The enterprise for Americas initiative - a White House progress report - U.S. support for Latin American and Caribbean market

Business America, July 15, 1991

President Bush's Enterprise for the Americas Initiative, which looks toward the creation of a hemispheric market, is now a year old. On the first anniversary of its announcement, the White House issued this fact sheet on its progress.

President Bush set forth the Enterprise for the Americas Initiative (EAI) on June 27, 1990, in support of the new commitments of our neighbors in Latin America and the Caribbean to democracy and economic reform. The Initiative proposes action in three areas of vital interest to our neighbors-trade, investment, and debt. The response from Latin American and Caribbean leaders has been very positive, and implementation has begun.

Trade. The United States is taking the first step toward the vision of a hemispheric free trade system by commencing negotiation of a North American Free Trade Agreement with Mexico and Canada (NAFTA). Congress paved the way for this negotiation by extending the fast track procedures.

Trade issues with other countries in Latin America and the Caribbean are being addressed through negotiation of framework agreements on trade and investment. These agreements create Trade and Investment Councils which will consult on trade and investment relations and work towards liberalizing, and thereby expanding, trade and investment opportunities.

Framework agreements are now in place with 16 countries: Mexico, Bolivia, Colombia, Ecuador, Chile, Honduras, Costa Rica, Venezuela, El Salvador, Peru, Panama, and Nicaragua, and the southern common market countries of Argentina, Brazil, Paraguay, and Uruguay. It is expected that negotiations will be concluded by July with CARICOM (13 English-speaking Caribbean nations) and Guatemala.

Latin American and Caribbean countries are eager to advance free trade. They are working to reduce trade barriers and expand opportunities for trade among themselves, as well as with the United States. The United States supports their accelerating efforts.

Investment. The Inter-American Development Bank (IDB) has responded to the EAI by taking the lead in helping Latin America and the Caribbean become more competitive in attracting capital for economic growth. A new IDB sector lending program will help countries liberalize their investment regimes and compete for capital. The first such investment sector loan, a $150 million loan for Chile, was approved by the IDB Board on June 19. Several other countries are also seeking the IDB's support through investment sector loans.

The President's innovative proposal to establish a Multilateral Investment Fund (MIF) to provide additional, targeted support for investment reforms is gaining support from other creditor governments. This Fund will support efforts to privatize government-owned industry, strengthen productivity of the work force, and help small entrepreneurs gain access to capital.

The Administration has asked Congress to authorize U.S. contributions of $100 million annually for five years to the Fund, which will be administered by the IDB. Japan has pledged $100 million per year for five years in grant resources. Other creditor governments have also indicated a willingness to provide resources.

The IDB is organizing a private investment forum to take place this fall on the implementation of market-oriented reforms underway in the region and the resulting improvement in the climate for private investment.

Debt. Under the EAI, the United States intends to provide significant support for difficult, but necessary, reforms and help countries restore confidence in their economies by reducing debt owed to the U.S. government by countries implementing strong economic reform programs.

Congress has authorized the reduction of concessional food assistance (PL-480) debt for those Latin American and Caribbean countries implementing strong economic reform programs, including investment liberalization. PL-480 debt constitutes $1.7 billion of the $12 billion owed to the United States by Latin American and Caribbean countries. In authorizing this debt reduction, Congress also established a framework for interest payments on reduced debt to be made in local currency and used to fund grass roots environmental projects in debtor countries. The debt reduction agreement just signed between the United States and Chile is the first under the EAI.

In addition to action on bilateral debt, the President proposed that the Inter-American Development Bank join the IMF and World Bank in providing resources to back commercial bank debt and debt service reduction packages. The IDB has committed to provide such support to Uruguay.

Critical Next Steps. The President is committed to working with our hemispheric neighbors to sustain the excellent momentum of the first year of EAI.

On trade, the United States is pursuing two complementary approaches-global and regional. A successful conclusion to the Uruguay Round of multilateral trade negotiations remains the most effective way of promoting long-term economic growth in Latin America and the Caribbean. Negotiations also have begun on the North American Free Trade Agreement, and we will be working to conclude additional framework agreements. We will continue to be actively engaged in dialogue with our neighbors on specific trade and investment issues of mutual concern through existing Trade and Investment Councils.