An Empire Upside Down
New directions in Trump’s approach to Latin America reveal the changed status of U.S. influence in the region.
This article is from Dollars & Sense: Real World Economics, available at http://www.dollarsandsense.org
This article is from the
July/August 2017 issue.
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In the early months of the Trump administration, high-profile White House visits from foreign leaders from Europe, Asia, and the Middle East garnered headlines about the changing role of the United States in the world. In the context of political and economic upheaval around the globe, observers worry that, under Trump, the United States is abandoning the global leadership role it has played for decades. But the Trump administration’s response to various crises—Brexit, North Korea, Syria—paints a chaotic and often incoherent picture. Looking instead to a region long assumed to be firmly in the grasp of U.S. hegemony—Latin America—can help us understand the contours of the changes underway. It’s true that Latin America has generally been a low priority for the new president: he did recently move to roll back Obama-era changes in the relationshipF with Cuba, but while he made Mexico a central focus of his campaign, promising to build a border wall and tear up NAFTA, there has been little action on either front. Despite the relative disinterest in the region, however, White House visits by three Latin American heads of state—Argentina’s Mauricio Macri, Peru’s Pedro Pablo Kuczynski, and Colombia’s Juan Manuel Santos—reveal three broad ways in which U.S empire is being reconfigured under Trump.
First, where Trump has a personal financial interest—such as in Argentina—his transactional deal-making instincts have marked a return to the “dollar diplomacy” of the early 20th century. Trump, however, has given the traditional exercise of U.S. political and military might in service of U.S. capital a particularly venal, personalist twist, looking to line his own pockets, even at the expense of other U.S. business interests. Second, where the broader issue of free-trade agreements dominates the agenda—as in Peru—Trump’s disavowal is affecting those countries’ international economic strategies. Trump’s vigorous campaigning against such agreements is leading those countries to seek closer economic ties with other partners, such as China. And, third, in those places—like Colombia—where leaders are seeking new solutions to the failed drug war, the Trump administration has pushed back, determined to re-escalate and remilitarize U.S. strategy. Meanwhile, U.S. non-military foreign aid to such countries is on the chopping block. These changes come even with a resurgent pro-business right wing coming to power in various countries across the region—which might have portended even closer ties to the United States. Instead, Trump may be pushing Latin America further out of the United States’ shadow—with consequences good and bad.
Trump’s Personal Dollar Diplomacy
In the context of Donald Trump’s foreign-policy belligerence—trying to point aircraft carriers toward North Korea, dropping massive bombs on Afghanistan, announcing $100 billion in arms sales to Saudi Arabia—it’s easy to overlook a few Argentine lemons. But the recent deal to allow citrus imports from Argentina for the first time since 2001, made after the visit of Argentine president Maurcio Macri to Washington, reveals much about the nature of Trump’s intentions in Latin America, where the Washington Consensus is giving way to the “art of the deal.” Macri is the wealthy businessman who won Argentina’s presidency in late 2015, ending the rule of the Justicialist (Peronist) party of Nestor Kirchner and Cristina Fernández de Kirchner. The Kirchners’ party had been in power for 12 years, and was an important part of Latin America’s “pink tide” of center-left governments. Macri’s election, therefore, signaled a broader regional shift toward the right, and he made clear his intention to bring Argentina back into the good graces of the United States.
But Macri was already a known quantity to Trump—and the two had a tense personal relationship. The massive Trump Place development on Manhattan’s Upper West Side—where residents notably rallied to remove Trump’s name from their buildings after the U.S. election—stands on land Trump bought in 1985 from an Argentine real estate magnate: Francisco Macri, the current president’s father. The deal was acrimonious, and Trump developed a strained relationship with the elder Macri, one of Argentina’s richest men. Francisco Macri told journalist Wayne Barrett that, on a golf trip in Argentina during the early 1980s, Trump spoke to him condescendingly, as if he were “a South American banana farmer” (leaving one to wonder how Macri himself might speak to such a farmer). And the rancor extended to his son Mauricio: when the younger Macri beat Trump during a later round of golf, Trump reportedly snapped his clubs in frustration. Perhaps this personal history was part of the reason that the Argentine president openly supported Hillary Clinton, a strong proponent of the neoliberal consensus to which Macri hoped to return, during the U.S. presidential campaign.
