Left Populism in Latin America – A Danger to Economic Development?

This year is election year in Mexico, Brazil, Venezuela and Colombia. And at least three of these countries have candidates with good chances, that are clearly on the left side of the political spectrum. Andrés Manuel Lopéz Obrador leads the Mexican political field with his MORENA coalitions; in Brazil the question remains open if Lula da Silva will somehow make it back into the elections; and in Colombia the former M-19 guerrillero Gustavo Petro made it into the final electoral round. The field of candidates in Venezuela is less easy to categorize in classic left/right, but considering the Chavez legacy, the overall political structure of the country can still be considered “left” and left populism is not exactly unseen in this oil-rich state.

For all four countries we have seen writers and economic leaders voicing their concerns over left populist movements endangering economic development. One fear has been that, with a free market critic in the white house who has repeatedly been on record with racist insults against the US’s southern neighbors, any left populist in Latin America would be able to close up its country’s markets. In other words, the free trade agreements that have been worked on over the past decades would be off the table rather quickly. In the aftermath, economic growth would come to a halt, endangering the global market and potentially leading the next big crisis.  

The Chances of Closing up Markets

The chances of countries leaving free trade agreements under a new left leadership are certainly there. A report on the economic development in Mexico even indicated that its participation in the North American Free Trade Agreement (NAFTA) does actually not benefit its economy. The fact that US American leadership is tweeting racist insults against Mexicans and Central Americans does clearly not help the cause of open markets (and internationally open societies). Lopez Obrador and his team have shown divided positions on this question, keeping the possibility of at least renegotiating the terms of NAFTA on the table.

Gustavo Petro in Colombia has not positioned himself explicitly against the United States-Colombia Trade Promotion Agreement (CTPA), but had for example been in support of local, informal trash collectors over big companies during his time as mayor of Bogotá. He has also promised to implement ‘green taxes’ that would exclude some of the American products from the Colombian Markets.

Lula da Silva has, on the other hand, a track record of focusing Brazil’s economy on itself and its neighbors. He has used the country’s economic power in the region to strengthen a southern block against the US (and partly against the WTO).

Already a short glance at these three candidates shows that there is certainly interest in at least renegotiating the economic order in the Americas. With protectionist politics in the US and an at least limited benefit for the respective countries under the current conditions, these negotiations might even have a chance to become reality.  

Crashing Markets Through Negotiations

Hence, part of the fears mentioned above are certainly reasonable. Only that renegotiations in themselves are not yet crashing any market. They might lead to short term ‘bumps’ in stock markets and currency trade but are not likely to have an impact on real economic development. Additionally, all four countries mentioned above do in fact have strong and diverse political oppositions to the left populist striving after power that will not allow a radical closure of the markets but – if at all – lead to rather reasonable debates on smaller corrections.

Unfortunately, this does not lead us to the assumption that nothing threatens economic development to the south of the United States. A report published by the Brazilian Iganapé Institute highlights a problem that puts the whole region at risk – and economically: while accounting for 8 % of the world’s population, 38 % of the criminal killings take place here. And 25 % percent of the worl’ds homicides are committed in Brazil, Venezuela, Mexico, and Colombia.

This is not a new development. Reports on human rights violations, police violence, organized crime, torture committed by cartels, military forces, and the police alike are too much to count. Just this week, protests are taking place in central Mexico where students have been once more murdered by the Jalisco New Generation Cartel. Most likely the three young men died, because they had been mistaken for someone else.  

It is such profound disregard for human life that is likely to threaten economic development. It becomes increasingly difficult to invest in larger productions sites, if each area can turn into a war zone at any moment. Another problem is the so called brain drain, or human capital flight. What this means on the ground is, that who ever can, leaves either the region or the country. The higher one’s education and income, the more likely one will leave. A third point is that it becomes harder to find partners ‘on the ground’ to work with. The risk to be financially involved with criminal organizations or individuals when investing in these countries rises. Due diligence and measurements to protect the investments against AML violations are increasingly complex.  

The critique against market protection without human rights protection has been voiced before – and it has been ignored before. But in a time when so much fear against populist political leadership is voiced, strategies against the gross violation of the very basic right to “life, liberty, and security of person” should be included in these debates.

 

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