Latin America and the U.S.: A New Policy Direction


On January 20 a new administration will come to Washington, so this is the right time to reflect on the lessons of recent experiences in inter-American relations and to point out some pathways to a better future.

From the perspective of U.S. policymakers, the two leading recent U.S. policy objectives for the region–the war on illegal drugs and the uniform adoption of U.S.-style free market policies– are not just good for the United States, they are good for Latin Americans.

The trouble is that they are not. United States foreign policy objectives have for some time been decidedly out of synch with the needs of ordinary Latin America women, men, and their families.

Beginning with Plan Colombia in 2000, the United States has now spent over $5 billion dollars in Latin America with the stated goal of the eradication and interdiction of illegal drugs.

However, it is very hard not to draw the conclusion that the U.S. anti-drug policy has been a failure. Despite great efforts–the U.S. has over 2.3 million people behind bars, nearly half for non-violent drug offenses–drug addiction and drug use in the United States has not retreated (the U.S. Drug Enforcement Agency describes crack and cocaine use as remaining “high and stable”).

Study after study has shown that the most cost effective way to reduce drug use in the U.S. is through treatment, and that by far the most expensive method is source country eradication—it is 13 times more expensive. Present U.S. drug policies are expense and do not work.

Another key U.S. policy goal has been its whole-hearted push for the adoption of free market policies (what Latin Americans call “neoliberalism”), that economic religion that finds in free markets everyone’s salvation.

Latin America’s vast foreign debts and its need for new leading from international banks to pay the interest on existing obligations have provided leverage to compel adoption of neoliberal policies across Latin America. Most Latin America nations have had little real choice but to request loans from the International Monetary Fund, and the IMF typically attaches “conditionality” to these loans, the condition being the adoption of neoliberal economic policies.

These neoliberal programs have been in place for three decades across much of Latin America, so it is possible now to assess their success in providing economic growth and reducing poverty.

The news is not good.

Under these economic policies overall regional economic growth has been unimpressive, slower than other regions, and slower than Latin America itself in prior decades. Worse, such growth as has come has not been evenly shared, and according to the United Nations over 40 percent of Latin American’s live in poverty.

At its core this problem is about income distribution. Latin America has the most uneven income distribution of any region in the world. If Latin America’s income were only as unevenly divided as that of southeast Asia or eastern Europe, then even the tepid economic growth of the past decade would have been enough to move all but three percent of the population out of poverty across Latin America. Neoliberal policies cannot work in Latin America to end poverty because the income is too unevenly divided.

We are witnessing now how unregulated markets have worked out in this country, and more and more Latin Americans are having their doubts about these polices too. Neoliberal enthusiasts continue to argue for more time to give the free-market time to work its magic, that in the long run we all will be better off. But as John Maynard Keynes put it, “in the long run we are all dead.” We have given these policies three decades to work. They haven’t. Time’s up.

Free trade should be more fairly constructed. Less developed nations cannot fairly compete when the United States and other developed nations heavily subsidize agro-business in their home markets. The U.S. corn subsides, over 8 billion dollars a year, make it impossible for Mexican farmers to compete, and over one million Mexican farmers have lost their livelihood since Nafta came on line in 1994. The U.S. should move to swiftly phase out agricultural subsidies to agro-business, and should pressure other developed nations to follow suit.
And the United States should use its considerable influence with the International Monetary Fund to end the practice of loan conditionality. Supporting democracy means allowing nations to craft their own fiscal policies, not imposing an ideological driven, one-size fits all, economic program.

As U.S. attention has centered on its war in Iraq, Latin American has dropped off the radar. The United States is mattering less to Latin America. However, the United States should engage Latin America. The U.S. can play a positive role in Latin America, but can only do this with a change in priorities. It is time for a new direction in U.S. policy for Latin America, one that advances free and fair trade, one that focuses more on debt relief and poverty reduction, and one that respects the right of Latin America democracies to construct their own fiscal policies.

Ronn Pineo teaches Latin American history at Towson University in Maryland. He is the author of Ecuador and the United States: Useful Strangers (University of Georgia Press).