Mexico

While politicians have focused primarily on the effects of trade, automation is rapidly transforming the nature of work. A recent McKinsey report estimates that half of the labor done today can be turned over to machines, fundamentally changing the nature of manufacturing, retail, food services, and data processing among other sectors. They predict that China, India, the United States, and Japan will see the largest and fastest shifts as a combination of easy capital, aging populations, and falling productivity speeds the transition away from a human workforce. By their calculations, nearly 400 million Chinese and 235 million Indian workers compete with robots today. In the United States and Japan, some 60 percent of jobs are susceptible to change. Although positions may not disappear altogether, the work people do will change, as roughly a third of today’s repetitive tasks could be taken over by machines. Latin America will also see significant change – with roughly half of the current labor mix in Mexico, Brazil, and Argentina vulnerable to automation, a higher percentage than the United States. Sales of robots already top $2 billion a year, showing that the shift is already underway. Brazil looks the most vulnerable to change, as its mix of stagnant productivity, an aging population, and the infamous “Brazil cost” make labor expensive. In manufacturing, retail, transportation, and agriculture more than half the work done by 32 million employees could be automated. Though Argentina’s economy is slightly less susceptible to automation, its aging population combined with a decade long lack of investment could lead companies to step up capital spending on robotics under the more market friendly Macri government. Slowing the process down are strong unions and unreliable electricity. But over half of its agricultural and manufacturing jobs are vulnerable. Structurally, Mexico has the highest potential to automate, as almost two-thirds of the work done in advanced manufacturing plastic, auto, and aerospace sectors could be phased out, affecting some five million workers. Yet the process in Mexico will likely be slower, cushioned by its younger population and lower wages. The global question is what comes afterward. The majority techno-optimists believe new jobs will emerge for these displaced workers, following the industrial and agricultural revolutions before. They point to car mechanics, coal miners, engineers and more recently app developers as previously unimaginable gigs that have appeared. The pessimists see this time as indeed different, as with the rise of artificial intelligence making machines viable substitutes for people. Leaning optimistic, McKinsey’s advice for advanced nations rings just as true for Latin America. Governments need to expand social safety nets to protect those most vulnerable to these coming labor upheavals. They also need to transform schools and educational curriculums to train a twenty-first century workforce that complements rather competes with robots, encouraging creativity, flexibility, and entrepreneurship. And governments need to support basic research and innovation, helping them shape the ongoing revolution. For Latin America especially, it means promoting these types of investments, as even though they disrupt today’s status quo they will help ensure the region isn’t left behind in these global shifts.

This morning, I had the privilege of testifying before the U.S. Senate Committee on Foreign Relations at a hearing titled “Venezuela: Options for U.S. Policy.” Also joining me before the committee were David Smilde, Senior Fellow, Washington Office on Latin America, and Mark Feierstein, Senior Associate, Americas Program Center for Strategic and International Studies. You can read my written testimony, the written testimonies of my fellow witnesses, and watch a recording of the hearing on the U.S. Senate Committee on Foreign Relations website.  

A wave of corruption scandals has roiled Latin America in recent years, from Chile’s campaign finance affairs, through Mexico’s Casa Blanca revelations. Most recently, the information divulged in the December Odebrecht settlement has sent a shudder of fear across regional politics after the Brazilian construction firm admitted to paying nearly $800 million in bribes in twelve countries. The tide of corruption revelations has contributed to massive protests, slumping incumbent polls, and political uncertainty throughout the region. Obviously, the scandals of recent years differ greatly from each other. The Odebrecht scandal was driven by a Brazilian context very distinct from the Guatemalan environment that led to President Pérez Molina’s downfall, or from the Mexican and Chilean cases. Empirical evidence about corruption trends in the region is also quite mixed, with polls showing contradictory findings about the direction of public experiences with corruption victimization and public perceptions of corruption more broadly. For all these differences, there is a common silver lining to the region-wide wave of scandal. As a perceptive study released this week by the Inter-American Dialogue argues, the region has seen declining public tolerance of corruption and a rising normative edifice that makes it easier to tackle abuses. On the public side, authors Kevin Casas-Zamora and Miguel Carter catalogue a variety of factors that are changing the accountability equation. Citizens are angry: three-quarters of the population in Latin America view their society as unjust, and fewer than two in five express satisfaction with their democracies. An economic downturn has driven down incumbents’ average approval ratings across the region. Meanwhile, citizens are not only more motivated to mobilize, they are better able to do so: the revelations come against a backdrop of improving information transparency, changing access to public information through the widespread adoption of social media, and growth of a politically active middle class. Simultaneously, a “new normative edifice” of international agreements and standards, alongside improved national laws and policies, has given teeth to previously weak anticorruption bodies (see figure below). Laws have been introduced or rewritten in ways that constrain money laundering, reduce campaign finance violations, increase fiscal transparency, and facilitate prosecution. The investigative capacities of police and prosecutors have increased. New bodies, such as governmental auditing agencies and civil society anticorruption organizations, have been created in many countries over the past two decades. Anticorruption measures adopted by Latin American countries, 1990-2015 Source: Kevin Casas-Zamora and Miguel Carter, “Beyond the Scandals: The Changing Context of Corruption in Latin America,” Inter-American Dialogue, February 2017. The authors are quick to remind us that there is a big gap between laws on the books and “their effective implementation and enforcement.” But the cautiously optimistic conclusion I draw from their analysis is that the pincer movement of greater public mobilization for effective accountability, on the one hand, and institutional changes, on the other, is having tangible effects in fighting longstanding patterns of impunity for corruption across countries as diverse as Brazil, Chile, Guatemala, Honduras, Mexico, and Panama. This two-pronged process may continue to cause political instability for the foreseeable future. And the list of reforms that are still needed is enormous, from structural changes, such as addressing the economic and political disparities that diminish the equality of citizens before the law, to more “technical fixes” such as improving judicial performance and enhancing political finance oversight. But overall, the trend is a largely positive one, with declining public and institutional tolerance fueling corruption revelations. These in turn often generate the political pressure for legal and institutional reforms that have the potential to create less corrupt and more accountable political systems. Whether one agrees with this hopeful conclusion or not, the report is well worth a read, marshalling substantial cross-national evidence on the evolution of corruption and accountability processes across the region.

