Geopolitics

The Economics, Both Real And Imagined, Behind Latin America's Unrest

Many people have had to tighten their purse strings in recent years. But that's only part of what's fueling frustrations in the region.

Nov. 13 protests in Bolivia
Ricardo Arriazu*

-OpEd-

BUENOS AIRES — The deep divisions present in most Latin American societies are well known and longstanding, and include economic, social, ideological and even racial factors. The solution to conflicts in these societies was always difficult, but since 1980, most of them have been resolved through voting. That has changed in recent years, with discord spilling onto the streets and an increased use of violence, as evidenced in Venezuela, Nicaragua, Ecuador, Chile and Bolivia.

The recurrence of unrest in other countries seems to confirm a belief that many parts of the world are in convulsion. Economic demands are becoming mixed with resurgent nationalism in several regions, provoking divisions that require complex, multidisciplinary solutions that are as yet unclear.

Latin America has now joined the trend we have been seeing elsewhere in recent years —​ in Greece and Catalonia, in France with its Yellow Vests, and in Iraq, Hong Kong and various Arab states —​ all in the framework of a broader, commercial and cultural confrontation between two superpowers (the United States and China). Europe, meanwhile, struggles to find an orderly solution to the Brexit problem.

As analysts, we are obliged to redouble our efforts and work together to find a logical explanation for all this. It might be helpful to consider what the U.S. political analyst Joseph S. Nye said almost three decades ago: regimes do not change due to objective variables like poverty, repression or income levels, but because of changes to those variables.

The recurrence of unrest in other countries seems to confirm a belief that many parts of the world are in convulsion.

The political effects of changes to economic conditions in Latin America in recent decades may confirm his premise. And without an adequate diagnosis, it would be difficult to find an adequate solution. As I pointed out several times in this column, a classical economist would never have thought of separating economic analysis from social and political issues. Their analyses would have focused on studying the "great dynamics' that include all these factors. All efforts to design isolated economic, social or political formats have ended in failure.

The current situation is not conducive to balance: The dynamic of the spontaneous uprising is unpredictable, and it's unclear whether these will always lead to better social conditions. The revolts termed together as the Arab Spring, which have much in common with happenings in our region, clearly illustrate this.

The movement had no leader, was summoned up through social networking and led to massive protests that shared a goal (obtaining the removal of individuals identified as dictators) amid a plethora of other inorganic demands and complaints. The results were not always positive. It ended well in one place — Tunisia — as the academic Andrés Malamud points out. But in places like Egypt, one military ruler has ultimately led to another and in Libya, factions have usurped the state's authority. In Syria, the uprising gave way to a civil war.

Rubble in Syria — Photo: Ryad Alhussein

Latin America faces a great challenge. A decade of brisk economic growth didn't do away with divisions. It only submerged them, and today, as economies falter, divisions resurface.

Between 2002 and 2011, Latin America's total terms of exchange improved by almost 35% before worsening from 2012. The improvement in the first period not only boosted revenues in most countries, but also bettered their fiscal and foreign trade accounts. And this "raise" in regional wages allowed a rise in people's purchasing power and living standards without an overall deterioration in the current account balance. Governments should have saved part of their extra earnings then, knowing that cycles come and go.

When revenues dipped, not only were governments unable to implement anti-cyclical policies, but they had to adjust spending to new earning levels. In some cases, they didn't even do that, raising spending instead in a bid to offset the effects of falling revenues. Spending deficits came to exceed 5% of GDP in most countries, and reached 8% in some.

A decade of brisk economic growth didn't do away with divisions.

On the foreign front, the bonanza allowed an increase in imports at twice the rate of exports, without harming the currency account balance and even reducing external debt, thanks to the impressive rise in the price of our export products. With a worsening of exchange terms, the volume of imports did not rise but the exchange balance deteriorated, creating more debt.

These vicissitudes were clearly reflected in politics. All governments gained by an ample margin in boom times, and most were defeated when the economy slowed, which was logical given the socio-economic indicators. Between 2002 and 2012, average poverty levels sank from 45% to 27%, and levels of extreme poverty from 12% to 8%, marginally becoming worse after that. These are the changes in objective conditions to which Nye refers.

My friend, the Argentine economist David Konzevik, anticipated these developments in 2000 when, at an UNESCO conference, he spoke about the "Revolution in Expectations." Once information is instantaneous, "we must reconsider matters," he said. "The poor today are rich in information and millionaires in expectations."

The contrasting welfare of different social sectors, even when the worst off are not as badly off as before, fuels aspirations and can arouse resentments. The challenge for the world today is to reconcile those feelings with the economic realities of each country.



*Riccardo Arriazu is an Argentine economist.

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A tribute to the 30,000 Iranian political prisoners murdered in Iran in 1988

Anne-Sophie Goninet, Hannah Steinkopf-Frank and Bertrand Hauger

👋 Laba diena!*

Welcome to Wednesday, where Afghanistan's Taliban demand to speak at the United Nations, China takes a bold ecological stand and we find out why monkeys kept their tails and humans didn't. Business magazine America Economia also looks at how Latin American countries are looking to attract a new generation of freelancers known as "digital nomads" in the wake of the COVID-19 pandemic.

