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.
A U.S. Border Patrol agent checks an area under a bridge crossing between the United States and Mexico (Eric Thayer/Courtesy Reuters).
Starting today, at the end of each week I will post a weekly roundup of articles, reports and other analyses on developments in Latin America and U.S. relations in the region that I have found particularly interesting. Please feel free to add your takes on these “reads of the week” in the comments section!
This is a good summary by my CFR colleague Ted Alden and co-author Bryan Roberts of what we know, what we don’t know, and what we need to know to develop a better U.S. border policy.
Southern Pulse provides interesting analysis of how drug cartels evolve, and the role Calderón’s security strategy has played in accelerating this process.
At the Central American Security Conference (SICA), Secretary of State Hillary Clinton’s calls on Central America’s elites to step up their contributions to the region-wide fight against violence.
A recent Los Angeles Times article illuminates why high growth and voter discontent co-exist in Peru.
Published in conjunction with Latin America’s Moment at the Council on Foreign Relations.
Fans outside Johannesburg's Soccer City stadium before Mexico and Brazil World Cup game (Siphiwe Sibeko / Courtesy Reuters).
The conventional U.S. wisdom today is that Mexico is a problem, and Brazil is an opportunity. The reality is that while Mexico faces serious challenges, the United States shouldn’t count it out. And, while Brazil does present real promise, there are serious issues it has yet to take on.
Economically, these two countries are not as drastically different as current analyses suggest. Yes, Brazil has had six years of consistent high growth. In large part, these were the dividends from macroeconomic reforms begun in the mid-1990s under President Cardoso and reinforced and deepened by President Lula (in fact, the pick up in growth coincided with the start of Lula’s second term, when domestic money finally believed his centrist promises).
By comparison, Mexico embarked on a similar reform process ten years earlier and earned its macroeconomic dividend in the 1990s, when Brazil was still struggling to rein in hyperinflation. Looking at per capita growth rates over the last twenty years (not just the last 7 or 8), Mexico and Brazil actually look fairly similar (with annual average per capita growth of 2.25% and 2.5% respectively).
While both countries have now solidified a range of necessary macro reforms, they face somewhat similar long term challenges. Both desperately need to invest in infrastructure, in education, and to find ways to reduce stark inequalities. Both too are now thriving democracies – a plus on so many levels, but not for pushing through big comprehensive reforms.
There are of course big differences – but those don’t necessarily cut just in Brazil’s favor. Brazil is a bigger market, has ever increasing oil finds, and is a complement to China’s rise – all positive. But it is also a more bloated state, stands in a much worse place vis-à-vis inequality and infrastructure, and faces worrisome inflationary and exchange rate pressures that threaten to undermine its recent gains.
Mexico is already a more export and manufacturing-led economy. And while Obama (and others) made much of the potential of US-Brazil trade during his March visit, the reality is that the United States already depends on Mexico as its second largest export market – earning some $163 bn last year compared to $35 bn with Brazil.
Mexico is also a much more friendly business environment. According the World Bank’s Doing Business index, Mexico ranks 35th globally – and the highest in Latin America — while Brazil is a woeful 127th (out of a total of 183 countries). On the downside, Mexico lacks widespread credit (which is much more available in Brazil), suffers from too many monopolies and oligopolies, and so far competes with (rather than complements) China’s rise.
The upshot is that there is no clear “winner” in terms of future potential or peril. So what drives the misguided conventional wisdom? A recent paper by Roberto Newell, founder of the Mexican Institute for Competitiveness (IMCO), provides a partial answer. Analyzing the Mexico coverage in the New York Times and Wall Street Journal since the late 1980s, he shows the increasingly negative tone and focus of the main U.S. papers of record. While political and economic news dominated both papers in the 1990s (in large part due to NAFTA), in recent years crime and the border have taken over the new cycle. Economic and political news – much of it good – rarely merit a mention, much less a sustained focus.
