Image courtesy Semilla Luz
If there is one region of the world most closely perceived with populist politics it is Latin America. From Che Guevara in the 50's and 60's to more recent leaders like Ecuador's Rafael Correa and Bolivia's Evo Morales, populist leadership south of the U.S. is the norm. Elections in 2018 saw Jair Bolsanaro and Andres Manuel Lopez Obrador (AMLO) take power in Brazil and Mexico, respectively. While they both continued the populist trend, their political approaches came from separate camps, befitting of what was seen as a necessary response to the current establishments in both countries.
Mexico's AMLO is a life-long politician. He ran on a left-winged platform within a party he created, the Movement for National Regeneration, that challenged the entrenched political establishment in Mexico. In Mexico, of course, that means being a challenger of the Institutional Revolutionary Party (PRI), which has held power most of the last century. AMLO's leftist ideals threaten the capitalist approach Mexican elites have built since the 1970's. In Breakout Nations, Ruchir Sharma explains that privatization in the 70's meant effectively handing over industrial power to a few rich families. Since then, those exact same families have remained at the top of Mexico's billionaires club list. So the riches of the rich have grown at high rates, but Mexico's economy has remained at 2-3.5% rates. That is partly due to the fact that Mexican tycoons have turned from their people and put attention in profit-enriching opportunities outside of the country. In turn, Mexicans have been passed by Brazilians and Chileans on an income per capita basis. For these reasons, it's not surprising to see AMLO's leftist platform, which includes halting $13 b construction plans for a new airport in Mexico City and closing off the oil and gas industry to foreigners, capture the attention of the Mexican people. After his inauguration, he took a page from the book of Jose Mujica, and rode away in a simple car, instead of a fancy bullet-proof limo with security detail all around. He's a man of the people, but will he be able to get things done.
In Brazil, many politicians get things done in a mafioso way. Brazilian culture is so enmeshed with quid-quo-pro that just like the Eskimos have 50 words snow, Brazil has an entire set of language devoted to corruption. Historically, Brazil may have been doomed from the start with the way representatives of Portugal encouraged close links between the public and private sectors, and even turned a blind eye to illegal activity. Today, the system remains so broken that it even broke Dilma Rousseff, who believed so staunchly in breaking the political establishment up that she was willing to endure secret prisons for a decade. We know how that ended - she shifted from a populist to a pragmatist to the overseer of what is perhaps Brazil's biggest scandal in history. In response to these scandals and economic recession, Brazil recently elected populist politician Jair Bolsonaro. Bolsonaro campaigned on a hard-right platform with the penultimate promise to "break the system". In many ways, he was the political polar opposite to Dilma and offered the stability level opposite to what Brazilians have seen over the last decade. Along those lines, he touted his alliance with the military and he preyed on fear. Much like Trump did in the U.S., Bolsonaro branded himself as the anti-politician who would put Brazil first. It worked.
The important question, between Brazil and Mexico, is which country will fare the best in the near-term. Like with most questions like this, it will ultimately come down to leadership's strategy and their ability to implement those strategies. My forecast is that Mexico will see the most short-term improvement largely due to global trends in manufacturing. Costs in China have risen dramatically in the past 2 decades, as wages have risen above those in Mexico. Correspondingly, firms throughout North America are turning their attention to what BCG calls a rising global star for manufacturing. Given these global trends, Mexican leaders don't need genius strategies to boost their economy. They simply need AMLO to be enough of a pragmatist to maintain a capitalist mentality toward free-trade partnerships. He needs to keep a NAFTA deal in place that attracts firms to do their manufacturing in Mexico. By doing this, he has a chance to take advantage of a similar model that Japan, Korea, Thailand and others have used to pull rural workers into cities, where they can earn a better wage and gain a better education, which cycles into the country's ability to strengthen higher value industries. Furthermore, this model would help vulnerable Mexicans avoid the trap of drug cartels. While Brazil struggles its way out of the corruption quagmires of the past decade, AMLO can help Mexicans return to the top of Latin America's per capita income list.