View article in Spanish, originally published in El Financiero. Mexico’s presidential elections for decades have been a one shot deal. Whomever wins the most votes—paltry as that count may be—goes on to live in Los Pinos. And paltry they increasingly are -- in the last two elections these numbers dipped well below 40 percent; in 2018 many believe the winner could garner less than a third of the ballots. This has significant negative ramifications for legitimacy, accountability, and governability. But there is a solution – a second electoral round. Most of Latin American and indeed most countries around that world that elect presidents, as opposed to prime ministers, have a second round. A few weeks or so after the first election voters return to the ballot box to choose between the two highest vote getters. This process ensures the new president an electoral mandate, as by definition over half of the voters chose the winner in the second round. This is vital for leaders, such as Argentina’s president Mauricio Macri, who want to make big changes to the status quo.   Second rounds also tend to eliminate extreme or fringe candidates, exposing the very real electoral ceiling on their vote share beyond the fervently loyal. This is the immediate reason many in Mexico champion the reform, as they believe it will stop a 2018 AMLO victory. A two round system lends itself to political bargaining– with the two top contenders assiduously courting the runners up and their votes. This at times makes strange bedfellows – for instance recently in Peru, when the left and right of the political spectrum galvanized around former banker turned politician Pedro Pablo Kuczynski (PPK) to defeat the initial front runner, Keiko Fujimori. Runoffs of course have their limits. While the president has a more robust mandate, they often face a divided congress, which can lead to gridlock. And because two people can win in the first round, it encourages more candidates to run, leading to a proliferation of political parties and the problems therein. But Mexico’s other electoral rules—namely the combination of single member districts, where just one person wins a senate or congressional race, and the plurinominales, where party leaders’ choose who makes the longer proportional representation list —will head off a more Brazilian fate (at least in terms of the number of political parties).  What a second round will help Mexico deal with is the longer term political fracturing already under way. This is due both to changing social mores and the rise of independent candidates. Mexican voters no longer identify as they once did with the traditional parties. As recently as the turn of the 21st century, nearly 3 out of 4 voters identified with one of the main political parties: PRI, PAN, or PRD. Today, just half of the electorate declares any allegiance to an identifiable party. The young and educated in particular don’t commit, shifting with candidates or splitting their tickets between parties. With the new generations of voters increasingly unmoored from the lifelong identifications of the past, politicians have growing incentives to differentiate themselves from the party masses. Add to this the new legal framework for independent candidates. While the recent reforms allowing these mavericks are a win for representation, it further fragments the political scene. Looking toward the 2018 presidential race, Mexico could see five or more options on the ballot, particularly if a few of those vying for a traditional party nomination make good on their threats to go it alone if not chosen. And even if their appeal remains quixotically in the single digits, the inherent dispersion among so many choices will weaken the election’s winner by granting him or her just a fraction of the popular vote. President Peña Nieto has come out against instituting a second round in Mexico’s electoral system, saying that the majorities such rules create are “fictitious.” Yet fictions can serve a purpose -- building trust among politicians and with society, and forming a programmatic basis for political coalitions. Peña’s opposition likely results from other reasons. The president may believe the PRI’s famous “hard vote” is still enough to win the 2018 contest. If the PAN fractures or if El Bronco or other independents jump in, then with even less than 30 percent of the vote the PRI candidate could in fact squeak by—though at the cost of legitimacy and governability. But perhaps the president’s real worry is as he looks around the table, the most likely second round coalition—between the PAN and PRD—would exclude him and his chosen successor. And that is something a PRI president can’t abide.  Yet if these short term partisan preferences win out, Mexico will lose. True, a second round won’t solve all of the nation’s ills. But it will help shift away from an imperial presidency to one where power comes from an electoral mandate. This would give the next president the citizen’s backing to deal firmly with a potentially erratic northern neighbor. And most importantly, it could galvanize Mexico’s political system to finally implement the desperately needed changes to improve security, better education, and increase long term investment, making its economy competitive for the twenty-first century in ways that will benefit society more broadly.

