Author: Alberto Cossu – 14/01/2025
Latin America: A Strategic Priority for the United States
Alberto Cossu
The new American administration will face a series of significant challenges in Latin America, a region that could become a priority for U.S. foreign policy. These challenges are influenced by various factors, including the growing influence of China in the region, immigration issues, drug trafficking, and trade relations with Latin American countries. The European Union is also emerging in the area with a Free Trade Agreement involving Mercosur countries. Although seemingly abandoned, the Monroe Doctrine may find new life.
One of the primary issues that the American administration will need to address is the expansion of Chinese influence in Latin America. In recent years, trade between China and Latin American countries has increased dramatically, rising from $18 billion in 2002 to $480 billion in 2023. China has invested in significant infrastructure projects, such as ports and electrical networks, making it challenging for the United States to persuade countries in the region to distance themselves from Beijing and collaborate more closely with Washington. In this context, the United States is considering adopting a more aggressive approach to limit China’s access to sensitive projects, viewing it as a national security issue. China’s role in Latin America and the Caribbean has rapidly grown since the beginning of the century, promising economic opportunities while also raising concerns about Beijing’s influence. Chinese state-owned enterprises are key investors in the energy, infrastructure, and space sectors within the region. Moreover, Beijing has expanded its cultural, diplomatic, and military presence throughout the region. Recently, China celebrated the opening of a new mega-port in Peru as part of its global Belt and Road Initiative (BRI).
Additionally, Mexico is undergoing significant transformations spearheaded by former President Andres Manuel Lopez Obrador that open investment prospects for international capital. Notably, the President’s main project aims to revitalize the southeastern part of the country, which is the least developed area. The plan includes large-scale infrastructure projects such as highways, railways, airports, ports, and logistics and digital platforms where China is becoming increasingly involved. In northern Mexico, automotive companies are assembling Chinese products, leading to a surge in imports from China into Mexico. This situation fuels a system of businesses with uncertain origins aimed at circumventing tariffs that favor China’s continued exports.
Furthermore, from 2024 onwards, Beijing has signed free trade agreements with Chile, Costa Rica, Ecuador, Nicaragua, and Peru. The volume of foreign direct investment from China to Mexico increased from $272 million during 2004-2013 to $1.843 billion in the subsequent decade (2014-2023), representing more than a sixfold increase in a relatively short period.
Managing immigration will be another crucial challenge. The previous administration prioritized combating illegal immigration. With rising migration flows—though recently declining—from countries such as Mexico, Guatemala, Venezuela, and Haiti, the incoming administration may exert pressure on Latin American governments to halt migrant flows toward the United States. This could involve imposing tariffs or sanctions on countries that do not cooperate in curbing emigration.
Drug trafficking represents another critical issue. The United States continues to combat the opioid epidemic-particularly fentanyl-much of which originates from Mexico. This situation prompts Washington to consider punitive measures against Mexico and other regional countries if they fail to control drug trafficking. Such measures might include using drones or other forms of military intervention against Mexican cartels.
The new U.S. administration has threatened to impose significant tariffs on Mexican goods if the Mexican government does not cooperate in addressing immigration and drug trafficking issues. Statements indicate that it may consider tariffs as high as 25% on imports from Mexico. This strategy could severely damage trade relations between the United States and Latin American countries—especially with Mexico, which is America’s primary trading partner in the region. However, it is essential to clarify that trade relations between the U.S. and Mexico are governed by the USMCA (United States-Mexico-Canada Agreement), which allows for safeguard clauses but does not permit indiscriminate use.
The new administration will engage with Latin American leaders who may be more favorable to its policies than their predecessors. Presidents like Javier Milei in Argentina and Nayib Bukele in El Salvador have demonstrated a conservative orientation. However, this administration must balance support for these leaders with maintaining stable relations with other countries that may not be ideologically aligned.
In summary, the new President will encounter a series of complex challenges in Latin America during his second term. From increasing Chinese influence to immigration issues and drug trafficking concerns, his policies could significantly impact relations between the United States and Latin American nations. It will be crucial for the new administration to navigate these dynamics carefully to avoid open conflicts and maintain some stability in the region.
The next President has already announced plans to prioritize Latin America within his foreign policy agenda—contrary to the “benign neglect” approach adopted over recent decades. His administration will focus on issues such as immigration, drug trafficking, and Chinese influence—all factors that could affect elections in Latin American countries.
The sanctions that the new U.S. administration imposes could profoundly impact Latin America’s economy. These punitive measures—including tariffs and other trade restrictions—are designed not only to affect directly targeted countries but also to reshape the entire economic landscape of the region. One immediate effect of sanctions will be a deterioration of trade relations between the United States and Latin American nations. The U.S. serves as a crucial destination for exports from many countries in this region—especially Mexico—which relies on this market for over 80% of its exports. The imposition of high tariffs—such as those threatened by Trump—could lead to a significant reduction in bilateral trade, harming local economies and increasing costs for consumers.
Trade sanctions and tariffs can have a direct impact on employment within affected countries. Sectors such as agriculture, manufacturing, and services may experience substantial losses due to decreased U.S. demand. This situation could lead to increased poverty and unemployment rates exacerbating already difficult economic conditions across many Latin American nations.
With rising tensions with the United States, Latin American countries may seek to diversify their trade relationships by increasing their dependence on alternative partners like China. In recent years, China has significantly expanded its economic presence in Latin America by investing in infrastructure and natural resources. Thus, U.S. sanctions could accelerate this diversification process leading to greater Chinese influence within the region.
U.S.-imposed sanctions might also provoke retaliatory responses from affected Latin American governments. Countries like Mexico and Brazil may impose tariffs on U.S.-made products in response to Trump’s punitive measures creating an escalating cycle of trade conflict that further harms all involved economies.
These sanctions will not only affect Latin America’s economy; they will also have repercussions on global economic stability. Disruptions in trade flows between the United States and Latin America could contribute to market instability worldwide increasing uncertainty for investors and potentially impacting growth rates in other regions.
In conclusion, the new administration is compelled to abandon its previous policy of “benign neglect” in favor of a more aggressive stance aimed at protecting both the American economic system and national security interests that view an openly adversarial nation not only economically but also politically situated nearby as a threat. In this context, a resurgence of Monroe Doctrine principles—even its more aggressive aspects—is possible since national security is at stake while Latin America becomes increasingly attractive for European nations—primarily Germany—that seek new commercial spaces amid potential reductions elsewhere globally. This scenario positions Latin America as one of the main priorities for the new administration moving forward.