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Latin America Looks East – Where Does This Leave the United States?

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Latin America Looks East

Where Does This Leave the United States?

Central and South American nations are increasingly seeking economic security and military ties with eastern countries, radically changing their decades-old relationship with the U.S.

Learn the why behind the headlines.

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China investing billions of dollars of infrastructure across South America. Venezuela and Cuba offering land to Russia for the construction of military bases as Russian warships dock on Cuban shores. Brazil and Iran making oil deals, and Chile and Russia promising renewed relations.

With the deepening global economic crisis, Latin American nations are seeking economic security. This security no longer comes primarily from the United States, but also from the growing—and apparently more stable—powers of the East.

What affect will this paradigm shift have on the relationship with the United States and the nations with which it shares the Western Hemisphere?

United States’ Waning Influence

Evidence of diminishing U.S. influence in Latin America became evident with its exclusion from the Rio Group summit in 2008. The purpose of the annual meeting is to address regional issues impacting Latin American and Caribbean countries. Summit leaders invited Cuba, but excluded the United States, Portugal and Spain for the first time since the founding of the meeting.

The United States hoped to rekindle relations with many South and Central American nations at the fifth Summit of the Americas held in April 2009.

As 34 leaders from the Caribbean and Central, South and North America gathered to discuss the future of the region, U.S. President Barack Obama promised a fresh approach to diplomacy for the hemisphere in his opening address: “There’s no senior partner and junior partner in our relations. There’s simply engagement based on mutual respect, and common interests, and shared values. So I’m here to launch a new chapter of engagement…”

Mr. Obama also extended an olive branch to longtime political rival Cuba in hope of a “new beginning.” In doing so, the U.S. president endured criticism from socialist presidents Hugo Chávez of Venezuela, and Daniel Ortega of Nicaragua, who delivered a fiery speech at the summit in which he condemned Washington’s terroristic aggression in Central America and its isolation of Cuba’s Communist government.

Miguel Tinker-Salas, professor of Latin American history at Pomona College in Claremont, Calif., said that the waning influence of the U.S. has recently begun to manifest itself. “The last 10 years have produced dramatic changes in Latin America,” he said, “and one of the most striking is the loss of the United States’ formerly towering dominance in a wide range of areas” (Christian Science Monitor).

President Obama indicated a desire for a “new beginning,” but Latin American nations may already have found a new beginning—with growing superpowers of Asia.

Looking for New Economic Partners

Weeks before the Summit of the Americas, Hugo Chávez attempted to strengthen economic and political ties with several Asian countries by visiting China, Iran and Japan.

In February, China’s Vice President Xi Jinping visited Mexico, Jamaica, Colombia, Venezuela and Brazil to seek stronger ties with the five countries. The following week, Vice Premier Hui Liangyu stopped in Argentina, Ecuador, Barbados and the Bahamas to offer Chinese aid to those nations.

Visits to the Caribbean and Latin America by U.S. delegations seem meager in comparison. Thus far, three U.S. leaders—the secretary of state, attorney general and head of homeland security—have made trips to Mexico, and President Barack Obama visited with Mexican President Felipe Calderón on his way to the Summit of the Americas in Trinidad and Tobago. In addition, Vice President Joe Biden met with leaders in Chile and Costa Rica.

Although the United States is still Latin America’s largest trading partner, U.S. trade with Latin America fell to $35.3 billion in February 2009—a 28.9 percent drop from the same month last year. “The falling trade is mainly due to weak demand in the United States, although the leading trade partners in Latin America are also buying fewer products from U.S. companies” (Latin Business Chronicle).

As Washington struggles to contain its own financial troubles, Caribbean and Latin American nations are looking eastward, with delegates from China and Russia making regular visits to these nations to offer economic assistance and increase bilateral trade talks, including military development.

China’s Emergence as a Global Trade Force

The New York Times reported that in light of apparent U.S. disengagement and increasing economic uncertainty, China offered to provide the struggling region with necessary financial assistance. In contrast to rapidly diminishing trade with the United States, Bloomberg reported that Chinese Central Bank Governor Xiaochuan Zhou said China’s trade with Latin America has grown from $15 billion in 2001 to $140 billion in 2008.

