Secretary of State Antony Blinken said all the right things about Latin America’s problems during his first official trip to South America. But, unfortunately, he didn’t say much about, perhaps, the best ways to help the region: a plan to re-direct U.S. business supply chains from China to Latin America.
During his three-day trip to Ecuador and Colombia, which started Oct. 18, Blinken spent much of his time talking about the need to preserve democracy, combat corruption, save the environment and handle mass migrations. He also reminded his audiences — repeatedly — that the United States has donated more COVID-19 vaccines than any other country.
But even Colombia’s President Ivan Duque, one of the closest U.S. allies in the region, reminded him at joint press conference on Oct. 20 that what Colombia and other Latin American countries need the most are investments.
Duque said that he expects Colombia’s economy to grow by more than 7% this year, and hopes that it will keep growing in the future, “But doing it means attracting investments.” Colombia could have a “wonderful opportunity” to grow much faster if U.S. multinationals moved their supply chains to friendly nations in Latin America, he added.
The Biden administration has said that it seeks to reduce U.S. dependence on Chinese supplies. It wants to prevent future cases such as the panic that erupted when there were shortages of China-made face masks at the beginning of the COVID-19 pandemic, or the current problems with the supply of semi-conductors and batteries.
U.S. officials and trade experts increasingly are replacing the idea of “near-shoring” — bringing factories closer to home — with the concept of “friend-shoring” or “ally-shoring.” But so far, there is no grand plan by the United States that I know of that would encourage U.S. firms to move factories from Asia to Latin America.
According to a recent Inter-American Development Bank (IDB) study, Latin America could make an extra $70 billion a year if it just managed to replace 10% of China’s exports to the United States. And that could be easily done with goods that Latin America already is producing, such as car parts, tv sets and other electronic goods, it says.
IDB president Mauricio Claver-Carone told me that the current bottlenecks in shipments from China and other Asian countries to the United States have created “the greatest realignment of global supply chains in our lifetime.”
He added that this is a great opportunity for Latin America and the Caribbean “to be the biggest beneficiaries” of this phenomenon. And the more prices continue to rise in the United States because of the current trans-Pacific shipping problems, the more sense it will make to re-direct supply chains to Latin America, he said.
The governments of Colombia, Ecuador, Uruguay and Costa Rica, among others, already have started to actively lure China-based U.S. and European factories to their countries.
In July, Volkswagen announced plans to test 100% electric cars in Uruguay and to create a hub to export them regionally from there in 2022. The French IT firm Teleperformance said recently it plans to hire another 10,000 remote employees in Colombia. Intel said earlier this year that it would invest an additional $600 million to produce more microchips in Costa Rica.
In addition to being closer to the U.S. market and helping U.S. companies diversify their supply chains, IDB experts say that several Latin American countries use cleaner energies than China. That’s going to be increasingly important in the future, as more countries and companies require greener production procedures.
Of course, there are many old-guard populist governments in the region that scare away investments and will hardly be considered by multinational firms seeking to move away from China.
But the Biden administration should urgently launch an “ally-shoring” plan with those Latin American countries that are interested in it and encourage U.S. companies to move at least some of their production to the region.
Biden should do it now, in time to set the plan in motion at the 33-country Summit of the Americas to be held in the United States next summer. It’s a pity that Blinken didn’t make this the centerpiece of his first trip to South America, but it’s still doable.
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