CAFTA: New Treaty for Old Policies

CAFTA: New Treaty for Old Policies

By Miguel Pickard

For the US government it was about achieving an economic objective, but above all a geopolitical one: in fact CAFTA represents, 12 years after the beginning of NAFTA — North American Free Trade Agreement — the next step towards a new economic, military colonization. and politics, from Latin America. This article traces the relationship between CAFTA and the Puebla Panama Plan, explains why it is sensible to view the two projects as expressions of the interests of the same elites, and why it is convenient not to separate the struggles against them.

New Treaty for Old Policies: The Free Trade Agreement between Central America, United States and the Dominican Republic (CAFTA)

Summary: A few weeks ago the US Congress approved, by a difference of two votes in favor, a new free trade agreement, this time with five Central American countries and the Dominican Republic (the so-called CAFTA). Due to the similarities between CAFTA and NAFTA (the trade agreement between Mexico, Canada and the United States in force since 1994), the conditions are set for a repetition of the social and economic disruption that Mexico has suffered for more than 12 years. Let us therefore prepare for the deepening disaster in the Central American agricultural sector, the collapse of small and medium-sized industries and a greater migration of labor to the US and Canada. The depopulation of Central America will continue, since its economy will be at the service of the interests of a small Creole and international elite and that there will be no opportunity to consider an autonomous project of a country or region. The following article traces the relationship between CAFTA and the Puebla Panama Plan, explains why it is sensible to see the two projects as expressions of the interests of the same elites, and why it is advisable not to separate the struggles against them.


The George Bush administration had designated January 1, 2006 as the start date of the Agreement between his country, five Central American nations, and the Dominican Republic (hereinafter CAFTA). The five Central American countries are Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua.

A few days before the peremptory date, the spokesman for the office of the US Trade Representative announced a delay, possibly until February or March 2006. The alleged reason: Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and the Dominican Republic did not they had still “harmonized” their national laws to the provisions of CAFTA in terms of competitiveness, telecommunication services, public services, and national treatment for foreign companies. These were some of the issues currently not negotiated within the World Trade Organization (WTO), but that the US is promoting anyway through the agreements they control better, that is, bilateral or multilateral agreements.

After the negotiation ended in mid-2004, during 2005 CAFTA was analyzed by national congresses and ratified by all, except for that of Costa Rica. For the US government it was about achieving an economic objective, but above all a geopolitical one: in fact CAFTA represents, 12 years after the beginning of NAFTA — North American Free Trade Agreement — the next step towards a new economic, military colonization. and politics, from Latin America. It is a more necessary step now given the serious difficulties faced by all the liberalization processes negotiated at the multilateral level, and in particular those that have been discussed within the WTO, given the setbacks of the Doha Round in the meetings ministerials of Cancun (September 2003) and Hong Kong (December 2005), as well as the repudiation that the FTAA has caused [1] (Free Trade Area of ​​the Americas).

Three preliminary considerations should be analyzed in order to clarify the nature of the negotiated agreement:

1. CAFTA is nothing new. Rather, it represents the destiny and legalization of the policies imposed on the region starting in the 1980s, through Structural Adjustment Policies, which led to a progressive opening of commercial and financial borders. As Joseph Stiglitz concludes, before outlining a new reform agenda for Latin America [2] , which addresses poverty reduction and ongoing social transformations, and before macroeconomic stability, we must take into account:

“I) the reforms increased the countries' vulnerability to risks without increasing their economic capacity to face them; ii) macroeconomic reforms were not balanced; iii) the reforms promoted privatization and the strengthening of the private sector, but underestimated improvements in the public sector ”.

2. CAFTA is linked to the Puebla Panama Plan (PPP), which since 2001 has tried to create the physical infrastructure in the southeast of Mexico and Central America to make the region attractive for international capital investment and facilitate the exploitation of natural resources. The realization of the PPP is subordinated to the ability of the countries of the region to borrow from international and regional financial institutions (in particular the Inter-American Development Bank and the Central American Bank for Economic Integration), and to attract private investment during the development phase. the realization of the project. [3]

3. Despite the presentation of the PPP as a regional integration project, the main problem is that the Central American countries have lacked true national integration. Indigenous minorities or, in the case of Guatemala, the indigenous majority, have been marginalized from the economic and political life of the countries. Your rights have been trampled on. Huge peripheral and marginal areas throughout the Central American isthmus have remained as such, without having experienced the so-called "development" or "progress." The model provides that “marginal citizens” are relocated in large industrial corridors (location of the maquiladoras [4] ), which will be developed around high-speed arteries (motorways), despite the fact that even today most of the roads have not been paved. Development paradoxes.

