US DEPARTMENT OF STATE DISPATCH VOLUME 5, NUMBER 3, JANUARY 17, 1994 PUBLISHED BY THE BUREAU OF PUBLIC AFFAIRS ARTICLES IN THIS ISSUE: 1. Key Issues in Inter-American Relations -- Alexander F. Watson 2. The Hemispheric Community of Democracies: Agenda for Collective Action -- Richard E. Feinberg 3. What's in Print: Foreign Relations of the United States ARTICLE 1: Key Issues in Inter-American Relations Alexander F. Watson, Assistant Secretary For Inter- American Affairs Address to the 1994 Miami Congressional Workshop on Hemispheric Political, Economic, and Security Affairs, Miami, Florida, January 7, 1994 I would like to thank the organizers of this annual congressional workshop for inviting me to share my thoughts with you on U.S.-Latin American and Caribbean policy. From this beautiful city in south Florida, we look out today at a region that is undergoing change at an incredible pace. The ideas of a generation that sought to protect markets and erect tariffs have been largely swept away. Authoritarian governments, with few exceptions, have given way to democratically elected leaders, some of whom have succeeded dramatically in providing greater freedom and prosperity to their people. Traditional suspicion of the United States has been replaced by insistent calls for expanded ties of trade and investment. With strong bipartisan support in the Congress, President Clinton obtained an important victory for U.S. relations with the Latin American and Caribbean region by winning the NAFTA vote. That victory affirms that we will practice what we preach and maintain our commitment to free trade and open markets. Throughout the hemisphere, countries share the common values of market economies governed by democratic principles. In addition, with the collapse of the Soviet empire, the hemisphere has achieved the goal expressed in the Monroe Doctrine: to make our region safe from external threats. All is not so positive, of course. Ninety miles from our shores, the Cuban revolution is dead but staggers forward zombie-like, threatening the Cuban people with new suffering. The Cuban Government clings to the discredited and bankrupt policies of socialism, apparently willing to risk economic collapse rather than to end totalitarian control of society. Human rights are not respected, and pleas for a say in government are ignored. In Haiti, the old patterns of military and elite domination still seek to defy the will of the Haitian people and of the international community. In too many countries of the region, the rapidity of change has placed great burdens on social systems already hit hard by the economic hardships of the 1980s. Demagogic slogans resonate among some citizens abused by corrupt and inefficient governments and left out of the new prosperity. But because we have so much in common now, we have greater prospects than ever to address these urgent problems through cooperation and by peaceful means. Democracy and Economic Reform Almost all governments in the hemisphere are now committed to macroeconomic reform and restructuring. They are implementing policies to achieve financial balance through tax reform, monetary and fiscal discipline, and privatization. They are gaining real international competitiveness as they open up their economies to international trade and to free up internal markets. The region's economies are responding to the following reforms. -- Capital inflows are continuing at record levels. Particularly heartening is the steady increase in direct foreign equity investment--the best indicator of the business community's long-term confidence. For 1992 and 1993, preliminary estimates indicate that the level of investment is almost three times the average level of the 1980s. -- Inflation is receding in most countries and is near or below single-digit levels in a number of countries which, not so long ago, were struggling with three-digit rates--for example, Argentina, Bolivia, Chile, and Mexico. -- Latin America is experiencing its third year of solid growth. The Economic Commission for Latin America and the Caribbean (ECLAC) anticipated that growth in 1993 would be around 3.6%. This combination of market reform and renewed growth is clearly positive for the U.S. economy. Although our exports to Latin America this year are growing more slowly than last, the region has become one of our largest and most dynamic markets. U.S. exports to Latin America have more than doubled in six years to about $76 billion in 1992. That is considerably more than we sell to Japan and about what we sell to all of the developing countries of East Asia. Simultaneously, with the wave of economic reform sweeping the hemisphere, there is a burgeoning commitment to democratic political institutions and processes, which are both responsive and flexible in addressing the demands of citizens. The biggest challenge we now face is maintaining this positive momentum and consolidating previous achievements. We are building a new relationship between the United States and Latin America and the Caribbean, which is remarkably free of confrontation and characterized by cooperation for mutual benefit. How do we extend and solidify this relationship so that it becomes routine and irreversible--so