“In recent weeks, China has been negotiating deals to double a development fund in Venezuela to $12 billion, lend Ecuador at least $1 billion to build a hydroelectric plant, provide Argentina with access to more than $10 billion in Chinese currency and lend Brazil’s national oil company $10 billion. The deals largely focus on China locking in natural resources like oil for years to come” (The New York Times).

A report published by the International Committee of the Fourth International said that Venezuela is angling to increase its export ratio to China. “While Venezuela now exports 60 percent of its oil to the US, the agreements between Beijing and Caracas could change that. Venezuela aims to triple its exports to China to one million barrels a day by 2013. (Today, the US consumes 1.5 million barrels a day of Venezuelan oil.)”

In a 2008 multibillion-dollar deal, China’s Chinalco Corporation purchased the Peruvian Toromocho Mountain, securing a virtual monopoly on copper production in Peru. In the past, this type of deal would likely have been made with an American corporation.

But not now.

This transaction shows the diminishing influence of the United States in its own hemisphere—and China’s growing need for natural resources and the great lengths to which it will go to get them. As the Christian Science Monitor stated, “The U.S. is no longer the only game in town.”

The New York Times reported that “just one of China’s planned loans, the $10 billion for Brazil’s national oil company, is almost as much as the $11.2 billion in all approved financing by the Inter-American Bank in 2008. Brazil is expected to use the loan for offshore exploration, while agreeing to export as much as 100,000 barrels of oil a day to China, according to the oil company.”

China’s interest in Brazil comes on the heels of Brazilian President Luiz Ignacio Lula da Silva’s call for an economic new world order. In a telling statement about where many Latin American heads-of-state place blame for the economic situation, the popular leader blamed “white people with blue eyes” for the current global financial mess. He said this during a meeting with British Prime Minister Gordon Brown, and repeated it publicly in weeks to come.

Even Jamaica, heavily indebted and confronting growing unemployment, turned to China after failing to secure credit from the U.S. or Britain. The Caribbean island nation negotiated $138 million in loan packages from Beijing, turning China into its principal financial partner overnight.

Searching for Like-minded Partners

In addition to increasing economic ties, many Latin American countries relate to eastern countries who share the same political goals. This includes the development of a socialist state. A 2008 Gallup poll revealed that of 19 countries polled in Latin America, all but Mexico primarily consider themselves socialists, rather than capitalists.

Professor Tinker-Salas said there has been a shift of mentality in America’s southern neighbors. “The region has undergone a political transformation beyond US control that was unimaginable a generation ago. It began with the election of Venezuela’s leftist-populist (and anti-gringo) President Hugo Chávez in 1998, and has culminated with the victory in March of Mauricio Funes, El Salvador’s first leftist president” (Christian Science Monitor).

China and Russia have strongly advocated for increased reform of the international economic system and regulation of financial markets. Further, China confirmed its position in January as a member of the Inter-American Development Bank, which helps finance long-term projects in the region.

President Hugo Chávez stated that Venezuela is relying on China to get them through this economic crisis.

“‘This is how the balance of power shifts quietly during times of crisis,’ said David Rothkopf, a former Commerce Department official in the Clinton administration. ‘The loans are an example of the checkbook power in the world moving to new places, with the Chinese becoming more active’” (The New York Times).

“Currently, China is the biggest motor driving the world amidst this crisis of international capitalism,” Mr. Chávez said, before meeting with Hu Jintao, China’s president and Communist Party leader. Later, addressing the president, he said, “No one can be ignorant that the center of gravity of the world has moved to Beijing” (Associated Press).

During his recent two-day trip to China, Mr. Chávez said the two countries, along with others, were working to create “a new world order.” This realignment is at the expense of capitalism, with many nations and their leaders clamoring for a more stable economic system and form of governance.

In times of great political upheaval and economic uncertainty, some believe the answer is socialism.

Russia and Iran Assert Themselves

It is not just China that is capitalizing on opportunities in the Western hemisphere. Russian and Iranian ties and support for Latin America have also been growing.