But when Mauricio Macri arrived at the White House, Trump was already eager to turn over a new leaf with his fellow real-estate scion. In fact, the path had already been cleared for a reconciliation: the Argentine newpaper La Nación reported that Felipe Yaryura, the main Argentine investor in a Trump office building in downtown Buenos Aires, was at Trump’s victory party in Manhattan on election night, posting celebratory selfies with Trump’s son Eric and having breakfast with the Trump children the next day. Then, just days later, after Macri made a congratulatory phone call to the president-elect, long-stalled permits for the Buenos Aires project were suddenly granted. Trump and Macri denied that the permits had been a subject of their conversation, but with Yaryura in constant contact with the Trump children, the content of the short phone call between the two presidents was largely irrelevant. Trump’s business interests in Argentina would proceed as he had planned.
And then came the lemons. “I know all about the lemons,” Trump told reporters during his meeting with Macri in April. “One of the reasons he’s here is about lemons.” And indeed, the lemon issue was an important piece of Macri’s broader agenda. One of the touchstones of the Macri administration—besides rolling back the advances won by activists and human rights groups to confront the horrifying legacy of the country’s military dictatorship—has been what he calls the “normalization” of the Argentine economy. To him, that includes lifting currency controls, cutting public subsidies, dismantling trade barriers like the 35% tariff on electronic goods, and negotiating a deal with the intransigent “vulture funds” that scooped up Argentine public debt after the financial crisis of 2001. All of this is intended to open the Argentine economy back up to world markets. So reversing the United States’ 15-year ban on the import of lemons from Argentina was a part of this strategy. The Kirchner adminstrations had been unsuccessfully battling the restriction through the World Trade Organization (WTO) for years, but after Macri was elected, the Obama administration indicated a willingness to reconsider the ban. Trump, however, announced immediately upon taking office that he would block any further consideration of the Obama plans for 60 days—thereby convincing U.S. citrus growers that their lobbying for the continued ban would pay off. After he extended the ban again, it seemed that Trump intended to heed domestic producers’ concerns not only about any diseases the fruit might carry, but, more importantly, about competition, and that “America First” would win the day.
While citrus makes up only about half a percent of of Argentina’s foreign sales, which are dominated by $18 billion a year in soy exports, “normalizing” access to U.S. markets is especially important to the Macri administration. What’s more, Argentina produces nearly three times the volume of lemons that the United States does, making it one of the world’s leading suppliers. In fact, a USDA analysis showed that even a small influx of Argentine lemons—20,000 metric tons, a tiny proportion of their overall production—would result in a 4% drop in prices in the United States, something domestic growers feared. Allowing Argentine lemons back in the country would hurt the industry, growers argued. So when the Department of Agriculture suddenly lifted it the lemon ban in May, after Macri’s visit, citrus growers were shocked: the “America first” promise had been broken, and U.S. producers were left in the lurch.
This seemingly small deal reveals the first important Trump-era change to the way that U.S.-Latin American economic relations have worked in recent decades. In some ways, the agreement itself is fairly typical: a neoliberal Latin American leader argues for lifting regulations in accord with a free-trade ideology, accruing benefits to agricultural producers who have consolidated landholdings and concentrated capital in fewer, larger, and more vertically integrated industrial agribusiness firms. This is consistent with the longer trajectory of trade integration that has marked the process of globalization. But it’s how this deal was arrived at, the quid pro quo on which Trump’s deal-making instinct depends, that makes Trump’s strategy toward Latin America look a bit less like the neoliberal consensus of the last thirty years, and more like the gangster capitalism of the early 20th century—only now the gangster sits in the Oval Office. That the reversal of Trump’s nationalist posturing on the Argentine lemon ban came after meeting with the leader of a country that had recently approved his business dealings demonstrates that when Trump himself stands to gain financially, he’s willing to make a deal that might contradict his America-first promises. The story of Argentine lemons, then, seems to portend a new and deeply venal kind of dollar diplomacy, where aid and trade will be dispensed as rewards for help lining Trump’s personal coffers.
Trade and Multipolarity
When Peru’s newly elected President, Pedro Pablo Kuczynski, arrived at the White House for a meeting with Trump, the narrative seemed to be one of continuity rather than change. During Kuczynski’s visit, Trump took the time to highlight to reporters his approval of the sale of military vehicles to Peru. The deal was for $668 million in reconditioned Stryker armored infantry carriers—mid-sized, rapidly deployable, armed people-movers, used by the U.S. Army in Iraq and Afghanistan, particularly in urban areas. (Notably, they are manufactured and reconditioned by a General Dynamics subsidiary in Canada, not the United States.) During his White House press briefing with Kuczynski, Trump told reporters, “I understand they’re going to be buying quite a bit of our military—some of our military vehicles. And they are great vehicles. I just looked at it and we’re approving it.” While Trump took credit for approving the agreement, the deal was actually worked out in December, under the Obama administration. That Trump’s administration decided to continue a policy of selling security-related materiel to a Latin American country was no surprise. Security aid and arms sales have long been a backbone of the relationship between the United States and Peru, which, according to the Stockholm Institute, has received more than $1 billion in arms sales since 1950.
