Presidents Chavez of Venezuela, Fernandez of Argentina and Rousseff of Brazil chat while posing for a family photo during the CELAC summit in Caracas (Carlos Garcia Rawlins/Courtesy Reuters).
As 2011 comes to an end, I want to reflect on just a few trends affecting the region over the course of the past year. While these developments certainly have long histories, they have all become more noticeable – and noteworthy – in 2011. To keep it interesting, I will be posting one trend a day for the rest of this week, so check back — and let me know what you’d add to the list in the comments or via my twitter account (@latintelligence).
This hasn’t been a good year health-wise for Latin American leaders. Cristina Kirchner’s recent diagnosis of thyroid cancer is just the latest. The most mysterious, and politically game-changing health challenge is that of Hugo Chávez. Officially, Cuban doctors removed a reportedly “aggressive” pelvic tumor in June, and since then he has undergone chemotherapy and steroid treatment. Though he claims to have conquered the disease, others (including his former doctor) say he may not live more than two years.
Last year, Paraguayan President Fernando Lugo was diagnosed with non-Hodgkin’s lymphoma, and spent four months in chemotherapy and in and out of hospitals. According to the most recent tests, his cancer is in remission. In Brazil, President Dilma Rousseff continues some treatment for lymphatic cancer (discovered during her 2010 presidential campaign) and former President and still political heavyweight Luiz Inácio Lula da Silva has just begun his final round of chemo for throat cancer (diagnosed in October). Pictures of the famously bearded leader now show him hairless, though still beaming. There were also rumors circulating that Evo Morales had a cancerous tumor in his nose, though this was never proven.
This type of illness has idiosyncratic, but nevertheless real effects on politics. It can weaken a politician due to their physical absence from the public limelight as well as political backroom negotiations. Lula’s Worker’s Party (PT) will sorely miss his active leadership, especially in the run up to local elections in 2012. Kirchner is expected to make a quick recovery after surgery, though she will turn power over to her Vice President Amado Boudou (a close political confidant) for three weeks in January. It remains to be seen whether these absences will make a significant mark on either country’s internal politics.
Javier Corrales, a political scientist at Amherst, has written about a different role for illness, and its potential to strengthen rather than diminish the political patient. Calling it “participatory cancer” he chronicles Chávez’s attempts to turn his illness from a disadvantage to an electoral strength. By brandishing cancer and his fight as an electoral gimmick, the Venezuelan leader distracts voters from more serious problems (such as a floundering economy and rising crime).
While continuing to watch the political fallout, let’s hope the new year brings health to all.
Published in conjunction with Latin America’s Moment at the Council on Foreign Relations.
A truck of the Mexican company Olympics bearing Mexican and U.S. flags approaches the border crossing into the U.S., in Laredo (Courtesy Reuters).
It is worth reading the Woodrow Wilson Center Mexico Institute’s new study by Christopher Wilson, entitled “Working Together: Economic Ties between the United States and Mexico.” The report is packed with examples and statistical evidence of the deepening integration between the United States and Mexico since 1993 (the signing of NAFTA), and concisely explains why this relationship is so important and beneficial for the United States.
In terms of trade, for nearly half of U.S. states, Mexico is the number one or number two export destination. For border states such as Texas, New Mexico, and Arizona, up to a third of all exports head to our southern neighbor. But it isn’t just a border issue – export industries in states as far flung as New Hampshire, South Dakota, Nebraska, and Missouri all depend on Mexican industries and consumers. And these are some of the most dynamic trading relations we have. Twenty U.S. states increased exports to Mexico by more than 10 percent each year over the last fifteen years. Investment also flourished. Mexican FDI in the United States, though starting at a low base, increased tenfold over the past two decades.
The report shows that trade with Mexico is particularly beneficial to the United States because these goods incorporate many parts and products produced in the United States. In fact, even though fully counted as imports in official trade data, an estimated 40 percent of the value of Mexican products is actually “made in the USA.” Only Canada comes close to this ratio (25 percent). In stark contrast, only 4 percent of the value of Chinese imports is made on U.S. soil. This means that products coming from Mexico support homegrown industry and labor. In fact, 6 million American jobs – or 1 out of every 24 – depend on Mexican trade. The study breaks down employment by state – showing for instance that some 200,000 Georgians, 120,000 Indianans, and 100,000 Coloradans owe their jobs to Mexico. Other studies show that export oriented jobs pay more than others, further benefiting U.S. workers. And what is good for Mexico is good for the United States — Mexico’s strong 2011 economic growth should create 150,000 new U.S. jobs.
