Manwaring – Intertwined Economies of Latin America and the United States
Alan
Manwaring
Executive Director for the “Consensus of the Americas”
Intertwined Economies of Latin America and the United States
Philadelphia Society Regional Meeting
San Antonio, Texas
October 11, 2008
Shift of US Policy
from FTAA to individual trade agreements with each county
In recent years the US has shifted from looking at Latin
America as a whole in its policy and trade approach to pursuing a policy toward
each county individually. This is
demonstrated primarily in the US moving from the Miami Summit policies of 1994
intent on the pursuit of a region wide Free Trade Area of the Americas (FTAA) to
moving toward the creation of individual trade agreements with each county, i.e.
Chile, Peru, Colombia, the Dominican Republic, and working toward expanded trade
relations with Brazil in the area of energy etc.
The imperative of
economic growth and development to be accompanied by the “rule of law,”
strong institutions, and an understanding of security.
It is important to understand that as the US pursues its
individual trade relations and continues to link our economies that the most
important factors in this process will be; first and foremost, the establishment
of the “rule of law” in the individual countries; second, the establishment
of strong institutions based on the rule of law; and third, an understanding of
the importance of security in establishing and maintaining an environment where
businesses can grow and prosper.
Example one: In Argentina last year I was with my good
friend and partner in the development of the Consensus of the Americas Travis
Seegmiller, who is a senior associate for Latin America at the Patton Boggs law
firm in Washington, DC. He spends a
great deal of his time being asked to assess business risk in various countries
throughout Latin America. While we
were together in Argentina giving a presentation at the highly respected PensAr
think tank in Buenos Aires he was asked why it seemed like foreign (mainly US)
investment was decreasing recently. He
responded that it is because the rules are changing in Argentina and have been
changing during the Kirchner Administration to the point where businesses have
no confidence that the rules won’t change and dramatically affect their
ability to do business in Argentina. He
said that when confidence is restored that the rules of doing business in
Argentina are more consistent then foreign investment will increase — but not
until then.
Example two: At
a Hudson Institute forum in Washington just this past Wednesday, one of the
presentations centered on the economic situation in Nicaragua.
The presentation pointed to the dramatic gap between foreign investment
and business development in Nicaragua as opposed to the other countries in
Central America. The point was made
that the main reason for this condition which has existed over several decades
is because in Nicaragua no one ever knows what the rules of doing business are
going to be from day to day, month to month, or year to year.
In fact, the example of the present government saying one thing one day
regarding a certain economic policy and then turning around the next day and
saying something completely different is quite common now a days and that
discourages anyone from wanting to invest in Nicaragua because there is no
“rule of law” or understanding of the rules of doing business.
The point was also made that this lack of knowing what the rules of doing
business will be from day today is not the same as “corruption issues” —
which while certainly a terrible thing can be accounted for as a “know
cost.” It is not knowing what the
rules of doing business are or will be — having no established “rule of
law” — that really drive foreign investment away and will continue to drive
foreign investment away.
Example three: When one looks at the economic success of
Chile one always points to the establishment of the rule of law and the
development of strong intuitions that have enabled businesses to feel
comfortable investing in Chile.
One must also understand that without an acceptable level
of security, rule of law and the development of strong institutions will not
occur.
Foreign investment and overall business growth will
increase or decrease in direct correlation to the degree of the established rule
of law, the development of strong institutions, and the level of security in
each individual country.
Nine
“suggestions”
We have spoken a great deal over the past two days about
the cycles of liberalism and authoritarianism.
I make several suggestions — not necessarily of my own but based on
observations from my experience throughout Latin America over a period of many
years — that if applied, may help in breaking that cycle and put Latin America
on a more stable path toward economic liberalism.
Before I begin my list of “suggestions” I start with a
statement made yesterday by one the panel members, Paul Bonicelli of Houston
Baptist University, at the Atlas Foundation conferenceÖ.
“The lack of liberty is the root of the problem”
I could not agree more.
With that said let me begin a list of nine suggestions that
may help in establishing a better economic environment for Latin America and a
better environment for more connections between the economies of Latin America
and the rest of the world — most especially the United States.
I take my first three suggestions from comments made by
Carl Meecham (senior professional staff over Latin American policy for Senator
Richard Lugar who is the ranking member of the Senate Foreign Relations
Committee) at a Hudson Institute seminar I attended just this past Wednesday
afternoon in Washington. He gave
these first three suggestions that I now list as what he would tell any incoming
administration to focus on regarding Latin American policy.
- Have
infrastructure development become the cornerstone of US policy toward Latin
America with a message that we have the “will” but not the “wallet”
and therefore we must focus on the development of pubic-private partnerships
as the key to this policy.
- In
light of public private partnerships being a key to infrastructure
development in Latin America it is incumbent on the US to actively promote
these kinds of public private partnerships between not only US companies and
institutions in Latin America but also between foreign companies and
institutions — from nations that share our vision for the future — i.e.
Japan and Chile.
- While
certainly continuing to promote foreign investment in Latin America, the US
should encourage and therefore actively help Latin American countries to
rely less on foreign investment and establish a responsible tax base as a
source of stable income.
This next suggestion I make based on my observations of the
success of Plan Colombia, the success of an established trade agreement between
Peru and the US, and the failure of an established trade agreement with Colombia
to date.
- We
must promote a better understanding within the diplomatic corps in Latin
America of how Washington works. When
one looks at the success of Colombian Ambassador Fernando Cepeda in working
through Plan Colombia, the success of Peru in working through a trade
agreement with the US, and the relative failure to date of establishing a
trade agreement between the US and Colombia one must look at the impact of a
lack of understanding on the part of many on how Washington works.
This next suggestion comes from several experiences,
perhaps most illustrative an experience I had while attending a seminar in
Buenos Aires several years ago.
