As the trade war—marked by tit-for-tat tariffs—between the United States and China escalates, Latin America is looking for opportunities to diversify economic growth. The disruption of global trade flows by the dueling trends of liberalization and protectionism may provide an opportunity for some Latin American governments to pursue politically difficult modernization agendas. Seizing the moment, however, requires policy makers and the private sector to balance short-term opportunism with long-term strategies for durable growth.
The Atlantic Council’s Adrienne Arsht Latin America Center celebrates the five-year anniversary of its founding this year. This is the first in a series of blog posts to mark this milestone. To kick off the series, we have identified five ways Latin America can make the most of a changing world order.
1. Diversify trade partners
Earlier this summer, US President Donald J. Trump’s administration imposed tariffs on steel and aluminum imports from a number of countries, including Brazil and Mexico. This act served as a wake-up call for Latin America showing that the region cannot depend exclusively on the United States as the Trump administration’s economic and industrial policies turn inward. Whether the response lies in new bilateral or multilateral trade agreements, or in upgrading existing frameworks, the US-China trade clash, in particular, offers a panoply of opportunities for Latin America. The trick, however, is in making sure these opportunities lay the groundwork for long-term sustainable and inclusive economic growth.
2. Train workforce for the jobs of tomorrow
Latin America is a young region—especially in comparison to Europe where fertility rates are low and the population aging—but it has the world’s largest skills gap. Evidence of this can be found in the fact that no Latin American countries are currently ranked in the Economist Intelligence Unit’s top ten for automation-ready countries. Argentina is the top-ranking Latin American country, coming in 17th place. The private sector in Latin America holds the key to differentiate the region in this respect. Some companies like Volkswagen in Mexico are already rising up to the task.
3. Focus on South-South cooperation
In line with the opportunity to diversify its trade partners, and efforts to tap new markets, Latin America can shift alliances and build new ones. Chile has taken this opportunity seriously since 1990. The Chilean Agency for International Development Cooperation (AGCID) works under the premise that South-South cooperation is a key instrument that can help countries reach their sustainable development goals (SDGs). The Northern Triangle countries—El Salvador, Guatemala, and Honduras—are already working with Uruguay, Colombia, and Chile, to address the endemic corruption and impunity in their countries.
4. Look inwards, take stock
With encouraging signs of a Pacific Alliance-MERCOSUR rapprochement, now is the time for Latin America to look inwards in order to better position itself in the world, all while bucking the global trend of populism. The Pacific Alliance-MERCOSUR nations would represent more than 90 percent of Latin America’s gross domestic product (GDP) and more than 80 percent of regional foreign trade, according to a report by the Economic Commission for Latin America and the Caribbean (ECLAC). Beyond mere commercial and trading opportunities, this convergence would help the region’s positioning and leverage when negotiating with China, the United States, or other economic giants. We explored this topic in our report “Pacific Alliance 2.0: Next Steps in Integration.”
5. Lead renewable energy revolution
Latin America can lead the renewable energy revolution. Taking care of the environment— mitigating human’s pernicious effects on climate—is a sure path to durable and sustainable growth. BNamericas predicts that “the number of clean energy projects coming online in 2019 in Latin America will exceed fossil fuel projects.” According to the same source, Mexico, Chile, and Argentina—three of the region’s largest economies—are leading the revolution. If successful, they could provide best practices on big economies becoming less reliable on fossil fuels.
Latin America is at an inflection point. Where it goes from here will depend on the vision of policy makers and an environmentally-conscientious private sector that has long-term strategies for durable growth.
Stay tuned for our blog posts on each of these five points.
Maria Fernanda Perez Arguello is a project associate with the Adrienne Arsht Latin America Center at the Atlantic Council.
The Atlantic Council’s Adrienne Arsht Latin America Center focuses on the region’s strategic role in a global context. The Think Five Blog Series, launched to mark its five-year anniversary, reflects on major transformations set to redefine the trajectory of the region now and in the years ahead.