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Former Mexico City mayor Claudia Sheinbaum has been selected by Andres Manuel Lopez Obrador to succeed him. She leads polls ahead of elections in June. (Photo: Mexico City Government)
Dominican President Luis Abinader (right) with French President Emmanuel Macron at the EU Latin America Summit last year. Abinader is expected to win re-election for another four years. (Photo: Dominican Government)
Wednesday, February 7, 2024

Latin America 2024: The Political Outlook

A closer look at the political outlook in nine countries in the region.

BY JOACHIM BAMRUD

Latin America is scheduled to hold several presidential elections this year, including in Mexico, the region’s second-largest economy. Meanwhile, the political situation remains uncertain in countries like Argentina, Ecuador and Venezuela.

In this report, we take a closer look at the political outlook in nine countries in Latin America this year.

ARGENTINA

Although libertarian Javier Milei won Argentina’s presidential elections in November and assumed office in December, his party La Libertad Avanza (LLA) only holds 40 of 257 lower house members in Congress and seven of 72 Senators. He has formed an alliance with the pro-business PRO party, the moderate Union Civica Radical (UCR)and Hacemos por Nuestro Pais to try to pass legislation.

On February 2, it appeared the alliance worked, after the three allied parties voted in a general vote in the lower house for Milei’s omnibus bill of major economic reforms. But on February 6, it became clear that a mandatory second round of votes for each article in the bill would fail to garner enough votes – a clear setback for Milei.

“Milei faces a narrow window for success, but it won’t be easy or without considerable costs,” says Michael Shifter, a Senior Fellow at the Inter-American Dialogue and leading Latin America expert.   “His mandate is to tame inflation and get Argentina’s economy under control.   But his numerous and wide-ranging reform measures suggest Milei has interpreted his November victory in broader terms, nearly tantamount to thoroughly overhauling the entire government, which is bound to generate confusion and strong reactions.”

Unless Milei narrows his focus and develops a coherent strategy towards the political “caste” that he has so roundly criticized – but that he also needs to govern effectively – his project will be doomed, Shifter warns.

“He appears intent on doing everything at once, which is unrealistic in a democratic system like Argentina’s, where Congress and courts play a fundamental role,” he says. “He needs to develop a clear sense of priorities and attempt to forge a political and societal consensus behind his prescriptions to pull Argentina out of its deep economic abyss. So far, Milei has displayed little sensitivity to the huge pain Argentines are enduring as a direct result of the government’s shock therapy. The protests by powerful unions and social movements are inevitable and need to be factored in to implementing the government’s plan.  Given Argentina’s history, it would be a mistake to ignore or underestimate the impact of massive street mobilizations.”

COLOMBIA

Colombia’s leftist president Gustavo Petro assumed office in August 2022 and has tried to pass radical health, labor and pension reforms, but so far without success.

“Petro has been dogged by multiple problems, reflected in a sharp drop in his approval level,” Shifter says. “He suffered a huge rebuke in last October’s local elections [and] the political discussion quickly shifted to the next presidential election in 2026.”

Since the collapse of his governing coalition in the first year, the prospects for Petro’s transformational reform agenda have dimmed considerably, he adds.

“There is still a chance to get through one or two reforms during the remaining two and a half years of his term, but expectations for meaningful accomplishments are low,” Shifter says. “Petro’s big bet on “total peace” was widely criticized and confronted big obstacles from the outset.”

Despite ceasefires with the guerrilla ELN, there are few reasons to be optimistic that it will succeed, he says.

“Indeed, according to many indicators the security situation in Colombia has deteriorated since Petro has been in office, with a sharp spike in kidnappings and the Clan de Golfo controlling a substantial swath of national territory. In addition, coca and cocaine production has reached record levels and show no signs of abating.”

The National Liberation Army (Ejército de Liberación Nacional – ELN) is Colombia’s last true insurgency and one of Latin America’s most powerful criminal organizations, focused on kidnapping, extortion, attacking the oil infrastructure and in recent years the international drug trade, according to Insight Crime,  which says the group has 5,000 members that operate both in Colombia and Venezuela.

“While in Colombia, the ELN is dedicated to confronting the state in an armed revolution, but in Venezuela, it acts more like a paramilitary force in support of the government of Nicolás Maduro. in recent years,” InsightCrime says.

Meanwhile, Clan de Golfo has become the dominant criminal force in Colombia and is involved in transnational drug trafficking, but local cells that are financially self-sufficient have moved into illegal mining, extortion, migrant smuggling, and microtrafficking, InsightCrime reports.

