LatAm Outlook 2021 Where the UK meets Latin America and Iberia - Control Risks
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LatAm Outlook
2021
Where the
Where theUK
UK meets Latin America
meets Latin American & Iberia
and Iberia
ISBN number: 978-1-9165047-4-5
Edited by Ian Perrin, Cristina Cortes,
Contents
and Joe Brandon
This report has been compiled and published by
Canning House
126 Wigmore Street, Biographies P. 4
London,
W1U 3RZ Overview P. 6
Telephone: +44 (0) 207 811 5600
Political Outlook P. 9
Email: communications@canninghouse.org
Regional Trends P. 9
Country Political Outlooks P. 16
Economic Outlook P. 29
Regional Trends P. 29
Country Economic Outlooks P. 32
Health Outlook P. 45
Social Outlook P. 59
Regional Overview P. 59
Perceptions of 2020 P. 60
What worries Latin America P. 60
What will happen in 2021? P. 63
Environmental Outlook P. 69
Security & Corruption Outlook P. 79
Regional Trends P. 79
Copyright © 2021, Canning House in all countries. Country Security & Corruption Outlooks P. 82
All rights reserved.
No part of this publication may be reproduced, Conclusions P. 96
stored in a retrieval system, or transmitted, in any
form or by any means, electronic, electrical, chem-
ical, mechanical, optical, photocopying, recording
or otherwise, without the prior written permission
of the publishers.
Page 2 - LatAm Outlook 2021 Page 3 - LatAm Outlook 2021
Biographies
Cristina Cortes, CEO, Canning House Dr Clare Wenham, Assistant Professor of Global Health Policy, London
School of Economics
Cristina Cortes is an Oxford and LSE politics and
economics graduate. Having worked in government, Clare Wenham is Assistant Professor of Global Health Policy at London School of Economics
banking and energy across a variety of commercial, and Political Science (LSE). She specialises in global health security and the politics and policy
business development and government relations roles of pandemic preparedness and outbreak response, through analysis of influenza, Ebola
in London, Houston, Venezuela, Colombia, Argentina and Zika. Her work considers global health governance, role of WHO, national priorities and
and Brazil, in 2015 she joined Canning House, the UK’s innovative financing for pandemic control, particularly in Latin America. More recently she
leading forum for Latin America and Iberia. She took has been analysing the downstream effects of global health security policy on women, with a
over as CEO in 2018. forthcoming OUP book offering a feminist critique of the Zika outbreak. Her work features in
The Lancet, BMJ, Security Dialogue, International Affairs, BMJ Global Health and Third World
Quarterly. She previously worked at the London School of Hygiene and Tropical Medicine,
Michael Stott, Latin America Editor, delivering projects relating to surveillance and transmission of infectious disease.
Financial Times
Michael Stott is the Latin America editor of the Financial Jean-Christophe Salles, CEO Latin America, Ipsos
Times based in London and has reported from more
than 60 countries in more than three decades as a Jean-Christophe Salles is CEO of Ipsos Latin America, based in Santiago, Chile. He has over
foreign correspondent and news executive. Michael 25 years’ experience in the market research sector, having previously worked at GfK, a global
reported from Latin America between 1990-1998, living German market research company, in both Latin America and his native France. He holds
in Brazil, Colombia and Mexico. Michael graduated a PhD in social sciences from the University of Paris/HEC business school, and a master’s
from Cambridge University with an MA in Modern degree in Marketing from Paris Arts et Métiers. Jean-Christophe has given lectures in various
Languages and is a regular speaker and moderator at French universities and business schools, and has also published various papers in Marketing
conferences on Latin America. magazines as well as participating as a speaker in various events throughout Latin America
and Europe.
João Pedro Bumachar Resende, Senior
Latin America Economist, Itaú Unibanco Oliver Wack, Partner and General Manager Colombia and Andean
Region, Control Risks
João Pedro Bumachar Resende is responsible for
covering Latin American economies at Itaú Unibanco. Oliver Wack is the General Manager for Colombia and the Andean Region for Control
He holds a Business Management degree from FGV-SP Risks. Based in Bogotá, Oliver is responsible for supporting the successful execution of our
(2003) and a master’s degree in Economics from PUC- clients’ operations and investments in the Andean region. Oliver’s specific areas of expertise
RJ (2006). He worked in the economics department of include risk intelligence, issues management, crisis-driven investigations, stakeholder
Banco BBM for two years before joining Itaú Unibanco, engagement and corporate reputation risk management, among others.
also in the economics department, in October 2008.
Dr David Purkey, Latin America Centre Director, Stockholm
Environment Institute
David Purkey directs the Stockholm Environment Institute’s regional research centre in Latin
America, located in Bogotá, Colombia. This, the newest SEI centre, opened in January 2018.
Prior to accepting this position, David led the Water Research Group within SEI’s US Centre
for 12 years. In his prior position, David was able to put into practice his academic training in
hydrology and water resources management that culminated in a Ph.D. from the University
of California, Davis. His primary research interest is the proper use of modeling and analysis
within multi-actor, multi-objective negotiations related to the management of shared
water resources.
Page 4 - LatAm Outlook 2021 Page 5 - LatAm Outlook 2021
However, the overall objectives have not changed. As before, this second Canning House LatAm
The Canning House LatAm Outlook continues Outlook focuses on the six major countries - Brazil,
to get beneath superficial headlines to what is Mexico, Argentina, Colombia, Chile and Peru.
really going on in Latin America. It addresses Wider Regional developments are considered
fundamental questions such as: through the lens of their impact on those countries.
