SPEAKERS CONTENTS INSERTS
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39—975 CC
1997
OPEN SESSION ON THE WESTERN HEMISPHERE TODAY: A ROUNDTABLE DISCUSSION
HEARING
BEFORE THE
SUBCOMMITTEE ON
THE WESTERN HEMISPHERE
OF THE
COMMITTEE ON
INTERNATIONAL RELATIONS
HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTH CONGRESS
FIRST SESSION
MARCH 12, 1997
Printed for the use of the Committee on International Relations
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COMMITTEE ON INTERNATIONAL RELATIONS
BENJAMIN A. GILMAN, New York, Chairman
WILLIAM GOODLING, Pennsylvania
JAMES A. LEACH, Iowa
HENRY J. HYDE, Illinois
DOUG BEREUTER, Nebraska
CHRISTOPHER SMITH, New Jersey
DAN BURTON, Indiana
ELTON GALLEGLY, California
ILEANA ROS-LEHTINEN, Florida
CASS BALLENGER, North Carolina
DANA ROHRABACHER, California
DONALD A. MANZULLO, Illinois
EDWARD R. ROYCE, California
PETER T. KING, New York
JAY KIM, California
STEVEN J. CHABOT, Ohio
MARSHALL ''MARK'' SANFORD, South Carolina
MATT SALMON, Arizona
AMO HOUGHTON, New York
TOM CAMPBELL, California
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JON FOX, Pennsylvania
JOHN McHUGH, New York
LINDSEY GRAHAM, South Carolina
ROY BLUNT, Missouri
JERRY MORAN, Kansas
KEVIN BRADY, Texas
LEE HAMILTON, Indiana
SAM GEJDENSON, Connecticut
TOM LANTOS, California
HOWARD BERMAN, California
GARY ACKERMAN, New York
ENI F.H. FALEOMAVAEGA, American Samoa
MATTHEW G. MARTINEZ, California
DONALD M. PAYNE, New Jersey
ROBERT ANDREWS, New Jersey
ROBERT MENENDEZ, New Jersey
SHERROD BROWN, Ohio
CYNTHIA A. McKINNEY, Georgia
ALCEE L. HASTINGS, Florida
PAT DANNER, Missouri
EARL HILLIARD, Alabama
WALTER CAPPS, California
BRAD SHERMAN, California
ROBERT WEXLER, Florida
DENNIS KUCINICH, Ohio
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STEVE ROTHMAN, New Jersey
RICHARD J. GARON, Chief of Staff
MICHAEL H. VAN DUSEN, Democratic Chief of Staff
Subcommittee on the Western Hemisphere
ELTON GALLEGLY, California, Chairman
CASS BALLENGER, North Carolina
MARSHALL ''MARK'' SANFORD, South Carolina
CHRISTOPHER H. SMITH, New Jersey
DAN BURTON, Indiana
ILEANA ROS-LEHTINEN, Florida
JAY KIM, California
ROY BLUNT, Missouri
GARY L. ACKERMAN, New York
MATTHEW MARTINEZ, California
ROBERT E. ANDREWS, New Jersey
ROBERT MENENDEZ, New Jersey
CYNTHIA A. McKINNEY, Georgia
WALTER H. CAPPS, California
BRAD SHERMAN, California
VINCE MORELLI, Subcommittee Staff Director
DAVID ADAMS, Democratic Professional Staff Member
ANITA WINSOR, Staff Associate
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C O N T E N T S
WITNESSES
Dr. Abraham F. Lowenthal, President, Pacific Council on International Policy
Dr. Riordan Roett, Director, Johns Hopkins School of Advanced International Studies
Dr. Joseph Tulchin, Director, Woodrow Wilson International Center for Scholars
Dr. Albert Fishlow, Senior Fellow, Council on Foreign Relations
Mr. Tom Dawson, Director, Merrill Lynch
Hon. William Pryce, Vice President, Council of the Americas
Hon. Michael Skol, Senior Vice President, Diplomatic Resolutions, Inc.
Dr. William Perry, President, Institute for the Study of the Americas
APPENDIX
Prepared statements:
Dr. Abraham F. Lowenthal
Dr. Riordan Roett
Dr. Joseph Tulchin
Dr. Albert Fishlow
Mr. Tom Dawson
Hon. Michael Skol
Dr. William Perry
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OPEN SESSION ON THE WESTERN HEMISPHERE TODAY: A ROUNDTABLE DISCUSSION
WEDNESDAY, MARCH 12, 1997
House of Representatives,
Subcommittee on the Western Hemisphere,
Committee on International Relations,
Washington, DC.
The subcommittee met, pursuant to notice, at 2 p.m., at 2172 Rayburn House Office Building, Washington, DC, Hon. Elton Gallegly (chairman of the subcommittee) presiding.
Mr. GALLEGLY. Today the subcommittee on Western Hemisphere begins a series of oversight hearings on current conditions in Latin America.
Over the past decade exciting and important changes have been taking place in Latin America with respect to democracy and political and economic reform. Perhaps the single most important issue is the fact that 10 years ago, 16 of the 34 nations of the hemisphere were ruled by left- or right-wing authoritarian regimes or military dictatorships. Today, all but one nation is ruled by a democratically elected executive.
It is unfortunate that while the changes taking place in Latin America have been as dramatic as those taking place in Russia and Eastern Europe, Latin America's story has either been ignored or has been overshadowed by negative news such as government corruption, the war on drugs, or a hostage crisis.
Our hearing today and those in the future will attempt to highlight the good news from the regions, such as the recent elections in Nicaragua, the peace accords in Guatemala, and the peaceful resolution of the constitutional crisis in Ecuador, as well as an attempt to more fully understand those problems which continue to plague the region.
To help us address these issues, we have with us today a very distinguished panel of scholars and thinkers on the hemisphere, and we look forward to their observations.
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But before we get into the agenda with those testifying today, I would like to turn to our ranking member, my good friend Gary Ackerman, for any opening remarks.
Mr. ACKERMAN. Thank you very much, Mr. Chairman. I am very pleased to be here this afternoon as the subcommittee has its first hearing.
Latin America is of tremendous importance to the United States, and to the region. And I think that getting a sense of where the region stands today and where U.S. relations, bilaterally and multilaterally, are is a good way for us to begin.
We have assembled here a very distinguished panel, as you have noted, experts on the broad range of issues that face Latin America. And I look forward to hearing their views and sharing them with our colleagues today. And I appreciate the format that you have chosen, Mr. Chairman, this roundtable discussion, or as close to round as the government can get. And I thank you for your leadership.
Mr. GALLEGLY. Thank you very much, Mr. Ackerman. I guess if anyone ever wanted to have an opportunity to sit at the corner of the roundtable, this is it. So, in any event, our format today will attempt to be a little less formal than a normal hearing. And hopefully we will be able to engage in more of a dialog than straight testimony and questions.
As I stated in my letter of invitation, I will recognize each of the witnesses for some brief verbal observations of the current political and economic conditions in the hemisphere.
At the same time, I offer each of the members of the subcommittee an opportunity to raise questions at any point during the discussion.
Those of you who have provided formal written testimony will have those remarks submitted for the record in their entirety.
In my letter of invitation I asked that each of you address your comments and observations to several key themes. These include: ''To what extent has democracy really taken hold in Latin America and how strong are the governments of the region today? How extensive have the economic reforms been in Latin America, and how likely are these reforms to bring true open markets and sustainable economic growth to the region? How will these issues, like poverty, drugs, corruption, and crime, influence the abilities of these democracies to succeed?''
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With these themes in mind, I would like to turn to our first witness at this time. We will start with Dr. Abraham Lowenthal.
Dr. Lowenthal.
STATEMENT OF DR. ABRAHAM F. LOWENTHAL, PRESIDENT, PACIFIC COUNCIL ON INTERNATIONAL POLICY, AND DIRECTOR, CENTER FOR INTERNATIONAL STUDIES, UNIVERSITY OF SOUTHERN CALIFORNIA
Mr. LOWENTHAL. Thank you very much, Mr. Chairman and members of the committee. It is a great honor to be here. I cannot help but reflect, as I look up at the portrait of Dante Fascell, that I recall the excitement I felt as a young person, believe it or not, in 1973, when I first testified in this committee, and he was gracious enough to invite my parents and myself to lunch with him.
In preparing for this hearing, I have noticed that one-third of the committee members are from California, and that two of the 15 members of the committee are graduates of the University of Southern California, where I teach. So I feel very much at home.
In my oral remarks what I would like to do, based on the written testimony I have presented, is, in very telegraphic form, to provide the 10 key points that I am trying to make. I will read in very short order, and then offer some informal reflections about U.S. policy that were not in the prepared testimony.
The first point I would make is, as someone who has followed Latin America closely for many years, through various cycles and fads, is to question both the uncritical optimism about Latin America which was fashionable in the early 1990's, and the broad deprecation which is now increasingly heard in some quarters, including on Capitol Hill.
Second, I would emphasize that the turns toward free market economics, democratic politics, and inter-American cooperation which we have seen in the last several years are very significant. They are not merely cyclical turns of the wheel; they respond to profound changes in the region and in the overall global context.
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Third, though those changes are significant, they are still at grave risks. And there are going to be bumps in the road, and even reversals in the next few years. Changes in policy, or at least in emphasis and pace, in several Latin American countries seem to me likely, if it becomes generally perceived that income concentration is worsening, that unemployment is rising, that social, economic, and in some cases ethnic, divisions are widening in some of these countries.
Fourth, I think we need to take into account a decrease in public support for some of the economic reform programs which has been evident in a number of Latin American countries in the last couple of years. I do not think there is a consensus on an alternative approach. But the package of policies which have been advocated by the so-called Washington Consensus is not firmly established, and is in trouble in some countries.
Fifth, I think we have to be realistic about the pace of economic growth and dynamism in Latin America. I think it has been oversold at times, certainly by some of the mutual fund salesmen. Other than Chile, only Colombia, Costa Rica, and Panama have thus far sustained moderate high rates of growth averaging 4 percent a year or more throughout the 1990's.
Sixth, the regional turn toward democracy, which we all welcome, is also highly vulnerable. In fact, I think effective democratic governance now exists really only in those few countries--Chile, Costa Rica, Uruguay, the Commonwealth Caribbean--where democratic traditions were already well implanted 35 or 40 years ago.
The pervasive corruption and violence associated with narcotics has been undermining State authority in a number of countries. There is still guerilla violence in some countries. Civil-military relations is an unsolved problem in several places.
In country after country there are polls which show that, although people favor democracy as a form of government, they are increasingly skeptical of all democratic political institutions. And the hard truth, I believe, is that representative democracy is not yet successfully consolidated in most of Latin America. In many cases it really has yet to be truly constructed.
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Seventh, the chances that Latin America can sustain the economic and political advances which have occurred in the last few years depend in part on overcoming widespread poverty and vast inequalities. But I must say that these problems have, on the whole, been getting worse in many of the countries of Latin America. The gap between what some people have called the ''fast caste''--those who live in the mid—21st century with their internet connections and their cellular phones and interactive videos, and so on--and those who are still living, in effect, in the nineteenth century--is growing larger. And income distribution, which has long been more inequitable in Latin American than elsewhere in the world, has become even more unequal in some countries.
Eighth, the chances that Latin America can confront this social agenda may very well depend significantly on political forces which were opposed by the United States during the cold war period. I believe a political space now exists in many Latin American countries for modern social democratic movements which accept the democratic political rules and the main tenets of modern economic doctrine, but are ready to squarely face the issues of equity that have been largely neglected by technocrats in many countries.
The ninth point I would make is that the countries of Latin America and the Caribbean are very different, although we all are forced to generalize about--you on the committee and those of us on this panel. But these countries are not simply strung along a spectrum, ineluctably going through the same stages of development. Their paths are diverging. And they may well diverge further in the future. It is harder than ever to make broad generalizations about Latin America and the Caribbean, in economic, political, social, or geopolitical terms.
I would say that most Latin American and Caribbean nations do share two difficult internal tensions. One is between the imperatives of political and economic liberalization; that is, between the opening of democratic politics and of market economies.
We tend to think of those as two sides of the same coin. But I think they are often tradeoffs and tensions, and this creates a real problem of political management.
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The second important tension is between streamlining States and ridding them of excess functions and personnel on the one hand, and strengthening their capacity to provide crucial public services and exert legitimate authority on the other. And that is a difficult balancing trick.
Finally, tenth, it is by no means clear whether and when all the Latin American and Caribbean countries can turn the many corners that have to be successfully negotiated to assure sustainable economic development and effective and enduring democratic governance.
I think we are going to see some setbacks in the next few years, and it is dangerous to sweep those possibilities under the rug. But it would be equally wrong to ignore the political, social, and policy gains which have been made in many countries.
Let me turn now, even in briefer form, very telegraphically, to some comments about U.S. policy in the region.
I would suggest--and I hope I am not going to be strongly contradicting others on the panel--that the historic breakthroughs of ''community'' and ''convergence'', as they were trumpeted at the Miami Summit of the Americas, were a little less than met the eye. To some extent, they represented a temporary optical illusion.
