U.S. GOVERNMENT PRINTING OFFICE

64–522 CC WASHINGTON : 2000

THE U.S. AND LATIN AMERICA IN THE NEW

MILLENNIUM: OUTLOOK AND PRIORITIES

HEARING

BEFORE THE

SUBCOMMITTEE ON

THE WESTERN HEMISPHERE

OF THE

COMMITTEE ON

INTERNATIONAL RELATIONS

HOUSE OF REPRESENTATIVES

ONE HUNDRED SIXTH CONGRESS

SECOND SESSION

WEDNESDAY, MARCH 15, 2000

Serial No. 106–104

Printed for the use of the Committee on International Relations

(

Available via the World Wide Web: http://www.house.gov/international—relations

(II)

COMMITTEE ON INTERNATIONAL RELATIONS

BENJAMIN A. GILMAN, New York, Chairman

WILLIAM F. GOODLING, Pennsylvania

JAMES A. LEACH, Iowa

HENRY J. HYDE, Illinois

DOUG BEREUTER, Nebraska

CHRISTOPHER H. SMITH, New Jersey

DAN BURTON, Indiana

ELTON GALLEGLY, California

ILEANA ROS-LEHTINEN, Florida

CASS BALLENGER, North Carolina

DANA ROHRABACHER, California

DONALD A. MANZULLO, Illinois

EDWARD R. ROYCE, California

PETER T. KING, New York

STEVE CHABOT, Ohio

MARSHALL ‘‘MARK’’ SANFORD, South

Carolina

MATT SALMON, Arizona

AMO HOUGHTON, New York

TOM CAMPBELL, California

JOHN M. MCHUGH, New York

KEVIN BRADY, Texas

RICHARD BURR, North Carolina

PAUL E. GILLMOR, Ohio

GEORGE P. RADANOVICH, California

JOHN COOKSEY, Louisiana

THOMAS G. TANCREDO, Colorado

SAM GEJDENSON, Connecticut

TOM LANTOS, California

HOWARD L. BERMAN, California

GARY L. ACKERMAN, New York

ENI F.H. FALEOMAVAEGA, American

Samoa

MATTHEW G. MARTINEZ, California

DONALD M. PAYNE, New Jersey

ROBERT MENENDEZ, New Jersey

SHERROD BROWN, Ohio

CYNTHIA A. MCKINNEY, Georgia

ALCEE L. HASTINGS, Florida

PAT DANNER, Missouri

EARL F. HILLIARD, Alabama

BRAD SHERMAN, California

ROBERT WEXLER, Florida

STEVEN R. ROTHMAN, New Jersey

JIM DAVIS, Florida

EARL POMEROY, North Dakota

WILLIAM D. DELAHUNT, Massachusetts

GREGORY W. MEEKS, New York

BARBARA LEE, California

JOSEPH CROWLEY, New York

JOSEPH M. HOEFFEL, Pennsylvania

RICHARD J. GARON, Chief of Staff

KATHLEEN BERTELSEN MOAZED, Democratic Chief of Staff

SUBCOMMITTEE ON THE WESTERN HEMISPHERE

ELTON GALLEGLY, California, Chairman

DAN BURTON, Indiana

CASS BALLENGER, North Carolina

CHRISTOPHER H. SMITH, New Jersey

ILEANA ROS-LEHTINEN, Florida

MARSHALL ‘‘MARK’’ SANFORD, South

Carolina

KEVIN BRADY, Texas

PAUL E. GILLMOR, Ohio

GARY L. ACKERMAN, New York

MATTHEW G. MARTINEZ, California

ROBERT MENENDEZ, New Jersey

ROBERT WEXLER, Florida

STEVEN R. ROTHMAN, New Jersey

JIM DAVIS, Florida

EARL POMEROY, North Dakota

VINCE MORELLI, Subcommittee Staff Director

DAVID ADAMS, Democratic Professional Staff Member

KELLY MCDONALD, Staff Associate

(III)

C O N T E N T S

Page

WITNESSES

Peter Hakim, President, Inter-American Dialogue ............................................... 2

Susan Kaufman Purcell, Ph.D., Vice President, Americas Society/Council of

the Americas ......................................................................................................... 6

Jennifer McCoy, Ph.D., Director, Latin American and Caribbean Program,

The Carter Center ................................................................................................ 9

Sidney Weintraub, Ph.D., Center for Strategic and International Studies ........ 13

APPENDIX

Prepared statements:

The Honorable Elton Gallegly ................................................................................ 28

The Honorable Robert Menendez ........................................................................... 30

Mr. Peter Hakim ...................................................................................................... 32

Dr. Susan Kaufman Purcell .................................................................................... 37

Dr. Jennifer McCoy ................................................................................................. 48

Dr. Sidney Weintraub ............................................................................................. 53

Materials submitted for the record:

Article printed by Policy Options titled Economic Crisis Won’t Halt Latin

America’s Reforms written and submitted by Susan Kaufman Purcell ........... 58

Questions for witnesses submitted by the Honorable Cass Ballanger on behalf

of the Honorable Mark Sanford .......................................................................... 62

Statement titled U.S. National Interests and the Western Hemisphere, The

Case for a New Approach and the Role of Brazil submitted by His Excellency Rubens A. Barbosa, Ambassador, Embassy of Brazil ............................. 71

(1)

THE U.S. AND LATIN AMERICA IN THE NEW

MILLENNIUM: OUTLOOK AND PRIORITIES

WEDNESDAY, MARCH 15, 2000

HOUSE OF REPRESENTATIVES

SUBCOMMITTEE ON THE WESTERN HEMISPHERE,

COMMITTEE ON INTERNATIONAL RELATIONS,

Washington, DC.

The Subcommittee met, pursuant to notice, at 1:30 p.m., in room

2200, Rayburn House Office Building, Hon. Elton Gallegly (chairman of the Subcommittee) presiding.

Mr. BALLENGER. [Presiding] Let me just say hello to everyone

and I apologize. It seems like they schedule us rather tightly

around here and luckily for me I beat Elton Gallegly here so without further ado let us begin. I have no opening statement. Do you

have an opening you would like to make?

Mr. DELAHUNT. No, I do not, Mr. Chairman, except thank you for

allowing me to sit in on this particular hearing. As you know, I am

not a Member of this Subcommittee, but as you well know, we

share a binding interest in the work of this particular Committee,

particularly as it impacts Central America and Latin America. It

has been a distinct pleasure to work with you on the issues that

I know we will be discussing here today.

Mr. BALLENGER. If I may, I would like to recognize several guests

that are here. First of all, Ambassador Barbosa of Brazil, thank

you sir, glad to have you with us. Also Ambassador Fernandez of

Bolivia who is much better looking than most Ambassadors. Good

to see you.

I understand Ambassador Toro Hardy is here from Venezuela,

good to see you sir. Are there any other Ambassadors that I have

missed? Nobody prepared me? I hope we have a constructive hearing for all of you.

I would like to remind all of the witnesses that all of your written statements will be entered in the record in their entirety. I

guess I ought to introduce the witnesses one at a time: First, Peter

Hakim, President of the Inter-American Dialogue. Susan Kaufman

Purcell, Ph.D., Vice President of the America Society. Sidney

Weintraub, Ph.D., William E. Simon. Chair in Political Economy,

Center for Strategic and International Studies. And Jennifer

McCoy, Ph.D., Director of Latin American and Caribbean Program,

The Carter Center. We might have worked in a couple of elections

together. Yes ma’am, I thought so.

We welcome you all here and again I apologize for the lateness

and if I may, Mr. Hakim, go ahead.

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STATEMENT OF PETER HAKIM, PRESIDENT, INTER-AMERICAN

DIALOGUE

Mr. HAKIM. Thank you very much. Mr. Chairman, I welcome this

opportunity to testify on Latin America. Let me say I testified before the Full Committee back in 1993, and I happened to just go

back to my notes on that, and let me just say that we have made

some progress, but not enough I believe.

In any event, this is a time of exceptional opportunity for the

United States and Latin America. In fact, I cannot recall a time

when there was more Latin American interest in cooperating with

the United States in a range of different ways. There is more opportunity now than ever to achieve a cooperation of benefits between Latin America and the United States.

Unfortunately, my sense is the U.S. has not been taking very

good advantage of these opportunities. Let me say that when I talk

about Latin America I include the Caribbean. With the Ambassador here, I wanted to make sure that was clear.

