U.S. State Department Geographic Bureaus: Latin America Bureau

U.S. Department of State
96/02/21 Remarks: Alexander Watson at Latin American Assoc. of Japan
Bureau for Inter-American Affairs

Mutual Interests and Cooperation in Latin America

Remarks by
Alexander F. Watson
Assistant Secretary of State for Inter-American Affairs
United States Department of State
to the
Latin American Association of Japan
Matsuya Salon, Tokyo, February 21, 1996

Thank you, Ambassador Maeda.* I am delighted and honored to be here, and look forward to exchanging views with you about the situation of Latin America and the Caribbean today, and about our respective policies to that region.

________
* A/S Watson was introduced by Amb. Masahiro Maeda, Director General of the Latin American Association of Japan.
________

Since Assistant Secretary Aronson spoke to this very group in 1991, there have been enormous changes in Latin America, changes which are of great benefit to Latin America, to the U.S. and, I would venture to say, to Japan as well.

The State of the Region Today

The principal dynamics of Latin America's societies today are strengthening democracy, and market-based economic reform.

Today, every government in Latin America and the Caribbean -- with the single exception of Cuba, of course -- came into office through free and fair elections. Despite some problems, respect for basic human rights, as well as the demands of the people for the rule of law, have never been stronger.

The remarkable success of democracy is graphically demonstrated in Haiti, arguably the country in the hemisphere with the least democratic tradition. Enormous problems remain there, but I believe the Haitian people -- and our hemisphere as a whole -- can take great pride in the events of February 7, the first transfer of power from one elected president to another president in the whole tragic history of this nation. International support has been crucial to this achievement, and must continue to extend and consolidate the progress to date. The $72 million in bilateral aid which Japan contributed to Haiti from 1990 to 1994, and its $12 million contribution to finance the United Nations Mission in Haiti have done a lot of good in this desperately poor country.

We have also seen enormous progress in making the hemisphere an area of peace, and placing the region's militaries under firm civilian control. Security thinking is gradually shifting from traditional political-military doctrines of national security toward cooperative efforts to combat the transnational threats of narcotics trafficking, organized crime and terrorism. A number of Latin American countries have contributed significantly to United Nations and to other peacekeeping forces.

We witnessed a set-back to our vision of a peaceful hemisphere when the Ecuador-Peru border dispute erupted into open fighting early last year. But the successful resolution of this issue demonstrated the new collaborative approach to addressing hemispheric problems. Argentina, Brazil, Chile and the U.S. -- the four countries named as "guarantors" in the treaty which originally delineated this border 50 years ago -- worked closely together to quickly separate the forces, establish a military observers mission, set in place a demilitarized zone, and set in motion wide-ranging efforts to develop a permanent settlement of the underlying issues. And in fact, tomorrow and the next day there is a very important meeting in Quito between the guarantors.

In connection with efforts to maintain peace in the Western Hemisphere, I want to express my appreciation for Japan's role in helping the transition in El Salvador from a nation caught in a fratricidal war, to a nation committed to political reconciliation and economic modernization. Japan contributed a total of over $65 million to El Salvador's recovery between 1990 and 1995. Its contribution has paid enormous dividends. Progress on the economic front has been as great as on the political front.

Through continuing market-based reform, the region's economies are being transformed: from stagnant, inward-looking and statist -- to growing, export-oriented and market-driven.

Last year proved to be a very difficult test of this process, a test which the region clearly passed. Indeed, 1995 could be described as the year in which Latin America demonstrated that its commitment to market reforms is irreversible.

The Mexican peso crisis of December 1994 raised considerable concern in the financial and economic communities that the region would turn its back on market reforms and suffer though yet another "lost decade" (the "lost decade" refers, of course, to the 1980's in Latin America). Instead, Mexico and Argentina, the two countries most deeply affected by the crisis, not only maintained their reform programs, but deepened them -- enacting stabilization programs which one prominent economist (the President of the Inter-American Development Bank, Enrique Iglesias of Uruguay) called the most rigorous he has ever seen, and privatizing state enterprises even in sectors previously considered sacred. It is important to note that the international financial institutions and -- particularly in the case of Mexico -- the United States, and also the strong support of Japan, provided essential support for these countries' bold recovery efforts.

The result has been a gradual return of confidence by the investment and financial communities. For instance, Mexico was able to return to the capital markets in only seven months, rather than the seven years it needed after the 1982 crisis.

1995 also confirmed the strength of the region's economic fundamentals. The region experienced its lowest rate of inflation in a quarter century. The regional average (25%), however, obscures some remarkable individual successes: Argentina, for example, achieved an annual rate of inflation of 2%; not too long ago, a monthly inflation rate of 2% was considered a positive achievement. Brazil's inflation last year was 22%, its lowest in 30 years, and the first time it enjoyed an inflation rate under three digits in many years.

