U.S.-Mexico Trade: The Numbers and the Real Issues

By Robert A. Blecker*

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Two maquiladoras in Tijuana, Mexico. The low percentage of Mexican value-added in Mexico’s exports is a key reason why the country has not gotten nearly as much employment growth as it hoped for when it joined NAFTA. / Anthony Albright / Flickr / Creative Commons

Officials in the Trump administration are proposing a new way of measuring the U.S.-Mexican trade deficit that, by making the deficit look larger than it currently appears, will likely be spun to support efforts to impose high tariffs or dismantle NAFTA.  According to press reports, the President’s senior advisors, including the head of his new trade council, Peter Navarro, are proposing to include only “domestic exports” (exports of U.S.-produced goods) in calculating bilateral trade balances with Mexico and other countries.  This would exclude “re-exports” – goods that are imported into the United States from other countries (such as Canada or China) and transshipped into Mexico – which are currently counted in total U.S. exports.

  • In spite of its political motivation, the proposed new accounting would render a more accurate measure of U.S. exports. In fact, it would make the U.S. deficit with Mexico look closer to what Mexico reports as its surplus with the U.S.  For 2016, the U.S. reports a deficit of $63.2 billion with Mexico, while Mexico reports almost twice as big a surplus of $123.1 billion with the U.S.  If the U.S. excluded re-exports, its trade deficit with Mexico for 2016 would be $115.4 billion, which is much closer to the Mexican number.

Nonetheless, this recalculation fails to correct for another bias, which makes the U.S. deficit with Mexico look artificially large.  Imports are measured by the total value of the goods when they enter the country, from the immediate country of origin.  But in today’s global supply chains only part of the value-added in imported goods comes from any one country.  A television, for example, can be assembled in Mexico with components imported from Korea and other East Asian nations.  As a result, the reported U.S. imports from Mexico (especially of manufactured goods) greatly exaggerate the Mexican content of those goods.  Although data limitations do not permit an exact calculation of the Mexican content of U.S. imports from Mexico, it is likely relatively low.  (My own estimates suggest it is on the order of about 30-40 percent for manufactured goods).  Indeed, the low percentage of Mexican value-added in Mexico’s exports is a key reason why the country has not gotten nearly as much employment growth as it hoped for when it joined NAFTA.

The Trump Administration’s aggressive rhetoric and action on other issues related to Mexico, including immigration and the wall, suggest a political motivation for the proposal to adopt a new measure of exports, regardless of its merits.  But the real problem is not the “correct” number for the U.S.-Mexican trade deficit; it is why NAFTA has not lived up to its promise of supporting high-value added exports and high-wage job creation in both countries.  This promise was based on the idea that the United States would export capital and intermediate goods to Mexico for assembly into consumer goods, which would then be exported back to the United States.  But especially since China joined the WTO in 2001, Mexico has increasingly become a platform for assembling mostly Asian inputs into goods for export to the United States (and secondarily Canada).  Even if “re-exports” are excluded, Mexico remains the second largest export market for the United States (after Canada) – and U.S. exports to Mexico are 65 percent greater than U.S. exports to China.  Focusing too much on measuring the U.S.-Mexico trade imbalance only distracts attention from the need to reform NAFTA so as to encourage more of the “links” in global supply chains to be produced in North America generally.  If the Trump administration is serious about making the U.S. more competitive vis-à-vis China, it should think about viewing Mexico as a partner instead of as an enemy.  In the larger context of Trump’s many objectionable policies on migration and in other areas, a long-overdue correction of U.S. export statistics is not worth getting upset over.  The real issue is whether Trump’s trade policies – with Mexico and beyond – will bring the promised gains to U.S. workers, or will further enrich corporate billionaires and Wall Street tycoons.

February 23, 2017

* Robert A. Blecker is a Professor of Economics at American University.

U.S.-Mexico Tensions: Harbinger for Latin America?

By Eric Hershberg and Fulton Armstrong

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The U.S.-Mexico border near Tijuana and San Diego. / Tomas Castelazo / Wikimedia Commons / Creative Commons

U.S. President Donald Trump’s unilateral actions on Mexico last week have precipitated the most serious crisis in bilateral relations in decades and threaten to further undermine U.S. image and interests throughout Latin America.  During last year’s campaign, in the face of Trump’s characterization of Mexicans as rapists and drug-traffickers and repeated pledges that he’d make Mexico “pay for the Great Wall,” President Enrique Peña Nieto adopted a strategy of patience and positive engagement.  He paid dearly in political terms for meeting with Trump in August – a misjudgment that worsened his already declining popular approval – but he continued to try to stay on the high road after the election.

  • Peña Nieto resurrected former Finance Minister Luis Videgaray, the architect of the Trump meeting last August, as Foreign Minister, and he replaced his ambassador in Washington with one having deep experience with NAFTA and a reputation for calm negotiation, in response to Trump’s repeated demand for a renegotiation of the 1994 accord. As opponents across the political spectrum egged him on to reciprocate Trump’s belligerent tone and strident U.S. nationalism, Peña Nieto – like all Mexican presidents for the past 25 years – tried hard to suppress the anti-Americanism that has lingered beneath the surface of Mexican politics even while the two neighbors have become increasingly integrated economically, demographically, and in governance.  Even after Trump’s first barbs following inauguration on January 20, Peña Nieto emphasized his preference for calm dialogue – “neither confrontation, nor submission.”  He declared that Mexico doesn’t want walls but bridges, and accepted the American’s demand to renegotiate NAFTA, although with a “constructive vision” that enables both sides to “win,” with “creativity and new, pragmatic solutions.”