The appearance of continued harmonious relations (lubricated by arms sales), however, was deceiving. Trump was not especially interested in Peru—he has no business dealings there—and Kuczynski, for his part, didn’t seem especially interested in the Stryker deal during the photo-op, either. Kuczynski is a classic technocrat, educated at Oxford and Princeton, who has headed not only the Peruvian energy and economy ministries, but also held positions as an executive in private finance and multinational mining, and as an economist at the World Bank and IMF. He actually held U.S. citizenship until renouncing it during his presidential bid. When Trump asked him to say a few words to the gathered reporters, he didn’t respond regarding the military sale, but instead stressed that “Latin America needs to grow more, and we’re going to talk about how to do that.” Turning to Trump, the Peruvian president said, “Maybe you have a few ideas,” to which Trump responded, “I guess I do. I guess I do.”
But the ideologies of the two presidents are largely antithetical: during the visit, Kuczynski stressed that he prefers “bridges over walls” and said that he favored the “free movement of people” across borders, a direct reference to Trump’s xenophobic campaign rhetoric about Mexico and undocumented immigrants. In this, Kuczynski echoed the speech Hillary Clinton gave to Goldman Sachs in 2013, published by Wikileaks, where she professed to dreaming of a “hemispheric common market, with open trade and open borders.” The dream of a free-trade utopia of unfettered capital animated a policy consensus that had been promoted by technocratic elites, North and South, over the last few decades. Trump’s campaign rhetoric of economic nationalism and blatant racism flies in the face of this consensus, even if, as with the Argentine lemons, some of his policies don’t. And Latin American leaders like Kuczynski are responding—by looking elsewhere for trade relationships. In an interview with a Washington Post editor before his trip to D.C., Kuczynski said he would tell Trump, “You are lucky you have Latin America.” This was backed up with an implicit threat: you may not have it forever, as new trading partners like China are becoming increasingly important.
Before he came to the White House, Kuczynski’s first trip abroad after he was elected last fall was to China, where he said his goal was to “look for investors.” Peru and China have had a free trade agreement since 2009, and they announced their intention to “upgrade” it shortly after the U.S. election in November. China is Peru’s biggest foreign market, receiving almost a quarter of Peru’s exports, largely metals like copper and iron. In addition, Chinese investors directly own a number of large mining concerns in Peru, like the massive Las Bambas copper mine in the Southern highland Apurímac region. Las Bambas has been the subject of massive protests: in September 2015, more than 15,000 people took to the streets to oppose the opening of the mine, and were in turn brutally repressed by military and police forces, which opened fire on the crowd, killing four people. As a result of the ongoing opposition—including continued road blockages that prevent the company from transporting the copper out of the mine—Kuczynski has asked the Chinese firm that owns the mine to resubmit its environmental impact studies, and has promised large-scale investment in social and developmental programs in the region. Kuczynski has realized that he must address local concerns, in order to ensure that Chinese firms will continue to invest.
Even in the area of arms sales, where the U.S. and Peru have such a long track record, new trading partners are emerging. Just a few weeks after the visit, the Peruvian Ministry of Defense announced that, despite the State Department’s approval, they had no intention of buying the U.S. Stryker vehicles. In a statement, the Peruvian government indicated that they were instead considering “proposals from diverse countries that make such military equipment.” Indeed, Peru has been courting such “diverse countries” for some time: in 2012, the Peruvian government cancelled a deal with U.S. defense contractors including Northrup Grumman, after receiving other bids from Chinese, Russian, and Israeli contractors. Though the deal eventually went to an Israeli company, the conservative Washington Times ran the headline “China steals $114 million U.S. defense deal with Peru.” Despite the hyperbole, the trade and investment relationship between China and Peru—and between China and the region more broadly—has become more important in recent years. And Trump’s inconsistent, venal approach to trade and foreign relations is likely to exacerbate the trend.
