Central and South America: Geopolitics and the Burden of History

It was José María Torres Caicedo, a Colombian writer, who in 1856 popularised the term ‘Latin America’ which for many readers is synonymous with the Spanish language. Yet it is not necessarily the Spanish language that dominates the region; after all, the language of South America’s largest country and biggest economy, Brazil, is Portuguese. Brazil’s neighbour, Suriname, is a Dutch-speaking nation whose other immediate neighbours, namely Guiana (French) and Guyana (English), do not have Spanish as the official language either. It is not the United States of America alone that can claim the title of melting pot.

Even if Spanish is the official language of eighteen republics in Central and South America (including the Caribbean), it is salient to remember that the region’s indigenous languages each boast millions of speakers. Quechua is common in the former Inca empire (Perú, Bolivia and Ecuador – in the latter case it is called Quichua); Guaraní is the common tongue of Paraguayans and in Guatemala and parts of southern Mexico a number of Mayan languages are spoken. Mexico alone can claim over 50 Indian languages, including Náhuatl, which was spoken by the Aztecs (more correctly called the Mexica).

The French immediately warmed to the expression ‘Latin America’ when it was first used because it distinguished the region from the United States (US) at a time when France was trying to establish its own sphere of influence. This eagerness would lead to the disastrous attempt by Louis Napoleon to install Maximilian, a Habsburg prince, as emperor of Mexico. Brazil can relate to France’s 19^th century motives and when reflecting on doctrines of American exceptionalism, one should also think of Brazil; many Brazilians don’t even feel part of Latin America. This sense of separateness and proud independence has led Brazil to believe that it is entitled to a permanent seat on the United Nations Security Council. To have been selected to host the Olympic Games in 2016 is a triumph that Brazilians will speak about for many years to come.

The North American Free Trade Agreement signed by Mexico and the US is not seen by Brazil as a unifying step for all of the Americas; quite the opposite. Brazil prefers to encourage unity within South America itself. That is why back in 2000, when Fernando Henrique Cardoso was the Brazilian president, he hosted the first summit of South American presidents. The inspiration for this was Simón Bolívar, South America’s iconic figure of the 19^th century, who fought and conquered the Spanish. Subsequently, in November 2004, when 11 South American countries (including Guyana and Suriname) met in Cusco, the former Inca capital in Perú, a South American Community of Nations was proclaimed. The ultimate goal is to have a common passport and currency, so whether or not this European Union ideal is achieved is not the real issue: it is the stated desire for an independent identity, encouraged by Brazil, which is significant.

Brazil is a natural driving force behind the initiative and its unique position has several strands, these quite aside from the fact that, unlike anywhere else in South America, it was a constitutional monarchy for the first seven decades after its independence. The country, as I say, is the largest on the continent and both its language and geography (the forbidding boundaries being the Amazon rainforest, the Pantanal swamps and the powerful Paraná river) serve to reinforce this isolation.

It is thought that out of approximately eight million Africans who survived the passage to the Americas, well over three million were shipped to Brazil in the four centuries to 1850 – much more, in fact, than the number shipped to the US. Slavery was not abolished until 1888 (the same year as it was in Cuba) and it was that decision, with its purest of intentions, that would lead to the end of the Brazilian monarchy.

The Awkward Squad

‘No nation is fit to sit in judgement upon any other nation’ – US President Thomas Woodrow Wilson’s sentiment is certainly one shared by Brazil. Reports last year caused a stir outside the country, especially in the US, after Brazil’s central bank and aides to President Luiz Inácio Lula da Silva announced that Brazil and China will move towards using their own currencies, in preference to the US dollar, in future trade transactions. There are several reasons why the greenback’s prominence should be questioned, a status that was established from the remnants of the Bretton Woods system created after the Second World War. Today the dollar isn’t fixed to gold and the US is no longer the world’s largest creditor; there are those who argue that it is an empire that can only maintain the upper hand by military, rather than economic, strength.

Consequently, Brazil’s attendance at meetings in Yekaterinburg in Russia last June, along with the leaders of the six-nation Shanghai Cooperation Organisation, an alliance which includes Russia and China, should not come as any surprise. The intention of the gathering was to discuss mutual aid which would lead to trade between the countries being conducted in their own currencies; pointedly, US officials who had wanted to attend as observers were not allowed to. The latest figures available (2007) at the time of writing show that China’s annual trade with Brazil was USD29.7 billion. In 2008, however, China’s total trade with Latin America increased by a significant 40 per cent, reaching USD143 billion.

According to Jorge G. Castañeda, a former Foreign Minister of Mexico, and Stephen Haber, a professor of political science at Stanford University in the US, Latin America (despite pockets of resistance) is entering a phase of unprecedented political and economic stability which is amply illustrated by the degree of progress being made in countries such as Brazil, Chile, Costa Rica, El Salvador, Mexico, Panama, Peru and Uruguay. In varying, but nonetheless positive, degrees, these countries have pursued good macroeconomic policies that have effectively fought inflation; they have opened their markets and encouraged investment.

