XIII Annual CAF Conference

The 2009 CAF Conference convened on September 9 and 10 at the Carnegie Endowment for International Peace. 

Latin America’s ability to dodge the worst effects of the global financial downturn should not be taken as a sign that the region’s problems are behind it, according to participants at the XIII Annual Corporación Andina de Fomento (CAF) Conference on Trade and Investment in the Americas. Among the many issues on the hemisphere’s agenda are the social development challenges of inequality and poverty and the critical problem of how to address the violence wrought by transnational criminal organizations, including drug trafficking networks.

CAF, the Inter-American Dialogue, and the Organization of American States (OAS) sponsored the Sept. 9-10, 2009, conference attended by more than 300 people, including U.S. and Latin American government officials, international economists, lawmakers, policy analysts, journalists, and corporate and financial leaders. The aim of the sustained collaboration is to bring a detailed review of hemispheric affairs to Washington, D.C., officials and opinion leaders.

Enrique García, executive president of CAF, opened the conference by noting that Latin America is coping better with the global economic crisis than would have been expected in the past, but several important challenges still must be addressed. The region must improve its global competitiveness, its lopsided distribution of wealth must be examined, and the Americas must seek coherent long-term approaches to hemispheric challenges, including immigration and integration.

Cautiously optimistic about the cooperative tone U.S. President Barack Obama is taking with the region, panelists during the two-day event called for regional and global solutions to problems facing the Americas. The wide-reaching discussions urged multilateral agencies, such as the Inter-American Development Bank, to become more agile so they could play an active role in the reshaping of the Americas. Other discussions topics included energy security and supply, global warming, trade, intra-regional tensions, and problems of governance.

José Miguel Insulza, secretary general of the Organization of American States, underscored the region’s continuing commitment to democracy but cautioned that work is needed to build rule of law and strong institutions. “We have to talk about how we really stabilize our region so it is a region where democracy has fewer ups and downs … a region safe and successful for investment,” he said.

The ouster of President Manuel Zelaya in Honduras and the need to rectify that breach of democracy was a topic of discussion throughout the conference over the two days.

The Obama Administration’s Agenda in the Region

The liveliest session of the conference looked at the Obama White House’s relationship with the region. Two members of the administration – Everett Eissenstat, assistant U.S. trade representative for the Americas, and drug czar Gil Kerlikowske – acknowledged a shift in the U.S. approach to trade and the containment of drug trafficking.

In a panel discussion mediated by CNN en Español anchor Patricia Janiot, Eissenstat rebutted claims that free trade agreements were dead. He said the Obama administration is pushing forward on long-delayed trade accords with Panama and Colombian but added that those trade agreements must include labor safeguards and other protections. He provided no time frame for approval of the agreements.

It was the presence of Kerlikowske, chief of the White House Office of National Drug Control Policy, however, that sparked a high-energy exchange with conference participants.

In March 2009, en route to her first diplomatic trip to Mexico, Secretary of State Hillary Clinton signaled a turnabout in U.S. drug policy by saying that the responsibility does not fall solely on supplier countries in Latin America and the Caribbean. The drug czar echoed that position.

“The United States accepts a doctrine of shared responsibility and acknowledges that it is the [United States’] duty to reduce drug use and the flow of guns linked to it,” Kerlikowske said. The Obama administration’s official drug strategy will be published in February 2010.

Kerlikowske called the drug problem a public health issue as much as a law enforcement challenge. “A U.S. policy based solely on controlling the flow of drugs is no longer feasible,” he said. “More emphasis will be placed on prevention and treatment.”

He described Mexico as the new “center of gravity” for drug traffickers, but said a solution must look beyond a single country – otherwise traffickers will simply move into neighboring nations. He noted that the Merida Initiative, which gives anti-drug assistance to Mexico, also includes money for Central America.

