At the beginning of this new decade, Latin America and the Caribbean, taken together within the international system, face a more adverse regional and global scenario. But at critical junctures, opportunities are also arising to redefine the development agenda and strategies for international insertion. Despite significant progress, the region remains burdened by deep social divisions and institutional weakness, and it seems to be falling back into its old boom and bust cycle, characterised today as the “middle income trap”.     

The economy is one of the main challenges in this unfavourable scenario. Latin America and the Caribbean are going through their worst economic period in decades: the end of the commodity cycle, the “trade war” driven by the United States and the global economic downturn and the instability in the region being the main causal factors. In 2019, the region’s average GDP growth was only 0.1%, and for 2020 a meagre 1.3% is projected. This was not only due to the impact of the very serious drop in Venezuela’s GDP: in 2019, 14 out of 20 Latin American countries had growth rates below 1% and 18 countries were in a clear deceleration phase. Overall, 2014-2020 will have been the lowest growth period in the last seventy years, even worse than in the so-called “lost decade” of the eighties. 

The effects of all this is significant setbacks in social indicators. Between 2014 and 2019, GDP per capita fell by 4% and open unemployment and the informal economy were on the increase once again. The social advances of the commodity boom – poverty reduction, middle class expansion, a slight decrease in inequality – have come to a halt and there has already been a backward step: during that same period poverty increased from 28% to 31% of the total population and extreme poverty from 7.8% to 11.5%. This establishes a scenario of rising social expectations that will not be met, both for the middle classes as well as for sections of the population that were no longer poor, but vulnerable to recession. As noted by the executive secretary of the United Nations Economic Commission for Latin America and the Caribbean (ECLAC), Alicia Bárcena, Latin American societies cannot withstand a new round of adjustment policies and a different economic policy framework is required: “it’s time for fiscal policy to revive growth and respond to social demands”.  

These trends are also causal factors for the general “discontent in democracy” and social protests that have taken place across the region: all the countries in Latin America and the Caribbean have held legislative and/or presidential elections between 2017 and 2019. A clear pattern has emerged from this electoral “super cycle” that transcends the traditional left-right divide: the defeat of the ruling party whatever its political leaning, as a result of widespread demands for political change. This expresses a broad “discontent in democracy” that is also observed in the data from “Latinobarómetro” and other opinion polls: 6 out of 10 people do not trust their governments, and 8 out of 10 say their government is corrupt. Between 2009 and 2018 the proportion of people dissatisfied with the way democracy functions rose from 51% to 71%. These are the worst statistics in 25 years. There is also growing social questioning regarding “policy capturing” by some elites which society perceives to be true “extractive elites”: between 2006 and 2018 the proportion of those who think their country is governed for the benefit of the rich and powerful has risen from 61% to almost 80%, as a regional average. In short, the economic decline has meant that inequalities, corruption, citizen insecurity – which are on the increase in countries such as Brazil, Mexico and Venezuela – as well as “bad government” are now less tolerated.  

Beyond national circumstances, these elements are key to understanding the changes in government in Argentina and Mexico, and the origin of the social revolts that erupted in 2019 in countries such as Chile and Colombia. Overall, the backdrop of relative stability seen in Latin America just a year ago has disappeared in the space of a few months at the hands of a number of liberal-conservative governments, in a surprising way in some cases such as Chile, and the “package” of neoliberal policies implemented by them seems to be widely questioned.  

It is important to note that these trends have particular local and regional characteristics, with structural and agency factors specific to each national scenario. These distinguishing factors are key: they explain whether popular revolts will take place or not, they explain their particular dynamics (Ecuador, Chile); or whether the discontent is channelled through electoral mechanisms (Argentina, Uruguay, Mexico); whether the reasons behind the protest and the demand for political change are related more to inequality and/or socio-economic precariousness (Argentina, Chile, Ecuador), or to political or electoral factors, such as electoral fraud (Bolivia), or corruption (Peru, Brazil), or the rejection of the consolidated middle classes and the higher income strata, or social change and the rise of counter-powers (Bolivia, Brazil). There is, however, a common regional pattern, and at the same time, these trends also represent the particular Latin American expression of a global dynamic of disaffection and crisis in democracy, the rejection of elites, and of challenging or questioning the current order.  