that it not only withstands the inevitable disagreements and tensions but contributes to their resolution? This is a question we will be struggling with for years. But I would like to share with you some of my general ideas. Strengthening Multilateral Cooperation A critical part of the answer is international institutions. We must strengthen those which already exist and build new ones to address the new issues which arise as technology changes, new priorities emerge, and citizens' needs change. The OAS and the UN are now very effectively fulfilling specific roles in resolving conflicts in the region. The OAS role in the defense of democracy is deeply supported by Latin American countries, as well as by the United States. Examples abound: -- The new OAS Democracy Unit to coordinate such efforts as election observation in countries as diverse as El Salvador, Peru, and Antigua/Barbuda; -- The monitoring of the 1990 elections in Nicaragua and the extra- ordinary efforts to reintegrate former combatants into civilian life; -- The 1991 agreement to impose a trade embargo in response to the coup d'etat in Haiti in 1991, upon which the UN sanctions were later built, aimed to bring about a political settlement and restore democracy in that country; and -- The response to and eventual reversal of the threat to democracy in Guatemala represented by the auto-coup of former President Serrano. Our recent setbacks in Haiti should not obscure the close multilateral cooperation which has developed in seeking a peaceful solution consonant with democratic values. Examples from the economic arena are the Special OAS General Assembly which Mexico has offered to host next month to discuss cooperation for development, and the restructuring of the OAS Trade Committee, whose new charter replaces the old pattern of confrontation with a new emphasis on dialogue aimed at encouraging trade liberalization throughout the hemisphere. International financial institutions, particularly the Inter-American Development Bank, are playing a greater role in assistance to the region. That trend will only strengthen as levels for bilateral U.S. aid continue to decline in the face of the need to control the deficit. The region is also developing new forums to address specific problems, such as the Four Friends Plus One formula in the peace process in El Salvador; regional meetings to discuss security- and confidence-building measures; and efforts to control weapons proliferation in Brazil, Argentina, and Chile. We must remain open to new institutional ideas and new combinations and variations of institutional arrangements to address the emerging issues facing us in the 21st century. Closer Bilateral Cooperation Another critical part of the answer will be stronger, more comprehensive bilateral arrangements. Here, our relationship with Mexico can serve as something of a model for what we should be working toward with our other neighbors in the hemisphere. What we are seeking--and have to a significant extent already achieved with Mexico through the Binational Commission--are mechanisms for addressing the many problems which inevitably arise between neighbors. Our frequent meetings provide clear understanding of our mutual interests and available resources and venues for dealing with misunderstandings or unanticipated issues. If we get the rules and the structures for consultation right, we will enhance understanding, predictability, and flexibility; problems can be resolved at the level of experts rather than at the political level where passions and symbolism can overwhelm knowledge. Better yet, future problems can be anticipated and avoided through consistent and long-term relationships among experts and representatives of affected citizens as well as governments. Obviously, our geographic proximity and the resulting intensity of our interrelationship make Mexico something of a special case. But the issues between us are certainly not unique. Look at migration. The level of legal and illegal Mexican migration, obviously, significantly affects the prosperity of communities in Mexico and the U.S. But migration is also a critical issue for our relationships with many Caribbean, Central American, and even Andean countries. The Key Role of NAFTA If we reflect on the NAFTA debate in the media and in Congress, I think we would have to recognize that NAFTA is far more than a trade pact. First, NAFTA and its side agreements represent the consolidation in international law of the commitment the Mexican Government first made almost a decade ago to market-based policies. It consolidates the Mexican commitment to an economy deriving its prosperity from openness and global competitiveness. By opening markets, stimulating growth, creating jobs, and supporting reforms, NAFTA and its supplementary agreements should promote democracy and good government in Mexico. NAFTA offers the promise of a more predictable and stable relationship between our two countries. NAFTA is also a model for our relationship with Latin America and the Caribbean. It advances a vision for the U.S.