From
[email protected] Dec 16 10:43:57 1995
Date: Fri, 19 May 1995 08:31:56 -0700 (PDT)
From: IATP <
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To: Recipients of conference <
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Subject: NAFTA & Inter-Am Trade Monitor 5/19
NAFTA & Inter-American Trade Monitor
Produced by the Institute for Agriculture & Trade Policy
May 19, 1995
Volume 2, Number 16
_________________________________________
Headlines:
- EUROPEAN UNION INCREASING TRADE TIES TO THE AMERICAS
- ARGENTINA: MENEM RE-ELECTED, FACES ECONOMIC PROBLEMS
- U.S. COMPANIES POISED FOR MEXICAN TELECOM PRIVATIZATION
- BISHOPS DENOUNCE NAFTA, NEOLIBERALISM
- REPORT SHOWS WORLD BANK FAILURES
- CUBA IMMIGRATION ACCORD, ECONOMIC CHANGES
_________________________________________
EUROPEAN UNION INCREASING TRADE TIES TO THE AMERICAS
Canada has led a move for trade liberalization between NAFTA and
the European Union (EU), though both Mexican and United States
government officials have indicated some reservations about
progress toward North Atlantic free trade. EU commissioner Sir Leon
Brittan said the EU will study the feasibility of a free trade zone with
the U.S., though farm products would be excluded. Sir Leon said that
a free-trade zone with the U.S. might be preferable to a NAFTA-EU
agreement.
In April, the EU Council of Ministers approved the progress of trade
negotiations with Mercosur (Argentina, Brazil, Paraguay, and
Uruguay), scheduled to lead to the signing of a preliminary
cooperation agreement in late 1995. While serious negotiations are
underway, many important items, including the sensitive area of
agricultural trade, have been postponed until the year 2001.
Proponents of an interregional accord between Mercosur and the EU
note that many agricultural products, such as soy, coffee, tea, and
cocoa, already receive liberalized tariff treatment.
Latin America is an increasingly important market for Germany.
Latin American and Caribbean countries increased exports to
Germany by nearly 14 percent last year to a total of $10.3 billion,
compared to a 7.9 percent rise in total German imports. German
exports to Latin America and the Caribbean increased by 11 percent,
to $14.5 billion. Germany's major trading partners in the region are
Argentina, Brazil, Colombia, Chile, Mexico, and Venezuela.
Italian-Latin American economic ties are also increasing. A recent
Latin American visit by Italian foreign minister Susana Agnelli
resulted in swaps of debt bonds for Italian participation in
companies scheduled to be privatized.
The EU is also supporting economic integration among English-
speaking Caribbean nations, giving credits of 27.23 million European
Currency Units (ECUs) to CARIFORUM to help establish ties between
the Caribbean Community (CARICOM) and the wider Caribbean basin.
Additional aid is targeted to improving product competitiveness and
promoting tourism. CARIFORUM and CARICOM members will join
Central American and some South American nations in the
Association of Caribbean States (ACS), once ratification is complete.
The World Trade Organization's (WTO) outgoing head, Donald
Sutherland, warned in April that bilateral negotiations between, for
example, the EU and the U.S., could undermine the multilateral
system of the WTO, as could continued unilateral sanctions, such as
the U.S. Section 301 trade sanctions.
Leo Ryan, "Response Cautious to Canada Push to Liberalize Nafta-EU
Trade," JOURNAL OF COMMERCE, April 5, 1995; Bruce Barnard, "US,
EU Plan Discussions on Implementing Free-Trade Zone, JOURNAL OF
COMMERCE, April 28, 1995; "La Union Europea y el Mercosur
Comienzan Negociaciones," SUCESOS, April 10, 1995; Debra Percival,
"EU Support for Integration Effort," INTERPRESS SERVICE, May 5,
1995; Ramesh Jaura, "Asia, Latin America Are Germany's Major
Buyers," INTERPRESS SERVICE, April 20, 1995; Ramesh Jaura,
"Exports Up, But Germany Retains Surplus," INTERPRESS SERVICE,
April 25, 1995; "Italian Minister Points to 'More Mature'
Cooperation," INTERPRESS SERVICE, April 26, 1995; Chakravarthi
Raghavan, "Bilateralism, Unilateralism Undermines WTO -
Sutherland," INTERPRESS SERVICE/ THIRD WORLD NEWS, April 25,
1995.
