Comments by Dr. Osvaldo Martinez, chairman of the Parliamentary Economic Committee and Director of the Center for Research into the World Economy, at the televised Round Table that analyzed the Free Trade Area of the Americas.
April 20,2001

Now that our viewers have seen these TV images showing how the purest democratic principles of police repression are enforced against those contemptuously called globalophobes --for quite rightly opposing neo-liberal globalization-- I think it would be a good idea to start by recalling that our Jose Marti as early as the 19th century, opposed a U.S. plan for the integration of the United States and Latin America. U.S. imperialism was just coming into being at the time and at the American Republics' Monetary Conference in 1890 it fell to Marti to oppose this imperialist plan. He wrote some really amazing pages that often seem as if they were written with this current FTAA plan in mind.

One of the things that Marti said back then is that "you have to look for the hidden agenda in every meeting among nations". He was referring to the meeting to which nascent US imperialism was then inviting the peoples of the Americas in an attempt to get them to integrate in what it claimed to be a monetary union.

In the present stage of imperialism --no longer nascent but quite mature-- I think that the agenda behind the FTAA is not at all hidden and it is rather easy to discover what it is.

The FTAA is nothing more than a U.S. plan to establish a free trade agreement between the U.S economy --in other words, the richest and most powerful on the planet-- and the Latin American and Caribbean underdeveloped, deeply indebted, scattered economies whose Gross Domestic Products added together are ten times lower than that of the United States. We could say that, on the face of it, this is nothing other than integration between a shark and some sardines.

Now, the reasons for the FTAA are not what the Caribbean or Latin Americans want nor are they the alleged advantages of economic integration for those countries. The reasons are, in fact, the U.S. strategic craving for domination over the region in the face of competition from its rivals in today's developed world. Other reasons stem from Latin America's own weaknesses that we can see here.

It hardly goes unnoticed that Latin America comes to these negotiations on the FTAA in a state of exceptional weakness, poverty and economic, political and social crisis; that it is about to enter into what is historically the most important agreement it has ever made with the United States, an agreement that could completely overwhelm the future of the region and of the people in the region, and it is doing so at a time of great economic and political weakness, when there is a really major lack of internal cohesion.

I think that this current Latin American weakness derives from two basic factors. The first is the region's almost complete dogmatic adherence to neo-liberal policies and the second is the economic and social crisis which these neo-liberal policies, in place for two decades now, have inflicted on Latin America.

With respect to the first element, the fact that neo-liberalism is more or less the general practice in the Latin American region facilitates the FTAA in as much as it applies the same neo-liberal politics between the dominator --the United States-- and the dominated. Naturally, the FTAA, once it becomes a reality, would be a more complete form of neo-liberalism and imply an even larger degree of dependency and subordination.

Two aspects of this dependency and weakness related to the way economic integration is put into practice and understood are worthy of comment.

If, 20 years ago economic integration in Latin America was understood to mean a primarily defensive mechanism used by internal Latin American markets --a mechanism for establishing preferential treatment within Latin America to protect internal Latin American markets, mostly from U.S. capital which was the most efficient and powerful-- if --and I deliberately repeat it-- if that was the meaning of integration 20 years ago, as a defense or protection of internal markets, today, with the dogmatic adherence to neo-liberalism, the definition that has moved to first place is not that of protecting internal markets and creating a preferential space for Latin Americans but rather the notion that the most important aim is to join in world trade currents and capital flows and to join in the practice of abandoning defense of internal markets

A second point which I would like to make as an example of Latin America's weakness, once neo-liberalism and the way integration is understood today has taken root, is the examination of something that is fundamental in any attempt at economic integration, and that is the various levels of economic development among countries.

If we discuss an integration plan between the most developed economy in the world and a group of countries at various levels of underdevelopment whose economies range from the Brazilian economy to those extremely weak economies of Haiti, Bolivia, and Honduras --and then there are the tiny island economies in the English speaking Caribbean-- then, the various levels of development becomes a problem of crucial importance

Twenty years ago, Latin American integration was understood to mean that preferential treatment would have to be accorded to less developed countries. Today, with the adoption of neo-liberalism, this idea has been replaced by the notion of reciprocity, which only allows for countries to implement the same neo-liberal policies, and the only difference possible is that they can be implemented on slightly different schedules. In other words, that it can take Honduras or Bolivia maybe one or two years more to do the same as the United States and Canada do, as crazy as that sounds.

