Brookings: Topics - South America

Brazil Hosts Workshop on "Responsibility While Protecting"

Thomas Wright — Wed, 29 Aug 2012 00:00:00 -0400

Last week I attended a workshop in Rio de Janeiro on the Responsibility While Protecting (RWP), a Brazilian concept introduced in late 2011 to curb what it perceives as the excesses of the Responsibility to Protect. Over the course of the workshop, I had the opportunity to hear and interact with senior foreign policy officials and experts from Brazil, South Africa, India, the United States, Canada, and Australia. Here are some observations on the RWP concept (a subsequent post will discuss Brazilian foreign policy more generally).

The IBSA countries—India, Brazil, and South Africa—feel betrayed by the Western interpretation of the mandate it received under UNSC resolution 1973 to intervene in Libya. They realized it meant an initial series of strikes against Libyan air defenses but wanted the West to consider a settlement with Gaddafi after the initial strikes. They claimed to be shocked by the extension of the campaign into one of regime change. The West views Libya as a success of sorts, but IBSA sees it as a dramatic failure and warning.

IBSA officials complained, in particular, that their diplomats were treated dismissively throughout the operation and were left uninformed. This sense of personal humiliation at the hands of the P3 (the US, France, and the UK) appears to be the most significant proximate cause of RWP (although the official reason is the path of the intervention in Libya). The IBSA countries made it clear that they would be extremely reluctant to support any new R2P action in light of the Libyan experience.

Read the full article at foreignpolicy.com »

Authors

Thomas Wright

Publication: Foreign Policy

Image Source: © Ho New / Reuters

What Hurdles Face Brazil Ahead of the Olympics & World Cup?

Andrés Rozental — Fri, 17 Aug 2012 00:00:00 -0400

After what has been universally characterized as a tremendous success by London in organizing the Olympics, Rio de Janero and Brazil will have a tough act to follow. While London is generally a disciplined and orderly city, Rio, like many other large urban concentrations in developing countries, is somewhat chaotic and disorganized. The biggest challenge the Brazilians face is to somehow make logistics work during both the World Cup in 2014 and the Olympics in 2016. A large hotel deficit in Rio, combined with poor public transportation networks and phenomenal traffic congestion—especially in São Paulo—will present huge challenges to the authorities as they prepare for the influx of tens of thousands of athletes and spectators.

While there is still time to build the necessary new infrastructure, Brazil needs to accelerate
preparations and ensure that the airports, roads, transportation facilities and stadiums are ready. Neither FIFA nor the International Olympic Committee seem to be worried that things are not on schedule, but the risk remains that some of the major projects might not be in place by 2014. Security is also a concern, but more from the perspective of localized crime and violence, than from any terrorist threat. The mayor of Rio de Janeiro was in London twice during these past Olympics and was able to take advantage of watching the recently concluded Games to better understand the size and complexity of the events and how to adequately prepare for every contingency.

Having attended several of the events in London myself, I can't underestimate the task ahead and Brazil's challenges in preparing for their time in the sun.

Read the full Q&A, including responses from other non-Brookings experts » (PDF)

Authors

Andrés Rozental

Publication: Inter-American Dialogue's Latin America Advisor

Image Source: © Ricardo Moraes / Reuters

The Road to Hemispheric Cooperation: Beyond the Cartagena Summit of the Americas

Tue, 17 Jul 2012 09:00:00 -0400

Event Information

July 17, 2012
9:00 AM - 11:00 AM EDT

Saul/Zilkha Rooms
Brookings Institution
1775 Massachusetts Avenue NW
Washington, DC 20036

Latin America and the Caribbean have made substantial progress in advancing democratic freedoms and enhancing economic opportunities. However, hemispheric cooperation and integration remain key challenges. During last April’s Summit of the Americas in Cartagena, leaders reached consensus on social inclusion and other difficult challenges facing the region but disagreements on other topics, such as Cuba and drug policy, dominated the agenda. Can the region’s governments rise above the current stalemate and move forward on pressing issues such as economic innovation and integration, public security, education reform, and energy and climate change?

On July 17, the Latin America Initiative at Brookings hosted a discussion and offered recommendations for a roadmap to greater inter-American cooperation on these and related issues. Drawing on a set of papers commissioned by Brookings, authors Inés Bustillo, Kevin Casas-Zamora and Ted Piccone assessed issues of economic development, public security, and democracy and human rights. Their presentations were followed by commentary by John Feeley, principal deputy assistant secretary for Western Hemisphere Affairs at the U.S. Department of State, and Brookings Nonresident Senior Fellow Richard Feinberg. Senior Fellow Ernesto Talvi, director of the Latin America Initiative, provided introductory remarks.

Browse the full report and download individual papers »

Comment on Cartagena

Abraham F. Lowenthal — Fri, 11 May 2012 16:19:00 -0400

Quite apart from the distraction caused by the shenanigans of U.S. Secret Service agents with Cartagena prostitutes, most comments on the Cartagena Summit of the Americas missed the important points. They emphasized the inability of the participating presidents to agree on a final communiqué, highlighted vocal Latin American rejection of U.S. policies on Cuba and anti-narcotics strategy, and suggested that the Summit showed a confrontation between the United States and Latin America.

Actually, the Summit confirmed what most analysts have long understood: that no meaningful agreements can be reached to unite the diverse interests and priorities of more than 30 countries of such great variety. The difference between a meaninglessly vague final communiqué and no statement at all is unimportant.

Second, if there was anything significant about the extended discussion in Cartagena, it was that the presidents discussed their differing perspectives and on counter-narcotics efforts respectfully, not confrontationally, and that President Obama willingly participated in a dialogue. What a contrast from John Foster Dulles’s trip to Caracas to secure an OAS resolution condemning communism, in preparation for the CIA overthrow of Guatemala’s President Arbenz, when he immediately left the conference, not waiting to hear the Latin American presentations on their own agendas of concerns.

Finally, the most evident gap in Cartagena was between the ALBA nations—Venezuela, Cuba, Ecuador and Bolivia, with Argentina apparently aligned—and the rest of the Latin American members. The presidents of Cuba, Venezuela and Ecuador were absent for different reasons. President Morales of Bolivia was isolated, and Argentina’s Cristina Fernández de Kirchner left early and in a huff when she could not garner the support for escalating tensions around the Malvinas/Falklands dispute. The ALBA nations are losing momentum; that was, for me, the big story from Cartagena.

Authors

Abraham F. Lowenthal

Image Source: © Ueslei Marcelino / Reuters

Privatization and Argentina's Economic Crisis

Eduardo Levy-Yeyati — Mon, 30 Apr 2012 13:14:00 -0400

Argentine President Cristina Fernandez has announced that the government will assume control of a Spanish oil company operating in Argentina. The action calls for the state to take a controlling interest in YPF as a means to funnel much needed money back into Argentina’s troubled economy. Nonresident Senior Fellow Eduardo Levy-Yeyati suggests it might be the right move done the wrong way.

Video

Argentina's Twin Deficit Problem

The Cartagena Summit: Positive Voices amidst Rancor

Richard Feinberg — Fri, 20 Apr 2012 11:33:00 -0400

While the headlines from the recently concluded sixth Summit of the Americas in Cartagena, Colombia focused on the deeply divisive issues of Cuba, the Falklands/Malvinas islands, and counter-narcotics strategies, the gathering nevertheless registered some notable progress toward building a genuine community of democratic nations.

Summits these days are not solely meetings among heads of state. In the western hemisphere and elsewhere, they convene representatives from civil society, social movements, and the private sector. The Summit of the Americas specifically has come to resemble an annual association meeting, gathering a wide range of players interested in inter-American relations. Summits are efficient opportunities for personal networking and information gathering, for job-hunting and deal-making, and for advancing policy agendas.

The leaders’ meetings are the centerpiece of summitry, but the Summits of the Americas have become multi-ring circles of specialized conferences. One such circle, the Civil Society Forum, has evolved over the years from being heavily attended by Canadian and U.S.-based non-governmental organizations (NGOs) to being dominated by NGO leaders and society movements from Latin American and Caribbean.

At the catastrophic 2005 summit in Mar del Plata, Argentina, many civil society organization banded together to stage a noisy counter-summit in the streets. That year, left-leaning presidents Evo Morales of Bolivia and Hugo Chavez of Venezuela vacated their seats at the official table to express their solidarity with the protestors. To avoid a repetition of this divisiveness, Colombian president and Summit host, Juan Manuel Santos, traveled to Bolivia to persuade Morales not to repeat the antics of Mar del Plata; rather, he invited him into the main tent and offered him the honor of closing speaker at the official Civil Society Forum. To provide him with a friendly audience, a private plane flew 83 of his indigenous and other grassroots supporters to Cartagena with their brightly-colored traditional garb and visible black hats standing out amidst the crowd. They alternately chewed coca leaves and cheered their leader.

To bolster the prestige of the Civil Society Forum, Colombia’s capable foreign minister, Maria Angela Holguin, chaired key sessions and Santos delivered a full-length speech. At the closing session, civil society representatives presented their recommendations to foreign ministers and the ministers of Brazil and Argentina, among others, offered lengthy responses. To the thrill of the crowd, Hillary Clinton delivered remarks just prior to Morales’ closer. Overall, the tone of the Civil Society Forum was constructive and respectful, and the recommendations presented to foreign ministers avoided heated rhetoric in preference to very specific proposals. Presentations by representatives of another parallel conference of hemispheric youth were remarkable in their maturity and specificity.

At Cartagena, attendance by U.S.-based NGOs was spotty. Some U.S. NGOs question whether such forums have much impact on leaders’ deliberations, and choose to engage in consultations that are offered by the Organization of American States (OAS) in the months leading up to the summit. Others doubt the efficacy of summits altogether and prefer to focus their energies directly on their own government’s programs. They may want to reconsider their attendance at future gatherings.

Corporate executives have attended previous summits under various umbrellas, but it took the duet of two powerful Colombians – President Santos and the head of the Inter-American Development Bank, Luis Alberto Moreno – to orchestrate the first-ever “CEO Summit of the Americas.” To attract corporate big-wigs, the Santos-Moreno team called upon their many friends in foreign ministries and presidencies to participate in the CEO Summit, which directly preceded the leaders’ meeting. Most impressive was a panel of presidents, where Barack Obama traded barbs with Brazilian president Dilma Rousseff. Santos comfortably sat between the two contenders for hemispheric leadership, declaring himself the reasonable centrist sandwiched between the two regional powers. To add luster, NBC’s Christopher Matthews moderated the presidential panel.

The 700 corporate executives attending the CEO Summit sat mesmerized while Colombian pop star Shakira urged them to join with her in support of early childhood development programs. (More than one executive commented on her poise and intelligence and speculated as to whether she might one day become president of Colombia.) The CEO Summit was capped by an energetic performance by another iconic Colombian performer, singer Carlos Vives, who literally had conference participants dancing in the aisles.

At both the Civil Society Forum and CEO Summit, speakers expressed growing confidence in the Americas, in the prospects for sustained growth and rising living standards, and for ever-greater connectivity among citizens within nations and across borders, even as the full inclusion of various minorities remains an enduring challenge. Chris Matthews summed up the buoyant mood, referring to “the unusual optimism, the positive zeitgeist” of the CEO Summit, in contrast to the gloomy mood in Europe and other regions in the world suffering from economic recessions or political turmoil.

The Civil Society Forum and CEO Summit also contrasted with the contentious atmosphere at the central leaders’ meeting. In preparatory sessions, the region’s diplomats had agreed upon a rich agenda of initiatives covering economic integration, citizen security, disaster relief, and poverty reduction. But some countries decided to poison the deliberations by purposefully injecting divisive issues that diverted the attention of leaders and the media from more constructive tasks.

It was a shame that the diplomats of some countries did not follow the more positive examples of civil society and corporate leaders also present at Cartagena, who saw the Summit not as an opportunity to score points against their rivals but rather as a moment to build bridges and seek common ground.

Authors

Richard Feinberg

Image Source: © Ricardo Moraes / Reuters

Implementing the Colombia Free Trade Agreement — Now the Work Begins

Joshua Meltzer — Tue, 17 Apr 2012 16:05:00 -0400

During President Obama’s recent participation in the Summit of the Americas in Cartagena, Colombia, he announced that the Colombia-U.S. free trade agreement would enter into force in the United States on May 15 of this year, following Congress’s passage of the FTA in October 2011.

We should not forget that most Colombian exports already enter the U.S. duty free under the Andean Trade Promotion and Drug Eradication Act. Therefore, many of the economic benefits from the Colombia-US FTA will accrue to U.S. business as a result of improved market access in Colombia. However, the Colombia-FTA will increase Colombia’s exports and should stimulate U.S. investment in Colombia, resulting in economic growth and jobs.

In addition to the benefits of the FTA in terms of increased trade and investment, the Colombia-U.S. FTA needs to be understood as a comprehensive framework for addressing a full range of bilateral trade and economic issues, from investment to telecoms regulation, to protecting the environment and labor rights. For instance, labor rights groups are concerned that Colombia has not done enough to implement its commitments in the Action Plan Related to Labor Rights and the FTA’s labor chapter. Although Colombia has made important progress on labor rights including establishing a Labor Ministry and passing legislation to prosecute employers who undermine labor rights, labor rights advocates argue that this is not enough. Now, however, the U.S. government can work through the Labor Affairs Council created in the FTA to develop a cooperative work program with the Colombian government to address current and future labor rights issues.

More broadly, working within the FTA framework will allow U.S. and Colombian officials to develop greater trust and understanding of each other and to build a constructive and forward looking economic partnership. And if issues do arise, the U.S. can always resort to dispute settlement under the FTA if it believes that Colombia has failed to comply with its FTA commitments.

Authors

Joshua Meltzer

Image Source: © Kevin Lamarque / Reuters

Latin America Economic Perspectives - All Together Now: The Challenge of Regional Integration

Lucio Castro, Luciano Cohan and Eduardo Levy-Yeyati — Mon, 16 Apr 2012 11:18:00 -0400

INTRODUCTION: MISSING PARTS

It has been a good ride. After the dismal 1990s, which stigmatized Latin American and Caribbean economies as the paradigmatic emerging markets (a high-risk/high-return bet on inherently unstable countries doomed by the original sin of chronic mismanagement), the 2000s were something of a revelation. Dollarized external obligations shrank or were replaced by more manageable domestic debt issued in local currency, increasing tax revenues enhanced the fiscal capacity to reduce inequality and poverty, and policy continuity and consistency denied the stereotype of a region perennially oscillating between political extremes. Populism, all of a sudden, became smart pragmatism.

