Free Preview of Members-Only Content
To view the requested intelligence, you must be a Stratfor.com member.
Engagement and Disengagement
After the Cold War ended, U.S. officials spoke glowingly of a dawning era of U.S.-Latin American relations. Starting in the late 1980s and continuing well into the 1990s, a generation of Latin American leaders and economists trained at Ivy League universities implemented sweeping free-market reforms endorsed by Washington policymakers. It was widely believed that if Latin American democracies adopted U.S.-style free-market policies, the region’s economies would grow with the robust vigor of the Asian economies.
Latin American political leaders encouraged voters to expect rapid improvements in their living standards. If the 1980s was a lost decade, the 1990s would be the decade in which Latin America would launch itself into the global economy by linking ever more tightly to the U.S. economy. Then-Mexican President Carlos Salinas de Gortari summed up the new relationship thus: “Trade, not aid.”
Starting in June 1990 with the Enterprise for the Americas Initiative, proposed by President George H. W. Bush, the United States negotiated and launched the North American Free Trade Agreement with Mexico and Canada from 1990 to 1994. NAFTA is now more than a decade old.
Then U.S. President Bill Clinton hosted the Summit of the Americas in Miami in December 1994. The heads of state from 34 countries pledged to create a hemispheric Free Trade Area of the Americas by 2005 or earlier. Clinton promised to include Chile in NAFTA before the end of 1995. The region-wide assumption was that after Chile joined NAFTA other countries would quickly gain entrance as well. The summit ended in a burst of hemispheric optimism.
Only a week later, the Mexican peso collapsed, and the sun never rose on the new era in U.S.-Latin American relations. Bipartisan political support in Washington for new trade deals evaporated — largely due to the new Republican-controlled Congress’s objections to Clinton’s use of U.S. Treasury funds to bail out Mexico’s government and banks. Republicans in the 104th Congress came to Washington intending to cut the federal government’s fiscal profligacy. Their mantra was no federal bailouts, handouts or subsidies for anyone, yet the first issue they were forced to debate was whether to bail out Mexico.
After the Mexican peso crisis, things began sliding progressively downhill for the rest of Latin America. No new trade initiatives came out of Washington while the Clinton administration and Congress battled over fast-track authority to negotiate new trade agreements. The White House demanded trade deals be linked to issues relating to the environment and organized labor, but Congress shot down the effort. As a result, U.S.-led trade expansion in the Americas stalled completely until nearly the end of 2000, when Clinton finally launched free trade talks with Chile.
The Bush administration completed the Chile FTA negotiations, and since 2001 has been negotiating a framework Central American free trade agreement (CAFTA) with Guatemala, Nicaragua, Honduras and El Salvador. That treaty has not been presented to Congress for approval, and it might not pass in the 2004 election year.
The Mexican peso crisis of 1995 rocked Latin America. Then came the 1997 Asian financial crisis, the 1998 Russian crisis, the 1999 Brazilian crisis and Argentina’s default on close to $100 billion in government bonds at the end of 2001. From 1997 through 2003, economic growth stagnated in most Latin American countries. Poverty and unemployment rose to 20-year highs. Social inequality worsened, per capita incomes plummeted and corruption spread with pandemic speed.
By the time Argentina defaulted in 2001, most Latin Americans were disenchanted with the economic policies Washington endorsed during the preceding decade. Reformist presidents in Argentina, Mexico, Venezuela, Peru, Ecuador and several other countries had left office pursued by allegations of corruption on an unprecedented scale. Between 1998 and 2003, corruption scandals and popular revolts forced regime changes in Ecuador, Peru, Argentina and Bolivia.
During the 1990s, the dominant vision of Latin America’s future was the so-called Washington Consensus. In a nutshell, the future was more globalization, more open economies, more free trade and more linkages between the United States and Latin America. Rhetorically at least, the Bush administration and leaders in Colombia and El Salvador still endorse this vision.
Less than five years into the 21st century, geopolitical trends in Latin America and the Caribbean are analogous to a fly-fishing championship in a turbulent river. Many new Latin American leaders and foreign countries are casting lines, hoping to catch a political and economic windfall. For example, Brazilian President Luiz Inacio “Lula” da Silva is seeking to build a multi-polar network of political alliances with Argentina, India, South Africa and Russia. He has two clear objectives: to counter Brazilian perceptions of intrusive U.S. hegemony, and to make Brazil a regional power in its own right by pursuing a foreign policy that deliberately goes against U.S. foreign policy — in Latin America or the rest of the world.
The Rise of the Populists
| Stratfor Members, please log in at the top left hand corner |