The report interestingly points out how the United States is now competing with China and others to supply parts and materials used in Mexican production. Here, worryingly, the United States is falling behind – losing market share to its Asian rivals. Part of the problem is the border. Overwhelmed infrastructure, and long and unpredictable wait times at crossings limit competitiveness, costing taxpayers billions in lost revenue and jobs.
There are some signs that these issues are at least appreciated. In 2010 three new border crossings opened, easing congestion along the dense 2,000 mile border, and under its “21st Century Border” project, the Obama administration is working to make commercial and other crossings more efficient and secure. But a conceptual shift is still needed. U.S. politicians, business owners, workers, and the general public need to understand that the path to improving U.S. global competitiveness –defending American industry in the process – runs through, rather than around Mexico (and Canada). Regional integration is vital for U.S. economic recovery and growth going forward.
Published in conjunction with Latin America’s Moment at the Council on Foreign Relations.
Mexican Gov. Enrique Pena Nieto answers reporters' questions at the National Press Club in Washington (Molly Reilly/Courtesy Reuters).
It seems the campaign book so popular in the United States has headed south of the border. After a recent tour through Washington, DC, and New York, former governor and likely PRI presidential candidate Enrique Peña Nieto just released Mexico, the Great Hope. An efficient state for democracy with results.
Arguing that the successive PAN administrations have left the country worse for the wear, Peña Nieto lays out his vision for a government based on guaranteeing citizens’ basic rights (such as security), getting the economy growing at its full potential, and reaffirming Mexico’s leadership as an emerging power on the world stage. He calls for a number of economic reforms, including opening Petróleos Mexicanos (PEMEX) to private investment (still maintaining state ownership), as well as widening the tax base and simplifying the tax code. On security, he favors a more comprehensive strategy geared first and foremost to reducing the violence.
Most of his positions are quite sensible. Mexico needs to (and is already starting to) focus on lowering the escalating levels of violence, as opposed to concentrating on taking down drug kingpins. Economically, opening up PEMEX would increase foreign investment and improve Mexico’s overall competitiveness, boosting jobs and growth in the process. Reforming the tax code would also go a long way to enhancing and diversifying government revenues and hopefully make it easier to start up businesses. But these two reforms are also politically difficult — having been on the legislative table for years now, and repeatedly stymied by Peña Nieto’s own party. If he wins, perhaps the former governor will be Mexico’s equivalent of a “Nixon in China” – able to change the dynamics precisely because of his party’s ties to PEMEX’s union – but that remains to be seen.
Much will also depend on the United States. For Mexico to reach its economic potential, the United States will have to grow as well, as the economies today are indelibly intertwined. A U.S. immigration reform – if it happens — also could change things for Mexico. For all its big vision, the book makes clear that there is much that needs to happen during the next presidential term in Mexico to fulfill this “great hope.”
Published in conjunction with Latin America’s Moment at the Council on Foreign Relations.
Young people rest on a sidewalk as a man cleans in Mexico City (Henry Romero/Courtesy Reuters).
An OECD report released this September shows that seven million young Mexicans between the ages of fifteen and twenty-nine are neither in school nor in the labor force. Among OECD countries, Mexico has the third largest “inactive” youth population, behind only Turkey and Israel. Mexico has been increasingly concerned about the security implications of the vast number of these “idle” youths — dubbed “Ni-Nis” (Neither-Nors). NiNis are thought to be especially vulnerable to recruitment by organized criminal groups, acting as lookouts, dealers, smugglers, or even hit-men.
Overall, the number of NiNis has decreased by more than 10 percent since 1990, questioning at first glance the ties to rising violence. But a more detailed breakdown of this rootless youth suggests these worries aren’t totally misplaced. Most of the decline reflects the changing prospects for young women – who are much more likely to work or study today than they were twenty years ago. For urban men – the population most likely to be recruited by gangs and organized crime groups – not as much has changed, as their share of the total NiNi population has only decreased by one percent over the past two decades.
