Enterprise of the America Initiative: An Analysis
From: Hannah Holm 
Subject: Enterprise of the Americas Initiative-- Analysis July '93


                Enterprise of the America Initiative
                        Current Information
                             July 1993

      Three years ago, President George Bush unveiled his Enterprise
of the Americas Initiative (EAI), a hemispheric program that he
projected would establish a free-trade zone stretching from
"Anchorage to Tierra del Fuego," expand investment and provide a
measure of debt relief to the countries in Latin America and the
Caribbean.  The three components of the EAI are: the negotiation of
a series of free-trade agreements, beginning with the North
American Free Trade Agreement (NAFTA); the establishment of a
US$1.5 billion grant fund to support the implementation of
investment reform programs; and a program of official debt relief,
with the conversion of the interest on the remaining debt used for
environmental funds in Latin America and the Caribbean.

      The NAFTA was signed by the presidents of Canada, the United
States and Mexico in December 1992.  President Clinton has insisted
on the negotiation of supplemental agreements to NAFTA to resolve
certain environmental and labor problems in the agreement.  The
Administration hopes to complete the negotiations of the
supplemental agreements by the end of July 1993, so as to present
the "package", including NAFTA and the supplemental agreements, to
the U.S. Congress in August.  Under "fast-track" procedures,
Congress would have 60 legislative days to approve or disapprove
NAFTA without the possibility of amending it.  There is already a
heated discussion in Congress on the agreement, and the result of
the vote -- if there is one -- is very uncertain.  Various
citizens' organizations in the three countries have published
critical analyses of the agreement and of the existing proposals
for the supplemental accords.  Please contact us at The Development
GAP if you would like copies of these documents.

      Every country in Latin America and the Caribbean except Cuba,
Haiti, and Suriname have signed "framework agreements" with the
U.S. government that establish Trade and Investment Councils in
each country.  These councils are designed to monitor trade
relations and identify and eliminate any obstacles to investment
and trade flows in preparation for the negotiation of free-trade
agreements.  In many countries, one of these changes has been the
modification of laws on the protection of intellectual property
rights to make them equivalent to U.S. laws in this area.

      The accession clause (Article 2205) of NAFTA specifies that
other countries or groups of countries (not limited to the
countries in this hemisphere) can join NAFTA subject to the terms
agreed on by the member countries and in accordance with domestic
approval procedures in each country.  This would mean that future
negotiations could proceed much more quickly than has the NAFTA,
since it makes NAFTA the model for future agreements.  If the
legislative bodies of Canada, the U.S. and Mexico approve NAFTA,
Chile is slated to be the next country to negotiate a free-trade
agreement with the U.S.  Spokespersons for the U.S. government have
indicated that Chile will be next precisely because of its long
history of free-market policies.

      The multilateral investment fund will be administered by the
Inter-American Development Bank (IDB).  It is not yet functioning,
but is expected to begin in July 1993.  So far, US$1.25 billion
over five years has been pledged by Japan and 20 North American and
Latin American countries.  This pledge includes US$500 million from
the U.S. government, but Congress only appropriated $90 million in
fiscal year 1993, and the House of Representatives proposes $75
million for fiscal year 1994, which begins in October 1993.  These
funds will be spread over all countries in Latin America and the
Caribbean and will only be used to finance reforms to facilitate
private investment.

      The third component of the EAI conditions forgiveness of debt
under the PL480 (Food for Peace) and AID programs on participation
in structural adjustment programs, open investment regimes and
arrangements with commercial creditors.  Countries eligible for
debt relief under these conditions can enter into Environmental
Framework agreements with the U.S. government, creating local funds
for environmental projects with the interest payments on the
remaining debt.  A board named by the U.S. president will manage
the program.

      In 1990 the U.S. Congress gave the Administration authority to
forgive up to $1.7 billion in PL480 loans.  Later, due to changes
in U.S. laws regarding bilateral debt, Congress is required to
approve funds equivalent to the reduction in expected payments.  In
fiscal year 1993, Congress appropriated $50 million, and so far has
not proposed financing the program for the next fiscal year.  Even
if this program were fully funded, the total debt eligible for
forgiveness would be less than two percent of the region's total
official and commericial debt.

      Through June 1993, $875 million in official debt has been
forgiven under this program:


     Country             Original             Total              
                         Debt                 Forgiven  
                                 (millions of US dollars)     
                  
     Argentina           $   38.1             $  3.8
     Bolivia                 38.4               30.7
     Chile                  186.0               30.6
     Colombia               310.0               31.0
     El Salvador            614.0              463.9
     Jamaica                405.4              310.8
     Uruguay                 34.1                3.7
     Total               $1,625.6             $874.5

                     (source: U.S. Treasury)

Prepared by Karen Hansen-Kuhn, The Development GAP, 927 15th
Street, NW, 4th Floor, Washington, DC 20005.