US-Latin American Relations Heading South

The US Under-Secretaty of State for Latin American Affairs Arturo Valenzuela has set off a firestorm in Buenos Aires when making remarks critical of Argentina's legal protections for foreign investment. The remarks have so angered the Argentines that Foreign Minister Jorge Taiana sought out Secretary of State Hillary Clinton on the margins of the World Climate Conference in Copenhagen to lodge a protest.

What set off the fireworks were comments by the Under-Secretary in Buenos Aires as his initial trip to region since being confirmed was wrapping up Wednesday. Valenzuela relayed some criticism he had heard from the representatives of US companies doing business in Argentina about the local investment climate.

"I noticed a change: In 1996 there was much more enthusiasm and intentions to invest; today I heard concerns about legal insecurity and concerns about economic management; unless there are changes, the expected investments can't be carried out," he told local press on Wednesday. Valenzuela was also the Under-Secretary for Latin American Affairs during the Clinton Administration, the hey-day of the neo-liberal Washington Consensus when free markets economic policies were all too often rammed down Latin America's throats.

That comparison to 1996 and the criticism of legal protection regime for foreign investment (inseguridad jurídica) is what triggered a ferocious response not just from the Argentine government of Cristina Fernández de Kirchner but from various sectors within Argentina that has been front-page news for the last two days.

Most searing were the comments of former President Néstor Kirchner (2003-2007), whose administration stabilized the economy after the crash, who opined that Valenzuela came to visit "the neo-liberal parties and not the Argentine people."

"These are the declarations of a man who does not recognize the reality that Argentina has lived, he overlooks or dismisses the failed enterprises, the unemployment and the indigency that the attitudes, policies and politics of 1996 generated," affirmed Kirchner to radio networks.

Referring to the numerous on-going bailouts in the United States, the former President and husband of the current one added that "Valenzuela would do well pay attention to the drama in his own country where there prevails a doctrine of unforseeability that rescues failed institution after failed institution" adding that Argentina does not need more "viceroys" on lecture tours.

In hindsight, it was perhaps a mistake to nominate the Chilean-born Georgetown University professor Arturo Valenzuela for this post. His ties to the Clinton Administration and the Washington Consensus run too deep and across much of Latin America, anything that reeks of neo-liberalism is automatically disqualified. It speaks volumes, however, that Obama Administration is preaching free markets and giving lectures on the free flow of capital to Latin America.

Nonetheless, there are a few other issues driving the increasing bitterness in US-Latin American relations. The failure to restore Manuel Zelaya to power in Honduras has not only upset the usual suspects of Hugo Chávez, Rafael Correa, Daniel Ortega and Evo Morales but also the more pragmatic Luiz Ignácio da Silva (Lula) in Brazil who is refusing to recognize the newly elected government of Porfirio Lobo. So far only, Panamá, Costa Rica, Perú, the Dominican Republic and Colombia have recognized the results of the election but Lobo is currently on a good will tour of the region in hopes of gaining diplomatic recognition. However, Lula's spokesman Marcelo Baumbach said Monday that "The president's position is clear. Brazil does not intend to recognise a government elected in a process that was organised by an illegitimate government." Lula has also said he has no interest in talking to Lobo.

The other major sore point is the ten-year US-Colombia bases agreement that was recently signed in October. The agreement has aroused the natural bellicosity of Hugo Chávez who now see plots against his regime afoot everywhere. This week Chávez accused the Netherlands of allowing the US to use the Nederland Antilles (Aruba, Bonaire, and Curaçao) as a staging area for troops. Chávez's own paranoia aside, the US-Colombia agreement has aroused general rebuke across the region. Only Perú has been mildly supportive.

Still, Washington's relations with Caracas are arguably worse now than they were under the Bush Administration. While the US-Colombia agreement has clearly angered Chávez, there are other factors that plague the relationship. A July 2009 US Government Accountability Office (GAO) report on Venezuelan drug-trafficking found that the influx of cocaine into Venezuela from Colombia had increased fourfold from 2004 to 2007 due to corruption at high levels of the Venezuelan government. US officials have long accused the Chávez regime of turning a blind eye to the increasing drug flows via Venezuela and allegations that the Venezuelan military is aiding the FARC in Colombia. As the charges escalate, Venezuela has refused, in turn, to cooperate with US counternarcotics programs maintaining that Venezuela has its own programs in place but Chávez has also on more than one occasion claimed that DEA is simply a front for the CIA.

