An elderly Guatemalan woman rests before leaving Bolivia from Santa Cruz (David Mercado/Courtesy Reuters).
For those of you that haven’t seen this yet — the Economist’s Americas editor Michael Reid provided a great overview of Latin America’s progress in recent years, as well as the challenges that lie ahead in his testimony before the Senate Foreign Relations Committee Sub-Committee on the Western Hemisphere two weeks ago.
The following are two, slightly less optimistic pieces – based on economics, and in particular income inequality. FOCAL recently released a policy brief authored by Guillermo Perry and Roberto Steiner on “Economic Growth and Inequality” in Latin America. Two graphs stand out here. The first, on page 3, reflects that while inequality is getting better in Latin America, the situation is still pretty abysmal, as the most equal countries in the region are still more unequal than most countries across the globe. The figure on page 5 suggests a possible explanation: Latin American countries have among the least progressive taxation systems in the world.
A World Bank study from 2008, “The Measurement of Inequality of Opportunity: Theory and an application to Latin America” gives a sense of just how much this matters in the lives of Latin Americans. Analyzing data from 6 countries in the region, it shows that up to half of differences in income are due to structural inequalities. Getting ahead in Latin America today, it seems, still depends on being born a specific race, in a particular place, and within a certain kind of family.
Lastly, CFR’s independent Task Force report “Global Brazil and U.S.-Brazil Relations” argues that the U.S. must take Brazil seriously as the newest pillar in a multipolar world.
Published in conjunction with Latin America’s Moment at the Council on Foreign Relations.
U.S. President Barack Obama and Brazil's President Dilma Rousseff toast during lunch in Brasilia (Ho New/Courtesy Reuters).
Today the Council on Foreign Relations is releasing its independent Task Force report, “Global Brazil and U.S.-Brazil Relations”. I sat in as an observer for the Task Force, ably led by co-chairs Samuel W. Bodman — former Secretary of Energy under George W. Bush — and James D. Wolfensohn — chairman of Citigroup’s international advisory board and former president of the World Bank Group — and directed by my CFR colleague, Julia Sweig. The project’s 30 participants hail from diverse backgrounds, some old Brazil hands and others with functional and/or wide-ranging expertise. Needless to say, the four meetings that took place over the course of a year yielded a stimulating and fruitful dialogue. Although there were some differences of opinion among Task Force members (some of which are noted in the additional comments and dissents section of the report), everyone agreed to Brazil’s rising importance.
We addressed a wide range of issues, including Brazil’s economic health, its energy agenda, its role as a dominant regional power and its relationship with the U.S. government. The report’s core recommendations focus on deepening cooperation between Brazil and the United States so that both can more effectively advance their common interests (and better manage areas where we might come into conflict). In particular, the Task Force points to Chinese monetary policy, climate change mitigation, the expansion of the biofuels industry and regional counternarcotics policy as issue areas that provide opportunities for bilateral cooperation. It calls for Washington to better appreciate Brasilia’s increasing potential as a global strategic ally. As a sign of goodwill, the Task Force recommends a particular concrete step: fully endorsing Brazil as a permanent member of the United Nations Security Council.
The report’s most basic takeaway is that Brazil is the newest pillar in a multipolar world and must be treated as such. Slotted to become the world’s fifth largest economy within the next decade, it grew at a stunning pace of 7.5% in 2010 (whether this is sustainable remains a big question mark), and is expected to expand 4.5% this year. Unemployment and inequality — perennial concerns for the nation—have fallen. Still, Brazil’s economic outlook is not entirely rosy. In the short to medium term, rising exchange rates and inflation threaten Brazil’s growth. Decrepit infrastructure and an overwhelmed public education system threaten its longer term competitiveness. Whether Brazil can take on these myriad obstacles effectively remains to be seen.
Whatever its economic future may hold, the Task Force report is worth a full read, as it provides important insights and ideas on how both Brazil and the U.S. can manage the challenges that lie ahead, and the U.S.-Brazil relationship, for the better of both nations.
Published in conjunction with Latin America’s Moment at the Council on Foreign Relations.
US Secretary of State Clinton and Mexican Foreign Minister Espinosa (Saul Loeb / Courtesy Reuters).
