International Political Economy Series

General Editor: Timothy M. Shaw, Professor and Director, Institute of International

Relations, The University of the West Indies, Trinidad & Tobago

Titles include:
Leslie Elliott Armijo (editor)
FINANCIAL GLOBALIZATION AND DEMOCRACY IN EMERGING MARKETS

Jeffrey Ayres and Laura Macdonald (editors)

CONTENTIOUS POLITICS IN NORTH AMERICA
National Protest and Transnational Collaboration under Continental Integration

Eudine Barriteau
THE POLITICAL ECONOMY OF GENDER IN THE TWENTIETH-CENTURY
CARIBBEAN

Gabriel G. Casaburi
DYNAMIC AGROINDUSTRIAL CLUSTERS
The Political Economy of Competitive Sectors in Argentina and Chile

Peter Clegg
THE CARIBBEAN BANANA TRADE
From Colonialism to Globalization

Andrew F. Cooper and Timothy M. Shaw (editors)

THE DIPLOMACIES OF SMALL STATES
Between Vulnerability and Resilience

Matt Davies
INTERNATIONAL POLITICAL ECONOMY AND MASS COMMUNICATION IN CHILE
National Intellectuals and Transnational Hegemony

Yvon Grenier
THE EMERGENCE OF INSURGENCY IN EL SALVADOR
Ideology and Political Will

Ivelaw L. Griffith (editor)

THE POLITICAL ECONOMY OF DRUGS IN THE CARIBBEAN

Jerry Haar and Anthony T. Bryan (editors)

CANADIAN–CARIBBEAN RELATIONS IN TRANSITION
Trade, Sustainable Development and Security

Tricia Juhn
NEGOTIATING PEACE IN EL SALVADOR
Civil–Military Relations and the Conspiracy to End the War

Laura Macdonald and Arne Ruckert (editors)

POST–NEOLIBERALISM IN THE AMERICAS

R. Lipsey and P. Meller (editors)

WESTERN HEMISPHERE TRADE INTEGRATION
A Canadian–Latin American Dialogue

Shaw
Gordon Mace, Andrew F. Cooper and Timothy M. Shaw (editors)
INTER-AMERICAN COOPERATION AT A CROSSROADS

Don Marshall
CARIBBEAN POLITICAL ECONOMY AT THE CROSSROADS
NAFTA and Regional Developmentalism

Juan Antonio Morales and Gary McMahon (editors)

ECONOMIC POLICY AND THE TRANSITION TO DEMOCRACY
The Latin American Experience

Leo Panitch and Martijn Konings (editors)

AMERICAN EMPIRE AND THE POLITICAL ECONOMY OF GLOBAL FINANCE

Eul-Soo Pang
THE INTERNATIONAL POLITICAL ECONOMY OF TRANSFORMATION IN
ARGENTINA, BRAZIL, AND CHILE SINCE 1960

Henry Veltmeyer, James Petras and Steve Vieux

NEOLIBERALISM AND CLASS CONFLICT IN LATIN AMERICA
A Comparative Perspective on the Political Economy of Structural Adjustment

Henry Veltmeyer, James Petras

THE DYNAMICS OF SOCIAL CHANGE IN LATIN AMERICA

William Vlcek
OFFSHORE FINANCE AND SMALL STATES
Sovereignty, Size and Money

International Political Economy Series

Series Standing Order ISBN 978–0–333–71708–0 hardcover
Series Standing Order ISBN 978–0–333–71110–1 paperback
(outside North America only)

You can receive future titles in this series as they are published by placing a standing
order. Please contact your bookseller or, in case of difficulty, write to us at the address
below with your name and address, the title of the series and one of the ISBNs quoted
above.
Customer Services Department, Macmillan Distribution Ltd, Houndmills, Basingstoke,
Hampshire RG21 6XS, England

Shaw
Inter-American Cooperation
at a Crossroads
Edited by

Gordon Mace
Professor, Department of Political Science and School of Advanced International Studies, and
Director of the Inter-American Studies Centre, Université Laval, Canada

Andrew F. Cooper
Distinguished Fellow, The Centre for International Governance Innovation (CIGI), Canada
and Professor, Department of Political Science, University of Waterloo, Canada

Timothy M. Shaw
Professor and Director, Institute of International Relations, University of the West Indies,
St. Augustine, Trinidad and Tobago, and Senior Fellow, The Centre for International Governance
Innovation (CIGI), Canada

Shaw
Introduction, selection and editorial matter © CIGI and Gordon Mace 2010
Individual chapters © contributors 2010
All rights reserved. No reproduction, copy or transmission of this
publication may be made without written permission.
No portion of this publication may be reproduced, copied or transmitted
save with written permission or in accordance with the provisions of the
Copyright, Designs and Patents Act 1988, or under the terms of any licence
permitting limited copying issued by the Copyright Licensing Agency,
Saffron House, 6–10 Kirby Street, London EC1N 8TS.
Any person who does any unauthorized act in relation to this publication
may be liable to criminal prosecution and civil claims for damages.
The authors have asserted their rights to be identified as the authors of
this work in accordance with the Copyright, Designs and Patents Act 1988.
First published 2010 by
PALGRAVE MACMILLAN
Palgrave Macmillan in the UK is an imprint of Macmillan Publishers Limited,
registered in England, company number 785998, of Houndmills, Basingstoke,
Hampshire RG21 6XS.
Palgrave Macmillan in the US is a division of St Martin’s Press LLC,
175 Fifth Avenue, New York, NY 10010.
Palgrave Macmillan is the global academic imprint of the above companies
and has companies and representatives throughout the world.
Palgrave® and Macmillan® are registered trademarks in the United States,
the United Kingdom, Europe and other countries.
ISBN 978–0–230–24361–3 hardback
This book is printed on paper suitable for recycling and made from fully
managed and sustained forest sources. Logging, pulping and manufacturing
processes are expected to conform to the environmental regulations of the
country of origin.
A catalogue record for this book is available from the British Library.
Library of Congress Cataloging-in-Publication Data
Inter-American cooperation at a crossroads/edited by Gordon Mace, Andrew F.
Cooper, Timothy M. Shaw.
p. cm.
Includes bibliographical references and index.
ISBN 978–0–230–24361–3 (hardback)
1. Pan-Americanism. 2. Latin America—Relations—United States. 3. United
States—Relations—Latin America. I. Mace, Gordon, 1947– II. Cooper, Andrew
Fenton, 1950– III. Shaw, Timothy M., 1945–
F1418.I5953 2011
327.98073—dc22
2010034182
10 9 8 7 6 5 4 3 2 1
19 18 17 16 15 14 13 12 11 10
Printed and bound in Great Britain by
CPI Antony Rowe, Chippenham and Eastbourne

Shaw
The Centre for International Governance Innovation (CIGI) is an independent,
non-partisan think tank that addresses international governance challenges.
Led by a group of experienced practitioners and distinguished academics,
CIGI aims to anticipate emerging trends in international governance and
to strengthen multilateral responses to the world’s most pressing problems.
CIGI advances policy ideas and debate by conducting studies, forming net-
works and convening scholars, practitioners and policy makers. By operating
an active program of publications, events, conferences and workshops, CIGI
builds capacity to effect change in international public policy. CIGI was
founded in 2001 by Research In Motion (RIM) co-CEO and philanthropist
Jim Balsillie, who serves as CIGI’s chair. CIGI is advised by an International
Advisory Board.

Shaw
This page intentionally left blank

Shaw
Contents

List of Tables and Figures ix

Foreword: Imagining without Building the Sub-Regions of the Americas x
Robert A. Pastor
Acknowledgements xx
Notes on Contributors xxii
List of Abbreviations xxviii

Introduction 1
Gordon Mace, Andrew F. Cooper and Timothy M. Shaw
Part I A Changing Landscape
1 Hemispheric Relations: Budding Contests in the Dawn of a New Era 23
Diana Tussie
2 The Obama Administration and Latin America: Towards a New
Partnership? 43
Daniel P. Erikson
3 The Caribbean in a Turbulent World 60
Norman Girvan
Part II Responding to Challenges
4 Economic Integration in the Americas: An Unfinished Agenda 81
Antoni Estevadeordal and Kati Suominen
5 Building on Sub-Regional Economic Integration Projects to
Forge an Energy and Climate Partnership of the Americas 95
Thomas Andrew O’Keefe
6 Demise of the Inter-American Democracy Promotion Regime? 111
Thomas Legler
7 A More Secure Hemisphere? 131
Rut Diamint
8 Poverty Reduction and the Role of Regional Institutions 153
Nicola Phillips
Part III The Effectiveness of Other Institutions
9 The Successes, Failures and Future of Mercosur 171
Marc Schelhase

vii

Shaw
viii Contents

10 Ruling the North American Market: NAFTA and its Extensions 187
Louis Bélanger and Richard Ouellet
11 New Forms of Integration: ALBA Institutions and Mechanisms 204
Josette Altmann
Part IV Reconstructing a Regional System for the Americas
12 Middle Powers and Hemispheric Diplomacy: Towards an A10 225
Jorge Heine
13 What Role for the Private Sector in Inter-American
Multilateralism? 242
Richard E. Feinberg
14 Conclusion: The Fragile Legitimacy of Inter-American
Institutions 261
Gordon Mace and Jean-Philippe Thérien
Index 275

Shaw
List of Tables and Figures

Tables

0.1 Indicators for the Americas, 1980–2006 xiv

0.2 Western Hemisphere: Total and intraregional exports,
1994–2004 xvi
4.1 Trend comparisons of trade openness and regional bias
(1990 and 2007) 83
4.2 Intraregional trade (share of exports), 2008 85
4.3 Intraregional trade in the Western Hemisphere (1990–2009) 86
11.1 ALBA and Petrocaribe summits 206
11.2 Latin America and the Caribbean: Poverty evolution 208
11.3 Latin America: Main trading partners by sub-region (2007) 209
11.4 Latin America: Poverty and extreme poverty (%) 212
11.5 Latin America: Distribution of wealth in the wealthiest and
poorest segments of the population (%) 213
11.6 Venezuelan funds destined to the countries of the ALBA
(in US$ millions) 214

Figures

4.1 Trade with Western Hemisphere RTA partners in 2008 83

4.2 Trade with Western Hemisphere RTA partners in 1990 84

ix

Shaw
Foreword
Imagining without Building the
Sub-Regions of the Americas
Robert A. Pastor

The nations of the Western Hemisphere were born with a congenital

contradiction. Their struggles for independence were, largely, national strug-
gles, though many of the liberators dreamed of a wider continental entity. Those
dreams of unity remain in the hearts of many Latin and North Americans and
have resulted in periodic declarations to form new groups of nations or func-
tional inter-governmental institutions.
The groups have varied in size and differed in purpose. Simon Bolivar
dreamed of a united group of Latin American nations. James Monroe viewed
all of the Americas as distinct from and better than Europe, and his ‘doc-
trine’ aimed to preclude European re-colonization of the Americas. When
hopes for unification faded, national leaders proposed new forms of coop-
eration to defend the region, prevent intervention, foster human rights,
resolve investment disputes, and promote freer trade.
While the dream has not died, the reality has fallen short. A few of the
new groups include all the nations of the Americas, but most of them
encompass a few proximate nations or were focused on particular functions.
In most cases, the initial impetus to combine stopped short of institutionali-
zation. Even those that achieved some form of institutionalization did not
achieve their original promise.
The contributors to this book have systematically examined the history
of sub-regionalism and inter-American cooperation in the Americas. They
find the evolution, growth, and diversification of the inter-American idea
endlessly fascinating and have conveyed the creativity as well as the reality
in this volume.

The idea of regionalism and its evolution

The idea of the Americas was born of two unusual ironies five centuries ago.
First, Christopher Columbus claimed to have discovered the region and yet
he met large numbers of people who were already here. He compounded
his error by calling them ‘Indians’, believing he had arrived in South Asia,
missing his destination by half a globe. The second irony was a joke on
Columbus: his magnificent achievement was named by a German publisher
to honour another Italian navigator, Amerigo Vespucci, who again ‘discovered’
the ‘Americas’ several decades later.

Shaw
 Foreword xi

These ironic roots may explain why the patterns of inter-American

cooperation also yield a convoluted quality. In the early nineteenth century,
soon after a majority of new nations emerged in the Americas, US President
James Monroe enunciated a strategic vision of the Americas which aimed to
separate those new nations from Europe’s ancient intrigues. Latin America
welcomed the statement, believing that it meant that the US would defend
their independence, and in a few cases the US did so, but not often or impar-
tially enough to assuage their concerns. Simon Bolivar responded to Monroe’s
initiative three years later by convening an ‘Amphicytonic Congress’ in
Panama to discuss unity. Initially uncertain as to whether to invite the United
States, he chose to do so, though late and without much enthusiasm. The
US was similarly ambivalent, debating over a prolonged period whether to
attend, and finally dispatching two envoys, one of whom died on the way and
the other arrived too late for the conference. That pattern of inter-American
cooperation has been repeated. As pertinent, not much was accomplished in
Panama. Nonetheless, Latin American leaders met from time to time during
the next 60 years, and the US was not upset over the lack of invitations.
In 1889, having survived a devastating civil war and begun to explore
the world for new markets and opportunities, the US turned first to Latin
America, inviting its leaders to Washington to discuss freer trade and mecha-
nisms for handling disputes. The leaders decided to establish an institution
to address these and other issues, and that became the Pan American Union.
At the turn of the century, Andrew Carnegie built a magnificent building to
host the new institution in Washington, and that building has housed the
Organization of American States (OAS) since its founding in 1948. The OAS
has proven the most durable (though not necessarily the most effective)
institution in the Americas. It includes other institutions, such as the Inter-
American Commission on Human Rights and the Inter-American Court
on Human Rights. It expanded into economic development and cultural
affairs and, with the Santiago Commitment of 1991 and the Inter-American
Democratic Charter a decade later, moved into the area of trying collectively
to preserve and defend democracy in all the OAS states.
Beginning in 1960, groups of Latin American countries forged economic
arrangements to strengthen their bargaining power against foreign investors,
widen their markets, and set rules that could reduce disputes and enhance
cooperation. Those groups initially included free trade regimes, like the
Caribbean Common Market (CARICOM), the Central American Common
Market, and the Andean Pact. Several decades later, after the debt crises of
the 1980s, several sub-regions, including North America and Mercosur, tried
to deepen their economic pacts through ‘open regionalism’. More recently,
a group of governments, led by Venezuela, formed an organization,
Bolivarian Alternative for the Americas (ALBA), aimed at an alternative to
free trade. Other organizations, such as Union of South American Nations
(UNASUR), seek greater cooperation among South American countries.

Shaw
xii Foreword

Parameters for assessment

This volume examines and assesses all of these organizations as well as

new regimes on democracy, human rights, and trade. While each chapter
displays the independence and creativity of its author, two threads connect
most of them, and that is: cooperation is desirable, and there is room for
improvement. Recommendations abound, making this volume that much
more valuable.
Stanley Hoffmann helped us to recognize that while international organi-
zations seek to transcend the nation state, they also reflect and are affected by
the balance of power. In the Western Hemisphere, the disproportionate power
of the US has shaped virtually all the groups. Indeed, many are established
to try to balance that power. A discussion of inter-American cooperation that
fails to take into account the balance of power is one that places greater faith
in the declarations than the substance of the organizations.
In Table 0.1 – Indicators of the Americas – one can see clearly the
dimensions of each major subgroup. Mercosur – with Brazil as its principal
partner – represents 28 per cent of the population and about 7 per cent of
the gross product and the total trade of all the Americas. In comparison, the
Andean Community represents 15 percent of the population, 2.7 per cent
of the gross product, and 4.5 per cent of the region’s total trade. CARICOM
and the Central American Common Market add to about 6 per cent of the
population and less than one percent of the region’s product and trade.
Alongside these efforts, the three countries of North America constitute half
of the region’s population and nearly 90 per cent of the region’s gross product
and total trade.
The North American market, in brief, eclipses all the other regional groups
in the hemisphere. Indeed, all the other 31 nations of the Americas consti-
tute about 10 per cent of the economic weight of the Americas. Although
Mercosur aspires to be as deep as the European Union, and the others have set
high standards, by one simple indicator – intra-regional trade as a percentage
of total trade – it is clear that North America is the only group that has estab-
lished a market (see Table 0.2). Even if one includes Chile and Bolivia with
Mercosur, the total amount of intra-regional exports in that group as a percent
of its global exports reached only 16 per cent in 2004. Only 10 per cent of the
Andean Community’s exports with the world were with each other. Central
America, in contrast, traded 28 per cent of its total trade with each other. In
the case of North America, more than half of the three countries’ exports
are destined for each other, and that amounted in 2004 to US$700 billion as
compared to their total exports of US$1.2 trillion.
No doubt North America is a daunting economic presence because of the
US, but it is worth noting that Canada’s economy is second in the Americas
and Mexico’s is fourth. Together, North America is a formidable global entity
while the other groups in the Americas are Lilliputian.

Shaw
 Foreword xiii

The future of inter-American cooperation needs to face these asymmetries,

especially when contemplating economic cooperation. This economic gap,
however, is not as important in the areas of human rights and democ-
racy, and indeed, in these areas, the Americas has demonstrated both real
progress and continued obstacles. The future of cooperation in the Americas
might very well turn on whether the governments overcome those obstacles
and create a durable mechanism to assure the continued promotion of the
human rights of all the Americas and the defence of democracy.

Shaw
 xiv
Table 0.1 Indicators for the Americas, 1980–2006
Group or Population GDP (billions USD) Exports Imports Trade (a) Total Trade
country (millions) (billions USD) (billions USD) as % of (billions
GDP USD)

2006 1980 2006 1980 2006 1980 2006 2006 2006

North 436.2 51.6% 3,198.5 15,275.7 89.0% 410.6 1,675.1 432.4 2,544.0 27.6% 4,219.1 87.2%
America
US 299.4 2,709.0 13,163.9 76.7%* 301.8 1,036.6 314.8 1,918.1 22.4% 2,954.7 61.0%*
Canada 32.6 266.0 1,271.6 82.0 388.1 82.8 357.7 58.7% 745.8
Mexico 104.2 223.5 840.2 26.8 250.4 34.8 268.2 61.7% 518.6
Mercosur 237.7 28.1% 356.9 1,310.6 7.6% 37.0 190.3 48.3 140.8 25.3% 331.1 6.8%
Brazil 189.3 234.9 1,067.8 6.2%* 23.5 137.8 33.8 95.9 21.9% 233.7 4.8%*
Argentina 39.1 77.0 214.2 10.9 46.6 11.1 34.2 37.7% 80.8
Paraguay 6.0 4.6 9.3 0.6 1.9 0.9 5.9 83.9% 7.8
Uruguay 3.3 10.1 19.3 2.0 4.0 2.5 4.8 45.6% 8.8
Andean 122.8 14.5% 138.0 466.3 2.7% 36.5 130.0 36.1 89.8 47.1% 219.8 4.5%
Community
Venezuela 27.0 69.4 184.5 20.5 65.2 20.2 33.6 53.6% 98.8
Colombia 45.6 33.4 135.7 6.5 24.4 7.0 26.0 37.1% 50.4
Peru 27.6 20.6 93.2 5.2 23.8 4.2 15.3 42.0% 39.1
Ecuador 13.2 11.7 41.4 3.2 12.7 3.6 12.1 59.9% 24.8
Bolivia 9.4 2.8 11.5 1.1 3.9 1.1 2.8 58.3% 6.7
Caricom (b) 12.1 1.4% 4.1 15.0 0.1% 2.1 2.5 2.4 7.3 65.3% 9.8 0.2%
Haiti 9.4 1.5 5.0 0.4 0.5 0.6 1.6 42.0% 2.1
Jamaica 2.7 2.6 10.0 1.7 2.0 1.8 5.7 77.0% 7.7

Shaw
CACM 36.7 4.3% 21.0 87.2 0.5% 6.0 20.9 8.5 39.5 69.3% 60.4 1.2%
Guatemala 13.0 7.9 30.2 1.9 6.0 2.5 11.9 59.3% 17.9
El Salvador 6.8 3.6 18.7 1.2 3.7 1.5 7.7 61.0% 11.4
Costa Rica 4.4 4.8 22.2 1.4 8.2 2.1 11.5 88.7% 19.7
Honduras 7.0 2.6 10.8 1.0 2.0 1.3 5.4 68.5% 7.4
Nicaragua 5.5 2.1 5.3 0.5 1.0 1.1 3.0 75.5% 4.0
The Americas 845.5 100.0% 3,726.1 17,154.8 100.0% 492.2 2,018.8 527.7 2,821.4 28.2% 4,840.2 100.0%