In September, a US Treasury Department investigation into money laundering in Miami led authorities to bank accounts in the Principality of Andorra, nestled in the Pyrénées. According to the Diari d'Andorra, officials of the Unit for the Prevention of Money Laundering (UPB) blocked the assets "after relevant inquiries and after certifying the existence of the accounts and the information received from the United States." The frozen bank accounts belonged to people with close ties to the Venezuelan President. The report, which cites official Andorran sources, noted there were "billions of US dollars of doubtful origins (in the Miami accounts) with possible links to the financing of terrorism." Among the organizations that US officials suspect might have benefitted from this assistance are the Colombian Revolutionary Armed Forces (FARC), the Islamic groups Hezbollah, Hamas and Al Qaeda, Iran's Revolutionary Guard and the Basque separatist group ETA. Moreover the United States has expressed concerned that Venezuela could supply the Islamic Republic of Iran with uranium from recently-discovered deposits. Chávez dismisses the charges but didn't help matters when in one of his weekly television programs jokingly asked his Defense Minister if he had shipped the uranium to Iran.

The situation has reached the level of absurdity. A comment by Secretary of State Clinton at a State Department forum on US relations with Latin America set off another unexpected volley of reaction. "If people want to flirt with Iran they should take a look at what the consequences might well be for them. And we hope that they will think twice," she said. "We can only say that is a really bad idea for the countries involved," Clinton warned.

The Secretary received an earful in return. Chávez lashed out declaring her statement as "signs of an imperialist offensive" which aims to stop the growth of progressive forces in the region and recover control over its "backyard".  Speaking at the summit of the Bolivarian Alliance for the Peoples of Our America (ALBA) as it met in Havana, Chávez insisted that the statements were an "open threat, an indication of the coming imperialist offensive." Bolivian President Evo Morales rejected Clinton's comments and reiterated he would not accept any kind of threat or warning from the US government adding that a US invasion of Latin America would lead to a "second Vietnam."

Even Brazil, where cooler heads prevail, is openly dismissive of Obama overtures.  In November, President Obama wrote to Brazil's President Luiz Inácio Lula da Silva on the eve of a visit from Iranian President Mahmoud Ahmadinejad, reiterating the US position on Iran's nuclear program, and urging the Brazilian leader to back it. Instead Lula gave Ahmadinejad the red-carpet treatment at their meeting telling him Brazil supports Iran's nuclear program "for peaceful means." Later in early December Lula went even further suggesting in Berlin that US should first get rid of their nuclear arsenals before trying to prevent Iran from building its own atomic weapons.

And Lula was openly critical of the US-China agreement not to set targets on carbon emissions reached at the APEC meeting. Moreover issues such as Cuba remain a thorn with an increasingly exasperated Latin America failing to see any movement in US-Cuban relations and holding the Obama Administration responsible. Whatever optimism there was in the region that Obama would lift the embargo unilaterally has faded now almost a year into his term. Furthermore, there is a developing consensus in the region that the United States isn't doing enough to curb its perceived voracious consumption of illicit drugs and that the drug trade is destabilizing regimes from México to Argentina. And then in both Colombia and Panamá, complaints center on signed Free Trade Agreements (FTAs) that have yet to be ratified. The Colombia FTA was signed November 2006 and the Panamá FTA in June 2007 and the view gaining currency is why bother with the United States.

No doubt much of the current dynamic can be traced back to the Bush Administration, when Latin America, apart from perhaps Colombia, was largely ignored. The failure of neo-liberalism set in motion a process that has moved the continent leftward, albeit with two very distinct economic models and varying adherence to democratic norms. But the continent also learned to say no and to make due without if not ignore the United States while seeking alternative arrangements. Though the US remains the largest trading partner with the region with an exchange of goods valued at $560 billion in 2008, trade between Latin America and China has skyrocketed from $10 billion in 2000 to $140 billion in 2008. China is now Brazil's largest export market and Chile's largest trading partner in each case supplanting the United States. And countries as diverse as Colombia, Perú, Ecuador, Costa Rica and Argentina have all signed trade agreements with Beijing. And while the United States seeks to lecture Latin America, China does not.

