January 2017

By Gabriella Ippolito

As this new year begins, a number of countries in South America are facing serious economic and political challenges as well as national elections. In Brazil and Argentina, political leaders are grappling with long-lasting economic recessions and anxious citizens, while in Ecuador and Chile, South America’s “pink tide” may continue being rolled back as conservative candidates are catching up or leading the polls in upcoming presidential elections. Finally, the ongoing political and humanitarian crisis in Venezuela continues to command the attention of the region as well as the broader international community.

In Brazil…

South America’s largest economy remains mired in an economic crisis and a political class that is dogged by ongoing corruption allegations. The current administration headed by President Michel Temer has experienced declining approval rates during the prolonged recession and is under pressure to improve the country’s shrinking economy and get the budget deficit under control. President Temer has announced new measures to help jump-start the economy such as boosting productivity by offering more credit from state development bank BNDES to small businesses and a labor reform. The government is also examining measures to reduce the time it takes to authorize imports and exports. Notwithstanding these efforts, the economic outlook for Brazil in 2017 has worsened in recent weeks. For example, on January 2, the central bank reduced its forecast for GDP growth for 2017 to .5 percent, down from .8 percent. 

As part of the ever-growing “Lava Jato” corruption investigation, former president Luiz Inacio “Lula” da Silva will face a fifth corruption trial and, if convicted, could face more than 15 years in prison. The latest case involves the acquisition of land for the Lula Institute (a think tank founded by the former president) and an apartment in a Sao Paulo suburb allegedly used by Odebrecht, a construction firm, to bribe Lula in exchange for public contracts. Yet despite all this, recent polls still favor Lula to regain the presidency should he choose to run in the 2018 elections. 

In Argentina…

Since taking office, economic reforms have been central to President Mauricio Macri’s political platform. Despite Mr. Macri’s promise of a return to growth in the second half of 2016, Latin America’s third largest economy is still in a recession. In order for the president to avoid losing ground in Argentina’s October 2017 legislative elections, the projected return to growth in 2017 is crucial. Mr. Macri's own political party (“Republican Proposal”) is in the minority in the Argentine National Congress and if it loses seats in the election, the further passing of reforms and legislation will likely prove even more difficult. President Macri recently shook up his finance team, announcing that finance minister Alfonso Prat-Gay would be replaced and that the Ministry will be reformed into two divisions: a Finance Ministry led by Luis Caputo; and a Treasury Ministry headed by Nicolas Dujovne. It is hoped that this new economic team will enable growth, slow inflation, and reduce unemployment. 

In addition to economic turmoil, Argentina is home to high political drama as former president Cristina Fernandez de Kirchner was indicted in late December 2016 on fraud and corruption charges related to major public works projects. This case will be ongoing throughout 2017.

In Ecuador…

Ecuador’s general elections, with the first round set for February 2017, could bring significant change to the country, including a new president for the first time in a decade since current President Rafael Correa (Alianza Pais Party) was first elected in 2007. The presidential candidates include former vice president and U.N. Special Envoy on Disability and Accessibility Lenin Moreno of the left-leaning Alianza Pais Party and more conservative candidates, including Guayaquil banker Guillermo Lasso (CREO), Guayaquil attorney and National Assembly member Cynthia Viteri (Social Christian Party), and former mayor of Quito Paco Moncayo (National Agreement for Change Coalition).

While Mr. Moreno currently has the lead in the polls at 28.6 percent, he is unlikely to cross the threshold that will enable him to avoid a runoff, which would take place on April 2. Mr. Moreno’s lead has also shrunk in recent months as more conservative-leaning candidates catch up. If the election goes to a runoff vote and the conservative parties coalesce around Mr. Lasso, Ms. Viteri, or Mr. Moncayo, Ecuador could become the latest country in Latin America whose “pink tide” is turned back, following Argentina, Brazil, and Peru of last year.

In Chile…

Chile’s next presidential election is scheduled for mid-November 2017. Recent updates show that former president Sebastian Piñera, a conservative candidate, is leading in the polls with 23 percent, having positioned himself as the leader of the opposition to current left-leaning president Michelle Bachelet’s policies. President Bachelet has said that she will retire from Chilean politics after the election and her popularity has decreased notably towards the end of her mandate. In a recent poll, 68 percent of Chileans said they disapproved of her presidency. Other candidates for president include independent Senator Alejandro Guillier (19 percent), former president Ricardo Lagos (four percent), Manuel Jose Ossandón (four percent), and former Secretary General of the Organization of American States (OAS) José Miguel Insulza (one percent). Still, the race is just beginning and more candidates may announce their intention to run. Indeed, many political parties in Chile have said that they will only announce which candidate they are supporting in March.

In Venezuela…

While Argentina and Brazil each show potential for economic growth, Venezuela continues to be the most weighed down economy in the region as it suffers from a double digit recession and triple digit inflation. Venezuela has the both the highest inflation rate (1,107 percent) and the deepest recession in the world. President Nicolas Maduro (PSUV-Socialist Party) has failed to mitigate the country’s economic, political, and humanitarian crisis and has faced street protests and calls for a recall referendum last year. Only his hold over the electoral council and courts has enabled him to avoid such a referendum. Vatican-moderated talks with the opposition commenced in late October 2016 but fell apart in December.

On January 4, the evening before the National Assembly’s new session was scheduled to commence, Mr. Maduro appointed a new Vice President, Tareck El Aissami, a former minister of the interior and Governor of the state of Aragua. Mr. El Aissami’s appointment is critical because, should the opposition gather the signatures necessary for a referendum vote, and should President Maduro be recalled, Mr. El Aissami would complete Mr. Maduro’s presidential term through 2019. Mr. El Aissami, a self-identified “extreme Chavista,” is reputed to have ties to narco-traffickers as well as to Hamas and Hezbollah.

Leaders in the opposition-controlled Venezuelan National Assembly have said that they are afraid that President Maduro and his PSUV Party supporters will attempt a coup d’etat this year to remove all of the Assembly’s powers and further solidify control over the state. Indeed, PSUV leaders have stated publicly that the current National Assembly needs to be dissolved, despite calls to the contrary by the OAS. In this increasingly destabilizing environment, many observers are arguing that greater regional pressure on the Maduro government will be needed to help lessen the crisis and provide support for opposition voices.