Neither Here Nor There

Dear all,

We welcome you to the Greater Caribbean Monitor (GCaM).

In this issue, you will find:

• The Latin America Alignment Question

• Central America’s Slow March Forward

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Best,

The GCaM Team

The geopolitical equilibrium in Latin America is under mounting strain. Once dismissed as the West's backyard, the region is now at the center of a global competition for influence, capital, and security cooperation.

• A resurgent BRICS bloc, strengthened by China and Russia’s assertive presence, offers Latin America attractive alternatives to the U.S.-led order. In turn, the United States and its allies are responding with increasing urgency—using tariffs, defense diplomacy, and military realignments to reassert influence.

• Yet this contest is no longer about hard alignments. Some Latin American leaders are leveraging the moment to maximize options and negotiate from a position of relative autonomy.

Panorama. Last month, British and Argentine officials met behind closed doors to discuss military coordination—a move deemed unthinkable a decade ago. The Falklands still haunt the relationship, but the shared concern today is China.

• The South Atlantic, once a peripheral theater, is now part of a broader contest among global powers. From undersea cables to lithium corridors in South America, and from ports to critical infrastructure in Central America, the region has emerged as one of the world’s most contested strategic zones.

• The surprise UK-Argentina dialogue is emblematic of a broader shift—at the center of this global tug-of-war stands BRICS, now expanding and increasingly positioning itself as an alternative to the Western-led order.

• China and Russia, the de facto leaders of the BRICS coalition, are pursuing complementary influence strategies across Latin America. Beijing focuses on ports, energy, critical minerals, and digital infrastructure. Moscow leans into arms deals, counter-narcotics, and cybersecurity cooperation. Together, they offer what many governments in the region see as pragmatic, low-conditionality partnerships.

Why It Matters. The expansion of BRICS offers Latin America a platform to challenge U.S.-EU economic dominance. Yet the recent example of Brazil—a founding BRICS member—shows how a country can find itself in an awkward position.

• In a stunning escalation, Donald Trump announced a 50% tariff on Brazilian imports, explicitly linking the decision to what he described as a "witch hunt" against former President Jair Bolsonaro. Brazil swiftly retaliated.

• The move lays bare the new U.S. approach under Trump: weaponizing trade policy to influence political outcomes abroad. Nonetheless, the dispute has revealed the region’s vulnerability in navigating between ideological alignments and economic dependencies.

• Governments across Latin America now face the challenge of balancing the political expectations of BRICS solidarity with the economic imperatives of U.S. trade reliance.

Between the Lines. The West is not standing still. In addition to the Brazil dispute, the U.S. is stepping up military engagement across the region. Colombia is now a NATO global partner, and officials are eyeing South Atlantic routes like the Strait of Magellan as strategic chokepoints, especially amid Panama Canal disruptions.

• Argentina is emerging as another pivotal player. Once estranged from Western military supply chains due to the Falklands War, Argentina is now in quiet dialogue with Britain to reset defense ties. President Javier Milei has raised the defense budget significantly and is pursuing NATO-compatible equipment.

• This strategic shift is being watched closely by the U.S., which is eager to prevent Chinese arms sales and infrastructure projects in Patagonia and the Southern Cone.

• The UK, though cautious, is also re-engaging. A potential softening of its arms embargo on Argentina could open the door for deeper Western coordination in the South Atlantic, a zone increasingly important due to Chinese fishing fleets, undersea cable routes, and proximity to Antarctica.

What’s Next. With few exceptions—such as Guatemala, which remains firmly aligned with the U.S.-led Western bloc, and countries like Nicaragua and Venezuela, which lean toward the BRICS axis—most Latin American governments are not merely caught in the crossfire; they are playing their own game.

• Argentina courts Chinese investment while reviving EU trade negotiations. Brazil juggles BRICS rhetoric with Western economic ties. Colombia leverages U.S. military aid while exploring Chinese energy partnerships.

• Even smaller nations like El Salvador and Guyana are negotiating on both sides for digital and security infrastructure.

• This is not neutrality. It's maneuvering. And it reflects a growing belief in Latin capitals that in a fragmented world, survival depends on diversification, not loyalty.

Bottom Line. The China-Russia alliance, often dubbed the "Dragon-Bear" axis, is not merely economic—it's philosophical. Both countries cast the West as a relic of colonial hegemony and present themselves as alternative models for governance and global order. Their appeal resonates in parts of Latin America, where historical grievances against Western dominance remain potent.

• But this alignment is not without cracks. Russia and China have diverging long-term interests, and some Latin American leaders remain skeptical of becoming overly reliant on either. Still, the symbolism of BRICS and the material incentives offered by Beijing and Moscow are reshaping global loyalties.

• What happens when ambiguity no longer buys time? As the global order becomes more polarized, pressure on Latin America to "choose sides" will intensify—especially in crisis scenarios: a Taiwan Strait confrontation, energy supply shocks, or unrest in Venezuela.

• For now, Latin America is exploiting the space between empires. But that space is shrinking. Neutrality is dying. Strategic ambiguity may follow. The real question is: when the next crisis hits, where will the region stand?

Volcano Innovation Summit is a global initiative, which acts as a platform to exchange visions and experiences. The event will bring together world leaders from all fields; digital, corporate, financial, telecom, cyber, energy, mobile, sustainability and more.

Why It Matters. Volcano Innovation Summit driven by the mission to incorporate Latin America to the global network of innovation, science and culture by connecting business, entrepreneurs, etc.

