The Central American Integration: Open Agenda and Pending Dilemma
Pedro Caldentey del Pozo and José Juan Romero Rodríguez
The 1990s resemble the 1950s in terms of the profusion of trade and integration accords worldwide. The delays and difficulties faced by the Uruguay Round of the GATT negotiations sparked the adoption of alternative strategies in case of failure, which did not end up happening. The intense debate between regionalism and multilateralism characterizing those years tapered off with the end of the Round and subsequent creation of the World Trade Organization (WTO), but this did not keep the regional integration models created in the heat of that debate from taking firm root at the beginning of this decade.
Latin America has been one of the regions in which integration initiatives have proliferated: the resurgence of the Andean Pact, Mercosur, CARICOM. Mexico's participation in the Free Trade Agreement with the United States and Canada, the revitalization of Central American integration. Today, all Latin American countries are participating in some sub-regional integration process and some are involved in various projects simultaneously.
There is a certain level of confusion in the wave of Latin American integration, depending on which integration scheme one is talking about. This confusion has important causes: the remains of political instability, the persistence of social problems and the coexistence in Latin America of two different economic development models or strategies, each with its own concept of regional integration's role in development. What are these two strategies? The neoliberal strategy, based on structural adjustment and trade liberalization; and the neostructuralist strategy proposed by the United Nations" Economic Commission for Latin America (ECLA), which advocates productive transformation with equity and open regionalism.
Neoliberal Proposal PredominatesThe structural adjustment and commercial liberalization models have invaded the continent. With content based on assumptions from the neoclassical theoretical model, these programs have been applied throughout the region since the beginning of the 1980s under the sponsorship of the World Bank and the International Monetary Fund. Accepting the structural adjustment and economic stabilization programs became a necessary condition for Latin American countries to renegotiate their huge foreign debts and receive international financing.
Although everyone recognizes the need to correct the major macroeconomic imbalances and carry out some structural reforms to liberalize the economy and reduce state intervention, the adjustment programs have been strongly criticized since the 1980s for both their effects and their conceptual framework. The neoliberal strategy for Latin American economic integration is related to this framework. The neoliberal proposal limits itself to establishing free trade zones whose only objective is to reduce trade protectionism or, in many cases, create customs unions that exclude the possibility of even temporary or partial protection for some productive sectors.
The proposal is not, then, for integration but only for trade liberalization. And since integration is not truly proposed, it cannot generate the benefits that integration brings to socioeconomic development when it truly happens.
A Chain of Proposals From the NorthThe neoliberal development and integration strategy for Latin America is also determined by the offensive launched by the US government in favor of free trade in the region. The Caribbean Basin Initiative (1983 and 1989), the Enterprise Initiative of the Americas (1990), the implementation of NAFTA (1994) and the proposal to create the Free Trade Area of the Americas in the Americas Summit called by Clinton in Miami (1994), form a chain of proposals and projects aimed at eventually creating a continental free trade zone, or a hemispherical one, as its US proponents call it with such grandiloquence.
These proposals from the North have triggered enormous interest in the Latin American countries because of the overriding importance for almost all of them of entering the US market. The interest is even greater for Central Americans, with expectations so exaggerated that the proposals for integrating with each other have taken second place in national priorities.
ECLA’s Neostructuralist ProposalThe other economic development strategy being discussed in Latin America today has its origin in the continent’s structuralist tradition. Latin American neostructuralism at the end of the century has once again become the primary reference point for ECLA, which has designed a proposal it calls Productive Transformation with Equity. The basic elements of this proposal are increased employment, investment in human resources and a traditional ECLA principle: the incorporation of technical progress.
Alongside these three elements, ECLA does not fail to recognize the need to correct major macroeconomic imbalances. Its proposal is actually an adaptation of its earlier development theory to these new times, which are so characterized by the predominance of neoliberal thinking and international globalization processes.
The productive transformation with equity proposal starts from an appraisal of structural adjustment’s negative effects to claim that economic growth and equity are compatible. The difference is that ECLA gives preference to improving the levels of equity, while equity is subordinated to economic growth in structural adjustment.
For all that, the major divergences between the neoliberal proposal and that of ECLA have to do with the state’s role in economic activity. ECLA accepts the need for adjustment and stabilization, but proposes a heterodox adjustment. Throughout its proposal, including in these heterodox adjustment aspects, the state maintains a clear leadership role.