Preparations for the summit meeting, scheduled for this week, crashed when Trump – without coordinating with his Mexican counterpart or the appropriate U.S. government agencies – issued executive orders putatively aimed at tightening control of the border.  One directed an immediate increase in efforts to deport undocumented Mexicans, and the other launched the “immediate construction of a physical wall on the southern border.”  Trump initially abided by an informal agreement with the Mexicans not to repeat his harangue that he was going to make Mexico pay for the wall, but on January 26 he tweeted that “If Mexico is unwilling to pay for the badly needed wall, then it would be better to cancel the upcoming meeting.”  His press spokesman followed up with a suggestion that Washington could impose a 20 percent tariff on imports from Mexico to cover the costs of construction, after which Peña Nieto, facing a firestorm at home, postponed the meeting.  The two presidents talked on the phone for an hour the following day and reportedly agreed to let things calm down, although the two sides presented different versions of the chat.

The speed of the trainwreck – in Trump’s first week in office – and the depth of the damage his unilateralism has done to bilateral relations have alarmed many in Mexico and the United States, including Republicans who worked hard to build the relationship.  (Only the Administration’s stunning decrees regarding immigration from other parts of the world have overshadowed the mess.)  Mexico is, of course, not without leverage and, as Trump stirs up long-repressed Mexican nationalism, Peña Nieto – whose popular support was recently in the garbage bin – is going to have to talk tough (at least) and could have to retaliate.  He could impose tariffs on the billions of dollars of Mexican exports that Americans have grown accustomed to having at low prices.  Mexico could also opt to diminish cooperation in counternarcotics and other law enforcement efforts, or to cease blocking Central American migrants seeking to reach the U.S. border – interests that the impulsive Trump policy team doesn’t seem to have considered.

Coming on the heels of Trump’s executive order totally withdrawing from the Trans-Pacific Partnership, the new president is presenting the image of a U.S. leader whose harsh policies and arrogant style serve neither the United States nor Latin America’s interests.  Having appointed as White House National Security Council Senior Director for Latin America a political scientist whose writings draw bizarrely on analytic approaches that have been rejected in the discipline for more than 30 years, and whose recent articles lament the Obama administration’s abandonment of the Monroe Doctrine, the region’s leaders will rightly conclude that Washington is voluntarily abdicating any plausible case for leading multilateral cooperation around common interests.  The United States and Latin America are inextricably linked, however, and a policy based on stale assumptions of big power unilateralism ultimately will run into insurmountable obstacles: however ignorant Trump and his team are proving themselves to be, we live in the real world of the 21st century, in which imperialist, mercantilist fantasy will be treated with the disdain that it deserves.

January 31, 2017

Deciding Asylum: Challenges Remain As Claims Soar

By Dennis Stinchcomb and Eric Hershberg

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Graphic credit: Nadwa Mossaad / Figure 3, “Refugees and Asylees 2015” / Annual Flow Report, November 2016 / Office of Immigration Statistics, Department of Homeland Security

The exodus of children and women from the three countries of Central America’s Northern Triangle – El Salvador, Honduras, and Guatemala – is accelerating, but information gaps and institutional flaws are obstructing asylees’ access to legal protections and hindering equitable decision-making on their claims in the United States.  The United Nations has recorded a nearly five-fold increase in Northern Triangle citizens seeking asylum in the United States since 2008, a trend driven largely but not exclusively by a spike in child applicants.

  • Legal scholars agree that high-quality, verifiable data on forms of persecution experienced by migrants in their home countries better equip attorneys to establish legitimate asylum claims and inform the life-transforming decisions by U.S. immigration judges and asylum officers.  Accumulating evidence also indicates that deeper systemic challenges to transparent, unbiased processing and adjudication of asylum claims remain, with grave consequences for the wellbeing of Central American migrants with just claims for protection under international and U.S. law.

In a December hearing before the Inter-American Commission for Human Rights (IACHR), advocates presented immigration court data from U.S. jurisdictions dubbed “asylum-free zones” – large swaths of the map where low asylum approval rates prevail.  In Atlanta, Georgia, for example, U.S. government data show that 98 percent of asylum claims were denied in Fiscal Year 2015; in Charlotte, North Carolina, 87 percent were rejected – far above the national average of 48 percent.  The month before, the highly respected U.S. Government Accountability Office (GAO) issued a scathing report, citing variations in application outcomes across immigration courts and judges.  (See full report for details.)  Attorneys and advocates refer to this phenomenon as “refugee roulette,” an arbitrary adjudication process further complicated by the fact that many asylees’ fate is determined by Customs and Border Protection (CBP) officers who function as gatekeepers to the asylum system.  Border Patrol is an increasingly militarized cadre of frontline security officers whose members took the remarkable and unprecedented decision to publicly endorse the presidential candidacy of Donald Trump.

