Is Latin America Ready for the Next Decade?

The region is weathering the global economic crisis well, but as it deepens and spreads globally, the future remains uncertain. Although the United States remains the region’s most important investment partner, the Obama administration is missing the opportunity to forge effective collaboration on issues ranging from climate change to immigration. And important gains, including the reduction of poverty in South America, remain precarious.

“There is good economic management in defending the region from the crisis,” said Enrique García, CEO of CAF, the Development Bank of Latin American. “But there is still volatility. At the same time, we need to look at how Latin America can get faster, higher equity, sustainable growth.”

Whether the region is embracing the tools and policies it needs for continued growth was the focus of spirited discussion during the September 7 and 8, 2011, CAF Conference on the Americas, which drew some 400 people for a wide-ranging look at the region’s readiness for the future. Panelists addressed issues ranging from joblessness and security to education, press freedom, and civil society.

“There is great opportunity that we may be able to grow much more than we are now so that [Latin American] countries are developed nations by 2020,” said Enrique Iglesias, secretary general of the Ibero-American General Secretariat, in a keynote address. “It is a new world. We need to think of reconciliation on our great points in common. By resolving these, we can contribute to the improvement of humanity.”

CAF was joined by the Organization of American States and the Inter-American Dialogue in organizing the annual conference in Washington, D.C. The gathering serves as a platform to identify pivotal issues in the region and make related policy recommendations. It draws US and Latin American government officials, international economists, lawmakers, scholars, policy analysts, journalists, and corporate and financial leaders.

This year’s participants included Inter-American Development Bank president Luis Alberto Moreno; former president of Panama Martín Torrijos; the president of Bolivia’s Chamber of Deputies, Héctor Arce; the secretary general of the Union of South American Nations (UNASUR), María Emma Mejía; Uruguay’s minister of the economy Fernando Lorenzo; French Development Agency deputy CEO Didier Mercier; and the Asian Development Bank Director for North America Alessandro Pio.

While panelists acknowledged the region’s impressive growth against the backdrop of a global recession, there was concern about its ability to sustain expansion if key challenges are not addressed. Joblessness—especially for young people—remains a problem. Education levels must be improved if Latin America is to boost productivity and compete globally. Organized criminal networks are destabilizing still-fragile democratic institutions. Integration efforts need a jumpstart.

Noting that the CAF Conference coincided with the 10th anniversary of the Inter-American Democratic Charter, OAS secretary general José Miguel Insulza cited reasons for optimism. “We have elected democracies all over the region. What has improved is the governability of the region.”

Acting US undersecretary of state for political affairs Thomas Shannon also underscored “how unique the democratic accomplishments of the Americas are—not just in a regional context, but in a global one.” He noted that the Inter-American Democratic Charter went beyond advocating democracy as a form of government to push for it as a fundamental responsibility of governments toward their citizens. He called it a model for Middle East nations moving toward democracy.

“That model is special in the vast space it gives to societies and individuals to pursue their own visions of success in an ever more competitive world,” Shannon said. “Countries have followed their own unique paths, reflecting distinct histories and cultures, but the aggregate social and political advance has been strong and sustained.”

During his address, Shannon acknowledged that the White House has been focused on the economic crisis and two wars, but he denied that the Obama administration has ignored Latin America. “Over the last two-and-a-half years, we have seen major advances in cooperation across a wide span of priorities shared by people throughout the Americas,” Shannon said. He added that much of the work goes on behind the scenes or at levels below the presidency.

But panelists in a discussion titled “Obama’s Politics after his Visit to Latin America: What is Next?” pointed to the beginning of the US election campaign and predicted there will be no significant movement on issues of importance to the hemisphere, including energy, gun control, immigration, remittances, human rights, citizen security and drug trafficking. Expectations for the April 2012 Summit of the Americas in Cartagena were also subdued.

“The United States is weaker, but it is still the No. 1 power in the world,” said Guillermo Fernández de Soto, former foreign minister of Colombia. “We can still build a dialogue. It’s viable—we can build a conversation, an agenda, but it can’t be from summit to summit.

“I hope that in the summit in Cartagena at least two things appear,” he continued. “The priority of the hemisphere, which is drug trafficking and crime, and the concerns of democratic institutions in the region.”

Panelist Gustavo Fernández Saavedra, former foreign minister of Bolivia, suggested that the United States no longer sees just “one Latin America.” He said the economies, politics and societies of Mexico, Central America and the Caribbean are more intertwined with the United States than are those of South America. “We can’t talk about an agenda for Latin America when there are two Latin Americas,” he added.

Panelists repeatedly returned to themes of shifting relationships in the region, noting that the United States’ waning influence comes in tandem with China’s growing importance to Latin America.

“The entrance of China into Latin America as a major trading partner has been extraordinarily beneficial,” said Jeffrey Davidow, former US assistant secretary of state for Western Hemisphere affairs. “Some of the other concerns that one hears, I think we can discard. China [for example] does not see Latin America as a platform in any way for military adventure.”

However, Davidow cautioned that China may use its growing trade relationships to create political alliances on questions related to the United Nations, the environment and international banking.

Osvaldo Rosales, director of the Division of Trade and Integration at the Economic Commission on Latin America and the Caribbean, said the region should be worried about its growing dependence on China as a trade partner.

“The South American boom wouldn’t have happened without China,” he said. “And if you take China out of the equation, then the rate of growth would fall, as would savings.”

Wu Guoping, a professor at the Institute of Latin American Studies of the Chinese Academy of Social Sciences, told conference participants that China’s businesses are not yet skilled at navigating Latin America’s bureaucracies and regulatory landscape. However, he predicted that the region would remain a strong trade and investment partner.

“China’s international reserves are a problem for China. We can’t invest everything in US debt—so much is already tied up in dollars,” he said. “And where else can we go? Europe with its problems?

“Latin America is a better investment arena under the current economic circumstances,” he added. “Latin America invites us and there is a place for us there.”

Politics were also examined, including as related to upcoming elections in the region. A panel of young Latin American politicians and journalists from Bolivia, Colombia, Peru, Uruguay, and Venezuela discussed political challenges, among them how the region will move from neoliberalism to new development models. The panelists listed a decline in violent crime and poverty, as well as inclusion of indigenous and ethnic Latin Americans in the political process, as critical goals. They predicted that governments, including left-leaning ones, will turn from economic policy and put greater focus on social policy.

The conference closed with an exchange, moderated by CNN anchor Patricia Janiot, between OAS secretary general Insulza and UNASUR secretary general Mejía over the roles of their organizations in the region. Among other things, both have positioned themselves as election monitors. Insulza said one big difference was the scope of their membership. UNASUR includes only countries in South America, while OAS also represents the United States, Canada, Mexico and Central America. Mejía pointed out that, unlike the OAS, UNASUR’s mission includes regional integration.