Without doing a similar in depth study, anecdotal readings of Brazil in the U.S. media shows the reverse – an almost ebullient focus on economics and politics, with relatively few stories on crime (even though Brazil’s 25 per 100,000 inhabitants murder rate far exceeds Mexico’s 14).
This negative shift isn’t because that is the only news coming out of Mexico. Yes Mexico’s security situation is grave, but it isn’t Mexico’s only story. As the brief comparison above shows, there are many economic and political strengths (and weaknesses) in both countries. Newell lays out many more of Mexico’s advantages and advances vis-à-vis the much touted BRICs, which include Brazil.
This skewed coverage hits both countries – though Mexico the hardest. For Brazil, it encourages the “hot money” flowing in, further aggravating the underlying economic weaknesses. For Mexico, the resoundingly negative take may, somewhat paradoxically, make it harder to address the security challenge. To see through necessary changes, Mexicans need some sense of optimism and can-do spirit, as well as a sense of what can be lost – and that is so much of what Mexico has gained.
President Obama delivers remarks on immigration reform at Chamizal National Memorial Park in El Paso (Jim Young / Courtesy Reuters).
Framed by sunny El Paso skies, President Obama put immigration back firmly on center stage yesterday. In his speech he called on Congress to “put politics aside” and find “common ground” in order to reform a broken system. His justifications are similar to those of the past – immigration reform is both an economic and moral imperative, as important for the future competitiveness of our country as for our understanding of ourselves as Americans. The basic outline for reform is also similar to the last legislative round in 2007 – tougher penalties against businesses employing undocumented workers; temporary worker programs; a path to citizenship for those living in the shadows requiring applicants to pay penalties, taxes, and learn English; legal status for American college graduates hoping to start businesses here; and citizenship for young people brought to the U.S. as children who go on to college or serve in the military (the so-called DREAM Act).
What is different this time around is that in reopening the debate, Obama explicitly called on a constituency that remained decidedly quiet during the last polarizing round: business. In his speech, he singled out and quoted as many businessmen as immigrants. Alongside the voices of immigrants serving in the U.S. marines and navy, Obama added those of Bill Gates and Rupert Murdoch. He went on to mention some of the largest corporations founded by immigrants – Google, Intel, Yahoo and Ebay –which add billions of dollars and thousands of jobs to the U.S. economy.
An eloquent speech in and of itself will change few minds, particularly as the 2012 Presidential election season nears. But if it would open the deep pockets of the private sector, it could perhaps make a difference. Of any constituency business has a cross-cutting power to pressure for the necessary reach across the aisle. And openness to immigration reform seems to span the private sector – from agriculture to high tech, from small businesses to the largest corporations, from the coasts to the center. Even the U.S. Chamber of Commerce – a consistent Obama critic – agrees with the President on the issues and has been pushing these types of reforms for a decade.
Comprehensive immigration reform is a long shot. The hostility of a vocal portion of the electorate will still likely hold the political process hostage, at least until after the 2012 election. But involving the quite powerful groups sitting on the sidelines is the way to give reform its best chance.
Published in conjunction with Latin America’s Moment at the Council on Foreign Relations.
Fireworks over Mexico City's Zocalo during its bicentennial anniversary of independence in September 2010 (Daniel Aguilar/Courtesy Reuters).
Mexico’s Centro de Investigación y Docencia Económicas, or CIDE, released its latest study, “Mexico, the Americas, and the World.” This is now its fourth version (the previous surveys were done in 2004, 2006, and 2008) and provides a fascinating glimpse into Mexicans’ views (both from its leaders and the general population) toward politics, policies, and, in particular, international relations.
There are several interesting takeaways. On the domestic front, there are strong differences of opinion between elites and the masses. Mexico’s leaders are quite dissatisfied with the progress made in terms of social inclusion, economic development, and peace and security. This negative view confirms what one hears in the halls of congress and reads on the editorial pages of its leading newspapers. In contrast, Mexicans in general are much more positive about their country’s advancements. A fairly strong majority are satisfied with the steps forward in terms of social inclusion and economic development. Just under a majority (compared to one-third of leaders) are satisfied with the progress made regarding peace and security.
