Update Country Report Curaçao 12 Nov 2020

The recent election of Joe Biden as US president promises a return, in large part, to the status quo of US-Latin American relations seen during the administration of a former president, Barack Obama (2009-17). This will involve a less draconian immigration policy, support for trade, rapprochement with Cuba and a change of tack on Venezuela. However, we do not expect the US policy focus on immigration and security to change under Mr Biden. This threatens to crowd out other issues of mutual interest where the US risks losing influence to other countries, particularly China. The evolving relationship between China and Latin America and the Caribbean (LAC) is, in fact, likely to emerge as one of the Biden administration's key policy challenges in the region.

US-Latin American policy has for many years revolved around the three main issues of immigration, security and trade, and has been heavily focused in recent decades on Mexico, Central America and the Caribbean. In South America, US relations with Colombia and Venezuela have provided scarce examples of close co-operation and conflict respectively. These priorities have not changed under the current US president, Donald Trump, although his administration has taken a much more aggressive policy stance, creating tensions with Mexico and Central America, particularly on issues of trade and immigration.

Outside these areas, there has been a feeling on the part of LAC leaders that the Trump administration has failed to engage much with the region. This seems likely to change at least somewhat under Mr Biden, who had an important role in managing Mr Obama's Latin America policy during their two terms in office, and it is likely that the region will be considered strategically important, even if there are priorities elsewhere. Mr Biden will benefit from some of Mr Trump's few successes in the region, such as the negotiation of the United States-Mexico-Canada Agreement (USMCA). However, he will also inherit some of his predecessor's most controversial policies towards Latin America, chief among them the problem of immigration.

Immigration in the spotlight

The Trump administration's immigration policies-including widespread detentions of immigrants and their families, as well as limits on protections for immigrants who arrived in the US as children under the Deferred Action for Childhood Arrivals (DACA) programme-have been met with considerable criticism in Latin America. Mr Biden has promised to continue supporting DACA and is likely to focus deportation and detention efforts more closely along the border.

However, evidence from the Obama administration suggests that policy will not change wholesale under Mr Biden. Although frequent claims that deportations were higher under Mr Obama than under his predecessors are incorrect, Mr Obama did significantly increase deportations that involved a legal process and a formal court order (this procedure is known as a "removal"). This also resulted in an expansion of the immigration detention infrastructure, which Mr Trump has leveraged to increase border detentions. The Obama administration also promoted the use of Mexico's security forces to stop migrants at Mexico's southern border, in order to combat the "caravans" of immigrants from Central America (which now account for the bulk of illegal immigration) that have become common in recent years. This has been continued by the Trump administration, albeit through more coercive means, including a threat of trade sanctions against Mexico in mid-2019.

Mr Biden is unlikely to resort to those threats but will continue to seek ways of curtailing immigration from the sub-region, particularly from the three Northern Triangle countries (Guatemala, El Salvador and Honduras). His major policy proposal is a US$4bn regional strategy to combat the underlying drivers of immigration, working in some areas with development banks, although the concrete details of the strategy remain vague. The plan does appear to be highly conditioned on Central American countries combating corruption.

Friends and enemies

Although the data are incomplete, US foreign assistance to Latin America and the Caribbean is likely to have declined substantially under Mr Trump. Under Mr Biden, we expect total funds to Latin America to increase once again, and for some of this to be focused on economic development and institutional capacity-building. However, as has been the case for many years, security will continue to represent a big chunk of US aid to Latin America. Mr Biden's proposals on regional security have not been fully developed, but if his time as vice-president is any guide, these will be modelled on the US's existing plans such as Plan Colombia and Plan Mérida (México). These plans involve high levels of military and security aid, training for local security forces, and in some cases the deployment of US security forces (ostensibly in an advisory role), as evidenced by the recent deployment of a Security Force Assistance Brigade (SFAB) in Colombia on a four-month operation. Mr Biden has previously praised programmes such as Plan Colombia for helping to reduce levels of violence in the country. The US has also provided considerable security aid in Central America.

