MADRID/MONTEVIDEO – Latin America is experiencing an especially grave set of crises. The region’s economies are stagnating. Its politics are broken. And, above all, the health of its people is in jeopardy. The mass protests that have recently erupted in multiple countries attest to the severity of the problems that the region’s leaders and the international community must now tackle.

Despite accounting for just over 8% of the world’s population, Latin America has recorded more than 30% of confirmed COVID-19 deaths. With a few exceptions, vaccination in the region is still proceeding painfully slowly. In Peru, which has one of the world’s highest COVID-19 death rates, only about 20% of the population has received at least one vaccine dose.

The region’s economy shrank by 6.3% in 2020 because of the pandemic, but Latin American countries had already been performing anemically for the previous five years. They are also among the world’s most unequal countries, creating an ideal breeding ground for both COVID-19 and the virus of political instability.

Fatalism about Latin America is counterproductive, however, because it masks the heterogeneity of the region’s societies and institutions. But we cannot ignore the historical and structural factors behind the region’s late modernization, nor its tendency toward social and political volatility, as proven by its trajectory over the past 30 years.

Latin America’s democratic surge in the early 1990s, together with a commodity boom a decade later, resulted in an expansion of the region’s middle classes and seemed to suggest that the cycle of underdevelopment had been broken. But the end of the upswing in commodity prices in the 2010s wiped out much of this economic advance and roiled the region’s societies and politics.

Worryingly, the middle classes now fear a return to poverty and have lost their self-confidence. Their gnawing economic anxiety has eroded their support for democratic institutions and cleared the ground for a revival of populism on both the right and the left. Civil liberties and the rule of law are now under threat, and Latin America’s global standing has inevitably suffered.

At the same time, Latin America’s abundant mineral, energy, and agricultural resources continue to attract the attention of the world’s major powers, reflected in the region’s increasing trade, investment, and financial cooperation with China. Although the 2000s raw-materials boom also was partly driven by Chinese demand, Latin America today is in a more exposed and dependent position, aggravated by the pandemic.

Latin America’s problems must be addressed above all by its own leaders. The most pressing priority – beyond the fight against COVID-19 – is to promote a new social contract, which should aim to mitigate inequality and improve access to health care, education, and other pillars of the welfare state. The changes must be deep enough to restore dignity to politics, thus reviving popular support for democratic institutions.

But political leaders cannot undertake this task alone. More fluid collaboration with the private sector and civil society would make it possible to maximize the opportunities that digital transformation offers and provide stronger guarantees to help manage its impact on labor markets.

At the same time, Latin American countries would do well to accelerate their regional integration, which has long been on the backburner. The new frontiers of technology, communications, and education can help to strengthen inter-American ties, primarily with regard to trade (as demanded by most citizens across the region).

From a wider perspective, Latin America must be regarded as a key political and economic actor, capable of altering the global balance of power. And with 40% of the world’s species, 30% of its freshwater reserves, and 25% of its forests, the region should play a vital role in the multilateral fight against climate change. But that will be impossible so long as the pandemic is undermining its economies and political stability.

International organizations have responded to the COVID-19 crisis by providing more funding. But it is still not enough for developing countries, which need more flexible access to long-term, low-interest financing. Some initiatives demanded by Latin American and other developing economies focus on creating liquidity to mitigate the pandemic’s social impact and help firms whose survival is threatened.

Likewise, Latin America and its traditional allies would benefit from devising new forms of cooperation. The United States is particularly well-equipped to help countries in its neighborhood, such as those in Central America and the Caribbean. And the links between Latin America and Europe, a legacy of colonialism and subsequent migration, are also strong.

But Europe must reach out more decisively to Latin America. Aside from cultural affinity, a convergence of interests – such as curbing the pandemic, mitigating climate change, promoting economic prosperity, and complementing the influence of other powers – makes greater engagement a geostrategic imperative. Concluding the European Union’s free-trade agreement with Latin America’s Mercosur bloc (Argentina, Brazil, Paraguay, and Uruguay) would represent a tangible and highly significant advance.

