Download PDF As US policymakers struggle to overcome sluggish economic growth while confronting abiding security threats, there is a stronger argument than ever for fortifying US partnerships with countries in the Americas whose economies and security are intertwined with America’s own economy and security. While the United States has been preoccupied with other regions, most Latin American nations have continued to modernize their market economies; two nations in particular—Brazil and Mexico—are emerging as global players. Therefore, the time is right to restore a strong bipartisan consensus in the United States that promotes a constructive, free-market growth agenda in the Americas. Practical initiatives—not rhetoric—will encourage America and its neighbors to find common ground for their collective benefit.
Key points in this Outlook:
- America’s economic crisis and threats to US security have undermined its traditional global-leadership role and weakened its connections to Latin American nations that continue to modernize their economies.
- The United States must recover its regional credibility by taking bold initiatives to restore its fiscal solvency, while aggressively promoting trade, energy interdependence, technology transfer, and economic growth.
- The United States must then retool its strategy for its partners in the Americas by working with them to combat threats such as cross-border criminality and radical populism, encouraging dialogue with regional leaders, and ensuring law enforcement cooperation to develop a mutually beneficial relationship.
A stable and prosperous Americas is indispensable to US economic success and security. The region is home to three of the top four foreign sources of energy to the United States, as well as the fastest-growing destinations for US exports and investment. Clearly, geography and shared values predetermine a united destiny for the United States and its neighbors in the Americas. How positive and fruitful that destiny will be depends on whether US policymakers, private businesses, and civil society move with a greater sense of purpose toward seizing promising opportunities and meeting critical challenges.
Times have changed. The US fiscal crisis and preoccupation with two distant wars have distracted policymakers in Washington and undermined US leadership in the Americas. Although access to the US market, investment, technology, and other economic benefits are highly valued by most countries in the Western Hemisphere, today, the United States is no longer the only major partner to choose from. Asia (principally China) and Europe are making important inroads. So, as US policymakers retool their strategy for the Americas, they must shelve the paternalism of the past and be much more energetic in forming meaningful partnerships with willing neighbors.
Of course, the United States must recover its credibility by making bold decisions to restore its own fiscal solvency, while aggressively promoting trade, energy interdependence, technology transfer, and economic growth. Then, Washington will be better positioned to cultivate greater economic and political cooperation among its neighbors, beginning with an open and candid dialogue with the region’s leaders about their vision, their challenges, and their priorities. Partnerships can thus be built on common ground.
"Today, 95 percent of the world’s consumers live outside the United States, and the International Monetary Fund predicts that, through 2015, some 80 percent of economic growth will take place beyond US shores."
The security challenges in the Americas are very real and growing more complicated every day. Illegal narcotics trafficking, transnational organized crime, and radical populism fueled by petrodollars and allied with dangerous extraregional forces pose daunting challenges. Although it is wise to prioritize a positive socioeconomic and political agenda, assessing and addressing threats is an indispensable prerequisite to achieving US security and regional leadership.
To make the most of their united destiny, the United States and its partners in the Americas should:
- Promote and defend democracy, the rule of law, and human rights and private property as the building blocks of just societies, accountable governments, and prosperous economies;
- Advocate and support the empowerment of individuals through the development of strong free-market economies, healthy private sectors, and free trade among nations;
- Assist neighbors in addressing their essential security needs so they can grow in peace and be more effective allies to prevent or confront common threats;
- Incentivize capital markets and encourage new and innovative technology cooperation to develop a regional community that is interdependent in the production and distribution of a range of products and services—particularly energy;
- Confront international organized crime in Mexico and Central America by supporting effective law-enforcement institutions and competent judicial systems;
- Work with willing allies to restore the Organization of American States to its essential mission of promoting and defending common values and meeting common threats;
- Address the role of China and Russia in the Americas by encouraging open and transparent regional investment and trade and rejecting exploitive policies that undermine local societies, regional security, and economic growth;
- Combat threats posed by authoritarian regimes and their ties with Iran, Hezbollah, and transnational criminal organizations;
- Assist the Cuban people in transitioning to a post–Castro Cuba by helping to jump-start their private sector, rehabilitate their economy, and restore their political freedoms when the dictatorship collapses.
