Media Center



March 18, 1998 - San Jose, Costa Rica

I would like to express my appreciation to the Government of Costa Rica and to its President, José María Figueres, for the hospitality that has been shown by a country that represents a paradigm for the Americas through its social achievements, its devotion to peace, to human rights, and to the preservation of the environment. Our thanks also go to the president-elect Miguel Angel Rodríguez who, through his proven ability, has advanced the leadership that Costa Rica has already acquired by making trade a fundamental pillar in the search for growth with equity. I would also like to thank José Manuel Salazar for the indispensable leadership he has provided in this process.

I would also like to welcome those members of the business community who have come from all corners of the Americas to share with us their concerns and their vision of the challenges and opportunities that are facing this Hemisphere, here on the eve of the fourth meeting of Trade Ministers of the Americas and only month away from the Second Summit of the Americas in Santiago. I am honored to have the opportunity to address you before these two important events.

As we try to visualize the tasks that lie ahead of us and identify the enormous challenges and opportunities that the creation of the Free Trade Area of the Americas may present, we can see that such Hemispheric encounters have already allowed us to travel well down the road toward the realization of this goal. I am convinced that this meeting will deliver to our Heads of State and Government a fresh and informed perspective on the process of hemispheric integration.

Recently, the OAS celebrated fifty years since its creation. This event allowed us to pause and take stock of how to achieve a balance in hemispheric relations and, above all, to place in perspective the goals that governments have set for themselves for the next summit.

On the path from Miami to Santiago, the OAS has taken numerous steps to respond to the priorities expressed by our peoples: economic integration, improved education, peace and democracy. Of equal importance are steps toward equality, justice, partnership, preservation of the environment, growth and prosperity. In addition, we need to confront the problems that reduce the legitimacy of our democratic systems such as drug trafficking, terrorism, corruption and extreme poverty.

Without a doubt, today we can see much more clearly how we have moved away from decades of isolationism, confrontation and distrust. We have reached a convergence of ideas not only on basic elements of democracy and how to defend it but on the promotion of human rights and civic liberties as well. We also share the conviction that peace, prosperity and regional stability constitute the best basis for free and nondiscriminatory trade. We are well aware that the path ahead of us is steep and will require us to channel the energy of all of our societies in order to surmount the major challenges that lie ahead. In this process, the active commitment of the business sector is fundamental. The four pillars of the next Summit of the Americas are education, democracy, economic integration and the eradication of poverty. It is in our own individual interest, as well as for the greater benefit of all, that the business sector continue to contribute to the strengthening of our economies in order to achieve the political and social objectives that we have set for ourselves.

In this spirit, I would like to share with you some thoughts on what we have been doing in the OAS. The first of these is to fashion a way in which education can serve as the backbone for growth, and to help our citizens become well-informed, responsible, and tolerant individuals. Our countries need citizens who are capable of taking on a critical attitude with respect to information, who value democratic practices and the peaceful settlement of conflicts, who have the capacity to reason and learn for their own benefit, who embody knowledge, values and work habits that allow for both personal and professional growth in order to compete in the new global economy. These are the necessary elements for the realization of greater equality.

As we all know, in this era of globalization, the most important resource available to a country is its people. In order for our citizens to obtain greater access to better education systems, we need to resolve problems related to resources, institutions, educational processes and teaching quality, especially for those in marginal urban and rural areas, for ethnic minorities, and for those that have special education needs.

We have proposed a program to strengthen national and Interamerican institutions for the protection of human rights. In the area of sustainable development, we are preparing a report for the Santiago Summit on how the Western Hemisphere can advance the initiatives given to it at last year´s Summit in Cruz de la Sierra. This would place the Americas as the main region to have a plan for sustainable development in the framework set up under the Earth Summit of Rio de Janeiro in 1992.

