Costa Rica - Rodrigo Chaves wins the presidency

The incoming president is simultaneously populist and allegedly market-friendly, but markets aren’t going to like how hard it will be for him to govern.

Former finance minister Rodrigo Chaves won the Costa Rican election by about six points or 100,000 votes. Turnout was around 57%, lower than Costa Rica’s usual average of almost 64%. 

There is a portrayal of Chaves as “market-friendly.” It’s true that he’s not a fire-breathing socialist, but there are reasons to think Chaves’s term won’t be particularly market friendly. Chaves turned more populist in the second round, and he has little reason to maintain fiscal discipline as president if those “market-friendly” policies make him unpopular. In addition, a president who can’t make political progress due to a lack of cooperation from other parties and corruption scandals is not going to be able to pass market-friendly reforms.

Chaves’s election fits a pattern in which political party systems have declined in Costa Rica and more broadly in Latin America. The new president will now face a Congressional system where he must negotiate with a broad range of other parties that have little incentive to help the new president succeed. I was quoted in the New York Times this weekend as saying, “You’re going to get a cycle where people become increasingly disillusioned with the political system.” That’s something that holds true for many Latin American countries right now (I could easily say the same thing about Peru). 

Chaves has tried to portray his economist background as a strength, but having a PhD doesn’t mean he’s going to be a good manager of the government or the economy. His time as finance minister of President Alvarado was cut short due to his clashes with the president. The local Costa Rican media have numerous articles describing Chaves’s management style as abrasive and difficult. There are also the infamous allegations at the World Bank of sexual harassment that appear to have led at least one office in Brazil to refuse to work with him.

Chaves can potentially succeed by buying off the other parties with some sort of pork. Clientelism, particularly promises made to local mayors and others who control small political machines, certainly helped his campaign and is one way to govern. However, that style of governance comes with high risks of corruption. Given how the new president’s campaign was trailed by a large and complex campaign finance scandal that will now follow him into his presidency, the risks of corruption becoming an issue that hobbles the new president are high.

Chaves doesn’t have Chavistas. The economist ran a relatively populist campaign, railing against the traditional political elite and taking full advantage of corruption accusations against his opponent. But that’s a different sort of populism than creating a cult of personality and individual support that is sustainable. Chaves, who was only polling around 5% in the month prior to the first round, lacks a solid base of personal support in the country.