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ICT Investment in Latin America and the Caribbean Pt. II: Supporting Transparent Tech Growth
Photo: NICOLAS ASFOURI/AFP/Getty Images
By Andrew Braverman
If American policymakers concede that the United States and China are enmeshed in an often-zero-sum economic competition and China’s BRI investments have repeatedly proved to be vehicles for industrial espionage and political gain, then something must be done. Supporting more transparent ICT growth in LAC should be a top priority for the Biden Administration given the geographic proximity to the United States, historical relationship, and relatively recent arrival of Chinese capital to the region. This post looks at three potential tools to check Chinese influence and encourage ICT growth in LAC.
Investment
Multilateral development banks and international financial institutions are one effective vehicle that the United States can leverage to help advance digital infrastructure in Latin America. As the largest funder of the World Bank, the United States has the most votes in the Bank’s decision-making process. There has been recent progress by the Bank catalyzing growth in the LAC region; this must be continued. For example, at the end of 2021 the IFC announced a $100 million investment in Brazil (amongst other countries) to “help enable the expansion of towers and data centers.” The Inter-American Development Bank (IDB) has also helped finance a number of projects in recent years focused on public sector digital transformation and ICT development. Here too the United States holds the highest amount of capital stock and 30% of voting power. Both international financial institutions offer an effective means to form consensus around the need for transparent and effective ICT investment in LAC.
Diplomacy
In 2019, the State Department partnered with Japan and Australia to launch the Blue Dot Network (BDN) to evaluate and certify infrastructure development projects based on their funding transparency and environmental and financial impact. The BDN was spearheaded by the US Development Finance Corporation (DFC) and was founded with a specific interest in cultivating alternatives to the BRI.
In a similar effort, the Trump Administration’s Clean Network Initiative sought to develop digital networks free of influence from authoritarian actors. Unfortunately, the CNI gained limited traction in Latin America. President Biden’s Build Back Better World (B3W) program carried on the torch of the BDN. But the administration disproportionately focused the initiative on the Indo-Pacific. The United States and its allies must expand the BDN, CNI, and B3W digital efforts to all its neighbors in the LAC region. This could help catalyze private investment in broadband technologies and secure Latin American networks from less-than-benevolent Chinese investment. The DFC and State Department could also work with USAID to grow momentum for these ideas in LAC.
Another opportunity ripe for bilateral and multilateral diplomacy is cybersecurity. Both the public and private sectors in the United States boast a wealth of resources and experience when it comes to securing information networks from malicious actors. LAC has struggled to cultivate enough human capital to grow domestic cybersecurity efforts. As the former program manager of the Organization of American States’ (OAS) cybersecurity team noted, the United States must support capacity building efforts in LAC. The OAS and their Inter-American Committee against Terrorism (CICTE) already have extensive experience developing national cybersecurity strategies and expanding the cyber workforce and would be a helpful partner for, say, DHS’ CISA to work with. Capacity-building efforts are an integral step to facilitate tech growth in LAC largely because, for ICT investments like broadband infrastructure or data centers to thrive, Latin America must have secure networks.
Trade Agreements
China is quickly becoming LAC’s largest trade partner. Mexico, Chile, and Peru signed onto the CPTPP in 2018, after Washington’s bungled response to the trade agreement’s erstwhile older sibling (TPP). International trade problems with and within LAC are compounded by the hodgepodge of overlapping and sometimes exclusive FTAs (Mercosur, Pacific Alliance, Andean Community, Central American Common Market).
The United States could leverage a new regional FTA modeled on the United States–Mexico–Canada Agreement (USMCA) to help grow the ICT sector in LAC. Over two decades ago, the Clinton Administration attempted to do this with its Free Trade Area of the Americas but the process stalled over Brazilian and Argentinian objection. The model still offers a helpful framework of how to foster ITC development; USMCA-member Mexico now receives 12% of American telecommunications exports, as much as any country except Hong Kong. There are competing schools of thought whether the best way to do this is through digital-only FTAs, tech-focused clauses in broader bilateral agreements, or through multilateral organizations or treaties. Executed well, any of these approaches could work.
FTAs are useful means of aligning policy between trade partners. Latin America’s digital divide and failure to keep up on 4G and 5G has been, in part, a domestic policy problem. Expensive spectrum, unregulated consumer tech industries, and onerous legal systems have hamstrung the region’s investment in digital resources. Regulatory structures need to encourage competitiveness. Related to policy reform, LAC’s IP environments have greatly improved in recent years. Some countries like Mexico, Colombia, Chile, and Peru have even been commended for IP protection. It is no coincidence, though, that these countries are members of the Pacific Alliance—an FTA that codified various patent protection measures in 2016.
Data protection laws are another useful regulatory framework that will keep safe Latin American data and ensure responsible tech growth in the region. In fact, many countries like Chile, Brazil, Mexico, Panama and Barbados have recently enacted such laws. LAC governments can use these as models to write their own legislation.
Conclusion
President Biden’s Interim National Security Strategic Guidance refers to China as a “strategic competitor” that the United States must confront when its interests are threatened. It also emphasizes the imperative to reinvigorate alliances around the world. The opportunity to invest in and support the ICT sector in LAC represents a timely opportunity to do just that. By working with national governments and multilateral organizations in the region, the American public and private sector can help fuel digital growth in LAC and present more transparent alternatives to China’s BRI investments.
Andrew Braverman is a research intern with the Strategic Technologies Program at the Center for Strategic and International Studies in Washington, DC.
