How to Hack an Election, #PanamaPapers and LatAm’s Economic Recession Could be an Explosive Mix

 

For most Latin American countries, the label of “democracy” is a work in progess. Over recent years, the region has been making efforts to strengthen their institutions in order to consolidate democratic transitions. When one begins to believe in political stability and institutional resilience, then articles such as Andrés Sepulveda’s telling How to Hack an Election and describing how he rigged votes across the region, or #PanamaPapers happen.

 

Sepulveda’s reminder that democratic processes in the region still face obstacles comes at a time in which Latin America enhances those risks in the midst of a deep economic crisis. In the last six months, we have seen popular unrest in Argentina, Venezuela and Bolivia pressing for deep government change.

 

Satisfaction with democracy is one indicator of development, according to political scientists such as Juan Linz and Alfred Stepan. At least over the last 20 years, Latinobarometro’s index seems to move together with economic development (in the form of per capita GDP growth) in Latin America. Growth has been declining fast since 2012 and satisfaction with democracy could repeat the trend in the coming years. In 2015, only in three countries—Uruguay, Argentina and Dominican Republic—more than half of the population was satisfied with democracy.

 

Chart 1 How to Hack an Election

 

If we consider the average satisfaction with democracy during the 20 years that the index has been published, there are only four countries in the region where the print stands above 50%: Uruguay, Ecuador, Dominican Republic, and Argentina. Mexico has the lowest satisfaction average with 19%.

 

Chart 2 How to Hack an Election

 

In this context of declining growth and low satisfaction, the region has experienced crucial political events over the last year.

 

Marci’s victory in Argentina last November faced several challenges, especially with a divided congress, to consolidate the change that Argentines were demanding from their new government. Macri has overcome some challenges while trying to reform Argentina’s economic policy and regain access to capital markets. Furthermore, the rest of the democratic processes in the region are unfinished.

 

Bolivians have told Evo Morales that they do not want him to stay in power; however, the power and control of Bolivian institutions that the president has consolidated in the last years puts in risk the 2019 election.

 

Ecuador provides an example of the extent that a president’s electoral power can have. Although more than 80% of Ecuadorians wanted a referendum to decide on the amendment to remove presidential term limits, Correa, with the control of the Supreme Court and the National Assembly, still passed the referendum. Although he had to give up running in 2017 after the street demonstration of last year, given the new law on reelection, he might be able to run in 2021, this time for life.

 

In Venezuela, Maduro and the new National Assembly controlled by the opposition, MUD, are clashing over new laws. The Assembly has started the process to call for a referendum to remove Maduro. Although the president’s significant disapproval indicates that Maduro will lose that referendum, he controls the Supreme Court and the military. Even assuming that the opposition can push reforms through, these might arrive late. The deep economic crisis is asphyxiating Venezuelans, adding pressures for unsustainable social unrest.

 

Brazil is another country where change is not moving as fast as needed. Even if Dilma is impeached after going through a long and slow process, this might do little to alleviate Brazil’s economic woes and poses risks for democracy, considering that Dilma’s approval rate stands around 10% and that democratic satisfaction hovers around 20%.

 

This month, Peru’s elections will be tested after the electoral tribunal banned two presidential candidates just days before the election (April 10th). Additionally, as it is happening in Chile with Bachelet, Humala’s approval rate has been declining to historically low levels due to a high-level corruption scandal.

 

Corruption is Mexico’s endemic problem. Peña Nieto’s administration has been constantly facing scandals such as Ayotzinapa, the White House, and OHL Mexico. How to hack an election is a new obstacle for the president in an electoral year. Although the PRI governments have proven to be resilient to these scandals, Mexico’s lowest level of satisfaction in the region could have a limit.

#PanamaPapers

The internet exploded over the weekend. A massive data leak of more than 11.5 million financial and legal records from Panama-based law firm Mossack Fonseca went online Sunday. The report alleges that politicians, public officials, criminals and celebrities hide wealth via shell companies. The German newspaper Suddeutsche Zeitung and the International Consortium of Investigative Journalists (ICIJ) collaborated to publish the story. The ICIJ said the files contain information about more than 214,000 offshore corporations. References to tax evasion, money laundering, bribery, corruption, violating business sanctions and criminal enterprises are mentioned in the files. The leaked data covers nearly 40 years, from 1977 through the end of 2015. Controversial Russian leader Vladimir Putin is accused of secretly shuffling as much as $2 billion. Even Lionel Messi and his father (and of course, the FIFA) are in the spotlight.

 

Latin American leaders are not free of imputations. (Surprise, surprise.) Argentina’s President Mauricio Macri and Mexico’s President Enrique Peña Nieto are among the big names mentioned by the report. According to the report: “Macri, his father Francisco and brother Mariano were directors of Fleg Trading Ltd, incorporated in the Bahamas in 1998 and dissolved in January 2009. In asset declarations in 2007 and 2008 when he was mayor of Buenos Aires, Macri did not disclose his connection to Fleg Trading. He declared a Merrill Lynch bank account in the United States with $2.9 million in 2007 and $1.9 million in the same account in 2008. “  Meanwhile, the report states that “Juan Armando Hinojosa, who has been called Mexican President Enrique Peña Nieto’s “favorite contractor,”…throughout the summer and fall of 2015, not long after the controversy over the Casa Blanca, Mossack Fonseca helped Hinojosa create three trusts to take over accounts worth approximately $100 million previously held in banks…His network was complex, with nine entities set up in three different jurisdictions — New Zealand, the United Kingdom and the Netherlands.” Expect plenty of media noise this week.

 


LATAM PM’s Take: Elections have the potential to correct a country’s course, as seen in Argentina. Elections in Bolivia, Brazil, Venezuela and Peru have also started a process of change; still, these countries are going through a vulnerable period of economic crisis and corruption scandals too. Even more stable economies such as Chile and Mexico face their own challenges, which are mixing with low levels of satisfaction with democracy. These conditions represent a wake-up call to the region, since they pose a threat to the young democratic institutions, economic development and political stability that the region has enjoyed (on average) after years of military and authoritarian rule.

 

Analyst: Fernando Posadas