In Mexico, Andrés Manuel López Obrador (AMLO)’s frequent condemnation of the conservative elite and neoliberal technocrats echoed in his daily morning conferences during his six years as president. He mobilized voters mainly by appealing to popular resentment, accusing private enterprises and autonomous institutions (like the judiciary) of obstructing the will of the people. In Argentina, Javier Milei channels similar resentment without the left-wing undertones, railing against “la casta”—the political class he blames for Argentina’s decline—and promising to “dynamite” existing institutions. The politics of Argentina and Mexico seem to have diverged ideologically but, at their core, follow from a similar set of conditions. This becomes evident in their populist experience. Both are shaped by the political and economic legacies of a period of Keynesian neoliberalism and macroprudential reform in Latin America, spearheaded by Argentina’s Carlos Menem and Mexico’s Carlos Salinas in the early 2000s. Over a decade, these leaders, along with the international community, transformed material conditions in their countries and thus brought massive sociopolitical effects that continue to resound today. As a result, Argentina and Mexico are important embodiments of the relationship between neoliberalism and modern day populism. More broadly, they exemplify how Latin America’s economic history continues to hinder its political progress.
The 1980s marked a historical shift in Latin American trade policy that integrated many of the region’s markets into the global economy and, as a result, permanently altered the political, social, and economic composition of the region. Through the 1970s, populist and autocratic leaders ran massive fiscal deficits funded by foreign borrowing to uphold welfare states and import substitution models. Borrowing was generally dollar-denominated, as US commercial banks, stuffed with dollars from a boom in oil-exporting countries, were especially keen to give out loans with cheap interest rates. When the US federal reserve hiked up interest rates—protocol for controlling inflation—borrowing countries found themselves unable to pay off the debt and defaulted. Starting with Mexico, 16 Latin American countries rescheduled their debt, with many entering a state of deep recession. The debt crisis plagued the region with destructive hyperinflation, unemployment, currency depreciation, and falls in real incomes.
In the 1980s, the International Monetary Fund (IMF) and American central and commercial banks collaborated to restructure these debts under the condition that countries undergo fiscal reforms and eliminate budget deficits, partially by embracing open trade and dollarization. However, creditors and multilateral institutions were fragmented in their response to the crisis and thus unable to create a coordinated plan for debt relief. At the same time, debtor governments oftentimes exacerbated the problem by cutting spending on infrastructure, health, and education instead of reducing unproductive subsidies and state-owned enterprises. As a result, poor crisis management in LDCs (so-called less-developed countries) meant debt renegotiations lasted an entire decade at a grave cost to the general population, earning this period the title the “lost decade.”
When a coordinated plan for crisis management was finally developed, creditor confidence was gained through strict frameworks that required these countries’ integration into global trade and manufacturing, notably through Structural Adjustment Programs (SAPs). SAPs were part of greater policy packages, originating primarily in Washington, that were meticulously planned and based on a neoliberal, free market framework of controlling inflation, balancing countries’ current account deficits (their balance sheet between imports and exports), and developing the private sector. Through various stages of deregulation and detaxation, economies opened up, foreign investment surged, industry flourished, and competition was stronger than ever before. Toward the end of the decade, most Latin American countries had successfully embarked on political and economic reform that prepared them to borrow and trade globally.
At the political level, populists around the region were replaced with a new class of democratically elected, technocratic, elite-educated political experts who became enmeshed in political and economic institutions as instruments to implement liberalizing reforms. These democratically elected and internationally endorsed liberal leaders cooperated with creditors and multilaterals to propel their countries’ integration into the global economy. Notable examples include Salinas in Mexico and Menem in Argentina, whose market-oriented programs reflected the Washington Consensus agenda promoted by the IMF and the United States. Across the region, this kind of top-down policy rollout proved successful in bringing significant economic benefits: Compared to the previous decade, the region’s combined GDP growth rate doubled, and the fiscal deficit and consumer price indices declined significantly. However, moving forward several decades, their limitations have become increasingly evident.
Despite the positive macroeconomic legacy of this new policy mix, a closer look at the effects on social and regional dimensions reveal some overlooked issues. Gains from liberalization were far from universal: Many citizens, especially those in regions that remained relatively unindustrialized (like land-locked or mountainous areas), were susceptible to increased social inequality, informality, and job and wage insecurity. This has been attributed primarily to two factors: Most of the industries protected in trade relied on unskilled labor, and yet China and other low-skilled worker economies entered the global market around the same time and gained comparative advantage in this field. This, coupled with the introduction of manufacturing technology through the open market, meant a drastic reduction in formal employment for unskilled workers. With no alternative sources of formal employment put into place, poorly enacted fiscal austerity also meant less social safety nets for these countries’ most vulnerable. Crucially, this meant that the communities that did not belong to the industrial areas, like those in southern Mexico and northwest Argentina, were excluded from the globalized economy. There, liberal policy packages fell short at reducing poverty.
