Inter-American Cooperation at a Crossroads (International Political Economy)

International Political Economy Series General Editor: Timothy M. Shaw, Professor and Director, Institute of International Relations, The University of the West Indies, Trinidad & Tobago Titles include: Leslie Elliott Armijo (editor) FINANCIAL GLOBALIZATION AND DEMOCRACY IN EMERGING MARKETS Jeffrey Ayres and Laura Macdonald (editors) CONTENTIOUS POLITICS IN NORTH AMERICA National Protest and Transnational Collaboration under Continental Integration Eudine Barriteau THE POLITICAL ECONOMY OF GENDER IN THE TWENTIETH-CENTURY CARIBBEAN Gabriel G. Casaburi DYNAMIC AGROINDUSTRIAL CLUSTERS The Political Economy of Competitive Sectors in Argentina and Chile Peter Clegg THE CARIBBEAN BANANA TRADE From Colonialism to Globalization Andrew F. Cooper and Timothy M. Shaw (editors) THE DIPLOMACIES OF SMALL STATES Between Vulnerability and Resilience Matt Davies INTERNATIONAL POLITICAL ECONOMY AND MASS COMMUNICATION IN CHILE National Intellectuals and Transnational Hegemony Yvon Grenier THE EMERGENCE OF INSURGENCY IN EL SALVADOR Ideology and Political Will Ivelaw L. Griffith (editor) THE POLITICAL ECONOMY OF DRUGS IN THE CARIBBEAN Jerry Haar and Anthony T. Bryan (editors) CANADIAN–CARIBBEAN RELATIONS IN TRANSITION Trade, Sustainable Development and Security Tricia Juhn NEGOTIATING PEACE IN EL SALVADOR Civil–Military Relations and the Conspiracy to End the War Laura Macdonald and Arne Ruckert (editors) POST–NEOLIBERALISM IN THE AMERICAS R. Lipsey and P. Meller (editors) WESTERN HEMISPHERE TRADE INTEGRATION A Canadian–Latin American Dialogue

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Gordon Mace, Andrew F. Cooper and Timothy M. Shaw (editors) INTER-AMERICAN COOPERATION AT A CROSSROADS Don Marshall CARIBBEAN POLITICAL ECONOMY AT THE CROSSROADS NAFTA and Regional Developmentalism Juan Antonio Morales and Gary McMahon (editors) ECONOMIC POLICY AND THE TRANSITION TO DEMOCRACY The Latin American Experience Leo Panitch and Martijn Konings (editors) AMERICAN EMPIRE AND THE POLITICAL ECONOMY OF GLOBAL FINANCE Eul-Soo Pang THE INTERNATIONAL POLITICAL ECONOMY OF TRANSFORMATION IN ARGENTINA, BRAZIL, AND CHILE SINCE 1960 Henry Veltmeyer, James Petras and Steve Vieux NEOLIBERALISM AND CLASS CONFLICT IN LATIN AMERICA A Comparative Perspective on the Political Economy of Structural Adjustment Henry Veltmeyer, James Petras THE DYNAMICS OF SOCIAL CHANGE IN LATIN AMERICA William Vlcek OFFSHORE FINANCE AND SMALL STATES Sovereignty, Size and Money

International Political Economy Series Series Standing Order ISBN 978–0–333–71708–0 hardcover Series Standing Order ISBN 978–0–333–71110–1 paperback (outside North America only) You can receive future titles in this series as they are published by placing a standing order. Please contact your bookseller or, in case of difficulty, write to us at the address below with your name and address, the title of the series and one of the ISBNs quoted above. Customer Services Department, Macmillan Distribution Ltd, Houndmills, Basingstoke, Hampshire RG21 6XS, England

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Inter-American Cooperation at a Crossroads Edited by

Gordon Mace Professor, Department of Political Science and School of Advanced International Studies, and Director of the Inter-American Studies Centre, Université Laval, Canada

Andrew F. Cooper Distinguished Fellow, The Centre for International Governance Innovation (CIGI), Canada and Professor, Department of Political Science, University of Waterloo, Canada

Timothy M. Shaw Professor and Director, Institute of International Relations, University of the West Indies, St. Augustine, Trinidad and Tobago, and Senior Fellow, The Centre for International Governance Innovation (CIGI), Canada

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Introduction, selection and editorial matter © CIGI and Gordon Mace 2010 Individual chapters © contributors 2010 All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No portion of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, Saffron House, 6–10 Kirby Street, London EC1N 8TS. Any person who does any unauthorized act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The authors have asserted their rights to be identified as the authors of this work in accordance with the Copyright, Designs and Patents Act 1988. First published 2010 by PALGRAVE MACMILLAN Palgrave Macmillan in the UK is an imprint of Macmillan Publishers Limited, registered in England, company number 785998, of Houndmills, Basingstoke, Hampshire RG21 6XS. Palgrave Macmillan in the US is a division of St Martin’s Press LLC, 175 Fifth Avenue, New York, NY 10010. Palgrave Macmillan is the global academic imprint of the above companies and has companies and representatives throughout the world. Palgrave® and Macmillan® are registered trademarks in the United States, the United Kingdom, Europe and other countries. ISBN 978–0–230–24361–3

hardback

This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources. Logging, pulping and manufacturing processes are expected to conform to the environmental regulations of the country of origin. A catalogue record for this book is available from the British Library. Library of Congress Cataloging-in-Publication Data Inter-American cooperation at a crossroads/edited by Gordon Mace, Andrew F. Cooper, Timothy M. Shaw. p. cm. Includes bibliographical references and index. ISBN 978–0–230–24361–3 (hardback) 1. Pan-Americanism. 2. Latin America—Relations—United States. 3. United States—Relations—Latin America. I. Mace, Gordon, 1947– II. Cooper, Andrew Fenton, 1950– III. Shaw, Timothy M., 1945– F1418.I5953 2011 327.98073—dc22 2010034182 10 9 8 7 6 5 4 3 2 1 19 18 17 16 15 14 13 12 11 10 Printed and bound in Great Britain by CPI Antony Rowe, Chippenham and Eastbourne

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The Centre for International Governance Innovation (CIGI) is an independent, non-partisan think tank that addresses international governance challenges. Led by a group of experienced practitioners and distinguished academics, CIGI aims to anticipate emerging trends in international governance and to strengthen multilateral responses to the world’s most pressing problems. CIGI advances policy ideas and debate by conducting studies, forming networks and convening scholars, practitioners and policy makers. By operating an active program of publications, events, conferences and workshops, CIGI builds capacity to effect change in international public policy. CIGI was founded in 2001 by Research In Motion (RIM) co-CEO and philanthropist Jim Balsillie, who serves as CIGI’s chair. CIGI is advised by an International Advisory Board.

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Contents List of Tables and Figures

ix

Foreword: Imagining without Building the Sub-Regions of the Americas Robert A. Pastor

x

Acknowledgements

xx

Notes on Contributors

xxii

List of Abbreviations

xxviii

Introduction Gordon Mace, Andrew F. Cooper and Timothy M. Shaw

1

Part I A Changing Landscape 1 Hemispheric Relations: Budding Contests in the Dawn of a New Era Diana Tussie 2 The Obama Administration and Latin America: Towards a New Partnership? Daniel P. Erikson 3 The Caribbean in a Turbulent World Norman Girvan

23

43 60

Part II Responding to Challenges 4 Economic Integration in the Americas: An Unfinished Agenda Antoni Estevadeordal and Kati Suominen 5 Building on Sub-Regional Economic Integration Projects to Forge an Energy and Climate Partnership of the Americas Thomas Andrew O’Keefe

81

95

6 Demise of the Inter-American Democracy Promotion Regime? Thomas Legler

111

7 A More Secure Hemisphere? Rut Diamint

131

8 Poverty Reduction and the Role of Regional Institutions Nicola Phillips

153

Part III The Effectiveness of Other Institutions 9 The Successes, Failures and Future of Mercosur Marc Schelhase

vii

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171

viii Contents

10 Ruling the North American Market: NAFTA and its Extensions Louis Bélanger and Richard Ouellet

187

11 New Forms of Integration: ALBA Institutions and Mechanisms Josette Altmann

204

Part IV Reconstructing a Regional System for the Americas 12 Middle Powers and Hemispheric Diplomacy: Towards an A10 Jorge Heine

225

13 What Role for the Private Sector in Inter-American Multilateralism? Richard E. Feinberg

242

14 Conclusion: The Fragile Legitimacy of Inter-American Institutions Gordon Mace and Jean-Philippe Thérien

261

Index

275

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List of Tables and Figures Tables 0.1 Indicators for the Americas, 1980–2006

xiv

0.2 Western Hemisphere: Total and intraregional exports, 1994–2004

xvi

4.1 Trend comparisons of trade openness and regional bias (1990 and 2007)

83

4.2 Intraregional trade (share of exports), 2008

85

4.3 Intraregional trade in the Western Hemisphere (1990–2009)

86

11.1 ALBA and Petrocaribe summits

206

11.2 Latin America and the Caribbean: Poverty evolution

208

11.3 Latin America: Main trading partners by sub-region (2007)

209

11.4 Latin America: Poverty and extreme poverty (%)

212

11.5 Latin America: Distribution of wealth in the wealthiest and poorest segments of the population (%)

213

11.6 Venezuelan funds destined to the countries of the ALBA (in US$ millions)

214

Figures 4.1 Trade with Western Hemisphere RTA partners in 2008

83

4.2 Trade with Western Hemisphere RTA partners in 1990

84

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Foreword Imagining without Building the Sub-Regions of the Americas Robert A. Pastor The nations of the Western Hemisphere were born with a congenital contradiction. Their struggles for independence were, largely, national struggles, though many of the liberators dreamed of a wider continental entity. Those dreams of unity remain in the hearts of many Latin and North Americans and have resulted in periodic declarations to form new groups of nations or functional inter-governmental institutions. The groups have varied in size and differed in purpose. Simon Bolivar dreamed of a united group of Latin American nations. James Monroe viewed all of the Americas as distinct from and better than Europe, and his ‘doctrine’ aimed to preclude European re-colonization of the Americas. When hopes for unification faded, national leaders proposed new forms of cooperation to defend the region, prevent intervention, foster human rights, resolve investment disputes, and promote freer trade. While the dream has not died, the reality has fallen short. A few of the new groups include all the nations of the Americas, but most of them encompass a few proximate nations or were focused on particular functions. In most cases, the initial impetus to combine stopped short of institutionalization. Even those that achieved some form of institutionalization did not achieve their original promise. The contributors to this book have systematically examined the history of sub-regionalism and inter-American cooperation in the Americas. They find the evolution, growth, and diversification of the inter-American idea endlessly fascinating and have conveyed the creativity as well as the reality in this volume.

The idea of regionalism and its evolution The idea of the Americas was born of two unusual ironies five centuries ago. First, Christopher Columbus claimed to have discovered the region and yet he met large numbers of people who were already here. He compounded his error by calling them ‘Indians’, believing he had arrived in South Asia, missing his destination by half a globe. The second irony was a joke on Columbus: his magnificent achievement was named by a German publisher to honour another Italian navigator, Amerigo Vespucci, who again ‘discovered’ the ‘Americas’ several decades later. x

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xi

These ironic roots may explain why the patterns of inter-American cooperation also yield a convoluted quality. In the early nineteenth century, soon after a majority of new nations emerged in the Americas, US President James Monroe enunciated a strategic vision of the Americas which aimed to separate those new nations from Europe’s ancient intrigues. Latin America welcomed the statement, believing that it meant that the US would defend their independence, and in a few cases the US did so, but not often or impartially enough to assuage their concerns. Simon Bolivar responded to Monroe’s initiative three years later by convening an ‘Amphicytonic Congress’ in Panama to discuss unity. Initially uncertain as to whether to invite the United States, he chose to do so, though late and without much enthusiasm. The US was similarly ambivalent, debating over a prolonged period whether to attend, and finally dispatching two envoys, one of whom died on the way and the other arrived too late for the conference. That pattern of inter-American cooperation has been repeated. As pertinent, not much was accomplished in Panama. Nonetheless, Latin American leaders met from time to time during the next 60 years, and the US was not upset over the lack of invitations. In 1889, having survived a devastating civil war and begun to explore the world for new markets and opportunities, the US turned first to Latin America, inviting its leaders to Washington to discuss freer trade and mechanisms for handling disputes. The leaders decided to establish an institution to address these and other issues, and that became the Pan American Union. At the turn of the century, Andrew Carnegie built a magnificent building to host the new institution in Washington, and that building has housed the Organization of American States (OAS) since its founding in 1948. The OAS has proven the most durable (though not necessarily the most effective) institution in the Americas. It includes other institutions, such as the InterAmerican Commission on Human Rights and the Inter-American Court on Human Rights. It expanded into economic development and cultural affairs and, with the Santiago Commitment of 1991 and the Inter-American Democratic Charter a decade later, moved into the area of trying collectively to preserve and defend democracy in all the OAS states. Beginning in 1960, groups of Latin American countries forged economic arrangements to strengthen their bargaining power against foreign investors, widen their markets, and set rules that could reduce disputes and enhance cooperation. Those groups initially included free trade regimes, like the Caribbean Common Market (CARICOM), the Central American Common Market, and the Andean Pact. Several decades later, after the debt crises of the 1980s, several sub-regions, including North America and Mercosur, tried to deepen their economic pacts through ‘open regionalism’. More recently, a group of governments, led by Venezuela, formed an organization, Bolivarian Alternative for the Americas (ALBA), aimed at an alternative to free trade. Other organizations, such as Union of South American Nations (UNASUR), seek greater cooperation among South American countries.

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Foreword

Parameters for assessment This volume examines and assesses all of these organizations as well as new regimes on democracy, human rights, and trade. While each chapter displays the independence and creativity of its author, two threads connect most of them, and that is: cooperation is desirable, and there is room for improvement. Recommendations abound, making this volume that much more valuable. Stanley Hoffmann helped us to recognize that while international organizations seek to transcend the nation state, they also reflect and are affected by the balance of power. In the Western Hemisphere, the disproportionate power of the US has shaped virtually all the groups. Indeed, many are established to try to balance that power. A discussion of inter-American cooperation that fails to take into account the balance of power is one that places greater faith in the declarations than the substance of the organizations. In Table 0.1 – Indicators of the Americas – one can see clearly the dimensions of each major subgroup. Mercosur – with Brazil as its principal partner – represents 28 per cent of the population and about 7 per cent of the gross product and the total trade of all the Americas. In comparison, the Andean Community represents 15 percent of the population, 2.7 per cent of the gross product, and 4.5 per cent of the region’s total trade. CARICOM and the Central American Common Market add to about 6 per cent of the population and less than one percent of the region’s product and trade. Alongside these efforts, the three countries of North America constitute half of the region’s population and nearly 90 per cent of the region’s gross product and total trade. The North American market, in brief, eclipses all the other regional groups in the hemisphere. Indeed, all the other 31 nations of the Americas constitute about 10 per cent of the economic weight of the Americas. Although Mercosur aspires to be as deep as the European Union, and the others have set high standards, by one simple indicator – intra-regional trade as a percentage of total trade – it is clear that North America is the only group that has established a market (see Table 0.2). Even if one includes Chile and Bolivia with Mercosur, the total amount of intra-regional exports in that group as a percent of its global exports reached only 16 per cent in 2004. Only 10 per cent of the Andean Community’s exports with the world were with each other. Central America, in contrast, traded 28 per cent of its total trade with each other. In the case of North America, more than half of the three countries’ exports are destined for each other, and that amounted in 2004 to US$700 billion as compared to their total exports of US$1.2 trillion. No doubt North America is a daunting economic presence because of the US, but it is worth noting that Canada’s economy is second in the Americas and Mexico’s is fourth. Together, North America is a formidable global entity while the other groups in the Americas are Lilliputian.

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The future of inter-American cooperation needs to face these asymmetries, especially when contemplating economic cooperation. This economic gap, however, is not as important in the areas of human rights and democracy, and indeed, in these areas, the Americas has demonstrated both real progress and continued obstacles. The future of cooperation in the Americas might very well turn on whether the governments overcome those obstacles and create a durable mechanism to assure the continued promotion of the human rights of all the Americas and the defence of democracy.

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Table 0.1

Indicators for the Americas, 1980–2006

Group or country

Population (millions)

GDP (billions USD)

2006

1980

2006

1980

15,275.7 89.0% 410.6 1,675.1 432.4 2,544.0

27.6%

4,219.1

87.2%

13,163.9 76.7%* 301.8 1,036.6 1,271.6 82.0 388.1 840.2 26.8 250.4

22.4% 58.7% 61.7%

2,954.7 745.8 518.6

61.0%*

51.6% 3,198.5

299.4 32.6 104.2

2,709.0 266.0 223.5

Mercosur Brazil Argentina Paraguay Uruguay

237.7 189.3 39.1 6.0 3.3

28.1%

356.9 234.9 77.0 4.6 10.1

1,310.6 1,067.8 214.2 9.3 19.3

Andean Community Venezuela Colombia Peru Ecuador Bolivia

122.8

14.5%

138.0

466.3

69.4 33.4 20.6 11.7 2.8

184.5 135.7 93.2 41.4 11.5

Caricom (b) Haiti Jamaica

12.1 9.4 2.7

4.1 1.5 2.6

15.0 5.0 10.0

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1980

2006

2006

Total Trade (billions USD) 2006

436.2

1.4%

Imports Trade (a) (billions USD) as % of GDP 2006

North America US Canada Mexico

27.0 45.6 27.6 13.2 9.4

Exports (billions USD)

314.8 1,918.1 82.8 357.7 34.8 268.2

7.6% 6.2%*

37.0 23.5 10.9 0.6 2.0

190.3 137.8 46.6 1.9 4.0

48.3 33.8 11.1 0.9 2.5

140.8 95.9 34.2 5.9 4.8

25.3% 21.9% 37.7% 83.9% 45.6%

331.1 233.7 80.8 7.8 8.8

6.8% 4.8%*

2.7%

36.5

130.0

36.1

89.8

47.1%

219.8

4.5%

20.5 6.5 5.2 3.2 1.1

65.2 24.4 23.8 12.7 3.9

20.2 7.0 4.2 3.6 1.1

33.6 26.0 15.3 12.1 2.8

53.6% 37.1% 42.0% 59.9% 58.3%

98.8 50.4 39.1 24.8 6.7

2.1 0.4 1.7

2.5 0.5 2.0

2.4 0.6 1.8

7.3 1.6 5.7

65.3% 42.0% 77.0%

9.8 2.1 7.7

0.1%

0.2%

CACM Guatemala El Salvador Costa Rica Honduras Nicaragua The Americas

36.7 13.0 6.8 4.4 7.0 5.5

4.3%

845.5

100.0%

21.0 7.9 3.6 4.8 2.6 2.1

87.2 30.2 18.7 22.2 10.8 5.3

0.5%

6.0 1.9 1.2 1.4 1.0 0.5

20.9 6.0 3.7 8.2 2.0 1.0

8.5 2.5 1.5 2.1 1.3 1.1

39.5 11.9 7.7 11.5 5.4 3.0

69.3% 59.3% 61.0% 88.7% 68.5% 75.5%

60.4 17.9 11.4 19.7 7.4 4.0

1.2%

3,726.1 17,154.8 100.0% 492.2 2,018.8 527.7 2,821.4

28.2%

4,840.2

100.0%

CACM ⫽ Central American Common Market Caricom ⫽ Caribbean Common Market a. Trade is defined as Exports ⫹ Imports b. Export and Import data included only for Haiti and Jamaica * As a percentage of the Americas Sources: For 1980: GDP, export and import data taken from World Bank, World Development Report 1999/2000: Entering the 21st Century, 252–3, 268–9; for population, World Bank, World Development Indicators 2000, table 1.1, 13. For 2004: Import and export data taken from World Trade Organization, Statistics Database, www.wto.org: population and GDP data taken from World Bank, Data Query. www.worldbank.org.

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xvi Table 0.2 Western Hemisphere: Total and intraregional exports, 1994–2004 (millions of US dollars and percentages) 1994

1995

1996

1997

1998

858,456 18.1 392,278

994,328 15.8 471,910

1,071,955 7.8 496,479

1,179,833 10.1 521,552

1,161,673 –1.5 484,536

15.4 466,178

20.3 522,419

5.2 575,475

5.1 658,280

–7.1 677,138

20.4 54.3

12.1 52.5

10.2 53.7

14.4 55.8

2.9 58.3

Latin America and the Caribbean (LAC)2,3 Total Exports 182,545 220,411 % growth 18.1 20.7 Extra-LAC exports 147,584 178,629 % growth 18.0 21.0 Intra-LAC exports 34,961 41,782 % growth 18.7 19.5 Intra/Total 19.2 19.0

249,332 13.1 203,074 13.7 46,257 10.7 18.6

276,962 11.1 223,464 10.0 53,498 15.7 19.3

268,849 –2.9 215,609 –3.5 53,240 –0.5 19.8

Western Hemisphere 1,2,3 Total Exports % growth Extra-hemispheric exports % growth Intra-hemispheric exports % growth Intra/Total

Andean Community Total Exports % growth Extra-Andean exports % growth Intra-Andean exports % growth Intra/Total Caricom3 Total Exports % growth Extra-Caricom exports % growth Intra-Caricom exports % growth Intra/Total CACM Total Exports % growth Extra-CACM exports % growth

34,243 17.5 30,816

38,259 11.7 33,524

45,687 19.4 40,996

47,655 4.3 42,028

38,742 –18.7 33,402

17.3 3,427 19.8 10.0

8.8 4,735 38.2 12.4

22.3 4,691 –0.9 10.3

2.5 5,627 19.9 11.8

–20.5 5,341 –5.1 13.8

5,069 57.7 4,376

5,531 9.1 4,649

5,439 –1.7 4,568

6,008 10.4 5,082

5,543 –7.7 4,473

64.2 693

6.2 882

–1.8 872

11.3 925

–12.0 1,070

26.0 13.7

27.2 15.9

–1.1 16.0

6.1 15.4

15.6 19.3

5,509 12.4 4,280 12.7

6,864 24.6 5,408 26.4

7,778 13.3 6,192 14.5

8,242 6.0 6,417 3.6

10,313 25.1 8,125 26.6

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1999

2000

2001

2002

2003

2004

1,216,398 4.7 488,397

1,308,489 7.6 508,778

1,234,953 –5.6 478,327

1,192,998 –3.4 459,310

1,289,255 8.1 513,532

1,490,117 15.6 592,897

0.8 728,001

4.2 799,711

–6.0 756,626

–4.0 733,688

11.8 775,723

15.5 897,220

4.2

7.5 59.8

9.9 61.1

–5.4 61.3

–3.0 61.5

5.7 60.2

15.7 60.2

6.8

287,680 7.0 242,330 12.4 45,349 –14.8 15.8

346,324 20.4 290,255 19.8 56,069 23.6 16.2

334,441 –3.4 275,638 –5.0 58,803 4.9 17.6

332,182 –0.7 283,493 2.8 48,689 –17.2 14.7

366,119 10.2 312,581 10.3 53,539 10.0 14.6

439,222 20.0 367,311 17.5 71,911 34.3 16.4

43,207 11.5 39,268

57,236 32.5 52,045

50,837 –11.2 45,181

48,955 –3.7 43,766

55,015 12.4 50,052

72,578 31.9 65,049

17.6 3,939 –26.2 9.1

32.5 5,191 31.8 9.1

–13.2 5,656 9.0 11.1

–3.1 5,189 –8.3 10.6

14.4 4,963 –4.4 9.0

30.0 7,529 51.7 10.4

5,933 7.0 4,871

7,754 30.7 6,349

8,393 8.3 6,929

5,480 –34.7 4,453

7,108 29.7 5,775

— — —

8.9 1,062

30.3 1,404

9.1 1,464

–35.7 1,027

29.7 1,334

— —

3.1

–0.7 17.9

32.2 18.1

4.3 17.4

–29.9 18.7

29.9 18.8

— —

7.5

11,175 8.4 8,886 9.4

12,765 14.2 10,194 14.7

10,510 –17.7 7,693 –24.5

10,008 –4.8 7,198 –6.4

11,626 16.2 8,498 18.1

12,621 8.6 9,060 6.6

AAGR 1994–20044

5.7

9.2 9.5 7.5

7.8

7.8 8.2

3.8

8.6 7.8 (Continued)

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1994 Intra-CACM exports % growth

1995

1996

1997

1998

1,229 11.5

1,456 18.5

1,586 8.9

1,826 15.1

2,188 19.9

22.3

21.2

20.4

22.1

21.2

62,113 14.8 50,157

70,402 13.3 56,019

74,998 6.5 57,960

82,342 9.8 62,289

81,323 –1.2 60,972

13.7 11,957

11.7 14,384

3.5 17,038

7.5 20,053

–2.1 20,351

19.3 19.2

20.3 20.4

18.5 22.7

17.7 24.4

1.5 25.0

Mercosur + Chile + Bolivia (MCB) Total Exports % growth Extra-MCB exports % growth Intra-MCB exports % growth Intra/Total

74,790 17.0 58,333 16.5 16,458 18.6 22.0

87,977 17.6 67,903 16.4 20,074 22.0 22.8

91,700 4.2 68,732 1.2 22,968 14.4 25.0

100,632 9.7 73,874 7.5 26,758 16.5 26.6

97,197 –3.4 70,615 –4.4 26,582 –0.7 27.3

NAFTA Total Exports % growth Extra–NAFTA exports % growth Intra-NAFTA exports % growth Intra/Total

737,888 18.2 383,349 15.1 354,539 21.7 48.0

853,694 15.7 460,581 20.1 393,113 10.9 46.0

918,077 7.5 485,698 5.5 432,379 10.0 47.1

1,013,108 10.4 517,457 6.5 495,651 14.6 48.9

1,012,114 –0.1 490,885 –5.1 521,229 5.2 51.5

Intra/Total Mercosur Total Exports % growth Extra-Mercosur exports % growth Intra-Mercosur exports % growth Intra/Total

1. Western Hemisphere includes Latin America, Canada, and the United States. There are gaps in some years for some Caribbean countries. 2. Latin America and the Caribbean includes Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, Dominican Republic (except 1998–2004), Ecuador, EI Salvador, Guatemala, Honduras, Mexico, Nicaragua, Panama (except 1994), Paraguay, Peru, Uruguay, Venezuela and Caricom (see note 3 for exceptions). Caricom data for 2004 are not available. 3. Caricom includes Bahamas, Barbados, Belize, Dominica, Grenada, Guyana, Jamaica, St Kitts and Nevis, St Lucia, St Vincent and the Grenadines, Suriname, and Trinidad and Tobago, because of the unavailability of data for the other Caricom member states. Totals exclude Bahamas (1994–96, 2002–03), Guyana (1994–97, 2003), St Kitts and Nevis (1996) and Suriname (2002–03).

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1999

2000

2001

2002

2003

2004

AAGR 1994–20044

2,289 4.6

2,571 12.3

2,817 9.6

2,810 –0.2

3,128 11.3

3,560 13.8

20.5

20.1

26.8

28.1

26.9

28.2

74,320 –8.6 59,158

84,659 13.9 66,961

87,876 3.8 72,725

88,880 1.1 78,714

106,086 19.4 93,367

134,865 27.1 117,787

–3.0 15,163

13.2 17,698

8.6 15,151

8.2 10.166

18.6 12,719

26.2 17,078

8.9

–25.5 20.4

16.7 20.9

–14.4 17.2

–32.9 11.4

25.1 12.0

34.3 12.7

3.6

91,355 –6.0 70,664 0.1 20,691 –22.2 22.6

104,120 14.0 79,581 12.6 24,539 18.6 23.6

106,839 2.6 84,668 6.4 22,171 –9.6 20.8

107,675 0.8 90,720 7.1 16,955 –23.5 15.7

127,795 18.7 106,998 17.9 20,797 22.7 16.3

167,386 31.0 140,033 30.9 27,353 31.5 16.3

1,071,355 5.9 486,296 –0.9 585,059 12.2 54.6

1,134,834 5.9 491,695 1.1 643,140 9.9 56.7

1,061,548 –6.5 464,133 –5.6 597,415 –7.1 56.3

1,021,497 –3.8 432,856 –6.7 588,641 –1.5 57.6

1,066,976 4.5 458,068 5.8 608,908 3.4 57.1

1,231,634 15.4 537,581 17.4 694,053 14.0 56.4

11.2

8.1

8.4 9.2 5.2

5.3 3.4 6.9

4. AAGR: Average Annual Growth Rate: Calculated using the formula [(Y(t)/Y(s))(1/n)–1]*100, where Y(t) and Y(s) are the values in years “t” and “s”, respectively, where t > s and n ⫽ t–s. For Caricom the formula is based on the 1994–2003 period. Source: IDB, Integration and Regional Programs Department, based on data from DataIntal, ALADI, SIECA, Hemispheric Database, UN Comtrade and official country data Note: There are periodic changes in data sources. This is especially pronounced between 2003 and 2004. Although the data are generally consistent, these changes in sources can affect results

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Acknowledgements This collection is the result of a colloquium held in advance of the Fifth Summit of the Americas (Trinidad and Tobago) that took place at the University of the West Indies (UWI), St Augustine Campus 15–16 April 2009. The colloquium and the collection it contributed to reflect the organic collaboration between Canadian and Caribbean institutions and interests that brought together a range of hemispheric universities and think tanks, convened by The Centre for International Governance Innovation (CIGI), the Inter-American Studies Centre (CEI) at Université Laval, and UWI, respectively. CIGI and the Institute of International Relations (IIR) at UWI had cooperated in early 2008 for a seminar on small states, leading to the publication of The Diplomacies of Small States: Between Vulnerability & Resilience, Cooper and Shaw (eds), that is also a part of this IPE Series (www.palgrave.com/politics/ipe.asp). In addition to financial support from CIGI and CEI, the pre-summit colloquium was supported by two agencies of the government of Canada – the Canadian International Development Agency (CIDA) and the Department of Foreign Affairs and International Trade (DFAIT). The CEI particularly wishes to acknowledge the financial support offered by the Québec Department of International Relations. The colloquium also included a ‘Voices of the Americas’ roundtable that brought together representatives from think tanks in the hemisphere. This innovative effort was facilitated by the Canadian Foundation for the Americas (FOCAL), the Latin American and Caribbean Center (LACC) at Florida International University, and the Facultad Latinoamerica de Ciencias Sociales (FLACSO). Other organizational partners included Coordinadora Regional de Investigaciones Económicas y Sociales (CRIES) and the Woodrow Wilson Center. Aside from the authors of the revised chapters included here, other distinguished participants included Ambassador Albert R. Ramdin, Assistant Secretary General at the Organization of American States (OAS), Dr David Malone, President of the International Development Research Centre (IDRC), and Canadian Assistant Deputy Minister, Latin America and the Caribbean, Alexandra Bugailiskis (DFAIT). We also appreciate the participation of everyone who attended the conference, whose valuable comments helped shape this volume. The colloquium could not have taken place without the support at UWI of the Principal’s Office and other senior management plus the IIR Secretariat. In turn, the Summit Office, the OAS as well as Dr Riyad Insanally, Political Advisor to the Association of Caribbean States (ACS), and Dr Luis Andrade, Assistant Secretary General of the ACS, were most helpful, leading to further xx

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collaboration in 2009 and in 2010 around the NETRIS Edulink network. IIR looks forwards to further such mutual cooperation. The colloquium also benefited from the organizational talents of Joe Turcotte at CIGI and Nicolas Diotte at CEI. Their assistance in the preparation of application grants, in efficient management of logistics, and their attention to details helped considerably and was deeply appreciated. The staff and volunteers at UWI and IIR worked to ensure that the colloquium unfolded without a hitch. Special thanks go to Marilyn Ramon-Fortuné at UWI for her diligence and courtesy while hosting the event. The preparation of the volume itself was made much easier with the expert editorial assistance of Joe Turcotte at CIGI. Our gratitude to Joe, and to Alexandra Webster and Renée Takken at Palgrave Macmillan, who supervised the publication process with courtesy and efficacy. Max Brem (CIGI’s Senior Director for Publications), Jessica Hanson (CIGI Publications Coordinator) and Andrew Schrumm (Research Officer at CIGI) provided much sage advice and counsel throughout the process. As is the case of all CIGI projects Thomas A. Bernes, the acting executive director, created an environment amenable to productive research. CIGI was founded in 2001 by Jim Balsillie, co-CEO of RIM (Research In Motion), and collaborates with and gratefully acknowledges support from a number of strategic partners, in particular the Government of Canada and the Government of Ontario. Le CIGI a été fondé en 2001 par Jim Balsillie, co-chef de la direction de RIM (Research In Motion). Il collabore avec de nombreux partenaires stratégiques et exprime sa reconnaissance du soutien reçu de ceux-ci, notamment de l’appui reçu du gouvernement du Canada et de celui du gouvernement de l’Ontario. Finally, this volume can be considered in some ways as a companion to the Andrew F. Cooper and Jorge Heine collection Which Way Latin America? Hemispheric Politics Meets Globalization (United Nations University Press, 2009) and to the Gordon Mace, Jean-Phillipe Thérien and Paul Haslam volume Governing the Americas: Assessing Multilateral Institutions (Lynne Rienner Publishers, 2007). The former looks more at Latin America’s strategic calculus in the wake of recent world transformations while the latter also examines hemispheric institutions but without the benefit of a comparative analysis and without the insights of a post-economic crisis situation. The three collections, however, do offer a useful package for the understanding of present day inter-American relations. Gordon Mace, Québec, Canada Andrew F. Cooper, Waterloo, Canada Timothy M. Shaw, St Augustine, Trinidad and Tobago April, 2010

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Notes on Contributors Josette Altmann is a Regional Coordinator for International Cooperation in the General Secretariat of the Latin American Faculty of Social Science (FLACSO) and Professor of History and Political Science at the University of Costa Rica. Professor Altmann holds a Master’s degree in Political Sciences and a Bachelor’s degree in History, both from the University of Costa Rica. From 1990 to 1991 she was an intern at Harvard University. She has worked as a consultant for the Democratic Centre of Latin America Studies (CEDAL), the International Labour Organization (ILO), and the Costa Rican government. Her latest publications are El ALBA, Petrocaribe y Centroamérica: ¿intereses comunes? En: Revista Nueva Sociedad, Buenos Aires, Argentina. N 219. Enero-febrero 2009. En: www.nuso.org; ALBA: An Alternative Project for Latin America? ARI17-2008. Real Instituto Elcano. 2008, in www.realinstitutoelcano.org; Las Paradojas de la Integración en América Latina y El Caribe. Altmann, Josette y Rojas Aravena, Francisco (eds) Fundación Carolina/Siglo XXI. Madrid. 2008. Louis Bélanger is a professor of International Relations in the Department of Political Science at Université Laval, Quebec City. A graduate from Laval (Ph.D., 1996), Louis Bélanger also pursued Slavic Studies at the University of Ottawa. From 2000 to 2005, Professor Bélanger was the Director of Université Laval’s Quebec Institute for Advanced International Studies (HEI). Professor Bélanger held visiting positions at Duke University (Durham, NC), at SciencePo-Paris (Centre d’études et de recherches internationales), at the Woodrow Wilson International Center for Scholars, in Washington, and, as a Canada-US Fulbright Visiting Scholar, at the Paul H. Nitze School of Advanced International Studies (Johns Hopkins University). He is a member of the Advisory Council on National Security and the Military Police Complaints Commission of Canada. He is the author of numerous publications on Canadian foreign policy, comparative foreign and trade policy, inter-American cooperation, and the politics of secession. Andrew F. Cooper is Distinguished Fellow at The Centre for International Governance Innovation (CIGI) and Professor in the Department of Political Science at the University of Waterloo, where he teaches in the areas of International Political Economy, Global Governance, and the Practice of Diplomacy. In 2009 he was the Canada-US Fulbright Research Chair in Public Diplomacy at the Annenberg School of Communications, University of Southern California. In 1993 he served as the Leger Fellow in the Canadian Foreign Ministry’s Policy Planning staff. He has written or edited a number of books, including Which Way Latin America? Hemispheric Politics Meets xxii

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Globalization (with Jorge Heine; United Nations University Press, 2009); Intervention Without Intervening? The OAS Defense and Promotion of Democracy in the Americas (with Thomas Legler; Palgrave, 2006); Celebrity Diplomacy (Paradigm, 2008); and, Emerging Powers in Global Governance: Lessons from the Heiligendamm Process (WLU Press, 2008). Rut Diamint is a professor at Torcuato Di Tella University and the University of Bologna, in the Buenos Aires programme. She served as advisor to the Under-Secretariat of Politics and Strategy of the Ministry of Defense of Argentina (1993–6) and Cabinet Director of the Minister of Defense (2004–5). She has written several articles in books and academic journals on regional and hemispheric security affairs and civic-military and disarmament topics. Daniel P. Erikson is Senior Adviser in the Bureau of Western Hemisphere Affairs in the United States Department of State. His chapter was written while he was the senior associate for US policy and director of Caribbean programmes at the Inter-American Dialogue, and it reflects his own analysis, not the views of the US government. Erikson is the author of The Cuba Wars: Fidel Castro, the United States, and the Next Revolution (Bloomsbury Press, 2008). His book chapters appear in The Obama Administration and the Americas: Agenda for Change (2009), The Diplomacies of Small States (2009), Latin America’s Struggle for Democracy (2008), Looking Forward: Comparative Perspectives on Cuba’s Transition (2007), Taking Sides: Clashing Views on Latin America (2007) and Transforming Socialist Economies: Lessons for Cuba and Beyond (2005), which he co-edited. His past positions include research associate at Harvard Business School and Fulbright scholar in US–Mexican business relations. Antoni Estevadeordal is currently the Manager of the Integration and Trade Sector at the Inter-American Development Bank in Washington, DC. He was responsible for IDB technical assistance to the FTAA process from 1995 to 2000. He has coordinated the Bank’s policy research programme on trade and integration issues as well as several joint initiatives with the WTO, ADB, EU, OAS, and UN agencies. Before joining the IDB he taught at the University of Barcelona and Harvard University. He has published widely in major journals. He has coordinated several IDB reports such as The Emergence of China: Opportunities and Challenges for Latin America and the Caribbean (IDB-Harvard University Press, 2006, with R. Devlin and A. R. Clare) and Regional Rules and the Global Trading System (Cambridge University Press 2009, with K. Suominen and R. Teh). He holds a Ph.D. in Economics from Harvard University and a B. A. in Economics from the University of Barcelona. Richard E. Feinberg is Professor of International Political Economy at the Graduate School of International Relations and Pacific Studies, University of California, San Diego. He serves as Director of the University’s APEC (Asia

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Pacific Economic Cooperation) Study Center. In addition, he is the book reviewer for the Western Hemisphere section of the prestigious publication of the Council on Foreign Relations, Foreign Affairs. Prior to his arrival in California, Feinberg was Special Assistant to President Clinton and Senior Director of the National Security Council’s Office of Inter-American Affairs (1993–6). As the President’s senior adviser for Latin America, Feinberg was one of the principal architects of the 1994 Summit of the Americas in Miami. Norman Girvan is Professorial Research Fellow at the UWI Graduate Institute of International Relations at the University of the West Indies in St. Augustine, Trinidad and Tobago. He has been Secretary General of the Association of Caribbean States, Professor of Development Studies and Director of the Sir Arthur Lewis Institute of Social and Economic Studies at the University of the West Indies, and head of the National Planning Agency of the Government of Jamaica. He received his Bachelor’s degree in Economics from the University College of the West Indies and his PhD in Economics from the London School of Economics. He has published extensively on the political economy of development in the Caribbean and the Global South. He is the recipient of several honours and awards. Jorge Heine holds the Chair in Global Governance at the Balsillie School of International Affairs, is Professor of Political Science at Wilfrid Laurier University and is a Distinguished Fellow at The Centre for International Governance Innovation. He was previously Ambassador of Chile to India, Bangladesh and Sri Lanka (2003–7). He has also been Ambassador to South Africa (1994–9), as well as a cabinet minister in the Chilean government. He has been a Visiting Fellow at St Antony’s College, Oxford, and a Research Associate at The Wilson Center in Washington, DC. He is the author, coauthor, or editor of ten books, including The Dark Side of Globalization (with Ramesh Thakur, United Nations University Press, 2010); Which Way Latin America? Hemispheric Politics Meets Globalization (with Andrew F. Cooper, United Nations University Press, 2009); and The Last Cacique: Leadership and Politics in a Puerto Rican City (Pittsburgh University Press, Choice Magazine Outstanding Academic Book of 1994), and around 70 academic articles. Thomas Legler is a professor of International Relations at the Iberoamerican University of Mexico City. Previously he taught at Mount Alison University, Victoria University, and the University of Toronto. He holds a Ph.D. in Political Science from York University. As a specialist in Latin American politics and development, he investigated the promotion and defence of democracy in the Americas with the support of the Social Sciences and Humanities Research Council of Canada. He is the author of the book Intervention Without Intervening? The OAS Defense and Promotion of Democracy in the Americas (2006) as well as one of the editors of the text Promoting Democracy in the

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Americas (Johns Hopkins University, 2007). He participated as an electoral observer in several missions organized by the OAS and the Carter Center in the Dominican Republic, Mexico, Nicaragua, Peru, and Venezuela. Gordon Mace is a professor of International Relations at the Department of Political Science and at the School of Advanced International Studies at Université Laval. In addition to being director of the Inter-American Studies Centre, he is Editor-in-chief of Études internationales. He holds a Ph.D. in Political Science from Geneva’s Graduate Institute of International Studies. Author and co-author of more than a hundred academic articles and chapters, his most recent co-authored or co-edited publications are Governing the Americas: Assessing Multilateral Institutions (Lynne Rienner, 2007, with J. P. Thérien and P. Haslam), and Regionalism and the State: NAFTA and Foreign Policy Convergence (Ashgate, 2007). He serves on the editorial/advisory board of several journals and he is the recipient of the 2008 ISA Canada Distinguished Scholar Award. Thomas Andrew O’Keefe is the President of Washington, DC-based Mercosur Consulting Group, Ltd. [http://www.mercosurconsulting.net]. He did his undergraduate work at Columbia University, received his J. D. from the Villanova University School of Law, and has an M.Phil. in Latin American Studies (History and Economics) from the University of Oxford. In 1986 he worked for the legal departments of the Chilean Human Rights Commission and the Vicaría de la Solidaridad (the human rights office of the Archdiocese of Santiago). He has taught courses on Western Hemisphere economic integration, the Political Economy of the Southern Cone countries of South America, and Energy Cooperation in the Western Hemisphere at Johns Hopkins University’s School of Advanced International Studies, The George Washington University’s Elliott School of International Affairs, and Stanford University. He was Chair of the Brazil and Southern Cone course at the US Foreign Service Institute between September and December 2005. He is the author of two books, Latin American and Canadian Trade Agreements (Martinus Nijhoff, 2009) and Latin American Trade Agreements (Brill, 1997), and numerous articles on Latin American and Caribbean economic integration. Richard Ouellet, lawyer and doctor of law, is Associate Professor of International Economic Law at the Faculty of Law and the Institute of Advanced International Studies (HEI) at Université Laval where he is the Director of the Masters and Doctoral programmes. His teaching and research programme focuses on trade agreements such as the World Trade Organization and NAFTA. He is author of several papers presented in Canada, the US, France, Switzerland, Morocco and Vietnam. He has also authored several book chapters and articles in scholarly law journals. He is editor of the chronique “Commerce” in l’Annuaire canadien de droit international. He is a member of the Centre d’études interaméricaines (CEI), the Society of International

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Economic Law, European Society of International Law, the Quebec Society of International Law, Centre for Research in Agricultural Economics and founding member of the Center on Studies in Economic Law. Robert A. Pastor is Professor of International Relations and Founder and Co-Director of the Center for North American Studies and the Center for Democracy and Election Management at American University in Washington, DC. He was Director of Latin American and Caribbean Affairs on the National Security Council during the Carter Administration, nominated to be Ambassador to Panama during the Clinton Administration, and an advisor to Presidential Candidate Barack Obama. He received his doctorate from Harvard University, was a Fulbright Professor in Mexico, was the founder of the Latin American and Democracy Programs at The Carter Center, and is the author or editor of 17 books, including The North American Idea (Oxford University Press, 2011). Nicola Phillips is Professor of Political Economy and Founding Director of the Political Economy Institute at the University of Manchester, UK. She is also an Associate Fellow of the Brooks World Poverty Institute and the Centre for Chinese Studies, both based at Manchester, was formerly an Associate Fellow of Chatham House in London, and holds and has held various visiting positions across Europe and Latin America. She is editor-in-chief of the New Political Economy, and sits on the boards of several other journals. Her research focuses on the political economy of development, with a particular emphasis on questions of migration, development, and labour standards. Much of her work has focused on the region of the Americas, particularly on questions of regional development, poverty and inequality, and migration. Among her most recent publications are The Southern Cone Model: The Political Economy of Regional Capitalist Development (Routledge, 2004), coauthor with Anthony Payne of Development (Polity Press, 2009) and editor of Globalizing International Political Economy (Palgrave Macmillan, 2005), and The Global Political Economy of Migration (Lynne Rienner, 2011). Marc Schelhase is a Lecturer in the Defence Studies Department, King’s College London, UK and a Visiting Professor in the EU International Relations and Diplomacy Studies Department at the College of Europe, Bruges, Belgium. His recent book Globalization, Regionalization and Business (Palgrave Macmillan, 2008) maps the role of organized business interests in the evolution of the Mercosur. In addition to processes of regionalization and regionalism in the Americas, he is currently conducting comparative research into conceptualizations of risk in financial markets and defence procurement by focusing on the political economy of risk. Timothy M. Shaw is Professor and Director at the Institute of International Relations at the University of the West Indies in Trinidad. He previously taught at Dalhousie University in Nova Scotia for three decades and the Institute of Commonwealth Studies at the University of London for half a

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decade. He continues to be a visiting professor in South Africa (Stellenbosch) and Uganda (MUBS & MUST), having previously taught at Aalborg, Ife, Makerere, Nihon, Zambia, and Zimbabwe universities. Kati Suominen is Resident Fellow, German Marshall Fund of the United States. In 2009, she also served as Trans-Atlantic Fellow at the German Marshall Fund. She has co-published seven books about global trade and economy, including Regional Rules in the Global Trading System (Cambridge, 2009, with Antoni Estevadeordal and Robert Teh) and Globalization at Risk: Managing Challenges to International Trade and Investment (Yale University Press, 2010, with Gary Hufbauer). She holds various degrees: MBA, Wharton (2009); PhD, Political Science and International Relations, University of California, San Diego (2004); MA, International Relations, Boston University (1996); and BA, Political Science and International Relations, University of Arkansas at Little Rock (1995). Jean-Philippe Thérien is Professor in the Department of Political Science of the Faculty of Arts and Sciences at the Université de Montréal. An expert in international relations, his fields of interest include international institutions, North–South relations, and inter-American politics. Most of his research has focused on foreign aid policies, and on the role of large international organizations (UN, IMF, WTO). He is currently conducting two research projects on the growing concern of multilateral institutions over poverty issues, and on the role of the Organization of American States in the inter-American system. Author of some 30 scholarly articles, his work has been published in American Political Science Review, International Organization, Global Governance and Comparative Political Studies. He is the co-editor (with Gordon Mace and Paul Haslam) of Governing the Americas: Assessing Multilateral Institutions (Lynne Rienner, 2007). His latest book is Left and Right in Global Politics (Cambridge University Press, 2008) (co-authored with Alain Noël). Diana Tussie heads the Department of International Relations at FLACSO/ Argentina and is the founding director of the Latin American Trade Network (LATN). Her recent books include The Politics of Trade: Research and Knowledge in Trade Negotiations (Brill & IDRC, 2009), Trade Negotiations in Latin America: Problems and Prospects (Palgrave Macmillan, 2003), and El ALCA y las Cumbres de las Américas:¿Una nueva relación público-privada? (with M. Botto) (Biblios, 2003). She has served as junior secretary for trade negotiations and was a member of the board of the International Trade Commission in Argentina. In 2005 she served on the High Level External Panel for the Trade Assistance Evaluation of the World Bank. More recently she joined colleagues from Canada and India in the external evaluation of the WTO’s technical assistance programme. She is a current member of the Committee for Development Policy of the United Nations and serves on the Editorial Boards of several international journals.

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List of Abbreviations 3G

Global Redesign Initiative

AACCLA

Association of American Chambers of Commerce in Latin America

ACS

Association of Caribbean States

AD/CVD

Antidumping and countervailing duty

AIMA

Argentinean-Israeli Mutual Association

ALADI

Latin American Integration Association

ALALC

Asociación Latinoamericana de Libre Comercio

ALBA

Bolivarian Alternative for the Americas; Alternativa Bolivariana para América Latina

ALCA

Free Trade Area of the Americas

ANC

Andean Community of Nations

APEC

Asia-Pacific Economic Cooperation

ARENA

Alianza Republicana Nacionalista, El Salvador

ASEAN

Association of Southeast Asian Nations

BASIC

Brazil-South Africa-India-China

BBC

British Broadcasting Corporation

BOT

Build-Operate-Transfer Contract

BRIC

Brazil, Russia, India, China

BRICSAM

Brazil, Russia, India, China, South Africa, Mexico

C-TPATUS

Customs-Trade Partnership Against Terrorism

CACM

Central American Common Market

CAF

Andean Development Corporation; Corporacion andina de fomento

CAFTA-DR

Central America-Dominican Republic-United States Free Trade Agreement

CAIC

Caribbean Association of Industry and Commerce

CALC

Latin American and Caribbean Summit

CAN

Andean Community of Nations; Comunidad Andina de Naciones

CARICOM

Caribbean Community xxviii

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xxix

CARILEC

Caribbean Energy Utility Services Corporation

CBM

Confidence Building Measures

CDM

Clean Development Mechanism

CEAL

Business Council of Latin America

CEATAL

Business Technical Advisory Committee on Labor Matters

CEO

Chief executive officer

CEP

Provisional Electoral Council; Conseil Électoral Provisoire, Haiti

CEPALC

Economic Commission for Latin America and the Caribbean; Comisión Economica para America Latina y el Caribe

CET

Common external tariff

CGR

Committee of Government Representatives on the Participation of Civil Society

CIDA

Canadian International Development Agency

CIFTA

Convention Against the Illicit Manufacturing of and Trafficking in Firearms, Ammunition, Explosives, and other Related Materials

CIP

Inter-American Committee on Ports

CITEL

Inter-American Telecommunications Commission

CMC

Common Market Council; Consejo del Mercado Común

CNE

National Electoral Council; Consejo Nacional Electoral, Venezuela

CREDP

Caribbean Renewable Energy Development Project

CRIE

Regional Commission of Electricity Interconnection; Comisión Regional de Interconexión Eléctrica

CRNM

Caribbean Regional Negotiating Machinery

CSEP

Caribbean Sustainable Energy Project

CSME

CARICOM Single Market and Economy

CSO

Civil Society Organizations

CSR

Corporate social responsibility

CSSP

Cross-Sector Social-Oriented partnerships

CUSTA

Canada-United States Free Trade Agreement

DC

District of Columbia, United States

DNA

Deoxyribonucleic acid

DPD

OAS Department for the Promotion of Democracy

DPU

Democracy Promotion Unit

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DMS

Dispute Settlement Mechanism

DTT

Department of Trade and Tourism

EAI

Enterprise for the Americas Initiative

ECCS

European Conference on Cooperation and Security

ECLAC

UN Economic Commission for Latin America and the Caribbean

EG

Major National Companies; empresas Grannacionales

EOR

Regional Operating Authority; Ente Operador Regional

EPA

Economic Partnership Agreement with European Union

EPR

Empresa Propietaria de la Red

EU

European Union

FARC

Revolutionary Armed Forces of Colombia

FCES

Economic-Social Consultative Forum of Mercosur

FDI

Foreign Direct Investment

FECAICA

Federation of Chambers and Industry Associations of Central America

FECAMCO

Federation of Chambers of Commerce of Central America

FIPA

Foreign Investment Protection Agreement

FLACSO

Facultad Latinoamericana de Ciencias Sociales

FMLN

Frente Farabundo Martí de Liberación Nacional, El Salvador

FTA

Free Trade Agreement

FTAA

Free Trade Area of the Americas

FTC

Free Trade Commission

GATT

General Agreement on Tariffs and Trade

GDP

Gross Domestic Product

GPN

Global Production Networks

GMC

Common Market Group; Grupo Mercado Común

GVC

Global Value Chain

G5

Outreach Five

G7/8

Group of Seven/Eight

G8

Group of Eight

G20

Group of Twenty

HDI

Human Development Index

HIPC

Highly Indebted Poor Countries

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IACHR

Inter-American Convention (Commission) on Human Rights

IADC

Inter-American Democratic Charter

IBSA

India-Brazil-South Africa Forum

ICBL

International Campaign to Ban Landmines

ICCAD

Inter-American Convention against Drug Abuse

ICD

Inter-American College of Defense

ICT

Information and Communication Technology

IDB

Inter-American Development Bank

IADB

Inter-American Defense Board

IFE

Federal Electoral Institute; Instituto Federal Electora, Mexico

IFES

International Foundation for Electoral Systems

IIRSA

UNASUR South American Infrastructure Integration Initiative

IMF

International Monetary Fund

IPE

International Political Economy

ISP

Inter-American Strategy for Public Participation in Sustainable Development Decision-Making

ITRA

Inter-American Treaty of Reciprocal Assistance

KP

Kimberley Process

LAC

Latin America and Caribbean

LAFTA

Latin American Free Trade Association

LAIA

Latin American Integration Association

LDC

Less Developed Countries

LNG

Liquefied Natural Gas

MAS

Movimiento al Socialismo (Bolivia)

MDG

Millennium Development Goals

MER

Regional Electricity Market; Mercado Eléctrico Regional

Mercosur

Southern Common Market

MFA

Multi-Fibre Arrangement

MFN

Most Favored Nation

MIF

Multilateral Investment Fund

MNC

Multinational Corporation

MOU

Memorandum of Understanding

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NAEWG

North American Energy Working Group

NAFTA

North American Free Trade Agreement

NAFTA TWGP

NAFTA Technical Working Group on Pesticides

NATO

North-Atlantic Treaty Organization

NDI

National Democratic Institute for International Affairs, United States

NED

National Endowment for Democracy, United States

NGO

Non-Governmental Organization

NIC

Newly Industrializing Country

N-11

Next Eleven

OAS

Organization of American States

OECD

Organization for Economic Co-operation and Development

OECS

Organization of Eastern Caribbean States

OEM

Original Equipment Manufacturing

OFC

Offshore Financial Centre

OLAMP

Latin American Organization for Micro, Small and Medium Enterprises

OP

Ottawa Process

OPEC

Organization of Petroleum Exporting Countries

OTCA

Amazon Cooperation Treaty Organization

PADF

Pan-American Development Foundation

PAN

National Action Party; Partido Acción Nacional, Mexico

PDVSA

Petroleos de Venezuela Sociedad Anonima

PECC

Pacific Economic Cooperation Council

PG

Major National Projects; proyectos Grannacionales

PIP

Partners in Protection

PNPB

National Programme for the Production and Use of Biodiesel; Programa Nacional de Produção e Uso de Biodiese, Brazil

PPP

Purchasing Power Parity

PPP

Public–Private Partnership

PRD

Party of the Democratic Revolution; Partido de la Revolución Democrática, Mexico

PRS

Poverty Reduction Strategies

PSF

Private Sector Forum

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PTA

Preferential Trade Agreement

R2P

Responsibility to Protect

RNM

Caribbean Regional Negotiating Machinery

xxxiii

SICA

System of Central American Integration

SEC

Securities and Exchange Commission, United States

SEDI

Executive Secretariat for Integral Development

SGR

Strategic Global Repositioning

SICA

Central American Integration System

SIEPAC

Electrical Interconnection System for the Countries of Central America; Sistema de Interconexión Eléctrica para los Países de América Central

SIRG

Summit Implementation Review Group

SLA

Canada-United States Softwood Lumber Agreement

SME

Small and Medium Sized Enterprises

SOA

Summit of the Americas

SPP

Security and Prosperity Partnership

SSR

Security Sector Reform

TEPJF

Electoral Tribunal of the Federal Judiciary; Tribunal Electoral del Poder Judicial de la Federación, Mexico

TNC

Transnational Corporations

TPA

Trade Promotion Authority

TWG

Technical Working Group

UK

United Kingdom

UN

United Nations

UNASUR

Union of South American Nations; Unión de Naciones Suramericanas

UNDP

UN Development Programme

UPD

OAS Unit for the Promotion of Democracy

US

United States

USTR

United States Trade Representative

UWI

University of the West Indies

WOLA

Washington Office on Latin America

WTO

World Trade Organization

YABT

Young Americas Business Trust

YPF

Yacimientos Petrolíferos Fiscales

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Introduction Gordon Mace, Andrew F. Cooper and Timothy M. Shaw

Despite all the attention placed on globalization and its processes, regional integration mechanisms continue to hold a pivotal position in world affairs. The global governance structure is marked by a patchwork of authority. This sense of complex design comes to the fore with respect to the myriad of regionalization projects currently in existence. Although the debates surrounding the European approaches and concepts maintain a privileged position, variants located in other regional projects deserve closer examination. This requirement is no more apparent than in the Americas where the process of regionalization has a long history and is currently becoming increasingly complex, contested and fluid. In terms of scope, inter-American regional projects are increasingly at the front lines about the framing of ‘we-ness’ around a distinctive sense of belonging and identity. This normative turn retains its political edge by making clear choices about who is in and out in terms of regional actorness. After all, regions are at their core highly conscious socio-political constructs (Breslin and Higgott, 2000). In terms of form, regional projects in the Americas highlight the contradistinction between formal (de jure) and informal (de facto) regionalization. The former depends on a heavy degree of state-driven institutionalization. The latter focuses on the extension of transnational networks with a concomitant building-up of interactions either of a corporate or social nature (Hveem, 2008). In terms of intensity, inter-American regional projects bring out the contrasts between the familiar and the novel components. Many elements of the debate about regional cooperation or integration have been in place for a considerable amount of time, as witnessed by the long debates about the role of the Organization of American States (OAS) or the prospects of the Free Trade Area of the Americas (FTAA). Other significant ingredients of the debate, however, have risen fast in recent years as featured by the emergence of the Alternativa Bolivariana para las Americas (ALBA; the Bolivarian Alternative for the Americas). 1

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Although each of these contours needs to be more thoroughly well rehearsed, the starting point for any examination of regionalization in the Western Hemisphere must be the changing context in which these projects are situated. The defining element of the Western Hemisphere’s historical experience with regionalization has been its distinctive relational dimension. As opposed to the relative degree of equality (showcased by the French–German bilateral relationship) and diffuse ownership, the traditional design of regionalization in the Americas was the asymmetrical element, with hegemonic domination by one state and an explicit distinction between the core and periphery (Hettne, 2003). The Monroe Doctrine, ‘pocketbook diplomacy’, the ‘Good Neighbor Policy’, and support for client regimes reinforced the impression of a hemisphere locked in the US’s backyard that is not of identical status. This sense of unequal ownership was reinforced in turn by the bias in the transnational segment towards the corporate as opposed to the social network. Although the ‘declinist’ image of the US can be exaggerated, the erosion of US leadership capabilities cannot be ignored (Zakaria, 2008). The centre of gravity of the global power structure is no longer exclusively in the US. The George W. Bush administration abdicated both the normative and practical responsibilities of liberal internationalism, while its unilateral overstretch in Iraq and poor economic policies have drained US resources. The issues of extraordinary renditions and Guantanamo Bay detainees have undermined the US’s normative credentials. The ‘made in the US’ character of the severe economic crisis of 2008–9 underscored the extent of the economic policy failures. Still, an analysis of the shifting global order that focuses only on fading US hegemony and leadership is insufficient. The world is also changing at the beginning of the twenty-first century for what Parag Khanna (2008) has termed the ‘second world’. As Khanna has laid it out in a kaleidoscope format, this grouping is a significant but largely undifferentiated cluster of countries. Such an approach, if valuable as an antidote to the retention of US-centrism in so much of the literature, misses the degree to which a new form of hierarchy has reappeared on both the global and the regional scene as rising states seek a new equilibrium (Delong and Cohen, 2010; Kagan, 2008; Zakaria, 2008). The ‘rise of the rest’ does not create uniformity (Alexandroff and Cooper, 2010). This appreciation of differentiation comes out most strongly in the attention accorded to the BRICs – Brazil, Russia, India and China. But it extends beyond this design to other forms of conceptualization and practice. In addition to the BRICs, Goldman Sachs has also put together a list of the ‘Next-Eleven’ (N-11) (Goldman Sachs, 2007), other countries from the second world that possess the potential to bring about a profound shift in international relations at the start of a ‘long second decade’ in the twenty-first century. The ascendancy of the G20 as the premier institution of economic governance reinforces this image of differentiation. This forum makes no

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claims of universalism; instead it is created as a new club of the few. The legitimacy attached to it is functional in nature, with weight (or influence) and efficiency as the core rationales. Although blending traditional powers and global South countries, only ‘major’ countries with a big stake in the system are accorded representation, with an implicit recognition of a hierarchy of powers. Paralleling so much of the trajectory of other regional projects, the Americas provide key actors to both the new cluster of insiders to these global constellations and to the main sources of resistance. Brazil is a member of the BRICs. Mexico is included in the Goldman-Sachs list of the N-11, and chaired the ‘Outreach 5’ or G5 in the structured dialogue with the G8 through the Heiligendamm Dialogue Process (Cooper and Antkiewicz, 2008). Brazil, Mexico and Argentina have gained representation to the global ‘high table’ of the G20. At the same time, though, the exclusive top-down quality of the G20 has generated a backlash among a variety of non-members in the Americas. Venezuela, Bolivia, Cuba, and Nicaragua were among the most vociferous voices of dissent directed at the G20 during the June 2009 ‘G192 Summit’ of the UN General Assembly. Another group of countries – comprising Chile, Uruguay, Costa Rica, Guatemala, Panama, Jamaica, Barbados, and Bahamas – signed on to the so-called 3G initiative led by Singapore, Qatar, Switzerland, and Tanzania (the Global Redesign Initiative) that promotes a more inclusive form of global governance (Kanth, 2010). These varying responses play to the image of a fundamental dichotomy, with a split between those countries willing and able to constructively engage in establishing new rules of the game and those putting the onus onto blocking and disruptive endeavours. A more nuanced appreciation about the manner in which the hierarchy is reconfigured is reinforced by the structural as well as the diplomatic separation in the ranks of the second world. As the big emerging countries move up in the global rankings, other counties are relegated once again to a new third or even fourth world at the bottom. In sharp variance to the concentrated observation of the BRICs and other components of the emerging global South, the countries or sub-regions falling behind are almost completely neglected. Amid his ambitious overview of the second world, Khanna devotes only a few lines to the Caribbean (and those are targeted mostly to Haiti). Zakaria makes only one passing reference to Central America and the Caribbean. One important dimension relates to the differentiation between the upwardly and downwardly mobile countries related to the top-tier countries, both among established and emerging powers. Brazil at one end of the spectrum is increasingly included in a wide set of exclusive cross-regional clubs – not only the G20 and BRICs but also the India–Brazil–South Africa Dialogue Forum (IBSA) and the BASIC group (Brazil–South Africa–India–China) that formed via the Copenhagen conference on climate change. Moreover, as Washington is less and less able to dominate the regional agenda, Latin

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America is asserting itself in regional and world affairs under Brazilian leadership (Prideaux, 2009, p. 51). Smaller and more vulnerable countries at the other end of the spectrum look to alternative forms of collective and defensive forms of activity. Brazil, along with China and India, seeks to be a shaper of governance along with the US and other members of the old G7/8. Venezuela and its allies work to repel the influence of the US and the ex-colonial North. Another crucial dimension comes back to the location of individual countries in the economic division of labour. Helped by new forms of extraregional connections with China and India, the Americas have avoided the worst-case scenario effects of the 2008–9 economic crisis. Select companies from Brazil, as well as Mexico and Chile, have an enhanced global reach internationally as well as regionally (Goldstein, 2007; van Agtmael, 2007). But economic growth has been volatile and extremely unevenly distributed. Commodity prices including those for oil and natural gas have fluctuated severely, with a yo-yo effect on countries such as Venezuela, and Trinidad and Tobago. The upwardly mobile states have also acted as a ring of magnets, attracting migrants from relegated states, and in turn resulting in different flows of remittances. Are these developments announcing a new era in inter-American relations? Certainly the concerted phase of hemispheric region building, which started with the Summit of the Americas in Miami in 1994, has lost its dominance, making way for alternative regional groupings. In doing so the classic regional integration literature must be supplemented by revisionist modes of analysis. It is precisely because of these changing contours of regionalization and magnitude of the contextual concerns in which these processes must be grounded that this volume is so salient. What sets it apart is its willingness to mix historical assessment with reflections on the future of the regionalist project with all its multidimensional and comparative-oriented qualities.

A long, rich history of region building In his landmark monograph A World of Regions, Peter Katzenstein (2005) writes that strong asymmetry favouring the US has prevented the emergence of a viable regional intermediary state or group of states in the Americas, as was the case in Asia and Europe. As a result of that situation, the Americas never managed to become a functional (‘porous’) region of the American imperium (Katzenstein, 2005, p. 3). Be that as it may, the region does offer rich terrain to observe the dynamics of regionalism from a historical as well as a contemporary point of view. After all, state actors were involved in region-building projects as soon as independence was secured in the 1820s. During the first half of the nineteenth century, governments in the Andes and in Central America pursued an elusive quest for political unity through attempts at federation. Initiated with the Congress of Panama, this period

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witnessed the failure of all federalist projects from the Republic of Gran Colombia to the Peruvian–Bolivian Confederation in 1839 (Schneider, 2007, pp. 97–105). The Lima Conference of 1864–5, as Peter Smith aptly remarks (Smith, 1996, p. 92), was ‘the last institutional embodiment of Bolivar’s dream’. Thereafter, the flame of political unity was kept alive but never succeeded in giving birth to a lasting political experiment. After the Second World War, political unity gave way to economic integration with projects such as the Latin American Free Trade Association and the Central American Common Market (CACM), and to multidimensional integration schemes with the Andean Pact and the Caribbean Community and Common Market (CARICOM). After years of difficulty and limited progress, these were replaced by open regionalism projects (ECLAC, 1994), as illustrated by the Mercosur (the Southern Common Market) and the Andean Community. More recently, these economic integration projects have been complemented by more diplomatic and politically oriented forums such as the Union of South American States (UNASUR), ALBA, and an eventual Latin American and Caribbean diplomatic forum – proposed in February 2010 by the Mexican government (Heine, 2010). With regard to the US-led regionalist project, the intriguing paradox is that despite all the power and the political weight of the US in the Americas, Washington was never able to obtain the type of institutional structure that it wanted. The first window of opportunity was opened in 1889, at the First International Conference of American States, when the Latin American governments present rejected the US proposals for a customs union and an arbitration treaty (Connell-Smith, 1974, p. 110). The following Pan-American conferences were no more successful at institution building despite the establishment of the Pan-American Union in 1910. Pan-Americanism can nevertheless be considered a success for US diplomacy because it prevented the creation of an exclusive Latin American forum, thereby providing Washington with more flexibility to intervene in the region. Another opportunity presented itself, in the aftermath of the Second World War, in the context of the restructuring of the international system and the nascent bipolar order. The Ninth International Conference of American States, held in Bogota in 1948, was the occasion for a transformation of Pan-Americanism into the Inter-American System. For the US, the Bogota Conference had mixed results. On the one hand, it reinforced the institutional architecture of hemispheric regionalism with the adoption of the Charter of Bogota and the establishment of the OAS as the principal political forum of the inter-American system. This main institutional structure would be complemented by a defensive military alliance, the Rio Treaty, an important development tool, the Inter-American Development Bank (IDB), and significant democracy and human rights institutions such as the Inter-American Convention of Human Rights (IACHR), the Inter-American Commission on Human Rights and the Inter-American Court of Human Rights.

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On the other hand, however, the Bogota Conference did not deliver on US expectations with regard to two important issues. As in 1889, one of them concerned the settlement of disputes on which most governments agreed on principle but disagreed on specific provisions to be included in an agreement. A treaty, the Pact of Bogota, was nevertheless proposed in 1948 and signed by the participating governments. However, it was ratified by only 13 states with, in some cases, far-reaching reservations which considerably limited its scope. (Connell-Smith, 1974, p. 202; Atkins, 1989, pp. 226–7). The other issue was that of economic cooperation. The Economic Agreement of Bogota included a certain number of measures in that regard, particularly concerning trade in commodities and national treatment of foreign investment, but the document was signed with so many reservations as to make it useless even if ratified. The previous listing, even though incomplete, reveals that there is a rich history of region building in the Americas unfolding from the days of independence to the present time. In what concerns the US-led regionalist project up to the 1980s, the analysis shows that there was an almost constant tension between the US vision concerning the regional architecture and Latin America’s reaction to that vision. Given the enormous asymmetry of power between the US and its neighbours, it was unthinkable for Latin American governments to openly reject US proposals or confront Washington directly on issues of particular importance for the region. Consequently, the main strategy for Latin American governments was a defensive one, based on the use of law and the construction of a regional law regime. The regime is based on the fundamental principles of respect for sovereignty and territorial integrity, and non-intervention. These principles have been put into practice early in the twentieth century through measures such as the Drago Doctrine of 1902, on non-intervention, and the Calvo Clause by which foreign investors in the region renounced the right to appeal to their government in case of conflict with local governments. They are also affirmed in Articles 15 and 17 of the Bogota Charter. In this way, Latin American states were not able to prevent unilateral US interventions in countries of the region but they managed to limit these interventions to selected countries in Central America and the Caribbean. By fiercely defending the regional normative order, they succeeded in containing US power and gave themselves a certain margin for manoeuvre.

Redesigning hemispheric regionalism After almost 25 years of near stagnation in inter-American relations, a new era seemed to appear at the beginning of the 1990s. It was the result of a particular combination of international and regional developments. At a systemic level, globalization seemed to be creating conditions for a ‘new regionalism’ as a result of a process of global structural change (Hettne,

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1999, pp. 1–24; Mittelman, 1999, pp. 25–53; Hettne, 2003, pp. 22–42). The end of the Cold War and the apparent triumph of representative democracy and of a neoliberal economic order paved the way for a ‘unipolar moment’ (Krauthammer, 1990) in which Latin American and Caribbean (LAC) governments seemed to have no choice but to harmonize state strategies with those of the dominant powers, most notably the US. At the regional level, the context had also changed considerably compared to the start of the previous decade. Pressure from the international community, most notably from the Carter administration, had started to have an impact in the region at the end of the 1970s with regard to democracy and respect for human rights. The 1977 decision to reduce aid to countries violating human rights (Pastor, 2001, p. 46) signalled a change in US policy on democracy in the Americas. It was a central factor in the re-democratization movement that started in the region with the return of a civilian government in Ecuador in 1979. The external debt crisis of the mid-1980s was also a very significant development. A psychological shock, more than anything else, it was at the source of a major change of attitude on the part of the élites of the region concerning the economic development model followed by almost all Latin American governments since the 1930s. Under pressure from international lending institutions, a majority of governments progressively replaced industrialization by import substitution with state strategies more in line with the neoliberal economic policies adopted by the US and the UK in the early 1980s and then by most of the OECD countries later on. Finally, the signing of a free trade agreement between Canada and the US in 1987 and the start of negotiations between Washington and Mexico two years later, that would lead to the North American Free Trade Agreement (NAFTA), were also instrumental in changing perceptions and expectations of the other governments of the region. The opening of discussions concerning free trade between two industrialized countries and an emergent economy like Mexico in one way served as an illustration that a free trade agreement was possible between rich and poor countries in the Americas. In another way, negotiations on a free trade project in North America could be perceived as a kind of menace for LAC governments who would not have had the same kind of access to North American markets. All this happened while market access to the European Union (EU) was becoming more difficult. This particular mix of international and regional occurrences created a unique context favourable to a rapprochement between the US and its neighbours of the Americas, which Daniel P. Erikson discusses later in this volume. This new sense of community and shared interests was based, however, on false premises and on what was left unsaid. On the one hand, the US administration developed the unrealistic view that there now existed a convergence of values and interests between the US and Latin America, and

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that a window of opportunity now existed that had to be seized in order to remodel hemispheric relations (Aronson, 1996; Bush, 1989; Christopher, 1993; Watson, 1995). On the other hand, and for reasons that may have had to do with uncertainties concerning the world environment or expectations regarding changing US policies, Latin American and Caribbean officials never publicly formulated at that time an alternative vision or an opposing point of view concerning the agenda of inter-American affairs proposed by the US. Consequently, the new phase of hemispheric regionalism would rest from the start on shaky grounds of misunderstandings and silences. The hemispheric regionalist project of the 1990s took form nevertheless and started with the Enterprise for the Americas Initiative put forward by President George H. W. Bush in June of 1990. The Initiative offered increased foreign investments, selective reduction of the external debt of the region and possible free trade deals to LAC governments willing to implement economic and trade reforms (Scheman, 2007, p. 17). Of course, these reforms had to be in line with the neo-liberal model promoted by the US. That opening towards the region on the part of the US administration, along with the revival of regionalism in all parts of the hemisphere, set the stage for a major redesigning of the inter-American system. The new architecture was put in place following the First Summit of the Americas in Miami, in December 1994. From then on, major orientations concerning hemispheric affairs would be decided by heads of state at regular summits involving all the states of the region except Cuba, whose regime had been excluded from the OAS in 1962. Following up on summit mandates, decisions for specific sectors would be taken at ministerial meetings convened in-between summits. Decisions taken by heads of states and ministers would be implemented by national governments on one part, and by regional institutions on the other (Scheman, 2007, pp. 17–27; Mace and Loiseau, 2005, pp. 124–9). The OAS, which had been the main political body of inter-American relations up to then would now be charged with implementing summits mandates in coordination with other regional agencies. The IDB, however, was never really integrated in the new institutional design (Feinberg and Haslam, 2007, pp. 51–68). With regard to agenda, the scope of the regionalist project was quite comprehensive. Like all such endeavours, the cornerstone of hemispheric regionalism was naturally economic integration through the establishment of a free trade area. Support for and promotion of representative democracy and human rights were also a central feature of the project. That was a logical development as the Protocol of Cartagena had already reinforced the OAS’s mission in this sense in 1985. Other issue-areas covered were those in relation to security, particularly with regard to terrorism, transnational crime and confidence-building measures, economic development and prosperity promotion, sustainable development, scientific and energy cooperation, and central social issues such as the role of women in society, and universal access to education and basic health services.

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This third phase of hemispheric regionalism was thus quite an ambitious enterprise. Led by the US and now including Canada and the Commonwealth Caribbean countries, the regionalist project was a multidimensional scheme which sought not only to move inter-American relations towards more productive cooperation but also to impact positively on the social and economic conditions of the peoples of the region. After five Summits of the Americas and more than 15 years following the initial summit, it is appropriate to look back and try to assess the results of this cooperative endeavour.

A critical assessment with a focus on institutions In a very interesting collection comparing regional institutions, Acharya and Johnston (2007) propose an analytical framework around the central notion of institutional design. Following on from previous studies on the rational design of institutions (Koremenos, Lipson and Snidal, 2004), but adopting a very different angle for analysis, they seek to offer answers to two puzzles. The first puzzle concerns the variation in the design of security and economic institutions across regions given that, according to functionalist theory, we should expect little. The second one concerns the variation in institutional design in relation to the variation in the nature of cooperation (Acharya and Johnston, 2007, p. 2). The contributors to the volume were asked to examine the institutional design of regional institutions both as a dependent and as an independent variable. As a dependent variable, institutional design is characterized by using elements such as membership, scope, formal rules, norms, and mandates (pp. 21–2). The independent variables are then types of cooperation problems, number of actors, ideology and identity, systemic and sub-systemic power distribution, domestic politics, extra-regional institutions and nonstate actors, and history (pp. 16–21). Authors were asked to study the analytical relationship from both directions. With regard to the Americas (Dominguez, 2007), three cases were selected: the OAS, the Mercosur, and the Central American Common Market (CACM). Jorge Dominguez’s main conclusion is that regional institutional performance after 1990 in these cases is best explained by the following six independent variables: impact of prior and independent structural and normative international systemic changes, the role of international non-governmental organizations, domestic preferences, choice of automatic rules, relative emphasis on interstate distributional issues, and choice of voluntary and comprehensive institutional strategies (pp. 85, 125–8). Our own collection also has a strong focus on institutions but it differs significantly from the Acharya and Johnston volume with regard to two main aspects. Our choice of institutions is different and the analytical focus is not the same. We cover only one region, the Americas, and we are mainly

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interested in the performance of inter-American institutions. Why such an exclusive focus? From the mid-1960s to the end of the 1980s, the flagship institution of the inter-American system had been more or less irrelevant. In the eyes of many, the OAS had become moribund, thereby signalling the inadequacy of the interAmerican system as the main diplomatic forum of the region. By giving new life to the promotion of democracy mission of the OAS in 1985, the Protocol of Cartagena restored a certain level of legitimacy to the organization, further increased by the Santiago Commitment of 1991 and the Protocol of Washington a year later (Gosselin and Thérien, 1999, pp. 178–82). But the major reorganization of the inter-American system came in 1994 on the occasion of the First Summit of the Americas. Whether or not the product of ‘wishful thinking’ (Shifter, 2009, p. 51) on the parts of the assembled Heads of state in Miami, the Declaration and Plan of Action that came out of that summit gave a new institutional architecture to the inter-American system and launched a new phase of hemispheric regionalism. Sixteen years later, after six summits (including the special one in Monterrey), numerous ministerial meetings and considerable time and effort devoted by regional institutions, the dominant point of view seems to be that hemispheric regionalism has not delivered substantial results and has contributed little to increasing the well-being of the peoples of the Americas. Social and economic conditions in the region have not improved substantially, where a third of the population still lives in poverty while insecurity remains high, problems of governance affect many countries, and support for democracy has diminished (Rojas, 2009, pp. 19–23). Inter-American institutions, of course, are not the only ones to blame for the limited social and economic progress in the Americas during the past 20 years as they are not the only actors involved and because they can only do so much with the resources given to them by national governments. But there is a sense nevertheless that regional institutions have not been up to the task. The OAS in particular has been a ‘disappointment’ (Lowenthal, 2009, p. xxvi), a ‘site of divergence’ (Cooper, 2009, p. 160) and is in serious need of ‘fixing’ (Meacham, 2010). Whilst intra and extra-hemispheric inter-governmental relations may account for some of the above recent desultory performances, there may be another or additional explanation: the impacts of non-state relationships. The ‘new’ regionalisms perspective, as a response to the limitations of the older, established inter-state approach, seeks to identify non-state trans-boundary relations in a variety of sectors at micro-, meso- and macroregional levels. We focus on five of these which both advance/energize and retard/deflate inter-state ambitions. Perhaps the most apparent at the turn of the decade is the war on drugs, gangs and cops, with its horrendous death toll, on the Mexican–US border which cannot but impact upon the OAS let alone NAFTA.

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First, somewhat recognized in official organizations, is the increasingly established and institutionalized migration/diaspora/remittances syndrome. In terms of the hemisphere, this is particularly concentrated in the Mexico/ Central America–US nexus, but it exists in Caribbean islands as well as between them, as well as in North America and the European Union (EU), especially France, Netherlands, Spain and the UK. Diasporas have become important parts of elections and policy debates in Canada and the US especially around multi-culturalism and -racialism along with immigration. And they have become central to the flow of foreign exchange south, even if it took the World Bank a long time to so recognize (in late 2000). Such remittances are crucial to the life of extended families, contributing to MDGs, but they have become more problematic given the global financial crisis at the turn of the decade (IDB, 2009). Nevertheless, while off historic highs, they totalled some US$ 60 billion from the US to Latin America, including Central America and the Caribbean at the end of the last decade: some US$ 21 billion to Mexico alone then US$ 4.7b to Brazil and US$ 4.1b to Columbia followed by US$ 3.9b to Guatemala and US$ 3.4b to El Salvador. Second, the proliferation of ‘new’ issues such as civil society, climate change and corporate social responsibility (CSR) has lead to a burgeoning of novel heterogeneous global and hemispheric coalitions around, say, ocean rise, management of valleys like the huge Amazonia system (Hochstetler and Keck, 2007), Arctic and Antarctic melting and so on. Such extensive, heterodox alliances have been most visible globally around causes such as landmines (the International Campaign to Ban Landmines, ICBL, and the Ottawa Process, OP), blood diamonds (the Kimberley Process, KP), the Extractive Industries Transparency Initiative (EITI), among others. In turn, these have begun to shine a spotlight on myriad heterogeneous coalitions, certification initiatives, and other collaborative measures (Dingwerth, 2008, pp. 628–30). Third, the expansion of Southern multinational corporations (MNCs) means that they can no longer be overlooked in hemispheric discussions/ institutions. Just as Southern non-governmental organizations (NGOs) are increasingly recognized, so MNCs from Brazil and Mexico impact regional and global negotiations. There is a burgeoning literature on such Southern MNCs (Goldstein, 2007; van Agtmael 2007) as they creep up the Fortune 500 list (Brahma, Embraer, Petrobras, and Vale from Brazil; America Movil, Cemex, Femsa, and Pemex from Mexico). Such regional MNCs from the South increasingly impact regional supply-chains/logistics, as in containerlines like COSCO from China, CSAV from Chile, Malaysia’s MISC and Singapore’s NOL, along with Caribbean Airlines in Trinidad and Tobago as well as Copa out of Panama. Fourth, at the turn of the decade, issues around energy, food, land, water and human security are increasingly recognized, symbolized by the Copenhagen Summit at the end of the first decade of the new century. These in turn have implications for state and non-state actors and networks.

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And finally, some of the hemisphere, especially the Mexican, Columbian and Caribbean, along with parts of the US, cannot be isolated from drug networks and mafias. These illicit organizations have proliferated and diversified as US and related tracking methods have improved even if no ‘war on drugs’ can be won. Such gangs operate within extensive alliances such as surenos and nortenos in California as well as La Gran Raza and La Gran Familia on the East Coast. But while demand in the North remains resilient, Southern entrepreneurs, sometimes aided by diasporic networks, can export and reinvest via ‘money-laundering’, with Offshore Financial Centres (OFCs) being of growing concern to the G8/G20 and OECD especially the US. Together such unofficial connections impact formal inter-state regional arrangements in both positive and negative ways. All state regimes have an interest in their longevity let alone legacy, but if these become more problematic, then they may seek extra-national regional support. Together, sometimes in combination, sometimes separately, these factors impact the formal regional agenda, both positively and negatively at the turn of the decade. Must we therefore consider the third phase of hemispheric regionalism as an ‘interregnum’ (Shifter, 2009, p. 58) after which inter-American relations will return to a ‘normal’ state of conflicting relations or, worse, to a state of irrelevancy with regard to solving the central problems of the Hemisphere? Will hemispheric regionalism become obsolete as the inter-American system faces too many contradictions thereby giving more importance to sub-regional, extra-hemispheric, and other forms of institutions? This volume seeks to answer these fundamental questions concerning the future of the Hemisphere by proposing a critical examination of the record of hemispheric regionalism over the past sixteen years. It offers an assessment of the performance of inter-American institutions in important issue-areas of the regional agenda. The volume also examines the performance of significant sub-regional institutions to see if they did better and, with that in mind, reflects on ways to make hemispheric regionalism more functional.

