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While the United States Slept, South America Walked

As published in Volume 24 of the MACLAS (Middle Atlantic Council of Latin American Studies) Latin American Essays (2011), pp. 43-55.

By Thomas Andrew O’Keefe
Stanford University

I. Introduction

Since the terrorist attacks on the United States mainland in September 2001, the strong political and economic influence that the United States once wielded over South America has steadily eroded as a result of rising new global economic powers and a multiplicity of self-inflicted foreign policy fiascos under the Bush administration that forced officials in Washington, D.C. to turn their attention elsewhere in the world. Despite initial promising rhetoric from the Obama administration of a new relationship with the South American continent premised on a partnership, particularly on the issues of energy security and climate change, the loss of influence continues. The United States remains mired in intractable conflicts in Western Asia, its economic recovery tenuous, and a highly partisan political system at the Federal level makes it impossible to achieve a consensus on addressing major issues of importance to the future of not only the country but the planet.

South America has taken advantage of the lack of attention from Washington, D.C. during the past decade to solidify regional efforts that bring leaders from a myriad of ideologies together to tackle problems that have long bedeviled the continent. Not surprisingly, given it is largest country in South America and has the biggest population and economy, Brazil finds itself at the center of these efforts. Despite this, Brazil has avoided assuming an overt and aggressive leadership style preferring to work through regional or multilateral frameworks. In part this reflects a conscious desire not to be seen as replacing the United States as the new hegemonic power in the region, something that would generate inevitable resentment and backlash from its smaller neighbors.

The purpose of this article is to explore the Brazilian-led initiatives of the past decade in South America and discuss their achievements and shortcomings. This article also examines how these initiatives have the potential to complement a visionary U.S. policy for the continent that supports goals that are of mutual interest to the inhabitants of both North and South America. For the latter to succeed, however, it will require a major paradigm shift among U.S. policy makers that appreciates South America’s new role as a political and economic power on the global stage. At the same time it will also require that Brazil take on the type of responsibilities associated with responsible global leadership that may occasionally demand sacrificing short term national gain in favor of long term regional stability. In that regard, Brazil may also find it necessary to rethink its traditionally strong opposition to anything that limits its sovereign powers in favor of the establishment of strong regional institutional bodies.


The inauguration of George W. Bush as 43rd President of the United States was greeted with cautious optimism throughout Latin America. Bush had previously been the governor of Texas and had encouraged cross-border cooperation between his state and Mexico. The fact that Bush’s first foreign visit was to Mexico City and not Ottawa, thereby breaking a long-standing tradition by American Presidents, further fed this guarded optimism. During its first year in office, the Bush administration exhibited interest in reforming U.S. immigration policies by recognizing the need to facilitate the legalization of millions of undocumented workers, most of them from Latin America and the Caribbean.1 The terrorist attacks in the northeastern United States on September 11, 2001 quickly brought any initial heightened concern shown to countries south of the border to an abrupt halt. The United States became preoccupied with border security as well as Central Asia and the Middle East, eventually leading to the invasion of Iraq, a quagmire that continues to consume billions of dollars in resources on a weekly basis.2

The pre-emptive U.S. invasion of Iraq in search of supposed weapons of mass destruction that proved to be non-existent was never approved by the United Nations (UN) Security Council. The United States was unable to secure a unanimous vote approving the invasion from the permanent members of the Security Council as well as a majority of the temporary members that included Chile and Mexico. This was despite a public apology made by the then U.S. Secretary of State Colin Powell for acts committed by the Nixon administration that contributed to the overthrow of Chilean President Salvador Allende on September 11, 1973 and veiled threats not to ratify the Chile-U.S. free trade agreement. The actual invasion of Iraq in March 2003 was therefore illegal under Public International Law and revived memories of the worst excesses of historical US violations of national sovereignty throughout Latin America.3

The Fourth Summit of the Americas held in the seaside city of Mar del Plata, Argentina, on November 4-5, 2005 signaled the demise of the Free Trade Area of the Americas (FTAA) project that had been greeted with enthusiasm by Western Hemisphere governments when it was first announced a decade earlier in Miami. Although 28 of the 34 participating countries in the Western Hemisphere supported a US proposal to reinitiate FTAA negotiations in early 2006, the four MERCOSUR countries (i.e., Argentina, Brazil, Paraguay, and Uruguay) and the Bolivarian Republic of Venezuela refused. At an alternative “People’s Summit of the Americas” held in a large soccer stadium across town, Venezuelan President Hugo Chavez delighted the crowds with fiery denunciations of the FTAA as a project designed to make Latin America and the Caribbean the economic vassals of U.S. imperialism.

The election of Barack Hussein Obama to the White House in November 2008 was greeted in Latin America and the Caribbean---as in much of the rest of the world--- with relief. The new U.S. president, the first with visible African ancestry, came across as charismatic, articulate, and intelligent and promised to put an end to the divisive unilateralism that had characterized the foreign policy of his predecessor. Nothing during the campaign indicated, however, that an Obama presidency would renew U.S. interest in working with its hemispheric neighbors to resolve mutual problems. In truth, Obama’s campaign threats to withdraw his country from the North American Free Trade Agreement (NAFTA) implied just the opposite. Furthermore, candidate Obama only once gave a policy address on Latin America and the Caribbean. That one speech was in May 2008 before the right-wing Cuban American National Foundation in Miami. The speech was intended primarily to attract votes from Cuban-Americans and increase support for three Cuban-Americans running as Democrats in Florida against three entrenched Cuban-American Republicans for seats in the US House of Representatives.4 Accordingly, policy proposals for Cuba dominated Obama’s address in Miami, including a pledge to retain a trade embargo older than he. Obama also pledged to fight drug trafficking in Colombia, but this was undermined by his subsequently expressed opposition to ratification of the Colombia-U.S. free trade agreement and enhancing opportunities for Colombians to engage in alternative export activities not centered on the drug trade.

