Four questions about big picture trends in Latin America
I needed to think about something other than the US election for a few minutes.
For today's newsletter, to take a deep breath and avoid current events, here are four questions I'm thinking about right now regarding big-picture trends and scenarios. This is more me thinking out loud than any formal conclusions and predictions.
Is climate change hitting South America unusually hard right now or is this the new normal?
The weather feels worse this year. And I feel like I've said that every year for the last few years, as if every year is exceptionally worse, near crisis levels. The region is seeing the expected effects of climate change - glaciers are melting, average temperatures are up, precipitation patterns are changing - and that would be bad if that was all that was happening. But the general sense is that 2024 has been awful. Drought is drying up rivers. Rain, when it comes, drops in exceptional amounts that causes deaths and damage at a scale rarely seen. My concern is there is little reason to believe we will revert to the mean and have a good weather year in 2025 or 2026. The new normal is that climate change is hitting South America harder than the models predicted a few years ago and that continues into the coming years.
What happens if oil prices drop in 2025 or 2026?
Imagine three scenarios: oil prices remain around the current levels, oil prices rise by $20 per barrel due to geopolitical tensions, or oil prices drop by $20 per barrel due to oversupply and a drop in global economic growth. I can make a case for all three scenarios, but I think the market is underestimating the odds of that third scenario. If that scenario hits, it's a massive political shock to Venezuela (worse than any sanctions) and Guyana (election year next year!). It's a serious economic problem for Brazil and Ecuador. Pemex takes a huge hit. Argentina's Vaca Muerta becomes less interesting. How badly it hits Chile and Peru depends on how that oil price drop correlates with metals. If the reason oil prices drop is due to global demand, the metals prices correlate closely; but there is also a case where oil oversupply is paired with the ongoing green energy revolution that keeps lithium and other metal prices high even as oil prices fall. In any case, I think this potential oil price fall is a macroeconomic and political shock that could hit Latin America in the next 18 months or so and is under-rated in forecasts.
Are protests back to normal or will they spike again?
There are plenty of protests around Latin America if you track the statistics. I could write a thread per week about ongoing protests in some country. But those protests are fairly tame in terms of size, scope, damage, and police response as well as regional implications. The protest wave that destabilized governments and societies in 2019 and seemed to be rising again post-pandemic feels like it's not as relevant today. Food prices, one of my top indicators for protests, remain high but are down from their peak levels. However, if you look at the polls, the anger among citizens that drove those 2019 protests remains. I'm sure there will be plenty of protests in 2025, but my gut feeling says they aren't near 2019 levels regionally. Still, to say that there isn’t a regional protest trend doesn’t mean that one or two countries won’t see something big. Separating the average protests from the existentially bad ones and figuring out which countries might be the exceptions to the declining protest wave is one of the challenges I’m considering right now.
Is 2024 the exception to the anti-incumbent wave or the start of a new trend?
In World Politics Review at the start of this year, I wrote that 2024 would be the exception to the ongoing anti-incumbent wave that began in 2018. So far, it has played out as expected. Incumbent presidents/parties won in El Salvador, the Dominican Republic and Mexico. Brazil's mayoral elections saw over 80% of incumbent mayors reelected. The US and Uruguayan elections still to be decided, are at least close and haven't seen the sort of anti-incumbent push that causes big ruling party losses. At the same time, the presidents in many of the countries that have elections in 2025 and 2026 are wildly unpopular and seem to be falling into the anti-incumbent traps of previous years. I think 2024 was the exception year and the trend continues, but that Brazilian election in particular hints that something else may be going on. Over the coming years, it may be a slow ride away from the anti-incumbent wave rather than a light switch being flipped like we saw in 2018.
