U.S.-Latin American Relations: From Here to Where?

Latin America is a region transformed. In the past 10 years, it has become confident, independent minded, and economically sound. The region, particularly the commodity-exporting nations of South America, is charting a new course, perhaps less beholden to the United States and more willing to explore diverse relationships. Brazil is leading the way as Latin America’s largest economy by far, but others, such as Colombia, Chile, and Peru, are adding considerable economic weight of their own. Mexico and Central America, so dependent for their own economic well-being on the sluggish U.S. economy and without commodities to export to China, are recovering more slowly. Nonetheless, the region as a whole is economically strong and, along with Asia, is pulling the global economy out of the crisis that the United States and Europe began. This marks a historic shift: Where once the region was known for its contributions to global economic difficulties—the debt crisis of the 1980s and the peso and so-called tequila crises of the 1990s—Latin America is now an engine of economic recovery. Prospects for the region are bright.

At the same time, the United States has arguably turned inward in most areas except for direct engagement in the Middle East and Central Asia. From September 11, 2001, until today, Washington has been obsessed with domestic and foreign security concerns in a manner quite different than before 9/11. The successful steps that the Bush Administration took to keep the United States free from subsequent attacks also created deep political divisions within the nation and in other nations that have yet to be resolved. Additionally, massive Bush-era tax cuts combined with greatly increased government spending, for enhanced security as well as for increased social programs such as a new, multi-billion dollar prescription drug benefit, combined with huge new spending by the Obama Administration in response to the financial crisis of 2008 and the ongoing “jobless recovery,” have put the United States on an unsustainable financial path with a $14 trillion debt load. Without further steps it will increase by $1 trillion per year.

Dramatic actions will need to be taken to get the U.S. budget under control, and the November 2 midterm elections were the political result. For the first time since 2006, Republicans regained control of the House of Representatives, in a repudiation of the first two years of the Obama Administration and a bid to reduce the deficit by restraining spending (while holding the tax rate steady). Many of the new Republicans are drawn from the so-called Tea Party, a populist movement of the right, and they are replacing moderate or centrist Democrats. The result is a more-polarized Congress, with a shrinking middle, and less room for compromise across a range of highly sensitive issues. The Senate remains in Democratic hands, but the margin of difference has narrowed considerably.

President Obama has tacked back toward the political center, agreeing to the full extension of the Bush-era tax cuts for another two years and pushing hard to conclude a trade agreement with South Korea, both of which have been identified as Republican priorities. At the same time, further battles are looming. Early indications are that Republicans will attempt to overturn some of the Obama Administration’s signature achievements, including health care reforms, and will also exercise a much more aggressive oversight function through the use of investigative hearings and subpoenas that will require significant Administration time and attention in response.

For the foreseeable future, there will be at least two overriding realities: battles over the budget and enhanced partisanship. The White House will be forced to defend its legacy while trying to find areas for compromise that do not unduly demoralize its partisan base supporters in the run-up to the 2012 presidential elections. Republicans believe they have a mandate to overturn the Obama agenda and seek to cut back spending across the board, particularly in social areas favored by the Administration, including healthcare.

Washington will continue to be self-consumed and self-absorbed, limiting the ability and the desire of the United States to project influence abroad or to take on additional priorities outside the immediate political environment. Domestic politics will prevail. This has profound implications for U.S. relations with Latin America, particularly a Latin America that is newly empowered through economic growth to determine a different future.

Of course, Latin America is not homogeneous. It makes little sense to discuss the region en toto given the differences between Argentina and Guatemala or Haiti and Chile. The countries of the region are different, and therefore policies must be designed to take account of current realties on the ground. U.S. relations with Brazil are fundamentally different from U.S. relations with Venezuela or Colombia.

What is similar is the way that U.S. policies that are essentially domestic in nature affect the individual and diverse countries of the region. For example, immigration reform is more directly related to U.S. relations with Mexico, Central America, and the Caribbean; nonetheless, a lack of immigration reform also affects growing migrant communities from Bolivia, Brazil, Colombia, Peru, and Venezuela. Trade relations, another sensitive political issue domestically, also affect the region as a whole. The inability to pass and implement pending agreements with Colombia and Panama or to abide by the terms of the North American Free Trade Agreement (NAFTA) provisions on cross-border trucking, as well as Buy America provisions in the stimulus package, a lack of progress to conclude the Doha Development Round of the World Trade Organization, and the moribund Free Area of the Americas, affect all Latin American countries by calling into question the ability of the United States to provide needed leadership on trade. Instead, regional trade agreements with other partners have proliferated, arguably making the conduct of trade relations in the hemisphere more complicated. Finally, security assistance is also at issue because of domestic priorities given spending constraints that affect the continued implementation of the Merida Initiative and assistance for the Caribbean Basin, Plan Colombia, and ongoing programs across the region.

Where do these issues stand? Given the November election results, comprehensive immigration reform will not occur in the near term. Trade relations are uncertain, depending on whether the White House will seek to push the Colombia and Panama agreements over the objections of its important labor constituency. Spending will be cut, affecting foreign aid and the ability to promote the Administration’s social agenda in the hemisphere. At this point, the United States is not in a position to “bear any burden” in the hemisphere, as says John F. Kennedy’s famous phrase.