For many of the region’s countries –particularly those in South America– this progress was to no small degree aided by an exceptional external context of low inflation, declining financing costs, stable global growth and supportive terms of trade. If anything, the region’s governments took advantage of global tailwinds to reduce their long-dated financial vulnerabilities –an achievement that allowed them to implement, for the first time in decades, countercyclical policies that limited the depth and length of the contagion from the 2008– 9 global crisis, feeding the hope that the 2010s might be, for once, the Latin American decade.

Yet first impressions often overshoot reality. Much as the skeptical view prevalent at the start of the century may have exaggerated the irreversible nature of some of Latin America’s earlier flaws, the goldilocks picture of the region’s miracle overlooks a number of drawbacks that were temporarily dwarfed by the long bonanza. Now that the world has become less supportive, these drawbacks are returning to the foreground.

If anything, it appears that this decade, rather than marking the culmination of a virtuous process, poses a challenge. After working out the macrofinancial constraints that thwarted development policies in the past, can these countries address the pending tasks and issues that are critical to consolidate their gains and keep up the momentum?

We have tackled some of these tasks and issues in past editions of the Brookings Latin American Economic Perspectives. The region’s gradual primarization of exports, its inadequate investment in physical infrastructure and modest productivity growth, and its deficits in social development and education, all cast doubt on its growth prospects looking forward.

In this edition, we concentrate on another economic dimension on which the region is falling behind: commercial integration. Our comparative analyses reveal that, in both the depth and quality of regional integration, the Latin American and Caribbean economies are lagging from their emerging peers in Asia. And this is happening at a time when the missing intraindustry trade could provide the economies of scale needed to increase productivity in nonprimary sectors, and when regional markets offer a welcome counterpoint to the growing Chinese influence and to a global context that, even as the worldwide financial crisis subsides, will not be as stable and supportive as in the 2000s. Chapter 3 highlights several reasons why the wave of free trade agreements in the 1990s fell short of achieving true commercial integration, and it argues that a more proactive political agenda is needed to counter short-term economic incentives to diversify away from the region.

The chapter also tackles another topical aspect of regional integration: the pooling of financial resources to cope with the increasingly recurrent bouts of global financial distress. Now that the long debate about global financial safety nets –namely, multilateral liquidity facilities designed to mitigate the impact of financial contagion– seems to have reached its limit, can the discussion move forward at the regional level? It has been correctly pointed out that because the Latin American and Caribbean economies are all hit by global shocks in the same way, they cannot reduce the needed stock of aggregate liquidity by insuring each other. However, as we show in the pages that follow, regional cooperation in a reserve pool has additional advantages beyond the conventional diversification gains. Moreover, a regional pool is the natural vehicle for cooperatively mustering regional and multilateral resources, which is perhaps the missing link in the dysfunctional global safety net.

Trade and liquidity, external demand and financial stability—these are the two fronts on which the region can help itself in the next decade. Two varieties of integration important enough to be at the top of the regional agenda, and at the center of this report.

Downloads

Download Full Report

Authors

Lucio Castro
Luciano Cohan
Eduardo Levy-Yeyati

Image Source: Enrique de la Osa / Reuters

U.S. and Brazil: Together and Apart

Ted Piccone — Mon, 09 Apr 2012 15:45:00 -0400

President Dilma Rousseff’s visit to Washington this week, just one year after President Obama’s celebrated visit to Brazil, is a good illustration of the growing maturity of the relationship between the two powerhouses of the hemisphere.

The visit is the latest stage in an ongoing effort to elevate and deepen cooperation between the two nations. Next week, Secretary Clinton will travel to Brazil for dialogues on global security and open government, signaling the intense desire of both governments to do even more together. Yet this embrace is likely to go only so far given the underlying tensions that animate a growing rivalry for influence on the regional and global stages.

The Good News

On balance, the United States and Brazil are getting along fine, with both sides proactively working to resolve differences on a wide range of issues and find common ground on relatively safe ones like science, education, racial diversity and innovation. Even on more sensitive topics like defense cooperation, Iran, Cuba and currency policies, Washington and Brasilia are managing their differences in ways that protect the overall positive tone of the partnership both presidents seek to project.

Read the full article »

Authors

Ted Piccone

Publication: The National Interest

Image Source: © Kevin Lamarque / Reuters

Education Reform Experiences on the Ground: Implementing a Learning Agenda

Mon, 02 Apr 2012 10:30:00 -0400

Event Information

April 2, 2012
10:30 AM - 12:00 PM EDT

Falk Auditorium
The Brookings Institution
1775 Massachusetts Ave., NW
Washington, DC

For the first time, the city of Buenos Aires is systematically measuring learning by implementing a district-wide assessment of all students and teachers, drawing heavily from the education reform efforts underway in the District of Columbia. Requiring everyone to participate in teaching and learning evaluations, city officials in Buenos Aires plan to use the assessment results to help inform their ongoing education reforms.

On April 2, the Center for Universal Education (CUE) at Brookings hosted a discussion on what happens when education reform policies are applied on the ground. Maria de las Mercedes Miguel, director general of education planning for the city of Buenos Aires, discussed the opportunities and challenges of implementing new policies aimed at measuring learning outcomes in order to make smart investments in education. Sir Michael Barber, chief education advisor at Pearson International and author of Deliverology 101: A Field Guide for Educational Leaders (Corwin Press, 2010), and Carey Wright, D.C. Public Schools’ chief academic advisor, offered their perspectives on implementing a learning-focused reform agenda, comparing experiences and lessons from Washington, D.C. with those of Buenos Aires. Brookings Senior Fellow Rebecca Winthrop, director of CUE, moderated the discussion.

After the program, participants took audience questions.

Audio

0402 learningagendainlatinamerica

Transcript

Event Materials

Participants

Moderator

Panelists

Sir Michael Barber

Chief Education Advisor
Pearson International

Maria de las Mercedes Miguel

Director General of Education Planning
City of Buenos Aires, Argentina

Carey Wright

Chief Academic Advisor
District of Columbia Public Schools

The Southern Tiger: Chile’s Fight for a Democratic and Prosperous Future

Mon, 23 Jan 2012 15:00:00 -0500

Event Information

January 23, 2012
3:00 PM - 4:30 PM EST

Falk Auditorium
The Brookings Institution
1775 Massachusetts Ave., NW
Washington, DC

2011 will forever be remembered as the year revolution went viral. The world watched as citizens across the Middle East unseated dictators that had ruled for decades—grabbing the brass ring of freedom and opportunity so long denied them. For the people of Chile, it was a familiar story. In his book, The Southern Tiger: Chile’s Fight for a Democratic and Prosperous Future (Palgrave Macmillan, 2012) former Chilean President Ricardo Lagos provides a first-hand and timely account of Chile’s own transformation from dictatorship to one of Latin America's most stable nations and leading economies—an experience that holds key lessons for the rest of the region as it strives towards modernity.

On January 23, the Latin America Initiative at Brookings hosted the launch of The Southern Tiger: Chile’s Fight for a Democratic and Prosperous Future featuring President Ricardo Lagos. He was joined by Brookings Distinguished Senior Fellow Thomas Pickering, former U.S. under secretary of state for political affairs and ambassador to the United Nations, and Arturo Valenzuela, former assistant secretary of state for Western Hemisphere Affairs, who provided an assessment of Chile in the wider context of Latin American politics. Senior Fellow Kevin Casas-Zamora, interim director of the Latin America Initiative, provided introductory remarks and moderated the discussion.

After the program, panelists took audience questions.

Audio

The Southern Tiger: Chile’s Fight for a Democratic and Prosperous Future

Transcript

Uncorrected Transcript (.pdf)

Event Materials

20120123_chile_lagos

Participants

Panelists

His Excellency Ricardo Lagos

Former President
Republic of Chile

Arturo Valenzuela

Professor of Government and Foreign Service
Georgetown University

Latin America Economic Perspectives: Innocent Bystanders in a Brave New World

Thu, 17 Nov 2011 14:00:00 -0500

Event Information

November 17, 2011
2:00 PM - 5:00 PM EST

Falk Auditorium
The Brookings Institution
1775 Massachusetts Ave., NW
Washington, DC

In the midst of a lingering global financial crisis, Latin American countries are feeling the impact of the global slowdown. The prospect of a long period of modest economic growth, coupled with volatile capital markets, has enticed the creation of numerous regional initiatives aimed at making the region less sensitive to seasonal global swings. However, implementation of many of these initiatives has fallen well short of their intentions.

On November 17, the Latin America Initiative at Brookings hosted a discussion of its biannual Brookings Latin America Economic Perspectives report. The report analyzes the economic resilience of Latin American countries while attempting to understand the obstacles which are hindering the development of a regional agenda. Leading international experts discussed the findings of the report, analyzed the region’s economic performance and set forth recommendations for governments and policymakers.

After each panel, participants took audience questions.

Transcript

Transcript (.pdf)

Event Materials

20111117_latin_america_perspectives

Participants

Panelists

José Antonio Ocampo

Professor and Director of Economic and Political Development Concentration, School of International and Public Affairs
Columbia University

Rodrigo Valdés

Senior Advisor, Western Hemisphere Department
The International Monetary Fund

Luis Bonell

Executive Vice President & CEO, Liberty International

Alberto Musalem

Managing Director
Tudor Investment Corporation

Arturo Porzecanski

Distinguished Economist in Residence
American University

Disaggregating Latin America: Diverse Trajectories, Emerging Clusters and their Implications

Abraham F. Lowenthal — Tue, 01 Nov 2011 11:56:00 -0400

From the time a 19th century French geographer labeled the countries south of the United States and Canada “Latin America,” the term has always seemed more of a reality from outside the Western Hemisphere than within it. From outside, and particularly from Europe, these nations often seem more closely related to each other than they appear to be up close. In fact, Latin American countries have long been divided by almost as much as that which unites them: different colonial heritages and histories, and radically different geographies, demographies, and ethnic compositions. They have different levels and types of economic and social development, political traditions and institutions, modes of insertion into the international economy, and international policies and relationships. Most of the countries of South and Central America and parts of the Caribbean do share common Iberian historical, religious, linguistic and cultural traditions; many have had broadly comparable relations most of the time with the industrial countries; and they all share the same hemisphere with the United States and Canada. But one should not lose sight of the many and important differences among the diverse countries of Latin America and the Caribbean.

The policy communities, both in the United States and in Europe, came in the 1990s to think of the Latin American countries as tending then toward convergence—mostly proceeding, at different paces, along the same presumably irreversible path of political and economic liberalization, with Chile blazing the trail. This perception is highly questionable now, as various countries pursue distinct goals with contrasting approaches and policies. Easy rhetoric about regional integration, and even such institutional steps in that direction as the Community of Latin American and Caribbean States (CELAC) and the Union of South American Nations (UNASUR), South America’s recently established diplomatic and security communities, are mainly wishful thinking or, at best, “thoughtful wishing.” Rhetorical expressions of Latin American (or at least South American) unity are often rudely contradicted in practice. Transnational integration is occurring in Latin America much more at the level of corporations and professional networks than at the level of governments and multilateral organizations. Intraregional trade agreements have not taken hold, for the most part, and intraregional trade has been declining over the past several years, in fact, both among the Mercosur countries and in the Andean Community.

Disaggregating Latin America

The countries of Latin America may best be understood and analyzed by focusing on where they fit along five distinct dimensions—three structural, and two historical and institutional—which have significant implications for how they work politically and economically, and for their international roles:

• Their levels of demographic and economic interdependence with the United States, or with other major regions including Europe and China

• Their resource endowments and their degree of openness to international competition, and the consequent nature of their insertion into the global economy

• The extent to which they face the challenge of incorporating traditionally excluded populations, including millions of marginalized and disadvantaged but increasingly mobilized indigenous people, as well as Afro-descendants and others in deep poverty who have not previously been fully integrated into the economy nor able to exercise effective citizenship

• The relative strength and capacity of the state and of civil and political institutions beyond the state, such as political parties, trade unions, religious organizations, the media and other non-governmental entities

• The vitality of such key aspects of democratic governance as separate branches of government, checks and balances, free and fair elections, independent media, accountability and the rule of law.

Where these countries are found along a spectrum with regard to each of these five dimensions—rather than familiar dichotomous categories such as left or right, authoritarian or democratic, free market or statist—captures the most important variations among these many countries.

Indeed, the very term Latin America is not very useful. It is more helpful to think of subcategories, including the countries of North America (Mexico and the various nations of Central America and the Caribbean), almost all—even Cuba in some important ways—ever more closely integrated with the United States; Brazil, a nation of continental scope that has never felt itself closely and exclusively tied with the countries of South America and is now even more than before linked with Asia, Africa, the Middle East and Europe as well as with Latin America and the United States; the Amer-Indian regions, mostly on the Andean ridge, but also in southern Mexico, parts of Central America, and Paraguay, which are ever more shaped by their indigenous populations; and the truly “Latin” (or European) countries of the Southern Cone, with ethnic compositions, social structures, political institutions and traditions broadly similar to the countries of continental Europe. The subcategories I have suggested are not geographically defined, nor are most candidates for subregional economic integration; they are conceptual groupings, highlighting salient characteristics that make the members of each subcategory behave similarly in some important respects.

Focusing on these important differences, more than on aspirations of regional integration, is necessary to understand diverse countries that have been and are on quite different paths, reflecting their distinct pasts and shaped by different political leaders and constituencies, available resources, opportunities and ideologies.

The Universal Challenge: Reconciling Equity and Markets

In their efforts to achieve economic growth, socioeconomic equity and social inclusion, Latin American countries have all moved in recent years, from different starting points, away from the extremes of unbridled capitalism on the one hand and state-run socialist economies on the other.

Even Cuba under the Castro brothers, who still proclaim themselves Socialist with a capital S, is radically reducing the number of state employees, authorizing private ownership of housing, encouraging private agricultural production and markets as well as small businesses of many types, and otherwise experimenting with the reintroduction of material incentives and other capitalist practices. Few well informed observers doubt that in the next decade Cuba’s economy, whether through gradual reforms or rupture, will be significantly transformed, and that domestic and international investment in private enterprises will sooner or later spur a burst of economic growth. Nationalism, not socialism, is likely to be the lasting contribution of the Castro period to Cuban history.