What has happened in Latin America over the last 15 years is

really remarkable. In a region that had been mostly governed by

dictators, it is now mostly, governed by elected governments. Most

of them are firmly in place. I just came back from the inauguration

of President Lagos in Chile. It was an extraordinarily impressive

affair. Also, in a region that was once dominated by state-led, inward-looking economies, we now have open, globalized market

economies. It is precisely these kinds of changes more than anything else that have opened up the way for a real partnership or

series of partnerships with the United States.

Despite the move in most countries toward democracy and free

markets, the changes have not produced the expected or promised

results. Ordinary Latin Americans are losing confidence in their

governments. In fact, as I have mentioned in the report, democracy

and market economics are still on trial in many countries. Let me

add that there are four central challenges that most Latin American countries have to meet over the next period. The first crucial

challenge is to achieve sustained economic growth. Most of them

have been extraordinarily successful in the fight against inflation,

but now they need to lift up their growth rates to at least 4 or 5

percent a year. That is the minimum according to the World Bank

necessary to begin reducing poverty. Clearly, growth rates in the

region have not reached that point. They were just above 3 percent

during most of the 1990’s, way below the Asian tigers—despite the

crisis of recent times—and even less than Latin America achieved

in the 1960’s and 1970’s.

The second is to improve the performance of their democratic institutions. In country after country, institutions like congresses, political parties, judicial systems are just not functioning as well as

they should and in some countries we can see actually some slippage. Peru, for example, has an autocratic president who is about

to win what many would say is an unconstitutional third term in

an election that is certainly far from fair.

In Ecuador, there was recently a military coup and the country

avoided by the skin of their teeth having a military junta take

power.

3

A third challenge is to improve public services including education, health, and reducing the amount of criminal violence. Governments basic institutions and basic public services are still not

working as they should in most countries.

The fourth and last challenge which requires meeting the other

three is to begin reducing the poverty and inequality that dominates most of the region. Due to slow economic growth most Latin

Americans in most places are just as poor as they were almost 20

years ago.

Let me say that all of these are mainly challenges for the citizens, governments, and industry of each country. However, U.S.

policy, can reinforce democracy and economic progress. It can

strengthen the position of those who are economic and political reformers.

In my written testimony I have also listed 12 initiatives that the

U.S. Government could take, most of them not very high cost. In

fact, some of them have almost immediate benefits to the United

States.

Let me just summarize three or four of the proposed initiatives

here. The economic side is particularly crucial. The U.S. needs to

have congressional approval of Fast Track so that we can move

ahead with free trade and expand NAFTA to the rest of the hemisphere. This should be the anchor or cornerstone of broader cooperation. The U.S. also should be thinking beyond trade and toward economic coordination more generally, with the prospect of

moving toward some common economic goals for the hemisphere,

goals similar to Maasricht, a convergence over a longer period of

time. There ought to be a joint enterprise to make trade and investment for everybody easier. This should allow for coordination

on crisis prevention, the kinds we saw in Mexico and almost in

Brazil and to which we responded well. However, could have done

a better job if we had helped both countries avoid crises in the first

place.

Another initiative involves, Mexico which is clearly the Latin

American country most important to the United States for a whole

range of reasons. I believe Mexico is one of the countries with

which we have established the most successful foreign policy. We

have had an enormous number of conflicts with Mexico, but in

issue after issue there have been institutional mechanisms in place

to manage those conflicts and to move cooperation forward. I believe that this is the crucial point in the U.S.-Mexico relationship:

that it is being institutionalized.

Also, we ought to move very quickly to bring the Caribbean

Basin countries, Central America and the Caribbean into North

America. It is the fourth part of North America. There is no reason

why it should not be part of NAFTA.

In South America, Brazil is clearly the big player. It is mainly

through economic cooperation of all sorts that we ought to base our

relationship with the country. More broadly, Brazil ought to be our

ally in a whole range of instances, whether it is in the Free Trade

Area of the Americas, the WTO or in other international institutions. Brazil is after all a big important regional power.

I will not speak about Colombia, except to say that the Pastrana

government needs bolstering. That means we have to work with

4

him and improve the capacity of the Colombian military to promote

negotiations, protect human rights and move forward.

Finally, I think that there is some need now to begin to find better ways of working with Latin American countries to respond to

elected regimes who do not follow the rules of democracy as I have

discussed in the case of Peru.

In sum it is not hard to show that a more prosperous, stable and

democratic Latin America is in the U.S. interest. It is easiest to

show in the case of Mexico and the Caribbean. However, this is

true for the entire region. The simple truth that a prosperous, stable and democratic Latin America is in the U.S. interest ought to

be the central basis of our policy toward the hemisphere.

Thank you.

[The statement of Mr. Hakim appears in the appendix.]

Mr. GALLEGLY. [Presiding] Thank you very much, Mr. Hakim. I

apologize for coming in here a few minutes late today, as I am sure

most of my colleagues can understand, there are days that are bad

and there are days that are worse. Today happens to be one of the

worse days, with all of the things in which we are involved. We

have three markups going at the same time and I would, with the

indulgence of my colleagues, like to have a brief opening statement.

I also have a major piece of legislation that I have to address this

afternoon at 2:30, so I may defer to my colleague, Mr. Ballenger

from North Carolina. With my colleagues’ indulgence, I would like

to kind of halfway explain what the purpose of this hearing is all

about today if they have not figured it out already or at least for

the benefit of those that have a question.

As we enter the new millennium, there seems to be a disturbing

trend of uncertainty about Latin American stability and direction

coming from many of our international analysts. Likewise, there

seems to be a more negative critique of how United States policy

is, or should be, reacting to the current environment throughout

the region.

Three years ago this Subcommittee held a similar hearing on

Latin America with a distinguished group of witnesses, very much

like yourselves. At that hearing I posed several questions.

To what extent has democracy really taken hold in Latin America?

How strong are the governments of the region?

How extensive have economic reforms been in Latin America?

How likely are these reforms to bring true open markets and sustainable economic growth throughout the region?

How will issues like poverty, drugs, corruption and crime influence the abilities of Latin democracies to succeed?

The general consensus at the time could have been described as

one of ‘‘cautious optimism.’’

Clearly, there were high expectations resulting from the growing

democratization in the region attributable to the many free and

open elections taking place; with the implementation of market-oriented economics; and first generation political and economic reforms taking hold. Additionally, U.S. policy seemed to be pro-active,

having seen the Mexicans through the peso crisis, and the convocation of the Summit of the Americas, promoting economic integraVerDate 11-MAY-2000 09:25 Sep 22, 2000 Jkt 000000 PO 00000 Frm 00008 Fmt 6633 Sfmt 6633 64522.TXT HINTREL1 PsN: HINTREL1
5

tion through policies such as NAFTA, CBI and the concept of an

FTAA, progress seemed to be on course.

Today, however, the attitude seems to be different. The high expectations seem to be turning to disappointment. The bumps in the

road predicted by most of the witnesses then, have come true in

varying degrees today.

Political uncertainty lingers in Venezuela, Peru and Paraguay;

continuing violence plagues Colombia; recent unrest racked Ecuador; the escalation of tensions between Belize and Guatemala as

well as Nicaragua and Honduras, over borders, have become cause

for concern.

In a recent public opinion poll taken by the MORI research firm

in Chile, people of only two Latin America nations, Costa Rica and

Uruguay gave democracy an approval rating of more than 50 percent.

On the economic front, overall growth seems too slow; economic

volatility still prevails; little progress has been made against poverty, corruption or crime; and, for the most part, the institutions

which are supposed to be the strength of a long-lasting democracy,

seem marginal at best.

U.S. policy toward the region has been characterized by some as

being ‘‘fatigued’’, ‘‘reactionary’’, ‘‘bad news oriented’’, or just plain

‘‘disinterested.’’

So where are we?

I suspect the answers lie somewhere between a statement Senator Coverdell made in a recent speech when he said that ‘‘with the

proper nurturing of the political and economic relationships among

nations of the Western Hemisphere the next century will be the

Century of the Americas’’ and the question raised by Mr. Hakim

in a recent article where he wrote ‘‘Is Latin America Doomed to

Failure?’’ I hope it is more to the former rather than the latter.

In the end, only time will tell. However, our hearing today will

attempt to at least lay out the issues and parameters of the problem and hopefully begin to identify ways in which we can help ensure that Senator Coverdell’s view ultimately prevails.

[The statement of Mr. Gallegly appears in the appendix.]

Mr. MENENDEZ. Mr. Chairman, in fairness to the panel, I will

just ask unanimous consent to have my statement be entered into

the record.

