On February 12, 2024, the Georgetown Americas Institute (GAI), in partnership with the Elcano Royal Institute for Strategic and International Studies and the Prince of Asturias Chair at the BMW Center for German and European Studies at Georgetown University, hosted two panels of experts for a conversation about why Latin America matters to the United States and European Union.
Latin America’s relationships with the European Union and the United States are currently dominated by misconceptions that negatively impact integration and investment. The recently released Elcano Report "Why Does Latin America Matter?" challenges these narratives with data and in-depth analysis and highlights the strategic, economic, and political importance of a region with an indisputable protagonism in the current geopolitical context.
To discuss this new report, GAI, the Elcano Royal Institute, and the Prince of Asturias Chair hosted a conversation with an array of distinguished guests:Cynthia Arnson, distinguished fellow and former director of the Wilson Center’s Latin America Program; Santiago Levy, senior advisor at the United Nations Development Programme and a nonresident senior fellow at the Brookings Institution; Carlos Malamud, senior analyst for Latin America at the Elcano Royal Institute; Marcela Melendez, deputy chief economist at the Latin America and the Caribbean chief economist office at the World Bank; Moises Naim, author, journalist, and host of the show Efecto Naím; José Juan Ruiz, chairman of the Elcano Royal Institute; and Ernesto Talvi, visiting fellow with the Georgetown Americas Institute and senior analyst at the Elcano Royal Institute. GAI Founding Director Alejandro Werner and H.E. Ángeles Moreno Bau, ambassador of Spain to the United States, provided introductory remarks.
José Juan Ruiz stressed the importance of the report as a tool to help dispel prevalent misconceptions and assumptions that dominate Spanish and European thinking about Latin America. Ruiz highlighted four as particularly harmful: 1) Latin America is a political failure; 2) Latin America is an economic mess; 3) the EU and the United States have abandoned Latin America, opening the door to China; and 4) EU companies are leaving the region to invest in more productive and secure markets.
“Are these pessimistic conceptions of Latin America true? We wrote this report exactly to show that real data from the region actually dispels these negative narratives.” -José Juan Ruiz.
Ernesto Talvi delved into the reasons Latin America’s GDP per capita has failed to converge with those of the United States and the developed world. He argued that achieving “development status” is actually quite difficult; only five countries in East Asia have achieved it in over half a century. That is why Talvi believes that instead of focusing on convergence, Latin America should concentrate on its real challenge, growth, which has remained stagnant for a decade now.
Talvi analyzed historic trends on foreign direct investment and trade in the region to dispel the notion that the United States and the EU are retreating. European companies continue to reinvest the profits they make in Latin America, signaling their belief that future profits will continue to be made. Talvi made a particular point on trade, explaining that while China is the single largest destination of South American exports, machinery imports from China actually are actually equaled by those coming from the United States and EU combined, dispelling the notion that South America only imports from China. He concluded that evidence such as this challenges the belief held by some that the region is now defined by China’s “hegemony.”
Marcela Melendez agreed with Talvi’s assessment that the region has experienced stagnant growth in recent years. Latin America and the Caribbean face a number of challenges, including internally fragmented labor markets, perennial regulatory hurdles, notable levels of market concentration in key industries with high markups, a lack of coordination of intra-regional migration, low integration levels of women into the workforce, and the growth of organized crime.
“There is so much potential for growth, but unless we somehow unleash these forces that are holding us back I think this will be very difficult for us to achieve.” -Marcela Melendez
Santiago Levy analyzed Latin America’s current economic performance. With the exceptions of Argentina and Venezuela, he believes that most of the region has managed to modernize macroeconomic management and end previous challenges like rampant inflation. The problem, however, is that while most countries “got the macro right” they still have failed to converge with the developed world.
What makes Latin America unique is that it is the only region trying to build democracy and develop at the same time. Levy argued that this dual pursuit is challenging because voters need short-term solutions that drive the redistribution of resources in very unequal societies that have failed so far to develop the foundations for inclusive growth.
He clarified that while the problem is not democracy itself, a functional welfare state that is able to pursue redistribution while remaining sustainable and friendly to productivity has failed to materialize so far in Latin America. Instead, the region remains characterized by fragmented labor markets with high levels of informality. Convergence has failed to take place because productivity levels stagnated as a consequence of dysfunctional labor markets that produce dysfunctional firm dynamics. Essentially, Latin America has failed so far to create functional welfare states because it has preserved what in essence are exclusive institutions.
“The authors are telling us that the glass is half full, and us Latinos are always seeing it as half empty, but the paper reminds us that there is promise that soon it will be full. There is a nice optimism to this report that is welcome and is very refreshing.” -Santiago Levy
Ruiz spoke on Latin America’s inequality challenges. Poverty and inequality characterize the region’s policy discussions and are integral to understanding where the region is headed.
Cynthia Arnson commended the report for its ability to take the reader away from negative narratives on the region that tend to focus on “failure and pessimism” and instead present an optimistic analysis that highlights the region’s potential. In her opinion, however, the report makes the traditional connection between a lack of economic growth and political discontent, which while valid in some respects still fails to account for crime and violence as a major driver of public sentiment. She observed that while democracy may be embattled around the world, there are signs of concern for Latin America in particular, where dwindling levels of support for democracy among the young and poor and the weakening of traditional political parties spell trouble for the future.
Carlos Malamud commented on the regionalization of narco trafficking and organized crime. To him, drug trafficking has been the only area in which Latin America has become more integrated, with the obviate that this is an illegal industry. Only illicit industries, in his opinion, seem to have been successful in integrating across the region. In his view, the only other comparable case was Operation Condor in the 1970s, when Latin America’s brutal dictatorships successfully integrated and coordinated their repression tactics.
A full recording of the event is available on the GAI YouTube channel.
February 12, 2024
On February 12, 2024, the Georgetown Americas Institute (GAI), in partnership with the Elcano Royal Institute for Strategic and International Studies and the Prince of Asturias Chair at the BMW Center for German and European Studies at Georgetown University, hosted two panels of experts for a conversation about why Latin America matters to the United States and European Union.