Under Hugo Chávez, Venezuela has proclaimed that it is building “21st Century socialism” (a goal that Chávez did not unveil until he had been in power for several years). The Chávez government has nationalized various important companies, strongly regulated and intimidated others, and undertaken social programs and provided social services through redistributive programs (the Misiones). But Venezuela has also preserved a well-rewarded private financial sector, permitted significant other private sector activity and the continuing accumulation of private wealth, and maintained a primary trade connection with the United States while also diversifying its international relationships by cultivating countries antagonistic to the United States. Recently, moreover, in the wake of his cancer surgery and in the run-up to the elections scheduled for 2012, President Chávez appears, at least at times, to be downplaying the “socialist” discourse and concentrating on encouraging the market-oriented middle class, giving some signs of recognizing how vital their confidence and participation could be for Venezuela’s national success.

In Bolivia, Ecuador and Nicaragua—three other members of the Bolivarian Alternative (ALBA) that have employed “socialist” discourse in recent years—there are increased, if ambivalent, efforts to attract foreign investment, cooperate with international financial institutions, and coax national private investors to participate more actively. Ecuador’s Rafael Correa has explicitly downplayed the rhetoric of “21st Century socialism,” preferring the language of “buen vivir,” a concept of indigenous (Bolivian) origins connoting “living well,” in a normatively positive and sustainable way, privileging solidarity rather than competition. A similar though less clearly articulated discourse has emerged in plurinational Bolivia, where Evo Morales attempts to balance an appeal to indigenous peoples and ecological sustainability with occasional pragmatic efforts to attract foreign investment for major projects in natural resource extraction and development, a combination that sometimes leads to major contradictions and course corrections. Nicaragua under the Ortega couple, albeit in a cruder way, combines old-style “socialist” rhetoric with pragmatic policies to retain international markets, attract both official development assistance and private investment from the capitalist world, and coopt national business leaders by giving them opportunities to prosper.

The state “socialist” ideological model, in short, is giving way in practice to an evolving attempt, different in each case, to combine the goals of social inclusion, community solidarity and the integration of disadvantaged sectors with the use of capitalist instruments to expand economic growth. In all these countries, popularly-oriented economic and redistributive policies are accompanied by severely weakened legislative and judicial restraints on executive power and personal aggrandizement, populist appeals to disadvantaged majorities, systematic attacks on privileged elites and on “neoliberalism” (and behind that, the United States), and appeals to anti-globalization advocates around the world. These regimes do not foster coalition-building across social sectors nor do they seek Western Hemisphere cooperation to confront shared challenges.

There are many differences among these ALBA cases. Daniel Ortega and his wife, Rosario Murillo, operate in large measure as traditional Central American/Caribbean caudillos, manipulating personal ambitions and relationships with little regard for ideological coherence or legal constraints. Hugo Chávez brings a special combination of charisma, audacity, social resentment, military authority and tactical flexibility to his leadership, which is overwhelmingly personalistic, and therefore vulnerable if his health deteriorates. Rafael Correa is a U.S.-educated Ph.D. who is drawing on civil society activists to build technocratic bureaucracies, while continuing relentlessly to attack discredited elites and institutions. Evo Morales builds upon and exacerbates long-standing and deep-seated ethnic and regional cleavages within Bolivia and cultivates transnational support from NGOs, while striking out against real and imagined foreign enemies whenever he feels that domestic circumstances require an external foe.

Two Broad Groups

With all these and other variations, however, the “Bolivarian alternative” countries share deep suspicion of markets, free enterprise and globalization generally, and especially of the institutions of liberal representative democracy, where horizontal accountability is sought through separate and independent branches of government, checks and balances, and the rule of law. These Bolivarian experiments with “refoundation” and plebiscitary governance have been made possible by the thorough discrediting of previous regimes and, in most cases, have been financed directly or indirectly by windfall profits from natural resource endowments that allow immediate and broader distribution of expanded national income.

In the rest of Latin America, with the possible exception of Argentina, the ALBA approach has not lately been gaining further traction, and it is less likely to do so as the ALBA countries experience growing internal difficulties that will be further compounded if and when energy prices drop. But in many of the other Latin American countries there is emerging, to differing degrees, an amalgam of market-oriented, socially responsive and redistributive policies, combined, however, with an embrace (stronger in some cases than in others) of markets, capitalism and globalization. In these cases, moreover, there is a much more institutional approach to governance and accountability, combined with concerted efforts at consensus-building and international cooperation rather than polarization. Such attempts are evident in Chile, Brazil, Uruguay, Mexico, the Dominican Republic, El Salvador, Costa Rica, Panama, Colombia, and now in Peru. Peru’s recently elected president, Ollanta Humala, originally aligned with the ALBA approach, was finally elected and thus far appears to be governing in ways much closer to the mainstream approach.

In these countries, highly diverse in many other respects, there is a shared tendency to give high priority to achieving macroeconomic stability; to demonstrating openness to foreign private investment, although often on improved terms, especially in the mining and petroleum sectors; and to achieving previsibilidad (i.e stability of expectations about the rules of the game and about agreed procedures for changing these). These countries, at least in their stated goals, are all emphasizing policies to reduce and alleviate poverty through economic growth and expanded employment, conditional cash transfers, higher minimum wages, social programs and, in some cases, progressive taxation. They all aim to diminish socio-economic inequities; make conditions safer for the private sector by reducing polarization; expand access to and improving the quality of education and infrastructure; and strengthen accountable political, judicial and law enforcement institutions.

Implementation of this broad program varies greatly from country to country, in part because state capacity differs so widely. It has been called a “global social democratic” path by Fernando Henrique Cardoso, Brazil’s scholar-statesman. It is being funded in some countries by windfall income from high commodity prices, and is also made possible in part by the relatively mild impact in South America of the international financial crisis. This was a silver lining that resulted from the fact that their financial institutions and fiscal policies had been greatly strengthened in response to recent debacles. But it is also made possible, as Cardoso argues, by structural and political preconditions, including the prior diversification of economic production and the development of effective, albeit imperfect and uneven, institutions and practices of democratic governance. In several countries—Mexico, the Central American and some Caribbean nations, and still to some extent in Colombia—these advantages are being undermined, however, by organized crime, much of it related to drug-trafficking organizations.

There are also important differences, of course, in leaders’ backgrounds, political coalitions and specific programs. The presidents range from former guerrillas and leftist insurgents to former military officers, business tycoons and an ex-bishop; from internationally educated cosmopolitans to highly provincial figures; from very experienced politicians to newly minted ones. The political coalitions are grounded in some countries in the most modern and economically advanced regions, while in others, their base of support comes primarily from the most impoverished provinces, sometimes of indigenous ethnic composition. The scope of state enterprises in these countries varies widely, with some of the largest and most powerful state enterprises (Petrobras in Brazil, PEMEX in Mexico, and CODELCO in Chile, for example), operating in the most market-friendly nations. In all these diverse countries, however, the shared central challenge is how to combine the dynamics of market capitalism with improved social inclusion. Nowhere has the perfect solution yet been fashioned. Even in Chile, which had seemed the poster child for social democracy, strong pressures are building to expand effective participation; to redress class privileges, embodied in the country’s secondary and higher educational systems; and to extend to the middle class rights previously exercised only by economic and social elites.

Latin America, in sum, is not a unified region. Its heterogeneous countries differ significantly in several ways. But despite their many differences, they cluster at present into two broad groups. One comprises the “Bolivarian alternative” countries: profoundly suspicious of globalization, markets, liberal representative democracy and cooperation with the well-established world powers, but all groping in different ways to attract resources and markets from the capitalist countries. The other is a highly diverse set of nations that are trying to adjust to globalization by seeking access to the dynamic energies and resources provided by capitalist enterprises, while counterbalancing capitalism’s negative effects on equity and social inclusion through redistributive policies and by strengthening the institutions of democratic governance. These two clusters are more fuzzy than distinct, more “works in progress” than ideological models, and are responding tactically both to domestic pressures and to international constraints and opportunities, rather than conforming to consistent templates.

What Shapes the International Relations of the Latin American and Caribbean Countries?

These broadly differing approaches have important international policy implications. This is most evident in the recurring tendency in Cuba, Venezuela, Bolivia, Nicaragua and Ecuador to seek confrontation with the United States as one aspect of their domestic strategies for popular legitimacy. To the extent that these confrontational tactics are mostly symbolic, and often contradicted in practice by pragmatic cooperation, they have limited geopolitical importance as long as the U.S. government (and European governments when relevant) responds to provocations with the “rope-a-dope” technique made famous by Muhammad Ali in the boxing ring: letting the punches fall unanswered, without causing real damage, while the puncher tires. An interesting question is whether a more beleaguered Chávez, or perhaps another severely challenged ALBA leader, might eventually seek more concrete and genuinely threatening international cooperation with an extra-hemispheric power against the United States. This is an unlikely, but plausible, scenario.

The most important determinants of Latin America’s diverse international relationships are less ideological than structural and geoeconomic, however. First and foremost, there is an overwhelming distinction between the closest neighbors of the United States—Mexico and the countries of Central America and the Caribbean—and the nations of South America. During the past fifty years, the society and economy of the United States have become ever more intertwined with those of Mexico and the countries of Central America and the Caribbean, primarily as a result of massive migration, authorized and unauthorized, to the United States and of growing functional economic integration, particularly of labor markets, finance and production processes. The frontier between the United States and its closest neighbors is extremely porous. People, goods, money, and ideas flow easily back and forth across formal boundaries. Sixty percent of Mexico’s population have relatives in the United States, where nearly a fifth of Mexico’s population is employed, and more than half a million U.S. retirees, in turn, reside in Mexico. Some fifteen percent of those born in the Caribbean and Central American countries alive today have also moved to the United States. In Mexico, remittances from the diaspora amount to some $25 billion a year (more or less, depending on the state of the US economy), almost as much as direct foreign investment. In Central America, Haiti and the Dominican Republic, remittances exceed foreign investment and international economic assistance combined. Campaign contributions and votes from the diaspora are crucially important in home country politics, while the votes of naturalized immigrants play an increasingly important role in U.S. elections. Juvenile gangs and criminal leaders socialized on U.S. streets and in U.S. jails are wreaking havoc in their countries of origin, in many cases after being deported from the United States, while Latino gangs contribute to violence in Los Angeles, Phoenix, and elsewhere. Historical notions of “sovereignty” have much less real meaning in such circumstances, even as they are still vociferously articulated on both sides.

The issues that flow directly from the growing mutual interpenetration between the United States and its closest neighbors—human, drug and arms trafficking, immigration, the environment and public health, medical tourism and portable health and pension benefits, natural disasters, law enforcement and border management—pose particularly complex challenges for policy on both sides. These “intermestic” issues, combining international and domestic facets, are difficult to handle because the democratic political process pushes policies, both in the United States and in the neighboring countries, in directions that are often diametrically opposed. That makes it difficult to secure the intimate and sustained international cooperation required to manage difficult problems that transcend borders. The difficulty is compounded in those countries—Guatemala, Honduras and Haiti, in particular—with very weak state capacity. All this in turn makes the international relations of these countries different in kind from those of South America’s nations.

Brazil is an increasingly influential country with a population of more than 190 million and the world’s seventh or eighth largest economy, likely to become the fifth largest (with the United States, China, India and Japan) by mid-century or sooner. It has largely opened itself to international economic competition, dramatically modernized its vast agricultural sector, developed industries with continental and even worldwide markets and expanded the global competitiveness of its engineering, financial and other services. Brazil has also slowly but steadily strengthened both its state and its nongovernmental institutions. And it has forged an increasingly firm centrist consensus on broad macroeconomic and social goals, including the urgent need to reduce gross inequities and alleviate extreme poverty; to continue to expand its large, expanding and influential middle class (now numbering some one hundred million persons); to improve the quality of and access to education; and to improve productivity, infrastructure, citizen security and efficiency. Achieving these gains will be far from easy, especially with the country’s fragmented parties and governance, but at least there is a high degree of national consensus about where Brazil should be headed.

Brazil is playing and will play a growing role in international negotiations on trade, climate change, the environment, public health, food security and intellectual property. It is an active leader of the Global South; works closely with China, India and South Africa on several issues; and is cultivating ties with the Muslim world and with Africa. It is also one of the influential and growing BRICS (Brazil, Russia, India, China and South Africa) nations, the darlings of international investors and geopolitical analysts. It is taking an ever more prominent leadership role in South America, a lead role in UN efforts to stabilize Haiti, and has been active (though not always effective) in the United Nations, the G20 group of the world’s most important economies and in other multilateral global and regional fora.

The fundamental challenge at this stage for relations between Brazil and the United States, as well as with the EU nations, is to overcome conflicting domestic political imperatives, vested interests and policy gridlock on both sides in order to build greater synergy on major global issues: by strengthening regimes for trade, finance and investment; developing and implementing measures to cope with climate change and to develop alternative renewable energy sources; preventing and responding to pandemics; curbing nuclear proliferation; and reforming international governance arrangements. All this will require conceptual clarity, constructive diplomacy, and consistent tact by all involved.

The countries of the Southern Cone are neither as connected to nor as integrated with the United States as its closest neighbors, nor are they as globally influential or as important for Europe as Brazil. Chile is the Latin American nation most fully engaged in the world economy, with strong political institutions and entrenched democratic practices, but it remains, after all, a small to medium-sized country. Chile’s international influence, based on its soft power, is considerably greater than its size, military power or economic strength alone would command. It presents issues and opportunities, both to the United States and to European nations, comparable to those posed by long-time allies, grounded upon broadly shared interests. Argentina, by contrast, has had great difficulty over the years in building broad consensus, fortifying institutions, opening up its full economy to international competition and achieving the stability of expectations that is so important to overcome short-termedness (cortoplacismo) and to facilitate economic development and consistent international engagement. For both European countries and the United States (equidistant from Buenos Aires), Argentina always seems like a natural partner, but almost always disappoints. Uruguay is in some ways an extension of Argentina, but it acts internationally much like Chile, largely because of its well-developed political institutions.

The Andean countries (Bolivia, Colombia, Ecuador, Peru and Venezuela) to differing degrees are plagued by severe problems of governance and with the challenge of integrating large numbers of historically excluded people, living in poverty or extreme poverty, and in many cases from indigenous or Afro-descendant backgrounds. Poverty, compound inequities, mass exclusion, rising ethnic and class consciousness, market economies and electoral politics have made all the Andean nations, in different ways, politically unstable. Colombia has long had democratically elected governments and constitutional governance, but it has also faced a prolonged insurgency and pervasive corruption, weakening its institutions. Peru has seemed politically stable through several consecutive presidential elections, but its political parties have weakened more each time; the prospects that an anti-system “outsider” will triumph has been high time after time, and has produced the election in the past twenty years of three such outsiders (Alberto Fujimori, Alejandro Toledo and Ollanta Humala), all of who won because of their appeal in the most disadvantaged regions of Peru.

