Envío Digital
Central American University - UCA  
  Number 278 | Septiembre 2004


Central America

“We’ve Handed CAFTA Our Greatest Advantages on a Silver Platter”

Although our self-interested Central American governments have happily signed away the region’s economic sovereignty, the new free trade agreement is still pending ratification. It’s never too late to analyze what has been given up, by whom, for what purpose and to whose benefit, and even to look at the possibility of building alternatives.

Amaru Barahona

Negotiating means first having a project, then making it as viable as possible through negotiation. In the Central American experience of negotiating the free trade agreement with the United States, only one party had a project and a vision of how to make it viable. That party was the United States, by which I really mean its ruling class. The other parties, representing the interests of the Central American oligarchies, have no alternative project. And as became evident in the signing of the Central American Free Trade Agreement (CAFTA), they are not even interested in resisting the US project. In fact, their objective is simply to form part of that project “made in the USA.”

Competition among giants
within the economic triad

After 1990 and the implosion of the USSR and Eastern Europe’s socialist systems, the United States ended up the only military and political superpower on the planet, and capitalism imposed itself around the world as a universal civilization. But unlike the years following the Second World War, when US economic hegemony was unquestioned, today’s capitalism is a “poly-centric system.” It is concentrated in three major centers of economic power, the so-called “triad” of the United States, Western Europe and Japan, which concentrate nearly 90% of the gigantic global corporations that dominate banking, industry and services throughout the world.

Those corporations are competing for hegemonic or quasi-monopolistic control of the markets of the capitalist periphery, utilizing the policies of their respective states to channel their interests. The United States is leading this competition: of the largest companies and banks dominating the world market, 48% are US, 30% are from the European Union and 10% are Japanese. In this title role, the US corporations have a particular characteristic: their power and concentration have been based on foreign investment and on the remittance of interest payments, profits, royalties and capital flows from abroad to the United States. The technological revolution has facilitated this transmission of wealth, enabling as it does the globalization of messages, calculations and means of transport.

The US empire-republic contradiction

And what is the result of all this? The US “economic empire” is growing at the cost of its domestic economy, the “republic,” which is falling into crisis and becoming less competitive. Industries such as textiles and garments, household appliances, automobiles, iron and steel, air transport and agricultural production would be unable to compete if the rules of the reigning free trade rhetoric were applied to them. These branches of the US economy only function with the application of state protection and subsidies.

The increasingly declining competitiveness of the real US economy has generated the highest trade deficit on the planet: between $400 billion and $500 billion in recent years. It has also led to the highest fiscal deficit in the world (aggravated by the bad business represented by the war in Iraq) and the most excessive public debt on the planet: more than US$7.375 trillion, according to the US Treasury Department’s Bureau of the Public Debt, up nearly $2 trillion over September five years ago. Despite all this, the US economy is functioning with a positive balance of payments thanks to the massive transfer of wealth from overseas, product of all the above-listed payments by the US companies and the royalty, interest and other transfer payments made by other countries. The Latin American economies contribute hundreds of billions of dollars to this gigantic hemorrhage of wealth.
It is in the framework of this “empire-republic” contradiction that the US ruling class is promoting the strategic project of constructing a mega-market subordinated to its interests. Ruling class consensus on this project was encapsulated in the Trade Promotion Authority, promulgated in 2002. In that law, the US Congress provided the executive branch a political framework that sets the boundaries, orients the actions and imposes limits on the jurisdiction of those responsible for negotiating this mega-market.

The central vectors of
the US mega-market project

The United States has demonstrated great flexibility in making this project viable, using various avenues to promote it. It has also maneuvered around any tendencies toward resistance. In the process of building this viability, the following have operated as the central vectors so far:

· The Initiative for the Americas proposed by Bush Sr. in 1990, at the time still a very general framework. The North American Free Trade Agreement (NAFTA) negotiations were pushed through at the same time.

· Coinciding with the signing of NAFTA, President Clinton promoted the Free Trade Area of the Americas (FTAA) in 1994, a process that was supposed to culminate in 2005.

· Bilateral free trade agreements (FTAs). Once the FTAA began to encounter resistance and become problematic, the United States ratcheted up its bilateral agreements with countries all over the world. In Latin America, an FTA was approved with Chile, and a regional one has now been signed by the Central American countries and the Dominican Republic and is awaiting ratification by the US Congress and the Central American parliaments. Next on the list are bilateral FTAs with Panama, Colombia, Ecuador and Peru.