Similarly, developments in the wider world – e.g.,
• What are the forces shaping Latin America’s emanating from the USA or China – are also
social, political, economic, and business looked at in terms of their impact on “the big six”.
environment? The rationale is that these are the countries that
businesses have told us they are predominantly
Overview
• What are the likely impacts on people, the interested in. No value judgements are implied
environment, government policies and as to the intrinsic importance of other countries;
economic development, and trade and nor does it imply that there are not perfectly good
investment? individual business opportunities to be found
elsewhere in LatAm.
Cristina Cortes, CEO, Canning House • What are the resulting risks and uncertainties
facing the major countries of interest to As previously, most of the focus will be on the
businesses, investors and NGOs? next five years. Because there are legislative,
Last year, I introduced the Canning House LatAm Outlook with the following statement: presidential and even constitutional elections
In the process, the report and its associated events taking place in four of our six majors this year,
will seek to address questions such as: against a continued backdrop of considerable
Nothing happens in a vacuum. We cannot assess, let alone anticipate, risks uncertainty over the progress of both vaccine
unless we have a good understanding of the factors driving them. Business • How will the Region fare in terms of vaccine rollout and economic recovery, looking beyond
roll-out – compared to other geographies? the next five years will be exceptionally difficult.
conditions are driven by economics which in turn tend to be governed by But, because there are strategic structural issues
political forces; the latter are the result of (often not clearly articulated) social • There is much talk in the US and Europe impacting the region which will take more than
pressures which, in their turn, are deeply influenced by culture and history. of “building back better” post-Covid-19 – one presidential or congressional term to fix, we
addressing climate change and social injustice will continue to dare to look further and consider
If you have a good grip on all these inter-related forces, then very few things
as they recover. In LatAm is it more a question mega-trends out towards a 10-year horizon. We
should come as a complete surprise. of whether the Region recovers at all or will also consider what further forces - or grim
whether it faces another “lost decade”? surprises - might knock current trends off-course.
While that statement undoubtedly holds true, We have great continuity and we have also added • Populism might be on the retreat in the
the fact remains that our expectations and great value in this 2021 edition of the Canning USA, but what about Argentina and Mexico
predictions were, in March 2020, about to be House LatAm Outlook. I am delighted to say that (left-wing populism) and Brazil (right-wing
completely upended by Covid-19. Not only has our partners from 2020 are still with us – the FT’s populism)? Could historically conservative
the virus changed the Outlook for Latin America Latin America editor Michael Stott, Itau Bank of countries like Chile and Peru turn populist after
politically, economically, socially and from a Brazil, Ipsos and Control Risks. And we have added their upcoming elections?
security perspective; it also added great impetus to contributors from the LSE’s Global Health Policy
Canning House’s objective to progressively expand faculty and from the Stockholm • When it comes to Sustainable Development,
the scope of our Canning House LatAm Outlook – Environment Institute. can the Region exorcise its deforestation
in this instance to include both health and demons and instead take on a global
the environment. leadership role?
Page 6 - LatAm Outlook 2021 Page 7 - LatAm Outlook 2021
Political Outlook
Michael Stott, Latin America Editor, Financial Times
Regional Trends
The long difficult road out of the pandemic
The coronavirus pandemic hit Latin America with wealth inequalities and large informal economies.
full force when the region was already extremely
vulnerable, following a decade of low growth and Analysis of the data one year after the pandemic
declining real living standards. began suggests that although governments in the
region took widely diverging approaches, the per
Latin America has 8.2 % of the world’s population capita death rates in the larger nations were not
yet by February 2021, it had recorded more than hugely different. Argentina, which imposed one of
650,000 Covid-19 deaths - more than a quarter the world’s longest lockdowns in 2020, had a death
of the world total. The health impact was among rate by early 2021 which was very similar to that
the most serious in the developing world, with per of Brazil when adjusted for population size. Only
capita deaths far outstripping those in Africa, most smaller nations off the major international travel
of Asia or the Middle East. The pandemic exposed routes such as Uruguay were spared the worst of
the region’s inherent weaknesses: low state the health and economic damage.
capacity, inadequate public health systems, severe
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One year into the pandemic, economists were Who are the populists? By populists, we mean the The problem for the technocratic, investor-friendly
estimating that more than a third of the Latin type of leader common in Latin American history governments of the centre or the right in Latin
American population had been infected. The major of the latter 20th century and early years of this America is that while they strengthened institutions
challenge by early 2021 was to ensure the rapid century: a president who governs with a highly and managed well at a macro-economic level,
and comprehensive vaccination of populations. personal style, centralising power and resources, they typically neglected the importance of
Campaigns began at the start of the year in diminishing the role of independent institutions and good quality public services such as health and
some countries but with continued high infection spending heavily on programmes which deliver education and failed to address adequately citizen
rates and supplies of the most effective vaccines a short-term electoral boost but often lack long- concerns that provision of too many public goods
constrained by availability or cost, it seemed term coherency and logic, typically social subsidies was left to the private sector.
possible that by the time all of the population are favouring his or her support base or public works
vaccinated in the worst-hit nations, a majority Cristina Fernández de Kirchner of Argentina, Bolivia’s Evo Morales, of dubious benefit.
may already have been infected. Goldman Sachs Venezuela’s Nicolás Maduro and Dilma Rousseff of Brazil
estimated in early 2021 that nearly half of Mexico’s
population had already been infected and more
than 40% of Peru’s. Election Cycle -
Chile is among the nations with the best supplies Return of the pink tide?
