Latin America’s Powers:Overcoming Common Challenges to Emerge on the Global Stage

Zhang Mingde

Since the beginning of the 21st century, Brazil, Mexico,Argentina and other major Latin American countries have made progress in searching for sustainable development models more suitable for their national conditions. Their democratic systems have been consolidated, their national economies have grown continuously, their comprehensive national strengths have been enhanced, and they have been playing an increasingly important role in regional and international affairs. But the development of these countries also faces many challenges.To become real emerging powers, they must overcome various constraints.

I.Rapid Development of the Emerging Powers in Latin America

Brazil, Argentina and Mexico are three major countries in the Latin American and Caribbean region. Their combined population is 343 million (Brazil has 191 million; Argentina,40.09 million; Mexico, 112 million). Their land area is 13,259,600 square kilometers (Brazil, 8,514,900 square kilometers; Argentina 2,780,400 square kilometers; Mexico 1,964,300 square kilometers). In 2011, the aggregate GDP of the three countries was over 3.5 trillion U.S. dollars (Brazil was$2.1 trillion; Argentina was $445.986 billion; Mexico was $1.04 trillion. The three countries have very rich natural resources,and their resources have obvious advantages. Mexico’s silver reserves and Brazil’s iron ore resources are among the highest in the world. Also, all these countries have huge proven oil reserves. Argentina has the world-famous prairies, with very rich agricultural and animal husbandry resources.

As of 2010, these three economies maintained varying degrees of growth for over a decade. After the outbreak of the international financial crisis in 2008, the three economies together experienced a setback. But after the crisis, the three countries learned a lesson from their bitter experiences,summed up the lessons of the neo-liberal model of development which they had followed, vigorously readjusted their economic development strategies, and searched for a development model more suitable for their countries. As a result of the sovereign debt crisis in the West and the global economic downturn,their growth rates dropped in 2011. According to a report by the United Nations Economic Commission for Latin America and the Caribbean, in 2011, Brazil’s domestic economy grew by 2.9%, while Argentina’s grew by 9% and Mexico’s by 3.9%.Meanwhile, the three countries have maintained stable political and social conditions, and their democratic systems have been consolidated and have been in normal operation. Brazil and Argentina successfully held general elections in 2010 and 2011 respectively, and in each case, the ruling party won re-election.Mexico’s presidential election was held on July 1, 2012, and the Institutional Revolutionary Party, which was once in power for 71 years between 1929 and 2000, won the general election.This political stability guaranteed that the three countries would enter a period of stable development, markedly enhancing their economic strength. In 2011, Brazil’s economic aggregate ranked 6th in the world, while Mexico ranked 14th and Argentina 27th.

Brazil is Latin America’s largest economy, and its total economic output and population account for about half of the combined totals of 12 countries of South America. Between 2003 and 2010, Brazil’s average annual economic growth was 4.01%. Its steady economic growth in recent years makes Brazil optimistic about its future development prospects, and its government’s goal is to achieve an average annual economic growth of 5% between 2011 and 2020. The IMF estimates that by 2020 Brazil’s GDP per capita will rise to $16,000-$20,000. It is worth mentioning that in recent years, Brazil has discovered abundant deep-sea oil resources in the undersea rock formations, and these fields are estimated to hold 50 billion to 80 billion barrels of oil. Such a discovery is bound to make Brazil one of the world’s“energy superpowers.”Brazil plans to invest 378 billion reais (1 USD=2.0227 Reais) in 2011-2014 to increase its oil and gas production. Its oil production will be raised from the more than 2 million barrels at present to 5.1 million barrels in 2020, and its gas production is set to jump to 116 million cubic meters in 2020. In addition, Brazil plans to invest $38 billion to develop new energy and to raise its ethanol production so that in 2020 the annual production of bio-energy in Brazil will reach 64 billion liters. With regards to improving people’s livelihood, Brazil has actively grasped the opportunity to host the 2014 World Cup and the 2016 Olympic Games,and it has developed a second five-year plan of“accelerated development.”It is expected that during 2011-2014, the scale of the government’s investment in infrastructure construction will reach 955 billion reais, involving roads, railways, electricity,and new affordable houses for low-and middle-income families.

