The Economist - USA (2019-11-30)

The EconomistNovember 30th 2019 The Americas 33

2

Bello The street and the politicians

A

nother week, and another Latin

American country is out on the

street. Now it is Colombia, where large

protests have been taking place since

November 21st. In other places, demon-

strations have been triggered by specific

things, even if the protesters’ demands

went beyond them—increases in metro

fares in Chile and fuel prices in Haiti and

Ecuador, and electoral fraud in Bolivia.

But in Colombia there is just a pervasive

feeling of discontent with an unpopular

government. It has brought disparate

groups onto the streets, from students,

trade unionists and indigenous and gay

activists to archaeologists against min-

ing. A similar mood prevails in much of

the region. The longer this goes on, the

more it may paralyse governments.

The protests are not without prece-

dent, nor are they confined to Latin

America. In the early 2000s, elected

governments were toppled in Argentina,

Ecuador and Bolivia (twice, in disorders

led by Evo Morales, who has just suffered

the same fate). Huge protests erupted out

of almost nothing in Brazil in 2013.

As in 1968, this is a time of global

discontent, but it is particularly intense

in Latin America. The protests are not its

only manifestation. Popular anger

showed up last year in electoral victories

for contrasting populists, Jair Bolsonaro

in Brazil and Andrés Manuel López Obra-

dor in Mexico. The overarching trend of

recent Latin American elections has been

defeat for incumbents, confirmed in the

return of Peronism in Argentina in Octo-

ber. In Uruguay Luis Lacalle Pou of the

centre-right appears to have ended 15

years of rule by the centre-left in a presi-

dential election on November 24th.

The causes of this ill humour include

economic stagnation or slowdown, the

diminishing of opportunity and the fear

of falling back into poverty amid persis-

tently deep inequality. The gap between

rich and poor has not widened in Latin

America, but it has become more visible.

Take Chile, where the Costanera Centre, a

shopping mall built around a priapic

64-storey office tower in Santiago, has

been the target of anger. “A person who

earns 300,000 pesos [$375] a month sees a

handbag that costs 4m pesos,” says Marta

Lagos of moriChile, a pollster. Ferraris and

Maseratis have arrived, their owners

seemingly oblivious to poor housing,

overcrowded buses and patchy health care.

Latin America’s political class has been

discredited by corruption and campaign-

finance scandals. These, too, are more

visible than in the past, thanks to more

combative prosecutors, investigative

journalists, whistleblowers and freedom-

of-information laws. In other words, the

growth of transparency has outpaced

that of good governance. Political parties,

many of which are weakened and frag-

mented, have largely ceased to do their

fundamental job of channelling discon-

tent. The politicians have, in short, been

overtaken by the street.

Diagnosis is easy but finding a cure

will be much harder, as governments are

discovering. Many of the problems are

deep-rooted and their solutions long-

term. Higher growth, more progressive

tax, higher minimum wages and better

social provision would assuage dis-

content. The problem is that growth

depends on raising productivity, which

requires unpopular reforms. And conser-

vative elites resist paying more tax. The

left in Chile and Colombia is staying on

the street to win more concessions. In

1968 prolonged global disorder ended in a

conservative reaction. That risk is espe-

cially high in Chile, where looting and

vandalism continue.

The immediate official response has

been to run for cover. In Ecuador Lenín

Moreno’s government cancelled the

fuel-price rise and is struggling to get

congress’s assent to modest tax in-

creases. Chile’s government is fighting a

rearguard action against demands for

much higher public spending. In Colom-

bia President Iván Duque may back away

from mooted labour and pension re-

forms. In Brazil Mr Bolsonaro postponed

a bill that would trim salaries and jobs in

the bloated public sector because of fears

it might trigger protests.

Reform has rarely been easy in Latin

America. More presidents may imitate

Martín Vizcarra in Peru. In 20 months in

office he has ducked unpopular deci-

sions, such as approving a big mine.

Riding an anti-politician wave of anger,

he shut down an obstructive congress.

Along with Mr López Obrador, he is one

of only four Latin American presidents

with an approval rating of over 50%.

Crowd-pleasing gestures can quiet the

streets. They postpone discontent, but

they will not diminish it.

Protests will deter governments from making unpopular but necessary decisions

drop in aid from Venezuela, has been

squeezed by American sanctions. The

Trump administration has banned cruises

and “people-to-people” (ie, non-group)

visits. The government expects the number

of tourists to drop by 8.5% this year.

The scarcity of dollars has put the cuc

under pressure. Currency dealers listed on

Revolico, a shopping portal, demand up to

1.2 per dollar. Transactions are settled off-

line, perhaps at a slightly higher valuation

of the cuc.

The government hopes that the Tiendas

mlcwill keep dollars in the country. It may

funnel them into state enterprises, which

would help them boost production and al-

leviate shortages of consumer goods.

More broadly, the government seems to

realise that it needs to take bolder steps to

modernise the economy. It is encouraging

state-owned enterprises to behave more

like private ones, though turning bureau-

crats into professional managers is prov-

ing difficult. It is loosening restrictions on

private enterprise. In early November Mar-

ta Elena Feitó Cabrera, the vice-minister of

work and social security, announced that

private firms would be able to provide

goods and services to foreign firms. The

government is also trying to attract more

foreign investment, including by setting

up a “one-stop shop” for permits.

But the state has a hard time letting go.

Although Cuba’s new constitution, enacted

in April, recognises private enterprise, the

law that allows firms to incorporate has yet

to pass. They still cannot legally import

supplies. Wholesale markets, vital to dis-

tributing goods efficiently, have yet to ap-

pear. The dual-currency system continues

to distort prices across the economy. But at

least scooters are cheaper. 7