Last Friday, Hillary Clinton hosted the Merida Initiative High-Level Consultative Group in Washington. The meeting was the Group’s third, building on previous meetings in November 2008 and March 2010 in Mexico City to deepen the security partnership between the two countries. The meeting brought together cabinet secretaries from both governments, including Defense Secretary Robert Gates, Attorney General Eric Holder, DHS chief Janet Napolitano, Chairman of the Joint Chiefs Mike Mullen, drug czar Gil Kerlikowske, and Ambassador Pascual, as well as Mexico’s Foreign Secretary Patricia Espinosa, Secretary of Governance José Francisco Blake Mora, Secretary of National Defense General Guillermo Galván Galván, top police chief Genaro García Luna, Attorney General Marisela Morales Ibañez, National Security Spokesman Alejandro Poire Romero, and Ambassador Arturo Sarukhan.
Much as the Calderon visit to Washington in March, little new was announced beyond renewed commitments to the current four-pillar strategy and a recognition of shared responsibility. Instead, the main “news” is that security relations continue on the same path. Which begs the question – where are we now after 4 years of US-Mexico security cooperation?
An excellent new paper by Andrew Selee and Eric L. Olson at the Woodrow Wilson Center’s Mexico Institute lays out a concise evaluation and accurate scorecard. On the first pillar, targeting organized crime groups, they argue that while progress has been made in intelligence sharing and the arrest of key leaders in both Mexico and the U.S., a clear strategy to dismantle the cartels’ financial and arms smuggling networks – arguably the most important task ahead to erode future capacity – has yet to emerge. On the second pillar, to strengthen Mexico’s rule of law institutions, they find that police reforms and efforts to clean up Mexico’s courts have been slow and face numerous setbacks, and have failed to filter down from the federal to the state and local levels. On the third pillar, they see positive first steps in the lengthy task of modernizing the U.S.-Mexico border, including new ports of entry and technology to expedite transit and improve security. They find that the least progress has been made on the fourth pillar, as U.S. resources for strengthening communities through job creation and youth engagement has lagged behind other programs. Finally, they name the implicit fifth pillar that should be a key component of measuring success: demand reduction in the U.S.
While no news may be good news out of these high level meetings, Selee and Olson’s analysis suggests the need for much bolder measures and stronger support on both sides of the border, given how much is needed to turn the security tide.
Published in conjunction with Latin America’s Moment at the Council on Foreign Relations.
President of the IADB Luis Alberto Moreno and U.S. Treasury Secretary Geithner at the 50th Inter-American Development Bank's general assembly (Jose Gomez/Courtesy Reuters).
The Inter-American Development Bank (IDB) just finished its annual meeting that brought 29 finance ministers, including Mexico’s Ernesto Cordero, Colombia’s Juan Carlos Echeverry and the United States’ Tim Geithner, to snowy Calgary.
The ministers and their aides spent four days talking about swapping dollar loans into local currencies, infrastructure needs, and Chinese investment in the region. But one behind-the-scenes rumbling was the potential fallout from the current U.S. domestic budget showdown. Would the United States meet its 2011 commitment?
The largest of 48 shareholders, the U.S. has a 30% share in the IDB. The bank is now in the process of increasing its capital base by $70 billion (approved at last year’s Cancun meeting) – which will enable it to double the number of loans it makes. The first installment of the U.S.’ share — $102 million — is due in October.
As Republicans and Democrats square off over the budget, multilateral dues are easy victims. But the costs of this short-sightedness will be significant. Skipping out on IDB dues directly undercuts U.S. efforts to reach out to Latin America and its economic markets in the goal to double U.S. exports by 2015. By showing that the United States doesn’t put its money where its mouth is, it diminishes U.S. “soft power” in negotiations over trade deals, economic opening, and other multilateral issues such as global economic governance or even climate change. And for those that fear “losing” Latin America to China (an IDB member that will pay its dues), this is not the way to show that the U.S. cares.
