The World in 2013

Ten predictions for a year of brewing conflict.

Three major forces will loom behind the headlines in 2013, driving events in the new year: the crisis of the Western political order, rising sectarian strife in the Middle East, and worries about American withdrawal from the world.

The most immediate challenge is the crisis of the Western democratic model, caused by the inability of the United States and Europe to deal with their respective fiscal and financial issues. The problems are economic, but the weaknesses are fundamentally political. A continued failure to act will result in the weakening of the West's global stature in every dimension of national strength -- its ability to prosper, to summon and guide international action, and to advance core national interests.

The immediate issue for the United States is to keep from falling off its "fiscal cliff" -- the combination of scheduled tax increases and automatic spending cuts designed to be so painful that they would force Congress to agree on a package of spending cuts, revenue increases, and entitlement reforms. So far, however, the threat of fiscal crisis has failed to elicit the necessary compromise.

In Europe, the economic issues are far more severe -- but there, too, it has been impossible to summon the necessary political will until the euro teeters on the brink of collapse. It's a dangerous way to live: At each stage, when the markets crack the whip loudly enough, governments respond. But at each stage, the price of the necessary fix rises. Steps that could have resolved the crisis at one point are inadequate months later.

For decades, the United States and Europe have been the two centers of global governance. They have the experience in international problem solving and the will to act. All of these assets, however, rest on the success of their own governance. Once their model is no longer a success, the world will look elsewhere for leadership. At least for the foreseeable future, however, it will not find any substitutes.

The Middle East, meanwhile, will continue to demand the attention of the international community. From Morocco to Iran, the region is still consumed with the political upheavals of the Arab Awakening: Islamists are moving from the familiar role of opposition to the far harder job of governing, religious movements are being transformed into political parties, and secular groups are struggling to organize effective parties. But in the coming year and beyond, it seems likely that sectarian strife will become the defining thread of events across the region.

Through decades of otherwise ineffective rule, the Middle East's dictators did manage to keep divisions between Sunnis and Shiites under control. The enforced peace came apart first in Iraq, where the U.S. invasion triggered a sectarian civil war. Iraq today looks like a country about to splinter into Kurdish and perhaps later into separate Shiite and Sunni pieces, partly due to Iranian influence. Iran's mullahs are also playing a major role in Syria, where the minority Shiite rulers in Damascus are fighting for what they fear may be their very existence in a largely Sunni country. Sunni and Shiite governments across the region ship arms and money to like-minded groups, choosing sides in the country's sectarian civil war.

Sectarian bloodletting is not only limited to Syria. Only miles from Damascus, Lebanon -- always a sectarian tinderbox -- tries desperately to hold on to its uneasy peace. In Bahrain, the Sunni government has brutally repressed a Shiite-led uprising. It is much easier to see this trend spreading even further across the region than to imagine events that would reverse it.

Worries about American withdrawal from the world will also have a growing influence on global affairs in 2013 and beyond. The fears are triggered in part by the scheduled pullout of most American forces from Afghanistan at the end of 2014. The policies of Afghanistan's neighbors -- notably Pakistan, Iran, India, and the Central Asian "stans" -- are already being reshaped to preserve their influence in the aftermath.

At the same time, the explosive growth in production of American unconventional gas and oil resources has raised the specter of drastically reduced American dependence on -- and therefore interest in -- the oil-exporting countries of the Middle East. Finally, America's budget deficits and the need for spending cuts suggest to some that the United States will play a smaller role abroad in the years ahead.

Whether America's slow retreat from global affairs is welcomed or feared, and whether or not it actually comes to pass, it will likely trigger actions and adjustments in anticipation. How these might influence global events or American interests is by no means clear. However, here is my best estimate of the events that will define the year to come.

A Critical Time in Asia

Both China and the United States, protagonists in the most important bilateral relationship in the world, have just passed through tense leadership changes -- but there the similarity ends. Some key players in President Barack Obama's team will change, but the central thrust of his policies is largely set and he can move promptly to address the many issues that were put on hold during the prolonged U.S. political season.

Chinese President Xi Jinping, on the other hand, faces an array of immediate challenges. He must build consensus among the new generation of leaders around a new set of policies appropriate for China's growing global stature. Beijing's outgoing leadership could afford to allow growth to slow and politico-economic problems to accumulate after years of stellar economic growth -- Xi cannot. He will have to accelerate the rebalancing of the Chinese economy and at the same time address the growing restiveness of a new, 300-million strong middle class. These needed policy shifts will often be in tension.

