The COVID-19 pandemic shrank the global economy by 3%, but sent the Latin American and Caribbean economy plunging by 7%. The region is still struggling to climb out of that hole — and it's often been looking to China for help.
But that could be changing now as the U. S. looks to ramp up its economic partnership with Latin America.
Jose Fernandez, the Under Secretary of State for Economic Growth, Energy and the Environment, is one of the Biden administration's most important point men in that effort. While in Miami recently to hear what Latin American countries say they need at this crucial juncture, the Cuban-born Fernandez spoke with WLRN Americas editor Tim Padgett.
READ MORE: From cocaine cowboys to trade captains: how the 1994 summit transformed Miami
While bilateral trade between China and Latin America has reached $500 billion, Fernandez says the U.S. had almost $900 billion in two-way trade just with Mexico in 2023 — and points out that the infrastructure projects Beijing's Belt and Road Initiative offer can often leave developing countries in onerous debt.
"Look, we welcome competition. It's good for the region," he said. "What we think is required, though, is fair competition that complies with local law in Latin America, that respects labor rights. And I think that's where U. S. companies are better partners. And so we think we make a better offer."
Here are excerpts of their conversation, edited for clarity:
PADGETT: Under Secretary Fernandez, you were meeting at the U.S. military’s Southern Command, or Southcom, headquarters here in Doral with top Latin American diplomats. What are their biggest concerns about the economic struggles they're having?
FERNANDEZ: I think what we're finding out is that we are changing the terms of the debate in the region. We're seeing interest on the part of the Latin American countries to look for investments from the United States, for example, in the semiconductor area. In the supply chain area. In critical minerals. These are all now opportunities for the region.
But do they feel that U. S. commitment to investment and financial assistance is perhaps below the bar where they'd like to see it right now?
I think they realize that everyone could always do better. But look, we are by far, by far, the largest investor and trade partner in the region. About a third of the region's imports come from the United States; almost half of their exports go to the U. S. In Mexico, U. S. investment is several hundred percentage points above that of the People's Republic of China. And so they're seeing that we remain committed.
They're also seeing that our trade is a little bit different from that of other countries. Our trade isn't just four or five commodities. It's not just copper, soy beans. It's value-added products that bring technology, jobs — that actually foster development. So I think in Latin America, we are pushing on an open door.
As the pandemic subsided, at the Summit of the Americas in Los Angeles in 2022, President Biden made a point of helping create the America's Partnership for Economic Prosperity. Can you share with us what you think the accomplishments are for APEP, as it's known, after almost two years now?
I think we've got a lot to show for the America's Partnership. We have now 12 countries that are part of APEP. We have free trade agreements with three quarters of them. And what we have focused on is some of the things that are keeping investment and development from taking root in the region — which is not about trade.
"I think we learned a lesson the hard way during the pandemic: You want to diversify your sources of supply."Jose Fernandez
It's about corruption, infrastructure, health systems, transparency, education, trying to promote entrepreneurship, renewable energy. The region has an opportunity to be a leader in wind and in solar energy.
It also has an opportunity to benefit from critical minerals. Latin America has 60% of the world's lithium. We're going to need 42 times the amount of lithium that we use today in our electric vehicles and the like by 2050 if we are going to meet our clean energy goals.
But a lot of people would say that the biggest challenge the United States has in Latin America and the Caribbean is the incursion of China. Since 2000, we've seen China's annual bilateral trade with the region skyrocket from $10 billion to almost $500 billion — and Beijing’s Belt and Road Initiative has been bringing more Chinese infrastructure projects into the region, like ports.
I get that question all the time, Tim. And the first thing I would say is, yes, they might have $500 billion of trade — but just in Mexico, just in 2023, we had almost $900 billion in two-way trade. As for Belt and Road, you may want to look at some of the debt situations that many countries find themselves in as a result [of those projects].
Look, we welcome competition. It's good for the region. What we think is required, though, is fair competition that complies with local law in Latin America, that respects labor rights. And I think that's where U. S. companies are better partners. And so we think we make a better offer.
Infrastructure, is a super important part of APEP. With the InterAmerican Development Bank, for example, we’ve cooperated on $3 billion to promote and develop ports, roads, electricity. And that’s just a beginning. We’re also using those funds to leverage our private sector. That’s our secret sauce: a lot of U.S. companies that are great at infrastructure around the world, but which haven’t been coming to Latin America because of those conditions in the region I mentioned earlier that have made it difficult to attract investment, like security and corruption.
A lot of people also think at this moment that one of the best tools for confronting China's incursion is a bill now in Congress called the America's Act. One of its big objectives is to focus more on nearshoring — bringing the supply chain closer to home in this hemisphere. Is that the best tool in your mind?
I think we learned a lesson the hard way during the pandemic: You want to diversify your sources of supply. I'll give you three specifics: Every week, a country comes [to us] and says they believe that they can be our best nearshoring partner for critical minerals, for semiconductors, and for pharmaceutical products and medical equipment.
So, for example, under the CHIPS Act, the State Department has received a hundred million dollars for each of five years, and we have now announced grants to Mexico, Costa Rica, and Panama, for things like helping to improve the talent of their workforce. And this is creating a race to the top.
