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Latin America in 2021: challenges and opportunities

The coronavirus crisis has devalued almost all raw materials due to falling demand in advanced economies. This global “deflation” of goods has significantly reduced the inflow of foreign currencies into the Latin American economies. The year 2021 will be a year of struggle for economic recovery. But it will also be a very dangerous year politically. Because the increase in poverty will lead to more dissatisfaction on the streets. In an election year that is quite good for the region, people’s frustration can be exploited by populism (left or right). The virus, debt, poverty, polarization and populist authoritarianism. Here the giants are to be defeated.

In 2020, the Latin American economy contracted 8%, generating more than 40 million new arms in less than 12 months. That means that every third Latin American is poor. Under these circumstances, the population might be tempted to fall into the old vice of believing in the false promises of a “strong man” (again). This is a latent threat to the region. El Salvador already has its “strong man” in Nayid Bukele. The new leader of the painting. Promising villas and castles as usual. Difficult solution.

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Latin America in 2021: challenges and opportunities
Latin America in 2021: challenges and opportunities

Let’s talk a little about Mexico. The populist President of Mexico, Andrés Manuel López Obrador, is in favor of a medium-term referendum to confirm his position. Until june. Because it coincides with the parliamentary and regional elections. Of course, his handling of the coronavirus crisis was really unfortunate. It was quite a disaster (in terms of deaths), ranking second after the disasters in the US, Brazil and India. That is on health issues. But economically we also have a catastrophe. With an economic decline of roughly 10% and the loss of 1.1 million jobs, fiscal conservatism and its persistent austerity policies have been a veritable death.

However, his followers love him because he gets out of his car from time to time to eat empanadas with some workers, speaks without a script and fights against the elites. Although its popularity has declined quite a bit recently, it is still extremely high. Especially considering its performance. His charisma as a man of the people struck the ordinary Mexican deeply. On the other hand, there is his reputation as an honest person. Here’s a point in his favor. Even his political opponents recognize his honesty, a very rare virtue seen in “strong men” in Latin America. He will surely win the elections. But can he reduce economic inequality and political corruption with his self-employment plan?

We will hold presidential elections in Ecuador (February), Peru (April) and Chile (November). The Ecuadorian President Lenin Moreno has the rejection of the public and the opposition in Congress. Defeat is very likely. And the big beneficiary could be Rafael Correa’s candidate Andrés Arauz. In short, a return to left-wing populism. Peru is thirsty for an apolitical candidate (an outsider). And populism could take the opportunity. Chile, which was the poster boy of capitalist stability in the region, had to conduct a reality check during the 2019 protests. The plan for a new constitution was passed with an overwhelming majority. Inequality will be the central theme of the new constitution. That could tip the balance to the left in the next election. The good news is that copper prices are sure to rise in 2021.

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