All these countries are mobilizing new participants in both politics and the economy, in many cases challenging established institutions and elites, and in some cases fostering efforts at “refoundation.” They tend, to differing degrees, to favor populist politicians who systematically weaken parties and other institutions, preferring to communicate directly with the public.

Implications for North America and Europe

First, the United States and Canada need to take more seriously the accelerating process of functional integration between them and their closest neighbors in Mexico, Central America and the Caribbean. New attitudes, approaches, policies and institutions are required to manage this increasingly complex but highly asymmetric interdependence.

Second, the countries of North America and Europe must adjust to Brazil’s new strength and stature by developing global cooperation with Brazil on a wide variety of issues, by no means confined to the Western Hemisphere.

Third the Andean countries present, especially to the United States but also to Europe, tough issues that include (in most cases) resource nationalism, narcotics trafficking, authoritarian governance and violations of human and labor rights, as well as international tensions arising from the ties some have been developing with global adversaries of the United States and Europe. For both the United States and Europe, a key aim in the Andean region, as also in Central America, is to help vulnerable countries strengthen their institutions in order to enable them to resist organized crime and drug trafficking organizations as well as resist the ALBA path. It is important for Washington and the members of the EU to distinguish carefully among the already aligned ALBA countries, looking in each case for common ground in order to confront shared problems. The thus-far promising beginnings by the governments of Juan Manuel Santos in Colombia, Ollanta Humala in Peru, and Mauricio Funes in El Salvador merit sympathetic attention and support, both from Europe and the United States. Both Washington and the EU countries should also seek case by case cooperation regarding shared concerns with Bolivia, Ecuador, Venezuela, Nicaragua—and Cuba. How the international relations of all these countries unfold in the coming years will depend in each case not only on their internal evolution, but also on the willingness and capacity of international actors to relate to them individually and constructively.

Fourth, the United States, Canada and the European countries should think of Latin American and Caribbean nations not simply as sources of commodities, arenas for investment, export markets and suppliers of labor but as important potential partners in confronting the broad global agenda, from climate change to public health, nonproliferation to fighting organized crime. They should also focus on the synergistic energies that could be released by investing in Latin America’s infrastructure and its educational and technological capacity.

Fifth, the United States, Canada, and the countries of Europe should invite all the countries of Latin America and the Caribbean, whatever their political orientation, to join in dealing with the challenges that affect them all, and on which the former have as much to learn as to teach: improving research, opening up debate and undertaking concerted efforts to curb the violence and corruption that the drug trade produces; improving citizen security by focusing on what can be learned from experiences throughout the world on the relationships between citizen security and economic prosperity, social equity, political participation, community-based policing, and judicial and penal reform; and exploring and implementing feasible ways to understand and respond effectively to climate change and its consequences.

These global issues are not unique to the Americas, but they are all challenges for which the diverse countries of Latin America and the Caribbean are highly relevant.

Authors

Abraham F. Lowenthal

Image Source: Â© Luis Galdamez / Reuters

Colombia’s Elections and Consolidation: Moving Beyond FARC and the Paramilitaries?

Fri, 21 Oct 2011 10:00:00 -0400

Event Information

October 21, 2011
10:00 AM - 11:30 AM EDT

Falk Auditorium
The Brookings Institution
1775 Massachusetts Ave., NW
Washington, DC

After significant improvements in Colombian security over the past decade, President Juan Manuel Santos has increased focus on social progress, unveiling a series of social and economic changes addressing issues from poverty reduction to land reform. While emphasizing these important reforms, President Santos has also worked to continue the fight against urban crime, the leftist guerrilla group, the Revolutionary Armed Forces of Colombia (FARC), and the criminal networks that have emerged after the demobilization of the paramilitaries. With municipal elections just around the corner, expectations for the Santos administration continue to grow as many in Colombia wonder if the positive changes achieved will continue or if additional security and social challenges will once again overwhelm the state’s capacity.

On October 21, the Latin America Initiative at Brookings hosted a discussion on the current achievements and challenges ahead for the Santos administration. Panelists included Brookings Fellow Vanda Felbab-Brown; Adam Isacson, director of the Regional Security Policy program in the Washington Office on Latin America; Virginia Bouvier, senior program officer at the United States Institute of Peace; and Claudia López, a prominent Colombian journalist now at Northwestern University. Senior Fellow Kevin Casas-Zamora, interim director of the Latin American Initiative at Brookings, provided introductory remarks and moderated the discussion.

After the program, the panelists took questions from the audience.

Audio

Colombia’s Elections and Consolidation: Moving Beyond FARC and the Paramilitaries?

Transcript

Transcript (.pdf)

Event Materials

20111021_colombia_elections

Participants

Panelists

Virginia Bouvier

Senior Program Officer, Center for Mediation and Conflict Resolution
United States Institute of Peace

Adam Isacson

Director, Regional Security Policy Program
Washington Office on Latin America

Claudia López

Ph.D. Candidate
Northwestern University

Korea, Colombia, Panama: Pending Trade Accords Offer Economic and Strategic Gains for the United States

Mauricio Cárdenas and Joshua Meltzer — Wed, 27 Jul 2011 16:14:00 -0400

Editor's Note, Oct. 12, 2011: Congress has passed a trio of trade agreements negotiated during the George W. Bush administration and recently submitted by President Obama. The authors of this policy brief say the pacts with South Korea, Colombia and Panama will boost U.S. exports significantly, especially in the key automotive, agricultural and commercial services sectors.

Policy Brief #183

A trio of trade agreements now pending before Congress would benefit the United States both economically and strategically. Carefully developed accords with South Korea, Colombia and Panama will boost U.S. exports significantly, especially in the key automotive, agricultural and commercial services sectors.

Among the other benefits are:

increased U.S. competitiveness
enhancement of U.S. diplomatic and economic postures in East Asia and Latin America
new investment opportunities
better enforcement of labor regulation and
improved transparency in these trading partners’ regulatory systems.

The pacts are known as Free Trade Agreements, or FTAs. The Korean agreement (KORUS) was negotiated in 2006-2007 and revised in 2010. The Colombian agreement (COL-US, sometimes known as COL-US FTA) was signed in 2006. The agreement with Panama (PFTA, sometimes known as the Panama Trade Promotion Agreement) was signed in 2007. All have the support of the Obama administration.

RECOMMENDATIONS

The three FTAs will substantially reduce these trading partners’ tariffs on U.S. goods, opening large markets for U.S. commerce and professional services. In combination, they will increase the size of the U.S. economy by about $15 billion. Furthermore, they will help reverse a slide in U.S. market influence in two important and increasingly affluent regions of the globe.

Approval of all three agreements is in the national interest. To move forward, both Congress and the administration should take these appropriate steps:

Congress should approve the trade agreements with Korea (KORUS), Colombia (COL-US) and Panama (PFTA) without additional delays.
To maximize the trade and investment benefits of KORUS, the administration should actively engage in the KORUS working groups, such as the Professional Services Working Group.
Similarly, the U.S. Trade Representative should participate in the Joint Committee’s scheduled annual meetings, in order to maintain a highlevel focus on U.S.-Korea trade, drive further trade liberalization and enable the committee to serve as a forum for broader discussions on trade in East Asia.
The Colombia-U.S. Joint Committee should include representatives of Colombia’s Trade and Labor Ministers with their US counterparts. The presence of the Labor minister should facilitate progress under the FTA through strengthened labor standards and timely implementation of all elements of the agreed-upon action plan. This Committee and specialized working groups could increase the pace of bilateral interaction and help officials identify important areas for discussion, negotiation and agreement.
Panama has ratified the Tax Information and Exchange Agreement which entered into force on April 2011. Panama and the US should strengthen bilateral communication so that collaboration in the battle against money laundering is pushed even further with greater cooperation.

Economic Effects of the Korea Agreement

The economic benefits to the United States from KORUS are especially significant, as the agreement will provide preferential market access to the world’s 11th largest—and a fast-growing—economy. In 2010, U.S.-Korea trade was worth $88 billion, comprising U.S. exports of $39 billion and imports of $49 billion, making Korea the United States’ seventh largest trading partner. According to the independent, quasi-judicial U.S. International Trade Commission (ITC), exports resulting from KORUS will increase the U.S. gross domestic product (GDP) by up to $12 billion. This constitutes a remarkable gain in both real and percentage terms.

To the United States, KORUS offers diverse economic advantages. Most strikingly, KORUS will open Korea’s service market to U.S. exports, allowing the United States to exploit its competitive advantages in financial services, education and information and communications technologies. The agreement also will lead to increased imports from Korea, which in turn will help the United States achieve greater economic specialization. The likely effects of more specialization—and of increased Korean investment in the United States—include greater U.S. efficiency, productivity, economic growth and job growth. Meanwhile, U.S. investors will gain new opportunities in the increasingly active Asia-Pacific region.

Lately, passage of KORUS has assumed enhanced importance with the impasse in the World Trade Organization’s Doha Round. No longer can the United States reasonably anticipate that Doha will lead to improved access to the Korean market. Moreover, an FTA between Korea and the European Union (EU) that took effect July 1st confers preferential access to European exporters, undermining the competitiveness of U.S. businesses in Korea. Even before the European FTA, the United States had been losing valuable ground in Korea. Between 2000 and 2010, the United States fell from first to third in the ranking of Korea’s trading partners (reversing positions with China), as U.S. products declined from 18 to only 9 percent of Korean imports. Failure to approve the agreement can be expected to lead to a further decline. These moves will strongly assist U.S. producers of electronic equipment, metals, agricultural products, autos and other consumer goods. For example, agricultural exports are expected to rise $1.8 billion per year.

On the services front, KORUS will increase U.S. businesses’ access to Korea’s $560 billion services market. Financial services providers, the insurance industry and transportation firms stand to benefit substantially. KORUS usefully builds on the link between investment and services by improving the ability of U.S. law firms to establish offices in Korea. In addition, the agreement establishes a Professional Services Working Group that will address the interests of U.S. providers of legal, accounting and engineering services, provided that U.S. representatives engage actively in the group. KORUS also requires that regulations affecting services be developed transparently and that the business community be informed of their development and have an opportunity to provide comments, which the Korean government must answer.

On the investment front, KORUS affords a chance to strengthen a bilateral investment relationship that probably is underdeveloped. In 2009, the U.S. foreign direct investment flow to Korea was $3.4 billion, while there was a net outflow of Korean foreign direct investment to the United States of $255 million. KORUS supports market access for U.S. investors with investment protection provisions, strong intellectual property protection, dispute settlement provisions, a requirement for transparently developed and implemented investment regulations and a similar requirement for open, fair and impartial judicial proceedings. All this should markedly improve the Korean investment climate for U.S. business. It will strengthen the rule of law, reducing uncertainty and the risk of investing in Korea.

On the governance side, KORUS establishes various committees to monitor implementation of the agreement. The most significant of these is the Joint Committee that is to meet annually at the level of the U.S. Trade Representative and Korea’s Trade Minister to discuss not only implementation but also ways to expand trade further. KORUS establishes committees to oversee the goods and financial services commitments, among others, and working groups that will seek to increase cooperation between U.S. and Korean agencies responsible for regulating the automotive sector and professional services. These committees and working groups, enriched through regular interaction between U.S. and Korean trade officials, should increase levels of trust and understanding of each county’s regulatory systems and help officials identify opportunities to deepen the bilateral economic relationship.

Strategic Effects of the Korea Agreement

Congressional passage of KORUS will send an important signal to all countries in the Asia-Pacific region that the United States intends to remain economically engaged with them, rather than retreat behind a wall of trade barriers, and is prepared to lead development of the rules and norms governing trade and investment in the region. KORUS will provide an important economic complement to the strong, historically rooted U.S. military alliance with Korea. It also will signal a renewed commitment by the United States in shaping Asia’s economic architecture.

The last decade has seen declining U.S. economic significance in Asia. Just as the United States has slipped from first to third in its ranking as a trading partner of Korea, similar drops are occurring with respect to Japan, Indonesia, Malaysia and other Asia-Pacific economic powers. In all of Northeast and Southeast Asia, the United States has only one FTA in effect, an accord with the Republic of Singapore. Passage of KORUS now would be particularly timely, both as a sign of U.S. engagement with Asia and as a mechanism for ensuring robust growth in U.S.-Asia trade and investment.

To illustrate how KORUS might affect U.S. interests throughout the region, consider regulatory transparency. The KORUS transparency requirements could serve as a model for how countries can set and implement standards. They might for example, influence the unfolding Trans-Pacific Partnership negotiations, talks that could set the stage for a broader Asia-Pacific FTA. U.S. producers, investors and providers of commercial and professional services could only benefit from a regional trend toward greater transparency and the lifting of barriers that would ensue. Other KORUS provisions favorable to the United States could function as similar benchmarks in the development of U.S. relations with Asia-Pacific nations and organizations.

Effects of the Colombia Agreement

COL-US will also strengthen relations with a key regional ally and open a foreign market to a variety of U.S. products. Bilateral trade between Colombia and the United States was worth almost $28 billion in 2010. COL-US is expected to expand U.S. GDP by approximately $2.5 billion, which includes an increase in U.S. exports of $1.1 billion and an increase of imports from Colombia of $487 million.

COL-US offers four major advantages:

It redresses the current imbalance in tariffs. Ninety percent of goods from Colombia now enter the United States duty-free (under the Andean Trade Promotion and Drug Eradication Act). COL-US will eliminate 77 percent of Colombia’s tariffs immediately and the remainder over the following 10 years.
It guarantees a more stable legal framework for doing business in Colombia. This should lead to bilateral investment growth, trade stimulation and job creation.
It supports U.S. goals of helping Colombia reduce cocaine production by creating alternative economic opportunities for farmers.
It addresses the loss of U.S. competitiveness in Colombia, in the wake of Colombian FTAs with Canada and the EU as well as Latin American sub-regional FTAs.

With respect to trade in goods, U.S. chemical, rubber and plastics producers will be key beneficiaries of COL-US, with an expected annual increase in exports in this combined sector of 23 percent, to $1.9 billion, relative to a 2007 baseline according to the ITC. The motor vehicles and parts sector is expected to see an increase of more than 40 percent. In the agriculture sector, rice exports are expected to increase from a 2007 baseline of $2 million to approximately $14 million (the corresponding increases would be 20 percent for cereal grains and 11 percent for wheat).