The Fifth Summit of the Americas in Port of Spain, Trinidad in April 2009 served as an expensive debutante ball for Obama for which the hapless taxpayers of Trinidad and Tobago were saddled with paying much of the tab. Underscoring the clever politician that he is, Obama diverted attention from the fact that the United States was unable to offer anything that the rest of the Western Hemisphere needed or wanted by saying he was there to “listen”. The fact that the United States was not in a position to commit itself to anything in Port of Spain was understandable. The United States economy was still in a free fall with the biggest U.S. banks teetering on bankruptcy, the number of unemployed Americans dramatically increasing, and a foreign policy agenda dominated by withdrawing U.S. troops from Iraq, stabilizing Afghanistan, and resolving the Israeli-Palestinian conflict.

The scant attention the Obama administration continues to pay the Western Hemisphere after the Trinidad Summit displays a shocking ignorance of the importance of the region for the long term economic health of the United States. For example, nearly half of all U.S. imports of crude oil and refined petroleum products come from the Western Hemisphere (versus 21 percent from the Persian Gulf).5 That proportion has the potential to increase in the future in light of recent discoveries of massive off-shore oil deposits in Brazil. Trinidad and Tobago is already the largest source of Liquefied Natural Gas imported by the U.S.6 Increased use of bio-fuels and other alternative energy resources by the United States, coupled with the need to establish a workable “cap and trade” program on carbon emissions, requires enhanced not reduced cooperation with countries in the Western Hemisphere. At the same time, the U.S. pay-as-you-go social security system is increasingly sustained by a steady inflow of young immigrants from Latin America and the Caribbean.7

At the margins of the Fifth Summit of the Americas in Trinidad, the U.S. delegation floated the idea of establishing an Energy and Climate Partnership of the Americas. Precisely what this initiative would consist of was left for a June 2009 meeting of energy ministers in the Peruvian capital.8 At the June meeting in Lima, U.S. Energy Secretary Steven Chu was noticeably absent. He preferred to address the delegates in a prepared speech delivered through video conferencing technology that permitted no opportunity for debate or intense discussion. Perhaps not surprisingly, the meeting concluded without any firm commitments on energy security, alternative energy promotion, or even common goals for confronting climate change. Among the few concrete achievements was a bilateral agreement signed by U.S. and Peruvian officials to establish a Regional Energy Efficiency Center. For its part, the Mexican government agreed to fund a Regional Wind Center.9 The U.S. delegation also proposed a “Low Carbon Communities Program” by which the Department of Energy will “partner with countries in the region to provide technical assistance and limited funding to develop building standards and adopt modern urban planning strategies including transit-oriented development to achieve low carbon communities.”10 Besides being presumptuous, given that many South American cities such as Bogotá (Colombia) and Curitiba (Brazil) are already well ahead of their U.S. counterparts in substantially reducing carbon emissions, critics point out that this new effort appears remarkably similar to the Clean Cities International Program first proposed by the Clinton administration with Chile in the 1990’s.11 That initiative was ultimately hampered by a lack of funding. Given the massive fiscal deficit amassed by the United States in recent years and the need for major cuts to the federal budget for the foreseeable future, Low Carbon Communities appears doomed to the same fate as its predecessor proposed in the 1990’s during a period of fiscal surplus.

An Energy and Climate Partnership that seeks to integrate energy markets throughout the Western Hemisphere can provide the participating nations with enhanced energy security. Latin America alone currently accounts for 13.8 percent of world oil output but consumes only 8.1 of global oil production.12 The prospects for a fully integrated hemispheric energy market in traditional fossil fuels are currently hampered, however, by the fact that not all the major fossil fuel producers utilize market mechanisms to set prices. In addition, some governments such as Argentina and Peru impose restrictions on exports, while others such as Mexico severely limit private sector involvement in the petroleum sector. These problems are political in nature and not insurmountable if the right type of leadership and diplomatic acumen is applied. The truth is that the limitations of nationalistic petroleum policies and market interventions are already becoming evident as reserves continue to shrink and energy shortages abound in those countries pursuing this route. Up until now, however, the United States has not exhibited the required leadership role or made the necessary resource commitments to turn the Energy and Climate Partnership of the Americas into a reality. For example, it took a year for the first Energy and Climate Ministerial of the Americas to be held in Washington, D.C. on April 15-16, 2010. One reason for the long delay in holding a Ministerial after ECPA was first proposed at the Fifth Summit of the Americas in Trinidad was the debilitating turf battle between the Clintonistas in the U.S. State Department and the Obama political appointees at the U.S. Department of Energy over who would have the lead role in representing the United States. The fact that Energy Secretary Chu and Secretary of State Hillary Clinton were both keynote speakers at the first ECPA Ministerial in April 2010 indicated that this dispute had finally been resolved in favor of a joint, cooperative inter-departmental approach.

