    [Senate Hearing 115-786]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 115-786

                 EMERGING EXTERNAL INFLUENCES IN THE WESTERN
                                   HEMISPHERE

    =======================================================================

                                    HEARING

                                   BEFORE THE

                            SUBCOMMITTEE ON WESTERN
                           HEMISPHERE, TRANSNATIONAL
                           CRIME, CIVILIAN SECURITY,
                            DEMOCRACY, HUMAN RIGHTS,
                           AND GLOBAL WOMEN'S ISSUES

                                     OF THE

                         COMMITTEE ON FOREIGN RELATIONS
                              UNITED STATES SENATE

                         ONE HUNDRED FIFTEENTH CONGRESS

                                 FIRST SESSION
                                   __________

                                  MAY 10, 2017
                                   __________

           Printed for the use of the Committee on Foreign Relations

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                       Available via the World Wide Web:
                             http://www.govinfo.gov

                   U.S. GOVERNMENT PUBLISHING OFFICE
     40-276 PDF             WASHINGTON : 2020

                     COMMITTEE ON FOREIGN RELATIONS

                    BOB CORKER, Tennessee, Chairman
    JAMES E. RISCH, Idaho                BENJAMIN L. CARDIN, Maryland
    MARCO RUBIO, Florida                 ROBERT MENENDEZ, New Jersey
    RON JOHNSON, Wisconsin               JEANNE SHAHEEN, New Hampshire
    JEFF FLAKE, Arizona                  CHRISTOPHER A. COONS, Delaware
    CORY GARDNER, Colorado               TOM UDALL, New Mexico
    TODD YOUNG, Indiana                  CHRISTOPHER MURPHY, Connecticut
    JOHN BARRASSO, Wyoming               TIM KAINE, Virginia
    JOHNNY ISAKSON, Georgia              EDWARD J. MARKEY, Massachusetts
    ROB PORTMAN, Ohio                    JEFF MERKLEY, Oregon
    RAND PAUL, Kentucky                  CORY A. BOOKER, New Jersey
                      Todd Womack, Staff Director
                Jessica Lewis, Democratic Staff Director
                        John Dutton, Chief Clerk

                  SUBCOMMITTEE ON WESTERN HEMISPHERE,
           TRANSNATIONAL CRIME, CIVILIAN SECURITY, DEMOCRACY,
                HUMAN RIGHTS, AND GLOBAL WOMEN'S ISSUES

                     MARCO RUBIO, Florida, Chairman
    RON JOHNSON, Wisconsin               ROBERT MENENDEZ, New Jersey
    JEFF FLAKE, Arizona                  TOM UDALL, New Mexico
    CORY GARDNER, Colorado               JEANNE SHAHEEN, New Hampshire
    JOHNNY ISAKSON, Georgia              TIM KAINE, Virginia

                                  (ii)

                                C O N T E N T S

                                  ----------
                                                                       Page

    Rubio, Hon. Marco, U.S. Senator From Florida.....................     1

    Menendez, Hon. Robert, U.S. Senator From New Jersey..............     3

    Emanuele Ottolenghi, Ph.D., Senior Fellow, Foundation for Defense
      of Democracies, Washington, DC.................................     5
        Prepared statement...........................................     7

    Eric Farnsworth, Vice President, Council of the Americas,
      Washington, DC.................................................    34
        Prepared statement...........................................    36

                                  (iii)

         EMERGING EXTERNAL INFLUENCES IN THE WESTERN HEMISPHERE

                                  ----------

                            WEDNESDAY, MAY 10, 2017

                                   U.S. Senate,
     Subcommittee on Western Hemisphere, Transnational
    Crime, Civilian Security, Democracy, Human Rights,
                             and Global Women's Issues,
                        Committee on Foreign Relations,
                                                        Washington, DC.
        The subcommittee met, pursuant to notice, at 10:24 a.m., in
    room SD-419, Dirksen Senate Office Building, Hon. Marco Rubio,
    chairman of the subcommittee, presiding.
        Present: Senators Rubio [presiding], Gardner, and Menendez.

                OPENING STATEMENT OF HON. MARCO RUBIO,
                       U.S. SENATOR FROM FLORIDA

        Senator Rubio. Good morning. This hearing of the
    Subcommittee on Western Hemisphere, Transnational Crime,
    Civilian Security, Democracy, Human Rights, and Global Women's
    Issues will come to order. The hearing today is entitled,
    ``Emerging External Influences in the Western Hemisphere.''
        I apologize to the witnesses and to the members. It has
    been an interesting morning, and navigating the hallways was
    quite an adventure. But I appreciate your patience in being
    here.
        The panel today is going to feature Emanuele Ottolenghi,
    the senior fellow at the Foundation for Defense of Democracies,
    and, of course, Eric Farnsworth, the vice president of the
    Council of the Americas. I welcome the opportunity to have them
    testify here today.
        I also want to thank all of you here today in attendance at
    this hearing.
        It is my hope that we can examine external political and
    economic influences on our hemisphere from traditional state
    actors such as Russia, China, Iran, and North Korea.
        We will also consider the potential terrorist threat posed
    by external terrorist groups such as ISIL, who are potentially
    radicalizing susceptible individuals in small countries
    throughout the hemisphere and, in particular, the Caribbean.
    Some of these individuals are motivated to travel to join the
    fight in Syria and Iraq, and others may pose a risk for
    conducting attacks in their home countries, or even seeking to
    enter the United States to do the same.
        Countering radicalization online within a small factor of
    the Muslim community and corresponding threat of homegrown
    violent extremism is perhaps one of the greatest challenges
    that we face in protecting innocent Americans at home from
    lone-wolf terrorist attacks like those we have seen in Boston,
    San Bernardino, and Orlando.
        The fact that this terrorist threat is spreading to other
    nations in our hemisphere should concern us all. For instance,
    Trinidad and Tobago is a prime example of a small Caribbean
    nation currently struggling with the threat of radicalization.
        According to a New York Times article from 21 February of
    this year, the Trinidadian Government recently introduced a
    series of amendments that would criminalize membership in the
    Islamic State and other extremist organizations. That is an
    obvious legal reform that the United States must demand and
    hope to achieve from other countries in the hemisphere for the
    safety of their own citizens and our own. According to the New
    York Times, this new Trinidadian law would stipulate people who
    travel to certain regions would be presumed to be doing so for
    terrorism.
        Trinidad has a population of just 1.3 million, but it had
    130 of its citizens travel to Syria to fight for ISIL. The U.S.
    with 321 million people has seen 250 citizens travel to join
    ISIL, by comparison.
        I want to hear from our witnesses about what the United
    States can do to work with Trinidad and other nations in the
    region struggling with these challenges. In particular, I want
    to hear what roles should the Departments of State, Justice,
    Homeland Security, and the Southern Command and the Defense
    Department be playing to reduce and confront radicalization.
        This hearing is also an opportunity to consider the
    continued illicit financial activities of Hezbollah, Iran, and
    other actors enabled by some governments in the region with a
    history of antidemocratic postures. I also want to hear the
    current status of illicit financing and the financing of
    Hezbollah, in particular.
        What is its posture in Latin America today? How are
    activities of Hezbollah supported by travel from Iranian
    officials, particularly MOIS and the Quds Force?
        More broadly, it is important to examine how our
    adversaries in countries like Cuba, Venezuela, and Nicaragua
    through new diplomatic military and intelligence cooperation
    are affecting our standing in the region.
        We will also examine the links between external actors and
    the production of trafficking and selling of illegal drugs in
    the Western Hemisphere and the bankrolling of global terrorist
    activities. For instance, with the peace agreement in Colombia,
    how are Mexican transnational criminal organizations filling
    the void potentially left by the FARC?
        In 2014, I led in the Senate the Hezbollah International
    Financing Prevention Act of 2014 to prevent Hezbollah and
    associated entities from gaining access to international
    financial institutions, but there is more to be done, and I
    look forward to hearing from our witnesses.
        With that, I turn it over to the ranking member, Senator
    Menendez.

