By Guy Edwards and Kelly Rogers*
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Since the former US Assistant Secretary of State for the Western Hemisphere, Arturo Valenzuela, resigned via Twitter last Friday, commentators are debating who should replace him and whether this change presents an opportunity to alter the Obama Administration’s policies in the region. The Inter-American Dialogue invited four of Dr. Valenzuela’s predecessors to share what qualities his successor will need. However, all but one failed entirely to mention the issues of climate change, clean energy, resource scarcity and green growth.
The new assistant secretary needs to have experience on these issues. In Chile, President Barack Obama spoke of the urgency of tackling climate change and embracing a more secure and sustainable energy future in the Americas. His administration has stated that securing a clean energy future is one of the four over-arching priorities in the region. The Energy and Climate Partnership of the Americas, which aims to accelerate the deployment of clean energy and advance energy security, is an essential component of hemispheric relations.
Multiple US agencies and other organisations which receive significant funding from the US are carrying out considerable work on climate change, clean energy, resource scarcity and green growth. USAID, which runs the Global Climate Change Initiative, argues that climate change is one of the century’s greatest challenges and will be a diplomatic and development priority. At the 41st session of the General Assembly of the Organization of American States (OAS) held last month a resolution on climate change was adopted which resolves to strengthen the resilience of the OAS member states to the adverse impacts of climate change. The US Special Envoy for Climate Change, Todd Stern, says that Latin America is a significant focus of funding with over US$60 million spent in 2009-10 on climate-related bilateral assistance in the region. The World Bank and the Inter-American Development Bank are also investing considerable resources on these challenges.
The security implications of climate change have risen in prominence following a UN Security Council debate in 2007 where former British Foreign Secretary, Margaret Beckett, argued how an unstable climate will exacerbate some of the core drivers of conflict such as migration and competition for resources such as food, water and energy.
Latin America and the Caribbean boasts incredible and highly coveted natural resources including 25% of the planet’s arable land, 22% of its forest area, 31% of its freshwater, 10% of its oil, 4.6% of its natural gas, 2% of coal reserves and 40% of its copper and silver reserves. The International Energy Agency forecasts that in the future world consumers are going to become more dependent on the Americas to satisfy their growing demand for oil with Brazil and Colombia alongside the US and Canada set to meet the demand.
The U.S. Southern Command co-hosted two events in Colombia and Peru focused on climate change concluding that the issue is a major security concern and as a result could be a powerful vehicle for US military engagement in the region. The National Intelligence Council which held a workshop on ‘Latin America in 2020’, also concludes that the participation of the US in addressing hemispheric problems such as climate change will be crucial.
This year UNASUR’s South American Defense Council (CDS) inaugurated the new Defense Strategic Studies Center (CEED), which will look at various challenges including the protection of strategic energy and food resources and adapting to climate change. The choice of issues demonstrates that climate change and resource scarcity present real security concerns to regional governments.
Peter Hakim argues that at a time when US-Brazilian relations are fraught, Washington and Brasilia need to work harder to find opportunities for cooperation. Climate change, clean energy, resource scarcity and green growth are key potential areas for US-Brazilian relations. The launch of a US-Brazilian Strategic Energy Dialogue, focusing on cooperation on biofuels, renewable energy, civilian nuclear energy and the development of Brazil’s deepwater oil and gas resources, is a productive start.
Brazil will host the UN Conference on Sustainable Development in 2012 with the green economy theme topping the agenda. The British Deputy Prime Minister Nick Clegg has praised Brazil as an ‘environmental super-power’ citing its leadership on renewable energies. The World Bank has conducted studies on the potential of low carbon development in Brazil and Mexico identifying a number of great opportunities to mitigate and reduce emissions, mainly in agriculture, deforestation, energy, transportation and waste management.
Debates surrounding green growth have a strong resonance in Latin America given the region’s strong background on clean energy, leadership at the international climate negotiations and willingness of various countries to embark on low carbon development pathways. The US’s top diplomat in Latin America should have experience on these issues to ensure policy coherence among US agencies and partners and effective dialogue with Latin American governments.
Trade and investment
US goods and services trade with the Western Hemisphere totaled US$1.5 trillion in 2008. Although Latin America and the Caribbean continues to be the largest US export market, the US’s share of the region’s imports has dropped from 55% in 2000 to 32% in 2009. The US’s share of the region’s exports also fell from 61% to 42% during the same period. China is now the top destination for the exports of Argentina, Venezuela, Brazil, Chile, Costa Rica, Peru and Uruguay.
