Posts   |   “The end of an era” in Latin America, leading expert says

April 22, 2016
“The end of an era” in Latin America, leading expert says

Roett High Res Photo

Riordan Roett, Professor and Director of the Latin America Studies Program, Johns Hopkins SAIS

By Afshin Molavi

Last week, I visited with Riordan Roett, one of America’s greatest Latin America specialists to discuss the fate of Latin America as well as China and India’s engagement across the continent. Professor Roett heads Johns Hopkins SAIS’ Latin America studies program, sits on numerous investment boards, and has been a pioneer in the field.

It was a fascinating discussion at a critical moment in Latin America’s history.

I began our conversation by asking Dr. Roett if the “pink tide” in Latin America was ebbing with the troubles faced by leftist, populist governments in Venezuela, Bolivia, and Brazil, and the defeat of “Kirchernismo” with the victory of the centrist, pragmatist Mauricio Macri in Argentina.

“Yes, I think it is the end of an era,” he said. What followed was a tour d’horizon of Latin America’s political and economic landscape that I found extremely enriching. The below are direct quotes from Riordan Roett in part I of the interview, mainly focusing on Latin America. In part II, to be published later, we will hear from Roett on India, China, and Japan’s engagement with Latin America.

‘The end of an era.”

“I think it is the end of an era. Many of the [leftist, populist] regimes were driven by massive commodity exports for 8 or 10 years, an dthey didn’t really invest the income and they spent it badly or with corruption and they are now left with large deficits and increasing popular discontent that they don’t have better medical care or education or transportation.”

“About 15 years ago, there was a sudden turn against the so-called Washington consensus. You had a bunch of new leftist leaders with not that much experience in government and who came in and, frankly, looked around and said this is marvelous and we can spend all the money we want and build up the popular support we want forever.”

“That dream came crashing down four or five years ago and now we are going through the adjustment process.”

Brazil is in very serious political, economic, and social trouble. In Bolivia, Morales lost his effort to run for a fourth term.”

Argentina

“Argentina is the perfect example of this where both Christina and her husband Nestor Kirchener just spent the country into the ground to keep building their populist base. Macri now has a very tough job turning it around, but the Argentines appear to be supportive thus far. They understood that moving toward hyperinflation is just not the way to build a country.”

“The fact that [Macri] appointed competent people to [economic and finance positions] is very important. Most of these pink governments did not have competent people.”

Venezuela – Crisis Imminent

“Venezuela has a more serious situation. I think there will be regime crisis very soon in Venezuela. [President Nicholas] Maduro just can’t govern. The Chavistas have no money. Oil prices are not going back up…the shelves are bare and Chavistas are grabbing onto every bit of power they can… there could be a recall this year or next year, or there could be a popular uprising. There could also be a military intervention, I hate to say that, but the only institution that still exists that is more or less autonomous, although deeply embedded in the Chavista movement, is the military. In general, militaries in Latin America try to retain a certain amount of distance from street politics, though that has been more difficult in Venezuela. This will be a last resort but hopefully that will not happen and instead a referendum will bring up a new election for president.”

Investment prospects

I asked Roett to put on his investment advisor hat, and offer some thoughts on the most promising places to invest in Latin America.

“If Pedro Pablo Kuczynski wins the presidential election (on June 5, 2016), Peru will be open to investment because there are real opportunities the current government has overlooked or has not managed well.”

“Mexico, even with all the bad press, there are certain parts of Mexico that are very competitive and technologically advanced and there are very good places to invest as well. With NAFTA and the 2,000 mile border and the ease of travel and exporting into the U.S market with the U.S economy growing reasonablyt well, Mexico will do relatively well.”

“Colombia is going to be very attractive as the FARC is finally going to come out of the jungle and negotiate a peace settlement. Colombia is a big economy, a very important country, a lot of resources, with a lot of opportunities.”