                  STATEMENT OF HON. ROBERT MENENDEZ,
                      U.S. SENATOR FROM NEW JERSEY

        Senator Menendez. Thank you, Mr. Chairman. I am glad we are
    keeping the subcommittee active, exploring the myriad pressing
    issues that we have in our own hemisphere even as we are
    challenged by events elsewhere in the world.
        Let me welcome our witnesses, Dr. Ottolenghi and Mr. Eric
    Farnsworth, the vice president of the Council of the Americas
    who has a great deal of expertise in the hemisphere that I have
    found valuable over time.
        As you and I both know, Mr. Chairman, this body and,
    indeed, most of the headlines out of the foreign policy
    community often overlook our own hemisphere and, by extension,
    our closest neighbors and some of our most important allies.
        Over the course of its history, the United States has
    certainly influenced our neighbors to the south. And I will
    acknowledge that this history, with some countries in
    particular, is complicated and imperfect. Looking inward, it is
    impossible to tell the history of the United States without the
    immense influence of immigrants and migrants from the rest of
    the hemisphere.
        In general, over the past few decades, we have witnessed
    relative stability between nations and the general trend toward
    embracing democratic values that protect fundamental rights,
    empower people, promote opportunity for citizens throughout the
    hemisphere.
        While we certainly cannot take full credit, the United
    States' active engagement in the region in support of
    governments transitioning from dictatorship to democracy, of
    partnerships, training, and shared responsibility for
    supporting democratic institutions, combating criminal
    networks, of economic development programs that help foster
    resilient communities, has served our national security
    interests in tandem with supporting a stable and prosperous
    hemisphere in general.
        To consider external influences on the whole hemisphere is,
    of course, ambitious in one subcommittee hearing, but there are
    trends we see throughout. The United States is a constant.
        So I hope we can use this hearing as an opportunity not
    just to hear from our esteemed witnesses on their particular
    expertise but to use this as an opportunity to highlight the
    importance of American and, in this subcommittee let me say,
    United States' leadership and engagement.
        There are, of course, a few notable exceptions to the
    trends I have spoken about. We have watched with horror and
    frustration as Nicolas Maduro continues to oppress the people
    of Venezuela, drag its economy and future further into the
    quagmire that the Chavez legacy created. Bolstered by shady
    bond purchases, Russia seems more than willing to help him in
    this effort.
        In Cuba, despite diplomatic efforts from the past
    administration, people are still jailed for expressing their
    opinions, still unable to earn meaningful incomes to improve
    their lives.
        As the Washington Post reported last month, Russia is
    increasing its presence in Nicaragua into the welcoming arms of
    Daniel Ortega. While I am not convinced we are living in a new
    Cold War, we certainly have not yet fully escaped Russia's
    influence here in the United States or in the hemisphere. It is
    no coincidence that these countries in which citizens are
    suffering, and whose fundamental human rights are oppressed,
    all share an affinity for a particular country and the failed
    ideology pushed in the middle part of last century.
        On the other side, China, whose foreign policy objectives
    in the region seem confined to trade deals, has also steadily
    increased its presence in the region. China, however,
    notoriously cares little for the rule of law, governance
    structure, or environmental and labor protections that
    ultimately secure long-term economic interests for a nation.
        As we build our own trade relationships, we must prioritize
    these components to best facilitate long-term mutually
    beneficial relationships. Bloviating about reneging on trade
    deals or throwing around threats of tariffs does nothing to
    improve the economic outlook of American business. In the worst
    case, it pushes our would-be partners toward other countries.
        I recognize there are those who would look to Chinese or
    Russian presence in our hemisphere and point out that the
    United States maintains an active presence well beyond our
    borders. Our interests, however, and intentions are clear. It
    is rooted in our principles and values, defensively supporting
    our allies in Europe, Asia, and the Middle East; seeking
    investment opportunities for American businesses overseas;
    supporting nations who actively seek that support; and building
    democratic institutions and governance structures.
        So I look forward to hearing from our witnesses their
    assessments of the intentions and motivations of some of the
    primary external actors in Latin America.
        Mr. Farnsworth, in your written testimony, you note that
    most of China's actions do not pose a direct ``threat'' per se
    to the United States, but influence in soft power can be very
    commanding tools.
        Mr. Ottolenghi, I am curious to hear your assessment about
    whether some of the actions you have studied are confined to
    country-specific goals or are in pursuit of broader regional
    ambitions.
        I will conclude by saying that, as with the rest of the
    world, American engagement, investment, and aid to the Western
    Hemisphere is in our own national interests. It is our economic
    interest to support the growth of vibrant middle classes around
    our hemisphere who are more eager to do business with the
    United States than they are with China. It is in the interests
    of our national security to support stable and resilient
    countries that share our democratic values and our sense of
    shared security against external threats.
        With that, I look forward to hearing from our witnesses.
    Thank you, Mr. Chairman.
        Senator Rubio. Thank you, Senator Menendez.
        Dr. Ottolenghi, we will begin with you. I would, just for
    the witnesses' purposes, and it is the pot calling the kettle
    black as a Senator about to say this, but if we could limit to
    about 5 minutes, because it gives us more time for questions.
    We have your written statements. I imagine all three of the
    Senators here and others who may not be in attendance have
    already read it. But it is important, as there may be other
    points you may want to raise throughout the testimony.
        But the question-and-answer part is the one where we really
    get to the heart of the matter. I know members have other
    engagements as well, and you are both veteran witnesses at
    these hearings.
        So, Doctor, we will begin with you. Thank you for being
    here.

            STATEMENT OF EMANUELE OTTOLENGHI, PH.D., SENIOR
     FELLOW, FOUNDATION FOR DEFENSE OF DEMOCRACIES, WASHINGTON, DC

        Dr. Ottolenghi. Chairman Rubio and Ranking Member Menendez,
    members of the subcommittee, I thank you for this opportunity.
        The convergence of Iran-sponsored radical Islam with
    transnational organized crime in Latin America should be
    recognized as a serious threat to the national security of the
    United States and the integrity of its financial system.
        Congress and the executive branch have a panoply of tools
    at their disposal to address this threat. What has been missing
    is a coherent foreign policy that recognizes the importance of
    Latin America as a key arena of competition with Iran and puts
    in place the needed resources to blunt Iranian and Hezbollah
    threats.
        In his 2015 posture statement before Congress, General John
    Kelly lamented that, and I quote, ``Our limited intelligence
    capabilities make it difficult to fully assess the amount of
    terrorist financing generated in Latin America or understand
    the scope of possible criminal terrorist collaboration.''
        To date, there is still no accurate assessment of how much
    Hezbollah makes from illicit activities in Latin America, but
    this involvement is known and growing. That needs to change.
        Hezbollah's involvement in illicit trade is not just a law
    enforcement problem. Behind Hezbollah stands Iran, which seeks
    to leverage the group's networks to gain political influence
    while helping it expand its base of supporters and protect
    their illicit activities.
        Iran's and Hezbollah's operation in Latin America thus
    intersect and mutually reinforce one another. Both pursue goals
    that are not only diametrically opposed to U.S. interests but
    also clearly pose a direct threat to American national
    security.
        In my written testimony, I discuss specifically the case of
    four Hezbollah suspects recently arrested on drug trafficking
    charges in the tri-border area of Argentina, Brazil, and
    Paraguay, otherwise known as TBA. They may also have been
    involved in human trafficking, counterfeiting, and immigration
    fraud. This adds to the growing evidence of Hezbollah's
    involvement in multibillion-dollar illicit trade schemes that
    often generate from the TBA and whose revenue Hezbollah seeks
    to launder through the U.S. financial system.
        That should be a wake-up call to Congress to make the
    necessary means available for intelligence-gathering and
    assessment of what is a significant national security threat.
        The recent designation of Venezuela's Vice President Tareck
    El Aissami under the Kingpin Act is a stark reminder of our
    vulnerabilities. El Aissami was designated alongside 13 U.S.
    companies he allegedly used to run his fraudulent activities
    through the U.S.
        Authorities froze substantial assets in his name here. That
    move should worry our enemies, but it is also significant that
    a Latin American politician with reported links to Iran and
    Hezbollah and drug cartels felt confident enough to park his
    wealth in the U.S.
        Part of the problem with U.S. policies is that U.S.
    sanctions against Hezbollah operatives in the TBA, the hub of
    Hezbollah's illicit finance, are more than a decade old, and
    those targeted are still able to travel, transact, and conduct
    business as if there were no sanctions.
        It is important that the U.S. rectify this state of affairs
    for two reasons. Sanctioned operatives may continue to engage
    in nefarious activities, and lack of sanctions enforcement
    undermine their credibility in deterrence.
        Another problem the U.S. needs to address, in Latin
    America, Hezbollah has benefited from a permissive environment
    where corrupt local officials connive with Hezbollah's illicit
    finance for their own gain.
        A November 2017 $1.2 billion money laundering
    investigation, which a 2017 State Department report cites as
    evidence of corruption in Paraguay, offers proof of ongoing
    trade-based money laundering in the TBA and cover-up by local
    authorities. Local sources told me that the investigated
    companies were given 48-hour advanced notice about the search
    warrants against them.
        U.S. officials familiar with the case privately complained
    of subsequent obstructionism at the highest levels of power,
    preventing attempts by U.S. law enforcement agencies to gain
    access to files. U.S. offers to cooperate were politely but
    decisively rebuffed.
        In such a corrupt environment, Hezbollah thrives. The U.S.
    should demand that local governments put an end to this type of
    impunity or face consequences. These could include: one, impose
    designations under Section 311 of the Patriot Act on financial
    institutions known to be used by Hezbollah financiers to move
    the revenues; two, designate banking sectors of countries that
    facilitate Hezbollah's terror financing zones of primary money
    laundering concern; three, work with allies potentially through
    international forums like the Financial Action Task Force to
    blacklist government entities that cooperate with Hezbollah;
    revoke or deny visas from those implicated in Hezbollah
    activity, including local politicians who facilitate or fail to
    prevent Hezbollah's illicit finance in their own jurisdiction;
    engage Latin American governments to ensure they have adequate
    legislative tools to investigate terrorist activities and
    combat terror finance; and, finally, persuade allies in the
    region to list Hezbollah as a terrorist organization.
        I thank you for your attention, and I very much look
    forward to your questions.
        [The prepared statement of Mr. Ottolenghi follows:]

