1. The Brazilian government and Telebras are pushing forward on a Fortaleza to Lisbon internet cable that will allow Brazilian internet traffic to bypass the US.

    As I wrote in February:
    Efforts to build more cables and connections among countries, particularly those that create new routes and greater resilience, are good for the global internet. Everyone should support those new connections, even the US.
    Bloomberg provides an update that the $185 million dollar project is excluding all US technology companies and equipment.

    If Brazil excluded the US technology firms to boost Brazilian firms, that would at least fit within Rousseff's economic model. However, Brazil is excluding the US firms so it can subcontract out to European and Asian firms, which isn't just bad for US-Brazil relations but is also probably bad for the project's overall cost and success.

    In handing out contracts in this way, one challenge may be the politicization of the contracting process. Rather than choosing the best firms, Brazil is specifically picking firms that meet a political agenda. That's easier said than done and will require some significant oversight. Remember that reports about monetary kickbacks to regulators and politicians during government contracting were a bigger scandal than the NSA spying during this past year in Brazil.

    It might feel like sweet revenge to kick the US in the shins by denying US companies contracts on this internet cable, but if Brazil can't keep this process transparent and bribery free, this cable is going to turn into a bigger hassle than it's worth.
  2. On Monday, the Brazil stock market crashed. Numerous analysts and editorial boards used that crash as evidence that "the market" was opposed to Rousseff's reelection and her economic policies. Perhaps this was best emphasized by the Wall Street Journal editorial board, which wrote:
    On Monday the world voted on Brazil’s choice, and this time the result was a resounding no confidence.
    On Tuesday, the Brazil stock market rebounded to levels higher than before the election. None of those analysts (or the WSJ editorial board) will publish corrections for their stories. Nobody concludes that the market is suddenly happy with Rousseff's economic policies based on the evidence from Tuesday. It doesn't fit the narrative as nicely as Monday's evidence.

    Is "the market" (the mystical and vengeful god that it is) happy with Rousseff's reelection? Probably not. You can see that via the economic statistics since her original election in 2010 and the movements in recent months.

    However, market reactions need to be measured over months or years. A single day market swing, especially those that are reversed in the following days, tells you more about the irrational exuberance of investors than it does long term economic trends.
  3. A weak mandate. President Dilma Rousseff was reelected yesterday winning not quite 52% of the vote. She won 54.5 million votes vs Aecio Neves’s 51 million. She was reelected with her approval rating was below 50%. Rousseff didn’t win because the Brazilian public thought highly of her or her party. She won by beating her opponents, first Marina Silva, then Aecio Neves, into the ground with an effective and brutal negative campaign strategy. That sort of campaigning often wins elections, but it doesn’t deliver mandates for leaders or the policies they represent.

    A strong mandate. To the extent there is a strong mandate, it is for the continuation of the PT’s social welfare policies including Bolsa Familia. Dilma campaigned hard on those policies. Marina Silva’s strongest moment in the first round was when she spoke of her parents going hungry when she was a child, a reason she would never cut those policies. Neves lost in large part due to attacks by Dilma’s campaign claiming that his right-wing economics would lead to cuts that would harm Brazil’s poor and emerging middle class. Bolsa Familia and related programs are supported by the Brazilian public and have become the third rail of Brazilian politics.

    A divided Brazil. The election results show Brazil divided along class and geographic lines, with most of the North voting for Rousseff while most of the South voted for Neves. Rousseff’s big wins in Rio and Minas Gerais were critical to pushing her over the 50% mark. In her victory speech, Rousseff rejected the idea of a divided country, but also spoke of the need for ‘peace and unity.’ Rousseff promised to reach out to her opponents, but didn’t mention either Neves or Silva by name during the speech. However, this isn’t just a pro- vs anti- Rousseff divide. The Brazilian political system is divided among numerous parties. I wrote after the first round that the Brazilian Congress would have 28 different parties. Similarly, after this second round, the 27 governor positions in Brazil will be divided among nine parties.

    Where is the protest vote? There was 79% turnout and only about 6% of the votes were left blank or null. On one hand, given the close results, those 6% of protest votes mattered. If those blank/null voters had cast their ballot against Rousseff by voting for Neves instead of protest voting for nobody, the election would have had a different result. At the same time, there are plenty of democracies around the world, the US included, that wish they could get 3/4 of their citizens to vote. While many voters expressed opinions rejecting the politicians and parties they view as corrupt, when it comes to actually voting, this is a country still strongly participating in democracy. Additionally, the millions of Brazilians who took to the streets during the 2013 protest movement were not all anti-Rousseff. The protests represented multiple ideologies, some to the right of Rousseff who supported Neves and some to the left of Rousseff who would never consider supporting her opponent. That meant that the protests didn’t translate directly to votes against the president.

