Reform US neighborhood bully image

The protests in Santiago, Chile, during President Bush's visit for an Asia-Pacific summit last month are a symptom of far deeper troubles in Latin America. Relations with the United States have seriously deteriorated in the past two years, opening a breach that may affect the future of democracy and market economies, and possibly derail the long-sought Free Trade Agreement of the Americas (FTAA). Four events have dramatically changed attitudes.

The first was the Argentine financial crisis in early 2002. The indifferent US response to the difficulties of a country that had committed itself to strong support of the United States in global politics stunned the Argentines and raised eyebrows throughout the hemisphere.

The second was Iraq. While in itself not directly relevant to inter-American issues, it touched sensitive nerves among Latin American nations, which have seen their share of US intervention. Their historic strategy to constrain US power has relied on international institutions. But with Iraq, the US made clear that its unilateral interpretation of national interests prevail over international commitments.

The third shock took place during the attempted coup in Venezuela in April 2002. While every other country in the Americas condemned the ill-conceived attempt to oust populist President Hugo Chávez, the Bush administration temporized in its support for democratic continuity. The widespread interpretation was that the US was abandoning the unequivocal commitment to democracy that had long been the anchor of its foreign policy. The more serious result was that President Chávez has consolidated power, with a strong anti-American bias.

The fourth event was in Bolivia in the summer of 2003. When democratically elected President Gonzalo Sanchez de Lozada was forced to flee widespread unrest, again the US remained aloof. That failure to act may come to be seen as one of the worst blunders in US-Latin American policy in decades. The Bush administration simply watched as groups aligned with the drug mafias became the new power brokers. The antidrug network throughout the Andean region built with billions of dollars of US taxpayer money is now in grave danger of unraveling.

The implications of the change in attitudes were plainly visible at the Special Summit of the Americas last January. While the Central American and Caribbean leaders were positive about prospects for their Free Trade Agreement, frustration with the US was clearly evident among the South American countries. President Luiz Inácio Lula da Silva of Brazil spoke of a "perverse" economic model of the 1990s that was supposed to bring financial stability and create jobs - but did neither - and "strangles us." President Nestor Kirchner of Argentina had stinging comments about a "voracious" private sector. Even the comparatively friendly Ecuador and Peru complained of a dysfunctional financial system whereby allegedly corrupt bankers have taken refuge with impunity in the US and Europe.

At the moment, favorable economic winds are blowing for the hemisphere. Low interest rates and rising commodity prices fueled by surging demand from Asia are giving the region its first current account surpluses in decades. While democracy and open markets are still preferred, a backlash is growing as a result of pervasive corruption among public officials and the failure of economic reform to generate jobs. Unemployment is at its highest rate in decades. Rampant crime is creating anxiety and insecurity at every level of society.

Many Latin American countries are having a difficult time addressing these issues while at the same time trying to overcome their huge heritage of poverty. Although this is primarily their responsibility, the challenge is formidable. They must build a modern infrastructure, devote scarce resources to providing security, combat international crime, and at the same time deal with the increasing pressure for social action. Debt levels are approximating the levels of the 1980s. The only thing saving them is low interest rates. As rates rise to normal levels, the inevitable financial pressures will become unsustainable.

Secretary of Defense Donald Rumsfeld traveled to Peru in November to call for concerted inter-American action to stem the threat of terrorist infiltration along the porous drug routes from Latin America. Effective cooperation for this purpose, however, is gravely handicapped by the current state of relations in the Americas and the wide levels of poverty and corruption.

There is still time for the United States to recover. A good beginning is with the Millennium Challenge Account, which President Bush designed to support committed democracies. Only three countries in Latin America presently qualify for assistance because of restrictive income criteria. That is a huge mistake. The program must be reformulated to address the problems in the Americas where drugs, illegal immigrants, and prospective terrorism can flow across our borders almost at will.

A second priority should be negotiation of the FTAA. This is now a major factor that will unite or divide the hemisphere. When Brazil proposed last year that agricultural products be included in the trade negotiations, the US had to make a critical decision: Either it could consider the Brazilian proposal seriously by adopting a more flexible attitude toward the self-imposed 2005 deadline for signing the agreement, or it could insist on keeping the deadline and accepting a drastically diluted agreement. President Bush chose the latter. By ignoring the increasingly complex trade environment, the US greatly irritated Brazil and many other Latin American countries. Any agreement that emerges now will be seriously flawed and will satisfy no one.

If we continue to ignore the underlying drift in the hemisphere, we may not only fail to achieve the levels of cooperation to combat terrorism that Secretary Rumsfeld seeks, but also miss the opportunity to get a trade agreement as well.

• L. Ronald Scheman is the author of 'Greater America' and is former director-general of the OAS Inter-American Agency for Cooperation and Development and former US executive director of the Inter-American Development Bank.