President Bush traveled across Latin America in December to promote his “Enterprise for the Americas Initiative,” a proposal to eliminate all barriers to free trade “from Anchorage to Tierra del Fuego.” Like the Brady debt-relief plan before it, the Baker plan before that, and the Caribbean Basin Initiative before that, this package is intended above all to assuage Latin American leaders whose careers depend on maintaining the fiction that the United States cares about them.
Chances are it won’t be implemented for years, if at all. It does not address the structural development problems the region faces. And if implemented as proposed, it may well confirm Latin America’s ever-shrinking role in the world economy as an exporter of natural resources and a low-wage haven for the most technologically backward manufacturing.
Despite the probable emergence of “trading blocs” in Europe and East Asia – and despite the heartfelt hopes of Latin America’s elites – the region’s importance to the United States is clearly on the decline. Latin America’s share of world trade dropped from 12.4% in 1950, to 5.2% in 1979, to only 3% today; and a decreasing share of this is with the United States. Given the destruction of Latin American markets by the IMF and the dearth of new private investment since 1982 (outside of Mexico and Chile), the United States will probably continue to trade primarily with Europe, Japan, Canada, and perhaps Mexico, while the rest of Latin America, at least where there is no oil, goes the way of Africa
The hidden agenda in the Bush initiative is also the most evident: debt. Nearly ten years into the “crisis” foreign debt is still strangling the continent. Latin America now owes $415 billion; the interest alone eats up over half of most countries’ export earnings. The initiative proposes a paltry $7 billion in debt concessions from the U.S. government, a negligible $300 million “investment fund,” and $5 billion for debt-for-nature swaps.
The Enterprise Initiative is actually a good cover for doing nothing about debt. By promising greater access to the U-S. market, and thus greater export earnings, free trade is portrayed as a way for Latin America to keep up its payments. It’s worth noting that Spain and Portugal’s integration into the European Community included hefty subsidies to offset their greater poverty. Bush’s plan would keep subsidies-in the form of debt payments going the other way. (Over the 1980s, Latin America sent abroad nearly $161 billion more than it received.)
But in this depressed region any initiative from Washington must be taken seriously. And, as occurred in Canada, it could provide a forum for public debate on development strategy which goes beyond the narrow confines of the proposal itself. There has been a sea-change in economic thinking among the region’s elites: Every government save Cuba is pursuing the same export-led development model, slashing state spending, selling off public enterprises, and celebrating the virtues of free trade. This is due partly to the large numbers of Latin American technocrats who have studied in the United States, partly to their desperation for hard currency to pay the debt, and largely to the impossibility of carrying forth the previous import-substitution model that relied on foreign borrowing.
The old thinking gave the primary role to the state – a strategy based as much on the successful experience of the United States as on the need to keep U.S. corporations at bay. But much of the economic clout of the state was squandered on short-sighted subsidies to national and foreign elites. In practice, state companies, which might have defended the nation from plunder, became entrenched vested bureaucracies providing little but sinecures for politicians and union bosses. The state sector even turned out to be less subject to public control than the infamous transnational corporations. (Though much decried by the Left, “privatization” is essentially a transfer of resources from a bureaucratic elite to an entrepreneurial one – not that different to those they employ or shunt aside,)
The lesson of this failure is not that state-led development does not work, as the new dogma would have it, but that it won’t work as long as self-serving elites are in charge. And the same is true of the new silver bullet. Export promotion may indeed be essential, and some form of free trade may indeed be the only means at hand, but neither will go very far in the hands of bankers, businessmen and bureaucrats.
Who can say that Mr. Bush policies will turn around Latin America’s economic plight? The Left’s traditional assumption that free trade is nothing but naked imperialism is as shallow as the belief that state-owned enterprises are by nature progressive. The real struggle is not to defend one or the other, but to “deprivatize” the state-so that the policies adopted pursue broad public interests, not just those of the wealthy few.
We can’t expect much from Bush’s version of “the vision thing,” nor from the Latin American politicians who cozy up to it. Those who believe the region has suddenly become favored are certainly mistaken. But if the free trade issue can provide a forum for democratizing the politics of development, then something may just come of it.
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ABOUT THE AUTHOR
Mark Fried is the editor of the NACLA Report