1995 also confirmed that the region remains on the path to self- sustaining growth. Despite the recessions in Mexico and Argentina which followed the peso crisis, the region's cumulative growth for the five years 1991-95 (15%) exceeded its growth through the whole decade of the 1980's (13%). Once again, regional averages obscure the remarkable success of individual countries. Peru, Chile and El Salvador are now being described as growing at "East Asian" rates, with annual average growth exceeding 6% for the 1991-95 period, and every expectation that this kind of growth will continue.

Perhaps nothing better illustrates the economic turn-around of the region than Peru. When I served as the U.S. Ambassador to Peru from 1986 to 1989, I had the pleasure of working with my Ambassadorial colleague from Japan, Masaki Seo (with whom I just had lunch), to try to convince the Peruvian government to change its destructive populist economic policies. Unfortunately, we met with little success. The disaster of these policies is illustrated by one statistic -- the decline of per capita income by 29% from 1981 to 1990 -- with enormous attendant human misery, particularly for the poorer groups. Peru's remarkable economic reforms and growth in recent years under President Fujimori's leadership are finally beginning to redress the horrible economic and social inequities.

Let me use this opportunity to express my appreciation to Japan for its help in supporting this turn-around, with its $100 million contribution to the 1993 international debt package, and its bilateral assistance which totalled more than $1 billion from 1990 to 1994.

US Policy Objectives

After this description of changes which have taken place, I'd like now to describe U.S. policy objectives in Latin America and the Caribbean. I want to emphasize above all that our policy toward Latin America is based on the idea of partnership -- a partnership derived from common values and aiming for wide-ranging cooperation to achieve common goals. Goals which I believe are also shared by Japan. More than at any time in our hemisphere's history our interaction is characterized by collaboration and dialogue.

The Summit of the Americas held in Miami in December 1994 was a dramatic expression of this new era of cooperation. The 34 democratic leaders of the hemisphere agreed wholeheartedly on the overall goals of: strengthening democracy and respect for human rights; opening markets and moving toward free trade; preserving the environment; and ensuring that the benefits of growth are shared by all segments of the population. The consensus on the specific initiatives of the Summit's Action Plan may be even more impressive than consensus on overall philosophical goals. The Plan's 23 initiatives and over 100 specific action items mobilize national governments, international financial institutions and non-governmental organizations. They involve work in areas which were in many countries considered too sensitive domestically (such as human rights and problems of corruption) to even discuss multilaterally -- much less act on multilaterally.

The commitment to negotiate a Free Trade Area of the Americas which we call FTAA by the year 2005 is the best-known and perhaps the most dramatic of the Summit initiatives. But I want to emphasize that the FTAA forms part of a much broader, comprehensive and mutually reinforcing plan.

o The FTAA commitment is complemented by other economic initiatives to strengthen capital markets, improve infrastructure, and cooperate more closely in energy, science and tourism.

o The economic initiatives, in turn, are complemented by parallel actions to strengthen government institutions, fight corruption and narcotics trafficking, combat terrorism, improve education and health, ease poverty, and reverse environmental degradation.

Progress toward the Summit commitments has been really impressive across the board. Here are a few areas by way of example:

1) In the fight against corruption -- which is so important to ensure fair competition among business companies, whether foreign or domestic -- governments are putting teeth into their legislation and enforcement, we are working in the Organization of American States on an Inter-American Covenant Against Corruption, and in December we reached a comprehensive agreement on so-called "laundering" of money acquired from the drug trade and other criminal activities. It is particularly impressive that the initiative on corruption is coming largely from Latin American countries: the issue was first placed on the agenda of the Summit by Ecuador, and it was Venezuela who proposed the drafting of a convention against corruption.

2) In the fight against poverty, a host of initiatives are underway to increase job opportunities for the poor and to improve health and education -- the most powerful weapons against poverty over the longer run. The Inter-American Development Bank, for example, has earmarked $500 million for loans and grants to bolster micro-enterprises and small businesses. Our First Lady Hillary Rodham Clinton recently launched a Partnership for Education Revitalization in the Americas, focussed particularly on improving basic education throughout the hemisphere. The Pan-American Health Organization last April initiated a program to eliminate measles from the hemisphere.

3) Another example is the Committee on Hemispheric Financial Issues we have established. Extensive data on capital flows and capital regulations in the hemisphere are being drawn together for the first time. A ministerial meeting is planned for mid-1996 to develop concrete plans to strengthen, liberalize and integrate the region's capital markets.

