Time for Reform in Latin America

Latin AmericaBy Beatriz Gorostiaga.

2015 seems to be a promising year for those interested in Latin American politics. The following list contains topics that I believe will impact the region the most in the year to come.

1) The political implications of the region’s slowing growth

Amid an unfavorable international environment and a halt in the continued growth of commodity prices, it is important to pay close attention to the economic evolution of various Latin American countries. Although not nearly comparable to the dramatic regional situation following the 1930 crisis, each country is following its own course. And this depends not only on the nature of exported goods – for example, oil- but also on the quality of public policies, especially economic ones, of the last five to ten years. As commodity prices tumble and economic growth stalls, the region needs open markets, trade and regional cooperation.

2) A new era in US-Cuba relations

The announcement of the restoration of diplomatic relations between the two countries eases trade and travel restrictions. It is a sign of changing times in Latin America, where the fall of commodity prices has caused the need for open markets. However, there are still numerous issues that need to be addressed, many of which may be solved this year. Will Cuba return to the OAS? Will Raul Castro be capable of seeking the necessary economic and political reforms to partially lift and finally eliminate the embargo? The diplomatic opening may suggest a deliberate attempt to weaken the Cuban government’s grip on political dissent. Perhaps this restoration and Latin America’s growing need for investments will help revamp Washington’s standing in the region.

3) The deepening of Venezuela’s crisis and the political future of “chavismo”

Both the economic situation, aggravated by the plunge in oil prices, and the political context in Venezuela are deteriorating by the second. On January 13th, the ratings agency Moody’s downgraded Venezuela to Caa3, merely one step above default. What will 2015 hold for Venezuela? As President Maduro tours the world in search of financial support, sky-high inflation and unbelievable queues outside supermarkets may lead to mobilization in the streets.

4) The Colombian Peace Process

The Colombian government and the country’s largest left-wing rebel group, the Revolutionary Armed Forces of Colombia (Farc), are trying to end more than five decades of armed conflict. The two sides started holding formal peace talks in November 2012 in the Cuban capital, Havana. Since then they have reached agreement on three key topics, but there is still widespread skepticism as to whether a permanent deal can be achieved. Colombian President Santos’ greatest wish is to settle an agreement this year. On 15 January 2015, he said his government was for the first time prepared to begin talks on a bilateral ceasefire. The hope is that a permanent settlement with the Farc will allow security forces to concentrate on protecting the civilian population rather than fighting an endless battle with Farc rebels.

5) The Argentine presidential elections: Argentine President Cristina Kirchner is heading into the final stretch of her second term amid concerns about the country’s economy, including a high level of inflation and an ongoing battle with holdout bondholders. The relationship between Argentina and the bondholders has been a battle of public relations. They, along with New York Judge Griesa, have also been called “vultures” in Argentina, seeking to scavenge the remnants of the nation’s 2001 default. With presidential elections set for October, a number of potential candidates including Daniel Scioli, the governor of Buenos Aires province, National Deputy Sergio Massa and Buenos Aires Mayor Mauricio Macri have already emerged. Since the sad state of the economy is the biggest issue in Argentina at the moment, it is no surprise that all the front-runners in the upcoming election are considered business friendly. While the impact they can make immediately is uncertain, the change in sentiment of a new political regime may prove positive.

6) Mexico and president Peña Nieto’s reforms:

Just when it seemed that 2015 would be the triumphant year of Enrique Peña Nieto, the 2014 Iguala mass kidnapping completely reversed this. The massacre and subsequent disappearance of 43 college students, known as “normalistas,” represented a grim episode in Mexico’s ongoing struggle with police corruption and organized crime.  It has also called into question the deep ties between drug cartels and Mexican politicians. Many even bet on a sharp increase in political instability and failure of the PRI government. With the start of the new year, it seems that the president has regained some of the lost initiative. Therefore, the coming elections in July (deputies, governors and countless local offices- about 2,100 positions) will be vital for understanding the direction that the country will take and the future of reform.

7) Dilma Rousseff’s Second Term: On January 1, 2015 the incumbent Brazilian president, Dilma Rousseff, was sworn in for a second term. Among the challenges she faces are a corruption scandal involving Petrobras (the state-oil company), a slacking economy, and weak congressional support for her ruling coalition. During her first term, a combination of macroeconomic laxity and microeconomic meddling, intended to boost growth, merely undermined public finances and her credibility. If she intends to lead Brazil to solid and sustainable growth, she will need to undo much of what she did in the first term. Rousseff needs to stimulate growth, fiscal responsibility and domestic and international credibility. However, one of the main implications would be the opening of Brazil to global markets, something that may seem difficult given her past leftist interventionist policies that have scared investors and dragged down Brazil’s once-booming economy.

The political and economic agenda of Latin America in 2015 is complex. Indeed, other important circumstances include the new reforms by the Chilean president Michelle Bachelet, the presidential elections of Guatemala – a country that continuously struggles with drug trafficking- or the future of regional integration under the auspices of the most well-known institutions, such as Mercosur, The Community of Latin American and Caribbean States (CELAC), or the Pacific Alliance. These and other topics are sure to make 2015 an exciting year for followers of Latin American politics.

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