Welcome back to Foreign Policy’s Latin America Brief.
The highlights this week: Researchers seek to correct misconceptions about Latin America’s economic outlook, Russia cuts down on Ecuadorian banana imports, and generative AI reveals the U.S. role in weapons flows to Mexico.
An Optimistic Prognosis for Latin America
On Monday, a group that included a senior Spanish diplomat; scholars from Latin America, the United States, and Spain; and current and former officials from the World Bank and International Monetary Fund gathered at Georgetown University in Washington for a seminar provocatively titled “Why Does Latin America Matter?”
It’s a question that Spain has prioritized over the past 18 months. Last year, Madrid used its authority as president of the Council of the European Union to organize a summit between the European Union and the Community of Latin American and Caribbean States. Spain was also a vocal advocate for concluding the EU-Mercosur trade deal in months of intense but ultimately unfruitful talks.
Researchers from the Elcano Royal Institute, a think tank funded in part by the Spanish government, compiled the report that was the centerpiece of Monday’s event and was also presented to Spanish Prime Minister Pedro Sánchez. The researchers conducted more than eight months of interviews with European think tanks, business leaders, politicians, and academics, asking broad questions about their perceptions of the region, said Elcano’s José Juan Ruiz, one of the lead authors of the study.
Ruiz’s team was concerned by the responses they received. “Once we started this debate, we could not stop, because it was so misguided,” he said. “What most of these different interest groups in Europe think about Latin America is very clear,” he continued, citing a list of those impressions: “Democracy is weak.” The region is an “economic disaster.” China “is the new hegemon.” And companies that invested in Latin America in the 1990s amid an economic opening “destroyed value for their shareholders.”
The Spanish research group dug through data and concluded that these claims were generally overblown, if not outright false, Ruiz said. He argued that for European companies and firms, intensifying ties with Latin America made geopolitical and business sense. The report found that the portion of the world’s debt and financial crises that occurred in Latin America dropped significantly in the last two decades compared with the three previous decades. On governance, the countries in the region are generally democracies.
Writing off the region “is really very costly,” said Ruiz, an economist and former Spanish government official.
Although trade between China and South America is high, the total investment stock of U.S. and EU firms in Latin America is 20 times that of Chinese firms, the study noted. And European and U.S. firms buy more of what the study called “high value-added” South American exports than do Chinese companies—purchasing machine parts instead of soybeans, for example. High-value goods are an export class that Latin American countries want to grow.
At the United Nations, Latin American nations usually vote with the West on resolutions regarding democracy, human rights, and territorial integrity. This sets the region apart from most other developing regions and aligns it more closely with EU foreign-policy positions than many of the Eastern European countries vying for EU membership, former Uruguayan Foreign Minister Ernesto Talvi, another lead author of the study, said at the Monday event.
Finally, when it comes to the ability for foreign companies to make money, the paper found that Spanish firms see a net return of 4.8 percent per year in Latin America, compared with 3.5 percent for equivalent investments in the developed world. That’s why they are largely reinvesting their earnings in the region.
The Elcano report provides data-based assurances that so-called friendshoring to Latin America can make business sense. More broadly, it offers a glass-half-full take on the region’s current trajectory. The research adds to many of the points made by Americas Quarterly’s Brian Winter in an essay last October laying out a “relatively bullish case” for doing business in the region.
Monday’s event included two panels to debate the merits of the Elcano report. Some panelists quibbled that a fair-stock take of the region should include more information on shortcomings such as low-quality education and organized crime. But many attendees also voiced comments such as that of the Brookings Institution’s Santiago Levy, a former Mexican official and former vice president of the Inter-American Development Bank.
“It’s refreshing and forces you to think,” Levy said. “It’s always good if you have somebody from the outside who is a friend, and I mean Spain. … They take a cold look at the region from the outside, and you say, ‘Look, guys. You can do it.’”
Upcoming Events
Saturday, Feb. 17, to Sunday, Feb. 18: Brazilian President Luiz Inácio Lula da Silva attends an African Union assembly in Ethiopia.
Wednesday, Feb. 21, to Thursday, Feb. 22: G-20 foreign ministers meet in Rio de Janeiro.
