Against CAFTA

by Toni Solo

ZNet, June 7, 2005


Amid the confusing signals streaming out of events in Latin America recently, arguments around the Central American Free Trade Agreement juxtapose two opposing motifs. One follows from the mute recognition by the United States that it is in decline against its competitors in Asia and against the European Union. Hence US efforts to pre-empt World Trade Organization negotiations so as to consolidate corporate control of and access to Latin America's resources via CAFTA and similar deals before Latin American countries can consolidate resistance,

The other contrary motif is growing widespread resistance to CAFTA and similar agreements accompanying increasing awareness that the bogus "free trade" they represent is unsustainable. Rejected along with CAFTA is the gangster system of international corporate welfare economics rigged by the powers that control the World Bank, the International Monetary Fund and by local financial enforcers like the Inter-American Development Bank. Throughout Latin America, the majority of people know very well that handing over sovereignty within a failed international economic and financial system operated for the benefit of rapacious corporations is a bad idea.

Mutiny afoot in the US backyard

As oil prices trend upwards and the US dollar trends downwards, one country after another seems to be slipping their neo-colonial traces. A majority of people in Venezuela, Bolivia and Ecuador now reject corporate welfare economic policies because they obviously do not meet most people's needs. These realities mean Janus-faced political leaders like Brazil's President Da Silva are able to play a kind of teasing peekaboo with the Bush regime over Washington's continent-wide Free Trade Area of the Americas initiative and associated attempts to demonize Venezuela's government.

Energy policy may be the principal factor influencing perceptions of available options. Throughout the continent, import-dependent countries have found that the corporate welfare "free market" model fails to meet national energy needs. For example, Chile may well strike energy deals with Venezuela because its neighbours Argentina and Bolivia, carved up by energy multinationals, cannot guarantee long term supply. (1)

For their part, the international financial gangsters remain detached from reality. They continue to talk about "growth" and "privatization" being the solution to poverty without acknowledging that experience shows their policies have little to offer. After twenty years of such abysmal failure few on the receiving end take them seriously. Nor do the gangsters acknowledge that the experience of countries like India and China renders their advice redundant for countries like Venezuela that are not hopelessly locked into their glorified protection racket.

The resistible rise of Pascal Lamy.

When one looks at the behaviour of the people concerned it's clear only a concerted hard line against the international financial and trade goons will protect the majorities in poorer countries from declining living standards. Pascal "Arturo Ui" Lamy poses as the poor countries' friend but when it came to crunch time at the world trade summit in Mexico in 2003, as George Monbiot writes, "He tried to force through new rules on investment, competition and procurement, which would have allowed corporations to dictate terms to the poor world's governments.....By destroying the talks, Lamy prevented a fairer trading regime from being introduced. He left the rich countries free to strike individual treaties with their weaker trading partners."(2) That is exactly what happened in Latin America, with a cowboy US administration trying to corral wayward countries so as to lassoo and mark them with the indelible, neo-colonial "free trade" brand.

For Lamy, former head of France's flagship bank Credit Lyonnais and who oversaw its privatization, talking softly while nursing a metaphorical machine-gun-in-the-violin case is a necessary career skill. His successor Peter "Warlock" Mandelson, twice slung out of Tony Blair's government for delving in dark downright deceit, lacks Lamy's finesse. Early in May, Lamy announced that China would brake its exports by raising tariffs on its exports of textiles. Despite the apparent win, Mandelson, addressing the European Parliament, could not resist threatening China with WTO legal moves. As European Trade Commissioner, Mandelson plays the role of United States cuckoo in Brussels even more directly than the rest of Tony Blair's pro-Washington UK ensemble.(3)

By the end of May, China's response to this gangsterism ("...wouldn't want anything to happen to those nice textile quotas, would you....?") was to cancel its domestic tariffs on textile exports. That may be just the toughness required to see off Lamy-Mandelson style intimidation and extortion. Inexplicably, developing countries ceded the post of WTO Director General to Lamy by failing to back the Uruguayan, Carlos Perez de Castillo. (4) So Europeans now head both the International Monetary Fund and the World Trade Organization, while the United States' Paul Wolfowitz heads up the World Bank. The Cosa Nostra never had it so good.

In Central America the footsoldiers slog it out

Back in Central America, rich-country-mafia footsoldiers like Enrique Bolaños in Nicaragua, Tony Sacasa in El Salvador and Martin Torrijos in Panama are finding the going heavy. Torrijos is trying to tough out Social Security reform, raising retirement ages for men and women and increasing qualification requirements. His reforms have been met by violent riots. In Nicaragua, Bolaños waited till the Mother's Day holiday to declare an economic state of emergency so as to bypass the country's legislature and force through an 11% price rise in electricity prices.

In neighboring El Salvador business leaders scatch their heads at scraggy growth statistics. The economy grew under 1.8% in 2004.(5) Within that figure, somewhat better growth in the agricultural sector at a little over 3% seemed to result from government credit intitiatives to assist producers of cotton and basic grains. Whoops! An all too visible hand there saved the day while the "free market" fumbled.

El Salvador is also finding it hard to retain maquila businesses that characteristically relocate to wherever wages are lower, to Nicaragua for example, or to Haiti, currently being worked over good with help from UN rich country enforcers. So even using the growth measure in the same self-serving, almost meaningless way (because it ignores wealth distribution) that the World Bank and the IMF do, El Salvador, after over twenty years of their policies, is a basket case - a poor advertisement for more-of-the-same-but-worse CAFTA.

