Summary

With the decline in commodity prices, Latin America faces the possibility of a downward political and economic cycle. During the last fifteen years, as the region has enjoyed economic prosperity with the rise of commodity prices on the international market, left/centre governments spent liberally on the expansion of social policy initiatives. These measures spread the wealth among all socio-economic groups in ways that have not occurred in the past. Poverty declined and there has even been a reduction in the region’s high level of inequality. However, these countries now faces a new critical juncture as left/centre governments face corruption scandals, loss of political power, widespread protests, and the rise of the political right. The commodity boom papered over both institutional inadequacies and hard redistributive decisions. Governments spread the wealth but did not substantially redistribute it, ensuring that middle and upper classes retained an inordinate share of state largesse. Faced with economic downturns and declining state revenues, governments will now have to make hard decisions about the allocation of diminishing state resources. This reality is already giving rise to an increased level of political polarization and contestation, a development that, in combination with the economic downturn itself, may worsen prospects for continued progress toward social inclusion.

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