of vaccines pre-ordered and made a fast start,
meaning it should be able to vaccinate most of The reappearance on the region’s political stage
its population during 2021; as of early 2021, Brazil, of some of the leading figures from the “Pink
Argentina and Mexico were next in the vaccine Tide” era of leftist rule in the first decade of the
race, with Colombia and Peru some way behind. 21st century (pictured above) opens the possibility
of a second wave of socialist rule. In Bolivia Evo
Economic responses to the pandemic have varied Morales returned triumphant after his socialist
widely, with Brazil and Peru among the nations MAS party candidate (and former finance minister)
which launched the biggest fiscal responses Luis Arce triumphed by a landslide in October
relative to the size of their economies and 2020 elections; and in Argentina, former president
Mexico the most parsimonious. The size of the (and current vice-president) Cristina Fernández
stimulus packages announced did not necessarily de Kirchner increased her power and influence
correspond to the amount of borrowing room: within the government significantly at the expense
Brazil, with very high debt to GDP ratios, was of moderate President Alberto Fernández. In
among the biggest spenders while Colombia, Ecuador, Andrés Arauz, the protegé of former
which had more space to borrow, spent socialist firebrand president Rafael Correa won the
significantly less. first round of the 2021 presidential election. Leftist
candidates were also polling strongly in Chile and
In most of the region, governments held back from Peru ahead of elections later in the year and in
ambitious spending of the kind seen in the US or Colombia ahead of the 2022 presidential contest.
Europe because of fears of incurring unsustainable Demand for public services - Which model?
levels of debt, but most Latin American nations However, while there is clearly a strong voter desire
succeeded during 2020 in preserving access to for better public services, greater equality, and a Regionwide social protests started in Chile in both nations are already governed by
international capital markets and raising money at better social safety net, economic conditions are October 2019 and convulsed several Andean populist presidents.
acceptable rates of interest. The major exception less favourable for a return of “Pink Tide” socialism nations. The common themes were demands for
was Argentina, which was shut out of markets to the region. The boost from the commodities better quality, more affordable public services The risk is growing that, amid rising popular
following its default in 2020. super cycle was a key ingredient in the original and greater equality of opportunity. With discontent, voters may lose faith with pragmatic,
Pink Tide, and while global prices rallied strongly government finances under severe pressure after evidence-led reforming governments which try
Since none of the major Latin American nations towards the end of 2020, it is not yet clear whether the pandemic, many countries in the region face to push through difficult but necessary structural
can point to a truly effective response to Covid-19, this momentum will be sustained. Governments serious fiscal challenges to find the funds needed changes such as tax reforms and turn instead to
it seems likely that the virus’s political legacy will are more heavily indebted and there is less scope to fulfil these demands. populists advocating short-term fixes of dubious
be to hurt the standing of most incumbent leaders for the kind of expensive social programmes which merit. This is a particular concern in the Andean
and boost the standing of populist outsiders characterised the earlier era. So populist outsiders The pandemic has exposed with particular clarity nations facing the Pacific which have generally
challenging the status quo, whether from the right from across the political spectrum are just as the deficiencies of public health systems in Latin outperformed the rest of the region because of a
or the left. The pandemic has however boosted likely to win election as classic populist leftists, America, but inadequate pensions and poor better policy mix but where the population is losing
popular appetite for higher social spending and while incumbents and conservatives will find it quality or expensive education have also been confidence in the economic model: in Chile, Peru,
greater government intervention, limiting the increasingly difficult to win re-election. recurrent themes. Mexico and Brazil have largely and Colombia in particular. The other concern is
political space for conservatives. been excepted from this trend, partly because that higher public spending may not translate into
Page 10 - LatAm Outlook 2021 Page 11 - LatAm Outlook 2021
better public services: Argentina spends relatively
generously on education but its outcomes are poor
This risk has been most evident in Mexico, where
President Andrés Manuel López Obrador has
Regional integration and The Biden presidency marks an important shift in
US attitudes towards Latin America. The Trump
by global standards. been explicit in denouncing institutions he believes leadership era was characterised mainly by neglect, with
served only the interests of a narrow elite. But it President Trump making only one visit to the region
has also surfaced in Argentina under the Peronist The political divisions between left and right for a G20 summit in Argentina. President Biden, by
Escaping dependence on oil government, which has been encroaching on
judicial independence, and in Central America
which have split the region since the end of the
“Pink Tide” alliance of left-wing leaders have
contrast, brings extensive experience from his time
as vice-president, when he made 16 trips to
and commodity exports where corruption investigations in Guatemala and paralysed efforts at building cohesive, functioning Latin America.
Honduras have been stymied. In Brazil, democratic regional institutions. The return of populism in
The region’s continued high dependence on institutions have so far successfully resisted Latin America could complicate this task further, However, given the very serious impact of the
commodity exports, including fossil fuels, is President Bolsonaro’s attacks. In particular Brazil’s with the presidents of Mexico and Brazil, the two virus pandemic on the US, as well as the pressing
becoming an increasingly urgent problem amid Supreme Court, which has unusually wide power biggest nations, focused mainly on domestic range of international problems demanding his
global consensus over the need to move to a zero to intervene on a large range of matters, has held issues. Argentina’s leader has argued for greater attention, President Biden is unlikely to have much
carbon economy. Mexico, Colombia, Ecuador, firm in the face of attacks on its judgments and regional unity and has made overtures to Mexico, time to devote to Latin America policy initiatives,
Bolivia and Brazil are all exposed to a significant presidential pressure. but the weakness of the Argentine economy particularly in his first year or two in office. He has
degree via their dependence on oil or gas exports makes it difficult for him to assume a bigger role. nonetheless picked experienced and respected
and need to diversify quickly. Nonetheless, Alberto Fernández seems the most experts in the region for key posts, such as Juan
The role of business likely of any of the Latin American leaders to take González as his top White House adviser on
Aside from Mexico, no nation in the region has on some kind of regional coordinating mantle, Latin America.