The ratification of CAFTA occurs in a context of general opposition, even in the US. In the US Congress, the Treaty was approved with 217 votes in favor, 215 against, a minimal difference for a measure defined as "Bush's number one trade priority in 2005." There was also opposition from trade unionists, social organizations and civil society. In Central America the main protagonists have been trade union, peasant and indigenous organizations. Throughout the region, popular forces mobilized against the Treaty, stating that its application would harm the right to life of millions of human beings, causing the death of the Central American agricultural sector, the total loss of national sovereignty, the weakening of the labor rights and the concession of natural wealth to foreign companies.

The reasons for your opposition [5] They are quite evident and it is enough to read some of the reports published on the occasion of the tenth anniversary of NAFTA in 2004, both those prepared by NGOs opposed to free trade, and those written by World Bank officials: millions of Mexican peasants and indigenous people expelled from their lands by unfair competition from agricultural products subsidized by the US government [6] , forced to move to urban centers and to look for work in industrial zones, or to seek their fortune beyond the Mexican borders.

Taking into account the striking similarities between NAFTA and CAFTA (neither considers the deep economic asymmetries between the signatories), it is easy to foresee the possible economic and social consequences of CAFTA in Central America.

It is conspicuous by its absence any opposition from governments or parliaments to the Treaty in all of Central America, except in Costa Rica, where the Treaty has not been approved and where organized civil society has had a kind of "education", through the facts, in the confrontations he has had with institutional representatives [7] . It also highlights the inability of the representatives of the Central American countries to negotiate an agreement that defends the interests of the citizens.

The problem lies in the political class:

“Negotiating means first of all having a project. And having it, make it viable through negotiation. During the CAFTA negotiation, one of the parties, the United States — and when I mention the United States, I am thinking of its ruling class — have a project and are building its viability. The other party, which represents the interests of the Central American oligarchies, does not have an alternative project. And as was evident in the signing of CAFTA, much less does it have the will to resist the counterpart's project. In fact, their project consists of being part of the project of the other party. " [8]

To better understand the main criticisms made of CAFTA, it is important to analyze the implications of the Agreement around three aspects: its impact on the agricultural sector, on the maquiladora industry, and on the control of natural resources.

The agricultural sector

In October 2003, an analytical article published by the World Bank clarified the opportunities that CAFTA would represent for the Central American agricultural and agro-industrial sector, as well as the greatest challenges for a true effectiveness of the treaty. [9]

According to WB researchers in Washington, the Treaty should answer two crucial concerns:

1. “how to guarantee better access to the US market for agricultural and agro-industrial exports from Central America; Y

2. How to promote greater openness to US imports of foods that are "sensitive" in the internal markets of Central American countries. "

The same document clarifies, however, which are the categories that would take advantage of the new opportunities of CAFTA:

“In Central America as in the United States, the only positive reactions to new trade-related businesses come from exports of traditional (coffee, bananas, sugar, meat) and non-traditional goods and from producers involved in import substitution agriculture. or non-tradable goods ”.

In the same article, the WB suggests that the Central American countries eliminate the tariffs that currently protect “sensitive products” (“key agricultural goods for domestic consumption, eg, dairy products, yellow corn, rice, beans, sugar, beef, pork and chicken) ”. The restrictions are not correct - believes the World Bank - given the low competitiveness of these products.