ARGENTINA: MENEM RE-ELECTED, FACES ECONOMIC PROBLEMS
President Carlos Menem won a first-round re-election victory on
May 14, defeating center-left FREPASO candidate Jose Octavio Bordon
and the traditional opposition Radical Civic Union's (UCR) Horacio
Massaccesi. The election results make FREPASO Argentina's chief
opposition party, displacing the UCR.
Menem faces severe economic problems, including failing banks,
massive foreign debt ($85 billion in the public sector and $17 billion
in the private sector), and a growing trade deficit. The banks are
scheduled to be rescued and privatized with the help of recent,
multi-billion dollar loans from multilateral lending institutions. The
Mexican financial crisis severely affected Argentina, with
withdrawals of $8.5 billion in capital from the country following the
December Mexican peso devaluation. About 30,000 Argentine small
businesses have failed since December, brought down by decreasing
sales and increasing taxes and interest rates.
>From 1990 to 1994, Argentina's Gross Domestic Product grew from
$141.17 billion to $273.64 billion, but wages were frozen and
unemployment doubled, reaching a record official level of 12.2
pe Argentine exports.
Marcela Valente, "The Foreign Debt, a Weighty Problem for New
Government," INTERPRESS SERVICE, May 9, 1995; David Pilling,
"Argentina Still on the Operating Table," FINANCIAL TIMES, May 16,
1995; "President Carlos Menem Favored to Win Re-Election,"
NOTISUR, May 12, 1995; Marcela Valente, "Small Businesses Folding,"
INTERPRESS SERVICE, March 23, 1995.
U.S. COMPANIES POISED FOR MEXICAN TELECOM PRIVATIZATION
As Mexico prepares to privatize its $7 billion telecommunications
market, United States-based AT&T, MCI, GTE, Sprint, Motorola,
Teleglobe, and Bell Atlantic have all entered into alliances with
Mexican partners. Legislation soon to be approved calls for opening
up long-distance telephone services to competition beginning
January 1, 1997 and opening local phone services before then. Any
consortium planning to offer telephone services has to have a
majority Mexican stake.
Providers of local wireless telephony will bid for space in the radio
spectrum, but fiber-optic and cable networks will not have to pay a
licensing fee. Since most of the new firms are expected to focus on
the most profitable "crystal triangle" between Monterrey,
Guadalajara, and Mexico City, the Mexican government will continue
to subsidize rural telephone development.
Currently, Telefonos de Mexico (Telmex) is a privatized monopoly.
Anticipating the competition it will face, it is lowering line
installation charges and adjusting the rate structure, which
previously used its monopoly long-distance market to subsidize local
calls. The Mexican economic crisis has forced Telmex to cut its
investment budget by half, to $1 billion this year. Telmex and Sprint
have entered an alliance that will have each company carrying the
other's long-distance traffic and offering other services such as data
transmission and calling credit cards.
Leslie Crawford, "Rivals Eager to Enter Mexico's Telecoms,"
FINANCIAL TIMES, May 5, 1995; Martin Langfield, "Mexican Bill
Eases Way to Telecom Sell-Off," REUTERS, April 26, 1995;
BISHOPS DENOUNCE NAFTA, NEOLIBERALISM
The Mexican Roman Catholic bishops, meeting in late April,
denounced NAFTA's free market system and deplored "the
catastrophic result of a chain of injustices that has left 40 million
Mexicans in poverty while concentrating the nation's wealth in the
hands of a privileged few." The conference also criticized
government manipulation of the public press and election fraud. In
contrast, the bishops praised the Mexican people for "preparing
themselves for [democracy] by participating in the electoral process,
by attempting to protect their votes, by getting involved in matters
that touch the common good ..." at the time of Mexico's "worst crisis
in modern times."
According to a recent study from the Autonomous University of
Mexico, the minimum wage would have to be raised 250 percent to
give workers the same buying power that a minimum wage earner
had 20 years ago. Another report cited in the April 27 issue of "La
Jornada" said that a pair of shoes costs a U.S. auto worker 2 hours
and 15 minutes' pay, but costs a Mexican auto worker doing the
same job 32 hours and 15 minutes' pay. A month's rent for a two-
bedroom apartment with kitchen and bath costs a U.S. worker 21
hours' pay, and costs the Mexican worker 107 and a half hours' pay.