-Latin American relationship as a community of nations committed to democracy, bound together by open markets and rising standards of living, and dedicated to the peaceful resolution of disputes. This vision has been a powerful stimulus to reformist Latin American leaders to intensify their efforts to restructure their economies and societies. Latin American leaders have been telling the United States for a decade that "trade, not aid", is the key to mutually advantageous relationships and real economic progress. NAFTA and succeeding agreements will open demands for investment as well as trade, thus attracting resources from the private sector of our economies that far surpass what can be provided by traditional foreign assistance from governments. NAFTA also promotes a pattern of cooperation between the United States, Mexico, and Canada that will be essential to dealing effectively with increasingly important transnational issues such as labor standards, environmental degradation, narcotics trafficking, law enforcement, migration, and health. The other response to Latin America's interest in "trade, not aid" is our leadership in the Uruguay Round. The Uruguay Round and NAFTA both signal that the U.S. will continue to lead the world toward a more open trading system as we have for a half century, and that we, as a nation, have the long- range vision and confidence to compete effectively in the world economy. Not only is NAFTA consistent with GATT, but we see it as a model for greater global liberalization, because some of the discipline achieved and trade liberalization agreed to in NAFTA go well beyond what was achieved in the Uruguay Round. The U.S. will take another step toward regional cooperation through the hemispheric summit of the democratically elected heads of state that was announced by Vice President Gore on his trip to Mexico. We are actively engaged in preparing for the summit both substantively and logistically. We expect to have strong participation from Congress and non-governmental organizations in the planning of the meeting and will be in direct contact with you soon to hear your ideas about the best way to take advantage of this unique opportunity. Subregional Economic Integration I have talked about multilateral institutions and bilateral arrangements as tools for consolidating the new cooperative relationship between the U.S. and Latin America. Another important aspect of that relationship in the future will be the subregional integration, which is underway in Latin America and the Caribbean. Latin America, of course, has a long history of inward-looking and protectionist integration. However, the old groups are being completely revamped to be outward-looking and export oriented. All the integration groups are committed to implement common external tariffs, which are generally no higher than 20%. As barriers drop, both within these groups and with the outside world, trade among Latin American countries is booming, with the corollary benefit of increased opportunities for U.S. exporters as well. The list includes bilateral arrangements such as those between Chile and several other countries--the Central American Common Market, the Andean Pact, MERCOSUR, and CARICOM. The U.S. welcomes these trends. We want to see a region of countries open to each other and to the world--with increased trade, investment, and other exchanges throughout the hemisphere and the globe. We see the growth of subregional free trade and integration as a sound base for further progress toward hemispheric free trade. The Growing Role of Non-Governmental Organizations I have spoken so far only of intergovernmental relationships. But increasingly, as our societies and economies mature, and as technology shrinks the distances between us, most of the threads in the fabric of relations among nations will be made up of private relationships among citizens and non-governmental groups of different nations. The participation of non-governmental organizations in the political process is growing everywhere in Latin America, the Caribbean, and the United States. This is a development which is not only inevitable but healthy for democratic societies. In open societies, people express their views through a variety of forms, not only through traditional political parties and the ballot box, but also through various groups which represent their specific interests and concerns. This is vital to keep governments responsive, to identify and articulate new issues, and to keep policy moving in response to new needs and changed circumstances. We are just beginning to see the development of a network of private relationships in the hemisphere. Labor has a long history of transnational organization, which is now in the throes of change and modernization to respond to the new economic and political realities on the continent. Business is forming transnational groups. But in addition, there is a need and opportunity for many other groupings across the spectrum--indigenous people; women; professional groups such as journalists, scientists, lawyers, and health specialists; special interest groups of citizens interested in environmental protection, children's welfare, protection of historical sites, and safeguarding of human rights; and many more. The development of a network of strong, articulate, and well-organized citizens groups