Similarly, domestic political constraints in the United States currently undermine the feasibility of an integrated Western Hemisphere market limited to renewable energy resources. The United States maintains a corn based ethanol program that cost U.S. taxpayers an estimated U.S.$ 9.2 to 11 billion in 2008 in subsidy programs.13 These subsidies, when combined with the 2.5 percent ad valorem duty, a surcharge of 14.7 cents per liter, as well as restrictive volume caps, currently keep out less costly, more efficiently produced, and environmentally friendlier sugar-based ethanol from Brazil.14 For the time being, the U.S. Congress has shown itself resistant to any attempt to remove the protection and subsidies provided to corn-based ethanol produced in the United States.15 Given the political capital expended by the Obama administration in enacting health care reform and the limited capital still available to pass other pressing legislation, it is unlikely to want to engage in a battle to liberalize imports of ethanol and other biofuels that directly compete with U.S. production. Furthermore, the difficulties confronting the Obama administration in getting Congress to approve any type of climate change related legislation have been greatly exacerbated by the Republicans gaining control of the House of Representatives following the mid-term elections in November 2010.16

An important pillar of the Energy and Climate Partnership of the Americas should be the establishment of a Clean Development Mechanism (CDM) limited to the Western Hemisphere. Under the current UN administered CDM, credits can be issued to a developed country and its companies for financing projects in the developing world (e.g., building a more expensive thermal plant fueled by natural gas or a hydro dam to generate electricity instead of a cheaper coal powered generator) that reduces global greenhouse gas emissions and would not have been built but for the funding emanating from the rich country donor. The credits received through the CDM can then be used to offset mandated emission reduction targets at home.

Unlike the multilateral CDM established by the Kyoto Protocol, a hemispheric version would be less susceptible to the type of fraud that plagues the current UN administered system.17 This is not only because of the smaller number of countries involved, but also because of the plethora of potential institutions in the Western Hemisphere that can more effectively administer a hemispheric cap-and-trade program. For example, the Andean Development Corporation (CAF) already oversees a Latin American carbon market through the registration and issuance of certified reductions in the transportation sector. The CAF has also signed contracts for carbon emission sales with public and private agencies (including Spain’s Ibero-American Carbon Initiative) and investment funds resulting in new energy generation facilities using renewable resources, forestry related activities, and an expansion of biofuel production.

A CDM limited to the Western Hemisphere provides a way to move the Caribbean and Central America away from their traditional heavy reliance on fossil fuels. It also provides a means for sharply diminishing Brazil’s role as a top source of global carbon emissions. In contrast to the situation in China or the developed world, the bulk of Brazil’s greenhouse gas emissions come from the burning of its tropical rain forests. The continued burning of trees in Brazil, home to the 65 percent of the Amazon rain forest, also exacerbates global climate change given the important role the Amazon plays in naturally sequestering greenhouse gases and its impact on regional rainfall patterns. While forest conservation or reforestation projects can be used to obtain carbon offsets under the current multilateral CDM, Brazil---citing sovereignty concerns---has so far refused to permit any type of Amazonian conservation or sustainable use initiative to generate carbon credits. Brazil would be less likely to resist an effort to utilize projects in the Amazon to gain carbon offsets under a CDM limited to the Western Hemisphere, particularly if as part of a grand bargain, the United States agreed to eliminate its current arsenal of tariffs, hefty surcharges, quota restrictions, and subsidies that effectively keep out Brazilian sugar-based ethanol. In light of the previously discussed difficulty in getting the U.S. Congress to get rid of its ruinous corn-based ethanol program or pass a climate change bill, however, a hemispheric CDM seems unlikely at this point.


Whereas the United States was the destination for a majority of Latin American and Caribbean exports before 2000 as well as a source of much of the region’s imports, that is certainly no longer the case today.18 For the largest economies in South America such as Argentina, Brazil, and Chile, trade with Asia, the European Union, or even the rest of Latin America far surpasses that with the United States.19 European-based companies are also the most important source of foreign direct investment capital in the Southern Cone countries of South America, while Asian firms are increasing their presence.20 Even South American militaries no longer look automatically to the United States for weapons procurement, but now scour the international arms market instead.21

In February 2009 Brazil announced that it would supply China with long-term supplies of oil in return for loans to develop huge reserves of petroleum found in off-shore fields under several kilometers of ocean, rock, and a hard- to-penetrate layer of salt.22 China has also been assisting Venezuela to break free from its heavy dependence on the United States as a market for its oil by accelerating the reconfiguration of state-run refineries to handle more of the heavy Venezuelan crude oil. China recently loaned Venezuela some US$ 8 billion to be repaid with future oil exports, allowing Caracas to avoid turning to the International Monetary Fund (IMF). 23 Taking advantage of booming soybean exports to China, Argentina used its cash reserves to pay off its US$ 9 billion debt to the IMF in early 2006, a move intended to achieve freedom from the economic prescriptions dictated by the IMF and its principal shareholder, the United States.24 In March 2009 China agreed to a 70 billion renmenbi currency swap with Argentina allowing for payment of Chinese exports to Argentina in renmenbi instead of U.S. dollars. Ostensibly the move was an attempt to unblock trade financing severely curtailed by the global recession. However, the deal followed on the heels of China’s public questioning of the dollar as an international reserve currency and was seen by some analysts as an attempt to promote wider international use of the non-convertible renmenbi and boost China’s financial presence in Latin America.25 Less than two months after the Argentine currency swap deal, Brazil and China announced plans to work towards using their respective national currencies in trade transactions rather than the U.S. dollar.26

The erosion of U.S. economic and political influence in South America is further underscored by what happened in December 2008 when meetings of four different regional organizations were held concurrently in the northeastern Brazilian seaside resort of Costa do Sauípe.27 The four regional entities included MERCOSUR, the Rio Group (i.e., all the Spanish and Portuguese speaking nations in the Western Hemisphere plus Belize, Guyana, and Haiti), UNASUR (i.e., the Union of South American Nations), and the newly created Organization of Latin American and Caribbean States (whose name was changed to the Community of Latin American and Caribbean States following its second plenary session with the Rio Group in Cancun in February 2010). The United States and Canada are excluded from all four of these organizations.

