Chile and Latin American affairs
Editorial 2025
Trump’s second term in the Oval Office will potentially affect Latin American countries on two fronts. One is the White House's focus on curtailing immigration flows from Central America and Venezuela through Mexican borders. The other is restoring fairness in the U.S. trade relationships with commercial partners perceived by the White House as having taken advantage of America through trade deficits in commercial dealings. According to Trump, this imbalance in trade has been affecting American interests domestically and economically, and, therefore, Trump has announced to carry out the 'Fair and Reciprocal Plan' (Feb. 13, 2025) to tackle the trade deficits with partners or allies imposing a levy on American products entering their borders.
One example is Brazil, which, according to the White House, charges a tariff of 18% on American ethanol. In contrast, the USA, according to the White House, only charges a tariff of 2.5% on ethanol imports. This tariff threat might have been off the table had Brazil and the White House agreed on a Bilateral trade agreement or FTA before Trump’s 2nd term to solve protectionist measures. Attempts to strike a deal had commenced in 2020 under Bolsonaro’s administration for a path to free trade between the South American giant and the USA. Additionally, countries that already enjoy an FTA with America and a surplus in the trade balance with America might run under Trump’s radar. In regards to illegal immigration, Trump’s envoy to Venezuela, Richard Grenell, held meetings in Caracas to speed up the deportation of Venezuelan illegal migrants from American soil and back to their country. Grenell announced the termination of licenses to drill and export Venezuelan oil to America, which Biden had authorized in 2022, ending Chevron’s oil activities there. Will this move toughen Trump’s determination to deal with Maduro’s grip on the government? It remains to be seen.
Argentina’s President Milei, the libertarian advocate of limited state expenditure, characteristically portrayed with a chainsaw to do away with bureaucracy, has also been affected by Trump’s announcement of a 25% tariff on steel and aluminum, which Argentina provides to America. However, at the conservative CPAC summit, Milei stepped forward to accept Trump’s ‘Fair and Reciprocal Plan,’ leaving Milei’s agenda for a bilateral trade agreement between Argentina and the White House on hold. Argentina, under Milei, has managed to bring down inflation rates to an astonishing record low since the Kirshners’ era. Lithium deposits and American FDI flowing into the country to extract it remain Milei’s card to play for a beneficial commercial agreement. Again, it remains to be seen how quickly and efficiently this deal might result in the short term.
What does Trump’s 2nd term in office mean for Chile?
Chile has an open economy and is one of the few countries reaching the zero tariff policy on the border following WTO guidelines. Chile has signed over 60 FTAs and is in the trade mega bloc CPTPP of 11 member states (excluding America, as it was during Trump’s first administration that the White House abandoned the idea of joining the bloc). Chile has maintained a vocation for free trade, and it was one of the first countries in Latin America to sign a FTA with the White House in 2004. As of January 1, 2015, all goods from the United States enter Chile duty-free. Chile enjoys a visa-waiver status, a privilege granted to a few partners worldwide, which might be in jeopardy if Chile does not strive enough to impede local thieves from committing robberies in America.
Still, the rise of crime in Latin America, intensified by the surge of drug cartels post-COVID-19 and the destabilization of the hemisphere by Maduro’s regime, which has triggered the massive exodus of Venezuelans illegally crossing the borders of Latin American countries, had debilitated Latin American countries’ capacity for governance and efficient dealing with organized crime, and therefore, local gangs operating in American soil might be the target of stringent measures by Trump’s administration. In the meantime, Trump has decided to label Mexican cartels as terrorist organizations. These measures might incentivize governments in Latin America to implement additional measures to curtail crime entering the USA.
And then, we have the China issue
Trump has been emphatic in signaling that countries in the region must impede favoring Chinese interests. This has been the case in Panama, with the threat of invading the country to seize control of the Panama Canal for geostrategic reasons and vessel passage securities. Panama was forcibly incentivized into action and, thus, has announced the termination of its endorsement of the BRI (Belt and Road Initiative), which began in 2017, and an audit into Chinese concessions in the Canal, which might cause some Chinese infrastructure to terminate. Trump’s transactionalism in foreign affairs exemplifies the dealings regional governments will face with America’s Trump's strategy concerning China’s interests in the region as this is embedded in the current global power competition (GPC) staged by the White House and Beijing, in what is commonly known as 'peer rivalry” between two superpowers, or, simply put, the Sino-American competition for global power waged in technology revolution and possibly in outer space.
Feb. 26, 2025
Editorial 2024
The war in Ukraine and the conflict in Gaza have put pressure on Latam leaders to take sides. Risks additionally relate to China’s potential resolve to regain its glorious past and retake Taiwan in a military operation affecting global stability. These geopolitical conflicts exacerbate leaders in Latam to take ideological sides, blurring their need to remain neutral at a time of erosion of International Law at a multilateral level.
EDITORIAL 2017-2018
The geopolitics of the north, with the Brexit referendum and "America First" precepts under Trump’s presidency, provide Latin America and Chile with opportunities to foster greater integration in the region and strive to hit the Asia-Pacific commercial area.
However, the advancement of China in the region and the crisis in Venezuela should be closely analyzed in terms of the risks and opportunities they pose with efforts made by regional states for greater regional convergence.
Country Risk Chile has been closely examining the opportunities for greater convergence, inclusive growth, and open regionalism in Latin America. Internal political factors are also discussed in a pragmatic arrangement that might derive into a political and economic alliance between MERCOSUR and the Pacific Alliance to increase their bargaining power in deals with China, India, and other prominent international commercial players interested in the region.
December 2017