I think that Latin America's other big weakness right now is the economic and social crisis the region is going through. The cause of this is two decades of diligent implementation of neo-liberal policies. I would like to go over the basic features of this economic crisis caused by the same neo-liberal policies which they are now trying to push even further down our throats with the FTAA.

There has been less than adequate growth in the last two decades. At the very best, the growth rate during the nineties was half the minimum growth rate set by the United Nation Economic Commission for Latin America as absolutely necessary to start closing the gap between development and underdevelopment and to begin reducing poverty in the region.

This anemic and negligible growth has been very poor quality growth; the factors contributing to it were very weak and all of them tended to become ineffective very quickly.

First, there is privatization. In previous round tables we have discussed the wave of privatization which swept over Latin America, how even institutions like the postal service, parks, highways and cemeteries have been privatized. We mentioned how this unbridled privatization has certainly provided some capital revenues to the governments responsible for it, but naturally, at the cost of yielding national sovereignty. Quite simply, however, this way of getting capital revenues is increasingly depleted because there is not much left to privatize in Latin America. It is therefore not possible to go on supporting any kind of growth based on a privatization process which is finding very little left to privatize.

Secondly, capital inflows, --another of neo-liberalism's panaceas for Latin American development-- even though they may have produced some results useful as poster children for neo-liberal propaganda, much of their charm is lost when one realizes that at least a third of these capital inflows are little more than visiting capital, speculative short term capital which comes and goes amazingly fast and acts as a destabilizing factor. They have behaved like that in all the financial crises that affected the region in the 90s. Moreover, this foreign capital does indeed flow in, but profits also flow out. This is the main reason for which these capital inflow figures are wiped out and more than offset by the deficit in the balance of payments current account. This deficit stems mainly from the fact that this foreign capital takes its profits out of Latin American countries.

The third pillar of this growth has been indebtedness. Let us just recall that the Latin American debt was $300 billion in 1985 while today it stands at around $750 billion. However, between 1992 and 1999 alone, the region paid $913 billion in debt-servicing charges. Today, this debt is consuming 56% of the region's income from exporting goods and services, that is just to pay this debt and so the debt continues to grow. The more you pay, the more you owe, as these figures show.

I think that the ultimate example of the conditions of weakness and crisis affecting the region as it heads towards these highly important negotiations with the United States about the FTAA, is the desperate remedy used by some governments in the region --the dollarization of Latin American economies. This means that, in order to directly adopt the American dollar, they give up their all-important sovereignty over their own currency, that is, their right to have a monetary policy. This is the kind of neocolonialism variant that makes it really difficult to imagine any other deeper form of submission or dependency.

Now, if this is what the economic crisis looks like, its social equivalent is truly horrifying. If as the United Nations says, in 1980 --when neo-liberalism had only just begun-- 39% of Latin Americans were poor, today 44% of them are poor. Of course, that is according to statistics that as Felipe indicated almost always underreport reality, but they are the United Nations' statistics.

Today, 44% of Latin America's population is poor. In absolute figures that means 224 million poor people; of these, 90 million are destitute, in other words, they are in the lowest stage of poverty.

Two decades of neo-liberalism in Latin America has given the region the most inequitable income distribution, the most inequitable and most unfair income distribution in the entire world. The richest 20% of Latin America's population receive an income, which is nineteen times higher than that of the poorest 20%.

Unemployment, according to these doctored figures, affects 9% of the population of Latin America. On the other hand, out of every 100 jobs held by those considered to be employed, 85 are in the informal sector characterized for extremely low salaries, the absence of labor rights, no pension rights, that is, the workers are completely at the mercy of the employers.

In this region, infant mortality in the first year of life is, on average, 35 for 1000 live births, an absolute disgrace and cause for embarrassment for the Latin American region.

The 13% of Latin America's population are illiterate, and this more than 170 years after most countries in the region gained independence from the colonial metropolis. Only one out of three students makes it to junior high school.

Finally, the murder rate, a reflection of the poverty and extreme violence in the region, is 300 for one million inhabitants, which is twice the world rate.

It is in this situation that Latin America comes to the FTAA negotiations.

Now, what does the United Sates hope to gain from the FTAA?

