Beyond The Panama Canal: The Impact Of Trump’s Re-Election For Latin America – Analysis

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By Víctor Muñoz 

Incoming US president Donald Trump has recently ignited discussion around the Panama Canal—hinting that he wants its control to revert to the United States—as part of his rhetoric focused on national security and competition with China. His “America First” policies could have a significant impact on key areas for the continent, such as trade, migration, security, and transnational crime.

Incoming secretary of state Marco Rubio will certainly be paying close attention to these dynamics. Born to Cuban parents in Miami, Rubio is fluent in Spanish and familiar with Latin American culture. He is known for fiery views on Latin American issues, having labelled the Venezuelan regime as a “narco-dictatorship”, accused Nicaragua of “sponsoring human trafficking“, and blamed Cuba for providing “safe harbour for terrorists”. Rubio’s active opposition to China’s growing influence in the western hemisphere could also significantly shape the administration’s approach to the region.

The US administration’s combative attitude could present an opportunity for the European Union to deepen its ties with Latin America. Initiatives like Global Gateway, which seeks to support infrastructure and digital technology projects in the developing world, or the nearly-finalised EU-Mercosur deal, are a great starting points. But the EU should develop an even more robust partnership with Latin America, one that incentivises investment in renewable energies, biodiversity protection and technological cooperation, with particular attention to the governance of AI. It also calls for structured political dialogue that transcends regular landmark events, such as the upcoming EU-CELAC summit to be held in Bogotá in July.

Trade with China and global influence

Trump’s promises of import restrictions and tariffs, along with a general pivot to the Asia-Pacific, could encourage Latin America to deepen trade ties with China, already the main commercial partner of major regional economies such as Brazil, Chile, and Peru.

The US and Europe remain the largest investors in the Latin America, accounting for 33% and 22% of its total FDI 2023. In contrast, China accounted for a negligible 0.4%, down from 3% in the previous year. However, Chinese FDI in the region is changing, moving away from transport and energy infrastructure to more targeted opportunities in strategic sectors, such as renewables, data centres, fintech, and electric vehicle production.

Europe should closely monitor these shifting dynamics and actively seek to engage in the region’s emerging sectors, ensuring it plays a pivotal role in shaping Latin America’s future.

Pressure on Venezuela

During his first term, Trump pursued a “maximum pressure” policy towards Venezuela, with economic sanctions and incentives to oust Nicolas Maduro’s government. In contrast, Biden’s policy shifted towards dialogue and negotiation, drawing criticism from Trump.

While Maduro has offered an olive branch to Trump for his second term, it’s unlikely that Trump will entertain it with Rubio as secretary of state. Rubio has consistently advocated for isolating and pressuring leftist governments in Latin America through sanctions. With Maduro’s recent inauguration after unfree elections, expectations regarding Trump’s position are high.

The Venezuelan crisis matters for Europe as it influences migration, energy markets, and geopolitical alignments. While Europe looks to Latin America for critical raw materials and energy diversification, rising tensions could disrupt regional trade or governance. More than 8 million Venezuelans have been displaced globally since 2014, and more could flee if the crisis deepens. Instability in Venezuela can affect global oil prices, which in turn impacts European economies.

Migration and border security

Trump has pledged to harden border controls with Mexico and railed against undocumented migrants. On social media, the president-elect has expressed his intention to use the US military to carry out the deportation of hundreds of thousands of undocumented individuals.

If the US enforces stricter policies, it is likely that more migrants from Latin America will seek alternatives in Europe, heightening pressure on European asylum and migration systems.

Transnational crime and security cooperation

Trump has linked transnational crime and illegal migration throughout his campaign, promising to expel criminal networks such as Tren de Aragua from the US. He shares this vision with other hard-right leaders in the region, such as Argentina’s Javier Milei or El Salvador’s Nayib Bukele. These figures might feel more emboldened in their own domestic security policies with Trump’s re-election, yet the tangible benefits they might draw remain unclear. Other key regional politicians like Brazil’s former president Jair Bolsonaro and Chilean opposition leader José Antonio Kast coincide with Trump and his regional allies in the primacy of national security over human rights and social policies.

This securitisation approach opens the door for intelligence and security cooperation with the US, eliciting mixed reactions in the region. Some countries will likely welcome US intelligence support, while others will see it as a potential meddling in their national sovereignty, especially those with ideologically opposing leaders in office, such as Mexico, Colombia, and Bolivia.

These security policies could also impact Europe, potentially increasing migration pressures, straining asylum systems, and challenging EU commitments to human rights, while reshaping transatlantic cooperation and influencing regional geopolitical dynamics.

Latin America looks for partners

Faced with the yet unknown effects of Trump’s presidency, Latin America needs a robust and multilateral strategy that maximises opportunities for cooperation with the US, Europe, and China. Countries in the region will be looking to build an autonomous bargaining position, reinforcing both economic and political relations with their key global partners and allies.

While Trump 2.0 pursues his protectionist trade and security agenda goals in Latin America, the EU should seek to foster an outward-oriented strategy that places value on strategic interdependence between itself and middle-powers amid the overarching US-China strategic competition.

In light of the growing diplomatic tensions across the region, Latin America should strengthen trade and security commitments both within and beyond by adopting an approach that transcends transactional relationships.

  • About the author: Víctor Muñoz is visiting fellow at the European Council on Foreign Relations. He is an industrial engineer specialising in telecommunications, with more than 20 years of experience in the business process outsourcing and information technology (IT) sectors. Muñoz is co-founder and partner of Argia, a consulting firm in green tech and economics.
  • Source: This article was published at ECFR

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The European Council on Foreign Relations (ECFR) is an award-winning international think-tank that aims to conduct cutting-edge independent research on European foreign and security policy and to provide a safe meeting space for decision-makers, activists and influencers to share ideas. We build coalitions for change at the European level and promote informed debate about Europe’s role in the world.

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