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August 21, 2014

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Saturday, July 12, 2014

New era likely to kick off for region

Bolivia''s President Evo Morales, Uruguay''s President José Mujica, Brazil''s Dilma President Rousseff and Argentina''s President Cristina Fernández de Kirchner wave during a Mercosur summit in Brasilia.
By Marcelo Falak
Guest columnist
Progressive leaders must improve investment conditions in addition to social policies

Nothing lasts forever. The tide of progressive governments which began more than 10 years ago could be approaching its end, given the elections in sight in key countries and the strengthened position acquired there by centre-right opposition parties. But is this result inevitable?

Brazil will vote on October 5, and it is highly possible that it will need to do so again in a second round on October 26. Bolivia has its electoral calendar set for October 12. And Uruguay will most probably go to the polls twice, on October 26 and on November 30.

Closing the circle, Argentina will hold its elections in October 2015 and, given its political and economic turbulence, it is possible to anticipate a recall referendum in Venezuela after April, 2016.

The ball is about to stop spinning in Maracanã stadium, and that will point to the real beginning of the electoral campaigns in the first set of countries.

If in Bolivia, the strength of Evo Morales seems to anticipate a new and legally controversial re-election, things are far from clear in Brazil and Uruguay, countries which may influence the future shape of regional politics more.

The age of the Partido dos Trabalhadores started in 2003, and has lasted three terms until now — two with Luiz Inácio Lula da Silva in command and one with Dilma Rousseff, who is looking for an uphill vindication. She is still favourite for the second round but opposition candidates, especially “social democrat” (conservative) Aécio Neves, have grown in surveys and dream of a scenario considered impossible a few months ago.

The era of the Uruguayan Broad Front started a couple of years later, in 2005, when Tabaré Vazquez made history, followed by current president, José Mujica. The former now wants to return to power for the next five years but he will need to make a big effort to beat an opposition unified around Nationalist (Blanco) nominee Luis Lacalle Pou.

More than a decade is a long time in politics, especially in Latin America, a part of the world where things seem to happen faster because of the intense character of social conflict and the everlasting and mostly unresolved discussion about the basis of wealth distribution. Moreover, things are made more complicated this time by the fact that the economic cycle may be turning, with rising inflation rates and declining growth.

If social instability and supply crisis are the fate of liberal models, inflation and slower growth are the marks of the distributionist ones. The key question is, are the progressive parties and coalitions which have ruled the last years in many Latin American countries capable of adapting themselves to an agenda more concerned with investment and growth, without dropping its historic values?

Economic reality seems to ask them that — if they do not want to be replaced by a cycle of centre-right governments, more sensitive in principle to that kind of programme.

In Brazil, 2010 was the last year of strong growth, 7.5 percent. The decline coincided with the replacement of Lula da Silva by Rousseff, although it should not be explained by that fact but, instead, by the natural expiration of a model largely based on consumption.

In the following years, the growth rate was 2.7, 1 and 2.5 percent, and this year it is expected to be again one percent with a very modest rebound of 1.5 percent in 2015.

Meanwhile, inflation strives to break the ceiling of 6.5 percent, with food averaging at least double than that, a real blow to popular living standards.

In part because of those developments, Brazil has initiated a drive not to lose its budget surplus and see its current account numbers deteriorate.

In Uruguay the path is similar. Growth is no longer what it used to be; if it reached 4.4 percent last year, provisions for the current year dropped to 2.5 percent with similar figures for 2015.

In the meantime, inflation persists at a high 8.5-9 percent, and the budget deficit will finish 2014 at 3.3 percent of GDP.

Argentina is directly in recession and its inflation is above 30 percent and expectations of a rebound for 2015 are pretty modest. Venezuela is doing even worse.

As is well-known, the international context is not the ideal one but China still registers remarkable growth rates, the United States is in better shape, Europe has avoided the worst scenario, commodity prices remain high and interest rates low. So, the problems seem to be ours and linked to investment rates insufficient to keep economic expansion high.

Another key factor is the quality of public spending.

“We need to focus public spending on priorities such as transport, services, energy and a better education. We need to work on the quality of public spending, where we are in debt. We have worked very little at that‘, said recently Uruguayan vice-president Danilo Astori, already named by Tabaré Vázquez as his future economy minister. But his words are fitting for the different countries mentioned in this column and indicate the shape of the coming political and electoral agenda.

Let us remember, in this sense, that Brazil’s social protests over the past year have pointed in that direction. Better health coverage and educational standards, enhanced public transport, more accessible housing — those were the mass claims, beyond promises not answered until now. These are “second-generation” requests, which show, at the same time, the increased living standards of a new middle class and a failed expansion of those services, which has made them scarce for a broader consumer society.

Latin American progressive governments are forced to decide in the next few months if they are capable of enriching their traditional slogans with the new claims generated by themselves. Otherwise, their own success will be the cause of the end of their era, and the rise of new centre-right administrations.

Redistribution and social justice, of course, but with a necessary dose of better investment conditions and growth. The challenge is to think about better living standards for broader societies.

Let us say it in fewer words: the return of a project of development for all.

* Marcelo Falak is a political scientist and international news editor with the daily Ámbito Financiero.

@marcelofalak
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