                   Prepared Statement of Emanuele Ottolenghi

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Senator Rubio. Thank you very much, with one second on the
    clock. Excellent.
        Just as a reminder to members, the minority, as is their
    right under our rules, has invoked the two-hour rule, so we
    will have to conclude this hearing at 11:30. So we are going to
    chop through it fairly quickly here, but I think we will have
    plenty of time.
        Mr. Farnsworth, thank you.

     STATEMENT OF ERIC FARNSWORTH, VICE PRESIDENT, COUNCIL OF THE
                        AMERICAS, WASHINGTON, DC

        Mr. Farnsworth. Mr. Chairman, thank you, Mr. Ranking
    Member, thank you for the invitation to appear before you.
        Let me also upfront thank you for your leadership on
    addressing the most salient issues in the hemisphere, including
    Venezuela, which is a humanitarian crisis developing before our
    eyes. So thank you for your leadership in highlighting those
    issues.
        As requested, I will address the issue of China in the
    Americas.
        Let me give you, if I may, the bottom line first. China's
    entrance into the Americas has been one of the most significant
    developments of hemispheric affairs in this century. While
    there are other important developments such as populist
    governance, which may be on the way out, China's engagement is,
    if anything, intensifying.
        China's dramatic economic rise has necessitated new
    commercial and economic partners worldwide. This has broad
    implications particularly for the commodities-producing nations
    in South America. Nations such as Brazil, Chile, and Peru count
    China as their top trade partner. China's the second largest
    trade partner of Argentina, Colombia, and others.
        This has helped a number of nations to diversify their
    trade relations, proving beneficial, for example, during the
    global economic crisis of 2009. But because the Chinese
    approach to date has been overtly mercantilistic, it has also
    negatively impacted regional producers who now face
    supercharged competition in manufactured products while
    weighting the balance toward the production of primary goods
    just when Latin America is looking to move up the value chain.
        China's activities on the investment side are also having
    an impact, particularly in sectors including energy, mining,
    and agriculture, where China feels the need to lock in access
    to supplies which sustain its economy. Of particular interest
    is energy, where China is an active participant most recently
    in the deep water off the Gulf of Mexico but also from
    Argentina to Venezuela and virtually every regional energy
    producer in between.
        Increasingly, China is also looking to expand its regional
    investment portfolio with a heightened focus on infrastructure
    development.
        Mr. Ranking Member, as you mentioned, this is not
    necessarily a security threat per se to the United States,
    although it does change the competitive framework; and it does
    have broader implications for U.S. policy interests,
    particularly as China looks to dominate industries that will
    increasingly form the backbone of the global economy, including
    artificial intelligence, cloud computing, and clean energy.
        The Chinese investment model differs from others. To
    oversimplify, Chinese entities often pay a premium above market
    value for purchases in order to lock in assets. Once an
    investment is confirmed, Western investment values of job
    creation on the local economy, technology and management
    transfer, corporate governance, respect for labor rights,
    environmental protection, anticorruption, and corporate social
    responsibility are not necessarily priorities.
        There are larger implications as well. Progress in Latin
    America to solidify democratic governance has been uneven but
    generally positive. It is unquestionably in the U.S. interest
    to support these efforts. China's entry into the Americas has
    complicated this agenda.
        For example, efforts to promote labor and environmental
    reforms through sound business practices and formal trade
    agreements are undermined when nations sign agreements with
    China that do not include similar provisions, and Chinese
    businesses are not expected to operate necessarily under the
    same prevailing conditions.
        Multilateral lending agencies, like the World Bank, IMF,
    and Inter-American Development Bank that promote financial
    reforms and good governance, become less relevant if borrowing
    nations can receive funds from China or Chinese-led
    institutions without conditionality.
        China's huge purchases of commodities and the provision of
    credits on favorable terms allow regional leaders the
    flexibility to postpone necessary economic and policy reforms
    consistent with open market, democratic governance, or to take
    actions that even harm democracy itself. They can also embolden
    anti-American leaders.
        The best example, of course, is Venezuela, which today is
    in the midst of a humanitarian crisis. The so-called Bolivarian
    Revolution has been enabled at least in part and until recently
    by high oil prices as well as plentiful external financing from
    sources other than the United States and traditional
    international financial institutions. Financial support from
    China of well in excess of $50 billion, according to some
    estimates, has allowed the Venezuelan regime to accelerate its
    antidemocratic repressive course.
        At the same time, China's vision for the region is
    expanding. While engagement heretofore has primarily been
    economic and educational, such as language training through
    exchanges and its regional Confucius Institutes, there are
    indications that political and security considerations,
    especially on cyber issues, are also growing in importance.
        China issued its latest policy paper on Latin America and
    the Caribbean on November 24, 2016, which is a serious and
    ambitious effort to strengthen ties with the region from trade
    and economic development to space cooperation, to health care
    and global epidemics, and global governance.
        This means that the United States must do a better job
    contending for the region. We need a more strategic approach
    based on the values that we hold dear and that we share with
    the majority of citizens across the Americas.
        Let me put this as succinctly as I can: The street
    protesters in Venezuela who seek outside support to end
    repression and restore democracy do not write their banners in
    Chinese or Russian or Persian. Protesters against the Castro
    regime do not fly the Chinese or Russian or Iranian flags
    during May Day parades.
        The example of the United States remains powerful for the
    citizens of the Americas. That is, so long as we do not forget
    that the promotion of our traditional values supports rather
    than undermines U.S. national security efforts, and we work to
    promote them.
        In many cases, Latin Americans and others prefer the United
    States as a more natural partner than China. But as is often
    said, you cannot beat something with nothing. China is playing
    a multidimensional game. The United States should seek to
    compete on the playing field of greatest advantage to us,
    namely democratic governance and meeting the common aspirations
    of the people of the region.
        Meanwhile, we would also do well to reactivate an ambitious
    economic partnership agenda for the hemisphere focusing on,
    among other things, energy and agriculture, as well as the rule
    of law and anticorruption.
        We also need to reconsider the regional paradigm, frankly,
    that limits actions to the lowest common denominator as a means
    to achieve regional consensus on most issues, which has become
    essentially a straightjacket to U.S. policy implementation.
        Broadly speaking, a reenergized approach to the region, in
    my view, is required.
        Mr. Chairman, thank you again for the opportunity, and I
    look forward to your questions.
        [The prepared statement of Mr. Farnsworth follows:]

