The current issue of the Bonn Power Shift Monitor deals with Latin America’s fragile recovery against the backdrop of a Trump presidency – away from the old model as the United States’ backyard, towards more diversified relations and regional integration?
Latin America’s and the Caribbean’s economic downturn which has been threatening its status as an emerging region finally seems to be coming to an end. Clearly, the region is still struggling from a number of serious structural challenges, particularly when it comes to the informal economy, its enormous skills gap and low quality education. The UN development report estimates that approximately a third of all Latin Americans who moved out of poverty over the past decade will likely slide back. Nevertheless, the LAC region is at a turning point. After two years of contractions, the World Bank projects a modest growth of around one percent for 2017.
The new US administration’s economic and foreign policy approach might constitute a new threat to Latin America’s cautious recovery – over 40% of Latin American exports are destined for the United States. Trump’s protectionist stance with the threat of borders closing and possible renegotiations of NAFTA and CAFTA have unanimously been met with harsh criticism from Latin leaders. As ties with the United States are becoming chillier and more uncertain than ever, Washington’s retreat is increasingly opening up room in the region for other actors. Latin America is expected to lead the charge of emerging markets bouncing back after the global recession, offering the best investment proposition of any region in the world; this applies particularly to Argentina, Brazil as well as the Pacific Alliance of Mexico, Columbia, Peru, and Chile. Subsequently, Australia, for instance, is increasingly turning towards the region while the EU is looking to develop a firm Latin America policy for which the conclusion of negotiations for an agreement with Mercosur could be starting point. The current situation particularly creates a strategic opportunity for Washington’s big rival to strengthen its ties to the region: In a sharp contrast to Trump’s rhetoric, Beijing considers the region a “land of vitality and hope”. As long as negotiations are held with considerable caution, deepening the cooperation with China might create good development opportunities for Latin America.
Aside from various external partners, interregional integration might start playing a crucial role in Latin America’s recovery. Washington’s backtracking might provide a much needed push that could bring decades of hesitant regional integration efforts to fruition. With the Pacific Alliance’s ambitious integration and liberalization scheme, the increasing convergence between Mercosur and the Pacific Alliance, and a fresh interest in a closer cooperation between Mexico, Brazil and Argentina, regional multilateralism is likely to receive new momentum. Trump’s lack of attention to his neighboring region is not only a security threat for US , but also challenges long-standing regional dynamics – possibly even leading to an unprecedented political and economic unity south of the US - Mexico border.
Prof. Dr. Xuewu Gu
Center for Global Studies, University of Bonn