Dr. Yasmin Calmet

Latin America has rung in 2024 as it continues to face numerous challenges, including weakened democratic institutions and the lowest economic growth in the world, especially in South America. Economic struggles threaten to undermine many Latin American governments. Other regional challenges that deserve increased attention include social inequality, environmental degradation, political and urban violence, the migration crisis, growing xenophobia, and the threat of war between Venezuela and Guyana.The coming year will also be pivotal for Latin America politics, as six countries—El Salvador, Panama, Mexico, the Dominican Republic, Uruguay, and Venezuela—prepare to hold presidential elections and two—Brazil and Chile— are set to hold municipal elections. Will these elections move the region to the right, or will there be a balance of ideologies? In 2023 elections, Paraguay, Ecuador and Argentina chose right-wing presidents, while Cuba and Guatemala opted for left-wing leaders. There are various other regional issues of concern for these elections: Will elections in Venezuela be fair and transparent? In El Salvador, where incumbent Bukele is certain to win reelection, will security and order continue to take precedence over human and constitutional rights? How long will Argentine society resist the fiscal reforms and deprivation of social rights that Milei has imposed?In the economic sphere, the Economic Commission for Latin America and the Caribbean (CEPAL) projects just 1.9 percent growth in 2024 (down from only 2.2 percent growth in 2023), with average inflation around 3.8 percent. This is not a particularly encouraging outlook for the region, since an economic slowdown means less investment in sociopolitical spheres such as education, health, and food security, or in economic infrastructure itself. Fewer jobs are being created while informality is on the rise. The expansion of the informal sector has implications for quality of employment, precarity of labor, widening gender gaps, and limited development of scientific, technological, and industrial sectors. Although inflation is falling (except in Argentina) this does not mean that the region’s monetary policy will become less restrictive. In other words, interest rates are likely to increase, since cutting rates would have a negative effect on monetary flows and potential currency devaluation.Consequently, although Latin America’s external debt has decreased, debt remains at high levels relative to GDP growth. Low growth rates could result in lower tax revenues, which limits fiscal space in the region. This could have a greater effect in democratically fragile countries, including through exacerbating social tensions, and promoting the rise of new authoritarian governments or strengthening existing ones.As discussed above, low economic growth rates will mean a lack of investment in urgent regional issues. This will make it difficult to achieve the 2030 Agenda for Sustainable Development goals, such as the eradication of poverty and food insecurity, and combatting global warming. Poverty rates in the region have remained consistent &nbsp;(around 29.1 percent). This includes 11.4 percent of the population living in extreme poverty, which indicates incomplete progress towards the goal of poverty eradication. These challenges are also reflected in social inequality rates. According to a CEPAL report from late 2023, the income of the top decile in the region is 21 times higher than that of the lowest income decile. This inequality is even more striking with regard to concentration of assets: In 2021, the wealth of the region’s 105 billionaires (defined as those with assets exceeding 1 billion USD) rose from 2019 and 2020 levels to almost 4 percent of total wealth.Investment in technologies for the sustainable use of natural resources could help alleviate this situation and promote regional growth, especially if there is a transition to a green economy. Such investment would help reduce CO2 emissions, while also generating more jobs in the formal sector. However, Latin America must first address two pressing challenges: (1) to create a consensus on this agenda across the region and (2) to develop its strategy for climate change mitigation. The region already has the cleanest electrical grid in the world, abundant reserves of minerals such as lithium and copper, the potential to generate green hydrogen, and large forest reserves. However, few governments are willing to end reliance on fossil fuels. With regard to climate change, Pacific coastal areas in the region were particularly affected by the El Niño phenomenon last year. This has had various socioeconomic consequences. For example, excessive rain had negative ramifications for the agricultural sector, which increased the cost of food as well as the cost of urban infrastructure and housing.Finally, tensions between Venezuela and Guyana are keeping the region and world on alert. A potential war between these two nations over the territory of Essequibo could destabilize relations between other South American countries, further widening ideological divides. This dispute could also exacerbate the migration crisis beyond Venezuela, with other countries in the region also potentially experiencing increased levels of violence driven by xenophobia.&nbsp;

What Can Be Anticipated in Latin America in 2024?