The Biden administration needs more than good intentions to repair the relationship with Latin America and the Caribbean
By Daniel Payares-Montoya, Solutions Lab Distinguished Fellow
To most Americans, the problems in the Latin America and the Caribbean (LA&C) region seem remote enough that there is no reason to believe they might have an effect on their lives. However, the truth is that what happens in this region often has a direct impact on the U.S. The geographic proximity means that economic, political, humanitarian and security crises in LA&C can quickly evolve into disruptions and even threats on American soil. Examples of this include the Central American migration crisis, drug trafficking, and the increasing investment and influence of China in the region.
Aside from President Trump, (who established a more confrontational approach to LA&C foreign policy when he was not neglecting the region)US government administrations tend to focus on investing in the expansion of partnerships with LA&C countries. Prior to the Trump administration, a consolidation of economic and social well-being, democracy, and security represented the priorities of U.S. foreign policy in the region. Now, under President Biden’s leadership, the new administration has the opportunity to resume those goals and repair the damage caused to the relationship between the U.S. and LA&C countries over the past four years.
Meanwhile, as the new administration moves forward with its foreign policy agenda, the situation in LA&C could not be more grim. The social consequences of the Covid-19 pandemic represent a colossal setback for a region that was already experiencing economical and political distress. The Economic Commission for Latin America and the Caribbean (ECLAC) estimated that in 2020 the region had its worst GDP contraction in the last 120 years, - 7.7 %. It also stated that the unemployment rate increased to 10.7%, while the number of people living below the poverty threshold may have reached 231 million, - 45 million more than in 2019 which is, a regression of at least a decade and a half in poverty-reduction efforts. According to ECLAC and the International Labour Organization (ILO), returning to pre-pandemic economic activity levels is likely to take several years. Experts anticipate a second lost decade for the region, 2015-2024, similar to what happened after the debt crisis of the 1980s.
The pandemic complicated what was already a challenging political situation in the region. In the years since Biden served as vice president and chief emissary to LA&C for the Obama administration, social unrest, economic stagnation, and political turmoil have expanded.
The Biden administration cannot simply pick up where the Obama administration left off. The new administration’s approach to the region must be swift and decisive, prioritizing the most important crises. First, it must help LA&C countries lay the foundation for a successful post-Covid recovery period (which can only happen if people are vaccinated). U.S. assistance in several key areas (e.g. vaccine production and acquisition, distribution and access, funding, and regulation) would allow people to resume with their lives, and countries to reactivate their economies starting this year. This would send a positive message to LA&C leaders as well as the general public as it would signify that the U.S. recognizes the value of its partnerships in the region and is committed to its economic recovery and political stabilization. A pragmatic policy would offer a set of incentives such as infrastructure investment, 5G expansion, and sustainable energy sector development that will reintroduce U.S. foreign direct investment and position the U.S. as a trusted development partner.
Secondly, the new administration should design and implement a strategy to strengthen freedom and democratic institutions in LA&C. According to the Freedom in the World 2020 report, freedom in LA&C declined between 2016 and 2020, with almost a third of countries experiencing a deterioration in their civil liberties or political rights. Likewise, the Democracy Index 2020 registered the fifth consecutive year of democratic backsliding in the region, which was driven by a weakening of electoral processes and pluralism, ineffective governments, corruption and violence. This, combined with a less dynamic economy, has undermined Latin American support for democracy. Only 48% of the people in LA&C believe that democracy is the best form of government, down from 56% in 2015.
Addressing these challenges will require smart development policy. Two institutions with bipartisan support on and off Capitol Hill can help to address both issues: The United States Agency for International Development (USAID) and the Development Finance Corporation (DFC). Together, they can provide vital infrastructure funding and support for meaningful reform in underperforming sectors, including health and education. Shifting the dialogue away from contested issues like migration and illicit narcotics to new investment opportunities through infrastructure development and energy security, would go a long way toward building mutually beneficial partnerships in the region.
Under the new leadership of Samantha Power, (former U.S. Ambassador to the United Nations) USAID intends to regain a leading role in humanitarian support, democracy assistance, and economic development across the world. This may include distributing the Covid-19 vaccine through bilateral partnerships with low- and middle-income countries, and sharing scientific expertise to advance immunization and other public health programs. The agency also plans to help governments tackle corruption, which will help to reinvigorate interest in democracy.
With a direct presence in 13 countries and 4 regional programs USAID could easily work to the benefit of LA&C countries by recalibrating its programs to again address the ‘push’ factors that weaken democracy and build resilience to external shocks like the current Covid-19 pandemic. Despite the previous administration's pressure to reduce assistance to the region, USAID requested $199.7 million for its programs in fiscal year 2021. This is 14 % of the total U.S. Foreign Assistance requested for LA&C.
Already DFC has become a catalyzing investor by bringing investment into the region and by promoting sustainable development. Its active commitments in LA&C already total 8.5 billion, more than in any other place in the world. The corporation is part of América Crece, an initiative that harnesses assistance from a variety of U.S. agencies, including USAID, to facilitate infrastructure projects in LA&C countries (e.g. energy, healthcare, and agriculture). DFC’s investment in the region is crucial to fostering economic recovery, boosting long-term growth, creating jobs, and improving quality of life, all of which contribute to the creation of freer and more stable democracies.
If the Biden administration is sincere in its desire to improve well-being in LA&C then helping to address the pandemic, promoting fast recovery, and strengthening democracy and freedom should be the first steps. USAID and the DFC have the regional knowledge and resources to make it happen. By doing so, the United States would not only restore the trust of important allies in the region, it would also contribute to its own long-term prosperity.
1. If the labor participation rate was similar to that of 2019, the unemployment rate would have been 18.5 %.
2. Nicaragua and Venezuela, ruled by authoritarian governments, are not considered free countries anymore. Colombia, Mexico, the Northern Triangle countries, among others, are considered just partially free.
3. According to the index, the region has only three full democracies, Chile, Costa Rica and Uruguay.
4. Indifference between a democratic regime and an authoritarian one climbed from 16% to 28%.
5. Also through COVAX — the Covid-19 Vaccine Global Access Facility, if the U.S. decides to join the mechanism.