The Mexican bishops met just before the May 1 opening of the 40th
gathering of CELAM, the council of Latin American bishops. CELAM
denounced the neoliberal model, saying that it "will fall by itself,
perhaps more rapidly than communism." Despite splits between
liberal and conservative factions, the bishops ended in denouncing
"the absolutization of market forces and the power of money" and
insisted that "the economy must be at the service of mankind and
not vice versa."
Bill and Patty Coleman, "Mexican Bishops Decry 'Chain of Injustice,'"
NATIONAL CATHOLIC REPORTER, May 12, 1995; Diego Cevallos,
"Bishops Versus the Market," INTERPRESS SERVICE, May 5, 1995;
Diego Cevallos, "Catholic Church Criticizes Neoliberalism," INTERPRESS
SERVICE, May 2, 1995; "Bishops Predict Collapse of 'Inhuman'
Neoliberalism," INTERPRESS SERVICE, May 8, 1995.
REPORT SHOWS WORLD BANK FAILURES
According to an unpublished, internal World Bank study, a third of
World Bank-financed projects in Mexico over the past 50 years
failed, compared to an overall failure rate of 26 percent of all World
Bank loans. The 184-page "Study of Bank/Mexico Relations 1948-
1992" analyzed the transactions between the Bank and its second-
biggest customer. Mexico borrowed $23.4 billion from the Bank
during the term analyzed in the study.
In the 1970s, Bank senior management ignored its own staff advice
against rapid expansion of Mexico's oil sector and against too-large
influxes of debt capital. In the 1982 debt crisis, the World Bank and
International Monetary Fund joined forces to bail out the Mexican
economy. By 1992, the Bank held 15.7 percent of Mexico's debt, and
its role in the country has continued to grow since then.
During the 44 years studied, 75 percent of the Bank's 163 loans went
to specific projects. The worst-performing projects were in the
agricultural sector, where half were rated unsatisfactory. The
internal study says that Mexican development failed "to provide
enough jobs for its growing labor force and ... to provide an adequate
social safety net."
Another Bank study, the well-publicized annual "Global Economic
Prospects and the Developing Countries," predicts that Third World
economies will grow at an overall annual rate of as much as 5.2
percent for the next decade, and calls the global picture " in general
bright." According to the study, Latin American and Caribbean
countries should grow at an annual rate of 3.5 percent, or 1.9 percent
per capita. Higher-income countries will grow at an average 2.8
percent annual rate, or 2.3 percent per capita. The different per
capita rates reflect different rates of population growth. According
to the Bank forecast, the gap in per capita incomes between rich and
poor countries will increase over the next ten years.
For the first time since its founding in 1945, the World Bank will
begin an advertising campaign this year. The campaign, aimed at
improving the image of the Bank, will be similar to corporate image
advertising, and is expected to cost $3-5 million. The Bank's external
affairs director, Malloch Brown, says that "we've allowed ... critics to
set the terms of the debate and let our operating failings be the sole
standard by which we are judged." The ad campaign, says Brown,
will indicate that the Bank has heard the critics and is trying to
improve.
Pratap Chatterjee, "Mexico Finance: Find High Failure Rate in Past
Mexican Projects," INTERPRESS SERVICE, May 5, 1995; "World Bank
Predicts Growth in Poor Nations," INTERPRESS SERVICE, April 18,
1995; Stuart Elliott, "Sensing a Need to Polish Its Image, the World
Bank Gets Ready for Its First Campaign," NEW YORK TIMES, May 17,
1995.
CUBA IMMIGRATION ACCORD, ECONOMIC CHANGES
After secret negotiations, the Cuban and United States governments
reached an accord on immigration that will allow 21,000 Cuban
would-be immigrants held at Guantanamo naval base since last
summer's raft exodus to enter the United States. The accord will
reverse long-standing U.S. policy by returning all future raft people
to Cuba as soon as they are picked up at sea. The Cuban government
will discourage illegal immigration, and has expressed hope that the
immigration accord will lead to further normalization of relations
between the two countries.
