The Winds of Change in South America

by Maria-Jose Alvear

For more than fifteen years, extreme left-wing governments have ruled several countries in South America in an attempt to combat extreme inequality, poverty and concentration of income. Recently, however, an inadequate management of the economy has caused recessions and social unrest in countries run by populist administrations. The outcomes of two important elections at the end of 2015 – the presidential election in Argentina and the parliamentary elections in Venezuela – may provide the necessary fresh air to redirect the region’s political spectrum.

To understand the effects of both processes, the political and economic background is needed. Former president of Argentina, Cristina Fernández de Kirchner, remained in office for two terms, terms characterized by conflicts with trade unions and the press. A marked division between the government’s followers and opponents polarized the society, and freedom of the press was limited and controlled by the government. Weekly television broadcasts intended to criticize the opposition and emphasize the media’s distortion of the president’s words were much used as well.

©Rodrigo Soldon, flickr

In 2007, Argentina was among the countries with the highest inflation in the world. The government, however, later interfered with the work of the National Institute of Statistics, and since then official inflation figures were kept on average under 10%, whereas consultant firms calculated inflation rates of 24%. In February 2013, the International Monetary Fund (IMF) issued a censure declaration against Argentina due to the lack of precision of its economic indicators. The government’s persistent disregard of inflation led to a split with trade unions, an appreciation of the Argentinean Peso and a decrease in competitiveness and capital outflow.

As a response to non-conformity, on November 22, 2015, Argentinean voters decided to put an end to more than twelve years of populist governments. For the first time since their return to democracy, Argentines elected a center-right candidate, Mauricio Macri, as the new President. With Macri’s triumph over the governing-party candidate, all eyes turned to the elections that followed. On December 6, 2015, the opposition to the government of Nicolás Maduro, President of Venezuela, won the majority of seats in the National Assembly. This outcome represents a fundamental change for the legislative power, which has been extremely left-wing since the late President Hugo Chavez took office in 1999. The opposition claimed 112 of the 163 seats in the Assembly, an absolute majority that may help to balance the government’s power and eventually defeat Chavism.

Highly dependent on oil revenues, plunging oil prices have been shrinking Venezuela’s economy since 2014. As a result, shortages in goods such as food and medicine have increased considerably. Consumers wait for hours in long lines at supermarkets, trying to buy whatever they can. “This is the worst shortage level we’ve seen in the past thirty years. At the beginning some things were lacking, but not everything at the same time and they didn’t disappear completely. There is no food,” explained thirty-eight year old electrician Jesús Calderón to Reuters. Paradoxically, the government has repeatedly affirmed that there is no economic crisis. In fact, government employees insist that there is a conspiracy, an “economic war” orchestrated by the opposition aiming to overthrow president Maduro.

“After withholding the release of economic indicators for more than a year, the Central Bank reported that inflation in the twelve months to September 2015 was 141.5% and that GDP shrank by 7.1% over the same period,” a recent report from The Economist revealed. Now, at the start of 2016, there seems to be no signs of change in Venezuela, and according to the IMF the economy will shrink by 8% this year with inflation rates reaching 720%.

Social unrest and demonstrations led the government to tighten its control of the media. In February 2014, local authorities imprisoned Leopoldo López, one of the key opposition leaders, and accused him of inciting violence, encouraging demonstrators to vandalize government buildings and attempting to force President Nicolás Maduro’s ouster. An international report by CNN adds: “Major social and economic problems in Venezuela have fueled the protests. But as the demonstrations gained steam, officials have pointed fingers at other factors, accusing the United States of plotting to destabilize the government.”

©Wikimedia Commons

Other left-wing governments in the region, like those of Ecuador and Brazil, find themselves in similar situations. There, too, progress towards democratic values and economic development seems to have stalled.

In Ecuador, the government of Rafael Correa, politically close to Venezuela, enjoyed high revenues from oil during its first years in office. Such earnings, however, financed the creation of new ministries, bureaucracy and government expenditure. The economy relies strongly on fossil fuels, and with falling oil prices there is a significant budget deficit, which has hampered investment. In order to combat the situation, taxes were imposed on imports so as to foster national production. Yet, the national industry is still developing and such measures have increased living costs. On several occasions, the administration has shown its disapproval of opposition as well as its disdain for the press and international financial institutions such as the World Bank.

“People have grown tired of deteriorating conditions that diminish the value of their salaries and savings, not to mention the evident hardship of food shortages.”

Brazil, on the other hand, has been affected by many corruption scandals during Dilma Rousseff’s time in office. The worst economic recession since the 1930s combined with an immense corruption scandal for Petrobras, which registered losses of more than USD 2 billion, according to the firm’s financial statement, should pave the way for changes. The judiciary’s intervention in legislative competences, however, is undermining opposition hopes of a successful impeachment process against Rousseff. Likewise, clampdowns on protests against inflation, government performance and expenses incurred by the 2014 FIFA World Cup have deteriorated freedom of expression according to the NGO Freedom House.

Macri now faces the challenge of rebooting the Argentinean economy and combating inflation by reducing money printing and government expenses. Moreover, Macri has insisted that he will cut energy subsidies, foster foreign investment, standardize statistics and harmonize inflation to 5% over the next four years. In Venezuela, which now has an opposing majority in the National Assembly, a change in the country’s dramatic economic situation is expected. People have grown tired of deteriorating conditions that diminish the value of their salaries and savings, not to mention the evident hardship of food shortages. Even though the government and the opposition have agreed to work together for the sake of the Venezuelan people, clashes between them are still taking place and cooperation remains difficult.

The results of both elections are being interpreted as a beacon of hope. They challenge not only policy-making at a national level, but also the well-entrenched tradition of left-wing governments in South America. People are demanding change and are no longer willing to accept additional violations of democratic values such as freedom of the press, freedom of speech and economic welfare.

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