Colombia’s social unrest could spread across Latin America

Colombia’s social unrest could spread across Latin America

Governments have little budgetary room for manoeuvre to quell rising wave of protests

A mistake by an out-of-touch government triggers big street protests. Violence spirals amid a heavy-handed police response. The government backtracks but the protests continue regardless. Motivated by longstanding grievances, the demonstrators’ demands broaden to encompass radical social and political change.

Colombia this month looks uncannily similar to Chile in 2019, when a wave of street protests triggered by a small rise in the price of Santiago metro tickets snowballed into a mass movement which almost toppled the billionaire conservative president, Sebastián Piñera.

In Bogotá, the straw which broke the camel’s back was a government tax reform, unveiled last month. The broad principle seemed sound: to plug a budget hole and raise extra money for welfare payments by increasing taxes, mostly on better-off individuals and companies.

The devil was in some of the details: imposing VAT for the first time on funerals and cremations in a country where more than 78,000 people have died of coronavirus and levying tax on the water supply to lower middle-class homes — but keeping a zero rate on guns and mineral water.

Suffering a deep pandemic-induced recession in what was already one of the world’s most unequal countries, many Colombians decided that President Iván Duque’s “Sustainable Solidarity Law” was anything but.

María Margarita Zuleta, director of the school of government at the University of the Andes in Bogotá, said youth frustration over limited opportunities had combined with widespread exhaustion and anger at one of the world’s longest virus lockdowns to create a highly combustible atmosphere, into which the government had thrown its tax reform.

“The government didn’t explain it well,” she said. “There was a rather arrogant view, typical of classical Colombian economists, that ‘we know how to do this’….the difficulties of the present time demanded much more careful communication”.

The government’s timing was unfortunate — and not helped by Duque’s low approval ratings — but it had little choice. It was under pressure from rating agencies to act now or face a downgrade in its debt to junk, which would raise further the cost of borrowing to fill the holes in its budget created by coronavirus.

Many other countries in Latin America could face a similar prospect.

“Colombia shares some of the factors that fuelled protests in other countries in the region, including rising demands for more social spending, fiscal constraints, and difficulties in pursuing tough reforms,” said Maria Luisa Puig, who follows Andean nations for Eurasia group.

Pummelled by its worst recession in a century, Latin America has neither the rich world’s ability to raise cheap debt to fund huge deficits nor the poorest nations’ access to debt forgiveness programmes.

As a result, governments in the region are forced to cut spending or raise taxes when their economies are still reeling from the damage inflicted by the pandemic, which hit Latin America harder than anywhere else.

In Ecuador, newly elected President Guillermo Lasso has inherited a fiscal crisis far worse than Colombia’s. His predecessor bequeathed plans to slash spending and raise taxes, but the plan was so radical many thought it unachievable.

Lasso has already ruled out tax rises but he still faces the challenging task of persuading an opposition-controlled congress and an angry population to swallow tight spending curbs.

In Brazil, one of the developing world’s highest debt piles prevents the government from repeating the generous emergency pandemic aid disbursed last year, even though the economy is only recovering slowly.

Across the region, tempers are fraying as longstanding grievances over governments seen as out-of-touch, corrupt and incompetent come to the fore.

The prophecy several years ago of Maurice Armitage, a former mayor of Colombia’s third-biggest city, Cali, could apply to much of Latin America:

“In the coming years Colombia will undergo a social convulsion which if we are not prepared for it . . . will see this country go to hell,” he said. “We know very well how to kill each other . . . but what we don’t understand is how to distribute income”.

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