Accurate information on the conditions asylees face in their native countries is fundamental to getting fair treatment in the United States.  The barriers to due process and disparities in asylum outcomes have long been sources of concern, and the systemic flaws – and politicization of CBP processes – raise troubling questions about screener objectivity and the degree to which prevailing U.S. screening procedures conform to international norms.  That asylum claims made by many Central Americans are first considered by officers of institutions whose primary responsibility is to deport undocumented persons, rather than to protect refugees, signals a glaring misallocation of responsibilities.  The U.S. failure to accurately and efficiently adjudicate claims at all levels of the discretionary chain – from frontline officers to immigration judges – also undermines efforts to promote fair treatment of intending migrants elsewhere in the hemisphere.  Mexico’s overburdened refugee agency COMAR, for example, continues to struggle to provide requisite protections, even while reporting a 9 percent increase in applications each month since the beginning of 2015.  Meanwhile, the UN reports steady increases in applications in Belize, Nicaragua, Costa Rica, and Panama.  Citizens of the Northern Triangle states who have legitimate grounds for seeking protection as refugees stand the most to lose, but the consequences of institutional failure in the U.S. and neighboring countries’ asylum systems reverberate beyond individuals and families.  With virtually no government programs to reintegrate deported migrants, growing numbers of displaced refugees returned to Northern Triangle countries ill-equipped to receive and protect them will further complicate efforts to address root causes of migration throughout the region.

January 19, 2017

A workshop on Country Conditions in Central America & Asylum Decision-Making, hosted by CLALS and the Washington College of Law, with support from the National Science Foundation, examined how social science research on conditions in El Salvador, Guatemala, and Honduras can assist in bridging the gap between complex forms of persecution in the region and the strict requirements of refugee law.

This material is based upon work supported by the National Science Foundation under Grant No. 1642539. Any opinions, findings, and conclusions or recommendations expressed in this material are those of the authors and do not necessarily reflect the views of the National Science Foundation.

Guatemala: Cheers for Trump?

By Ricardo Barrientos*

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Iván Velásquez, head of the UN International Commission Against Impunity in Guatemala (CICIG). Velásquez and his team face a difficult task of bolstering Guatemalan anti-corruption efforts. / US Embassy Guatemala / Flickr / Creative Commons

Anti-corruption efforts in Guatemala have suffered serious setbacks in recent months, and the election of Donald Trump as U.S. president appears likely to hurt them further.  A number of media reports have already documented that efforts by right-wing Army veterans accused of crimes against humanity during the civil war, politicians, and campaign financiers are seriously threatening anti-corruption efforts started in 2015, which swept former President Pérez Molina from office.  President Jimmy Morales, who campaigned that he was “neither corrupt, nor a thief,” has failed to fulfill voters’ mandate to fight corruption, and instead has allowed Army friends to dominate his administration.  Called la juntita, Morales’s closest advisors are former military officers who operate in the shadows, are widely suspected of crimes against humanity during the war, and are alleged to be using their influence for personal enrichment.

  • The Supreme Court and Congress are also under pressure. Numerous media reports point to members of the Supreme Court, including its President, being tainted.  One magistrate, whose son has already been convicted of illicit use of public funds, is widely suspected as well.  In the legislature, the election of a new Directive Board increased the power of members long suspected of links with the mafias.  (Some local observers speculate that the internal voting was conducted on the U.S. Election Day because U.S. Ambassador Todd Robinson, an advocate of anti-corruption initiatives, and his staff would be too busy to care about what was going on in the Guatemalan Congress.)

With the Central Square in Guatemala City empty and only memories remaining of the citizen mass demonstrations of 2015, the last line of defense against the “re-capture” of the Guatemalan State are Iván Velásquez, head of the UN International Commission Against Impunity in Guatemala (CICIG), and Guatemalan Attorney General Thelma Aldana.  They have already started investigations and are prosecuting corrupt members of Congress, including members of the new Directive Board.  U.S. government support has been crucial.  Ambassador Robinson may have crossed the thin line between active diplomacy and intervention at times, but many observers note that – quite unusual in Latin America for a U.S. ambassador – he enjoys strong support and sympathy from Guatemalans, and he is disliked by the Army veterans and others who are part of what in Guatemala is known as the “old politics.”

Corrupt Guatemalans appear to believe that their first hope – to neutralize the U.S. Embassy – moved one step closer to reality with the election of Donald Trump last week.  Politicians and commentators opposed to U.S. support for CICIG celebrated.  One proclaimed that “Democrats shriek; Republicans vote,” while another interpreted the message of Trump’s victory for Ambassador Robinson: “You’re fired!”  The mafias would not expect a Trump Administration to support them, but rather – interpreting the President-elect’s campaign statements – simply adopt a policy of indifference toward Guatemala and its internal affairs.  The corruption networks of the “old politics” in Guatemala hope that Trump will stay focused on nothing in Latin America except stopping migration.  Analysts who say that everyone in Latin America is regretting Trump’s victory are wrong.  Trump’s election may help the corrupt win a battle or two, but the war against corruption in Guatemala is far from over.

November 18, 2016

*Ricardo Barrientos is a senior economist at the Central American Institute for Fiscal Studies (Icefi).

