The increasing influence of China in Latin America: challenge or opportunity?
by Rodrigo R. Coutinho
Originally written in 2012
Abstract
Over the last few years, China has been having increasing influence in Latin America. Be it through investments, trade agreements, trade per se, politically or even militarily, the fact is China has become more and more involved in Latin American "businesses". Some argue that this increasing "influence" may be harmful not only to the U.S. influence and "dominance" over the region, but to the region itself, as it may harm local industries.
Brazil, for example, has been constantly complaining about the Chinese currency value, and is not only studying sanctions against China but is in the process of implementing tighter quality requirements for Chinese products. The U.S., on its turn, is also complaining about the Chinese currency and increasing trade deficits with China. And this seems to be a topic to be included during the presidential debates to come, especially as Republicans, such as Donald Trump, advocate against the trade politics of the U.S. towards China.
This paper aims at better understanding to what extent Chinese influence in Latin America has really increased, and if it really poses a threat to the U.S. and/or the region, or if it actually provides an opportunity for the U.S. and Latin America to engage in a "closer relationship", not only beneficial for both, but that also decreases the importance of China for both.
Introduction
The relationship between the U.S. and its Latin American neighbors has always been one of "ups and downs", with periods of closer and periods of loosen ties. But since especially the end of the 19th Century, U.S. - Latin American relations have strengthened.
The Monroe doctrine (1823), according to Santiba?es (2009), "did set a strategy that would transform the U.S. into the only state able to maintain control [over] its own continent (p. 17)." Since then, important events have marked the relationship between U.S. and Latin America, such as the Mexican American War (1835-1848), the Spanish American War (1898), and subsequent possession of Puerto Rico and Cuba, Cuba's independence (1902), Panama's independence (1903) and the construction of the Canal (1903-1914), the Cuban Revolution (1959), the invasion of the Dominican Republic (1965), its covert operations in Chile (1973) and Guatemala (1954), among others. More recently, still according to the author, the collapse of socialism created the conditions for reforms in the 1990s, following the policies suggested by the Washington Consensus - which included, among others, free trade, privatization and fiscal discipline.
In regards to trade, though, according to Bulmer Thomas (2003, p. 25), in fact, at the end of the colonial era, most countries in Latin America presented both extraregional and intraregional trade, what could somehow be explained due to "specialization" characteristic of the region at that time, and concentration of production in few commodities. According to the author, circa 1913, 78% of Brazilian exports were concentrated in coffee (62%) and rubber (16%); in Costa Rica, in bananas (50%) and coffee (35%); in Guatemala, in coffee (85%) and banana (6%); and so on (p. 58). And the U.S., in 1913, were already significant to Latin American trade (p. 74): it represented 32% of Brazil's exports, 75% of Mexico's, 94% of Panama's, 85% of Puerto Rico's, etc.; and 30% of total Latin America's exports, whereas the UK represented 21%, Germany 12% and France 8%, all four representing 71% of the total exports of Latin America; while U.S. imports represented 26% of total imports from the region, whereas UK represented 25%, Germany 17% and France 8%, a total of 75% for the four altogether (p. 76). The US, still according to him (p. 102), was also representative in the region's public external debt (14%), and direct foreign investments (18%), although UK was still more significant (with 68% and 47%, respectively).
And, although the region has suffered consequences following the crisis of 1929 and World War II (WWII), with huge impacts on trade, its relationship with the US, in regards with trade continued increasing. According to Bulmer Thomas, exports from Latin America to the U.S. (with different degrees of intensity for the different countries in the region) went, on average, from 30% in 1913 to 34% in 1929; imports from the U.S. to Latin America went from 24% in 1913 to 39% in 1929 (p. 156); and investments from the U.S. in Latin America went from USD 1,6 million in 1914 to USD 5,4 million in 1929.
According to the Council on Foreign relations, on a recent U.S.-Latin American relations report, from 1996 to 2006, total U.S. merchandise trade with Latin America grew by 139%, whilst 96% for Asia and 95% for the European Union. U.S. exports to Latin America were worth USD 223 billion in 2006 (compared with USD 55 billion to China). Latin America is the U.S. main source of oil, accounting for 30% of the total. Latinos now account for 15% of U.S. population and nearly 50% of the U.S. population growth (p. 6).
Therefore, in spite of periods of downturn in trade between Latin America and the world, especially following the crisis of 1929, the WWII and the "lost decade" (the 1980s), trade from the region tends to increase, especially with its major partner from the North, the United States.
However, more recently, there have been increasing publications, including the article from Santiba?es, about the increasing influence of China in Latin America, through trade, direct investments and increasing political and military dialogues with the region.