When the Colombian writer Gabriel García Márquez accepted the 1982 Nobel Prize in literature, he delivered a lecture entitled “The Solitude of Latin America.” He said that “those clear-sighted Europeans who struggle, here as well, for a more just and humane homeland, could help us far better if they reconsidered their way of seeing us.” After all, “Solidarity with our dreams will not make us feel less alone, as long as it is not translated into concrete acts of legitimate support for all the peoples that assume the illusion of having a life of their own in the distribution of the world.”

In these times of shared – though unequally distributed – hardships and afflictions, García Márquez’s wise words challenge us all, Europeans and non-Europeans alike. The pandemic and its economic and political fallout must imprint two messages in our minds: No one is safe from global threats, and no one should be left to face them alone.

MADRID – Thousands of Cubans took to the streets last weekend to protest food and medicine shortages – the biggest display of dissent seen in the country in decades. And Cubans are not alone: across Latin America, social, political, and economic crises are intensifying, with dire consequences. The European Union needs to start paying attention.

Throughout the region, economies have been gradually weakening, and populism has been gaining momentum, for quite some time. But the COVID-19 crisis has plunged Latin America into its worst economic recession in a century. By gutting the middle class, the pandemic has increased inequality in what was already the world’s most unequal region. Now, one-third of Latin Americans are living in extreme poverty ($1.90 per day or less, according to the World Bank definition).

It might seem inappropriate, even dismissive, to discuss Latin America as a single entity, given the region’s vast socioeconomic diversity. But there is considerable overlap in terms of the challenges its countries face.

From Chile and Ecuador to Venezuela and Peru, populations are grappling with their national identities. Amid rampant corruption and state capture, Latin Americans lack trust in their institutions – a trend that has contributed to the collapse of traditional political parties and a surge of populist outsider candidates. Democratic backsliding and disillusionment are rife.

To reverse these trends, the region needs deep structural change. And it is incumbent on the international community – especially the United States and the EU – to help.

During the Cold War, Latin America was often treated as a pawn on the global geopolitical chessboard. To a significant extent, this remains the case today, though it is now China, not the Soviet Union, that is competing with the US for influence. In fact, China has worked hard in recent years to re-orient Latin America’s trade away from the US, and is now set to become Latin America’s main trading partner by 2035.

And yet, even as Latin America has been manipulated and used by great powers, it has also been an influential global actor in its own right. Accounting for nearly half the delegations at the Bretton Woods Conference in 1944, the region played an important role in laying the foundations of the liberal world order.

More recently, Latin America was a driving force behind the adoption of landmark international agreements, from the 2030 Agenda for Sustainable Development to the Paris climate agreement. And the region is home to many economies that, just a few years ago, were being hailed for their vast growth potential.

Between the problematic legacy of foreign intervention in Latin America and the region’s vast economic and diplomatic potential, there is no shortage of compelling reasons why the international community, especially the wealthy Western democracies, should be helping it to overcome the cascade of challenges it faces. Yet that simply has not happened – and Western neglect is particularly glaring in the case of the EU.

The bloc’s Latin America policy began essentially as an afterthought. It was only after the accession of Spain and Portugal in 1986 that something akin to a focused regional policy came into being. But, 35 years later, the policy remains embryonic. The European Commission proudly proclaims that the EU is Latin America’s most important development partner. That is a significant overstatement.

Consider the fate of the EU’s free-trade agreement with the Mercosur bloc (Argentina, Brazil, Paraguay, and Uruguay). The deal, signed in 2019 as part of a broader Association Agreement between the two regions, inspired high hopes. More than 90% of tariff barriers were to be reduced over the course of a decade.

Alas, the agreement was never ratified. Instead, it has been put on hold over environmental concerns – in particular, the destruction of the Amazon in Brazil. EU trade policy now upholds stringent environmental and labor standards. This, together with the bloc’s new strategy for financing the transition to a sustainable economy, means that the pact is unlikely to move forward without new provisions and conditionality.

