How Will a Biden Presidency Impact Latin America?

December 22, 2020

Mexico

This is the USA’s most important bilateral relationship in Latin America. It matters for Mexico, with almost 30% of its GDP generated from exports to its northern neighbour. But it’s also vital for the US economy, which relies on integrated north American supply chains to compete with low-cost Asian manufacturing. The tens of millions of Mexican Americans that now live in the US, make the relationship politically important, while the illicit drugs trade causes social and justice problems on both sides of the border.

Without doubt, Biden’s tone will be less confrontational than Donald Trump’s. And of course work will stop on the, largely symbolic, wall between the two countries. Biden will be keen to co-operate on security, migration and social issues. He was responsible for a Central American aid and migration programme during the Obama administration and has already pledged $4billion for a similar scheme in his presidency. That should find support in Mexico, which is keen to reduce the flow of Central American immigrants northwards. The new mood of cooperation may also mean the US has a more active ally in resolving regional disputes, such as the human rights abuses of left-wing regimes in Nicaragua and El Salvador.

Yet in economic terms little is likely to change…

Yet in economic terms little is likely to change. Donald Trump’s revamped Nafta, now known as USMCA, trade deal between Mexico, Canada and the US was supported by Democrats and will not be revisited by Biden. If anything, friction could arise if the environmental wing of the Democrat party puts more pressure on the enforcement of some USMCA regulations. Mexican president, Andres Manuel López Obrador, is steadily undermining the local business environment for international investors. And if that interferes too heavily with US corporate interests there will be problems, regardless of who is sitting behind the desk of the Oval Office.

Brazil

President Jair Bolsonaro, ‘the Trump of the Tropics’, had a close personal relationship with Biden’s predecessor. But aside from the personal ties there are structural reasons why Bolsonaro and Biden may clash. Biden told Americas Quarterly in May that he will be keeping a close eye on the Amazon: “The fires that ravaged the Amazon last summer were devastating and provoked global action to stop the destruction and support reforestation before it’s too late. President Bolsonaro should know that if Brazil fails to be a responsible custodian of the Amazon rainforest, then my administration will rally the world to ensure the environment is protected.”

One possible area of co-operation is reform of Mercosur. Bolsonaro is losing patience with the trade block, especially now there is a left-wing administration in Buenos Aires. Biden is also keen for Mercosur to realign itself to the more trade-friendly stance of the Pacific Alliance. Judging by his campaign rhetoric Biden is going to be just as tough with China as Trump was. Indeed, there is bi-partisan support in the US for stronger measures on China. That should sit well with Bolsonaro, who has pushed back against the Middle-Kingdom’s growing clout in Latin America.

Venezuela

Trump took a tougher stance on Venezuela than any previous US president has shown in the last two decades of Chavismo. It’s telling that dictator Nicolas Maduro, congratulated Biden before either Bolsonaro or Amlo. Trump’s sanctions have started to bite in Venezuela, with the remaining western oil firms due to leave in December. Maduro is asking for “dialogue” with Biden, yet experienced Venezuela watchers will have little faith in his intentions.

Chavismo has tended to use dialogue processes to buy time without offering genuine political concessions – this time, if talks of some kind materialise, is unlikely to be any different”, says Nicholas Watson, Managing Director of Teneo, a political risk consultancy. “Before Biden becomes president, Maduro aims to have a newly pliant National Assembly (AN) in place following the 6 December legislative elections. The manner of that vote is likely to go some way to shaping how the next administration will approach Venezuela. In parallel, opposition leader Juan Guaido, whose leadership of the AN is the basis for his claim to the presidency, will hope to convince the new US administration that he remains the most credible opposition interlocutor and that he speaks for the opposition as a whole.” Cuba retains outsize influence in Venezuela, so perhaps Biden’s efforts to return to the Obama-era thaw with Cuba will be linked to negotiations with Maduro.

Cuba

Trump undid Obama’s Cuba policy with great fanfare and placed renewed restrictions on trade and travel with the island. The suspicion is that his motives were domestic rather than international politics, as that tough stance helped him win Florida, a crucial swing state, in the recent election. Biden has made it clear that he will reach out to the Communist regime, telling Americas Quarterly: “As president, I will promptly reverse the failed Trump policies that have inflicted harm on the Cuban people and done nothing to advance democracy and human rights.”

The rapprochement could not come at a better time for Cuba, says Watson. “Tightening US sanctions; the tourism shock resulting from the Covid-19 pandemic; benefactor Venezuela’s economic meltdown; lower remittances; and the drop in exports amid the global economic downturn are a shuddering body blow to the Cuban economy; the UN’s Economic Commission for Latin America forecasts an 8% contraction this year.” Biden wants a democratic Venezuela, while Cuba needs money now that Maduro can no longer send free oil. There is potential for a deal, but Biden may not wish to get embrangled in messy negotiations when there is so much to fix at home.

Oil producers

Oil exports are important for Venezuela, Ecuador, Colombia and to a lesser extent, Mexico. Biden’s commitment to re-enter the Paris Agreement from the first day of his presidency will make it more likely that the US sign’s up to ambitious environmental targets and cuts oil demand. As Nikhil Sanghani from Capital Economics notes, “Biden’s focus on clean energy could put downward pressure on oil prices over the medium term, and would add to our view that global oil demand will peak around 2030. That would darken the prospects for oil producers in Latin America including Colombia, Ecuador, Venezuela and Mexico, which could lose market share to lower-cost producers in the Middle East over the coming years.” And if Biden restores the Iran nuclear deal, we could see another million barrels a day of Iranian crude return to global markets, further depressing oil prices.

Yet the efforts to cut emissions could favour natural gas, which is cleaner than oil, and that would be good news for Bolivia, the region’s largest exporter. Meanwhile Chile and Peru, the world’s first and second-largest producers of copper respectively, should also benefit from Biden’s clean energy push. Electric cars and new renewable power plants will mean lots of extra copper demand. This should also encourage the likes of Argentina and Ecuador, which geologists suspect have incredible potential copper deposits waiting to be discovered, to kickstart their mining industries. This transition from oil to metals is happening anyway – but a Biden presidency should make it happen more quickly.

China

 Over the last two decades China has made steady inroads into what some in the US patronisingly call ‘America’s backyard’. Biden told America’s Quarterly that he will push back against China’s growing influence. “It is the current absence of American leadership in the Western Hemisphere that is the primary threat to U.S. national security. Russia and China can’t match our extraordinary ties and common history with the people of Latin America and the Caribbean. They should be on notice that Trump’s incompetence and neglect in Latin America and the Caribbean will end on Day 1 of my administration.”

In reality it is probably too late – if it was ever possible – to restrict China’s influence in Latin America. This has nothing to do with Trump or Biden but global economics. China sucks in enormous amounts of the region’s commodities, and in return sells low-cost consumer electronics and industrial machinery. It is now the top trading partner for most of the region’s major economies, including Brazil, Argentina and Chile, and the largest creditor to the likes of Ecuador and Venezuela. Biden will be no more able to change that than Great Britain could have prevented the US rise in the region following the Second World War.