Tuesday, January 19

A year in which the presidential elections will complicate post-Covid economies


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The year that has started is not going to be easy for Latin America. Delaying the vaccination of your population may slow down recovery, so the economic rebound expected for 2021, after an estimated drop in regional GDP for 2020 of between 8% and 9%, could be weaker than expected. Although trade with China has mostly rebuilt in recent months, the reduction in imports and investments from the United States and Europe and the absence of tourists is prolonging. Presidential elections to be held in various countries throughout 2021 will probably not help focus the exit well.

Especially significant in economic terms will be the presidential elections of Peru (April 11) and Chile (November 21). In both places, following the institutional crisis living, the consensus on free market policies that have been implemented by all governments in recent decades and that have sustained the development of both countries can be broken. Less change in substance would take place in Ecuador (February 7) in the event that the party of former President Rafael Correa wins, but the agenda of necessary adjustments promoted by Lenín Moreno before the pandemic may be put aside, weighing down the country in the next years.

In 2021 there will also be presidential elections in three other Latin American countries. In Nicaragua (November 7) the holding of elections with serious democratic limitations will consolidate the dictatorship process imposed by Daniel Ortega, lengthening the economic hardships that the country has been experiencing since the 2018 riots. In Honduras (November 28) and in Haiti (date yet to be determined), the result of the presidential elections will not properly affect the evolution of the economy, already battered by the last hurricanes, the reduction in remittances and the migratory plug that the Trump Administration has created.

There will also Parliamentary election –In some cases, along with local elections– in El Salvador (February 28), Bolivia (March 7), Mexico (June 6) and Argentina (October 24). They will have less relevance in economic matters; however, mid-term appointments for Mexican and Argentine voters carry important political significance.

Peru and Chile

Peru and Chile are experiencing a somewhat parallel process, with some steps ahead in the Chilean case. Ultimately it is a review of an economic model and a long political cycle that have been especially useful up to now. for both countries since the dictatorships of Fujimori and Pinochet, respectively. The street demonstrations in Chile in 2019 revealed a certain social discomfort with the current framework, manifested in the 2020 plebiscite in favor of a new Constitution. The general elections of 2021 will probably mean the rupture of the political structure that the country has known in recent decades, with an electoral alliance between Socialists and Christian Democrats against conservatives. It is possible that a greater influence from the radical left will lead to the new Constitution enshrining a more social economy, although it is not clear that this can substantially combat inequality.

In Peru the street demonstrations They have occurred a year later, in 2020, and initially not linked to social perceptions, but political. Peruvians have first dismantled the political structure (they have had four presidents in what should have been a single mandate), to move towards what may also lead to a change in the Constitution, which, as in the Chilean case, dates from the time of the dictatorship.

Political instability and economic “experimentation” would certainly not be the best recipe to face the demands of all kinds posed by the coronavirus pandemic and its consequences.

Ecuador and Nicaragua

If Rafael Correa ceded the presidency to Lenín Moreno in 2017, it was partly because he knew that, after the fall in oil prices and the country’s growing debt, it was necessary apply clippings that would generate social conflict. Rather than forcing him to remain in power, he chose to appoint a successor, probably hoping to return four years later, once the country’s economic difficulties had been overcome and the controversial reelection counter resetting.

But the operation has not gone entirely to the former president as expected: on the one hand, Moreno soon broke with his godfather and led to a referendum to approve the limitation of terms, closing the way to a new Correa presidential candidacy; on the other, the cuts applied by his successor have not been enough to straighten out the economy, as the coronavirus has aggravated the situation.

Demanded by justice, Correa has not been able to at least run for the position of vice president, as Cristina Fernández de Kirchner did in Argentina. For the February 7 elections (with a second round on April 11, if necessary) he has promoted the candidacy of Andrés Arauz. Some surveys Arauz won and others instead point to a triumph of the conservative Guillermo Lasso. Either of the two will have to assume the commitments made by Moreno with the IMF to put the country back on its financial feet; Arauz may have assumed that role, but pressure from Correa to avoid unpopular measures could seriously complicate Ecuador’s recovery.

With regard to Nicaragua, the deepening of the dictatorial way undertaken by Daniel Ortega and his wife, Vice President Rosa Murillo, will only torpedo the way out of the economic crisis. As a result of the 2018 repression, when the regime murdered more than 300 protesters, the country’s GDP fell that year by 4% and in 2019 it did so by 3.9%. The arrival of the pandemic will have led to a decrease of another 5.5% in 2020. Nicaragua is the country, after Venezuela, with the worst economic performance in Latin America in recent years and the only one for which negative numbers are expected in 2021, with a decrease of 0.5% of GDP.

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