4) With regard to the FTAA, the hemisphere's Trade Ministers met last June in Denver and launched the preparatory phase of the negotiations. Seven working groups were established in such specific areas as market access, investment, standards, customs, each working group charged with developing a comprehensive data base and analyzing the laws and practices of countries and regional integration groupings. I should mention here that the OAS has pulled together this information on all the laws and practices in the different countries for the first time, and we owe a debt to the OAS for their work.

We are now preparing for a second ministerial meeting to be held in Cartagena, Colombia next month. This meeting will establish four additional working groups, instruct all the working groups to develop recommendations for negotiating procedures, and look for trade- facilitating measures that could be implemented in the near term, even before we start the full negotiating process. As in the case of Asian Pacific Economic Cooperation, the Ministers will have input from their business communities through a Business Forum which will meet just before the ministerial meeting in Cartagena.

I want to take this opportunity also to address the concerns expressed by many outside of the Western Hemisphere about this effort. As Ambassador Kantor, the U.S. Trade Representative, has noted repeatedly, the FTAA and other U.S. regional trade initiatives form part of an overall strategy aimed at liberalizing and building a more open trading system globally. The FTAA will not raise barriers to non- members, and will be fully consistent with the spirit and rules of the WTO.

The stimulus to growth provided by the FTAA will benefit not only its participants but all countries which have economic interaction with this region. Further, the FTAA is seen by many of the leaders of Latin America as an instrument to consolidate the dramatic trade liberalization which they undertook unilaterally over the past decade.

The North American Free Trade Agreement (NAFTA) is another example of our view of free trade agreements as policy instruments, not only to provide a stable market for American goods and services, but also to consolidate economic reforms. In my view, NAFTA's greatest achievement to date has been the support that it gave to Mexico's reformers to maintain their commitment to market-based policies, as they struggled with the peso crisis of Dec. 1994. This commitment to market reforms has been critical in establishing the conditions for a rapid return to growth by Mexico, which will of course be of primary benefit to the Mexican people but which also benefits all of Mexico's trading partners.

Cooperation Between the U.S. and Japan in Latin America and the Caribbean

I would like to turn for a moment to cooperation between the U.S. and Japan in Latin America and the Caribbean. The U.S. and Japan have a long history of cooperation in the region, and I strongly believe that there is every reason for this cooperation to continue and to strengthen. My feelings were confirmed by meetings yesterday and today with Director General Sato of your Ministry of Foreign Affairs. Each year, the U.S. and Japan participate in consultations -- these are the 19th consultations on Latin America and the Caribbean -- with the goal of our cooperating more fully. Japan obviously has its own national interests to pursue. Those interests will not always coincide with those of the U.S. But overall, both Japan and the U.S. gain by supporting the current trends in Latin America.

Well-functioning democratic governments have an inherent legitimacy which makes it more likely for them to achieve domestic consensus to sustain far-reaching economic reforms. Judicial systems which are efficient and fair are important not only to a country's citizens but also to foreign businesses which must work within that country's legal framework. Broadly-shared growth -- economic growth shared broadly thoughout a society -- produces more customers for everyone.

We believe that Japan, as a world leader, has an important role to play in Latin America, both as a partner in trade and investment, and as a participant in efforts to tackle the broader regional issues I've discussed today.

I have already noted how Japan's assistance has helped solidify peace, democracy and economic reform in such diverse countries as Haiti, El Salvador and Peru. We welcome and appreciate Japan's continued support for development of the region through both bilateral assistance and support for multilateral institutions. Japan's decision during the Eighth Capital Replenishment of the IDB in 1994 to increase its share of IDB capital to 5% was a most welcome development. Equally appreciated was Japan's pledge of a $500 million contribution to the IDB's Multilateral Investment Fund.

One way in which our two countries have formalized their joint efforts in the hemisphere is through the U.S.-Japan "Common Agenda," which began as part of the Framework for the New Economic Partnership in July 1993. While our Common Agenda efforts have centered largely, and naturally, on Asia, we deeply appreciate Japanese cooperation in projects in Latin America. Their scope is wide, as it should be to meet the region's needs -- for instance, improving education for women in Guatemala; preserving rain forest and other wilderness through the "Parks in Peril" program; projects to give Latin America's farmers viable alternatives to growing drug crops, and many others. We see the Common Agenda as an opportunity for the world's two largest economies to work together to promote the common goal of the region's development.

To sum up, I believe that the evolution of Latin America into a region of peace, democracy and widely-shared prosperity offers great opportunities for all of us -- for the people of Latin America, for the U.S. and for Japan. Working together, the U.S. and Japan have already accomplished much by supporting these positive trends. I am convinced that we can accomplish more together, by leveraging resources and finding synergies, than we can accomplish by working separately.

Sannin yoreba monjunochie. When Japan, the United States and Latin America work together, we can make two plus two equal five.

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