[*Lithuanian]

🌎  7 THINGS TO KNOW RIGHT NOW

• Taliban ask to speak at UN: With global leaders gathered in New York for the 76th meeting of the UN General Assembly, Afghanistan's new rulers say their country's previously accredited United Nations ambassador no longer represents the country, and have demanded a new Taliban envoy speak instead. Afghanistan is scheduled to give the final intervention next Monday to the General Assembly, and a UN committee must now rule who can speak.

• Four corpses found on Belarus border with Poland: The discovery of bodies of four people on Belarus-Poland border who appear to have died from hypothermia are raising new accusations that Belarus is pushing migrants to the eastern border of the European Union, possibly in retaliation over Western sanctions following the contested reelection of the country's strongman Alexander Lukashenko. The discovery comes amid a surge of largely Afghani and Iraqi migrants attempting to enter Poland in recent weeks.

• China to stop building coal-burning power plants abroad: Under pressure to limit emissions to meet Paris climate agreement goals, China announces an end to funding future projects in Indonesia, Vietnam and other countries through its Belt and Road initiative.

• Turkey ratifies Paris climate agreement: Following a year of wildfires and flash floods, President Recep Tayyip Erdogan announced at the UN that Turkey will become the last G-20 country to ratify the emissions-limiting accords. Turkey already signed the agreement in 2016, but has yet to hold a vote in parliament.

• Mass evacuations following Canary Islands volcano: More than 6,000 people have fled the Spanish archipelago as heavy flows of lava have buried hundreds of homes. Four earthquakes have also hit the Canaries since the Sunday eruption, which could also cause other explosions and the release of toxic gas.

• Rare earthquake hits Melbourne: The 5.9 magnitude quake struck near Melbourne in southern Australia, with aftershocks going as far Adelaide, Canberra and Launceston. Videos shared on social media show at least one damaged building, with power lines disrupted in Australia's second largest city. No injuries have been reported.

• The evolutionary tale of tails: Charles Darwin first discovered that humans evolved to lose this biological trait. But only now are New York scientists showing that it was a single genetic tweak that could have caused this shift, while our monkey relatives kept their backside appendages.

🗞️  FRONT PAGE

"The roof of Barcelona" — El Periodico daily reports on the latest delay from what may be the longest-running construction project in the world. Work on the iconic Barcelona church La Sagrada Familia, which began all the way back in 1882 as the vision of master architect Antoni Gaudí, was slated to be completed in 2026. The Barcelona-based daily reports that a press conference Tuesday confirmed that the deadline won't be met, in part because of delays related to COVID-19. Officials also provided new details about the impending completion of the Mare de Déu tower (tower of the Virgin), the first tower of the temple to be completed in 44 years. Although it is currently the second tallest spire of the complex, it will become the highest point of the Sagrada Familia, reaching 172.5 meters thanks to an illuminated "great cross."

📰  STORY OF THE DAY

Latin America, the next mecca for digital nomads

Latin American countries want to cash in on the post-pandemic changes to the fundamental ways we work and live, in particular by capitalizing on a growing demand from the new wave of remote workers and "youngish" professional freelancers with money to spend, reports Natalia Vera Ramírez in business magazine America Economia.

💻🏖️ Niels Olson, Ecuador's tourism minister, is working hard to bring "digital nomads" to his country. He believes that attracting this new generation of freelancers who can work from anywhere for extended visits is a unique opportunity for all. Living in a town like Puerto López, he wrote on Twitter, the expat freelancer could "work by the sea, live with a mostly vaccinated population, in the same time zone, (enjoy) an excellent climate, and eat fresh seafood." For Ecuador, the new influx of visitors with money to spend would help boost the country's economy.

🧳 While online-based freelancers already hopped from country to country before COVID-19, the pandemic has boosted their current numbers to around 100 million worldwide. The Inter-American Development Bank estimates there could be a billion roaming, digital workers by 2050. Some European countries already issue visas for digital nomads. They include Germany, Portugal, Iceland, Croatia, Estonia and the Czech Republic, but in the Americas, only four countries make the list, namely Antigua and Barbuda, Barbados, Panama and Costa Rica.

💰 In August 2021, Costa Rica approved a law for remote workers and international service providers, intended to attract digital nomads and make its travel sector more competitive. The law provides legal guarantees and specific tax exemptions for remote workers choosing to make the country their place of work. It allows foreign nationals earning more than $3,000 a month to stay for up to a year in the country, with the ability to renew their visa for an additional year. If applicants are a family, the income requisite rises to $5,000.


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$2.1 billion

Google announced yesterday it will spend $2.1 billion to buy a sprawling Manhattan office building, in one of the largest sales of a building in U.S. history. The tech giant plans on growing its New York workforce to more than 14,000 people.

📣 VERBATIM

It is sickening and shameful to see this kind of president give such a lie-filled speech on the international stage.

— Opposition Brazilian congresswoman Vivi Reis in response to President Jair Bolsonaro's inflammatory 12-minute speech at the UN General Assembly. The unvaccinated head of state touted untested COVID-19 cures, criticized public health measures and boasted that the South American country's environmental protections were the best in the world.

✍️ Newsletter by Anne-Sophie Goninet, Hannah Steinkopf-Frank & Bertrand Hauger

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