Protesters Are Now Everywhere in Latin America as Boom Fades

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Protesters in Guatemala City on May 30, 2015.

Protesters in Guatemala City on May 30, 2015.

Photographer: Johan Ordonez/AFP via Getty Images

The central plaza in Guatemala City was packed with 20,000 demonstrators blaring horns, waving blue and white flags and calling on the country’s president to resign.

Some 1,600 miles away, thousands of Venezuelans dressed in white and carrying flowers demanded a commitment to congressional elections and the release of political prisoners.

The date was May 30th but it could have been almost any recent day in Latin America. Earlier that same week, Peru’s government called out riot police and closed schools in the historic Andean city of Arequipa as anti-mining protesters took to the streets, fending off tear gas with homemade balaclavas.

From Mexico to Chile, Latin Americans frustrated with scandals, stagnant economies and government incompetence are taking to the streets. Often they are protesting the very populist leaders they rallied around over the past decade, when rising wealth from a commodities boom fueled a surge in government spending and helped mask corruption.

“The economic growth of the past decade or so, and in some cases the arrival of new parties in power, postponed a reckoning of deep citizen anger,” said Chris Sabatini, an adjunct professor at Columbia University’s School of International and Public Affairs.

The growth of Latin America’s middle class -- an estimated 49 million people were pulled out of poverty from 2000 to 2010 - - has also raised citizens’ expectations of their leaders, said Claudio Loser, a former head of the Western Hemisphere department at the International Monetary Fund.

Permanent Corruption

“In Latin America, corruption has been a permanent issue,” Loser said. “In recent years, two things have occurred: The rule of law has turned into a more important issue and at the same time an emerging and rising middle class is less tolerant” of illegal behavior.

With budgets tight, political leaders have little room to spend their way out of their crises. That makes it a particularly delicate time for the region, said Daniel Lederman, deputy chief economist for Latin America at the World Bank.

“These scandals emerge due to very deep, fundamental reasons that we’re going to have to face,” said Lederman. “The timing creates problems with economic policy at a time of a fiscal tightening in many of our economies.”

Falling Investment

The turmoil is showing up in financial markets. The Brazilian real’s 14 percent decline this year against the dollar makes it the worst performer among 16 major currencies in the world. The return for Latin American bonds lags behind Asia, Africa, Europe and the Middle East, according to JPMorgan Chase & Co.’s EMBIG index.

Foreign direct investment in Latin America and the Caribbean dropped 16 percent last year to $158 billion dollars, according to the UN’s Economic Commission for Latin America and the Caribbean. The decline was more than double the 7 percent drop seen worldwide, the commission said.

“Countries have been hurt pretty badly across the board,” said Arthur Byrnes, who oversees almost $1 billion as senior managing director at Deltec Asset Management in New York.

The IMF agrees. It forecasts GDP growth of 0.9 percent in Latin America and the Caribbean this year, the slowest of any major world region. With China’s expansion slowing, the World Bank says weaker commodity prices will continue this year, hitting Chilean copper miners, Argentine soybean farmers and Venezuela’s oil-dependent government.

World Cup Fury

Brazil’s President Dilma Rousseff, who warned during elections last year that her opponent would put the country’s economic achievements at risk by raising interest rates and cutting spending, has been doing just that. And two years after fury over crime and spending on the World Cup soccer tournament sent millions into the streets, a multibillion-dollar graft scandal at state-run oil company Petroleo Brasileiro SA has created what former President Fernando Henrique Cardoso called “the pain of lost opportunities.”

In Chile, a corruption probe into legislators accused of taking illegal funds from an investment bank has spread across the political spectrum, forcing the departure of the interior minister and the minister in charge of relations with congress in the past month.

A separate scandal over abuse of influence forced President Michelle Bachelet’s son to resign as director of social and cultural affairs at the presidency.

Generational Change

“If democracy isn’t responding to the demands of middle class and there is corruption in an environment of decelerating growth or economic stagnation, well, that’s simply a formula for social protest and political disaffection like what we have seen in the last few months,” said former Costa Rica President Laura Chinchilla.

A generation ago, Latin Americans in countries emerging from civil conflicts or authoritarian rule had different expectations and demands for their governments. Promises of accountability and transparency in recent decades have made a difference in how voters view their leaders’ failings. The fact that protests are taking place at all is a sign of progress, Loser said.

“We have a better democratic system -- not perfect, far from it -- but better,” he said. “People are willing to demand measures against those in positions of power.”

And the demands keep coming.

Basement Jail

Guatemala’s central bank president was sent to a basement jail last month ahead of his indictment for fraud as part of an investigation into a $15 million contract issued by the Social Security Institute. He’s said he is innocent.

Mexico President Enrique Pena Nieto’s wife and Finance Minister Luis Videgaray were dogged by questions over properties they own that were financed by a government contractor.

Former Panamanian Finance Minister Frank de Lima was arrested May 11 as a part of an investigation that more than $17 million was skimmed from grain purchases made by a government food assistance program. He dismissed the charges.

The scandals may increase demands from civil society for better government practices.

“There’s going to be a pro-transparency agenda in the majority of these countries because the middle class demands it,” the World Bank’s Lederman said. “They demand it in Chile, Brazil, as do all the other Latin American citizens that live in democracy. The governance and transparency agenda can’t be postponed.”

Whether such demands will succeed is unclear but the protesters are growing bolder. At the May 30 rally in Guatemala City, amid the throngs blowing horns and whistles, 68-year-old salesman Julio Garcia stood out. With the president struggling to hold on to power after the departure of his vice president and half a dozen cabinet members, Garcia waved a toilet plunger: just the right tool, he said, to clean out the country’s political system.

For more, read this QuickTake: Costs of a Crackdown

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