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Redefining Politics: Latin American Style

May 10, 2006

Introduction

JOANNE MYERS:  Good afternoon.  I’m Joanne Myers, Director of Public Affairs Programs.  On behalf of the Carnegie Council, I’d like to welcome you here this afternoon.

Today our speaker is Ambassador Charles Shapiro, who just flew in from Washington to be with us today.  He is here to discuss recent developments in Latin America.

If we consider the recent election victories of Morales in Bolivia, of Bachelet in Chile, and Humala in the first round of Peru’s presidential balloting, and include them with the existing leadership in Venezuela, Argentina, Brazil, and Cuba, one could easily argue that the governments in these countries form part of a seamless web of left-leaning leadership in Latin America.

One could differ about whether these heads of government are true leftists.  But whether we label these governments populist, nationalist, or socialist, this new generation of leaders has prompted a rash of headlines declaring that Latin Americans are fed up with the Washington consensus of free markets and fiscal discipline, reflecting the view that past policies have failed to erase their longstanding poverty and inequality.

Consequently, Latin Americans are electing politicians who are seen as being more pragmatic, resulting in governments that are embracing their own flavor of free-market policies, while vowing to become the champions of the poor and the downtrodden.  These leaders are reverting to protectionism, state ownership of industries, and unlimited social spending.

For America, the change in leadership from what was once seen as reliable allies to nations that can no longer be counted on to support the United States in international disputes, nor to sign trade deals that preserve subsidies for U.S. industries, is worrisome and arouses anxiety.  On the other hand, standing up to the United States is perhaps the only way to win votes that will quiet the unrest found in so many of these countries.

No matter how we speculate about these changes in governments, many of us are still interested in learning about how our country is adapting to the changes taking place in our backyard.  To that end, we are extremely pleased to welcome Ambassador Shapiro to our program this afternoon.

As you will note in reading his bio, his assignments, whether serving in Latin American or in the State Department, have been varied and his experience vast.  With each new assignment, he has demonstrated commitment and displayed intelligence in dealing with a variety of challenging political issues, skills which today should serve him extremely well in facing any dilemma.

I take pleasure in presenting to you Ambassador Shapiro.  Thank you for joining us.

Remarks

CHARLES SHAPIRO:  I’m delighted to be here with such a large audience.

I want to thank you for your interest in Latin America.  Part of the problem is that the headlines you mentioned are too few and far between.  Even in our newspaper of record, there is very little coverage of Latin America.  You have to work to find out what’s going on.

A month ago, President Alejandro Toledo of Peru was in Washington to sign the United States-Peru free trade agreement, which did not preserve subsidies for U.S. industries.  He had a tremendous story to tell, and he told it everywhere he went.  He said that when he turns over the sash of presidential office in Lima to the new president on July 28, he will inherit a country whose economy has grown an average of 5 percent each year for the last five years, including 6.7 percent in 2005; where poverty has dropped by 6 percent during that same period, and extreme poverty—those living on less than $2.00 a day—has decreased from 24 percent to 18 percent; whose exports are up from $9 billion in 2003 to $16 billion in 2005; and where private investment, both foreign and Peruvian domestic investment, has tripled over the last three years.  It is the sort of story that makes economists and analysts and Wall Street very happy.  And Toledo is rightly proud of that.

Yet if you look at the first round of the Peruvian presidential elections, you will notice something odd.  Ollanta Humala, a radical populist, who opposes the very policies that have made the Peruvian economy grow so robustly, came in first in the first round.  Former president Alan García, who was president in the 1980s, will face Humala in the runoff on January 4.  You may remember that García was the president who was famous for a cumulative total of 7,000 percent inflation during his term in office.

Lourdes Flores, who had pledged to continue those policies that Toledo bragged about, came in third—only by 6 percent behind Alan García.

But something is out of sync when the candidate who pledges to undo successful policies comes out on top.  We are seeing some of the same trends region-wide.