I just want to make one overarching comment so as they make

their comments, hopefully, we will hear them weave it into their

presentation. It seems to me, that as someone who has now spent

7 years on this Committee, this being the 8th year that I have been

here on the Western Hemisphere Subcommittee, that we have

some serious concerns. We have some things to celebrate with the

hemisphere, but we still have some serious concerns.

Earlier today we had the AID Administrator speaking before the

Full Committee and I asked him a series of questions about what,

some of our policies are. I mean can we with trade alone expect to

control the illegal migration? Can we, with trade alone, seek to reduce the flow of illicit drugs? Can we, with trade alone, help consolidate fragile democracies? Can we, with trade alone, seek to reduce poverty, the spread of infectious diseases or the environment?

He answered no to all of those which I am glad to hear him say

6

which means that the AID budget which is a third of what it was

a decade ago, simply is insufficient to try to meet our goals in all

of these national interests, not just of our neighbors to the south,

but in the national interests of the United States.

I would hope that we hear from our panelists why they think

that we cannot create a constituency for aid here with the neighbors so close to our south being where the greatest expansion of

trade possibilities are as well as with some of the greatest risks in

terms of all of the moneys that we have spent to consolidate and

promote democracy. Why can we not achieve a greater constituency

to promote the necessary resources for the consolidation of that democracy?

Last, in my other Committee assignment as a Ranking Democrat

on the International Economic Policy and Trade Subcommittee, I

am concerned about U.S. companies dealing with Latin American

countries and with the manner in which they are being treated. We

want to trade with Latin America. We hear the advocacy for a free

trade zone, the advocacy for Fast Track and yet we continuously

hear from countries with which we have bilateral relationships, of

U.S. companies who are treated rather rough, shoddily in terms of

the system of law, the system of operation with those countries. I

am concerned about issues in Peru. I am concerned about issues in

El Salvador. I am concerned about issues in various countries and

I am going to ask the Chair Lady to hold a hearing, particularly

on Latin America and the business relationships.

We want to work with our Latin American neighbors. There is

no one who is a bigger advocate of that than I. But they must understand also that it must be clear, transparent and on an equal

basis. I thank you for the opportunity and ask that you include my

full statement in the record.

[The statement of Mr. Menendez appears in the appendix.]

Mr. GALLEGLY. Without objection. Thank you. Our next witness

is Dr. Susan Kaufman Purcell.

Dr. Purcell?

STATEMENT OF SUSAN KAUFMAN PURCELL, PH.D., VICE

PRESIDENT, AMERICAS SOCIETY/COUNCIL OF THE AMERICAS

Dr. PURCELL. Thank you, Mr. Chairman. In my written testimony, I attempted to address the bifurcation of views concerning

Latin America that you mentioned in your opening statement and

to explain that the different views depend on whether you see the

glass as half full or half empty. This in turn depends on whether

you are looking ahead or looking back. If you look ahead and compare Latin America to developed democracies and developed economies, then Latin America falls short and people will be pessimistic.

On the other hand, if you compare Latin America to where it has

come from in the last couple of decades, then I think you come out

feeling that the glass is actually more than half full. A lot of the

problems that we see in Latin America today have been around for

a very, very long time. Latin America has been characterized by

poverty for hundreds of years, by an inequitable distribution of resources, by undemocratic governments and the like. There was a

time several decades ago when Latin America moved to more

democratic kinds of government and even to more open economies

7

and toward regional integration. These developments did not last.

However, they occurred in a different context. In my statement I

try to show what is different this time that should lead us to be

somewhat more optimistic about the viability of both the democratic and the economic reforms. At the same time I would be

happy to say a few words about Congressman Menendez’ concerns

too, although those are not specifically in the statement. So I will

rapidly summarize my statement and then say a few words about

Congressman Menendez’ concerns.

First, I lay out the new Latin America. I will not repeat what

Peter Hakim has already said. Military regimes have been replaced

by democratically elected ones. Formerly closed economies are now

more open and integrated into the global economy. Intra-regional

trade, as a result of developments such as NAFTA and

MERCOSUR, has grown, and relations with the U.S. are considerably friendlier than during the Cold War years.

As I just mentioned, these are all not new phenomena so why

then should we be more optimistic this time around? I think it is

because there is a different character to these processes this time.

The electoral processes of the new democracies, for example, are

stronger, more transparent, and less capable of being manipulated.

Politics is far less ideologically polarized in Latin America this time

around. The left and the right have both moved toward the center.

Incumbent governments defeated in elections have been willing, for

the most part, to give up power even if, as in Argentina they tried

to modify the constitution first. When this failed, as in Argentina,

President Menem stepped down.

Democracy also no longer exists mainly at the national level.

There is more grass roots democracy, more democratic competition

at all levels, more activity on the part of so-called nongovernmental

institutions many of which did not exist 20 or 30 years ago.

People are also more informed today as result of technological

advances with which we are all familiar. The opening of the regions’ economies is more durable than in the past, in part, because

of external developments. Protectionism is not as viable in the new

global economy and it is too costly for many of these countries to

pursue.

Also, despite the fact that the more open economies have not

lived up to the expectations of their people, in most countries now

there is a critical mass that has benefited enough from the economic reforms to make them sustainable. The most dramatic reform in this regard which we often do not hear enough about is the

virtual elimination of inflation. This has occurred in countries that

were characterized not only by inflation but even by hyper-inflation

that reached 5,000 percent not so long ago.

Economic integration is also occurring in a different context this

time. Last time, in the 1960’s, it was in the context of protectionism. Latin America integrated in order to build a wall around

the whole region. This time it is in the context of more open economies. The goal is to facilitate greater integration into the global

economy. Market forces, rather than negotiated government decisions are for the most part determining what is produced and what

is not produced. Also, relationships between the U.S. and Latin

America are more constructive, in part because of the end of the

8

Cold War. Latin America can no longer play U.S. and Soviet Union

off against each other. The U.S. is now the main game in town. I

also think that the end of the Cold War allowed the United States

to de-emphasize security issues and to focus more on economic

issues. In addition the American people are going to want more

and better relations with Latin America in the future to the extent

that Latin America remains democratic. The American people do

not seek close relations with military regimes, although certain

groups in the United States might do so.

Many vulnerabilities remain despite this progress. Peter discussed many of them and so I will not repeat them now. We all

know that the rule of law is a big problem in the texture of the

new democracies. I mention this in my paper under the section

called ‘‘What needs to be done’’.

I will only note that the problems in Latin America today, either

come from the past or exist not because the reforms have gone too

far and too fast, but instead because they have not gone far

enough. Those countries in Latin America that have progressed the

most in terms of economic growth and integration into the global

economy are precisely the ones that have gone the furthest in opening and restructuring their economies.

Now, what can the United States do to help? Taking into account

Congressman Menendez’ remarks, I still would focus my recommendations around the need to revive U.S. leadership in a push

for a Free Trade Area of the Americas. I do not believe, as you do

not believe, Congressman Menendez, that free trade solves everything. However, I do think that Mexico is a wonderful example of

how free trade provides the context that allows a lot of the other

things that we would like to see happen in Latin America possible.

I do not have the time to go into detail right now. I understand

that we are in a Presidential election year and I understand that

the presidency for the last 8 years has been held by a Democrat

and I understand that the AFL–CIO is a key supporter of the

Democratic Party, which puts limitations on what the Clinton Administration has been able to do in terms of pressing for Fast

Track, expanding NAFTA, and working for a Free Trade Area of

the Americas.

I think, however, that both Mr. Gore and Mr. Bush are strong

supporters of free trade and could be persuaded to revive the Fast

Tract initiative. Also, I think the AFL–CIO is changing somewhat.

Several weeks ago it changed its position on legal immigration

from Latin American countries. So I think there is a new opportunity to expand hemispheric free trade. I think that the focus

should not be on creating jobs or making money, as it was in the

past. Instead the focus should be on economic integration and free

trade as ways of reinforcing and consolidating democracy, helping

to bring about more social justice and the kinds of governments

and standards of living that we would like to see. The focus should

not be on losing or creating jobs because such developments have

less to do with NAFTA than, for example, with the global economy.

The new approach needs to explain that NAFTA has been a success, not a failure. It should not be a dirty word to talk about

NAFTA and all the good things that it has brought to Mexico and

the United States.

9

Now let me just review a few more issues very quickly ——

Mr. GALLEGLY. Dr. Purcell, we have about 6 minutes to get to

the floor. If you could just kind of hold that thought because the

third bell is about to go off.

Dr. PURCELL. I am sorry.

Mr. GALLEGLY. It takes us 5 minutes and if you could just hold

that thought until we get back. I do not think anyone wants to

miss a vote. We will be back.

[Recess.]

