South America faces political disaster as well as economic crisis due to the shocks from the coronavirus, after a turbulent year of protests across the continent. 

Ten of South America’s 12 countries are rated ‘high’ or ‘extreme’ risks in the Civil Unrest Index produced by risk consultancy Verisk Maplecroft. This includes the region’s economic success story, Chile, which was rated an ‘extreme risk’ following protests in 2019 that included significant damage to the local assets of foreign investors such as Walmart and Enel. 

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However, the enforcement of social distancing has temporarily halted the civil unrest in Latin America, according to Verisk Maplecroft.

What happens after these lockdown measures are lifted depends on the effectiveness of governments’ responses to the outbreak. If the rate of infection drops, then political parties may regain the public’s trust and support. If the situation worsens, economic and healthcare systems become at risk of collapse, which would be likely to reignite social unrest once social distancing measures are lifted. 

Foreign investors will be wary, as the increased risk of political instability is a cause of uncertainty and reputational risk for investors. 

Venezuela is particularly at risk of social breakdown, having performed worst in the Civil Unrest Index. The country ranked 176th of 195 countries in its readiness to deal with a pandemic in a Global Health Security Index in October 2019.

As governments declared a ‘state of exception’ – whereby they limit civil liberties such as freedom of movement and assembly for varying periods of time – most of the continent’s 15 scheduled elections in 2020 are likely to be disrupted or postponed. These changes to the electoral timeline are an “erosion of the democratic process and threaten stronger backlash once the emergency measures are lifted”, according to Verisk Maplecroft. 

Bolivia is also highly volatile after its 2019 election was declared fraudulent and former president Evo Morales was exiled. The next vote, scheduled for May 3, 2020, has been postponed without a new date.

As well as political upheaval, South American economies are reeling from the twin shocks of the coronavirus and a plunge in global oil prices, with budgets currently ill-equipped to launch a Western-style bailout. South American governments face many challenges in the near term and must calibrate their responses very carefully.