within countries and across their borders is one of the strongest guarantors for democracy and responsive government. An indicator of our own faith in this process is the series of agreements we have signed with seven countries which will use savings from debt reduction to provide some $20 million this year to help fund the environmental and child development activities of non-governmental organizations. Let me turn next to two major challenges the region will face as we move toward the 21st century. The Challenge of Poverty The poverty which exists in Latin America and the Caribbean is a challenge we must address if we hope to maintain support for both democracy and market economics. That challenge is enormous. By ECLAC estimates, about 45% of Latin America's people live in poverty. Per capita income in 1992 for the region was still 7% below the 1981 level. Income inequality is greater than in any other region. Perhaps most importantly, the disparities between wealth and poverty are increasingly apparent--and politically volatile--with increasing urbanization and improved means of communication. Major efforts are underway to increase the economic and political participation of marginal groups. There are indications throughout the hemisphere of greater civic participation, and growing numbers of non-governmental organizations are looking for ways to relieve and resolve some of the problems of the poor. But the keys to a sustained expansion of the middle class and diminution of poverty are continued rapid economic reform and the institutionalization of responsive, democratic government. Let me give some examples of policy changes that are part of economic reform and are also good for social equity. -- Getting rid of artificial protection or subsidies for inefficient industries lowers the cost of living, which is of greatest benefit to the middle class and the poor. -- Capital-intensive production all too frequently has been subsidized or protected, with no more justification than that machines looked more "modern" than people. Getting rid of such policies means more opportunities for labor-intensive industries and jobs for unskilled and semi-skilled labor. -- The progressive lowering of inflation in the hemisphere may be the single biggest benefit for the poor and the middle class, whose incomes tend to be fixed and quickly eroded by inflation. The growth which such market-based policies foster will also provide increased resources for social programs. More effective democratic institutions--governmental and non-governmental, including free labor unions--build the political basis for addressing problems of poverty. Past patterns of social spending in many countries tended to concentrate on programs which benefited the elites more than the needy. In the face of budgetary constraints which preclude financing both kinds of programs, the decision to restructure social programs and to focus on the neediest is always politically difficult. It is a measure of the deepening democracy and social responsibility in the region that many countries are beginning to refocus their spending on the most urgent needs, such as basic education and primary health care and safety nets for the most vulnerable. Good Governance As democracy and economic reform flourish, we face another major challenge: improving the functioning of government--its efficiency and honesty--throughout the hemisphere. Failure to meet this challenge will threaten not only specific governments, but the political system itself. The commitment to good governance is growing, and not just in Latin America. In the United States the effort to reinvent government led by Vice President Gore is a major attempt to improve governance here--to make our government more efficient, responsive, and flexible. In Latin America, there is a growing new perception of government's role in the economy. Increasingly, government is no longer seen as the primary source of economic growth. This new concept of the government's role is a more limited and realistic one, which focuses on those functions which only government can do and which government must do. Such functions include: -- Setting the rules and the framework for private decision-making and ensuring that the rule of law is applied to all citizens, rich or poor, powerful or powerless; -- Investing in basic human and physical infrastructure, which is highly beneficial to the society as a whole but which is beyond the individual's ability to finance--such as basic health and education; -- Providing services to the most vulnerable in society; and -- Protecting national interests through diplomacy and the conduct of foreign relations. Largely because of this new perception of government's role and the self-evident failure of statist models, government is becoming leaner and more efficient throughout the region. It is also becoming cleaner. In the past year, presidents in Brazil, Venezuela, and Guatemala were forced from office for malfeasance and replaced through constitutional means. The OAS has formally recognized the need to improve legal and administrative structures so as to prevent corruption and improve effectiveness. The Inter-American Development Bank is adopting "modernization of the state" as one of the guiding principles of its Eighth Replenishment. Only through such modernization can democratic governments effectively meet the needs of their increasingly insistent peoples. Market-based economic reform is a major part of the recipe for improving governance and controlling corruption. With privatization of state enterprises and the elimination or liberalization of controls on prices, foreign exchange, and trade, economic decisions are shaped by impersonal market forces rather than bureaucracies which can become subject to improper influence. Progress toward honesty and efficiency in Latin America's governments will also substantially benefit exporters and investors, including those in the U.S.