Maximizing Mutual Global Competitiveness
Expanding regional economic cooperation is crucial to US economic growth. An aggressive trade promotion and investment strategy in today’s hypercompetitive, globalized economy is not a policy option; it is an imperative. Clearly, prosperity at home depends on success abroad. The economic opportunities in the Western Hemisphere are enormous, and US policy-makers and the private sector must recognize them as critical to US economic growth.
In 2011, US exports reached a record $2.1 trillion in total value, despite the fact that only 1 percent of US businesses export their products to foreign markets. The United States must expand on these opportunities. Exports benefit the US economy by offering companies opportunities to tap new markets, expand their production, and earn more consumer dollars. Today, 95 percent of the world’s consumers live outside the United States, and the International Monetary Fund predicts that, through 2015, some 80 percent of economic growth will take place beyond US shores.
It is indisputable that an aggressive US trade policy—meaning selling US goods and services in as many markets as possible—is essential for the US economy to hone its competitive edge in the 21st century. In this sense, America’s future is inextricably linked to the future of its neighbors in its own hemisphere. A prosperous hemisphere means a more prosperous United States.
"Since 2003, an estimated 73 million Latin Americans have risen out of poverty. Moreover, between then and 2010, the average Latin American income increased by more than 30 percent."
The Western Hemisphere’s Moment. The United States is strategically well-placed to begin a new chapter in trade relations with Latin America. The countries within the Americas are bound by close historical, cultural, familial, and geographic ties, linked by common values and mutual interests. What also facilitates expanded economic engagement is the regional trade partners’ proximity to US shores, and the significant number of Hispanics living in the United States—some 50 million—that provide an exceptional strategic advantage in doing business with their countries of origin.
Equally important are the advances that many countries within the region have made in establishing economic stability and growth in recent years as the roots of democracy and the rule of law continue to take hold. Countries such as Mexico, Chile, Peru, Brazil, and Colombia have been at the forefront in modernizing their economies and opening them to investment, liberalizing trade, and becoming more competitive overall.
The numbers tell the story. Since 2003, an estimated 73 million Latin Americans have risen out of poverty. Moreover, between then and 2010, the average Latin American income increased by more than 30 percent, meaning that currently, nearly a third of the region’s some 570 million people are considered middle class. And in just the next five years, regional economies are projected to expand by one-third. That macroeconomic stability generates even greater opportunities for US business.
The Western Hemisphere already supplies a quarter of the world’s crude oil, a third of the world’s natural gas, nearly a fourth of its coal, and more than a third of global electricity, while offering tremendous potential for the development of renewable energy technologies.
Certainly, many in the US private sector have already discovered the benefits of intrahemispheric economic relationships. In fact, Latin America has played a key role in expanding US exports in recent years.
The Congressional Research Service reports that from 1998 to 2009, US trade with Latin America increased an average of 82 percent, more than 72 percent with Asia, 52 percent with the European Union, and 64 percent with the rest of the world. In 2011 alone, trade with Latin America grew 20 percent.
The economic growth in 2011 elevated trade between the United States and the region to a historic high of $772 million. Exports to the region grew 22 percent to $350 million, while imports increased by 20 percent to a total of $420 million.
According to the US Department of Commerce, American companies now export more to the Western Hemisphere—some 42 percent of total US exports—than to any other part of the world, including China. Last year, US merchandise exports to Latin America totaled $367 billion, and the US private sector accounts for one-third of all foreign direct investment in the region.
The United States now has trade agreements with 11 countries in the Western Hemisphere, which the Department of Commerce reports help to support nearly four million US jobs. Clearly, however, there is much more that can be done to fulfill the potential of intrahemispheric economic relations in the hyper-competitive global economy.
High-level official US engagement is imperative to revitalizing existing alliances and developing new partnerships to boost mutual competitiveness. A reinvigorated US trade policy must transcend past approaches that have been too identified with solely US interests and too focused on bilateral relationships. A 21st-century approach necessitates more multilateral engagement and cooperation, mutually beneficial information-sharing and support, and an inclusive vision.
A complementary strategy to increase demand for US goods and services requires mobilizing private capital, encouraging technology transfer, and leveraging existing US programs to strengthen the private sector throughout the Americas. Traditionally, private-sector growth has been held back by lack of investment and access to credit. In a true win-win strategy, the United States can boost exports and investment while strengthening regional producers and consumers.
