The private sector in Latin America: upcoming challenges

By Guillermo Bolinaga

Partner at Opportunitas Advisor

July 11, 2022

A study published in The Economist regarding the quality of democracy in the world registered democratic setbacks in all five continents. When observing the results and focusing on Latin America, we find that “the change in score was the biggest interannual drop that any territory has experienced since the beginning of the Democracy Index in 2006.[1]” This means our region stands out for its sustained trend towards its democracy deconsolidation.

There are various structural conditions that conspire against the region’s democratic force, in particular, the social and economic inequality. Even though each country in the continent has its own history, geography and tradition, inequality is a condition that affects the region as a whole.[1] Structural inequality is a breeding ground for political and social conflict and for the ascendancy of populist politicians.

In Latin America, COVID-19 deepened these gaps and made them more visible. The pandemic, among other things, revealed the weakness of the assistance capabilities of democratic states, and showed the coercive capacity of the authoritarian states[2]. In Latin America and other latitudes, this scenario crystalized discontent and deep questioning of democracy as a political system that can offer appropriate responses to the population’s economic and social woes.

The region has experienced in the last few years, the rise to power of various political figures of dubious commitment to democracy and clear populist tendencies, as well as the consolidation of closed political systems and autocracies. The first group includes Jair Bolsonaro in Brazil, Nayib Bukele in El Salvador, Andres Manuel López Obrador in Mexico, Alberto Fernández in Argentina, Pedro Castillo in Peru and now, Gustavo Petro in Colombia. In the second group, we have Nicolás Maduro in Venezuela, Miguel Díaz Canel in Cuba, and Daniel Ortega in Nicaragua.

Even though both groups are clearly differentiated in the international indexes regarding democratic quality, and it would be quiet daring to equate them, in must be made clear that both groups—the so-named hybrid regimes and the consolidated autocracies, are characterized by polarization, instability, uncertainty, volatility, and social conflict. Additionally, these conditions are exacerbated by recent changes in political culture associated to the widespread use of new technologies and the surge of a new global information ecosystem.

Current studies regarding media consumption reveal that while it used to be a community activity, media consumption it is now profoundly solitary. Most information is consumed through smart phones and content platforms that the user configures based on his/her interests and preferences. This leads to a context that deepens the de-structuring of public spaces and can obstruct consensus building[4].

The deconsolidation of democracy, populism, and the pandemic’s economic effects are important challenges for civil society in our countries as well as for the private sector. Three trends will undoubtedly leave a mark on our countries in the next few years:

Increase in the fiscal pressures and tax collection to reduce fiscal deficits and increase public spending;
Social tensions and conflict as a consequence of inequality and inexistent or insufficient economic growth;
The politically-motivated attributing of social problems to the private sector, which leads to a boom in regulatory and restrictive policies.

The private sector must recognize the political moment it’s living and prepare for this kind of environment. Acting in a “business as usual” manner is no longer valid in the current context. It is necessary for them to deepen their understanding of the political, regulatory, and reputational risks they are facing. The situation demands that private enterprises provide, as part of civil society, their view of how to solve some of the countries’ most crucial economic problems and that this vision is widely communicated and openly discussed with all audiences.

It would be a very expensive mistake to leave communicational voids that lead to the characterization of the private sector as part of the problem and not the solution. It’s not about businessmen playing politics. That would be a big mistake. It’s about businessmen understanding the grave difficulties of the environment they’re operating in, the political consequences of that environment and the importance that the private sector has for the country’s economic development.

The key is businessmen who are guided by democratic convictions and willing to promote the idea that private enterprise and investment is key to our countries’ future and the possibility that democracy will live on in our continent.

[1] Democracy Index 2021-The China Challenge. The Economist Intelligence Unit Limited, 2022. : 47

[2] UNPD. “Trapped: High Inequality and Low Growth in Latin America and the Caribbean | United Nations Development Programme”. UNDP, 22 de junio de 2021.

[3] Bautista de Alemán, Paola. «Autoritarismo y pandemia: el predominio de las capacidades coercitivas». En ¿Democracia infectada? Cómo la pandemia transformó la política latinoamericana y qué podemos hacer para sobrevivir, editado por Carlos Andrés Pérez y Sebastián Grundberger, 43–57. Montevideo: Konrad Adenauer Stiftung, 2020.

[4] Osío Cabrices, Rafael. «Lleva tu pedacito de ágora«. Democratización 3, n.º 18 (2022): 39–52.