A recent study conducted by investigators from CIDE and the Colegio de México shows too that NiNis are concentrated in Central and Northern states — including some of Mexico’s most violent ones. The largest proportion of inactive youths are in Chihuahua, Durango, San Luis Potosí, Guerrero and Zacatecas (and in cities such as Ciudad Juarez). In municipalities in these five states the numbers have remained stubbornly high over the last twenty years. Also, while NiNis aren’t concentrated in the poorest states, they do come predominantly from poorer families. Seven in ten NiNis come from households earning below the national average. Their parents are also less educated than the average Mexican, suggesting a vicious cycle as they too spend less time in school than their occupied counterparts.
Some factors are working in Mexico’s favor. Demographics should lessen the challenge a bit – as going forward each year fewer youths will hit the streets. A rebounding economy can help too – as unemployment levels fairly strongly affect the number of (particularly male) NiNis. But Mexico’s government and society still will have to find ways to engage these young people, to help them see beyond the next few years and offer them real alternatives to a life of crime.
Published in conjunction with Latin America’s Moment at the Council on Foreign Relations.
Peña Nieto, outgoing Institutional Revolutionary Party governor in the State of Mexico, is silhouetted against the national flag before delivering his sixth and final state report in Toluca (Courtesy Reuters).
I had the pleasure of speaking at and moderating a panel last Thursday at the Council of the Americas/Americas Society with Claudio X. González, Chairman of the Board of Kimberly-Clark de Mexico and on the board of a number of top Mexican corporations, as well as Alberto Ardura, Managing Director and Head of Capital Markets for Latin America at Deutsche Bank. Some of the most interesting issues raised were the relationship between security and the economy, and the future of the energy sector.
Overall, the political and economic outlook was quite positive, despite the formidable challenges the next administration will face. Mr. González highlighted that Mexico presents something of a paradox – despite increasing insecurity, the economy is picking up. He credited this in large part to orthodox economic policies that have kept deficits and inflation low, leading to GDP growth in the realm of 4-5 percent (outpacing current market estimates). Mr. Ardura echoed this view, saying that the fifteen plus years of fiscally responsible policies have made Mexico’s economy the healthiest in the hemisphere, with some of the best macroeconomic fundamentals in the world (certainly among emerging markets).
Still, both panelists remained concerned about Mexico’s future competitiveness and growth. Despite its macroeconomic prowess, it has fallen behind Brazil, Peru, Colombia, and even less orthodox Argentina. The main holdups are security, the closed energy sector, education, and the concentration within so many sectors of the Mexican economy. They felt that if the government could tackle a few of these major issues, it could pick up the speed of annual growth to five or six percent — transforming Mexico in the process.
The speakers were quite optimistic about the PRI, both on its ability to get things done if it wins the presidency (particularly if it wins a majority in Congress, ending legislative gridlock), and on substance — especially the possibility of opening the energy sector.
But some in the audience doubted the positive momentum, particularly the veracity of the new, more modern PRI that looks set to capture Los Pinos next July. Many (at the podium and in the audience) remained skeptical about whether the “dinosaurs” of the party would stand down, allowing these more comprehensive reforms to strengthen Mexico’s public institutions and jump-start its economy.
Published in conjunction with Latin America’s Moment at the Council on Foreign Relations.
Bundles of confiscated drug money worth two million euros ($2.7 million) are displayed at a police headquarters in Madrid January 18, 2011. (Andrea Comas/Courtesy Reuters).
On Tuesday, the UN Office on Drugs and Crime (UNODC) released a new report on global money laundering, “Estimating Illicit Financial Flows Resulting from Drug Trafficking and Other Transnational Organized Crime.” The upshot? It is really hard to estimate. But, the report does provide some tangibles. Surveying numerous studies, it calculates that illicit global proceeds amount to over $2 trillion dollars every year (roughly 3.6 percent of global GDP), with some $1.6 trillion of this laundered. Within these staggering figures, roughly $870 billion of these revenues relate to drug trafficking and organized crime, and close to $580 billion of those illicit funds are laundered through financial institutions. The study drills down and looks specifically at the global cocaine market, estimated at some $85 billion. Most of this, again, is laundered.