These and other gains will result from the gradual elimination of tariffs and from provisions that reduce non-tariff barriers as well. Among the latter, the most important changes would be increased transparency and efficiency in Colombia’s customs procedures and the removal of some sanitary and phytosanitary (or plant quarantine) restrictions. With respect to trade in services, Colombia has agreed to a number of so-called "WTO-plus" commitments that will expand U.S. firms’ access to Colombia’s $166 billion services market. For instance, the current requirement that U.S. firms hire Colombian nationals will be eliminated, and many restrictions on the financial sector will be removed.

On the investment front, the potential advantages to the United States also are substantial. In 2009, the U.S. flow of foreign direct investment into Colombia was $1.2 billion, which amounted to 32 percent of that nation’s total inflows. COL-US improves the investment climate in Colombia by providing investor protections, access to international arbitration and improved transparency in the country’s legislative and regulatory processes. These provisions will reduce investment risk and uncertainty.

COL-US presents significant improvements in the transparency of Colombia’s rule-making process, including opportunities for interested parties to have their views heard. COL-US also requires that Colombia’s judicial system conform with the rule of law for enforcing bilateral commitments, such as those relating to the protection of intellectual property. In addition to access to international arbitration for investors, COL-US includes dispute settlement mechanisms that the two governments can invoke to enforce each other’s commitments. Taken as a whole, these provisions offer an important benchmark for further developments in Colombia’s business environment. The transparency requirement alone could reduce corruption dramatically.

Labor rights have been a stumbling block to congressional approval of COL-US. The labor chapter of the agreement guarantees the enforcement of existing labor regulations, the protection of core internationally recognized labor rights, and clear access to labor tribunals or courts. In addition, in April 2011, Colombia agreed to an Action Plan strengthening labor rights and the protection of those who defend them. In the few months the plan has been in effect, Colombia has made important progress in implementation. It has reestablished a separate and fully equipped Labor Ministry to help protect labor rights and monitor employer-worker relations. It has enacted legislation authorizing criminal prosecutions of employers who undermine the right to organize or bargain collectively. It has partly eliminated a protection program backlog, involving risk assessments. And, it has hired more labor inspectors and judicial police investigators.

Besides economic benefits, COL-US offers sizable strategic benefits. It would fortify relations with an important ally in the region by renewing the commitment to the joint struggle against cocaine production and trade. Under the agreement, small and medium-sized enterprises in labor-intensive Colombian industries like textiles and apparel would gain permanent access to the U.S. consumer market. With considerable investments, Colombia would be able to compete with East Asia for these higher quality jobs, swaying people away from black markets and other illicit activities.

While Congress deliberates, the clock is ticking. Colombia is also looking at other countries as potential trade and investment partners in order to build its still underdeveloped infrastructure and reduce unemployment. Complementing its FTAs with Canada, the EU, and several countries in the region, Colombia has initiated formal trade negotiations with South Korea and Turkey and is moving toward negotiations with Japan. A perhaps more telling development is China’s interest in building an inter-oceanic railroad in Colombia as an alternative to the Panama Canal: on July 11th President Juan Manuel Santos signed a bilateral investment treaty with China (and the UK) and is expected to meet Chinese President Hu Jintao in the fall.

Effects of the Panama Agreement

Although Panama’s economy is far smaller than Korea’s or even Colombia’s, the PFTA will deliver important economic and strategic benefits to the United States. Considerable gains will take place in U.S. agriculture and auto manufacturing. Moreover, the PFTA will strengthen the U.S. presence in the region, allowing for the stronger promotion of democratic institutions and market-based economies.

U.S. merchandise exports to Panama topped $2.2 billion in 2009. The PFTA’s elimination of tariffs and reduction in non-tariff barriers will cause this figure to grow. For example, rice exports are expected to increase by 145 percent, pork exports by 96 percent and beef exports by 74 percent, according to the ITC. Exports of vehicles are expected to increase by 43 percent. The PFTA also guarantees access to Panama’s $21 billion services market for U.S. firms offering portfolio management, insurance, telecommunications, computer, distribution, express delivery, energy, environmental, legal and other professional services.

Panama’s trade-to-GDP ratio in 2009 was 1.39, highlighting the preponderance of trade in Panama’s economy and the international orientation of many of its sectors. Following passage of the PFTA, Panama will eliminate more than 87 percent of tariffs on U.S. exports immediately. The remaining tariffs will be removed within 10 years for U.S. manufactured goods and 15 years for agricultural and animal products.

PFTA protections to investors—similar to protections accorded under KORUS and COL-US—are especially valuable, as Panama receives substantial investments associated with sectors that will benefit from both from the expansion of the canal and from other infrastructure projects. A fair legal framework, investor protections and a dispute settlement mechanism, all features of the PFTA, are almost certain to increase U.S. investments in Panama. Panama’s Legislature also recently approved a Tax Information Exchange Agreement with the United States and amended current laws to foster tax transparency and strengthen intellectual property rights. These are crucial steps in preventing the use of Panamanian jurisdiction as a haven for money laundering activities.

Panamanian laws and regulations prohibiting strikes or collective bargaining were a concern that initially delayed implementation of the PFTA. But, these laws have been changed, with the exception of a requirement that 40 workers (not the recommended 20) are needed to form a union; the 40-worker requirement has been kept partly because labor groups in Panama support it. The PFTA’s labor chapter protects the rights and principles outlined in the International Labor Organization’s 1998 Declaration on Fundamental Principles and Rights at Work.

Besides offering economic advantages to the United States, the PFTA is a strategic agreement. Strengthening economic links with Panama should bolster the U.S. capacity to address cocaine trafficking in the region, in light of Panama’s location as Colombia’s gateway to North America. The importance of the canal, now undergoing an expansion that will double its shipping capacity, further underscores the U.S. need to strengthen bilateral relations with Panama.

The time to act is now. Like Colombia, Panama has been negotiating with economic powerhouses other than the United States. It recently signed a trade agreement with Canada and an Association Agreement with the EU. Delaying passage of the PFTA would generate a loss of market share for a variety of sectors of the U.S. economy.

Conclusion

All three FTAs encourage trade by removing tariff and non-tariff barriers. All the agreements provide access to large services markets, foster transparency and offer significant strategic advantages to the United States. Congress should approve each of them now.

The authors would like to thank Juan Pablo Candela for his assistance with this project.

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Latin America’s Economic Future: Shifting Gears in the Age of Heightened Expectations

Fri, 15 Apr 2011 09:30:00 -0400

Event Information

April 15, 2011
9:30 AM - 12:30 PM EDT

Stein Room
The Brookings Institution
1775 Massachusetts Avenue, N.W.
Washington, DC 20036

In the wake of the most severe financial crisis in recent times, Latin America is witnessing unprecedented economic challenges and opportunities that are shaping the region’s growth and development prospects.

On April 15, the Latin America Initiative at Brookings hosted the launch of its biannual Latin America Economic Perspectives report. This year’s report, "Shifting Gears in the Age of Heightened Expectations," examines the scope and effectiveness of the policies and strategies that different Latin American countries are implementing—or should implement—to address the challenges of today’s global economy. Leading international experts discussed the findings of the report, analyzing the region’s economic performance and setting forth recommendations for governments and policymakers.

After each panel, participants took audience questions.

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Event Materials

20110415_latin_america

Participants

Panelists

Alexandre Tombini

Governor, Central Bank of Brazil

José Luis Escrivá

Head of Global Public Finance, BBVA

Piero Ghezzi

Managing Director and Head of Economics and Emerging Markets Research, Barclays Capital

Juan Carlos Echeverry

Minister of Finance, Colombia

José de Gregorio

Governor, Central Bank of Chile

A Shared Responsibility: Counternarcotics and Citizens' Security in the Americas

Vanda Felbab-Brown — Thu, 31 Mar 2011 12:20:00 -0400

Mr. Chairman and Members of the Subcommittee:

I am honored to have this opportunity to address the Subcommittee on the important issue of the impact of the drug trade and counternarcotics policies in the Western Hemisphere on citizens’ security and U.S. national security goals. The threats posed by the production and trafficking of illicit narcotics and by organized crime, and their impacts on U.S. and local security issues around the world, are the domain of my work, and the subject of my book, Shooting Up: Counterinsurgency and the War on Drugs (Brookings, 2009). I have conducted fieldwork on these issues in Latin America and elsewhere in the world numerous times, including this year for eight weeks in both rural and urban parts of Colombia, Peru, and Mexico.

In my testimony, I first provide an overview of crime trends in the Western Hemisphere. I then sketch some of the dynamics of the crime-insecurity nexus and its complex impacts on state security and citizens’ security. In the third section, I discuss elements of a multifaceted response for addressing the threats generated by the drug trade while at the same time enhancing citizens’ security. In the fourth section, I sketch key U.S. and local counternarcotics efforts in Mexico and Colombia.

I. Overview of Organized Crime and Street Crime and Human Security in Latin America

Citizens’ insecurity has greatly intensified over the past two decades in many parts of the Western Hemisphere. To an unprecedented degree, ordinary people in the region complain about living in fear of crime. With the exception of Colombia, criminal activity throughout the region has exploded. Overall, the rates of violent crime are six times higher in Latin America than in the rest of the world.[1]Since the 1980s, homicide rates in Latin America as a whole have doubled and are among the highest in the world. The available data show El Salvador with a murder rate of 57.3 per 100,000 in 2007; Colombia with 42.8 per 100,000 in 2006, Venezuela with 36.4 per 100,000 in 2007, and Brazil with 20.5 in 2008.[2] The U.S. homicide rate for 2009, the most recent data available, was 5 per 100,000.[3] The United Nations considers a murder rate of more than 10 per 100,000 an epidemic rate of homicides.

Mexico far exceeds the epidemic threshold, reporting over 6,000 deaths in 2008, over 6,500 in 2009, and over 11,200 in 2010 (more than a 75% increase over 2009), and with drug-related violence surpassing conflict-caused deaths in both Afghanistan and Iraq.[4] Although it has received less media attention, Guatemala’s homicide rate is four times that of Mexico’s. Kidnapping is also frequent in the region. Well above 50 percent of the approximately 7,500 worldwide kidnappings in 2007 took place in Latin America.[5]

Organized crime is one of the principal sources of threats to human security but so is flourishing street crime, which frequently receives far less attention from governments in Latin America and the Caribbean. Indeed, law enforcement in Latin America is clearly struggling to cope with both organized and street crime, and two decades of efforts to improve and reform law-enforcement institutions have little to show in improvements in public safety and accountability of law enforcement. Many Latin Americans are deeply distrustful of and dissatisfied with their local law-enforcement institutions.[6] Indeed, the provision of security in Latin America has been increasingly privatized, with large segments of the population relying on private security companies or even criminal organization for protection and basic order on the streets. Thus in Guatemala and Honduras private security personnel outnumber police by five to ten times.[7]

Although the negative effects of high levels of pervasive street and organized crime on citizens’ security, sometimes often referred to as human security, are clear, the relationships between human security, crime, illicit economies, and law enforcement are highly complex. Human security includes not only physical safety from violence and crime, but also economic safety from critical poverty, social marginalization, and fundamental under-provision of elemental social and public goods such as infrastructure, education, health care, and rule of law. Chronically, Latin American governments have been struggling to provide these public goods in large parts of their countries, in both the rural and urban areas.

Multifaceted institutional weaknesses are at the core of why the complex relationships between illegality, crime, and human security are so inadequately dealt with. By sponsoring illicit economies in areas of state weakness where legal economic opportunities and public goods are seriously lacking, criminal groups frequently enhance some elements of human security even while compromising others. At the same time, simplistic law enforcement measures can and frequently do further degrade citizens’ security. These pernicious dynamics become especially severe in the context of violent conflict.

II. Dynamics of the Crime-Insecurity Nexus and the Complex Threats the Drug Trade Poses to States

A variety of actors have penetrated various illicit economies, including the drug trade, usually considered the most lucrative of illicit economies and estimated to generate revenues on the order of hundreds of billions of dollars a year.

Participants in illicit economies include the populations that produce the illicit commodities and services; criminal groups such as drug trafficking organizations (DTOs) and mafias; belligerent actors such as terrorist, insurgent, paramilitary, and militia groups; and corrupt government and law enforcement officials.

The penetration of the illicit economies by terrorist or insurgent groups provides an especially potent threat to states and regional stability since belligerent groups typically seek to eliminate the existing state’s presence in particular locales or countries. The FARC in Colombia and the resurgent Sendero Luminoso (Shining Path) in Peru continue to profit from the drug trade and mobilize cocaleros alienated from the state as a result of crop eradication policies.

Criminal organizations usually have more limited aims. However, groups such as the Comando Vermelho in Brazil or the Zetas in Mexico also seek to dominate the political life of a community, controlling the community’s ability to organize and interact with the state, determining the extent and functions of local government, and sometimes even exercising quasi-control over the local territory. Thus they too can represent an intense and acute threat to governments, at least in particular locales.

Youth gangs known as maras have spread rapidly through Central America, now often having individual memberships in the tens of thousands. Emerging out of limited social opportunities for extensive youth populations and their deep sense of alienation from the state, the maras have complex and varied linkages to organized crime. Sometimes they participate in drug trafficking, at other times they perpetrate street crime. But they often represent a major source of insecurity for the citizens of the countries they operate in, even as they provide a sense of identification, belonging, and empowerment to their disaffected members.

Many Latin American criminal groups now increasingly operate across country borders. They traffic in drugs from the source country all the way to the final street distribution areas, as currently the Mexican DTOs do from the border of Colombia do the streets of United States. Similarly, Colombian DTOs operate in Bolivia; as do Brazilian traffickers in Peru. A newer, and particularly dangerous, development is the effort by Mexican DTOs, such as the Zetas and the Sinaloa DTO, to themselves control territory in transshipment countries of Central America.

Moreover, beyond Colombia, several countries in Latin America have experienced the emergence of dangerous militia groups who pose significant threats to both communities and the state, even while presenting themselves as protectors of the citizenry against crime. In addition to Colombia, such militia groups have appeared, for example, in Brazil and Mexico.

Extensive criminality and illicit economies generate multiple threats to states and societies. They corrupt the political system, by providing an avenue for criminal organizations to enter the political space, corrupting and undermining the democratic and legitimate process. These actors, enjoying financial resources and political capital generated by sponsoring the illicit economy, frequently experience great success in politics. They are able to secure official positions of power as well as wield influence from behind the scenes. The problem perpetuates itself as successful politicians bankrolled with illicit money make it more difficult for other actors to resist participating in the illicit economy, leading to endemic corruption at both the local and national levels. Guatemala, El Salvador, and Haiti are cases in point.