We are also focusing in the OAS on how to make progress in the area of social development and in the eradication of poverty. How can we move the Americas away from being the region with the greatest inequality? What role can economic policy play in bringing about such a change? What role can the State and its institutions play? The urgency of this debate is constantly with us. Notwithstanding the progress made in recent years, a large part of the Americas, and in particular Latin America, continues to display the worst indices of the planet in the area of equality and resource distribution. The result is an unacceptable paradox: that this region so rich in resources and possibilities, has left millions of its inhabitants abandoned, caught in the jaws of misery.

In the global era we have been witnesses to the strengthening of the tendency towards commercial linkages that have gone beyond our national borders. There has been a growing process of integration of the international market for goods, services and capital, just as there has been a rapid technological advance, particularly in transport and communication. A constantly growing number of countries are participating today in the global trading system. In this context we can clearly see how hemispheric integration is no longer an option but an imperative.

Equally it is true that in the time that has passed since the Miami summit we have learned to better understand and appreciate our weaknesses and our uncertainties. Enormous challenges have arisen, from the Mexican peso crisis and its effects on the rest of the Americas, the failure to approve the request for "fast track" authority by the United States legislative branch, and the pressure that the Asian financial crisis has placed on our economies, to the greater volatility of capital flows, the enormous requirements and pressures placed on our education and social security systems, and the risks that encircle our cultural identities.

In all of this process we have learned, on the one hand, that globalization, prosperity and growth do not follow a straight path, but that economic and political pitfalls always arise along the way. On the other hand, the hemisphere/s resolve to create the FTAA has been reinforced through each crisis, and in spite of the difficulties today we perceive a higher degree of political will and a more realistic and mature attitude towards the virtues and weaknesses of our economic structures.

The liberalizing measures that have been taken in the various markets of the region will surely continue at a good pace and will continue to have very positive effects on our growth. With the reduction in tariffs from an average of 40 percent in 1980, to around 11 percent at present, the value of exports by the region has continued to grow, from $223 billion (U.S. dollars) in 1994 to an estimated $327 billion in 1997. In conjunction with this export growth, Latin America and the Caribbean have been attracting foreign investment by the private sector at an impressive rate. According to the Report on World Investment by UNCTAD, between 1995 and 1996, foreign direct investment increased by 52 percent to $39 billion (U.S. dollars); a record level. The private sector will find opportunities in these economic trends for enhancing growth and prosperity, and governments will find forces for stability, economic well-being and security.

However, we must remember that the results from these reforms are still unequal. Unemployment while it has fallen, remains very high in much of Latin America and the Caribbean. For the majority of countries economic growth rates are not yet sufficient to produce a significant decrease in poverty while unequal access to resources has appeared to grow in certain countries. A recent study by the World Bank concluded that to reduce poverty, the economies of the region must grow faster than 6 percent a year, a rate that we have not yet achieved.

In the context of the new circumstances that the Asian crisis has created, this task will be difficult for us to achieve. As the Annual Meeting of the IDB which is currently in progress has shown, the monthly flows of private capital to Latin America have fallen since November to nearly half of the record levels realized since October 1997. However, it is clear that we have advanced in the area of regulatory reform, of supervision, restructuring, capitalization, and entry of foreign banks since the last crisis. Latin American countries have also made an effort to raise their levels of reserves, reduce external debt, extend re-payment terms and discourage the contracting of more short-term debt, including through capital controls. Equally, they have adopted more flexible exchange rate regimes and do not have the very high levels of current account deficits that are evident in many Asian countries. The Latin American economic authorities, and especially those from Brazil, acted quickly and decisively to avoid the transmission of the Asian crisis to this hemisphere. However, this does not mean that there have not been unfavorable economic consequences. Besides the reduction in capital flows already mentioned, Latin America has had to face the consequences of a fall in its exports to Asia, along with heightened competition from exports of the latter, and the fall in the prices of nearly all primary products. It is estimated that the slowdown in growth will amount to around one and a half points, on average, for Latin America. It is likely that growth this year will be only around 3 percent.