The report provides some hints as to how this happens. Of the $85 billion cocaine market, most (estimated at $61 billion) stays in the retail markets – the United States and Europe primarily. Producers – mostly Andean farmers – receive in total $1 billion, or just over 1 percent of the gross profits. This leaves, by their estimates, roughly $23 billion for those processing and moving the drugs from the fields to the domestic wholesalers. Shipping cocaine from producing regions to transit locations generates at least $8 billion in profits.
When it comes to laundering this money, at least half occurs locally, and most of the rest in nearby countries. In South America, the report estimates that some $13 billion dollars of laundered cocaine money likely flows into and through local banks and local businesses, and roughly $7 billion is probably cleaned nearby, often in the Caribbean. The report also touches on the profound (and mostly negative) impacts of these flows on local economies, including corruption, real estate price distortions, large income disparities, and weaker growth (since criminals aren’t usually looking for long term productive investments in local economies).
The report ends on a fairly pessimistic tone. Drawing on a separate, heavily cited 2009 report from the U.S. Department of Justice’s National Drug Intelligence Center, the UNODC estimates that Mexican and Colombia’s drug-related money laundering may amount to between $18 and $39 billion each year. The authors argue that, unlike taking down kingpins (who are easily replaced), seizing illicit funds has much more severe and long lasting impacts on illicit trade. But, then the report goes on to show that our global ability to find and stop these financial flows is abysmal – estimated at far less than 1 percent – not much different than the fees brokers charge to clients to buy and sell stocks, and less than hedge funds take to manage your (legal) money. With the cost of doing business – at least in terms of money laundering – remaining low, the UN office points out the vital need for international law enforcement to truly step up and follow the money.
Published in conjunction with Latin America’s Moment at the Council on Foreign Relations.
First lady Michelle Obama attends a Hispanic Heritage event at Lamb Public Charter School in Washington (Yuri Gripas/Courtesy Reuters).
At last week’s Republican presidential debate a member of the audience provocatively reminded the candidates that not all of the Latinos in the United States are illegal, and then asked them, “What is the message from you guys to our Latino community?” Nearly everyone on stage dodged the question, saying that they didn’t have a specific message for Hispanic voters because “they want virtually exactly what everyone else wants” such as a healthy economy and access to affordable health insurance. That may be true, but the exchange raises the broader issue of whether the Republicans can connect with the growing number of American citizens with links back to Latin America.
Finding a good answer to this question is more important than ever. Some 50.5 million people – or one in six Americans – fall under this moniker. In every single state of the union, the Latino population grew over the past decade – including in swing states such Florida, Iowa, Virginia, Georgia and North Carolina.
What the presidential frontrunners have done quite vocally is attack one another for “soft” immigration stances and lashed out against “illegals”. Herman Cain ratcheted up the rhetoric to an all time high, suggesting electrifying the border fence and killing anyone who tried to cross into the United States from Mexico. A wave of harsh immigration laws – requiring police to check the immigration status of anyone they suspect is undocumented, punishing landlords that rent to those without papers, and even checking immigration status at schools — have passed in states including Arizona, Georgia, and Alabama. With the economy in the doldrums and unemployment near historic highs, blaming illegal immigrants for many of America’s ills has gained traction, particularly within the Republican Party. Though technically not directed at U.S. Latinos, many feel the rising hostility targets them all the same.
While it may be awhile until the full economic effects of these laws are clear (a recent study by the Council of the Americas suggests that the restrictive laws hurt rather than help local employment), the political impact is more immediate. How the polarization will play out in the primaries –will it further energize a strongly anti-immigrant conservative base, or mobilize Latino and other pro-immigrant groups (along the lines of the coalition that defeated an English-only bill in Nashville, Tennessee in 2009) – remains to be seen. But in the general national election, it is hard to imagine how it helps its proponents.