At the December 2008 meeting of the Rio Group, Cuba was formally inducted as a full member, even though the other states had to disregard a clause that limits inclusion to democracies. For good measure, the U.S. trade embargo against Cuba was categorically condemned. The action of the Rio Group follows Cuba’s 1999 incorporation into the Latin American Integration Association (ALADI) and its membership in the newly created Community of Latin American and Caribbean States. Building on this momentum, the United States found itself outmaneuvered at the June 2009 plenary session of the Organization of American States (OAS) held in San Pedro Sula, Honduras and was corralled into voting with Canada and all the Latin American and Caribbean countries in rescinding the 1962 resolution that had suspended Cuba’s membership in the OAS.

Perhaps nothing better underscores the weakened position of the United States in South America than its inability to get support from Brazil for a new UN Security Council resolution to impose sanctions on Iran over alleged efforts to develop a nuclear bomb. Given Brazil’s status at the time as a temporary member of the UN Security Council, Secretary of State Hillary Clinton visited Brasilia on March 3, 2010 to enlist its support but was rebuffed by President Luiz Inácio Lula da Silva who remarked “[i]t is not prudent to push Iran up against a wall”.28 So long as Brazil remains unconvinced that Iran’s nuclear program is for anything other than peaceful purposes, it will not support any move towards sanctions. Undoubtedly, Brazil’s tough position reflects the successful diplomatic and commercial ties that Iran has established with many South American countries over the past decade. Argentina and Brazil are both major suppliers of foodstuffs to the Middle East, including Iran. Since 2007, Iranian President Mahmoud Ahmadinejad has been warmly received during state visits to Bolivia, Ecuador, and Brazil. Iran also has significant petroleum investments in Venezuela and there is a direct Iranair flight linking Caracas and Tehran.29

The Union of South American Nations or UNASUR that was formally launched in May 2008 seeks to integrate the entire South American continent at the political, social, cultural, economic, financial, environmental, and infrastructure level. Integration of energy markets and preparing the continent to adapt to climate change are now also important items on the UNASUR agenda. UNASUR was first proposed at a meeting of the South American heads of state in Cuzco in December 2004. UNASUR’s intellectual author is Brazil, which was also the primary promoter of the Integration of Regional Infrastructure in South America (IIRSA) initiative launched in 2000.30 UNASUR builds upon the work the Secretariats of ALADI, MERCOSUR, the Andean Community, and CARICOM have been doing since 2005 to examine ways to create a South American free trade agreement through convergence of existing sub-regional free trade agreements and bilateral preferential market access accords. Operating under the auspices of UNASUR is the South American Defense Council which seeks to promote a continental consensus on defense related issues and avoid conflicts by, among other things, requiring the South American governments to reveal their national defense budgets and cooperate in developing new technologies.

UNASUR and the closely associated IIRSA initiative promote “an understated, consensual style of leadership in the South America continent; a ‘discreet, fit-to-Brazil way’ of conducting its diplomacy.”31 UNASUR, like IIRSA, provides “an attractive political cover for the affirmation of Brazilian regional leadership, using the theme of economic integration.”32 In many ways UNASUR is a response to what was perceived as the overly commercial emphasis of the now failed FTAA. In that respect, UNASUR offers a South American approach to integration designed to overcome current differences in the types of political and economic policies being pursued in individual countries.

One concrete result of UNASUR to date has been the elimination of the use of passports and visa requirements for nationals of one South American country to travel to any other. Quick implementation of this proposal was facilitated by the fact that nationals of countries participating in the various sub-regional economic integration processes such as the Andean Community and MERCOSUR have long been allowed to travel among the participating states with only a national identification card.

In September 2008 UNASUR was mobilized to prevent a coup d’état against President Evo Morales in Bolivia. The United States was reduced to the status of an uncomfortable bystander, its own Ambassador expelled from La Paz for alleged complicity in the coup plot.33 What is most interesting about the strong support orchestrated by UNASUR in favor of Morales was that it occurred while UNASUR’s rotating presidency was held by Chilean President Michelle Bachelet. This reflects the type of visionary leadership that a country like Chile is able to provide to UNASUR, allowing historical animosities to be overlooked in favor what is in the best long-term interest of the continent. Perhaps the move was also based on a calculation in Santiago that Morales may provide the best chance for resolving the long standing territorial dispute with Chile arising from the 19th century War of the Pacific that prevents energy-starved Chileans from accessing Bolivian natural gas resources. In the past, Morales has used the loss of Bolivia’s access to the sea for his own political gain and is the first Bolivian president to win power with a clear majority since the 1960’s. Accordingly Morales is in similar position as strongly anti-Communist Richard Nixon was when he decided to visit the People’s Republic of China in 1972 without worry that he would come under sharp political attack at home.

