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Latin America And The USA: Creating More Win-Win Relationships

Latin America And The USA: Creating More Win-Win Relationships

Posted by Juan Gavasa on August 29, 2014

Whenever a Latin American country shares a headline with the U.S., it is usually attached to a crisis. The flow of illegal immigrants coming from Mexico and the unaccompanied children from troubled Honduras arriving to stay; the Argentine government defying the rulings of U.S. judges; or the anti U.S. rhetoric and actions from countries that are admirers of Cuban socialism. The saying “no news is good news” could be complemented by saying, “good news is not news.” American audiences rarely hear about good news coming from the region. This includes honest discussions on why the U.S. government, as well as private actors, should play a more intelligent and active role in the region.

Latin America continues to be key to the United States. U.S. producers export three times more to Latin America than to China. Central and South America (excluding Mexico) purchase 50 percent more U.S. goods than the Chinese. In total trade, imports plus exports, if we include Mexico, Latin American weight has hovered between 20 and 25 percent of total U.S. trade. Approximately 20 percent of foreign direct investment in the region still comes from the U.S.  Investments and trade that result from free interaction are the best type of win-win relationship.

Despite these trade figures, Latin American civil society and policy leaders are realizing that now, more than any time in recent history, they are “on their own.” The United States is seen as less influential. This is due in part because the U.S. is occupied in major geostrategic challenges in other regions of the world. The threats in North Africa, the Middle East, Ukraine and the China seas, are seen as more dangerous than those in Latin America.

The economic challenges at home, which also seem worse than in Latin America, also contribute to some neglect. The government debt/GDP ratio in Latin America is less than half of that of the United States (nearly 100 percent). Part of the reason is that some countries, such as Argentina and Venezuela, have such bad credit ratings that no one wants to lend to them. Better managed economies, such as Chile, Colombia and Peru, have debt/GDP ratios of under 32 percent. The region is growing at twice the rate of the U.S. and, except for a few exceptions, such as Argentina and Venezuela, inflation is under control in most countries.

The biggest threat, however, is the weak rule of law and efforts by many Latin American governments to achieve absolute power by controlling all the key local institutions. In the World Justice Index only Chile and Uruguay have decent scores. But there are limits to what the U.S. or other foreign players can do to improve this. Direct foreign intervention in the troubled countries can create backlash. The U.S. has important tools such as denying visas to corrupt leaders and their cronies, prosecuting foreigners who conduct illegal activities through American-based banks and companies, and also punishing corrupt companies. Other foreign countries have the same powers, but they seldom exercise them. The United States is more aggressive than other countries and its Foreign Corrupt Practices Act is a tool that few other U.S. competitors have. American companies are kept more pure but tend to lose in corrupt environments.

Speaking in terms of GDP, half of the region’s population is represented by Mexico and Brazil. The U.S. can’t neglect them but neither can they monopolize the attention. Both have characteristics which prevent them from being models for the region as a whole. Due to Mexico’s closeness to the United States, former Mexican President Porfirio Díaz remarked once, “Poor Mexico, so far from God but so close to the United States.” It is not my business to know about how close they are to God, but Mexico’s closeness to the U.S. is of major relevance. Even the current openness to a private sector role in the energy sector, previously considered taboo, is due mostly to shale-oil discoveries and improvements in fracking technology in the U.S., rather than to any ideological change in Mexico. Brazil, with its different language and different history, has found limits in its efforts to play a role beyond its borders. Just recall its dismal failure in trying to intervene in tiny Honduras in favor of the installment of another “democratic” dictatorship.

Not everyone in the U.S. neglects Latin America. Some of the free-market think tanks and foundations which have programs or experts focused on the region include: Cato Institute, Heritage, The Fund for American Studies, The Leadership Institute, Hudson, HACER, AEI, Acton Institute, Liberty Fund and the Atlas Network. These last two lead in grants and programs but I estimate that the combined spending of all these groups in the region is only $5 million per year.  This is a tiny fraction of their combined $200 million plus budgets. Foundations and think tanks funded directly or indirectly largely by the government, such as the National Endowment for Democracy, and the International Republican Institute, each spend over $5 million per year, while the Center for International Private Enterprise spends approximately $1 million.

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