                     Prepared Statement of Eric Farnsworth

        Good morning, Chairman Rubio, Ranking Member Menendez, and Members
    of the Subcommittee. It is a privilege to appear before you again
    today. Let me also thank you, up front, for your strong, bipartisan
    leadership to promote hemispheric democracy and to address the
    worsening political, economic, and humanitarian crisis created by the
    Chavista regime in Venezuela.
        As you know, the Council of the Americas (``Council'') is a leading
    policy voice on Latin America, the Caribbean, and Canada. For over 50
    years, our mandate has been to promote democracy, open markets, and the
    rule of law throughout the Americas.
        Thank you for the invitation to appear before you to discuss the
    very important topic of emerging external influences in the Western
    Hemisphere. As requested, I will address the issue of China in the
    Americas.
    china's presence in the americas is recent but already well established
        Mr. Chairman and Mr. Ranking Member, let me give you the bottom
    line first: China's entrance into the Americas has, in my view, been
    one of the most significant developments in hemispheric affairs this
    century. And, while other important developments such as the siren call
    of populist governance may be on the wane, China's engagement is, if
    anything, intensifying.
        China's dramatic economic rise has necessitated new commercial and
    economic partners worldwide, to procure the raw materials needed to
    fuel China's domestic growth while opening new markets abroad both to
    sell finished products and also to invest significant dollar and other
    international hard currency reserves. This has broad implications
    particularly for the commodities producing nations of South America,
    which have benefited from sales to China and other developing markets.
    Nations such as Brazil, Chile, and Peru count China as their top trade
    partner; China is the second largest trade partner of Argentina,
    Colombia, and others. This has helped a number of nations to diversify
    their trade relations, proving beneficial, for example, during the
    global economic crisis of 2009. But because the Chinese approach to
    date has been overtly mercantilistic, it has also negatively impacted
    regional producers who now face supercharged competition in
    manufactured products from China, while weighting the balance toward
    the production of primary goods just when Latin America is looking to
    advance upward along the value chain.
        China's activities in Latin America on the investment side are also
    having an impact. In the first instance, some of the promised
    investment has not yet materialized, leading to unmet expectations.
    Still, investment is flowing and it is increasing, particularly in
    those commodities sectors including energy, mining, and agriculture,
    where China feels the need to lock in access to supplies which sustain
    its economy. Of particular interest is energy, where China is an active
    participant, most recently in the deep water of the Gulf of Mexico, but
    also from Argentina to Venezuela and virtually every regional energy
    producer in between. China is also looking to expand its regional
    investment portfolio with an increasing focus on infrastructure
    development.
                       all investments are not made equal
        This is not at this point a security threat per se to the United
    States, although it does change the competitive framework for investors
    and it does have broader implications for U.S. policy interests
    particularly as China looks to dominate industries that will
    increasingly form the backbone of the global economy, including
    artificial intelligence, cloud computing, and clean energy.
        The Chinese investment model differs from others. To oversimplify,
    Chinese entities often pay a premium above market value for purchases,
    in order to lock in assets. Once an investment is confirmed, Western
    investment values of job creation on the local economy, technology and
    management transfer, corporate governance, respect for labor rights,
    environmental protection, anti-corruption, and corporate social
    responsibility are not necessarily priorities. This can unfairly put
    U.S. and other companies at a disadvantage by lowering the costs of
    Chinese production vis-a-vis the competition.
        But there are larger implications, as well. Since the end of the
    Cold War, Latin America has worked diligently to promote democratic
    governance. Progress has been uneven but generally positive; it is
    unquestionably in the U.S. interest to support these efforts. Open
    market democracies that broadly share values tend to make the best
    long-term partners of the United States in the promotion of shared
    interests. China's entry into the Americas has complicated this effort,
    not just in the conduct of business but also in the conduct of foreign
    policy.
                changing the calculus for policy implementation
        For example, efforts to promote labor and environmental reforms
    through sound business practices and formal trade agreements are
    undermined when nations sign agreements with China that do not include
    similar provisions, and Chinese businesses are not expected to operate
    under the same prevailing conditions. Multilateral lending agencies
    like the World Bank, IMF, and Inter-American Development Bank that
    promote financial reforms and good governance become less relevant if
    borrowing nations can receive funds from China or Chinese-led
    institutions without conditionality. China's huge purchases of
    commodities and the provision of credits on favorable terms allows
    regional leaders the flexibility to postpone necessary economic and
    policy reforms consistent with open market, democratic governance, or
    to take actions that harm democracy itself. It also emboldens anti-
    American leaders to pursue policies at home and across the region
    contrary to U.S. interests.
        The best example is Venezuela, which today is in the midst of
    humanitarian crisis. While it is clearly the responsibility of Hugo
    Chavez and the course that he and his followers including Nicolas
    Maduro have set, nonetheless the so-called Bolivarian Revolution has
    been enabled, at least until recently, by high oil prices as well as
    plentiful external financing from sources other than the United States
    and traditional international financial institutions. Financial support
    from China of well over $50 billion, according to some estimates, has
    allowed the regime to accelerate its anti-democratic, repressive
    course.
        At the same time, China's vision for the region is expanding. The
    upcoming May 14-15 Belt and Road Initiative meeting is just the latest
    high level diplomatic initiative that will include Latin America; at
    the APEC meetings last November in Lima, Peru, which I attended,
    China's leader Xi Jinpeng went beyond the usual methodical courting of
    the region by publicly laying out a strategic approach to Latin America
    that, if fully realized, would position China as a new guarantor of
    open markets and international governance in the Asia-Pacific region.
    During the November visit, Xi strongly supported renewed progress
    toward the long-stalled Free Trade Area of the Asia Pacific, an
    initiative until recently subsumed by the now-shelved Trans-Pacific
    Partnership, he worked to build momentum toward the Beijing-led
    Regional Comprehensive Economic Partnership which is a roadmap for
    trade and economic linkage within Asia that excludes the United States,
    and he offered the Asian Infrastructure Investment Bank as a partner
    for infrastructure and other initiatives in Latin America, adding to
    pre-existing Brazilian membership in the BRICS Bank. In addition to his
    State Visit to Peru, he also declared Ecuador and Chile to be
    ``comprehensive strategic partners'' of China. Soon after, on November
    24, 2016, China issued its latest Policy Paper on Latin America and the
    Caribbean, a serious and ambitious effort to strengthen ties with the
    region from trade and economic development to space cooperation to
    healthcare and global epidemics to global governance.
        a competitive commercial environment calls for a more strategic
                                    approach
        China's interest in the Americas will continue to develop rapidly,
    as it has since the beginning of the century. And, while China's
    engagement heretofore has primarily been economic and educational, such
    as Chinese language training through exchanges and also its regional
    Confucius Institutes, there are indications that political and security
    considerations, especially on cyber issues, are also growing in
    importance. This means that the United States must do a better job
    contending for the region. We need a more strategic approach based on
    the values that we hold dear and that we share with a majority of
    citizens across the Americas. Let me put this as succinctly as I can:
    the street protesters in Venezuela who seek outside support to end
    repression and restore democracy do not write their banners in Chinese
    or Russian or Persian. Protesters against the Castro regime do not fly
    the Chinese or Russian or Iranian flags during May Day parades. The
    example of the United States remains powerful for the citizens of
    oppressive regimes in the Americas. That is, so long as we do not
    forget that the promotion of our traditional values supports rather
    than undermines U.S. national security efforts and we work to promote
    them.
            the united states remains the preferred regional partner
        In many cases Latin Americans and others prefer the United States
    as a more natural partner than China, given history, economic
    opportunity, geography, culture, language, and values, but
    circumstances going forward will dictate policies and actions. As is
    often said, you can't beat something with nothing. The APEC meetings in
    Lima clearly showed that strategic economic and political re-evaluation
    if not realignment is underway. China is playing a multi-dimensional
    game. That is even more reason why we should seek to compete on the
    playing field of greatest advantage to us, namely, democratic
    governance and meeting the common aspirations of the people of the
    region. And we should not be shy about speaking out on principle when
    required, ideally with the coordination and support of regional allies
    and also the Organization of American States.
        Meanwhile, the United States would also do well to deepen further
    not alienate our economic relations with Canada and Mexico, nations
    that engage in common business practices with the United States and
    Europe, as partners in the promotion of a common agenda that share
    common values. More broadly, we also need to re-activate an ambitious
    economic partnership agenda for the hemisphere. Rethinking U.S. support
    for the Trans-Pacific Partnership gives us an opportunity now to re-
    envision a strategic initiative for the Americas, not just Asia.
    Initiatives would include stronger emphasis on energy and agriculture
    partnership, as well as the rule of law and anti-corruption. We also
    need to reconsider the regional paradigm that limits actions to the
    lowest common denominator as a means to achieve regional consensus on
    any issue, a paradigm that has become more of a straightjacket to U.S.
    policy implementation. And, we need to build on previous bi-partisan
    successes, including movement toward full and lasting peace in
    Colombia, and also a more effective approach to addressing the deep
    security, economic, and social concerns in Central America while
    maintaining security commitments to Mexico and the Caribbean.
        The battle for the soul of Latin America continues. If anything,
    the United States is potentially better positioned than we have been
    for some time given recent changes in regional governance and the
    decreasing allure of populism. But China's entrance into the Americas
    has changed the game. The United States must engage in a positive, pro-
    active manner to offer the region a vision for cooperation consistent
    with our values. A re-energized approach to the region is required.
        Mr. Chairman, thank you again for the opportunity to testify before
    you this afternoon. I look forward to your questions.

