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 conference…. 

“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. 

  1. 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.
  1. 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.
  1. 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. 

  1. 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.

  1. 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.    

  1. 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.
  1. 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. 

  1. 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. 

  1. 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.