Latin America: Total Chaos?

By Carlos Malamud*

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South American Presidents waving to the cameras in Santiago, Chile / Flickr / Creative Commons

Democracy and democratic values are in crisis throughout South and Central America, but the causes – and solutions – vary across the region, with rays of hope that at least some countries will find their way forward. The Bolivian elections, plagued by suspicions of fraud, reflect some of the problems that affect all of Latin America. The previously unbeaten President Evo Morales, in government since 2006, has now shown his limits and, even if his election is confirmed, will govern without the parliamentary majorities he enjoyed in the past.

  • Latin America witnessed violent protests almost simultaneously in Ecuador and Chile; Mexico blinked during a confrontation with the son of narcotics kingpin Chapo Guzmán; the Congress was dissolved in Peru; an ex-President in the Dominican Republic denounced as fraudulent the primary election he lost and joined another party to be its candidate; and a massive exodus continued pouring out of Venezuela, whose crisis is terminal but without an expiration date.
  • The Argentine and Uruguayan elections on October 27 marked the end of a three-year cycle of elections during which 14 countries voted to elect or re-elect their presidents. Speculation was originally that a swing to the right would counteract the Bolivarianism of the previous swing to the left. That shift never happened. In its place, a more heterogeneous and divided Latin America emerged, reflected in the outcome of the Argentine and Uruguayan elections, and in the not-insignificant fact that Mexico is governed by Andrés Manuel López Obrador while Brazil, the other regional power, has Jair Bolsonaro.

The causes of this wave of divisiveness are the subject of different theories. Many observers speak of a Castro-Chavista conspiracy, orchestrated by Venezuelan President Nicolás Maduro and the leftist São Paulo Forum. Others think it’s a popular reaction to the drastic adjustment programs of the IMF. Yet others argue about a contagion factor and the impact of social networks, which enable real-time communication and the transfer of vivid images of events. Nonetheless, any theory that tries to harness all of these theories will be flawed because each national reality is responding to different logic and dynamics.

  • All of the countries of the region are experiencing inequality, poverty, corruption, violence and narco-trafficking, unhappiness with democracy and its institutions, rejection of politicians, and the impact of the “new politics” of social media and fake news. But they are not present to the same proportions.
  • Neoliberal, Bolivarian, and populist governments are all suffering from rebellions. The Chilean protests over transportation fees under neoliberal President Piñera were preceded by protests in Brazil in 2013 under progressive President Dilma Rousseff. If Piñera resorts to military force to stop the protests, Nicaraguan President Daniel Ortega did something similar in 2018, killing more than 300. The IMF might have been behind the reduction of fuel subsidies in Ecuador, but it had no role in Chile. While elections went as normal in Argentina and Uruguay, in Bolivia, like in Venezuela, the allegations of fraud have been constant.

The solutions to each country’s challenges will have to be as different as their causes. While one country needs deeper economic adjustment, another needs to fix its political institutions. Each is going to have to find its way through the crises. Latin America will find little solace, moreover, in the fact that this high level of conflict is not exclusive to its region. From Hong Kong to Cataluña, or in Libya and Lebanon, similar challenges are disrupting national life.

  • Amid the many indications that representative or liberal democracy is under direct attack – that we may be facing the end of an era with potentially dire implications – some positive notes are visible in Latin America. In addition to the orderly contests in Argentina and Uruguay, the local and regional elections in Colombia in late October were an effective exercise in democracy – won by the center and lost by the extremes. Uribismo on the right and Gustavo Petro on the left were the big losers. The emerging symbol was Claudia López, the first woman elected mayor of Bogotá, who is also a lesbian, environmentalist, and leader against corruption. The path ahead is certainly not going to be easy for Latin America, but there is evidence that, with a big dose of tolerance and respect for each other’s reality, Latin Americans can do a lot better.

November 5, 2019

* Carlos Malamud is Senior Analyst for Latin America at the Elcano Royal Institute and Professor of Latin American History at the Universidad Nacional de Educación a Distancia (UNED), Madrid. A version of this article originally was published as Turbulencias latinoamericanas in El Clarín of Buenos Aires.

 

Latin American Integration: No New Ideas

By Carlos Malamud*

Heads of state stand for a picture at the 14th ALBA Summit held in Caracas in 2017

Heads of state at the 14th ALBA Summit held in Caracas in 2017/ EneasMx/ Wikimedia Commons

Several proposals claiming to promote regional integration in Latin America, particularly South America, have received attention in recent months, but proponents’ continued reliance on the same political-ideological alignments as always leaves little hope of bridging the deep splits in the region. Coming in the wake of completion of the EU-Mercosur trade agreement, after arduous and complicated negotiations, the proposals appeared to be good news. But that has not been the case.