In ECLA's development strategy, regional integration shows up in the complementary proposal of open regionalism. In contrast to what is contained in the productive transformation with equity proposal, this idea appears a bit confused, giving the impression of trying to create a balance between ECLA's own traditional doctrine on economic integration and the dominant neoliberal doctrine.
The primary objective proposed for open regionalism is the creation of a hemispheric free trade zone, thus coinciding with the neoliberal proposal. The objectives of the political and economic union of Latin Americans are abandoned and the goals are less ambitious. The formation of a customs union takes a secondary and marginal role, although the establishment of a common external tariff is recommended.
One also notes the absence in the ECLA proposal of references to the role of integrating the region's industrialization. In contrast, regional instruments of compensation for economic differences are quite candidly proposed.
Excessive confidence is expressed that the intensification of foreign trade will have positive effects on national economies. That combined with the absence of any proposals for regional action to deal with the structural obstacles facing balanced development could be the consequence of the enormous influence of neoliberal theories in all fields in recent decades.
ECLA: Pragmatic and AmbiguousTo confront the attacks by neoliberalism, ECLA has assumed a pragmatic and ambiguous program in its proposals for the 1990s. With this it seeks, among other things, to avoid the intense pressures it has felt within the UN from countries like the United States, which have expressed their disagreement with ECLA actions and measures. The replacement of Gert Roshental with Colombia's former economic minister Jose Antonio Ocampo as ECLA general secretary appears to be an episode in this struggle and could presage notable changes in the institution's style.
ECLA's excessive ambiguity and pragmatism facilitate a coming together of the current Latin American governments, but weaken its proposals. ECLA's open regionalism coincides to a large degree with the trade liberalization processes and avoids a clash with the unacceptable aspects of neoliberal strategy.
This ambiguity creates conditions to alter the model being proposed under pressure of the free-trade avalanche, such as occurred in the 1960s and 70s during the earlier attempt to apply ECLA's import substitution model to Central America.
Despite all this, the presence—albeit limited—of specific economic measures in the region, the connection of open regionalism with proposed national policies in the strategy of productive transformation with equity and the great vigor with which some clearly structuralist measures are defended in later documents all appear to connect ECLA's concepts today with their concepts of yesterday. In any case, the current ECLA proposals constitute a fundamental reference for drawing up alternative development strategies in Latin America.
Arias-Stein Proposal For Central AmericaVarious other neostructuralist proposals have been formulated in Central America as alternatives to reigning neoliberalism and its dominant structural adjustment programs. The global proposal authored by a group of recognized Central American researchers under the coordination of Salvadoran economist Arias Penat and Guatemalan Eduardo Stein, currently Guatemala's Foreign Relations Minister, stands out among them. In 1992, they published the document “Democracy Without Poverty: Alternative for the Central American Isthmus," which is, without a doubt, one of the most complete and accomplished alternative policy proposals among all those put forward in Central America.
Their proposal places agroindustry as the articulating centerpiece of an alternative development model. According to the authors, agroindustry can propel development of the Central American region and resolve or mitigate its structural problems, incorporating social sectors that are currently excluded because of their poverty. In their proposal, this strategy is compatible with structural adjustment policies as long as the adjustment adapts to the needs and priorities of Central American societies.
The Arias-Stein strategy could present feasibility problems because it assumes broad consensus about its proposals in all countries of the region and because precisely such a confluence of political conditions and resources would be required to put it in practice. In addition, the leadership role proposed for the state in this strategy could become an unresolvable obstacle, since Central American states are characterized by a lack of economic and human resources.
Although such doubts exist about the feasibility of this proposal, three virtues make it highly interesting:
1. It is an effort at deep analysis of the region's issues and is an autochthonous development proposal that partially overcomes the traditional deficit of autonomous thinking in Central America.
2. It is a combination of alternative options to the failed structural adjustment programs, in which the reduction of poverty is an absolute priority.
3. It is an alternative strategy that proposes terms for a debate about both the general and concrete aspects of a much-needed economic and social policy in Central America.
Other proposals designed by diverse collectives in Central America share the neostructuralist framework of the Arias-Stein proposal, as well as concern over the role of the agricultural sector and the need to break down the negative aspects of the agroexport model.
