In a global competition in which regions are more important than ever before, the Western Hemisphere is risking being left behind to the detriment of not just Latin America and the Caribbean, but also the United States.
Unrecognized by most, the Biden´s administration biggest political success and the most transformative policy in terms of sustainability and competitiveness — the Inflation Reduction Act (IRA) — represents a unique opportunity to forge a Western Hemisphere alliance.
With the midterm elections behind us, Biden and his team — including newly named Special Presidential Advisor Chris Dodd, a former Democratic senator from Connecticut — must swiftly refocus to explore the prospect of shared prosperity in the Western Hemisphere through an economic transformation centered on the sustainable green economy.
The industrial policy at the heart of the IRA represents an umbrella for joint development, partnership and investment in Latin America and the Caribbean, to strengthen the political and economic position of the whole region while improving human development, democracy and addressing the root causes of insecurity and migration.
To understand the imperative, let us look at the global context today and Latin America’s place in it.
As Shannon O’Neil, senior fellow for Latin America Studies at the Council on Foreign Relations, lays out in her provocative and well-informed new book, “The Globalization Myth,” globalization has been essentially regionalization — and the Americas are lagging behind. With strong arguments and data, O’Neil unmasks the myth behind the narrative of the free flow of trade and knowledge across the globe and explains that what has occurred is in fact the consolidation of regional trade and regional supply chains across three blocks: Asia, Europe and North America. These blocks represent 90 percent of the trade of goods. Latin America is within the 10 percent of the rest of the world and not well integrated with the North American trade block.
The book highlights the reality of today’s geopolitics: a competition between regions and systems. Indeed, the Biden administration’s recently published U.S. National Security Strategy explicitly recognizes this fact. Its central priority is to outcompete China, with one key element of this strategy being “to align our efforts with our network of allies and partners, acting with common purpose and in common cause”.
And while this strategy puts China in such a central role, at the same time it recognizes that “no region impacts the United States more directly than the Western hemisphere.” Although this statement would seem like a self-evident truth, in practice it has been less so.
This reality calls for a reset of the policy within the Western Hemisphere, both to ensure that the Americas regional trade and regional supply chains do not keep lagging those of Europe and Asia —which would portend a grim long-term outlook — and to effectively address human development, security, and economic prosperity, bearing in mind the deficiency on these areas lies at the root of historic migration in the Americas.
Competition and geopolitics are played regionally. Take for example, nearshoring, food safety and security, where regional synergies and coordination are essential. The Western Hemisphere has consistently missed opportunities to exploit the potential of the synergies.
This must change. And a hemisphere-wide, green sustainable transformation needs to be at the heart of efforts going forward. We must act with urgency to seize the current window of opportunity for transformative sustainable change at the core of the IRA does and of Costa Rica’s National Decarbonization Plan my administration laid out in 2019. Not only because it is an economic and human development opportunity, but also because if it is missed the regional risks are immense.
Fossil fuels are among the most important exports for each of the largest countries of Latin America (Brazil, Mexico, Argentina, Colombia, Venezuela, Ecuador and Bolivia). With jobs and national budgets depending on them. In a world aiming at carbon neutrality by 2050, and in a future in which fossil fuels usage will dramatically decrease, countries need to find new niches in the regional and global economies. If Latin America and the Caribbean are not successful in this transformation, economies and societies will fail, which in turn would create huge human security risks.
As is often noted by policymakers and advisers across the region, the United States’ toolkit for sanctioning non-allies is very clear, but its toolkit for working with allies in the Western Hemisphere is not clear, while geopolitical competitors like China handle a deep toolkit for the region.
The opportunity to address these challenges rests in enhancing the reach of the Los Angeles Declaration on Migration and Protection, and its call for sustainable development, coupled with the IRA’s most salient elements. Under the leadership of Ilan Goldfajn, its newly elected President, the Inter-American Development Bank is also a critical player in achieving a new Western Hemisphere alliance. So too is the forging of a constructive relationship between Biden and Brazil’s incoming president, Lula de Silva.
It is both a brilliant opportunity and a necessary path. It requires lots of work. Such as those the Alliance for Progress or the Caribbean Basin Initiative called for in their time. But most of all, it calls for political leadership and courage and a mutual recognition of all parties involved as true partners.
Carlos Alvarado Quesada was president of Costa Rica 2018-2022 and is a professor at the Fletcher School at Tufts University.