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Latin America's View Donald Trump a boorish racist; Hillary Clinton respected and considered respectful. (Photos: GOP; HillaryClinton.Com)
Monday, November 7, 2016
Perspectives

2016 US Election: Gun-Shy Globalist or Ugly American?


Why this US Presidential election matters so much to Latin America.

BY JOHN PRICE

On November 8, Latin Americans will either breathe a collective sigh of relief, should Clinton win, or plunge into an even deeper sense of anxiety as the nightmare of a Trump presidency becomes reality.  

A year of campaigning by two candidates with decades of political and personality baggage in the digital age has left no stone of either’s ugly pasts and peccadillos unturned.  For the first time since polling asked the question, both candidates have net negative favorability ratings.  For Americans, this is a contest of loathsome choices. 

But that is not how the rest of the world sees it, especially not in Latin America.  In fairness, Hillary Clinton is not the beacon of hope and change that Barack Obama was in 2008 when his speech in Berlin on the campaign trail drew over one million fawning followers.  However, in a survey of the 19 largest (non-US) economies around the world (including Mexico and Brazil), Clinton was the preferred candidate in 18 of those countries.  The exception, not surprisingly, was Russia.  Around the world, including Latin America, Hillary Clinton is both respected and considered respectful of other cultures and countrymen – a positive image fostered abroad initially as First Lady and subsequently as Secretary of State.  As for Hillary Clinton’s less than savory instincts of covering up embarrassing truths and navigating blurred lines between public service and personal gain, these character weaknesses are the norm among Latin American politicians.  

That starkly contrasts with the world’s perception of Donald Trump, viewed in Europe as a buffoon and a sexist, and in Latin America as a boorish racist.  Perhaps most concerning (but not surprising) to Latin Americans is the sight of thousands of Trump supporters shouting “build-the-wall”.  As one Mexican friend shared with me, “the rest of the world seems shocked by just how many Americans openly support a racist-nativist candidate like Trump, but every winter our beaches are invaded by drunken, ignorant Americans who can’t string two words together in Spanish – we’ve known for a long time how many ugly Americans there are out there.”

But beyond the string of angry epithets that Trump inspires in Latin America, there are more substantive issues that divide the two candidates, particularly trade and immigration.  Mexican policy wonks and historians bristle when American politicians insist that NAFTA hurts the USA.  How could breaking down the trade barriers between USA, the world’s most competitive economy and Mexico (ranked 50th at the time) be anything but a win for the Americans?  Yes, some low skill manufacturing jobs (soon to be replaced by technology) did migrate south but Mexico lost practically its entire mid-cap economy, thousands of companies that were bankrupted by the combination of the Peso crisis and NAFTA’s removal of protectionism against more competitive larger scale American business.  Beyond the growth in NAFTA manufactured trade, 90 percent of which is dominated by 300, mostly American owned multinationals, in Mexico, NAFTA is seen as the catalyst that brought to their unprepared country so many domineering American companies.  Before NAFTA, hundreds of independent grocers and small chains competed in Mexico.  Today, Walmart owned supermarket chains control more than 50 percent of the formal grocery market, a level of market concentration that would never be permitted in the US. 

The trade risk to Mexico of a nativist US President is not that the NAFTA might be “tweaked” to favor the US, but rather that calls to throw out NAFTA and protect jobs will be as loudly demanded south of the Rio Grande as it is north of it.  In 2006, the right-wing PAN party Felipe Calderón very narrowly beat Andrés Manuel López Obrador of the leftwing PRD in an election where the merits of globalization were a leading campaign issue.  50,000 more votes in AMLOs camp and the renegotiation of NAFTA may have begun a decade ago.  Mexico is not a land of free trade lovers – it is a nation guided by a struggling middle class beset by its own economic anxieties and an historic mistrust of the US.

