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The
World’s Bank, the CAFTA, and the Central American development
The vision of the World’s Bank
about the Free Trade Agreement between the United States and Central America
(known as CAFTA) should be a signal for the governments of the area to
seriously reflect about the possible impact and the unavoidable challenges
that the agreement represents.
This is a commercial pact that will connect two channels between both parts
involved in it. One of those channels would let the exportations flow from
Central America to the United States with the smallest amount of
restrictions. An the other channel would perform exactly the same function
on the opposite direction, in order that Central America receives the flow
of importations that come from the United States without any barriers that
might obstruct the arrival of the American products to the local markets of
the region.
From the perspective of the World’s Bank, it is clear that the impact that
such channels have over Central America has an ambiguous outcome. For a
considerable sector of the organizations of the civil society it seems to be
clear that the agreement will not bring any positive benefits at all. For
the government, on the contrary, and to judge by the present campaign that
promotes the agreement in question, the potential benefits are such that the
Central American population should be celebrating. However, this idea is
still questionable. The trade of goods and services between the parts that
sign the commercial agreement has a “domino effect” over many variables, and
the effects are not easy to predict. No one can talk about how many jobs
will be created if only the new positions opened by the agreement will be
considered, and if they overlook the number of people who will lose their
job because of that same agreement.
For the leading economist of the World’s Bank Regional Office for Latin
America and the Caribbean, D. Mason, the analysis of the information
provided by an opinion poll conducted in a number of homes of the Central
American region suggests that most people will receive the benefits of the
CAFTA. However, the World’s Bank admits that “at the same time, a portion of
the homes –particularly the poor ones- could be affected by the changes in
the prices” that would take place because of the arrival of the new sources
of products and services to the local market. That is the reason why for the
World’s Bank it is necessary to take the basic measures to support the
economic transaction and make sure that the CAFTA brings benefits for all.
If the CAFTA does not actually bring any benefits to the poorest sectors,
and considering that most of the Central American population belongs to
those sectors, then why are they claiming that the free trade agreement with
the United States will bring benefits to all?
The World’s Bank itself stated that a strategy to make sure that the
agreement will bring benefits to all should include a couple of higher
dimensions:
a. The creation and the use of policies to deal with the transition in the
short term.
b. The creation of investments to make sure that the less fortunate sectors
will be able to take advantage of the new opportunities in the long term.
Despite of these elements, in the case of El Salvador, no one has formulated
yet a coherent policy to “deal with the transition” or to make sure that
there will be investments to promote the creation of jobs. In the short term,
the expectations of the government are very simple: with the free trade they
automatically expect that the prices of the protected goods will go down in
order to favor the consumers. The dilemma here is that what seems to be
economical in the end will be expensive for the Central American economies,
since the development strategies for the productive sectors are sacrificed,
and they are expected to compete from a disadvantageous position with a
country that has a hundred times more power, a country that is more
efficient, that has the top of the line in technology… It is not the same
thing to sign a free trade agreement with Mexico and face its impact on the
national economy, than to do the same thing with a country like the United
States.
On the other hand, since the Central American economies are already open, it
is expected that the affected groups are mainly the producers of the
protected goods. However, it turns out that, historically, these have been
the agricultural and the manufacturing sectors, since that is what the
Central American economies have traditionally exported in the last century.
In fact, the World’s Bank was clear enough when it admitted that the most
vulnerable group is formed by those who produce the “sensible” agricultural
goods (corn, beans, etc.). What kind of policies has the government adopted
to protect the weak productive tissue of the agricultural sector?
If this aspect is not resolved before rubricating any kind of agreements
with nations that have a superior level of competitiveness in their
productive sector, the possibilities to reactivate the economic growth and
reduce the levels of poverty are practically none.
