Photo Jonathan Blair

Wednesday, June 2, 2010

Two hubs, many spokes, no frame: The Shape of Post-American Americas

Fareed Zakaria's Post-American World doesn't say much about the Americas: a few remarks on Brazil, fewer still on Mexico's regional assertiveness, a dismissive reference to Hugo Chavez' rants, and peppered here and there, brief allusions to some of the smaller countries of the region. Why say more? The fate of American power was not played out in the Western Hemisphere and nothing that happened there over the last twenty years weakens his general thesis: US influence is declining and challengers are more assertive while, on the whole and sometimes slowly but without much prodding, market economies and democracy consolidate their hold on politics and state policy, from Alaska to Tierra del Fuego.

This, however, does not tell us much about what those post-American Americas look like, which is what this short piece is about: how does the global lessening of America's power leave the rest of the hemisphere?

My answer is simple, but not straightforward: the post-American Americas have broken into a strange contraption: one America that is at least as American as ever, tightly organized around the United States; a second one that is less American than ever, for the most part loosely organized around Brazil; and between the two halves, a relationship whose importance for each side gets ever slighter. Think of the whole as a surreal bicycle.

1- A tight wheel in the North

The United States remains the hub of a system that includes Canada and Mexico, but also the Caribbean, Central America, and possibly even Venezuela. Among the spokes, not much goes on, but their relationship with the hub is the most important foreign issue for their economic prosperity and political stability.

The nature of existing hub-and-spoke relationships varies. America is the primary trade partner of all the spokes, but only Canada, Mexico and the US share extensive value chains. A massive amounts of energy flows into the US from Canada, Mexico, Venezuela and Trinidad and Tobago. Capital movements contribute to the tightness of the wheel, with investments flowing freely and in large quantities between the US, Canada and Mexico. Beyond that core, the movement is largely unilateral, as massive amounts of private capital goes from the US to the Caribbean fiscal havens while migrants, both legal and illegal, send remittances from the US back to Mexico, Central America and the Caribbean. People and drugs move in the opposite direction. Mexico and –through the latter—Central America represent the main source of migrants to the United States, of whose economy they have become critical cogs. Cocaine from Colombia, Bolivia and Peru, penetrates the US through Central America, the Caribbean and Mexico. High-potency marijuana crosses southward from Canada and northward from Mexico.

That system is diverse and dynamic, with heavily interdependent formal and informal economies and deeply intertwined social universes. In most ways, it "works," with massive movements of goods, people and money circulating smoothly; but in others it doesn't, as violence ravages its peripheries, from Mexico's Northern border to the shantytowns of San Salvador, Guatemala City and Kingston, Jamaica.

Overall the region remains dominated by the United States. It is however by no means governed or even actively managed by Washington. There is instead the overwhelming sense and the reality that what happens in the United States is profoundly consequential for its neighbours, whereas the opposite is not true. The mostly uncontrolled character of US domination reflects a decline of America's ability to effectively control its environment whereby its tremendous economic and political prominence cannot effectively be mustered for any purpose.

2- A wobbly wheel in the South

A superficially similar structure is emerging in South America, with Brazil as the hub, and its neighbours as spokes. The wheel is smaller though: Brazil truly matters only for Bolivia, Argentina, Paraguay, Uruguay and to some extent for Venezuela. Colombia shares a huge frontier with Brazil, but aside from substantial cocaine exports, it has never had much interaction with it. Ecuador and Chile, out of immediate reach and with economies tuned increasingly to the Pacific are also largely out of the system.

The southern wheel is also far from tight. Quite a few things happen between the spokes but the region remains massively extroverted. Above all , there is no integrated core with significant value chains and circulation of capital. Instead, except for Brazil's dependencies (Bolivia and Uruguay, to some extent, and especially Paraguay), much of the region's exports, mostly agricultural commodities and minerals, are sent the world over. Imports are just as globalized, as are investment inflows. In the its most integrated part, capital and manufactured goods go from Brazil to its neighbours, while people, agricultural products and—for Bolivia and Paraguay—energy flow in the other direction. Argentinean car exports to Brazil is an exception, still significant, but since they began decades ago, little has grown around them, especially not integrated production chains. The other exception, electronic and consumer goods from Paraguay, are in fact Asian exports—many of them illegal—merely transiting through the notoriously porous Paraguayan customs.