  • The new push follows the creation of PROSUR by right-leaning governments in March and, more recently, efforts to relaunch UNASUR by left-leaning groups such as the Grupo de Puebla (Progresivamente) – each claiming commitment to unify the region behind their political visions. Two of the main advocates, Chilean President Sebastián Piñera on the right and Argentine Presidential Candidate Alberto Fernández on the left, have taken the easy path of convoking like-minded supporters while rejecting opponents.
  • These groups appear to have learned nothing from the first decade of the 21st century, when Venezuelan President Hugo Chávez pushed his Bolivarian project. The three efforts emblematic of the period – ALBA, CELAC, and UNASUR – all eventually failed. The rise of neoliberal governments in various countries since then has produced an even more complex situation. The new governments have continued emphasizing ideological conformity, reducing prospects for unity. Last December, a “Conservative Summit of the Americas” inspired by Brazilian President Jair Bolsonaro and his son met in Foz de Iguazú to rally the most extreme elements of the region’s right, conditioning participation on total agreement with its tenets.

There are exceptions.  The Pacific Alliance – a trade accord launched by Chile, Colombia, Peru, and Mexico eight years ago – has remained inclusive despite changes of government in each country. MERCOSUR, with its solid foundation and intense commercial exchanges, has also resisted ideological temptation in its way, although dismissive insults between President Bolsonaro and Argentine candidate Fernández do not bode well (even if both know that they need each other in the long run). But the fear is that extreme ideologies will, once again, trump national interests.

The intense electoral cycle of the past three years, and the pending elections in Argentina, Bolivia, and Uruguay, further complicate the situation. As the “turn to the right” has not turned out as predicted, the results of these three races this month will make regional relations even more unstable. The lack of a new vision for promoting Latin American regional integration is aggravated by the growing sense among both extremes of the political spectrum that they have to dig trenches.

  • The need for a new vision is obvious as the growing attacks on multilateralism and the escalation of the U.S.-China trade war are going to force practically all international actors to take sides. Latin America will suffer potentially grave consequences if its governments and political leaders don’t grasp that inclusion, not exclusion, is the only way to advance unity and integration. Acceptance of differences, dialogue, and negotiation are what’s needed now, as is a creative imagination that can accept reality as it is, with all its problems and imbalances. The question is whether the existing leaders will be able to overcome this sad state of affairs.

October 1, 2019

*Carlos Malamud is Senior Analyst for Latin America at the Elcano Royal Institute, and Professor of Latin American History at the Universidad Nacional de Educación a Distancia (UNED), Madrid. A version of this article originally was published in the Elcano Blog.

Argentina: Market Meltdown Can Be Halted

By Arturo Porzecanski*

From right to left, then-president Cristina Ferdandez de Kirchner, then-minister Alberto Fernandez, and other then-ministers

Ministers of Cristina de Kirchner / Wikipedia / Creative Commons / https://es.wikipedia.org/wiki/Archivo:Ministros_de_Cristina.jpg

The unexpectedly strong performance of the Alberto Fernández-Cristina Fernández de Kirchner (FF) ticket in Argentina’s August 11 presidential primaries has triggered a stampede out of the country’s currency, stocks, and bonds, but FF hold the key to staving off a full-fledged crisis. If the confidence of local and foreign investors is not recovered soon, the market rout has the potential to induce runaway inflation, plunge the economy into a deep recession, and cut off domestic and international financing for both the outgoing and incoming governments, potentially leading to a default.

  • The FF Peronist ticket’s 15.6 percentage-point margin of victory over President Mauricio Macri and his companion was foreseen by none of the pre-election polls. The wide gap shocked investors because it indicates the Fernández duo could win in the first round in the October 27 general election, avoiding a second-round ballot on November 24 in which the pro-market Macri was thought to have a better chance. The coattail effect of FF helped allies in provincial and local primaries around the country. With likely majorities in one or possibly both houses of congress, FF would have a powerful government that could implement much of its agenda, for better and for worse.

Now the challenge is to stop the vicious cycle of capital flight, currency depreciation, accelerating inflation, and plunging economic activity sparked by the electoral results. Failure to do so sooner rather than later will make it very difficult for the government to refinance its maturing short-term debts, and the Central Bank will likely experience a steady drain of its international reserves. In that scenario, the IMF, which has been sending big checks to Argentina every three months, would probably not send the next one in late September.

  • The Macri administration has announced some palliative measures (e.g., a 90-day freeze in gasoline prices and a tax exemption for food purchases), and the Central Bank has tightened marginally monetary conditions. But the government leadership team is powerless to restore the investor confidence that has evaporated.

