What to Watch in Latin America 2014: Trends and Highlights

With 2013 coming to a close and the new year beginning, it seems appropriate to ask what the past year has meant for Latin America—and what the region can expect in 2014.

The past year has been marked by Colombia’s peace process, a hardening of U.S.-Brazil relations, an expansion of the region’s free trade profile—and the deepening contrast between the Atlantic and Pacific economies, the growth—and growing importance—of social movements throughout the hemisphere, growing North American energy production, the pushing-off of U.S. immigration reform, the NSA scandal’s effects on confidence in U.S. regional leadership, and a new (and tumultuous) administration in Venezuela—just to mention a few highlights.

The coming year promises to be no less active. What, then, can we expect?

Q1: What regional trends can we expect to develop in 2014?

A1: In brief, the region’s developments will likely be focused in five key areas: commerce, immigration, energy, drug policy, and social movements.

Commerce will certainly be key in the coming year, with some countries in the region already emerging as global leaders in free trade and economic liberalization. The majority of the free trade agreements currently in negotiations either are based in or include countries from the Americas, and should the several agreements currently in negotiations come to fruition, the lion’s share of rules-based trade agreements will be situated right here in the Western Hemisphere.

But the hemisphere is not just jumping on some free-trade bandwagon with extra-regional origins. The Pacific Alliance, an innovative trade bloc founded by four of Latin America’s most robust and open economies and with observers from around the world, has made headlines throughout 2013 as it takes steps toward fully integrating the Mexican, Peruvian, Chilean, and Colombian economies—and in all likelihood, those headlines will continue in 2014.

The Trans-Pacific Partnership (TPP) and the Trans-Atlantic Trade and Investment Partnership (TTIP) have similarly attracted international attention for their efforts to further liberalize trade within the hemisphere and beyond. The sheer scope of each ensures that they will shape both intra- and interregional trade moving forward.

And with Secretary of State John Kerry joining the call to update the North American Free Trade Agreement (NAFTA) as it closes out its first twenty years, the current climate in the hemisphere is more favorable for free trade than at any time in the recent past. 2014 is sure to be an interesting year for commerce in the Americas.

Though immigration reform fell off the U.S. legislative agenda for 2013 in the midst of the budget dispute, the chemical weapons crisis in Syria, and the nuclear negotiations with Iran, advocates of reform will likely remain vocal as 2014 unfolds. And despite House intransigence on the issue last year, even those U.S. legislators who have firmly opposed comprehensive reform will likely find the process harder to stall. If the issue is tackled in the first two quarters of the year, we may see some real progress—though a truly comprehensive reform probably remains far-off.

Still, any optimism about the return of immigration reform to the forefront of U.S. policymaking should be tempered by the reality that 2014 is an election year in the United States—and so controversial and divisive an issue will have still more trouble gaining traction when legislators fear that their reelection is at stake. The later in the year the issue is addressed, then, the less likely we are to see meaningful immigration reform in 2014.

This year will likely bring an interesting set of developments in energy. North American energy production is higher than ever before (the United States alone currently produces 83 percent of its energy domestically, compared to 73 percent five years ago), with the continent well on its way to energy independence—potential that will only be furthered with the successful finalization of Mexico’s energy reform process. And, perhaps tiring from the five-year wait on a U.S. permit decision to build the KeystoneXL pipeline, Canada may accelerate the pursuit of alternatives for the transportation and sale of its vast crude oil reserves.

The growing possibility of a self-reliant North America may carry implications for the South America’s and the world’s energy producers—particularly Brazil, Venezuela, and Saudi Arabia—as the vast northern market may turn still further away from imported oil in the mid-term.

In the realm of drug policy, Uruguay’s recent move to legalize the production, distribution, and sale of marijuana may set the tone for the coming year. Though it is unlikely that this year will bring a shift in hemispheric drug policy on a massive scale, Uruguay’s experiment with legalization may signal the beginning of a more fundamental shift in the region’s perspective on counternarcotic policy.

People throughout the hemisphere growing tired of the violence and suffering that result from the ongoing drug war—and the majority of U.S. citizens in support of the legalization of marijuana, according to recent Gallup polls. To date, 20 states and Washington, DC have legalized use of physician-prescribed marijuana for medical purposes, and New York has announced it will move to do the same. And in 2012, the state governments of Washington and Colorado both legalized the recreational use of marijuana—in direct contradiction to federal law. In short, regional opinions may, for the first time, be trending toward alternative approaches in line with Uruguay’s.

Last May, the Organization of American States (OAS) published a report suggesting that the Western Hemisphere’s leaders evaluate all possible scenarios—including the potential for widespread legalization efforts—for reducing the corruption and crime that come with it. And the Global Commission on Drug Policy, whose members include the former presidents of Mexico, Colombia, Chile, Brazil, and Poland, has called on national governments to decriminalize drug possession and sales.

And given that the U.S. government has spent between US$20 and US$25 billion each year on counternarcotic efforts over the past decade—not to mention the significant volumes of illegal narcotics still entering U.S. borders—many are suggesting that considering these alternatives reflects the challenges associated with reducing drug trafficking to the United States.

Finally, the presence and prominence of social movements throughout the region will likely continue to play an important role in 2014. The eruption of protests throughout Brazil last summer helped to demonstrate the potential of popular movements to affect measurable change. Though the protests began as a narrowly defined movement seeking transportation reform, they expanded into a push for improved government provision of social services and reduced corruption. And Brazilians may take advantage of the World Cup this summer to bring their demands for change to the international stage.