Nor can the new Chinese government afford to look weak abroad. An increasingly informed populace, angry over widespread corruption and personal enrichment by an elite few, is easily susceptible to nationalist appeals. The public, and many in ruling circles, believes a number of conspiracy theories about U.S. intentions -- for instance, that it is trying to encircle China, that it pushed Japan to act in the East China Sea, that it is trying to make trouble over Taiwan. The majority of Chinese are expecting a more assertive, higher-profile foreign policy.

The coming year, then, will call for great care on both sides. Washington and Beijing will have to separate rhetoric and mutual suspicions from actual changes in policy. A simmering conflict in the East China Sea will have to be managed through and beyond Japan's elections. The United States will have to undo the damage wrought by its "pivot" to Asia, which has only enhanced Chinese suspicions that Washington's goal is to contain Beijing. It will take a long time to convince China that the actual U.S. goal is to rebalance its attention from the Middle East toward East Asia, given that the United States has diverse economic, political, and security interests there.

Above all, both China and the United States have to take the first difficult steps toward defining a new kind of great power relationship in which China is less subordinate and more of a responsible, burden-carrying international leader.

The Long Arab Awakening

Poorly chosen words can do lasting damage. The pivot to Asia was one. The "Arab Spring," which led many to expect that the upheavals in the Middle East would lead to swift democratic change and resolution, is another. Unlike the end of Soviet rule in Eastern Europe, these are genuine internal revolutions that will take decades to play out. The challenge for outsiders, especially the United States, is to develop the necessary strategic patience to distinguish between inevitable ups and downs and long-term trends, while also helping new governments deliver the economic progress they will need to survive.

Egypt's complex political evolution will continue to play out in 2013. On balance, events there have been encouraging -- the discipline of governing has exerted a moderating influence on the Muslim Brotherhood, the military has relinquished a desire to rule, the country has stuck by its peace treaty with Israel, and political violence is the exception not the rule. In Libya, the government will continue to struggle to take back its rightful monopoly on the use of force from well-armed militias. It will find itself aided by swelling oil revenues but terribly hampered by the country's complete lack of functioning institutions after 40 years of Muammar al-Qaddafi's misrule.

Governments in countries where unrest still festers below the surface -- Jordan, Kuwait, the Gulf emirates, and Morocco -- will continue to stall, hoping that the greater legitimacy they enjoy as monarchies will enable them to avoid major protests and hold on to power. Syria, Iraq, and Iran are the focal points of major change in the year ahead.

The Syrian Stalemate

After more than a year of fighting, the conflict in Syria has become a military stalemate. Neither side can make decisive gains. The Gulf countries' injections of arms to the opposition cannot offset the regime's tanks and fighter jets. Bashar al-Assad remains president but no longer rules the country. Notwithstanding the severe impact of international sanctions, he can survive indefinitely on little money by suspending the government's normal services and encouraging his military and militia to supplement their salaries by looting.

The somewhat encouraging news is that an international consensus is emerging around the need for a political compromise between elements of the regime -- excluding Assad -- and a coalesced opposition encompassing those outside the country and those still inside fighting, from all sectarian communities. In November, the opposition took an important step toward unifying by forging a new umbrella coalition -- but whether it can stay together, and whether it will accept less than a complete end to the present regime, is uncertain at best.

If it can, and if outside powers (minus Russia and China) can also stay unified, 2013 could well see an end to the killing -- and the beginning of what will be a long, difficult political transition in Syria.

Nuclear Showdown in Iran

2012 saw conflicting trends in Iran. The Obama administration won an important international success in the severest sanctions ever imposed on Iran, which caused the value of the Iranian rial to plummet and inflation and unemployment to skyrocket.

For the first time in the long nuclear standoff, Iran is paying a price for its pursuit of nuclear weapons. But Tehran isn't waving a white flag yet: Even as its standing in the region was weakened by the Arab uprisings, it nevertheless expanded its uranium enrichment program beyond the level needed for civilian reactors. And Israel continued to push for a war it could begin alone but could not finish, even as the politics of the U.S. election season made serious nuclear negotiations impossible.

Moreover, without ever explaining why, both American presidential candidates flatly insisted that containment of a nuclear Iran was impossible and unacceptable. Happily, however, an important area of ambiguity has been preserved around the difference between actual weaponization by Iran and an undefined "nuclear capability." This gray area could eventually be where an agreement is found. Meanwhile, Iran delayed a showdown this summer by diverting some of its growing stockpile of enriched uranium to civilian purposes, easing Israel's insistence on the need for an early attack.