China: a threat (?)
According to Santiba?es (2009), in the summary of his article, "the lack of attention that the United States is paying to Latin America, on the one hand, and the growing levels of economic and political influence China is gaining in the Southern Cone, on the other, are increasing the number of disputes between states and allowing governments to distance themselves from Washington. This scenario might allow Beijing to obtain new allies in its global competition with the U.S. and put an end to the latter's hegemony in the Western Hemisphere - endangering, then, American security. If the United States wants to avoid this, it will have to increase its links with states such as Brazil and Argentina."
In his article, Santibanes suggests China could select key allies in Latin America to disrupt America's hegemony, and paraphrasing John Mearsheimer, he mentions "Mexico, Brazil, and Argentina as three states that, in the future, might be able to balance U.S. power (p. 19)." He also paraphrases Stephen Walt, saying that "states do not decide to balance others by measuring their power but by calculating the level of threat they present (p. 20)". Still paraphrasing Walt, there are, according to him, "four variables to measure the perceived levels of threat that a state poses to another: its aggregate strength (size of its economic capabilities, population, and so forth), geographical proximity, offensive capabilities, and offensive intentions (p. 20)". Therefore, a weak state near a strong state, the author suggests, might bandwagon, while a strong state far away might balance power through local alliances.
However, according to Ellis (2011), former Assistant Secretary of State Arturo Valenzuela believes that "PRC [China] trade with and investment in Latin America could contribute to the prosperity of the region, consistent with U.S. interests and objectives (p. 37)." If real, though, threats could emerge in three areas: national security (military relationship), commerce (competition, access to natural resources and bilateral agreements) and political values (p. 41).
Yet, according to Ellis, U.S. and China share interests in the region, which "fall into three areas: 1. Strengthening of the rule of law and administrative efficiency in countries of the region; 2. Creating a secure and stable security environment for all; and 3. Achieving an efficient and effective commercial infrastructure (p. 42)." Therefore, concludes Ellis, "there are more than sufficient shared interests between the United States and China in the region to forge a win-win partnership, and, in the process, allow both the United States and China to forge new and constructive partnerships within the region (p. 44)."
China now has bilateral agreements with Chile, Peru and Costa Rica. And has recently passed the U.S. as major trading partner of Brazil, Chile and Peru, and is in a close 2nd place in Argentina and Colombia. And, to make matters worst for the "pessimists", China has been granted "market economy status" by several Latin American economies (Argentina, Brazil, Chile, Peru and Venezuela), what makes it more difficult to prove dumping practices within the World Trade Organization (WTO).
In addition to that, according to Jenkins (2010), Foreign Direct Investments (FDI) from China in the region have been increasing, especially in industries of interest to China, such as oil and mining, and assembly activities (p. 816). A few examples of that are acquisition of pipelines in Ecuador by Sinopec and PetroChina, and other investments in the oil industries of Peru and Brazil, Gree and SVA industrial facilities in Brazil, and more recently Foxconn to produce iPads, also in Brazil.
China's increasing trade with Latin America
According to a recent edition of Americas Quarterly (p. 70), exports from Latin America to China increased from USD 5.4 billion in 2000 to USD 91.1 billion in 2010; and imports increased from USD 7.1 billion in 2000 to USD 91.0 billion in 2010. And, in 2009, China was number 1 importer from Brazil (up from #12 in 2000) and Chile (up from #5), and #2 from Costa Rica (up from #30), Peru (up from #4) and Venezuela (up from #35). And was number 1 exporter to Paraguay (up from #3 in 2000), #2 exporter to Brazil (up from #12), Chile (up from #4), Colombia (up from #9), Mexico (up from #7), Panama (up from #25) and Peru (up from #9), and #3 to Argentina (up from #4), Costa Rica (up from #15), Ecuador (up from #10), Guatemala (up from #19), Uruguay (up from #7) and Venezuela (up from #18). And China's FDI in Latin America were of USD 10.5 billion in 2010, while total stock of FDI was of USD 43 billion.
According to the same magazine, in 2008 the Chinese government released its first-ever strategy paper on its relations with the region, in which it highlights its objectives in developing the relationship: 1. politically, to support each other and become reliable and all-weather friends; 2. economically, to realize complementary advantages and become cooperation partners based on mutual benefit and new issues; and 3. culturally, to communicate closely and to establish a constructive pattern of dialogue (p. 76).
The magazine highlights (p. 71) that China became Latin America's 3rd largest trade partner, and that its relationship is both complementary and competitive, but founded on mutual respect and interest. But it also remarks that China became the world's largest exporter and 2nd largest importer.
