ASCF Report | 4.22.15
By Alan W. Dowd
Much of Latin America, especially
the belt of countries stretching from the northern edge of South America into
the Caribbean and around the Central American isthmus, is mired in deep poverty.
According to the World
Bank, 16.4 percent of the people in Mexico and Central America live in
extreme poverty, a higher percentage than their neighbors to the north and
south, and 80 million people live in extreme poverty in the Latin
America/Caribbean region (LAC). In fact, virtually all of the per-capita GDPs
of this region fall in the bottom half of the global rankings. The plight of
this region is puzzling given that other parts of the Americas, as well as most
of Eastern Europe, South Asia and East Asia have shaken loose from chronic
poverty and surged past this belt of impoverished states in recent decades. Why
During his trek across the United States in the 1830s,
Alexis de Tocqueville observed that “social condition is commonly the result of
circumstances, sometimes of laws, oftener still of these two causes united.”
What is true of individuals is true of nations. Laws—and public policy in
general—shape the circumstances of nation-states. The result can be economic
successes or economic messes. The hard but undeniable truth is that bad laws
and growth-stifling economic policies have sentenced this belt of states to
Let’s look at how these countries rank in three key areas of
public policy: rule of law, property rights and economic freedom.
The rule of law means just what it says: The law is what
rules—not charismatic strongmen, not armies, not anarchy, not the law of the
jungle or the law of brute force. The rule of law holds that everyone in a
nation-state is subject to the same laws; that laws are written, well-defined
and not arbitrary; that the enactment and enforcement of laws is open, fair and
Deformed by Chavez and still trapped in his shadow, Venezuela
ranks dead last—99thout of 99—on a global rule-of-law survey. Nicaragua ranks 85th,
Guatemala 83rd, Ecuador 77th, Dominican Republic 67th, Colombia 61st. Haiti,
Costa Rica and Honduras aren’t even measured.
By comparison, regional neighbors like Uruguay (20th) and Chile
(21st) are healthy rule-of-law nations, as are countries that were less
politically and economically developed after World War II like South Korea
(14th) and Botswana (25th), as are countries that once struggled with living up
to the rule of law like Jordan (38th) and the UAE (27th).
The great 20th-century economist Friedrich Hayek called
private property “the most important guarantee of freedom,” and he was right.
Property Rights Index ranks 97 countries. Again, Venezuela is dead last—97thout of 97. Honduras is 78th. Ortega’s Nicaragua ranks 75th, Guatemala 66th,
the Dominican Republic 64th. Ecuador and Colombia are tied at 59th. Again, Haiti
is so dysfunctional it’s not even measured.
Finally, we come to economic freedom, which the Heritage
Foundation defines as the “right of every human to control his or her own labor
and property…In economically free societies, governments allow labor, capital
and goods to move freely, and refrain from coercion or constraint of liberty
beyond the extent necessary to protect and maintain liberty itself.”
Venezuela ranks 176th out of 178 on the Heritage
Foundation’s measure of
economic freedom. Ecuador is 156th, Haiti 151st, Honduras 116th, Nicaragua
108th. Among our focus
nations, only Colombia (an impressive 28th) and Costa Rica (51st) have
The World Bank reports that the share of tax revenue as a percentage of GDP in the
LAC region is only about 20 percent, compared to more than 30 percent among
OECD countries. The low tax-collection levels of LAC countries are an
indication not of small and efficient government, but of weak and ineffective
In OECD countries, 90 percent of
adults have a bank account. “But in almost all the LAC countries,” according to
the World Bank, “less than 40 percent of adults have accounts at formal
financial institutions.” This is an indication of distrust in institutions—and
a weak rule of law.
The result of bad economic policies and poor governance is,
not surprisingly, bad economics and poor populations.
Compare oil-rich Venezuela and comparably-sized Taiwan,
which has virtually no natural resources. Thanks to a free-market economic
system and a pluralist political system, Taiwan’s per-capita GDP is 28th in the
world. Venezuela’s in 99th.
Nicaragua’s per-capita GDP is 166th in the world. Comparably-sized
Denmark’s is 32nd.
Haiti’s per-capita GDP is 209th, the Dominican Republic’s
123rd. Yet the Bahamas, enjoying the same climate advantages and facing the
same resource and accessibility disadvantages, has a per capita GDP of 43rd. It
also happens to be one of the more economically free places on earth. This is
not a coincidence.
The LAC region is desperate for investment and development. But regrettably, it
is looking for help in all the wrong places, seemingly trying to find a
shortcut to development by accepting Beijing’s billions rather than doing the
hard work of political-economic reform and building the institutions that can
promote sustained economic growth.
be sure, there are pluses and minuses to Beijing’s increased interest in the
Americas. Investment can spur development. That’s a plus. But China’s riches
come with strings, and that’s what raises concerns.
Driven by a
thirst for oil and other resources, China is aggressively building its economic
portfolio in the Western Hemisphere.
Ecuador just received $5.3 billion in financing from Beijing’s
bankers, and Beijing announced in January that Venezuela will receive $20
billion in Chinese investment. As World Politics Review reports,
“Chinese banks have pledged more than $50 billion in financing for Venezuela
and nearly $10 billion to Ecuador since 2005.”