Given his clear frontrunner status, Alberto Fernández could play a crucial role in reversing the trend. During eerily reminiscent circumstances in Brazil in mid-2002, local and foreign investors were increasingly worried that Luiz Inácio “Lula” da Silva, who was running strong in the polls in his fourth presidential campaign, would end the market-friendly policies of the outgoing Fernando Henrique Cardoso – including a break with the IMF, from which Brazil had been borrowing.

  • Worried about potentially inheriting an economic and financial mess, Lula made a public statement – he called it a “Letter to the People” – making clear his commitment to sound fiscal and monetary policies and the rule of law. He wrote about a “new social contract capable of assuring economic growth with stability,” one of whose premises was “naturally, a respect for the country’s contracts and obligations.” He followed those words with concrete actions. Two months before the elections, he gave his blessing to a new IMF program committing the next government to maintain, with minor modifications, Cardoso’s austere fiscal and monetary policies.

Lula’s actions after his election, including putting a market-friendly and popular mayor in charge of his transition team and choosing a career private-sector banker to run the Central Bank, provide a path that Alberto Fernández could follow as well. Under Lula, the Brazilian Central Bank felt supported in its all-out effort to extinguish the flames of inflation and to buttress the currency. Interest rates were thus hiked as needed before and after the October 2002 elections. He initiated confidence-building meetings with investors before taking office and reassured lenders and investors, both in Brazil and abroad.

  • So far, Alberto Fernández is denying any responsibility for the developing financial and economic crisis, blaming Macri for all that’s gone wrong. But unless he makes announcements that give confidence to local and foreign investors, he will inherit a mess.

August, 22, 2019

*Dr. Arturo C. Porzecanski is the Distinguished Economist in Residence at American University and a member of the faculty of the International Economic Relations Program at its School of International Service. This article is adapted from an essay he wrote in Americas Quarterly.

Venezuela: Washington Trying to Tighten the Noose

By Eric Hershberg

Two side by side images of Venezuela's territory comparing the electrical grid on March 7 and March 12, after six days of blackout

Satellite images of Venezuela. Left image taken on March 7, 2019; right image taken on March 12, 2019 during a blackout / Wikimedia Commons / Creative Commons

As Venezuelan President Nicolás Maduro completes 11 weeks in office since Washington and dozens of other countries recognized National Assembly President Juan Guaidó as “interim president,” the Trump Administration is ratcheting up the pressure. U.S. officials’ rhetoric and actions against both Venezuela and Cuba, which the State Department says is “propping up the former [Maduro] regime,” are escalating. A “senior official” told reporters last Friday that new sanctions would “tighten the noose of financial strangulation of Maduro and his cronies,” while U.S. Vice President Pence, speaking in Houston, reiterated that “all options are on the table.” Pence further focused U.S. regime-change policy on Cuba, citing Guaidó’s wife as the source of evidence that “the only way [Maduro] clings to power is with the help he receives from Communist Cuba.” Pence also said six U.S. businessmen arrested on corruption charges last year “are being held hostage by the Maduro regime,” suggesting another pretext for aggressive action.

  • Last Friday, the U.S. Treasury Department designated 34 vessels owned by PDVSA and two owned by non-Venezuelan companies for sanctions. Treasury Secretary Steven Mnuchin said the move was to block Venezuelan oil exports and cut off supplies to Cuba under the two countries’ “oil-for-repression schemes.”.
  • Press reports on Venezuela’s oil shipments have varied, but Thomson Reuters specialists have reported that Venezuelan oil shipments, after a 40 percent drop in February, remained basically steady in March despite the crisis and electricity disruptions at oil facilities. PDVSA was shipping almost 1 million barrels a day in March, with the bulk going to India, China, and Russia. Reuters calculated that some 65,000 barrels a day went to Cuba.

Electricity blackouts and resulting water shortages have continued for three weeks. While conceivably the result of serious neglect of infrastructural maintenance by Maduro’s Administration, the outages have all the markings of covert sabotage operations. Venezuela has suffered from short power outages many times in recent years, but the latest blackouts have been by far the most extensive, longest, and most damaging. U.S. officials have denied any U.S. role, direct or indirect, in the blackouts. On March 8, Special Representative Elliott Abrams said, “So the United States did not cause those [electricity] problems, the international community did not; the regime caused those problems.”