--and that means benefits for U.S. workers and communities. At present, foreign competitors not subject to U.S. ethical and legal constraints can sometimes outmatch even the most efficient U.S. businesses. Our embassies in the region will strongly support American commercial interests with their host governments as necessary to restore a competitive balance. The Role of Congress It is not possible to be the Assistant Secretary of State for Inter-American Affairs without recognizing daily the important role of the Congress in the formulation and conduct of our relations with Latin America and the Caribbean. At the Bureau of Inter-American Affairs we have a long and diverse agenda with the Congress. We are still working on some old problems such as Nicaragua, which is, in many ways, an inheritance of the Cold War. We also have some new problems such as Haiti and Peru, which present us with challenges to the democratic convergence in the region that I mentioned at the beginning of my remarks. How we deal with these challenges will affect perceptions of the U.S. and of the international commitment to protect democracy in the hemisphere. There is, in addition, a very important foreign aid reform going to the Congress this year which will offer us the opportunity to rethink, fundamentally, how we provide foreign assistance. I would like to conclude with some thoughts on some of these specific problems. Nicaragua. The President recently made the decision to release some $40 million in FY 1993 assistance to Nicaragua over the objections of a number of Republicans from the House and Senate. I frankly regret that we could not obtain a stronger bipartisan consensus. There is no doubt that the high expectations many of us had for Nicaragua have not been fulfilled. Although important progress has been made in some areas, particularly economic reform, there remain grave concerns about civilian control of the military, protection of human rights, and respect for private property. As U.S. aid levels decline precipitously, it is clearer than ever that unless Nicaragua can restore confidence in its political and economic system, the private investment and repatriated capital essential to the country's future will not return. Since taking up my position, I have tried to simplify and more sharply focus our Nicaragua policy. Some members of the UNO coalition, in particular, had come to the mistaken conclusion that criticism in Washington of Mrs. Chamorro's Government indicated that U.S. support was ending. We have made it clear to all sides that we support the democratically elected President of Nicaragua and will oppose any extra-constitutional changes in that government. At the same time, we have urged Mrs. Chamorro to exert greater civilian control over military and security forces. We have opened channels of communication with the Sandinista party to make clear that we will judge our relations with them not by the past, but by the extent to which they now play by the democratic rules of the game. The release of the aid at this time is critical to the success of the new messages we are sending to all the political actors in Nicaragua. Our aim is to increase Mrs. Chamorro's capacity to govern effectively and then to hold her to high standards of performance on the key issues of civilian control, protection of human rights, economic reform, and enforcement of property rights. We seek to strengthen the moderate and democratic sectors of all political factions with the aim of improving Nicaragua's democratic practices and the responsiveness of the political system to citizen demands. I believe this policy is already having positive results in encouraging renewed dialogue among the relevant political factions. That dialogue has, in turn, enabled the legislature to function again and should make possible passage of a series of reform laws that will address Nicaragua's outstanding problems. When Congress returns later this month, I want to renew my conversations with the Members to work toward a Nicaragua policy with stronger bipartisan support.Haiti. The U.S. has real interests at stake in Haiti which can be explained clearly to the American people. It is not a problem far removed from our shores. Failure in Haiti will have strong and proximate impact on the United States through refugee flows. President Clinton has made it clear that we support the restoration of the democratically elected government of President Aristide and the end of military domination