Media Center



September 7, 2006 - Washington, DC

When we meet on an occasion such as this to consider the outlook for trade and integration in the Americas, our first thought is not economic, but political.

On the one hand, this is because this year has been – or is still – an electoral year for the whole of the Andean region. Between December 2005 and December 2006, the five Andean countries will all have presidential elections, as will eight other countries in South America, Central America, and the Caribbean. Never before in our Hemisphere have so many elections been held in one year, nor, I believe, have elections followed one another, in such quick succession, in the five countries of the region.

On the other hand, the economic issues we are addressing today have a profound impact on the chances of our democracies surviving. That is because our countries have committed themselves to trade and economic integration as one of the linchpins of their economic and social development strategies. Ensuring that trade grows and generates prosperity is becoming a core factor in the vision of development that we, as a region, must foster: a vision to which our countries subscribed when, in the OAS Charter, they linked economic integration to the overcoming of poverty, asserting that “economic cooperation is essential to the common welfare and prosperity of the peoples of the continent.” Our leaders also recognized that link recently when they declared at the Summit in Mar del Plata that “Our objective is to expand our trade, as a means of boosting growth and our capacity to generate more, higher quality, and better-paying jobs.”

We must admit that although democracy has gained considerable ground in our Hemisphere, it remains vulnerable. It is vulnerable because we still face problems of governance. Yet it is vulnerable, too, because broad segments of the population are unsatisfied and feel excluded from the benefits that democracy should have brought in terms of employment and poverty reduction.

Despite that, the political context and macroeconomic framework should give us grounds for optimism. Already we have held nine of the 13 elections – including those in Bolivia, Colombia, and Peru – with four to come, including those in Ecuador and Venezuela. So far they have been competitive, free, participatory, and fair elections, better – generally speaking – than at any other stage in our history as independent nations. We are sure that the outcome of the elections still to be held will be broadly positive. It is true that in an electoral year uncertainty spreads and, as in any democracy, debates and ideological clashes abound. Nevertheless, 2006 will be remembered as the year with the most elections in the democratic history of America and as the year in which all the Andean countries elected their governments within the space of 12 months.

The economies of the Andean region have also continued to grow at a significant pace: 6.9 percent in 2005, with projections of 6.2 percent for 2006 and 5.2 percent in 2007 (compared with 4.6 percent and 4.3 percent, respectively, for the whole of Latin America and the Caribbean). Average inflation has dipped below two digits and is projected to decline to 5.4 percent in 2006. The region’s fiscal performance has also improved substantially, with several countries achieving fiscal equilibrium.

Trade figures are also promising. In 2005, the value of exports of goods from Latin America grew by 20.3 percent. In the case of Bolivia, the increase was 24 percent; for Colombia 26 percent; Ecuador 25 percent; Peru 37 percent; and in the case of Venezuela: 43 percent.

We have experienced such periods in the past. But the big questions are still: Is this growth sustainable? Or will it, as in the past, turn out to be ephemeral? Will democracy finally be consolidated as the form of government throughout Latin America? And more important still: Will we manage this time to overcome the bane of our countries: the problem of inequality? Because we do still have over 200 million poor, many of whom believe that democracy has not brought them the promised benefits. As Rodrigo Rato, the Managing Director of the IMF, said in a recent interview: “There are levels of poverty that are not only dramatic from a social and human point of view, but which create a serious impediment to macroeconomic growth.” And that is what generates political instability, because the mix of democracy, growth, and inequality makes people tired of waiting.

The answer is not, as some fear, to engage in populist experiments or radical changes, but rather to persevere with sound macroeconomic policies and to continue to strengthen democracy and civic mindedness. I believe that the Andean countries are making enormous efforts along those lines. However, they also need the good will and cooperation of their trading and political partners, which are now indispensable ingredients in a world that is politically and economically interdependent.

I referred to promising trade statistics. However, even more impressive, I believe, is the story of the exporters at the root of those statistics, a story that is often left untold.

Take, for instance, cut flowers in Ecuador. The exports of this sector in 1980 barely totaled US$40,000. This year, in 2006, they will total almost US$400 million, directly and indirectly generating over 100,000 jobs.

A well-known success story in Peru is that of its asparagus farmers and exporters; this sector remains an important source of nontraditional employment, directly generating some 60,000 jobs, 60 percent of them for women. Less well known are the stories of institutions such as Frío Aéreo, a partnership between asparagus producers and exporters that, with government support, today provides the refrigeration, storage, and quality control services needed to meet the demands of a highly competitive international market. So we are not just talking about asparagus, artichokes, or grapes. We are talking about a chain of providers of services and intermediate goods reaping the benefits of trade.

Take another example. Bolivia expects its exports of palm hearts to the United States to triple in 2006. Significantly, palm hearts are grown in the Chapare, a priority area for the strategy of promoting alternative crops to replace coca. The palm heart sector employs 3,000 families, not counting those working in the processing industries. Improvements in quality and packaging have yielded higher prices and the diversification of markets to include not just traditional partners, such as Chile and Argentina, but also France, Spain, Uruguay, and Israel.

All these stories have one factor in common. Growth in those exports took place with the help of preferential access to the United States market under the Andean Trade Promotion and Drug Eradication Act (ATPDEA), a program that constitutes a tangible expression of the United States’ commitment to promote the prosperity, stability, and democracy of the beneficiary countries: Bolivia, Colombia, Ecuador, and Peru. When the program began in 1991 and was then renewed in 2002 for an additional four years, it was inspired by recognition of the need to promote the economic development of those countries by supporting alternatives to the illicit production and trafficking of drugs.

