Another Revolution in Latin America: Who Will Win?

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Introduction

A decade ago, Silence of the Lambs, the cinematicthriller starring Jodie Foster and Anthony Hopkins, was on its wayto sweeping the Academy Awards; South Africa was holding its firstmultiracial democratic vote; and in Nicaragua, to nearly universalsurprise, national elections had swept the Sandinistas from power.In his book Everybody Has His Own Gringo, Glenn Garvinrecounts how one disappointed former contra had re-armedand returned to the mountains only a few months after theelections. This recontra observed to Garvin, "Here inNicaragua, the only dialogue we ever have is with bullets."[1] At the time, manyCentral Americans agreed, fearing that their latest experiment withdemocracy would meet a quick and bloody end and that the regionwould again descend into the chaos of war.

Yet on December 17, 2003, Latin America was engaged in a verydifferent kind of dialogue. Trade ministers from El Salvador,Honduras, Guatemala, and Nicaragua had joined U.S. TradeRepresentative Robert B. Zoellick to celebrate the conclusion ofnegotiations for a free-trade agreement (FTA) between theircountries and the United States. At a press conference, ElSalvador's economy minister Miguel Lacayo predicted: "This willmean a new future for our region. We are firm believers that thereis a strong link between trade, development and democracy."[2] A monthlater, Costa Rica concluded an FTA with the United States; theDominican Republic was added earlier this month. [3]

The ongoing crisis in Haiti highlights the remarkable progressthat Central America has made in a short period of time. But thereis no guarantee that these countries will continue on a path ofeconomic and political progress. The democratically electedpresidents from the region--no military man among them, afirst--took a major risk in deciding to pursue trade negotiationswith the United States. As U.S. policymakers have long urged, theybet their political futures on free markets and democracy. [4] If the UnitedStates now turns its back on this agreement, the resolve of thoseleaders and the support of their publics could disintegrate. Theachievements of the past decade could be reversed, and the regionalcredibility of the United States would, once again, be badlydamaged.

CAFTA Makes Economic and Political Sense

Supporters of the U.S.-Central America Free Trade Agreement, orCAFTA, understandably tend to champion it on economic grounds.Trade between the United States and Central America is alreadysignificant for both sides, totaling about $20 billion per year.Although Central America stands to gain the most from thisagreement, U.S. consumers and businesses will also reap significantrewards. U.S. exports to the region--some $9 billion in 2001--arealready roughly equal to our exports to Russia, India, andIndonesia combined.[5] Trade is thriving despite the fact that U.S.exporters currently face a competitive disadvantage in CentralAmerica. The region has more than 20 trade agreements grantingpreferences to products from Mexico, Canada, Chile, and severalSouth American nations; CAFTA is needed to put U.S. companies on anequal footing.

There is also strong foreign policy justification for CAFTA.When foreign policy goals are cited, however, they seldom meritmore than a sound bite, such as "[CAFTA] is more than a tradenegotiation--it is a plan to strengthen democracy and promotedevelopment in a region that has known too little of both."[6] While factuallycorrect, framing the debate in this manner does not convey the fullimportance of CAFTA for Central America and, by extension, for U.S.foreign policy. For many Americans, the reasons behind CentralAmerica's desire for this agreement, if they are recognized at all,get lost in the cacophony of the domestic trade debate. Ananti-globalization movement that works to undermine CAFTA byportraying it as something Washington is imposing on CentralAmerica further obscures the truth.

Ultimately, the biggest payoff from CAFTA will not be counted indollars. With few exceptions, Latin America has a history of hopeand potential that has repeatedly fallen prey to turmoil andpoverty. Now, these small countries have approached the UnitedStates, not for a handout, but for a chance to be equal partners intrade. This is an important--and challenging--step on the road topolitical stability and prosperity. Despite progress, democracy inCentral America remains fragile. Americans must not turn theirbacks on the region.

The Different Roads to CAFTA

Economic growth requires sound government institutions and areliable legal framework. As the CAFTA negotiations proceeded,Zoellick reflected on how free trade can be a valuable catalyst forpolitical progress: "Oppression, violence, and dictators on boththe left and right have given way to a commitment to democracy inCentral America," he said. "With an FTA, we have an extraordinaryopportunity to lock in economic reforms and strengthen the rule oflaw, good governance, and democratic institutions." [7]

Of course, Central America is not a monolithic bloc. Eachcountry has experienced bitter conflicts--at times with neighbors,at times within itself, and at times with the United States. Yetthe region's leaders now recognize that Central America willprosper more as a unified common market than as separate smalleconomies. In a remarkably short period of time, these countrieshave come to share a common set of goals and are working to forge aunited region. Staking their futures on the promise of free tradewith the United States, Central America's leaders have resisteddomestic interests that seek to undo two decades of free market anddemocratic reforms. Unfortunately, progress in thesecountries--where political campaigns and elections are relativelynew and often turn violent--can crumble rapidly.

