U.S. Tariff Frenzy Shakes Western Hemisphere

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

In this issue, you will find:

•U.S. Tariff Frenzy Shakes Western Hemisphere

•The Smuggler at the Heart of Colombia’s Government

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The GCaM Team

Washington’s tariff salvo sent shockwaves through global markets, with the S&P 500 dropping 2.3% and the Nasdaq falling 3.1%. Bond yields also slid as investors sought safety on March 4, the day many of these tariffs took effect. The White House has since postponed many tariffs, insisting that “reciprocal” levies will be put in place by April 2.

• The Trump administration imposed a 25% tariff on all imports from Canada and Mexico, except for a 10% rate on Canadian energy. Tariffs on Chinese imports have increased from 10% to 20%. Pressure from the automotive industry, which relies on continental supply chains, is thought to have led to the postponement.

• Washington insists the tariffs are aimed at addressing fentanyl and migration issues—and advancing Trump’s reindustrialization agenda. Trump is fully aware of the risks of a trade war, although he believes any “disturbances” would be brief.

• All countries in the region, deeply intertwined with U.S. trade, are certain to feel the brunt of these policies to some extent. Their aggressive nature could prove counterproductive to Washington’s efforts to curb Chinese influence—particularly in Latin America—and reduce immigration, as economic disruptions unfold at its doorstep.
  
  

Panorama. Tariffs are hitting Latin America’s agricultural exports hard, especially since the U.S. is a major market. Supply chains that thrived under the USMCA’s tariff-free trade are beginning to break down.

• Mexico’s $14 billion agricultural export industry is facing steep declines due to tariffs on items like avocados and tomatoes. U.S.-bound exports might decrease by as much as 20%, hurting businesses that rely on cross-border sales.

• Food processing industries across the region are experiencing cost increases as a result of these disruptions.

• Mexico and Canada might impose their own tariffs on U.S. exports like corn, cumulatively valued at more than $5 billion, possibly redirecting trade to countries like Brazil, which has reduced tariffs amid increased food prices.
  
  

Mixed Effects. Mexico’s agricultural downturn is significant, but it does not tell the whole story for Latin America. Some countries might actually benefit as U.S. buyers look for alternatives.

• Brazil and Argentina could see increased demand for soybeans and beef as Mexican goods become more expensive.

• Guatemala, with its $800 million coffee exports, might find new buyers or gain a small foothold in the U.S. market.

• Colombia’s $1.5 billion flower industry could experience a modest boost if U.S. demand shifts away from tariff-affected suppliers.
  
  

Regional Fallout. Overall, Latin America’s agricultural sector is trending downward due to these tariffs, but the impact varies. Mexico’s losses are substantial, though some nations could see limited gains.

• Mexico is projected to lose $4 billion annually in agricultural exports, dwarfing any small wins elsewhere. Brazil might increase its corn or pork exports by $500 million if Mexico and Canada retaliate against the U.S.

• Honduras’s $500 million banana trade could shrink by 15-20% due to lower prices, capping potential benefits.

• As U.S. markets tighten, Latin American countries are turning to China for trade alternatives. China’s imports of Brazilian beef jumped 25% in early March, adding $500 million; Chinese purchases may slow, however, due to health inspections. Mexico is considering tariff tweaks to boost trade with Beijing by $2 billion.
  
  

Balance. These tariffs could have effects beyond just trade numbers. They might alter economic relationships, increase migration, and inadvertently strengthen China’s influence in the region.

• U.S. consumers could face avocado price hikes of 10-15%, straining their wallets.

• Latin America might deepen ties with China, as seen with Brazil’s beef exports to Beijing rising 25% in March, and Mexico’s potential $2 billion trade pivot.

• Economic pressure in Mexico and Central America could drive more migration northward, countering U.S. policy goals. A 1-2% economic dip, as projected by CGIAR, might push more people to seek opportunities in the U.S. The effects of this must not be overstated: U.S. authorities will simply not allow a large influx.
  
  

Manufacturing and Supply Chains. The tariffs are disrupting manufacturing sectors and supply chains across North America, with significant implications for Latin American economies.

• Mexico’s automotive sector, a cornerstone of its manufacturing industry, faces substantial challenges. The 25% U.S. tariff on Mexican goods could lead to a 12% drop in exports, potentially causing a 4% decline in Mexico’s GDP in 2025.

• Companies are reassessing their supply chains to mitigate tariff impacts. Some may relocate production to other Latin American countries or seek alternative suppliers, leading to regional economic shifts.
  
  

Economic Outlook. The tariffs introduce uncertainty into the economic forecasts for Latin American countries, with potential for both challenges and opportunities.

• The IMF warns that sustained U.S. tariffs could significantly negatively impact Mexico and Canada, increasing the risk of recession.

