2023 will be complex and challenging for Latin America. The region will face an unfavourable international context in which it is expected, according to the IMF, that there will be a simultaneous slowdown of the three leading economies (United States, China, and the European Union), whose effect will be weak global economic growth of 2.7%, which could even fall below 2% according to its Director Kristalina Georgieva. A third of the global economy is forecast to be in recession this year.
Four issues demand priority attention globally: the effects of the conflict in Ukraine; the struggle to control inflation and interest rates; the challenges facing the energy markets; and the uncertain path that China will take in the post-pandemic period. Moreover, the geopolitical agenda is littered with hotspots, tensions between the United States and China, an inoperative collective security system, and a major increase in military spending, all of which add more tension.
According to the World Economic Forum’s Global Risks Report 2023, “the world’s top current risks are energy, food, inflation and the overall cost of living crisis. Over the next two years, the cost-of-living crisis remains the first threat, followed by natural disasters and trade and technology wars (…). But the combination of societal, technological, economic, environmental and geopolitical risks we face today is unique”. All these events will impact our region to a greater or lesser extent.
Welcome to the “polycrises” or “permacrises,” a historical moment characterized by multiple global crises unfolding at the same time on an almost unprecedented scale, ushering in a prolonged period of uncertainty, instability, and insecurity.
Latin America enters the new year with a reconfigured political map: a new pink tide with the five largest economies in the hands of progressive governments, but with important differences among them and with a much more adverse global and regional scenario than when the presidents of the first pink tide governed at the very beginning of the 21st century.
Economic growth will face headwinds. The regional average will be anemic: the IMF projects 1.7 per cent, the World Bank and ECLAC 1.3 per cent, and S&P 0.7 per cent. The region will also rack up a second lost decade in economic terms (2014-2023), together with major social development setbacks due to this weak growth and the cursed legacy of the pandemic. Inflation, while it will diminish, will continue to be high. Interest rates will also continue to be high, which is needed to fight inflation. Low growth will have a negative impact on poverty, which will remain above 30%, and on employment, inequality, and informality, which suggests social unrest and demands will continue to find expression in the streets; thus, one mustn’t discard the possibility of new social upheavals.
Democracy and Governability
Politics in 2023 will be marked by a high level of uncertainty, instability, volatility, and political risk. This explosive combination, and especially the gap between the magnitude and complexity of the problems to be resolved and the diminished capacity of the governments to respond to them, will continue to produce crises of governability in several countries of the region.
Some democracies will continue to be besieged by populism and authoritarianism.
A new threat requires our utmost attention: the populism of the far right, which is ready and willing to blow up the institutions, calls for military intervention when the results are not to their liking, and attacks democracy, repudiating its values and principles. Pro-Trump sectors in the United States and bolsonaristas in Brazil are two recent examples of this dangerous phenomenon in our hemisphere. A second group of democracies could suffer deterioration to the point of becoming hybrid regimes. Some of these regimes could drift more sharply towards authoritarian rule. No democratic opening is anticipated, for the time being, in the dictatorships of Cuba and Nicaragua. For Haiti, 2023 will be crucial. In other countries, by contrast, despite the enormous challenges, democracy will maintain its quality and resilience or even make gains. Uruguay will continue to have the highest-quality democracy in the region.
Intense electoral agenda
In Latin America in 2023, voters will be called to the polls to vote in three general elections – i.e. both presidential and legislative – in Paraguay, Guatemala, and Argentina, the last two with possibilities of going to a second round (ballotage) to determine who the next president will be. This electoral moment comes in the context of a more extensive process, the so-called electoral super-cycle that started in 2021 and will end in 2024. During this period, all the region’s countries except Bolivia (which held elections in 2020) will have gone to the polls to renew or ratify their presidents.
Other very important actions round out the busy 2023 calendar. Two state elections in Mexico, in the states of México and Coahuila, will serve as a barometer for the 2024 presidential elections. Local elections will be held in Ecuador, along with a referendum to consult the population regarding the possible amendment of the Constitution in respect of citizen security, state institutions, and the environment. And there will be regional elections for mayors and governors in Colombia and in Chile elections to designate constitutional assembly members and a plebiscite to approve or reject a forthcoming proposed constitution. In Peru, amidst the discontent and social pressure – and even though it has been agreed to bring the general elections forward to April 2024 – one can’t discard the possibility that the election could be brought forward even more if the crisis worsens. In Haiti, one will have to see if at some point in the year, the many-times-postponed presidential elections will be held, as was recently announced by Prime Minister Ariel Henry. And finally, in several countries, primary or internal elections will be held, including in Argentina (PASO), Panama (leading up to the 2024 general elections), Dominican Republic, and, most likely, in Venezuela, the opposition will also hold primaries to elect the next unified candidate for the 2024 presidential election.
In Paraguay (April 30) the contest will be focused on the pro-government candidate of the Partido Colorado, Sebastián Peña (close to former president Horacio Cartes), and Efraín Alegre (Partido Liberal Radical Auténtico), the candidate of the opposition coalition, which pulls together several political forces. The pro-government forces start off at an advantage, but there could be a surprise.
In Guatemala (June 25), the June elections could provide an opportunity for improvement or accelerate the country’s democratic and social deterioration provoked by the last three presidents ( (Pérez Molina, Morales, and Giammattei). The polls show opposition figures Zury Ríos (conservative) and Sandra Torres (centre-left populist) in the lead, and Manuel Conde, the pro-government candidate, very far behind both women. Certainly, there will be a vote to punish the government; a turn to the left is not anticipated, nor can one discard the possible rise of a candidate who pulls off a last-minute surprise, as in 2015 and 2019. On this occasion, it could be Edmundo Mulet.
