Latin America’s New Left Meets Davos

Welcome back to Foreign Policy’s Latin America Brief.

The highlights this week: Latin American officials share proposals for taxation and green energy at the World Economic Forum, Latin American tech developers become a hot commodity in Silicon Valley, and Shakira’s diss track goes viral.

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The annual meeting of the World Economic Forum in Davos, Switzerland, may seem a strange destination for delegations from Latin America’s newly inaugurated leftist governments. But the slow-growing region could benefit from foreign investment, and the event—where billionaires comfortably mingle—is a chance to court financing for their ambitious policy plans.

Top officials from Colombia and Brazil were among those who made the Alpine trip, with Colombian President Gustavo Petro, once a guerrilla in subtropical Bogotá, bundling up in a plaid scarf to greet the Swiss snow. The center-right presidents of Ecuador and Costa Rica were also in attendance.

Petro’s speech at a political leaders’ panel on Wednesday—delivered in a tone that seemed more calibrated for a convention of leftists than bankers—stressed his desire to green Colombia’s economic model. Meanwhile, in an interview with Reuters, Colombian Finance Minister José Antonio Ocampo announced that his country aims to rally Latin American governments to agree to a corporate tax deal that is more far-reaching than one brokered in 2021 by the Organization for Economic Cooperation and Development (OECD).

In the OECD deal, 136 countries and jurisdictions committed to taxing multinational companies at least 15 percent in countries where they earned profits. This standard is intended to prevent firms from shopping for low tax havens for their headquarters. Signatories said they would implement the agreement this year, though the U.S. Congress has not approved legislation to do so. At Davos, Ocampo called the OECD deal “too limited,” saying it applied to only very large multinational firms. He wants Latin American finance ministers to meet to discuss the topic in July.

Ocampo and Petro have unique political capital to push such a plan. The two successfully shepherded a tax overhaul that hiked levies on the rich through Colombia’s Congress last November, just three months into Petro’s presidency. The administration of Chilean President Gabriel Boric, inaugurated in March 2022, tried to make a similar reform in its early months without success. Boric’s domestic approval rating has now sunk to 25 percent while Petro’s remains at 48 percent, according to recent polls.

Ocampo could draw momentum from Brazil’s new Luiz Inácio Lula da Silva administration, which aims to take advantage of its 51 percent approval rating—high, for regional standards—by passing a tax reform in its National Congress in the first half of this year. Lula has said Brazilians earning under roughly $965 per month should no longer have to pay income taxes, while the rich will be taxed more, though he did not say by how much.

Brazil’s team in Davos has focused its public messaging on attracting funding for green projects. Environment Minister Marina Silva reiterated the Lula administration’s commitment to reaching net-zero deforestation by 2030, and her presence at the event suggests that climate concerns will play a key role in Lula’s policymaking. Finance Minister Fernando Haddad, meanwhile, has touted Latin America’s widespread use of clean energy to companies seeking to guarantee to consumers that their products are made with renewable energy. More than 25 percent of the region’s primary energy supply comes from renewables, twice the global average, according to the Inter-American Development Bank.

Speaking on separate panels, both Haddad and Felipe Bayón, president of Colombian state oil company Ecopetrol, advocated for improving and better integrating power transmission lines across Latin America. Ecuadorian President Guillermo Lasso and Costa Rican President Rodrigo Chaves Robles also talked up the clean energy potential in their countries and said they were close to finalizing a bilateral trade deal.

Latin American leaders’ optimism about tax proposals and green infrastructure at Davos was tempered by serious concern about the region’s social needs. The same panel that featured Bayón included Ana Cecilia Gervasi, the foreign minister of Peru, where ongoing anti-government protests have slowed output in the copper sector—itself an important component of green technology. Gervasi read somberly from a prepared statement that said Peru’s government was committed to addressing the inequality behind the unrest and would investigate those responsible for deaths at protests, where more than 50 people have died so far. Human rights groups say some protesters were killed by security forces.

The panel with Gervasi routinely circled back to the same topic: the need for a better social contract in the region.

For politics to work better, Brazilian television presenter and panelist Luciano Huck said, “we can only cure that if people believe they can have a better life again.”

Monday, Jan. 23, to Tuesday, Jan. 24: Brazilian President Luiz Inácio Lula da Silva visits Argentina.

Tuesday, Jan. 24: Argentina hosts a conference of the Community of Latin American and Caribbean States.

Tuesday, Jan. 24: The U.N. Security Council discusses situation in Haiti.