• Aggressive U.S. trade policies are prompting Latin American countries to explore new diplomatic and trade partnerships. Their ability to diversify is nonetheless limited, especially in the short term. It ought to be recalled that China is already the top trading partner for most South American nations; the challenge facing North American nations is far more difficult.

• China is capitalizing on the strained U.S.-Latin America relations by strengthening economic ties with countries like Brazil and Argentina. Chinese investments in infrastructure and energy projects are increasing, potentially shifting the region’s economic alignment.
  
  

Bottom Line. The U.S. tariffs and potential retaliatory measures from Canada, Mexico, and China are reshaping trade relations and economic performance in Latin America. While some countries may find new opportunities, the overall impact leans toward economic disruption, prompting a reevaluation of trade strategies and alliances across the region.

Suspicions of a cozy relationship between Colombian President Gustavo Petro’s government and the country’s top contraband kingpin are growing.

Panorama. In Colombia, an investigation into smuggler Diego Marín, known as “Papá Pitufo” (“Papa Smurf”), hit a snag after a meeting between the case’s prosecutors, Andrés Marín and Leonardo Quevedo; the head of police counterintelligence, Colonel Julie Ruiz; and then-Defense Minister Iván Velásquez.

• The meeting took place at the Defense Ministry’s Bogotá headquarters in October 2023. Its stated aim was to debrief officials on the investigation’s progress and secure protection for investigators.

• Prosecutor Andrés Marín (no relation) explained that an undercover officer, Álvaro Galvis, had infiltrated Papa Smurf’s organization and needed heightened security, as the criminal group was growing suspicious of him.

• During the discussion, Colonel Ruiz undermined the investigation, claiming Diego Marín was no longer in Colombia, despite video evidence from the prosecution proving otherwise.
  
  

Yes, But, Hours after the meeting, Major Peter Steven Nocua—a police officer under investigation for taking bribes from Marín—was tipped off about what the prosecutors had revealed at the Defense Ministry. Nocua, previously recorded meeting with Marín and Galvis, alerted the organization’s leader about the investigation and the surveillance footage tracking him.

• Five weeks after the leak, Papa Smurf fled Colombia for Spain, just before prosecutors could secure an arrest warrant.

• The warrant against him wasn’t issued until April 2024, by which time he was already in Europe.

• Marín is currently detained in Portugal, where he has dodged extradition by applying for asylum.
  
  

Between the Lines. After the meeting with then-Defense Minister Velásquez, the bribery case tied to Marín fell apart. Prosecutor Andrés Marín said the leak torpedoed their efforts, tipping off the smuggler and exposing the undercover officer’s identity. Meanwhile, Major Nocua went from being a suspect in the bribery probe to an undercover agent in an anti-corruption unit now investigating the case.

• Colombia’s Attorney General, Luz Adriana Camargo, delivered the final blow. Camargo is known to be personally close to Velásquez, serving as his right-hand woman and head of investigations when Velásquez headed the UN-backed International Commission against Impunity in Guatemala (CICIG).

• Camargo took over the Public Prosecutor’s Office in March 2024. By April, she had sacked prosecutor Andrés Marín, who has been relegated to investigating sexual abuse cases.

• She also dismantled his investigative team, scattering them to other departments and sidelining them from the Papa Smurf case.
  
  

Subtext. In his final press conference as minister, Iván Velásquez lashed out at Andrés Marín. In a slip-up, the former CICIG commissioner insisted the prosecutor’s accusation was false and that neither he nor Colonel Ruiz had leaked anything. The catch? Andrés Marín never accused either of them.

• The prosecutor merely reported a leak had occurred, derailing months of work against the smuggling “sheikh.” 

• While there is no hard evidence, only two people learned the case details against Papa Smurf on the day of the leak: Iván Velásquez and Julie Ruiz.

• The culprit’s identity remains unknown, but it is certain that the sabotage came from within the Defense Ministry. Both Velásquez and Ruiz have offered inconsistent accounts—publicly and privately—when addressing the matter.
  
  

On the Radar. Velásquez isn’t the only Petro ally suspected of ties to the smuggling network. Recently, Augusto Rodríguez, head of the National Protection Unit (UNP), accused Presidential Chief of Staff Armando Benedetti of being the link between Marín and Petro.

• According to Rodríguez, Benedetti facilitated a 500 million-peso (~121,000) contribution from the smuggler to Petro’s 2022 presidential campaign.

• Petro’s administration is increasingly under suspicion of shielding—and profiting from—the criminal exploits of Colombia’s biggest smuggling baron.

• The president is relatively unpopular, with an approval rating of 41.7%. Vice President Francia Márquez, who has distanced herself from Petro in recent weeks, is even more unpopular; only 29.6% of Colombians approve of her.