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  Number 285 | Abril 2005
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Central America

CAFTA: A Disempowering Fetish

The parliaments of El Salvador, Honduras and Guatemala have already approved the Central American Free Trade Agreement, and the Nicaraguan National Assembly is on the verge of doing so. What will come next, and what brought to this point?

Peter Marchetti sj. and René Mendoza V.

Both supporters and opponents of the Central American Free Trade Agreement (CAFTA) with the United States describe it as a watershed, a line that will separate our region’s future from its past. They talk of a “before” and “after,” of its social, environmental, economic and cultural impact.

Some equate it with foreign investment and therefore massive job creation and others with further misery. Still others point to increased exports in areas such as the textile maquiladoras, although 85% of the exported value comes from imported inputs. There is talk of judicial, labor, electoral and environmental reforms, to name but a few. These would amount to reforming reforms, because CAFTA requires its own version of “modern laws” to attract foreign investment.

The region’s political and economic elite is fond of repeating that CAFTA will rescue Central America from poverty, free it from caudillos and set it on the path to progress and democracy. The United States, meanwhile, warns that “If you don’t accept these rules, China will finish you off. The shark will swallow the fish.”

There is some truth in all of this, and we should recognize that Central America has neither capital nor a model of accumulation, that it isn’t otherwise allowed to participate in international competition and has no proposals for creating small openings or partial solutions to generate capital based on its regional exports. We have to admit that Central America is far from being a viable model on its own.

CAFTA simply legalizes
what started in the eighties

What is CAFTA and what is its value added? The answer can’t be found in what was signed, but rather in the “frame” around the “picture.”

CAFTA is the legalization of a process that started in the eighties with neoliberal policies and partial structural adjustments—trade liberalization, reduction of the state, privatization—that helped concentrate wealth in the social sector linked to trade and finance, turn the poor into the vast majority and transform government institutions into entities at the service of the transnational economy. What the free trade agreement represents in practice already has constitutional status in Central America, even though the US Congress can revise the treaty before ratifying it.

The consecration of US cynicism

CAFTA is a neo-protectionist agreement, in which the US government liberalized measures related to products and sectors in which it is competitive or that are highly subsidized, and protected all of its products and sectors that have grown less competitive through quotas, anti-dumping laws of little international credibility, tariffs and non-tariff barriers.

In Central America, maize or dairy producers, who could be considered competitive with US farmers, find that CAFTA only institutionalizes age-old obstacles, such as these subsidies and non-tariff barriers. It is a great paradox in these times of supposedly “free” trade that while Central American maize producers want free trade in order to compete with US producers, it is being blocked by the governments and the transnationals that control the distribution of American corn. They have blocked any real competition for several decades now, while continually preaching freedom and reforms to the formal institutionality.

How did this come to pass? For years, the Central American governments have preferred not to resist neo-protectionist policies because of the “donated grain” they receive. And the US government uses the same “donations” to justify its dumping policy by market and subsidy. But CAFTA has surpassed even those levels of US cynicism, because it has now been consecrated as official policy by Central America’s own governments.

Transnational caudillos

CAFTA is not about free trade. It is a blueprint for free foreign investment. The same elite economic groups and families imbedded in the Central American states since colonial times have increased their voracity over the past two decades, while at the same time breaking through national borders.

In addition to the deregulation included in CAFTA, the states now have to provide subsidies and security to transnational companies in the form of tax exonerations and investment in infrastructure. They also have to offer them legal facilities to avoid any labor demands, for example, all of which increases the tax burden that mainly falls on the region’s poorest sectors. They even have to offer up their country’s public utility services—such as drinking water, social security, education, mail and museums—by privatizing them to the transnationals, who will now be in charge of “looking after society’s welfare.”

Historically, the Central American states have blocked every initiative taken by small and medium rural and urban businesspeople—peasant leader Wilson Campos famously shouted, “They won’t let us be peasants!”—while subsidizing the transnationals through taxes charged on the national rural and urban sectors. Now all of this will be accentuated. From now on the caudillos will be transnational rather than national.