Latin America: Wait-and-See Reaction to Trump – For Now

By Catie Prechtel and Carlos Díaz Barriga*

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An effigy of Donald Trump in Mexico City. / Sequence News Media / Daniel Becerril / Wikimedia / Creative Commons

Most Latin American leaders publicly reacted with caution to Republican presidential candidate Donald Trump’s victory in last week’s U.S. elections, but reactions will sharpen quickly if Trump tries to make his campaign rhetoric about the region and Latino immigrants into policy.  Mexico and Central America showed clear anxiety over the implications for their economies and regional migration pressures.  Some South American presidents expressed mild enthusiasm and voiced hope for a positive relationship with the new administration, although Trump’s avowed opposition to the Trans-Pacific Partnership trade accord – under discussion at the APEC summit in Lima this week – has fueled concerns about the future of free trade.  Fear that the new U.S. President, who takes office on January 20, will deport millions of undocumented migrants from Mexico and Central America and force U.S. firms to shut factories in those countries has seized the media there.

  • Mexican newspapers headlines screamed “Be afraid!” and warned of a “Global shakedown.” Reports recited the many promises Trump had made against Mexico, including his proposal to build a border wall (and make Mexico pay for it); revising NAFTA and raising taxes on Mexican imports, putting conditions on remittances, and charging more for visas. The peso suffered three consecutive days of losses before recovering slightly following interviews by Trump and his team suggesting a softer stand on the wall and free trade.  President Peña Nieto phoned Trump with congratulations and agreed to meet soon to discuss bilateral issues, including presumably the wall.
  • Guatemala’s Prensa Libre reported businessmen are worried Trump’s rejection of free trade could have a direct impact on the economy and described the possible mass deportations as a “social bomb” for the country. In Nicaragua, newspapers speculated that Trump’s victory will give a boost to U.S. legislation, the Nicaragua Investment Conditionality Act (NICA), which calls for economic sanctions if President Daniel Ortega doesn’t take “effective steps” to hold free and fair elections.  In El Salvador, the main concern is the deep economic stresses of mass deportations of Salvadorans in the United States.  Honduras shares those concerns but apparently was more wrapped up in President Juan Orlando Hernández’s announcement confirming his intention to make a controversial bid for reelection.
  • Venezuelan President Nicolas Maduro, often given to bombastic rhetoric, has focused on working with Washington in the closing months of the Obama Administration. In a phone conversation with Secretary of State John Kerry, he stressed the need to establish an agenda with the next administration that favors bilateral relationships, but he specifically called on Obama to “leave office with a message of peace for Venezuela” and rescind a determination that Venezuela is a “threat to the United States.” Obama himself last April said the designation was exaggerated.
  • Media in Colombia speculated that Trump will be less committed to aid and support for finalizing and implementing a peace accord with the FARC. Argentina, Brazil, and Chile offered calm reactions to the news.  For Buenos Aires and Santiago, the biggest concern was potentially strained commercial relationships and free trade agreements with the United States, according to press reports.  Brazil offered little reaction to the news, but Trump’s win brought four consecutive days of losses for the real – weakening 7.6 percent since the election.

The political leaders’ cautious reactions conceal a broad and deep rejection for President-elect Trump’s values and intentions as he stated them during the campaign.  Former Mexican President Vicente Fox once again tweeted his disapproval for Trump, while José Mujica, former President of Uruguay, expressed dismay on Twitter, summing up the situation in one word: “Help!”  Press reports and anecdotal information indicate, moreover, that large segments of Latin American society have shown a widespread distaste for Trump’s win.  Their general wait-and-see attitude will end when and if Trump proves himself the unpredictable and reactionary he seemed on the campaign trail.  Latin American leaders have a lot of work ahead as they navigate a new relationship with the United States.

November 15, 2016

* Catie Prechtel and Carlos Díaz Barriga are CLALS Graduate Assistants.

The Cataclysm that the Latino Vote Couldn’t Stop

By Eric Hershberg

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Presidential candidate preference, by race or ethnicity / Pew Research Center

In unprecedented numbers, Latino voters flexed their muscles in the bitter and destructive U.S. presidential campaign, but that wasn’t enough to elect a competent but mistrusted centrist and block an erratic TV showman espousing policies anathema to their interests.  Former Secretary of State Hillary Clinton lost in the electoral college, which in the American system is what actually matters, but she won the popular vote by a slim margin – little consolation to Latinos.  Donald Trump and the forces that will accompany him into the Executive branch have pledged to begin efforts to deport millions of undocumented immigrants, build walls to keep Latin Americans out of the country, and reverse decades of policies meant to strengthen ties among the Americas.  The election highlighted deep cleavages in U.S. democracy:

  • An inclusive coalition of the well-educated, urban dwellers, youth, and racial and ethnic minorities lost to a bloc of angry white working-class, rural, and small-town voters rallied by a man whose behavior and rhetoric were called repugnant by leaders of even his own party. The outcome testifies to the degree to which vast segments of the American population feel ignored and denigrated by political and cultural elites and alienated by profound social changes that accelerated during the Obama administration, including shifts regarding such issues as gender and sexual identity and, particularly, racial diversity and empowerment.
  • The Trump-led “whitelash” has been largely rhetorical up to this point, but it will soon be manifested in public policies with life-changing consequences for immigrants, minority populations, and impoverished citizens. There’s a possibility that, once charged with running the country, the Trump faction will moderate on some issues, but it’s frightening to recall that no fewer than 37 percent of German voters mobilized behind an analogous cocktail of racial resentment and violent impulses in 1932.  In 2016, nearly half of the American electorate did just that, with profound implications for civil discourse, tolerance, and respect for sometimes marginalized sectors of the country’s population. If Trump’s exclusionary rhetoric becomes translated into concrete policies that diminish the country’s diversity, the U.S. will lose its status as among the most dynamic and creative places in the world.

