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.