A wave of corruption scandals has roiled Latin America in recent years, from Chile’s campaign finance affairs, through Mexico’s Casa Blanca revelations. Most recently, the information divulged in the December Odebrecht settlement has sent a shudder of fear across regional politics after the Brazilian construction firm admitted to paying nearly $800 million in bribes in twelve countries. The tide of corruption revelations has contributed to massive protests, slumping incumbent polls, and political uncertainty throughout the region. Obviously, the scandals of recent years differ greatly from each other. The Odebrecht scandal was driven by a Brazilian context very distinct from the Guatemalan environment that led to President Pérez Molina’s downfall, or from the Mexican and Chilean cases. Empirical evidence about corruption trends in the region is also quite mixed, with polls showing contradictory findings about the direction of public experiences with corruption victimization and public perceptions of corruption more broadly. For all these differences, there is a common silver lining to the region wide wave of scandal. As a perceptive study released this week by the Inter-American Dialogue argues, the region has seen declining public tolerance of corruption and a rising normative edifice that makes it easier to tackle abuses. On the public side, authors Kevin Casas-Zamora and Miguel Carter catalogue a variety of factors that are changing the accountability equation. Citizens are angry: three-quarters of the population in Latin America view their society as unjust, and fewer than two in five express satisfaction with their democracies. An economic downturn has driven down incumbents’ average approval ratings across the region. Meanwhile, citizens are not only more motivated to mobilize, they are better able to do so: the revelations come against a backdrop of improving information transparency, changing access to public information through the widespread adoption of social media, and growth of a politically active middle class. Simultaneously, a “new normative edifice” of international agreements and standards, alongside improved national laws and policies, has given teeth to previously weak anticorruption bodies (see figure below). Laws have been introduced or rewritten in ways that constrain money laundering, reduce campaign finance violations, increase fiscal transparency, and facilitate prosecution. The investigative capacities of police and prosecutors have increased. New bodies, such as governmental auditing agencies and civil society anticorruption organizations, have been created in many countries over the past two decades. Anticorruption measures adopted by Latin American countries, 1990-2015                           Source: Kevin Casas-Zamora and Miguel Carter, “Beyond the Scandals: The Changing Context of Corruption in Latin America,” Inter-American Dialogue, February 2017.   The authors are quick to remind us that there is a big gap between laws on the books and “their effective implementation and enforcement.” But the cautiously optimistic conclusion I draw from their analysis is that the pincer movement of greater public mobilization for effective accountability, on the one hand, and institutional changes, on the other, is having tangible effects in fighting longstanding patterns of impunity for corruption across countries as diverse as Brazil, Chile, Guatemala, Honduras, Mexico, and Panama. This two-pronged process may continue to cause political instability for the foreseeable future. And the list of reforms that are still needed is enormous, from structural changes, such as addressing the economic and political disparities that diminish the equality of citizens before the law, to more “technical fixes” such as improving judicial performance and enhancing political finance oversight. But overall, the trend is a largely positive one, with declining public and institutional tolerance fueling corruption revelations. These in turn often generate the political pressure for legal and institutional reforms that have the potential to create less corrupt and more accountable political systems. Whether one agrees with this hopeful conclusion or not, the report is well worth a read, marshalling substantial cross-national evidence on the evolution of corruption and accountability processes across the region.

Last week while in Mexico I had the chance to talk to Alejandro Domínguez, Reporter for Milenio TV about U.S.-Mexico relations under the Trump administration. You can watch the conversation here.

Transparency International yesterday released its annual Corruption Perceptions Index (CPI) that ranks 176 countries on a scale from zero (highly corrupt) to one-hundred (very clean), based on the opinions of citizens and experts. As in years’ past, Nordic countries fared best. Denmark topped the list (tied with New Zealand), followed by Finland, Sweden, and Switzerland. Ranked worst were Yemen, Syria, North Korea, South Sudan, and Somalia. Regionally, Europe stagnated compared to last year, sub-Saharan Africa progressed unevenly, and Middle Eastern and North African countries saw sharp declines. Most Asia Pacific nations continued to post failing grades (scoring forty points or less). Latin America’s fight against corruption, witnessed in the region’s ongoing headlines and rising number of domestic cases, generally hurt perceptions. Mexico took the biggest hit. Continued revelations of flagrant wrongdoing by numerous governors and other public officials—followed by few investigations or prosecutions—led the nation to plummet twenty-eight places to 123, alongside Honduras and Sierra Leone. After two years of declines, Brazil’s score stabilized, even as the Lava Jato investigations expanded and deepened. This year’s further arrests, prosecutions, and convictions seemed to give some confidence that law enforcement might change things. Argentina’s score improved to its highest in five years, reflecting widespread sentiments that Macri’s government will be cleaner than that of his predecessor, Cristina Fernández de Kirchner. Scores for Honduras and Guatemala, both suffering from their own corruption scandals, remained roughly even, though their rankings fell relative to others. Though many criticize the index for measuring perceptions rather than realities, the survey remains one of the best indicators of global and regional corruption trends. And as my colleague Matthew Taylor points out, it draws the attention of policymakers, law enforcement and the public—those that will need to come up with actions and solutions if their countries are to change.