Although UNASUR can be characterized, up to now, as more of a “talk shop”, it does provide a means of achieving continental consensus on potentially contentious issues that will be necessary to economically and physically integrate South America. The fact that two CARICOM countries (i.e., Suriname and Guyana) are also involved means that UNASUR can serve as a bridge for incorporating the Caribbean nations into that continental consensus as well. So far Brazil, supported by countries with stable political and economic regimes such as Chile and Uruguay, has been able to use UNASUR to keep countries with mercurial leaders such as Venezuela in check. In the past, the charismatic Hugo Chavez has challenged Brazil’s aspirations to regional leadership, providing a clear and competing project centered on a largely rhetorical anti-American discourse and the consolidation of an increasingly authoritarian regime supported by abundant petrodollars.34 To date, Hugo Chavez has remained at the UNASUR table and feeding at the IIRSA trough as more South American countries appear poised to cooperate with Brazil’s politically moderate vision of South American cooperation and closer economic integration than with Venezuela’s more ideological and polarizing dream of a Bolivarian Alliance for the Peoples of our America or ALBA.35 That opens up the potential for the United States to work with UNASUR on issues of energy security and climate change.

The fantasy of generations of leftist and nationalist Latin Americans looms on the horizon: the end of American hegemony in the Western Hemisphere. The United States is currently in a similar position to the United Kingdom between the First and Second World Wars. Although inter-war Great Britain still had significant overseas possessions (despite the recent loss of its oldest colony, Ireland) and pound sterling remained the international monetary unit of reference, the handwriting was on the wall. Similarly, the sun is setting on domination of the global economy by U.S. firms as the media abounds in reports of efforts to dump the U.S. dollar as the preferred reserve currency by central banks throughout the world or, at the very least, increase the use of currencies other than the dollar in global trade and finance.36 Whether South America can benefit from the collapse of U.S. hegemony depends on how well Brazil can turn UNASUR into a viable vehicle for continental economic integration, thereby raising South America’s profile on the international stage so as to achieve a more balanced insertion into the new global economic and political order. The MERCOSUR experience certainly does not offer much room for optimism. Nearly two decade’s after it was launched, MERCOSUR has fallen short of its stated goal of establishing a common market. Indeed, MERCOSUR has failed to advance beyond a much less ambitious free trade area plagued by weak institutions incapable of quickly resolving the perennial commercial disputes that arise among its four core member states.

The reference to MERCOSUR as an analogy for what may lie in store for UNASUR, however, may be unfair. When MERCOSUR was launched in 1991, Brazil was still a developing country plagued by economic and political instability and the majority of its citizens were classified as poor. By contrast, the majority of Brazil’s citizens are today deemed to be middle class, hyperinflation has been relegated to the ash heap of history, and Brazil’s political system rests on a solid institutional foundation. Brazil is also a much more technologically sophisticated country fully integrated into the global economy. This new reality provides Brazil’s leadership with sufficient confidence to, inter alia, make the type of astute concessions required to secure the enthusiastic participation of her neighbors in constructing a viable UNASUR. That self-confidence is already apparent on the global stage, where former President Lula strived to position Brazil as a voice for emerging nations and a mediator in global disputes.37 Lula even promoted Brazil as a privileged interlocutor in the search for peace in the Middle East as seen in the joint effort with Turkey in May 2010 to broker a deal with Iran to send its uranium abroad for enrichment. Under the Lula government, Brazil also became one of the world’s biggest providers of aid to poor countries.38

Within South America, the Lula administration showed itself to be especially savvy in its dealings with neighboring countries. When Evo Morales sent troops to nationalize Petrobras refineries in Bolivia in 2006, Lula resisted calls from the Brazilian media and political elite to respond forcefully and even militarily. Recognizing that it was in Brazil’s best interests to have an economically and politically stable neighbor, Lula pursued a shrewder and less confrontational tact. Eventually La Paz did agree to pay adequate compensation for the nationalized Brazilian refineries and Petrobras remains the largest foreign producer and biggest purchaser of Bolivian natural gas

Similarly, in 2009 the Lula administration defused a long simmering dispute with Paraguay over the price of the electricity generated at the massive bi-national hydroelectric dam at Itaipú. Although built primarily with Brazilian capital and technology, because Itaipú sits astride the Paraná River that serves as the border between Paraguay and Brazil, Paraguay is entitled to 50 percent of the generated electricity. Historically, Paraguay has never had need for all that electricity, and was obligated by a 1973 treaty to sell any excess to Brazil at well below market rates. Although legally not bound to do so until 2023, the Lula administration renegotiated the treaty and agreed to pay Paraguay a more equitable price. Brazil also agreed to permit Paraguay to sell any unused electricity of its allotted quota to any country after 2023. The move was seen as a way to shore up the sagging political fortunes of President Fernando Lugo, the first Paraguayan head of state in modern history not to come from the notoriously corrupt Colorado Party.

Although Lula is no longer the President of Brazil, his successor Dilma Rousseff, who also hails from the Workers Party, has shown in her first month in office to be an efficient pragmatist, responding quickly to the housing crisis caused by the massive floods and mudslides that ravaged Rio de Janeiro and putting a cap on an increase in the minimum wage despite threatened opposition from coalition partners.39 The fact that her first foreign visit as Brazilian head of state was to Buenos Aires underscores that she will continue the policy launched by Fernando Henrique Cardoso and intensified by Lula of prioritizing relations with the country’s continental neighbors as a way of enhancing the country’s global presence. High on Rousseff's diplomatic agenda should be a major effort at rapprochement with Colombia in order to repair relations that became strained when then President Alvaro Uribe signed a deal in 2009 to allow the United States access to Colombian military bases to help with operations against drug trafficking and terrorism. That deal was subsequently ruled unconstitutional by Colombia’s Constitutional Court after Uribe had already left office because it had never been debated and ratified by the Colombian Congress. By the same token, nothing prevents the United States to reach out to the new Rousseff administration to work as genuine partners on issues of mutual concern. For that to succeed, however, it will require Washington, D.C. to get its own house in order and to wake up to the vast possibilities that an emboldened South America offers as a continent no longer in anyone’s backyard.