        Senator Rubio. Thank you, Mr. Farnsworth. You have shamed
    yourself here today. You went a minute over. The doctor was a
    second under. Of course, I am joking.
        Again, I thank you both for your testimony. I am going to
    defer to the ranking member.
        Let me just say I am glad that Senator Gardner is here. He
    has numerous responsibilities today. He has been a leader on
    the issues of the Asia-Pacific region. What is interesting is
    the interplay between the Asia-Pacific region and the Western
    Hemisphere, in particular with China. So I know he has another
    meeting he has to get to, but his presence here today shows how
    all these things are interlinked.
        The ranking member.
        Senator Menendez. Thank you, Mr. Chairman.
        Thank you both for your testimony. There are so many
    avenues here to pursue.
        I know that listening to you, Mr. Farnsworth, about China,
    it sounds like we are in a competition in economics. I get
    that, but in some respects, whether purposely or not, China's
    engagement in investments are more nefarious, in my mind. For
    example, they do not observe the Foreign Corrupt Practices Act,
    which American companies do. And in that reality, as well as in
    giving money without conditionality, it changes the dynamics of
    what we want to see countries do in the hemisphere, so that
    while I have always been an advocate for American business and
    investment in our hemisphere, in the interests of U.S.
    businesses and the jobs that are created from them and the
    profit that can be derived, I also have always viewed a
    corollary to that is the better business practices that U.S.
    businesses bring, the preserving of the Foreign Corrupt
    Practices Act, in essence, all of those elements of good
    governance, in a sense, that they contribute in the countries
    that they engage in. China does not really care about that.
        So when we are competing with the Chinese in the
    hemisphere, the challenge is not just, in my mind, an economic
    one, but it is the influence that they extend undermining the
    very essence of principles that we want to see countries build.
        Is that a fair concern?
        Mr. Farnsworth. Thank you for the question. I think that is
    a keen observation. I would say that is not the intent of
    Chinese investment into the Western Hemisphere. I mean, their
    intent is to, in some cases, deploy the massive reserves of
    foreign capital that they have and to put it to productive use,
    whether it is in Latin America or Africa or East Asia or what
    have you.
        That is legitimate, but the implications of that are, Mr.
    Ranking Member, as you implied. So what we are seeing across
    Latin America is, in countries with strong institutions, we see
    a recognition that sometimes the investment might look good on
    paper but the implications for some of the values of Latin
    Americans that we hold dear as well can be undermined. So you
    are seeing some pushback. You are seeing some legislation. You
    are seeing some recognition that all investment is not created
    equal.
        You are also seeing the Chinese, in my view, move up the
    learning curve. They recognize that Latin America is different
    from other parts of the world and that there are expectations
    along the lines that you are indicating. So it is an evolving
    process.
        Senator Menendez. It is challenging when you want to have
    the Inter-American Development Bank and the World Bank
    promoting some critical core values in governance and rule of
    law opportunities as well as economic development. If I have to
    live with the burden of this and I can have this without the
    burden, human nature is it is going to go to the least
    consequential response. I look at this, and I look at it in a
    combination of different ways.
        Why does China, and for that fact Russia, make huge
    investments in a country like Venezuela who clearly is on a
    huge downward spiral economically, as well as in terms of civil
    unrest and human rights and democracy of its people?
        Senator Rubio and I recently sent a letter to the Treasury
    Department about Russia's state-owned oil company Rosneft's
    stake in Venezuela's state-owned oil company, PDVSA. But China
    has also provided financial support to Venezuela, as you
    mentioned in your remarks.
        So when you see a country that is ultimately taking its
    most significant national asset, which is its oil, to PDVSA,
    sells nearly 50 percent of it, potentially, to Russia, to
    Rosneft, if it defaults, Rosneft will own 49.9 percent plus
    whatever they purchase on the open market, which very well
    could lead to a 50, 51 percent ownership. And they own Citgo in
    the United States of America, which has very significant oil
    infrastructure in our country. And then that is just the
    Russian side. Now the Chinese come in and invest a lot of
    money.
        Other than raw material, are there other concerns that we
    should have? I invite either one of you to make a comment about
    that.
        Mr. Farnsworth. Let me just make a brief comment, and then
    if my colleague would care to as well.
        I think the China and Russia situation is different.
        China, because of its own domestic issues, has been looking
    worldwide to find and procure guaranteed access to natural
    resources wherever they are, and Venezuela has the world's
    largest supply of oil. So, by definition, China is going to be
    interested in that and has been playing a long game in
    Venezuela.
        I do not think that China is particularly enamored with the
    leadership in Venezuela. In fact, I think that they would
    prefer something different, but they are not there for
    political purposes. They are there for natural resources, just
    like they are in other countries in Latin America for similar
    purposes.
        One of the things that we found is that the Chinese
    investors do not really care that much about the governments in
    the countries that they are operating in, so long as they are
    allowed to do business and so long as they are allowed to get
    the upside from that that they are looking for.
        From the perspective of, what does that mean? Well, it
    means they have invested a whole lot of money in the country
    that they may not get back but they have amortized that against
    future deliveries of oil.
        So from the Venezuelan regime, it makes a lot of sense,
    because they get the money up front. They spend it for their
    own political purposes. And then they give the bill to a later
    generation of Venezuelans, and it is all good for them. So it
    is a marriage of convenience.
        Senator Menendez. I worry about the continued--when the
    bill comes due----
        Mr. Farnsworth. Absolutely.
        Senator Menendez.--and Maduro is not in power anymore, what
    China will demand of the future governance of the country.
        Mr. Farnsworth. I think that is fair.
        Senator Menendez. I have more questions, but I will wait.
    Thank you.
        Senator Rubio. Senator Gardner?
        Senator Gardner. Thank you, Mr. Chairman.
        Senator Rubio and Senator Menendez have been leaders on
    this issue, and I thank you for the partnerships we have been
    able to forge as it relates to China and other activities
    around the globe.
        China has provided Venezuela with over $60 billion in
    financing over the past decade--you have talked about that--
    most recently a $2.2 billion loan for oil development in
    November 2016. News events talk about involvement of fake news
    in Europe, elections, hacking, the United States, Russia's
    involvement in placing news stories in the United States.
        To what extent does the Chinese Government participate in
    those kinds of activities in South America, Venezuela in
    particular, providing either antidemocratic government
    assistance, any signs of that in what you see, and how the U.S.
    can play a role in pushing back?
        Mr. Farnsworth. I personally do not see that. China has a
    very robust global effort in terms of media and in terms of
    news. I personally have not seen an overt effort to promote,
    for example, the Maduro regime in Venezuela.
        Again, from my perspective, China's interests in the region
    have primarily been economic. In fact, what they have tried to
    do assiduously is to stay away from the politics of the region
    because they do not want to get wrapped up in it. That is not
    why they are there. They are there to do business and benefit
    themselves.
        At some point, that bleeds into politics. We have been
    talking about that a little bit, but that overt engagement is
    something that, from my perspective, they try to avoid.
        Dr. Ottolenghi. If I may add, sir, the actor that is
    perhaps most actively involved in Venezuela and also elsewhere
    in Latin America in promoting strident antidemocratic values
    and a very militant anti-American rhetoric and posture is the
    Islamic Republic of Iran. And for the Islamic Republic of Iran,
    Venezuela is perhaps the closest ally alongside Evo Morales of
    Bolivia in Latin America.
        It is Iran's forward operating base. It is the place where
    the Iranian missionary network really has begun building its
    own infrastructure. It is the place where the Iranian regime
    launched its Spanish-language propaganda network, Hispan TV, in
    2012. That network shares a considerable amount of human
    resources, starting from journalists and production material,
    with TeleSUR, which is the Venezuelan equivalent.
        Some of that propaganda spills over into other areas of the
    world. There is clear evidence of connections between the
    Spanish propaganda network for Latin America and its use in
    Spain, so that is a bridge into Europe.
        Therefore, I think from an ideological perspective, the
    focus of concern should really be Iran.
        Senator Gardner. Thank you. Admiral Kurt Tidd, the
    Commander of SOUTHCOM, stated in SOUTHCOM's 2017 posture
    statement to Congress that China, and I quote, ``cooperates
    with Latin America on space, potential nuclear power projects,
    and telecommunication networks, which could pose security
    concerns to the United States.''
        Could you talk a little bit about Admiral Tidd's comments?
        Mr. Farnsworth. He is accurate, and China is not shy about
    saying that. In their most recent policy paper toward Latin
    America, which was released late last year in November, space
    cooperation was clearly one of the aspects of priority.
        Latin America, in some ways, sees this as good for
    themselves. It transfers technology. It gives them the
    opportunity to participate in some of these issues.
        Again, I think we have to see what the real intent is
    there. The question of cooperation toward technology and toward