Transparency International yesterday released its annual Corruption Perceptions Index (CPI) that ranks 176 countries on a scale from zero (highly corrupt) to one-hundred (very clean), based on the opinions of citizens and experts. As in years’ past, Nordic countries fared best. Denmark topped the list (tied with New Zealand), followed by Finland, Sweden, and Switzerland. Ranked worst were Yemen, Syria, North Korea, South Sudan, and Somalia. Regionally, Europe stagnated compared to last year, sub-Saharan Africa progressed unevenly, and Middle Eastern and North African countries saw sharp declines. Most Asia Pacific nations continued to post failing grades (scoring forty points or less). Latin America’s fight against corruption, witnessed in the region’s ongoing headlines and rising number of domestic cases, generally hurt perceptions. Mexico took the biggest hit. Continued revelations of flagrant wrongdoing by numerous governors and other public officials—followed by few investigations or prosecutions—led the nation to plummet twenty-eight places to 123, alongside Honduras and Sierra Leone. After two years of declines, Brazil’s score stabilized, even as the Lava Jato investigations expanded and deepened. This year’s further arrests, prosecutions, and convictions seemed to give some confidence that law enforcement might change things. Argentina’s score improved to its highest in five years, reflecting widespread sentiments that Macri’s government will be cleaner than that of his predecessor, Cristina Fernández de Kirchner. Scores for Honduras and Guatemala, both suffering from their own corruption scandals, remained roughly even, though their rankings fell relative to others. Though many criticize the index for measuring perceptions rather than realities, the survey remains one of the best indicators of global and regional corruption trends. And as my colleague Matthew Taylor points out, it draws the attention of policymakers, law enforcement and the public—those that will need to come up with actions and solutions if their countries are to change.

We know very little about who will run Western Hemisphere affairs under the Trump administration. So far, the only named appointees are Homeland Security Secretary John Kelly and National Security Council (NSC) Senior Director Craig Deare. There are as yet no nominees for key Western Hemisphere positions at State, Defense, or Commerce, which is not unexpected for an administration this young. Although the Latin America team is not fully formed, the pressing Latin America agenda – which will get underway in earnest with today’s visit by a Mexican delegation – suggests that it is well worth reflecting on the central questions likely to determine the trajectory of the region during Trump’s presidency: Mexico: The wall, immigration, and NAFTA may all be on the table when Mexican Foreign Minister Luis Videgaray and Economy Minister Ildefonso Guajardo come to Washington this week, followed by President Peña Nieto at the end of the month. Even after today’s executive order paving the way for a wall, the central question looming over the talks – led on the U.S. side by Reince Priebus, Stephen Bannon, Jared Kushner, Peter Navarro, Gary Cohn, and Michael Flynn – is just how far Trump is willing to go. Is the incendiary campaign rhetoric about NAFTA simply the opening gambit of a negotiating strategy, as some suggest, or is Team Trump really sincere in its desire to sink the most successful hemispheric trade deal of all time? In the meantime, what does this uncertainty do to the Mexican economy, given that 85 percent of Mexican exports are to the United States and the country has already seen a decline in U.S. investment? What are the implications for integrated supply chains throughout NAFTA? What effect does a worsening labor market in Mexico have on migration flows? The Mexican response to Trump: Peña Nieto’s response so far has been measured, displaying perhaps a disbelief that Washington will allow the bilateral relationship to be scuttled, a recognition that there are elements of NAFTA that deserve renegotiation, and a desire to quickly resolve the uncertainty that is wreaking havoc on business decisions. But Penã Nieto is under considerable pressure to respond forcefully to U.S. pressure. Many Mexican thought leaders – such as Enrique Krauze and Jorge Castañeda – have called for the country to retaliate against any U.S. bullying by easing controls on both Mexican and Central American migration, backing down from the drug war, or building international alliances with China and Russia. The Peña Nieto administration has noted that the “whole relationship” is up for discussion – a subtle hint that the United States has much to lose if Mexico ceases to cooperate on security and migration. Mexican policymakers have also expressed their willingness to perhaps even contemplate dropping NAFTA if the United States pushes too hard. The frontrunner in the July 2018 elections, Andrés Manuel López Obrador (AMLO), seems unlikely to be more conciliatory than Peña Nieto’s Institutional Revolutionary Party (PRI) and, if anything, his electoral prospects seem enhanced by the bullying tone out of Washington. How far will the Mexican response go? Elections: As the AMLO phenomenon demonstrates, there is likely to be a Trump effect on the electoral landscape of Latin America. The mobilizing effect of Trump’s rhetoric is already being exploited by Corona beer, which has hit back hard against Trump’s vituperative statements with a well-received public relations campaign mocking Trump’s wall-building and America first jingoism. Silly though that may be, it points to the enormous public repercussion of Trump’s words south of the border. The next two years will bring elections in half of Central and South America, and although much has been made of the supposed rightward turn in the region, is it possible that nationalistic appeals responding to perceived American jingoism might provide succor to the left and/or to nationalist forces? Cuba: How far will Trump turn back the thaw in relations that took place during the second Obama administration? And what will be the practical effect on Cuba’s planned 2018 leadership transition? While some lawmakers are pushing for more pressure on Cuba for human rights, it seems unlikely that the administration would be able to completely unwind U.S. investment on the island, given growing U.S. business interests. Even as he has promised to review Cuba regulations, Secretary of State Rex Tillerson seems to have put some space between himself and the most dramatic Trump campaign oratory. But a harder rhetorical line and the possibility of renewed sanctions from Washington may strengthen hardliners within the Cuban regime and diminish the impetus toward reform; already it has led to nationwide military exercises that belie the Cuban regime’s concern about a return to a more confrontational relation. Venezuela: Does the country implode slowly or explode catastrophically? And how does Washington respond? The Trump administration has so far adopted a fairly measured tone regarding Venezuela, but recent statements by lawmakers on both sides of the aisle calling for further targeted sanctions against President Nicolás Maduro’s officials may contribute to a ratcheting up of rhetoric against the autocratic chavista It seems unlikely that