CAMBRIDGE: The current disconnect between market calm and underlying social tensions is perhaps nowhere more acute than in Latin America. The question is how much longer this glaring dissonance can continue.
Markets seem relieved that the apparent winner of Peru’s presidential election, Pedro Castillo, a Marxist, appears to have at least a couple of mainstream economic advisers, but it remains to be seen what real influence they will have.Moreover, Latin American economic data so far this year are good only in the sense that they are not as awful as in 2020, when output fell by 7 per cent.
Worryingly, much of the region’s real growth this year stems from rising commodity prices fuelled by recovery elsewhere, not from genuine productivity improvements that will sustain income through the commodity cycle.Stay on top of major news and announcements made through the workday.This service is not intended for persons residing in the EU. By clicking subscribe, I agree to receive news updates and promotional material from Mediacorp and Mediacorp's partners.
Bolsonaro, when he is not threatening to raze the Amazon, has continued to be successful in blaming Brazil’s problems on the left-wing opposition Workers’ Party that governed the country until 2016. Several of the PT’s leaders, including former President Luiz Inacio Lula da Silva, were jailed for corruption.
Mexico’s public debt is lower than Brazil’s, at 60 per cent of GDP. For all his radicalism, AMLO has so far been a fiscal conservative, much as Lula was in Brazil. The lesson that debt crises can derail a populist revolution has been well learned. Governments seeking to redistribute income need to raise taxes on better-off citizens rather than temporarily paper over problems with additional debt.