1 See, e.g., Thompson, U.S. and Mexico to Open Talks on Freer Migration of Workers, N.Y. Times, Feb. 16, 2001, at A1; Weiner & Thompson, Bush Gives Mexico Backing on Drive Against Narcotics, N.Y. Times, Feb. 17, 2001, at A1.

2 In the 2008 book he co-authored with Linda Bilmes, The Three Trillion Dollar War, the former World Bank Chief Economist and Nobel Prize laureate Joseph Stiglitz estimated the Iraq War was costing U.S. taxpayers US$ 12 billion a month, or US$ 3 billion per week.

3 The Latinobarometro Report 2008 notes that positive views of the United States among Latin Americans fell from 73 percent in 2001 to 58 percent by 2008. The Southern Cone of South America was the most critical, with only 32 percent of Argentines, for example, having a positive image of the United States. Interestingly, the 40 to 61 year old group throughout Latin America had the least positive image of the United States (31 percent) which the report points out was the generation that experienced the brunt of support by the U.S. (but for the Carter administration) of brutal military dictatorships from the 1960’s to the 1980’s. The full report can be accessed at: http://www.latinobarometro.org/docs/INFORME_LATINOBAROMETRO_2008.pdf The impact of the Iraq War on generating negative opinions of the United States can be surmised from a survey by the Pew Global Attitudes Project which showed that favorable images of the U.S. held by Brazilians, for example, fell from 52 percent in 2002 to 34 percent one year later. See, June 2003 Views of a Changing World report available at: http://www.pewglobal.org/reports/pdf/185.pdf

4See, e.g., Luce, Obama Woos Cuban-Americans with Promises, Fin. Times, May 24, 2008. One of those Democrats was himself the President of the Cuban American National Foundation. Notwithstanding the strenuous endorsement by Obama, all three Democratic candidates lost to the Republican incumbents.

5 See, U.S. Energy Information Administration’s Energy in Brief: How Dependent Are We on Foreign Oil? available at: http://tonto.eia.doe.gov/energy_in_brief/foreign_oil_dependence.cfm

6 See, U.S. Energy Information Administration’s Energy in Brief: What Role Does Liquefied Natural Gas (LNG) Play as an Energy Source for the United States? available at: http://tonto.eia.doe.gov/energy_in_brief/liquefied_natural_gas_lng.cfm Approximately 15 percent of U.S. natural gas needs are imported, primarily through pipelines from Canada.

7 ee, G. RIVERA, THE GREAT PROGRESSION: HOW HISPANICS WILL LEAD AMERICA TO A NEW ERA OF PROSPERITY (2009) at 80-88. Rivera notes that relatively youthful immigrants and the new wave of U.S.-born Hispanics are increasing the size of the working population in proportion to the retired population. Rivera cites a 2005 Pew Hispanic Center report entitled Hispanics and the Social Security Debate that notes “[t]he role that Hispanics play as contributors to Social Security will increase substantially in the next several decades. While the white labor force is projected to fall from 100 million in 2005 to about 94 million in 2050, the Hispanic labor force is projected to more than double, increasing from 19 million in 2005 to about 46 million in 2050. While fewer white workers will be contributing, many more Hispanics will be paying Social Security taxes by the middle of the century.” In addition, illegal immigrants (primarily from Latin America and the Caribbean) who work with falsified or improper Social Security numbers in effect donate some U.S.$ 6 to U.S.$ 7 billion in Social Security tax revenue to the Social Security Fund every year!

8 A press release put out by the White House on April 19, 2009 noted only that “President Obama invited countries of the region to participate in an Energy and Climate Partnership of the Americas; a voluntary and flexible framework for advancing energy security and combating climate change.”

9 Since the Lima meeting, a regional Renewable Energy Center has been proposed to be placed in Chile, an Energy Efficiency Center in Costa Rica in conjunction with the Natural Resources Defense Council, a Biomass Center in Brazil, and a Geothermal Center in El Salvador with support of the Inter-American Development Bank and the U.S. Department of Energy. Brazil has also agreed to lead an initiative to promote sustainable urban development and planning.

10 See, June 16, 2009 Department of Energy Press Release found at: http://www.energy.gov/news/7468.htm

11 In 1995, the Clean Cities International Program began sharing information on reducing emissions through the use of natural gas fueled vehicles with the City of Santiago in Chile. It eventually led to the creation of a public-private partnership in cooperation with the U.S. Department of Energy and the conversion of 500 taxis to natural gas, the deployment of 12 natural gas buses, and the construction of 6 natural gas refueling stations. The total cost was U.S.$ 1.6 million dollars, of which only $200,000.00 came from the private sector in the form of a subsidy for light-conversion kits provided by METROGAS, the monopoly distributor of natural gas in Santiago. The Chilean National Development Corporation or CORFO supplied the bulk of the funding at U.S.$ 1.3 million, while the U.S. Energy Department Clean Cities International Program chipped in a mere U.S.$ 127,000.

12 Insulza, Energy and Development in South America, in ENERGY AND DEVELOPMENT IN SOUTH AMERICA: CONFLICT AND COOPERATION 9 (C. Arnson, C. Fuentes, & F.J. Aravena, eds., 2008).