Dynamic man versus passive woman

Deep down, CAFTA is just the legalization and intensification of a process that has been going on for decades, even centuries. As the movements in favor of and against CAFTA don’t take this into account, the result is a discourse that actually disempowers the people.

Instead, they present CAFTA as the result of globalization and offer us the image of globalization as a dynamic, triumphant and determined man and Central American society as an indigenous woman, a passive and static victim whose only recourse is to attract the man and offer herself to him. Through such distorted lenses they view rural communities as spaces frozen in time that will only change with the arrival of McDonalds. Given this image, the poor take up the cry “No to free trade!” and the rich laugh all the way to the bank.

Appearances: “Our country”
and “our sovereignty”

Losing the perspective that CAFTA is the culmination of a prolonged historical process is to fall into the trap of viewing it from an apparently territorial perspective. Ministers talk of the advantages obtained for “our country,” while anti-CAFTA movements warn of the threat to “our sovereignty.” But the elites hidden in our national states—and now allied with the transnationals—are using such discourses and states to their own advantage. Who is actually prejudiced or benefited by either adulating or battling CAFTA?

We have to remember that the Free Trade Area of the Americas (FTAA) grew out of the deepest interests of the United States, which has never negotiated strategic issues for the poor majority in Latin America. It has never addressed the issue of agricultural subsidies or the protection of its own labor market, let alone Latin American immigration or the low salaries offered for illegal employment.

In Latin America, US logic finds an echo among small segments of the private sector that have a lot of influence on the governments, which is why they approve of CAFTA and the FTAA. These segments, known as “modern pro-FTAA business people,” are linked to foreign maquiladoras and to importers. They represent the commercial capital linked to importations and the Latin American capital associated either with transnational and maquiladora service consortiums or directly with the transnational corporations.

What key are we looking for?

There’s a joke about a lady who goes up to a drunken man who is searching for something under the light. “Have you lost something, sir?” she asks him. “Yes,” he replies, “I’ve lost my key.” “But are you sure that you lost it here?” “No, I’m sure that I lost it over there, but the light’s much better over here.”

Exactly what key are we looking for? If it’s a question of fighting poverty, the most effective measure is to eliminate agricultural subsidies in the United States, Japan and Europe, whose agricultural markets are the least free, most protected and most subsidized in the world.

A total of US$370 billion is invested in subsidizing this sector every year. This explains why the salaries of cane cutters in Nicaragua and Bolivia are dropping, cotton production is disappearing from Central America and Paraguay, the price of rice is nose-diving, maize and bean production is in crisis and meat prices are stagnating in Central America. Without these subsidies, the countries of the South would increase both their sales and their agricultural productivity and the legitimate pressure for agrarian reform would intensify, leading to a significant worldwide reduction of poverty. The energy sector is also trapped by the same subsidy logic, particularly in the United States, with direct subsidies on crude oil outstripping even food subsidies.

Focusing the fight on
taxes and subsidies

The issues currently dominating the struggle of and for the poor are taxes and subsidies. The movement against subsidies is already under way. But the movements in favor of progressive tax models in our countries have been overshadowed by protests against both neoliberalism and free trade agreements. The fact is that there’s no alternative; so without radical changes to both subsidies and taxes there’s no point even protesting.

Agriculture is not viable in the United States, Japan or the European Union because it is not profitable without subsidies. It is an ecologically harmful form of agriculture that depends heavily on petroleum for both production and transportation. The subsidies are canceling out investment in micro-business production and clean energy sources. The logic behind it all is perverse: 25% of the consumption of the social sectors that account for 87% of world income revolves around the automobile. Eliminating subsidies could therefore undermine the world economy as currently constructed in one fell swoop.

The consequences of eliminating food subsidies are more positive for the poor, and not as dramatic as would be the case if energy subsidies were scrapped. But doing away with food subsidies would break the “agribusiness” transnationals, producing a world recession. Given this, we need to come up with intelligent proposals on subsidies, based on their gradual—and never indiscriminate—elimination.