The structure of the volume This volume has four parts. In the first one, of a more contextual nature, we examine the changing political environment in the Americas during the first decade of the new millennium. Putting to profit her vast expertise on regional politics, Diana Tussie analyses the shifting grounds of recent hemispheric and sub-regional relations. She traces the contours of the trajectory of the hemispheric project, focusing her attention particularly on the strategic motivations behind the fall of the FTAA project and the plethora of bilateral trade deals that followed. She then examines the alternative forms of region building linked to the complex interplay of the grand

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strategies of Brazil and Venezuela. It is unclear what the future holds for the ‘circular game of cooperation and competition’ that is now developing in the Americas, but there is clearly a search for ‘ a new social contract’ and for institutional arrangements that will adequately reflect the new combination of norms and values. The geopolitical context has changed considerably in the Americas during the last few years and Brazil will compete from now on with the US to shape the future agenda and the institutional architecture of the region. Follows a contribution from Dan Erickson on the evolving relationship between the US and Latin America under the Obama administration. After noting that Latin America had all but disappeared from the US foreign policy agenda after the 9/11 terrorist attacks, Erikson shows how high the expectations of LAC governments and populations were during the months leading to the Fifth Summit of the Americas in Trinidad and Tobago in April of 2009. But US policy towards the Americas cannot change rapidly as it is shaped by four central factors, among them the uncertainties concerning the political dynamics in Latin America and the bureaucratic path dependency of Washington’s policies in the region. The Obama administration is well aware, however, that the context of inter-American relations has changed in important ways, one being the increasing presence of external actors, China in particular. Expectations are that President Obama will progressively try to recalibrate the US–LAC relationship starting with more attentive management of the Brazil–US agenda. Norman Girvan then uses his long experience as an academic and as a practitioner to analyse how the Caribbean has been affected by the profound changes in the world economy in recent years and what options small countries have to adjust to the situation. He first discusses the challenges associated with the structural shifts that have occurred in the global economy and the international system. Of significance among them are the important changes that have characterized the political economy of Latin America during the last decade, notably the rising opposition to the Washington Consensus and to the Western models of democracy and development, the arrival of new social movements, and the affirmation of the region on the world scene led by Brazil and Venezuela. The resulting decline of the US’s influence in the region have left the CARICOM countries with some options but governments of the region will need to make additional efforts to define a vision concerning the place of the Caribbean in the new architecture of the Americas. A critical assessment of hemispheric regionalism The second part of the volume offers a critical assessment of the performance of inter-American institutions in major sectors of inter-American cooperation. As said previously, the cornerstone of the hemispheric project was the proposal for a FTAA. Antoni Estevadeordal and Kati Suominen’s contribution

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thus opens up this section with a study of trade relations in the Americas. They start with an overview of trade relations in the Americas where one can see that intra-regional trade in the LAC region is not as significant as it is in other regions of the world but that it has increased in recent years. The authors then show how the failure of the FTAA negotiations has left the region with a patchwork of trade agreements which reveals quite a few uncertainties concerning the future of regional trade relations. Among four possible scenarios concerning trade in the Americas, the most advisable would be a convergence of existing agreements that would prepare the way for a region-wide agreement. But there are significant hurdles in this case as in the case of all the scenarios. For Estevadeordal and Suominen, the important consideration is to keep trade liberalization going because it offers the best prospects for prosperity and stability. From trade, we move to energy cooperation. In his contribution, Tom O’Keefe writes that despite a proposal made by the Obama administration to create an Energy and Climate Partnership of the Americas in April 2009, hemispheric regionalism has a poor track record with regards to energy cooperation. Energy and sustainable development did figure on the official agendas of the first three Summits of the Americas, and a Hemispheric Energy Initiative was officially launched in 1995. But nothing significant came out of these initiatives, leaving the field open for energy cooperation at the sub-regional level. All sub-regional integration schemes were active in proposing agreements and creating institutions to facilitate one form or another of energy cooperation among member states. In the case of CARICOM, the PetroCaribe Energy Cooperation Agreements dominate the landscape and have more or less undermined efforts at energy cooperation within CARICOM. With regard to energy cooperation at the hemispheric level, it might be possible to build on existing sub-regional agreements but the prospects are not good because of Brazilian and Venezuelan reticence and because of limited US leadership in the region given the importance of other problems for the Obama administration. Tom Legler’s contribution highlights the centrality of democracy and human rights in the hemispheric regionalism project. Starting with the Protocol of Cartagena de Indias in 1985, member states created a democracy promotion regime that gave the OAS a major role in promoting democracy and human rights in the region. OAS activities in this sense have been important, particularly in the field of election monitoring. The 1990s witnessed the development and acceptance by member states of a democratic normative order in the region whose most salient instrument is the Inter-American Democratic Charter adopted on 11 September 2001. Since that year, however, the Charter itself and the democracy regime were the object of ‘a number of contradictory and worrisome developments’. The diminishing consensus on what democracy entails have made it difficult to consolidate the regime. Furthermore, recent events in Honduras

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and Venezuela have shown that there is a need to refine some of its major instruments. Security is also an important dimension of inter-American cooperation as illustrated by Rut Diamint’s chapter. During the Cold War, the main instrument of hemispheric regionalism for security purposes was the InterAmerican Treaty for Reciprocal Assistance or Rio Pact of 1947. Evoked only a few times, the Rio Pact is a defensive alliance that was never used for its initial purpose, which is to protect the member states from external threats. The end of the Cold War and the appearance of other types of security threats, such as those related to terrorism and international crime, brought the hemispheric community to adopt a new security paradigm at the Mexico Conference on Security in 2003. Building on the new concept of multidimensional security, the OAS enlarged its security mission by incorporating the Inter-American Defense Board in 2006 and by upgrading the Committee on Hemispheric Security to a Secretariat on Multidimensional Security. Combined with that of the defence ministerials, the work of the OAS may not have reduced insecurity in the region but it did manage to help reduce tensions among states and it is contributing to the creation of a normative framework useful in the fight against criminality and terrorism. The last chapter of the second part of the volume deals with poverty reduction and the role of regional institutions in this regard, principally the IDB. Nicola Phillips essentially argues that the poor record of poverty reduction in the Americas has a lot to do with the problematic conceptual basis on which the institutions have articulated their strategies. Her analysis of aggregate figures on poverty in the region brings her to remark that they are misleading because ‘heavily skewed’ by trends in the larger economies. The IDB strategies to fight poverty have been handicapped by a conceptual view focused too much on the national context, thereby obscuring the nature of the incorporation of LAC economies in global production networks. In order to have a more effective poverty reduction strategy, the IDB and other regional institutions should modify their approach to include the dynamics of ‘adverse incorporation’ into the world economy along with the notion of social exclusion. The effectiveness of other institutions Assessing the performance of hemispheric institutions unearths interesting findings, but the assessment is more complete when the record is compared to that of other regional institutions. The third part of the volume thus analyses the situation of three sub-regional institutions, two established ones and a relative newcomer. In his chapter on the Mercosur, Marc Schelhase assesses the progress of the integration scheme on the basis of its original aims: creation of a regional economic space, consolidation of democracy, integration of the region into the global trading system, and entrenchment of economic reforms

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taking into consideration development imperatives. Examined from that angle, Mercosur demonstrates notable achievements during the first half of the 1990s but tensions started to appear in the second half of the decade. The agenda became increasingly crowded, both externally and internally while global economic conditions exacerbated internal tensions. The second decade of the Mercosur saw an increase in tensions and limited progress despite an attempt at macro-economic coordination on the part of Brazil and Argentina. As Venezuela prepares to join the Mercosur as a fully fledged member, the future of the institution appears uncertain as member states have difficulty in implementing the bloc’s original aims while they will have to decide on whether to commit more resources to the Mercosur or to UNASUR. In the case of the NAFTA, the first observation made by Louis Bélanger and Richard Ouellet is that the agreement has delivered the main commercial and economic results that it was designed to produce. Many non-tariff barriers were eliminated, easy-to-apply rules of origin were introduced, and innovative rules were adopted. Trilateral merchandise trade has tripled from 1994 to 2008 while NAFTA was also instrumental in fostering economic growth for each member state. Despite these successes, it seems now that NAFTA has reached a plateau and is ill equipped to face the challenges ahead. The original agreement lacks effective amendment procedures and rule-making capability to deal with twenty-first century trade issues. To be truly effective in the years to come, NAFTA will need to be upgraded in a comprehensive and formal fashion. The Alternativa Bolivariana para América Latina (ALBA) is a much looser type of association. As Josette Altmann writes in her chapter, the ALBA was conceived as an alternative to the FTAA. It presents itself as another model of integration, respectful of sovereignty and people’s self-determination, and opposed to the economic model represented by the Washington Consensus. Initiated and led by President Chavez of Venezuela, the ALBA functions around a few selected instruments such as Petrocaribe, Telesur, Banco del Sur, and joint development projects. If Petrocaribe has had a significant impact in Central America and in the Caribbean, it is unclear what real impact the ALBA had and how it will resist the consequences of the international financial crisis. Although the ALBA discourse does find support in many parts of Latin America and the Caribbean, the challenge in coming years will be to resist extreme polarization and deliver concrete results with regard to joint development projects. Reconstructing a regional system for the Americas Given the difficulty, and in some cases the failure, of hemispheric regionalism to produce significant results with regard to many aspects of interAmerican cooperation, and taking into consideration the experience of selected sub-regional institutions, are there ways to improve the performance

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of inter-American institutions? Are there ways to make hemispheric regionalism viable for the near future? After having noted the significant recent changes in the dynamics of inter-American politics, notably the new assertiveness of Latin America in world affairs and the openness of the Obama administration towards the region, Jorge Heine believes middle powers have a role to play in giving a new impetus to hemispheric regionalism. Canada, the middle power par excellence, has already acted in this sense but Latin American middle powers such as Argentina, Mexico and Chile could also play positive roles. Not having hegemonic aspirations of their own, they are well placed to act as honest brokers and propose new policy tools to improve interAmerican cooperation. One possible solution to relaunch hemispheric regionalism would be to create an informal working group of ten countries that would make it easier to discuss and find solutions to important regional problems. The inclusion of another type of actor, the private sector, would also be a positive move, according to Richard Feinberg. Historically, OAS relations with the private sector have not been very strong, though this improved after 1994 when the Miami Summit engaged private sector representatives in consultations in the context of the FTAA negotiations. These consultations were institutionalized in the framework of summitry and the trade ministerials. This led to the creation, in 2005, of the Private Sector Forum with the mission of building bridges between the OAS and the Hemisphere’s private sector. With the help of instruments such as the public–private partnerships, the public sector could play an important role in helping inter-American institutions deliver concrete results for member states. Coming to the last chapter of the volume, Gordon Mace and JeanPhilippe Thérien present a summary of findings concerning the results of this last phase of hemispheric regionalism. From their point of view, the mixed record of inter-American institutions raises the question of legitimacy of these institutions and of the hemispheric project itself. When applied to regional institutions, legitimacy has to do with notions of democracy and efficiency. The communities involved must have access to the decisionmaking process, and the institutions must implement decisions effectively and with transparency. When this is missing, doubts arise concerning the legitimacy of an institution. This itself is problematic and it becomes more so in an environment of competing regionalist projects.

References Acharya, Amitav and Alastair Iain Johnston (2007), ‘Comparing Regional Institutions: An Introduction’, in Amitav Acharya and Alastair Iain Johnston (eds), Crafting Cooperation, Regional International Institutions in Comparative Perspective, Cambridge: Cambridge University Press. 1–31.

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Alexandroff, Alan S. and Andrew F. Cooper (eds) (2010), Rising States, Rising Institutions: The Challenge of Global Governance, Washington, DC: Brookings Institution Press. Aronson, Bernard W. (1996), ‘Our Vision of the Hemisphere’, US Department of State Dispatch, October 15: 184–5. Atkins, G. Pope (1989), Latin America in the International Political System, second edition, Boulder: Westview Press. Breslin, Shaun and Richard Higgott (2000) ‘Studying Regions: Learning from the Old Constructing the New’, New Political Economy Vol. 5, No. 3, pp. 333–52. Bush, George H. (1989), ‘Remarks to the Council of the Americas’, Public Papers of the President of the United States, Vol. 1, Washington, DC: Government Printing Office. 504–7. Christopher, Warren (1993), ‘A Bridge to a Better Future for the United States and the Hemisphere’, US Department of State Dispatch, 4(37): 625–6. Connell-Smith, Gordon (1974), The United States and Latin America: An Historical Analysis of Inter-American Relations, London: Heinemann Educational Books. Cooper, Andrew F. (2009), ‘Renewing the OAS’, in Andrew F. Cooper and Jorge Heine (eds), Which Way Latin America? Hemispheric Politics Meets Globalization, Tokyo: United Nations University Press. 159–81. Cooper, Andrew F. and Agata Antkiewicz (eds) (2008) Emerging Powers in Global Governance: Lessons from the Heiligendamm Process, Waterloo: Wilfrid Laurier University Press. Delong, Brad and Stephen S. Cohen (2010), The End of Influence, New York: Basic Books. Dingwerth, Klaus (2008) ‘Private Transnational Governance and the Developing World: A Comparative Perspective’ International Studies Quarterly 52(3), September: 607–34. Dominguez, Jorge I. (2007), ‘International Cooperation in Latin America: The Design of Regional Institutions by Slow Accretion’, in Amitav Acharya and Alastair Iain Johnston (eds), Crafting Cooperation: Regional International Institutions in Comparative Perspective, Cambridge: Cambridge University Press. 83–128. ECLAC (Economic Commission for Latin America and the Caribbean) (1994), Open Regionalism in Latin America and the Caribbean, Santiago: ECLAC. Feinberg, Richard E. and Paul Haslam (2007), ‘Problems of Coordination: The OAS and the IDB’, in Gordon Mace, Jean-Philippe Thérien and Paul Haslam (eds), Governing the Americas: Assessing Multilateral Institutions, Boulder: Lynne Rienner Publishers. 51–68. Goldman Sachs (2007) BRICs & Beyond, New York: Goldman Sachs Group. Available at http://www2.goldmansachs.com/ideas/brics/book/BRIC-Full.pdf. Goldstein, Andrea (2007), Multinational Companies from Emerging Economies, London: Palgrave Macmillan. Gosselin, Guy and Jean-Philippe Thérien (1999), ‘The Organization of American States and Hemispheric Regionalism’, in Gordon Mace, Louis Bélanger and contributors, The Americas in Transition: The Contours of Regionalism, Boulder: Lynne Rienner Publishers: 175–93. Heine, Jorge (2010), ‘Latin Craze for Regional Integration’, The Toronto Star, 28 February. Available at http://www.thestar.com/printarticle/772318. Accessed 2 March 2010. Hettne, Bjorn (1999), ‘Globalization and the New Regionalism: The Second Great Transformation’, in Bjorn Hettne, Andras Inotai and Osvaldo Sunkel (eds), Globalism and the New Regionalism, London: Macmillan. 1–24. Hettne, Bjorn (2003), ‘The New Regionalism Revisited’, in Fredrik Soderbaum and Timothy M. Shaw (eds), Theories of New Regionalism, Basingstoke: Palgrave Macmillan. 22–42. Hochstetler, Kathryn & Margaret E. Keck (2007), Greening Brazil: Environmental Activism in State & Society, Durham: Duke University Press.

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Gordon Mace, Andrew F. Cooper and Timothy M. Shaw 19 Hveem, Helge (2008) ‘The Regional Project in Global Governance’, in Fredrik Soderbaum and Timothy M. Shaw (eds), Theories of New Regionalism, Basingstoke: Palgrave Macmillan. 81–98. IDB (2009), “Remittances to Latin America & the Caribbean”, 2009: The Impact of the Global Crisis, Washington, DC: IDB & MIF. Kagan, Robert (2008), The Return of History and the End of Dreams, New York: Alfred Knopf. Kanth, Ravi (2010) ‘S’pore to Host 3G Group During WEF Informal Coalition to Discuss how it can Strengthen, Support Global Governance’, The [Singapore] Business Times, 3 February. Katzenstein, Peter (2005), A World of Regions: Asia and Europe in the American Imperium, Ithaca and London: Cornell University Press. Khanna, Parag (2008), The Second World: Empires and Influence in the New Global Order, New York: Allen Lane. Koremenos, Barbara, Charles Lipson and Duncan Snidal (eds), (2004), The Rational Design of International Institutions, Cambridge: Cambridge University Press. Krauthammer, Charles (1990), ‘The Unipolar Moment’, Foreign Affairs, 70, 1: 23–33. Lowenthal, Abraham F. (2009), ‘Foreword’, in Andrew F. Cooper and Jorge Heine (eds), Which Way Latin America? Hemispheric Politics Meets Globalization, Tokyo: United Nations University Press. xxi–xxix. Mace, Gordon and Hugo Loiseau (2005), ‘Cooperative Hegemony and Summitry in the Americas’, Latin American Politics and Society, 47, 4, Winter: 107–34. Meacham, Carl (2010), Multilateralism in the Americas: Let’s Start by Fixing the OAS. A Report to the Committee on Foreign Relations, United States Senate, Washington: Government Printing Office. Available at http://www.gpoaccess.gov/congress/ index.html. Accessed 15 February 2010. Mittelman, James H. (1999), ‘Rethinking the “New Regionalism” in the Context of Globalization’, in Bjorn Hettne, Andras Inotai and Osvaldo Sunkel (eds), Globalism and the New Regionalism, London: Macmillan: 25–53. Pastor, Robert A. (2001), Exiting the Whirlpool, US: Foreign Policy Toward Latin America and the Caribbean, second edition, Boulder: Westview. Prideaux, John (2009), ‘After Lula’, The World in 2010, London: The Economist. Rojas Aravena, Francisco (2009), Integracion in América Latina: Acciones y Omisiones; Conflictos y Cooperacion. IV Informe del Secretario General de FLACSO, San José: FLACSO. Scheman, L. Ronald (2007), ‘The Inter-American System: An Overview’, in Gordon Mace, Jean-Philippe Thérien and Paul Haslam (eds), Governing the Americas. Assessing Multilateral Institutions, Boulder: Lynne Rienner Publishers. 13–33. Schneider, Ronald M (2007), Latin American Political History, Boulder: Westview. Shifter, Michael (2009), ‘Managing Disarray: The Search for a New Consensus’, in Andrew F. Cooper and Jorge Heine (eds), Which Way Latin America? Hemispheric Politics Meets Globalization, Tokyo: United Nations University Press. 50–63. Smith, Peter H. (1996), Talons of the Eagle: Dynamics of US – Latin American Relations, New York; Oxford: Oxford University Press. Van Agtmael, Antoine (2007), The Emerging Markets Century: How a new Breed of WorldClass Companies is Overtaking the World, New York: Free Press. Watson, Alexander F. (1995), ‘Toward a New Relationship of Western Hemisphere Democracies’, US Department of State Dispatch, 28: 1–5. Zakaria, Fareed (2008), The Post-American World: And the Rise of the Rest, New York: Penguin Books.

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Part I A Changing Landscape

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1 Hemispheric Relations: Budding Contests in the Dawn of a New Era Diana Tussie

Introduction In the 1960s, when region building was first having a renaissance, economist Gunnar Myrdal (1968: 39) issued a cautious note, suggesting that ‘the regional approach has no intrinsic justification. There are no mystical qualities in geographical proximity that make neighboring nations a “unit” in any real sense culturally, politically or economically’. True to this dictum, Latin America is a vast and uneven continent of many contrasts that escapes ‘essentialist’ characterizations, such as language, Hispanic-Catholic traditions or a single civilization, as Huntington (1998) would have it. In the region, the differences in size and levels of development are several times larger than those found between the actual and prospective members of the European Union. But such contrasts still leave room for positive assertions about shared trends, common dilemmas or recurrent policy features that prompt region-building efforts. The regional level of analysis adds an exciting dimension to the study of international political economy, long over-focused upon advanced industrial societies and states as the systemic rule makers par excellence. European empires enshrined this balance of power and the US, and through the Monroe doctrine, promoted templates for controlling (and understanding) their respective regions; most other countries also built ways of dealing with their neighbours that have been overlooked by the systemic view of enquiry. It is not that regions have been ignored outright, but rather that only certain regions were deemed of interest: those seen to shape global rules. The others were bundled up at the receiving end. In a period of rapid transformation, the cloth of regional policies, regional identities and regional forms of cooperation and competition (and not just in ‘core’ regions) have come into focus as they are seen to have significant global reverberations (Bélanger and Mace, 1999), beyond the role of passive receivers. Sticking to a binary view, Robert Keohane (2001) sets Latin American countries as the takers not makers of global rules. Going beyond 23

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this binary description, there is a more complex situation characterized as much by convergence and divergence, as well as by abeyance and contestation – even if in comparison with the countries in Europe, Asia, and the Middle East, the countries of Latin America and the Caribbean rarely grab newspaper headlines. Regionalism as an intensely political process is now a motivating and legitimizing tool for linked strategies and objectives whereby governments seek to coordinate the terms of competition on which rival economic and political agents confront each other. In Latin America the process has gone through phases of: energetic expansion, mere trend-following, controlled stalemate, disaggregation and reconfiguration as a result of the ups and downs of policies and the changing conditions in the global scene. These factors have led to a leadership competition in terms of goals and of the policies included and geographical reach. The analysis of competing projects raises a number of interesting questions about the relationship between the US’s ambition to lead a continent-wide project and defensive reactions to it. The advent of a new administration in Washington hand in hand with the global financial crisis of 2008–10 opens the door for a fresh look at this increasingly rich and ambivalent relationship. Forced to find the essence (which Myrdal called into question) that makes up a region, the regional milieu in the Americas broadly speaking is in some ways unique because of its natural resource base, its shared beginnings in the system of states, the intimate exposure to US reach and the ultimate mark of US hegemony. In this sense, regionalism as a channel for the spread of policies dates as far back as the struggles for independence and the coetaneous conformation of republics with startling degrees of social and organizational commonalities (Fawcett, 2005). This is a distinct birthmark, which also helps to explain the trajectory of regional politics, and its mix of abeyance, adaptation, contestation, sidelining and pragmatism to a number of realpolitik dilemmas. True to this pattern, the last decade of the twentieth century ushered in a paradigm shift, a new flux of styles, fashions and philosophies manifest in the collapse of military rule, renewed electoral competition and the crumbling of import substitution that had shaped and inspired policy for so long. Trade reform became the mechanism for the transmission and adaptation of neoliberal principles. Regional economic integration made a comeback. In some cases, it entailed sprucing up old agreements, as was the case with the Andean Pact in 1989 and the Central American Common Market (CACM) in 1990. In other cases, new regions were created, such as the North American Free Trade Agreement (NAFTA) in 1993 and the Mercosur in 1991. The competition for potential expansion of the latter two brought them into steadfast opposition from time to time, a continued tension over modes of regional associations and, ultimately, regional leadership. Mercosur was widely believed to create a window of opportunity for the

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contestation to the US-led mode, an opportunity that as soon as it was seen to lose vigour was jumpstarted by the Bolivarian Alternative for the Americas (ALBA, in its Spanish acronym) – a project forged by President Hugo Chávez of Venezuela. Strategic rivalries have cast unprecedented shadows in the region. While China (see Phillips, 2009) makes hasty strides in trade as a supplier and export destination, Spain has become the leading foreign investor in Argentina, the second in Bolivia, and the fourth in Peru. Russia has enhanced its presence through high-level visits, warming up relations with Cuba, and engaging in (modest) joint military and naval manoeuvres with Venezuela. Iran has also toured the region extensively, in 2009 landing in Venezuela, Bolivia and Brazil. The approach of this chapter is primarily analytical. My concern is to assess the nature of projects that have emerged in the Americas. This chapter advances a dualistic conceptual framework and proceeds in two parts, each tackling contrasting motivations for regional projects. The first shows the main features and trajectory of the hemispheric project that was born under American leadership, whose saga subsists quite vividly, albeit in a splintered manner. The second part of this chapter examines rival attempts: the quest to fend off American pre-eminence and making the claim for more autonomous regional projects. It shows how these grapple in rocky waters to sideline each other, at times reaching the verge of direct confrontation.1 It concludes with an applied reflection on the ensuing dynamics fuelled by the emergence of local powers and ‘alternative globalizers’.2 In the longer term what we are seeing is the slow and partial unravelling of the age-old tug of the US’s hegemony in the region, which has been propelled in opposite directions by élite alignment and societal resistance. As this relationship begins to dim, nascent projects imbued with a range of strategic objectives, mark new directions in still fuzzy, winding ways.

Reigning supreme When the Cold War came to an end, Latin America stood alone as the only region where American influence remained largely uncontested (Castañeda, 1993). This provided an opportunity for the most encompassing US attempt to establish a model of regional economic governance through the Free Trade Area of the Americas (FTAA). The relevance of the FTAA stemmed not only from issues of regional market access for trade and investment but also as a broader set of global power issues. The idea of creating a single market with the 34 countries of the Americas was predicated on consolidating the hegemony of US multinationals and structural adjustment policies – that is, neoliberalism – until they became practically irreversible. This, in turn, would be a major step towards establishing US hegemony over the international system, as the country’s net was cast over more and more countries to bring them into the spiral of expanding agreements.

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The effort to join the economies of the Americas into a single free trade area began at the First Summit of the Americas held in Miami, US in December 1994. The initiative was warmly received by Latin American heads of government, at a time when the Washington Consensus was the dominant mindset. Countries in the region were leaving behind the worst excesses of authoritarianism, regulation and protectionism. When the heads of state signed the 1994 Miami Declaration and Plan of Action, there was a consensus accepting of American leadership in the post-Cold War world and in favour of de-regulation and trade liberalization. The 34 countries of the Americas agreed to complete negotiations towards this agreement by the year 2005. During the preparatory phase (1994–8), the 34 ministers responsible for trade established 12 working groups to identify and examine existing trade-related measures in each area, with a view to identifying possible approaches to negotiations. The FTAA negotiations were formally launched in April 1998 at the Second Summit of the Americas in Santiago, Chile. The heads of state declared that the negotiating process would take into account the differences in the levels of development and size of the economies in the Americas in order to facilitate full participation by all countries and to ensure that existing sub-regional schemes would not be wiped away. Consequently, much of the literature explains open regionalism as a project of governments responding to the needs of corporate actors to improve competitiveness in global markets, using regional action as a means to engage with the global economy (Grugel and Hout, 1999; Hveem, 2008; Mittelman, 2000). These projects are likely to include a strong neoliberal agenda requiring extensive domestic deregulation, apart from trade liberalization, aimed at reducing the state’s role in economic life in order to yield efficiency gains (Phillips, 2000). The effect of such actions is to markedly reduce transaction costs for firms engaged in business across national borders. Open regionalism and neoliberal regionalism are often regarded as synonymous in the literature (see Mittelman, 2000); in Latin America it was intimately connected to the attempt to replace import substitution, countenance the FTAA and its subsequent fallback option, that is, the web of bilateral agreements connected to the US hub that replaced the original blueprint. The establishment of the North American Free Trade Area (NAFTA) was a watershed: it triggered panicked reactions in a spate of excluded countries. North–South agreements modelled on NAFTA were put on offer and for many countries that had been silent bystanders in the General Agreement on Tariffs and Trade (GATT), regional arrangements of the North–South variety provided an opportunity to increase inward investment and gain the market access they sought but had never really extracted from multilateral negotiations. In this context, the US tried to achieve WTO-plus agreements that would allow for a favourable position not only in the hemisphere and with other countries from other parts of the world. Unable to ignore these forces, governments, businesses and other social groups responded with a variety of tactics.

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Latin American governments and firms felt particularly challenged by the multitude of pressures, with an eye on growth prospects and the intense competition for foreign investment flows. Open regionalism emerged as one response to these multiple pressures. It was considered a mid-course placement along the way to globalization, a means through which policymakers and business could flex their muscles and, at the same time, make a difference by connecting to the engine of globalization processes. By engaging in market expansion (integration of larger regional markets) and by employing selective protection/privileges (preferential treatment only to group members), governments perceived regionalism either as a form of gaining and locking in access for their competitive exports or of helping competitive domestic industries before exposing them to global market competition. Strategic trade insights, thus, suggest that regionalism in a developmental perspective is not always or necessarily about governments providing sanctuary to sunset industries. In this sense, regionalism approximated a type of ‘meso-globalization’ (Phillips, 2000), which advanced through a ‘bottom-up’ process ultimately convergent with increasingly deep engagement with the process of globalization. The expectation was that globalization, as well as new forms of economic regulation, would generate a new system of international political governance grounded in multilateralism. Business and governments reacted to actual market pressures and responded to perceived or anticipated events (Palan et al., 1996). The US dimension was crucial at that juncture. Both the George H. W. Bush and Clinton administrations were actively engaged in the changing regional landscape, and policies that both expanded and complicated policy alternatives. In spite of some tensions and disagreements about strategy, and in spite of the weight of American power, relations between Latin America and the US then entered a comparatively smooth era. Apart from facilitating trade liberalization, open regionalism was designed to enhance the potential for countries to attract foreign direct investment, as a result of the lure of larger markets for multinational corporations eager to take advantage of economies of scale. But the contested nature of the project led it down a winding road and the specific form that it finally took departed quite significantly from the original template which the US sought to enforce. Each Summit of the Americas forum had taken up a mission. The 1994 Miami Summit was the ‘Trade Summit’; the 1998 Santiago Summit was the ‘Education Summit’; the 2001 Quebec Summit was the ‘Democratic Summit’; and the 2005 Mar del Plata Summit in Argentina officially focused on the themes of ‘Creating Jobs to Fight Poverty and Strengthen Democratic Governance’. The US agenda of economic integration, neoliberal reform, democratic consolidation, and a campaign against corruption and drug trafficking enjoyed wide acceptance as late as 2001, when, for example, former president Cardoso appealed at the Democratic Summit in Quebec for a vision

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of a continent ‘defined not by asymmetry of power but by a community of values’. Yet at that point, and for the first time, the final statement was not approved unanimously among the heads of state of the 34 countries represented. Venezuela reserved its position in relation to both the FTAA negotiating schedule and the definition of democracy exclusively as ‘representative democracy.’ Further criticisms of the FTAA negotiating process were formulated at the Quito ministerial meeting in November 2002, which demanded transparency in the negotiations and pointed out that the Venezuelan Constitution (Article 73) required the holding of a national referendum before such an important policy decision could be made (Blanco and Linares, 2008). A global critique of the FTAA was presented at the FTAA Trade Negotiations Committee meeting held in Puebla in April 2003. By the time of the 2005 summit in Mar del Plata the tide had changed. Because of its pungency the Mar del Plata Summit is best remembered as the ‘Maradona Summit’ or the ‘final breakdown’ where the pro and anti-FTAA sides met to work out their respective issues, although the spirit of collegiality had already broken down in 2003 over disagreements over trade progress during the ministerial meeting held in Miami. From then on, the FTAA unravelled. While Washington intended to jump-start talks for the FTAA, Chávez headlined a giant rally with hemispheric social movement leaders, stuck a nail in the FTAA coffin and proclaimed Mar del Plata the ‘tomb of the FTAA’. For better or for worse, the summit in Mar del Plata showed the prominence of the FTAA within the agenda of the preceding four summits, overshadowing all the other issues that had been set out in those meetings. The Mar del Plata Summit concluded with the collapse of the FTAA as envisaged by the US, and, with it, the fall of Washington’s principal strategy for the region. As challengers gained momentum, rather than confronting a losing battle on a united ground, the US opened multiple negotiating windows in order to be able to ‘forum shop’. In this more docile environment, the policy of competitive liberalization opened a race for access to its market, thereby enticing countries to open their economies to US companies and farmers. Competitive liberalization (see Bergsten, 1996; Evenett and Meier, 2007) has been used to describe a trade negotiating strategy containing a sequential logic linking negotiations, and therefore trade liberalization, across different levels (bilateral, regional and multilateral). It is also the dynamic that is said to be created by that strategy, the competition among countries to be part of the club. As the USTR Representative recognized: By moving forward on multiple fronts, the US can exert its leverage, create a new competition in liberalization, target the needs of developing countries, and create a fresh political dynamic by putting free trade on to the offensive. (Robert Zoellick quoted in The Economist, 2002)

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The competitive liberalization strategy has allowed the US to complete a string of FTAs. The countries involved include Singapore, Australia, Morocco, Bahrain and South Korea; and in the Americas, Chile, CAFTA-DR (Costa Rica, El Salvador, Nicaragua, Honduras, Guatemala and the Dominican Republic), Peru, Colombia and Panama. For the US, trade policy has never been just about trade, but also about setting the rules of the game with a view to broader global political interests. The change of course was not merely a means of favouring apt allies and punishing the wavering. One of the main reasons for US interest in the FTAA and then the bilateral deals was the opportunity to advance a ‘new trade agenda’ and the ability to control the multilateral agenda in the hemisphere. The strategic motivations behind these bilateral deals need to be understood in the context of the possibilities they provide for strengthening the hand of local lobbies in the domestic political economy; for favouring piecemeal rule acceptance, and building on sequential negotiations as a means of generating ‘a spiral of precedents’ (Van Grasstek, 2008). The thrust of the new bilateral deals is towards articulating regional disciplines which reflect a set of offensive extra-regional and global interests at least as much as they respond to more defensive regional priorities. At the hemispheric level, the deals were part of the strategy to encircle recalcitrant countries, and can be interpreted as a preventive move to avoid Brazilian leadership of a consolidated South America that could emerge from the ambition to link Mercosur with the Andean Community and create a space for Brazilian internationalized business. US irritation subsequently switched from Brazilian leadership to the exuberant sparring of President Chávez in oil-rich Venezuela and his own regional ambition extending to the Caribbean, Bolivia and Cuba in particular. Whether a defensive reaction against Brazil or Venezuela as contending states, the logic underlying the approach was to remain at the centre and ensure the adoption of US-style market-friendly business laws and regulations, or at least the adoption of regulations in which American businesses did not lose the upper hand. Winners of the race were supposed to garner more foreign direct investment and exports, both of which may well have been diverted from losers. The loss of trade shares is said to put pressure on the losers to participate in the contest more enthusiastically in the future (by offering to liberalize more). By this logic, countries are concerned not just with their absolute position with respect to the US market but also with their relative position vis-à-vis other US trading partners. Business interests were prodded in one country after another, in one export sector after another. The race put considerable weight on the relationships between different levels of trade negotiation and reform (namely, the bilateral, regional and multilateral levels). For countries on the receiving end of this policy, the developmental trade-offs have been formidable: they retain market access for their leading exports and opportunities for specialization in exchange for restricting their use of

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industrial policy instruments to create new productive capacities. This is especially evident in the management of inward investment (commitment to ‘investor-state’-type arrangements and the elimination of capital controls) and intellectual property protection (Shadlen, 2008).3 Why do countries agree to such bilateral agreements that undermine their aspiration to increase bargaining power in the putative FTAA and the WTO? A significant part of the answer is to be found in the export specialization and the political dependence that underlies these decisions. As noted, except for Mercosur, most of Latin America remains highly dependent on the US as a destination for its exports and a source of direct investment flows. A source of fear is the phase-out of non-reciprocal agreements which contain preferences granted on a discretionary base. The most widespread is the General System of Preferences, which coexists with the Andean Trade Preferences and Drug Eradication Act and the Caribbean Basin Trade Preference Act. By encouraging trade in sectors where there are rents, preferences induce specialization in those sectors. In addition, by raising returns, they also create a powerful business interest that will lobby for the continuation of access. If preferences apply to highly protected sectors in donor countries, they will result in high rents for those able to export free of trade barriers. Hence the threat of phase-out generates an immediate policy-induced distress. Bilateral trade agreements are a way of locking in benefits on a binding basis. But binding, in turn, is only granted so long as there is reciprocal give and take. Most important in the case of Central America and the Caribbean is the panic provoked by the phase-out of the Textile and Garment agreement at the end of 2005, leading to the elimination of quotas, which, restrictive as they might have been, had guaranteed orderly access to the US market. The free-for-all with China’s highly competitive industry would lead to the collapse of the rents associated with quota rights. Holders of rents are well aware of how they stand to lose. They are well organized and have considerable clout. Leading export sectors in many countries are either internationally integrated or have well-established links with buyers. In this context they have been able to exert powerful pressure on the conclusion of agreements. Industrial sectors behind the Central American Free Trade Agreement (CAFTA-DR) were the electronics industry (Intel in Costa Rica), medical equipment (Costa Rica), pharmaceuticals (Costa Rica, El Salvador and Guatemala), chemicals and chemical by-products (El Salvador and Costa Rica), paper and paper by-products (El Salvador and Nicaragua). Foodstuff producers such as fresh and preserved foods – including pineapples, melons, flowers, plants, cigars, vegetables and pulses, tubers and roots – traded by transnational enterprises such as Chiquita and Del Monte were also avid players. A broad segment of US interests was happy to see the elimination of duties on 80 per cent of all industrial goods exported to CAFTA-DR countries,

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benefiting information technology, construction equipment, chemicals, and paper products, medical and scientific equipment. In addition, the agreement wiped out duties on US (subsidized) farm exports, including cotton, rice, wheat, soybeans, as well as processed foods, fruits and vegetables and beef. CAFTA-DR also agreed to open markets to US telecoms, banks, insurers, retailers, advertising agencies, express-delivery couriers, and travel and transport firms. It also allows freer movement of professional services such as engineering and accounting (granting short and medium-term visas). The deal will grant WTO-plus protection for patented drugs, copyrighted movies and software, Internet domain names and other intellectual property. In its encompassing but failed attempt to construct the FTAA, and in its fragmented version of a hub and spoke system shaped around the web of bilateral agreements, open regionalism is an attempt to entrench both the global and the regional hegemony of the US. The crumbling of the Central America Common Market as a result of these pacts is an important development. Together with the Andean Community, both had been relatively successful in articulating a set of common negotiating objectives in the FTAA process, in good part because these objectives had been largely limited to the single issue of special and differential treatment for small economies. In addition, the reduced clout of the smaller nations in the negotiations allowed them to take a comfortable place on the back seat while bigger players were left to fight the big battles. The Andean Community had been generally rather robust vis-á-vis the FTAA process. In part this was due to the presence of supranational institutional structures, and a certain delegation of authority that allowed some coordination among member countries. The pattern had been one in which different countries assumed leadership on different issues and at different times. So there had been a record (albeit timid) of more success at executing common negotiating positions. Moreover, in the last quarter of 2002, members had reached an agreement over 62 per cent of the lines in the common external tariff and had made a commitment to agree on the remaining 38 per cent by the end of the year. But the commitment was never honoured: Colombia, Peru and Ecuador defected and opened up negotiations with the US. With neither the letter nor the spirit of this agreement to hold on to, Venezuela’s President Hugo Chávez announced in April 2006 that his country was pulling out of a hollowed Andean Community. Intensifying bilateralism reflected adversarial and competing strategicalliance behaviour and diminished the prospects of regional communitybuilding processes and endeavours. The conflictive context is exemplified by the signing and negotiation of the agreement with Peru behind closed doors in order to isolate the participation of civil society. As the US pressed on, the cycle of elections ushered in new leaders and fresh analyses of costs and benefits. This was largely the case in Ecuador and Bolivia, which withdrew from the table. Mercosur, under Brazilian leadership, first resisted

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the FTAA and subsequently the first overtures for bilateral pacts.4 Many Brazilian social, political and economic actors perceived that Washington used the FTAA to undermine strides in sub-regional integration and align the hemisphere to its interests. Other countries dependent on the US market were more willing to undertake policy reforms as a quid pro quo for preferential access for their exports. As the continent split on the costs and benefits of the package on offer, bilateral agreements netted a coalition comprising Chile, Colombia, Peru and Central America. North America and Mercosur became contending hubs for the emerging patterns of integration. Gradually a degree of creativity and flexibility in setting the regional agenda emerged in the interstices. While opposition to neoliberalism gathered strength, the string of globalization crises in the region (Mexico in 1995, Brazil in 1999, Argentina in 2001) forced a reality check, damaged confidence in neoliberal reform and changed the mindset of élites. US unilateral policy in the era of George W. Bush, its lack of strategic vision – even negligence and divisiveness in its dealings with Latin America – was to be the handmaiden that provided the occasion for a turnaround of the entanglement that had marked the 1990s. George W. Bush came to personify the threat that acquiescence to American power could get out of control. His contribution to contesting politics should not be judged by its own tragic global outcomes but by the strong counter-reactions it provoked. It is out of such dynamics that in Latin America regionalism emerges as a defensive response.

Vying for influence: Nascent forms of region building Instead of an integrated Pax Americana in the hemisphere, Latin American relations now face an array of loose ends that could turn out to be salutary in as much as it allows each of the countries of the region to gain leeway. Many region-building projects and much regional activity grow out of the need to gain grounds for disentanglement from US-led initiatives. Defensive interests are also concerned with retaining power in the region, reaching out to other powers or filling spaces in which American leadership or global structures were seen as encroaching or excessively constraining (Fawcett, 2005). In a number of sectors where producer interests sometimes compete with foreign business and often play a crucial political role, governments may well respond to the lost thrust of Pax Americana in ways that attempt to nurture spaces for their own interests. The lingering trade conflicts are projected in a circular game, alternating pro and anti-liberalization stances through regional structures and arrangements, attempting to shape the regional arena, sometimes offensively and sometimes defensively. Venezuela and Brazil compete and cooperate, each promoting old and new forms of cooperation as part of their strategy. Mercosur is a case in point, in that each country has battled to use the

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symbolic hold of Mercosur in the social imagination of the electorate and its ability to plod along, despite a proven inability to move forward. Several reasons underlie Mercosur’s faculties for plodding, resistance and sidelining. In the first place, Brazil accounts for three-quarters of GDP, exports and population. The association subsists as one of the many rings of Brazilian grand strategy. Argentina and Brazil are sizeable economies with dense domestic markets of their own. Both remain the least open economies in the region with average tariffs standing at around 14 per cent (the highest in place in the continent) and with exports accounting for less than 10 per cent of GDP. Business interest in the hemispheric initiative was at best lukewarm and public opinion at most indifferent, if not outright averse. A referendum in 2002 organized in Brazil by more than 60 civil society organizations, with the support of the National Confederation of Catholic Bishops, revealed that more than 90 per cent of the people that cast a vote were opposed to the FTAA and in favour of quitting negotiations altogether. Brazil stands apart in other respects too. Brazil’s main exports to the US include: relatively high-tech goods such as aircraft, tractor-parts, engines and telecommunications equipment; low-skilled, labour-intensive goods such as footwear; and natural resource-intensive goods like steel and paper. Many of these have often been the target of the wide gamut of US protectionist instruments (tariff peaks, anti-dumping and countervailing duties, to name a few). That has been the case, for instance, with orange juice, footwear, apparel, and sugar exports. To restrain American might, overtures with Europe, China, Russia, and other countries of the global South were also exercised. At the core of this is a defensive reaction that seeks to avoid, delay or compensate adjustment costs; as well as a concern with global redistribution which accepts the inevitability of some trade liberalization while trying to manage its Darwinian aspects by means of continuous counter-proposals on all negotiating fronts, including the WTO. Disagreement with the US on procedural and substantive issues were raised relentlessly all along the FTAA process, a strategy that delayed all established schedules and deadlines and ultimately hollowed the project. While the US had favoured country-by-country negotiations, Brazil led the charge for decision making by consensus and the recognition of the presence and collegiate interests of sub-regional blocs. When the US promoted an ‘early harvest’ to advance the process, Mercosur upheld the principle of a single undertaking for the entire package, in other words, that no issue be brought to a final decision until the whole set of trade-related issues is agreed upon. In regard to liberalization of services, the US had insisted on a broad liberalization scheme, a top-down approach to services trade liberalization based on negative listing, whereby all sectors and measures are to be liberalized unless otherwise specified in annexes containing reservations, or non-conforming measures. Mercosur, in contrast to other countries in the region, counter-proposed a positive list approach, following the policy lines

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applied in its own Montevideo Protocol on Services Liberalization (Tussie and Quiliconi, 2004). The positive list approach entails a gradual step-by-step mechanism whereby countries specify the type of access or treatment offered to a particular service (or service supplier) in scheduled sectors. On government procurement, in order to carve out and retain a slice of the market for itself, Mercosur opposed the US stance to extend open bidding to state companies and sub-national entities. At the 2001 ministerial meeting of the FTAA in Buenos Aires, the Brazilian delegation rejected the US proposal to bring forward the deadline for concluding an FTAA. Argentine backing of Mercosur was crucial at the subsequent ministerial meeting in Miami in 2003, when Argentina turned down a backdoor offer from the US (Carranza, 2006). Mercosur expressed broad disagreement with a good part of the FTAA agenda. The US attempt to have agriculture and trade relief measures tackled at the WTO was mirrored by Mercosur with its own defensive interests – government procurement, intellectual property, and services should in turn be unloaded on the WTO as well. Use of the global arena of the WTO has the twofold advantage of requiring lower concessions than the ones demanded in the FTAA, and of coalition building with China, India and other non-Latin American countries that might provide greater leverage over the agenda. Against this backdrop Mercosur has also pursued a hedging strategy opening negotiations with other South American nations both to weave a fabric of agreements that allow mutual access and to increase leverage vis-à-vis the US. The interest in extending the reach of Mercosur and obtaining a free trade area with the Andean Community and Central America, as well as the Gulf Cooperation Council, the South African Customs Union and countries such as India, exemplify this vision. The aim is to preserve the backbone of Mercosur while at the same time prying open markets abroad. Ultimately, the aim is to build consensus with new players capable of making that balance viable. Such policy direction is evident in the Brazilian efforts to give life to the Union of South American Nations (UNASUR, in its Spanish acronym), bringing together the countries of the Andean Community of Nations (ANC; CAN in Spanish) with those of Mercosur, through initiatives of energy integration and physical infrastructure. At the micro-level, the projection of Brazilian export interests and the appetite of neighbours for energy from Bolivia and Venezuela directly challenges the compact created by the 12 US bilateral agreements. Regardless of the coming to fruition of the South American Community as a geo-economic union of sorts on the basis of institutional bridge building between CAN and Mercosur, the overall balance has moved from trade negotiations to a political project to keep the US at bay in a cooperative fashion. The fear of being swamped by the massive asymmetries in political power, and social, cultural and economic resources, has translated into the emergence of a heterogeneous ensemble of governments vying for the role

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of hub and trying to gain a competitive edge over US-inspired regional pacts. While Mercosur plateaued, ALBA was born as another rather more radical and rambunctious contender led by Chávez. ALBA’s agenda emerged as a result of the widespread resistance of social movements to the FTAA and the ensuing search for alternatives (Saguier, 2007). Dented by the 2002 coup attempt which had the outright blessing of President Bush, Chávez felt that it was necessary to build international legitimacy for his regime; to that end a new phase of foreign policy was inaugurated with an outward push for the construction of strategic alliances as a network of support for the Venezuelan revolution. After winning the 2004 recall referendum, in which Chávez fetched 58 per cent of the vote, the opposition fell silent, shocked as much by the results as by the ease with which international observers condoned the Electoral Council’s audit of the results. Chávez’s attacks on the US escalated noticeably at the end of 2004. He has accused the US of plotting to kill him, crafting his overthrow, placing spies inside the state oil company Petroleos de Venezuela Sociedad Anonima (PDVSA), planning to invade Venezuela, and terrorizing the world. In this context, ALBA was put forth in 2004 as an alternative, antineoliberal model for regional integration, antithetical to the FTAA and with its emphasis on social issues, solidarity and cooperation in public service provision. Originally signed by Venezuela and Cuba, ALBA set a framework for cooperation between both countries whereby Venezuela provides preferentially priced oil in return for a variety of in-kind resources, including health care personnel and education programmes. In addition to Venezuela and Cuba, the core of this alliance is formed by Bolivia, Dominican Republic, Nicaragua, St Vincent and Dominica. Paraguay and Ecuador are also part of this alliance, though they have not yet become fully fledged members. Honduras had become a member six months before a coup ousted President Manuel Zelaya in mid-2009. The advocates of ALBA promote a socially oriented trade bloc rather than one strictly based on market incentives (see Altmann, this volume). The cornerstone in the design of the ALBA is the proposal for a Compensatory Fund for Structural Convergence, which would manage and distribute financial aid to the most economically vulnerable countries. The programme favours endogenous development; rejects taking up the low quality employment of globalized sweatshops; promotes self-sufficient agriculture, the establishment of cooperatives and opposes the intellectual property rights regimes on the grounds that they only protect the areas of scientific and technological knowledge that developed countries control, while neglecting biodiversity and the traditional knowledge of peasant and aboriginal peoples. Venezuela has voiced the need to identify bottlenecks, arguing for a transfer of resources to develop infrastructure. In that vein, Venezuela has acquired the leading microcredit institution in Bolivia, Prodem, which own 92 branches across the country and has 250,000 clients. Making efforts to also regionalize

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financial arrangements, it is ready to support the establishment of a Bank of the South to provide balance–of-payment financing and catalyse regional development projects. Whereas Chavez’s outbursts and aggressive diplomacy ebb and flow, overall petro-generosity is strongly tied to the price of oil. After the recall referendum Chávez has had luck on his side with the fivefold increase in world oil prices since his first term began. From 2003 to 2007 the country experienced three straight years of near-double-digit growth, partly due to the rebound from the 2003 national strike and partly due to the rise in oil prices. As Carlos Andrés Pérez had done during similar circumstances in the 1970s, Chávez used this windfall to further his diplomatic ambitions. But 2009 ended on a rather gloomier note, with a fall in GDP, rampant inflation, power rationing, growing black market dealings and a clouded future for the 2010 legislative elections, altogether auguring a fall in the available capital of sympathy for the government. What these contending projects show in sum are not unified one-directional strategy, but motivating and legitimizing piecemeal steps. In a world where tariffs have lost a good deal of their weight and shortages of foodstuffs and energy have gained relevance, what is beginning to change is the US hold on regional projects. The trend may be towards regional convergence on some issues, such as payments or tariffs, and also towards greater diversity over other instruments. Some improvement has been witnessed in setting up binding dispute-settlement mechanisms, dealing with existing asymmetries, creating (albeit timid) structural funds, and coordinating social policies and initiatives in the fields of energy and infrastructure. But many political and institutional obstacles remain. As each country juggles with its idiosyncrasies, the trend may be not towards amalgamation or a single converged regional bloc, but towards greater diversity of hybrids with mutually fuzzy boundaries, arranging component pieces in ever new combinations,5 underpinned by increasingly intense regional relations sidelining or contesting US policy preferences. Such contestation has grown in a context where many countries in the region have, in recent years, elected left-leaning governments (see Cooper and Heine, 2009). New figures have stood up to represent the highly mobilized masses and battle for the hearts and minds of Latin Americans pushing for a new social contract. The conditions for this turn were ripe when Latin America was overridden by a series of financial and economic crises in the 1998–2001 period, and trade deficits contributed greatly to show how economically vulnerable countries had become. The policy of ‘open regionalism’ proved not only insufficient but also counterproductive to generate balanced accounts. The popular uprisings that ousted Fernando de la Rúa in Argentina in 2001, Gonazalo Sánchez de Lozada in Bolivia in 2003, and the government of Lucio Gutiérrez in Ecuador have prompted a change of course. In the new political climate, governments are motivated to make overtures to civil society networks for the purpose of mobilizing public support in

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contentious negotiations with the US. Those governments, at least potentially, are likely to be more receptive than right-leaning ones to the concerns and claims being articulated by civil society groups and social movements. The emerging alliances forged between presidents Luiz Inácio Lula da Silva (Lula) in Brazil, Evo Morales in Bolivia, Rafael Correa in Ecuador, Hugo Chávez in Venezuela, Nestor Kirchner in Argentina, the Frente Amplio in Uruguay, and Lugo in Paraguay6 suggest an interesting configuration in which agendas advanced by groups resisting neo-liberalism are accepted and to some extent articulated by governments (Heidrich and Tussie, 2008). What is being suggested here, however, is not merely an ideological swing to the Left but more broadly a loss in the faith of the self-equilibrating power of global markets, regional channels once again allowing the soft spread of agendas by governments seeking allies to consolidate their power and legitimate their positions with grass-roots movements, disenfranchised electorates and labour groups. Specific strategic political motivations are making for an alignment of perspectives, an ideological affinity of governments with those groups more resistant to American-led patterns of regional trade integration. Concessions of selective participation to some civil society actors, a common currency used by the US in classic two-level games to increase leverage in negotiations, are being emulated by weaker Latin American governments in their strategies that challenge the US. Each of the Latin American government leaders mentioned earlier face the realpolitik dilemmas of avoiding open confrontation with powerful, established commercial interests while at the same time enhancing and maintaining important domestic civil society support to shore up their domestic popularity. As governments and civil society alignments converge to increase their mutual effectiveness and base of support, the FTAA (perceived as ‘the onslaught of empire’) became a leading case in the new generation of contested trade agreements that could not be insulated from public concerns. What emerges from these trends is an interesting relationship between the use of mobilization and resistance in which it is not always clear how governments will balance the risk-averse mindset of élites with popular disaffection, and adapt in response to claim making and mobilizing by civil society. All told, if we are to point out the single coincidence in this diversity, there is a very significant one: the search for a new social contract. This points to a landscape in which the scope for real clashes of interest and of values will remain wide, and it is in fact here that we will continue to see the deepest changes (see Legler, this volume). Even with the declining price of oil, Venezuela stands out as a contending force in regional affairs. Its funding of political movements beyond its borders has been a matter of controversy in countries from Argentina and Honduras to Bolivia. Chávez’s radical, confrontational outbursts, while effective in terms of rallying popular support, ultimately create distrust and preclude him from becoming a trusted interlocutor, a challenge that takes on an added sharpness given the rise of

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international crisscrossing diplomatic activity. Not only are single countries such as China, Spain, Canada, making inroads as alternative globalizers, but in the last couple of years there have also been a string of outreach initiatives such as the Arab–South America and Africa–South America Summits to name but a few.

Pulling the threads together Was Myrdal right in claiming that there are no mystical qualities in geographical proximity that make neighbouring nations a ‘unit’ in any real cultural, political or economical sense? The answer depends on the degree of uniformity required to qualify as a unit. What we now see in this particular region are the trappings of a complex competition over rules as well as economic and social values. While Central America, Chile, Peru, Colombia and Mexico find value in the US market, other governments are more challenging in a variety of ways, deriving political legitimacy from their capacity to preserve the region as a space for normative niches. What we now see is a circular game of cooperation and competition through regional structures and arrangements, each one attempting to offset the other and gain extra-regional credentials. A lesson stemming from Europe is that regional integration projects often need large member states with technocratically capable cadres in order to provide vision and leadership for the rest of the group. France and Germany have played this role in the European Economic Community and its antecedents from the 1950s, and Singapore and Thailand seem to aspire to a similar partnering role in ASEAN (Dent, 2006). Venezuela and Brazil compete for that role on different grounds and with different styles, making the institutionalization of new projects far from stable. Yet the dimensions of the competition should not be exaggerated. In their mutual dealings, both avoid direct confrontation and have even searched for spaces of cooperation. The joint venture between the Venezuelan and Brazilian oil companies in petrochemicals is a case in point as is Brazilian provision of arms to Venezuela. Brazil and the ALBA governments have maintained close and friendly relations.7 While President Lula has at times gone out of his way to praise Chávez, he has also been very effective in moderating the latter’s propensity for conflict and containing his more extreme international gambits, such as his enthusiastic support for Colombia’s FARC guerrillas. Yet if war ultimately breaks out between Colombia and Venezuela, Brazil will be forced to walk a fine line in its traditional, nuanced and conciliatory approach to regional diplomacy; so far it is quite averse to taking an overtly confrontational approach vis-á-vis the US, but strongly averse to being viewed as its pawn. Today, Brazil can be seen in the league of conciliatory-style-alternativeglobalizers. It has become more outward-looking from the diplomatic and

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business perspectives than at any point in its history. As a net exporter of capital to the region and hence vulnerable to political risk, it shows a growing appreciation in regional stability, catalysing diplomatic efforts, creating normative niches that retain room to shape how problems are understood. The project of regional rule construction can be seen in the government’s increasing assertiveness in retaining open markets for its exports, in addressing political instability and in key diplomatic issues in countries such as Paraguay, Ecuador, Peru, Venezuela but also (and most significantly vis-á-vis the US) Colombia, Cuba and Honduras. Emergence on the world scene has propped up its convening power, although fully fledged regional economic leadership apparently still remains beyond the Brazilian grasp. And not just because of Chávez. The twofold Brazilian foreign policy dilemma is how to retain its domestic constituency and how to make sure that third-tier countries follow – a dilemma that was crudely exemplified on the occasion of the Bolivian nationalization of hydrocarbon assets and the protracted conflict over the price of gas. As a nascent globalizer it is forced to maintain a delicate balance, pressing for its interests without alienating third-tier countries and still retaining trust and leadership. There has been an important leaning throughout South America towards the formulation and execution of policy strategies independent of the traditionally dominant foreign policies of the US. Divergence from the US over ends and means has come to the fore on how to deal with issues such as: the democratic collapse in Honduras, where – following the rallying cry – Brazil clearly acted in favour of ousted President Zelaya by offering their Embassy as a safe haven; or security in Colombia, where the US has favoured a militarized approach and Brazil a political process involving international mediation. Each move by the US pushes Brazil to deepen and widen the themes of regional cooperation. The uprising in the Pando region of Bolivia and the reinstatement without consultation of the US Fourth Fleet in 2008, for example, prompted the ultimate consolidation of the UNASUR forum, the stepped-up efforts to incorporate Cuba to the Grupo de Rio, the articulation of the Consejo de Defensa de America del Sur (resisted but finally joined by Colombia) and the convening of the First Summit of Latin America and Caribbean countries in Costa do Sauípe in 2008. The attempt to mark turfs was made evident on the occasion of the Pando rebellion, which prompted the expulsion of the US Ambassador in Bolivia. Despite the alliance of sympathy between Morales and Chávez, and despite the bilateral conflict with Bolivia over the price of gas supplies, President Lula threw his weight behind Morales and brushed aside attempts by the Organization of American States (OAS) to intervene in the crisis. In the context of proliferating nascent multilateral mechanisms in the region that do not include the US, Brazil has been and will likely remain a key player. On the world level, there is every reason to expect Brazil to be a net beneficiary of global governance reforms such as, who the permanent

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members of the UN Security Council will be, how the shares and voting structures in international financial institutions change and what the structures might be of new organizations such as the G20. Indeed, crafting and institutionalizing a new global leadership role for Brazil is an accepted objective of the government and a key goal – perhaps the most important goal – for Minister Celso Amorim. In the field of finance, it has turned lender to the International Monetary Fund (IMF), joining India, China and Russia in October 2009 in the purchase of bonds worth US$ 10 billion to boost the Fund’s resources. All these moves show that Brazil no longer wants to be viewed simply as the largest country in Latin America, and considers itself to be in a different league. While this process does not imply the wholesale elimination of forms of governance that engage the US, such as the OAS or the circle of bilateral trade agreements with the US, all actors look like wrestlers attentively circling one another in a continuous process – each intensifying their bilateral relations, none wanting full disruption, failure or long-standing deadlock. Regional building has turned into a complex, multilayered arena where contending political enterprises compete, a far cry from a crystallized and conceptually neat project in the hands of a single uncontested leader. No mystical qualities exist, but this is still a region with a discernible identity that is intensely interlaced and unprecedentedly projected outwards in multiple directions.

Notes 1. At the time of writing, Colombia announced that it was preparing a strategy to ward off a Venezuelan attack while President Chavez called Colombia’s government a declared enemy of Venezuela (see La Nacion, 2009). 2. I owe the term to my colleague Maria Pia Riggirozzi. It refers to the host of countries, such as China, India, Venezuela and Brazil gradually trying to carve spaces for themselves in the global (and regional) scene. 3. Ken Shadlen (2008) shows the disproportionate influence of these export lobbies in trade-dependent countries. 4. Uruguay signed a bilateral investment treaty with the US which, though causing ripples of discontent within the governing party as well as with its regional partners, did not actually violate the core of Mercosur commitments. 5. To put this move into perspective see Baldwin (2006). The process is equivalent to the configuration of the European Free Trade Area following the creation of the European Economic Community and the domino effect triggered when Britain changed camps in the 1970s. Ireland, Norway and Denmark, nations that had seen fit to stay out of the EEC in 1957, all put in applications soon after Britain. 6. The election that led Lugo to victory in April 2008 in Paraguay broke the 60-year authoritarian stronghold of the conservative Colorado Party. 7. The exception to the trend is the bone of contention between Bolivia and Brazil over oil and gas investments. Hitting the raw nerve of bilateral relations, Petrobras is the largest investor in Brazilian oil and gas, supplying gas to Brazilians at extremely low prices. The production of Petrobras in Bolivia is equivalent to 15 per cent of

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Bolivian GDP; its tax contributions add up to 20 per cent of overall collections. Yet in 2008, when the Eastern Bolivian provinces instigated a civic coup, Brazil threw its support behind Evo Morales and the continuation of the rule of law.

References Bélanger, Louis and Gordon Mace (1999), ‘Building Role and Region: Middle States and Regionalism in the Americas’, in L. Bélanger and G. Mace (eds), The Americas In Transition: The Contours of Regionalism, Boulder, CO: Lynne Rienner. Bergsten, C. Fred (1996) ‘Competitive Liberalization and Global Free Trade: A Vision for the Early 21st Century’, Peterson Institute for International Economics, Working Paper No. 96–15. Available at http://www.iie.com/publications/wp/wp.cfm?ResearchID=171. Blanco, Ronald and Rosalba Linares (2008) ‘Chávez en la política exterior venezolana: ALCA versus ALBA, de la democracia representativa a participativa’ in Aldea Mundo, Año 13, Numero 26, julio-diciembre. Carranza , Mario (2006) ‘Clinging Together: Mercosur’s Ambitious External Agenda, its Internal Crisis and the Future of Regional Economic Integration in South America’, Review of International Political Economy, Vol. 13, No. 5, December. Castañeda, Jorge G. (1993) ‘Can NAFTA change Mexico?’ Foreign Affairs, September/ October. Cooper, Andrew F. and Jorge Heine (eds) (2009) Which Way Latin America? Hemispheric Politics Meets Globalization, Tokyo: United Nations University Press. Dent, Christopher (2006) ‘Free Trade Agreements in the Asia-Pacific: Convergence or Divergence?’ LATN Working Paper No. 62. Evenett, Simon and Michael Meier (2007) ‘An Interim Assessment of US Trade Policy of “Competitive Liberalization”’, University of St. Gallen Economics Discussion Paper, No. 2007–18, February. Fawcett, Louise (2005) ‘The Origins of the Regional Idea in the Americas’, in L. Fawcett and Mónica Serrano (eds), Regionalism and Governance in the Americas, London: Palgrave Macmillan. Grugel, Jean and Wil Hout (1999) ‘Regions, Regionalism and the South’, in J. Grugel and W. Hout(eds), Regionalism Across the North-South Divide: State Strategies and Globalisation, London: Routledge. Heidrich, Pablo and Diana Tussie (2008) ‘Post-Neoliberalism and the New Left in the Americas: The Pathways of Economic and Trade Policies’ in Laura MacDonald and Arne Ruckert (eds), Post Neoliberalism in the Americas, London: Palgrave Macmillan. Huntington, Samuel P. (1998) The Clash of Civilizations and the Remaking of the World Order, New York: Simon & Schuster. Hveem, Helge (2000) ‘Explaining the Regional Phenomenon in an Era of Globalisation’, in Richard Stubbs and Geoffrey R. D. Underhill (eds), Political Economy and the Changing Global Order, Oxford: Oxford University Press. Keohane, Robert (2001) ‘Between Vision and Reality: Variables in Latin American Foreign Policy’, in Joseph Tulchin and Robert Espach (eds), Latin America in the New International System, Boulder, CO: Lynne Rienner, La Nacion (2009) ‘Chavez advierte a Colombia que derribará aviones’, 20 December. Mittelman, James H. (2000) The Globalisation Syndrome: Transformation and Resistance, Princeton, NJ: Princeton University Press. Myrdal, Gunnar (1968) Asian Drama: An Enquiry into the Poverty of Regions, Volume 1, New York: Pantheon.

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Palan, Ronen P. and Jason Abbott, Phil Deans (1996) State Strategies in the Global Political Economy, London: Pinter. Phillips, Nicola (2009) ‘Coping with China’, in Andrew F. Cooper and Jorge Heine (eds), Which Way Latin America? Hemispheric Politics Meets Globalization, Tokyo: United Nations University Press. Phillips, Nicola (2000) ‘Governance After Financial Crisis: South American Perspectives on the Reformulation of Regionalism’, New Political Economy, Vol. 5, No. 3. Saguier, Marcelo (2007) ‘The Hemispheric Social Alliance and the Free Trade Area of the Americas Process: The Challenges and Opportunities of Transnational Coalitions against Neo-liberalism’, Globalizations, Vol. 4, No. 2. Available at http:// dx.doi.org/10.1080/14747730701345267 Shadlen, Ken (2008) ‘Globalization, Power and Economic Integration in the Americas in Diego Sánchez-Ancochea and Kenneth C. Shadlen (eds), Responding to Globalization: The Political Economy of Hemispheric Integration in the Americas, Basingstoke, Hampshire: Palgrave Macmillan. The Economist (2002) ‘Unleashing the Trade Winds’, December 7–13. Tussie, Diana and Cintia Quiliconi (2004) ‘Market Access as a Substitute for Development? North-South Regionalism in Latin America’, Commissioned Paper for 2005 Human Development Report, December. Van Grasstek, Craig (2008) ‘What is the FTAA’s Role in the USA’s Global Strategy?’ Capítulos del SELA 54.

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2 The Obama Administration and Latin America: Towards a New Partnership? Daniel P. Erikson*

The election of Barack Hussein Obama as the 44th president of the United States was widely hailed at home and abroad as a pivotal and potentially epoch-making event. In a remarkably short time, Obama moved from a rising star of the Democratic Party to a formidable presidential candidate to become the first black president of the US. The world celebrated Obama’s election as an example of the American possibility of renewal and a welcome shift from the perception of strident unilateralism that had dogged President George W. Bush – even after his policies took a more moderate and multilateral turn during his second term in office. Virtually every major world region expected its relations with the US to be substantially altered (and mostly improved) by a new American president with a decidedly more cooperative and multilateral approach to foreign policy. Latin America and the Caribbean were no exception. The 33 developing countries of the Western Hemisphere broadly welcomed Obama’s election to the White House. Indeed, in no part of the world outside Africa did the election of a black US president have greater symbolic value. Latin America, with its history of slavery and racism, is home to a large African diaspora. As many as one-third of the region’s 550 million inhabitants are of African descent, including a large fraction of the population in Brazil, the vast majority of the Caribbean and smaller communities throughout the Andes and Central America. Coupled with the fact that Latin American countries generally prefer Democratic presidents, for reasons that have as much to do with unpleasant Cold War memories of Nixon and Reagan as any specific policy agenda, Obama’s emergence was a welcome event. In a BBC poll which included surveys of opinion in Brazil, Mexico, and Panama, respondents heavily favoured Obama over his Republican opponent John * Daniel P. Erikson wrote this chapter in his capacity as senior associate for US policy at the Inter-American Dialogue, prior to his appointment to the State Department’s Bureau of Western Hemisphere Affairs. Therefore, this chapter is based on his independent analysis and does not necessarily reflect the views of the US government. 43

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McCain, and about half thought that their nation’s relations with the US would improve as a result of his election. (Canadians, uncharacteristically, were even more optimistic.) About 60 per cent of Mexicans added that it would fundamentally change their view of the US, and slightly fewer than half of Panamanians and about one-third of Brazilians agreed (BBC World Service, 2008). While virtually all the presidents of Latin America and the Caribbean hailed Obama’s election, specific responses reflected the idiosyncrasies of each country – perhaps nowhere more so than Brazil, where six candidates in municipal elections legally changed their names to either Barack or Obama in an attempt to capitalize on the local popularity of the American candidate. Brazil’s President Luiz Inácio Lula da Silva (quoted in Foley, 2009), a leftist who had burnished his credentials as a pragmatist by cosying up to the Bush administration, placed Obama’s election in a regional context, saying, ‘In the same way that Brazil elected a metalworker, Bolivia an Indian, Venezuela a Chávez, and Paraguay a bishop, I believe it will be an extraordinary thing if in the biggest economy in the world a black is elected president’. Brazil’s Foreign Minister Celso Amorim chimed in that ‘We aren’t going to deny that the Brazilian government had a good, pragmatic relationship with the Bush government, but now the relationship can be refined, and we hope to establish a relationship of partners with the new US government’ (quoted in Erikson, 2008). Lula later proposed two policy changes for Obama to implement: an end to US agricultural subsidies and the repeal of the US embargo of Cuba. Mexico’s President Felipe Calderon spoke to Obama about the challenge of fighting organized crime and drug trafficking, an issue also emphasized by Colombia’s President Álvaro Uribe along with urging passage of the controversial Colombia Free Trade Agreement then awaiting a vote in the US Congress. Venezuela’s President Hugo Chávez said of Obama, ‘We don’t ask him to be a revolutionary, nor a socialist, but that he rise to the moment in the world’, adding, ‘we hope the next government will end that savage embargo and aggression against Cuba’ (The Telegraph, 2008). In a column in the Cuban government newspaper Granma, Fidel Castro – the ailing 82-year-old ex-president of Cuba – expressed relief that the US had not elected John McCain, whom he described as ‘old, bellicose, uncultured, not very intelligent, and not in good health’ – proving yet again that the grizzled Cuban leader did not subscribe to the notion that those in glass houses should not throw stones. Castro praised Obama as ‘more intelligent, educated and levelheaded’, but fretted that ‘concerns over the world’s pressing problems really do not occupy an important place in Obama’s mind’. Another commentary in Granma described Obama’s victory as ‘surprising and meteoric’, which the author credited in part to McCain’s fateful decision to select as his running mate ‘the Arctic Amazon of Alaska, Sarah Palin’ (Montoto, 2008). But it was Prime Minister Baldwin Spencer of the tiny twin-island nation of Antigua

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and Barbuda who made the grandest gesture. He promptly wrote a letter of congratulation to the US president-elect in which he declared that his country’s tallest mountain, the 1319ft high Boggy Peak, would be henceforth known as Mount Obama (Kentish, 2009).

Bringing Latin America into focus All this hoopla caused even hardened sceptics to wonder if Barack Obama could revive the flagging relationship between the US and Latin America following the disenchantment of the Bush years. To some degree, enthusiasm for Latin America is cyclical, as newly elected US presidents frequently promise to reinvigorate ties with America’s neighbours to the south. Some have made efforts in good faith: Bill Clinton, for example, helped secure enactment of the North American Free Trade Agreement (NAFTA) in 1993, restored Haiti’s ousted President Jean-Bertrand Aristide to power, and convened the First Summit of the Americas in 1994. Clinton later became so preoccupied with the conflict in the former Yugoslavia and then his impeachment scandal at home that, with the exception of the drug war in Colombia, Latin America largely fell from the agenda. George W. Bush invited the then Mexican president, Vicente Fox, as the first guest at a White House state dinner in early September 2001, where he declared that the US ‘has no more important relationship in the world than the one we have with Mexico’. The 9/11 terrorist attacks occurred the following week, and Mexico, along with the rest of Latin America, virtually disappeared from the US foreign policy agenda for the rest of Bush’s first term, except for the effort to negotiate a range of bilateral FTAs with regional allies. It could be argued that, no matter where an American president’s foreign policy eventually ends up, an early emphasis is often placed on Latin America; history demonstrates, however, that US policy towards Latin America does not change quickly, especially during the first year of a new American presidency. The Obama administration’s Latin America policy has been shaped by four important factors. The first was the broader foreign policy environment facing the US government as well as the overall trajectory and scope of Obama’s global engagement. Given that the top three priorities of the Obama administration were the wars in Afghanistan and Iraq and the repercussions of the financial and economic crisis that the White House inherited, Latin America was generally relegated to a lower priority, as reflected in a limited number of new initiatives, and the slow and uneven pace of staffing key governmental positions. Still, Obama recast US international relations from the Manichean ‘with us or against us’ approach favoured by the Bush administration to a style that embraced global engagement and direct diplomacy. The Western Hemisphere was not the primary focus of US outreach, but nevertheless it experienced the positive reverberations, whether

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it meant: the more frequent meetings with G20 countries like Argentina, Brazil, Canada, and Mexico; the cautious diplomatic openings to Cuba and Venezuela; or the efforts to back a Latin America-led solution to the political crisis in Honduras that was precipitated by the ousting of President José Manuel Zelaya in June 2009. The second factor was the political and bureaucratic momentum that drives forward a number of US policies in Latin America, some of which date back decades while others were created under the Bush administration. While Obama softened the edges of longstanding policies like the US embargo of Cuba and the ‘war on drugs’, his administration demonstrated little enthusiasm for seriously rethinking or reversing these efforts despite the tensions that these policies produced in the region (see Latin American Commission on Drugs and Democracy, 2009; Reuter, 2008). The same was true for a number of more promising Bush-era initiatives, such as the Merida Initiative (to provide police and military support to the Mexican government as it battles drug traffickers along its northern borders), and the expansion of the nearly decade-old effort to help the Colombian government establish internal security and dismantle guerrilla groups. In May 2009, the Obama administration requested US$ 1.4 billion to expand the Millennium Challenge Corporation, a US aid effort created by Bush officials to reward high-performing governments in poor countries worldwide, with major poverty-reduction compacts already active in El Salvador, Honduras, and Nicaragua, and threshold programmes established for Guyana, Paraguay, and Peru. Third, the Obama administration, like most of its predecessors, exercised caution in dealing with high-cost, low-reward policy issues such as immigration reform, new trade deals, and Cuba. Serious negotiations with the US Congress over immigration reform were postponed until after the passage of health care reform, which absorbed an enormous amount of political effort. While the Obama administration quickly backpedalled from its campaign promise to ‘renegotiate NAFTA’, it has nevertheless shied away from bucking the strong anti-trade tendencies that dominate the Democratic Party. Significant trade agreements that the Bush administration negotiated with Colombia and Panama were left in limbo as a result, and the plans for the US-backed Free Trade Area of the Americas (FTAA) have essentially been consigned to purgatory following the breakdown in negotiations that occurred during Bush’s second term (see Shifter, 2009). A widely acknowledged need to overhaul Cuba policy was muted by concerns about provoking the ire of strongly pro-embargo Cuban exile legislators in the House of Representatives and Senate, even though a sea change in the sentiments of the broader Cuban American community initially seemed to encourage a broader opening. Lastly, emerging political trends in Latin America have raised new questions about how the US should define its relationship with the countries to its

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south at a time when they are exhibiting a greater level of assertiveness (see Cooper and Heine, 2009). This independent streak is increasingly apparent throughout South America. During the Lula presidency, Brazil has strengthened its role as a continental leader and achieved new political heft on the world stage. The decision by the International Olympic Committee to award the 2016 games to Brazil, bypassing Obama’s hometown Chicago, marks the first time that a South American country has been chosen to host the Olympics, and represents a major symbolic milestone in Brazil’s rise, much as the 2008 games in Beijing served that purpose for China. Assuming that he remains in office despite the rapidly deteriorating economy, Venezuela’s Hugo Chávez has positioned himself as the regional provocateur and principal adversary of American dominance in the Western Hemisphere. Leaders in Ecuador, Bolivia, and Argentina have taken steps to distance themselves from the US, while Chile and Peru have become more focused on trade ties with the Asia-Pacific region. Colombia, notwithstanding its reliance on US military aid, is irritated that its free trade deal with the US remains indefinitely stalled pending a Congressional vote in Washington. In Mexico, Central America, and the Caribbean, the region’s economic interconnectedness with the US has persisted as the dominant fact of its politics. Mexico’s President Felipe Calderon pledged to work closely with the US to solve the problem of drug-related insecurity along the border. Still, all countries are experiencing a diversification of political relationships, and the Caribbean is looking increasingly to China (see Phillips, 2009) and Venezuela (see Legler, 2009) as major partners.

The globalization of Latin America The US has long been wary of foreign powers meddling in the Western Hemisphere for reasons both real and imagined. In recent years, Latin America’s increasingly diverse international relations have stoked these fears anew, as the US has witnessed the region draw closer to global rivals just as American influence is facing unprecedented challenges. The warm embrace that Iran’s President Mahmoud Ahmadinejad received from Venezuela’s President Hugo Chávez and, more recently, Brazil’s President Lula, provides the most dramatic example of a new trend that has seen Latin America and the Caribbean seek greater independence from the US while deepening ties with such emerging powers outside the hemisphere as China, India, and Russia. To be sure, many US policymakers intellectually understand that this increasingly complex mosaic of international relations is the product of a more globalized world. Still, there is an underlying current of unease that American primacy in the Western Hemisphere is being threatened in subtle but important ways. Of course, there has long been a precept in US foreign policy that was developed to address precisely this problem. It is called the Monroe Doctrine,

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after its creator President James Monroe, and it represents the iconic assertion of the US’s right to oppose foreign powers in the Western Hemisphere. Today, the realities that were the foundation for the Monroe Doctrine have fundamentally changed, but the US has been slow to adjust its attitudes and mindset accordingly. In order to be effective in Latin America, the Obama administration recognizes that it must adapt to an increasingly globalized era in inter-American relations. As a result, the US has attempted to forge a middle path between counterproductive efforts to isolate countries with which it has difficult relations and efforts to engage Latin America’s rising powers that show little interest in reciprocating American goodwill. In May 2009, US Secretary of State Hillary Clinton, speaking at a public forum in Washington, DC, was asked how the US should manage the challenges posed by Hugo Chávez, the Venezuelan leader who has positioned himself as the chief opponent of American power in Latin America. Secretary Clinton (2009) used the opportunity to rebut the George W. Bush administration’s record in dealing with leftist leaders in the hemisphere, saying that ‘the prior administration tried to isolate them. … It didn’t work’. She continued: I have to say that I don’t think in today’s world, where it’s a multipolar world, where we are competing for attention and relationships with at least the Russians, the Chinese, the Iranians, that it’s in our interest to turn our backs on countries in our own hemisphere. Clinton also stated that the new engagement between extra hemispheric actors and certain Latin American countries is ‘quite disturbing’ (Clinton, 2009). Secretary Clinton is hardly the first US public official to cast China’s growing presence in Latin America as a sign that the US should deepen its own engagement in the region. During the 2008 US presidential campaign, China’s growing influence in Latin America was portrayed as a symptom of the perceived neglect of the region by the Bush administration. In his first debate with Republican candidate John McCain, Obama highlighted China’s role as a potential challenge: We’ve got challenges, for example, with China, where we are borrowing billions of dollars. They now hold a trillion dollars’ worth of our debt. And they are active … in regions like Latin America, and Asia, and Africa. The conspicuousness of their presence is only matched by our absence, because we’ve been focused on Iraq. (New York Times, 2009). To its credit, the Obama administration has adopted a more nuanced approach with regard to China in Latin America. The US posture has

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continued in the largely clear-headed and restrained direction that was initiated by the second Bush administration. Indeed, in the fall of 2009, Frank Mora, the top official managing Western Hemisphere affairs at the Pentagon, suggested that China could help Latin America to address the issues of ungoverned territories, lack of economic opportunity, and narcotics and arms trafficking in the region (Mora, 2009). Similarly, Russia’s renewed interest in Latin America has been met with relative equanimity, despite the fact that Russian arms sales to the region have surged in recent years to overtake those of the US. According to the International Institute for Strategic Studies, Russian arms sales to Latin America in 2009 topped US$ 5.4 billion, principally to Venezuela, although Brazil, Colombia, Mexico and Peru also made major purchases (UPI, 2010). It is the deepening engagement of Iran in Latin America that has provoked the greatest alarm in the Obama administration. In Congressional testimony in January 2009, Secretary of Defense Robert Gates warned, ‘I’m more concerned about Iranian meddling in the region than I am the Russians’, adding, ‘I’m concerned about the level of frankly subversive activity that the Iranians are carrying on in a number of places in Latin America. … They’re opening a lot of offices and a lot of fronts behind which they interfere in what is going on in some of these countries’ (Reuters, 2009). Indeed, while the Obama administration has accepted – even embraced – the notion of a multipolar world, it continues to indicate that one of the potential poles, Latin America, should remain off-limits to those powers of which the US disapproves. These latent tensions were thrown into even sharper relief in November 2009 when Brazilian President Lula hosted a state visit by Iranian President Ahmadinejad, despite deep disapproval in Washington (see Sweig, 2010). The emergence of Iran as a worrisome new actor in the region has heightened the need for the US to develop effective responses to the region’s increasing globalization. The continuing debate over declining US influence in the region is driven by a confluence of positive and negative trends. The most favourable change is that the Western Hemisphere has forged a consensus on democratic norms, ratified by the Inter-American Democratic Charter signed by OAS member countries in 2001. Setting aside the troubling case of Cuba, the spread of democracy has increased the political legitimacy of the governments throughout the hemisphere – including those at odds with the US. Foes like Venezuela’s Hugo Chávez and Nicaragua’s Daniel Ortega may seek to weaken or dismantle democratic institutions, but their ability to win power through the ballot box still shields them from criticism among Latin American countries that hold the principle of non-intervention more dearly than notions about the collective defence of democracy. There is little doubt that the US helped democracy take root in Latin America and the Caribbean in the 1990s, but this created new limits on Washington’s ability to intervene in these countries to pursue its own interests.