Mr. BALLENGER. [Presiding] Since I started as Chairman, it looks

like I am going to finish up maybe as Chairman too. Everybody has

got meetings, but I know there are more Members coming. I just

voted as fast as I could and got back over here because I know you

all do not want to stand around and sit around all day.

So Susan, if you would like, we will let you finish.

Dr. PURCELL. I will say just one or two sentences more. I want

to remind people that when President Bush unveiled and announced the Enterprise of the Americas Initiative it contained very

few specifics. Yet it captured the imagination of the entire hemisphere. U.S. leadership is crucial to reviving the momentum for

hemispheric free trade in Latin America. After our Presidential

elections, we should try again. Domestic political forces no matter

which party, wins the election—might be more favorably disposed

to free trade. I think we cannot underestimate the symbolic importance of U.S. leadership on the issue. We cannot underestimate

how much the U.S. and Latin America will benefit if the U.S. government goes on record as strongly favoring Fast Track and hemispheric free trade.

Thank you.

[The statement of Dr. Purcell appears in the appendix.]

Mr. BALLENGER. I agree with you 100 percent, Dr. Purcell. I

would like to say Dr. McCoy, it was in Nicaragua that we met.

Dr. MCCOY. Yes. 1990.

Mr. BALLENGER. I worked in about 8 or 10 elections down in

Central and South America and it is nice to meet somebody that

also seems to be dedicated to the cause of honest elections. So if

you will, go right ahead.

STATEMENT OF DR. JENNIFER McCOY, DIRECTOR, LATIN

AMERICAN AND CARIBBEAN PROGRAM, THE CARTER CENTER

Dr. MCCOY. Thank you very much, Congressman Ballenger. I

also appreciate the opportunity to testify today. As you noted, we

had met in Nicaragua. Chairman Gallegly actually participated as

a member of our delegation in those 1990 elections monitoring in

Nicaragua, so I was pleased to have the opportunity to be with him

again today too.

I have worked both as a professor of Latin American politics and

at The Carter Center in policy areas with the region for a number

of years and I do believe that this is a crucial moment for Latin

American democracy and that, in fact, sustained U.S. attention and

partnership is critical at this moment to continue the economic and

political progress made in the last decade in the hemisphere.

We are working at the Carter Center specifically and intensely

now in three countries: Peru, Venezuela and Ecuador. I wanted to

10

mention for Congressman Menendez, perhaps, if he is able to return that we are working on the corruption issue through The

Carter Center and that the good news is that even though there

are still high levels of corruption in many countries around the

world, not just in this hemisphere, that in this hemisphere there

is new attention being paid to it and there are efforts to combat

it. That is the exciting news, especially from the grass roots up.

The civil society, the nongovernmental organizations are organizing

to demand accountability from their governments to address this

issue. So I am somewhat hopeful that we are going to see some

progress on that particular issue.

In my testimony, in the written statement, I discussed four

points and a lot of it does overlap with the first two speakers so

I am not going to cover that ground again. Let me mention those

four points though.

The first one that I think has not been made explicitly today is

that there is not a single region of Latin America and the Caribbean, but in fact, there are many Latin Americas, many parts of

Latin America, each with its own needs and priorities. In fact, I

espouse the point of view that I just discovered that the Ambassador from Brazil coincides with it, that the U.S. needs to pay more

attention to recognizing the distinctions within the hemisphere.

I think that looking at that puts me in the middle of Mr. Hakim’s

somewhat more pessimistic view, also coming out of the recent

Inter-American Dialogue report, and Dr. Purcell’s somewhat more

optimistic view. I do not want to label you, Peter, but you can respond, about the optimistic view of the glass half full. I instead

have a very mixed view because of looking at the region in its different parts.

Obviously, when we look at the emerging markets, Brazil, Chile,

Argentina, and Mexico, their amazing ability to survive the financial crises in the last few years I think is great testimony to what

they have done in terms of economic reforms. In Mexico, particularly, the support that the U.S. gave that was absolutely critical in

1994 and 1995. Their preferences are also testimony to their democratic institutions that could weather those crises in these emerging markets.

On the other hand, if we look at the Andean countries as well

as Paraguay, I am done?

Mr. BALLENGER. No, no. I wanted to keep you on your toes.

Dr. MCCOY. If we look at the Andean countries we see countries

that are in extremely bad shape, negative growth rates of 4 to 7

percent last year. We have seen the coup in Ecuador. We have seen

the major changes going on in Venezuela with an uncertain outcome. We have seen the questionable elections in Peru that Peter

mentioned that we could go into more detail if you have interests.

Obviously Colombia is still struggling with the major guerrilla

struggle and drug lords that is a struggle that is frightening the

rest of Latin America because of the spillover across its borders. So

the U.S. attention and program for Colombia is extremely important at this point in time for the region.

Then we also look at the Caribbean and Central America and I

would just second the recommendations coming out of the first two

speakers there that NAFTA parity is absolutely crucial for these

11

countries, as they are coming out of their own civil wars and trying

to find a place in the global economy which is difficult for these

smaller countries.

The second broad point that I make in my testimony is that, in

fact, democracy has survived since the transition of the 1970’s and

1980’s, but its social and economic performance is poor. It is, in

fact, qualitatively thin. It centers around elections, but the people

are distrusting their legislatures and their political parties and in

some cases they are choosing strong men and populist options.

They are looking for saviors and those that give the message of salvation to address the critical problems that have not been addressed of poverty and lack of potable water and lack of good hospitals.

What we may be seeing, and I do not want to be too pessimistic

about it, but certainly in looking at the Andean countries, is a new

hybrid form of democracy with authoritarian underlinings. We are

not going to see a return to the military coups of the past. I do not

believe that. We are going to see new, more subtle forms of

authoritarianism through the electoral option because the people

are demanding solutions.

The third point that I make is that poverty and its underlying

inequality have grown in the 1990’s despite economic reform and

growth and that I believe this remains the single largest challenge

for the deepening of the region’s democracies and raising its standard of living and I want to come back to that in just a minute.

The fourth broad point is that Latin Americans, in fact, admire

the U.S. and do want a close relationship, but that they are skeptical about our commitment to hemispheric cooperation and to democracy. We need to lead, as a democratic partner. We need to join

in rather than imposing solutions on the hemispheric problems and

our mutual needs.

In addressing Congressman Menendez’s question, why is there so

little interest in Latin America in Congress, I would love to turn

it around and ask the panel why that is the case. I think that Peter

summarized quickly the very great national interest we have in the

region. Historically, we know that we have swung back and forth

from crisis containment—attention when there is a crisis—to benign neglect, and I believe that is indeed because they are such

good neighbors. We have come to take them for granted. But my

impression from traveling to Latin America is that they are increasingly frustrated and insulted at that kind of an attitude. In

fact, they are looking and turning, as we know, with trade agreements to Europe, to Asia, because the U.S. is not responding with

a consistent, sustained attention and strategy.

Let me just make a couple of other specific points without repeating all of the same points. In terms of U.S. policy—actually, let me

go on.

Income inequality, I mentioned, is a crucial point with two consequences. One is the extreme level of inequality in Latin America

that helps explain the puzzling phenomenon of economic growth

that leads to increased poverty in the region. The gap between the

rich and poor has actually grown during the past two decades, despite the economic reforms, leaving more people under the poverty

line, even as per capita income rises. But it is also dangerous to

12

democracy. Weak democratic institutions are susceptible to the influence of the economically powerful who resist the reforms that

could change that pattern. Then, subsequently, the failure of democracies to deliver services and protection to their citizens erodes

their legitimacy and makes these alternative forms of government

attractive to people who are in desperate situations.

One of the things I have been disappointed about is that obviously the hemisphere recognized that education is a key both for

inequality and poverty. That was recognized in the 1998 Summit

of the Americas. Even within education in Latin America, there is

great inequality as very few people have access to the higher levels

of education. Commitments were made in the 1998 Summit of the

Americas. I would like to see those implemented to really address

the question of education.

Now given all this, what should the U.S. do? I will just go

through a few recommendations quickly as we are running out of

time. The U.S. should recognize that the Western Hemisphere provides natural allies in a global economy of blocs and spheres of influence. As I said, Latin Americans are ready, even eager to be our

partners, as long as the basis is one of mutual respect. It is time

to engage them as democratic partners with a consistent, sustained

policy.

I suggest the following priorities. Again, reinforcing the point already made, reinitiate Fast Track for the free trade of the Americas. Along with that, pass NAFTA parity for Central America and

the Caribbean. Third, give consistent and full backing to democratic institutions and leaders. Several mentions have been made

about Peru. The recent State Department messages in fact warning

against President Fujimori’s manhandling of the electoral process

are welcome, but they need to be sustained and spread to other

countries, including Venezuela, which is coming up on very crucial

elections in May.