Of course, there is good reason for this: sound management of natural resources is essential to long-term prosperity. Nonetheless, Europe can ill afford to ignore Latin America’s strategic importance, or take for granted Mercosur’s interest in the deal, which took 20 years to negotiate, especially given China’s efforts to consolidate its presence in the region. After all, environmental concerns are not going to stop China.

The most recent EU Council Conclusions reflect Europe’s recognition that it needs to boost its global engagement. “A Globally Connected Europe,” as the document is called, “invites” the Commission and the high representative for foreign affairs and security policy, Josep Borrell, to “identify and implement a set of high impact and visible projects and actions globally.” But while multiple Asian countries are highlighted, Latin America is a footnote.

The Conclusions also make no mention of China. But this is not a case of neglect: countering China is the principal motivation behind the document’s recommendations. The same is true of the EU Strategy for Cooperation in the Indo-Pacific, which also avoids any explicit mention of China.

The EU well knows that when it comes to expanding its influence within a country or region, China plays the long game. But China is also adept at identifying opportunities to make rapid progress, and Latin America’s escalating crises represent a golden one. The region needs help from somewhere. If the EU doesn’t act quickly to provide it, China will.

BOGOTÁ – While the United States and other advanced economies are returning to normalcy, Colombia reported its highest number of COVID-19 cases and deaths to date during the last week of June. Since early May, the country has been recording one COVID-19 death per 100,000 people per day – three times India’s rate.

Meanwhile, social tensions have erupted in Colombia’s cities. In early May, thousands of protesters – many of them young – forced the withdrawal of a proposed tax reform and the subsequent resignation of the finance minister. Later that month, S&P Global Ratings downgraded Colombian bonds from BBB- rating to BB+, below investment grade, weakening the country’s chances of restoring fiscal sustainability.

This triad – unabated COVID-19, social unrest, and fiscal crisis – is not unique to Colombia. Many other developing and emerging economies, especially in Latin America, face a similar set of problems, whereby a worsening of one could exacerbate the others.

But this is not a traditional Latin American crisis with technocratic solutions. Instead, the protesters are demanding a change to the political system.

In Chile, independents and outsiders will have the upper hand in drafting a new constitution. And in Peru, Pedro Castillo, a left-wing former schoolteacher who advocates nationalizing strategic assets, appears to have shaken the entire political establishment by winning the country’s June 6 presidential election. Unfortunately, discontent with traditional politics is resulting in a wave of demagogic populism.

In Colombia, riots, protests, and strikes have lasted for two months. While popular support for marches and demonstrations has begun to decline, it is clear that the people are dissatisfied with the political system. A recent poll indicated that 71% of Colombians do not identify with any of the country’s existing political parties.

The direction of political change in Colombia remains uncertain, and will depend on how each of its three problems evolves. On the pandemic front, the vaccination effort had a slow start, owing to supply delays, but is finally gaining speed, with about 12 million doses (one for every four Colombians) having been administered so far. At the current pace, 60% of the population could be vaccinated by October 2021. But the high costs of ongoing lockdowns mean that the economy will reopen well before then.

The social explosion is also related to the pandemic and its economic impact. According to the National Administrative Department of Statistics, nearly 5% of the population – 2.1 million Colombians – have fallen out of the middle class during the pandemic. And a further 2.7 million who were already poor or vulnerable are now destitute. The first group is frustrated and disappointed, and the second is despairing and angry.

Compounding social tensions is the situation of women and young people. The number of employed women has fallen by 15% during the pandemic (compared to a 6% decline for men). Lockdowns and school closures have kept many women at home – where domestic violence has increased – and the pandemic has hit sectors in which many of them work, such as services, especially hard. Meanwhile, 27% of young people between the ages of 14 and 28 – two-thirds of them women – are neither working nor studying.

Blockages of critical roads, including those to Cali and the Pacific port of Buenaventura, caused the economy to suffer further. Fedesarrollo, an independent think tank, puts the costs of the strikes so far at 0.6% of GDP, while food prices increased by 5.4% in May, owing to supply disruptions.