built a competitive export-oriented manufacturing As Covid-19 rips through the region, business since he enjoys the respect or support of a number
economy and Latin America’s distance from supply elites have found themselves questioned as never of allies, such as Mexico and Bolivia, as well as the President Biden poses a special challenge for
chains, major markets and the lack of relevant before. Latin America’s relatively weak tradition ear of some European leaders. the region’s two main populist presidents, Jair
specialist skills make it difficult for such a sector to of corporate philanthropy, coupled with severe Bolsonaro and Andrés Manuel López Obrador.
develop. More realistic is the aspiration to grow wealth inequalities and oligopolistic practices by Given the historic dominance of Mexico and Brazil Both men forged transactional alliances with
business outsourcing operations (such as call companies in some markets, present a serious in regional diplomacy, it would be unrealistic to President Trump which, together with Trump’s lack
centres offering technical support, telemarketing challenge to the reputation of business. Well- expect presidents of medium-sized Latin American of interest in corruption and human rights, served
or back office services such as accountancy), publicised instances of profiteering and corruption nations to take up the baton of leadership. Even their domestic political ends. As dedicated fossil
agribusiness and tech companies. In order to around the procurement of medical supplies if they had the appetite and the ability, the fuel enthusiasts, both are likely to find President
maximise these opportunities, governments need during the pandemic have not helped. incumbent leaders of Chile, Colombia and Peru are Biden’s focus on environmental issues awkward.
to make quicker progress on improving digital all fighting major domestic crises and struggling
infrastructure, particularly in remote rural areas Leading progressive figures in the business with low popularity ahead of elections in which The Biden administration has edged away
and poorer suburbs. community have already voiced concerns that none are running for office again. It is therefore from the hardline policies of the Trump era on
unless Latin America’s company leaders start to likely that the Biden administration (see below) will Venezuela and Cuba, and in particular has been
However, the strength in commodity prices seen throw their weight behind demands for greater encounter greater than usual difficulties in seeking uncomfortable with wide-ranging economic
at the end of 2020, if it persists, is likely to make equality of opportunity and a fairer distribution of strong and effective Latin American leaders with sanctions which had a disproportionately severe
it even harder for Latin American countries to wealth, and manage their companies according to whom to shape regional initiatives. impact upon ordinary citizens. However, Biden
diversify away from raw material production; more socially responsible principles, business in the officials have been equally clear that they see
indeed in Brazil voices are already heard region risks being seen as part of the problem. It Venezuela as a dictatorship and Cuba as a serious
complaining that the country “risks being turned remains to be seen whether business people heed Biden presidency abuser of human rights and wish to maintain
into a giant farm” because of neglect of the that call; whether they do so will help determine pressure via targeted sanctions on key regime
industrial base. the likelihood of political leaders turning figures. Small incremental changes in policy are
against business. therefore more likely than bold gestures, unless
there are unexpected domestic developments in
The challenge to institutions Added to this is a rise in the power of indigenous either country.
movements, NGOs and environmental groups. All
The revival of populism in the region presents have been vocal in opposing projects which they It is unlikely that the governments of either Cuba
a strong challenge to institutions which remain see as harmful; most often this means mining, or Venezuela will respond to overtures from
vulnerable to political interference because of their dam or road schemes. International companies Washington with serious moves towards political
fragile and relatively brief autonomy. Whether considering such schemes in Latin America need liberalisation or free elections, meaning that any
an independent judiciary, a competent and free- to be increasingly attentive to such considerations process of détente is likely to be slow and painful.
standing central bank, or a technocratic finance and to the risk of associated legal action. However, the humanitarian relief which is likely to
ministry, the risk is that outsiders winning election Joe Biden, pictured in 2016 with then-President of Colombia Juan come under a Biden administration should help
Manuel Santos to contain the Venezuelan refugee crisis and limit
blame these institutions for their country’s ills and
pressure them, marginalise them or even major new outflows of people.
dismantle them.
Page 12 - LatAm Outlook 2021 Page 13 - LatAm Outlook 2021
Possible upside and downside scenarios
Given the high degree of uncertainty in the region in the post-pandemic period, and a number of pivotal
elections in 2021-22, predictions are more than usually difficult.
An upside scenario could arise from any/all of A downside scenario foresees any or all of
the following: the following:
• the pandemic subsides relatively quickly in 2021 • a wave of populist election victories leading
through a combination of mass vaccinations to inexperienced, big-spending presidents
and immunity acquired via infection who borrow heavily and trigger debt crises,
cause political instability and scare off foreign
• government and corporate borrowing remains investment. (These risks are more elevated in
contained and does not reach dangerous Ecuador, Peru, Chile and Bolivia)
levels; continued strong Federal Reserve
support for the global financial system provides • rule of law and the quality of
liquidity, easing lending to Latin America institutions deteriorate
• stronger global oil and commodity prices help • fresh weakness in global oil and commodity
government finances and economies across prices puts pressure on public finances
the region and economies
• elections in Andean countries elect • Biden administration policies on the
generally pragmatic candidates who make environment, human rights and corruption lead
improvements to public services but do not to a conflictive relationship with Latin America
fundamentally uproot the economic model
• the EU shelves the Mercosur trade agreement
• presidents who are further to the left increase indefinitely because of environmental issues
public spending moderately, improving
services, reducing inequality and taking the • vaccination delays and lax controls mean the
steam out of mass protests coronavirus continues to deal a heavy human
China and Russia and economic blow to the region and recovery
• private investment remains strong and the from the pandemic is slow and fitful
China has used the pandemic to further advance Corp bought the country’s largest independent region avoids picking sides in the battle
its diplomatic, trade and investment priorities in renewable energy company Zuma Energia. between the US and China, winning money • old-fashioned leaders with an attachment to
Latin America from an already strong position built from both extractive models of development, such as
during the commodity boom years. It is already the China’s relatively strong global position in vaccines, fossil fuels, block efforts to move to renewable
biggest trading partner for Brazil, Chile, Peru its rapid and powerful economic recovery, its • renewable energy investment remains strong energy. Deforestation continues at high levels,
and Argentina. continued international investment drive and its and the region becomes one of the more leading to trade boycotts and disinvestment
growing political and diplomatic clout mean it is promising places in the world for solar and
Beijing was quick to make well-publicised gifts of likely to continue to gain influence in the region wind power, helping accelerate the trend to • slow economic progress frustrates the
protective equipment and ventilators in the early relative to the US and Europe over the green energy population in some countries, who stage
months of the pandemic and to offer vaccines coming decade. repeated protests and marches, creating
on favourable terms as they became available. • Amazon deforestation is brought under control serious governability challenges
Chinese companies took advantage of the 2020 Russia will have outsize influence in Venezuela and international boycotts and
slump in Latin America to snap up good quality because of its military support for the Maduro disinvestment avoided. • the region’s internal problems prevent it from
assets, particularly in infrastructure, at favourable government and its oil and gas interests, but playing a wider role on the world.
