For many economists and political commentators, Latin America was the utopia in the mid-2000s when the region was experiencing unprecedented growth and democracy seemed to have more or less consolidated in several countries.
From Brazil – which saw its aggregate GDP grow by a multiple of over five to $2.616 trillion in 2011, from $508 billion in 2002 – to Venezuela that was cheerfully raking in hundreds of billions of dollars through oil exports, Latin America appeared to be the model continent on a first glance, at least economy-wise, for much of the 2000s and early 2010s as well.
But cracks began to appear, especially over the past month or so, as the region saw protests erupting almost all across. Be it the socialist Bolivia under Evo Morales or the neoliberal Chile under Harvard-educated economist Sebastián Piñera, hardly anyone has been spared from the wave of angry citizens.
What started as a brief trailer in Argentina against the food crisis this September eventually transformed into a full movie in other parts of the continent. In Ecuador, it was the government rolling back fuel subsidies as part of fiscal consolidation measures under the International Monetary Fund programme that brought people to the streets. This first forced President Moreno to flee the capital, Quito, before finally withdrawing from the multilateral bailout and restoring old prices.
Similarly, Chile – often hailed as the free-market oasis in the desert of a socialistic continent – saw huge demonstrations, killing 20 people as per last count, after the government raised the subway fares in the capital by 30 pesos. The president, in response, initially declared a state of emergency and imposed curfew which agitated the public more, thus forcing him to adopt a more reconciliatory tone that has since seen a cabinet reshuffle. He has also promised to put in place social reforms including an increase in minimum wage and state pensions.
Meanwhile, questions over the fairness of elections in Bolivia, which saw incumbent president winning yet another term, was the main cause behind the agitation. Other regional countries urged for an audit which was agreed upon, with a 30-member Organisation of American States delegation expected to do the review.
From stability to chaos
The journey from rising living standards and an emerging middle class to being done with their respective governments hasn’t been as drastic as one would imagine even though some have been quick to blame Venezuela’s infamous Nicolas Maduro for exporting this unrest across the borders. The seeds of discontent were sown long ago and have just gotten ripe.
As the fruits of the post-commodity boom – which saw economic growth thanks to significant investments – became scarcer, the region started showing early signs of a slowdown. Consequently, average per capita income in South America has fallen from $11,170 in 2011 to current levels of $8,160.
A major chunk of this decrease has been led by Brazil where GDP in current dollar terms has contracted to $1.87 trillion. Likewise, Argentina – the second biggest country – witnessed growth rates alternating between negative and positive 2.5%, both leading to unpredictable developments in their respective elections.
However, an economy stumbling on aggregate basis doesn’t explain the case of individual countries well enough. After all, Bolivia is currently growing at 3.9% and Chile at 2.5%, which is not half bad in the backdrop of global recessionary fears.
Considering two of the three protests had to do with price increases, one is naturally inclined to immediately seek the cause in inflation, but the data show that there has been a downward trend in consumer prices across the three states.
Part of the explanation also lies in the growing inequality, an area in which the continent already fares the worst. The Gini coefficient for Latin America and Carribean countries was at 44.06 in 2015 – higher than other grouping – with Chile leading the charts consistently as it outperformed the regional average by 3.64 points.
Some argue that this doesn’t go far enough, since all three countries have successfully reduced income inequality over the past decade, raising questions if this is the right place to look into. But citizens’ opinions are not perfectly aligned with data and just the perception of inequality is enough to cause unrest, and that seems to be the case as well.
Any disaggregated analysis of different indicators is based on the assumption that individual parts combined must add to their sum, but the public sentiments work quite differently. Take Chile for example, where disenchantment over the country’s hardcore neoliberal policies had been brewing for a while. Its listed corporations had been doing well for several years while youth unemployment rates touched close to 19%, creating winners and losers of the system. Hence the increase in fares was the boiling point which took people out and as history tells us, the streets have no leader, but faceless voices.