The Left’s ‘Pink Tide’ in Latin America Is Receding: Leaders who promised to lift the poor have been brought down by corruption and dismal economic performance

By Juan Forero and David Luhnow of The WSJ. Excerpts: 

"Early on, they offered hope for millions. A dramatic run-up in the prices of commodities from Argentine soybeans to Brazilian iron ore, fueled by Chinese demand, led to heady economic growth and big declines in poverty—from 45% before the 2003 start of the boom to 28% at its end 11 years later. That helped to make many of the presidents hugely popular. “I had more and more work and only saw growth, progress and hope,” said 38-year-old Argentine electrician Carlos Fe.

But even before the Chinese economy slowed and commodity prices came back to earth in 2014, it was clear that the Pink Tide leaders had two fatal flaws: a love of power that led to growing authoritarianism and corruption, and a lack of ideas for how to generate economic growth without relying on a resource boom or borrowing. “It was a moment of euphoria—but then came the process of governing,” said Moritz Akerman, a Colombian columnist and former Communist Party power broker. “It all became about subsidizing the poor and creating dependency. This is not sustainable.”

During the 11 years of the boom, the key Pink Tide countries of Argentina, Brazil, Ecuador, Bolivia and Venezuela posted a respectable 4.3% average annual rate of growth. But their peers to the political right, the commodity exporters Peru, Colombia and Chile—the latter led by a center-left government that was a careful economic steward—did even better, at 5% growth.

Since then, the economies of the two camps have diverged significantly. While Peru, Colombia and Chile have continued to grow annually since 2015 at a more subdued average of 2.7%, Venezuela’s economy has collapsed, losing more than half its value, while the other Pink Tide states have eked out less than 1% average growth per year. Countries that weren’t swept up in Pink Tide populism had stronger public finances and robust private sectors when the boom ended. In other words, they had saved some of the money from the party to spend when times weren’t so good, said Javier Corrales, a scholar on Latin America at Amherst College."

"But the Pink Tide populists never modernized their economies. During the boom, the size of the public sector in both Argentina and Ecuador roughly doubled to about 43%, according to International Monetary Fund figures. Argentina’s private sector has just 9 million workers supporting 15 million people who are either employed by the state or receive pensions or welfare payments, the IMF estimates.

Instead of using the boom to diversify, the leaders doubled down. Oil, for instance, made up 69% of Venezuela’s exports in 1998, the year Mr. Chávez was elected. In 2012, Mr. Chávez’s last full year in office, oil accounted for 97% of Venezuela’s exports.

Though Bolivia logged growth averaging more than 4% over Mr. Morales’s term, the country has run through half of its international reserves and now has a fiscal deficit of more than 8% of GDP, which most economists call unsustainable."