Trade Matters, American Friends Service Committee, May 3, 2006
Title: “Is the US Free Trade Model Losing Steam?”
Author: Jessica Walker Beaumont
International Herald Tribune, December 28, 2006
Title: “Economic Policy Changes With New Latin American Leaders”
Author: Mark Weisbrot
International Affairs Forum, March 31, 2007
Title: “Is Hugo Chavez a Threat to Stability? No.”
Author: Mark Weisbrot
Student Evaluator: Toni Catelani
Faculty Evaluator: Phil Beard, Ph.D.
The US Free Trade model is meeting increasingly successful resistance as people’s movements around the world build powerful alternatives to neoliberal exploitation.
This is particularly evident in Latin America, where massive opposition to US economic domination has demanded that populist leaders and parties take control of national governments in Venezuela, Bolivia, Ecuador, Argentina, Brazil, Nicaragua, and Uruguay.
Latin American presidents are delivering on promises to fix the mistake of twenty-five years of neoliberal reforms that resulted in the region’s worst economic collapse in more than one hundred years. In the two decades preceding World Bank and International Monetary Fund (IMF) policies, 1960-1980, the region’s income per person grew by 82 percent. By comparison it grew just 9 percent 1980–2000, and only 4 percent 2000–2005.
Strong ties between Venezuela’s Hugo Chavez, Cuba’s Fidel Castro, and Bolivia’s Evo Morales, Ecuador’s Rafael Correa, and Nicaragua’s Daniel Ortega, along with cooperative relationships with major economies including Argentina and Brazil, are creating the real potential for autonomous alternatives to US-dictated economic policy in the Western Hemisphere.
In the past year alone several leaders have announced plans to cut ties with the World Bank and IMF. After a sweeping reelection in December 2006, Chavez announced April 30, 2007 that, having paid off debts to the World Bank and the IMF, Venezuela would cut ties with both institutions.1 Chavez has been able to put his nation on a path of solid growth by fulfilling his 1998 campaign promise to renationalize Venezuela’s oil industry (PDVSA). Though fierce US opposition to his move to end foreign privatization led to a failed US-backed military coup in 2002, nationalized oil is now the source of nearly half the Venezuela government’s revenues and 80 percent of the country’s export earnings. Venezuela’s economy has grown 38 percent in the last three years.
Chavez plans to set up a new lending institution run by Latin American nations and has pledged to support it with Venezuela’s booming oil revenues.1 Venezuela’s $50 billion in foreign exchange reserves is providing financial support to countries in the region without the exploitive policy conditions attached to WTO and World Bank lending. Leaders are thus able to deliver on promises to their people, contributing not only to stability but to the strengthening of Democracy in the region.
In April 2006, Evo Morales announced his rejection of the IMF and any future FTA with the US. He instead launched the Bolivian Peoples Trade Agreement (PTA), a socialist alternative to the neoliberal free trade model. The PTA emphasizes support of indigenous culture, reciprocity, solidarity, and national sovereignty. Above all the PTA emphasizes improved living conditions for the whole population as a result of international trade and investment. Bolivia’s 2005 passage of a Hydrocarbons Law raised the royalties paid by foreign gas companies to the government of Bolivia. While infuriating US corporations, the resulting tens of millions of dollars in revenue have enabled Bolivia to pay off its IMF debt and begin to build social programs and national reserves.
In December 2006, Rafael Correa, who recently won the presidential election in Ecuador on an anti-privatization, anti-US military base platform, announced plans to restructure Ecuador’s foreign debt in order to increase spending on crucial social programs. Ecuador has since paid its debt to the IMF and announced plans to sever ties to the institution. Nicaraguan President Daniel Ortega has also announced negotiations toward an IMF exit.