U.S. Government support of NGO’s like NDI, IRI, IFES, and the

Carter Center does provide a neutral and professional means to improve electoral process, but that support is declining at the very

moment when it could help to deter new hybrid democracies.

Fourth, and related to the above I advocate using the 2001 Summit of the Americas to be held in Canada next year as an opportunity to address the democracy issue. The Carter Center works

with a group of former Presidents from the region called the Council of Presidents and Prime Ministers. This group asked us during

this past year that we focus our next conference on democracy because they are so frightened about what is happening in the region.

In fact, we will be doing that in October.

Latin Americans often perceive that the U.S. is more interested

in drug enforcement and in immigration than in strengthening democracies, so I believe that we need a consistent message from all

of our agencies and nongovernmental organizations that we do indeed care.

A fifth point and again related is to encourage more politically

and socially realistic IMF policies. Even with the proper economic

prescriptions political realities can prevent the adoption of full IMF

remedies they can undermine the courageous leaders who are trying to make those reforms. This is what just happened in Ecuador.

13

It was ironically a leader who was trying to modernize the economy, but who could not, because of the political constraints in his

country, get the proper legislation to carry out the full prescription

that the IMF was laying out. For a full year Ecuador remained

without any fresh loans or capital until finally popular unrest combined with a military coup led to his ouster. I think that it is very

ironic that that happened to a leader who was trying to implement

those kinds of reforms. The international community and IMF need

to be flexible.

I understand right now, in fact, that U.S. aid is being held up

to Ecuador because of a hold from Congress and I would urge that

that be addressed as soon as possible.

Finally, I will make my last point that I would urge that we

show mutual respect for international norms that we value and

want to instill in other countries by signing the international treaties to protect human rights and combat corruption. I hope that

you will talk to your colleagues in the Senate about these treaties

because that will show the mutual respect and put us in the position of leadership to ask the Latin Americans to follow along those

lines as well.

Thank you.

[The statement of Dr. McCoy appears in the appendix.]

Mr. BALLENGER. Thank you, Ms. McCoy.

Dr. Weintraub?

STATEMENT BY SIDNEY WEINTRAUB, CENTER FOR

STRATEGIC AND INTERNATIONAL STUDIES

Dr. WEINTRAUB. Thank you very much for having me. I have a

cold and my voice is going. It should hold out for the 10 minutes

that I am speaking, but if not, it is your blessing.

I was listening to a discussion a few days ago at our place. I am

with the Center for Strategic and International Studies and the

Israeli Ambassador was talking and he made a point that I just

want to make to you. He said, ‘‘We are not as lucky as you. We

do not have Mexico and Canada as neighbors.’’ Just keep in mind

that we do have essentially benign neighbors who are looking for

cooperative activities.

I will not repeat too much, but I want to make a few points that

others have made just to emphasize them. If you look at the hemisphere today, thinking back what it was 15 years ago, roughly, import barriers throughout the hemisphere are now modest. The

hemisphere is wide open to foreign direct investment. Congressman

Menendez made a point that struck me about the number of complaints he is hearing from business people. I would like to confront

him on that because when I look at what is happening in Brazil

where last year foreign direct investment—the Brazilian ambassador is here and correct me if I am wrong—was something like

$28 billion. In Mexico, it is now averaging about $11 or $12 billion

a year. Argentina is higher than that. They may be complaining,

but boy, they are going into the big countries.

A third point, the privatization program that took place in Latin

America over the last 15 years, particularly in the southern cone,

earlier in Mexico, was bigger than any place else in the world. It

was not a trivial process and these facts have to be kept in mind.

14

I think the most important change from an economic sense was

a shift in development philosophy and some of my colleagues have

already made that point. The philosophy is now based on prudent

macroeconomic policy, promotion of exports which I will come back

to that, and reliance on the private market which I think is a crucial aspect of democracy. I do not think you can have democracy

if you do not have a market. Keep in mind these are major achievements. I will come back to some of these points.

We have not reached nirvana yet in this area but that it takes

a little time to get there is really the point I am making. The key

currencies in the hemisphere, in Brazil, in Mexico, and in Chile,

are floating, relatively clean floats. The currencies are flexible.

They have exchange rate policies that are quite reasonable. Argentina, as you all know has a fixed 1 to 1 relationship between its

Peso and the Dollar and they are holding that.

Susan Kaufman Purcell made the point that inflation is down.

The Latin American disease, as inflation always was, averaged less

than 10 percent last year. This is high by our standards, but boy,

by the Latin American standard this is remarkable. There are still

problems in many countries and I will not repeat the ones that

were mentioned.

Democracy has a pretty firm hold in the big countries in the

hemisphere. I think it is almost inconceivable that the big countries in the southern cone, Argentina, Brazil, and Chile which is

not a big country, would revert to military dictatorship. Just think

back 15 years. They have had transfers of power in these countries.

Mexico, which was once described by, what is his name, the Peruvian writer, Vargas Llosa, as the perfect dictatorship. Mexico is

now going through the most competitive election in its modern history and it is unsure who is going to win. I ask you to keep these

points in mind.

There are some serious problems and my colleagues have mentioned them and you are aware of them. Poverty has not diminished. Is probably has gotten worse. Income inequality has probably grown in recent years. Public safety is weak, almost throughout the hemisphere. There are a lot of reasons for this. These are

major, major issues. But they are not the only issues in the hemisphere.

1999 was a terrible year for the economies of Latin America. I

put a little table in my paper which gives you some of the figures

as to what happened to GDP, gross domestic product growth in the

last 3 years. It was one of the worst years in recent history. Some

of this stems from the crisis in Brazil which the country came out

of very quickly. Some of it stems from the decline, the problems in

Asia. Chile had its first bad year in about 10 years because of the

decline in copper prices. Some of it stemmed from the countries

own activities and their own inadequacy. It is a combination. This

year will be much better and the table that I have given you indicates that.

If you look at the really big countries you see that they are going

to be doing well, Mexico, Brazil, and Chile. I think I had too low

a growth figure in my table for Argentina.

Let me now get to the issue and then I will give some recommendations. U.S. exports capture 40 percent roughly of the

15

Latin America market. It is about 75 percent in Mexico and then

it diminishes as one moves south to the southern cone. Taken all

together, we get about 40 percent of the market. When Latin America grows faster, our exports grow faster. We get half of that in Europe or in Asia—about 20 percent of the market. So Asia has to

grow twice as much before we capture the same share as we do in

Latin America and that makes a difference. It is why you have

seen the biggest growth in U.S. exports going to Latin America in

recent years.

Let me very quickly make four or five recommendations and I

will embellish them very little and then I want to touch on one or

two of Congressman Menendez’ points. First, I agree with what my

colleagues have said, that we need Fast Track and we need a Free

Trade Area of the Americas if we want to secure our market in this

hemisphere. If we do not, others will secure their markets there.

The Europeans have already moved into Mexico. They are going to

negotiate with MERCOSUR. If we do not, somebody else will move

in.

The drug certification process that you follow in Congress I think

is not very useful. I do not think any of you could cite a single positive example of what that certification process has done except to

bring us into conflict with a bunch of countries once a year. If we

can multilateralize the certification process, somehow by doing

something else, let the OAS do it, life would be a lot easier for a

good many countries and for us.

I agree with my colleagues that we must speak out all the time

about strengthening democracy and I will not add to that.

We must support second generation reforms; education, health

care, things of that type. The systems are weak. The justice system

of these countries as well. These are hard issues. We have not

solved our primary and secondary education problems in this city.

Finally, let me make my major point. Maybe this sounds like an

economist. If we do not open our market fully to Latin America, if

we ever were to turn protectionist—and the failure to move on the

FTAA is not protectionist yet, but it is moving in that direction—

we do not have anything else to say to Latin America. The rest of

our policy becomes meaningless. We convinced them through

preaching over 20 years to shift philosophy. The philosophy is now

based on exports. This has had a remarkable success next door in

Mexico, even as many in Congress fear NAFTA. My own judgment

is if we cannot meet the single most important issue that Latin

America looks toward in developing its own economy, what else

have we got to talk to them about? We can preach, but they are

not going to listen, if we do not deliver on trade policy.

Let me just make one point for the record with respect to Congressman Menendez’ queries and some of his queries are quite

right. However, I think he stacked the deck when he said development does not come from trade alone. Most economists have a

Mantra. Open trade is a necessary condition, but not sufficient. I

never heard anybody say trade alone will solve all problems, but

surely he prefers trade to aid. Anyhow, that is one answer.

