Uruguay’s Lacalle Pou Wins Presidency as Rival Concedes

(Bloomberg) -- Luis Lacalle Pou of the center-right National Party won Uruguay’s presidency after his rival conceded four days after a run-off election.

Lacalle Pou, a career politician and son of a former president, was congratulated by his opponent Daniel Martinez of the ruling Broad Front, ending 15 years in power for the left-wing party.

“The evolution of the vote count hasn’t changed the trend,” Martinez wrote on Twitter. “Therefore we salute President-elect Luis Lacalle Pou with whom I’ll have a meeting tomorrow.”

With a difference of just 1.2 percentage points in a preliminary count, Martinez had refused to concede until the electoral court finished its final count. The electoral court has not yet published its final results.

President Jair Bolsonaro called Lacalle Pou to congratulate him, according to a statement from Brazil’s foreign ministry.

Lacalle Pou and Martinez are scheduled to meet at the president elect’s campaign headquarters Friday afternoon.

Speaking with reporters, vice President-elect Beatriz Argimon said she will meet with Vice President Lucia Topolansky next Tuesday to discuss the transition.

Swinging Right

One of South America’s wealthiest nations, Uruguay had already started its swing to the right in the Oct. 27 general elections that saw the Broad Front lose control of Congress for the first time since 2005.

Lacalle Pou’s victory is part of a recent anti-incumbent backlash in the region that has seen Latin Americans vote for change, whether it be from the right or the left. It also comes at a time of increased volatility in South America with violent protests erupting in Colombia, Ecuador, Bolivia and Chile.

The result in Uruguay means that the right will govern in three of the four countries that constitute the South American trading bloc known as Mercosur. That could leave Argentina’s president-elect, left-wing populist Alberto Fernandez, isolated when he takes office next month.

The bloc is already under strain following comments from President Jair Bolsonaro casting doubt on whether Brazil will even stay in Mercosur.

Uruguay can’t afford to lose its Mercosur export market if the bloc collapses, but at the same time it needs Mercosur to negotiate more trade deals with the rest of the world, Ignacio Bartesaghi, dean of the Catholic University of Uruguay’s business sciences school, said in an interview.

“When there are two players like Argentina and Brazil with so much weight and two presidents that are so far apart like Fernandez and Bolsonaro, it’s Uruguay that can mediate,” he said. “Argentina needs an ally to prevent Bolsonaro’s extreme position becoming reality.”

Sputtering Economy

The 46-year-old former lawmaker and heir to one of Uruguay’s oldest political dynasties will start his five-year term on March 1 as the head of a broad five-party “multicolor coalition” spanning the center-left to the far-right. The grouping will have ample majorities in both houses of Congress.

Lacalle Pou, who has already named three ministers, including former debt management director Azucena Arbeleche as his finance minister, said he will fill the rest of his cabinet by mid-December.

The new government will inherit an economy on a slightly stronger footing thanks to outgoing President Tabare Vazquez’s efforts to secure $5 billion of investment in public works and the construction of a massive pulp mill. Economists surveyed by Bloomberg forecast growth of 1.5% next year and 2% in 2021, compared with a meager 0.3% this year.

Still Uruguay’s economy will face headwinds from its two much larger neighbors, with Argentina’s economic crisis likely to continue and Brazil’s recovery slow, according to James Boswoth’s Latin America Risk Report.

Cutting a public sector deficit approaching 5% of GDP to protect Uruguay’s access to cheap credit is a key part of Lacalle Pou’s policy program, which includes potentially contentious social security and public education reforms. His advisers have promised to reduce wasteful spending by $900 million in 2020 alone.

Regional unrest and his narrow victory might prompt Lacalle Pou to adopt a more gradual fiscal adjustment, says Aldo Lema, an economist and partner at Vixion Consultores. In opposition, the Broad Front will also have an incentive to foster political stability as it eyes a return to power in 2025, he said.

But Lema noted that Uruguay is far from immune to the unrest roiling the region. “The political system’s maturity and stature is going to be put to the test over the next two years,” he said.

Responsible Opposition

The Broad Front remains the country’s largest political party with the ability to draw thousands of supporters onto the streets. Lacalle Pou will also have to reach an understanding with militant trade unions organized under the umbrella of the powerful PIT-CNT labor confederation.

Broad Front party chairman Javier Miranda told reporters Monday that his party will be a “responsible opposition” that will defend the achievements of its 15 years in power. The party would also accept Lacalle Pou’s offer to place its representatives on the boards of state-run companies and other government entities, he added.

National Party senator Javier Garcia sees the governing coalition and opposition forging a more productive relationship than in the past. Pension reform will require the Broad Front’s support to give the process political legitimacy, Garcia said in an interview before the election.

The new administration would not imitate the Broad Front government’s unwillingness to work with the opposition, Garcia added. “We aren’t going to pay them back in the same currency they paid us,” he said.

To contact the reporter on this story: Ken Parks in Montevideo at kparks8@bloomberg.net

To contact the editors responsible for this story: Daniel Cancel at dcancel@bloomberg.net, Bruce Douglas, Walter Brandimarte

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