Argentina was one of the IMF’s most publicized “successes” turned-crushing-failure at the end of the last century. From 1991 to 1998 the country adopted a host of IMF-recommended reforms including large-scale privatizations. The economy grew substantially during this period but went into a terrible downward slide beginning in mid-1998. At the end of 2001 the whole experiment fell apart, with the country defaulting on more than $100 billion of debt. The currency collapsed soon thereafter, and the majority of people fell below the poverty line in a country that had previously been one of the richest in Latin America.2
When Argentina’s President Nestor Kirchner finally refused the IMF’s debilitating repayment mandates, Argentina’s economy began to rebound—and it hasn’t stopped growing. In a remarkable expansion, which was never supposed to have happened according to IMF predictions, Argentina’s economy has grown by 47 percent in the past few years, making it the fastest growing economy in the Western Hemisphere, and pulling more than nine million people (in a country of 36 million) out of poverty.2 Argentina decided to make its break with the IMF in January 2006 by paying off its remaining $9.9 billion debt.
As of December 2005, Brazil is also free to make its own decisions, free from IMF interference, after paying off its debt two years ahead of schedule. “We repaid the money to show the world that this country has a government and it is the owner of its own nose,” Lula said at the time, adding, “Brazil has been able to decide that it does not want another IMF deal.”3
While it is an expanding reality that many strong and growing people’s movements have not been so fortunate as to have representative governments—the people of India (see story #8), Mexico (see story #18), and Niger (see story #3) are but a few examples—more and more elected leaders in Latin America are providing models of true democratic leadership that is of, for, and by the people.
1. Jorge Rueda, “Venezuela Pulling Out of IMF, World Bank,” Associated Press, May 1 2007.
2. Mark Weisbrot, “IMF’s Fall From Power,” Washington Post.com, April 13, 2007.
3. Xinhua, “Early Debt Payment Enables Brazil to Make Own Budget Decisions,” Peoples Daily Online, December 16, 2005.
UPDATE BY Jessica Walker Beaumont
Written a year ago, the American Friends Service Committee article “Is the US Free Trade Model Losing Steam?” accurately predicted a growing resistance among Latin American and African leaders to the current “one-size-fits-all” US trade policy model.
Proponents of the current US free trade model seem willing to do whatever it takes to keep the free trade train moving down the track. However their time is literally running out, in part due to the looming July 1 expiration of “fast track” authority that gives the Bush administration the power to negotiate free trade agreements on behalf of Congress.
Although Bolivia, Ecuador and Southern Africa stand firm against US Free Trade Agreements (FTA), there remains a “coalition of the willing” lining up to get their trade agreements. Pending trade pacts for Congressional consideration include those with Colombia, Peru, Panama and Korea. Greasing the wheels to pass these FTAs is a new “breakthrough trade deal” with the Bush administration announced by Democratic leadership on May 10, 2007.
It is said that the deal would improve new free trade agreements by requiring that they include labor and environmental standards, and by insuring better access to essential medicines. Sounds good right? Well, the deal was negotiated in secret with only a handful of Congressional members, the legal text is still not released, and high-powered big business groups are supporters. The official outline of the deal reveals all that is excluded, ignoring a cry for substantial rethinking of US trade policy.
Meanwhile Bolivia continues to advance its People’s Trade Agreement. In April, 2007 Bolivia (along with Venezuela and Nicaragua) decided to withdraw from the International Center for Settlement of Investment Disputes (ICSID) housed at the World Bank. This came out of the social movement started in 2001 against the US multinational Bechtel that sued Bolivia under the ICSID for $25 million after it was thrown out during the Cochabamba Water War. Dropping out of the ICSID sends a clear message that protecting private investment at the expense of the rights of the people will not be tolerated.
Ecuadorian President Rafael Correa, elected into power on an anti-FTA and anti-US military base agenda, is considering doing the same. In April Correa expelled the World Bank’s representative in Quito, accusing him of withdrawing funds in protest over the government’s oil sector reforms.
Costa Rica offers a new beacon of hope as they have yet to ratify the Central American Free Trade Agreement (CAFTA). Huge resistance to CAFTA grew as people learned it would require the dismantling of Costa Rica’s public telecommunications sector that is funding education. On April 12, 2007 the Supreme Electoral Court approved a measure calling for a binding referendum on CAFTA, likely to take place in August or September. The CAFTA referendum will be Costa Rica’s first public referendum since it gained independence from Spain in 1821 (Inside US Trade, May 4, 2007).