The Latino vote was expected to be among the decisive factors that would sweep Clinton into the White House and swing the Senate back to Democratic control, albeit by the slimmest of margins.  But while it was influential, diminishing Trump’s margin of victory in reliable Republican strongholds such as Arizona and Texas, and enabling the Democrats to eke out victories in states such as Nevada, New Mexico, and Colorado, the Latino vote was insufficient to rescue Clinton’s fortunes in the pivotal states of Florida and North Carolina.  Whereas in 2012 Obama had an estimated 71-27 percent advantage among Latinos against his opponent, Clinton failed to match that total – exit polls indicate roughly a 65-29 percent split – even against a candidate explicitly targeting Latino interests.  Trump called for mass deportations of the country’s 10 million undocumented Latino residents and a rollback of the Obama administration’s efforts to provide safe haven and legal status for at least half of this vulnerable segment of American communities.  Whatever the reasons for their low participation, these communities now confront existential threats.

  • If Trump follows through on his promises, the impact will be manifested in numerous domains beyond immigration and related human rights that have profound implications for the welfare of U.S. Latinos, including the composition of the Supreme Court and its commitment to voting rights; protection against discrimination in employment, housing, and financial services; access to health care for 20 million people who for the first time gained coverage through the Affordable Care Act (“Obamacare”); opportunities for pre-school and tertiary education; and environmental regulations needed to protect public safety and health.

Political scientists and informed citizens must now revisit their assumptions about the impact that a growing Latino population may have on the outcome of presidential elections.  The gap separating the two parties in terms of Latino preferences is vast and increasingly consolidated, suggesting an enormous and enduring disadvantage for the Republicans.  But whether the Latino vote can become a decisive, rather than merely influential, component of the electorate is much less certain.  The anger among white voters – at least this time around – carried the day.  This “whitelash” may or may not be a transitory phenomenon, but the prospects for efforts to make the United States a force for good in the world, and to make government an agent for social and economic justice for all, will depend in large part on the future mobilization of the Latino community.  Arguably, the future of the United States – and by extension the world’s – hinges on the capacity of Latino voters to make America great again.

November 10, 2016

U.S. Elections: Latino Voters Lost in the Noise?

By Fulton Armstrong and Eric Hershberg

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The U.S. general election on November 8 could give Latino voters their biggest chance yet to flex their political muscles.  The Pew Research Center has released new projections showing that a record 27.3 million Latino voters – 4 million more than in 2012 and 12 percent of the U.S. total – are eligible to vote this year.  Millennials (born since 1981) now make up 44 percent of Latino eligible voters, and Pew Research says that first-time voters represent one-fifth of those who say they are “absolutely certain” to vote.  (Only 9 percent of those over 36 are “absolutely certain.”)  Pew is agnostic, however, on whether their turnout in November will set a record.  Latino non-participation rates are generally high:  their turnout rate was only 48 percent in 2012.  Indeed, analysts at the New York Times cautioned last month that comparisons between Clinton’s support among Latinos now and Obama’s in 2012 – which are similar – indicate that she can’t take them for granted.

Latinos’ political preferences – traditionally Democratic except in the Cuban-American community, which itself is trending towards the Democrats – appear poised for an unprecedented surge in favor of Democratic candidate Hillary Clinton next month.  The “Vote Predict” model of Latino Decisions shows Clinton stands to win 82 percent of the Latino vote, and her Republican counterpart, Donald Trump, 15 percent, with a 5.5 percent margin of error.  This 67-point gap breaks the previous record of a 51 percent split between President Bill Clinton and Senator Bob Dole in 1991, and the 71-to-27 difference between President Obama and Mitt Romney in 2012.  Press reports indicate that, despite unhappiness with aspects of the Obama Administration’s immigration policies which Clinton supported as Secretary of State, Latinos judge that Donald Trump’s policies of walls and expulsions call for active opposition.  Pew’s polls confirm that two-thirds of Millennial Latinos say their support for Clinton is more a vote against Donald Trump than for her.  The Republican Party’s own “autopsy” of its resounding 2012 electoral defeat underscored the importance of attracting Latino voters, who were dismayed by anti-immigrant and xenophobic stances they associated with the GOP.  In nominating Trump, the party fulfilled its strategists’ worst fears.

