October 23, 2002

ALCA: Viewed from the U.S.

James Petras

In conversations and interviews with US businessmen and bankers on Wall Street, financial editors and government officials in Washington as well as from a reading of business journals and public documents it is clear that there is near unanimous and enthusiastic support for ALCA. The trade union confederation, the AFL-CIO, which is virtually impotent in any case, seeks to impose tariff on Latin American exports to protect US workers. Apart from some Christian church groups and Latin American solidarity organizations which oppose ALCA, the rest of the US public is ignorant of the very existence of the trade agreement.

Several important questions arise from these facts: (1) Why is there such solid support for ALCA given the failure of the free market policies of the past two decades in Latin America and rising poverty in Mexico under NAFTA? (2) Why is ALCA necessary if US and European multinational corporations have prospered under the current neo- liberal framework? (3) How does ALCA fit into the Bush Administration's global war strategy?

From Super-Profits to ALCA

From 1990 to 2002, the "Golden age of neo-liberalism", US banks and multinational corporations (MNC) remitted $1 Trillion dollars in profits, interest payments and royalties from Latin America. In addition, close to $900 Billion dollars in "dirty money" – or illegally gained funds – was sent by the Latin American elite overseas via US and European banks. In the same period US and European banks bought over 4,000 lucrative, previously publicly-owned banks, telecommunications, transportation, oil and mining, retail and other companies throughout Latin America, but principally in Argentina, Mexico and Brazil. US trade surpluses with Latin America covered over 25% of its deficit with Asia or over 50% with Europe. Rates of profit and interest of US owned MNC's and banks in Latin American were 2 to 3 times the rates of return within the US. US enterprises which relocated to Latin America were able to reduce labor costs by 70 to 80%; US shares of Latin American retail markets via banking and local subsidiaries increased geometrically especially in fast food, shopping malls and real estate. In other words, the "free market" policies generated diametrically opposing results: the highest profits and presence in Latin America fo the 20/21st century for US MNC's and the worst growth performance in the same period for Latin America – especially Argentina, Brazil and Mexico. The poverty and stagnation of Latin America is a product of the concentration and centralization of wealth and expansion of the US.

From the point of view of US bankers the 'neo-liberal' regimes were a smashing success and their understanding of ALCA is that it will deepen and extend the literally "golden" years of 1990-2002. The massive transfers of wealth "north" has undermined local accumulation and growth; privatization has led to increased profits and higher unemployment; deregulation of banks has led to the US banks' capture of local savings and the illegal transfer of billions of illegal funds from Latin America to the US ( including Citibank's transfer of $100 million of Raul Salinas illicit funds ), and high interest rates and scarce credit for local producers; asymmetrical "free trade and protection" has led to the capture of retail trade, telecommunications and real estate by US firms and quotas and restrictions on Latin American exports in agricultural goods ( citrus, sugar, cotton, shrimps etc.), transport, textiles and many other products. If we exclude petroleum and foreign-owned low value-added assembly plant products, Latin America exports as a percentage of US exports has shrunk considerable. If this immense transfer of wealth to the US had been invested in Latin America over the past decade, living standards would have risen by 40% and national health and educational systems would have been vastly improved.

The conclusion is absolutely clear: US support for ALCA is based on the super- profits of the free-market policies and the belief that ALCA will consolidate the framework for continuing high returns. The disintegration of Latin American economies and the decay of Latin American societies is absolutely excluded from the calculation of Wall Street and Washington – except as it may lead to popular uprisings. In which case Washington is prepared to militarize control rather that modify the conditions of exploitation.

The Necessity of ALCA

ALCA is a necessary continuation of the "free market" because it establishes a legal and formal institutional basis for the total absorption of Latin American resources, savings, markets, trade and enterprises. As discussed above, Neo-liberalism has been a tremendous success for Wall Street but there still remains pockets of local control, and some enfeebled restrictive national and social legislation and in some cases weak regimes unable to fully implement Washington's policies because of popular pressure. With ALCA these impediments to total imperial plunder will be abolished. As it is conceived, ALCA's economic policies will be dictated by a commission dominated by the US – as it dominated the OEA, BID and other regional organizations. ALCA rules will be enforced by US controlled administrative personnel and military alliances. ALCA emerges "full-grown" from the previous neo-liberal shell, but it is also an attempt to make the regressive policies and structures "irreversible". By eliminating local legislative and executive bodies subject to popular influence, ALCA will substitute non-elected commissioners under the direction of the US Department of Treasury and Commerce Department, who will oversee and formulate policies to further US penetration and protect uncompetitive US enterprises, at the expense of European competitors and Latin American producers.

Finally US MNC's see ALCA as a means of restricting European competitor MNC's from grabbing lucrative Latin resources and market shares. Given the ballooning US trade deficit with the rest of the world, ALCA will permit further trade surpluses and ease the northward transfer of "dirty money". With the breakdown and discredit of neo-liberal client regimes and the rise of popular movements and progressive electoral regimes, ALCA proposes to move the power of decision-making from their local discredited clients, directly into the hands of imperial functionaries.

ALCA and Bush's Global War Strategy

While US economic functionaries are preparing the groundwork for the ALCA pact in 2005, the top officials of the Bush Administration are on a different but parallel track: the pursuit of military conquest and the monopolization of strategic petroleum resources via a war and occupation of Iraq – and most likely future wars and colonization of other oil-producing countries. The convergence of the oil-directed military conquest and Latin America is found in Washington's intense efforts to foment a military coup in Venezuela, and to promote total war in Colombia.

The ascendancy of the ultra-right militarist in the Bush regime ( Wolfowitz, Perle, Cheney, Rice and Rumsfeld ) means that at least temporarily war and repressive policies have a higher priority than economic policies – including ALCA. Washington is assuming that its Latin American client regimes and political assets among the servile foreign ministers will "carry the ball" in pushing ALCA. In a strategic sense the US warlords are counting on their increasing ties with the Latin American military and secret police ( so-called "intelligence" and security forces ) to impose ALCA, if necessary.

Objectively speaking, the Bush regime's emphasis on military conquest is premised on the present economic deficits and future monopoly profits from direct control over Middle East and Venezuelan oil. In the period of "transition", between current deficits and future gains, Washington is intent on squeezing Latin America to make up for the difference. Washington and Wall Street's calculations , however, underestimate the scope and depth of the emerging tide of mass popular movements against ALCA and its military component; as Washington proceeds in its empire-building projects, the masses are growing restless and the client regimes are becoming a footnote of history. There remains a question of timing: Will the popular movements create nationalist and socialist regimes before Washington can impose the iron cage of ALCA? I am betting on the popular movements.