Opportunity for the Americas

EARLIER this month, Secretary of State Warren Christopher and Treasury Secretary Lloyd Bentsen affirmed that the Clinton administration planned to vigorously pursue the goals of the Enterprise for the Americas Initiative (EAI) and was committed to free trade with all of Latin America, not just Mexico. This was good news for Latin American governments, nearly all of which had reacted favorably to the initiative when it was announced by President Bush in June 1990, but have since been dismayed by the slow pace of its implementation.

President Clinton can make the news even better by reshaping the EAI to reflect more closely the policy directions of his administration by incorporating a special dimension and turning the initiative into a genuinely multilateral effort. EAI has three central provisions: the reduction of Latin America's $12 billion bilateral debt to the United States, the creation of a $300 million fund to promote private investment in Latin America, and the eventual development of a Western Hemisphere free trade area.

By proceeding on these fronts, the Clinton administration would reassure Latin America of its commitment to that part of the EAI that could make an important contribution to the region's economies: the building of open hemispheric trading arrangements that would assure Latin America of stable, long-term access to the US market, which currently absorbs about half the region's exports. They would also serve as an anchor and incentive for Latin America's ongoing trade and economic reform efforts, and likely

spark increased investment flows to the region. Stronger Latin American economies would, in turn, serve US interests by expanding markets for US goods, services, and investment capital.

Clearly, the North American Free Trade Agreement (NAFTA) of the US, Mexico, and Canada, comes first. For the US, free trade with Latin America must start with Mexico, which accounts for more than half of all US exports to the region. Once NAFTA is ratified by the US Congress - an outcome that is by no means certain - the stage will be set for trade negotiations with other Latin American countries. Even if this is accomplished, EIA would still be incomplete on two scores. First, it fails to address Latin America's most difficult economic challenge: mass poverty and inequalities that plague most of the region. Consistent with its domestic agenda, the Clinton administration's economic policy toward Latin America should be concerned with more than growth, trade, and capital flows. It should also give emphasis to improving the living standards of the people of the region.

Adding a social component to the EAI would not necessarily require new US funding. Washington, instead, should be pressing Latin American governments and the major international financial institutions, particularly the World Bank and the Inter-American Development Bank, to push ahead with their announced intentions to assign far higher priority to poverty alleviation, invest more in programs directed to the poor, and promote policy changes, like tax reform and reduced military expenditures.

Second, EAI has been managed almost completely unilaterally from Washington. The initiative should be transformed into a regional effort. As a first step, the Clinton administration could convene a meeting of senior economic officials and nongovernmental leaders from throughout the Americas both to discuss hemispheric trade and investment issues and to explore alternative mechanisms for regular multilateral consultations on these issues. It is up to Mr. Clinton to make EIA serve his own vision of a Weste rn Hemispheric Community of Democracies.