Much has been made of an alternative system emerging around Venezuela, and articulating Bolivia, Ecuador, Paraguay, Nicaragua, and Cuba into a progressive alliance. This more openly "anti-imperialist" coalition, however, has even less substance than the Brazilian-centred wheel: its member countries are poor—Venezuela excepted—socially restless and politically divided, they are all utterly dependent on the export of a few commodities, and neither invest nor trade much among themselves—except for oil, from Venezuela to non-energy producers. As the Venezuelan core decays economically and sickens politically, what substance this alternative has had may soon dissipate.

Regional interdependence is thus limited and in fact declining. Even energy, long touted as the potential backbone of an integrated sub-continent, is losing much of its steam because oil and gas discoveries, everywhere but in Chile and Uruguay, are making everyone a net energy exporter. The commodity boom further lessens interdependence as most countries compete with one another for shares of the global market.

The large and growing asymmetry between Brazil and the rest of the sub-continent further weakens the local system, for low interdependence and high —and growing—asymmetry is no recipe for integration. And yet, shared governance arrangements abound: the Common Market of the South (Mercosur), the Union of the Nations of the South (UNASUR), the Bolivarian Alternative for the Americas (ALBA), the Amazon Cooperation Treaty Organization (OCTA), the Andean Community, the Mercosur Parliament and soon its South American counterpart, along with multi-yearly presidential summits, to name but a few. In theory, these should provide the region with substantial governance capability. In practice, none of these arrangements has much organizational substance, resources or political legitimacy. Regional governance remains a matter of ad hoc and "variable geometry" presidential diplomacy.

In that game, Brazil plays the key role, but not as a regional leader. The country's economic and political weight is accepted as a fact, but its clout and influence is actively and tenaciously denied by all. No major country in the region, for instance, supports Brazil's claim to a permanent seat at the Security Council and Brazilian candidates to the head of the WTO and the Inter-American Development Bank have failed to get support from South America. In fact, Brazil does not seem to have much leverage over its neighbours. Its efforts to dissuade Bolivia from nationalizing the assets of Brazilian flagship Petrobras in the gas sector went to naught and Argentina keeps imposing special tariffs and quotas against Brazilian products, in open violation of Mercosur rules. Brazil's successes at defusing tensions between Colombia, on one side, and Ecuador and Venezuela, on the other, appear to have depended exclusively on the personal qualities of Lula and on the dexterity of its diplomatic service. In a severe confrontation opposing Mercosur members Argentina and Uruguay about the location of a huge paper mill, however, the Brazilian government did not even dare test its influence.

Brazil's regional leadership, in other words, exists more in the imagination of Davos Summit guests and heads of states in North America, Europe, Africa and Asia, than on the ground. Even more than the US, it "dominates" the region on paper, but cannot translate that dominance into significant influence.

3- No frame

The Americas have long been seen as the US backyard. They have been claimed as such by the United States since James Monroe famously barred European powers from interfering on the continent. For a long time, however, there was not much substance to the claim and Britain did as it wished, dominating the continent economically until World War II. Still, the OAS traces its roots back to a "Pan-American Union" established in 1890, US marines have been roaming around the Caribbean basin since then, American multinationals have invested massively in the resource sectors of much of the continent and, between 1950 and the end of the 1990s, they had little "foreign" competition. From those standpoints, Zakaria is thus warranted to speak of an American domination of the continent.

A closer look, however, reveals a much different picture, and shows the break I have documented earlier to be less significant than it looks. Throughout the XXth century, true imperial dominance was largely confined to the Caribbean and Central America, with the South largely free of outright intervention. Cuba, Nicaragua, Haiti, Guatemala, Grenada, and Panama bore the brunt of the Empire's dominance. The sub-continent, however, had a very different history.

Much fuss was made about US support for the military regimes of the Southern Cone and for the coups that launched them in the 1960s and 1970s, but that support was never critical and those regimes' claim to power were largely self-sustaining. A convergence of interest between Cold War America and anti-communist and reactionary military and economic elites has long been painted as the manipulation by Washington of political establishments dependent on that support to stay in power. It is easy to forget how nationalist and profoundly anti-liberal those regimes were, how free they all felt not to play into the US' anti-Cuban policy or, to take specific examples, how nationalized Codelco became the cash-cow of the Chilean military, how the Peruvian military launched the land reform in their country, how Brazil's generals were not particularly keen on US multinationals, how their economic policy is best termed state capitalism and how quick they were to establish relations with communist Angola and to cut military cooperation with Jimmy Carter's America. Similarly, when the time came for the generals to leave, US influence proved marginal: elites turned their back on them, civil society mobilized and in some cases—Argentina and Chile for instance—sheer hubris brought them down. Differently from Central America and the Caribbean, in sum, domestic factors, not US schemes and manipulations, overwhelmingly determined the rise and the fall of South America's military dictatorships.

