Whats Going On?
Chile. A group of teenage boys and girls jump over metro barriers to protest fare spikes. They are quickly joined by university students, worker unions and opposers of President Piñera’s government in mounting social unrest. Fast forward a couple of months, and after the militarisation of some parts of Chile’s main cities, police repression of varying brutality, widespread vandalism, the promise of constitutional reform and a call for a new social (and more inclusive) contract, the crisis seems as hot as ever, with no end in sight.
Bolivia. Election night, the official transmission of the vote recount suffers a brief interruption, and on its return, an apparent minor tendency change spiralled into all-out fraud allegations. In a couple of days, and after a couple dozen deaths and hundreds injured, President Morales is in exile in Mexico, the country has a new transitional president and new elections are to be held, with doubts to what Morales’ role will (be allowed to) be.
Perú. A constitutional deadlock between the executive and the legislative regarding the appointment of supreme court judges results in mutual accusations of abuse of power, with the first dissolving the congress, and the second naming a new executive. Astonishingly, few mourned the exiting congressmen, and new legislative elections are to be held in 01/2020.
Ecuador. President Moreno, in the midst of an austerity package backed by the IMF, slashed oil subsidies in the country. This sparked a weeks long crisis where transport unions, cab drivers, and the indigenous movement revolted in a march on the main cities, a virtual occupation, and (again) promises of a new constitution and a new social contract. Negotiations ensured that the subsidies would continue, and peace was achieved, yet doubts of the country’s future macro stability remain.
Meanwhile, Nicaragua continues its now two years of unrest after the governments’ social security reform, Venezuela approaches failed state status, Argentina borders (yet another) sovereign debt default, Colombia mourns its first death amidst protests, Mexico all but cedes territorial control of its northern states to drug cartels, and the Uruguayans drink mate and elect its first right wing politician in 20 years.
So, like the title of this piece says, and Linda Perry sang in the 90’s, What’s Going On?
Andrés Malamud, one of the keenest analysts of the region says this is just “Business as Usual” for such a traditionally unstable region as Latin America. In fairness, the main claims in this piece mirrors what he and other analysts believe to be true for the region. The Federal Reserve’ interest rate and the price of commodities have both, they say, reached critical levels for the region: while expensive commodities generate an influx of hard currency to LatAm countries, low interest rates guarantee that they stay here and fuel economic growth. With the US-China trade war which drives China’s growth (and commodity prices) down, and strong economic growth from the US (and higher interest rates), this trend seems likely to persist.
What this means is the end of the commodity boom for the region. Private estimates believe that between the years 2000–2013 commerce between LatAm and China rose from USD 12 billion to USD 275 billion. States and politicians on the left and on the right seized the moment, passing fiscal expansive reforms, lowering inequality and guaranteeing reelection. Most of those politicians are the same ones who lost power in the past couple of years, and the “Pink Wave” which flooded the region after the fiscally conservative 1990’s seems to be receding in the face of a new turn to the right. In reality, economic woes punished whoever happened to be incumbent before the boom started, and is punishing the current incumbents now that the boom is gone.
How can this impact platform economies such as Glovo? Obviously, most of this is at worst irresponsible futurology, and educated guess at best. But there are some lessons of the past that feed the analysis.
- Lower than usual growth rates and unfulfilled promises of material well being will be the new normal and the breeding ground for unrest for years to come. The new middle class birthed to the heat of the commodities boom will feel their new hard earned status challenged, and will react, often violently, to any perceived threat.
- Consumption will plateau. Again, economic stagnation will limit perspectives of growth, and will probably result in cannibalization of the same user base, resulting in a deepening of the zero sum game we’ve been seeing up until now, or a rush to displace phone-based delivery.
- Higher demand for platform work. Dwindling economic opportunities vis a vis a plateauing user base will probably result in more people pushing for less space.
- Migration. Both internal and foreign migration might increase, and platforms like Glovo are the usual first barrier of containment of recent migrants.
Does this spell doom for the future of Platform Economy in Latin America? Not necessarily. The region is still vastly richer than what it was in the 90’s as prices are still twice as high as what they were before the boom. As the passage from growth based models leaves way to profitability based models, the dependence of foreign exogenous (venture capital) investment vs. local endogenous (profit based) investment becomes larger. Moreover, the role of these investments in the development of local tech hubs that support the transition from commodity-export based economies to a high value services one, will be even more central. The value of platform work as a social containment net, not only of migrants but of the threatened middle classes, might be crucial for the success of our policy strategy. It is an opportunity for the platform economy to show how it can not only work as a professional tool for professional couriers, but as a complement of the social security safety net of welfare states. It just might be the key to our social license to operate: a gig in the platform economy might be a way of limiting the impact of economic downturns, and an excellent tool to target skill and education development programmes to affected demographics. Spanish speaking countries have a saying: “A río revuelto, ganancia de pescadores” — “A turbulent river is a fisheman’s boon”. I guess it’s a matter (again) of learning how to fish.