A Process Begun With EsquipulasThe first objective of reactivating and restructuring the Central American integration process during the 1990s was to put an end to the conflicts that the region's countries faced during the 1980s. The Contadora and Esquipulas processes marked an historic milestone by being two autochthonous initiatives—one Latin American, the other Central American—that succeeded in replacing the dynamic of confrontation with the dynamic of negotiation.
With the end of the Esquipulas process—which covered seven summits held between August 1987 and April 1990—meetings among the Central American Presidents continued. The summit in Antigua, Guatemala (August 1990) marked the beginning of discussions about regional integration, and already dealt with economic aspects of it. The region's Presidents have held 19 ordinary meetings since the first Esquipulas summit and many other extraordinary or informal encounters.
A new conceptual, legal and institutional framework for Central American integration has emerged from this succession of meetings and negotiations. The five member countries of the controversial Central American Common Market created in the 1960s form part of this. Together with these five countries, some of the new integration accords extend to Panama, Belize and the Dominican Republic.
Two summits in particular stand out because of their results: the XI Summit in Tegucigalpa (December 1991) and the XIV Summit in Guatemala (October 1993). Out of them came the agreements renewing the fundamental Central American integration treaties of the 1960s: the Tegucigalpa Protocol to the 1962 Letter of ODECA and the Guatemala Protocol to the 1960 General Treaty of Economic Integration. Together with the Treaty of Social Integration, approved at the XVI Summit of San Salvador (March 1995) and the Framework Treaty of Democratic Security, approved at the XVII Summit of San Pedro Sula (December 1995), they form the fundamental legal basis of Central American integration in the 1990s.
Along with these treaties, another accord must be noted due to its important novelty in the process. In the regional Ecological Summit—an extraordinary presidential meeting held in Masaya, Nicaragua, in October, 1994—the countries adopted the Alliance for Sustainable Development in Central America (ALIDES), a conceptual framework that involves the entire integration process and adopts the concept of "sustainable development" as its theoretical base.
At a time marked by the Earth Summit of Rio de Janeiro (1992) and the Social Summit of Copenhagen (1995), the Central Americans appear to have wanted to give Central American integration a special wrapping to facilitate foreign financing to support the process. The following years have demonstrated that, despite the positive theoretical aspects of the idea, its development has been minimal and it has barely had an echo in Central American society.
A Valuable but Very Complex DesignThe Tegucigalpa Protocol to the ODECA Letter (1991) is the treaty that establishes the legal and institutional basis of the new stage of regional integration, with the creation of the Central American Integration System (SICA). By designing a model based on four subsystems (political, economic, social and cultural), SICA attempts to give an overall dimension to integration that it never had in the designs of the 1960s.
Leaving aside the transitory mechanisms established for until the treaties are implemented, the institutional design of the new Central American integration is structured into various organs, specialized technical secretariats, regional institutions and ad-hoc inter-governmental secretariats, as enumerated below.
SICA’s organs include: the Central American Presidential Summit Meetings, Council of Ministers, Executive Committee, General Secretariat, Consultative Committee, Central American Parliament (PARLACEN), Central American Court of Justice and the Central American Vice Presidential Summits.
The specialized technical secretariats include: the Permanent Secretariat of the General Treaty, the Secretariat of Social Integration (SIS), the General Secretariat of Central American Educational and Cultural Coordination (SGCECC) and the Executive Secretariat of the Central American Commission of Environment and Development (SE-CCAD).
The new institutional and legal framework of Central American integration is a valuable design because it has the potential to respond to any principal needs that may arise as the integration process develops. But its complexity is such that decision-making and the dispersion of institutions can put a brake on the process’ advancement.
The primary virtues of this new stage’s institutional framework are its globality and multi-dimensionality and the creation of two institutions—the Central American Court of Justice and the Consultative Committee. They will resolve two fundamental gaps in the earlier stage: first that there were no institutional mechanisms to guarantee fulfillment of the accords reached or to preserve the community interest, and second that civil society’s participation was very weak.
As demonstrated by the European Union example, institutionality is, without doubt, a determining factor in the success of an integration process. In the Central American case, despite the efforts made and the interesting novelties introduced by the new accords, the institutional framework presents a series of dysfunctions and problems that could have significant negative repercussions. How this new institutionality works is a decisive element in revitalizing the integration process.
