For decades, the United States has bet on economic blockades to try to pressure authoritarian governments to leave power in foreign countries, or at least to stop committing abuses. The cases of Cuba and Venezuela, however, show that the tactic is flawed: the two countries have become very poor, but the regimes questioned by the Americans remain in power.
To prevent such situations from recurring, Joe Biden’s administration is seeking to reshape the use of economic sanctions and devise new tactics to pressure governments that persecute opponents, disrespect human rights and steal public money. The plan, which is being released little by little, is to adopt tighter and more targeted blockades, convince more countries to endorse these barriers and move forward in the fight against corruption, so as to close doors for dictators to send illicit resources abroad.
New announcements should be made amidst the Summit of Democracy, a virtual meeting with leaders from around 110 countries —​including Brazil—, called by Biden to seek ways to fight authoritarianism and corruption. The event will be held on Thursday (9) and Friday (10).
In October, the Treasury Department – ​​which enforces financial penalties – completed a review of the sanctions policy. “The analysis pointed out that sanctions are often used by us as a first-resort tool, without really having a strategic analysis of their purpose,” says Juan Gonzalez, senior director responsible for Latin America at the National Security Council , connected to the White House.
From there, the US intends to start linking measures to clearer objectives. Currently, it is common for sanctions to be adopted indefinitely. Generally speaking, individuals or companies targeted by the measures cannot do business with the US government or companies, and may have their assets in the US frozen. Companies that fail to comply with the blockades and carry out transactions with embargoed persons or entities are subject to punishment, which leads to the commercial isolation of the affected countries.
All countries can issue restrictions, as well as entities like the UN and the European Union, but their weight will depend on the importance of their economies in the global scenario. Vetoes work in different ways: they can affect individuals, companies, governments, entire industrial sectors in a region, and even ships and planes. The blockade can have varying intensities, such as barring only the sale of one type of product, such as firearms, or preventing any financial transaction with companies in a certain country.
In the long run, sanctions create more serious economic problems. Industries may not be able to import parts to repair their machinery, for example, which paralyzes services and production lines, generating ripple effects on the economy.
“We are looking at these tools [como as sanções] in a way that allows us to move forward together with our international partners and in a way that does not punish the people of a country just because a small group of individuals are involved in corrupt actions. It is about having a priority focus and strict sanctions against individuals who are involved in activities [antidemocráticas]”, projects Gonzalez.
Currently, there are about 10,000 US restrictions in effect. In 2014, there were 6,000, according to surveys by entities such as the Center for a New American Security. The use of sanctions took off in the Donald Trump administration (2017-2021), which practically doubled its application, compared to the administration of Barack Obama (2009-2017). In 2020, 777 new sanctions were issued, and 212 names were removed from the veto list.
The Biden government also intends to seek new measures to monitor and stop businesses that involve money of illicit origin. The pillars of this new policy are to increase transparency, strengthen law enforcement and improve partnerships, according to Wally Adeyemo, deputy secretary of the Treasury, at an event on Monday (6).
As an example, he cited the case of Joseph Kabila, former president of the Democratic Republic of Congo, who invested $3.5 million in kickback money on real estate in the United States. “He was able to turn illicit funds into valuable assets by making purchases in cash, taking advantage of loopholes in the US anti-money laundering rules,” commented Adeyemo.
The Treasury Department is studying ways to close these legal loopholes and increase the identification of who does business in the country, including a new database of the names behind shell companies. For this, the plan is to increase the exchange of information with other government agencies, such as the IRS (equivalent to the Federal Revenue). And also convince companies, private banks and foreign governments to tighten enforcement.
“The globalized nature of the financial system means that our efforts to keep illicit funds out of the US market will not succeed if other jurisdictions leave the door open for them,” says Adeyemo.
During the summit, the US is expected to announce new partnership programs with other countries to encourage the creation of anti-corruption programs, such as sending US officials to help implement them. It is also planned to announce actions to support journalists and entities that investigate the embezzlement of public money.
The Biden administration believes that fighting corruption will help strengthen national governments. According to the IMF, countries lose $1 trillion a year in public money. And he estimates that the sale of real estate on American soil alone helped launder around $3 billion in illicit resources. Some deals involved buying upscale homes and apartments in cities like Los Angeles and New York.
However, the American government itself recognizes that the task is difficult. “Many of the changes we hope to achieve will take time to unfold,” noted a senior Treasury Department official, speaking on condition of anonymity.
“In Latin America, the US has failed to preserve democracy in Venezuela and Nicaragua, or even to stop the erosion of democratic rule that is happening daily in El Salvador, Guatemala and Honduras,” says Benjamin Gedan, deputy director of the program. Latin America by the Wilson Center think tank. “This fight depends on a global arsenal of stimulus and punishment, from supporting pro-democracy activists to sharp sanctions against bad actors.”
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