IDB funds are especially important for the smaller and poorer countries in the region—such as the Central American nations the U.S. is working with on a range of issues, including regional security, migration, and job creation. IDB loans are often the glue that brings together other lenders for long term infrastructure and other development projects, all of which are crucial for the economic health of particular countries and the region as a whole. The IDB helps open up economies, strengthen property rights, allowing the private sectors (and often U.S. companies) to flourish.
So far the Department of Treasury has been out front, trying to save multilateral outlays. The State Department should be joining the bandwagon, as these dues are as important diplomatically as economically. Their joint efforts will surely be needed to convince a skeptical Congress that the IDB matters.
Published in conjunction with Latin America’s Moment at the Council on Foreign Relations.
Three weeks ago, Reynosa, Mexico–just across the Rio Grande from McAllen, Texas–exploded in violence. The Zetas and the Gulf cartels, once allies, began what may become a fight to the death. The turf war over a lucrative passageway to the United States reportedly claimed over one hundred lives, though no official headcount is available, as observers bemoan the lack of official presence–the local government as well as the army.
But what happened some eight hundred miles to the west on Saturday in Ciudad Juarez, when three U.S. consulate workers–two of them U.S. citizens–were killed in their cars in broad daylight wasn’t likely masterminded by drug cartel leaders. Such assassinations would be bad for cross-border business. Instead, this first case of serious violence against U.S. citizens in the “war on narcotraffickers” waged by President Felipe Calderon’s administration was probably committed by one of Ciudad Juarez’s gangs. Initial intelligence points to the Aztecas, a local gang of hitmen who have worked with “La Linea,” the enforcement arm of the Juarez cartel, which was also implicated in the January 31 massacre of sixteen youths at a birthday party.
In places like Ciudad Juarez, the prevalent depiction of a battle between highly organized and disciplined drug cartels is misleading. Instead, these “organizations” are sprawling networks full of freelancers who might work one day for a cartel, the next on their own or with a local gang. Some of the violence of recent years is between street toughs and gangs, often resolving local turf wars. This growing problem, while fueled by the money and guns associated with the drug trade, is distinct from the presence of multinational criminal drug-trafficking organizations.
Ciudad Juarez today presents a bleak picture. City infrastructure and manpower are overwhelmed; the dominant maquila factories offer only low-wage labor; and over 40 percent of the city’s youths are neither in school nor lawfully employed. Exclusion from the hope of joining Mexico’s developing middle class along with weak control mechanisms mean disaffected youth coalesce around an alternative source of social “status”–urban gangs.
In the aftermath of the shooting, President Obama vowed to continue to work with the Calderon government “to break the power of the drug trafficking organizations that operate in Mexico and far too often target and kill the innocent.” Secretary of State Hillary Clinton vowed to “ensure that the perpetrators . . . are brought to justice,” reasserting that “this is a responsibility we must shoulder together, particularly in border communities where strong bonds of history, culture, and common interest bind the Mexican and the American people closely together.”
The United States should support Mexico during this moment–as the events of the past few weeks and this weekend show how closely tied Mexico’s stability and safety are to our own. Yes, weapons and equipment are needed for Mexico’s police forces–particularly at the local level where beat cops often patrol without bulletproof vests and in rundown squad cars. Many are even required to buy their own bullets.
But it is not just more gun power that Mexico needs. Instead, it is a functioning police and court system, a better and more open education system, and programs for early intervention, and professional development for at-risk youth. Partnerships between the United States and a wide range of agencies and stake holders at Mexico’s federal, state, and, most importantly, local levels will be vital for the coordination and pooling of resources and expertise.
This broader challenge of reknitting Mexico’s social fabric in places such as Ciudad Juarez is what Mexico struggles most with today. In light of the weekend violence, the United States should prioritize efforts that will assist Mexico in pushing through the changes that will actually matter, changing today’s violent dynamic for the long term.
Executive Summary
The United States has always seen Brazil as a significant regional powerhouse, but its perceived importance has risen in the last decade. Due to Brazil’s economic strength, its hemispheric leadership, and its growing geostrategic role through multilateral international forums, it has become a vital player in both regional and global politics across numerous dimensions. While US recognition of Brazil’s political and economic emergence brought the question of how Washington should manage relations with Brasilia to the fore, the ability to translate this new awareness into concrete bilateral policies and partnerships remains difficult. Whether the US and Brazil will be willing and able to form a ‘special relationship’ remains unclear.