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US policy challenges Since his election in 1998, Hugo Chávez is the political leader who has posed the most severe test to US power from within Latin America. Chávez has both rejected the US’s historical leadership role (which he terms ‘imperialism’), and strived to create a network of alliances and institutions independent of US influence. He sought to replace the International Monetary Fund (IMF) and the World Bank with the Latin America-dominated Banco del Sur, exchange the FTAA with a social trade pact known as the Bolivarian Alternative for Latin America (ALBA), and funded a new Spanish-language news station, Telesur, as an alternative to US media sources. Chávez has won a limited following for these ideas in the region, and the passage of a recent Venezuelan referendum rescinding term limits has paved the way for him to seek another term in January 2013. Brazil, with the world’s fifth largest population and tenth largest economy, is similarly interested in a realignment of global power that recognizes its political and economic heft. Unlike Venezuela, however, it has been careful to ensure that its pursuit of this goal does not veer into open conflict with the US. Indeed, Brazil’s President Lula enjoyed one of the warmest relationships with President Bush of any Latin American leader, and the personal rapport between Obama and Lula has been even warmer (see Marinis, 2010). Still, Brazilian opposition to the FTAA helped fuel its demise in 2005, and the country has clashed with the US in world trade talks as a leader of the G77 group of developing countries that includes China, India, and South Africa. Brazil’s aggressive bid to win a permanent seat on the UN Security Council has led Lula on a global tour to garner support for the country’s global aspirations. Brazilian diplomacy has focused on positioning Brazil as a leader in world affairs ready to hold the US at arm’s length when necessary (see Simpson, 2010). The need to manage the increasingly complex relationship with South American countries will be a critical US policy priority. The early effort to enhance the US–Brazil agenda was especially vital, because strong US–Brazilian ties could help the Obama administration handle festering tensions in countries including Colombia, Venezuela, and Bolivia. However, such an outcome may be overly optimistic, given that Brazil and the US soon diverged in their responses to the coup against President José Manuel Zelaya in Honduras, where initial unity in opposing the constitutional breach quickly gave way to divisions over whether the international community should recognize the Honduran elections scheduled for November 2009 in the absence of Zelaya’s restoration (see Sheridan, 2009). The US provided its tacit support to the elections while Brazil, whose embassy in Tegucigalpa provided Zelaya sanctuary, disagreed. The Honduran episode illustrates the degree to which Brazil’s rise has made the complexity of this relationship more difficult for the Obama administration to navigate. This new dynamic was also evident in summer 2009, when news emerged that the US had

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signed a Defense Cooperation Agreement with Colombia that gave the US access to seven Colombian military bases under a ten-year lease. Brazil was among the countries that reacted with hostility to the spectre of increased US military involvement in South America, and Foreign Minister Celso Amorim warned that ‘The presence of foreign bases in South America awakens sensibilities of a political and even psychological nature that should be taken into account’ (quoted in Carroll and MacAskill, 2009). Colombia was also linked to an unpopular political battle in the US over the merits of expanding free trade during an economic downturn, as one of the Bush administration’s parting gifts was the contentious and unpopular trade agreement with Colombia, and another with Panama. (A separate agreement with South Korea was part of this equation as well.) Given the current climate in the US Congress, these agreements will not be ratified unless there is a serious effort to ameliorate concerns about Colombia’s situation with regards to labour rights – and even then, the anti-trade wing of the Democratic Party would likely oppose them. Indeed, the Obama administration appears to have consigned the Colombia trade pact to a seemingly indefinite limbo, which will likely persist now that Alvaro Uribe, the chief proponent of the FTA, has been barred from pursuing a third term as president. In his State of the Union address in January 2010, President Obama declared that ‘we will strengthen our trade relations in Asia and with key partners like South Korea and Panama and Colombia’, but he stopped short of pledging to have the existing agreements ratified. By all appearances, the Bush administration’s approach of ignoring or playing down the challenge posed by Hugo Chávez has run out of steam – a fact highlighted by last fall’s ejection of the American ambassadors to Venezuela and its close ally Bolivia. Furthermore, Chávez’s relationships with Iran, Russia, and other unfriendly powers are likely to continue deepening, and his influence in Bolivia, Ecuador, and Nicaragua is clearly growing, although the recent decline in oil prices points to new vulnerabilities (see Romero, 2009). At the same time, Obama has little to gain from engaging in counterproductive sabre-rattling towards Venezuela, and has expressed interest in setting the US–Venezuela relationship on a sounder footing. Fashioning a viable policy towards Venezuela, both to check Chávez’s worrying tendencies as well as to establish a more constructive diplomatic relationship, will ultimately be a litmus test for the success or failure of Obama’s policies in Latin America. The Obama administration will face no shortage of challenges closer to home. In the area of US–Mexico cooperation, it has faced challenges in advancing the Merida Initiative, a US$ 1.4 billion military aid package to help fight organized crime. This major US effort to help Mexico contain an explosion of drug-related violence was initially criticized for adopting a militarized approach to the problem. In addition, a US government audit in December 2009 revealed that only US$ 24.2 million of the funds had actually been

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spent, because much of the programme remained mired in red tape and governmental bureaucracy (Sherman, 2009). Meanwhile, perhaps the most important issue to Mexico – meaningful immigration reform in the US – was postponed as the US Congress focused on more pressing domestic concerns like job creation and health care reform. Moving forward, two potential flashpoints in the Caribbean pose further worrying challenges. The lacklustre rule of Raúl Castro and the worsening economic situation in Cuba have undercut early hopes that the island would adopt a path of reform following Fidel Castro’s retirement. Nonetheless, Obama has implemented new travel rules for Cuban Americans and favoured direct bilateral negotiations on issues of mutual concern, such as migration and establishing a direct postal service. Haiti, for its part, remains fragile and poses an ongoing source of humanitarian disaster that needs to be part of the regional agenda. In January 2010, Haiti was struck by a powerful earthquake that devastated the capital city of Port-au-Prince and resulted in more than 200,000 casualties. The US led in delivering humanitarian relief immediately after the quake, as well as granting Temporary Protected Status to Haitian migrants, and made available hundreds of millions of dollars in aid while promising to deepen that investment in the months and years ahead (Silva, 2010). Honduras, as referenced above, emerged as an unexpected flashpoint in US–Latin American relations in June 2009 when its democratically elected president, José Manuel Zelaya, was deposed in a coup. The Honduran military awoke President Zelaya early in the morning and deposited him in neighbouring Costa Rica while still dressed in his pyjamas (Malkin, 2009). The resulting outcry against the newly appointed interim government of Roberto Micheletti prompted a months-long standoff between the de facto Honduran regime and the inter-American community. President Obama (quoted in BBC News, 2009) took an early stand in condemning the coup and called for the restoration of Zelaya, describing the forced removal of an elected president as a ‘terrible precedent’ for the region. While the US joined with other Latin American countries in attempting to reverse the coup, that effort was ultimately unsuccessful, and Micheletti presided over new elections and a transition to a new president, Pepe Lobo, thereby thwarting Zelaya’s efforts to return to power. The Honduran crisis also illustrates how fault lines in US domestic politics can complicate foreign policy responses to sensitive political issues in Latin America. Obama’s initial support for Zelaya’s restoration was strongly challenged by US conservative critics, led by Republican Senator Jim DeMint, who blocked the nomination of several top State Department appointments charged with handling Latin American policy. DeMint’s support for the interim government of Roberto Micheletti, created a situation where the Obama administration’s stance on Honduras was being actively undermined by members of the US Congress. This allowed Micheletti and

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his allies to run out the clock until the previously scheduled elections on 29 November, after which they could be reassured that Zelaya would not return to power. For its part, Brazil (which had hosted Zelaya in its Honduras embassy when he covertly returned to the country) was not impressed with the US response and US–Brazil relations suffered strain (see Heine, 2009). The Honduras situation highlights the increasingly complicated nature of the US relationship with Latin America and the Caribbean. In order to pursue the US national interest, the Obama administration is compelled to navigate between the contentious US politics regarding Latin America, as well as the issues and concerns of the countries of the region which are becoming increasingly assertive. The emergence of a regional hegemon in Brazil has added a new dimension to this difficult balancing act that foreshadows the potential for more friction in the years ahead.

The Summit of the Americas and beyond If the stakes were high for a successful outcome of the Fifth Summit of the Americas in Trinidad and Tobago in April 2009, the bar was set low. The previous inter-American summit, which took place in Mar del Plata, Argentina in 2005, was widely viewed as a disaster. In an effort to play to domestic sentiments opposed to a visit by President Bush, the government of Nestor Kirchner had given its blessing to a protest rally of 25,000 demonstrators who included Argentine soccer legend Diego Maradona. Venezuela’s President Chávez took advantage of the venue to deliver a scathing, two-hour indictment of President Bush and the US-backed plan to develop the FTAA, over which summit negotiations later collapsed in acrimony. Against this backdrop, the 2009 summit provided Obama with an important opportunity to begin fleshing out specific proposals made during his campaign. Two initiatives that were especially highlighted were the ‘Energy Partnership for the Americas’ to forge a path toward sustainable growth and clean energy (see Spencer, 2009), and the pledge to increase aid to the Americas through targeted micro-financing, vocational training, and small enterprise development to help achieve the United Nations Millennium Development Goals by 2015. When Obama arrived at the summit, there was anticipation about seeing the new US leader perform for the first time on the hemispheric stage. Furthermore, his visit to Trinidad was preceded by a flurry of activity related to Cuba. A group of legislators from the Congressional Black Caucus became the first American politicians to meet Fidel Castro since the former Cuban leader fell ill three years ago. The Obama administration also repealed restrictions on the ability of Cuban Americans to travel back to Cuba and send money to their families living on the island, prompting Raúl Castro (quoted in CNN, 2009) to declare that ‘we have sent word to the US government in private and in public that we are willing to discuss everything, human rights, freedom of the press, political prisoners, everything’. At a

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press conference en route to the summit, Hillary Clinton responded, ‘We are continuing to look for productive ways forward because we view the present policy as having failed … We welcome his comments and the overture they represent, and we are taking a very serious look at how to respond’ (quoted in Stolberg and Barrionuevo, 2009). During his visit to Trinidad, Obama contributed to a possible diplomatic breakthrough when he announced to 33 of the assembled leaders that the US was seeking a ‘new beginning’ in its tormented relationship with Havana (Richter and Nicholas, 2009). Not everyone was convinced, however. During a 50-minute speech, Nicaragua’s President Daniel Ortega lambasted US policies and focused on Cuba’s exclusion from the summit: ‘I cannot feel comfortable by being here. I feel ashamed of the fact that I’m participating at this summit with the absence of Cuba’ (quoted in Rampersad, 2009). Ortega then blasted the US government’s backing for the Bay of Pigs invasion in April 1961, led by Cuban exiles, although he acknowledged that Obama ‘obviously doesn’t have any responsibility for that historic event.’ Obama told the assembled leaders, ‘We cannot let ourselves be prisoners of past disagreements. I am very grateful that President Ortega did not blame me for things that happened when I was three months old. Too often, an opportunity to build a fresh partnership of the Americas has been undermined by stale debates’ (quoted in Fox News, 2009). Obama (2009) went on to say: The United States seeks a new beginning with Cuba. I know that there is a longer journey that must be traveled to overcome decades of mistrust, but there are critical steps we can take toward a new day. I’ve already changed a Cuba policy that I believe has failed to advance liberty or opportunity for the Cuban people. We will now allow Cuban Americans to visit the island whenever they choose and provide resources to their families – the same way that so many people in my country send money back to their families in your countries to pay for everyday needs. Over the past two years, I’ve indicated, and I repeat today, that I’m prepared to have my administration engage with the Cuban government on a wide range of issues – from drugs, migration, and economic issues, to human rights, free speech, and democratic reform. Now, let me be clear, I’m not interested in talking just for the sake of talking. But I do believe that we can move US–Cuban relations in a new direction. In addition to the attention on Cuba’s absence, the image that came to dominate the coverage of the summit was a handshake that occurred between Obama and Chávez early in the gathering. ‘I greeted Bush with this hand eight years ago’, Chávez intoned to Obama. ‘I want to be your friend’. The Venezuelan President later gave Obama a Spanish-language copy of The

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Open Veins of Latin America: Five Centuries of the Pillage of a Continent, by Uruguayan intellectual Eduardo Galeano, a classic leftist text that decries European and US exploitation of Latin America. Obama, who does not read Spanish, appeared bemused by the gift. He later quipped, ‘I thought it was one of Chávez’s books. I was going to give him one of mine’ (quoted in Pickert, 2009). Within hours, the 1973 text soared to the top of the Amazon. com bestseller list, following in the footsteps of the Noam Chomsky book that Chávez had praised during his infamous ‘Bush is the Devil’ speech nearly three years earlier (Fox News, 2006). Before departing Trinidad and Tobago, Obama defended his handshake with Chávez against Republican attacks that he was irresponsibly cavorting with an anti-American adversary, saying that his courteous response to the Venezuela leader was hardly ‘endangering the strategic interests of the United States’. Obama also stated that freedom for the Cuban people remained the top US objective for engagement with the island, saying ‘That’s our lodestone. That’s our North Star’ (quoted in Barrionuevo and Stolberg, 2009). Within days, Fidel Castro wrote, ‘There is no doubt that the President misinterpreted Raúl’s statements. When the President of Cuba said he was ready to discuss any topic with the US president, he meant he was not afraid of addressing any issue. That shows his courage and confidence in the principles of the Revolution’ (quoted in Neill, 2009). Barack Obama is the 11th US president to face the Castro regime at the helm of Cuba, and his administration has inherited a complex and frequently contradictory policy that points in multiple directions. The goal of the US embargo is to deprive the Cuban government of resources, yet Congressional exemptions for agricultural trade have transformed the US into Cuba’s fifth largest trading partner, while Cuban Americans send hundreds of millions of dollars back to their families on the island each year. Successive US governments have set aside millions of dollars to build up domestic opposition groups within Cuba, but current immigration law grants residency rights to every Cuban who makes it onto American soil, which has allowed the Castro government to systematically export those who would otherwise be its most likely opposition. Tens of millions of dollars have been spent on Radio and TV Martí broadcasts intended to break through the Castro regime’s ‘information blockade’, but the average American citizen is banned from travelling to the island, despite the fact that people-to-people contacts have the potential to provide an important source of information about the outside world. In April 2009, the Obama administration reaffirmed the Bush administration’s designation that Cuba is a ‘state sponsor of terrorism’, even though the accompanying State Department report described Cuba as a country that ‘no longer actively supports armed struggle in Latin America and other parts of the world’, documented ‘no evidence of terrorist-related money laundering or terrorist financing activities’, and determined that Cuba ‘has not provided safe

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haven to any new US fugitives wanted for terrorism’ (Department of State, 2009). Moreover, the Obama administration, which has placed a special emphasis on multilateral diplomacy, has been repeatedly confronted with the fact that virtually none of its allies supports the continuation of the US embargo of Cuba.

Conclusion: In search of the elusive partnership Upon entering the White House in January 2009, the Obama administration had to move quickly to confront a range of pressing challenges. There is little doubt that the new president’s to-do list was to be dominated by the economic crisis, Afghanistan, and Iraq. Issues facing Latin America and the Caribbean, though important, were of less immediate concern. That does not mean, however, that Obama has not engaged in serious and substantive work to help repair the damage that the Bush administration wrought on US–Latin American relations. Moreover, there is now a window of opportunity to push through significant changes and lay the foundation for implementing Obama’s vision for renewing US leadership in the Americas. Indeed, Obama’s election ushered in a welcome honeymoon period for his administration in a region that is strategically important for US interests – and the challenge was to prolong this moment and harness it to rebuild some semblance of hemispheric cooperation. The path ahead will not be easy, but Obama has already substantially recalibrated US–Latin America policy in the direction of engagement in small but important ways. President Obama and members of his cabinet have frequently met with their counterparts throughout Latin America and the Caribbean and emphasized multilateral diplomacy as the central instrument for addressing the region’s concerns. The US supported a resolution backed by Latin American countries to lift Cuba’s suspension from the Organization of American States, and has stood with Latin American countries in calling for the restoration of democratic rule in Honduras. Under Obama, US relations with Latin America appear to be on the mend, but the progress to date is fragile and by no means irreversible. The political situation in Latin America and the Caribbean has shifted considerably in recent years and the new assertiveness of many regional countries, especially Brazil, has created an increasingly complex situation. Although the early hopes for momentous change have begun to dissipate, the presidency of Barack Obama still has the potential to bring about an important restructuring of inter-American relations. In retrospect, the initial warm glow of good feelings was always destined to give way to a more pragmatic understanding on both sides of the relationship regarding the possibilities and limits of what the US and Latin America can expect of each other. But throughout the Americas, the desire remains that

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Barack Obama will be attentive and respectful to the region’s concerns. The 44th president of the United States has already pledged to keep an open mind and demonstrate a willingness to listen. The next step is to advance the strategy of substantive, issue-oriented engagement that can sustain the goodwill that so much of the hemisphere felt upon his election to the White House.

Note 1. This chapter originally appeared as part of the CIGI Working Paper series and was written prior to the author taking on his current position. The opinions expressed in it are solely those of the author and do not necessarily reflect the views of any affiliated institutions including the United States Government, The Centre for International Governance Innovation or its Board of Directors and/or Board of Governors.

References Barrionuevo, Alexei and Sheryl Gay Stolberg (2009). ‘Hemisphere’s Leaders Signal a Fresh Start with US’, New York Times. April 20. BBC News (2009). ‘Obama Says Honduras Coup Illegal’, BBC News. June 29. BBC World Service (2008). ‘All Countries in BBC Poll Prefer Obama to McCain’, BBC World Service Poll. Available at http://www.worldpublicopinion.org/pipa/pdf/sep08/ BBCPresidential_Sep08_pr.pdf. Carroll, Rory and Ewen MacAskill (2009). ‘Outcry in South America Over US Military Base Pact’, The Guardian. August 27. Clinton, Hillary Rodham (2009). ‘Keynote Address and Town Hall Meeting at Plenary Session of Foreign Affairs Day’, US Department of State, 1 May. Available at: http:// www.state.gov/secretary/rm/2009a/05/122534.htm. CNN (2009). ‘Raul Castro: Cuba ‘Ready to Discuss Everything’ with US’, CNN. April 19. Available at http://www.cnn.com/2009/POLITICS/04/17/us.cuba/index.html. Cooper, Andrew F. and Jorge Heine (eds) (2009). Which Way Latin America? Hemispheric Politics Meets Globalization. Tokyo: United Nations University Press. Department of State (2009). Country Reports on Terrorism 2008. Washington, DC: US State Department April 30. Erikson, Daniel P. (2008). ‘Obama & Latin America: magic or realism?’ World Policy Journal. Vol. 25, No. 4 (Winter). pp. 101–7. Foley, Connor (2009). ‘‘Good Looking’ Lula’s Revenge’, The Guardian. April 11. Available at http://www.guardian.co.uk/commentisfree/2009/apr/10/brazil-gordon-brown. Fox News (2009). ‘Obama Endures Ortega Diatribe’, April 18. Available at http://www. foxnews.com/politics/2009/04/18/obama-endures-ortega-diatribe/. —— (2006). ‘Chávez Says US Empire will Soon Fall, Calls Bush “Devil,”’ September 21. Available at http://www.foxnews.com/story/0,2933,214709,00.html. Heine, Jorge (2009). ‘A Case of Missed Opportunity’, The Hindu. December 23. Available at: http://www.thehindu.com/2009/12/23/stories/2009122354720800.htm. Kentish, Anika (4 August 2009. Available at http://abcnews.go.com/International/ wireStory?id=8249926.

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58 The Obama Administration and Latin America Latin American Commission on Drugs and Democracy (2009). Drugs and Democracy: Towards a Paradigm Shift, Statement by the Latin American Commission on Drugs and Democracy. Available at http://www.plataformademocratica.org/Publicacoes/ declaracao_ingles_site.pdf. Legler, Thomas (2009). ‘The Chávez Effect’, in Andrew F. Cooper and Jorge Heine (eds), Which Way Latin America: Hemispheric Politics Meets Globalization. Tokyo: United Nations University Press. pp. 221–42. Malkin, Elisabeth (2009). ‘Honduran President Ousted in Coup’, The New York Times. June 28. Available at http://www.nytimes.com/2009/06/29/world/americas/ 29honduras.html. Marinis, Alexandre (2010). ‘Obama’s “Man” Goes Nuclear as Global Fixer’, Business Week. February 23. Available at http://www.businessweek.com/news/2010-02-23/ obama-s-man-goes-nuclear-as-global-fixer-alexandre-marinis.html. Montoto, Ramón Sánchez-Parodi (2008). ‘Obama to the White House’, Granma. November 5. Available at http://hcvanalysis.wordpress.com/2008/11/05/cuba-on-obama/. Mora, Frank (2009). ‘Strategic Implications of China’s Evolving Relationship with Latin America’, November 6. Available at http://www.ndu.edu/CHDS/China-Wksp/ Presentations/CHDS-ChinaSpeech-Frank_Mora.pdf. Neill, Morgan (2009). ‘Obama Misreads Cuban Offer, Fidel Castro Says’, CNN. April 22. Available at http://edition.cnn.com/2009/POLITICS/04/22/castro.cuba.obama/ index.html. The New York Times (2009). ‘The First Presidential Debate: Transcript’, September 26. Available at http://elections.nytimes.com/2008/president/debates/transcripts/firstpresidential-debate.html. Obama, Barack (2010). ‘Remarks by the President in State of the Union Address’, Office of the Press Secretary, The White House. January 27. —— (2009). ‘Remarks by President Barack Obama’, Fifth Summit of the Americas, Trinidad and Tobago, April 18. Phillips, Nicola (2009). ‘Coping with China’, in Andrew F. Cooper and Jorge Heine (eds), Which Way Latin America: Hemispheric Politics Meets Globalization. Tokyo: United Nations University Press. pp. 100–21. Pickert, Kate (2009). ‘Chávez’s Gift: Open Veins of Latin America’, Time. April 21. Available at http://www.time.com/time/arts/article/0,8599,1892801,00.html. Rampersad, Indira (2009). ‘Let’s Sum-It Up: Cuba Stole the Show’, The Guardian (Trinidad & Tobago). April 25. Available at http://guardian.co.tt/features/life/2009/04/26/ let-s-sum-it-cuba-stole-show. Reuter, Peter (2008). ‘Assessing US Drug Policy’, Debate Material for the First Meeting of Latin-American Commission on Drugs and Democracy, April 30. Available at http://www.drogasedemocracia.org/Arquivos/peter_reuter_ingles.pdf. Reuters (2009). ‘Iran playing “subsversive” Latin America role – Gates’. January 27. Available at http://uk.reuters.com/article/idUKTRE50Q6CT20090127 Richter, Paul and Peter Nicholas (2009). ‘US, Cuba Mutually Signal Thaw in Relations’, Los Angeles Times. April 18. Available at http://articles.latimes.com/2009/apr/18/ world/fg-us-cuba18. Romero, Simon (2009). ‘Chávez lets West Make Oil Bids as Prices Plunge’, The New York Times. January 14. Available at http://www.nytimes.com/2009/01/15/world/ americas/15venez.html. Sheridan, Mary Beth (2009). ‘US and Some Allies at Odds over Honduras Presidential Elections’, The Washington Post. December 1. Available at http://www.washingtonpost. com/wp-dyn/content/article/2009/11/29/AR2009112900989.html.

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Sherman, Christopher (2009). ‘Only Sliver of Aid for US-Mexico Drug Plan Spent’, Associated Press. December 3. Shifter, Michael (2009). ‘Managing Disarray: The Search for a New Consensus’, in Andrew F. Cooper and Jorge Heine (eds), Which Way Latin America: Hemispheric Politics Meets Globalization. Tokyo: United Nations University Press. pp. 50–63. Silva, Mark (2010). ‘US is Flying Doctors and Food to Haiti in Massive Earthquake Relief Effort’, Los Angeles Times. January 16. Simpson, Jeffrey (2010). ‘The Country of the Future may Finally be Arriving’, The Globe and Mail. February 22. Available at http://www.theglobeandmail.com/news/ opinions/the-country-of-the-future-may-finally-be-arriving/article1477427/. Spencer, Nicole (2009). ‘Obama’s Energy Partnership for the Americas’, Latin Business Chronicle. March 23. Available at http://www.as-coa.org/article.php?id=1545. Stolberg, Sheryl Gay and Alexei Barrionuevo (2009). ‘Obama Says US Will Pursue Thaw with Cuba’, New York Times. April 18. Available at http://www.nytimes. com/2009/04/18/world/americas/18prexy.html. Sweig, Julia E. (2010). ‘An American in Brazil’, The New York Times. March 2. Available at http://www.nytimes.com/2010/03/03/opinion/03iht-edsweig.html. The Telegraph (2008). ‘Venezuelan president Hugo Chávez Hoping for a Barack Obama Victory’, November 2. Available at http://www.telegraph.co.uk/news/worldnews/ southamerica/venezuela/3369053/Venezuelan-president-Hugo-Chavez-hoping-forBarack-Obama-victory.html. United Press International (UPI) (2010). ‘Russia Displaces US as Latin Arms Source’, UPI. February 8.

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3 The Caribbean in a Turbulent World Norman Girvan

The crisis that overtook the world economy in 2007–9 intersected a long-term process of global reconfiguration that is marked by declining US power. Concurrently, this is taking place during a process of global climate change that presents potentially cataclysmic consequences for small island states. Caribbean societies1 are vulnerable to both of these global developments and challenged in their capacity to adapt to them. Political fragmentation and a ‘dependency syndrome’ combined with limitations of size have resulted in a pattern of reactive rather than strategic decision making and a tendency to seek solutions through alignment with extra-regional powers. Regional cooperation represents one means by which Caribbean societies can secure a greater measure of autonomy vis-à-vis the wider world. However, Caribbean regionalism contends with a formidable legacy of geography, history and geopolitics and as such, remains an elusive goal. In this chapter, I first review the challenges to the Caribbean that have resulted from the world economic crisis and the nature of responses thus far. Then I discuss the challenges that are associated with long-term structural shifts in global geo-economic and geopolitical configuration. Here, I highlight the momentous changes that have occurred in the Latin American political economy in the past ten years and review their implications for the Caribbean. Next I review the changing dynamics of regionalism in the Caribbean, their relationship to these developments, and assess their future prospects. There is a brief conclusion.

The financial crisis and the Caribbean As a region of small, open, trade-dependent economies with strong economic linkages to the US and Europe, the Caribbean was significantly impacted by the global financial crisis. The effects were felt mainly through declines in tourism, merchandise export receipts, remittances and capital flows (Caribbean Centre for Money and Finance, 2009). The United Nations’ Economic Commission for Latin America and the Caribbean (ECLAC) 60

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projects a 1.2 per cent contraction in Caribbean sub-regional GDP for 2009, a deterioration of over 8 per cent relative to 2006 (Caribbean Press Releases, 2009). ECLAC expects the slowdown to last through 2010 (Commission for Latin America and the Caribbean, 2009, p. 46). Most affected were the tourismdependent economies of Bahamas, Barbados and Jamaica – the latter being also crippled by the closure of a large part of its aluminium industry (International Monetary Fund, 2009a, p. 193). By September 2009, seven CARICOM countries had turned to the International Monetary Fund (IMF) for crisis-related financing.2 Jamaica, with the largest package, announced a 20 per cent budget cut five months into the 2009/10 fiscal year (Helps, 2009). Insofar as IMF loans will require fiscal contraction, this will exacerbate the effects of contraction in the external sector in the affected countries. The social impact of the crisis will likely be uneven between countries and socio-economic groups: some countries will suffer more than others and the burden(s) will fall on the more vulnerable groups in their populations. Time lags in the production of social statistics will make it difficult to measure and analyse these impacts before they become problematic. The potential longterm social and political repercussions are also not yet clear. There is the ever-present possibility of social unrest and political instability. Government approaches to the IMF have aroused opposition (Foster, 2009). Tensions have arisen within the Caribbean Community over the subject of informal intra-regional migration. In 2009, Barbados’s announced policy of removing undocumented CARICOM nationals initiated a major controversy and elicited strong reactions from Guyana, St Vincent and the Grenadines in particular (see Bradshaw, 2009; Stabroek Staff, 2009; Office of the President of Guyana, 2009; and Ramjeet, 2009). A similar policy reportedly under way in Antigua and Barbuda also became controversial (Jamaica Observer, 2009). Barbados’s earlier request to review the freedom of movement provisions of the CARICOM Single Market Economy (CSME) is also thought to be a response to pressures resulting from the global slowdown. CARICOM has had its share of financial institution failures that required costly government interventions. The threatened failure in January 2009 of the CL Financial group, a major regional conglomerate headquartered in Trinidad and Tobago with operations in several other CARICOM countries, led to a government takeover of the group and cash injections of up to TT$ 5 billion to finance payouts to depositors and policyholders (see Trinidad and Tobago News Blog, 2009; Neptune, 2009). The government of Trinidad and Tobago also financed payouts to other CARICOM countries. The threatened failure was due to serious deficiencies in the regulatory regime of the host country (Girvan, 2009). In February 2009, the Stanford International Bank, based in Antigua and Barbuda, failed after its owner was indicted in the US on seven counts of wire fraud, ten counts of mail fraud, conspiracy to obstruct an investigation for the Securities and Exchange Commission (SEC), obstruction of an investigation by the SEC and conspiracy to commit money

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laundering, all totalling US$ 7 billion (Cricinfo Staff, 2009). Following this, the chief financial regulator of the state was indicted for having accepted bribes from Stanford International to overlook financial irregularities at the bank (Associated Press, 2009). The case has exposed the government to legal action from the international depositors in the bank, who are claiming damages of an amount that is approximately equal to 600 per cent of the GDP of Antigua and Barbuda – estimated to be US$ 1225 million in 2008 (World Bank, 2008). The two cases illustrate how regulatory systems in small Caribbean countries can be subverted by the resources and influence of large financial institutions. They underline the need for a seamless, region-wide regulatory system for the financial sector within the CARICOM region as a whole. The legal instruments for this have been prepared but have yet to be approved by governments.3 CARICOM leaders repeatedly stated that the crisis underlined the urgency of the need to strengthen the Community, and the necessity for a collective confrontation of the challenges (Pilgrim, 2009). The difficulty has been to give practical effect to this principle. Three different task forces were set up by CARICOM leaders between January and July 2009,4 but the net result was a decision to ‘coordinate approaches’ to the international financial agencies (Georgetown Communiqué, 2009). In practice, this has meant little more than information sharing. The basic problem is the absence of institutional capability within the CARICOM system to undertake coordinated external financing and macroeconomic policies. There is no CARICOM monetary union, no CARICOM central bank and no community budget. The CARICOM Development Fund, which became operational in 2009, is not meant to deal with short-term emergency financing needs of member states. Hence, they turn to the IMF and, in one instance, to Venezuela. The ad hoc measures that have been adopted lack regional coherence, do not strengthen regional institutions, do not necessarily mitigate the social impact, and come with conditionalities that necessarily involve some loss of policy autonomy. A robust regulatory and institutional framework would enable the community to better mitigate the impact of the crisis and to manage it collectively. Hence, there is a connection between the strength of regionalism, the space for autonomous policies, and the degree of resilience in response to external shocks.

Global reconfiguration The financial crisis is accelerating the eastward/southern shift in global geo-economics that had been underway for some time (see Cooper and Antkiewicz, 2008), symbolized by the emergence of the BRICs group of countries (Xinhua, 2009). Asia will decline less, and recover faster, than the US and Western Europe.5 The US will emerge as a heavily indebted nation, with the international competitiveness of its production in question, and its political and ideological prestige severely damaged. The roles of the US dollar

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as global reserve currency and US dominance over the IMF, both remnants of the defunct Bretton Woods system, are therefore in growing contestation. The US will resist the calls for change as long as possible; however, some restructuring seems inevitable. Economically, Caribbean countries are strongly linked to the centres of world economic power that are in relative decline – the US and Western Europe. CARICOM’s merchandise exports to the US grew at a rate of 8.7 per cent per year in the period 1993–2003 (Jessen and Vignoles, 2005, p. 58) and accounted for approximately 48.7 per cent of CARICOM’s exports and 35.9 per cent of their imports over the period 2001–6 (CARICOM, 2008, pp. 7, 9); the US is the main tourist market for the larger Caribbean region and constitutes 53 per cent of the total number of tourist arrivals, Europe accounts for 23 per cent (ECLAC, 2003); Spain and the US were the main sources of foreign direct investment (FDI) to the region in 2008, representing 9 per cent and 24 per cent of the total respectively (Jamaica Observer, 2010); virtually all of their remittances are concentrated in the US, Canada, and the European Union. This magnifies the regional impact of the economic downturn in these countries. China is a major source of imports and a growing source of aid and investment for the region. Asia’s share of imports from the CARICOM was averaged to be 14.7 per cent over the period 2001–6 (CARICOM, 2008, p. 7). Its main trade interest so far has been in acquiring natural resource products, particularly bauxite, aluminium and timber. Only 4.1 percent of CARICOM’s export market is in China (ibid, p. 9), and an insignificant fraction of its tourist market comes from Asia. This limits the potential spin-offs to regional economies from the relatively high-growth performing Asian economies. Hence, CARICOM countries should seek to develop their trade-investment-tourism linkages with the world’s emerging economies, including value-added products in agricultural and manufactured exports. Several initiatives have been taken, individually and collectively, to develop relations with the government of China. However, individual CARICOM nations evidently lack the capacity to adequately service relations with the entire Asian continent. A joint ‘Asian strategy’ carried out by the Community as a whole would help to share costs and exploit synergies. This requires an improved governance framework and institutional capability to handle the region’s external economic relations.

Latin America’s new orientation Developments over the past decade have significantly altered the political, ideological and institutional landscape of Latin America (see Cooper and Heine, 2009). This chapter identifies seven features of the ‘New Orientation’ that are of particular relevance to the Caribbean. First, governments have been elected in the majority of Latin American countries that are critical of, or opposed to, neoliberalism and the Washington Consensus,6 and are experimenting with various alternatives.7 Second, new social movements

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have played a key role in this shift. This is exemplified by the large attendance at the annual gatherings of the World Social Forum since 2001 and the role of social movements in the elections of Luiz Inacio Lula da Silva in Brazil, Evo Morales in Bolivia and Rafael Correa in Ecuador. These movements are the result of consciousness-raising and political mobilization of historically marginalized groups in Latin American society: indigenous peoples, AfricanLatin Americans, campesinos, women and other elements of the poor underclass. Third, the new ideological orientation often extends to questioning the prevailing Western models of ‘democracy’ and ‘development’. Notions of ‘participatory democracy’ are being developed featuring the political enfranchisement of marginalized groups, community councils and the like;8 and alternative ‘models of civilization’ are proposed. An example of this is the following extract from a declaration of indigenous people at the 2009 World Social Forum: The crisis of Western capitalist civilization requires us to rebuild and reinvent new and different options of coexistence between nature and society, democracy, the state and patterns of consumption. We, the Indigenous Peoples and Communities … and all the other excluded, invisible and ‘untouchables’ of the planet (who) continue to resist, to strengthen and to update alternative forms of social, technological, ethical, political, economic, cultural and spiritual organization of the human existence. (Latin American Information Agency, 2009; author’s translation from the original Spanish) A fourth element is the strategic importance given to regional integration as a means of consolidating Latin America’s geo-political identity and of projecting its influence globally. Fifth is the renewed importance attached to the principles of sovereignty, self-determination and non-interference in a region with a long history of colonization and US intervention. Sixth, the impact of these developments owes much to the leadership and resources of two key Latin American players: Brazil and Venezuela. Seventh, the New Orientation has created several new institutions that provide it with a certain permanence and outreach. As a consequence of all of the above, the capacity of the US to influence events in Latin America has steeply declined with some analysts speaking of the ‘end of US hegemony’ in Latin America. Although these developments do not have an equivalent within the domestic politics of CARICOM countries, they have had a substantial impact at the level of their inter-state relations. A prime example is the failure of the Free Trade Agreement of the Americas (FTAA) negotiations as a result of Brazilian and Venezuelan opposition to the US model of the agreement. CARICOM members had invested considerable resources in the FTAA: they

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had set up the Caribbean Regional Negotiating Machinery (CRNM) partly to service these negotiations; they were the principal driver of the Small Economies Working Group in the FTAA; and Trinidad and Tobago, with CARICOM’s support, had vigorously promoted its candidature as the headquarters of the proposed FTAA Secretariat.9 Another example is the role of Petrocaribe, which was set up by Venezuela to provide oil on concessionary terms to Caribbean countries. Twelve of CARICOM’s fourteen members participate in Petrocaribe. Petrocaribe finances a percentage of the bill for oil imports from Venezuela10 with loans of between 1 and 2 per cent payable over 25 years with a grace period of two years.11 The loan is used for approved projects in the state sector, infrastructure, and poverty reduction. The total ‘savings’ to all 18 importing countries from Petrocaribe up to mid-2009 was $1.4 billion (Ramirez, 2009). Petrocaribe has now become the largest single source of concessionary financial assistance to CARICOM countries, exceeding the traditional bilateral and multilateral sources (Girvan, 2008a). Three CARICOM countries have joined the Bolivarian Alternative for the People of the Americas (ALBA).12 ALBA was founded by Venezuela and Cuba in 2005, with the stated aim of being an alternative to the neoliberal model of economic integration, which is based on liberalization of trade and investment and binding of private-sector-friendly policies (ALBA, 2009, p. 2). The ALBA integration principles are those of solidarity, complementarity, compensatory financing for the treatment of asymmetries, and differentiated treatment of countries according to their circumstances (ibid.). ALBA’s programmes consist mainly of financial cooperation; provision of technical personnel and of scholarships in health and education; and non-reciprocal trading arrangements. The ALBA Bank has been established with a paid-up capital of $1 billion13 and there is also an ALBA Food Security Fund with an initial investment of $100 million (VenWorld, 2008). ALBA membership has brought tangible benefits for CARICOM states. Dominica has received funding for its ‘Housing Revolution’ programme and for a national fuel distribution plant, as well as scholarships for university training in Cuba and Venezuela. St Kitts and Nevis, though not an ALBA member, received a $50 million loan in 2009 at 1 per cent interest payable over 20 years.14 Shortly after joining ALBA in 2009, Antigua and Barbuda received a ‘cash injection’ of $50 million from the Venezuelan government under ALBA’s principles of solidarity to finance the country’s immediate fiscal needs (Spencer, 2009). Two CARICOM members on the South American continent – Guyana and Suriname – are members of the Union of South American Nations (UNASUR), the Brazilian-led project to create a South American Union modelled loosely on the EU. Under UNASUR’s South American Infrastructure Integration Initiative (IIRSA), a continent-wide road and river transport network is being constructed, complemented by a South American Energy

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Ring utilizing natural gas and a regional telecommunications network. A Bank of the South has been set up with initial capital of $7 billion, and a South American Defense Council; while a Common Market is targeted for 2019.15 Guyana and Suriname both expect to benefit from IIRSA. Guyana also hosted a Summit of the Rio Group in 2007 and joined the group as full member; Jamaica now represents the rest of CARICOM in the Group. In 2009, events related to the Cuban embargo, the Honduras coup, and US bases in Latin America showed how influential these new linkages were in aligning CARICOM nations with Latin America regarding contentious issues with the US. CARICOM participated in the first Latin American and Caribbean Summit in Bahia, Brazil in December 2009 where a unanimous call was made for the lifting of the US embargo on Cuba (Osava, 2008). Although CARICOM had always opposed the embargo, the demonstration of a solid and exclusively LAC bloc in opposition to US policy was an historic development. Immediately prior to the Fifth Summit of the Americas (SOA), two CARICOM countries16 attended an ALBA summit where a public declaration was adopted stating that there would be no signature of the draft summit declaration – as the prepared SOA declaration did not include condemnation of the US embargo on Cuba (Pearson, 2009). This may have embarrassed the host CARICOM country, Trinidad and Tobago, which had been responsible for the summit preparations, but in the end CARICOM states maintained their solidarity with the Latin Americans. The issue resurfaced at the Organization of American States (OAS) General Assembly in June of 2009, when CARICOM states supported the Latin America-sponsored resolution to lift the suspension of Cuba from OAS membership. CARICOM states also issued individual condemnation of the military coup in Honduras, and called for the immediate restitution of President Manuel Zelaya; they also gave their support as individual member states to similar calls made by ALBA, the OAS, the Rio Group, the Central American Integration System (SICA, in which CARICOM’s Belize is a member), and UNASUR. Although the official US position was the same as that of the Latin Americans, the perceived ambivalence of the US towards Zelaya’s restoration and their implicit support for the de facto regime (see Heine, 2009) appear to have aligned CARICOM nations more closely to the Latin Americans. Guyana and Suriname also attended the UNASUR Summit in August 2009 at which there was strong criticism of the Colombian decision to grant access to the US military for the use of bases in its territory (El Universal, 2009). As its individual member states take up membership in organizations influenced by larger Latin American powers – which entails strong pressures for the ‘Latin Americanization’ of CARICOM’s hemispheric foreign policy relations – CARICOM is increasingly challenged to maintain its own distinct identity in its relations with Washington. Can the foreign policy coordination of CARICOM countries, as required by the Revised Treaty of Chaguaramas, be reconciled with coordination of foreign policies of ALBA, UNASUR and even SICA?

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Another challenge is to maintain the integrity of the Community’s economic integration arrangements in the face of emerging hemispheric alliances. For example, each of the 12 CARICOM states has signed separate agreements with Petrocaribe, while Trinidad and Tobago and Barbados declined to participate (Girvan, 2008) – the former is an exporter of petroleum refined products to the rest of the Caribbean and regards Venezuela as a competitor in energy markets and a rival in political influence among its CARICOM partners. Trinidad and Tobago’s initiative to forge a political and economic union with the member states of the Organization of East Caribbean States was likely partially motivated by the wish to counter Venezuela’s growing influence in that sub-region. Barbados has an oil refining arrangement with Trinidad and Tobago and did not wish to prejudice this by involvement with Petrocaribe. Barbados also took the view that CARICOM member states participating in Petrocaribe had a legal responsibility under the CARICOM treaty to seek prior approval from the relevant CARICOM organs. The problems of having separate agreements with Petrocaribe were highlighted in 2009 when Venezuela proposed modifications to the financing terms, which are subject to separate negotiations with the participating states. Questions have arisen on the compatibility of ALBA membership with membership in CARICOM and participation in the CARICOM Single Market and Economy. ALBA is operationalized by means of inter-governmental cooperation agreements that do not require reciprocal trade and investment liberalization and the adoption of common policies. A content analysis of these agreements provides no evidence of the violation of the Treaty commitments of CARICOM members (ibid). The Revised Treaty of Chaguaramas does not give the Community exclusive jurisdiction over the conclusion of trade and economic agreements with external partners, but it provides for this possibility (see Revised Treaty of Chaguaramas, 2001, Article 80). A single, collective CARICOM agreement with Petrocaribe and separately with ALBA would have the advantages of exercising the combined bargaining power of the member states, securing the best possible terms, and responding to broader strategic objectives of diversification of the Community’s international economic relations. In the case of Petrocaribe, such an agreement would help attenuate the financial and political risks associated with dependency on a single source. It would also help in the monitoring of debt sustainability in taking on new obligations to Petrocaribe. The main obstacles to such an arrangement are differences among CARICOM members in their circumstances and perceived interests, and the corresponding wish to retain their sovereign prerogatives over foreign economic relations. However, to the degree that trade relations, financial cooperation, and functional cooperation intensify within ALBA and UNASUR, these groupings may well become competing economic poles of attraction for CARICOM countries and sources of tension between CARICOM regional integration on the one hand and hemispheric integration on the other.

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Caribbean integration initiatives Integration initiatives in the Caribbean have been driven by the need to overcome the limitations of size as well as by a sense of shared history and culture. The establishment of the West Indies Federation (1958–62), between ten British territories in the region, originated with the belief that the individual territories were too small to achieve national independence on their own. Once this rationale was removed the federation foundered. Nonetheless, economic regionalism and functional cooperation have flourished in the post-colonial period, with fresh impetus being created by the challenges of globalization. In recent years regionalism has widened to encompass the entire Caribbean basin and the different linguistic zones of the region. Unification of national markets through economic integration, resource pooling, and the realization of synergies through functional cooperation are the chief motives for current integration initiatives. The former is presently centred on the Caribbean Community’s drive to create a CARICOM Single Market and Economy (CSME). Functional cooperation is also a major element in the CARICOM programme; and it is the principal raison d’être for the establishment of the Association of Caribbean States (ACS).

CARICOM CARICOM was launched in 1973 with the pillars of economic integration, functional cooperation, and foreign policy coordination.17 The Community’s fifteen members now include two non-English speaking countries and have a combined population of 15 million. In respect to economic integration, little progress was made after 1973; in 1989 CARICOM adopted the creation of a Single Market and Economy (CSME) as its objective. The Revised Treaty of Chaguaramas, signed in 2002, provides for integration of the markets for goods, services, capital, and labour (beginning with skilled labour), for common macroeconomic and sectoral policies, and for monetary integration. Progress towards accomplishing this goal has been slow. Officially, the single market was instituted in 2006, but many legal and administrative barriers to the full integration of product and factor markets remain in place. To date, no significant progress has been made in the harmonization of policies and laws impacting on business, while the goal of monetary union appears to have been abandoned. CARICOM’s CSME project is informed by the principles of ‘Open Regionalism’. Tariffs on extra-regional imports have been sharply cut and market integration, complemented by common policies and laws, is meant to stimulate domestic and foreign investment, increase international competitiveness, and promote economic diversification. But intra-regional trade was on average only17.2 per cent of CARICOM’s total trade over the period 2001–6 (CARICOM, 2008); intra-regional exports are dominated by one country – Trinidad and

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Tobago – and its growth is not attributable to market integration (Jessen and Vignoles, 2005). The benefits of Open Regionalism are likely to be limited due to the structurally undiversified nature of CARICOM economies, which export mainly resource products and services to extra-regional markets (ECLAC, 2004). The slow pace of CSME implementation has been blamed on the absence of supranationality in the CARICOM governance arrangements; including the absence of binding Community law, the discretionary status of implementation of decisions by CARICOM organs, and the absence of sanctions for non-implementation (Girvan, 2005; Brewster et al., 2002). Since 1992, proposals have been made for reforms of CARICOM governance that would give binding effect to the decisions of Community organs and establish an executive mechanism to oversee implementation. This would provide CARICOM governance with a degree of supranationality that would presumably ensure speedier and more efficient implementation. In the Rosehall Declaration (2003), the governments approved these changes in principle but they have so far failed to reach agreement on subsequent proposals aimed at giving effect to the declaration (Lewis, 2006). The difficulty is that governments tend to perceive supranationality as less an exercise in collective sovereignty and more a diminution of national sovereignty. There is also the issue of possible incompatibility with the provisions of national constitutions and fears that supranationality will amount to ‘Federation (or political union) in disguise’. Complicating the matter is the perception that the tangible economic benefits of such changes are small. In 2007, CARICOM leaders approved a ‘Single Development Vision’ which charts a road map towards completion of the CSME by 2015 (Girvan, 2006). The vision designates five industry clusters that will drive regional economic growth and will be priority areas for the adoption of common policies and support measures by regional governments. This will be supported by measures to establish an enabling economic environment for private sector activity, and a governance framework that both addresses the need for timely implementation and engages the involvement of the social partners. The report established a framework for the phasing of CSME implementation in ways that would generate tangible benefits for the member states at each stage. But it became difficult to operationalize after the superimposition of an Economic Partnership Agreement (EPA) with the European Union onto the CSME process; as well as several changes in governments. Since 2007, no significant progress has been made in advancing the CSME or putting the vision into effect. Currently CARICOM is preparing a Strategic Plan for Regional Development that will focus on the provision of regional public goods meant to advance the regional integration process. The Organization of Eastern Caribbean States (OECS) is a six-state grouping within the CARICOM membership that is creating a sub-regional single market and economy in advance of the CSME.18 The sense of cohesion

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within the OECS derives from geographical proximity, similarity of size and levels of development, strong historical links through the previously existing West Indies Associated States, and a common currency and Central Bank (CARICOM Secretariat, 2005, p. 49). OECS members are designated as Less Developed Countries (LDCs) within the CARICOM Treaty,19 which entitles them to special treatment under Chapter 7 of the Treaty titled ‘Special Regimes for the Less Developed Countries’ (ibid., p. 41). The OECS Economic Union, which is due for completion in 2010, will have an aggregate population that approximates that of Guyana and a GDP that is marginally greater than that of Barbados while being approximately 20 per cent of the GDP of Trinidad and Tobago, the largest CARICOM economy. In August 2008, Trinidad and Tobago and three members of the OECS20 announced their intention to form an economic union by 2011 with ‘appropriate political integration’ by 2013. A task force appointed to report on the first proposal recommended a ‘new bargain’ of integration based on the identification of ‘designated spaces’ of integration, namely, (a) economic spaces (land, maritime and air); (b) human resource spaces; (c) monetary spaces; (d) security spaces; (e) external relations spaces; and (f) legal and judicial spaces (Lewis, 2009). There would be a ‘merging of the participating states decision-making competencies’ for the particular activities undertaken in the designated areas and an evolutionary approach to building of further political structures.21 Two potential sources of tension are immediately apparent: one is between the proposed union and the CARICOM/CSME process; the other between it and the OECS Economic Union programme. With regard to the first, participants in the initiative insist that it will in no way breach their obligations under the Revised Treaty and that it will hasten completion of the CSME.22 Concerns expressed by other governments led to a decision to schedule a special CARICOM summit to discuss the initiative and review the state of CSME implementation later in 2009. Regarding the second, at their meeting in September 2008 OECS leaders reaffirmed their intention to complete the OECS Economic Union in 2009, which was later changed to 2010, and with the expectation that Trinidad and Tobago will ‘become a member of the Economic Union by 2011’ (OECS Secretariat, 2008). This is not the model presented by the subsequent Task Force Report, however, which foresees an entity that other OECS (and CARICOM) states may later join. Thus, the issue of how to reconcile the new union initiative with existing integration processes awaits resolution. Another potential threat to the viability of the CSME project is represented by the Economic Partnership Agreement (EPA) with the European Union that was signed by 14 CARICOM states and the Dominican Republic, grouped together as the Cariforum group (Girvan, 2008b). The EPA will eliminate barriers to the movement of the majority of goods and services and of current and capital payments among the 12 CSME participating

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countries, the other three members of CARICOM, the Dominican Republic and the 27 member states of the EU. It establishes binding regulatory polices among all 42 countries in services, treatment of investment, intellectual property, public procurement, competition, and electronic commerce – all subject areas that are contemplated in the CSME but not yet put in place. It sets up an elaborate institutional machinery to oversee implementation that in some respects supersedes the governance machinery of CARICOM organs. When fully implemented, the EPA will render the CSME redundant. CARICOM would then have lost the economic integration pillar of its raison d’être and be left with functional cooperation, foreign policy coordination, and security. The EPA, UNASUR, ALBA, and the Trinidad and Tobago-OECS Union initiative all represent competing and sometimes cross-cutting currents in the drive to integrate Caribbean economies within larger economic configurations. CARICOM member states have tended to respond to these developments in a reactive manner rather than within the framework of a coherent strategy for engagement with the world economy and its changing configurations. The CSME, when it was first mooted in 1989, was meant to be such a strategy; one that would establish a single economic space, governed by common decision making from which business and governments could transact more effectively with the rest of the world. But delays in completing the CSME carry the risk that it will be overtaken by events in other arenas. CARICOM as presently structured is not equipped with the institutional and governance frameworks necessary to complete the CSME in a timely manner and to deal with external partners as a single unit that is capable of following up on its commitments. Without these factors, the possibility of gradual fragmentation of the economic dimension of the community – as different members seek different external alliances – cannot be discounted.

The Association of Caribbean States (ACS) The establishment of the ACS in July 1994, as a result of a CARICOM initiative, was a significant step in the development of closer relations between the English and Spanish-speaking countries of the Greater Caribbean region. With its 27 members, associate members, and its combined population of 230 million, the ACS could potentially have become a major player in economic and political affairs in the hemisphere and as a vehicle for substantial cooperation among the different linguistic zones of the Caribbean basin, which have been historically isolated from one another. However, it has failed to realize this potential. There are several reasons for this. It proved impossible to create an ACS free trade area, due to the launching of the FTAA negotiations soon after the ACS was founded. Hence the FTAA, and the already existing free trade arrangements under NAFTA, Mercosur, the Andean Group, the Central American Common Market, and the CSME left no space

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for a distinct ACS free trade configuration. With its crucial trade component missing, the ACS was left with the mission to promote functional cooperation in transport, tourism, and natural disasters. Cooperation in these areas has consisted largely of the exchange of information and the conclusion of regional agreements. The ACS has not assumed the role of interlocutor in political matters among its members, or between them and external powers. This role is carried out by existing regional and hemispheric organizations, including the Organization of American States. ACS members have also preferred to develop their mutual cooperation in bilateral mode rather than through the ACS. For example Mexico, Venezuela, and Cuba have each made bilateral cooperation agreements with CARICOM rather than channelling their cooperation through the ACS. The US, as the principal player in hemispheric affairs, has not interacted with the ACS because of Cuban membership. A significant achievement of the ACS, however, is the Caribbean Sea Initiative in which the United Nations General Assembly is to grant recognition of the Caribbean Sea as a Special Area for Sustainable Development, and promote regional and international cooperation in the common management of this shared resource. As the Caribbean Sea is the single most important element that ACS members have in common, cooperation on its management represents the best possibility for establishing an ACS ‘niche’, one that it is uniquely qualified to fill. The focus here would be on the sustainable management of the coastal and marine environment, including cooperation on control of the shipment of hazardous materials such as nuclear waste, oil spills, and cruise ship waste. Inasmuch as the ACS members sit astride the major routes for trafficking in illegal drugs and arms between North and South America, cooperation among themselves as well as negotiating with the US on these matters is another possible area of cooperation. Evidently a change in US policy towards the ACS and a willingness to collectively engage the region on these subjects would be necessary. US willingness to work with the ACS would trigger similar supportive actions by other external players, such as Canada and the EU. ACS members would need to decide whether they wish the organization to play this role; they would need to empower the ACS by making it the focal point of cooperation in these areas and giving it the requisite political, diplomatic, and financial support.

In conclusion The CARICOM Caribbean needs to strengthen its institutional and intellectual capacity to be informed and to analyse these developments in real time and to respond strategically to them. It needs a critical mass of scholars who specialize in global and hemispheric geopolitics and geo-economics in the breadth and depth required, ‘think tanks’ where these can be deployed,

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and a regional governance machinery that is far more efficient in decision making and implementation than presently exists. For a variety of historical and cultural reasons, this is a region that is highly susceptible to seeing the world and itself through the eyes of others. The effort to develop Caribbeancentred perspectives and to act upon them must continue.

Notes 1. In this chapter the term ‘Caribbean’ refers to the islands in the Caribbean Sea as well as the mainland countries of Belize, French Guiana, Guyana, and Suriname. The focus of the chapter, however, is on the member countries of the Caribbean Community, referred to as ‘CARICOM’. The term ‘Greater Caribbean’ encapsulates all the countries bordering the Caribbean Sea. 2. Jamaica was negotiating a US$1.2 billion standby arrangement; Dominica, St. KittsNevis, St Lucia, St Vincent and the Grenadines have already begun using either the IMF’s Rapid Response Facility (RRF) or the Exogenous Shocks Facility (ESF). Grenada has requested continuation of a poverty reduction scheme; Barbados has indicated that it will begin to utilize its IMF allocation of special drawing rights of around US$80m. 3. A CARICOM Financial Services Agreement and CARICOM Investment Code have been drafted, but not adopted. 4. The first task force was established after the 13th Meeting of COFAP on 29 January 2009. The second and the third were established after the 30th CARICOM Heads of Government Meeting 2–5 July 2009. 5. Growth estimates for emerging countries have been revised upwards to 5.5 per cent in 2009 and 7.0 per cent in 2010; growth projects for the US declined from 0.2 per cent to ⫺ 2.6 per cent in 2009 and are estimated to increase to 0.8 per cent in 2010; Western Europe growth estimates declined from ⫺ 0.6 per cent to ⫺ 4.8 per cent in 2009 and are estimated to increase to ⫺ 0.3 per cent in 2010 (International Monetary Fund, 2009b). 6. At the time of writing in September 2009, this is the case for Argentina, Bolivia, Brazil, Chile, Ecuador, El Salvador, Honduras, Guatemala, Paraguay, Uruguay, and Venezuela. 7. As pointed out by Macdonald and Ruckert (2009, p. 67) there is no single ‘PostNeoliberal’ economic model that is practised, and several governments (e.g. Brazil, Argentina, Chile) retain some elements of the Washington Consensus, while abandoning others. 8. To this end, constitutions have been rewritten in Venezuela, Bolivia, and Ecuador, and received popular approval in national referenda. 9. This is not to say that CARICOM countries would have derived significant benefits from the FTAA, which is debatable. Instead, the breakdown of the negotiations is a clear signal that relations of power in the hemisphere have changed dramatically. 10. Under the original arrangement the percentage of the oil bill financed as a loan reached 50 per cent when the price of oil exceeded $100/barrel. In June 2009 Petrocaribe proposed to adopt a flat rate of 50 per cent payable in cash and 50 per cent as a credit. 11. The 1 per cent interest rate applies at an oil price above $40/bbl; below $40 the rate applied is 2 per cent.

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74 The Caribbean in a Turbulent World 12. Dominica in 2008, and Antigua and St. Vincent and the Grenadines in 2009. 13. The Bank has more than $ 1 billion in capital, which it uses to make loans available to member states in order to undertake infrastructural, health, education, and social and cultural developments. Loans from the Bank of ALBA do not contain any conditions and the bank is run on a democratic basis (see Hattingh, 2008). 14. $10 million was disbursed on signing of the agreement with the remainder to be disbursed on approval of projects. 15. UNASUR initiatives include the creation of a single market to eliminate the fees for non-sensitive products by 2014 and non-sensitive items by 2019. 16. ALBA member Dominica was present at the summit in addition to St Vincent and the Grenadines. 17. Security was recently added as the fourth pillar. 18. On 18 June 1981, the OECS was established with the signing of the Treaty of Basseterre. The objectives of the OECS were: (a) promoting cooperation among member states and defending their sovereignty, territorial integrity, and independence; (b) assisting member states in meeting their obligations and responsibility to the international community with due regard to the role of international law as a standard of conduct in their relationships; (c) establishing and maintaining, wherever possible, arrangements for joint overseas representation and common services; and (d) promoting economic integration among the member states. 19. Article 3 of the original treaty differentiates between LDCs and MDCs. MDCs are specified as Barbados, Guyana, Jamaica, and Trinidad and Tobago. All other countries are classified as LDCs (see Treaty Establishing the Caribbean Community, 1973, Article 3). 20. Grenada, St, Lucia, and St. Vincent and the Grenadines. 21. The Task Force Report is currently the subject of consideration and consultation by the participating governments. 22. According to the Section on the Implementation of the Joint Declaration (b): ‘The signatory countries hereby undertake to conclude a framework agreement on sustainable economic, social and political development that commits them in areas of common interest to: (b) facilitate the development and implementation of the agreements necessary for the achievement of the Single Economy, including the Agreement for the Development of Financial Services, the Framework for the Integration of the Capital Market, the Investment Policy Harmonization (Caribbean Investment Code), Framework for the Harmonization of Fiscal Incentives, Framework for Fiscal Policy Harmonization and the Framework for Monetary Cooperation’ (see Joint Declaration, 2008).

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OECS Secretariat (2008) ‘OECS agree to Trinidad and Tobago Membership’, St Lucia: Government Information Services, 15 September. Available at http://www.stlucia.gov. lc/pr2008/september/oecs_agree_to_trinidad_and_tobago_membership.htm. Office of the President of Guyana (2009) ‘President Jagdeo Slams Rhetoric of Barbadian PM’, Office of the President of the Republic of Guyana, 2 July. Available at http://opnew.op.gov.gy/index.php?option⫽com_content&view⫽article&id⫽610: president-jagdeo-slams-rhetoric-of-barbadian-pm. Osava, Mario (2008) ‘Latin America: Summit Marks Distance from US’, Inter Press Service, 17 December. Available at, http://ipsnews.net/news.asp?idnews⫽45153. Pearson, Tamara (2009) ‘Venzuela and ALBA Promote ‘New Climate’ in Summit of the Americas’, Venezuela Analysis, 21 April. Available at http://www.venezuelanalysis. com/news/4382. Pilgrim, Clarence E. (2009) ‘Economic Task Force – Another CARICOM Step in the Right Direction’, KaieteurNews Online, 8 February. Available at http://www. kaieteurnewsonline.com/2009/02/08/economic-task-force-another-caricom-step-inthe-right-direction/. Ramirez, Rafael (2009) Petrocaribe produjo ahorro de 1.400 millones de dolares. Venezuela: Prensa Presidencial. Ramjeet, Oscar (2009) ‘St Vincent Prime Minister lashes out at Barbados Immigration Policy’, Caribbean-American Forum, 16 May. Available at http://www. caribbeanamericanforum.com/?p⫽919. Revised Treaty of Chaguaramas (2001) Revised Treaty of Chaguramas Establishing the Caribbean Community including the CARICOM Single Market and Economy. Available at http://www.worldtradelaw.net/fta/agreements/caricomrevisedfta.pdf. Rosehall Declaration (2003) The Rosehall Declaration on ‘Regional Governance and Integrated Development’, CARICOM Secretariat, 2–5 July. Available at http://www. caricom.org/jsp/communications/meetings_statements/rose_hall_declaration. jsp?menu⫽communications. Spencer, W. Baldwin (2009) ‘PM Spencer’s Address to the Nation on Receipt of US$50 Million from Venezuela’, The Official Website of the Government of Antigua and Barbuda, 13 August. Available at http://www.ab.gov.ag/gov_v2/government/ speeches/2009/speech_2009aug13_id2.html. Stabroek Staff (2009) ‘Guyanese are Being Raided in Barbados’, Stabroek News, 17 June. Available at http://www.stabroeknews.com/2009/news/local/06/17/guyanese-arebeing-raided-in-barbados/. Treaty Establishing the Caribbean Community (1973) 4 July. Available at http://www. caricom.org/jsp/community/original_treaty-text.pdf. Trinidad and Tobago News Blog (2009) ‘Government to Bailout CLICO’, Trinidad and Tobago News, 30 January. Available at http://www.trinidadandtobagonews.com/blog/?p⫽924. VenWorld (2008) ‘Venezuela and ALBA Create Food Security Fund’, Venezuela World, 23 April. Available at http://venworld.wordpress.com/2008/04/23/venezuela-andalba-create-food-security-fund/. World Bank (2008) Gross Domestic Product 2008, World Bank Development Indicators Database. Available at http://siteresources.worldbank.org/DATASTATISTICS/ Resources/GDP.pdf. Xinhua (2009) ‘BRIC Makes Formal Debut with First Summit Meeting’, People’s Daily, 15 June. Available at http://english.peopledaily.com.cn/90001/90777/90856/6678 396.html.

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Part II Responding to Challenges

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4 Economic Integration in the Americas: An Unfinished Agenda Antoni Estevadeordal and Kati Suominen

While the Doha Round negotiations have been at a standstill, countries have continued to engage in external trade by pursing regional and bilateral trade agreements. In Latin America and the Caribbean (LAC), Mexico and Chile have been leaders in spearheading free trade agreement (FTA) expansion in the region. The drift towards regional trade agreements, sub-regionalism and preferential trade agreements (PTAs) contrasts with the sentiment and momentum from nearly two decades ago. In 1990 (then) US President George H. W. Bush floated the idea of a free trade area that would stretch ‘from Alaska to Tierra del Fuego’, which was later outlined under the vision of the Free Trade Area of the Americas (FTAA). In 1994, the US, Canada, and 32 LAC1 countries hoped to negotiate an all-embracing FTAA by 2005. But five years since that deadline, the mood has changed. The US appears less enthusiastic about trade agreements. Mercosur, the trade bloc led by Brazil, gave priority to multilateral liberalization under Doha. Meanwhile, some governments in Latin America are pressured by public backlash against globalization and are turning their backs on open trade. However, there are new potential success stories. Eleven countries on the Pacific side of the Americas are working to unify their trade agreements to allow seamless cumulation of production among them. Both Mexico and Central America are also requesting cumulation of origin in their agreements with the European Union; this would promote closer business linkages and capitalize on Mesoamerican and European markets. Brazil is promoting negotiations between Mercosur and Central America, and hosted the Latin American Summit on Integration and Development in 2007. Further, US President Barack Obama recently reaffirmed US aspirations for restoring regional integration by calling for a ‘new beginning’ in the hemispheric relationship at the Fifth Summit of the Americas, held in Trinidad and Tobago in April 2009 (for more, see Dan Erikson’s chapter in this volume). The global financial crisis of 2008–9 adds another potential change in trade policy in Latin America. The direction, however, is not clear. According to the Inter-American Development Bank, growth in the seven 81

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largest regional economies – Argentina, Brazil, Chile, Colombia, Mexico, Peru, and Venezuela – will slow over the next five years, reaching average annual growth of just 1.9 per cent for the period 2009–13, compared with the annual average of nearly 6 per cent during the 2003–7 period. Just as the 1929 crisis led to more activist states in the region and the 1982 debt crisis triggered wider-scale adoption of the Washington Consensus, the current financial crisis will likely lead to rethinking of the models of economic development and global engagement. This chapter focuses on the shift towards new regionalism in the Americas. By first contrasting ‘old’ and ‘new’ regionalism, this chapter will then consider the evolution of regionalism in the context of tension with sub-regionalism. The challenges of implementing an FTAA, recalibration of hemispheric integration and implications of a shift towards bilateralism for regionalism today will also be addressed.

Trends in economic integration in Latin America and the Caribbean Latin America and the Caribbean encompass diverse countries in terms of population, economic size, geography, stage of development, linguistic roots as well as ethnic and cultural backgrounds. In 2007, the LAC region accounted for about 13 per cent of world population, and contributed about 8 per cent of world GDP. When the US and Canada are included, the hemispheric share of the world economy rises above 35 per cent. Currently, Latin America is well integrated into the international trading system – a significant shift from the past. Latin America and the Caribbean accounted for 5 per cent of world merchandise exports and 3 per cent of world services exports in 2007. Since 1990, trade openness also expanded significantly. In some cases, such as Costa Rica, openness jumped from 67 per cent in 1990 to 102 per cent in 2007 (see Table 4.1). While merchandise trade as a share of LAC GDP nearly doubled during the 1990–2007 period, to comprise more than 40 per cent of regional GDP, nearly all of the countries in the Americas are net importers. Overall, the regional balance of trade reached a US$ 6 billion deficit in 2007.2 The growth of LAC exports to the US has slowed in recent years, from an annual average of 19 per cent in the 1990s to 7 per cent during the period 2000–7. At the same time, countries have forged more trade agreements with one another and intensified regional efforts on trade facilitation. Notable examples include the adoption of unified customs documents and harmonization of customs regimes within the Andean Community, Central American countries harmonizing sanitary and phytosanitary (SPS) measures (see ECLAC, 2007). As a result, most LAC countries – especially smaller economies – have seen their regional bias, measured by the share of regional trade, increase during the period 1990–2007 (see Table 4.1).

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Antoni Estevadeordal and Kati Suominen Table 4.1

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Trend comparisons of trade openness and regional bias (1990 and 2007) 1990

2007 a

Openness Argentina Brazil Canada Chile Colombia Costa Rica El Salvador Jamaica Mexico US

15% 15% 51% 65% 35% 67% 50% 100% 38% 21%

b

Regional bias 22% 7% 11% 70% 71% 26% 11% 12% 27% 5%

Openness 45% 26% 70% 80% 38% 102% 76% 109% 58% 28%

Regional bias 29% 10% 12% 67% 68% 27% 15% 10% 29% 16%

Note: a (exports + imports)/GDP b (Regional exports + imports)/(Total exports + imports) Source: IDB calculations based on WDI (2009) and Comtrade (2009) data

Figure 4.1

Trade with Western Hemisphere RTA partners in 2008

Source: IDB calculations based on UN Comtrade data

Brazil Jamaica Colombia US Argentina Costa Rica Chile Mexico Canada EI Salvador 0 10 20 30 40 50 60 70 80 Imports from Western Hemisphere RTA partners as % of total imports from world

The pattern is also reflected in trade figures. Colombia received 67 per cent of imports from its LAC PTA partners in 2007 (see Figure 4.1). Smaller economies experience disproportionate effects on their trade from trade agreements, as revealed by the jump in Jamaican imports from LAC PTA

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84 Economic Integration in the Americas Figure 4.2

Trade with Western Hemisphere RTA partners in 1990

Source: IDB calculations based on UN Comtrade data

Jamaica Brazil Colombia US Argentina Chile Costa Rica EI Salvador Canada Mexico 0

10

20

30

40

50

60

70

80

Imports from Western Hemisphere RTA partners as % of total imports from world

partners, which increased from 5 per cent in 1990 to 19 per cent in 2008 (see Figures 4.1 and 4.2). Intraregional trade flows seem small compared to total exports in Latin America and the Caribbean, reaching 19 per cent in 2008. The depth of intraregional integration also pales in comparison with other regional blocs with higher ratios, such as the European Union (64%), Asia Pacific (42%) and the Association of Southeast Asian Nations (ASEAN, 23%) (see Table 4.2). However, intraregional trade in the LAC region has been very dynamic, rising to 19 per cent of the total in 2008.3 Also sub-regional trade has grown rapidly. For example, intraregional trade for Mercosur grew at an average of 22 per cent between 1990 and 2008, compared with just 14 per cent extraregional flows in the same period. By comparison, the difference between intraregional and extraregional trade growth was smaller for some blocs, such as the North American Free Trade Agreement (NAFTA) (9% and 8% respectively), or remained even for others, such as the Central American Common Market (CACM) (both at 20%). Many countries are particularly integrated in their sub-regional markets, including Argentina (39% exports destined to the subregion), Bolivia (63%), Ecuador (36%), El Salvador (66%), and Guatemala (46%) (see Table 4.3).4 The lower ratios of intraregional trade in CARICOM and Mercosur suggest

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Table 4.2

Intraregional trade (share of exports), 2008 (changes from 1990 in italics; bold cells are intraregional trade flows) Direction

Exporting Region LAC Mercosur NAFTA CARICOM CACM US + Canada EU Asia Pacific ASEAN

LAC

Mercosur

NAFTA

CARICOM

CACM

US + Canada

EU

Asia Pacific

ASEAN

19% 8% 36% 23% 15% 5% 20% 20% 38% 7% 16%

12% 5% 25% 15% 5% 3% 2% 2% 2% 1% 5%

47% 1% 24% −3% 49% 8% 47% −39% 41% −8% 43%

1% 0% 2% 2% 1% 0% 17% 17% 1% 0% 1%

2% 1% 1% 0% 1% 1% 2% 2% 28% 3% 1%

47% 2% 13% −13% 42% 6% 44% −41% 37% −9% 35%

14% −9% 22% −11% 16% −6% 16% 4% 13% −4% 18%

10% −1% 17% 1% 16% −4% 3% 1% 8% 6% 18%

2% 0% 4% 1% 4% 0% 0% −5% 1% 1% 4%

6% 2% 1% 4%

2% 1% 0% 2%

3% 8% 0% 17%

0% 0% 0% 0%

1% 0% 0% 1%

0% 8% 0% 16%

−4% 64% −3% 18%

−3% 7% 1% 42%

0% 2% 0% 13%

2% 3% 2%

1% 1% 1%

−13% 12% −8%

0% 0% 0%

0% 1% 1%

−13% 12% −8%

−1% 13% −4%

10% 56% 7%

0% 23% 3%

Source: UN Comtrade (2009)

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Table 4.3

Intraregional trade in the Western Hemisphere (1990–2009)

Regional Groupings Intraregional Exports (US$ millions) Subregional bloca NAFTA Mercosur CACM CARICOM % share of overall exports Subregional bloc NAFTA Mercosur CACM CARICOM Country Argentina Bolivia Brazil Chile Costa Rica Ecuador El Salvador Guatemala Mexico Peru Source: Comtrade (2009) Note: a: intra sub-regional trade

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1990

1995

2000

2005

2008

220,115.00 1,699.00 561.00 350.00

378,709.06 14,451.00 1,677.00 769.00

649,126.80 17,727.00 2,927.00 1,330.00

759,272.51 21,138.00 4,368.00 2,488.00

933,605.12 41,587.00 5,903.00 4,013.00

42% 5% 25% 11%

46% 21% 23% 16%

56% 21% 25% 18%

56% 13% 25% 19%

49% 15% 28% 16%

33% 39% 11% 13% n/a 18% n/a n/a 6 n/a

47% 36% 23% 19% 20% 22% 48% 40% 6% 17%

48% 44% 25% 22% 19% 31% 61% 40% 4% 18%

40% 66% 23% 17% 23% 30% 65% 37% 4% 21%

39% 63% 25% 17% 26% 36% 66% 46% 7% 21%

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future potential for intraregionalism. By deepening regionalism beyond the development of intraregional production chains linked to integration schemes, Latin America and the Caribbean should continue to reduce nontariff barriers, develop clearer rules, and foster greater legal certainty to attract foreign investment (see ECLAC, 2007).

Journey towards hemispherism The origins of hemispheric integration date back to the 1950s when the first set of agreements were made under the Latin American Free Trade Association (LAFTA). LAFTA focused on inward-looking protectionist schemes and support import substitution policies being implemented by Latin American countries. Other earlier summits in the Western Hemisphere were convened more than a generation ago, in the context of the Cold War in 1956 and 1967. These focused on the size and shape of US aid programmes and the relationship between trade preferences and immediate security concerns (see Feinberg, 1997). Since the Second World War, the intellectual climate and objectives for hemispheric cooperation have shifted. Throughout the period of ‘Old Regionalism’ – from 1950 to 1975 – regional agreements such as the Andean Pact (1969) and the Caribbean Community and Common Market (CARICOM, 1973) initiated the pathways for developing a common market, but implementation was at times incomplete. The debt crisis in the 1980s encouraged countries to replace import substitution and active state intervention. The US re-engaged the region with a bipartisan consensus of promoting democracy. In the 1990s, about 15 countries (over a third in the region) turned democratic, and the hemisphere moved decisively away from trade as aid towards adopting trade liberalization, structural reforms, and privatizing state-owned enterprises. The agreements of the ‘Old Regionalism’ were based on PTAs that focused primarily on market access in goods and to locking-in open regulatory regimes and tariff phase-outs. With the successful implementation of NAFTA and the launch of hemispheric FTAA negotiations in 1994, Latin America re-emerged into a period of ‘New Regionalism’ – exemplified by the launch of Mercosur (1991), the Central American Common Market (CACM, 1991), and North American Free Trade Agreement (NAFTA, 1992). Most recently, 11 Latin America countries are exploring methods and modalities for better integrating themselves into a single bloc. Since the mid-1980s, unilateral trade reforms by most LAC countries led to a sharp decline in average most favoured nation (MFN) tariff rates, from 40 per cent to 10 per cent in 2000 (see Estevadeordal and Robertson, 2004). Recent bilateral and regional PTAs in the Western Hemisphere are modelled on NAFTA but include more comprehensive provisions for goods, services, and investment; there are also increased provisions for means of beyondborder integration, such as government procurement, intellectual property

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rights, competition policy, and dispute settlement mechanisms. Post-2002 PTAs include even deeper disciplines with greater transparency and economic integration measures. For example, the Canada–Chile PTA includes provisions to eliminate anti-dumping and substitute safeguard disciplines. Today, LAC countries are increasingly focusing on trade with Asia. Exports to Asia have doubled since 2005, to US$168 billion in 2008, with China displacing Japan as the main trading partner with LAC (see Phillips, 2009). For some Latin American countries, the Asia Pacific region represents a massive market: nearly 36 per cent of Chile’s exports go to that region; the figure for Peru and Costa Rica is about 24 per cent each. Chile and Peru have already signed PTAs with China, in 2005 and 2008, respectively.

Historic turning points 1994 and the road to regional integration Since the late 1970s, Latin America has undergone a process of political transformation – from authoritarian to democratic regimes – which has paralleled economic reforms. During the democratic transformation in the region, which Huntington (1991) identified as part of the global ‘third wave’ of democratization, the number of democratic LAC countries increased from three in early 1978 to 15 democracies or semi-democracies in 1992. After the late 1990s, the pattern has been mixed, with some advances and setbacks, but continues strongly. The momentum towards building regional democracy and implementing market-based policies reached its apex during the initiation of the FTAA process at the Summit of the Americas (in Miami), December 1994. The FTAA negotiations began in earnest in 1998. Unlike the previous Cold War era summits, the 1994 Miami Summit provided a unique forum to establish a common agenda for trade and social issues among democratically elected leaders in the hemisphere. The US had a keen interest in integration, as evidenced by NAFTA, the Enterprise for Americas Initiative (EAI), and NAFTA parity for Central America and Caribbean countries. The Miami Summit renewed aspirations for achieving hemispheric integration beyond post-Second World War security pacts. Most were also implementing structural reforms and fiscal responsibilities embodied in the ‘Washington Consensus’.5 Building on the Miami Summit, other institutional mechanisms to enforce democratic norms emerged. In July 1996, presidents of the Mercosur countries – Brazil, Argentina, Uruguay, Paraguay, Bolivia, and Chile – signed an agreement stating that any member nation would be expelled if democracy broke down. Pressure from neighbouring Mercosur nations initially helped thwart a coup in Paraguay in April 1996 (see Hagopian and Mainwaring, 2005). During this period, world trade also increased rapidly, due most notably to the international General Agreement on Tariffs and Trade (GATT). By 1993, the GATT Uruguay round was completed, which cut tariffs on goods and created

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the World Trade Organization (WTO). The Uruguay round also made three major changes to the rules of world trade by opening the process for negotiating liberalization of the most heavily protected industries, agriculture and textiles; expanding international trade rules to cover services; and introducing new issues such as technical barriers to trade and intellectual property rights. The FTAA negotiations were troubled, however. Although NAFTA illustrated the possibilities for economic integration between industrial and developing economies, there were protectionist pressures and growing tensions in the hemisphere. Negotiating positions over agricultural subsidies and anti-dumping between countries of the Northern hemisphere and the Southern hemisphere stalled discussions. The talks collapsed in 2003 in the face of divergent interests and seemingly irreconcilable bargaining positions between the main economies of the region: Brazil and the US. New opening in 2002 The Uruguay round did not go as far as FTAs could go in areas such as dispute settlement, competition, services, investment, and agriculture. This gave impetus for the US and other nations to forge bilateral and regional agreements to promote deeper, market-oriented reforms. The US Congress passed the Trade Promotion Authority (TPA) in 2002, thus better equipping then President George W. Bush to engage in ambitious trade negotiations. By mid-2006, the US had completed or was negotiating with 11 LAC countries, accounting for about 88 per cent of two-way trade.

Future scenarios There are several new pathways for the future of trade integration in the Americas to take: multilateralism, hub-and-spoke models, and regional convergence to an FTAA-like agreement. Multilateral scenario: WTO Doha round In an increasingly integrated world, multilateral trade liberalization matters more than ever. One of the key benefits of multilateral trade negotiations is that the principle of ‘most-favoured-nation’ (MFN) applies, such that any trade preference extended to one WTO member must be offered to all. Under a successful conclusion of multilateral liberalization, firms everywhere could bypass overlapping preferential agreements and rules of origin requirements. Multilateral negotiations would be optimal and prospects are brightening in light of the December 2009 WTO ministerial to advance agriculture and services talks. Sub-regionalism scenario By deepening sub-regional integration initiatives (such as Mercosur, NAFTA, CACM and CARICOM), Latin American countries can consolidate regional

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trade preferences and move towards building a common market. CAFTA provided a pragmatic alternative for convergence of disciplines and multiplicity of rules of origin, by cumulating rules of origin requirements in some textile categories. In the case of Mercosur, consolidation into a customs union as a bloc – including macroeconomic convergence and the dismantling of exceptions in common external tariff (CET) and duties – would provide the political commitment necessary to advance the Mercosur process. Mercosur is the second largest customs union outside of the EU and seemed to epitomize the ‘new regionalism’ in the 1990s, which was based on ‘open regionalism’ and shared development goals. The ARCO process is particularly advanced and aspirations persist for better integrating South American countries. However, there are still challenges. For example, since the Mercosur customs union agreement was signed in Ouro Preto in 1994, there have been persistent tariff exceptions for both intra-zone zero tariffs and common external tariffs. Trade figures in part reflect this. Intra-Mercosur exports in 2008 totalled just US$ 39.5 billion, or 14 per cent of global exports of the four countries (down from 20% in 1999). By contrast, intra-NAFTA exports were valued at about US$ 934 billion in 2008, and accounted for about 49 per cent of total exports of the three countries that year. Within the Andean Community (CAN), two of its founding members – Chile and Venezuela – left the grouping in 1975 and 2006, respectively, because of disagreements over trade and other issues. Recently, the four remaining full members have adopted somewhat divergent positions over trade policy. There are also inadequacies that need to be addressed in regional dispute settlement mechanisms around Latin America and the Caribbean, as they can abet nontariff barriers (see Rosales et al., 2008). Hub-and-spoke model In this scenario, the US would serve as the hub, with other countries joining as spokes in various bilateral PTAs. The US pioneered the idea of competitive liberalization through bilateral and regional PTAs, beginning with trade agreements with Israel and Canada in the 1980s, and Canada and Mexico in 1994. US PTAs with Chile, CAFTA-DR, Panama, Andean-3, and continued deepening integration in NAFTA, can help maintain momentum and establish negotiating precedents for a broader regional agreement. For example, recent studies have shown that preferential cuts in tariffs were often followed by multilateral cuts in the same tariffs (see Estevadeordal, Freund and Ornelas, 2009). The potential drawback of pursuing PTAs is resulting complexity and foregone scale economies across PTAs. Because of multiple negotiations there would be overlapping regulatory standards and rules of origin requirements. Convergence of agreements A region-wide agreement would yield great economic benefits. It would better link the major economies in North and South America, whose bilateral

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trade – as projected by gravity models – could expand two or threefold in response. One way to move towards a regional deal is through convergence of PTAs – stitching existing PTAs together. The feasibility of such convergence in the area of market access regimes among RTAs in the Americas is rather substantial (see Estevadeordal and Suominen, 2009). Tariff elimination – the first precondition for effective convergence – is highly advanced in the Americas and particularly in NAFTA members’ agreements. The Mercosur–Andean agreements tariff elimination is also well under way. In the area of rules of origin, the extent of compatibilities is high within PTA families built around Mercosur, the US, and Mexico, respectively. There are also already a number of initiatives seeking convergence that are at different stages of discussion, such as the Latin America Free Trade Area initiative (Espacio de Libre Comercio), an 11-country Pacific Basin Forum formed in January 2007. The 14-country Pathways to Prosperity in the Americas effort involving the US, Canada, and a dozen Latin American countries6 also includes discussions on common trade issues. Five countries of the Americas7 are also involved in convergence discussions in the Asia Pacific Economic Cooperation (APEC) forum. There are, of course, some hurdles. For instance, there would have to be an agreement from Brazil to open its market to foreign competition in goods and services. As well, the US would need to boost market access for Brazilian agriculture and competitive manufactures. Any format going forward would also have to reconcile the NAFTA model and customs union models. Third, as in any trade negotiation, political pressures – motivated by protectionism or ideological differences – would need to be overcome. But at the same time, economic opportunities and joint gains provided by an Americas-wide agreement are too important to be missed.

Beyond agreements To date, there are more than 40 extra-regional PTAs being implemented, negotiated or proposed. However, agreements are not enough. The lack of adequate physical infrastructure and trade links between Latin American countries has precluded closer trade integration. Although intraregional trade posted double-digit growth in 2008 (about 19%), the rate of expansion was slower than in previous years and considerably smaller than other fast-growing regional economies, such as Asia (about 42%) or the European Union (64%). Intraregional trade in LAC is lower than a decade ago, which suggests it has not become an engine of growth as it has in Asia, where a complex network of vertical supply chains contributed to robust growth of intrafirm and intra-industry trade. Experience in Latin America suggests that regional integration benefits small and medium enterprises more than bilateral PTAs with developed countries. However, unlike Asia, Latin America has yet to develop extensive

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and fluid integrated cross-country supply chains that would facilitate competitiveness and provide small and medium-sized enterprises with an indirect role in targeting industrialized markets. This is a worthy issue to address. Regional integration in Asia has been intensified through intra-industry and intra-firm trade. The Asia Pacific region did not use the proliferation of PTAs to successfully integrate itself with the world economy. Instead, domestic reforms and the expansion of ‘factory Asia’ supply networks helped boost intraregional trade, which has grown by 10 per cent since 1990 to reach 42 per cent (compared with about 19%in Latin America). Positively, there are now efforts to foster trade facilitation in the region. In 2000, 12 South American8 countries launched the Initiative for the Integration of Regional Infrastructure (IIRSA), which has developed 348 infrastructure projects across the region – covering transport, energy and communications – requiring investment of at least US$ 38 billion. Beyond building physical infrastructure, IIRSA also supports the harmonization of regulation across the region and improvements in cross-border traffic. The revival of the South American Community of Nations (UNASUR) and the Meso-American Integration and Development Project, which stretches from Mexico to Colombia and includes regional infrastructure and trade reform are examples of Latin American cooperation in fields other than preferential trade agreements. The Pacific Basin Forum initiative explores methods for fuelling regional trade and investment. The US and Canada are participating in the Pathways to Prosperity in the Americas initiative, which includes technical capacity building for small businesses, investments in clean energy, and development.

Conclusion: A future of vibrant, open regionalism The financial instability caused by the global financial crisis places an onus on common efforts to safeguard prosperity. One of the key means to guaranteeing growth and wellbeing is trade. In times of turmoil, exports have served as a countercyclical force in hemispheric economies, propelling growth and economic stability. Through good times and bad, trade has been the anchor of our economies throughout the post-war era. The current situation is important and calls not for recoiling and turning our backs on liberalization, but for closer trade integration and liberalization. In the area of trade the gains of hemispheric cooperation are perhaps the most palpable and immediate. Some of the ideological and political differences on trade and other issues could be resolved through trade and integration. Connecting countries via trade would help to set the entire region on a more prosperous plane and help ignite cooperation in other areas. Since the 1990s, trade integration has fuelled hemispheric cooperation. It has created trust, built cross-border networks of stakeholders, and developed

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demands for further openness as well as interaction from cross-border infrastructure projects to regional environmental protection and security cooperation. Trade integration has also been integral for solidifying alliances and the heady gains in democracy in this hemisphere. Agreements are not enough in a world of fierce competition. The future agenda has to span beyond agreements and include measures that facilitate doing business across borders – improving customs, logistics, infrastructures, as well as building relationships with consumers in foreign markets and multinational firms (potentially major regional clients for LAC’s small and medium-sized firms). Only then can the hard-earned integration of the past two decades be fully harnessed for trade, growth, and development.

Notes The views expressed are those of the authors and do not necessarily reflect the views or policies of the institutions they represent. 1. These countries include Antigua and Barbuda, Argentina, Bahamas, Barbados, Belize, Bolivia, Brazil, Chile, Colombia, Costa Rica, Dominica, the Dominican Republic, Ecuador, El Salvador, Grenada, Guatemala, Guyana, Haiti, Honduras, Jamaica, Mexico, Nicaragua, Panama, Paraguay, Peru, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Suriname, Trinidad and Tobago, Uruguay and Venezuela. 2. In 2007, total exports of merchandise goods and services reached about US$850 billion; and total imports of merchandise goods and services was US$856 billion (based on the WDI database, 2009). 3. Intraregional trade in Latin America and the Caribbean excludes the US and Canada. 4. Based on latest year when trade figures are available (see Comtrade database, 2009). 5. The author of the phrase ‘Washington Consensus’, John Williamson, identified ten key reforms that Latin America should have implemented in 1989: fiscal discipline, reordering public expenditure priorities, tax reform, liberalizing interest rates, adopting a competitive exchange rate, liberalization of FDI, privatization, deregulation, and property rights (see Williamson, 2002). 6. These are Chile, Colombia, Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, Mexico, Panama, Peru, and Uruguay. 7. These are the US, Canada, Mexico, Chile, and Peru (Estevadeordal and Suominen, 2009). 8. These are Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Guyana, Paraguay, Peru, Suriname, Uruguay, and Venezuela.