Tags: Arturo Valenzuela, Hugo Chávez, Latin America, Luiz Ignácio da Silva, Neo-liberalism, Obama Administration, US-Brazilian Relations, US-Latin America Relations (all tags)



Re: US-Latin American Relations Heading South

Maybe we should have just stayed out of the Honduras situation.  About the only reason to label it a "coup" is that we wouldn't want to put ourselves in opposition to the rest of the hemisphere by saying otherwise.  But if they're still going to be angry with us for not doing enough to reverse the "coup" - seriously, folks, a negotiated resolution is how the grownups handle it - then why did we even bother?  Frustrating.

by Steve M 2009-12-19 05:39AM | 0 recs
Re: US-Latin American Relations Heading South
Valenzuela is right about Argentina's weak legal system. I'm glad he said it.
by GT 2009-12-19 06:07AM | 0 recs
Re: US-Latin American Relations Heading South

Hillary picked him, and he's very very good. He's also correct, and the Argentines know it. The guy's a fricking genius with amazing credentials and decades of experience. This is a tempest in a teapot. her-clinton-hand-joins-obamas-team-as-he ad-of-hemispheric-affairs%22

(I very recently spent 3 weeks in Argentina and Chile. Amazing people, amazing geography, and Arg politics / economy is completely untrusted by its people, btw. If you ever get the chance to visit, do not pass it up.)

by QTG 2009-12-19 06:21AM | 0 recs
Re: US-Latin American Relations Heading South

I've known him for years. He's peer reviewed some of my work ages ago. And I've attended a number of his lectures. His Breakdown of Democratic Regimes: Chile remains the definitive work from a political science perspective.

I think where I disagree with you is that the political climate has changed. Latin America isn't up for lectures anymore especially from neo-liberals. The term has reached epithet proportions.

I haven't been to Argentina in a few years now but I've been there many times and I was there when it all went awry in December 2001. But 2008 was also a tough year with some of the sheen of the Kirchner model coming undone. If anything the country is probably more polarized than any other country except Venezuela and Bolivia.

I think you are right this episode vis-a-vis US-Argentine relations is a tempest in a teapot but elsewhere the relations are irreconcilably poisoned. Venezuela, Bolivia, and Nicaragua are clearly headed in a different path. Chávez does have continental ambitions in the sense he wants to extend his Bolivarian revolution across the region but Chávez is the most unpopular and divisive figure in the region. You either love him or hate him. Even Lula doesn't know quite what to do him.

Elections are due in Chile next month. The country looks to be headed to the right. I haven't seen any polling so I may be wrong. Colombia goes to the polls in May. Hard to say what will happen there. Uribe is at the lowest point of his Presidency at just 56% approval after being at 93% in July 2008. He's not pushing for a third term - which I oppose and I do vote in Colombia - but his supporters are. The pressure from outside Colombia on Uribe to step aside is tremendous and I appreciate those who have spoken up. The issue really is that Latin American presidents are essentially constitutional dictators. They have wide powers of appointment and can rule by a decree to a degree not found elsewhere. Uribe has largely but not completely remade the courts. A third term would complete that. His security policies are popular but his economic ones less  so -he's a free marketeer in a country that has traditionally had a large state sector that is well managed. And then there is the matter of his religious views. He is the most Catholic president to run the country since the 1950s. It's wearing thin. Still it has been a series of scandals that have been eroding his popularity. There's been false positive scandal (where the army lured innocent youths to their deaths to reap rewards for killing guerrillas), a domestic spying scandal, another scandal that hit the DAS - the intelligence agency - where its leader ordered the extrajudicial assassination of four people of whom one wasn't even a member of an illegal organization, and a scandal in a agricultural credit bank.  So it is still hard to say what will happen. The mood of the country may be Uribismo without Uribe so that means Juan Manuel Santos, the former Defense Minister and member of the Santos family one of the most respected in the country. Still there are other options. The Liberal Party is staging a comeback and there is progressive civic movement which probably where I personally will end up supporting plus the left and the right. Colombia has a first past the post second round format.

Perú goes to the polls in 2011 and Perú may be the next go hard left.

