Transatlantic Collaboration and Latin America: New Opportunities and Incentives?

WASHINGTON—When U.S. Secretary of State John Kerry said last November that the Monroe Doctrine was over, few on either side of the Atlantic took much notice. But his words are significant against the backdrop of 21st century transatlantic ties. Despite Asian growth, transatlantic collaboration sustained by common interests and values will be critical in shaping the global order. Greater participation by Latin America — particularly Brazil, despite current obstacles— can strengthen this partnership.

Trade will be a prime vector for engagement. The mega-agreements under negotiation — the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP) — encompass roughly two-thirds of global GDP. The open trade and investment regimes they envision can drive economic growth and social development for decades. The agreements will facilitate the participation of Latin America’s open traders in value chains, accelerate the dissemination of new technologies, and help spur competitiveness.

Regional integration within Latin America helps. The most successful example may be the new Pacific Alliance, encompassing Chile, Peru, Colombia, and Mexico. With a third of the region’s GDP and over half its manufactured exports, alliance states are advancing quickly toward a zero-tariff regime, integrated stock and capital markets, regulatory harmonization, free movement of labor, and greater political coordination. As Pacific Alliance states reach outward — all have free trade agreements with the EU and United States — they will have greater capacity, and influence.

Atlantic South America is more complicated, but still promising. Brazil, with its unique combination of scale, resources, talent, and national will, is the main protagonist. Brazil and Argentina sat out the push for trade integration embraced by Pacific Latin America, North America, Europe, and much of East Asia. Although Mercosur (encompassing Brazil, Argentina, Uruguay, Venezuela, and Paraguay) furthered some short-term political objectives after the agreement’s establishment in 1991, its principle economies remain among the region’s most closed.

Brazil instead leveraged high commodity prices and sound macro-economic policy to achieve growth and reduce social inequity. But its statist, protectionist approach abetted by private sector complacency are unlikely now to produce the growth required to expand social gains. With persistent infrastructure, fiscal, and regulatory problems too, Brazil knows the status quo will leave it increasingly isolated and uncompetitive in the new global economy.

Diplomatically, relations with the United States and EU took a back seat to other priorities, including attempts to project Brazilian leadership in the global south and strengthen ties to emerging economies. Many Brazilians now question the effectiveness and appropriateness of these approaches. A number of developments — softer commodity prices (including for energy), stronger economic fundamentals in the United States, improving economic prospects in Europe, progress toward TPP and TTIP, and closer commercial and energy ties between Africa and the North Atlantic — suggest an emerging global economic environment very different from what Brazil’s leaders bet on.

The days of breathless rhetoric of an emerging Brazil seem to be over. As all societies know, reinvention is politically difficult. There are heated debates in Brazil about how best to pursue the country’s interests and what its role in the world should be.
Some signs suggest pragmatism may win out. More businesses are advocating open trade and investment regimes. And the public is demanding better services and accountability — demands hard to ignore, and impossible to fulfill in anemic growth scenarios.

After 14 years of discussion, the EU is awaiting final proposals on an EU-Mercosur free trade area. At issue is whether Brazil’s will suggest a two-track approach to facilitate a strong agreement with countries that are ready — Brazil, Uruguay, and Paraguay — leaving room for Argentina to follow later if it so decides. At Davos last month, Brazilian President Dilma Rousseff seemed to back away further from Brazil’s defensive trade posture when she said it was time to recognize the role that trade plays in economic growth.

In its biggest defense upgrade in decades, Brazil just signed a contract with a European company, Saab, for a new generation of fighter aircraft. Brazilian interests require significantly upgraded national security and intelligence capabilities. The entire transatlantic community would benefit from this too, for example, through enhanced Brazilian maritime capacity in the South Atlantic, and more effective information-sharing for counterterrorism and law enforcement.

These are all areas where stronger transatlantic partnership can pay big dividends. A strong and practical partnership does not imply subservience or an identical outlook. Pursued in good faith, it can provide mechanisms to compartmentalize and manage differences while still achieving concrete progress on common goals. Both the EU and United States have various formal structured dialogues with Brazil. They have limited impact, and should be invigorated by all sides to drive more productive ties.

Beyond that, a more robust conversation is necessary between private sector, civil society, and academic players about our priorities and common interests. Understanding these will be critical as our societies assume a greater — perhaps leading — role in shaping relations throughout the wider Atlantic. Transatlantic collaboration is the world’s biggest generator of global public goods — and here is a chance to enhance it.

William McIlhenny is a senior Wider Atlantic fellow with the German Marshall Fund of the United States.

The views expressed here are the views of the author alone and do not necessarily reflect the stance of the German Marshall Fund of the United States.
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