    Four more years. The Brazilian markets clearly favored Neves and their reaction to Dilma’s reelection is not a positive one. The question for Rousseff’s government isn’t what the reaction is here at the end of 2014 (the next few weeks might be rough) but how the country looks in 2018. She has four more years to restart growth, tame inflation and get a handle on corruption, and those must be priorities for her government. She won reelection by campaigning dirty, but she can’t govern that way and hope to succeed.
  4. Former President Tabare Vazquez of the Frente Amplio faces off against Luis Lacalle Pou of the National Party and Pedro Bordaberry of the Colorado Party. The two opponents are the sons of two former presidents. Elections for the Congress take place concurrently.

    Via Pan American Post:
    El Pais and Subrayado have good overviews of the three ( Equipos Mori: Frente Amplio 43.6%, National Party 33.4%, Colorado Party 15.1 and Independent Party 3.1%; Cifra: FA 43%, PN 32%, PC 18% y PI 3.3%; and Factum FA 44%, PN 32%, PC 15% y PI 3%), with most analysts agreeing that the ruling coalition will lose its legislative majority and that the second round presidential race is still too close to call.
    As this graphic from AS-COA shows, the election really hasn't moved much in the past six months.

    The election will also have a referendum to move the age at which people can be tried for crimes as adults from 18 to 16. Polls show that it is likely but not certain to pass.
  5. A new Datanalisis poll (via Caracas Chronicles) shows Venezuela President Maduro has only 30% approval and 68% disapproval. The chart below shows how Maduro's approval rating has steadily fallen since late last year.



    The situation is worse when asked if the country is on the right or wrong track, with 82% saying Venezuela is on the wrong track and only 18% saying it is on the right track. That number, which has steadily dropped since Maduro took office, gives the sense that there are a lot of dissatisfied Chavistas.

    Certainly, plenty of presidents around Latin America in the past 15 years have survived significant approval plunges. President Humala is around the same level as Maduro at the moment and has been there for months. Argentina President Kirchner has dropped below 30% several times in her term. Former Costa Rica President Chinchilla spent most of her final year well below 30%. Even Brazil President Rousseff's approval rating dropped to 30% in mid-2013 and she's currently the favorite in a tight reelection campaign. Approval numbers don't automatically signal the end of a government.

    However, the difference in Venezuela is that there is no end in site for the Chavismo model. Unlike Peru, Argentina, Costa Rica, Brazil or other cases with low presidential approval, there is not an election in the near-term that can offer the population an opportunity to vote on the change they are demanding. Several recent Venezuela polls indicate that over 50% of Venezuela's population wants Maduro to resign, to revoke his mandate or to call for a new constituent assembly, all of which would be steps that would not be a normal transition of leadership. That's not good news for Venezuela's president.
  6. Today's NYT editorial praising Cuba's efforts on Ebola contains one important specific recommendation:
    As a matter of good sense and compassion, the American military, which now has about 550 troops in West Africa, should commit to giving any sick Cuban access to the treatment center the Pentagon built in Monrovia and to assisting with evacuation.
    Whatever else you think about this editorial, this one sentence recommendation makes a lot of sense. It plays to the strengths of both Cuba's and the US's response to Ebola in West Africa. It's not a grand gesture or policy shift, but rather a small measure that benefits everyone involved. The two countries should cooperate to make this happen.
  7. Datafolha and Ibope, the two pollsters considered most credible, have each released two polls that have been the exact same. 

    The polls on 9 October had Neves 46, Rousseff 44. 
    The polls on 15 October had Neves 45, Rousseff 43.

    Neves has a slight but perhaps statistically irrelevant lead.

    Two other polls are in the mix.

    Vox Populi has the race Rousseff 45, Neves 44.
    Sensus has the race Neves 52, Rousseff 37 (outlier!).

    The bad news for Rousseff is that she took almost none of the undecided vote in the first round, which means that the statistical models for how Rousseff and Neves split the undecideds in round two likely lean in favor of the challenger. 

    The good news for Rousseff is that her party organization is strong and her very negative campaign is hurting Aecio Neves's ratings, even as it bothers everyone watching the election as to just how dirty this is getting. In the past week, the Rousseff campaign team has shifted from criticizing Neves for being a right-wing ideologue to criticizing specific corruption problems he and his party have faced. The polling data I've seen suggests the attacks may be working.