Peru, then, represents another trend in the relationship with Latin America that is likely to accelerate under Trump: Latin American countries diversifying trade and investment relationships away from the United States and toward new partners, especially China. While trade between the U.S. and Latin America has doubled since 2000, according to an OECD economist, trade with China has multiplied 22 fold. After Trump withdrew the United States from further negotiations on the Trans-Pacific Partnership, Latin American leaders convened a multilateral trade meeting in March in Chile that included representatives from China and South Korea—but not the United States. In addition to the kind of foreign direct investment and trade relationships represented by mines like Las Bambas and factories like the newly announced JAC motors plant in Mexico, Chinese state banks have been rapidly increasingly their portfolio lending to the region as well, providing more than $141 billion since such lending began in 2005. In fact, in 2016, Chinese development lending to Latin America and the Caribbean surpassed that from the World Bank and the Inter-American Development Bank, funding new infrastructure, energy, and industrial projects in Ecuador, Brazil, Bolivia, and Venezuela, among other places. Where the Trump administration prioritizes nationalist grandstanding or Trump’s personal self-interest, China will be happy to step into the breach.
Ramping up the Drug War
Beyond issues of trade, the White House visit this May from President Juan Manuel Santos of Colombia reveals how the United States under Trump is poised to stymie important progressive changes led by Latin American governments—particularly when it comes to the drug war. Colombia has long been the United States’ staunchest ally in the region, as the Colombian ambassador reinforced before Santos’ trip, telling reporters, “There are very few countries that will come and tell that we love the United States, and we want to partner with the United States.” Colombia, he insisted, loves the United States. And Santos himself, who holds degrees from Harvard and the London School of Economics, has long had a relationship with his counterparts in Washington: before becoming president in 2010, he was the country’s defense minister, working very closely with the U.S. on drug and security issues. The visit, then, appeared cordial, and both presidents issued statements reaffirming the close ties between their countries.
During their joint press conference, however, Trump implicitly reprimanded his Colombian counterpart, drawing attention to the issue of coca growing in Colombia. The Drug Enforcement Administration (DEA) recently reported that coca production had reached record-high levels in the country in 2016. The increases came after the termination of a controversial aerial eradication program in which U.S. pilots sprayed suspected coca crops—and frequently the people, animals, and plants in their proximity—with glyphosate, a chemical that the World Health Organization (WHO) has linked to cancer. Ending the aerial spraying of the chemical put Colombia at odds with a crucial part of the United States’ counter-narcotics strategy in the country (though the Colombian government allowed on-the-ground eradication efforts to begin again this year). For many observers, this change marked a new willingness of Colombia to defy the United States.
Santos, for his part, has been at the helm of two significant changes in Colombian politics: negotiating the end of the decades-long civil war between the government and the Fuerzas Armadas Revolucionarias de Colombia (FARC) guerrilla group, and advocating an international rethinking of counter-narcotics strategy. Donald Trump, however, looks to stand in the way of both—and therefore in the way of crucial changes in the region. In April, weeks before Santos’ official visit to the White House, Trump met secretly at his Mar-a-Lago resort with former Colombian presidents Álvaro Uribe and Andrés Pastrana, both of whom had been actively campaigning against Santos’ peace deal. Uribe’s vehement fight against the agreement brokered by Santos led to a narrow rejection of the first version of the deal in a national referendum, sending Santos back to the bargaining table. A revised deal was reached in November, and while progress in implementing it has been slow and uneven, the demobilization of the guerilla groups has begun.
But while his efforts at ending the half-century long Colombian civil war earned Santos the Nobel Peace Prize, critics here in the United States have pointed to the peace plan as an important cause of the increase in coca cultivation. They argue that when peace negotiations got underway in 2014, it became clear that an important part of demobilizing the FARC would be providing incentives for those growing coca to switch to alternative crops. As word of this provision spread, critics alleged, people in FARC-controlled territory planted more coca to take advantage of the coming subsidy. But as groups like the Washington Office on Latin America (WOLA) have pointed out, this narrative oversimplifies the varied and complex reasons that coca cultivation is on the rise—which include a strong dollar relative to the peso, which has pushed up the peso price of coca. Nevertheless, critics have been able to link the accord to the increase in coca cultivation, and therefore to put it squarely at odds with the stated objectives of the U.S.-led war on drugs. While we don’t know what Uribe and Pastrana discussed with Trump during their secret meeting, the president’s focus on coca cultivation levels in his press conference with Santos indicates that this narrative has been presented forcefully to Trump.