Firstly, to consolidate its dominion over Latin America and the Caribbean, which is the region where traditionally and historically it has had and continues to have its largest degree of economic and political control. It also wants to consolidate this control in the context of the struggle between the large centers of world power that today are working towards a kind of regionalization of economic power.

The United States is mostly faced with competition from Europe and Japan. The European Union, as we know, has moved forward with its integration process and has not only made progress with its integration but has found a new area to exploit, a new exploitable underdeveloped area, in the former socialist countries. Some or many of these join enthusiastically with them in voting for anti-Cuban resolutions. They constitute a new exploitable hinterland for the European Union.

As for Japan, its area of influence is in the Asian region, where the Japanese economy carries a lot of weight. Therefore, as far as the United States is concerned, placing Latin America under its dominion and command is also a way to fight back the competition of major economic power centers. It is also a way of tightening its control over Latin America in the struggle for markets or investments, in the struggle to find a place for speculative capital, to access natural resources, especially energy resources, mostly petroleum, to access clean water, which is another thing the United States wants from Latin America, and to access to the biodiversity there. It is, in short, a way of keeping European and Japanese competition out of the region.

Actually, the FTAA intends to become a space where U.S. capital and goods can circulate freely, from Canada to the extreme south of the continent, and with preferential treatment vis a vis the Europeans and the Japanese.

The second thing I want to mention that the United States hopes to gain from the FTAA is to undermine and paralyze Latin American economic integration, that integration which, despite its flaws and limitations, has made some progress and of which MERCOSUR is the prime example.

Despite of all its limitations, MERCOSUR has tried to move forward and even create preferences over foreign capital among its member countries. The United States purpose is thus to eliminate the MERCOSUR, that is, to eliminate any kind of real, indigenous Latin American attempts at integration; to eliminate the Andean Community; to eliminate the Central American Common Market; to eliminate CARlCOM, here in the Caribbean. To put it simply, to integrate in a way suitable to U.S. interests.

I think that if we want a very telling image of what the FTAA might mean if it became a reality in Latin America, we only need to look into the mirror of the Mexican economy. Let us recall that since 1994 Mexico has been linked to the United States and Canada by the North American Free Trade Agreement. In fact, this North American Free Trade Agreement is nothing other than the FTAA on a smaller scale, since it is inspired by the same philosophy, the same neo-liberal thinking. Although on a smaller scale, it is also an attempt to integrate two developed economies with a poor underdeveloped economy.

What has happened in Mexico in these six years –it’s coming up to seven-- since the Free Trade Agreement came into effect? if we set aside the mask of modernity given by the high figures for capital investment --which is the success story touted by pro-neo-liberal policies and pro-NAFTA propaganda-- we can see that the Free Trade Agreement has meant a deterioration of its domestic economic base and an obvious social decline.

For example, in the 70s, when there was no Free Trade Agreement and no neo-liberalism, the Mexican economy achieved an average annual growth of 6.6%. In the 90s, with a Free Trade Agreement and with neo-liberalism, its growth was 3.1 % annually, in fact, less than half the previous growth rate.

If we examine this growth per capita, it shows that in the 7Os per capita output grew on average 3.4% annually In the 90s, with Free Trade and with neo-liberalism, it grew 1.3%. In other words, the wonders of neo-liberal growth brought about by the NAFTA are nowhere to be seen; it is just the opposite.

As for the impact of all of this on the Mexican worker, today it is estimated that in Mexico the informal sector, which we mentioned a little earlier as having substandard working conditions --with no rights for the workers to strike or to receive a pension, nor to holidays, where not even contracts are signed between workers and employers-- this informal sector, a prime example of who are the fire-eaters whom we see on street corners sadly trying to earn a few cents in this awful way, comprises 50% of those working in Mexico today. There are currently 20 millions workers working in substandard conditions in that country. These are not, of course, figures or facts invented by us, all have been taken from Mexican sources or from international agency sources.

Let us look at foreign capital inflow, another of NAFTA wonders. Foreign capital inflows have indeed risen. For example, they were $36.3 billion between 1998 and 2000. However, in that same time period, the current account deficit --in other words, what that foreign capital to a great extent took out of the country, and particularly to their U.S. headquarters-- was $48.6 billion. To simplify things, let us say 36 billion came in and 48 billion left.