Economically, the main difference is that elites lead a general trend. Overall, Mexicans view globalization increasingly favorably. A relative majority – some 43 percent – believe globalization has been good for Mexico (outweighing the 28 percent that see it as bad). This positive view is up from 34 percent in 2004 – climbing despite the 2008-9 global economic crisis. Mexico’s leaders are way out in front – with nearly three-quarters in favor of globalization. A strong majority of all Mexicans support free trade and foreign direct investment (though not in the state-run oil sector), and believe that trade and investment have brought benefits to their country and to them personally. Riding this wave of enthusiasm, two- thirds want to integrate economically with the rest of Latin America – likely an impetus behind the free trade accord scheduled to be signed between Mexico, Chile, Colombia and Peru in Lima next week.
Though increasingly looking outward economically, fewer Mexicans seem to be moving. The number of Mexicans reporting family members abroad fell from 61 percent in 2004 to 52 percent last year. This matches fairly closely with U.S. immigration statistics, which report 2004 as the height of Mexican immigrant inflows. Moreover, slightly less than half of Mexicans think migration is good for their families, their communities, or for Mexico. Elites are even more pessimistic about its benefits – for anyone other than the country receiving their fellow citizens (e.g. mainly the United States).
Looking northward, Mexicans generally feel warmly toward their neighbor. The public ranks the United States a very close second to Canada (Mexico’s leaders put the U.S. further down the rankings, next to China) in their affections. Many more “admire” the U.S. than disparage it, and while still somewhat wary of their neighbor, “confidence” has improved significantly – up 5 points since 2008. In fact, for the first time, a majority sees being neighbors as a distinct advantage for Mexico, rather than a problem.
Both Mexico and the United States are headed into presidential elections seasons. In the past, elections have often brought out the worst in the bilateral relationship, as politicians point fingers for short-term electoral gains. Yet this CIDE survey shows that Mexicans now hold more goodwill than not toward their northern neighbor, and favor a closer relationship with the United States than ever before. Let’s see if politicians truly read the polls, and appeal to this now broad constituency.
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.
Ambassadors Pascual and Sarukhan at a Council on Foreign Relations symposium on U.S.-Mexico relations in November 2010.
On Saturday, U.S. Ambassador to Mexico Carlos Pascual resigned from his post. President Calderón’s quite public animosity limiting his effectiveness, the ambassador chose to place binational priorities above individual interests and stepped down.
This is a blow to U.S. -Mexico relations, in that the personal overcame the institutional. It is also a blow as it will remove an important interlocutor and champion for the U.S.-Mexico relationship. The confirmation process for a new ambassador will be a challenge, to say the least. It is possible, indeed likely, that there will be no replacement for months.
The United States and Mexico face numerous mutual issues, many of which Ambassadors Pascual and Sarukhán discussed when they spoke at CFR in November 2010. Both stressed the interdependence of our countries and the need to transform the way the bilateral relationship figures in the public debate in the United States and in Mexico – essentially, that the two countries will succeed or fail together. This latest episode just highlights the importance of – and the distance from – achieving this goal.
Published in conjunction with Latin America’s Moment at the Council on Foreign Relations.
Brazil's President Dilma Rousseff at a meeting for the Growth Acceleration Program 2 in Brasilia (Ueslei Marcelino/Courtesy Reuters).
As Obama heads to Brazil this weekend, much has been made of the trade agenda. In the lead up briefing with the press, Deputy National Security Advisor for International Economic Affairs Michael Froman stressed that “this trip fundamentally is about the U.S. recovery, U.S. exports, and the critical relationship that Latin America plays in our economic future and jobs here in the United States.” In tow are Commerce Secretary Gary Locke, U.S. Trade Representative Ron Kirk, Treasury Secretary Timothy Geithner, and Ex-Im Bank head Fred Hochberg, among others, to push just such as agenda.
