Latin America’s incoming ‘pink tide’ suffers from rosy nostalgia

Luiz Inácio Lula da Silva, who is campaigning to regain the Brazilian presidency next month, likes to dwell on the past, recalling the happy years from 2003 to 2010 when the country was, as he likes to put it, ruled by “the man was considered the best president in the history of Brazil.”

He has things to brag about. Brazil’s economy grew an average of over 4% per year during Lula’s presidency – far surpassing the track record of his rival, current President Jair Bolsonaro. Under Lula’s watch, Brazil cut inflation by two-thirds, cut unemployment by half, and cut public debt.

All of this happened, he told national television, as “we implemented the largest social inclusion policy in the history of this country”. The minimum wage rose by half after inflation. Poverty fell from 40% to 25%. Infant mortality went down.

For all its victories, this Greatest Hits campaign strategy underscores a thorny challenge, not just for Lula, but for the entire cohort of new left-wing governments hoping to recalibrate economic and social policies across Latin America: the world doesn’t look like it the happy years when the left was last in power.

In addition to Brazil, where Lula is almost certain to return to the presidency after next month’s elections, the left now governs Argentina, Colombia, Chile, Peru and Bolivia.

But while this may seem like a regional ideological realignment, the leftward swing is largely the product of voters’ frustration with incumbent right-wing governments.

These voters share the kind of nostalgia that drives Lula’s campaign. But bringing back the good times will likely remain an unattainable goal. And voters won’t show much patience with the left-wing governments they’ve brought back to power in hopes of reclaiming some of that past prosperity.

Despite a sharp slowdown towards the end, Nestor Kirchner and his wife Cristina Fernandez de Kirchner presided over an economy that grew an average of 4.5% per year for over 13 years. Bolivia’s GDP grew an average of 4.7% per year during the 14 years of Evo Morales’ government, significantly more than in the previous 14 years.

But that was back when China was buying commodities from across South America and foreign direct investment was pouring in. To reproduce these feats, China’s economy would need to recover from the doldrums, the war in Ukraine would have to end, the global pandemic would have to erupt, and probably good luck on top of that.

Bolivia’s natural gas production boomed during Morales’ tenure – allowing him to fund extensive social programs. Argentina’s goods exports to China doubled during Kirchner and his wife’s tenure. Brazilian exports to China increased sevenfold over Lula’s.

Argentina is not only suffering from runaway inflation today, which is expected to reach 100% by the end of the year. Its economy is slowing due to the post-Covid recovery. The International Monetary Fund expects it to grow at an average of less than 2% per year during the tenure of current President Alberto Fernandez, a close ally of Ms. Fernandez de Kirchner, now his Vice President.

Bolivia’s economy is also growing much more slowly than in Morales’ time. Brazil and Chile are also unlikely to be able to escape the downward trend. The IMF expects them to grow at only about 1.5% per year over the next 4 years. In addition, inflation is rising across most of the continent, threatening the existence of the politically powerful middle class. If interest rates in the United States go much higher, their economic reality will be much worse.

While touting his past accomplishments, Lula might want to remember what happens to left-wing governments when business turns sour on them. Lula’s handpicked successor, Dilma Roussef, was fired after a year and a half into a sharp economic contraction.

Argentina’s economy eventually went awry because Cristina Fernandez de Kirchner helped hand the presidency to far-right Mauricio Macri. In Chile, a few years of snail’s pace led to the transition of power from Michelle Bachelet’s socialist government to right winger Sebastian Pinera.

Whatever their ideological leanings, the “pink wave” of left-leaning governments coming to power across the region will have their hands full navigating a very narrow economic, let alone political space , where prosperity and voter patience are hard to come by .

Think of Chile, where voters sacked Pinera last year and replaced him with Gabriel Boric, a 36-year-old left-wing arsonist who invested his political capital in a radically ambitious effort to draft a new constitution to replace those inherited from the dictatorship replace General Augusto Pinochet.

The 388-article charter created constitutional rights to housing, education, health care, leisure, culturally relevant food, free legal advice, sex education, and a dignified death, among other things. Earlier this month, it was defeated by a large majority in a referendum. And Boric discovered that voters’ frustration with a previous government does not constitute a mandate for radical change.

Lula’s diagnosis of Brazil’s challenges – where growth is weak and almost one in ten workers is unemployed; where 18.4% of the population lives in poverty and the richest 10% of households earn 15 times as much as the poorest 40% – is spot on. The diagnosis would be similar in most of Latin America.

The question is whether the champions of the Latin American left – Lula and Boric, Argentines Alberto Fernandez and Gustavo Petro in Colombia; Luis Arce in Bolivia or Pedro Castillo in Peru can deliver the broad-based growth needed to meet the challenge. If not, soon expect a bluish wave moving across the region from the right.

More from the Bloomberg Opinion:

Should the US say goodbye to Latin America?: Eduardo Porter

In search of political redemption, Bolsonaro uses his wife and her prayers: Clara Ferreira Marques

Governance must trump ideology in Latin American elections: Shannon O’Neil

This column does not necessarily represent the opinion of the editors or of Bloomberg LP and its owners.

Eduardo Porter is a columnist for the Bloomberg Opinion, covering Latin America, US economic policy and immigration. He is the author of American Poison: How Racial Hostility Destroyed Our Promise and The Price of Everything: Finding Method in the Madness of What Things Cost.

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