Public
FTAA.soc/civ/103
September 18, 2003

Original: Spanish
Translation: FTAA Secretariat

FTAA - COMMITTEE OF GOVERNMENT REPRESENTATIVES ON THE PARTICIPATION OF
CIVIL SOCIETY

CONTRIBUTION IN RESPONSE TO THE OPEN AND ONGOING INVITATION
 

FTAA VS. DEBT
 

One need not be a leftist to grasp the huge imbalance that signing the FTAA agreement in 2005 would be for Latin America. Any serious economist would advise against signing the treaty. Because our countries are not yet prepared for such highly competitive games, their current industries would be simply devastated.

On the other hand, Latin America carries with it the enormous burden of its foreign debt. It is often moving to see countries with smaller economies earmark high percentages of their budgets with much sacrifice to meet their commitments while postponing development in many areas.

Now we find ourselves at a historical crossroads, a threshold with new solutions that we have not wanted to cross for lack of knowledge. It would involve swapping debt for tariff elimination. In other words, it would be a matter of pegging the payment of our debt to tariff elimination: the more open a country’s market, the more its debt will be repaid.

Let us start from the fact that developed countries, and in this case the United States and Canada, are interested in the free flow of their products into our markets. Companies wishing to export to a specific country in Latin America would be required to purchase an entry pass; this entry pass would mean zero tariffs into that country. Passes would only be sold at the International Monetary Fund and the cost of these entry passes would be used toward amortizing or repaying that Latin American country’s debt.

Of course, every interested US or Canadian transnational would carefully research the size and sociopolitical situation of the target market in order to determine whether or not it is profitable to buy an entry pass. It is important however to note that the entry pass has no expiration date, in other words, it is forever.

Ford, General Electric and IBM, for example, choose Argentina as a destination for their products. Each one would pay, for example, a billion dollars to the Monetary Fund for its entry pass. Similarly, Bombardier, of Canada, shows interest in sending its planes to Argentina. The Argentine debt would automatically be reduced by four billion dollars. However, in the future, Argentina would be faced by constant competition from the country's kitchen appliance, computer, automobile, and aircraft industries of its Canadian and US counterparts.

It costs nothing to dream, but it is difficult to strike a balance. In other words, the difficulty lies in determining a price for such entry passes. And that is where our experts and economists would come into play. A tough task lies ahead for them. I think Latin America should not lose this excellent opportunity to sit down and negotiate its debt.

Eduardo Pérez-Albela                                       Caracas, 14 July 2003