“The big story in Colombia, however, is that despite Petro’s troubles, the country’s democracy has demonstrated real strength and resilience, as other political actors and institutions have performed well,” Shifter point out.

Case in point: After the local elections, Colombia’s top three cities Bogota, Medellin and Cali are governed by centrist or right-of-center mayors known to be independent or critical of Petro. (See this link)

DOMINICAN REPUBLIC

The Dominican Republic, Latin America’s seventh-largest economy and a leading US trading partner in the region, is scheduled to hold presidential and congressional elections on May 19.

President Luis Abinader – one of the few business-friendly leaders in Latin America today – is expected to win re-election for another four years.

According to a poll by CID Gallup in December, Abinader would win a first round of elections with 54%, followed by former president Leonel Fernandez at 29% and the candidate of the former ruling party PLD, Abel Martinez, at 15%.

Abinader is running on popular themes such as his fight against corruption and a stronger stance against neighboring Haiti.

The Dominican Republic is the only country in Latin America that has made significant progress in the fight against corruption since 2021, according to Germany-based watchdog Transparency International.

Both Fernandez and Martinez are linked to the corruption of the PLD years, although Fernandez in 2019 started a breakout party called Fuerza del Pueblo after leading the PLD since 2002.

Abinader has won widespread praise from investors for his reforms aimed at reducing corruption, improving the business climate and boosting tourism.

ECUADOR

Daniel Nobia assumed Ecuador’s presidency in November after his predecessor Guillermo Lasso resigned and called for new elections to avoid impeachment.

However, Noboa faces two major challenges – a lack of majority in Congress (his ADN party holds only 25 of 137 seats in Congress) and even worse, a dramatic deterioration in security.

“Noboa’s overriding challenge is to get Ecuador’s profound and spreading security crisis under control,” Shifter says.  “It is a tall order indeed. The situation has been deteriorating for a number of years, allowed to go largely unattended without an effective policy response by previous administrations.”

Amid a dramatic spike in violence and pervasive lawlessness, the 36 year-old Ecuadoran president imposed a “state of exception” on January 9 and then declared that the country was in an “internal armed conflict” and called on the military to combat some 22 criminal groups, now called “terrorists.”

“Policy merits aside, the move is part of Noboa’s strategy aimed at re-election in May 2025, after a truncated term,” Shifter points out. “Noboa is counting on the armed forces to lead and carry out an effective and politically popular security policy. For Noboa, the approach is a big political gamble. Success is far from assured, and security conditions could get much worse before they get better.”

The country remains highly polarized between followers and opponents of former president Rafael Correa, he adds.

“Although Noboa has reached a pact with pro-Correa forces in Congress, as the campaign heats up next year, the incumbent president will likely be pitted against a candidate representing the former president’s political party,” Shifter says. “There is little question that Ecuadoran voters will attach great importance to the results of the government’s efforts to improve security when they cast their ballot.”

Noboa is seen as generally pro-business, although he has received mixed marks for his economic policies so far.

MEXICO

Mexico is scheduled to hold presidential and congressional elections on June 2 after nearly six years with leftist Andres Manuel Lopez Obrador as president. AMLO, as he is popularly known, has disappointed investors with his statist policies, disrespect for the judiciary and failure to curb growing insecurity.

AMLO’s hand-picked candidate to succeed him is Claudia Sheinbaum, who was mayor of Mexico City for more than four years until June last year. According to all polls, she has a comfortable lead over her nearest rival, Xóchitl Galvez, from an alliance of opposition parties.

Many investors are hoping Sheinbaum will be more moderate and pragmatic than AMLO.

“It is hard to predict how Sheinbaum will govern if she becomes Mexico’s next president in October,” Shifter says. “From all accounts she seems to be more pragmatic than AMLO and is likely to be more respectful of democratic norms, judicial independence and a free press than he has been over the past six years.”

One area that will be challenging for Sheinbaum is how to deal with the significant economic empowerment of the military that has taken place under AMLO and that is a problem for democratic governance.

AMLO has militarized the country’s infrastructure, handing over the management of 20 airports and Mexico’s top 14 ports to the armed forces, including the top airport AICM as well as the relaunched Mexicana airlines and the $28.5 billion Maya Train.

“Much of AMLO’s animus towards democratic institutions stems from his caudillo-like personalistic, confrontational style, which is repeatedly displayed in his early morning briefings,” Shifter says. “There are different theories and much speculation about the extent to which he will be pulling the strings of a Sheinbaum administration. AMLO will probably exert most influence on particular policy areas that are especially important to him such as energy. At least rhetorically Sheinbaum can be expected to continue to invoke the Fourth Transformation as the lodestar of her administration.  Departing from that, so dear to AMLO and his legacy, might be risky for the new president.”