CACM ⫽ Central American Common Market

Caricom ⫽ Caribbean Common Market
a. Trade is defined as Exports ⫹ Imports
b. Export and Import data included only for Haiti and Jamaica
* As a percentage of the Americas
Sources: For 1980: GDP, export and import data taken from World Bank, World Development Report 1999/2000: Entering the 21st Century, 252–3, 268–9;
for population, World Bank, World Development Indicators 2000, table 1.1, 13. For 2004: Import and export data taken from World Trade Organization,
Statistics Database, www.wto.org: population and GDP data taken from World Bank, Data Query. www.worldbank.org.

xv
Shaw
xvi

Table 0.2 Western Hemisphere: Total and intraregional exports, 1994–2004 (millions
of US dollars and percentages)
1994 1995 1996 1997 1998

Western Hemisphere 1,2,3

Total Exports 858,456 994,328 1,071,955 1,179,833 1,161,673
% growth 18.1 15.8 7.8 10.1 –1.5
Extra-hemispheric 392,278 471,910 496,479 521,552 484,536
exports
% growth 15.4 20.3 5.2 5.1 –7.1
Intra-hemispheric 466,178 522,419 575,475 658,280 677,138
exports
% growth 20.4 12.1 10.2 14.4 2.9
Intra/Total 54.3 52.5 53.7 55.8 58.3
Latin America and the Caribbean (LAC)2,3
Total Exports 182,545 220,411 249,332 276,962 268,849
% growth 18.1 20.7 13.1 11.1 –2.9
Extra-LAC exports 147,584 178,629 203,074 223,464 215,609
% growth 18.0 21.0 13.7 10.0 –3.5
Intra-LAC exports 34,961 41,782 46,257 53,498 53,240
% growth 18.7 19.5 10.7 15.7 –0.5
Intra/Total 19.2 19.0 18.6 19.3 19.8
Andean Community
Total Exports 34,243 38,259 45,687 47,655 38,742
% growth 17.5 11.7 19.4 4.3 –18.7
Extra-Andean 30,816 33,524 40,996 42,028 33,402
exports
% growth 17.3 8.8 22.3 2.5 –20.5
Intra-Andean exports 3,427 4,735 4,691 5,627 5,341
% growth 19.8 38.2 –0.9 19.9 –5.1
Intra/Total 10.0 12.4 10.3 11.8 13.8
Caricom3
Total Exports 5,069 5,531 5,439 6,008 5,543
% growth 57.7 9.1 –1.7 10.4 –7.7
Extra-Caricom 4,376 4,649 4,568 5,082 4,473
exports
% growth 64.2 6.2 –1.8 11.3 –12.0
Intra-Caricom 693 882 872 925 1,070
exports
% growth 26.0 27.2 –1.1 6.1 15.6
Intra/Total 13.7 15.9 16.0 15.4 19.3
CACM
Total Exports 5,509 6,864 7,778 8,242 10,313
% growth 12.4 24.6 13.3 6.0 25.1
Extra-CACM exports 4,280 5,408 6,192 6,417 8,125
% growth 12.7 26.4 14.5 3.6 26.6

Shaw
 xvii

1999 2000 2001 2002 2003 2004 AAGR

1994–20044

1,216,398 1,308,489 1,234,953 1,192,998 1,289,255 1,490,117

4.7 7.6 –5.6 –3.4 8.1 15.6 5.7
488,397 508,778 478,327 459,310 513,532 592,897

0.8 4.2 –6.0 –4.0 11.8 15.5 4.2

728,001 799,711 756,626 733,688 775,723 897,220

7.5 9.9 –5.4 –3.0 5.7 15.7 6.8

59.8 61.1 61.3 61.5 60.2 60.2

287,680 346,324 334,441 332,182 366,119 439,222

7.0 20.4 –3.4 –0.7 10.2 20.0 9.2
242,330 290,255 275,638 283,493 312,581 367,311
12.4 19.8 –5.0 2.8 10.3 17.5 9.5
45,349 56,069 58,803 48,689 53,539 71,911
–14.8 23.6 4.9 –17.2 10.0 34.3 7.5
15.8 16.2 17.6 14.7 14.6 16.4

43,207 57,236 50,837 48,955 55,015 72,578

11.5 32.5 –11.2 –3.7 12.4 31.9 7.8
39,268 52,045 45,181 43,766 50,052 65,049

17.6 32.5 –13.2 –3.1 14.4 30.0 7.8

3,939 5,191 5,656 5,189 4,963 7,529
–26.2 31.8 9.0 –8.3 –4.4 51.7 8.2
9.1 9.1 11.1 10.6 9.0 10.4

5,933 7,754 8,393 5,480 7,108 —

7.0 30.7 8.3 –34.7 29.7 — 3.8
4,871 6,349 6,929 4,453 5,775 —

8.9 30.3 9.1 –35.7 29.7 — 3.1

1,062 1,404 1,464 1,027 1,334 —

–0.7 32.2 4.3 –29.9 29.9 — 7.5

17.9 18.1 17.4 18.7 18.8 —

11,175 12,765 10,510 10,008 11,626 12,621

8.4 14.2 –17.7 –4.8 16.2 8.6 8.6
8,886 10,194 7,693 7,198 8,498 9,060
9.4 14.7 –24.5 –6.4 18.1 6.6 7.8

(Continued)

Shaw
xviii

1994 1995 1996 1997 1998

Intra-CACM exports 1,229 1,456 1,586 1,826 2,188

% growth 11.5 18.5 8.9 15.1 19.9
Intra/Total 22.3 21.2 20.4 22.1 21.2
Mercosur
Total Exports 62,113 70,402 74,998 82,342 81,323
% growth 14.8 13.3 6.5 9.8 –1.2
Extra-Mercosur 50,157 56,019 57,960 62,289 60,972
exports
% growth 13.7 11.7 3.5 7.5 –2.1
Intra-Mercosur 11,957 14,384 17,038 20,053 20,351
exports
% growth 19.3 20.3 18.5 17.7 1.5
Intra/Total 19.2 20.4 22.7 24.4 25.0
Mercosur + Chile +
Bolivia (MCB)
Total Exports 74,790 87,977 91,700 100,632 97,197
% growth 17.0 17.6 4.2 9.7 –3.4
Extra-MCB exports 58,333 67,903 68,732 73,874 70,615
% growth 16.5 16.4 1.2 7.5 –4.4
Intra-MCB exports 16,458 20,074 22,968 26,758 26,582
% growth 18.6 22.0 14.4 16.5 –0.7
Intra/Total 22.0 22.8 25.0 26.6 27.3
NAFTA
Total Exports 737,888 853,694 918,077 1,013,108 1,012,114
% growth 18.2 15.7 7.5 10.4 –0.1
Extra–NAFTA exports 383,349 460,581 485,698 517,457 490,885
% growth 15.1 20.1 5.5 6.5 –5.1
Intra-NAFTA exports 354,539 393,113 432,379 495,651 521,229
% growth 21.7 10.9 10.0 14.6 5.2
Intra/Total 48.0 46.0 47.1 48.9 51.5

1. Western Hemisphere includes Latin America, Canada, and the United States. There are gaps in
some years for some Caribbean countries.
2. Latin America and the Caribbean includes Argentina, Bolivia, Brazil, Chile, Colombia, Costa
Rica, Dominican Republic (except 1998–2004), Ecuador, EI Salvador, Guatemala, Honduras,
Mexico, Nicaragua, Panama (except 1994), Paraguay, Peru, Uruguay, Venezuela and Caricom (see
note 3 for exceptions). Caricom data for 2004 are not available.
3. Caricom includes Bahamas, Barbados, Belize, Dominica, Grenada, Guyana, Jamaica, St Kitts and
Nevis, St Lucia, St Vincent and the Grenadines, Suriname, and Trinidad and Tobago, because of
the unavailability of data for the other Caricom member states. Totals exclude Bahamas (1994–96,
2002–03), Guyana (1994–97, 2003), St Kitts and Nevis (1996) and Suriname (2002–03).

Shaw
 xix

1999 2000 2001 2002 2003 2004 AAGR

1994–20044

2,289 2,571 2,817 2,810 3,128 3,560

4.6 12.3 9.6 –0.2 11.3 13.8 11.2
20.5 20.1 26.8 28.1 26.9 28.2

74,320 84,659 87,876 88,880 106,086 134,865

–8.6 13.9 3.8 1.1 19.4 27.1 8.1
59,158 66,961 72,725 78,714 93,367 117,787

–3.0 13.2 8.6 8.2 18.6 26.2 8.9

15,163 17,698 15,151 10.166 12,719 17,078

–25.5 16.7 –14.4 –32.9 25.1 34.3 3.6

20.4 20.9 17.2 11.4 12.0 12.7

91,355 104,120 106,839 107,675 127,795 167,386

–6.0 14.0 2.6 0.8 18.7 31.0 8.4
70,664 79,581 84,668 90,720 106,998 140,033
0.1 12.6 6.4 7.1 17.9 30.9 9.2
20,691 24,539 22,171 16,955 20,797 27,353
–22.2 18.6 –9.6 –23.5 22.7 31.5 5.2
22.6 23.6 20.8 15.7 16.3 16.3

1,071,355 1,134,834 1,061,548 1,021,497 1,066,976 1,231,634

5.9 5.9 –6.5 –3.8 4.5 15.4 5.3
486,296 491,695 464,133 432,856 458,068 537,581
–0.9 1.1 –5.6 –6.7 5.8 17.4 3.4
585,059 643,140 597,415 588,641 608,908 694,053
12.2 9.9 –7.1 –1.5 3.4 14.0 6.9
54.6 56.7 56.3 57.6 57.1 56.4

4. AAGR: Average Annual Growth Rate: Calculated using the formula [(Y(t)/Y(s))(1/n)–1]*100,
where Y(t) and Y(s) are the values in years “t” and “s”, respectively, where t > s and n ⫽ t–s.
For Caricom the formula is based on the 1994–2003 period.
Source: IDB, Integration and Regional Programs Department, based on data from DataIntal, ALADI,
SIECA, Hemispheric Database, UN Comtrade and official country data
Note: There are periodic changes in data sources. This is especially pronounced between
2003 and 2004. Although the data are generally consistent, these changes in sources can affect
results

Shaw
Acknowledgements

This collection is the result of a colloquium held in advance of the Fifth

Summit of the Americas (Trinidad and Tobago) that took place at the
University of the West Indies (UWI), St Augustine Campus 15–16 April
2009. The colloquium and the collection it contributed to reflect the organic
collaboration between Canadian and Caribbean institutions and inter-
ests that brought together a range of hemispheric universities and think
tanks, convened by The Centre for International Governance Innovation
(CIGI), the Inter-American Studies Centre (CEI) at Université Laval, and
UWI, respectively. CIGI and the Institute of International Relations (IIR)
at UWI had cooperated in early 2008 for a seminar on small states, leading
to the publication of The Diplomacies of Small States: Between Vulnerability &
Resilience, Cooper and Shaw (eds), that is also a part of this IPE Series
(www.palgrave.com/politics/ipe.asp).
In addition to financial support from CIGI and CEI, the pre-summit col-
loquium was supported by two agencies of the government of Canada – the
Canadian International Development Agency (CIDA) and the Department of
Foreign Affairs and International Trade (DFAIT). The CEI particularly wishes
to acknowledge the financial support offered by the Québec Department
of International Relations. The colloquium also included a ‘Voices of the
Americas’ roundtable that brought together representatives from think
tanks in the hemisphere. This innovative effort was facilitated by the
Canadian Foundation for the Americas (FOCAL), the Latin American and
Caribbean Center (LACC) at Florida International University, and the
Facultad Latinoamerica de Ciencias Sociales (FLACSO). Other organizational
partners included Coordinadora Regional de Investigaciones Económicas y
Sociales (CRIES) and the Woodrow Wilson Center. Aside from the authors
of the revised chapters included here, other distinguished participants
included Ambassador Albert R. Ramdin, Assistant Secretary General at the
Organization of American States (OAS), Dr David Malone, President of the
International Development Research Centre (IDRC), and Canadian Assistant
Deputy Minister, Latin America and the Caribbean, Alexandra Bugailiskis
(DFAIT). We also appreciate the participation of everyone who attended the
conference, whose valuable comments helped shape this volume.
The colloquium could not have taken place without the support at UWI of
the Principal’s Office and other senior management plus the IIR Secretariat.
In turn, the Summit Office, the OAS as well as Dr Riyad Insanally, Political
Advisor to the Association of Caribbean States (ACS), and Dr Luis Andrade,
Assistant Secretary General of the ACS, were most helpful, leading to further

xx

Shaw
 Acknowledgements xxi

collaboration in 2009 and in 2010 around the NETRIS Edulink network. IIR
looks forwards to further such mutual cooperation.
The colloquium also benefited from the organizational talents of Joe
Turcotte at CIGI and Nicolas Diotte at CEI. Their assistance in the prepara-
tion of application grants, in efficient management of logistics, and their
attention to details helped considerably and was deeply appreciated. The
staff and volunteers at UWI and IIR worked to ensure that the colloquium
unfolded without a hitch. Special thanks go to Marilyn Ramon-Fortuné at
UWI for her diligence and courtesy while hosting the event.
The preparation of the volume itself was made much easier with the
expert editorial assistance of Joe Turcotte at CIGI. Our gratitude to Joe,
and to Alexandra Webster and Renée Takken at Palgrave Macmillan, who
supervised the publication process with courtesy and efficacy. Max Brem
(CIGI’s Senior Director for Publications), Jessica Hanson (CIGI Publications
Coordinator) and Andrew Schrumm (Research Officer at CIGI) provided
much sage advice and counsel throughout the process.
As is the case of all CIGI projects Thomas A. Bernes, the acting execu-
tive director, created an environment amenable to productive research.
CIGI was founded in 2001 by Jim Balsillie, co-CEO of RIM (Research In
Motion), and collaborates with and gratefully acknowledges support from a
number of strategic partners, in particular the Government of Canada and
the Government of Ontario. Le CIGI a été fondé en 2001 par Jim Balsillie,
co-chef de la direction de RIM (Research In Motion). Il collabore avec de
nombreux partenaires stratégiques et exprime sa reconnaissance du soutien
reçu de ceux-ci, notamment de l’appui reçu du gouvernement du Canada et
de celui du gouvernement de l’Ontario.
Finally, this volume can be considered in some ways as a companion to
the Andrew F. Cooper and Jorge Heine collection Which Way Latin America?
Hemispheric Politics Meets Globalization (United Nations University Press,
2009) and to the Gordon Mace, Jean-Phillipe Thérien and Paul Haslam
volume Governing the Americas: Assessing Multilateral Institutions (Lynne
Rienner Publishers, 2007). The former looks more at Latin America’s strate-
gic calculus in the wake of recent world transformations while the latter also
examines hemispheric institutions but without the benefit of a comparative
analysis and without the insights of a post-economic crisis situation. The
three collections, however, do offer a useful package for the understanding
of present day inter-American relations.

Gordon Mace, Québec, Canada

Andrew F. Cooper, Waterloo, Canada
Timothy M. Shaw, St Augustine, Trinidad and Tobago
April, 2010

Shaw
Notes on Contributors

Josette Altmann is a Regional Coordinator for International Cooperation

in the General Secretariat of the Latin American Faculty of Social Science
(FLACSO) and Professor of History and Political Science at the University
of Costa Rica. Professor Altmann holds a Master’s degree in Political
Sciences and a Bachelor’s degree in History, both from the University of
Costa Rica. From 1990 to 1991 she was an intern at Harvard University.
She has worked as a consultant for the Democratic Centre of Latin America
Studies (CEDAL), the International Labour Organization (ILO), and the
Costa Rican government. Her latest publications are El ALBA, Petrocaribe
y Centroamérica: ¿intereses comunes? En: Revista Nueva Sociedad, Buenos
Aires, Argentina. N 219. Enero-febrero 2009. En: www.nuso.org; ALBA:
An Alternative Project for Latin America? ARI17-2008. Real Instituto Elcano.
2008, in www.realinstitutoelcano.org; Las Paradojas de la Integración en
América Latina y El Caribe. Altmann, Josette y Rojas Aravena, Francisco (eds)
Fundación Carolina/Siglo XXI. Madrid. 2008.
Louis Bélanger is a professor of International Relations in the Department
of Political Science at Université Laval, Quebec City. A graduate from Laval
(Ph.D., 1996), Louis Bélanger also pursued Slavic Studies at the University
of Ottawa. From 2000 to 2005, Professor Bélanger was the Director of
Université Laval’s Quebec Institute for Advanced International Studies (HEI).
Professor Bélanger held visiting positions at Duke University (Durham, NC),
at SciencePo-Paris (Centre d’études et de recherches internationales), at
the Woodrow Wilson International Center for Scholars, in Washington,
and, as a Canada-US Fulbright Visiting Scholar, at the Paul H. Nitze School
of Advanced International Studies (Johns Hopkins University). He is
a member of the Advisory Council on National Security and the Military
Police Complaints Commission of Canada. He is the author of numerous
publications on Canadian foreign policy, comparative foreign and trade
policy, inter-American cooperation, and the politics of secession.
Andrew F. Cooper is Distinguished Fellow at The Centre for International
Governance Innovation (CIGI) and Professor in the Department of Political
Science at the University of Waterloo, where he teaches in the areas of
International Political Economy, Global Governance, and the Practice of
Diplomacy. In 2009 he was the Canada-US Fulbright Research Chair in Public
Diplomacy at the Annenberg School of Communications, University of
Southern California. In 1993 he served as the Leger Fellow in the Canadian
Foreign Ministry’s Policy Planning staff. He has written or edited a number
of books, including Which Way Latin America? Hemispheric Politics Meets

xxii

Shaw
 Notes on Contributors xxiii

Globalization (with Jorge Heine; United Nations University Press, 2009);

Intervention Without Intervening? The OAS Defense and Promotion of Democracy
in the Americas (with Thomas Legler; Palgrave, 2006); Celebrity Diplomacy
(Paradigm, 2008); and, Emerging Powers in Global Governance: Lessons from the
Heiligendamm Process (WLU Press, 2008).
Rut Diamint is a professor at Torcuato Di Tella University and the University
of Bologna, in the Buenos Aires programme. She served as advisor to the
Under-Secretariat of Politics and Strategy of the Ministry of Defense of
Argentina (1993–6) and Cabinet Director of the Minister of Defense (2004–5).
She has written several articles in books and academic journals on regional
and hemispheric security affairs and civic-military and disarmament topics.
Daniel P. Erikson is Senior Adviser in the Bureau of Western Hemisphere
Affairs in the United States Department of State. His chapter was written
while he was the senior associate for US policy and director of Caribbean
programmes at the Inter-American Dialogue, and it reflects his own analy-
sis, not the views of the US government. Erikson is the author of The Cuba
Wars: Fidel Castro, the United States, and the Next Revolution (Bloomsbury
Press, 2008). His book chapters appear in The Obama Administration and
the Americas: Agenda for Change (2009), The Diplomacies of Small States
(2009), Latin America’s Struggle for Democracy (2008), Looking Forward:
Comparative Perspectives on Cuba’s Transition (2007), Taking Sides: Clashing
Views on Latin America (2007) and Transforming Socialist Economies: Lessons
for Cuba and Beyond (2005), which he co-edited. His past positions include
research associate at Harvard Business School and Fulbright scholar in
US–Mexican business relations.
Antoni Estevadeordal is currently the Manager of the Integration and
Trade Sector at the Inter-American Development Bank in Washington, DC.
He was responsible for IDB technical assistance to the FTAA process from
1995 to 2000. He has coordinated the Bank’s policy research programme
on trade and integration issues as well as several joint initiatives with the
WTO, ADB, EU, OAS, and UN agencies. Before joining the IDB he taught
at the University of Barcelona and Harvard University. He has published
widely in major journals. He has coordinated several IDB reports such as
The Emergence of China: Opportunities and Challenges for Latin America and
the Caribbean (IDB-Harvard University Press, 2006, with R. Devlin and
A. R. Clare) and Regional Rules and the Global Trading System (Cambridge
University Press 2009, with K. Suominen and R. Teh). He holds a Ph.D.
in Economics from Harvard University and a B. A. in Economics from the
University of Barcelona.
Richard E. Feinberg is Professor of International Political Economy at the
Graduate School of International Relations and Pacific Studies, University of
California, San Diego. He serves as Director of the University’s APEC (Asia

Shaw
xxiv Notes on Contributors

Pacific Economic Cooperation) Study Center. In addition, he is the book

reviewer for the Western Hemisphere section of the prestigious publication
of the Council on Foreign Relations, Foreign Affairs. Prior to his arrival in
California, Feinberg was Special Assistant to President Clinton and Senior
Director of the National Security Council’s Office of Inter-American Affairs
(1993–6). As the President’s senior adviser for Latin America, Feinberg was one
of the principal architects of the 1994 Summit of the Americas in Miami.