Latin American exports to China are concentrated in raw materials, which account for nearly 60%. Exports to the US are more diversified which Arturo Valenzuela says makes Latin Americans better off trading with the US because they can take advantage of greater technology in the value chain. However, crude oil remained the top export to the US for Argentina, Brazil, Colombia, Ecuador, Mexico & Venezuela in the 2007-2009 time period.
Although the US may argue it has a superior trade model to that of China, ECLAC argues there is a perceived lack of strategic vision of the US in Latin America. There is currently no US initiative on the scale of the Alliance for Progress or the Initiative for the Americas. The Energy and Climate Partnership of the Americas may aspire to this level but it is not yet comparable to its predecessors.
This comes a time when China’s twelve Five Year Plan emphasizes technological innovation, improving environmental standards and various targets such as reducing energy consumption per unit of GDP by 16%. Various sectors are being targeted for improvement such as vehicles with alternative energy sources, which present possible opportunities to collaborate between China and Latin America.
The US was the largest investor in Latin America in 2010 followed by the Netherlands and China with the majority of this foreign investment being channeled into natural resources. Although Latin American commodities are a significant draw to foreign investors, investment in clean energy is now considerable at US$13.1 billion. The UNEP reports that Latin America saw the biggest increase in renewable energy investment among developing regions with Mexico taking first place. These clean energy investment opportunities should be embraced by US companies, particularly when a number of European companies are investing heavily in this area.
The State Department and USAID has announced a new partnership with the Private Finance Advisory Network to accelerate private finance in renewable energy projects in Central America. However, the Energy and Climate Partnership of the Americas, which aims to encourage investment in the deployment of clean energy, is yet to receive notable financial support from the private sector. The International Development Bank cites an UNFCCC estimate that more than 85% of Latin American countries’ energy investment needs until 2030 will come from the private sector.
Encouragingly, an American Chambers’ recent membership poll, listed “Energy” as the hottest investment sector for members investing in Latin America, followed by the technology sector. In 2010, General Electric announced their sponsorship of a US$500 million Global Research Center to help promote oil, gas, clean energy, transportation and mining industries in the region. Recently, Cannon Power Group, a US wind company, signed a 10-year joint-venture contract with the Spanish company, Gamesa, to harness wind energy in Mexico.
US-Brazilian commercial relations on biofuels are also under the spotlight. Three US senators reached a deal to repeal the $6 billion per year ethanol tax credit. The deal, which still needs to passed by Congress, would reduce the federal deficit this year by $1.33 billion and direct $668 million to extend tax breaks for technologies to help alternative motor fuels including biofuels get to market. US ethanol producers and the Brazilian Sugarcane Industry Association have stated that they support the deal. Although the Obama Administration, which is against a full repeal of ethanol subsidies, has threatened to veto the elimination of these subsidies, the Senate vote was highly symbolic and suggests that there is potential for cooperation between this major Latin American industry and its counterparts in the US.
Regardless of whether national or international climate change legislation is forthcoming, the issues of clean energy, resource scarcity and green growth provide the impetus for increasing trade and investment in the low carbon economy and high-tech industries. Climate change is increasingly connected with trade issues presenting an important opportunity to speed up discussions on how to further diversify Latin American exports. As ECLAC points out, any future US climate change legislation might create additional costs and penalise carbon-intensive Latin American exports. Although the Office of the US Trade Representative leads US trade policy in the Western Hemisphere, the State Department’s diplomats complement this work and Valenzuela’s successor can make a valuable contribution in this area with the relevant expertise.
Observers of US-Latin American relations argue that the next Assistant Secretary for Western Hemisphere Affairs should know just as much about US domestic policy and Washington politics as on Latin American affairs. While the US languishes in the depths of federal climate policy inertia, this requirement is partially unhelpful. The new arrival should have a solid brief in climate change, clean energy, resource scarcity and green growth because most Latin American governments are acting decisively on these issues. As the surge in clean energy investment in the region demonstrates there are also significant opportunities for US companies which American diplomats can help support. It is therefore imperative that Valenzuela’s successor has experience on these four issues, which are set to dominate US-Latin American relations this decade and beyond.
*Kelly Rogers is currently a second-year Master’s student of Public Policy at Brown University where she is focusing her policy studies on the institutional and political barriers to US domestic climate policy progress.
 Steven J. Puig (n.d.) ‘Financing Renewable Energy Investments in Latin America & the Caribbean’ Presentation by Vice President for Private Sector and Non-Sovereign Guaranteed Operations, Inter-American Development Bank