Is Washington Losing Latin America?

Peter Hakim

From Foreign Affairs, January/February 2006

Summary:  For nearly a decade, U.S. policy toward Latin America has been narrowly focused on a handful of issues, such as China's growing influence in the region and the power of Venezuelan President Hugo Chávez. Latin Americans want economic ties with the United States but feel slighted by Washington and uneasy about the U.S. role in the world. The costs of the estrangement will be high for both sides.

PETER HAKIM is President of the Inter-American Dialogue.

DRIFTING DANGEROUSLY

Relations between the United States and Latin America today are at their lowest point since the end of the Cold War. Many observers in the 1980s had hoped that Latin America's turn toward democracy and market economics, coupled with Washington's waning emphasis on security matters, would lead to closer and more cooperative ties. Indeed, for a time, the Americas seemed to be heading in the right direction: between 1989 and 1995, Central America's brutal wars were largely settled; the Brady debt-relief proposal (named for then U.S. Treasury Secretary Nicholas Brady) helped end Latin America's decade-long, debt-induced recession; the United States, Canada, and Mexico signed the North American Free Trade Agreement (NAFTA); the United States hosted the hemisphere's first summit meeting in more than a generation; and in 1995 a bold Washington-led rescue package helped prevent the collapse of Mexico's economy. But much of this progress has since stalled, with U.S. policy on Latin America drifting without much steam or direction.

After 9/11, Washington effectively lost interest in Latin America. Since then, the attention the United States has paid to the region has been sporadic and narrowly targeted at particularly troubling or urgent situations. Throughout the region, support for Washington's policies has diminished. Few Latin Americans, in or out of government, consider the United States to be a dependable partner. U.S.-Latin American relations have seriously deteriorated -- the result of failures of Washington's leadership, the United States' uncompromising stance on many critical issues, and the unwillingness of the administrations of both Bill Clinton and George W. Bush to stand up to powerful domestic constituencies.

The United States is not the only culprit, however. Latin American leaders have also performed badly. Most Latin American governments have only partially completed the political and economic reforms needed to sustain robust growth and healthy democratic institutions. They have mostly neglected the region's deep economic inequities and social tensions. Too often, Latin American governments have only grudgingly cooperated with the United States and one another. Some of the region's leaders have turned to populist and anti-American rhetoric to win supporters and votes.

So far, Washington's tattered relations with Latin America have mainly translated into a series of lost opportunities for both sides. At a time when the Bush administration needs partners and allies across the globe, the United States and its international agenda are discredited in Latin America. Democratic progress is faltering in the region, in large part because of the dismal economic and social performance in country after country. The United States still has a big market in Latin America, with U.S. exports to the region valued at more than $150 billion a year, almost as much as the value of its exports to the European Union. But two-thirds of that goes to Mexico, while Brazil and other South American markets remain relatively untapped in the absence of more productive hemispheric trade arrangements. The burgeoning Hispanic population in the United States is already providing important new links to countries throughout Latin America, but its potential contribution is constrained by Washington's muddled and unworkable immigration rules.

U.S. interests in the region are endangered in other ways, too. Oil and natural gas supplies from politically troubled Venezuela and other energy-rich Andean nations are less secure than ever. Several small and weak states in the Caribbean and Latin America are at risk of becoming permanent centers of drug activity, money laundering, and other criminal operations. Stability is threatened by the upsurge of crime and violence almost everywhere in Latin America. The United States could end up paying a stiff price for the region's economic reversals and unsettled politics. Unfortunately, there are few prospects for a turnaround in U.S.-Latin American relations anytime soon.

SOUTHERN EXPOSURE

At the beginning of his administration, President Bush declared that Latin America would be a priority for U.S. foreign policy. The White House hailed the region's progress toward democracy and market economics and set out to complete the ongoing negotiations for a hemisphere-wide free-trade pact, build broader economic partnerships, and resolve such chronic problems as immigration and drug trafficking. The administration was confident that it could reinvigorate relations with the region's two largest and most influential countries, Brazil and Mexico. In particular, it saw the newly installed government of President Vicente Fox, whose election ended 70 years of one-party rule in Mexico, as a special opportunity to reshape and deepen the relationship.

Five years later, the Bush administration's attitude has changed markedly. U.S. officials have been regularly disappointed by developments in Latin America across an array of issues. Economically, the region has been limping along for years. True, the past two years have brought mostly good news: foreign investment has started flowing in, trade has expanded at a strong pace, family remittances are surging, and inflation remains low. But few analysts are confident that the gains can be sustained. The region's economic improvement is mostly the result of a particularly benign global economy that has boosted Latin America's commodity exports and kept interest rates down, easing the burden of the region's high debt.

Even under these conditions, the growth rates of Latin American countries have trailed those of countries in more dynamic regions. Most Latin American countries are caught in a slow-growth trap, a consequence of the region's low educational standards, paltry investment in technology and infrastructure, pitifully low rates of saving, derisory levels of tax collection, and politically divisive inequalities. In 2004, its best year in two decades, the region's economy expanded by 5.5 percent. In contrast, India has been averaging 6 percent growth annually for 15 years, and China's economy has grown by 10 percent for 25 years.