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Peter F. Romero, Acting Assistant Secretary of State for Western Hemisphere Affairs Remarks to the Inter-American Businessmen's Association, Santo Domingo, Dominican Republic, October 27, 2000

As delivered

U.S. Support for Strengthening Democracy and Free Enterprise in
Latin America and the Caribbean, 1960-2000

It's a great pleasure to be back in the Dominican Republic and to see the vibrancy of this economy and the business community here. I'd like to review how democracy and private enterprise have evolved in Latin America and the Caribbean since 1960 and then discuss the role of business in meeting the new challenges we face.

Where We Were and Where We Are

The contrasts between the Latin America of the 1960s and of 2000 are dramatic. Yet our goals in the region are essentially unchanged. In brief, we want to promote democracy and prosperity and to strengthen our mutual cooperation on key transnational issues such as illicit drugs and the environment.

Democracy has moved from being a hoped-for ideal to a dominant reality. In 1967, 26 countries attended the hemispheric summit in Punta del Este, Uruguay; of those 26, ten were ruled by authoritarian dictators. Today, of the 35 independent countries in the Western Hemisphere, only one -- Cuba -- is ruled by a dictatorship. The past year has seen an historic vote in Mexico and credible elections in seven other countries, including the Dominican Republic. 95% of the people in this hemisphere live under constitutional democracy today.

In the economic area, the region's thinking in the 1960s was dominated by a development model emphasizing import substitution and government controls on private enterprise. Today, governments have almost universally adopted a market-based, export-oriented model that recognizes the private sector as the engine of growth and encourages both foreign and domestic investment. Most state enterprises in the region have been privatized or are slated for privatization, thereby lowering costs and improving government budgets. Inflation last year averaged less than 10%, the lowest in 50 years. The region has slashed its average tariffs from around 45% in the 1960s to the low teens today. Trade among us has exploded. Latin America and the Caribbean have been the fastest growing markets for U.S. products in recent years. Last year our two-way trade with the region amounted to $310 billion.

Let me take this opportunity to note the recent enactment by the United States of the Caribbean Basin Trade Partnership Act - also called "CBI enhancement." President Clinton has designated 24 countries in the Caribbean and Central America as eligible for important new trade preferences, notably in apparel. It is yet another tie in the increasing interdependence within this hemisphere.

Another important force tying us together is the rising proportion of Hispanics in the U.S. population. Today people with Latin American or Caribbean roots account for 12% of the U.S. population; this proportion is expected to increase to 15% by 2010. You know, of course, the vibrant Dominican communities in New York, Miami, and several other parts of the U.S., and how important remittances from these communities are to their families in the Dominican Republic.

The new hemispheric consensus on democracy and market economics combined with growing interdependence has greatly strengthened cooperation among the countries of the region. It also led to the creation of a new institution for such cooperation, the Summit of the Americas.

The Summit is far more than the telegenic meetings of the hemisphere's leaders which took place in Miami in December 1994, in Santiago de Chile in April 1998, and which will take place in Quebec, Canada in April 2001. The Summit is above all a plan of action to strengthen democracy, promote prosperity, and improve the daily lives of the hemisphere's citizens. As was the case in previous Summits, the Quebec Summit will launch 15 to 20 initiatives with specific and time-limited objectives, subject to regular reviews to ensure that the objectives are achieved. The initiatives are wide-ranging, covering elections, education, the environment, and combating corruption, among other issues.

Negotiation of a Free Trade Area of the Americas is a key part of the Summit process. Our trade negotiators are working hard to complete the negotiations by 2005, the goal set by the 1994 Summit. We expect the negotiators to complete an initial draft for each chapter of the Agreement by the end of this year. Difficult issues remain ahead, but this important process of integration will continue.

This active partnership is a far cry from the donor-beneficiary relationship that characterized U.S.-Latin American relations in the 1960s, and it provides a solid foundation for future leaders, including the U.S. President elected next month, to face their challenges.

The Challenges of the Future

There is no question that the hemisphere will remain prominent on the new President's agenda; both Vice President Gore and Governor Bush have repeatedly said this during their campaigns. This reflects not only their personal interest in this region but also their awareness of the accelerating interdependence among us.

In defining how to meet the challenges of the next century, the new President will face three key issues:

First, democracy must be strengthened. As shown by the flawed elections in Peru and Haiti, free and fair elections are not yet a guaranteed feature throughout the hemisphere. Electoral institutions must be strengthened. But democracy means more than elections. While there is strong public support for democracy as a concept, most citizens also express doubts about the state of their own democracies, largely because of the sense that the system is working for some but not all. Critical to democracy's success therefore will be its ability to deliver on its promises to all, not just to the elites.

