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Left-wing governments in Latin America have difficulties

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Editor’s note: Jorge G. Castañeda is a CNN contributor. He was Mexico’s Secretary of Foreign Relations from 2000 to 2003. He is currently a professor at New York University and his most recent book, “America Through Foreign Eyes,” was published by Oxford University Press in 2020. The views expressed in this commentary are solely from the author. You can find more opinion pieces at CNNe.com/opinion.

(CNN Spanish) — Since the end of 2021, at least three new governments that define themselves as left-wing have taken office in Latin America.

In the wake of presidents of the same political and ideological inclination elected in 2018 and 2019 in Mexico and Argentina, the new leaders of Chile, Colombia and Brazil came to power arousing great expectations, especially in terms of social policy. After the pandemic and the economic recession that it brought with it, and in the case of Colombia and Chile, large-scale social outbreaks, Gabriel Boric, Gustavo Petro and Luiz Inácio Lula da Silva are expected to make a solid and sustained effort of (re)construction of the welfare state.

Thanks to the accumulated experience, the expertise of their main economic collaborators, and their own prudence, the three presidents have sought to carry out their social reforms along with significant fiscal reforms. This is already progress in Latin America. With the partial exception of Brazil, in addition to Cuba and Argentina, the tax collection in the region is abysmally low, but many reformers, such as Andrés Manuel López Obrador in Mexico, have not wanted to finance their projects with a serious increase in this tax burden. Boric and Petro yes, and Lula, in another way, has also tried to increase social spending with healthy financing.

Boric proposed from his campaign a rtax form around 4% of GDP at the end of his term. As was logical, the negotiation with the right-wing opposition and with the business sector brought about a reduction in the amounts and mix of taxes, leading to a proposal that will add 3.6% of GDP. It was a minor reform, but by no means insubstantial and, above all, essential to finance the health and pension reforms that the left-wing coalition had promised to carry out. It is located in a Chilean paradox: from the first years of the Concertación governments, the tax burden stagnated at 20% of GDP, too small a figure to consistently and significantly reduce Chilean inequality, a primary goal of those governments.

Popularity of President Gabriel Boric falls in Chile <span class="caption--duration">3:17</span>

He may yet achieve some equivalent, but his great initial reform was defeated. At the beginning of March the Chamber of Deputies rejected the so-called “idea” of the 3.6% of GDP reform, effectively burying it for a while. The right-wing opposition voted against it, and Boric fell short of a handful of votes to approve it. The weakening of the government due to the failure of the initiative for a new Constitution; the unity and intransigence of the right; the careless political operation of those in charge of getting the votes; and the intrinsic resistance to any tax reform: all of these factors contributed to the setback inflicted on Boric and his program.

The situation in Colombia is similar, although not identical. Thanks to a broad alliance, from the left to the center right in the CongressPetro achieved a modest tax reform, but real. In principle, it represents between 1.2% and 1.3% of GDP: nothing special, but enough to start financing two important social reforms that candidate Petro promised in his campaign: pensions and health. During the campaign, Petro proposed a reform that would be worth 3.6% of GDP; his original initiative sent to Congress was 1.8%.

What does the new pension reform it is the unification of the public and private regimes to add a single old-age pension. In addition, he wants to guarantee a basic retirement income for 2.5 million adults over 65 years of age without possibility of pension. In fact, it will reduce the number of beneficiaries of private insurance, and will increase the number of insured by the public sector. It was barely presented in Congress, and it is impossible to know for now if it will be approved, since the Petro’s coalition begins to crack, when rejecting the first version the Liberal Party and the Conservative Party, much less in what exact way. It is difficult for its extension to be reduced, due to the cost of more ambitious changes and the exiguity of the fiscal reform.

But it is also possible that he suffers the same fate as the health reform proposed a month and a half ago by the government. This provides for an extension of coverage to rural areas and, above all, making the State the sole payer of medical care, although insurers and private providers will remain, but not the private managers of the resources involved. Three Petro ministers signed a document questioning the feasibility and suitability of the reform, and one of them, Alexander Gaviria, Minister of Education and in charge of health in the government of Juan Manuel Santos, left the cabinet. The initiative has not reached a vote in Congress, but the controversy unleashed by the departure of Gaviria, the cost of the reform and the resistance of some sectors make it doubtful.

International markets react to the arrival of Lula da Silva <span class="caption--duration">1:10</span>

Petro, thanks to his coalition and perhaps his lesser audacity, retains a better chance than Boric for part of his social program to materialize. But in both countries, the fact that the presidential term is four years without consecutive re-election, and the resistance from powerful conservative forces and the lack of a clear mandate, mean that the probability of large mutations is modest. In Brazil, this probability seems even lower.

The differences are important. The most populous country in Latin America is also the one with the highest tax collection: more than 30% of GDP. It also has a universal, public and free health system (with a lack of services in rural areas, far from the big cities), but also a generous pension system, which is extremely expensive, especially for public employees. Due to excesses in the past decade, Congress imposed in 2016 a so-called tax ceiling to limit spending above treasury revenue. The pandemic allowed a first suspension of the roof; the electoral maneuvers of Jair Bolsonaro in 2022 included another suspension. In order to restore the social policies that Bolsonaro dismantled, Lula achieved the abrogation of the ceiling before taking office, with the understanding that already in the presidency (this year) he would promote a tax reform.

This could include tax collection effects, but it is focused on taxing the rich more and, above all, replacing the extraordinarily complex skein of indirect, state and heterogeneous taxes with a federal and preferential, unique Value Added Tax (VAT). This would help finance the restoration or expansion of social programs such as Bolsa Familia, or Minha casa, Minha vida, and also a project of new programs that will be presented in the second semester.

Lula’s legendary political skill may enable him to achieve these ambitious goals. But the obstacles he faces, just like Boric and Petro, are not negligible. The seizure of the main state headquarters in Brasilia, at the beginning of January, by Bolsonaro mobs constitutes a pledge of these obstacles. The Brazilian and international economic situation is different, together with the nervousness of the Brazilian business community. And the president’s health, closely followed from his cancer in 2011 and the 2022 laryngeal operationhas been in the news again for the postponement of his visit to China.

In other words, the Latin American left, at least in these countries, has learned a lot. It proposes far-reaching social reforms, but healthily financed, and it does so by seeking legislative alliances and in society. But this learning, and this new wisdom, brings with it the risk of failure. Nobody wants it to be like this, but many want it.

If you want some motivation, then here is your way: Frases Positivas

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