The Summit's importance was substantially less than was claimed at the time, and it has become progressively less significant, I believe, as the difficulties of operationalizing and implementing its accords have become evident.
Indeed, I think U.S.-Latin American relations may be entering a much more complex and problematical phase than we have seen in the last several years. Despite the rhetoric of free trade, hemispheric partnerships, and inter-American cooperation, there is a danger in this country of reverting in practice to protectionist commercial practices, to restrictionist immigration policies, to punitive approaches to the narcotics issue, to unilateral instincts on issues ranging from Cuba to narcotics and immigration. And I think such trends may very well pose significant problems and tensions in inter-American relations.
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At least from the perspective of Los Angeles, it sometimes looks like Washington is somehow unwilling to confront some of the hardest questions of Western Hemisphere policy. I would like, in closing, to throw out five or six questions that I would hope the committee could address, not only in this hearing, but in its agenda for the next Congress.
First, with Mexico's long-established system of governance clearly deteriorating, does the United States have an interest in the nature and quality of governance in Mexico? And if it does, as I believe, what U.S. policies would be effective and appropriate in helping to nurture a political system in Mexico that is consonant with U.S. interests and values?
Second, with effective democratic governance being eroded or undermined in Colombia, Peru, Ecuador, perhaps even in Venezuela, is there anything the United States can do to ward off a further deterioration?
Third, with a narcotics certification process so obviously producing ''lose-lose'' options for U.S. policy, is there anything the Congress can do that will help the United States systematically face the narcotics trafficking problem in the Americas in ways more likely of success?
Fourth, with anti-immigrant sentiment rising in the United States, and in California in particular, is there anything we can do in this country to reduce or mitigate the tensions that will arise in this context between the United States and Mexico and the countries in Central America and the Caribbean, from which most immigrants arrive?
Fifth, what can the United States do to increase the likelihood of a peaceful transition toward democratic governance in Cuba, and to reduce the chances there of a violent transition when the Castro regime ends, with U.S. military intervention a predictable result? I can not believe that the policy the United States has been pursuing in Cuba over the last several years is the best policy for facing that question.
Finally, looking ahead, what will be the effects on other Caribbean islands and Central American nations when Cuba does return to normal relations with its neighbors and with the United States? Are we doing any constructive thinking about that issue?
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Thank you.
[The prepared statement of Mr. Lowenthal appears in the appendix.]
Mr. GALLEGLY. Thank you very much, Dr. Lowenthal. First of all, I would like to say how pleased I was to hear you make your opening comments about my good friend, Dante Fascell. As a young member here I had the privilege of serving under Dante's chairmanship. Although he was on the other side of the aisle, he dealt with this committee in a very even-handed way, and I really appreciated your comments about our past chairman.
What we want to do is to try to keep this as informal as possible, and I do not want to go off and spend all the committee's time. But I do just have a couple quick questions, and then we want to try to get any other members who want to ask Dr. Lowenthal a question on record. We have eight folks here; we want to make sure that we take advantage of that resource this afternoon.
Dr. Lowenthal, you mentioned the issue of anti-immigrant sentiment, particularly in the case of California. As a southern California resident, I am sure you are well aware of what is happening in Los Angeles. As a native Angelino, born and raised in the Los Angeles area, I have seen a lot of changes in the last 50 years.
One of the things that concerns me greatly on the issue of illegal immigration--you mentioned the term ''anti-immigrant sentiment.'' I personally think that that is largely due to the unchecked flow of illegal immigration, and that has caused a broad brush to be used to paint all immigrants as not being productive in this country, which is unfortunate.
I met last week with the ambassador from Mexico, and we discussed several of these issues. But one of the issues that we discussed--and I am not sure that he was able to answer the question, perhaps you could have a different perspective. Mexico is largely dependent on (in using their numbers), a minimum of $5 billion a year being put into the Mexican economy by those who have illegally entered the United States sending money back to loved ones, family members, friends, and so on and so forth. Every time one of these folks illegally enters the United States, I think one could safely argue that this has eliminated a liability to Mexico, and generated an asset.
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And with infusing $5 billion a year, again using the Mexican Government's numbers, into their economy, which is a significant amount of money, what incentive does the Mexican Government have to work with the United States to help deal with the flow of illegal immigration into the country? It seems like almost a contradiction. Does that make any sense?
Mr. LOWENTHAL. Thank you, Mr. Chairman. First on the distinction between legal and illegal immigration. With due respect, I believe it is not the illegality of the immigration, but the scope, the massive size of the immigration, that is the issue.
I say that because we can perform a mental experiment. We could legalize the immigration which is now illegal.
Mr. GALLEGLY. We did that 10 years ago.
Mr. LOWENTHAL. But it would not eliminate the tensions and the problems. It is the scope of the immigration, and the widespread sense of loss of control of the society, even when we all know--you know, as a Californian, I know--that the Mexican immigrant population is making a tremendous contribution to the economy and society of California. There is hardly a sector of California that would work as well as it does if we did not have the participation of immigrants.
I think there is an interest in not having sudden surges of migration. That is in our interest. And I believe that this problem can only really be addressed by social and economic and political conditions in Mexico that will make it more attractive for people to stay home and make their careers and livelihoods in their own country, which is the basic impulse that most people have. Most people would really rather stay with their families and neighbors, and with those who speak their own language, and so on. It is both the need we have had for immigrant labor, and the difficult social, economic, and political conditions in Mexico that has driven this rate of migration.
I think the Mexican Government has incentives similar to our own in trying to make the quality of life in their country more successful and more attractive.
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Mr. GALLEGLY. But with all due respect, Dr. Lowenthal, that really does not answer the question about what incentives we can provide to the Mexican Government, if, in fact, this is truly a financial benefit to their whole economic system?
Mr. LOWENTHAL. Well, I do not deny that the remittances are important. I think they are important. But I think that the contribution toward economic growth that could be made by some of these people in Mexico, if circumstances were propitious for it, would be much greater, dollar-wise, than what they can send back in from the United States.
Mr. GALLEGLY. Any other members have any questions for Dr. Lowenthal?
Mr. BALLENGER. If I might.
Mr. GALLEGLY. I yield to the ranking member first.
Mr. ACKERMAN. Thank you. Do you have any--that $5 billion number is absolutely intriguing if it is not part of the U.S. economy. But if indeed those remittances are the disposable income after these folks have participated in the American economy, do you know how much money they are spending in California?
Mr. LOWENTHAL. Certainly a lot. You know, I do not know the numbers, and I am not sure whether it is $5 billion or $3 or $4 billion. But in any case, there is a substantial amount of remittances. There is also a substantial amount of taxes being paid in California. And there is a very substantial amount of consumption and participation in the economy.
In many ways over an extended period of time, there has been an increasing functional integration of the economies of northern Mexico and southern California, in which there is a lot of back-and-forth. And this silent integration has been a very important part of the growth of California.
Mr. GALLEGLY. Well, if the gentleman would yield.
Mr. ACKERMAN. Certainly, Mr. Chairman.
Mr. GALLEGLY. On that issue, there is no question that immigrant labor does provide resources to California and every other place. Is the net result a negative increase or a positive increase?
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I would just submit to the gentleman that in Los Angeles, the second-largest city in our nation, for the past 7 years, two-thirds of all births that take place in our publicly funded hospitals, the hospital completely pays the bill, involves mothers who have no legal right to be in the country.
Now, if she is going to apply for total public assistance in providing for the birthing of that child, she is also going to apply for A.F.D.C. And in the State of California, that is $670 a month per child, with a large portion of that money going back to their native country.
This does not mean that they are bad folks. I am talking about the reality of what it means in net dollars, whether the bottom line is a plus or a negative. So that is a significant concern in the second-largest city in the nation.
Mr. ACKERMAN. Two-thirds of every birth?
Mr. GALLEGLY. Two-thirds of all of the births in Los Angeles County-operated hospitals.
Mr. ACKERMAN. Is that what we call partial-birth financing or something?
Mr. GALLEGLY. It is total-birth financing, is what it amounts to, Mr. Ackerman.
[Laughter.]
Mr. GALLEGLY. There is a big argument by some that those whom are illegally in the country do not solicit public services out of fear of being turned over to I.N.S. Well, if that is the case, then only a small portion would seek public assistance. Yet from the total number of people seeking public assistance in L.A. County, two-thirds of them are illegal. It does not take a Rhodes Scholar to be able to count to 10 without taking your shoes off. It is a concern.
Mr. BALLENGER. Mr. Chairman, I think I will drop my question, because I do not think we are ever going to hear from everybody if we keep going on.
Mr. GALLEGLY. Anything else for Dr. Lowenthal?
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Mr. ACKERMAN. Does this affect New York at all?
Mr. LOWENTHAL. Excuse me?
Mr. ACKERMAN. Does this affect New York?
Mr. GALLEGLY. Does what affect New York?
Mr. ACKERMAN. What are we talking about. Or is it just California? I withdraw the question.
[Laughter.]
Mr. LOWENTHAL. Immigration in New York from the Caribbean is a big thing.
Mr. GALLEGLY. Thank you very much, Dr. Lowenthal. And I appreciate the committee's sensitivity to the fact that we have seven other very, very qualified witnesses.
Dr. Riordan Roett.
Mr. ROETT. That is close.
Mr. GALLEGLY. Would you correct me, please?
Mr. ROETT. Roett.
Mr. GALLEGLY. Roett.
STATEMENT OF DR. RIORDAN ROETT, DIRECTOR, LATIN AMERICAN STUDIES PROGRAM AT THE PAUL H. NITZE SCHOOL OF ADVANCED INTERNATIONAL STUDIES, THE JOHNS HOPKINS UNIVERSITY
Mr. ROETT. Thank you very much. I am delighted to be here, and I appreciate the invitation. And nothing impacts on New York, Mr. Congressman. Being born and bred in New York and going to Columbia University for three degrees, New York is just fine.
Let me comment on five or six of the critical issues which you raised, and the questions which were sent to us by the subcommittee staff.
First, on democratic institutions in Latin America, we in America tend to equate, unfortunately, democracy in many areas of the world, but particularly in Latin America, with holding elections, and we then forget about it.
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Democracy is really about, as we know in this country, a democratic process. It is about accountability. It is about legitimacy. And I think we need to raise some very grave questions in Latin America. While the electoral process is just fine, what is going to really deepen that electoral process to make it solid and to consolidate it?
Point two. In part, the ephemeral nature of the democratic process in Latin America, based primarily on elections from our observations here, is linked to what many of our colleagues are now calling reform fatigue, reform skepticism with the economic changes that have taken place during the last 6 to 7 years.
Real wages are below the 1980 level throughout the region. Poverty is up, unemployment is up, job creation is down.
The need for Latin America to react to those very, very difficult issues will clearly have an impact on the political process at some point. Latin America needs to increase its internal savings. It needs to increase its exports. It needs to attract foreign direct investment. All of those are very complicated and very, very difficult questions.
And again, as many of the World Bank and other studies have pointed out, there is one critical component to this: that is education. Latin America actually spends more money on education than East Asia, and gets far less out of it. Why?
But I would emphasize this afternoon any critical component for us, in which we might indeed actively participate in working with Latin America, is the need to address the judicial system, broadly defined. Courts, judges, prosecutors absolutely critical for the rule of law, absolutely critical for any kind of long-sustainable democratic process.
I would also point out that social safety nets, much discussed at the international institutions, are a critical component to get Latin America through the reform fatigue, the reform skepticism, and to preclude wild variances in the electoral process in the region.
You asked us to address drugs, crime, and corruption. There is no question that those are all critical issues that are threatening democratic institutions, but they also impact on the possibilities of economic growth.
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I was surprised, but I agree with The New York Times this morning, in which they, in addressing Mexico, ''It is now in deep disarray,'' the Mexican political system, ''unable to reform itself and unwilling to give way to a more democratic and accountable system.'' The New York Times supports Congress overriding Mexico's certification.
This, it seems to me, is where the critical issues are, in terms of addressing those questions in Latin America that are undermining, in the medium-long term, democracy, impacting on the possibilities of economic growth, and clearly poisoning the relationship between the United States and Mexico in particular. But the case of Colombia is indeed instructive, as are other relationships.
Finally, too much of our talk in Washington comes down to a rather dull exchange over who has the right trade policy. Are we protectionist or are we not protectionist? And there is an unfortunate issue here, I think, Mr. Chairman, which I hope this subcommittee would address, that appears to argue in Washington that there is only one way toward regional economic integration, and that is NAFTA. That is the Miami Summit 2005 goal for a free-trade area of the Americas. We have another very interesting alternative, which is MERCOSUR, the customs union in formation in South America, now comprised of four countries plus two associate members. And the unfortunate exchange between the American, or members of the American administration and the Brazilian administration and others in MERCOSUR should not continue.
This is not an either-or. It is a process in which we need to work together to find the appropriate mechanisms for broader trade integration, which in part will help with the reform fatigue on the economic side, and in the longer term, actually work to strengthen democratic processes.
Let me close, since I know you want us to be short, by a quote from Agence France Press. Nobody in Washington bothers to read the European press very much, but my secretary has a great facility for coming up with these things.
