Issue # 1: The World Economic Crisis, President Obama, the G-20, and Latin America

After a paradigm-shifting election, a paradigm-shifting conference?

This weekend, for the first time, the Heads of State of the G-20 countries (Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom and the United States of America) met in Washington to coordinate solutions to the global economic and financial crisis. Called by lame duck President Bush, the meeting was lampooned by pundits all week as doomed to irrelevance due to the lack of leadership and gridlock present. President-Elect Obama wisely declined to participate while sending representatives to observe it all. I say this is wise even though the crisis is severe and demands immediate attention, because America only has 1 president at a time and infighting between the outgoing Bush team and the incoming Obama team, which have starkly different views on many of the issues discussed, would only weaken the conference further. Moreover, this approach enables our President-Elect to remain separate from our discredited current President and continue to receive earnest goodwill and overtures of cooperation from the rest of the world. I believe it is much more crucial, regardless of how much worse the situation is in January, that President Obama continue to receive this goodwill and cooperation deep into next year, so that we can actually create a solution, and not temporary fixes, to this grave crisis.

While the Conference, as expected, has largely been devoid of agreement on a coordinated global policy response, I would argue that its symbolism has been very significant. In and of itself, the protagonism in this meeting of emerging markets such as Brazil, China and India evidences that the Bretton Woods financial and economic order created by the U.S. and Europe after World War II is obsolete. Despite his many faults and increasing irrelevance, President Bush should be applauded for recognizing this and expanding the invitation list to this global summit. We are the doorstep of a new multilateral economic order where the United States will be one of many important actors. Don't be fooled by the pundits and newspapers in this country who make light of this event. One only needs to look to the international media to see its significance for the rest of the world. For example, Folha de Sao Paulo, perhaps Brazil's most respected newspaper, spoke enthusiastically about the importance of the Conference and Brazil's leadership. According to columnist Kennedy Alencar, "this meeting in Washington was a goal scored" for the world community, and an indication that it is time for Brazil to "think big" about its influence.

Luckily, we will have a President at the helm who not only represents the best of America, but the best of the entire world. The relatively muted criticism of the U.S. from other countries about a crisis that was born here and facilitated by our government shows the incredible amount of goodwill and hope that the world has towards this man and our new government. Many of the policies espoused by the incoming Administration, such as additional economic stimulus and an overhaul of the global regulatory system, are echoed by other major powers. Clearly, President-Elect Obama and his Administration face enormous expectations and a significant challenge.

Our Future Latin American Partners

In developing a coordinated global policy response, in addition to our traditional European and Asian allies, President Obama should look for common ground with our partners in Latin America. Brazil, Mexico and Argentina are all part of the G-20, and all have reasons to support the U.S. They are all democracies that have embraced one form or another of market capitalism over the past 20 years. They all have had strong trade relationships with the United States for many years. There are obvious partnerships which can be built in this Adminstration and the years that follow with these countries on issues affecting the economy such as energy, the environment, food, poverty, trade and investment. Their wealthiest citizens and corporations have invested heavily in the United States over the past decade, and their citizens make up a substantial portion of this country's immigrant population. Most of all, they can even offer advice from their own relatively recent experiences with financial and economic crisis. This is a perspective that our European allies cannot provide. Meanwhile, neither China, India nor Russia, three other crucial players, have the same incentive to bandwagon with the United States, even under Barack Obama. It will be up to President Obama to exercise clear leadership at the next summit and convince these countries that they should join the U.S. in taking action, not because it will help us, but because we need them on board so that we can remake the world economy and benefit all of us, including them.

The Pivotal Role of Brazil

Brazil will be particularly important because of rising economic clout, its presidency of the G-20, its political leadership and clout among developing and non-aligned countries, and the popularity of its president, Luiz Inacio "Lula" da Silva, who this month led the Economist's public opinion poll Latinobarometer as the Latin World's "most outstanding leader." In the region, and particularly in vitally important South America, Brazil is widely viewed as a leader, conciliator and lynchpin between right-wing and left-wing leaders and countries. Under Lula's presidency, the government has worked hard to strengthen its ties and influence in South America, maintaining good relations with both Colombia's Uribe, a strong U.S. ally, and Venezuela's Chavez, a strong U.S. critic. Because of this, Brazil's position holds significant clout in Latin America, particularly when the electoral fortunes of Venezuela's ambitious president Chavez are suffering.