prices: China did more M&A deals in Latin America it has generally been unwilling to make major
in 2020 than in Europe and North investments in the region, preferring deals which
America combined. deliver quick short-term benefits. However, the
appearance of the Russian Sputnik vaccine, which
In Chile, China’s state grid company paid $3bn to has been eagerly adopted by Mexico, Argentina
buy an electricity network company from Spain’s and Venezuela in particular, offers Russia
Naturgy. In Mexico, China’s State Power Investment additional leverage.
Page 14 - LatAm Outlook 2021 Page 15 - LatAm Outlook 2021
Country Political Outlooks
Argentina
son Máximo, who heads the Peronist grassroots by early 2021 among the 25 nations globally with
organisation La Cámpora and is a key deputy in the highest per capita mortality, despite the heavy
the lower house of congress, as the main Peronist economic cost of the long lockdown. Fernández’s
presidential candidate for the 2023 election. This reliance on the Russian Sputnik vaccine could
would solidify a political dynasty which began increase the government’s vulnerability in the
with Cristina’s late husband Néstor Kirchner, who face of the pandemic, or prove to be a winner,
governed from 2003-2007. depending on the reliability of supplies and the
effectiveness of the vaccine.
Despite its internal divisions, the Peronist
movement is aware that its hold on power depends Further government intervention is likely to
on it maintaining a unified front and is unwilling control prices, regulate the export of agricultural
to risk the in-fighting which led to Macri’s narrow commodities and maintain subsidies. A wealth
victory in 2015. Although Cristina still has a high tax surcharge imposed last year has triggered
President Alberto Fernández and his vice-president,
rejection rate among non-Peronist voters (the the exit of some prominent business figures to
Cristina Fernández de Kirchner reason why she ran in 2019 as VP to the much neighbouring Uruguay. The bleak mood among
lesser-known Alberto), her hope is that Máximo will Argentine business people is unlikely to change
Argentina’s political dynamics and its difficult be seen as a new generation figure. significantly for the remainder of the Fernández
economic environment are likely to prove term, given the political dynamics.
challenging for investors in the coming years. Argentina’s economic situation, meanwhile,
President Alberto Fernández, a moderate Peronist, continues to be challenging. Agreement was Compounding this unease is a government
inherited a country deep in foreign debt and mired reached in 2020 with private creditors on a conflict with elements of the judiciary. Whilst the
in economic crisis upon taking office in December restructuring of $65 billion of debt, ending its ninth government’s justification for this is the need to
2019 from his business-friendly predecessor, sovereign debt default. Since the deal mainly modernise institutions, political opponents believe
Mauricio Macri. pushed out repayments by several years without the main rationale is to bring judges to heel and
significantly reducing the capital owed, it is unlikely prevent any of the multiple corruption cases
Fernández is an instinctive pragmatist but lacks to provide a long-term solution to the country’s against Cristina from advancing in the courts.
a political base of his own and depends on his debt woes. A deal with the IMF to restructure $44 Argentina slipped 12 places in the Transparency
more radical vice-president, Cristina Fernández billion of debt owed is likely to come during 2021, if International annual Corruption Perceptions Index
de Kirchner, to govern. Cristina, who was herself only because the amount owed – Argentina is the in 2021.
president between 2007-15 and is not related to Fund’s biggest creditor – makes it imperative for
Alberto Fernández, controls a sizeable part of the the IMF to do a deal. Despite the government’s problems of
Peronist political base and enjoys strong support economic management and its internal political
among grassroots organisations and unions. A It is unlikely, however, to bring public finances disagreements, the opposition remains hamstrung
key figure in the Pink Tide movement of socialist fully under control and with Argentina still unable by Macri’s insistence on continuing to lead it,
leaders earlier this century, she favours greater to access international debt markets as a result despite his 2019 election defeat. Macri’s most
state intervention in the economy, has been a of its default in 2020, central bank financing likely successor as opposition leader, Buenos Aires
strong critic of the IMF and is resistant to tighter of the deficit is likely to continue with serious mayor Horacio Rodríguez Larreta, as yet lacks
controls on public spending. consequences for inflation, which could exceed 50 broad national appeal but could still build a bigger
per cent this year. Some relief is likely to come in base and the opposition has few other credible,
This difference of approach and political the form of commodities export income, if global well-known figures.
philosophy between Alberto and Cristina at the soya prices remain high (Argentina is the world’s
heart of the administration is likely to complicate third biggest soybean exporter). Midterm congressional elections in October 2021
government and policy over the remainder could see the Peronists keep their narrow majority
of Fernández’s term, which runs to late 2023. The Fernández government’s handling of the in the Senate, where only a third of the seats
Cristina’s power and relative influence have been pandemic, which initially appeared promising are being contested; the opposition is fighting to
steadily increasing since Alberto and Cristina after a strict early lockdown and relatively low defend its majority of 138 seats out of 257 in the
took power and this process is likely to continue; case numbers, deteriorated as time went on with lower house, where half the seats are
she is widely believed to be trying to position her infections rising sharply and Argentina featuring being contested.
