Look South

Opinion, by Shinjini Kundu

RIO DE JANEIRO, BRAZIL – President Obama’s foreign policy has focused more on Asia than any other president in U.S. history. President Obama considers Asia to be a strategic player in the U.S. economy. The rapidly expanding Asian consumer market is a funnel for U.S. exports.

The administration is also worried that the regional trade deals within Asia will leave the U.S. without any influence in the region. The Obama administration worked assiduously to re-negotiate free trade agreements with South Korea, partly in response to China and Japan, who have now both outbid the United States as South Korea’s top trading partner.

However, in pursuing trade deals in Asia, the U.S. is merely responding to China’s agreements with Southeast Asian countries, missing important opportunities in the south. And by south, I mean our South American neighbors.

Growing trade with Asia has increased competition for South American exporters in access to the U.S. market. But lack of free trade agreements with most South American countries has given Asian countries preferential access to the U.S. market, forcing South American exporters to look elsewhere. This has been a thorn in trade and foreign relations with South America.

There are many reasons why the U.S. should be focused on Latin America now. Rising industrial production in Asia has stoked demand for raw materials, increasingly sourced by South American countries. China has already replaced the U.S. as Brazil’s largest trading partner, and the U.S. is slowly falling off the radar.

Latin American countries collectively have an oligopoly on rich natural resources. Chile has the world’s largest copper stores. Bolivia has lithium. Brazil is home to the largest oil discovery in the past thirty years. Arable land in South America cultivates thriving agribusinesses. From tropical fruits to grains, coffee and sugar, meats and fish to cocoa, South America exports food to the rest of the world.

This year, the world population surpassed seven billion people. By year 2050, nine billion people will inhabit Earth, driving up demand for everything from minerals to agricultural products. No other continent is better poised to pick up this demand than South America.

Countries like Brazil, Argentina, Uruguay, and Chile will become formidable players in this trade. China will be the foremost competitor for market share of South America’s exports.

In fact, demand for South American goods is ripening as we speak and China is already staking claims to South American exports. From 2000 to 2009, total trade from South America grew by a factor of ten.

China has already surpassed the U.S. in energy consumption, and has become our greatest competitor for energy and natural resources. Political power is realigning with trade, which does not augur well for U.S. influence in South America.

The United States has also lost its standing with continued weakness of its economy, while Latin America emerged from the global financial crisis largely unscathed and gained political confidence from sustained growth at over four percent a year.

South America also represents a potent consumer base for American products, which helps support U.S. businesses as well. Mauricio Cárdenas, senior fellow and director of the Latin America Initiative at the Brookings Institution, points out that Latin America’s GDP is about 84 percent of China’s GDP, and GDP per capita is double that of China.

The savings rate in Latin America is significantly lower than in China, translating directly into higher discretionary spending. Thus, the urgency for hemispheric trade agreements has never been greater for the U.S., though fostering these agreements will require tough negotiations.

Because when it comes to our southern neighbors, it appears that the U.S. has wittingly been left off the guest list of the housewarming party.

There has been a growing sentiment among many South American countries toward south-south integration and autonomy from U.S. influence, manifested in political rhetoric and actions. For instance, earlier this month, the Community of Latin American and Caribbean States (CELAC) summit was held. All countries in the western hemisphere were invited except the U.S. and Canada. The Chinese president penned congratulations on the summit in a letter.

Latin America is wary of unilateralism and interventionism. Latent resentment stems from the memory of numerous U.S. and proxy Soviet showdowns using Cold War era Latin America as the stage, not to mention open criticism of current socialist regimes.

The past policies of a unilaterally dictated South America are no longer tenable in the future. The U.S. needs to be proactive in promoting a mutually beneficial relationship based on shared interest. Given that history between Latin America and the U.S. has been shaky, the onus is on the U.S. to focus on building hemispheric partnership with South America expediently, shedding politics of the past.