Voices from Latin America is a project of the Democracy Center and our friends both North and South to bring Latin American perspectives into the U.S. debate.
The ABCs of Trade and Economic Relations
Contemporary economic relations between the United States and Latin America have been established in the context of the free market politics of the Washington Consensus. Under such a framework, the International Financial Institutions – the International Monetary Fund and the World Bank – have applied market policies in Latin America that, far from bringing economic prosperity or reducing external debt, have greatly increased the gap between rich and poor.
The application of these policies – privatizing natural resources and public businesses, cutting public spending, increasing commercial and financial freedom, bringing in foreign investment, state deregulation, strengthening property rights, etc – have proven themselves to have quite negative consequences in Latin America. There has been an increase in unemployment and a loss in worker rights, restriction of access to basic services and medicines, devastation of the manufacturing industry and agricultural production because of monopolies, loss of self-sufficiency, environmental conflicts, etc.
These facts have contributed to an increase in large scale migrations to the United States and Europe, bringing with it undesirable social effects such as discrimination and familial separation. In addition, many United States corporations have prosecuted various Latin American countries, the majority of the cases ultimately helping the local population. These judgments can even award lost profits, hundreds of thousands of dollars which increasingly surpasses the possibility of just indemnity or adequate compensation for losses to the Latin American people.
Joseph Stiglitz himself, ex-vice president of the World Bank, affirmed that well-guided globalization could economically benefit the poorest of nations. However, he criticizes the way in which the International Monetary Fund and other international organizations have directed this process, causing excessive prejudice in developing countries. He also affirms that inequality in the system of world trade has widened the divide between rich and poor.
Since the failure of the Free Trade Area of the Americas Project, the United States government has pushed forward free trade agreements in Latin America through trade blocs. Their first achievement was in 2003 with the signing of CAFTA, which included Central American countries.
The U.S. government has looked to establish such deals with the Andean Community of Nations and to avoid a failure has proceeded to negotiate with each of the countries individually. Bolivia and Ecuador are the only ones that have refused trade agreements under conditions similar to those of NAFTA or CAFTA. They have argued that the provisions constitute a model of commercial annexation of their small countries, rather than regional integration.
Latin America also holds internal responsibility for the negative economic consequences it has suffered in the last several decades. The great majority have been provoked by the excessive economic gap, the inequality of working and living conditions, and the application of an orthodox neo-liberal open-market model.
Some Important Facts
- Between 1980 and the late 1990s, when the “politics of structural adjustment” were applied:
- Inequality between rich and poor increased in 48 of the 73 countries that followed the guidelines set forth by the International Monetary Fund. (1)
- At the end of the 1990s, 10% of the Latin American population received 60% of the wealth, while the poorest 10% of the population was left with 2% of the wealth. (2)
- Currently, there exist 228 million poor people in Latin America, almost half of the Latin American population. Ninety-six million of these people are indigenous. (3)
- Latin America is the most divided continent in the world, with an economy that grows at a consistent level of 4% since 2000.
- The total external debt for Latin America grew from 660 billion dollars in what year? to 770 billion dollars in 2000.
- In Mexico from 1994 to 2000, under the umbrella of NAFTA, there was an increase in poverty from 51% to 70%.
- Between 2000 and 2006, an estimated two million Mexican farmers abandoned their land because of the invasion of subsidized grains from the United States.
The Debate
Debate in the United States about US-Latin American economic relations mainly focus on the issue of trade: free vs. fair. In broad terms, free trade agreements between countries allow goods to cross borders without any kind of tariff or tax. Fair trade, on the other hand, involve placing a restriction on imports to protect national production, or to uphold certain environmental or labor standards.
Proponents of free trade claim its benefit in expanding a country’s economy, saying that such a policy opens up markets and allows the country’s products to reach the world’s marketplace (including human labor), with the effect of raising a country’s overall income level and ultimately decreasing poverty.
Those against free trade and in favor of fair trade assert that free trade agreements have mainly benefited elite and corporate business owners, at the expense of small producers. Free trade permits companies the liberty to ship manufacturing overseas, where regulatory rules are near absent. Not only are overseas workers’ rights often violated, such transfer of manufacturing site equates to layoffs in the companies’ homeland. Under such liberal import policies, subsistence family farms lacking the ability to compete with cheap food imports are often forced to migrate to the city in search of alternatives. Peasant lives along with the economy and autonomy are destroyed.
In Latin America, a growing number of countries have rejected trade agreements seeing the effects free trade deals have had on its neighbors: collapse of national industry, loss in food security and sovereignty, among others. Free trade and loans from institutions such as IMF permit a powerful country such as the United States to exercise control over borrower (and weaker) nations, undermining these nations’ rights to manage their own economic matters and environmental conservation and development.
Links
http://www.ontheissues.org/2008/Hillary_Clinton_Free_Trade.htm
http://www.ontheissues.org/2008/Barack_Obama_Free_Trade.htm
http://www.nytimes.com/2008/03/26/us/politics/26text-mccain.html?pagewanted=2&ref=politics
http://cfomaquiladoras.org/naftaconsecuencias.es.html
(1) Iriarte Gregorio. Critical Analysis of Reality, 16th Edition. Kipus Editorial Group (2007).
(2) According to PNUD (United Nations Program for Development) found at http://www.radiomundoreal.fm/rmr/?q=es/node/23700
(3) According to CEPAL (Economic Commission for Latin America and the Caribbean) found at: http://www.bilaterals.org/article.php3?id_article=2154