The U.S. Clinton administration also announced its opposition to some
of the contents of legislation proposed by Sen. Jesse Helms (R-NC) to
further tighten the U.S. trade embargo against Cuba. The bill is also
opposed by many U.S. allies, including the European Union, Canada
and Mexico.
The United Nations Development Organization (UNIDO) opened an
office in Cuba in early May to promote foreign investments in Cuba
and sale of Cuban technical services abroad. UNIDO will support the
development of biotechnology and tourism industries and, in general,
"sustainable industrial development."
New Cuban laws on foreign investment, the petroleum industry, and
social security changes are expected by the end of 1995, increasing
Cuba's attractiveness to foreign investors. A mining law passed in
December 1994 already assures foreign investors of the security of
their investment in mining concessions. Government budget cuts are
part of the planned changes, including job cuts. Guaranteed
employment for all has long been part of Cuba's promise but lay-offs
now planned are expected to eliminate 700,000 jobs, affecting one-
seventh of the work force. Social security will provide
unemployment benefits, but only if a worker accepts any other job
offered, including jobs in the agricultural sector.
Steven Greenhouse, "First Step on Cuba?" NEW YORK TIMES, May 4,
1995; Pascal Fletcher, "A Slight Thaw on Warm Seas for the US and
Cuba," FINANCIAL TIMES, May 16, 1995; Dalia Acosta, "Jesse Helms
Barks, Investments Flow," INTERPRESS SERVICE, May 11, 1995; Dalia
Acosta, "Full Employment is a Thing of the Past," INTERPRESS
SERVICE, May 4, 1995; Pascal Fletcher, "Cuba's Workers Bear the
Brunt of Reforms," FINANCIAL TIMES, May 9, 1995; Charles W.
Thurston, "Cuban Bills Signal Wave of Economic Reforms," JOURNAL
OF COMMERCE, April 24, 1995.
RESOURCES/EVENTS
Cuba -- Investment and Business, 1994-95. Published by
Consultores Asociados in association with the National Institute of
Economic Research, Havana, Cuba, 1994. Official guide to current
Cuban foreign investment law, labor legislation, and natural
resources, including in-depth description of investment opportunities
in specific areas, e.g. health tourism, mining. Information may
become dated due to rapid changes in Cuban laws to attract
additional foreign investment. To order, call 537/33-6011. $60.
Prado Pacayal, video from Imagenes de Mexico. 26 minute video
available in VHS or 3/4-inch tape includes testimony and images
from community Prado Pacayal in the Lacandon Jungle of Chiapas
following the February invasion by Mexican army. Spanish with
English subtitles. Todos Somos Marcos is a 20 minute video covering
four protests in Mexico City during February. English narration and
subtitles. Order both on one tape from Imagenes de Mexico, 4814
Ave. G, Austin, TX 78751; 512/458-4492; email
[email protected]. $15 VHS, $30 3/4-inch tape, $3
postage and handling. Institutional rate $50 plus postage.
"NAFTA Disaster," MULTINATIONAL MONITOR, April 1995. Includes
"'Social Dumping' in Mexico Under NAFTA," "NAFTA's Footloose Plants
Abandon Workers," "The Zapatista Struggle," "The Fall of the Peso and
the Mexican 'Miracle.'" Multinational Monitor, P.O. Box 19405,
Washington, DC 20036; telephone 202/387-8030; fax 202/234-5176;
email
[email protected]. Multinational Monitor is published 10
times each year by Essential Information Incorporated. Subscription:
$25 individual, $30 nonprofit institution; $40 business, in U.S.; $10
additional in Canada and Mexico. Single copy $3.
__________________________________________
Produced by the Institute for Agriculture and Trade Policy, Mark
Ritchie, President. Edited by Mary C. Turck. The NAFTA & Inter-
American Trade Monitor is available free of charge to Econet and
IATPNet subscribers. For information about fax or mail
subscriptions, or other IATP publications, contact: The Institute for
Agriculture and Trade Policy, 1313 5th Street SE, Suite 303,
Minneapolis, MN 55414. Phone: 612-379-5980; fax: 612-379-5982;
e-mail:
[email protected]. For information about IATP's contract research
services, contact Dale Wiehoff at 612-379-5980, or e-mail:
[email protected]