The question is what will happen now. In Israel, much is in flux. Prime Minister Benjamin Netanyahu will have to re-evaluate his options in light of Obama's reelection and the public opposition to war by many of Israel's top military and intelligence leaders. Though his political opposition is weak, elections scheduled for January could also force adjustments in Israeli policy.

Tehran's position will largely be determined by Supreme Leader Ayatollah Ali Khamenei, who has made no secret of his disbelief in compromise. The single most important external determinant will be whether the U.S. and European governments will accept Iran's right to enrich uranium up to the low level needed for civilian purposes. If so, it may be possible to negotiate sufficiently tough safeguards, inspections, and limits on the size of a low-enriched uranium stockpile to insure that Tehran does not cheat. If not, any form of agreement is likely impossible.

Even if negotiations fail in 2013, Iran still has ways to make a military strike unlikely by choosing to mark time in its weapons program -- limiting the size of its enriched uranium stockpile and avoiding steps toward weaponization.

Life or Death for a Two-State Solution

Perhaps a two-state solution to the Israeli-Palestinian conflict is already dead. Many believe so. But even if there is still hope, it will not last much longer -- certainly not long enough for a protracted peace process. Moreover, with the changes the Arab Awakening has brought about, an Israeli-Palestinian accord is no longer enough: A regional, Arab-Israeli agreement is clearly needed.

Such an agreement would require a monumental effort on the part of the United States. The question is whether the Obama administration will choose to devote so much precious political capital to this potentially historic but so-elusive goal. That's a question only President Obama can answer, but after November's hostilities in Gaza, the odds of him making such a choice seem very long indeed.

Can Iraq Hang Together?

Within hours of the departure of the last U.S. troops a year ago, Iraq's Shiite prime minister, Nouri al-Maliki, accused the country's Sunni vice president of treason -- an early indicator of the deepening sectarian fissures in the country. Since then, Iraq's political fabric has become steadily more threadbare. In the north, an unexpected -- some call it nearly miraculous -- rapprochement between Kurdistan and Turkey has transformed the relationship from active conflict to political warmth. Investment by major foreign oil companies has subsequently poured in, at the expense of Baghdad's rights. The economic divides are deepening: Today, Kurdistan gets 22 hours per day of electricity from its electricity grid, while Baghdad struggles with only four.

The good news out of Kurdistan only emphasizes the stagnation in the rest of the country. Iraq's Shiites receive most of the few services that Baghdad's divided and feckless government is able to provide, leaving the country's Sunni population increasingly angry and resorting to violence.

Elections in the early months of 2013 may indicate whether Iraq will be able to hold itself together. What unfolds in Syria will also heavily influence Iraqi Sunnis' decisions about how far to push their dissatisfaction. The chances of Iraq becoming a stable, unified country -- 10 years after the U.S. invasion, and with more than a trillion dollars spent -- are not encouraging.

Ending America's Longest War

In 2011, Obama announced that most U.S. troops would leave Afghanistan at the close of 2014. By then, his administration anticipated, Afghan security forces would be strong enough to secure the country and a political agreement involving the Taliban would be in the offing.

What a difference two years makes. Even when the plan was announced the security situation was discouraging, and it has only grown worse. International casualties had reached their highest point in nine years of war in 2010. They climbed higher in 2011 and higher still in 2012 as shootings of U.S. and NATO troops by individual Afghan police and army members became a grim feature of the war. After several false starts, a successful negotiation with the Taliban seems increasingly remote. Afghanistan's neighbors are positioning themselves for what seems likely to be a period of even greater instability after international forces depart.

If it hopes to leave a stable Afghan government behind when it departs, the United States and its international partners will have to broaden their efforts to build political reconciliation that encompasses Afghan groups far beyond the Taliban. Whether they will choose to do so is not yet clear. Even less clear is whether, with declining leverage as their troops leave the country, they will be able to push for a fair presidential election when President Hamid Karzai's term ends in 2014. An obviously corrupt outcome in that election could prove a devastating setback.

Pakistan represents a surprising bright spot over the past year. It now seems likely that Pakistani elections next year will see the first peaceful end to a period of civilian rule in Pakistan's history -- a notable milestone. Violence or a military coup looks increasingly unlikely. At the same time, Pakistan's obsession with its adversary, India, has significantly lessened. Trade across the border has increased markedly, visa restrictions have been loosened, and there is talk of renewed efforts to settle long-standing Indo-Pakistani territorial disputes. A sickening attack by Taliban militants in October on Malala, a 14-year-old schoolgirl who campaigned for women's education, brought the country together as never before. It is impossible to say whether this unity will last, but the attack has dramatically reinforced the reality that the country's internal problems mean more to Pakistan's security than does the threat from India.