On Chávez, it is really hard to say what will happen. There are legislative elections at the end of 2010. He too is at his lowest point but the country is deeply polarized. Chávez is erratic but increasingly dogmatic. He won't relinquish power willingly. Elections are increasingly farcical. His electoral council disallowed over 300 opposition candidates in last year's municipal and state elections. It is quite the system, any prosecutor can put a candidate under suspicion of corruption but not actually bring charges. It's a legal limbo where you are accused of wrongdoing going years back but you can't clear your name because you never go to trial in time for the elections. For him it truly is "socialism or death." He has crossed the rubicon, the question is whether Venezuela is prepared to go with him.

by Charles Lemos 2009-12-19 10:45AM | 0 recs
Re: US-Latin American Relations Heading South

Whether American commerce is leery of investment in Argentina right now seems to be an empirical statement rather than an ideological lecture.  If it's true, it really doesn't matter whether Argentina likes it or not; the investment is simply not going to be there.

by Steve M 2009-12-19 11:01AM | 0 recs
Re: US-Latin American Relations Heading South

I don't disagree. The investment is likely not going to occur. Argentina will increasingly seek alternative arrangements.

I think part of the objection is that Valenzuela made private complaints public. If you are going to criticize another country's legal system, tell it to their faces, not via the press.

This whole episode need not have happened.

by Charles Lemos 2009-12-19 11:37AM | 0 recs
Re: US-Latin American Relations Heading South

I wouldn't necessarily assume that the issue wasn't raised in private first...

by Steve M 2009-12-19 11:43AM | 0 recs
Re: US-Latin American Relations

I think you're right on that. I'm sure it was brought up but I am still going to argue it was undiplomatic. Part of my argument rests on that this is the sort of stuff that feeds Chavez and breeds resentment.

The main issue revolves around capital controls. The US is arguing for free flow of capital. The Argentines aren't interested. Perhaps more accurately, the Kirchner government isn't interested. I think it important to understand the nature of speculative capitalism and the wreckage it can cause and the wreckage that it did cause in Argentina. Of course this is not to excuse the irrational exuberance of the go-go Carlos Menen years.

Here's some background from the Financial Times in June 2005:

Argentina on Thursday announced stricter controls on capital inflows in an attempt to discourage "speculative" funds and protect the peso from strengthening further against the dollar.

The measure, which is expected to come into force on Friday, obliges investors bringing capital into the country to lock away 30 per cent of the total amount for 12 months. The decision, to be enforced by decree, adds to existing rules that force inflows to remain in the country for at least one year.

However, Roberto Lavagna, the economy minister, said on Thursday that there would be exemptions for trade finance and direct foreign investment in productive sectors as well as investment in primary issues of bonds and shares.

He said the main objective was to prevent the peso from strengthening further, and added that maintaining a competitive exchange rate had been one of the keys to Argentina's economic recovery since it devalued the peso in January 2002.

Argentina's economic recovery since its financial collapse in December 2001 has made the task of keeping a competitive peso much harder. For example, private-sector capital flows switched from net outflows to net inflows towards the end of last year, which has placed further upward pressure on the local currency.

From the LATAM perspective, the US also has a credibility problem. Speculative capitalism is a large part of the reason we're in the mess we are in and yet the US wants to export the model so American financial elites can make more money. I see this increasingly as a moral issue. The model failed there, it's failing here and yet we want to double down on it and force others to accept our dictum so that Wall Street investors can make more money.

Then consider the plight of the Panamanians and  Colombians who negotiated in good faith, signed and ratified FTAs three years ago only to be left hung out to dry. So from a Latin American perspective why should they trust the United States when all previous advice has too often been off the mark and when the US can't kept its own promises?

Personally, I think our economic model is broken. Our system is good at creating financial assets, not so good at creating productive assets. My own empirical observations indicate that neo-liberal systems are great at creating wealth for a narrow elite but not so good at eradicating endemic poverty. I'd go so far that neo-liberalism actually increases poverty. I think the better path is the Lula Third Wave with tight controls on capital, an emphasis on productive assets for a domestic market (only 16% of Brazilian GDP is export-led), and a focus on establishing a social safety net. There are trade-offs of course. You don't have hyper-growth.

If you're interested in a critique of neo-liberalism, I'd avoid Naomi Klein. Frankly,  the book is too political. I'd recommend David Harvey's A Brief History of Neo-Liberalism. The book is 200 pages and it's more economic history than straight up economics. Still for the best economic history on the failure of free markets nothing beats Karl Polanyi's The Great Transformation. Written in 1944, it's a tougher read but it is the antidote to Hayek's The Road to Serfdom which coincidentally is from the same period. I'd be hard press to take one book to a desert island but Polanyi's would certainly make the short list of candidates.