    Yesterday's debate was a mud-slinging festival in which the two candidates traded allegations about which one is more corrupt. In a country where millions protested last year against corruption in politics, this campaign isn't exactly helping to heal the political system.
  8. In 2006, Jorge Castaneda published a Foreign Affairs article claiming there were "two lefts" in Latin America.
    One is modern, open-minded, reformist, and internationalist, and it springs, paradoxically, from the hard-core left of the past. The other, born of the great tradition of Latin American populism, is nationalist, strident, and close-minded.
    I never agreed with Castaneda'a "two lefts" analysis (nor did I agree the region experienced a "pink tide"), but it was the sort of elegant narrative that became conventional wisdom in many circles. Analysts contrasted a moderate left defined by Brazil and Chile with a populist left defined by Venezuela and the rest of ALBA. The assumption was that the moderate left would succeed while the populist left would eventually collapse under its own failures (but we should all panic about it anyway).

    A subsidiary belief to this was that the populist left was created and supported by Hugo Chavez. The rest of those ALBA countries needed Venezuela and its oil money to keep their political systems working.

    Eight years later, it's interesting to see that divide in what was considered the radical left. Venezuela is facing economic and political turmoil, recession and massive inflation, some of the worst crime statistics in the hemisphere, and one recent poll showing 58% of the Venezuelan public thinks President Maduro should resign. Meanwhile, Bolivia President Evo Morales was reelected with a solid 60% support brought about by strong economic growth and an ability to subtly and effectively neutralize his opposition.

    The "two lefts" weren't supposed to be defined by the differences between Venezuela and Bolivia, but here we are.

    Michael Shifter and Murat Dagli hit some important points in this WPR article:
    At least three of the ALBA members—Bolivia, Ecuador and Nicaragua—have proved to be among the most stable Latin American governments, with very popular leaders.  Despite their troubling authoritarian tendencies, marked by an erosion of the rule of law, the governance models forged by Presidents Evo Morales, Rafael Correa and Daniel Ortega, respectively, have gained wide support and are sustained by sound economies. For Washington, the challenge has become how to balance criticisms of democratic backsliding with attempts to engage popular governments presiding over economic and social progress.
    Shifter and Dagli's take on the political situations in each country is just as important as the economics. It's not just economic growth in each of those three countries, but also a more successful manipulation of the political system than what has been mismanaged in Venezuela.

    The alternative hypothesis for these countries is written by Oppenheimer in his column this weekend:
    Financially irresponsible countries with luck: They include Ecuador and Bolivia, which have followed Venezuela’s steps nationalizing companies and taking other anti-business measures, but started doing these things much more recently. They are relatively lucky, because the world is awash with cash looking for short-term high yields, and they can still get some speculative investments to keep their economies going.
    This is how a few analysts try to hold on to the quickly disintegrating Two Lefts theory. Instead of trying to explain why Bolivia and Ecuador are growing faster economically than Venezuela (or for that matter, Mexico and Colombia), Oppenheimer attributes it to luck and the fact their nationalizations were more recent and moves on.

    So lets look at the other side of the two lefts divide. Chile has already seen the left leave and come back in the form of Michelle Bachelet, it's a member of the Pacific Alliance, and its economy is struggling given the current low copper prices. Brazil is facing very weak economic growth, serious protests last year and a potential (though still not likely) removal of the PT from power this year. Uruguay's economy is doing ok, but that election is also likely to be close. Humala, who was lumped in with Evo Morales and the "populist left" in Castaneda's 2006 article, has turned out to be one of the most macro-economic orthodox leaders on the continent and is widely praised by investors.

    The group of countries and politicians defined as a moderate and pragmatic left is struggling both economically and politically to varying degrees.

    Let me leave aside the crazy idea that we shouldn't try to force each country's individual politics and economics into an easily explainable grouping and ask the tougher question. Is there an elegant narrative for Latin America today?

    To some extent there is a narrative and conventional wisdom in Latin American political analysis, with many analysts moving away from "two lefts" to contrasting the Pacific Alliance vs. Mercosur vs. ALBA. Yet, while I think the Pacific Alliance has value as a tangible group taking real integration actions, the narrative that these countries are doing better economically is only barely supported by the data and its long term political stability as an organization is not supported by public opinion polling.

