Brazil, the “superpower” of Latin America, is in the throes of a vicious, commodity-driven recession that has seen a severe contraction in GDP, and with little relief in sight. Simultaneously, it’s facing a deep political crisis as President Dilma Rousseff has been forced to temporarily step down from the presidency amidst accusations that she lied about the fiscal condition of the country, but claiming she’s “the victim of a great injustice.” With her party caught up in the ever-expanding Petrobras oil company scandal that has rocked the entire political class, what is happening today in Brazil is not taking place in a vacuum. Rather, it reflects in broad outline what is happening in other parts of the world—including the United States.
These are fascinating times for Latin America. Vast and far-reaching changes are afoot, as the radical populism—and outright Marxist and neo-Marxist trends—of the last several years may be running out of steam. Latin America, in fact, may be entering a new era of relatively pragmatic and centrist politics. What may make things different this time is that the policies that will emerge will be more dictated by domestic political realities than taking place through the pressure of foreign governments. This provides the opportunity for a more sustainable and enduring pro-market, centrist politics that Latin America has had difficulty creating. Just look at Argentina.
The stunning election upset in Argentina by conservative and pro-market candidate Mauricio Macri over Peronist candidate Daniel Scioli in November has breathed new life into a country that has suffered for years from Peronist profligacy and radical interventionist policies in the economy. The efforts by Macri to reach a settlement with investors holding Argentinian debt on which Argentina defaulted helps illustrate the seriousness with which Macri has begun tackling the formidable problems facing what has often been called the sick man of Latin America. It’s truly shocking when one considers the fact that in the early 20th century, the United States and Argentina were essentially equal in terms of per-capita GDP.
Venezuela, which has suffered more than 18 years of radical populist rule, first under Hugo Chavez and then under Nicholas Maduro, may be nearing a breaking point, as shortages and rationing have created a nightmare situation in large cities, especially in Caracas. One wonders how much longer Chavismo can survive, and whether Maduro can even last the remainder of the year, given the increasing confidence of the opposition and the increasingly self-evident clownishness of Maduro.
Mexico and Central America offer reason for hope. Although the frequent target of Donald Trump, Mexico, though riven with crime and enormous social problems, is slowly developing into a relatively mature, stable democracy with increasingly resilient institutions. Mexico has come a long way from the days when it was sometimes derided by American intellectuals as being on the verge of a “failed state.” Although not denying Mexico’s problems, including a still-horrific crime rate, driven in large part by the drug trade and the cartels, Mexico has achieved enviable economic progress over the last few years and seems likely to continue down that path. Things are a far cry from the nail-biting election of 2006 when a leftist candidate came within a mere percentage point or so of winning the presidential election.
Latin America has been through drastic political change in the past. Back in the 1980s and 1990s, the region adopted what was known as the Washington Consensus, which called for major free-market reforms, trade liberalization, and other reforms favored by foreign policy intellectuals in Washington. The Washington Consensus eventually collapsed, in part due to the absence of proper institutional structures in Latin American countries, as well as the bane of so many countries, their dependence on the availability of robust commodity markets. With the collapse of the Consensus came the current crop of populist authoritarian governments in the region. But these governments’ incompetence in managing the economy combined with ideological overreaching has led to backlash.
The politics of Latin America today is not all that terribly different from what is happening in the United States and Europe. There is an increasing anger toward ruling elites and the sense that the governing structures are no longer performing in the interests of the average citizen. In the U.S., it takes the form of the Bernie Sanders and Trump insurgencies. In Europe, it takes the form of anger against governing parties over uncontrolled immigration and increasing hostility toward what is viewed as an out-of-touch European Union bureaucracy, and the rise of populist parties, such as the Swedish Democrats, Alternative for Germany (AfD), or the National Front in France.
A relevant example is the success of Jaime Rodriguez Calderon, governor of the northern Mexico state of Nuevo Leon, who is the first independent to ever be elected governor of a Mexican state. A lifelong member of the long-dominant PRI (Institutional Revolutionary Party), he broke with the PRI and was elected governor in 2015. He may well have higher ambitions, however, and run for president of Mexico in 2018. Calderon’s rise to power is not terribly different from Rodrigo Duterte, the new president of the Philippines, which, though far from Latin America, shares important historical and cultural linkages. Duterte won the election by his relentless attacks on organized crime, a theme similar to those raised by Calderon in Nuevo Leon. But more generally, what has fueled their success is a sense on the part of voters that the governing institutions do not care about them, or are incapable of responding to the needs of the day.
Although the mass uprising against Rousseff is in part driven by raw partisanship, those who misconstrue the pressures for impeachment as being merely partisan are fooling themselves. There is a powerful populist thrust to the opposition that views the elites as out of touch and caring only for themselves. In important ways, the opposition to Rousseff resembles the populist themes of the Trump and Sanders campaigns in the U.S. In Brazil, lavish spending by the government over the last few years served to exacerbate the nation’s perilous financial situation, forcing massive retrenchment in spending programs. Here, the Tea Party—and even important elements of the Trump coalition—are fearful of what they see as a continued slow-motion slide by the nation toward insolvency. As analysts have noted, it’s possible that a populist backlash against elites may just be getting started, and is today a mild manifestation of what’s to come. The chances of a major recession occurring in the next few years is relatively high, given the country’s current state in the economic cycle. A major downturn in the economy, especially if combined with a financial crisis—such as the looming pension crisis that many states are staring at, another bursting housing bubble, or some other black swan event—could provide the impetus for upheaval in the U.S., emulating the kind of disruption taking place today in Brazil.
Dr. Euel Elliott is a professor of public policy and political economy and the associate dean in the School of Economic, Political and Policy Sciences at the University of Texas at Dallas. He is the author of the soon-to-be published books,Paths not Taken: The What Ifs of American History from theWar for Independence to the Bush-Gore Election andAdventures of Maia Neeri of the 24th Century.