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U.S. Plan for Latin Debt Relief Is a Non-Starter : Development: Bush's proposal for free trade will profit large U.S. banks at enormous cost to the people of Latin America.

December 02, 1990|Robin Broad and John Cavanagh and Walden Bello | Robin Broad is a professor in the School of International Service at the American University in Washington; John Cavanagh co-directs the World Economy Working Group at the Institute for Policy Studies; Walden Bello is executive director of the Institute for Food and Development Policy. This article is adapted from one in the current issue of Foreign Policy.

WASHINGTON — Air Force One today will ferry George Bush and his advisers on a rare trip to the south--a week-long tour of five crisis-ridden Latin American nations. Pushing an "Enterprise for the Americas Initiative," Bush hopes to extend the all-encompassing "motherhood-and-apple pie" concept of free trade to the entire Western Hemisphere, from Canada to Argentina.

In short, Bush will offer his Latin counterparts the carrot of increased access to North American markets if they continue repaying their debts and agree to a development strategy that emphasizes private enterprise and opening of economies to U.S. investment.

Bush's model suggests that developing countries can export their way to South Korea or Taiwan status through the purgatory of what is known as "structural adjustment." But the strategy is deeply flawed. It will reap short-term benefits for large U.S. banks at enormous cost to the people of Latin America and to the longer-term stability of the hemisphere.

The debt repayment component of the package has led to a perverse capital outflow from Latin America to U.S. banks. Since 1983, Latin American nations have repaid creditor banks and institutions more than $100 billion more in debt service than they have received in new loans and aid. This leaves precious little either for social programs or development projects.

Furthermore, the model that Bush is peddling has already proved a failure in the dozens of countries across Africa, Asia and Latin America where "adjustment" has been applied for more than a decade. Supervised by the World Bank and the International Monetary Fund, these adjustment packages mandate severe cutbacks in government spending to balance budgets, elimination of trade barriers and social subsidies, encouragement of exports, devaluation of currencies and dismantling of nationalist barriers to foreign investment.

In practice, structural adjustment has damaged environments, worsened structural inequities, bypassed popular participation and failed even in the very narrow goal of pulling economies forward. Ecological sustainability has been undermined in country after country. In the frenzy to increase exports, countries often resort to the easiest short-term approach: unsustainable exploitation of their natural-resource base.

The stories of ecological disasters lurking behind export successes have become common: Timber exports have denuded mountains, causing soil erosion and drying critical watersheds. Cotton, soybeans and other cash crop exports have typically depended on polluting pesticides and fertilizers. Large fishing boats have often destroyed the coral reefs where fish breed and live. Tailings from mines have polluted rivers and bays.

Structural adjustment hurts the poor as well. As government spending is reduced, social programs are decimated. One 1989 World Bank working paper concluded that a byproduct of the "sharply deteriorating social indicators" that accompany contractionary adjustment packages is that "people below the poverty line will probably suffer irreparable damage in health, nutrition and education."

Signs of failure are even emerging in South Korea and Taiwan, the miracle models of high-speed, export-oriented capitalist development. After decades of systematic exploitation, the South Korean labor force erupted in thousands of strikes during the late 1980s, undermining the basis of that country's export success. Meanwhile, decades of uncontrolled industrial development have left large parts of Taiwan's landscape with poisoned soil and toxic water.

This is not meant to deny that developing countries need substantial reforms, that some governments consistently overspend or that markets have a role to play. Rather, the lesson of the 1980s teaches that there are no shortcuts to development. Development strategies will not succeed and endure unless they incorporate ecological sustainability, equity and participation, as well as effectiveness in raising living standards.

Out of the generalized failure of development over the 1980s, there is a different kind of consensus emerging among people the Western development Establishment rarely contacts and whose voices are seldom heard. A new wave of democratic movements across Latin America, Asia and Africa is demanding another kind of development. In citizens' organizations, millions of workers, farmers, women and environmentalists are saying they want to define and control their own futures.

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