Norman Girvan is Professorial Research Fellow at the UWI Graduate

Institute of International Relations at the University of the West Indies
in St. Augustine, Trinidad and Tobago. He has been Secretary General of
the Association of Caribbean States, Professor of Development Studies and
Director of the Sir Arthur Lewis Institute of Social and Economic Studies
at the University of the West Indies, and head of the National Planning
Agency of the Government of Jamaica. He received his Bachelor’s degree
in Economics from the University College of the West Indies and his PhD in
Economics from the London School of Economics. He has published exten-
sively on the political economy of development in the Caribbean and the
Global South. He is the recipient of several honours and awards.

Jorge Heine holds the Chair in Global Governance at the Balsillie School
of International Affairs, is Professor of Political Science at Wilfrid Laurier
University and is a Distinguished Fellow at The Centre for International
Governance Innovation. He was previously Ambassador of Chile to India,
Bangladesh and Sri Lanka (2003–7). He has also been Ambassador to South
Africa (1994–9), as well as a cabinet minister in the Chilean government. He
has been a Visiting Fellow at St Antony’s College, Oxford, and a Research
Associate at The Wilson Center in Washington, DC. He is the author, co-
author, or editor of ten books, including The Dark Side of Globalization (with
Ramesh Thakur, United Nations University Press, 2010); Which Way Latin
America? Hemispheric Politics Meets Globalization (with Andrew F. Cooper,
United Nations University Press, 2009); and The Last Cacique: Leadership
and Politics in a Puerto Rican City (Pittsburgh University Press, Choice
Magazine Outstanding Academic Book of 1994), and around 70 academic
articles.

Thomas Legler is a professor of International Relations at the Iberoamerican

University of Mexico City. Previously he taught at Mount Alison University,
Victoria University, and the University of Toronto. He holds a Ph.D. in
Political Science from York University. As a specialist in Latin American politics
and development, he investigated the promotion and defence of democracy
in the Americas with the support of the Social Sciences and Humanities
Research Council of Canada. He is the author of the book Intervention Without
Intervening? The OAS Defense and Promotion of Democracy in the Americas
(2006) as well as one of the editors of the text Promoting Democracy in the

Shaw
 Notes on Contributors xxv

Americas (Johns Hopkins University, 2007). He participated as an electoral

observer in several missions organized by the OAS and the Carter Center in
the Dominican Republic, Mexico, Nicaragua, Peru, and Venezuela.

Gordon Mace is a professor of International Relations at the Department

of Political Science and at the School of Advanced International Studies at
Université Laval. In addition to being director of the Inter-American Studies
Centre, he is Editor-in-chief of Études internationales. He holds a Ph.D. in
Political Science from Geneva’s Graduate Institute of International Studies.
Author and co-author of more than a hundred academic articles and chap-
ters, his most recent co-authored or co-edited publications are Governing
the Americas: Assessing Multilateral Institutions (Lynne Rienner, 2007, with
J. P. Thérien and P. Haslam), and Regionalism and the State: NAFTA and Foreign
Policy Convergence (Ashgate, 2007). He serves on the editorial/advisory board of
several journals and he is the recipient of the 2008 ISA Canada Distinguished
Scholar Award.

Thomas Andrew O’Keefe is the President of Washington, DC-based Mercosur

Consulting Group, Ltd. [http://www.mercosurconsulting.net]. He did his
undergraduate work at Columbia University, received his J. D. from the
Villanova University School of Law, and has an M.Phil. in Latin American
Studies (History and Economics) from the University of Oxford. In 1986 he
worked for the legal departments of the Chilean Human Rights Commission
and the Vicaría de la Solidaridad (the human rights office of the Archdiocese
of Santiago). He has taught courses on Western Hemisphere economic integra-
tion, the Political Economy of the Southern Cone countries of South America,
and Energy Cooperation in the Western Hemisphere at Johns Hopkins
University’s School of Advanced International Studies, The George Washington
University’s Elliott School of International Affairs, and Stanford University.
He was Chair of the Brazil and Southern Cone course at the US Foreign Service
Institute between September and December 2005. He is the author of two
books, Latin American and Canadian Trade Agreements (Martinus Nijhoff, 2009)
and Latin American Trade Agreements (Brill, 1997), and numerous articles on
Latin American and Caribbean economic integration.

Richard Ouellet, lawyer and doctor of law, is Associate Professor of Inter-

national Economic Law at the Faculty of Law and the Institute of Advanced
International Studies (HEI) at Université Laval where he is the Director of
the Masters and Doctoral programmes. His teaching and research programme
focuses on trade agreements such as the World Trade Organization and
NAFTA. He is author of several papers presented in Canada, the US, France,
Switzerland, Morocco and Vietnam. He has also authored several book
chapters and articles in scholarly law journals. He is editor of the chronique
“Commerce” in l’Annuaire canadien de droit international. He is a member
of the Centre d’études interaméricaines (CEI), the Society of International

Shaw
xxvi Notes on Contributors

Economic Law, European Society of International Law, the Quebec Society of

International Law, Centre for Research in Agricultural Economics and founding
member of the Center on Studies in Economic Law.
Robert A. Pastor is Professor of International Relations and Founder and
Co-Director of the Center for North American Studies and the Center
for Democracy and Election Management at American University in
Washington, DC. He was Director of Latin American and Caribbean Affairs
on the National Security Council during the Carter Administration, nomi-
nated to be Ambassador to Panama during the Clinton Administration,
and an advisor to Presidential Candidate Barack Obama. He received his
doctorate from Harvard University, was a Fulbright Professor in Mexico, was
the founder of the Latin American and Democracy Programs at The Carter
Center, and is the author or editor of 17 books, including The North American
Idea (Oxford University Press, 2011).
Nicola Phillips is Professor of Political Economy and Founding Director
of the Political Economy Institute at the University of Manchester, UK.
She is also an Associate Fellow of the Brooks World Poverty Institute and
the Centre for Chinese Studies, both based at Manchester, was formerly an
Associate Fellow of Chatham House in London, and holds and has held various
visiting positions across Europe and Latin America. She is editor-in-chief of
the New Political Economy, and sits on the boards of several other journals. Her
research focuses on the political economy of development, with a particular
emphasis on questions of migration, development, and labour standards.
Much of her work has focused on the region of the Americas, particularly
on questions of regional development, poverty and inequality, and migra-
tion. Among her most recent publications are The Southern Cone Model: The
Political Economy of Regional Capitalist Development (Routledge, 2004), co-
author with Anthony Payne of Development (Polity Press, 2009) and editor
of Globalizing International Political Economy (Palgrave Macmillan, 2005), and
The Global Political Economy of Migration (Lynne Rienner, 2011).
Marc Schelhase is a Lecturer in the Defence Studies Department, King’s
College London, UK and a Visiting Professor in the EU International
Relations and Diplomacy Studies Department at the College of Europe,
Bruges, Belgium. His recent book Globalization, Regionalization and Business
(Palgrave Macmillan, 2008) maps the role of organized business interests in
the evolution of the Mercosur. In addition to processes of regionalization
and regionalism in the Americas, he is currently conducting comparative
research into conceptualizations of risk in financial markets and defence
procurement by focusing on the political economy of risk.
Timothy M. Shaw is Professor and Director at the Institute of International
Relations at the University of the West Indies in Trinidad. He previously
taught at Dalhousie University in Nova Scotia for three decades and the
Institute of Commonwealth Studies at the University of London for half a

Shaw
 Notes on Contributors xxvii

decade. He continues to be a visiting professor in South Africa (Stellenbosch)

and Uganda (MUBS & MUST), having previously taught at Aalborg, Ife,
Makerere, Nihon, Zambia, and Zimbabwe universities.

Kati Suominen is Resident Fellow, German Marshall Fund of the United

States. In 2009, she also served as Trans-Atlantic Fellow at the German
Marshall Fund. She has co-published seven books about global trade and
economy, including Regional Rules in the Global Trading System (Cambridge,
2009, with Antoni Estevadeordal and Robert Teh) and Globalization at Risk:
Managing Challenges to International Trade and Investment (Yale University
Press, 2010, with Gary Hufbauer). She holds various degrees: MBA, Wharton
(2009); PhD, Political Science and International Relations, University of
California, San Diego (2004); MA, International Relations, Boston University
(1996); and BA, Political Science and International Relations, University of
Arkansas at Little Rock (1995).

Jean-Philippe Thérien is Professor in the Department of Political Science

of the Faculty of Arts and Sciences at the Université de Montréal. An expert
in international relations, his fields of interest include international insti-
tutions, North–South relations, and inter-American politics. Most of his
research has focused on foreign aid policies, and on the role of large inter-
national organizations (UN, IMF, WTO). He is currently conducting two
research projects on the growing concern of multilateral institutions over
poverty issues, and on the role of the Organization of American States in
the inter-American system. Author of some 30 scholarly articles, his work
has been published in American Political Science Review, International
Organization, Global Governance and Comparative Political Studies. He
is the co-editor (with Gordon Mace and Paul Haslam) of Governing the
Americas: Assessing Multilateral Institutions (Lynne Rienner, 2007). His latest
book is Left and Right in Global Politics (Cambridge University Press, 2008)
(co-authored with Alain Noël).

Diana Tussie heads the Department of International Relations at FLACSO/

Argentina and is the founding director of the Latin American Trade
Network (LATN). Her recent books include The Politics of Trade: Research
and Knowledge in Trade Negotiations (Brill & IDRC, 2009), Trade Negotiations
in Latin America: Problems and Prospects (Palgrave Macmillan, 2003), and
El ALCA y las Cumbres de las Américas:¿Una nueva relación público-privada?
(with M. Botto) (Biblios, 2003). She has served as junior secretary for trade
negotiations and was a member of the board of the International Trade
Commission in Argentina. In 2005 she served on the High Level External
Panel for the Trade Assistance Evaluation of the World Bank. More recently
she joined colleagues from Canada and India in the external evaluation of
the WTO’s technical assistance programme. She is a current member of the
Committee for Development Policy of the United Nations and serves on the
Editorial Boards of several international journals.

Shaw
List of Abbreviations

3G Global Redesign Initiative

AACCLA Association of American Chambers of Commerce in Latin
America
ACS Association of Caribbean States
AD/CVD Antidumping and countervailing duty
AIMA Argentinean-Israeli Mutual Association
ALADI Latin American Integration Association
ALALC Asociación Latinoamericana de Libre Comercio
ALBA Bolivarian Alternative for the Americas; Alternativa
Bolivariana para América Latina
ALCA Free Trade Area of the Americas
ANC Andean Community of Nations
APEC Asia-Pacific Economic Cooperation
ARENA Alianza Republicana Nacionalista, El Salvador
ASEAN Association of Southeast Asian Nations
BASIC Brazil-South Africa-India-China
BBC British Broadcasting Corporation
BOT Build-Operate-Transfer Contract
BRIC Brazil, Russia, India, China
BRICSAM Brazil, Russia, India, China, South Africa, Mexico
C-TPATUS Customs-Trade Partnership Against Terrorism
CACM Central American Common Market
CAF Andean Development Corporation; Corporacion andina de
fomento
CAFTA-DR Central America-Dominican Republic-United States Free
Trade Agreement
CAIC Caribbean Association of Industry and Commerce
CALC Latin American and Caribbean Summit
CAN Andean Community of Nations; Comunidad Andina de
Naciones
CARICOM Caribbean Community

xxviii

Shaw
 List of Abbreviations xxix

CARILEC Caribbean Energy Utility Services Corporation

CBM Confidence Building Measures
CDM Clean Development Mechanism
CEAL Business Council of Latin America
CEATAL Business Technical Advisory Committee on Labor Matters
CEO Chief executive officer
CEP Provisional Electoral Council; Conseil Électoral Provisoire, Haiti
CEPALC Economic Commission for Latin America and the Caribbean;
Comisión Economica para America Latina y el Caribe
CET Common external tariff
CGR Committee of Government Representatives on the
Participation of Civil Society
CIDA Canadian International Development Agency
CIFTA Convention Against the Illicit Manufacturing of and
Trafficking in Firearms, Ammunition, Explosives, and other
Related Materials
CIP Inter-American Committee on Ports
CITEL Inter-American Telecommunications Commission
CMC Common Market Council; Consejo del Mercado Común
CNE National Electoral Council; Consejo Nacional Electoral,
Venezuela
CREDP Caribbean Renewable Energy Development Project
CRIE Regional Commission of Electricity Interconnection;
Comisión Regional de Interconexión Eléctrica
CRNM Caribbean Regional Negotiating Machinery
CSEP Caribbean Sustainable Energy Project
CSME CARICOM Single Market and Economy
CSO Civil Society Organizations
CSR Corporate social responsibility
CSSP Cross-Sector Social-Oriented partnerships
CUSTA Canada-United States Free Trade Agreement
DC District of Columbia, United States
DNA Deoxyribonucleic acid
DPD OAS Department for the Promotion of Democracy
DPU Democracy Promotion Unit

Shaw
xxx List of Abbreviations

DMS Dispute Settlement Mechanism

DTT Department of Trade and Tourism
EAI Enterprise for the Americas Initiative
ECCS European Conference on Cooperation and Security
ECLAC UN Economic Commission for Latin America and the
Caribbean
EG Major National Companies; empresas Grannacionales
EOR Regional Operating Authority; Ente Operador Regional
EPA Economic Partnership Agreement with European Union
EPR Empresa Propietaria de la Red
EU European Union
FARC Revolutionary Armed Forces of Colombia
FCES Economic-Social Consultative Forum of Mercosur
FDI Foreign Direct Investment
FECAICA Federation of Chambers and Industry Associations of
Central America
FECAMCO Federation of Chambers of Commerce of Central America
FIPA Foreign Investment Protection Agreement
FLACSO Facultad Latinoamericana de Ciencias Sociales
FMLN Frente Farabundo Martí de Liberación Nacional, El Salvador
FTA Free Trade Agreement
FTAA Free Trade Area of the Americas
FTC Free Trade Commission
GATT General Agreement on Tariffs and Trade
GDP Gross Domestic Product
GPN Global Production Networks
GMC Common Market Group; Grupo Mercado Común
GVC Global Value Chain
G5 Outreach Five
G7/8 Group of Seven/Eight
G8 Group of Eight
G20 Group of Twenty
HDI Human Development Index
HIPC Highly Indebted Poor Countries

Shaw
 List of Abbreviations xxxi

IACHR Inter-American Convention (Commission) on Human

Rights
IADC Inter-American Democratic Charter
IBSA India-Brazil-South Africa Forum
ICBL International Campaign to Ban Landmines
ICCAD Inter-American Convention against Drug Abuse
ICD Inter-American College of Defense
ICT Information and Communication Technology
IDB Inter-American Development Bank
IADB Inter-American Defense Board
IFE Federal Electoral Institute; Instituto Federal Electora, Mexico
IFES International Foundation for Electoral Systems
IIRSA UNASUR South American Infrastructure Integration
Initiative
IMF International Monetary Fund
IPE International Political Economy
ISP Inter-American Strategy for Public Participation in
Sustainable Development Decision-Making
ITRA Inter-American Treaty of Reciprocal Assistance
KP Kimberley Process
LAC Latin America and Caribbean
LAFTA Latin American Free Trade Association
LAIA Latin American Integration Association
LDC Less Developed Countries
LNG Liquefied Natural Gas
MAS Movimiento al Socialismo (Bolivia)
MDG Millennium Development Goals
MER Regional Electricity Market; Mercado Eléctrico Regional
Mercosur Southern Common Market
MFA Multi-Fibre Arrangement
MFN Most Favored Nation
MIF Multilateral Investment Fund
MNC Multinational Corporation
MOU Memorandum of Understanding

Shaw
xxxii List of Abbreviations

NAEWG North American Energy Working Group

NAFTA North American Free Trade Agreement
NAFTA TWGP NAFTA Technical Working Group on Pesticides
NATO North-Atlantic Treaty Organization
NDI National Democratic Institute for International Affairs,
United States
NED National Endowment for Democracy, United States
NGO Non-Governmental Organization
NIC Newly Industrializing Country
N-11 Next Eleven
OAS Organization of American States
OECD Organization for Economic Co-operation and Development
OECS Organization of Eastern Caribbean States
OEM Original Equipment Manufacturing
OFC Offshore Financial Centre
OLAMP Latin American Organization for Micro, Small and
Medium Enterprises
OP Ottawa Process
OPEC Organization of Petroleum Exporting Countries
OTCA Amazon Cooperation Treaty Organization
PADF Pan-American Development Foundation
PAN National Action Party; Partido Acción Nacional, Mexico
PDVSA Petroleos de Venezuela Sociedad Anonima
PECC Pacific Economic Cooperation Council
PG Major National Projects; proyectos Grannacionales
PIP Partners in Protection
PNPB National Programme for the Production and Use of
Biodiesel; Programa Nacional de Produção e Uso de Biodiese,
Brazil
PPP Purchasing Power Parity
PPP Public–Private Partnership
PRD Party of the Democratic Revolution; Partido de la
Revolución Democrática, Mexico
PRS Poverty Reduction Strategies
PSF Private Sector Forum

Shaw
 List of Abbreviations xxxiii

PTA Preferential Trade Agreement

R2P Responsibility to Protect
RNM Caribbean Regional Negotiating Machinery
SICA System of Central American Integration
SEC Securities and Exchange Commission, United States
SEDI Executive Secretariat for Integral Development
SGR Strategic Global Repositioning
SICA Central American Integration System
SIEPAC Electrical Interconnection System for the Countries of
Central America; Sistema de Interconexión Eléctrica para los
Países de América Central
SIRG Summit Implementation Review Group
SLA Canada-United States Softwood Lumber Agreement
SME Small and Medium Sized Enterprises
SOA Summit of the Americas
SPP Security and Prosperity Partnership
SSR Security Sector Reform
TEPJF Electoral Tribunal of the Federal Judiciary; Tribunal Electoral
del Poder Judicial de la Federación, Mexico
TNC Transnational Corporations
TPA Trade Promotion Authority
TWG Technical Working Group
UK United Kingdom
UN United Nations
UNASUR Union of South American Nations; Unión de Naciones
Suramericanas
UNDP UN Development Programme
UPD OAS Unit for the Promotion of Democracy
US United States
USTR United States Trade Representative
UWI University of the West Indies
WOLA Washington Office on Latin America
WTO World Trade Organization
YABT Young Americas Business Trust
YPF Yacimientos Petrolíferos Fiscales

Shaw
This page intentionally left blank

Shaw
Introduction
Gordon Mace, Andrew F. Cooper and Timothy M. Shaw

Despite all the attention placed on globalization and its processes, regional
integration mechanisms continue to hold a pivotal position in world affairs.
The global governance structure is marked by a patchwork of authority.
This sense of complex design comes to the fore with respect to the myriad
of regionalization projects currently in existence. Although the debates
surrounding the European approaches and concepts maintain a privileged
position, variants located in other regional projects deserve closer examination.
This requirement is no more apparent than in the Americas where the process
of regionalization has a long history and is currently becoming increasingly
complex, contested and fluid.
In terms of scope, inter-American regional projects are increasingly at
the front lines about the framing of ‘we-ness’ around a distinctive sense
of belonging and identity. This normative turn retains its political edge by
making clear choices about who is in and out in terms of regional actorness.
After all, regions are at their core highly conscious socio-political con-
structs (Breslin and Higgott, 2000). In terms of form, regional projects in
the Americas highlight the contradistinction between formal (de jure) and
informal (de facto) regionalization. The former depends on a heavy degree
of state-driven institutionalization. The latter focuses on the extension of
transnational networks with a concomitant building-up of interactions
either of a corporate or social nature (Hveem, 2008).
In terms of intensity, inter-American regional projects bring out the
contrasts between the familiar and the novel components. Many elements
of the debate about regional cooperation or integration have been in
place for a considerable amount of time, as witnessed by the long debates
about the role of the Organization of American States (OAS) or the pros-
pects of the Free Trade Area of the Americas (FTAA). Other significant
ingredients of the debate, however, have risen fast in recent years as
featured by the emergence of the Alternativa Bolivariana para las Americas
(ALBA; the Bolivarian Alternative for the Americas).

