TPP deal shows LatAm's new ideological divide
The benefits of signing up for the biggest trade deal in history may take a while to materialize in the three Latin American countries that agreed Monday to the 12-nation Trans-Pacific Partnership (TPP).
Chile, Peru and Mexico already have free-trade deals in place with the United States. And their leaders are among Latin America's weakest and least popular, which does not bode well for TPP's swift and easy approval in their respective legislatures.
"These countries had a tough time getting their respective trade deals passed at home, and will face stiff difficulties again as they have had to sign on to deeper rules for intellectual property, pharmaceuticals and finance," said Kevin Gallagher, a Latin America trade expert at Boston University's Frederick S. Pardee School of Global Studies.
As a matter of symbolism, though, the TPP signing matters for another reason: It solidifies the emerging ideological split in a region where the old left vs. right divide has grown more and more meaningless.
A generation ago, as much of Latin America emerged from Cold War-era military autocracies, the region was split between conservatives who pushed the privatization of infrastructure and services, and leftists who demanded a bigger state role in alleviating poverty. That debate is now pretty much a dead one.
With the exception of a few smaller states like Honduras and Paraguay, Latin America no longer has any governments that identify as conservative or right-wing. Left-leaning candidates and centrists have won elections again and again with populist social welfare programs and nationalist messages.
A far more significant difference is how Latin American countries view their place in the global economy and their relationship to the United States. Several nations in the region, especially Venezuela, Cuba, Ecuador and Bolivia, continue to blast the United States as a meddling imperial bully while courting China as their preferred commodity market and creditor.
The TPP nations -- Chile, Peru and Mexico -- are three pillars of the region's other bloc, where debates about free trade vs. protectionism have largely been settled, and relations with the United States are viewed more as an opportunity than a threat.
This division could grow sharper in the next few years, if the TPP nations economically outperform others in the region who have edged closer to China.
With global commodity prices in a rut, Latin American governments on both sides of the split are facing a new period of austerity and potential instability.
"The TPP could open up new markets for these three Latin American countries and help alleviate the impact of the slowdown in the Chinese economy," said Michael Shifter, president of Inter-American Dialogue, a Washington, D.C., think tank. "It is hardly a silver bullet that will offset the deceleration, but could give the economies a slight boost over the medium and long term."
Other countries in South America will be watching Chile and Peru closely to gauge the trade agreement's economic impact and political challenges. Colombia, which has a free trade agreement with the United States, is also looking to join TPP as it opens up to new members, and other nations could also sign on later, according to Shannon K. O'Neil, a Latin America scholar at the Council on Foreign Relations.
"Embracing the TPP means that you’re betting your economic growth will come from exports, imports, and exposure to the rest of the world in ways that some of these other countries — which have chosen more protected, state-led industrial policies — have not at least yet decided to do," she wrote.
"The question is, once the TPP is in effect, would those countries down the road want to join? They could later if their populations and governments felt it would be beneficial."