América Crece: Washington’s new investment push in Latin America

We have quietly entered a new era of US investment in geo-strategic projects in Latin America, carried out with the specific goal of deterring Chinese investments in the region. Since 2019, Washington’s effort to promote private investment via US government subsidies for infrastructure projects has come under a new public-private partnership initiative called Growth in the Americas, or América Crece

On December 17, 2019, the United States Chamber of Commerce and the Trump administration announced the creation of the initiative, which is designed to incentivize investment in infrastructure projects across the hemisphere. América Crece was initially launched without fanfare in Chile, Argentina, Peru, Panamá, and Jamaica in 2018. Increasing Chinese investment across the region meant Washington’s initiative was expanded to the rest of the hemisphere, with only Venezuela, Cuba, and Nicaragua left out. 

A geothermal plant in the community of La Calera, Zunil, Quetzaltenango, in the Guatemalan highlands. It is owned by an Israeli company, and is an example of the kind of infrastructure that could be promoted through América Crece. When this plant was built in the early 1990s a test bore collapsed, leading to a landslide that killed 25 people. Photo by Jeff Abbott.

“[América Crece] is an umbrella concept through which the U.S. has been trying to relaunch its attempts to promote private sector investment in critical sectors in Latin America, in energy and infrastructure, to counter Chinese investment in those sectors,” said Bruno Binette, an analyst with the Washington D.C. based think tank The Dialogue. “But it is unclear if the América Crece initiative will provide an alternative to [Chinese investments].”

América Crece comes after the United States Congress and Senate passed the bipartisan Better Utilization of Investment Leading to Development act, commonly known as the Build act, in October 2018. The act consolidated the Overseas Private Investment Corporation (OPIC) with the Development Credit Authority of the United States Agency for International Development (USAID), and other agencies into the United States International Development Finance Corporation (DFC). The new agency saw a budget increase from OPIC’s $29 billion to $60 billion.

“The government of the United States [makes available] investments using public funds to guarantee private investments in Latin America,” said Carlos Flores, an analyst with Foro del Agua in San Salvador. “This type of plan serves to bind the governments of Central America and the rest of Latin America to comply and submit to the requirements of companies from the United States.”

As part of the initiative, individual governments of Latin America sign Memorandums of Understanding (MOUs) with the DFC, laying out areas of focus for which types of projects will be included in the funding. The Governments of Honduras, Guatemala, and El Salvador have each signed on for $1 billion each in US government funding for infrastructure projects as part of América Crece. 

According to the MOU signed between the Guatemalan Ministry of the Economy and the DFC, the key areas of focus are energy, housing, and “social infrastructure” including public health and schools, as well as the promotion of small and woman-run businesses. During the pandemic, the DFC approved $200 million for Guatemala’s health sector.

According to the US Department of State, there are over 102 infrastructure projects owned by US companies in Latin America. But details about which projects are receiving funding through the América Crece initiative are hard to come by. This lack of transparency worries analysts in the region. 

“I do not have confidence with plans that are not transparent,” said Jonathan Menkos, the director of the Central American Institute for Fiscal Studies (ICEFI). “There is nothing clear on the website and negotiations with the private sector in Guatemala have not been public.” 

“…All private investment does not represent an improvement in development. It is important, but it is insufficient. Private industry will never substitute public investment for wellbeing,” added Menkos. “It is the same error as the Alliance for Prosperity plan.” 

América Crece began with a focus on energy production, but was later expanded to include infrastructure projects in general. 

The known projects

In the course of reporting this story, I contacted the State Department and the Treasury Department for comment. Neither responded to requests for information about which projects were being funded through América Crece. Working independently, however, I have been able to identify at least two projects that have possibly received funding in Honduras and El Salvador. 

The first is a natural gas plant in Acajutla, Sonsonate, El Salvador, which received $1 billion in financing from the DFC to construct the 378 megawatt project. It is owned by the Chicago based energy company Invenergy and its Salvadoran subsidiary Energía del Pacífico. The project includes a five kilometer natural gas pipeline from the coast to the plant. While there is currently no visible opposition to the project, Salvadoran analyst Flores points out that the new gas plant could contribute to the degradation of the environment and create the threat of contamination of the Pacific Ocean if the pipeline were to leak.

Flores suggests that the investments in El Salvador under the mantle of América Crece could expand to include a major airport as well as a major port. “The United States already has investment in the Energía del Pacífico project,” Flores said. “It would be strange that this investment is not extended to airports, ports, and other projects.”