In countries where drug traffickers are most powerful, Kerlikowske said the U.S. seeks to support institutions that are corruption free. He advocated knowledge sharing among the United States, Latin America, and the Caribbean. Domestic U.S. strategies he cited as transferable included drug courts and the eTrace firearms-tracing database, which will be shared with Mexico so it can identify the source of the weapons it confiscates during anti-drug operations.

Jeffrey Davidow, president of the Institute of the Americas and former U.S. ambassador to Venezuela and Mexico, said the Obama administration has also shown interest in engaging the region on energy security.

“Energy must been seen as part of a package with global climate change – the administration is taking this approach,” he said. He added that U.S. dialogue on energy has been “deliberate,” rather than speedy, but predicted that would change once U.S. government agencies leading energy and climate change issues are fully staffed.

Like others at the conference, Davidow said energy security requires a multinational and cooperative approach. The United States could provide the region with important assistance when it comes to energy research, energy conservation, and alternative energy.
Latin America’s Agenda: Development, Integration, and Energy

Energy was examined in more depth in a panel discussion that featured a former Latin American president, a former vice president, and a one-time minister of the presidency. Diego García-Sayán, executive director of the Andean Commission of Jurists, mediated the conversation on three issues affecting every country in the region: development, integration, and energy.

Eduardo Stein, former vice president of Guatemala, said armed conflicts are a thing of the past in most countries yet violence is not. International criminal networks are skillfully using globalization channels. At the same time, youth gangs – or maras – are growing in response to the region’s inability to offer jobs or a future to its disproportionately young and poor population. The situation is worsened by the global economic crisis, which has caused a slowdown in growth in the region, a contraction in much-needed remittances, and a setback in efforts to reduce poverty.

Criminal networks have infiltrated and weakened democratic institutions, including the judiciary in some countries. Stein characterized that institutional erosion “one of the greatest threats to regional stability.”

“No single country is able to come up with sufficient solutions. Ironically, and sadly, this is unfolding at a time when integration is particularly difficult,” Stein said. He added that joint tools and strategies are imperative and called upon think tanks, research institutes, and academia to help with a deeper understanding of the problem.

Genaro Arriagada, a former minister of the presidency of Chile, detailed the need for energy integration in the region, adding that he was not optimistic that countries would take the steps required. The energy-sharing relationship between Chile and Argentina has fallen apart. Countries with natural gas are selling their energy to Africa, rather than to other countries in their own hemisphere. And the Gran Gasoducto del Sur, the proposed natural gas pipeline to connect Venezuela, Brazil, and Argentina, does not have the support it needs.

Arriagada praised Brazil’s Petrobras for its outstanding performance and transparency but said the region’s other state-owned energy companies were performing poorly and needed reform. Arriagada was among many conference panelists who noted that Latin America and the Caribbean need to take a big-picture look at their energy grid, improving the efficiency of existing resources even as they diversify their energy portfolios.

Integration has been a thorny problem for the region. Bolivia’s former president, Carlos Mesa, said Latin America’s models for integration have been flawed. Most were not inclusive; some did not properly link the region to the global marketplace. He said political ideology too often inserts itself into integration efforts. And he criticized the region for too often taking a “victim approach,” blaming developed countries for its problems.

Mesa called upon the region to develop a list of priorities and “to work together on the decline in remittances, the fight against organized crime and violence, on infrastructure, and on energy.”
Keynote Address

The Obama administration is responsible for an important change in tone when it comes to relations between the United States and the rest of the Americas, U.S. senator Richard Lugar said in the keynote address to the CAF conference.

“In his speech at the Fifth Summit of the Americas, President Obama eschewed the historic legacy of paternalism,” said the Indiana Republican. “Instead, he called for an equal partnership based on mutual respect and common interests.”

Lugar, a moderate voice in foreign policy and a leading Latin America expert within the U.S. Senate, said the unanswered challenge for the United States for many years has been how it can play an appropriate and effective role in strengthening cooperation on issues ranging from “security to trade to human rights, but mostly regarding democratic governance.”