The U.S. sanctions and related operations are having an impact, but Washington’s initial estimations of Maduro’s strength and the timeline for his collapse were not realistic. Meanwhile, denials of involvement in the blackouts are hard to take at face value. The phrase “all options” surely includes covert action. Turning out the lights is a common disruption tactic, and extraordinary neglect in system maintenance makes the power grid a particularly tempting target in Venezuela. Sabotage and disinformation operations have long been core components of American covert operations in the hemisphere. They were essential tools in successful efforts to depose Guatemalan President Arbenz in 1954 and Chilean President Allende in 1973. The CIA has also formed armed groups, such as the Bay of Pigs force in 1961 and the Nicaraguan Contras in the 1980s (where CIA also mined Corinto harbor). These historical precedents may provide some indications of next steps in the administration’s campaign to bring about regime change in Caracas.

April 11, 2019

South America: Regional Integration or Presidential Posturing?

By Stefano Palestini Céspedes*

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South American Presidents waving to the cameras in Santiago, Chile / Flickr / Creative Commons

Seven South American presidents’ launch of brand-new regional grouping called PROSUR last week was intended to give a boost to their personal agendas rather than take a serious step toward regional integration. The announcement was made on March 22 at a summit organized by Chilean President Piñera and attended by the presidents of Argentina, Brazil, Colombia, Ecuador, Peru, and Paraguay. The declared goal of the summit was to overcome what Piñera called the “paralysis” of the decade-old UNASUR.  Its final declaration emphasized the need “more than ever to work together to update and strengthen the South American countries’ process of integration” in the face of current and future challenges, including “inserting ourselves in an efficient way into the fourth industrial revolution and society based on knowledge and information.”

  • The creation of the Forum for the Progress of South America (PROSUR), however, delivered very little in terms of regional integration. The Santiago Declaration does not tackle the obstacles that hampered UNASUR, such as its decision-making procedure based on consensus. On the contrary, the declaration envisions PROSUR as a forum exclusively based on presidential diplomacy, in which all decisions by definition must be taken by consensus.
  • The Presidents said the new organization will focus on infrastructure, energy, health, defense, and dealing with natural disasters – the same areas where UNASUR had shown some progress. The declaration did not mention any particular ongoing crisis, such as Venezuela, but it made clear that it would work for full respect for democracy, constitutional order, and human rights. Again, this is not a departure from UNASUR, which also had a democracy clause adopted and ratified by the national parliaments.

The summit promised political gains for several participants. For President Piñera, it was an opportunity to project himself as a regional leader able to convene and coordinate South American heads of states, at a time that his domestic popularity is decreasing. Ecuadorean President Moreno – the only central-left president attending the summit – had yet a new opportunity to signal his willingness to coexist with pro-market governments in the region. For Brazilian President Bolsonaro, a well-known skeptic of South American integration, the summit was a platform to show a more palatable image closer to his liberal peers.

President Piñera and his guests blamed UNASUR’s bureaucracy for its lack of effectiveness, opting instead for a lean mechanism based on presidential diplomacy. Most long-time observers believe, however, that UNASUR’s effectiveness was undermined by its very weak organizational capacity, with a powerless Secretary General and personnel made up of low-ranking national diplomats instead of qualified international civil servants. Presidential diplomacy, unburdened by a bureaucracy of specialists who analyze problems and possible solutions, works well when Presidents get along in ideological terms, but precedent shows it is vulnerable to collapse when governments have divergent preferences or when states must agree on complex transnational issues such as migration, drug-trafficking, or deep economic integration.

  • PROSUR will work exclusively as a forum (not as a regional organization) and its decisions and initiatives will have to be executed and monitored by the national bureaucracies of the member states, which by definition look after national interests rather than regional interests. The Santiago Summit has demonstrated that when it comes to regional integration, leftist and right-wing heads of government look and act alike. No matter which ideology they claim, South American presidents fear collective institutions, cherish presidential diplomacy, and prefer to create new initiatives with pompous names from scratch, rather than make necessary reforms to existing ones. As Uruguayan President Vázquez – who did not attend the summit – put it, South America has a long history of integration initiatives that have not brought about integration. The region would be better served by reinforcing and overhauling existing mechanisms such as MERCOSUR, the Andean Community, or the Pacific Alliance, and try to make them convergent in any possible way, rather than adding yet another acronym.

March 29, 2019

* Stefano Palestini Céspedes is an Assistant Professor at the Institute of Political Science, Catholic University of Chile.

South America: Can it Navigate the Changes Ahead?

By Leslie Elliott Armijo*

Latin america

Latin America / Google Images / Creative Commons

Venezuela is the latest example of how Latin America, especially South America, has missed an opportunity to demonstrate the sort of hemispheric leadership it has long striven for – and instead has ceded that role to the United States and even Russia and China.  Although the United States, and the rest of the hemisphere more generally, have been slow to realize it, economic drivers are making the world more multipolar.  In a recent article by two colleagues and myself, we analyze international financial statistics covering 180 countries from 1995 to 2013 that reveal the slow relative decline of the United States as the reigning financial hegemon.  U.S. influence, although still formidable by some margin, is eroding.

