Latin America : U.S. Initiative Yields Political Gains but Few Tangible Results

WASHINGTON —  The bold Latin American foreign policy initiative that President Bush embarked upon a year ago is paying big political and symbolic dividends, but it has yet to produce many tangible results, policy analysts say.

Bush lauded the program this week at a Rose Garden ceremony marking its first anniversary, saying, “We’ve worked miracles in one year, and so let us shape a revolution in the next.”

The program--the Enterprise for the Americas Initiative--is widely viewed as the most ambitious, well-received U.S. plan for the region since President John F. Kennedy’s Alliance for Progress in the early 1960s.

It has spurred more than a dozen Latin American countries to weave new alliances with their neighbors and sweep away longstanding impediments that kept out foreign goods and investment.

But Congress has yet to act on many of the initiative’s most important elements; other wealthy countries outside the region have not shown much enthusiasm for contributing, and many Latin American nations are in no position to take advantage of it.

The initiative works this way: If countries in the region are willing to open their markets to foreign investment and trade--steps that can be painful in the short run--they become eligible for a modest reduction in their debts and an increase in aid. Most important, they may enter free-trade negotiations with this country, giving them the chance to hitch their weak, struggling economies to the giant U.S. locomotive.

Ultimately, Bush hopes to bring all of North and South America under a single free-trade arrangement. The United States, Canada and Mexico began formal negotiations toward that end this month.

BACKGROUND: History and economics helped boost the Latin American initiative, analysts said. Only months after the American invasion of Panama had raised new fears of the use of U.S. muscle in the region, Latin American governments welcomed Bush’s offer to think of this country as a partner, not a bully. For the first time in decades, it seemed to them that the United States was defining its relations with its neighbors in terms more positive than a war on drugs, or a concern that communism was spreading to the U.S. doorstep.

Moreover, many Latin countries had already begun to abandon their economic isolationism in the belief that trade and investment offered their best hope of rising out of debt.

But at the same time, they saw protectionism growing globally, with powerful trading blocs forming in Europe and Asia. They grew concerned that they would no longer be able to sell their goods overseas. And with the world captivated by the bold transformation under way in Eastern Europe, they feared they would lose out to the new democracies when it came to winning aid from wealthier countries.

TRENDS: While the initiative has received little attention in the United States, “If you travel the (Latin American) region, you find the place is in an absolute turmoil and debate and discussion in a way that it hasn’t been for years,” said Treasury Undersecretary David C. Mulford.

Alan J. Stoga, managing director for Kissinger Associates in New York, agreed that the initiative has “had a powerful impact. It really has given governments something to work toward.” But in terms of specific results, “It doesn’t really amount to much, frankly.”

Still, where once they feared and resented U.S. influence, Latin American and Caribbean nations now are clamoring to join in the “new economic partnership” that Bush offers. “It clearly struck a responsive chord with other nations throughout the hemisphere,” says Sen. Christopher J. Dodd (D-Conn.), chairman of the Senate Foreign Relations Committee’s Western Hemisphere subcommittee and a frequent critic of past Republican policies in the region. “The real question is whether the United States can take ‘yes’ for an answer from Latin America and the Caribbean.”

And that remains to be seen. Other countries in the region have been told they must wait until the Mexican agreement has been concluded before they can start their free-trade talks with the United States. Some program elements--including those providing aid and debt reduction--are mired in Congress. And the plan has yet to be bolstered by contributions that the Administration hoped to get from other wealthy nations, many preoccupied with Eastern Europe.

Meanwhile, some Latin countries remain too burdened by their debts--a staggering $422 billion for the region as a whole--to even begin looking toward the future.

The Bush initiative envisions wiping away much of what participating countries owe the United States. But this government-to-government lending accounts for only 3% of the total. Also, to qualify for debt relief, the countries must adopt even more stringent economic reforms than usually required of would-be borrowers by the International Monetary Fund and World Bank, said Peter Hakim, staff director of the Inter-American Dialogue, a Washington research group.