Shaw
2 Introduction

Although each of these contours needs to be more thoroughly well

rehearsed, the starting point for any examination of regionalization in the
Western Hemisphere must be the changing context in which these projects
are situated. The defining element of the Western Hemisphere’s historical
experience with regionalization has been its distinctive relational dimension.
As opposed to the relative degree of equality (showcased by the French–German
bilateral relationship) and diffuse ownership, the traditional design of region-
alization in the Americas was the asymmetrical element, with hegemonic
domination by one state and an explicit distinction between the core and
periphery (Hettne, 2003). The Monroe Doctrine, ‘pocketbook diplomacy’,
the ‘Good Neighbor Policy’, and support for client regimes reinforced the
impression of a hemisphere locked in the US’s backyard that is not of identical
status. This sense of unequal ownership was reinforced in turn by the bias
in the transnational segment towards the corporate as opposed to the social
network.
Although the ‘declinist’ image of the US can be exaggerated, the erosion
of US leadership capabilities cannot be ignored (Zakaria, 2008). The centre
of gravity of the global power structure is no longer exclusively in the US.
The George W. Bush administration abdicated both the normative and practi-
cal responsibilities of liberal internationalism, while its unilateral overstretch
in Iraq and poor economic policies have drained US resources. The issues of
extraordinary renditions and Guantanamo Bay detainees have undermined the
US’s normative credentials. The ‘made in the US’ character of the severe economic
crisis of 2008–9 underscored the extent of the economic policy failures.
Still, an analysis of the shifting global order that focuses only on fading
US hegemony and leadership is insufficient. The world is also changing at
the beginning of the twenty-first century for what Parag Khanna (2008)
has termed the ‘second world’. As Khanna has laid it out in a kaleidoscope
format, this grouping is a significant but largely undifferentiated cluster
of countries. Such an approach, if valuable as an antidote to the retention
of US-centrism in so much of the literature, misses the degree to which a
new form of hierarchy has reappeared on both the global and the regional
scene as rising states seek a new equilibrium (Delong and Cohen, 2010;
Kagan, 2008; Zakaria, 2008). The ‘rise of the rest’ does not create uniformity
(Alexandroff and Cooper, 2010). This appreciation of differentiation comes
out most strongly in the attention accorded to the BRICs – Brazil, Russia,
India and China. But it extends beyond this design to other forms of con-
ceptualization and practice. In addition to the BRICs, Goldman Sachs has
also put together a list of the ‘Next-Eleven’ (N-11) (Goldman Sachs, 2007),
other countries from the second world that possess the potential to bring
about a profound shift in international relations at the start of a ‘long second
decade’ in the twenty-first century.
The ascendancy of the G20 as the premier institution of economic
governance reinforces this image of differentiation. This forum makes no

Shaw
 Gordon Mace, Andrew F. Cooper and Timothy M. Shaw 3

claims of universalism; instead it is created as a new club of the few. The

legitimacy attached to it is functional in nature, with weight (or influence)
and efficiency as the core rationales. Although blending traditional powers and
global South countries, only ‘major’ countries with a big stake in the system
are accorded representation, with an implicit recognition of a hierarchy of
powers.
Paralleling so much of the trajectory of other regional projects, the
Americas provide key actors to both the new cluster of insiders to these
global constellations and to the main sources of resistance. Brazil is a member
of the BRICs. Mexico is included in the Goldman-Sachs list of the N-11,
and chaired the ‘Outreach 5’ or G5 in the structured dialogue with the
G8 through the Heiligendamm Dialogue Process (Cooper and Antkiewicz,
2008). Brazil, Mexico and Argentina have gained representation to the global
‘high table’ of the G20. At the same time, though, the exclusive top-down
quality of the G20 has generated a backlash among a variety of non-members
in the Americas. Venezuela, Bolivia, Cuba, and Nicaragua were among the
most vociferous voices of dissent directed at the G20 during the June 2009
‘G192 Summit’ of the UN General Assembly. Another group of countries –
comprising Chile, Uruguay, Costa Rica, Guatemala, Panama, Jamaica,
Barbados, and Bahamas – signed on to the so-called 3G initiative led by
Singapore, Qatar, Switzerland, and Tanzania (the Global Redesign Initiative)
that promotes a more inclusive form of global governance (Kanth, 2010).
These varying responses play to the image of a fundamental dichotomy, with
a split between those countries willing and able to constructively engage in
establishing new rules of the game and those putting the onus onto blocking
and disruptive endeavours.
A more nuanced appreciation about the manner in which the hierarchy is
reconfigured is reinforced by the structural as well as the diplomatic separation
in the ranks of the second world. As the big emerging countries move up in
the global rankings, other counties are relegated once again to a new third or
even fourth world at the bottom. In sharp variance to the concentrated obser-
vation of the BRICs and other components of the emerging global South,
the countries or sub-regions falling behind are almost completely neglected.
Amid his ambitious overview of the second world, Khanna devotes only a few
lines to the Caribbean (and those are targeted mostly to Haiti). Zakaria makes
only one passing reference to Central America and the Caribbean.
One important dimension relates to the differentiation between the
upwardly and downwardly mobile countries related to the top-tier countries,
both among established and emerging powers. Brazil at one end of the spectrum
is increasingly included in a wide set of exclusive cross-regional clubs – not
only the G20 and BRICs but also the India–Brazil–South Africa Dialogue
Forum (IBSA) and the BASIC group (Brazil–South Africa–India–China) that
formed via the Copenhagen conference on climate change. Moreover, as
Washington is less and less able to dominate the regional agenda, Latin

Shaw
4 Introduction

America is asserting itself in regional and world affairs under Brazilian

leadership (Prideaux, 2009, p. 51). Smaller and more vulnerable countries
at the other end of the spectrum look to alternative forms of collective and
defensive forms of activity. Brazil, along with China and India, seeks to be
a shaper of governance along with the US and other members of the old
G7/8. Venezuela and its allies work to repel the influence of the US and the
ex-colonial North.
Another crucial dimension comes back to the location of individual
countries in the economic division of labour. Helped by new forms of extra-
regional connections with China and India, the Americas have avoided the
worst-case scenario effects of the 2008–9 economic crisis. Select companies
from Brazil, as well as Mexico and Chile, have an enhanced global reach
internationally as well as regionally (Goldstein, 2007; van Agtmael, 2007).
But economic growth has been volatile and extremely unevenly distributed.
Commodity prices including those for oil and natural gas have fluctuated
severely, with a yo-yo effect on countries such as Venezuela, and Trinidad
and Tobago. The upwardly mobile states have also acted as a ring of magnets,
attracting migrants from relegated states, and in turn resulting in different
flows of remittances.
Are these developments announcing a new era in inter-American relations?
Certainly the concerted phase of hemispheric region building, which started
with the Summit of the Americas in Miami in 1994, has lost its dominance,
making way for alternative regional groupings. In doing so the classic
regional integration literature must be supplemented by revisionist modes of
analysis. It is precisely because of these changing contours of regionalization
and magnitude of the contextual concerns in which these processes must
be grounded that this volume is so salient. What sets it apart is its willingness
to mix historical assessment with reflections on the future of the regionalist
project with all its multidimensional and comparative-oriented qualities.

A long, rich history of region building

In his landmark monograph A World of Regions, Peter Katzenstein (2005)

writes that strong asymmetry favouring the US has prevented the emergence
of a viable regional intermediary state or group of states in the Americas, as
was the case in Asia and Europe. As a result of that situation, the Americas
never managed to become a functional (‘porous’) region of the American
imperium (Katzenstein, 2005, p. 3). Be that as it may, the region does offer
rich terrain to observe the dynamics of regionalism from a historical as
well as a contemporary point of view. After all, state actors were involved in
region-building projects as soon as independence was secured in the 1820s.
During the first half of the nineteenth century, governments in the Andes
and in Central America pursued an elusive quest for political unity through
attempts at federation. Initiated with the Congress of Panama, this period

Shaw
 Gordon Mace, Andrew F. Cooper and Timothy M. Shaw 5

witnessed the failure of all federalist projects from the Republic of Gran
Colombia to the Peruvian–Bolivian Confederation in 1839 (Schneider,
2007, pp. 97–105). The Lima Conference of 1864–5, as Peter Smith aptly
remarks (Smith, 1996, p. 92), was ‘the last institutional embodiment of
Bolivar’s dream’. Thereafter, the flame of political unity was kept alive but
never succeeded in giving birth to a lasting political experiment. After the
Second World War, political unity gave way to economic integration with
projects such as the Latin American Free Trade Association and the Central
American Common Market (CACM), and to multidimensional integra-
tion schemes with the Andean Pact and the Caribbean Community and
Common Market (CARICOM). After years of difficulty and limited progress,
these were replaced by open regionalism projects (ECLAC, 1994), as illus-
trated by the Mercosur (the Southern Common Market) and the Andean
Community. More recently, these economic integration projects have been
complemented by more diplomatic and politically oriented forums such
as the Union of South American States (UNASUR), ALBA, and an eventual
Latin American and Caribbean diplomatic forum – proposed in February
2010 by the Mexican government (Heine, 2010).
With regard to the US-led regionalist project, the intriguing paradox is
that despite all the power and the political weight of the US in the Americas,
Washington was never able to obtain the type of institutional structure that
it wanted. The first window of opportunity was opened in 1889, at the First
International Conference of American States, when the Latin American
governments present rejected the US proposals for a customs union and
an arbitration treaty (Connell-Smith, 1974, p. 110). The following Pan-American
conferences were no more successful at institution building despite the
establishment of the Pan-American Union in 1910. Pan-Americanism can
nevertheless be considered a success for US diplomacy because it prevented
the creation of an exclusive Latin American forum, thereby providing
Washington with more flexibility to intervene in the region.
Another opportunity presented itself, in the aftermath of the Second World
War, in the context of the restructuring of the international system and the
nascent bipolar order. The Ninth International Conference of American
States, held in Bogota in 1948, was the occasion for a transformation of
Pan-Americanism into the Inter-American System. For the US, the Bogota
Conference had mixed results. On the one hand, it reinforced the institu-
tional architecture of hemispheric regionalism with the adoption of the
Charter of Bogota and the establishment of the OAS as the principal political
forum of the inter-American system. This main institutional structure would
be complemented by a defensive military alliance, the Rio Treaty, an important
development tool, the Inter-American Development Bank (IDB), and signifi-
cant democracy and human rights institutions such as the Inter-American
Convention of Human Rights (IACHR), the Inter-American Commission on
Human Rights and the Inter-American Court of Human Rights.

Shaw
6 Introduction

On the other hand, however, the Bogota Conference did not deliver on
US expectations with regard to two important issues. As in 1889, one of
them concerned the settlement of disputes on which most governments
agreed on principle but disagreed on specific provisions to be included in an
agreement. A treaty, the Pact of Bogota, was nevertheless proposed in 1948
and signed by the participating governments. However, it was ratified by only
13 states with, in some cases, far-reaching reservations which considerably
limited its scope. (Connell-Smith, 1974, p. 202; Atkins, 1989, pp. 226–7). The
other issue was that of economic cooperation. The Economic Agreement of
Bogota included a certain number of measures in that regard, particularly
concerning trade in commodities and national treatment of foreign invest-
ment, but the document was signed with so many reservations as to make
it useless even if ratified.
The previous listing, even though incomplete, reveals that there is a
rich history of region building in the Americas unfolding from the days of
independence to the present time. In what concerns the US-led regionalist
project up to the 1980s, the analysis shows that there was an almost constant
tension between the US vision concerning the regional architecture and Latin
America’s reaction to that vision. Given the enormous asymmetry of power
between the US and its neighbours, it was unthinkable for Latin American
governments to openly reject US proposals or confront Washington directly
on issues of particular importance for the region. Consequently, the main
strategy for Latin American governments was a defensive one, based on
the use of law and the construction of a regional law regime. The regime is
based on the fundamental principles of respect for sovereignty and territorial
integrity, and non-intervention. These principles have been put into practice
early in the twentieth century through measures such as the Drago Doctrine
of 1902, on non-intervention, and the Calvo Clause by which foreign investors
in the region renounced the right to appeal to their government in case of
conflict with local governments. They are also affirmed in Articles 15 and
17 of the Bogota Charter.
In this way, Latin American states were not able to prevent unilateral US
interventions in countries of the region but they managed to limit these
interventions to selected countries in Central America and the Caribbean. By
fiercely defending the regional normative order, they succeeded in containing
US power and gave themselves a certain margin for manoeuvre.

Redesigning hemispheric regionalism

After almost 25 years of near stagnation in inter-American relations, a new

era seemed to appear at the beginning of the 1990s. It was the result of a
particular combination of international and regional developments. At a
systemic level, globalization seemed to be creating conditions for a ‘new
regionalism’ as a result of a process of global structural change (Hettne,

Shaw
 Gordon Mace, Andrew F. Cooper and Timothy M. Shaw 7

1999, pp. 1–24; Mittelman, 1999, pp. 25–53; Hettne, 2003, pp. 22–42). The
end of the Cold War and the apparent triumph of representative democracy
and of a neoliberal economic order paved the way for a ‘unipolar moment’
(Krauthammer, 1990) in which Latin American and Caribbean (LAC) govern-
ments seemed to have no choice but to harmonize state strategies with
those of the dominant powers, most notably the US.
At the regional level, the context had also changed considerably compared
to the start of the previous decade. Pressure from the international commu-
nity, most notably from the Carter administration, had started to have an
impact in the region at the end of the 1970s with regard to democracy and
respect for human rights. The 1977 decision to reduce aid to countries vio-
lating human rights (Pastor, 2001, p. 46) signalled a change in US policy on
democracy in the Americas. It was a central factor in the re-democratization
movement that started in the region with the return of a civilian govern-
ment in Ecuador in 1979.
The external debt crisis of the mid-1980s was also a very significant
development. A psychological shock, more than anything else, it was at the
source of a major change of attitude on the part of the élites of the region
concerning the economic development model followed by almost all Latin
American governments since the 1930s. Under pressure from international
lending institutions, a majority of governments progressively replaced indus-
trialization by import substitution with state strategies more in line with
the neoliberal economic policies adopted by the US and the UK in the early
1980s and then by most of the OECD countries later on.
Finally, the signing of a free trade agreement between Canada and the US
in 1987 and the start of negotiations between Washington and Mexico two
years later, that would lead to the North American Free Trade Agreement
(NAFTA), were also instrumental in changing perceptions and expectations
of the other governments of the region. The opening of discussions con-
cerning free trade between two industrialized countries and an emergent
economy like Mexico in one way served as an illustration that a free trade
agreement was possible between rich and poor countries in the Americas.
In another way, negotiations on a free trade project in North America
could be perceived as a kind of menace for LAC governments who would
not have had the same kind of access to North American markets. All this
happened while market access to the European Union (EU) was becoming
more difficult.
This particular mix of international and regional occurrences created
a unique context favourable to a rapprochement between the US and its
neighbours of the Americas, which Daniel P. Erikson discusses later in this
volume. This new sense of community and shared interests was based, how-
ever, on false premises and on what was left unsaid. On the one hand, the
US administration developed the unrealistic view that there now existed a
convergence of values and interests between the US and Latin America, and

Shaw
8 Introduction

that a window of opportunity now existed that had to be seized in order to

remodel hemispheric relations (Aronson, 1996; Bush, 1989; Christopher,
1993; Watson, 1995). On the other hand, and for reasons that may have had
to do with uncertainties concerning the world environment or expectations
regarding changing US policies, Latin American and Caribbean officials
never publicly formulated at that time an alternative vision or an opposing
point of view concerning the agenda of inter-American affairs proposed by
the US. Consequently, the new phase of hemispheric regionalism would rest
from the start on shaky grounds of misunderstandings and silences.
The hemispheric regionalist project of the 1990s took form nevertheless
and started with the Enterprise for the Americas Initiative put forward by
President George H. W. Bush in June of 1990. The Initiative offered increased
foreign investments, selective reduction of the external debt of the region and
possible free trade deals to LAC governments willing to implement economic
and trade reforms (Scheman, 2007, p. 17). Of course, these reforms had to be
in line with the neo-liberal model promoted by the US.
That opening towards the region on the part of the US administration, along
with the revival of regionalism in all parts of the hemisphere, set the stage for
a major redesigning of the inter-American system. The new architecture was
put in place following the First Summit of the Americas in Miami, in December
1994. From then on, major orientations concerning hemispheric affairs
would be decided by heads of state at regular summits involving all the states
of the region except Cuba, whose regime had been excluded from the OAS in
1962. Following up on summit mandates, decisions for specific sectors would be
taken at ministerial meetings convened in-between summits. Decisions taken
by heads of states and ministers would be implemented by national govern-
ments on one part, and by regional institutions on the other (Scheman,
2007, pp. 17–27; Mace and Loiseau, 2005, pp. 124–9). The OAS, which had
been the main political body of inter-American relations up to then would
now be charged with implementing summits mandates in coordination with
other regional agencies. The IDB, however, was never really integrated in the
new institutional design (Feinberg and Haslam, 2007, pp. 51–68).
With regard to agenda, the scope of the regionalist project was quite
comprehensive. Like all such endeavours, the cornerstone of hemispheric
regionalism was naturally economic integration through the establishment
of a free trade area. Support for and promotion of representative democ-
racy and human rights were also a central feature of the project. That was
a logical development as the Protocol of Cartagena had already reinforced
the OAS’s mission in this sense in 1985. Other issue-areas covered were
those in relation to security, particularly with regard to terrorism, trans-
national crime and confidence-building measures, economic development
and prosperity promotion, sustainable development, scientific and energy
cooperation, and central social issues such as the role of women in society,
and universal access to education and basic health services.

Shaw
 Gordon Mace, Andrew F. Cooper and Timothy M. Shaw 9

This third phase of hemispheric regionalism was thus quite an ambitious

enterprise. Led by the US and now including Canada and the Commonwealth
Caribbean countries, the regionalist project was a multidimensional scheme
which sought not only to move inter-American relations towards more pro-
ductive cooperation but also to impact positively on the social and economic
conditions of the peoples of the region. After five Summits of the Americas
and more than 15 years following the initial summit, it is appropriate to look
back and try to assess the results of this cooperative endeavour.

A critical assessment with a focus on institutions

In a very interesting collection comparing regional institutions, Acharya

and Johnston (2007) propose an analytical framework around the central
notion of institutional design. Following on from previous studies on the
rational design of institutions (Koremenos, Lipson and Snidal, 2004), but
adopting a very different angle for analysis, they seek to offer answers to
two puzzles. The first puzzle concerns the variation in the design of security
and economic institutions across regions given that, according to functional-
ist theory, we should expect little. The second one concerns the variation in
institutional design in relation to the variation in the nature of cooperation
(Acharya and Johnston, 2007, p. 2).
The contributors to the volume were asked to examine the institutional
design of regional institutions both as a dependent and as an independent
variable. As a dependent variable, institutional design is characterized by
using elements such as membership, scope, formal rules, norms, and man-
dates (pp. 21–2). The independent variables are then types of cooperation
problems, number of actors, ideology and identity, systemic and sub-systemic
power distribution, domestic politics, extra-regional institutions and non-
state actors, and history (pp. 16–21). Authors were asked to study the
analytical relationship from both directions.
With regard to the Americas (Dominguez, 2007), three cases were
selected: the OAS, the Mercosur, and the Central American Common
Market (CACM). Jorge Dominguez’s main conclusion is that regional insti-
tutional performance after 1990 in these cases is best explained by the
following six independent variables: impact of prior and independent
structural and normative international systemic changes, the role of
international non-governmental organizations, domestic preferences,
choice of automatic rules, relative emphasis on interstate distributional
issues, and choice of voluntary and comprehensive institutional strategies
(pp. 85, 125–8).
Our own collection also has a strong focus on institutions but it differs
significantly from the Acharya and Johnston volume with regard to two
main aspects. Our choice of institutions is different and the analytical focus
is not the same. We cover only one region, the Americas, and we are mainly

Shaw
10 Introduction

interested in the performance of inter-American institutions. Why such an

exclusive focus?
From the mid-1960s to the end of the 1980s, the flagship institution of the
inter-American system had been more or less irrelevant. In the eyes of many,
the OAS had become moribund, thereby signalling the inadequacy of the inter-
American system as the main diplomatic forum of the region. By giving new
life to the promotion of democracy mission of the OAS in 1985, the Protocol
of Cartagena restored a certain level of legitimacy to the organization,
further increased by the Santiago Commitment of 1991 and the Protocol
of Washington a year later (Gosselin and Thérien, 1999, pp. 178–82). But
the major reorganization of the inter-American system came in 1994 on the
occasion of the First Summit of the Americas. Whether or not the product of
‘wishful thinking’ (Shifter, 2009, p. 51) on the parts of the assembled Heads
of state in Miami, the Declaration and Plan of Action that came out of that
summit gave a new institutional architecture to the inter-American system
and launched a new phase of hemispheric regionalism.
Sixteen years later, after six summits (including the special one in
Monterrey), numerous ministerial meetings and considerable time and effort
devoted by regional institutions, the dominant point of view seems to be
that hemispheric regionalism has not delivered substantial results and has
contributed little to increasing the well-being of the peoples of the Americas.
Social and economic conditions in the region have not improved substan-
tially, where a third of the population still lives in poverty while insecurity
remains high, problems of governance affect many countries, and support
for democracy has diminished (Rojas, 2009, pp. 19–23). Inter-American
institutions, of course, are not the only ones to blame for the limited social
and economic progress in the Americas during the past 20 years as they are
not the only actors involved and because they can only do so much with
the resources given to them by national governments. But there is a sense
nevertheless that regional institutions have not been up to the task. The
OAS in particular has been a ‘disappointment’ (Lowenthal, 2009, p. xxvi),
a ‘site of divergence’ (Cooper, 2009, p. 160) and is in serious need of ‘fixing’
(Meacham, 2010).
Whilst intra and extra-hemispheric inter-governmental relations may
account for some of the above recent desultory performances, there may
be another or additional explanation: the impacts of non-state relation-
ships. The ‘new’ regionalisms perspective, as a response to the limitations
of the older, established inter-state approach, seeks to identify non-state
trans-boundary relations in a variety of sectors at micro-, meso- and macro-
regional levels. We focus on five of these which both advance/energize and
retard/deflate inter-state ambitions. Perhaps the most apparent at the turn
of the decade is the war on drugs, gangs and cops, with its horrendous
death toll, on the Mexican–US border which cannot but impact upon the
OAS let alone NAFTA.