References ECLAC (2007) Latin America and the Caribbean in the World Economy. Estevadeordal, Antoni and Raymond Robertson (2004) ‘From Distant Neighbors to Close Partners: FTAA and the Pattern of Trade’ in A. Estevadeordal, D. Rodrik, A. M. Taylor, and A. Velasco (eds) Integrating the Americas: FTAA and Beyond. Cambridge: Harvard University Press.

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94 Economic Integration in the Americas Estevadeordal, Antoni, Caroline Freund and Emanuel Ornelas (2008) ‘Does Regionalism Affect Trade Liberalization Towards Non-Members?’ CEP Discussion Papers dp0868, Centre for Economic Performance, LES. Estevadeordal, Antoni and Kati Suominen (2009) Bridging Regional Trade Agreements in the Americas, with Jeremy Harris and Matthew Shearer. Washington: Inter-American Development Bank. Feinberg, Richard E. (1997) Summitry in the Americas: A Progress Report. Washington, DC: Institute for International Economics. Hagopian, Frances and Scott P. Mainwaring (eds), (2005) The Third Wave of Democratization in Latin America: Advances and Setbacks. Cambridge: Cambridge University Press. Huntington, Samuel (1991) The Third Wave: Democratization in the Late Twentieth Century. Norman, OK: University of Oklahoma Press. McKinney, Joseph A. and H. Stephen Gardner (eds), (2008) Economic Integration in the Americas. New York: Routledge. Phillips, Nicola (2009) ‘Coping with China’, in Andrew F. Cooper and Jorge Heine (eds), Which Way Latin America? Hemispheric Politics Meets Globalization. Tokyo: United Nations University Press, pp. 100–21. Rosales, Osvaldo, and José. E. Durán Lima, Sebastián Sáez (2008) ‘Trends in Latin American Integration’, in Joseph A. McKinney and H. Stephen Gardner (eds), Economic Integration in the Americas. New York: Routledge. United Nations (2009), United Nations Commodity Trade Statistics Database (UN Comtrade), available at: http://comtrade.un.org/kb/. World Bank (2009), WDI 2009, available at: http://data.worldbank.org/data-catalog/ world-development-indicators/wdi2009.

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5 Building on Sub-Regional Economic Integration Projects to Forge an Energy and Climate Partnership of the Americas Thomas Andrew O’Keefe Introduction By the time US President Barack Hussein Obama appeared at the Fifth Summit of the Americas in Trinidad in April 2009, the ambitious initiative to economically integrate the Americas that had previously dominated the Summit of the Americas process lay in tatters. Accordingly, there was much speculation as to what Obama would say in Port-of-Spain, especially given that US relations with the Western Hemisphere had barely surfaced as a topic of debate during the presidential campaign. The only policy address Obama had given during the campaign on Latin America and the Caribbean was to the right-wing Cuban American National Foundation in Miami, in May 2008. That speech had focused almost exclusively on topics designed to attract votes from the influential Cuban-American community in South Florida. Obama’s performance at the Summit of the Americas was masterful, in that he offered nothing of substance but still managed to charm his audience. By telling the other heads of state that he was there to listen and learn from them, he differentiated this summit from previous meetings of Western Hemisphere leaders – where the US usually proposed an action plan that everyone else was expected to implement with minimal debate. At the margins of the 17–19 April 2009 summit, a US proposal to create an Energy and Climate Partnership of the Americas was floated that coincided with two of the summit’s three major themes (i.e. energy security and environmental sustainability).1 Details as to what this partnership entailed were left for a June 2009 meeting of energy ministers in the Peruvian capital.2 At the 15–16 June meeting in Lima, US Energy Secretary Steven Chu was noticeably absent. Perhaps not surprisingly, the meeting concluded without any firm commitments on energy security, alternative energy promotion, or even common goals for confronting climate change. Among the few concrete achievements was a bilateral agreement signed by US and Peruvian officials to establish a Regional Energy Efficiency Center. For its part, the Mexican 95

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government agreed to fund a Regional Wind Center. The US delegation also proposed a ‘Low Carbon Communities Program’ by which the US Department of Energy would ‘partner with countries in the region to provide technical assistance and limited funding to develop building standards and adopt modern urban planning strategies including transit-oriented development to achieve low carbon communities’ (see Department of Energy, 2009). Besides being presumptuous, given that many South American cities such as Bogotá in Colombia and Curitiba in Brazil are already well ahead of their US counterparts in substantially reducing carbon emissions, critics point out that this new effort appears remarkably similar to the Clean Cities partnership first proposed by the Clinton administration with Chile in 1999. That initiative was hampered by a lack of funding. ‘Low Carbon Communities’ seems slated to meet the same fate. Despite the pressing need to establish an Energy and Climate Partnership of the Americas, the US will be unable to exert a leadership role during much if not all of Obama’s first term in office. President Obama has spent a lot of time addressing primarily domestic concerns. Upon taking office, he inherited an economy that was in free fall with many major banks on the verge of bankruptcy. Internationally, the country is involved in two costly wars that are unlikely to result in a decisive military victory. Just over a third of Americans either lack health insurance or are under-insured and one catastrophic illness away from financial ruin. The country’s infrastructure and public education system suffer from decades of under-investment and threaten the ability of the US to remain globally competitive. As if these problems were not enough, the Republican Party is engaged in a scorched earth campaign to bring down the Obama presidency.3 Given the poor track record of previous hemispheric efforts to promote energy and environmental cooperation as well as the current inability of the US to take a strong leadership role in constructing a meaningful Energy and Climate Partnership of the Americas, this chapter explores whether the different sub-regional economic integration projects throughout the Americas can serve as building blocks to subsequently buttress a hemisphere-wide initiative. Under such a scenario, countries like Brazil, Canada, Trinidad and Tobago, and Venezuela will have to assume a proactive leadership role within their respective regions if there is to be a free flow of conventional fuels and alternative energy resources as well as meaningful reductions in greenhouse gas emissions.

The Andean Community In 2000 the Andean Commission – one of the supranational bodies within the Andean Community that can issue new rules that are binding on all its member states (currently Bolivia, Colombia, Ecuador, and Peru) – issued Decision 536. Decision 536 seeks to establish a general framework for the interconnection of electrical grids and the exchange of electricity among the nations that make up the Andean Community.

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Decision 536 rests on a number of fundamental principles that are currently applicable to Colombia, Ecuador, Peru and, as a result of Andean Commission Decision 639, Bolivia (since 2006). These principles include: 1 A general prohibition on maintaining discriminatory prices for electricity destined for the domestic market and directed to foreign markets, as well as engaging in any other type of discriminatory practice related to the demand or offer of electricity; 2 Guaranteeing free access to international interconnection lines; 3 Ensuring that the physical use of interconnections is based on a coordinated, market-oriented, and economically rational approach; 4 Ensuring competitive conditions in the electricity market, with prices and rates that reflect efficient economic costs, avoid discriminatory practices, and abuse of dominant market position; 5 Allowing short-term international transactions for the sale or purchase of electricity; 6 Promoting the participation of private investment in developing infrastructure for the transmission of electricity via international interconnections; 7 A prohibition on granting any type of subsidy for the export and import of electricity, as well as imposing any type of import tariff or specific restrictions on the import or export of electricity among the Andean Community countries. Decision 536 (as modified by Decision 639) also requires that Bolivia, Colombia, Ecuador, and Peru coordinate efforts to build electrical interconnections between their respective national grids, establish a common methodology for calculating the cost for using these interconnections, and guarantee a fair price for access under short-term electricity contracts. The four countries are also expected to make the necessary changes to their domestic legal frameworks that will harmonize regulations related to the use of the interconnections and the drafting of commercial contracts for the purchase and sale of electricity. In order to facilitate the harmonization effort and oversee implementation of the other goals established under Decision 536, an Andean Committee of Regulatory and Legal Bodies for Electricity Services was established. Decision 557, issued by the Council of Andean Ministers of Foreign Relations in June 2003, establishes a Council of Ministers of Energy, Electricity, Hydrocarbons, and Mines of the Andean Community in order to ensure adequate institutional support for all actions that may be required to assure the regional integration of the energy sector. Despite the existence of Decision 536 and its progeny, cross-border trade in electricity within the Andean Community remains limited. In 2007, for example, Colombia – considered the electricity powerhouse for the Andean region – exported 877 gigawatt hours of electricity to Ecuador (out of a

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total production of 54,551 gigawatt hours), less than what Brazil exported to Argentina that year or what Argentina exported to Chile. Although Colombia has in previous years exported to Ecuador about double the amount of electricity it exported in 2007 (i.e. roughly 3% of the country’s total electricity generation), Colombian exports to other Andean destinations as well as electricity exported by other Andean Community nations within the subregion have always been negligible.

CARICOM Although there was much talk at the start of the twenty-first century about developing a Common Caribbean Energy Policy, little substantive progress has been achieved to date. This can be partially explained by the Petrocaribe initiative launched by the Bolivarian Republic of Venezuela in 2005. Under Petrocaribe, Venezuela agrees to supply a participating country with a set volume of oil per day for domestic consumption. In return, the recipient country must create a national oil company (if one does not already exist). The amount of oil that Venezuela is willing to sell to the participating country on credit is based upon the international market price for a barrel of oil at the time of sale, which will also determine the number of years required for full payment (i.e. the higher the price, the greater the amount sold on credit, and the longer the payment period). In all cases, there is an initial grace period of at least two years. Afterwards the interest rate on all outstanding balances is either 1 or 2 per cent per annum (the exact interest rate again dependent on the actual price of the barrel of oil). In addition, Venezuela is open to the possibility of accepting partial payment with goods or services in lieu of cash. To sweeten the attractiveness of participating in Petrocaribe, the Venezuelan government has often promised to provide participating countries with economic development grants that can be used to, among other things, build storage facilities for imported petroleum shipments. The Petrocaribe Energy Cooperation Agreements that all CARICOM member states – with the notable exception of Barbados and Trinidad and Tobago – have signed with Caracas, have shifted their traditional reliance on petroleum imports away from Trinidad and towards Venezuela.4 Facilitating this move has been the fact that Trinidad and Tobago eventually acquiesced in waiving CARICOM’s 20 per cent Common External Tariff (CET) for oil imported from Venezuela. The government in Port-of-Spain did so when Venezuela’s President Hugo Chávez promised to utilize Trinidadian facilities to refine Venezuelan crude oil bound for CARICOM countries that lack their own refineries. At present only the Bahamas, Jamaica, and Suriname have refining capacity (see Bryan, 2007, p. 381). Despite this promise, the loss in market share once enjoyed by Trinidadian petroleum exports within the Caribbean market has created internal CARICOM frictions.5 Petrocaribe has also undermined the economic viability of constructing a 600-mile undersea natural gas pipeline

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from Tobago to Barbados and then on to St Lucia, Martinique, Dominica, and Guadalupe. Just as Petrocaribe has undermined efforts at energy integration within CARICOM, it also threatens to do the same with respect to weaning the Caribbean away from its traditional heavy reliance on imported oil to generate electricity and power vehicles. Some 93 per cent of CARICOM’s energy consumption is currently fossil fuel-based, while only 4 per cent comes from renewable energy. In addition to the negative environmental impact, this heavy reliance on fossil fuels also strains fiscal accounts. While Petrocaribe provides temporary relief, it does nothing to free most CARICOM countries – already among the most heavily indebted nations in the world on a debt-to-GDP basis – from incurring more debt (Bryan, 2007, p. 381). Among the specific initiatives that Petrocaribe has the potential to undermine is the Caribbean Renewable Energy Development Project (CREDP), launched in 1998. CREDP aims to assist Caribbean countries (including Cuba but currently excluding Antigua and Barbuda, Montserrat, and Haiti) to remove policy, financial, and technical barriers to the increased use of renewable energy resources,6 thereby helping to reduce implementation costs, dependency on fossil fuels, and greenhouse gas emissions. Linked to CREDP is a US$1.6 million Caribbean Renewable Energy Technical Assistance Facility designed to provide early-stage, high-risk financing for qualified projects, as well as a Caribbean Renewable Energy Fund that (once capitalized) will provide equity and debt financing for renewable energy projects. Another at-risk initiative is the Caribbean Sustainable Energy Project (CSEP) that is being implemented by the Organization of American States (OAS) with input from, inter alia, the Caribbean Energy Utility Services Corporation (CARILEC) and CREDP. CSEP is designed to accelerate the transition to cleaner, more sustainable energy use (both in terms of renewable energy resources and enhanced energy efficiency) in seven of the smallest CARICOM countries (i.e. Antigua and Barbuda, the Bahamas, Dominica, Grenada, St Kitts and Nevis, St Lucia, and St Vincent and the Grenadines). CSEP provides the funding necessary to meet the mandate established by the CARICOM Secretariat’s Energy Programme: by 2010 at least 10 per cent of the energy matrix in all CARICOM countries must consist of renewable energy. In particular, CSEP seeks to implement energy-sector policy and regulatory reforms that will: favour sustainable energy; provide training to public officials, electric utility personnel, and large consumers; establish national sustainable energy offices in the appropriate energy ministries as well as a regional coordination office; and facilitate efforts to obtain required project financing.

The Central American Integration System (SICA) During the 1990s the Inter-American Development Bank financed the interconnection of the national energy grids of Costa Rica, El Salvador,

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Guatemala, Honduras, Nicaragua, and Panama at a cost of half a billion dollars. The completion of this interconnection effort improved the reliability of service and reduced consumer rates throughout the isthmus. The country that most benefited was Honduras, which had previously been plagued by constant power outages that disrupted industrial production and reduced the country’s attractiveness as a locale for foreign investors to set up manufacturing facilities. As a result of the interconnection of all the Central American electricity grids, a Regional Electricity Market or Mercado Eléctrico Regional (MER) was established following the entry into force of the Framework Treaty on the Electricity Market of Central America in January 1999. The Framework Treaty (and two subsequent protocols) opens the domestic markets of the six Central American countries to regional operators with respect to the generation, transmission, as well as the sale and purchase of electricity. The second protocol to the Framework Treaty establishes general regulations for the regional electricity market. Two institutions with supranational authority were also established to oversee this regional electricity market: the Regional Commission on Electricity Interconnection or Comisión Regional de Interconexión Eléctrica (CRIE), and the Regional Operating Authority or Ente Operador Regional (EOR). The CRIE is tasked with ensuring that the governments fulfil the commitments made in the 1999 Framework Treaty and subsequent regulations, while the EOR oversees actual operations of the electrical interconnections and directs surplus energy flows to where they are most needed. The Framework Treaty on the Electricity Market of Central America also authorized the establishment of a new company that could either be a wholly state-owned entity or a mixed public-private sector enterprise to build and operate a single 1800-km transmission line stretching from Guatemala to Panama. This single transmission line is called the Electrical Interconnection System for the Countries of Central America or Sistema de Interconexión Eléctrica para los Países de América Central (SIEPAC). The new company that is supposed to operate SIEPAC is the Empresa Propietaria de la Red (EPR). The basic idea behind SIEPAC is that a seamless transmission line operating at the same electrical current will enhance the reliability of electrical flows and be less prone to bottlenecks than the system operating since 1999, which relies on bilateral interconnections at border crossings. There are already discussions about linking SIEPAC to the Colombian electricity grid, which predominantly relies on hydropower. Construction of SIEPAC began in April 2007 and should be fully operational by 2010. The existence of two supranational institutions in Central America to oversee the smooth functioning of the regional electrical grid and electricity market has not, by itself, resulted in one seamless regional electricity market. To date, cross-border trade of electricity remains minimal as national governments appear reluctant to encourage supply contracts that involve international sales of electrical power if it requires waiving the right to adequately ensure that

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domestic needs are first met.7 This apprehension could change once SIEPAC’s single transmission line becomes fully operational. Another deficiency of the current Central American system is its high dependency on fossil fuels to generate electricity and the detrimental impact this has on global efforts to redress climate change. Ironically this phenomenon responds to the widespread privatization of electricity generation in individual Central American countries throughout the 1990s. Privatesector firms tend to opt for projects that have shorter gestation periods in order to more quickly recoup profits on the initial investment. Accordingly, electricity generation based on fossil fuels has been favoured in Central America because the initial capital investment cost is anywhere from half to two-thirds less than for most hydropower equivalents (see Center for International Governance Innovation, 2009, p. 11).

Mercosur In 1998 Mercosur’s highest institutional body, the Common Market Council, issued Decision 10/98, which contains a Memorandum of Understanding (MOU) Related to the Exchange and Integration of Electricity in the Mercosur. Under the MOU, the Argentine, Brazilian, Paraguayan, and Uruguayan governments committed themselves to ensuring the existence of a competitive, transparent, and non-discriminatory environment for the generation and intra-Mercosur trade of electricity. In particular, the four countries agreed to: not provide subsidies or set rates that do not reflect true economic costs; permit distributors, wholesalers, or large end-users to freely enter into contracts to meet their electricity needs within any of their territories and not impose restrictions on the fulfilment of legally sound contracts; establish a fully transparent online system that permits the rapid flow of real-time data and other information on the availability of electricity so as to facilitate cross-border sales; and, ensure free access, at pre-established rates and without regard to nationality or final destination, to any spare capacity for the transmission and distribution of electricity both domestically and through international interconnections. In 1999 the Common Market Council (CMC) issued Decision 10/99 which contains a MOU with respect to the Exchange of Natural Gas and Integration of the Natural Gas Sector among the Mercosur Member States. This second MOU on the natural gas sector prohibits the use of discriminatory policies that may favour buyers over sellers or vice versa, and practices such as subsidies that distort market prices for the transport, distribution, or the warehousing of natural gas. There are also requirements that domestic regulations must be drafted so as to guarantee the free import of natural gas; as well, distributors, wholesalers, and large end-users must be allowed to purchase the amount of natural gas they need. In addition, governments should respect executed cross-border sales contracts that comply with

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local law and should not impose additional terms that are not required for transactions involving purely domestic parties. Furthermore, governments should not discriminate on the basis of nationality, public or private-sector status of the firm, or the final destination of natural gas in granting access to excess pipeline capacity nor in what is charged for use of those pipelines. Governments should also promote transparent methods for communicating data and information on the natural gas markets, pipeline capacity, and past transaction history. Finally, there is an obligation to protect consumers from monopolies, oligopolies, or other abusive practices that may arise when a company dominates the local market, as well as from bad service. Unfortunately, CMC Decisions 10/98 and 10/99 have joined the huge backlog of Decisions, Resolutions, and Directives issued by Mercosur’s institutional bodies over the years that have never been ratified by all four member states. Accordingly, neither of these two Decisions are enforceable legal obligations. In any event, Argentina may already have been in violation of Decision 10/99 when it was signed, as a single company (i.e. the formerly state-owned Yacimientos Petrolíferos Fiscales or YPF) already controlled at least 60 per cent of Argentine natural gas production and 80 per cent of the country’s natural gas sales. A high level of reserves in the hands of one company can act as a barrier to the entry of potential competitors and prevents existing producers from increasing their share of sales by lowering prices because the dominant company can agree with large customers to meet the competition’s lower prices, a practice that YPF engaged in throughout the 1990s (see Bonderovsky and Petrecolla, 2002, pp. 110, 114). The policies that successive Argentine governments have followed since the country’s economic implosion of 2001–2 are clearly incompatible with the provisions contained in both Mercosur Decisions on electricity and natural gas. For example, since 2004 the Argentine government has severely disrupted natural gas exports to Brazil, Chile, and Uruguay in favour of domestic users. In March 2005, the Argentine government even balked at a Brazilian request to purchase Argentine electricity that would be funnelled through the conversion plants in Garabí (just over the border in the Brazilian State of Rio Grande do Sul). It was only after Brasilia reminded its counterparts in Buenos Aires that it might adopt a similarly truculent attitude if Argentina ever needed electricity later in the year, during its peak-demand winter season, that Argentina backed down.

The North American Energy Working Group (NAEWG)/Security and Prosperity Partnership (SPP) The North America Free Trade Agreement (NAFTA) has had a direct impact on the energy sector in Canada, Mexico, and the US. The countries are prohibited from levying export taxes on energy goods (including oil and natural gas) or charging a higher price for them than they are sold for in

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the domestic market. Furthermore, Canada and the US are also required to maintain energy shipments to each other at the same proportion vis-à-vis domestic sales as during the preceding three years regardless of any global energy crisis that might otherwise serve as an excuse to interrupt supplies (see Johnson, 1994, pp. 114–5, 206).8 NAFTA Section 606(2) also obliges the Federal governments in Canada, Mexico, and the US to ‘seek to ensure’ that regulatory bodies within their national territory avoid disrupting contractual relationships when applying energy measures. Mexico specifically exempted itself from NAFTA provisions, otherwise applicable to Canada and the US, that allow private or foreign participation in the exploration, production, and refining of oil and natural gas. However, Mexico permits limited participation in the transport and distribution of natural gas as well as in the generation, cross-border transmission, and sale of electricity by investors from Canada or the US (ibid., pp. 312–13).9 In doing so, investors from Canada and the US are protected by NAFTA’s investment provisions (including its separate dispute resolution mechanism). Similarly, the Multi-Service Contracts – used by PEMEX since the late 1990s to attract private participation in its hydrocarbon industry by paying private firms a set fee for defined exploration and drilling work – are subject to NAFTA’s government procurement provisions when the firms are from Canada or the US. Building on the precedent for trilateral energy cooperation established by the NAFTA, a North American Energy Working Group (NAEWG) was established in 2001 with mid-level officials (as opposed to cabinet level representatives) from Canada, Mexico, and the US. An ad hoc subgroup of experts was also established to collect statistics and advise the NAEWG on matters directly related to electricity, energy efficiency, hydrocarbons in general, natural gas trade and interconnections, nuclear power, oil sands, energy regulation, and science and technology. The primary goal of the NAEWG was to enhance the sharing of information among the three governments so as to improve cross-border trade in energy. Although the NAEWG established agreements on conservation programmes and efficiency targets for a variety of equipment and appliances, some observers feel that its effectiveness was undermined by excessive secrecy and a generalized failure to include privatesector input (Dukert, 2007, pp. 134, 152). In 2005 the heads of state of Canada, Mexico, and the US met in Waco, Texas and launched the Security and Prosperity Partnership (SPP). The NAEWG was folded into the SPP as its working group on energy issues.10 In addition, senior-level officials with direct responsibility for their country’s energy portfolio would now represent each government on NAEWG. In response to the criticism levelled at the old NAEWG, the working groups under the SPP are required to regularly consult ‘stakeholders’ including state and provincial government officials, the private sector, and non-governmental organizations. Since it was folded into the SPP, the biggest success story of the NAEWG has been the development of an adequate system of receiving

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facilities for Liquefied Natural Gas (LNG) and supporting infrastructure for LNG distribution in re-gasified form, as well as the harmonization of rules for the licensing, issuing of permits, and oversight of the energy sector (ibid., pp. 152–3). The more important SPP mandate for designing a common policy framework for energy issues in North America, however, remains hamstrung by internal Mexican political constraints that prevent that country’s federal government from opening its hydrocarbons sector to private enterprise or eliminating price controls that subsidize consumer petroleum purchases.11 At the North American Leaders Summit in Guadalajara on 9–10 August 2009, Presidents Obama of the US and Felipe Calderón of Mexico along with Prime Minister Stephen Harper of Canada announced a number of energy and climate change-related initiatives, including a North American Carbon Capture and Storage Partnership,12 trilateral efforts to reduce unnecessary natural gas flaring, enhanced collaboration in devising a harmonized framework on energy efficiency standards, and cooperation in the research and development of clean energies (including devising smart grid inter-operability standards). By far the most interesting development, however, was the decision by the three governments to continue working on energy-related issues within the SPP framework given previous criticism in Canada and the US about its alleged democratic oversight deficiencies. In addition to the initiatives arising under the NAEWG/SPP, Canada and the US are also engaged in a Clean Energy Dialogue launched when President Obama visited Ottawa in February 2009.13 This bilateral initiative produced an Action Plan in September 2009 which calls for a number of joint efforts related to carbon capture and storage, expanding and modernizing the cross-border electricity grid through, inter alia, use of smart grid technologies and greening the electricity supply, and clean energy research and development. Among the specific collaborative projects proposed for immediate launching are those related to sustainable bioenergy, lifecycle analysis, production of biofuels using algae and mountain-pine-beetle-killed trees, development of lightweight materials for vehicles, and tools optimizing energy efficiency.

Overcoming Brazilian and Venezuelan reticence to an energy and climate partnership of the Americas Focusing initial efforts to enhance energy cooperation and confront climate change at the regional rather than the hemispheric level increases the likelihood that concrete results can be achieved given the smaller number of governments involved. It also gets around some of the political limitations that currently make doing anything at the hemispheric level extremely difficult if not impossible. The most obvious examples of potential bottlenecks to a hemispheric accord are Venezuela, with respect to energy, and Brazil, in terms of climate change.

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Venezuelan participation in an Energy and Climate Partnership of the Americas is crucial. Not only is it among the world’s most important sources of crude oil, but Venezuela’s creation of Petrocaribe has disrupted traditional energy supply patterns within CARICOM and threatens to undermine efforts to move the Caribbean away from its heavy reliance on fossil fuels in favour of alternative energy. By building the Energy and Climate Partnership of the Americas at the regional level first, this increases the possibility that Venezuela will participate. Otherwise, pushing for a hemisphere-wide initiative at the outset will be attacked as an effort by the US to further its own hegemonic interests. An Energy and Climate Partnership of the Americas that includes a Clean Development Mechanism (CDM) similar to the current multilateral version that arises from the Kyoto Protocol would be an important means of addressing global climate change. Under the CDM, credits can be issued to a developed country and its companies in exchange for financing projects in the developing world (e.g. building a more expensive thermal plant fuelled by natural gas or a hydroelectric dam instead of a cheaper coal-powered plant) that ultimately reduce global greenhouse gas emissions. The credits received through the CDM are then used to offset mandated emission reduction targets at home. Unlike the multilateral CDM, a hemispheric version would be less susceptible to the type of fraud that plagues the current UN-administered system.14 This is not only because of the smaller number of countries involved, but also because of the plethora of potential institutions in the Western Hemisphere that can more effectively oversee and/or administer a hemispheric cap-andtrade programme. For example, the Andean Development Corporation (CAF) has already developed a Latin American carbon market through the registration and issuance of certified reductions in the transport sector. The CAF has also signed contracts for carbon emission sales with public and private agencies (including Spain’s Ibero-American Carbon Initiative) and investment funds resulting in new energy generation facilities using renewable resources, forestry-related activities, and an expansion of biofuels production. A CDM limited to the Western Hemisphere provides a way to move the Caribbean and Central America away from their traditional heavy reliance on fossil fuels. It also provides a way to sharply diminish Brazil’s role as a top source of global carbon emissions and preserve the Amazon as a natural carbon sequestration mechanism. In contrast to the situation in China or the developed world, the bulk of Brazil’s greenhouse gas emissions come from the burning of its tropical rain forests. The continued burning of trees in Brazil, home to 65 per cent of the Amazon rainforest, also exacerbates global climate change given the important role the Amazon plays in sequestering greenhouse gases and its impact on regional rainfall patterns. While forest conservation or reforestation projects can be used to obtain carbon offsets under the multilateral CDM, Brazil has so

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far refused to permit any type of Amazonian conservation or sustainable-use initiative to generate carbon credits. Brazil will likely resist any effort to utilize projects in the Amazon to gain carbon offsets under a CDM limited to the Western Hemisphere as well. However, Brazil is less likely to resist a carbon-offset programme that is regional in scope and administered by an entity Brasilia feels it has more ability to influence. If a regional CDM process proves successful, a Brazilian government may then be more amenable to its expansion to encompass the rest of the Americas. The chances for Brazilian acceptance of a hemispheric mechanism will be further enhanced if – as part of a grand bargain leading to the establishment of an Energy and Climate Partnership of the Americas – the US agrees to eliminate its current arsenal of tariffs, hefty surcharges, quota restrictions, and subsidies that effectively keep out Brazilian sugar-based ethanol.

Using regional projects as building blocks for an eventual energy and climate partnership of the Americas While it should be clear by now why developing a framework for enhancing energy cooperation and controlling greenhouse gas emissions is more likely to initially succeed at the regional level rather than any effort that immediately tries to encompass the entire Western Hemisphere, less obvious is which existing regional projects can be utilized to establish this framework. The high level of energy integration already achieved within North America, as well as the emphasis given in both the NAEWG/SPP and the bilateral Clean Energy Dialogue to addressing climate change, offers an existing regional structure that can be used as a building block for a hemispheric initiative.15 Because of the pressing foreign policy and domestic problems confronting the Obama administration, however, Canada will have to take a leading role in developing a framework for ensuring the free flow of traditional and alternative energy resources and establishing a workable North American CDM. Ideally, Mexico should also be taking a leadership role, but this is impossible so long as the Mexican government is unable to move away from anachronistic, counterproductive policies that are contributing to a sharp reduction in Mexican reserves.16 CARICOM and SICA also offer two existing regional groupings within which to develop a framework that can later be incorporated into a hemispheric energy cooperation and climate change initiative. The fact that Trinidad and Tobago has large oil and natural gas reserves and major refining facilities makes it the most credible country to take on a leadership mantle within CARICOM. While there is no energy powerhouse within SICA that can assume a similar leadership role, the Central American governments have shown an ability to work together to resolve energy bottlenecks, particularly when prodded by generous foreign donors. In addition, the Central American Bank for Economic Integration has a number of credit programmes

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in place that work with micro as well as small and medium-sized enterprises to enhance energy efficiency and encourage greater use of renewable energy resources. Using the Andean Community to serve as a regional stepping stone in the construction of an Energy and Climate Change Partnership of the Americas is unlikely to bear much fruit. For one thing, the trade bloc is riddled with serious internal cleavages (between Bolivia and Ecuador on the one hand, and Colombia and Peru on the other) regarding the most appropriate policies for achieving economic development and interacting with the global marketplace. The withdrawal of Venezuela from the Andean Community in 2006 also diminishes the usefulness of working through this economic integration project. Furthermore, the Andean Community’s impact on integrating the energy sector regionally has been minimal. For its part, Mercosur has shown itself incapable of providing a minimum of energy security within the Southern Cone. Accordingly, in the case of South America, it makes better sense to use the Unión de Naciones Suramericanas (UNASUR) as the regional grouping around which to build an energy cooperation and climate change framework that can later be incorporated into a hemispheric effort. Officially launched in May 2008, UNASUR seeks to integrate South American energy markets and address climate change issues. UNASUR also supports initiatives to develop alternative and renewable sources of energy and promote the efficient use of all types of fuels. A big advantage of working through UNASUR is that Brazil and Venezuela are both active members. Another advantage is that UNASUR includes two CARICOM member states: Guyana and Suriname. This link can be used to coordinate efforts at energy and environmental cooperation among both regional groupings.

Conclusion The golden era of inter-American cooperation was the 1990s. An important explanation lay in the fact that most governments in the Western Hemisphere had already adopted or were rushing to implement market-friendly economic reforms that included dismantling high import barriers. This was encouraged by the collapse of the Soviet Union and a widespread feeling throughout Latin America that it stood to lose out to competition with the old Soviet bloc in the race to secure foreign investment capital if it did carry out these reforms. Under such a scenario, the creation of a Free Trade Area of the Americas complemented what many governments were attempting to achieve at the domestic level. By the start of the twenty-first century, the inter-American consensus on economic and trade policy began to collapse. The failure of some governments to continue the economic reform process beyond the narrow Washington Consensus mandates focused on fiscal discipline exacerbated wealth concentration in societies with already high levels of income inequality. New leaders

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like Hugo Chávez in Venezuela, Evo Morales in Bolivia, and Rafael Correa in Ecuador emerged to challenge purely market-oriented models as incompatible with sustainable economic development. Further poisoning the atmosphere was a Bush White House that continuously disregarded international law and even invaded a sovereign nation, reviving memories of an imperialistic US plaguing its southern neighbours with frequent interventions under the guise of promoting ‘freedom’. Developing and subsequently facilitating trade in renewable energy resources, ensuring reliable access to conventional fuels, and reducing the harmful impact of greenhouse gas emissions is probably one of the few areas where a consensus can be achieved among the governments in the Western Hemisphere today. For reasons previously explained in more detail, however, the Obama administration is beset by pressing foreign and domestic crises that prevent it from taking the lead in forging a hemispheric initiative that would ensure all three objectives. Further complicating matters is the fact that governments in the Americas are no longer united around a single economic vision as may have been the case in the 1990s. Hence actual or potential energy power houses like Brazil, Canada, Trinidad and Tobago, and Venezuela are going to have to take up the leadership mantle within their own respective regions if the concept of an Energy and Climate Partnership of the Americas is ever to prosper.

Notes 1. Although the high prominence given to energy and the environment at the Fifth Summit of the Americas in Port-of-Spain was new, both issues had previously appeared on the official agendas of the first three Summits as well as a Special Summit on Sustainable Development held in Santa Cruz, Bolivia in December 1996. For example, the Plan of Action issued at the First Summit of the Americas in Miami acknowledged that ‘[s]ustainable economic development requires hemispheric cooperation in the field of energy’ and launched a Partnership for Sustainable Energy Use, a Partnership for Biodiversity, and a Partnership for Pollution Prevention. Based on the mandates of the 1994 Miami Summit, a Hemispheric Energy Initiative focused on the regional integration of energy markets and developing policies to facilitate private-sector investment in the energy sector was formally launched in 1995. By 2002, the three partnerships as well as the Hemispheric Energy Initiative had collapsed into oblivion. 2. A press release put out by the White House on 19 April 2009 noted only that ‘President Obama invited countries of the region to participate in an Energy and Climate Partnership of the Americas; a voluntary and flexible framework for advancing energy security and combating climate change’. 3. The Obama White House also needs to resolve a turf battle between the State Department and the Department of Energy as to which agency will have primary jurisdiction over international energy cooperation and climate change initiatives. 4. The current 15 CARICOM member states include: Antigua and Barbuda, the Bahamas, Barbados, Belize, Dominica, Grenada, Guyana, Haiti, Jamaica, Montserrat, St Kitts and Nevis, St Lucia, St Vincent and the Grenadines, Suriname, and Trinidad and Tobago.

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5. One veiled threat initially made by Trinidad’s Prime Minister Patrick Manning to persuade CARICOM member states not to sign on to Petrocaribe was the suggestion that if they did, his country would be forced to seek extra-regional markets and ‘guarantees could not be offered to countries attempting to resume buying oil and petroleum products from T&T if the Petrocaribe arrangement eventually faltered’ (Bryan, 2007, pp. 383–4). 6. Renewable energy resources include: wind, hydro, biomass (including bagasse and other agricultural residues, landfill gas, solid waste, and cellulose), biofuels (including ethanol and bio-diesel), solar energy, and geo-thermal. 7. Cross-border trade in electricity in 2007 represented less than 1 per cent of total available supply in Central America (see Center for International Governance Innovation, 2009, pp. 10, 12). 8. From 1973 to 1980, Canadian exports of crude oil to the US were significantly reduced without any domestic cutbacks. (ibid., pp. 206). As a result of the NAFTA, Canada can now only reduce shipments to the US in proportion to domestic cutbacks. Mexico specifically exempted itself in the NAFTA from making any proportionality commitments with respect to trade in energy and basic petrochemical goods with either Canada or the US. 9. In general, the generation of electricity by foreign investors must be for their own use (with any excess sold to the Mexican state electricity monopoly CFE), as part of a co-generation arrangement with CFE, or strictly for export. Interestingly, the exploitation of radioactive minerals and the generation of nuclear energy in Mexico are also reserved for the state. 10. Other working groups under the SPP were entrusted with looking at business facilitation, electronic commerce, environmental issues, financial services, food and agriculture, manufactured goods, rules of origin, and transport. 11. Recent Mexican presidents have not been able to amend Mexico’s Constitution, which puts ownership of the country’s hydrocarbons exclusively in the Mexican nation since the petroleum industry was nationalized in 1938. To pass a constitutional amendment requires two-thirds of the votes of the federal congress as well as a two-thirds vote in each of the state legislatures (Morales, 2007, p. 26). Attempts to get around constitutional restrictions by permitting joint ventures or strategic alliances with private-sector companies have been systematically blocked as well. 12. As a result of this initiative, the three governments have agreed to produce a North American Carbon Atlas that will result in uniform mapping methodology data sharing with respect to major sources of carbon emissions and potential storage sites. 13. Following Obama’s visit, three bilateral government working groups were formed to identify key opportunities for joint collaboration in: developing and deploying clean energy technologies; building a more efficient electric grid based on clean and renewable generation; and expanding clean-energy research and development. 14. Research conducted by two Stanford University law professors in 2008 found that a large fraction of the credits generated under the CDM did not represent genuine reductions in greenhouse gas emissions as many projects that ‘reduce’ emissions would have been built anyway and at a far lower cost as well. Even worse, the CDM creates perverse incentives for developing countries to increase carbon emissions as a way of generating CDM credits that can then be offered to developed nations desperate to find offsets for their pollution-inducing activities (see Wara and Victor, 2008). 15. Canada and Mexico are the two top sources of US petroleum imports. Canada and the United States swap more electricity in a typical year than some South American countries produce. In fact, the electricity grids in some Canadian provinces are

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110 Energy and Climate Partnership for the Americas actually synchronized with those in US states, rather than with adjacent provinces (Dukert, 2007, p. 136). 16. This may also explain why the US is pursuing the Clean Energy Dialogue with Canada despite the fact that the objectives and programmes of this bilateral initiative are almost identical to those supposedly being pursued trilaterally under the SPP.

References Beato, Paulina and Jean Jacques Laffont (eds) (2002) Competition Policy in Regulated Industries: Approaches for Emerging Economies. Washington, DC: Inter-American Development Bank. Bonderovsky, Diego and Diego Petrecolla (2002) ‘Argentina’s Natural Gas Markets: Antitrust and Regional Integration Issues’, in Paulina Beato and Jean Jacques Lafont (eds) Competition Policy in Regulated Industries: Approaches for Emerging Economies. Washington, DC: Inter-American Development Bank. Bryan, Anthony T. (2007) ‘Trinidad and Tobago,’ in Sidney Weintraub (ed.) Energy Cooperation in the Western Hemisphere: Benefits and Impediments. Washington, DC: The CSIS Press. Center for International Governance Innovation (2009) Blueprint for a Sustainable Energy Partnership for the Americas. Waterloo, ON: CIGI, 2009. Department of Energy (2009) Department of Energy Press Release, 16 June. Available at: http://www.energy.gov/news/7468.htm. Dukert, Joseph M. (2007) ‘North America’, in Sidney Weintraub (ed.) Energy Cooperation in the Western Hemisphere: Benefits and Impediments. Washington, DC: The CSIS Press. Johnson, Jon R. (1994) The North American Free Trade Agreement: A Comprehensive Guide. Aurora: Canada Law Book, Inc. Morales, Isidro (2007) ‘The Politics of Energy Markets in North America: Challenges and Prospects for a Continental Partnership’, in Isabel Studer and Carol Wise (eds) Requiem or Revival: The Promise of North American Integration. Washington, DC: Brookings Institution Press. Studer, Isabel and Carol Wise (eds) (2007) Requiem or Revival: The Promise of North American Integration. Washington, DC: Brookings Institution Press. Wara, Michael and David G. Victor (2008) ‘A Realistic Policy on International Carbon Offsets’. Program on Energy and Sustainable Development Working Paper # 74. Palo Alto: Freeman Spogli Institute for International Studies, Stanford University. Available at http://fsi.stanford.edu/publications/a_realistic_policy_on_international_carbon_ offsets/.

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6 Demise of the Inter-American Democracy Promotion Regime? Thomas Legler

During the 1990s, the member states of the OAS constructed a new regime to protect democracy from threats of authoritarian reversals. The foundation of the regime was a set of international legal pillars, including the Protocolo de Cartagena de Indias (1985), Resolution 1080, the Washington Protocol (1992/1997) and the Inter-American Democratic Charter (IADC, 2001). It was put to the test on numerous occasions with varying results: Bolivia (2003, 2005, 2008), Ecuador (1997, 2000, 2005), Guatemala (1993), Haiti (1991–4, 2000–5), Nicaragua (2005), Paraguay (1996, 1999), Peru (1992, 2000), and, Venezuela (1992, 2002). Recent developments in the Americas may call into question the future of the inter-American democracy promotion regime. Democracy no longer seems a membership requirement for participating in a number of the region’s new and existing multilateral forums. Despite the persistence of its authoritarian regime, Cuba has become a member of the Rio Group, the Latin American and Caribbean Summit (CALC), and the Community of Latin American and Caribbean States. In 2009, a sizeable number of Latin American and Caribbean member states pushed for Cuba’s reintegration into the OAS and the Summits of the Americas. Even though provisions exist in the Democratic Charter, the OAS has also been unable and/or unwilling to respond adequately to repeated instances of ‘authoritarian backsliding’ by member state governments, including at various moments Ecuador, Nicaragua, and Venezuela. Until the Honduran coup d’état in June 2009, the OAS encountered considerable difficulty in invoking the Inter-American Democratic Charter (IADC) either to prevent or respond to political crises where democracy was clearly under threat. In the case of Honduras, in spite of unprecedented international condemnation, isolation, and sanctions, the OAS and the international community failed to overturn the 28 June coup and restore ousted President Manuel Mel Zelaya to office. As if that were not enough, the OAS vision of representative democracy has been challenged by participatory and plebiscitary alternatives. Are we witnessing the demise of the inter-American democracy promotion regime? I argue that it is premature to talk of regime decline. Rather, 111

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we are witnessing contradictory directions in regime change and, overall, a failure following the IADC’s launch in 2001 to consolidate the regime beyond a minimalist emphasis on defending against coups d’état. In my analysis I stress the interdependence between regime prospects and regional contextual factors. In what follows, I break down the regime into its constituent components, a constellation of regional norms. I then sketch how these norms have consolidated, evolved, or devolved from the 1990s to the present, paying close attention as well to the shifting terrain of regime construction, which includes the changing meanings and practices of democracy on the ground in Latin American countries, evolving regional geopolitics, namely US–Latin American relations, regionalism trends, and the OAS’s own state of health.

The inter-American democracy promotion regime, 1990s–2001 In addition to a principal agency, the Organization of American States and its member states, the inter-American democracy promotion regime represents a constellation of regional norms of varying degrees of consolidation or normalization and, as we shall see later on, legalization. Not only are these norms concerning how democracy should be promoted or protected, but also norms that condition and reflect existing sovereignty meanings and practices as well how multilateral pro-democracy diplomacy ought to be conducted. The regime as it was elaborated in its formative period, 1990–2001, represented an interconnected, sometimes contradictory set of norms and values. An anti-coup norm In contrast to the Cold War, coups or self-coups were no longer acceptable or legitimate forms of political change in the Americas, and became subject to international condemnation and various forms of soft and hard intervention (Legler and Tieku, 2010). This norm was reflected in the creation of Resolution 1080 (1991) and the Washington Protocol (1992/1997) as well as strong collective responses by the OAS to real or attempted coups and self-coups in Guatemala (1993), Haiti (1991), Paraguay (1996), Peru (1992), and Venezuela (1992). Representative democracy as the accepted type of democracy to promote The construction of the democracy promotion regime was centred on the promotion of a specific type or style of democracy: representative democracy. Although countries such as Mexico and Brazil historically resisted the imposition of a single definition of democracy in the Americas, by 2001 OAS member states were able to reach consensus on a set of criteria that they considered should be present in any country that could be categorized as a democracy. These elements were codified for the first time in Articles 3 and 4 of the IADC.

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Representative democracy membership criterion With the end of the Cold War, regime type became very important in the politics of international recognition and sovereignty. Governments in the Americas could no longer count on automatic international recognition or full rights of international participation if their political systems were non-democratic (Cooper and Legler, 2001, 2006; Legler, 2007; Legler and Tieku, 2010). With the Declaration of Quebec City and the Inter-American Democratic Charter, representative democracy became a requirement for membership and participation in the OAS, the Summits of the Americas, and the Inter-American system. The Washington Protocol and later on the IADC contained the possibility of membership suspension as an ultimate sanction for any member state in which democracy was undermined. The Rio Group also reinforced this norm in its own membership requirements. Indeed, Peru’s membership was temporarily suspended in 1992 following President Fujimori’s autogolpe. An anti-authoritarian backsliding norm Thanks to ten years of creeping authoritarianism during the Fujimori presidency (1990–2000), the Paniagua transitional government that replaced Fujimori advocated the creation of a Democratic Charter that would not only protect against coups or self-coups but also backsliding of the type that Peruvians had suffered painfully (Cooper and Legler, 2006; Legler, 2007). The nascent form was manifested in Article 19 of the IADC, which acknowledged both coups/self-coups or ‘unconstitutional interruptions of the democratic order’ and authoritarian regressions by incumbent elected leaders or ‘unconstitutional alterations of the constitutional regime’ as unacceptable practices in the inter-American system. External validation of elections Several key election observation experiences by the OAS helped establish a new external validation norm: that the OAS, where invited by a host country to observe an electoral process, has the authority to validate, criticize, or even invalidate that election and the organizing authorities (Cooper and Legler, 2006; Legler, Lean and Boniface, 2007). Such was the case in landmark observations in the Dominican Republic (1994), Haiti (2000), Peru (2000), and Venezuela (2005). Article 25 of the IADC instructs OAS election observation missions to advise the General Secretariat and the Permanent Council ‘if the necessary conditions for free and fair elections do not exist’.1 Graduated response to political crises Similar to UN diplomatic practice with respect to security provisions in Chapters VI and VII of the UN Charter, the collective defence of democracy in the Americas also followed a preferred logic of graduated, flexible diplomatic response to political crises, rather than a rigid, automatic,

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one-size-fits-all approach (Cooper and Legler, 2006; Insulza, 2007, p. 14; Legler, 2007). Preference for political concertation over legalistic approaches Coupled with the inclination towards graduated, flexible responses, political élites and their diplomatic representatives in the region have preferred to address threats to democracy allowing room for political negotiation and manoeuvring rather than according to a strict legal logic. The IADC, as has been oft criticized, fails to establish clear legal benchmarks for defining what constitutes a serious enough violation as to warrant or trigger action by the Permanent Council and/or General Assembly (Carter, 2005; Legler, 2007; Ayala and Nikken, 2006). In this way the inter-American democracy promotion regime differs markedly from the inter-American human rights regime, where the Inter-American Commission of Human Rights and the Inter-American Court of Human Rights have evolved a process of stricter legal jurisprudence based on the American Convention of Human Rights and other international human rights instruments for advancing human rights. Separation between democracy promotion and human rights protection In a similar vein, although some overlap exists between inter-American democracy promotion and the inter-American human rights system, the construction of the former occurred largely in isolation from the latter. While the Inter-American Commission on Human Rights has produced human rights reports critical of individual countries’ abuses of democracy, little coordination or cooperation has existed among the Secretary-General, the Permanent Council, and the Inter-American Commission and Court of Human Rights. Although Article 1 of the IADC established democracy as a human right, in theory linking the protection of democracy to a wide body of international human rights treaties and other legal documents, the Permanent Council normally avoids discussion of democracy-related human rights concerns emanating from the Commission or the Court. ‘By invitation only’ intervention With the exception of a military coup, the IADC is very clear on the point that sovereign governments have the final say over most forms of interventions that the OAS might undertake in order to uphold democracy (Cooper and Legler, 2006; Legler, 2007; Legler and Tieku, 2010; Committee on Foreign Relations, 2010). Article 17 enables them to request assistance in the face of anti-democratic threats. Article 18 stipulates that the SecretaryGeneral or Permanent Council requires the prior consent of the host government before undertaking pro-democracy collective action. As stated in Articles 23 and 25, OAS election monitoring also requires a formal invitation by a member state.

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Executive sovereignty In conjunction with the ‘by invitation only’ norm, the inter-American democracy promotion regime reinforces a particular, élitist style of sovereignty: executive sovereignty (Cooper and Legler, 2006; Legler 2007, Committee on Foreign Relations 2010). That is, as practised in inter-American diplomacy, sovereignty resides in a head of state or government or his/her designated diplomatic representatives. Despite occasional rhetoric, it is not a popular sovereignty, nor is executive sovereignty shared among the president/prime minister, judiciary, parliament, and other branches of the states. The IADC is an instrument at the exclusive disposal of national leaders. It is a democratic sovereignty only in so far as these leaders are elected and held accountable through elections. An important implication of the inter-American tradition of executive sovereignty is that the Secretary-General of the OAS has a very limited scope for action independent of the General Assembly and Permanent Council in defending democracy. As Chapter XVI of the OAS Charter indicates, he is responsible to the General Assembly in the fulfilment of all his obligations and functions. The IADC operative clauses did enhance the good offices of the SecretaryGeneral, in the sense that Articles 17 and 18 outline a role for him in preventive diplomacy. Nonetheless, it is noteworthy that the execution of his good offices in this regard requires the express consent of the member state and, more narrowly, its head of state or government. Article 20 also authorizes the Secretary-General to convene a meeting of the Permanent Council in the event of ‘an unconstitutional alteration of the constitutional regime that seriously impairs the democratic order in a member state’. Importantly, it is the Permanent Council that ultimately decides or pre-vets any course of action to be taken, reaffirming that any good offices which the Secretary-General wishes to undertake must await a green light from his state masters.2 Monitoring and peer review What was absent from the IADC was arguably as important as what was contained therein. The Paniagua transition government served an important norm entrepreneur role not only in its effort to construct a regional anti-authoritarian backsliding norm but also to craft a new mandate for the OAS to monitor member states’ democratic performance. Peru’s admirable proposal to empower the Inter-American Commission on Human Rights to serve the role of monitoring member state compliance with the Democratic Charter was soundly rejected by other states (Legler, 2003; 2007).

The shifting terrain for regime construction, 2001–10 As suggested at the outset, the creation of the inter-American democracy promotion regime has a lot to do with the particular context in which it

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arose. The regime was originally constructed during the 1980s and 1990s in a propitious environment that included the end of the Cold War and the Third Wave of democratic transitions. With the threat of authoritarian reversals still very real in many countries, the elected leaders of Latin America’s new democracies had a keen interest to project their new democratic values through their foreign policies, as well as to create multilateral bulwarks as an additional line of defence to help them lock in their new democratic constitutional orders.3 The rise of democracy promotion also occurred against a backdrop of dynamic hemispheric regionalism and a growing consensus concerning how representative democracy was defined and practiced. Finally, the OAS itself underwent an important revival under the capable leadership of Secretary-General César Gaviria (1994–2004). The new millennium has been an altogether different story. As elaborated below, the terrain for consolidating the regime became much more difficult. A changing democracy problematic in the region Some types of problems common during the 1990s persist. As alluded to above, authoritarian backsliding by incumbent, democratically elected leaders continues to threaten democracy in countries like Venezuela and Nicaragua, and even possibly Ecuador. Venezuela (2002) and Honduras (2009) remind us that coups are still plausible in the present. Newer threats to democracy have also emerged, presenting new challenges for a defence-of-democracy regime designed to deal with other types of problems. A more recent phenomenon is that of executive-legislative or executive-judiciary power struggles in which these institutions enter into destabilizing zero-sum conflicts. Where delegative democracy (O’Donnell, 1994), in which presidents attempt to circumvent congress through their use of decrees, is a continuous concern, nowadays élites opposed to incumbent presidents fight back through the influence they enjoy in legislatures and judiciaries. Prime examples can be found in the intense political conflicts between President Bolaños of Nicaragua (2005), President Gutiérrez of Ecuador (2004–5) and President Zelaya of Honduras (2009) and their congressional and judicial opposition. In this context, sometimes executive sovereignty may give presidents a competitive advantage in these struggles, since they are the only ones who can invoke or resist the invoking of the IADC. However, legislatures – as demonstrated in the Ecuadorean case (1997, 2000, 2005) – can use mass popular mobilizations to their advantage to remove unpopular presidents like Bucarám, Mahuad, and Gutiérrez via constitutionally dubious means. In any event, as these countries’ experiences have underlined, presidents are not always the only actors capable of subverting democratic constitutional orders. Recalling the famous words of Linz and Stepan (1996), in many Latin American countries, democracy is still not the only game in town.

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Another recent development has been the emergence of political crises that are not just narrow intra-élite conflicts but also society-wide processes of intense political and social polarization. Conflicts in Venezuela, Bolivia, Ecuador, and Honduras have assumed this form. Acute polarization leads to the construction of two opposing sides, each with a collective identity formed in mutual antagonism with the other. One pole assumes the identity of ‘el pueblo’ (the hitherto oppressed or excluded), and the other perceives itself as the guardian of the status quo ante and/or opposition to the dictatorial projects of Chávez, Morales, Correa, and Zelaya. Both sides come to perceive a zero-sum situation or existential struggle for survival at all costs. Politics in these contexts abruptly departs from existing rules of the political game, abandoning dialogue, tolerance, and political concertation for political confrontation, intolerance, mobilization, and even violence. In other words, politics becomes a battlefield where only one side can win and the costs of losing for either side are unacceptable. It is worrisome that, for both sides, the ends of political actions can come to justify the means employed. Democracy can become the victim in these struggles. As illustrated by the coups in Venezuela (2002) and Honduras (2009), citizens who would never normally have supported such anti-democratic actions came to defend them as necessary evils to eliminate those whom they perceived as threatening their very existence. For their part, locked in bitter class and ethnic or racial conflict, the leaders of these countries and their followers have resorted to growing human rights abuses to advance their causes. Needless to say, the proposition of defending democracy in these contexts becomes a real headache. The two sides in these internal conflicts extend their polarizing logic to their relations with external actors like the US, the OAS, and the European Union: assuming that these actors are either for or against their cause. It therefore becomes difficult for international actors to convincingly maintain a stance of impartiality or neutrality. As we shall see below in the recent case of the 2009 Honduras coup, punitive measures applied in an intensely polarized context can be counterproductive, as the mutual perception of a high-stakes, zero-sum struggle makes the option of making concessions virtually impossible. With the erosion of tolerance, respectful debate, and the perception of common ground or destiny in society, it becomes even more difficult for the OAS to promote effectively its preferred diplomatic tool in crises contexts: the facilitation of intra-élite democratic dialogue processes. If the defence of democracy were not sufficiently complicated beforehand, now the OAS and the international community must confront the additional challenge of how to address and diffuse polarization. From the hegemony of representative democracy to the participatory challenge Within the shifting regional democracy problematic of the new millennium, there is no longer a consensus on the meanings and practices of democracy

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as was the case during the previous decade. Democracy is a socially and politically contested concept subject to change (Grugel, 2002). On the one hand, the social construction of democracy on the ground in diverse directions in recent years is a healthy phenomenon. As the UNDP signalled in 2004, real existing democracy in the region was very problematic, a ‘democracy without citizenship’ in its terms. The participatory and/or plebiscitary alternative as it has evolved in Venezuela, Bolivia, Ecuador, and elsewhere, has put democratic citizenship and the fight against poverty and social exclusion squarely on the agenda. On the other hand, the lack of élite and popular consensus on the meanings and practices of democracy obviously makes it harder for the international community to defend or promote democracy. For example, the separation of powers is a staple of the representative democracy tradition. It is not necessarily the same case with the plebiscitary and participatory model of democracy espoused by Chávez. Democracy à la Chávez, et al. is notoriously critical of what is perceived as the élitist representative function characteristic of representative or liberal democracy (Canovan, 1999; Decker, 2003; De la Torre and Peruzzotti, 2008; Panizza, 2005). The Chávez alternative eliminates or weakens institutional mediation between citizens and the executive, creating more direct links between voter and elected leader. As Seligson (2007, p. 93) recently found, two-thirds of recent AmericasBarometer respondents across Latin America indicated that they would accept the kind of reduction of the autonomy of the judiciary, legislature, and opposition parties undertaken by Chávez. Therefore, whereas the erosion of horizontal accountability appears as authoritarian backsliding in Venezuela from a US or Western perspective, it is not necessarily so from other alternative democratic logics. Indeed, electoral irregularities notwithstanding, leaders in Venezuela, Ecuador, and Bolivia can point to the heightened frequency of plebiscites in their countries as ample evidence of their democratic credentials. The downturn in US–Latin American relations As is now well known, the uncommonly friendly ties that existed between US political élites and their counterparts during the 1990s dissipated during the new millennium. Latin American trust and confidence towards the US were replaced by distrust and suspicion. The downturn in US–Latin American relations on the one hand corresponded to the onset of the George W. Bush administration, which did not endear itself to the Latin American public with its invasion of Iraq or its war on terrorism. On the other hand, new governments in Venezuela, Bolivia, Ecuador, and elsewhere pursued intentionally nationalistic, anti-imperialist, and confrontational foreign policies vis-à-vis the US. The democracy promotion issue area was a clear victim of rising tensions between the two. US credibility on democracy promotion was shattered by actions such as the Bush administration’s tacit support for the Venezuelan

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coup of 2002, in which democratically elected Chávez was briefly ousted. The covert actions of the International Republican Institute to criticize and even possibly undermine the Aristide government in Haiti and Chávez also hurt the US image, as did electoral intervention by US government officials or Congressmen against left-wing candidates in Bolivia (2003, 2005) and Nicaragua (2006). The selective use of the Millennium Challenge Account, the annual Congressional drug certification process, the Andean Trade Preferences Act, and even human trafficking reporting to criticize and punish the governments of Cuba, Venezuela, and Bolivia also gained the US growing numbers of critics in the region. Latin Americans reminded the US government of its own contradictory behaviour: criticizing Venezuela in particular for endangering democracy while mistreating Mexican migrants on the US–Mexican border and illegally maintaining prisoners in its Guantanamo facility. Accordingly, the growing US–Latin American divide negatively affected possibilities for implementing and strengthening the IADC. The Obama administration quickly attempted to distance itself from its predecessor’s policies and to improve US credibility in the region upon assuming office in January 2010. It promised a new, equal partnership with Latin American and Caribbean governments and Obama won points for his willingness to listen to them at the Trinidad and Tobago Summit of the Americas as well as signalling a willingness to redefine US relations with Cuba in a more positive direction.4 Nevertheless, the Honduras crisis revealed that it would be very hard for the US to overcome perennial perceptions that it always put its narrow interests before the principles of the inter-American democracy promotion regime. Although Obama and Hillary Clinton condemned the 28 June coup and backed the OAS as the key agent for handling the crisis, US actions in November 2009 once again hurt US credibility on democracy. US officials won praise after helping to broker an eleventh-hour deal on 30 October 2009 between ousted President Zelaya and de facto President Roberto Micheletti that would pave the way for the return of Zelaya and the creation of an interim government of national unity. Just days later, however, US officials signalled that they would be prepared to accept the results of the 29 November elections in Honduras, irrespective of whether Zelaya was reinstated or not. Thanks to the US reversal, the so-called Guaymuras Accord rapidly unravelled; Zelaya was barred from returning to power, and Micheletti proudly remained in office, handing over power to president-elect Porfirio Lobo on 27 January 2010. The unconditional US recognition of the 29 November election results infuriated President Lula, driving a rift between the US and Brazil and their respective cohorts of supporters in the Americas. Consequently, the prospects for renewed US–Latin American cooperation in terms of strengthening the democracy promotion regime remain limited in the immediate future.

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From hemispheric regionalism to regional fragmentation and bifurcation ‘We are all countries of the Americas’ gained credence during the 1990s. In the new millennium it has become more difficult to speak of the Americas or the Western Hemisphere Idea as a single, coherent regional project. Instead, hemispheric regionalism has been challenged by two other rival regional projects. First, regional fragmentation has been common, as reflected in the creation of a plethora of subregional multilateral and integration initiatives throughout Latin America and the Caribbean. The gradual unification of South America through UNASUR has been prominent within this fragmentation. After the Washington Consensus and the widespread interest during the 1990s in a hemispheric free trade initiative, there has also been ideological fragmentation along regional lines in recent years. The Washington Consensus ideals have found healthy competition from the socialist proposal of the ALBA camp as well as a more moderate leftist proposal from Lula and Bachelet. Second, in the last few years, Latin American countries have constructed new regional spaces for political concertation and integration which intentionally exclude Canada and the US. In December 2008, these countries created the Latin American and Caribbean Summit (CALC) for this purpose. In February 2010, they agreed to found the Community of Latin American and Caribbean States. At a minimum, these regional and subregional developments mean that the defence and promotion of democracy occur in an ever more complex regional and subregional multilateral context, with the challenges of interinstitutional coordination, mandate duplication and overlap as well as organizational competition for scarce resources. However, whereas once the OAS and organizations such as the Rio Group, the Mercosur, and the Andean Community shared common concerns and beliefs regarding democracy in the region, now this is far less evident. The exclusive Latin American and Caribbean multilateral clubs, for example, have now opened their doors to Cuban membership, despite that country’s democratic deficit. From OAS revival to OAS survival Former Colombian President César Gaviria led a successful effort as OAS Secretary-General to reform and revitalize the OAS, an organization that during the Cold War had lost much of its credibility. The protection of democracy was precisely the issue area that enhanced OAS credibility.5 During recent years the OAS has entered into renewed crisis. In part this is because the OAS once again finds itself in the middle of strained US–Latin American relations. The reintegration of Cuba into the OAS fold has been a key source of contention with countries such as Venezuela and Bolivia threatening to leave the organization permanently. The 2009 San Pedro Sula General Assembly managed to prevent the collapse of the OAS by revoking

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the 1962 decision to suspend Cuba, leaving the door open for Cuba’s return to the organization, should it so desire. The OAS also suffers a chronic fiscal crisis that limits its ability to fulfil its enormous number of mandates (Committee on Foreign Relations, 2010). Part of the blame for the OAS’s current woes must also be attributed to questions concerning the leadership of its Secretary-General. Although admittedly he has had to negotiate difficult waters between the US and its various Latin American adversaries, he has failed to invigorate the OAS as his predecessor Gaviria did in his time. Indeed, for much of his initial term it was widely speculated that he was more concerned with positioning himself as a candidate to succeed President Bachelet in Chile than running the OAS as it needed to be run. A surprising editorial by the Washington Post depicted Insulza as the embodiment of the OAS’s dysfunction and accused him of being intentionally soft on anti-democratic actions by leftist presidents Chávez and Zelaya (Washington Post, 2010). The inter-American democracy promotion regime, 2001–10 The past decade should have been a period of regime consolidation. Instead, the contextual changes mentioned above impeded the realization of the expectations embodied in the Inter-American Democratic Charter. As I outline below, there have been a number of contradictory and worrisome developments with respect to inter-American democracy promotion norms. A strong anti-coup norm The 11 April 2002 coup in Venezuela and the 28 June 2009 coup in Honduras clearly indicate that this norm remains strong in the Americas, especially among Latin American countries. For the first time, the OAS invoked Article 21 of the IADC to suspend Honduras’s membership – its strongest response yet to a coup. The OAS was not alone, however, in its punishment of Honduras. The international isolation and an assortment of economic sanctions directed against the Honduran de facto government involved the OAS and its member states, ALBA, the Rio Group, UNASUR, Mercosur, SICA, the European Union, the United Nations, the Ibero-American Secretariat, the International Monetary Fund, the World Bank, and the Inter-American Development Bank. To appreciate the magnitude of Honduras’s castigation, newly elected President Lobos remarked upon assuming office that Honduras had suffered the loss of more than US$ 2 billion dollars in international aid (El País, 2010). However, the strong anti-coup impulse in the region was not without its problems or contradictions. Oppenheimer (2009) wrote that Brazil deserved a gold medal for its hypocrisy. President Lula insisted on the continued punishment of Honduras months after the coup for the failure of the de facto government to permit the restoration of Zelaya, even after democratic elections were held for his successor on 29 November 2009. Yet he rolled

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out the red carpet for Iranian dictator Mahmoud Ahmadinejad on an official state visit. Moreover, as Oppenheimer queried, ‘how can Lula da Silva call for maintaining international sanctions against Honduras while at the same time urging the world to lift remaining sanctions against Cuba?’ Additionally, the strength of the anti-coup conviction within the interAmerican and wider international community seemed to dissipate as the Micheletti Government persistently clung to power and as the 29 November general elections approached. By the time the elections were held, the original inter-American anti-coup consensus had split into two groups: a hardline group containing Brazil, Venezuela, Bolivia, Ecuador, Paraguay, and Nicaragua that insisted on not recognizing the 29 November elections since Zelaya had not been restored to office, and a soft-line group including the US, Costa Rica, Colombia, Guatemala, and Panama that viewed the elections as a democratic exit from Honduras’s political crisis and intended to recognize the elections even if Zelaya were not reinstated. According to Raúl Benítez (2009), the Honduras debacle represented the triumph of realism over principles, as countries of the Americas invariably weighed how their national interests were affected. Representative democracy in trouble Representative democracy as elaborated in Articles 3 and 4 and elsewhere in the IADC is a broad rubric that should permit a diverse array of democratic institutional arrangements and practices from country to country. Nonetheless, in tune with endogenous developments on the ground in the Americas, during the new millennium its acceptance came under fire first from Venezuela’s President Hugo Chávez and soon thereafter from his allies President Evo Morales of Bolivia, President Rafael Correa of Ecuador, and President Daniel Ortega of Nicaragua. Soon after the adoption of the Democratic Charter on 11 September 2001, Chávez advocated the creation of a companion Social Charter on the grounds that representative democracy was an élitist, Western form of democracy that concerned itself little with questions of participation or equality (despite acknowledgement of these factors in the IADC). Caribbean countries saw the Social Charter as an important opportunity not to undermine representative democracy but rather to promote their longstanding concern for social and economic development. To date, despite numerous meetings, the OAS has failed to produce a Social Charter. Even so, Chávez was successful in political discursive terms: in helping to damage the credibility of representative democracy in the region. Despite the IADC’s previously mentioned recognition of the importance of citizen participation and socioeconomic equality, representative democracy was successfully devalued and portrayed as little more than an élitist project imposed by the US out of antagonism towards more popular, made-inLatin-America, participatory, direct, and plebiscitary democratic variants.

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Sadly, Chávez and ALBA have succeeded in presenting representative and participatory democracy as antithetical. It must be remembered that following the demise of authoritarian regimes in the 1970s and 1980s, the newly emerging representative democracies in the Americas were hugely popular, not simply élite-driven projects. Additionally, it was Peru and not the US that originally advocated the Democratic Charter, the principal expression of representative democracy. In sum, the OAS could no longer easily promote representative democracy as an acceptable brand as it had during the 1990s. Representative democracy membership criterion There are confusing signals concerning the current import of this norm. On the one hand, as indicated above, many Latin American countries have pushed for Cuba’s reintegration into the OAS and other inter-American multilateral forums, indicating a seeming erosion of the norm. In December 2008, the Rio Group granted membership to Cuba, despite the prior condition of democracy as a membership criterion. Cuba also became a member of the newly formed Latin American and Caribbean Summit (CALC) in the same month. It did not seem to matter much that Cuba’s entry seemingly contradicted the democracy clauses of existing sub-regional organizations such as Mercosur or the Andean Community. At the Trinidad Summit of the Americas in April 2009 and at the OAS General Assembly in San Pedro Sula, Honduras in June 2009, many Latin American countries, especially members of ALBA (Alianza Bolivariana para las Américas), demanded Cuba’s restoration as a full member in the OAS. In February 2010, Cuba became a member of the newly launched Community of Latin American and Caribbean States. Once again, membership was extended to Cuba with little concern for its lack of democracy. On the other hand, the suspension of Honduras’s OAS membership was a clear vindication of this norm. The OAS suspension also extended to other regional and subregional bodies, including the Central American Integration System, the Rio Group, and the CALC. Strangely, while undemocratic Cuba fully participated, Honduras was barred from participating at the aforementioned Cancun Unity Summit. The differential treatment of Cuba and Honduras clearly represents a gross contradiction in terms of the democratic membership norm.6 An anti-authoritarian backsliding norm The proto-norm championed by Peru through the IADC has failed to take hold. There is still no consensus on what constitutes a serious enough threat to democracy by an incumbent elected leader in order to warrant invoking the Democratic Charter. Countries that have allegedly engaged in authoritarian backsliding, such as Ecuador in 2004–5, Nicaragua since 2008, and Venezuela since 2004 have faced little reaction from the OAS or the international community for these actions. Given the current lack of consensus

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on the meaning and practices of democracy in the region, it is not likely that this norm will be strengthened any time soon. It is also possible that the problematic nature of this norm might have an experiential and intercultural explanation. That is, from the perspective of Latin American leaders such as Insulza or Lula, who personally endured and suffered military dictatorships, situations that the US describes as authoritarian backsliding fall far short of the brutal reality of military dictatorships of yesteryear, and, accordingly, do not warrant the same concern as military coups. Additionally, the self-interest of political leaders may well help explain the reluctance of many to put international constraints on their own political room for manoeuvre. External validation of elections The OAS’s ability to serve as election judge suffers from two problems. First, it is worrisome that this norm may have suffered some reversal. While many countries continue to invite the OAS to observe their electoral processes, others, such as Venezuela and Nicaragua, no longer invite OAS missions. These are precisely countries where election-related controversy has occurred in recent years. Moreover, other countries – such as Canada, the US, Brazil, Argentina, and Chile – never invite election monitoring missions, hampering the uniform consolidation of this norm. Second, since the OAS’s ability to judge the validity of elections is contingent on receiving a formal invitation from the host government, it has been frustratingly difficult if not impossible for the organization to criticize electoral processes in the region where clear electoral violations have occurred but where it has not been invited to monitor. During the electoral process leading up to the November 2008 local and state elections in Venezuela, several hundred opposition members were barred by the Venezuelan Comptroller General (whose decision was upheld by the Supreme Court) from running for office on alleged corruption charges. This controversy, despite its potential impact on the fairness of the electoral process, was not questioned whatsoever by either Secretary-General Insulza or the Permanent Council. The preference for ‘graduality’ and political concertation The Honduran crisis provoked a response uncharacteristic of the OAS. Instead of pursuing its normal gradualist approach and preference for political concertation, the organization turned rapidly to punitive measures against the de facto Micheletti Government. On 30 June, in Resolution 1 (OAS, 2009a), the special General Assembly issued an ultimatum to the de facto government in Honduras: to restore democracy and Zelaya within 72 hours or have Honduras’s membership in the OAS suspended via Article 21 of the Democratic Charter. When Micheletti and company failed to comply, the OAS special General Assembly passed Resolution 2 (OAS, 2009b), in which it invoked Article 21 to suspend Honduras.

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Interestingly, the OAS employed sticks first and then turned to carrots afterwards. Just days after Honduras was suspended from the organization, the US government, the OAS Secretary-General, and SICA decided to opt for a negotiated solution to the conflict, probably sensing the determination of the de facto Micheletti Government to resist international diplomatic isolation and sanctions. Since Insulza’s credibility in Micheletti circles was badly damaged thanks to his association with the OAS’s suspension of Honduras as well as his support for the restoration of Zelaya, these actors turned to Costa Rica’s Nobel laureate President Oscar Arias to foster dialogue between Micheletti and Zelaya. In the end, neither punitive sanctions nor dialogue were able to restore Zelaya to power during the remainder of his presidential term. As both Peter Hakim (2009) and Michael Shifter (2009) stressed, international punitive measures can be very counterproductive in polarized contexts. Instead of weakening the Micheletti government and its support, they argued that the use of such measures actually served to harden positions on both sides. International condemnation, sanctions, and diplomatic isolation actually strengthened the resolve of the de facto government and its supporters. Even so, Hakim’s suggestion (2009) that negotiations might have been a more appropriate course of action immediately following the coup is also problematic. OAS or international-facilitated dialogue between Zelaya and Micheletti from the outset could also have been counterproductive in the sense of awarding political legitimacy to the latter after having participated in a coup. While Hakim is correct in signalling the potential for stronghanded international measures to be counter-productive, he neglects the moral hazard that comes with fostering negotiations with coup mongers. ‘By invitation only’ intervention This norm has been reinforced through recent occurrences, both negatively and positively. On the negative side, in the case of Haiti, President JeanBertrand refused to invoke the IADC or to permit it to be invoked, fearing its manipulation for US ends. For instance, as mentioned beforehand, following international criticism of electoral processes in 2009 and 2005 respectively, Nicaragua and Venezuela no longer invite OAS election observation missions. On other occasions, heads of state have willingly extended invitations to the OAS to help them resolve political crises. Via General Assembly Resolution 43 (OAS, 2005), Nicaragua’s President Bolaños authorized the OAS to assist in the promotion of a national dialogue process. Accordingly, OAS envoy Dante Caputo was able to help forge an agreement between Bolaños and former Presidents Daniel Ortega and Arnoldo Alemán. Interestingly, even though Bolaños approached the OAS for assistance, Resolution 43 invoked Article 18, which indicates a broader community concern for the situation, rather than Article 17, in which a member state extends its own invitation

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to the OAS. It is possible that, through Article 18, embattled Bolaños wished to signal to his powerful foes Ortega and Alemán that he could count on important international support for his cause. Honduras’s President Zelaya formally invited the OAS to lend its assistance in addressing the mounting crisis his government faced. For the first time, Article 17 of the IADC was invoked in Permanent Council Resolution 952 (OAS, 2009c). Sadly, Zelaya’s turn to the OAS for help on 26 June proved too little too late, as he was ousted in a coup d’état just two days later. Executive sovereignty During the period 2001–10 there were signs of both the executive sovereignty phenomenon’s persistence as well as the possibility of more independence for the Secretary-General vis-à-vis his state handlers. On one side, Secretary-General Insulza (2007, pp. 14–15) recently lamented the persistence of this diplomatic norm and its negative effect on implementing the Democratic Charter. To paraphrase the Secretary-General, no state power other than the executive can invoke the IADC, much less civil society organizations. The 2009 Honduras saga confirmed that the IADC is an instrument whose recourse is limited exclusively to heads of state and government. Long before the 28 June coup took place, a growing number of other governmental bodies voiced their concerns about alleged democratic transgressions by President Zelaya and an alarming process of political polarization in the country. Perhaps, had the Honduran Supreme Court or Congress been able to invoke the IADC, the outcome of the mounting crisis in that country might have been much different. On the other side, General Assembly Resolutions 2154 and 2251 potentially enhanced the Secretary-General’s role in defending democracy. In its third operative clause, Resolution 2154 reaffirmed that ‘the Secretary General may bring to the attention of the Permanent Council, in the exercise of the authority contained in the OAS Charter and pursuant to the Inter-American Democratic Charter, those situations likely to lead to action under the said Charters’.. Resolution 2251 employed virtually identical words. Nevertheless, Secretary-General Insulza has yet to test this new prerogative. In a scathing critique of his immobilism, CNN en Español newscaster Patricia Janiot took issue with Insulza for not once bringing to the attention of the Permanent Council the worsening political repression of dissidents and the erosion of the separation of powers by the Chávez Government in Venezuela as had been recently reported by the Inter-American Commission on Human Rights (IACHR, 2009). In a convenient separation of human rights and democracy, Insulza responded by stating that human rights were the jurisdiction of the Inter-American human rights system, not the Permanent Council. He also remarked that the Secretary-General’s role is to carry out resolutions of the OAS’s 34 member states, thereby reaffirming executive sovereignty.7

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Limited monitoring and peer review The aversion to democratic peer review persists in the OAS and the interAmerican system. Efforts by the Carter Center and its affiliated Friends of the Democratic Charter, as well as the Andean Committee of Jurists (CAJ) to promote a democracy watchdog role for civil society went largely ignored by the OAS and its member states. At the 2005 Fort Lauderdale General Assembly, the US government attempted unsuccessfully to promote the creation of a new mechanism for monitoring member states’ compliance with the Inter-American Democratic Charter that would include civil-society participation (Legler, 2007). On the occasion of the fifth anniversary of the IADC in 2006, the Peruvian government proposed a voluntary evaluation mechanism. Even this modest proposal was soundly rejected on sovereignty grounds (Insulza, 2007, p. 4). Member states consistently refuse to surrender sovereignty in this important area that could help combat the erosion of democracy by elected leaders.

Conclusions The preceding analysis suggests that there has been regime change, but that there have been conflicting signals about the direction of that change. The relative expedience with which the democratic membership criterion was put aside in the interest of the reintegration of Cuba into the inter-American system is a cause for concern. So too is the facility with which the external validation norm can be avoided by countries in which electoral irregularities occur, by simply not inviting OAS electoral observation missions. Additionally, representative democracy is no longer hegemonic in the Americas, making the task of defending democracy even more difficult without a consensus on the meaning and practices of democracy. Other norms, such as the anti-authoritarian backsliding norm, have simply failed to take hold, despite the best intentions of their norm entrepreneurs. Similarly, various efforts have failed to create a peer review mechanism for monitoring countries’ democratic performance. Nonetheless, the experience of defending democracy in the new millennium indicates that not all is gloomy. The anti-coup norm remains very strong, although not completely unproblematic. After much previous criticism for the difficulty in invoking the Democratic Charter, this document was used as never before in responding to the Honduran crisis. Moreover, the international response to the Honduran coup, in terms of international isolation and sanctions, was the strongest yet. When all these factors are taken into consideration, it is therefore premature to conclude that the inter-American democracy promotion regime is in decline. It is more accurate to speak of the failure to consolidate the early advances during the 1990s leading up to and including the Inter-American Democratic Charter. Accordingly, the current state of the regime is one with

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a limited but important mandate for countering coups and little else in terms of consolidated norms and real capacities. Is there hope in the future for the consolidation of a democracy promotion regime that has a broader set of capabilities including effective preventive diplomacy, combating authoritarian alterations by elected leaders, peer review, and holding governments accountable for fraudulent elections? In this chapter I have stressed the importance of the prevailing circumstances or conditions in which regime development took place. Just at the moment when the inter-American system finally had a comprehensive toolkit for defending and promoting democracy via the IADC, dramatic contextual changes prevented the consolidation of the regime. My analysis underscores the importance of key factors for successful regime construction: an élite and popular consensus on what is meant by democracy and how it is practised; favourable US–Latin American relations and regionalism trends; and a healthy OAS with effective leadership from its secretary-general. In hindsight, the synergy among these factors during the 1990s is truly exceptional and striking. It is also noteworthy how the contextual downturn of the new millennium not only hurt the future prospects for regime consolidation but also the regime’s ability to adapt to new challenges. Here I have highlighted new threats to democracy that arose, such as executive–legislative and executive–judicial conflicts, as well as new challenges for defending democracy caused by the phenomenon of extreme polarization in many contemporary political conflicts. Given this contextual significance, our best hope is to focus on how to make the terrain for the defence and promotion of democracy more fertile.

Notes 1. On the evolution of OAS election monitoring, see Lean (2007) and Santa-Cruz (2007). 2. It is instructive that weak secretariats with limited delegation of autonomous prerogatives is common throughout much Latin American and Caribbean multilateralism, and not just the OAS, reinforcing the idea of executive sovereignty as a broader regional norm. This is a point that resonates throughout a forthcoming special issue of Foreign Affairs Latinoamerica. See Legler (2010). 3. Similar to Moravcsik’s (2000) ‘lock-in’ thesis, the construction of the collective defence of democracy regime signified the willingness of OAS member states to surrender a certain amount of sovereignty to the OAS in exchange for the OAS’s support to lock in their newly created democratic constitutional orders. 4. See Dan Erikson’s chapter in this volume for an exploration of this topic. 5. For Gaviria’s ideas and autobiography while serving as OAS Secretary-General, see Gaviria (1995, 2004). 6. Perhaps part of the confusion is caused by the ongoing debate concerning which is the appropriate foreign-policy approach to Cuba in order to foster political liberalization and democratization: diplomatic isolation versus constructive engagement. Interestingly, in recent years the European Union also shifted its approach towards Cuba, replacing an earlier hardline tack with renewed engagement. The Obama

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administration has also made more moderate overtures toward the country in the direction of greater engagement. 7. Patricia Janiot, Interview of OAS Secretary-General José Miguel Insulza, CNN en Español, 28 March 2010.

References Ayala Corao, Carlos and Pedro Nikken Bellshaw-Hógg (2006) Defensa colectiva de la democracia: definiciones y mecanismos. Difusión de la Carta democrática Interamericana 5. Atlanta and Lima: Carter Center and Comisión Andina de Juristas. Benítez Manaut, Raúl (2009) ‘La crisis de Honduras y el sistema interamericano: el triunfo del realism sobre los principios’, Foreign Affairs Latinoamérica 9, no. 4 (October–December): 75–84. Canovan, Margaret (1999) ‘Trust the People: Populism and the Two Faces of Democracy’, Political Studies 47 (1): 2–16. Carter, Jimmy (2005) ‘The Promise and Peril of Democracy’, Keynote speech to OAS Lecture Series of the Americas. Washington, DC, January 25. Committee on Foreign Relations (2010) Multilateralism in the Americas: Let’s start by fixing the OAS. Report to the Committee on Foreign Relations, United States Senate, 54–584 PDF. Washington, DC: US Government Printing Office, January 26. Cooper, Andrew and Thomas Legler (2001) ‘The OAS Democratic Solidarity Paradigm: Questions of Collective and National Leadership’, Latin American Politics and Society, 43 no. 1 (Spring), pp. 103–26. Cooper, Andrew F. and Thomas Legler (2006) Intervention without Intervening? The OAS Defence and Promotion of Democracy in the Americas. New York: Palgrave Macmillan. Decker, F. (2003) ‘The Populist Challenge to Liberal Democracy’, Internationale Politik und Gesellschaft (International Politics and Society) 3: 47–59. De la Torre, Carlos, and Peruzzotti, Enrique (eds) (2008) El retorno del pueblo: Populismo y nuevas democracias en América Latina. Quito: FLACSO Ecuador and Ministerio de Cultura. Gaviria, César (1995) A New Vision of the OAS. Washington, DC: Organization of American States, 1995. Gaviria, César (2004) La OEA 1994–2004: Una década de transformación. Washington, DC: Organization of American States. Hakim, Peter (2009) ‘Honduras and the OAS’, Revista América Economía, August 3. IACHR (2009) Democracy and Human Rights in Venezuela. OEA/Ser.L/V/II. Doc.54. Washington, DC: Inter-American Human Rights Commission, December 30. Insulza, José Miguel (2007) La Carta Democrática Interamericana. Informe del Secretario General en cumplimiento de las resoluciones AG/RES. 2154 (XXXV-O/05) y AG/RES. 2251 (XXXVI-O/06). OEA/Ser.G CP/doc. 4184/07. Washington, DC: Organization of American States, April 4. Lean, Sharon F. (2007) ‘External Validation and Democratic Accountability’, in Thomas Legler, Sharon Lean, and Dexter Boniface (eds) Promoting Democracy in the Americas. Baltimore, MD: The Johns Hopkins University Press, pp. 152–76. Legler, Thomas (2003) ‘Peru Then and Now: The Inter-American Democratic Charter and Peruvian Democratization’, Canadian Foreign Policy 10, 3 (Spring): 61–74. —— (2007) ‘The Inter-American Democratic Charter: Rhetoric or Reality?’ in Gordon Mace, Jean-Philippe Thérien, and Paul Haslam (eds) Governing the Americas: Assessing Multilateral Institutions. Boulder: Lynne Rienner Publishers, pp. 113–30.