the Trump administration would continue talks with the regime that had taken place during the late Obama administration. But there are not many good multilateral options for addressing Venezuela’s crisis, nor is it clear that there are many effective unilateral options beyond targeted sanctions. Nevertheless, the deepening economic crisis and the increasing power of hardliners within the regime suggests that Venezuela will soon become a hemispheric hotspot, worsening the already devastating humanitarian crisis in ways that could test the new administration’s capacity to galvanize a regional response. Colombia: Although the peace deal has now been approved by the Colombian Congress, will the Trump administration commit to funding the peace? Even before Trump’s victory, there was uncertainty about the U.S. Congress’ willingness to fund the peace over the long haul, although it was heralded on both sides of the aisle as a rare bipartisan foreign policy success and a vindication of the huge investment in Plan Colombia. Homeland Secretary Kelly noted before his confirmation that it was “imperative” that the United States remain involved in Colombia, but Secretary of State Tillerson cast doubt on that commitment in his written responses to the Senate Foreign Relations Committee. Given continued lobbying by former president Álvaro Uribe and the isolationist tendencies of some Trump administration officials, it is by no means a certain proposition that the administration will invest in the Colombian peace, especially if Congress’ attention turns elsewhere. China, investment and trade: The Trump administration’s withdrawal from the Trans-Pacific Partnership (TPP), its promised renegotiation of NAFTA, and its inward-looking rhetoric have begun what looks like a paradigmatic shift of the trade and investment panorama in Latin America toward the east and the south. In the absence of a better deal up north, the Pacific Alliance is the new hot thing in the region. One Brazilian diplomat snidely remarked that Trump’s victory means that “Mexico will have to remember that it is Latin American.” Mexico has already suggested that the Pacific Alliance turn southward to Mercosur, which appears more open than ever to a deal that allows its Atlantic membership to reach Pacific markets. The savings-depleted nations of South America are also happy to turn eastward for increased foreign investment that might enable them to recover from the economic downturn. China is well aware of the opportunity this presents: President Xi Jinping arrived for the Asia-Pacific Economic Cooperation (APEC) summit in Peru only ten days after the U.S. election. Latin American countries are already moving “to put their eggs in a [Regional Comprehensive Economic Partnership (RCEP)] basket,” led eastward by Chilean and Peruvian expressions of interest. Will the end of TPP presage greater hemispheric trade integration, centered around a Mercosur-Pacific Alliance deal? What would be the implications of an even greater Chinese economic role in the region? Would the Chinese be willing to incorporate Latin America into RCEP? Would RCEP complement or weaken the BRICS, and what are the implications for the relative roles of Mexico and Brazil as regional leaders (and sometimes rivals)? Central America: These countries will likely be squeezed by the United States’ cooling trade relationship with Latin America, the stronger anti-migration rhetoric of the new administration, and the possibility that the US will double down even further on hardline measures in the drug war. The big questions for Central America will be: does the United States maintain the CAFTA-DR trade agreement (which was not mentioned by the Trump team during the campaign)? Where does the Trump administration find the balance between its stated desire to cut foreign assistance budgets and the need to maintain aid programs designed to slow migration and quell security problems? And how will migration and remittances be affected by the Trump administration’s emphasis on illegal workers and the border, amidst already desperate conditions that led to increasing apprehensions of Central Americans in Mexico and the United States in recent years, and a record-breaking 2.7 million deportations under the Obama administration? Anticorruption: In recent years, the U.S. government has played a largely unheralded role in anticorruption efforts in Latin America, ranging from support for Guatemala’s CICIG (International Commission Against Corruption and Impunity) to indictments and actions against firms and executives accused of corrupting regional officeholders. While it does not seem likely that the U.S. Department of Justice will shut down Foreign Corrupt Practices Act (FCPA) enforcement (given the pipeline of pending cases, the competitiveness arguments that can be made for FCPA, and the investments that have been made by business to ensure compliance), in all likelihood the anticorruption agenda at both State and DOJ will become far less of a priority under a regulation-averse Trump administration. Will the Trump administration actively work to water down anticorruption efforts and cross-border enforcement? If so, what will be the repercussions for countries that have undergone significant anticorruption reforms in recent years, and are seeking to consolidate anticorruption gains, often against powerful domestic opposition? The Monroe Doctrine: Given the proximity of Latin America to the U.S. homeland, Washington policymakers have long been concerned by the efforts of countries like Iran, Russia, and China to penetrate into the hemisphere. Trump’s Latin America advisor on the NSC, Craig Deare, has written critically of Secretary John Kerry’s 2013 declaration that the “era of the Monroe Doctrine was over,” noting that it served “as a clear invitation to those extra-regional actors looking for opportunities to increase their influence.”[1] He further argued, with reference to China’s growing role in Latin America, that the United States has the right to protect its geopolitical interests in the region, and “if it does not do so, [it] cedes to China its strategic goal of ‘reshaping the current world system in a fashion more to its liking.’” Will the Monroe Doctrine be resurrected? What are the practical implications of this renewed emphasis on U.S. primacy in the region? As the United States turns inward, what tools will policymakers have to prevent perceived meddling by extra-regional forces? How will the Trump administration balance its rapprochement to Putin with concerns about, for example, Russia’s growing role in Venezuela? How will the administration react if Latin America does indeed turn more forcefully to Asia, and particularly China, on trade? In sum, although Latin America has long been one of the most neglected regions of U.S. foreign policy, the next four years are likely to significantly shift the trajectory of regional relations, regardless of whether the Trump administration adopts an active or passive role. The coming appointments of key Latin America personnel will provide us with a better sense of where the administration hopes to come down on some of the questions raised above. [1] Deare, Craig A. “Latin America,” in Charting a Course: Strategic Choices for a New Administration, edited by R.D. Hooker, Jr. Washington: National Defense University Press, 2016.

