LatAm’s dramatic elections calendar that landed three leftist presidents in the Andean region might be two-thirds over, but the political and policy uncertainty created by these election results is far from it. Chile and Colombia are expanding the size and role of the state, while intense political and macro conditions have forced yet another and a big-time government reshuffle in Peru and Argentina, respectively. In Brazil, which has yet to hold elections, Lula leads Bolsonaro comfortably, but the gap has been narrowing there as well.
It has been an eventful, if not dramatic, political cycle in Latin America, driven by anti-establishment sentiment and public discontent with the status quo, magnified by the economic and health flaws exposed by the Covid-19 crisis. The cycle kicked off a little over a year ago, when Peru elected a (hard) leftist president, followed six months later by a similar outcome in Chile. Then Colombia, and only recently, made it three for three in the Andean region when it comes to left-wing heads of state. This was an even more surprising result there given the country’s political history – it had never elected a leftist president before. But there were also a couple of (mid-term) election results that defied the general trend. Both in Argentina and Mexico, ruling coalitions lost important seats that meant relinquishing a simple majority in the case of Peronists and a qualified majority for Andrés Manuel Lopez Obrador’s party Morena.
While the election season is two-thirds, the political and policy uncertainty results is far from over. In Argentina, a government reshuffle in a more orthodox direction was needed to arrest a run on the peso and a disorderly economic adjustment that would have undermined further the Peronists’ chance in next year’s elections. In Peru, another reshuffle – there has been on average one ministerial change every several days – was needed to address deep and chronic governability issues under president Pedro Castillo and impeachment is the most likely outcome. Chile’s focus shifted to the constitutional process that will decide if the newly drafted constitution will be implemented or the process restarted. In addition, Gabriel Boric’s administration is advancing an ambitious tax reform and will unveil soon its proposal for a pension reform with significant implications on the economy and society. In Colombia, the electoral transition has been smooth, though the far-reaching tax reform suggests that the administration is full of ambitious proposals in line with the campaign promises.
Brazil will hold elections in October. Former president Luiz Inacio Lula da Silva leads the incumbent Jair Bolsonaro comfortably, though the polls are showing narrowing dynamics, aided by slowing inflation and boosted by direct transfers. Changes to macro policy are on their way, though they will pale in comparison to the rest of the region, with the exception of Mexico, a relative oasis of political peace in LatAm. Where domestic politics is less of a headwind, frictions on the USMCA free-trade agreement front are worth keeping an eye on as they could undermine otherwise big-time tailwinds, courtesy of the recent geopolitical shocks.