The macroeconomic numbers for Latin America as a whole are good.  According to the United Nations Economic Commission for Latin America and the Caribbean (ECLAC, or CEPAL in Spanish), Latin America grew by 4.3 percent in 2006, fueled by faster-than-expected growth in Brazil, Chile, and Mexico, and.  It’s the third consecutive year for the region in excess of 4 percent.  Latin America has not done this well since the 1970s.

Strong economic growth in the United States and tremendous economic growth in China, and Chinese purchase of commodities, accounts for a great deal of the growth in Latin American.  High commodity prices and low international interest rates have also contributed.  But sound economic policies put in place over the past two decades have played a key role.

The strongest performers in Latin America are precisely those countries which have pursued economic reform most assiduously.  Chile’s economy, well-managed for over twenty years, grew at an average rage of 5 percent over the last five years.  Brazil grew by almost 5 percent in 2004.  Growth dropped in 2005, but is expected to pick up again this year.  Peru’s economy grew at 6.7 percent last year, the fifth year of strong economic growth.  Growth, of course, results in poverty reduction.

ECLAC estimates that the number of poor decreased in 2004 and 2005, the first decreases in fifteen years.  Poverty reduction is particularly strong in those countries that have implemented the most economic reform.  Mexico has reduced poverty by 15 percent since the early 1990s; El Salvador, by 7 points; Costa Rica, by 6.  Chile has cut extreme poverty to less than 10 percent of the population.

To give you an example, when Patricio Aylwin took over as president in 1990, the poverty rate in Chile was around 50 percent.  By the time I left in 1998, it had dropped to about 21 or 22 percent.  Now Chilean economists estimate that it’s below 20 percent.

But growth is a metric which is important in the macro.  What really counts is whether economies are creating better lives, not only for the skilled and the well-educated, but also for the poor and the marginalized.  Forty percent of Latin Americans are still poor.  That is more than 200 million people.  Those still living in poverty don’t feel the tangible improvements in their daily lives.  Surveys show that most Latin Americans support the principles of democracy and the free-market system, but many feel that their governments aren’t doing enough to translate that into good jobs, good schools, good health care, and controlling crime where they live.

The informal economy accounts for 25 percent to 70 percent of employment in Latin America and the Caribbean.  These are the people who sell things on streets or have small, unregistered businesses.  A substantial part of Latin America lives outside the formal economy and feels that it has no stake in the political system.  Inequality is a key factor.  Latin America is second only to sub-Sahara Africa as the region with the most unequal distribution of income.  The richest one-tenth of the population earns almost half of total income, while the poorest tenth earns less than 2 percent of income.  The region has the worst record among emerging economies in protecting property rights and enforcing contracts.

Crime, corruption, and government inefficiency impact marginalized groups more than the wealthy.  Good governance benefits everyone, but it has its greatest impact on the marginalized.  For example, if you want to stop being an informal, unregistered business, and take the steps necessary to become a formal, registered business, it takes more days—not hours, but days—to do so in Latin America than in any other region in the world except sub-Saharan Africa.

Those who feel left behind—the poor, the indigenous, isolated rural communities—are easily attracted by radical populists who offer simple solutions to complex problems.
The challenge that the United States, and the international democratic community, faces in Latin America comes from poverty, from social exclusion, and from the inability in some societies or institutions to deliver the goods and services that people need and expect in order to take advantage of economic opportunity.

Condoleezza Rice, in a speech she gave recently to the Council of Americas, said, “The goal of U.S. policy in Latin America is the inclusion of every citizen of the Americas, not just the elites, and the opportunities and benefits of democracy.  For men and women who are committed to freedom, who work hard and play by the rules, democratic governments must create opportunities for people to rise as high as their talents will take them.  That is how the United States defines social justice.”

What do we do about that?  Felipe Gonzalez, former prime minister of Spain, said, “Más democracia, más desarrollo,” “More democracy, more development.”  Forward-looking leaders in Latin America, whatever their political orientation, are implementing pragmatic policies to extend the benefits of growth more broadly.

