Dancing to a Latin beat

Canada has high free-trade hopes

WILSON RUIZ April 20 1998

Dancing to a Latin beat

Canada has high free-trade hopes

WILSON RUIZ April 20 1998

Dancing to a Latin beat


Canada has high free-trade hopes


Santa Ana, El Salvador, is a perfect snapshot of a Central American town —typical in its lumber, in its coffee-scented heat and in the dusty elegance of its old buildings, whose whitewash at nightfall gives them a vivid phosphorescence. In the centre of the plaza, the Salvadoran army band, in blue uniforms, punches out Sousa marches near the fountain. A sizable crowd has gathered to listen: children play by the bandstand, lovers hold hands—and young people drink Labatt’s Blue out of the can. Among them is Luis Cantos, a fast-talking youth in a loud check shirt. Why does he drink Canadian beer in El Salvador? “I didn’t know Labatt’s was Canadian,” he answers with a big smile.

If Santa Ana is perfect in its familiarity, Canada is un perfecto desconocido—a perfect stranger—in Latin America.

The region buys $5.2 billion worth of Canadian exports annually and has absorbed some $29 billion in Canadian investment, yet Canada is still widely seen as a faraway land eternally covered in snow, somewhere beyond the United States. This is changing rapidly, however, and next weekend’s Summit of the Americas in Santiago, Chile, will cement a much more visible relationship. Canadian business interest in Latin America is at an all-time high, and Ottawa stands ready to lead the way in extending NAFTA-style rules for free trade all the way south to Argentina, with or without Washington. André°s Serbin, director of the Venezuelan Institute of Social and Political Studies in Caracas, says Canada will be “a key go-between for us, and one that in Latin America is perceived as a counterbalancing force to the United States.” Opening up Latin America has become a key priority for Ottawa, especially as Asian markets shrink due to the region’s financial crisis. In part, the push is in line with the born-again conversion of Prime Minister

as Canadians will also discover our north-south membership in the Americas hemisphere.” Last month, Marchi jumped at the chance to grab a higher profile—and a more demanding role—for Ottawa. At a presummit meeting of trade ministers in San José, Costa Rica, Canada was made chairman for the first 18 months of negotiations for a Free Trade Area of the Americas, a vision approved at the first hemispheric summit in Miami in 1994. Setting the talks in motion will be the key duty of the leaders of 34 nations in the Americas and the Caribbean convening in Santiago on April 18 and 19. Ottawa officials are determined to make sure the work gets off to a quick start—and is not dragged down by skepticism over Washington’s willingness to take the planned seven-year bargaining process seriously. U.S. President Bill Clinton will arrive at the summit hobbled by the congressional defeat last November of the so-called fast-track approval process he needs to negotiate trade deals on his own. That has cast a cloud of doubt over the whole ambitious initiative.

I But Canadian bullishness § remains undiminished. Latin 5 American policy-makers visit| ing Ottawa these days are of¡5 ten surprised to discover that slow-growth Europe is being eclipsed by a new preoccupation with trade opportunities in Latin America. “I’m returning home with the sense that, in Canada’s eyes, Europe is the past and Latin America the future,” said a senior Mexican diplomat after a week spent in discussions with her Canadian counterparts. Brazilian banker Roberto da Costa has seen the same trend. “Canada has become very transparent in its lobbying for free trade with Latin America because it means more business for Canadian companies and more jobs for Canada,” says the Rio de Janeiro-based executive.

In Canada, many business people and trade officials have been impressed by the results of free trade with Mexico and Chile, as well as the January trade mission to Mexico, Brazil, Chile and Argentina by Team Canada. Chrétien and his entourage

Jean Chrétien’s Liberals to open markets, by which they signed NAFTA—the 1994 North American Free Trade Agreement with the United States and Mexico—and a free-trade pact with Chile last year, as well as embracing the APEC trade forum with Asia. It is also a personal enthusiasm of Trade Minister Sergio Marchi, who was born in Argentina in 1956. His Italian immigrant parents later moved to Toronto, and his family background makes the economic link to Latin America more real to him than it might seem to most Canadians. “In Canada, we started with deep roots in Europe, we have obviously developed close bonds with the U.S., we have found out the Asian-Pacific side of our identity,” Marchi said recently. “I predict that in the next three to five years we


of premiers and businessmen came home with what Ottawa totalled as $1.78 billion in deals. Gilles Thériault, chairman of UNIC Marketing Group in Shediac, N.B., and a member of Team Canada 1998, is convinced that the region is the next big trading area. “Latin America is a huge potential market for Canadian companies in mining, forestry, fisheries, agri-food, and especially technology,” he says.

