Latin America Is Primed for U.S. Trade and Investment
Led by the pro-business Mauricio Macri, Argentina could become a much more important economic partner for the United States in South America. Boasting the second largest economy on the continent, Argentina recently signed a Trade and Investment Framework Agreement (TIFA) in March 2016 with the United States and finally ended its debt crisis in November 2016 with payments of $475 million to remaining creditors. With Brazil in disarray, Argentina has emerged as South America’s next most important power, and its economic rebound and relative political stability could make it attractive for U.S. businesses.
Brazil, traditionally the most important power in the region with the largest economy, is reeling from corruption and bribery scandals. Former President Dilma Rousseff was impeached last year and her successor, Michel Temer, was accused on May 18 of paying hush money to an imprisoned Brazilian senator and accepting bribes from JBS, a global meat processing giant, in return for subsidized government loans. He denies these charges. Temer currently has a nine percent approval rating, making it increasingly likely that voters in Brazil may look to turn the page on the restrictive economic policies and corruption of the ruling elites. Despite Temer’s pro-business reputation, a successor untainted by scandal would be better equipped to renew economic engagement with the United States. Ninety-two percent of Brazilians in a recent poll do not believe Temer can advance important fiscal reforms in the country. Although the path is painful, rooting out corruption in the country and passing pension and labor reforms will make Brazil more attractive to investors and more prosperous in the future.
In Colombia, a negotiated peace with the FARC rebels has brought a fifty-year conflict to an end and could stabilize the country enough for new investment. As it attempts to put the FARC conflict in the past, Colombia plans to join the Organization for Economic Cooperation and Development (OECD) and looks forward to a projected 2.2 percent growth rate this year. Greater American investment could build on the progress made since the US-Colombia Free Trade Agreement came into force in 2012 and help the country’s economy recover from decades of warfare. That the economic opportunities from this investment could cement the recent peace deal is an added bonus.
Finally, the civil unrest in Venezuela, pitting the Congressional opposition and Venezuelan people against President Maduro, has greatly destabilized the country. Many blame the policies of Maduro and his predecessor, Hugo Chavez for the economic disaster unfolding in the country. Venezuela’s economy contracted by 10 percent last year and the country is suffering under the strains of 700 percent inflation. Protesters are taking to the streets, even as the opposition to Maduro in Congress pleads for non-violence. Seventy-five percent of Venezuelans have lost 19 pounds over the past year due to food shortages and the military has begun an illicit trade in bread. To prevent a new civil war in Latin America or even a failed state, the United States could offer mutually beneficial trade and investment with the beleaguered country. The Bolivarian Republic appears to have had enough of chavismo, and the prospect of a U.S. trade deal (with normalized relations, easing of sanctions, etc.) would remove socialism’s appeal for the Venezuelan people.
The political cyclones in Brazil and Venezuela, the peace in Colombia and the relative strength of Argentina mean that prospects have never been better to acquire new, friendly business partners in Latin America. However, the U.S. must strike while the iron is hot. In 2012, Latin American-Chinese trade reached $270 billion. Chinese investment is not tied to good government or humanitarian concerns and could be used to prop up anti-American regimes in the region. China has been Africa’s largest trading partner since 2000 and Pew Research surveys showed that Africans have a high opinion of China (70 percent favorable). In addition to the economic windfall from this investment by securing access to many natural resources and raw materials, China has fared well strategically from its hyper-investment in Africa, earning goodwill in rising nations across the continent. Chinese infrastructure investment has greatly benefited some parts of Latin America as well and American neglect of the region could leave room for greater Chinese influence and purchase. America should not squander the economic and geopolitical opportunities in South America.