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Climate, energy to dominate US-Latin American relations

Source: Thomson Reuters Foundation - Mon, 18 Jul 2011 11:14 GMT
Author: Guy Edwards
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By Guy Edwards

Since the former U.S. Assistant Secretary of State for the Western Hemisphere, Arturo Valenzuela, resigned via Twitter last Friday, commentators have been debating who should replace him and whether this change presents an opportunity to alter the Obama administration’s policies in the region.

With the challenges of climate change, clean energy, resource scarcity and green growth set to dominate U.S.-Latin American relations, Valenzuela’s successor should have experience in these areas.  

These issues are a priority for the Obama administration and present lucrative opportunities for the U.S. to improve trade and commercial relations with Latin America at a time when the region is a magnet for investment in clean energy.

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. 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 U.S. agencies and departments are carrying out extensive work on climate change. The U.S. Agency for International Development (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.

The U.S. Special Envoy for Climate Change, Todd Stern, says that Latin America is a significant focus of funding with over $60 million spent in 2009-10 on climate-related bilateral assistance in the region. The U.S. military 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 U.S. military engagement in the region.

This year the Union of South American Nations’ (UNASUR) 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 REGION’S RESOURCES

Latin America and the Caribbean boast incredible and highly coveted natural resources including 25 percent of the planet’s arable land, 22 percent of its forest area, 31 percent of its freshwater, 10 percent of its oil, 4.6 percent of its natural gas, 2 percent of coal reserves and 40 percent 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 demand for oil with Brazil, Colombia, the U.S. and Canada set to meet the demand.

Brazil will host the U.N. Conference on Sustainable Development in 2012 with the green economy theme topping the agenda. Peter Hakim, president emeritus of Inter-American Dialogue, argues that while U.S.-Brazilian relations are fraught, both countries need to work harder to improve cooperation.

Climate change, clean energy, resource scarcity and green growth are key potential areas for U.S.-Brazilian relations. The launch of a U.S.-Brazilian Strategic Energy Dialogue, focusing on cooperation on biofuels and renewable energy, among other areas, is a productive start.

Although Latin America and the Caribbean continue to be the largest U.S. export market, the U.S.’s share of the region’s imports and exports has dropped over the last few years. 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 percent, while exports to the U.S. are more diversified.

THE RISE OF CHINA

Arturo Valenzuela says this makes Latin Americans better off trading with the U.S. because they can take advantage of greater technology in the value chain. However, crude oil remained the top export to the U.S. for Argentina, Brazil, Colombia, Ecuador, Mexico and Venezuela in the 2007-2009 time period.

The U.S. may assert it has a superior trade model to China, but the U.N.’s economic commission for the region argues there is a perceived lack of strategic vision by the U.S. in Latin America. Although the Energy and Climate Partnership of the Americas is the flagship U.S. initiative in the region and will be a key focus for President Obama at the 2012 Summit of the Americas, it is not yet comparable to past initiatives such as the 1960s-era Alliance for Progress.

This comes at a time when China’s twelfth Five Year Plan emphasizes technological innovation, improving environmental standards and various targets such as reducing energy consumption per unit of GDP by 16 percent. In 2010, China was the top installer of wind turbines and solar thermal systems, suggesting there are possible areas to collaborate between China and Latin America.

The U.S. was the largest investor in Latin America in 2010 with the majority of this investment being channeled into natural resources. But as the United Nations Environment Programme (UNEP) reports, Latin America saw the biggest increase in renewable energy investment among developing regions, presenting U.S. companies with great opportunities south of the border.

The State Department and USAID have  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.

ENERGY HOTTEST INVESTMENT

Encouragingly, an American Chambers of Commerce Abroad recent membership poll listed “energy” as the hottest investment sector for members investing in Latin America. Recently, Cannon Power Group, a U.S. wind company, signed a 10-year joint-venture contract with the Spanish company, Gamesa, to harness wind energy in Mexico.

The threats of climate change and growing resource scarcity, combined with the opportunities presented by green growth, provide the impetus for increasing trade and investment in low carbon and high-tech industries.

Although the Office of the U.S. Trade Representative leads U.S. 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.

As climate, clean energy, resource scarcity and green growth begin to define U.S.-Latin American relations, the U.S.’s top diplomat in the region should have the appropriate experience to ensure greater policy coherence among U.S. agencies and effective dialogue with Latin American governments, many of which are trailblazing in these areas.

Guy Edwards, who is based in Ecuador, is a research fellow at Brown University’s Center for Environmental Studies and works with the Latin American Platform on Climate and the Climate and Development Knowledge Network. A longer version of this blog first appeared on Intercambio Climatico.

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