Forming a 30-year perspective

Although the complaints against CAFTA or demands for a different CAFTA are correct in terms of ethics and efficiency, they leave Central and South America waiting for a change in the US positions. From this point of view, assuming, rejecting or formulating another kind of CAFTA means falling into the trap of “fetishizing” the TLC and acting like the drunken man in the joke.

Rather than reacting like a traditional NGO seeking to put out fires as soon as they break out, we need to find the “key” by forming a 30-year perspective that will help us understand the present and work towards alternatives that put us on the road to our chosen horizon. And to arrive at that horizon we need to learn from other experiences in the world, place ourselves in the context of globalization and identify our own model of accumulation.

Let’s look to Europe, China and India

The world has experienced different types of structural adjustment. The most successful ones have taken place in Europe, China and India. What they all have in common is that they cover a great diversity of nations and ethnic groups. India consists of 28 states and 7 union territories with very strong regional autonomy. It has 14 official languages with the most common one, Hindu, still only spoken by 30% of the population. At least four languages are spoken in every state: English, Hindu, the given state language and the local caste languages.

China, meanwhile, has 11 ethnic groups in 5 autonomous regions, with much more profound differences than exist among the Latin American nations. The European Union, in turn, currently covers 25 countries and is heading toward a total of around 40, with an enormous diversity of ethnic groups.

These experiences demonstrate that the greater the contact, or alliances, the greater the autonomy and identity and therefore the greater the dignity. These blocs of nations have resulted in sustained growth and economic development over a number of decades. So why can’t Latin America develop the same way? The sad fact is that our elites fear diversity, while Latin America’s fragmentation favors their personal interests and their alliances with transnational companies.

Comparing the FTAA
and the European Union

It is interesting to observe the positive effects of free trade agreements on the preparatory phases of European integration, and in particular the social improvements and economic “miracles” experienced by certain small European countries like Portugal and Ireland. A European-style “special free trade agreement” in which commercial integration is based on each country’s particular identity and resources would also be welcome in Latin America. Underestimating this kind of experience goes some way to explaining the weakening of our sub-regional blocs (MERCOSUR, CARICOM and CACM), which right from the start depended on an alternative that was never seriously attempted.

How does the FTAA differ from European integration? In Europe, the process was gradual, spread over 40 years. The United States pushed the FTAA along at such a rate of knots that the Mexican Congress signed NAFTA before it had even read the final version. The CAFTA negotiation process also took place at an unacceptable pace. In comparison, Chile signed its own free trade agreement with the United States after a 12-year process and Brazil is taking its time over the G4 alliance with China, India and South Africa and its leadership of the 29 countries of the South grouped together in the G29.

Other differences include the fact that the negotiations in Europe involved official aid to the most underdeveloped countries and agreements on migration and social, labor and environmental policy, while the FTAA process is subordinating labor, social and environmental issues to the dominant logic of investment, commerce and the privatization of public services. As a result, the FTAA involves absolutely no economic integration. Furthermore, the European experience involved real unification in order to achieve free investment with a certain degree of control, while there are no controls in the FTAA.

The only path is the dream of Bolivar

One crucial difference is that the goal of the European process was a political union, something completely missing from both CAFTA and the FTAA. But this European objective should be a goal for Latin America. Rather than campaign against free trade agreements, we should be pushing for a politically unified Latin America built around majority interests. Such unification is by no means an impossible dream. It would actually be easier than the unification of China, India or Europe. If our elites want to maintain the differentiation and fragmentation, the peasant majorities and those from urban neighborhoods are ready for such unification. In these times of globalization, there is no alternative to the dream of Simón Bolivar.

Realizing the dream of Latin American integration necessarily involves registering that the failure of the processes of negotiation, solidarity and cooperation in MERCOSUR, CACM, CARICOM and the Andean Pact can be explained by our growing dependence on the United States.