The result, a significant shift towards more economic opportunity, social mobility and political democracy, has gone unnoticed in some quarters. Where the countries already mentioned have broken with the past, the opposite applies in Argentina, Bolivia, Ecuador, Nicaragua and Venezuela, where they are still living in the past and have not been able, so far, to break with it. Not only that, this awkward squad of countries also fosters an elevated level of hostility towards the US. The argument goes that from the 1950s up to the election of Barack Obama, every US president since Dwight Eisenhower – other than Jimmy Carter – has interfered, in one way or another, in the domestic affairs of one or more countries in the region.

So how should one interpret last year’s coup against the Honduran president, Manuel Zelaya, who was unceremoniously removed from office last June? Importantly, it should be understood that the Honduran coup did not originate in a military barracks but was the direct result of a court order issued by a competent judge of the country’s Supreme Court. President Zelaya, a member of the axis of ‘21^st-century socialists’ headed by the president of Venezuela, warmed quickly to the idea of extending his presidential mandate, just as Hugo Chávez had done; President Chávez, however, did so only after he had held a Constituent Assembly to change the constitution.

In contrast, Mr. Zelaya, whose ambitions were not shared by parliament, the Supreme Court or even his own Liberal Party, decided to start the ball rolling by holding a referendum to test the waters. The army refused to distribute the ballot boxes and subsequently the head of the armed forces, General Romeo Vásquez, was sacked by the president. The resignations of the Defence Minister as well as the heads of the army, marines and air force, all duly followed. The Supreme Court had already declared the referendum illegal but the president chose to ignore this.

Perhaps if the president had not been arrested the conflict could have escalated into widespread bloody civil turmoil; that would have been terribly damaging, not just to Honduras, but to the region as a whole. By the time this article is published I would expect most of the dust to have settled and fresh presidential elections to be in planning or completed. In my opinion, it is not taking sides to say that the coup is hardly a return to the 1980s with its spate of civil wars across Central America. Just as the US Supreme Court determined the fate of a presidency in December 2000, arising, in part, from considerations of judicial power, so the gavel, and not the grenade, was used in Honduras to defend that country’s constitution.

Geopolitics in Central America and the northern Andes point to Panama – where presidential elections in the middle of last year proceeded, as they have done for almost twenty years, without incident – as Washington’s new Central American listening post. Ironically, Panama replaces Honduras which, back in the 1980s, had played this role during the civil wars in El Salvador, Nicaragua and Guatemala. Certainly, relations between Panama and the US on all levels have improved since Theodore Roosevelt requested a legal justification for his acquisition of the canal in Panama from his Attorney General, Philander C. Knox. ‘Oh, Mr. President’, came the response, ‘do not let so great an achievement suffer from any taint of legality’.

It would appear that in Panama, resentment has been replaced by reality which, sadly, is not the case in those few Latin American countries still locked in the past. Panama’s regional political prominence, as well as its infrastructure (the most developed in Central America), suggests that its regional banking centre will continue to develop. Although its government is reluctant to dilute the country’s prized banking secrecy, Panama will not choose the path of isolationism and risk becoming known as the North Korea of offshore banking. Above all else, as with their canal, reality will always trump resentment for Panamanians.

Derek Sambrook
Derek Sambrook is a member of the Society of Trust and Estate Practitioners in the United Kingdom and obtained the Trustee Diploma of the Institute of Bankers in South Africa in 1973, becoming a Fellow of the institute in 1996. He emigrated in 1977 from Rhodesia (now Zimbabwe) where he was branch manager of a trust company and continued his profession in North America (Miami), Europe (including London and the Channel Islands), and the Caribbean (including the Cayman Islands). He has lived in Panama since 1996 where he is the Managing Director of Topaz Services, S.A. (www.trustservices.net), a Panamanian financial services company. He was Treasurer of the British Chamber of Commerce Panama for several years. Mr Sambrook‘s regulatory experience began in the corporate division of the Rhodesian (now Zimbabwe) Ministry of Justice (1965-1970) and subsequently he was appointed by the British government (1989-1992) as the first Bank, Trust Company and Insurance Regulator in the Turks & Caicos Islands, British West Indies; he established a regulatory body and drafted trust and insurance laws, banking and other regulations including licensing guidelines. As a direct result of his innovative captive insurance law, the Turks & Caicos Islands at the end of his contract had more than 5,000 producer-owned reinsurance companies and was the leading domicile in the world for this service. During his tenure he was also an affiliated member of the Latin American and Caribbean Banking Commission and Chairman of the government’s Offshore Financial Services Committee. He was a columnist for a leading United Kingdom offshore financial journal for over 15 years. His newsletter, Offshore Pilot Quarterly, has been published since 1997. In 2021 he celebrated 50 years in the trustee profession.