14 A liter of Brazilian ethanol made from sugar cane currently costs almost half the “real” cost to produce a liter of corn-based ethanol. In addition, corn-based ethanol yields a little more than the same amount of energy as the fossil fuel needed to produce it. By contrast, the input-to-output ratio in the case of ethanol made from sugar is about one to nine. Finally, it takes almost twice as much land to grow corn to obtain the equivalent ethanol produced from sugar, and corn requires extensive use of pesticides and petrochemical-based fertilizers not required for sugar production. National Bank of Economic and Social Development (BNDES) & the Center for Strategic Studies and Management (CGEE), SUGARCANE-BASED BIOETHANOL: ENERGY FOR SUSTAINABLE DEVELOPMENT 67, 70, 81, 89, 92 & 96 (2008). A copy of the full report is available at: http://www.sugarcanebioethanol.org/

15 See, e.g., Political Pressure Keeps Cash Flowing into Ethanol’s Tanks, Fin. Times, Oct. 23, 2008, at 6, noting the enormous political and corporate weight behind the corn based ethanol industry in the United States that allows it to survive against all rational odds. The article highlights that in one of his early speeches after he was elected to the U.S. Senate in 2004, then Senator Barack Obama from Illinois---one of the biggest corn-producing states in the country---called “on fellow legislators in Washington to do more to help the struggling ethanol industry, not only for the future of farmers but for the good of the environment, and for energy independence”. See, also, Marianne Lavelle & J. Okray, Brazil Ethanol Looks to Sweeten More Gas Tanks, NATIONAL GEOGRAPHIC DAILY NEWS (Nov. 18, 2010), http://news.nationalgeographic.com/news/energy/2010/11/101118/brazil-ethanol-gas-exports/ and Joe Kamalick, U.S. Ethanol Sector Hails House Final Vote on Subsidy, ICIS News (December 17, 2010), http://www.icis.com/Articles/2010/12/17/9420631/us-ethanol-sector-hails-final-house-vote-on-subsidy.html

16 See, e.g., Elizabeth Kolbert, Uncomfortable Climate, THE NEW YORKER, (November 22, 2010) at 53-4; and The Environment: Heated But Hollow, THE ECONOMIST (February 12, 2011) at 36.

17 Research conducted by two Stanford University law professors in 2008 found that a large fraction of the credits generated under the CDM did not represent genuine reductions in greenhouse gas emissions as many projects that “reduce” emissions would have been built anyway and at a far lower cost as well. Even worse, the CDM creates perverse incentives for developing countries to increase carbon emissions as a way of generating CDM credits that can then be offered to developed nations desperate to find offsets for their own pollution inducing activities. See, Michael Wara & David G. Victor, “A Realistic Policy on International Carbon Offsets” (Program on Energy and Sustainable Development Working Paper # 74, Freeman Spogli Institute for International Studies, Stanford University, April 2008). Available at: http://fsi.stanford.edu/publications/a_realistic_policy_on_international_carbon_offsets/

18 See, e.g., UN Commission on Latin America and the Caribbean, LATIN AMERICA AND THE CARIBBEAN IN THE WORLD ECONOMY 2008-2009 (2009). Between 2006 and 2009 the United States was responsible for an average of only 37 percent of Latin America and the Caribbean’s total global trade flows. Id. at 56.

19 See, e.g., Inter-American Development Bank (Institute for the Integration of Latin America and the Caribbean), MERCOSUR REPORT NO. 14 (2010). In 2008, the European Union was the largest recipient of exports from the four core MERCOSUR countries (i.e., Argentina, Brazil, Paraguay, and Uruguay) at 21.9 percent, followed very closely by Asia, while the NAFTA countries (including the United States) lagged well behind at 7.9 percent. In terms of imports into the MERCOSUR countries, Asia is now the most important source of imported goods (28.2 percent), followed closely by the European Union. The NAFTA countries come in far behind at 8.2 percent. Id. at 28.

20 See, UN Economic Commission for Latin America and the Caribbean, FOREIGN DIRECT INVESTMENT IN LATIN AMERICA AND THE CARIBEAN 2008 (2009). In a recent Op-Ed piece in the Financial Times, Luis Alberto Moreno, president of the Inter-American Bank noted that from 2001 to 2009 China’s total investments in Brazil were estimated to total a mere U.S.$ 215 million. Yet in 2010 Chinese energy and chemical groups quietly spent more than U.S.$ 20 billion acquiring assets in Argentina and Brazil alone. See, Moreno, Look for New Links Across the Global South, Fin. Times, Jan. 28, 2011, at 12. The piece also notes that the Indian companies Infosys and Tata now have 17,000 employees in Latin America and the Caribbean.

21 C. Arnson & P. Sotero, eds., BRAZIL AS A REGIONAL POWER: VIEWS FROM THE HEMISPHERE (2010) at 14. France’s Dassault Aviation will supply the Brazilian Air Force with 36 jet fighter planes and France’s DCNS that is helping the Brazilian Navy build nuclear submarines.

22 Wheatley, Brazil to Supply Oil to China in Return for Loans, Fin. Times, Feb. 20, 2009, at 5. The agreement for China to lend U.S.$ 10 billion to Petrobras was not formally signed until President Luiz Inácio Lula da Silva visited China in May 2009. Under the deal, Brazil will provide 200,000 barrels of oil a day to Sinopec, China’s state oil company for 10 years. Wheatley & Hille, China Deals Bolster Brazil Trade Ties, Fin. Times, May 20, 2009, at 3.

23 Molinski, Chavez, Shunning IMF, Gushes about China Oil-for-Credit Deal, Wall St. J., March 4, 2010, at A14.

24 A. Armony, The China-Latin American Relationship: Convergences and Divergences (unpublished manuscript, 2009) at 16. Forthcoming in CHINA ENGAGES LATIN AMERICA: TRACING THE TRAJECTORY (Hearn & León, eds).