What We’re Following
Russia’s banana ban. Russia said this month that it would suspend purchases from some Ecuadorian banana exporters following a deal in which Ecuador agreed to supply the United States with military parts. The United States has said those parts would be shipped to Ukraine. Russia’s banana ban is significant. Bananas are a major Ecuadorian export; until now, around 98 percent of bananas arriving in Russia from overseas came from Ecuador.
The U.S.-Ecuador deal represents rare arms support to Ukraine from Latin America and Caribbean countries, which have generally shunned U.S. requests for military aid to Kyiv. But center-right Ecuadorian President Daniel Noboa has signaled he hopes to improve Quito’s relations with Washington and is committing to security cooperation with the United States to address a domestic crime wave.
The Wall Street view on Caracas. Wall Street traders who deal in government-issued debt played a role in lobbying the U.S. government for its October 2023 move to lift sanctions on Venezuela, the Wall Street Journal reported this week. The traders observed that U.S. sanctions had pushed Venezuela to intensify financial ties with Russia via debt markets and alerted U.S. officials.
Even if Washington reimposes most of its sanctions on Caracas this year due to Venezuelan President Nicolás Maduro’s noncompliance with U.S. expectations for free and fair elections, government debt markets might remain untouched, the Journal reported. Such a sanctions snapback appeared even more likely this week after news broke on Tuesday that the Maduro administration had imprisoned a prominent human rights researcher, Rocío San Miguel.
A hot air balloon enthusiast looks at a balloon during a tribute to mothers on Mother’s Day, in Rio de Janeiro on May 14, 2023.Tercio Teixeira/AFP via Getty Images
Brazil’s balloon bandits. Of the illicit activities that occur in Rio de Janeiro, hot air ballooning is less known to outsiders. But residents of the city and surrounding suburbs are used to seeing hot air balloons streak the sky despite a decades-old ban. The Guardian reported this week on the law-flouting Brazilians who engage in the practice—and have, on some occasions, launched 10-story-high balloons or loaded balloons with fireworks. Practitioners of large-scale ballooning call it gigantismo, or gigantism.
Question of the Week
On Tuesday, officials from the host countries of the 2023, 2024, and 2025 U.N. climate conferences—the United Arab Emirates, Azerbaijan, and Brazil, respectively—met for talks. In which Brazilian city is the 2025 conference due to take place?
Belém is on Brazil’s northern coast, where the Amazon rainforest meets the Atlantic Ocean.
FP’s Most Read This Week
- How Primed for War Is China? by Michael Beckley and Hal Brands
- The Country With Nothing Left to Lose by Christina Lu
- Everyone Wants a Chip Factory by Rishi Iyengar
In Focus: AI and Arms Flows
Mexican Foreign Secretary Marcelo Ebrard holds up maps of gun sales in the United States and gun seizures in Mexico during a news conference at the U.S. State Department in Washington on Oct. 13, 2022.Chip Somodevilla/Getty Images
Generative artificial intelligence may help reveal cross-border flows of arms to criminal groups in Latin America. For years, researchers who study arms flows in the region have used photos of weapons uploaded to social media to pinpoint details about where guns were originally manufactured. But AI allows researchers to scour much more open-source data on the internet.
Andrei Serbin Pont, the president of the Regional Coordinator of Economic and Social Research (CRIES), a Latin American think tank, wrote in Bellingcat last week that AI has given researchers from CRIES and Florida International University stronger capabilities to process open-source data. Members of his team upload their findings to a platform they run on the so-called small arms and light weapons trade in the region (i.e., handguns rather than tanks).
The platform’s data appeared to reinforce an assertion from Mexico that U.S.-manufactured guns are flooding into the country and being used in criminal violence. Mexico’s government has sued U.S. gunmakers in a lawsuit that was revived by a U.S. appeals court last month. The suit claims that U.S. gunmakers abet weapons’ illegal use by Mexican cartels.
“Dangerous weapons don’t just end up in the hands of criminal cartels,” Mexican journalist Chantal Flores wrote in an article co-published by Foreign Policy and the Dial last year, adding that Mexico only has one legal gun store. “Much of this trafficking is done by people with dual citizenship or Americans hired by drug cartels.”
The AI-enhanced data platform has also revealed concerning trends elsewhere in the region, such as the apparent use of Peruvian army grenades by Ecuadorian criminal groups.