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President Chirac arrived in Latin America for an 8-day visit 24 hours ago. And before he left Paris, I am sure in much better French than my English, he said that, in speaking of Latin America, its vocation--Latin America--is not to be a piece of NAFTA. Its vocation is to be open to the world, and its essential economic interest trade investment aid is not with the United States, but with Europe. He noted that the European union was the main trading partner, biggest investor, and most generous development aid donor for Brazil, Uruguay, Paraguay, and Argentina, the MERCOSUR Customs Union.
Mr. Chirac does not pose a threat to President Clinton, gentlemen. But it seems to me what is terribly important is that the European issue of returning to South America, the increased interest of Japanese investment in South America, means we must begin to pay more attention to the underlying structural issues that confront us, not confrontationally, but really in a very interesting intellectual, as well as political, process, in Washington as well as in the Americas. That, it seems to me, is the important issue. Engagement, attempting to find compromise, and not attempting to dictate to the Latin Americans, within the Miami framework or any other framework. And if we begin to do that, we are then on a much sounder ground in terms of U.S.-Latin America relations.
Thank you.
[The prepared statement of Mr. Roett appears in the appendix.]
Mr. BALLENGER. Mr. Chairman, as you may know, a group of us went to Brazil, Argentina, and Chile, discussing MERCOSUR and also NAFTA for Chile. Referring to your statement, does it make sense to you that maybe we are so restrictive in the agreements that we have worked out in NAFTA that some people might want to join and some people might not want to join? Instead of a trade arrangement, we seem to have to have a labor arrangement, and a civil rights or human rights arrangement. We also have to have pollution controls and all this other stuff.
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Does it make more sense to try to put together a trade group without all this additional stuff? Is it possible, in your considered opinion? Or is it practical?
Dr. ROETT. Mr. Congressman, I support the building block approach, which is not necessarily the Brazilian approach. But it seems to me it is an appropriate one in the short- to medium-term.
I do not believe you can have a broad hemispheric trade arrangement given the present mood in Washington, the present differences over fast-track authorization. And of course President Frei of Chile, when he was here just a few weeks ago, made it clear that the United States is losing the fast train on trade integration because, one, we cannot come up with an idea on fast track; and second, NAFTA, the FTAA, is not as appealing in 1997 as it was in 1994, for obvious reasons.
Therefore, the Chileans have opted for MERCOSUR. The Andean countries are negotiating with MERCOSUR. And those negotiations will go forward. And MERCOSUR has become a very interesting and important component of South America's growth and development of increasing attraction to Europe, and ultimately to Asia.
Mr. BALLENGER. So in other words, you think that the approach that MERCOSUR is taking might make more sense than the approach we have in NAFTA.
Dr. ROETT. I think that the MERCOSUR issue is a very important one to confront, and we have got to stop trying to dictate to the members of MERCOSUR an American-derived formula that comes out of a different set of historical circumstances before the Mexican peso crisis and before the whole set of other domestic political issues came into the debate, all of which are very authentic and legitimate.
Mr. GALLEGLY. Do you have anything?
Mr. ACKERMAN. No.
Mr. GALLEGLY. Thank you very much, Dr. Roett. Dr. Tulchin.
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STATEMENT OF JOSEPH S. TULCHIN, DIRECTOR, LATIN AMERICAN PROGRAM, WOODROW WILSON INTERNATIONAL CENTER FOR SCHOLARS
Mr. TULCHIN. Thank you very much, Mr. Chairman. Members of the committee, it is a great pleasure to be here today. It is even an honor, and an honor also to be on this panel. I feel myself privileged to be surrounded by such distinguished colleagues, and flatter myself that I can be considered on the same level.
I want to make clear, in the statement that I have submitted in advance for distribution that will be included in the record, along with a complementary document, the piece I just published in a Spanish journal on reflections on U.S.-Latin American relations, are to be considered as my personal opinions, and do not, in any way, reflect the positions of the Woodrow Wilson Center, where I work.
In my opinion, Mr. Chairman, this is a very propitious time for the Western Hemisphere Subcommittee to review critical issues facing the hemisphere.
The President is preparing for his first trip to Latin America, and the Congress should consider what role it can play in U.S. policy at this time.
What are U.S. interests in the region? And given those interests, as well as our interests in other regions of the globe, what can the United States do to meet the needs of our Latin American neighbors?
With the end of the cold war, the United States is without a geopolitical threat in the Western Hemisphere for the first time in our history. This is a tremendous luxury. To maximize our advantage at this remarkable moment, the United States must do everything within its power to facilitate the consolidation of democracy and the economic modernization of the nations in the hemisphere. In this way we will ensure the stability that best protects us, and contribute to the prosperity and equity that provides us with markets for our services and products, and a secure environment for our investments.
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While each nation is different and requires different tactics or policies, this broad view should be our general strategy for Latin America.
Given our nation's commitments around the globe and the constraints imposed by the effort to balance our own budget, it is clear that the foreign policy of the new administration will continue to focus on European issues. The principal mode of organizing our relations with Latin America will be summitry, with a continuing focus on trade relations, especially the process of adding members to NAFTA.
In this context, in my opinion, there is more to gain from promoting active partnerships with the nations in the region, than from continuing traditional policies. We must exercise our leadership in the hemisphere in a new way, a way that enhances the new autonomy of the democracies in the region.
This means that we must encourage multi-lateral solutions to common problems, problems for which there are no viable unilateral solutions; problems such as drug trafficking, money laundering, terrorism, arms proliferation, and the environment--while at the same time we will empower the nations of the region to assume greater responsibility for their own fate, their individual fate, and their collective fate.
This means that in order to accomplish U.S. goals in the hemisphere, the Congress also must learn to be more collegial in its dealings with the region. In the post-cold war context, such collegiality will strengthen U.S. sovereignty, not weaken it.
Specifically as to the questions posed in the letter of February 27 from the chairman to me, my very brief answers are as follows:
First, with reference to the democracies in the hemisphere, we must understand that they vary greatly from one to another in their stability and their capacity. For the most part, the nations of the region are moving in the proper direction. And with only two or three exceptions, they are capable in the short run of sustaining themselves in the face of threats from anti-democratic forces.
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The key, both for the Congress and for the Administration, is to make it clear throughout the hemisphere that we are unequivocal supporters of democracy and human rights. And that we are sincere in our efforts to collaborate with the nations of the hemisphere in the achievement of those common goals.
We must empower the nations of the hemisphere to strengthen their own democracy. We cannot, as Woodrow Wilson once stated in sad error, shoot them into democracy. He was talking about Mexico in 1915.
Some countries in the region are still caught up in the transition from civil war to peace. Tomorrow at the Woodrow Wilson Center we are conducting a conference on the peace processes in six countries in Latin America, including Mexico. I have brought copies of those proceedings for those who may be interested in distribution afterward.
Obviously, the countries still in the process of transition from civil disorder to peace are less far along the path of consolidating democracy than the countries mentioned here earlier.
Second, the economic condition of the region holds the greatest reason for optimism, and at the same time, the greatest threat to the region's stability. Buttressing our optimism is the fact that the free market reforms have gone too far to be turned back. The benefits of macroeconomic stability in modernized public services are too obvious and too widely enjoyed to be given up.
The bad news is that the efforts to deepen the economic reforms are losing momentum. Most of the first-generation reforms were enacted by decree, and did not win the support of popular institutions, such as the Legislature or political parties.
Further reforms, however, must win such support. And as sometimes happens even in this country, the relations between the Executive and the Congress are not always harmonious.
The economic reforms are under attack also from another direction, for allegedly having produced greater inequality in a region already saddled with the most unequal distribution of resources in the world. The challenge for the countries of the region is to maintain their growth, while finding the means, both political and economic, to satisfy the needs of their population.
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Third. Crimes, drugs, and corruption are more serious threats to stability in the region than the rate of economic reform or any deviation from macroeconomic orthodoxy. Moreover, these issues capture the very essence of the challenge for U.S. policy in the hemisphere today. We must lead within an active partnership. We can neither retreat from leadership, nor impose our will unilaterally.
Crime, drugs, and corruption are threats which can be dealt with only by creating an environment in which the rule of law can flourish. Citizens in vibrant democracies demand the rule of law. They demand responsible representatives. We can help our neighbors. We can show them the way. We cannot force them to behave as we wish.
Given the headlines in U.S. newspapers lately concerning campaign finance and other issues, it seems curious for this country to make unilateral demands on other nations in the region concerning crime and corruption. It is entirely different, however, and perfectly appropriate if we were to act within a collaborative framework to support a common set of values.
Similarly, given the fact that we consume more drugs than any other nation in the world, it is curious that we attempt to impose our will on supplier nations through the crude and counterproductive device of certification. A more effective way to solve our collective problems would be through collaborative efforts.
The problem with U.S. policy toward Latin America at this time is the heavy historical legacy of geopolitical threat. We are simply too used to considering the region as a danger zone, an area we had to keep safe from the influence of others, through the exercise of our benign hegemony.
Given the overwhelming preponderance of our power today, it is difficult, and it will be difficult, to achieve active partnerships with the nations of the region. But that is the only way in which we can maximize our own national interests, and at the same time best aid the efforts of the countries in the region to consolidate their democracies and their economic reforms.
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The President's coming trips to the region are a grand opportunity. This is an administration that should welcome constructive participation by Latin American nations in such sensitive and complex areas as counter narcotics, democratic conditionalities, the struggle against corruption, arms sales, border disputes, and immigration. In addition, on his trips the President must leave behind him the sense that he is willing to put in place effective mechanisms to follow up on the successes of the various summits. Summitry without follow-up may be worse than no summitry at all.
The Congress can play a very positive role in the active partnerships with Latin America. We must play by our own rules. The imposition of extraterritoriality through domestic legislation does not advance our interests in the hemisphere. We have more to gain than any other nation or group of nations in the world from the consolidation of an international system ruled by law and equity. Congress must resist the temptation to allow its domestic agenda to intrude on our foreign policy in a way that damages the national interest.
It is a glorious moment for the United States. If we learn to exercise our leadership in a collegial manner, the new century could well bring us and our friends in the hemisphere a period of democratic stability and economic growth with equity. That certainly is our hope, and that certainly should be the goal of our foreign policy.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Tulchin appears in the appendix.]
Mr. GALLEGLY. Thank you very much, Mr. Tulchin. With respect for our other witnesses, I think we will just move ahead.
Thank you very much, Mr. Tulchin.
Mr. BALLENGER. I would like to welcome him as another, not a southern Californian or anything, but an Amherst graduate.
Mr. TULCHIN. Thank you, sir.
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Mr. BALLENGER. Some of us--or maybe we were a few years ahead of you there--enjoyed it.
Mr. GALLEGLY. I thought southern California, we ought to focus on that.
Mr. BALLENGER. I can understand that.
Mr. TULCHIN. But we are lucky the NCAA tournament has not begun, sir. So you and I would have to go off and watch the Tarheels.
[Laughter.]
Mr. GALLEGLY. Dr. Fishlow, welcome.
STATEMENT OF ALBERT FISHLOW, SENIOR FELLOW FOR INTERNATIONAL ECONOMICS, COUNCIL ON FOREIGN RELATIONS
Mr. FISHLOW. Thank you very much, Mr. Chairman. It is a great pleasure to have the opportunity to appear before the members of the committee this afternoon.
I do want to start my testimony in a slightly different fashion. In particular, I want to call attention to the positive elements over the course of the last 15 years.
In some sense, this has really not been noticed nor discussed by my friends up to this point. In the midst of major changes within the world, the end of the Communist bloc and split-up of the Soviet Union, the emergence of China as a major force, the great economic rise of other Asian countries, the movement toward greater unity within Europe, to name just some of the themes, Latin America has not occupied a central role.
Yet since 1982, this region has moved to virtually universal civilian, and increasingly democratic, governance. The countries in the region have transformed themselves economically, changing from reliance on large government deficits and high rates of inflation to budgetary equilibrium and single-digit rates of price increase. They have gone from high rates of tariff protection to much greater reliance on imports. And they have altered their dependence on State enterprise, and have begun to depend instead on leadership of the private sector.
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Finally, Latin America is now beginning to attack the serious problem of high income and wealth inequality, the greatest in the world, as well as that of poverty, malnutrition, inadequate housing, land concentration, and other manifestations of a deprived lower class.
These are highly significant changes. And it is encouraging to see them increasingly recognized both by the Administration and Congress. Moving from ratification of NAFTA, the Treaty of Miami in 1994, the important financial assistance to Mexico in early 1995, the recent peace settlement in Guatemala, and now the Presidential visits in advance of the summit that is scheduled for 1998, one has seen the evolution of potentially closer hemispheric ties since the early days of the Alliance for Progress.
At the same time, I recognize that these 15 years have seen lower growth than have been historically achieved. This has been the worst period in Latin American economic performance in the twentieth century. It also has been a period in which real wages have failed to advance, and in which income distribution has deteriorated. And it has been a period in which the public sector has gone from excess expenditures and weakness to restricted outlays, but also to continuing weakness.
What is fundamentally different now is the form of international relations between the United States and Latin America. Now the issue centrally involves trade, rather than aid, from the Latin American side. Will the United States prove to be a hospitable market, as well as a source of exports of capital goods? Will foreign investment move into key sectors that will result in productivity advance and rising income? Or will it be limited to short-term engagement in the financial sector?
