Southern Strategy

When it comes to trade, states of the U.S. South are ready to bring expertise and goods to a growing Latin America and Caribbean customer base.

The months before a presidential election are a well-known dead zone for the formulation and implementation of new policies. This is doubly true for policy toward Latin America and the Caribbean. Nonetheless, as Washington focuses on the election, momentum for heightened engagement between the United States and Latin America and the Caribbean is being generated at the state level.

For the past year under the leadership of Puerto Rico’s Governor Luis Fortuño, the Southern Governors Association (SGA) focused on strengthening trade and investment ties to Latin America and the Caribbean. Southern states have a natural advantage in trading with Latin America and the Caribbean based on geographic proximity, the emergence of global production chains, and shared values of family and faith. Under the follow-on leadership of Kentucky’s Gov. Steve Beshear, the Southern states have a significant opportunity to build on this initiative, creating jobs and improving peoples’ lives.

Latin America and the Caribbean present compelling opportunities for trade and investment. These are based on growing incomes; commercial needs ranging from infrastructure to energy to consumer durables and everything in between; and a desire for more balanced trade relationships than currently offered by China. The 16 states and two territories representing the “American South” are well positioned to take advantage of these favorable conditions. Already the region enjoys over $476 billion of annual trade with Latin America and the Caribbean. There are many reasons to believe that this figure will increase.

The nations of the hemisphere are hungry for best practices, including products based on technology and innovation, areas where Southern producers excel. As incomes rise in Latin America and the Caribbean, demand for goods and services is taking off. And changing demographics mean that healthcare and other nontraditional sectors present huge growth opportunities. Venerable Southern companies such as Coca-Cola, UPS, and Wal-Mart are already benefitting. The hemisphere is also ripe for trade with small and medium-sized enterprises, many which enjoy historical and cultural ties to Latin American and Caribbean nations, and which are at the forefront of the export economy of the Southern states.

More broadly, the extensive deep water ports and fully integrated transportation system across the Gulf of Mexico up the Eastern Seaboard north to Baltimore imply that whenever trade between the United States and Latin America and the Caribbean increases generally, Southern states benefit. Both imports and exports require the South’s trade infrastructure. And the pending expansion of the Panama Canal is projected to increase traffic flows significantly, and will require expanded port and transportation infrastructure to take full advantage of trade opportunities.

But Southern states are also looking beyond the Gulf of Mexico and Caribbean Basin. Brazil makes up literally half of the total regional economy and is now the world’s sixth largest economy. Brazil is an agricultural superpower and will also be a legitimate energy superpower once drilling in its deep waters comes fully online. As Brazil prepares to host the 2014 World Cup and next Olympic Summer Games, infrastructure is another area of trade and investment opportunity—roads, ports, airports, bridges, communications—and in areas such as smart cities that utilize best the practices of urban development including technology incorporation to engineer world-class cities that work.

Other opportunities also exist. Mexico is the second largest economy in the region after Brazil. In addition to the robust trade already occurring with Mexico, Southern states enjoy a leadership position on energy issues, and can play a critical role in developing Mexico’s energy sector if reforms there take hold under the Peña Nieto Administration. Other countries of note include Chile, Colombia, and Peru. The United States has entered into free trade agreements with each of these nations and trade is booming. But it’s not just trade agreements, market size, or the increasing purchasing power of citizens. Commercial interest is also related to sound economic policies that respective governments have put in place and sustained over time. For our part, states which are perceived to treat their Latin American and Caribbean migrant communities fairly and with dignity will be the best positioned to take full advantage of strengthening commercial ties with the hemisphere.

Kudos to the SGA. Building ties to Latin America and the Caribbean is both timely and wise, pointing toward a longer term strategy of successfully positioning the Southern states for success in the hypercompetitive global economy.