By Kyle Castellanos
In the face of widespread economic and political uncertainty in Latin America and Africa, the United States has withdrawn from the international community in favor of isolationist policies. Over the past 40 years, the international community has condemned the United States on multiple accounts for corporate and territorial over-extensions and other neocolonial tendencies. Consequently, the United States has reacted by gradually receding from its spheres of influence, with recent manifestations in former President Trump’s withdrawals from NAFTA and the Trans-Pacific Partnership as well as President Biden’s military withdrawal from Afghanistan.
To preserve its international reputation and status as “Leader of the Free World,” the United States has become reluctant to engage in ambitious multilateral trade initiatives. Subsequently, regional vacuums formed, and nations have begun making geopolitical moves to secure rivaling regional hegemonies. Although admittedly, the United States has, at times, not reflected the core values of its Constitution abroad, it has time and time again defended freedom and democracy while other nations fight to overthrow the liberal international order. The United States must draw back to its post-World War II era of economic diplomacy to solve global problems, advance its own geoeconomic interests, and create fruitful relations with Latin America and Africa.
Conditions in Europe were dire after World War II as industrial production failed to reach pre-war levels. However, a more pressing issue plagued all of Europe: there was no capital available for investment, thus, stagnating trade throughout the continent. United States Secretary of State George C. Marshall and President Harry Truman believed that the deterioration of the European economy would drastically affect American interests. First, European stagnation would severely limit trade with the region. The United States needed to secure stable markets abroad that would purchase American products and alleviate its excess capacity issues. Second—and perhaps more pressing to the United States at the time—the Cold War had begun to take footing in Eastern Europe. To address these concerns, President Harry Truman signed the Marshall Plan into effect in April of 1948, granting $5bn in aid that would later rise to over $13bn.
Although the Marshall Plan is remembered as an act of American generosity towards Europe after World War II, it primarily served America’s political and economic interests. To many Western economists and political analysts, the Marshall Plan yielded considerable successes in Europe. At the program’s conclusion in 1952, Western Europe fully recovered from post-war recessions. Output had surpassed pre-war levels by over 30% in all countries that received aid from the Marshall Plan. As for the United States, it successfully created external demand for its products, allowing it to continue expanding the economy by exporting manufactured goods.
Put simply, those who successfully implement bold geoeconomic strategies at a global level lay claim to set political and economic standards which others must follow. Since 2016, American and Chinese scholars have likened China’s One Belt One Road (OBOR) strategy to the U.S.’s Marshall Plan. In truth, China’s OBOR strategy is more ambitious than the U.S.’s post-War strategy in Europe. Chinese banks have already invested over $250 million in infrastructure in 60 countries throughout South, Southeast, and Central Asia. The Chinese government has also created the Silk Road Fund, a state-owned investment fund, and set aside $40bn to finance OBOR projects. The China Development Bank has pledged to invest $900bn into OBOR projects over the next several years. China’s OBOR ambitions also plan to establish integrated Eurasian trade connections, as Russian President Vladimir Putin expressed interest in OBOR. The U.S.’s association with Ukraine in their defense of the Russian invasion may continue to isolate Russia further from the United States and closer to China. [Eurasian corridor essential to geostrategy].
The United States sustains numerous disadvantageous business dealings in China that could be redirected to Latin America (Central and South America), a region uniquely poised for successful industrial and infrastructural investment. Panama, Peru, Honduras, the Dominican Republic, Chile, Colombia, Nicaragua, and El Salvador were within the top 20 countries sustaining the highest real GDP growth rate in 2021, as Latin American nations comprised 40% of the list. Further, Latin America’s demographics reflect a workforce that is in a prime position for an industrial manufacturing boom. The average age in Central America is 28.5, much lower than in the United States at 38.1. Latin American nations also enforce more developed labor rights laws while still offering competitive labor rates relative to those in China. In some countries such as Honduras, manufacturing labor costs are lower than China’s. Countries such as Argentina, Costa Rica, Chile, and Guatemala highlight Latin America’s potential for growth.
