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Rise of Latin America

Rise_of_Latin_AmericaAs broad swathes of Latin America launch into year-long celebrations of the bicentenary of their independence from Spain, it is worth noting just how far the region has come in terms of exercising sovereign power. Contrary to what certain populist demagogues may say, Latin America has moved far away from being under the colonialist-imperialist thumb of either Europe or the United States. Increasingly, it is a region full of nations forging their own identities and establishing new strategic alliances across the globe – a region in which the US is perceived as but one potential strategic partner among many. In other words, Latin America is more actively shaping its future than it has shaped its past.

Brazil, for example, has made significant inroads into various newer global groupings such as the India-Brazil-South Africa (IBSA) Dialogue Forum, and is now also a key member of the G20. Meanwhile, Mexico and Chile have struck major trade and investment agreements with the EU and a number of Asian countries, most prominently China. China has likewise become – along with France, Libya, Russia and Iran – an increasingly important trade and investment partner for Venezuela, as Hugo Chávez, the Venezuelan president, actively seeks to marginalise the US government’s influence in the region.

Whether it is petroleum, biofuels or rechargeable batteries, Latin America holds the keys to most of our future energy supplies. The world simply cannot meet its energy demands without the co-operation of Central and South America.

As a region, Latin America has been for nearly a century the largest foreign supplier of oil to the US, and today it accounts for roughly 30 per cent of US oil imports (mostly from Mexico and Venezuela), compared to around 20 per cent from the Middle East. (At 17 per cent, Canada remains the largest individual supplier of imported oil to the US.) Now that Brazil’s recent discovery of the deep-sea Tupi oil field has given it the potential to become one of the world’s biggest producers of oil, second only to Venezuela in the region, the global influence of Latin American oil is set to rise even further.

Furthermore, in the realm of biofuels, Brazil is already the world’s largest producer of sugar-based ethanol, which it manufactures far more efficiently, with lower costs and less environmental damage, than the US does its own corn-based ethanol.

As technology advances, the world’s appetite for rechargeable electric batteries looks set to become insatiable. Small personal devices (such as mobile phones and laptops), large transportation vehicles (such as cars, trucks and light aircraft) and even solar-powered buildings all require rechargeable lithium-ion batteries. Here again, Latin American countries hold the key. The ‘Lithium Triangle’, a 43,000 square-kilometre area straddling northern Argentina and Chile and southern Bolivia, contains 75 to 90 per cent of the world’s salt-lake lithium deposits. A full 50 per cent of the world’s lithium reserves are in the yet-to-be-developed Salar de Uyuni salt flat located high in the Bolivian Andes; hence the frenzy of flights into La Paz from representatives of countries such as France, Russia, China, South Korea and Canada.

Beyond merely exploiting its natural reserves, Latin America is flexing its growing muscles in the areas of trade and investment. From 1996 to 2006, total US merchandise trade with Latin America grew by 139 per cent, as opposed to 96 per cent with Asia and 95 per cent with the EU. Similarly, in 2008 the US exported $137 billion worth of goods to South and Central American consumers – nearly twice as much as it did to China.

Latin America’s business relationship with the EU is equally well-established and continues to develop. Mexico and Chile were the first two Latin American countries to sign (in 1997 and 2002 respectively) free trade agreements with the EU: the EU-Mexico Economic Partnership, Political Co-ordination and Co-operation Agreement came into force in 2000, while the EU-Chile Association Agreement was ratified in 2005. A raft of new trade agreements were discussed at this year’s EU-Latin American and Caribbean Summit in Madrid, where EU Trade Commissioner Karel de Gucht commented: ‘These latest trade deals with Latin America will translate into much-needed jobs and growth for both sides. And it’s precisely because we face challenging times that we must stand ready to do more business together to ensure increased regional and economic stability.’

Overall, the EU is Latin America’s second largest trading partner, and it is the largest trading partner for both Mercosur – the ‘Common Market of the South’ comprising Argentina, Brazil, Paraguay and Uruguay – and Chile. EU-Latin America trade doubled between 1999 and 2008: imports into the EU increased from €42.5 billion to €102.4 billion, while EU exports to the region rose from €52.2 to €86.4 billion. (Trade volume decreased somewhat in 2009, but in a manner consistent with the global downturn in trade, and is therefore expected to recover quickly.) At present, these imports are mainly primary products from Latin America (Mercosur alone accounted for 19.8 per cent of total EU agricultural imports in 2009), while the EU’s exports mainly consist of machinery and transport equipment. And while the EU’s trade balance with respect to goods is negative, it is in fact a net exporter of services to Latin America.

The EU is also the most important source of foreign direct investment (FDI) for Latin America, with the total stock of European investment in Latin America having grown from €189.4 billion in 2000 to €275.4 in 2009. (Incredibly, the EU has more FDI stock in Mercosur alone than in Russia, China and India combined.) Such positive trends are only likely to improve with the expansion of the EU.

Latin America has traditionally been viewed as the US’ either exploited or ignored backyard. These days, however, the shifting power dynamic is rendering this stereotype obsolete: Latin Americans are beginning to exert influence in the American political arena.

Latin America is the largest source of immigrants – legal or otherwise – to the US. Latinos now account for 15 per cent of the US population and nearly 50 per cent of recent US population growth. Approximately 73 per cent of the US’ Latino population has American citizenship, and increasing numbers are turning out to vote: according to the Pew Research Center, a polling group, 47.2 per cent of eligible Latinos voted in the 2004 presidential election, while 49.9 per cent voted in 2008. Moreover, between 2004 and 2008 the number of eligible Latino voters rose by 21.4 per cent, as against a rise of just 4.6 per cent among the rest of the population.

The accessibility of Spanish-language media, in conjunction with transnational and family ties to ‘home’ countries, means that this growing Latino electorate is increasingly well-informed about events and developments in Latin America and therefore increasingly motivated to influence US policy, with domestic and international consequences. A prime example is the ongoing brouhaha over the state of Arizona’s tough new immigration law that has prompted the federal government to bring suit against the state government for superseding federal jurisdiction. While the outcome of the suit remains uncertain, Arizona’s controversial law was at the top of Mexican president Felipe Calderón’s agenda at a recent summit with his US counterpart, Barack Obama. In short, Latinos are increasingly shaping America’s political agenda.

Indeed, emergent Latinos are everywhere. Carlos Slim, a Mexican telecommunications mogul, is currently the world’s wealthiest man, according to  Forbes magazine. He is also the man who single-handedly saved The New York Times by lending the embattled newspaper $250 million early last year, thereby becoming, some suggested, its unofficial owner. Meanwhile, a Brazilian named Eike Batista occupies eighth position in Forbes’s list of billionaires. With two of the top 10 wealthiest people on Earth coming from Latin America, perhaps it is time we shifted our gaze away from the East for a moment, to focus on another region that is in many respects enjoying an equally momentous resurgence.

Whether it is petroleum, biofuels or rechargeable batteries, Latin America holds the keys to most of our future energy supplies. The world simply cannot meet its energy demands without the co-operation of Central and South America.



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