  • The Trump Administration’s activities in the larger world are also undermining Washington’s influence. Policies in the WTO and other trade actions writ large – such as withdrawing from the Trans-Pacific Partnership (TPP) and threatening and implementing trade sanctions with little apparent logic – have brushed even allies back. Positions on the Paris climate accord, at the United Nations, and in the President’s relations with North Korean leader Kim Jung Un and Russian President Vladimir Putin have left many around the world increasingly reluctant to follow the U.S. lead.

In this increasingly multipolar world, Latin America, especially South America, is going to find itself not so much freed of U.S. influence – as intellectuals in the region have often stated their wishes – as exposed to new pressures.  The change will be manifest mostly in the economic arena.  New research by McKinsey Global Institute suggests that global value chains are ever more concentrated within multinational corporation networks, which tie major markets (essentially the United States, Western Europe, China, and Japan) to geographically contiguous countries.  This is arguably good for closer neighbors, such as Central America and the Caribbean in our hemisphere, but potentially harmful to those left out – including Sub-Saharan Africa, possibly the Mideast, and South America.

South America has diversified its trade – generally a good thing – among the United States, EU, and East Asia, with the latter having become the major trading partner for a number of countries. Chile and others have been pushing hard to build the Pacific Alliance, as well as to institutionalize the alliance’s relationship with Mercosur. This strategy will be put to the test if, as early trends indicate, the world regionalizes and South America comes under great pressure to refocus on its relations with the United States. To protect and advance their interests in the future, South American countries probably will try to find the right balance between embracing and rejecting the declining yet still dominant hegemon to the north and, as in the case of Venezuela, developing their own strategic vision, forging unity among themselves, and putting some muscle behind an agenda that prepares them for the future.

March 18, 2019

* Leslie Elliott Armijo is an associate professor at the School for International Studies, Simon Fraser University, Vancouver. She is the co-author, with Daniel C. Tirone (Louisiana State University) and Hyoung-kyu Chey (National Graduate Institute for Policy Studies, Tokyo), of The Monetary and Financial Powers of States: Theory, Dataset, and Observations on the Trajectory of American Dominance.

A Right Turn in Latin America?

By Santiago Anria and Kenneth Roberts*

Jair Bolsonaro

Brazilian President Jair Bolsonaro in January 2019. / Marcos Brandão / Agência Senado / Flickr / Creative Commons

After a long winning streak, the left in Latin America has experienced electoral defeats in a number of former strongholds since 2015 – including Argentina, Chile, and Brazil – but the trend is not unidirectional and so far falls short of being a regional “right turn.”

  • Right wing presidents govern today in those three countries as well as Colombia, Guatemala, Paraguay, Honduras, Panama, and Peru – a scenario that is quite different from 2010, when about two-thirds of Latin Americans lived under some form of leftist government. Democratization, financial crises, and market liberalization shaped the 1980s-90s, while mounting social discontent against neoliberal market reforms helped to produce a “left turn” that spread across the region following the election of Hugo Chávez in 1998.  Leftist candidates won 30 presidential elections in 11 different Latin American countries between 1998 and 2014.

The current trend lines are hardly unidirectional across the region.  Mexico, which remained under conservative government when most of the region turned toward the left after 1998, has recently elected long-time leftist leader Andrés Manuel López Obrador to the presidency.  Incumbent leftist parties have been re-elected one or more times in Uruguay, Bolivia, Costa Rica, and El Salvador.  Notably, leftist parties in some countries where they have been historically weak, such as Colombia and Honduras, have strengthened electorally and organizationally, laying the groundwork for further growth.  Leftists’ records elsewhere are mixed.  Rivalries among Ecuadorean leftists make their future uncertain.  Venezuelan President Maduro and Nicaraguan President Ortega have resorted to increasingly repressive and authoritarian measures to maintain their grip on power.

  • With the possible exception of Brazil, the right’s surge is not the result of the sort of social backlash that brought the left to power. In general, the right’s victories appear to be a routine alternation of power rather than a regional wave with common starting points and driving forces.  Argentina and Chile are the two clearest examples of routine electoral alternation of power explained by retrospective, anti-incumbency voting in contexts of economic slow-downs, corruption scandals, and social policy discontent.  In countries like Paraguay and Honduras, on the other hand, the shifts were initiated by non-electoral means – a politically motivated presidential impeachment in the former and a military coup in the latter – and then consolidated through elections after the fact.  In Brazil, the right turn can be traced back to the social protests that broke out against Dilma Rousseff’s leftist PT government in June 2013, but former conservative allies’ opportunistic impeachment of Rousseff, along with their imprisonment of former President and PT founder Lula, seriously weakened her party – paving the way for the election of anti-establishment candidate Jair Bolsonaro.