Chilean president Michelle Bachelet, in her inaugural address, said, “We’re going to work with vigor, with energy, so that our region can be more just, more humane, more united, and more equal.”

There’s a lot to do.  Experience in both Latin America and other regions of the world offers many lessons.  Here are some that are particularly important:

1) Sustained economic growth is imperative.  World Bank studies show that for every percentage point of growth of GDP, poverty drops by 1.25 percent.  Low inflation and sustainable public finances are necessary if that growth is to reduce poverty.  High inflation and financial crises are devastating for everyone, but they are particularly devastating for the poor.

2) Investment is key to growth.  That means the right policies to attract investment and to ensure the most productive use of resources.  By investment, I mean not just investment by big multinationals and established businesses, but from new businesses and small entrepreneurs.  In Latin America, just as in the United States, employment growth comes from job creation by small and medium-sized enterprises.

3) Education is key to sustainable growth.  Skills must be upgraded, not only at the university level, but even more importantly at the primary and secondary levels.  High quality education must be available in rural as well as urban areas, to the poor and indigenous, as well as to the middle class.  One of the secrets of Chile’s success is the major effort that it has made to invest in health and education.  In Mexico, the Oportunidades Program gives cash grants to 4 million poor families—20 percent of the population—conditioned upon keeping children in school and improving family health.  In Brazil, President Lula has implemented a similar program, called Bolsa Familia, which should reach 11 million families, most of Brazil’s extreme poor, by the end of 2006.  Colombia and Peru have similar programs.

What is the United States government, the Bush administration, doing?  The foundation of our policy is to help countries move toward deeper democracy and broad-based prosperity.  Our goal is not to make the rich richer, but the poor less poor.  Here are some of our key programs:

1) Debt relief: We pioneered debt relief reduction at the G8, which provides the poorest countries in the region with nearly $5 billion in debt relief.  This initiative eliminates debt owed to the World Bank and the IMF by Bolivia, Guyana, Haiti, Honduras and Nicaragua.  We are exploring similar possibilities of providing relief to these same countries through the Inter-American Development Bank (IADB).  This could add as much as an additional $5 billion in debt relief.

2) Access to capital, especially for small and medium-sized enterprises:  Last year, President Bush proposed, and the region’s leaders agreed to, the goal of tripling bank lending to small businesses by 2007, with help from the IADB.  We know from experience in other regions that small businesses can succeed and that banks will support them, under the right conditions.

The regional leaders are also committed to cutting in half the cost of remittances.  The IADB estimates that in 2005, Latin Americans working in the United States sent home to their families $45 billion, and that the total worldwide to Latin America is $53 billion.  Too much of that money is being raked off by companies that charge high fees for transmitting that money back home.

This money has a tremendous impact on poverty, because the people who go abroad tend to be the poorest.  They are sending money home directly to family members, who tend to be in the poorest areas of their countries.  It doesn’t go to central bankers and ministries.

3) Trade:  Our trade policy is aimed at further opening what is already a largely open market in the United States for Latin American products.  Trade agreements reinforce market-based reforms, transparency in economic decision-making, and increased competition to stimulate innovation and efficiency.  We have concluded agreements with nine countries through NAFTA, a bilateral agreement with Chile, and the CAFTA-DR agreement with Central America and the Dominican Republic, which accounts for about 85 percent of our trade with the western hemisphere.  We initialed an agreement with Colombia in February, and we signed the agreement with Peru in April.  We hope to close soon with both Ecuador and Panama.

4) Aid:  U.S. bilateral aid to Latin America in the past five years has gone up from about $800 million to something on the order of $1.4 billion.  In addition, we have established the Millennium Challenge Account (MCA) as a new model for aid.  It rewards low-income and lower-middle-income countries that demonstrate their commitment to rule justly, to invest in people, and to offer economic freedom.