Other trade agreements between the US and Latin American countries have generated vociferous local debates.  Before the collapse in oil prices plundered the value of the Colombian Peso, portions of the agricultural sector in Colombia were under attack from American food exporters, especially rice and grains which receive the bulk of the US farm bills subsidies.  Similarly, cattle farmers in Central America & the Dominican Republic, the auto sector in Colombia and Peru, and others have suffered dramatic market share loss to highly competitive (sometimes subsidized) American producers.  In most of these countries, the executive branch, run by technocrats who saw free trade as a precursor to economic modernization, utilized “whatever means necessary” to pass their free trade agreements through congress, far from the open debates similar agreements face in the US, Canada and Europe.  Analysts are wrong to cast Latin America as a region smitten with free trade.  Voters in the region know that their ability to compete in world markets is handicapped by a litany of issues and are as wary of globalization as any American.

To even maintain the status quo of free trade links between the US and Latin America, the next US President must work both at home and abroad to reassure workers and entrepreneurs that more is to be gained by the pursuit of sensible globalization than interfering with the flow of goods, services, ideas, capital and people.  Hillary Clinton is uniquely qualified as a Presidential candidate who has travelled the globe and witnessed both the progress and anxiety of globalization and can deftly cast her support for trade.  To win the Democratic ticket against Bernie Sanders, Clinton had to reverse her support for the TPP and now even calls a review of the NAFTA.  But most analysts believe that she will flip-flop again back to her pro-trade stance when any protectionist policy proposals are met by resistance from US business leaders. 

Donald Trump, even if he is a globe-trotting deal-maker of some note, has so dramatically positioned himself as anti-trade, that his entire credibility rests on his ability to renegotiate NAFTA and possibly CAFTA-DR. 

The issue of immigration and the wall that Trump promises to build (or better said extend because it already dots the US-Mexican border) is substantially less of a threat to Mexico (and the rest of Latin America) versus trade even while it conjures greater dismay.  Mexico will never agree to pay for the wall and the US government has few, if any, levers at its disposal to oblige the Mexicans to pay.  Attempts to retain remittances will be met by lawsuits from Western Union, PayPal, and Wells Fargo.  Import tariffs slapped on Mexican imports, most of which are assembled by US conglomerates will be vigorously fought by the largest lobbyists in Washington.  Mexico no longer relies on bi-lateral loans or aid from the US so those levers are weak, if they exist at all. 

Ironically, the flow of illegal migration from Mexico to the US has slowed to a trickle of what it once was.  Under Obama, known in border communities as the Deportation President, close to three million illegal migrants have been sent home or detained, more than all US Presidents combined in the 20th century.  Mexicans who used to cross the border for a few months of seasonal work before returning home now think twice before heading north (or returning south). 

Economically, this is the worst moment to tighten the immigrant labor pool.  The US work force population peaked in 2012 at approximately 155 million people.  US GDP growth going forward will rely on more immigrants, not fewer, from all skill levels.  The economic merits of stopping illegal immigration only make sense if legal immigration is radically expanded and less bureaucratic.  Without ready access to competitive labor, American companies will migrate in greater numbers abroad.  On this issue, neither Clinton nor Trump have displayed the wisdom and knowledge to recognize immigration for what it is – a vital lifeline to the US economy.  However, Clinton is more likely to surround herself with advisors who do understand the need for immigration reform that both formalizes the status of 11+ million undocumented people as well as provides a mechanism to import labor on a needs (rather than quota) basis, much like the systems employed in Canada and Australia where work visas are given to those who bring skill sets and experience to the workforce that employers are struggling to source at home. 

Whoever Americans elect as their President, economic growth over the next four years will be threatened by the deferred inflationary effects of eight years of loose central bank policies in the US, Europe and China since the financial crisis.  Now that the US labor market has tightened up, inflationary growth will accelerate and the US Fed will be obliged to act.  Higher interest rates will cast a pall over Latin American currencies and economies.  With limited prospects at home LatAm exporters and migrants will set their sights on the US market, playing right into the hands of nativist American leaders.  In such an environment, preserving our flawed but functioning trade system in the Americas will require the leadership of a globalist American President. 

John Price is the managing director of Americas Market Intelligence and a 24-year veteran of Latin American competitive intelligence and strategy consulting. jprice@americasmi.com


SEE ALSO

Ex-Ambassadors Warn Against NAFTA Changes

Hills: Losing Mexico Market Would Be Devastating

Farnsworth: Trump & Latin America 

Fact Check: Donald Trump Wrong on Mexico

The Cost of a US-Mexico Trade War

NAFTA: The Benefits Versus The Costs

 

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