Lisa Barbiéri, spokeswoman for Kalish Canada Inc., which manufactures packaging machinery in Kirkland,

Que., says her company has seen a sharp rise in exports to Latin America in the past two years. Annual sales in Brazil alone quadrupled last year to $2.2 million and are expected to jump another 30 per cent this year. “We are definitely seeing more activity in Latin America than Asia right now,” says Barbiéri.

Ottawa will be a key player at the summit

Canada has some distinct advantages over the United States in its economic dealings with Latin America. Canadians have no history of political interference in the internal affairs of other countries in the hemisphere, and Ottawa gets high marks from Latin Americans for refusing to buckle to U.S. pressure to join the economic embargo of Cuba. In fact, as Canada posig tions itself as the honest broker at 5 the summit, many Latin Americans § hope it will strongly promote §

Cuba’s inclusion in future inter% American talks. Last week, 12 Ï former Cuban political prisoners, 5 released in the wake of the Pope’s January visit, arrived in Canada under a deal Ottawa credits in part to its yearold co-operation agreement with Havana.

The Americans’ position on the Free Trade Area of the Americas has compromised their credibility in the eyes of many Latin Americans. During his eight-day tour of South America in October, Clinton promised a hemispheric free-trade deal in place by 2005, but when he returned to Washington he was in a protectionist mood on issues from saving U.S. jobs to ensuring that new trade deals include tougher rules on environmental and labor protection. “Mr. Clinton’s promotion of both free trade and protectionism has created skepticism in Latin America,” says an Argentine former cabinet minister who is now an international business consultant in New York City.

That makes Canada’s energetic involvement all the more crucial. Central and South American leaders know the free-trade push cannot hope to gain support in Washington if Americans see it as a clamor by poor countries to gain easy access to the world’s richest market. The lesson of the NAFTA

debate has not been forgotten: free trade with Mexico was opposed by U.S. right-wing populists and left-leaning union leaders alike as a dire threat to American jobs. But if the well-heeled Canadians are for it, goes the thinking, the plan will be easier to sell. Ottawa officials say the game plan is to get the ball rolling, in hopes that U.S. political opinion shifts in favor of a deal, perhaps under the next president’s administration.

Currently there are two trade groups in

South America—the Andean Community, an internal free-trade area among Bolivia, Colombia, Ecuador, Peru and Venezuela— and Mercosur, a customs union among Argentina, Brazil, Paraguay and Uruguay. These two groups have just begun negotiating a customs agreement, to be followed by a free-trade zone in South America. Canada is also planning to sign a trade and investment agreement with the Mercosur countries, and many businessmen in the region hope Canada is ready to embrace further free trade on its own. That view is endorsed by David Winfield, a former Canadian ambassador to Mexico who now oversees government relations for Mississauga, Ont. based multinational Northern Telecom. ‘We would much rather that the U.S. and Canada work in concert on this,” says Winfield. “But from a Canadian perspective, if they can’t join us, it is in our interest to go forward as quickly as possible.”

Although some Latin Americans, notably in Brazil, worry about moving too fast, many are starting to think that only free trade can

bring about the structural changes needed in the region. Despite almost two centuries as independent nations, most Latin American countries have not succeeded in overcoming miserable poverty, high unemployment and wide social differences. “Right now, Latin America is functioning with less than half of its potential,” says Ricardo Crespo, an economist and World Bank consultant in Guayaquil, Ecuador.

Opponents focus on social costs, arguing that large multinational corporations are benefiting from globalization and open mar-

kets at the expense of workers and small business. As in Canada, trade unions have mounted the most powerful political challenge to free trade. In Santiago about 50 representatives of Canadian church, human rights and other activist groups will join some 2,000 others from the region at a People’s Summit to develop a “citizen’s agenda” aimed at the leaders.

But as free-trade fever grows in a region made up mostly of smaller countries, there is palpable interest in connecting with a medium-sized developed nation that is not the United States. Over coffee at TVPERU’s headquarters in Lima, a young and eager news reporter named Laura Rosas asks a Canadian visitor: “Why isn’t Canada more present in Latin America? How can we get Canadians to care about us?” If nothing else, Canadians this week are likely to hear a lot more about their southern neighbors.

WILSON RUIZ in Quito, Ecuador, with JOHN GEDDES in Ottawa and NOMI MORRIS in Toronto