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From the Winter 2015/16 Issue “Latin America On Life Support?“
What are the challenges determining your country’s position within Latin America?
The balance of power in Latin America is shifting. Large, recently thriving countries like Brazil are struggling, hampered by domestic scandals. The economies of oil-dependent countries like Venezuela and Ecuador are stagnant, while other nations, such as Chile and Mexico, seem poised for growth. Amid this turbulence, countries are striving to reposition themselves. World Policy Journal consulted a panel of experts to help understand what issues are defining their countries’ changing roles in the region.
ARGENTINA: NARCO STATE
MARIANO TURZI
The most pressing problem Latin America faces today is narcotrafficking. As Pope Francis mentioned in his U.N. speech in September, narcotrafficking is accompanied by human trafficking, money laundering, the arms trade, child exploitation, and other forms of corruption. This trade increases violence, with Latin America’s poorest people caught in the middle as the state tries to eliminate drug rings or stop rivalries between cartels.
Moreover, the narco state destroys economies. Illegal networks arise, concentrating on trafficking in substances, arms, and persons. But then they “diversify” into general smuggling and kidnapping. Narco-economies generate enclaves that displace other productive endeavors. Financial and human capital are chased away by the prospect of escalating violence.
The politics of drug trafficking also erodes state sovereignty and legitimacy. In 2013, the Organization for American States recognized in its “Drug Problem in the Americas“ report that 97 percent of all cocaine consumed in the world comes from three South American nations: Bolivia, Peru, and Colombia. But it’s not just drug-producing states that are challenged by transnational criminal networks. Producer states, transit states, and consumer states all generate internal mafias that capture state institutions, including law enforcement, border control, and the judiciary. In some cases, this leads to open violence—Michoacan’s autodefensas—but more often, it is a slow-motion process of institutional decay that opens the door for a gradual colonization of state structures to the detriment of the social, political, and moral order.
Mariano Turzi is an international relations professor at New York University in Buenos Aires and senior consultant at Berensztein.
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BRAZIL: MERCOSUR INDEBTED
FERNANDA CANOFRE
Brazil is experiencing a turbulent moment, both economically and politically. For the past 12 years, the country has maintained its role as a regional leader. While funding infrastructure projects such as the Mariel Port in Cuba may have been a clever move internationally, inside the country it has been presented by the opposition as an example of the government “not investing in Brazilians.” As President Dilma Rousseff faces a fractured Congress, corruption scandals, internal opposition, and a daily debate on possible impeachment, the alliances with other left-wing governments in the region are like stones in the pockets of a drowning person.
The biggest challenge here is to balance domestic politics and the relationship with our neighboring countries. When Rousseff assumed Mercosur’s presidency last July, Rousseff filled her promise to extend and renew the Mercosur Structural Convergence Fund, which gathers proportional contributions from each of the member states to fund development within the region and is essential to regional integration. Yet, the economic crisis affecting Brazil touches all countries within the bloc. Brazil’s own debt to Mercosur amounts to $120 million. Other Latin American countries are now focusing on direct deals with the European Union and the United States to both avoid dependency on Brazil and becoming a drag on their neighbors during a crisis.
Fernanda Canofre writes from Brazil for Global Voices.
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MEXICO: GEOGRAPHIC FLOWS
GABRIELA DE LA PAZ MELÉNDEZ
There is a major problem that stems from Mexico’s geographical position: arms and money flow unlawfully from north to south, and drugs and people flow unlawfully from south to north. Transnational criminal actors from the United States, Mexico, and Central America are involved in this dynamic, and the Mexico-United States border is the area where the consequences are felt most profoundly. Security issues in Mexico mainly concern the ways government and society are affected by common or organized crime within the country. In addition to violence, the most pressing problems are a weak judicial system and a huge income disparity within the population.
The fact that Canada and not Mexico hosted some of the negotiations for the recent restoration of diplomatic relations between the United States and Cuba shows a loss of leadership and credibility for Mexican diplomacy in the region. And while Guatemala recently overthrew a corrupt president and Colombia negotiated peace with FARC, Mexico trails both with respect to corruption and peacemaking.
