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Understanding Latin America’s New Political Paradigm

Latin America's 40-year history of political shifts between center-right and center-left governments is evolutionary: each new stage builds upon the previous one. Much like creative destruction in the economy, this political evolution preserves what works, discards what does not, and sometimes adds new disruptive features.

MONTEVIDEO – Center-left and populist governments’ hegemony in Latin America for most of the last decade now seems to be coming to an end, with center-right parties rising to power in Argentina, Brazil, Guatemala, Paraguay, and Peru.

We should not be surprised that Latin America’s “red tide” is receding. Historical evidence from the last 40 years shows that political cycles within the region are highly synchronized, and tend to reflect economic booms and busts.

From 1974 to 1981, Latin America’s economy grew at an average annual rate of 4.1%, compared to its annual 2.8% historical average, owing to the 1970s oil-price spike. Petrodollars flooding into the region financed huge public-spending increases and real-estate booms, and fueled an economic bonanza that propped up the continent’s military dictatorships. At the time, authoritarian regimes took credit for the economic boom, because they had reestablished stability and order on the continent.

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