    space exploration is, on its face, potentially dual-use. But I
    think we have to recognize where that may or may not be going.
        So, yes, it is a very open part of their strategy. And if
    you look at what the Chinese have laid out very publicly, it is
    a comprehensive approach to Latin America.
        Now not all of the commitments that China has made over
    recent years have come to pass, particularly announcements of
    multibillion dollars of investment. You get the news reports
    and you get the media, but those investments do not always
    necessarily flow. So we have to see what actions follow these
    words.
        To the extent that it does become dual-use and becomes a
    threat to the United States, we certainly have to be aware of
    that.
        Senator Gardner. Dr. Ottolenghi, if you would like to
    comment?
        Dr. Ottolenghi. The only thing that I would like to add,
    again, in relation to Iran, is, of course, especially during
    the sanctions era and perhaps at the height of the Venezuelan-
    Iran bilateral relation with the late Chavez and the former
    President Ahmadinejad of Iran in power, and their very close
    relationship, Venezuela was used by Iran not just for sanction
    evasion in the financial sector but also for joint projects in
    the missile program.
        These projects, as far as I am concerned and as far as I
    can tell, are still ongoing. Their relationship is not just
    economic and ideological. There is obviously a clear component
    of military and technological cooperation, which should
    continue to be monitored.
        Senator Gardner. Dr. Ottolenghi, in terms of the sanctions
    lifting under the Iran nuclear deal, what kind of uptick did
    you see in that activity in Venezuela?
        Dr. Ottolenghi. It is interesting to see that during the
    entire duration of the Rouhani presidency, while the
    negotiations were ongoing, you did not have the same level of
    bilateral visits and delegations from Venezuela to Iran and,
    more importantly, from Iran to Venezuela occurring at the same
    speed and seniority you saw during Ahmadinejad.
        That combined with the fact that the volume of trade
    between Iran and Latin American countries, and the fruition of
    a lot of the projects that were signed during that era did not
    happen, was interpreted as a sign that Iran's interest in the
    region may be waning or perhaps that the failure of all those
    ambitious projects to come to fruition indicated a
    disenchantment by Latin American leadership towards the
    Iranians.
        I see a very different picture. First of all, since the
    agreement was signed, you have seen important visits by
    President Rouhani, by Foreign Minister Zarif to the region.
    Beneath the surface, the amount of formal diplomatic relations
    and also what you could call nongovernmental relations that, in
    those countries are really sort of driven by the regime through
    nonofficial means, have continued at pace.
        We see a continuation of investment by Iran in the region.
    We see a continuation of dedication of resources by the Iranian
    regime in the ideological struggle, in the export of the
    revolution. They see a priority in the region to flip countries
    to their side. We see the transfer of funds and political
    support to anti-American movements in the region, and certainly
    the continued partnership with Bolivarian regimes and anti-
    American regimes.
        So I think that the overall assessment is that the
    infrastructure the Iranians created during the sanctions era
    and the infrastructure that Hezbollah continues to develop,
    particularly its partnership with organized crime, are there
    and are being leveraged as need be.
        Senator Gardner. Thank you.
        Thank you, Mr. Chairman.
        Senator Rubio. Thank you.
        I have a quick meeting to attend to in the anteroom, so I
    know Senator Menendez, the ranking member, has a couple
    additional questions. I am going to turn it over to him, but I
    am not leaving. I will be back.
        Senator Menendez.
        Senator Menendez. Thank you, Mr. Chairman. I am not going
    to ask unanimous consent for anything.
        Senator Rubio. Objection.
        [Laughter.]
        Senator Menendez. I have a question. I know neither of you
    are Russia experts, but maybe you can shed light or thoughts.
        Russia's recent actions in Nicaragua, as reported in the
    Washington Post last month, the article cites a number of
    officials who think that this new ground tracking station
    ultimately is to be used to increase Russian influence or
    surveillance of Americans and/or the United States. Do you have
    any insights into that? Any perceptions?
        Mr. Farnsworth.
        Mr. Farnsworth. Thank you for the question. I also saw the
    report, and I suppose that is certainly a possibility. I do not
    have access to the intelligence, which I think would probably
    paint a clearer picture.
        From my perspective, the Russian engagement in Latin
    America, since the Cold War but until now, has essentially been
    tactical and it has been a way to promote, particularly in the
    arms industry, arms sales and the procurement of hard currency.
    A lot of what was sold to Venezuela was clearly not for
    Venezuelan military interests. They do not need any of that
    material except to impress their own citizens. But the Russians
    are very happy to sell it because it brings hard currency to
    industries that they want it to support.
        We have seen a lot of that. It did not seem to have much of
    a political component. To the extent that there is a benefit to
    the regime in Venezuela, okay, they probably are reasonably
    happy about that. But what we may be seeing a little bit more
    of now is a more robust presence of Russia into the region. It
    is hard to speculate on what the purpose of that may be.
        But from my perspective, I do not necessarily see it
    because they want to return to the Cold War or have Latin
    America as their chief allies, but rather, frankly, to annoy
    the United States and to keep track on some of the things we
    may be doing because of what they perceive us to be doing in
    some of the countries around them and in Europe. So it is a way
    to kind of play part of the global chess game with Latin
    America, again, as the playing field.
        Senator Menendez. That is interesting. I hope it is only
    that. An annoyance is an annoyance.
        By the same token, I wonder what Ortega is thinking about
    when he has an MCC agreement with the United States that has
    served Nicaragua well, to be inviting the Russians in for a
    monitoring and tracking station. I do not think it is for other
    neighbors in the hemisphere except for the United States.
        So it makes me wonder whether or not sometimes, whether it
    be China, whether it be Russia, whether it be Iran, that the
    way in which they seek to use their economic influence is far
    different than the way we seem to. We seem to be pretty up and
    up in the way in which we use our influence. But they seem not
    necessarily to care about those elements of using their
    influence.
        I sometimes get concerned that, in our desire to have good
    governance and rule of law, which I am a big supporter of,
    human rights, democracy, that we do not use, in pursuit of
    those goals, our economic levers sufficiently enough to engage
    countries, because I would be looking at Ortega, if there is a
    new compact to be reviewed or the conditions of this compact,
    and say, what are you doing?
        Would that be an unfair use of American power?
        Mr. Farnsworth. I do not think it is unfair at all. I think
    it is entirely within our rights to take a look at how we are
    spending our money, our taxpayer money.
        Senator Menendez. Dr. Ottolenghi, last question, do you see
    the concerns that you have raised as it relates to Iran,
    Hezbollah, and related entities as a foothold? Or do you see a
    greater regional ambition? And if you see a greater regional
    ambition, do you see the work being laid, the foundation being
    laid, to fulfill that greater regional ambition?
        Dr. Ottolenghi. Thank you for your question, which is a
    very important one. I do see both points playing out. The
    networks that Hezbollah is building, developing, expanding,
    enhancing in Latin America serve mainly the purpose of
    maintaining the loyalty of expatriate communities there on the
    one hand, and provide steady flows of financial support for its
    operations back home.
        So there is, of course, a political dimension there to
    ensure that the local powers that be will leave this operation
    in place, will not try to dismantle them, will not interfere
    with them.
        There is a concerted effort to use the money that these
    networks yield to buy political influence and to ensure
    impunity. That, of course, has an impact on the quality of
    governance in the specific countries.
        There is also a broader design when it comes to Iran. That
    is Iran views the entire region as a place where American
    influence can be pushed back and rolled over. They believe and
    they have always believed the operation that the Iranians
    mounted in Latin American began in the early days of the
    Iranian Revolution.
        The first envoy that was dispatched for this purpose came
    to Buenos Aires in 1982, and the idea was that Latin America is
    a fertile ground for the export of the revolution because there
    are both governments and movements which are wedded to a
    similar political agenda of diminishing U.S. influence in the
    region, of fighting Western imperialism, as they call it. The
    Iranians viewed that perhaps as the most promising area for the
    export of the revolution.
        At some point in the process, they also realized that they
    could somehow expand and export not just revolutionary values
    but their faith as a vector to fulfill the revolutionary ideals
    of Latin America.
        So in a way, they repackaged the Shia iconic founding
    figure of Hussain as an Islamic variant of Che Guevara and
    built a whole panoply of tools to promote this idea and to
    actually recruit people to their cause.
        This is a four-decade-long project that is ongoing. There
    is actually literature produced by the people involved that
    says Latin America is a continent that, 500 years ago, was
    conquered by the Catholic religion in less than a century
    through violence and conquest at times. We can do it too.
        So I think the design there, the project, is a lot broader.
    It is strategic. And the target is to push back American
    influence in the region and export the values of the Iranian
    Revolution.
        Senator Rubio. Thank you.
        So as a continuation here, unless any other members appear,
    we will spend the next 20 minutes pretty much off the clock