The Fourth Transformation is the name AMLO has given his overall reforms in Mexico since he assumed the presidency in 2018. He defined the first three transformations as the Mexican War of Independence, the Reform War and the Mexican Revolution.

PANAMA

Panama is scheduled to hold presidential and congressional elections on May 5, which will decide which course the country will take the next five years after the administration of President Laurentino Cortizo, who moved the country away from its traditional business-friendly haven after closing Canada-based First Quantum’s mine (despite being the largest foreign investor ever). Local business has also strongly criticized Cortizo for failing to stop violent protests and blockades hitting the country.

Polls show the race is wide open, with no clear favorites. Among the candidates is former president Martin Torrijos, a former McDonald’s executive who ruled between 2004 and 2009 when the Panama Canal expanded its waterway.

Former president Ricardo Martinelli – praised by investors for his business-friendly policies but criticized for his massive corruption – is also running despite having a formal ruling prohibiting from doing so due to a 11-year prison sentence for money laundering.

PERU

Peru has continued seeing political chaos after many years of political and economic stability. The South American country has not had a president complete the traditional five-year term since 2016 and long gone are the days of Peru being one of Latin America’s business stars.

Current President Dina Boluarte assumed office in December 2022 after President Pedro Castillo was ousted for trying to dissolve congress ahead of an impeachment vote. Castillo’s rule had been marred by complete chaos and constant changes in ministers.

While Boluarte is set to complete Castillo’s term, which ends in 2026, there have been calls for her to hold early elections.

Boluarte is seen as more pragmatic and less investor-hostile than Castillo, who had ruled with support from the Marxist Peru Libre party.

“In Peru, anything can happen,” Shifter says. “The political situation is highly precarious and there is massive discontent. Both President Boluarte and the Congress are discredited and have approval levels in the single digits. Peruvians overwhelmingly have no confidence in the Executive or Legislative branches of government.”

Despite protests in late 2022 and early 2023 calling for early elections, both the president and Congress have dug in and resisted the majority sentiment in the population, he points out.

“It would not be surprising to see renewed unrest in Peru, especially in light of the country’s increasingly difficult economic situation,” Shifter warns. “At the same time, in a country where informality is so significant, many Peruvians can’t afford to go to the streets. They need to work just to make ends meet. Many scenarios are possible, though probably the most likely at this point is that Boluarte will continue to govern until 2026, when she will no longer enjoy immunity and will need to face the justice system on various charges.”

URUGUAY

Uruguay is scheduled to hold presidential and congressional elections in October.

Luis Lacalle Pou, who has been president since 2020, can’t run for re-election. Investors have been pleased with his policies aimed at opening the economy.

Lacalle was able to win a referendum on his original economic reform package, although he has not been able to deliver on plans to privatize oil company Ancap and telecom Antel.

According to recent polls, the leftist Frente Amplio is set to narrowly defeat the current coalition of three center-right parties and one center-left party.

The likely presidential candidates from Frente Amplio are either Yamandú Orsi or Montevideo mayor Carolina Cosse, while Álvaro Delgado (presidential secreteray until December) is the likely candidate for the National Party of Lacalle.

VENEZUELA

Long a bastion of democracy in Latin America, Venezuela has not held free or fair elections since 2012.

In October last year, during talks in Barbados, the government of President Nicolas Maduro reached an agreement with the opposition to hold free and fair elections in 2024.

However, it subsequently barred the leading opposition candidate, Maria Corina Machado, from running.

The United States had rewarded Venezuela’s government for the Barbados agreement by lifting sanctions, but has now re-imposed mining sanctions and threatens to re-impose oil sanctions after April 18  unless opposition candidates are allowed to run.

“The biggest political surprise in 2024 would be if the Maduro regime agrees to hold free and fair elections in Venezuela,” Shifter says.  “The good news is that it is extremely likely that elections will take place in the latter part of the year and the opposition is united in its decision to participate.  The bad news is that the elections will be neither free nor fair.”

Though Maduro is very unpopular, he will probably be the government’s candidate, but that is by no means certain, he adds.

“In early 2024, the regime has stepped up its brutal crackdown of opposition political figures and activists, creating widespread fear in the country,” Shifter says.  “In the coming months it is possible that Maduro will show flexibility on issues related to this year’s elections but will not go so far as to risk losing the vote – and his tight grip on power, extending Chavista rule over a quarter of a century.”

© Copyright Latinvex

 

LATIN AMERICA 2024 OUTLOOK

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Latin America Capital Markets: Positive Outlook

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Latin America M&As: Good Outlook 

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