· The FTAA “Lite” (Miami 2004), resulting from the growing unwillingness of a bloc of South American countries to sign the FTAA as originally designed by the United States. The resisting countries are Venezuela, Brazil, Argentina, Paraguay and more recently Bolivia. This opposition bloc is arguing that, just as the United States has eliminated from the FTAA proposal any components that affect its interests—such as production subsidies and anti-dumping standards—several chapters affecting their countries should be deleted as well: those on investments, intellectual property and services. They propose that the FTAA be reduced to negotiations over trading products, and, at that, only the products the parties are interested in trading.

The United States begrudgingly accepted the formality of continuing with the FTAA proposal, despite the terms sustained by the opposition bloc, but it immediately declared that it would proceed apace with its free trade project with countries that show interest. Its strategy is to prioritize the bilateral FTAs in the hope of isolating the opposition bloc.

Why the US needs a mega-market
sooner rather than later

The US ruling class needs this mega-market now more than ever before. It needs it to bolster its competition with the other centers of capitalism. Despite the free market rhetoric, the competition taking place in the “triad” involves each center of economic power maintaining protected and subsidized economies. And each center is shaping its own respective areas of hegemonic, or quasi-monopolistic market control. Western Europe is building its hegemony around Eastern Europe and the Mediterranean Basin, and Japan is reaching out to its geographic periphery.

The United States needs this mega-market to resolve its enormous trade deficit and to export its huge subsidized agricultural surpluses and uncompetitive industrial production. It also needs it to increase the remittance of offshore profits, royalties and capital payments, since this process sustains the US economy. It needs it to facilitate the transnationals’ appropriation of strategic resources indispensable to increasing their competitiveness according to the new technological patterns: biodiversity, aquifer resources, oil, gas, minerals, energy sources and geo-strategic spaces that permit them to cut costs.

And in Latin America it needs it to consolidate the neoliberal model. Since the eighties, neoliberalism has imposed a new capital accumulation strategy on the world. The United States has become its main promoter, using various mechanisms for its purpose.

In Latin America, the expansion of neoliberalism has been unable to eliminate various important pitfalls. The first is the growing resistance of the populations to the catastrophic social and economic consequences of its application. The second is the fact that the policies of three countries—Costa Rica, Uruguay and Venezuela—have not embraced it with the celerity required by its orthodox promoters. In this setting, the advance of the mega-market will put a cap on the judicial viability of any alternative economic policies and force those countries dragging their feet on the orthodoxy’s demands to catch up.

Plan Puebla-Panama: Who gives, who gets?

And what can we say about Plan Puebla-Panama (PPP), aimed at providing infrastructure to the mega-market from Puebla, Mexico, down through Central America to Panama? It was designed by World Bank and Inter-American Development Bank (IDB) technocrats and Mexico’s President Vicente Fox happily offered himself up as the straw man to present it, hoping to gain political points in the process. In its original formulation, the PPP’s geographic space covered nine southern Mexican states and all Central American countries, including Belize and Panama. In that geographic bloc, the PPP contemplates the construction of highway and super-highway networks, oil and gas pipelines, ports, airports, hydroelectric dams, an integrated energy system and the installation of maquilas, or assembly plants for re-export, where the progress in infrastructure permits. A few additional components in the World Bank and IDB documents were thrown in, as usual, to add flavor to the soup: sustainable development, protection of the Meso-American Biological Corridor, disaster prevention and mitigation, and the like.

In the original design, the PPP projects were to be financed either through government budgets—which is why the plan hasn’t gotten off the ground, given our countries’ ongoing fiscal crises—or some other potentially more viable means, such as IDB loans to the governments. Of course, the latter would have to be paid back by the region’s taxpayers with the respective interest, and the IDB would have to approve the projects and loans, which would be implemented by private for-profit companies. It’s a very nifty scheme, in which the infrastructure for a mega-market designed to benefit the US economy will be built by increasing the foreign debt of the Meso-American peoples, who stand to benefit hardly at all.

There has been a lot of rhetoric about the amount budgeted for the PPP, as is the wont of Latin American political culture, which in the Mexican case acquires paradigmatic levels of hyperbole. The first figure thrown about was US$25 billion. Then it was US$10-12 billion, and now the Mexican government is talking about 28 mega-projects for the whole region with an estimated budget of US$4.4 billion, 96.3% of which is assigned to highways and electric interconnection. This tells us quite a lot about the difference between the soup’s substance and its condiments.