- We
must encourage, and I would even say actively promote, a shift in dialogue
away from history being debated as an issue of public policy.
This may sound strange as a suggestion but as mentioned it
comes from an experience at a seminar a couple of years ago hosted in Buenos
Aires at a leading think tank (PensAr) where the subject matter was how to get
Argentina to move forward toward better economic and social development.
At that seminar a significant amount of the debate centered on the
atrocities of past governments in Argentina as if that was the issue at hand in
the context of how to move forward. At
the end of the several hours of debate on the issue a person that was described
to me as the “Larry King of Argentina” — who had the last word at this
seminar apparently — stepped forward and said: “Hey, if President Bachelet
can live in the same neighborhood with General Pinochet — only several blocks
away in fact — then certainly we can get past events of the 70’s as we
discuss how to move forward in developing our public policy for today and the
future.” He then went on
and scolded the group for basically debating issues of history in the context of
present public policy development and said that if the Chileans were at some
point able to make a decision to the put the past behind them and look to the
future in moving forward then certainly they (the Argentines) could also do the
same — that in fact unless they do they will never be able to come together as
a society to focus on the issues at hand and create a better future for their
country.
One need not go very far from Argentina, perhaps to Bolivia
and Peru in relation to Chile, to know that this issue — that of debating
history as a matter of present public policy — is certainly not limited to
Argentine society.
While we would all acknowledge that there is certainly a
place for events of the past to be discussed and debated as matters of history
since certainly they inform and shape the policies of the present and future, I
think his point was well made. No
doubt this may sound like a strange suggestion, but I think it is more profound
than it may seem at first glace — and something to really think about.
- We
need more UFMs (University Francisco Marroquin) in Latin America.
UFM is a university dedicated to teaching sound economic principles
in support of free markets. I
recently had the opportunity to visit this University and while there had
the chance to reflect on the significance of its very existence.
While UFM certainly provides a quality education to capable young
Guatemalan students — perhaps more significantly it provides an
alternative to leaving Guatemala for these young Guatemalan students to
receive a quality education. In
providing this alternative to leaving Guatemala for quality higher education
UFM will significantly impact the “brain trust” that stays in Guatemala
and contributes to the necessary development of Guatemalan institutions —
this is significant.
- We
need to develop a better understanding of how Spain integrated itself into
the European Union, the development of the European Union itself, and use
those models as process models for potential economic cooperation and
integration in the Latin American region and the Hemisphere.
The European Union started with coal and steel in the
aftermath of World War II and incrementally developed to where it is today.
The elite of Spain made a conscious decision at some point to cooperate
with each other and do what was required to establish the kinds of institutions
necessary to achieve acceptance into the European community — knowing that if
they failed to do so they would be left behind as the rest Europe developed both
economically and socially.
These last several are very important.
- We
must promote a better understanding of the relationship between security
issues and economic development — as well as an understanding of what
those security issues really are.
Latin America is embroiled in an increasingly effect
conflict begin described as “asymmetrical warfare” or “fourth generation
warfare.” As this conflict
becomes ever more apparently effective in changing the nature of the economic
conditions in various countries throughout the region it becomes ever more
important that the corporate and business community understand the nature of
this conflict. We must understand
that while it may be unlikely that Chavez or his friends in Argentina, Bolivia,
and Ecuador will ever fire a shot they are engaged in a deliberate, organized,
and well financed effort to create a region of failed states in an effort to
replace democratic capitalism with what they call Bolivarian populism —
nothing more than what really amounts to Marxism.
If the business and corporate community doesn’t take this threat
seriously and waits for governments to act they will find themselves in a Latin
America with ever decreasing markets and ever decreasing economic opportunity
— something that will dramatically affect their bottom line.
This last suggestion is in direct relation to this
understanding of number eight.
- We
must understand that money matters in the conflict between democratic
capitalism and Bolivarian populism.
We must spend a greater effort as public policy
institutions, educational institutions, and perhaps most importantly private
institutions, in understanding the economic cost issues as they relate to
security and the spread of Bolivarian populism, and in so doing encourage
corporate involvement — out of economic self interest as opposed to
philanthropic interests — in acting to promote good governance principles
throughout the region.
Democracy is not
enough!
When I first sat down with several friends and colleagues
in creating the idea of establishing an organization devoted to promoting good
governance principles throughout the hemisphere — The Consensus of the
Americas — one of the wisest of these colleagues — Julio Cirino at the
PensAr think tank in Argentina — said that one of the keys to promoting these
ideas will be to send the message to the region that democracy is not enough.
This is so true.
It is important to understand that democracy — as has been
too often defined even by us — is not enough.
Without understanding the basic economic principles and necessary
institutions that must accompany “democratic capitalism” the word
“democracy” alone will be used — as it is being used now — in an effort
to establish absolute power intent on destroying the very idea central to its
meaning.
I think it is important to understand that our economies
will only become more intertwined as we work together to establish an economic
environment in this hemisphere that encourages investment and trade.
This will mean a clarion call that goes beyond “democracy” and
primarily focuses on the rule of law, the establishment of strong and reliable
institutions, and a better understanding of how security issues relate to
economic development inside each country.
I conclude by relating an experience inside Congress Hall,
adjacent to the more famous Independence Hall, in Philadelphia.
The park ranger conducting the tour pointed out that in his estimation
the most significant date in all that occurred in these buildings in the
establishment of our nation at the end of the eighteen century was not that of
July 4th 1776, or even on September 17th 1787, when the
constitution was signed — but that which occurred on March 4th
1797, when there was a peaceful, institutionalized, and accepted
transition of executive power from one man to another, when then
President George Washington stood with Thomas Jefferson at the inauguration of
President John Adams.