Global Economics

What Can Bush Bring Latin America?


As President Bush heads off on a tour of the region, some observers wonder whether he has the political muscle to offer more than goodwill

Having largely ignored Latin America during his six years in office, President George Bush is heading off on Mar. 8 on a week-long visit to Brazil, Uruguay, Colombia, Guatemala, and Mexico in an attempt to restore relations and counter the growing influence of leftist Venezuelan President Hugo Chávez.

He's planning to launch a biofuels initiative with Brazil, discuss a proposed free-trade pact with Uruguay, promise continued anti-drug assistance to Colombia, provide encouragement for Guatemala's young democracy, and discuss immigration reform and border security with Mexico's new President, Felipe Calderón.

Bush is also bringing along a delegation of businesspeople, led by First Brother Jeb Bush, the former governor of Florida. They will meet with their Brazilian counterparts to explore trade and investment opportunities in South America's largest economy.

Dead-End Talks?

But it's not clear what Bush can really accomplish on his longest-ever visit to the region. Thanks to strong demand from China, many Latin American central banks are awash in dollars earned from record exports of commodities such as copper, iron ore, steel, soybeans, and wheat, so they're less dependent on U.S. largesse than they have been in decades.

The smaller, poorer countries that could use some aid are unlikely to get much relief, since U.S. assistance to the region, currently around $1.6 billion annually, is set to drop next year. And the biggest chunk of that aid is aimed not at poverty relief but at helping Colombia battle drug trafficking and a 40-year-old leftist insurgency

Although the U.S. and Uruguay signed a trade and investment agreement in January, Bush is unlikely to win a renewal of trade-negotiating authority from the Democratic-controlled Congress in July. That will make it difficult for him to deliver on free-trade agreements that have already been signed with Colombia, Peru, and Panama—much less forge a new one with Uruguay.

Even the splashiest initiative of the trip, an agreement with Brazil to jointly promote the worldwide adoption of ethanol and other biofuels, may fall short of its promise. That's because Bush cannot exempt Brazil from a congressionally mandated 54% import tax on the sugar cane-based ethanol Brazil would like to sell to the U.S. The two countries together produce 70% of the world's ethanol, and Bush wants to work with Brazil to help countries in Central America and the Caribbean start their own alternative fuel production programs to reduce their dependence on imported oil—including subsidized oil currently being sent to them by Chávez.

Two Revolutionaries

Indeed, the specter of Chávez lies behind many of Bush's initiatives. Chávez has used Venezuela's oil wealth to win allies throughout Latin America and the Caribbean. He has bought more than $1.5 billion worth of Argentine bonds to help out fellow leftist President Nestor Kirschner and has offered to buy bonds from Ecuador, which expelled California-based Occidental Petroleum (OXY) last year and a few months ago elected a new leftist President, Rafael Correa.

Chávez also encouraged Bolivian President Evo Morales, another leftist leader, to nationalize natural gas reserves that once belonged to foreign companies and charge key customers, including Brazil, higher prices for the fuel. Bush, whom Chávez has characterized as the "devil," is also concerned by the Venezuelan leader's close ties with Iranian President Mahmoud Ahmadinejad, who visited Caracas and two other Latin American capitals in January.

On the eve of his trip, Bush co-opted Chávez's revolutionary rhetoric by invoking the name of Simon Bolivar, Chávez' favorite revolutionary hero, who helped South American countries win independence from Spain in the 1800s. Bush compared him to the U.S.'s own revolutionary war hero George Washington. "It is our mission," Bush said in a speech delivered to the Hispanic Chamber of Commerce in Washington on Mar. 5, "to complete the revolution they began on our two continents." He said that tens of millions in the hemisphere remain mired in poverty. "In an age of growing prosperity and abundance, this is a scandal," Bush said, that "has led some to question the value of democracy."

Doubts About Trade

In his Mar. 5 speech, Bush pledged to spend $385 million to help underwrite home mortgages for working families in Central and South America, and another $75 million to teach English to young Latin Americans and support programs to send them to the U.S. for further study. The U.S. is already providing $885 million in aid to El Salvador, Honduras, Nicaragua, and Paraguay in exchange for promises to invest in education, health, and governance programs.

In June, Bush is sending a U.S. Navy medical ship to the region to treat 85,000 patients and carry out up to 1,500 surgeries. "We're helping to increase opportunity by relieving debt and opening up trade, encouraging reform, and delivering aid that empowers the poor and the marginalized," Bush said.

Washington has long pressed the region to open up to trade and investment to promote economic growth and job creation, but many Latins are frustrated by the lack of progress. A recent poll conducted in 18 countries by Chile-based Latinobarometro shows that only 38% of Latin Americans are satisfied with the way their democracies are working.

Although Latin Americans may be skeptical of the benefits of free trade, it's about all Washington has to offer them these days. "Bush is a lame-duck President who has lost control of Congress, so it's hard to see what else he has to offer Latin America right now," says David Fleischer, professor emeritus of political science at the University of Brasilia, Brazil. But, he adds, "At least he will show that the U.S. hasn't forgotten completely about its neighbors to the south."

Smith is BusinessWeek's Mexico bureau chief.

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