Because All Things Are Relative, and We Think of the World in Different Terms Than We Did

Central America today: Some conclusions after the ILEX Trip

Jose Muñoz

F.A. Arias & Muñoz, Guatemala, El Salvador, Nicaragua, Honduras, Costa Rica

San Jose, Costa Rica

The American republican empire was created between 1776 and 1865 (Perkins, The Cambridge History of American Foreign Relations). Within that period, in 1823, the Monroe Doctrine was promulgated, to the dislike of the European powers. President Monroe and Secretary of State John Quincy Adams were determined “to establish American influence and undercut that of Europe, to assist commerce, and though the hopes were not high, to encourage the growth of republicanism” (Perkins).

Then came Manifest Destiny; followed by the quest for a canal (in Nicaragua and Panama) and the Spanish-American War of 1898 (over Cuba) in which William Howard Taft played a preponderant role. He was a Rough Rider in the war and was President when the Canal was finally built in Panama. The Roosevelt Corollary was in effect: The first part of the Twentieth Century was a busy time for U.S.-Latin American diplomacy.

The 60s were marked by President Kennedy’s Alliance for Progress (to date he is still the most liked U.S. President in Latin America due to his charisma); the early 70s by U.S. intervention; and the late 70’s and 80’s by world recession and war in Central America. The 90s finally brought a respite, including President George Bush's proposed Initiative of the Americas, which included the idea of building a Federal Trade Agreement from Alaska to Tierra Del Fuego.

In 2002, at the outset of the Central American Free Trade Agreement negotiations, International Legal Exchange visited Central America: What was found?

Introduction

Because all things are relative and we think of the world in different terms than we did five years ago, Central America is now perceived as a less dangerous region and as a friendly destination for U.S. tourists, business, and expatriates.

Progress can be measured in absolute terms as well. Central America has indeed made progress in absolute terms in its long road towards economic development, democracy, social justice, rule of law, equality of opportunities, and respect for human rights. Hence, this positive recognition of the area - the U.S.’s backyard - is firmly grounded on evaluation of the region’s social and economic data and indicators.

International institutions and government, including our own ABA’s ILEX, the World Bank, the European Union, neighboring Mexico, and the U.S. State Department and Office of the U.S. Trade Representative (USTR), have increased the visibility of their delegations and trips to the region and are embarked on projects of paramount importance to the region and the world. Water, energy, bio-diversity, transparency of electoral processes, administration of justice, micro-enterprise, intellectual property protection, increased free trade, political and economic integration, and foreign direct investment are but a few of the areas to which the international and the regional communities have dedicated their concerted joint efforts.

Following is a summary of some relevant facts that make Central America the focus of attention:

Respect for Human Rights and Democracy

The core of the America’s System of Human Rights is in San José, Costa Rica: the Inter-American Court of Human Rights. From its inception, the Court has decided more than 50 cases. Its justices are highly qualified publicists, and its decisions are respected.

The fact that all five Central American Presidents in power today were elected in democratic elections is precedent setting. Not only are they well regarded in their own countries, but they are well regarded in the other Central American countries: They are even good friends among themselves. Precisely because of this camaraderie, Costa Rica and Nicaragua for instance, have put long standing diplomatic conflicts on the back burner, thereby allowing for an optimistic multilateral agenda focusing on win-win projects as opposed to debilitating acrimonious disputes

The Presidents of Central America are not content with fostering democratic elections: They encourage transparency in the public affairs and personally lead anti-corruption campaigns, including those against prominent political figures such as former Nicaraguan President Arnoldo Alemán.

Economic Indicators, Economic Development and Growth

Foreign direct investment in Central America and freer trade within the region and between the region and the rest of the world, if organized in accordance with the principles of international economic law, may be the single most important element in bringing about permanent economic, social, and human progress to these hitherto vulnerable nations.

As a whole, the five Central American countries represent a market of thirty-plus million people. GDP growth in 2001 was over 3%, exports exceeded U.S.$ 12,000 million, while imports exceeded U.S.$ 19,000 million. Central America not only represents an attractive market for products, but also for direct investment because, i.e., infrastructure is badly needed: Central America is painfully separated by formidable natural barriers, which remain unconquered due to a woefully feeble infrastructure. The countries lack great regional highways and railways. They also lack adequate maritime and aviation ports. Production of energy across the region is uneven, and the regional grid is not fully integrated, failing to efficiently deliver surplus power where it is needed. Telecommunications infrastructure is also unevenly developed, causing many-a-headache and inordinately high IT and telecom costs to multinational corporations with regional operations. If this is coupled with proximity to the U.S. market, political and even military stability, skilled labor force in some countries, less expensive labor force in others, Central America provides opportunities for the world’s stagnant economies.

Intel manufactures chips in Costa Rica; software is developed throughout the region; major international hotel chains are also present, Central America is after all a safe, if not one of the safest, tourist destination for Americans; air transportation is served by all the most important airlines. Mergers and acquisitions are active: Royal-Ahold from the Netherlands partnered with the Paiz family from Guatemala and the Uribe family from Costa Rica to establish the most prominent supermarket chain in Central America; South-African Breweries-Miller acquired a 50% stake in the breweries of El Salvador and Honduras; the Bavaria Brewery from Colombia purchased the market-leader brewery in Panama (La Nacional), while Heineken joined efforts with Panamco (which is the biggest Coca-Cola bottler in Latin America) and the Costa Rican Brewery (FIFCO) to make a bid for the second brewery in Panama (Barú) and also purchased a 25% stake in FIFCO and in FIFCO’s own stake in the Nicaragua Brewery (COCECA.) These were complicated multi-million dollar transactions in the midst of the world recession. The banking system is also moving: Citibank and Scotiabank are the international leaders, Cuscatlán and BFA from El Salvador and Banco del Istmo (a very suggestive name) from Panama are the regional ones.