I would like to turn to the FTAA, which is the initiative that has brought us all together here in San Jose. More than three years have passed since 34 Presidents and Prime Ministers agreed to establish a free trade area covering the entire hemisphere. Next month in April, in Santiago, the Heads of State will ask what we have accomplished during this period of time. What will we tell them?

Without doubt we can inform them that the political commitment on the part of all of the participating countries has been constant, and that the progress in the FTAA process has been extraordinary, with four meetings of Trade Ministers, four Business Forums of the Americas, 13 meetings of Vice-Ministers, and around 75 meetings of the FTAA Working Groups.

The meetings of Trade Ministers have been extremely useful because they have established objectives and set time frames. The meetings of Vice-Ministers have constituted the center of the decisions that have made possible the progress in the work already advanced and will continue to be the center of the decisions of a technical nature during the negotiating process. The Vice-Ministers also have the enormous responsibility of defining the negotiating groups, and the principles and objectives that will guide them.

We can also tell the heads of state that all of the Working Groups have carried out their tasks in an outstanding fashion, have contributed to the creation of a common language and to a convergent technical discussion of the principal areas that will constitute the negotiations. They have also compiled data bases and inventories, collected statistics and regulations, carried out a systematic comparison of the various sub-regional integration agreements, and undertaken detailed studies on many aspects of political and trade relations.

In addition, the Working Groups have helped to identify the areas of convergence and divergence in the various subjects of the future negotiations. This has helped to guarantee greater transparency around the functioning of the various trade and investment regimes of both individual countries and sub-regional groupings, and to ensure a common understanding of these regimes as a crucial step leading to the negotiations.

But the mobilization of efforts and will does not stop there. Participants in the Business Forums of the Americas have been attended by more than 1500 business leaders from all parts of the Hemisphere who have come together to find new commercial and investment opportunities. At these fora, business associations have exchanged views, discussed the problems related to the FTAA, and have put forth possible solutions and important recommendations. They have offered technical analyses and information about the needs of the private sector. Without a doubt, these have become a major source of information for the business community about the advantages of free trade and the FTAA process. This effort guarantees that from its inception, the process will be compatible with the aspirations and needs of the business community, and will serve to stimulate public support for the FTAA process.

In all of this, we must remain forever conscious of the fundamental reality of the Americas: that when trade and investment increase through the reduction of tariffs and the signing of free trade agreements, the role of the private sector is key. We must keep in mind that in the Americas trade agreements do not precede business. Rather, they are forged when trade and investment have developed in such a manner that tariffs, customs procedures and other forms of controls are seen as an obstacle to the further expansion of trade and productive foreign investment. Successful trade agreements are impossible to implement if they are not supported, from the beginning, by the domestic business community.

The multilateral institutions of the Tripartite Committee --- the Organization of American States, the Inter-American Development Bank and the United Nations Economic Commission for Latin America and the Caribbean - have also mobilized tremendous resources in support of the FTAA. Since Miami, the Tripartite Committee has worked with great dedication in support of the FTAA. Officials from our organizations have worked side by side with national representatives to build a common knowledge base to better inform the decisions that will be taken. We have reached out to the public and have made available an unprecedented amount of information. As governments look forward to what the next few years will bring, we in the multilateral organizations will also be striving to ensure that our mandates and resources allow us to be effective in this new stage of the FTAA process.

Before ending this reflection, I would like to comment on some of the fundamental principles that will underlie the FTAA. One of the strengths of this process has been the commitment to consensus in the decision making process, which will ensure the opportunity to attain a balanced and comprehensive agreement. This also means that all opinions will be given respect, and that any reasonably argued proposal will be heard in this forum in the context of the effort towards building consensus.

Another guiding principle of the process is that the FTAA will coexist with the bilateral and subregional agreements that are already in place. We are not starting from zero in the area of trade liberalization --- and this hemispheric process will further the region's economic integration achievements. This is one of the strengths of the process. In their subregional integration efforts -- for example in the NAFTA, the Mercosur, the Andean Community, the Central American Common Market and the Caricom -- the governments and entrepreneurs of the region have gained extraordinary experiences that can further the FTAA objectives.