NAFTA is as much an investment as a trade treaty, providing guarantees of international courts, regulatory coordination, and intellectual property protections. This has helped bring over $500 billion in foreign direct investment (FDI) to Mexico over the last twenty-three years. This investment has mostly come from the United States, going into manufacturing, financial services, and mining. Trump’s rhetoric—and perhaps soon his actions—are putting this underpinning legal structure in doubt. Throughout the campaign he repeatedly bashed the agreement, and his transition team has promised to rework NAFTA early on. In Congress, Republicans are pushing for a 20 percent border adjustment tax as part of their larger fiscal reform, a measure that would undercut NAFTA-inspired cross border trade. International companies are already wary. While in 2016 overall FDI declined only slightly, new investment (as opposed to reinvested profits) fell by nearly a third. And U.S. investors—traditionally the majority—declined as well, from just over half of all 2015 FDI to a third of 2016 intakes. In the opening weeks of 2017 delays and cancellations have continued, with Ford, Chrysler, and General Motors all pulling back from previous commitments for factories. Source: Centro de Estudios de la las Finanzas Públicas, Cámara de Diputados  Yet investment in Mexico is not going to end, even if Trump takes a hard line. Despite continuing crime and corruption problems, Mexico has succeeded in making it easier to be in business, to register property, obtain credit, pay taxes, and go bankrupt. In the World Bank Ease of Doing Business rankings, Mexico now surpasses its Latin America peers and far outpaces emerging market heavyweights China and India. In fact, much of the money coming in recently is not just betting on NAFTA access to the United States. Instead it is taking advantage of Mexico’s free trade agreements with another forty-four nations, including the European Union, China, and Japan (the United States by contrast, has agreements with just twenty countries). General Motors, when called out by Trump for making the Chevrolet Cruze in Mexico, responded that very few of these cars are headed to the United States—most head from Ramos Arizpe, Coahuila, to Europe. Other companies are coming to take advantage of Mexico’s large internal market. Despite huge inequalities, over 14 million families earn between $15,000 and $45,000 a year, creating thousands in disposable income. Walmart is banking on rising consumption—investing $1.3 billion over the next three years. Israeli owned Teva Pharmaceutical Industries just bought leading Mexican pharmaceutical company RIMSA for $2 billion (though the deal faces legal challenges). And for Mexico’s overall growth, internal decisions may matter more than those of multinational corporations. While vital in developing Mexico’s advanced manufacturing sectors—autos, aerospace, electronics, medical equipment, and the like—in the end FDI is a small part of the overall economy. Averaging roughly $25 billion, it comprises less than 3 percent of the nation’s trillion plus dollar economy. In a way, Trump’s inauguration will help Mexico, as it moves closer to ending the current economic uncertainty. Then the NAFTA “renegotiation” can begin in earnest. This could include new side agreements on rules of origin, procurement, labor, the environment, ecommerce, intellectual property, and sanitation issues for agricultural products among other issues. If the new U.S. president ends the storied agreement, Mexico would return to Most Favored Nation status, raising tariffs on imports into the United States an average 3.5 percent (U.S. exports to Mexico, now some $236 billion a year, would face an average 7.5 percent rate). A 20 percent border adjustment tax on imports would be a bigger threat to cross-border commerce, though the peso’s 20 percent fall over the last year—and the expected further dollar appreciation in the tax’s wake—would help limit the immediate costs borne by Mexico’s exporters. Though not calamitous, NAFTA provides Mexico something special in its investment guarantees. If it ends, these will be harder to replace. But most important for Mexico’s economic future is that the government addresses its own internal challenges—specifically crime and corruption. This, more than anything else, will shape the investment decisions of domestic and foreign companies, creating jobs and growth.

