Trends in Latin America & presidential leadership.

Author:Martinez, Mel
Position:Center for the Study of the Presidency and Congress News Analysis - Report

A Reshaped Regional Narrative

Too often, presidential administrations see the Western Hemisphere as a geopolitical afterthought. Despite geographic proximity, economic opportunity, and generally shared political values, the lack of a "crisis" in the region has relegated it to the bottom of the inbox behind other geopolitical regions such as the Middle East, Eastern Europe, and East Asia. While the United States has been forced to confront challenges in these regions--and will continue to do so--it cannot continue to be at the expense of opportunities to improve relations with partners in the Western Hemisphere.

Over the past year and a half, the Center for the Study of the Presidency & Congress has analyzed how the regional narrative has changed in ways that demonstrate the importance of political reform and economic growth to regional stability and integration. In many cases, it has been the Latin American middle classes and their increasingly global outlook that have driven this process. In others, it has been a combination of bold political leadership and reformist thinking that has driven new approaches to regional problems. In all areas, the growth of entrepreneurialism and private-sector initiative has been key to transforming Latin American economies and, thus, demanding more of Latin American political systems.

Contrary to the Cold War--during which many preconceptions of Latin America were developed among policy makers (1)--the regional situation is not one of competition within the region. Rather, the region finds itself now defined by two narratives that are driven from within the region itself. The first is of nations backsliding away from democracy as populism and cronyism erode existing institutions and prevent the growth of civil society. Venezuelan oil largesse--combined with Cuban security and intelligence support--had allowed for the continued repression of the Venezuelan people and the spread of Chavez-inspired populism in the region. Brazil's economic potential remained unrealized due to political stagnation, widespread corruption, and overreliance on commodity-led growth. The shortcomings of these systems are laid bare in the Venezuelan economic collapse--a looming humanitarian disaster--and the political turmoil in Brazil.

While significant attention has been paid to the failures in these countries, there is the second narrative: success stories from the region that serve as a model for U.S. policy makers and regional leaders. In this project, the examples of Colombia, Mexico, and Panama have been studied to look at their successes and how those lessons learned can be applied to the region as a whole. This report also examines cases from Chile, Nicaragua, and Peru to explore how some countries require continued engagement and support for major reforms to improve their prospects for economic growth and political stability.

Additionally, during the course of this project, we have seen how the second narrative is ascended in nations that were once paralyzed by the cronyism and populism of the first narrative. Argentina is the greatest example of this, where the election of Mauricio Macri has ushered in a sea change from the period of Kirchnerism that saw Argentina largely isolated from global markets. Seeking reform at home and settlements with bondholders abroad, the new Argentinian leaders have seen that the future lies with reintegration into the global economy; not the preservation of the institutions constituting a neo-Peronist political economy.

While these narratives are driven from within Latin America, that is not to say that U.S. leadership is a nonfactor in the outgrowth of these positive trends. As our analysis will show, the leadership of U.S. presidents in relations with Latin America is a key aspect of hemispheric integration and positive U.S. relations with the region. Consistent engagement with Latin American partners demonstrates how U.S. presidents can help set a positive course for the region. At the same time, the cases we have examined also demonstrate the cost of disengagement.

In this report, we will describe what we have discovered during the roundtable sessions we have chaired during this project--held in Washington DC; Miami, Florida; Bogota, Colombia; and Panama City, Panama--which draw on the expertise of many U.S. and regional leaders from government, the private sector, and the business community. First, we look at how this project's analysis of trade and investment, private-sector growth and the rule of law, efforts at hemispheric integration, and security policy demonstrate the changing trends in the region and what they mean for U.S. relationships with hemispheric partners. Following that, we will discuss the narratives of presidential leadership from recent administrations and how the project's participants viewed the legacy of their leadership and engagement with the Americas. We will also briefly address the impact of U.S. relations with the region and what the project found to be their impact on U.S. domestic politics. Finally, we close with a glimpse of some of the positive trends moving forward that draw on the lessons of these case studies of both Latin American countries and the leadership of U.S. presidents.

Regional Trends

Trade and Investment

As Latin America continues to experience a period of economic and political stability, new opportunities for engagement and investment have emerged. Specifically, for states such as Colombia, Mexico, and Panama, their focus on improved governance, economic diversity, and global competiveness has allowed for private-sector companies and foreign nations to invest confidently in these Latin American countries. In addition, the success of the Pacific Alliance and participation of Latin American countries in the Transpacific Partnership (TPP) negotiations reinforce their commitment to comprehensive reform and development of civil society. The United States should continue to partner with these pro-market, pro-trade countries, while also pushing for these states to make further reforms that foster increased trade, bolster the rule of law, and further regional integration.

For countries such as Mexico and Colombia, reform agendas have assisted in strengthening their economies by moving away from solely commodity-driven growth. Over the past three decades, Mexico has been able to transition from an agricultural and commodity-based economy to one dominated by services and manufacturing. This shift has created a growing middle class with disposable income and has fostered multinational corporations that have the capacity to invest abroad. In addition, the Pena Nieto administration passed a widespread series of reforms in 2013, which will usher in a new era of investment into many essential sectors, such as energy. Policy makers within Mexico are hoping to increase the country's competitiveness through the Pacific Alliance and involvement in the G20 and TPP negotiations. Finally, despite the focus on migration from Mexico that blurs the line between domestic politics and foreign relations, more Mexican nationals are returning to Mexico to seek opportunities there than are entering the United States.

For Colombia, the increased security resulting from Plan Colombia has raised investor confidence in the nation and legitimized the country as a stable trade partner. The country has aggressively pursued free trade agreements and secured a dozen bilateral agreements with countries such as England, Switzerland, the United States, and with the European Union. However, as the Colombian economy has begun to slow down due to a number of factors including declining oil prices--"the central bank now expects the economy to expand to only 2.8% this year [2015] and 3% in 2016"--the success of the country in diversifying its economy and its steady economic growth over the past few years should not be overlooked. (2)

For President Santos, growing the Colombian economy has been a priority and his administration has passed multiple reforms aimed at creating more formal private-sector jobs--rather than jobs in the shadow economy--and eliminating onerous taxes, as well as promoting public--private partnerships specifically for infrastructure development. The expansion and diversification of the Colombian economy demonstrates that the country's successful transition from a nearly failed narcostate to a regional leader and global business hub.

Taking advantage of its geographic location and expanding the infrastructure of the Panama Canal, Panama has built a hemispheric trade and transport hub for the needs of global commerce. Emphasizing rule of law and promoting a pro-trade agenda, Panama has sought to attract foreign investment and foster businesses based not just on transshipment of goods, but also further diversification as a regional energy hub and a center for the service and financial industries. As multiple infrastructure projects--including the Canal expansion and development of an extra metro line in the capital Panama City--are nearing completion, policy makers hope to reinvigorate the country's stalled economic growth.

Private-Sector Growth and the Rule of Law

Throughout the course of this project, participants identified a key trend in the region--Latin Americans are expecting more in terms of both economic opportunities and the performance of their governments. An increasingly educated and upwardly mobile middle class is seeking to build new paradigms that emphasize the interrelationship of private-sector entrepreneurship, economic growth, and the respect for rule of law and human rights. Nations that have emphasized the importance of this interrelationship have pulled ahead of neighbors that have remained bound by statist economies and abridgments of freedom. Again, this is the same set of nations that has emphasized open...

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