Introduction
In the last century, the US has viewed Brazil as an important nation on the world stage – based on the sheer size of its territory, economy, and population, as well as its shared Western values. At times, the US has pushed for a ‘special relationship’ with Brazil, recognizing its importance for hemispheric and global stability. During World War II, the US promised support for Brazil’s development agenda and, in exchange, Brazil became the only Latin American nation to send troops to Europe’s battlefields. Although the pledged alliance faded after the war, throughout the 1950s Brazil largely supported US Cold War policies, if at somewhat of a distance. This support continued under Brazil’s military government in the 1960s. During the 1970s the US – especially Henry Kissinger – tried to reaffirm the ‘special relationship’ between the two nations, envisioning greater consultation and cooperation on an array of issues. These efforts were scuttled by a Carter administration more concerned with Brazil’s equivocal position on human rights and nuclear nonproliferation. These differences led not to conflict, but to detachment between the two governments.
By the 1980s, relations tilted further toward tensions and away from commonalities. The US disapproved of Brazilian trade policies and of its hardline stance when negotiating with the International Monetary Fund (IMF) and other creditors in the wake of the debt crisis. As the largest of all Third World debtors, Brazil repeatedly refused to pay interest on its arrears, threatening the deals US banks were negotiating with other nations. Newly democratic Brazil and the United States were also at odds over US military involvement in Central America.
By the 1990s, the debt crisis was resolved, and Brazil again became a welcome partner for the United States in the evolving post-Cold War world. Even if few concrete actions were taken, Presidents Cardoso and Clinton agreed on many matters. Some progress was made in the realm of democracy. Both the US and Brazil supported the consolidation of democracy in the region and leaned on Paraguay to reverse the attempted coup by an army commander against the elected government in 1996. Later, Brazil would prove important in pushing through the Inter-American Democratic Charter of the Organization of American States (OAS), which binds all 34 active member states to strengthen and uphold democratic institutions in the hemisphere.
Yet, as globalization became the driver behind much of US foreign policy, trade again became a sticking point between the two nations. In particular, Brazil’s reluctance to fully support the Free Trade Area of the Americas (FTAA) frustrated the Clinton administration and thwarted a closer relationship.
Generalizing five decades of foreign policy, the US rhetorically recognized Brazil’s importance, but concrete, practical initiatives or partnerships were few. This left little in the way of tangible policy outcomes between the US and Brazil. Instead, the two countries maintained a fairly warm, if distant, status quo, befitting Washington’s viewpoint that Brazil occupied an influential — but not central — role in the world pecking order.
A Turning Point in US-Brazil Relations
The urgency for bilateral relations began to change in the last decade. While blessed with natural resources, an almost 200 million-strong domestic market, and a well diversified economy (with robust agricultural, mining, manufacturing and service sectors), for decades Brazil suffered from high inflation, exchange rate instability, and low growth. This chronic economic instability meant that while viewed as geographically and geostrategically important, Brazil was seen by many in Washington, to quote General Charles de Gaulle, as ‘not a serious country’.
These reservations began to fade with the rise of Brazil’s economy. Anchored by the 1994 Plan Real, Brazil finally tamed its historically high inflation through solid macroeconomic and monetary policies and embarked on a process of privatization and other economic reforms. Put in place by President Fernando Henrique Cardoso, these initiatives were adopted and deepened by his leftist successor and current president Luiz Inácio ‘Lula’ da Silva.
By 2001, Brazil’s ascent was recognized by the financial markets. Banking giant Goldman Sachs named it one of the countries — alongside Russia, India and China (BRICs) – that could potentially eclipse the G8 in the coming decades. By the mid 2000s, Brazil’s macroeconomic instability seemed fully relegated to the past, and its economy boomed with higher commodity prices and the long awaited expansion of its own middle class.