Since taking office in 2006, the government of Mexican President Felipe Calderón has worked out the“National Development Plan 2007-2012.”The Plan lists industrialization as the main development goal and strategy, actively promotes national industrial restructuring and labor and tax reform,takes full advantage of mineral resources and oil resources,and increases the government’s investment in all of these areas.It also increases investment in aerospace, medical devices,pharmaceutical services, software information and other strategic new industries in order to accelerate the industrial modernization. As a NAFTA member, Mexico has seen its economy become integrated with the economies of the United States and Canada. It has unique advantages in gaining access to U.S. capital, science and technology, and preferential access to the U.S. market. Its regional trade with the United States and Canada is a key component of this country’s economic growth.In addition, Remittances sent by Mexicans living abroad are the country’s second-largest source of foreign exchange. The U.S.Department of Commerce data showed that Mexico received over$22.7 billion in remittances in 2011. Mexico’s stable economic situation has also attracted many multinational companies’enthusiastic investment. In early 2012, the United States’Coca-Cola, Wal-Mart, Japan’s Nissan Motor, Mitsubishi, Tokyo UFJ Bank, Mazda, and other multinational companies announced capital injection plans in Mexico. According to The World in 2050 released by the British HSBC Bank, Mexico’s economic growth will remain between 3-5% in the next 40 years, and is expected to become the world’s eighth largest economy by 2050.

Argentina has plentiful mineral, water and fishery resources,and forest areas account for about one third of the country’s total area. Confident in the country’s economic development,the Argentine government in February 2012 announced the implementation of the“2020 Industrial Strategic Plan.”Under the plan, within the next decade, Argentina’s GDP growth rate will maintain an average of 5%, and the average annual growth rate of industrial output value will reach 7%. By 2020,its GDP is expected to increase to $580.709 billion, with a per capita GDP of $12,900. Its unemployment rate is projected to decline from 7.3% in 2010 to 5%. The government will focus on supporting food, footwear, textiles, wood, paper, building materials, agricultural machinery, motor vehicles and parts,pharmaceuticals, software, petrochemical development and other economic sectors. In terms of output value and labor absorption, these areas presently account for 80% and 60% of the entire industrial sector, respectively. In recent years, the rate of Argentina’s economic growth has taken the lead among the Latin American countries. Adelmo J. J. Gabbi, Chairman of the Buenos Aires Stock Exchange, said that Argentina’s economy is“growing at the rate of Asia.”

The governments of Brazil, Mexico and Argentina have the same basic characteristics concerning government concepts.

First, the three countries all attach great importance to the stability of their domestic political and economic situations. In their campaign platforms, the political parties, whether leftwing or right-wing, stressed the importance of maintaining the stability of their national democracies, developing their economies and improving the people’s livelihood. The governments of the three countries have managed smooth transitions, and the democratic institutions in these countries have been properly consolidated.

Secondly, the governments of these three countries are all striving to explore development paths more suitable for their national conditions, and they have implemented the development mode combining the market economy with state intervention. The governments have enhanced the control and nationalization of important sectors that influence the countries’economic development, such as natural resources, mining,telecommunications, electricity, and other sectors. In May 2010, the Argentine government forcibly acquired a 51% stake previously held by Spain’s Repsol, the majority stakeholder of the YPE Company (Argentina’s largest oil firm), and put YPF into state control. Argentine President Christina Fernandez said:“In the development process, the governments of many emerging market countries have firmly grasped the strategic control of their oil industries, because this affects the survival and development of countries. In the major economies in Latin America, only Argentina has not yet grasped the economic lifeline of its oil resources.”She emphasized that after controlling oil resources, Argentina“will open the road to power.”Their nationalization efforts have strengthened the state control of their natural resources and important industries and helped solve the difficulties in their economic development. Meanwhile,these efforts have also improved the governments’image, eased social pressures, and enhanced domestic cohesion.

Thirdly, they have all implemented the economic and social development strategy targeting poverty eradication, and achieved some success. The three governments emphasized that solving social problems is essential for stabilizing domestic politics and focusing economic development. Therefore, they have attached great importance to improving people’s livelihoods and made enormous efforts to solve social problems. After Brazil’s Lula government adopted the Family Allowance Program, which mainly aimed to eliminate poverty and reduce extreme poverty,the Rousseff government launched a new poverty eradication program. It has announced that between 2011 and 2014 the government will allocate a special fund of 20 billion reais each year to help lift 16.5 million people (8.5% of the country’s population) living in extreme poverty out of poverty by 2014.President Rousseff stressed that the eradication of poverty was a lofty mission of the Brazilian governments at all levels, and of all the Brazilian people:“Only by reducing poverty, can Brazil see its economy grow. The best development path is to fight poverty.”Since taking office, Argentina’s Fernandez administration has focused on social development. While maintaining rapid economic growth, it has managed to substantially increase the living standards of its people. After her re-election in 2011,President Fernandez announced an increase of the national pension, starting in 2011. This move will benefit more than 6.8 million retirees.