We have MCA agreements with Honduras, for $215 million, and with Nicaragua, for $175 million.  That money will be disbursed over five years.  We have just signed a threshold agreement for $35 million with Paraguay to help the country reduce corruption and qualify for full eligibility and a larger agreement.  Three other countries from the hemisphere are in various stages of qualifying for MCA programs.  Bolivia submitted a proposal in December.  Guyana is developing a threshold proposal, and El Salvador is preparing a compact. These compacts give countries ownership of their own development strategies and provide aid for infrastructure, institutions, and training to reduce poverty through growth.

5) Building human capital:  We provide support for education, health, and other antipoverty programs through our bilateral aid and our contributions to the IDB (Inter-AmericanDevelopment bank) and the World Bank.  For example, we provided more than $130 million in bilateral aid for child survival and health programs in 2005.

Democracy, at its very essence, means political inclusion of all citizens, and inclusion of the marginalized into the formal national economies of their countries.  Democracy and development go hand in hand, each strengthening the other.

Let’s go back to Peru which is clearly at a turning point.  It can go in one direction and move its economy ahead, to create jobs and reduce chronic poverty, or it may decide to return to the economic policies that failed in the 1970s.  The problem is that economists and international financiers look at the macroeconomy.  Voters vote based on the microeconomy.  Their lives, the future for their children are what motivates them.  The challenge for us is to find linkages between the macroeconomy and the microeconomy so that economies continue to grow and that citizens feel, in their own pockets, in their own lives, the benefits of that growth.

At the end of the day, it’s the voters of Latin America who must decide which future they want for their country.  On June 4, the voters of Peru go to the polls to choose between Alan García and Ollanta Humala.  It’s up to them.

JOANNE MYERS:  We’ll open it up for your questions now.

Questions and Answers

QUESTION:  You have not mentioned at all Venezuela, Bolivia, and any of the other trouble points in Latin America, particularly South America, which are quite at variance with the picture you are painting.  Forty years ago, the Alliance for Progress was designed to produce some of the same results that we are working on now.

Would you talk a little bit about Castro, Hugo Chávez, Morales, and all of the others who have banded together, who have a very different agenda and will paint a very different picture from the one that you have just given us?

CHARLES SHAPIRO:  There are, in fact, two Lefts in Latin America.  One is a modern forward-looking Left that is committed to liberal democracy, and to market-oriented economic policies.  It varies from country to country, depending on the conditions of those countries.  I would include in that group people like Michelle Bachelet, Lula, Tabaré Vázquez, who was in Washington recently, who is quite to the left, but has an excellent relationship with the United States and with his neighbors.

Then there is the Left of the leaders whom you cited.  It is a self-defined Left.

There is no ideological membership card required to work with the United States.  We’re willing to work with, and do work quite well with, leaders as varied as Lula in Brazil, Vázquez in Uruguay, Uribe in Colombia, Torrijos in Panama.  We are trying hard to work with President Morales.

What will be interesting over the next few years isn’t necessarily the United States vis-à-vis Venezuela and Bolivia, but Brazil and Uruguay and Chile, the modern Left, vis-à-vis this radical Left.

Like anything, that’s an overgeneralization.  They vary among and within themselves, and there are differences from country to country.

Chávez is Chávez.  He views himself as a Bolivarian revolutionary.  I’m not quite clear what the words means, but when you look at what he’s doing, it’s fairly obvious where he wants to go.  Like revolutionaries, he has a certain messianic quality, where he thinks that other people should follow the path that he is blazing.  He perceives himself as the revolutionary heir to Fidel Castro.

There are presidential elections in December of this year in Venezuela.  In February, when President Chávez announced his reelection campaign, he said that his opponent was George Bush.  You can expect various issues to come to the fore between now and December, as he campaigns against the United States.

But our issue isn’t Chávez.  The real threat in Latin America is poverty.  We want to work with those countries that want to work with us.

Our ties with Latin America, in contrast with some areas of the world, go much deeper than our formal bilateral official ties.  In every country in Latin America, there are large numbers of American citizens and, likewise, a large number of their citizens in the U.S., with population flow back and forth.  We continue to be Venezuela’s number-one trading partner and number-one customer.  We exported $6.5 billion in U.S. products to Venezuela in 2005.  Our economies are tied together.