Page 16 - LatAm Outlook 2021 Page 17 - LatAm Outlook 2021
Brazil
include an overhaul of Brazil’s byzantine tax formed in 2020 to pressure the Brazilian
system and of the rules around hiring and firing government through dialogue and several EU
of government employees. They also include governments have made clear that a trade deal
provision for the automatic triggering of a “fiscal between the EU and the south American trade bloc
emergency” with spending curbs imposed when a Mercosur will not be ratified without significant
state or municipality exceeds certain thresholds. advances from Brazil in environmental protection.
Progress on these reforms has been very slow Given the rising pressure from the domestic
because of a lack of political consensus and the business lobby – powerful agribusiness interests
Bolsonaro government’s history of poor relations are concerned about the possible loss of markets in
with Congress. They suffered a further blow in Europe and the US – it is likely that the Bolsonaro
Brazil’s vice-president Hamilton Mourão meets an indigenous leader February 2021 when Bolsonaro fired the head government will be forced into some kind of
during a visit to the Amazon
of state-controlled oil company Petrobras for accomodation with Washington and Brussels on
cutting fuel subsidies. Implementation is likely environmental issues. Although China is Brazil’s
President Trump’s exit from the White House at to slow further as the 2022 election approaches largest trading partner and has traditionally been
the start of 2021 robbed Brazilian president Jair and the bulk of the reforms will be left to future far less concerned about environmental issues, the
Bolsonaro of a key ally for his brand of right-wing governments. The same is likely to happen EU and US are much bigger sources of investment
populism and conservative cultural values as he with major privatisations; state electricity giant and loans, which could be jeopardised by poor
approaches a re-election campaign in 2022. The Eletrobras may not be sold off during the rest of environmental performance.
timing of the election is awkward for Bolsonaro, Bolsonaro’s term.
who had enjoyed a ratings boost in 2020 owing As for Brazil’s political opposition, while the left
to heavy spending on monthly pandemic support However, the central bank has been pursuing a remains the biggest force in Brazilian politics, the
payments for up to a third of the population. useful programme of microeconomic deregulation, once-dominant Workers Party (PT) remains under
green finance and modernisation which does the spell of former president Luiz Inácio “Lula” da
Complicating matters is Brazil’s challenging not need legislative approval and this is likely to Silva, who still sees himself as its natural leader.
economic situation, with the withdrawal of continue. Central bank independence finally won Lula is now too old (75) and too tainted by his
pandemic support slowing the recovery, an approval in congress in early 2021, indicating that association with past corruption scandals – which
extremely challenging fiscal position with the reform agenda was not completely dead. he denies - to be a credible candidate in 2022 and
government debt levels of around 90 percent of has signalled his support for Fernando Haddad,
GDP and a poor health situation, with recurrent A major concern for business is the growing who failed to win last time against Bolsonaro. If
outbreaks of coronavirus in the underfunded risk of trade and investor boycotts of Brazilian the left can unite around a new leader for the
northeast of the country a particular worry. For companies and products owing to concerns about 2022 election, it would significantly improve
these reasons, it looked likely in early 2021 that the environment, and in particular the destruction its chances. Guilherme Boulos of Sao Paulo, a
additional pandemic support would be agreed of the Amazon rainforest. While Brazil has strong youthful and charismatic former Communist who
between the government and congress. environmental legislation, enforcement is weak stood unsuccessfully for mayor of the city in 2020,
and has become significantly weaker under winning 40.6% of the vote, might be one
These factors are likely to hurt Bolsonaro’s Bolsonaro owing to reductions in staffing at such option.
popularity during 2021 and increase the likelihood environmental agencies. The premature ending
that he pushes for more populist measures and in April of the army’s operations to limit Amazon In the absence of a strong challenge from the left,
in particular increased government spending to forest fires will not help. other credible opponents to Bolsonaro in the 2022
try to restore his fortunes ahead of the election in presidential race are likely to include São Paulo
October 2022. A number of impeachment requests Bolsonaro’s constant attacks on environmentalists governor João Doria, TV talkshow host Luciano
have been filed in Congress but are unlikely to and his support for loggers and ranchers have Huck and former anti-corruption crusader and
progress unless there is either a severe economic convinced foreign audiences that Brazil is not justice minister Sérgio Moro. Of these, Doria
crisis, a complete collapse in Bolsonaro’s ratings or serious about protecting the Amazon, despite and Huck are likely to be the strongest potential
the Covid-19 death toll soars out of control. government protestations to the contrary. They candidates, assuming they make no major
have also increased the risk of boycotts and mistakes between now and the election.
