Latin America Wants to Seize on Derisking; Cassidy Argues for Americas Act

Mike Pyle, the deputy national security adviser, said at an Inter-American Development Bank Group event that the bill, introduced in the Senate by Sens. Bill Cassidy and Michael Bennet, is innovative, and would advance investment in the region.

Pyle moderated a panel that included Cassidy, R-La., Bennet, D-Colo., Mexico's Foreign Secretary Alicia Barcena, as well as IDB and private sector participants.

The White House is about to host Latin American leaders for an Americas Partnership for Prosperty meeting, and Pyle said the administration wants to build on its 12 comprehensive free trade agreements in the Western Hemisphere.

Pyle asked Cassidy what would be most transformative to create deeper economic integration, and Cassidy said that before any tools can be implemented, first, politicians need to recognize that it's in the interest of the U.S. to increase trade and investment in the hemisphere.

"If we understand it’s in our self-interest, we’re more likely to have the momentum to go forward," he said.

Cassidy highlighted some of the planks of his bill (see 2301130042), such as subsidizing businesses moving production from China to the Western Hemisphere, and having those countries implement digital licensing and other regulatory actions.

He said that the bill suggests creating a pathway for Latin American countries to join USMCA.

"Obviously, there's a process of development," he said, and mentioned Costa Rica as a possible candidate. He called it a "small enough country it wouldn’t threaten the stakeholders in the three countries that are already there."

Barcena didn't talk about USMCA expansion when she had the floor, but said as firms regionalize supply chains, it's not just Mexico that will benefit. "We don’t want to do this alone. I think we need to bring the rest of the region into this strategy," she said.

Bennet said the amount of new foreign investment in China has declined by 80%. "Well, that has to go somewhere," he said.

Bennet said he, Cassidy, and "a bunch of U.S. senators" met with Barcena on Nov. 1 to talk about economic matters. He said he thinks there's a bipartisan consensus that economic integration with Latin America is the right way to go -- and that's a consensus that wasn't there before.

He said that economic development, particularly if it benefits the poorest people in these countries, would address migration and drug trafficking.

Barcena said there are two narratives among politicians -- one, to try for an economic partnership that is sustainable and inclusive; the other: "We’re going to go for violence, close the border."

She said that Mexico needs help from the IDB and North American Development Bank to improve 53 points of entry.

"We have to modernize the border if we really want to control drug trafficking, arms trafficking," she said, and that would also improve trade flows.

Panelist Arrow Augerot, director of Americas public policy for Amazon, also focused on trade facilitation as a barrier to better economic integration.

She said 60% of the units sold on Amazon are posted by small businesses, and she said in Latin America, they face challenges, such as very low de minimis thresholds.

"First of all, it’s really hard to get your products from Colombia to Peru, Brazil to Argentina -- customs needs to be modernized," she said.

She said that in one country in Latin America, "they’ve adopted electronic manifests, but you still have to print out the paper copy to get your shipment across the border."

IDB Vice President for Countries Anabel Gonzalez said the IDB has helped its member countries improve trade facilitation. She said IDB helped countries implement electronic single windows, which reduced the time to acquire an import license in Peru by 25%. In Chile, it reduced export times for salmon from 48 hours to 10 minutes, she said.

Small and medium-sized firms disproportionately benefit from trade facilitation, she said.

"Trade is a powerful engine of growth. It creates jobs, it reduces poverty," said Gonzalez, who used to be trade minister for Costa Rica. "Policymakers know it. They all want to scale up trade and investment flows."

This is a moment of opportunity for Latin America and the Caribbean, she said -- foreign direct investment flows to the region increased by 51% in 2022 compared with 2021.

"The IDB group is a great partner to unleash these opportunities," she said, by helping close gaps in transportation networks and helping countries improve their inefficient customs and border management.