Latin America This Week: August 22, 2023

In Guatemala, money can’t buy elections—at least not this time. On August 20, Guatemalan voters elected anti-corruption candidate, Bernardo Arévalo, to be Guatemala’s next president. Arévalo won in a landslide, beating his establishment rival, Sandra Torres, by nearly one million votes. Given the backlash against anti-corruption efforts in Guatemala over the past few years, Arévalo’s win was surprising. What was even more remarkable is how little his campaign cost. Guatemalan investigative news outlet, No Ficción, reported that Arévalo registered just half of the campaign cash that Torres received. And for Torres, the total reported was probably just the tip of the iceberg. Before the lead investigator of Guatemala’s Special Unit Against Impunity fled the country in 2021, prosecutors revealed that establishment candidates received far more campaign cash than they officially reported in 2007, 2011, 2015, and 2019. 2023 looked like the same story all over again, only this time, discontent with the political class was too widespread for a well-financed establishment candidate to triumph. Arévalo’s austere campaign is a sign of the times. More and more often, it’s the Latin American presidential candidates that have the most TikTok followers, not the deepest pockets, winning elections. After Ecuador’s August 20 elections, dark horse candidate Daniel Noboa is headed to an October 15 runoff against Luisa González thanks in large part to clips of a single debate performance that went viral on social media. The days of big budget election winners may be numbered.

External factors drive Latin America’s economic upside. The International Monetary Fund’s (IMF’s) latest forecast for the region revised growth up 0.3 percentage points to 1.9 percent. Brazil and Mexico lead the positive trend, the IMF now forecasting their economies to grow 1.2 and 0.8 percentage points more than expected. Yet the upside reflects external shocks, not internal dynamism. The surge in food commodity prices with Russia’s war in Ukraine combined with a record soybean harvest has boosted Brazil’s agriculture exports nearly 40 percent. Argentina would have seen significant upside too but for a catastrophic drought that destroyed over half its soy crop.

United States-China distancing pushed Mexico’s economy further into the black. Foreign direct investment recovered to pre-pandemic levels despite worries over the business friendliness of the current administration of President Andrés Manuel López Obrador. Goods exports to the United States hit a record $450 billion in 2022, led by manufactured vehicles, auto parts, and machinery.

These geopolitical tailwinds provide a respite for a region still struggling to recover from its COVID slump. But these nations won’t see a more permanent and structural economic bump without the internal follow-ups, including fiscal and tax reforms in Brazil and public infrastructure and electricity grid investment in Mexico.