However, in Latin America and the Caribbean, Mexico holds the most fruitful relations with countries that are not part of the Bolivarian Alliance. In trade matters, Mexico has agreements with all countries in the region, demonstrating the interdependence of the regional economies. So, even when a weakened peso hurts most Mexicans, for exporters it is still an advantage. This dynamic explains Mexico’s entry into the Trans-Pacific Partnership.
Gabriela de la Paz Meléndez is a professor of international studies at the Instituto Tecnológico de Monterrey (ITESM).
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CHILE: GOOD NEIGHBORS
LORENA OYARZÚN SERRANO
Chile’s foreign policy has shown stability since the return to democracy in the 1990s, promoting multilateralism, democracy, and respect of international treaties. These strategies have reduced both Chile’s asymmetrical economic dependence and the potential political influence that global and regional powers could exert over the country through the diffusing effect of multiple political and commercial ties.
Two features of Chile’s foreign policy inherited from the authoritarian period are pragmatism and the role of economic elites who organize into powerful interest groups to lobby for influence in the formulation of foreign policies. One of the most emblematic examples of this is in the relationship between Chile and Peru during their maritime controversy. The case was analyzed by the International Court of Justice (ICJ) in the Hague in its 2014 verdict. The Chilean government adopted a “two track” approach separating political and economic dimensions in order not to disturb trade and investment with Peru, which is one of the most important destinations of Chile’s foreign direct investments.
On the other hand, Chile’s relationship with Bolivia is framed in the logic of the 19th century, in the context of the War of the Pacific (1879-1883), when Bolivia lost its access to the ocean and became landlocked. Since then, the two countries’ relationship has been most contentious. Currently the ICJ is analyzing a Bolivian claim against Chile that would force Santiago to negotiate a solution for the “Bolivian Mediterranean problem.” Finally, one of the most important challenges for Chile is transforming itself into a bridge country that can reduce tensions between the different models of development in the region.
Lorena Oyarzún Serrano is an assistant professor at the Instituto de Asuntos Públicos of the Universidad de Chile.
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VENEZUELA: LEGACY
HERNÁN CASTILLO
Once Lieutenant Colonel Hugo Chávez took power in 1999, Venezuela aligned itself with enemies of liberal democracies in the Western Hemisphere. From the foreign policy perspective, one of the major problems affecting relations between Venezuela and its neighbors is the use of oil as a tool to spread a form of communism inspired by Cuban totalitarian socialism and then to cast 21st-century Bolivarian socialism throughout Latin America.
The set of problems affecting Venezuelan relations are the threats that are a legacy to the confrontations between the United States, the Soviet Union, and China during the years of the Cold War. These problems include drug trafficking; smuggling; illegal trade of weapons, radioactive materials, and precious stones; terrorism; human trafficking; migration of refugees and displaced people due to poverty and conflicts; environmental destruction and ecological depletion of the Amazon; border disputes both on land and at sea; and violations of human rights, particularly freedom of expression, thought, and democratic political organization.
As the United States appears to be evaluating its foreign relations, attention must be placed on Venezuela because of its potential for becoming a cause of political disturbances in the hemisphere.
Hernán Castillo is a professor at Universidad Simón Bolívar in Caracas, Venezuela and the author of Militares y Control Civil en Venezuela.
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PERU: WEAK INSTITUTIONS
ENRIQUE MENDIZABAL
Weak political institutions in Peru and its neighbors remain the main factor affecting the development of deeper and better relationships with other countries in the region.
Peru had a prolonged period of rapid and sustained growth. It has not been alone in the region, and it is not alone in its concern for the slowdown it now faces. Peru’s institutions are still weak, with a few pockets of excellence in public policy bodies, such as the Central Bank and the Ministry of Finance, and one or two highly technocratic ministries staffed by young policy entrepreneurs. Unfortunately, these staffers serve more as temporary consultants than as civil servants and only for as long as their ministers remain in fashion with the private sector and the international community. While the various initiatives they promote are highly regarded, their unexpected contribution to undermining efforts to develop the country’s politics has gone largely unreported.