As all but one of the 34 participants in the FTAA process are members of the WTO, they will work toward an agreement that is fully consistent with the multilateral trading order. This is of great importance, as it will send a strong signal to our trading partners outside of the region. Since last year we have clearly established that the Free Trade Area of the Americas will not raise barriers to trade or investment. On the contrary, existing arrangements have stimulated trade and investment linkages with the rest of the world. Rather than closing markets, they contribute to maintaining an open trading environment. Rather than curtailing investment, they cultivate them. This is not an inward-oriented integration but an endeavour aimed in part towards increased trade with the rest of the world. Average tariff levels are substantially lower than they were before. We have also seen that our countries have participated actively in the multilateral trade negotiations at the same time as advancing their subregional integration agreements, which have had a positive affect on the multilateral agenda. In general, one can say that there is a strong will to strengthen WTO mechanisms.

There is no doubt that the countries of the region have a great interest in strengthening the WTO and not in undermining it. The results of the Uruguay Round have been positive for all. Perhaps the most eloquent proof of this is the increased use of the dispute settlement mechanism by the Latin American countries. Venezuela and Brazil, for example, were among the first countries to successfully use this mechanism. Since then, various other countries - including Costa Rica - have also used this mechanism. In all cases the Latin American countries have been successful in their efforts.

The message that we want to send is that the FTAA is not an inward-oriented bloc, designed to raise barriers to nonparticipants, but an endeavour aimed towards a higher degree of liberalization that goes beyond current global standards. As such, if the FTAA succeeds in taking its disciplines beyond those of the WTO, the Hemisphere has the opportunity to provide leadership to the world trading community. Already we have seen how some of the work conducted by the Working Groups, such as the Working Group on Investment, chaired by Costa Rica, point to such possibilities.

Another important principle is that countries may negotiate individually or as members of a subregional integration group. This is crucial, as one of the collateral results of the process has been the deepening of the existing linkages between the members of such groups. We have seen, for example, that the countries of the Andean Community, the Mercosur, Central America and Caricom have spoken with a single voice. The weight and influence of smaller, and at times the larger, economies has multiplied when combined with the voice and views of their regional partners. This is also important because the regional integration groups formed in earlier years are being positively influenced by more recent trade policy developments as embodied in the WTO, the NAFTA, the Group of Three and the new generation of bilateral accord signed by Chile and Mexico.

As a region, we have agreed from the outset that special attention must be given to the special needs and conditions of the smaller economies in order to facilitate and ensure their participation in the FTAA. While there is agreement on this principle, many of its components have been extremely difficult to define. Some economies that are small by one criterion, may not be considered so according to another. At this stage of the process it is clear that different solutions will be required on a case-by-case, country-by-country basis.

We also know that in 15 of the participant countries of the FTAA, trade tariffs represent 20% or more of their current government revenue. For these countries it will be a great challenge to design mechanisms that will allow them to participate effectively in the negotiations, as on the one hand, the eventual elimination of tariffs is a key feature of a free trade agreement, and, on the other hand, these same countries rely heavily on this source of revenue to fund hospitals, schools, the building of roads, police and fire protection services, and to meet many other social responsibilities.

One of the most important elements of this process is the commitment to achieve significant progress by the year 2000. This means that if the private sector can begin to reap some benefits of this integration as soon as possible, it will reinforce public support for free trade initiatives, which, by their very nature, tend to produce longer-term results. There is a clear need for transparent standards in the establishment of policies, programs and rules for issues such as customs procedures, health and plant inspection rules and technical barriers and a growing need to harmonize the regulations governing trade and investment.

We must also not ignore that the measures that will be taken within the FTAA process to stimulate freer trade and investment will be not only complementary to these efforts but will enhance them. Similarly, the implementation of the Uruguay Round commitments by all countries, will stimulate credibility and confidence in the process.

