Patience Pays Off In Latin America

08 March 2016, from STRATFOR

By Reva Bhalla

Washington seems to be hitting numerous walls these days when it comes to its foreign policy. How do you preserve European institutions when each member will logically put its interests ahead of the bloc in fighting migrant waves? How do you stem a migrant crisis when the dissolution of Sykes-Picot boundaries creates massive power vacuums for militants to fill? How do you enforce a lasting cease-fire in Syria when Russia is still holding out for concessions from the West on sanctions and Ukraine? How do you get Kiev to agree to recognize elections in eastern Ukraine when the government can barely stand on its own?

It may not be a coincidence that this whirlpool of seemingly zero-sum conflicts is centered on Eurasia, a part of the world where geography tends to do a poor job of keeping competitors from clashing in terrifically violent ways. The picture looks remarkably rosier, however, when Washington looks to its south.

Left-Wing Populism in Tatters

Even if the United States can't take much of the credit, Latin America seems to be sorting itself out quite nicely. Now on the verge of returning to international bond markets, Argentina is biting the bullet of painful economic restructuring. Brazil is willing to detain even the most grandfatherly and charismatic populist of his time in the name of fighting corruption. Colombia is in the final stages of making peace with the Revolutionary Armed Forces of Colombia after more than 50 years of armed conflict. And while Caracas is burning, pragmatic Cuba has excused itself from its Bolivarian alliance duties to make nice with the United States. From Caracas to La Paz to Quito to Managua, the pink tide of left-wing populism is in tatters.

We can see why U.S. President Barack Obama chose this geopolitical backdrop for his next trip abroad. Washington finally has room to maneuver again in a region where the raw economics, as opposed to the entrails of the CIA, has done most of the dirty work in phasing out all those problematic populists who long vexed U.S. policymakers and investors alike. By supporting anti-corruption bodies, an increasingly popular foreign policy tool in Washington's kit, the United States can more subtly influence the politics of the region over time while working to strengthen institutions.

The United States also has a more favorable climate this time around to temper paranoia over a perceived return of neoliberalism. China now follows the United States as the region's second-largest trading partner and has helped enable the creation of the New Development Bank to create financing alternatives for the developing world. U.S. economic imperialism is a lot harder to argue against when China forms such a large piece of the regional trade picture.

Even the International Monetary Fund, the very embodiment of the Washington Consensus prescription of reforms that offended the social consciousness of the region and fueled populism, has seen a bit of a Keynesian resurgence since the 2008 financial crisis. The IMF has been articulating a higher tolerance for spending, the need for closer examination of social costs and the use of a wider array of fiscal tools that can be tailored to countries grappling with recession. In short, the death of populism in Latin America does not simply equate to a return of draconian economic policy prescriptions drawn up in Washington.

Human rights naturally remain a sticky subject for the White House in dealing with this region. With two Cuban-Americans in the race for the Republican presidential nomination, we will hear plenty in the days leading up to Obama's Cuba visit on how the U.S. president is an apologist for brutal regimes and how the United States should be engaging only with a democratic Cuba. While we cannot expect the United States to lift the trade embargo on Cuba any time soon in the name of human rights, we also cannot expect a U.S. president to pass up the opportunity to knock the legs out from under Venezuela's Bolivarian alliance.

Cuba, Key to Venezuela

The Castros knew before anyone that the Venezuelan regime was imploding. Cuban intelligence became pervasive in Venezuela upon the invitation of former Venezuelan President Hugo Chavez, who decided he was better off trusting his Bolivarian brothers in Cuba than his own generals at home to safeguard his regime. With that Cuban access came direct knowledge and handling of Chavez's health up until the point of his death three years ago. Cuba could see there was no viablereplacement for Chavez who could effectively manage the years of economic rot that had built up and still maintain popular support, much less maintain the subsidies to poor neighboring islands in the name of Bolivarian solidarity. Moreover,Chavez had tolerated an elaborate web of armed groups, from the barrios to the prisons, to make it too costly for any one of his rivals to challenge him. With Chavez gone, the fractured security landscape in Venezuela would become a nightmare for anyone trying to oversee a transition.

Cuba needed to create options for itself, and needed to do so while it still held some leverage with Venezuela. Washington will want the best information it can get from Havana to try to shape what will likely be a tumultuous transition in Venezuela. In other words, Venezuela was the catalyst for what was arguably an overdue normalization between Havana and Washington.

We can expect Obama to discuss at length the challenge that lies ahead in Venezuela when he visits Cuba later this month. Venezuelans have tolerated economic chaos for years, but the country is nearing its breaking point. Severe food, water and electricity shortages are now gripping Caracas, the urban core that the state always tried to prioritize when it came to distributing basic supplies to avoid triggering unrest.

Venezuelan Transition Scenarios

Venezuelan President Nicolas Maduro thus far has sought to avoid and neuter the opposition in the National Assembly, but this is a stalling strategy at best, and time is running out. For this deadlock to break before social unrest gets out of hand, Maduro's removal is the first step in any transition. Venezuelan Defense Minister Padrino Lopez will likely be one of several key figures involved in a potential intervention against Maduro, so long as he has the support of the military and the cooperation of certain segments of the opposition. Careful thought is being given to try to abide by the constitution and avoid the stigma of a junta to ensure support from Venezuela's neighbors and the West. Efforts will be made to draw support from Organization of American States and UNASUR to sanction a move against Maduro. The Vatican could also signal its support for a democratic transition in Venezuela at an opportune time to help enlist the support of the masses.

But much can still go wrong in a carefully orchestrated political transition. The military could use social unrest as a trigger to intervene against Maduro, though at the risk of sparking out-of-control protests. Chavistas on the chopping block, such as former National Assembly speaker Diosdado Cabello, will meanwhile try to leverage their clout with the National Guard and armed narco groups to negotiate an exit strategy as the threat of extradition to the United States hangs over their heads.

All parties, including Cuba and the United States, want to mitigate the security fallout as best as they can. That also means a great deal of responsibility will likely fall on the military, the only institution capable of managing what could be a highly volatile transition, even if that winds up compromising human rights. The timing of the transition is also critical: The military could use social unrest as justification for intervention, but it also cannot wait long enough for street protests to overwhelm the state. There is no guarantee of constitutional outcomes when desperation is spreading in the streets.

For all its unknowns, the Venezuelan crisis and its cascading effects in the region amount to a net positive for U.S. foreign policy. The transition will be messy and there is a long restructuring ahead, but this is not a process that Washington needs to drive itself, unlike the sticky web of conflicts it faces in Eurasia. Populist leaders have run out of economic steam and the politics are simply catching up across the region. Washington just needs to go along for the ride.

"Patience Pays Off in Latin America" is republished with permission of Stratfor.