Just as Latin America begins to emerge from a recession, new challenges have emerged. Political populism is on the rise, as the ruling class appears increasingly out of touch with voters and an anti-establishment fervor sweeps the region. Free trade is under threat, with the United States imposing tariffs on steel and aluminum imports and stirring doubts about the future of NAFTA. And the so-called Fourth Industrial Revolution, or 4IR, is disrupting everything from consumer behavior to global employment, forcing Latin America’s economies to address the widening mismatch between an under-skilled workforce and the training required in an increasingly technological world.

The World Economic Forum on Latin America convened in São Paulo earlier this month under the theme “Latin America at a Turning Point: Shaping the New Narrative” and brought together more than 700 regional and global leaders, including Brazilian President Michel Temer and Finance Minister Henrique Meirelles, Panamanian Vice President Isabel Saint Malo, Mexican Economy Minister Ildefonso Guajardo and the Inter-American Development Bank (IDB) President Luis Alberto Moreno.

Populism rising

Heightened political risk topped the agenda. Presidential elections are scheduled to take place in Paraguay on April 22, Colombia on May 27, Mexico on July 1 and Brazil on October 7. In just six months, the region’s two largest economies could undergo radical changes, with a left-wing candidate, Andrés Manuel López Obrador, also known as AMLO, leading the polls in Mexico and an extreme-right politician, Jair Bolsonaro, leading other contenders in Brazil.

Both AMLO and Bolsonaro make similar promises – fight corruption, respect the rule of law and guarantee safety for all citizens – and they have tapped into voter indignation, as corruption and weakened public institutions in recent years have undermined decades of reforms and democratic rule in Latin America.

“People are disillusioned with democracy because they’ve seen how democracy can empower the worst rulers,” said Denise Dresser, an author and political science professor at the Instituto Tecnológico Autónomo de México (ITAM).

For Ricardo Villela Marino, the head of Itaú Unibanco’s operations in Latin America outside Brazil, voters in the region are questioning democratic institutions and rejecting traditional politicians. “This is a moment of major turbulence,” Marino said. “The saving grace is that we are in a context of global growth of more than 4%.”

Threats to free trade

But the context of global economic growth could come under threat as US President Donald Trump pursues his “America First” policies and threatens to wage trade wars with partners both near and far. Trump notably called NAFTA a “bad deal for Americans” during the campaign and demanded the renegotiation of the free-trade agreement. The talks started in August.

Guajardo admitted that Mexico and Canada must allow for the possibility that the United States could leave NAFTA, but he added that coming to an agreement by the end of April was “difficult but not impossible.”

As the Trump administration slapped import tariffs of 25% on steel and 10% on aluminum, Temer said Brazil would join forces with other nations and take the matter to the World Trade Organization (WTO) if the different side could not reach a “quick and friendly solution.”

Trump exempted products from Brazil, Argentina, the European Union, Australia and South Korea from the tariffs on March 22, but he gave those countries until May 1 to “negotiate satisfactory alternative means” to offset what his administration considers to be threats to national security from importing high levels of steel and other metals.

A post-manufacturing world

Beyond the threats of political extremism and protectionism, participants in the World Economic Forum on Latin America also discussed technological disruptions in a post-manufacturing world.

“It’s clear now that the lines are no longer dividing the left and the right, but those who hold on to the past and those who are working to get ready for the future,” said Klaus Schwab, the founder and executive chairman of the World Economic Forum.

The unanimous opinion said Latin America is behind on implementing the reforms needed to adapt economies to the new realities of automation and artificial intelligence. The region is particularly deficient when it comes to providing the necessary skills for people to adapt to a fast-changing labor market, said Ángel Melguizo, the head of the OECD’s Latin American and Caribbean unit.

Two out of three companies cannot find skilled workers for open positions, according to a survey from Manpower Latin America and the OECD Development Center.

“The skill gap is huge, and we find it in all sectors, from manufacturing to extractive industries and services, which is the one that we expect to take the lead,” Melguizo said. “Among all the policies that are necessary for Latin America to adapt to the post-manufacturing world, countries need to focus on skills, skills, skills.” LF