And from our view, the central questions are now very much more domestic. They involve, in the first instance, our direct concerns over illegal immigration, the traffic in drugs that is found in the region. It seems to me that there are possibilities of the partners in this relationship for achieving these goals. They are to be seen as complementary, rather than substitutes.
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Latin America needs a period of return to high rates of growth under the new rules of freer markets, to consolidate its still fragile, but increasingly effective, democracies. Much of what is required is in the realm of their domestic economic policy, continuing sound fiscal and monetary policy, privatization and regular expansion of their export penetration.
In addition, and absolutely central, is an increase in their rates of domestic savings. They, like us, fail to provide enough for the future.
But a key role can be played by U.S. policy in at least two dimensions. First is real movement on the trade front. It is difficult to sustain belief in a hemispheric-wide free trade area in the absence of fast-track authority from Congress. Such an absence leads to frustration and lack of belief by our Latin American neighbors.
This is not to suggest that the ultimate negotiations will be easy. The difficulties will be found between making compatible the strong Brazilian and U.S. positions. That is the real question involved in hemispheric integration.
A second area, however, worth exploring is some broader degree of U.S. financial guarantee, not merely for Mexico where it proved to be so valuable, but for other countries within the hemisphere. Now that they have moved so substantially in the right direction in their domestic policy, we have an opportunity to limit the traditional cycles that have taken place in the availability of foreign flows.
Through higher rates of growth, the democratically elected governments of the hemisphere can then begin to tackle the burdensome difficulties of high inequality and widespread poverty. There is no longer serious danger of populism and its short-term appeal. Even the discussion by my colleagues of the reversal and the potential change in policy within the region does not give enough credit to the extent of continued commitment to achieving, in fact, a workable economic system.
The only effective way to meet this problem is through much greater investment in primary and secondary education, as well as efforts to deal with land reform where that provides a feasible option.
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There is no magic formula. Growth can provide the necessary resources, but there must be widespread domestic commitment in the region if the policy is to yield results.
In return, the United States can ask for, and can receive, a high degree of cooperation from countries in the region on the issues we take most seriously: drugs, illegal immigration, corruption. These are no longer simply binational issues. They involve a multiplicity of countries, and are best dealt with cooperatively on a broader basis.
Beyond these direct targets there are a variety of other areas: pollution, the environment more generally, in which joint efforts can lead the gains for all.
We are now in a new and evolving world where foreign relations increasingly have a strong economic component, and where domestic interests enter much more fundamentally. Latin America provides an excellent example. It is an opportunity at the present time. What is clearly essential is strong and bipartisan congressional support for the newly invigorated efforts of the Administration.
Thank you very much.
[The prepared statement of Mr. Fishlow appears in the appendix.]
Mr. GALLEGLY. Thank you very much, Mr. Fishlow.
Any of my colleagues want to jump in? Very good.
Mr. Dawson.
STATEMENT OF TOM DAWSON, DIRECTOR, FINANCIAL INSTITUTIONS, MERRILL LYNCH
Mr. DAWSON. Thank you, Mr. Chairman. I think my comments will go further than Dr. Fishlow's comments, who I think thought that the cup or glass was perhaps 60 percent full; I think it is probably three-quarters full.
I am happy to be here. I want to commend the chairman for the first time in my history in dealing with the Congress, usually on the staff side. I see that we have tailored letters to the various speakers with a different, at least, lead question. Because I noticed with my colleague over here that his lead question was slightly different than mine.
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I have geared my comments to the questions addressed to me. But if I might perhaps rephrase that initial question, just since I do represent a financial services firm, and that was not perhaps a clear theme of some of the previous speakers, except for the first speaker, who made a rather unkind comment about mutual funds, which I will return to a little later.
[Laughter.]
Mr. GALLEGLY. You will be given equal time, Mr. Dawson.
Mr. DAWSON. That is quite all right. But in any event, the initial question addressed to me was how does the financial and investment industry view the current trends in Latin America, and continuing. But that is the central theme.
I think it certainly is fair to say that the capital markets are very enthusiastic about recent trends in Latin America, and this can be seen with just a few numbers. First of all, the performance numbers. This last year growth in Latin America, a little over 3 1/2 percent, projected this year to be about 4 1/2 percent in real terms.
As one of the earlier speakers noted, inflation is trending down in most countries, and in single digits in some countries that have not seen single-digit inflation in a generation. Argentina, since 1944, for example.
Private capital flows, I think a theme on which I would be expected to comment. This last year, 1996, private capital flows to Latin America, $80 billion, expected to be only slightly less than that this year. This is a mixture of portfolio, of direct investment, of commercial bank lending, of bond markets. Fairly evenly or widely separated.
The markets are optimistic. You can also judge by the terms at which they are willing to lend to countries. Colombia, able to float an investment-grade 30-year bond at a spread over Treasuries of less than 200 basis points. Quite an improvement over the situation of just a couple of years ago. Although 200 basis points over Treasury is a spread that indicates clearly that there are still risks in the market, but a remarkable performance.
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The quick recovery from the problem of just 2 years ago is extremely impressive, particularly when one differentiates it or contrasts it with what happened in 1982, when the markets essentially shut down for many of these countries for a number of years. In fact, some, like Michelle Camdesus, the head of the IMF, refers to the 1980's as the lost decade. I think there is a considerable degree of truth to that.
Contrast 1995's experience after the Mexican crisis, at the end of 1994. Many countries in Latin America continued decent growth. The two obviously the most heavily hit were Argentina and Mexico, but a number of countries continued pretty decent growth throughout that period, and have increased the growth performance since then.
I think the chairman mentioned having seen recently Ambassador Silva Herzog of Mexico. He is someone who I think can testify to that, having been the Finance Secretary of Mexico in the 1982 period. And in fact, that brings me to the second question that you posed I think to most of the panel, which is whether the present, what was referred to as the new generation of free market reformers, would be able to sustain their effort, be able to build upon it.
I think the first point to note is that the present generation of free market reformers, without exception, lived through the decade of the 1980's. Many of them were in positions in the government. Some of them were in positions where they perhaps made mistakes the first time around and learned from it; others, in cases like Ambassador Silva Herzog, were critics of the policies followed 15 years ago. And I think they have, if anything, a stronger commitment to reform than many of those inside and outside of the region who perhaps did not go through a similar sort of experience.
I do not disagree with a number of the speakers who noted that sustained growth is critical to maintain the consensus, if that is what one wants to call it, behind market reform, and certainly for poverty alleviation. But I have to say in my conversations with those who are recently in positions of responsibility in a number of these governments, if they think that they have made a mistake in the last year or two in pursuing reform, is not in pursuing it vigorously enough. And they regret not having pursued issues such as pension reform and structure reforms more rapidly than they have had in the past.
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Finally, so we can leave room for questions, the question of what is the nature of, I guess we would call it the policy dialog, the relationship between the United States and the region at this point. Certainly as compared to 1982, it is much, much improved. But I think there obviously is a considerable amount of work that remains to be done.
From my perspective, which is 25 years in public and private sector working in the region, I continue to think there is a tremendous amount of what might be called institution-building needed within the region. Whether that is the development of independent central banks, Social Security or pension market reform, I think that is an area where much, much more needs to be done.
I would say that while the Summit of the Americas approach has come under some criticism here, I think the finance and central bank work that has been done as part of the Finance Summit of the Americas, under the leadership of Larry Summers of Treasury, has in fact been quite good in promoting that kind of a reform program, and follow-on efforts are underway in meetings with the SECs and the regulatory authorities of the region.
Trade has come up. I am not in a position to argue the merits of the MERCOSUR-versus-NAFTA approach. I would just note, particularly from my present perspective, to remember that neither NAFTA nor MERCOSUR are really just about trade. They are also about services and, particularly in my case, about financial services. And I think that is a very important element to look toward as these countries try to develop. I would include, also in that regard, local capital market development.
For all the talk about the region, the United States, in some sense, being either less interested or having other concerns than the region, I would also note that we should keep in mind that the region is still, in a very fundamental sense, still very dependent on the United States in the context of interest rates. We are largely talking about dollar-based interest rates in these countries, and that is an area in which I think, if things get difficult, as they did 2 years ago, the region could be in some difficulty.
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To not sound too Pollyannaish, because I think these are mostly optimistic comments, I noted one of the speakers, my fellow speakers earlier, I first started dealing with the region in 1972 when I was a foreign service officer and was sent to Peru to complain about the nationalization of the International Petroleum Company, which was an Exxon subsidiary.
My first job with Merrill Lynch in 1993 was to go to Peru to negotiate to get the rights to privatize the same company. So I do think we should keep in mind that these things do go in cycles. But I, at least from my own view in looking, dealing with many people in the region, I think this is a cycle that has a long way to run, continue to run on the upside.
Thank you.
[The prepared statement of Mr. Dawson appears in the appendix.]
Mr. GALLEGLY. Thank you very much, Mr. Dawson. Our next witness is Ambassador Pryce.
I just have to say that in your position as a former ambassador to Honduras, you must be a very courageous man to fly in and out of Tegucigalpa.
Mr. PRYCE. It is not as bad as it seems. You know, one of the interesting things is that National Airport here in Washington is one of the most dangerous airports in the country. But we do not have accidents, because all the pilots know it's dangerous, and they fly into National very carefully. It is the same way in Tegucigalpa. That is a heck of a turn, but all the pilots know it and they are very careful.
Mr. GALLEGLY. I do a lot of flying in this line of work, but I have never had the white knuckles like I had when going into Tegucigalpa.
Mr. SANFORD. Mr. Chairman, before we hear from the ambassador, could I ask just a general question? Because unfortunately I have to leave.
Mr. GALLEGLY. Sure, go ahead.
Mr. SANFORD. Would that be all right with you, sir?
Mr. PRYCE. Absolutely.
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Mr. SANFORD. All right. And that was, I read an article, I think it was a couple years back, in Forbes, that talked about a protestant reformation in Latin American countries. Keep in mind, my wife is Catholic. But it talked about the centralization of, or the hierarchical nature of the Catholic faith, and that therefore, the article suggested that that led toward--I am trying to think of the simplest way to put this--it led toward a passive nature on the hierarchical nature of South American politics. It lasted for a long time. And it contrasted this to the self-reliance that came with this young, sort of protestant reformation, as they called it in this article, and a greater degree of self-reliance, less reliance on systems or hierarchical natures.
Is that completely fictitious? I mean, I just remember reading this article, and I did not know if it made sense or did not make sense. True or false?
Mr. PRYCE. Mr. Chairman, I wanted to begin by thanking you all very much for inviting me. I am very pleased and very honored to be here. I really look forward to this opportunity.
I do not have a prepared speech. My presentation will be short, just a few remarks.
First, in response to Mr. Sanford's question, I would say that the Catholic religion has certainly had an effect on the hemisphere. But the church is different things to different people. The Catholic religion flourishes in the United States, and in Italy. It has flourished in many places, is all around, but it influences different societies differently.
The factors that affect the development of Latin America are much more complex than the Catholic faith alone. In addition, there are many different trains of thought within the church, and very different leaders.
There is outstanding leadership, for example, in the last country I served in, in Honduras. The Bishop, the Archbishop there is a wonderfully modern man, who not only is a most erudite, charismatic leader, but he has never forgotten that he is a priest. And he cares very much about people.
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But I get off the subject.
Mr. SANFORD. Well, I did, too. But it was just a crazy article. None of you all would have a comment on it? Makes sense, does not make sense?
Mr. GALLEGLY. Ambassador Skol.
Mr. SKOL. I think that is a very interesting question, and books indeed have been written about the different cultures. But I would put less emphasis on Catholic versus Protestant as on colonial Spain vs. our own heritage initially from France and England. There was a tendency, a very strong tendency throughout the colonial period, and right up to modern times, in much of Latin America, to mimic, to imitate the extremely hierarchical form of government in Spain at the time of the conquest of the New World.
And I think what you read is not a crazy article. I think it says an awful lot about what Latins, even today, are escaping from, in terms of being able to enter the modern world--which they now have, Catholics, almost all of them, they most certainly have, in terms of economic and political modernization.
But the Spanish colonial heritage, in my opinion, was always something of an institutional drag for historical and somewhat accidental reasons.
Mr. SANFORD. Interesting.
Mr. GALLEGLY. Mark, I really appreciate your help in getting the chairman to make this a roundtable meeting. In any event, with that, Ambassador Pryce.
STATEMENT OF AMBASSADOR WILLIAM PRYCE, VICE PRESIDENT, WASHINGTON OFFICE, COUNCIL OF THE AMERICAS
Mr. PRYCE. Thank you very much, sir. I want to say first, I am speaking in my personal capacity as a retired, recently retired foreign service officer with 38 years in the foreign service, not as a member of the U.S. Government. And also, not at this point as a representative of the Council of the Americas, which is where I am now working.
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And I want to say in the beginning that, in my experience over those 38 years, congressional visits to foreign countries are a very positive thing. I know congressional delegations are often criticized.
