This past Sunday, February 21st, Bolivian President Evo Morales was defeated in an electoral referendum as he tried to amend the constitution to allow him to run for a fourth straight term in office. Morales’ loss in the polls represents only the latest installment of a clear trend in Latin American politics. Over the last few months, countries across the region have shifted support away from the “pink tide” of left-leaning governments that have ruled them for over a decade, bringing new hope for the political and economic development of the region.
The term “pink tide” refers to the expansion of left-wing ideology and policy throughout Latin America since the turn of the 20th century (pink being a lighter version of red—a color often associated with communism). The election of Hugo Chavez as president of Venezuela in 1998 and the implementation of his “Bolivarian Socialism of the 21st Century” ignited a trend that rapidly influenced other countries in the region. Chavez in Venezuela, Lula DaSilva (followed by Dilma Rouseff) in Brazil, Evo Morales in Bolivia, and Cristina Fernandez de Kirchner in Argentina have been the central figures of the movement, instituting anti-free-market policies in their countries, as well as eroding the democratic institution of their governments. Pink tide governments had intended to empower the previously marginalized working-class of their countries through populist reforms, but their misguided economic policy only worsened their nation’s socioeconomic woes.
Over the past two years, the slowdown of the Chinese economy and the global collapse of commodity prices have hit Latin America’s mostly export-oriented economies extremely hard. Economic growth in the Latin America and the Caribbean slowed down for the fifth year in a row, dipping below 1%. Projections for 2016 do not look much better. Countries like Brazil and Venezuela—who’s GDP is almost 99% based in oil exports—have been hit particularly hard. Citizens of this countries have shifted the blame for the economic hardship to their governments, demanding change.
On November 23rd 2015, conservative candidate Mauricio Macri’s was elected president of Argentina, following almost a decade of populist rule under Cristina Kirschner. Macri did not waste any time implementing his market-oriented political reforms, allowing the Argentine peso to float more freely, amending the tax code, and opening the country modernizing the country’s international trade policy. A month latter, at the other end of the South American cone, Venezuela’s opposition party won a decisive victory in National Assembly elections, undermining Nicolas Maduro’s (Chavez’s hand picked successor after his death) strong grip over the country. In Brazil, President Dilma Rousseff's approval ratings are barely above 10%, as she faces possible impeachment for corruption charges. After Sunday’s defeat, Evo Morales will have to surrender power to a new regime when his term ends in 2020. The improved relationship between the U.S. and Cuba can also be seen as part of the same trend.
The economic outlook for Latin America as a region still looks extremely bleak in the short term. The economies of Brazil and Venezuela will shrink by 4% an 7% respectively over the next year, with most other countries posting only marginally better results (with a few noticeable exceptions). Yet the recent political changes provide us with new hope for the future long term economic development of the region. The imminent shift towards free-market policies will allow for the institutional changes necessary to take advantage of export-derived income if commodity prices rebound, as well creating additional revenue streams through the development of local industries and innovation. Latin America has the potential of being a leader of global growth over the next century, and moving past this era of a “pink tide” is the first step in achieving this vision.