The shifting political landscape in the countries of South America is unlikely to have serious implications for Moscow’s economic interests in the region. However, regional organizations such as BRICS and MERCOSUR may see some decline in their relative importance.
With a sign that reads in Portuguese "Temer out," demonstrators march against Brazil's acting President Michel Temer and in support of Brazil's suspended President Dilma Rousseff, in Sao Paulo, Brazil, May 22, 2016. Photo: AP
In the wake of the current political turmoil in Latin America, one often hears suggestions that there are certain correlations between the “color revolutions” in Eurasia and the ongoing shift in power in countries such as Brazil or Venezuela. If this were the case, then Russia would be genuinely justified to worry about the political developments in Latin America.
The reality, however, is that any Latin American leader would be imprudent to worsen relations with Moscow, given the vast (and as of yet, unused) potential for economic cooperation. Apart from the traditional spheres of cooperation in the energy and chemical industries, there’s still untapped potential for the two sides to propel the agricultural, engineering and metallurgical industries to a new level.
In view of this prospect for future economic growth, there is only a remote probability that the gradual demise of the so-called “Pink Tide” of populist political movements that swept South America sharply leftward over the past 17 years will translate into worsening relations with Russia.
There have been many well-argued articles on what it means for so many rightist leaders to be coming to power in various areas of Latin America. For now, Russian experts’ predictions are overwhelmingly downbeat over the future implications, foretelling a new epoch of subsiding Russian influence in Latin America.
Whether Moscow had any genuine influence on Latin American affairs in the first place is a highly debatable issue, yet it is undeniable that Russia whole-heartedly embraced the opportunity to forge real partnerships with leaders of the Pink Tide.
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Examples abound concerning the cordial relationships between top-level Russian officials and their Latin American counterparts. For instance, both Russian President Vladimir Putin and the CEO of the Russian oil giant Rosneft, Igor Sechin, were close friends with the former President of Venezuela (1999-2013) Hugo Chávez. President Putin even went so far as to praise former President of Argentina (2007-2015) Cristina Fernández de Kirchner’s dance moves.
Now that most of the leaders of the Pink Tide have stepped aside in one way or another, what will happen to the ties that already bind Russia and Latin America?
No changes to Russia’s economic interests in the region
In all probability, Russia’s Latin American relations will stick to their charted course. Take, for instance, Argentina, a fitting example of how new Latin American leaders are striving to keep a healthy balance in their foreign policy by normalizing relations with the United States without causing harm to their ties with Moscow.
In this vein, the new Argentine president, Mauricio Macri, has explicitly expressed his willingness to amplify cooperation with Russia. Visiting Moscow in April, the Argentine Foreign Minister Susana Malcorra reiterated President Macri’s invitation to Buenos Aires (Putin‘s visit will most likely take place in 2017), while confirming his intention to visit the Russian capital during the 2018 FIFA World Cup. This will be complemented by meetings on the sidelines of forthcoming G20 summits, first in Hangzhou in September 2016, then in Hamburg the following year.
President Macri’s “downright pro-American stance“ is often confounded with his drive to end Argentina’s isolation from international financial markets, the result of a long-standing dispute between previous Argentinian presidents and U.S. hedge funds. The row dates back to 2001 when Argentina defaulted on $93 billion of sovereign debt: most bondholders accepted the write-off of 70 percent of their value, but several U.S. hedge funds, among them NML Capital and Aurelius Capital Management, refused.
By April 2016, President Macri managed to ram an all-encompassing settlement through the Senate, thus clearing the way for the national government and cash-strapped provincial authorities to raise cash according to global standards. Having reached one of his main pre-election promises, Macri might go on to pursue a fairly pragmatic foreign policy, without a requisite rapprochement with the United States.
In other countries, such as Venezuela or Bolivia, the leftist regime finds itself embattled or (perhaps temporarily) weakened. The remnants of the Venezuelan Chavista regime attest to the fact that President Nicolas Maduro faces an almost insurmountable task of breathing life into a devastatingly crippled economy. Russia, via its largest company, Rosneft, holds massive economic interests in Venezuela’s oil sector. With five joint ventures formed with the state-controlled Petróleos de Venezuela (PDVSA) and more than $14 billion invested throughout the country, Russia is one of the leading investors in Venezuela.
The worsening financial posture of PDVSA, along with skyrocketing inflation, food shortages and constant unrest in the streets of Venezuela will in all likelihood result in Maduro’s leaving the presidential post in 2018. The opposition, ideologically disparate as it may be, will not be in a position to pursue radical measures for fear of another public blowback. That is why, as soon as the strained coexistence of Chavistas and opposing political forces (Mesa de Unidad Democrática, or MUD) comes to an end, the presence of Russian (and any other foreign) companies will be even further incentivized by giving them greater say in joint ventures or curtailing the royalty rate on production in an effort to kick-start the country’s economy again.