I remember my very first delegation with Senator Mansfield and Congressman Derwinsky when I was in Mexico 30-odd years ago. It was a very, very positive visit. I remember the visit I had from Chairman and former Chairman Fascell at a very tough time in Guatemala, when I was the political chief, and we were getting shot at. He came down there at some personal risk and really helped us out at an inter-parliamentary meeting.
And my very last congressional visit with Congressman Ballenger was very, very helpful. And congressional visits almost invariably, certainly invariably in my experience, are worthwhile. I would just like to encourage Members of Congress, when they can find the time, to make visits to other countries, because I think it helps our country. It helps give our Congressmen better perceptions, and it is just a good thing all around.
Mr. SKOL. You saw Henry Clay on your first visit.
[Laughter.]
Mr. PRYCE. OK. I know when I started to think about retiring, I looked on the wall in the anteroom of the Assistant Secretary for Inter-American Affairs, and realized that there is a row of pictures of 16 Assistant Secretaries for Inter-American Affairs, and that I served with each one of them. And there was a back wall with pictures of seven more, and I knew six of those. I then figured it was time to do something else.
I thought I would start my short presentation by answering one of the last questions on the list sent to me. It asks whether our Latin American policy is one of involved partnership or benign neglect.
I think it is the former. I think it is involved partnership. But there is a certain neglect, which is not benign. When we neglect the hemisphere there are unfortunate consequences. Some of the previous speakers have mentioned some of them.
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Another question that you raised is whether trade is the single most important issue in our relations with the hemisphere. I think that from the point of view of the other nations in the hemisphere it certainly is. And I think from our own point of view it is. I think there is a bipartisan recognition of that fact when the trade issue was made the principal issue in the meeting in the Miami Summit of the Americas meeting several years ago. That did not just happen by itself.
There were other people who had different ideas. The fact that trade came out as the principal issue, and that a trade goal was established, was the result of, first, a bipartisan approach on the part of the United States; and second, U.S. leadership in helping everybody come to that conclusion.
Concurrent with encouraging free trade we also need to keep up our bipartisan support for democracy. And I would like to just report on a conversation I had with Jeff Davidow, Assistant Secretary of State for Inter-American Affairs, in a meeting with him this morning. We were talking about some of these same problems. And we were talking about the progress which has been made towards democracy in the hemisphere. Everybody says, you know, 15 years ago there were not very many democracies. Now we have got 34 nations which are democracies.
Jeff pointed out that we have done the easy part. We have progressed to the point where now everybody expects that there will be regularly scheduled elections, that they will be free and fair, that you can throw the rascals out if you believe they are rascals. But that is the easy part.
The part that is more difficult, said Jeff, is that we have to build that social/economic base which will strengthen democracy and give it deeper roots.
I think that one of the most important things that the U.S. Government can do in terms of economic assistance--and I am reinforcing what one of my colleagues said--is to help support hemispheric efforts to improve legal and justice systems.
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The rule of law, of course, is important because of the respect it gives to individual human beings. But it is also a key element in providing a climate investment which provides economic growth and impairs the economic opportunity for society.
There is more Honduran money in the United States than there is U.S. money in Honduras. And that would not be there if Honduras had a legal system like the United States which provided confidence and the feeling that you would get a fair shake if you had to go to court.
Many Hondurans recognize this fact, including President Reina. He is working hard, and we are working with him, to try to improve Hondura's judicial system. And it is true not just for Honduras; it is true, I think, for just about every country in Latin America.
That is one part of our economic programs, and that we ought to support that. We had that program in Honduras.
One last comment on the role of the military. That was another one of the questions. There have been changes. I would like to make the point that the U.S. military, contrary to what a lot of people say, has had a positive influence on the role of Latin American military in terms of trying to foster and engender respect for the civilian authority.
We have seen, in the last 5 years, a number of instances where there has been a change. For example, the change of government in Brazil, where Brazilian President Carlos de Melo was thrown out for corruption. He was not thrown out by the military. He was thrown out by a combination of the Congress and the Supreme Court. That is a big step forward.
You had the question in Guatemala, where President Serrano tried to pull an auto-coup, mainly because he was being accused of corruption by his Congress. At first the military leaders sort of winked and said, well, maybe it is OK. But the junior officers basically said, ''Wait, we don't have a dog in this fight. And why are we becoming involved?'' And that made the senior military pull back and say, ''This is not our fight.'' And then you had the combination of the OAS, Guatemalan businesspeople, the U.S. Government, and other Central American Presidents moving in, and Serrano was out. This was a healthy development.
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Mr. GALLEGLY. Mr. Ambassador, pardon me for just a moment, but I have been called to the Judiciary Committee on a very key vote there. So if you gentlemen will excuse me, I will turn the gavel over to Congressman Brady. And I will try to be back. And I mean no disrespect, but this is a very important vote.
Mr. PRYCE. I understand.
Mr. GALLEGLY. I appreciate your understanding.
Mr. PRYCE. Actually, I think we are all very grateful that so many of you are here and listening to us.
Mr. GALLEGLY. Well, it is too bad that we got a late start.
Mr. PRYCE. I will finish quickly. With the example of Ecuador, the Congress there frankly acted improperly in impeaching the President under a law that is really intended to deal with cases of mental incapacity. What they really were doing was impeaching him on a majority vote. There is a process for impeaching a President, which requires a two-thirds vote. So democracy took a little bit of a knock there.
Nevertheless, the role of the military was a positive one. All three potential candidates came to the military and said, ''I'm the right person. Put your bayonets in front of me.'' And the military said, ''Wait a minute. We are not going to get into this. You guys, you, civilian government leaders, settle this. You decide what should happen.''
That is something positive. Now, I will finish with just one more comment on the question of NAFTA. Here I am speaking partly in my new role as head of the Washington Office of the Council of the Americas. The Council is doing a series of studies. The first one is California, and New York is going to be coming out within a week or so, on the effect of NAFTA on individual States, which is very revealing.
Some have said NAFTA has not done any good. This study reveals, I think, that it is pretty objective--trade in California and Texas have both increased over the life of the NAFTA by about 30 percent. That is pretty positive.
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The Council of the Americas will be issuing studies on 20 States. We are sending each of you a copy on your States.
Thank you.
Mr. BRADY [PRESIDING]. Thank you, Ambassador. Questions from the subcommittee members?
Well, as a freshman with my first chance to chair the subcommittee, my whole goal is to not incite an international incident this afternoon. So any help you can give me along that line would be a great help.
Ambassador Skol, you have been very patient today. If you would like to make your remarks.
STATEMENT OF AMBASSADOR MICHAEL SKOL, SENIOR VICE PRESIDENT, DIPLOMATIC RESOLUTIONS, INC.
Mr. SKOL. Mr. Chairman, members of the committee, it is indeed an honor to be here. And I am delighted to be able to be the first person formally to testify under your chairmanship, Mr. Gallegly.
I want to focus my remarks today on three issues cited in the committee's letter: democracy, free trade, and corruption. But I want to start with the Summit of the Americas in Miami in December 1994. Because I do believe very strongly that it was a signal event which is a benchmark for all of us in talking about U.S. policy toward Latin America: how good is it, how bad is it.
Because for all of its faults, it really was the high point in what we call convergence between the United States and all of the Latin countries, with the obvious exception of Cuba.
And I regret to say that, in my opinion and the opinion of others, there has been a deterioration, a slow-down, since the Summit of the Americas. But I believe that the momentum is entirely recoverable. The United States loses something as long as it does not try as hard as it can, all of us, to recover that spirit of Miami. No matter what you want to call it, there was a convergence there, the same set of shared principles.
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Someone once asked me while I was still in the government--I have, as you know, since been, I prefer the term ''privatized''. Someone asked me what was the best single piece of paper to describe U.S. policy toward Latin America. And in my view, since December 1994, it has actually been the multi-national document that came out of the Summit of the Americas.
With the exception of a very few specific policies, what was signed by 34 Chiefs of State, leaders of our countries, including President Clinton, that document best described the best of what we were doing, where we were heading, and why we were doing it. It still is the best such document, but frankly, I do not think we are living up to the high standard that was set.
Let me turn to democracy now. The good news about democracy, in my view, is not just that we have 34 democracies in the hemisphere, with just one hold-out. That is very good.
But what is so interesting is that this hemisphere has developed something that no other hemisphere can even begin to claim. And that is a genuinely united force in defense of democracy. It is not just rhetorical. It is not just the Declaration of Santiago. Something has happened to take the words and make them into a real defense of democracy.
Let me cite one example which I think is a watershed event in the history of Latin America. And that is what happened last year in Paraguay, when General Oviedo tried to overthrow the legitimate elected Government of Paraguay.
Now, Paraguayan generals and a lot of other generals have been doing this kind of thing for years. But this time something different happened. Of course, the United States did the right thing. We could be expected to. We have been a leader in insisting on democratic processes unwaveringly over the last years in Latin America.
But in my opinion, more importantly--and it symbolizes what I am talking about here--was the action of Argentina and Brazil. The two foreign ministers went to Asuncion. They confronted General Oviedo, and they said, ''Little man, if you stage a golpe, a coup d'etat against the Government of Paraguay, you are going to be the head of a government without relations with the only two countries that make any difference to you, and that's Brazil and Argentina. You're going to be a horseman without a horse.''
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And that stopped him cold, along with what the United States did, with what the OAS did, with what the Paraguayan people did.
But look back in history. What would Argentina and Brazil have done just a very few years before that? They would have acquiesced. Under their military leaderships in the past, they may even have encouraged that kind of thing. But they did not. They said, ''You can't be part of a MERCOSUR free-trade real relationship in this modern world, if you are some tinhorn little military dictator. We can't have a relationship with you.'' That is a signal event in Latin American history. No one at this table can say that this was an imposition of Washington, of Foggy Bottom, of the White House, of the United States, of our political philosophy on the Latin Americans.
We have to continue that sort of policy. And in that sense, let me turn quickly to the 35th country, to Cuba.
In my opinion, consistency and ethics demand that the United States treat democracy in Cuba exactly the same way we treat democracy, or challenges to democracy, anywhere in the hemisphere.
If we support actions against the Haitian military dictators, if we support what happened to General Oviedo last year, why, how can it logically be different when we are dealing with Fidel Castro?
Now, I know it is fashionable these days to talk about armies of businessmen and students and others who are going to invade the island and cause a change in the attitude of Fidel Castro's Cuba. And I will admit that there is a factual basis to this. It is a phenomenon that does occur. You have lots of good people, lots of free people talking, communicating, it does have an effect on many societies.
But always you have to weigh in the balance whether the effect of this army of free people inside Cuba will have more good effect, will be more important than the bad effect of the dollars they leave behind, which do not go into anything but the coffers of the Government of Cuba.
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In my opinion, looking very carefully over the years at this phenomenon, of people preaching good things in Cuba but still leaving their dollars behind, they in fact do more damage. The dollars do more damage in terms of leaving change in Cuba than the communication does good by changing Cuba.
I can remember any number of world leaders, politicians, others saying, ''Wait until we establish relationship with Cuba. Wait until we have consular, and then commercial, and then diplomatic relations. You will see how much this will affect Cuba.'' It never happened. And I happen to know that some of these leaders, always privately, admitted later that they were wrong.
It did not work then; it is not going to work now. I think our policy on democracy in this hemisphere should be the same in Cuba as it is in Paraguay and Guatemala and Peru and Haiti.
Let me turn to free trade. Ambassador Pryce, answering the question of how important is free trade, is it the most important issue facing us, said yes. I also think it is. It was the cement glue that held the summit together. It was what made so many other issues which might have been conflictive between the United States and Latin America less important, or what made the Latins willing to see our point of view on so many issues, because we joined with them in doing something that was so much in the mutual interest of Latin America and the United States.
Now, of course, we are in the position of not having the ''four amigos'' yet. And the three amigos are not even so friendly these days. And we have failed to capture the notion of fast track for Chile or anyone else. And in my opinion--especially given that the United States has the lowest tariffs anyway and we have the most to gain from free trade--I think we are making a serious mistake in delaying fast track for Chile and the rest of Latin America.
Now to the issue of MERCOSUR versus NAFTA. It is not necessarily conflictive. We all knew, we all know that some day, hopefully before 2005, there will be some kind of grand negotiation between MERCOSUR plus the countries in South America that adhere to MERCOSUR, and NAFTA plus whoever adheres to NAFTA. And there will be something that happens, and we will call it a free trade area of the Americas. That will be a very good thing; it is a very important thing to happen.
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But there is a problem with Brazil having taken the lead abandoned by the United States. The problem is not a tragedy. Brazilian leadership is not a bad thing. It is merely an unfortunate thing when it is the United States that is ceding the leadership. I am not saying that in 10 years we will all be speaking Portuguese. What I am saying is that when this grand negotiation happens, if Brazil's point of view, Brazil's model is more fully developed and has more of a salience than the American model, we are going to see a free trade area of the Americas which looks a lot more like MERCOSUR than like NAFTA.
Now, why should that bother us? Well, it should bother the bankers here, and it should bother a lot of other people. Because we do focus on services. We focus on intellectual property, and the Brazilians do not. And every year, every month that we lose out in the fast track battle here in Washington, I think we lose a little bit in terms of models.
