Source: AS/COA / Roey Yohai Photography
The following interview between Global Americans’ Executive Director Guy Mentel and Richard E. Feinberg took place this week, in light of recent and upcoming trips to Central America from Secretary of State Antony Blinken and Vice President Kamala Harris. The purpose of this interview was to glean insight from Mr. Feinberg’s decades of engagement with inter-American relations, and evaluate the Biden administration’s leading agenda items for the region, such as migration, corruption, and foreign investment.
About Richard E. Feinberg
Richard E. Feinberg is a professor of international political economy at the School of Global Policy and Strategy, University of California, San Diego. He has over four decades of engagement with inter-American relations that spans government service, numerous Washington, D.C.-based public policy institutes, the Peace Corps (Chile), and now academia. He recently published a report with the Latin American Program at the Wilson Center, entitled, “Widening the Aperture: Nearshoring in Our ‘Near Abroad,'” which offers recommendations for U.S. engagement in the Greater Caribbean Basin.
1. To begin, Secretary Blinken travelled to Costa Rica earlier this week and Vice President Kamala Harris is traveling to Guatemala and Mexico next week. Can you tell us a little bit more about what they hope to accomplish with their trips?
It is wonderful to see the Secretary of State and the Vice President focusing on Latin America and the Greater Caribbean Basin. They are just beginning their engagement process and it is an opportunity for them to listen and learn from the region and its governments, the private sector, civil society, professional experts, and international organizations. They are at the early stages of making concrete decisions regarding what the U.S. government can do and can accomplish with its partners in the region, so I hope that they are very much in a “learning mode.”
Their primary political goal is to try to gradually reduce the pressure on the U.S. southern border due to large flows of immigration from Central America. But the Biden administration understands that addressing issues at the border is all about changing the conditions on the ground, which in this case would mean providing employment and other opportunities for migrants so they don’t feel that the only way to find a decent wage is by relocating to the U.S. The administration is well aware that this is not something that can be accomplished overnight; rather it is a long-term challenge.
Most immediately, though, the administration hopes to gain the cooperation of governments in the region in order to reduce migrant flows through the implementation of various administrative measures. Governments, however, are more likely to cooperate in such efforts if there’s something in it for them; in this case, what would be in it for them would be a large scale international assistance program to dramatically bolster their economies, so that they can finally break through decades of sluggish growth and reach a whole new plateau of dynamic sustainable development.
2. A frequent debate we hear in the United States is one centered on the question of root causes of migration. In your view, what are the biggest drivers of migration today? How has the landscape changed in light of the COVID-19 pandemic and recent natural disasters in Central America? How have these phenomena impacted traditional drivers, including violence, poor governance, poverty, and general instability in the region?
The main driving force is really demographics; continuously high population growth in parts of Guatemala, El Salvador, and Honduras have created many large families and not enough employment for the younger generations, so they are heading north in search of work. In order to absorb that large demographic explosion, you need to create jobs at a very rapid rate, and that requires growth rates well in excess of what the region has been able to accomplish in recent decades. Such growth requires notable investment, some of which can come from the public sector and international sources, but a lot must come from both the domestic private sector and foreign investors—which means that the region needs to present an environment where investors feel that their personal security is safeguarded and their investments well protected. Achieving and promoting the region as an attractive investment destination requires political understanding with governments, but also among the broader social sectors of society, so that citizens feel that these investments are benefiting not just a handful of investors but also workers, communities, and society at large. So that’s the task, to create an environment where everyone feels that the growth model is sufficiently equitable and hence sustainable over time.
3. You recently wrote that policymakers should reimagine the area around the Caribbean Basin as a Greater Caribbean Community (GCC). What countries are included and what does that community mean for you?
The United States is already tremendously intertwined with the Greater Caribbean Basin via Central America and the islands of the Caribbean, as well as Mexico, Colombia, and Venezuela—which also border the Basin via the Gulf of Mexico and the Caribbean Sea. Many people from each of these areas have already moved to the United States, with many of them often sending back remittances to those who have not journeyed to the U.S., thus entangling the U.S. economy with those of the Greater Caribbean Basin. Then of course there’s the integration of cultures, music, and literature, as well as dramatic engagement through tourism, all of which add to already high rates of trade and investment flows. When approaching U.S. relations with the region with these dynamics in mind, it is clear that borders are becoming increasingly blurred. Therefore, the economic development programs that President Biden is putting in place for the United States (clean energy, good jobs, integrated supply chains, and improved infrastructure) are critically important to allowing these trade and investment flows to be more efficient, effective, and competitive. Thus, as the Biden administration expands its efforts to strengthen the infrastructure of the continental U.S., it should carry out similar efforts and expand its programs to the “near abroad” of the greater Caribbean Basin on a large scale. The scale here is important, as the U.S. has tried to carry out foreign assistance programs in the past, but they have not been sufficiently transformative. The U.S. has been trying to foster development in the greater Caribbean Basin since the days of the Alliance for Progress in the 1960s, so we must ask the following questions: (1) Why haven’t outcomes been better? (2) What should we be doing differently? I argue that what we need to be doing differently is putting greater focus on the investment climate and on supply chains, coupled with a broader vision for large-scale programs that can alter the behavior of governments and the private sector in Central America (which have not been sufficiently dynamic and forward-looking in recent decades).