Perhaps the most unexpected defeat for left-wing forces in Latin America was the blow Bolivian voters inflicted on Evo Morales in February 2016 by denying him the opportunity to run for a fourth term in 2020. The surprise element of such a vote stems from the fact that President Morales displayed unprecedented (among leftist Latin American leaders) fiscal responsibility, attaining 5 percent median GDP growth between 2005 and 2015. He also managed to alleviate the country’s perennial inequality problems by the means of widespread social inclusion programs. But even with this defeat factored in, Morales‘ Movement for Socialism (MAS) party will remain the main political force in Bolivia.
The current political disarray in Brazil, carried to the verge of complete chaos by the impeachment proceedings against President Dilma Rousseff, stands out from the abovementioned cases. First, President Rousseff has not yet been formally impeached because the court investigation has only started. In the case, she is charged with using state banks’ money to cover budget deficits. If she will absolved during the trial, the whole proceedings will be declared null and void. Hence, Brazil will be stuck in a political limbo several months until a judicial decision is put forward. Second, corruption is an all-pervasive phenomenon in Brazil, with both the acting President Michel Temer and Eduardo Cunha, until recently serving as President of the Lower House of Congress, implicated in massive kickback schemes.
Many have suspected questionable behind-the-scenes moves from the United States during the political crisis, yet even Dilma Rousseff admitted that the alleged coup d’état is unlikely to have resulted from any kind of foreign intervention. More likely, it is an internal, purely Brazilian, struggle for power in which virtually everyone is implicated in one corruption scheme or another. It is almost impossible to foresee the outcome since choosing the lesser evil does not necessarily mean the one with the least flagrant crime committed. Most likely, Brazil’s new leader will act in a cautious manner given the volatile internal situation and will not exacerbate relations with Moscow, at least in the short to mid-term.
As far as Russia’s direct politico-economic interests are concerned, the graduate fading of the Pink Tide’s appeal will not result in any real changes in the conditions of existing partnerships and initiatives. Regular country-to-country political coordination will remain at least as well-developed as it is currently. Moreover, Russian economic projects will continue to move forward.
Rosatom, Russia’s largest state-owned nuclear energy corporation, will continue the construction of a pressurized-water nuclear power plant in Argentina and construct its $300 million nuclear complex in Bolivia. Russian gas giant Gazprom will remain one of Bolivia’s key partners and will further look into the possibilities of developing Argentina’s vast shale gas reservoirs.
BRICS and MERCOSUR could lose influence
Yet, who will lose as a result of shifts within the Latin American political landscape? The most likely candidates are regional integration organizations and loose groupings of emerging markets economies, namely MERCOSUR and BRICS.
Tensions within MERCOSUR are running high, as the Argentinian President Macri makes no secret of his antagonism towards Venezuela’s Nicolas Maduro. Macri already removed TeleSUR, the pan-Latin American television channel launched with the objective of promoting the continent’s integration, from Argentina’s airwaves. With a new Brazilian foreign minister, having previously qualified MERCOSUR as a “megalomaniac delirium,” the regional bloc is bound to begin its slow path towards obsolescence. For Russia, that might not be a huge hiccup, since Moscow preferred to negotiate with individual countries anyway; MERCOSUR’s direct dealings with the Kremlin never went beyond several consultative meetings.
The ramifications of Latin America’s shift to the right will most certainly impact the BRICS, a loose grouping of regional leaders that aspire for a more influential say in global affairs. BRICS has built up considerable momentum in the past few years, having established a plethora of contact mechanisms between member countries.
However, as Brazil is struggling to find a government that would be able to navigate the country of the storm, the advancement of BRICS initiatives are likely to be postponed for a while. The deceleration in the countries‘ integration efforts would have happened either way, as the importance of Brazil’s political turmoil is dwarfed by larger global developments.
The main hindering factor of BRICS development has been the bust in commodity prices. The GDP of Brazil, the main export products of which are oil seeds, ore and oil, has experienced a 3.8 percent fall. Russia’s economy, also heavily dependent on primary resources, contracted by 3.7 percent, while South Africa’s growth reached only 1.3 percent in 2015. China and India, although having manifested robust growth at 7 percent and 7.5 percent respectively, have also had their share of market volatility.
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BRICS initiatives that have been already underway for some time will materialize. For instance, the New Development Bank, commonly known as the BRICS Development Bank, is currently in the staffing phase and should be brought to full operational capacity by the end of 2016. It would be unlikely to see any new grand overtures by any BRICS member country at the 2016 BRICS Summit in Panaji, Goa.
If there are still people assuming 2016 will see a Pinochet-like replay of a brusque diplomatic standoff between Russia and Latin American countries with recently elected right-wing presidents, the disappointment will be inevitable. Today’s Latin America can ill afford another decade like the 1980s which saw an overall slip in the region’s combined GDP by 8 percent. That is why bilateral ties with Russia will be cultivated as previously.
Latin American solidarity within the context of the current integration projects will most certainly experience a tangible blow; however, those who rejoice at the “sad death of the Latin American left” are shortsighted. The Pink Tide has bequeathed a rich legacy that will be hard to ignore, including extensive social programs, the prioritization of local manufacturing and the political inclusion of previously marginalized groups of the population. Any further shift to the right will have to keep this in mind.
The opinion of the author may not necessarily reflect the position of Russia Direct or its staff.