However, the magazine also graphs (p. 101) the increases in imports share by partner. And it's interesting to notice that:
- In Latin America, imports from Latin America went up from around 13% of total in 1990 to ~19% of total in 2010, while from China went up from ~1% to 14% in the same period;
- In the U.S., imports from Latin America went up from ~13% in 1990 to ~18% of total, and from China went up from ~3% to ~19% in the same period;
- In the European Union, imports from Latin America remained stable in the period 1990-2020, while imports from China went up from ~1% in 1990 to ~8% in 2010.
Latin America in Perspective
Across Latin America, some countries have been developing steadily for a while now. And, although inequality is still present, according to Fukuyama, "any free society with a prosperous market economy will necessarily have to tolerate some degree of inequality, given the uneven distribution of talents within any population (p. 69)". But he points out the negative effects of high levels of inequality in economic growth and political stability: "inequality delegitimizes the political system, gives rise to antisystemic social movements and political actors, and sets the stage for bitterly polarized social conflict and a zero-sum 'fight for shares' (p. 70)".
While some countries, though, seem to be moving in the right direction, in his article, Fukuyama calls the attention to Bolivia, Ecuador and Venezuela, where three populist elected presidents "have been busy consolidating executive power, dismantling democratic institutions, reversing liberalizing economic reforms, and engaging in social policies that are broadly favored by the poor but are unsustainable in the long run (p. 71)." It seems Argentina, more recently, started to move in the same direction, with Cristina Kirchner. In the same article, Fukuyama also calls the attention to the regressive characteristic of fiscal policy across the region (p. 70), with tax evasion by the rich and subsidies to well-off groups.
According to Munck (2004), though, one thing is certain: "Latin American politics has recently undergone a fundamental transformation. For many decades prior to the 1990s, most elected leaders could not discount the possibility of military coups, and most authoritarian rulers could not ignore the actions of antiauthoritarian movements. Now, in contrast, elections are held regularly, winners take office and make legally binding decisions, and losers and new players prepare for the next election. Latin America has made a clear break with its past".
In general, while some progress can be felt across the region, there is still work to be done in regards to education and training; and some countries, like Brazil, already feel the absence of skilled labor; not for other reason President Dilma gave lectures and signed deals at Harvard and MIT following her visit to Washington on April 9, 2012. There is also work to be done in modernizing its institutions, and approving some necessary reforms to improve efficiency.
In addition to that, the social policies that have been implemented across the region, including conditional cash-transfers programs, such as Oportunidades in Mexico and Bolsa Família in Brazil, have clearly generated results, in reducing inequality and even providing better health, education and social security, among others. But one needs to question the extent to which the government can absorb that increase in expenses without jeopardizing investments and growth. In Brazil, for example, more than 60 million people are now beneficiaries of Bolsa Família, and the example of Europe's social welfare state has been proving not very efficient.
Latin American "cohesion" (?)
To better understand the effects of China in Latin America, it is important to notice some characteristics of the Latin American countries.
According to Reid (2007), "the Andean countries are culturally very different from the southern cone. While Bolivia and Ecuador retain large Indian populations, Colombia is mainly mestizo; Peru is somewhere in between. Venezuela, like Brazil and Cuba, has a large black and mulato population (p. 22)." And "even within Central America there are differences. Relatively equitable landholding, European migration and a strong democratic tradition mark Costa Rica out from the others. Guatemala, with a large Indian population, suffers from a racist and backward political elite and an over-mighty army, but is showing timid signs of democratic progress." (p. 26).
However, still according to the author, "some writers have argued that so great are the similarities among the Latin American countries, and so great their differences with other parts of the world, that the region constitutes a distinct civilization. (p. 29).
Some countries in the region, such as Brazil and Mexico, were able to develop a large manufacturing industry, while others remain mostly producers of raw materials. No matter which strategy (Export Promotion, Export Substitution, Primary-export Development or Debt-led growth[1]) the countries in the region have adopted in different times, the results were different.
Brazil was able, for example, to develop a broad industrial base, which includes mining, steel, automotive and auto-parts, petrochemicals, oil, domestic appliances (or "white goods"), agribusiness, pulp and paper, livestock, consumer durables (TVs, etc.), aircraft, among others. The same, I believe, applies to Mexico, but not to Bolivia, or Ecuador. The reasons for that might be many - history, dependency theory, modernization theory, market to support supply, etc. – but the fact is that the countries across the region have now different levels of industrialization.
