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[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]

     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

                                 ______

                     U.S. GOVERNMENT PRINTING OFFICE
64-522 CC                    WASHINGTON : 2000

                  COMMITTEE ON INTERNATIONAL RELATIONS

                 BENJAMIN A. GILMAN, New York, Chairman
WILLIAM F. GOODLING, Pennsylvania    SAM GEJDENSON, Connecticut
JAMES A. LEACH, Iowa                 TOM LANTOS, California
HENRY J. HYDE, Illinois              HOWARD L. BERMAN, California
DOUG BEREUTER, Nebraska              GARY L. ACKERMAN, New York
CHRISTOPHER H. SMITH, New Jersey     ENI F.H. FALEOMAVAEGA, American 
DAN BURTON, Indiana                      Samoa
ELTON GALLEGLY, California           MATTHEW G. MARTINEZ, California
ILEANA ROS-LEHTINEN, Florida         DONALD M. PAYNE, New Jersey
CASS BALLENGER, North Carolina       ROBERT MENENDEZ, New Jersey
DANA ROHRABACHER, California         SHERROD BROWN, Ohio
DONALD A. MANZULLO, Illinois         CYNTHIA A. McKINNEY, Georgia
EDWARD R. ROYCE, California          ALCEE L. HASTINGS, Florida
PETER T. KING, New York              PAT DANNER, Missouri
STEVE CHABOT, Ohio                   EARL F. HILLIARD, Alabama
MARSHALL ``MARK'' SANFORD, South     BRAD SHERMAN, California
    Carolina                         ROBERT WEXLER, Florida
MATT SALMON, Arizona                 STEVEN R. ROTHMAN, New Jersey
AMO HOUGHTON, New York               JIM DAVIS, Florida
TOM CAMPBELL, California             EARL POMEROY, North Dakota
JOHN M. McHUGH, New York             WILLIAM D. DELAHUNT, Massachusetts
KEVIN BRADY, Texas                   GREGORY W. MEEKS, New York
RICHARD BURR, North Carolina         BARBARA LEE, California
PAUL E. GILLMOR, Ohio                JOSEPH CROWLEY, New York
GEORGE P. RADANOVICH, California     JOSEPH M. HOEFFEL, Pennsylvania
JOHN COOKSEY, Louisiana
THOMAS G. TANCREDO, Colorado
                    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                  GARY L. ACKERMAN, New York
CASS BALLENGER, North Carolina       MATTHEW G. MARTINEZ, California
CHRISTOPHER H. SMITH, New Jersey     ROBERT MENENDEZ, New Jersey
ILEANA ROS-LEHTINEN, Florida         ROBERT WEXLER, Florida
MARSHALL ``MARK'' SANFORD, South     STEVEN R. ROTHMAN, New Jersey
    Carolina                         JIM DAVIS, Florida
KEVIN BRADY, Texas                   EARL POMEROY, North Dakota
PAUL E. GILLMOR, Ohio
               Vince Morelli, Subcommittee Staff Director
           David Adams, Democratic Professional Staff Member
                    Kelly McDonald, Staff Associate
                            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

 
     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.

  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.
    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 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 integration 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 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 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 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.
    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 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 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 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. 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.
    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 
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 eliminate 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 
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 
Cuauhtemoc 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 
substantial 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.
    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 
challenged 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 anti-labor 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----
    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?
    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 
governments 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 production 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 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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                            A P P E N D I X

                             March 15, 2000

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