Of concern to investors and business people is the disinvestment. President Biden has been clear
fate of the government’s much-touted programme about his intention to penalise Brazil if it fails to join
of structural reforms to the constitution to put his Amazon conservation initiatives.
public finances on a more sustainable footing and
to improve the business climate. These reforms A large group of international investors was
Page 18 - LatAm Outlook 2021 Page 19 - LatAm Outlook 2021Chile
protests which followed. Citizens voted in a 2020 opinion poll ratings fell to single digits during elections will be held in November) increases the
referendum for a new constitution to be drawn up the worst period of the riots and although his risk of potentially costly decisions being taken by
by a specially elected assembly, a process which government offered numerous concessions to the new assembly, such as guaranteeing higher
will take until at least 2022 and which has ushered protesters, including a referendum on a new levels of public services in the new constitution.
in considerable uncertainty among investors about constitution, Piñera’s ratings had only recovered to Mitigating this risk are two factors: the stipulation
the extent of possible changes. levels just above 20 per cent by early 2021. that a two-thirds majority is required for decisions
and the need for the entire draft to be voted
Chile’s recent decades of moderation in political The moderate left has also suffered from criticism upon by electors before taking effect – something
and economic policy have led many to conclude that when in power during the Michelle Bachelet expected in mid-2022.
that the country is unlikely to embrace radical presidencies (2006-2010 and 2014-2018) it failed
changes to its model. This ignores the high degree to make significant reforms to the system. The The Piñera government has responded to the
of citizen dissatisfaction with the current system, main beneficiaries of the discontent in Chile so far coronavirus emergency with a wide-ranging
which is seen as having failed to deliver quality have thus been populist outsiders of the left and assistance package, which has minimised
Chilean president Sebastián Piñera public services and having favoured the interests the right, and a populist candidate may win the economic damage, and with strong public health
of a small political and business elite rather than presidency in the November 2021 election. measures, but the human costs of the pandemic
Latin America’s star performer for decades, Chile offering genuinely equal opportunities. have been high, with cumulative per capita death
has been submerged in a process of profound With elections for the constituent assembly in rates not far below those of Brazil and Colombia
introspection and questioning of its economic President Sebastián Piñera, a billionaire April and the new body convening in May or June, at the start of 2021. Fortunately, the Chilean
and political model triggered by the riots of businessman before entering politics, has been the confluence of constitutional reform with the government is among the best prepared in the
October 2019 and the months of sometimes violent especially vulnerable in this political climate. His election calendar (presidential and congressional region in terms of vaccine supplies, with more than
enough pre-orders to cover the entire population,
and made a very fast start to vaccinations.
Of concern to investors have been recent populist
economic measures from parliamentarians such as
two initiatives in Congress to allow pension savers
to withdraw part of their savings prematurely.
The Piñera government was unable to stop
these measures passing, despite the damage
they inflicted on local capital markets and on the
pensions industry. Pamela Giles, the deputy who
pushed for the early withdrawals, saw her ratings
jump as a possible presidential candidate, so
the temptation for other politicians to follow the
populist path is likely to increase. Other leading
contenders include communist Daniel Jadue and
centre-right populist Joaquín Lavín, both mayors of
Santiago suburbs.
In terms of economic recovery, Chile is relatively
well placed. Its low debt levels mean it has
much more room to borrow additional funds for
coronavirus-related spending than many of its
neighbours and its main trading partner China
is recovering fast. In addition, Chile is pushing
hard into renewable energy and the country has
a relatively favourable score on ESG metrics. It
remains to be seen, though, whether its reputation
as a business and investor friendly destination
survives the constitutional reform process: this is
the major question facing Chile.
Page 20 - LatAm Outlook 2021 Page 21 - LatAm Outlook 2021Colombia
The biggest challenges for the Duque of workers, particularly those with skills, and from
administration in the remainder of its term, apart a relocation of businesses but has also had to
from dealing with the pandemic, are avoiding meet the considerable social and medical costs
a fresh upsurge of street protests, advancing of the influx with relatively little international help.
a tax reform which will help Colombia keep its Duque’s move to offer the refugees temporary
investment grade debt rating by boosting revenues protected status in February 2021 was a generous
and accelerating efforts to diversify the economy gesture which merited more international support.
away from an excessive dependence on fossil
fuel exports. It is far from clear that the tax reform A Petro win in 2022 remains a distinct possibility,
will succeed, given the government’s problems in particularly if the pandemic increases popular
agreeing an agenda with congress. Some of the discontent. This would spook investors and raise
Colombian president Iván Duque region’s worst inequalities of income (Colombia concerns about institutional stability and debt
has the second-worst score on the Gini index of sustainability. Most of the other likely candidates
In common with its Andean peers, Colombia is inequality among the six countries in this report) would not trigger such concerns and would
faced with a dilemma. On the one hand there remain a persistent source of discontent. probably keep Colombia’s well-earned reputation
is the relative success of its economic model in for moderation in economic policy.
delivering steady growth and investment over the The 2022 presidential election is likely to be an
past two decades – the country has been amongst unusually consequential vote, with a clear choice President Duque has attempted to promote the
the best performers in Latin America - and on the between the radical left and more moderate creative economy and offshoring as alternative
other, the rising discontent of a large segment options. Duque cannot run again. Gustavo Petro, models for economic growth, with some progress.
of the population who are dissatisfied with what the former leftist guerrilla who attracted criticism However, in the longer term, Colombia’s success
the model has delivered and want better public for poor performance during a term as mayor in diversifying its economy is likely to depend on
services and greater equality of opportunity. of Bogotá, was a runner-up to Duque last time whether the country can dramatically improve its
and is likely to run again as the main standard- deficiencies in infrastructure, particularly roads,
This rising discontent coincides with a period when bearer of the left. In the political centre, former ports and rural broadband, to make its exports
strong leadership has been lacking. President Medellin mayor Sergio Fajardo, who was narrowly more competitive internationally.