In summary, increased US government initiatives to expand economic partnerships with the country’s Western Hemisphere neighbors are crucial to America’s economic recovery and competitiveness. A prosperous hemisphere is also beneficial to US security concerns. The Americas is home to some of the most dynamic markets in the world. The US administration must recognize this reality and take full advantage of the opportunities.
"According to the US Department of Commerce, American companies now export more to the Western Hemisphere—some 42 percent of total US exports—than to any other part of the world, including China."
Boosting Two-Way Trade. US prosperity depends on greater global economic interaction, with the Western Hemisphere providing unique opportunities. Three recommendations for boosting two-way trade:
- Promote the US government’s Pathways to Prosperity initiative as the primary US vehicle—including presidential- and cabinet-level participation—through which to facilitate greater hemispheric trade integration;
- Expand Latin American participation in the Trans-Pacific Partnership—an initiative to promote stronger economic ties between the Western Hemisphere and the Asia-Pacific region—beyond Peru, Chile, and Mexico;
- Through the Inter-American Development Bank, increase material and technical support to trade- and business-advocacy groups throughout the region to promote “best practices” among companies, cooperatives, or individuals seeking to export their goods or services.
Americas Economic Freedom Initiative. To accelerate the growth of the regional middle class—and thereby spur demand for US goods and services—a presidential-level initiative should be implemented to help boost a robust private sector throughout the region. Some recommendations for accomplishing this:
- Marshal US and regional expertise to develop regional capital markets that will increase the availability of private financing for business expansion, budding entrepreneurs, and innovators. First, this would entail convening a regional capital-markets summit—with the participation of the US Department of the Treasury and regional counterparts—to launch a public-private task force to develop a capital formation work plan identifying the prerequisites and targeting obstacles to the development of robust capital markets in Latin America and the Caribbean. The team would consist of government financial-sector experts, Inter-American Development Bank specialists, and business and investment professionals. Second, it would require joining other nations in developing and funding a regional private-enterprise investment fund through the Inter-American Development Bank to provide equity and debt capital directly to private entrepreneurs quickly and on commercial terms (especially in locations traditionally neglected by private capital because of high risk). This fund should be governed by a private board and managed independently by investment professionals subject to public oversight;
- Charge multilateral development banks to technically and financially support the creation of national or subregional enterprise funds to bolster local private-sector development at the grassroots level, which will provide seed capital and technical support to small and medium enterprises. These funds would be capitalized with public and private funds and managed by investment professionals;
- Ensure that adequate protections exist in regional capital markets to prevent international terrorist financing and illicit-narcotics money laundering;
- Convene a summit of deans of business schools to expand exchange programs between the 20 most prominent business schools in the Americas. This program should bolster expertise in trade, business management, and capital management, among other fields, to strengthen the professional capacity in national economies;
- Expand exchanges among scientists and engineers with innovator-entrepreneurs and those engaged in private research and development to cross-fertilize and identify commercially viable technology and innovation;
- Revise US Millennium Challenge Corporation guidelines to prioritize programs in subregions (for example, in Southern Mexico and Northeast Brazil) and to emphasize cooperative funding arrangements, including private-sector contributions.
Attaining Western Hemisphere Energy Security. We must also maximize mutual global competitiveness in the energy realm. The United States can accomplish this by immediately approving extension of the Keystone XL Pipeline that connects Canada oil deposits with US refineries in the Midwest. We should also strive to create a “Big 4” regional energy consultative group between the United States, Canada, Mexico, and Brazil—including representatives of the private sector—to promote cooperation and share best practices on energy production and distribution. We should likewise host a Camp David summit with leaders of these four nations.
Democracy Promotion Agenda
The rise to power of Hugo Chávez and his fellow authoritarian populists has exposed the fragility of Latin America’s democratic institutions. Their modus operandi has been to use those institutions to gain power and then proceed to systematically hollow them out, concentrating power in the executive, marginalizing the opposition, and undermining rule of law.
A US strategy to reengage with the Americas must include a vibrant democracy promotion component to assist US partners in helping to strengthen and consolidate their democratic institutions against the predations of would-be authoritarians.