In sum, Central America offers potential for growth with risks that have been minimized.

Political and economic integration: The Puebla-Panama Plan

The increased economic and political stability in Central America has brought the recurring issue of integration of the countries that make up the region to the forefront. The integration effort; however, has gained momentum and is more promising than ever before. In stark contrast to previous regional efforts focused on the creation of regional institutions, there is an increasing focus by governments, multilateral entities and private actors on more immediate challenges, most of which deal with infrastructure.

Enter the Puebla-Panama Plan. The Plan is the result of the planning and joint efforts of two institutions: the Government of Mexico and the Secretariat for Central American Integration (“SICA”). Both institutions came together to bring several dozen projects they had been separately working on to the attention of the governments of Mexico, Guatemala, Panama, El Salvador, Costa Rica, Honduras, Nicaragua, and Belize. Through the coordination of a permanent office, periodical meetings of the countries’ Presidents, and the financial planning and strong institutional support of the Inter-American Development Bank (IDB), the Central American Bank for Economic Integration (CABEI), and other multilateral institutions, these several dozen parallel projects were transformed into a joint effort that encompasses 17 specific projects in eight areas: (a) sustainable development, (b) human development, (c) prevention and mitigation of natural disasters, (d) promotion of tourism, (e) facilitation of commercial exchange, and, (f) integration of the network of regional roads. Energy and telecommunications are also a major part of the Plan.

The Plan has borne early fruit, as it has enabled governments and politicians in the region to present their constituencies and their institutional benefactors (IDB, World Bank, and international aid agencies in the U.S. and the European Union) with a program and schedule of projects that they will be willing to support and fund.. Finally, the Plan will hopefully “de-nationalize” the development agenda in the region, which should allow the countries to dodge the bullet of an escalation of migratory problems and further national boundary issues among them.

At present, the Plan is contemplating specific projects regarding integration of the electric power grid throughout the region and the creation of an energy market, the unification of customs procedures, and improvement of airport security. The Plan, in and of itself, will present important opportunities for local and foreign developers of infrastructure.

The Power Grid

The Central American Electric Interconnection System (SIEPAC) provides for electric interconnection infrastructure to facilitate commercial exchanges of electric power among the Central American nations. The transmission line will be 1,830 kilometers long and will be capable of transporting 230 KV from Guatemala to Panama.

Whereas the Framework Agreement, executed on 29 December 1996, establishes the structure, it is the U.S.$170 million loan from ordinary capital under the Single Currency Facility of the Inter-American Development Bank (IDB) and the 60 million ECUs loan from the Spanish Quincentennial Fund that will provide the substance needed by SIEPAC.

The project has three sets of partners: the five Central American countries and Panama, the IDB, and Spain’s ENDESA.

The power grid will allow for the existence of a power exchange market with players in all of the Central American Republics.

Free Trade: CAFTA

The proposed Free Trade Agreement between the U.S. and Central America, or CAFTA, has manifold importance. Negotiations with Central America may serve as a catalyst to move forward the somewhat cumbersome negotiations with all of Latin America for the Free Trade Agreement of the Americas. It will also provide market access to the region’s economies, and serve as a vehicle to establish international labor, human rights and environmental standards, facilitate the creation of permanent and viable public and legal institutions in Central America, and strengthen legal and regulatory policies towards direct foreign investment.

The pressure and desire to move forward in both reaching an agreement with the U.S. and having it approved by the U.S. Congress will add momentum to the foundation and operation of much-needed institutions, such as a supra-national Supreme Court, dispute resolution boards for intra-regional immigration, labor, customs and trade, and decision-making authorities on common economic and monetary policies.

Increased foreign direct investment flows, under a legal and regulatory frame provided by CAFTA, will serve the goal of increased economic and social opportunities across the social spectrum.

The ABA and Central America

The ABA and this Section of International Law and Practice can have a preponderant and determinant role in creating sound, realistic and permanent opportunities for advancing the rule of law and social and economic development in Central America.

Some of the recommendations that the ILEX committee received for follow-up include:

• To broaden the ABA’s program of presentations and discussions of the U.S. Constitution to bring these discussions to the Central American public and court, government and bar leaders. The presentations should be more international in nature and include discussion of constitutional principles in the Constitution of the United States, Magna Carta and the first joint constitution of the Central American States (1824) after their independence from Spain. The discussion should also serve as a forum for presentation of court development of the basic constitutional principles and theories in modern times (e.g. law and economics, critical legal studies.)

• To maximize the opportunities offered by passage of Trade Promotion Authority to the President of the United States and the Bush Administration’s stated policy of negotiating a free trade agreement (CAFTA) with the Central American republics to:

• advance regional legal and administrative institutions under rule of law principles;
• create a legal framework for foreign direct investment that includes, i.e., realistic minimum standards in administration of labor laws, occupational and environmental safety, social security and education; and
• Strengthen the protection of individual rights.

CAFTA negotiations are enhanced by the U.S. Administration’s decision to include capacity building programs for negotiation and treaty administration. The U.S. Department of State, AID, USTR, and multilateral agencies like the InterAmerican Development Bank (IDB) and the Central American Bank for Economic Integration (CABEI) are expected to play active roles in CAFTA-related capacity building programs.

• To liaise with institutions of higher learning in the U.S. and Central America, such as law schools, INCAE (the Harvard-affiliated graduate school for business administration), and the schools for judges and court officers (“escuelas judiciales”), to promote courses of study in protection of constitutional rights, labor law, foreign investment and economic development.

Conclusion

To define the goal in short, in the philosophy of Monroe and John Quincy Adams referred to in the introduction of this article, “to assist commerce and to encourage the growth of republicanism."