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. - --- MAP posted-by: Larry Seguin