To be sure, the primary democracy-building responsi-bility rests with the leaders and citizens of each country. It is for each nation to make the difficult decisions to reduce the power of the state, protect individual freedoms, and promote accountability and integrity in government. The United States is not a disinterested bystander, however. It is best served by working to advance the cause of democracy around the world, for the very real benefits of America’s long-term security and prosperity.
This is not only an issue of US self-interest. Democracy also confers significant benefits on its citizens wherever it has succeeded in taking root, resulting in more effective government, more security, and better prospects for economic development. The United States can support this process by backing reformers who are working in their countries to consolidate stable, honest, and rules-based institutions and creating incentives for increased accountability in government through US assistance.
Also critical is the need to increase support for the bedrock of representative government: civil society nongovernmental organizations. These include, but are not limited to, busi¬ness associations, media organizations, government, labor unions, consumer and environmental groups, and women’s and human rights watchdog groups.
In Cuba, citizens must rise to this challenge by overcoming their fears and claiming their future. Before they can build that future, they must dismantle the vestiges of the police state and command economy. The responsibility is theirs, but their friends can help with a series of bold and constructive measures. Although it is more important than ever to preserve the economic sanctions and use them as leverage to bring about broad, deep, and irreversible reforms, the United States should use the promise of aid, trade, and normal political relations as an incentive to leverage change.
The United States must be conscientious and bold in its support for democrats in the Americas. It must not allow the hostility of antidemocratic regimes to deter it from helping struggling democrats in countries such as Venezuela, Ecuador, Bolivia, and Nicaragua. If those democrats are willing to take the necessary risks to advocate for different futures for their countries, the United States must demonstrate its solidarity and support for them.
Again, there is no silver bullet in the policy toolkit for developing democratic institutions, building transparent and apolitical judicial systems, eliminating corruption, and promoting competitive elections. It is a difficult process that is never quite complete, as US history shows. But only by resolutely supporting democracies and democratizing countries can we achieve and sustain a stable, secure, and prosperous hemisphere.
Some recommendations for promoting democracy:
- The Organization of American States: the Obama administration should instruct the US permanent representative to work with willing states to promote core values and interests, invigorate the application of the Inter-American Democratic Charter, and restore the independence of the Inter-American Commission on Human Rights.
- Latin America needs to be reprioritized as a recipient of the funding allocated to the National Endowment for Democracy, the International Republican Institute, the National Democratic Institute, and related organizations. While democracy has taken firm root, its institutions need strengthening, or else the hard-fought-for gains of recent decades will be jeopardized. Democracy promoters should prioritize support for political parties, independent journalists, and others that are indispensable and constructive protagonists in the political process.
- In Cuba, the United States should restore purposeful and focused prodemocracy programs aimed at bringing genuine change to the island.
- The US president should reactivate the US Commission for Assistance to a Free Cuba to update transition plans and formulate a specific pledge of robust US aid to a genuine transition.
- The United States should create a private-enterprise fund and a US-Cuba business council to empower entrepreneurs on the island once a transition is under way to promote the development of a healthy and independent private sector, respect for private property, and the rule of law.
A Security and Stability Agenda
Shared land and maritime borders make security in Western Hemisphere countries a permanent priority for the US government. The security challenges confronting Mexico, Central America, and Venezuela are more dramatic today than in recent memory.
In the final year of the George W. Bush administration, Mexico and the United States agreed on a $1 billion counter-narcotics assistance package. Yet, despite the enormous opportunity this presented to bring Mexico and the United States into a closer and mutually beneficial security cooperation, the aid was so slowly delivered that Mexicans have been left to wonder if their raging drug war is a priority for the United States. Conservative lawmakers who were the driving force behind Plan Colombia a decade ago have been less active on Mexico, focusing instead on border security as a means to fight illegal immigration and leaving Mexicans to square off with bloodthirsty cartels on their own.
It is time for the United States to more fully recognize that “Mexico’s drug war” is more accurately “America’s drug war” that Mexico is fighting. The US Department of Justice says that Mexico’s drug-trafficking organizations are the greatest organized crime threat in the United States. The US must suppress demand for illicit drugs through education, treatment, and law enforcement, but helping Mexico sustain this fight is an indispensable responsibility as well.
