This is the first blog post in a series on protests in key regions of the world and their potential impact on companies and executives. The series focuses on protest likelihood as well as takeaways for short-term travel risk, long-term corporate planning, and everything in between.
Why Protests Matter, Especially in Latin America
Social or political protests serve as both a source of immediate risk and a driver of long-term change for companies. Not only do they disrupt operations or travel plans, but in minutes a demonstration that turns violent can threaten the safety of company assets and personnel. Protests can also create lasting policy changes.
I begin this blog series with a look at protests in Latin America in part because their significance in this region is in some ways most striking. Unlike the rest of the world, Latin America has not dealt with any major interstate conflicts for decades. Incidents of terrorism, too, have been less common than elsewhere. When it comes to demonstrations, however, few Latin American governments can afford to either ignore or eliminate entirely the massive social unrest that has been building for the past few years.
Assessing the Likelihood of Demonstrations
At first glance, protest prediction seems futile due to the sheer variety of unrest in Latin America. There is no way to forecast each demonstration, but we can get closer to analyzing the overall likelihood of protests by looking at a couple indicators.
The first of these signals is a country’s economic performance. Why economics? Because if putting food on a family’s table becomes more difficult, people will find reasons to protest. Figure 1, below, highlights the significant Gross Domestic Product (GDP) growth drop in Brazil and Venezuela in the last few years; this change can be linked to much of the massive unrest we’ve seen in each of these countries.
Figure 1 – GDP Growth in Four Latin American Markets*
Source: IMF World Economic Outlook 2016
*All figures for 2016, all figures but Mexico for 2015, and Venezuela’s figures for 2014 are IMF staff estimates
The economic factor is also tied closely to another key signal of potential protests, regime popularity. While Mexico’s economic decline has not been as precipitous as Brazil’s or Venezuela’s, its government and especially President Enrique Pena Nieto are extremely unpopular due to a cascade of scandals. As of February, Pena Nieto’s approval stood at 17%. In this context, demonstrations are also likely to expand in frequency and size, particularly in the run-up to midterm elections in the state of Mexico and the general elections in 2018.
Of course, these signposts of protest likelihood are by no means the only ones. Many multinationals operating in Latin America have found that out the hard way when their natural resource extraction projects ran into opposition from local communities.
Will the Protests Get Violent?
The roots of protest violence are still widely debated, but we do know that they are related to issues such as: the seriousness of the grievances, the severity of the government’s security response, the willingness of authorities to compromise, as well as the internal structure of the protesting groups. Taking this into consideration, countries in Latin America broadly have an average or higher than average probability of violent demonstrations. Not only are residents in several countries dealing with drastically worsening crime risk and economic wellbeing, but their governments are less likely to properly address grievances, and more likely to respond to protests in a heavy-handed way.
What to Watch For in 2017
Whereas business leaders used to view Latin America as a battleground between free-market and left-wing regimes, recent unrest across the region shows that there is a lot more to understanding how safe and business-friendly an operating environment really is. Based on our analysis, here are just a few issues that you should be tracking as a starting point for assessing protest risk this year:
- How will commodity prices affect economic growth in Peru, Chile, and Bolivia?
- To what extent can Brazil’s economy bounce back from its corruption scandal and worst-ever recession?
- As President Pena Nieto fails to curb violent crime and continues to be seen as weak on relations with the U.S., will Mexicans take to the streets to rally for populist leader Andres Manuel Lopez Obrador?
- Will Venezuelans demanding an end to the country’s economic freefall be met with a show of force by the government?
- How will Argentinians mobilize and organize against President Mauricio Macri’s economic policies ahead of the October legislative elections?
Whether executives are considering a short trip to Mexico or implementing an expansion strategy for all Latin America, effective risk management requires consistent and committed assessments of protest risk. In the next installment, I’ll focus on protests in the Middle East and North Africa (MENA) region, where large-scale demonstrations have had the most recent transformational impact.