To be precise, CAFTA heralds for the future of Central American markets that they will be literally flooded with low-priced corn produced by the United States (produced in excess by the very high subsidies that large agricultural companies in the United States receive). Thus, the small farmers who produce corn for self-consumption and who sell the surplus to meet other expenses or for emergencies will leave the market. [10]

An interesting example has to do with the rice trade. Sinforiano Cáceres, president of the National Federation of Agricultural and Agroindustrial Cooperatives (FENACOOP) of Nicaragua, clearly describes the scenario that will be faced in a few years:

“The worst thing about CAFTA, what can screw up our lives, is that the asymmetries have not been recognized so that the products we produce and that they do not produce can compete loyally in the market. Take, for example, the example of rice. The US is the fifth largest producer worldwide. For an American producer to produce a quintal of rice costs US $ 9.40. For a Nicaraguan producer from the Sébaco Valley, from our cooperatives, it costs US $ 8.45 instead. Which means that we can be competitive with rice. But we won't be. Because the US producer will be able to sell in Nicaragua, and will sell, his quintal of rice for US $ 7.65. Why can you sell it at a lower price than it cost you to produce it? Because he receives a subsidy from his government and when he takes a metric ton of rice (22 quintals) to the port and which he will sell here for US $ 179, he will have already received US $ 230 in subsidies for that same ton. In other words, when you ship your rice, you no longer care how much you will earn selling it in Nicaragua. […] Until now Nicaragua has imported rice only to cover the deficit in national production. CAFTA will establish a maximum annual import quota, an increasing quota, whatever happens in the domestic market. In the first year of CAFTA, rice imported from the US will be equivalent to 43% of current domestic production. In 2015 it will be 73%. "

The same can be said about milk, sugar, and beans. [11]

For Washington theorists, however, this is no problem. According to calculations taken from a database collected in El Salvador, Guatemala and Nicaragua,

"Most of the families in these countries will earn something from the price change associated with the removal of trade barriers for" sensitive "agricultural goods. More specifically, 90% of the families in Nicaragua, 84% in Guatemala, and 68% in El Salvador, respectively, were recognized as net consumers of the basket of sensitive goods and, therefore, it can be assumed that they will be able to benefit from the price change related to CAFTA. Only 9% of families in Nicaragua, 16% of those in Guatemala, and 5% of those in El Salvador have been classified as net producers of the basket of sensitive goods and therefore could experience reductions in their own well-being. " [12]

The lack of dialogue between the two positions is undoubtedly due to a deep cultural gap — starting with the same definition of “poverty” made by the World Bank for those who earn no more than US $ 2 a day, which considers subsistence agriculture and the very existence of small indigenous peasants as a relic of the past, and it does not admit that one can choose to survive outside the market and fight against those who would like to eliminate that right.

It does not allow such an option because the opening of these markets is a matter of survival for the economic model and the industrial system that is going through a phase of overproduction and that finds it increasingly difficult to enter new markets.

The maquiladoras

Millions of peasants expelled from their lands will be forced, as we have seen, to relocate to the maquiladora industry. The sector is an important escape valve for so many who, otherwise, would have to find their destination in the United States.

It is a sector, however, that has already experienced a deep crisis for several years (exacerbated at the beginning of 2005 due to the expiration of the Multifiber Agreement, which limited the export volume of textile products from China). Despite the assertions of its promoters, not even CAFTA will be able to save the textile sector — one of the main turns of the maquiladoras — in Central American countries. Todd Tucker, Research Director for Public Citizen's Global Trade Watch in the US, in analyzing some of the economic myths surrounding CAFTA [13] , highlights structural conditions that make Chinese cotton totally invincible for companies located in Central America.

With or without CAFTA, Tucker writes, "Central America will lose its market share because of huge cost advantages in China." The very low level of Chinese wages, normally around 15-30 US cents per hour, yields production costs that can hardly be matched, although in Guatemala, the Dominican Republic and Costa Rica wages are anything but decent (US $ 1.49 per hour). hour, US $ 1.65 and US $ 2.70 respectively).

Not even the geographic proximity between Central America and the United States can ensure significant advantages over Chinese industry. In the first place, some Chinese maritime companies have significantly reduced the time of the crossing to the western coast of the United States and, furthermore, Central American producers will never be able to become, for reasons of scale and productive capacity, "custom" suppliers (ie That is, they won't be able to offer American department stores new styles before long when customs and fashions suddenly change.)

It is therefore necessary to analyze whether the presence of a greater number of assembly companies in these countries can be considered positive or negative.

Calculations for Mexico, where the maquiladoras were born, along the border with the United States — but which we believe are valid for the Central American context — show that the national added value for each dollar exported by the maquiladora industry does not exceed two cents (that is, the 2%).

