The United States and Latin America: Vital Interests and the Instruments of Power

As the 1980s begin, U.S. interests in Latin America are greater than ever while traditional instruments of American government power in the area are far less effective than they have been in preceding decades. Moreover, the domestic component of U.S. policy toward Latin America is getting very explosive, while at the same time new foreign policy power centers in Latin America are emerging. With the end of the bipolar simplicity of a generation ago, and the diminishing international financial, technological and military power of the United States, the relationship between the United States and Latin America has changed profoundly. The great diversification of global power relations is not only reflected in the emergence of the European Community, OPEC, the Nonaligned Nations Movement, and the conflict and competition among communist countries, but also by the growing participation in world trade of the newly industrialized nations such as South Korea, India, Mexico and Brazil. In this less orderly world of assertive nation-states and the transnational forces and organizations they contend with, there are special problems for U.S.-Latin American relations.

World economic and political changes have increased U.S. stakes in Latin America in a number of ways. Continued U.S. dependence on oil imports from the politically volatile Middle East has obviously increased the strategic and economic importance of Mexican oil to the United States. As a major importer of oil, as well as for other reasons, the United States will continue to be forced out of its relatively self-contained economy to compete in world trade. To the extent that the United States has a comparative advantage in Latin America, much of this trade could take place within the Hemisphere-already 80 percent of North American exports to developing countries go to Latin America. By the mid-1980s, Mexico could well be the largest trading partner of the United States. Meanwhile, U.S. banks are dramatically increasing their exposure in Latin America-20 percent of Citibank's profits recently came from Brazil alone. Indeed, Latin America's growing role in international capital markets is indicated by the fact that in the first eight months of 1979 the world's top three borrowers in Eurocurrency bank credits were Mexico, Venezuela and Brazil.1

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