As of January 2022, the United States recorded an $8.4 billion increase in its trade deficit with China, totaling $87.9 billion. Further, millions of Americans unknowingly finance the Chinese Communist Party, contributing to the consistent repression of speech and religion in China and the inhumane treatment of Uyghurs in Xinjiang. The COVID-19 pandemic also revealed the United States’ overreliance on China in maintaining a stable supply chain. It behooves the United States to diversify its supply chain by divesting in China and finding new industrial and manufacturing partnerships in Latin America. With the primary goal of investing in the Americas being to reinvent the U.S. supply chain into a hyper-efficient, self-reliant continental trade system, infrastructural investment must accompany industrial investment. In “The Case for a Pan-American Manufacturing Ecosystem,” Linton et al. argue that “in supply chains, speed translates into cash and flexibility translates into resilience.”
In order to build a robust, flexible, and self-reliant supply chain and in response to the economic crises in Latin America, the United States should work with Latin American nations to build a continental high-speed railways network from Mexico into South America. Updating regional railway networks and financing new railway networks will create connections in South America eastward to Brazil and south toward Chile and Argentina. Further, given that the United States has signed free trade agreements with 11 Latin American nations—most notably, the Dominican Republic-Central American-United States Free Trade Agreement (CAFTA-DR)—there is no need to engage in complex trade negotiations to establish a multilateral trade agreement. An American trans-continental high-speed railway would reduce transportation time up to a quarter of the time it would take to ship goods from Asia. Investments in infrastructure significantly reduce transportation costs as well, allowing previously distant partners to profitably trade.
Industrial, manufacturing, and infrastructural investments will also respond to the food and job crises in Latin America exacerbated by the COVID-19 pandemic. Over 28 million people remain unemployed in Latin America and over 10% of the jobs lost during the pandemic have not been recovered. Furthermore, according to UN reports, food insecurity affects 41% of the population in Latin America. As infrastructural development would lower transportation costs, the United States can increase the sales of its leading exports in grains, livestock, and horticultural products to Latin American nations. Additionally, with transportation networks going eastward to Brazil, South America can become a focal point of contact for trade with West Africa. This would also enable the United States to challenge China's questionable involvement in African business. The China-Africa Cooperative Vision 2035 outlines China’s goals to heavily invest in African agriculture in an effort to control their output and trade partners. Fomenting trade relations between South America and West Africa would limit China’s ability to control Africa’s trade relations and ensure self-determination through free trade in African nations. Given the multi-trillion-dollar scale of this project, infrastructural and industrial investment would undoubtedly recover the millions of jobs lost in the last two years. Over time, sustained development projects would stimulate a strong middle class that would provide American corporations with export markets closer to home.
The United States should also consider investing in Latin American industry and infrastructure due to concerns about rising communism and authoritarianism in the region. Much as throughout post-World War II Europe, growing economic pessimism in Latin America has fomented radical communist sentiments. Speaking on the state of Latin America, famed Peruvian novelist and Nobel Laureate Mario Vargas Llosa said, “Latin America is going bad; it is going very bad.” The rise of Pedro Castillo in Peru, Gabriel Boric in Chile, and Gustavo Petro in Colombia reflects impatience with current conditions. Successful implementation of authoritarian communism in any of these countries would seriously affect American economic interests as well as damage foreign investment in the future. Given these conditions, the United States has an opportunity to increase its connectivity with 20 countries throughout the Americas. Investing in infrastructure is the first step in creating profitable economic corridors that uplift Latin American economies and advance our position within our spheres of influence.
However, certain questions will be asked regarding the project’s time scale, cost, and security concerns with respect to the transportation of goods. Given the 35-year timescale of China’s One Belt One Road strategy, one can assume a similar length for an American project. For this project’s success, it must be a bipartisan effort, as changes in the White House cannot derail its trajectory. With respect to funding, OBOR is expected to total up to $8 trillion dollars. The scale of the project will necessitate cooperation from the United States government, those in Latin America, as well as the World Bank and International Monetary Fund. Without external funding, the United States cannot compete with China in terms of scale and efficiency. Finally, security concerns in Latin America remain valid, as growing organized crime threatens the realization of this project. Governments will have to coordinate security amongst themselves or hire a third party. Nevertheless, with 40% of the world’s fastest-growing economies, it is time the United States turns its attention to Latin America for future business ventures. This is the perfect opportunity for the United States to reassert its position in its spheres of influence and propose bold geoeconomic solutions that prioritize mutual benefit while securing the liberal international order.