Finally, let me make one or two points on corruption. It is bad

in the hemisphere. I do not quarrel with that, but there have been

some positive steps. Let me mention one or two. When you elimiVerDate 11-MAY-2000 09:25 Sep 22, 2000 Jkt 000000 PO 00000 Frm 00019 Fmt 6633 Sfmt 6633 64522.TXT HINTREL1 PsN: HINTREL1
16

nate import licensing, you eliminate one source of corruption. You

do not have to buy your license. When you bring tariffs down, you

eliminate one source of corruption. You do not have to buy your

way in through the customs agent. When you make foreign direct

investment open and do not have to negotiate every step of the

way, you have eliminated that middle man in the process. That is

happening throughout the hemisphere. Does it solve all problems?

Of course not. However, all of the countries are conscious that they

have a problem of corruption. They do not know how to deal with

it, but a few people have been thrown out of office. That happened

in Brazil. There were big headlines in The Washington Post and a

long story about Argentina’s corruption and that is being dealt

with. I guess what I am saying is sure, this is a problem and it

is not going to get solved very quickly, but the hemisphere was a

hell of a lot worse 15 years ago on all of these points.

Thank you.

[The statement of Dr. Weintraub appears in the appendix.]

Mr. BALLENGER. I am sorry that the panel has faded away.

Nonetheless, in reality I think you will find that everybody that

was here is vitally interested in what is happening in Latin America. I do not know whether some of you may or may not know it,

but I got involved down there in the middle 1960’s in El Salvador.

My father-in-law was invited to the country as a member of the

International Executive Service Corps. We went down there and we

helped a fellow there set up cost accounting systems, inventory controls. I am a businessman basically. This system was successful

enough that he became a friend and he had a couple of manufacturing plants there that he ran on the basis of the way people do

in El Salvador. He brought his boys that were going to run this

plant up to North Carolina. They went through my plant and we

sat down and discussed the way we operate and the personnel

practices that we had. This resulted in a change of attitude about

the way employees should be treated and the way they should be

paid. He actually gave them packets of food as well as their pay

checks. I do not know if you can translate our employment practices to Latin America and I do not think you can solve all the

problems of the poor, the very poor in everyone of the hemisphere’s

countries. However, through these type of exchanges and by setting

a positive American example we can have an impact. We are rich

and we can afford to implement progressive labor practices, but the

basic idea of economic development in Latin America is probably as

important as anything.

One thing I would like to say is that the first year I was here

I came up with this brilliant idea of Congressional or Parliamentary exchanges which I did not know already existed. We were invited to make a trip to Brazil, Chile and Argentina and I went to

Brazil and met with their parliamentary leaders who were at that

time drawing up their constitution. I would love to have a working

relationship as legislators with the Brazilian legislators. However,

I ran into a problem when I came back because the question of how

long it takes to get to Brazil was constantly raised. If we were to

plan a weekend codel to Brazil we would be flying the whole weekend. It turns out that we do have a very good working relationship

with Mexico. It used to be that the Mexican legislators would come

17

and sit down and read a paper to us and that was all. Finally,

about 3 or 4 years ago we told them they had 3 minutes to speak

and then they were cutoff. This led to us actually getting a discussion going. I believe this positive interrelationship is something on

which we need to work. Peter has invited me to attend a meeting

with a group of legislators in Costa Rica and I look forward to

interchanges that will be constructive. I was heavily involved as

Ms. McCoy knows in the election in Nicaragua. We won the election and I came back up here and forgot all about it. Then this lady

flew all the way up here and said OK, we have won the election

and I am now Speaker of the House, what do I do? We went out

and got all our books on parliamentary procedure and practices

and gave them to her. These types of legislative exchanges serve

not only to bolster to bilateral relations but also support democratic

institution building.

I would like to pose two questions because right now two really

strange things seem to be occurring in Latin America and I would

like your opinion. First of all, the election in El Salvador did not

turn out as expected. I believe there was a light vote. The president

of the party PAN in Mexico came and presented me with statistics

and so forth that would suggest that there is a good likelihood that

Mr. Fox might win in Mexico. I would like to throw those two at

you and ask you how you read this situation? Salvador going left

and Mexico going free enterprise.

Yes ma’am, fire away.

Dr. PURCELL. I will just address the Mexico issue. About a week

ago the polls showed that the two candidates were more or less

even and some even showed that Mr. Fox was ahead. This was unprecedented. This morning I read that Reforma’s polls showed that

they were about 9 or 10 percentage points apart. Mr. Labastida,

the candidate of the PRI, was ahead of Mr. Fox, the candidate of

the PAN. The elections do not occur until July, and it could still

go either way.

It is not quite accurate to think of Mr. Fox as on the right. The

PAN is on the right, but Mr. Fox is not. He is part right on some

issues, part left on others, part populist, part free enterprise,

etcetera, and that is precisely why he has been able to gain a lot

of support despite the fact that he did not get the support of his

party. Initially, he actually presented them with a fait accompli, as

you know.

What is occurring in Mexico is truly amazing in the context of

what Mexico has been until fairly recently. For the first time there

is the possibility that an opposition candidate could win, the presidency. There are some who say that say Cuauhte ̆

moc Cardenas

won in 1988, but the government did not recognize his victory, if

indeed it occurred. This time, if an opposition candidate wins, it

will be recognized. I have absolutely no doubt about it. Mexico has

changed profoundly. What you are seeing is less of a left-right kind

of contest in Mexico, than a contest between a governing party and

opposition candidate. The opposition is not based on economic

grounds but on democracy. You can have all the democratic processes you want in a place, but for many Mexicans, as long as the

PRI, the party that has governed Mexico since 1929 under a variety of names, continues to hold the presidency, there will be subVerDate 11-MAY-2000 09:25 Sep 22, 2000 Jkt 000000 PO 00000 Frm 00021 Fmt 6633 Sfmt 6633 64522.TXT HINTREL1 PsN: HINTREL1
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stantial skepticism and dissatisfaction with Mexico’s democratic

transition. Many people will continue to believe that the transition

has not been completed.

I do not know who is going to win, but I must say that I am

thrilled that I do not know.

Mr. BALLENGER. Peter?

Mr. HAKIM. Just to add, I think what is interesting is that in

both El Salvador and Mexico there are competitive elections and it

does not really matter to the United States or to the relationship

with either country really who wins. This is remarkable, particularly in the case of El Salvador where the sort of people that came

out ahead of reform were guerrilla fighters who were doing battle

with U.S. supported troops. The fact is that now ideological differences have narrowed substantially. They have not been eliminated yet, but these people now sit together in congresses, passing

laws and reaching compromises. There is no question that this is

a significant change. The Chairman, Mr. Gallegly, cited an article

of mine as being at the extreme pessimistic end of the spectrum.

The title, I agree, was a little bit ominous sounding, ‘‘Is Latin

America Doomed to Failure?’’ I wanted to make two points in closing. First, one has to read the last paragraph of my article to get

that the answer is not necessarily positive to the question. Second,

I like to think of myself really as the optimist in the sense that I

believe our standards for Latin America ought to be higher, that

we ought not be able to say that corruption is terrible, awful, but

it is better than it was 10 years ago. That is really not enough. The

same can be said about this recent economic recovery, which I

think is remarkable. Everyone is hearing of 4 percent growth rates,

but that is less than the average growth rate over the 20 years between 1960 and 1980. That is far less than the East Asian countries.

I believe to be optimistic one ought to set higher goals—so yes,

I do sound pessimistic compared to what I would like to see happen

there, but I think that the way to do it is not to excuse failure, but

to strive for stronger standards of success.

Mr. BALLENGER. Yes, go ahead, Jennifer.

Dr. MCCOY. Just to add one point about the electoral results, I

agree that there is much less ideological difference certainly between the PAN and the PRI. They are basically advocating the

same economic strategy. You recall the last elections in Chile, Argentina, and Brazil have elected people on the center left, basically.

Central America had been electing people more on the center right

and right and now may be moving. I think that that reflects not

a major difference in economic policy, because there is a basic consensus on the economic reform, but this frustration that I mentioned with the lack of social and economic performance: the people

are not getting services from their governments and they are voting for a change and especially voting for people who are saying

they are going to address the needs of the people.

In more extreme cases, we are seeing people like Hugo Chavez

elected in Venezuela who are being more radical in how they are

going to address the needs of the people. In these other countries

it is a more modified version of that.