Half of the eighteen nations of Central and South America will hold presidential elections over the next two years.[1] The number of elections is not unprecedented, but the degree of uncertainty is, given the economic doldrums and political crises that have afflicted the region in recent years. As a consequence of the electoral outlook’s uncertainty, many of the coming year’s events in Latin America will need to be interpreted through the peculiar lens of candidates’ strategic calculations and parties’ maneuvering for advantage at the polls. Of the seven largest Latin economies, all but Peru face elections before the end of 2018. Argentina is the only one of the six remaining big countries that will not be holding presidential elections, but given the hostile Congress Mauricio Macri faces, the legislative elections of October 2017 will in many ways be a referendum on the course of his presidency, determining how far and fast he can bend Argentina’s course. In his first year, Macri has chalked up many achievements in the opposition-dominated Congress, approving more than seventy new laws. Growth is projected to reach as high as 3 percent in 2017. But inflation is stubbornly high, the fiscal deficit looms, and tax reform has stalled, none of which bodes well for Macri’s reform efforts. As a consequence, the legislative elections will be a bellwether of the country’s longer-term trajectory. Chile is in many ways the harbinger of the uncertain presidential election season. It will be the first of the large countries to go to the presidential polls, in November 2017. Incumbent Michelle Bachelet is barred from running for reelection, but the social conflicts of her presidency are very much center stage. Deteriorating relations between the Nueva Mayoria coalition and civil society have been highlighted by November public sector strikes, following a poor coalition showing in the October municipal elections. The Nueva Mayoría is fractured, and while former president Ricardo Lagos remains the frontrunner for the coalition’s nomination, he has had to push back against internal competitors such as Senator Isabela Allende Busi (who has withdrawn) and former OAS secretary general José Miguel Insulza (who has not). This means that the run-up to the mid-year primary that will select Nueva Mayoría’s candidate could be turbulent. In the face of this divided center, conservative former president Sebastián Piñera looks increasingly like the national frontrunner. But relative outsiders could still roil the race, from politicians such as Senator Alejandro Guiller to businessmen such as Leonardo Farkas. Colombia holds legislative elections in March 2018, followed by the presidential contest in May. The elections hinge on the fate of the new peace deal with the FARC rebels, which was narrowly defeated in a national referendum in October, renegotiated, and then unanimously approved in a December 2016 legislative vote (boycotted by opponents led by former president Álvaro Uribe). The fate of the peace deal is so deeply intertwined with the 2018 elections that the presidential election can be said to be a second, definitive referendum. Neither President Santos nor President Uribe can run for reelection, but their rivalry is playing out in the implementation of the deal. For Uribe and the right, the calculus seems to be that the longer implementation is delayed, the more likely the FARC can be driven back to conflict, and the less likely voters will support the deal. For Santos and the center-left, the calculus seems to be that a successful deal could help voters to set aside the unpopularity of Santos’ government in favor of a legacy of peace. The degree to which implementation can be delayed in the run-up to the mid-2017 disarmament deadline may therefore have big effects as the political campaigns begin to ramp up in the second half of the year. The next question is who will run, and how: the current frontrunner in the polls is Vice President Germán Vargas Lleras, whose Radical Change party falls on the center-right, in the space between the center-left that backs the peace and the uribistas on the right. If the center-left were to gel together, they might be able to pick up a legislative majority, but the question is whether the current leading center-left candidate, peace negotiator Humberto de la Calle, will have the popular support needed to take the presidency. Meanwhile, although none of the uribista candidates are currently polling strongly, it is possible that this could be an election decided in the second round of voting. Much will depend on the peace deal’s success in coming months. Mexico’s electoral season will be dominated by a politician from other parts: Donald Trump, whose August visit to the country was seen by many Mexicans as one more in a string of strategic miscalculations by incumbent Peña Nieto. Significant reforms opening the economy have been overshadowed by recrudescent violence, a ham-handed government response to the Ayotzinapa disappearances, and a string of corruption scandals that have diminished the governing party. The PRI was severely punished in the June 2016 gubernatorial elections, and repeated stories of corrupt governors—including some on the lam—have done little to improve its electoral chances. The top running PRI candidate, government secretary Miguel Angel Osorio Chong, currently polls in third place behind the PAN’s top-seeded Margarita Zavala (wife of former President Calderón) and the PRD’s Andres Manuel Lopez Obrador. Lopez Obrador has been seen as the candidate most likely to push back against the new U.S. administration’s efforts to revisit NAFTA and migration issues and, perhaps as a consequence, he has risen to meet Zavala in recent polls. Both far outpace Osorio, suggesting that whoever wins, this election will lead the country away from the PRI. In Brazil, Dilma Rousseff’s impeachment has thrown the political class into disarray. The big question at present is whether her successor, Michel Temer, will survive until the October 2018 vote: he faces an impeachment threat of his own, and his centrist coalition appears to be fraying in the face of a massive set of plea bargains by executives at construction giant Odebrecht. Given the breadth of political corruption exposed by the Car Wash investigation, it is hard to know who will be the last man standing. At present, it looks to be a woman, Senator Marina Silva (Rede), who leads head-to-head simulations of second round voting. Former President Lula, of the Workers’ Party, continues to lead in first round voting projections, but his high levels of rejection mean that Marina Silva could prevail in a second round. The big question in Brazil may be less about the presidential race, though, then about the coalition the new president must pull together to govern effectively in 2019. The judicial phase of the Car Wash investigations is unlikely to proceed quickly enough to remove scandal-ridden legislators from office by 2018, and the intricacies of Brazilian electoral law mean that voters may not do much better at throwing the bums out, however much they may wish to do so. There is at least the prospect, then, that an electorate desirous of change may elect a relative outsider such as Marina Silva as president, only to find that she is forced to govern with the same old crowd that has caused such upheaval in the first place. Finally, Venezuela, where elections are—in theory, at least—scheduled for December 2018. The profound economic and political crisis means that it is not even clear at this juncture whether elections will happen, much less who the candidates might be. The opposition Democratic Unity Roundtable (MUD) has dominated the National Assembly since 2015, but its efforts to impose a recall referendum have so far been sidetracked by a skillful set of dodges and parries by Hugo Chavez’s successor, President Maduro. Most recently, Maduro appears to have used Vatican-sponsored talks to delay any real discussion of a recall until January of next year, thereby ensuring that even if a recall were to take place, the PSUV would continue to govern.  Given unprecedented levels of popular discontent and the depth of the crisis, however, it is hard to envision a scenario in which Maduro survives as a viable candidate for the 2018 election, or continues in office beyond 2018 with any kind of popular mandate. Venezuela is in uncharted waters. [1] Brazil, Mexico, Colombia, Venezuela, Chile, Ecuador, Costa Rica, Paraguay, and Honduras.