of Haitian politics. We believe that our commitment to the democratic process in Haiti will be best served through negotiation and dialogue with all Haitians, including the military, to achieve an agreement permitting Aristide's return and his functioning as president under constitutional guarantees for the rights of all Haitians. Imposed solutions will not endure; for in the last analysis, Haitians must agree to live and work together to solve their common problems. Peru. Having had the privilege of serving as U.S. ambassador to Peru, I must tell you that I have been very frustrated at not being able to move forward in our relations with that country. Obviously, the events of April 5, 1992, in Peru were a setback for the entire hemisphere and have affected congressional attitudes toward Peru ever since. The auto-coup was a terrible mistake which cannot be justified. But the U.S. and the international community have worked diligently with Peru to restore constitutional procedures, and we have seen a number of positive developments. Peru's just-completed October 31 referendum on the new constitution represents the third consecutive democratic election within a span of 12 months. I believe that this progress justifies our active and continuing engagement with Peru as it seeks to consolidate its democracy and strengthen the legislative and judicial processes. We need to keep in mind the full range of concerns we have in dealing with Peru and not permit any single issue to dominate our agenda. There remain legitimate concerns about Peru's vigilance in protecting human rights, but we can better advance our interests in human rights by being involved and active rather than by withdrawing. That is why I have renewed my consultations with the Congress about the possibility of releasing some $30 million in Economic Support Funds (ESF) for Peru. This is part of a multilateral commitment we made to Peru with other international donors early in 1993, and it would demonstrate to Peru that there is an ongoing relationship worth fostering. Peru is also responsible for the production of two-thirds of the world's illicit coca. Cocaine abuse and associated violent crime, along with related health care costs, are major domestic problems in the United States. Although the United States has put much emphasis on demand reduction activities, U.S. anti-drug efforts must necessarily address production as well. Reducing cocaine production in Peru and other Andean countries is clearly in the interests of both the U.S. and the Latin American and Caribbean nations. Together, we must move to curb narcotics trafficking while taking care to provide alternative lines of employment for small-scale coca farmers. Conclusion Finally, let me end on an issue which has dominated our relations with the Congress in the past but promises to change dramatically in the future--foreign assistance. This Administration is committed to a fundamental overhaul of the foreign assistance legislation, rooted in the Cold War, which has guided our aid relations for the last 40 years. That reform of foreign assistance will, I hope, help to make a better case to the American people and to the Congress about the reasons for and costs of our involvement in the world. As I have also noted, our relations with Latin America and the Caribbean will be more trade and less aid based in the future. This is desirable from the perspective of our foreign policy as well as from our necessary focus on domestic priorities. But as Congress and the Administration have moved this year to take on a number of new foreign policy obligations such as aid to Russia--as well as to maintain important traditional commitments to areas such as the Middle East--Latin America and the Caribbean have taken the greatest hits. Aid levels, particularly in the most fungible category of ESF, have declined by 40% to 50% or more for FY 1994 and FY 1995. We will be hard-pressed to fulfill the international commitments we made in cooperation with a number of other donors for such important countries as Nicaragua, El Salvador, and Peru. Our counter-narcotics programs have also been reduced drastically. As I have indicated, I believe that we have an opportunity for unparalleled peace and progress in the Western Hemisphere. Modest investments in the region will pay big dividends. For this reason, we must carefully evaluate our overall aid priorities. We must find a way to channel what resources we have for Latin America and the Caribbean in ways that will protect the gains of the last decade and ensure the future. I appreciate this opportunity to speak with you today, and I look forward to working closely with all of you in the Congress on the important and challenging issues facing us in Latin America and the Caribbean. (###) ARTICLE 2: The Hemispheric Community Of Democracies: Agenda for Collective Action Richard E. Feinberg, Special Assistant to the President for Inter-American Affairs, National Security Council Address to the Council of the Americas, Miami, Florida, December 9, 1993 Thank you, George Landau. It is always a great honor to be introduced by you and to be hosted by the Council of the Americas. We are at a historic turning point in inter-American