What has broken down since the end of the 1980s is thus partly an illusion, for the Empire's backyard has always been smaller than it looked. Still, what power and influence there was is indeed shrinking as American strategic and economic interests in the region as a whole diminish.

The most important strategic challenges to America are either wildly exaggerated, like the Chavez threat, or self-created, like the prohibition-induced illegal drug market and the "War on Drugs"-induced violence in Mexico, Central America and the Caribbean. When Washington does not realize on its own that a strong presence is not a good idea, it is told. As the Colombian government's progressively wins its civil war, the legitimacy of significant American military cooperation with, and presence in, the country will also shrivel. Recently expelled from Ecuador, the American military looks doomed to fully abandon the region in the next decade.

Economically, the US is also losing interest in South America, whose proportion of US stock of investments has declined significantly over the last ten years, from 11% of its global portfolio in 1998, to 7% in 2008. Trade numbers tell the same story, with 68% of US exports to Latin America (2008) going to Mexico, and with Brazil (at 1.8% of world total) the only exporter from the region to rank among the 15 top sources of US imports. From the standpoint of US companies, consumers and economic policy-makers, in other words, South America, with or without free trade agreements, is a part of the world like any other.

The flip side of that declining interest has been a growing presence of new players in the region. Canadian companies dominate the mining sector of most Andean countries, and of the continent as a whole for exploration. European banks, particularly Spain's, along with Canada's Scotia, have aggressively invested in the region. China, while still tentative and not particularly welcome, should soon make significant forays in the resource sector. Russia and France are strong players in the regional arms market. Even Iran is now expressing interests, albeit essentially for diplomatic reason. The overall effect is that while the Americas decline in US global portfolio, the US also declines as an investor in the region, further weakening hemispheric interdependence.

The breakdown of imperial America's continental hold makes hemispheric arrangements superfluous. The project of a Free Trade Area of the Americas collapsed less as a result of Brazilian resistance than of Washington's and especially Wall Street's indifference. The OAS has long been a diplomatic backwater, notwithstanding its recent ventures –sometimes successful—into local crises. Its recent reinvention as a bulwark of democracy on the continent, already tested in the recent Honduran crisis, could soon break on the reefs of Chavez' autocratic consolidation, in the face of which it will likely be impotent and divided. The Summit of the Americas' process is quickly sinking into irrelevance. There simply is no more need for such arrangements and their survival is becoming a matter of inertia: meetings follow meetings, treaties beget commitments, diplomats sustain posting locations, and bureaucrats hold to their jobs. The Inter-American Development Bank is a partial exception: for a long time larger a player in the region than the World Bank, well-managed, largely controlled by borrowers and devoid of the market fundamentalism of other Washington-based IFIs, it has developed into a useful financing tool for the region's governments. As the integration agenda that has underlain much of its recent work breaks down, it should lose what political drive it had and become strictly a prudent and well-managed source of relatively cheap credit.

The region is left without a frame, but the idea of a shared identity endures, and ideas matter. "Latin America" still structures much of the diplomatic activity in the region, and it explains why in the face of low and declining interdependence weak institutional arrangements survive and why new ones keep popping up, just as spineless and institutionally deficient. It also explains why the United States remains a constant reference of nationalist discourse while, paradoxically, American analysts keep deploring their country's indifference towards the region.

Conclusion: From Imperium to Condominium

The surreal contraption of this two-wheeled frameless America survives, in the face of the progressive breakdown of its material and strategic basis. Perhaps "post-modern" Americas suits that reality better than post-American. Yet, what is happening in the Western hemisphere does not belie Zakaria. The Americas as a single whole has been a casualty of globalization and of the end of the Cold War. Together, these have broken down what unity Imperial and Cold War America had brought to the region. What is left is typical of the post-American world: a diverse and quite open continent where the United States, still massively dominant, must negotiate with all but the smallest states, and where emerging powers, local like Brazil, or foreign like China, are becoming significant players, though they find themselves at least as constrained as the old empire.