Latin America: Impressions of a Troubled Region By Roger F. Noriega June 2015 KEY POINTS . Apart from the controversial recognition of Castro’s dictatorship in Cuba, the Obama administration has largely ignored Latin American relations, indifferent to the economic decline and instability in several countries. Washington’s disengagement has allowed China to establish an economic foothold in the region using predatory business practices and exploitive projects. It’s not too late for the Obama administration to proactively support free-market exchanges and restore productive relations within the hemisphere. razilian President Dilma Rousseff’s visit and the systematic violation of human rights. to Washington this week suggests that Worse still, the vacuum has been filled by China B US President Barack Obama may be and chavismo—the authoritarian populism prepared to focus more attention on Latin inspired by the late Venezuelan strongman Hugo America, which he has virtually ignored aside Chávez. Specifically, predatory loans from China from his controversial decision to recognize the have made it possible for leftist governments to Castro dictatorship in Cuba.1 A stable and subsist despite unsound policies. Anti-US prosperous Americas is certainly critical to US protagonists have imposed their divisive politics security and prosperity. However, the Obama in many countries, while US allies feel abandoned administration has failed to defend the country’s and besieged. interests and promote its values, forfeiting Of course, the economic decline in virtually every strategic relationships on energy and trade. US country governed by leftist, statist, or reticence regarding authoritarian populism in the authoritarian governments is fresh evidence that region is not a product of lethargy or indifference: socialist formulas are recipes for failure. it is the product of Obama’s gringo guilt that Opportunities to swing the pendulum back to the ascribes all of the region’s ills to US “meddling.” center exist, if the United States adopts a Washington’s disengagement has contributed to proactive policy to support free-market policies economic decline, insecurity, instability, and the rule of law. corruption, weakened democratic institutions, 1 AMERICAN ENTERPRISE INSTITUTE Jump-starting economic growth and the Brazil: Economic Malaise productivity of Petrobras will take time and considerable effort. Rousseff appointed a new and Governance Crisis economic team at the beginning of the year that Brazil, South America’s most populous country has proposed new measures to restore economic and the world’s sixth-largest economy, is confidence and growth. In recent weeks, Brazil’s suffering from economic malaise and a National Congress has begun to adopt elements governance crisis that undermines the region’s of an austerity plan that is expected to bring 4 prospects. This predicament is the legacy of government spending under control. With leaders who relied on costly statist policies and Brazil’s vast natural resources, a regimen of protectionism and refused to retool their overdue reforms should eventually get the economy to make it more competitive and economy growing again. However, the scandal- attractive to investment. ridden politics, a fractious Congress, and the president’s plummeting approval ratings may Sworn in to a second four-year term just five make it difficult for her new team to get traction months ago, Rousseff is confronting the worst in a second term. economic conditions in decades and a spiraling public corruption scandal involving the state- owned oil company, Petrobras. Even before her Presidential-level narrow victory last October, most Brazilians questioned whether Rousseff’s policies could personal diplomacy is jump-start economic growth and address the nation’s social and economic challenges. Her needed to work around unabashed pro-business opponent, Aécio Neves, Brazil’s foreign policy came within two percentage points of beating her. Since then, her popularity has plummeted; establishment, which according to a poll taken in March, 62 percent of those interviewed rated Rousseff’s government as sees relations with the "bad" or "terrible," while only 13 percent United States as a zero- considered the government “great” or “good.”2 sum game. A series of protests this spring in Brazil’s main cities drew millions of people to the streets It may be too late to repair the relationship with demanding Rousseff’s impeachment. Although Brazil to the extent that it can have a meaningful the dissatisfaction appears to be rooted in impact on bilateral interests; however, Obama middle-class anxiety about a flagging economy, can sustain positive momentum from his trip by the protests intensified after allegations that keeping a channel open to Rousseff. This contractors tied to Petrobras paid $800 million in presidential-level personal diplomacy is needed kickbacks to politicians—the vast majority of to work around Brazil’s foreign policy whom are from the president’s left-wing Workers’ establishment, which sees relations with the Party (PT). Unless investigators are able to prove United States as a zero-sum game. Rousseff’s direct knowledge of the kickback schemes, few experts expect the matter to Nothing is more important to both countries than escalate to her impeachment. Nevertheless, the a healthy private sector–led dialogue, which can arrests of the PT’s treasurer and an executive of shape a practical agenda for jump-starting Odebrecht, one of the country’s most important reforms to make them more globally competitive multinational companies, indicate an aggressive, through cooperation with one another. Both independent investigation that is challenging the countries (among others in the region) stand to political establishment and powerful economic benefit from an industry dialogue on what it will interests.3 take to develop more productive energy sectors and attract essential capital and technology. 2 AMERICAN ENTERPRISE INSTITUTE Uruguayan Foreign Minister Luis Almagro as its Venezuela: Impending new secretary general in mid-March.8 Almagro has indicated his interest in reviewing the Collapse situation in Venezuela, although his leftist track Venezuela’s corrupt and authoritarian record inspires little confidence within a government, led by the leftist caudillo Nicolás democratic opposition that is hoping for a Maduro, has created depleted international vigorous and neutral arbiter to insist on fair reserves, food lines, power outages, soaring elections. homicide rates, crumbling infrastructure, US federal law enforcement agencies and fraudulent elections, political polarization, and prosecutors—which enjoy absolute increased repression. The government’s rising independence—are expected to continue to unpopularity even among poor Venezuelans is document violations of US narcotrafficking and compounded by infighting between factions led money laundering laws, bring formal by Maduro, who is seen as a puppet of Havana, indictments, and impose sanctions against and National Assembly President Diosdado officials of the Venezuelan government. Such Cabello, who is cited by a US Justice Department measures will expose the regime’s unparalleled source as a drug kingpin.5 criminality and complicate efforts to seek an Traditional opposition leaders, with the accommodation with the ruling party. encouragement of the US State Department, look to national assembly elections scheduled for December 6 as a means to secure political Mexico: Stubborn Security leverage and defuse the crisis.6 Followers of the jailed Leopoldo López, a charismatic young Crisis Undermines Reforms politician who has emerged a de facto leader of the opposition, are skeptical of increasingly Perhaps no country is more important to US unfair elections and prefer to challenge the security than Mexico, which is recording slow but regime’s legitimacy through demonstrations, civil steady economic progress while grappling with disobedience, and international engagement. lawlessness fueled by international drug Although the chance of fair elections is slim, the trafficking. Mexican President Enrique Peña Obama administration has pledged to become Nieto won high praise for winning a political more active in regional diplomacy to press for consensus behind a series of major economic and freer and fairer parliamentary elections, social reforms—notably a “modernization” of the including international monitoring. country’s underperforming energy sector. In fact, the tax, education, and energy reforms were Current US foreign policy is to encourage hardly transformative; but they were considered a stability, whatever the costs. Ongoing US law step in the right direction and as far as the ruling enforcement investigations into the Maduro- party would allow the president to go. Cabello regime’s complicity in narcotrafficking have complicated the State Department’s Frankly, Peña Nieto has been unable to overcome wrongheaded efforts to normalize relations with the entrenched interests of the Institutional the increasingly dictatorial and criminal regime. Revolutionary Party (PRI), which reclaimed the Department Counselor Thomas Shannon has met presidency after a 12-year hiatus and still twice with Maduro in Caracas in recent months; operates as a corporatist political machine. Peña his meeting in Haiti in mid-June with accused Nieto’s clout has been weakened by persistent narcotrafficker Diosdado Cabello demoralized allegations of personal corruption that have many in the internal opposition