Iván Duque has followed generally pragmatic squeezed out of the 2018 second round run-off, is
centre-right policies but has struggled to distance likely to make another attempt but may struggle to
himself from his political patron, conservative break through. It will probably not become clear
former president Álvaro Uribe, and has not been until near the end of 2021 who will win Uribe’s
able to build a strong base in congress with which backing as the main conservative candidate. In
to translate his political priorities into action. His an environment dominated by figures from the
opinion poll ratings have been relatively low by last election, a fresh political face might attract a
regional standards – though higher than those of strong following.
incumbents in Chile and Ecuador - and he has not
attracted the kind of mass support that Uribe did. The country remains strongly polarised between
As a result, he remains vulnerable in the run-up to pro- and anti-Uribe factions and this division is
the 2022 presidential election to a renewed wave reflected in disagreements over the fate of the
of street protests. peace deal with former Marxist guerrillas, which
was signed by Duque’s predecessor Juan Manuel
Colombia’s response to the coronavirus pandemic Santos. The Duque government has publicly
initially looked promising, with rapid lockdown insisted it is committed to the agreement but in
measures and relatively low infection rates. practice has soft-pedalled on implementing it,
However, as the lockdown continued through something which has increased social tension in
2020, infection rates began to rise steadily as the most affected areas of the country. A change of
compliance fell and by early 2021 the country was policy on the peace process is unlikely during the
among the worst affected in the region in terms rest of Duque’s term.
of deaths adjusted for population size. Colombia’s
pandemic-related economic stimulus was modest, As the country playing host to the largest number
with funds limited by a relatively high debt, but the of refugees from neighbouring Venezuela,
underlying strength of the economy meant it was Colombia has the biggest direct exposure to the
less badly affected than some of its neighbours. Venezuelan crisis. It has benefited from the influx
Page 22 - LatAm Outlook 2021 Page 23 - LatAm Outlook 2021Mexico
it led to one of the world’s highest death tolls by majorities in both houses of congress which would
early 2021 when adjusted for population size. allow constitutional changes. As a result, López
Widespread scepticism about the official count Obrador’s response may be to radicalise further
means that the true number of deaths could be and appeal over the heads of legislators directly to
significantly higher. the people to back his more controversial policies.
The inauguration of President Biden has created Mexico’s strong advantages of geographical
fresh challenges for López Obrador. He had proximity to the US and access to its markets via
reached an accomodation with President Trump, the USMCA trade pact will mitigate to some extent
accepting Trump’s draconian curbs on immigration López Obrador’s perceived hostility to business.
as a necessary price for keeping relations and But the president’s unpredictable decision-making
trade on track. López Obrador is strongly focused and an increasing tendency to diminish the role of
on domestic issues and will therefore want to avoid independent regulatory institutions bode ill for the
conflict with Biden. But the US president’s renewed business environment in the longterm.
focus on climate change will be unwelcome:
as an old-fashioned energy nationalist, López Another major source of concern is López
Obrador has made a big bet on fossil fuels via Obrador’s heavy and increasing reliance on the
a $8bn investment in a new oil refinery and a Mexican military for everything from policing
push to boost oil production at state giant Pemex, duties to infrastructure construction. The price
while attacking foreign-owned renewable energy demanded in return became evident when the
companies. Biden’s emphasis on human rights US arrested in late 2020 and tried to prosecute a
and fighting corruption risk being seen in Mexico former Mexican defence minister and ex-general,
as unwarranted interference in domestic affairs; Salvador Cienfuegos for alleged drug trafficking
there is plenty which could upset the US-Mexico offences. Heavy pressure from the Mexican
relationship over the rest of López Obrador’s term. military led to López Obrador demanding the
return of Cienfuegos to Mexico, supposedly to face
Midterm legislative elections in June 2021 would investigation but in fact to be exonerated. Mexico
Mexican president Andrés Manuel López Obrador normally pose a major challenge for a sitting accused the US of fabricating evidence
president facing weak growth and a serious against him.
Mexico is undergoing a significant shift from the Obrador’s failure so far to revive the economy or to pandemic. However, López Obrador is likely to
broadly free-market approach which prevailed improve security. benefit from the continued severe weakness of The most likely scenario for Mexico over the
under successive governments of the centre the opposition, which lacks effective leadership remainder of López Obrador’s term to 2024 is a
and the right for the past 40 years. President Despite López Obrador’s stinging criticism of the and is still suffering from its association with past continued steady deterioration in the business and
Andrés Manuel López Obrador is aiming for a economic model of the past 40 years for failing corruption scandals. As a result, the president’s investment climate and the rule of law, mitigated
“transformation” which will end what he terms the to deliver higher growth rates, particularly in the Morena coalition of left-wing forces is likely somewhat by the commercial opportunities
failed decades of neoliberalism and replace them impoverished and backward south of the country, to retain its simple majority in the lower house created by President Biden’s “Buy America” policy
with a more interventionist government dedicated his government has presided over a further of congress and pick up a number of state and access to the vast North American market.
to greater social justice and fighting corruption. reduction in growth rates even before governorships which are being defended by
the coronavirus. the opposition; it is unlikely to win two-thirds
Lopez Obrador’s style of government is
idiosyncratic and highly personalised. He is a López Obrador’s fiscal conservatism (he is a rare
very skilled communicator and has maintained left-wing populist in that he is reluctant to jack
consistently high opinion poll ratings by up public spending) meant he refused to give
emphasising his credentials as a man of the the Mexican economy a significant fiscal boost
people living an austere lifestyle in contrast to to combat the consequences of the coronavirus
the near-regal trappings which surrounded his pandemic. The president also played down the
predecessors. In a country where inequalities significance of the virus, prioritising the economy,
of income are rife and corruption rampant, this rejecting strict lockdowns and continuing to travel
approach has proved very popular with less around the country, often without a mask. While
well-educated voters in particular. It has also this approach reduced the impact of the virus
compensated for growing disillusion with López on the economy and played well with his base,
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