The critical aspect of this situation is that, taking as a precedent the
free trade agreement that the United States established with both Canada and
Mexico (NAFTA), the World’s Bank admits that the agricultural sector (a much
more developed sector than the one of the Central American economies), even
if it did not decrease, it did not help to increase the agricultural
production levels either. In addition, it has not contributed to improve the
life standards of the farmers. However, the World’s Bank explained that what
favored the Mexican experience was that many of its producers were also
consumers, and others were self-sufficient; but most of all, that the
producers of the basic crops affected by the NAFTA were the ones who
received support when they first got into the program, and this support came
from different governmental programs such as “Procampo”, among others. Here
is a radical difference between the Salvadoran and the Mexican context: the
systematic support of the government with budget and subsidies. And this is
a key aspect of an agreement because this is what happens when the there is
a State that makes it possible to have a development with equity. Even with
these sort of programs, according to this international organization, the
most developed regions of Mexico have received more benefits than the less
developed areas. What can be expected in El Salvador? The urban areas would
probably be the ones that receive more benefits from an agreement. In the
rural areas, on the other hand, the economic stagnation would probably be
intensified due to the impact of the agreement in the productive structures
and due to the lack of governmental support.
The alternative visions: what is the place that both the integration and the
development occupy in Central America?
One of the most incisive critics regarding the “light” vision that the
World’s Bank, the United States, and several Central American Ministers have
about the CAFTA is that the free trade agreements will not contribute to the
Central American integration process. The reason is that the design, the
approach, and the conceptions that sustain the agreement do not intend to
strengthen the integration mechanisms, but to attract investments and become
part of the external markets through asymmetries and preferences in the
medium term.
The axis of action of the free trade agreements is different an restrictive.
The governments of the region have been reducing the strategies of growth to
simple plans of external insertion. These actions have affected the impulse
of the actual development strategies. For the Minister of Economy, Miguel
Lacayo, for instance, the free trade agreements have become the universe of
his economic policy. With these simplified strategies to become part of the
external market, the free trade agreements tend to ignore the policies, the
actions, and the activities that are not directly connected with them. The
analysis about the impact that this might cause over the poor sectors of
society are not important, the objective is not to promote the Central
American integration (in the end, the CAFTA was negotiated in a bilateral
fashion), it does not matter if the producers, the small farmers, and the
small business company’s owners are well informed about the impact and the
implications of the treaty. If the population is not able to participate in
the decision making process connected with the issues that has the most
impact on their lives, who will guarantee that the population plays an
important role when the agreement is already signed? All that is left to do
is to feel destined to suffer the effects of a disloyal competition, and to
demand from the government a true set of specific development strategies.
In the present political scenery, it is clear that the economic structure
that sustains it allows some people to see that a new administration period
of ARENA would only strengthen the already existing dependency level that El
Salvador already has on the United States, and this could actually be a
knife that cuts both ways.
Just as the representative of the small farming organizations and the CID
initiative, Soriano Caceres, explained in a conference of the World’s Bank
that took place between February 17th and 18th, it is important to consider
that whatever is agreed inside the free trade agreements also determines the
relations between the business companies and the States, between the working
relations and the interactions, between the investments and the environment,
between the investments and the development of knowledge, and between the
investments and the competition laws of the States, among other aspects.
This means that the free trade agreements are international treaties with a
body of duties and rights that are actually more important than the national
juridical frames. For Caceres, “an important variable of both the national
economy and the society gets subjected to the international regulations, and
far from the control of the States, the companies, or the national
communities”. And, do the United States care if the poor sectors of Central
America receive the benefits of the agreement, or that at least they receive
the necessary protection against the negative effects of the free trade
agreement?
What does seem to be clear is that for the Bush administration, through a
program of subsidies for the agricultural sector named Farm Bill, the
objective is to help the growers, and that is why there are alternatives of
direct assistance that have considerably increased during the last few years,
and this goes against the spirit of the rounds performed by the OMC (the
rounds of Uruguay and Doha), which promoted a certain level of discipline in
the systematic reduction of the subsidies. The Global Measure of
Consolidated Aid of the United States in the annual reduction of internal
aid (the engaged level) went from $23,879 million (1995) to $32, 265 million
(2000). A farmer who receives the benefits of the Farm Bill program could
expect to receive as much as $360,000 in subsidies distributed in ten years,
or $36,000 per year. And how does the Salvadoran government support the
farmers?
In summary, despite the application of an asymmetric criteria for the free
trade agreements with, for instance, the different calendars of the
exemption of duties and the differentiated treatment of products, at this
moment, experience indicates that the way in which the commercial
liberalization is being conducted can only contribute to disarticulate and
destroy the national productive structures. In this context, velocity is not
important if there is no productive conversion, if the State does not have
an efficient line of support, and if by the end of the term to neutralize
the tariffs will be devastating. Regardless of the time that it might take,
the destructive effects will have the same intensity.
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