19

Mr. HAKIM. Can I just say one thing? Brazil is not a real good

example because they re-elected the president, so I mean there was

a certain degree of continuity.

Dr. MCCOY. Yes.

Mr. BALLENGER. Economically, I would agree with everything

you said. The fact that I come from a part of the country that lost

all our textile jobs to Central America before they started going to

Asia. Now NAFTA is starting to bring textile jobs back to Mexico.

I am all for developing something along those lines, but let me ask

you one favor, please. If we want to sell something around here and

you want to get our vote at least where I come from, do not use

the word NAFTA. Free trade, CBI–30, whatever you want to call

it, but NAFTA burned a few of us pretty badly. Also I would rather

have another choice of words. It may be cowardly on my part. Also,

let me, if I may yield to my friend from Boston, you mentioned Mr.

Chavez. You probably have two of his strongest supporters sitting

right here so we are going to keep him straight no matter what

happens.

Go ahead, my friend from Boston.

Mr. DELAHUNT. Thank you, Mr. Chairman. I want to pick up on

just some of the themes that you have articulated. I think it is interesting, listening to such a distinguished panel that Dr.

Weintraub said the big countries are doing well. This is reassuring.

Yet, at the same time I heard from all the witnesses that there is

a growing gap between the rich and the poor, that the disparity in

wealth and income has grown. It is like somebody is doing well, but

the people in these societies, are they truly doing better?

Chairman Ballenger just mentioned the term NAFTA. Dr. Purcell mentioned the AFL–CIO. Those of us who come from Districts

where organized labor has political clout like to remind those that

talk about free trade that what the AFL–CIO and others are trying

to do in terms of instilling in the debate is the need to insure that

the increased prosperity from trade is allocated equally and fairly

among entire societies.

To pick up on a point again that Mr. Ballenger referenced just

now about President Chavez in Venezuela. I am clear that his popularity which is overwhelming, which is real, which is palpable is

due to the fact that he recognizes the inequalities that have existed

in Venezuela for the last 20 or 30 years. We talk blithely about democracies. I do not know who it was, but someone talked about

elected democracies. We had elected democracies in Venezuela for

an extended period of time that gave nothing more than lip service

to democracy where I think there is a consensus that in terms of

the rule of law, in terms of the so-called democratic institutions in

Venezuela that existed prior to the arrival of President Chavez on

the scene were corrupt. It was interesting to listen to American

commercial interests that do business in Venezuela. In terms of the

lack of predictability of what would occur within the judicial system in Venezuela businesses certainly were discouraged oftentimes,

unless of course, they were adequately and I say this with a tinge

of sarcasm, adequately represented before judicial tribunals in Venezuela. I guess that is more of a statement and a commentary.

However, I do agree with Dr. McCoy when she challenges Congress and really challenges the Administration and I think chalVerDate 11-MAY-2000 09:25 Sep 22, 2000 Jkt 000000 PO 00000 Frm 00023 Fmt 6633 Sfmt 6633 64522.TXT HINTREL1 PsN: HINTREL1
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lenged the American people to revisit our relationship with our

neighbors to our south. It is not a priority. It is not on the radar

screen. It only comes before us when we begin to get concerned

about the flow of drugs coming from Colombia to the United States.

It is unfortunate and I think the concerns expressed by Mr. Menendez really resonate. We, I mean, Members of Congress, and the political leadership in this country should really revisit our relationship with Latin America. I think many of your comments are on

the mark.

I think there is also a danger too, when we talk about polls and

we start to label democracies as hybrid, left or right because these

are all dynamics as opposed to static situations. Those of us that

have run for office understand this all the time.

Six months ago, most Democrats had conceded the presidency to

George Bush. That is not the case now. John McCain 3 months ago

was really not a factor in American political life. He clearly said

something that resonated. Would you put John McCain on the left,

on the right, in between or what? I think what he did is he as I

think all of you have said and I think you in particular, Dr. McCoy,

he hit a chord much like President Chavez has in Venezuela.

If anyone wants to make any comments, I would be happy to listen.

Mr. BALLENGER. Dr. Weintraub first.

Dr. WEINTRAUB. Let me make just a brief comment. Do not get

the impression that scholars do not care about poverty. Economists

have talked about this for as long as I can remember. But I ask

the question and I want you think about this too: How do you reduce poverty in a country? I am not talking about inequality now,

that is different. I am talking about poverty. Unless you want to

have a revolution, the only way that I know of to reduce poverty

is by sustained high growth rates, year after year after year. Does

this work? Well, it worked in Chile. Chile is about the only important Latin American country that has sharply reduced poverty and

that is because it grew year after year, based a lot on trade. Trade

was the critical element in reducing poverty. Chile’s inequality, by

the way, went up as its poverty went down, so the two do not necessarily go quite together.

The reason that most of you get critical, I will not use the word

NAFTA too often, even——

Mr. DELAHUNT. Go ahead, Doctor, that is OK. There is only two

of us here, so we will not squeal.

Dr. WEINTRAUB. I think NAFTA has been a success, economically. A fantastic success. It has been a political failure, but the

question that many of us who are not anti-labor and I am not antilabor by any means, but the question I keep asking the labor movement is whether thay really care about the people in poverty in all

of these countries if they do not want to give them the opportunity

to grow and trade as necessary if they are going to grow? In other

words, part of the problem, I suspect is that their motives may be

right, but I think they are recommending all of the wrong things.

Mr. DELAHUNT. I guess growth obviously will have some benefit,

but what I dare say——

Dr. WEINTRAUB. It is the only way to do it.

Mr. DELAHUNT. Well——

21

Dr. WEINTRAUB. You tell me how else you can——

Mr. DELAHUNT. Right, but I do not think it has to be predicated

on a trade policy.

Dr. WEINTRAUB. Sure it does.

Mr. DELAHUNT. In other words, growth, what you are suggesting

is that growth is solely and exclusively predicated on trade?

Dr. WEINTRAUB. No. What I said is these countries have all

adopted a policy at our recommendation that instead of looking internally, which failed and poverty was great, they have all adopted

policies which are export oriented. Almost every Latin American

country with a few exceptions. Venezuela has not been very good

except for oil on that score. If we are going to cutoff our market——

Mr. DELAHUNT. I am not suggesting, again, let me be clear, too.

I want to be clear to you. I am not suggesting that we cutoff that

market. What I am suggesting is that our trade policy ought to factor into the equation a mechanism to insure that the benefits have

increased prosperity, presumably emanating for trade, be allocated

fairly and equitably. That is my point.

Dr. WEINTRAUB. Let me make one comment and I will quit.

Mr. DELAHUNT. Keep going.

Dr. WEINTRAUB. The main point I want to make is that there are

a lot of ways to do that and a lot of us have been trying to figure

out ways to do that. The one thing that they will not accept anywhere in the developing world is that the technique for doing that

is to impose a trade sanction when they do not meet some standard

that we set. This has been unanimously rejected. That is not the

only way to show concern for labor. You can fine the companies.

You can label the product. All I am saying is think about those

techniques.

Mr. DELAHUNT. I think your recommendation is good and I think

too, that we have seen a shift in terms of the attitude of the IFI’s

in terms of the abrupt changes that have been brought about in

some countries as a result of the conditions of the IMF and other

international financial institutions.

I think there is a balance. I do not really think that you and I

would necessarily disagree, but there has to be a balance. In the

end, if you have a society of have and have nots, whether it is in

a developed country, like the United States where you have a permanent long term increasing gap between those that have and

have not, you have social tensions.

We have social tensions in our cities because of the gap of income

and the ability of individuals to access capital and wealth. That is

my point, Doctor.

Mr. BALLENGER. I would like your opinion because the Ambassador is here and when you sit right down and look at it, Brazil

is larger than Russia or India. Their GDP is greater than China’s,

Russia’s, India’s or Mexico’s. It seems like they should be the engine for growth in all of South America. I wish the Ambassador

was sitting here, but you can express an opinion.

Somehow we do not seem to be developing the relationship with

the real engine of South America in this country and I do not know

how you go about it. The great distance is a barrier to trade between our countries, although I note trade does exist. Any expression of an opinion there?

22

Dr. WEINTRAUB. I have one comment and I agree with your

point, by the way, your basic point. It is only—but I will give you

some answers if I can. It was only recently when the Brazilians got

into the crisis last year and they had to be bailed out with what

was it, $41 billion, that concentrated a lot of minds up here that

and the end of the Cold War concentrated a lot of minds. I think

we care about Brazil now in ways that most of us ignored earlier.

By most of us I really mean the policy community. The business

community was not ignoring it. They were going down with billions

and billions of dollars.

