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Peru's path to prosperity

October 11, 2006

NEARLY HALF A CENTURY AGO, President Kennedy launched one of this country's more ambitious foreign-aid experiments, a program to develop Latin America called the Alliance for Progress. Like most aid efforts during the Cold War, it was less an attack on poverty than on communism, though the one was seen as a precursor to the other. Although the United States spent more than $20 billion, the effort fizzled out with few accomplishments.

The program is seldom mentioned anymore in this country, but its name was invoked Tuesday by Peruvian President Alan Garcia during a news conference at the White House with President Bush.

"What could have been done almost 50 years ago with the Alliance for Progress is something that we can do now," Garcia said. His point was that the things the aid program failed to do in the 1960s, free trade could do today.

Garcia is anxious over a free-trade pact that both the U.S. and Peru have signed but that has yet to be ratified by Congress. An existing trade agreement between the U.S. and four Andean nations expires at the end of the year, and if the new pact isn't in place by then, thousands of Peruvian products will lose duty-free access to the U.S. market, which accounts for about 30% of Peru's exports.

Ratifying the agreement shouldn't be a tough decision by Congress, yet leaders have held up a vote until after the Nov. 7 election. Democrats fret that its labor provisions are too weak, ignoring the fact that an end to Peru's preferential trade status would render a large number of impoverished Peruvians jobless. Meanwhile, Republicans from textile states fear that it will hurt the domestic industry -- a quaint notion in an era of globalized competition.

A failure to seal the trade deal would be a disaster on many fronts. The original Andean agreement was intended to help build diversified economies in the region so that the four countries -- Peru, Ecuador, Bolivia and Colombia -- could lessen their reliance on coca, the raw material for cocaine. Letting it expire with nothing else in place would deal a heavy blow to the U.S. war on drugs. If Congress turns its back on these Andean countries, it will be playing into the hands of Venezuelan President Hugo Chavez and others trying to encourage the spread of anti-Americanism in the region.

The Alliance for Progress was a bust for a lot of reasons; U.S. planners underestimated the amount of money it would take to develop an entire continent, and Latin American governments didn't impose necessary reforms. Today, Peru's economy is growing 5% annually, but half its people still live on $2 or less a day. Engagement with the global economy, as neighboring Chile has shown, is the best path to prosperity, and American consumers also benefit from a lowering of barriers. Election-year politics should not be allowed to hijack this important trade deal.

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