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The Big Question: Should we be worried by the rise of the populist left in South America?

David Usborne
Thursday 04 May 2006 00:00 BST

How far-reaching is the populist left tilt in Latin America?

The pattern is real and is perhaps best traced back to the coming to power of Hugo Chavez in Venezuela eight years ago, who takes Fidel Castro of Cuba as his mentor. He has made a sport of taunting the United States under President George Bush, flirted with co-operating with Iran and Argentina on nuclear technology and has moved swiftly to exert state control over Venezuela's huge oil industry. Elected earlier this year in Bolivia, President Evo Morales vowed to become "a nightmare for Washington". Following the Chavez model, this week he set about nationalising Bolivia's natural gas fields and deploying the military to guard them. Ecuador is moving down the same path regarding its energy resources.

Next month's election in Peru could bring victory for another leftist firebrand, Humala Ollanta, who has promised a government take-over of energy assets. It may not stop there. Mexico is in the midst of a nail-biting presidential contest with polls showing populist Andres Manuel Lopez Obrador, a former Mexico City Mayor famous for dispensing government funds, near victory. The geo-political map of the continent would thus be almost entirely painted left, with only Columbia and Central America resisting the trend.

How much can this disrupt the world's energy supplies?

It sets off alarm bells, but there is nothing new about nations wanting to exert sovereignty over their resources to ensure that they, rather than foreign energy companies, are assured a decent share of the rewards. Nationalisation of energy supplies is always an easy sell to voters, particularly in countries with large populations in poverty. In the Saudi Arabia and Iran did it and Russia has taken similar steps under Vladimir Putin. Mexico pulled the same trick, ejecting the US oil giants in 1938.

If he wins on 2 July, Lopez Obrador would need only to maintain the status quo. Nor are steps towards nationalisation always as dramatic as they might first appear. Morales demands that the state control 82 per cent of Bolivia's largest oil fields. Foreign companies have six months to decide whether to accept the new conditions or leave. Although Bolivia has Latin America's second largest reserves of gas, it exports to two countries only, Argentina and Brazil. As one of the top suppliers to the US, Venezuela, by contrast, has the greater potential to cause problems.

Are the populist policies of Chavez and Morales economically sustainable?

The policy priorities adopted by Chavez and more recently by Morales can seem to be born more out of a desire to pander to supporters, pay homage to Cuban leader Fidel Castro and anger the US than to give their countries any serious chance of improved growth or of closing the wealth gap. While maintaining a high level of popularity, Chavez has failed to lift his country economically, as symbolised by the recent closing of the main road from Caracas to its international airport because of crumbling bridges.

The economy has barely grown since he took office and the poverty numbers are as bad as ever. Morales may be taking a big risk by confronting the oil companies in Bolivia, meanwhile. His energy industry is unsophisticated and needs foreign investment, which it is now unlikely to get. Meanwhile, Bolivia is dependent on its neighbours and customers to get the gas to the market. Brazil, which has the most to lose there, may not be in the mood to help any more, particularly if it decides to get gas from elsewhere, including from newly discovered fields of its own. Criticising Morales this week, the incumbent in Mexico, President Vicente Fox, warned that Bolivians will have to "eat" their gas to survive if no one buys it.

With leaders such as these, is Latin America heading towards collapse?

While most of Latin America is now led by governments with leftist pedigrees, there are very big differences between them. Far from homogeneous politically, the region in fact faces a deep schism with a minority embracing Chavez-style populism and the remainder taking far more pragmatic routes, emphasising social programmes but showing restraint in macro-economics and foreign policies. Thus while Bolivia, Cuba and Venezuela just last weekend signed a new trade co-operation agreement that is specifically meant to undermine the efforts by Bush to extend free trade through the Americas - under President Nestor Kirchner, Argentina seems similarly set on opposing the free-trade effort - other governments are working with the US on trade pacts, including Uruguay and Peru.

The election three years ago of labour leader Luiz Inacio Lula da Silva in Brazil triggered much international concern, but instead of taking the populist path, he largely maintained existing economic policies. and soon won back the confidence of foreign investors. Chile, meanwhile, continues to outstrip the entire region with economic growth under former President Ricardo Lagos and the recently elected Michelle Bachelet both from the old Socialist Party.

Is the rise of the popular left Bush's fault, and what should be done?

Jorge Castaneda, a former foreign minister of Mexico and now a professor at New York University, argues that a populist resurgence in Latin America was inevitable with the concurrence of democratic elections in countries with still huge gaps between rich and poor. "The combination of inequality and democracy tends to cause a movement to the left everywhere," he wrote recently in Foreign Affairs. Countries that have already experienced free trade with the US, notably Mexico under the Nafta pact negotiated by Bill Clinton's administration, increasingly have difficulty in demonstrating the benefits to populations seeing little change in their living conditions.

Additionally, however, there is a sense across Latin America that George Bush, distracted by terrorism and Iraq, has failed to pay sufficient attention to his neighbours to the south. Washington now finds itself largely powerless to halt the shift to the left in these countries. Indeed, if it tried, the backlash would surely only get worst.

At least, however, the US and Europe might be expected to demonstrate a greater willingness to bolster those Latin governments that may be leftist in their roots but not populist in their policies.

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