At the same time, climbing worldwide energy prices and rising concerns over climate change brought Brazil’s biofuel successes and technology to Washington’s attention. Brazil’s biofuel industry dates back to the 1970s when the military government launched an ethanol program mandating a blend of sugar cane ethanol into transportation fuel with the hope of weaning the country off its dependence on imported fossil fuels. The program gained competitive traction by the late 1980s when more than a third of the country’s motor vehicle fleet was running on pure ethanol. In the 1990s the program experienced some growing pains as a 1993 federal law increased the mandate to a 25% ethanol blend, and demand outstripped local supply. The later technological breakthrough of flex-fuel vehicles restored widespread confidence (and investment) in ethanol, allowing motorists to switch to any blend of gasoline and ethanol at anytime.
By the turn of the 21st century, Brazil boasted the most efficient biofuel production in the world, with volumes rivaling those of the United States, and vast expanses of pasture land ready for planting more sugar cane. In February 2008, the market share of ethanol surpassed that of traditional gasoline at Brazilian pumps, proving the market viability of alternative fuels in one of the world’s largest economies. Add to this the recent discovery of significant oil fields off its coast and Brazil’s image as a global energy leader was secured.
Politically, the United States came to see Brazil’s well-grounded democracy and President Lula’s centrist even-handedness – particularly in comparison to some of its neighbors such as Venezuela – as important for US interests in the hemisphere. In addition, Presidents George W. Bush and Lula seemed to genuinely like each other, encouraging greater efforts to work together.
For Washington, Brazil’s rise came at a propitious time, one of changing policies and priorities. As the Bush administration took on two wars abroad, little bandwidth remained for policing its own hemisphere, despite what many saw as worrisome political shifts in the Andean region. The White House hoped that Brazil, as an important stakeholder and leader, would also take on the responsibility to push for stability and democracy in South America. During his visit in 2005, George W. Bush recognized Brazil as a ‘leader — …exercising its leadership across the globe’ and reassured Lula that as he ‘works for a better tomorrow, Brazil must know (it has) a strong partner in the United States’.
The US View Today
The events of the last few years and a change in the US administration make Brazil perhaps even more important than ever for US foreign policy. After the worldwide financial meltdown, the relative success of Brazil, China, and other developing economies has definitively shifted the multilateral center of global financial agreements from the G8 to the G20. This gives Brazil a permanent seat going forward in all major global macroeconomic discussions, where it has already become a vital voice in the North-South dialogue.
With climate change a priority for the Obama administration, Brazil’s perceived importance has grown, both on account of its leadership in alternative energy and its fight against deforestation. Brazil already boasts one of the most eco-friendly energy matrices in the world, with 46% of primary energy coming from renewable energies, far above the world average of 8%. In addition, as the majority owner of the planet’s largest rainforest, the Amazon, Brazil will play perhaps the central role in slowing worldwide deforestation, the leading cause of carbon emissions, ahead of the global transportation network.
While still not given as much airtime in Washington as many of its BRIC partners – China in particular – Brazil is seen as an emerging power that the United States can work with, be it on issues of global financial stability, climate change, reform of multilateral institutions (e.g.: the UN, G20, WTO, IMF) or regional security, stability and development.
Stumbling to Translate Interest into Policy
For all these reasons, many in Washington are calling yet again for a new special relationship with Brazil. While this is progress, significant limitations exist to translating growing US interest in Brazil as an emerging power into concrete policies.
On a practical level, the US-Latin America policy community has historically been biased toward Spanish-speaking Latin America. Few in Washington know Brazil well or speak Portuguese. The lack of a dedicated group of experts – both inside and outside of government – limits the constant pressure needed to keep Brazil firmly on the US foreign policy agenda. Adding to this, due to US domestic political battles it took nearly a year for President Obama to confirm his new Ambassador to Brazil. To date, this gap has severely hampered the administration’s ability to create a more dynamic engagement with Brazil.
Beyond these logistical challenges, it is still unclear how best to promote the two countries’ common interests. While they share many concerns in principle, priorities and policies are often not aligned, and at times even in conflict. In the realm of security, the United States prioritizes counterterrorism, which sits low on the list of Brazilian concerns. Regarding drug trafficking, US counter-narcotics assistance to the region often focuses on military responses, while Brazil has tended toward policing and law enforcement solutions. Add to this long-standing suspicion over US military involvement in the region, which recently resurfaced with the Colombian base agreement that granted the US military access to seven Colombian bases to combat drug trafficking and the guerrillas, or US concerns about Iranian President Mahmoud Ahmadinejad’s official visit to Brasilia in November 2009, and these differences may make it difficult to find a middle ground for deeper partnership around security issues in the hemisphere – while highlighting the need for Washington to more openly communicate with its regional partners.
