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posted on 16 August 2017

In Latin America, Populism Is Alive And Well

from STRATFOR

-- this post authored by Paulo Gregoire

Populism is frequently diagnosed as the root cause of Latin America's greatest political and economic ills. But just as the human body reacts to an infection by entering a feverish state, many consider populism to be the public's response to a society in disarray. By understanding the underlying conditions that enabled the rise of strongmen like Argentina's Juan Domingo Peron or Venezuela's Hugo Chavez, we can more easily spot the early signs of populism flaring in the region once again.

Men of the People

In the centuries following its independence, Latin American history has been marked by economic cycles of boom and bust. Periods of political volatility and upheaval accompanied these ups and downs, further adding to the stress that financial uncertainty places on regional governments. It is little surprise, then, that powerful leaders gained a reputation in Latin America as the glue holding society together in times of great strain.

The first of these strongmen - known locally as caudillos - emerged after the region's decolonization during the 19th century, establishing a trend that was to become prominent in the 20th century. From Juan Manuel de Rosas in Argentina to Simon Bolivar in Venezuela, charismatic rulers proceeded to capture the public's attention and, more often than not, their support - a style of leadership today founded on populism.

Of course, the term "populism" is still open to debate in many circles. Some define populist leaders as demagogues who lack fiscal discipline, thus associating the label with a particular policy orientation. Others believe them to be politicians who understand the needs and demands of the people at a given point in time. These views have led to a tendency among economists to use the term to criticize leaders who overspend, who lack coherent economic policies or who overlook the long-term consequences of policies designed to appeal to the masses. But it would be a mistake to associate populists with a single policy approach.

Because populism is a political phenomenon, it is perhaps best viewed through the lens of political power. Rather than being champions of a particular economic vision, populist leaders are those who are able to capitalize on popular discontent with the status quo to take control of the government, where they stay by maintaining a direct connection to the masses.

Capitalizing on Discontent

And dissatisfaction isn't difficult to find. Some Latin American societies are among the most unequal, in terms of income, in the world. When hard times hit, governments in the region must carefully weigh the potential consequences of much-needed austerity measures against their citizens' ability - and willingness - to weather them.

Whereas more developed parts of the world can often rely on family savings and easy access to credit to pad individuals' pocketbooks until growth begins to pick back up, Latin America cannot. Even in the region's largest economies - Brazil, Mexico and Argentina - gross domestic product per capita is only a quarter of the United States'. Recession and poor fiscal discipline can easily lead millions of people back into poverty. Brazil's economic downturn over the past two years, for instance, has put nearly 14 million people out of a job.

Lack of upward mobility - along with high unemployment, income inequality, corruption and crime - makes for societies uniquely susceptible to the charms of populist leaders, especially those promising better prospects for all. Such was the case of Peron's Argentina in 1946, where people had abandoned the rural countryside for the cities in droves, causing the number of labor unions in the country to more than double from 1941 to 1945. As the secretary of labor, Peron found himself in an advantageous position to understand the political and cultural changes underway, particularly at a time when the rest of the ruling elite were in disarray, unable to channel the people's demands into action. Coupled with the cults of personality that rampant nationalism fostered at the time, this insight drove Peron's ascent to the head of the nation. His followers even adopted the mantra, "We are neither Yankees nor Marxists, we are all Peronistas."

Founder and leader of the Peronist party and president of Argentina Juan Domingo Peron speaks from the balcony of Government House, circa 1950.

Juan Domingo Peron, founder and leader of the Peronist party and president of Argentina, speaks from the balcony of Government House, circa 1950.

(Keystone/Getty Images)

The policies of early populist leaders like Peron created an image of Latin American populism that seemed to be centered on the state's intervention in the economy. But some of their successors strayed from this path. Peru's Alberto Fujimori, for example, followed a strategy that many dubbed "neo-populism." Elected in the 1990s from a non-traditional political party, Fujimori adhered to the approach of his populist predecessors by shutting down Congress, calling a new constituent assembly to draft constitutional reform, and directly communicating with the people. But he also used this political strategy to take a very different tack on the economy, opting for openness rather than protectionism in order to combat hyperinflation.

Peruvian President Alberto Fujimori addresses a crowd outside the government palace in Lim during a surprise public appearance in April, 1992.

Peruvian President Alberto Fujimori addresses a crowd outside the government palace in Lim during a surprise public appearance in April, 1992.

(DANTE ZEGARRA/AFP/Getty Images)

These reforms, known as the Washington Consensus, were measures the United States, World Bank and International Monetary Fund had advocated throughout Latin America as a solution to the climbing inflation plaguing the region. But while the reforms managed to bring down inflation, they came at a price, pushing unemployment into the double digits in Argentina and Brazil in the early 2000s. And as the region's citizens like to say, "Inflation may reduce purchasing power, but unemployment will destroy it."

A Dormant Condition

The turn of the millennium brought with it the rise of populist leaders who railed against the U.S.-led financial institutions that were responsible for overseeing Latin America's economic liberalization. Chief among them was former Venezuelan President Hugo Chavez, though he was certainly accompanied by anti-establishment leaders in Argentina, Bolivia, Brazil, Ecuador and Nicaragua.

Venezuelan President Hugo Chavez speaks during an anti-imperialist rally at the 40,000-seat Buenos Aires stadium in 2007.

Venezuelan President Hugo Chavez speaks during an anti-imperialist rally at the 40,000-seat Buenos Aires stadium in 2007.

(ALEJANDRO PAGNI/AFP/Getty Images)

The high commodities prices that financed these governments' generous spending programs have slipped over the past two years amid waning Chinese demand. The appeal of populism similarly declined at the same time. But the sentiment has by no means been stamped out completely. The political fate of Latin America's biggest economies will hang in the balance over the next year and a half as Brazil, Chile, Colombia and Mexico hold presidential elections. Meanwhile, Argentina will hold legislative elections in October, a crucial test of the government's plan to amass the congressional support needed to forge ahead with sweeping economic reforms.

Balancing the need for austerity measures with the public's willingness to shoulder the burden they carry is not easy, particularly in societies weakened by division and discord. Though the fall of Kirchnerism in Argentina and the collapse of the economy in Venezuela are only a few of the recent symptoms suggesting a gradual shift away from populism, there are still many factors ensuring that Latin America remains prone to its return in the future. Economic slowdowns, persistent unemployment, far-reaching corruption scandals and the uncertainty surrounding Argentine President Mauricio Macri's ability to see through economic reforms are all reason for pause in ruling out the possibility of a populist revival.

The same can be said of the tension mounting between the United States and Mexico. As the back-and-forth rhetoric grows more heated, it could inflame nationalism on both sides of the border, encouraging more Mexican voters to support populist candidate Andres Manuel Lopez Obrador for the presidency next year. Farther south, a corruption scandal engulfing Brazil's political parties, coupled with an unemployment rate of 13 percent, could likewise make room for a candidate outside the traditional elite to gain momentum.

Mexican leader of the National Regeneration Movement, Andres Manuel Lopez Obrador, takes part in a protest in support of the CNTE teachers' union in Mexico City in June, 2016.

Mexican leader of the National Regeneration Movement, Andres Manuel Lopez Obrador, takes part in a protest in support of the National Coordination of Education Workers (CNTE) teachers' union in Mexico City in June, 2016.

(HECTOR GUERRERO/AFP/Getty Images)

Latin America will remain susceptible to the draw of populism as long as economic and political volatility persists throughout the region. And if history is any indication, politicians will keep trying to harness it when those in power are unable or unwilling to answer society's calls for change.

"In Latin America, Populism Is Alive and Well" is republished with permission of Stratfor.

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