Beyond the original PPP design, it is now being announced that it will keep on heading south, following the progress of the mega-market negotiations. One Latin American figure who always faithfully interprets US designs is Colombian President Álvaro Uribe, who said in January 2004, “We want Colombia’s total integration into Plan Puebla-Panama. It would begin with an electricity interconnection line between Colombia and Panama, whose first studies will be submitted to us in April. The second project would be the building of a gas pipeline, with the expectation that it unite not only Colombia and Panama but Venezuela as well. This is necessary to join the continent from the United States to Patagonia.” Interpreting Uribe, you only need to change the last P in PPP to make it Plan Puebla Patagonia.

Part of Central America’s importance
is its geo-strategic advantages

During the CAFTA negotiations, US trade representative and chief negotiator Robert Zoellick traveled through Central America spouting staggering declarations. One cited by numerous Central American newspapers was: “A free trade agreement with the United States isn’t a right; it’s a privilege. The Caribbean Basin Initiative (CBI) has to be transformed from a unilateral and revocable gift into a contract of reciprocal responsibility.”

The Central American oligarchs, without any project—or, better said, anxious to be the counterpart of the US project through the “government-major media-business chamber” triad that so well expresses their interests—have been selling the signing of the free trade agreement with the same thesis as Zoellick, albeit with a little creative editing. They say we’re being granted privileged access to the largest market in the world and that the CBI was a very fragile unilateral US concession that the United States could suspend, whereas now we’ll have solid, long-term access guaranteed by a treaty. They add that the Central American countries represent an insignificant market for the United States and close by saying that we have to placate the United States in its demands.

In the negotiations, this utterly myopic oligarchic vision ignored the most valuable Central American asset in negotiating any transaction with the centers of contemporary capitalism: our geo-strategic attributes, which have acquired unprecedented relevance in the dynamic of the globalization process. Not only did our “leaders” ignore these advantages, they handed them to the United States in exchange for very little when signing CAFTA and climbing aboard the PPP express.

What are these attributes? Central America is “the waistline of the Americas,” to use Pablo Neruda’s metaphor in his “Canto General.” We are the bridge that joins North and South America and the Atlantic with the Pacific. Historically, this position always played an important role in the process of building global capitalism. Today, its value has increased thanks to the new accumulation strategy being imposed on the world with the globalization of capital. The bulk of US economic transactions are with the Americas and Asia, not with Europe, yet 80% of US economic activity is located east of the Mississippi River. With the mountains of the western United States a costly obstacle to the Pacific, the territories of America’s waistline offer shorter routes, particularly now that the Panama Canal is becoming obsolete. The United States could build its continental mega-market project in the absence of almost any South American country, but it is impossible to even move into the south if the Central American isthmus isn’t brought on board.

Another part is its biodiversity
and its wealth of water

Another great attribute is Central America’s biodiversity. Although what is being called the Meso-American Biological Corridor—which extends from Chiapas to Panama—only covers 0.5% of the planet’s surface, it contains 7% of the world’s known biodiversity. The abundance of Central America’s biodiversity is second only to the Amazon, and is considerably superior to that of the US.

Our water is also a Central American treasure. With the exception of El Salvador, each Central American country has more cubic meters of underground water per capita than Mexico. In descending order, including Mexico, the per-capita availability is Belize (66,000 m3), Panama (51,616 m3), Nicaragua (37,484 m3), Costa Rica (27,936 m3), Honduras (14,818 m3), Guatemala (11,805 m3), Mexico (4,136 m3) and El Salvador (2,820 m3).

At a time of biotechnological revolution and with water being seen as the strategic weapon of the future, our biodiversity and our water are a strategic patrimony that we must consider inalienable. But in the CAFTA negotiations not only was our biodiversity wealth not valued, it was handed to the transnationals, especially the US ones, on a platter.

How did we give it all away?

Let’s look at some examples of what I’m referring to. No restriction was established in CAFTA on manipulating the molecules of our biodiversity. The transnationals are thus allowed to patent any result of this manipulation, its marketing included. Article 15.1 of CAFTA establishes the obligation to ratify a list of ten treaties on intellectual property. One of these is the UPOV (a French acronym) Agreement, which authorizes patents on higher life forms (genes, seeds and plants).

Another is the Budapest Treaty, which facilitates patents on living beings in which it is enough to present and deposit a sample or example to show the details of what is considered an “invention.” CAFTA article 15.9.2 states that the signatory countries must make a greater effort to grant patents on plants, if they have not already done so. In listing the priorities of environmental cooperation, annex 17.1, article 3, point (h) of Chapter 17 (the environmental chapter) speaks of the “development and promotion of beneficial environmental goods and services.” As the concept of “services” in CAFTA involves any activity, this opens the possibility of privatizing the provision of water.

