An Empire Upside Down, Part 2

Christy Thornton

This is the second part of a three-part article on the United States and Latin America in the Trump era, forthcoming in the July/August issue of Dollars & Sense magazine. Part 1 focused on Argentina, this part focuses on Peru, and Part 3 will focus on Colombia. Christy Thornton is an assistant professor of history and international studies at Rowan University.

Trade and Multipolarity

When Peru’s newly elected President, Pedro Pablo Kuczynski, arrived at the White House for a meeting with Trump, the narrative seemed to be one of continuity rather than change. During Kuczynski’s visit, Trump took the time to highlight to reporters his approval of the sale of military vehicles to Peru. The deal was for $668 million in reconditioned Stryker armored infantry carriers—mid-sized, rapidly deployable, armed people-movers, used by the U.S. Army in Iraq and Afghanistan, particularly in urban areas. (Notably, they are manufactured and reconditioned by a General Dynamics subsidiary in Canada, not the United States.) During his White House press briefing with Kuczynski, Trump told reporters, “I understand they’re going to be buying quite a bit of our military—some of our military vehicles. And they are great vehicles. I just looked at it and we’re approving it.”

While Trump took credit for approving the agreement, the deal was actually worked out in December, under the Obama administration. That Trump’s administration decided to continue a policy of selling security-related materiel to a Latin American country was no surprise. Security aid and arms sales have long been a backbone of the relationship between the United States and Peru, which, according to the Stockholm Institute, has received more than $1 billion in arms sales since 1950.

The appearance of continued harmonious relations (lubricated by arms sales), however, was deceiving. Trump was not especially interested in Peru—he has no business dealings there—and Kuczynski, for his part, didn’t seem especially interested in the Stryker deal during the photo-op, either. Kuczynski is a classic technocrat, educated at Oxford and Princeton, who has headed not only the Peruvian energy and economy ministries, but also held positions as an executive in private finance and multinational mining, and as an economist at the World Bank and IMF. He actually held U.S. citizenship until renouncing it during his presidential bid.

When Trump asked him to say a few words to the gathered reporters, he didn’t respond regarding the military sale, but instead stressed that “Latin America needs to grow more, and we’re going to talk about how to do that.” Turning to Trump, the Peruvian president said, “Maybe you have a few ideas,” to which Trump responded, “I guess I do. I guess I do.”

But the ideologies of the two presidents are largely antithetical: during the visit, Kuczynski stressed that he prefers “bridges over walls” and said that he favored the “free movement of people” across borders, a direct reference to Trump’s xenophobic campaign rhetoric about Mexico and undocumented immigrants. In this, Kuczynski echoed the speech Hillary Clinton gave to Goldman Sachs in 2013, published by Wikileaks, where she professed to dreaming of a “hemispheric common market, with open trade and open borders.”

The dream of a free-trade utopia of unfettered capital animated a policy consensus that had been promoted by technocratic elites, North and South, over the last few decades. Trump’s campaign rhetoric of economic nationalism and blatant racism flies in the face of this consensus, even if, as with the Argentine lemons, some of his policies don’t. And Latin American leaders like Kuczynski are responding—by looking elsewhere for trade relationships. In an interview with a Washington Post editor before his trip to D.C., Kuczynski said he would tell Trump, “You are lucky you have Latin America.” This was backed up with an implicit threat: you may not have it forever, as new trading partners like China are becoming increasingly important.

Before he came to the White House, Kuczynski’s first trip abroad after he was elected last fall was to China, where he said his goal was to “look for investors.” Peru and China have had a free trade agreement since 2009, and they announced their intention to “upgrade” it shortly after the U.S. election in November. China is Peru’s biggest foreign market, receiving almost a quarter of Peru’s exports, largely metals like copper and iron. In addition, Chinese investors directly own a number of large mining concerns in Peru, like the massive Las Bambas copper mine in the Southern highland Apurímac region.

Las Bambas has been the subject of massive protests: in September 2015, more than 15,000 people took to the streets to oppose the opening of the mine, and were in turn brutally repressed by military and police forces, which opened fire on the crowd, killing four people. As a result of the ongoing opposition—including continued road blockages that prevent the company from transporting the copper out of the mine—Kuczynski has asked the Chinese firm that owns the mine to resubmit its environmental impact studies, and has promised large-scale investment in social and developmental programs in the region. Kuczynski has realized that he must address local concerns, in order to ensure that Chinese firms will continue to invest.

Even in the area of arms sales, where the U.S. and Peru have such a long track record, new trading partners are emerging.  Just a few weeks after the visit, the Peruvian Ministry of Defense announced that, despite the State Department’s approval, they had no intention of buying the U.S. stryker vehicles. In a statement, the Peruvian government indicated that they were instead considering “proposals from diverse countries that make such military equipment.”

Indeed, Peru has been courting such “diverse countries” for some time: in 2012, the Peruvian government cancelled a deal with U.S. defense contractors including Northrup Grumman, after receiving other bids from Chinese, Russian, and Israeli contractors. Though the deal eventually went to an Israeli company, the conservative Washington Times ran the headline “China steals $114 million U.S. defense deal with Peru.” Despite the hyperbole, the trade and investment relationship between China and Peru—and between China and the region more broadly—has become more important in recent years. And Trump’s inconsistent, venal approach to trade and foreign relations is likely to exacerbate the trend.

Peru, then, represents another trend in the relationship with Latin America that is likely to accelerate under Trump: Latin American countries diversifying trade and investment relationships away from the United States and toward new partners, especially China. While trade between the U.S. and Latin America has doubled since 2000, according to an OECD economist, trade with China has multiplied 22 fold. After Trump withdrew the United States from further negotiations on a Trans-Pacific Partnership, Latin American leaders convened a multilateral trade meeting in March in Chile that included representatives from China and South Korea—but not the United States.

In addition to the kind of foreign direct investment and trade relationships represented by mines like Las Bambas and factories like the newly announced JAC motors plant in Mexico, Chinese state banks have been rapidly increasingly their portfolio lending to the region as well, providing more than $141 billion since such lending began in 2005. In fact, in 2016, Chinese development lending to Latin America and the Caribbean surpassed that from the World Bank and the Inter-American Development Bank, funding new infrastructure, energy, and industrial projects in Ecuador, Brazil, Bolivia, and Venezuela, among other places. Where the Trump administration prioritizes nationalist grandstanding or Trump’s personal self-interest, China will be happy to step into the breach.

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