Shaw
 Gordon Mace, Andrew F. Cooper and Timothy M. Shaw 11

First, somewhat recognized in official organizations, is the increasingly

established and institutionalized migration/diaspora/remittances syndrome.
In terms of the hemisphere, this is particularly concentrated in the Mexico/
Central America–US nexus, but it exists in Caribbean islands as well as
between them, as well as in North America and the European Union (EU),
especially France, Netherlands, Spain and the UK. Diasporas have become
important parts of elections and policy debates in Canada and the US espe-
cially around multi-culturalism and -racialism along with immigration. And
they have become central to the flow of foreign exchange south, even if it
took the World Bank a long time to so recognize (in late 2000). Such remit-
tances are crucial to the life of extended families, contributing to MDGs,
but they have become more problematic given the global financial crisis at
the turn of the decade (IDB, 2009). Nevertheless, while off historic highs,
they totalled some US$ 60 billion from the US to Latin America, includ-
ing Central America and the Caribbean at the end of the last decade: some
US$ 21 billion to Mexico alone then US$ 4.7b to Brazil and US$ 4.1b to
Columbia followed by US$ 3.9b to Guatemala and US$ 3.4b to El Salvador.
Second, the proliferation of ‘new’ issues such as civil society, climate change
and corporate social responsibility (CSR) has lead to a burgeoning of novel
heterogeneous global and hemispheric coalitions around, say, ocean rise,
management of valleys like the huge Amazonia system (Hochstetler and Keck,
2007), Arctic and Antarctic melting and so on. Such extensive, heterodox alli-
ances have been most visible globally around causes such as landmines (the
International Campaign to Ban Landmines, ICBL, and the Ottawa Process,
OP), blood diamonds (the Kimberley Process, KP), the Extractive Industries
Transparency Initiative (EITI), among others. In turn, these have begun to
shine a spotlight on myriad heterogeneous coalitions, certification initiatives,
and other collaborative measures (Dingwerth, 2008, pp. 628–30).
Third, the expansion of Southern multinational corporations (MNCs)
means that they can no longer be overlooked in hemispheric discussions/
institutions. Just as Southern non-governmental organizations (NGOs) are
increasingly recognized, so MNCs from Brazil and Mexico impact regional
and global negotiations. There is a burgeoning literature on such Southern
MNCs (Goldstein, 2007; van Agtmael 2007) as they creep up the Fortune
500 list (Brahma, Embraer, Petrobras, and Vale from Brazil; America Movil,
Cemex, Femsa, and Pemex from Mexico). Such regional MNCs from the
South increasingly impact regional supply-chains/logistics, as in container-
lines like COSCO from China, CSAV from Chile, Malaysia’s MISC and
Singapore’s NOL, along with Caribbean Airlines in Trinidad and Tobago as
well as Copa out of Panama.
Fourth, at the turn of the decade, issues around energy, food, land,
water and human security are increasingly recognized, symbolized by the
Copenhagen Summit at the end of the first decade of the new century. These
in turn have implications for state and non-state actors and networks.

Shaw
12 Introduction

And finally, some of the hemisphere, especially the Mexican, Columbian

and Caribbean, along with parts of the US, cannot be isolated from drug
networks and mafias. These illicit organizations have proliferated and
diversified as US and related tracking methods have improved even if no
‘war on drugs’ can be won. Such gangs operate within extensive alliances
such as surenos and nortenos in California as well as La Gran Raza and La
Gran Familia on the East Coast. But while demand in the North remains
resilient, Southern entrepreneurs, sometimes aided by diasporic networks,
can export and reinvest via ‘money-laundering’, with Offshore Financial
Centres (OFCs) being of growing concern to the G8/G20 and OECD
especially the US.
Together such unofficial connections impact formal inter-state regional
arrangements in both positive and negative ways. All state regimes have
an interest in their longevity let alone legacy, but if these become more
problematic, then they may seek extra-national regional support. Together,
sometimes in combination, sometimes separately, these factors impact the
formal regional agenda, both positively and negatively at the turn of the
decade.
Must we therefore consider the third phase of hemispheric regionalism as
an ‘interregnum’ (Shifter, 2009, p. 58) after which inter-American relations
will return to a ‘normal’ state of conflicting relations or, worse, to a state of
irrelevancy with regard to solving the central problems of the Hemisphere?
Will hemispheric regionalism become obsolete as the inter-American system
faces too many contradictions thereby giving more importance to sub-regional,
extra-hemispheric, and other forms of institutions? This volume seeks to answer
these fundamental questions concerning the future of the Hemisphere by
proposing a critical examination of the record of hemispheric regionalism
over the past sixteen years. It offers an assessment of the performance of
inter-American institutions in important issue-areas of the regional agenda.
The volume also examines the performance of significant sub-regional insti-
tutions to see if they did better and, with that in mind, reflects on ways to
make hemispheric regionalism more functional.

The structure of the volume

This volume has four parts. In the first one, of a more contextual nature,
we examine the changing political environment in the Americas during
the first decade of the new millennium. Putting to profit her vast expertise
on regional politics, Diana Tussie analyses the shifting grounds of recent
hemispheric and sub-regional relations. She traces the contours of the
trajectory of the hemispheric project, focusing her attention particularly
on the strategic motivations behind the fall of the FTAA project and the
plethora of bilateral trade deals that followed. She then examines the alter-
native forms of region building linked to the complex interplay of the grand

Shaw
 Gordon Mace, Andrew F. Cooper and Timothy M. Shaw 13

strategies of Brazil and Venezuela. It is unclear what the future holds for
the ‘circular game of cooperation and competition’ that is now developing
in the Americas, but there is clearly a search for ‘ a new social contract’
and for institutional arrangements that will adequately reflect the new
combination of norms and values. The geopolitical context has changed
considerably in the Americas during the last few years and Brazil will compete
from now on with the US to shape the future agenda and the institutional
architecture of the region.
Follows a contribution from Dan Erickson on the evolving relation-
ship between the US and Latin America under the Obama administration.
After noting that Latin America had all but disappeared from the US foreign
policy agenda after the 9/11 terrorist attacks, Erikson shows how high the
expectations of LAC governments and populations were during the months
leading to the Fifth Summit of the Americas in Trinidad and Tobago in April
of 2009. But US policy towards the Americas cannot change rapidly as it is
shaped by four central factors, among them the uncertainties concerning the
political dynamics in Latin America and the bureaucratic path dependency
of Washington’s policies in the region. The Obama administration is well
aware, however, that the context of inter-American relations has changed in
important ways, one being the increasing presence of external actors, China
in particular. Expectations are that President Obama will progressively try to
recalibrate the US–LAC relationship starting with more attentive manage-
ment of the Brazil–US agenda.
Norman Girvan then uses his long experience as an academic and as a
practitioner to analyse how the Caribbean has been affected by the pro-
found changes in the world economy in recent years and what options
small countries have to adjust to the situation. He first discusses the chal-
lenges associated with the structural shifts that have occurred in the global
economy and the international system. Of significance among them are
the important changes that have characterized the political economy of
Latin America during the last decade, notably the rising opposition to the
Washington Consensus and to the Western models of democracy and develop-
ment, the arrival of new social movements, and the affirmation of the region
on the world scene led by Brazil and Venezuela. The resulting decline of the
US’s influence in the region have left the CARICOM countries with some
options but governments of the region will need to make additional efforts
to define a vision concerning the place of the Caribbean in the new archi-
tecture of the Americas.

A critical assessment of hemispheric regionalism

The second part of the volume offers a critical assessment of the performance
of inter-American institutions in major sectors of inter-American cooperation.
As said previously, the cornerstone of the hemispheric project was the pro-
posal for a FTAA. Antoni Estevadeordal and Kati Suominen’s contribution

Shaw
14 Introduction

thus opens up this section with a study of trade relations in the Americas.
They start with an overview of trade relations in the Americas where one
can see that intra-regional trade in the LAC region is not as significant as
it is in other regions of the world but that it has increased in recent years.
The authors then show how the failure of the FTAA negotiations has left
the region with a patchwork of trade agreements which reveals quite a few
uncertainties concerning the future of regional trade relations. Among four
possible scenarios concerning trade in the Americas, the most advisable
would be a convergence of existing agreements that would prepare the way
for a region-wide agreement. But there are significant hurdles in this case as
in the case of all the scenarios. For Estevadeordal and Suominen, the impor-
tant consideration is to keep trade liberalization going because it offers the
best prospects for prosperity and stability.
From trade, we move to energy cooperation. In his contribution, Tom
O’Keefe writes that despite a proposal made by the Obama administration
to create an Energy and Climate Partnership of the Americas in April 2009,
hemispheric regionalism has a poor track record with regards to energy
cooperation. Energy and sustainable development did figure on the official
agendas of the first three Summits of the Americas, and a Hemispheric
Energy Initiative was officially launched in 1995. But nothing significant
came out of these initiatives, leaving the field open for energy cooperation
at the sub-regional level. All sub-regional integration schemes were active
in proposing agreements and creating institutions to facilitate one form
or another of energy cooperation among member states. In the case of
CARICOM, the PetroCaribe Energy Cooperation Agreements dominate the
landscape and have more or less undermined efforts at energy cooperation
within CARICOM. With regard to energy cooperation at the hemispheric
level, it might be possible to build on existing sub-regional agreements but
the prospects are not good because of Brazilian and Venezuelan reticence
and because of limited US leadership in the region given the importance of
other problems for the Obama administration.
Tom Legler’s contribution highlights the centrality of democracy and
human rights in the hemispheric regionalism project. Starting with the
Protocol of Cartagena de Indias in 1985, member states created a democ-
racy promotion regime that gave the OAS a major role in promoting
democracy and human rights in the region. OAS activities in this sense
have been important, particularly in the field of election monitoring. The
1990s witnessed the development and acceptance by member states of a
democratic normative order in the region whose most salient instrument
is the Inter-American Democratic Charter adopted on 11 September 2001.
Since that year, however, the Charter itself and the democracy regime were
the object of ‘a number of contradictory and worrisome developments’.
The diminishing consensus on what democracy entails have made it dif-
ficult to consolidate the regime. Furthermore, recent events in Honduras

Shaw
 Gordon Mace, Andrew F. Cooper and Timothy M. Shaw 15

and Venezuela have shown that there is a need to refine some of its major
instruments.
Security is also an important dimension of inter-American cooperation
as illustrated by Rut Diamint’s chapter. During the Cold War, the main
instrument of hemispheric regionalism for security purposes was the Inter-
American Treaty for Reciprocal Assistance or Rio Pact of 1947. Evoked only a
few times, the Rio Pact is a defensive alliance that was never used for its initial
purpose, which is to protect the member states from external threats. The
end of the Cold War and the appearance of other types of security threats,
such as those related to terrorism and international crime, brought the
hemispheric community to adopt a new security paradigm at the Mexico
Conference on Security in 2003. Building on the new concept of multidi-
mensional security, the OAS enlarged its security mission by incorporating
the Inter-American Defense Board in 2006 and by upgrading the Committee
on Hemispheric Security to a Secretariat on Multidimensional Security.
Combined with that of the defence ministerials, the work of the OAS may
not have reduced insecurity in the region but it did manage to help reduce
tensions among states and it is contributing to the creation of a normative
framework useful in the fight against criminality and terrorism.
The last chapter of the second part of the volume deals with poverty
reduction and the role of regional institutions in this regard, principally the
IDB. Nicola Phillips essentially argues that the poor record of poverty reduc-
tion in the Americas has a lot to do with the problematic conceptual basis
on which the institutions have articulated their strategies. Her analysis of
aggregate figures on poverty in the region brings her to remark that they are
misleading because ‘heavily skewed’ by trends in the larger economies. The
IDB strategies to fight poverty have been handicapped by a conceptual view
focused too much on the national context, thereby obscuring the nature
of the incorporation of LAC economies in global production networks. In
order to have a more effective poverty reduction strategy, the IDB and other
regional institutions should modify their approach to include the dynamics
of ‘adverse incorporation’ into the world economy along with the notion
of social exclusion.

The effectiveness of other institutions

Assessing the performance of hemispheric institutions unearths interesting
findings, but the assessment is more complete when the record is compared
to that of other regional institutions. The third part of the volume thus
analyses the situation of three sub-regional institutions, two established
ones and a relative newcomer.
In his chapter on the Mercosur, Marc Schelhase assesses the progress of the
integration scheme on the basis of its original aims: creation of a regional
economic space, consolidation of democracy, integration of the region
into the global trading system, and entrenchment of economic reforms

Shaw
16 Introduction

taking into consideration development imperatives. Examined from that

angle, Mercosur demonstrates notable achievements during the first half
of the 1990s but tensions started to appear in the second half of the decade.
The agenda became increasingly crowded, both externally and internally
while global economic conditions exacerbated internal tensions. The
second decade of the Mercosur saw an increase in tensions and limited
progress despite an attempt at macro-economic coordination on the part
of Brazil and Argentina. As Venezuela prepares to join the Mercosur as a
fully fledged member, the future of the institution appears uncertain as
member states have difficulty in implementing the bloc’s original aims
while they will have to decide on whether to commit more resources to
the Mercosur or to UNASUR.
In the case of the NAFTA, the first observation made by Louis Bélanger
and Richard Ouellet is that the agreement has delivered the main commer-
cial and economic results that it was designed to produce. Many non-tariff
barriers were eliminated, easy-to-apply rules of origin were introduced, and
innovative rules were adopted. Trilateral merchandise trade has tripled from
1994 to 2008 while NAFTA was also instrumental in fostering economic
growth for each member state. Despite these successes, it seems now that
NAFTA has reached a plateau and is ill equipped to face the challenges
ahead. The original agreement lacks effective amendment procedures and
rule-making capability to deal with twenty-first century trade issues. To be
truly effective in the years to come, NAFTA will need to be upgraded in a
comprehensive and formal fashion.
The Alternativa Bolivariana para América Latina (ALBA) is a much looser
type of association. As Josette Altmann writes in her chapter, the ALBA was
conceived as an alternative to the FTAA. It presents itself as another model
of integration, respectful of sovereignty and people’s self-determination, and
opposed to the economic model represented by the Washington Consensus.
Initiated and led by President Chavez of Venezuela, the ALBA functions
around a few selected instruments such as Petrocaribe, Telesur, Banco del
Sur, and joint development projects. If Petrocaribe has had a significant
impact in Central America and in the Caribbean, it is unclear what real
impact the ALBA had and how it will resist the consequences of the inter-
national financial crisis. Although the ALBA discourse does find support in
many parts of Latin America and the Caribbean, the challenge in coming
years will be to resist extreme polarization and deliver concrete results with
regard to joint development projects.

Reconstructing a regional system for the Americas

Given the difficulty, and in some cases the failure, of hemispheric region-
alism to produce significant results with regard to many aspects of inter-
American cooperation, and taking into consideration the experience of
selected sub-regional institutions, are there ways to improve the performance

Shaw
 Gordon Mace, Andrew F. Cooper and Timothy M. Shaw 17

of inter-American institutions? Are there ways to make hemispheric regionalism

viable for the near future?
After having noted the significant recent changes in the dynamics of
inter-American politics, notably the new assertiveness of Latin America in
world affairs and the openness of the Obama administration towards the
region, Jorge Heine believes middle powers have a role to play in giving
a new impetus to hemispheric regionalism. Canada, the middle power
par excellence, has already acted in this sense but Latin American middle
powers such as Argentina, Mexico and Chile could also play positive roles.
Not having hegemonic aspirations of their own, they are well placed to
act as honest brokers and propose new policy tools to improve inter-
American cooperation. One possible solution to relaunch hemispheric
regionalism would be to create an informal working group of ten coun-
tries that would make it easier to discuss and find solutions to important
regional problems.
The inclusion of another type of actor, the private sector, would also
be a positive move, according to Richard Feinberg. Historically, OAS
relations with the private sector have not been very strong, though this
improved after 1994 when the Miami Summit engaged private sector
representatives in consultations in the context of the FTAA negotiations.
These consultations were institutionalized in the framework of summitry
and the trade ministerials. This led to the creation, in 2005, of the Private
Sector Forum with the mission of building bridges between the OAS and
the Hemisphere’s private sector. With the help of instruments such as the
public–private partnerships, the public sector could play an important
role in helping inter-American institutions deliver concrete results for
member states.
Coming to the last chapter of the volume, Gordon Mace and Jean-
Philippe Thérien present a summary of findings concerning the results of
this last phase of hemispheric regionalism. From their point of view, the
mixed record of inter-American institutions raises the question of legitimacy
of these institutions and of the hemispheric project itself. When applied to
regional institutions, legitimacy has to do with notions of democracy and
efficiency. The communities involved must have access to the decision-
making process, and the institutions must implement decisions effectively
and with transparency. When this is missing, doubts arise concerning the
legitimacy of an institution. This itself is problematic and it becomes more
so in an environment of competing regionalist projects.

References
Acharya, Amitav and Alastair Iain Johnston (2007), ‘Comparing Regional Institutions:
An Introduction’, in Amitav Acharya and Alastair Iain Johnston (eds), Crafting
Cooperation, Regional International Institutions in Comparative Perspective, Cambridge:
Cambridge University Press. 1–31.

