Thank strong parties, sensible leadership and a scary neighbour
Publicado en The Economist, el 31 de octubre de 2024
Would you like to retire five years earlier than planned with a fatter pension? Governments do not normally put such tempting questions to voters directly, for fear that they will merrily opt for jam today and disregard the disastrous fiscal consequences for tomorrow.
Yet when Uruguayans went to the polls on October 27th they were asked a version of this question, thanks to a union-led campaign. It was one of two referendums which ran alongside congressional and presidential elections. The presidency is going to a run-off on November 24th between Yamandú Orsi of the left-wing Broad Front and Álvaro Delgado of the centre-right coalition. Congress ended up evenly split. But a large majority, displaying unusual powers of restraint, rejected the offer of more generous pensions.
Latin America is not known for fiscal probity. In Argentina Peronist governments have spent recklessly for years to buy popularity, causing the inflationary mess that Javier Milei, the president, is trying to clean up. Halfway through his third term, Luiz Inácio Lula da Silva, Brazil’s president, is failing to hit his own fiscal targets and worrying investors. Markets had feared Uruguayans would take the money and damn fiscal virtue; investors sold government bonds as the referendum loomed. How and why did Uruguayans resist?
For one thing, they understand fiscal chaos. It is on display just across the Rio de la Plata in Argentina every day. They have first-hand experience of the damage it can do, too. In 2002 Uruguay, then economically fragile and heavily reliant on Argentina, suffered a devastating banking crisis prompted largely by its neighbour’s economic collapse. Today it relies less on its erratic neighbour, but Argentina’s fiscal follies still cause headaches. A recession across the river, for example, means swathes of sun-seeking Argentines eschew holidays on Uruguay’s sweeping beaches.
But the principal reason for the referendum’s failure was probably the fact that the main presidential candidates all publicly opposed it. The outgoing centre-right president, Luis Lacalle Pou, called it “dangerous and harmful”. Even José Mujica (pictured), a popular left-winger and former president, who was once a Marxist guerrilla, said it would bring “chaos”.
This sort of level-headed unity is hard to imagine elsewhere in Latin America (and near impossible in Argentina). It was constructed atop a strong consensus among economists of almost all stripes in favour of prudence and macroeconomic stability, says Gabriel Oddone, who will be the finance minister should Mr Orsi win the run-off. “All the people who have been in charge of economic policy in the last 20 to 25 years, and who are likely to be [in the future], share a training, a worldview and an understanding of the limitations of our discipline,” he says.
That is so unusual as to be bizarre at a time when the region—and the world—is gripped by populism and distrust of experts and elites. In 13 of the past 16 presidential elections in Latin America, the winning party was one founded less than ten years earlier, points out Andrés Malamud of the University of Lisbon. Establishment opinions are often ignored. But Uruguay is different. Political parties are strong, with deep historical roots. They enjoy higher levels of trust than anywhere else in the region. This was reflected in the congressional result. Despite a proportional voting system that opens the door to insurgents, the three main parties scooped up 87% of the vote—a greater share than in the previous election.
But even with Uruguayan levels of immunity to anti-establishment anger, infection is not impossible. Gustavo Salle’s Sovereign Identity party, a hotbed of conspiracy theories, got 2.7% of the vote. Its 66-year-old leader rages against the “kleptocorporatocracy” and the “perverse, paedophile elite”. On election day he declared Congress to be a “cave of traitors”. Worryingly, the vote between the two big blocs was so evenly split that his party appears to hold the balance of legislative power.
Still, optimists hope that Uruguay’s sensible side will shine through here as well. The run-off will be hard-fought, but once the new president is elected, aversion to Mr Salle’s conspiratorial rage could well prompt real negotiations between the left- and right-wing coalitions. That could help with fixing the country’s enduring problems: persistently high crime and a decade of sluggish growth.