What to Expect for Latin America’s Politics and Economy in 2023
On January 30, the Georgetown Americas Institute (GAI) hosted a conversation with Monica de Bolle, Michael Shifter, and Shantall Tegho to discuss their expectations for Latin America’s politics and economy in 2023.
Russia’s invasion of Ukraine in 2022 and the rise of global inflation stifled Latin America’s post-pandemic economic recovery. The new year has brought slower regional economic growth than forecasted, as it remains uncertain if the U.S. economy will enter into a recession. To reflect on the political, economic, and social challenges and opportunities that lie ahead for the region, GAI hosted a conversation with Shantall Tegho, managing director at Goldman Sachs; Michael Shifter, adjunct professor at Georgetown University’s Center for Latin American Studies; Monica de Bolle, senior fellow at the Peterson Institute for International Economics; and GAI Founding Director Alejandro Werner.
Latin America and a Cooling World Economy
Inflation and growth are expected to slow down globally as high interest rates impact economic growth from the United States to Chile. This will have a bigger impact on Latin America than the United States and Canada through dwindling consumption and lower commodity prices as disrupted supply chains get restored. Unstable energy markets, a possible recession in the United States, and the unknown effects of China’s recent post-pandemic reopening could further complicate the picture.
“As these forces decelerate the world economy, no one sees any aggressive growth for Latin America in the short to medium term.” -Alejandro Werner
Slower growth and inflation fuel political uncertainty in economies with young administrations or upcoming elections, including Argentina, Brazil, Colombia, Guatemala, Mexico, and Paraguay.
“Who is the leader of the opposition in countries like Venezuela, El Salvador, Bolivia, and even in Brazil or Colombia? It is not clear, so will new leaders emerge?” -Michael Shifter
Nonetheless, Tegho pointed out that Goldman Sachs does not foresee a major economic crisis for 2023. Unless there is an unexpected disruption, Latin America could sail through this turbulent year if the region’s governments manage domestic tensions while making responsible use of monetary and fiscal policy without triggering a return of inflation. However, instability and polarization in places like Brazil, Ecuador, and Peru may make this task hard to accomplish.
“This could be the shallowest recession in U.S. history, if it happens.” -Shantall Tegho
Countries to Follow in 2023
Brazil, the region’s main economic powerhouse, is one of the main stories to watch. An extremely polarized society and congress will make governance difficult for the new administration of Luiz Inácio “Lula” da Silva, with potential risks for the country’s already fragile economy. The reconfiguration and empowerment of the political right is a particular source of concern.
“Bolsonaro was not a chance event; he was the man that the military found to stand behind, and they will find someone else for 2026.” -Monica de Bolle
The panelists noted several other countries that merit close attention. Tensions in Bolivia may lead to spikes of protest and violence amid the ongoing conflict between the government and supporters of the imprisoned governor of Santa Cruz, Luis Fernando Camacho. Ecuador is another salient case as unprecedented murder rates remain a top concern for a disaffected electorate. Finally, in Argentina the upcoming presidential election is dominated by enormous disarray in the two leading coalitions, and while the opposition coalition Juntos por el Cambio is expected to win, its infighting may open the door for a radical outsider to gain support. Throughout the conversation Tegho, Shifter, de Bolle, and Werner highlighted how the interplay of economic, political, and social dynamics may alter the course of Latin America’s future in unexpected and intriguing ways, encouraging students to remain flexible and multidimensional in their own analyses.
A full recording of the event is available on the GAI YouTube channel.