These are not the only examples. In the Investments Chapter (chapter 10), articles 10.7.1, 10.16, 10.17 and 10.28 give the transnationals the faculty to sue states in courts outside of national jurisdiction when they believe that a state action has caused them “losses or damages” or when they believe they are the object of “measures equivalent” to expropriation or nationalization. Article 10.9 of the same chapter establishes the state’s renunciation of establishing performance requisites on any transnational capital investments. Annex 2.1 of the General Definitions Chapter (chapter 2) grants the United States jurisdiction over Central America’s 200-mile territorial waters, establishing that “in any zone beyond the territorial seas of the United States, the latter may, in conformity with international law and its domestic legislation, exercise rights with respect to the marine floor and subsoil and their natural resources.” (The meaning of “territory” is found in point (c), iii).

In addition to ignoring and giving away our geo-strategic advantages, the oligarchies have underestimated Central America’s relative commercial importance to the United States. In 2001, the volume of Central America’s commercial transactions with the United States exceeded US$20.1 billion. That was 1.5 times higher than US trade with Eastern Europe, Russia included, and greater than its trade with India and Indonesia. That volume has steadily increased to some US$22 billion today.

Arguments against the promotion
of a collective fear of catastrophe

What’s the upshot of all this? The first conclusion is that the Central American oligarchies have gotten skillful at promoting collective fears to achieve their personal objectives. Through their control of that other triad—the governments, major media and business chambers—they are applying designs of collective panic, bombarding people with the message that if the free trade agreement isn’t signed, we will be left without markets and catastrophe will immediately befall us. But this apocalyptic perspective is false. We can’t fall into this terror trap and lose clarity. There are arguments against this fear, the first of which is that the most dynamic export categories—the maquilas and nontraditional agricultural production—are substantially controlled by US capital and send gigantic investment remittances back to the United States. Let’s not forget that the positive US balance of payments depends on precisely such remittances. Second, it is false that the Caribbean Basin Initiative has an end date of 2005, plus which its preferential quotas cover only a very low percentage of Central American exports. Only 10.5% of total exports were made via the CBI in 2001, whereas 31% went via the system known as CPBA, which includes some textile products not covered by the CBI; 1.2% via the Generalized System of Preferences ; and the rest, a full 57.8%, had no preferential tariff or quota systems. Today, nearly 80% of Central America’s products enter the United States with import duties of under 5%, although categories such as beef, dairy products, peanuts, sugar, tobacco and textiles pay up to 35%.

The second conclusion is that the oligarchies are willing to sign the free trade agreement because their project is simply to be a counterpart. What seems most serious to me is that the treaty legally removes our faculty to decide on our own development model, transferring that faculty to the transnationals, especially those from the United States. If some future Central American government wants to change the orientation of today’s development model, it would come into open judicial conflict with the United States. And that could lead to further US aggression or military intervention.

The third conclusion is that fighting CAFTA also means fighting to build a Central American alternative to that trade agreement. The only way to build such an alternative would be to shake off the oligarchic myopia and work “from below and from within,” as the recently deceased Jesuit thinker Xabier Gorostiaga used to argue. This alternative must contain precisely what CAFTA denies us: food sovereignty, the inalienability of our biodiversity and ecological patrimony, national control of our strategic services, the possibility of ceasing to be enclave economies, the right to protect the formation of productive chains within the country that help expand the domestic market, the exportation of goods that provide greater value added than the maquilas and primary goods, national reinvestment of the profits from our production, the ability to increase salaries and protect the rights of our workers, regional integration that protects and strengthens our domestic markets, and equitable trade with the rest of the world.

The fourth conclusion is that a Central American alternative from below and from within implies visualizing the continental and world resistance to the US mega-market and planetary domination project. At the governmental level, it means designing alliances with the bloc of countries that came up with “FTAA Lite,” the Group of 20 in the World Trade Organization and the anti-FTAA positions of the European Union and Japan. At the level of people, it requires alliances with the Zapatista movement in Mexico; the indigenous movements of Bolivia, Ecuador and Peru; the Landless Movement of Brazil; peasant movements all over Latin America; South American municipalities with participatory experiences; the unemployed people’s movement in Argentina; civil society organizations in Latin America; trade unions and environmentalist organizations in the United States; and people everywhere who are resisting neoliberal globalization and proclaiming “Another world is possible.”

And the fifth conclusion is that projects from below and within are not built or even promoted at academic levels of action. They are built and promoted within the setting of grassroots struggles. But for all that, lucid and ethical academics, who haven’t lost their analytic rigor or critical function, could help construct these projects by contributing both their brilliance and their civic participation.

Amaru Barahona is a Nicaraguan academic living in Costa Rica.

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