A few words are sufficient: Mr. President, take care of the dollar!
In Latin America, and Mexico especially, we are holding our breath to see how the 44th U.S. president will steer his country’s economy through the current storm. Although the health of the dollar is important around the world, it is vital to Latin America, a region that has often been plagued by currency devaluations, inflation and lackluster growth. Just when the region was getting its act together—economically speaking, at least—the unofficial currency of last resort is faltering.
Mr. President-elect, we hope you will take into account the impact of the dollar’s weakness on our hemisphere—rather than blame emerging markets for the current economic malaise of the U.S. economy. With the campaign now ended, the White House must stop taking cheap shots at signed trade agreements like the North American Free Trade Agreement (NAFTA) and take responsibility about the proposed one with Colombia.
No Latin American nation is forcing private U.S. citizens to buy cheaper, globally-made products at Wal-Mart or forcing them to drive around in gas-guzzling SUVs that increase U.S. dependence on nations like Venezuela. We should not be seen as part of the U.S. economic problem. We should be seen as part of its solution.
The president should look beyond stereotypical charges and recriminations. What about making this presidency vis à vis the American Hemisphere about the unspoken “C-word”—competitiveness?
Economic competitiveness, as any middle-aged Latin American has learned the hard way, does not come from currency devaluation. Although wealthy Mexicans joined Europeans until the summer of 2008 during the fiesta of a falling dollar, they suffered an unbearable hangover this past fall as economic conditions worsened. A devaluation, explicit or tacit, without a carefully thought-out economic program, makes life very hard for middle and working classes and also affects national well-being. We Mexicans have the scars to prove it. The peso crises of 1976, 1982, 1986 and 1994 left us less competitive, not more
A Washington insider once told me that appealing to self-interest is the best way to get things done “inside the Beltway.” I truly see nothing more in the self-interest of the next U.S. president than to do some New Year’s house-keeping in the face of an increasingly difficult global economic situation.
This should involve a multi-disciplinary approach that embraces energy, as was said forcefully during the election campaigns, but should also address labor, education, the opening of new markets, and, above all, innovation.
Innovation involves creative thinking and practical know-how. To achieve it and use it to stay ahead of China and the European Union power engines, the U.S has to invest in people.
Each country in the Americas, including the U.S., has to deal with much-needed reform in elementary and high school education; but it is at the university level where the U.S. can lead the region to converge at its best.
So far, it has not chosen to do so.
Mexico is the U.S.’s third-largest trading partner, behind only to Canada and China. But according to the New York-based Institute of International Education, Mexico holds seventh place in the number of foreign graduate and undergraduate students enrolled at U.S. universities. No other Latin American country even makes it to the top ten.
In order for the U.S. to remain competitive in the 21st Century, it must reverse the trend in which it is educating its economic rivals rather than its neighbors. Scholarships, such as a G.I.-bill-like initiative that would support the best and the brightest of NAFTA to be trained in select fields to compete globally could be a centerpiece of such an effort.
The U.S. must also stop protecting some of its key economic sectors from competition. The old liberal idea that creative destruction renews and strengthens capitalism is being ignored by the world’s most allegedly liberal country.
Agriculture is a good example of the U.S. government’s protectionism under its most dangerous, hypocritical guise. Brazil has made a very strong case in international forums, such as the World Trade Organization, for the U.S. to stop subsidizing its farmers. The U.S. should accept the point. Nothing will help Latin America more than for the next U.S. president to encourage an end to anachronisms such as sugar subsidies.
The current immigration policy is also an example of a type of U.S. protectionism. Opening regional labor markets could foster competitiveness if the specific demographics and labor skills that Latin America offers are used to complement the U.S. labor force.
Taking the recent Merida initiative with Mexico as an example, it is possible for the U.S. to work closely with Latin American countries in very difficult issues, like drug trafficking, for common goals. Why can’t we worth together on equitable labor solutions?
Latin America, as a whole, and Mexico, in particular, should encourage Washington to open the U.S. economy. We could certainly bring to the table a very valuable asset to address the current U.S. economic crisis: expertise.
Having lived through economic dire straits, we can possibly lend the U.S. some top-notch advice from our own technocrats. Thinking ahead is essential, so it would be wise to have the likes of Secretary of Treasury Agustín Carstens and Central Banker Guillermo Ortiz at hand.
If we stand behind the dollar and we work together for a more competitive hemisphere, I see no rival on the world scene that can challenge our combined economic power.
