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Latin America: Ditching the left, right?

International investors will swiftly return to Latin America if they see clear evidence of economic progress.

Dilma Rousseff doll-R-600

An inflatable doll of Brazil's president Dilma Rousseff held at a protest calling for her impeachment

Cristina Kirchnerhas left the Casa Rosada. In Venezuela, Nicholas Maduro suffered a heavy defeat. In Brazil, Dilma Rousseff is officially its most unpopular president ever.

What do these three countries, which are all rebelling against their long-time left-of-centre ruling parties have in common – aside from their size and abundant natural resources? 

The answer is economic and financial mismanagement. That’s what is driving a desire for change, but political analysts are clear: these populations are not embracing centre-right, market-driven politics and policies that place an emphasis on fiscal and monetary discipline. Rather it is a reaction against the incumbents’ inability to provide economic growth and prosperity. 

That distinction might be subtle but it is important. Because what has opened the door for Mauricio Macri in Argentina, and Venezuela’s Henrique Capriles Radonski, and which is likely to open the door for opposition parties in Brazil (Aécio Neves of the Brazilian Social Democratic Party lost to Rousseff in the last election but is comfortably ahead of her, and Lula, in current opinion polls) – is, finally, a rejection of the incumbent.

However, it should not be read as a mass ideological rejection of the left by these countries’ voters – indeed Rousseff won the last election despite clear signs of deterioration in the economy. The wheels had to fall off spectacularly – led by the discovery of levels of corruption and greed at Petrobras that beggar belief – before her political base began to turn against her.

In Argentina, the Kirchners had managed to hold power since 2003 before sheer fatigue with the Peronists and a clearly-spent economic model led to Macri winning a slim majority. Venezuelans backed Chavism since 1997, despite many years of economic decline. 

Now, Macri (with others likely to follow in Venezuela and Brazil) has been given the opportunity to govern and the chance to lay the foundations for a new economic model in the south of Latin America. 

The templates are already in the region: Mexico, Colombia, Chile and Peru. The Pacific Alliance countries can be looked to for inspiration and, as in these countries, the international markets are ready to invest and play a leading role in development.

Argentina has been locked out of the capital markets for more than a decade; Venezuela’s last sovereign trade was 2011 and even Brazil has been 16 months without a bond. But a clear change in direction will easily persuade international investors to return.