Undoubtedly, ATPDEA is a trade mechanism with political roots and a political impact. It is designed to help countries develop alternative sources of output to illicit crops and to generate jobs in the areas from which the migrants to the “red zones” come.

Unilateral trade liberalization mechanisms, such as the ATPDEA, granted by highly developed countries, have proved effective in boosting value added exports, and therefore also generate employment. In countries that are essentially exporters of primary goods that are trying to design diversification strategies, their impact is considerable.

As we have seen, the ATPDEA has been embraced by the private sector with promising results. Between 2002 and 2005, Colombian exports to the United States under the ATPDEA have increased tenfold, while Peruvian exports have grown almost six times; Ecuadorian exports have increased 20 times, and those of Bolivia have quadrupled. Except in the case of oil and gas, these increases have occurred in nontraditional sectors, thereby contributing to the diversification of the economies of the beneficiary countries. These countries were, definitively, given an opportunity, which they seized.

The impact on employment has been significant. Once again, let me illustrate this with concrete examples that remind us that all this has a human dimension we should not neglect.

Over 300 production units in Ecuador account for the dynamism shown in the broccoli sector, a nontraditional product for which exports to the United States under the ATPDEA rose from only US$700,000 in 2000 to US$10 million in 2005. More than three-quarters of the employment generated in this sector is concentrated in rural areas in the Ecuadorian Andes. Planting and processing broccoli provides over 10,000 jobs and many more if indirect jobs are taken into account.

The gold jewelry sector in Bolivia is also worth noting. A single enterprise, Exportadores Bolivianos, employs 750 workers and a further 2,000 jobs are farmed out to persons living in El Alto, the populous and impoverished city in the highlands near La Paz. Those workers earn three times the Bolivian minimum wage. Encouraged by the rapid growth of exports – by 50 percent in 2005 over 2004 --, the enterprise was contemplating expansion. Investments, however, require certainty. If they do not have it, investors move to other countries with more advantageous conditions. We must also remember that El Alto has been the scene of fiery manifestations of social unrest. What can one expect if, on top of all other woes, the inhabitants have to face the loss of sources of jobs?

Here, let me return to the point about the political dimension attached to the subject of trade as the generator of prosperity and employment. The ATPDEA is scheduled to end on December 31 of this year. Interruption of the preferential access to the United States market for the trade flows it has helped to generate and which have proved so dynamic will have repercussions that go far beyond the economic sphere. When jobs are lost in vulnerable regions, a country’s social and political stability is at risk and a harsh blow is struck to its development aspirations.

That was well understood by the countries when they sought to obtain permanent status for the preferential access to the United States market they were benefiting from. Thus, in mid-2004, Colombia, Ecuador, and Peru began negotiating free trade agreements with the United States, with Bolivia participating as an observer. Currently, those processes are at various phases and being conducted under different circumstances. The important thing, however, is to make sure that preferential access is not impaired. The Andean region continues to be threatened by instability and economic and political fragility; it is vulnerable to the consequences of the fight against drug trafficking as well as to the strong competition it faces for its lawful exports.

The ATPDEA has been a key element in the United States’ anti-drug strategy in the region. By offering preferential access to the United States market, it has helped encourage the diversification of exports as an economically sustainable alternative to the production and trafficking of drugs. Striving to ensure that that preferential access is not interrupted would be consistent with the principle of “shared responsibility” and yet another sign of the United States’ ongoing commitment to the fight against illicit drugs.

It follows, first, that the procedures required for the entry into force of the free trade agreements that Peru and Colombia have signed with the United States should be completed in such a way as to ensure the continuity of trade flows during the transition. Likewise, the two countries – Bolivia and Ecuador – that have not yet negotiated such agreements should be granted an extension of the preferences in order to prevent the grave harm to their citizens that would result from the loss of the benefits provided by a successful agreement. Extending the ATPDEA is the only positive answer possible to avoid a widening of the gaps that today threaten hemispheric relations. That is what the presidents of the four countries conveyed to President Bush in the letter they sent him in mid-June: extension of the ATPDEA is “necessary while the trade agreements to which Bolivia, Colombia and Ecuador aspire are worked out, finalized and implemented in accordance with their respective visions and interests, so as not to disrupt their trade with the United States.”

We are conscious of the complexity and problems associated with an extension of tariff preferences. However, it would be even more problematic to not have those preferences, as that would hamper both diversification and economic development and the creation of sustainable economic alternatives to the cultivation of drugs in the most vulnerable populations.

Thanks to stable trade relations with the United States, the countries will manage to attract the investment they need to continue on the path to further growth. More growth and prosperity will mean more workers employed in their own countries. It will also expand the market for United States products.

Democracy and the observance of human rights are the twin pillars of peaceful coexistence in the Hemisphere. However, that coexistence must also be based on growth, poverty reduction, employment generation, and the equitable distribution of opportunities for social progress.

President Bush said as much a year ago in the OAS, when he was promoting congressional approval of CAFTA: “The people of [Central America] need to see that democracy produces more than just free elections, that democracy produces measurable progress in their lives. As the oldest democracy in this hemisphere, we have a moral obligation and a vital interest in helping the Central American economies and societies succeed.”

That same vision of solidarity must prevail now. All of us are committed to strengthening democracy in our Hemisphere. To achieve that, we have to ensure that all partake of prosperity in an equitable manner. Strengthening our trade ties and deepening our economic integration can help us attain that goal.