Latin American Presidents and International Capital

Although events in Argentina have grabbed international headlines and in Venezuela, the president of the Assembly (and one of his bodyguards) have become embroiled in allegations about a narco-trafficking ring, I have decided to return to something I discussed last year (and once again engage in some self-promotion – sorry).

As I told you in that post, with two colleagues, Christian Arnold and Nina Wiesehomeier, I have been working on a project that is using the annual addresses of Latin American presidents as data in order to derive some comparative understanding of executive politics across the region.

Every year, Latin American presidents make a speech to the national assembly (akin to the US State-of-the-Address). This is an institutionalized event, where the president is constitutionally obliged to make this speech at an appointed time each year and report on the initiatives of the executive over the last year, and the proposed agenda for the year ahead. We have been interested in who the president is primarily speaking to when they make these speeches, and we suggest there are two audiences: the legislature and the international economy.

We have collected speeches for 68 presidents across thirteen Latin American countries between the years 1980 and 2014 and have employed computational models, based on the scaling algorithm Wordfish, to scale these speeches (relative to each other within each country).[1] The first part our project was interested in the institutional incentives the president may have to move in the policy space, and our research has indicated that this seems to be largely driven by the legislative support of the president and their executive power.

Right now, we have been exploring the effect of international market pressures on the positions that presidents take. Latin American countries face significant pressures from international capital, be it in the form of the IMF, banks or bonds and presidents have switched their policy orientation in response to exchange market crises.[2] We are interested in the effect that international capital has on the behavior of the president. Specifically, does the president change their revealed policy stance on economic policy in response to the preferences of capital? And if so, what effect does this have?

To explore this, we have developed an automated method of extracting the portion of the speech where the president discusses all matters related to the economy. We then re-scale this economic dimension only, with the method I briefly described above. This gives us a reasonable approximation of the economic policy position of each Latin American president (in our thirteen countries) in a given year. Below, you can see two graphs combining the general overall position of presidents, and their economic position, in two different countries. Unsurprisingly, in Venezuela, the economic position is closely related to the overall position. This is what we might expect, given the main political cleavage in Venezuela at the moment probably runs along an economic (redistributive/statist vs. market) dimension. In Colombia, the economic position is less important for the overall position of presidents. Again, this is what we might expect, given the importance of security-related issues for politics in Colombia. compare_econ_ven compare_econ_col

With these measures, we have done some basic analyses to see what shapes the economic positions that presidents assume. Unsurprisingly, presidents in Latin America are highly responsive to international capital. When under IMF programs, presidents assume a position on the right. The higher the level of bank or bond debt, the further right the political position (although this effect is greater for bank debt). And when there is a currency crisis, presidents move to the right, and do so sharply. We interpret all of this as a signaling game, whereby presidents will adopt economic positions favorable to capital when they are in desperate need of short-term inflows of finance (crises); or when they believe doing so might create some space (from banks and the IMF) to pursue policies more amenable to their electorate.

Of course, all of this is all very tentative. Any thoughts or suggestions would be very welcome!

[1] More detail on Wordfish can be found here.

[2] Some excellent recent research has explored this. See Stephen B. Kaplan 2013. Globalization and Austerity Politics in Latin America. Cambridge University Press or Daniela Campello 2015. The Politics of Market Discipline in Latin America: Globalization and Democracy. Cambridge University Press or Erik Wibbels. 2006. “Dependency Revisited: International Markets, Business Cycles and Social Spending in the Developing World,” International Organization (Spring 2006): 433-69.



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