Latin America is no stranger to unrest. On and off, the region has suffered decades of political turmoil, the growing pains of economies many of which remain relatively immature by international standards, and where income inequality continues to be amongst the highest in the world.
Prior to the COVID-19 pandemic it was Chile that was most in the news, where protests initially triggered by a rise in fares on the Santiago metro quickly morphed into a national expression of public anger. The unrest led to a referendum on constitutional reform, a process which remains ongoing.
The pandemic and resultant lockdown restrictions brought a hiatus in public unrest, but as normal life has returned across the region so too have the protests. Recent months have seen renewed disturbances, with violent protests, strikes and blockades in Panama, Ecuador, Peru, Brazil and Argentina. The old grievances remain, and have been exacerbated by the global phenomenon of inflation following Russia’s invasion of Ukraine. While headline rates of inflation in most Latin American countries are no higher than those in Europe or North America, the impact is felt more sharply in emerging economies than in more developed markets. It is estimated that non-discretionary spend such as food and energy makes up 40% of average household expenditure in emerging markets, against just 15% in developed economies.
In inflation terms, the true outlier is Argentina, where the annual rate of inflation is currently running at an eyewatering 90% plus, the highest in three decades, and with no immediate end in sight according to the latest economic forecasts. Even the euphoria of World Cup success proved short lived, as the celebratory outpouring quickly turned to violent protest on the streets of Buenos Aires in the week leading up to Christmas.
Looking ahead, Argentina is set to elect a new president and legislature in October of this year, and the incumbent President Alberto Fernández has announced an intention to stand again. Whether he will command the support of his fracturing coalition, however, remains to be seen. On 6 December 2022 the Vice President (and the country’s former President) Cristina Fernández de Kirchner was sentenced to six years’ imprisonment on corruption charges, though she enjoys immunity from serving the sentence while holding public office. She is currently appealing the conviction.
In Brazil, the transition from the presidency of Jair Bolsonaro to the returning Luiz Inácio Lula da Silva was initially smoother than many had feared, but the relief proved to be short lived. Barely a week after Lula was sworn in, riots broke out in Brasilia and the capital buildings were stormed in scenes reminiscent of those in Washington DC only 12 months earlier. The country remains hugely polarised, and the dramatic change in political direction promised by the incoming administration will undoubtedly face fierce resistance from those dissatisfied with the outcome of the presidential election, a victory for the left won by only the narrowest of margins.
In Peru, protest has taken many forms of late. In 2021, indigenous communities in the upper Amazonian basin began a campaign of sabotage attacks, blockades and occupations of oil pipeline and refinery installations across the north east of the country, protesting about the impact of operations on their communities and the lack of economic benefit they generate for the population. Similar protests broke out around copper mine operations in the southern province of Cotobambas.
This was quickly followed by urban unrest in the spring of 2022, triggered in part by inflationary pressures resulting from the outbreak of the conflict in Ukraine, and leading to a general strike. The current wave of unrest in Peru has an important political context, reflecting the power struggle between the left wing presidency of José Pedro Castillo, elected in July 2021, and the country’s legislature, the latter of which remains dominated by the right wing ‘Fujimorist’ group. Many on the right never accepted Castillo’s victory as legitimate, and on 7 December 2022 the legislature was expected to vote to impeach Castillo, the latest of its many attempts to do so. The President’s response was to dissolve Congress before it could convene, but the move failed when both the army and the Constitutional Court sided with Congress. Castillo was promptly removed from office and arrested, a move which has been rejected by many in the country, who view it as nothing more than a congressional coup. In a bid to quell the inevitable unrest the new government declared a state of emergency, suspending all rights of assembly, but this has failed to prevent almost daily clashes between police and anti-government protesters. The violence is reported to have claimed some 47 lives so far.
Elsewhere in the region, the government of Daniel Ortega has continued a programme of repression in Nicaragua, while in Venezuela free and fair elections would appear to remain a distant prospect.
For the insurance and reinsurance industry the tensions in the region have given rise to heightened claims activity in recent times, particularly in the area of political violence. All the signals suggest that 2023 is likely to remain a challenging year for insurers.