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Jewish World Review Nov. 10, 2005 / 8 Mar-Cheshvan, 5766 U.S. should lure, not lecture, Latin business world By Robert Robb
http://www.JewishWorldReview.com |
The contentious Summit of the Americas illustrates why the United States
might achieve more with a less pushy foreign policy.
President Bush has preached free trade as a way to improve economic growth
and alleviate poverty in developing countries. He has proposed a Free Trade
Area of the Americas, basically making the entire hemisphere a free trade
zone.
That idea got essentially shelved at the summit by members of a regional
common market of sorts known as Mercosur. Mercosur consists of Brazil,
Argentina, Uruguay and Paraguay, with Venezuela scheduled to become a full
member by the end of the year.
The headlines went to Venezuela's virulently anti-American leader Hugo
Chavez. But the real political dynamic at work is more subtle.
Center-left governments have been coming to power in Latin America in part
in reaction to what are perceived to be the failings of what is known,
misleadingly, as the Washington consensus. The perception is that Latin
America followed the prescriptions of the United States during the 1990s,
including freer trade. But the U.S. benefited disproportionately from the
trade, while the lot of Latin America's poor didn't improve.
The Washington consensus, however, is more accurately described as the
International Monetary Fund consensus, which stresses debt management over
growth policies.
Moreover, Latin America has clearly benefited from freer trade. Latin
American exports to the United States nearly tripled over the last decade.
Overall, Latin America went from running a trade deficit with the United
States to running a pretty healthy trade surplus.
Improved economies did not, however, much affect the poverty rate in Latin
America, which runs close to 50 percent. But this is certainly not because
of freer trade. It's because of cultural and institutional barriers to
indigenous growth.
In his book Liberty for Latin America, Alvaro Vargas Llosa analyzes the
historical and political developments that left Latin America with a
corporatist rather than an entrepreneurial economic structure and culture.
The World Bank has actually done some useful work documenting how
government bureaucracy and red tape adversely affects indigenous economic
growth. It takes longer to start a business in Latin America, and requires
more governmental approvals, than virtually anyplace else in the world.
As a result, more than 40 percent of economic activity in Latin America is
estimated to take place in the informal sector. The key to helping the poor
in developing countries, as Peruvian economist Hernando de Soto has pointed
out, is giving legal entitlement to what they own and sharply reducing
regulatory and tax barriers to participating in the formal economy.
Trade can help, however, and Latin America remains well behind other
developing countries in both export growth and attracting foreign
investment.
While there is a political desire to be perceived as more independent of
the United States, the new center-left governments, with the radical
exception of Chavez, are not turning their backs on economic
liberalization.
In fact, some of the reluctance about a free trade agreement for the
Americas is to keep the pressure on for a new global free trade agreement.
Brazilian President Lula da Silva wants deep reductions in agricultural
subsidies among developed nations worldwide. He has also been foremost
among the new center-left leaders in reassuring markets and investors,
although scandals in his party illustrate the political and legal
instability that is another hindrance to Latin American development.
Beyond the leaders, a recent Latinobarometro poll found that about
two-thirds of the Latin American people believe that a market economy is
the only system that can develop their country.
Center-left leaders in Latin America are trying to diversify their economic
relations. But the U.S. market is just too big and too convenient to ignore
or minimize. About 60 percent of Latin American exports currently go to the
U.S., and the U.S. is the largest source of foreign investment for most
Latin American countries.
Given the current Latin American political climate, a U.S. government that
quietly did business might very well do more to advance free trade and
economic liberalization than one that preaches and lectures about them.
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JWR contributor Robert Robb is a columnist for The Arizona Republic. Comment by clicking here.
© 2005, The Arizona Republic |
Arnold Ahlert | |||||||||