Five Design DefectsThe institutional framework created by the 1991 Tegucigalpa Protocol has various defects:
1. Notable legal disorder. This was provoked by the decision to sign new accords as protocols to old accords—only abolishing old norms that contradict the new ones—which creates interpretation difficulties. The disorder grew out of the fact that there are no homogeneous and obligatory time frames for ratifying the accords in each country, which leads to both delays in validating the accords and confusion because they are only partially instituted in some countries.
2. Profusion of institutions. This complicates a key to the success of the process: efficacy and efficiency in decision-making.
3. Complexity of the system. The SICA graph demonstrates this. And successive Central American accords have increased the already high number of institutions in the process. The complexity of the institutional system and the proliferation of organs create a serious financing problem for all these activities.
4. Imbalance between “inter-governmental” power and “community” power. The regional institutions—which defend and develop community interests in the process—have a high level of dispersion and, thus, a low level of coordination, which endangers community power. In fact, the Presidents’ Summit has decision-making power and in its intense activity has expanded the regional agenda immeasurably.
5. Loss of leadership by the Permanent Secretariat of the General Treaty. Although it is critical for this secretariat to increase its ability as an implementing and proposing body in the economic integration process, this has not happened.
The accumulation of accords and decisions could generate frustration between Central Americans if the process does not demonstrate significant advances. Advances in economic integration are particularly important because they are what really moves the process, despite the necessary concerns about Central America’s social reality.
Rationalizations and ReductionsWith support from ECLA and the Inter-American Development Bank, the Central American governments and SICA have engaged in a serious reflection on rationalizing and reinforcing the institutions of integration, which has generated important consequences. These became manifest in the XIX Presidents' Meeting (July 1997, Panama), when the Presidents decided to address the institutional reform of SICA with the primary goal of rationalizing it. The major decisions made on that occasion were to:
* Review the attributes and number of representatives to PARLACEN.
* Abolish the power of the Central American Court of Justice with respect to domestic intervention and reduce the number of justices to one per country.
* Unify the different secretariats of the SICA.
* Replace the Executive Committee with a Liaison Committee.
In addition, the Central American governments decided to initiate work to re-issue all the regional accords as a single treaty. The Panamanian government also decided to initiate talks for the signing of a free trade agreement with the five Central American countries, which assumes the first step toward participation in the economic integration accords. Despite this, it is not likely that Panama will advance in Central American integration anywhere beyond free trade in the short term. There is no clear desire on the Panamanians' part to participate in economic integration and there is a real difference between Panama's political and economic dynamic and that of the Central American countries, based on its historic formation.
On February 5, 1998, the Central American Presidents held an extraordinary meeting in El Salvador's Comalapa airport to discuss the progress in the reflection on reforming the institutional framework. Some important decisions came out of this meeting, of which the major ones were to:
* Reduce the number of PARLACEN members from the current 20 to 10 or 15 per country.
* Reduce the number of judges on the Central American Court of Justice from 2 to 1 per country and modify their working relationship with the Court, paying them by session and not by month.
* Proceed with unifying the regional institutions into one secretariat based in San Salvador and coordinated by the SICA General Secretariat. When this decision was made, Ernesto Leal, Nicaragua's Foreign Minister under the Chamorro government, held that post. There was speculation that a Central American with international stature would be named to head the new unified General Secretariat.
* Name a technician as President of the Central American Bank of Economic Integration (CABEI), eliminating the custom of rotating this presidency among each country, and modify the Bank’s statutes to facilitate the entrance of extra-regional partners.
Although these decisions are very correct from the viewpoint of rationalizing the system, they caused considerable uproar, even though neither the Central American Court nor PARLACEN knew how to justify the importance of their functions. They simply lost themselves in that frustrating integrationist rhetoric that raises so many suspicions in Central American society.
Opening Windows to the CaribbeanAn extraordinary summit was held on November 5-7, 1997, in Santo Domingo, Dominican Republic. Its most important result was the decision by the Dominican Republic and the Central American countries to begin the process of incorporating the Dominican Republic into SICA.
This meeting gave substantial support to the integration process since it shows the firm Central American will to open itself up to the Caribbean countries by cementing relationships with one of that area's most important nations.
Another result of that Summit was the decision of Dominican President Leonel Fernández to formally propose to the Caribbean Community (CAR1C0M) countries approval of a strategic alliance to create a free trade zone between Central America and the Caribbean, with a potential market of 60 million people. Trade relations between the two regions have been very limited to date.
