Two very different articles on Latin America from this week

While we were all fretting about the Iranian hostages, bamboo, and Nancy Pelosi’s Hermes scarf, there were two very interesting articles on Latin America that are worth mentioning:

At Der Speigel, Peter H. Smith asks Are We Losing Latin America?

This question has been asked for over a century now, and Smith’s not particularly insightful in his opening paragraph:

A new populism is rising across Latin America and Cuba faces what could be a tough transition period. After years of neglect, it’s time for Europe and the United States to reengage a trans-Atlantic dialogue on Latin America.

For starters, while Smith accuses Pres. Bush of totally ignoring Latin America (an arguable point, to say the least), the EU’s not just ignoring but actively neglecting the region, as Smith himself admits

Europe has been unable to grant much time or attention to Latin America. In May 2006 a summit meeting of EU and Latin American heads of state produced elegant declarations that were elegant declarations devoid of meaningful content. Participants solemnly affirmed that “we reiterate our commitment to continue promoting and strengthening our strategic bi-regional association as agreed in previous summits…” As summarized by one prominent newspaper, “A paralyzed Europe collides with a divided Latin America.” The EU-Latin American summits were falling short of expectations. In recent years, the EU has undertaken few significant initiatives. The most notable activity resulted in FTAs with Mexico, in 1997, and Chile, in 2002. The 2006 summit also proclaimed the intention to negotiate a free trade agreement with Central America. In this case, as in the others, the principal goal would be to offset the preferential effects of bilateral FTAs with the United States. In the meantime, the much publicized idea of an FTA between the EU and Mercosur languished for lack of attention – and for lack of commitment on both sides. “To achieve success,” as one observer noted, “the negotiation needs fresh air.”

The EU’s reiterated commitments to continue promoting and strengthening anything and everything, are for the great part reactions to the USA’s bilateral free trade agreements with Latin American countries, among them,

• the Caribbean Basin Initiative of 1983
• the North American Free Trade Agreement (NAFTA) of 1992
• other free trade agreements (FTAs) with:
  Colombia
  Peru
  Central American nations,
  Dominican Republic,
  Chile,

and of course, Brazil.

Smith ignores completely Brazil’s current negotiations with the USA both for bilateral trade and for extraterritorial alliances.

All of these are arguable points (not the least of which being that ignorance can be bliss), but the problem I have with Smith’s article is that it views American interests in the region as bad

because they threaten to prejudice European economic interests

What about Latin America’s economic interests?

Unfortunately the EU’s economic interests are predicated on more regulation, more tariffs, more taxes, and more bureaucracy. IF (yes, a big “IF”) the EU were serious about its own, and Latin America’s, economic interests they would concentrate on how to abolish all trade tariffs and farm subsidies.

Which they will never do.

The US and Brazil, by the way, are currently accelerating the process of the DOHA global trade talks which has everything to do with tariffs.

The other article on Latin America is Alvaro Vargas Llosa’s
Castro’s Enemy: The Ethanol Alliance. As I have mentioned previously, the ethanol produced in Brazil is subject to a 54-cents-a-gallon US tarriff. Vargas Llosa correctly states

If the United States wants to boost ethanol consumption and reduce oil-dependency, it needs to make a simple decision — eliminate its 54-cents-a-gallon tariff. Experts tell us that corn-based ethanol, the kind being produced in the United States, is eight times less efficient than Brazil’s sugarcane version of the biofuel. Alessandro Teixeira, Brazil’s point man for his country’s ethanol strategy, insists that “we are the world leader, and if people really want to benefit from our ethanol industry, they have to embrace it in practice, not in theory.” Precisely because corn is much less efficient than sugarcane, the U.S. has been able to replace only about 3 percent of its oil consumption despite a huge government biofuel program.

Vargas Llosa, however, is aware of the DOHA talks,

It is hard to see how the new ethanol alliance will boost the Doha Round of world trade talks, as some commentators are claiming. The principal stumbling block is the fact that developing countries are using American and European protectionism as an excuse to maintain their own barriers in areas such as services. The U.S. ethanol program already has caused an artificial rise in the price of cereals, giving new arguments to developing nations who want to blame the United States for impoverishing them.

Vargas Llosa ends with the real reason to worry about all this government intervention,

It makes me nervous when governments, rather than investors and consumers, decide what we should invest in and what we should consume. But if the ethanol partners want their grand schemes to have a chance at success, then they at least need to start by being consistent.

And that is the lesson of the day for all involved: Latin America, the EU, and the USA.

For more on Latin America and the USA, listen to last Monday’s podcast with Monica Showalter.

(one side comment to the TCS article: Alvaro Vargas Llosa’s correct last name is Vargas Llosa, not Llosa)