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Behind South America’s Year of Rage, Years of Woe

Behind South America’s Year of Rage, Years of Woe

(Bloomberg) -- One South American nation after another has seen an explosion of anti-government rage in recent months. Five years of weak economic growth is stoking dissent, as is a widespread belief that the costs of adjustment aren’t being fairly shared between rich and poor. In Argentina, which had an election to serve as a safety valve, incumbents were voted out. In Bolivia, a contested election unleashed massive protests. Elsewhere, in the Andean nations of Colombia, Chile and Ecuador people have taken to the streets in the hundreds of thousands.

1. How bad is the economy?

Over the last five years, South America has been the world’s worst-performing region economically. Argentina is in deep recession, and Venezuela is undergoing one of the worst slumps in history. Elsewhere, growth is sluggish rather than catastrophic. The International Monetary Fund expects the economies of South America to contract 0.2% this year.

2. What accounts for the doldrums?

According to the United Nations Conference on Trade and Development, all 12 countries in South America are commodity dependent, meaning raw materials such as oil, iron ore, copper, soy and coal account for more than 60% of merchandise exports. That’s true for just a quarter of nations in South Asia, Central Asia and Europe and none in North America. A boom in commodity prices from 2000 to 2014 led to a decrease in the poverty rate in Latin America from 27% to 12%, but since then demand from China and elsewhere has cooled as the global economy slowed. That’s caused commodity prices to drop, shrinking export and government revenue as well as investment. Colombia, for example, sold exports worth $42 billion in 2018, down from a peak of more than $60 billion in 2012.

3. How have citizens been affected?

Unemployment has risen in all the major South American economies over the last five years, including Argentina, Brazil, Chile, Colombia and Peru. That’s also made it harder for these economies to absorb millions of migrants fleeing Venezuela’s crisis, who need jobs. Wage growth has also been sluggish. As finance ministries try to keep debt under control, austerity programs have meant higher taxes and less money spent on subsidies and government services.

4. How does inequality factor in?

All the world’s most unequal countries are either in Africa or in Latin America and the Caribbean, according to data from the World Bank. A common complaint from protesters in Colombia, Chile and Ecuador is that the poorest citizens are hurt the most by austerity measures. Inequality, like corruption, seems harder to bear when the economy is weak and the jobless rate is rising.

5. In what ways is the unrest country-specific?

  • Chile: The nation appeared to be on the cusp of first-world status, with a standard of living approaching that of Portugal or the Czech Republic. Still, Chile, like the rest of the region, is a deeply segregated society, with the poor living largely out of sight of the wealthy. A modest increase in transport fares unleashed a wave of anger that few suspected existed.
  • Colombia: As elsewhere in the region, protesters are aggrieved by corruption and inequality. Many are also angry about continuing violence in rural Colombia following a peace deal in 2016 between the government and Marxist guerrillas. These include the unsolved murders of community leaders who, in many cases, are thought to have been killed by drug-trafficking mafias who took over territory from the demobilized rebels.
  • Ecuador: Protests were triggered by the elimination of fuel subsidies, which were part of an IMF-backed austerity drive. Demonstrations were led by indigenous groups who make up 7% of the population and who complain of being excluded from positions of power in politics and in the economy.
  • Bolivia: Violence was sparked first by a disputed election in which President Evo Morales claimed victory, and then by his resignation after the armed forces chief called on him to quit. The country is split along ethnic lines, and many indigenous Bolivians who had backed Morales, a member of the Aymara indigenous group in a country traditionally ruled by a white elite, have protested the new, transitional government, led by a woman of European descent.

6. How have governments reacted?

The governments of Ecuador, Chile and Colombia all caved in to some of the protesters’ demands, or proposed measures to placate them, while in Bolivia Morales was forced out. In all four countries, aggressive police tactics have resulted in protester deaths, further stoking outrage. In Colombia, demonstrators are calling for the country’s anti-riot squad to be disbanded. In Chile, anti-police graffiti has become common in big towns, and there are calls to reform the police after weeks of violent confrontations with protesters.

The Reference Shelf

  • Related QuickTakes on tensions in Bolivia, Ecuador and Chile.
  • Bloomberg Opinion’s John Authers argues that if a sudden breakdown in order can happen in Chile, it can happen anywhere.
  • Research on the economies of Latin America by the Organization for Economic Cooperation and Development.
  • The book “Brazillionaires” describes Brazil as its economic boom ended, focusing on the nation’s super rich.

To contact the reporter on this story: Matthew Bristow in Bogota at mbristow5@bloomberg.net

To contact the editors responsible for this story: Walter Brandimarte at wbrandimarte@bloomberg.net, Lisa Beyer

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