It is also worth noting that the Administration won congressional authority to negotiate with Mexico only after a bitter struggle with opponents who warned that a free-trade agreement would cause a massive flight of industry and jobs from this country. “I’m not sure there’s been a clear signal from the Congress that they are wildly enthusiastic about the notion of hemispheric free trade,” Stoga said.

OUTLOOK: It is clear that it will be years, perhaps decades, before the initiative lives up to the high hopes it has built in the region.

But at the White House ceremony Thursday, Bush signed an agreement to trim $16 million from Chile’s food assistance debt to the United States and put the money it repays on the rest of the loan into a trust fund aimed at improving Chile’s environment. While that sum is small, the symbolism is powerful, because Chile has led the region in opening its economy and now is seen as a model for the rest of Latin America.

Bush also announced the framework of trade agreements with Nicaragua and Panama, bringing to 14 the number of countries that have taken that first small step toward full-scale trade negotiations since the initiative began last year. “People see that this is something that is going to unfold over time,” Mulford said.

And that is what worries many in Latin America. They have seen that the United States has a short attention span where their region is concerned.

But in the post-Cold War world, where economic alliances are assuming the importance that military ones once held, “We’re going to get there one way or another,” Stoga said.

Bush’s Latin America Plan

President Bush last year proposed a foreign policy plan which he called the Enterprise for the Americas Initiative. Here are the main elements of the proposal:

TRADE: The initiative envisions creating a hemispheric free-trade zone. Toward that end, the United States, Canada and Mexico are already in free-trade talks. More than a dozen other Latin American countries have taken the first step, which is signing a framework agreement. But the Administration says further talks with the other nations are unlikely to proceed until it has concluded the agreement with Mexico and Canada.

INVESTMENT: The U.S. is seeking contributions from Japan and Europe to create a $1.5-billion fund that would help Latin American countries revamp their economies--for example, retraining workers thrown out of work by the changes and providing direct loans to small-and medium-sized businesses. Thus far, only Japan has agreed to commit the share requested by the U.S.--$100 million a year for five years. Treasury officials say they also have tentative commitments from Spain, Canada, France and Portugal.

DEBT: To reward countries that have undertaken significant economic reform, the Administration hopes to reduce the debts they owe the United States. Payments on those debts would go instead to improve the environment in those countries. Thus far, Congress has agreed to reduce some of those debts, but not all of them. Trade in Latin America: (in billions of dollars) Honduras Imports: $1.4 Exports: $1.0 External debt: $3.2 (Dec. 1989) El Salvador Imports: $1.1 Exports: $0.497 External debt: $1.7 (Dec. 1989) Nicaragua Imports: $0.55 Exports: $0.25 External debt: $8 (1988 year-end) Costa Rica Imports: $1.4 Exports: $1.3 External debt: $4.5 (1989) Panama Imports: $0.83 Exports: $0.22 External debt: $5.2 (Nov. 1989) Chile: Imports: $4.7 Exports: $7 External debt: $16.3 (Dec. 1989) Venezuela: Imports: $10.9 Exports: $10.4 External debt: $33.6 (1988) Colombia: Imports: $5.02 Exports: $5.76 External debt: $17.5 (1989) Ecuador: Imports: $1.6 Exports: $2.2 External debt: $10.9 (1989) Brazil: Imports: $18 Exports: $34.2 External debt: $109 (Dec. 1989) Bolivia Imports: $0.786 Exports: $0.634 External debt: $5.7 (Dec. 1989) Peru Imports: $2.5 Exports: $3.55 External debt: $17.7 (Dec. 1989) Uruguay: Imports: $1.1 Exports: $1.5 External debt: $6 (1988) Argentina Imports: $4.3 Exports: $9.6 External debt: $60 (Dec. 1989) Paraguay Imports: $1.01 Exports: $1.02 External debt: $2.9 (1989) Source: CIA World Factbook 1990