Look South, Not East
The Obama administration is turning to Asia for the defining competition of the next century. But if the United States actually wants to win, it'll need Latin America.
With Barack Obama’s administration pivoting toward Asia and with the U.S. president now off to Hawaii for the Asia-Pacific Economic Cooperation summit (and then to Australia and Indonesia), let’s remember that the most important trip of his time in office was not east but south. In March, in the midst of the fallout from Japan’s tsunami and nuclear meltdown and the brutal escalation in Libya, Obama made an international trip the Western media almost entirely ignored. His destination: Brazil, Chile, and El Salvador. There was pressure to cancel the visits, and photos and media reports revealed that Obama was accompanied by his military advisors and was getting constant updates on both crises from a secure camouflage tent.
Of course, the date for the trip was not movable, especially as it was precisely the 50th anniversary of President John F. Kennedy’s declaration of the "Alliance for Progress," which brought about an industrial expansion from Mexico to Argentina. Obama’s journey thus had a grand strategic purpose missed by Washington’s Mideast- and China-obsessed elites (not to mention previous administrations — one recalls George W. Bush in 2005 being startled by a map of South America and exclaiming, "Wow! Brazil is big!") By setting out to "forge new alliances across the Americas," Obama has implicitly acknowledged the emerging geopolitical reality that Latin America is nothing less than the third pillar of the West, alongside Europe and North America.
The United States certainly can’t take Latin American loyalty for granted, if it ever could. This is an age of multialignment, with most powers playing all sides. South America has rolled out the welcome mat to the new Asian power, with Brasilia and Beijing declaring a strategic partnership years ago and many South American commodities exporters like Chile and Argentina owing much of their recent growth to China’s massive appetite for raw materials.
Indeed, the first aim of geopolitics is access to resources, which South America has in abundant supply. Some 30 percent of the world’s total biocapacity resides in South America. It may sound cliché to say that the Amazonian rain forest is the world’s lungs, but it’s true. The continent is also the world’s breadbasket. Most of the global supply of bananas, sugar, oranges, coffee, soybeans, and salmon, as well as a major share of beef and pork, come from South America. It also has massive mineral deposits: silver, copper, lead, tin, zinc, iron ore, and lithium.
Perhaps most importantly, Latin America is fundamental to any strategy for energy self-sufficiency. North America’s energy future already looks strong with oil and gas deposits under the Arctic seabed, Canada’s gigantic oil sands, wells in the Gulf of Mexico, and newfound shale-gas deposits in the United States. Add to this the major discoveries of oil off Brazil’s Atlantic coast, plus Venezuela’s abundant reserves, and you have a comprehensive solution for total energy independence from the turbulence of Eurasia and Africa. There is also a sustainability angle here. Brazilian sugar cane-based ethanol is four times more efficient to produce than North American grain-based ethanol.
According to energy expert Daniel Yergin, the new Western Hemispheric energy axis runs from Alberta, Canada — from which the United States gets another 1 percent of its oil imports each year — through Texas and the Gulf of Mexico down to Venezuela, French Guiana, and Brazil. U.S. energy policy should be increasingly Western Hemispheric — just as China’s energy policy is increasingly Middle Eastern. In this context, the Keystone XL pipeline from Alberta to Texas can be delayed (as it just was), but it is nonetheless inevitable.
Building a new hemispheric economy is crucial to tackling not only energy independence but also industrial competitiveness. Latin America’s 900 million people (about 12 percent of the world’s population) represent a $6 trillion economy — equal in size to China’s. Furthermore, Latin America is younger and more urbanized than Asia, making it a highly productive partner for the United States. Additionally, Latin economies now feel the Chinese economic threat as much as the United States does. China has dumped everything from clothing to cell phones onto the region, threatening an estimated 90 percent of Latin America’s manufacturing exports (which account for 40 percent of all its exports) and undercutting trade. Almost half of Brazil’s manufacturing exports go to other Latin American countries, and two-thirds of those markets (in everything from shoes to cars) are at risk from Chinese competition.
Rather than outsourcing to Asia and accelerating the rise of economic competitors, U.S. firms could look much closer to home, forging joint ventures in energy and manufacturing across the region. This is already happening to some extent, but the opportunities have not been seized. With coastal Chinese wages rising, numerous U.S. companies are relocating to Mexico, which offers logistical proximity, a more predictable exchange rate, and a closer political relationship — all of which mean less risk and eventually greater profits. Even the $100 billion IT outsourcing industry could be brought back from India into the United States’ time zones. In the long run, such a hemispheric industrial policy is the only way for the Americas to remain competitive with an Asia that has caught up in brawn and is catching up in brains.
With concerns over competition from China growing and with suspicion of multinationals giving way to pragmatism about the need for foreign investment and technology, now is the time to reinvigorate the goal of a hemispheric pact. Currently, U.S. free trade agreements (FTAs) with Colombia and Panama are under consideration, but more FTAs around the region could mean more exports and more jobs for the struggling U.S. economy. But here’s how not to strengthen ties: tariffs on Brazilian steel and wavering on a free trade agreement with Colombia. Accelerating job creation and economic growth in the erstwhile "banana republics" of Central America benefits the United States not only through decreased illegal migration but in real dollars: Most of these countries export their goods through Florida, using U.S. airlines and ports.
Seeing Latin America as a grand strategic prize rather than the object of congressional politicking is Obama’s fundamental challenge. He could take a line from Brazilian Foreign Minister Celso Amorim, who recently declared, "Integration is an imperative because in a world of large blocs, we will be stronger if we are united."
It is fashionable for pundits to declare that the world’s center of gravity is shifting east. But that need not be the case. Elevating South America to its rightful place as the third pillar of the West alongside Europe and North America could be the most decisive geostrategic maneuver still to be deployed. In the coming decades, the United States may well need to direct and project its power to the east, but the source of that power will increasingly be the south. There are some who think that the future of competition will come from across the Pacific — and they may be right — but if the United States can succeed in forging a new hemispheric economy with Latin America, the East would have an even longer way to go in catching up with the West.
Parag Khanna is a senior research fellow at the New America Foundation and author of The Second World: How Emerging Powers Are Redefining Global Competition in the Twenty-First Century and How to Run the World: Charting a Course to the Next Renaissance.