Energy - let's pin the tail on the burro......

Something all these countries share is an apparent paralysis in facing up to the growing energy crisis. No one seems to have worked out what much higher energy prices should imply in terms of sensible public economic policy. Nicaragua's case is indicative of the political, economic and social disruption in store following strict obedience to repeated visits over the years from IMF heavies

When electricity was privatized in the late 1990s, Nicaragua followed much the same model as was used in the UK during the 1980s. Generation was separated from distribution and a regulatory body was set up to monitor the rules of the game. A 30 year distribution deal was put out for contract and the killing was made by Spanish multinational Union Fenosa in 2000. Generation, (some hydro-electric, some geo-thermal but around 80% diesel fuelled) was left to five mostly foreign owned companies.

Now Union Fenosa owes hundreds of thousands of dollars to the generating companies and alleges it can't pay up unless it is permitted to raise prices by nearly twelve per cent. So Union Fenosa, with the total monopoly on electricity distribution and despite raising prices dramatically since the year 2000, is saying straight out that it can't cut it in the Nicaraguan energy market. Who was it forced Nicaragua to privatize its electricity industry? Step forward, Spats and Scarface from the International Monetary Fund.

If Nicaragua and its neighbours are on the rack now with oil prices at current levels, how will their economies cope in a year or two years' time as prices trend persistently upwards? Combined with a steady fall in the purchasing power of the dollar, high energy prices mean even bigger deficit problems for both public sector spending and balance of trade. Further trade liberalization will not address those problems adequately. CAFTA is virtually irrelevant in such a context.

A US$0.03 cents rise in bus fares following a fuel price increase in March led to widespread riots in Nicaragua's capital Managua. An 11% rise in electricity prices will eat even deeper into the budgets of families already struggling to cope with plummeting living standards. Apart from the rise in the monthly cost of domestic electricity, businesses will inevitably pass on the price rise in the cost of their goods and service. Social unrest is guaranteed as the poor majority are squeezed ever harder.

Learning from the gangsters

In politics and economics the United States government has little to teach the rest of the world except gross hypocrisy and how not to do things. The Central American countries do not need yet more domination by tiny plutocrat elites via CAFTA. They will not accumulate wealth for their peoples by opening up their economies to even more maquila-style exploitation, export-oriented agricultural policies that destroy their soils and forests to fatten off-shore bank accounts or by privatizing water and the other meagre remains of their public sectors. Nor will investment rules absurdly favourable to foreign corporations, restrictions on public procurement policy and the other disadvantageous CAFTA provisions produce benefits except for the already rich.

Among the prime lessons from the economic gangster zones of Europe and the United States protecting agriculture and enforcing preferences and advantages for domestic businesses stand tall. US and European experience suggest not to privatize or de-regulate public resources, especially electricity and water. Instead of CAFTA the Central American countries should have tried to make trade liberalization of selected sectors a quid pro quo in exchange for debt cancellation and other concessions. The region should have acted as a bloc for its peoples rather than each small country letting itself get bullied individually by the giant United States enforcement mob. They should have recognised and exploited the fact that the US needs them so as to present a "free trade" fait accompli to the rest of Latin America as a precedent for the FTAA.

Alternatives - looking South

If arguments around CAFTA and its infrastructure twin Plan Puebla-Panama have demonstrated anything, it is the pathetic failure of the respective countries' traditional elites to represent the best interests of their peoples. Central America will pay dear in decades of prolonged mass poverty and migration for the folly of allowing greedy US dominated elites to skew trade perspectives North instead of South and for denying inward integration focused on people's needs rather than corporate profit.

Venezuela, Cuba and the rest of the Caribbean, the Andean coutnries and Mercosur offer opportunities and models that represent beneficial possible alternatives for the countries of the isthmus to endless neo-colonial dependency on foreign great powers. The political forces exist in Central America to make that shift in the region's economic agenda. But it remains an open question if they are capable of effecting such change.

Billy Wilder as economic guru

Vibrant grass roots opposition to CAFTA and the imperialist system it represents tends to coalesce around local problems as they arise, without so far being able to achieve decisive political change. Existing apparently progressive political parties often seem both ambivalent about their own policies and intentions and self-absorbed in their internal feuds. The leadership of powerful blocs like the Sandinista FSLN in Nicaragua and the FMLN in El Salvador are busy entrenching their own economic interests. They need to work out a viable shift South in their perspectives if they are not to become clients of the IMF and the World Bank as crass as the national elites they have partially displaced.

With CAFTA, the traditional regional elites resemble increasingly the self-absorbed bride-hungry millionaire at the end of Billy Wilder's gangster comedy "Some Like it Hot" faced with Tony Curtis crying "I'm a man!" through the make-up as he tears off his wig. By rights, if CAFTA had a similar comic denouement, the double-talking US imposter regime would cry "It's true, we're two-bit plutocrat hoodlums!" The complacent Central American elite know that and have already replied, "well, nobody's perfect..." as did Wilder's millionaire. But there's nothing comic about CAFTA. If achieved it will steer Central America into a social, environmental and economic dead end for a generation.


toni solo is an activist based in Central America - contact via


Index of Website

Home Page