While the North American Free Trade Agreement (NAFTA), a key part of this liberalization plan in Mexico, contributed to job and wage growth in certain urban and export-oriented regions, it had the disastrous effect of increasing competition in the agricultural industry. Combined with the dismantling of the Ejido sector, which removed government obligations to provide land to the peasant class, rural agrarian producers were left to grapple with decreased profits and a lack of social safety nets. Then came a severe recession called the “Tequila Crisis”—a strong, sudden jolt on the economy resembling a shot of tequila. It erupted when huge short-term foreign investment and an exchange rate policy that kept the peso artificially strong severely overvalued the currency, triggering a crash when investors realized this and suddenly pulled out. In Argentina, firms that had previously relied on formal labor substituted with informal workers, which allowed them to flout regulations and evade taxes. The country also found itself in a similar situation to the Tequila Crisis as the decision to peg the peso to the dollar triggered a run on the banks when people realized there were not enough dollars to back up deposits. The subsequent crash hiked unemployment to 25 percent of the workforce and poverty rates to a record 55 percent of the population. The currency devaluation and unemployment spikes marking both these crises disproportionately impacted the poor and workers in the informal sector, as they relied almost entirely on cash earnings and lacked savings or access to credit. These severe changes grew confusion and resentment among an already vulnerable majority, turning the tides against the technocratic elite.
Materially, the lives of a large part of the population either worsened or remained unchanged as subsequent crises and uneven industrial development excluded rural, poor, and informal workers from the new economic order. Furthermore, the rise of the technocrat during this period occurred hand in hand with an expansion of the industrial elite class and rural and export oligarchies. Simultaneously, weak civil institutions at the local level gave rise to new channels for bureaucratic corruption. Arguably, this meant that the public associated the creation of these new local elites with rising inequality, which in turn tainted the image of technocrats and harbored distrust in institutions. Furthermore, increased exposure to others’ living standards heightened perceptions of inequality, as citizens became increasingly aware of the discontinuity between the promises of modernization, the benefits to some parts of the population, and their own conditions. Public view of modernization proved grave: In a survey across 12 Latin American countries, most perceived a decline in quality of life over the generations and shared a poor outlook for the future on this front. Despite bringing irrefutable benefits to the region’s macroeconomic health, the policy failures that blemished post-debt crisis reform bred the popular anti-establishment sentiment that continues to shape political outcomes in the region.
Over the decades, Latin America has witnessed the polarizing effects of such popular frustrations. The region experiences uniquely intense and frequent populist policy cycles, where populist spending and redistributive policies result in economic collapses, only to be repeated in a later regime claiming to expel the previous establishment. This trend has only intensified with time. The cycle endures because each populist wave leaves institutions weaker and expectations higher, creating the very disillusionment that fuels the next regime. Furthermore, popular frustrations with the moderate realpolitik of the past decades are evident in another concerning trend—growing tendencies to vote for the extreme sides of the political spectrum. Instead of seeing civic participation translate into more equitable policy over the past decades, the region has cycled through polarization, institutional decay, and radicalization.
We see this in how Mexico recently rejected the centrist, business-oriented realpolitik that dominated the past few decades in favor of AMLO’s leftist populism. His crusade against the status quo has permanently altered the makeup of the government, most notably through expensive and unprofitable state-led enterprises like the “Tren Maya” and the remaking of the judiciary into democratically elected judges, which are easier to manipulate and appoint by the party in power. He has built a support base largely among the rural poor, informal urban workers, and older citizens nostalgic for a more interventionist state and stronger redistribution. His constituencies have long felt marginalized by the neoliberal turn and weak social safety nets, and they see AMLO’s political ideology as a vehicle for restoring economic protection and inclusion.
Argentina offers a unique, but similar, case of populism. Javier Milei, nearing his second year as president, positions himself as a libertarian promoting austerity, deregulation, shrinking of the state, and re-building the trust of foreign creditors. By attacking the past Argentinian political doctrine of “Peronismo,” an anticapitalist, nationalist populism that tainted previous governments, Milei rose to power and branded this political establishment as “la casta politica.” During his campaign, he argued that la casta had risen to power in order to promote their own interests and that the government needs to be remade entirely and reduced to preserve the freedom of the people. He has imposed severe cuts on government ministries and launched a fiscal austerity plan that has devastated pensions, subsidies, and wages while hindering consumption and employment. Yet, Milei’s populism is also special because it does not exist in the left-right political spectrum—its core doctrine is one of libertarianism, but even that does not define it, as it fails to explain his authoritarian character. Milei’s is a movement driven almost entirely by the same anti-establishment, personalist, and plebiscitary appeal that defines AMLO, without the constraints of a consistent political doctrine.
For both Milei and AMLO, the core of their popularity is not the particular direction in which they claim to lead the country, but rather the reactionary substance behind their populism: They frame themselves as protectors of the people battling a corrupt elite by rejecting traditional parties and institutions. Their political success is a symptom of the deep-rooted inequalities and institutional weaknesses across Latin America, which have left huge parts of the population frustrated with economic liberalization and technocratic governance. Furthermore, populists like Milei and AMLO are prone to executive aggrandizement, tyranny, and democratic erosion, and often neglect fiscal discipline and defy technocrats. They are proof of the concerning region-wide trend of populist cycles and increasingly radical political views among the public, which continues to hinder real political progress. The radical regime changes that have brought their success are driven by frustration and idealism, and they disrupt policy continuity, weaken institutions, and open up space for corruption and bureaucratic inefficiency, perpetuating populist cycles. They appeal to popular discontent while eroding institutions and undermining democracy, misleading the masses into thinking it is for their best interest. Broadly, they solidify Latin America as a testament to the fact that when economic growth is not made universally visible in things like infrastructure, wage growth, and reductions in informality, democracy falls short of its utilitarian purpose and instead becomes a vehicle for manipulation and tyranny.