Extending the Central American Accords to the Caribbean through the special windows that have been opened, first to Belize and now to the Dominica Republic, offer notable opportunities to the Central American countries.
A strongly founded suspicion remains that the motivation to open these windows is based less on the objectives of the regional accords themselves and more on obtaining potential advantages in the US Free Trade Area for the American project.
And the Political Confederation?A notable episode in Central America’s integration process was the proposal by Salvadoran President Armando Calderón Sol and Honduran President Carlos Roberto Reina for political unity of the Central American countries—the formation of a sort of confederation. The idea was discussed by all the Central American Presidents at the Extraordinary Summit of Managua (September 1997).
Although an initial theoretical reaction to the proposal was positive since it expressed confidence in the regional integration process, it also raised some doubt. First, it would introduce new goals when the fulfillment level of the ones already agreed to is quite limited. And second, it comes from Calderón Sol, who in 1996 decided to unilaterally modify Salvadoran taxes to third countries. This episode made clear that the Central American Presidents are still prisoners of the dilemma between advancing or retreating in the process, which makes it ever more difficult for Central American societies to believe and have hope in the integrationist process of their nations.
Living with the DilemmaCentral American economic integration in the 1990s is based on theoretical frameworks very different from those of thirty years ago, the period of the Central American Common Market. As with all other integration processes occurring in Latin America today, the Central American one is marked by a new globalization paradigm and by the objectives of an integration centered on competitive insertion of the countries in the international economy.
The neoliberal strategy of economic development and commercial integration is currently dominant in Central America, however the regional model design of the 1990s conserves many aspects of neostructuralist theory in the conception of its objectives. In fact, the Tegucigalpa and Guatemala Protocols have developed a legal and institutional framework for a broad integration model, and the accords reached have developed other dimensions of regional integration, like regional democratic security and the social dimension of integration. Despite all of this, the Central American governments appear to want to promote only those aspects of integration most closely related to neoliberal tenets, like the establishment and development of a customs union with the single objective of reducing protectionism.
Thus, the Central American countries continue to live with the unresolved dilemma between a broad neostructuralist integration strategy and a neoliberal commercial integration strategy. For this reason, any evaluation of the economic integration process demands a dual review: the theory, expressed in the accords; and the practice, expressed in reality.
Free Circulation of What?The Guatemala Protocol is very pragmatic. It avoids establishing fixed deadlines for fulfillment of its integration objectives. This pragmatism in terms of dates and deadlines contrasts with the specific nature of the diverse stages of economic integration: from the perfecting of the free trade zone to economic union, passing through the customs union or monetary integration.
The economic integration model proposed in the Guatemala Protocol consists of initially establishing a customs union, without deadlines, taking advantage of what is left of the Central American Common Market—for example, the unification of tariff nomenclature or the lowering of duties already carried out in some sectors. A second stage is then proposed: establishment of a single regional market based on determined advances in the free circulation of capital and workers among the Central American countries.
The primary accords contained in the Guatemala Protocol refer to five stages: improving the free trade zone, developing the customs union, coordinating foreign trade relations, free mobility of productive factors—with monetary and financial integration—and developing common policies.
The most important accords, because of both their advanced level and their impact on the success of the process, are without a doubt those related to improving the free trade zone and establishing the customs union.
Although the accords include free circulation of labor when speaking of the free mobility of productive factors, they do not expect progress in that freedom in even the medium term. In fact, the "single Central American market" that the accords are planning for—though they do not use that name—would have the free circulation of merchandise, services and capital as one of the primary components.
A Regional Agrarian PolicyThe Guatemala Protocol proposes common policies among countries. In fact, accords have already been produced and some actions already taken in the areas of agriculture, tourism and social policy. But these accords are more declarations of principle and expression of willingness than realistic and concrete proposals. This problem especially affects the Social Integration Treaty (1995), which contemplates a broad catalogue of irreproachable lines of action, contradictory with a weak institutional framework, and even more contradictory with the absence of financing and implementation mechanisms for a regional social policy that would decide to follow some of these directions.