An overwhelming Latino majority for Clinton seems almost certain.  Political scientists increasingly predict that their rejection of the Republican brand may endure for generations to come, with profound implications for the viability of the Republican Party beyond the Congressional district and state levels.  Latinos may not get credit as the crucial swing vote in the presidential race, but they could be crucial in other contests.  The Latino vote could prove critical to the outcome of key Senate races in states such as Florida, North Carolina, and Arizona.  While the absolute number of Latino voters appears likely to rise, turnout in this unusual – even unsightly – presidential contest is one of the most unpredictable variables confounding polling experts, who see signs that many Americans’ faith in democracy and its processes is dropping, at least temporarily.  A survey reported in the Washington Post, for example, showed that fully 40 percent of 3,000 registered voters say they “have lost faith in American democracy,” while just 52 percent say they have not.  An astounding 28 percent said they probably would not accept the legitimacy of the outcome if their candidate loses.  These trends, along with Trump’s allegations that the election may be rigged, make the timing of the coming-of-age of Latino Millennials truly ironic in this extraordinary election year.  Many Latinos, or their parents or grandparents, left polarized, imperfect democracies and, after earning U.S. citizenship and the right to vote, find themselves in a polarized, imperfect democracy with deep historical roots but an uncertain near-term future.

October 20, 2016

Brexit: Limited Implications for Latin America

By Arturo C. Porzecanski*

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Photo Credit: Elionas2 / Pixabay / Creative Commons

The June 23rd British referendum result – a 52-to-48 percent vote to leave the European Union (EU) – has roiled the world’s leading financial markets, but contrary to many opinions issued in the referendum’s wake, the economic and financial implications of Brexit for Latin America have been either mild or favorable.  Hard line Brexit statements made earlier this month by UK Prime Minister Theresa May, and various rebukes from policymakers on the Continent, have had financial-market repercussions for the pound.  Most notably, sterling has fallen sharply, and it is now down more than 15 percent from its high on the day of the fateful vote, plummeting to three-decade lows against the dollar.

  • The market reaction initially led to a mostly regional (UK and Europe) correction in stock prices. Even this was short-lived: for example, the FTSE 250, an index of domestically focused UK firms, at first dropped by 14 percent but recovered fully by early August – and has since been trading above the pre-referendum level.  Moreover, the UK recession many feared did not materialize, at least not during 3Q16.
  • Financial markets priced in fairly quickly the conclusion that the Brexit shock would lead to greater dovishness among the world’s major central banks. Most relevant to Latin America and the emerging markets (EM) generally, the Brexit helped to persuade the U.S. Federal Reserve to delay its tightening until at least the end of 2016.  While Latin America’s trade and investment ties to Europe are not insignificant, the region’s major economies are far more dependent on the health of the U.S. economy and on the mood in the U.S. financial markets, and secondarily on trends in China.
  • If the UK and the Eurozone had stumbled and were headed for a recession, however, one likely casualty of Brexit would have been a noticeable drop in world commodity prices, with strong implications for the major economies of Latin America. While commodity prices have softened somewhat (non-oil commodities have averaged 2¼ percent lower since the Brexit vote, and oil has traded 7½ percent below), confirmed expectations of loose monetary conditions in the U.S. and Europe during 3Q16 have more than compensated.  This is why most EM stocks, bonds and currencies have rallied, with the parade led by the Brazilian Real (BRL), so far the best-performing of 24 EM currencies tracked by Bloomberg (up about 20 percent year-to-date).

The medium-term implications of Brexit for Latin America will depend on how much “noise” emanates from London, Brussels and other European capitals during the negotiation process (likely, 2Q17-2Q19).  Prime Minister May has now made three statements that define her bargaining position: Article 50 (exit) negotiations will begin by next March; the imposition of migration controls on EU citizens coming to the UK is non-negotiable; and the UK will no longer be under the jurisdiction of the European Court of Justice.  The latter two points mean that Britain cannot remain a member of the single market, and is therefore committed to forging a customized free-trade agreement with the EU, which could sow uncertainty and thus depress economic growth in Europe and beyond.

The most probable scenario – slow and halting Brexit negotiations, with progress hard to achieve until close to the end (in 2019) – will encourage uncertainty and speculation among economic agents and thus will be a drag on economic growth especially in the UK, and much less so in the rest of the EU.  However, it need not generate the kinds of waves that will reach, never mind derail, Latin America’s economic trajectory.  It is much more likely that what does or does not happen in Buenos Aires, Brasilia, Caracas or Mexico City, and above all in Washington, DC – courtesy of the Fed, the White House, and the U.S. Congress, in that order – will overshadow just about any headlines generated by the Brexit negotiations in Europe.  There is room for Latin America to clock higher GDP growth numbers in the years ahead when compared to the disappointing regional averages of 1 percent growth in 2014, zero growth in 2015, and a contraction of about -0.6 percent in the current year (as per IMF estimates).  This assumes that the Fed’s tightening is gradual (namely, no more than 0.25 percent increases in the Fed’s target rate per trimester) and that the UK’s divorce proceedings are not overly hostile.  This scenario foresees that creditworthy governments, banks and corporations in Latin America will retain access to the international capital markets on reasonable terms, despite some initial retraction in investor interest ahead of, and right after, the resumption of the Fed tightening cycle.

 October 17, 2016

*Dr. Porzecanski is Distinguished Economist in Residence at American University and Director of the International Economic Relations Program at its School of International Service.

As Mexico “Absorbs” Central American Refugees, Record Numbers Reach the U.S.