Let us look at the Mexican foreign debt. At the end of the year 2000, the Mexican foreign debt stood at $163.2 billion, more than twice what it was in 1982, the year when the foreign debt crisis burst onto the scene in Mexico and made history and continues to make history in Latin America.

The NAFTA has meant increased dependency on and concentration in Mexico's economic relations with the United States.

Before the NAFTA, Mexico had somewhat more diversified, less dependent economic relations. After the NAFTA, for example, 74% of Mexican imports are from the USA and 89% of Mexico’s exports go to the USA. That means that Mexico's foreign economic relations are very heavily concentrated on the U.S. economy.

These exports, which are another of the big propaganda themes, have grown; it is true. But, who are producing these export goods? Well, mainly 300 companies produce them. The vast majority of them are subsidiaries of U.S. transnational companies, and if we add the cross-border assembly plants, which are mostly involved in assembly work --that is to say, they import almost everything and what they do is assemble it-- and in exploiting Mexican labor which is fifteen times cheaper than U.S. labor simply by crossing the border, then, those two groups produce 96% of Mexican exports and the other 4%, the other measly 4%, is divided up between 2 million small companies which, of course, neo-liberal policies incessantly threaten with take-over or ruin.

For example, the Mexican textile industry has markedly increased its exports to the United States. However, in this sector 71% of the companies are U.S owned, the capital is U.S. capital that set up shop there after it had thrown out the Mexican capital that had been invested in that sector.

Mexican economists have calculated, and they have made these calculations public, that in every dollar of Mexican industrial exports to the United States, there are only 18 cents worth of Mexican components. This is the wonder of U.S. capital investment in Mexico.

But if we take the cross-border assembly plants, which have proliferated along the border and even deeper in the country, of every dollar exported from those plants, the Mexican component is worth 2 cents.

The main attraction of such assembly plants for the United States is that of paying salaries which are fifteen times lower than those paid to American workers.

One could also use truck freight transport as a very telling example. Truck freight transport, within the framework of NAFTA, was liberalized overnight. They did something overnight that has taken the Europeans 40 years in their European integration process, and that took the Americans themselves in their own economy about 15 years.

The impact of the liberalization of truck freight transport, above all on Mexican trucks which carry products to the United States is as follows: in Texas 50% of Mexican freight is denied entrance; in Arizona 42% and in California 28%.

The Mexican agricultural sector is faced with another truly catastrophic situation. We could say that the Mexican agricultural sector, once it came into contact with U.S. agriculture and with U.S agricultural exports, is in contact with the most sophisticated system of subsidies found anywhere in the world and obviously, with the most technologically advanced agricultural sector in the world, too

The impact of this on Mexican agriculture, on rice, for example: Mexico was a big rice producer, however, domestically produced rice has been replaced by rice imported from the U.S. and these imports make up over 50% of Mexico's rice consumption.

Then, Mexican potatoes: Mexico was also a potato exporter, however, Mexican potatoes' access to the U.S. market has been blocked, plant health barriers have been placed, one of the many barriers used to prevent products from entering the U.S. market. Meanwhile U.S. potatoes have invaded the Mexican market. Cotton: we think of Mexico as a traditionally big cotton exporter. Mexico has moved from being a cotton exporter to being one of the biggest cotton importing countries.

In summary, in Mexico the amount of land under cultivation has been reduced and there are 6 million displaced agricultural workers who previously grew crops which have now been replaced by those imported from the United States. Those 6 million workers are looking for work and not finding it in the Mexican agricultural sector, or are trying to go through that sad story which we all know -that of trying to cross the border, to cross that "democratic” wail which divides the two countries, putting their lives at risk doing so, to try to find work on the other side.

As for poverty, Mexican economists currently say that 47% of the Mexican population live below the poverty line and 19% of them live in extreme poverty.

Since the NAFTA came into effect, the price of the Mexican population's basic goods has increased by 560%, while real income has only climbed 135%. In other words, the price of basic goods increased almost five times more than the workers' real income.

Under President Zedillo, the minimum wage lost 48% of its purchasing power and more than 50% of Mexican wage earners today have a real income of less than half of what they earned 10 years ago This is the sad, ugly face of the integration as carried out along neoliberal lines. It is the same kind of integration that the FTAA is now fostering for the rest of Latin America. I think that Latin America can see itself quite clearly in this mirror

Finally, 1 would like to make some brief comments on some of the positions the U.S is putting forward at these negotiations for the FTM. They do not come from any special source; rather the United States has published them on the Internet. These are their positions on every subject up for negotiation for the FTAA.

