January 2022

By Gabriel Sánchez Zinny

A few months ago, as vaccination rates increased around the world, we were hopeful of returning to a pre-COVID reality. However, the emergence of the Omicron variant and the threat it brings to public health, have delayed the region’s economic recovery and harm general well-being. The first months of the new year in Latin America will be marked by an increase in infections, alongside varying reactions from governments facing a population fed up with closures and quarantines.


This reality will, once again, challenge the states' capacity to execute on their plans and policies, while already hindered by limited resources due to increased deficits and debt, combined with growing inflation across the region. The demands of the population for more effective state governance to increase quality of life will continue to stress political leaders and democratic systems in general, as we saw in 2021.


The influence of China, and to some extent Russia, will likely continue to grow in the region. China will continue to increase its investments in and trade with the region, widening the involvement gap with the West. Meanwhile, The United States appears to have taken a less proactive approach, focusing more on Asia and defensive actions against China, rather than establishing itself as an outspoken leader and partner in Latin America.


Global value chains will continue to be redefined, as companies around the world relocate due to global instability, the uncertain future of the pandemic, and the growth of nationalism. Investment in automation and robotization will continue to increase, making local production more profitable than a global system dependent on manufacturing and transportation between countries and continents. This reality will continue to offer important opportunities for nearshoring, with Mauricio Claver-Carone, president of the Inter-American Development Bank estimating “that, if Latin America and the Caribbean capture 15% of imports from the United States that currently come from places outside the Western Hemisphere, the region can increase its exports by 72 billion dollars per year”. The Bank has recently announced several new lines of financing to promote nearshoring.


2022 will see three presidential elections in Latin America, first in Costa Rica, then Colombia, and finally Brazil. In addition, the new president of Honduras, Xiomara Castro, will take office in January, and the recently elected president of Chile, Gabriel Boric, will take office in March. These changes will spark new policies and visions for the region’s recovery. If 2021 is a good indicator, we can expect very polarized elections this year, especially in Colombia where more than 10 candidates are running. The extreme polarization of campaigns will continue to make it very difficult to govern and create coalitions and majorities in congress, putting even more stress on the lack of “delivery” that is being demanded of democracies.


The other important election this year is the midterm election in the United States, where President Biden's low popularity is driving projections of a Republican victory in the House of Representatives and perhaps the Senate as well, sure to complicate the approval of the agenda of the Democratic government for the last two years of the Biden administration. It will be important to follow former President Trump's influence on candidate support and funding, which will serve as a good indicator of whether he will run in the 2024 presidential election.


On social issues, immigration in Latin America will continue to be a challenge, not just to the United States but also between countries in the region. This will continue to contribute to the more than 40 million Latin Americans who have left their communities due to lack of freedom and possibilities for prosperity and jobs. The generation of quality jobs, as I point out in my recent book Sin Trabajo, will present another enormous challenge this year, where the pandemic has stimulated transformations that are impacting the workforce’s needs much faster than governments and educational systems can adapt to provide the necessary training.


Hopefully we will understand this year that, beyond the political and party ideologies, it needs to be everyone's objective to focus on generating greater prosperity and opportunities in the region, especially for the most vulnerable segments of the population. To achieve this, it is essential to generate economic stability and respect for the law, as well as facilitating greater economic integration and a dynamic private sector that generates quality employment. It is up to us.