25 Webber, China and Argentina in Currency Swap, Fin. Times, March 31, 2009, at 5. In fairness, it should be pointed out that the United States also provided Brazil with a U.S.$ 30 billion currency swap deal at the end of 2008 in response to the global liquidity crisis.

26 Wheatley, Brazil and China in Plan to Axe Dollar, Fin. Times, May 19, 2009, at 6.

27 See, e.g., Barrionuevo, At Meeting in Brazil, Washington is Scorned, N.Y. Times, Dec. 17, 2008, at A10.

28 See, e.g., Dombay & Wheatley, Brazil Rebuff for Iran Sanctions Drive, Fin. Times, March 4, 2010, at 4.

29 For a more complete analysis of the growing relationship between the Islamic Republic of Iran and Latin America, see Arnson, Esfandiari, & Stubits, eds., IRAN IN LATIN AMERICA: THREAT OR AXIS OF ANNOYANCE? (2010). As noted in the report, the relationship is complicated. Despite being Iran’s second most important trading partner in Latin America, Argentina’s diplomatic relations with Iran remain strained by accusations that Iranian operatives were involved in the bombing of the Israeli Embassy and a Jewish social welfare agency in Buenos Aires in the early 1990’s that killed dozens of people.

30 IIRSA promotes the implementation of some 510 communication, energy, and transportation infrastructure projects that are regional in vision and scope. The projects are funded by the South American governments working closely with the CAF, the Inter-American Development Bank, and the River Plate Basin Development Financial Fund (FONPLATA) as well as with the private sector through public-private partnerships. By the end of 2009 some U.S.$ 6.2 billion dollars had already been expended and a number of projects completed such as a bridge over the Acre River linking Brazil and Peru as well as another over the Takutu River connecting Brazil with Guyana. See, http://www.iirsa.org

31 Sotero & Armijo, Brazil: To Be or Not to Be a BRIC?, 31 ASIAN PERSPECTIVE 43, 54 (2007).

32 Id. at 54.

33 See, e.g., Schipani & Dombey, Morales Expels ‘Divisionist’ US Ambassador, Fin. Times, Sept. 11, 2008, at 4.

34 Sortero & Armijo, supra note 32 at 55.

35 Id. at 58. The ALBA bloc currently includes Antigua and Barbuda, Bolivia, Cuba, Dominica, Ecuador, Nicaragua, Saint Vincent and the Grenadines, and Venezuela. See, http://www.alianzabolivariana.org

36 See, e.g. Anderlini, China Urges Reserve Currency Switch, Fin. Times, March 24, 2009, at 1 See, also, Strength in Reserves, Fin. Times, Feb. 9, 2011, at 7.

37 Solomon & Lyons, New Hurdle to Iran Sanctions, Wall St. J., March 4, 2010, at A1.

38 The value of all Brazilian development aid broadly defined could reach U.S.$ 4 billion a year; less than China but similar to generous donors such as Sweden and Canada---and unlike theirs, Brazil’s contributions are soaring. Brazil’s Foreign-Aid Programme: Speak Softly and Carry a Blank Cheque, THE ECONOMIST (July 17, 2010) at 46.

39 Leahy, Technocrat Rousseff Makes Her Mark on Brazil, Fin. Times, Feb. 4, 2011, at 6.


"Brazil’s Foreign-Aid Programme: Speak Softly and Carry a Blank Cheque”, The Economist, July 17, 2010, 46.

"Political Pressure Keeps Cash Flowing into Ethanol’s Tanks”, Financial Times, October. 23, 2008, 6.

"Strength in Reserves”, Financial Times, February 9, 2011, 7.

“The Environment: Heated But Hollow”, The Economist, (February 9, 2011), 36.

Anderlini, Jamil, “China Urges Reserve Currency Switch”, Financial Times, March 24, 2009, 1.

Arnson, Cynthia, Haleh Esfandiari, & Adam Stubits, eds., Iran in Latin America: Threat or Axis of Annoyance? (Washington, D.C.: Woodrow Wilson International Center for Scholars (Latin America and Middles East Programs), 2010).

Arnson, Cynthia, Claudio Fuentes, & Francisco Rojas Aravena, eds., Energy and Development in South America: Conflict and Cooperation (Washington, D.C.: Woodrow Wilson International Center for Scholars, 2008).

Arnson, Cynthia & Paulo Sotero, eds., Brazil as a Regional Power: Views from the Hemisphere (Washington, D.C.: Woodrow Wilson International Center for Scholars (Latin America Program and Brazil Institute), 2010).

Barrionuevo, Alexei, “At Meeting in Brazil, Washington is Scorned”, The New York Times, December 17, 2008, A10.

Dombey, Daniel & Jonathan Wheatley, “Brazil Rebuff for Iran Sanctions Drive”, Financial Times, March 4, 2010, 4.

Hearn, Adrian H. & José Luis León Manríquez, eds., China Engages Latin America: Tracing the Trajectory (Boulder, Co.: Lynne Rienner Publishers, Inc., 2011).

Inter-American Development Bank, MERCOSUR Report No. 14 (Buenos Aires: Instituto para la Integración de América Latina y el Caribe, 2010).

Kamalick, Joe, “US Ethanol Sector Hails House Final Vote on Subsidy”, ICIS News (December 17, 2010).

04/04/10. 08:01:40 pm. Categories: Articles, Latin American Law & Business Report ,