Envío Digital
Central American University - UCA  
  Number 256 | Noviembre 2002


Central America

The Puebla Panama Plan In a Nutshell

The victory of Lula da Silva’s Workers Party in Brazil will hold up the continental negotiations over the FTAA. The Nicaraguan government sees this delay as an chance to move ahead on Central America’s free trade agreement with the United States and consequently with the Panama Puebla Plan. The following is a guide-at-a-glance to the Plan that also offers insights on the free trade agreement.

Miguel Pickard

The Puebla Panama Plan (PPP) is easy to explain. It is an enormous infrastructure project designed to favor big business in an area consisting of the nine states in south-southeast Mexico and the seven Central American countries.

Who’s promoting the PPP?

Mexico’s government of Vicente Fox supposedly conceived the plan, and that country appears to be promoting it more than anyone else, but its roots can actually be found in plans and projects designed previously by the World Bank and the Inter-American Development Bank (IDB) for Mexico and Central America. After Fox took office in December 2000, his government put several regional projects into one packet and called it the Puebla Panama Plan, which Fox presented to the Central American leaders during a summit meeting in El Salvador on June 15, 2001, and they subsequently approved it.

Is the PPP related to NAFTA?

Yes, it is. The North American Free Trade Agreement (NAFTA) is the trade agreement between the United States, Canada and Mexico put into effect in 1994, which establishes the “ground rules” for commercial exchange among these three nations. The United States is now seeking to extend similar rules to the 34 countries of North, Central and South America and the Caribbean nations—with the exception of Cuba—in an agreement known as the Free Trade Area of the Americas (FTAA). The FTAA has a geopolitical dimension of great importance to the United States. It will create a single trade bloc from Alaska to Patagonia under US tutelage, thus making the United States more competitive against its commercial rivals in Europe and Asia. Commercially speaking, the FTAA will place the Americas under US dominion. The trade agreements promoted by the United States (NAFTA and FTAA) are a necessary requirement for creating the “right atmosphere” that big business is seeking. The PPP responds to the same logic but has its own specific nuance, as it will channel billions of dollars of public funds—government resources—into developing the infrastructure requested and needed by big business.

How is the PPP related to other plans?

The PPP is related to another infrastructure project being implemented in South America, known as the Integration of Regional Infrastructure in South America (IIRSA). The PPP and the IIRSA have the same aim: to create basic infrastructure or improve existing infrastructure to encourage investment by big companies. Such new or improved infrastructure will increase business profits by offering, among other advantages, an improved highway system and the flow of goods to or from our region. The most striking aspect is that the inhabitants of the participating countries will bear a large part of the cost of these projects. The works will be paid for directly out of our taxes, or indirectly through IDB and World Bank loans that will increase the foreign debt and hence still be paid off with our taxes over time.

Who will be the main beneficiaries?

The main beneficiaries will be the big US firms. The PPP will facilitate investment by transnational corporations in a region very rich in oil, minerals, forests, biodiversity, water and tourist attractions. The area in which we live is one of the richest of the world in biodiversity, which makes it particularly attractive for pharmaceutical companies, seed marketers and biotechnology companies working on genetic manipulation. This is also a geographically strategic zone as it is the narrowest part of the Americas, linking the North and South American continents, making it a natural corridor for north-south as well as east-west trade.

Will the PPP only benefit US corporations?

Although investment capital seeking profits in the PPP area can come to our region from any part of the world, US companies will surely obtain the greatest benefits for several reasons. First of all, the PPP area has been America’s “backyard” since the 19th century, and since then the United States has consistently maneuvered to ensure that its political and corporate interests prevail in this area of the world. With unusual frankness, US Secretary of State Colin Powell explained that the objective of the FTAA is to guarantee US control over a territory stretching from the Arctic to the Antarctic in which American businesses will have free access and no obstacles or difficulty selling their products, services, technology and capital in the whole hemisphere.

Another reason is that the US security strategies since the September 11 attacks have reawakened interest in Mexico and Central America. President Bush proposed a new free trade agreement with Central America in January 2002, obtaining congressional approval for fast-track negotiations. Most regional export and import trade is already with the United States. Over 85% of Mexico’s exports go to the United States, with a similar percentage of its imports coming from its northern neighbor. Although with lower percentages than Mexico, Central America’s foreign trade is also dependent on the United States. For all of these reasons, the US transnational corporations, which already have strong links with this region, will benefit most from the PPP.

Why was this area created?