According to Halperín-Dongui (1993), the Spanish colonies produced different goods. While Mexico and Bolivia were major exporters of silver, the Greater Antilles (Cuba, Santo Domingo and Puerto Rico) produced crops, such as sugar, Colombia was a major exporter of gold, and Venezuela a major exporter of cacao, indigo, coffee and cotton. Still according to him (p. 25), while the Spanish Crown's reforms encouraged the growth of exports based on agriculture (e.g. tobacco and sugar from Cuba, cacao from Venezuela and Ecuador), mining remained dominant in Mexico, New Granada (Colombia), and the Rio de la Plata (Bolivia, Argentina, Paraguay and Uruguay). Brazil, in the 18th century, still according to the author, went from being a sugar-producing area to also being an exporter of gold and diamond, coffee and later rubber.
Following the collapse of the Spanish empire, Halperín-Dongui points out to the legacy of colonialism and the struggle for political and administrative power in the region, with the increasing British dominance in the region during the neocolonial order "established" after 1870, based on the production of primary products for European markets, while importing manufactured goods from Europe in return, and, following the Mexican-American War, the appearance of the U.S. as a growing "force" in the region, starting with Central America, and Cuba.
After the crisis of 1929, still according to Halperín-Dongui, the decline in trade affected the countries in the region, and a shift of resources to the manufacturing sector occurred. However, not all countries in the region had enough market size (like Brazil, Argentina and Mexico, for example) to support industrialization (the case of many Central American countries). Therefore, in the longer term, results from the import-substitution industrialization of the 1930s varied across the region. Actually, instead, according to Halperín-Donghin, "this process of partial industrialization further accentuated the regional inequalities that had appeared during the earlier period of export expansion (p. 212)." Countries with larger markets, higher skilled labor and larger urban areas, thus, benefited more from the process than others with lower skilled, rural population.
According to Halperín-Donghin, World War II further boosted the process of import-substitution industrialization, as trade with European countries and the US, after its engagement in the conflict, was further restricted, as efforts were being directed to the war. Therefore, the economies in Latin America were somehow "isolated". The impact, though, was harder on imports rather than on exports, which rose buying power in the region, further stimulating local factories, which enjoyed a period of "dizzying growth (p. 213)." The bonanza, however, was not equal within the region. Countries "that barely produced supplies of food sufficient to feed their populations (and there were a number of these, from Mexico to Chile) suffered with particular intensity (p. 212)." While "the industries of the larger Latin American countries were able not only to dominate their domestic markets but also to initiate exportation of manufactured good. Brazilian industrial production soon reached markets in Spanish America and Africa (p. 213)."
After the end of the war, though, the impetus on industrialization slowed, the Soviet Union gained importance, the Cuban revolution occurred, and several Latin American countries "appeared" to be moving to the left, as some achievements in Cuba rose in the imaginary of many in Latin America. And the U.S. increased its activism in the region, through a highly complex and differentiated presence in the region, which can be exemplified by its "cooperation" in the 1964 military coup in Brazil, failed attempts to reverse the Cuban revolution, exemplified by the Bay of Pigs in 1961, Che Guevara's assassination by Bolivian forces with U.S. counterinsurgency training, and following participations on later struggles in Honduras (late 1980s), Nicaragua ("Contras", after 1981), Guatemala (1982) and Panama (1984-1987), just to name a few.
US activism, though, lowered again in the 1970s due to changes in the international context - suspension of the parity of dollar to gold (1971), and the oil shocks of 1973 and 1979. And a long period of difficulties followed in Latin America, with high levels of debt and inflation, currency crisis, fiscal profligacy, instability, and difficult transitions from dictatorship to democracy in the 1970s and 1980s. In addition to that, violence and drug trafficking escalated during what many call the "lost decade", the 1980s.
In the 1990s, a new "set of reforms" was implemented in the region, mostly according to neoliberal economic policies. As usual, however, its effects were felt unequally in the region. While some countries have been able to sustain a more steady growth, such as Brazil and Chile as the best example, others seem to be moving in the wave of populism mentioned earlier. Another group, which might include Paraguay and Uruguay, seems to have an unknown future, as their small size makes them more "dependent" on larger close economies; and a last group, which might include Honduras, Guatemala and Nicaragua also seems to have an uncertain future due to increasing violence in recent years. And, an isolated case might be that of Cuba, which seems to have a prominent future, but which is still uncertain due to the difficulty to predict the speed and profoundness of the reforms already taking place and yet to come.
What is clear, though, is that the countries that have committed to fiscal prudence, trade openness and market orientation have been able to attract increasing foreign investments and be granted "investment grade" classification. However, according to Edwards (2010), "the economic reforms of the 1990s and 2000s were incomplete and stalled before transforming Latin America into a competitive region (p. 72)".