I am asking you as business leaders to help make democracy irreversible by making it an everyday reality in the lives of average citizens. Your help is needed in:

• Modernizing justice systems, making them more efficient and responsive;
• Weeding out corruption so that government services are provided efficiently and impartially;
• Making quality education available to all, not only to prepare skilled workers but also to ensure that citizens make intelligent decisions on issues of governing;
• Controlling soaring crime, not with vigilante justice but with efficient and law-abiding police systems; and
• Encouraging the political process to be open to dialogue and compromise, avoiding a win-at-all-costs mentality.

The second big challenge of the future is to continue reforming economic institutions -- first, to provide a positive climate for investment, innovation, and growth; second, to spread the benefits of growth throughout society; and third, to ensure that the nations of this region participate positively in the new global economy.

Latin America's economy in the 1990s grew three times faster than it did in the 1980s. The bad news is that this was not enough to meet the expectations generated by the democratic, market-based model; nor was it enough to fundamentally improve Latin America's income distribution -- which remains the most skewed in the world. By some calculations a mere 15% of Latin America's population controls 85% of the region's wealth, and about one-third of the region's people live on less than two dollars a day.

One of the answers to this problem is fuller participation in the global economy. Not everyone of course sees globalization as constructive, as exemplified by the demonstrators who filled the streets of Seattle, Washington and Prague recently. I am asking you in business to make your voices heard as well, explaining both the benefits and constraints of globalization.

The citizens of this hemisphere need to understand more clearly that, as technology continues its ever-accelerating advance, globalization has the potential to deliver explosively large benefits -- not just more profits for business and revenue for governments, but also more employment and higher incomes for the world's poor. And the gains are not only economic. As countries open their economies, the need increases for a stronger rule of law and clearer accountability, and the opportunity increases for the spread of ideas. All this strengthens democracy.

Citizens need also to understand that globalization does not automatically guarantee benefits to all. Countries will benefit if they show potential investors that they encourage productive investment, respect the rule of law, and have the basic human capital to respond quickly to changing technology and evolving consumer demands.

On another globalization issue, there is an emerging consensus to which you in business can make a major contribution. The arguments of the anti-globalization demonstrators are largely invalid, and their tactics in many cases grossly inappropriate, but there is one part of their dogma which commands wide respect. And that is, that globalization should take into account the need to improve workers' rights, protect the environment for future generations, and provide a safety net for individuals and communities harmed by change. Free trade should not mean a "race to the bottom" whereby investment goes where the environment and labor have little or no protection.

There is agreement on the principle. But there is fierce controversy about how to turn the principle into an operational reality. What, specifically, are bad labor and environmental policies in poor countries with very limited resources? How do we develop standards that are fair, widely supported and realistic for countries with widely different economic situations? And how can we design them so they cannot become disguised protectionism?

We need your help in answering such questions. We need advice from businesspeople who have the experience of producing and trading products and services, but who also have the wisdom to take a long-term and broad perspective on the needs of the country and the hemisphere.

The third big challenge of the future will be to confront transnational crime more effectively especially by enhancing international cooperation against drugs.

I am encouraged that two of the countries most afflicted by drugs, Bolivia and Peru, have substantially reduced coca production. But this past year has also produced new evidence that coca plantings are more extensive throughout the Andean Ridge than previously reported. And recent laboratory developments allow a much higher yield of pure cocaine from coca leaves than previously believed.

On the positive side, the recent passage by Congress of the $1.3 billion supplemental package in support of "Plan Colombia" offers hope of an integrated approach dealing with all dimensions of the drug problem: growers, processors, transporters, and antiquated and often corrupt judicial systems.

If we see progress with Plan Colombia such as we have seen in Peru and Bolivia, we can begin to stem the tide of illicit drugs. But we must monitor the drug situation in all countries of the hemisphere, lest we merely move the problem from Colombia to somewhere else. That includes the small countries which are especially vulnerable to the corruptive power of the mega-rich drug cartels. It includes also the United States where we need to reinforce our efforts against not only drug trade but also against drug use. I see the new multilateral evaluation mechanism, the OAS anti-drug committee CICAD, as a powerful new tool in the hemisphere's fight against the drug plague.

Conclusion

In conclusion, I see your involvement in the process of reform not only reflecting a sense of responsibility to the community but also because it serves your own interests. Instability, corruption, low growth, widespread poverty -- these not only harm individuals, they also severely limit the scope for business and profit. Clearly, business holds a major stake in good governance and broad-based prosperity. I urge you to consider aligning with other reform-minded associations, such as non-government organizations or indigenous groups, to press -- in an apolitical manner -- for honest and effective government, and to ensure that the benefits of growth are widely spread. If we succeed in consolidating democracy and stimulating broad-based growth, we will build a hemispheric community offering unparalleled opportunities to achieve our common ideals.

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