Latin America: Political update
Summary
Latin American politics have become increasingly complex over the last few years. In 2021, those complexities have risen and political risk is now more prevalent and widespread across the region. To that point, the constitutional rewrite process in Chile has turned more populist than expected, while a candidate from the Communist Party of Chile is making major headway in this year's Presidential election. Peruvians also appear to have elected a self-proclaimed Marxist as President, marking a potential sharp shift in policy across the country. Politically charged protests have also erupted across Colombia and could lead to a left-leaning candidate in next year's election, while the return of Lula in Brazil adds an additional layer of uncertainty to Brazil's 2022 Presidential election. As political risk permeates across the region, the long-term policy outlook in Latin America is uncertain. This political uncertainty is a key factor contributing to our view for long-term currency weakness in many Latin American countries. In addition, a turn toward more populist style policies could result in a steady deterioration of public finances and result in sovereign credit rating downgrades across the region.
Author
Wells Fargo Research Team
Wells Fargo