The left in power is still strong, though probably not unbeatable today, in countries like Bolivia and Uruguay, at least in part because of their roots in and strong connections with social movements.  Unlike the PT, both Bolivia’s MAS and Uruguay’s FA have managed to preserve more of their movement character and to avoid extreme forms of top-down control and professionalization.  The ability of mass popular constituencies and grass-roots activism to hold party leaders accountable and steer public policies in desired directions—a condition largely absent in countries like Brazil, Ecuador, and Venezuela—has helped the left maintain cohesion in Bolivia and Uruguay.  This cohesion, accompanied by significant reductions of inequality, helps to explain the continued vitality of left parties in these countries.  The recent strengthening of leftist alternatives in Mexico and Colombia, moreover, should guard against facile assumptions that a region wide right turn is underway.  Conservative forces’ recent victories are better understood as a reinforcement of the post-neoliberal left-right programmatic structuring of political competition in Latin America than a unidirectional political shift to the right.  That said, Brazil wields significant political and economic influence in the region and, traditionally seen as an “early mover” in the region, may be a bellwether of the future.  The ability of President Bolsonaro and his model of governance to deliver the results that Brazilians want—and to operate within the parameters of democratic institutions—will be key factors in determining the direction and strength of the region’s rightist wave.

January 9, 2019

*Santiago Anria is Assistant Professor of Political Science and Latin American Studies at Dickinson College, and Kenneth Roberts is Professor of Government and Director of Latin American Studies at Cornell University.

Mercosur: Diversifying Partnerships

By Andrés Serbin*

Mercosur Summit

A seminar at the 53rd Mercosur Summit. / Sabrina Pizzinato / UCIM / Creative Commons

Mercosur’s signing of a memorandum to increase economic and commercial cooperation with the Eurasian Economic Commission (EAEU) signals the trading bloc’s interest in diversifying its trade and political relationships beyond the western hemisphere.  The presidents of the Mercosur countries – Brazil, Argentina, Uruguay, and Paraguay –signed the agreement at the 53rd Mercosur Summit, held last month in Montevideo.  At a ceremony at which he accepted the rotating presidency from Uruguay, Argentine President Mauricio Macri emphasized the need for Mercosur to open not just to the Pacific Alliance, but also to Central America, Asia, and Africa.

  • Proposals for closer cooperation with the EAEU have been under study for many years, since Russia first created the Commonwealth of Independent States (CIS) from among the former Soviet republics (except the Baltic countries) after the end of the Soviet Union in 1991. The CIS was intended as a post-Soviet space under Russia’s leadership that would reconnect its members within a “Eurasian” geopolitical region distinct from both Europe and Asia.  The EAEU, formalized in 2015 under the leadership of Russia and Kazakhstan, now also includes Belarus, Kyrgyzstan, and Armenia.  Mercosur ministers agreed to sign the memorandum during meetings immediately before the summit, stating that enhanced cooperation and coordination with the EAEU – with which Mercosur would account for a combined 6.5 percent of world GDP – was consistent with efforts to strike a similar arrangement with the European Union.
  • Mercosur’s decision comes amid international tensions over trade and protectionism, but it cannot be divorced from the ideological, cultural, and geopolitical elements of the vision for “Great Eurasia” of which Russian President Vladimir Putin has spoken (and which Chinese President Xi Jinping has shared). The tensions between Russia and Ukraine, and Western pressures in retaliation, were a key driver of Moscow’s push for formalization of the EAEU as a potential interlocutor with the European Union while at the same time putting a brake on U.S. presence in the region.  Western analysts have debated the power of “neo-Eurasian” identity as a tool of geopolitical projection beyond the creation of a new economic bloc.  China is also a factor in Russia’s calculations.  The “Shanghai Cooperation Organization” (OCS) fostered by both countries and Beijing’s “New Silk Road” project, through Central Asia and to the EU, have also increased the salience of “Great Eurasia.”  Russia and China have increased cooperation in trade, in technology (including military) and against terrorism and extremism.  Through the EAEU and OCS mechanisms, they have extended contacts all the way to India and Pakistan and, potentially in the future, Iran and other countries.