II.Rising International Impact of Latin America’s Emerging Powers

Brazil, Mexico and Argentina regard maintaining and developing relations with the United States as the most important issue in their foreign affairs. To them, the second top issue is to develop their traditional relations with European Union member countries and their good-neighborly relations with their neighbors. They have a strong desire to expand and deepen their relations with China and Asia-Pacific countries. The three countries together actively promote regional integration and the solidarity of regional countries. They use multilateral diplomatic activities as an important stage to display the image of the three major countries, support the multi-polarization and democratization of the world, and advocate the establishment a fair and rational new international political and economic order,where all countries, big or small, are treated equally. They are actively involved in world affairs, having good performance in multilateral diplomatic occasions such as the UN General Assembly and its relevant committees, the G20 summit, the General Assembly of the World Trade Organization, and the UN Conference on Sustainable Development.

Within their region, the three countries attach importance to developing cooperation with neighboring countries, and actively promote regional integration. Mexico first proposed and actively promoted the establishment of the Community of Latin American and Caribbean countries. Brazil and Argentina support the establishment of a regional integration organization,though they pay more attention to the construction of the Union of South American Nations. Brazil is continuing to consolidate its leadership in the South American region, while Argentina is seeking a leading role in the region as well. Brazil also makes full use of the BASIC countries (China, Brazil, India and South Africa)and the BRICS countries (China, Russia, Brazil, India and South Africa) and other multilateral consultation and cooperation mechanisms to actively participate in major international issues and express its relevant ideas, as well as to build its image and influence as a world-class emerging power. Brazilian media claim that“Brazil has achieved its dream of taking center stage globally.”With regard to sensitive international hot-spot issues such as the Iranian nuclear issue, Brazil offered to participate in the mediation. In May 2010, Brazil and Turkey reached a nuclear fuel swap agreement with Iran, trying to find a new way to ease the Iranian nuclear crisis. During her visit to the United States in April 2012, President Rousseff expressed her concerns to President Barack Obama about sanctions against Iran, believing that this would aggravate tensions in the Middle East and lead to a sharp rise in oil prices.

Brazil, Argentina and Mexico have played a key role in promoting regional cooperation in Latin America and have achieved considerable success. The Union of South American Nations has more substance than the previous attempt at regional integration organization, and it has established sub-agencies such as the Bank of the South and South American Defense Council, playing an important role in coordinating positions on the international financial crisis and other major issues affecting regional development. The three countries have also played an essential role in establishing the Community of Latin American and Caribbean States. On December 2, 2011,the Summit of Latin American and Caribbean countries was held in Caracas, Venezuela’s capital. Presidents, government leaders and representatives from 33 Latin American and Caribbean countries attended the meeting. The meeting announced the establishment of the Community of Latin American and Caribbean States. The group is a regional organization that excludes the United States and Canada, but includes all Latin American countries. According to Mexican President Felipe Calderon, the establishment of the Community of Latin American and Caribbean States will further consolidate and strengthen the Latin American and Caribbean countries as a whole in terms of our international status and influence.“Our future cannot be built on the basis of the differences. Now finally we can unite without giving up the differences. What we have in common is the basis of solidarity, and it greatly exceeds the differences.”Brazilian President Rousseff pointed out:“The history of Latin American countries being manhandled should end. Latin American countries now have the best historical opportunities, and unlike the United States and Europe,Latin American countries have strong momentum of economic development. Only development can bring Latin American countries on the road to real freedom.”

After its establishment, the Community of Latin American and Caribbean States focused on intra-regional cooperation,strengthened regional integration, maintained regional unity, opposed foreign interference, and emphasized taking joint measures concerning the economy and finance, social development, environmental protection, energy cooperation and other issues. Its top task is to improve the quality of life for all citizens of member countries through independent and sustainable development, on the basis of democracy, balance and social justice. Executive Secretary of the UN Economic Commission for Latin America and the Caribbean (ECLAC),Alicia Barcena, said,“The establishment of the Community is the most important political achievement made in Latin America at this stage. It will make decisions, on behalf of all Latin American countries, with regard to regional integration.It will represent this region in dialogues with other economic regions, and promote the country-to-country exchange of experience within this region. The goal is mutual support and common progress.”The establishment of the Community of Latin American and Caribbean States (CELAC) has helped Latin American emerging powers increase their status in regional and international affairs.