Shaw
18 Introduction

Alexandroff, Alan S. and Andrew F. Cooper (eds) (2010), Rising States, Rising Institutions:
The Challenge of Global Governance, Washington, DC: Brookings Institution Press.
Aronson, Bernard W. (1996), ‘Our Vision of the Hemisphere’, US Department of State
Dispatch, October 15: 184–5.
Atkins, G. Pope (1989), Latin America in the International Political System, second
edition, Boulder: Westview Press.
Breslin, Shaun and Richard Higgott (2000) ‘Studying Regions: Learning from the Old
Constructing the New’, New Political Economy Vol. 5, No. 3, pp. 333–52.
Bush, George H. (1989), ‘Remarks to the Council of the Americas’, Public Papers of the
President of the United States, Vol. 1, Washington, DC: Government Printing Office.
504–7.
Christopher, Warren (1993), ‘A Bridge to a Better Future for the United States and the
Hemisphere’, US Department of State Dispatch, 4(37): 625–6.
Connell-Smith, Gordon (1974), The United States and Latin America: An Historical
Analysis of Inter-American Relations, London: Heinemann Educational Books.
Cooper, Andrew F. (2009), ‘Renewing the OAS’, in Andrew F. Cooper and Jorge Heine
(eds), Which Way Latin America? Hemispheric Politics Meets Globalization, Tokyo:
United Nations University Press. 159–81.
Cooper, Andrew F. and Agata Antkiewicz (eds) (2008) Emerging Powers in Global
Governance: Lessons from the Heiligendamm Process, Waterloo: Wilfrid Laurier
University Press.
Delong, Brad and Stephen S. Cohen (2010), The End of Influence, New York: Basic Books.
Dingwerth, Klaus (2008) ‘Private Transnational Governance and the Developing World:
A Comparative Perspective’ International Studies Quarterly 52(3), September: 607–34.
Dominguez, Jorge I. (2007), ‘International Cooperation in Latin America: The Design
of Regional Institutions by Slow Accretion’, in Amitav Acharya and Alastair Iain
Johnston (eds), Crafting Cooperation: Regional International Institutions in Comparative
Perspective, Cambridge: Cambridge University Press. 83–128.
ECLAC (Economic Commission for Latin America and the Caribbean) (1994), Open
Regionalism in Latin America and the Caribbean, Santiago: ECLAC.
Feinberg, Richard E. and Paul Haslam (2007), ‘Problems of Coordination: The OAS and
the IDB’, in Gordon Mace, Jean-Philippe Thérien and Paul Haslam (eds), Governing the
Americas: Assessing Multilateral Institutions, Boulder: Lynne Rienner Publishers. 51–68.
Goldman Sachs (2007) BRICs & Beyond, New York: Goldman Sachs Group. Available at
http://www2.goldmansachs.com/ideas/brics/book/BRIC-Full.pdf.
Goldstein, Andrea (2007), Multinational Companies from Emerging Economies, London:
Palgrave Macmillan.
Gosselin, Guy and Jean-Philippe Thérien (1999), ‘The Organization of American
States and Hemispheric Regionalism’, in Gordon Mace, Louis Bélanger and con-
tributors, The Americas in Transition: The Contours of Regionalism, Boulder: Lynne
Rienner Publishers: 175–93.
Heine, Jorge (2010), ‘Latin Craze for Regional Integration’, The Toronto Star, 28 February.
Available at http://www.thestar.com/printarticle/772318. Accessed 2 March 2010.
Hettne, Bjorn (1999), ‘Globalization and the New Regionalism: The Second Great Trans-
formation’, in Bjorn Hettne, Andras Inotai and Osvaldo Sunkel (eds), Globalism and
the New Regionalism, London: Macmillan. 1–24.
Hettne, Bjorn (2003), ‘The New Regionalism Revisited’, in Fredrik Soderbaum and Timothy
M. Shaw (eds), Theories of New Regionalism, Basingstoke: Palgrave Macmillan. 22–42.
Hochstetler, Kathryn & Margaret E. Keck (2007), Greening Brazil: Environmental
Activism in State & Society, Durham: Duke University Press.

Shaw
 Gordon Mace, Andrew F. Cooper and Timothy M. Shaw 19

Hveem, Helge (2008) ‘The Regional Project in Global Governance’, in Fredrik

Soderbaum and Timothy M. Shaw (eds), Theories of New Regionalism, Basingstoke:
Palgrave Macmillan. 81–98.
IDB (2009), “Remittances to Latin America & the Caribbean”, 2009: The Impact of the
Global Crisis, Washington, DC: IDB & MIF.
Kagan, Robert (2008), The Return of History and the End of Dreams, New York: Alfred
Knopf.
Kanth, Ravi (2010) ‘S’pore to Host 3G Group During WEF Informal Coalition to
Discuss how it can Strengthen, Support Global Governance’, The [Singapore] Business
Times, 3 February.
Katzenstein, Peter (2005), A World of Regions: Asia and Europe in the American Imperium,
Ithaca and London: Cornell University Press.
Khanna, Parag (2008), The Second World: Empires and Influence in the New Global Order,
New York: Allen Lane.
Koremenos, Barbara, Charles Lipson and Duncan Snidal (eds), (2004), The Rational
Design of International Institutions, Cambridge: Cambridge University Press.
Krauthammer, Charles (1990), ‘The Unipolar Moment’, Foreign Affairs, 70, 1: 23–33.
Lowenthal, Abraham F. (2009), ‘Foreword’, in Andrew F. Cooper and Jorge Heine (eds),
Which Way Latin America? Hemispheric Politics Meets Globalization, Tokyo: United
Nations University Press. xxi–xxix.
Mace, Gordon and Hugo Loiseau (2005), ‘Cooperative Hegemony and Summitry in
the Americas’, Latin American Politics and Society, 47, 4, Winter: 107–34.
Meacham, Carl (2010), Multilateralism in the Americas: Let’s Start by Fixing the OAS.
A Report to the Committee on Foreign Relations, United States Senate, Washington:
Government Printing Office. Available at http://www.gpoaccess.gov/congress/
index.html. Accessed 15 February 2010.
Mittelman, James H. (1999), ‘Rethinking the “New Regionalism” in the Context of
Globalization’, in Bjorn Hettne, Andras Inotai and Osvaldo Sunkel (eds), Globalism
and the New Regionalism, London: Macmillan: 25–53.
Pastor, Robert A. (2001), Exiting the Whirlpool, US: Foreign Policy Toward Latin America
and the Caribbean, second edition, Boulder: Westview.
Prideaux, John (2009), ‘After Lula’, The World in 2010, London: The Economist.
Rojas Aravena, Francisco (2009), Integracion in América Latina: Acciones y Omisiones;
Conflictos y Cooperacion. IV Informe del Secretario General de FLACSO, San José: FLACSO.
Scheman, L. Ronald (2007), ‘The Inter-American System: An Overview’, in Gordon
Mace, Jean-Philippe Thérien and Paul Haslam (eds), Governing the Americas. Assessing
Multilateral Institutions, Boulder: Lynne Rienner Publishers. 13–33.
Schneider, Ronald M (2007), Latin American Political History, Boulder: Westview.
Shifter, Michael (2009), ‘Managing Disarray: The Search for a New Consensus’, in
Andrew F. Cooper and Jorge Heine (eds), Which Way Latin America? Hemispheric
Politics Meets Globalization, Tokyo: United Nations University Press. 50–63.
Smith, Peter H. (1996), Talons of the Eagle: Dynamics of US – Latin American Relations,
New York; Oxford: Oxford University Press.
Van Agtmael, Antoine (2007), The Emerging Markets Century: How a new Breed of World-
Class Companies is Overtaking the World, New York: Free Press.
Watson, Alexander F. (1995), ‘Toward a New Relationship of Western Hemisphere
Democracies’, US Department of State Dispatch, 28: 1–5.
Zakaria, Fareed (2008), The Post-American World: And the Rise of the Rest, New York:
Penguin Books.

Shaw
This page intentionally left blank

Shaw
Part I
A Changing Landscape

Shaw
This page intentionally left blank

Shaw
1
Hemispheric Relations: Budding
Contests in the Dawn of a New Era
Diana Tussie

Introduction

In the 1960s, when region building was first having a renaissance, economist
Gunnar Myrdal (1968: 39) issued a cautious note, suggesting that ‘the
regional approach has no intrinsic justification. There are no mystical qualities
in geographical proximity that make neighboring nations a “unit” in any
real sense culturally, politically or economically’. True to this dictum, Latin
America is a vast and uneven continent of many contrasts that escapes
‘essentialist’ characterizations, such as language, Hispanic-Catholic traditions
or a single civilization, as Huntington (1998) would have it. In the region,
the differences in size and levels of development are several times larger
than those found between the actual and prospective members of the
European Union. But such contrasts still leave room for positive assertions
about shared trends, common dilemmas or recurrent policy features that
prompt region-building efforts.
The regional level of analysis adds an exciting dimension to the study of
international political economy, long over-focused upon advanced industrial
societies and states as the systemic rule makers par excellence. European
empires enshrined this balance of power and the US, and through the
Monroe doctrine, promoted templates for controlling (and understanding)
their respective regions; most other countries also built ways of dealing
with their neighbours that have been overlooked by the systemic view of
enquiry. It is not that regions have been ignored outright, but rather that
only certain regions were deemed of interest: those seen to shape global
rules. The others were bundled up at the receiving end.
In a period of rapid transformation, the cloth of regional policies, regional
identities and regional forms of cooperation and competition (and not just
in ‘core’ regions) have come into focus as they are seen to have significant
global reverberations (Bélanger and Mace, 1999), beyond the role of pas-
sive receivers. Sticking to a binary view, Robert Keohane (2001) sets Latin
American countries as the takers not makers of global rules. Going beyond

23

Shaw
24 Hemispheric Relations

this binary description, there is a more complex situation characterized as

much by convergence and divergence, as well as by abeyance and contestation –
even if in comparison with the countries in Europe, Asia, and the Middle
East, the countries of Latin America and the Caribbean rarely grab news-
paper headlines.
Regionalism as an intensely political process is now a motivating and
legitimizing tool for linked strategies and objectives whereby governments
seek to coordinate the terms of competition on which rival economic and
political agents confront each other. In Latin America the process has gone
through phases of: energetic expansion, mere trend-following, controlled
stalemate, disaggregation and reconfiguration as a result of the ups and
downs of policies and the changing conditions in the global scene. These
factors have led to a leadership competition in terms of goals and of the
policies included and geographical reach. The analysis of competing projects
raises a number of interesting questions about the relationship between the
US’s ambition to lead a continent-wide project and defensive reactions to
it. The advent of a new administration in Washington hand in hand with
the global financial crisis of 2008–10 opens the door for a fresh look at this
increasingly rich and ambivalent relationship.
Forced to find the essence (which Myrdal called into question) that makes
up a region, the regional milieu in the Americas broadly speaking is in some
ways unique because of its natural resource base, its shared beginnings in
the system of states, the intimate exposure to US reach and the ultimate
mark of US hegemony. In this sense, regionalism as a channel for the spread
of policies dates as far back as the struggles for independence and the
coetaneous conformation of republics with startling degrees of social and
organizational commonalities (Fawcett, 2005). This is a distinct birthmark,
which also helps to explain the trajectory of regional politics, and its mix of
abeyance, adaptation, contestation, sidelining and pragmatism to a number
of realpolitik dilemmas.
True to this pattern, the last decade of the twentieth century ushered in a
paradigm shift, a new flux of styles, fashions and philosophies manifest in the
collapse of military rule, renewed electoral competition and the crumbling
of import substitution that had shaped and inspired policy for so long.
Trade reform became the mechanism for the transmission and adaptation
of neoliberal principles. Regional economic integration made a comeback.
In some cases, it entailed sprucing up old agreements, as was the case
with the Andean Pact in 1989 and the Central American Common Market
(CACM) in 1990. In other cases, new regions were created, such as the
North American Free Trade Agreement (NAFTA) in 1993 and the Mercosur
in 1991. The competition for potential expansion of the latter two brought
them into steadfast opposition from time to time, a continued tension
over modes of regional associations and, ultimately, regional leadership.
Mercosur was widely believed to create a window of opportunity for the

Shaw
 Diana Tussie 25

contestation to the US-led mode, an opportunity that as soon as it was seen

to lose vigour was jumpstarted by the Bolivarian Alternative for the Americas
(ALBA, in its Spanish acronym) – a project forged by President Hugo Chávez
of Venezuela. Strategic rivalries have cast unprecedented shadows in the
region. While China (see Phillips, 2009) makes hasty strides in trade as a
supplier and export destination, Spain has become the leading foreign inves-
tor in Argentina, the second in Bolivia, and the fourth in Peru. Russia has
enhanced its presence through high-level visits, warming up relations with
Cuba, and engaging in (modest) joint military and naval manoeuvres
with Venezuela. Iran has also toured the region extensively, in 2009 landing
in Venezuela, Bolivia and Brazil.
The approach of this chapter is primarily analytical. My concern is to
assess the nature of projects that have emerged in the Americas. This chapter
advances a dualistic conceptual framework and proceeds in two parts, each
tackling contrasting motivations for regional projects. The first shows the
main features and trajectory of the hemispheric project that was born under
American leadership, whose saga subsists quite vividly, albeit in a splintered
manner. The second part of this chapter examines rival attempts: the
quest to fend off American pre-eminence and making the claim for more
autonomous regional projects. It shows how these grapple in rocky waters
to sideline each other, at times reaching the verge of direct confrontation.1 It
concludes with an applied reflection on the ensuing dynamics fuelled by the
emergence of local powers and ‘alternative globalizers’.2 In the longer term
what we are seeing is the slow and partial unravelling of the age-old tug of
the US’s hegemony in the region, which has been propelled in opposite direc-
tions by élite alignment and societal resistance. As this relationship begins to
dim, nascent projects imbued with a range of strategic objectives, mark new
directions in still fuzzy, winding ways.

Reigning supreme

When the Cold War came to an end, Latin America stood alone as the only
region where American influence remained largely uncontested (Castañeda,
1993). This provided an opportunity for the most encompassing US attempt
to establish a model of regional economic governance through the Free
Trade Area of the Americas (FTAA). The relevance of the FTAA stemmed not
only from issues of regional market access for trade and investment but also
as a broader set of global power issues. The idea of creating a single market
with the 34 countries of the Americas was predicated on consolidating the
hegemony of US multinationals and structural adjustment policies – that
is, neoliberalism – until they became practically irreversible. This, in turn,
would be a major step towards establishing US hegemony over the inter-
national system, as the country’s net was cast over more and more countries
to bring them into the spiral of expanding agreements.

Shaw
26 Hemispheric Relations

The effort to join the economies of the Americas into a single free
trade area began at the First Summit of the Americas held in Miami, US
in December 1994. The initiative was warmly received by Latin American
heads of government, at a time when the Washington Consensus was the
dominant mindset. Countries in the region were leaving behind the worst
excesses of authoritarianism, regulation and protectionism. When the heads
of state signed the 1994 Miami Declaration and Plan of Action, there was
a consensus accepting of American leadership in the post-Cold War world
and in favour of de-regulation and trade liberalization. The 34 countries of
the Americas agreed to complete negotiations towards this agreement by the
year 2005. During the preparatory phase (1994–8), the 34 ministers respon-
sible for trade established 12 working groups to identify and examine existing
trade-related measures in each area, with a view to identifying possible
approaches to negotiations. The FTAA negotiations were formally launched
in April 1998 at the Second Summit of the Americas in Santiago, Chile. The
heads of state declared that the negotiating process would take into account
the differences in the levels of development and size of the economies in the
Americas in order to facilitate full participation by all countries and to ensure
that existing sub-regional schemes would not be wiped away. Consequently,
much of the literature explains open regionalism as a project of governments
responding to the needs of corporate actors to improve competitiveness in
global markets, using regional action as a means to engage with the global
economy (Grugel and Hout, 1999; Hveem, 2008; Mittelman, 2000). These
projects are likely to include a strong neoliberal agenda requiring extensive
domestic deregulation, apart from trade liberalization, aimed at reducing
the state’s role in economic life in order to yield efficiency gains (Phillips,
2000). The effect of such actions is to markedly reduce transaction costs for
firms engaged in business across national borders. Open regionalism and
neoliberal regionalism are often regarded as synonymous in the literature
(see Mittelman, 2000); in Latin America it was intimately connected to the
attempt to replace import substitution, countenance the FTAA and its sub-
sequent fallback option, that is, the web of bilateral agreements connected
to the US hub that replaced the original blueprint.
The establishment of the North American Free Trade Area (NAFTA) was a
watershed: it triggered panicked reactions in a spate of excluded countries.
North–South agreements modelled on NAFTA were put on offer and for many
countries that had been silent bystanders in the General Agreement on Tariffs
and Trade (GATT), regional arrangements of the North–South variety provided
an opportunity to increase inward investment and gain the market access
they sought but had never really extracted from multilateral negotiations.
In this context, the US tried to achieve WTO-plus agreements that would allow
for a favourable position not only in the hemisphere and with other countries
from other parts of the world. Unable to ignore these forces, governments,
businesses and other social groups responded with a variety of tactics.

Shaw
 Diana Tussie 27

Latin American governments and firms felt particularly challenged by the

multitude of pressures, with an eye on growth prospects and the intense
competition for foreign investment flows. Open regionalism emerged as
one response to these multiple pressures. It was considered a mid-course
placement along the way to globalization, a means through which policy-
makers and business could flex their muscles and, at the same time, make
a difference by connecting to the engine of globalization processes. By
engaging in market expansion (integration of larger regional markets) and
by employing selective protection/privileges (preferential treatment only
to group members), governments perceived regionalism either as a form
of gaining and locking in access for their competitive exports or of helping
competitive domestic industries before exposing them to global market
competition. Strategic trade insights, thus, suggest that regionalism in a
developmental perspective is not always or necessarily about governments
providing sanctuary to sunset industries.
In this sense, regionalism approximated a type of ‘meso-globalization’
(Phillips, 2000), which advanced through a ‘bottom-up’ process ultimately
convergent with increasingly deep engagement with the process of globali-
zation. The expectation was that globalization, as well as new forms of
economic regulation, would generate a new system of international political
governance grounded in multilateralism. Business and governments reacted
to actual market pressures and responded to perceived or anticipated events
(Palan et al., 1996).
The US dimension was crucial at that juncture. Both the George H. W.
Bush and Clinton administrations were actively engaged in the changing
regional landscape, and policies that both expanded and complicated policy
alternatives. In spite of some tensions and disagreements about strategy, and
in spite of the weight of American power, relations between Latin America
and the US then entered a comparatively smooth era. Apart from facilitating
trade liberalization, open regionalism was designed to enhance the poten-
tial for countries to attract foreign direct investment, as a result of the lure
of larger markets for multinational corporations eager to take advantage of
economies of scale. But the contested nature of the project led it down a
winding road and the specific form that it finally took departed quite signifi-
cantly from the original template which the US sought to enforce.
Each Summit of the Americas forum had taken up a mission. The 1994
Miami Summit was the ‘Trade Summit’; the 1998 Santiago Summit was
the ‘Education Summit’; the 2001 Quebec Summit was the ‘Democratic
Summit’; and the 2005 Mar del Plata Summit in Argentina officially focused
on the themes of ‘Creating Jobs to Fight Poverty and Strengthen Democratic
Governance’. The US agenda of economic integration, neoliberal reform,
democratic consolidation, and a campaign against corruption and drug traffi-
cking enjoyed wide acceptance as late as 2001, when, for example, former
president Cardoso appealed at the Democratic Summit in Quebec for a vision

Shaw
28 Hemispheric Relations

of a continent ‘defined not by asymmetry of power but by a community

of values’. Yet at that point, and for the first time, the final statement was
not approved unanimously among the heads of state of the 34 countries
represented. Venezuela reserved its position in relation to both the FTAA
negotiating schedule and the definition of democracy exclusively as ‘rep-
resentative democracy.’ Further criticisms of the FTAA negotiating process
were formulated at the Quito ministerial meeting in November 2002,
which demanded transparency in the negotiations and pointed out that
the Venezuelan Constitution (Article 73) required the holding of a national
referendum before such an important policy decision could be made (Blanco
and Linares, 2008). A global critique of the FTAA was presented at the FTAA
Trade Negotiations Committee meeting held in Puebla in April 2003. By the
time of the 2005 summit in Mar del Plata the tide had changed. Because of
its pungency the Mar del Plata Summit is best remembered as the ‘Maradona
Summit’ or the ‘final breakdown’ where the pro and anti-FTAA sides met
to work out their respective issues, although the spirit of collegiality had
already broken down in 2003 over disagreements over trade progress during
the ministerial meeting held in Miami. From then on, the FTAA unravelled.
While Washington intended to jump-start talks for the FTAA, Chávez head-
lined a giant rally with hemispheric social movement leaders, stuck a nail
in the FTAA coffin and proclaimed Mar del Plata the ‘tomb of the FTAA’. For
better or for worse, the summit in Mar del Plata showed the prominence of
the FTAA within the agenda of the preceding four summits, overshadowing
all the other issues that had been set out in those meetings.
The Mar del Plata Summit concluded with the collapse of the FTAA
as envisaged by the US, and, with it, the fall of Washington’s principal
strategy for the region. As challengers gained momentum, rather than
confronting a losing battle on a united ground, the US opened multiple
negotiating windows in order to be able to ‘forum shop’. In this more docile
environment, the policy of competitive liberalization opened a race for
access to its market, thereby enticing countries to open their economies
to US companies and farmers. Competitive liberalization (see Bergsten,
1996; Evenett and Meier, 2007) has been used to describe a trade nego-
tiating strategy containing a sequential logic linking negotiations, and
therefore trade liberalization, across different levels (bilateral, regional and
multilateral). It is also the dynamic that is said to be created by that strategy,
the competition among countries to be part of the club. As the USTR
Representative recognized:

By moving forward on multiple fronts, the US can exert its leverage,

create a new competition in liberalization, target the needs of developing
countries, and create a fresh political dynamic by putting free trade on
to the offensive.
(Robert Zoellick quoted in The Economist, 2002)