By Dennis Stinchcomb

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The meeting of world leaders that President Obama convened on Tuesday to rally support for refugee resettlement and inclusion across the globe was good diplomacy but contradicts Washington’s policies even in the Americas.  At a meeting on the margins of the UN General Assembly, Obama thanked Mexico for “absorbing a great number of refugees from Central America,” yet the data make clear that Mexico is hardly absorbing refugees.  During the first seven months of 2016, as WOLA has reported, Mexico granted asylum to just under 1,150 Central Americans but deported over 80,000 others.  Meanwhile, far greater numbers of Central Americans have reached the U.S., principally women with children (whom U.S. Customs and Border Protection labels “family units”) and minors traveling without a guardian (“unaccompanied children”).  With one month remaining in Fiscal Year 2016, apprehensions of Central American women with children total over 61,000 – up 79 percent from FY15 – and are on pace to surpass the FY14 record.  Likewise, apprehensions of unaccompanied children have already exceeded the FY15 total, and September numbers will likely push the current tally of 42,000 just shy of the FY14 record.

This renewed influx comes despite the Obama administration’s multi-pronged strategy to deter unauthorized migration from the Northern Triangle countries of El Salvador, Guatemala and Honduras:

  • U.S. support for Mexico’s Southern Border Program has resulted in unprecedented numbers of both detentions and deportations of Central Americans in Mexico, yet the dramatic increases in arrivals to the U.S. and shifting points of entry – including an upswing in seaborne trafficking – suggests that the exodus from the Northern Triangle continues and that human smugglers have adapted to stepped-up enforcement measures by forging new routes through Mexico.
  • Ongoing raids by U.S. Immigration Control and Enforcement (ICE) authorities, which under the banner of Operation Border Guardian aim to roundup unaccompanied youth who had been ordered deported from the U.S. and have recently turned 18, have not stemmed the tide of new arrivals fleeing untenable circumstances in their countries of origin.
  • Despite a July 2016 expansion of the CAM Program for in-country processing of youth applications for refugee status and for others in Central America asserting that they are at risk of harm, the pool of beneficiaries remains miniscule. Whereas the program had received 9,500 applicants by mid-year, only around 270 had been resettled in the U.S. With a six- to eight-month processing period and room for only 200 applicants at a time at shelters that have been set up in Costa Rica, desperate Central Americans continue to turn to more efficient human smugglers.
  • Public messaging campaigns launched in the region with U.S. government funding, to warn Central Americans of the dangers involved in irregular migration and to dispel misperceptions regarding U.S. immigration policies, also appear fruitless, as outlined in a recent American Immigration Council report).

President Obama’s efforts to galvanize international action in response to forced displacement worldwide highlight his own administration’s shortcomings in addressing refugee flows closer to home.  Expedited hiring of border patrol agents and an increase in the number of beds at contract detention facilities, among other domestic measures, have enabled the administration to process large volumes of Central American migrants while avoiding the appearance of a “border crisis” akin to 2014.  Meanwhile, an emphasis on curtailing outflows from Central America (without regard to the justification of people’s decision to flee), detention (rather than absorption) in Mexico, and deportation in both Mexico and the U.S. has not been matched with analogous investments to address the needs of Central American migrants already in the U.S. who may have legitimate claims for asylum or other forms of protection.  Central American families and unaccompanied children, for example, now account for over one-fourth (26 percent) of the 512,000-case backlog in immigration courts, yet only 53 percent of families and 56 percent of unaccompanied minors have access to attorneys.  In failing to guarantee legal representation for these vulnerable populations the administration is sidestepping the same moral obligation to thoroughly vet and provide safe, inclusive communities for refugees that President Obama challenges other governments to fulfill.  Perhaps funding that is supporting Mexico’s strategy of detention and deportation could be better allocated to programs that ensure proper adjudication of asylum claims – in both Mexico and the U.S. – and to genuinely seek to absorb individuals and families who, through due process, are judged to qualify as refugees.

September 22, 2016

Update: Venezuela-U.S. Tensions Rise

By CLALS Staff

Photo credit: andresAzp / Foter / CC BY-NC-ND

Photo credit: andresAzp / Foter / CC BY-NC-ND

AULA BLOG lets policymakers’ own words characterize the state of relations between Washington and Caracas.

Venezuelan Government Statements

I have ordered the Foreign Minister of the Republic … to declare persona non-grata y to expel from the country these three consular officers from the United States Embassy in Venezuela. We have been watching them for two months already, holding meetings in universities. The story is that they’re offering visas. … Well, let them go and conspire in Washington. …

The demands [made in a statement delivered by Deputy Assistant Secretary of State Alex Lee to Venezuelan Ambassador to the OAS, Roy Chaderton] are unacceptable, insolent. I ordered a diplomatic response. In Venezuela, we are willing to accept all consequences in defense of democracy. I take orders from no one. …

The government of the United States should take responsibility, before the Venezuelan people and the world, for allowing U.S. institutions and individuals to finance, legitimize and promote the actions of persons and groups who attack Venezuelan society violently, and who look to twist the democratically expressed will of our people to build their sovereign destiny in peace.
—President Maduro, February 16
AP, EFE (CLALS translation)

The Bolivarian Republic of Venezuela forcefully rejects the statements made today, Wednesday, February 19, by the President of the United States, Barack Obama, insofar as they constitute new and crude interference in the internal affairs of our country, made worse by being based on false information and baseless accusations.