• Prepare to immerse yourself in a dynamic environment filled with thought-provoking discussions, hands-on workshops, and networking opportunities with industry leaders and innovators.

• Set up with an open mind and a readiness to challenge established paradigms.

• Become part of the conversation and help create the most audacious tech innovation summit in the Latin America Region.

Data. The 2025 edition will take place on September 6th to 8th in Hotel Casa Santo Domingo, Antigua Guatemala.

• The event is primarily by invitation, but we reserve tickets for sale.

• Stay tuned for release announcements on LinkedIn or Instagram.

What’s Next. Ensure you have your Volcano Innovation Summit 2025 ticket either on your mobile device or in printed form, along with a valid ID or passport for identification purposes.

• For a comprehensive overview of what to expect and additional tips, make sure to keep an eye out for our Volcano Innovation Summit Attendee Guide, which will be provided to you along with your ticket.

The economic performance of DR-CAFTA countries in 2024 reflected a combination of domestic dynamics and global headwinds.

• Weakened demand from the U.S. and a slowdown in exports dampened growth, while subsidies and lower international commodity prices helped keep inflation in check.

Panorama. Despite global turbulence, the subregion outperformed the Latin American average, reflecting a degree of resilience in the face of international uncertainty. The sustainability of this momentum, however, hinges on both external conditions and pending structural reforms.

• In 2024, the region's GDP expanded by 3.9%, outpacing Latin America and the Caribbean’s overall growth of 2.3%. The Dominican Republic and Costa Rica led the way, posting growth rates of 5% and 4.3%, respectively.

• Private consumption—driven by remittances, job creation, and credit access—was the main driver of growth, contributing 3.8 percentage points to GDP expansion.

• Growth is expected to slow slightly in 2025 to 3.5%, still above the regional average. Nevertheless, the outlook is clouded by weaker economic performance in key trade partners, particularly the United States.

Between the Lines. The weakening of U.S. demand and tightening trade conditions are undercutting the region’s key export engine, exposing structural vulnerabilities.

• The slowdown in manufactured goods exports is directly linked to reduced demand from the U.S., the region’s principal trading partner.

• The projected deceleration for 2025 reflects lower expected growth in major global economies, compounded by a volatile international environment and rising protectionist policies.

• Despite strong domestic demand and a robust tourism sector, the region remains heavily dependent on external variables beyond its control.

Friction Point. Labor markets remain marked by high levels of informality and low wages, even as some indicators show marginal improvements in employment and labor force participation. These dynamics cast doubt on the quality and inclusiveness of current growth patterns.

• Informality averaged 59.7% across the region in 2023. As of 2024, Costa Rica was the only country with updated figures, reporting an informality rate of 37.4%. Agriculture and construction remain the sectors with the highest concentrations of informal labor.

• The regional unemployment rate stood at 5.7% in 2024, with peaks in Panama (7.8%) and Costa Rica (7.5%). Nicaragua posted the lowest rate at 3.1%.

• Meanwhile, labor force participation reached 62.2%, marking a slight improvement over the previous year. This uptick reflects both labor stimulus policies and a partial recovery to pre-pandemic levels.

What’s Next. As the region enters 2025, expectations are more moderate, and unresolved structural challenges persist. Formal job creation, productivity gains, and deeper commercial integration will be crucial to sustaining economic dynamism.

• Employment growth is expected to be modest, constrained by global deceleration. Wage increases are already being implemented in several countries, though with uneven sectoral and geographic distribution.

• An increase in real disposable income and relatively stable prices may support domestic consumption, but external trade conditions are likely to be less favorable.

• Improving job quality and advancing labor inclusion remain essential tasks for achieving more equitable and sustainable development.

What We’re Watching 🔎 . . .

Mexico and Brazil seek deeper trade ties to expand beyond US and China [link]

Christine Murray y Michael Pooler, Financial Times

Mexico and Brazil have initiated preliminary talks to deepen their trade agreement and diversify their relations beyond the United States and China. Since Claudia Sheinbaum’s inauguration as president, both countries—led by left-leaning administrations—have engaged in informal dialogue, with regular meetings between Sheinbaum and Luiz Inácio Lula da Silva. These efforts aim to boost trade and investment, particularly in strategic sectors such as aerospace and pharmaceuticals.

Despite their historical rivalry and Mexico’s traditional focus on its relationship with Washington, current circumstances—with ideologically aligned governments and an uncertain international context—favor the strengthening of bilateral ties. While bilateral trade remains modest, totaling just USD 13.6 billion in 2024, both countries are seeking to expand it. However, the exact terms of the agreement’s expansion remain unknown.

Mercosur, four-nation European trade bloc seal sweeping trade deal [link]

Lisandra Paraguassu y Lucila Sigal, Reuters

After more than a decade of negotiations, MERCOSUR and the European Free Trade Association (EFTA)—comprising Norway, Iceland, Switzerland, and Liechtenstein—have reached a free trade agreement covering over 97% of trade flows between the two regions. The deal, which will create a free trade area encompassing 300 million people and a combined economy exceeding USD 4.3 trillion, still requires parliamentary approval but is expected to be finalized in the second half of 2025.

In parallel, MERCOSUR is moving forward with the elimination of internal tariffs and the signing of energy agreements, such as the natural gas deal between Argentina, Paraguay, and Brazil, while efforts continue to finalize a treaty with the European Union. Meanwhile, Brazilian President Luiz Inácio Lula da Silva emphasized the need to strengthen trade ties with Asia in order to diversify the bloc’s markets.