Latin America’s Moment

How much do Canada and Mexico matter for the United States? Here are a few snapshots illustrating the importance of our combined global heft and influence. North American countries are joined by 7,500 miles of land borders, among the longest in the world. Though comprising less than 7 percent of the world’s population, Canada, Mexico and the United States produce nearly a quarter of the world’s GDP—some 20 trillion dollars. Energy North America is the world’s largest biofuel producer, accounting for nearly half of global ethanol and biodiesel production. The United States, Canada, and Mexico produce nearly 20 percent of the world’s oil and 27 percent of the world’s natural gas. Forty-eight natural gas pipelines connect United States, Canada, and Mexico. In 2012, the region invested more than $250 billion in exploration and production of oil and gas, and experts predict that number could grow to half a trillion dollars annually by 2016. In 2013, Mexico sent 85 percent of its crude oil experts north—making Mexico the United States’ third-largest oil supplier, behind only Canada and Saudi Arabia. Economic Competitiveness Over the last 20 years, North American regional trade grew from $300 billion to $1.1 trillion. Nearly half of all North America’s total exports traded between the three neighbors. Mexico and Canada, in fact, sell more than 75 percent of their exports within North America. The value of U.S. exports to Mexico and Canada is twice the value of exports to the European Union, and five times the value of its exports to China. Since NAFTA’s start, regional trade in services rose by nearly 200 percent—to well over $100 billion a year. The People of North America Some thirty-four million Mexicans and Mexican-Americans, and more than three million Canadians and Canadian-Americans live in the United States. Mexicans and Canadians are the largest groups of tourists entering the United States: a combined 34 million visitors each year contribute an estimated $35 billion to the U.S. economy. In recent years, net migration of Mexicans to the United States has dropped to zero. If you would like to learn more, read CFR’s new Independent Task Force: North America: Time for a New Focus.

Brazilian President Dilma Rousseff won the first–round of the 2014 presidential election yesterday with almost 42 percent of the vote. The real surprise of the contest, however, came in Brazilian Social Democratic Party (PSDB) nominee Aecio Neves’s impressive second place finish, capturing a third of voters and surpassing Marina Silva of the Brazilian Socialist Party (PSB). Although Neves’s polling numbers had risen in the election lead–up, few expected such a strong showing. Neves and Rousseff now turn to the October 26 runoff. For the next three weeks Neves will enjoy equal air time for government–regulated TV and radio advertisements, almost tripling his exposure from before the first round. The domestic and international business communities have already thrown their support behind him, and many hope that Silva will formally endorse him and bring many of her voters (21 percent) into his camp. This is particularly important in the southeast—home to 62 million potential voters (43 percent of all citizens of voting age)—where Silva won 24 percent compared to Neves’s 39.4 percent. A strong showing there could outweigh Rousseff’s strength in the north and northeast of the nation. Still, as James Bosworth has pointed out, only two incumbents in the last thirty years in Latin America have lost their reelection bids, the last being a decade ago in the Dominican Republic. The next president will face substantial economic challenges. Foreign currency holdings, investment, and growth are all down. Inflation and interest rates are up. More structurally, Brazil’s economy is bifurcated between a modern, productive part linked to the world alongside a stagnant, sheltered side (not unlike other emerging economies, including Mexico). Under Rousseff, Brazil has slowed rather than increased in its connections with the world. Trade is down in the face of falling commodity prices and targeted protections. The country has yet to complete its decade–long negotiations with the EU, even as other Latin American nations have signed some thirty free trade agreements since Rousseff entered office in January of 2011. Brazil also stands outside the two largest and most dynamic free trade negotiations involving the region today—the Pacific Alliance and the Trans-Pacific Partnership (TPP). A recent McKinsey report estimates that opening the economy could increase GDP by 1.25 percent per year—four times 2014 projections. This would come primarily from greater pressure to innovate and invest. For Brazil to leverage its many advantages—its natural resources, sizable domestic market, strong banking system, numerous entrepreneurs, and globally competitive companies—it needs to embrace trade globalization. And whether the election run–off brings a Rousseff or a Neves administration, trade should be put at the forefront of the agenda.

Today I am pleased to launch CFR’s Independent Task Force on North America. I have been working with co-chairs David H. Petraeus and Robert Zoellick, as well as some twenty other Task Force members and observers, over the past year to better understand the myriad issues facing Canada, the United States, and Mexico, and to make concrete policy recommendations for the U.S. government to strengthen the region. We find that while not always the most urgent of policy issues, North America is as vitally important to the United States’ future. The Task Force focuses on four main areas in North American relations: energy, economic competitiveness, security, and our shared community. It recommends steps to further integrate energy matrices, to bolster economic competitiveness by speeding the movement of goods and services across borders, to work as three nations together when facing common security threats, and to foster the deepening North American community through immigration reforms and joint workforce development. The full report, North America: Time for a New Focus, is available here.