Finally, let me mention quickly one issue that I think is the most important new issue to face Latin America and our relations with the continent. And that is the issue of corruption.
Something that came out of the summit, that has continued with the Inter-American Convention Against Corruption. It is a marvelous issue that should interest all Members of Congress, all of us here, because it combines the interests of all of our constituencies. The Latin American leaders have come to realize that if they do not want to get impeached, like the President of Brazil or the President of Venezuela, corruption must be addressed. If they want to capture monies that are not going to come from U.S. economic assistance, which does not really exist for Latin America any more; the best place to capture it is from corrupt monies that are going to mistresses and generals and a lot of other people, and should be going back into the coffers of the government.
They realize that. And why is it of such interest to the United States? Well, three of the people who spoke before me talked about good governance. They talked about institutions. It is, in fact, very important, in order to have relations with these people, that they have ethical and good government.
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But there is something additional and very special, and that is the position of American business in Latin America and around the world. We have the Foreign Corrupt Practices Act, which forbids the bribery of foreigners. No other country has it.
What is more, there are 14 countries in the world in Europe, Japan, Korea, where not only can companies bribe foreigners, they get full tax deductibility for the bribe. The anti-corruption campaign that is going on in Latin America today, including the Inter-American Convention Against Corruption, thanks to the participation of the United States, includes a mandated internationalization of the Foreign Corrupt Practices Act. This is something, a phenomenon that I think we should grab the way we grabbed human rights 10, 20 years ago, and make it a common crusade in the Western Hemisphere. Because as we diminish corruption, it benefits all those countries and American businessmen working abroad.
Thank you.
[The prepared statement of Ambassador Skol appears in the appendix.]
Mr. BRADY. Thank you, Mr. Ambassador. Questions, panel? Are we finished with the panel?
Mr. ACKERMAN. One more.
Mr. BRADY. We have one more? I do not know how you drew the short straw today, Dr. Perry, but thank you.
Mr. PERRY. No. In fact, it is easier and more advisable to be brief when you are last. In fact, my testimony is here, and if everybody wants to look at it, it is quite available. Although it is 6 months old, because these hearings were originally scheduled 6 months ago. And I will have to update it a slight bit.
STATEMENT OF WILLIAM PERRY, PRESIDENT, INSTITUTE FOR THE STUDY OF THE AMERICAS
Mr. PERRY. Much of what I have to say has been covered previously. My recommendation would be in the dialog, and I hope we can have some dialog here, to focus on strategy.
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There was a strategy here at one time in terms of advancing Latin American countries and advancing ourselves through pursuit of a free trade area in the hemisphere. It seems to me that that is in danger of expiring, at least so far as U.S. leadership is concerned. And I think, personally, that is a mistake. But it should be debated.
And if we are not going to pursue that strategy, then indeed, what other strategy would we pursue? And I think that is the thing the people in your position really have to focus on.
The test case for that strategy is sort of coming up in the form of Chile and fast track. And I think it is a test that, if you want to abandon this strategy, you can afford to fail. But if you do not want to abandon the strategy, you cannot afford to fail. And if you abandon the strategy, you have to have something to substitute for it.
There was a purpose to all this. I had the privilege of working on the Bush campaign in 1988, where much of the enterprise to the Americas initiative, which evolved into the Western Hemisphere Free Trade Area, evolved. And there was an idea of trying to head off problems in Latin America, and improve the competitive advantage of the United States in world global terms, by doing in some respects what Europe had done to southern Europe; that is, converted Spain and Portugal and Greece from sometimes embarrassing politics and immigration, and not-so-good economic performance, into an asset for the United States, and heading off some social and political problems along the way.
That was the purpose of it. I still think it could be served that way. There is obviously a lot of growing opposition to it in the Congress and in the public. But if it is going to be abandoned, I think there has to be a substitute for it. There were few enough real strong new initiatives in the wake of the cold war period. In fact, I think this generation has not really done as much as, say, the previous generation after World War II in terms of coming up with healthy, new, positive ideas that could not be pursued previously, but now we could pursue.
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And I just would like to conclude, being as brief as I can and hoping that we can have some kind of a dialog that would continue much of the afternoon as you gentlemen are willing, and later, hopefully, that we face, from my standpoint, the need to rededicate ourselves to the free trade principle. And that means fast-tracking Chile very quickly, because we are falling really far behind the power curve, and the thing is dying.
And I am not particularly optimistic about getting together in a global, in a hemispheric free trade area in 2005 or any other time real soon, given the speed at which we have been moving and the difficulty we have in jumping over what should be a very, very easy obstacle in terms of Chile.
And second, and in this I am probably in a minority and unpopular position, but I think we are going to have to also give a look at the political security apparatus in the hemisphere, which has not been working for a while. It is not adapted to the challenges we face today. And in my opinion, the lack of security cooperation, political cooperation on contemporary security issues, which are distinct from the previous ones, is one of the things that is killing the economic part because the average person in this country thinks we are conferring economic benefits on countries that are not cooperating with us.
We should get more cooperation with them, and we should tell the story of how this economic area, if it works as it was intended, is intended to benefit the United States. I mean, after all, it was we who launched it in the beginning, and certainly we intended to do good in Latin America, as well. And I think the fact that the Latin American countries so enthusiastically embraced this concept, which would have been inconceivable 2 or 3 years previous, is evidence that they saw some benefit in it, as well.
But as I say, I think we are on the verge of dropping the ball and kicking it pretty far off right now. And so that would be the thing that I think people in your position should focus on, is what is the whole purpose of this exercise? What is our policy toward Latin America? Why is it a policy, and how does it fit into a structure of some wider global policy? That also takes into consideration domestic things.
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Now, I agree that domestic issues are predominant, and certainly people see them that way. Well, if that is true, then Latin America ought to be our number-one foreign policy priority, not Bosnia or some other part of the world, or Africa. Because Latin America today, and certainly in the future, there is just no way of stopping it, is the region of the globe that has the most effect on circumstances in our country, good and bad, and our competitiveness globally.
I congratulate the chairman and the new members for taking up the challenge and looking at this thing, not in the context of this issue or that issue, I hope, but on a global basis, on a strategic basis. Because that is the only way you can judge things like NAFTA and Chile and so on and so forth.
And I thank you very much for the opportunity to be here. You know you are getting old when the people who used to be sitting in the chairs are now on the walls. But thank you again for your invitation, and for your indulgence.
[The prepared statement of Mr. Perry appears in the appendix.]
Mr. BRADY. Yes, sir.
Mr. LOWENTHAL. I wonder if it would be permissible, in the spirit of the roundtable that was announced, if I asked a question of one of my colleagues on the panel. Is that appropriate?
Mr. MENENDEZ. Dr. Lowenthal, I would like to have that spirit. But I would also like to have, since I have sat here quietly for well over an hour, in respect that you all traveled here and I wanted to listen your statements without interrupting you, if you could give me a few minutes before we have to depart.
Mr. BRADY. I will do that. Let me first ask----
Mr. MENENDEZ. And the ranking member may have to, as well.
Mr. BRADY [continuing]. Mr. Ackerman, if you would like to ask questions first.
Mr. ACKERMAN. Do you want to go first? I would like to ask if each of you could, in either a word, a phrase, or a sentence, describe what you think is the greatest threat to democracy in the region. Maybe we could just go left to right.
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Mr. PRYCE. I guess I would say poverty. Poverty and lack of leadership.
Mr. SKOL. Corruption. Bad government.
Mr. LOWENTHAL. Lack of strong institutions, pervasive inequity.
Mr. ACKERMAN. Lack of strong institutions and----
Mr. LOWENTHAL. And pervasive inequity.
Mr. ACKERMAN. What do you mean by pervasive inequity?
Mr. LOWENTHAL. Tremendous range regarding the rights of people. Poverty and wealth, unequal access to law, to opportunities.
Mr. ACKERMAN. You are talking about rights, or you are talking about economics? Or both?
Mr. LOWENTHAL. I am talking about both.
Mr. ACKERMAN. Dr. Roett.
Mr. ROETT. Low wages, and basically uncompetitive economies. Low savings rates, and terrible educational systems.
Mr. ACKERMAN. Educational systems? Dr. Tulchin.
Mr. TULCHIN. The immediate threat is drug trafficking and other forms of organized crime, feeding off the long-term threat, which is an absence of stable democratic institutions, especially judiciary and law enforcement.
Mr. FISHLOW. Lack of expectations of better economic growth.
Mr. PERRY. Reform fatigue and the lack of strong institutions.
Mr. ACKERMAN. What was the first one?
Mr. PERRY. Reform fatigue. A lot of disadvantages--to coming last. No, I mean----
Mr. ACKERMAN. You could repeat----
Mr. PERRY. I will, I am sure. It is lack of institutionalization of solid, productive economic institutions, which involves politics, crime, those kinds of threats. Because if you had a sound economic system for 20 or 30 years, you would probably take care of the rest. But it is hard to do without----
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Mr. PRYCE. The others have mentioned three; I would like to add one. The need for better educational systems. I would say poverty, improved systems of justice, and better education.
Mr. ACKERMAN. Thank you. Mr. Menendez.
Mr. MENENDEZ. Thank you, Mr. Chairman. I want to first thank the panel. It is a wide and global overview with several different points of view, but certainly a lot of convergence. And I have tried to sit here through most of it, except for one or two meetings, listening to what you had to say.
As someone who has actively participated in this committee for, this is the fifth year now, and who follows Latin America, I am very interested in what you had to say. I would like to raise four issues, some of which some of you touched upon. I would like to get your reactions to some of these issues.
One is, you know, it seems to me that over 50 percent of the hemisphere's population is below the poverty level, and some of you answered in your one question, either you said poverty or you said items that are affected, that affect the question of poverty. Over 50 percent of the hemisphere's people are below the poverty level, and we see those countries that have made the economic reforms we would like to see and we believe are in the right course, but have caused significant dislocation and civilian unrest in those countries.
I am concerned, and I also believe that the advocacy of trade is extremely important, for the United States and for our hemispheric partners in that effort. But it seems to me that we have so focused on the macroeconomic aspects of Latin America that we have not looked at the underlying questions that will give the breathing space and the time to ensure that the changes we want to see take place happen.
And what I am suggesting is, is that when the chairman is concerned about immigration, which is his first question to the panel after Dr. Lowenthal made his presentation, I know it is a very pressing issue for him. Well, people flee their countries because of either civil unrest or in search of economic opportunity.
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And so the pressures on our borders, to a large degree, are the realities of those things in their country.
It seems to me that part of our plan--and I would like to hear your responses to this--is that part of our priority in terms of policy must be how do we create living wage opportunities for people in the country? Whether that is on immigration issues that we are concerned about, or even dealing with drug trafficking, I mean, you want people to eradicate the drugs in their countries and the crops. But you must give them other sustainable forms of either crops or sustainable forms of other economic opportunities.
So it seems to me we have been short-sighted. When I look at the appropriations for Latin America in the context of aid, used intelligently at the same time with trade, I think we have been very short-sighted. I have said that now for 5 years. We seem to be going nowhere in terms of that philosophy. And since all of you have expertise, I would like to hear on that.
Second, the President has a trip. We believe and hope that it will be a trip of great opportunity. I also believe it is a trip fraught with great potential for trouble. And I view that in the context of our worsening relationships with some of our countries, because of the question of decertification and how we go about that process.
Second, what you have all mentioned already, the slow process we have had into having Chile send into the NAFTA agreement, which sends I think the wrong message, that we have dragged our feet on it. Because it tells the other countries in the hemisphere, even when you meet the goals that we, ourselves, have applied, you still do not get in to be part of the group.
I do believe that there should be goals, and that they should be met. But once they do, once they are met, we need to have those countries enter.
So what do you see the President's trip? What is he going to face? Some of our immigration laws obviously created friction with some of the neighboring countries. So I see that the President has a great challenge before him. What would some of your suggestions be to him?
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Third, with reference to the question of decertification, I personally believe that this is a blunt instrument which was meant for internal purposes, and has become questions that arise the insult of national sovereignty of other countries, and at the same time creates enormous frictions for us.
Can you suggest, do you believe that that is true or not? And can you suggest better ways for us to arrive at the same goal? I think the United States has the absolute right to ensure that its taxpayers are funding only those efforts that meet its goals. But by the same token, I think we have a better way of doing it.
Last, on Cuba, which is one of my pet projects for many reasons, let me just say that I want to comment on Ambassador Skol's comments. As someone who now has left the State Department, I have a great deal of admiration. I can tell you that now. While you were at the State Department I might have caused you trouble for your work in this regard.
Let me say that--and I heard Dr. Lowenthal's suggestion about violence in Cuba--it seems to me, Doctor, that the only person who can create violence in Cuba is the person who holds the guns. And that is totally in the hands of Fidel Castro and the people who are subordinate to him.
If in the Eastern European countries there had been a will by the government to use their guns against their people, that would have been violent, even though people peacefully sought change. If today where whistles are used to express discontent with the government, the government wishes to use--you know, in Belgrade--wishes to use their guns against their citizens, that is something that, no matter what the policy is, it is up to the regime that holds the guns to decide whether change, if its people ask them for change, will be peaceful or not.