Venezuela, Argentina, Mexico, and Chile are potential sites for increased social unrest as well. With scarcity and crime steadily rising through the second half of 2013, the Venezuelan population may well grow impatient with the problems that continue to plague the Maduro administration. And in Argentina, a long-suffering economy, public discontent with perceived governmental corruption, insufficient access to services, and poor infrastructural development—particularly frequent blackouts, insufferable in the summer heat—may bring about social unrest in kind.

The Mexican government is facing increasing public pressure as President Enrique Peña Nieto pushes the envelope on numerous issues—from energy, education, and tax reforms to ongoing problems with human security and drug trafficking. As protests, as is likely, increase, Peña Nieto’s commitment to these goals will be tested moving forward.

And though the protests in Chile—already several years in the making—have proved persistent, expectations are sky-high for incoming president Michelle Bachelet, who has an opportunity to address Chileans’ demands, most of which are centered on reforms of the Chile’s higher education and constitution. Should she fail to address these concerns early in her presidency, however, she will likely face the same public discontent and disillusionment on the streets from within her own coalition as did her predecessor.

Q2: What are the highlights to expect in the region this year?

A2: The coming year will likely see the furthering of a number of trends that began in the past year—Venezuelan economic instability, the Sino-Brazilian bilateral relationship, Mexican president Enrique Peña Nieto’s ambitious package of reforms, Colombia’s movement toward lasting peace, and the slow process of reform in Cuba, in particular.

Mexico: The Mexican government has a number of controversial issues on its agenda in 2014—including energy and education reforms and upcoming budget negotiations. Even as these issues develop, Peña Nieto will continue to face opposition both in the legislature and in the form of social movements—while facing ongoing widespread drug violence and persistently high levels of violent crime. The country’s participation and leadership in a number of trade liberalization efforts will likely continue into 2014—especially in the context of Mexico’s work to increase its global role through international agreements like the Pacific Alliance.

Brazil: With the upcoming World Cup and the social unrest that has wracked the country since June of last year, Brazilian president Dilma Rousseff is facing a delicate year, particularly given her upcoming reelection campaign. And even as the budding U.S.-Brazil relationship appears to falter still more in the wake of the NSA scandal, Rousseff’s cancelled state visit, and her awarding of a major military contract to Swedish manufacturer Saab, some have suggested that the situation is not quite as tense as it may appear.

Continued interaction between Rousseff and President Obama, the announcement of the reciprocal liberalization of certain agricultural trade, and U.S. support for the Brazilian-led United Nations resolution on privacy in the digital era may indicate that however difficult the past months have been for the bilateral relationship, all is not lost. Even given these signs, however, Brazil’s relations with China are closer than ever. Chinese president Xi Jinping is scheduled to visit Brazil in March 2014, and bilateral investment is at an all-time high. It remains to be seen to what extent the Sino-Brazilian relationship and Brazil’s increasing independence from U.S. regional influence will affect the hemisphere moving forward—and how these factors will define Brazil’s role in global politics.

Colombia: Central to Colombia’s agenda, at least in early 2014, are the ongoing peace negotiations between the Colombian government and the Revolutionary Armed Forces of Colombia (FARC). The past several months have seen several significant steps forward in the peace process—steps that many have hailed as promising signals for the successful conclusion of the process in the coming months. This year’s presidential elections and the outcome of the process are linked, however, so for Colombia, timing is key in the coming months. And as the peace process moves forward, Colombia’s consistent economic growth and demonstrated commitment to free trade are increasingly the focus of its relations abroad.

Venezuela: Last month, President Nicolas Maduro received special powers to rule by decree in a so-called rescue effort aimed to help the country’s ailing economy. So far, what Maduro calls his “economic offensive” has included government price controls and seizing private businesses that he blames for Venezuela’s economic woes. The country’s skyrocketing inflation, ever-growing instability, and worsening violent crime —not to mention perennial problems with the production and trade of drugs and the prevalence of violent crime—are likely to worsen as 2014 unfolds—though the outcomes for Maduro and his administration are yet to be determined. On the regional level, there are increasing concerns that as the Maduro administration’s stability falters, Venezuela’s government may collapse—bringing the many Central American and Caribbean economies that rely on Venezuelan largesse, including Cuba, down with it.

El Salvador: With presidential elections coming up on February 2, El Salvador’s immediate political future is uncertain. The two candidates, Salvador Sanchez Ceren and Norman Quijano, are neck-and-neck in the polls, but the two represent very different visions for the country’s future. The elections will determine if El Salvador will continue further down the less market-friendly path set by the current president—or if it will swing back toward market-oriented policies under a Quijano administration. Regardless of the outcome, the ongoing struggle between the political left and right in El Salvador are yet another reminder that many Central American economies have yet to reach a consensus on a stable macroeconomic framework—an issue that will likely continue to spur controversy and hamper economic growth moving forward in El Salvador—but also in Honduras and Guatemala. Security concerns also factor heavily into the presidential elections, with Sanchez promoting a more conciliatory approach to the Maras, in contrast to the more decisive policy promoted by Quijano—and this debate reflects continuing challenges posed by the worsening reality of drug violence and security in Central America.

Cuba: The past year brought a number of unexpected reforms and developments in Cuba, spurring a lively debate on the future of the island. While some have read these reforms as an empty effort to gain credibility, others have regarded them as indicative of a trend—however glacial—toward meaningful change. Whatever the ultimate outcome, we will likely see a similar trend in 2014—though the recent reforms have given little reason to expect changes in the state of human rights and political liberties in the near future.

In summary: With everything on this year’s regional agenda, 2014 could well be a defining year for the Western Hemisphere, setting it up for the foreseeable future. 

Carl Meacham is director of the Americas Program at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Jillian Rafferty, staff assistant with the CSIS Americas Program, provided research assistance.

Critical Questions is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).

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Carl Meacham