Furthermore, Latin America and the Caribbean have a scenario of ideological divisions and deep political polarisation, which is also observable in other regions, that negatively affects their ability to formulate public policies based on consensus, and the possibility of maintaining these over time. In particular, this has resulted in a visible paralysis of Latin America’s capacity as an international actor. Faced with these divisions, the crises in Venezuela and Nicaragua prevent the Organisation of American States (OAS) from acting and they prevent countries from resorting to their own regional bodies to seek democratic outlets: the Union of South American Nations (UNASUR) has been dismantled by liberal-conservative governments and the Community of Latin American and Caribbean States (CELAC) is paralysed. In addition, the forums promoted by right-wing governments, such as the Forum for the Progress of South America (PROSUR) and the Lima Group, have no credibility as a result of its members being aligned with a United States, which is once again exerting some influence in the region. Thus, a more fragmented Latin America and the Caribbean becomes another arena for growing global geopolitical competition, with a rising China, a more assertive Russia, and a more interventionist United States, although it has no clear strategy beyond clumsy struggles to contain China and its interests. 

The imperative to reactivate the bi-regional relationship and the role of the European Union 

In this scenario, the EU should reactivate its relationship with Latin America and the Caribbean. After a period of relative abandonment of the bi-regional link, it is aiming to gain presence and dialogue within the region. This entails a stronger commitment and greater investment of political capital. Indeed, given the region’s fragmentation and the greater competition in global geopolitics, Latin America seems to perceive China and the United States as the key actors in the economy and/or in managing political crises, particularly in the case of Venezuela. This perception of emerging bipolarity has weakened the EU’s position, but this is also based on self-inflicted reasons: on the one hand, the loss of political dialogue. The 8th EU-LAC Summit, which was to be held in 2017, was suspended sine die due to political divisions on the Latin American side, but also, little was done to reverse the situation on the European side. On the other hand, changes in the EU development cooperation policy adopted in the 2014-2020 budget period, which, with the “grading” of most of the middle-income countries in the region, meant that the EU would deprive itself of the tools and resources that, beyond the transfer of resources, are necessary for development work in the region.  

Given the regional and global scenario and the new political situation in European institutions, it is necessary to recognise both the imperative of a renewed bi-regional relationship, as well as the opportunities that would be opened up in the new regional geopolitical landscape. In light of the competitive power that other global powers exert in Latin America and the Caribbean, how can the EU act with the new geopolitical vision the Von der Leyen Commission has adopted as its strategic direction and hallmark of its mandate? On the one hand, the EU must continue to act with its own profile and unique initiatives to address the crises in the region, in particular in Venezuela. In light of the risk this crisis poses, it is essential to deal with its humanitarian dimension with initiatives that also contribute to its negotiated exit, promoting elections with democratic guarantees, or initiatives that allow the use of the country’s oil resources to acquire essential goods abroad, through a partial suspension of US sanctions, as proposed by the initiative known as “Petroleum for Venezuela”. 

Beyond these crisis scenarios, in Latin America and the Caribbean, a “geopolitical EU” must be based on a social agenda. The EU is now the only global actor in regional geopolitics that is approaching Latin America with an agenda focused on the central concerns of their societies: inclusion, quality of democracy, human rights, gender equality, peace and citizen security. In short, with everything that constitutes the 2030 Agenda, the content of which can be seen as a renewal of the “social contract”, which today is in question. In particular, Latin America and the Caribbean offer an opportunity for the European Green Deal to develop its external dimension. To this effect, resuming the bi-regional political dialogue and promoting a more active cooperation policy through the new programmes and financial instruments that are being defined within the 2021-2027 Multiannual Financial Framework is considered to be urgent.  

To a large extent, many of these elements have already been raised in the Communication “The European Union, Latin America and the Caribbean: joining forces for a common future” from April 20192. It is the first EU policy document with Latin America since 2009 and it makes important changes: firstly, a more horizontal relationship to address shared challenges. It is not, as in the past, an EU that paternally helps Latin America to solve its problems, but one of two regions that are working together in the light of shared interdependencies, risks and challenges. Secondly, the repolitisation of relations, with a “more strategic political commitment”, more investment of political capital, and “stronger” positions on shared values and interests.  Thirdly, a relationship with “variable geometry” is proposed: to avoid the “one size fits all” or “least common denominator” approach by recognising the diversity of LAC, and this would mean further progress between the countries and groups that want to and can intensify their commitment around four priorities: prosperity, democracy, resilience and effective global governance.  

To this end, the EU must implement an advanced cooperation strategy, in line with the new, more horizontal European Consensus on Development, which, without renouncing the use of development aid, must leave “gradation” behind and be open to all the countries in the region. This requires a “tailored” approach for each country, including South-South and triangular cooperation, public policy dialogue, knowledge sharing and significant investment in areas such as resilient infrastructure and ecological transition, by means of the financing channels that the new Instrument for Neighbourhood, Development and International Cooperation (IVDCI) provides.  

Underlying this societal and geopolitical agenda there is an important premise. There will be no way to face global challenges such as climate change, migration, trade, security, accelerated technological change, and the future of work, essential to achieving the 2030 Agenda, if both regions do not rebuild bi-regional dialogue and join forces within the multilateral agenda. 

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