While legal wranglings over the recent US presidential election may drag on for some time, Joe Biden is almost certain to be inaugurated as the 46th President of the United States of America on January 20. That result will be welcomed by many in Latin America’s investment and businesses community, writes Craig Dempsey, co-founder and CEO of Biz Latin Hub.
The 2020 US presidential election was historic in many ways. First and foremost, it was held under the extraordinary circumstances of a global pandemic that has hit the United States particularly hard, with over 10 million people infected and 249,000 killed by the time of writing. Nevertheless, the election saw the highest voter turnout in recorded history, with more than 150 million US citizens voting, coupled with the widespread use of mail-in ballots.
Biden has promised a more harmonious approach to geopolitics and better backing for traditional US allies than President Donald Trump, which could prove very beneficial for business and investment in Latin America, a region of huge geostrategic importance to US interests.
The United States has a long — sometimes regrettable — history of involvement in Latin America, where it has enjoyed significant influence since the 19th century and counts several countries as key allies.
Today, the US is the number one trading partner for many nations in the region, including Colombia, Costa Rica, the Dominican Republic, Ecuador, Guatemala, Honduras, Mexico, Nicaragua, El Salvador and Venezuela. It is also the largest import partner for Belize and Panama.
The US has a free trade agreement (FTA) in place with Mexico, as part of the United States–Mexico–Canada Agreement (USMCA), which also includes Canada. The Dominican Republic-Central America Free Trade Agreement (CAFTA-DR) includes El Salvador, Costa Rica, Guatemala, Honduras, and Nicaragua, as well as the Dominican Republic. Meanwhile, the US also has individual free trade agreements with Chile, Colombia, Panama, and Peru.
Given how vital trade with the US is to many Latin American economies, it is important to consider what change the Biden Administration could represent in the region, although first it is important to understand Trump’s legacy.
Trump’s Legacy in Latin America
Perhaps Trump’s most high-profile policy that affects relations with Latin America is his hardline border and immigration policy. That has seen him push for the construction of a wall along the border with Mexico, while overseeing a harsh approach to migrants entering the country, which has seen families split up, including children removed from parents.
Another Trump policy in Latin America that has been met with widespread public outrage has been his revival of the Monroe Doctrine, a 19th century policy that saw the US warn European powers away from Latin America, which it declared its domain of influence.
“It has been the formal policy of our country since President Monroe that we reject the interference of foreign nations in this hemisphere,” Trump said to the UN General Assembly in September 2018.
That declaration was made in an attempt to warn China off of its ongoing efforts to deepen ties in the region, despite the fact the doctrine was declared “dead” by then-Secretary of State John Kerry in 2013.
Meanwhile, Trump has been accused of ignoring two of Latin America’s biggest challenges — migration and corruption — with a wave of anti-corruption sentiment that emerged in the region in 2018 going largely overlooked.
According to the Washington Office on Latin America, Trump’s approach to the region has been characterised by “myopic focus on migration and transactional foreign policy,” which has been met with an erosion of trust in the US as a bastion of human rights and the rule of law.
Trade has also been notably affected, with the value of goods exchanged between Latin America and the United States dropping from a total of $955.5 billion during the final three years of the 2008 to 2016 Obama Administration, to $796 billion during Trump’s first three years, according to US Census Bureau statistics.
Nevertheless, Trump has earned admirers in the region, including Brazil’s ultra right-wing President Jair Bolsonaro, whose deference and similar firebrand style to the US leader has earned him the moniker “Trump of the Tropics.”
Mexico’s letwing populist President Andrés Manuel López Obrador has also emerged as an ally of Trump, while members of Colombia’s hardline ruling Democratic Center Party were reported to be campaigning for Trump in the United States.
Given this reality, perhaps one of the most long-standing effects Trump will have on the region is the inspiration he offers to anti-democratic firebrands with isolationist tendencies.
What to Expect from Biden in Latin America
Having served as vice-president under Obama, some indications of what to expect from Biden can be drawn from that administration’s approach to Latin America. While Obama was widely accused of neglecting the region during his first term, his second term saw greater efforts in that direction.
During that second term, trade with Latin America hit new highs, with exports to the region exceeding $180 billion each year between 2012 and 2015 – an almost $50 billion increase on exports seen during the year before Obama took office.
Obama notably oversaw a warming of historically frosty relations with Cuba, removing the island-nation from the “State Sponsors of Terrorism” list in May 2015. He also sought to improve ties with Argentina, which had maintained a strained relationship with the US for many years.
While Trump sought to crank up pressure on Cuba, in keeping with consistent attempts to roll back Obama Administration reforms, Biden has pledged to reset foreign policy relations, with Latin America slated to be the first to enjoy a more-friendly approach.
As such, he has promised to stop acting like the “bully dictating policy to smaller countries” in the region. Biden has also railed against Trump’s border policies, pledging to set up a task force to reunite 545 children separated from their parents.
Nevertheless, Biden will undoubtedly face challenges. How the likes of Bolsonaro, López Obrador and Colombia’s ruling party will respond to a Biden presidency remains unclear. Though the US aid that those count on will most likely see them each change tack once Trump’s electoral loss is finalized.
One such challenge is an anticipated surge in migrants attempting to cross the Mexico border. Meanwhile, China’s influence in the region continues to grow, driven by its insatiable hunger for natural resources and Latin America’s abundance.
While redeclaring the Monroe Doctrine may not be the wisest approach, Biden will need to figure out a way to be assertive in the region to protect US geopolitical and business interests.
Business in Latin America Under Biden
Biden’s more open-armed approach to the world will undoubtedly pay dividends for US business in Latin America. While Trump preaches a pro-US business mantle, his isolationist and protectionist approach to geopolitics has left the country estranged from many traditional partners.
Good business relations are reinforced by strong political relations. So as Biden warms relationships in the region, and promotes a more trade-friendly agenda, it can be expected that the value of goods exchanged will begin to grow again.
As such, trends seen in recent years of increased US investment in rapidly growing industries, such as tech and IT, can be expected to increase.
The improvement in relations with Latin America under Biden will also likely pay dividends in some of the region’s poorest countries, such as the “Northern Triangle” of El Salvador, Guatemala, and Honduras.
While Trump suspended aid to those countries in his battle against migration, Biden has pledged a $4 billion development package including measures to address some of the root causes of the migration — namely violence, poverty and lack of opportunity.
Peace and stability are key to inspiring business confidence. A conciliatory Biden administration promises to promote greater trade and stability in Latin America, and as such should be welcomed by many involved in business and investment in the region.