Latin America This Week: August 31, 2023

BRICS becomes BRICS+, though not all may join. On the last day of its South African summit, BRICS member countries formally invited Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates to join the group. China led the charge, anticipating the expansion would boost the grouping’s influence as a counter to the existing U.S.-led global order and institutions as well as potentially ease access to critical minerals and resources. Yet, at least in the case of Argentina, it may not be a done deal. The two leading candidates for the presidency both rejected the invitation. Patricia Bullrich, the center-right candidate, opposes Argentina’s inclusion due to Russia’s war in Ukraine. Her opponent, Javier Milei, rails against joining a coalition with “communists.” And Indonesia bowed out from being invited in the end.

Latin America looks West, not East, for its technology. Latin America made strides adopting technology during the COVID-19 pandemic. Digital payments and e-commerce uptake in particular soared. But the region lags on technological innovation. According to a recent McKinsey Global Institute study, “Latin America imports about eight times more intellectual property than it exports, the highest ratio of any region outside Africa.” 

The region depends mostly on the West for its technology. Despite the ubiquitous branded presence of Huawei phones and telecom equipment, 88 percent of the intellectual property imported to the region comes from the United States, Canada, and the European Union. As U.S.-China geopolitical rifts grow, this dominance will matter.  The United States’ “small yard, high fence” approach to ring fencing sophisticated technologies with military uses will increasingly force countries to choose sides. The Netherlands and Japan have already restricted sales to China of the equipment and machinery that goes into making high-end semiconductors and their component circuits and wafers. As more technologies get added to the U.S. list, nations that use technologies, such as those across Latin America, will also be pressured to choose.

More frequent droughts promise more slow downs in the Panama Canal. A months-long drought has slowed traffic through the Panama Canal. Over 200 ships wait to pass on either side as the Gatún Lake, which supplies water to the canal, sees its lowest water levels on record. The traffic jam and detoured vessels could cost Panama some $200 million in lost fees if the drought continues through the winter. U.S. consumer prices, too, could tick upwards as over 70 percent of cargo moving through the canal comes to or goes from the United States. And droughts are becoming the norm rather than an aberration, water levels plummeting twice in the last three years.

The Panama Canal isn’t the only transportation hub hit by the climate’s changes. The worst drought in 500 years across Europe last summer forced cargo ships along the Rhine, one of Europe’s most important waterways, to cut up to 75 percent of their capacity. In the United States, some routes of the Mississippi River had to close during October 2022, raising costs by around $20 billion. With over 80 percent of global goods moving by water, the next logistics crisis may come from the lack of it.