The official explanation is that it is linked to the promotion of foreign investment in an area rich in natural resources, but with the highest poverty levels in the Americas. Encouraged by the IDB and World Bank, the Fox administration proposed the Puebla Panama Plan as a mechanism for tackling the region’s poverty in a “comprehensive” way. From the perspective of the Fox government and of neoliberal strategists, poverty has to be tackled, although not necessary “resolved,” so we don’t feel compelled to ask ourselves why there are people who are so poor. In the neoliberal conception, poverty is tackled by the jobs that will supposedly be generated by the transnational corporations that decide to invest in the PPP zone.

Why aren’t the corporations already investing?

The transnational corporations are painstakingly searching the world for places where they can increase their profits, but they can afford to be selective because of the great competition going on among underdeveloped countries across the planet to attract investment capital. The corporations want things as easy and as convenient as possible, and among other things that means that the governments of our regions must sort out the infrastructure bottlenecks in our respective countries.
The corporations ask why they should put factories in an area with a shortage of reliable energy sources, or how inputs will reach their factories and how the finished products can be sent out if the highways are in such a bad state. If they need large areas of land for exportable mono-crops, they want to know if the area has been “cleared” of peasants yet or if they have at least been deactivated through government co-optation. Those who want to bio-prospect for interesting plants and micro-organisms in areas rich in biodiversity ask similar questions: have the indigenous peoples been evicted from or neutralized in these naturally wealthy areas, thus ensuring quick and easy access to these resources without scandalous conflicts? The transnational corporations want all such aspects resolved for them before they invest a single cent. And of course they still want the traditional “gifts” they already receive from governments, including free land on which to build their factories, free electricity, water and gas, tax exemptions for decades to come and the training of their work force at the government’s expense, among other “incentives.”

What will the PPP do to attract investment?

Highway construction is one of the main components of the PPP, and involves two main routes. The first will run along the coast of the Gulf of Mexico from the Texan border to the Yucatan peninsula, with “feeders” running towards Belize, Guatemala and Honduras. The other route will go down the Pacific coast, from Mexico City through Guatemala and the rest of Central America, stopping in Panama.

Another component is dam construction. A total of 25 dams are planned for the PPP region to generate the energy required for industrializing it and satisfying the US energy market’s demand. This component represents one of the greatest dangers to indigenous peoples, as the construction of these dams will flood thousands of hectares of land currently in use, destroying archeological sites, original forests, cities and indigenous communities. There is talk of at least two and possibly five dams along the River Usumacinta, which divides Mexico and Guatemala. Large amounts of infrastructure will also be built to link the Gulf of Mexico and the Pacific Ocean. A “dry canal” is already under construction in the Tehuantepec Isthmus—the narrowest part of Mexico—to guarantee the rapid movement of container-loaded products in the context of east-west trade.

What are the main components of the PPP?

There are eight components, presented in the following order in official documents:
1. Sustainable development
2. Human development
3. Natural disaster prevention and mitigation
4. Promotion of tourism
5. Trade facilitation
6. Highway integration
7. Interconnection of electricity systems
8. Integration of telecommunication services with the Meso-American Information Highway (AMI).

The last four components—designed to provide all of the infrastructure needed to “encourage” investment from multinational corporations in the PPP area—are the most important for the Fox government. Most funding will be earmarked for highway improvement, followed by interconnection of the area’s electricity systems and trade facilitation. Each of these eight components contains several mega-projects, 28 in all.

How much money is there for the PPP?

There is talk of $10 billion, although some sources put it at high as $25 billion. The main lenders are the IDB, the World Bank, the European Union, the Andean Development Corporation, the Central American Bank for Economic Integration and the government development agencies of the United States, Japan and Spain, among other countries. Some PPP countries will use funds provided by their own tax contributors to create or improve their infrastructure. The Mexican government, for example, originally budgeted $742 million for the PPP in 2002, but this had to be cut to $550 million, 84% of which is earmarked for highway construction. Some private companies will also contribute funds to cover certain infrastructure costs, with an eye to getting the edge over competing companies and thus controlling the market. One example of this can be found in the energy interconnection component, which plans to link the Mexican and Central American electricity networks at a cost of $405 million. The Spanish company ENDESA will contribute $45.8 million and thus become a co-owner of the network.

What impact will the PPP have on development?

It depends what is meant by development. The PPP is a public works project aimed at attracting foreign investment to the region and is thus designed to respond to business interests. While some of its eight components refer to tackling the problem of poverty in the region, they have the least funding and are the least far along. When neoliberal economists claim that the PPP tackles “social development,” they are using the following logic: private investment will create jobs and that will eradicate poverty.