There is, indeed, great potential in this regard for the United States in Brazil. Brazil’s economy is on a roll. It took just a minor hit during the worldwide downturn, and came roaring back in 2010 – posting 7.5% GDP growth. This growth is driven not just by high commodity prices, but also by Brazil’s dramatically expanding middle class– now topping 100 million- and its ever rising consumption.
But a deeper economic bilateral relationship remains just that – potential. Of the $500 billion dollars of U.S.-Latin America trade, Brazil makes up only $50 billion (Mexico, on the other hand, accounts for over $350 billion of the total). Trade with Venezuela, despite U.S. tensions with President Hugo Chavez, is almost as much.
There are some encouraging signs. U.S. exports to Brazil have doubled over the past five years. Annual trade with Texas, Ohio and Pennsylvania reached over a billion dollars; Brazil is now South Florida’s biggest trading partner. U.S. companies have made strong inroads in the telecom and energy sectors, among others.
But to truly unleash the potential of the U.S.-Brazil economic relationship, the United States needs to move beyond the shorthand of trade. First and foremost, the United States can’t deliver on a free trade agreement with Brazil (those with Colombia and Panama continue languishing). Second, like the United States, trade is a relatively small portion of Brazilian GDP. The money is in the domestic market, as Brazil relies on internal engines of growth. Finally, Brazil is worried about its trade deficit with the United States (currently $6 billion). Pushing solely or primarily to increase exports will ruffle diplomatic ties, particularly in the face of continued high tariffs on Brazil’s potential exports to the United States, such as on ethanol and sugar.
Instead, the United States should rhetorically – and in practice- focus on foreign direct investment, and joint efforts for research and development and innovation more broadly. This will enable U.S. firms to take advantage of Brazil’s domestic growth. It will also, in the course of things, increase U.S. exports – but without the political pushback, creating a more positive sum game. There are great economic opportunities on this trip, as the White House suggests. But reframing the agenda from trade to broader economic cooperation is vital for both U.S. diplomacy and our own economic growth.
Published in conjunction with Latin America’s Moment at the Council on Foreign Relations.
My colleague Julia Sweig and I share our thoughts about Obama’s upcoming trip to Latin America in a CFR conference call, which can be accessed here.
Behind bars inside a prison in Mexico City (Stringer/Courtesy Reuters).
CFR just released a very thoughtful report by David A. Shirk, “The Drug War in Mexico: Confronting a Shared Threat,” that explores the Mexican government’s capacity to fight organized crime. In it he argues that the U.S. should help Mexico address crime and corruption by focusing on building its judicial and law enforcement institutions. It can be accessed here.
A vivid take on the challenges Mexico’s justice system faces is presented in the extraordinary and award-winning documentary “Presunto Culpable” (Presumed Guilty). It tells the story of Antonio Zúñiga, who in 2005 was sentenced to twenty years in prison for a murder he did not commit, and two young attorneys turned filmakers, Layda Negrete and Roberto Hernández, who attempt to exonerate him. They bring a camera into the courtroom to expose the injustices, corruption and contradictions of a judicial system that presumes suspects guilty until proven innocent.
The film tells the other side of the story to Mexico’s 95% impunity rate: once charged, the court system stacks the deck to keep defendants locked up. Many never even see a judge or their arrest warrant, much less have access to a decent attorney.
While briefly pulled from cinemas due to a judge’s temporary injunction, a higher court overturned the ban last week on the grounds that it is in the public interest for it to be shown. Already the highest selling documentary in Mexico’s cinema history, it continues (at least for now) in theaters throughout the country. Presumed Guilty can be viewed on PBS until March 31, here.
Published in conjunction with Latin America’s Moment at the Council on Foreign Relations.