Although Colombia, Mexico, Central America and parts of the Caribbean will continue to take the lion's share of US foreign assistance to the region, Cuba and Venezuela will remain the US's biggest individual policy and diplomatic challenges in Latin America. With regard to Cuba, it is likely that some elements of the 2014-17 rapprochement that took place under Mr Obama will be restored under Mr Biden, particularly those concerning travel, investment and remittances. However, even assuming some easing in policy under the next US government, we currently assume that trade sanctions will remain in place.

Meanwhile, the difficult stand-off with the administration of Nicolás Maduro in Venezuela will continue, although we expect a change of tack from Mr Biden. The president-elect has recognised the opposition leader, Juan Guaidó, as the legitimate president of Venezuela; this should put him immediately at odds with Mr Maduro, who is increasingly secure in his position following failed attempts by the opposition to remove him. However, Mr Biden is unlikely to make overt calls for regime change (by force if necessary), as has been common under the Trump administration, particularly when John Bolton was national security adviser and tensions with Venezuela were at their peak. The Trump administration has also levied economic sanctions on Venezuela, but there has been no commitment by Mr Biden to remove them. Although some easing of sanctions is possible, particularly on humanitarian grounds, we believe that the Biden administration is likely to work closely with the opposition and maintain pressure for a negotiated resolution to Venezuela's political crisis, for instance through guaranteed free and fair elections.

Mr Biden may also struggle to deepen the US's diplomatic ties with certain countries where Mr Trump has cultivated a strong personal relationship with the leader, such as Jair Bolsonaro's Brazil. Mr Biden could end up being at odds with Mr Bolsonaro over the Brazilian president's policies on climate change and Amazon deforestation. Mexico remains a question mark. Although in theory Mr Biden and his Mexican counterpart, Andrés Manuel López Obrador, are more ideologically aligned, Mr López Obrador had developed a reasonable working relationship with Mr Trump, although this was founded on a power imbalance between the two sides and fear of US policy reprisals. On top of this, the Mexican president is a populist with his own record of refusing to respect election results (this happened in 2006, when he narrowly lost the presidential election). Although we expect relations to remain sound-bearing in mind Mexico's reliance on the US-Mr López Obrador has certainly got off on the wrong foot by refusing (like Mr Bolsonaro but unlike the rest of Latin America) to recognise Mr Biden's victory until all legal challenges have been exhausted. Barring these (significant) exceptions, however, most countries in the region will find more compatibility with Mr Biden's view of the world than with Mr Trump's, ensuring an amicable relationship.

Losing economic ground

Although US-Latin American relations seem likely to be warmer under Mr Biden, and there is likely to be some increase in aid to the region, we do not believe that the president-elect will have much luck in increasing US economic engagement with Latin America-or countering the growing economic influence of China. Thankfully, the ratification of the USMCA has largely put an end to US trade threats towards Latin America. Mr Biden has a more benign view of trade than Mr Trump; this will be one area in which a Biden administration will find it easier to restore the pre-Trump status quo. The Biden administration may also have some interest in attempting to reshore supply chains into the western hemisphere in order to avoid disruptions of the kind seen during the coronavirus (Covid-19) pandemic. Concrete initiatives in this area would be welcome in the likes of Mexico, Central America and Colombia, although they will be complicated by issues of labour cost, skills and logistics capacity.

Moves of this kind would help the US to regain some of the ground that it has lost to China over the past decade, but we remain doubtful about the extent to which the US's economic relationship with LAC will grow amid the region's deepening links with China. For many large economies in South America in particular, China is already a more important trading partner than the US. As we have previously highlighted, China's growing economic influence in the region does not necessarily reflect US negligence, but rather a lax stance on conditionality by Chinese firms seeking to secure resources. Bearing in mind that US (and other) firms are likely to be much more easily deterred by questions over contract rights, institutional strength and corruption than their Chinese counterparts have been to date, the incoming Biden administration will find it difficult to reverse China's growing economic presence in South America.

This may ultimately prove Mr Biden's biggest policy challenge in Latin America, and US pressure in technology, including the region's development of fifth-generation (5G) services, as well as finance and investment, is likely to build under Mr Biden, if anything. However, the president-elect may be more inclined to use the carrot than the stick to make fresh policy gains in Latin America.