A Political Ocean Economy - Conflict and Opportunity in Latin America
Plus how the war in Ukraine has shown the future of naval conflict and investment.
Latin America ought to matter. Almost as large as the US and China combined, the region contains nearly a quarter of the world’s forests, close to a third of its fresh water and a quarter of its cultivable land. Most of its 650mn people live under freely elected governments and they are among the better educated in the developing world, with a growing middle class.”
At the end of 2020, the US Coast Guard took delivery of its newest ship, a $500 million, 418 ft, Legend-class security cutter named the USCGC Stone. The Stone immediately set out to support Operation Southern Cross, a regional effort to police IUU fishing in the South Atlantic.
According to the US Southern Command (USCOM) website, this was to be the first patrol by a US Coast Guard vessel to the South Atlantic in "recent memory."
+SOUTHCOM to support Operation Southern Cross - SOUTHCOM.ml
The deployment was also intended to do some geopolitical bridge-building as the Stone participated in exercises with the security forces of Guyana and Brazil and made a stop in Uruguay.
The US embassy press release also stated that "the Stone will visit Mar del Plata, Argentina, for a ceremonial welcome by the Coast Guard's sister service, the Argentine Naval Prefecture, before the cutter returns home."
+U.S. Coast Guard multilateral cooperation to combat Illegal, Unreported, and Unregulated (IUU) Fishing - USEmbassy.gov
Sister Service. Sounds amicable enough.
Too bad things didn't quite work out that way.
In fact, the government of Argentina decided to refuse dock services to the Stone and sent it on its way.
Why?
Analysts speculate that the reason for doing so is the cozier relationship Argentina has developed with China over the last couple of decades.
China's Influence in Latin America Grows
China has made significant political and economic inroads in Latin America. This has been made possible partly by policies and general neglect of the United States and the EU, which have reduced their own investments in the region.
In 2014, China became the region's largest trading partner, with trade between the two growing from $12bn in 2000 to $495bn in 2022 (IMF).
China has also offered loans and grants to Latin American countries, often with few strings attached.
This is in contrast to dealing with the US, where:
"A Latin American foreign minister last year compared the American approach to the Catholic religion, telling the Financial Times that "you have to go to confession and you still may end up being damned."
+US reluctance on trade deals sends Latin America towards China - FT
Oh, and did you catch that little headline about China having a spy base in Cuba?
Ocean Conflict is Evolving in Real Time
While the little tiff between the US Coast Guard and Argentina showed how things could easily heat up in our own hemisphere, the war in Ukraine has exposed fundamental shifts in how conflict will play out in the future.
The sabotage of Nord Stream 1 in the early days of the war highlighted the vulnerability of strategically important subsea infrastructure. Technology for remote monitoring of pipelines and cables exists, mainly in the oil and gas industry. Yet demand for these tools will grow with new uses in new regions.
The use of drones has been well documented and is receiving plenty of attention. When we say drones, I tend to think of the aerial ones, but this recent article in The Economist highlights the importance of uncrewed surface vessels (USVs), "essentially drone boats."
+How oceans became the new technological battlefields - The Economist
But do drones mean no need for traditional navies?
Not according to Rune Andersen, chief of the Norwegian navy:
"On the day of the sinking (of the Moskva), I was confronted by army colleagues: this must surely be the end of the idea of building big warships?" recalls Andersen. "I said no: it's the end of having a 40-year-old warship which hasn't been updated and without trained crews."
$500 million Coast Guard cutters, drone boats, pipeline and cable monitoring, and updated naval vessels.
Sounds like a lot of money and tech flying around.
Note: The new Coast Guard cutter referenced earlier was built by Huntington Ingalls Industries (ticker: HII), a $10 billion US company.
Latam Ocean Economy
Events unfolding in Latin America have vast implications for stakeholders in the ocean economy in this hemisphere and beyond. Investments in shipping, ports, and offshore energy are evident and are a large part of China's Belt and Road Initiative.
Was it a coincidence that Guyana was a stop in this recent Coast Guard patrol soon after oil producer Exxon launched operations in the country?
Hard to think so.
Climate, conservation, and the ocean economy are increasingly in direct confrontation.
Panama is facing an unprecedented issue - not enough water for the Panama Canal to function. A "Mega-MPA" has created a fishing-free zone in over 500,000 sq km of Pacific from Ecuador to Costa Rica.
+Mega-MPA announced for Pacific - Oceanographic
Increased regional competition will mean growth in ocean monitoring and security technologies. And it has been estimated that post-pandemic nearshoring could add $78bln in annual exports to the region's economy.
+Nearshoring can add annual $78 bln in exports from Latin America and the Caribbean - IADB
Conflict and Opportunities Come Closer to Home
Geopolitical and economic actions in Latin America will get more complicated in the coming years as China continues to take advantage of historical apprehension towards the US and apathy from the EU.
A more complicated geopolitical picture will make it harder for the US to press its interests on everything from regional security to economic ties.
Trends towards de-globalization and the upcoming US presidential election will make this harder to prioritize, leaving the door open to competitors.
But Latin America holds vast opportunities to take advantage of trends in the emerging blue economy - from food and energy to carbon and natural capital.
The question is how they will leverage these assets at the global table (and will the US bother to be seated at it) and how competition over access to markets and commodities will bring increased competition to this region.