Tensions will rise in Latin America if leftist governments fail

Posted 3/26/2023 4:47 PM / Updated 3/26/2023 4:48 PM

(Credit: IE University/Disclosure)

Corresponds in Lisbon – China’s strong presence in Latin America will require redoubled efforts by the United States and Europe to keep the region closed to the West. According to IE Rector Manuel Muñiz, who was Spain’s deputy foreign minister, the fact that most Latin countries refuse to endorse sanctions against Russia, after invading Ukraine, indicates that North Americans and Europeans are failing to strengthen relations with these countries.

He believes that Brazil, as the largest Latin economy, will play an essential role in regional integration. However, Latin America will have to rediscover economic growth in order to distribute income. In Moniz’s assessment, massive social inequalities are continuing sources of tension in the region, which, in the five years leading up to the novel coronavirus pandemic, had the worst performance of the activity in seven decades. And when I began to recover, I had a serious health crisis. “This large social inequality fuels political polarization and encourages populism,” notes the professor of politics, economics and international relations.

For the dean, with the recent shift in part of Latin America to the left, especially in Brazil and Chile, this political current cannot fail to promise to improve the lives of the population, while at the risk of causing further unrest. It also draws attention to the prevailing rule of law, as well as political and legal security, so that investors feel comfortable allocating much-needed resources to countries, above all, to improving infrastructure. The following are excerpts from the interview that Muñiz gave to the letter on the Ibero-American Summit that took place this weekend in the Dominican Republic.

How did countries reach the Ibero-American summit two years after the pandemic?

With big changes since the last time they met. On the economic front: The past few years have generally been difficult for the region, with slow growth. Politically, there were earthquakes that indicated the deviation of several countries to the left. This is especially true in Chile and Brazil. And finally, on the geopolitical level, the meeting takes place in an apparent deterioration in relations between the United States, Europe and China. Given China’s centrality in the regional economy, rising global tensions will be a challenge for Latin American countries.

What are the main challenges facing the region today?

For many decades, the main challenge has been to provide equitable growth. The five years leading up to Covid were the worst in terms of economic performance for the region in seven decades. The impact of the epidemic was very great. Latin America experienced a contraction in economic activity on a scale not seen in 100 years. In other words, Covid hit an economy that was still recovering, facing a commodity cycle collapse, and struggling to improve productivity and raise incomes.

We have seen both far-right and far-left governments take power in many countries. How do you rate this movement? What are its consequences?

I think the movement to the left is rooted in the need to build more equitable societies. The region has a mixed record, to say the least, on this front. This clearly fueled political polarization. The big question is whether these new leftist leaderships will be able to deliver results.

Latin America has long been a populist paradise. Why can’t you get rid of this pest?

In my opinion, the fundamental causes of populism in Latin America are social inequality and the lack of a unified and secure middle class. The lack of an effective income distribution tool weakens the center of the political spectrum.

From an economic point of view, Latin America proved to be a failure. It grows less than the average for other regions. Why?

There are many reasons for this lack of growth. Human capital development is definitely one of them. The lack of infrastructure in large parts of the region and the modest level of regional economic integration are other factors that contribute to this reality. More: Political instability, which in some cases results in legal uncertainty, is critical in some cases and discourages foreign investment.

Is it possible to change this frustrating situation? like?

Yes, through a clear and sustainable policy to combat social inequalities, invest in education and infrastructure, promote regional integration and support democratic institutions and the rule of law. These are the points that make a big difference.

How do investors see the region? Is there any reason for this mistrust? Why?

Rule of law issues are pervasive in Latin America. In the case of investments originating in Spain, there have been cases of political exploitation. This is the symbol of Mexico. Rarely a week goes by without the country’s top leadership attacking Spanish companies or their activities in the country. This discourages international investment.

What do investors fear the most in the region? Erosion of the democratic rule of law and exposure to political risks. Is it possible to think of a more prosperous Latin America? Why?

Sure, it is possible. But it takes a certain kind of sustainable political leadership. The region has extraordinary natural and human resources. In my opinion, there is no structural reason why Latin America cannot achieve per capita income levels similar to those seen in European or East Asian economies.

Why does the United States keep its back on Latin America?

This is a very relevant question. The United States has not invested enough time or resources in Latin America. Now I discovered that the region is not willing, for example, to impose sanctions on Russia, despite pressure from the United States and Europe. China, Russia’s ally, is the main trading partner for most Latin American countries and one of the largest creditors in the region. And even one of the largest investors, including in Brazil, by the way. Both the United States and Europe need to be more present in the region, diplomatically and economically. If we want Latin America to remain part of the West, we must stick to it.

What role does Brazil play in regional integration?

She plays a major role. Regional integration simply will not happen if Brazil is not a part of it.

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