Meanwhile, Brazil's economy and financial markets were the Cinderella story of 2007 and much of 2008. Until October, the country seemed to be removed from the financial turmoil affecting the U.S. and much of the world, and the international community was noticing. In July, the third largest stock exchange in the world, the BM&F Bovespa, was created in Brazil, an event which was followed by the country's rise to investment grade among two of the three major ratings agencies in the world, Standard & Poor's and Moody's. It is no wonder that the downward slide currently affecting the country has its government angry at the United States for creating this crisis.

Finally, there are many opportunities for collaboration and exchange of ideas in alternative energy policy between Brazil and the U.S. Brazil is already a world leader in sugarcane ethanol production and is quickly advancing its production of other biofuels like biodiesel. The country has spent the past 30 years developing a highly advanced ethanol industry, and the United States could benefit much from their experience. Heightened cooperation on alternative energy could also have an additional benefit of establishing a new, more secure source of oil, as Brazil's reserves are among the largest in the world and the country could become almost as big of an oil producer as Venezuela in the coming years.

President Lula called the Conference a "historic day" where "the political geography of the world gained a new dimension." He said that the G-8 will become just a "club of friends." However, in the past, President Lula has placed much of the responsibility for fixing the world economic crisis on the United States and Europe, saying that they created the crisis and therefore should fix it and the effects on developing and emerging nations. It will be up to President Obama to show President Lula and other important leaders that no matter where this crisis started, the solution is one for the world community and requires their participation and leadership. Of course, President-Elect Obama, true to fashion, has already shown remarkable foresight in this relationship. In a phone call to Lula on November 11th, President-Elect Obama extended his support to Brazil's leadership of the G-20, recognized it as the proper forum to solve the global financial crisis, and indicated his willingness to discuss collaboration with Brazil on economic growth, alternative energy, and social programs. He told Lula essentially that he would support Brazilian participation in a future reform of the U.N. Security Council, and promised to visit the country at his earliest convenience.

If President Obama continues to give Brazil the attention it deserves early on, there is good reason to believe that the country will support the U.S. position in these crucial financial negotiations. First of all, Brazil and the United States share great historical, geographic and cultural similarities. As Professor Kenneth Maxwell put it in his 2005 article in The Harvard Review of Latin America,

"both the United States and Brazil are continent-sized nations. Each has a vibrant national culture. Each of their societies is composed of the descendents of large migrations with populations that are part of overlapping global diasporas. Both countries must deal with the deep-rooted heritage and lingering injustices of centuries of African slavery. Both were influenced by frontier cultures in which settlers often clashed with indigenous populations. Each created a domestic market large enough to create the illusion that they do not need to compete internationally or worry too much about international trade. Both have had an ambiguous relationship with the outside world, at times heavily involved but at other moments in their history retreating into isolationism. Both have domestic politics that are excessively local in which parochial interests prevail. Each has complex regional, federal and state interests that require conciliation."

These similarities are part of the reason that President-Elect Obama is extremely popular in Brazil. Last month, eight Brazilian candidates in municipal elections adopted his name as their own (a uniquely Brazilian practice) in an effort to increase their electability. Obama's presidential victory was celebrated across Brazil much as it was in the United States. This popularity puts pressure on Brazil's government to seek a closer relationship with the U.S.

Secondly, Brazil's financial and commercial sectors are more heavily invested in the U.S. now than they were at the beginning of the decade. These groups will push the government to support the U.S. position. Thirdly, Brazil knows that cooperation with the new Administration in this crucial first test will increase collaboration on energy and trade policy. Finally, U.S. support would bolster Brazil's chances of success in its efforts to obtain a U.N. Security Council seat and increased participation in the IMF and World Bank.

The crucial role of our closest Southern neighbor

Though not as economically significant to the world economy as Brazil, Mexico is also crucial to these global economic negotiations. The Mexican economy is intimately tied to the U.S. economy historically, through NAFTA, and through the millions of Mexican workers that have come to the United States and contributed to this economy. Obviously, the immigration issue is a crucial one in this relationship, as are the possible renegotiation of NAFTA and drug and arms control. Despite the fact that these will be controversial issues within our borders and will be challenges for the Obama Administration, we should not let them overlap our interest in having Mexico by our side in these financial negotiations. It is just as important to have Mexico by us as it is to have Brazil or Canada. After all, 90% of Mexican exports and 50% of Mexican imports come from trade with the United States and Canada. Mexico's economy is the 10th to 12th largest in the world, and exports to the United States represent around a quarter of the country's GDP. Despite this interconnection, before the current global slide, Mexico's financial markets were doing well and the country seemed resilient against the backdrop of the U.S. housing and credit crises. Like Brazil, the country has implemented unprecedented macroeconomic stability over the past 10 years, reducing the public debt and increasing the size of the private sector economy. The U.S. is heavily invested in Mexico, and in past years, Mexican private and public investors have increased their participation in the U.S. economy. Finally, Mexico's large oil and gas reserves, and its relation as the third largest oil exporter and eighth largest crude exporter to the U.S. means that it should be included in the Obama Administration's design of a new energy policy.

