How should Latin America respond to US President Donald Trump’s US-first approach to the global economy? Here is one possible answer: Build a free-trade area of the Americas without the US.
Of course, the idea is far from new. The founding fathers of Latin America’s republics talked about it two centuries ago. However, it never came to pass.
In the 1960s, there was much discussion about Latin American integration. Summit meetings were held and agreements signed. However, little progress on free trade followed. For most countries in the region, Europe or the US remained larger trading partners than their immediate neighbors.
In the early 1990s, then-US president George H.W. Bush grandly proposed a free-trade area from Alaska to Tierra del Fuego in Chile. The US subsequently signed agreements with Canada, Mexico, Chile, Colombia, Peru, and Central America, but the ambitious and overarching north-south agreement did not materialize.
The good news is that most of the factors blocking regional free trade back then have disappeared. So now is the right time to pick up on former Venezuelan president Simon Bolivar’s two-century-old idea.
One reason a region-wide trade deal foundered was that proud Brazil was unwilling to attend a party whose main host was the US. However, if Trump sticks to his protectionist promises, there will no longer be a concern about US-Brazil rivalry within the same trade agreement.
In the past, US farm subsidies were also deal-breakers for large agricultural exporters such as Argentina and, again, Brazil. With the US out of the picture, this also becomes a non-issue.
During the 1990s, left-wing populist governments came to power in a number of Latin American countries. For these governments — in Argentina, Bolivia, Ecuador, Nicaragua, and Venezuela — free trade was a dirty “neoliberal” phrase. For their leaders, too, an agreement with the US was out of the question.
Today, that brand of populism is — knock on wood — in retreat across Latin America.
In Argentina, the Peronists have lost the presidency; suspended Brazilian president Dilma Rousseff got herself impeached and Venezuelan President Nicolas Maduro’s increasingly dictatorial regime is teetering on the edge of the abyss.
Ecuador also might soon end its flirtation with populism: Ecuadoran President Rafael Correa’s handpicked successor did less well than expected in the recent first round of the country’s presidential election.
So, with the three main stumbling blocks gone, what is preventing a free-trade agreement of the Americas from being signed? Nothing much, except for policy inertia and lack of clear leadership. However, there is no shortage of regional leaders who could carry the torch of trade integration from the Rio Grande to Chile’s Cabo de Hornos.
Aside from their wariness of the US, former Brazilian presidents also feared their domestic business establishment, which never met a tariff or a non-tariff barrier it did not like. That protectionist sentiment, always strongest in the industrial heartland of Sao Paulo, is still there.
However, with Brazil just beginning to emerge from its deepest recession in decades, Brazilian businesses are eagerly seeking new customers. With China slowing, Europe mired in its own crisis and the US walling itself in, the region’s growing markets have fresh appeal.
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