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Peter F. Romero, Acting Assistant Secretary Bureau of Western Hemisphere Affairs Remarks at the Office of the Inter-American Development Bank Tokyo, Japan, April 9, 1999

I am honored to exchange views about the U.S.-Japanese relationship in Latin America with such a distinguished group of scholars and businesspeople. I look forward to hearing your perspectives. I'd like to talk today not only about what is happening in this region, but also about what is not happening; not only about the outcomes of conflicts and crises, but also about the manner in which these issues are addressed.

Latin America and the Caribbean today presents a positive picture overall. The Western Hemisphere is now a community of 34 representative, free-market democracies, with only one exception, Cuba. There are many deep-seated problems, like widespread poverty, inefficiency, and corruption; there are recurring crises, like natural disasters, political turmoil, and financial instability. But there is also a broad consensus on the need to deal with such issues within a democratic and constitutional framework. The manner in which conflicts are being addressed shows respect for law and openness.

The present moment of peace and consensus needs to be seized to rebuild and strengthen the fundamental political and economic institutions of the region. There will always be challenges to democracy, temptations to take the short-cuts of authoritarianism or populism so as to avoid laborious legal processes and market complexities. But when the governing institutions are firmly embedded in democracy, such temptations can be more easily rejected.

U.S. and Japanese Policy Goals in Latin America

Let me start by outlining some of our major policy goals. Because of the convergence of values and interests in the Western Hemisphere, the U.S. policy agenda largely reflects Latin America's agenda. Our key goals include:

• Consolidating democratic institutions, respect for human rights, and military professionalization and subordination to civilian leadership.
• Expanding economic growth and ensuring that the benefits of growth result in widely shared prosperity.
• Improving judicial systems so they deliver transparent, equitable justice for all citizens.
• Combating transnational crime and stemming the flow of illegal narcotics.
• Increasing sustainable development and encouraging sound environmental practices.
• Substantially reducing poverty, through growth and job creation, as well as better health and education systems.

These goals are very similar to those of Japan. Despite occasional differences, the U.S., Japan, and Latin American nations have a common vision and compatible policies. The U.S. and Japan are working with Latin American Governments to achieve our goals through a collaborative process. Multilateral institutions such as the World Bank and the Inter-American Development Bank, in which Japan has a strong role, are a key element of the U.S.-Latin American relationship.

We value deeply the trilateral cooperation which we have developed with Japan in Latin America, notably under our Common Agenda. Some important examples are the projects to protect nature reserves in Central American and Caribbean countries through the "Parks in Peril" program, support for development of alternative crops in drug-growing areas of Peru, and improved education for girls in Guatemala. We welcome the new public-private partnership under the Common Agenda, and look forward to more private sector Japanese involvement in Latin America.

The Summit of the Americas Process

There is one new institution in the Western Hemisphere which is a powerful force toward addressing crises and problems in a constructive manner: the Summit of the Americas process. The democratic leaders of the Americas met first in Miami in 1994 and next in Santiago, Chile in April 1998. At these events, the Western Hemisphere affirmed its commitment to democracy and market economics, but more importantly developed a specific action plan to forward those values in the daily lives of our population.

Educational reform was the main theme of last year's summit in Santiago. There has been growing realization in Latin America that, in the long run, education is critical to reducing the high rates of poverty and unequal distribution of wealth which are endemic to the region. In Santiago, the leaders recognized that Latin America does not provide quality basic education to all its people -- whether poor or rich, rural or urban, girls or boys, indigenous or of European origin. The summit agreed on a detailed program to improve the educational system from the bottom up. This commitment will take determined effort sustained over many years to fulfill, but the work has begun. I am heartened that many in the business community have joined the effort to provide relevant high-quality education and training.

To ensure continued momentum in the periods between summits, senior officials meet several times each year to review implementation of the action plan. Canada will host the third Summit of the Americas sometime in the year 2001.

All this has resulted in closer personal and working relationships among the leaders of the Western Hemisphere which builds upon and reinforces the consensus on fundamental principles. It has profoundly changed the manner in which the region is dealing with its problems.

Consider, for example, some of the crises of the last few weeks: serious political conflicts over economic policy in Ecuador, an assassination in Paraguay that triggered a presidential resignation, and a political stalemate in Haiti which may be lessening but is still unresolved. In each of these countries, democracy is not very deep-rooted. Ten or even five years ago, how would we have expected these crises to be resolved?

None of these stories is yet complete. But notice that, despite the turmoil, constitutional processes in these countries have not been scrapped; political differences have not generated bloodshed even when there were thousands marching in the streets; the militaries have not stepped in as alleged saviors of their country from chaos; the leaders and citizens of these countries have not pushed aside democracy and the rule of law. Instead, each is searching for solutions which are constitutional and consensus-based.

This demonstrates high political maturity of both the leadership and the electorates in Latin America, in fact a surprisingly high maturity when compared with the region's past history and with other regions that are at similar levels of economic development.

Let me discuss a few examples in greater depth: the financial crisis, the FTAA, and hurricane reconstruction.

The Financial Crisis

To begin with, I note that, while some countries were more severely hit, investor anxiety about emerging markets is testing all of us -- including the United States. Our falling exports to and growing imports from emerging markets have given new strength to U.S. protectionist fears. I want to assure you that this Administration will fight hard to keep U.S. markets open and push for freer trade globally.