I would like to emphasize, as I have on other occasions, a focus that must always be present in these negotiations. The current discussion about trade goes much further than those issues directly related to the exchange of goods, and includes themes that were called in the Uruguay Round "new issues." These include issues such as investment, intellectual property, services, government procurement, financial and capital markets, technology transfer, competition policy, among others, which will play a determining role in the negotiation of freer trade in the Hemisphere.

It is evident that for the industrialized countries of the region the issue of market access continues to be important, but the emphasis is more and more on these new themes. This is largely due to the fact that restrictions to the imports of industrialized country goods in the rest of the Americas has diminished considerably due to the unilateral opening measures that have been taken by these countries.

In contrast, countries with a medium level of development have a number of complaints and pending disputes regarding their access of their products to their major markets in the Americas. This is particularly true in certain sensitive sectors, such as agriculture, textiles, light manufactures and some basic industry. The mixture of administrative barriers, subsidies and high tariffs gives market access a special meaning for Latin America and the Caribbean.

It is important to understand that the success of the negotiations depends on the symmetry and equilibrium with which the concerns of both groups of countries are addressed. It will be necessary to look at the negotiations on market access and the new themes as a process of articulation of the areas of interest of the industrialized countries that needs to be accompanied by solid concessions and commitments in market access for the Latin American and Caribbean countries.

Besides the principles that we have agreed, we would like to take up in a systematic manner some of the main challenges for the years that lie ahead to 2005 and that will require a clear focus of our political will.

The first need is to send to all of the people of the hemisphere the message that free trade and the regional integration process are essential to the interests of all. It will be necessary for governments, the private sector, and the academic community to work together in order to emphasize in a clear and persuasive manner an evident truth : the opening of trade in a context of mutually agreed rules is the key to our economic growth.

However, confronted with labor unions, academic institutions and non-governmental organizations of all types, who demonstrate a certain fear of some of the undesirable characteristics of globalization, we should listen to their concerns and we must also educate our fellow citizens about the enormous positive implications of the vast economic and political endeavor that the FTAA represents. Our success in this endeavor will depend upon our ability to build a common understanding on these issues.

The second need consists of ensuring that hemispheric economic integration is carried out simultaneously with a greater social integration of our populations. While the opening to trade is the key to growth, we cannot allow persistent inequality to diminish the force of the development process. Those who understand economic reform only as a means of removal of the state so that the least protected in our societies are abandoned, are planting the seeds for a weakening of the necessary support from the electorate . Our political leaders must be convinced that protectionism is not the answer to the opening of markets throughout the region. In an era of globalization and characterized by increasing integrated, governments must instead maintain a growing role for social issues in order to attenuate the pressures that economic restructuring places on the local populace.

A third challenge consists in helping the developing countries of the region to build their institutional and human resource capacity so that they may draw maximum benefit from the advantages that new opportunities will bring. For many of the countries represented here today, the negotiation of the FTAA will be an extremely difficult task. In some cases trade ministers do not have adequate human and financial resources, or lack sufficient experience in complex trade negotiations, especially when one considers that these will include countries with the largest amount of experience in global negotiations.

Before the negotiations begin, certain governments will need technical cooperation in order to implement the commitments undertaken in the Uruguay Round. For this, technical assistance actions and programs that can be provided for the training of negotiators are fundamental in order to enhance access to information and the strengthening of national institutions, especially to the benefit of the small economies.

Lastly, and to conclude, I would say that we must not lose sight of the fact that the most important motivation of the FTAA is not to the benefit of States, but rather for the well-being of the individuals that make them up, who must be educated, provided security and opportunities for good jobs with good salaries, healthy environments, and of course, liberty and the protection of their civil rights.

It is these individuals who must be the beneficiaries of this effort of concerted action that we are advancing within our hemisphere. They are the ones who have inspired our labor: the millions of Americans who share this fertile ground and who wish to build underneath its skies a continent where they can realize the promises of economic well-being, peace, prosperity, and the union of our peoples.

Thank you very much.