Brazil’s and Mexico’s presidents are both ‘wrecking balls’

The writers are respectively former president of Brazil’s central bank and former governor of Mexico’s central bank and Mexico’s finance secretary

Although they come from opposite ends of the political spectrum, Jair Bolsonaro, the president of Brazil, and Andrés Manuel López Obrador, Mexico’s president, have reacted in remarkably similar ways to the pandemic. Both have defied health authorities’ recommendations about social distancing, continued to hold political rallies and, until recently, refused to wear masks. It’s all very Trumpian; Mr Bolsonaro has even forced out two health ministers. Unsurprisingly, their lack of a clear strategy combined with confused messaging has seen infections surge. Brazil has the world’s second-highest number of deaths; Mexico the third-highest, even as it admits to under-reporting.

This health policy response is in fact symptomatic of deeper troubles in each country. Dreams of accelerated growth after the stabilisation and reform efforts of the 1990s remain unfulfilled. Rather than converging on advanced countries’ living standards, Brazil and Mexico have diverged. They have famous and successful direct transfer programmes to alleviate extreme poverty, but while they made good social progress at the start of the century both countries still suffer high inequality. They also share a blatant disregard for the environment. Mr Bolsonaro has made a cavalier U-turn on protecting the Amazon. Mr López Obrador has slashed environmental budgets, downgraded renewable energy in favour of oil refining, and authorised pet infrastructure projects without proper environmental studies.

The one area where they have differed is in their economic approach. Mr López Obrador has kept spending tight, but not Mr Bolsonaro. As a result, Brazil’s fiscal deficit will balloon to an estimated 18 per cent of output this year, while Mexico’s will hit a less extravagant 5 per cent although at the price of a likely deeper recession. We cannot yet tell how the balance of these overall costs will fall. Meanwhile, their problems have led to similar political inflection points — as so often happens in economic crises.

In Brazil, after campaigning on an “anti-politics” platform and clashing with Congress and the judiciary, Mr Bolsonaro is under pressure to build an old-fashioned alliance with uber-pragmatic centrist parties. In Mexico, Mr López Obrador appears to be doubling down on populist policies, disappointing many who hoped for a more pragmatic approach. His actions have instead exacerbated policy uncertainty and discouraged investment.

Populist leaders often use moments of crisis to advance authoritarian agendas. The “perfect storm” currently engulfing Latin America — a lethal combination of political instability combined with health and economic crises — is just such a moment. It poses a clear threat to democracy in a region with a long tradition of populist regimes from both the political right and the left, and where democratic institutions are still fledgling by historical standards. Both Mr Bolsonaro and Mr López Obrador were elected in large part due to the flagrant displays of corruption and incompetence of previous administrations. Hopes were high that they would be positive agents of change in Latin America’s two biggest economies. Instead, intent on damaging their countries’ institutional settings so as to advance retrograde political agendas, they resemble wrecking balls.

There may be a silver lining to this disheartening narrative: the proven resilience of some democratic institutions. In Brazil, the judiciary, state governments and Congress have been an effective counterweight to Mr Bolsonaro. In Mexico, the judiciary has also blocked several of Mr Lopez Obradors’ initiatives, including his attempts to suppress clean energies and impose restrictions on autonomous state institutions. This is relevant since it was widely feared that the Supreme Court, which includes several of his appointees, would simply rubber stamp presidential initiatives. Instead, its independence has set an example to federal judges. The press and civil society have also been helped rein in authoritarian actions by both governments.

Latin America is set to suffer its greatest economic collapse in a century. This will exacerbate the region’s scourges of low growth, sagging productivity, inequality, corruption, crime, lack of opportunity and low social mobility — unless the crisis is used as an opportunity to confront such problems. Democracy, accountability and the rule of law may seem out of fashion in much of the world. But, while too early to celebrate, Brazil and Mexico have at least experienced some of the fruits of having resilient institutions. These need to remain central to the region’s response to its challenges.