Latin America’s Moment

For the twenty years since the start of the North American Free Trade Agreement (NAFTA), the United States failed to fulfill its treaty obligations to open its roads and permit safe cross-border services. As part of the original agreement, Mexican trucks were supposed to be able to operate in four U.S. states—Texas, California, New Mexico, and Arizona—by December 1995, and then throughout the continental United States by January 1, 2000. Almost fifteen years later, the vast majority of Mexican trucks are still not allowed on U.S. roads. Mexico retaliated in kind, blocking the movement of U.S. trucks within its borders. In 2009, Mexico also applied retaliatory tariffs on a yearly rotating basis to a variety of U.S. imports, permitted by a favorable 2001 NAFTA dispute settlement panel ruling. To try and comply with the treaty’s obligations while also addressing domestic concerns over road safety, the U.S. government developed a series of pilot programs. President George W. Bush launched the first in 2007, enabling a total of twenty-five Mexican carriers to operate roughly one hundred trucks within the continental United States. These pioneers crossed the border twelve-thousand times in the year-long pilot program (for comparison, some fourteen-thousand thousand trucks cross the U.S. southern border alone each day). Although the program was terminated early (precipitating the retaliatory Mexican tariffs), the U.S. Department of Transportation’s evaluation of the program concluded that the Mexican carriers had better safety records than U.S. carriers. The most recent pilot program began in 2011 and finished this past October. Thirteen Mexican carriers with fifty-five registered trucks crossed the border some twenty-five thousand times during the three year trial period. A joint evaluation by the U.S. Department of Transportation and the Federal Motor Carrier Safety Administration found that Mexican trucks “had safety records equal to or better than the national average for U.S. and Canadian carriers operating in the United States.” Based on these findings, the U.S. Department of Transportation just announced that the pilot program trucks can continue to traverse U.S. roads, and that all Mexican carriers will soon be able to apply to operate in the United States. U.S. Department of Transportation, "North American TransBorder Freight Data: Indexed Data," 2014. This change benefits the United States (and Mexico) in many ways. First, it will end the $2 billion in retaliatory tariffs against U.S. goods sent to Mexico—second in importance only to Canada for U.S. exporters. When fully operational, it will also reduce costs in terms of money, time, fuel, and pollution for thousands of U.S. companies. Approximately two-thirds of U.S. annual trade with Mexico—roughly $335 billion a year—goes by road. More broadly, it is a small but important step toward recognizing the importance of North America for America’s future. Facilitating trade will strengthen the economic production platform that increasingly undergirds U.S. competitiveness and economic growth.