This is an absurd oversimplification. No kind of investment, whether public or private, automatically produces improved living standards for the majority unless prior steps have been taken to eliminate the structural injustices that exist in the political, economic, social and cultural spheres. In fact, investment often increases poverty, as has happened over the last 20 years with the investment generated by neoliberal policies, which have failed to eliminate historical injustices, made the rich richer and created increasingly marked inequalities. The PPP has no policies designed to tackle the roots of structural poverty.

The PPP’s plans and projects have been designed in collaboration with big business and in accord with its objectives. They are not based on the needs of the 65 million people who live in the PPP area, most of them in extreme poverty, with 75% surviving on less than $2 a day. For all of these reasons, many social organizations oppose the PPP. One of the most important reasons for this opposition is the anticipated exploitation of natural resources to increase corporate profits, with limited or nonexistent concern for the people who will be directly affected by these projects. Around a hundred ethnic groups live in the PPP area and many have never even heard of this plan. And when they do hear about it and are consulted by the government or bankers or businesspeople in a merely formal way, the idea is often to co-opt them by offering them vague promises or presenting them with partial benefits.

What does the PPP say
about environmental issues?

Many social organizations oppose the PPP because it will wreak environmental havoc. One of its main components is the Meso-American Biological Corridor, one of the World Bank’s most nurtured projects for years, the aim of which is to link up several areas with very rich cultural and biological biodiversity throughout the PPP region. Although it is assumed that the corridor will protect existing flora and fauna, these territories will be open to pharmaceutical and seed companies, among others, all of them eager to access this biodiversity in order to patent new products.

Pulsar, one of the world’s biggest seed bioengineering companies, has already signed agreements with Conservation International to work in the Lacandona Forest in Chiapas. Conservation International operates under the banner of an environmental NGO, but its management board includes executives from big businesses such as Navigation Technologies Corporation, Eagle River Inc., Hyatt Development Corporation, First Philippine Holding Corporation (a mega gas and electricity company) and USA Networks. Knowing the interests connecting this mega project and big business makes it hard not to suspect that the PPP is more a plan for energy extraction than a development plan.

Will the PPP have any
positive effects for the poor?

It is difficult to find any bearing in mind that the PPP is designed to benefit big companies. A $10 billion infrastructure project designed to benefit the majorities would obviously look very different, putting more emphasis on building schools, rural clinics and roads to get agricultural products out of peasant zones than on toll highways and hydroelectric dams.

One of the most flaunted benefits that the PPP will bring to the poor is the quantity of jobs it will create. But these are mainly jobs in maquiladoras, export processing plants like those that have operated on Mexico’s northern border with the United States since 1966 and are currently operating throughout Central America. Most of them are assembly plants that import raw materials and parts from other countries and exploit our cheap labor to manufacture finished products. Their production is divorced from the host country’s needs, responding exclusively to corporate interests.

The maquiladoras have certainly provided employment to millions of people throughout the PPP area, but in addition to the low wages they pay, they offer virtually no benefits for the rest of the national economy. By their very nature, they are virtually exempt from any obligations to the government of the country that receives them, such as environmental, health and worker safety requirements or labor rights such as the freedom to form unions. Nor do they allow other conditions, such as the use of national inputs or technology transfer to the country in which they are operating. Yet this is the model the PPP wants to promote in Mexico and Central America. Improving infrastructure through these projects and establishing low wages for our labor will encourage corporations to establish maquiladoras, which could also employ many of the peasants who will be expelled from their lands as a result of other projects essential to the PPP, such as the dams project.

Are there any alternatives?

Yes, there are, and they are already quite well developed. The Hemispheric Social Alliance (HSA), consisting of civil organizations from all over the Americas, has designed an alternative proposal to the free trade agreements and the trade rules that the FTAA seeks to impose on us. Consensus on the proposal was reached with hundreds of social and civil organizations throughout the Americas. The HSA’s documents are available on their web page (www.asc-hsa.org) or through the Mexican Free Trade Network (RMALC) in Mexico City (www.rmalc.org).
There are alternatives. In the words of Global Exchange, “Policy makers and pundits often try to make it seem that top-down, corporate globalization is a naturally occurring phenomenon. Nothing could be farther from the truth. In fact, the current economic processes known as ‘globalization’ have been defined and driven by a very small number of people. United, citizens around the world can create a kind of grassroots globalization—a people’s globalization—that puts economic, social and political justice at the center of trade and investment. Citizens groups from across the Western Hemisphere have written an ‘Alternative Agreement for the Americas’ that offers a picture of what socially responsible and environmentally sustainable commerce would look like.” (This alternative agreement can be found on Global Exchange’s web page: www.globalexchange.org)

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