El Salvador. Althoughthe country's economic turnaround has been called miraculous byoutside observers, reforming El Salvador's moribund state-runeconomy has proven more painful than many of its citizens expected.Opinion polls have shown consistent popular support for free trade,yet this year's presidential elections have exposed a lingeringnostalgia for the country's authoritarian past among a substantialsegment of the population. Officials say CAFTA will help buttresspro-market reforms at a critical time in the country's history.They warn that excessive delay will give protectionist interestgroups time to organize and will bring mounting pressure tobackslide on trade.

The hard-fought win by pro-reform President Tony Saca on March21 illustrates the dangers of rejecting CAFTA. As the ChristianScience Monitor reported on the eve of the vote: "Theleft-wing party is running a former guerrilla commander and avowedcommunist. Twelve years have passed since a peace accord ended ElSalvador's bitter civil war and closed the curtain on one of theU.S.'s hottest cold-war theaters. But Friday, on the eve ofSunday's presidential elections, this tiny Central American nationseems to have gone back in time." [8]

Guatemala. Tensionwas palpable throughout the region in the fall of 2003, aselections threatened to return to power Gen. Efrain Rios Montt. Theformer dictator has been accused of sponsoring 11 massacres inwhich at least 1,000 people died. During the campaign, CentralAmerica was reminded of its bloody past. As the BBC reported thismonth:

The leader of a military coup in the country in 1982, Rios Monttcame third in last year's presidential elections despite aconstitutional rule that no one who had overthrown a governmentcould stand for the presidency. The elections were marred byviolence, with more than 22 people connected with political partieskilled in the run-up to the polls. There were also riots inGuatemala City last June in support of Mr. Rios Montt, when itlooked as if he would be barred from standing. He was eventuallypermitted after a constitutional court overturned a supreme courtban on his candidacy. [9]

Fortunately, the Guatemalan people did not return Rios Montt tooffice, and the new administration has stated that it stronglysupports CAFTA and will seek to have it ratified as soon aspossible. But the politics of the Guatemalan election show that thecountry is still not fully stable. Failure of the U.S. Congress toapprove CAFTA would be a major setback for Guatemala's pro-reformgovernment.

Nicaragua. Throughouthis term, President EnriqueBolaÃÆ'Ã'±os has battledagainst a culture of corruption pervasive in Nicaraguan politicsand business. CAFTA has been at the center of his efforts. TheSandinista party, still a force in Nicaraguan politics, positioneditself to oppose the agreement in the early stages of negotiations.Undeterred, PresidentBolaÃÆ'Ã'±os pressed aheadwith an aggressive public education campaign, giving the publicunprecedented insight into the CAFTA negotiations. In a short time,the Nicaraguan people began to expect transparency andaccountability from their government. They also came to supportCAFTA as an opportunity for the country to climb out of poverty.The Sandinistas are now on the defensive and have even acknowledgedthe economic benefits of free trade. However, Daniel Ortega and hisSandinista comrades are waiting in the wings, watching closely foran opportunity to capitalize on a hoped-for rejection of the FTA bythe U.S. Congress.

Honduras. Althoughstill recovering from the devastation caused by Hurricane Mitch in1998, Honduras has demonstrated a quiet leadership in the CAFTAnegotiations that has helped to keep the process on track atcrucial junctures. The Honduran government understands the need todiversify its economy as quotas are removed from apparel next year.Certainly, geographic proximity to the United States and CAFTA willbenefit the textile and apparel industries in both countries. YetHonduras does not expect apparel production to be its primaryengine of growth. Its leaders expect that CAFTA will make thecountry a more attractive destination for foreign investment innumerous sectors.

Costa Rica. CostaRica is the most stable and prosperous country in Central America.In recent years, the country's leaders have shown an impressivecommitment to implementing pro-market reforms. Yet much remains tobe done. Costa Rica's archaic state-owned telecom and insurancecompanies, for example, cling to their protected monopoly status.Previous attempts to reform or liberalize those sectors weregreeted with violent street protests. CAFTA has provided thenecessary external pressure to get reforms moving again. Under theFTA's terms, Costa Rica's insurance sector will face immediateadjustment and be fully open by 2011.

