UC Research Shows Latin America’s Political Risk Index
This indicator, developed by the UC International Studies Center, had the participation of 1,023 people, corresponding to the general public. Additionally, a panel of 48 experts from Latin America and the Caribbean was formed, which included former presidents, regional authorities, opinion leaders, and academics.
The Center for International Studies of the Pontificia Universidad Católica de Chile (CEIUC) launched the third edition of the Latin America Political Risk Index , as a guide for decision makers in the public and private spheres.
If the first version of the index was marked by the devastating effects of the pandemic and the second version by the growing level of uncertainty and volatility, this third version warns of the growing insecurity in the region, the continuous deterioration of democracy and an increasingly complex governance.
The third edition had the participation of 1,023 people, corresponding to the general public. Additionally, a panel of 48 experts from Latin America and the Caribbean was formed, which included former presidents, regional authorities, opinion leaders, and academics.
If the first version of the index was marked by the devastating effects of the pandemic and the second version by the growing level of uncertainty and volatility, this third version warns of the growing insecurity in the region, the continuous deterioration of democracy and an increasingly complex governance.
The ten risks identified, in order of importance, by the index are the following:
Organized crime
democratic rollback
complex governance
New outbreaks of malaise
immigration crisis
food insecurity
Polarization and fake news
Loss of competitiveness
Increase in cyber attacks
Weakening of regional integration
The third edition of Political Risk Latin America anticipates that 2023 will be complex and challenging for the region, which will have to face an unfavorable international context in which, according to the IMF, a simultaneous slowdown of the three main economic engines (the US, China and EU), whose effect will be a weak global economic growth of 2.7% -or could even be less than 2% according to its director- and with possibilities, more and more certain, that some economies enter into recession.
In addition, Latin America will live this year an electoral rally marked by the celebration of three general processes -presidential and legislative- in Paraguay, Guatemala and Argentina, together with other elections of great importance. Of these processes, it is important to observe two main trends: whether the vote to punish the ruling party will be maintained; And if the progressive governments will continue to triumph or we will see a change in the political cycle favorable to center-right or right-wing governments at the regional level.
For Jorge Sahd, director of the CEIUC and one of the editors of the report, two elements will be central in 2023. The first is the reconfiguration of the political map, with the return of the pink tide 2.0, where 5 of the 6 main economies in the region they will be ruled by leftist forces. “It is likely that the current political cycles are shorter than in the past, because the punishment vote is the one that is marking all the elections in Latin America from 2019 to date. The second element that will mark this year is a great cooling of the economy, where the region could grow less than 1% of GDP. This downturn in the economy, coupled with rising inflation and the cost of living and increased financial constraints, may lead to new explosions of social unrest,” he argues.
Latin America will live this year an electoral rally marked by the celebration of three general processes -presidential and legislative- in Paraguay, Guatemala and Argentina, together with other elections of great importance.
Regarding political risks, in the opinion of Daniel Zovatto, a senior researcher at CEIUC and one of the editors of the report, “the fact that organized crime ranks first shows that insecurity is a general feeling in the region; while the democratic setback reflects the deterioration that democracies and political institutions are suffering, as we have recently seen in Brazil and Peru. Finally, for the third consecutive year, migration is among the main political risks, being identified by the panel of experts in the first place”.
In this scenario of high volatility, polarization, and political risk, governments and companies must continue to improve their ability to navigate rough waters, manage uncertainty and expectations, guarantee governance, and implement reforms that respond to citizen demands with fiscal responsibility and without affecting the investment climate and, above all, deliver results.
Political Risk Latin America warns that 2023 will be another very challenging year and that “cloudy times” will continue in the region. The combination of hot streets and irritated ballot boxes will complicate governance, making it, along with anemic growth and high inflation, instability and insecurity the main headaches for a significant number of Latin American governments. But not everything in the region will be negative. There are also new growth opportunities, especially in agriculture, mining, energy and nearshoring, which must be well exploited. In this scenario of high volatility, polarization and political risk, governments and companies must continue to improve their ability to navigate rough waters, manage uncertainty and expectations,