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130 Demise of the Inter-American Democracy Promotion Regime? —— (2010) ‘Multilateralism in the Americas’, Special issue of Foreign Affairs Latinoamerica. Legler, Thomas, Sharon Lean, and Dexter Boniface (2007) ‘International and Transnational Dimensions of Democracy in the Americas’, in Thomas Legler, Thomas, Sharon Lean, and Dexter Boniface (eds) Promoting Democracy in the Americas. Baltimore: The Johns Hopkins University Press. Legler, Thomas and Thomas Kwasi Tieku (2010) ‘What Difference can a Path Make? Regional Democracy Promotion Regimes in the Americas and Africa’, Democratization 17, 3 (June): 465–91. Linz, Juan J. and Alfred Stepan (1996) Problems of Democratic Transition and Consolidation. Baltimore: Johns Hopkins University Press. Moravcsik, Andrew (2000) ‘The Origins of Human Rights Regimes: Democratic Delegation in Postwar Europe’, International Organization 54, 2: 217–52. —— (2009a) Resolution on the Political Crisis in Honduras. AG/Res. 1 (XXXVII-E/09), July 1. —— (2009b) Resolution on the Suspension of the Right of Honduras to Participate in the OAS. AG/Res. 2 (XXXVII-E/09), 4 July. —— (2009c) Situation in Honduras. CP/RES. 952 (1699/09), June 26. O’Donnell, Guillermo A. (1994) ‘Delegative Democracy’, Journal of Democracy 5, 1 (January): 55–69. Oppenheimer, Andrés (2009) ‘Brazil, US, OAS Flunked Honduras Test’, Miami Herald, 3 December. Panizza, Francisco (ed.) (2005) Populism and the Mirror of Democracy. London: Verso. Santa-Cruz, Arturo (2007) ‘Election Monitoring and the Western Hemisphere Idea’, in Thomas Legler, Sharon Lean, and Dexter Boniface (eds) Promoting Democracy in the Americas. Baltimore, MD: The Johns Hopkins University Press, pp. 133–51. Seligson, Mitchell A. (2007) ‘The Rise of Populism and the Left in Latin America’, Journal of Democracy 18, 3 (July): 81–95. Shifter, Michael (2009) The Crisis in Honduras. Testimony before the Subcommittee on the Western Hemisphere, Washington, DC, 10 July. UNDP (2004) Democracy in Latin America: Toward a Citizen’s Democracy. New York: United Nations Development Programme. Washington Post (2010) ‘Short on Democracy; why the Obama Administration should press for reform at the OAS’, The Washiington Post, 10 February.

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Introduction The Dominican Republic in 1978 and Ecuador in 1979 were the countries that started the third democratic wave in Latin America.1 So began a long, difficult process of reforms of the political regimes, along with the demilitarization of neighbourly relations and the renewal of regional integration. Hemispheric organizations and sub-regional mechanisms adapted to the new rules that Juan Linz and Alfred Stepan (Linz and Stepan, 1996, p. 5) called ‘the only game in town’: a spirit of cooperation based on democratic principles and the effectiveness of international regimes. In keeping with this spirit, the Organization of American States (OAS) – created for the peaceful, democratic solution of inter-state conflicts – implemented reforms in its organization while creating other instruments to defend democracy. At the same time, security negotiations were established at the sub-regional and bilateral levels (see Appendix). For some time, several Latin American countries had expressed their disagreement with the Inter-American Treaty of Reciprocal Assistance (ITRA), the Inter-American Defense Board (IADB) and the corresponding Inter-American College of Defense (ICD), alleging that they did not constitute effective tools for coping with a new stage of cooperation and democratization (Diamint, 2001; Radseck, 2004). From 1995 onwards, the OAS attempted to adapt the logic of the Cold War to the new period of expansion of democracies. The Hemispheric Security Commission, Resolution 1080, and the Unit for the Promotion of Democracy were therefore set up. These were followed by the Inter-American Democratic Charter and several resolutions and declarations. All these are reflections of a different will to achieve hemispheric cooperation. Were these reforms effective in administering hemispheric security? Have they succeeded in dealing with the risks and threats faced by the continent? This chapter addresses these questions. It begins with a brief reference to the 131

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OAS reforms since the end of the Cold War. The second section analyses the new security concepts and their impact on the hemisphere. The third describes the contradictions that arose as a result of crime fighting. To this end, three topics will be explored: first, the logic of repression; second, the lack of political will of leaders; and third, the false dichotomy of favouring order over security. The fourth point presents the constraints experienced by the OAS in solving security problems between incomplete states. The last section concerns the title of this chapter and addresses whether or not the changes discussed have made the region safer.

A destructured structure Recurrent internal political crises combined with pressure from the US during the Cold War had eroded the OAS’s effectiveness and credibility. The organization’s inability to respond to the Central American conflicts of the 1980s, its refusal to have anything to do with the War of the Malvinas and its donothing policy towards Cuba, and the US intervention in Grenada in 1983 and Panama in 1989 were signs that revealed the organization’s uselessness. The persistence of the principles of sovereignty and non-interference in the internal affairs of other states dominated hemispheric relations, restricting the organization’s actions. During the 1980s, Latin America had more faith in its own resources to solve its problems than in the mediation of an institution dominated by the US. This was the philosophy behind the Contadora agreement, the alliance between the Rio Group and the European Union2 and Mercosur, which created covert competition with the OAS. George H. W. Bush, realizing the importance of rescuing the hemisphere, encouraged the Enterprise for the Americas Initiative and attempted to strengthen the OAS. The OAS’s legal instruments for establishing peace have been overtaken by events. The Treaty of Reciprocal Assistance developed under the precepts of the Second World War and the bipolar confrontation of the Cold War. The Bogota Pact included the principles of the United Nations charter regarding mediation, conciliation, arbitrage, and the pre-eminence of international law but was only ratified by 14 countries and never achieved the legitimacy of the UN. Years later, the 1991 reforms (the Declaration of the Collective Defense of Democracy or Santiago Declaration, the 1080 Resolution, and the Democracy Promotion Unit [DPU]) were the expression of a new form of liaison between countries in the Western Hemisphere that prefigured a new period of hemispheric relations.3 The Inter-American Convention against Terrorism (ICTE) was created in 1999 on the basis of an Argentine proposal after the terrorist attacks on the Israeli Embassy (1992) and the Argentinean Israeli Mutual Association (AIMA) of 1994; the Inter-American Convention Against the Illicit Manufacturing of and Trafficking in Firearms, Ammunition, Explosives, and other

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Related Materials (CIFTA) in1998 and the Inter-American Convention on Transparency of Conventional Weapons Acquisitions (2002), in addition to the Inter-American Convention against Drug Abuse (ICCAD) of1986. During the administration of Bill Clinton (1993–2001), the Washington Protocol that established the suspension and/or exclusion of a member state that violates the rules of democracy was ratified. In 2001, under the administration of George W. Bush, the Inter-American Democratic Charter was signed, institutionalizing the Republican paradigm. All these changes were positive for strengthening democratic ideals in the continent. In any case, this did not substantially modify the individual decisions of each of the national governments that continued to prioritize their national interests over any regional proposal. National interest and bilateral negotiations continued to be the main tools of external negotiation. Within this context, one important progression was the incorporation of cooperative security and the Confidence Building Measures (CBM) at the bilateral, sub-regional and hemispheric levels (Carter, Perry and Steinbruner, 1992). This model of cooperation in security, drawn from the European Conference on Cooperation and Security (ECCS), began in Latin America in 1995 with the Regional CBM Conference held in Chile. This process had two obvious consequences: on the one hand, it helped new democracies strengthen civil control of their armed forces. On the other hand, it was influential in reducing rivalry between nations by making military capacities of states more transparent. To complete the structure of hemispheric security, mechanisms were simultaneously created such as the Conference of Ministers of Defense of the Americas, which held its eighth meeting in 2008. The aim of these conferences was to confirm the subordination of the armed forces to democratic authorities. These Conferences created a certain amount of overlapping between the agendas of the Ministries of Defense and Foreign Affairs, resulting in a lack of coordination that gave rise to serious political inconsistencies. This tension was transferred to the OAS, which is trying to become the executive secretariat of the meetings; this proposal does not have the approval of the defence ministers. Thus security matters permeated the process of the Summit of the Americas, since during the Second Summit, the OAS Commission for Hemispheric Security was asked to engage in ‘the follow-up and expansion of issues linked to measures to boost confidence and security’ (OAS, 1999). This information would be used to establish new frameworks in the future Special Conference on Security. Finally, security has also been part of a national debate that led to subregional agreements such as the Framework Treaty of Central American Security (1995) and the Regional Plan against Organized Crime and Related Crimes (2007) drawn up by the System of Central American Integration (SCAI) and the National Security and Law Enforcement Agency of CARICOM (2006),

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More recently, the UNASUR Defence Council was organized (2008), establishing a series of principles, although the purpose of this Council is as yet unknown. There are also a series of bilateral initiatives for confidence and security-building measures, transparency, combined operations, and combined monitoring systems. An evaluation of all these agencies shows that all aspects of security are covered. Nevertheless, it is obvious that the lack of safety on the streets increased, which gradually became a source of political instability and risk for the population.

A new security paradigm A few years after the transition to democracy and in the midst of the conviction that coups d’état staged by the armed forces were unlikely to succeed,4 security concerns led to other issues. In 2003, a Security Conference was held where a new hemispheric frame of reference was expected to be achieved to jointly deal with the problems of defence and public order. There was division between OAS members regarding their security priorities and, therefore, about the main missions of their armed forces. This disparity was reflected in the Final Declaration of the Special Security Conference in Mexico, which ended up as a long shopping list that did little to coordinate the extremely diverse needs and concerns of the states of the continent. It was a complex agenda that reflected the different realities of each of the subregions. The crux of the debate was the overlapping of external defence and public security tasks. Some representatives argued that the sharp division between the two fields had been blurred. Separation was a requirement during the time of the transition to democracy to ensure that the military did not threaten their own citizens. This situation belonged to the past. In response to the emergence of armed players that were neither terrorist groups nor national armed forces (such as gangs, drug traffickers and organized crime), it was necessary to defend the political stability of nations by resorting to the state’s instruments of defence. Other countries rejected the overlapping of public-order affairs with those of defence, which was activated by the US desire to redirect Latin American armed forces towards the job of combating drug trafficking, strictly in keeping with its own interests: ‘calling for cooperation between regional partners whilst at the same time identifying crucial security matters from an exclusive and very narrow American point of view’ (Varas, 2008, p. 6). This particular point of view translated into an obvious interest in modifying military roles towards police tasks by preparing Latin American armed forces for the fight against drug trafficking and radical rebel groups (Withers et al., 2008).5 To this end, as the Washington Office on Latin America (WOLA) points out, ‘The United States funded the training of 13,076 Latin American

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personnel in 2002, of a total of 34,013 soldiers worldwide (excluding NATO countries). … The US military trains considerable numbers of police in Latin America’ (WOLA, 2008, p. 2). This tension between the military and police functions was transferred to the OAS. The North American representative suggested that the Inter-American Defense Board (IADB) should be transformed into the Inter-American Council of Defense and Security, while its college should become the Inter-American College of Defense and Security. The organization was engaged in a process of defining institutional relations between the OAS and the IADB. This deliberation, which took ten years, ended with the tight consensus that the Council should be a specialized organization of the OAS (Eastman, 2002) and that it should not modify either its structure or its name. This ensured that the OAS’s political representatives would determine the military functions of their delegates. Finally, in 2006 and in keeping with this agreement on new threats, the OAS Secretariat of Multidimensional Security was created with the following objectives: the abuse limiting the use of psychotropic substances, preventing crime and violence; reinforcing democratic institutionalism; improving the juridical and legal issues; and promoting health and education. This secretariat has four departments which in turn coordinate several offices. For its part, Canada promoted the concept of human security. The idea emerged from the 1994 United Nations Development Program Report, which sought to focus problems on the security of the individual, rather than on state security alone. Mahbub ul Haq’s concern (Haq, 2008) was that the assistance offered in countries in conflict usually failed to deal with the suffering and poverty of the weakest sectors in society (Ball, 2001). In the UNDP Human Development Report, he states his ideas for human development, human security and women’s empowerment (Haq, 2008). Canadian Minister of Foreign Affairs Lloyd Axworth made this the axis of his international cooperation policy and promoted its acceptance among other countries. The Canadian initiative highlighted the states’ responsibility to protect their populations and create the conditions for their development by not only dealing with defence through the military instruments but including other vulnerabilities that affect the individuals in a state (The Human Security Report, 2005).6 One consequence of that conception definition of multidimensional security and the notion of human security is that the inclusion of new social and human aspects in the field of security authorizes human interventions for protecting the inhabitants of territories in conflict. This was established through the United Nations proposal on the Responsibility to Protect (R2P) – promoted by Secretary-General Ban Ki-Moon – which challenges the traditional principles of Latin America regarding sovereignty and non-intervention in the internal affairs of other states. Lastly, the Security Sector Reform (SSR) emerged in the 1990s to address the necessity to develop and strengthen efficient, effective security institutions

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that meet the needs of citizens and the state. The SSR includes all the organizations that have the authority to use and order the use of force, or the threat of force to protect individuals, groups, and the state: security forces, the judicial and penitentiary system, the armed forces, and the state’s foreign policy. This covers four types of global response: political (democratic control mechanisms of the security sector); institutional (reform of state institutions); economic (support reforms using economic resources); and social (call on society to support security sector reforms). This approach acknowledges the fact that democracy depends as much on development, the consolidation of peace, and democratization as on the rule of law and the state’s capacity for democratic control (Schnabel and Ehrhart, 2005, pp. 1–16; Ball and Brzoska, 2004). Although the concept has been accepted, particularly in the European Union, to improve stability in Africa, it has been less used in the Latin American context. The case of Haiti is the only one in which developed cooperating countries promote SSR ideas. But within the sphere of the OAS, although its criteria were debated, it did not lead to any political action. These three new kinds of thought on security – multidimensional, human and SSR – entail other contradictions. For example, suggesting that the new threats, concerns, and other challenges of hemispheric security are transnational in nature and require hemispheric cooperation overlooks the fact that the greatest shortfall in security is domestic in nature. What fails centrally is state capacities to provide justice, control illegal migration, review customs, train police forces, and plan social integration and cohesion policies. In short, as Secretary-General of the OAS José M. Insulza notes, ‘Most countries completely lack security plans or policies’ (Insulza, 2008a, p. 3). The inadvertent consequence of these tendencies is that they authorize the armed forces to act in spheres that historically have not corresponded to national defence. Some authors argue that the excessive expansion of the concept of security to areas that do not traditionally belong to it runs the risk of making the term meaningless, which results in the potential failure of the state to protect its citizens (Buzan, Weaver and de Wilde, 1998, pp. 21–47). Implementing the multidimensional concept is therefore perceived as a bridge towards the securitization of socio-economic problems and the subsequent militarization of solutions. Chillier and Freeman point out four factors that contribute to this risk: first, the historical tendency towards political intervention during authoritarian regimes; second, the US ‘war’ on drugs, which encourages a broader role for the armed forces in ensuring compliance with the law; third, the crisis of the public security systems of most of the countries in the region; fourth, ‘the war against terrorism’, launched by the US, which encourages an expansive, nebulous definition of terrorism (Chillier and Freeman 2005, p. 1). Consequently, the modernization of the concept of security places greater demands on the OAS, since each conceptual advance also implies a new risk

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about which the organization is expected to give a reply. Reviewing the term therefore provides neither clarity nor solutions. On the contrary, it creates a broader, more complex agenda that adds regional tensions and hampers hemispheric cooperation.

Internal security and organized crime Despite having more institutional resources, all the countries on the continent are suffering the effects of the increase in violence and organized crime. Virtually all governments and most studies on the topic agree that poverty does not create the conditions that lead to the emergence of criminal gangs.7 It is generally held that the increase in organized crime – as stated by OAS Secretary-General José Miguel Insulza, too – is due to the increase in drug consumption, the easy acquisition of firearms, modern communication and banking systems, the presence of porous borders, the weakness of institutions linked to the criminal justice system, police corruption, and a judicial branch which, according to opinion surveys, is regarded as inefficient, slow, and unfair in virtually all the countries in the region (Insulza, 2008). Inequity and social exclusion, among other factors, contribute to disenchantment, illegality and tolerance towards criminal forms of occupying a place in society. Inequality in Latin America is extreme. The average Gini8 coefficient in Latin America is 0.52, reflecting greater inequality than in Sub-Saharan Africa (0.46); and obviously higher than the 0.41 of the US, the 0.40 of East Asia, or the index between 0.25 and 0.35 of European countries. Brazil has a coefficient of 0.60, reflecting the extreme inequality and discrimination that offsets the progress of its economy (Barshefsky and Hill, 2008, p. 5). The richest decile earns 48 per cent of the country’s income while the poorest decile earns 1.6 per cent (Lustig, 2007, p. 231). This divergence means that the obvious changes in the macroeconomic profile of Latin America and the Caribbean go hand in hand with an increase in crime. Exclusion and social fragmentation, together with the lack of expectations of improving the quality of life, encourage people to band together in criminal gangs. This occurs particularly within the young population. Laura Tedesco remarks that ‘One of the social costs of violence is that paradoxically, although it creates social capital, it does so perversely. Maras or violent gangs help young people join groups or communities that have their own codes and create an identity that neither families nor schools have managed to give them’ (Tedesco, 2009, p. 8). In short, the diagnoses have achieved a fairly broad level of coincidences. However, not even these accurate diagnoses have managed to provide effective answers to reduce the threat to citizens. Common responses include proposals that seek the professionalization of the police force, different forms of policing that tend to provide community responses, the re-education

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of those affected, and the control of the sale of arms, drugs, and alcohol, etc. (Buvinic, 2008, pp. 40–50). I would therefore like to draw attention to three topics that could shed light on some of the sources of this inefficiency. First, the logic of repression; second, the leaders’ lack of political will, and third, the false antinomy of favouring order over security. The repressive response From the 1980s onwards, a form of discourse began to be structured whereby drugs were seen as a threat to state security. Former US President Ronald Reagan had suggested that Congress modify the Posse Comitatus Act that prohibited the armed forces from enforcing civil laws. Reagan signed a National Security Decisions Directive that provided assistance to foreign countries for drug control measures and an increase in military activities to counteract drug trafficking, which was understood as an issue of national security. During the George H. W. Bush administration, military participation was reinforced through a declaration by the Legal Advisory Office of the Department of Justice authorizing military forces to arrest alleged drug traffickers outside the US without the approval of the host country, and an order by Secretary of Defense Richard Cheney to the Pentagon to assume a leading role in operations against drug trafficking (Bagley, 1993, pp. 181–206). The design of the Colombia Plan confirmed the militarized, repressive response to the problem of drug trafficking. As Youngers and Rosin confirm, ‘The narrow approach of the measures adopted by the United States gave rise to what those familiar with issues in the region generally call “militarization” which refers to the expansion of the role played by US and Latin American military forces, to training provided to civil police in military operations and strategies, and the tendency to prioritize US military and police assistance over aid for socio-economic purposes or for democratic institutions’ (Youngers and Rosin, 2005, p. 16). Thus a threat, which began with the war on drugs, was constructed using the same friend/foe logic of the past and replaced the threat of the expansion of communism, which was diluted in the early 1990s, with the threat to public security. With the changes in world power, the so-called national security ideology was shelved and substituted by a public discourse of Civic Security as an ideology (Zaffaroni, 2006, pp. 1117–47). This ideological construction is not new. It was developed by the tradition of Marxist thought in the late 19th century and completed by Louis Althusser and Michel Foucault in the twentieth century to explain institutional mechanisms of social control (Althusser 1988; Foucault 1992). Power relations are not abstract since they are the expression of a particular moment in history. In the absence of a modelling doctrine, a role previously filled by the empire’s opposition to evil, the dominant sectors created another ideological construction that functions as a moderator for subordinates as

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well as justifying the security apparatuses of the state on which resources and interests converge. The threat of organized crime is ideological because it justifies states’ responding repressively by announcing a war on poverty, and creates confusion between immigration, social movements, terrorism, and criminality. The US government led this ideological battle by attempting to solve political and social problems through improved persecution and penalization. Its strategy for combating the threat of criminal gangs in Central America and Mexico (OAS, 2008), the Colombia Plan and the Merida Initiative, reproduced the militarized response to organized crime (Olson, 2009; Mckinley, 2009).9 However this repressive logic is not exclusive to the US. It is also common in other countries. Reducing the age of accountability for crimes, using the armed forces to establish law and order, building new prisons, purchasing more sophisticated military equipment, fortifying emergency towns, limiting migration, establishing restrictive visas, recording DNA, and other methods are means that have already been proved in several countries in the hemisphere to limit the problem but not solve it. A study undertaken by three Argentine economists for the World Bank proves that, contrary to the hypotheses that led to the research, the inclusion of young people in compulsory military service does not reduce – and in fact probably increases – the chances of establishing criminal records in adulthood (Galiani et al., 2006, p. 17). This is another indicator that repressive measures do not encourage the integration of gang members or instil more harmonious norms of coexistence with the established order. On the basis of their data, the authors conclude that military service has detrimental effects on the future performance of the labour market and the profits to be obtained. A repressive model creates more violence. A WOLA report reflects that ‘Most Central American government policies have treated gangs as enemy combatants that must be eliminated rather than as the result of various social problems that should be solved through integral strategies that include an intelligent application of the law, combined with prevention and rehabilitation programs’ (WOLA, 2006, p. 5). A community social vision, with supportive, horizontal, social links is eschewed in favour of a vertical, hierarchical, corporate model, focusing on authority, discipline, and control. Thus, if the national and international resources assigned for purchasing police equipment and computer systems, funding the training and mobilization of troops, and the construction of prisons were directly allocated to creating institutions, sources of employment, education, inclusive settings, and housing, the effectiveness of these institutions would be increased. Crime would not disappear. But it should be quite clear that in Latin America the state cannot win the war on organized crime if it fails to offer alternatives to the seductive weapons and money offered by organized crime. Or are we

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to believe that a 12-year-old boy who consumes paco is the main threat to regional security (Legrand, 2009)?10 Leadership and political will Governments have been negligent in dealing with the consequences of dictatorships. The transition to democracy entailed enormous challenges. Many governments preferred not to increase the civil management of the armed forces in order not to add another conflict to the necessary economic and social reforms linked to the changes in regime. Broad prerogatives were maintained such as the intelligence sector, legal concessions, the lack of trials for human rights abuses, and the democratization of the police who had been under military leadership (McSherry, 1998). Latin American police, who are endemically corrupt and ineffective, are a product of the political system itself. While they served dictatorship and authoritarian governments, security forces were strongholds of illegitimacy. These police, criminal, penitentiary institutions and the justice system itself, which were previously accessory to the abuses against citizens, cannot be the linchpin of the application of the Rule of Law. Democratic consolidation depended largely on reinforcing republican institutions, one of whose functions is the civil control of the armed forces. Guillermo O’Donnell created the concept of ‘delegative democracy’ to describe the Latin American government model, in which power was concentrated in the figure of the president, with a weak parliament and an apathetic party system. O’Donnell stated that representativeness deviated towards the introjection of authoritarianism, understood as the denial of public issues and the effective legality of the democratic state (O’Donnell, 1992, 1993). This deficit influenced the role of the police as guarantors of the law, a basic flaw that was compounded by the growing complexity of illegal organizations which, using resources acquired from illegal trafficking, made it even more difficult for security forces to establish law and order. In short, in Latin America, democracy had raised enormous expectations but had re-emerged with enormous shortcomings. The political system tended to exacerbate mistakes rather than establish a form of leadership firmly committed to republican institutionalism. Within this context, populism weakened the construction of democracy since, as former Argentine President Raúl Alfonsín admitted, the main enemy of democracy was populism, ‘which, with its promises, won elections yet on failing to fulfil them, exacerbated the crisis, discouragement and poverty’ (Alfonsín, 2004, p. 96). Julio Cotler confirms this idea by pointing out that populist leaders denounced the injustices of the institutional system and gained power and prestige by promising to fulfil the aspirations of the marginalized populations by basing their legitimization on trust in the leader rather than in institutions (Cotler, 1995, p. 121).

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Given this situation, the dominant classes opt for laws with a greater punitive content as the only alternative to social demands. This enables them to avoid meeting the innumerable demands produced by democracy and the requirement for inclusion and social cohesion that this political system creates. Governments’ responses increase discrimination, exclusion, and authoritarianism. That is why although the OAS convened a conference of Security Ministers for the first time, this meeting may have very few tangible effects. The General Secretariat offered a plan based on six lines of work and three action mechanisms: orientations and assessment for the development of legislative proposals, public policies, and institutional reforms; construction of periodic, reliable, and comparable indicators; strengthened rehabilitation and reinsertion; improved police training; involvement of the private sector in violence prevention, rehabilitation and social reinsertion actions; collaboration with the mass media. This plan will be achieved by promoting permanent consultations with governments, coordinating with other international institutions, and involving civil society and academia (Insulza, 2008, pp. 2, 10–11).11 But the OAS cannot respond unless there is demand from the member states. At this stage, one should stop being disingenuous and at least ask whether this violent tension favours populist leaders who use social inequality as a campaign slogan, or leaders who use the threat of the lack of law and order as a source of credibility and legitimacy. Are governments really willing to combat organized crime? Or, as happened with the democratization of the armed forces, does avoiding a thorough reform end up being functional in that it permits the survival of regimes based on privileges? What additional benefits can be obtained from using criminal networks as the main source of Latin American and Caribbean problems? Neither order nor progress This section will question the arguments that prioritize order over societal construction. In other words, I would like to reject the initiatives that merely stress force, at least as a first stage of democratic construction. As one can see from the case of Haiti, there are two contradictory types of logic at work. One assumes that without establishing a certain prior level of order, internal and external cooperation are wasted. This is the logic of the countries cooperating in MINUSTAH, the logic of the Organization for Economic Co-operation and Development (OECD) and, in more sophisticated terms, what underlies the idea of Security Sector Reform. The central concern is the low level of effectiveness of international cooperation in countries undergoing internal conflicts. In order to resolve this issue, they attempt to ‘pacify’ the country before offering the basic resources that could inspire hope among the most disadvantaged populations.

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The other logic states that unless the population perceives concrete benefits and everyday improvements, no military response will be able to prevent violence. This was the experience of the forces operating in Haiti, an argument repeatedly wielded by the Brazilian commander in charge of the UN military forces when asked to increase the repression of dissident groups. He said that there can be no social peace without social cohesion (Ribeiro Pereira, 2007; Carmona, 2005). This statement does not imply that the forces will not meet their task of imposing law but rather that force is not the only component of cooperation or stabilization. Obviously, measures such as those offered by the OAS General Secretariat or those proposed by the United Nations Convention against Transnational Organized Crime (to boost international, coordinated responses; agree on standards for domestic legislation; combat money laundering; protect witnesses that declare against organized crime, and prevent and combat people trafficking) are initiatives that can improve the control of international criminal trafficking. There are also a series of public and private initiatives that attempt to understand the complexity of the problem and seek more efficient solutions (WOLA, 2006, pp. 2–3). International institutions serve to establish these patterns. The problem is that the application of these guidelines is left in the hands of incomplete states. Therein lies the main problem of the lack of law and order. In the Latin American region, there are stateless territories within states. The authorities do not cover the entire territory, the state does not exist for many inhabitants, and many abandoned populations are exposed to other non-state forms of domination. As a top US government official reported, in Colombia there are 1098 municipalities with no state presence and over 7000 villages with fewer than 1000 inhabitants who do not have a permanent presence of police or armed forces.12 In Colombia, there are places where the state authority has been absent for decades (Villalobos, 2006, p. 1). Guillermo O’Donnell describes this: The main issue and problem of the state in Latin America in the past, and even in a present in which democratic regimes predominate, is that, with few exceptions, the state fails to penetrate or control its entire territory. It has implemented a frequently limited form of legality and the legitimacy of the coercion that supports it is challenged by its scant credibility as an interpreter and producer of the common good. (O’Donnell, 2003, p. 149) The neoliberal model played a role in increasing violence by reducing the state’s role. Joseph E. Stiglitz, the Nobel laureate in economics, said ‘Washington’s politics of consensus pursued a single goal, to reduce the state’s role’ (2005, p. 54). Neoliberal policies increased injustice, prompting the swing to the Left in much of the region (see Cooper and Heine, 2009).

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Moreover, citizens experienced the lack of state protection as a disappointment with democracy, including the political system and the parties that intervened in it. This spawned both populist expressions and a nostalgia for authoritarian regimes. The cases of a number of countries in the region demonstrate the consequences of this absence of state. Although the 1998 Constitution defined Ecuador as a multiethnic, multicultural state, the Ecuadorian state has been unable to comply with this legal mandate. Moreover, the armed forces operate as a substitute state, since they are present in towns where they are the only state authority present. Bolivia has a historically exclusive, political tradition that exploded in 2003 and has yet to be re-established, despite the indigenous legitimacy of President Evo Morales (Mercado Camacho, 2005). As well, in 2003, President Óscar Berger of Guatemala came to power following an extremely low voter turnout, since several indigenous peoples feel little inclination to cast their votes for a traditionally oppressive state (Cabañas, 2007). Similar situations occur in Chiapas, Honduras, and Paraguay. As Guillermo O’Donnell (2004, pp. 32–47) argues, ‘state legality is absent: whatever the existing system of norms, it is applied intermittently in the best of cases’. This imbalance produces political chaos and a breakdown of public order. Imposing security and the prevention of conflicts in scenarios with so many deficiencies would be an impossible task, even if the OAS were able to set highly rational objectives. Security is not merely a question of establishing law and order, investing in armed forces or security forces. If the state does not work for broad sectors of the population, neither the military nor the police will be able to end the violence resulting from injustice and exclusion. At least, that would never be possible in a democracy. The regulations and codes of conduct offered by the OAS and the United Nations are sound. But multilateral institutions lack the capacity to ensure compliance or to sanction transgressors. And looking at some of the proposals being implemented today, in their attempt to become more effective, multilateral organizations are failing in their most essential and urgent mission, namely to defend the human, social, political, and economic rights of the inhabitants of Latin America and the Caribbean.

An eternally challenged OAS? The hemisphere advanced in the integration and activation of subregional agreements, despite the fact that many countries have anticooperative concepts of national security, defence, and foreign policy. But conflicts are increasing and the OAS has shown that it lacks the resources to cope with them. For example, the Inter-American Democratic Charter, an initiative proposed by the Peruvian government in 2001 to prevent

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situations such as Fujimori’s self-imposed coup d’état in 1992, has authority in the event of the alteration of constitutional and democratic order. In other words, it is able not only to address instances of coup d’état but also other political acts that compromise representative democracy. Any measure that violates the regulations of the rule of law or the separation and independence of the three branches of government entitles the OAS to intervene in national government. The democratic charter was applied in the case of Venezuela following the 2002 coup; during the re-establishment of the Supreme Court of Justice in 2005, and in support of political dialogue in Nicaragua (OAS, 2006). Nevertheless, it is the members of the OAS who have the power to convene and agree on the corresponding sanctions. The coup d’état in Honduras in 2009 provided an opportunity to analyse many of these shortcomings. Honduras – the Central American country least exposed to the violence of civil wars, although the poorest in comparison with its neighbours – had shown signs of the approaching constitutional crisis. Before the internal political deterioration had been revealed, it was reported that: The two majority parties in Honduras, the PL and the PN13 have been affected by a tendency towards internal division and increasing power struggles; the co-opting of factual groups with enormous economic power and the deterioration of their relations with civil society organizations, which has been compounded by the weakness of the Electoral Court. All this encourages conflictive conditions within the political parties due to power struggles. (Medrano, 2009, p. 22) But it was only when the conflict had broken out that the OAS reacted with all the force its instruments allowed: its member states condemned the coup and called for the return of President Zelaya. In response to the de facto government’s refusal to reinstate Zelaya, OAS members unanimously voted to suspend Honduras’s membership and the OAS accompanied the negotiation proposed by Costa Rican President Óscar Arias. Nevertheless, all this legal apparatus appears to be insufficient in nations that are states without the rule of law. The structure from which the new role of the OAS should emerge in conflict prevention is based on three pillars: peace building – the peaceful solution of inter-state conflicts and the concept of multi-dimensional security linked to a new agenda of hemispheric security; the protection of human rights; and the defence and promotion of democracy together with the reinforcement of representative institutions (Serbin, 2009, p. 20). This is now a greater challenge than during the Cold War.

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Previously, the enemy was the state, with moderately predictable policies, which ultimately acted on the basis of international norms, either to implement or to prevent them, but the normative-institutional framework existed. Nowadays, the enemies of democracy are also non-state actors who ignore the rules of the international system. They are linked to the illegality and the informality of the extra-legal economy entailed by these new wars (Kaldor, 2001, p. 119–38) and attempt to corrupt government and co-opt individuals on the basis of a project involving financial power rather than installing a new political regime. The old agenda of territorial issues, regional security, and national defence continues, with the addition of new forms of violence and non-traditional threats. Within the sphere of the United Nations, progress has been made in R2P policies to defend the most vulnerable sectors of the population: children, women, refugees. The UN is committed to a humanitarian agenda that will reinforce institutions and society (Miller and Rudnik, 2008: 7–10; see UN, 2005, Para. 9). This approach poses challenges to the OAS. The future of its effectiveness will be linked to the response member states provide for social problems involving law and order. If the agenda remains confined to the principles of sovereignty and non-interference, the new humanitarian agenda will not be able to be undertaken by the regional organization. This would therefore alter both the concepts of multidimensional security and of human security. The OAS’s capacity to respond to the new threats will be seriously affected and its credibility will be reduced in the eyes of the community. If, on the contrary, progress is made on the humanitarian agenda, the OAS must determine the instruments it will use to achieve these objectives without resorting exclusively to the armed forces. Since the organization only has resources to act after a conflict has emerged, and has no early warning mechanisms (Milet, 2004, pp. 143–76), one option would be to create a conflict prevention centre. But centrally, if states don’t yield effective sanction capacity, the organization will be unlikely to make a difference in combating the multidimensional lack of law and order. The OAS may only act with the consensus of its members and according to their instructions. This consensus has never been easy to achieve and is more difficult now that the hemisphere is profoundly divided politically and ideologically (Hakim, 2009). Multilateral projects must emerge from the domestic policy of every state. Defence and security must therefore be regarded as state policies rather than government policies, while both the armed forces and the police must internalize the notion that they are civil servants. Above all, nations must complete their institutional development. If certain governments set illegal rules, if these nations accept leaders who build their power illegally by challenging republican constitutional principles, if civil society fails to make a concerted effort to desecuritize the repressive logic, the OAS cannot be expected to implement the new security agenda on its own.

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Appendix Security mechanisms OAS Institutions

Year

Mechanisms

Meetings of Consultation of Ministers of Foreign Affairs

1948

Hemispheric Security Commission

1995

American Treaty of Peaceful Solutions Defense Advisory Board Inter-American Treaty of Reciprocal Assistance Santiago Declaration on Measures to Promote Reliability and Security

Multidimensional Security Secretariat

2005

Year (Initial) 1948 1951 1947 1995

San Salvador Declaration on Confidence- and Security-Building Measures Miami Consensus, Declaration by the Experts on Confidence and Security-Building Measures Inter-American Commission for Drug Abuse Control (ICDAC)

1998

Santiago Declaration on Confidence and Security-Building Measures Inter-American Convention Against the Illicit Manufacturing of and Trafficking in Firearms, Ammunition, Explosives, and other Related Materials OAS Register of Anti-Personal Landmines Meetings of Ministers of Justice or Ministers or Attorney Generals of the Americas (REMJA) Inter-American Committee against Terrorism (IACAT) Inter-American Committee for the Reduction of Natural Disasters (ICRND) Inter-American Convention on Transparency of Conventional Weapons Acquisitions Inter-American Drug Observatory Inter-American Convention against Terrorism

1995

2003

1986

1997

1997 1997

1998 1999

1999

1999 2002

(Continued)

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OAS Institutions

Year

Mechanisms Special Conference on Security and Declaration on Security in the Americas Special Security Conference ‘Declaration on Security in the Americas’ Special Commission on Transnational Organized Crime of the Permanent Council Special Commission on Transnational Organized Crime Combating people trafficking Office of Humanitarian Mine Action Department of Public Security and Meeting of Ministers Responsible for Public Security of the Americas (MISPA) Deny MANPADS to terrorists

Year (Initial) 2003

2003

2005

2005 2006 2007 2008

2002

Inter-American 1942 Defense Board IADB (2005 Review) Inter-American 1979 Court of Human Rights (CIDH)

Notes 1. Samuel Huntington (1994, p. 1723) developed the concept of the third democratic wave to refer to states’ movement towards democracy, begun in 1974 with the carnation revolution in Portugal and continuing in Southern and Eastern Europe, Latin America, Africa and Asia. In 1979, Alvin Toffler (1980) had used the concept to predict the new global phase of capitalism. 2. In 1983, the Contadora Group – Mexico, Panama, Colombia, and Venezuela – met to promote pacification in Central America. In 1985, Brazil, Argentina, Peru, and Uruguay formed a Support Group for the Contadora initiatives, known as the Group of Eight. In 1986, they formed a group to continue supporting efforts to solve the Central American crisis and provide collective answers to Latin American issues. Chile, Ecuador, Bolivia, and Paraguay joined in 1990 as well as representatives from Central America and the Caribbean. 3. The Santiago Declaration forces member countries to engage in collective action if the democratic institutions of a country are threatened. Resolution 1080 states

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4. 5. 6. 7.

8.

9.

10. 11. 12. 13.

that the OAS Permanent Council will immediately be convened if a country suspends its democratic process, and that a special session of the General Assembly will be held within a maximum of 10 days. The UPD is an agency that reports on and follows up democratic mechanisms. This belief was destroyed by the coup d’état in Honduras on 28 June 2009. See also Hill (2004), Stavridis (2007), and USSOUTHCOM (2008). In order to promote this agenda, the United Nations created the Commission on Human Security in January 2001. See among others: ‘Promoción de la Cooperación Hemisférica para el Tratamiento de Pandillas Delictivas’, presented by the Salvadoran delegation with the joint sponsorship of the delegations of Honduras, Nicaragua, the US, Bolivia, and Guatemala, and approved during the 12 May 2008 session, OEA/Ser.G, CP/CSH990/08 rev. 4 May 2008, p. 2; ‘Organised Crime and Terrorism,’ Standing Group Organised Crime, European Consortium for Political Research, 12 May 2006, http://www.essex.ac.uk/ECPR; Alex Stevens and Dave Bewley-Taylor; The Beckley Foundation Drug Policy Programme (BFDPP), January 2009; Paoli (2008); Luis Esteban Manrique (2006). This is a measure of inequality devised by Italian statistician Corrado Gini, where 0 corresponds to perfect equality (everyone has the same income) and 1 corresponds to perfect inequality (one person has all the income and all the rest have none). In April 2009, auguring an opposite trend to this repressive model, US Secretary of State Hillary Clinton admitted the joint responsibility of her country, particularly as regards drug consumption and the provision of light arms. The paco is a mix of cocaine, crushed glass, kerosene, chemical product and even rat poison. The issue was also on the agenda at the Summit of the Americas 2009 in TrinidadTobago (Final Declaration, 2009, Para. 68). Mail interview, 30 January 2008. Honduran Liberal Party (PL) and Honduran National Party (PN).

References Alfonsín, Raúl (2004) Memoria Política, Buenos Aires: Fondo de Cultura Económica. Althusser, Louis (1988) Ideología y aparatos ideológicos del Estado: Freud y Lacan. Buenos Aires: Nueva Visión. Bagley, Bruce (1993) ‘Los mitos de la militarización: las fuerzas armadas en la guerra contra las drogas’, in Peter Smith (ed.), El combate a las drogas en América, México, DF: Fondo de Cultura Económica. Ball, Nicole (2001) ‘Human Security & Human Development: Linkages and Opportunities’, Report of a conference organized by the Programme for Strategic and International Studies, Geneva, Graduate Institute of International Studies, 8–9 March, http://www. humansecuritynetwork.org/report_may2001_3-e.asp. Ball, Nicole and Michael Brzoska (2004) ‘Voice and Accountability in the Security Sector’, BICC Paper 21. Bonn, Germany: Bonn International Centre for Conversion, http://www.bicc.de/publications/papers/paper21/content.html. Barshefsky, Charlene and Hill, James T. (eds) (2008) US-Latin America Relations: A New Direction for a New Reality. Independent task force report No 60, New York, Council on Foreign Relation.

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Buvinic, Mayra (2008) ‘Un balance de la violencia en América Latina: Los costos y las acciones para la prevención’, Pensamiento Iberoamericano, Número: 2. Madrid, pp. 37–55. Buzan, Barry, Ole Weaver and Jaap de Wilde (1998) Security: A New Framework for Analysis, Boulder, London: Lynne Rienner Publishers. Cabañas, Andrés (2007) ‘Guatemala 2007: Elecciones sin población’, Revista Pueblos, Madrid, 16 de agosto, http://www.revistapueblos.org/spip.php?article632. Carmona, Ernesto (2005) ‘Recrudecen las críticas a la intervención ONU en Haití’, Voltairenet.org, 23 de marzo, http://www.voltairenet.org/article124351.html. Carter, Ashton B., Perry, William J., and Steinbruner, John D. (1992) A New Concept of Cooperative Security, Washington, DC: Brookings Institution. Chillier Gastón y Freeman, Laurie (2005) ‘El Nuevo Concepto de Seguridad Hemisférica de la OEA: Una Amenaza en Potencia’, Un Informe Especial de WOLA, Washington, DC: julio, pp. 1–16. Cotler, Julio (1995) ‘Crisis política, “outsiders” y democraduras: El “Fujimorismo”’, en Carina Perelli, Sonia Picado y Daniel Zovatto (eds), Partidos y clase política en América Latina en los 90. San José de CR: IIDH-CAPEL, 1995, pp. 117–41. Diamint, Rut (2001) ‘La OEA ¿debe desaparecer?’, en Archivos del Presente, Buenos Aires, Año 6, No 22, pp. 81–95. Eastman, Jorge M. (2002) ‘Análisis de las Respuestas de los Estados Miembros al Cuestionario sobre los Nuevos Enfoques de la Seguridad Hemisférica, solicitado por la Presidencia de la Comisión de Seguridad Hemisférica’, OEA/Ser.G, CPSH-430/02 rev.1 Add.1, 10 de octubre, Washington, DC, http://www.oas.org/csh/spanish/ documentos/cp10315s04.doc. Final Declaration (2009) Declaration of Commitment of Port-Of-Spain, Organization of American States, 19 April. Available at http://www.summit-americas.org/V_Summit/ decl_comm_pos_sp.pdf. Foucault, Michael (1992) Microfísica del poder, Buenos Aires: Editorial La Piqueta. Galiani, Sebastian, Rossi, Martín, y Schargrodsky, Ernesto (2006) ‘Conscription and Crime’, World Bank Policy Research, Working Paper No. 4037, 1 October. Hakim, Peter ‘El golpe hondureño a la OEA’, AméricaEconomía.com, 3 de agosto de 2009, http://www.americaeconomia.com/314136-El-golpe-hondureno-a-la-OEA. note.aspx. Haq, Khadija (2008) ‘Pioneering the Human Development Revolution: An Intellectual Biography of Mahbub ul Haq’, Introduction of the book at the New York launch by the UN Human Development Report Office on October 17, http://hdr.undp. org/en/media/Mahbub_ul_Haq.pdf. Cooper, Andrew F. and Jorge Heine (eds) (2009) Which Way Latin America? Hemispheric Politics Meets Globalization, Tokyo: United Nations University Press. Hill, James T. (2004) ‘Testimony of General James T. Hill, United States Army Commander, United States Southern Command, Before The House Armed Services, Committee’, Washington, United States House of Representatives, 24 March. Huntington, Samuel (1994) La tercera ola: La Democratización A Finales Del Siglo XX, Barcelona: Paidós. Insulza, José Miguel (2008a) ‘Informe sobre la situación de seguridad pública en las Américas’, Primera Reunión de Ministros en Materia de Seguridad Pública de las Américas, OEA/Ser.K/Xlix. 1, 7 y 8 de octubre, México DF, México. Insulza, José Miguel (2008b) ‘Insulza presenta en México Informe sobre la Situación de Seguridad Pública en las Américas’, Comunicado de Prensa, OEA, C-381-08, Washington, DC, 7 de octubre.

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150 A More Secure Hemisphere? Kaldor, Mary (2001) La nuevas guerras: Violencia organizada en la era global, Barcelona, España, Tusquets. Legrand, Christine (2009) ‘En Argentine, des mères se mobilisent contre le “paco”, la drogue des pauvres – Amériques’. Le Monde.fr. http://www.lemonde.fr/ameriques/ article/2009/03/26/en-argentine-des-meres-se-mobilisent-contre-le-paco-la-droguedes-pauvres_1172844_3222.html#ens_id=1170226. 26 de marzo. Linz, Juan J. and Stepan, Alfred (1996) Democracy and its Arenas, Baltimore: The Johns Hopkins University Press. Lustig, Nora (2007) ‘América Latina: la desigualdad y su disfuncionalidad’, en José Luis Machinea y Narcís Serra (eds) Visiones del desarrollo en América Latina, Santiago de Chile: CEPAL-CIDOB, pp. 231–46. Manrique, Luis Esteban (2006) ‘Un poder paralelo: el crimen organizado en América Latina’, Real Instituto Elcano, ARI No 84/2006, July 25 pp. 1–9. Mckinley Jr., James C. (2009) ‘US is a Vast Arms Bazaar for Mexican Cartels’, The New York Times, February 26. McSherry, J. Patrice (1998) ‘The Emergence of Guardian Democracy’, NACLA, Vol. 32, No. 3, noviembre-diciembre 1998, pp. 16–24. Medrano, Celia, Daniel Matul, David Morales, Alonso Ramírez Cover,José Manuel Ugarte, (2009) Conflictividad y focos de conflicto en Nicaragua, Guatemala, Honduras y El Salvador: Una evaluación preliminar, Buenos Aires: Editorial CRIES. Mercado Camacho, Orlando (2005) ‘Visiones contrapuestas de país’, Los Tiempos, Cochabamba, Bolivia, 2 de febrero. Milet, Paz Verónica (2004) ‘El rol de la OEA. El difícil camino de prevención y resolución de conflictos a nivel regional’, Pensamiento propio, Buenos Aires, Editorial CRIES, No 9, enero-junio, pp. 143–78. Miller, Derek B. and Rudnik, Luisa (2008) The Security Needs Assessment Protocol: Improving Operational Effectiveness trough Community Security, Geneva, UNIDIR, April. OAS (2008) ‘United States Strategy for combating the threat of criminal gangs in Central America and Mexico’, presented at the Special Session for Analyzing the Phenomenon of Criminal Gangs’, held on 17 January. OEA/Ser.G, CP/CSH/ INF.148/08, p. 2. OAS (2006) ‘La stabilité démocratique dans les Amériques: le rôle institutionnel de l ⫻ OEA’ Funglode, Ministère des Affaires étrangères et du Commerce international du Canada, Santo Domingo, 3 June. OAS (1999) ‘Programa de trabajo de la Comisión de Seguridad Hemisférica con miras a la preparación de la Conferencia Especial sobre Seguridad’, Organization of American States, RES. 1643 (XXIX-O/99), 7 June. O’Donnell, Guillermo (1992) ‘¿Democracia delegativa?’ Cuadernos de CLAEH No. 61, Montevideo, pp. 9–19. O’Donnell, Guillermo (1993) ‘Acerca del estado, la democratización y algunos problemas conceptuales. Una perspectiva latinoamericana con referencia a países poscomunistas’, Desarrollo Económico: Revista de Ciencias Sociales No 130, Buenos Aires, IDES, julio-septiembre, pp. 163–84. O’Donnell, Guillermo (2003) ‘Gobierno y estado en América Latina: Algunos problemas y desafíos’, Anuario Elcano América Latina 2002, Madrid, España, pp. 142–53. O’Donnell, Guillermo (2004) ‘Why the Rule of Law Matters’, Journal of Democracy, vol. 15, No. 4, 2004, pp. 32–46. Olson, Georgina (2009) ‘Hillary juzga intolerable la narcoviolencia’, Diario Excelsior, México, 28 de marzo.

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Paoli, Letizia (2008) ‘Organized Crime: New Label New Phenomenon Or Policy Expedient?’ Annales Internationales de Criminologie, Vol. 46, No 1/2, pp. 37–60. Radseck, Michael (2004) ‘El sistema interamericano de seguridad: ¿quo vadis? Posiciones del Cono Sur a la luz de la Conferencia Especial sobre Seguridad Hemisférica’, presentación, Segundo Congreso Latinoamericano de Ciencia Política, Asociación Latinoamericana de Ciencia Política (ALACIP), 29, 30 septiembre y 1 de octubre, Ciudad de México, http://www.giga-hamburg.de/dl/download.php?d= / content/ilas/pdf/radseckalacip04.pdf. Ribeiro Pereira, Augusto Heleno (2007) ‘El componente militar en la Misión de las Naciones Unidas para la Estabilización en Haití’, Military Review, enero-febrero 2007, pp. 2–33. Schnabel, Albrecht and Ehrhart, Hans-Georg (2005) ‘Post-Conflict Societies and the Military: Challenges and Problems of Security Sector Reform’, in Albrecht Schnabel and Hans-Georg Ehrhart (eds) Security Sector Reform and Post-Conflict Peacebuilding, Tokyo, New York, Paris: United Nations University Press, pp. 1–16. Serbin, Andrés (2009) ‘La Organización de los Estados Americanos, las Naciones Unidas, la sociedad civil, y la prevención de conflictos’, Documentos CRIES, No 11, Buenos Aires, marzo. Stavridis, James G. (2007) ‘The Posture Statement of Admiral James G. Stavridis, United States Navy Commander, United States Southern Command, Before The 110th Congress’, Washington, 21–22 March. Stevens, Alex and Dave Bewley-Taylor with contributions from Pablo Dreyfus (2009), ‘Drug Markets and Urban Violence: Can tackling one reduce the other’, The Beckley Foundation Drug Policy Programme, January. Online at: http://www. beckleyfoundation.org/pdf/report_15.pdf. Stevens, Alex and Bewley-Taylor, Dave ‘Drug Markets and Urban Violence: Can Tackling One Reduce the Other?’ Stiglitz, Joseph E. (2005) ‘Le cap des réformes: Vers un nouveau programme pour l’Amérique latine’, Revista de la CEPAL, Santiago de Chile, Número Especial, junio, pp. 35–70. Tedesco, Laura (2009) ‘Violencia urbana: Un desafío al fortalecimiento institucional. El caso de América Latina, Working Paper No 78, FRIDE, Madrid, España, pp. 1–28. The Human Security Report 2005: War and Peace in the 21st Century, University of British Columbia, Canada, New York, Oxford: Oxford University Press, http://www.human securityreport.info/index.php?option=content&task=view&id=28&Itemid=63. Toffler, Alvin (1980) La Tercera Ola, Barcelona: Plaza & Janés. UN (2005) ‘Resolution 60/1’, United Nations General Assembly, 16 September, A/RES/60/1. USSOUTHCOM (2008) ‘The United States Southern Command (USSOUTHCOM) Command Strategy for 2018. Partnership for the Americas’, December. Available at http://www.southcom.mil/AppsSC/files/0UI0I1177092386.pdf. Varas, Augusto (2008) ‘Latin America and the US: An Agenda Adrift’, FRIDE Comment, Madrid, June, pp. 1–8. Villalobos, Joaquín (2006) ‘Colombia en negociación, desmovilización, reconciliación y guerra’, Fundación Ideas para la Paz, Bogotá, Colombia, Comentarios, www.ideaspaz. org/publicaciones. Withers, George, Isacson, Adam, Haugaard, Lisa, Olson, Joy, and Fyke, Joel (2008) ‘Ready, Aim, Foreign Policy: How the Pentagon’s Role in Foreign Policy is Growing, and Why the Congress, and the American Public Should be Worried’, A joint project

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8 Poverty Reduction and the Role of Regional Institutions Nicola Phillips

From the 1970s onwards, the proposition that development cannot be approached purely as a matter of economic growth became conventional wisdom in both scholarly and policy debates. These debates yielded a flourishing of alternative approaches to development that proposed to supplant the established focus on growth with a commitment to ‘human’ or ‘peoplecentred’ development, and the problem of poverty moved to the heart of this agenda. This focus on poverty evolved through its early expression in the ‘basic needs’ framework and the ‘human development’ agenda associated with the work of the United Nations Development Programme (UNDP), to its explicit articulation as the centrepiece of the global development agenda, encapsulated in the Millennium Development Goals (MDGs) at the start of the 2000s. It is unsurprising that these trends in development thinking should have been reflected both in national development strategies across Latin America and the Caribbean (LAC) and in the inter-American agenda. From the mid1990s onwards, the Inter-American Development Bank (IDB) became, with the World Bank, the institutional protagonist in elaborating and promoting a poverty reduction agenda for the region, and subsequently the MDGs were centrally integrated into the Summit of the Americas process after their unveiling in 2000. An important part of an evaluation of the role and effectiveness of regional institutions in the contemporary period, as well as the wider agenda for inter-American cooperation encapsulated in the Summit process, concerns the record of poverty reduction strategies. It is argued here that this record reflects negatively on the institutions and strategies which have shaped the social and economic trajectory of the region in the contemporary period. The positive ‘headline’ news on poverty reduction for the region as a whole since the start of the twenty-first century masks the persistence and, at times, deepening of poverty for large parts of LAC societies. This is particularly the case when poverty is measured not solely in terms of per capita and household income, but also with reference to the absence of a wide range of opportunities and ‘freedoms’ (Sen, 1999). 153

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This chapter sets out to justify this critical appraisal of the record on poverty reduction in the region, and considers why the poverty reduction strategies of the IDB and other regional institutions have met with scant success. It suggests that the explanations that are usually given, which focus on the political and institutional problems which have impeded effective implementation at the national level, offer only a partial and rather distorted understanding of the poverty reduction agenda and its results. Rather, this chapter argues that the poor record of the poverty reduction agenda owes much to the problematic conceptual basis on which the institutions have articulated their strategies. On the one hand, the emphasis on national-level politics obscures the ‘vertical’ dimensions of poverty dynamics (Ponte, 2008) associated with the terms of incorporation of Latin American economies, producers, and workers in global production networks (GPNs) and associated labour markets. The argument here pivots on the notion of ‘adverse incorporation’, which stands as a challenge to the IDB’s and other institutions’ emphasis on ‘exclusion’ (from globalization) as the cause of persistent poverty, and by extension greater ‘inclusion’ as the strategic priority for poverty reduction. On the other hand, the focus in both the regional poverty reduction agenda and more widely the MDGs prioritizes poverty in its ‘absolute’ incarnations, neglecting its complex structural connections with ‘relative’ poverty – that is, with socio-economic and other forms of inequality. It is thus suggested that alongside any due consideration of national-level politics and institutions, recognition of the importance of these ‘vertical’ and structural influences is central to an adequate understanding of poverty dynamics in the region; indeed, their omission from policy frameworks developed by the IDB and other institutions constitutes an important explanation for the shortcomings of the poverty reduction agenda. The discussion proceeds in three sections. The first offers an empirical summary of the nature and trajectory of poverty in the region as a backdrop to the discussion. The second considers the approach and strategies of the regional institutions (principally the IDB) in relation to poverty reduction. The third seeks to advance an explanation for the shortcomings of the record on poverty reduction, emphasizing the links with the functioning of global value chains and global labour markets, and the associated connections with the dynamics of inequality.

Poverty in Latin America and the Caribbean The problems and pitfalls of measuring poverty have been amply documented. Differing methods of measurement yield sharply different estimates of overall global, regional, and national levels of poverty and contradictory interpretations of observed trends. The most common measurement of ‘absolute’ poverty – that is, the absence of the basic necessities for human survival – relies on a calculation of ‘purchasing power parity’

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(PPP),1 and the standard categorization of absolute poverty is the proportion of the population existing on the PPP equivalent of US$ 1 per day. Using this system, most estimates have indicated a fall in overall global poverty levels over the 2000s: although the number of people living below the PPP US$ 1 per day line has risen, world population growth has meant that levels of global poverty have in fact fallen. However, these improvements have been almost entirely the result of strong economic performance in East Asia, especially in China. The population living below the PPP US$ 1 per day poverty line has increased significantly in most other parts of the world, and the recorded increase has been even greater using the PPP US$2 per day measurement (World Bank, 2002a; Kaplinsky, 2005). Yet the figures are disputed: some contend that World Bank figures represent a considerable overestimate of global poverty levels (Sala-i-Martin, 2002) and others that they may be a substantial underestimate, not least because the PPP US$ 1 per day line is considered an absurdly low baseline (Reddy and Pogge, 2003; Wade, 2004; Kiely, 2007; Reddy, 2008). The regional picture mirrors these trends. It is generally accepted that the proportion of the region’s population living in poverty is declining, with the figures for the 2000s indicating substantial progress, especially in reducing extreme poverty. Yet it is unquestionably the case that ‘lost in the statements about progress are serious discrepancies in the available data, questions about the correct methodology for measuring poverty, and overgeneralizations about regional progress’ (Helwege and Birch, 2007, p. 1). The discrepancies between the data generated by the World Bank and the UN Economic Commission for Latin America and the Caribbean (ECLAC) do not differ substantially in their depiction of trends, but they feature very stark discrepancies in their assessment of levels of poverty in the region. In the middle of the 2000s, for instance, ECLAC put moderate poverty levels at around 40 per cent of the total population, and the World Bank at around 20 per cent. The former arrives at its figures based on estimated costs of a basic food basket, while the latter uses the PPP-based system of measurement (Helwege and Birch, 2007). The problems for accurately assessing regional poverty in this context are clearly considerable. Yet, to avoid falling at the first hurdle, let us here take the data produced by ECLAC and published annually in its ‘Social Panorama of Latin America’ report to gain an impression of the profile and trajectory of poverty in the region. The 2008 report estimated the proportion of the region’s population living in poverty in that year to stand at 34.1 per cent (184 million people), and those living in conditions of extreme poverty or indigence at 12.6 per cent (68 million). Since 2002, the decline in regional poverty levels was described in the report as ‘remarkable’: 9.9 percentage points in the case of poverty and 6.8 points in the case of indigence. The overall trend since 1990 has also been to declining levels of poverty, but the highest incidence was recorded in 2002 and the bulk of the decline has been recorded since that

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time (ECLAC, 2008, pp. 10–11). By 2007 the region, taken as a whole, looked highly likely to yield figures for poverty reduction which met the first target of the MDGs. Yet these aggregate figures are ultimately misleading. The data are heavily skewed by trends in the large economies, specifically in Mexico and Brazil. Those two countries, along with Chile and Ecuador (the latter using data for urban poverty), had already met the first MDG in 2007, with Costa Rica close behind.2 ECLAC then reported progress towards the MDG targets that had been faster than expected in a handful of other countries: Venezuela, Colombia, El Salvador, Nicaragua, and Peru. Yet, by 2008, the remaining countries of the region were showing few signs of approaching the targets. It is thus clear, as ECLAC conceded, that the ‘subsidy’ represented by Brazil, Mexico, and Chile – which together account for around 60 per cent of the region’s population and have all already exceeded the target of the MDGs – distorts the regional picture substantially. Assessments of the levels of growth that would be required for the region as a whole to meet the first MDG are consequently very low (ECLAC, 2008: 15). Equally, the achievement of the goal by ‘the region’ would not indicate significant poverty reduction in all the countries encompassed within it, nor necessarily for a significant proportion of the region’s poor. Indeed, it may mask a persistence or worsening of poverty levels for large parts of the poor population. For the Dominican Republic, for instance, ECLAC recorded poverty levels of 47.1 per cent for 2002, 44.5 per cent for 2006, and 44.5 per cent for 2007. Indigence levels for the same years were recorded as 20.7 per cent, 22 per cent, and 21 per cent. For Paraguay, the stasis is comparable: poverty levels were recorded as 61 per cent in 2001 and 60.5 per cent in 2005 and 2007; indigence levels for the same years were 33.2 per cent, 32.1 per cent, and 31.6 per cent. Especially given the small size of these two countries’ populations, these figures indicate at best negligible progress in terms of the numbers of people lifted out of poverty and indigence since the start of the decade. Likewise, for Uruguay, data on indigence in urban areas registered a rise between 2002 and 2005, but then a slight fall by 2007; nevertheless poverty levels exhibited an increase of some three percentage points over this period. This aggregate data also conceals substantial variations in patterns and levels of poverty between particular groups in society. Women are in the majority among the populations vulnerable to poverty and indigence, also disproportionately carrying the burden of dealing with poverty, as recognized in the now influential ‘feminization of poverty’ discourse (Chant, 2008). Likewise, poverty among indigenous groups is substantially higher across Latin American societies. The general point is that poverty is strongly associated with patterns of disadvantage, discrimination, and inequality operating along diverse axes, including gender, age, ethno-racial identity, and migration status.

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Approaches to poverty reduction and the role of regional institutions Since the mid-1990s, there has been a significant refocusing of both national and international strategies under the ‘poverty reduction’ banner. At the national level, a restructuring of welfare regimes and the emergence of new forms of social assistance have been implanted across the region, the Brazilian Bolsa Escola/Familia, the Mexican Progresa/oportunidades and the Chilean Chile Solidario programmes being among the most visible examples (Barrientos, 2009). These national-level initiatives have been accompanied and supported by a central concern with poverty reduction strategies in regional institutions and within the inter-American agenda. The IDB’s first major statement on the subject appeared in 1997, and, after a flurry of reports and papers on the subject in between, an updated document was issued in 2003 which outlined a strategy ‘to promote poverty reduction and social equity as well as environmentally sustainable growth’ (IDB, 1997; 2003b). The 1997 document set out clearly the IDB’s conceptual understanding of poverty. The aim was stated baldly on the first page of the document, ‘to help the poor earn their way out of poverty’ (IDB, 1997, p. 1), to which end the strategy was formulated as one of helping to enhance the inclusion of the poor in labour markets, increase their productivity, and cajole the private sector into cooperating with this agenda by providing better quality employment opportunities. The 2003 document preserved this market-based understanding of the causes of and remedies for poverty, but claimed to have updated this into a more ‘multidimensional’ approach which incorporated issues of income, participation, vulnerability, and quality of life. An integrated strategy would therefore involve mobilizing this multidimensional conception of poverty and emphasizing the issues of equity (and its consequences for poverty), social protection, social exclusion, the institutional capacity of states in respect of policy formulation and implementation, and the centrality of poverty reduction in all areas of the Bank’s activities (IDB, 2003b, p. 14). The resulting strategy since that time has emphasized lending strategies to support poverty reduction strategies at the national level. First, the IDB has collaborated with the World Bank, International Monetary Fund (IMF), and other multilateral and bilateral agencies in the Poverty Reduction Strategies (PRS) process, under which poverty reduction assistance and debt relief to poor countries were tied to their governments’ preparation and implementation of a poverty reduction strategy paper (PRSP). The PRS approach was adopted in 1999 as a comprehensive, ‘locally-owned’ approach to poverty reduction, encapsulating the market-oriented approach to poverty reduction built around three key components: ‘promoting opportunity’ and pursuing ‘pro-poor growth’; ‘facilitating empowerment’, particularly by promoting ‘good governance’; and ‘enhancing [human] security’, involving such areas as health, education, and sometimes ‘social safety nets’ or ‘social protection

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measures’ (Craig and Porter, 2003, pp. 53–4). The four countries identified in the ‘highly indebted poor countries’ (HIPC) initiative were obliged to participate (Bolivia, Guyana, Honduras, and Nicaragua), and a range of other countries (Belize, the Dominican Republic, Guatemala, Paraguay, and Peru) were also involved in the PRS process over the 2000s. The second emphasis has fallen on supporting social policy schemes aimed particularly at social assistance programmes such as those outlined above, which were promoted as ‘a key element in the fight against the intergenerational transmission of poverty and inequality and … good complements to efforts to increase the quality and coverage of health and education services through supply-side interventions’ (IDB, 2003a, p. 19). Education and health sectors constituted the priority areas for IDB investment strategies. A third strategic focus on ‘improving tax revenues for equity’ and associated institutional reforms has aimed to create macroeconomic conditions favourable to sustaining these poverty reduction strategies based on social assistance and conditional cash transfer schemes. Yet the primary emphasis in this market-based understanding of development has continued to fall heavily on employment – that is, the opportunity for the poor to exploit their key endowment of labour – as the primary means to realizing human development potential and reducing poverty. In this respect, the contemporary poverty reduction agenda deviates very little from the much earlier basic needs and human development agendas, which took shape from the 1970s onwards (Payne and Phillips, 2009). The IDB emphasizes the importance of ‘close collaboration with the private sector’ in order to further the goals of inclusion of the previously ‘excluded’ in the labour market (IDB, 2003a, p. 21). One of the most visible new initiatives to this end, promoted by the IDB and a range of other multilateral and donor organizations from the 1990s onwards, involved the expansion of ‘microcredit’ schemes – an ‘entrepreneurial’ model of development which aimed to provide the poorest in society, particularly women, with the possibilities of setting up and sustaining small businesses (see Ferguson, 2007). The goals relating to education and health policy are also clearly tied into this casting of the poor as actual or potential workers, increasing their skill levels and capacity to function effectively in the labour market. Notably, this point has been highlighted as a critique from within the IDB itself. An evaluation report of 2003 drew particular attention to the instrumental nature of the market-based strategy in taking other goals of social development, such as health and education, as a ‘means to an end’: such interventions would improve the productivity of poor workers and consequently their incomeearning capacities as a means to contribute to the overall goal of economic growth (IDB, 2003c, p. 7). The conceptual foundations of the regional poverty reduction agenda are clear. First, the dynamics of poverty and the substance of the poverty reduction agenda are articulated in strongly national terms, built as they are

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around the PRS approach and the national-level reform of welfare systems and social policy. Likewise, the bulk of assessments of the record of the poverty reduction agenda locate explanations in national-level politics and institutions, in either a positive or a negative sense: the positive evaluations would be enthusiastic about the social policy innovations of various leftist governments, such as those of President Luiz Inácio Lula da Silva in Brazil or Hugo Chávez in Venezuela; the negative ones would focus on the myriad political and institutional impediments to effective implementation, policy consistency, and/or constructive relations with regional and international donors. The market-based understanding of poverty necessarily takes some account of ‘globalization’, but again this is usually cast in nationalized terms. The goal of ‘promoting inclusive globalization and regional integration’ (IDB, 2003b, pp. 22–3) is to be furthered through macroeconomic coordination and ‘appropriate’ forms of exchange rate, investment and trade policy; that is, through national-level interventions to deal with the implications for the poor of the functioning of markets. Again, the failures of implementation in these policy areas are often offered as an explanation for the uninspiring outcomes of poverty reduction strategies. To this extent, the poverty reduction agenda has been consistent with the overall thrust of the neoliberal development framework within which it is encased; that is, it has constituted a programme of internal reform which has excluded any serious consideration of the ways in which the workings of the global economy condition both the causes and the dynamics of poverty. Second, the ‘causes’ of poverty are strongly related to notions of ‘exclusion’ – as both a general issue of social exclusion or marginalization and as a more specific, although intrinsically related, issue of exclusion from the labour market. The poverty reduction agenda is thus articulated as one of achieving greater levels of ‘inclusion’, in order, as the World Bank (1990) put it, to enhance the ‘productive use of the labour of the poor’. Such a conceptual frame conforms with the orthodox view, which has achieved prominence in the international development community, that the poor are those who have failed to engage with globalization and that a ‘deepening’ of globalization will lift nearly (and eventually) all of the world’s poor out of destitution (see Kaplinsky, 2005, p. 49; Milanovic, 2003). A direct connection is posited between the acceleration of globalization and liberalization and a decline in the absolute numbers of people living in poverty and indigence across the world. The case is therefore made for an expansion of globalization and the elaboration of strategies that will enable the benign forces of globalization to reach the world’s poor more effectively (World Bank, 2002a, 2002b; Dollar and Kraay, 2002; Sala-i-Martin, 2002). Third, the accent in the poverty reduction agenda is on poverty in its ‘absolute’ manifestations, largely disconnected from the problem of ‘relative’ poverty (inequality). The connections between the two are well recognized in scholarly research and indeed in policy debates within and between

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institutions, and the IDB has perhaps gone furthest of all the multilateral institutions towards recognizing the importance of inequality in its focus on ‘equity’ and ‘social exclusion’. Nevertheless, the resulting policy frameworks tend systematically to marginalize questions of inequality – their absence is particularly striking in the MDGs – and/or to focus on economic inequalities without sufficient attention to their complex relationship with other forms of inequality, particularly those relating to gender, ethno-racial identity, and migration status. The assumption is that economic inequalities are amenable to redress through a form of market-based ‘empowerment’ (that is, through the extension of employment and entrepreneurial opportunities), and that this empowerment will have a ‘trickle-down’ effect, as it were, on other forms of inequality. Let us turn now to consider the problems and implications of this conceptual frame in more detail. The first and second points – the focus on the national level and the emphasis on an exclusion/inclusion duality – form the basis for a set of arguments concerning the ‘vertical’ dynamics of poverty, focusing in particular on the workings of global value chains and associated labour markets. The third – the interest in absolute poverty at the expense of relative poverty – invites a consideration of the links between poverty and inequality that need to be incorporated into an adequate understanding of poverty dynamics and appropriate remedies.

‘Adverse incorporation’ and the ‘vertical’ dimensions of poverty The critique of the orthodox view of poverty outlined above is well established in academic debates. Poverty in this view is cast as a ‘residual’ phenomenon – the result of exclusion from globalization processes, and amenable to resolution through the extension of (labour) markets and appropriate supporting policy interventions. The thrust of critical arguments has been that poverty is instead a ‘relational’ phenomenon (Bernstein, 1990; Kaplinsky, 2005), which is in important respects generated and reinforced by globalization processes. Not disputing partial improvements in data on poverty, and accepting that the general direction has been towards a reduction in the proportion of the world’s population living in poverty, the contention is that there is no directly causal or uniformly positive association between global socioeconomic restructuring and patterns of poverty, and indeed that globalization has acted to perpetuate poverty and vulnerability to poverty at least as much as it could be said to have contributed to its lessening. The picture, in other words, is substantially more mixed than the orthodox view allows. The task is therefore to understand how exactly the relationship between global socio-economic change and the dynamics of poverty works, and sophisticated studies have taken up this challenge. These ‘residual’ and ‘relational’ notions of poverty are related to a further set of concepts which are of particular value to the present discussion, namely,

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those of ‘social exclusion’, on the one hand, and ‘adverse incorporation’, on the other. Social exclusion became established in debates about poverty from the 1970s onwards as a way of understanding its social roots and the ‘multidimensionality’ of deprivation (see Hickey and Du Toit, 2007; de Haan, 1999). Indeed, we have seen the emphasis placed by the IDB and other organizations on the causal links between social exclusion and poverty. The notion of ‘adverse incorporation’ was proposed subsequently as a corrective to the perceived emphasis in the social exclusion discourse on the ‘residual’ rather than the ‘relational’ dimensions of poverty, which, according to the proponents of the adverse incorporation perspective, impeded an appropriate understanding of how particular kinds of power relations underpin poverty (Hickey and du Toit, 2007, p. 5). The further, insightful objection was that by the late 1990s the growing prominence of the social exclusion discourse had come to displace the notion of ‘exploitation’ in explanations of the causes and dynamics of poverty (Byrne, 1999, pp. 44–59; Hickey and du Toit, 2007, p. 5) – a displacement immediately conducive to legitimizing an approach to poverty based on the extension of market forces. The notion of ‘adverse incorporation’, by contrast, leads us to focus not on a condition of socioeconomic ‘exclusion’ as the principal determinant of poverty and marginalization, but rather on the terms on which different social groups are included and incorporated into global economic activity. That is, it is often the case that poor people are not in fact ‘excluded’ from markets or indeed societies, but rather are included on adverse terms in ways that either perpetuate conditions of chronic poverty or heighten their vulnerability to ‘transient’ forms of poverty. Both chronic poverty and transient poverty are in this sense intimately linked to the terms of inclusion, which may in some circumstances be beneficial for the poor and may in others amount to forms of ‘adverse incorporation’ which are both neglected and obscured by the ‘residual’ understanding of poverty and its emphasis on an exclusion/inclusion duality. This notion of adverse incorporation and its complex relationship with social exclusion therefore provides us with a useful platform from which to think about the ‘vertical’ influences on poverty, and indeed to challenge a predominantly state-centric focus in our understandings of poverty (Ponte, 2008). The question, from this perspective, concerns the relationship between the workings of GPNs and the dynamics of poverty and marginalization, and concretely how the terms of incorporation into GPNs shape the actual and potential relationships between the processes of economic upgrading in GPNs and particular social trends associated with poverty, marginalization, and exploitation (Barrientos et al., 2008). As we have seen, the poverty reduction agenda orchestrated by regional and international institutions, in Latin America and the Caribbean as elsewhere, rests on an assumption that processes of economic upgrading and greater inclusion in GPNs will lead to processes of social upgrading, with employment being the

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key mechanism for lifting people out of conditions of poverty. The focus on adverse incorporation instead contends that economic upgrading is at least as often associated with social downgrading as a result of the disadvantageous terms on which poor producers and workers are incorporated into the (labour) markets associated with particular sectors. The terms on which incorporation takes place are consequently of decisive importance in shaping the relationship between global economic restructuring and social upgrading, and the task for poverty reduction agendas is to take due account of what Stefano Ponte (2008, p. 27) calls the ‘normal functioning’ of global value chains (GVCs). The pressures arising from competition between firms and the pronounced squeezing of suppliers by retailers to reduce costs and therefore maximize profit are among the characteristics of this ‘normal functioning’ which produce the ‘symptoms’ of poverty and deprivation (Ponte, 2008, p. 27).3 The social consequences of economic restructuring are also shaped by the functioning of particular kinds of labour markets. In the Latin American and Caribbean context, ECLAC (2008) has well documented that the bulk of progress in alleviating poverty and indigence over the 2002–7 period was due to an increase in the average household income, driven predominantly by labour income. In most cases, including in those countries which registered the highest reductions in poverty levels, the increase in labour income was due to a rise in the wages of the employed person(s), whereas in others, including those where levels of change have been negligible, the key factor was the net employment rate, even while wage levels played a part. While unemployment rose considerably across the region during the 1990s, there is evidence of a decline in urban unemployment in the majority of the region’s major cities. It should nevertheless be noted that gender disparities are significant in the data – unemployment among women remains higher than among men, and their participation and employment rate markedly lower. This indicates that both employment and income levels are crucial in understanding the dynamics of poverty and the means of alleviating it. Yet the point is that the bulk of employment growth (as opposed to economic growth) has been in low-productivity, low-wage sectors of the informal economy, and both the 1990s and 2000s have seen an arresting expansion of precarious employment and low-quality jobs. This has occurred as a result of both the workings of GPNs – particularly in sectors where demand for low-cost labour is paramount – and, by extension, of extensive processes of ‘labour flexibilization’ reforms that have been put in place to meet the generalized demand for more flexible and lower cost labour. Questions concerning the quality of employment and the terms on which workers are incorporated into particular labour markets are therefore central to the way we think about poverty in the region, inasmuch as the absence of decent work conditions or access to good-quality jobs is strongly correlated with levels of vulnerability to poverty.

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If we think not only of those living in conditions of ‘chronic poverty’, but also those who are vulnerable to slipping into poverty and those who live in conditions of ‘transient poverty’ – the latter populations being generally neglected in the rubrics of poverty reduction – then the question of precarious employment in the informal sector becomes key to both our conceptual compass and appropriate policy strategies. ECLAC data document a very slight contraction of the percentage of the economically active population working in the informal sector between 2002 and 2006. Yet, while aggregate monthly wage income levels increased slightly from the start of the decade, this was not in line with the growth of per capita gross domestic product (GDP) for the region. The reason was a fall in the monthly labour income of urban workers in low-productivity sectors. Consequently we have seen a widening gap between formal and informal employment in terms of wages (ECLAC, 2008, p. 26), as well as an increasing number of workers who are incorporated into economic activity without access to social security, labour protections, and possibilities for collective organization. Women are also disproportionately represented in figures for employment in the informal sector, as well as significantly more excluded from access to protections and security. All in all, ECLAC reports that labour productivity and levels of employment increased for the region as a whole in the 2000s, and poverty among the employed population fell, but the vulnerability of workers (the proportion of own-account workers and unpaid family members) remained stable. The additional element that needs to be included in this picture, and yet is usually entirely excluded, concerns the increased emphasis on migrant labour across a vast number of sectors, including those associated with GPNs. Migrant workers in the low-productivity and low-wage informal sector, in Latin America and the Caribbean as elsewhere, are usually among the most vulnerable to the various forms of ‘adverse incorporation’ under discussion here. The poorest in Latin American societies, as elsewhere, do not move as they lack the resources to do so. But the dynamics which position poor migrant workers as an underclass in both richer and poorer destination countries are well documented (Harris, 1995; Sassen, 2001; Bauder, 2006; Phillips, 2009). While net employment among poor migrant workers is high, it is also extremely precarious, reflecting both a high level of under-employment and high levels of vulnerability in terms of employment conditions. Migration status thus impinges heavily on the ways in which adverse incorporation acts to trap people in conditions of chronic poverty, and also to heighten vulnerability to transient poverty.

Poverty and inequality The second conceptual emphasis that has dominated national and international policy debates has been on poverty in its ‘absolute’ incarnations. The focus has been on measuring the numbers of people living in poverty and

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indigence, and devising strategies to address the conditions of those parts of the population. Even while in much of the scholarly debate, and indeed in research publications disseminated by international institutions such as the IDB, the links between poverty and inequality are recognized and taken seriously, these are not incorporated substantively into policy responses and rarely find a place in the same policy debates as questions of absolute poverty. It is generally accepted, even from the orthodox standpoint, that there has been a pronounced widening of inequality in this contemporary phase of global restructuring. Latin America and the Caribbean remains the region with the most striking levels of inequality in the world. ECLAC data in the 2008 ‘Social Panorama’ report indicates that average per capita income in the tenth decile of the region’s population is about 17 times greater than among the poorest 40 per cent of households, and for the richest quintile about 20 times higher than for the poorest one. National variation is significant: in Colombia, for example, the per capita income of the richest 10 per cent is 25 times higher than that of the poorest 40 per cent. Crucially, this has been strongly associated with the acceleration and concentration of wealth accumulation in the richest sections of societies across the world and the region, which has been far greater than any increase in the rate of absolute poverty. As Peter Edward (2006, p. 1667) observes, ‘growth did help the poor, but it was much better for the rich’. High levels of inequality are correlated strongly with poverty, particularly in terms of the prospects for poverty reduction. This connection is recognized as taking a number of forms (IDB, 2003a). First, while inequality does not cause poverty, it is associated with higher levels of poverty as the poor obtain a smaller share of total income. The IDB itself (2003a, p. 5) cites estimates that in the mid-1990s, the Gini co-efficient for Latin America and the Caribbean was 25 per cent higher than the level that would have been expected given its per capita GDP, and suggests that in several countries the decrease in poverty that would have resulted from income growth was counteracted by increases in poverty associated with increases in inequality. Second, inequalities in levels of education reduced the benefits of growth for poverty, inasmuch as economic growth was concentrated in sectors characterized by higher skill levels and greater capital intensity. Workers with no education saw their wages stagnate or decline over the 1990s, with significant implications for chronic poverty and vulnerability to poverty. Finally, inequality is associated with higher vulnerability to poverty inasmuch as poverty of opportunity is strongly connected with exclusion from access to healthcare, education, social security and so on, and in highly unequal societies the extent of investment in public and basic services tends to be considerably lower than investment in services oriented to the high-income groups in societies (particularly in education and healthcare).

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Gender inequalities are also important as causal explanations for the particular forms of poverty experienced by women. Given these connections, the absence of questions of relative poverty from dominant policy frameworks is clearly significant – we have already noted the MDGs in this respect. Given that the question of inequality is ‘highly contentious, politically difficult to handle in a global capitalist and neoliberal order, and much less amenable to global political consensus than absolute poverty’ (Payne and Phillips, 2009), the default focus on absolute poverty is thus a means of dissipating the political charge of questions about inequality and diminishing poverty reduction strategies to a set of ‘technical’ and ‘technocratic’ issues associated with the extension of market forces (Pieterse, 2002, p. 1033). Yet, even where questions of inequality are taken seriously, as they are ostensibly by the IDB, the central problem is the faith in the labour market as a means of mitigating inequalities and thereby eliminating their implications for poverty. Economic ‘empowerment’ through ‘inclusion’ in the labour market is thus advocated as a key mechanism for poverty reduction on the assumption, noted earlier, of its potential ‘trickledown’ impact on various forms of inequality. A clear illustration can be found in the case of microcredit which, as we have seen, has been central to the IDB’s poverty alleviation strategies. It achieved prominence in particular for its associations with the empowerment of women as workers and market actors: the direct targeting of women was seen as a means of increasing their economic status and independence, and increasing the participation and employment rates of women which, as we have seen, were and remain very low relative to those of men. By the start of the 2000s, it was estimated that more than half of poor people in Latin America and the Caribbean earned their income in the microenterprise sector, and that in most countries the private sector consisted almost entirely of these enterprises (IDB, 2003a). In short, the IDB’s contention by the early 2000s was that the microenterprise sector had ‘become a stabilizing force and has contributed greatly to overall employment, production, and national income’ (IDB, 2003a, Foreword). Yet the problem has been an inattention to the structures of inequality that are underpinned by particular social norms, beyond merely questions of income inequality between households. The persistence of gendered norms associated with inequalities between men and women has been shown to have limited the effectiveness of microcredit schemes in Latin America and elsewhere, inasmuch as control over household finances and ownership of land remained resolutely in the hands of the male members of households, despite the fact that women carried the liability for microcredit loans. Focusing on women’s home-based work, in this sense, has been criticized for its inattention to the ways in which the ‘empowerment’ of women through their integration into the market economy is constrained by the persistence of norms which value their traditional social roles and undermine their

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capacity for ownership and control of their means of subsistence (Ferguson, 2008; Goetz and Sengupta, 1996). This then reveals further shortcomings of the focus on poverty to the exclusion of inequality – in this case, the forms of gender inequality which are central to the dynamics of poverty and vulnerability to poverty.

Conclusions As a central element of the inter-American agenda, poverty reduction efforts in the region have yielded disappointing results. Notwithstanding some improvements in overall data for the region and positive trends in some countries, the economic and social outcomes of the regional institutions’ strategies have featured the persistence or worsening of poverty for large parts of the region’s population. It has been suggested here that this is in part due to the flawed conceptual foundations on which these strategies have been articulated, lacking as they do an understanding of what we have called the ‘vertical’ dimensions of poverty associated with the terms of inclusion of Latin American workers and producers in global productive activity, on the one hand, and the structural connections between poverty and inequality, on the other. The implications of neglecting these factors are perhaps particularly striking in Latin America and the Caribbean, given the scale of integration of the region’s economies into global production networks and its ongoing status as the most unequal region in the world. An adequate approach to understanding poverty, and indeed elaborating an effective poverty reduction strategy, thus needs to incorporate the dynamics of ‘adverse incorporation’ alongside an emphasis on social exclusion, in place of the excessively simplistic emphasis on ‘inclusion’ and ‘empowerment’ through participation in the market as the key mechanism for poverty reduction. In other words, we need, as Stefano Ponte (2008, pp. 7, 12) has argued, to explore ‘how participation in value chains exposes poor people to risks, as opposed to how it affects income opportunities’, and to accept that ‘integration and incorporation are not necessarily empowering. Sometimes exclusion and separation can be valid strategies for the poor’. The structural connections between inequality and poverty need to be recognized, not simply in the sense of acknowledging the connection between high levels of inequality and the persistence of poverty, but also in understanding how diverse forms of inequality impinge on the ‘terms of inclusion’ of poor people in economic and social activity. Especially in view of the dire predictions of a substantial worsening of poverty as a result of the global financial crisis of the late 2000s and the global food crisis that is expected to take hold over the coming decades, understanding the adverse and unequal incorporation of the poor needs to be much more central to academic debates, policy approaches, and political action.

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Notes 1. This system estimates what a US dollar could buy at a given point in time, translates this into other currencies, and maps income levels across countries on this basis. 2. The availability of data only for urban areas (which in the ECLAC report applies to Ecuador, Uruguay, and Argentina) is to be noted as, although the incidence of poverty remains higher in rural areas (as a percentage of the total rural population), the number of people living in poverty in urban areas has increased significantly as a result of both accelerating urbanization and rapid population growth (Ravaillon et al. 2007; IDB 2003a). 3. Much more detailed research is also needed to establish when, where, how and under what circumstances a positive relationship does or can exist between economic restructuring and social outcomes. Among the important variables are the characteristics of the global value chain in question (including the extent to which it is dominated by buyers or by producers); the manner in which it is governed by firms, states, labour organizations, and other non-state actors; and the variegated impact of regulatory innovations such as ‘sustainability’, codes of conduct, and standards relating to fair/ethical trade.

