The Christian Science Monitor
March 22, 2002

Central America ambivalent toward free trade

             Bush travels to El Salvador Sunday to discuss a long-awaited regional trade pact.

             By Catherine Elton | Staff writer of The Christian Science Monitor

             SAN SALVADOR - President Bush arrives here Sunday and expectations are running high. Leaders in the region have long wanted a
             free-trade agreement with the United States. Ever since Bush expressed interest earlier this year and then announced his upcoming visit
             many here have become convinced that it just might happen.

             Business leaders and government officials say that free trade is the key to development in a region that, after a decade of peace, is still
             struggling to win the battle against poverty.

             "Everything will improve with free trade," says the Guatemalan Vice Minister of Economy, Marco Ventura. "Our expectation is that free
             trade negotiations will be launched in El Salvador and that we will have an agreement by 2003."

             But on the eve of this highly awaited visit, some are questioning whether a free-trade accord is the answer to the region's woes.

             "I am not convinced that an FTA [free-trade agreement] with Central America would actually open up a lot of opportunities for Central
             America," says George Vickers, Latin America director of the Open Society Institute, a think tank founded by US businessman George
             Soros. "I just don't think it would change a whole lot."

             Sectors of the US government say that a free-trade agreement between the US and Central America would stimulate economic
             development and thereby bring stability to a good chunk of an increasingly fragile region. With increasing instability in South America there
             is an interest in making sure that it doesn't spread. Trade is a good way to assure that, say supporters.

             This is not a new theory. It has been pushed in the region for decades and the region has responded. Nations have flung open their doors to
             US investment and have received trade preferences for some of their exports under agreements like the Caribbean Basin Initiative.

             "Bush's logic is that trade is the motor of development," says Enrique Palamo Lacs, who is the coordinator of the a private-sector
             committee working on trade issues in Guatemala. "The logic, however, was the same in the 1980s and we followed it. But this logic hasn't
             shown results. We export more, but we are not any richer. We continue with the same problems as always."

             US restaurants line the streets of most Central American capitals and the nations here benefit from trade preferences for textiles and some
             clothing, yet without the promised economic gains.

             Because poverty still exists after much trade liberalization, critics charge that free trade only benefits the privileged classes.

             "Trade is something that has worked mostly for the wealthy elites in these nations," says Manuel Orozco, Central America program director
             of the Inter-American Dialogue, a Washington-based think tank. "All the governments in Central America are led by private-sector and
             business-sector people, and they are pro-free trade because they know what it means for their pockets."

             Some observers also say that free trade could further aggravate already-existing problems of poverty and income disparities in Central
             America. Agricultural products still enjoy protective tariffs across the region. Producers say they couldn't compete with an influx of US
             goods if these protections were removed.

             But according to a US Embassy source here, the US would like to see these products lose their tariffs. "With an FTA in which there are no
             clauses to protect agricultural products basic grains, poultry and dairy this will be the final blow to the many rural people already in very
             delicate economic situations," he says.

             Those who say there is too much optimism about free trade say governments here should be searching for ways to make their nations'
             economies more competitive and battling inequalities at home, such as improving education to create a better workforce.

             "The leaders say things are not good here because we need a trade agreement to make things better," says Mr. Vickers. "They use it as a
             way to detract attention from their failure to deliver. It's an excuse governments use for why things aren't better."