And in Argentina (October 22), the outlook remains open-ended regarding both the government and the different sectors of the opposition. Cristina Fernández de Kirchner, after she was convicted at trial and sentenced to six years in prison and permanent disqualification from holding public office, at first excluded herself and, more recently, changed her position and denounced that she was a victim of a “proscription”. It’s not clear whether President Alberto Fernández will seek re-election or whether he will step aside to support another candidate, which could be the current economy minister Sergio Masa (depending on the state of the economy and inflation), or some figure from the peronistas or kirchneristas, such as Daniel Scioli, Wado de Pedro or Axel Kicillof. Nor is it clear who will lead the opposition sector of Juntos por el Cambio, as several figures would like to be the candidate, including former president Mauricio Macri, the head of government of the city of Buenos Aires Horacio Rodríguez Larreta, former minister Patricia Bullrich, and some persons from el radicalismo. A third question is how much will the right-wing “anti-political caste” candidate Javier Millei grow and whether he’ll run on his own or in an alliance with some sector of the opposition. There will likely be a punishment vote against the government (alternation for the third time in 12 years) with a centre-right or right trend.
In all these processes, two trends should be observed: (1) whether the punishment vote against incumbent forces (which marked the 2019-2022 electoral period) will continue; and (2) whether progressive governments will continue to triumph or whether we will see a change in the political cycle favourable to centre-right or right governments regionally, as occurred in 2015 with Macri’s victory.
Countries and elections to monitor
This year 2023, will be particularly intense for South America. Mindful of the above-mentioned busy electoral calendar, it is important to keep tabs on the following: (1) Lula’s third administration is getting off to a complicated start. In addition to the difficult economic and social situation it inherited, last January 8, it faced the greatest crisis since Brazil’s return to democracy in 1985: the attack on the constitutional institutions perpetrated by extremist rightwing sectors close to former President Jair Bolsonaro, characterized by terrorist and vandalic acts against the seats of the three branches of government. Those same persons have also been calling for a military coup. This level of toxic hyperpolarization that Brazil has been suffering and the radicalization of extreme rightwing, violent, and anti-democratic sectors pose serious dangers that Lula, and the other two branches of government, must urgently confront in a twofold strategy. First, they must thoroughly investigate these severe acts and mete out exemplary punishment to those who attempted to carry out a coup with the full weight of the law. And second, they must adopt all measures necessary to bridge the divide and reconcile and pacify the country. To this is added the urgency, on the part of the new government, of carrying out campaign promises, especially to balance the implementation of more active social policies – to fight hunger, poverty, and inequality – with fiscal responsibility so as not to lose the trust of the markets, to be able to reactivate the economy and generate employment. Also worthy of paying close attention are: (2) the progress of the negotiations between the authoritarian regime and the Venezuelan opposition, whose litmus test is whether Maduro has the political will to allow presidential elections to be held with full guarantees in 2024; (3) the evolution of the current very serious crisis in Peru; (4) the sharp increase in political tension in Bolivia and the possible consequences for democracy in that country; and (5) in Colombia, progress in the pension and health reforms, the negotiations with the ELN and other groups, and the results of the regional elections, which will define whether Petro will succeed in consolidating his centre-left government during 2023.
Outside of South America, the focus should be on the dictatorships in Nicaragua and Cuba; the move towards authoritarianism in El Salvador; the administrations of Xiomara Castro in Honduras and Rodrigo Chaves in Costa Rica; and the serious crisis (political, economic, humanitarian, and of refugees) in Haiti, which has become a failed state.
Thus, Latin America is headed for another complex and challenging year. The Latin America Political Risk Report 2023 reveals the growing perception of insecurity in the face of increasingly widespread organized crime; a setback of democracies besieged by populism, polarization and authoritarian proposals; risks of new outbreaks of social unrest in the face of an anaemic economy and governments incapable of processing citizen demands in a timely and effective manner; a migratory crisis that does not subside; and the appearance of issues such as food insecurity, the increase in cyber attacks or the loss of competitiveness to develop the “green economy”, all this in a region that is suffering from a “diplomatic eclipse” that reduces its visibility and prominence on the global stage.
Summarizing: Forecasting is difficult with so many black swans and grey rhinos.
Despite this difficulty, we can say that 2023 will be another very challenging year, and everything suggests that “cloudy times” will continue in the region. The combination of “hot streets” and “irritated voters” will complicate governability, such that governability — along with anaemic growth and inflation, instability, and insecurity – will be one of the biggest headaches for many Latin American governments.
To address this multiplicity of challenges, presidents should win citizens back to trusting in politics and their institutions, recover growth, improve the quality of public policies, renegotiate social contracts, and protect, strengthen, and re-think democracy to adapt it to 21st-century societies.
In addition, both governments and businesses will have to improve their capacity to operate in rapidly changing, highly-complex, volatile, and politically risky contexts while also effectively managing the uncertainty and expectations, fostering consensus, and implementing reforms that answer to the exigent citizen demands without having a serious negative impact on the macroeconomy, fiscal equilibrium, or the business climate. Rather, they should attract foreign investment in high-growth sectors, among them the “green economy,” agriculture, mining, energy and nearshoring, putting in place strategic partnerships between the state and the private sector, and, above all, to have the capacity to deliver timely and effective results in response to people’s real problems.
Source : Idea