As a result, Washington needs to take a step back and consider what its core interests are in the Americas and how best to promote them. The region has advanced considerably in the past decade at the same time that the tools available for use by the United States have diminished and interest in the region from nontraditional parties including China has increased exponentially. The game is changing. The question now is, how should Washington react?

In the first instance, the United States depends on the region for its own economic well-being, and it should begin to recognize that fact and act accordingly. Rather than seeing North America as a competitive economic environment among three nations, for example, the United States should be working diligently with Mexico and Canada to build a more unified economic space, better able to compete with China and other emerging markets through production efficiencies and economies of scale. As it did with existing free-trade partners Chile, Peru, and the Central American nations, the United States should also recognize that markets in Colombia, Panama, and elsewhere are not guaranteed and that, unless U.S. economic access is locked in through trade agreements and commercial provisions, it will continue to lose out to Canadian, Chinese, European, and intraregional competitors, including the Southern Common Market. The United States should improve the performance of existing agreements including NAFTA, first by abiding by their terms and second by working to consolidate diverse agreements into one economic zone, cutting significantly the cost of doing business and providing developmental benefits to all parties to the respective agreements. The United States should also seek a means to regenerate a hemisphere-wide conversation on trade liberalization by discussing sectorspecific arrangements such as autos, clean energy, information and communications technology, and others. It should also recognize that it is reliant on energy from the hemisphere for its own economic growth and look for ways to build out hemispheric energy efficiencies, including alternatives such as next-generation biofuels.

Second, the United States must understand that the rise of Brazil is a good and worthy development in hemispheric and global affairs but that it will bring about new challenges and differences that did not exist before. These must be managed deftly. There has been almost no strategic thinking in Washington on the implications for the United States of Brazil’s rise, other than cheerleading from various policy experts who are uncomfortable or even opposed to a strong U.S. presence in the region. This is extraordinary because the rise of Brazil is arguably the most significant strategic issue that the United States faces in the hemisphere, rivaled only by the effect of China’s engagement, another issue with limited strategic investigation to this point. The vacuum in thinking was a direct cause of the flat-footed response by the Administration when Brazil took high-profile positions in 2009 on Iran, Honduras, and the manufactured issue of U.S. “bases” in Colombia. The United States and Brazil will continue to experience friction in moving foreign policy issues forward unless both nations can do a better job of accommodating the other’s core respective interests. Much additional thinking on these issues and positive concrete steps are needed.

Third, crime and criminal activities including cyber-crime are becoming a real menace, particularly for the smaller nations of Central America and the Caribbean that are ill equipped to fight well-armed and -financed criminal gangs operating with virtual impunity. This threatens to corrupt institutions, bankrupt treasuries, and hollow out democracies. Guatemala is a failing state, unable to control vast swathes of its own national territory, and other nations in Central America are not far behind. Mexico is no failing state; it is waging a valiant and courageous effort, but the fight is far from finished. Comparisons with Colombia in the 1980s are frequent. Crime is not limited to the Caribbean Basin; Brazil has taken a strong stand against criminal and drug gangs in Rio de Janeiro and elsewhere even as the country looks forward to hosting the World Cup in 2014 and the Olympics in 2016. In some ways, hemispheric efforts against crime have just begun. It will take time, immense resources, and a true spirit of cooperation to get the problems under control. The United States can help but not if political leaders in Washington fail to see the seriousness of the issues and cut security assistance budgets or otherwise reduce the effectiveness of efforts. Finding ways to reduce the insatiable U.S. demand for illegal drugs, reduce the supply of handguns and automatic weapons going south, and continue efforts to improve border management are also necessary steps that the United States can take to assist.

Finally, the United States and similarly minded nations should realize that the dramatic changes confronting Latin America over the past decade have also fueled a regional debate as to the region’s direction. There is an ongoing battle for the soul of the region as it strives to find political and economic models that work. The main debate is between social democracy and populist authoritarianism. It is a battle that has yet to play out fully, but the evidence is clear; democrats from the left and the right have proven to deliver better results for their citizens than their populist counterparts. Generally, such leaders have a more favorable view of the United States than the rejectionist populists and tend to work more cooperatively toward mutual goals. It is beneficial for the United States to promote a model of governance and economics that supports democratic institutions, open markets, social inclusion, and growth with equity. Similarly, it is important for the United States to promote models of regional governance that link the region as a whole, such as the Organization of American States and the Inter-American Development Bank, rather than groupings such as the Union of South American Nations or others that purposefully exclude the United States and Canada. Doing so will require a commitment from the United States to show a sensitivity to regional concerns such as immigration, education, and exchange and to bolster the importance and effect of pan-regional institutions as critical tools toward achieving broader hemispheric consensus.

It is unclear whether policy-makers in Washington, fully consumed by Afghanistan, Iran, Iraq, Korea, the health of the U.S. economy, job creation, debt, healthcare, and a host of other pressing issues, will heed this advice, particularly in an environment of raw partisan combat. If they do, there is a chance of fundamentally repositioning the United States in hemispheric affairs in a manner consistent with its own core interests and the aspirations and ongoing changes of the region itself, to mutual benefit and reward.

The decisions that Washington chooses to make or not to make in the near term will determine the direction that it will take and where it will end up.