The Strategic Technologies Blog is produced by the Strategic Technologies Program at 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).
If American policymakers concede that the United States and China are enmeshed in an often-zero-sum economic competition and China’s BRI investments have repeatedly proved to be vehicles for industrial espionage and political gain, then something must be done. Supporting more transparent ICT growth in LAC should be a top priority for the Biden Administration given the geographic proximity to the United States, historical relationship, and relatively recent arrival of Chinese capital to the region. This post looks at three potential tools to check Chinese influence and encourage ICT growth in LAC.
Investment
Multilateral development banks and international financial institutions are one effective vehicle that the United States can leverage to help advance digital infrastructure in Latin America. As the largest funder of the World Bank, the United States has the most votes in the Bank’s decision-making process. There has been recent progress by the Bank catalyzing growth in the LAC region; this must be continued. For example, at the end of 2021 the IFC announced a $100 million investment in Brazil (amongst other countries) to “help enable the expansion of towers and data centers.” The Inter-American Development Bank (IDB) has also helped finance a number of projects in recent years focused on public sector digital transformation and ICT development. Here too the United States holds the highest amount of capital stock and 30% of voting power. Both international financial institutions offer an effective means to form consensus around the need for transparent and effective ICT investment in LAC.
Diplomacy
In 2019, the State Department partnered with Japan and Australia to launch the Blue Dot Network (BDN) to evaluate and certify infrastructure development projects based on their funding transparency and environmental and financial impact. The BDN was spearheaded by the US Development Finance Corporation (DFC) and was founded with a specific interest in cultivating alternatives to the BRI.
In a similar effort, the Trump Administration’s Clean Network Initiative sought to develop digital networks free of influence from authoritarian actors. Unfortunately, the CNI gained limited traction in Latin America. President Biden’s Build Back Better World (B3W) program carried on the torch of the BDN. But the administration disproportionately focused the initiative on the Indo-Pacific. The United States and its allies must expand the BDN, CNI, and B3W digital efforts to all its neighbors in the LAC region. This could help catalyze private investment in broadband technologies and secure Latin American networks from less-than-benevolent Chinese investment. The DFC and State Department could also work with USAID to grow momentum for these ideas in LAC.
Another opportunity ripe for bilateral and multilateral diplomacy is cybersecurity. Both the public and private sectors in the United States boast a wealth of resources and experience when it comes to securing information networks from malicious actors. LAC has struggled to cultivate enough human capital to grow domestic cybersecurity efforts. As the former program manager of the Organization of American States’ (OAS) cybersecurity team noted, the United States must support capacity building efforts in LAC. The OAS and their Inter-American Committee against Terrorism (CICTE) already have extensive experience developing national cybersecurity strategies and expanding the cyber workforce and would be a helpful partner for, say, DHS’ CISA to work with. Capacity-building efforts are an integral step to facilitate tech growth in LAC largely because, for ICT investments like broadband infrastructure or data centers to thrive, Latin America must have secure networks.
Trade Agreements
China is quickly becoming LAC’s largest trade partner. Mexico, Chile, and Peru signed onto the CPTPP in 2018, after Washington’s bungled response to the trade agreement’s erstwhile older sibling (TPP). International trade problems with and within LAC are compounded by the hodgepodge of overlapping and sometimes exclusive FTAs (Mercosur, Pacific Alliance, Andean Community, Central American Common Market).
The United States could leverage a new regional FTA modeled on the United States–Mexico–Canada Agreement (USMCA) to help grow the ICT sector in LAC. Over two decades ago, the Clinton Administration attempted to do this with its Free Trade Area of the Americas but the process stalled over Brazilian and Argentinian objection. The model still offers a helpful framework of how to foster ITC development; USMCA-member Mexico now receives 12% of American telecommunications exports, as much as any country except Hong Kong. There are competing schools of thought whether the best way to do this is through digital-only FTAs, tech-focused clauses in broader bilateral agreements, or through multilateral organizations or treaties. Executed well, any of these approaches could work.
FTAs are useful means of aligning policy between trade partners. Latin America’s digital divide and failure to keep up on 4G and 5G has been, in part, a domestic policy problem. Expensive spectrum, unregulated consumer tech industries, and onerous legal systems have hamstrung the region’s investment in digital resources. Regulatory structures need to encourage competitiveness. Related to policy reform, LAC’s IP environments have greatly improved in recent years. Some countries like Mexico, Colombia, Chile, and Peru have even been commended for IP protection. It is no coincidence, though, that these countries are members of the Pacific Alliance—an FTA that codified various patent protection measures in 2016.
Data protection laws are another useful regulatory framework that will keep safe Latin American data and ensure responsible tech growth in the region. In fact, many countries like Chile, Brazil, Mexico, Panama and Barbados have recently enacted such laws. LAC governments can use these as models to write their own legislation.
Conclusion
President Biden’s Interim National Security Strategic Guidance refers to China as a “strategic competitor” that the United States must confront when its interests are threatened. It also emphasizes the imperative to reinvigorate alliances around the world. The opportunity to invest in and support the ICT sector in LAC represents a timely opportunity to do just that. By working with national governments and multilateral organizations in the region, the American public and private sector can help fuel digital growth in LAC and present more transparent alternatives to China’s BRI investments.
Andrew Braverman is a research intern with the Strategic Technologies Program at the Center for Strategic and International Studies in Washington, DC.
The Strategic Technologies Blog is produced by the Strategic Technologies Program at 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).