Still according to Edwards, countries in the region "group" themselves in a few clusters, somehow similar to the groups I have mentioned above but with some particularities. Those include, to the author, a populist category (p. 232), which includes Venezuela, Ecuador, Bolivia and Nicaragua. "A second group of countries will be formed by those that will neither fall for the populist temptation nor move forward in the implementation of the pro-competition policies and institutional reforms needed to spur productivity growth (p. 233)". He includes in this group Brazil and most of the Central America countries. Argentina, according to the author, "raises several important questions (p. 234)", especially regarding whether or not support for the populist measures of Cristina Kirchner will increase or decrease. And a third, small group of countries that, according to him, "will embrace the innovative, productivity-based path to development and prosperity (p. 234)". Chile is the leader of this group, who might be followed by Peru, Colombia and Costa Rica, and eventually Brazil and Mexico.
U.S. - Latin American future prospects
According to Reid (2007), "Brazil has more 'environmental capital' than any other country in the world: it has the most biodiversity and its river systems contain more fresh water than those of any other country (almost three times more than those of the United States). Latin America has the world's largest reserves of arable land, and is a storehouse of many important commodities, from oil to metals and foodstuffs (p. 3)". Still, "in 2004, the region had 8.5% of the world's proven oil reserves" and "accounted for almost a third of oil imports by the United States". And subsequent reserves have been discovered since then.
However, according to Reid (2007), "it has long been true that the further south you go in the Americas, the less powerful is U.S. influence. For Brazil and Argentina, the European Union is a more important trade partner and source of investment than the United States. Many Latin Americans still yearn for Europe to act more generally as a counterweight to the United States in the region. A generation of politicians and writers who sojourned in Paris's Quartier Latin during the 1960s and 1970s argued that Latin America has more in common with the social democratic values of Europe than with hard-driving Anglo-Saxon individualism. That is debatable (p. 300)". I do not agree with that.
Still according to Reid (2007), "more recently, some Latin Americans have seen salvation in the rise of Asia, and of China in particular. China fever reached a peak in the region in November 2004 when the country's president, Hu Jintao visited Argentina, Brazil and Chile, promising to lay out billions of dollars in investment in infrastructure to facilitate the import of the commodities that his country craves. (...) Partnership with China, the assumption seemed to be, was a liberating alternative to depending on the United States (p. 300-301)". He argues this is odd since China's imports from Latin America are mostly of raw materials, which is not the case of the US, to what I agree.
However, the author continues on arguing that China has contributed to the better economic outlook in the region since its increasing imports increased commodity prices, benefiting the region, in particular Chile and Peru, Ecuador and Venezuela. On the other hand, though, its increasing exports of low cost industrialized goods poses threats to countries with maquiladoras, such as Mexico, the Dominican Republic and other Central American countries. But also poses opportunities for the increasing number of multilatinas from the region, such as Embraer, Telmex, Vale, among others. The author (p. 303) also argues that "what is important is not what countries produce but how", that "farming, mining and forestry all have high-tech elements that can generate spillover effects elsewhere in the economy", that "if China was becoming the world's workshop and India its back office, Brazil is its farm - and potentially its centre of environmental services". The main question, thus, is how to add value to its natural resources.
Reid also mentions an interesting data (p. 304): that Latin American and the Caribbean have 116 UNESCO world heritage sites compared with 33 in China and 26 in India. This shows a huge potential for increased tourism within the Americas.
Still, according to a recent Inter-American Dialogue report (2012), the region's political structures have opened up, giving way to growing participation of women, indigenous and Afro-descendant populations, and other once-excluded groups.
However, according to the same report, the US position on some troublesome issues - immigration, drug policy, and Cuba - has set Washington against the consensus view of the hemisphere's other 34 countries. But "with a rapidly expanding US Hispanic population of more than 50 million, the cultural and demographic integration of the United States and Latin America is proceeding at an accelerating pace, setting a firmer basis for hemispheric partnership (p. 3)."
In regards to the sensitive issues mentioned above, although I believe they could be set aside in order to "move forward", not because they are not important, but because they depend on what the report calls "dysfunctional" U.S. politics, the report makes some remarks I find important:
- Immigration: the US could make efforts to approve the Dream Act, which allows children brought to the U.S. without proper documentation an opportunity to qualify for citizenship;
- Drugs/Crime: the U.S. should take seriously the recommendations from the Latin American Commission on Drugs and Democracy[2], which asks for a serious review of drug policy which includes decriminalization of marijuana, greater emphasis on drugs as a public health problem, and increased support for harm reduction; the flow of dangerous arms southward from the U.S. demand measures to control those flows more effectively;
- Cuba: there is a consensus among the other countries of the hemisphere that the 50-year old embargo has not worked, and, in fact, might have been counterproductive.