First, preferential treatment for less developed countries, a key point when a shark is tying to integrate with sardines. Quite simply, the shark thinks that there is no need to give preferential treatment to the sardines. The sardines must swim in neoliberal waters, which are the only waters around. The biggest concession made to the sardines is that they will be allowed to arrive at a certain destination a little later than the shark.

As I was saying a while ago, if tariffs must be reduced by 20% then let economies "as developed" as the Bolivian, the Honduran, those of the little Caribbean islands, of Haiti, let them reduce them one or two years later than the Canadian and U.S. economies do. As you can see, that is amazingly generous.

Of course, a principle of reciprocity is imposed, which is nothing other than formal equality between completely unequal parties.

Another issue: Subsidies and anti-dumping measures.

The United States wants the FTAA negotiations focus only on the reduction of tariff barriers. But the fact is that the main tools the United States has for trade discrimination against Latin America are not its tariff barriers but rather its non-tariff barriers.

What are the non-tariff barriers? A whole gamut of barriers which range from alleged environmental protection or ecological measures in the United States to demands for special labeling which in fact remove Latin American goods from the market. They even include a section 301 in an U.S. foreign trade law, and there is even a part of it known as the super-3O1. It is "super" because of the amount of measures, exclusion and discrimination barriers it contains. It even has provisions for the exclusion of those countries that do not comply with U.S. regulations on human rights or democracy from the alleged benefits of commercial relations with the United States.

Just a few words on the subject of capital investment.

Actually, the United States has more than a trade interest in the FTAA. It has that too, but more importantly, what it is really interested in is capital investment, that is, in finding an extensive geographic area where it can invest and move U.S. capital around freely.

Now, what are its two principal positions on investment? First, that U.S. capital must be given what it refers to as 'domestic treatment'. What on earth does that mean? Let us say that Bolivia

- to stick to the same example- must treat U.S. capital in the same way as it treats Bolivian capital or as it treats capital from any other country in the Latin American region.

Another angle of the U.S. position on investment is an ambiguous, unclear definition and -I dare say- highly ill intentioned definition of the very concept of investment. This definition states that investment, not only all the classic things that anyone might understand as investment, that is, investing in a Company, creating real assets. They also include in their definition of investments which they are trying to impose in the FTAA negotiations, such things as debts. This will allow the Unites States to ask for special guarantees, even for a Latin American country private sector debt owed to U.S. capital or creditors. It would also allow those speculative investment of long term visiting capital to be considered as investments and to receive domestic treatment thus avoiding any kind of regulation.

Lastly, on public sector purchases The United Sates is also aiming to shackle our governments so that not even the public sector, the State in those countries, could make purchases in the social interest, purchases meant to improve development.

It is quite funny to hear the U.S. position when it admonishes that the public sector purchases must avoid official monopolies and give preference this what it says literally –“ to those companies which have the most experience and the largest volume of business", which is the same thing as saying that all public sector purchases in Latin America must be made from US companies.

Last April 16, our Commander in Chief said and I quote him exactly: "... we know that Latin America can be devoured, but it cannot be digested. Sooner or later, like the biblical character, in one way or another, they will escape from the whale's belly. And the Cuban people will be waiting outside, for they learned a long time ago how to swim in trouble waters and they know that until there is a radical change in their living conditions, the peoples of the Third World will become increasingly ungovernable and force the adoption of the necessary solutions."

To conclude, I once again go back to Marti in those enlightening pages about the Monetary Conference of the American Republics in 1890 Marti said to the Hispanic American countries --he said so at that time, we can now translate it as the peoples of Latin America and the Caribbean- at that juncture something that I think we can agree with and that applies just as well to those countries trying today to join the FTAA. I quote from our national hero:

"When trading with a pushy, overconfident nation to be so accommodating as to appear weak might not be the best way of saving our countries from the dangers to which a reputation for weakness has left us exposed. Wisdom lies not in living up to a reputation for weakness but rather in seizing the opportunity to show ourselves strong without danger. And as for danger, once the moment is carefully chosen and properly used, the least dangerous way is to be strong”.