Beijing, Teheran, Building Bridges to Latin America

I frequently complain about Barack Obama not paying enough attention to Latin America. The region affects our security directly, yet the Obama administration gives little sign of recognizing the efforts of China, Iran, Venezuela, Cuba and others to build alliances against our interests. Two recent articles help illustrate the dangers. The first deals with Iran’s ongoing efforts to strengthen supporters in Latin America’s large Arab population:

Of course where there is Hezbollah and Hamas, the Iranian hand is not far away. Secretary of Defense Robert Gates has openly worried about “Iranian meddling” in Central and South America, and Navy Admiral James Stavridis, head of U.S. Southern Command, expressed concern over Iranian support of Hezbollah and other militant operatives in the tri-border region and in Colombia.

But Iran’s subversive activity in lawless regions of the Americas is often overshadowed by its more public interactions with Latin American populists such as Hugo Chávez of Venezuela, Rafael Correa of Ecuador, and Evo Morales of Bolivia. For example, in September 2006, Iranian president Mahmoud Ahmadinejad was welcomed with full military honors in Caracas, where he signed 29 economic cooperation agreements. Ahmadinejad embraced Chávez at the airport, saluting “all revolutionaries who oppose world hegemony.” Since then, Iran has funded economic projects and signed cooperation agreements with Bolivia, Ecuador, and Nicaragua, not forgetting to take advantage of the convenient anti-American photo opportunity…

All the while, chummy relations between Iran and its Latin American comrades will continue, and until countries such as Venezuela, Bolivia, Ecuador, and Nicaragua restore the democratic institutions that have been degraded by their authoritarian populist leaders, America will be a common enemy and Iran an intriguing partner. Latin populists will not have to respond to domestic scrutiny or dissent, and they will be able to pursue short-term propaganda goals and economic interests while disregarding regional security and possibly turning a blind eye to more subversive Iranian activities in their countries.

The second addresses China’s recent deal with Argentina to give its products preference over those of the U.S. in Latin America:

China’s agreement with Argentina to trade in their local currencies instead of U.S. dollars — following similar deals between China and Malaysia, South Korea, Belarus and Indonesia — raises new questions about the future of the U.S. dollar. My advice: Don’t kiss the dollar goodbye.

Under a deal signed Sunday, the central banks of China and Argentina agreed to a $10 billion currency swap. Under the deal, Argentina will be able to pay for Chinese imports in yuans and China will be able to import Argentine goods in pesos.

The agreement, whose details remain to be worked out, comes amid growing questions about the future of the U.S. dollar…

China’s currency swap with Argentina has raised eyebrows in both financial and diplomatic circles because it was China’s first such agreement in Latin America. China is believed to be seeking to maintain its exports to countries that are having a hard time getting hard currency loans, boosting the yuan as a world currency and turning Beijing into an increasingly influential world power.

“It’s significant because it signals China’s intention to turn the yuan into a major world currency,” Javier Gonzalez Fraga, a former two-time head of Argentina’s Central Bank, told me Wednesday. “Two years ago, China’s currency wasn’t on anybody’s agenda.”

One pretty sure outcome of these currency swaps is that they will put U.S. exporters at a disadvantage. It will be cheaper for Argentine importers, for instance, to buy Chinese goods, among other things, because China has consistently undervalued its currency in order to boost its exports.

The common theme in the outreach efforts of Iran and China is a willingness to use tighter trade ties to build closer political ties. Whether the deals center on Iranian oil or Chinese currency, both countries recognize the strategic value of cultivating closer ties with nations in our own hemisphere. In some cases the commercial deals are followed up by military exchanges. Then there are where the reasons for a partnership are unclear. Iran and Venezuela for example, are both significant oil-producing nations; they certainly aren’t discussing an oil deal. What could be at the heart of their deepening relationship?

And where is Barack Obama? He’s focused on making sure that America’s labor unions are appeased – by putting a chill on NAFTA, on a Free Trade Area of the Americas, and any other deal that would bring closer commercial ties with the region’s developing countries. If the U.S. fails to offer strong commercial ties, our trading partners can look elsewhere.

If Obama continues to keep Latin America at arms length, he will find it increasingly filled with unfriendly regimes. It’s only a matter of time before someone starts a war using weapons and money derived from Teheran, Moscow, or Beijing. Or before some act of terrorism is traced back to the mullah-caudillo alliance.