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South America’s ‘Pink Tide’ in Transition

The recession of this left-leaning stance is to be expected.

  • Last updated: March 8
  • Total word count: 1268 words

By Allison Fedirka

Leftist governments are staging a comeback in South America, right? The talk surrounding upcoming elections throughout the continent seems to suggest they are. Nostalgia for the days of economic prosperity in Brazil has lent credence to the notion that former president Luis Inacio Lula da Silva will run for president again. In Argentina, unpopular and painful economic reforms championed by President Mauricio Macri have breathed new life into rumors that citizens would prefer the populist policies of the previous administration. Other examples abound, but suffice it to say, the “pink tide” – South America’s peculiar brand of leftism – is in vogue again.

Or is it? It’s true that the left is alive and well. But the pink tide began to recede in 2015, and despite statements to the contrary, it’s still on its way out, not on its way in.

One Extreme to the Other

The pink tide came to be in the early 21st century. South America leaders mixed elements of populism and socialism into their governments. They lauded the working class, maintained a presence in many aspects of the daily lives of their subjects and regulated the economy. It was not a return to red communism; it was a paler shade of socialism. Hence the name pink tide.

The rise of the left was a result of two things: disillusionment with the ruling governments and higher commodity prices. The political climate of the time gave governments a mandate to more actively try to improve their citizens’ quality of life, renew economic activity and buck the country that so often told them what to do: the United States. Higher commodity prices gave these governments the money to fund large-scale social programs and spurred economic growth. With strong public and economic backing, leftist governments grew more popular, taking hold just about everywhere except Colombia.

But this newfound fervor would not last. Indeed, the political history of the past century suggests that countries tend to swing from one political extreme to the other. Policies that reflect whichever mode of government is in place are felt most acutely in economic management, and their economies depend largely on commodities. Indeed, commodities – particularly metals, grains and more recently, oil – are the ties that bind South America to the rest of the world. In the 1920s, the region traded openly and primarily with the U.S. and Europe. Commodity prices tanked when the stock market crashed in 1929, and countries began to seek other ways to nurture their economies. World War II complicated things for these countries, since South America traditionally purchased finished manufactured goods from Europe and the U.S. With their industries going offline or reverting to the production of wartime materials, the region had limited access to manufactured goods, and what did arrive was extremely expensive.

It was during this time that countries of the region began to look inward for solutions. They subsequently adopted import substitution models to manage their economies. This model requires a strong hand to regulate the import of finished goods, provide production subsides to increase domestic consumption and devise other programs that facilitate the development of national industry. But the model never fully performed as advertised. Instead, it led to high government spending, debt and distorted markets. This continued into the heady days of the Cold War in the 1970s. Afraid that this would give communism a foothold in the Western Hemisphere, the United States countered leftist movements at nearly every turn, exiling, imprisoning or killing their members. The movements weakened accordingly.

By the time the Cold War ended in 1991, right-wing governments began to assume power throughout the region. Many South American economies had been in a precarious state. They were very far in debt, which they had trouble servicing, and in need of loans and investment. In what became known as the Washington Consensus, institutions such as the U.S. Treasury Department, the International Monetary Fund and the World Bank encouraged and promoted the adoption of fiscal reforms, privatization, market deregulation and opening to trade and investment in exchange for loans and investments. They honored the end of the agreement, but they were ultimately unsuccessful in transforming their economies. The right-wing, U.S.-friendly governments soon fell out of favor.

Conditions were ripe for a return to the left, a return we now call the pink tide. The era lasted roughly 10 years, which, uncoincidentally, were years of high commodities prices. It ended near the end of 2015.

Transitions

After that, open-market, internationalist, reformist governments came to power in several countries with center-left governments – most notably Argentina, Brazil and Peru. The trend continued last year in Chile, where right-leaning former president Sebastian Pinera was re-elected for a second term.

Few countries have been able to withstand the swing to the right. In 2017, Ecuador elected as president Lenin Moreno, who had served as vice president under President Rafael Correa. Correa himself was a leftist, but Moreno has already distinguished himself from his predecessor. He inherited an economy in disarray after the collapse of oil prices, so he adopted new fiscal policies and a more pragmatic approach to managing the economy rather than continuing with hefty government spending and protectionism. He has also tried to align the economy with global markets by re-negotiating the country’s previously preferential oil contracts with China.

Bolivia held out a little longer than others, mostly because Bolivia’s economy managed to grow despite low commodity prices. Its primary commodity is natural gas – which accounts for about half the country’s exports – and the price of gas remained high when oil tanked in 2014. (It started to decline only toward the end of 2015.) The public didn’t start to turn against President Evo Morales until 2016. There had always been opposition to his rule, but the opposition gained a lot of momentum when Morales’ traditional allies in Venezuela and Brazil, preoccupied as they were with their own problems, were no longer strong enough to support him. The opposition held a referendum that banned Morales from seeking re-election in 2019, though the Supreme Court would not uphold the results. Protests subsequently broke out, and though Morales is still in power, the rising social discontent, the declining natural gas production and ideological isolation are challenging the government’s hold on power.

Then there is Venezuela, where government this month announced that presidential elections will be held in May, after the initial April 22 date was rejected by opposition parties. Mounting pressures are pushing the country toward some solution that involves the end of the current leftist regime headed by Nicolas Maduro. The most recent dialogue with the opposition has failed, and neighboring Colombia and Brazil have both beefed up border security to help prevent any more spillover of desperate populations moving to border towns and depleting supplies meant for the local populations. Later this month the government will also start the first phases of its cryptocurrency, designed to help circumvent the U.S. sanctions that are restricting the government’s (and the national oil company’s) ability to conduct business and to access imports and U.S. dollars. Colombia already wants to propose a financial recovery plan for Venezuela that would be in line with carefully opening and deregulating the economy. Meanwhile, the United States has not ruled out further oil sanctions against Venezuela.

At GPF, we are not in the business of predicting elections; we are in the business of predicting geopolitical trends. So while we can’t say exactly when Venezuela and Bolivia will succumb to the pressures that felled their neighbors, we can say that eventually they probably will. After all, political transitions do not happen overnight.