If I am reading the mood of Latin America right and perhaps I am not, it is the US matters less and less. And the blame lies squarely with the US and American-style capitalism.

by Charles Lemos 2009-12-19 05:15PM | 0 recs
Re: US-Latin American Relations

I have a client who got his start in the financial industry working for a major U.S. broker-dealer... in Argentina, like a dozen years ago.  Has the ship already sailed??

by Steve M 2009-12-19 05:28PM | 0 recs
Re: US-Latin American Relations Heading South

I've lived in Latin America for many years, including Argentina.  Valenzuela was right on the mark with his comments and the Argentine's b.s. response shows that he struck at the truth.

by Bugs222 2009-12-19 06:25AM | 0 recs
Gosh, I find myself disagreeing with what

appear to be sock-puppet trolls? Lemos, you have exactly the right mix of wariness for the current progressive wave in the rest of the Americas and disdain for the heavy-handedness of left-over Clintonista / Chicago-boys-style neo-Liberal so-called economics of yore that Obama has not gotten out from under at his state department.

by Jeff Wegerson 2009-12-19 08:36AM | 0 recs
Re: Gosh, I find myself disagreeing with what

When will some people get over the belief that any liberal who fails to subscribe to their orthodoxy must be a troll?  Not this year, it seems, but there's always hope.

by Steve M 2009-12-19 09:01AM | 0 recs
You know

If it had just been you I wouldn't have noticed. My comment was number 5 following 4 quick and short milquetoast comments all defending, not a liberal to my mind but a neo-liberal. Neo-liberals have strong orthodox beliefs too, don't they.

So maybe you're not a sock-puppet but I see that two of your buddies have come to your defense, fwiw.

by Jeff Wegerson 2009-12-19 01:56PM | 0 recs
I doubt

you could even define neoliberal.

Please don't confuse being 'left' in the US and being 'left' in Latin America.

by GT 2009-12-19 04:36PM | 0 recs
Re: US-Latin American Relations Heading South

Charles, could you correct Jeff on his misbehavior with the TRs?  

by QTG 2009-12-19 08:58AM | 0 recs
Re: US-Latin American Relations Heading South

Yes, there is no reason to downgrade comments if one simply disagrees with the opinion being expressed.

Here is the guideline:

Do not troll rate (rating as 1) another user's comment unless it is a comment that is an attack on another user. Do not hide (rating as 0) a comment unless it is an abuse of the guidelines. Abusing this privilege will result in all your ratings being erased and/or getting a warning, or being banned.
by Charles Lemos 2009-12-19 09:52AM | 0 recs
I apologize as appropriate

I was simply struck by the sequence of 4 quick and similar comments. They appeared to me to be sock-puppets. I was quite aware then and am aware now that it is bad form to troll-rate for disagreement. But I don't have TU status so by myself I was not going to disappear their comments. It was an easy way to associate the potential sock-puppets and in essence comment to all at once.

Whatever. Now this is a breeze in a teapot. But hey it's Saturday and we all have little else to do.

I hope this doesn't cause hard feelings. I would have liked a "Marginal" rating. Indeed as I think about it this rating system lacks balance and/or robustness. Can one give mojo simply because one agrees with a comment. If yes then there is need for a rating that simply rates a disagreement.

So school me further. Is 2-Mojo only used to balance a 1-Troll that may have been applied eronously? If yes then maybe I am not out of form here.

In that case, thanks for correcting me. But then there would have been no need to appeal to Mr. Lemos to call me out.

Oh this gets complicated.

by Jeff Wegerson 2009-12-19 02:14PM | 0 recs
Or how about

Maybe people have different views than you do and that does not make the trolls, or marginal , or republicans.

It may come as a surprise to you, but many people that vote for Democrats may not agree with your world view.

by GT 2009-12-19 04:38PM | 0 recs
Re: I apologize as appropriate

Charles schooled me just yesterday on a hr I gave to what appeared to me to be plaigerism. While plaigerism is illegal, it is not a basis for hr'ing a comment. I had to mojo the comment I had hidden to undo my mistake.

by QTG 2009-12-19 05:01PM | 0 recs
Re: I apologize as appropriate

Another point you missed is that when someone attributes their quote (i.e., "from Raw Story") it is not plagiarism.

by Steve M 2009-12-19 05:27PM | 0 recs
Re: I apologize as appropriate

 Even worse, I merely glanced at the posting since I never actually ever slog through that particualr poster's long-winded copy/pastes. Bound to miss something that way, I guess. I've decided that the better approach is not to read it, scan it, nor glance at it. Nor rate it. win-win

by QTG 2009-12-20 03:06AM | 0 recs


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