Large illicit economies dominated by powerful traffickers also have pernicious effects on a country’s law enforcement and judicial systems. As the illicit economy grows, the investigative capacity of the law enforcement and judicial systems diminishes. Impunity for criminal activity increases, undermining the credibility of law enforcement, the judicial system, and the authority of the government. Powerful traffickers frequently adopt violent means to deter and avoid prosecution, killing or bribing prosecutors, judges, and witnesses. Colombia in the late 1980s and Mexico today are stark examples of how the existence of extensive criminal networks and high levels of violence can corrupt and paralyze law enforcement and indeed the entire judicial system. The profound collapse of Guatemala’s judicial system resulting from its penetration by criminal entities compelled the country to invite a special U.N. judicial body, the International Commission Against Impunity in Guatemala (CIGIG) to help its judiciary combat organized crime and state corruption.

In addition to outright corruption by organized crime and impunity of powerful elites, judicial systems across Latin America are deficient in other ways: Justice is rarely equally available to all, is often painfully slow, and rarely produces significant convictions.

Moreover, illicit economies have large and complex economic effects. Drug cultivation and processing, for example, generate employment for the poor rural populations and can even facilitate upward mobility. They also can have powerful macroeconomic spillover effects through boosting overall economic activity. But a burgeoning drug economy typically contributes to inflation that and can harm legitimate, export-oriented, import-substituting industries as well as tourism. It encourages real estate speculation and undermines currency stability. It also displaces legitimate production. Since the drug economy is more profitable than legal production, requires less security and infrastructure, and imposes smaller sunk and transaction costs, the local population is frequently uninterested in, or unable to, participate in other (legal) kinds of economic activity. The illicit economy can thus lead to a form of so-called Dutch disease where a boom in an isolated sector of the economy causes or is accompanied by stagnation in other core sectors since it gives rise to appreciation of land and labor costs. In Mexico, for example, the drug violence has already undermined not only Mexican citizens’ human security and overall law and order, but also economic activity, including tourism.

Most importantly, burgeoning and unconstrained drug production and other illicit economies and strong organized crime have profound negative consequences not only for local stability, security, and public safety, but at times also for national security. Illicit economies provide an opportunity for belligerent groups to increase their power along multiple dimensions -- by gaining control of physical resources, and also by obtaining support from local populations. Such belligerents hence pose a serious security threat to local and national governments and, depending on the objectives of the group, to regional and global security. With large financial profits, the belligerent groups improve their fighting capabilities by increasing their physical resources, hiring greater numbers of better paid combatants, providing them with better weapons, and simplifying their logistical and procurement chains.

Crucially and frequently neglected in the design of policy responses, however, is the fact that large populations in Latin America in areas with minimal state presence, great poverty, and social and political marginalization are dependent on illicit economies, including the drug trade, for economic survival and the satisfaction of other socio-economic needs. For many, participation in informal economies, if not outright illegal ones, is the only way to satisfy their basic livelihood needs and obtain any chance of social advancement, even as they continue to exist in a trap of insecurity, criminality, and marginalization. The more the state is absent or deficient in the provision of public goods – starting with public safety and suppression of street crime and including the provision of dispute resolution mechanisms and access to justice, enforcement of contracts, and also socio-economic public goods, such as infrastructure, access to health care, and education – the more the neglected communities can become dependent on, and even supportive of, criminal entities and belligerent actors who sponsor the drug trade and other illegal economies.

Such belligerents derive significant political capital – legitimacy with and support from local populations - from their sponsorship of the drug and other illicit economies, in addition to obtaining large financial profits. They do so by protecting the local population’s reliable (and frequently sole source of) livelihood from government efforts to repress the illicit economy. They also derive political capital by protecting the farmers from brutal and unreliable traffickers (bargaining with traffickers for better prices on behalf of the farmers), by using revenues from the illicit economies to provide otherwise absent social services such as clinics and infrastructure, as well as other public goods, and by being able to claim nationalist credit if a foreign power threatens the local illicit economy. In short, sponsorship of illicit economies allows non-state armed groups to function as security providers and economic and political regulators. They are thus able to transform themselves from mere violent actors to actors that take on proto-state functions.

Although the political capital such belligerents obtain is frequently thin, it is nonetheless sufficient to motivate the local population to withhold intelligence on the belligerent group from the government if the government attempts to suppress the illicit economy. Accurate and actionable human intelligence is vital for success in counterterrorist and counterinsurgency efforts as well as law enforcement efforts against crime groups.

Four factors determine the size of the political capital which belligerent groups obtain from their sponsorship of illicit economy: the state of the overall economy; the character of the illicit economy; the presence (or absence) of thuggish traffickers; and the government response to the illicit economy.

- The state of the overall economy – poor or rich – determines the availability of alternative sources of income and the number of people in a region who depend on the illicit economy for their basic livelihood.

- The character of the illicit economy – labor-intensive or not – determines the extent to which the illicit economy provides employment for the local population. The cultivation of illicit crops, such as in Colombia or Peru, is very labor-intensive and provides employment to hundreds of thousands to millions in a particular country. Production of methamphetamines such as that controlled by La Familia Michoacana (one of Mexico’s drug trafficking organizations), on the other hand, is not labor-intensive and provides livelihoods to many fewer people.

- The government responses to the illicit economy (which can range from suppression to laissez-faire to rural development) determine the extent to which the population depends on the belligerents to preserve and regulate the illicit economy.

In a nutshell, supporting the illicit economy will generate the most political capital for belligerents when the state of the overall economy is poor, the illicit economy is labor-intensive, thuggish traffickers are active in the illicit economy, and the government has adopted a harsh strategy, such as eradication, especially in the absence of legal livelihoods and opportunities.

This does not mean that sponsorship of non- labor-intensive illicit economies brings the anti-government belligerents or armed groups no political capital. If a non-labor-intensive illicit economy, such as drug smuggling in Sinaloa, Mexico, generates strong positive spillover effects for the overall economy in that locale (by boosting demands for durables, nondurables, and services that would otherwise be absent, and hence indirectly providing livelihoods to and improved economic well-being of poor populations) it too can be a source of important political capital. Thus in the Mexican state of Sinaloa the drug trade has at times been estimated to account for 20% of the state’s Gross Domestic Product (GDP); and for some of Mexico’s southern states, the proportion might be higher.[8] Consequently, the political capital of the sponsors of the drug trade there, such as the Sinaloa cartel, is hardly negligible. Moreover, Mexico’s drug trafficking organizations (DTOs) also derive important political capital from their sponsorship and control of an increasing range of informal economies in the country. Similarly, in Brazil the ability of drug gangs to provide better social services and public goods than the state has them to dominate some of country’s poor urban areas. In such circumstances, the criminal groups and belligerents will also provide socio-economic services, such as health clinics and trash disposal.

In addition, both criminal entities and belligerent groups will often provide security in the communities they dominate. Although the sources of insecurity and crime in the first place, once in power they have an interest in regulating the level of violence, and suppressing street crime, such as robberies, thefts, kidnapping, and homicides. Street or common crime in Latin America is extremely intensive, one of the highest rates in the world. Functioning as providers of public order and rules brings criminal entities important support from the community, in addition to facilitating their illegal business since it too benefits from the reduced transaction costs and increased predictability.

Indeed, in many parts of Latin America, public safety has become increasingly privatized: with upper and middle classes relying on a combination of official law enforcement and legal and illegal private security entities, while marginalized segments rely on organized criminal groups to establish order on the streets. Organized criminal groups and belligerent actors, such as the Primero Comando da Capital in Sao Paolo’s shantytowns, also provide dispute resolution mechanisms and even set up unofficial courts and enforce contracts. The extent to which they provide these public goods varies, of course, but it often takes place regardless of whether the non-state criminal entities are politically motivated. Yet the more they do provide such public goods, the more they become de facto proto-state governing entities.

Moreover, unlike ideologies of politically-motivated belligerents, which promise rewards in the future, sponsorship of illicit economies allows belligerent groups to deliver in real time concrete material improvements to lives of marginalized populations and thus gain support. Especially when ideology wanes, and the brutality of the belligerents and criminal groups alienates the wider population, their ability to deliver material benefits to the population can preserve the belligerents’ and criminal groups’ political capital.

The ability of illegal groups to provide real-time, immediate economic improvements to the lives of the population also explains why even criminal groups without ideology can garner strong political capital. This will be especially the case if the criminal groups couple their distribution of material benefits to poor populations with the provision of otherwise-absent order and minimal security. By being able to outcompete with the state in provision of governance, organized criminal groups can pose significant threats to states in areas or domains where the government’s writ is weak and its presence limited. Consequently, discussions of whether a group is a criminal group or a political one or whether belligerents are motivated by profit, ideology, or grievances are frequently overstated in their significance for devising policy responses.

III. Policy Responses and Considerations

In areas of state weakness and underprovision of public goods, increased action by law enforcement agencies to suppress crime rarely is a sufficient response. Approaches such as mano dura policies, saturation of areas with law enforcement officers, especially if they are corrupt and inadequately trained, or the application of highly repressive measures are rarely effective in suppressing organized crime and often attack only the symptoms of the social crisis, rather than its underlying conditions.

Policies that focus on degrading the belligerents’ physical resources by attempting to destroy the illicit economy are frequently ineffective with respect to the objective of drying up the belligerents’ resources. In the case of labor-intensive illicit economies where there are no legal economic alternatives in place, such policies are especially counterproductive with respect to securing intelligence and weaning the population away from the terrorists and insurgents. Eradication of illicit crops has dubious effects on the financial profits of belligerents. Even when carried out effectively, it might not inflict serious, if any, financial losses upon the belligerents since partial suppression of part of the illicit economy might actually increase the international market price for the illicit commodity. Given continuing demand for the commodity, the final revenues might be even greater.

Moreover, the extent of the financial losses of the belligerents also depends on the ability of the belligerents, traffickers, and farmers to store drugs, replant after eradication, increase the number of plants per acre, shift production to areas that are not subject to eradication, or use high-yield, high-resistance crops. Belligerents also have the opportunity to switch to other kinds of illicit economies such as synthetic drugs. Yet although the desired impact of eradication - to substantially curtail belligerents’ financial resources - is far from certain and is likely to take place only under the most favorable circumstances, eradication will definitely increase the political capital of the belligerents since the local population all the more will strongly support the belligerents and will no longer provide the government with intelligence.

Policies to interdict drug shipments or measures to counter money laundering, while not alienating the local populations from the government, are extraordinarily difficult to carry out effectively. Most belligerent groups maintain diversified revenue portfolios. Attempts to turn off their income are highly demanding of intelligence and are resource-intensive. Colombia provides one example when drug interdiction efforts in particular locales registered important tactical success against the FARC and reduced its income. The overall improvement in Colombia’s military and counterinsurgency policy, however, was the critical reason for the vast improvements in security in the country and the success against the FARC.

Counterinsurgency or anti-organized-crime policies that focus on directly defeating the belligerents and protecting the population tend to be more effective than policies that seek to do so indirectly by suppressing illicit economies as a way to defeat belligerents. Efforts to limit the belligerents’ resources are better served by a focus on mechanisms that do not harm the wider population directly, even though such discriminate efforts are difficult to undertake effectively because of their resource intensiveness.

Overall therefore, counternarcotics policies have to be weighed very carefully, with a clear eye as to their impact on counterinsurgency and counterterrorism. Seemingly quick fixes, such as blanket eradication in the absence of alternative livelihoods, will only strengthen the insurgency and compromise state-building, and ultimately the counternarcotics efforts themselves.

Effectiveness in suppressing illicit economies is critically predicated on security. Without constant and intensive state presence and security, neither the suppression of illicit economies nor alternative livelihoods programs have been effective.

It is also important to note that some alternative illicit economies, and new smuggling methods to which belligerents are pushed as result of suppression efforts against the original illicit economy, can have far more dangerous repercussions for state security and public safety than did the original illicit economy. Such alternative sources of financing could involve, for example, obtaining radioactive materials for resale on the black market. Reports that the leftist Colombian guerrilla group, the FARC, acquired uranium for resale in order to offset the temporary fall in its revenues as a result of eradication during early phases of Plan Colombia before coca cultivation there rebounded, provide an example of how unintended policy effects in this field can be even more pernicious that the problem they are attempting to address. The traffickers’ switch to semisubmersibles for transportation of drugs is another worrisome example of unintended consequences of a policy, this time intensified air and maritime interdiction. The more widespread such transportation technologies are among non-state belligerent actors, the greater the likelihood that global terrorist groups will attempt to exploit them for attacks against the U.S. homeland or assets.

Similarly, in the absence of a reduction of global demand for narcotics, suppression of a narcotics economy in one locale will only displace production to a different locale where threats to local, regional, and global security interests may be even greater. Considerations of such second and third-degree effects need to be built into policy. An appropriate response would be a multifaceted state-building effort that seeks to strengthen the bonds between the state and marginalized communities dependent on or vulnerable to participation in the drug trade for reasons of economic survival and physical insecurity. The goal of supply-side measures in counternarcotics efforts would be not simply to narrowly suppress the symptoms of illegality and state-weakness, such as illicit crops or smuggling, but more broadly and fundamentally to reduce the threat that the drug trade poses to human security, the state, and overall public safety.

Effective state response to intense organized crime and illicit economies usually requires that the state address all the complex reasons why populations turn to illegality, including law enforcement deficiencies and physical insecurity, economic poverty, and social marginalization. Such efforts entail ensuring that peoples and communities will obey laws. One component is increasing the likelihood that illegal behavior and corruption will be punished. An equally important component is creating a social, economic, and political environment in which the laws are consistent with the needs of the people and therefore can be seen as legitimate and can be internalized.

In the case of efforts to combat illicit crop cultivation and the drug trade, one aspect of such a multifaceted approach that seeks to strengthen the bonds between the state and society and weaken the bonds between marginalized populations and criminal and armed actors would be the proper sequencing of eradication and the development of economic alternatives. Policies that emphasize eradication of illicit crops, including forced eradication, above rural development, such as alternative livelihoods efforts, have rarely been effective. Such sequencing and emphasis has also been at odds with the lessons learned from the most successful rural development effort in the context of illicit crop cultivation: Thailand. Indeed, Thailand offers the only example where rural development succeeded in eliminating illicit crop cultivation on a country-wide level (even while drug trafficking and drug production of methamphetamines continue).

Effective rural development does require not only proper sequencing of security and alternative livelihoods development, but also a well-funded, long-lasting, and comprehensive approach that does not center merely on searching for a replacement crop. Alternative development efforts need to address all the structural drivers of why communities participate in illegal economies -- such as poor access to legal markets, deficiencies in infrastructure and irrigation systems, no access to legal microcredit, and the lack of value-added chains.

