Juan Pablo Spinetto, Bloomberg News

MEXICO CITY
EnergiesNet.com 06 28 2022

When the police of El Puyo, a provincial capital in Ecuador’s Amazon region, were confronted this week by a crowd of protestors enraged by surging fuel prices, they opted to flee.

Political leaders across Latin America may not be following that example exactly, but in many cases voters have moved to encourage them.

The skyrocketing cost of living has hammered lower-income and middle-class households worldwide, but few areas have seen the magnitude of social and political upheaval now in evidence across this vast region.

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Ecuador has experienced riots that have put the administration of President Guillermo Lasso up against the ropes. In Argentina, truckers are blocking roads around the country in protest against diesel shortages, hobbling the transport of grain to key ports.

Having spent close to $11 billion in energy subsidies last year, Buenos Aires is in a very tight spot. It needs to cut back in order to comply with an International Monetary Fund loan agreement. But discord over how to tackle that issue has helped fracture the government coalition, with some seeking to keep the benefits no matter the impact on the IMF deal.

In Brazil, President Jair Bolsonaro has been assailing Petrobras, the national oil company. Petrobras’s policy of passing higher crude costs on to drivers has badly damaged his popularity, with a growing number of citizens blaming the far-right incumbent for the country’s economic woes.

He now faces an uphill battle to beat left wing former President Luiz Inacio Lula da Silva in October’s presidential election. Bolsonaro will likely need to do everything possible to dissuade truckers—one of his key constituencies—from paralyzing the country in protest.

Meanwhile in Mexico, the administration of President Andres Manuel Lopez Obrador is spending billions of pesos every month to keep fuel prices contained, with the state now shouldering about 35% of the cost of gasoline in a bid to stave off widespread discontent.

Despite his effort, inflation there continues to climb. This week, the Mexican central bank accelerated the pace of interest-rate increases while warning of more tightening to come—regardless of a sluggish growth outlook.

Indeed, recent fuel-price spikes across Latin America, triggered in large part by Russia’s war on Ukraine, are adding extra instability to an already-complex political picture. 

As voters seek significant change, traditional parties and candidates have been obliterated from Peru to Costa Rica. Anti-establishment figures are ascendant, including Gabriel Boric in Chile and Pedro Castillo in Peru. The latest example is in Colombia, where Gustavo Petro, a left-leaning former mayor of Bogota, narrowly defeated controversial magnate Rodolfo Hernandez.

“Latin America is a region where economics and politics traditionally interplay in a quite intense way,” Morgan Stanley analysts wrote this month. “More pronounced changes in policy and regulatory frameworks are more common, and the effects of these changes may prove more far-reaching.”

But volatile electorates can sometimes mean leaders have little in the way of political honeymoons when it comes to addressing deep-seated socioeconomic problems.

Less than a year into the job, Castillo’s approval rating has tumbled to 9%, according to one poll. And in Chile, a Cadem poll showed Boric already has a 54% disapproval rating—and he took office in December. 

bloomberg.com 06 24 2022