Across Latin America and the Caribbean, voters worried about rising crime have elected populists who promise to impose order and security in their countries. Some observers have read this development as a sign of a regional swing to the right, but there is little evidence of a durable shift in that direction. Rather than ideology, what seems to be driving voters is a frustration with traditional politicians’ failure to solve everyday problems. In the latest electoral cycle, voters rebelled against the breakdown of law and order; in the next, they may push back on rising costs and the region’s persistent social and economic inequalities.

Latin American and Caribbean governments, already operating with limited fiscal space, must now grapple with two external shocks: the prolonged closure of the Strait of Hormuz and this year’s El Niño, a warming of sea surface temperatures in the Pacific Ocean that upends normal weather patterns. Both are fueling inflation, disrupting supply chains, and forcing cash-strapped, indebted governments to make hard choices.

For voters across the region, these twin crises have brought the economy back to center stage. Leaders such as Chilean President José Antonio Kast and Ecuadorian President Daniel Noboa, who won office on security-focused platforms, have seen their public standing plummet as economic woes deepen. Argentine President Javier Milei, who in 2023 ran an outsider campaign against economic mismanagement, faces an uphill 2027 reelection bid as Argentines struggle with day-to-day economic challenges despite the country’s macroeconomic improvements.

All this sets the stage for more political swings in the coming years, as climate change and geopolitical shifts generate shocks at a pace difficult for any government to contend with. That turbulence could fuel further polarization and reward populists whose promised solutions are unlikely to fix the structural flaws holding back growth.

But chaos is not inevitable. The region has the resources to adapt to a more unstable environment. Its critical minerals, abundant renewable energy, and strong agricultural sector are exactly what the world needs for food security, advanced technology, and the energy transition. To harness those resources, however, the region will have to overcome profound infrastructure deficits, strengthen the rule of law, and accelerate regional integration. Multilateral development banks and outside actors, such as the United States and Europe, can help by bringing in private investment for shared infrastructure, promoting intraregional trade and regulatory harmonization, and creating value chains where economic benefits are broadly shared. The alternative is a region that lurches from crisis to crisis, and from one extreme to another.

SHOCK WAVES FROM HORMUZ

Disruptions to energy and fertilizer markets stemming from the prolonged effective closure of the strait have already reshaped Latin American politics. In March, Kast saw his approval rating drop 14 points after he declined to issue consumer subsidies to soften the blow of rising energy prices. In April, Peruvians, upset by the sharpest monthly inflation spike in the country in more than 30 years, showed how economic anxiety can upend politics and open the door to populists. The leftist Roberto Sánchez unexpectedly surged in the first round of presidential elections........

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