But the economic approaches to reducing illegality and crime should not be limited only to rural areas: there is great need for such programs even in urban areas afflicted by extensive and pervasive illegality where communities are vulnerable to capture by organized crime, such as in Mexico or Brazil. Often the single most difficult problem is the creation of jobs in the legal economy, at times requiring overall GDP growth. But GDP growth is often not sufficient to generate jobs and lift people out of poverty as long the structural political-economic arrangements stimulate capital-intensive growth, but not job creation – a common feature in Latin America, and one that only increases inequality.

It is important, however, that such social interventions are designed as comprehensive rural development or comprehensive urban planning efforts, not simply limited social handouts or economic buyoffs. The latter approaches have failed – whether they were conducted in Medellín as a part of the demobilization process of the former paramilitaries (many of whom have returned as bandas criminales) or in Rio de Janeiro’s favelas. The handout and buyoff shortcuts paradoxically can even strengthen criminal and belligerent entities. Such buyoff approaches can set up difficult-to-break perverse social equilibria where criminal entities continue to control marginalized segments of society while striking a let-live bargain with the state, under which criminal actors even control territories and limit state access.

Effectiveness of law enforcement efforts to combat organized crime is enhanced if interdiction policies are designed to diminish the coercive and corruption power of criminal organizations, rather than merely and predominantly to stop illicit flows. The former objective may mandate different targeting strategies and intelligence analysis. Predominant focus on the latter objective often weeds out the least capacious criminal groups, giving rise to a vertical integration of the industry and “leaner and meaner” criminal groups.

An effective multifaceted response by the state also entails other components:

- addressing street crime to restore communities’ associational capacity and give a boost to legal economies;

- providing access to dispute resolution and justice mechanisms – Colombia’s casas de justicia are one example;

- undertaking law enforcement, corrections, and justice sectors reform to enhance their performance, expand their accessibility, and increase their accountability;

- encouraging protection of human rights, reconciliation, and nonviolent approaches;

- improving access to effective education as well as health care – a form of investment in human capital;

- insulating informal economies from takeover by the state and limiting the capacity of criminal groups to become polycrime franchises; and

- creating public spaces free of violence and repression so that civil society can recreate its associational capacity and social capital.

Boosting the capacity of communities to resist coercion and cooptation by criminal enterprises, however, does not mean that the state can rely on communities themselves to tackle crime , especially violent organized crime. In fact, there is a great deal of danger in the state attempting to mobilize civil society to take on crime prematurely while the state is still incapable of assuring the protection of the people. Without the state’s ability to back up communities and secure them from violence by organized crime or belligerents, the population will not provide intelligence to the state. Actionable and accurate human intelligence is often critical for success not only of counterinsurgency, but also for anti-organized-crime efforts. Equally significant, unless the needed backup is provided, the community can all the more sour on the state. It will then be very hard for the state to mobilize civil society the second time around and restore trust in state capacity and commitment.

Whether as a result of organized criminal groups’ warfare or as a side-effect of crime suppression policies, intense violence quickly eviscerates associational and organizational capacity and the social action potential of communities. Even if the drug traffickers or maras are killing each other, intense violence on the streets hollows out the communities. Success hinges on the state’s ability to bring violence down: without a reduction in violence, socio-economic interventions do not have a chance to take off and even institutional reforms become difficult to sustain as political support weakens.

Reducing demand is a critical component of counternarcotics control policy. The need for demand reduction measures is no longer limited to Western countries, such as the United States or Western Europe. In fact, in many countries in Latin America, such as Brazil, Argentina, and Mexico (as well as Afghanistan, Pakistan, Russia, and China), demand for illicit narcotics has greatly increased over the past twenty years. In some of these countries, including in Latin America, the per capita consumption of illicit narcotics rivals and even surpasses that of the United States or West European countries.

However, prevention and treatment programs are often lacking in many of the countries with increasing consumption and tend to assigned low policy priority. At the same time, demand reduction programs often suffer from poor design and implementation not grounded in the best available scientific knowledge.

Regional coordination and the sharing of best practices can mitigate the dangers of displacing illicit economies and organized crime to new locales. Nonetheless, in the absence of a significant reduction in demand, drug supply and transshipment will inevitably relocate somewhere. Thus, there is a limit to what regional efforts can accomplish to mitigate this so-called balloon effect. As long as there is weaker law enforcement and state-presence in one area than in others, the drug trade will relocate there.

Moreover, areas with very weak state and law enforcement capacity and high levels of corruption often have constrained capacity to constructively absorb external assistance. Worse yet, such assistance risks being perverted: in the context of weak state capacity and high corruption, there is a substantial chance that counternarcotics efforts to train anti-organized crime units will only end up training more effective and technologically-savvy drug traffickers. The best assistance in such cases may be to prioritize strengthening the capacity to fight street crime, reduce corruption, and increasing the effectiveness of the justice system. Once such assistance has been positively incorporated, it may be fruitful to focus on further anti-organized crime efforts, including through advanced-technology transfers and training specialized counternarcotics and anti-organized crime units. Such careful considerations of absorption capacity and possible unintended consequences are, for example, urgently needed regarding the level and design of policy interventions in Central America. Even though the countries there may be severely impacted by the drug trade, simply rushing in with standard counternarcotics assistance packages in the form of equipment transfer and specialized units training could potentially aggravate the situation. Putting a premium on overall law enforcement and justice sector reforms may well be more desirable forms of outside assistance.

IV. The Obama administration’s Policy toward the Drug Trade and Organized Crime in the Western Hemisphere

The Obama administration has unequivocally acknowledged joint responsibility for efforts to suppress the drug trade and the threats it poses to states and local communities. Even though U.S. funding for demand reduction measures has been increased only modestly, the Obama administration has clearly committed itself to reducing the demand in the United States. A robust and well-funded commitment to demand reduction not only reduces consumption, but also greatly facilitates the effectiveness of supply-side measures. As long as there is a strong demand for illicit narcotics, supply-side measures cannot be expected to stop supply and eliminate consumption.

Mexico

The Obama administration has also embraced a multifaceted approach to dealing with organized crime and illicit economies. Indeed, a focus on reinforcing the relationship between marginalized communities in Mexico’s cities, such as Cuidad Juarez, and the state is now the fourth pillar of the new orientation of the Merida Initiative, “Beyond Merida.” Beyond Merida recognizes that there are no quick technological fixes to the threat that DTOs pose to the Mexican state and society. It also recognizes that high-value-targeting of drug capos, even while backed up by the Mexican military will not end the power of the Mexican DTOs; paradoxically, it is one important driver of violence in Mexico, with all its deleterious effects on rule of law and society.

Instead, Beyond Merida focuses on four pillars: a comprehensive effort to weaken the DTOs that goes beyond high-value decapitation; institutional development and capacity building, including in the civilian law enforcement, intelligence, and justice sectors; building a 21st century border to secure communities while encouraging economic trade and growth; and building community resilience against participation in the drug trade or drug consumption. Beyond Merida thus seeks to expand interdiction efforts from a narrow high-value targeting of DTO bosses to a more comprehensive interdiction effort that targets the entire drug organization and giving newly trained police forces the primary street security function once again while gradually putting the military in a background support function. By focusing on the building of a secure but smart U.S.-Mexico border that also facilitates trade, the strategy not only helps U.S. border states for which trade with Mexico often represents an economic lifeline, but also helps generate economic opportunities in Mexico that reduce the citizens’ need to participate in illegality for obtaining basic livelihood. Pillar three then critically meshes with fourth pillar – focused on weaning the population away from the drug traffickers – which again seeks to build resilient communities in Mexico to prevent their takeover by Mexican crime organizations.

Beyond Merida is designed to also significantly enhance the capacity of the government of Mexico. The outgoing U.S. ambassador to Mexico, Carlos Pascual, deserves much credit for helping to devise such a comprehensive and multifaceted U.S. policy toward Mexico and for helping Mexico’s government recognize the need to expand its law enforcement strategy, institutionalize its rule of law reforms, and complement its law enforcement strategy with socio-economic programs that can break the bonds of Mexico’s poor and marginalized communities with the criminal groups. Social programs sponsored by the U.S. fourth pillar, such as Todos Somos Juarez, aim to restore hope for underprivileged Mexicans – 20% of Mexicans live below the extreme poverty line and at least 40% of the Mexican economy is informal – that a better future and possibility of social progress lies ahead if they remain in the legal economy. Such bonds between the community and the state are what at the end of the day will allow the state to prevail and crime to be weakened. But they are very hard to effectuate – especially given the structural deficiencies of Mexico’s economy as well as political obstacles. Indeed, Mexico’s implementation of Todos Somos Juarez has encountered some serious problems.

Notwithstanding the level of U.S. assistance so far, including having generated over several thousand newly trained Mexican federal police officers, Mexico’s law enforcement remains deeply eviscerated, deficient in combating street and organized crime, and corrupt. Corruption persists even among the newly trained police. Expanding the investigative capacity of Mexico’s police is an imperative yet frequently difficult component of police reform, especially during times of intense criminal violence when law enforcement tends to become overwhelmed, apathetic, and all the more susceptible to corruption. The needed comprehensive police reform will require sustained commitment over a generation at least.

U.S. assistance to Mexico in its reform of the judicial system and implementation of the accusatorial system, including training prosecutors, can be particularly fruitful. Urgent attention also needs to be given to reform of Mexico’s prisons, currently breeding grounds and schools for current and potential members of drug trafficking organizations.

Such a multifaceted approach toward narcotics and crime and emphasizing social policies as one tool to mitigate crime, is increasingly resonating in Latin America beyond Mexico. Socio-economic programs designed to mitigate violence and crime -- for example, the Virada Social in Sao Paolo or the socio-economic component of the Pacification (UPP) policy in Rio de Janeiro’s favelas -- have been embraced by state governments in Brazil.

Colombia

Yet they continue to be slow to expand in Colombia, even as President Juan Manuel Santos has initiated a range of socio-economic programs, such as land restitution to victims of forced displacement. The National Consolidation Plan of the Government of Colombia, currently under reevaluation, recognizes the importance of addressing the socio-economic needs of the populations previously controlled by illegal armed actors. But state presence in many areas remains highly limited and many socio-economic programs often consist of limited one-time handouts, rather than robust socio-economic development. The government of Colombia also lacks the resources to robustly expand its socio-economic development efforts and its security and law enforcement presence to all of its territory and even its strategic zones.

Although the size and power of illegal armed groups, such as the leftist guerillas, the Fuerzas Armadas Revolucionarias de Colombia (FARC) have been substantially reduced, and the guerrillas have been pushed away from strategic corridors, they still maintain a presence of perhaps several thousand, critically undermine security in parts of Colombia, and participate in the drug trade and extortion. Despite the formal demobilization of the paramilitary groups, new paramilitary groups, referred to by the Government of Colombia as bandas criminales, have emerged and by some accounts number ten thousand. They too participate in the drug trade and undermine public safety in ways analogous to the former paramilitaries. Such paramilitary groups have also penetrated the political structures in Colombia at both the local and national levels, distorting democratic processes, accountability, and socio-economic development, often to the detriment of the neediest. New conflicts over land have increased once again and displacement of populations from land persists at very high levels. Homicides and kidnapping murders are up in Bogotá and Medellín, once hailed as a model success. The government’s provision of security in many areas remains sporadic and spotty.

Yet the government of President Santos needs to be given major credit for recognizing the need to focus rigorously on combating the bandas criminales, all the more so as municipal elections are scheduled in Colombia this year. The government also deserves credit for focusing on combatting street crime and urban violence and for unveiling a well-designed plan for combating urban crime, Plan Nacional de Vigiliancia Comunitaria por Cuadrantes, emphasizing crime prevention, community policing, and local intelligence.

Critically, with all its emphasis on social policies, the Santos administration has yet to move away from the ineffective and counterproductive zero-coca policy of inherited from Colombia’s previous administration. The zero-coca policy conditions all economic aid on a total eradication of all coca plants in a particular locality. Even a small-scale violation by one family disqualifies an area, such as a municipality, from receiving any economic assistance from the government of Colombia or from cooperating international partners. Such a policy thus disqualifies the most marginalized and coca-dependent communities from receiving assistance to sustainably abandon illicit crop cultivation, subjects them to food insecurity and often also physical insecurity, pushes them into the hands of illegal armed groups, and adopts the wrong sequencing approach for supply-side counternarcotics policies. In cooperating with the Santos administration in Colombia, the United States government should encourage the new Colombian leadership to drop this counterproductive policy.

Over the past nine years, reflecting the results of U.S. assistance under Plan Colombia and the Andean Counterdrug Initiative, Colombia has experienced very significant progress. Nonetheless, the success remains incomplete. It is important not to be blinded by the success and uncritically present policies adopted in Colombia as a blanket model to be emulated in other parts of the world, including in Mexico. While its accomplishments, including in police reform and the impressive strengthening of the judicial system, need to be recognized and indeed may serve as a model, the limitations of progress equally need to be stressed, for it is important to continue working with Colombia in areas of deficient progress and to avoid repeating mistakes elsewhere around the world.

Furthermore, in counternarcotics and anti-crime policies, as in other aspects of public policy, it is important to recognize that a one-shoe-fits-all approach limits the effectiveness of policy designs. Local institutional and cultural settings will be critical determinants of policy effectiveness; and addressing local drivers of the drug trade and criminal violence and corruption will be necessary for increasing the effectiveness of policies.

Central America

In its efforts against organized crime and narcotics in the Western Hemisphere, the Obama administration has also recognized the danger of countering the balloon effect and the possibility that intensified law enforcement efforts in Mexico risk increasing drug shipment flows and associated threats to the states and societies in Central America and the Caribbean. To mitigate the spillover effects, the Obama Administration has adopted two initiatives: the Central American Regional Security Initiative (CARSI) and the Caribbean Basin Security Initiative (CBSI). During his recent visit to El Salvador, President Barack Obama significantly increased U.S. assistance to CARSI, pledging $200 million. However, I would like to emphasize that even such regional efforts are unlikely to prevent the emergence of a crime displacement effort altogether and countries in Central America are constrained in their capacity to absorb various types of assistance. Careful consideration of the design of counternarcotics and anti-organized crime efforts, vetting of the recipients of U.S. assistance, and overall careful and constant monitoring of such assistance programs and their side-effect is needed in Central America.

