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.

What the majority of Latin American countries most want and need from the United States are productive economic ties, such as the free-trade agreements Washington concluded with Chile in 2003 and the countries of Central America and the Dominican Republic in 2005. These will bring sizable benefits to the countries involved, and they have kept the U.S. trade agenda active even as the negotiations for a free-trade area in the Western Hemisphere remain stalled. But Washington can do better. In the recent past, Latin Americans have particularly welcomed four U.S. initiatives: the Brady debt-relief plan, introduced in 1989; President George H.W. Bush's 1990 proposal for a hemisphere-wide free-trade area; the 1993 adoption of NAFTA, which prompted negotiations over the proposed Free Trade Area of the Americas (FTAA); and the rescue of the Mexican peso in 1995. There has been no U.S. economic initiative in Latin America of similar magnitude for the past decade.

Most Latin American governments want to negotiate free-trade accords with the United States. Knowing the trade politics of Washington, they are even prepared to accept conditions they consider to be less than fully fair or balanced. Still, they resent Washington's unwillingness to compromise on most issues, such as the trade-distorting support payments the U.S. government makes to U.S. farmers, harsh U.S. antidumping rules, and Washington's demands for new standards of intellectual property protection. Sky-high tariffs and quota limitations on sugar, orange juice, cotton, and many other high-volume Latin American exports make the United States seem ungenerous and breed cynicism about Washington's advocacy of free trade.

Another sore point, particularly for Mexico, Central America, and the Caribbean, but also for an increasing number of South American countries, has been U.S. immigration policy, which has remained basically unchanged for two decades. Latin Americans see immigration as a solution both to their own high unemployment and low wages and to the huge demand for workers in the United States. They argue that the United States should accept larger numbers of immigrants. Instead, Washington has stiffened enforcement measures at its borders, an action that has not reduced illegal immigration but has raised the costs and risks of entering the United States and kept many immigrants in the underground economy, where exploitation is common. Worse, state and local governments in the United States are increasingly implementing harsh anti-immigrant initiatives, and armed civilian volunteers occasionally take it upon themselves to patrol the U.S.-Mexican frontier to keep immigrants out. A related issue concerns the U.S. practice of deporting convicted felons, including naturalized U.S. citizens, to their countries of origin, where many join extraordinarily vicious street gangs. All of this generates extensive press coverage in Mexico and other countries that send immigrants to the United States, making it appear that the United States is becoming increasingly anti-Latin American.

Perhaps what most troubles Latin Americans is the sense that Washington just does not take the region seriously and still considers it to be its own backyard. Less than a week before 9/11, President Bush made the stunning declaration that the United States' most important relationship worldwide was that with Mexico. No one was surprised by the dramatic shift in U.S. priorities in the aftermath of the attacks toward a reemphasis on security and the Middle East. But the virtual exclusion of Mexico and the rest of Latin America from the U.S. foreign policy agenda was brusque and unexpected. Today, Washington seems to notice only those developments in Latin America that look like direct challenges to its own interests, such as the growing influence of Chávez, the expanding presence of China, or the reemergence of Ortega. On issue after issue, Latin American officials feel they are not consulted, and when they are, they sense that their views carry little weight with U.S. decision-makers.

A VERY LONG ESTRANGEMENT

There is little reason to expect that U.S. relations with Latin America will improve soon. More likely, they will get worse. The region will remain peripheral to the central concerns of U.S. foreign policy, which are the war against terrorism, securing and rebuilding Iraq, the Arab-Israeli conflict, and nuclear proliferation. With new presidents scheduled to come to power in nearly a dozen Latin American countries over the coming year, some important political shifts will certainly occur. But many conditions in Latin America are unlikely to change much. At best, the region will sustain its recent modest economic growth, but it will not offer the trade and investment opportunities that U.S. businesses find in Asia and central Europe. Latin America's social and political tensions will persist, and much of the region will remain alienated from the United States. Chávez is likely to continue his adversarial stance toward the United States for some time, and it may get even stronger if he further consolidates power at home and continues to earn and spend Venezuela's enormous oil profits. The elections in Nicaragua and Bolivia may even provide him with new allies.

Still, there are some U.S. policy initiatives that could improve hemispheric relations. What Latin American governments consistently press hardest for are changes in U.S. farm policy that would lower barriers to the region's food and fiber exports. In particular, they want cuts in U.S. subsidies to agricultural producers and reductions of tariffs and quotas on key commodities. These changes would not only increase Latin American exports and create jobs, but they would also revive negotiations toward the proposed FTAA and open the way to more secure access to U.S. trade, investment, and technology -- precisely what the region desires from its relationship with the United States. Such reforms would also end many bitter disputes with Brazil and Argentina, the region's largest agricultural exporters. The Bush administration basically supports this agenda and has taken the lead in the Doha Round of multilateral trade talks to push for an accord that would require Europe, Japan, and other governments, as well as the United States, to lower subsidies and other barriers. But powerful U.S. agricultural producers and their representatives in Congress make it impossible for the United States to reshape its farm policy on its own. On this front, Washington has refused to make even the smallest unilateral concession to Latin America.

For many Latin American countries, especially Mexico, U.S. immigration policy has become the most important issue in their bilateral relations with the United States. U.S. and Latin American policymakers largely agree on the basic principles that should guide a new U.S. approach to the issue -- including a substantial increase in the number of temporary workers granted lawful entry to the United States, the development of procedures for some undocumented immigrants to earn legal status, and the effective enforcement of any new legislation. President Bush has called for immigration reform essentially in accord with these principles. Yet disagreements over actual policies have so deeply divided Congress and the U.S. public that the chances are slim that any changes, besides more intense enforcement of existing laws, will be enacted. The weakening of the Bush presidency in recent months has made immigration reform even less likely.

Nearly all Latin American governments would welcome U.S. aid to accelerate their countries' economic and social progress. The Bush administration has made available modest amounts of new development financing for Latin America through the Millennium Challenge Account. But the program is designed to assist well-governed but very poor countries, and because Latin America's income levels are relatively high, only a few states in the region are likely to be eligible. Latin Americans often unfavorably compare the United States with the EU, which has transferred resources from wealthier to poorer regions of the continent on the premise that more equitable growth across the EU would benefit all of its members. But Washington has long preferred "trade not aid," viewing hemispheric free-trade arrangements as the best mechanism to boost Latin America's development because they not only expand trade but also attract foreign direct investment and foster wide-ranging reforms. In any event, with U.S. budgets now stretched thin by the Iraq war, the aftermath of Hurricane Katrina, and tax cuts, it is fanciful to contemplate larger aid flows to Latin America.

In short, the United States is in no position to pursue any of the initiatives that would address Latin America's priorities. Even if the administration were able to revamp U.S. policies, it is uncertain whether the region's governments would be prepared to strike the kind of bargains needed to secure the support of the U.S. Congress and the American public for the proposed changes. Any U.S. trade concessions on agriculture, for example, would require Brazil and other countries to drastically reduce their barriers to U.S. exports of food, manufactured goods, and services and accept stringent standards on copyright and patent protection. But successive Brazilian governments have never said whether they would accept these conditions. It is also uncertain whether Washington could count on the Mexican government's assistance in enforcing border controls in exchange for a substantial liberalization of U.S. immigration laws. Similarly, many Latin American governments might not want increased U.S. development and antipoverty support if, as is the case with EU support for its members, such assistance came with requirements for higher taxes and an array of new budget and financial rules.