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Next Step : Toward a New Kind of Latin Revolution: Power to the Middle Class : The Bush plan aims to revive laggard economies with investment, trade and debt relief. The wealthy oligarchies would lose out in the process.

July 17, 1990|ART PINE | TIMES STAFF WRITER

WASHINGTON — President Bush's new program offering Latin American countries unprecedented opportunities to expand trade ties with the United States, win help in reducing their debts and attracting foreign investment is meant to foment nothing less than a new revolution in the region.

While he has not said so specifically, Bush wants to see power in Latin America wrested from the corrupt oligarchies that have dominated the region's economies for the past four decades and transferred to the long-fettered middle class, according to knowledgeable analysts.

And the big question now is how aggressively the region's new democratic governments will respond. Initial reactions have been positive but slow in coming. Chile was the first to express interest in such a trade pact.

The oligarchies, a legacy of the Spanish conquistadores, controlled their economies directly until the 1950s, when Argentine economist Raul Prebisch captured the region's fancy with a call for protection from imports, which was accompanied by a move to state ownership of private industry.

When the region adopted Prebisch's policies, the government-owned enterprises became the major drain on national economies and provided a steady channel of income for the top economic classes, which obtained ownership shares and provided management skills.

Today, state-run industries that in many cases benefit only a handful of wealthy families are subsidized by government borrowing and by taxes imposed on the relatively small populations of middle-class taxpayers. Latin economies are choking on the resulting debt.

Alan J. Stoga, analyst for Kissinger Associates, former Secretary of State Henry A. Kissinger's New York consulting firm, argues that restructuring the Latin economies so they can operate on free-market principles is as central to any recovery in the hemisphere as it is to Eastern Europe and the Soviet Union.

"There's absolutely no doubt that absent any restructuring of the Latin economies, there is nothing even worth talking about," Stoga said. "There will be no partnership at all."

That is the rationale behind Bush's trade-rather-than-aid approach. The new democratic governments are strapped by debt and crippling inflation. If Washington can encourage them to abandon "Prebischism," it can weaken the oligarchies and boost the middle class.

That, in turn, would help democracy take root, bolster American economic ties with the region and strengthen American security interests throughout the Southern Hemisphere, according to government and private strategists who specialize in Latin America.

Although Bush's new proposals have attracted little attention, analysts say they constitute the most sweeping set of incentives since the "Alliance for Progress" program that John F. Kennedy proposed to help counter Fidel Castro's appeal in the 1960s. Here are the major points:

* The United States will negotiate a bilateral free-trade agreement--designed to cut tariffs and increase the flow of trade--with any Latin country that is willing to undertake the kinds of reforms needed to shift to a market-oriented economic system. U.S. and Mexico already have begun preliminary work aimed at launching more formal trade talks later this year.

* Washington will help set up a $300-million international lending pool to finance the infrastructure and technical aid needed to convert state-owned industries into private corporations and attract more foreign investment to the region.

* Reversing its previous opposition, Washington would consider forgiving portions of the billions of dollars in debts that Latin countries owe the U.S. government--a first step toward matching the writedowns that commercial banks have taken on their Latin loans.

* And last week, Bush asked the annual seven-nation economic summit in Houston to launch a multibillion-dollar international effort to provide aid and technical help to Latin countries just as the Western nations have done for Eastern Europe.

The series of rapid-fire proposals has come as a result of a rare personal involvement by the President, reflecting both his own longtime interest in the region and his belief that helping to bolster democracy there is important to U.S. national interests.

Though born in Connecticut, Bush spent much of his early career in Texas, where--as Commerce Secretary (and fellow Texan) Robert A. Mosbacher says--"you learn a lot about the Mexican economy almost by osmosis." One of Bush's sons, Jeb, married a Mexican national.

More important, Bush acquired a professional interest in Latin American during his years as director of the CIA and, later, as vice president--an interest that continues today.

Besides rushing out his new initiatives, Bush is scheduled to visit Brazil, Argentina and other Latin American countries in September. U.S. strategists say he has tentatively decided to take three more trips to the region over the next 12 months.

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