Conclusion

Efforts to strengthen the state in Latin America will facilitate what local governments can accomplish against organized crime. An indispensible component of state-strengthening capacity in Latin America includes reforming the law-and-order apparatus and the justice sector so that the state can provide public safety and the rule of law for all of its citizens. But states in Latin America would be more effective in combating transnational organized crime if they also focused more than they now do on combating street crime. The latter, often receiving little priority in U.S. development-assistance policies and in policies of many Latin American countries would provide new opportunities for cooperation with the United States, where innovative local community-policing programs have been experiencing considerable success in recent years. The needed comprehensive law-enforcement and justice-sector reforms would involve expanding police presence and limiting police corruption, brutality, and abuse, in addition to greater emphasis placed on community policing.

The governments in Latin America are also likely to become more effective in combating crime if they intensify their focus on the socio-economic issues that underlie key aspects of criminality and informal and illegal economies in Latin America. Expanding economic and social opportunities for underprivileged marginalized populations can facilitate community cooperation against organized crime. If the manifestation of the state becomes benevolent by providing legal economic opportunities for social development and legitimate and reliable security and justice, many root causes of transnational crime would be addressed and belligerent and crime organizations delegitimized. Latin American citizens would become both far less interested in participating in illicit economies and far more willing to participate with the state in tackling transnational crime.

Thank you for giving me this opportunity to address the Subcommittee on this important issue.

[1] See, for example, Jorge Sapoznikow et al., “Convivencia y Seguridad: Un Reto a la Gobernabilidad” (Coexistence and Security: A Challenge to Governability”, Inter-American Development Bank, Washington, DC: 2000, and Centro Nacional de Datos, Fondelibertad, Ministrio de Defensa Nacional, República de Colombia, “Cifras Extorcion” (Extortion Rates), June 20, 2007; available from www.antisecuestro.gov.co/documentos/7_16_2007_4_58_07_PM_CifrasHistorias.pdf, accessed May 17, 2008.

[2] “Murder Rate Among Youths Soars in Brazil,” The Washington Post, February 24, 2011. Since data collection, reporting mechanisms, and strength of law enforcement varies greatly among Latin American countries and many murders go unreported and undetected, there are limits to the accuracy of the data. Moreover, data are not always available for the same year for all countries.

[3] Ibid.

[4] “Ejecutómetro 2010” (Metrics of Execution 2010), La Reforma, accessed April 15, 2010, and December 27, 2010.

[5] “La industria del secuestro esquilma a América Latina”, El País, February 17, 2008.

[6] See, for example, John Bailey and Lucía Dammert, “Public Security and Police Reform in the Americas,” in Public Security and Police Reform in the Americas, Pittsburg: University of Pittsburg Press, 2006, pp.1-22.

[7] Michael Shifter, “Central America’s Security Predicament,” Current History, February 1, 2011.

[8] Guillermo Ibara in Manuel Roig-Franzia, “Mexico’s Drug Trafficking Organizations Take Barbarous Turn: Targeting Bystanders,” Washington Post, July 30, 2008.

Authors

Vanda Felbab-Brown

Publication: Senate Foreign Relations Committee, Subcommittee on the Western Hemisphere, Peace Corps and Global Narcotics Affairs

Is Chile Next? The Effect of Japan’s Earthquake on Nuclear Energy Ambitions in South America

Isabella Alcañiz and Mauricio Cárdenas — Mon, 21 Mar 2011 10:51:00 -0400

While Argentina, Brazil and Mexico are currently the only nuclear energy producers in Latin America, other countries in the region have considered the idea of building nuclear power plants. Recently, Chile has been perusing the nuclear market with energy on its mind. Last month, the Chilean government signed a treaty with France on uranium development and this week Chile was poised to sign a major agreement on nuclear energy cooperation with the United States to coincide with President Obama’s visit to Santiago. However, the nuclear momentum has been interrupted by the tragic events unfolding on the other side of the Pacific.

Chileans are paying careful attention to the nuclear crisis in Japan, as it rings close to home. Both Chile and Japan are located on the infamous Pacific Ring of Fire that concentrates the most violent seismic activity of the world. Japan’s recent 9.0 magnitude earthquake came almost exactly a year after Chile’s 8.8 magnitude earthquake. Both countries experienced tsunamis in the immediate aftermath. If Chile were to build a nuclear power plant, would it be safe? Or could it be vulnerable to a nuclear meltdown similar to what is happening in Japan?

Nuclear power plant accidents are rare but catastrophic. Improved plant designs and careful location selection should reduce this threat considerably. There are a few design options available between light (Pressurized Water Reactor-PWR and Boiling Water Reactor-BWR) and heavy water reactors (Pressurized Heavy Water Reactor-PHWR) with distinct advantages and disadvantages regarding efficiency and costs along the fuel cycle. Brazil, Mexico and Japan have all adopted variants of the light water reactor (the breached Japanese power plant is BWR); Argentina has embraced the heavy water design (PHWR). However, when considering a topography with a higher than normal probability of experiencing cataclysmic natural disasters (like Japan and Chile), selecting the location of the plant is of the utmost importance.

But is there any location in Chile where a major seismic event would be highly unlikely? The answer is probably not. If selecting a location in Argentina, Brazil and Mexico provides any guidance, proximity to users has in the past been the single most important determinant of location. Existing Latin American plants built over 30 years ago are located next to large urban areas in order to minimize distribution costs. Yet, the crisis in Japan makes it considerably less likely that Chilean voters would put distribution benefits ahead of safety concerns.

Civil society, when in opposition, can thwart the location of nuclear facilities. “Not in my backyard” rallies, increasingly popular in South America, could steamroll proponents of nuclear energy in the country. Given the two devastating earthquakes on both sides of the Pacific within a year, a decision to build a nuclear energy plant would bring major demonstrations. Marcelo Tokman, former Chilean energy minister agrees, “in fact, we have a civil society that increasingly is more active in opposing projects in hydropower, coal plants, and even mining. Given this, if the decision was made to advance with nuclear energy, undoubtedly there would be numerous protests.”

For now, the current Chilean government administration of Sebastián Piñera is still waiting to see how events in Japan continue to unfold. His government went ahead with the signing of a U.S.-Chile agreement on nuclear energy this past Friday. It seems President Piñera is keeping the nuclear option open, perhaps as a bargaining chip to make sure that the U.S. provides more support for the development of alternative energy sources, such as wind, solar and geo-thermal technologies. Chile’s energy security is one of the nation’s main concern, and rightly so. How it will be solved remains an open question, but one that hardly will be answered by Chileans alone.

Authors

Isabella Alcañiz
Mauricio Cárdenas

Think Again: Latin America

Mauricio Cárdenas — Thu, 17 Mar 2011 00:00:00 -0400

"There's no reason for Obama to be going to Latin America now."

On the contrary. Former U.S. President Richard Nixon once famously told the young Donald Rumsfeld that "people don't give one damn about Latin America now." (To be fair, his view of the region may have been colored by the experience of being pelted with rocks in Caracas while on a vice presidential goodwill tour in May, 1958.) Today, with popular revolutions upending the political order in the Middle East, an unprecedented natural disaster devastating Japan, and his own government hovering on the verge of shutdown, it may seem odd to many that U.S. President Barack Obama is choosing to embark on a five-day tour of a region often considered an afterthought in international politics.

But in fact, Obama's trip south is important for long-term U.S. interests, and long overdue. In today's economic order, where the G-20 is essentially a board of directors with only minority shareholders, the United States needs strong allies. Brazil is the ideal partner: large among the emerging countries, democratic, free of internal tensions, and without enemies. Cultivating that relationship is essential if Washington wants to continue to exercise leadership in the region. The recent turmoil in the Middle East also reminds us again of the fragility of energy security in the United States, and the importance of Latin America as a reliable source of renewable and nonrenewable energy.

Other powers have begun to take notice. China, for one, seems to have a strong strategic interest in a region where the U.S. is losing influence. China is Brazil and Chile's main trading partner, and in 2009 and 2010, the China Development Bank agreed to lend more than $35 billion to borrowers in Argentina, Bolivia, Brazil, Ecuador, and Venezuela (mostly under "loans-for-oil" arrangements). This is three times what the Inter-American Development Bank approves every year for the region as a whole.

U.S. political and business leaders, on the other hand, often seem reluctant to look to Latin America for opportunity, hampered as they are by outdated views of the region as dangerous, economically stagnant, and politically backward. With the U.S. losing market share to other countries eager to invest in and trade with Latin America, it is time to dispel some myths hanging over the region.

Read the full piece at foreignpolicy.com »

Authors

Mauricio Cárdenas

Publication: Foreign Policy

Colombia’s Consolidation: Everything Coming up Orchids?

Vanda Felbab-Brown — Tue, 08 Mar 2011 15:56:00 -0500

The following article is one of four reports based on Vanda Felbab-Brown's fieldwork in different parts of Colombia in January 2011. Here she gives an overview of the Santos government’s national security strategy. Read also a description of her trip to the Colombia-Venezuela border, where smuggling is rampant; her review of security in Nariño; and her walk in the comunas of Medellín.

There is a great sense of optimism in Colombia today. After significant improvements in security over the past decade, President Juan Santos embraced the public desire for social progress that took a back seat to security during Álvaro Uribe’s presidency and unveiled a package of social and economic reforms. Reducing poverty is high on his agenda, and restoration of land to those forcibly displaced by armed groups has become his signature issue. Out of the more than two million displaced, his plan is to resettle about 160,000 families over the next two years.

There are even talks about land reform in Bogota, not merely land restoration. President Santos has shaken up the Ministry of Agriculture, historically an obstacle to meaningful agricultural reform and an institution that has privileged big landlords at the expense of small farmers, thus serving as a critical impediment to making alternative livelihood efforts for Colombia’s coca farmers more effective. The Santos government has also recognized the need to increase the state’s fiscal capacity: like in many Latin American countries, land and the rich are taxed very lightly, the poor often work in informal or illegal economies, and thus the middle class bears much of the tax burden. Such a tax policy has done little to generate jobs even during times of national economic growth.

With the decline in violence, the confidence of Colombian military and law enforcement officials, many trained under U.S. Plan Colombia, has increased to the point where they are offering their expertise to other countries. In Mexico and Afghanistan they are providing counternarcotics training; in the Philippines they have offered to teach how to demobilize armed groups. (Never mind the 10,000 newly-armed belligerents, the so-called bandas criminales, that have emerged after the paramilitaries’ demobilization.) A Colombian government official recently asked me if Colombia should approach Pakistan to teach them how to do counterinsurgency (COIN).

The Santos government has recognized the still-serious security challenges in the country. A new impressive plan was unveiled to tackle urban crime, including street crime, the neglected menace of citizens across Latin America. The Ministry of Interior has committed itself to go after the persisting paramilitary networks and new bandas criminales to prevent their manipulation of the October municipal and departmental elections in Colombia. It even hired experts from a think tank, Corporación Nuevo Arco Iris, to help map the paramilitary networks. Along with journalist Claudia López, Nuevo Arco Iris helped expose the paramilitary penetration of Colombia’s political institutions several years ago. In striking contrast, President Uribe was frequently on a war footing with human rights NGOs, Colombia’s justice institutions, and other critics of his government.

Among Colombia’s NGOs, especially in Bogota, there is also a great deal of excitement about possible negotiations with the FARC, even those which might move beyond a humanitarian exchange to reach for a political settlement. The New Year statement by the FARC’s leader, Alfonso Cano, was by far the most conciliatory that has been heard from the FARC in years.

So is everything coming up orchids in Colombia (of which Colombia has approximately 3000 species, among the greatest diversity in the world)? Surprisingly, the biggest challenge may again be security. Although the government is talking about consolidation of the security gains achieved over the decade, it has come to realize that its model project for a comprehensive counterinsurgency and state-building package – in Macarena – is likely to be hard to replicate elsewhere. The concentration of resources Macarena received will be difficult to bring to other areas – be they military and police forces or economic assistance. Colombia simply does not have enough of such assets. Nor have the consolidation zones, including in Macarena, been expanding (like the proverbial “ink spot” as predicted in standard COIN theory). The Colombian government had originally hoped to have 16 more such consolidation zones, then 13; but now is going through a major review of whether to decrease the number of consolidation zones further or do more Macarenas Light. Such a reduced effort would leave a lot of spaces without adequate government presence, including in the security sphere.

Meanwhile, Colombia still has tens of thousands of bad guys running around – from the FARC to the narcos to bandas criminales. In parts of Colombia, like Nariño, security is worse than it has been in years. Unavoidably, there will have to be some hard guns-and-butter choices made. Colombian officials are already complaining about the reduction of U.S. aid, including its military component -- asking where they will get money for addressing continuing security deficiencies.

In many parts of the country, the security and state-building challenges are quite different than in Macarena. There COIN was about defeating the FARC’s in its heartland and bringing in a functioning multifaceted state (much of which is still in progress). In Montes de Maria, another area at one point selected as a Consolidation priority area, most of the local government is under indictment or in prison for ties to the paramilitaries. The issue there has not been so much to bring in the state as to rid it of capture by paramilitary thugs.

Civilian presence has often been slow to come on the heels of the military’s boots. Getting line ministries to establish an effective presence has been a major challenge. Instead, it has often been the military and police forces who are holding the bag of distributing socio-economic goodies and even venturing into socio-economic development. With a well-meaning desire to win the hearts and minds of the population and shake off memories of police corruption and abuse, rural police deployments have been given training in agronomy so that they can teach farmers how to cultivate legal crops. (Despite the good intentions, one can’t help but wonder whether that is an appropriate role for police forces.) One of the tasks for Colombia’s new national security advisor, the architect of the Macarena pilot, Sergio Jaramillo, is to ensure coordination and real delivery by the line ministries.

President Santos, with his high approval ratings, is likely to get reform laws passed through the Uribistas-dominated Congress. But the crucial test will come with the reforms implementation on the ground. That is where the Colombian state is the weakest. That is also where the bandas criminales, the FARC, and entrenched powers will put up the greatest opposition to reforms-- land redistribution, tackling crime, or bringing in a functioning justice system -- that reduce their power.

One way to think of Colombia’s tortured history is as a precarious effort to sustain a strong and developed center on the back of a neglected and exploited periphery. Every so often the periphery’s seething socio-economic problems erupt and a periphery-based militancy starts encroaching on the center. The center mobilizes, suppresses the militancy, but fails to address the root causes of the troubles and to bring a stronger, more multifaceted, and more equitable state to the periphery. Eventually, seething problems and militancy start bubbling up again and spill over onto the center. Colombia now has a chance to break this pattern. The verdict is still out whether it will succeed.

Authors

Vanda Felbab-Brown