Donald Trump’s election has sent the mainstream media and intellectual circles in the United States into complete disarray.
Not only that, but international outlets and the intelligentsia are also at a loss for words at Trump’s unexpected ascent to the American presidency.
The most notable of these international outlets are Spanish-language-oriented ones like Univision, who constantly branded Trump as a threat to Hispanics and even argued that his policies would bring Latin American style underdevelopment to the United States. In the same vein, other experts contend that Trump’s rhetoric and policies will lead to economic malaise throughout Latin America.
A decade ago, no one talked about tail risk hedge funds, which were a minuscule niche of the market. However, today many large investors, including pension funds and other institutions, have mandates that require the inclusion of tail risk protection. In a recent interview with ValueWalk, Kris Sidial of tail risk fund Ambrus Group, a Read More
For starters, Latin America’s underdevelopment is indicative of the failure of socialist/mercantilist style policies that have been fixtures of the majority of these countries long before Trump came into office. Unlike Latin America, the United States has generally avoided falling into this economic abyss, and will continue to do so to a large extent, thanks to the nature of its political institutions.
While there are legitimate concerns about the impact of Trump’s more protectionist economic measures and immigration policies, the principal threat to Latin America countries’ stability still remains the same — their very own governments.
Trump as a Scapegoat
The anti-Trump paranoia put forward by Latin American intellectuals and policy figures is nothing more than a smokescreen that diverts attention from the corruption of the political class in that region which is the principal culprit behind its squalid state. This scapegoating is part of a victimhood complex perpetuated by Marxists and their social democratic cousins in which the region’s underdevelopment is blamed on “Yankee Imperialism.” However, when one peels back the onion a bit, a different picture emerges.
For decades, Latin America has engaged in outdated mercantilist policies, dabbled in radical socialist experiments à la Cuba and Venezuela, or IMF reforms (revealed to be socialist half-measures when one takes a deeper look). The results have ranged from disastrous to mediocre and have left a lot to be desired. This can’t be blamed solely on the United States.
Naturally, it’s easy to find demons abroad, rather than looking at oneself in the mirror and identifying the true causes of your country’s economic problems.
Trump’s tariff policies, especially his latest proposal to tax Mexican goods at 20%, are truly a reason for concern. Tariffs have a proven track record of impoverishing consumers and hurting producers in countries that possess a comparative advantage in exporting certain goods. However, the tariff issue barely scratches the surface of Latin America’s underdevelopment dilemma. Latin America’s problems consist of a package deal of statist economic policies — onerous occupational licensing, import bans, quotas, wage restrictions, unionism, loose monetary policy, expropriations, price and capital controls, etc. — that have shackled the region since its independence from Spain in the nineteenth century.
Quite frankly, the US is not the culprit in this case. It’s the fault of an arrogant political class in Latin America that has the temerity to continue to dabble in failed economic policies and maintain primitive political institutions that do not foster economic and institutional growth.
At the end of the day, the biggest threat to Latin American countries is not Trump or any other US administration. The greatest threat lies with the Latin American regimes.
These governments have a proven track record of impoverishing their own citizens at rates that even the most punitive of US tariffs or misguided interventions couldn’t even generate.
Latin Americans should pause to reflect on why their economies fail to achieve the levels of growth and income they have long wished for — instead of looking for foreign boogiemen such as Trump. This only serves to give the corrupt ruling classes of the region cover for their many failings. Naturally, these elites will continue to plunder their countries’ wealth with impunity knowing that they can just conjure up anti-American rhetoric at a moment’s notice to divert attention from their nefarious actions. Once Latin America can overcome this self-destructive habit of scapegoating other countries for their own domestically brewed problems, the region will then be able to live up to its potential.