In Honduras, the Jilamito hydroelectric project is the only project known to have received funding as part of the América Crece initiative. The proposed 14 megawatt project is owned by the Honduran company Inversiones de Generación Eléctricas, S.A. (IGLESA), and is to be located on the Jilamito river in the municipality of Arizona. 

The Jilamito hydroelectric project has been met by massive mobilization by residents, who fear the project will impact their access to water. This has led to the criminalization of local leaders: at least five members of the resistance have faced criminal charges for their opposition to the project. In 2018, Carlos Hernández, a lawyer who represented the community in resistance, was murdered. Since then, other community members have received death threats for their resistance.

Opposition in the US

The signing of the MOUs to fund these projects has also faced criticism from US progressives in Congress. In August, Representative Ilhan Omar (Minnesota – D) issued a letter to Adam Boehler, CEO of the Development Finance Corporation, signed by 16 other members of congress, raising concern over the threat to human rights with the financing arrangement signed with Honduras. 

“There are elements of the proposed investment that run in direct and flagrant contradiction to DFC’s stated commitment –and Congress’s stated intent in creating DFC– to promote and facilitate investment with respect for human rights, the environment, and worker rights,” the Members wrote. “It is a staggering disappointment, just seven months into DFC’s existence, that it would take such a profound misstep.” 

Exactly which projects in Guatemala and elsewhere in Central and Latin America are receiving funding under América Crece remain unclear. One member of the Guatemalan business community interviewed for this article suggested that there is a hydroelectric plant being funded through the initiative, which is located on the notorious northern arch of the Guatemalan energy grid in the departments of Alta Verapaz, El Quiche, and Huehuetenango. However, it was not possible to independently confirm this information.

Previous efforts to promote investment

With the energy and infrastructure integration of Central America largely complete, new US efforts to promote investment in infrastructure are designed to kick off a new phase of capitalist development in the region. 

“This initiative, as we are understanding it, is a new Plan Puebla-Panamá,” Flores said over the phone. “It is the new mechanism for investment, which always includes energy, telecommunication, roads, ports, and airports. It is a plan to guarantee investments in Latin America.” 

Over the last two decades the United States has launched a series of development plans in Latin America, which came on the heels of the privatization of energy networks throughout the region. 

In 2001, the US (in cooperation with the administration of Vicente Fox in Mexico) launched Plan Puebla-Panamá, which had the goal of integrating the US, Mexico and Central America through investment into energy projects, telecommunications, and highways. While the plan eventually collapsed due to corruption, many of the projects continued under the mantle of Plan Mesoamerica. 

Plan Mesoamerica encouraged large scale investment by transnational companies from Europe, the United States, and China into the expansion of energy projects in Central America. The plan included the construction of the Central American Electrical Interconnection System, known as SIEPAC. It also included a widespread increase in energy production through the construction of new hydro electric, wind, and geothermal projects in Central America. 

The integration of energy in Central America is key to the United States, with officials pushing for hemispheric interconnection. The massive expansion of energy production and the integration between Central America and Mexico permits both the importation of energy in the region and the exportation of energy to the United States. Indeed, the US Southern Command sees energy as a key geo-strategic sector. 

“The primary goal is to guarantee that the United States companies earn a profit,” said Flores. 

The social impacts of these efforts, despite optimistic statements from US officials, have seen the economic situation of local populations in Central America and elsewhere go from bad to worse. Poverty in Guatemala has skyrocketed to 59.3 percent, Honduras sits at 48.3 percent, and El Salvador at around 29.2 percent of the populations living in poverty, according to World Bank data. Yet the real figures are likely even higher due to inadequate means of registering statistics.

The massive expansion of energy projects also led to intense social conflicts. Guatemala and Honduras are at the forefront of these conflicts, which have led to targeted killings and criminalization of land rights activists and the forced displacement of families. 

Contrary to the claims of project boosters, privatization and the rampant expansion of energy production and regional integration have done little to lower the cost of energy for consumers across the hemisphere. 

Instead, energy costs have skyrocketed. According to Hugo Noé Pino, who was Finance Minister during Manuel Zelaya’s administration in Honduras, the 2016 privatization of the Honduran Energy company led to an increase of 150 percent in the cost of energy. The 1997 privatization in Guatemala saw a 212 percent increase in energy costs to consumers, according to data collected by the Campesino Development Committee. 

Investment in energy projects was a central plank of the Obama administration’s Alliance for Prosperity plan. In January 2015, then Vice President Joseph Biden wrote an op-ed in the New York Times calling for a one billion dollar plan in Guatemala, Honduras, and El Salvador, which Biden claimed would resolve the factors pushing migrants toward the US-Mexico border. The plan called for investment in judicial systems to root out corruption, some local projects, and investment in energy systems. But after nearly five years, there is little to show for the plan. 