In my piece published in the November/December 2016 issue of Foreign Affairs, I lay out the economic and political characteristics of populism, analyze why it is receding in Latin America today, and describe what a next wave might look like. I also argue that Latin America’s historical experience with populism provides some bracing warnings to other countries now flirting with such politics. You can read the first three paragraphs of the article below: On the morning of October 17, 1945, thousands of protesters in Buenos Aires marched on Argentina’s main executive building, the Casa Rosada, to demand the return of Vice President Juan Perón, who had been forced to resign a week earlier. The day was hot, and many of the men took off their jackets and even their shirts. This earned them the mocking title of los descamisados—“the shirtless.” Perón’s supporters promptly reclaimed the insult and turned it into a badge of honor. When Perón ran for president in the 1946 election as an unabashed populist, he toured the country in a train he named El Descamisado after his followers. The descamisados, and those like them, were integral to the populism that dominated Latin American politics from the 1930s until recently. Starting with Brazilian President Getúlio Vargas, who first assumed power in 1930, and leading all the way up to Bolivian President Evo Morales, who entered office in 2006, Latin American leaders have repeatedly harnessed the power of the once excluded masses by railing against the establishment and promising a more prosperous future for their followers. Today, however, even as populists are surging throughout the rest of the world, such voices have fallen conspicuously silent in Latin America. The region’s grandiose strongmen, with their cults of personality, have largely faded away. Recent elections have ushered in middle-of-the-road leaders, including one former investment banker, promising fiscal conservatism, free trade, and legal due process. In a striking role reversal, it is now Latin America that is watching, aghast, as populists elsewhere threaten to disrupt the world’s more mature economies. You can read the entire piece here.

Last month, I had the pleasure of joining Jim Zirin on “Conversations in the Digital Age” to discuss the U.S.-Mexico relationship, the presidential impeachment in Brazil, Colombia’s peace deal, Argentina’s return to global markets, and the turmoil in Venezuela. You can watch the interview here.

Last June, Mexico elected new governors in twelve of its thirty-one states. As millions of voters went to the urns, corruption was a top concern (along with insecurity). Eight states saw the incumbent party kicked out; in four—Veracruz, Quintana Roo, Chihuahua, and Durango—the PRI lost for the first time in the party’s history. The voter outrage behind this rout seems to be rooted in reality. Seven of the outgoing governors face serious corruption allegations; in five of these investigations are already underway, either by the Mexican or U.S. government. Here is a rundown of their alleged misdeeds: The most egregious accusations surround the outgoing PRI governors of Veracruz, Quintana Roo, and Chihuahua. In Veracruz, still Governor Javier Duarte (PRI) is being investigated by Mexico’s attorney general’s office (PGR) for embezzlement and illicit enrichment. News reports count at least 646 million pesos—roughly $48 million dollars—in government contracts to phantom companies. In response the PRI has distanced itself, taking away Duarte’s party privileges. Quintana Roo’s former Governor Roberto Borge (PRI) is under investigation by Mexico’s tax authority (SAT) following a CNN exposé alleging that he led a vast fraud ring, systematically robbing individuals’ and businesses’ real estate and bank accounts. In just one day, authorities took over four hotels worth 340 million pesos. Televisa journalists also uncovered sales of protected lands to Borge’s friends on the cheap, and his use of public money to fund his own personal airline. In Chihuahua, the PGR is investigating former Governor César Duarte (PRI) for illicit enrichment and money laundering, based on allegations that he directed 80 billion pesos in public funds into a bank he partially owned. He is also facing a lawsuit from a Spanish corporation for trying to use public funds to pay off $2 million of a $4 million dollar personal debt. All three governors attempted to protect themselves against prosecutions before stepping down, setting up ahead-of-schedule state-level anticorruption offices and then packing them with their cronies. So far, the Supreme Court has struck down both Duartes’ actions, and Borge’s case is pending. In Zacatecas, former Governor Miguel Alonso (PRI) is being investigated by the PGR for embezzlement and illicit enrichment for buying protected land before it was rezoned for residential or commercial use. Local legislators also accuse him of receiving kickbacks for government contracts—paid to his brother Juan Manuel Alonso. In Oaxaca, outgoing Governor Gabino Cué (PAN) is under investigation by U.S. authorities for possible money laundering, following the movement of tens of millions of dollars through the bank accounts of his close associates. In Hidalgo, the press uncovered that former Governor Francisco Olvera (PRI) spent hundreds of thousands of pesos to attend the Super Bowl and bring chart-topping musicians to play at his private parties, all supposedly on his governor’s salary. He also used his government helicopter for personal fun, including going to a soccer game. Finally in Aguascalientes, news exposés accuse outgoing Governor Carlos Lozano (PRI) of nepotism, maneuvering his nephew into control of the state’s finances. Those ending their tenure in the remaining five states have not yet been accused of illegal financial dealings, though rumors of using public funds for self-promotion, ties to drug cartels, and missing financial documents swirl around many of them. This corruption—part of the morass that costs the Mexican economy up to 10 percent of GDP each year—motivated voters last summer. It is time now for the judicial branch to step forward and play its democratic role—investigating, prosecuting, and convicting the guilty.