He said the fruits of democracy are not enjoyed by everyone in the region, and there are still dangerous challenges to the rule of law, freedom of the press, and human rights. “And, because of the historical legacy of American support – on some occasions of military governments in Latin America – U.S. credibility on democracy is often questioned,” he noted.

Lugar said Venezuela will be a critical testing ground of U.S. support for democracy. Meanwhile, he praised the Obama administration for eliminating barriers affecting family travel and remittances to Cuba.  “I have urged President Obama to work with Congress to allow travel [to Cuba] for all Americans,” he added.

The senator said the broader agenda for the region should include energy security and climate change, the need to develop a hemisphere-wide drug trafficking and organized crime strategy, and reform of the Organization of American States. He called for the United States to broaden its energy dialogue with Brazil, both as a petroleum producer and as a source of alternative energy.  He said Mexico could also play a larger role in energy security if it were willing to upgrade its aging infrastructure.

Lugar said U.S. policy should take into account Latin America’s diversity as well as the region’s willingness to tackle national and regional problems.
Latin America’s Challenges Beyond the Global Economic Crisis: The Day After

Latin America has fallen far behind other countries in terms of competitiveness, especially when it comes to global trade and foreign investment. Inadequate headway on infrastructure, logistics, education, and technology are among the reasons.  Conference presentations noted that the region is still vulnerable to external shocks and Latin Americans do not save and invest at adequate levels. Strategies for ensuring continued economic growth were an important part of a discussion on the region’s challenges.

Alicia Bárcena, executive secretary of the UN Economic Commission for Latin America and the Caribbean (ECLAC), told conference participants that the region must look at the future effects of the current global economic downturn, strengthen its democratic institutions, and embrace long-term planning that sees beyond a single election cycle.

ECLAC predicts that potential global GDP growth will be slowed for the next three or four years and that the economic recovery will be a jobless one. The latter is particularly troubling for Latin America, where unemployment is already a problem, especially among young people.

Some countries are responding to the financial slowdown by cutting social spending. Bárcena predicted that would only worsen the problem over time. But she acknowledged that as governments most need to embrace stimulus plans, their revenues are falling.

Bárcena said the region has important things it must address, including its inequality gap and productivity gap. She also said the region’s inefficient energy use must be examined, particularly in the context of global warming.

Augusto de la Torre, the World Bank’s chief economist for Latin America and the Caribbean, said Latin America should pay particular attention to the buffers that kept it from being hit more dramatically by the global economic downturn. In particular, he noted that the region’s currencies were solid, banking systems were stronger, and fiscal policies were improved.

The region also has been helped by the social protection structures that it already had in place when the world economy began its downward spiral.  Conditional cash transfer programs targeting the unemployed, families with children, and people living in poverty received wide praise during the conference.

De la Torre cautioned conference participants not to take away a misconception: that countries most hurt by the economic storm were battered because they were part of the global trading network. He said they have suffered because trade exposed them to fluctuations in the world economy but predicted that same position will help them rebound faster as the global economy improves.

Experts at the conference said better regional integration would also help in the trade recovery.  José Antonio Ocampo, a professor of international and public affairs at Columbia University, predicted that it would be at least three years before Latin America’s trade figures are back at pre-recession levels. Ocampo, a former UN under-secretary for economic and social affairs and Colombia’s former finance minister, urged the region to also begin diversifying its trade – including with China – beyond commodities.

A stronger technology policy was also cited as a tool that will improve production, help exports, and diversify Latin American economies. The idea of a regional currency and deeper intra-regional trade ties, along the lines of a European Union-style model, were also discussed.

Inter-American Development Bank president Luis Alberto Moreno said the global economic crisis has helped reveal Latin America’s strengths, as well as areas of opportunity. He said the region offers opportunities to develop agro-industry and improve regional transportation links. Several panelists called for massive infrastructure investment. Moreno said investment banks should consider the importance of supporting projects at the state and local levels.

Moreno also said education has become “our lost agenda,” when it should be an important tool for improving regional productivity.