The inter-American Dialogue report points to seven changes that have shaped hemispheric relations in the past several years:
- Brazil's Rise: now Latin America's dominant economic power, with increasing influence in regional affairs, effective political leadership and assertive and skilled diplomacy;
- Mexico's Challenge: uncertainty regarding future role and economic performance, and increased violence;
- Overall Progress: economic and social advances, improved fiscal management and social policies, increasing trade and decreasing inequality and poverty;
- Pragmatic Politics: centrist, pragmatic politics, directed at economic growth, social progress and democratic governance;
- New Forms of Regionalism: UNASUR (Union of South American Nations), CELAC (Community of Latin American and Caribbean Nations), which don't curtail US influence;
- Citizen Insecurity: criminal violence, arms trafficking and illegal cash flows;
- U.S. Reversals: important setbacks in its regional and global standing, ongoing wars, financial crisis, increased inequality, dysfunctional politics.
And points to a few issues that should be considered further on "looking ahead": expanded trade, investment and energy cooperation. The US, according to the report, buys about 40% of the region's exports and provides 40% of the region's FDI. In regards to U.S. exports, though, the region accounted for 55% a decade ago, but less than 33% today. Another "critical step" appointed by the report would be for the U.S. to ease protection of agriculture through tariffs, subsidies and quotas. This is particularly important in the case of U.S. - Brazil relations. The report also recommends the U.S. to seed greater cooperation and consultation with Brazil, Mexico and other countries of the region in world forums addressing shared interests.
A Special "Remark" on Brazil
In regards to Brazil, in particular, I would like to make a few remarks.
According to a report released in 2011 by the Council on Foreign Relations (Global Brazil and US-Brazil Relations), Brazil "has undertaken a peaceful economic and social transformation to become the cornerstone of South American growth and stability and a significant power and presence on the world stage (p. 3)." The report recognizes Brazil as an integral force in the evolution of a multipolar world, in a leadership position in Latin America and in the world and mentions similarities with the U.S. in respect to ethnicity, the respect for democratic values and rule of law, individual rights, religious freedom, diversity and equality.
Therefore, the report recommends the U.S. to recognize Brazil as a global actor, to treat its emergence as an opportunity and to work together with Brazil to develop complementary policies.
The report recommends a more mature relationship with what they call the "new Brazil", which should include more (open and regular) communication, through a more comprehensive U.S. policy toward Brazil. And "encourages both governments to maintain and expand channels of communication on trade and monetary policy, especially with respect to China. Brazil and the United States each approach China carefully, balancing relationships that are both complementary and competitive. Both Brazil and the United States have concerns about China's undervalued Yuan, and though a joint approach is unrealistic, the Task Force [who wrote the report] suggests that Brazil and the United States agree on common language to describe the currency challenges presented by China in order to encourage China to allow its Yuan to appreciate (p. 6)."
The same report also recommend the U.S. to lift tariffs on ethanol, which it did earlier this year, that U.S. endorse Brazil as a permanent member of the UN Security Council, what I think improbable, that they deepen bilateral understanding and cooperation in issues such as education, innovation, health care and infrastructure, what I believe is happening, and that they communicate more openly in sensitive issues, such as trade, market access, and subsidies.
In short, the report indicates U.S. and Brazil could have a mature relationship on bilateral and global issues without complete alignment across the board. And that, to me, could even eventually counterbalance dispute among Latin American states, that have been increasing lately, between, for example, Brazil and Argentina, Colombia and Venezuela, among others.
Another reason why U.S. and Brazil could both benefit from a closer relationship is that both Brazil and U.S. somehow compete with China; Brazil and China compete in the production of manufactured goods to the US, and even to the Brazilian market, more recently; U.S. trade deficit with China is gigantic, and its surplus with Brazil is increasing; and, besides, both Brazil and the U.S. produce agricultural goods, although not necessarily the same ones.
Conclusion
I understand that there has been an increasing trade between Latin America and China, as has increased direct investments from China in the region, and also in Africa. I also believe increased talks are being made in regards to military cooperation, as it is with other countries, such as Russia, France, Sweden and Israel. But that, I believe, mostly due to the resistance from the U.S. to closer cooperation with transfer of technology, something that other countries, such as France and Sweden, are less resistant. I am not in favor of either part, but I believe that in case negotiations between U.S. and Latin American countries fail, these countries will indeed look for partners other than the U.S. and, in that case, both Latin America and U.S. will loose.