The region will hold just two presidential elections this year, choosing new leaders in Guatemala and Argentina. More prevalent will be congressional and local elections. Midterms in Mexico, Venezuela, and Colombia in particular may prove bellwethers for the direction of these three important regional economies. With term limits barring Otto Pérez Molina from running again, Guatemalans will head to the polls in September. The current front-runner is Manuel Baldizón of the Libertad Democrática Renovada (LIDER), returning to the electoral ring to try and avenge his second round defeat by Pérez Molina in 2011. The president’s Partido Patriota (PP) has thrown its support behind former Minister of Communications, Infrastructure, and Housing Alejandro Sinibaldi. Sandra Torres of the Unidad Nacional de la Esperanza (UNE), who divorced former President Álvaro Colom to be constitutionally eligible to run for office, also has significant name recognition and possibilities. Early polls suggest that none of the candidates has the 50 percent needed to avoid a second round. More closely watched, at least from the global financial world hoping to resolve the current debt impasse, will be Argentina’s October presidential elections. President Cristina Kirchner has yet to throw her weight behind any of the precandidates, though most expect her to (grudgingly) endorse Daniel Scioli, current governor of the province of Buenos Aires, who comes from her Frente Peronista para la Victoria (FPV) and is the front-runner in most polls. Other favorites include Sergio Massa, a Kirchner defector and current federal legislator attracting dissident peronist and opposition support behind his candidacy and party, the Frente Renovador. Mauricio Macri represents the one non-peronist in the leading bunch, leveraging his track record as a well-known businessman, former president of the storied Boca Juniors soccer team, and now mayor of Buenos Aires. To win in the first round Scioli would need to convince 45 percent of voters to stick with the FPV (or 40 percent and a 10 percent advantage over the second-place finisher), otherwise he will face a November run-off. Among midterm elections, Mexico’s president Enrique Peña Nieto and his Partido Revolucionario Institucional (PRI) may face significant challenges come July, when the entire lower house, nine governorships, and control of Mexico City’s delegations are up for grabs. The lack of immediate benefits from the recent spate of economic reforms combined with an evolving and deepening political crisis due to several instances of state associated violence and corruption make the PRI vulnerable. The question is whether the fractured PAN and PRD opposition can overcome their own problems to take advantage of their governing rival’s weakness. Colombia will hold regional elections in October that, among other positions, will determine the next mayor of Bogotá—the second most powerful elected office in the country. With well-known leftist Gustavo Petro stepping down, candidates from across the political spectrum have jumped into the race. In polls, the leftist Polo Democrático Alternativo (PDA) leads with Clara López. President Santos’ coalition, the Unidad Nacional, will likely endorse Rafael Pardo of Partido Liberal Colombiano (PLC), while former president Álvaro Uribe is already pushing Francisco Santos of the Centro Democrático (CD). Finally, Venezuelans are scheduled to head to the polls in December to renew all 165 members of its National Assembly. In the face of falling public support—with just 25 percent approving of Maduro’s performance—rising inflation, food and basic good shortages, the government has responded with increasingly authoritarian measures. Opposition leader Leopoldo Lopez has been in pre-trial detention since February and Maria Corina Machado has been recently charged with conspiring to assassinate President Maduro (along with the U.S. Ambassador to Colombia, Kevin Whitaker). Assuming the elections occur as planned, the opposition will have to overcome its own deep historic divisions to do well—a challenge for newly elected executive-secretary of the opposition coalition Democratic Unity (MUD) Jesús Torrealba. If they do, and the Partido Socialisto Unido de Venezuela (PSUV) loses its legislative majority, the stage will be set for the potential recall of Maduro in 2016.  

December 20 marks the 25th anniversary of Operation Just Cause, better remembered as the U.S. invasion of Panama. Set off by the death of an off-duty Marine lieutenant by Panamanian security forces, the invasion represented the final step in a deteriorating relationship between the United States and Manuel Noriega—once a CIA informant and close ally, later a defiant dictator, undone by the winding down of the Cold War and his own brazen corruption. The lopsided confrontation ended by early January of 1990, when Noriega surrendered to U.S. authorities. He was then extradited, tried, convicted, and eventually sentenced to twenty years in U.S. federal prison for drug-trafficking, racketeering, and money-laundering. Noriega left a devastated economy and society. During his last years the nation defaulted on its debt and fell into a deep recession, with GDP plummeting 13 percent. Panamanians living on just $2 a day rose to nearly a third of the population. Under the new democratic government led by Guillermo Endara—who most thought won the nulled 1989 presidential elections—Panama began to improve. After the United States lifted its sanctions foreign direct investment returned, especially into the country’s services sector. The U.S. military, always a strong presence due to the canal, as well as others, could again visit, boosting consumption.  Panama’s economy, and in particular its middle class, began to recover. 1999 represented an economic turning point for the country, as the United States returned the canal to Panamanian ownership and control. Today, upwards of 13,000 ships pass through the canal’s locks each year, paying on average roughly $250,000 a trip (which they wire to the canal a couple days before entering the line). This direct influx of money (netting the federal government some three million dollars a day) is complemented by a huge supporting transportation and logistics service sector that, combined, have helped Panama grow an average of nearly  7 percent a year since it gained control of the passageway—faster than any other Latin American country during this time period. Still, while the country as a whole has gotten richer, not everyone has benefited. Panama’s middle class remains small and inequality high. The sleek skyscrapers that fill the cityscape sit alongside neglected cinder-block apartments. Outside Panama’s urban areas, over 40 percent of the population lives in poverty. Panama’s richest 20 percent of the population controls nearly 60 percent of the nation’s income—a disparity that rivals neighboring countries such as the Dominican Republic and Honduras. With an expanded canal set to open in early 2016, commerce will only increase (capacity is set to double). While bringing in greater revenues, as well as likely investment, this growth will further tax Panama’s already overburdened infrastructure, including bridges, roads, and even sewer systems. The challenge will be to make its economic growth sustainable and inclusive, finding more ways for average Panamanians, and especially those in areas far away from the canal, to share in the benefits from their country’s continuing economic boom.