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2024: The year of the election in Latin America

Published on Wednesday, April 10, 2024

This year, some countries in Latin America will change presidents: Mexico, Panama, Uruguay, Venezuela, the Dominican Republic, and El Salvador.

The only election that has taken place so far is in El Salvador, where despite the constitution prohibiting re- election, the current president Nayib Bukele was re-elected.

This country has had some success in reducing criminality but with serious questions regarding respect for human rights.

The rest of the countries will have elections during the remainder of the year. Mexico, the most populated country among them, will hold elections . The competition is between the candidate of the governing party (left-populist) and the candidate of the opposition alliance (centre-right).

ESG Factor

Although it is expected that Mexico will benefit from the nearshoring process, receiving additional investments relocated from China, the depth and speed of these investments will depend on the election results. The business climate in Mexico will be tied to the election outcome because both options have different focuses in important areas.

For example, the governing party aims to limit private investment in energy, particularly green energy, while the opposition proposes continuing the policy of an open and competitive energy market.

Impact

In general, elections in Latin America will share some characteristics:

Disillusionment with democracy, particularly with traditional parties.
The rise of populist candidates offering easy but inefficient solutions.
Weakening of the rule of law, ranging from Venezuela, which will not have free elections, to hybrids like Mexico and El Salvador, which have relatively free elections but with many questionable practices.
Increased polarisation and lack of open dialogue between different political groups.
Illegal money and corruption.

Opportunities

Despite these challenges, Latin America will present investment opportunities for multinational companies:

Low labor costs with a medium level of education and everyday more people speaking English.
Except for Venezuela, most countries recognise the necessity of private investment for development and poverty reduction.
Minimal differences in language and culture among countries, allowing Latin America to be considered as one region for investment purposes.
A tendency toward low inflation and interest rates, which will accelerate GDP growth in the coming years.
Significant mineral resources and key raw materials.

There are not expected to be significant changes in the investment climate that multinational companies need to consider. Mexico will continue to be a natural destination for certain investments, particularly in automotive and other industries strongly tied to US production chains.Similarly, other countries will serve as natural markets for specific industries, such as semiconductors, software programming, mining, agriculture, etc.

Venezuela

Overall, significant political instability is not predicted, except for Venezuela, which has not received foreign investment for some years now. There are forecasts of social mobilisations following the inequitable elections and possibly more international sanctions.

Latin America is not expected to undergo major changes in the business environment, except in the event that the opposition takes power in Mexico and implements changes to energy and mining policies, which could open the door to new private investments.

Author: FRANCISCO BRACAMONTE - Tax Partner, Kreston BSG

This article was first publish in the Kreston Global's magazine Doing business in Latin America. Click here to see.