China has poured $1.24 billion into Costa Rica to upgrade its
main oil refinery; invested $10 billion to modernize Argentina’s rail system
and $3.1 billion to purchase Argentina’s petroleum company; and is planning to build a dry canal to link Colombia’s Pacific and Atlantic
coasts by rail, with dedicated ports at the Pacific terminus for shipping
Colombian coal to China.
also is laying the groundwork for the “Grand
Canal of Nicaragua.” According to The Washington Post, the Nicaragua canal
project will “dwarf the Panama Canal in terms of
capacity and bring untold economic benefits to what remains one of
the poorest countries in the Americas.” If completed, 5 percent of the world’s
sea commerce will move through Nicaragua’s canal.
know from our own history that trade and economic ties often lead to security
and defense ties. And that’s exactly what’s happening as China lays down roots
in the Americas:
report in a journal of the
U.S. Army concludes that China is “winning a foothold” in the Americas,
with Chinese small-arms, artillery, air defenses and ground-attack
aircraft flowing into Bolivia, Ecuador and Venezuela.
- Chinese-made transport
aircraft and armored vehicles have been used by Venezuelan troops to smash
Joint Forces Quarterly study adds that China has “an important and growing presence in theregion’s military
institutions.” Most Latin American nations “send officers to professional
military education coursesin
worrisome of all, a Chinese
special-forces unit deployed to Latin America in March. “Despite releasing
photos of the exercise, the Chinese Ministry of Defense has not identified
the Latin American host country,” Popular Science reports. The most likely hosts are Argentina and/or Venezuela.
borrow a phrase from an old but timeless pillar of American foreign policy, Beijing’s
actions constitute “an unfriendly disposition toward the United States.” And
they must be answered.
words are President James Monroe’s. He delivered them in 1823, with the aim of putting
Europe on notice that the United States would view intervention in this
hemisphere as a hostile act. He arrived at that conclusion not because America
opposed all things European, but because America opposed the “political system”
of European powers—a system which was then “essentially different…from that of
America.” Thus, he concluded, “It is impossible that the allied powers should
extend their political system to any portion of either continent without
endangering our peace and happiness.”
is the authoritarian political system of today’s China that should concern Washington.
That’s why Washington should not countenance Chinese encroachment on the
Americas—and why the Monroe Doctrine remains relevant. Yet Secretary of
State John Kerry says, “The
era of the Monroe Doctrine is over.”
Without question, the Monroe Doctrine was misused at times
by some of Monroe’s successors. But by and large, it helped American presidents
defend U.S. interests and shield the Americas from threat.
The origin of the threats may
Russia and the Spanish Empire in the 1800s, Imperial
Germany in the early 1900s, Nazi Germany during
World War II, the Soviet Union during the Cold War—but the principles of the
Monroe Doctrine remain an important guide for, and statement of, U.S. foreign
policy. Instead of scrapping the Monroe Doctrine, President Barack Obama or his
successor would be better served developing “Monroe
Above all, a revamped Monroe
Doctrine should make it clear to Beijing that
while the United States welcomes efforts to conduct trade in the Americas, the
American people look unfavorably upon the sale of Chinese arms in this
hemisphere, the deployment of Chinese military personnel in this hemisphere,
and any attempt to export Beijing’s brand of business-suit autocracy into this
hemisphere. To borrow the genteel language of the original Monroe
Doctrine, these can only be seen as
“unfriendly” actions “endangering our peace and happiness.”
Washington needs to send the right message to our southern neighbors.
Specifically, Washington should emphasize that just as they are not U.S. or
European colonies, they should not allow themselves to become Chinese colonies.They should
reject—for their sake, for their security, for their sovereignty—arrangements with Beijing that will inevitably
erode their independence.
U.S. actions should
amplify U.S. pronouncements. For example, Washington should make hemispheric
trade a priority, instead of allowing trade deals to languish. Colombia and
Panama waited five years for Washington to approve trade agreements.
revive aid and investment in the Americas. That presupposes a stronger U.S.
economy. And Washington should encourage good governance and liberal economics
in Central and South America by rewarding governments that believe in free
markets and the rule of law. That presupposes a commitment to both by U.S.
be proactive on hemispheric security, building on successful
partnership-oriented models in Colombia and Mexico. That presupposes U.S.
military capacity, which means sequestration’s disastrous defense cuts must be
Washington needs to answer Beijing’s provocative behavior. U.S. assets could be
positioned to checkmateChina’s anti-access/area-denial strategy in the South China Sea; the trickle of
defensive weaponry flowing to Taiwan and the Philippines could become a torrent;
the U.S. could put muscle behind ASEAN’s recent declaration in defense of “freedom of navigation in, and over-flight above, the
South China Sea” by forming a joint maritime taskforce; the U.S. could
start acting like the energy
superpower it is. Joint Chiefs Chairman Gen. Martin Dempsey calls on U.S.
policymakers to view “energy as an instrument of national power.” Wielding this
instrument could have a profound effect on a China.
It’s been said that Beijing sees the world as a chessboard. America
has many moves it can make in China’s backyard.
*Dowd is a senior fellow with the American Security Council Foundation, where he writes The Dowd Report, a monthly review of international events and their impact on U.S. national security.