This is an offense to the heroic land of the Aztecs, of Juárez, of Villa, and of Zapata; to the noble and courageous people of Mexico, the sister nation from which President Obama continues attacking a free and sovereign nation of Latin America and the Caribbean because its policies, principles, and decisions are the result the democratic expression of popular will.

The statement that the independent governments and people of the world await is that in which the government of the United States of America explains why it finances, encourages, and defends opposition leaders who promote violence in our country, and clears up what right Deputy Assistant Secretary [of State] Alex Lee has in sending a message from his government that tries to impose conditions on and threaten the Venezuelan state for having taken judicial action against those responsible for the violent acts of recent days.

As a final point, the Venezuelan government reiterates that it will continue monitoring and taking the necessary actions to prevent U.S. agents attempting to cause violence and destabilization, and informs the world of the nature of the interventionist policies of the Obama administration in our country.
—Despacho de la Presidencia, February 20
(CLALS Translation)

I have just read recent statements by John Kerry – arrogant, interventionist and insolent – that confirm the terms of the threat that I denounced. John Kerry is threatening Venezuela with more violence through his statements giving the green light to violent groups to attack our people. Let the brutal and insolent imperialists know that we will continue defeating it with the force of our people, which is the force of Bolívar and Chávez.
—President Maduro, February 21
Tweets, via TeleSur (CLALS translation)

I call for a dialogue with you, President Obama. I call for a dialogue between the patriotic and revolutionary Venezuela and the United States and its government. Accept the challenge. Let’s initiate a high-level dialogue and let’s put the truth out on the table. … I say this, and some will say, ‘Maduro is naïve.’ No, we will always find a new situation through political dialogue – a change in the historic relations between the U.S. elite and Latin America and Venezuela. … I propose therefore a grand dialogue, and that we name ambassadors, since they haven’t been accepted so far, so they can sit down and talk.
—President Maduro, February 21
Various media (CLALS translation)

There’s a global campaign against Venezuela. It’s a campaign to justify an intervention in the domestic affairs of Venezuela. … [There is] a brutal manipulation campaign, [which] has created a perception in the world that Venezuela is on the verge of civil war, that here in Venezuela we have a group of docile students opposing an illegitimate government.
—President Maduro, February 22
CNN

U.S. Government Statements

In general, when it comes to Venezuela, we’ve made clear that we’re open to having a constructive relationship with the Government of Venezuela. Quite frankly, we haven’t seen that – we have not seen that reciprocated, to be clear. So we also, I think, see a lot of conspiracy theories or rumors out there in the press about how the U.S. is interested in influencing the domestic political situation in Venezuela, which is absolutely not true. It’s not up to us to comment on internal Venezuelan politics.
—State Department Spokesperson, February 13

So we are deeply concerned by rising tensions, by the violence surrounding these February 12th protests, and by the issuance of a warrant for the arrest of opposition leader Leopoldo Lopez. We join the Secretary General of the OAS in condemning the violence and calling on authorities to investigate and bring to justice those responsible for the deaths of peaceful protestors. We also call on the Venezuelan Government to release the 19 detained protestors and urge all parties to work to restore calm and refrain from violence.
—State Department Spokesperson, February 14

The United States is deeply concerned by rising tensions and violence surrounding this week’s protests in Venezuela. Our condolences go to the families of those killed as a result of this tragic violence.

We are particularly alarmed by reports that the Venezuelan government has arrested or detained scores of anti-government protestors and issued an arrest warrant for opposition leader Leopoldo Lopez. These actions have a chilling effect on citizens’ rights to express their grievances peacefully.

We join the UN High Commissioner for Human Rights, Secretary General of the Organization of American States, EU High Representative for Foreign Affairs, and others in condemning this senseless violence. We call on the Venezuelan government to provide the political space necessary for meaningful dialogue with the Venezuelan people and to release detained protestors. We urge all parties to work to restore calm and refrain from violence.

Freedoms of expression and peaceful assembly are universal human rights. They are essential to a functioning democracy, and the Venezuelan government has an obligation to protect these fundamental freedoms and the safety of its citizens.
—Secretary of State Kerry, February 15

The allegations that the United States is helping to organize protestors in Venezuela is baseless and false. We support human rights and fundamental freedoms – including freedom of expression and of peaceful assembly – in Venezuela as we do in countries around the world. But as we have long said, Venezuela’s political future is for the Venezuelan people to decide. We urge their government to engage all parties in meaningful dialogue.
—State Department Spokesperson, February 17

We have seen many times that the Venezuelan Government tries to distract from its own actions by blaming the United States or other members of the international community for events inside Venezuela. These efforts reflect a lack of seriousness on the part of the Venezuelan Government to deal with the grave situation it faces. … With the OAS and our regional partners, we are working to urge calm and encourage a genuine dialogue among all Venezuelans. There is no room for violence by either side.
—State Department Spokesperson, February 18

In Venezuela, rather than trying to distract from its own failings by making up false accusations against diplomats from the United States, the government ought to focus on addressing the legitimate grievances of the Venezuelan people. So, along with the Organization of American States, we call on the Venezuelan government to release protestors that it’s detained and engage in real dialogue. And all parties have an obligation to work together to restrain violence and restore calm.
—President Obama, February 19