relations. Just within the last week, the Clinton Administration took three major steps toward the creation of a genuine Western Hemispheric community of democracies. -- President Clinton met with the seven heads of state and government of Central America. It was the first time all of these nations came to the White House represented by democratically elected leaders. Together, we forged a forward-looking, affirmative agenda for the region for trade expansion, equitable development, and democratic governance. -- Yesterday, President Clinton chose to sign the implementing legislation for NAFTA in the very auditorium where President Truman signed the North Atlantic Treaty that created NATO. -- In Mexico City, Vice President Gore announced that next year the United States will invite the democratically elected heads of state of North America, Central America, South America, and the Caribbean to a Western Hemisphere summit. To quote the Vice President: At this summit, we will seek to make explicit the convergence of values that is now rapidly taking place in a hemispheric community of democracies, a community increasingly integrated by commercial exchange and shared political values. (end quote) As we look forward to the hemispheric summit, we have a magnificent opportunity to shape the agenda for inter- American relations for 1994 and beyond. To prepare for the summit, the United States will, of course, actively consult with governments throughout the region. We also welcome the input of the business community and other non-governmental organizations. Trade Expansion and Economic Reform Passage of NAFTA has generated a palpable excitement throughout Latin America. Not since the Alliance for Progress has there been such intense interest--and optimism--in the prospects for inter-American cooperation. Nations which not long ago feared American political intervention now actively seek inclusion in hemispheric free trade. On the very evening of the NAFTA vote,President Clinton reaffirmed his intention to reach out to the other market-oriented democracies of Latin America to ask them to join in this great American pact that offers so much hope for our future. The President has directed his Trade Representative and other senior advisers to study the modalities, timetable, and criteria by which freer trade can be expanded throughout the hemisphere. NAFTA and its side agreements constitute the first major trade negotiation to go beyond commodities and capital to take into account the other factors of production: land and labor. It is clear that to prepare themselves for freer trade, interested nations will want to improve their protection of intellectual property rights, enhance enforcement of environmental regulations, and upgrade--in law and in practice--the treatment of workers. We welcome the acceleration of national reform through trade-creating subregional arrangements. CARICOM, the G- 3, the Central American Common Market, MERCOSUR--all are valuable building blocks toward hemispheric integration. It is also in all of our interests to work hard for a successful conclusion of the Uruguay Round. Addressing the Social Agenda Most Latin American economies are becoming more open and more efficient. But many remain inequitable, and the lack of social opportunity threatens to undermine the legitimacy--and endurance--of market reforms. In particular, government failure to deliver adequate social services, particularly in primary health care and education, has eroded popular support for stabilization and deregulation. Future failure to redress poverty and overcome badly skewed income distribution would risk undermining faith in democracy. Just as the United States is pursuing reform of its health care and welfare systems to improve the well-being of its people, Latin America has an unprecedented opportunity to raise the quality and efficiency of both its public and private social services. With few exceptions, Latin American nations allocated less than 1% of GDP to primary education in the last decade. Having pressed for fiscal discipline, it may sound contradictory for the U.S.to advocate increased social spending. In fact, what is important is how existing funds are spent. Improving education and health helps equalize opportunity and stabilize democracy. Better human capital formation will increase the competitiveness of Latin America in global markets. This modern truth has motivated the promising social innovations of recent years in Mexico, Chile, and elsewhere in the region. Between November 1993 and the end of 1994, 16 Latin countries are holding elections. In many of these elections, the people will be demanding basic political and economic change. In implementing their new agendas, incoming administrations in Latin America must not lose sight of the fragile and costly gains achieved under inherited stabilization programs. Sound fiscal discipline and prudent monetary policy are sine qua non for social progress. Market liberalization, however, cannot occur in a void. It must be accompanied by institution-building to preclude the emergence of private monopolies and the abuse of markets. Efficient regulatory agencies need to be established with oversight operations