Some advances have occurred in agricultural policy. In particular, the initiative to set up a system of price bands for basic grains appeared to place regional food security as the primary tenet of Central American agriculture. But this initiative was almost immediately abandoned, which implied that the goal of developing a regional agricultural sector policy was also abandoned. This is quite serious if one takes into account the Arias-Stein proposal based on agroindustry.
Central American integration would especially improve regional agrarian policy. The regional framework for negotiating the establishment of a customs union and foreign trade is ideal for setting rules of the game that—as in the world's main economic blocs—would guarantee Central American food security and development of the rural zones with policies and mechanisms for regional production protection.
The agrarian policy debate is especially interesting since some Central American governments have expressed their decision to focus development strategies on the agricultural sector, as did Nicaragua’s Liberal government when it proposed to make that country “Central America’s granary.”
Advances: Free Trade and Customs UnionCentral American integration has made more progress in improving the free trade zones and establishing the customs union. The advances in lowering taxes and adopting a common external tariff are gradually and rationally resolving the obstacles growing out of each country’s particular interests and its discretionary use of non-tariff obstacles to favor those interests. All that remains is to harmonize customs legislation more and to engage in a regional reflection on an aspect hat would allow a qualitative leap in the possibility of success for the process: designating part of the tariff income as shared by all.
The following three elements characterize the establishment of the customs union:
1. The expansion of the intra-regional free trade system with four general exceptions: raw coffee beans, sugar, petroleum derivatives and chicken. There are other exceptions by country: ethylitic alcohol (El Salvador), cigarettes (Costa Rica), alcoholic beverages (Honduras), roasted and ground coffee (Nicaragua).
2. The abolition of “formal” obstacles to intra-regional free trade, although conserving very relevant non-tariff obstacles, in particular technical, fiscal and sanitary barriers that are frequently present in trade relations between Central American countries.
3. The definition—initiated at the end of the 1980s—of the characteristics of external tariffs. The so-called Central American Tariff System (SAC) has balanced or is in the process of balancing 97% of its tariff universe. Only 3% of that universe pertains to products whose tariff rights with respect to imports will not be balanced, among them some fiscal products such as cigarettes and liquor. Tariffs on lines to which the SAC applies range between 0% and 15%, as illustrated in the accompanying table.
With the initiation of the integration process in recent years, some Central American governments unilaterally decided to modify their tariff ranges for third countries. El Salvador and Guatemala did so in 1996, and Nicaragua did so in 1997 with its controversial Tax Reform Law. Since such measures make the regional accords vulnerable, they have forced the regional integration organizations to convince the country committing the infractions of the need to withdraw the measure for all the countries to modify regional tariffs. This is what happened with the Salvadoran modification, which changed to a new structure different from the earlier one (20%-1%)
Difficult Relations with the United StatesOne extremely important necessity if Central American integration is to advance is the coordination of the foreign trade relations of all member countries with third countries. The integrationist option depends primordially on its economic aspects, yet there is a scant percentage of trade among the Central American countries, which illustrates the limited level of economic relations and interdependence from which they are starting.
The Central American countries only conduct about 20% of their imports and exports with each other, though intra-regional trade data show a steadily increasing trend since 1987. Preliminary SIECA data for 1997 show an exchange of $1.77 billion in exports and $1,803 billion in imports. The depth of the integrationist strategy option could raise the percentage above 40%, which would have positive effects on the process.
This integrationist option does not aim to concentrate only on the Central American region and does not assume renouncing closer trade relationships with the United States or abandoning the still distant Free Trade Area of the Americas, both of which are unavoidable given the intra-regional trade data. What is clear is that Central America is not really interested in immediately forming part of the Free Trade Agreement or the hypothetical Free Trade Area of the Americas. The most appropriate strategy given Central America's lower relative development, would be to establish preferential accords with these two blocs to allow Central Americans freer access to these markets with better possibilities, while reserving the use of protectionist instruments to safeguard their regional development possibilities.
This, however, would be an attempt to establish asymmetrical and preferential accords, which does not seem easy given today's political conditions in the United States. The US Congress has denied President Clinton the so-called fast track, which gives Presidents the power to negotiate free trade agreements with other countries that Congress cannot later amend. The fact that Clinton has lost this power is an important obstacle to the creation of the Free Trade Area of the Americas. It assumes, for example, interrupting negotiations for a possible incorporation of Chile to the Free Trade Agreement and increases US government concerns about the European Union's growing presence in the Mercosur countries as well as the rest of Latin America.