    back and forth here on a dialogue and go from there.
        Senator Menendez may need to go somewhere. But if he is
    here, I am more than happy for him to jump in.
        We have a lot of topics to cover. I want to start
    particularly with Venezuela. We talked a lot about outside
    actors. If you look at their financial situation, their debt
    service, which they have a real problem making, the financing,
    their ability to make those payments appears to be coming from
    three sources at this point. One is private banks, whether it
    is an investment bank or a broad multinational. The hope there
    is that we can make and send a very clear message to these
    banks that they are active participants in funding repression
    when they conduct that sort of financial transaction.
        But the other are state actors--Russia and China. I think
    both of these nations, despite their interests in creating a
    foothold in the hemisphere, also want to get paid. They want
    their money back. They do not view this as a gift. They view it
    as a loan that gives them influence, but they want their money
    back. Particularly in the case of Russia, they cannot afford to
    be making loans that do not get paid back. In the case of
    China, I have found that nothing offends them more than the
    loss of face, and to basically be making bad loans that do not
    get paid back is a face-losing embarrassment.
        How would you advise members of the Senate and the Congress
    about articulating that message, because here is the bottom
    line: China and Russia are lending the Maduro regime money that
    is never going to be paid back. They are never going to get
    that money back.
        I understand that the hope of shaming them into not funding
    a repressive regime, that standard is probably too high to meet
    in the case of Russia and China. But I do think they understand
    not getting paid back.
        So how would you best argue to them? Or what is the best
    strategy that you would advise us on moving forward to let both
    of those nations know that not only is this something that
    affects our bilateral relationship with them but they are not
    going to get paid? I mean, these guys simply do not have the
    funds and the resources to pay them, and they are going to
    eventually default one way or the other, and they are going to
    get stuck with this bill.
        Mr. Farnsworth. If I may, Mr. Chairman, I think this is a
    fundamental question that you have hit on. This is why I keep
    saying that China's fundamental or primary interest in the
    Western Hemisphere is pragmatic. They want what they need to
    fuel their own economy. They are not that interested in the
    politics of the country in which they are engaged, so long as
    they are able to do business. Part of doing business is getting
    paid, obviously, just as you have articulated.
        So from the perspective of an outside observer, I think,
    first of all, the United States--certainly the Senate but also
    the executive branch--should be in active dialogue right now
    with China, and I have been urging this for a long time, that
    China has a huge interest in Venezuela for precisely the
    purposes you have said, and to bring China into the discussion
    of not just debt repayment but what comes after the Maduro
    regime, because from my perspective, the best workout plan that
    you are going to be able to get for international creditors for
    Venezuela will be with an opposition that is in power, that is
    democratically elected, and that is sustainable and has the
    authority of the Venezuelan people to meet its debts.
        Now it is unclear whether they will be able to meet all
    their debts. There may be a haircut that is required. Who
    knows? That is down the road.
        But from my perspective, I would work with the Chinese to
    say, look, let's work this out together. But the current path
    is unsustainable. So the earlier that we have free and fair
    elections in Venezuela, the earlier that we have the political
    prisoners released, the earlier that there is a sustainable
    government in place, the better prospects we together have for
    getting paid.
        Now I think the Russian scenario is different, as we have
    discussed. I think they do have more of an interest in terms of
    the government in power, but they have also a different debt
    profile with reference to Venezuela, and it is less of the
    official loans and it is more direct engagement in the energy
    sector.
        But to me, the most viable outcome for economic gain of
    debtors is a viable, democratically-elected government in
    Venezuela, and we do not have that right now.
        Senator Rubio. Doctor.
        Dr. Ottolenghi. Thank you, Mr. Chairman. I do have an
    additional point to make with regard to Iran in Venezuela,
    rather.
        During the sanctions era, Iran used Venezuela as a money-
    laundering place, as a place to evade sanctions. The entities
    that Iran created with Venezuela jointly for this purpose were
    delisted under the nuclear agreement. I think that gives us
    leverage because the Iranians do not have any desire to see
    entities relisted. That is something that could be used as a
    threat to diminish their involvement.
        The second point that I would make is that, of course, the
    Venezuelan regime has plundered its own natural resources in
    partnership with Iran and others by using these tools, and it
    is also getting revenues by increasingly becoming involved with
    drug cartels. The revenues from those illicit activities that
    we have seen in the case of Vice President El Aissami end up
    often in the financial system of the United States.
        So here you have additional leverage going after these
    assets, going after more individuals in the Venezuelan regime
    involved in this type of illicit activities on the side, going
    after entities that the Iranians have created, including joint
    ventures in the industrial sector as sanctionable activities
    that support the Maduro regime and are complicit in the
    repression inside the country.
        Senator Rubio. As an additional point on this topic, we are
    talking about external factors from outside the Western
    Hemisphere, but these are somehow interrelated also within the
    Western Hemisphere.
        In the case of Venezuela, one of the external actors within
    Venezuela is the Government of Cuba, which has both provided
    sort of expertise and personnel on the intelligence, passport,
    internal security side and also all sorts of logistical support
    on intelligence and the like. One of the phenomena that has
    emerged from that is the so-called colectivos, or these citizen
    militias, for lack of a better term, who, in many cases, are
    well-armed and sometimes actually undertaking much of the
    repression that is now going on.
        I think there is a broader conversation to have about what
    happens down the road even when those groups spin out of
    control. In essence, there will come a point when those groups
    establish, if they have not done so already, an independent
    character independent of state control so that Maduro cannot
    even control them anymore or tell them, even if he wanted to
    tell them to stop, he would not be able to. You could foresee a
    conflict between these groups and, for example, the national
    guard.
        But in the interim, when you have a bunch of well-armed
    individuals in the street, they also need to make a living.
    When the Venezuelan Government is no longer able to pay them to
    conduct repression, then what happens? Then these groups turn
    to illicit means. You now have well-armed individuals who
    perhaps initially entered this for purposes of money and/or
    ideology who now understand how to use weapons, how to conduct
    violence, and are looking forward a revenue source, and the
    experience of that in the hemisphere has been they turn to
    illicit activities such as drugs and trafficking and the like.
        Further complicating it is the possession of sophisticated
    weaponry. For example, there is a Miami Herald article from the
    24th of April this year. It talks about the Venezuelan
    Government's decision to arm civilians to defend the country's
    socialist revolution is rekindling fears of terrorist and
    criminal organizations acquiring part of the nation's arsenal,
    which includes a large stockpile of shoulder-fired surface-to-
    air missiles.
        I would say that we may not view this as an external factor
    per se. It is something that an external actor, be it a
    transnational criminal group or an international terrorist
    organization looking to buy such weaponry, could take advantage
    of, and perhaps is a topic that is unfair because it is an
    emerging topic and one that neither one of you perhaps has
    spent a tremendous amount of time on. But your initial
    impressions about whether that is something that is speculative
    or the existence of a large amount of weaponry in the hands of
    individuals looking to make a buck, isn't that always a recipe
    for disaster in terms of whether it is an outside actor coming
    in and buying them or those groups using it to fund other
    activities, to conduct other sorts of activities within the
    region?
        Mr. Farnsworth. Mr. Chairman, I do not think that is an
    idle concern at all. I think that is a very real concern.
        In fact, it is precisely the phenomenon we saw in Central
    America coming out of the civil wars in the 1980s and early
    1990s.
        You had peace processes. You had peace accords. But you
    also had a number of generally young men with no marketable
    skills except the ability to pull a trigger and live on the
    local economy. Once they could not find jobs in 1995, 1996,
    1997, many of them began to turn to gangs and began to turn to
    crime to sustain themselves.
        As we know, Central America right now is wracked with some
    of the highest criminal rates certainly in the hemisphere but
    even worldwide. This is a real problem that we are all
    wrestling with now in terms of financial support and other
    things to try to help resolve that issue.
        That developed out of the peace accords that were not
    necessarily fully implemented but, nonetheless, even to the
    extent they were implemented, did not touch all of the
    combatants and provide a way to make a living in the legal
    economy. So that is not an idle concern at all.
        The other issue that I would mention, you brought Cuba into
    the conversation. I think that is precisely right. It is
    fascinating to me how many of the people who are so quick to
    condemn the possibility that the United States might do
    anything on Venezuela as interventionism then are precisely the
    same people who turn a blind eye to what Cuba has clearly been
    doing in Venezuela now since President Chavez was elected at
