Latin America 2020 Outlook

Latin America 2020 Outlook


After a tumultuous end to 2019, Latin America faces a variety of obstacles as the region attempts to return to the prosperity experienced during the commodities boom. Analysts expect improved growth numbers compared to last year, though the region will have to cope with both internal and external shocks. 


2020 will be an important test for the region’s recently elected center-right leaders (many of whom rose to power in the wake of the “Pink Tide” of left-wing politicians) such as Jair Bolsonaro in Brazil and Luis Lacalle Pou in Uruguay. Fatigue with conservative policies is already seeming to take hold, and it remains to be seen how they will hold up in the face of the gradual resurgence of the Latin American left. Protests against entrenched inequality and corruption have shaken up governments across the region, destabilizing entire countries and frightening investors. Meanwhile, the trade war between the United States and China has added to the subpar growth presented by many Latin American economies. As tensions between the region’s two largest trade partners continue to unfold, governments will have to adapt their strategies to mitigate the potential fallout from lower growth presented by Beijing and Washington.



In early October, Chile became one of the first of a series of Latin American countries to be rocked by anti-government protests. Chile’s protests in particular have made waves because of the magnitude of the violence perpetrated by both civilian demonstrators and police forces. In the face of incidents of looting and arson, Chilean President Sebastián Piñera sent the military out to the streets to assist police. Since this decision, state forces have been accused by a myriad of human rights’ organizations of excessive force leading to the deaths of dozens of protestors. After initially resisting this wave of civilian anger, Piñera acquiesced to one of their central demands and signed a decree authorizing a referendum on replacing Chile’s current constitution. Chilean voters will go to the polls in April to decide on whether to rewrite one of the final and most significant holdovers from the dictatorship of Augusto Pinochet. Despite Piñera’s compliance, protests show little signs of ending. In the event that Chileans approve the motion for a new constitution, the drafting and ratification of the document would extend well into 2021. The protests effect on Chile’s once booming economy has been evident. Though the government had not indicated any predictions of a recession due to the protests, the central bank found a 3.3% drop in economic activity in November alone. In addition, finance minister Ricardo Briones announced low growth predictions and the potential for up to 300,000 lost jobs. Chile’s economy has consistently proven itself to be one of the most dynamic in the region, but investors remain wary of the coming aftershock from recent instability.



After years of recession and spotty growth, Latin America’s largest economy is beginning to show signs of recovery. President Jair Bolsonaro has presided over a period of economic revitalization characterized by neoliberal policies such as privatizing state companies and decreasing public spending. Along these lines, Bolsonaro and Economy Minister Paulo Guedes managed to pass one of their landmark economic measures in the overhaul of the Brazilian pension system (although significant changes were made to the law in its passage through Congress). Though economic growth is only just starting to pick up and is still being hindered by lagging consumer spending and investment, Brazil’s economy is returning to healthy levels of growth. However, Bolsonaro’s controversial and often offensive rhetoric has gotten him into trouble throughout his first year in office and promises to do the same in 2020. In addition to habitual racist, sexist, and homophobic remarks, Bolsonaro is perhaps best known for what is widely seen as his mishandling of the environmental crisis taking place in the Amazon rainforest. In defense of his policy of bringing greater economic development to the Amazon region, Bolsonaro has rejected international aid and attempted to shift the blame for the recent fires off of himself. His divisive tone on a host of social, political, and economic issues have affected his popularity levels within Brazil, which have fallen to about 30%. Despite this, Bolsonaro has so far managed to avoid the mass protests recently seen in other Latin American countries. Though Bolsonaro has announced the creation of an Amazon Council meant to coordinate economic and conservation actions in the Amazon, critics argue that all the council will do is militarize the region while hindering genuine environmental protection efforts. This could become an issue for Bolsonaro, as the international community continues to strongly urge Brazil to protect the vital Amazon ecosystem. In the face of his divisiveness and attacks on minority groups, it remains to be seen if an improving economy will be enough increase the approval ratings of the “Trump of the Tropics” and his allies leading up to local elections in October.



On October 27, the Argentine left returned to power when Alberto Fernández defeated incumbent presidential candidate Mauricio Macri. Riding a wave of discontent over Macri’s neoliberal policies, Fernández won the election promising a different approach to solving Argentina’s economic malaise. However, he will be forced to deal with many of the same challenges faced by his predecessor as he tries to jumpstart the Argentine economy while avoiding a loan default. Though Fernández has said that Argentina is currently unable to fulfill the $37 billion in debt repayments owed in 2020, he announced intentions to renegotiate terms of payment with the IMF and private bondholders. In addition to servicing Argentina’s debt, Fernández must find a way to revive the country’s economy. This task will be made more difficult by Macri’s unsuccessful economic maneuvers as well as promises Fernández made on the campaign trail. Shortly after Fernández’s victory, the Macri administration implemented a policy known as el cepo. “The clamp” prevents Argentines from purchasing more than $200 a month. Though this was meant to preserve Argentina’s dwindling foreign reserves, it also had the unintended effect of severely limiting economic activity. Aside from periodic debt payments, Argentina needs sustained economic growth in order to ensure lasting prosperity. However, it seems that, for the time being, the clamp will remain in place. Meanwhile, Fernández has announced the establishment of a “social pact” between business leaders and trade unions to highlight Argentina’s urgent need for economic growth and promised to turn away from Macri’s policy of cutting public spending. Fernández has signaled a moderate, center-left approach to reanimate economic activity. However, it remains unclear if his plans will be enough to pay back the nearly $100 billion Argentina owes to creditors, reign in rampant inflation, and leave behind a thriving economy with healthy government finances. It will take many years to solve the underlying issues that continue to keep Argentina stuck in a cycle of debt crises and recessions. Nonetheless, Fernández and his economic team (including economy minister Martín Guzmán, central bank chief Miguel Ángel Pesce, and production minister Matías Kulfas) are optimistic that they can set Argentina on the path to recovery in 2020.