Negotiations between the government and representatives of the strike committee were suspended in early June. The committee’s list of demands, which includes income support equivalent to a minimum salary for the 42.5% of the population now living below the poverty line, is likely to worsen an already severe fiscal crisis. The government deficit is expected to be 8.6% of GDP this year and 7% in 2022. Public debt will rise to 69% of GDP in 2022, from 50% in 2019.

In response, the government proposed its ill-fated tax reform, which would have affected the middle class by broadening the base of value-added tax and personal income tax. A more modest initiative – to be paid for entirely by large businesses and wealthy individuals – is now in the works, implying that any structural fiscal measures will be postponed until after the 2022 presidential and congressional elections.

Pragmatists argue that Colombia’s triad of problems presents an opportunity to develop a sensible reform agenda based on increased political participation, a phaseout of inefficient government programs, and more progressive fiscal policy. But this outcome is far from guaranteed, not least because the country is still divided over the 2016 peace agreement with the Revolutionary Armed Forces of Colombia (FARC). This amounts to a significant barrier to the formation of a centrist coalition that can address key policy issues.

The presidential candidate who embodies the populist approach, Gustavo Petro, currently leads opinion polls with the support of 38.3% of likely voters. Petro advocates a minimum wage for low-income families, paid by the central bank. Meanwhile, those on the far right are once again using fear to mobilize support. They claim that neighboring Venezuela deliberately orchestrated Colombia’s social explosion, in order to destabilize the country.

Like Peru recently, Colombia seems destined to choose between two extreme options – left-wing anger or right-wing fear – unless a viable centrist alternative emerges. And in a faceoff between the radical right and the populist left, the current government’s unpopularity will most likely give the left the upper hand.

In that case, the resulting fiscal blowout would eventually leave Colombians worse off. What the country urgently needs is political leadership that can respond to the sentiment in the streets with effective strategies to tackle the social and fiscal crises together, while relying on increased vaccination to defeat the pandemic. Sadly, the expectation that democracy will triumph over demagoguery may be wishful thinking.

MEXICO CITY – In the Caribbean, summer is when things happen. As the weather heats up and hurricanes pass through, passions tend to flare and crises erupt. Yet such crises rarely occur in more than one country at a time, and the dangers they pose are generally limited. Not this year.

On July 7, armed men stormed the private residence of Haitian President Jovenel Moïse in the middle of the night and shot him dead, shocking the country and setting off a political power struggle. Prime Minister Claude Joseph, who has served as acting president since Moïse’s death, has now agreed to hand over power to Ariel Henry, whom Moïse appointed as the country’s next prime minister just two days before being killed. But while this could go some way toward defusing the immediate political crisis, the assassination does not bode well for Haiti’s stability or prosperity.

This month has also brought the largest display of dissent in Cuba in decades, with thousands of Cubans taking to the streets to protest deteriorating living conditions and a lack of basic goods, including medicine, during a worsening COVID-19 outbreak. Many called for an end to the 61-year-old communist regime.

For policymakers in the United States, a perfect storm seems to be brewing. Their worst Latin American nightmare has long been the simultaneous exodus of refugees from Haiti and Cuba toward Miami. This prospect is particularly daunting at a time when migrant apprehensions at the US-Mexican border are at their highest level since 2000.

After Haiti’s 1991 military coup, tens of thousands of Haitians set out for the US. Today, thousands of Haitians are parked outside the Mexican Refugee Office in Tapachula, on Mexico’s border with Guatemala. Several thousand more have formed an increasingly permanent “temporary” camp in Tijuana. While US Secretary of Homeland Security Alejandro Mayorkas has warned Haitians not to attempt to enter the US, many are likely to ignore him.

In the case of Cuba, US officials might have even more reason to worry. In 1965, during one of the first economic crises after the Cuban revolution, Fidel Castro allowed the Swiss government and US President Lyndon B. Johnson’s administration to operate so-called Freedom Flights, which took thousands of Cubans to Miami.