All of these economic linkages mean not only that it is in Mexico's interest to support the U.S. position in these negotiations, but also that Mexico's concerns are important to the United States. Recently, President-Elect Obama indicated that he would not visit Mexico in his first year in office, due to his focus on this financial crisis and probably due to the fact that he may not be able to focus on immigration, NAFTA and drugs/arms in his first year. While this may be necessary, I believe that President Obama should make sure that Mexico is included among the big players in the global financial negotiations. If he cannot go to Mexico, he would likely benefit from inviting President Calderon to the White House as soon as possible. I believe if we give Mexico the role it deserves in these global talks, it will make it all the more easier to discuss issues like immigration, NAFTA and drugs/arms. Moreover, Mexican-Americans represent the largest portion of the U.S. Latino population. Their issues therefore should be paramount for this Administration, who received so much of their support. If Obama takes meaningful action on immigration, NAFTA, drug and arms control, he will ensure a large portion of Latino support for his re-election and for the Democratic party for years to come. One strong step he can take in this direction is to make Mexico a major player in the global financial negotiations.

We should not underestimate the importance of Argentina

Argentina could be considered by many observers to be the "black sheep" of the G-20. The country continues to owe international investors billions of dollars in unpaid debt seven years after its financial collapse and has been hit hard by the current crisis. The country just nationalized its private pension fund system in an effort to stave off a new default. Under its new president, Cristina Fernandez de Kirchner, Argentina's six years of strong economic growth have vanished and the country's fortunes and politics have been tied more firmly to those of Venezuela and its anti-U.S. president, Hugo Chavez.

Because of these realities, to some, it would seem to some that Argentina is relatively irrelevant on the G-20 and that we need not seek out their support. I would argue that Argentina's economic standing is not its only value in the region. Because of Argentina's political importance in Latin America, particularly among left-wing governments, obtaining their support would gain the support of the entire region, even countries traditionally opposed to us. Because Ms. Fernandez de Kirchner has a more ambivalent relationship with the United States than Venezuela's Chavez or Bolivia's Evo Morales, there is a greater potential for collaboration on the global financial situation. As neither of these polarizing leaders are actors in the G-20, if we can convince Ms. Fernandez de Kirchner to support our position, we can indirectly encourage their support of our position or at least make them seem like marginal actors in the region.

This weekend, President Fernandez de Kirchner met with Senator Christopher Dodd (D-CT), the President of the Subcommittee for the Western Hemisphere, Representative Ellio Engles, and Dan Restrepo, Obama's Principal Advisor for Latin America. According to Mr. Restrepo, who gave an interview to Argentina's Clarin newspaper after the meeting, the Obama Administration anticipates a positive relationship but "where Argentina goes will determine this relationship." I think this is a wise position, as long as we keep in mind Argentina's political influence in the rest of South America.

Latin America's Experience with Financial Crisis

Finally, one last benefit of strengthening our relationships with Latin America during this global financial crisis is the lessons that these countries and their leaders can impart to us on surviving serious financial crises. In the past, our country has not shown much willingness to learn from our southern neighbors. More often, we have been used to imparting advice and, particularly in the area of economics, dictating policy. However, the current severe crisis was engendered within our borders, and should give us all reason to pause and wonder what we can learn from the rest of the world. We hear the politicians and pundits all talk about the Great Depression. But why not also talk about more recent crises that occurred in the current system of globalization we are in. The Asian Financial Crisis is one example, but certainly not the only one. Both Mexico in 1994 and Brazil in 1998 suffered severe financial crises. Argentina, of course, suffered a historic economic collapse in 2001 whose effects continue to be felt in the country. Brazil and Mexico both bounced back from their financial messes, and created sustainable, growing economies that have lifted many out of poverty in these countries over the last 10 years. Because of the financial panics both suffered in the 1990's, both countries have solid and conservatively run banking sectors. Surely we can learn from these countries recent, successful experiences dealing with such economic calamities. It is time for our country to shed our developed world prejudices. I'm almost certain that President-Elect Obama sees it this way as well.