The sixth Summit of the Organization of American States held in Colombia in April 2012 reflected Latin America’s foreign policy featuring a desire for independence and the pursuit of solidarity. Latin American countries urged allowing Cuban leaders to attend the summit, but the U.S. rejected, with the excuse that the Cuban government is not democratically elected. The United States’hegemonic stance led to strong dissatisfaction among the Latin American countries. Ecuadorian President Correa announced that he would not participate in the summit.“Bolivarian Alliance for the Peoples of Our America,”formed by Venezuela, Bolivia, Nicaragua and other countries,issued a communiqué that it would no longer participate in any Organization of American States summit if Cuba was banned.Brazil, Argentina and other countries also agreed that the summit should be the last one without Cuba’s participation.Argentine President Fernandez returned home before the conclusion of the summit, because she failed to obtain the U.S.support concerning Argentina’s sovereignty over the Malvinas Islands (called the Falkland Islands by the United Kingdom).Latin American countries made great efforts to uphold their own positions and interests, and had the courage to stand up to the pressures of the United States. The summit ended up with no achievement.

There is a growing trend for Latin America’s emerging powers to protect their political interests and strengthen their solidarity.Therefore, as a group they are playing an increasingly important role in international affairs. They actively participate in major international affairs, and have become involved in the reform of the United Nations. The three countries are striving to become permanent members of the UN Security Council, and Brazil has been the most assertive. As for the reform of the international financial system, they look forward to a transition towards a direction that is conducive to the interests of developing countries, and they work vigorously for more say and voting right in the IMF, the World Bank and other international financial organizations.

According to Argentine President Fernandez, measures taken by the United States and Europe to deal with the financial crisis have not achieved their desired results. The new models of the world economy must be explored, and in particular, there is a need to strike a balance between market regulation and state intervention.“The international community has discussed the IMF’s reform for a long time, but no actual action has been taken.It is time to implement the recommendations of the reform.”They demand that the world’s economic order become more reasonable and balanced. In their view, today’s world economic order was established mainly by the developed countries, and it is neither reasonable nor fair. The emerging Latin American powers think that this order has not only failed to adapt to the changes in the pattern of the world economy, but it has also failed to truly reflect the shared needs of the emerging market countries for economic restructuring. In international affairs,Mexico has always been active. Whether in the United Nations General Assembly and its committees, or at the G20 summit and its related meetings, Mexico has repeatedly acted as the coordinator between the developing and developed countries.In June 2012, the G20 Summit was held in Mexico for the first time. Mexico held the rotating presidency of the G20 Summit,becoming the first Latin American host of the summit. In the same month, Brazil successfully hosted the UN Conference on Sustainable Development“Rio +20,”seeking to make the Conference on Sustainable Development adopt the“Brazilian brand.”

The trends in the above summits highlight the influence that Latin American emerging powers are having in the international multilateral arena. When they are involved in negotiations and coordination on the international economic and financial system reforms, they demand that developing countries and developed countries have equal rights, while at the same time seeking a favorable external environment for the development of their respective national economies. As for responses to climate change, energy conservation, environmental protection and sustainable development, they actively safeguard the interests of developing countries, demanding that the developed countries transfer technology and provide funds to developing countries,and arguing for development policies and measures which tilt towards the developing countries.

III. The Challenges

Domestically speaking, Brazil, Mexico and Argentina are faced with the following adverse factors concerning economic development. Their economic structures are imbalanced, they rely so heavily on foreign markets, capital and techniques, and their international competitiveness is relatively weak. Their technology is relatively backward, and their innovative abilities remain low. Their administrative efficiency is very low, and they still suffer from serious poverty and many social problems.In addition, their trade and investment protectionism is very pronounced and they are plagued by the brain drain of top professionals. Other problems exist. In all three countries,policies have changed too often. When their economic and social development is stable, they maintain policy continuity,but once difficulties arise, they unilaterally change their policies and take short-sighted measures. Due to the impact of the sluggish economic recovery and the financial market turmoil arising from the European and American debt crisis,Mexico, Argentina, Brazil and other countries have introduced a number of unilateral restrictive import initiatives since the year 2012. The Brazilian government has repeatedly taken steps to influence the currency exchange rate.“Trade protectionism has constituted a major threat to sustainable economic growth in Latin America.”In the closing session of the seventh World Economic Forum meeting on Latin America, Mexican President Felipe Calderon strongly called on Latin American countries to abandon short-sighted trade protectionism and actively create a more open and liberal trade environment. He said:“As the world economy has been faced with serious challenges, Latin American countries should strengthen trade ties rather than increase trade barriers; public and private investment should be encouraged rather than inhibited.”

