Americas Partnership for Economic Prosperity: Is Washington finally taking the Americas seriously?

On November 3, 2023, U.S. President Joseph Biden convened the inaugural Americas Partnership for Economic Prosperity (APEP) Leaders’ Summit with the goal of creating a lasting collaborative platform to enhance regional competitiveness and foster high-standard investments in the Americas. The summit at the White House brought together leaders from 11 nations: Barbados, Canada, Chile, Colombia, Costa Rica, the Dominican Republic, Ecuador, Mexico, Panama, Peru, and Uruguay. During the day-long assembly, leaders discussed new strategies to stimulate inclusive growth and fortify essential supply chains, concentrating on sectors such as clean energy technology, chips, and pharmaceuticals.

There has been skepticism in regard to APEP’s effectiveness as well as the extent of the Biden administration’s commitment. These concerns have been voiced largely by those within the region feeling neglected by the U.S., a sentiment vocalized by Costa Rican President Chaves and Uruguayan President Lacalle at the Inter-American Development Bank (IDB) Forum, Americas Partnership – IDB Responsible Investment Forum, the day before the White House meeting. This forum highlighted the varied perspectives of the region’s leaders and served to demonstrate the Biden administration’s commitment, outlining the IDB’s unique role in the partnership. Recognizing that governments cannot single-handedly accomplish the established objectives, the IDB, a principal regional provider of multilateral development funding, will play a crucial role in accomplishing these goals.

The presence of U.S. Treasury Secretary Janet Yellen at the IDB forum, complemented by her hosting of a breakfast with various leaders, highlighted the administration’s commitment to strengthening economic relationships within the hemisphere. Secretary Yellen emphasized the U.S.’s intent to diversify supply chains through collaboration with reliable Latin American and Caribbean partners, aiming to propel regional growth. Secretary Yellen also discussed plans for developing vertical supply chains, advocating for a comprehensive strategy that includes low-cost financing, knowledge sharing, worker upskilling, and engagement with diverse stakeholders to boost competitiveness in key industries. Furthermore, she announced that the Department of Treasury is actively working with the IDB Group to determine policy reforms and financial plans to facilitate substantial capital influx for the region.

Following the White House meeting, President Biden unveiled a series of forward-looking initiatives under the APEP to enhance economic resilience and environmental sustainability. Notable among these is the collaboration between the U.S. International Development Finance Corporation and the IDB to create a new investment platform dedicated to funneling billions into sustainable infrastructure in the Americas, with stringent labor and environmental standards. Additional initiatives include a $5 million program from USAID to support entrepreneurs with training and investment opportunities, an $89 million grant for improving infrastructure and social services in communities hosting migrants and refugees, and a series of symposiums led by the U.S. State Department to cultivate a skilled workforce in chips manufacturing and digital technology development.

Moreover, to stimulate environmental investment, a new Americas Partnership Fund for Nature has been proposed with $10 million from the U.S. State Department, aiming to attract private sector funds for projects like debt-for-nature swaps and blue/green bonds. Leaders have also directed their ministers to establish three collaborative pathways—foreign affairs, finance, and trade—to develop and implement targeted initiatives and actions. These ministers are tasked with annual meetings to monitor the progress of implementation, with leaders reconvening biennially to reassess joint priorities. In the interim, the partnership will explore processes to invite more countries in the hemisphere to join the initiative.

While President Biden did not explicitly mention China, he underscored the U.S. preference for transparent, high-quality development initiatives as opposed to “debt trap diplomacy.” Undoubtedly, the intensified competition with China in the region is a significant driver of the Administration’s decision to establish the partnership, with China’s Development Bank and the Export-Import Bank providing collective loans worth $137 billion to Latin American governments between 2005 and 2020. Beijing has also inked free trade agreements with Chile, Costa Rica, Ecuador, and Peru (all members of APEP) and has drawn twenty-one Latin American nations into its Belt and Road Initiative, which celebrated it’s 10th anniversary last month. China’s approach, offering financial support without stringent protections for human rights or democratic governance, has led to a shift in the region’s alignment, despite that fact that the U.S. remains Latin America’s largest trading partner.

However, China’s economic presence is growing rapidly, with trade increasing from $12 billion in 2000 to $315 billion in 2020 and expected to double by 2035. Such a surge by China, unencumbered by democratic or human rights considerations and coupled with military influence, has compelled the U.S. to re-engage with a region once firmly within its sphere of influence. Additionally, global geopolitical tensions have highlighted the importance of re-shoring, and near-shoring strategic supply chains, underscoring the strategic need for the U.S. to shift production closer to home and within politically stable, democratically aligned nations—what President Biden and Secretary Yellen have termed “friendshoring.”

Either way, the importance of the APEP initiative is noteworthy. It may be considered one of the most significant endeavors undertaken by the U.S. in recent years. However, the absence of U.S. ambassadors in three of the APEP countries and at least eight in the region presents a challenge to the efforts being made to better engage with the United States. Not only are countries questioning the level of priority given to the region by the Biden administration, but the indifference towards Haiti and recent concessions made to Venezuela raise questions on whether democracy and stability are more important than commercial or economic interests. With APEP, the U.S. has the opportunity to potentialize the region and strengthen its commercial ties, however, this success will continue to be driven by a bipartisan and coherent strategic policy with genuine intentions from Washington.

In essence, through the APEP, the United States is keenly focused on developing strong, sustainable infrastructure and strategic supply chain advancements, particularly in semiconductors. This approach aims to tighten supply chains within stable, geopolitically strategic ally nations, while also tapping into the region’s critical natural resources, such as the world’s largest lithium reserves essential for electric vehicle production. The strategy seeks to maintain U.S. global leadership and economic influence for generations, while concurrently reducing China’s sway in the hemisphere. Furthermore, it is essential to recognize the region’s economic potential; with a combined GDP of $4.7 trillion (World Bank 2020) and holding the third-largest population after China and India, Latin America is a pivotal area of interest for global superpowers. The subsequent summit is slated for 2025 in Costa Rica, with many awaiting the progress and new plans that will emerge by then.