A week ago, the leaders of 34 Western Hemisphere nations, including President Bush, signed an agreement for a Free Trade Area of the Americas, amid shouts of protesters in Quebec City and questions from skeptical legislators back home in Washington; Brasilia, Brazil; and other capitals.
But the lowering of tariffs and other obstacles to international trade agreed upon in Quebec are almost a side issue to the far more important trend of foreign direct investment among countries in the hemisphere.
This year, more than $60 billion of investment from companies all over the world will flow into Latin America, setting up operations to produce and sell locally and export to global markets.
Those investments represent infusions of capital to countries that until the last decade have remained relatively poor and on the margins of the global economy.
Now the economies of Latin America are growing faster, investing in themselves and opening to trade and investments with other countries.
The trade agreement is meant to set up a framework of laws governing transfers of goods and money. That it should also include standards for labor and the environment, as Quebec protesters and some legislators contend, would seem logical in a world in which global standards are now a reality even for business accounting.
But to understand the new economies of the Americas, it's best to start with foreign investment, which has changed the international economy from a two-way street into a multilevel highway interchange.
Investment by U.S. companies in Latin America and the Caribbean totals almost $250 billion--roughly comparable to U.S. exports to the region.
And U.S. companies are not the largest investors in many Latin countries today--companies based in Spain are. Only a generation ago, Spain itself was a poor corner of Europe. But it has prospered with foreign investment, and now Spain and Portugal are investing in countries their conquistadors and missionaries first encountered 500 years ago.
Flows of corporate investment have been crisscrossing the world for years--mostly among rich, industrially developed countries--and that has created a new international market.
For example, affiliates of U.S. companies had more than $2.5 trillion in sales of goods and services around the world last year, a sum much larger than the exports by which U.S. trade is conventionally measured, write Joseph Quinlan and Marc Chandler in Foreign Affairs magazine. Quinlan is senior global economist of Morgan Stanley Dean Witter and Chandler is chief currency strategist for Mellon Financial Corp.