It is seen that this type of industry — already a beneficiary of large government concessions (it does not pay taxes, has unlimited access to water, trade union rights are not recognized—) does not produce wealth in the country or for the country. Can all this be considered development?

Control of natural resources

Indigenous people are also forced to abandon their lands due to corporate strategies of some transnational companies. The interest of corporations — and the search for new and higher profits — is in fact the engine of the economic policy promoted by the US government. In the case of the rural sector, strategies promote the grabbing of ever larger areas of cultivation for large plantations of agricultural products. In CAFTA there is a recognition of the "competitive advantage" of these Central American products over those of the United States. In addition, there are abundant natural resources that are currently concentrated in areas where indigenous peoples traditionally inhabit.

According to neoliberal logic, whatever the cost, it will be necessary to deprive the indigenous population of their control of the land. Either through CAFTA or through the constitutional reforms approved and that will form part of the Treaty, or approved in previous years to please the World Bank or the International Monetary Fund, it seeks to legalize this looting. [14]

To understand this situation, it is enough to read the General Law on Concessions, which the Guatemalan Parliament considered in 2004, regarding the provisions to promote the development of the State infrastructure and public services and set the basic regulations for their execution and / or provision of part of private legal persons, national or foreign, through the allocation of concessions.

The law, which applies to the construction and / or maintenance of roads, highways, viaducts, tunnels, railways, ports, airports, aqueducts, oil pipelines, gas pipelines; installation and / or operation and / or provision of the electric power generation service, tourism development, public squares and buildings, environmental cleaning and protection, postal services, food services for hospitals, prisons and schools; preparation of identity documents, such as passports, identification cards, patents; public transport systems (bus, surface trains, metros, others); and tourist parks, has received the approval of the Commissions for Decentralization and Development of the Congress of the Republic, which hereby recognizes the right — of legal or juridical persons to invest large sums of capital in the country— " to recover and obtain the profits that every investor needs to participate in the public service concession process or the construction of public works. "

It is worth asking if the North could be interested in controlling some of these sectors.

What has not been understood in the north of Central America, specifically in Mexico, is the strategy of activist organizations in Central American countries to relegate the PPP to the background. The PPP is embedded, as we have seen, with free trade agreements and, specifically, CAFTA. The PPP, it should be clarified, is not a free trade agreement, but it responds to the same interests of the US elites that maneuver in close collaboration with the Central Americans. Although it is understood that it has been a priority for social and civil organizations in Central American countries to defeat CAFTA, disassociate it from the PPP, and not trace their intimate relationship, it has produced a predictable effect: CAFTA has been approved in six of seven legislatures and it will begin to govern commercial relations shortly, despite the delay it has had in the Costa Rican legislature. But the PPP is today a virtually unknown issue in Central America. Retaking it will cost effort, as was seen at the VI Mesoamerican Forum in San José, Costa Rica, held in December 2005, where 1,500 representatives from different regional organizations attended. Despite its importance for Central America and Mexico, the PPP was not the axis of analysis (except in a brief round table promoted by Mexican organizations), nor were strategies to fight against it proposed. Worse than the prevailing ignorance is the progress that infrastructure megaprojects continue to have in the region, without an adequate organization and response from the peoples who most resent its effects.

In short, the strategy of “isolating” CAFTA and concentrating all the weight of the opposition to defeat it did not have the expected success. On the other hand, the opportunity to continue linking the two phenomena as particular and local expressions of a broader project was lost and towards which all the batteries should be aimed: capitalism in its current neoliberal phase.

* Translated from the original in Italian by Miguel Pickard
Mon ca Martinelli
This writing was prepared by its author in the context of a research project of the interuniversity research center for peace and cooperation (cirpac) of the universities of Florence, Pisa and Siena, funded by the Tuscan region.