    the end of the last century. So that is a double standard that
    I wish did not exist, but I think you are right to point it
    out.
        Dr. Ottolenghi. If I may just add, Mr. Chairman, watching
    the dramatic images of repression that come through social
    media from Venezuela, I cannot help but see the similarity in
    the images with the repression we saw in 2009 right after the
    fraudulent elections in Iran that brought Ahmadinejad to his
    second term.
        The militias that you refer to do not only benefit from
    training by the Cubans, but they seem to follow the model of
    the Basij popular militias that Iran has created as a kind of
    passive defense, a popular defense army in the country, which
    is designed specifically to counter and put down civil
    opposition, organized civil opposition.
        In Iran, it worked very well, and part of the reason why
    the Iranians have advised the Chavez and then the Maduro
    regimes on this issue is that they know how to put down a
    revolution because they successfully produced one in their own
    time. I think that that highlights the problem of the external
    interference you have, but it should also invite some measures
    well short of the kind of interventionism that America often
    unfairly is accused of, namely to, again, use economic warfare
    against those in Iran and perhaps in other places closer to
    home such as Cuba that are dispatching military advisers that
    are providing the weaponry and the financial resources to make
    these militias operate.
        Senator Rubio. So we have about 9 minutes left before
    turning into pumpkins. So let me try to cover three quick
    topics. They are all important.
        The first is, when we speak about Iran, one of the things
    people do not realize is part of their statecraft is
    asymmetry--in essence, the asymmetrical ability to attack the
    United States. Both of you alluded to it in your testimony.
        What that means, for people who may not be aware of the
    terminology, is they are not going to try to build 10 aircraft
    carriers. What they are going to try to do is to have cells or
    groups, friendly and under their direction, throughout the
    world who, in the case of conflict with the United States or
    the West, could conduct attacks in the homeland. Obviously, the
    Iranian regular army or even the Quds Force cannot transplant
    10,000 fighters to come into somewhere in the United States and
    fight us, but they could potentially flip a switch and give the
    signal for groups they have implanted in the region and
    throughout the world to attack us.
        One of the places where we are concerned that would occur
    is here in the Western Hemisphere where individuals and/or
    cells and capacities, be it through safehouses or the like,
    have accumulated either weaponry or explosives or both, and
    personnel with the capacity that at a moment of conflict could
    conduct attacks against the United States and/or its interests
    in the region, potentially in the homeland benefiting from
    visa-free travel to attack us.
        That is something we do not talk about nearly enough, but
    that remains a threat that we should be vigilant of.
        Perhaps both of you could comment on that briefly, so in
    the 8 minutes we have left we can get to the other two.
        Dr. Ottolenghi. Thank you for your question. It is a very
    important point.
        Again, I would like to refer to a case I discussed more
    extensively in my written statement of a recent arrest in
    Paraguay of a suspect Hezbollah trafficker. The individual in
    question was arrested a month ago. He is in custody. In
    addition to being a drug trafficker, it turns out he was
    accredited by the local ministry of immigration as a mediator
    to facilitate applications for permanent residency and
    citizenship, which is fairly easy to obtain through a small
    investment to begin with.
        The rumor from sources down there is that this individual
    was involved in as little as 500 and possibly many more
    applications throughout the years by Lebanese men, mostly,
    coming from South Lebanon to reside permanently and to get
    involved in business locally along the frontier between
    Paraguay and Brazil, which is, of course, a hub for illicit
    funds for Hezbollah.
        So here is the concern. The concern is that the networks
    that are in place, which could help the Iranian asymmetric
    model you described, are actually bringing in people more and
    more through the lax immigration rules in South America. These
    people are in place. They are building infrastructure.
        Over time, they acquire citizenship, which makes it easier
    for them to apply for a visa and come into the United States.
    They are using the status they have gained already to develop
    money-laundering networks, sometimes building companies,
    establishing companies here in the United States and using the
    financial system here.
        But they are also there to provide the logistical
    infrastructure support when Iran decides that such terrorist
    actions are called for, to provide the local support network
    for cells that come from Iran or from Lebanon in order to carry
    out these attacks.
        So the danger is very much there, and it should require
    additional attention from the U.S.
        Senator Rubio. Just in the interest of time, because I have
    to limit it to one more topic, but it is one I talked about in
    my opening statement, and that is Trinidad, which by far has
    the largest per capita contribution to ISIS of foreign fighters
    of any Nation in the Western Hemisphere. It is actually a
    startling number--125 for a nation whose population is just a
    percentage, a small percentage of ours.
        In the United States, you have 240 times their population,
    and yet they have about half as many ISIS fighters. So it is
    just significant per capita, and you do not hear a lot of
    discussion about this.
        But the concern, of course, is that these individuals would
    return back to Trinidad and, at some point, are a 3-hour flight
    away from South Florida where I live in my home State, but also
    the mainland of the United States.
        So I know that the risk of radicalization in Trinidad is
    not new. In fact, I believe it was a radicalized group that led
    a coup there in the 1990s, if I am not mistaken, the early
    1990s. But how has that evolved? Is it getting enough attention
    beyond a couple articles? And is it your view that the Trinidad
    Government understands the threat posed by this and is prepared
    to work with us to confront it?
        Dr. Ottolenghi. I am not entirely familiar with the
    situation specific to Trinidad. I do see, however, the broader
    picture across the region where, on the one hand Iran, and on
    the other hand radical Sunni movements, both backed by states
    and otherwise, are actually conducting a very aggressive drive
    to radicalize, to convert, and to recruit.
        We see the presence of radical Sunni preachers from Mexico
    all the way down to the Southern Cone. Equally for that
    Iranians, they are probably competing for recruits. But the
    phenomenon is very much there and is underreported.
        And I think that governments in Latin America, perhaps for
    a lack of understanding, capacity, are not treating the problem
    seriously enough. There is plenty of open source evidence of
    radical preachers flying in from Qatar, from the Gulf, from
    Iran straight into Latin America. There are direct flights now
    from the Gulf into Latin America.
        They come. They preach. There is plenty of evidence of
    radicalization in local mosques. And they come back.
        I assume that Trinidad and Tobago, the problem is the same.
    And because it is such a small nation with limited resources
    for governance, their capacity to confront this problem, even
    if there is political will, is limited. So help building
    capacity I think is a key component of what U.S. policy should
    be.
        Mr. Farnsworth. Mr. Chairman, only two quick things, if I
    may.
        The first is to thank you again for your leadership on
    these issues. It is tremendously important, and it is noticed,
    and it is very much appreciated, so thank you.
        The second is, with that specific reference to Trinidad,
    this is an issue I think--there is an issue of cyber that, if
    we look forward in terms of emerging potential threats for the
    region, and we bring in Russia and other countries like that,
    to the extent that there are political interests that can be
    manipulated in the electoral process, et cetera, that is
    something I would encourage people to give increasing attention
    to because, as we go down the road, we have seen what has
    happened in Europe, et cetera. This is a potential for
    mischief-making in Latin America to the extent people are so
    inclined.
        Senator Rubio. That is an interesting point because many of
    these countries, unlike the United States, have centralized
    voting systems. People do not realize we have over 9,000
    separate jurisdictions that conduct elections at the county
    level primarily.
        In many countries around the world, and certainly in the
    Western Hemisphere, the elections are conducted by a central
    entity. The council votes for the whole country. So you do not
    need to hack 9,000 or the strategic parts of the 9,000
    infrastructure in terms of the United States. You can very much
    do it--and that is just on the hacking front not to mention the
    influence part.
        We appreciate both of your testimony. I apologize. There
    are probably other topics we could have touched on. We have
    this situation here today where the 2-hour rule has been
    invoked, so that would end our hearing here any moment now. I
    do not know what happens, but I guess if we get 1 minute past,
    I may go to jail or something. I do not know, at least Senate
    jail.
        But I appreciate both of your willingness to come here
    today and talk about this topic. I wish it got more attention.
    I hope it will get more attention. As I said yesterday, and you
    were there, Mr. Farnsworth, that I think in many ways the
    Western Hemisphere is an answer, not a problem.
        Today, we talked about some of the challenges in the
    region, but this committee spends a lot of time talking about
    the opportunities. I hope we will spend more time.
        The record for this hearing is going to remain open for 48
    hours. You may receive a written question from some of the
    members who were not able to attend. If you can, we ask you to
    answer so it can be part of our record for future
    consideration.
        Senator Rubio. With that, I thank you both, and the members
    who came, and this hearing is adjourned.
        [Whereupon, at 11:30 a.m., the hearing was adjourned.]