Country Risk

Latam Outsiders' Appeal Deepens

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  • The surprising strength of outsider primary candidates in Argentina and Mexico reflects new levels of regional anti-incumbent sentiment.

  • Latin America is seeing the speed and extremes of political swings intensifying as successive governments struggle to solve endemic problems — and voters look for yet another alternative.

  • This year’s primary candidates could swing policies rightward, but volatility will weigh on companies’ corporate planning.

In Argentina, Javier Milei, a foul-mouthed libertarian economist and federal deputy with heavy-metal vibes, has surged to frontrunner status ahead of October presidential elections. In Mexico, Xochitl Galvez, a former street vendor and leading opposition candidate for an alliance of past political enemies, may give the ruling party a run for its money in presidential elections next year. In Venezuela, right-wing outsider Maria Corina Machado has led polls for Oct. 22 opposition primaries to select a challenger to President Nicolas Maduro next year if a competitive contest is allowed.

Latin America has seen its share of swings between left- and right-wing governments as political movements cycled in and out of power. But the underlying problems of poverty, inequality, security and instability have proved stubborn. The resource boom in the 2000s helped stabilize economies and incumbents but today is long gone, with the present macroeconomic picture marred by multiple oil price crashes and the Covid-19 pandemic. Disillusioned voters keep seeking out alternatives. In the past, those were distinct but still mainline candidates that helped unseat political dynasties. Today, voters seem to be increasingly looking outside the establishment altogether, creating uncertainty for investors.

“You’re seeing a trend that’s endemic in Latam right now — anti-incumbentism,” Schreiner Parker, head of Latin America for Rystad Energy, tells Energy Intelligence. “The pendulum of change is swinging at a much faster rate than maybe what it did traditionally.” It’s not even necessarily about candidates’ views or ideologies, Parker said of the Mexico and Argentina primaries, but the hunt for solutions that traditional figures have failed to deliver.

These swings make it challenging for Latin American leaders to actually make progress on turning around long-term problems, feeding the cycle that prompts voters to look elsewhere. It's a dynamic that's likely to intensify in the case of far-outsider candidates, given their lack of institutional and legislative support. Chile is one example. Young outsider leftist Gabriel Boric beat his far-right opponent by a huge margin last year, after the center-left and center-right parties spent years trading power. But absent a strong base in parliament he has struggled to enact his sweeping policy changes, and his popularity ratings have tanked.

Energy investors in such jurisdictions expect some volatility and plan for success regardless of politics, but ever-more extremes in electoral swings further complicate corporate strategy.

Argentina's Milei Moment

Argentina’s libertarian Milei has a strong shot at the presidency after outperforming the two establishment center-right and center-left coalitions in open primaries earlier this month — turning the country’s political landscape upside down. Those results set up an Oct. 22 general election contest between Milei, head of the right-wing Freedom Advances coalition; mainline conservative candidate Patricia Bullrich; and left-leaning Economy Minister Sergio Massa — with a possible runoff scheduled for Nov. 19.

Milei's radical proposed changes have struck a chord with anti-establishment sentiment. Tapping into popular despair over the country's persistent hyperinflation, he supports eliminating the Argentine currency and replacing it with the US dollar, and abolishing the country's central bank. With a platform centered around a deep belief in free market capitalism, he also backs massive cuts in public spending and privatizing state-owned enterprises — including national oil company YPF.

Milei has also been a vocal supporter of restricting women's access to abortion, expanding private gun ownership and denying the existence of climate change, which has drawn comparisons to the right-wing populism espoused by former US President Donald Trump and former Brazilian President Jair Bolsonaro.

As far as the energy and LNG sector, Milei would look to phase out the country's highly controlled and convoluted system of prices and subsidies for its energy sector while respecting existing contracts — albeit with few details on how such a move would avoid consumer price spikes. But even if Milei managed to clinch the upcoming general election, he would face an uphill battle to amass congressional support for his controversial plans. Uncertainty around his economic proposals has already rattled Argentina’s currency, which if it continues could bring further complications to recovery.

Mexico's Amlo Challenger

While Mexican President Andres Manuel Lopez Obrador is limited to a single six-year term, a successor from his Morena party — likely Mexico City Mayor Claudia Sheinbaum — was looking nearly invincible in presidential elections planned for next June. That changed this summer with the surging fortunes of Xochitl Galvez, a former street vendor and now tech entrepreneur and senator for the center-right PAN party.

Galvez has a down-to-earth streak, dressing in traditional Indigenous styles and tooling around her electric bicycle, but also has a compelling personal story of overcoming extreme poverty to study engineering and found her own tech company. She rapidly leapt to the top three contenders to represent the Broad Front for Mexico (FAM), a coalition made up of former political rivals the center-right PAN, center-left PRI and farther-left PRD.

Galvez has taken Lopez Obrador head-on, hammering him on issues like brutal cartel violence and women’s rights, her folksy manner challenging his own populist tone. Lopez Obrador has in turn repeatedly mocked Galvez’ candidacy and tamale-selling history at his morning press conferences. Galvez still faces an uphill battle — an August El Financiero poll shows support for Galvez at 36% to Sheinbaum's 48% — but has reinvigorated a demotivated opposition.

On the energy front, Galvez has talked about the need to fight climate change and leverage renewable energy sources including hydrogen. The PAN was a key backer of the 2014 energy reforms to open Mexico’s energy sector to private companies, and broadly supported an all-of-the-above energy strategy, but via tapping private investors. Lopez Obrador dismayed energy investors with his efforts to return that approach to a state-led focus.

Investor Outlook

While many investors have essentially "baked in" Latin America's political swings to their strategies, the current climate promises something of a choppier ride. On the plus side, contract sanctity has proved durable, even in the face of resource nationalist or anti-oil sentiment. Many resource bases remain attractive with favorable economics, and the region offers relative isolation from acute security risks. Still, investors will need to thread the needle of complex and often contradictory conditions — like existing contracts or legal precedent clashing with presidential policy or messaging — that may end in gridlock.

Elections, Resource Access, Policy and Regulation
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