In many respects, Latin America has performed better than other areas of the world in weathering the financial crises. Again, I would argue that this comes from the broad consensus among leaders and citizens in favor of democratic and market-oriented processes. Brazil's President Cardoso was re-elected last October with a market-based program of continued budget stringency to tame inflation. No one likes budget cuts and austerity, whether in Brazil, Japan. or the U.S. But the Brazilian electorate has been remarkably willing to accept some sacrifice in the present to build a solid foundation for self-sustaining growth in the future.

The United States will continue to support those governments, in Latin America and elsewhere, which demonstrate through action their commitment to continue moving toward market-based economies, sound macro-economic policy, open markets, and transparent financial systems. We are happy that Brazil remains committed to sound economic policies, and is implementing the package of reforms agreed with the IMF. We were pleased that Japan was able to work with us to develop the financial relief package for Brazil. Brazil's recent actions have helped reassure financial markets about Brazil, MERCOSUR, and the region as a whole.

For 1999, we expect little or no growth in Latin America, but a basis is being laid for better growth next year. The long-term prospects remain excellent. A decade of market-based reforms has made Latin America resilient. As the region continues its economic reforms, it will continue to attract foreign capital and remain a profitable opportunity for long-term investors. As Treasury Secretary Rubin said, this region is the world's "most forward-looking" in reform.

Free Trade Area of the Americas (FTAA)

Agreement by the hemisphere's leaders to negotiate a FTAA by the year 2005 has been the most dramatic and best-known outcome of the summit process to date. The FTAA would create a market of 800 million consumers, and an economy of more than $10 trillion in national product per year. This will boost growth and the quality of life throughout the Western Hemisphere. It is yet another example of the commitment to law-based and transparent processes in Latin America. Democracy can only be strengthened where economic decisions are largely made by market forces rather than government bureaucracies working behind closed doors.

The FTAA negotiations are successfully underway, with negotiating groups meeting regularly. Some concern has been expressed about the U.S. lacking "fast-track authority" to simplify U.S. Congressional review of trade agreements. But for this early phase of the negotiations, lack of fast-track will not slow the FTAA's momentum. The U.S. did not have fast-track for the first 3 years of the Uruguay Round, but negotiators made progress and the U.S. played a constructive role. I am confident that, just as in the Uruguay Round, we will have fast-track when we need it.

I also believe the FTAA is good for Japan. I know that there is concern that the FTAA may become a trading bloc which might damage non-participants. Let me be clear. The FTAA and other U.S. regional trade initiatives are a part of our strategy to build a more open trading system globally. The FTAA will not raise barriers to non-members and will be fully consistent with the letter and the spirit of the WTO. The FTAA will consolidate Latin America's dramatic trade liberalization over the past decade. Continuation of this trend and the stimulus to growth provided by the FTAA will benefit all trading countries.

Hurricanes Mitch and Georges

Last year's Hurricanes Mitch in Central America and Georges in the Caribbean brought damages of tragic proportions but also a renewed commitment to democracy, transparency, and continuing reform. Repairing the damages will challenge us for years: over 31,000 casualties, at least three million people homeless, infrastructure repairs estimated at $8.5 billion (not including lost crops and lost business). The worst devastation occurred in two of the poorest countries of the hemisphere, Honduras and Nicaragua.

The U.S. has already provided more than $300 million in humanitarian relief. We began with search and rescue, and then delivered millions of pounds of water, food, medicine, plastic sheeting, and clothing to the hundreds of thousands that lost everything to the hurricanes.

I want to take this opportunity to thank the many people in Japan who contributed to the relief effort. The dispatch of 205 members of the Japanese Self-Defense Forces to Central America in a first-ever overseas relief operation provided great and immediate relief to the victims of Hurricane Mitch. This action also signaled to the world Japan's commitment to and interest in the region.

We have now gone from the relief phase into long-term reconstruction. On February 16, President Clinton submitted to Congress a $956 million supplemental budget request for reconstruction, including debt relief for Honduras and Nicaragua to permit them to better harness their own resources. On March 4, the Administration submitted to Congress its proposed Caribbean Basin Trade Enhancement Act that will provide significant new trade benefits for the region, generating jobs and foreign exchange.

I think the most important point about the catastrophe is that the affected governments see the hurricanes not just as destroyers but also as an opportunity. They want not just to rebuild but to transform their institutions politically and economically. Some elements of that transformation are already underway, with increased accountability for foreign assistance implemented in Honduras and Nicaragua, and with a substantial strengthening of local governments and non-governmental organizations in the rebuilding process. We look forward to continuing to work with the Government of Japan to ensure effective coordination of the reconstruction and redevelopment effort.

Conclusion

Despite distance and cultural distinctiveness, Japan has made major contributions to the economic and social development of Latin America throughout its history: beginning with Japanese emigrants to Brazil, Peru and other countries; continuing with Japanese investors in the region's natural resources and trade; and more recently, Japan's official assistance for elections, for the environment and for counternarcotics projects. As technology continues to shrink distance and to diminish the importance of national boundaries and cultural differences, the scope for cooperative action increases. The trilateral relationship among Japan, the United States, and Latin America is a striking example of how cooperative action serves the interests of all three.

Hurricanes, earthquakes, financial turmoil, and falling commodity prices have tested the Latin American and Caribbean democracies. They are passing these tests. Although many are fragile, they are surviving the storms of the 1990s. Japan and the United States can be proud to have helped democracy in the Western Hemisphere.

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