If these trends endure, real change could be on the horizon in one of the world's most dangerous countries. In the best case, they could ease Islamabad's fear of being caught between unfriendly governments in New Delhi and Kabul enough to allow Pakistan to play a more constructive -- or at least a less destructive -- role in shaping Afghanistan's future.

Strange Interlude in Russia

Large street protests in Moscow at the close of 2011 suggested a political turning point in Russia. But the movement weakened rather than spread, and only three months later Prime Minister Vladimir Putin was overwhelmingly reelected to the top post of president -- albeit with badly damaged legitimacy. Since then, he has gathered greater power into his own hands, labeled those who did not support him as "decadent" and unpatriotic, and branded Russian non-governmental organizations that receive financial support from abroad as "foreign agents." Internationally, he has executed his own pivot toward Asia, huffily turning away from the West.

In all likelihood, decisive change in Russia will be a long, slow evolution that will not occur in 2013, or perhaps for years thereafter. Yet Russia is not the same as it once was. An urban elite and a well-informed middle class, which is freer and more prosperous than ever, are too aware of the regime's failings. A more assertive foreign policy appears to be part of Putin's answer to his domestic problems -- even when it works against Russia's own interests, as stubborn support for the regime in Syria does.

The most critical near-term decision will be whether the United States and Russia can find a way to cooperate on the missile defense systems each is planning to build. Missile defense cooperation is a game changer for the Russian relationship with the West and for the future of nuclear arms control -- for good if it happens, for ill if it does not.

A Superstorm Reminder

Will Hurricane Sandy, an immense hybrid of winter storm and tropical hurricane, at last allow all Americans to see climate change as an urgent threat? While climatologists do not know whether this unusual type of storm is caused by a warming climate, its high death toll, along with economic costs that may exceed $50 billion, could be enough to convince more Americans to take a clear-eyed look at the increasing number of extreme weather events in recent years.

The only economically sensible and effective way to address this enormous global challenge is by putting a price on carbon and then freeing markets -- rather than government -- to innovate and choose among fuels and technologies. Sandy will not, in itself, be enough to spark this change. But together with the weather disasters that will certainly follow, it may provide a significant push.

U.S. recognition that climate change is a real and urgent threat to the nation's and the planet's well-being is the key to some form of effective international accord. While neither that recognition nor a global agreement will happen in 2013, both will come eventually as the threat becomes overwhelmingly obvious. The longer we wait, unfortunately, the higher the cost will be.

As the United States embarks on the production of unconventional oil and gas resources, the need to price carbon will only become more compelling. In addition to sparking a U.S. economic recovery, these new resources could lower the price of gas and perhaps later of oil -- aiding a eurozone recovery, roiling the fossil fuel markets, introducing greater price volatility and, over time, dramatically shifting global geopolitical alignments as newly oil-rich North America becomes far less dependent on Middle Eastern energy sources.

It's the Economy, Stupid

No "foreign policy" issue in 2013 will matter as much to the global economic, political, and security outlook as whether the United States and Europe are able to deal with their economic crises.

If America's political parties can agree on a way to climb down from the fiscal cliff, the resolution of the acute economic uncertainty that has gripped the country for the past 18 months would unleash private sector investment, spark an economic recovery, and give new weight to the country's international role. Such a compromise might help resolve the United States' present, crippling political polarization.

In purely economic terms, an agreement is certainly achievable. Whether political conditions will allow it depends on whether the Republican Party, having failed to make Obama a one-term president, now judges either that an agreement is in its interest or that the country's economic need is paramount. If so, and if the Democratic Party is also in the mood to compromise, the economic benefits will be very great.

For Europe, the world's largest economic entity and a critical leader of a liberal and peaceful world order, the challenge is to summon sustained economic discipline and political will. Progress has been made: Governments have convinced themselves, if not the markets, that they will do whatever it takes to save the euro. Thanks largely to the efforts of two Italians -- Mario Monti, the technocrat prime minister installed to put Italy's house in order, and Mario Draghi, the new head of the European Central Bank -- concrete steps have been taken that prove a rescue is possible. But painful structural reforms will have to be endured for many years -- a tall order for any single democracy, let alone for many sharing each other's pain.