"Even as the international community implements new financial sanctions to deny Teheran the means to sustain a uranium enrichment program, the regime has established dozens of shadowy commercial enterprises and banks in Venezuela to launder as much as $30 billion through its petro-economy."
Moreover, increased US bipartisan political support may encourage the Mexican people and their new president, Enrique Peña Nieto, to sustain their antidrug efforts to advance the two countries’ common security, stability, and prosperity. The United States should also provide robust and innovative material support for these efforts and institutionalize law-enforcement cooperation and information sharing that are essential to the common fight against transnational criminal groups.
In Central America, the institutions of government and the rule of law have been overwhelmed by the onslaught of criminal gangs that have been displaced by Mexico’s stepped-up law enforcement. Guatemala’s state apparatus has been underfunded for decades, and the institutions of Honduras have been weakened by a succession of populist caudillo presidents, systematic corruption, and the expanding presence of organized crime. El Salvador confronts the unique challenge of hardened gang members deported from the United States maintaining their ties to criminal networks in US urban centers. A public-security crisis in these countries has undermined popular confidence in elected officials and overwhelmed poorly trained and equipped security forces.
Unless the United States and neighboring countries organize an international response, several of these countries may soon become ungovernable territories, producing economic failure, civil strife, and refugee crises. This challenge requires a regional rescue plan (led by the United States, Mexico, Colombia, Europe, and the multilateral development banks). The United States should encourage interested nations to organize a summit of governments and institutions to develop such a plan and agree on how it should be implemented and funded.
But by far the greatest threat to security and stability in the Americas is the narco-state that has taken root in Venezuela under the unaccountable regime of Hugo Chávez. This hostile regime is managed by Cuba’s security apparatus, funded by China, armed by Russia, and partnered with Iran, Hezbollah, and Colombian and Mexican narco-traffickers.
US law enforcement and federal prosecutors have gathered fresh, compelling evidence implicating senior Venezuelan officials and Chávez himself in narcotics trafficking in collusion with Colombian terrorist groups. Chávez has also forged an important strategic alliance with Iran to allow it to evade international sanctions and carry its asymmetrical threat against the United States to the country’s doorstep. Even as the international community implements new financial sanctions to deny Teheran the means to sustain a uranium enrichment program, the regime has established dozens of shadowy commercial enterprises and banks
in Venezuela to launder as much as $30 billion through its petro-economy.
Certainly the drug kingpins managing Venezuela today have everything to lose when Chávez succumbs to cancer. Several ruthless, anti-United States governments have a stake in trying to engineer a chavista succession, even as the government struggles with an unsustainable fiscal situation, a collapsing economy, social polarization, and a public-security crisis. In short, within the next several years, Venezuela will become a manmade disaster that will impact regional security and energy supply. America’s current policy of evading responsibility for the implosion in Venezuela is untenable and dangerous.
Every serious government in the Americas has a stake in addressing these issues before they become unmanageable. The crises in Central America and Venezuela will require US leadership, intelligent diplomacy, and resources to organize an effective
The following are recommendations for addressing these issues, listed by country or region.
- Renew emphasis on intelligence capabilities and mission to confront extraregional threats and cross-border criminality;
- Increase dialogue with regional and European military, intelligence, and security agencies on common threats;
- Direct US Northern and Southern Commands, the US Coast Guard, and the US Drug Enforcement Administration (DEA) to provide “surge” engagement plans for additional funding and other support;
- Ensure better cooperation from the US State Department with law enforcement and intelligence efforts.
- Develop strong bipartisan support in the US Congress for Mexican counternarcotics efforts and for treating Mexico as not just an “enforcer” but an ally against drug trafficking cartels, and emphasize common “North American” strategies;
- Set up an interagency US-Mexico financial crimes unit based at the US Treasury to improve targeting of organized-crime money-laundering operations to cripple the financial solvency of the cartels.
- Build an international coalition to support Central American antidrug and anticrime security efforts— which would include Mexico, Colombia, and the European Union—then direct confiscated assets to foreign antidrug programs;
- Develop an integral strategy to strengthen regional governments and their institutional processes with the objective of marginalizing organized crime groups through increased security, legal prosecution, and anticrime operations.