Negotiation of the FTAA began in 1994 just after NAFTA came into effect. At first it should have entered into force on January 1, 2005. However, the process has stopped several times since 2003 and until the last Summit of the Americas held in Argentina in November 2005, due to the political changes in the countries of South America and in particular by the vigorous opposition of Argentina, Brazil and Venezuela.
Stigltiz, Joseph, Towards a new agenda for Latin America. The course of reforms, Universidad Andina Simón Bolívar - Ecuador Headquarters, Corporación Editora Nacional, Quito, 2004.
For a detailed analysis of the Puebla Panama Plan, see Luca Martinelli, Mesoamerica towards the ravine: The Puebla Panama Plan and the “step by step” liberalization strategy, CIEPAC, A.C.,, January 11, 2005.
“The word maquiladora is used to designate any factory in Mexico, nationally or foreign-owned, that has the authorization of the Mexican government to import and export products under a special regime of tariffs and income taxes. The term often evokes images typical of the first generation of maquiladoras: very large plants along the northern border, owned by transnational companies. However, there is great diversity in the maquiladora sector: from huge subsidiaries of transnational corporations to small companies that export only part of their production under the maquila regime to complement sales in the national market. " Excerpt from the article “Local conglomerates in global chains: the garment maquiladora industry in Torreón, Mexico”, by Bair, Jennifer, and Gary Gereffi, Comercio Exterior, April 2003, vol. 53, No. 4, Mexico, p.343.
According to surveys carried out in several Central American countries, in Costa Rica 58% of the population requests the renegotiation of the Treaty or to reject ratification; 60.8% of Dominicans oppose; 76% of Salvadorans believe that it will not help or will worsen their situation; In Guatemala, 65% of the population believes that CAFA will be harmful to the country. The data, collected from various Central American and US sources, were published in Tucker, New Year sees delay in CAFTA implementation, op.cit.
The 2003 “Farm Bill” established a 70% increase in incentives for local producers. These are actually export subsidies, the direct effect of which is to drive local producers in southern countries out of the market. Corn is the crop that receives the most support from the US government. In 2000, grain subsidies totaled $ 10.1 billion. Before NAFTA, Mexico imported 8.8 tons of corn (grains and oilseeds) in 1993, but in 2002 it imported more than 20 million tons of corn.
The opposition candidate in the February 2006 elections, Ottón Solís (defeated in 2002, but managed to win a quarter of the votes, being the third party in the country) is campaigning with an anti-CAFTA approach. In Costa Rica there is a very negative opinion about the management of the outgoing president Abel Pacheco, a signatory to the Free Trade Agreement. See Costa Rica’s Pacheco will depart with low numbers, Angus-Reid GlobalScan, December 18, 2005.
Barahona, Amaru, op.cit.
Monge-González, Ricardo, Miguel Loría-Sago and Claudio González-Vega, op. cit.
Let us remember that in Central America more than 33% of the population works in the agricultural sector (with a maximum of 42.9% in Nicaragua, according to the World Bank).
Sinforiano Cáceres, CAFTA will be like a hurricane Mitch, with a commercial name, in Revista Sent, Universidad Centroamericana –UCA–, Managua, September 2005.
World Bank, Central America Department and Office of the Chief Economist Latin America and Caribbean Region, “DR-CAFTA: Challenges and Opportunities for Central America”. Analysis by the Inter-American Development Bank suggests instead that “rural non-agricultural income represents 29% of rural income in Costa Rica, 38% in El Salvador, 22% in Honduras, and 42% in Nicaragua) (Reardon et al, 2001). Arias, Diego, Jessica Todd and Paul Winters, CAFTA and the rural economies of Central America: a conceptual framework for policy and program recommendations, IADB, December 2004.
Tucker, Todd, Why CAFTA Cannot Save Central America from the Expiry of the Textile Quota, IRC Americas Program, January 27, 2005.
On the issue of deforestation, see the results of the investigation carried out in Honduras by the Environmental Investigation Agency and the Center for International Policy: The crisis of illegal logging in Honduras. On how the importation of illegal Honduran timber by the United States and the European Union increases poverty, accelerates corruption and destroys forests and communities, published November 2005. On the subject of the mining industry: Cuffe, Sandra, “Un Desarrollo Patas Up and Back ”Global Actors, Mining and Community Resistance in Honduras and Guatemala, Rigths Action,, February 2005; o Martinelli, Luca, “Golden” Deaths: I'll tell you the “story” of the Mine

Video: Central Americans: Beyond the Headlines, Daniel Alvarenga (May 2021).