The debate over free trade poses similar dilemmas. While both the US and Brazil rhetorically support the expansion of global free trade through the World Trade Organization’s Doha round and other mechanisms, their fundamental interests often diverge. Brazil wants the reduction and/or elimination of extensive US agricultural subsidies and protections, as well as tariffs on products such as ethanol. The vagaries of US domestic politics will make it difficult to deliver on these demands. The US, in turn, is suspicious of Brazilian protection of its industrial sector, and of what it sees as a weak intellectual property rights regime, and hopes Brazil is willing to change its position on services and market access.
Finally, assuming that Washington stays focused on developing and deepening its relationship with Brazil (a big assumption), it is unclear whether Brazil actually aspires to closer relations with the United States. It might benefit Brazil to keep the northern behemoth at arm’s length, particularly given the role the United States likely envisions for Brazil as an active regional ‘stakeholder’, shouldering greater responsibilities in the hemisphere and acting in US interests.
Conclusion
In recent years, the US view of Brazil has likely changed permanently, recognizing the nation’s importance for regional and world order. Brazil is finally seen by the United States as a genuine emerging power. The enhanced strategic dialogue and cooperative steps taken in recent years in light of this recognition has benefited both countries. Nevertheless, many areas of disengagement and even conflict remain. Whether the newly invoked ‘special relationship’ will be more multifaceted and long-lasting this time than on previous attempts remains to be seen.
Recommendations
• Brazil’s rise as an economic and global emerging power has finally been recognized by the US. To effectively leverage this interest, Washington needs to strengthen the policy community dedicated to Brazil – perhaps separately from Spanish-speaking Latin America, thus reflecting its emerging power status – in order to ensure more thorough and consistent attention to US-Brazil relations.
• Despite the potential, an ambitious ‘special relationship’ may be difficult to achieve. Too many differences in policies and priorities remain, particularly in the areas of security and trade. This is most evident in the context of regional leadership and a broader vision for the Americas.
• Bilateral relations should focus on a more permanent dialogue across multiple issue areas, thus converting growing areas of interest into concrete action and policy on a bilateral and multilateral level.
• The United States and Brazil should identify clear issues and strategies of mutual interest to start deepening the bilateral partnership and multilateral engagement. Energy and climate change, as well as global financial stability, are good starting points.
• The biofuel industry and associated technology development is an area of mutual interest that satisfies national and multilateral ambitions related to climate change. This is an obvious point of intersection between the US and Brazil where bilateral cooperation would have a global impact.
This piece was first published by the South African Institute of International Affairs and is available to download here
Last night Chris Sabatini from the Council of the Americas and I joined Martin Savidge on WorldFocus to discuss the Obama administration’s policy toward Latin America. The conversation focused on natural resources, relations with Cuba, Venezuela and the war on drugs.
Secretary of State Hillary Clinton’s heads to Mexico today. The main issue on the agenda with Mexican President Felipe Calderon and Foreign Minister Patricia Espinosa will undoubtedly be security. The rising power and violence of Mexico-based drug trafficking organizations (DTOs) covers the front pages of newspapers throughout both countries, and is a priority for policymakers in both capitals. Yet as these two nations focus on their mutual security, the United States should not forget about other bilateral issues – in particular immigration. This is an important topic in and of itself, and perhaps the most important issue on the bilateral agenda for Mexico. But it is also intrinsically related to security. Immigration reform would boost U.S. and Mexican efforts to lessen the reach of the drugs cartels’ on both sides of the border.
The drug cartels’ operations are fueled by one thing: money. This money buys guns, buys people, and buys power. The vast majority of this money – estimated at some $15-20 billion dollars a year – comes from drug sales in the United States. These profits are then sent back to Mexico, and fuel the insecurity and violence.
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