At the Western Republican Leadership Conference/CNN debate Rick Santorum was the only Republican presidential candidate who seemed to recognize what other prominent party leaders (such as Karl Rove and Jeb Bush) have been saying now for awhile: the Republicans cannot afford to alienate this huge and growing demographic. They also don’t have to. The Republican Party has the opportunity to connect with Latinos on a number of issues, including family values, faith-based views, and an emphasis on entrepreneurship and small businesses. But if Rick Santorum is the only Republican hopeful that understands the importance of reaching out to Latinos, then the party is in trouble. President Obama won a whopping 67 percent of the Latino vote in 2008, and preliminary counts suggest that this demographic will only be more important this time around. History suggests that minorities, while often punching below their electoral weight, tend to turn out for national presidential (as opposed to midterm) elections. In 2012, they will represent over a third of the voting age population — an all time high. To compete, the Republicans have to come up with a better answer, or they risk losing America’s fastest growing electorate.
Published in conjunction with Latin America’s Moment at the Council on Foreign Relations.
Source: Corporación Latinobarómetro, Informe Anual 2010 (Santiago de Chile, December 2010).
Steven Levitsky’s recent article in the Journal of Democracy explains why Humala won the Peruvian elections last summer. He points to a mix of campaign particulars — most importantly the divisions within the center-right – Humala’s effective shift from the left to the center, and most fundamentally, state weakness (which tends to push voters toward anti-establishment candidates). The Peruvian state has always been weak – as Hillel Soifer’s work has shown.
This weakness means Humala faces a huge challenge — and not just from the Lima-based political and economic establishment that voted against him. As the graph above shows, Peruvians in generally have little faith in their government, their parties, their political institutions in general. This hints at Humala’s bigger problem. He has few tools – especially outside of the country’s larger urban centers – to do much to drastically improve Peruvians’ standard of living. Even if economic growth continues and can pay for it, delivering social programs, better schools, and safer streets will require building a stronger state (almost from scratch) – quite a tall order.
Still, Humala is off to a decent start – he appointed a “market-friendly” cabinet that pleased even Alan Garcia, then raised the minimum wage without upsetting the economic elite too much, and most recently passed a prior consultation law many years in the making. Whether he can build and strengthen the Peruvian state will define his presidency. If he can’t, it will lead to Levitsky’s most likely scenario – a mediocre government.
Published in conjunction with Latin America’s Moment at the Council on Foreign Relations.
– Latin Americans are second only to North Americans in terms of social networking — for those that access the Internet, 8 in 10 use social media.
– While broadband access is limited but increasing (expected to surpass 30% by 2014) some 36% of Latin Americans Internet access of some form. And, 90 percent of Latin Americans have cell phones – so the potential to expand is large.
– Facebook claims 100 million Latin American users, led by Brazil, and then Mexico, Colombia, Argentina and Venezuela.
– Some governments – most notably Colombia – are investing millions to expand Internet use, seeing it as an important driver of economic growth.
Overall it is an interesting and fairly positive technological look at the region. While Latin America falls behind Asia in terms of access to the Internet, the region’s citizens are more socially connected – at least as measured by Facebook, Twitter, and the like. These connections have had and can have broader political and economic impacts than just catching up with family and friends. Social networking has already played big roles in Colombia, with a Facebook-led series of marches against the FARC in 2008 that spread throughout the country (and as far as New York and Chicago), and in Mexico, where twitter updates on drug violence give people vital information the local press and governments are no longer able or willing to provide. Some even see the arrival of social media to Latin America as a great democratizer – helping open up governments (like in the Arab Spring) and media monopolies.
Published in conjunction with Latin America’s Moment at the Council on Foreign Relations.
Free trade agreements with Colombia, Panama and South Korea finally passed, after four plus years of delay. My colleague Ted Alden talks about the consequences for the U.S. job market and for the Obama administration’s trade and investment strategy.
Published in conjunction with Latin America’s Moment at the Council on Foreign Relations.
Latin America’s Economic Outlook Free trade agreements with Colombia, Panama and South Korea finally passed, after four plus years of delay. My colleague Ted Alden talks about the consequences for the U.S. job market and for the Obama administration’s trade and investment strategy.
Published in conjunction with Latin America’s Moment at the Council on Foreign Relations.
Changes in Mexican Migration Free trade agreements with Colombia, Panama and South Korea finally passed, after four plus years of delay. My colleague Ted Alden talks about the consequences for the U.S. job market and for the Obama administration’s trade and investment strategy.
Published in conjunction with Latin America’s Moment at the Council on Foreign Relations.