I am concerned about those who say that we should be fully engaged with Cuba, because having seen all of my Canadian, Mexican, Spanish, and other friends invade Cuba, over the last 5 years they have done absolutely nothing to change the system there. The reality is that Fidel Castro has only changed out of necessity, not out of desire. And it is the economic necessity that has made him reduce the third-largest army in the Western Hemisphere. It is economic necessity that now permits the American dollar, the most hated symbol of the Revolution, to be freely traded. It is economic necessity that has permitted the limited--and I say limited, because it is heralded as much more than it is--international investment that has taken place there.
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And so if you look at the regime as having only responded to necessity other than desire, you question whether or not, if we could create greater necessity in the regime, we would see the movements that we all want to see. We all want to see a peaceful change in Cuba. I especially want to see it because I still have family there who suffers.
So my concern is, these engagement views, what can you show me through the Canadian experience, the Mexican experience, the Spanish experience, who have made both investment and sent its people, but whose people are isolated from the population because they only go to the place where there is surf and sun, and who, for most Cubans, cannot join with them to interact. Or how the Canadians with the Sherrod Company--and I will finish on this, Mr. Chairman; you have been very generous with the time--or the Canadians with the Sherrod Company, it seems to me they undermine what we seek to do. Because what does Sherrod and other companies do? They cannot go get the average Cuban into a partnership. There are no tender offers in the economists. There is only a wink and a nod, and an agreement by the man himself.
And so they cannot even employ the people in Cuba. So the bottom line is they have no way by which the economic decisionmaking process for which average Cubans could be engaged and involved in, would then say, ''Hey, I want something more once I have this move in the economy.''
Those are four areas. I know it is a lot. But I would love to hear some response.
Mr. BRADY. Thank you, Mr. Menendez. I am going to resist the temptation to ask you to repeat the question.
[Laughter.]
Mr. BRADY. Out of courtesy. But just out of fairness, Dr. Perry, if we could start at this end of the panel for your comments.
Mr. PERRY. Well, there were a lot of them. I am not sure, the first point was insufficient attention in terms of aid to Latin America? Was that----
Mr. MENENDEZ. Do we not engage equally with aid, at the same time as we are dealing with macroeconomic issues?
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Mr. PERRY. Well, of course, a lot of the countries have grown out of the traditional aid parameters, so it sort of takes them out.
I would certainly favor a system whereby our aid priorities, such as it is, would be allocated to the countries that are most important. I mean, providing they are below a certain threshold. And therefore, Latin America, to me, would get a great deal more than it gets.
I mean, the problem is that we have some outdated priorities left over from the cold war, when if you sat down and looked at it objectively in the absence of the cold war, Latin America would be just a great deal more important to you than other parts of the world. If you are from Texas, you would agree, and California, and wherever.
The potential for trouble, yes, there is some potential for trouble, I suppose. It has, you know, there is a difficult process to go through in terms of getting where we want to go, economically and so on and so forth, in Latin America. Some of the countries are agonizing, and I do not think we have helped it very much by going so slowly on Mexico and Chile, for example. We keep moving the light at the head of the tunnel farther and farther back. I can testify from personal experience that when these ideas were first broached in 1988, so on and so forth, during the Bush campaign, that Chile was thought of as the first country, before we really knew what the Mexicans' intentions were. And therefore, it has been sitting around for almost a decade, and it is really unconscionable.
And if you send the President without anything in his quiver, I mean, you know, at least it will be embarrassing; I do not know if there will be trouble about it. The other issue is decertification.
Again, it gets back to what I said initially about looking at some of our political security institutions. I think both the Clinton and the Bush administration were reluctant to do that in the absence of the cold war. It somehow seemed unseemly.
But the result of that has been to sort of slowly escalate our requirements. When I was in Mr. Morelli's place in the other body some time ago, you had to be an autocratic incorrigible criminal and an enemy of the United States to be decertified, essentially. That is what, I mean, the law was the same as it is now, but that was the actual requirement.
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Now, because of domestic political pressure, we keep raising the sights, and hitting some countries over the heads, when I would think we would want to sit down and talk with them about what the new requirements are, and notify them beforehand, and talk about some kind of a new system of political and security cooperation in this hemisphere, rather than just, in response to domestic political pressure, raising and raising the level of our own wrath against particular governments.
And on the issue of Cuba, I have been at previous hearings, and I do today wholly agree with you.
Mr. BRADY. Great. Thank you, Dr. Perry. Mr. Dawson.
Mr. DAWSON. Thank you, Mr. Chairman. I think I will try to, given my present position, focus on the first of the Congressman's questions.
Clearly, we cannot ignore the downside risk stemming from failed economic expectations. Social safety nets are an issue that increasingly governments are trying to work to develop. One of the problems is there is not any sort of universal model, or even universal model within Latin America, of such approaches.
Similarly, as one of the earlier speakers said, there is no alternative economic model, either. So that what is happening is governments are trying to find ways to develop social safety nets.
I think in one sense there may not be enough money, in terms of assistance, but I think the money is potentially available if the good projects or enterprises are there. And I would point to the Inter-American Development Bank, World Bank, and its affiliates, as well as the IMF, all of whom have the capability to provide that kind of funding if the right kinds of approaches can be developed. And I think increasingly they are being developed.
Mr. BRADY. All right, thank you, Mr. Dawson.
Dr. Fishlow.
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Mr. FISHLOW. Well, those are four excellent questions, and they do cover much of the relationship that we are concerned about in the hemisphere.
On the first, I would reinforce the emphasis which my predecessor had given, on the limited amount that aid can play at the moment in Latin America.
Aid can make a difference in the case of Haiti, in the case of some of the Central American countries, in the case of Bolivia. It cannot make a difference in the case of Argentina. It cannot make a difference in the case of Brazil. It cannot make a difference in the case of Mexico.
The reality is that the only thing that will make a difference there is the evolution of trade. And that is one of the reasons why it is really quite essential that one move forward on the question of fast track, and on the question of implementing the opportunities that exist, through expanded trade with the hemisphere.
If we do not do so, there will be extraordinary frustration. And we will find that we will have missed an important opportunity.
On the second question of the Presidential trip, I do believe that the trip, while it holds challenges, also holds possibilities and opportunities. It is not the first time that a President goes to an area and is forced to consider policy in a very direct fashion.
In the past, it was out of such Presidential trips as Lyndon Johnson's to Uruguay that one got the question of expansion of trade through the Latin American free trade area. One is hopeful that in the process of preparation, that will go on through the period up through May and the Belarazanchi meeting of the trade ministers, that one will evolve a strategy and a policy that will give some sense of movement toward integration.
On the question of decertification, I quite agree that we have no real policy on drugs. That, ironically, what we do is have a policy in which we can limit countries in one way or another, but where the positive aspects of policy in this country have been too limited. When we consider that we are only spending $3 billion in the United States in terms of dealing with the drug problem, as opposed to spending a larger amount in Latin America; simply dealing with the supply side, and not focusing enough attention on the demand side, will not deal with the problem.
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There is just too much money to be made. And there are just too many opportunities. And you cannot get enough airplanes over the area in order to eradicate the possibility.
And finally, on the question of Cuba, your point is certainly extraordinarily well taken. I think the one difficulty in having a completely negative posture toward the Castro regime at the present moment is precisely the inability to suggest positive alternatives when the transformation occurs. And I think that there is clearly scope within a policy which recognizes the difficulties and the limited degree of cooperation that one currently can have. And the question of what kinds of efforts can be expected to occur in the future. And I would hope that we would spend some time on the latter, rather than focusing entirely on the former.
Mr. BRADY. Thank you, Doctor. Doctor, could you move, for recording purposes, could you pull that microphone closer to you?
Mr. TULCHIN. Yes, sir. Thank you, Mr. Chairman. I appreciate the chance not only to be heard, but to be recorded.
Mr. Menendez, in an effort to respond to your difficult questions, let me offer a strategy in dealing with the first question, which I think can be applied also in dealing with the third.
That is to say, on the issue of jobs and trade, I think that we are, in a sense, victims of the divisive political debate on NAFTA. And NAFTA was sold, perhaps oversold, as a free trade treaty that would create jobs in the United States. And the opposition, particularly by some Members of Congress and members of organized labor in the United States, that in fact it would hurt, take jobs from us, was only too obvious.
What is going to happen in the case of Mexico or through other trade agreements between the United States and other countries, is that no single treaty will increase or decrease jobs. But rather, by increasing the total amount of trade and investment, over time jobs can be expected to increase on both sides of the border or on both sides of the agreement.
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In the short run, however, as far as dealing with congressional debates, it seems to me that the strategy I would propose is a, what we call linking or linkage of issues.
The chairman mentioned earlier his concern with immigration in California, and the cost. He mentioned the figure $5 billion. Let us take that and not dispute it. The cost to the State of California is $5 billion per year.
Let us extrapolate, somewhat arbitrarily, for argument's sake, that the cost to the United States for illegal immigration is close to $15 or $20 billion a year. If that is the case, you, yourself, said that one of the reasons we get such illegal immigration is because of poor work opportunities in the source countries--in this case Mexico, but also in Central America.
If we could somehow get the Congress to appropriate half of the potential loss, as demonstrated by the study to which the chairman referred, and apply that to the creation of economic opportunities in the countries from which we are now receiving illegal immigration, you might get some joining on this issue; I cannot say. But you certainly would open the debate in a manner that would be more fruitful in seeking solutions.
Moving immediately to the third question on certification, my point is--and I so indicate in my testimony--that certification is a failure. It is counterproductive. The purpose of that policy is to reduce the flow of illegal drugs into the United States. Nobody claims that it has achieved that purpose.
We also are very clear that it has achieved a very different purpose. It has alienated countries which otherwise are close friends and allies with us in the struggle for democracy and economic modernization.
Now, we have managed to offend both Mexico and Colombia over the last 3 months, even though we decertified one but certified the other. And the debate in the United States Congress over the entrails of Mexican domestic politics is certainly unseemly. If the Congress spoke in similar terms about domestic politics in Germany or in France, the response from the representatives of those countries I think would be quite different.
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So then I propose a similar strategy: issue linkage. There are seven countries in the Caribbean that are desperate because of the threat to their national security over the loss of what is known as the banana quota, through the fight between Europe and the United States. What is the total value of the entire banana quota, from all seven countries, all seven potential runways for illegal narcotics through the Caribbean into the United States--increasingly, the flow is through the Caribbean, not through Mexico? The shift has been remarkable in the last 2 years.
The cost of buying and distributing free, as a charity, all the bananas in these potential drug-transit countries is less than 10 percent of what we now spend on counter-narcotics in the Latin American area. And yet, General McCaffrey quite understandably says, ''I don't have a mandate to buy bananas.'' Well, maybe we should put two different kinds of lobbies, bureaucratic groups, together, two different groups in the Congress together, and suggest that we meet the needs of these microstates--and they are our larger States in the Caribbean; Trinidad is one, Jamaica is another, Santa Domingo is concerned in the same manner, but it is not exclusively bananas. It is very easy in Antigua and St. Lucia to highlight the point.
But the strategy is that you try and deal with one issue by focusing simultaneously on another. And I think we need some kind of imaginative strategies in dealing with drug trafficking. The response to Colombia is not unilateral decertification or certification. The response is to get the nations of South America jointly to operate to protect their borders, their legal systems, their governments from money laundering and corruption, and to act collectively in that area.
And obviously, the rest of the South American States want to see a good-will effort on our part to curb demand. And as has been stated here before by other speakers, we spend less than 10 percent on demand curb than we do on supply interdiction. And many people in Latin America think that is an inappropriate balance. We at least ought to discuss the issue with them.
The Presidential trip is a risk; it certainly is. But I see it as a tremendous opportunity. And I would simply prefer, I hope not in a Pollyanna way, prefer to look upon what the President might accomplish. I fear, in disagreement with Ambassador Skol, that the summit has been grossly oversold. And I think that we are not capable as a nation in responding to the promises made in Miami. Would that we were, but I do not think that we are.
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As for Cuba, well, Mr. Menendez, you know my views on that issue. I will be as parsimonious as I possibly can. I think the response is that current policy clearly is not accomplishing its goal. It has been 37 years trying. I would suggest that we turn to our Latin American allies and say, ''All right, you don't like the way we've been doing it. Join with us in effecting a transition to democracy, post-Castro, in Cuba. And in a good-faith effort, you put forward your good faith, and we will, also.''
We have alienated our Latin American allies on this issue. We have created tensions in our relations with European nations, which it seems to me is totally inappropriate and distracts our attention from such major issues, on a global scale, as the World Trade Organization. And I think that the solution, sir, is that we, without for a second compromising our beliefs as to how the transition should take effect, that we simply allow other nations to join with us in working toward that transition.
Thank you very much.
Mr. BRADY. Thank you, Doctor. Dr. Roett. And again, if I could ask you to pull that microphone a little closer. Thank you.
Mr. ROETT. Thank you, Mr. Chairman. Let me be very brief. On the first issue, which I did discuss in my oral presentation, the question of poverty. A critical question. It is obviously linked to job creation; job creation is linked to high-value-added exports--not just exports, but high-value-added exports. That means investing in physical and human capital. That means drawing in that capital to be able to do so.