It is easy for us to criticize the United States for not supporting the reduction of the hemisphere’s growing inequalities. But we should also recognize that the elites of Guatemala, Costa Rica and El Salvador never set aside their own interests to help out Nicaragua and Honduras, the region’s two least developed countries. Nor did Brazil help out Paraguay in MERCOSUR. Only now is President Lula offering something new in this regard, while in Mexico López Obrador, the Democratic Revolutionary Party’s presidential candidate, is shaping up to be another Lula. The behavior of our elites and the growing neo-conservatism of our leftist sectors and civil societies has facilitated the imposition of “savage capitalism.” At least up until now, that is, when the Left is finally beginning to revitalize itself.

Unity in diversity:
Therein lies the key

The Central American elites and the transnational companies have imposed their own particular interpretation of reality on us, telling us that it can only be found here, under the light. The problem is that the key is not actually under the light, and there’s no light where it is to be found.

The experiences of Europe, India and China demonstrate that the key is unity in diversity, a slogan that we have to re-conceptualize. Rather than proving an obstacle, the hundreds of different ethnic groups in these three territories have been a positive factor in helping those giants “wake up” in a sustainable way. It is increasingly illusory to talk about Guatemala as Guatemala, Nicaragua as Nicaragua or even Brazil as Brazil. It will only make any sense in the framework of a Latin American union based on the common points to be found in a beautiful diversity. If we compare the topography of two rural communities, we will see that each meter of their geography is different. What we actually need is a counter-topography that unites the diversity to identify the “key.” That’s where the foundations of Latin American—as opposed to hemispheric—integration actually lie.

Sovereignty and
ferocious guard dogs

Globalization shows us that we must work on this counter-topography in relation to determined social sectors. Today, the transnational elites of each of our countries are using the state and exploiting it beyond all bounds, while at the same time maintaining the discourse of “country.” These elites are redefining the notion of “sovereignty,” as they simultaneously guard their owners’ territory like ferocious guard dogs. The elites of a community, a municipality or a country only confuse the search for the “key,” pointing us in the wrong direction.

Globalization has implied a societal, political and economic interconnection that breaks down national borders. Capital is no longer international, but global. The FTAA needs to be understood from this perspective. Equally, the notion of territory must be re-conceptualized in line with the human coalitions of those social sectors that are breaking through the frontiers of any physical space, including the dual North-South one. Latin American union must be understood as incorporated into the global economy and connected to those social sectors. Paraphrasing the famous expression of Pedro Arrupe: “We don’t know where we’re going, but we are convinced who we should go with.” We must go with all of the excluded sectors, including those willing to break down the walls erected by the “fierce dogs.”

Where should we seek the key?

Latin American union should be carried out from the perspective of the social sectors, taking as its starting point the development of merchandise, accumulation for economic growth through technology and markets, and alliances among different companies based on mutual fruitfulness.

One example: the producers of organic coffee from “La Voz” Cooperative in Atitlán, Guatemala, sell coffee to Elain Organic in the United States. The coffee is organic, indigenous (Tzutujil) and produced by an organized group, which gives it ethnic, environmental and social identity, while the coffee from most of the producers selling to the giant Nestlé corporation, for example, has no identity at all. This cooperative has managed to increase its own standard of living and that of its community. Its merchandise, the expression of diverse families, has a meaning and life of its own.

This example shows how an agricultural product can express something intangible with its own particular trademark. The same thing could happen working to accumulate knowledge tailored to a collective’s own needs as distinguished from hiring oneself out as a research consultant for an organization that doesn’t typically want in-depth knowledge or care a great deal about the genuine betterment of people. There’s an urgent need to work with specific social sectors with concrete human faces, rather than intoxicate ourselves on political activism, fooling ourselves that we can find the key of development under the FTAA or CAFTA lamppost.

These reflections should not generate perplexity or the helpless feeling that there’s no point doing anything. Structures both limit and facilitate human actions and their social results. The key of counter-topology lies in attracting all the multiple trajectories where one finds demobilized capital, exclusion of the population’s repressed potential and the national diversity for a Latin American union. Therein lies the key. We just have to look for it.


Peter Marchetti, sj, is director of research and post-graduate studies at Guatemala’s Rafael Landívar University. René Mendoza is an associate researcher at the same university.

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