References Barrientos, Armando (2009) ‘Labour Markets and the (Hyphenated) Welfare Regime in Latin America’, Economy and Society, 38:1, pp. 87–108. Barrientos, Stephanie, Gary Gereffi and Arianna Rossi (2008) ‘What are the Challenges and Opportunities for Economic and Social Upgrading?’ concept note for the workshop on ‘Capturing the Gains’, University of Manchester, December. Bauder, Harald (2006) Labor Movement: How Migration Regulates Labor Markets (New York: Oxford University Press). Bernstein, Henry (ed.) (1990) The Food Question: Profits vs. People (London: Earthscan). Byrne, David (1999) Social Exclusion (Milton Keynes: Open University Press). Chant, Sylvia (2008) ‘The “Feminisation of Poverty” and the “Feminisation” of Anti-Poverty Programmes: Room for Revision?’ Journal of Development Studies, 44:2, pp. 165–97. Craig, David and Doug Porter (2003) ‘Poverty Reduction Strategy Papers: A New Convergence’, World Development, 31:1, pp. 53–69. De Haan, Arjan (1999) ‘Social Exclusion: An Alternative Concept for the Study of Deprivation’, IDS Bulletin, 29:1, pp. 10–19. Dollar, David and Aart Kraay (2002) ‘Spreading the Wealth’, Foreign Affairs, 81:1, pp. 120–33. Edward, Peter (2006) ‘Examining Inequality: Who Really Benefits from Global Growth?’ World Development, 34:10, pp. 1667–95. Ferguson, Lucy (2007) ‘Production, Consumption and Reproduction in the Global Political Economy: The Case of Tourism Development in Central America’, unpublished Ph.D. thesis, University of Manchester. Goetz, Ann Marie and Rina Sen Gupta (1996) ‘Who Takes the Credit? Gender, Power, and Control over Loan Use in Rural Credit Programmes in Bangladesh’, World Development, 24:1, pp. 45–63. Harris, Nigel (1995) The New Untouchables: Immigration and the New World Worker (London: Penguin).

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168 Poverty Reduction and the Role of Regional Institutions Helwege, Ann and Melissa B. L. Birch (2007) ‘Declining Poverty in Latin America? A Critical Analysis of New Estimates by International Institutions’, Global Development and Environment Institute, working paper no. 07–02, Tufts University, September. Hickey, Sam and Andries du Toit (2007) ‘Adverse Incorporation, Social Exclusion and Chronic Poverty’, Chronic Poverty Research Centre, Working Paper no. 81, June. Inter-American Development Bank (IDB) (1997) A Strategy for Poverty Reduction (Washington DC: IDB). —— (2003a) ‘Inequality, Exclusion and Poverty for Latin America and the Caribbean: Implications for Development’, by Cesar P. Bouillon and Mayra Buvinic, background document for EC/IDB ‘Seminar on Social Cohesion in Latin America’, Brussels, 5–6 June. —— (2003b) Poverty Reduction and the Promotion of Social Equity: Strategy Document (Washington DC: IDB). —— (2003c) ‘Poverty Reduction and the IDB: An Evaluation of the Bank’s Strategy and Efforts’, Office of Evaluation and Oversight, Washington DC, November. Kaplinsky, Raphael (2005) Globalization, Poverty and Inequality (Cambridge: Polity). Kiely, Ray (2007) ‘Poverty Reduction through Liberalisation? Neoliberalism and the Myth of Global Convergence’, Review of International Studies, 33:3, pp. 415–34. Milanovic, Branko (2003) ‘The Two Faces of Globalization: Against Globalization as we Know It’, World Development, 31:4, pp. 667–83. Payne, Anthony and Nicola Phillips (2009) Development (Cambridge: Polity). Pieterse, Jan Nederveen (2002) ‘Global Inequality: Bringing Politics Back In’, Third World Quarterly, 23:6, pp. 1023–46. Phillips, Nicola (2009) ‘Migration as Development Strategy? The New Political Economy of Dispossession and Inequality in the Americas’, Review of International Political Economy, 16:2, pp. 231–59. Ponte, Stefano (2008) ‘Developing a ‘Vertical ‘ Dimension to Chronic Poverty Research: Some Lessons from Global Value Chain Analysis’, Chronic Poverty Research Centre, Working Paper no. 111, June. Ravaillon, Martin, Shaohua Chen and Prem Sangrula (2007) ‘New Evidence on the Urbanization of Global Poverty’, Population and Development Review, 33:4, pp. 667–701. Reddy, Sanjay (2008) ‘The World Bank’s New Poverty Estimates – Digging Deeper into a Hole’, working paper, Institute for Social Analysis. Reddy, Sanjay and Thomas Pogge (2003) ‘How Not to Count the Poor’, working paper, Institute for Social Analysis. Sala-i-Martin, Xavier (2002) ‘The Disturbing “Rise” in Income Inequality’, NBER Working Paper No. 8904, April. Sassen, Saskia (2001) The Global City: New York, London, Tokyo (Princeton, NJ: Princeton University Press). Sen, Amartya (1999) Development as Freedom (Oxford: Oxford University Press). UN Economic Commission for Latin America and the Caribbean (ECLAC) (2008) Social Panorama of Latin America: Briefing Paper (Santiago: ECLAC). Wade, Robert (2004) ‘Is Globalization Reducing Poverty and Inequality?’ World Development, 32:4, pp. 567–89. World Bank (1990) World Development Report 1990: Poverty (New York: Oxford University Press). —— (2002a) Globalization, Growth, and Poverty: Building an Inclusive World Economy (Washington DC: World Bank). —— (2002b) Global Economic Prospects and the Developing Countries 2002: Making Trade Work for the World’s Poor (Washington DC: World Bank).

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9 The Successes, Failures and Future of Mercosur Marc Schelhase

Introduction The signing of the Tratado de Asunción (Treaty of Asunción) in 1991 marked the foundation of the Mercado Común del Sur (Mercosur) and with it one – and in many ways the – most ambitious integration project in terms of scope.1 Globally, it is the fourth largest trading bloc – after the European Union (EU), the North American Free Trade Agreement (NAFTA), and the Association of South East Asian Nations (ASEAN) – constituting a market of 270 million people (Klonsky and Hanson, 2009, p. 1). From the beginning, the Mercosur project has centred on the political and economic aims of its two biggest member states, Argentina and Brazil. As such, the primary focus of the analysis presented in this chapter will focus on these two, who together account for approximately 92 per cent of intra-Mercosur trade (IDB, 2009, pp. 29, 31). The dynamic between the two countries continues to dominate Mercosur politics, both inside and outside the organization. With the changing landscape of regional integration in the Americas, and new trends and patterns of cooperation and integration emerging, it is now – after nearly two decades of regional integration – timely to reassess the Mercosur project. In order to provide a balanced evaluation, the measures of success applied in this chapter are the original aims and objectives of Mercosur. These were the consolidation of democracy in the region, the integration of the Southern Cone economies into the global trading system, the acceleration and the lock-in of economic reforms while strengthening development in its member states, and, finally, the creation of a regional economic space through moving from a Free Trade Agreement (FTA) to a customs union and later to a common market. The chapter is divided into two sections. First, it reviews Mercosur’s first decade, which is marked by both notable achievements and emerging questions about its continuing existence. Second, it explores the growing tensions within Mercosur in its second decade of integration, focusing on both the internal and external challenges to the organization and how they interrelate. 171

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Mercosur: The first decade Mercosur has its origins in the process of bilateral cooperation between Argentina and Brazil that started in 1985 with the Declaración de Foz de Iguazú (Foz de Iguazú Declaration) by the then Presidents of Argentina and Brazil, Raúl Alfonsín and José Sarney, respectively; it culminated in the Acta de Buenos Aires (Buenos Aires Agreement) in 1990, in which both countries agreed to establish a common market by 1 January 1995.2 The Acta de Buenos Aires in turn gave rise to the Acuerdo de Complementación Económica No 14 (ACE-14 – Economic Complementation Agreement 14), which aimed to facilitate the creation of a common market by confirming previous agreements and by establishing clear timelines for tariff reductions (Hírst, 1999, p. 392). As such, ACE-14 formed the nucleus for the trade liberalization measures contained in the Tratado de Asunción one year later.3 The first decade of the Mercosur project was marked by a convergence of the domestic economic policies and the wider political objectives of its two biggest member states. Here it is important to note that in the first few years of the integration project, Mercosur enabled politicians to push through unpopular economic reforms. The reforms themselves and their implementation sustained the rationale of regional integration while at the same time helping to create a regional economic space after decades of national fragmentation (Schirm, 2002, pp. 131–3). It was this creation of a more open regional market through the systematic reduction in tariff barriers which subsequently attracted a significant inflow of Foreign Direct Investment (FDI) and a restructuring of, for example, production networks along regional lines (Leipziger et al., 1997, p. 599; Pearce and Tavares, 2000, p. 26; Schelhase, 2008, p. 53). The initial growth in intra-regional trade and FDI investment was substantial. By 1998, intra-bloc trade as a percentage of total trade increased to 25 per cent (IDB, 2009, pp. 29–30), and by 1999 annual FDI inflows into Mercosur were over US$ 50 billion; on average this accounted for 17.7 per cent of all FDI received by developing countries in the second half of the 1990s (IDB, 2009, pp. 59–60). These early successes were institutionally supported by the signing of the Protocolo de Ouro Preto (Ouro Preto Protocol) in December 1994 to further develop the provisions of the Tratado de Asunción. This protocol created the two main institutional bodies of Mercosur, namely the Consejo del Mercado Común (CMC – Council of the Common Market), representing ministers of foreign affairs and the economy, and the Grupo Mercado Común (GMC – Common Market Group) as the executive organ of Mercosur, consisting of members of the two ministries plus the central banks.4 The institutional structure of Mercosur reflects the intergovernmental nature of the regional integration process. Unlike the EU, there is no supranational bureaucracy charged with proposing, developing and ultimately implementing a vision or purpose for Mercosur. At an institutional level,

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this is left to the intergovernmental process and, as we will see later on, this weakens the effectiveness of the organization and therefore accounts for some of the challenges and difficulties that Mercosur continues to face. As a result, and building on the significant increase in intra-bloc trade in the first half of the 1990s, the realities of increasing economic interconnectedness and therefore interdependencies resulted in a reconfiguration of organized business interests vis à vis the regional integration process. The business community was initially sceptical about the benefits of Mercosur, primarily based on the lack of competitiveness of the domestic industries after decades of ISI.5 However, with increasing levels of intra-bloc trade and cross-border investments, business interests shifted. The increasing regionalization and globalization of the Southern Cone markets also resulted in a reconfiguration of business-interest representation on the domestic level and the emergence of new regional forms of interest representation.6 Also, the significant inflows of FDI brought the growing presence of Trans-National Corporations (TNCs). The combination of cross-border investments, TNCs investment, widespread privatization (first in Argentina, then in Brazil) and structural reforms on the domestic level fundamentally changed the economic landscape of the Southern Cone (Schelhase, 2008, pp. 97–8) and gave rise to what Phillips (2004) has called the Southern Cone model of regional capitalist development. Consequently, Mercosur in the mid-1990s could be considered a success. This is particularly the case in comparison to other regional integration schemes at the time (Bouzas, 2001, p. 3) and in the context of enabling economic reforms, sustaining economic growth, and the substantial increases in FDI in the region (Schirm, 2002, pp. 117–18; 124–8). As Bouzas notes, ‘in just four years Mercosur made more progress towards intra-regional trade than in the previous three decades. In effect, by January 1995 the bulk of intraregional trade was subject to zero tariff rates’ (Bouzas, 2001, p. 3). The growing economic interdependence between Argentina and Brazil was so significant that the same author has called the period 1995–8 the ‘age of the markets’, where ‘the prevailing view was that Mercosur was so successful that it could move forward pushed solely by private sector interests’ (Bouzas, 2001, p. 4). Yet, both externally and internally, the agenda of Mercosur became increasingly congested. With the formal launch of talks in 1994 to establish a Free Trade Area of the Americas (FTAA) and the start of negotiations in 1999 to conclude a FTA between Mercosur and the EU, the organization was faced with developing agreed common negotiating positions, which are explored further below. This external congestion happened at a time when Mercosur’s internal progress was already lagging behind, something Bouzas has called ‘a widening “relative enforcement gap”’ (2001, p. 4), and its aims to deepen integration by 2000 (Agenda 2000) were stagnating (Bouzas, 2001, p. 4). At the same time, the global economic conditions exacerbated the growing internal tensions. The region had to cope with the fall-out from the

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Mexican Peso crisis of 1994, which saw the end of the fixed-exchange rate regime and a devaluation of the Mexican currency. In addition, the 1997 Asian crisis and the crisis in Russia in 1998 weakened the confidence of investing in, and lending to, emerging economies (Schelhase, 2008, p. 92). The turmoil in the international economic environment had a direct impact on Mercosur countries, and here in particular Argentina and Brazil. An important factor was also the substantial devaluation of the Brazilian Real in 1999, as a result of the end of its peg against the US Dollar. With a depreciating Real, Brazilian exports to Argentina became more competitive, and with diverging currency regimes the Argentine Peso, still pegged to the US Dollar, appreciated and made Argentine exports increasingly expensive with a direct impact on its trade balance with the rest of Mercosur and Brazil in particular (IDB, 2004, p. 24). However, it is important to point out that devaluation of the Real was just one factor contributing to the deteriorating economic climate (Bouzas, 2001, p. 5). Indeed, persistently high unemployment levels in Argentina (14.2% in 1999) and negative GDP growth rates (–3.39% in 1999 and ⫺ 0.79% in 2000) combined with a fiscal and monetary policy constrained by a currency peg, demonstrated the increasingly difficult situation the country was in (IDB, 2004, p. 20). In contrast, Brazil’s unemployment rate was 7.6 per cent in 1999 with a GDP growth rate of 0.79 per cent in 1999 and 4.36 per cent in 2000. At the same time, intra-Mercosur trade collapsed from 25 per cent of total trade in 1998 to 11.5 per cent in 2002 with the volume of trade in US$ billions shrinking by 50 per cent during the same period (IDB, 2009, p. 29). Furthermore, overall levels of FDI dropped by approximately 70 per cent between 1999 and 2003, with FDI inflows into Argentina being particularly badly hit in the years 2001–3 due to the country’s financial crisis (IDB, 2009, pp. 59–60). This increasingly difficult economic climate provides the context and explanation for the growing tensions within Mercosur. Whereas the initial phase of the regional integration project was characterized by the economic and political convergence of the countries’ aims vis à vis regional integration, the second half of the 1990s was now characterized by an increasing divergence of these aims as a direct result of domestic economic problems. As a consequence, the CET came increasingly under pressure, both in terms of lowering it to make extra-bloc trade (meaning cheaper imports in the case of Argentina) and in the form of tariff increases as anti-dumping measures (in the case of Paraguay and Uruguay) (Phillips, 2004, pp. 94–5). As Phillips (2004, p. 94) puts it, ‘unilateral changes to the rules governing the bloc proliferated further and government responses were progressively atomised rather than collective’. At one point, Argentina’s Minister of the Economy Domingo Cavallo even suggested suspending the Mercosur project of a customs union and eventual common market and focusing on an FTA instead (Schelhase, 2008, p. 92). These tensions finally culminated in the economic crisis in

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Argentina in 2001/2, in the wake of which the US Dollar peg for the Peso was abandoned and the Peso devalued. The crisis in Argentina marks the end point of the first decade of the evolution of Mercosur and in many ways reflects the internal problems and challenges of regional integration in the Southern Cone. However, it also provides the link to the next section of this chapter, which starts by looking at the re-launch of Mercosur in the aftermath of the crisis.

Mercosur’s problems in context: The challenge of coordination The economic crisis in Argentina in 2001/2 followed an attempt in 1999/2000 to re-launch Mercosur by focusing on comprehensive institutional strengthening, an ambition to broaden the regional integration agenda and, above all, re-emphasizing the role of Mercosur as a platform for a regional developmental model (Mecham, 2003, pp. 369–70; Phillips, 2001, pp. 565–6). Arguably, the most important aspect of this re-launch was the focus on macro-economic coordination between Argentina and Brazil in particular, called a ‘mini-Maastricht’ by the presidents of both countries (Phillips, 2001, pp. 573–4). Yet, with the Argentine crisis, this revitalization and refocusing of Mercosur ground to a halt. What followed on from the crisis is best described as an initial convergence of Argentina and Brazil’s views on the priorities for the regional project, followed by an increasing divergence with regard to the economic, political, and social dimensions of the project. To reflect this, the following section of the chapter is divided into three broad themes in order to clearly delineate the different strands of the argument. First, there are the institutional challenges Mercosur is facing. Second, the domestic economic policies, and with them the economic ‘vision’ of what the regional project should achieve, have increasingly diverged. Third, Mercosur is facing a range of external challenges, both political and economic, which reinforce the problems and challenges that will be discussed in relation to the first two themes. Ironically, in institutional terms the Argentine crisis of 2001/2 could – initially at least – be understood as positive for the reinvigoration of the regional project. Indeed, as O’Keefe notes, ‘the crisis provoked by the collapse of the Argentine financial system in January 2002 underscored that Argentina’s real friends in its hour of need were its Mercosur partners’, with Brazil initiating the removal of further tariff and non-tariff barriers (O’Keefe, 2003, p. 8). Moreover, for Argentina this also marked a shift away from a focus on the US (especially towards the end of the convertibility regime) and the International Monetary Fund (IMF) in the direction of a more regional focus in terms of economic and social development.7 The overall context was therefore – at least temporarily – favourable to another re-launch of Mercosur, also supported by the strong support given to the regional project by – in 2002 – Brazil’s then newly elected President Luiz Inácio Lula da Silva and followed in 2003 by Argentina’s new President

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Néstor Kirchner. The desire was to return to the previously high levels of intra-bloc trade and cross-border investments by accelerating regional political and economic integration and in the process creating and strengthening globally competitive industries (O’Keefe, 2003, p. 3). The emphasis was placed on macro-economic policy coordination now that all Mercosur members had similar currency regimes (O’Keefe, 2003, p. 3), on the more robust implementation of Mercosur-related legislation, and also on regional infrastructure projects to physically integrate the region better and facilitate trade (Schelhase, 2008, p. 96). Yet, despite this short revival and re-launch of the integrationist agenda, to date key problems have remained unresolved, partly because different domestic economic agendas resurfaced (as we will see later in this chapter), but also because of the clear lack of long-term political commitment to make the institutional structure of Mercosur work more effectively and thus deepen the integration process. Essentially, the organization continues to suffer from (very) weak institutional structures. These are intergovernmental rather than supranational in character, as mentioned above. The promised strengthening of the capacity of the Mercosur Secretariat to include the monitoring of technical norms and the implementation of Mercosur decisions (Schelhase, 2008, p. 10) has been weakened by the decision of member states to maintain a veto about what work the Secretariat will be allowed to conduct in this area (Bouzas, 2008, p. 360). The primary motivation here is to maintain national vetoes but also to prevent a more centralized decision-making capacity, which would potentially weaken national autonomy (Kaltenthaler and Mora, 2002, pp. 72–97) through the creation of a ‘common vision’, as Bouzas (2008, p. 360) calls it. The desire to maintain national control over the integration process is also underlined by the poor implementation of Mercosur decisions and norms into national law. This is due to the provision in Article 40 of the Protocolo de Ouro Preto that stipulates how decisions made by Mercosur institutions have to be incorporated into the domestic law of each member state before they can enter into force. This three-step process asks member states first to take the necessary measures to incorporate the decisions into domestic law, second to inform the Mercosur Secretariat that they have been incorporated, and third – once the decisions have been incorporated in all member states – the Secretariat then informs all member states accordingly, after which it takes 30 days for the decisions to actually take effect. Thus, attempts by the Common Market Group and the Common Market Council to improve the implementation process and to widen the scope of Mercosur to include, for example, intra-regional investment protection, are curtailed, as the resolutions and decisions of both bodies cannot supersede the provisions contained in Article 40, unless the Protocolo de Ouro Preto is revised to remove the national ‘second-level’ veto contained therein (Bouzas, 2008, pp. 361–3). Furthermore, the widening of the Mercosur process has

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resulted in increasing the backlog of resolutions and decisions requiring incorporation at the national level. As Bouzas summarizes, ‘the effectiveness of the rule-making process when rules require legislative approval has been no better than in the case of norms that do not require such action. On the contrary, the ‘horizontal’ expansion of the Mercosur agenda has simply multiplied the number of rules that remain unadopted at the national level’ (Bouzas, 2008, p. 363). Similarly, the arbitration process in Mercosur has evolved from the Brasilia Protocol in 1991 through the Protocolo de Ouro Preto to the Protocolo de Olivos (Olivos Protocol) in 2002, which came into force in 2004.8 The Protocolo de Olivos is important in this regard as it enhances the arbitration process by strengthening the ad hoc tribunals set up to deal with disputes between member states in relation to their obligations under Mercosur’s treaties and protocols, and also establishes a Tribunal Permanente de Revisión (Permanent Review Tribunal) to achieve a more consistent interpretation of Mercosur norms (O’Keefe, 2003, pp. 10–11). The protocol also enables the tribunal to give advisory opinions to, for example, lower courts, thus potentially increasing the consistency of the application of Mercosur norms. A key remaining weakness of the arbitration process, however, is that it is fully open only to state actors, thus making it very difficult for individuals and companies (among others) to enforce Mercosur obligations vis à vis a member state (Bouzas, 2008, pp. 363–4; O’Keefe, 2003, pp. 9–11). Moreover, as the dispute between Argentina and Uruguay over the environmental impact of the Botnia paper mill shows, the dispute settlement procedure is not fully trusted by the member states themselves. In the case of the paper mill, Uruguay’s claim in relation to Argentina’s refusal to stop protesters blocking a key bridge, thus inhibiting the free movement of trade and therefore violating its obligations under Mercosur, was submitted to an ad hoc tribunal which ruled against Argentina. However, the tribunal and later on the Permanent Review Tribunal imposed no sanctions. Additionally, both countries also went to the International Court of Justice in The Hague in order to pursue the case, thus effectively pursuing a dual-track strategy both inside and outside the Mercosur framework (IDB, 2009, p. 117; The Economist, 2009d). The next section of the chapter will now focus on the economic dynamics of the regional integration process to see how the institutional challenges and difficulties outlined above are linked to the economic challenges the bloc has been facing since the 2001/2 crisis. In terms of the immediate effects on Mercosur, the Argentine devaluation removed the Brazilian exchange rate advantage and made Argentine exports significantly more competitive. The resulting economic expansion resulted in impressive economic growth rates of 10.82 per cent of GDP in 2003, albeit from a relatively low level due to the financial crisis and years of economic stagnation before the crisis (IDB, 2004, p. 20). This was accompanied by a recovery in exports from 2003 onwards, largely driven by the global rise in

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commodity prices, from which Argentina and Brazil benefited significantly (IDB, 2009, p. 34). The resulting tax revenues and foreign currency inflows contributed substantially to the economic recovery of Argentina in particular. It enabled the government of President Néstor Kirchner to pursue a broadly populist economic and social policy, combined with an increasing role for the state in the economy and a move away from Menem’s neo-liberal policy agenda. This was initially supported by spare capacity in the economy and the cancellation and subsequent restructuring (or, in the case of money owed to the IMF and the Paris Club, repayment or planned repayment) of external debt originally defaulted on as a result of the financial crisis (The Economist, 2005, 2006, 2008a, 2008b). Although initially successful, Kirchner’s policies have increasingly run into difficulties. The conversion of energy prices from the US Dollar into the Peso combined with price controls (the latter a measure designed to keep inflation under control) has resulted in energy prices that are on average 40 per cent lower than elsewhere in the region. This has resulted in a lack of investment in energy generating capacity at a time when demand is soaring due to high economic growth (The Economist, 2006, 2007). Predictably, this led to energy shortages and outages, affecting industrial output and requiring Argentina – controversially – to disrupt natural gas deliveries to Chile and to import electricity from Brazil and Uruguay (The Economist, 2007). This brief analysis of Argentina’s economic and fiscal policies is important for two reasons. First, it highlights the divergence of the economic and fiscal policies of Argentina and Brazil. In contrast to Argentina, Brazil has continued to pursue a set of (neo)liberal policies aimed at providing economic stability, a stable investment environment, and predictable political environment, while ensuring social development and reduction of poverty (The Economist, 2008c, 2008d). Furthermore, funded by its growing currency reserves, Brazil announced an early repayment of its debt owed to the IMF in 2005, a move followed by Argentina, as noted earlier. Despite the financial crisis that started in 2007 and a subsequent fall in global commodity prices, Brazil has become the first country in Latin America to emerge from a short recession that started in the last quarter of 2008 and lasted until the first quarter of 2009 (The Economist, 2009c). Indeed, Brazil has now agreed, for the first time in its history, to participate in the planned capital increase for the IMF, so in effect lending money to the organization (MercoPress, 2009a). Second, this divergence has resulted in the emergence of new challenges for the regional integration process. As a consequence of Argentina’s poor relationship with international investors, primarily due to its protracted renegotiations of debt defaulted on during the 2001/2 crisis, access to international capital markets was very limited. This only changed from 2008 onwards as a result of renewed attempts by President Cristina Fernández de Kirchner, who succeeded her husband in 2007, to reach a settlement with creditors and manage the debt more effectively (The Economist, 2008b). Yet,

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despite these measures, the credibility of Argentine economic management is still weak. Among other things, this is due to the continuing manipulation of the inflation rate, estimated at 15 per cent (twice the official rate), an unsuccessful attempt to repeatedly raise taxes on agricultural exports to increase tax revenue and thus shore up the budget, and the nationalization of the private pension funds in late 2008 (Raszewski, 2008; Schelhase, 2008, pp. 147–9; The Economist, 2009a, 2009b). Consequently, in order to raise capital, Argentina has in recent years borrowed approximately US$ 8.4 billion from Venezuela in the form of bond issues, albeit at an increasingly punitive interest rate (The Economist, 2008b; Raszewski, 2008). In addition to this dependence on Venezuelan finance, the severely restricted access to other external financing, and an economic slowdown due to the global financial crisis, the Argentine government has increasingly reinforced a degree of economic nationalism that is directly affecting Mercosur. Measures have focused on reducing imports and stimulating exports through, for example, non-tariff barriers such as delayed issue of import permits and other import restrictions (MercoPress, 2009f). These measures, coupled with a weakening Peso, have resulted in a very significant increase in the country’s trade surplus for the first half of 2009 to US$ 9.86 billion (MercoPress, 2009c). Although Brazil is openly complaining about the Argentine measures (MercoPress, 2009b), its smaller partners in Mercosur – Paraguay and Uruguay – are equally, if not more, affected by the import restrictions imposed by Argentina and are equally concerned about similar measures that Brazil has imposed on, for example, Uruguayan dairy exports to the country (MercoPress, 2009d, 2009e). These tariff and non-tariff barriers to intraMercosur trade undermine the rationale of the integration project and point to both Argentina and Brazil’s reluctance to provide a more positive economic framework for their two substantially smaller partners. Additionally, both countries increasingly aim to solve disputes through sectoral agreements, as has been the case in the automobile industry from the inception of Mercosur, thus favouring bilateral agreements to Mercosur-wide solutions (MercoPress, 2009e). Similarly, to protect their industries from a sudden increase in imports, Argentina and Brazil in 2006 agreed on a Competitive Adaption Mechanism outside the Mercosur framework (Hornbeck, 2006, p. 7), thus harming intra-regional trade and integration. This observation is also reflected in the development of Mercosur’s intra-regional trade patterns since the 2001/2 crisis. In terms of the effects on the bloc, intra-regional trade has recovered to 15.3 per cent of total trade in the first half of 2008, yet this is still significantly lower than the 25 per cent achieved in 1998 (IDB, 2009, p. 29).9 This relatively low level of intra-regional trade is also reflected in the share of exports to Mercosur as a percentage of total exports for each country. In 2008, for Argentina exports to Mercosur represented 22.3 per cent of total exports, for Brazil the figure was 11.5 per cent, for Paraguay a high 51.1 per cent (reflecting

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the particular characteristics of its economy), and for Uruguay 26 per cent (IDB, 2009, pp. 38–51). Although significant in themselves, in the context of a regional integration project that aims to become a full customs union and eventually a common market, these figures are low (except in the case of Paraguay). They reflect the importance of extra-regional trading partners to Mercosur member states and, as they are still substantially below the levels achieved by the end of the 1990s, an increasing diversification rather than a consolidation of trading partners and the inability of members to deal effectively with the bloc’s asymmetries.10 Levels of FDI have also recovered, but in 2007 Mercosur’s share of 8.3 per cent of all FDI received by developing countries was still below the average of 9.4 per cent for the period 2001–5 and the 17.7 per cent share recorded during the height of privatizations in Argentina and Brazil in the 1990s (IDB, 2009, pp. 59–60). Although FDI inflows into Argentina have gradually recovered, Brazil accounts for approximately 75 per cent of all FDI inflows into Mercosur between 2000 and 2008 (IDB, 2009, pp. 60–1). Conversely, Brazil is now the biggest investor in Argentina, partly as a result of the Mercosur integration, but also as a result of a fall in Argentine asset prices in the wake of the 2001/2 crisis (IDB, 2009, p. 62). Indeed, these tensions vis à vis the internal market mirror the problems encountered with the CET and explain its only partial implementation, resulting in an increasingly ‘perforated’ tariff. As Mesquita Moreira (2008, p. 14) argues, ‘the main problem with the Mercosur … is … one … of policy design … [The CET] closely reflects Brazil’s industrial interests’. As the CET on capital goods of 16 per cent is relatively high, the result of fully implementing it would be to ‘[shift] demand from producers outside the bloc to producers in Brazil … and … [thus] asking consumers in Uruguay and Paraguay to help pay the extra cost without getting any of the benefits’ (Mesquita Moreira, 2008, p. 14). Yet, without a fully functioning CET, the benefits of a common market in terms of economic growth and inward investment cannot be fully realized (Mesquita Moreira, 2008, pp. 14–15), thus undermining Mercosur’s overall potential. Following on from this focus on the internal economic dynamics of Mercosur, the next section of the chapter will map some of the external challenges facing the organization. Similar to the institutional and internal economic challenges, Mercosur’s external agenda is, as previously noted, equally complex and congested. Throughout the 1990s and into the new millennium the twin dynamics that dominated Mercosur’s external trade agenda, and which to some extent pushed the member states to attempt to develop common negotiating positions, were that of the FTAA and Mercosur–EU FTA negotiations (Schelhase, 2005). With the FTAA process at the time of writing still stalled, what has emerged from the failed FTAA is the increasingly important role of Brazil as a regional leader, and Mercosur is seen by Brazil as a useful vehicle to

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provide that regional leadership (Schelhase, 2005, p. 1). However, as noted above, the economic tensions between the member states (partially caused by Brazil’s trade preferences being strongly reflected in the way the CET is established, for example) reflect Brazil’s unwillingness to provide the public goods necessary not just to sustain but to propel the project forward. As the most recent Mercosur report of the Inter-American Development Bank (IDB) very succinctly summarizes: [I]n the issue of asymmetries, while Paraguay, Uruguay, and Argentina act as petitioners [in improving the treatment of asymmetries], Brazil is capable of selecting, filtering, and driving the initiatives it considers most realistic or least expensive in light of its own interests. In this sense, its leadership is purely reactive (IDB, 2009, p. 68) Furthermore, especially for Uruguay but also Paraguay, the increasing amount of bilateral agreements between Argentina and Brazil are undermining the core functions of Mercosur, thus diminishing its benefits by encouraging fragmentation (IDB, 2009, p. 67). As a result, Uruguay has repeatedly sought to be allowed to negotiate bilateral trade agreements outside the Mercosur framework, something that is not possible under the bloc’s founding treaties, in order to overcome the perceived lack of progress and diminishing returns in the context of Mercosur. However, these attempts have been repeatedly blocked (MercoPress, 2009g). The Mercosur–EU FTA, which is at the time of writing (summer 2009) still being negotiated, and which was initiated and at times largely sustained by the business communities of the EU and Mercosur, has also suffered repeated attempts at re-launch amid tensions over agricultural subsidies in relation to the EU and industrial goods and services in relation to Mercosur.11 These are areas that have also halted the negotiations to conclude the World Trade Organization’s (WTO) Doha round of trade negotiations. The Mercosur–EU FTA was put on the back burner following the collapse of the FTAA and the aim to solve the outstanding disputes in the context of the WTO negotiations. However, with these now stalled, the EU and Mercosur will try to start the negotiations again in late 2009 in order to reach an agreement in 2010 (Radowitz, 2009). An FTA between Mercosur and the EU would only be Mercosur’s second, after it concluded an agreement with Israel in 2007 and after embarking on South–South initiatives with Southern Africa, Asia – and here in particular India – and the Middle East (Schelhase, 2008, p. 151). Yet, over recent years another set of external challenges has emerged in the form of a gradual merger of the Comunidad Andina (CAN – Andean Community) with Mercosur, to form the Unión de Naciones de Suramérica (UNASUR – Union of South American Nations), and the attempt to enlarge Mercosur through the inclusion of Venezuela.12 In the case of UNASUR, the

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overall aim is to develop an organization that covers all of Latin America, thus potentially providing a counterweight to any future efforts to resuscitate the FTAA process. However, it remains to be seen to what extent this new integration initiative will bear fruit, particularly as the CAN has only recently started to negotiate its own FTA with the EU, thus somewhat challenging Mercosur’s efforts in this area.13 Moreover, the summit in Ecuador’s capital, Quito, in August 2009, was marked by conflict between Colombia and Venezuela about American bases in Colombia. Brazilian attempts to mediate failed, and UNASUR as an integration project now looks decidedly weak (The Economist, 2009e). Furthermore, Mercosur’s decision in 2006 to admit Venezuela as a new member has still not been ratified by all member states. The formal ratification of its accession to the bloc has been delayed in the Brazilian Senate, and Paraguay’s President Lugo has also withdrawn the necessary ratification bill from parliamentary deliberation due to increasing concerns about it being voted down (MercoPress, 2009h). The critique in both countries centres on President Chávez’s increasingly harsh treatment of media outlets critical of his government, the treatment of the opposition in Venezuela, and more broadly Chávez’s commitment to democracy (MercoPress, 2009h). Indeed, membership of Venezuela is problematic in the light of Mercosur’s commitment to democracy and fully functioning democratic institutions, most recently reaffirmed by the Protocolo de Ushuaia (Ushuaia Protocol) in 1998, following the attempted military coup in Paraguay.14 Bearing in mind that one of Mercosur’s explicit aims was to consolidate democracy in the Southern Cone, Venezuela’s full membership, despite being based on very tangible trade and resource interests by both Argentina and Brazil, would be problematic, at least if Chávez continues his current political and economic polices, both inside and outside Venezuela.15

Concluding remarks: Mercosur – Entre la Realidad y la Utopía16 When looking back at the definition of success introduced at the beginning of this chapter it becomes clear that Mercosur has achieved some success, experienced a few failures, and in many respects faces an uncertain future. The aim to lock in economic reforms in the region was achieved, although the 2001/2 crisis in Argentina and a shift to the left under the Kirchner presidencies has brought about an increasingly pronounced divergence of views in Argentina and Brazil in relation to economic policy and about the wider role of Mercosur as a developmental project. Even though the bloc has consolidated democracy in its member states, the planned inclusion of Venezuela – although currently on hold – might test the bloc’s commitment. The current attempts to widen and deepen Mercosur internally, for example through the planned introduction of a directly elected parliament with mainly advisory capacity17 and the setting-up of modestly funded structural

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funds to aid economic and social development and cohesion,18 and externally, through its trade negotiations, its planned merger with UNASUR, its incorporation of Venezuela and its South–South initiatives have deflected from its main weakness. This is the inability of its members, particularly Argentina and Brazil, to implement the bloc’s original aim of achieving a fully functioning free-trade area, followed by a customs union and complemented by a common market, in the wider context of a comprehensive development agenda. As such, Mercosur’s ambitious external agenda has not provided the glue that holds the organization together (Phillips, 2001, p. 577), but has provided a fig leaf to cover the inability of the member states to implement the internal reforms necessary to make Mercosur effective and develop a clear and credible vision for the organization (Carranza, 2006, pp. 802–29). As Enrique Iglesias, former President of the IDB, notes, ‘[Mercosur has] over ambitious targets and little pragmatism. … We are trying to refine very ambitious objectives which in practice are difficult to achieve’ (MercoPress, 2009g). Mercosur as a significant developmental project is drifting as a result of members’ diverging political and economic views about its aims and objectives. The integration process is too dependent on presidential initiatives, and successive attempts to re-launch the organization have not addressed the institutional weaknesses and the lack of political will previously discussed. However, by implementing the original aims of Mercosur, the member states would provide a much more effective framework for significantly increasing intra-regional trade, thus providing political and economic incentives to create stronger and more robust regional governance structures while supporting development. In turn, this would also better utilize the existing efforts of the private sector and other civil society actors aimed at creating and sustaining a vibrant, dynamic, and expanding regional vision, potentially encompassing the whole of South America.

Notes I would like to thank Andrew Cooper, Gordon Mace, and Tim Shaw for the invitation to participate in the colloquium and the participants for their comments and encouragement. Although I am affiliated with King’s College London, Defence Studies Department, Joint Services Command and Staff College at the UK Defence Academy, the analysis, opinions, and conclusions expressed or implied in this chapter are mine and do not necessarily represent the views of the JSCSC, the UK Ministry of Defence, or any other government agency. 1. The founding members of Mercosur – and still the only full members of the organization – are Argentina, Brazil, Paraguay, and Uruguay. At the time of writing (summer 2009), Venezuela’s full membership is still pending ratification in Brazil and Paraguay (Klonsky and Hanson, 2009, p. 1). The delay is mainly due to concerns about Venezuela’s democratic credentials under Hugo Chávez’s increasingly authoritarian leadership. Bolivia, Chile, Colombia, Ecuador, and Peru are associated members.

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184 The Successes, Failures and Future of Mercosur 2. It is important to note that a common market is the logical end point of an integration process that started as an FTA, followed by a customs union with a Common External Tariff (CET), which then evolves into a common market with the free movement of goods, services, and labour. 3. For more information see Acta para la Integración Argentino-Brasileña ⬍ http:// www.iadb.org/Intal/instrumentos/picab1.htm:; Tratado de Integración, Cooperación y Desarrollo ⬍ http://www.iadb.org/Intal/instrumentos/picab2.htm ⬎; Acta de Buenos Aires ⬍ http://www.iadb.org/Intal/instrumentos/picab3.htm ⬎; Acuerdo de Complementación Económica No 14 ⬍ http://www.sice.oas.org/Trade/ARG_ BRA/ARGBRA_ind_s.asp ⬎; Tratado de Asunción ⬍ http://www.sice.oas.org/Trade/ MRCSRS/MRCSRINS.ASP ⬎. For a discussion of the initial process of integration see also Phillips (2004, pp. 87–8). 4. In addition, the Comisión de Comercio del Mercosur (CCM – Mercosur Trade Commission), the Comisión Parlamentaria Conjunta (CPC – Joint Parliamentary Commission), the Foro Consultivo Económico-Social (FCES – Economic and Social Consultative Forum), and the Secretaría Administrativa del Mercosur (SAM – Mercosur Administrative Secretariat) were also created. For the protocol see Protocolo de Ouro Preto ⬍http://www.mercosur.org.uy/⬎. 5. A notable exception is the chemical industry (see Schelhase, 2008, pp. 99–113). 6. Examples for this on the level of Mercosur are the Consejo Industrial de Mercosur (CIM – Industry Council of Mercosur) and the Consejo de Asociaciones de la Industria Ouímica del Mercosur (CIQUIM – Chemical Industry Council of Mercosur). 7. For a more in-depth discussion of the role of the IMF in relation to the Argentine financial crisis, see Mussa (2002). 8. For the protocol see Protocolo de Olivos ⬍http://www.mercosur.int⬎. 9. It is important to note that the share of intra-regional trade might be underestimated, as extra-regional trade in US$ terms has grown substantially due to the increase in commodity prices, whereas commodities are significantly less important for intra-regional trade, thus potentially undervaluing intra-Mercosur trade (IDB, 2009, p. 29). 10. For a discussion of attempts to strengthen regional production networks in order to deal with the economic asymmetries in Mercosur see IDB (2009, p. 82–90). 11. For an in-depth discussion of the Mercosur–EU FTA and the Mercosur–EU Business Forum see Schelhase (2008, Chapter 5). 12. CAN was founded in 1969 as the Pacto Andino by the Cartagena Agreement and renamed CAN in 1997. Its members are Bolivia, Columbia, Ecuador, Peru, and Venezuela. In addition to the member states of CAN and Mercosur, Chile, Guyana, and Suriname are also members of UNASUR. 13. For an overview for the CAN–EU negotiations see the CAN website: ‘Negociaciones CAN-UE para un Acuerdo de Asociación’ ⬍http://www.comunidadandina.org/ exterior/can_ue.htm⬎. 14. For the protocol see Protocolo de Ushuaia ⬍http://www.mercosur.int/⬎. 15. For a discussion of Mercosur in the wider context of regional integration in the Americas see Schelhase (2011). 16. With reference to Campbell et al. (1999). 17. For the Mercosur Parliament see Parlamento del Mercosur ⬍http://www. parlamentodelmercosur.org/index1.asp⬎. 18. The Fondo para la Convergencia Estructural del Mercosur (FOCEM – Mercosur Structural Convergence Fund) was agreed in 2005 and was implemented in 2006 for an initial duration of ten years. The total money available annually

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from Year 3 onwards is US$ 100 million, with 27 per cent being contributed by Argentina, 70 per cent by Brazil, 1 per cent by Paraguay, and 2 per cent by Uruguay. The funds will be disbursed to the member states according to fixed shares. Paraguay will receive 48 per cent of the money available, Uruguay 32 per cent, and Argentina and Brazil 10 per cent each. For FOCEM see Fondo para la Convergencia Estructural del Mercosur ⬍http://www.mercosur.int/focem⬎.

References Bouzas, Roberto (2001) ‘Mercosur Ten Years After: Learning Process or Deja-Vu?’. Mimeo. Buenos Aires: FLACSO/Argentina. Bouzas, Roberto (2008) ‘Regional Governance Institutions, Asymmetries, and Deeper Integration in Mercosur’, in Juan S. Blyde, Eduardo Fernández-Arias and Paolo Giordano (eds) Deepening Integration in Mercosur – Dealing with Disparities. Washington: IDB, pp. 355–79. Campbell, Jorge (ed.) (1999) Mercosur – Entre la Realidad y la Utopía. Buenos Aires: Grupo Editor Latinoamericano. Carranza, Mario E. (2006) ‘Clinging Together: Mercosur’s Ambitious External Agenda, its Internal Crisis, and the Future of Regional Economic Integration in South America’, Review of International Political Economy 13 (5), pp. 802–29. Hírst, Mónica (1999) ‘Brasil – Argentina a la sombra del futuro’, in José María Lladós and Samuel Pinheiro Guimarães (eds) Perspectivas Brasil y Argentina. IPRI, pp. 387–99. Hornbeck, J. F. (2006) Mercosur: Evolution and Implications for US Trade Policy. Washington, DC: Congressional Research Service – The Library of Congress. Inter-American Development Bank (2004) Mercosur Report No. 9. Buenos Aires: IDB-INTAL. Inter-American Development Bank (2009) Mercosur Report No. 13. Buenos Aires: IDB-INTAL. Katenthaler, Karl C. and Frank Mora (2002) ‘Explaining Latin American Economic Integration: The Case of Mercosur’ with Frank Mora. Review of International Political Economy. Vol. 9, No. 1: 72–97. Klonsky, Joanna and Stephanie Hanson (2009) Mercosur: South America’s Fractious Trade Bloc. Council on Foreign Relations. Leipziger, Danny M., Claudio Frischtak, Homi J. Kharas and John F. Normand (1997) ‘Mercosur: Integration and Industrial Policy’, The World Economy 20 (5), pp. 585–603. Mecham, Michael (2003) ‘Mercosur: A Failing Development Project?’ International Affairs 79 (2), pp. 369–87. MercoPress (2009a). ‘Lula da Silva Proud to Lend Money to the IMF’, MercoPress, 4 April [online edition]. MercoPress (2009b). ‘Brazil Threatens to Take Argentina to WTO on Import Licences’, MercoPress, 4 July [online edition]. MercoPress (2009c). ‘Brazil could Restrict Credit to Argentina in Retaliation for Trade Barriers’, MercoPress, 11 July [online edition]. MercoPress (2009d). ‘Uruguay Rejects Proposals to Grant Mercosur More Powers’, MercoPress, 22 July [online edition]. MercoPress (2009e). ‘Uruguay Criticizes Mercosur Trade Barriers and Integration Delay’, MercoPress, 24 July [online edition]. MercoPress (2009f). ‘Argentina Ignores Mercosur; Rallies Domestic Support for Protectionist Policies’, MercoPress, 29 July [online edition].

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186 The Successes, Failures and Future of Mercosur MercoPress (2009g). ‘The Mercosur Dream has “Over Ambitious Targets and Little Pragmatism”’, MercoPress, 13 August [online edition]. MercoPress (2009h). ‘Paraguayan Government Withdraws Bill for Venezuela’s Mercosur Incorporation’, MercoPress, 14 August [online edition]. Mesquita Moreira, Mauricio (2008) ‘Brazil’s Trade Policy: Old and New Issues’, INT Working Paper 11. IDB. Mussa, Michael (2002) Argentina and the Fund: From Triumph to Tragedy. Washington: Institute for International Economics. O’Keefe, Thomas Andrew (2003) ‘A Resurgent Mercosur: Confronting Economic Crises and Negotiating Trade Agreements’, The North-South Agenda – Paper Sixty. Miami: North-South Center. Pearce, Robert and Ana Teresa Tavares (2000) ‘Emerging Trading Blocs and their impact on The Strategic Evolution of Multinationals’, Managerial Finance 26 (1), pp. 26–40. Phillips, Nicola (2001) ‘Regionalist Governance in the New Political Economy of Development: “Relaunching” the Mercosur’, Third World Quarterly 22 (4), pp. 565–83. Phillips, Nicola (2004) The Southern Cone Model. London and New York: Routledge. Radowitz, Bernd (2009) ‘Spain, Argentina Push for restart of Mercosur-EU Talks’. Dow Jones Newswire, 9 February. Available at www.bilaterals.org. Raszewski, Eliana (2008) ‘Fernández May Elude Curbs on Argentine Pension Funds (Update 1)’. Bloomberg.com, 19 November [online edition]. Schelhase, Marc (2005) ‘Mercosur’s External Trade Agenda: Regional and Global Linkages’, Evian Group Policy Brief, July. Schelhase, Marc (2008) Globalization, Regionalization and Business. Basingstoke; New York: Palgrave Macmillan. Schelhase, Marc (2011) ‘The Changing Context of Regionalism and Regionalization in the Americas: Mercosur and Beyond’, In T. Shaw, S. Cornelissen and J. A. Grant (eds) The Research Companion to Regionalisms. Aldershot: Ashgate. Schirm, Stefan A. (2002) Globalization and the New Regionalism – Global Markets, Domestic Politics and Regional Cooperation. Cambridge: Polity Press. The Economist (2005). ‘Screeching to the Precipice’, The Economist, 24 February [online edition]. The Economist (2006). ‘Tucking into the Good Times’, The Economist, 19 December [online edition]. The Economist (2007b). ‘Caught Short’, The Economist, 14 June [online edition]. The Economist (2008a). ‘Satisfying the Creditors’, The Economist, 4 September [online edition]. The Economist (2008b). ‘Better Late than Never’, The Economist, 25 September [online edition]. The Economist (2008c). ‘The Delights of Dullness’, The Economist, 17 April [online edition]. The Economist (2008d). ‘Making the Grade’, The Economist, 2 May [online edition]. The Economist (2009a). ‘A Chance to Change Course’, The Economist, 18 June [online edition]. The Economist (2009b). ‘A Vote for Change’, The Economist, 30 June [online edition]. The Economist (2009c). ‘Late In, First Out’, The Economist, 14 September [online edition]. The Economist (2009d). ‘Pulp Friction’, The Economist, 10 March [online edition]. The Economist (2009e). ‘Lula and his Squabbling Friends’, The Economist, 13 August [online edition].

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10 Ruling the North American Market: NAFTA and its Extensions Louis Bélanger and Richard Ouellet

In 1994, the governments of Canada, Mexico, and the US created what was at that time a very modern free trade area by promulgating the entry into force of NAFTA, the North American Free Trade Agreement. NAFTA was essentially an amended version of the then five-year-old Canada–United States Free Trade Agreement (CUSTA). The new agreement not only enlarged CUSTA by adding Mexico as a third party; it made economic integration stronger and deeper in the fields already opened to free trade and it covered new sectors and new trade-related issues. Aimed at creating ‘an expanded and secure market for the goods and services produced in [the] territories’ of the signatory governments and at ‘ensur[ing] a predictable commercial framework for business planning and investment’ (NAFTA, 1993, Preamble), NAFTA delivered the main commercial and economic results it was designed to produce. It eliminated a fair number of non-tariff barriers between Canada, the US, and Mexico. With the exception of the dairy, poultry, egg, and sugar subsectors, NAFTA gradually led to the elimination of the tariff duties that were previously applicable between the three countries. It also brought the three national governments into a new era of cooperation and harmonization of standards, regulations, and policies. Chapter 4 and Annex 401 created a new regional set of rules of origin that is easy to apply and that allowed North American importers to qualify more goods for NAFTA preferential treatment (Hufbauer and Schott, 2005, p. 60). Chapter 5 enhanced the harmonization of the procedures applied by the customs authorities. In Chapters 8 and 9, the signatory governments agreed upon important conditions of application for safeguard measures and for standards-related measures. NAFTA also changed the practices followed by federal government departments and entities of the NAFTA countries in procuring goods, services or construction services for public uses. When the estimated value of the contract exceeds specific thresholds, Chapter 10 on Government Procurement prohibits discriminatory practices and forces the 187

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covered entities to open the tendering processes to all admissible Mexican, American, and Canadian suppliers. With regard to foreign direct investment, NAFTA created, in its Chapter 11, an innovative set of rules that, despite all the controversies that surround it, has to be recognized as providing North American investors with improved protections that enhance the flow of investments in the NAFTA zone. For more than ten years, Chapter 11 has been totally or partly copied in numerous free-trade agreements or foreign investment protection agreements (FIPAs) signed by Canada, the US, and many of their other international trading partners. NAFTA provisions also affected other subsectors like telecommunications or financial services, trade-related issues like competition policy, monopolies, state enterprises, temporary entry for business persons, and intellectual property. Despite their weaknesses, which will be addressed later, these provisions contributed to the harmonization of numerous national regulations in these fields and helped bring the economic integration of North America to its current level. Assessing the real economic impacts of NAFTA is not an easy task, but mentioning a couple of commercial facts helps illustrate how North American markets are integrating. Since NAFTA came into force on 1 January 1994, trilateral merchandise trade has tripled, reaching US$ 946.1 billion in 2008. Canada and Mexico are currently the two top purchasers of US exports and the first and third suppliers of goods imported to the US market. Beyond those figures, NAFTA has proven to be a factor of economic growth for each of the NAFTA countries. For the US, it secured access to Canada’s large energy-exporting market. For Canada, it guaranteed access to the US market for manufactured goods and services. Mexico is now one of the most liberalized economies in the world and one of the largest exporters because NAFTA forced it to diversify its production and economic activities. The trade agreement appears at first sight to be a huge success. During its first years of implementation, plans to further enlarge or deepen NAFTA were envisaged (Weintraub, 1994). For example, Chile was seen by the Clinton administration as a serious candidate for accession and, under President Fox, the Mexican government tabled an ambitious proposal to upgrade the free trade area into a fully fledged common market. More recently, during the 2008 Presidential campaign, Barack Obama promised to renegotiate the deal in order to incorporate labour and environmental standards into its core body. However, none of these plans to significantly redraw NAFTA went very far. Therefore, the North American market continues to be governed by an agreement that was negotiated fifteen years ago. Has NAFTA revealed itself to be flexible enough as an institution to accommodate new developments in the absence of such renegotiation? In this chapter, we will propose a negative, but qualified, answer to this question. First, we will show that not only does NAFTA lack effective amendment

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procedures, but also that its governing bodies have not been granted the rule-making capability needed to effectively tackle twenty-first century trade issues such as regulatory harmonization. We will then examine some regional cooperation mechanisms that can be considered as institutional extensions of NAFTA, and point out that they offer practical, but imperfect, attempts at compensating for NAFTA’s secondary rule-making deficit. This post-NAFTA cooperation circumvents the original agreement’s rigidities by operating exclusively on the basis of executive-to-executive arrangements. However, while such an institutional strategy can bear fruit, in order to be truly effective it would need to be pursued in a more comprehensive and formal fashion.

NAFTA: Trade liberalization without secondary ruling In terms of the breadth of its sectoral coverage and the precision and depth of its legal disciplines, NAFTA is an impressive piece of work. The agreement is divided into 22 chapters, some of which are entirely devoted to one sector or subsector of trade such as Energy and Basic Petrochemicals, Agriculture, Services, Telecommunications, or Financial Services. Each chapter contains highly detailed provisions that must be read in conjunction with definitions, reservations or exceptions placed in numerous annexes. Some provisions go into great detail, such as specifying that Bourbon Whiskey and Tennessee Whiskey should be recognized as distinctive products (NAFTA, Annex 313), or stating that, on Canadian territory, Canada Post Corporation has the exclusive privilege to collect, transmit, and deliver ‘letters’ as defined in the Canadian Letter Definition Regulations (NAFTA, Annex V, Schedule of Canada). NAFTA was drawn up as a business contract (Pastor, 2001, p. 96) full of complex and lengthy legal contortions (Weintraub, 1993). These highly detailed pre-established rules are coupled with a quasi-absence of ex-post rule-making capability (Bélanger, 2007). NAFTA is equipped with a minister-level Free Trade Commission (FTC), a decentralized secretariat, sophisticated dispute settlement mechanisms (DSMs), and several technical working groups and committees (TWGs). However, none of these bodies has real authority to create new rules or modify existing ones. The central decision-making body provided for by NAFTA is the Free Trade Commission. The FTC was not granted the power to directly amend the agreement, apart from technical modifications to the classification of products for origin determination or to the schedule for tariff elimination (NAFTA, 1993, Art. 414 & 512). The NAFTA agreement nonetheless gives the FTC the mandate to monitor the implementation of the agreement and, to this end, grants it some interpretative and procedural decision-making authority, which has been used with great restraint. The FTC used its interpretative authority once, in 2001, when it attempted to clarify some provisions pertaining to the operation of Chapter 11’s arbitration tribunals (Canada, 2001). The tribunals have

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since operated in accordance with the Commission’s interpretative note, but this move has not gone unchallenged, being criticized as an illegitimate and indirect way of amending the agreement (see Pope and Talbot, 2002, p. 23). During its first months of existence, the FTC realized how severely its power to decide on procedures was limited when it attempted to establish a centralized North American Trade Secretariat in addition to the three national sections provided for in the original agreement. In the absence of clear provisions for this administrative body in the text of NAFTA, the US Congress simply refused to appropriate the necessary budget and the FTC decision was never implemented (Grijalva and Brewer, 1994, p. 5). In a regional trade agreement that left its signatory governments with very little power or room to amend its provisions or include new ones, it was obviously of the greatest importance to provide for clear sets of procedures that would apply when the parties disagreed on the interpretation of this complex set of rules. The NAFTA DSMs are thus recognized for their precision and effectiveness. While a very useful instrument for the enforcement of existing provisions, NAFTA’s judicial institutions did not engage in ‘law making from the bench.’ Intergovernmental disputes over the interpretation and application of the text of NAFTA are to be settled in accordance with the Chapter 20 DSM. So far, only three panel decisions have been issued under this procedure. The first provided hope that Chapter 20 panels would render some rulings that would inevitably produce secondary rulings. In this case, Canada and the US were split over how to conciliate the tariffication process imposed by the Uruguay Round Agriculture Agreement and the tariff elimination provided for in Chapter 3 of NAFTA. In its Report issued on 2 December 1996, the Panel found that Canada had properly reconciled its World Trade Organization (WTO) and NAFTA obligations with regard to the tariffs applied to US-origin agricultural products. To reach this conclusion, the panel affirmed that Article 710 of CUSTA, which was included in NAFTA, had to be seen as a ‘forward-looking’ provision (NAFTA Arbitral Panel Established Pursuant to Article, 2008, 1996). If reaffirmed, this progressive vision of the interpretation of NAFTA could have led to a continuous adaptation of the application of the agreement. Unfortunately, the two other cases brought before Chapter 20 Panels concerned much tighter and sectorbased issues and did not require the panels to decide on the way NAFTA should evolve. To date, the most commonly used NAFTA DSM has been the panel review of final anti-dumping and countervailing duty (AD/CVD) determinations. This procedure, established in Chapter 19, provides an option of binational panel review in place of domestic judicial review of domestic decisions regarding AD/CVD matters. Between January 1994 and October 2009, over 100 cases were brought for review before such binational panels, which essentially apply national laws using standards of review that would be applied by national courts (NAFTA, Article 1904(3); Cannon, 2009).

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Binational panel decisions are binding on the Parties involved (NAFTA, Article 1904.9). In its decision, a Panel may uphold a final determination or remand it back to the competent investigating authority for action consistent with its decision (Johnson, 1994), and the vast majority of the final decisions have indeed remanded determinations of domestic trade authorities (Macrory, 2002). Some observers believe that Chapter 19 failed to bring peace to the industrial sectors that needed it most (Adams, 2008). Others point out that the fact that AD/CVDs have virtually disappeared from use – with a notable exception for the softwood lumber sector – constitutes evidence that Chapter 19 has been a success (Hart and Dymond, 2007). Aside from the disputable impact of Chapter 19 on the application by States of trade remedies applied in the NAFTA zone, there is also the question of the contribution that Chapter 19 has made to the creation of secondary norms. Since they apply national laws, as opposed to the international law applicable to all NAFTA Parties, and can only go as far as requiring the remand of a decision, Chapter 19 Panels cannot contribute to the evolution of NAFTA’s obligations. As will be seen below, the necessity to conceive, negotiate and sign the 2006 Softwood Lumber Agreement outside of NAFTA may be the best evidence that Chapter 19 has not been conducive to secondary rulings. Chapter 11 provides for the arbitration rules applicable to the settlement of disputes between a Party to NAFTA and an investor of another Party. To date, at least 53 cases have been filed by investors against one of the three governments. Chapter 11 arbitration panels decide on the treatment that each government must accord to complaining foreign investors. As was the case for Chapter 19, these rulings do not help improve and adapt NAFTA’s obligations over time. While it is possible to see in Chapter 11 arbitral sentences a form of supranational law binding the three NAFTA partners (Westbrook, 2007–8), this supranational law is, by nature, part of traditional international investment law, a sector of international economic law that existed long before the adoption of NAFTA. A final potential source of secondary rulings in NAFTA lies in the monitoring mandates given to its different sectoral TWGs. In short, the TWGs are responsible for facilitating and harmonizing the application of NAFTA provisions. Many of the TWGs have contributed to tightening the links between various domestic administrative authorities charged with the application of trade-related regulations and norms, but none has produced real secondary rulings. One exception, discussed below, may be the NAFTA Technical Working Group on Pesticides. The rules produced by this group, however, are not binding and find their legal ground in the regulating power of domestic agencies rather than in the authority entrusted in the regional body. Thus, we must agree with Robert Wolfe (2006) who, when reviewing the TWGs listed in NAFTA Annex 2001.2, evoked the notion of dead letters.

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Be they political (the commission), judicial (the DSMs), or technical (the TWGs), the different decision-making bodies instituted by NAFTA have, by design, all been prevented from engaging in secondary ruling. As this very brief overview of the actual functioning of these institutions has shown, fifteen years of operation have consolidated rather than diluted this structural characteristic. Therefore, the only way to adapt NAFTA, short of built-in secondary ruling mechanisms, would be to go through the exact same process of domestic ratification that was used to create it in the first place, but this has never been done. Not all international treaties are designed in such an inflexible manner. Many agreements, to which the US is often party, provide for amending mechanisms that do not require full domestic ratification on the part of the contracting parties. They can contain provisions for secondary ruling that explicitly isolate parts of the binding rules, and allow for a more expedient and secure way of modifying these rules than what is normally called for in more basic commitments. NAFTA also does this, but only in the very limited cases mentioned above. In other instances, ‘tacit amendment’ becomes binding on a Party if the latter acquiesces simply by failing to object after a given period of time, which means that there is no need for ratification (Bradley, 2006). In many other cases, non-binding standards produced by international bodies are assimilated as domestic regulations when administrative agencies are required by statute to adopt them. According to Swaine (2004, p. 1519), ‘(t)he US Code is replete with (such) international assimilations’. However, because NAFTA, despite its scope, was negotiated in the US treatymaking process as a standard free trade agreement, such levels of flexibility are out of its reach. This has little to do with the fact that, in the American system, NAFTA is considered as a congressional-executive agreement (therefore requiring a majority vote in both houses of Congress to be ratified as well as amended) rather than as a treaty (whose ratification requires a supermajority vote in the Senate). More important is the fact that Congress has always exercised firm and direct control over tax and other revenue-raising policies, and has closely guarded its rule-making authority in these areas. Therefore, trade policy, composed of tariff measures and the like, has traditionally been a policy area where delegation to the executive branch, through international as well as domestic means, has been minimal. Accordingly, traditional trade agreements negotiated by the US have been carefully crafted as definitive agreements, and the implementing legislations passed in Congress take extra precautions in making sure that no ex post decisions coming from the few bodies created by these agreements could ever be interpreted as selfexecuting (House of Representatives, 1993).

The consequences: Erosion and shallowness In order to be effective, a free trade agreement must provide economic actors with a high level of predictability. Agreed-upon rules must be precise,

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enforceable, and shielded against future opportunistic temptations to renege. There is a broad consensus in the literature that, while not perfect, NAFTA should be considered as exemplar in this regard (see Bernier and Roy, 1999; Abbott, 2000). Too much fixity, however, can lead to less than effective results. First, it makes it difficult and costly to adapt the free trade agreement to changes in the environment or to unforeseen endogenous developments, which can lead to rapid erosion. Second, it reduces the actual depth of the agreement by leaving important areas of trade liberalization, which specifically require ongoing rule making, outside of its reach. Both of these phenomena can be seen in the case of NAFTA. While at the time when NAFTA came into force the signatory governments could assert that the deal was attuned to the North American economy of the 1990s (see, for instance, Canada 1994, pp. 68–74), one has to admit today that many of its provisions have lost relevance and applicability over time. For example, Chapter 13 on Telecommunications, Chapter 14 on Financial Services, and their annexes are all still of use but they would certainly benefit from some rejuvenation to take account of the evolution and deregulation that have taken place in the markets in these sectors over the last 15 years. Some of the provisions related to tariff elimination, drawbacks, textiles, or emergency action proved their usefulness in the first years of NAFTA’s implementation but have since fallen into obsolescence. Today, agricultural issues are also much more effectively dealt with inside the WTO than in the normative context provided by NAFTA Chapter 7A. Such examples of the erosion of the usefulness of the text of NAFTA abound. But this is not the only adverse effect of the way NAFTA was originally structured and drawn up. Because NAFTA was meticulously structured to avoid secondary ruling mechanisms, it imposes strict limits to the depth of market integration in North America. For example, its structure makes the adoption of a common external tariff unthinkable, since this would require an ongoing coordination of the three states’ trade policies (Dymond and Hart, 2005). NAFTA instead has to rely on the suboptimal solution of a rules-of-origin regimen that not only opens the door to protectionist manipulations, but has also revealed itself to be costly for both governments to administer and business to comply with (Kunimoto and Sawchuck, 2004). Another clear example of the sub-efficiency of avoiding built-in rule-making capability in NAFTA can be found in its approach to trade remedies. Ideally, countries in a free trade pact would exempt each other from the application of their AD/CVD duty laws and adopt a common system of rules and policies related to competition. Again, such a system would necessitate the ongoing adjustment of regional rules on dumping and other distorting practices such as subsidies. The chosen alternative, which was to avoid policy coordination and instead establish the judicial mechanism described above, has been plagued by bureaucratic delays and lengthy extraordinary challenges fuelled by the

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absence of a common standard of review (Hufbauer and Schott, 2005, pp. 249–52). That said, rules-of-origin and protection against abusive trade remedies may be important aspects of any conventional free trade agreement, but they essentially pertain to twentieth-century trade issues. The new frontier of regional liberalization is clearly the reduction of regulatory obstacles to trade, and here again there is a need for secondary ruling (Hart, 2006). ‘Protective regulations’ (the regulatory activity aimed at protecting consumers, the environment, labour rights, public health and safety) and ‘economic regulations’ (the regulation of infrastructural and utility sectors such as communications, railways, energy, and water distribution) have steadily increased over the past 25 years and have had a significant impact on trade (Vogel, 1995). Differences in these domestic regulations impose significant compliance costs on producers who are willing to operate in different jurisdictions; simply put, there can be no true regional market without a concordant set of rules. In a recent communication to the WTO, the three North American governments estimated the amount of their reciprocal trade affected by regulatory barriers to be US$ 715 billion (WTO, 2009, p. 2). The problem is that the coordination or harmonization of regulations – from those affecting food safety to those relating to professional accreditation aimed at guaranteeing the free flow of goods and services – cannot be carried out successfully without ‘dynamic rule-making’ (Hart, 2006, p. 21). This is necessary for the simple reason that governments are permanently making new rules and unmaking others, and regulatory activity is a central and sensitive function of the modern state that cannot be preordained. In the US alone, federal agencies produce 4000 new regulations every year (Gattuso, 2008). Because it lacks secondary ruling capability, the concordance of regulations is an area that has largely been left out of NAFTA. Chapter 7B (Sanitary and Phytosanitary Measures) and Chapter 9 (Standards-Related Measures) do cover the issue of standards and regulatory matters, but only encourage Parties to make their regulations compatible ‘to the greatest extent practicable’ rather than establishing a mandatory process of harmonization. There is simply no obligation for any country to accept this compatibility; rather, it is up to the exporting party to assume the burden of demonstrating, to the satisfaction of its trade partners, that its own regulation should be recognized as equivalent to that of the importing party (Irish, 2009, pp. 338–42). This is a fastidious process which, furthermore, does not cover state, provincial, or municipal regulations. Here again, NAFTA would be a much more effective tool for economic integration if it provided for the negotiation and promulgation of regional standards and technical regulations, especially given that the equivalence of the national rules has to be verified in any case. To sum up, as a contract that favours the fixity of pre-established rules over the flexibility of ex-post ruling, NAFTA provides a highly predictable

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normative environment for the development of trade in North America. Too much rigidity, however, comes with a price. NAFTA cannot be efficiently upgraded in the face of a rapidly changing economic reality. Moreover, without the required secondary-ruling capability, it is not suitable in itself or as a model to address twenty-first century trade issues, the most important being the whole issue of regulatory coordination. In a global context of competitive liberalization, all this inevitably leads to a gradual erosion of the NAFTA advantage.

Executive-level extensions Unavoidably, over time, the insufficiencies of NAFTA have become increasingly manifest. The day-to-day business of trade in North America has changed since 1994 in ways that could not be foreseen when the agreement was created. One obvious example of this is the tightening of the borders which has taken place since the 2001 terrorist attack, but other developments, such as the Internet revolution, are also at play. Moreover, the implementation and expansion of WTO rules domestically and abroad, and the aggressive pursuit by Washington of competitive liberalization in every corner of the globe, have shrunk the competitive advantage of NAFTA. These developments have forced the North American governments to consider the necessity of supplementing the restrained NAFTA institutions with other coordination mechanisms. In this section, we will consider three of these mechanisms or sets thereof: the Security and Prosperity Partnership (SPP); the Canada–US Softwood Lumber Agreement (SLA); and the border security agreements. In spite of their differences, these instruments share an important commonality: they are all designed to function within the perimeter of the executive branch of government. As will be seen below, the SPP is not an international treaty or agreement, whereas the SLA and the border security agreements are legally binding instruments. Nevertheless, they all escaped legislative involvement in the US by having been concluded as ‘sole executive agreements’, which means they were negotiated and signed by the President without congressional ratification (Van Alstine, 2006). The SPP was launched in 2005, during a trilateral summit hosted by then President George W. Bush in Waco, Texas. Its clear objective has been to keep North American borders closed to security threats while open to the movement of legitimate people and goods. The SPP itself is essentially an agenda-led intergovernmental process. It is not a formal, legally binding agreement, and the Waco joint declaration did not even mention the convening of regular summits in the future (White House, 2005). Decisions were subsequently made to convene in Cancún (2006), Montebello (2007), New Orleans (2008), and Guadalajara (2009). The Guadalajara Summit, however, the first to take place under the Obama administration, was conducted without activating the SPP apparatus of ministerial meetings and action plans, raising

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the question of whether the SPP process will be dismantled, redesigned, or rebranded. These agenda-setting summits at the presidential and primeministerial level have been supported by a loose structure of cabinet-level coordination with one minister in each country responsible for each of two pillars, security and prosperity. In order to function without requiring the ratification of a treaty or even a congressional-executive agreement, the SPP was carefully designed to operate within the limits of the constitutional and administrative authority of the executive branch of each state (Ackleson and Kastner, 2006, pp. 215–18; Anderson and Sands, 2007, p. 18). At the bureaucratic level, 20 trilateral working groups have been operating under the SPP umbrella, ten for each pillar. On trade issues, the mandates of many SPP working groups duplicated those of the NAFTA working groups in an attempt to reanimate some technical discussions and provide the kind of cooperation at the operative level that NAFTA failed to sustain. This, according to Anderson and Sands (2007, p. 14), was a clear recognition by the three governments that ‘the soft political mandate for such negotiations … contained in NAFTA (the built-in agenda) had been insufficient’. Since the SPP itself was prevented from creating new legal and enforceable commitments, it made sense to have the working groups fully exploit the reservoir of untapped commitments that could be found in NAFTA. In at least one instance (pesticide certification) the combination of SPP processes and NAFTA’s institutional base seemed to produce some regional ruling activity, although not legally binding, through executive-level coordination. The NAFTA Technical Working Group on Pesticides (NAFTA TWGP) was first created in 1997 by the NAFTA Committee on Sanitary and Phytosanitary Measures (NAFTA TWGP, 1997) and was enlisted into the SPP process in 2005 as a component of its Food and Agriculture Working Group. Since 2007, the NAFTA TWGP has used a harmonized system of classification of chemicals as a basis for a joint certification of pesticides, the ‘NAFTA Labels’ (NAFTA TWGP, 2009, pp. 9–10). So far, nine pesticides have received a NAFTA Label joint certification by American and Canadian agencies. Indeed, while Chapter 7B of NAFTA calls for equivalence in sanitary and phytosanitary measures, it in no way provides for the establishment of regional labels for pesticides, nor does it entrust this power to a technical working group that is not even mentioned in the agreement. The legal ground for the labels are thus found neither in NAFTA nor in the SPP, but rather in the simultaneous registration of products by domestic agencies, which was propelled by the SPP process. Despite its confinement to the existing perimeters of executive power, the SPP has clearly shown serious rule-making potential, especially in areas where federal agencies in the three countries already benefit from relatively high levels of discretion in exercising their regulatory mandates (Ackleson and Kastner, 2006; Bélanger, 2009). As demonstrated by the case of standard harmonization in the certification of pesticides, this rule-making activity

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could be directed at ‘completing’ NAFTA. It is also interesting to note that decisions made under the SPP can later be formalized by an executive agreement and become binding. This is exactly what happened when talks in the SPP Border Facilitation working group led to the difficult negotiation of a Canada–US land preclearance agreement (SPP, 2006, p. 74).1 However, current uncertainty with regard to the status of the SPP clearly shows the limits of operating outside of binding cooperative agreements. The second main illustration of the evolution of North American integration operating outside the framework of NAFTA is the 2006 Softwood Lumber Agreement. This agreement put a temporary end to the fourth phase of a 25-year-old dispute between Canada and US, conducted largely through NAFTA DSMs, over the fair price of Canadian softwood lumber sold in the US. This major agreement provides for all the rules, figures, and methods applicable to the calculation of quantities and the price of softwood lumber that can be exported from Canada to the US. To make the deal sustainable, the SLA includes a Termination of Litigation Agreement which confirmed the settlement of at least 20 outstanding actions or proceedings related to AD/CVD measures. The SLA also revoked, as of May 2002, all AD/CVD orders related to wood products covered by the SLA. Parties also committed not to self-initiate any AD/CVD investigation unless very specific conditions are met. As an indication of the legally binding nature of the SLA, a clause provides that disputes should be brought before the London Court of International Arbitration (SLA, Article XIV, para. 6). In order to implement the agreement in Canada, the House of Commons adopted Bill C-24, but no legislation was considered necessary in the US since the SLA was concluded as a sole executive agreement. The SLA thus modifies NAFTA by suspending its applicability to softwood lumber and devising specific rules for this sector, but does so by creating a parallel legal instrument, one which is not subject to congressional approval or action. Finally, some post-9/11 agreements concerning joint venture programmes applicable along the Canada–US border, such as NEXUS or PIP/C-TPAT, or along the Mexico–US border, such as SENTRI, were also negotiated outside the NAFTA framework. The key international components of these new border management systems, aimed at reducing the impact of security measures on the fluidity of trade, are the 2001 US–Canada Smart Border Declaration and the 2002 US–Mexico Border Partnership Agreement. Both bilateral accords are executive–level, politically binding – but not legally binding – agreements. However, the implementation of the Canada–US declaration required the negotiation of one legally binding, executivelevel agreement dealing with cooperative research and development on infrastructure protection and border security (Agreement, 2004). One might argue that, since they primarily deal with security issues, it is not surprising that such border agreements are negotiated and implemented outside of NAFTA. However, when one looks at the detailed provisions found in

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NAFTA on Customs Procedures (Chapter 5), the application of Sanitary and Phytosanitary Measures (Chapter 7B), or Temporary Entry for Business Persons (Chapter 16), on the one hand, and at the action plans contained in both declarations, on the other hand, the complementarity is striking (Parks, 2004; Meyers, 2003). Here again, NAFTA’s provisions are rendered more or less obsolete. For instance, one of the main by-products of the Canada–US declaration is the Free and Secure Trade Program (FAST/EXPRES), a joint initiative between the Canada Border Services Agency and the US Customs and Border Protection agency that enhances border and trade chain security while making cross-border commercial shipments simpler and subject to fewer delays (Canada Border Services Agency, 2009). Clearly, this is an area of cooperation which could or, if possible, should have been discussed within the terms of NAFTA or, at least, been directly tied to NAFTA. These few examples show how, in the absence of built-in mechanisms to adapt and extend NAFTA, the three governments have responded to the different challenges they have faced in order to preserve the North American market by creating a disparate set of arrangements. While efforts have been deployed, through the SPP, to bring some comprehensiveness to the process, this cooperative activity has mainly been ad hoc and bilateral in nature rather than integrated and regional. And now the future of the SPP itself, which has more often than not operated at the working group level as two parallel bilateral processes, looks rather uncertain. As pointed out above, it should be noted that while these arrangements have taken very different institutional forms, from the essentially non-binding border declarations to the legally binding SLA, all of them, contrary to NAFTA, have been negotiated and operated strictly at the executive level. This raises the interesting question of the efficiency of completing or complementing NAFTA with executive-to-executive institutions. Analysing the specific case of the SPP, Anderson and Sands (2007) argue that regional economic governance through executive-level agreements is not sustainable, because, at the end of the day, it is the US Congress that has constitutional authority on trade and controls funding for border security measures. However, it is difficult to imagine how the flexibility governments seek in manoeuvring outside of NAFTA could be obtained by inviting the legislative branches back to the table. An alternative view is that lessons should be drawn from the extent of what has been achieved so far by cooperating at the executive level. Furthermore, the failure of the SPP to adequately coordinate and deepen cooperation could well be attributed to the hesitation of the Bush Administration, not in terms of involving Congress but rather in fully deploying its executive prerogative because of its well-known mistrust of international institutions (Bélanger, 2009). Whatever the reason, an effective institutional mechanism for the maintenance of a cohesive and competitive North American market remains to be found.

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Conclusion When, during the Democratic primaries of 2008, Barack Obama raised the argument that NAFTA should be renegotiated in order to include environmental and labour obligations in the core text of the agreement, the response from the Canadian government came swiftly and directly from the Prime Minister himself. Stephen Harper declared that if Washington ‘made the mistake’ of opening the agreement (Reuters, 2009), Canada would present itself at the negotiation table with its own list of amendments, notably the revocation of NAFTA’s proportionality clause which guarantees exports of energy at current levels to the US. Such a direct linkage between environmental and labour issues and the trade of energy was possible because NAFTA is a package deal, a single undertaking agreement. Any reopening of the deal closed in 1992 and put into force in 1994 would ultimately be a full and comprehensive one. This episode, which has had no follow-up to date, perfectly illustrates the political stakes that lie behind the legal and institutional state of affairs described in this chapter. North American integration needs more than a constitution written in stone, which is what NAFTA has offered to date. In order to evolve and adapt to a globally competitive environment, it needs a solid but more flexible institutional framework. As shown here, developments that could not be reflected by amendments in the text of NAFTA or obtained through its decision-making bodies have been negotiated in more flexible agreements that have become extensions to NAFTA. However, if the three signatory governments of NAFTA are going to accept that, when required by circumstances, necessary changes to their commercial relations will be worked out in à la carte agreements they should consider the consequences. As discussed above, the current trend of evolution in the North American institutional framework is causing the gradual obsolescence of NAFTA and the guarantees provided by its legal stature and recourses. It also signals the erosion of the single undertaking approach guaranteed by NAFTA and a return to ad hoc behaviours. For Canada and Mexico, this can only mean a decrease in their bargaining power vis-à-vis the US on trade issues. It is the single undertaking approach inherent to the NAFTA model that made it possible for Prime Minister Harper to forcefully suggest a linkage between Barack Obama’s preoccupations and Canada’s possible second thoughts on energy security. Moreover, neglecting the comprehensive and coherent set of rules provided for in the 1994 agreement, rather than building on it, will inevitably reinforce the position of the two smaller North American partners as ‘eternal supplicants’ (Gotlieb, 2004, p. 39), which is exactly what NAFTA was intended to avoid. This being said, we would not want to end this chapter leaving the reader with the impression that NAFTA is the only trade agreement in the

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Americas to have experienced inefficiencies due to a lack of flexibility and secondary-ruling capability. It has actually even been the case for Mercosur, which was built on the very opposite institutional model of trade liberalization, with its reliance on vague initial commitments and apparently strong ex post decision-making bodies (Bernier and Roy, 1999). At first sight, Mercosur looks like an exemplar case of dynamic regional liberalization. Its different political organs have progressively completed the original skeleton contained in the 24 articles of the 1991 Treaty of Asunción with more than 1700 acts of secondary regulations (Malamud, 2007, pp. 11). Which makes Bouzas, Da Motta Veiga and Torrent (2002, p. 109) observe that ‘at present, a consolidated version of the Asunción Treaty would be much longer than the European Community Treaty or even NAFTA’. However, these secondary rules are not self-executing in the Mercosur system, which has given rise to extremely low levels of domestic assimilation. Not unlike what happened in the case of NAFTA, this situation has prompted the Southern Cone countries to rely on executive-level intergovernmental cooperation (Malamud, 2005) and to supplement the Mercosur agreement with several ad hoc extensions covering strategic areas of liberalization such as investments, intellectual property, services, trade remedies, and dispute settlement (ibid., pp. 450–3). The lack of efficient secondary-ruling capability has had far worse consequences for Mercosur than for NAFTA. One has to realize that, despite its name and initial ambitious goals, Mercosur has yet to become a mere coherent customs union. Even the common Customs Code agreed on in 1994 has not made its way through the countries’ legislative processes. Thus, it seems that, whatever their initial design, the regional free trade institutions put in place in the 1990s like NAFTA and Mercosur (to which we could add the 1993 Central American Common Market and the 2001 Caribbean Community), all suffer from a lack of secondary-ruling capability which hinders their development and adaptation.

Note This research was supported by grants from the Social Sciences and Humanities Research Council and the ‘Fonds québécois de recherche sur la société et la culture’. The authors would like to thank Kim Fontaine-Skronski for her excellent research assistance, and the editors of this volume for judicious comments. 1. Negotiations that were later suspended due to irreconcilable positions on fundamental rights issues (GAO, 2008).

References Abbott, Frederick M. (2000) ‘NAFTA and the Legalization of World Politics: A Case Study’, International Organization. 54(3), pp. 519–47. Ackleson, Jason and Justin Kastner (2006) ‘The Security and Prosperity Partnership of North America’, The American Review of Canadian Studies. 36(2), pp. 207–32.

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Adams, Daniel N. (2008) ‘Back to Basics: The Predestined Failure of NAFTA Chapter 19 and Its Lessons for the Design of International Trade Regimes’, Emory International Law Review. 22, pp. 205–45. Agreement Between the Government of the United States of America and the Government of Canada for Cooperation in Science and Technology For Critical Infrastructure Protection and Border Security (2004) Signed at Washington, 1 June. Anderson, Greg and Christopher Sands (2007) Negotiating North America: The Security and Prosperity Partnership, Washington: The Hudson Institute (White Paper Series), Summer. Bélanger, Louis (2007) ‘NAFTA: An Unsustainable Institutional Design’, in Gordon Mace, Jean-Philippe Thérien, and Paul Haslam (eds) Governing the Americas: Assessing Multilateral Institutions. Boulder, CO: Lynne Rienner Publishers, pp. 195–212. Bélanger, Louis (2009) ‘Governance for a Competitive North America: A Canadian Strategy’, in From Correct to Inspire: Blueprint for Canada-US Engagement. Background Papers, Ottawa: Carleton University, 19 January, pp. 165–78. Bernier, Ivan and Martin Roy (1999) ‘NAFTA and Mercosur: Two Competing Models?’ in Gordon Mace and Louis Bélanger (eds) The Americas in Transition: The Contours of Regionalism, Boulder, CO: Lynne Rienner Publishers, pp. 69–91. Bradley, Curtis A. (2006) ‘Unratified Treaty Amendments and Constitutional Process’, Unpublished manuscript prepared for the Duke Workshop on Delegating Sovereignty, 6 February. Bouzas, Roberto, Da Motta Veiga and Pedro and Ramon Torrent (2002) In-Depth Analysis of Mercosur Integration, Its Prospectives and Effects Thereof on the Market Access of EU Goods, Services and Investment. Barcelona: Observatory of Globalization. Canada (2001) Pettigrew Welcomes NAFTA Commission’s Initiatives to Clarify Chapter 11 Provisions, Ottawa: Department of Foreign Affairs and International Trade (Press Release No. 116), August 1. Canada. Extract Canada Gazette, Part I, January 1, (1994) North American Free Trade Agreement, Department of External Affairs. Canadian Statement on Implementation, pp. 68–220. Canada Border Services Agency (2009) Description of the NEXUS Program. Available online at http://www.cbsa-asfc.gc.ca. Cannon, Kathleen W. (2008–9) ‘Trade Litigation before the WTO, NAFTA, and US Courts: A Petitioner’s Perspective’, Tulane Journal of International & Comparative Law. 17, pp. 389–434. Certain Agricultural Products [North American Free Trade Agreement, Arbitral Panel Established Pursuant to Article 2008. In the Matter of Tariffs Applied by Canada to Certain US Origin Agricultural Products, Final Report of The Panel] (1996) December 2. Dymond, Bill and Michael Hart (2005) Policy Implications of a Canada-US Customs Union. Ottawa: Policy Research Initiative (‘North American Linkages’ series), June. Gattuso, James L. (2008) The Rulemaking Process and Unitary Executive Theory, Testimony before the Subcommittee on Commercial and Administrative Law of the House Judiciary Committee, May 6. Available at http://www.heritage.org/research/ regulation/tst050708a.cfm. Government Accountability Office (GAO) (2008) Various Issues Led to the Termination of the United States-Canada Shared Border Management Pilot Project (Report GAO08-1038R). Gotlieb, Allan (2004) Romanticism and Idealism in Canada’s Foreign Policy. Toronto: C. D. Howe Institute (Benefactors Lecture).