Heading into the second year of his administration, Mexican president Andrés Manuel López Obrador, also known as AMLO, will have to face a flagging economy and rising crime rates without alienating his base of support. The relationship between AMLO and the business community got off to a rocky start when he halted the construction of Mexico City’s new airport and indefinitely suspended all oil field auctions. In order to improve the sluggish growth that has characterized his presidency, AMLO will have to regain the confidence of the investing community. He has begun doing so by softening his anti-business rhetoric, but he still has a ways to go in order to earn the trust of the private sector. The Mexican economy was almost completely stagnant in 2019. In order to counter this trend, AMLO has unveiled a host of measures aimed at increasing investment as part of his 2020 economic plan. Included within this strategy is his national infrastructure plan, which aims to foster public and private sector investment totalling over $40 billion to go towards improving roads, railways, airports, and telecommunications infrastructure across the country. Meanwhile, the renegotiated US-Mexico-Canada (USMCA) trade agreement continues to make progress. The US Senate ratified the agreement, and President Trump is expected to sign it as soon as next week. Nevertheless, there remains much to be done before the pact can officially go into effect. The Canadian government has yet to ratify the USMCA treaty, and various hurdles must be overcome after it receives the Canadian seal of approval. Once Canada ratifies USMCA, a transition period will begin in which the countries must implement the protocols outlined in the agreement. One hotspot of the ensuing negotiations will surely be Mexico’s enforcement of stricter workers’ rights measures. This whole process could take months or even years to complete. In the meantime, AMLO will also have to work towards improving the rule of law in Mexico. One of the central tenets of his campaign was a reworking of Mexico’s policing practices, arguing for a policy of “abrazos, no balazos,” Spanish for “hugs, not gunshots.” However, AMLO’s tenure has seen a staggering increase in violent crimes across Mexico. This led him to establish the country’s new National Guard, a police-like force under military command that aims to stem the rise of violence in Mexican communities. The challenges facing Mexico in 2020 promise to test the limits of AMLO’s high popularity as weak economic growth and security issues increasingly come to a head.



Despite being one of the countries with the most promising macroeconomic indicators in the region, with an estimate of 3.2% growth in 2020, Colombia faces a host of challenges in 2020. On the legislative end, an initially difficult year for President Iván Duque ended with signs of hope for the coming year. Despite his Centro Democrático party failing to have formed a majority coalition in Congress, Duque was able to overcome his political failures earlier in 2019 and pass his landmark tax reform law with the support of the Cambio Radical party. For now, Cambio Radical maintains its independence from the government, though sources within the party claim that the formation of a coalition with Duque remains possible. In order to secure the continued success of his legislative agenda, Duque must secure an effective governing coalition. Furthermore, the so-called ‘Ley de Crecimiento Económico” tax reform law is not out of the water yet, as it faces at least eight lawsuits to be resolved in Colombia’s Constitutional Court. Duque will also have to continue to pursue international aid to address the Venezuelan migration crisis. To date, over four million Venezuelans have fled their country, with the vast majority ending up in Colombia. Coupled with the millions of internally displaced people remaining from the country’s armed conflict, Colombia does not have the resources to adequately absorb this rapid influx of people. The Colombian government has admirably refused to let financial strain deter it from its “open door” policy towards Venezuelans. However, Duque continues to court the international community for greater support. His administration must balance these political and financial obstacles while attempting to quell the widespread civilian anger that has led to massive anti-government protests. Since November, hundreds of thousands of Colombians have taken to the streets to protest Duque’s economic plans and lack of support for the implementation of the peace process with the former FARC guerrilla, as well as police brutality and widespread government corruption. The government must also grapple with high levels of debt and unemployment which, in addition to the protests, threaten to derail the country’s economic stability.