- Form an interagency task force under US National Security Council leadership to assess and respond to the threats posed by the Chávez government and its alliance with Iran, its role in narco-trafficking, and implications of Russian arms purchases;
- Enhance the use of law-enforcement actions by the DEA and the US Treasury to unmask Venezuelan officials and companies that are involved with narco-trafficking, international terrorism, or sanctioned Iranian entities;
- Direct US embassies abroad to assist Venezuelan opposition groups in building an international democratic solidarity network to maintain scrutiny of the Chávez regime’s gross abuses of democratic processes and to defend the basic rights of the democratic Venezuelan opposition;
- Deliver appropriate diplomatic messages to China, Cuba, Russia, and Iran not to interfere in a post–Chávez democratic transition in Venezuela;
- Prepare a post–Chávez action plan to assist in removing criminal elements from the current Venezuelan government, helping Venezuelan people recover stolen assets through wanton corruption practices, and assist in rehabilitating the oil sector and national infrastructure through private-sector engagement and multilateral development banks.
A reinvigorated US policy in the Western Hemisphere cannot proceed without a fundamental reevaluation of bilateral relations with Brazil. With a population of some 200 million, a $2.5 trillion economy (the world’s sixth largest), and a recent history of steady political and economic management, Brazil is beginning to realize its enormous potential. Much as China used the 2008 Beijing Olympics to unveil its economic progress and modernity, Brazil will be the focus of global attention in 2014 and 2016 as it hosts the World Cup and Olympics, respectively.
Strengthening and expanding US relations with Brazil should be a US presidential priority. Specifically, it is in both countries’ interests to deepen the developing partnership, namely in the areas of trade, security, and energy. Yet, though there are opportunities in a more modern US-Brazil relationship, there are also challenges. It will be a test of US diplomacy to convince some sectors in Brazil that relations with the United States are not a zero-sum game, and that significant benefits can accrue for both populations as a result of deeper cooperation.
Some recommendations for US-Brazil cooperation:
- Invigorate presidential-level engagement;
- Establish a jointly funded US-Brazil foundation (modeled on the German Marshall Fund) to institutionalize broad cooperation; focusing on information and communications technology (the so-called “e-economy”); student, political, cultural, and other grassroots exchanges; and language training;
- Charge an interagency team with developing strategies to overcome the zero-sum approach in bilateral relations adhered to by some in the Brazilian foreign policy establishment;
- Institutionalize a bilateral defense ministerial on global security challenges, defense cooperation, military modernization, and regional security challenges;
- Incentivize US ventures with Brazil’s aviation and aerospace industries and overcome technology-transfer issues to create opportunities for US manufacturers;
- Offer working-level cooperation with World Cup and Olympics planning teams.
The potential opportunities and mutual benefits have never been greater for intrahemispheric cooperation. But US policymakers must aggressively seize initiative in turning that potential into reality. Certainly there are challenges and obstacles ahead, but increased economic relationships will take on a dynamic and momentum of their own, and once and for all render obsolete some of the retrograde populist agendas in the Americas. Geographic proximity, cultural and family ties, shared values, and growing prosperity are powerful incentives to drive a fundamental reassessment of US relations in the Western Hemisphere. It is essential that US policymakers demonstrate the political will to take advantage of this unprecedented opportunity.
Roger F. Noriega ([email protected]) was a senior US State Department official from 2001 to 2005. He is currently a
visiting fellow at AEI and managing director of Vision Americas LLC, which represents foreign and domestic clients. José R. Cárdenas ([email protected]) is a contributor to AEI’s Venezuela-Iran Project and a director with Vision Americas.
This paper benefited from the contributions and insights of subject-matter experts during two working sessions on hemispheric relations held in Washington, DC. These individuals include David Rogus, Martin Rodil, Alex Sutton, Eric Farnsworth, Angel Rabasa, Gabriel Sanchez-Zinny, Dan Runde, Francis Skrobiszewski, Danilo Cruz DePaula, Felipe Trigos, José Javier Lanza, and others who requested anonymity. The authors are solely responsible for this final product.
1. “Pathways to Prosperity in the Americas” (US Department of State, Bureau of Western Hemisphere Affairs), October 22, 2012, www.state.gov/p/wha/rls/fs/2012/199459.htm.