However, I don't believe there has been an increasing influence of China in the region that could jeopardize the relationship of the U.S. and Latin America. U.S. and Latin America, for various reasons, are tied to each other. They are mostly democratic countries, with a few exceptions, are, with different degrees of intensity, a "melting pot", and most of them share many cultural values. Not to mention the fact that they are geographically close to each other. Besides, a closer look at the numbers showed earlier in this article show that, although the importance of China in the region in what relates to trades has increased lately, the U.S. importance in regards to trade within the region has not decreased, but on the contrary, has also increased.
I further believe some of the recent events to be not only in the direction of closer ties between the U.S. and Latin America but somehow also an attempt for both to decrease the influence of China in the region, especially if we consider the recent events involving Brazil and US, the two major economies in the Americas. But it has yet to prove if it improves from good intentions to practice. After all, according to a recent Inter-American Dialogue report (2012), "what is at stake is the future of inter-American relations, which today are generally cordial but lack vigor and purpose (p. 1)."
President Obama has paid a visit to the region in 2011 (his third), during which he has been to Brazil, Chile and El Salvador. And, according to Julia Sweig, senior fellow for Latin American Studies at the Council on Foreign Relations, “Kicking this off in Brazil is sending a number of signals. One is that the administration seems to understand the importance of Brazil, not just as the strategic anchor of South America but also as a very important potential global player and global partner for the United States on a bunch of issues – climate change, financial architecture, dealing with China’s artificially low currency, cooperation in Africa[3]."
The trip aimed at fostering more trade within the region, which is not irrelevant but on the contrary, very significant. According to Shannon O'Neill, in a recent article published by the Council on Foreign Relations[4], "Trade with Latin America has grown faster than virtually any other region in the world, reaching nearly a trillion dollars. U.S. shipments to its southern neighbors now total some $350 billion annually, roughly a quarter of all exports. With somewhat complementary industries and economies, expanding these sales further can benefit all sides."
Still according to O'Neill, "energy too provides a promising opening, not just for the economies in the region but also for shifting the fraught geopolitical balance for the better. Brazil's huge oil finds, Colombia's rising output, and the possibility of renewed exploration and production in Mexico (if the next president reforms the oil sector to allow foreign direct investment in the same manner as Brazil's Petrobras), would all benefit the United States. The hemisphere is also a renewable energy leader, with wind, solar, hydroelectric, and ethanol. If integrated, these alternative sources could further the quest for a cleaner and more competitive energy matrix worldwide."
According to the Council on Foreign Relations[5], in a recent article, during his visit, President Obama said that "We now export more than three times as much to Latin America as we do to China, and our exports to the region will soon support more than two million jobs here in the United States." Still according to the same article, mentioning an earlier CFR Task Force report, “Latin America has never mattered more for the United States”, although the status quo “focus on trade, democracy, and drugs, while still relevant, is inadequate,” and "a shift to energy security, public security, poverty, and migration" is recommended.
Before his trip, it was also important the presence of Secretary of State Hillary Clinton in Brazil's Dilma Roussef's inauguration, her recent visit to the U.S. (on April 9, 2012), their recent meeting in Colombia (April 11-12, 2012), and other innumerous meetings that have been happening more and more frequently. Just in the last year, Brazil has received the visit from U.S. Treasury Secretary Timothy Geithner, Senator John Mccain, Secretary of State Hillary Clinton (for the third time last April 16-17, 2012), Secretary of Defense Leon Panetta, among others, not to mention the innumerous visits governors of state and representatives from both countries are doing to each other. Those are clear signs of an attempt for closer cooperation between the two major economies from the region.
There are, however, sensitive issues, and disagreements, not only between Brazil and the US, who disagree on several issues, from Iran to Turkey, Honduras, among others, but also between U.S. and the region as a whole. Drug trafficking and organized crime networks is a sensitive issue; illegal immigration is still a sensitive issue, although no longer as critical with Brazil (where the U.S. will open 2 additional consulates, to the existing 4, and facilitate VISA procedures), but still with Mexico and a few other Latin American countries. Cuba, Venezuela's Hugo Chavez, Bolivia's Evo Morales are other sensitive topics. In regards to trade, from the U.S. perspective, intellectual property is an issue, and from Latin America's perspective subsidies are an issue. Not to mention the Bush Administration, under then Treasury Secretary Paul O'Neill, let Argentina fall into default, entering a period of severe recession, and the fact that the U.S. did not back up Argentina in its pursuit of regaining control over the Falkland Islands (or Malvinas) in 1982.