We want to stay engaged, help keep the Venezuelan private sector and nongovernmental organizations alive to the extent that we can.  We hope that the international democratic community will do the same.

QUESTION:  A remarkable thing happened recently:  the election of the new president in Chile, a very Catholic country.  Is this election of a woman, a single mother, and a professed atheist indicative of cultural changes in other parts of South America or is it unique to Chile?  Another change is that they now recognize divorce, which would have been totally out of the question until just a few years ago.

CHARLES SHAPIRO:  First of all, just as in Europe, Latin American countries are as different from each other as European countries are.

The Chilean government goes out of its way to say they are not a model for other countries to emulate, that they are Chile.  Some countries—like the U.S. or Venezuela—see themselves as the center of the universe.  But Chileans will tell you, “We’re just a little country stuck on the edge of South America, at the wrong part of the Pacific Ocean.”

Having said that, what they are doing is absolutely phenomenal.  There are real cultural changes under way everywhere in Latin America, but Chile is unique in many ways.  Chileans, first of all, have a tradition of government service in a way that other countries in Latin America don’t, and they also have a sense of probity.  It is the only country I am aware of in Latin America where people use the word “sober”— not “sober” as in non-drunk, but “sober” in the self-constrained way—as a compliment.

Chile was the last country in Latin America to recognize divorce.  What’s unusual is that they didn’t recognize divorce, not that they did.  When I served there and would meet with high-ranking members of the Catholic Church, they would tell me that Chile is the most Catholic country in Latin America; Chile is the country in Latin America where the Catholic Church has the greatest influence.  So they are the last country to recognize divorce.

The other phenomenon in Chile and everywhere else in Latin America is an extraordinary growth in evangelical fundamentalist churches—something that sociologists will end up writing Ph.D. dissertations on for a long time to come.

QUESTION:  Our data from the last three decades show that, in large measure, the democratic idea and democratic institutions have taken hold.  What we have found in recent years is an enormous stress on democratic institutions in a number of countries and a trajectory that gets to some of the concerns that you’ve touched on.

Given the depth of the institutional challenges in so many of these countries, where reform efforts are stalled, what can the United States do beyond its current set of programs?

Beyond that, given the extraordinary negative perception of the United States, and perhaps even a linking of the United States with failed democratic reforms in a number of countries, what are we doing on the public diplomacy side to try to ameliorate some of these concerns?

CHARLES SHAPIRO:  Number one, there are countries in Latin American whose institutions have been unable to modernize, whose institutions are unable to deliver the benefits of good governance to the citizens of those countries,  whether you are talking about formal national institutions, political parties (which are formal institutions, but are not part of the governing structure), courts—the whole interconnection that modern society requires, whether it’s land registries or voter registries—that aren’t working well.  That’s a real crisis.

Those are very hard to deal with from outside.  Political parties in Latin America have not been able to serve they way your civics book in the eighth grade told you political parties are supposed to do, a way to channel popular feeling into policy proposals and mobilize political action.  So parties are rightly perceived as corrupt, “clientelistic,” and more concerned with keeping themselves in power than in generating policy alternatives and being open to voters.

The ability of outsiders to affect that is very limited, whether it’s Latin America or anywhere else.  You can hold seminars and give speeches and distribute terrific reading material.  The two major parties in the United States, as well as German, French and Spanish political parties are doing just that.  But for countries to internalize that and modernize is very difficult.

The United States has spent millions of dollars trying to assist with judicial reform over the past two decades.  The most successful case is Chile.  Most of the others have sort of sputtered along.  We’ve sent speakers down.  We’ve held courses.  We’ve brought people to the United States, particularly to Puerto Rico.  We’ve brought Spanish-speaking judges from New York.

But reforming a justice system goes right to the heart of a society and a society’s self-concept, how it judges itself.  It’s very difficult for outsiders to do.