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202 Ruling the North American Market Grijalva, J. Ernesto and Patrick T. Brewer (1994) ‘The Administrative Bodies of the North American Free Trade Agreement’, San Diego Justice Journal, 2(Winter), pp. 1–18. Hart, Michael (2006) Steer or Drift? Taking Charge of Canada-US Regulatory Convergence. C. D. Howe Institute (‘Commentary,’ No. 229), March, p. 9. Hart, Michael and Bill Dymond (2007) ‘Free Trade and Dispute Settlement: Time to Declare Victory’, Policy Options/Options Politiques, 28(9), pp. 45–51. House of Representatives (1993) An Act To Implement the North American Free Trade Agreement, 103d Congress, 1st Session (House Document 103–159, Vol. 1). Hufbauer, Gary C. and Jeffrey J. Schott (2005) NAFTA Revisited: Achievements and Challenges. Washington DC: Institute for International Economics. Irish, Maureen (2009) ‘Regulatory Convergence, Security and Global Administrative Law in Canada-United States Trade’, Journal of International Economic Law, 12(2), pp. 333–55. Johnson, Jon R. (1994) The North American Free Trade Agreement – A Comprehensive Guide. Aurora, Ontario, Canada: Canada Law Book Inc. Kunimoto, Robert and Gary Sawchuck (2004) ‘Moving Toward a Customs Union: A Review of the Evidence’, Horizons, 7(1), July, pp. 23–31. Macrory, Patrick (2002) NAFTA Chapter 19: A Successful Experiment in International Trade Dispute Resolution, C. D. Howe Institute (Commentary, No. 168). Malamud, Andrés (2005) ‘Presidential Diplomacy and the Institutional Underpinnings of MERCOSUR: An Empirical Examination’, Latin American Research Review, 40(1), pp. 138–64. Malamud, Andrés (2007) ‘The Internal Agenda of Mercosur: Interdependence, Leadership and Institutionalization’, Paper for presentation at the conference ‘El Derecho de Integracion Suramericano en su Contexto’, Max-Planck Institut, Heidelberg, 6–7 December. Meyers, Deborah Waller (2003) ‘Does “Smarter” Lead to Safer? An Assessment of the US Border Accords with Canada and Mexico’, International Migration, 41(4), pp. 5–42. North American Free Trade Agreement (NAFTA) (1993) Ottawa: Acquisitions and Services Canada. North American Free Trade Agreement Technical Working Group on Pesticides (NAFTA TWGP) (1997) Terms of Reference for the NAFTA Technical Working Group on Pesticides, June 4. [http://www.epa.gov/oppfead1/international/naftatwg/general/ terms-of-reference.pdf, consulted 5 October 2009]. North American Free Trade Agreement Technical Working Group on Pesticides (NAFTA TWGP) (2009) Accomplishments Report for the Period of 2003–2008. Parks, Joseph L. (2004) ‘The United States – Canada Smart Border Action Plan: Life in the FAST Lane’, Law and Business Review of the Americas, 10(2), pp. 395–416. Pastor, Robert A. (2001) Toward a North American Community: Lessons from the Old World for the New. Washington DC: Institute for International Economics. Pope and Talbot [In the Matter of An Arbitration Under Chapter Eleven of the North American Free Trade Agreement Between Pope & Talbot Inc. and Government of Canada. Award in Respect of Damages] (2002), May 31. Security and Prosperity Partnership (SPP) (2006) Report to Leaders. Security Annex [available at http://www.spp-psp.gc.ca/progress/reports-en.aspx]. Softwood Lumber Products Export Charge Act (2006) ‘Canada, House of Commons, Bill C-24’, 39th Parliament, 1st Session. Softwood Lumber Agreement between the Government of Canada and the Government of the United States of America (2006), September 12.

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Swaine, Edward T. (2004) ‘The Constitutionality of International Delegations’, Columbia Law Review, 104, pp. 1492–614. Thomson Reuters (2009) Obama Wants to Reopen NAFTA but Keep Trade Flowing. 17 February. Van Alstine, Michael P. (2006) ‘Executive Aggrandizement in Foreign Affairs Lawmaking’, UCLA Law Review, 54(2), pp. 309–71. Vogel, David (2005) Trading Up: Consumer and Environmental Regulation in a Global Economy, Cambridge MA: Harvard University Press. Weintraub, Sidney (1993) ‘The North American Free Trade Agreement as Negociated: A US Perspective’, in Steven Globerman and Michael Walker (eds) Assessing NAFTA, A Trinational Analysis, Vancouver BC: The Fraser Institute, pp. 1–31. Weintraub, Sidney (1994) NAFTA: What Comes Next? Westport: Praeger. Westbrook, Jay Lawrence (2007–8) ‘Legal Integration of NAFTA Through Supranational Adjudication’, Texas International Law Journal, 43, pp. 349–58. White House (2005) Joint Statement by President Bush, President Fox, and Prime Minister Martin. Security and Prosperity Partnership, Office of the Press Secretary, March 23. Wolfe, Robert (2006) ‘Decision-Making and Negotiations: Comparisons with WTO’, presentation at ‘NAFTA and the Modern Tools of Global Trade Governance’, The Canada Institute and the Mexico Institute, Woodrow Wilson International Center for Scholars, Washington DC, 13 March. World Trade Organization (WTO) (2009) The Importance of Regulatory Cooperation for Improving Governments’ Ability to Fulfil Legitimate Policy Objectives While Facilitating Trade: The North American Experience. Committee on Technical Barriers to Trade (document G/TBT/W/317), 15 June.

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11 New Forms of Integration: ALBA Institutions and Mechanisms Josette Altmann

Introduction ALBA (the Bolivarian Alternative for the Americas) is an integration initiative from the Venezuelan government and an alternative vision to free trade agreements. Venezuelan President Hugo Chávez announced the initiative at the III Summit of Head of States of the Association of Caribbean States (ACS) that took place in Isla Margarita, Venezuela, on 11–12 December 2001. ALBA can be understood in the context of the early twenty-first century. The unfeasibility of the Free Trade Area of the Americas (ALCA, after its initials in Spanish; FTAA, in English) and the increasing growth in the political and ideological discourse against US hegemony are two very important causes for ALBA’s conception and later consolidation on 14 December 2004, when its constitutional agreement was signed by Cuba and Venezuela. ALCA was established in the First Summit of the Americas (1994) and sought the gradual elimination of all barriers to trade and investment within the Western Hemisphere. In contrast, ALBA seeks to reinforce the selfdetermination and sovereignty of the people of the Americas by proposing an alternative integration initiative, which opposes the economic policies that have been proposed and implemented at the end of the 1990s by the US and international organizations such as the World Bank and the International Monetary Fund. ALBA is the antithesis of the so-called Washington Consensus (FLACSO, 2007). Even though it was created with a defined ideological (and even radical) tone, it has had an impact on various Latin American countries. ALBA poses new options for cooperation and its projects constitute viable options for accessing different resources and combating some consequences of the current international situation.1 While an alternative integration proposal, ALBA is not the only proposal at play in the Americas. Currently, the Latin American situation has been hampered by an oversupply of integration processes. There are many initiatives 204

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and even more actors involved in a great array of proposals in economic, cultural, commercial, political, and security issues (see Rojas-Aravena, 2007, 2008). Among all of these initiatives, three stand out by concentrating the principal commercial and integration proposals of the region: first, the Mesoamerican Project – formally known as the Puebla Panama Plan – extends from Mexico to the south, including Colombia, and has even reached as far as Ecuador; second, ALBA, which includes countries from South America, Central America, and the Caribbean; and third, the Union of South American Nations (UNASUR), which is made up of 12 countries of the region. All these initiatives are superposed over the different formal and institutionalized multilateral mechanisms of integration that have been established on each of the sub-regions: the Caribbean Community (CARICOM), the Central American System of Integration (SICA), the Andean Community of Nations (CAN), and the Southern Common Market (Mercosur). These initiatives operate at the same time as other mechanisms striving for cooperation in the region, such as the Amazon Cooperation Treaty Organization (OTCA), the Association of Caribbean States (ACS), as well as organizations like the Latin American Integration Association (ALADI). Finally, the only regional initiative that includes all Latin American and Caribbean countries, which in spite of obstacles throughout its history maintains the potential for continued development, is the Rio Group. This amount of proposals and integration initiatives leads to three negative consequences that hamper the integration processes; first, it generates a strong demand on the agendas of the heads of state and their government, which have to schedule and attend meetings as often as every three months in what can be called a context of ‘meetings diplomacy’; second, the oversupply leads to a lack of coordination, which ends up limiting the opportunities for convergence and the search for common interests and perspectives; third, the multiple proposals possess a weak institutional structure because some countries do not wish to transfer part of their sovereignty and autonomy to greater supranational structures. This reality has been made clear in multiple statements. ALADI has stated that since 2004, integration efforts have begun to disintegrate with the creation of different proposals causing a dispersal of attention and resources; none has achieved a relevant impulse (ALADI, 2008). As a result, and in spite of the political relevance that each integration initiative acquires in the presidents’ declarations, until now none of these projects has had the capacity to articulate an overarching view of the region; in fact, this situation has tended to fragment Latin America and the Caribbean into ‘many’ Latin Americas. It is in this context that ALBA seeks to position itself as a viable and alternative integration proposal for Latin American and Caribbean peoples. This chapter examines the ways in which ALBA is attempting this. It begins by

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briefly explaining the philosophy and main principles of ALBA. Second, its main institutions and mechanisms are presented. The focus then shifts to the impact of ALBA in the Latin American region. Finally, the chapter concludes by reflecting on the future of ALBA as an integration proposal.

ALBA: Philosophy and main principles Hugo Chávez announced the creation of the ALBA in 2001; however, the constitutive agreement and official birth of the initiative took place in December 2004 at Havana, Cuba. Both Hugo Chávez and Fidel Castro signed the agreement. The first meeting took place in 2005 (Table 11.1). In 2006, Bolivia joined, followed by Nicaragua and Dominica in 2007 and Honduras in 2008. Saint Vincent and the Grenadines, Ecuador, and Antigua and Barbuda joined in 2009. In 2005 Petrocaribe was created (also a Venezuelan initiative) promoting cooperation with Central American and Caribbean countries. The main Table 11.1

ALBA and Petrocaribe summits

ALBA

Petrocaribe

Meeting

Date

Meeting

Date

Agreement between presidents of Venezuela and Cuba for ALBA’s application

14 December 2004

II Summit of Montego Bay

6 September 2005

I Cuba–Venezuela Meeting for ALBA’s application

28 April 2005

III Summit Petrocaribe

10 August 2007

Meeting of the agreement for ALBA’s and TCP’s applications

29 April 2006

IV Summit Petrocaribe

21 Dec 2007

Signing of agreements between Cuba and Venezuela

24 January 2007

V Summit Petrocaribe

13 August 2008

V ALBA Summit

29 April 2007

VI Summit Petrocaribe

12 June 2009

VI ALBA Summit

26 January 2008

Extraordinary Summit

22 April 2008

Presidential Summit, sovereignty, and food security: food for life

7 May 2008

III Extraordinary Summit

26 November 2008

IV Extraordinary Summit

2 February 2009

V Extraordinary Summit

17 April 2009

VI Extraordinary Summit

24 June 2009

VII ALBA Summit

17 October 2009

Source: ALBA (2009a)

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objective of this is to contribute to energy security. Under Petrocaribe, six meetings of the heads of state have taken place, and many important energyrelated treaties have been signed by the members of ALBA and various Central American and Caribbean countries that make up Petrocaribe. This has made it easier for these countries to get closer to the policies and initiatives discussed within ALBA. Petrocaribe is a model for energy cooperation based on the principles of special and differentiated treatment and solidarity. It is based on the Venezuelan policy of establishing subsidized prices and developing mixed enterprises to operate the oil market. However, Petrocaribe must be seen as an ALBA instrument of cooperation that transcends strictly energy-related issues. In fact, one of the projects of Petrocaribe is the development of aerial and maritime transport in the sub-region, as this is one of the indispensable requisites for achieving integration. In their treaties and international agreements, both ALBA and Petrocaribe emphasize the ‘terrible consequences of the inequality of the international economic order’ that negatively affects the prices of basic products and raises the prices of oil and other fuels. They base their policies on the thesis that, after the failure of the FTAA (ALCA in Spanish), the US, in response to its inability to promote alternatives that lead to development, has carried out bilateral commercial agreements which contribute to the disintegration and weakening of the region. President Chávez suggests the idea of the state as a ‘producer’, based on the philosophy of ‘more state and less market’. Is this viable with today’s globalization, in which the main players behind large flows of capital are not only states but also private entities such as media conglomerates, financial organizations, and multinational corporations? Even now, arguments in Latin America between neoliberals and Keynesians – or free marketers vs interventionists – revive the old clash between development-oriented economists and ‘structuralists’ (in the 1960s) and between liberals and planners (in the 1930s). The well-known dilemma of ‘market or state’ does not help clarify things much, either. The political, economic, social, and cultural debate stemming from globalization and its social effects is fuelled by the ‘concentration vs equality’ dilemma. The theoretical clash on development centred on these issues in the second half of the twentieth century. Today this debate seems to have been overtaken by the emergence of new problems such as improving living standards in conditions of freedom, democracy, sustainable development, climate change, and the importance of citizen participation. The economic reforms undertaken in the region led to inequality and a lack of opportunities, both among poor and vulnerable people as well as indigenous communities, women, the young, and the elderly. At the same time, the concentration of wealth in certain sectors of the political and business élites, mainly linked to multinational corporations, has

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Latin America and the Caribbean: Poverty evolution

Poverty Year 1980 1990 1997 1999 2002 2004 2005 2006 2007 2008*

Percentage 40.5 48.3 43.5 43.8 44.0 42.0 39.8 38.5 34.1 33.2

Extreme poverty Millions of people 136 200 204 211 221 217 209 205 184 182

Percentage

Millions of people

18.6 22.5 19.0 18.5 19.4 16.9 15.4 14.7 12.6 12.9

62 93 89 89 97 88 81 79 68 71

Note: Estimation for 19 countries of the region, including Haiti a Projections Source: CEPAL (2008)

fuelled corruption and created even greater inequality. This has increased the unequal distribution of wealth and privileges (see Table 11.2). At the same time, this hinders institutional changes that would end privileges for certain social, political, and business classes. These factors have generated significant discontent and disillusionment with politics for many in the region. To some extent, these sentiments are responsible for the governance problems which affect the region and have made it easier for a new breed of politician to emerge, many of them clearly anti-globalization, anti-US and anti-free trade. It cannot be ignored, though, that the US continues to be the main investor and the most dynamic recipient of exports for most of the countries in the region, and that some of them, such as Venezuela, are major trading partners (Altmann, 2008). Trade agreements or treaties with the US are an important aspect of the overseas agendas of the countries of the region (see Table 11.3). Following the failure of the FTAA proposal, Washington has devised a kind of commercial diplomacy with a strong ideological component. Lively debate has swept the region in relation to free trade accords that prompted serious conflicts in some sub-regional integration entities, such as Venezuela’s withdrawal from the Andean Community of Nations (in April 2006) and the decision by Uruguay and Paraguay to start talks with the US on possible trade treaties due to asymmetries in Mercosur and the limited benefits the countries obtain from belonging to that bloc. Venezuela has threatened to pull out of Mercosur because of a trade focus that Chávez says ignores social issues. Costa Rica has gone so far as to suffer a congressional and governmental paralysis because of pre- and post-referendum debate on the free trade agreement between Central America, the Dominican Republic and the US. While

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Table 11.3

Latin America: Main trading partners by sub-region (2007)

Mercosur

Andean Community of Nations

MCCA

CARICOMa

Mexico

Chile

European Union (19.2%)

United States (29.0%)

United States (32.7%)

United States (50.5%)

NAFTA (84.7%)

Asiab (35.2%)

Mercosurc (16.1%)

European Union (15.0%)

Central America Common Market (27.1%)

European Union (14.6%)

European Union (6.0%)

European Union (21.5%)

United States (13.5%)

Andean Community of Nations (8.0%)

European Union (13.6%)

CARICOM (12.9%)

Central America Common Market (1.8%)

Latin America (15.9%)

Note: The numbers in each case represent the percentage of exports towards the country or region. a Only includes merchandise trade b Includes South Korea, China, India and Japan c Includes Venezuela Source: ALADI (2009); SIECA (2008); Comunidad Andina (2008); DIRECON (2008); INEGI

this agreement was based on the policy of trade, not aid, ALBA is anchored more on the idea of a barter system rather than free trade. In this context, Latin American integration processes are mired in doubt, as evidenced by the region’s growing fragmentation. Rather than a rise of the Left, as some observers suggest, what is occurring is the resurgence of populism in some leaders plus the fragility in most democratic systems in the region. Everything points to problems in terms of weak mechanisms for political agreement, fights over leadership, and differing versions of regional integration. Latin America has achieved a functional democracy without, at the same time, improving its democratic governance. Economic integration becomes a point of contention between the regional blocs because of trade disputes and different ideas about joining the international system.

ALBA and the People’s Trade Treaty The People’s Trade Treaty was signed in Havana on 30 April 2006 by Venezuela and Bolivia – the two countries in Latin America with the largest energy reserves – and Cuba, giving an excessive ideological slant to political and economic relations in Latin America. ALBA offers an alternative to free trade accords, on the basis of three principles: (a) opposition to free market economic reforms; (b) not limiting the regulatory action of the state in favour of economic liberalization; (c) harmonizing relations between the state and the market.

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President Chávez is of the opinion that, although they agree on the fundamentals of regional integration, the countries of Latin America lack an adequate strategy for implementing it. He says it is also necessary for integration projects to ‘stop serving imperialism and national oligarchies’ and become a tool for economic development among social sectors of the peoples of Latin America. It is in this sense that ALBA has a bottom-up type of arrangement in which the main actors are the people. ALBA is a proposal built with the people of the Americas as it basis. The initiative is inconceivable without people’s participation, and the alliance between the government and the people is a basic principle of ALBA. Even though ALBA is an ideologically charged plan and is often denounced, it merits examination. Since it was announced in 2001, it has taken shape in the programmes of the Venezuelan government, especially through links with the strategies spelled out in the National Development Plan for 2001–7, which seeks to balance five areas: social, economic, political, territorial, and international. Through ALBA, the Chávez government is pursuing a kind of endogenous development, both national and regional. Another feature of ALBA is its focus on social, cultural, historical, economic, and environmental issues. These are the main topics over which ALBA is at odds with the ALCA/FTAA free trade agreement proposition. ALBA makes a nine-point proposal based on criteria that are more sensitive and socially oriented in terms of the relationship between the state, society, and the environment. The proposal is based on respect for human rights, labour and gender civil rights, plus biodiversity. It places a special emphasis on a differential treatment for the poorest countries by creating a Structural Convergence Fund as a tool for reducing regional asymmetries.

Main institutions and mechanisms The efforts stemming from ALBA take concrete shape in three strategies. The first one is the creation of a television station, Telesur, which is a political project that seeks to fortify the ‘Bolivarian Revolution’ across the continent. Its main goal is to become a multi–state company; though initially started between the governments of Venezuela, Argentina, Uruguay, and Cuba, it has the possibility of taking on new members. In the case of Uruguay, the contract to be a part of Telesur was signed in 2005; however, the law to approve its joining the organization has not yet been approved by the Uruguayan Congress (Anon., 2009). The second strategy is aimed at using oil as a foreign policy tool by associating it with the process of consolidating ALBA through the Petrocaribe Cooperation Agreement (established in 2005). This is a Venezuelan initiative with the Caribbean countries whose main objective is to contribute to energy security. In the context of Petrocaribe, energy agreements between ALBA countries and Caribbean and Central American countries have also

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contributed to draw other countries closer to the policies and initiatives set up in the framework of ALBA. Petrocaribe has become ALBA’s conduit for implementing energy policy. Clear evidence of this is a scale for financing oil sales on the basis of crude prices. In conditions in which oil prices exceed US$ 50 a barrel, 40 per cent of the transaction is financed, the payment period is extended to 25 years, and the interest rate is reduced to 1 per cent; and if it is a short-term payment, the period is extended from 30 to 90 days. The third strategy is the creation of major national projects (proyectos Grannacionales or PG) and companies (empresas Grannacionales, or EG) in which two or more countries of ALBA participate. On 27 February 2009, during the VIII Reunion of ALBA-TCP Permanent Political Commission, held in Caracas, a new commission was established to follow up on the results and impacts of the Grand National Projects. As of today, there are energy, food, cultural, health, communication, commercial, industrial, and educational projects (ALBA, 2007). The Bank of the South (Banco del Sur) was founded on 9 December 2007 by six South American countries (Argentina, Bolivia, Brazil, Ecuador, Paraguay, and Venezuela). The idea was to devise an alternative to the International Monetary Fund and the World Bank, with ‘financial sovereignty’ to control resources and set terms for loans in South America. The plan is for the member countries to come up with a total of US$ 800 million, but it has not been decided how much each will contribute and where the money will come from. The ALBA Bank was created on 26 January 2008 with initial reserves of US$ 1 billion and the authorization for this sum to double. Its goal is to encourage economic and social integration by easing inequality and promoting a more even distribution of investments, while urging Latin American countries not to depend on the US economy or place their reserves in it. Hugo Chávez criticized how the majority of governments use their reserves to pay their debts with international organizations and put the rest in the form of US treasury bonds or deposited them in US banks. With the ALBA Bank they want to use the reserves of Latin American countries to finance projects in the region (Bossi, 2008). Initially, it was established that the funds for the ALBA Bank would come from each of the member countries. However, up until now, the funds have come almost exclusively from Venezuela.

ALBA’s impact on the region Poverty and exclusion in Latin America helps ALBA Poverty and exclusion continue to be among Latin America and the Caribbean’s great problems, as shown in Table 11.2. Since the 1990s, the percentage of people in the region living in poverty has been reduced, partly as a result of the end of political instability; however, in this period the total number of poor people has increased. In any case, the incidence of poverty

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Latin America: Poverty and extreme poverty (%)

Country a

Argentina Bolivia Brazil Chile Colombia Costa Rica Dominican Republic Ecuador El Salvador Guatemala Honduras Mexico Nicaragua Panama Paraguay Peru Uruguayb Venezuela Latin America

Year

Poverty

Extreme poverty

2006 2007 2007 2006 2005 2007 2007 2007 2004 2006 2007 2006 2005 2007 2007 2006 2007 2007 2007

21.0 54.0 30.3 13.7 46.8 18.6 44.5 42.6 47.5 54.8 68.9 31.7 61.9 29.0 60.5 45.5 18.1 28.5 34.1

7.2 31.2 8.5 3.2 20.2 5.3 21.0 16.0 19.0 29.1 45.6 8.7 31.9 12.0 31.6 16.1 3.1 8.5 12.6

Notes: a The data correspond to only 28 urban agglomerations b Urban total Source: CEPAL (2008)

is high in almost every country, with the exceptions of Chile, Uruguay, and Costa Rica. In Bolivia, Guatemala, Honduras, and Nicaragua, poverty affects almost two-thirds of the population or more. This incidence is higher than the Latin American average of 34.1 percent (in 2007). Also – except in the cases of Chile, Uruguay, and Costa Rica – the gap between poverty and extreme poverty is significant (see Table 11.4). However, poverty is not the only problem. Significant differences in the distribution of wealth continue to make Latin America an incredibly unequal region. This is true not just among different countries, but also within each country (see Table 11.5). On average, the poorest segment of the population possesses less than 5 per cent of total wealth, while the richest segment of the population possesses more than 50 per cent.

ALBA and Petrocaribe funds As mentioned before, the efforts of ALBA have manifested themselves in three strategies. The first is the continental station Telesur, today made up of six countries – Argentina, Bolivia, Cuba, Ecuador, Nicaragua, and Venezuela. This multi-state enterprise is considered as the instrument to aid the Latin American integration process, even though its messages always have a clear ideological tone.

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Table 11.5 Latin America: Distribution of wealth in the wealthiest and poorest segments of the population (%) Country

Year of the study

Poorest segment

Wealthiest segment

2006 2007 2007 2006 2005 2007 2007 2007 2004 2002 2007 2006 2005 2007 2007 2003 2007 2007

3.6 2.0 2.6 4.1 2.9 4.3 2.8 3.5 3.5 3.7 1.9 4.2 3.5 3.0 3.1 3.8 4.9 5.1

56.4 60.5 63.3 57.7 63.0 53.9 59.9 59.0 53.5 59.3 61.1 56.0 58.3 56.3 58.4 55.2 50.3 48.3

Argentinaa Bolivia Brazil Chile Colombia Costa Rica Dominican Republic Ecuador El Salvador Guatemala Honduras Mexico Nicaragua Panama Paraguay Peru Uruguayb Venezuela Note: a 31 urban agglomerations b Urban total Source: CEPAL (2009)

The second strategy is to the use of oil as an instrument of foreign policy. The signing of the Energy Agreement of Caracas in 2001, the creation of Petrocaribe in 2005, and the project of creating a South American Energy Cone – presented at the Mercosur meeting of June, 2005 – set the base for the creation of new spaces for cooperation and regional integration. The Fourth Summit of of Petrocaribe, that took place in Cuba in 2007, made it clear that the Venezuelan policy of barter and inexpensive loans is generating important proceeds. Many local products and services, such as doctors and medical training from the Cubans, are accepted as ways of paying for the costs of oil imports, thus allowing many countries to incorporate themselves within Petrocaribe that would not otherwise be able to do so. With the welcoming of Honduras and Guatemala, plus the formal request from Costa Rica, Petrocaribe will comprise 19 countries: Antigua and Barbuda, Bahamas, Belize, Costa Rica, Cuba, Dominica, Dominican Republic, Grenada, Guatemala, Guyana, Haiti, Honduras, Jamaica, Nicaragua, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Suriname and Venezuela. The discourse that positions ALBA as an alternative for ‘the people’ makes joining Petrocaribe much more flexible. Independent from the regional articulations or other prior commitments that each government has engaged in, membership to ALBA, in theory, does not create an obstacle for its members to be part of other integration projects. And even though in

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practice the strong ideological tone of ALBA has generated some frictions and divisions in each country, countries in Latin America are responding to its proposals, particularly in the case of Petrocaribe as part of a process of searching for commercial agreements that offer additional advantages to the region (Castillo, 2008). Under this state of affairs, Petrocaribe has turned into one of the major sources of cooperation for Central America and the Caribbean. Much of the fear that the initiative generated was related to the perception that adherence would necessarily imply a commitment to the political and ideological project that its founders defend. However, it has been possible to note that in the case of a few countries adherence to Petrocaribe and ALBA is explained more by the economic benefits generated by the agreement than by any ideological affiliations. According to data from the Venezuelan Centre for Economic Research (CIECA, after its initials in Spanish), the funds the country has allocated to the member countries of ALBA since its foundation up to September 2008 have reached as high as US$ 32.952 million, a figure that represents 23.51 per cent of taxes collected by the Venezuelan government. This amount reflects the total funds of ALBA, including Petrocaribe, and the estimate is based on official announcements from the government. However, in some instances, these announcements might not have been put into practice, and in other cases, the formal announcement of the giving of resources to a certain country does not include a specific total, which is why the estimate could be even larger. In all of the cases, though, these are large sums of money for all the countries (see Table 11.6). However, it is important to note that the funds shown in that table correspond to an official source of information. Up until now there have not been outside analysis or verification about the funding provided. Currently FLACSO is working on a new project that seeks to analyse the real role that ALBA has had in the region, both as an integration proposal and also by means of the ALBA Bank.

Table 11.6 Venezuelan funds destined to the countries of the ALBA (in US$ millions) Destination

Amount

Cuba Bolivia Nicaragua ALBA Bank Haiti Honduras Dominica

18,776 6724 5523 1350 440 130 8

Source: CIECA, cited in Olivares (2008)

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The economic aid provided by Venezuela is an important source of income for the receiving countries. This can be seen in Central America for example, where assistance from the US and the European Union has diminished considerably. According to the Costa Rica’s President Oscar Arias, Venezuelan aid to the region is four or five times larger than aid received from the US (Anon., 2008). The president is referring to both the funds of ALBA and benefits obtained from Petrocaribe. The funds from Petrocaribe are considerable. Between June 2005 and December 2007, the total credit given to member countries reached US$ 1.170 million; annually this represents US$ 468 million in credit lines. According to the International Monetary Fund (IMF), it is estimated that in countries like Guyana, Jamaica, and Nicaragua, financing from Petrocaribe represents about 5 per cent or 6 per cent of the Gross Internal Product (Gómez, 2008). The importance of these sums is made clearer when it is compared to the US$ 100 million allocated by the Inter-American Development Bank (BID after its initials in Spanish; IDB, in English) to the member countries of Petrocaribe in 2005–8.

ALBA and Petrocaribe in Central America and the Caribbean Both Cuba and Nicaragua are the main beneficiaries of ALBA. In Nicaragua, aside from the economic benefits, there are shared ideological concepts, selfproclaimed as ‘anti-imperialist’ and ‘anti-American’. However, even with the constant invocation of these adjectives on behalf of President Daniel Ortega, the truth is that the relationship between Nicaragua and the US still stands, the Free Trade Agreement is still in force, and the main market for the Nicaraguan entrepreneurs continues to be the US. Despite its association with the integration initiatives promoted by Venezuela and in spite of the signing of agreements with Iran, the status of Nicaragua in other integration systems has not suffered any alterations. Its relationship with the US – regarded as the main opponent of Venezuela’s proposals – did not suffer either. In fact, the American Undersecretary of Foreign Commerce, Christopher Padilla, visited Nicaragua in early 2008 and stated that the relationship with Venezuela through the ALBA and Petrocaribe is not a problem for Washington (Altmann, 2009). Almost two years after first joining ALBA, the benefits obtained by Nicaragua depend on who is judging the situation. For some opponents, the benefits that have been generated in the social sphere have been very limited and are mainly related to issues of energy and transport. The Venezuelan energy aid is considered with doubt by these same groups who state that the high dependency on oil has caused energy prices in these countries to be some of the highest in the region. However, the defenders of ALBA state that important social aid has been achieved due to the agreement, and that oil shortages are now in the past.

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Looking at Honduras, the other Central American country that has joined ALBA, the economic rationale for joining on 25 August 2008 is demonstrated. Honduras’s ideological position is quite different from the rest of the ALBA countries – to the point that President Manuel Zelaya was removed from office through a coup, partly due to his position vis-à-vis ALBA and democratic institutions. At first, the Zelaya government seemed to represent the position of the rest of the ALBA member countries, especially as Zelaya expressed his solidarity with Bolivia when the country expelled the American ambassador for allegedly interfering in domestic affairs. As a result, Zelaya delayed the reception of credentials from the new US ambassador in Honduras, Hugo Llorens. However, its position has gradually softened since which leads to doubts about the real extent of its ideological adherence to ALBA. In fact, on 19 September 2008, President Zelaya told a group of Honduran entrepreneurs that the decision to join ALBA was in response to the country’s lack of resources. According to Zelaya, the Honduran private sector did not help him and cooperation received from the World Bank or the Inter-American Development Bank was insufficient. While the World Bank offered to loan Honduras US$ 10m, the Venezuelan government gave it a credit for US$ 130m after the country joined ALBA (Laínez, 2008). The economic, rather than political, tone of the Honduras’s adherence to ALBA can also be seen in the ratification of the agreement voted by the Honduran Congress on 9 October 2008. The ratification included a series of restrictions related to the use of the resources and the choice to reject any military and political commitment that could be derived from ALBA. On 28 June 2009 the aforementioned coup d’état in Honduras against constitutional President Manuel Zelaya took place. Almost immediately the members of ALBA called for a meeting of ALBA’s heads of state in Nicaragua on the following day. They declared the actions taken by the Honduran Army, Congress, Judicial Courts, Catholic Church, the Ombudsman, and almost all the political institutions of the country illegal and unconstitutional. ALBA also encouraged the Organization of American Sates (OAS) and the international community (United Nations) to apply economic and political sanctions to the country, as well as to denounce the coup and regard the newly established government of Roberto Micheletti as a dictatorship (ALBA, 2009c). The UN, OAS, Rio Group, Mercosur, SICA, ALBA, and other Latin American regional institutions expressed their firm condemnation of the coup (FLACSO, 2009). These institutions affirmed their recognition of Manuel Zelaya as Honduras’s only legal president. In late September 2009, ALBA declared its non-recognition of the de facto government’s calling of elections in Honduras, which were set for that November. The ALBA presidents supported Zelaya’s return to power as a main condition for the reintegration of Honduras into international institutions. At the VII ALBA Summit, which took place in Bolivia on 17 October 2009, ALBA took concrete steps to deal with the situation in Honduras.

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They agreed not to allow any of the main parties responsible for the coup to enter any ALBA country; they would apply economic and commercial sanctions; they would not recognize the winner of Honduras’s November elections (Porfirio Lobo); they would promote international legal actions against those responsible for the coup; and would call for summits of the different integration initiatives in order to promote the agreement of sanctions against any new government in Honduras (ALBA, 2009b). They also reiterated that Manuel Zelaya was the only legitimate president of Honduras and that he should be restored as the constitutional president so that he could finish his presidential term (which was to end on 27 January 2010). The opinions of the ALBA countries have been a part of attempts to find a solution to the Honduran constitutional crisis. In the cases of Costa Rica and Guatemala, their relationships with the Venezuelan projects have been limited to Petrocaribe. Guatemala joined on 13 July 2008, and Costa Rica waits for its joining to be finalized. Neither of these countries has shown a desire to construct a political-ideological alliance with Venezuela through their adherence to ALBA. After the incorporation of Honduras into ALBA and the announcement of the possibility of Costa Rica joining Petrocaribe, attention has turned to El Salvador, the only Central American country that has not built any type of alliance with Venezuela. On 6 October 2008, former president Elías Antonio Saca stated his respect for the choices of the other Central American countries, but added that in the case of El Salvador he did not find any benefit in joining any of its initiatives. Mauricio Funes, the current president, has yet to express his intentions as to whether or not the country will become part of Venezuela’s initiatives, although he earlier expressed his willingness to strengthen his country’s relations with Brazil and the US as well as with Venezuela. With regard to ALBA and the political-ideological implications of the Venezuelan projects in Latin America, it is important to understand that these have not manifested themselves, with the exception of Nicaragua and Bolivia. But even in Nicaragua, as was previously stated, the anti-American discourse of Ortega has not had serious consequences on the country’s relationship with the US. And threats have not transcended mere discourses; like the one formulated in January 2008, affirming that in the hypothetical case of aggression from the US to Venezuela, all the member countries of ALBA would create a military alliance.

What’s next? In building a stronger regional integration, Latin America faces a series of important challenges related to the asymmetries between countries and to the absence of necessary funds to eradicate those asymmetries. As well, there has been a lack of political will to generate improvements in

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the regional integration and the weakness of the national and regional institutions. The threat to democratic governance generated in some countries of the region, like the one recently created in Nicaragua after the municipal electoral process of November 2008, added an additional worrisome challenge to Latin America’s strengthening of its democratic systems. In this case, it is important to emphasize that in Venezuela the electoral results have not been questioned. Many people’s perspective – that the Obama Administration will not be able to produce significant changes in its relations with the region (at least in the short term) – is also of concern. These perceptions arose after the visits of US Vice-President Joseph Biden to Chile and Costa Rica in March 2009. On these trips, he acknowledged that unilateral actions from the US had ended, and that they were now willing to listen more. However, he also asked the region to be patient in waiting for US responses to regional demands, due to the difficult financial situation the country is confronting as a result of the global crisis. Biden’s comments are not good news for many Latin American countries because of the interconnectivity of their economies with the American economy and because of the challenges the US economy faces due to the international financial crisis as well as other problems such as unemployment, migration, and the attendant impacts on remittances. All these imply a hard blow to the international economy as well as to Latin American economies, which had been experiencing a gradual process of recuperation before the financial crisis. At the last Summits of Heads of State and Government of the different subregional blocs, it was decided to strengthen efforts to capture other markets outside of the US. Therefore, markets such as China, Asia-Pacific, and Latin American countries gain new relevance to the region. In this context, the projects promoted by Venezuela represent a viable option for creating new cooperative opportunities to face some of the consequences caused by the new international situation. Petrocaribe has helped to soften the shock of the financial crisis among its members. However, the sustainability of this mechanism depends on how Venezuela confronts the effects of the lowering of oil prices: despite Chávez’s discourse, many specialists consider that Venezuela will not be able to maintain its levels of expenditure if the oil prices go below US$ 75 per barrel. The international financial crisis, the policies of the new US government towards the region, and the political changes occurring in Latin America open a new political cycle characterized by great polarizations and the appearance of different types of leadership. Even though the urge for integration manifests itself in political dialogue and public acts, the difficulties of making this process a reality limit the possibilities that Latin American countries have to deal with common problems, especially the ones derived from globalization processes. With greater difficulties for facing in an integrated manner such regional and global

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challenges as security, global warming, pandemics, and other emerging threats, Latin America faces important obstacles to achieving improved development for the majority of its population. The absence of ‘one voice’ not only inhibits any advances, but also favours fragmentation.

Conclusions The predominant discourses of ALBA, derived from the ideological positions of Venezuela and Cuba, seem favour more autocracy and endogenous forms of development. This process of development within the context of globalization seems to be linked to a greater extent to the major international markets, which drive economic development with effective social policies that help ease poverty, inequity, and inequality in a democratic context. ALBA discourses seem to have hit home in the region. But its proposals for integration – including its military project – are not viable. However, its concrete actions, through mechanisms such as Petrocaribe, display a viability and impact that are greater than those attributed to it by the main international players. New factors in Latin America are opening a new political cycle in the region, characterized by significant polarization and different kinds of leadership. The current status of integration processes gives the impression of a region that is increasingly splintered and that lacks a clear direction on issues of integration and political agreement. Even though in recent years various integration proposals have emerged or re-emerged – such as ALBA, UNASUR, the Mesoamerican Plan or even the Rio Group, to cite just a few – none has managed to consolidate and serve as a regional model for all of Latin America. For this reason, it is necessary to debate whether the proposals should be for all countries or, on the contrary, to simply accept that there are several Latin Americas that have increasingly diverged from one another. In this debate, ALBA appears to be an alternative project for Latin America and the Caribbean. The spirit that leads the agreements approved by the six ordinary meetings of ALBA, the six extraordinary meetings of the Heads of State and Government of the ALBA-TCP, and the six meetings of Petrocaribe should be underlined. All of them emphasize the need to find new ways of commercial cooperation and to secure the strengthening of the member countries’ economies. In the future, one of ALBA’s main challenges will be its capacity to develop some of the mega-projects that it has announced since its creation, especially in a context of lowering oil prices. Another challenge is that its political and ideological tone has caused some resistance in some countries, which fear that if they join the proposal they would implicitly adhere to radical ideological principles. Some countries fear that ALBA is producing a wide ideological polarization inside Latin America, and that this could hinder efforts for wider integration proposals. This explains why the

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greatest challenge of ALBA will be its ability to attract as many members as Petrocaribe has. If ALBA maintains itself as just a political and ideological alliance it will be an ineffective alternative that will fluctuate based on electoral cycles. However, even if ALBA’s political-ideological proposal has not yet had the impact hoped for by its promoters, its proposals of cooperation are considered valuable opportunities for developing countries.

Note 1. For further information on the history, philosophy, and principles of ALBA see FLACSO (2007).

References ALADI (Asociación Latinoamericana de Integración) (2008) Informe del Secretario General sobre la evolución del proceso de integración regional durante el año 2007. [Online] Available at http://www.aladi.org/nsfaladi/estudios.nsf/d61ca4566182909a032574a30051e5ba/ 39f2505e2691d0a90325740f006b4edc/$FILE/2136.doc. ALADI (2009) Sistema de Informaciones de Comercio Exterior (SICOEX). [Online] Available at http://nt5000.aladi.org/siiespanol/. ALBA (Alianza Bolivariana para los pueblos de nuestra América) (2009a) Acuerdos de Integración. [Online] Available at http://www.alternativabolivariana.org/modules.php? name=Content&pa=showpage&pid=230. ALBA (2009b) VII Cumbre del ALBA. Cochabamba, Bolivia, 17 de octubre de 2009. Available at http://www.flacso.org/fileadmin/usuarios/documentos/Integracion/ Octubre/Declaracion_VII_Cumbre_ALBA_sobre_Honduras.pdf. ALBA (2009c) Proclama del Consejo Presidencial Extraordinario. Managua, Nicaragua, 29 de junio de 2009. Available at http://www.flacso.org/fileadmin/usuarios/documentos/ Integracion/Junio_09/Declaracion_Reunion_ALBA.pdf. ALBA (2007) V Cumbre del ALBA. Proyecto Grannacional. Barquisimeto, República Bolivariana de Venezuela 29 de abril de 2007. Available at http://www.alternativa bolivariana.org/modules.php?name=News&file=article&sid=1802. Altmann, J. (2008) The ALBA Bloc: An Alternative Project for Latin America? Translated from Spanish. [Online] Real Instituto Elcano. Available at http://www.realinstitutoelcano. org/wps/portal/rielcano_eng/Content?WCM_GLOBAL_CONTEXT=/Elcano_in/Zonas_ in/Latin+America/ARI17-2008. Altmann, J. (2009) El Alba, Petrocaribe y Centroamérica: ¿intereses comunes? Nueva Sociedad, Nº 219. pp. 127–144. Also available at http://www.nuso.org/upload/articulos/ 3587_1.pdf. Anon. (2008) ‘Cooperación venezolana en Latinoamérica es mayor que la de EEUU’. Terra [Online]. 29 September. Available at http://www.terra.com.ve/actualidad/ articulo/html/act1441413.htm. Anon. (2009) ‘Uruguay no integrará directiva de Telesur durante 2009’, El Universal, [Online]. 25 February. Available at http://www.eluniversal.com/2009/02/25/pol_ art_uruguay-no-integrara_1280633.shtml. Bossi, F. (2008) ¿Qué es el ALBA? (Construyendo el ALBA desde los pueblos [Online] Available at http://www.alternativabolivariana.org/modules.php?name=News&file =article&sid=470.

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Castillo, R. (2008) CA: entre CAFTA y Petrocaribe. El Confidencial [Online] 12–18 October. Available at: http://www.confidencial.com.ni/2008-605/economia_605.html. CEPAL (Comisión Económica para América Latina y el Caribe) (2008) Social Panorama of Latin America 2008. [Online] Available at http://www.eclac.org/cgi-bin/getProd. asp?xml=/publicaciones/xml/3/34733/P34733.xml&xsl=/dds/tpl/p9f.xsl&base=/ tpl/top-bottom.xslt. CEPAL (2009) Statistical yearbook for Latin America and the Caribbean 2008. [Online] Available at http://www.eclac.org/cgi-bin/getProd.asp?xml=/publicaciones/xml/ 7/35437/P35437.xml&xsl=/deype/tpl-i/p9f.xsl&base=/tpl/top-bottom.xslt. Comunidad Andina (2008) Exportaciones Intra y Extra Comunitarias 2007. Documento Estadístico. [Online] Available at http://intranet.comunidadandina.org/IDocumentos/ c_Newdocs.asp?GruDoc=13. DIRECON (Dirección General de Relaciones Económicas Internacionales) (2008) Comercio Exterior de Chile. Segundo Trimestre 2008. [Online] Available at http://www. sice.oas.org/ctyindex/CHL/DIRECON20082_s.pdf. FLACSO (Facultad Latinoamericana de Ciencias Sociales) (2007) Dossier ALBA. Alternativa Bolivariana para América Latina. San José, Costa Rica: FLACSO-Secretaría General. Also available at http://www.flacso.org/integracion/cuadernos/alba.pdf. FLACSO (Facultad Latinoamericana de Ciencias Sociales) (2009) Crisis hondureña: diálogo estancado. Available at http://www.flacso.org/programas-y-proyectos/observ atorio-integracion-regional-latinoamericana-oirla/noticias-de-integracion-regional/ noticia-integracion/se-estanca-dialogo-en-honduras/. Gómez, O. (2008) FMI: Nicaragua el más beneficiado por ALBA. El Nuevo Diario. [Online] 26 October. Available at http://www.elnuevodiario.com.ni/nacionales/30717. INEGI (Instituto Nacional de Estadística, Geografía e Informática). www.inegi.gob.mx. Laínez, L. (2008) Zelaya pactó con Chávez por falta de dinero. La Prensa Gráfica. [Online] 28 September. Available at http://www.laprensagrafica.net/lodeldia/20080928/ 18468.asp. Olivares, F. (2008) Cuánto cuesta el ALBA. El Universal, [Online] 28 September. Available at: http://www.eluniversal.com/2008/09/28/pol_art_cuanto-cuesta-el-alb_ 1062204.shtml. Rojas-Aravena, F. (2007) La integración regional: Un Proyecto Político Estratégico. III Informe del Secretario General de FLACSO. San José, Costa Rica: FLACSO-Secretaría General. Also available at http://www.flacso.org/download/III-INFORME-SECRETARIOGENERAL-2007.pdf. Rojas-Aravena, F. (2008) Integración en América Latina: Acciones y Omisiones; Conflictos y Cooperación. IV Informe del Secretario General de FLACSO. San José, Costa Rica: FLACSO-Secretaría General. Also available at http://www.flacso.org/imagenes/iv_ informe_sg.pdf. SIECA (Secretaría de Integración Económica Centroamericana) (2008) Estado de Situación de la Integración Económica Centroamericana. [Online] Available at http:// www.sieca.org.gt/site/VisorDocs.aspx?IDDOC=Cache/17990000002788/17990000 002788.swf.

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Part IV Reconstructing a Regional System for the Americas

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12 Middle Powers and Hemispheric Diplomacy: Towards an A10 Jorge Heine

The year 2009 marked a turning point in inter-American affairs. The inauguration of President Barack Obama, the United States’s first black president, on 20 January; the Fifth Summit of the Americas in Port-of-Spain, held from 17–19 April; the lifting of the Organization of American States (OAS) 1962 resolution that suspended Cuba’s membership, on 3 June; and the subsequent unanimous suspension of Honduras on account of the 28 June military coup there; all combined to generate a new dynamic in the Western Hemisphere. The present situation is very different from the low point reached following the Fourth Summit of the Americas held in Mar del Plata, Argentina in October 2005, remembered for, among other things, President George W. Bush ostentatiously taking off his earphones, refusing to listen to the speeches of his Latin American counterparts. The very fact that US Secretary of State Hillary Clinton attended the June 2009 inauguration of President Mauricio Funes in El Salvador (the candidate of the former guerrilla-movement-turned-political-party Frente Farabundo Martí de Liberación Nacional (FMLN) and that country’s first left-wing president) is an indication of the considerable changes that have taken place in US–Latin American relations under the Obama administration. Moreover, it was on this occasion that Secretary Clinton said: ‘Some would say that President Obama is centre-left, and that of course means that we will work well with countries that share our commitment to improve and enhance human potential’. The election of Barack Obama generated great expectations in Latin America, as in the rest of the world.1 In the US, where Hispanics now comprise 15 per cent of the population, and where Hispanic voters have not always been ready to throw their support behind black candidates, Obama did well (better than Al Gore in 2000 and John Kerry in 2004), beating Senator John McCain in Florida. President Obama himself, with a Kenyan father and a Kansas-born mother, born in Hawaii and partly raised in Indonesia, has a personal trajectory that enhances his understanding of international affairs in a way that President George W. Bush’s (who first set foot in London, Great Britain as president) 225

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did not. Obama’s African roots and his exposure to Asia have made him especially sensitive to issues affecting the Global South (see Obama, 2004). In one sense, then, these changes were predictable. In another, however, they were not. For the vast majority of observers, Obama’s packed agenda, dominated by the global economic crisis that began in 2008, two wars (in Iraq and Afghanistan) and an ambitious programme of domestic reforms, meant that the Hemisphere would get short shrift (see Lowenthal et al., 2009). Yet, from January to September, President Obama made a state visit to Mexico, took part in the Fifth Summit of the Americas in Port-of-Spain, hosted at the White House Presidents Luiz Inácio Lula da Silva of Brazil, Michelle Bachelet of Chile, and Álvaro Uribe of Colombia, regularized diplomatic relations with Venezuela, went along with the unanimous lifting of the 1962 OAS resolution that suspended Cuba, and took measures to ease US links with Cuba. The latter move, in particular, reflects a considerable change from previous US policies. The obstacles within the US to these changes are not minor. The gap between current Latin American realities and the way they are perceived by many opinion-makers in the US is considerable, and was reflected in the Port-of-Spain summit. The fact that President Obama rose from his seat to respond to the greeting of President Hugo Chávez of Venezuela, that he smiled in so doing and that he accepted a gift from his Venezuelan counterpart, generated considerable criticism, even in the mainstream US media.2 And this leads us to the new Latin America that has emerged in the course of this decade, marked by the distancing, if not downright estrangement, from the US. This chapter addresses how the changed dynamics of interAmerican politics are affecting hemispheric cooperation and how best to redress this situation. The state of affairs in Latin America has transformed the region’s relationship with its northern neighbours. A ‘new Latin America’ has evolved that is more assertive in global affairs and international relations. Region-wide rejection of the Washington Consensus has diminished reliance on the US and overt anti-US sentiment appears in countries across the region. The region’s hierarchy has also begun to shift, with some countries, such as Canada and Chile, becoming more active and other countries’ importance rising and falling – Brazil and Argentina, respectively. Latin America’s resurgence, combined with the obstacles forced upon it by the OAS and the Summit of the Americas (SOA) process, have left current inter-American institutions at a standstill. At the same time, Latin American summitry has flourished as groupings such as the Rio Group, ALBA, UNASUR, and Mercosur allow the countries of the region to meet – although there are concerns of summitry overload. All of this has created the need for a sustainable and effective pan-American summit to deal with issues on a hemispheric level – common concerns, from the environment, to security, to drug trafficking require transnational responses. This chapter argues that the creation of an A10 – a small, informal grouping of Western hemispheric countries – can

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resolve these issues and promote greater inter-regional cooperation. Middle powers, including Canada and Chile, could be an integral part of this initiative, offering diplomatic skill and initiative to reconcile the differences that the region’s players have.

A New Latin America Painting with a broad brush, six trends stand out:3 1. Political stabilization and economic growth. Both military coups (pace Honduras) and inflation have been eradicated. Democratic institutions, albeit with imperfections, are in the processes of consolidation, and economic opening and export-led development made the region benefit considerably from the commodities boom of 2002–8. Six years of uninterrupted growth at close to 5 per cent allowed a number of Latin American countries to pay down a large part of their foreign debt, increase their foreign currency reserves, and, in some cases, to save for a rainy day. 2. Abandonment of the neoliberal dogma. The rise of the Left, of which the FMLN’s victory in El Salvador (which put an end to 20 years of right-wing ARENA rule) is but the latest expression – in this case, the first time a former guerrilla movement has morphed into a political party and won in free elections in Latin America – is in many ways a reaction against the Washington Consensus imposed in the 1990s. Though accepting certain elements of the Washington Consensus (economic opening and low-inflation policies), electorates lost faith in programmes of never-ending reforms that hardly ever delivered, and started to favour leaders and parties that offered alternatives to market fundamentalism (see MacDonald and Ruckert, 2009; Silva, 2009). Responding to what his colleagues had expressed to him at the Port-of-Spain summit, Obama said: ‘They are tired of the Washington Consensus’. 3. Expansion of international markets. Latin America’s traditional markets were the US and Europe. However, the rise of Japan, first of the ‘Asian tigers’, then of China and now India, opened new opportunities. Argentina, Brazil, Chile, and Peru were at the forefront of this ‘shift to Asia’. Oil, iron ore, copper, and soya, among other commodities, have been in heavy demand by the Asian giants and their neighbours to feed their double-digit growth. In the case of several South American countries, Asian markets have displaced those of North America and Europe both in terms of volume and value of exports, thus forging a very different type of international insertion.4 4. Diversification of diplomatic ties. From 2003–8, Brazil opened 32 new embassies around the world, something never seen before in the region’s diplomatic history. In the same

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period, the number of Latin American and Caribbean missions established in New Delhi rose from 13 to 17. Mexico joined the Organization for Economic Co-operation and Development (OECD), and Chile also became a member on 7 May 2010. Chile, Mexico, and Peru are members of the Asia Pacific Economic Cooperation (APEC) forum, and Brazil has participated in the creation of new groups such as the IBSA (India, Brazil, South Africa) Initiative and BRIC (Brazil, Russia, India and China). Argentina, Brazil, and Mexico are members of the newly created G20. 5. Keeping up (sub)-regional integration Over the past 20 years, regional integration has undergone many ups and downs in Latin America. The notion of a single, integrated market from the Rio Grande to Tierra del Fuego remains a dream, and may never come to pass. But this does not mean that myriad sub-regional integrations do not continue to flourish, sprout anew, and bring the various economies together in different and often unpredictable ways. From Mercosur in the Southern Cone, to the Andean Community on the Pacific Rim of South America, the Central American Common Market in the isthmus, the Caribbean Community (CARICOM) in the archipelago and its surroundings, and to the Bolivarian Alternative for the Americas (ALBA), governments continue to explore ways to expand markets and benefit from comparative advantage in the region. 6. Fostering political cooperation. For better or for worse, summit diplomacy in its regional (as opposed to hemispheric) expression has established itself, and even become routine. The Rio Group, the Ibero-american summits, the more recent UNASUR (South American Union of Nations) and the yearly heads of government meetings of the above-mentioned regional integration schemes have all contributed to a heavy schedule of summitry, which poses a challenge of its own. Yet, this flexible, variable-geometry type of approach to regional problem solving has its benefits. It has allowed the region to sometimes skip the heavy-handed formalities of older and more established regional organizations such as the OAS. The expeditious manner in which the Rio Group during its meeting in Santo Domingo in March 2008 solved the impasse between Colombia, Venezuela, and Ecuador is a good example. The same goes for the UNASUR meeting in Santiago, Chile in September 2008, called for by the pro tempore chair, Chile’s President Michelle Bachelet, to deal with Bolivia’s domestic political crisis. None of this means that Latin America does not still face enormous challenges or that it does not still have a long way to go before becoming fully developed. It just means that some progress has been made and that some learning from past mistakes has taken place.

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Obama’s challenges The fact that the US no longer plays the dominant role it played in the region in the past does not mean that it has become irrelevant for it. A fifth of all US foreign trade (the US is still the largest economy in the world, with a quarter of the world’s product) is with Latin America. Close to a third (30%) of its oil imports come from the region, a larger share than from the Middle East. Of the 45 million US residents born abroad, 18 million are Latin Americans. Many Latin American and Caribbean nations (especially Mexico, Guatemala, El Salvador. and Guyana) have come to depend very heavily on remittances, whose value in some cases reaches as much as 20 per cent of the GDP of the recipient country, and whose total value is only slightly less than the overall FDI flow into the region in any given year.5 Moreover, the dependency on the US by countries like Mexico, as well as those of Central America and the Caribbean, has increased in the course of the past 20 years, something very different to what has occurred in South America, and especially in the Southern Cone. Whereas some 80 per cent of Mexico’s exports go to the US, less than 20 per cent of Chile’s exports do so, despite the existence of a US–Chile FTA, in effect since 2003. In short, and despite the considerable progress that has taken place in Latin America in the past decade and the less prominent role of the US in the hemisphere, there continues to be a shared problematique. In addition to Latin America’s own development challenges and the degree to which they are linked to the US economy and society (in matters such as immigration, drug trafficking, and crime, among others), there are also broader transnational challenges that demand collective action and some degree of policy coordination (such as those of poverty, energy, and climate change). President Obama and Secretary Clinton, two deft politicians, have also grasped something else. The fact that there are no major crises, wars, or terrorism in Latin America means that the region can engage Washington in a different type of relationship, one based on maturity and mutual respect. It is thus ideal for the new US administration to display its new diplomatic approach, based on dialogue, multilateralism, and joint efforts to address common challenges, with the real possibility of showing results in the near future – something less easy to achieve in the more conflict-ridden areas of the world. The question then becomes one about how to move ahead and take advantage of this window of opportunity. As important as the content of the newly emerging inter-American agenda is the process to manage it. And this is where middle powers come in.

Middle-power diplomacy in the Americas Canada is, of course, the ultimate middle power, one with a very distinctive foreign policy tradition. A commitment to multilateralism and the rule of

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international law, as well as to such classical international citizenship duties as peace keeping are among its features. From the days of Lester Pearson, Canada has worked with ‘like-minded’ nations to foster these values, and in so doing has managed ‘to punch above its weight’.6 Canada’s joining of the OAS in 1990 has made quite a difference in the inter-American system, on many fronts, such as electoral assistance, human rights, and in Haiti. The country also hosted the Third Summit of the Americas in Quebec City in April 2001 and played an important role in the gestation and approval of the Inter-American Democratic Charter. From its traditional self-image as a strictly North Atlantic nation, closer to countries like Norway and Denmark than to Nicaragua and the Dominican Republic, Canada has recently evolved towards a broader view of itself and its role in the world, including the Americas. In fact, the first Free Trade Agreement between a country of the developed North and one from the developing South was signed between Canada and Chile in 1996. As Andrew F. Cooper (2009) has pointed out, though, Canada has undergone a significant shift in its profile as a middle power. Whereas under the Liberal governments of Jean Chrétien and Paul Martin the country engaged in ‘niche diplomacy’, giving high priority to issues such as banning landmines, the International Criminal Court, and R2P, working closely with ‘likeminded’ countries and with NGOs; under the Conservative government of Stephen Harper, Canada has projected a different approach. The latter is much closer to the US’s and Israel’s, and has expressed itself most vividly in the steadfast commitment to the NATO mission in Afghanistan, where Canadian forces have in many ways borne the brunt of the war against the Taliban in Kandahar province. Interestingly, though, Canada, through its Americas Initiative, has also assigned a high priority to the Western Hemisphere. Prime Minister Harper undertook a high-profile visit to the region in July 2007, visiting Chile, Colombia, Costa Rica, Barbados, and Haiti, and Free Trade Agreements have been signed with Peru, Colombia, and Panama, in addition to the one extant with Chile (see Canadian Foreign Policy, 2008). The democratic crisis in Honduras, triggered by the 28 June 2009 coup that ousted President Manuel Zelaya, though, has become a litmus test for this policy. Canada chaired the OAS Permanent Council meeting that unanimously suspended Honduras from the organization after the coup. Canada’s Minister of State of Foreign Affairs (Americas) Peter Kent took an active role in attempting to broker a solution to the impasse, being part of the delegation of foreign ministers that visited Tegucigalpa in August and met with the head of the de facto government, Congressman Roberto Micheletti, in an effort to persuade him to adopt the Arias Plan and resolve the crisis. Yet, whether Canada will follow the US lead and apply sanctions to Honduras after these efforts failed remains an open question at the time of writing.

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What about Latin American middle powers? Traditionally, the Latin American middle powers were identified as Argentina, Brazil, and Mexico, with everybody else in a second or third tier. However, over the past 15 years, under the presidencies of Fernando Henrique Cardoso (1994–2002) and Luiz Inácio Lula da Silva (2002–10), Brazil has emerged as a power to be reckoned with in international affairs. This in itself is an objective lesson in international affairs: the reason Brazil made the jump from just another Latin American middle power to a different status is not structural – its growth has been rather low in this period, and so has its defence spending. Rather, it has to do with a different way of approaching its international environment, embracing ambitious foreign policy projects and reaching out to Asia and Africa.7 Rather than positional or relational (Brazil has always been the largest Latin American nation), this new status is behavioural in origin. It is rooted in an assertive foreign policy undertaken by two presidents with a clear understanding of how to project Brazil abroad, not necessarily something that could be said of their predecessors.8 Thus, Brazil can no longer be considered merely a Latin American power. It is now a regional power with global ambitions, eager to become a permanent member of the United Nations Security Council, willing to invest heavily in foreign policy endeavours (thus the unprecedented opening of 32 new embassies in 2003–8) and otherwise determined to make a worldwide impact. One example should suffice. Fully aware of the significance of Brazil and the need to work with the South American giant, the incoming Obama administration mooted the possibility of a US–Brazilian partnership on renewable energy sources in the Americas. The answer from Brasilia was swift: for something of that nature, Brazil didn’t need the US, and could do it on its own. Now, if Washington was ready to consider a US–Brazilian partnership on renewable energy sources with a global mandate, Brasilia was prepared to consider it. Part of the reason Brazil and Mexico had such difficulties in projecting themselves abroad and making the most of their recognized middle-power status for much of the latter part of the twentieth century was because they were too absorbed by the ‘national question’ and internal governance issues. It was only after that was successfully resolved – in the case of Brazil by bringing inflation under control and acquiring a measure of continuity in presidential leadership, and in that of Mexico, after fully democratizing the political system – that they were able to take on foreign policy responsibilities commensurate with their size and weight. Much as Brazil and Mexico ended up transcending their original regional middle-power status to join the club of emerging powers in the Global South, Argentina may be seen as a fascinating case of downward mobility in the hierarchy of the international system. After the humiliation inflicted on it by the UK in the Falklands/Malvinas War in 1982, it has wavered from one extreme to the other in its foreign policy positions, the net result being

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one of utter unpredictability, not exactly an asset in international society.9 Its great achievement has been the creation of Mercosur, which, by joining the two South American giants, Argentina and Brazil, put an end of sorts to the historical rivalry between them. This increased intraregional trade for a number of years, but has since stagnated, being unable to grow and expand as its early promise suggested it might. On the broader international arena, however, Argentina has continued to pose more of a puzzle than most potential partners feel comfortable with. Under the Raul Alfonsín presidency (1983–9) it embraced non-alignment with great gusto, became a founding member of the G15 and tried by a variety of means to raise the Third World credentials of Argentina, in some ways harking back to the earliest positions of Juan Domingo Perón. Ironically, it was a Peronist president, Juan Carlos Menem (1989–2000), who jettisoned this by quitting the Non-Aligned Movement (NAM), proclaiming there was only one world, and having Foreign Minister Guido di Tella say that ‘it’s not that we want close relations with the United States; we want carnal relations with them’. Argentina did all it could to ingratiate itself with Washington, including sending ships to the Gulf in the First Gulf War to support the US Navy fleet there, and becoming a special, ‘out of area’ NATO partner. Yet, all of this was to no avail when, in 2000–1, Argentina, on the verge of defaulting on its international obligations, found that the US was adamant it would not move a finger to help, and that neither would the IMF, a very different position from the one taken by Washington on Mexico’s crisis in 1994–5, or Brazil’s in 1998. During Néstor Kirchner’s Presidency (2003–7) and that of Cristina Fernández (2007–11), Argentina has, to all intents and purposes, ceased to have a foreign policy, being fully absorbed by the challenge of bringing back the economy from the brink. It has dallied with Venezuela and embraced Hugo Chávez’s oil diplomacy, championing the latter’s entry into Mercosur, but has otherwise found it difficult to develop a proactive foreign policy agenda of its own.10 Much as was the case in earlier eras for Brazil and Mexico, for Argentina the ‘national question’ is too overwhelming and unresolved to allow for any serious international agenda, let alone such ambitious undertakings as the projection of middle statehood into the construction of hemispheric regionalism (see Levitsky, 2008).

Chile’s emergence Yet, over the past 20 years, there has been another South American nation that has emerged as a strong contender for middle-power status, namely Chile. The fastest growing economy outside Asia during the past two decades, Chile is one of the countries in the developing world that has managed to make the most of the opportunities offered by globalization. It has done so through an aggressive international economic policy (leading it to become

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the country with the highest number of FTAs – 56 as of last count in 2009) as well as diplomatic ‘charm offensives’, that have allowed it to increase its exports through this market access from US$ 9 billion in 1990 to US$ 63 billion in 2008, and to attract considerable amounts of FDI, whose stock is now 65 per cent of GDP, one of the highest in the world. A key factor here has been the diversification of Chile’s foreign markets. In 2007, China displaced the US as Chile’s largest export market, and four of Chile’s largest export markets that year were to be found in Asia (first China, third Japan, fifth South Korea, and tenth India).11 Revealingly, it has been this very diversification of markets and opening to global opportunities that became a source of criticism, both in the region and at home. Chile is the one country in Latin America that is not a full member of any regional integration scheme (although it has FTAs with many of them). It explicitly declined invitations to join Mercosur when it was first established in 1991, and once again in 2000 (it did become an associate member in 1996), and it is often accused of prioritizing Asia (which gets 40% of its exports) over Latin America (which gets only 20%). At home, the centre-left ruling coalition (the Concertación de Partidos por la Democracia) which has ruled the country since 1990, has also exposed itself to the critique that it doesn’t pay enough attention to the region, a sensitive subject given the Pinochet Regime’s explicit distancing itself from Latin America on many fronts. One result of this is that under the presidencies of Ricardo Lagos (2000–6) and Michelle Bachelet (2006–10), Chile continued with its global international trade policy, but added to it a more visible commitment to Latin American concerns. The election of Chilean Home Affairs Minister José Miguel Insulza as secretary general of the OAS in 2005, in a hard-fought election against Mexican Foreign Minister Luis Derbez (the first time an OAS SG who was not the preferred candidate of Washington was elected to the office) was a significant instance of this (see Heine, 2006). Something similar can be said of President Michelle Bachelet’s election as the first chair of the Unión Sudamericana de Naciones (UNASUR) in 2008, a new entity seen by some as designed to assert a measure of South American independence from North America. And although the contrast between this policy and the one followed by Chile’s military regime (1973–90) is considerable, Chile has been able to draw on its own, rich foreign policy traditions from the pre-1973 period to assert its commitment to certain permanent principles in the conduct of its foreign relations, principles that have stood it in good stead in the new, twenty-first century environment. These include the rule of international law, the principle of non-intervention, the significance of multilateral institutions, and that of pacta sunt servanda, principles which are not too different from those that have inspired Canadian foreign policy. However, Chile’s strong democratic institutions and political stability as well as its prosperous economy, mean that the ‘national question’, if not

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totally resolved, is sufficiently addressed in order to allow for a meaningful foreign policy (see Valenzuela and Dammert, 2008). While Chile’s high per capita income and burgeoning foreign trade more than compensate for its relatively small population and territory (relatively speaking, by South American standards), it is these former factors that undergird Chile’s emergence as a middle power.

The hemisphere’s conjuncture Because they are seen as non-threatening and because, by definition, they do not have hegemonic aspirations of their own, middle powers are ideally placed to act as honest brokers and problem solvers in international affairs, taking on tasks that are too intractable for either the big powers or for small and mini-states. At a time when regionalism in the Americas is in transition, middle powers such as Canada and Chile are in a good position to take initiatives for a new policy framework and for new policy tools that respond to this different environment. This is especially significant today because Latin America’s international relations are being buffeted by many forces. On the one hand, new actors such as China, India, Russia, and Iran are starting to play significant roles in the region, reflecting the latter’s diplomatic diversification and its quest for new markets. On the other hand, nations such as Brazil and Mexico, because of their sheer size, find themselves drawn into broader diplomatic arenas, being labelled as members of entities such as BRICSAM (see Aggarwal, 2008). Ideological divisions within the region itself, which often put the member countries of ALBA (Venezuela, Cuba, Nicaragua, Bolivia, and Ecuador) at loggerheads with some of their neighbours, add to these centrifugal tendencies. A natural response to these challenges would be to strengthen existing regional institutions, such as the OAS, which has undergone a revival over the past few years and has played a prominent role in the Honduras crisis. Canada’s joining the OAS in 1990 was an important milestone in the organization’s history. Yet, the basic problem of the OAS is not so much (as it is often argued) the lack of US willingness to pay its quota and thus undergird its perennially underfunded budget. At US$ 80 million the OAS budget is so small that Itamaraty, Brazil’s foreign ministry, could pay for it all if it so desired. The real problem is that Brazil has steadfastly opposed raising the OAS budget because it is leery of any such regional organization that could somehow limit Brazil’s freedom of action in the Americas – much as it has opposed the creation of formal conflict-resolution mechanisms within Mercosur, whose effects would also limit Brazil undisputed hegemony within that subregional integration scheme. Thus, the tragedy of the OAS is that it is distrusted by Latin Americans, who see it as a potential (or actual, as it did in the 1950s and 1960s) instrument of US foreign policy, and by the US, which regards it as a bit of a Latin American ‘talking-shop’ where nothing

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much gets done, where overheads and pensions eat up much of an already meagre budget, and innovation and initiative are scarce commodities. That said, there is little doubt that, at a time of increasing political differences within the Americas, and despite its somewhat chequered past, the OAS has raised its profile as the Western Hemisphere’s premier regional forum, taking up such ‘hot-button’ issues as ‘bringing Cuba back in’ and contending with the Honduras crisis in a forceful and decisive manner. As Feinberg and Haslam (2007) have shown, the OAS has also taken on with great verve the assigned task of becoming the administrative structure for the SOA process, and redefined its mission accordingly, giving a new impetus to the organization.

The nature of the problem The central paradox of inter-American relations in the first decade of the twenty-first century is that, precisely at the time when Latin American nations have substantially increased their interactions with each other and with the rest of the world, giving rise to terms such as a ‘new regionalism’, formal exchanges between the US and Latin American nations reached an all time low. Over the past decade or so, the Free Trade Area of the Americas (FTAA) project has died, the Washington Consensus has been discredited, and the US has become far less significant for most Latin Americans. Hemispheric cooperation and regionalism, in other words, are very much at a crossroads. In 2008–9, a number of reports on US–Latin American relations were released.12 They all coincide in their diagnosis: the US has a much weaker presence in the region. They are also very cautious in their proposals, arguing for modest, incremental changes that would tinker at the margins of the established patterns of inter-American relations. This is predicated on the not unreasonable assumption that President Obama has his hands full with many pressing matters and that Latin America, where there are no wars to speak of, and no Islamic terrorists to hunt down, will not be his foremost concern. Yet, I am not sure this is the way forward. Middle powers like Canada and Chile can play a constructive role in rebuilding regionalism in the Americas. This is not something that will happen by itself, nor out of the inertia of existing institutions. It certainly will not result from timid tinkering at the edges of current arrangements. There seems to be a consensus that the three issue areas on which US policy towards Latin America has been based in the past two decades – that is free trade, democracy, and the ‘war on drugs’ – have been exhausted, and that some fresh issues (like transnational crime, migration, poverty, and inequality in the Americas) ought to take centre stage. In other words, what is needed is a different, expanded policy framework.

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The main concern of this chapter though is not just with the substance of this new agenda, but with restoring a semblance of intra-hemispheric dialogue. Ever since its launch in 1994, the Summit of the Americas (SOA) process has been the linchpin of it. Yet, it has now reached a stage of everdiminishing returns. The SOA from the very beginning was linked to the FTAA project. Now that the latter is dead, this cannot but affect the SOA. But the crisis of the latter goes beyond that. In some ways, the SOA is the Americas’s equivalent to the United Nations General Assembly, only held every four years rather than every September. To sit 34 heads of government around a table to discuss common concerns is not a good working formula. To hold it every four years does not help to make it more operational either: most heads will attend only one SOA in their term of office. There are thus few incentives for follow-up. Add to that an under-funded and thus unempowered secretariat – with a US$ 700,000 yearly budget – and you do not exactly end up with a winning formula.

Towards a working summit approach The heart of the problem of hemispheric diplomacy is the following: there has been an enormous expansion of intra-Latin American and Caribbean political cooperation, leading to a plethora of summit meetings and ministerials; yet, there has been no concomitant increase – in fact, it could be argued that there has been a decline – in political cooperation between the US and the rest of the hemisphere. Given the realities of power and economic resources, this makes it very difficult to make progress on common challenges. Today, the very real regional and global issues that demand collective action and coordination in the Americas – from climate change to transnational crime and drug trafficking – are addressed partially and insufficiently by an ever larger number of Latin American summits, which have neither the capacity nor the resources to solve them. However, meetings of Latin American and Caribbean leaders with their US and Canadian counterparts to address multilateral (as opposed to bilateral) issues are few and far between, in some cases only once every four years, with weak follow-up mechanisms. This is not sustainable. To renew a sense of hemispheric regionalism, different policy tools are needed. These should increase the conditions for informal dialogue, genuine exchange of ideas, and a sense of collegiality between leaders of the Americas – not on the basis of ‘best-friendism’ but on that of common purpose. On the occasion of the G20 meeting at leaders’ level, the proposal that the five countries of the Americas (the US, Canada, Argentina, Brazil, and Mexico) should liaise and, if possible, coordinate common positions was mooted. Given the considerable differences of opinion among these countries as how to best move forward on fixing global financial architecture (the main

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item on the G20’s agenda), this is unlikely to occur. Yet, the seeds of an interesting idea are there. Along the same lines, one report on the state of US–Latin American relations has suggested the creation of an A8 – that is, an informal group, along the lines of the G8, that would meet once a year, bringing together eight heads of government from around the hemisphere to address issues of common concern (see The Brookings Institution, 2008). I would expand it to an A10. Few would question the sense of common purpose and even identity that the G8 created among the world’s leading industrialized democracies in the course of its more than 30 years of existence. Their yearly meetings, generally in July, elicit considerable media attention. More importantly, they are highly valued by the principals who take part in them because they are precisely what the UNGA and the SOA are not: an occasion to exchange views informally, within a small group, with no ready-made speeches, among colleagues, with no attempts at public posturing. The premium is on private exchanges among top leaders. A number of observers have underscored the cyclical nature of interAmerican relations. Bursts of seeming energy and creativity in the development of hemispheric institutions are followed by steep downturns, periods in which nothing much happens, or, even worse, acrimony and bitterness between North and South prevail. The contrast between the state of interAmerican relations in the 1990s and what obtained in the first decade of this century is a prime example of this cycle. The reasons for these pendular movements that go from the extremes of euphoria and warm optimism to near-depression are manifold. One of them is the lack of trust between North and South, between the developed part of the Americas (i.e. the US and Canada) and the developing one (i.e. all the rest). No other part of the world presents such a stark contrast between its component units as the Western Hemisphere in terms of the enormous income and wealth disparities between North and South of the Rio Grande. To that one should add the cultural and linguistic differences between an English and French-speaking North and a largely Spanish and Portuguesespeaking South. According to this view, the problem arises when, at certain moments, the US wishes to believe in the existence of certain common values in the Americas, a belief that is taken at face value by many Latin American nations eager ‘to score points’ with Uncle Sam – only to be disappointed when the latter returns to its traditional unilateralist behaviour as soon as the opportunity arises. From John F. Kennedy’s Alliance for Progress to Lyndon Johnson’s invasion of the Dominican Republic, from Jimmy Carter’s human rights agenda to Ronald Reagan’s consorting with dictators, from Bill Clinton’s NAFTA moment to George W. Bush’s Mar del Plata nadir, the pattern is much the same. If that is the case, and distrust has been the hallmark between the leaders of the Americas, it follows that there is a need to create the conditions for

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establishing this trust in the first place. These conditions do not obtain in large meetings with set speeches aimed at public opinion back home rather than at the presumed interlocutors in the room. They do exist in the equivalent of the G8 meetings, which have been so successful that many others wanted to join as well.13 To compress the 35 countries in the Hemisphere into a working group of ten would not be an easy exercise. But then, nobody said harnessing hemispheric regionalism was a cakewalk; the Rio Group started much the same way, and middle powers are better placed than most to make such a project happen.

Middle powers and the A10 The shifting architecture of international relations has opened the door for effective middle-power diplomacy in the Americas. Leadership is not necessarily dependent upon the size of the actor, it also relies upon ‘a combination of imagination in inventing institutional options and skill in brokering the interests of numerous actors to line up support for such options’ (Young, 1989: 335). As Andrew F. Cooper (2009) points out, there are certain characteristics that give middle powers the position to affect change: ‘working well with others, a mix of commercial and NGO strengths, and an ability to modify the state’s brand’. Canada and Chile, in particular, are well positioned to influence the regional leaders – the US and Brazil. In a small, informal setting – such as the proposed A10 – regular discussions and engagement can foster greater solidarity and understanding among the countries involved. Canada and Chile contain their own unique mix of middle-power characteristics and are perceived as capable of generating consensus building and inter-regional dialogue. Canada’s recent reengagement with the hemisphere (see, Canada and the Americas, 2009), traditional role as a US ally and position as a classical middle power provide it with the diplomatic will and skill to affect change in the region. To do so, Canada must shed perceptions that it is not truly committed to inter-American reforms and that its present engagement is a passing fad. As Jean Daudelin writes, ‘every twenty years or so, it seems Canada rediscovers the Americas’ (Daudelin, 2007: 2). Chile’s dynamic foreign policy and its institutional strengths make it an ideal partner for furthering hemispheric cooperation, which is one reason President Obama invited President Bachelet to visit him in June 2009, the second Latin American head of state to be invited to the White House after President Lula of Brazil. Chile’s recent surge in international trade and engagement with the rest of the world (specifically China and India) demonstrate the country’s capacity for diplomatic engagement. The growing strength of the Chilean economy and its government’s commitment to combating social inequalities make it a viable role model on the interAmerican stage.

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Conclusion The creation of an A10 grouping would provide a necessary mechanism for promoting greater inter-American cooperation. Freed from historical baggage, and perceptions of ineffectiveness, of the OAS and SOA process, such a grouping would help to bridge the concerns and interests of the region’s North and South. The US and Brazil would be given a sufficient platform to express their competing desires for regional leadership, while middle powers – such as Canada and Chile, and to a lesser extent Mexico, Argentina, and Venezuela – would be able to exert niche and middle-power diplomacy. Trinidad and Tobago – which has gained considerable working knowledge from its summit hosting duties in 2009–10 – could be added as a Caribbean representative, helping to balance representation from each of the hemisphere’s sub-regions. An A10 grouping would provide a workable and sustainable model for inter-regional cooperation. Important dialogue would be facilitated through a pan-American network, providing impetus and guidance for further inter-American initiatives.

Notes 1. For some reflections on these Latin American expectations, see the special issue of Foreign Affairs Latinoamérica 8:4 (2008), ‘Propuestas para un mundo sin Bush’, and especially the articles by Jorge Castañeda, Luis Maira, and Roberto Russell. 2. The occasion has even given rise to the term ‘to pull a Chávez’, and is referred to by The New York Times as ‘the now-infamous handshake’ – an extraordinary expression for the meeting of two heads of state in a summit whose very purpose is for participating heads of state to, well, meet each other. See Cooper, H. (2009). 3. For a broader discussion of these trends, see Cooper and Heine (2009). 4. For the case of China, which has been at the forefront of this trend, see Ellis (2009); for India, see Heine (2009a). 5. For these figures, see Inter-American Dialogue (2009). A useful companion report is Council on Foreign Relations (2008). 6. On Canadian foreign policy, see Tomlin et al. (2008) and Bothwell and Daudelin (2009). 7. This and the following paragraph draw on Heine, (2009b). 8. For a comprehensive assessment of the state of Brazil’s domestic and foreign policy challenges, see Foreign Affairs Latinoamérica (2009). 9. As one scholar put it, ‘Argentina has historically had an erratic, inconsistent and often ambiguous foreign policy. Examples abound of frequent and sudden changes in orientation, opposite stances along time (within and across administrations), contradictory positions depending on issues/countries and swinging between alignment and confrontation with the US’ (Margheritis, 2007). 10. For a devastating critique of Argentina’s foreign policy under President Kirchner by one of Argentina’s leading IR specialists, see La Nación (2006). 11. On Chile’s international trade policy, see Heine (2009c); on relations with India, see Heine (2007).

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240 Middle Powers and Hemispheric Diplomacy 12. In addition to the ones mentioned above (Council on Foreign Relations [2008] and the Inter-American Dialogue [2009]) one should also include The Brookings Institution, (2008). 13. The result of that, after many somewhat awkward combinations like the ‘Eight plus Five’ and others, has been, of course, the G20, which met for the first time in Washington, DC in November 2008, and subsequently in London in April 2009 and in Pittsburgh in September 2009.

References Aggarwal, Manmohan (2008) ‘The BRICSAM Countries and Changing Economic Power: Scenarios to 2050’, CIGI Working Paper 39. Bothwell, Robert and Jean Daudelin (eds) (2009) Canada Among Nations 2008: 100 Years of Canadian Foreign Policy. Montreal and Kingston: McGill-Queens University Press. Canada and the Americas: Priorities and Progress (2009) Department of Foreign Affairs and International Trade. Ottawa: Government of Canada. Canadian Foreign Policy (2008) ‘Special Issue: Canada and the Americas: Defining Re-Engagement’, 14:3 (Fall). Cooper, Andrew F. (2009) ‘Middle Powers: Squeezed Out or Adaptive?’, Public Diplomacy 1:2 (Summer), pp. 29–34. Cooper, Andrew F. and Jorge Heine (eds) (2009) Which Way Latin America? Hemispheric Politics Meets Globalization. Tokyo: United Nations University Press. Cooper, Helen (2009) ‘The Politics of Face Time’, The New York Times, 20 September. Council on Foreign Relations (2008) ‘US-Latin American Relations: A New Direction for a New Reality’, Independent Task Force Report 60. Daudelin, Jean (2007) ‘Canada and the Americas: A Time for Modesty’, Behind the Headlines. Canadian Institute of International Affairs, 64 (3). Ellis, R. Evan (2009) China in Latin America: The Whats & Wherefores. Boulder: Lynne Rienner. Feinberg, Richard and Paul Haslam (2007) ‘Problems of Coordination: The OAS and the IDB’, in Gordon Mace, Jean-Philippe Thérien and Paul Haslam (eds) Governing the Americas: Assessing Multilateral Institutions. Boulder, CO: Lynne Rienner, pp. 51–70. Foreign Affairs Latinoamérica (2009) ‘Brasil: ¿potencia americana?’ 9:2. Heine, Jorge (2006) ‘Between a Rock and a Hard Place: Latin America and Multilateralism’, in Edward Newman, Ramesh Thakur and John Triman (eds) Multilateralism under Challenge: Power, International Order and Structural Change. Tokyo: United Nations University Press, pp. 481–503. Heine, Jorge (2007) ‘From the Southern Cone to South Asia: Growing Links between Chile and India’, Indian Foreign Affairs Journal 2:1 (January–March), pp. 29–43. Heine, Jorge (2009a) ‘Playing the India Card’, in Andrew F. Cooper and Jorge Heine (eds), Which Way Latin America? Hemispheric Politics Meets Globalization. Tokyo: United Nations University Press, pp. 122–39. Heine, Jorge (2009b) ‘Middle Powers and Conceptual Leadership’ Public Diplomacy 1:2 (Summer), pp. 41–5. Heine, Jorge (2009c) ‘Chile’s International Trade Policy’, World Focus 350 (February). Inter-American Dialogue (2009) ‘A Second Chance: US Policy in the Americas’. Washington, DC, March. La Nación (2006) ‘Roberto Russell: es muy difícil explicar a Kirchner’, La Nación: la entrevista, 24 September.

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Levitsky, Steven (2008) ‘Argentina: Democracy and Institutional Weakness’, in Jorge I. Domínguez and Michael Shifter (eds) Constructing Democratic Governance in Latin America. Baltimore: Johns Hopkins University Press, pp. 99–123. Lowenthal, Abraham F. and Theodore J. Piccone and Laurence Whitehead (eds) (2009) The Obama Administration and the Americas: An Agenda for Change. Washington, DC: The Brookings Institution. MacDonald, Laura and Arne Ruckert (eds) (2009), Post-Neoliberalism in the Americas. London: Palgrave Macmillan. Margheritis, Ana (2007) ‘Argentina’s Foreign Policy and the Promotion of Democracy in the Inter-American System’, paper delivered at the 48th Annual Meeting of the International Studies Association, Chicago, 28 February–4 March. Obama, Barack (2004) Dreams from My Father: A Story of Race and Inheritance. New York: Three Rivers Press. Silva, Eduardo (2009) Challenging Neoliberalism in Latin America. New York: Cambridge University Press. The Brookings Institution (2008) ‘Rethinking US-Latin American Relations: A Hemispheric Partnership for a Turbulent World’, Report of the Partnership for the Americas Commission, November. Tomlin, Brian W. and Norman Hillmer and Fen Osler Hampson (2008) Canada’s International Policies: Agendas, Alternatives and Politics. Toronto: Oxford University Press. Valenzuela, Arturo and Lucia Dammert (2008) ‘Problems of Success in Chile’, in Larry Diamond, Marc F. Plattner and Diego Abente Bruin (eds) Latin America’s Struggle for Democracy. Baltimore: Johns Hopkins University Press, pp. 139–53. Young, Oran (1989) ‘The Politics of International Regime Formation: Managing Natural Resources and the Environment’, International Organizations, 43 (Summer).

