The Blog

A Perfect Storm in Latin America

How will Obama handle economic and security challenges south of the border?

11:00 PM, Dec 9, 2008 • By JAIME DAREMBLUM
Widget tooltip
Single Page Print Larger Text Smaller Text Alerts

RECENT EVENTS SUGGEST that Barack Obama will be facing a veritable perfect storm of challenges in Latin America. The death toll in Mexico's war on drugs is mounting. The future of Plan Colombia, which began as a U.S.-backed anti-drug initiative, is uncertain. Argentina may be on the verge of yet another economic collapse. The global financial crisis is affecting countries throughout the region. Venezuelan President Hugo Chávez is attempting to remove the constitutional limits on his power and is using his oil wealth to fund anti-American populists. Chávez is also pursuing a strategic partnership with Iran. In Nicaragua, the ruling Sandinista party stole recent municipal elections and has been harassing the opposition. In Cuba, the island's Communist rulers are trying to preserve a creaking dictatorship and squash hopes of democratic transition.

Meanwhile, Russian and Chinese influence in Latin America is growing. Just last week, Russian warships arrived in Venezuela for a series of military exercises. The Russian fleet included a nuclear cruiser. As the Guardian noted, "It was Moscow's first show of naval force in the region since the Cold War."

How will Obama respond? Unfortunately, Latin America got little airtime during the 2008 presidential campaign, so we don't know much about his plans for the region. We do know that Obama routinely criticized free trade and opposed the FTA with Colombia. We also know that he promised to increase U.S. economic aid to Latin America.

Regional officials are hoping that his anti-trade posturing was just campaign rhetoric. As for boosting development assistance, the financial crisis and a U.S. recession will probably scuttle that idea. Obama also famously pledged to meet with Chávez and Cuban President Raúl Castro "without preconditions." He has since backtracked from that promise.

Obama is taking office at a critical moment in Latin American history. After a lengthy stretch of strong GDP growth, the region must deal with the headwinds of a global financial crisis and economic downturn. The massive drop in oil prices has eroded Chávez's petro-power, at least temporarily. But Venezuela is moving to enhance its economic and security cooperation with Russia and China.

According to a recent Moscow Times article, "the volume of trade between Russia and Latin America has been growing at a clip of 25 percent to 30 percent annually." The Russian-Venezuelan war games highlight their burgeoning defense ties. In September, Chávez traveled to Beijing and purchased two dozen K-8 military aircraft. During the same visit, Venezuela and China agreed to expand their energy cooperation. As Agence France-Presse reported, "Caracas provides 500,000 barrels of oil per day to Beijing, a trade expected to grow to one million barrels a day by 2012."

The presidents of both Russia and China recently toured Latin America. Russian President Dmitry Medvedev met with Chávez last week in Caracas. The two leaders reached several agreements on energy, economic, and military collaboration, including a pact that will help Venezuela develop its own civilian nuclear program. Medvedev also stopped in Peru, Brazil, and Cuba. He was in Peru for the Asia-Pacific Economic Cooperation summit, as was Chinese President Hu Jintao, who declared that "China and South America have already become extremely good friends and partners." Hu also traveled to Cuba, where he signed economic accords, met with both Raúl and Fidel Castro, and spoke of the friendship between the Cuban and Chinese peoples. As the Associated Press noted, China is Cuba's second largest trading partner (after Venezuela), with annual bilateral trade eclipsing $2.6 billion, and Chinese trade with all of Latin America increased from $10 billion in 2000 to $103 billion in 2007.

China seems eager to expand its trade relations throughout the region. One hopes that U.S. lawmakers are paying attention. The U.S.-Colombia FTA remains stuck in Congress, as does the U.S.-Panama FTA. Their approval would send the right message to Latin American officials. Obama claims he is committed to the region. But will he endorse the Colombia and Panama deals?

Closer to home, Obama will have to coordinate anti-drug activities with Mexican authorities. The drug war in Mexico has become increasingly violent, with horrific bloodshed plaguing many Mexican border towns. As the Washington Post reported last week, Mexico's drug war "has claimed more than 4,500 lives since President Felipe Calderón unleashed the army and police against the cartels and corrupt officials in early 2007."