in recently privatized sectors, including telecommunications and electricity. The privatization of banks and the rapid growth of equities markets in the region call for the urgent development of regulatory institutions and upgrading accounting standards to preclude market failures and predictable scandals. We need leaner, less intrusive--but still strong--governments. Promoting Democracy Through Good Governance Throughout Latin America, defending human rights was the great challenge of the 1970s; restoring electoral processes was the triumph of the 1980s; and, now, the vital interest is to institutionalize the protection of human rights and make democracy function--to create a state that works for all the people. The challenge facing all of us is to build democratic institutions that endure, that are honest, that are responsive, that are effective. In the United States, we are seeking to reinvent our own government. The Clinton Administration--and the international financial institutions--are prepared to work closely with Latin America to promote reform in the judiciary and the civil service, in education and health care. As President Clinton said to the Central American leaders, good governance will advance our mutual objectives: to bolster democracy, promote social opportunity, and clear the path for freer trade. The Role of the Business Community Finally, allow me a few words about the role of the private sector in this economic and political transformation. Throughout the hemisphere, there are firms, excessively dependent upon state subsidies, that eschew international competition. The business community must not let those fearful voices of protectionism steal the banner of progressive nationalism. Paradoxically, today it is free-trade internationalism--more productive, more competitive--which is the best guarantor of national security. Emphatically, it is in the interest of the business community to encourage policies that enhance government efficiency, honesty, and transparency. Good governance contributes to popular confidence in democratic institutions and assures commercial predictability and political continuity. Many Latin American business executives now realize that social equity is also in their interest. Workers with better education and health care are more productive. They are also likely to be better citizens and better democrats. Trade expansion, social opportunity, and good governance are central themes for the hemispheric agenda for the 1990s. I urge the leaders of the business community to speak out and to participate actively in forging this hemispheric community of democracies. (###) ARTICLE 3: What's in Print: Foreign Relations of the United States The Department of State has released a two-part microfiche supplement to Foreign Relations, 1958-1960, Volume XV (South and Southeast Asia) and Volume XVI (East Asia-Pacific Region; Cambodia; Laos), which were published in 1992. These microfiche supplements are part of the official record in the Foreign Relations series of U.S. policy toward the South Asia, Southeast Asia, and East Asia regions during the years 1958-60, and are available from the U.S. Government Printing Office, as are the related volumes. Volumes documenting the record of U.S. policy on Indonesia, Japan, Korea, China, and Tibet and their accompanying microfiche supplements will be published this year. The material now available in the supplement to Volumes XV and XVI records the Eisenhower Administration's efforts to pursue policies fostering the external security and internal stability of the nations of Southeast Asia and the East Asia-Pacific region. Part 1 presents the record of U.S. policy toward Burma, Singapore, and Malaya, as well as documentation supplementing the compilations on U.S. regional policy toward the East Asia-Pacific region and Cambodia printed in Volume XVI. Part 2 documents U.S. relations with Laos, also supplementing the documents printed in Volume XVI. Each microfiche supplement includes a printed guide describing the methodology of selecting documents and evaluating the results of the document declassification review. The guides also contain lists of files and other material consulted, abbreviations used, and persons cited. All documents in the volume are also listed, including title, date, participants (for memoranda of conversation), from/to information, classification, source citation, number of pages, and a brief summary of the document. Each guide also summarizes the associated Foreign Relations volume. Part 1 of the microfiche supplement to Foreign Relations, 1958-1960, Volumes XV and XVI (GPO Stock No. 044-000- 02384-9) may be purchased for $8.50. Part 2 (GPO Stock No. 044-000-02385-7) may be purchased for $9.00. Both are available from: Superintendent of Documents Government Printing Office P.O. Box 371954 Pittsburgh, PA 15250-7954 To FAX orders, call (202) 512-2250. Checks payable to the Superintendent of Documents are accepted, as are VISA and MasterCard. For further information, contact Glenn W. LaFantasie, General Editor of the Foreign Relations series, at (202) 663-1133 or FAX (202) 663-1289. (###) END OF DISPATCH VOL. 5, NO. 03.
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