Juan Diego Barrera SandovalDuring his Latin America tour last week, U.S. Secretary of State Marco Rubio didn’t spend much time promoting the concept of “nearshoring”, but there is no doubt that economic integration remains a critical component of the relationship between the United States and the rest of the region.
While migration, anti-narcotics efforts, and security concerns dominated discussions, the trip may have ripple effects on the nearshoring services industry.
“Let me refer to that in Spanish”
Over the past few days, Rubio visited Panamá, El Salvador, Costa Rica, Guatemala, and the Dominican Republic. It was the first time in over a century that a U.S. Secretary of State chose Latin America for his inaugural trips. Having the first Latino in this role speaks volumes about the region’s significance in the Donald Trump administration’s plans.
Nearshoring services should see the visit as one filled with reasons for optimism. On one hand, regardless of trade conditions with Mexico, tech services remain one of the sectors largely unaffected by the new administration’s policies. This is especially true as labor arbitrage has become significantly more attractive in the region since the start of Trump’s second term.
On the other hand, the visit holds importance because Secretary Rubio stressed the U.S. view that stronger business cooperation in the region can serve as a safeguard against Chinese expansion.
El Salvador’s Nayib Bukele did not hold a public press conference alongside Rubio, leaving it unclear whether they discussed the government’s ongoing negotiations for a free trade agreement with China. It also remains unknown whether any policies for tech growth were addressed.
However, among the five countries visited, three appear to have seen the most activity in nearshoring services.
Panama
Although the Panamanian government initially maintained that its constitution prevents interference in the canal’s administration, the U.S. pressure finally forced it to bend.
Not only did Secretary Rubio call for “immediate changes” to China’s “influence and control” over the vital trade route, but following his meeting with President Mulino, the U.S. State Department announced that American ships would no longer have to pay canal entry fees. Shortly after, Panama’s president publicly pushed back, calling the claim a fabrication by the U.S. that did not reflect his discussions with Rubio.
Local analysts in Panama appear particularly frustrated by the situation. On paper, Mulino’s government was the only one to introduce concrete measures aimed at reassuring the U.S. that China’s influence was being curbed. “The memorandum of understanding we’ve signed with China on joining the Belt and Road initiative won’t be maintained moving forward”, Mulino said. However, given the broader foreign policy landscape, it seems likely that the U.S. will continue applying pressure on regional governments it perceives as drifting away from prioritizing the nearshoring model.
Costa Rica
President Rodrigo Chaves handled the visit that was most closely related to technology and nearshoring services.
Secretary Rubio made a statement regarding the country’s 2023 decision to block Huawei from presenting itself as a contractor for 5G-installation contracts, citing concerns about cybersecurity and aligning with the US’s stance on the matter
“I want to congratulate the president on being very firm on the security of their 5G system. 5G is going to be critical technology in the development of all industries that are going drive the twenty-first century. But it’s got to be secure. And when you confront companies that are not secure, they are backed by governments like China that likes to threaten, sabotage and use economic coercion to punish you.”
Rubio implied that the unusually high levels of cyberattacks Costa Rica suffered are a form of pressure from China. He vowed to develop a strategy that doubles down on recent collaboration the U.S. has offered to fend off future cyberattacks.
“Costa Rica is really vulnerable in terms of its dependence upon foreign investment for infrastructural growth”. JA del Rio’s Lucia Vargas explained how President Chaves faces a question of balance: “It doesn’t seem like Costa Rica is willing to step away from its relationship with China. Although its natural proximity and closer similarity to the U.S. is a force pushing in that direction, the government must and will try to keep alliances with both countries well taken care off.”
Vargas also offered a key insight which rings true for all visited countries: “every time tensions with Mexico emerge, because of tariffs or other factors, it is an opportunity for the rest of the region to call investment their way. And it is especially true for Costa Rica”.
During a press conference, a Costa Rican journalist questioned Rubio about the US stance on excluding Nicaragua from the Dominican Republic-Central America Free Trade Agreement (CAFTA). The journalist highlighted the inconsistency in the US’s previous stance, which aimed to punish Nicaragua for human rights violations through exclusion, despite CAFTA lacking mechanisms for such exclusion.
Rubio responded by stating that the matter is currently under review by the US government. This exchange underscores the complexities surrounding the US-Nicaragua relationship within the context of CAFTA, which has been a topic of discussion in recent times.
Guatemala
Concentrix’s regional vice president, Francisco Robert, praised President Bernardo Arevalo’s efforts in strengthening Guatemala’s ties with the US government. Specifically, Robert highlighted Arevalo’s offer of aid to resolve the deportation flight dispute with Colombia’s President Gustavo Petro.
“This perceived proximity could generate the investor confidence needed to attract more U.S. capital to Guatemala,” Robert said. He further commented that, in his view, the extension of free-trade offers and incentives for remote work, along with tax exemptions, should be paired with a commitment to refrain from imposing tariffs on services, thereby ensuring sustained growth in foreign investment.
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