In effect, the euro crisis morphed in 2012 from a life-threatening emergency to a chronic disease that will be with us for years to come. The challenge for 2013 is to maintain the harsh treatment, avoid setbacks, and continue to inch toward restored growth.

Between a half-dozen unfolding and potential crises in the Middle East, the no-longer-avoidable economic and political challenge confronting the United States and Europe, and a shaky U.S.-China relationship to be navigated past fresh shoals, 2013 looks to be a year of defining importance in international affairs.



Sea Change in Spain

Latin America's economic growth and Europe's debt crisis have turned Ibero-American relations upside down.

With possible independence on the line, it is not surprising that Catalonia's regional election has garnered so much attention this week. But several days earlier, another critical Spanish storyline was thrown into sharp relief down south, in the Atlantic port of Cádiz during the latest Ibero-American summit.

As it turned out, Cádiz was a fitting site for the annual gathering of the heads of government and state of the Spanish- and Portuguese-speaking nations of Europe and the Americas. No city better epitomizes the nearly inverted relationship that has developed between Spain and Latin America in recent years. Cádiz was once one of Spain's most prosperous towns, and happily swallowed up treasures from the mines and plantations in its former colonies more than 200 years ago. Today, however, it has the highest level of joblessness in the country (over 36 percent) and has witnessed numerous protests as social unrest spreads across Spain. The "colonies," meanwhile, are now part of one of the world's fastest-growing and most confident regions.  

Back in 1991, when the first Ibero-American summit was held in Guadalajara, Mexico, Latin America was recovering from a string of economic crises during its "lost decade" -- while Spain and Portugal were finally coming into their own. Long the only authoritarian governments remaining in Western Europe, their democracies were taking root after a shaky start and their economies were gaining ground following entry into the European Union. The first summit was in anticipation of the 500th anniversary of Christopher Columbus's voyage to the New World, and was viewed in particular by Spain as a way to re-establish its presence in Latin America. In the 1990s, Spain fulfilled that aspiration during a period that was widely known as the "re-conquest" and characterized by heightened cultural interest and frenzied investment and acquisitions by Spanish firms in the Americas.

But on Nov. 16 and 17, when the group met for the 22nd time, the tables had turned dramatically. Despite some ominous signs in a few countries, Latin American presidents were largely upbeat about their region's steady economic performance (according to the Organization of Economic Cooperation and Development, the Latin American economy will grow by 3.2 percent this year and by a projected 4 percent in 2013). Their European counterparts, however, continued to be shaken by the sovereign debt crisis in the eurozone, which is facing its own "lost decade." 

The summit's Spanish hosts, Prime Minister Mariano Rajoy and King Juan Carlos I, were notably gloomy and appealed to their Latin American counterparts for support in their moment of distress. For decades, European and Spanish companies helped drive foreign investment in Latin America and helped raised Latin American concerns at the European level. Now, Spain and Portugal fully recognized Latin America's enhanced global status. (In fact, there were some calls in Cádiz for Latin American help in giving Europe greater access to Asian markets.) "Spain receives Latin American investment with open arms," Rajoy said in his opening address. Just a few years back -- let alone two decades ago -- such an entreaty would not have been taken seriously.

With profound crisis -- Spain's downturn has been stunning by any measure, with more than a quarter of the workforce unemployed and over 50 percent of 16- to 25-year-olds out of work -- has come a sense of humility in Madrid. Gone is the sense that Spain could teach Latin American countries how to adopt its successful political and economic model -- an attitude exemplified in particular by the administration of Spanish Prime Minister Felipe González (1982-1996).

In some respects, Latin America is already answering the appeal coming from Spain and Portugal. The region is a significant source of revenue for some of Spain's largest companies, including banking groups like Santander and technology firms such as Telefónica. Santander derives more than half of its profits from Latin America, the bulk from Brazil. And Latin America's energy and infrastructure sectors represent other fertile areas for Spanish investment. (Of course, these opportunities also involve risks, as Spain found out in April when Argentina nationalized Yacimientos Petrolíferos Fiscales (YPF), a division of the Spanish oil company Repsol.) Latin American companies, meanwhile, are increasingly pursuing investment opportunities throughout the world. In 2012, Latin American companies have purchased more than $12.7 billion in European assets. In Cádiz, both the Inter-American Development Bank and Corporación Andina de Fomento (CAF), the development bank of Latin America, pledged substantial support to medium-sized companies to export or invest in Europe.

