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  HOME | Opinion (Click here for more)

Beatrice Rangel: While US is Away Latin America Rethinks Development Paths

By Beatrice E. Rangel

It has been one moon too many since the US had an insightful, sturdy and coherent foreign policy proposal for a region that is the country’s backyard or front garden -- depending on the analyst. It was back in 1990 that the White House of President George Bush the elder launched the Enterprise for the Americas Initiative. On such occasion, the U.S.'s 41st president indicated:

"All signs point to the fact that we must shift the focus of our economic interaction towards a new economic partnership because prosperity in our hemisphere depends on trade, not aid. The Enterprise for the Americas Initiative creates incentives to reinforce Latin America's growing recognition that free-market reform is the key to sustained growth and political stability The three pillars of our new initiative are trade, investment, and debt. To expand trade, I propose that we begin the process of creating a hemisphere wide free trade zone; to increase investment, that we adopt measures to create a new flow of capital into the region; and to further ease the burden of debt, a new approach to debt in the region with important benefits for our environment.”

In a few words, the United States was willing to serve as a development platform to the region.

With the end of the Cold War, the idea behind this initiative was to take advantage of the liberated public policy resources up to then tied by defense, containment, mutual assured destruction and other paradigms as part of the rivalry between the world superpowers. These resources could be rechanneled to seal a development wave inside the hemisphere.

It did not escape to George Bush’s deep geopolitical knowledge and insight that the upcoming century would be rife in conflicts arising from development bottlenecks. In the South America these hurdles sprang from two sources: institutional rigidities and limited freedom. Concerning institutions, south of Rio Grande these were development resistant. They had been created to keep communities clean from the sins of progress.

Phillip the II, the Spanish monarch that acted as architect of the institutional framework that shaped societies throughout Latin America, was obsessed with the defense of the Catholic Church and the defeat of Protestantism. This belief led him to build a hemispheric convent.

Latin American development potential was thus trapped for centuries in by an absentee ruler aiming at controlling every aspect of life. Under such circumstances entrepreneurship was a theoretical proposition.

In addition, individuals soon learned that there were personal gains in contravening law and regulations. This made rule of law not only impossible but undesirable.

The Enterprise for the Americas Initiative aimed at liberating economic potential so that people by virtue of experiencing progress would become entrepreneurial and law abiding.

This also made the U.S. stronger: It would have healthier trading partners while its political system would be able to truly nourish a continent of countries just starting the democratic journey. Failure by President Bush to secure reelection doomed the project, however.

Bush's successor took a photo-op approach to the venture, denying time and diplomatic resources to the region.

During President Clinton’s first term, almost half of Latin American missions where headless. No alternative blue vision for Latin America was designed or implemented. The Free Trade Zone of the Americas was left to starve to death. Debt was resolved but in the absence freer trade, investments did not reach the necessary level of $60 billion per year for 20 years.

Twenty four years since the launching of the initiative -- as might be expected -- the hemisphere is a basket case of development bottlenecks.

Brazil fails to launch because it lacks appropriate infrastructure; Central American mothers are sending their children on a perilous and atrocious journey in the hope to save them from certain death as organized crime fodder and several countries in the hemisphere have taken anti-market, pro-Castro stands on public policies in spite of their demonstrated failure to solve development problems.

It is against this backdrop of United States retreat from the region that China and Russia are taking the stage.

China because it has learned from the US the significance of building economic partnerships overseas. And the pupil is excelling over the teacher in effectiveness and results.

To begin with, China represents a better-suited platform for Latin American economics needs than that of the US or Europe. Indeed, prices of goods and services are economic mirrors for levels of income. Telephone users in Honduras may be able to afford a $30 monthly fee but not a $75 fee which is common in the US. But to keep the fee at $30 the phone company needs to deploy affordable technologies. China, being an emerging market as well as a country that is in the process of leaving poverty behind, produces goods and services at lower price levels than in Europe or the U.S.

Thus, an investment by China has a higher probability of creating goods and services that reflect China’s levels of income than one by the US or Europe.

Second, Latin America has what China needs and China needs what Latin America lacks. As a foreign reserves rich country, China invests in projects that secure access to minerals, soy and other edible commodities, and energy. For their part, Latin countries are also exposed to a more industrious work ethic while receiving the capital that they have failed to save and badly need to build infrastructure.

For its part, Russia is also playing a key role in developing the much needed Latin American infrastructure. As rivalry with the U.S. gets more voracious, Russia will increment its presence in the region. This is likely to make the US feel more uncomfortable.

Knowing that China is building economic muscle, the Russians feel better about the region and its investment returns. How long will this last without stirring geopolitical frictions is a good question. But observing the U.S. unstoppable march towards isolationism, it is safe to bet that it will take several more lost decades.

Also by Beatrice Rangel in her Latin America from 35,000 feet series

Rangel: In the Midst of Riots, a Star is Born in Brazil

Rangel: In Mexico Cinderella Gets to the Ball while Colombia Gets a Chance at Peace

Beatrice Rangel is President & CEO of the AMLA Consulting Group, which provides growth and partnership opportunities in US and Hispanic markets. AMLA identifies the best potential partner for businesses which are eager to exploit the growing buying power of the US Hispanic market and for US Corporations seeking to find investment partners in Latin America. Previously, she was the Minister of the Secretariat for Venezuela President Carlos Andres Perez as well as Chief Strategist for the Cisneros Group of Companies.

For her work throughout Latin America, Rangel has been honored with the Order of Merit of May from Argentina, the Condor of the Andes Order from Bolivia, the Bernardo O'Higgins Order by Chile, the Order of Boyaca from Colombia, and the National Order of Jose Matías Delgado from El Salvador.

You can follow her on twitter @BEPA2009 or contact her directly at BRangel@amlaconsulting.com.

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