What you are talking about is what Tom Friedman refers to in his book, the next generation of reform, all those things that have to take place, not necessarily at the national central government level, but throughout society, so that voters feel as if they are getting the benefits of good government.

QUESTION:  The 40 percent of the population who is poor is not interested in democracy; they just want to live better. You haven’t mentioned Cuba at all.  The whole world does business with Cuba.  The Chinese have gone there.  You haven’t mentioned what China is doing in Latin America.

Finally, you did not mention that the presidents of Argentina, Bolivia, Brazil, and Venezuela met recently.

The last question:  Why is Bush the most unpopular president in Latin America?

CHARLES SHAPIRO:  I agree with you.  Yes, people want to live better.  It’s up to governments to implement policies so that they can do so.  But it is not the opportunity solely of governments.  That’s what some of you here are doing as well.  That’s what U.S. investment and other foreign investment does when it goes to countries.  You create jobs; you create wealth.

In Venezuela, it’s not 40 percent that live in poverty; it’s 61 percent.  That is a real issue, there and everywhere else.

Mexico has presidential elections this year which will be very interesting to follow. One of the issues is the tremendous growth in jobs and investment in the Mexican economy since NAFTA took effect in 1993.  It has been absolutely extraordinary.

Cuba is a difficult issue.  We want the Cubans living in Cuba to decide their own future.  We want them to have a democratic government, and we hope they will have it as soon as possible.

China in Latin America is very important.  My boss, Tom Shannon, the assistant secretary for western hemisphere affairs, went to China last month for the first-ever U.S.-China consultations on Latin America.  We meet with Europeans regularly to compare notes, to try to coordinate policy in Latin America.  We have met with the Japanese on Latin America for over twenty-five years.  For the past five years, we have met with Korea, which, as a percentage of its GDP, actually invests more in Latin America than either Japan or China.

China is not a democracy, and so one has to look very carefully at what they say.  But they are interested in stability and security in Latin America, and in markets, both to sell their products and, more importantly, to buy commodities.  The Chinese are interested in food, number one; energy, number two; and number three, commodities.  They are buying copper like crazy from Chile and Peru.  Soybeans and iron ore from Brazil make up almost their entire export to China.  They are interested in oil in Ecuador, in Venezuela.

Their political interests in Latin America are very much limited to two things.  One is recognition of the People’s Republic of China.  There are six countries in the western hemisphere that still recognize Taiwan, and that is of extreme importance to the government of China.  Secondly, they like Cuba, which they see as a relic, an antique from the attic.  They have some interest in that as the last communist state around.

They have gone out of their way not to get involved in politics in the rest of Latin America.  They say that their interests are commercial.

Interestingly enough, their businesses in Latin America operate as businesses.  I had the Chinese ambassador to Venezuela lecture me on free enterprise and tell me that he couldn’t understand that these Venezuelans thought that their businesses were charitable organizations and there to do social work.  He said, “In fact, we’re here to make money.”

Yes, the presidents of Argentina, Bolivia, Brazil, and Venezuela, met, and papered over differences, if you read the statements to the press that came out afterwards.  Since then they have been fighting with each other.  The foreign minister of Brazil criticized Venezuela recently in the Brazilian congress.  The Venezuelan foreign ministry put out an amazing press release attacking Brazil for attacking Venezuela.

Why is the United States unpopular — why is Bush unpopular in Latin America?  The polling data are that the war in Iraq is unpopular in Latin America.  The United States is always the guy that Latin Americans love to throw spitballs at.  But the war in Iraq is extremely unpopular in Latin America, and that’s reflected in the polls.

QUESTION:  I realize that in Latin America there seems to be the same situation that you see in the Middle East — commodities, commercial interests of all kinds hovering around those commodities, and impoverished people without, necessarily, a voice in the administration of the government.  The U.S. administration seems to believe that talking about democracy or more commercial opening-up will be the solution.

The people in both the Middle East and Latin America don’t necessarily seem to see it that way.  But the only solution the United States seems to have is to ask for more of the same.  That indigenous leaders in some of these countries take pleasure and pride in nationalizing their commodity industries, et cetera, seems very much of a piece with what happens in the Middle East.