In the broader framework of the US trade strategy toward Latin America, Central American integration could have positive effects for various reasons. It could reduce the region's dependence on the US market and diversify trade options for Central Americans. It could promote the formation of more solid negotiating teams. And, above all, a united Central American market would be more attractive in any trade negotiation.
Will the Central American governments abandon unilateral trade negotiation strategies if they are incompatible with multilateral negotiations or the Central American accords? The indecision of some area governments about integration has already given way to unilateral negotiations that result in non-compliance with the accords and, above all, has undercut the legitimacy of the integration process in both regional and international public opinion. Renouncing unilateral strategies thus becomes a key element for the advancement of the regional project.
An Agenda with Ten ConclusionsOn the agenda for the Central American integration process, with all its still open questions, at least ten conclusions are already clear:
1. The Latin American debate about integration and development is again swinging between two poles: the neoliberal and the neostructuralist. For Latin America to successfully enter the 21st century, ECLA proposes its model of productive transformation with equity and open regionalism. This proposal is not as solid and its repercussions are not as strong as other ECLA proposals in past decades. It approximates some arguments of the neoliberal model, but is rooted in basic neostructuralist principles.
2. Because of the structural characteristics of Latin American societies and economies, and because the application of structural adjustment plans in the region have been so controversial and had such limited success, neostructuralist proposals that incorporate positive lessons from structural adjustment become a more appropriate alternative than the pure neoliberal model to facilitate Latin America's successful insertion in the world economy, while at the same time reducing the levels of poverty and inequality.
3. Latin American integration, as inspired in ECLA's open regionalism, is an effective instrument to reach the disparate objectives of each country's economic policies in the new globalization framework, but regional integration by itself cannot be expected to guarantee a solution to Latin American problems.
4. Latin America's integrations wave is based on neostructuralism even though, unlike the 1950s and 1960s, the experiences of the 1990s are oriented outward" rather than "within." The Latin American integration accords and treaties have neostructuralist foundations—a community institutional framework, a customs union or common market as an objective, planning for common policy and for mechanisms of regional cohesion, etc.—but their scant implementation demonstrates the discrepancy between the signed accords and the neoliberal orientation that marks economic policy decisions.
5. The greatest contradictions exist around the US proposal of a Free Trade Area for the Americas, in whose origin it is not difficult to perceive US concerns about the possible success of Latin American integration experiences like Mercosur. The Free Trade negotiations have become an important obstacle in Latin America's integration experiences, since the US market is an important determining factor for many Latin American countries.
6. The revitalization of Central American integration in the 1990s is progressing in its economic aspects. The new treaties offer an adequate framework for regional development, though they are being revised with the double objective of guaranteeing fulfillment of the signed accords and achieving a more streamlined, effective institutionality.
7. The most notable lack of compliance with the Central American accords has to do with the arena of joint trade negotiations. Central American integration faces unilateral decisions by member countries that are incompatible with the regional accords those countries have signed. The reason for this is the preeminence of neoliberal policies in the governments or in the demands put on governments by negotiations with the United States or Mexico.
8. The Central American situation offers tangible advantages for designing and applying some common policies. The advantages are more evident in the case of agrarian policy given the possibility of designing a regional development policy to protect basic grains and other regional products. It is harder to negotiate a common strategy to attract and implement international cooperation that would allow the development of some of the social policies contemplated in the Central American Integration Treaty.
9. Central American integration is not incompatible with the option of joining the Free Trade Area of the Americas, but the advantages that the neostructuralist regional integration model offer for the development of the Central American countries require that the US proposals be conditioned on this model and not the reverse.
10. The Central American countries reflect the doubts and contradictions experienced throughout Latin America in the face of the dilemma between today’s neoliberal and neostructuralist models. The Central American integration accords are based on neostructuralist principles and hence on an integration model closer to the European model than to NAFTA. But, despite this, the economic policy of all Central American governments responds to the neoliberal strategy, which frequently leads to non-compliance with the regional accords. This engenders doubts about the real willingness of Central America’s current governments to promote integration.
By Pedro Caldentey del Pozo and José Juan Romero Rodríguez, sj. Professors at the Economic and Business Sciences Faculty of the University of Cordoba, Spain, and collaborators with the Central American Universities (UCA) in Managua and San Salvador.