Last month, Russian Prime Minister Vladimir Putin met with socialist-leaning Chilean President Michelle Bachelet, promising to step up cooperation with the nation.

“‘We are satisfied with the development of our relations, including regular contacts and trends in trade and economic relations,’ [Mr.] Putin said. ‘Yet bilateral trade is rather modest so far. It is necessary to think about diversification’” (Itar-Tass).

“For Russia, its Caribbean naval jaunt is a symbolic riposte to America’s plan to place missile batteries in Poland and to its dispatch of naval vessels to distribute aid in Georgia after Russia’s incursion in August. The same goes for its recent revival of ties with Cuba…But Mr Medvedev’s main purpose in Latin America is business. Mr Chávez has already bought arms worth $4.4 billion from Russia—including a Kalashnikov factory due to start producing 50,000 rifles a year in 2010. Russia was reported this month to have signed a contract to sell Venezuela portable air-defence missiles” (The Economist).

In light of these developments, it must be considered that Russia’s goals may not be so economically singular.

Russian warships docked on Cuban shores, just 90 miles off the U.S. border, for the first time since the end of the Cold War. There was a time when the United States would have viewed this with heightened alarm. But in this age of “new beginnings,” and as President Obama distances the U.S. from the “diplomacy of the past,” it is not. Everything seems to be business as usual.

For a variety of reasons, Latin America has been of increasing interest to Iran as well. Not only has Iran identified the same economic opportunities in the region as China and Russia, but it recognizes Latin America, specifically Venezuela’s anti-American President Hugo Chávez, as a like-minded diplomatic partner.

“The motive for Iran’s recent interest in Latin America seems to be a desire to add to its small stock of diplomatic friends around the world, and to score propaganda points against the United States. Mr. Chávez has signed no fewer than 200 co-operation agreements with Iran. Venezuelan officials say that Iran has invested more than $7 billion in their country—in plants to assemble cars, tractors, farm machinery and bicycles, as well as oil—and that bilateral trade has reached $4.6 billion” (The Economist).

Recently, Brazil’s foreign minister visited Iran and invited Iranian President Mahmoud Ahmadinejad to visit Brazil.

Additionally, Iran has promised $1.1 billion in investments to develop Bolivia’s natural gas industry (ibid.).

With growing concern from the United States, Iran has also been in ongoing talks with Nicaragua and its former Marxist guerrilla-turned-president, Daniel Ortega. The talks have focused on pursuing the construction of a $350 million Caribbean port financed by Iran to alleviate the ongoing energy crisis in the small Central American nation.

Redefining Relationships

Latin American trade with the United States has been decreasing at such an alarming rate, while Asian trade skyrockets, that some believe this is an organized effort to remove the United States influence from the region.

Professor Tinker-Salas disagrees. “This doesn’t mean there is a united left in Latin America somehow threatening the US, as some have suggested. But it does mean there is a much more independent foreign policy vis-à-vis the US and more nationalistic perspectives on economic matters. It’s no longer the backyard where, either through benign neglect or direct intervention, the US could more or less freely act to achieve its goals” (Christian Science Monitor).

It is not only larger Latin American nations that have helped redefine the relationship between the region and Asian nations. In 2007, Ecuador signed an arms deal with China. That same year, Costa Rica became the first Central American country to establish diplomatic relations with China (La Nación).

What Lies Ahead?

Aristotle said that “nature abhors a vacuum.” This is true in regard to Latin America. As the United States struggles to regain its balance economically, the region is not waiting—and the growing powers of the East are more than willing to fill the empty space.

“The unipolar world [of America] has collapsed,” Mr. Chávez said. “The power of the U.S. empire has collapsed…Everyday, the new poles of world power are becoming stronger. Beijing, Tokyo,’s moving toward the East and toward the South” (Associated Press).

As billions of dollars travel between Latin America and Asia, and the United States watches economic opportunities with its neighbors evaporate, it remains to be seen whether this apparent shift and Eastern incursion into America’s backyard will be received with warmth—or will be met with revived Cold War sentiments.

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