Latin America faces a second ‘lost decade’?


From Chile to Bolivia, revolts against leaders from left and right have root causes in stagnant growth and weak investment in education and infrastructure, undermining faith in democracy.

The 1980s came to be known in Latin America as the “lost decade” after a debt crisis brought the regional economy to a standstill. For many countries, the current decade risks being a repeat experience, the Financial Times reports:

The problems began with the end of the global commodities boom in 2014. The predominantly leftwing Latin American governments of the previous decade spent generously to reduce poverty and redistribute income but did not invest enough in areas such as infrastructure or education to make their economies competitive in tougher times. Growth stalled and tens of millions of citizens who had joined the middle classes in the good years saw their gains being eroded and prospects for the future dim…..

Monica de Bolle, a senior fellow at the Peterson Institute for International Economics in Washington, says the best explanation for the chain of sudden social explosions in Latin America this year is the “tunnel theory” first coined by the Harvard economist Albert Hirschman in the 1970s to explain changing tolerance for economic inequality. It describes drivers stuck in traffic jams in adjacent lanes inside a tunnel.

“Suddenly the lane next to you starts to move but your lane doesn’t,” she says, paraphrasing Hirschman. “There’s no direct gain for you but your expectations rise that your situation will improve. If it doesn’t, then the frustrated expectations generate a sense of anger and revolt.”

Latin America was primed to explode. Economic malaise, social media, corruption, and foreign meddling combined to fuel raging protests from Chile to Haiti. What’s next for the region’s beleaguered democratic regimes? analysts – former National Endowment for Democracy board member – and  ask.

Latinobarómetro found last year that most Latin Americans viewed their economic future more darkly than at any time in the 23 years that the survey has run, FT analyst Michael Stott adds:

The proportion who felt their country was making progress hit a historic low of just 20 per cent, while 48 per cent felt it was stagnating and 28 per cent felt it was going backwards. Ironically, the two nations with the most positive sentiments about economic progress were Bolivia and Chile, where growth has been stronger than the regional average over the past few years. ….support for democracy slid to 48 per cent last year, its joint lowest level ever.

It is easy to get the impression that Latin America’s woes were purely economic, says Marta Lagos, the head of Latinobarómetro. “But it goes much deeper than that,” she says. “There are also problems of inequality, of political control and of corruption, which is fatal for democracy.”

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