In 1980, the Mariel boatlift – again masterminded by Castro – brought 125,000 Cubans from all walks of life to Miami, though some ended up in a military compound in Arkansas. In 1994, after the maleconazo riots, Castro announced that anyone who wanted to leave the country could. So, between 25,000 and 40,000 Cubans set out for Miami in makeshift rafts, with many ending up at the US Naval Base in Guantánamo.

Sending Cubans packing after mass protests has been the regime’s standard operating procedure. But this approach may no longer be enough to defuse domestic tensions. For starters, Fidel is dead, and his brother, Raúl, who had been running the country since 2006, retired in April. I knew Fidel, and Raúl is no Fidel. Neither he nor Miguel Díaz-Canel, who succeeded Raúl as president and head of the Communist Party, has the charismatic bond with the Cuban people that Fidel had, for better or for worse.

Moreover, the economic crisis Cuba is facing today may be even more severe than during the “Special Period” after the Soviet Union’s collapse. January’s maxi-devaluation has triggered hyperinflation, output is paralyzed, and restrictions on remittances and tourism from Miami imposed by former President Donald Trump’s administration remain in place. Virtually everything Cubans need is scarce. People wait in long lines to purchase basic goods and suffer through power outages in the sweltering summer heat. Meanwhile, the pandemic is raging.

Cubans see no light at the end of the tunnel. Even if the government pursued radical economic reforms – such as large-scale privatization, financed by resources from the Cuban diaspora, or complete import liberalization – the results would hardly be immediate.

A final distinctive characteristic of the current crisis is the role of social media. While its importance has often been exaggerated, its expanded availability in Cuba since then-President Barack Obama’s diplomatic normalization in 2016 has clearly made a difference. Protesters can now communicate with one another, sharing practical information, slogans, photos, and songs. And they can share their experiences with the rest of the world in real time.

There is no greater testament to social media’s impact than the Cuban government’s decision on July 11 to shut down the internet – a policy that has yet to be fully reversed. Now, the US is reviewing whether it can help restore internet access for Cubans using offshore satellite technology.

Of course, the Cuban regime also used good old-fashioned repression. Counter-demonstrators, police (and perhaps even military personnel in civilian clothes), and thugs armed with sticks managed to disperse the crowds and prevent new demonstrations. Hundreds of protesters – more than 500, according to Human Rights Watch – were detained.

Crucially, the government has avoided deploying the armed forces – at least so far. Such a move would present military personnel with a stark choice: fire at the crowd, if the order comes, or join it. Either would mean the end of the Cuban regime as we know it.

But change is probably underway in Cuba, anyway. The younger generation of officials knows that the current situation is unsustainable. Any hope they had of reforming the economy, without also reforming the political system, has been dashed.

If real change does come to Cuba, all of Latin America will feel the effects. As it stands, left-of-center candidates have already won or are set to win presidential elections in Brazil, Chile, Colombia, and Peru. All of these candidates are, to some extent, carrying Cuba’s baggage. An end to the communist regime there would enable, if not compel, the Latin American left to come to terms with its authoritarian past and predilections.

CAMBRIDGE – The current disconnect between market calm and underlying social tensions is perhaps nowhere more acute than in Latin America. The question is how much longer this glaring dissonance can continue.

For now, the region’s economic data keep improving, and debt markets remain eerily unperturbed. But seething anger is spilling out into the streets, particularly (but not only) in Colombia. And with the rate of new daily COVID-19 cases in Latin America already four times higher than the emerging-market median, even as a third wave of the pandemic sets in, the region’s 650 million people face an unfolding humanitarian disaster.

As political uncertainty rises, capital investment has stalled in a region already beset by low productivity growth. Even worse, a generation of Latin America’s children have lost nearly a year and a half of schooling, further undermining hopes of achieving educational catchup with Asia, much less the United States.