4. In your recent Wilson Center report, you trace the development of the Greater Caribbean Community (GCC) from the Caribbean Basin Initiative to NAFTA to CAFTA-DR. All of these institutions in some way relate to trade. Do you see a future Greater Caribbean Community being bound mostly by trade, or is there a political or cultural element as well?
When I say trade I mean both trade and investment, which are critically linked. Supply chains are about trade because you move goods and services back and forth through the supply chain, but you need investment to produce those component parts and ultimately the final product, all of which are critical because they create jobs. But when we talk about trade these days, we also have to include trade in services; i.e., workers from the region who are coming to the United States. That’s a form of trade in services—the service being labor for which they are compensated to support themselves and their families. Then, of course, there is tourism, which is the biggest driver of growth in the economy throughout the Caribbean (though the tourism industry has been devastated by the COVID-19 pandemic). Tourism is also an industry of growing importance in Mexico and Central America, which can be seen most notably in Costa Rica’s successful branding and promotion of being a welcoming destination with a sustainable green economy. All that is to say that tourism is a big part of this intertwining of economies and cultures between the U.S. and the Greater Caribbean Basin.
5. A large section of your report is dedicated to explaining the benefits that moving supply chains to the Caribbean would bring, both to the U.S. and to the region. Could you explain why there’s suddenly so much attention surrounding this issue of nearshoring, or decoupling from China?
In existing supply chains, large companies have decided that they can buy some of their component parts or products worldwide, particularly in Asia and China, where production can be conducted on a very large scale and in very efficient and cost-effective manners. We have found, however, that supplying out of China does involve certain risks and costs, and therefore some of those supply chains might want to move closer to the United States. Ideally, one could say that these companies should move back to the United States, but that’s unlikely in most cases because the U.S. workforce cannot, and does not want to, compete with lower-cost labor from China, Central America, or the Caribbean. Therefore the answer is not “onshoring,” or bringing these supply chains back into the U.S., but rather “nearshoring” into the Caribbean—which has already happened to some degree, as over 500,000 workers in the Caribbean Basin are already operating in factories that are part of these supply chains, producing apparel, pharmaceuticals, biotechnology, a variety of foods and beverages, and back-office and technology services, among other products. By focusing greater attention on moving supply chains into the Caribbean Basin, millions of jobs could be created (jobs with good working conditions, no less, as U.S.-based companies could more easily monitor the labor conditions in their factories and ensure that they meet the necessary international standards and regulations). Complimentarily, rather than people from the Greater Caribbean Basin feeling that they need to migrate to the U.S. to find an adequate job, workers would be able to find good employment as a part of these supply chains right at home.
6. The Biden-Harris administration’s ambitious “Buy American” campaign seeks to revive U.S. manufacturing in part by investing in the technology and talent that smaller manufacturers need to compete in the global economy. How do you communicate the benefits of massive nearshoring investments in the Greater Caribbean Community (GCC) in light of today’s political winds? How might you convince U.S. firms and consumers of the benefits of building a factory in Mexico rather than Michigan?
I think that U.S. firms understand the benefits, but sometimes they may need some additional incentives, such as assurance of quality infrastructure and beneficial fiscal policies in the countries that would host their factories. It is also important to consider the challenges that would need to be addressed in order to further these incentives, such as the high cost of energy in a number of countries in the Caribbean Basin and the resources and institutions needed to train future workers for their jobs. Addressing such issues would help establish an attractive business climate. The U.S. government can assist by supporting an incentive structure that fosters a positive ecosystem to drive investments into these critical areas.
The White House and the U.S. government have convening power. Kamala Harris has already started utilizing this, speaking with some CEOs and offering initial incentives on behalf of the U.S. government, and then gauging other potential ways in which other companies might be incentivized to invest in the region, underscoring that the U.S. government has the tools to either directly or indirectly support a business environment that provides adequate incentives to both U.S. and Central American investors.
Within the region itself, governments need to be assured that these U.S. and other international firms will pay their fair share of taxes, thus generating new revenue for social programs. Citizens need to feel confident that the incoming jobs offer good working conditions and meet high-quality labor and environmental protection standards.
7. You also call for locating technology hubs in certain areas of the Caribbean where there is high unemployment, in San Pedro Sula, for example, or along the Haiti-Dominican Republic border. What action can governments take to prepare historically underrepresented communities for high-skilled tech jobs?
