in Venezuela and Argentina are an indication that leftist populist governments with commodity export revenues are severely undermined. Citizens have just so much patience for incompetence and bad government.  The heyday of Chavismo in the region appears headed for the dustbin of history.”

And the trend towards more centrist, pragmatic leadership will probably continue, predicts Shifter.  

“Claims about swings to the left or, now, to the right, tend to obfuscate more than they illuminate,” he says.  “Governments will strive to pursue sound macroeconomic management, while maintaining social policies aimed at reducing poverty.  If they can’t deliver, voters will reject them in the next election.  One important question is whether instruments of regional integration will become stronger or weaker as domestic economic challenges intensify and foreign policies become less ideological.”

ARGENTINA: GOVERNING AMIDST OPPOSITION

Argentina, Latin America’s third-largest economy, provides a good example.The electoral victory of Mauricio Macri – a centrist businessman and former mayor of Buenos Aires — over kirchnerism was one of the greatest political surprises of 2015,” Shifter says. “The new administration has pledged to reduce government intervention in the economy – Argentina has barely grown in the last four years -- while preserving social policies that are widely popular.”

However, Macri faces serious challenges from supporters of former president Cristina Fernández de Kirchner.

Argentine politics will be tested as the country implements long overdue economic adjustments,” Arnson says.  “The measures adopted thus far by President Macri, including the lifting of exchange controls and a controlled devaluation, will benefit the country in the medium and long-term, as will an eventual settlement with the “hold-outs.”  But public opinion and Peronist political forces will resist passing on the costs of adjustments to ordinary people.  During the campaign Macri had to reassure voters that his election would not signify a return to the “savage capitalism” of the Menem era.  And opponents have seized on evidence that he has not been true to his word.   Controlling the streets as well as the  hard-core supporters of former president Fernández de Kirchner will be difficult for the technocrats and private sector leaders that comprise Macri’s inner circle.”

Roett and Shifter agree. “Cristina Fernandez de Kirchner, sullen, bitter, and in need of a reality check, will be a challenge for the new government but the power of the purse should win over some of the Peronist governors who need the financial support of the Casa Rosa,” Roett says.  “The Peronist delegation in Congress will be more recalcitrant but the governors may be of help there also.”

The new administration will have to pursue unpopular economic policies – including reducing subsidies for public services, lifting trade restrictions, containing inflation and normalizing the currency market – in a very complicated political context, Shifter points out. “Peronism is still in control of most provincial governments, and holds a majority in the Senate,” he says. “If Macri is able to deliver positive economic results and build broad legislative support, he should be in a strong position.  If not, he will have to deal with mounting social discontent and significant opposition from Peronist forces and labor unions.”

More than internal opposition, Macri’s biggest challenge will be to define a strategy to deal with the holdouts on the debt settlement, Roett says.  “Only then can the country return to the international capital markets,” he says.

And to help him achieve that goal, he has been able to arm a well-respected team.  “He has taken office under terrible economic conditions but he has appointed a superb cabinet of honest, talented and dedicated individuals,” Roett says.

PERU: A NEW PRESIDENT

Peru, Latin America’s sixth-largest economy, is slated to hold presidential elections on April 10. If no candidate wins 50 percent of the vote in the first round, then a second round will be held with the top two vote-getters. 

Peru’s presidential elections will almost certainly go into a second round, pitting front-runner Keiko Fujimori against the second-place candidate,” Arnson believes.  “Who that second-place candidate will be is the central question.  Given the volatility of Peruvian politics, it’s entirely possible that Fujimori could lose the second round after winning the first.”

Peru, the only South American country with presidential elections in 2016, poses something of a paradox, Shifter points out. “Economically, despite the deceleration due to falling commodity prices, it remains one of the strongest in the region, while politically voters could hardly be more disenchanted,” he says.

The next president will have to find ways to sustain economic growth while addressing voters' many concerns, especially mounting crime and widespread corruption, Shifter says. 

“Although Keiko Fujimori now has a commanding lead in the polls, Peruvian politics is known for its unpredictability and electoral surprises,” he says. 

If Fujimori wins, a key challenge will be how she deals with the legacy and imprisonment of her father, former president Alberto Fujimori, who remains a deeply divisive figure, Shifter adds.

Fujimori’s rivals include Alan Garcia (who was president twice), former prime minister Pedro Pablo Kuczynski (popularly known as PPK) and businessman and former governor Cesar Acuna, who seems to be gaining ground.

According to a CPI poll released January 14 by Peruvian media group RPP, Fujimori leads with 32 percent support, followed by Acuna at 15 percent.  PPK gets 13 percent, while Garcia only receives 7 percent support.

“Peru may have had enough of Aprismo and Garcia,” Roett says.  “PPK would be an excellent president but he does not have the “common touch,” unfortunately.  It is probably Keiko’s to lose.”

Independent of who wins the elections, the ongoing conflict with indigenous groups at the various mining sites will be a difficult challenge, he warns.  “Mineral prices will remain stagnant in 2016 posing budget issues for the government,” Roett says.

COLOMBIA PEACE THIS YEAR?

Other key political developments in Latin America this year include May elections in the Dominican Republic and the likely peace agreement in Colombia.  In the Dominican Republic, voters are expected to re-elect President Danilo Medina, while his party PLD and allied parties are expected to win majorities in congress and local governments.

Colombia’s president Juan Manuel Santos announced in September that the government and FARC had agreed to sign a peace agreement within six months. Although it’s unclear whether that will actually happen on March 23, 2016 or later, most pundits believe a peace agreement will be signed this year, formally ending 52 years of armed actions by FARC. In addition to its political objectives, FARC is known as Colombia’s largest drug trafficking and kidnapping organization. Santos believes a peace agreement with FARC will thus lead to reduced drug trafficking and kidnappings as well as an end to violent clashes with police and the armed forces.

All in all, Colombia’s GDP should see a 1.5 percent annual boost after the peace agreement is signed, while foreign investment should grow significantly, Santos predicts.

Former President Alvaro Uribe has criticized the peace talks as giving FARC too many concessions and not enough sanctions.

“Colombia is closer than ever to signing a final peace accord with the FARC, something that will be a high point for the entire region,” Arnson says.

© Copyright Latinvex

 

 

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