Shaw
 Diana Tussie 29

The competitive liberalization strategy has allowed the US to complete

a string of FTAs. The countries involved include Singapore, Australia,
Morocco, Bahrain and South Korea; and in the Americas, Chile, CAFTA-DR
(Costa Rica, El Salvador, Nicaragua, Honduras, Guatemala and the Dominican
Republic), Peru, Colombia and Panama. For the US, trade policy has never
been just about trade, but also about setting the rules of the game with
a view to broader global political interests. The change of course was not
merely a means of favouring apt allies and punishing the wavering. One of the
main reasons for US interest in the FTAA and then the bilateral deals was
the opportunity to advance a ‘new trade agenda’ and the ability to control the
multilateral agenda in the hemisphere.
The strategic motivations behind these bilateral deals need to be under-
stood in the context of the possibilities they provide for strengthening
the hand of local lobbies in the domestic political economy; for favouring
piecemeal rule acceptance, and building on sequential negotiations as a
means of generating ‘a spiral of precedents’ (Van Grasstek, 2008). The thrust
of the new bilateral deals is towards articulating regional disciplines which
reflect a set of offensive extra-regional and global interests at least as much
as they respond to more defensive regional priorities. At the hemispheric
level, the deals were part of the strategy to encircle recalcitrant countries,
and can be interpreted as a preventive move to avoid Brazilian leadership of
a consolidated South America that could emerge from the ambition to link
Mercosur with the Andean Community and create a space for Brazilian interna-
tionalized business. US irritation subsequently switched from Brazilian lead-
ership to the exuberant sparring of President Chávez in oil-rich Venezuela
and his own regional ambition extending to the Caribbean, Bolivia and
Cuba in particular. Whether a defensive reaction against Brazil or Venezuela
as contending states, the logic underlying the approach was to remain at
the centre and ensure the adoption of US-style market-friendly business laws
and regulations, or at least the adoption of regulations in which American
businesses did not lose the upper hand.
Winners of the race were supposed to garner more foreign direct invest-
ment and exports, both of which may well have been diverted from losers.
The loss of trade shares is said to put pressure on the losers to participate in the
contest more enthusiastically in the future (by offering to liberalize more).
By this logic, countries are concerned not just with their absolute position
with respect to the US market but also with their relative position vis-à-vis
other US trading partners. Business interests were prodded in one country
after another, in one export sector after another. The race put considerable
weight on the relationships between different levels of trade negotiation
and reform (namely, the bilateral, regional and multilateral levels). For
countries on the receiving end of this policy, the developmental trade-offs
have been formidable: they retain market access for their leading exports
and opportunities for specialization in exchange for restricting their use of

Shaw
30 Hemispheric Relations

industrial policy instruments to create new productive capacities. This is

especially evident in the management of inward investment (commitment
to ‘investor-state’-type arrangements and the elimination of capital controls)
and intellectual property protection (Shadlen, 2008).3
Why do countries agree to such bilateral agreements that undermine their
aspiration to increase bargaining power in the putative FTAA and the WTO?
A significant part of the answer is to be found in the export specialization
and the political dependence that underlies these decisions. As noted,
except for Mercosur, most of Latin America remains highly dependent on
the US as a destination for its exports and a source of direct investment
flows. A source of fear is the phase-out of non-reciprocal agreements which
contain preferences granted on a discretionary base. The most widespread
is the General System of Preferences, which coexists with the Andean
Trade Preferences and Drug Eradication Act and the Caribbean Basin Trade
Preference Act. By encouraging trade in sectors where there are rents,
preferences induce specialization in those sectors. In addition, by raising
returns, they also create a powerful business interest that will lobby for the
continuation of access. If preferences apply to highly protected sectors in
donor countries, they will result in high rents for those able to export free
of trade barriers. Hence the threat of phase-out generates an immediate
policy-induced distress.
Bilateral trade agreements are a way of locking in benefits on a binding
basis. But binding, in turn, is only granted so long as there is reciprocal give
and take. Most important in the case of Central America and the Caribbean
is the panic provoked by the phase-out of the Textile and Garment agree-
ment at the end of 2005, leading to the elimination of quotas, which,
restrictive as they might have been, had guaranteed orderly access to the
US market. The free-for-all with China’s highly competitive industry would
lead to the collapse of the rents associated with quota rights. Holders of
rents are well aware of how they stand to lose. They are well organized and
have considerable clout. Leading export sectors in many countries are either
internationally integrated or have well-established links with buyers. In this
context they have been able to exert powerful pressure on the conclusion
of agreements. Industrial sectors behind the Central American Free Trade
Agreement (CAFTA-DR) were the electronics industry (Intel in Costa Rica),
medical equipment (Costa Rica), pharmaceuticals (Costa Rica, El Salvador
and Guatemala), chemicals and chemical by-products (El Salvador and
Costa Rica), paper and paper by-products (El Salvador and Nicaragua).
Foodstuff producers such as fresh and preserved foods – including pineapples,
melons, flowers, plants, cigars, vegetables and pulses, tubers and roots –
traded by transnational enterprises such as Chiquita and Del Monte were
also avid players.
A broad segment of US interests was happy to see the elimination of
duties on 80 per cent of all industrial goods exported to CAFTA-DR countries,

Shaw
 Diana Tussie 31

benefiting information technology, construction equipment, chemicals, and

paper products, medical and scientific equipment. In addition, the agree-
ment wiped out duties on US (subsidized) farm exports, including cotton,
rice, wheat, soybeans, as well as processed foods, fruits and vegetables and
beef. CAFTA-DR also agreed to open markets to US telecoms, banks, insurers,
retailers, advertising agencies, express-delivery couriers, and travel and
transport firms. It also allows freer movement of professional services such
as engineering and accounting (granting short and medium-term visas). The
deal will grant WTO-plus protection for patented drugs, copyrighted movies
and software, Internet domain names and other intellectual property.
In its encompassing but failed attempt to construct the FTAA, and in its
fragmented version of a hub and spoke system shaped around the web of
bilateral agreements, open regionalism is an attempt to entrench both the
global and the regional hegemony of the US. The crumbling of the Central
America Common Market as a result of these pacts is an important develop-
ment. Together with the Andean Community, both had been relatively
successful in articulating a set of common negotiating objectives in the
FTAA process, in good part because these objectives had been largely limited
to the single issue of special and differential treatment for small economies.
In addition, the reduced clout of the smaller nations in the negotiations
allowed them to take a comfortable place on the back seat while bigger
players were left to fight the big battles. The Andean Community had been
generally rather robust vis-á-vis the FTAA process. In part this was due to
the presence of supranational institutional structures, and a certain delegation
of authority that allowed some coordination among member countries.
The pattern had been one in which different countries assumed leader-
ship on different issues and at different times. So there had been a record
(albeit timid) of more success at executing common negotiating positions.
Moreover, in the last quarter of 2002, members had reached an agreement
over 62 per cent of the lines in the common external tariff and had made a
commitment to agree on the remaining 38 per cent by the end of the year.
But the commitment was never honoured: Colombia, Peru and Ecuador
defected and opened up negotiations with the US. With neither the letter
nor the spirit of this agreement to hold on to, Venezuela’s President Hugo
Chávez announced in April 2006 that his country was pulling out of a
hollowed Andean Community.
Intensifying bilateralism reflected adversarial and competing strategic-
alliance behaviour and diminished the prospects of regional community-
building processes and endeavours. The conflictive context is exemplified
by the signing and negotiation of the agreement with Peru behind closed
doors in order to isolate the participation of civil society. As the US pressed
on, the cycle of elections ushered in new leaders and fresh analyses of
costs and benefits. This was largely the case in Ecuador and Bolivia, which
withdrew from the table. Mercosur, under Brazilian leadership, first resisted

Shaw
32 Hemispheric Relations

the FTAA and subsequently the first overtures for bilateral pacts.4 Many
Brazilian social, political and economic actors perceived that Washington
used the FTAA to undermine strides in sub-regional integration and align
the hemisphere to its interests. Other countries dependent on the US market
were more willing to undertake policy reforms as a quid pro quo for preferen-
tial access for their exports. As the continent split on the costs and benefits
of the package on offer, bilateral agreements netted a coalition compris-
ing Chile, Colombia, Peru and Central America. North America and
Mercosur became contending hubs for the emerging patterns of integra-
tion. Gradually a degree of creativity and flexibility in setting the regional
agenda emerged in the interstices. While opposition to neoliberalism
gathered strength, the string of globalization crises in the region (Mexico
in 1995, Brazil in 1999, Argentina in 2001) forced a reality check, damaged
confidence in neoliberal reform and changed the mindset of élites. US
unilateral policy in the era of George W. Bush, its lack of strategic vision –
even negligence and divisiveness in its dealings with Latin America – was
to be the handmaiden that provided the occasion for a turnaround of
the entanglement that had marked the 1990s. George W. Bush came to
personify the threat that acquiescence to American power could get out
of control. His contribution to contesting politics should not be judged
by its own tragic global outcomes but by the strong counter-reactions it
provoked. It is out of such dynamics that in Latin America regionalism
emerges as a defensive response.

Vying for influence: Nascent forms of region building

Instead of an integrated Pax Americana in the hemisphere, Latin American

relations now face an array of loose ends that could turn out to be salutary
in as much as it allows each of the countries of the region to gain leeway.
Many region-building projects and much regional activity grow out of the
need to gain grounds for disentanglement from US-led initiatives. Defensive
interests are also concerned with retaining power in the region, reaching
out to other powers or filling spaces in which American leadership or global
structures were seen as encroaching or excessively constraining (Fawcett,
2005). In a number of sectors where producer interests sometimes compete
with foreign business and often play a crucial political role, governments
may well respond to the lost thrust of Pax Americana in ways that attempt
to nurture spaces for their own interests.
The lingering trade conflicts are projected in a circular game, alternating
pro and anti-liberalization stances through regional structures and arrange-
ments, attempting to shape the regional arena, sometimes offensively and
sometimes defensively. Venezuela and Brazil compete and cooperate, each
promoting old and new forms of cooperation as part of their strategy.
Mercosur is a case in point, in that each country has battled to use the

Shaw
 Diana Tussie 33

symbolic hold of Mercosur in the social imagination of the electorate and

its ability to plod along, despite a proven inability to move forward. Several
reasons underlie Mercosur’s faculties for plodding, resistance and sidelining.
In the first place, Brazil accounts for three-quarters of GDP, exports and popu-
lation. The association subsists as one of the many rings of Brazilian grand
strategy. Argentina and Brazil are sizeable economies with dense domestic
markets of their own. Both remain the least open economies in the region
with average tariffs standing at around 14 per cent (the highest in place
in the continent) and with exports accounting for less than 10 per cent of
GDP. Business interest in the hemispheric initiative was at best lukewarm
and public opinion at most indifferent, if not outright averse. A referendum
in 2002 organized in Brazil by more than 60 civil society organizations, with
the support of the National Confederation of Catholic Bishops, revealed that
more than 90 per cent of the people that cast a vote were opposed to the
FTAA and in favour of quitting negotiations altogether. Brazil stands apart
in other respects too. Brazil’s main exports to the US include: relatively
high-tech goods such as aircraft, tractor-parts, engines and telecommunica-
tions equipment; low-skilled, labour-intensive goods such as footwear; and
natural resource-intensive goods like steel and paper. Many of these have
often been the target of the wide gamut of US protectionist instruments
(tariff peaks, anti-dumping and countervailing duties, to name a few). That
has been the case, for instance, with orange juice, footwear, apparel, and
sugar exports.
To restrain American might, overtures with Europe, China, Russia, and
other countries of the global South were also exercised. At the core of this
is a defensive reaction that seeks to avoid, delay or compensate adjustment
costs; as well as a concern with global redistribution which accepts the inevi-
tability of some trade liberalization while trying to manage its Darwinian
aspects by means of continuous counter-proposals on all negotiating fronts,
including the WTO. Disagreement with the US on procedural and substan-
tive issues were raised relentlessly all along the FTAA process, a strategy that
delayed all established schedules and deadlines and ultimately hollowed the
project. While the US had favoured country-by-country negotiations, Brazil
led the charge for decision making by consensus and the recognition of
the presence and collegiate interests of sub-regional blocs. When the US pro-
moted an ‘early harvest’ to advance the process, Mercosur upheld the principle
of a single undertaking for the entire package, in other words, that no issue
be brought to a final decision until the whole set of trade-related issues is
agreed upon. In regard to liberalization of services, the US had insisted on
a broad liberalization scheme, a top-down approach to services trade liber-
alization based on negative listing, whereby all sectors and measures are to
be liberalized unless otherwise specified in annexes containing reservations,
or non-conforming measures. Mercosur, in contrast to other countries in the
region, counter-proposed a positive list approach, following the policy lines

Shaw
34 Hemispheric Relations

applied in its own Montevideo Protocol on Services Liberalization (Tussie

and Quiliconi, 2004). The positive list approach entails a gradual step-by-step
mechanism whereby countries specify the type of access or treatment
offered to a particular service (or service supplier) in scheduled sectors. On
government procurement, in order to carve out and retain a slice of the
market for itself, Mercosur opposed the US stance to extend open bidding
to state companies and sub-national entities.
At the 2001 ministerial meeting of the FTAA in Buenos Aires, the Brazilian
delegation rejected the US proposal to bring forward the deadline for
concluding an FTAA. Argentine backing of Mercosur was crucial at the
subsequent ministerial meeting in Miami in 2003, when Argentina turned
down a backdoor offer from the US (Carranza, 2006). Mercosur expressed
broad disagreement with a good part of the FTAA agenda. The US attempt to
have agriculture and trade relief measures tackled at the WTO was mirrored
by Mercosur with its own defensive interests – government procurement,
intellectual property, and services should in turn be unloaded on the WTO
as well. Use of the global arena of the WTO has the twofold advantage of
requiring lower concessions than the ones demanded in the FTAA, and of
coalition building with China, India and other non-Latin American countries
that might provide greater leverage over the agenda.
Against this backdrop Mercosur has also pursued a hedging strategy opening
negotiations with other South American nations both to weave a fabric of
agreements that allow mutual access and to increase leverage vis-à-vis the
US. The interest in extending the reach of Mercosur and obtaining a free
trade area with the Andean Community and Central America, as well
as the Gulf Cooperation Council, the South African Customs Union and
countries such as India, exemplify this vision. The aim is to preserve the
backbone of Mercosur while at the same time prying open markets abroad.
Ultimately, the aim is to build consensus with new players capable of making
that balance viable. Such policy direction is evident in the Brazilian efforts
to give life to the Union of South American Nations (UNASUR, in its Spanish
acronym), bringing together the countries of the Andean Community of
Nations (ANC; CAN in Spanish) with those of Mercosur, through initiatives
of energy integration and physical infrastructure. At the micro-level, the
projection of Brazilian export interests and the appetite of neighbours for
energy from Bolivia and Venezuela directly challenges the compact created
by the 12 US bilateral agreements. Regardless of the coming to fruition of
the South American Community as a geo-economic union of sorts on the
basis of institutional bridge building between CAN and Mercosur, the over-
all balance has moved from trade negotiations to a political project to keep
the US at bay in a cooperative fashion.
The fear of being swamped by the massive asymmetries in political
power, and social, cultural and economic resources, has translated into the
emergence of a heterogeneous ensemble of governments vying for the role

Shaw
 Diana Tussie 35

of hub and trying to gain a competitive edge over US-inspired regional

pacts. While Mercosur plateaued, ALBA was born as another rather
more radical and rambunctious contender led by Chávez. ALBA’s agenda
emerged as a result of the widespread resistance of social movements to the
FTAA and the ensuing search for alternatives (Saguier, 2007).
Dented by the 2002 coup attempt which had the outright blessing of
President Bush, Chávez felt that it was necessary to build international
legitimacy for his regime; to that end a new phase of foreign policy was
inaugurated with an outward push for the construction of strategic alliances
as a network of support for the Venezuelan revolution. After winning the
2004 recall referendum, in which Chávez fetched 58 per cent of the vote,
the opposition fell silent, shocked as much by the results as by the ease
with which international observers condoned the Electoral Council’s audit
of the results. Chávez’s attacks on the US escalated noticeably at the end of
2004. He has accused the US of plotting to kill him, crafting his overthrow,
placing spies inside the state oil company Petroleos de Venezuela Sociedad
Anonima (PDVSA), planning to invade Venezuela, and terrorizing the
world. In this context, ALBA was put forth in 2004 as an alternative, anti-
neoliberal model for regional integration, antithetical to the FTAA and with its
emphasis on social issues, solidarity and cooperation in public service pro-
vision. Originally signed by Venezuela and Cuba, ALBA set a framework for
cooperation between both countries whereby Venezuela provides preferen-
tially priced oil in return for a variety of in-kind resources, including health
care personnel and education programmes. In addition to Venezuela and
Cuba, the core of this alliance is formed by Bolivia, Dominican Republic,
Nicaragua, St Vincent and Dominica. Paraguay and Ecuador are also part
of this alliance, though they have not yet become fully fledged members.
Honduras had become a member six months before a coup ousted President
Manuel Zelaya in mid-2009.
The advocates of ALBA promote a socially oriented trade bloc rather than
one strictly based on market incentives (see Altmann, this volume). The cor-
nerstone in the design of the ALBA is the proposal for a Compensatory Fund
for Structural Convergence, which would manage and distribute financial
aid to the most economically vulnerable countries. The programme favours
endogenous development; rejects taking up the low quality employment
of globalized sweatshops; promotes self-sufficient agriculture, the establish-
ment of cooperatives and opposes the intellectual property rights regimes on
the grounds that they only protect the areas of scientific and technological
knowledge that developed countries control, while neglecting biodiversity and
the traditional knowledge of peasant and aboriginal peoples. Venezuela has
voiced the need to identify bottlenecks, arguing for a transfer of resources
to develop infrastructure. In that vein, Venezuela has acquired the leading
microcredit institution in Bolivia, Prodem, which own 92 branches across
the country and has 250,000 clients. Making efforts to also regionalize

Shaw
36 Hemispheric Relations

financial arrangements, it is ready to support the establishment of a Bank

of the South to provide balance–of-payment financing and catalyse regional
development projects. Whereas Chavez’s outbursts and aggressive diplo-
macy ebb and flow, overall petro-generosity is strongly tied to the price of oil.
After the recall referendum Chávez has had luck on his side with the fivefold
increase in world oil prices since his first term began. From 2003 to 2007 the
country experienced three straight years of near-double-digit growth, partly
due to the rebound from the 2003 national strike and partly due to the rise
in oil prices. As Carlos Andrés Pérez had done during similar circumstances
in the 1970s, Chávez used this windfall to further his diplomatic ambitions.
But 2009 ended on a rather gloomier note, with a fall in GDP, rampant infla-
tion, power rationing, growing black market dealings and a clouded future
for the 2010 legislative elections, altogether auguring a fall in the available
capital of sympathy for the government.
What these contending projects show in sum are not unified one-directional
strategy, but motivating and legitimizing piecemeal steps. In a world where
tariffs have lost a good deal of their weight and shortages of foodstuffs and
energy have gained relevance, what is beginning to change is the US hold
on regional projects. The trend may be towards regional convergence on
some issues, such as payments or tariffs, and also towards greater diversity
over other instruments. Some improvement has been witnessed in setting
up binding dispute-settlement mechanisms, dealing with existing asymmetries,
creating (albeit timid) structural funds, and coordinating social policies and
initiatives in the fields of energy and infrastructure. But many political and
institutional obstacles remain. As each country juggles with its idiosyncra-
sies, the trend may be not towards amalgamation or a single converged
regional bloc, but towards greater diversity of hybrids with mutually fuzzy
boundaries, arranging component pieces in ever new combinations,5 under-
pinned by increasingly intense regional relations sidelining or contesting US
policy preferences. Such contestation has grown in a context where many
countries in the region have, in recent years, elected left-leaning govern-
ments (see Cooper and Heine, 2009). New figures have stood up to represent
the highly mobilized masses and battle for the hearts and minds of Latin
Americans pushing for a new social contract. The conditions for this turn
were ripe when Latin America was overridden by a series of financial and
economic crises in the 1998–2001 period, and trade deficits contributed
greatly to show how economically vulnerable countries had become. The
policy of ‘open regionalism’ proved not only insufficient but also counter-
productive to generate balanced accounts. The popular uprisings that ousted
Fernando de la Rúa in Argentina in 2001, Gonazalo Sánchez de Lozada in
Bolivia in 2003, and the government of Lucio Gutiérrez in Ecuador have
prompted a change of course.
In the new political climate, governments are motivated to make overtures
to civil society networks for the purpose of mobilizing public support in

Shaw
 Diana Tussie 37

contentious negotiations with the US. Those governments, at least potentially,

are likely to be more receptive than right-leaning ones to the concerns and
claims being articulated by civil society groups and social movements. The
emerging alliances forged between presidents Luiz Inácio Lula da Silva (Lula)
in Brazil, Evo Morales in Bolivia, Rafael Correa in Ecuador, Hugo Chávez
in Venezuela, Nestor Kirchner in Argentina, the Frente Amplio in Uruguay,
and Lugo in Paraguay6 suggest an interesting configuration in which agen-
das advanced by groups resisting neo-liberalism are accepted and to some
extent articulated by governments (Heidrich and Tussie, 2008). What is
being suggested here, however, is not merely an ideological swing to the Left
but more broadly a loss in the faith of the self-equilibrating power of global
markets, regional channels once again allowing the soft spread of agendas
by governments seeking allies to consolidate their power and legitimate
their positions with grass-roots movements, disenfranchised electorates and
labour groups. Specific strategic political motivations are making for an
alignment of perspectives, an ideological affinity of governments with those
groups more resistant to American-led patterns of regional trade integration.
Concessions of selective participation to some civil society actors, a common
currency used by the US in classic two-level games to increase leverage in
negotiations, are being emulated by weaker Latin American governments
in their strategies that challenge the US. Each of the Latin American govern-
ment leaders mentioned earlier face the realpolitik dilemmas of avoiding
open confrontation with powerful, established commercial interests while
at the same time enhancing and maintaining important domestic civil
society support to shore up their domestic popularity. As governments and
civil society alignments converge to increase their mutual effectiveness and
base of support, the FTAA (perceived as ‘the onslaught of empire’) became a
leading case in the new generation of contested trade agreements that could
not be insulated from public concerns. What emerges from these trends is
an interesting relationship between the use of mobilization and resistance
in which it is not always clear how governments will balance the risk-averse
mindset of élites with popular disaffection, and adapt in response to claim
making and mobilizing by civil society.
All told, if we are to point out the single coincidence in this diversity,
there is a very significant one: the search for a new social contract. This
points to a landscape in which the scope for real clashes of interest and of
values will remain wide, and it is in fact here that we will continue to see the
deepest changes (see Legler, this volume). Even with the declining price of
oil, Venezuela stands out as a contending force in regional affairs. Its funding
of political movements beyond its borders has been a matter of controversy
in countries from Argentina and Honduras to Bolivia. Chávez’s radical,
confrontational outbursts, while effective in terms of rallying popular sup-
port, ultimately create distrust and preclude him from becoming a trusted
interlocutor, a challenge that takes on an added sharpness given the rise of

Shaw
38 Hemispheric Relations

international crisscrossing diplomatic activity. Not only are single countries

such as China, Spain, Canada, making inroads as alternative globalizers, but
in the last couple of years there have also been a string of outreach initia-
tives such as the Arab–South America and Africa–South America Summits to
name but a few.

