January 8, 2020

Report Outlines the Prospects for Unrest in Latin America Throughout 2020

"Latin America is by no means a stranger to social unrest and political turmoil. Yet, even by historical standards, 2019 has proved to be an extremely volatile year for the land of the cacerolazo," says a report published by The Economist Intelligence Unit (The EIU). "Governments across the region, irrespective of their ideological leanings, have had to deal with the backlash of a public whose tolerance for the status quo has all but disappeared."

In its report entitled Where next and what next for Latin America? The EIU "outlines the prospects for unrest in Latin America throughout 2020, assessing the stress points that might trigger fresh instability in the year to come, and taking a closer look at countries hit by unrest in 2019 or at risk of unrest in 2020."

Key figures include:
  • Countries across Latin America—from Bolivia to Chile—have been roiled by political turmoil in 2019. Although each episode of social unrest is clearly distinct from the other, the roots of public frustrations across the region lie in dysfunctional political systems and economic malaise.
  • The problems faced by countries across the region are structural and, with a few exceptions, governments lack the fiscal and institutional capacities to sufficiently address citizens concerns. Consequently, Latin America will remain a breeding ground for political unrest.
  • According to the "political instability risk heat map" developed by The EIU, the preponderance of Latin American countries are at "moderate" or "high" risk of facing renewed volatility in 2020.
Source: The EIU
Source: The EIU

The report explains: "To assess the risk of unrest in the region, The Economist Intelligence Unit has produced a political instability heat map, which assesses the key drivers of unrest in the region, and which shows that the country with the greatest number of potential flashpoints in 2020 is Nicaragua (Venezuela was excluded from the sample owing to inadequate data availability), followed by Guatemala, Brazil, Honduras, Chile, Mexico and Paraguay. Uruguay, by some distance, stands out as the country with the fewest potential flashpoints for unrest."

Moreover, "Taking a closer look at the heat map," The EIU considers "the following indicators to be among the most relevant in determining the likelihood of social unrest in the region.
  • "Income inequality. A high level of economic inequality tends to breed political disparity as well, creating more polarized societies and undermining social cohesion. Using our measure of inequality, we find that eight out of the 25 most unequal countries in the world are in Latin America, making any of those countries a prime candidate for inter-class strife.
  • "Adequacy of social insurance. The quality of social protection programs is a key determinant of human capital development and of the standard of living in a country. Although Latin America fares reasonably well on this indicator by emerging-market standards, there are clearly deficiencies in the region's safety nets. Furthermore, an important caveat in the interpretation of this measure is that average household expenditure levels vary by country, limiting comparability.
  • "Government effectiveness. Making progress on "good governance" is something that has eluded Latin America for some time. Many governments struggle with budget under-execution, while existing public services are coming under strain owing to migration and demographic transitions. Haiti, which ranks the lowest in government effectiveness in the region, has clearly struggled to address the concerns of its population, with people repeatedly taking to the streets to call for the resignation of their president, Jovenel Mo├»se.
  • "Corruption. As public opinion surveys highlight, the vast majority of Latin Americans perceive corruption to be a major problem, owing to its corrosive effect on public trust in institutions and on economic development more broadly. Anti-corruption protests have erupted periodically in countries across the region (in Brazil, Peru and Colombia to name a few), and these could well flare up again.
  • "Youth unemployment. The crisis of youth unemployment is less pronounced in Latin America than in many other parts of the world. Yet there are clearly countries—such as Argentina, Brazil and Uruguay (all of which have youth unemployment rates above 20%)—where labor markets cannot absorb the surplus of young job-seekers, sustaining the risk that a large pool of unemployed youth could catalyze public frustrations.
  • "Change in real per-head income after the commodities boom. Stagnation following the commodities boom (2004-13) has seen a halt in the expansion of the middle class in parts of Latin America, leading to dramatic declines in expectations of intergenerational improvement.
  • "Democratic backsliding. Democracy can have an important impact on political stability. In particular, freedom of expression and an ability to express dissatisfaction through the electoral process help to provide release valves for collective dissent. A regression in democracy could therefore presage civil unrest. Our Democracy Index, an annual report assessing the state of democracy around the world, is based on a broad measure of democracy that encompasses themes such as civil liberties, political culture, functioning of government and political participation."

The report also includes a section where The EIU takes "a closer look at some of the major countries in Latin America, including a number of countries that have struggled with unrest in 2019 and several countries that are in theory at risk of unrest in 2020, to assess what might happen next."

Is the risk of social unrest in Latin America adversely affecting your company's operations or anticipated plans to conduct business in the region?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of Solutions for a Sustainable World.

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