By Gerhard Ottehenning
WASHINGTON, D.C. — The recent protests rattling Latin American capitals from Mexico City to Santiago are as diverse in their geography as they are in their proximate causes and goals. It can be difficult to keep up with the dizzying array of protest movements not only in Latin America but around the world. The tendency to want to find a single unifying theme between all of the protest movements can flatten the discourse on why they’re occurring. For example, Tyler Cowen, an economist at George Mason University, believes the recent protests go beyond class resentments, arguing that the protests in Chile have more in common with the gilets jaunes in France than the protests in Ecuador. Focusing on two countries, Ecuador and Chile, can provide a useful snapshot into the complexities of the current period of popular discontent in Latin America.
On October 2, 2019, a number of trade unions and an indigenous federation known as CONAIE called for a general strike against the Ecuadorian government’s austerity measures enacted as part of a deal with the International Monetary Fund. Protesters took to the streets the following day, leading the government to declare a state of emergency. Unable to quell the protests, on October 13, President Lenín Moreno reinstated the fuel subsidies that had drawn the brunt of the protesters’ ire.
Moreno, who assumed the presidency in 2017, faced a worsening fiscal environment as the commodities boom and Chinese loans that had allowed his predecessor and mentor, Rafael Correa, to expand public services came to a close. According to the U.S. Energy Information Administration, the oil sector alone accounts for half of the country’s export earnings and a quarter of its public sector revenues. In 2014, the price of oil dropped, pushing Ecuador into a recession and ultimately leading to Correa’s resignation. The fiscal deficit soon swelled to 8% of GDP. To fight hyperinflation, Ecuador adopted the dollar as its currency in 2000. Unable to cut its deficit by devaluing its currency and lacking access to capital markets (Correa defaulted on Ecuador’s loans in 2008), Moreno turned to the IMF. In exchange for an injection of $10 billion, Moreno agreed to cut the deficit through either an increase in the VAT or by cutting fuel subsidies.
According to the Inter-American Bank, reducing fuel subsidies helps to “reduce the consumption of fossil fuels which contribute to air pollution and represent a big source of greenhouse gas emissions.” Additionally, subsidies tend to benefit wealthy households the most, since the rich tend to consume more fuel. This does not mean that subsidies are not important for poor households. To be more equitable, the IAA recommended that as the government removed subsidies it should pass the savings onto the poorest households. After the protests began, the government increased the cash transfers to the poorest households, but by then it was too late.
A little over three weeks after protests began in Ecuador, over a million Chileans marched through the streets of Santiago triggered by an increase in metro fares. According to Moises Naim, a fellow at the Carnegie Endowment for International Peace, the scale and scope of the protests “suggest that the root causes are large and structural.” While the metro fare may have served as the catalyst, a local Santiago resident said, “This is about an elite with 30 years in power that has increasingly separated itself from the reality of the people.”
In many respects, Chile is Latin America’s success story. Influenced by economists trained at the University of Chicago, the Chilean model calls for a small state with social welfare left largely up to individual citizens. Since transitioning to democratic rule in 1990, Chile has seen poverty steadily decline and a sound fiscal environment has allowed Chile to avoid the cycle of hyperinflation and bailout suffered by its more profligate neighbors. Despite the strides Chile has made, there is a sense of unease in the country. Caroline Miranda, a second-year Latin American Studies concentrator said, “Yes, Chile has done well in comparison to other nations in the region, because they have benefitted from prudent fiscal and macroeconomic performances. However, government social policies have not entirely benefitted the whole population.”
Many Chileans feel the state does not do enough. Many find that their pension contributions don’t suffice for a decent retirement and are frustrated by long wait times in hospitals. Students graduate with high levels of debt and feel that well-paying jobs tend to go to well-connected families. This sense of unfairness pervades much of the protesters’ discourse.
In response to the protests, President Sebastián Piñera withdrew the metro fare hike and made plans to increase pensions, reform the healthcare system, and consider increasing the top income-tax bracket. These reforms may fail to placate the protesters. Miranda said that additional demands by protesters include “reform of [Chile’s] constitution that was rewritten in 1980 during the Pinochet dictatorship, lower the wages of senators,… and increase the minimum wage.”