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Cavalry to the Rescue!

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With flags furling and trumpets blaring, President Bush will ride into Latin America bearing treaties, money and arms.

BY WALTER T. MOLANO

The Bush Administration announced that Latin America was at forefront of its new foreign policy agenda. With its attention riveted on the Middle East, a power vacuum formed in the southern latitudes. Brazil should have stepped into the void, but it was preoccupied with its domestic issues. Lula is still licking the wounds from his re-election struggles. Itamaraty is also finalizing a new gas treaty with Bolivia. Unfortunately, the lack of regional leadership allowed a crop of rouge leaders to emerge. Led by Venezuela, several of the poorer countries in the region succumbed to the siren’s song of populism. The shift reached its zenith in 2006, during the regional presidential cycle. However, the pendulum turned when the electorates in Peru and Mexico finally rejected the leading populist candidates. Still, the threat persists. There is a good chance that Paraguay will soon join the ranks of Venezuela, Ecuador, Nicaragua and Bolivia. Fernando Lugo, a former Catholic bishop and a close ally of President Chavez, is gaining momentum, and he is the leading presidential contender in Paraguay. Given the growing prominence of rouge leaders and anti-American rhetoric, it was time for the U.S. cavalry to ride to the rescue.

REVITALIZED FREE TRADE INITIATIVE

With flags furling and trumpets blaring, President Bush will ride into the region bearing treaties, money and arms. Between March 8 and 14, the President will visit five Latin American countries -- Mexico, Brazil, Colombia, Guatemala and Uruguay. He hopes to bring along a revitalized free-trade initiative. Working groups, representing the new Democrat congressional majority, recently reviewed and amended the pending agreements, and they should be completed by the time the President travels. Although Ecuador will probably recuse itself from further negotiations, Peru, Colombia and Panama are anxious to complete the process. President Uribe wants to integrate Colombia with the U.S. through the free trade mechanism. Many Peruvians consider that a free trade agreement will force President Garcia to adhere to market-based economic policies, and President Torrijos sees the agreement as a way to heighten the role of Panama as one of the principal conduit into the U.S. mainland. The State Department is also putting the finishing touches on Plan Colombia II. The 2007 federal budget contained $586 million for bilateral assistance for Colombia. Of the total, $367 million will be for antinarcotics activities, $139.5 million for economic assistance and the balance for military equipment and training.

SUCCESS BREEDS INATTENTION

Although the Bush Administration can be faulted for its Middle East myopia, the improved economic climate in Latin America was the main reason why it fell out of sight. During the 1990’s Latin America was constantly battling balance of payments crises, requiring rescue programs, reviews and waivers. However, the rise of commodity prices at the start of the decade improved the region’s external dynamics, and it no longer warranted attention. Washington was all too happy to turn its gaze away. Nevertheless, the reduced presence in the region damaged U.S. interests. China and India made deep inroads into the region, increasing exports into Latin America, securing natural resource deposits and providing alternative sources of financing. Difficulties in gaining entry into the U.S. forced many Latin American students to look for alternate places to study, such as Europe, Australia or even Asia.  The dominance of North American culture is fading fast, with serious implications for U.S. manufacturers and service providers. Therefore, it is time for the U.S. to reassert its presence. Hopefully, Bush’s mission is a success, and it does not become a modern version of Custer’s Last Stand.

Walter Molano is head of research at BCP Securities.

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