If nothing else came out of the Summit of
the Americas in Argentina, it is the wide dislike of Free Trade Agreements
(FTA) in many countries in Latin America. President Bush was beating a
dead horse on that one to that audience.
While many governments in the region have embraced the FTA concept,
the general populations have not. México, of course, has been a leader in
adopting this concept as a national model of doing business in the global
market. It is, though, a concept that is rejected at the national level by
the Venezuela / Argentina / Brazil axis. And I should point out that the
order of countries is by diminishing objection. Venezuela, because they
are installing a Castro state there. Argentina has a recent history of
being burned by some of the rules imposed on them in the historic melt
down of their economy and Brazil seems to be taking more of a middle of
the road and wait and see attitude along with wanting to take a more
commanding role of influence in the region.
But the thing to realize is what FTAs are all about and what they are
not. What Free Trade does is to open up doors to trade and as a result,
the flow of money between countries. In México's case, after the NAFTA
agreement, foreign trade increased more than three fold. This is a similar
pattern in many others going the FTA route.
But what happens inside the country is another matter altogether. The
FTA concept does two things: it increases goods and money flow and at the
same time, by removing protectionism barriers, exposes formally
"protected" businesses more directly to foreign competition. This is a two
edged sword. Companies that learn how to be more competitive thrive and
prosper in the world market. Those who do not simply disappear. In the
late 1990s, México was loosing companies at the rate of more than 10,000
per year. On the other hand, other companies thrived. In most cases, the
winners were companies that increased productivity (read doing more with
fewer workers). This was, and still is especially true in the agricultural
sector. And more of the newer jobs that have been created demand higher
skills and educational level than the old cheap labor system used.
When the door opened up on increased trade, México had an opportunity
to use the "golden" time to increase worker training, invest in a more
efficient infrastructure, foster a more vibrant internal market along with
a more efficient and fair government. None of this happened. The effect
was that the top end of the economy got much richer and the bottom end
became much poorer. Now let's agree . . . a rob-the-rich and
give-to-the-poor model never has and never will work. But a better
distribution of wealth does help create the vital internal market that can
become the real engine of general prosperity. And offering the opportunity
for all to succeed does that. Note the word "opportunity". That is what it
is all about. And that is what is missing for most in México. The
opportunity is not there.
In México's case, this is what drives the biggest export product we
have . . . people going to the North. The positive aspect of this is the
money sent home by those going north to keep their families afloat. Next
to oil, it is our largest source of foreign income. And this in one of the
biggest stabilizing effects on the country in general, sad to say.
Mexico's middle and lower classes have yet to catch up from the
effects of the 1994/1995 financial crises. And without real structural
changes in México the future doesn't bode well for them. Therefore, México
depends on the "safety valve" of exporting people. This cannot be
sustained indefinitely.
And speaking of structural changes needed, more than 30% of México's
GDP is in the "informal economy". The sector that does not pay taxes,
receives no government benefits, and pretty well operates outside of most
government rules. Try to get your car fixed, get a house built, repair an
appliance and you will deal with the informal sector. By allowing this
sector to grow this big, México now faces an enormous problem to "entice"
this sector into the formal economy. That is without having a full-blown
revolution.
One of my friends, who operates a successful company doing a
considerable export business says; "México cannot be helped by outside
forces. México must learn how to help itself." To that I can only say,
"Amen!" And the same thing has to be said about many countries in the
region.
Unfortunately, for the poorer and getting poorer class (the vast
majority) that doesn't see the benefits filtering down to their level
don't see free trade as a good thing. And why should they? As a result
they are moving sharply to what we call "leftist" programs that are
sprouting up all over the region.
I remember a man who preached "You have nothing to loose except your
chains" to the downtrodden masses. And he founded a regime that took more
than 70 years to collapse under its own weight along with unbelievable
damage to so many.
Is this where Latin America is headed? The big lesson that the
region's governments must learn is that free trade, in itself, only opens
up a door. It is up to the governments to take advantage and go through
the door to reap the rewards for all.
Simply increasing the spread between the haves and have-nots is a
recipe for disaster.
Free trade, in itself, is not a panacea for prosperity.
_____________________________________
Richard N. Baldwin T., a HispanicVista.com (http://www.hispanicvista.com/)
contributing columnist, lives in Tlalnepantla, Edo de México. E-mail at:
R1041643422@aol.com
By
Richard N. Baldwin T. /HispanicVista.com