Missing Links

Saving Latin America

George W. Bush should use a U.S.-Brazil trade deal to jolt Latin America out of its drift toward political morass and economic chaos.

President Bush should invite Brazil’s newly elected president to his ranch in Crawford, Texas, and propose a bilateral economic treaty that the Brazilian leader cannot refuse. Such a deal would, of course, be a huge political gamble for a U.S. president facing plenty of difficulties elsewhere. But the benefits for the two countries and the rest of the Western Hemisphere would be enormous. And the continued failure to reverse some of South America’s current trends poses enormous dangers to the United States.

Bush should offer the next president of Brazil freer access to the U.S. market for Brazilian shoes, sugar, textiles, steel, soybeans, citrus fruits, ethanol, and other products that now face all kinds of import barriers. Such a deal could boost yearly Brazilian exports by up to $5 billion. President Bush should also commit to support Brazil’s macroeconomic stability through the International Monetary Fund (IMF) and other international and U.S. financial institutions and work to dissipate market fears of a catastrophic, Argentina-like debt default. The $30 billion rescue package extended by the IMF to Brazil already provides the foundation for such an offer. Bush should also propose a new bilateral investment treaty designed to spur renewed corporate interest in Brazil. Expectations of growth, stability, and clear rules could easily induce a foreign investment boom to Brazil. Furthermore, the U.S. president should back a major antipoverty program designed by Brazilians and implemented through the World Bank, the Inter-American Development Bank, and the U.S. Agency for International Development. It would be hard for an incoming Brazilian president to refuse such a deal.

In exchange, President Bush should demand that Brazil open market sectors that restrict foreign imports or investors and commit to fiscal and monetary goals designed to ensure economic stability. Moreover, the hemisphere’s two giants should also agree that any other nation in the Americas can join as long as it agrees to liberalize trade, adopt similar targets and policies that promote hemispheric economic stability, and enforce the provisions of the democratic charter of the Organization of American States. Few countries in the region could afford to be excluded from such a deal.

Why should President Bush incite the wrath of U.S. corporations and labor unions now protected from the competition of Brazilian products? Because by now he should have learned how costly and dangerous U.S. disengagement from troubled regions can be. U.S. decisions to ignore Afghanistan’s deterioration in the 1990s and to pull out of the Middle East at the outset of the Bush administration helped make difficult situations desperate, causing their malignancies to spread internationally, and even to reach U.S. shores. Unless a serious, bold initiative creates credible hopes for Latin American voters, politicians, and investors, the Southern Hemisphere’s decay is bound to accelerate, deepen, and threaten the United States in numerous ways. Unlike the situation in Afghanistan, a series of failed nations in Latin America can create manifold nightmares for the United States that its fabled military might cannot neutralize, quarantine, or eliminate.

In most South American countries, horrible social conditions fuel nasty politics that keep elected leaders from sustaining policies long enough to ease the poverty that is now also wiping out an ever thinner middle class. This foul political mood also prevents elected presidents from completing their terms in office and encourages the worst kinds of political adventurism. Recurring external shocks amplify the dire effects of homegrown governmental malpractice. From global financial crises that cause capital droughts to sharp swings in export prices, external events regularly force weak Latin governments to subject their frail economies to painful remedies. Fiscal austerity programs that strip money from critical government functions–schools, police, hospitals, courts — are constant. So are banking crises that pulverize meager public savings and pensions, spikes in interest rates that crush the private sector, and layoffs that leave the families of the jobless without any reliable social safety net. These are just some of the harsh realities that nurture the despair and anger now entrenched in Latin American societies.

High expectations breed deep frustrations, and Latin American nations in the 1990s had high hopes for the political and economic reforms they were undertaking. Market reforms would lead to prosperity, democracy to civility, and imminent and deep economic integration with the United States to modernity. Today, these promises look like just another swindle perpetrated by foreigners, acting in cahoots with corrupt accomplices in the local elite. To many, privatization was a scam, trade liberalization a ploy to import expensive gadgets for the rich, and fiscal austerity a trick to take money from the poor to pay foreign banks for loans that never reached the country. Moreover, critics argue that democracy fueled corruption and that the United States was a callous, unreliable partner, caring only about Latin American debts, drugs, and illegal immigrants.

This caricature of the Latin American experience of the 1990s informs national debates everywhere. Joseph Stiglitz is one of the most quoted economists among populist politicians in Latin America not because they know his Nobel Prize-winning work but because his rants against the "Washington Consensus," the IMF, U.S. Treasury, and globalization provide perfect fodder for their speeches and platforms.

A deal between the United States and Brazil will certainly not solve all the problems that beset Latin America or even Brazil. The difficulties of such a treaty, from the political to the technical, are as numerous as the powerful interests that will mobilize against it — from the sugar monopolies in Jeb Bush’s Florida to the Mexican conglomerates threatened by new Latin interlopers in their NAFTA market. But an ambitious bilateral proposal that bypasses the decade-old logjam in the negotiations for a Free Trade Area of the Americas while including all other willing participants will be the first good news the region has heard in a decade. It can be done. All President Bush needs is political bravery and a thirst for making history.

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