Mercosur’s trade with the EAEU is asymmetrical in favor of the Latin American countries, with the exception of Brazil (with which it is more balanced), according to EAEU officials.  The EAEU has high internal tariffs and limited internal trade – except in bilateral trade between Russia and Belarus – but there are already tariff exemptions for Mercosur members.  Food appears to be the biggest Mercosur export to the region.  Experts believe that trade between the two blocs can be significantly increased, and that a free trade agreement can be signed before the completion of the EU-Mercosur FTA, which has been under negotiation for 20 years.

Although many Western analysts remain doubtful about the success of efforts to form a “Great Eurasia,” Mercosur apparently has determined that engagement with it is low-cost and potentially beneficial.  Beyond the possibility of expanded trade, the memorandum of cooperation signed in Montevideo suggests Mercosur sees a geostrategic interest in signaling openness to such collaboration.  The right-leaning governments of Latin America and the Caribbean are likely to remain generally aligned with the United States, but they have learned the importance of trade diversification over the past two decades.  Setting tradition and ideology aside, most are trying to interact with whomever can bring good deals to their countries in terms of trade, investment, and cooperation.  In the context of Russia and China’s interest in a “Great Eurasia,” Mercosur’s increased outreach to EAEU also reflects an important piece in a strategy to undertake the necessary diversification of its foreign policy in a changing world.

  •  The United States may not appreciate the wisdom of Mercosur’s approach. Eurasia is a blind spot for Washington, which focuses on Russia’s actions in Europe and China’s in Asia – but not in Central Asia itself or as a bridge to India, Pakistan, Iran, Turkey, and the Arab world.

January 7, 2019

* Andrés Serbin is an international analyst and president of the Regional Coordinator of Economic and Social Research (CRIES), a network of more than 70 research centers, think tanks, NGOs, and other organizations focused on Latin America and the Caribbean.  This article is adapted from one published by Perfil.com.

Southern Cone: Rapid Transition to Non-Conventional Renewable Energy

By Thomas Andrew O’Keefe*

Edificio Alexander

Edificio Alexander, a building in Punta del Este, Uruguay, that produces wind energy on its roof. / Jimmy Baikovicius / Flickr / Creative Commons

South America’s Southern Cone is undertaking a transition to non-conventional, renewable energy resources – that is, production not dependent on fossil fuels or large-scale hydropower – that creates the opportunity for a historic regional consensus on energy policy.  Uruguay and Chile are at the forefront.  Both lack significant fossil fuel reserves and have experienced crises when droughts detrimentally impacted hydro-supplied electricity.  For them, the rapid shift to other forms of domestically sourced renewables is as much a means to guarantee energy security as to combat climate change.  Approximately a third of Uruguay’s electricity is currently generated from wind power (up from only one percent as recently as 2013).  Similarly, about a third of Chile’s electric power – depending on the time of day – is sourced from the sun and the wind.

  • Brazil has also made significant strides in incorporating wind, and to a lesser degree, solar power into its energy matrix. The primary motivation is the need to offset carbon emissions from the burning of rain forests and the country’s greater use of natural gas.  Brazil has long enjoyed the cleanest energy of any large economy in the world because of its heavy reliance on hydropower, which still covers some two-thirds of the country’s electric needs.  Brazil was also a pioneer in the development of more environmentally friendly sugar-based ethanol (as opposed to corn favored in U.S. ethanol production); most passenger vehicles today have flex-fuel engines.  Paraguay gets almost all its electricity from hydropower (and exports the bulk of what it produces).
  • Argentina, while increasing exploitation of its large shale gas and oil reserves, in 2017 expanded renewable energy projects nearly 800 percent over the previous year, according to reports. President Mauricio Macri has created a more inviting investment climate for the private sector, rapidly increasing natural gas output, especially from the Vaca Muerta shale reserves in Patagonia.  He is also encouraging the expansion of renewable energy beyond large hydro by, among other things, allowing long-term power purchase agreements in U.S. dollars as a hedge against currency devaluations.  Furthermore, large industrial consumers face penalties if they do not meet increasing thresholds set for renewable energy use.  Current laws require that at least 20 percent of the nation’s electricity come from non-conventional renewables by the end of 2025, and they include tax exemptions, import duty waivers, and a special trust fund called FODER, created in 2016, to provide subsidized loans and other assistance.

The rapid expansion of the renewable energy sector in the Southern Cone will enable countries to export excess production to their neighbors, facilitated by a robust regulatory framework to facilitate the cross-border trade in energy resources.  In addition, by creating a fully integrated regional market in renewable energy products, a crucial backup is established for resources such as wind and solar power that are inevitably prone to interruptions during the day.  It would also mitigate the impact of droughts on hydro-generated electricity, which are likely to worsen with global climate change.  Accordingly, there are strong incentives to revive efforts begun by MERCOSUR in the late 1990s to integrate energy markets that collapsed with the Argentine energy crisis at the start of the 21st century.  The fact that all the Southern Cone governments are now ideologically aligned in favor of market-oriented economic and investment policies facilitates achieving a regional consensus on energy for the first time.  Governments in the region now need to move beyond the discussion phase to turn all this into a concrete reality.