One of the speakers mentioned a very large number for the inflow of new capital into Latin America in 1997. But you compare that to East Asia and the Pacific Basin, and it is clear that capital is still flowing in larger quantities to those countries.
In part, why? Because the East Asian Tigers and other Asian countries have done what Latin America has not been able to do: to invest before their economic model was put into place in human capital, in education, in housing, and in health.
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The second question you asked, in terms of the suggestions about the Presidential trip. I look at the Presidential trip to Latin America in two parts: Mexico, one; part two, South America.
If anybody asks me--and they have not, and they will not--I would advise the President to postpone his trip to Mexico, and to confirm his trip to South America. This is not the time, given the heightened tensions between Mexico and the United States, for the President of the United States to arrive in Mexico to answer only one set of questions. He will be asked nothing else. Not trade, not investment. He will be asked only about certification, no matter what you gentlemen do, but about the whole question of the drug trade. And that is an inappropriate forum for the President to make his first trip south of the border.
The trip to South America is critical and key; should be sustained. And the trip to Mexico should be not canceled, but postponed. And I am sure my friends in the State Department can find a diplomatic way to do that.
Third, on drugs, yes, it is obvious we have got to cut consumption. We need to cut demand in this country. And gentlemen, that is your responsibility as our leaders to find ways in which we can find the resources to really attack the terrible, terrible situation we have in our schoolyards, in our neighborhoods, and on our streets. That is not the fault of the Colombians or the Mexicans; it is the failure of our leadership in this country, our own cowardice in our own communities, and I think it is despicable.
Finally, on Cuba, sir, I have no particular advice for the Congress. But as a deeply religious person, I place my faith in John Paul II's visit to Cuba, that he may do there what he did in Poland.
Thank you.
Mr. MENENDEZ. Dr. Lowenthal.
Mr. LOWENTHAL. Mr. Menendez, I wish I had answers as good as your questions. Time is short.
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On your first question, I agree with the thrust of it, but do not think that I have really anything substantively to add to what has already been said.
On your second question about the Presidential trip, it seems to me the way to turn it from a potential problem into a great opportunity is to accept the fact that the United States does not have to send its leadership abroad to provide answers to every question. That perhaps what the President should be doing is consulting with his Latin American counterparts on three of the big questions facing those countries, that are also facing the United States.
First, what to do about the problem of narcotics, corruption, and accountability, which is a big problem in this society and there. To consult about what really are the most effective approaches.
Second, to look at the issues of economic reforms in the context of globalization and of increasing inequalities, and to consult about the most effective ways of dealing with that problem.
And third, to discuss the strengthening of political institutions in a period in which they have been weakened by a variety of factors, some of them notorious in the headlines this week. The President might tell his Latin American counterparts what we are doing in this country to deal with those issues in this country, and ask them to tell him what they are doing in their countries. And ask for their advice as to how we could be helpful, rather than go forward preaching on these issues.
Your third point on narcotics and decertification, I certainly agree with what has been said by others. I would simply want to add just the reflection that if the quality and effectiveness of law enforcement to remove and reduce the problem were the test applied to the United States, and Latin American countries were in the position of certifying or decertifying the United States, they would have a hard time. That puts a context to evaluate how our certification process is looked at. I think most of what should be done about this issue has to be done at home, and the problem will not be quickly solved.
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On Cuba, the first point I wanted to make, if it is appropriate, is with regard to something that my colleague, Ambassador Skol, said. He called not once, but twice, for applying the same policy toward Cuba that the United States has applied elsewhere in the rest of Latin America, for ''consistency''.
I like the idea of consistency. And I wonder, respectfully, whether Ambassador Skol is calling, on the one hand, for the imposition of a commercial blockade and travel restrictions on other Latin American countries that are not now democratic or that might not be democratic in the future, in order to achieve that consistency; or whether he is calling for an end to the commercial U.S. embargo on Cuba in order to be consistent with the way the United States has dealt with other undemocratic countries in Latin America over the years.
One or the other of these approaches would be a consistent policy. The policy we are pursuing now is neither consistent nor effective.
I share fully with you, sir, the commitment to human rights, including the right of free political participation that should be respected in Cuba and everywhere else in the hemisphere. The question, obviously, is how to get there most effectively, what we can appropriately do.
I agree with Dr. Tulchin that we have, in fact, pursued the policies of isolation, economic sanctions, and denial for 37 years. I think we would be better off, while certainly keeping the pressure on in various ways on human rights, to invest in building a greater presence and stronger relationships with various sectors of Cuban society.
I think the point that Dr. Roett made in a very concise way about the church and its potential role is something that should be thought about. I think you cannot have the positive effect we want to have by systematically reducing the possibilities of influence, which I think has been the effect of the historic U.S. policy.
Mr. GALLEGLY. Mr. Skol.
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Mr. SKOL. Mr. Menendez, your question on poverty has really engaged all of us in the roundtable. But I think it is, for practical purposes, unlikely that the U.S. Government is going to increase bilateral economic assistance to Latin America.
What I think should be done, rather, is to increase the focus of that assistance in certain areas which in fact liberate a lot more money than is expended. I am referring to the kinds of economic assistance programs such as AID's Administration of Justice program, the Modernization of the State programs in the Inter-American Development Bank and the World Bank.
Because the fact is that the leaders of Latin America have looked around, and they do not see any money coming from the United States in terms of bilateral economic assistance. But they see all the money they have wasted. Someone mentioned, without naming the country in Latin America that spends an enormous amount on education, more than East Asian countries, and yet does not produce a good educational system. I think you were talking about Venezuela. If you were not, it applies to Venezuela anyway.
I would look to programs to reform the kinds of ways that governments operate: the judicial systems, the ministries themselves, the Social Security systems, the pension systems. If there can be real reform, and they are looking for it now, the percentages that ordinarily waste away to inefficiencies, on the one hand, and corruption on the other, would be enough to finance anti-poverty, education, health in Latin America. This is the conclusion that government after government has reached.
I know countries where the expected bribe has been as high as one-third. That is the amount of money that goes from a foreign firm to a general, a mistress, or someone in exchange for the project--whether it is to build a bridge, which therefore crosses only two-thirds of a river, or a hospital which has 200 beds instead of 300 beds. Pinpointed, direct assistance toward changing the way the State operates. I think is the way we must use U.S. and multilateral assistance.
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The President's trip. I am convinced that President Clinton, in the five places he is going to in his May trip--Barbados, Costa Rica, Venezuela, Argentina, and Brazil--in each place should say, and say convincingly and have acted beforehand in favor of fast track for Chile (he does not have to offer fast track for every country he visits, but fast track for Chile) and in favor of NAFTA parity for the Caribbean Basin, and mean it; and demonstrate that he means it, and demonstrate that it has a higher priority than certain other priorities, including domestic political priorities in the United States. If he does these things, I think this trip can not only be a triumph rhetorically, but a substantive triumph.
I think the fast track, free trade--and that includes NAFTA parity--that is what the Latins are looking for in U.S. leadership. They want U.S. leadership, they expect U.S. leadership. And they do not expect, except in the specific case of certain small countries where economic assistance is greatly needed, they do not expect and are no longer asking for funding from the United States. They are looking for U.S. leadership; they are looking for investment; they are looking for ways to change their society so that it can attract investment.
On decertification, on drugs, we are in a hell of a mess. I do not have, and I do not know if anyone has an easy prescription for how to change what we are doing now. I know that the certification system has reached an impasse. It is no longer the flexible tool that it once was. I think it used to work. I think it has worked in the past in pressuring countries to cooperate more on drugs. I do not think it is working right now.
The only thing I can think of, frankly (and I have just returned from a week in Colombia), is a prayer that in our country, in the Congress, in the White House, in the State Department, as well as in Bogota and in Mexico City, the level of personal venomous rhetoric be reduced. We are yelling at each other to a point we are going to make it very much more difficult for any kind of cooperation, now or into the future.
When high-ranking officials of the U.S. Government attack by name a person who is a legitimate candidate for President of Colombia, even if we do not agree with a lot of things he has done, this poisons the atmosphere, gives him a thousand more votes every time we say these things against him. I am not sure what we should do about drugs, but I am absolutely convinced from experience in this area that that kind of venom is not the way to gain the cooperation of anybody.
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Finally, on Cuba, first, I think you know that my view of consistency does not mean opening up to Cuba. My view of consistency is the United States tells Fidel Castro the same thing that the foreign ministers of Argentina and Brazil told General Oviedo in Paraguay. Dictatorship, lack of human rights, what you represent has no place in, in their case it was MERCOSUR; in our case, that kind of policy has no place in the Western Hemisphere.
Finally, Mr. Menendez, I agree with you on Cuba, obviously. And I also think, and I can say now what I could not have said before, that the Menendez Bill should have been passed 18 months before it was finally incorporated into Helms-Burton.
Thank you.
Mr. GALLEGLY. Ambassador.
Mr. PRYCE. Thank you. As someone else has said, very perceptive questions.
On question number one, the question of poverty and trade, I think that increased trade does create increased jobs. I certainly have seen that in countries where I have served. And so I think that this is something that we can do, to help alleviate poverty.
In conjunction with that, the question of trying to increase investment, which creates more jobs, is key. And key to that is to create a climate of respect for the law, which in turn gives you respect for investment, which creates jobs, which helps alleviate poverty.
On the question of a Presidential trip, I would also agree with Mr. Lowenthal. He said that the President needs to consult. I am sure the President will consult. That is part of the nature of the trip. And I see the trip, some dangers, but a very positive thing.
One of the things we need to focus on is the fact that when the President goes someplace, both before he goes, while he is there, and after he is gone, the entire U.S. executive focuses on that area. And Latin America needs more Presidential focus. So I would not delay in the slightest. You should not avoid going someplace because there may be problems; you should go someplace because you have an opportunity to overcome problems. So I would not delay going to Mexico.
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I do not think that President Clinton and Zedillo will only talk about narcotics. They will talk about the whole range. As a matter of fact, there is a U.S.-Mexican consultative committee which gets more participation by Cabinet ministers I think than almost any country in the world. There will be 12 ministers down there talking about environment, talking about trade, talking about finance, talking about a whole gamut. So I think absolutely go, and I think something good will come out of it.
And I also agree that we should have more going on with the trip in South America. I am sure it will come.
On the question of narcotics, I would reinforce the thought that the fundamental problem is demand reduction. I think we all know that. It is easy to say what the other guys should do. The real problem is what we do to ourselves. And there, I think the problem is education. And I think that Barry McCaffrey has seen that, and that he is working on it.
We also, of course, need to cooperate. We need to be tough. We need to do all the things we are doing. But at bottom, the narcotics problem is one of demand.
I can remember there was a time we would not even say that. I give Nancy Reagan credit for that. I remember she was the first person that said, ''You know, narcotics is a two-way street. And we can't just expect the guys someplace else to work this problem.''
On the question of Cuba. Over a period of years I have very much supported sanctions, in the belief that, one, that they send a signal. Economic sanctions have not worked; economic sanctions almost never work. And I think if we look at it objectively, they are not accomplishing, in terms of economics, what we would like to see them accomplish. But still, it is a problem of the signal.
But I would also say that we should find a way to increase interchange every bit as much as we can. And I hark back to my experience. I ran the U.S.-Soviet Educational Exchange program for several years. And this is in the mid-seventies. And it was not the height of the cold war, but it was still pretty cold.
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And we found a way to promote exchanges, and democracy and the U.S. point of view won every time. When you got Soviets over here, they learned. They went back, and little by little, it changed their system. Sure, Cuba has an autocratic system, but the Soviet system was pretty darn autocratic, too. Change does not happen overnight.
So I would say every way we can to increase interchange, consistent with our other policies, we ought to find a way to do it. Because it will weaken their system, it will strengthen democracy.
Mr. GALLEGLY. Thank you very much, Mr. Ambassador. Kevin, I appreciate you standing in for me. Did you have anything you wanted to add?
Mr. BRADY. Well, I do. But just for the sake of time, I think I will submit the questions in writing. And again, the witnesses have given great answers to some very good questions, so I have learned a lot being part of this hearing.
Mr. GALLEGLY. I want to thank you, too, Bob, and the other members who were present today. But particularly thank you, the panel, as the first official hearing as the chairperson of the Western Hemisphere Subcommittee.
I want to thank all of you very sincerely, and seek an ongoing dialog with you. I seek your counsel on issues affecting the Western Hemisphere. I have gone on record publicly from the very beginning that my principal objective in chairing the Western Hemisphere is to see that we try to, as aggressively as possible, deal with all of the Western Hemisphere without putting an overwhelming amount of energy into one very specific area. I want to try a little broader coverage of the entire Western Hemisphere, particularly all the Latin American countries. So I welcome your counsel. That is the reason we had this meeting as our first hearing. And any time that any of you folks think that maybe there is something that should be brought to our attention as a committee, or me personally, I welcome that.
And again, thank you all very much. And I just close by apologizing for the distraction of the Judiciary Committee. But, you know, what can you do? I have no control over that committee.
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Thank you very much, gentlemen.
[Whereupon, at 4:20 p.m., the subcommittee was adjourned to reconvene at the call of the chair.]