The political economy of the drug war here in the United States—where defense contractors get billions in federal dollars to build helicopters and drones, and where politicians want to keep those dollars coming to their districts—has proven difficult to change even when there is political will to do so. Trump’s focus on coca is in keeping with his administration’s promises to return to the punitive and militarized war on drugs that the Obama administration had started, tentatively, to scale back. And Trump’s return to the militarized status quo ante puts him in direct conflict with Santos. The Colombian president had been critical of the drug war since at least the 1990s, and had been part of a growing clamor for drug-consuming countries, like the United States, to recognize and address the crucial role played by demand for drugs in their own countries. Soon after being elected in 2010, Santos openly declared the drug war an abject failure, even affirming, in an interview with The Guardian, his openness to legalization (a position he has since walked back in favor of “controlled experiments in regulating drug markets”). His position stems in no small part from the devastation that the drug war has visited on his country; as he argued in a widely cited op-ed, Colombia has “carried the heaviest burden in the global war on drugs.” Indeed, in Colombia, the drug war has cost nearly half a million lives since 1990 and created the world’s largest population of internally displaced people—more than seven million refugees in their own land. The corruption of the political system, the diversion of economic resources to the military, and the environmental devastation have also been staggering. Given this burden, Santos spearheaded initiatives within the OAS and the UN system to address the failures of existing counter-narcotics strategy, and was a central convener—together with the presidents of Guatemala and Mexico—of the 2016 UN General Assembly special session on the world drug problem. Though intended to mark a turning point in global drug policy, the declaration that emerged out of the special session was fairly weak, as powerful countries like Russia and China largely upheld the status quo, and largely seen as a disappointment by those advocating a change in drug policy. But Santos vowed to continue the fight, and public opinion continues to turn toward new solutions.
Now Trump and his Attorney General Jeff Sessions seem poised to join those countries in advocating a strong return to the punitive and militarized policies of the past. But despite Trump’s open chiding of Santos, and Sessions’ grandstanding about domestic drug users, the president’s proposed budget actually slashes the aid meant to assist Colombia in drug-control efforts. Trump’s initial numbers include a 13% cut to International Narcotics Control aid, as part of a larger, 36% cut in total aid to the country. When adjusted for inflation, Trump’s proposal for non-military aid to Colombia would bring it to the lowest level since 1986, the year that DEA informant Barry Seal, who had infiltrated the Medellín cartel, was assassinated. While there may be some increases in Department of Defense appropriations for the country—congruent with a militarized strategy that Colombia would prefer to leave behind—as with so many issues in the Trump administration, the money simply isn’t where his mouth is. The proposed budget cuts could significantly hamper the Colombian government’s ability to enact the peace accord with the FARC, and the heated rhetoric will surely stymie the ongoing process to strengthen the 2016 UN agreement. Donald Trump’s government stands squarely in the way of Colombia’s push for progress.
An Empire Upside Down
In the coming weeks and months, there will likely be more revelations about the intentions of the Trump administration in Latin America, a region that has been overshadowed by the president’s rhetoric regarding Asia, Europe, and the Middle East. But the state visits by the presidents of Argentina, Peru, and Colombia reveal the broad ways in which U.S. empire is being reconfigured in the region. Where Trump stands to make a buck, he has proven willing to ignore U.S. business interests and his promise to put “America First,” as the deal over Argentina’s lemons demonstrates. But where leaders are forging ahead with a broader free-trade agenda, as in Peru, Trump’s disinterest is encouraging leaders to turn to other foreign partners and investors—particularly China. This diversification may benefit the countries of Latin America by allowing them to break a dependence on U.S. capital, but it is unlikely to change the extractive, primary-commodity model that has long dominated in places like Peru. What’s more, Trump’s anti-free-trade bluster has not yet demonstrated that it will have any positive effects for U.S. workers or consumers. And finally, Trump has demonstrated a rhetorical commitment to a hard line on the decades-long war on drugs, but also wants to drastically slash the foreign aid that has long sustained it. The new directions in Trump’s approach to Latin America, then, reveal the changed status of U.S. influence in the region. Latin America has long been seen as what historian Greg Grandin called “empire’s workshop,” the region where the United States tested out new political, economic, and military strategies that it would later deploy throughout the globe. With a new cohort of center-right, business-friendly, free-trade leaders taking power in the region, the old Washington Consensus model would have Latin America being drawn even more firmly into the U.S. orbit. But today, as Trump pursues his own business interests above all, abandons long-held trading relationships, and cuts the aid that has long sustained U.S. interests in the region, Latin America may be pulling away from the strong gravitational pull of the Colossus of the North—and the consequences, good and bad, are yet to be seen. Indeed, from Latin America, the view of the United States under Trump might begin to reveal an empire turned upside down.
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