Opinion | Kenneth Rogoff

As populists rise, Latin America’s economies may fall

Lesley Becker/Globe Staff; Adobe


Although President Donald Trump grabs most of the headlines, he is hardly a global exception. Populist autocrats have enjoyed a stunning rise in countries around the world, and nowhere is that more pronounced than in Latin America. Witness the elections of Mexico’s leftist president, Andrés Manuel López Obrador (AMLO), and Brazil’s right-wing president, Jair Bolsonaro.

To be sure, this does not mean that the Mexican and Brazilian economies will share the same fate as that of Venezuela under Hugo Chávez and its current strongman, Nicolás Maduro. Chávez and Maduro managed to take Latin America’s richest country — home to one-quarter of the world’s proven oil reserves — and turn it into a basket case, with inflation over 1 million percent and a poverty rate of about 90 percent. At least 4 million of Venezuela’s 30 million people have fled the country, and forecasts suggest that number could double this year if Maduro remains in office.

Mexico’s AMLO, like the charismatic Chávez two decades ago, was swept into office last year on the promise that he would improve the lives of ordinary people. One of his first official acts was to abort construction of a desperately needed new airport in Mexico City — even though the project was already 30 percent complete — on the grounds that airlines are for the rich. He then launched a new airport project in an impractical, mountainous location far from Mexico City, where it stands even less chance of being finished.


Though AMLO campaigned on a promise to end corruption, his government has eschewed competitive bidding for more than 70 percent of the contracts it has awarded. Like Trump, he dismisses media critics as “fake news.” He also warns reporters to “behave well” or “you know what will happen to you.” Still, global investors are encouraged by the fact that AMLO has left the central bank alone — at least so far.


But even if the market isn’t pricing in a massive “Venezuela risk” for Mexico, many of the left-leaning celebrities, writers, academics, and politicians who once praised Chávez to the skies have been notably reticent to cheerlead for AMLO. Having watched Trump turn the Venezuelan tragedy to his political advantage, outsiders who may be sympathetic to AMLO’s socialist ambitions are wise to be cautious. The one exception, of course, is the British Labor Party’s far-left leader, Jeremy Corbyn, a longtime supporter of Venezuela’s corrupt Chavist regime, who attended AMLO’s inauguration in December 2018.

While AMLO poses a threat to Latin America’s second-largest economy, Bolsonaro is jeopardizing its largest. As the sad old saying goes, Brazil “is the country of the future — and always will be.” Its new president, a former army captain who wants to arm the citizenry and raze large swaths of the Amazon (which would significantly accelerate global warming), has become a lightning rod for student protests, environmentalists, and gay rights activists.

Bolsonaro’s approval ratings have fallen by half since he took office at the beginning of the year. Early scandals make it far from clear that he will be able to clean up the endemic corruption that cripples Brazil’s governance, much less demonstrate the coalition-building skills needed to implement his ambitious economic reform agenda.

In Argentina, meanwhile, October’s presidential election may spell the return to corrupt, autocratic socialist rule. Incumbent President Mauricio Macri came to office in 2015 on the promise of restoring sanity to Latin America’s third-largest economy, after former President Néstor Kirchner and his successor/wife, Cristina Fernández de Kirchner, squandered the benefits of an early-2000s agricultural export boom. Yet Macri, constrained by a large budget deficit and limited borrowing capacity, has also made some critical mistakes.


To bring down inflation, which had probably reached around 30 percent, Macri’s government sought to slow the rate of money growth and find alternative sources of finance. But officials chose to rely on short-term foreign-dollar borrowing — and Argentina soon found itself unable to pay its debts. The exchange rate has now collapsed, inflation is up to 50 percent, and the Kirchners’ party could well return to power.

If all autocratic leaders were as competent as the late Lee Kuan Yew, Singapore’s founding father, recent political developments in the Americas might not be so worrisome. Sadly, that’s not the case. As matters stand, it looks like much of Latin America will remain the region of the future indefinitely.

Kenneth Rogoff is a professor of economics and public policy at Harvard University and recipient of the 2011 Deutsche Bank Prize in Financial Economics.