But, overall, to me, it seems clear the aim at increasing ties. Both Obama and Dilma have been critics of the weaken Chinese Yuan. And both are clearly worried about the "flood" of Chinese products in their economies. In the US, that criticism goes from the GOP candidates to Donald Trump to Obama himself, and in Brazil it goes from Dilma to Finance Minister Guido Mantega, among others. And businesses are increasingly complaining about Chinese businesses and weak currency.
In addition to that, to me, there are clear signs that overcoming issues could benefit both the U.S. and Latin America. The U.S. has been signing bilateral trade agreements with some countries, such as Mexico, Chile, Colombia, among others, but of the main reasons for ALCA not to succeed was the disagreements between U.S. and Brazil (subsidies, intellectual property, etc.), who are now talking about the possibility of a free trade agreement, during Hillary Clinton's recent visit (April 16, 2012) to Brazil, and even lifting the need for VISA, during Dilma's visit to the US (on April 9, 2012). Who could imagine that a few years ago?
According to O'Neill (April 13, 2012), "after the summit [of the Americas, Colombia, April 14-15, 2012], Defense Secretary Leon Panetta and Secretary of State Hillary Clinton will head to Brazil to meet with their counterparts on a range of issues. These stepped-up interchanges highlight the new reality that for most regional issues--democracy, trade, environment, or security--the United States' ability to make progress will depend on Brazil. These visits help lay the groundwork for a longer-term mature relationship with a rising Brazil on a world stage."
Still, according to O'Neill, "The recent high levels of diplomatic engagement between the United States and many Latin American nations are in many ways just governments catching up with the already deep ties on the ground among families, communities, corporations, and supply chains. Sustaining this interest after the Summit of the Americas will serve Washington well, benefiting the U.S. economy, society, and global position as it tackles more recalcitrant problems worldwide." I would add that this is reciprocal, which means that Latin American countries may also benefit from that increasing engagement.
President Barack Obama has tried to forge a new partnership with Latin America, as had intended his predecessor Pres. Bush 43 just a few days before the 9/11 attacks. And some countries in the region have been showing the same intent. And I believe this is the right time to do it. I understand, though, that other important issues are more important in the U.S. President's agenda, such as the Arab Spring, the global financial crisis, the military engagements in Iraq and Afghanistan, and the nuclear threats from North Korea and Iran. And there are also important disadvantages between U.S. and Latin American countries, in regards to subsidies, drug and guns trafficking and security, illegal immigration, the Free Trade Agreement of the Americas (FTAA), Cuba and even the Summit of the Americas. But I believe it should be the time to put the differences aside and work together on a closer partnership, that would benefit both.
After all, according to Ellis, "although the U.S. has many sincerely stated objectives with respect to Latin America, such as democracy, development, and respect for human rights, the core U.S. interests in the region may be understood in terms of three imperatives, in roughly the following order of importance: 1. The region does not represent a security threat to the United States; 2. The region supports commercial interactions consistent with the health of the U.S. economy; and 3. The conditions in the region are consistent with U.S. values concerning democracy, respect for human rights, and a decent standard of living for all (p. 38)."
To conclude, The Economist from April 14, 2012, started an article over the relationship between the U.S. and Latin America by stating that "all in all, this is a pretty good time to be an American", but later on the article it makes a clarification: "this is a pretty good time to be a Latin American". The article compares Latin America, where there is an expansion of the middle class, reduced inequality, improved governance, less ideological and more centrist and pragmatic politics, to the US, where those trends are moving in the opposite direction. The article, therefore, suggests the U.S. should "better appreciate" the rising importance of Latin America, and ends up suggesting that "it may be time for the U.S. to follow their example for a change." Maybe this is so.
Bibliography
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Condon Jr., George E. (March 19, 2011). Obama visits Latin America - A trip to promote U.S. jobs and a willingness to work cooperatively. National Journal (https://www.nationaljournal.com/whitehouse/obama-visits-latin-america-20110319).
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[1] Bulmer-Thomas (2003).
[2] That Commission is led by three former Latin American Presidents - Fernando Henrique Cardoso of Brazil, Ernesto Zedillo of Mexico, and César Gaviria from Colombia, three countries highly affected by the problem.
[3] https://www.nationaljournal.com/whitehouse/obama-visits-latin-america-20110319.
[4] Shannon K. O'Neill. Why the Summit of the Americas Matters (https://www.cfr.org/americas/why-summit-americas-matters/p27931?cid=nlc-public-the_world_this_week-link8-20120413).
[5] Tracking the Issues: Approaches to an Emerging Latin America (April 11, 2012) - https://blogs.cfr.org/campaign-2012/2012/04/11/tracking-the-issues-approaches-to-an-emerging-latin-america/?cid=nlc-public-the_world_this_week-link14-20120413.