Latin America is blessed with abundant and cheap renewable energy. It is one of the world’s biggest food exporters. It is at peace, far from global conflicts and its nations are mostly robust democracies. It is close to the US, ideally placed to profit from the moving of production from China.
Yet Latin America’s presidents seem to have other priorities.
Rather than figuring out how Brazil can compete with India to assemble iPhones or win investment in microchips, President Luis Inácio Lula da Silva wants to build oil refineries, revive shipbuilding and pursue a currency union with near-bankrupt neighbour Argentina.
“Brazil has all this potential to be thinking about green hydrogen,” says Monica de Bolle, of the Peterson Institute for International Economics in Washington. “And yet the government is simply not there at all.”
“There’s a sort of old-guard view of the world which is getting in the way,” she added, calling it a kind of “industrial nostalgia”. “It’s the typical story of Brazil missing opportunities”.
Lula’s apparent mis-steps come as Latin America is, surprisingly, struggling to manage good economic growth. This should not be so hard. Recent geopolitical trends have presented the region with some extraordinary advantages.
Chile’s leftwing president Gabriel Boric outlined a strategy to exploit the country’s abundant lithium reserves last month. It ticked several boxes: greater concern for the environment, consultations with local communities, a desire to use a rare opportunity to boost economic development.
One missing ingredient: any incentives for mining companies to choose Chile over other competitors for lithium investment. The leftist president’s decision to put future lithium projects under state control sliced $5.7bn off the value of the two companies currently mining the “white gold” in Chile.
“It was poorly crafted and poorly released,” said Joe Lowry, a US-based lithium expert, of Boric’s announcement. “This has created a huge amount of uncertainty.”
Mexico should be the best placed Latin American nation to win so-called near shoring business, given its proximity to the US and its free trade agreement.
Yet President Andrés Manuel López Obrador has abolished the investment promotion agency, attacked renewable energy companies, halted a large and mostly built US brewery project and scrapped a partly constructed international airport for Mexico City. Among his top priorities: a tourist train around the Mayan peninsula and a $14bn new oil refinery.
The result of López Obrador’s approach, says Shannon O’Neill, a Mexico expert at the Council on Foreign Relations in New York, is “a stream of . . . near shoring, not a tsunami”.
“The politics and the policies are holding it back,” she concludes. “Even as China has lost market share [in the US] . . . that’s mainly going to south-east Asia.”
Argentina, the third biggest regional economy, is almost bankrupt. Its Peronist government has imposed price and exchange controls that have failed to halt inflation of over 100 per cent a year, yet killed off most foreign investment.
Buenos Aires has also created uncertainty over taxation and foreign exchange for farm exports and imposed limits on grain sales abroad, holding back the vast potential of the agricultural sector. (The lithium industry, regulated by provincial governments, remains a bright spot.)
In Colombia, President Gustavo Petro has opposed new projects in oil and mining, the mainstay of the economy. The former guerrilla revolutionary has also just forced his entire cabinet to resign, including his respected finance minister, as part of a shift to an “emergency” government.
Reacting to what they see as an anti-business climate, many of Latin America’s wealthy have been shifting assets overseas in the past two to three years rather than investing at home.
“Many countries in the region are going through an inward-looking phase and may be at risk of missing out on the opportunities that are out there in the changing global context,” concludes Carlos Felipe Jaramillo, World Bank vice-president for Latin America and the Caribbean.
When Boric announced his lithium plan, he told Chileans: “We cannot afford to waste this opportunity.” He may have done just that.