Ten political risks facing Latin America, according to the Political Risk Index 2022

The region is experiencing increasing levels of uncertainty and volatility, as stated by the Center for International Studies of the Pontificia Universidad Católica de Chile (Ceiuc) in the second edition of its Political Risk Latin America 2022 index, in which it has identified ten risks to those that Latin American countries face.

These ten risks range from the erosion of democracy, the rise of climate change, the risk of a return to violence, to the proliferation of illicit economies and cyber threats. The report warns that this deepening of existing risks and the strong emergence of other emerging risks are a challenge that the region will have to get used to.

The second edition had the participation of 1,144 people and in addition, a panel of 170 experts from Latin America and the Caribbean was formed, which included former presidents, regional authorities, opinion leaders and academics.

Daniel Zovatto, senior researcher at Ceiuc and one of the report’s editors, says that “Latin America will face another complex year. The levels of uncertainty, volatility, political risk and polarization will remain high ”and that“ populism, anti-elite sentiment and xenophobic nativism will continue to be present and the combination of all this will make governance increasingly complex ”.

Ranked, in order of importance, The first risk facing the region is democratic erosion. The report points out that more than 40 years ago the democratic “third wave” began in Latin America, in which decades of military and personalist dictatorships gave way to democratic reestablishment and that in 2005 all countries were considered democratic, with the exception of Cuba.

But that, currently, the world trend is one of increasing deterioration and democratic decline, and the region is no exception. According to the Democracy Index of The Economist Intelligence Unit 2020, in Latin America there are three consolidated dictatorships -Cuba, Venezuela and Nicaragua-, and Honduras, El Salvador, Bolivia and Guatemala are classified as hybrid regimes.

The document also warns that, although during the pandemic, the number of democracies has remained, more than half of the countries have experienced erosion in their basic characteristics and that a large number of governments took advantage of sanitary restrictions to weaken the rule of law , the freedoms and institutional controls that have triggered governance problems in Peru or Ecuador; attacks against electoral bodies in Brazil, El Salvador, Mexico and Peru; corruption scandals such as Pandora Papers in Chile, Colombia or Ecuador, and the populist drifts in El Salvador and Brazil.

For these inconveniences, the report says that the regional mechanisms created for the protection of democracy, such as the Inter-American Democratic Charter, must be updated and include these new threats.

The second risk is climate change and water scarcity. The document states that during 2020, while the world was paralyzed due to the pandemic, some nations bet that it was an opportunity to correct the course of climate change. However, no specific actions were taken and future scenarios of rising sea levels and global temperatures that will cause heat waves, floods, droughts, among others, are still being contemplated.

An eventual generalized drought would cause a worsening of access to food in many areas of the region. This point has a direct impact on the capacities to reduce poverty and extreme poverty, especially in rural areas. Thus, it is estimated that by the year 2025 the capacity of Latin America to reduce rural poverty would be severely weakened as a result of the effects of climate change.

Third are social protests and violence. According to the report, the region experienced an anemic economic five-year period (2014-2019) that caused Latin America to experience a wave of anti-government protests in the second half of 2019 that shook the governance of several Latin American countries. Although he acknowledges that with the arrival of COVID-19, the protests also entered quarantine due to health and mobility restrictions.

Among the social consequences, ECLAC has 22 million newly poor people, equivalent to 33.7% of the population of Latin America, an increase in inequality of 2.9%, and a loss of 47 million jobs compared to 2019.

And despite the risks of massive contagion, protests against governments have been reactivated in recent months, many of them producing violent confrontations with the security forces and with a tragic outcome for participants such as in Colombia, Peru and Paraguay.

This is followed by the migration crisis that the region is experiencing, which has been repeatedly described as “unprecedented”. The main current migratory pattern is the intraregional one, which includes movements that are oriented from countries of the region to other countries of the same, being the displacement of Venezuelans the strongest with more than five million migrants, who leave their countries in search of better job and economic opportunities.

In fifth position of the risks are the illicit economies. The proliferation of illicit economies in the region is a matter of constant concern for governments, but they are perceived as rather passive actors in terms of their control. Drug production and trafficking, human trafficking, among others, are some of the economies that evolve to a structure of organized crime.

The sixth position is occupied by political polarization, considered, according to the report, as a threat to the democratic order. He refers that since the middle of the last century, the dynamics of electoral campaigns and the ways of governing, together with the arrival of social networks, have marked a radical turn in politics.

It emphasizes the growing interpersonal distrust, and towards the main political institutions that has increased the atomization of social groups. It mentions that, according to various investigations, external authoritarian actors (Russia and China) have carried out disinformation campaigns in Latin America through their state television stations to increase distrust in the democratic system or mobilize false information during waves of protests.

The seventh risk is foreign investment that is in decline and that the post-pandemic economic reactivation makes it essential. According to ECLAC figures, in 2020 $ 105,480 million entered Latin America and the Caribbean (LAC) for foreign direct investment (FDI), the lowest value in the last decade, with a year-on-year decrease of 37%. For 2021 and 2022, projections on FDI levels remain uncertain, because the magnitude of the recovery will depend on the rate of recovery of the global economy.

The eighth place for risks is occupied by regional irrelevance. The document maintains that the region has suffered strongly the health, social and economic effects of COVID-19 and that, despite representing less than 10% of the world’s population, it occupies four places among the countries with the highest number of deaths from coronavirus in the world: Brazil, Mexico, Peru and Colombia and points out that political coordination bodies, such as the Organization of American States (OAS) and the action of regional financial organizations, such as the IDB, were insufficient.

It also mentions that regional organizations, such as Prosur, has not managed to take off beyond the politicians of the moment and in the case of the Lima Group it suffered a serious setback due to the lack of commitment from Mexico, Argentina and Peru and that Mercosur does not go through its better moment and Uruguay’s criticism of the bloc’s slow advance and its decision to separately negotiate a free trade agreement with China are accentuated.

In ninth place are cybercrime. This risk, according to the report, is linked to the accelerated growth, and sometimes forced, that the digital transformation had the world during the pandemic, which made the sale of electronic equipment at a global level practically double and with it the increase in users . This new digital normality had a profound impact both on a personal level and in the public and private sectors and led to an acceleration and diversification of cybercrime, according to the study. At the government level, 78% of government agencies globally have been victims of cyber attacks.

And in the last place of the risks is the rise of China. The report indicates that China has not only become the main trading partner of a dozen countries in the region, but has also significantly increased its investment in different sectors, including strategic areas such as natural resources, infrastructure and telecommunications. The greater Chinese presence occurs in a context of greater strategic confrontation with the United States, a rivalry that only seems to be deepening.

According to the World Economic Forum, China’s trade with the hemisphere grew 26 times between 2000 and 2020, expected to double by 2035 to more than $ 700 billion.

Meanwhile, in addition to the ten risks, the document indicates that a triple crisis has been configured in the region, of governance, expectations and certainties.

Jorge Sahd, director of the Ceiuc and another of the report’s editors, states that in the region “a triple crisis of governance has set in, with democracies increasingly under stress; expectations, with a more demanding and impatient citizenry, without an economy that accompanies 2022; and of certainties, with higher levels of political uncertainty, the unknown of the new variants of the pandemic and states with less fiscal margin ”. (I)