A glass 98% full

Oh so close

In an interesting article in the WSJ in January, an analogy was made: Brazil was starting to look like Argentina, Argentina was looking like Venezuela, and Venezuela was resembling Zimbabwe. This metamorphosis was put to the test, when Brazil’s colossal voice resonated across the region as elections were held last Sunday. The continent held its breath to see if change was possible, or if indeed Brazil would continue heading toward Argentina-like status.

Brazil has spoken. The incumbent Dilma Rousseff secured the left wing PT’s hold of Planalto presidential palace for four more years, sixteen in total and counting.

In Latin America, this is business as usual. The incumbent possesses a great advantage, some would say insurmountable. Just 2 incumbents have lost reelection in the Americas. Nevertheless, what should be taken into account is the opposition candidate Aecio Neves’ performance at the ballot box, narrowly defeated by a mere 2% gap.

Neves, in my humble opinion, is the most formidable contender that the deplorable marxist left has faced in Latin America. A grandson of an elected Brazilian president and a successful former Governor of Minas Gerais, Neves tried to parry off the PT’s hegemony, particularly claims that he would curtail popular social programmes in Brazil, and pointing directly at the PT’s eyes accusing them of the rampant corruption in state-run firms while blaming Rousseff’s administration for an economy that is in doldrums amidst growing concerns of increasing inflation (to our eyes a 6% annual inflation rate is peanuts).

Unfortunately, neither these accusations nor Marina Silva’s support were enough for a coup de grâce against Rousseff or the PT for that matter.

Regardless of what happens in the rest of this decade, the next years could mean a lot for the fight against incumbents, for while Rousseff won, it was an ugly victory, too close to celebrate. Not only do reasonable politicians stand to bridge the electoral gap in Brazil, but a chance to finally overcome the populist wave in the Americas is right there. Here’s why:

1. Populist reelection models in the Americas are underpinned by a growing economy where jobs are plenty and the bonanza finds its way to consumers. There’s a strong link between consumption and political approval, and if the former stagnates, the latter vanishes. In a world economy in which demand for commodities is declining, a negative shock with respect to these countries’ terms-of-trade means less fiscal revenue to spend to keep the party on top.

2. Unlike Venezuela, Brazil is not a hybrid regime, nor is it a dictatorship. Brazil still benefits from a somewhat decent institutional framework that enables it to live in a democracy. Still, a shift in power at the end of this decade could very well mean a shift in Brazil’s influence in the region. This would translate into a Brazil less tolerant of human rights abuses and more staunchly against Venezuela’s growing repression against dissidents and disregard for the rule of law.

3. Even if the first two things are met, what’s required is a political vanguard that could turn the growing frustrations of the citizenry with the status quo and become sponsors of change in order to transform the political and economic challenges ahead into opportunities. This could be embodied in the likes of Aecio, Leopoldo, Henrique or a coterie that could foster hope, not despair.

As an economist, I tend to be highly pessimistic about our future, especially in a country that looks more and more like a failed-state, and not simply a nation in trouble. Surprisingly enough, this time I strongly believe that this cycle is about to end. It will require sacrifice, courage, and wisdom to lead the way into a more stable future in Venezuela and beyond. Aecio was close, but we will get closer with time.

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