Ojalá, if only this was just a downcycle

The sound of prison bars slamming shut on ousted Guatemalan president Otto Perez Molina reverberated through Latin American capitals last week. Allegations of corruption are dogging heads of state in Mexico City, Caracas, Brasilia, Buenos Aires, and even hallowed Santiago.  Corruption is hardly a novelty here. But questions of legitimacy and governability are gripping presidential palaces and many institutions at a time when the prices of oil, minerals and other strategic commodities on which they depend have tumbled.

Shrinking export revenue means weak and unpopular presidents have less money for the social programmes and subsidies that have helped to sustain them, and less of a cushion to absorb years of economic mismanagement in many cases. At the same time, China is losing its appetite for issuing hefty oil-backed credit as its own economy decelerates. The “Latin American decade” is over, says the IMF.

Latin America´s populist governments, many of which have repeatedly played the electoral system, are groping for other ways to drum up support. Venezuelan firebrand Nicolas Maduro, whose government depends on oil exports for virtually all of its spending and who has been rebuffed in attempts to forge a price-supporting strategy to unite Opec and Russia, is kicking out Colombians whom he blames for his country´s chronic shortages of everything from nappies to insulin. His Ecuadorean ally Rafael Correa attacks the media. So does outgoing Argentinian president Cristina Fernandez de Kirchner, who seems eager to secure a new supra-national perch to maintain her immunity from prosecution. In Brazil, Dilma Rousseff pleads innocence in a case of corruption so overwhelming as to dent the country´s sinking GDP and which is seemingly creeping closer and closer to her door. She points the finger at bad apples in Petrobras, its web of contractors and her own political party.

Blaming foreigners, oligarchs, the media and political opponents will only go so far when the lifeblood of so many governments appears to be draining away. Latin America´s current macroeconomic trends are almost uniformly bleak — inflation and unemployment are up; GDP growth, manufacturing and investment have stalled.

Some countries are far better prepared to weather the downcycle than others. Chile, Peru, Colombia and Mexico squirrelled away savings and boast relatively credible frameworks for investment. But even they need to tighten their belts and wrestle to retain investor confidence.

On the streets of many of the region’s capitals, the noise is impossible to shut out. Street marches are proliferating. So is labor strife. And resource nationalism persists. Peruvians want PetroPeru to pump oil again. Mexicans chafe at an emasculated Pemex. Chileans working for state-owned copper giant Codelco demand higher pay from money-losing mines.

Yet these are just symptoms of a crisis of political legitimacy that was long masked by the commodities boom. The mask is off. And it is likely to stay off even after this downcycle ends, because newfound material aspirations and widespread political participation sown during flush times will not go away. Resource-dependent governments that cannot deliver on their promises are vulnerable. Where palaces sit on steady foundations, ballots will cast out the discredited and the incompetent. Where they stand on shaky ground, expect chaos and instability.