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13 What Role for the Private Sector in Inter-American Multilateralism? Richard E. Feinberg

Why private sector participation in inter-governmental diplomacy? At the core of the inter-American system – the Organization of American States (OAS) and the Summits of the Americas (SOA) – are inter-governmental institutions. Quite properly, these inter-American institutions are driven by governments. The region’s democratically elected governments, as expressions of their sovereign peoples, are entrusted to define and advance their national interests. State institutions, therefore, are the primary drafters of OAS and SOA documents and are primarily responsible for their implementation. This is so also for the Inter-American Development Bank (IDB) which I treat towards the end of this chapter in the penultimate section as the third, ‘missing’ leg of the hemispheric stool of inter-state agencies. At the same time, both the OAS and SOA have sought to involve nongovernmental actors, including academics, non-governmental organizations (NGOs) and the private sector. From the Summit in Punta del Este, Uruguay in 1967 (the last summit before the current series begun in Miami in 1994), there are accounts of consultations with well-known business and labour leaders and intellectuals. But it was the Miami Summit that first sought broad-based and sustained involvement of civil society, including the private sector, in inter-American summitry. The Miami Summit’s Plan of Action listed ‘initiatives in which public and private sector partnerships play an important role’, that included, inter alia, hemispheric infrastructure, cooperation in science and technology, universal access to education, equitable access to basic health services, encouraging micro-enterprises and small businesses, and three partnerships for sustainable development including sustainable energy use. In 2006, the OAS General Assembly formally codified and sanctified OAS and SOA engagement with the private sector, in a resolution entitled

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‘Promotion of Private-Sector Participation in OAS Activities’. The OAS resolved: To invite the member states to continue the dialogue with the private sector and to strengthen the means of dialogue with that sector, at the national level, in OAS activities, and in the Summits of the Americas process. … To continue supporting the dialogue with the ministers of foreign affairs before the inaugural sessions of the OAS General Assembly and the Summits of the Americas. … To continue exploring ways in which linkages with the private sector may contribute to attainment of the essential purposes of the Organization, in particular those that relate to integral development. (OAS, 2006) The resolution also urged member states to promote voluntary programmes on corporate social responsibility. In fact, there are a number of good reasons to include the private sector in OAS and SOA activities: • To render the inter-American system more transparent and accountable to a wider citizenry and a key component of civil society; • To engage private sector resources and expertise, especially vital in light of the severe gap between the many ambitious OAS/SOA mandates and available public resources with which to realize them; • To catalyse the private sector to invest in projects that complement OAS/ SOA initiatives and are in harmony with public sector goals and activities; • To benefit from the ideas and recommendations of the private sector; • To gain private sector buy-in and support for the OAS/SOA, widening the constituencies interested in the inter-American system; • To provide forums in which private sector players from around the hemisphere can exchange ideas and best practices among themselves, strengthen their own regional associations, and promote regional integration and a community of the Americas; • To conform to what has become an increasingly common practice of formally involving the private sector in multilateral diplomacy, pioneered by the Asia-Pacific Economic Cooperation Forum (APEC). Certainly, there are differences between the cultures of private business and multilateral bureaucracies. They operate on separate calendars, time horizons, and incentive structures. These differences need to be understood and taken into account but can and have been overcome in many projects around the world, and should not be allowed to block mutually advantageous collaborations. Further, as it consults and collaborates with business,

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the OAS does and should regularly engage other components of civil society, many of whom can join with private firms and government entities in forming more inclusive and more effective partnerships. Such partnerships have been instituted and continue to evolve in other regions, in both the North and South from the UN Global Compact to Africa and Asia as well as European and hemispheric private–public partnerships (PPPs). These have increasingly become the focus of analytic and applied attention (see Utting and Marques, 2009; Utting, 2008). In particular, Utting (2008) abstracts several distinctive types of contemporary global regulation: certification schemes, global framework agreements, and standard setting (see also Utting and Zammit, 2009). Such typologies inform and contrast with those around international agencies as identified from the hemisphere in the third section below.

Historical context Historically, relations with the hemisphere’s private sector have not been at the core of the OAS’s mission or programmes. The world’s oldest regional multilateral institution, the OAS, is the premier multilateral political institution of the Western Hemisphere. The most senior governing body of the OAS, the General Assembly, consists of the foreign ministers of the 34 active member states. As the OAS’s primary responsibilities lie in the spheres of foreign policy and the politics of inter-American relations, its primary relations have been with member governments and their foreign ministries and with such inter-American judicial institutions as the Inter-American Court of Human Rights. Moreover, as over three dozen interviews for this study with officials of the OAS and executives of the private sector made clear, there are significant gaps between their respective cultures and incentives. In seeking to increase its engagement with the private sector, the OAS will have to work forcefully and creatively to overcome these inherent roadblocks. Most importantly, today the OAS is desperately short of financial resources, an essential input into business investment and operations, as member states for well over a decade have nearly frozen its regular budget in nominal terms – less than US$ 90 million in 2008 – and hence have allowed it to shrink in real purchasing power.1 A high percentage of this restricted budget is allocated to personnel, leaving an even smaller amount for programmatic spending and much of the programmatic spending is allocated to projects undertaken by governments or NGOs. Resources available for partnering with business, therefore, are very modest. The Summits of the Americas, initiated in Miami in 1994, opened new horizons for both the OAS as an institution and for engagement of the private sector in the inter-American System. Summits drew the heads of state and government into an expanded inter-American system, which came to include not only the OAS and related organs and institutions but also the summits and

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the follow-up ministerial meetings and other specialized working groups. In Miami and subsequent summits, rather than create new bureaucracies, summit leaders chose to rely heavily on existing institutions, particularly the OAS and the IDB (arguably, a component of the de facto inter-American system) to implement the wide range of summit initiatives. In response, the OAS – its Secretary General, Permanent Ambassadors and senior management – took steps to align its agenda to summit mandates, created an internal summit secretariat, increasingly took on responsibilities for the logistics of the numerous specialized ministerial meetings and for the Summit Implementation Review Group (SIRG) which oversees summit implementation and drives summit planning (OAS, 2001, 2004). In addition, the OAS drove creation of the Joint Summit Working Group which encompasses the major multilateral institutions seeking to foster regional economic development.2 Arguably, during the 1990s, the improvement in the region’s perceptions of the OAS – of its relevance and authority – was attributable in significant measure to the summits and the mandates and procedures passed on to the OAS. Nevertheless, there have been major problems in the summit process (Leadership Council for Inter-American Summitry, 1999). Most notable has been the glaring gap between the many summit pledges and the instrumentalities and resources allocated to their implementation.3 There have also been shortcomings with regard to monitoring and reporting of compliance with the leaders’ pronouncements. More recently, the hemispheric convergence of interests and values that the entire enterprise of summitry is based upon are under challenge by some participating states. The deepening ideological fragmentation and inter-state tensions plaguing the Western Hemisphere are particularly damaging to institutions with traditions of consensus governance. Realistically, summits have a number of functions. They can improve the chemistry among leaders and their senior staffs and may reduce tensions among states. They provide an opportunity for leaders to tackle pressing issues of the moment, as when during the 2004 Monterrey Summit leaders consulted on the Bolivian political crisis. Similarly, the Port of Spain Summit in April, 2009 provided a most auspicious opportunity for leaders to address regional tensions and, if not to restore a full convergence on interests and values, at least to find some common ground behind specific initiatives of broad appeal. Port of Spain offered the new US president, Barack Obama, the opportunity to meet the broad range of hemispheric leaders early in his administration, and to present the new face of American diplomacy – less confrontational, more multilateral, more collaborative (Feinberg, 2009a). Despite its inherent institutional and financial limitations, over the years the OAS has accumulated a surprisingly large number of programmes that engage the hemisphere’s private sector. These programmes are directed from several OAS entities including: the OAS’s Executive Secretariat for Integral Development (SEDI) and its various specialized offices; the OAS-affiliated Pan American Development Foundation whose programmes systematically

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include private sector partners; the OAS-affiliated Trust of the Americas which was established in 1997 explicitly to promote private participation in projects that reflect the principal goals of the OAS; and the Young Americas Business Trust. Sector-specific commissions, including the Inter-American Telecommunications Commission (CITEL) and the Inter-American Committee on Ports (CIP), also engage interested private firms. These activities are impressive in their creativity and in their resourcefulness in the face of very restricted resources, and frequently address the hemisphere’s most urgent needs. In 2005 the OAS also began to experiment with convening a Private Sector Forum (PSF) just before the annual General Assembly. The PSF is organized jointly by the OAS, the host government, and the Private Sector of the Americas, an association of private sector leaders created in large measure to assist in this event. The OAS also intends the PSF to build bridges between the organization and the hemisphere’s private sector, to help promote public–private dialogue, and to help catalyse concrete initiatives to promote PPPs as a tool for development. A PSF also met just prior to the Fourth Summit of the Americas in Argentina in 2005 and convened again just prior to the Fifth Summit of the Americas in Trinidad and Tobago.

Public–private partnerships: A strategic development tool Public–private partnerships, in their diverse forms, offer a major set of mechanisms to help the OAS and inter-American summitry realize their core missions. Summit declarations and private sector consultations have repeatedly called for PPPs, and OAS programmes are actively engaged in their formation. For example, SEDI’s Department of Trade and Tourism’s project, ‘Public–Private Partnerships for Workforce Development’, is examining successful cases of PPPs that match worker training and the requirements of the labour market, in order to elaborate guidelines to promote PPPs for human capital development.4 Broadly speaking, there are two categories of PPP: 1 Cooperation between public authorities and the private sector in order to ensure the financing, construction, renovation or management of physical infrastructure. These PPPs may take a number of forms: management and service contracts, leasing, concessions, and build-operate-transfer (BOT) contracts. A study by the Pacific Economic Cooperation Council (PECC), a predecessor and observer to the APEC process, concluded that successful PPPs require trust and cooperation among the parties, a clear definition of the roles of all stakeholders involved, transparency of procedures, performance evaluation criteria, review mechanisms, and a framework for the settlement of disputes (PECC, 2006). 2 Cooperation across sectors to address social issues. Cross-sector social-oriented partnerships (CSSPs), often involving civil society organizations as well as public and corporate entities, address challenges such as education,

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healthcare, community capacity building, and environmental sustainability (Selsky and Parker, 2005). In the corporate social responsibility realm, CSSPs are typically voluntary partnerships where each partner retains organizational autonomy while bringing a unique value, expertise, or legitimacy to the alliance. The PPPs sought by the OAS and inter-American summitry often fall within this category. For either category of PPP, public policy plays a critical role in establishing an enabling framework. Governments can provide regulatory stability and predictability, and a legal framework for contract enforcement and remedies. Governments can catalyze PPPs through their powers of persuasion and convocation, education and training, and through fiscal and other monetary incentives. Governments can set standards and encourage monitoring, evaluation, and public reporting of PPPs. For example, the Multilateral Investment Fund (MIF) of the IDB is preparing a project to help the government of Trinidad and Tobago to promote PPPs in infrastructure, by strengthening its capacity to design and regulate PPP project performance.

Building on best practices In light of such programmes and lessons learned from best practices, there are a number of steps that the OAS and the inter-American system can take to promote PPPs, building on valuable existing programmes. In particular, Summits offer a special opportunity to bring together public and private actors, and to motivate them to participate in the implementation of initiatives that arise in the high-profile summit context. The summitry process (as will be discussed at greater length below) contains a number of follow-up mechanisms, including ministerial meetings and possibly issue- and sectorplatforms, which can cultivate PPPs. In this regard, it is important to take into account the Inter-American Development Bank, notably its Multilateral Investment Fund (MIF), which is already engaged in promoting PPPs and has the huge advantage of commanding large budgets that facilitate dialogues with governments and that offer incentives to private firms.5 Therefore: • In seeking to encourage the formation of PPPs, the OAS should seek to coordinate initiatives and programmes with the Inter-American Development Bank (IDB). To encourage such coordination, leaders at the Summit should set it in motion, and the top management of both institutions should establish strong inter-agency mechanisms that foster programmatic collaboration between the two Washington, DC-based institutions. • Together, the OAS and IDB can encourage member states to establish well-designed enabling frameworks that facilitate the formation of PPPs. Frameworks can apply to the national and local levels of government,

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provide for legal and administrative transparency, encourage an equitable sharing of risk, and provide for positive and realistic incentives for all parties. Programmes of technical assistance and seminars that focus rigorously on specific sectors (e.g. infrastructure, energy, ICT, health, education) can be useful in spreading best practices. • Sharing of best practices can be stimulated through interactive databases and regional and national workshops, and by exposing the experiences of more advanced economies in Latin America to other member states. Exchanges with Europe and Asia, where PPPs are commonplace, could also be beneficial. The IDB’s extra-hemispheric membership can be useful in this regard. Also, experts from the World Bank, Asian Development Bank, and OECD can be usefully engaged. • Tripartite dialogues – government, business, civil society – can be particularly fruitful, as each brings to the table a specific set of resources and expertise, as well as its own constituencies and legitimacy-enhancing reputations. Many non-governmental organizations have built track records of experience in such tripartite partnerships, often linked to corporate social responsibility practices. • The Summit of the Americas, and the preceding Private Sector Forum (PSF), can stimulate the formation of PPPs around summit mandates. The agenda of the Private Sector Forum in Port of Spain highlighted and encouraged firms to perceive the advantages of PPPs (see Feinberg, 2009b). Ideally, in the interaction between representatives of the PSF and senior government officials, private firms will commit to forging PPPs around summit mandates, and the official interlocutors will embrace their participation and direct their ministries to follow up with attention, resources, and durable implementation mechanisms. Follow-up mechanisms can include monitoring and evaluation of PPPs, providing a public visibility that will encourage the sharing of best practices and the participation of a widening number of firms in constructive PPPs.

Summits of the Americas and the private sector The periodic Summits of the Americas are the highest form of regional multilateralism in the Western Hemisphere, as they assemble the leaders of the states to engage in collective decision making. Initiated in their current form in Miami (1994), subsequent summits have been held in Santiago, Chile (1998), Quebec, Canada (2001), Monterrey, Mexico (2004), Mar del Plata, Argentina (2005), and Trinidad and Tobago (2009). Institutionalized summitry involves not only these periodic meetings of state leaders but also related implementation mechanisms (secretariats, oversight instruments, working groups, ministerial meetings, conferences, projects, consultative groups, multi-stakeholder partnerships), which provide organic continuity between summits.

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The 1994 Miami Summit engaged the private sector by proposing an initiative of great interest to business: the negotiation of a Free Trade Area of the Americas (FTAA), a concept that the private sector (among others) had formally proposed during pre-Summit consultations (Katz and Fisher, 1995). The private sector had a strong self-interest in the FTAA process, as business would gain freer access to expanding markets for their goods and services. After Miami, the ministers of trade began to meet regularly and on an annual basis convened a private sector forum for business executives that preceded the ministerial meeting. The early forums gathered a large and enthusiastic number of senior executives who would break out into working group sessions and present formal recommendations to the ministers. Of course, with the suspension of the FTAA negotiations, these trade-related forums no longer occur. But what the FTAA experience demonstrated is that the private sector will come – if there is a strong enough agenda that engages its interests. The strategy of linking trade negotiations to a strong private sector presence has also been manifest during some negotiations for free trade agreements. For example, during the negotiations for the US–Central America FTA (CAFTA-DR), countries typically included significant numbers of business executives in their delegations. While ministers maintained leadership in the negotiations, many incorporated private sector suggestions into their bargaining positions. The CAFTA-DR negotiating sessions also provided opportunities for business executives to network among themselves and to formulate common positions, notably for sector-specific items on the negotiating agenda. The OAS asserted an active presence in these trade-related initiatives by joining the IDB and the UN Economic Commission for Latin America and the Caribbean (ECLAC) to house a Tripartite Commission that boasted a strong professional staff, maintained valuable databases, and published expert studies. As already noted, informed by cases in Latin America, Peter Utting (Utting and Marques, 2009; Utting and Zammit, 2009) has proposed typologies of different PPPs or certification, standards, processes etc. The Port of Spain Summit Declaration of Action contains many initiatives that could potentially be of great interest to a very wide range of business sectors. The coherence among OAS programmes, Summit of the Americas mandates, and private sector engagement, now require a thorough review. Summit mandates come from the leaders who, after all, are the principals to whom the foreign ministers and the OAS permanent representatives and ambassadors must report. At the same time, it is in the interests of the OAS to take ownership of the Summit and to identify with its authoritative declarations, many of which will be of great interest to the private sector and can help to catalyze PPPs. This review for coherence among OAS programmes should be led by the Secretary General and the Permanent Council, with support from the OAS Summit Secretariat.

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Pre-summit consultations The OAS organizes two series of opportunities for private sector inputs into the summit agenda, as with other components of civil society: a series of pre-summit consultations, which for businesses are organized at the regional level; and the Private Sector Forum immediately prior to the summit itself. Since summit documents are largely complete prior to the PSF, the earlier series of consultations offers more propitious opportunities for actually influencing the summit drafts. The OAS General Secretariat, through its Department of Trade and Tourism (DTT), and the Summits of the Americas Secretariat, in coordination with the Trinidad and Tobago National Secretariat for the Fifth SOA, organized a series of consultations with various regional and subregional business associations including: the Caribbean Association of Industry and Commerce (CAIC); the Federation of Chambers and Industry Associations of Central America (FECAICA); the Federation of Chambers of Commerce of Central America (FECAMCO); the Economic-Social Consultative Forum of Mercosur (FCES); the Council of the Americas; the Andean Consultative Business Council; the Latin American Organization for Micro, Small and Medium Enterprises (OLAMP); the Business Council of Latin America (CEAL); and the Business Technical Advisory Committee on Labour Matters (CEATAL). Inputs were collected and distributed to member countries, and private sector representatives were invited to make a presentation at a SIRG preparatory session in Sonsonate, El Salvador on 11–12 December 2008.6 However, this robust series of pre-summit consultations is not adequately wedded to the PSF. No doubt the organizers of the PSF take into account the pre-summit soundings in drafting the agenda for the PSF. But more could be done to knit the two mechanisms together. For example, the various business associations consulted during the pre-summit meetings might be asked to organize one or more of the PSF panel discussions. There might also be an opportunity at the PSF for business leaders to compare and contrast their earlier recommendations with the final summit texts; where their recommendations successfully found their way into the summit texts, the private sector could focus on next steps, such as the roles the private sector could play in further advancing their proposals, including through summit-established mechanisms, in their implementation at the regional and national levels. As such the Private Sector Forum should move forward to identify specific PPPs, linked to the final summit text. A cross-cutting theme of the PSF, of its keynote speakers and panellists, could be the usefulness of PPPs in driving summit initiatives. The PSF would not, itself, attempt to implement projects (it lacks the means to do so); rather, it would seek to identify summit initiatives where private firms might usefully engage, and partner with national or regional agencies, to

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catalyze the formation of such PPPs. Where appropriate, the collaborative roles of the OAS and IDB should be underscored (more on this below).

OAS engagements with the private sector The OAS has several entities and affiliated bodies that engage with the private sector through dialogue and projects. These include its Executive Secretariat for Integral Development (SEDI), three non-profits – Pan-American Development Foundation (PADF), the Trust of the Americas, and the Young Americas Business Trust (YABT) – and the sector-specific CITEL and InterAmerican Committee on Ports. In 2008 SEDI had a budget of US$ 47.1 million, nearly one-third of the OAS’s total budget.7 An umbrella secretariat, SEDI houses the departments of social development and employment, sustainable development, science and technology, education and culture, human development, and trade and tourism. Among SEDI’s key missions is to promote multi-sector dialogue and PPPs, and the secretariat is charged with maintaining relationships with organizations of the private sector and civil society that work on integral development. To varying degrees, SEDI’s component departments engage private firms in their programmes and projects. To cite a few examples: the Department of Science and Technology partners global high-tech firms in the Engineering for the Americas education programmes; the Department of Social Development and Employment includes the regional employer organization, CEATAL, in forums on labour and employment issues; and the Department of Sustainable Development has held dialogues with the private sector on energy strategies; the Department of Trade and Tourism organizes the OAS Private Sector Forums in the context of the General Assemblies and Summits of the Americas. However, the general orientation of most SEDI programmes is towards member government agencies and other multilateral institutions, with a lesser focus on the private sector. In conversations with the staff of SEDI departments, there was a clear awareness of the challenges inherent in a public sector development agency seeking to engage the private sector with its forprofit paradigm. Nevertheless, among SEDI staff there was also a widespread interest in more coherent and enhanced engagement with the private sector and confidence that there exist many opportunities for mutual benefit. In 2003, the OAS/SEDI signed a pioneering cooperation agreement with Forum Empresa, a non-profit association of some 19 national organizations in the Western Hemisphere dedicated to promoting corporate social responsibility among its private sector membership. Through this partnership, the OAS/SEDI, in conjunction with the Multilateral Investment Fund (MIF) of the Inter-American Development Bank (IDB), contributed with Forum Empresa in a joint project for the promotion of CSR within small and medium-sized enterprises (SMEs) in Latin America. Through this partnership,

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Forum Empresa was able to develop a CSR methodology and supporting materials as well as a network of businesses interested in promoting CSR that today numbers some 4000 firms. In addition, SEDI has scaled this initiative to the Caribbean region and has successfully stimulated the creation of CSR national associations within the five participating Caribbean countries. Founded in 1962, the Pan-American Development Foundation is a US 501 (c)(3) non-profit organization affiliated with the OAS. Its primary donor is USAID. Expenses in fiscal year 2007 were US$ 47.7 million. The private sector is well represented on PADF’s board and advisory committee. Partners include the Association of American Chambers of Commerce in Latin America (AACCLA), and many projects engage corporate partners (PADF’s 2007 Annual Report lists 34 corporate donors and partners). The Foundation aims for a 1:1 leverage ratio from partners (business, NGOs, and governments) and staff estimate that the private sector (corporate and individual) contributes, in cash and in-kind, roughly US$ 7 million per annum to joint projects. Projects that include significant corporate participation include the Disaster Management Alliance, the Disaster Management Emergency Response Programme, Joining Hands for El Salvador, and various education programmes. PADF also offers to assist firms with strategic corporate social responsibility programmes through services such as media strategies, government relations, and business development and that include evaluation, monitoring, and reporting. Also a non-profit affiliated with the OAS, the Trust of the Americas was established in 1997 to promote private sector and other public sector participation in OAS development projects. The Trust’s board of directors includes leading executives from prominent companies, and its website lists 17 private sector partners. In 2006–7 the Trust averaged just under US$ 2m in administrative and project expenses. Trust projects that include significant corporate participation include Partnerships in Opportunities for Employment through Technology (POETA) and Promoting a Culture of Labour Rights Compliance. Also, the Trust/OAS presents an annual corporate social responsibility award to a worthy private firm: past winners include Chrysler, for a programme that promoted sustainable development in the Brazilian rainforest; Conoco Philips, for a public, private and not-for-profit collaboration benefiting small-scale fishermen in the Gulf of Paria, Venezuela; and Pantaleon, for a programme to benefit worker families in Guatemala. Another more recent non-profit is the Young Americas Business Trust (YABT), which is grouped within OAS/SEDI. In part, the YABT is a response to declarations at Summits of the Americas addressing private sector engagement in development and the employment of young people. With an annual core project budget of about US$ 2 million (short of original aspirations), the YABT seeks to promote entrepreneurship among young people through a network of national chapters. With the support of the Canadian International Development Agency (CIDA) and its partnership with SEDI,

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the YABT promotes corporate social responsibility in small and medium enterprises, notably in the Caribbean. Other specialized OAS activities that include significant interface with the private sector are the Inter-American Committee on Ports (CIP) and the Inter-American Telecommunications Commission (CITEL). CIP includes port authorities among its member state institutions, and the lead objective of its 2008–11 Action Plan is ‘to assist in the strengthening of hemispheric port competitiveness by promoting complementarity between the public and private port sectors.’ For its part, CITEL seeks to promote common telecom standards and effective public-policy frameworks, and its 200 associate members include many private telecommunications associations and firms. This is an impressive array of programmes engaging with the private sector. As is so often the case with development assistance programmes, while many of these activities are worthy, their capacities to impact member country development programmes are clearly constrained by their modest budgets and, it seems, limited abililty to leverage private sector resources. Inevitably, the variety of the programmes, especially in contrast to the available resources, raises questions of administrative and programmamatic fragmentation, even as SEDI extends its umbrella over a number of them. It is uncertain whether the various projects build in sufficient capacity for replication and scaling up, and thereby for engaging a wider universe of private sector firms. This review of internal OAS programmes suggests the following findings and recommendations: • Across its various programmes, OAS engagement with the private sector would benefit from coordinating, synergistic structures, the imposition of some common disciplines and guidelines, and the systemic sharing of information and plans. From the viewpoint of the private sector, such institutional discipline would facilitate engagement. Private firms would see a more purposeful, focused inter-American system, easier to navigate and more partner-friendly. There would be more added value with less administrative strain. • As a concept that has gained increasing currency in the Western Hemisphere and has been incorporated into a number of valuable OAS programmes, corporate social responsibility (CSR) could be given greater visibility and centrality in a variety of OAS development programmes. By building on existing programmes, the OAS could further strengthen its relations with the many national CSR associations in member states, thereby facilitating the attraction of private firms to OAS programmes. • In addition to including private firms on programme advisory boards, as is already the case, the OAS should consider the creation of an institutionwide private sector advisory board or commission (more on this later). • The Hemisphere could both learn from and contribute to comparative PPPs in other regions, both South and North (see Utting and Marques, 2009).

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Intensifying OAS and business interaction: Optional frameworks Interviews with leaders from the private sector and from other multilateral institutions, and the experiences of other multilateral entities, suggest the value of institutional mechanisms that provide for two-way channels of communication between the OAS, and specifically the office of the Secretary General, and the business sector. For the OAS, such mechanisms would promise regular business input while channelling private sector support for the institution’s own priorities and programmes. There are several possible mechanisms for private sector engagement with the OAS. The weightiest is the APEC model. The least complex is an informal advisory board. An intermediary option is the formation of a standing, representative, private sector committee. Option 1: The APEC/ABAC model APEC has been a pioneer among regional multilateral organizations in institutionalizing a private sector role (see Feinberg, 2009c). In 1995 APEC officials created the APEC Business Advisory Council (ABAC) to provide them with a business perspective and to respond when the various APEC ministerials and working groups requested information about business-related issues (Mullen, 2003; see also Feinberg, 2000). ABAC comprises up to three members of the private sector from each economy (hence up to 63 members from the 21 APEC members). ABAC members are appointed by their respective governments, represent a range of business sectors, including small and medium enterprises, and typically serve for three years. ABAC maintains a modest secretariat in Manila, the Philippines, meets quarterly, and submits a detailed annual report to APEC officials with recommendations on a range of issues of interest to business. Each year ABAC members engage in an informal, face-to-face dialogue with APEC leaders. Consequently, business leaders perceive a self-interest in deep engagement in ABAC/APEC, in spending time and resources in attending meetings and helping to prepare detailed reports, and in some cases in engaging in sector-specific working groups (in chemicals, life sciences, transport security) that focus on projects and programmes of interest to business. The ABAC model is more state-centric than would be appropriate for the Western Hemisphere where civil society and the private sector exercise greater autonomy. But the concept of a standing private sector body, with the authority and capacity to meet periodically, provide regular business input, and to track implementation of their proposals, is deserving of consideration. Issues to be considered would include funding and staffing, selection of representation, and the modalities of interaction with official OAS and summit bodies. Certainly, business executives willing to devote significant energies to such an endeavour would anticipate meaningful access to public sector decision makers.

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Option 2: Formal private sector commission The OAS could draw on the APEC/ABAC model of a standing private sector entity, but one tasked with a less elaborate and less costly set of activities. More in keeping with Western Hemisphere realities, membership could be a combination of representatives of existing, independent regional and subregional business associations (such as those consulted during the summit preparatory process) supplemented by leading CEOs appointed by the OAS Secretary General in consultation with member governments. Additional members might well be drawn from the boards of standing OAS-affiliated programmes. Activities of such a commission would include substantive inputs into OAS programmes and meetings, including general assemblies as well as the PSF and summits. In return, members would be expected to partner in OAS programmes and summit initiatives and to help disseminate information and participation in such activities among their peers and in their respective business associations. Members would serve as bridges between the OAS and the business world. Among issues to consider: funding and staffing would still be necessary, and clarification of the selection process and member responsibilities might be matters for the OAS Permanent Council. Option 3: Informal SG advisory group The OAS Secretary General could ask a number of corporate executives in whom he has confidence to serve as his informal advisors on matters that he considers important and relevant to the private sector. On occasion, the Secretary General could ask them to prepare brief papers on specific topics; they might be convened once or twice a year, as deemed necessary. They would offer input prior to general assemblies and summits, but they would not have primary responsibility for representing the private sector in preparing such conclaves. Individually, participants might be interested in partnering in OAS programmes and assisting in OAS outreach to their peers in the private sector. The obvious advantage of this option is its low cost and simplicity. Conceivably, it could be paired with either of the two previous options. Thinking fully outside of the box, the OAS could partner with the IDB in constructing any one of these three options. The IDB and its president would also be well served by strengthening ties to the Hemisphere’s private sector. From the viewpoint of the private sector, interacting at the same time with both pillars of the Inter-American System would likely be efficient and attractive. Simultaneously addressing the leading political and economic institutions of the Hemisphere could also foster a more holistic perspective on regional problems. Certainly, both the OAS and IDB have come to recognize that the development challenge demands an approach that integrates economics and politics, just as it requires partnerships between the public and private sectors.

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The Inter-American Development Bank: The missing partner In contrast to the stringent treatment accorded to the OAS, member states doubled the capital base of the Inter-American Development Bank in 1994 to US$ 100 billion and at the time of writing were considering yet another major increase in lending capacity. The governors of the IDB are members’ ministers of finance or development. For the private sector, therefore, the IDB’s resources and senior governors are natural attractions. Yet, the OAS and the summitry process have struggled to fully engage the IDB. There is an inherent tension between institutions that are governed, respectively, by political ministries and economics ministries. Indeed, the IDB has resisted submission to the summitry process, even as important components of Bank programmes do share summit preferences and the growth of some IDB programmes can be attributed to summits (Feinberg, 2006). Notwithstanding these cleavages, if mechanisms can be found to increase cooperation between the OAS and IDB, especially with regard to their engagements with the private sector, there is room for mutual advantage among these fundamental pillars of the de facto inter-American system. Cooperation is ongoing in some areas but much more could be done. The draft Declaration of Commitment of Port of Spain calls upon the IDB, as a member of the Joint Summit Working Group, to strengthen its commitment and to develop coordinated programmes of action to deliver summit goals. To do so, the OAS and IDB should reach an understanding, formalized in a new Memorandum of Understanding (MOU), enumerating areas and programmes for cooperation. Special attention should be paid to implementation of SOA mandates and the formation of related PPPs, and both institutions should report on how current and planned programmes support these goals. The MOU should invite the IDB to participate more fully, along with the interested private sector, in the various specialized ministerial meetings organized by the OAS. The MOU should encourage broad inter-institutional cooperation, from the top leadership down to the functional offices. The MOU should also open doors to greater IDB participation in the planning of summits, and explore collaboration in the mounting of private sector forums. Importantly, the MOU should facilitate IDB financial support for effective OAS programmes of mutual interest. In short, notwithstanding its historic private sector concentration and limited communication with civil society, the IDB could benefit from the experience of both the OAS and UN in PPPs (see Utting and Marques, 2009).

Conclusions: The way forward The Organization of American States and the private sector are not a natural fit. The OAS is primarily a political body responsive to ministries of foreign affairs and is struggling under severe budget constraints. Nevertheless, over

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the years the OAS has built a number of innovative programmes that engage the private sector, including PPPs. More recently, the OAS has added the Private Sector Forum as an instrument to engage the private sector in its development dialogue. The Summit of the Americas and its follow-up mechanisms offer powerful instruments for elevating OAS engagement with the private sector to much higher levels. The Port of Spain Summit declaration contains many proposed initiatives congruent both with OAS objectives and private sector interests; it is important for the OAS to take charge and to partner other institutions in implementing important portions of that economic agenda. In 1959, the OAS gave birth to the Inter-American Development Bank, and it is time that the two Washington, DC-based agencies become strategic partners, forging a genuine political economy paradigm for development. Together, the OAS and IDB can make the encouragement of PPPs a common focus, assisting members to create enabling frameworks that promote both infrastructure and social-oriented partnerships. Together, the two pillars of the inter-American system can gather the expertise, resources and leverage necessary to provide the value that will attract the interests of the private sector. To optimize its capacity to engage the private sector and to leverage the profile and mandates of summitry, the OAS should strengthen its internal organization, take full advantage of the maturing Private Sector Forum, and build a new mechanism to formalize a permanent dialogue with private sector leaders. Taken together, these recommendations can help to more effectively engage the private sector in the inter-American dialogue and agenda for sustainable development and in the implementation of summit mandates. The 2009 Summit of the Americas and follow-up activities can serve to launch specific initiatives and new mechanisms for the forging of PPPs, while strengthening the core institutions of the inter-American system and their relations with the Hemisphere’s private sector and each other. The progress noted in engaging the private sector has occurred despite the long-standing ambivalence in many foreign ministries and some governments regarding the political legitimacy and representativeness of their national private sectors. Some foreign ministries see themselves as more reflective of a national interest than self-interested and more narrowly focused private firms. Some governments question whether the private sector should play more than a subordinate role in national economic life. These conflicts, deeply rooted in Latin American institutions and society, have taken on greater force with the re-emergence of nationalistic populism in some countries. Without doubt, these ideological cleavages make consensus more difficult to achieve; the refusal of some countries to ratify the official Summit communiqué in Trinidad and Tobago signalled these deep fractures. Nevertheless, engagement by the inter-American system with the private sector has occurred and will continue. Most countries are pursuing an

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economic development strategy guided primarily by the market and private sector investment; most countries, to varying degrees, advocate PPPs in an expanding array of economic and social sectors. And even in those countries where political leaders routinely criticize capitalism and call into question the patriotism of private investors, a space remains for private investors (with preferences for those with connections to political authorities) and for PPPs, and governmental entities remain unable to meet basic socioeconomic needs without the participation of private firms. In turn, the proliferation and sophistication of such PPPs implies the imperative of developing innovative forms of diplomacy. The OAS must begin reaching out from the established ‘club’ to what Jorge Heine (2006) has characterized as ‘network’ diplomacy, and engage with myriad, heterogeneous actors. At the inter-American level, many of the activities outlined in this chapter benefit from their own constituencies and built-in bureaucratic inertia. Often, governments favourable to these programmes can support them with earmarked funds. Looking ahead, interested governments can form coalitions to advance specific initiatives of mutual interest, pursuing an ad hoc functional multilateralism; for example, governments that wish to cooperate on energy can work together on promoting sustainable investments, while other governments interested in targeted social programmes can share best practices on conditional cash transfers (e.g. linked to school attendance); multilateral institutions can provide a blanket of inter-American legitimacy for such initiatives by endorsing them in a very general way, leaving active participation and the more detailed programmatic design to voluntary associations. Public–private partnerships can contribute to these functional alliances. Ideological cleavages at the level of grand strategy should not block creativity at the level of practical programmes that bring together the core competencies of public and private actors to advance inter-American cooperation.

Notes This chapter draws on a report prepared for the Organization of American States (OAS), Department of Trade and Tourism, ‘Private Sector Participation in the InterAmerican System and in the Summits of the Americas: Strengthening Dialogues, Catalyzing Actions’, March, 2009. 1. Indeed, the OAS’s own Board of External Auditors has issued this warning: ‘The Board feels that this is a very critical time for the future of OAS. If the Member States do not begin to take this looming budgetary crisis seriously, within a few years, OAS will no longer be able to continue, without dramatic cutbacks in programs and activities’ (OAS, 2007, p. 16). 2. The membership of the Joint Summit Working Group includes, in addition to the OAS: Inter-American Development Bank (IDB), UN Economic Commission on Latin America and the Caribbean (UN ECLAC), Pan-American Health Organization (PAHO), Inter-American Institute for Cooperation on Agriculture

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(IICA), Central American Bank for Economic Integration (CABEI), Andean Development Corporation (CAF), Caribbean Development Bank (CDB), World Bank, International Organization for Migration (IOM), International Labour Organization, and the Institute for Connectivity in the Americas (ICA). Unfunded mandates are a common problem in global governance; see Simmons and Oudraat, (2001). Case studies are available at ⬍http://www.sedi.oas.org/dttc/comp/⬎. For a review of 10 PPP projects by the IDB’s Multilateral Investment Fund, see Bloomgarden and Maruyama (2008). The OAS also posted the various inputs on the Internet: ⬍http://www.sedi.oas. org/dttc/psf/TandT/About_e.asp⬎. SEDI’s 2008 budget of US$47.1 million included US$20.2 million from the regular fund, US$20.9 million from special funds and US$6.0 million from the voluntary fund. The OAS’s total appropriations for 2008 of US$157.3 million included US$87.5 million from the regular fund, US$63.8 million from special funds and US$6.0m from the voluntary fund. In 2008, the country quota assessments for the regular fund totaled US$78.4 million and included: for the US US$45.7 million, Canada US$10.6 million, Brazil US$6.4 million, Mexico US$5.0 million and Argentina US$3.7 million.

References Bloomgarden, David and Asako Maruyama (2008) Infrastructure and Public–Private Partnerships in Latin America and the Caribbean, MIF Retrospectives, September. Feinberg, Richard (2009a) ‘The Eclipse of the Americas’, ForeignAffairs.com, 5 May. Available at, http://www.foreignaffairs.com/articles/65081/richard-feinberg/theeclipse-of-the-americas. Feinberg, Richard (2009b) ‘Promoting Private Sector-Led Prosperity’, Summary of the Private Sector Forum Panel Discussions and Keynote Addresses, Hemispheric Private Sector Forum, Port of Spain, Trinidad and Tobago, 15–16 April. Available on www. oas.org. Feinberg, Richard (2009c) ‘Private Sector Participation in Inter-American Summitry: From Inputs to Outputs’, paper submitted to FOCAL/Inter-American Dialogue Workshop, Washington, DC. Feinberg, Richard (2006) ‘Presidential Mandates and Ministerial Institutions: Summitry of the Americas, the OAS and the IDB’, Review of International Organizations, Vol. 1, pp. 69–94. Feinberg, Richard (2000) ‘Comparing Regional Integration in Non-Identical Twins: APEC and the FTAA’, Integration and Trade, Vol. 4, No. 10, pp. 3–30. Heine, Jorge (2006) ‘On the Manner of Practising the New Diplomacy’, CIGI Working Paper, No. 11, October. Available at http://www.cigionline.org/publications/2006/10/ manner-practising-new-diplomacy. Katz, Julius and Robert Fisher (1995) ‘Agenda for the Americas’, reprinted in Robin Rosenberg and Steve Stein (eds), Advancing the Miami Process: Civil Society and the Summit of the Americas. Miami: North-South Center Press, 1995. Paper commissioned by the Association of American Chambers of Commerce in Latin America, the Chamber of Commerce of the USA, and the Council of the Americas. Leadership Council for Inter-American Summitry (1999) Mastering Summitry: An Evaluation of the Santiago Summit of the Americas and its Aftermath. Coral Gables: North-South Center Press.

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260 What Role for the Private Sector? Mullen, Michael (2003) ‘Business Involvement in APEC’, in Richard E. Feinberg (ed.), APEC as an Institution: Multilateral Governance in the Asia-Pacific. Singapore: Institute of Southeast Asian Studies, pp. 199–214. OAS (2001) ‘Restructuring the Organization of American States to Address the Challenges of the Summit Process in Response to Resolutions AG/RES 1812, 1824, 1936 and 1839’, CP/doc.3537/01, December. Washington, DC: OAS. OAS (2004) ‘Advancing in the Americas: Progress and Challenges’, in Summit Report 2001–2003. Washington, DC: OAS. OAS (2006) ‘Promotion of Private-Sector Participation in OAS Activities’, Organization of American States, AG/RES. 2244, XXXVI-0/06. Washington, DC: OAS. OAS (2007) OAS: Annual Audit of Accounts and Financial Statements, Organization of American States. Washington, DC: OAS. PECC (2006) Guidelines for Effective Public Private Partnerships. Pacific Economic Cooperation Council, Singapore: PECC. Selsky, John W. and Barbara Parker (2005) ‘Cross-Sector Partnerships to Address Social Issues: Challenges to Theory and Practice’, Journal of Management, Vol. 31, pp. 849–73. Simmons, P. J. and C. de Jonge Oudraat (2001) Managing Global Issues: Lessons Learned. Carnegie Endowment for International Peace. Washington, DC. Utting, Peter (2008) ‘Rearticulating Regulatory Approaches’, in Volker Rittberger and Martin Nettesheim (eds) Authority in the Global Political Economy. Basingstoke: Palgrave Macmillan. Utting, Peter and Jose Carlos Marques (eds) (2009) Corporate Social Responsibility and Regulatory Governance: Towards Inclusive Development. Baskingstoke: Palgrave Macmillan. Utting, Peter and Ann Zammit (2009) ‘UN-Business Partnerships’, Journal of Business Ethics, 90, pp. 39–56.

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14 Conclusion: The Fragile Legitimacy of Inter-American Institutions Gordon Mace and Jean-Philippe Thérien

In this concluding chapter, we start with a brief summary of the main conclusions arrived at by the contributors to the volume regarding the performance of hemispheric and sub-regional institutions over the past 15 or so years. We then argue that an uneven performance raises a question concerning the legitimacy of regional institutions in the Americas. Finally, we look at possible ways to improve the performance of hemispheric regionalism and offer some ideas on the immediate future of the regionalist project.

A mixed record In a global environment where some believe there is now a ‘democratic regression’ and even a ‘freedom recession’ (Burnell, 2010, p. 1), having helped establish a democracy regime for the Americas is probably the most important contribution of the OAS and hemispheric regionalism since 1990. As pointed out by Thomas Legler in his contribution to the volume, the OAS was able to develop a set of norms that may not have been perfect but that nevertheless played a central role in consolidating the democratic rule in the hemisphere. However, the Americas of 2010 are quite different from the Americas of the 1990s. Diana Tussie shows that the new regional environment is now one of ‘fuzzy boundaries’ and contending projects. Despite conflicting signals concerning the future of the democracy regime in the Americas and the difficulty of defending democracy without a consensus on the meaning and practices of democracy, Legler believes that enduring gains have been made, such as opposition to coups, but that more needs to be done to increase democratic capacities. In this sense, the major challenge for the OAS and the democracy regime in the future will be to deal with ‘less conspicuous threats’ to democracy such as manipulation of courts and electoral systems, and other forms of abuse of power (Boniface, 2009, p. 194). A great leap forward would be made if all regionalist projects in the Americas incorporated democratic protocols and adopted incentives to make member states comply with them (ibid., p. 196). 261

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The success of hemispheric regionalism was not so evident with regard to overall security, but Rut Diamint argues in her chapter that hemispheric institutions nevertheless had a positive impact in the case of reduction of tensions between member states. The Special Conference on Security, held in Mexico in 2003, demonstrated that the countries of the region, through the OAS, the defence ministerials, the justice ministerials, and various committees and conventions, have accepted to enlarge the notion of security. Security in the Americas is now considered a multidimensional phenomenon covering both threats to the state and to the individual. The achievements of the past twenty years are certainly not sufficient to deal effectively with all the causes of insecurity in the Hemisphere, particularly those coming from organized crime (Kegö, 2010), but, as Diamint writes, the region would be still less secure without OAS and member states’ actions over that period. The record is more problematic when it comes to regional trade arrangements, energy cooperation, and poverty reduction. The problem with trade relations in the Americas is not a lack of growth. As shown in the chapter by Antoni Estevadeordal and Kati Suominen, intraregional trade has increased in most sub-regions over the period 1990–2008, with some countries like Argentina, Bolivia, and Ecuador having become strongly integrated in their sub-regional markets. The main problem is the absence of a hemisphere-wide trade agreement. The failure of the FTAA negotiations in November 2003 because of apparently irreconcilable bargaining positions between Brazil and the US made that impossible. The resulting spaghetti bowl of bilateral, trilateral, and sub-regional trade forums and agreements, among them the recent Pathways to Prosperity in the Americas initiated in December 2008, is certainly a manifestation of vibrant trade discussions but it is far from an optimal solution. The resulting overlapping regulatory standards and rules of origin requirements create confusion and uncertainty for the actors involved in inter-American trade relations. Even though energy cooperation was included on the official agendas of the first three Summits of the Americas, including the Special Summit on Sustainable Development held in Santa Cruz, Bolivia, in December 1996, this is one sector where hemispheric regionalism has delivered very little, according to Thomas O’Keefe in his contribution to this collection, to the point where whatever progress was made with regard to energy cooperation in the Americas happened inside existing sub-regional schemes. This being the case, it is clear that hemisphere-wide energy cooperation would have a better chance to succeed if built on existing sub-regional initiatives but it is less obvious which regional projects offer the strongest base. Energy cooperation seems to be one of the few areas of consensus among the governments of the Americas, but cooperation, here as in other areas, is complicated by the domestic situation in the US, regional politics, and the uncertainties of the energy investment climate (Farnsworth, 2010). It remains to be

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seen if the Energy and Climate Ministerial of the Americas, which met in Washington, DC, in April 2010, can start implementing some of the measures included in the Energy and Climate Partnership of the Americas proposed by the Obama administration at the Trinidad and Tobago Summit a year earlier. With regard to poverty reduction, Nicola Phillips writes that even though official figures indicate a decline in the overall trend since 1990, and most particularly since 2002, the aggregate figures are somewhat misleading. The trend is overly influenced by the performance of a few countries (notably Brazil, Chile, Mexico, and Ecuador), and masks a ‘persistence or worsening of poverty levels for large parts of the poor population’ of the region. By no means is the IDB solely responsible for the sad situation, but it does bear some responsibility in relation to the strategy used. The IDB strategy has been framed too much in national terms without giving enough consideration to the ‘vertical’ dimensions of poverty, which refer to the mode of inclusion in the global production processes and the structural connections between poverty and inequality. This situation will be complicated by the increasing phenomena of migrations and diasporas with their mix of positive and negative effects on national and regional policies. If the record of inter-American institutions is a mixed one then, did it fare better or worse than that of the institutions at the sub-regional level? Answers to this question are provided in the third part of the volume and reveal that the performance of sub-regional institutions was also lower than what was expected initially. In their respective chapters on Mercosur and NAFTA, Marc Schelhase, and Louis Bélanger and Richard Ouellet argue that these trade agreements initially performed well but had difficulty afterwards. In both cases, the integration process generated economic benefits as trilateral merchandise trade tripled in the case of NAFTA, reaching US$ 946.1 billion in 2008, while growth in intra-regional trade and FDI was substantial in the Mercosur for most of the 1990s. The negative side concerns the functioning of regional institutions and, in the case of Mercosur, the negative impact of global economic conditions resulting from the Mexican Peso crisis of 1994, and the crises in Asia and Russia in 1997–8, followed by that of Argentina in 2001–2. Since the second half of the 1990s, Mercosur has been handicapped by problems of coordination and enforcement. The attempts to deepen and widen the integration process have created a congestion that reveals the inability of member states to develop Mercosur according to a clear blueprint. As for NAFTA, the main problem is that of an institutional deficit whereby the governing bodies lack the ‘rule-making capability needed to effectively tackle twenty-first century trade issues’. Up to now, the member states have only agreed to improve NAFTA by ‘à la carte agreements’. The danger therein is to bring about a gradual obsolescence of NAFTA. ALBA, for its part, is quite a different institution as demonstrated in the chapter written by Josette Altmann. More a multidimensional integration

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project than a free trade agreement, it offers an alternative strategy to the neoliberal model of economic integration. Initiated and controlled by President Chávez of Venezuela, and based on instruments such as Petrocaribe, Telesur, Banco del Sur, and local MNCs, it seeks to promote local, autonomous strategies of development for the LAC region. It is too early to judge the longterm effectiveness of the ALBA project and instruments, although it seems clear that Petrocaribe did contribute to softening the effects of the recent financial crisis. The viability of the ALBA integration strategy remains uncertain as it rests heavily on the vision and the financial capacity of the Venezuelan government. Much will depend on the realization of Grannacionales projects and on tolerance concerning ideological pluralism. The contributions included in the second and third parts of the volume thus illustrate clearly the difficulties for regional institutions in the Americas to respond adequately to expectations and to perform the duties assigned to them. Hemispheric regionalism, particularly during the third phase of its evolution, has not been a great success despite the resources and energy invested in the effort. Other, sub-regional projects have delivered some economic benefits for member states, but their institutional set-up lacks the capacity to deal effectively with the demands of the current political and economic environment, and with the needs of their populations. As Michael Schifter has argued convincingly, ‘existing arrangements appear to have provided little added value and offered scant interest in cooperating more systematically’ (2009, p. 57). This can be explained by a combination of factors, chief among them the lack of political will on the part of the governments of member states. The mitigated performance of hemispheric and sub-regional institutions in the Americas is problematic in many regards and it does raise the question of the legitimacy of these regional actors.

A question of legitimacy Legitimacy has been central to political theory since the writings of Max Weber. It gives meaning to authority, and it is instrumental to the effectiveness of political systems (Scharpf, 1999, p. 6). In modern liberal societies, legitimacy constitutes the foundation of democratic life. In international institutions, legitimacy is primarily the result of the relationship between actor and institution, as perceived by the actor, be it state or individual. The perception of the actor may concern the substance of norms and decisions or the procedure through which norms and decisions are generated and implemented (Buchanan and Keohane, 2006, p. 407; Hurd, 1999, p. 381; Risse, 2004, p. 5). Legitimacy thus refers to stakeholders’ perceptions towards the political inputs or outputs of an institution. An institution lacking legitimacy can thus be severely handicapped when it comes to convincing stakeholders to contribute resources, to participate, or to comply with decisions.

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Since 1994, hemispheric regionalism has encompassed two sets of institutions: the Summit of the Americas process (SOA) – including the summits themselves, the meetings of ministers and the Summit Implementation Review Group (SIRG) – and the multilateral agencies centred on the OAS and its specialized agencies. In addition to the difficulties identified in the preceding part of the conclusion concerning these institutions, what can we say about the legitimacy of inter-American institutions? Input-oriented legitimacy The input aspect of legitimacy refers to inclusiveness and diversity of representation which both relate to the availability of channels for voice opportunity and to the actors that can access these channels with the possibility of influencing regional decision making. Up to now, two categories of actors have been successful at using regional fora in order to shape the agenda of hemispheric regionalism: national governments and the private sector. Governments are the prime movers of the integration process while the private sector is seen as a legitimate actor because of its importance for economic growth. States are formally equal in international law but they differ in terms of their relative weight, in addition to having different views of the world. With regard to hemispheric regionalism, the US is traditionally the main force supporting the integration process. It is only the hegemonic position of the US in the Americas that enabled inter-American institutions to exist over the years. In 1994, as with other initial phases of institution building at the hemispheric level, the US administration was able to build a consensus with other governments in the region in favour of a renewal of the inter-American system. In 2003, however, the consensus was broken as many South American governments became critical of US policies regarding regional and world affairs. Diverging views were expressed not only by governments of the ALBA coalition but also by Brazil and its Mercosur partners. This opposition of values and policy objectives on the part of member states now creates an important legitimacy problem for inter-American institutions that are again accused by some ALBA governments of promoting a US agenda that is detrimental to the interests of other countries of the region. The private sector was also very much involved in the consultations around the negotiations for the establishment of a Free Trade Area of the Americas (FTAA) and in preparatory meetings concerning the drafting of summits’ declarations and of plans of action. Private sector participation in the building of a hemispheric agenda is accepted because of the particular expertise of business organizations and because firms make investments, create jobs, and are the main architects of international trade. This is why the OAS developed the Private Sector of the Americas Initiative to help organize the Private Sector Forum, which holds pre-summit meetings before every Summit of the Americas. The private sector was also able to provide

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inputs for the negotiations toward an FTAA through the Business Forum, which was convened before every meeting of the trade ministerials. But firms and business organizations are not the only representatives of societal interests. What about the capacity of other actors to influence the decision-making process of hemispheric institutions? One category of actors, which is notable by its absence inside inter-American institutions, is that of parliamentarians. In a context of representative democracy, legislators have as much legitimacy as government officials to represent the interests of national societies. However, they have been kept at the margins of inter-American fora except for a small incursion on the part of the COPA (Confederation of Parliamentarians of the Americas). The COPA was established in 1994 and is composed of 400 parliamentarians pertaining to 28 countries of the Americas. The grouping made some recommendations regarding summits’ mandates, but it clearly hopes to play a larger role in the functioning of hemispheric regionalism. This is also the case for trade unions, which have not been given a special status inside hemispheric institutions as is the case for most sub-regional integration processes (Milet and Sanhueza, 2002, p. 22). This is somewhat surprising because trade unions are regularly consulted by governments in national contexts and because they are generally more organized, with better resources, for action at the transnational level. The other category of actors is that of civil society organizations (CSO). Even though CSOs are accused sometimes of representing narrow interests, it is true that collectively they express the views of a large segment of the population. The literature on civil society participation at the hemispheric level is abundant (Grugel, 2006; Icaza, Newell and Saguier, 2009; Milet and Sanhueza, 2002; Smith, 2008; Smith and Korzeniewicz, 2007; Tussie and Botto, 2003) and relatively unanimous in its assessment of the influence of CSOs on decisions taken at the regional level. Its two major conclusions are that regional institutions did make an effort to open up the decision-making process, but that the results fall well below expectations. The impetus for establishing channels to facilitate civil society participation came from the governments of Canada, Chile, and the US. As a result of the pressure exerted by these governments, two mechanisms were established concerning the participation of CSOs. One was the Committee of Government Representatives on the Participation of Civil Society (CGR), which was the only channel that CSOs could use to express their preferences with regard to the negotiations concerning the establishment of the FTAA. The CGR was created in March 1998 and held 24 meetings from 1998 to 2004. The other is the Committee on Inter-American Summits Management and Civil Society Participation in OAS Activities. An outgrowth of the former Committee on Inter-American Summits Management and of the Committee on Civil Society Participation, it is responsible for facilitating civil society participation at the OAS, during and between general assemblies, and prior

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to summits and ministerial meetings. Finally, the OAS, through its Unit for Sustainable Development, devised in 1999 the Inter-American Strategy for Public Participation in Sustainable Development Decision-making (ISP) as a follow-up to the Santa Cruz Declaration of 1996 on sustainable development (Mace and Loiseau, 2005, p. 128). Despite these efforts by regional institutions, CSOs rapidly became disillusioned with the space offered to them for expressing their preferences. This is especially true with regard to trade negotiations (Tussie and Botto, 2003, p. 37; Icaza, Newell and Saguier, 2009, p. 6; Shamsie, 2000, pp. 14–15), where CSOs came to see the mechanisms of consultation as merely ‘invited spaces’ and ‘drop-boxes’ whose only purpose was to get social support to legitimate the negotiation process (Saguier as cited in Icaza, Newell and Saguier, 2009, p. 6). As to the other channels for consultation, they were also seriously flawed from the point of view of CSOs. Even though the OAS still officially recognized 171 organizations in 2006, these mechanisms remain handicapped by problems related to both participation and influence. Participation is made difficult by the fact that convocations are often sent late, generally by email, and sometimes only one week in advance, with CSOs having to fund their travel costs. This results naturally in unequal representation among CSOs and among countries. Influence is also extremely limited (Grugel, 2006, p. 209; Smith and Korzeniewicz, 2007, p. 158) as the rules for participation determine that positions are expressed verbally (generally lasting two to three minutes) or through documents submitted to the appropriate secretariat. Direct participation to these gatherings and to encounters with ministers for foreign affairs reveal the limited consideration given by most governments to CSOs’ inputs. This state of affairs fuels a perception on the part of a vast majority of CSOs that there is unequal access to decision making. There is a clear sense on the part of CSOs and in academic circles that the present phase of hemispheric regionalism, which started in 1994, is essentially characterized by corporate governance with executive branches of governments and business organizations as main actors. It is felt that the voices of other categories of actors are not heard and, consequently, that their preferences and the interests they represent are not really taken into consideration. On this basis, input-oriented legitimacy of hemispheric institutions can be categorized as relatively low in the present context. Output-oriented legitimacy Output-oriented legitimacy refers to the effectiveness and accountability of an institution. With respect to effectiveness, two aspects can be distinguished: the clarity of an institution’s objectives and the implementation of these objectives.

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Clarity of objectives has to do with the sense of direction that is given to an institution or a group of institutions. In the context of hemispheric regionalism, this sense of direction results fundamentally from the plans of action elaborated at each summit and containing a certain number of mandates given by the heads of state to regional institutions and national bureaucracies. The role of the mandates is to trace the guidelines for collective action from one summit to the other with, ideally, a sense of what the priorities are. The problem in the case of hemispheric regionalism is that the plans of action did not fulfil this role of parameter setting and guide for action. One reason has to do with the sheer quantity of mandates that have been produced from one summit to the other, the total surpassing 800 if the special summits of Santa Cruz and Monterrey are included (Roberts, 2008, p. 3). Furthermore, each mandate has been given equal importance without indications given to those who will implement the mandates as to what the priorities are. Finally, the formulation of many of the mandates lacks the necessary specificity for guiding the action and for monitoring the results (Feinberg, 2006, p. 90; Cruz Diaz, 2008). Effectiveness also has to do with implementation. The literature on that aspect of hemispheric regionalism is also relatively substantial (Feinberg, 2006; Mace and Loiseau, 2005; Roberts, 2008; Smith and Korzeniewicz, 2007) and pointing in the same direction in terms of its assessment of the situation. According to the institutional design put in place in 1994, implementation of summits’ mandates was to be done by both national governments and regional institutions. National governments were then supposed to report to the SIRG on progress by tabling annual reports. Regional institutions, for their part, were supposed to coordinate their strategies through a Joint Working Group which would then supervise implementation. The design appeared to work well on paper but it failed miserably in reality. Only half of the member states produce annual reports and these reports often look like grocery lists. It is impossible to link the items identified in the reports to the mandates with any precision. As the OAS itself admitted: ‘it should come as no surprise that it is difficult to conduct a painstaking evaluation of each and every mandate emanating from the Summit Process through the lens of national realities’ (OAS, 2006, p. 11). And at the regional level, the mechanisms put in place to coordinate implementation never really functioned so that even when examining the work of regional institutions it is impossible to determine what mandates have been implemented and what mandates have not been implemented. Consequently, the absence of an efficient machinery to monitor progress made by regional institutions and national bureaucracies with regard to the implementation of summits’ mandates fuels a strong perception of ineffectiveness on the part of a majority of stakeholders outside government circles.

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Although it is widely recognized that member states’ decision not to increase the budget of regional institutions is a major handicap for the monitoring of implementation (Feinberg, 2006, p. 70), this is not the only problem with respect to output-oriented legitimacy. Hemispheric institutions are also criticized for a lack of transparency and the near absence of accountability. Problems of transparency are related essentially to difficulties of accessing the information and to the often technical nature of the information provided (Icaza, Newell and Saguier, 2009, p. 21). Transparency is one aspect of accountability. The other is responsibility. In the present institutional framework, hemispheric institutions and national bureaucracies are not really responsible to anyone for implementing or not implementing summits’ mandates. There is no real and immediate consequence if a member state does not report on implementation at the national level or if a regional institution is unable to document precisely how it succeeded or failed in its own strategy to implement the mandates given to that institution. All in all, inter-American institutions and hemispheric regionalism itself are severely hindered by failures in effectiveness and accountability. When these elements are added to the low level of inclusiveness of the process and its limited diversity of representation, the conclusion becomes inescapable. Whether examined from the point of view of inputs or from that of outputs, the overall legitimacy of contemporary hemispheric regionalism is now quite low. It is particularly revealing that the majority of CSOs now meet and work outside of regular channels put in place by inter-American institutions, such as for example the ‘people’s summits’ occurring at each regular summit meeting. Clearly, these parallel summits represent a form of sanction of hemispheric regionalism on the part of a substantial portion of its stakeholders.

The need for a stronger performance Given the analyses offered in this volume, in what ways can the performance of hemispheric regionalism be improved? Is there a role to be played by specific groups of actors and what innovative strategies could be envisaged in the present, difficult, context of inter-American relations? With regard to actors, Norman Girvan’s chapter reminds us that initial expectations concerning the positive effect on hemispheric cooperation of the arrival of the Caribbean Commonwealth countries in the OAS in 1990, along with Canada, were somewhat exaggerated. Small states have limited resources at their disposal to influence international negotiations, particularly when – as in the case of the Caribbean – they are negatively affected by ‘structural shifts’ in the global geo-economic and geo-political environment. The recent financial crisis increased the fragility of the small Caribbean states and reduced their capacity to shape the course of events in the Americas.

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The situation is different for middle powers, as Jorge Heine argues in his chapter, because the changing landscape in the Americas offers a unique moment for hemispheric cooperation. It provides a window of opportunity to rethink and reorganize the inter-American agenda. Middle States – such as Argentina, Canada, Mexico, and Chile – possess the resources and the foreign policy tools to conduct a diplomatic effort that could lead to renewed inter-American cooperation. Acting as a cohesive unit, middle-power diplomacy could ‘help to bridge the concerns and interests of the region’s North and South’ and, in so doing, could give a new breath of life to the interAmerican agenda. The private sector is also an actor that could play a very positive role in hemispheric cooperation, according to Richard Feinberg. Since 1994, and particularly but not only in the context of the FTAA negotiations, business representatives have been actively involved in hemispheric affairs as mentioned earlier. Through mechanisms such as the Business Forum and the Private Sector Forum, the private sector has been part of regular consultations concerning hemispheric affairs. Yet as Feinberg suggests, much more could be done. In particular, an increase in public–private partnerships could provide a unique boost to inter-American cooperation. There is certainly a place for input by various kinds of actors inside interAmerican cooperation but there is also a pressing need for new strategies, new attitudes, and different ways of doing things. Suggestions have already been made concerning the OAS specifically and summitry more generally. The OAS needs more resources but must also rethink its priority-setting process (Meacham, 2010). And more than anything else, it must remain an effective defender of regional democracy because, when all is said and done, the organization will be judged by ‘its ability to act effectively in line with its doctrinal commitment to the defense of democracy’ (Meacham, 2010, pp. 15–16). Summitry, for its part, is the object of profound scepticism even though it does have useful functions in terms of moving the hemispheric agenda, setting priorities, and facilitating dialogue between leaders (Feinberg, 2010, pp. 2–3). But it must work to eliminate its shortcomings with, among other things, a more workable agenda, stronger monitoring of implementation, more efficient use of resources, better coordination among regional agencies, and stronger participation from external actors (ibid., pp. 6–9). These are the nuts and bolts of cooperation, but there are also some fundamental issues to address if hemispheric cooperation is to have a chance to survive. Profound changes will need to be made in two directions at least. The first concerns states’ attitudes and positioning. As the dominant state of the region, it is natural for Washington to be the main mover of hemispheric regionalism just as it is natural for Brazil to be the main force behind South American integration. However, Washington would profit immensely by learning from Brazilian foreign policy in a context of regionalism, particularly

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with regard to restraint and responsiveness towards other member states’ preferences. In the context of hemispheric regionalism, more needs to be done to try to accommodate the needs of smaller states and to understand the rationale behind opposing points of view. It is unclear, however, if and how the Obama administration can rethink and re-target US policy towards the region. As Dan Erikson argues in his chapter, that policy ‘does not change quickly’ for reasons of path dependency, because it is part of a larger foreign policy agenda, and because there are more pressing domestic issues for the immediate future. But it is clear, as Christopher Sabatini aptly writes, that Washington’s Latin American policy is in need of a new rhetoric and a new course of action (Sabatini, 2010). It is also true that a more open-minded attitude on the part of some Latin American governments with regard to US positions would be helpful. Cooperation among a group of actors is impossible if only a few of them work to make it possible. Hemispheric regionalism cannot succeed if important LAC governments are not really interested in taking part because they have other priorities. The second issue is access to decision making. Steps that should be taken here concern channels for participation and diversity of representation. There is an urgent need for better, more institutionalized channels of participation for actors other than national governments and private sector representatives (Serbin, 2008, pp. 11–12). Participation must not be limited to gatherings at the time of summits, ministerial meetings or general assemblies of the OAS. It cannot be limited either to presentation of briefs to ministers or formulating an opinion through the Internet. Ways must be found to increase participation of parliamentarians and civil society representatives in regular activities of inter-American institutions so that their input will have a real influence on the decisions. One possible mechanism could be a regular consultation process when a new regional strategy or a new policy is being devised and implemented. What is important is that diversity of representation is assured and that the agents taking part in the process perceive that they are listened to. With regard to output-oriented legitimacy, steps must also be taken to make sure that hemispheric regionalism generates, and is perceived to generate, tangible benefits for the citizens of the Americas as a whole. There is little chance for that to happen if summitry tries to deal with too many issues, some of them not necessarily best dealt with at the regional level. Improving education standards, students’ performance, or access to school are certainly noble objectives, but is this a problem that should be dealt with at the regional level in a context of limited resources? Would it not be better to concentrate on issues where the regional level has a clear comparative advantage with regard to problem solving? A solution in that sense would be to concentrate on issues of a specifically transnational nature. Transnational crime with its related issues of violence

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and corruption would certainly figure at the top of the list in the present context. That is a problem which cannot be dealt with successfully at the national level only because it now forms a grid involving all the countries of the region. The same could be said for energy, environmental security, terrorism, food security, regulatory frameworks for economic relations, and so on. Effectiveness would therefore be increased considerably if governments and hemispheric institutions focused on fewer issues and adopted more articulated strategies to deal with these issues. Naturally, effectiveness will be improved if adequate resources are available. Although governments always want to make sure that funds are used in an effective manner, they need to understand that the credibility of engagements rests in good part on the financial support that regional institutions receive to implement their mandates.

Conclusion Inter-American institutions are once again at a crossroads. This is so in part because they were not able to deliver on most of the complex agenda imposed on them by the member states, thereby losing a fair amount of legitimacy, and in part because the regional environment of the Americas has become much more confrontational over the past fifteen years. Other regional institutions, as we have seen, have not fared a lot better. In this sense, both Monroe and Bolivar have been contradicted. Is it possible for hemispheric regionalism to regain its momentum? Perhaps, but it is difficult to be as optimistic as it was only a few years ago (Mace, Thérien, Haslam, 2007). A lot will depend on how legitimate interAmerican institutions are perceived to be. Unfortunately, the consequences of the financial meltdown and the history of US–Latin American relations do not provide strong signs of encouragement. On the one hand, decisionmakers in Washington do not seem to care very much about the impact of US behaviour on the rest of the Hemisphere (Schifter, 2009, p. 60). On the other hand, many Latin American and Caribbean governments do not appear to be very interested in a regionalist project that promotes values they do not share anymore and that is incapable of delivering clear benefits for their populations. As a result, their attention is increasingly focused on developing regional institutions that they will control entirely. It remains to be seen if these institutions will be more efficient for the peoples of the region but, here again, the past is not a major source of optimism. So what will the regional architecture look like in the foreseeable future? It may be that we have seen the end of large, encompassing regionalist projects of the EU type in the Americas. What we are witnessing is the emergence of a parcelled out, divided, region, both geographically and functionally, dominated by diplomatic fora without serious attempts at deep economic integration. The drama of the Americas as a region may be that

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it is now dominated by two great powers, both having global aspirations without necessarily sharing similar worldviews. The rest of the Hemisphere may therefore become only a theatre for their diplomatic interplays. The pace of change in the politics of the Western Hemisphere could thus be only beginning to accelerate.

References Boniface, Dexter S. (2009) ‘Dealing with Threats to Democracy’ in Andrew F. Cooper and Jorge Heine (eds) Which Way Latin America? Hemispheric Politics meets Globalization, Tokyo: United Nations University Press. 182–201. Buchanan, Allen and Robert O. Keohane (2006) ‘The Legitimacy of Global Governance Institutions’, Ethics and International Affairs, 20, 4: 405–37. Burnell, Peter (2010) ‘Is there a New Autocracy Promotion?’ Working Paper 96, Madrid, FRIDE. Available at http://www.fride.org. Cruz Diaz, Juan (2008) ‘The 2009 Summit of the Americas: A New Opportunity’. Online at http://www.as-coa.org/article.php?id=1143. Farnsworth, Eric (2010) ‘Setting a Hemispheric Energy Agenda’, Poder, April. Available from Americas Society at http://www.as-coa.org/print.php?type=article&id=2272. Feinberg, Richard (2006) ‘Presidential Mandates and Ministerial Institutions: Summitry of the Americas, the Organization of American States (OAS) and the Inter-American Development Bank (IDB)’, Springer Science ⫹ Business Media, 1: 69–94. Feinberg, Richard (2010) ‘Summitry in the Americas: The End of Mass Multilateralism?’ Focal Policy Paper, March. Available from FOCAL at http://www.focal.ca. Grugel, Jean (2006) ‘Regionalist Governance and Transnational Collective Action in Latin America’, Economy and Society, 35, 2: 209–31. Hurd, Ian (1999) ‘Legitimacy and Authority in International Politics’, International Organization, 53, 2, Spring: 379–408. Icaza, Rosalba, Peter Newell and Marcelo Saguier (2009) ‘Democratizing Trade Politics in the Americas: Insights from the Women’s, Environmental and Labor Movements’, IDS Working Papers Series. Kegö, Walter (2010) ‘Organized Crime: A Major Threat to State Security’, Policy Brief, 19, 19 February, Institute for Security & Development Policy. Available at http://www.isdp.EU/images/stories/isdp-main-pdf/2010_Kego_organized-crime. pdf. Mace, Gordon and Hugo Loiseau (2005) ‘Cooperative Hegemony and Summitry in the Americas’, Latin American Politics and Society, 47, 4: 107–34. Mace, Gordon, Jean-Philippe Thérien and Paul Haslam (eds) (2007) Governing the Americas: Assessing Multilateral Institutions, Boulder: Lynne Rienner Publishers. Meacham, Carl (2010) ‘Multilateralism in the Americas: Let’s Start by Fixing the OAS. A Report to the Committee on Foreign Relations. United States Senate’, Washington, DC: Government Printing Office. Available at http://www.gpoaccess. gov/congress/index.html. Milet, Paz and Andrea Sanhueza (2002) El Proceso de Consultas a la Sociedad Civil en la III Cumbre de las Américas, Santiago; FLACSO-Chile. Organization of American States (OAS) (2006) ‘Achievements of the Summits of the Americas: National Accomplishments’. Online at http://www.cumbre-americas.org/ Documents%20for%Argentina%20Summit%202005/IV%20Summit/Publications/ summit_eng.pdf.

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Risse, Thomas (2004) ‘Transnational Governance and Legitimacy’. Online at http:// www.atasp.de/downloads/tn_governance_benz.pdf. Roberts, James M (2008) ‘Rethinking the Summit of the Americas and Advancing Free Trade in Latin America’, Backgrounder, 2170, 8 August: 1–9 found at www.heritage. org/Research/latin America/bg2170.cfm. Sabatini, Christopher (2010) ‘Obama’s Latin American Policy: Talking Like It’s 1999’, The Huffington Post, 8 April. Available from Americas Society at http://www.as-coa. org/print.php?type=article&id=2273. Scharpf, Fritz (1999) Governing in Europe, Oxford: Oxford University Press. Schifter, Michael (2009) ‘Managing Disarray: The Search for a New Consensus’ in Andrew F. Cooper and Jorge Heine (eds), Which Way Latin America? Hemispheric Politics meets Globalization, Tokyo; New York; Paris: United Nations University Press: 50–63. Serbin, Andrés (2008) ‘The Organization of American States and Conflict Prevention’, Center on International Cooperation, New York University, November. Available at http://www.cic.nyu.edu. Shamsie, Yasmine (2000) ‘Engaging with Civil Society: Lessons from the OAS, FTAA and Summits of the Americas’, Discussion Paper, Ottawa: North-South Institute. Smith, Raquel (2008) ‘Summit Reform and Civil Society: Taking a Deeper Look’, Focal Point, 7, 6: 9–11. Smith, William C and Roberto P. Korzeniewicz (2007) ‘Insiders, Outsiders and the Politics of Civil Society’, in Gordon Mace, Jean-Philippe Thérien and Paul Haslam (eds) Governing the Americas: Assessing Multilateral Institutions, Boulder: Lynne Rienner Publishers. 151–74. Tussie, Diana and Mercedes Botto (2003) El ALCA y las Cumbres de las Americas: una Nueva Relacion Publico-Privada? Buenos Aires: FLACSO-Argentina.

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Index Acharya, Amitav & Alastair Iain Johnston 9, 17 ALBA see Bolivarian Alternative for the Americas Americas viii, 1, 4, 6, 7, 9, 12, 13, 16, 23, 25, 81, 82–84, 95–108, 111, 120, 124–127, 229–239, 261, 264 see also US Andean Community of Nations (ANC/ CAN) x, 5, 28, 31, 34, 96–98, 107, 181, 182, 205, 208, 209, 228 Andean Pact ix, 24 Argentina 3, 16, 17, 33, 34, 46, 53, 101–102, 132, 171–183, 231–232, 263 see also Mercosur Asia 62 see also financial crisis Association of Caribbean States (ACS) 68, 71–72, 204, 205 see also Caribbean, CARICOM asymmetries xi, 2, 4, 217 A10 226, 237–239

Bush Administration 2, 8, 43, 44, 45, 46, 48, 49, 53, 55, 81, 108, 132, 133, 138, 195, 198, 225, 237 see also Clinton Administration, FTAA, NAFTA, Obama Administration, US

BASIC (Brazil-South Africa-India-China) 3 see also BRICs, climate change Bolivarian Alternative for the Americas (Alternative Bolivariana para America Latina) (ALBA) ix, 16, 25, 35–36, 38, 50, 65, 67, 71, 120, 123, 204–220, 226, 228, 263–264, 265 ALBA Bank 211, 214, 234 see also Hugo Chavez, UNASUR, Venezuela Brazil x, 3, 4, 11–12, 13, 16, 29, 31–33, 38–39, 40, 43, 44, 46, 47, 49, 50, 51, 53, 56, 66, 96, 101–102, 104–106, 108, 171–183, 226, 227, 231–232, 234, 262, 265, 270 Amazon 105–106 see also BRICs, climate change, Lula da Silva BRICs 2, 3, 4, 40, 47, 62, 228, 234 see also Brazil, Russia, India, China

CACM ix, x, 5, 9, 24, 31, 84, 85–96, 87, 200, 228 see also Central America CAFTA-DR 30, 31, 249 Canada x, 7, 9, 11, 38, 43, 44, 46, 63, 72, 91, 96, 102–104, 108, 187–200, 226, 229–230, 234, 238, 269 as a middle power 229–230 see also NAFTA, OAS Caribbean 3, 5, 9, 11, 12, 43, 60–73, 206–207, 214, 215–220, 269, 272 see also ACS, CARICOM, Petrocaribe CARICOM ix, x, 5, 13, 14, 61, 62, 63, 65, 66, 68–71, 72, 85–86, 98–99, 200, 205, 209, 228 see also ACS, Caribbean Castro, Fidel 44, 52, 53, 206 see also Cuba Castro, Raul 52, 53 see also Cuba Central America 3, 4, 6, 11, 30, 38, 99–101, 132, 139, 205, 214, 215–220 SICA 99–101, 205 Chavez, President Hugo 16, 29, 31, 35, 36, 37, 38, 39, 44, 48, 49, 50, 51, 53, 54, 55, 98, 108, 118, 122, 159, 182, 204–220, 226, 264 see also ALBA, Venezuela Chile 4, 17, 81, 188, 209, 226, 228, 230, 232–234, 238 as a middle power 232–234 China 4, 13, 25, 38, 48, 63, 218, 227, 233 see also BRICs civil society 11, 37, 248, 266 civil society organizations (CSOs) 266–267, 269

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climate change 3, 60, 68, 95, 96, 104–106 see also BASIC Clinton Administration 5, 45, 133, 188, 237 see also Bush Administration, Obama Administration, US Clinton, Hilary 48, 54, 68, 225, 229 Cold War 25, 113, 131, 132 Columbia 11, 38, 46, 50–51, 66, 142, 182 Columbian Plan 138–139 see also crime, drugs corporate social responsibility (CSR) 11, 253 coup 52, 114, 121, 227, 261 see also Honduras, Jose Zelaya crime 31, 52, 132, 133, 137–141, 142, 229, 235, 262, 271 see also drugs Cuba 8, 25, 35, 44, 45, 46, 52, 53, 54, 55, 56, 66, 72, 95, 111, 120–121, 123, 127, 204, 206, 209, 215, 218, 225, 226, 235 see also ALBA, Fidel Castro, Raul Castro

EPA (with the EU) 69–71 see also EU EU 7, 23, 63, 69, 72, 84, 171, 181, 182, 209, 292 financial crisis 2, 4, 23, 60–65, 81, 272 financial services 189, 193 foreign direct investment (FDI) 63, 172, 180, 233 formal regionalization 1, 205 see also new regionalism Free Trade Agreements (FTAs) 8, 29, 45, 51, 81, 89, 91, 92, 171, 174, 181, 182, 187, 193, 229, 230, 233 see also Mercosur, NAFTA Free Trade Area of the Americas (FTAA) 1, 12, 13–14, 16, 17, 25–30, 31–34, 37, 50, 53, 64, 65, 71, 81, 82, 88, 89, 173, 180, 204, 207, 208, 235, 249, 262, 270 GATT 26, 88 see also WTO globalization 1, 6, 27, 47, 218 G7/G8 12, 238 G20 2, 3, 12, 40, 46, 228, 236

debt 7, 67, 82, 87 see also financial crisis democracy x, xi, 7, 12, 14, 15, 17, 49, 64, 111–128, 131, 140, 261, 270 Democratic Party (US) 43, 51 see also Bush Administration, Clinton Administration, Obama Administration, Republican Party diaspora 11, 43 drugs 10, 12, 46, 47, 138–141, 235 see also crime

Haiti 3, 52, 136, 141–142, 230 Honduras 50, 52, 66, 111, 117, 121–122, 123, 126, 127, 144, 216–217, 225, 230, 235 see also coup, Jose Zelaya human development 11, 153 human rights x, xi, 5, 7, 8, 14, 114 see also OAS human security 11, 135, 153, Huntington, Samuel 23, 88

ECLAC 5, 60, 61, 155, 162, 163, 164, 249 see also UN electricity 96–98, 99–101 energy 95–110, 189, 213, 231, 242, 262 clean development 105–106 clean energy 105–106 Energy & Climate Partnership of the Americas 95–106 see also electricity, natural gas, Petrocaribe

IBSA (India- Brazil- South Africa) 3, 228 see also BRICs India 3, 4, 227 see also BRICs indigenous communities 64, 156 inequality 137, 163, 164 see also poverty institutionalization 1, 9–11, 12, 261, 263, 269 see also new regionalism

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Index Inter-American Development Bank (IDB) 58, 81, 99, 151, 153, 154, 158, 164, 165, 181, 183, 215, 216, 242, 245, 247, 249, 251, 256, 263 see also OAS, Washington Consensus International Monetary Fund (IMF) 40, 61, 62, 157, 175, 204, 232 see also Washington Consensus, World Bank legitimacy 264–269, 271 input-oriented 265–266 output-oriented 266–269 Lula da Silva, Luiz 38, 44, 46, 47, 49, 119, 121, 124, 159, 175, 231, 238 see also Brazil, BRICs Mercosur ix, x, 5, 9, 15–16, 29, 30, 31, 32, 33, 34, 35–36, 101–102, 171–183, 200, 205, 209, 232, 233, 234, 263, 265 Mexico x, 3, 4, 5, 7, 10, 11, 12, 17, 43, 45, 47, 51, 81, 102–104, 106, 139, 187–200, 209, 229, 231–232, 262, 263 see also NAFTA middle powers 225–227, 229–239, 270 migration 11, 61, 235 see also diaspora, remittances Monroe Doctrine 2, 23, 47, 48 multilateralism 56, 229, 242, 265 multinational corporations 11, 173 see also CSR Myrdal, Gunnar 23, 24, 38

277

Obama Administration 13, 14, 17, 43–57, 95, 119, 188, 199, 225, 226, 229–239, 245, 263 see also Bush Administration, Clinton Administration, US open regionalism 26, 68–69 see also regionalism Organization for Economic Cooperation & Development (OECD) 7, 12, 141, 228 Organization of American States (OAS) ix, 1, 5, 8, 9, 10, 14, 17, 39, 49, 56, 66, 111, 112, 113, 115, 117, 120–121, 123, 124, 127, 135–147, 216, 225, 230, 233, 234, 235, 239, 242–258, 261, 265, 266, 267, 268, 270, 271 Organization of Eastern Caribbean States (OECS) 67, 69–70 Ortega, Daniel 54, 217 see also Nicaragua poverty 15, 153–166, 208, 211–212, 213, 263 poverty reduction 153–166 see also inequality private sector 17, 242–258, 265, 270 see also multinational corporations Public-Private Partnership 244–249, 253, 257, 258

natural gas 98–104 see also energy neo-liberal regionalism 7, 8, 26, 63, 65, 142 new regionalism 6, 10, 82, 87, 157, 235 see also regionalism Nicaragua 3, 54, 215, 217 see also Daniel Ortega North American Free Trade Agreement (NAFTA) ix, x, 7, 10, 16, 24, 26, 45, 46, 84, 85–86, 87, 88, 91, 102–104, 171, 187–200, 263 Free Trade Commission 189–190 see also Canada, Mexico, US

Regionalism viii, 1, 6, 8, 9–12, 13, 17, 60, 62, 71, 82, 95–108, 112, 120, 261, 262, 265, 272 sub-regionalism 95–108 see also new regionalism, open regionalism remittances 11, 60, 229 see also diaspora, migration Republican Party (US) 43, 96 see also Bush Administration, Democratic Party Russia 25, 48–49, 107, 263 see also BRICs security 15, 131–147, 262 Security & Prosperity Partnership (SPP) (NAFTA) 195–197, 198 Security Sector Reform (SSR) 135–136 Softwood Lumber Agreement (SLA) (Canada-US) 195, 197 see also NAFTA

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Spain 11, 25, 38, 63 see also EU Summit of the Americas (SOA) 4, 8, 9, 10, 13, 26, 27, 53–56, 81, 88, 153, 225, 226, 230, 236, 242–258, 262, 265, 268 see also OAS

102–104, 119, 132, 139, 187–200, 204, 208, 209, 215, 217, 218, 2225, 226, 229, 235, 262, 265, 272 US Congress 190, 192, 198 see also Bush, Clinton & Obama Administrations

tourism 60, 61, 63, 246 transnationalism 1, 2, 3, 271 see also crime, diaspora Trinidad & Tobago 4, 13, 53, 54, 55, 61, 65, 66, 67, 69–70, 81, 95, 96, 98, 106, 108, 123, 226, 39, 246, 250, 263 see also Summit of the Americas Union of South American Nations (UNASUR) ix, 5, 34, 39, 65, 71, 92, 107, 120, 134, 181, 183, 205, 228 see also ALBA United Nations (UN) 3, 53, 72, 113, 132, 135, 143, 145, 153, 216, 231, 244, 256 UNDP 135, 153 see also ECLAC United States (US) ix, x, 2, 4, 5, 6, 7, 8, 12, 13, 23, 24, 25, 27, 29, 32, 33, 39, 43–57, 62, 63, 72, 82, 91, 95–98,

Venezuela ix, 3, 4, 12, 25, 28, 29, 32, 35, 37, 38, 44, 46, 48, 50, 65–68, 96, 98–99, 104–105, 108, 117, 118, 182, 183, 204–220, 226, 264 Petrocaribe 98–99, 206–207, 210, 211, 212, 214 see also ALBA, Hugo Chavez Washington Consensus 12, 16, 26, 63, 82, 120, 204, 226, 227, 235 see also IMF, World Bank women 8, 64, 157, 165 World Bank (IBRD) 157, 159, 204, 216 see also Washington Consensus World Trade Organization (WTO) 26, 30, 33, 89, 181, 190 see also GATT Zelaya, Jose 50, 52, 66, 111, 119, 121–122, 124–125, 126, 144, 216, 230 see also coup, Honduras

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