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The ‘In-Between’ Truth of Latin America’s ‘Pink Tide’

By Schreiner Parker - Rystad Energy
Senior Vice President and Head of Latin America

STORY INLINE POST

Thu, 02/02/2023 - 12:00

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Presidential elections in Colombia and Brazil this past year confirmed the resurgence of the famous “pink tide” that washed across Latin America in the early 2000s. This renaissance has been widely celebrated by global leftists as these governments seek to institutionalize social progress. It has also been much maligned by worldwide rightists, including some in the international business community, for the perceived muzzling of the private sector in national development. The truth lies somewhere in-between, and for the energy sector in the region, each country will have a unique approach to managing their resources wealth versus embracing the energy transition and Mexico, as always, proves to be a unique case.

The pink tide of old was no monolith, and neither is this current turn to the left. From outside, it’s easy to categorize Latin America as a single unit. Most countries in the region share the common experience of conquest and colonization by the Iberian Peninsula and through that, share overarching linguistic and cultural commonality. There are, of course, macro trends that can be observed and interpreted that hold true for Latin America in general. For instance, most countries have principally been raw commodity exporters from the time of colonization until today. This is a legacy of both natural endowments, being blessed with large reserves of commodities, such as fertile land, wood, gold, silver, copper, iron ore and oil, as well as colonialism, which was a system built on extracting wealth from one place and sending it off to another. From a governance perspective, the countries of the region have broadly evolved on a similar trend line as well, going from independence movements to the age of the caudillo and then the periods of republicanism and military dictatorships before emerging into full-blown democracies. But each country that comprises Latin America has its own unique social, cultural, and economic history and each has a distinctive relationship with balancing liberal and conservative elements within their own borders. To really understand the macro shift in politics in the region, and the impacts on society, the economy, and energy, it is imperative to examine each component case and analyze the subtle nuances that paved the road to the present day.

The pink tide, in general, is a somewhat ambiguous term and, as such, is hard to characterize. The Concise Oxford Dictionary on Politics by Ian McLean and Alistair McMillan defines it as the emergence of “… ‘left‐of‐centre’, ‘left‐leaning’, and ‘radical social democratic’ governments in Latin America.” The first wave of the pink tide was seen as a turn away from neoliberalism and an embrace of more economic and socially progressive policies. Put another way, it was a decoupling with the capitalist foundations built in the region during the post-World War II era and especially a response to the neoliberal reforms of the 1990s, which followed the “Washington Consensus” of fiscal orthodoxy, free trade, and privatization. Instead, it was a move to emphasize the state’s role in maintaining and elevating society, especially its most vulnerable elements, through social spending, such as the subsidization of healthcare, housing, and fuel costs. The phenomenon began to manifest itself in the late 1990s in Venezuela and quickly spread through to the rest of the region by the late 2000s. By 2008, leftist governments controlled most of Latin America with Hugo Chavez in Venezuela, Nestor Kirchner (followed by his wife Cristina Kirchner) in Argentina, Lula da Silva (followed by Dilma Rousseff) in Brazil, Evo Morales in Bolivia, Tabare Vazquez (followed by Jose Mujica) in Uruguay, Michelle Bachelet in Chile, Fernando Lugo in Paraguay, and Rafael Correa in Ecuador. Among the larger countries, only Colombia and Mexico remained governed by the center-rightist parties.

Overall, the different shades of pink are very relevant to understanding each country’s trajectory, both in general and with regard to their energy policies. It is also important to note that this pink tide differs structurally from the first iteration in the sense that it’s more of an “anti-incumbent” wave than a true embrace of socialist ideals. Bolsonaro and Macri were the first presidents to lose a re-election bid in Latin America’s democratic history, and looking through a broader lens, the party in power has lost the last 10 elections in the region. This visceral and immediate reaction from the electorate to near-term hardships can, in fact, make politicians shortsighted in their thinking, which has a knock-on effect for energy policy since that is typically long term in nature. Commodity prices do play a role here. While the industry is currently in a high price cycle, it is not the commodities boom of the early 2000s. Today’s pink tide governments must deal with headwinds, such as inflation, high debt, and high borrowing rates for international financing. The fact is that most countries in the region badly need private oil investment, which differs from the early 2000s when countries could benefit from the investment cycle brought in by the 1990s reforms.

It's worthwhile to note that Mexico is distinct when it comes to this topic. As mentioned previously, it was not a part of the first pink tide nor does Mexico have a long history of oscillation between liberal and conservative governments. While AMLO’s election in 2018 heralded the initial salvo of leftist presidents returning to power in the region, it’s important to distinguish that AMLO himself is not a leftist in any traditional interpretation of the word nor is MORENA a leftist party from a structural standpoint. When it comes to energy policy, AMLO is an unabashed supporter of fossil fuels, although with a nationalist bent in the sense that he believes the state, i.e. PEMEX, should be the driving force behind and the main benefactor of the development of those hydrocarbon resources.

History repeats itself often in Latin America, on shorter and longer arcs, and such is the case with AMLO’s current position. His style of governance, both as President of the Republic and within the MORENA party, is much more reminiscent of the PRI during the 1970s. A significant difference is that the party that AMLO created is very much a result of his own popularity and a reflection of his own personality whereas the PRI by the 1970s was an entrenched political machine that had several powerbrokers operating behind the scenes, sometimes in concert and sometimes opposing each other’s initiatives. The commonality exists in the perception of leftist ideology underpinning the party in contrast to the actions being taken, which are closer to the rightest side of the spectrum.

AMLO has managed to pull off this balancing act thus far. But harmonizing leftist perceptions and rightist actions may not prove so easy for his successor, who will not benefit from the cult of personality that AMLO has developed for himself. It seems apparent that AMLO would like to continue to influence policy even after his sexenio ends, in the vein of Calles or Echeverria, but that’s easier said than done. As was the case with both aforementioned former presidents, their successors ended up realizing that the presidential sash has a mass of its own and were able to distance and differentiate themselves from their predecessors. How this will play out within the MORENA party and eventually in a new presidency is yet to be seen. The potential for an actual swing to the left, in the more traditional sense, is a distinct possibility as any successor to AMLO will search for his or her own unique identity upon assuming the presidency. 2023 will prove a critical year in understanding what the rest of the decade will look like for Mexico as relates to its left/right political orientation as pre-candidates to the presidency begin to truly show their colors before the election in 2024.

Photo by:   Schreiner Parker

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