In this stretch of bicentennial independence celebrations throughout Latin America, there have been numerous signs of a geopolitical role reversal. The region -- with the notable exception of Mexico in 2008, whose economy is closely tied to America's -- weathered the 2008 financial crisis remarkably well. Impressive macroeconomic management, innovative social policies, and huge, largely China-driven demand for high-priced commodities in many South American countries help account for the sound performance, which defied many expert predictions.

Perhaps nothing illustrates the striking reversal taking place in Ibero-American relations better than migration flows. The debt crisis has driven record numbers of Spaniards to emigrate, and many are choosing Latin America as their new home. Over the past four years, the Spanish population has risen 25 percent in Brazil, 54 percent in Peru, and 150 percent in Ecuador. Many of these migrants are Latin Americans who became Spanish citizens in the hopes of a better future and have returned home disappointed. Yet many others are young Spanish professionals unable to find work in their native country. Far more Spaniards are now coming to Latin America than vice versa.

When Christine Lagarde traveled to Mexico and Brazil a year ago, her message was unusual for the head of the International Monetary Fund (IMF), an institution that still arouses deep-seated resentment across the region for the austerity measures it prescribed over the decades. Lagarde sought to tap newfound wealth in those countries -- and specifically bilateral loans -- in response to the spreading debt crisis in Europe. Yet key officials such as Carlos Cozendey, the Brazilian finance ministry's international affairs secretary, made it clear that their willingness to contribute financially would be contingent on fundamental governance reforms at the IMF, including increased voting rights for developing nations. In the end, however, Brazil, along with the other BRICS, made the contributions that Lagarde had requested.

Brazil, the region's economic powerhouse and the world's sixth-largest economy, has and will continue to play a particularly critical role in defining the evolving relationship between Europe and Latin America. In Cádiz, Brazilian President Dilma Rousseff was hardly reticent in warning Spain and Portugal about the harsh consequences that severe austerity measures would bring -- and in touting her own government's vigorous effort to stimulate investment in infrastructure. Still, she acknowledged that Brazil is also greatly affected by the downturn in international markets, and this year the country's economy is projected to grow by merely 1.5 percent. Rousseff's warning reinforced Rajoy's own position as he seeks to ease drastic budget-deficit measures adopted by the European Union.

Indeed, while it may be tempting for Latin Americans to have a sense of schadenfreude in seeing their former colonial powers now suffering such a deep recession, they are acutely aware from firsthand experience how cyclical -- and contagious -- such crises are. The region is hardly immune from the dangers facing the global economy, be it the debt crisis in Europe (which accounts for 13 percent of Latin America's exports) or the economic slowdown in China (today China is the largest trading partner for Brazil, Chile, and Peru, and the second-largest for Argentina and Colombia). On a regional basis, the European Union remains Latin America's second-largest trading partner after the United States, with exports and imports that totaled more than $200 billion in 2011. Spain currently does $35 billion worth of trade with Latin America and in 2011 invested $18 billion in the region, mainly in Argentina, Brazil, Chile, and Mexico. Latin America, in other words, can hardly afford to view Europe's coming "lost decade" with indifference and complacency. As Rajoy noted in Cádiz, "If Latin America is an opportunity for Europe, we are also one for you." 

Still, the climate today is a far cry from what it was in 1991 in Guadalajara. The chief upshot of the Cádiz summit was the recognized need to "re-found" the Ibero-American relationship. The core idea that animated the annual gathering has been exhausted -- and it is still unclear what, if anything, will supplant it. The fraternal bonds and political mentorship on display in the 1990s have faded, giving way to heightened fragmentation.

For its part, Latin America is more diverse than ever, with Bolivarian countries rallying around Venezuelan President Hugo Chávez, other South American countries following Brazil's lead, and Mexico and Central American countries retaining deep ties to the United States. The leaders of these nations make economic decisions in accordance with hard-headed assessments of today's global economy, not some sentimental attachment to the mother country. None of these clusters needs Spain as a gateway to Europe or anywhere else in the world. The hard truth is that Latin America has outgrown Spain.

Mired in crisis for the foreseeable future, the Spanish model has lost its luster and the aura that was long associated with Felipe González's appealing leadership. Spain is not a G-20 member (unlike Argentina, Brazil, and Mexico) and a number of Latin American countries have increasing clout on the global stage. Growing political and economic dynamism is also manifest in the Latino population in the United States, which, at 52 million, exceeds Spain's population.

As if the two Iberian nations were not sufficiently dispirited by the reversal of fortunes, the next Ibero-American summit is scheduled to take place in booming Panama, where economic growth this year is expected to reach 10 percent -- the highest in the region.       

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