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NEWS ANALYSIS : No Major Impact From Bush's Latin Plan Likely Soon : Economics: Only Mexico and Brazil are anywhere near being ready to undertake the reforms it demands.

June 29, 1990|ART PINE | TIMES STAFF WRITER

WASHINGTON — President Bush's Latin America initiative is potentially the most sweeping since the Alliance for Progress of the early 1960s, but it may well be years before it has any major impact, government and private analysts said Thursday.

Although Mexico and possibly Brazil may move quickly to take advantage of the trade and debt-reduction benefits that the proposal offers, most other Latin countries are nowhere near being prepared to undertake the kind of economic reforms that it demands in return.

The plan, which offers to negotiate U.S.-Latin American free-trade agreements, forgive the debts that Latin countries owe the U.S. government and set up a new regional lending pool to finance change from national industries to private enterprise, was hailed here and in Latin America on Thursday as a long-needed step.

"This marks the first time in a decade or more that a U.S. Administration has said to Latin Americans, 'Let's sit down and talk about problems that you consider important,' " said Peter Hakim, staff director of the Inter-American Dialogue, a Washington research group.

Pedro-Pablo Kuczynski, a former Peruvian Cabinet minister and now chairman of First Boston International, agreed: "When you add up the numbers, it doesn't come to all that much--but it's the right time, and the right gesture."

Analysts say that the proposal outlined by Bush on Wednesday has some substantial political and economic pluses.

It provides a badly needed political framework, in the form of a proposed economic "partnership" with the United States, to enable Latin leaders to embrace the plan openly without fear that they will be accused of "selling out" to the Yanquis.

It reassures Latin America that it will not be abandoned as the United States and other Western governments rush to pour aid into Eastern Europe. What Bush offered the region parallels--and in some ways outstrips--what Eastern Europe is getting now.

It comes at a time when a growing number of Latin American governments are moving toward free-market economic systems anyway and thus will find it far less onerous than they might once have.

It carries the potential for important benefits for the United States as well. A bilateral free-trade accord with the major Latin American countries would result in far lower tariffs for U.S. exports to the region. That could spell the end of a 9-year slump in sales in Latin America by U.S. companies.

From the Administration's own point of view, the proposal has the added benefit of not straining the federal budget. Apart from a $100-million-a-year outlay for the new regional investment fund, the plan relies on "trade, not aid" to bolster Latin economies.

Even so, there is wide disagreement about how quickly and fully the region will prove able to take advantage of the proposal, both in terms of how rapidly individual countries will respond and how much they will be willing to abandon their current philosophy of central economic planning.

Mexico has moved dramatically to reduce its dependence on state-run industries and protectionist trade policies, and Brazil announced sweeping new measures just this week. But most other Latin governments are still way behind.

Argentina and Venezuela have only begun their reforms. And with the exception of Chile, which began shifting to a free-market economic system almost a decade ago, much of Latin America still depends on state-centered economies and is loath to give them up.

"Everybody knows that it's not going to produce immediate results," said Isaac Cohen, Washington director of the U.N. Economic Commission for Latin America and the Caribbean, the region's most distinguished think tank.

Nevertheless, the plan sends a clear signal--that Washington has ended its diplomatic isolation from the region and is ready to be responsive if the Latin governments want to take advantage of the opportunity.

It also marks a turning point in the evolution of U.S. policy toward the region. In the 1960s, Washington was intent on providing foreign aid. That was replaced by commercial bank lending in the 1970s and by International Monetary Fund lending in the 1980s.

What Bush did on Wednesday was to say that those days, too, are gone, and IMF lending will be replaced by trade and investment that the Latin American countries themselves will have to attract.

"Bush has set the trade agenda with Latin America for the 1990s," Cohen said.

That is essentially the same deal that the United States and the other major Western powers are offering to Eastern Europe. "And it is a lot more sustainable," Cohen said, "than the policies that were pursued before."

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