Latin America Summary 2015: a new political environment and its impact on the economy
2015 saw a number of key events in Latin America; but perhaps the most important occurred in the political arena with the change of government in Argentina, the National Assembly election results in Venezuela, and the progress made in the peace process in Colombia. These marked out a new direction for the countries in question and could have possible repercussions on the region's economy.
2015 Argentine elections: Macri triumphs
Firstly, Mauricio Macri's victory in Argentina put an end to a long period of Peronist domination and 12 years of Kirchnerism in power, and sees the start of a change from the prevailing leftist model towards one of the center-right which faces enormous economic policy challenges; among them, the normalization of the foreign exchange market and taming inflation.
2015 Venezuelan elections: a major blow to the ruling party
In Venezuela too, the government saw the triumph of the opposition in the parliamentary elections on December 6. The Coalition for Democratic Unity (La Mesa de Unidad Democrática), the main opposition to the government of President Nicolás Maduro, won 112 of the 167 seats in the National Assembly and ended 10 years of Chavist hegemony in legislative power, enabling room for change to open up in a country deep in economic crisis.
Peace process in Colombia: progress in the agreement with Farc
In Colombia, after three and a half years, the peace talks between the government of Juan Manuel Santos and the guerrilla group Farc reached agreement on the most complex issues regarding justice and reparations to victims. In mid-December agreement on the fifth point on the agenda was announced, the so called Integrated System of Truth, Justice, Reparation and Non-Repetition, after the agreements reached on Integral Agrarian Development, Political Participation and Solution to Illicit Drug Problem. With just two points pending to be agreed on – End of the Conflict and Implementation, Verification and Endorsement - the peace treaty is expected to be signed within the proposed March 2016 deadline.
Crisis of confidence in Chile
Chile faced a crisis of confidence towards the government, political parties and the business sector resulting from the cases of alleged influence peddling by President Michelle Bachelet's son, illegal political campaign financing and firms colluding to fix prices. According to the latest opinion poll published by Cadem, trust in political institutions is at an all-time low and only 6 out of 16 score over 50%.
Mexico begins energy reforms
There were, however, also a number of major economic milestones achieved in the region, for example, for the first time ever Mexico auctioned off oil exploration and production blocks to private companies, as part of the energy reform framework of Enrique Peña Nieto's government. This, put an end to 77 years of state monopoly, through Pemex, and opens up opportunities for foreign oil companies, with the idea of returning output to levels of around three million barrels a day.
Fall in Latin American commodity prices
Economies in the region were also hit by a drop in the price of raw materials, for example copper (the major export of Chile and Peru) and oil (the main source of income of Venezuela, Colombia and Mexico), which severely affected the public finances of these countries and their GDP. According to BBVA Research forecasts, in 2015 the GDP of the Pacific Alliance countries will drop to 2.3% from 2.6% in 2014, while for Mercosur countries the GDP will stand at -2.3% compared to -0.4% in the preceding year.