Telecommunications will not open immediately. But MinisterAlberto Trejos has argued that CAFTA will allow his government totake the first steps toward a separate process that will lead to afreer telecom market. For example, an independent regulator will beestablished and competition will be introduced in three keyareas--stimulating demand for greater competition down the road, itis hoped. The Costa Rican government considers these commitmentssignificant, fearing that they are putting the country's democraticfuture on the line. If the United States rejects CAFTA, it willweaken the government and embolden those who stage violent streetprotests.

Dominican Republic.Sharing an island with Haiti in the Caribbean, the DominicanRepublic is not geographically a part of Central America. Itsinclusion in a CAFTA package is thus a testament to the country'srole as one of the region's top trading nations. The DominicanRepublic also shares Central America's history of violence andstatism, having suffered a 31-year dictatorship known as the "Eraof Trujillo." Although the country has largely moved beyond itsbloody past, it is currently facing economic troubles. Over thepast year, the value of the Dominican peso has fallen by half andthe country's banking sector is in dire straits. CAFTA representshope for renewed growth and prosperity.

Whither CAFTA?

All the Central American governments have made commitments underCAFTA that will move their countries along the road to becomingprosperous free-market democracies. Much of what they agreed to dowill be politically difficult. Leaders in the region accepted thesacrifice, however, because they see CAFTA as vital to futureeconomic, social, and political progress--and because most peoplein the region agree. It would be shameful for members of the U.S.Congress to match this courage with timidity, to reward CentralAmerica's determination, foresight, and fortitude with narrowpartisan self-interest.

Regrettably, CAFTA's future is cloudy, especially given theupcoming U.S. presidential election. It is unclear whether the Bushadministration, facing a Democratic rival who has been critical ofthe value of free trade, will fight to implement the agreement ithas negotiated. Self-appointed activist groups, falsely claiming tospeak for a majority of Central Americans, will undoubtedly employscare tactics to delay or kill the agreement. Even if theadministration does press for CAFTA's passage, Congress's responseis uncertain.

It is unfortunate that CAFTA lacks more champions in the UnitedStates. The countries of Central America are not many years removedfrom political crises of the sort that now afflicts Haiti.Politicians and activists who demand action and support for Haitiwould do well to reflect on how CAFTA can help avoid similar crisesin Central America. It would be ironic if the lawmakers demandingaid for Haiti were to close the door of opportunity on Haiti'sLatin neighbors.

A vote against CAFTA would send a clear message to thedeveloping world: The United States prefers to maintain you asmendicants, peaceful and poor, but certainly not capable of takingcare of your own affairs. Conversely, should Congress approveCAFTA, the troubled nations of our hemisphere would see thetangible rewards of a sustained commitment to freedom anddemocracy.


[1] GlennGarvin, Everybody Had His Own Gringo (Washington:Brassey's, 1992), p. 265.

[2] DougPalmer, "U.S. Reaches Free-Trade Deal with 4 Nations," Reuters,December 18, 2003.

[3] CostaRica and the United States concluded negotiations on January 25,2004. The Dominican Republic integrated into the U.S.-CentralAmerica Free Trade Agreement on March 15, 2004.

[4] For moreon the link between open markets and democracy, see Daniel T.Griswold, "Trading Tyranny for Freedom: How Open Markets Till theSoil for Democracy," Cato Institute Trade Policy Analysis No. 26,January 6, 2004, http://www.freetrade.org/pubs/pas/tpa-026es.html.

[5] "FreeTrade with Central America: Strengthening Democracy, PromotingProsperity," USTR Fact Sheet, January 8, 2003, http://www.ustr.gov/regions/whemisphere/camerica/2003-01-08-cafta-facts.PDF.

[6] Robert B.Zoellick, quoted in Elizabeth Becker, "U.S. Announces Talks Aimedat Trade Pact with Central America," New York Times,January 8, 2003.

[7] Robert B.Zoellick, "Completing Latin America's Twin Revolutions," Address tothe Council of the Americas, May 7, 2002, http://www.ustr.gov/speech-test/zoellick/zoellick_22-councilamericas.PDF.

[8] CatherineElton, "El Salvador Vote Recalls Cold-War Power Play,"Christian Science Monitor, March 19, 2004.

[9]"Guatemala Ex-Head in House Arrest," BBC News, March 9,2004, http://news.bbc.co.uk/1/hi/world/americas/3545095.stm.

Andrea Gash Durkin and Ricardo Reyes

Andrea Gash Durkin is the managing director for international trade at Tew Cardenas, L.L.P. Ricardo Reyes is the manager for strategic communications at Bracewell & Patterson, L.L.P. Formerly with the Office of the U.S. Trade Representative, they were part of the U.S. team that negotiated the U.S.-Central America Free Trade Agreement.