Institutions in scandal-riddled Brazil may be larger, but they are not necessarily more developed or corruption free. Ecuador and Bolivia have made progress on a number of economic and social targets but have managed to all but break their political institutions in doing so. Argentina and Venezuela are on the brink, likely sustained by the inertia of decades of above-average education achievements. Chile and Colombia remain perhaps the two most stable polities in the region (which is saying a lot given Colombia’s ongoing internal conflict).
In this context, we find that the problems facing each of our countries are shared by many and require coordinated responses. These problems include climate change, employment, migration, security, energy, and the generation of knowledge. Peru cannot address these issues alone, but collaboration requires strong institutions. The Andean Community is a shadow of its past, and the Union of South American Nations (UNASUR) remains a monument to our failure to unite.
Enrique Mendizabal is founder of On Think Tanks and a part-time lecturer at Universidad del Pacífico in Peru.
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URUGUAY: COMPETITIVE CRISIS
IGNACIO MUNYO
After over a decade of record growth, the Uruguayan economy is at a standstill. Beyond the improvements in competitiveness that could develop with improvements in infrastructure, education, and international involvement, the reality is that Uruguay today is extremely expensive. The exchange disparity with Brazil—Uruguay’s principal trading partner, along with China—is already comparable to the record high levels of 1999. On average, what costs 100 pesos in Uruguay can be bought for less than the equivalent of 60 pesos in Brazil. With this regional economic context, in addition to the lower international prices of the products Uruguay exports, there is concern about the economy entering a recession.
Thanks to the process of de-dollarizing liabilities, Uruguay has the chance to let the dollar rise to recover competitiveness without an unsustainable climb in financial costs for businesses, families, and the government. What is inconvenient about this path is that inflation would invariably go above 10 percent, a limit that has been the most solid macroeconomic compromise of the past decade.
The card still left for the government to play is to take advantage of a positive external shock that the Uruguayan economy has had in recent years—the drop in oil prices. Uruguay is one of the world’s highest net oil importers relative to the size of its economy. If the state enterprise that imports and refines crude oil were to drop fuel prices in a staggered manner over a few months, inflation could be contained and the value of the dollar could rise significantly. As collateral damage because of the reduction in income of the state refinery, the fiscal deficit would increase by 0.4 percent to reach a total of 4 percent of GDP. This figure could actually be lower, however, because tax earnings would increase due to the rise in economic activity. This fiscal deterioration is a risk that must be assumed in the short term in order to regain confidence in the economy.
Ignacio Munyo is a professor of economics and director of the Centro de Economía, Sociedad, y Empresa at IEEM Business School of the Universidad de Montevideo.
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ARGENTINA: NEW CHALLENGES
ANDRÉS FONTANA
Argentina and its neighbors shared the experience of democratic transition in the 1980s, the challenges of the end of the Cold War, and globalization in the 1990s. After decades of authoritarian governments and international isolation, that process reshaped bilateral relations on the basis of peace, collective support for democracy, and regional integration. The new governments of this century developed a shared social agenda focused on poverty and inequality, as well as a more critical attitude toward U.S. foreign policy. The rejection of the American proposal for a hemispheric free trade agreement in 2005 was probably the highlight of the departure from the policies that characterized the 1990s.
Today, after 15 years of this shared view of regional, hemispheric, and international politics, some changes are to be expected, but none of the above parameters will be abandoned thoroughly. Transnational organized crime has become the major challenge affecting the whole region, with increasing operational capacity and a significant ability to both penetrate institutions and move across borders. In the new democratic era, these countries lack the capacity to share intelligence, establish coordinated border controls, and collectively carry out the basic policies needed to face this fast-growing challenge.
At the same time, countries in the region suffer from weak institutions, which affects policy effectiveness, political credibility, and sustained social and economic development. None of these issues have deeply affected bilateral relations. However, they do have a long-term effect on the quality of foreign policy and the relations of the sub-region with the international context, currently aggravated by the decline of economic activity in all of the Southern Cone countries, except Bolivia.
Andrés Fontana is a professor of international relations and political science at Universidad Nacional de La Matanza, Universidad Nacional de Buenos Aires, and Instituto Universitario de la Gendarmería Nacional.
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Compiled and translated by Ana Dávila, Laurel Jarombek, Joseph Naeem, and Abby Shamray
[Photo courtesy of Yuken Chen]