Latam: An Anti-Incumbent Wave, Not a Leftist Turn

The elections of Presidents AMLO in Mexico, Fernandez in Argentina, Castillo in Peru and others – along with a possible Lula return in Brazil – have triggered commentary about a leftist turn in Latam. The picture is more complicated, according to a Citi Research report. In fact, as shown in the chart below, there have been almost as many turns toward the right as toward the left.

Latam Elections, 201802022: Almost as many turns toward the right as the left 

_{© 2022 Citigroup Inc. No redistribution without Citigroup’s written permission.}

_{The red line indicates a change from the right or center to the left. The blue line indicates a change from the left to the right}

_{Source: Citi Research}

A clearer explanation for the electoral outcomes in the region, Citi analysts say, is a prevailing anti-incumbent sentiment that leads to governments being replaced by opposition parties.

Punishing incumbent governments for subpar results

The elections of AMLO, Fernandez, Castillo, Boric, and Petro variously followed corruption scandals (Mexico, Peru), economic stagnation or crisis (Argentina) and a widespread sense of a lack of progress, among other factors.

At the same time, though, other governments in the region were turning from left to right, and for mostly the same reasons.

Citi analysts argue that the ousting of incumbent governments was less out of ideological conviction for a particular set of economic and social policies and more out of a desire to punish incumbent governments for a lack of results. Current political developments, in Brazil and Argentina, for example, suggest the prospect of ideological political turns, but again not simply from right to left.

Stagnation, lack of reform, and increasing discontent are factors in political turns

Citi analysts had argued before the pandemic that social discontent in the Latam region could be explained not by levels of poverty and inequality (which had not significantly changed) but by a sudden lack of future economic growth. The pandemic has since worsened conditions for many Latin Americans, increasing levels of dissatisfaction and raising the propensity to protest, for the likes of higher wages and better public services.

In terms of the political economy, election shifts arising from the punishment of incumbents – rather than from a wave of ideological fervor among voters – are likely to be a constraint on an incoming administration. Newly installed leaders might feel they lack a mandate for radical action, especially for a policy slate that risks economic instability or a currency crisis and that in turn blights their re-election prospects. Cited as examples of this political pragmatism in the Citi report are the fiscal austerity of the AMLO administration and the macro moderation of Castillo, Boric, and Petro.

For more information on this subject, and if you are a Velocity subscriber, please see Latin America Economic Outlook & Strategy - Latam: An Anti-Incumbent Wave

Citi Global Insights (CGI) is Citi’s premier non-independent thought leadership curation. It is not investment research; however, it may contain thematic content previously expressed in an Independent Research report. For the full CGI disclosure, click here.