Latin America’s Big Three Dodge Chaos Sweeping Region -- For Now

Daniel Cancel and Simone Iglesias

(Bloomberg) -- Versión en Español

If Latin America’s sudden and violent protest movements have unsettled investors and surprised pundits, it’s worth noting that in the region’s three largest countries -- Brazil, Mexico and Argentina -- the streets have remained relatively calm.

With 380 million people and economies that represent $3.6 trillion annually, the big three usually set the tone. And it’s not like the grievances evident in the affected countries -- Chile, Colombia, Bolivia and Ecuador -- are missing there.

They too face tensions over subsidies, stagnant growth, insufficient pensions and lack of opportunity, and authorities there have expressed concern about contagion. Latin America remains the most unequal, lowest-growth major area in the world.

So is voter revolt headed to the regional giants?

Ballot Box Outrage

One answer is that it has already stopped by. In all three countries, elections in the past year have brought promise of radical change. The voters of Mexico, Brazil and Argentina have expressed their outrage at the ballot box and are waiting for results.

If not, they could take their grievances to the streets in 2020 as well.

“These guys are saying we’ll grow 4% and it won’t be as unequal as before,” said Shannon O’Neil, a senior fellow at the Council on Foreign Relations in New York, in reference to the newly elected leaders. “Can any of the three of them deliver that? The short answer is no and we’ll have to see how long they get the benefit of the doubt.”

While Argentine financial markets are already in turmoil, with the peso at record lows and the government on the verge of defaulting once again, any future social conflict could hit Brazil and Mexico harder, triggering a market sell-off like the one already seen across much of the region.

What’s been notable about the citizen uprisings is how varied the ideologies driving them have been. Bolivia was a leftist haven for 14 years and protests started largely from the right. In Chile, the region’s most market-friendly and successful economy of the past generation, the angry crowds have come from the left. Common has been a sense that the status quo is a source of betrayal.

Behind South America’s Year of Rage, Years of Woe: QuickTake

This has been equally true in the big three.

In Brazil, leftist-led governments ran the country for more than a decade. Then in January, Jair Bolsonaro, a far-right lawmaker who ran on an anti-crime, anti-corruption platform bolstered by free-market economists, took office.

Lopez Obrador

Mexico’s president, Andres Manuel Lopez Obrador, is a man of the left voted into power after disillusionment with his conservative predecessor. He remains widely popular a year into his term despite the economy having slipped into recession and without delivering many signs of growth or major job creation from investment.

The odds of protests convulsing the country “are less in Mexico, because Lopez Obrador and his election triumph were the escape valve for great public dissatisfaction,” said Alejandro Moreno, the director of opinion polling for El Financiero. “Approval isn’t necessarily an indicator of performance.”

There is a hint of unrest. Mexico City has seen some destructive marches in recent weeks to protest public insecurity and the murders and disappearances of women. Bus stations and public monuments have been vandalized, windows broken and graffiti sprayed. But the participants have numbered in the hundreds or, at most, thousands.

Lopez Obrador’s predecessor, Enrique Pena Nieto, ended his six-year term with approval of just 26%, and was seen as part of a system of power-sharing over recent years with the conservative National Action Party that was broken with Lopez Obrador’s election.

Macri

In Argentina, voters had plenty of reasons to revolt over the past few years. President Mauricio Macri’s reform-driven policies to reinsert the country into global markets fell short, triggering a surge in poverty, unemployment, consumer prices and more recession than growth during his four-year term.

Alberto Fernandez, who defied many forecasts and soundly beat Macri, campaigned on a return to the leftist populism of Argentina known as Peronism, restoring purchasing power to the people, bringing down inflation through a social pact with unions and companies and favoring local industry.

In all three countries, voters appear to be giving their new leaders a chance. But the prospect of unrest hovers.

In Brazil, Bolsonaro has downplayed the possibility of violence on the streets in recent comments but that may underline his concern. His legislator son and his economy minister have both referenced an anti-protest measure imposed in the 1960s and 70s under the dictatorship as an option should opponents begin to fill public squares. After criticism, both backtracked. Bolsonaro himself has spoken with admiration of that era.

In addition, an anti-crime package was presented by Justice Minister Sergio Moro which included a measure to absolve police officers suspected of killing criminals and would permit emergency measures in case of large demonstrations. A watered down and less controversial version of the bill was passed by the Lower House late Wednesday.

Polarization in Brazil

“Brazil is experiencing very strong polarization,” said Mauricio Moura, a researcher at George Washington University and the founder of Ideia Big Data. “There is a much greater likelihood of demonstrations for or against the government than a major anti-establishment protest.”

Brazilians are still waiting to see whether the economic measures implemented by the Bolsonaro administration improve their lives, according to Moura. If there’s no progress there, that might fuel a new cycle of protest.

Other regional leaders are “very concerned about the potential for broad social protests to develop,” said Cynthia Arnson, the director of the Latin American program at the Woodrow Wilson International Center for Scholars in Washington. “But also concerned about their limited resources to stave that off.”

In Argentina, Fernandez has to hammer out a deal with creditors, including the International Monetary Fund, over about $100 billion, and will have to try to keep the fiscal deficit in check to avoid another major debt crisis.

“The electoral process helped to stave off this wave of protests in the region,” Juan Cruz Diaz, director of political consulting firm Cefeidas Group in Buenos Aires, said. “The timing for Argentina worked well in that sense.” He added that street protests have occurred plenty in the past and could easily occur again, “especially given the level of stress we’re seeing in the economy.

(Adds vote on Brazilian anti-crime bill in 20th paragraph.)

--With assistance from Eric Martin and Patrick Gillespie.

To contact the reporters on this story: Daniel Cancel in Sao Paulo at dcancel@bloomberg.net;Simone Iglesias in Brasília at spiglesias@bloomberg.net

To contact the editors responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net, Ethan Bronner

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