Latin America’s populist leaders are sharing hard times

McClatchy NewspapersJuly 3, 2009 

RIO DE JANEIRO, Brazil — Two events at the opposite ends of Latin America last Sunday seemed liked isolated events.

But Argentine voters' stinging rejection of President Cristina Fernandez and her husband, Nestor Kirchner, and the political infighting that prompted the overthrow of Honduran President Manuel Zelaya both reflect tough times for Latin America's leftist-oriented populist governments.

Until now, a bloc of Latin American nations led by Venezuela's Hugo Chavez and consisting of Honduras, Ecuador, Nicaragua and Bolivia had been able to trumpet their political and economic success under what Chavez calls "21st Century Socialism."

The formal name for their economic alliance is the Bolivarian Alliance for the People of Our Americas.

Argentina, which prospered from 2003-07 under Nestor Kirchner, has had an unofficial alliance with these five countries.

The populist leaders of the six countries have seemed to operate from a stylebook written by Chavez, albeit with some differences, analysts said.

In general, the populists have brooked little opposition while bashing capitalism, knocking the press, denouncing the United States whenever possible and dividing the public by viciously attacking real and imagined enemies.

In most cases now, however, the six presidents find their national bank accounts dropping dangerously low because they doled out too much cash during the boom times.

The drop in oil prices has forced Chavez, for example, to slow the import of car parts to a trickle, while Ecuador's Rafael Correa has practically stopped the import of new clothes.

Nicaragua's Daniel Ortega is getting less foreign aid that he badly needs because of his virulent speeches against the United States and foreign investors.

"Populism is running out of gas in Latin America, and it's beginning to show," Arturo Porzecanski, a native Uruguayan who is a professor of International Finance at American University, said in a telephone interview.

Meanwhile, Latin American countries led by market-friendly leftist presidents who saved money and welcomed foreign investors have a brighter economic outlook for this year and next.

Not only that, these presidents – Brazil's Luiz Inacio Lula da Silva, Chile's Michelle Bachelet and Uruguay's Tabare Vazquez – remain popular even though the global recession has knocked their economies for a loop.

"Bachelet has never been more popular," said Eugenio Guzman, a government professor at the Universidad de Desarollo in Santiago, Chile. "We have a sound economy. Inflation and unemployment are low."

Chile, Brazil, Uruguay and Peru – which is led by unpopular President Alan Garcia – have been able to tap into savings to stimulate their economies in a way that the populist-led countries cannot match.

Taking their lead from Chavez, the populist leaders have shown a desperate desire to extend their time in power.

Like Chavez, Ecuador's Correa and Bolivia's Evo Morales got voters to approve new constitutions that dropped re-election bans. Correa won re-election in April, while Morales is favored to win another term in December.

Ortega has sought without luck to get Nicaraguans to allow him to seek re-election in 2011.

"They all are like traditional Latin American caudillos wanting to stay forever in power," said Rafael Nieto, a Bogota, Colombia-based political columnist for the newspaper El Tiempo.

It was Zelaya's machinations to try to get another term that led the Supreme Court to rule that he had acted illegally and the military to hustle him out of the country.

The Kirchners have employed a unique approach to hold on to power. Nestor Kirchner served one term as president, then stepped aside so his wife, Cristina, could win her own four-year term in 2007.

Widely disliked, she has upset Argentina's rural voters by raising taxes on farm exports and angered urban voters by nationalizing the country's pension system as a way of tapping into the system's huge financial reserves.

Nestor Kirchner's defeat in Sunday's mid-term congressional elections and their Peronist party's overall poor showing seem to have derailed plans for him to run for president again in 2011.

"They were never willing to have dialogue;, they saw everything in a confrontational manner," said Claudio Loser, an Argentine economist who consults for the Inter-American Dialogue in Washington, D.C.

After five years of high growth, Argentina's economy will contract by 2 to 3 percent in 2009 and barely grow in 2010, estimated Loser. He said the government has lost credibility by saying the inflation rate is 5 percent when independent economists put it at 15 percent.

Chavez won a major victory in February when Venezuelans voted to allow him to seek re-election in 2012. Poverty has fallen by 50 percent during his decade in office, the government says.

But Chavez has lost popularity since February and only about 50 percent of Venezuelans have a positive view of him now, said Luis Vicente Leon, a Caracas-based pollster.

Since February, Chavez has taken a hard turn to the left by nationalizing private companies and stripping power from local and state governments run by political opponents. The economy has become increasingly schizophrenic – one week, butter and eggs are absent from supermarket shelves, the next week it is toilet paper. The inflation rate, at 27 percent, is the highest in Latin America.

Venezuela is the only South American country projected by the IMF to see its economy shrink in 2009 and 2010, although exactly how the economy performs will ultimately depend on oil prices. Oil income accounted for 93 percent of Venezuela's export income in 2008, up from about 75 percent when Chavez took office.

In Bolivia, which has an Indian majority, Morales is the first self-identified indigenous president in the country's history and remains popular.

But investment in the country's most important industry – natural gas – has been moribund with Morales' decision to jack up taxes on the foreign producers and force them to operate under new contracts.

In an ominous sign for Bolivia, neighboring Chile this week began receiving its first shipment of natural gas delivered in tankers from foreign countries.

Chile has built the infrastructure to receive the natural gas to avoid the need for natural gas from Bolivia. Brazil, Bolivia's biggest customer, will soon lessen its dependence on Bolivia by opening its own natural gas ports.

"The populists are very good at leveling indictments against the old political order and getting a political bounce for that," said Michael Shifter, vice president of the Inter-American Dialogue. "But it's no substitute for governing."

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