    So what's the correct narrative that explains Latin America as it is, not as we might want it to be? Can we find a post-Cold War explanation for "left" and "right" ideology without stumbling over all the messy details of how these countries actually succeed or fail?

    What narrative gives us a region in which Venezuela is collapsing while Bolivia is succeeding, Brazil is stumbling but Mexico isn't doing much better, where Argentina is an economic disaster whose stock market has more than doubled this year, where the paragons of free trade ideology in Chile and Peru actually depend on a commodity export model while Ortega's Nicaragua is the biggest beneficiary of CAFTA? Can we create any simple and elegant explanation in which all of those data points hold together?
  9. A third term. With about 60% support (the polls were right!), Bolivia President Evo Morales will get a third term in office. Even though his vote percentage yesterday was slightly less than 2009 when he won 64% of the vote, his victory seemed smoother and more complete this year. Morales won eight of nine provinces including Santa Cruz, long considered an opposition stronghold. Unlike 2009, the opposition put up little fight this year and appeared resigned to their loss even before the votes were cast.

    A Congressional majority. Morales’s MAS party also won 24 of the 36 Senators and 80 out of 130 deputies (those are early results and may change), falling just short of their desired 2/3 majority in both chambers of Congress. Still, falling short of 2/3 doesn’t negate that they have solid majorities and can pass bills at will. After nine years in power, Morales has also consolidated control of the courts. This means there are limited institutional checks on Morales’s power. The president owns the perceived success Bolivia has today, which is why he won reelection, and without any institutional opposition he should be given credit or blame for the success or failure the country has in the coming five years.

    Bumps in the road. Morales has been riding high for almost all of 2014, but that doesn’t mean his first or second term were smooth. In 2011, the president's approval rating dropped into the 30’s and his reelection numbers were down at 25%. He’s faced a regular series of protests, previously by right-wing opposition in the East and more recently by unions and environmentalists. Winning 60% of the vote doesn’t mean Morales is going to have a smooth third term, but protests or sudden public approval drops also don’t mean that Morales is finished. He’s shown a proven ability to negotiate his way out of protest situations and bounce back from political problems. I expect Morales to have some rocky moments in his third term, but analysts should be careful never to count him out too early.

    Brazil’s influence. A lot of analysts place Bolivia in the Venezuela/ALBA sphere of influence. The reality is that Morales has done well to reduce those ties in recent years and limit the potential economic damage that could come from a collapsing Venezuelan state. Famously, Morales has also cut US ties, kicking out the DEA and the US ambassador. This means, to the extent Bolivia falls under anyone’s influence, it’s Brazil. Bolivia’s economy, including natural gas exports, is strongly tied to its neighbor. Brazil has also taken an active interest in security and counter-narcotics issues in Bolivia, sending troops to train, encouraging the Morales government to crack down on criminal traffickers, and using drones to patrol the border. That Brazilian influence will likely remain true no matter the outcome of Brazil’s election this month, but it’s hard to know how Morales would work with a non-PT government next door.

    After Evo. This is the third time I’ve written “Five Points on Morales” (see 2005 and 2009) and for the sake of regional democracy I hope that I don’t have to write it for a fourth in 2020. If he completes this term, Morales will spend 15 years in office, which should be long enough for any leader. Over the past nine years, he has not yet taken steps to groom a competitive successor and has arguably kept other politicians within the MAS from growing too strong to challenge his authority. In this third term, Morales needs to figure out how to step away from the presidency and pass along his “revolution” to a successor. Presidents for life tend to be presidents who remain just long enough to lose all the gains they have made.
  10. I last wrote about Bolivia's election in late July, a post noting that President Evo Morales had a huge lead in the polls. There hasn't been a need to write much because nothing has changed since then. Unlike some other recent elections, Bolivia has experienced a boring campaign awaiting an almost inevitable outcome.

    Good articles from Nick Miroff and Ben Dangl published this week explain why Morales is near certain to win. He's maintained a left-wing rhetoric while managing orthodox macro-economic policies. His recent policies have been relatively friendly to the business community and the extractive industries and have led to economic growth and budget surpluses. He's funded social programs and infrastructure spending, keeping high levels of support among the poor in the Altiplano, without breaking the bank. He has also worked to divide and overwhelm his critics on both the left and right with a cynical and Machiavellian style that has worked quite well for him in recent years.

    I estimate there is about an 85% chance that Morales wins in the first round this weekend. If one of the opposition candidates surprises and makes it to a second round, Morales is still a solid favorite in any second round scenario.
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