Pubdate: Fri, 29 Jul 2005
Source: Wall Street Journal (US)
Copyright: 2005 Dow Jones & Company, Inc.
Contact:  http://www.wsj.com/
Details: http://www.mapinc.org/media/487
Author: Jose Decordoba, John Lyons And David Luhnow
Section: A 11
Bookmark: http://www.mapinc.org/topics/mexico

DESPITE CAFTA, U.S. CLOUT WANES IN LATIN AMERICA

Superpower Is Seen As Aloof To Concerns Of The Region; Yankee Bashing On The
Rise

MEXICO CITY -- The U.S. may be losing the wider war over Latin America's
future, despite President Bush's victory in getting congressional approval
of the Central American Free Trade Agreement.

Cafta promises slender relief for five Central American countries and
the Dominican Republic, a Caribbean island nation.

The pact essentially makes permanent a raft of temporary preferences
already enjoyed by the region -- and provides limited access for its
highly competitive industries such as sugar. By contrast, the North
American Free Trade Agreement granted Mexico unprecedented new access
to the U.S. automobile market, an economic prize that still helps
drive the Mexican economy.

While Cafta offers no similar economic reward, Nicaragua, Guatemala
and Honduras already have ratified the accord and the others are
expected to follow suit. Despite some misgivings in Costa Rica, where
opposition to the pact is greater, the countries hope that by securing
a permanent trade deal with the U.S., international companies will
deepen their investments in the region. Washington's reluctant
approval of a deal that was widely seen in Latin America as tilted in
the U.S.'s favor is likely to aggravate the decline of U.S. influence
in the region, which feels it has an uneven relationship with the
world's sole superpower. Washington wants cooperation from Latin
America on issues such as fighting terrorism, but has yet to
reciprocate by addressing matters that concern its southern neighbors,
such as granting legal status to millions of undocumented Latin
Americans working in the U.S., cutting U.S. farm subsidies to make
agricultural trade more fair, and uniting the hemisphere in the
so-called Free Trade Area of the Americas. That drop in U.S. standing
south of the border has boosted anti-American and antiglobalization
critics like Venezuelan President Hugo Chavez. Nearly every major
country in the region has elected a left-leaning government, and
popular opposition to free-market policies espoused by Washington is
blocking further changes that might make the region's economies more
dynamic, limiting their potential as future markets for U.S. products
and investment.

With the U.S. focused on fighting terror, its friends in the region
feel abandoned. Three years ago, the pro-U.S. president of Bolivia,
Gonzalo Sanchez de Lozada, went hat in hand to Washington seeking $150
million to help his government bridge a budget shortfall and help
survive growing opposition from coca growers and antiglobalization
radicals.

The U.S. balked, and Mr. Sanchez de Lozada's government fell less than
a year later. Bolivia is now paralyzed, on its third president in as
many years. "With all the problems the U.S. faces, I think their
attitude was, 'Let sleeping dogs lie,' " Mr. Sanchez de Lozada says.
"The problem is the sleeping dogs are not sleeping -- they are
barking, biting, and running around tearing up the backyard."

Mr. Chavez's combination of lavish social spending and virulent
Yankee-bashing has proved a successful formula for staying in power.

It also makes a compelling model for populist politicians in some of
the region's most unstable countries, such as Bolivia, Ecuador and
Nicaragua. Ecuador's new government has unsettled Wall Street by
getting rid of an oil-reserve fund used for debt payments, while
raising social spending.

It has criticized the U.S. war on drugs, and says it won't renew a
U.S. lease on an air base there.

Mr. Chavez also is taking advantage of high oil prices to buy goodwill
around the region, emerging as the lender of last resort to
cash-strapped countries. This potentially allows them to thumb their
noses at the U.S. and the International Monetary Fund, which usually
impose conditions on their loans. So far this year, Venezuela has
acquired $500 million of Argentine bonds. Last week, Ecuadorian
officials were negotiating a Venezuelan purchase of $200 million of
bonds, a figure Ecuador hopes eventually will increase to $500 million.

"The U.S. is not putting money anywhere in Latin America, and Chavez
is," says Eduardo Gamarra, the head of Latin America Studies at
Florida International University.

Polls show Mr. Chavez is striking a chord with the Latin American
street.

He is the most popular political figure among Bolivians, and the
second-most-liked political figure in the Dominican Republic. A close
ally of Cuba's Fidel Castro, the Venezuelan leader wants to influence
the region further through a new 24-hour Latin American news station
called Telesur, with backing from Cuba, Uruguay and Argentina.

While many U.S. businesses continue to invest in the region, the
effect of a more hostile environment is already felt. Energy-rich
Venezuela and Bolivia have repeatedly raised taxes and royalties on
foreign oil companies.

In Argentina, President Nestor Kirchner has responded to popular
discontent over privatizations of oil, electricity, water and other
sectors by slapping price controls on companies.

Overall foreign direct investment in Latin America has fallen by 20%
from its annual average of around $70 billion in the late 1990s.
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MAP posted-by: Larry Seguin