October 19, 2018

*Thomas Andrew O’Keefe is the President of Mercosur Consulting Group, Ltd. and currently teaches at Stanford University in Palo Alto and Santiago, Chile.

U.S.-Latin America: Return of Monroe Doctrine

By Stefano Palestini Céspedes* and Fulton Armstrong

U.S. Vice President Mike Pence

U.S. Vice President Mike Pence visited Colombia during his Latin American tour last summer. / White House / Flickr / Creative Commons

The Trump administration’s revival of a vision of U.S.-Latin America relations akin to the Monroe Doctrine is advancing with little pushback from the region.  Since former U.S. Secretary of State Rex Tillerson eight months ago proclaimed that the Monroe Doctrine is “as relevant today as it was the day it was written,” Washington has continued to revive it as a guiding principle that includes limiting the influence of other powers in the hemisphere as well as reserving for itself the right to intervene when it feels its interests are threatened.

  • Tillerson complained that China “is using economic statecraft to pull the region into its orbit” and that Russia’s “growing presence in the region is alarming as well, as it continues to sell arms and military equipment to unfriendly regimes who do not share or respect democratic values.” In August, U.S. Defense Secretary James Mattis renewed the attack on China’s investment of billions in Latin America, claiming that “there is more than one way to lose sovereignty. … It can be with countries that come offering presents and loans.”  Last week, U.S. Vice President Mike Pence repeated his government’s complaint that Latin America is among the regions where China is offering large infrastructure loans that are “opaque at best, and the benefits flow overwhelmingly to Beijing.”
  • Washington has also resorted to cavalier rhetoric regarding its perceived right to intervene in the internal affairs of Latin American countries to advance its interests. At the United Nations in late September, President Trump said, “Here in the Western Hemisphere, we are committed to maintain[ing] our independence from the encroachment of expansionist foreign powers.”  President Trump argued for regime change in Venezuela and repeated that “all options are on the table, [including] the strong ones.”  In the new NAFTA agreement, Washington demanded, and achieved Mexican and Canadian concurrence on, a clause stipulating that the United States could terminate the agreement with six months’ notice if either negotiated a free trade agreement with a “non-market economy” – that is, with China.

Latin American governments’ voices have been thus far muted – perhaps because they are getting used to downplaying Trump’s rhetoric – even though the revival of the Monroe Doctrine is already shaping actual policies.  A hundred years ago, Latin American international lawyers, diplomats, and intellectuals worked hard to transform the Monroe Doctrine from a unilateral doctrine into a multilateral policy able to shape first Pan-American and later Inter-American relations.  Those efforts led to the adoption of hemispheric instruments such as the OAS Charter in 1948 and the Inter-American Democratic Charter in 2001, gradually defining a mutually acceptable approach that strikes a balance between shared hemispheric values and the principle of non-intervention.  After the Cold War, references to the Monroe Doctrine disappeared from public discourse – except to disparage it as the Obama administration did – until the Trump administration revived it.

Today, the forums and organizations that Latin America has used during the last decade to articulate concerns and political responses to U.S. policies are not working.  OAS Secretary General Luis Almagro’s recent declarations that military action to solve the crisis in Venezuela cannot be ruled out, rather than offering a riposte, echoes Trump’s stance.  The Lima Group – which gathers together a group of OAS member states committed to the defense of democracy in Venezuela – pushed back against Almagro’s statements but, importantly, not against the U.S. administration’s policy.  More formal organizations such as UNASUR are not only muted, but actually paralyzed by the inability of its members to reach consensus and solve fundamental discrepancies. 

  • To resist and speak up when confronted with rhetoric and policies with such profound implications as a revitalized Monroe Doctrine is not a matter of politics and economics, but rather a necessary condition for friendly and respectful international relations and the sort of partnership that Latin Americans of all political stripes claim to want with the United States. To articulate such a response, Latin America urgently needs its leaders to think in “regional” and not only “national” terms – to nurture a genuine Inter-American community, not just bilateral relations with Washington.  The odds for such leadership to emerge at this moment do not appear high.  The possible election of a nationalist, xenophobic, and illiberal leader in Brazil may become a further challenge for collective action in the region.

October 12, 2018

* Stefano Palestini Céspedes is an Assistant Professor at the Institute of Political Science, Catholic University of Chile.