“The information for the plan was never clear,” according to Fernando Solís, a researcher with the Guatemalan magazine El Observador. “The information [about the impacts] never matched up with what was being published in the press.”

All these initiatives, from Plan Puebla-Panamá to América Crece build on previous efforts which have been characterized by rampant social conflicts and few benefits for local communities.

In fact, América Crece brings to mind what US Ambassador to Guatemala Nathaniel Davis declared to representatives of the United States Chamber of Commerce who had gathered for a meeting in Guatemala City in 1971: “Money isn’t everything,” the Ambassador said. “Love is the other two percent. I think this characterizes the United States’ relationship with Latin America.”   

Nearly 50 years later, it is clear that money remains the driving force behind Washington’s priorities in Latin America. But today there is a new threat to US interest in the region. 

Challenging China

While details of which projects are receiving funding from the United States remain unclear, what is clear is that the initiative is designed to counter Chinese investments in Latin America. 

Over thirty years after the end of the Cold War, the region once again finds itself in a macro-geopolitical conflict. Faced with increased investment by Chinese firms in the region, the Trump administration launched América Crece to advance the interests of US corporations. 

“There is clearly a growing competition between the United States and China,” Binette said. “But it is very problematic for countries to choose between the United States and China.”

Simply put, the United States sees China as a threat in Latin America. 

In recent years, the United States has regularly warned business leaders in the region against doing business with China. In spite of this, China represents an ideal business partner for cash starved states in the region. Since 2010, companies associated with the Chinese government have averaged 10 billion dollars of annual investment in Latin America per year. These investments have gone to many sectors and industries, particularly infrastructure projects, mining and oil drilling, and other energy projects. 

“It is all about the availability of capital, quick loans, a willingness to navigate Latin America’s context of corruption and rule of law that would deter companies from Europe and the United States,” Binette said. “For China, everything is part of the package. They offer the countries an attractive package. Governments can offer immediate results.”

“The United States cannot rival China,” he said.

The Chinese option has opened new options for investments, leading Latin American governments to distance themselves from Taiwan as part of the “One China” policy, and grow closer to Beijing. In Central America, Costa Rica, Panamá, El Salvador and the Dominican Republic have ended diplomatic ties with Taiwan in return for development funds from China. Only Guatemala, Honduras, Belize, and Nicaragua continue to maintain diplomatic ties with Taiwan, which means that they mostly don’t trade with China.

In August 2018, Salvadoran President Salvador Sánchez Cerén signed an agreement for $150 million worth of investment. El Salvador’s decision to sign an agreement with China led to retaliation from the United States: after the El Salvador-China deal was announced, republican senators Marco Rubio and Cory Gardner threatened to remove El Salvador from the Alliance for Prosperity.  

However, the relationship between China and El Salvador has flourished following the election of Nayib Bukele last year, and it appears the El Salvador-US relationship is back on sure footing as well. At the end of 2019, President Bukele met with Chinese officials to continue talks, and later he signed an MOU to enter into America Crece with the United States.

Biden’s promise 

Following the U.S. election next month, tensions between the United States and China are likely to continue, as is América Crece. 

“There seems to be bipartisan support for this, at least on paper,” said Binette. “But the key issue is whether this will turn into long term attention, continuity, financing, and that is not clear.”

Both parties in the US continue to see Chinese investments in the region as a threat. In September 2020, the Senate Foreign Relations Committee launched the America Labor, Economic competitiveness, Alliances, Democracy and Security (America LEADS) Act to counter Chinese influence. The LEADS Act is designed to invest in American competitiveness; support American alliances and partners; restore and advance a values-centered foreign policy; and ensure China pays a price for what senators argue are predatory actions.  

Private investment in Central America appears to be a key part of democratic Presidential candidate Joseph Biden’s plan.

Biden’s campaign proposal looks similar to previous efforts of the Alliance for Prosperity and to the current América Crece initiative. According to his website, if elected, his administration would push for four billion dollars of investment into Central America and more private investment in the region. 

But challenging China in Latin America is a daunting task, and the focus on the US and China scrambling for Latin America resources can take the spotlight away from community struggles for land, affordable housing, education, clean water and health care, pressing issues which are generally not considered in these economic initiatives. Rather, the US approach to the region continues to favor large corporations, at the expense of the vast majority of people in Latin America.

This article was co-commissioned and published simultaneously by CISPES and Toward Freedom.

Author Bio:

Jeff Abbott is a freelance journalist based out of Guatemala where he has reported for Al Jazeera and The Progressive Magazine, among many others. Follow him on Twitter @palabrasdeabajo.