Puerto Rico

Still recovering from the damage caused by Hurricane Maria in 2017, Puerto Rico suffered a further blow from the series of earthquakes that has struck the island over the past few weeks. Deadly tremors and landslides ravaged the southern part of the island and have displaced thousands. While the administration of Governor Wanda Vázquez claims that the damages caused by the earthquakes amount to $110 million, analysts claim that the losses could be much higher. Less than a year after the resignation of Governor Ricardo Rosselló, Puerto Rico has once again been thrust into a political crisis by the discovery of a hidden stockpile of disaster relief aid in a warehouse in the southern city of Ponce. Even though Vázquez responded by promptly firing the Housing and Family Secretaries and the head of Puerto Rico’s disaster relief agency, protestors across the island as well as the mainland US are urging her to step down. Meanwhile, the Trump administration has placed onerous restrictions on congressionally approved aid for Puerto Rico’s recovery, promising yet another drawn out process. The Puerto Rican economy had already been struggling with years of recession compounded with Maria and the island’s declaration of bankruptcy. However, 2018 and 2019 brought about a slight uptick in both economic and population growth. That being said, economic analysts at Moody’s have warned that damage from the earthquakes and instability from the subsequent political turmoil threaten to dampen this momentum. Though there are some positive signs for Puerto Rico, such as record numbers of tourists, the Puerto Rican economy must deal with fundamental setbacks, such as crushing debt, population loss, and systemic corruption.



Last October, Bolivia was plunged into chaos over allegations of corruption involved in the election of left-wing leader Evo Morales to his fourth presidential term. In the face of violent protests and the loss of support from the military, Morales and Vice President Álvaro García Linera fled to Mexico. In the aftermath of Morales’s self-exile, conservative senator Jeanine Áñez took over as interim president of the country. Despite having limited power as a temporary leader without a legislative majority, Áñez has made her mark by reshaping Bolivia’s foreign policy. For the first time since 2008, the Bolivian government has appointed a representative to the United States, while expelling Venezuelan diplomats from the country. Bolivia’s electoral tribunal has announced that the elections to officially replace Morales, along with the members of the legislative assembly, will take place on May 3. Currently in Argentina, Morales has announced that former economy minister Luis Arce and former foreign minister David Choquehuanca will stand as the presidential and vice-presidential candidates, respectively, for his Movimiento al Socialismo (MAS) party. Áñez has also announced that she intends to run for office. For now, it is unclear if Bolivia’s political right will coalesce around her as the main candidate to challenge the MAS. Until then, Áñez will have to focus on returning a sense of normalcy to a country still racked by political violence.



2020 is set to be yet another grim year for Venezuela. Ever since National Assembly President Juan Guaidó failed to garner sufficient military and political support to topple strongman Nicolás Maduro, momentum for change in the country has seemed to die down. This “protest fatigue”, as it has been described by experts, has allowed Maduro to consolidate power and entrench himself in the presidency while continuing to act against his opponents. On January 5, Guaidó and other opposition lawmakers (who form the majority of the National Assembly) were prevented from entering the vote for the legislative body’s new head. A reduced quorum of pro-Maduro lawmakers, which Guaidó alleges failed to meet the legal minimum for the chamber to vote, elected congressman Luis Parra to the position. The opposition later held their own vote, where Guaidó was reelected. Though Guaidó has and continues to be recognized by a majority of the world, this has failed to have much of a tangible effect on the ground in Venezuela. Conditions in Venezuela continue to be dire, as crime, poverty, and unemployment run rampant while the economy continues to shrink by double-digits. This situation has led millions of Venezuelans to give up hope of change and instead abandon the country, in what has become a migration crisis spilling into the borders of other Latin American countries. Though the US has continued to escalate its imposition of strict sanctions on figures related to the Maduro regime, this has failed to generate any change in leadership. Guaidó has embarked on another international trip in order to garner support for his cause, but it is hard to see this leading anywhere given that Maduro commands the loyalty of the military, the judiciary, and now, potentially, the National Assembly.



After months of political turbulence, Peru seems set to return to normalcy, with President Martín Vizcarra in a renewed position of power. In September, Vizcarra took the unprecedented step of dissolving the Peruvian Congress after reaching an impasse with the opposition-dominated Congress. Though the opposition, headed by Keiko Fujimori (who happens to be the daughter of former strongman Alberto Fujimori) denounced Vizcarra’s maneuver, it was eventually upheld by the Peruvian Supreme Court. Vizcarra then called for a special election to instate a new Congress from now until the regularly scheduled election next year. There was no clear winner in Sunday’s vote, which saw Fujimori’s Fuerza Popular party fall from being the first to the sixth largest party in Congress, in a rejection of Fujimori (who is currently being tried on corruption charges) and her opposition to Vizcarra’s signature anti-corruption measures. It may be difficult for Vizcarra to create a governing coalition in such a fragmented legislature. However, his anti-corruption drive is immensely popular among the Peruvian public, and these measures are expected to pass successfully. 2020 is set to be a better year for Peru, as the final resolution of the country’s constitutional crisis brings about greater stability and incentivizes investment in one of Latin America’s fastest growing economies.


Though many of the region’s protest movements have calmed down since their peak last October and November, politicians will have to go about resolving these deep-seated issues in 2020 in order to prevent further unrest. There are some positive signs for the region, including the resurgence of the Brazilian economy and the continued growth presented by Colombia and Peru. That being said, there are certainly more questions than answers pertaining to Latin America’s outlook for the coming year.