You have to have the right conditions: adequate infrastructure, roads, airports, seaports, energy costs that are in-line with global standards, and a well-trained workforce. All of the governments in the region already have programs to train their workforce, and these programs could be further built upon. We could also create partnerships between U.S. community colleges and U.S. technical schools with counterparts in the region, which could be subsidized by the U.S. government or multilateral development agencies like the Work Bank or the Inter-American Development Bank. Such programs could, in effect, subsidize skills transfer and job training so that you have a workforce that will have sufficiently robust labor productivity to be competitive on an international level.
8. Some who are more wary of trade argue that there’s a danger that increased openness to foreign trade could allow businesses to use exploitative business practices. How can we prevent a race to the bottom, where countries compete to have the most lax labor laws to attract investment?
My first question for people who criticize globalization or international trade and investment is often: what exactly are you proposing that would be better? Some famous economists have said, “The only thing worse than being exploited is not being exploited.” That is to say, being unemployed. In the modern landscape, there is a lot that can be done to ensure that proper labor standards are being followed, such as by sending auditors or representatives of expert nonprofits who specialize in labor standards—some from the U.S. and some from the host countries—to go into the factories and see if their operations meet the established requirements. Should a factory fail to meet these standards, depending on the severity of any potential violations, the auditors and purchasing brands will then inform the factory’s managers that their products will no longer be available for purchase unless their operation meets the necessary standards, or the representative will report that the facility should be shut down in its entirety. Looking at the region as a whole, the U.S. can position itself to provide an incentive structure that offers better infrastructure and more efficient energy production, but only in return for the regional governments and the private sector all agreeing that high labor standards and strong environmental protections will be put in place, followed, and subsequently confirmed through proper auditing and reporting.
9. Corruption and violence have long deterred significant foreign investment in Central America. How might the Biden-Harris administration both incentivize investment while also getting Central American countries to commit to confronting corruption and instability so that these private investments actually stay long term?
There is no quick, simple solution to corruption in Central America (or worldwide, for that matter). Corruption, in its various forms, has been present in Latin America at least since the arrival of the Spanish, so it has proved itself an enduring, complicated challenge. But, what can be said about the current landscape is that when you have international investment going into technology hubs that are part of supply chains, there you really have sufficient control and you can be pretty sure that the standards of integrity and probity are being adequately enforced. From there, the hope is that if you showed those hubs functioning successfully, it demonstrates that the safeguards and legal systems being used can effectively guarantee integrity in business practices, and would therefore promote that such rules and regulations be diffused more broadly throughout national economies.
10. I’d now like to return to the topic we started with: immigration. Trade and investment are certainly drivers of economic growth, but in the past that growth has been uneven. Some have argued that NAFTA, for example, raised middle class incomes in Mexico but may have also contributed—to some degree—to greater emigration. What would be different about greater trade with Central America today?
First, I would disagree that NAFTA generated a greater emigration flow. The large-scale emigration flows from Mexico to California occurred before NAFTA, in the 1980s and 1990s. NAFTA definitely created a lot of jobs in Mexico, but of course it didn’t create 50 million good jobs—which is more or less the size of the Mexican workforce. Some people were elevated in the factories and the farms that exported into the U.S. market, their productivity levels rose and the middle class grew, but if we’re talking about absorbing tens of millions of Mexicans into the Mexican labor market, that’s largely a function of Mexican domestic policies. President López Obrador says that his major goal is to reduce income differentials and to increase the incomes of the poorest Mexicans, and I wish him the best of luck—those are goals and objectives that the United States and international community can assist in by helping foster a certain environment, but ultimately it’s up to national governments to realize those goals and objectives.
11. If you were advising Vice President Harris or Secretary Blinken as they departed for the region, what would you have recommended they focus on in these early days?
In terms of getting at the root causes of migration—low wages and high unemployment, which both have to do with development models—I would recommend that the U.S. representatives take these early days as a time to listen. If Vice President Harris and Secretary of State Blinken want to bolster local economic development, then they must generate and receive sufficient local buy-in for the proposed development plans. Therefore, the people around the table—representatives of local governments, the private sector, and civil society—should feel that they have input into these programs. In order to facilitate these conversations, I would urge that working groups be set up (and I think the administration is thinking along these lines) that will include voices from the region, and then incorporate representative of the United States government, the Mexican government, the World Bank, and the Inter-American Development Bank, collaborating in an effort to see if a “meeting of the minds” can ensure that investments, loans, subsidies and technical assistance will be well-received, rather than rejected as an external imposition. These programs have to be sustained over time, and that’s often an issue for the United States, because we have these very short political cycles where we have elections every two and four years. If we’re talking about economic development and investment, however, then you need to look at a decades-long horizon. Again, that is where people on the ground come in, as their lived experience and likely longer-term perspectives offer the Biden administration and other international investors the information necessary to generate more long-term frameworks. Many countries around the world have experienced dramatic transformations over the course of one to two generations; if given adequate, long-term international support and good public policies, I don’t see why the same can’t happen in Central America and the Caribbean.