Their nationalization measures have also attracted criticism.Nationalization can protect a country’s natural resources and help it seek maximum benefits, but forcible acquisition of shares held by foreign enterprises has undoubtedly brought serious damage to the interests of the investors. Forced government intervention and frequent policy changes have caused serious damage to the investment environment and the image of these countries, leading to foreign capital outflows and hindering the development of industries. To a certain extent, nationalization has also negatively impacted governmental fiscal situations.

To varying degrees, the three countries suffer from deteriorating legal order problems. Mexican drug cartels are becoming increasingly rampant, with tens of thousands of people becoming victims every year. Brazil has a conflict-ridden society and prison riots are frequent. The deterioration of law and order not only affects those countries’domestic economic development and social stability; it also often draws international media attention, damaging the image of Latin America’s emerging countries.

From an international perspective, Brazil, Mexico and Argentina are faced with many challenges and constraints if they wish to play a continued role and exert influence as emerging powers. Firstly, Latin America as a whole is plagued by imbalanced development. Latin America’s development and solidarity as a whole are the important basis for the three countries to have an influence in international affairs. There are 33 independent countries in the Latin American region, all of different sizes, levels of development, development models and foreign policies. As a result, Latin America’s integration has been restricted. In addition, countries like Chile, Venezuela and Colombia are eager to not be left behind, fighting to not be consigned to second-rate country status. They do not accept some of the policies and propositions of Brazil, Mexico and Argentina, negatively affecting Latin American countries’solidarity. Therefore, Brazil, Mexico and Argentina need to seek common development with other countries and coordinate their positions so as to truly become emerging powers that have strength and are representative.

Secondly, the three countries need to strengthen their cooperation and coordination. Brazil, Mexico and Argentina are all emerging powers in Latin America, but when seeking to become a major power each of them has different strategic demands. Brazil hopes to become a global power, and it seeks to become a permanent member of the UN Security Council through the reform of the United Nations. Mexico and Argentina have a conspicuous core leadership in the affairs of Latin America, and are also interested in permanent seats on the UN Security Council, so as to help them further enhance their international status. In addition, the three countries have different top diplomatic issues to solve. Between Mexico and the United States, the issues surround the fight against drug smuggling, drug trafficking and immigration control. Between Argentina and the United Kingdom there is the Malvinas Islands sovereignty dispute. Within the Organization of American States there is the issue of policy toward Cuba. Consequently, if Latin America’s emerging powers want to join hands and play a role together, they must rely on mutual solidarity, tolerance and coordination.

Thirdly, the three countries need to coordinate with other emerging powers. The rising status and influence of Latin America’s emerging powers are closely related with the overall influence that other emerging powers are gaining. Without the rise of emerging powers such as China, Russia, India and South Africa, it would be unimaginable for Latin America’s emerging powers to play a positive role in major issues,such as the construction of a new international political and economic order, the strengthening of South-South cooperation,the promotion of the North-South dialogue, global economic and financial governance and sustainable development. Only when emerging powers as a whole rise and cooperate closely can they make a significant contribution in advancing a multipolar world, the democratization process, fighting poverty and achieving the Millennium Development Goals and other major international issues. But Latin America’s emerging powers and other emerging powers do not entirely adopt the same policies and positions on certain issues. Among them there may be conflict and friction, which need to be solved in the spirit of cooperation and tolerance. Latin America’s emerging countries are very eager to develop a partnership with China, and they regard China as a leader and representative of emerging countries. In particular, in the fields of the economy, trade and investment, they are pleased to see that the rapid development of China helps boost the economic growth of Latin American countries. This being said, the two sides have some differences concerning the RMB exchange rate and Chinese investment in Latin America.

Fourthly, there is interference by the United States. The United States has always viewed Latin America as its backyard. In the fields of politics, security, economy and social development,the United States takes advantage of its existing influence to control Latin American countries and bring them into an international political and economic order dominated by the United States. From the perspective of Latin America’s emerging powers, they need to maintain their traditional relations with the United States, but they also must pursue independent and diversified foreign policies, resorting to solidarity to get rid of U.S. control and interference. Therefore, the control and anticontrol, interference and anti-interference struggle between Latin America’s emerging powers and the United States will last for a long time. Only when they are really free from the control of the United States can Latin America’s powers truly emerge on the global stage.