My second point is that Brazil is not that big a trader compared

with Mexico. Brazil exports somewhere in the neighborhood of 10

percent of its GDP. It is a big GDP, $800 billion or so. Mexico exports 35 percent of its GDP. It is about $500 billion.

We trade more with Mexico than with the rest of the Latin

America put together, in part because of changes. The answer to

your question is, that it is not only because Brazil is distant. A lot

of other countries are distant. It is because we just ignored trade.

Brazil ignored it. Brazil looked inward. We did not look much into

South America and I think we are slowly changing on that score.

Mr. HAKIM. I do not necessarily agree with my colleague. First,

I think that if you talk to the Brazilian government, talk to the

Ambassador here and the foreign minister is coming up in a couple

of weeks, the relationship between the United States and Brazil is

as good as it has ever been in many respects. That does not mean

we are taking advantage of all the opportunities possible—and one

of the problems is the long distance. We have had, as you say,

NAFTA, which did not work out politically so well, so it is hard to

think about moving the trade area much beyond that. It may be

that U.S. trade with Mexico is many multiple times that of trade

with Brazil, but direct investment in Brazil is very large. U.S.

firms are going into the country even through Brazil is a lot further away. It is not easy to develop a good relation. Brazil has a

lot of its own interests. Those interests, in part, reflect its own political preferences. They reflect the internal politics of the country.

I believe this is a long-term process. The core and anchor is the

economic relationship, and we ought to be consulting with Brazil

far more than we do on a whole range of issues. We are beginning

to do that. I believe, one of the high points in this relationship was

when President Clinton invited President Cardoso to go to Camp

David for a dinner and they spent most of their time as I understand it, talking about global issues, and issues in the hemisphere.

In other words, the U.S. was seeing Brazil as an ally and a partner, talking the way we would talk to Germany or France about

these sets of issues, not necessarily about nitty gritty bilateral relations. I think the way to develop this relationship is in part, to recognize Brazil as something special. Business people have not neglected Brazil especially now that the country has begun to grow

again as it continues to emerge from crisis. There is going to be

more and more invested, more and more pressure to loosen up on

the trade issues.

Mr. BALLENGER. Yes ma’am, go ahead.

Dr. PURCELL. I agree with most of what has been said except

that I think that we have the closest relationships with those govVerDate 11-MAY-2000 09:25 Sep 22, 2000 Jkt 000000 PO 00000 Frm 00026 Fmt 6633 Sfmt 6633 64522.TXT HINTREL1 PsN: HINTREL1
23

ernments that have gone out of their way to seek close relationships with us. They have wanted a special relationship with us. Examples include President Menem when he was President of Argentina, President Zedillo, and particularly President Salinas, when he

started restructuring the Mexican economy, I agree with Peter. Our

relationship with Brazil is better than ever. However, I do not

think that Brazil has given any indication that it particularly

wants a close relationship with us.

Brazil wants to be a leader in Latin America. The United States

also wants to be a leader in Latin America. Brazil is a big continental country. So is the United States. The U.S. and Brazil have

some overlapping goals. There is also a slightly competitive relationship between us in the hemisphere. I do not mean this in a bad

way.

Mr. BALLENGER. I do not doubt that. As far as business is concerned, if you ever go to Sao Paolo, it is unbelievable the economic

development there and Ford is there. General Motors is there. And

Mercedes.

Dr. PURCELL. Everybody is there.

Mr. BALLENGER. Everybody is there. I think the basic point economically as you say, is that it is a long distance to ship back and

forth, so if you are good businessman why not invest your money

in Brazil, then you do not have to transport it back and forth.

One thing I would like to ask and I am quoting Dr. Kaufman,

is that if her analysis is correct in assuming that by the year 2010,

U.S.-Latin American trade will exceed our trade with Europe and

Asia, even with the current tariffs and the trade restrictions, why

is the pursuit of the FTAA integration so important?

Dr. PURCELL. That is a good question. Because I think what it

will do is help consolidate and give emphasis to a second stage of

reforms that is necessary. This would include anti-corruption efforts, the need for the rule of law, and for better democratic processes. It is also in our interest because the FTAA would help open

up more of the hemisphere to greater intra-hemisphere and to

greater trade between the United States and Latin America. What

the FTAA would do is build on a process that seems to be moving

ahead even without it. It would help it move faster and further. It

would strengthen the position of pro-reform elements in Latin

America, and would insure that a good thing will get even better.

Mr. BALLENGER. Dr. Weintraub?

Dr. WEINTRAUB. I want to make two or three points. I will be

brief. First, we call the FTAA a trade agreement, but it is really,

trade is just one element. It is an important element. The FTAA

has to do with investment and it has to do with interactions and

relationships and the development of organizations, both official

and unofficial, governmental and nongovernmental organizations.

That is what a trade agreement does. Trade develops all of those

relationships and to say we do not really care about developing

these relationships, except with Mexico, the rest no. Our policy will

never be complete.

Second, we now face discrimination in just about every Latin

American country compared to other Latin American countries and

compared to some outsiders. For example, I can give you plenty of

examples of where U.S. producers deliberately move their producVerDate 11-MAY-2000 09:25 Sep 22, 2000 Jkt 000000 PO 00000 Frm 00027 Fmt 6633 Sfmt 6633 64522.TXT HINTREL1 PsN: HINTREL1
24

tion for export to Canada or Mexico because that is the way they

can ship into Chile without tariff. If shipped from the United

States, they have to pay a tariff.

We compete with Brazil in the rest of MERCOSUR and the associated countries. Our stuff pays a tariff. Their stuff does not pay

a tariff. We are getting free trade agreements and Customs Unions,

in all of Latin America. The European Union has decided it is

going to do its darnedest to conclude a free trade agreement with

MERCOSUR and my guess is it will not be quick, but eventually

they will succeed. They are going to move in with a free trade area.

In a sense, I think what we are saying is that our hemisphere

really does not mean that much to us if we turn down a free trade

area and I think if we were to say yes, the FTAA will come into

existence and every single country would come in, even if now they

say they are not sure. No country is going to want to be discriminated against in our market. I do not look at a trade agreement

as being about trade alone is really what I am getting at.

Mr. BALLENGER. I agree with you, basically. Even though North

Carolina lost a bunch of textile jobs to Central America, I hope

somehow we would establish free trade through CBI so that the

Caribbean can at least compete with Mexico. I would say that this

has been one of the more interesting hearings.

Excuse me, do you have any more?

Mr. DELAHUNT. I will be really brief. Due to Peter’s castigation

earlier for being a pessimist, I want to make the observation that

his and the Inter-American Dialogue’s efforts here on the Hill, I

think are absolutely to be embraced and welcomed. Through these

efforts what occurs is that leaders from officialdom here on the Hill

as well as representatives of the various Latin American countries

have a chance to have these kind of conversations. Dr. McCoy, I

think your challenge, is a very legitimate challenge. Peter, I think

the fact that you are bringing together Members of Congress and

various Parliaments from all over the western hemisphere in Costa

Rica is absolutely essential because the reality is the reality is in

terms of official Washington, Latin America is not on the radar

screen. Let us not deceive ourselves and let us not deceive the people who have an interest. We might disagree as to the solutions,

but I think you are so right in that it is time to insure that we provide sustained attention to the hemisphere in all spheres, cultural,

political and commercial relationships. As Dr. Weintraub illustrated, they are all interrelated and it is time that we ratchet up

our set of priorities so that the Western Hemisphere and Latin

America are right at the top.

Mr. BALLENGER. What I would like to do is thank you. Peter go

ahead.

Mr. HAKIM. First, I hope the Congressman’s comments are on the

record. I also want to thank him for his leadership and your leadership on this. He comes to lots of discussions and exchanges and debates and is always a good contributor and we would like to get

you to more of them.

Mr. BALLENGER. I thank all of you for coming. To me it was a

very fascinating discussion that we had and Bill and I are vitally

interested in what goes on in Central and South America and will

continue to be. I will be frank with you, the other Members that

25

were unable to stay all the way through also feel the same way.

Again, thank you profusely for coming and providing your knowledge to us in hopes that it will lead to something constructive. It

is not that we do not have South America on our screen, but the

State Department does not have it on its screen.

On behalf of Mark Sanford I ask unanimous consent that these

questions be submitted for the record. Hearing no objections so ordered. In addition I submit this statement by Ambassador Barbosa

for the record.

Thank you very much.

[The statement of Ambassador Barbosa appears in the appendix.]

[Whereupon, at 3:35 p.m., the Subcommittee was adjourned.]

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MARCH 15, 2000

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