For Cuba, Russia, and China, which already have a beachhead in Venezuela, the pandemic presents an opportunity to make further inroads. Markets seem relieved that the apparent winner of Peru’s presidential election, Pedro Castillo, a Marxist, appears to have at least a couple of mainstream economic advisers, but it remains to be seen what real influence they will have.

Moreover, Latin American economic data so far this year are good only in the sense that they are not as awful as in 2020, when output fell by 7%. In April, the International Monetary Fund forecast that the region’s GDP would grow by 4.6% in 2021; more recent estimates are closer to 6%. But in per capita terms – now understood as a better way to measure recovery from deep economic crises – most Latin American economies will not return to pre-pandemic levels until well into 2022, or beyond.

Worryingly, much of the region’s real growth this year stems from rising commodity prices fueled by recovery elsewhere, not from genuine productivity improvements that will sustain income through the commodity cycle. To make matters worse, low-income households have been hit especially hard by the pandemic and the associated economic downturn.

To understand Latin America’s policy challenges, we need only look at its two largest economies, Brazil and Mexico, which together account for more than half of the region’s output. Superficially, they are governed by polar opposites: Brazil by right-wing President Jair Bolsonaro, and Mexico by left-wing President Andrés Manuel López Obrador (widely known as AMLO). But the two men are similar in important ways.

While AMLO’s political instincts are rooted in the radical worldview of the 1970s, and Bolsonaro seems nostalgic for Brazil’s era of military rule, both are erratic autocrats. Moreover, both remain reasonably popular despite their catastrophic mishandling of the pandemic and a rash of other ill-advised economic decisions. AMLO canceled Mexico City’s badly needed new airport project soon after taking office in late 2018, despite the fact that it was well underway. And although he campaigned on a promise of rapid economic growth, Mexico’s GDP was shrinking even before the pandemic – by 0.1% in 2019.

Bolsonaro, when he is not threatening to raze the Amazon, has continued to be successful in blaming Brazil’s problems on the left-wing opposition Workers’ Party (PT) that governed the country until 2016. Several of the PT’s leaders, including former President Luiz Inácio Lula da Silva, were jailed for corruption.

Nevertheless, it is entirely possible that, in a few years’ time, Brazil will again have a left-wing president – perhaps Lula, whose convictions were overturned in March – while Mexico is back in the hands of a centrist. The two countries’ future policy course is thus hard to predict.

Why aren’t debt markets spooked by all this uncertainty? In part, it is because both countries have remained fairly conservative in their debt management. True, Brazil’s government debt is projected to reach nearly 100% of GDP this year. But it is mostly denominated in local currency, and domestic residents hold as much as 90% of the total, up from 80% five years ago. Even corporate foreign borrowing has been contained, with the country’s external debt still only around 40% of GDP.

Mexico’s public debt is lower than Brazil’s, at 60% of GDP. For all his radicalism, AMLO has so far been a fiscal conservative, much as Lula was in Brazil. The lesson that debt crises can derail a populist revolution has been well learned.

True, governments across the region have mounted a surprisingly robust macroeconomic response to the pandemic. But they have far less scope than the US to continue using deficit finance. To raise spending and tackle inequality on a sustainable basis, Latin American countries must also find a way to increase budget revenues. Ironically, the protests in Colombia began not in response to benefit cuts, but because the government tried to raise taxes on the middle class to provide more and better pandemic relief to the country’s poorest citizens. Governments seeking to redistribute income need to raise taxes on better-off citizens rather than temporarily paper over problems with additional debt.

In recent decades, the US has been reluctant to become deeply engaged in resolving Latin America’s problems, but perhaps this will change. For starters, the region needs massive vaccine assistance in order to get back on its feet. America can also help by strengthening trade – especially by addressing pandemic-induced bottlenecks and removing lingering Trump-era protectionist measures.

Most of Latin America is still far from the horrific conditions prevailing in Venezuela, where output has fallen by a staggering 75% since 2013. But, given the ongoing humanitarian catastrophe there, and the specter of political instability elsewhere, investors should not take a sustained economic recovery for granted.