Do you see any similarities in the situation?

Is that a common thread of unpopularity that the United States sees, trying to push commercial interests or its version of democracy, and thereby creating the sentiment —“that’s not actually what we want, but that’s what is forced down our throat”?

CHARLES SHAPIRO:  There are commonalities between Latin America and the Middle East; that the United States is just pushing our version of democracy and commercial interests—the perception—and that there is a wave of nationalization which is quite popular.

First of all, nobody is forced to negotiate a trade agreement with the United States.  That’s a sovereign decision.  You can if you want to; you don’t have to if you don’t want to.  We are offering access to the largest market in the world.  If they want their products to enter the United States, that’s terrific.  President Uribe went to Brasilia to meet with President Lula after Chávez announced the withdrawal of Venezuela from the Comunidad Andina, the Andean Community of Nations, which is a trading entity.  What Uribe said is, “What we want for Colombia is what Venezuela already has.”  Oil, Venezuela’s number-one export—in fact, its only export — enters the United States duty-free.  What they want is for Colombian producers to have that same access to the U.S. market.

Chávez says he doesn’t want a trade agreement with the United States.  He doesn’t need one.  There is no tariff on his product.

I can’t compare Latin America to the Middle East, because I don’t know enough about the latter.  But what strikes me in Latin America is the strength of Latin American democracy.  You may agree or disagree with Evo Morales, but he was elected democratically.

This year, there are ten presidential or parliamentary elections in the Caribbean, national elections.  Not all of those winners will be people who want to improve relations with the United States.  Some will want to do so, and that’s part of democracy.  You get to choose your government.  At the Quebec City summit in 2001, the leaders of this hemisphere said that they wanted to negotiate what turned out to be the Inter-American Democratic Charter, which stated that the right of all the nations of the Americas is to live in democracy, and they wanted to push ahead and negotiate a free-trade agreement and a free-trade area of the Americas.

That has not happened, for a number of reasons that have to do with the Doha Round and European subsidies, primarily to French farmers.  We would love to see that happen.  But if countries don’t want free-trade agreements with the United States, that’s fine.  If they don’t want investment, whether it’s from the United States, India, China, or Germany, or from their own nationals, that is also their right.  It condemns the countries to sputter in poverty.

QUESTION:  Raw materials, which are the biggest export of South America, are literally on a tidal wave of high prices.  What specific economic advice are you giving to the governments, to have the top 2 or 3 percent of the populace help the bottom 50 percent before they get nationalized?

CHARLES SHAPIRO:  What we are saying to them is what Secretary of State Rice is saying; it’s what George Bush said in Brasilia the day after the Mar del Plata summit, when he met with Lula and gave a speech.  Nations have a responsibility to include the poor, to include all of their citizens.

As a nation, we don’t give advice to the top 2 or 3 percent or the next 2 or 3 percent.  We deal with nations, not individuals.

What we tell U.S. businesses is that they have a responsibility to be good corporate citizens.  Without mentioning any particular names, in one of the Latin American countries, one major U.S. company is providing a case study of how you can do everything wrong in a country, of what you shouldn’t do if you are a major company with a major investment, particularly an investment that you can’t move out very quickly.  This is in infrastructure and exploiting resources.  They have managed to alienate everybody in that country.

On the other hand, I saw U.S. companies in Chile operating at the highest international standards, with the environment, concern about their workers, building schools.  I have seen U.S. companies in Venezuela doing exactly the same thing— building hospitals.

One of the issues for resources in Latin America is that in every country, mineral rights belong to the state, not to the property owner.  So if there is oil underneath your property, you get nothing for it.  It’s the state that takes the money.  So one of the challenges for U.S. oil companies and pipeline companies is, how do you ensure that the people whose village the pipeline goes through have some stake in that pipeline?  How do you ensure that the people displaced when digging a copper mine have a stake in that mind?

JOANNE MYERS:  Thank you very much.

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