Latin American Politics and Elections

A discussion on regional politics once again raised the call for greater long-term vision in the region. In a discussion chaired by Michael Shifter, vice president for policy at the Inter-American Dialogue, panelists noted that democratic institutions needed strengthening, that traditional political parties had weakened, and that new political players had emerged throughout the region – with new demands.

Guillermo Fernández de Soto, former minister of foreign affairs for Colombia and secretary general of the Andean Community, said Latin America’s most dramatic challenges – including the fight against organized crime and drug traffickers, the creation of jobs, the battle against corruption, a lack of transparency, persistent poverty, and a disregard for press freedoms – have influenced governments’ effectiveness.

In particular, he said the region needs strong leaders – not just election winners. He called populism a “very dangerous” trend because, among other things, it blocks integration efforts. “We need to find a way … for dialogue,” he said. “If we can’t construct a real agenda for dialogue, we’ll never be able to emerge from our problems, including our economic problems.”

Ana María Sanjuan, a professor at the Universidad Central de Venezuela, detailed how Latin America has become a region with strong executive branches of government and weak political parties. She called it a problem of presidencialismo.

Although she said some populist governments are seen as new solutions for countries, they have neither succeeded in being inclusive nor in strengthening democratic institutions. She warned that elections should not be viewed as the only evidence of democracy. “We used to say that democracy was elections. Now we see that there can be elected authoritarians,” she explained.

Lázaro Cárdenas, former governor of Michoacán state in Mexico, warned that Latin America’s democracies are still fragile, and governability is a constant challenge.  He echoed other conference participants in noting concern for narcotraffickers’ penetration of the political arena and how drug-related violence has encouraged strong-arm solutions that are detrimental to democracy.

Paulo Sotero, director of the Brazil Institute of the Woodrow Wilson Center, said Brazil’s political landscape promises a degree of continuity. He said the next election should not dramatically change the direction of the country. However, he said 2011 would be a difficult year because government spending is rising too fast.  He said Brazil’s challenge will be to “grow the economy with quality.”

The Challenges of the Consolidation of Democracy in the Region and the Future of Hemispheric Integration

The conference closed with a detailed presentation by Organization of American States secretary general José Miguel Insulza. Rodrigo Pardo, director of Colombian magazine Revista Cambio, moderated a question-and-answer session that followed.

Insulza said the past twelve months revealed both the direction the region was headed and the challenges still to confront. He warned conference participants not to be complacent about Latin America’s good performance in the face of the global economic downturn, adding that “the worst may not be over.” He also underscored two important developments, one encouraging and the other disturbing: the Summit of the Americas in Trinidad and Tobago and the ouster of the Honduran president.

During the summit, Insulza said, the Obama administration had opened the door to a constructive and collaborative U.S.-Latin American dialogue, exceeding expectations.  “It was a summit that showed good will, that signaled a new beginning,” he added.

The gathering of regional leaders not only ended with declarations but also with a firm agenda of the hemispheric issues that must be addressed. Insulza said it was noteworthy that transnational crime and violence were at the center of the discussion. He also said the summit’s “themes of responsibility” included serious dialogue on human prosperity and the need for social safety networks in the Americas.

The OAS’s approach to the problem is the Inter-American Social Protection Network (IASPN), slated for launch in New York on September 22, 2009.

In addressing the political upheaval in Honduras, Insulza stressed that the region can no longer be a place where democratically elected leaders are ousted. He said the OAS can only formally respond to threats to democracy when it is invited to do so by the executive branch of a government, precluding action when other branches of government – the legislature or the judiciary – are threatened. Insulza called for discussion on ways to strengthen the OAS’s tools for supporting democracies.

“We have grown much in democracy. We have had many elections in the last few years. That part of democracy is a big success,” the OAS secretary general said. “But we have a problem in those areas in which democracy is also being challenged, according to the Inter-American Charter.

“If our goal is to have democratic republics, in the sense of the rule of law, the stability of institutions, of respect for those institutions and not personalization of power, then in that aspect we are not doing very well.”


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