Peru’s climate grievances. Peru has experienced anti-government protests since former President Pedro Castillo was ousted last December. But a less proximate factor behind the unrest could be climate change-related economic hardship.

Lima-based reporter Mitra Taj noticed overlaps in maps of regions hit by severe drought last year and regions where protesters have blockaded roads in recent weeks. “[I]t doesn’t seem far-fetched to think that the drought, along with the fertilizer crisis last year, helped deepen discontent in rural areas,” she tweeted.

Regional inflation figures also appear to overlap with the most active protest locations, Economist Intelligence Unit analyst Nicolás Saldías pointed out. Though the weaknesses of Peru’s political system are in the headlines, longer-term insecurities related to food, cost of living, and climate appear to underlie the discontent.

Coup.doc. In Brazil, investigators searching the house of former President Jair Bolsonaro’s justice minister as part of a probe into the Jan. 8 Brasília capitol building riots uncovered a draft executive decree that could have allowed for a reversal of the result of the 2022 presidential election. Bolsonaro lost the contest to Lula.

The decree would have created a committee including eight military officials to intervene in Brazil’s electoral authority, which certifies results. The document will be used in investigations, which as of last Friday also include social media content posted by Bolsonaro himself.

Bolsonaro remains in Florida as of late Thursday and has denied involvement in the violence. On Monday, Brazil’s public prosecutor’s office said it had charged 39 people with offenses related to the riot, though it did not release their identities.

A woman takes a photo of graffiti of a Casio watch with the line “tengo un piquete cabron” from Shakira’s diss track about her ex-husband, Gerard Piqué, in Valencia, Spain, on Jan. 16.Rober Solsona/Europa Press via Getty Images

The economics of Shakira. Shakira’s new diss tape riffing on her relationship with her ex-husband, former Spanish soccer player Gerard Piqué, quickly became YouTube’s most-streamed new Latin track in history after it was released last week.

Many fans have observed that it’s the insults more than the musicality that make the song shine, with verses like “you traded a Rolex for a Casio” that roll off the tongue. (The latter, lower-cost watch brand—Shakira’s swipe at Piqué’s rumored new girlfriend, Clara Chia Martí—has experienced a boom in online searches in recent days.)

Another lyric that has delighted fans is: “Women don’t cry anymore; women invoice.” What could be interpreted as a message of financial empowerment also prompted reflections about persistent economic equality between men and women. In Latin America, “The Shakiras with a chance to buy Ferraris and Rolexes are few,” former Argentine economic ministry official Mercedes d’Alessandro wrote in Página 12. Of the 91 billionaires in the region, only 10 are women, she wrote citing Oxfam data. (Shakira is not thought to be one of them.)

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Co-working space WeWork is seen in Mexico City on Sept. 13, 2022.CLAUDIO CRUZ/AFP via Getty Images

Forecasts of slow worldwide growth in 2023 and a potential recession in the United States have had big repercussions for Latin America’s tech start-up sector, which had been enjoying a dramatic funding boom as recently as 2021. That year, the sector received its highest level of investment in history.

By late last year, foreign and domestic funders were already cutting back on the amount of venture capital they gave to regional start-ups. Now, as many U.S. tech firms lay off staff to cut costs, they are instead hiring Latin America-based programmers whom they can pay lower wages. That has exacerbated a shortage of senior developers at Latin America-based start-ups, Rest of World reported this week. Lower U.S. salaries are still higher than those paid by many Latin American start-ups.

Since the beginning of the pandemic, when remote work became common, U.S. firms have hired more remote tech workers based in Latin America. The similarity in time zones and lower average salaries often made Latin American workers attractive compared to their U.S. counterparts.

Now, as this hiring trend intensifies, some Latin American start-ups are trying to lure the senior developers still on the job market with perks like stock options, which are less common in Latin American start-ups than in their Silicon Valley equivalents, Rest of World reported. Meanwhile, some U.S. firms have moved to hiring Latin American developers as full employees rather than contractors.

To survive the drying up of venture capital funding, Latin American start-ups are also taking out debt with conventional banks rather than relying on angel and early-stage private investors, Bloomberg reported. Many Latin American start-ups are also carrying out layoffs of their own.

Still, a handful of the region’s highest-valued start-ups are continuing their expansion plans despite rough economic waters. Brazilian rental and home sale platform QuintoAndar began its expansion to Mexico last year with research about differences in the two countries’ housing markets, while Chilean food company NotCo—which uses artificial intelligence to imitate the taste of meat—is moving ahead with partnerships with the Kraft Heinz Company, Starbucks, and Burger King to create plant-based versions of popular food items.