Can Washington Regain Interest in Latin America?

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Vitoria Saddi | Aug 11, 2008

The presidential race in the United States and whether the next American president will come from the Democrats or the Republicans have important impacts for Latin countries.Tom Trebat, has (convincingly) argued that the positive aspects of Obama as the next US president and what he would do for Latin America. He argues that the Washington politicians and policy makers have given up on Latin countries and some of the countries in the Latam region display indifference about Washington. Opinion polls show that Latin Americans have an increasingly negative opinion of the United States, coupled with growing doubts about the success of Washington-affiliated political and economic reforms during the 1990s. The gap between the U.S. and Latin America is partly a reaction by Latin America to the United States’ post 9/11 foreign policy agenda. Latin America was not central to the global war on terrorism. Moreover, China captured the economic imagination of the U.S. However, one must recognize that Latin America itself bears some responsibility for Washington’s lack of interest in the region. Latin America’s slow growth reflects its failure to fully implement the so-called Washington Consensus – not the failure of Washington Consensus policies. In brief, the United States lost interest in Latin America both because US foreign policy changed (the pressing need to fight terrorism) and because Latin America failed to implement the economic reforms needed to compete with China.
Indeed, most Latin countries failed to implement the main aspects of the ‘Washington Consensus’ and as a result, failed to credibly consolidate macroeconomic stability and support sustained growth. On the political front, Latin countries displayed progress and have stable democratic regime. It is puzzling that economists and political analysts keep praising China and its economic performance without mentioning the dictatorship type of regime. Hugo Chavez, the Venezuelan president, tends to be more of an apprentice especially when compared to the not-so-soft Chinese leaders. In any case, we all know that Latin America countries still need to take additional steps to reduce poverty and inequality, in order to achieve high and sustainable growth rates.
The fact that US lost interest in Latin America does not suggest a severed relationship but something more related to the deep economic problems almost all the countries in South America experienced during the 1990s. On the other hand, as explained byTom Trebat, republicans have never cared about the region. All in all, I think that as long as we have a democrat as the new US president, Latin countries will get closer to Washington than ever before. Nowadays, Brazil, Mexico, Chile, Peru have stable economies and tend to move forward with their structural reforms. I have no doubts that a new democrat president will regain interest in the region mainly because they are aware of the economic potential of these countries that could be bring positive spillovers across the Americas.
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Comments
Good article. If the proper reforms are made the FDI will follow and is. I don't think it's as much the fact that the United States has 'given up' on Latin America as it is the fact that capitalists and fund managers alike will go where risk is lowest and return is greatest. Up until the most recent economic crises that was places like China, India, Russia, Brazil (BRIC). As these markets being to cool I think we will begin to see a renewed interest in expanded Latin American equities and other emerging markets.
The majority of Latin American administrations just simply are not there yet. Chavez, de Kirchner, fuel subsidies, and poor to moderate investment climates for such things as private equity and venture capital are holding the region back - albeit, it is getting better.
Its an exciting story to watch. I have much respect for the region as an investor and am looking forward to great times ahead. Lets keep our fingers crossed for a better US Administration and a more friendly foreign policy as the memories of 9/11 and a failed Bush presidency begin to fade.
Written by Brett on 2008-08-11 19:18:28