Donald Trump’s mantra has always been ‘America first’, but the latest twist in US foreign policy seems to broaden its focus to a more regional ‘America(s) first’.
This shift is enshrined in the new ‘Back to the Americas’ initiative, which the White House has launched with a clear target in mind: dragging Asian supply chains to Latin America and the Caribbean, using funds from the Development Finance Corporation (DFC) to cover company relocation costs.
“I think one of the things we learned from the pandemic is that really the most successful experiences that our companies had in regards to dealing with critical supply chains were those that went north to south, definitely not east to west,” Mauricio Claver-Carone, Trump’s top Latin America advisor and candidate to the presidency of the Inter-American Development Bank (IDB), tells fDi.
Imperfect, but solid
Despite sometimes tense diplomatic relationships, the US has traditionally been Latin America’s most important trade and investment partner.
The US is by far the largest source of greenfield projects to Latin America. US companies have invested in 3,662 projects in the past decade, more than double that of the runner-up, Spain, which contributed 1,496 projects in the same period, according to figures from foreign investment monitor fDi Markets.
However, China has sharply increased its leverage in the region over the past decade, raising concerns in Washington. Although rising, China’s FDI in the region is still relatively low. On the other hand, Beijing has ramped up concessional loans financing local projects in specific sectors – particularly resources and infrastructure – and strengthened trade and diplomatic ties across the region. As many as 18 Latin American and Caribbean countries have joined China’s ‘Belt and Road’ initiative, and China is now the largest trading partner of Brazil, Argentina, Chile and Peru.
The ‘Back to the Americas’ initiative is Trump’s answer to China’s growing influence in the region.
Mr Claver-Carone says that US relations with its Latin American neighbours like Mexico, though imperfect, remained “leaps and bounds better than they were with Asian countries and China, really, in particular”, and that this close relationship can help keep supply chains moving.
He recounts how direct cooperation with the government of St Kitts and Nevis ensured factories critical to the ventilator supply chain stayed open during the country’s lockdown.
“Due to our relationship and due to our friendship, due to our ability to pick up the phones, we were able to really make a difference and ensure that companies ... had the [personal protective equipment and] supplies they needed to keep their operations ongoing, to ensure that the chain kept moving.”
Reshoring versus nearshoring
Despite its renewed focus on the Americas as a whole, the Trump administration’s main priority is to bring jobs back to the US – a focus that has shaped how the ‘Back to the Americas’ initiative will work.
“What we want to ensure here is that, first and foremost, reshoring [bringing manufacturing back to the US] is our national priority,” Claver-Carone tells fDi, outlining how the ‘Back to the Americas’ initiative will avoid supporting companies that could otherwise relocate to the US.
To do so, it will target two types of companies: those that previously operated in Latin America before moving to Asia, and those operating in geography-dependent industries like mining and infrastructure.
“It's not about companies and jobs that left the US, went to Asia, and now we're looking for them to go someplace else instead of Asia,” he stresses, adding that “the initial immediate focus on the financing side is going to be footprint or geography”.
Even with this narrow focus, Claver-Carone predicts the initiative will attract between $30bn and $50bn in investment to Latin America.
Coming to Colombia
Last month, the government of Colombia launched an effort to attract multinationals from Asia, with investment promotion agency ProColombia identifying 536 potential candidates that previously had a footprint in Colombia. Of those, 31 showed interest in relocating.
Colombia’s push is a pilot programme of the ‘Back to the Americas’ initiative, showing the roles that the US government and Latin American governments will play. With the US focused on supporting relocation costs, it expects Latin American countries to identify viable candidates for relocation, as Colombia has.
Latin American countries are “going to have to make an attractive sales pitch”, Claver-Carone says, “and then with our DFC and other agencies of the US government, we can help finance or incentivise, like Japan did, initial relocation costs”, referencing Japan’s $2.2bn programme to cover the relocation costs of firms moving out of China.
The initiative will also work with US investment promotion agency SelectUSA, providing an alternative to firms that the agency has determined cannot sustainably relocate to the US.
The DFC will then fund short-term relocation costs, with Latin American countries responsible for providing long-term incentives like Colombia’s reshoring programme.
Eyeing the IDB
On September 12, the member countries of the IDB will vote for a new president, with the Trump administration breaking with precedent to nominate Mr Claver-Carone for the job, which has historically been held by a Latin American.
Claver-Carone concludes by telling fDi how the initiative reflects the level of US-Latin America cooperation he would like to bring to the IDB, providing an alternative to Chinese investment.