Pulling the threads together

Was Myrdal right in claiming that there are no mystical qualities in geo-
graphical proximity that make neighbouring nations a ‘unit’ in any real
cultural, political or economical sense? The answer depends on the degree
of uniformity required to qualify as a unit.
What we now see in this particular region are the trappings of a complex
competition over rules as well as economic and social values. While Central
America, Chile, Peru, Colombia and Mexico find value in the US market,
other governments are more challenging in a variety of ways, deriving
political legitimacy from their capacity to preserve the region as a space
for normative niches. What we now see is a circular game of cooperation
and competition through regional structures and arrangements, each one
attempting to offset the other and gain extra-regional credentials. A lesson
stemming from Europe is that regional integration projects often need
large member states with technocratically capable cadres in order to provide
vision and leadership for the rest of the group. France and Germany have
played this role in the European Economic Community and its antecedents
from the 1950s, and Singapore and Thailand seem to aspire to a similar
partnering role in ASEAN (Dent, 2006).
Venezuela and Brazil compete for that role on different grounds and
with different styles, making the institutionalization of new projects far
from stable. Yet the dimensions of the competition should not be exagger-
ated. In their mutual dealings, both avoid direct confrontation and have
even searched for spaces of cooperation. The joint venture between the
Venezuelan and Brazilian oil companies in petrochemicals is a case in point
as is Brazilian provision of arms to Venezuela. Brazil and the ALBA govern-
ments have maintained close and friendly relations.7 While President Lula
has at times gone out of his way to praise Chávez, he has also been very
effective in moderating the latter’s propensity for conflict and containing
his more extreme international gambits, such as his enthusiastic support
for Colombia’s FARC guerrillas. Yet if war ultimately breaks out between
Colombia and Venezuela, Brazil will be forced to walk a fine line in its tra-
ditional, nuanced and conciliatory approach to regional diplomacy; so far
it is quite averse to taking an overtly confrontational approach vis-á-vis the
US, but strongly averse to being viewed as its pawn.
Today, Brazil can be seen in the league of conciliatory-style-alternative-
globalizers. It has become more outward-looking from the diplomatic and

Shaw
 Diana Tussie 39

business perspectives than at any point in its history. As a net exporter of

capital to the region and hence vulnerable to political risk, it shows a growing
appreciation in regional stability, catalysing diplomatic efforts, creating
normative niches that retain room to shape how problems are understood.
The project of regional rule construction can be seen in the government’s
increasing assertiveness in retaining open markets for its exports, in
addressing political instability and in key diplomatic issues in countries
such as Paraguay, Ecuador, Peru, Venezuela but also (and most significantly
vis-á-vis the US) Colombia, Cuba and Honduras. Emergence on the world
scene has propped up its convening power, although fully fledged regional
economic leadership apparently still remains beyond the Brazilian grasp.
And not just because of Chávez. The twofold Brazilian foreign policy
dilemma is how to retain its domestic constituency and how to make sure
that third-tier countries follow – a dilemma that was crudely exemplified on
the occasion of the Bolivian nationalization of hydrocarbon assets and the
protracted conflict over the price of gas. As a nascent globalizer it is forced
to maintain a delicate balance, pressing for its interests without alienating
third-tier countries and still retaining trust and leadership.
There has been an important leaning throughout South America towards
the formulation and execution of policy strategies independent of the
traditionally dominant foreign policies of the US. Divergence from the US
over ends and means has come to the fore on how to deal with issues such
as: the democratic collapse in Honduras, where – following the rallying
cry – Brazil clearly acted in favour of ousted President Zelaya by offering
their Embassy as a safe haven; or security in Colombia, where the US has
favoured a militarized approach and Brazil a political process involving
international mediation. Each move by the US pushes Brazil to deepen and
widen the themes of regional cooperation. The uprising in the Pando region
of Bolivia and the reinstatement without consultation of the US Fourth Fleet
in 2008, for example, prompted the ultimate consolidation of the UNASUR
forum, the stepped-up efforts to incorporate Cuba to the Grupo de Rio,
the articulation of the Consejo de Defensa de America del Sur (resisted but
finally joined by Colombia) and the convening of the First Summit of Latin
America and Caribbean countries in Costa do Sauípe in 2008. The attempt
to mark turfs was made evident on the occasion of the Pando rebellion,
which prompted the expulsion of the US Ambassador in Bolivia. Despite the
alliance of sympathy between Morales and Chávez, and despite the bilateral
conflict with Bolivia over the price of gas supplies, President Lula threw his
weight behind Morales and brushed aside attempts by the Organization of
American States (OAS) to intervene in the crisis.
In the context of proliferating nascent multilateral mechanisms in the
region that do not include the US, Brazil has been and will likely remain a
key player. On the world level, there is every reason to expect Brazil to be a
net beneficiary of global governance reforms such as, who the permanent

Shaw
40 Hemispheric Relations

members of the UN Security Council will be, how the shares and voting
structures in international financial institutions change and what the structures
might be of new organizations such as the G20. Indeed, crafting and insti-
tutionalizing a new global leadership role for Brazil is an accepted objective
of the government and a key goal – perhaps the most important goal – for
Minister Celso Amorim. In the field of finance, it has turned lender to the
International Monetary Fund (IMF), joining India, China and Russia in
October 2009 in the purchase of bonds worth US$ 10 billion to boost the
Fund’s resources. All these moves show that Brazil no longer wants to be
viewed simply as the largest country in Latin America, and considers itself
to be in a different league. While this process does not imply the wholesale
elimination of forms of governance that engage the US, such as the OAS
or the circle of bilateral trade agreements with the US, all actors look like
wrestlers attentively circling one another in a continuous process – each
intensifying their bilateral relations, none wanting full disruption, failure
or long-standing deadlock. Regional building has turned into a complex,
multilayered arena where contending political enterprises compete, a far cry
from a crystallized and conceptually neat project in the hands of a single
uncontested leader.
No mystical qualities exist, but this is still a region with a discernible
identity that is intensely interlaced and unprecedentedly projected out-
wards in multiple directions.

Notes
1. At the time of writing, Colombia announced that it was preparing a strategy to
ward off a Venezuelan attack while President Chavez called Colombia’s govern-
ment a declared enemy of Venezuela (see La Nacion, 2009).
2. I owe the term to my colleague Maria Pia Riggirozzi. It refers to the host of coun-
tries, such as China, India, Venezuela and Brazil gradually trying to carve spaces
for themselves in the global (and regional) scene.
3. Ken Shadlen (2008) shows the disproportionate influence of these export lobbies
in trade-dependent countries.
4. Uruguay signed a bilateral investment treaty with the US which, though causing
ripples of discontent within the governing party as well as with its regional partners,
did not actually violate the core of Mercosur commitments.
5. To put this move into perspective see Baldwin (2006). The process is equivalent to
the configuration of the European Free Trade Area following the creation of the
European Economic Community and the domino effect triggered when Britain
changed camps in the 1970s. Ireland, Norway and Denmark, nations that had seen
fit to stay out of the EEC in 1957, all put in applications soon after Britain.
6. The election that led Lugo to victory in April 2008 in Paraguay broke the 60-year
authoritarian stronghold of the conservative Colorado Party.
7. The exception to the trend is the bone of contention between Bolivia and Brazil
over oil and gas investments. Hitting the raw nerve of bilateral relations, Petrobras is
the largest investor in Brazilian oil and gas, supplying gas to Brazilians at extremely
low prices. The production of Petrobras in Bolivia is equivalent to 15 per cent of

Shaw
 Diana Tussie 41

Bolivian GDP; its tax contributions add up to 20 per cent of overall collections. Yet
in 2008, when the Eastern Bolivian provinces instigated a civic coup, Brazil threw its
support behind Evo Morales and the continuation of the rule of law.

References
Bélanger, Louis and Gordon Mace (1999), ‘Building Role and Region: Middle States
and Regionalism in the Americas’, in L. Bélanger and G. Mace (eds), The Americas In
Transition: The Contours of Regionalism, Boulder, CO: Lynne Rienner.
Bergsten, C. Fred (1996) ‘Competitive Liberalization and Global Free Trade: A Vision for the
Early 21st Century’, Peterson Institute for International Economics, Working Paper No.
96–15. Available at http://www.iie.com/publications/wp/wp.cfm?ResearchID=171.
Blanco, Ronald and Rosalba Linares (2008) ‘Chávez en la política exterior venezolana:
ALCA versus ALBA, de la democracia representativa a participativa’ in Aldea Mundo,
Año 13, Numero 26, julio-diciembre.
Carranza , Mario (2006) ‘Clinging Together: Mercosur’s Ambitious External Agenda, its
Internal Crisis and the Future of Regional Economic Integration in South America’,
Review of International Political Economy, Vol. 13, No. 5, December.
Castañeda, Jorge G. (1993) ‘Can NAFTA change Mexico?’ Foreign Affairs, September/
October.
Cooper, Andrew F. and Jorge Heine (eds) (2009) Which Way Latin America? Hemispheric
Politics Meets Globalization, Tokyo: United Nations University Press.
Dent, Christopher (2006) ‘Free Trade Agreements in the Asia-Pacific: Convergence or
Divergence?’ LATN Working Paper No. 62.
Evenett, Simon and Michael Meier (2007) ‘An Interim Assessment of US Trade Policy
of “Competitive Liberalization”’, University of St. Gallen Economics Discussion Paper,
No. 2007–18, February.
Fawcett, Louise (2005) ‘The Origins of the Regional Idea in the Americas’, in L.
Fawcett and Mónica Serrano (eds), Regionalism and Governance in the Americas,
London: Palgrave Macmillan.
Grugel, Jean and Wil Hout (1999) ‘Regions, Regionalism and the South’, in J. Grugel
and W. Hout(eds), Regionalism Across the North-South Divide: State Strategies and
Globalisation, London: Routledge.
Heidrich, Pablo and Diana Tussie (2008) ‘Post-Neoliberalism and the New Left in
the Americas: The Pathways of Economic and Trade Policies’ in Laura MacDonald
and Arne Ruckert (eds), Post Neoliberalism in the Americas, London: Palgrave
Macmillan.
Huntington, Samuel P. (1998) The Clash of Civilizations and the Remaking of the World
Order, New York: Simon & Schuster.
Hveem, Helge (2000) ‘Explaining the Regional Phenomenon in an Era of Globalisation’,
in Richard Stubbs and Geoffrey R. D. Underhill (eds), Political Economy and the
Changing Global Order, Oxford: Oxford University Press.
Keohane, Robert (2001) ‘Between Vision and Reality: Variables in Latin American
Foreign Policy’, in Joseph Tulchin and Robert Espach (eds), Latin America in the New
International System, Boulder, CO: Lynne Rienner,
La Nacion (2009) ‘Chavez advierte a Colombia que derribará aviones’, 20 December.
Mittelman, James H. (2000) The Globalisation Syndrome: Transformation and Resistance,
Princeton, NJ: Princeton University Press.
Myrdal, Gunnar (1968) Asian Drama: An Enquiry into the Poverty of Regions, Volume 1,
New York: Pantheon.

Shaw
42 Hemispheric Relations

Palan, Ronen P. and Jason Abbott, Phil Deans (1996) State Strategies in the Global
Political Economy, London: Pinter.
Phillips, Nicola (2009) ‘Coping with China’, in Andrew F. Cooper and Jorge Heine
(eds), Which Way Latin America? Hemispheric Politics Meets Globalization, Tokyo:
United Nations University Press.
Phillips, Nicola (2000) ‘Governance After Financial Crisis: South American Perspectives
on the Reformulation of Regionalism’, New Political Economy, Vol. 5, No. 3.
Saguier, Marcelo (2007) ‘The Hemispheric Social Alliance and the Free Trade Area
of the Americas Process: The Challenges and Opportunities of Transnational
Coalitions against Neo-liberalism’, Globalizations, Vol. 4, No. 2. Available at http://
dx.doi.org/10.1080/14747730701345267
Shadlen, Ken (2008) ‘Globalization, Power and Economic Integration in the
Americas in Diego Sánchez-Ancochea and Kenneth C. Shadlen (eds), Responding
to Globalization: The Political Economy of Hemispheric Integration in the Americas,
Basingstoke, Hampshire: Palgrave Macmillan.
The Economist (2002) ‘Unleashing the Trade Winds’, December 7–13.
Tussie, Diana and Cintia Quiliconi (2004) ‘Market Access as a Substitute for
Development? North-South Regionalism in Latin America’, Commissioned Paper for
2005 Human Development Report, December.
Van Grasstek, Craig (2008) ‘What is the FTAA’s Role in the USA’s Global Strategy?’
Capítulos del SELA 54.

Shaw
2
The Obama Administration and Latin
America: Towards a New Partnership?
Daniel P. Erikson*

The election of Barack Hussein Obama as the 44th president of the United
States was widely hailed at home and abroad as a pivotal and potentially
epoch-making event. In a remarkably short time, Obama moved from a
rising star of the Democratic Party to a formidable presidential candidate to
become the first black president of the US. The world celebrated Obama’s
election as an example of the American possibility of renewal and a welcome
shift from the perception of strident unilateralism that had dogged President
George W. Bush – even after his policies took a more moderate and multi-
lateral turn during his second term in office. Virtually every major world
region expected its relations with the US to be substantially altered (and
mostly improved) by a new American president with a decidedly more
cooperative and multilateral approach to foreign policy.
Latin America and the Caribbean were no exception. The 33 developing
countries of the Western Hemisphere broadly welcomed Obama’s elec-
tion to the White House. Indeed, in no part of the world outside Africa
did the election of a black US president have greater symbolic value. Latin
America, with its history of slavery and racism, is home to a large African
diaspora. As many as one-third of the region’s 550 million inhabitants are
of African descent, including a large fraction of the population in Brazil,
the vast majority of the Caribbean and smaller communities throughout
the Andes and Central America. Coupled with the fact that Latin American
countries generally prefer Democratic presidents, for reasons that have as
much to do with unpleasant Cold War memories of Nixon and Reagan as
any specific policy agenda, Obama’s emergence was a welcome event. In a
BBC poll which included surveys of opinion in Brazil, Mexico, and Panama,
respondents heavily favoured Obama over his Republican opponent John

* Daniel P. Erikson wrote this chapter in his capacity as senior associate for US policy
at the Inter-American Dialogue, prior to his appointment to the State Department’s
Bureau of Western Hemisphere Affairs. Therefore, this chapter is based on his inde-
pendent analysis and does not necessarily reflect the views of the US government.

43

Shaw
44 The Obama Administration and Latin America

McCain, and about half thought that their nation’s relations with the
US would improve as a result of his election. (Canadians, uncharacteristi-
cally, were even more optimistic.) About 60 per cent of Mexicans added
that it would fundamentally change their view of the US, and slightly
fewer than half of Panamanians and about one-third of Brazilians agreed
(BBC World Service, 2008).
While virtually all the presidents of Latin America and the Caribbean
hailed Obama’s election, specific responses reflected the idiosyncrasies of
each country – perhaps nowhere more so than Brazil, where six candidates
in municipal elections legally changed their names to either Barack or
Obama in an attempt to capitalize on the local popularity of the American
candidate. Brazil’s President Luiz Inácio Lula da Silva (quoted in Foley,
2009), a leftist who had burnished his credentials as a pragmatist by cosying
up to the Bush administration, placed Obama’s election in a regional con-
text, saying, ‘In the same way that Brazil elected a metalworker, Bolivia an
Indian, Venezuela a Chávez, and Paraguay a bishop, I believe it will be an
extraordinary thing if in the biggest economy in the world a black is elected
president’. Brazil’s Foreign Minister Celso Amorim chimed in that ‘We aren’t
going to deny that the Brazilian government had a good, pragmatic relation-
ship with the Bush government, but now the relationship can be refined,
and we hope to establish a relationship of partners with the new US govern-
ment’ (quoted in Erikson, 2008). Lula later proposed two policy changes
for Obama to implement: an end to US agricultural subsidies and the repeal
of the US embargo of Cuba. Mexico’s President Felipe Calderon spoke to
Obama about the challenge of fighting organized crime and drug trafficking,
an issue also emphasized by Colombia’s President Álvaro Uribe along with
urging passage of the controversial Colombia Free Trade Agreement then
awaiting a vote in the US Congress.
Venezuela’s President Hugo Chávez said of Obama, ‘We don’t ask him to
be a revolutionary, nor a socialist, but that he rise to the moment in the
world’, adding, ‘we hope the next government will end that savage embargo
and aggression against Cuba’ (The Telegraph, 2008). In a column in the
Cuban government newspaper Granma, Fidel Castro – the ailing 82-year-old
ex-president of Cuba – expressed relief that the US had not elected John
McCain, whom he described as ‘old, bellicose, uncultured, not very intelli-
gent, and not in good health’ – proving yet again that the grizzled Cuban
leader did not subscribe to the notion that those in glass houses should not
throw stones. Castro praised Obama as ‘more intelligent, educated and level-
headed’, but fretted that ‘concerns over the world’s pressing problems really
do not occupy an important place in Obama’s mind’. Another commentary
in Granma described Obama’s victory as ‘surprising and meteoric’, which the
author credited in part to McCain’s fateful decision to select as his running
mate ‘the Arctic Amazon of Alaska, Sarah Palin’ (Montoto, 2008). But it was
Prime Minister Baldwin Spencer of the tiny twin-island nation of Antigua

Shaw
 Daniel P. Erikson 45

and Barbuda who made the grandest gesture. He promptly wrote a letter
of congratulation to the US president-elect in which he declared that his
country’s tallest mountain, the 1319ft high Boggy Peak, would be henceforth
known as Mount Obama (Kentish, 2009).

Bringing Latin America into focus

All this hoopla caused even hardened sceptics to wonder if Barack Obama
could revive the flagging relationship between the US and Latin America
following the disenchantment of the Bush years. To some degree, enthusiasm
for Latin America is cyclical, as newly elected US presidents frequently
promise to reinvigorate ties with America’s neighbours to the south. Some
have made efforts in good faith: Bill Clinton, for example, helped secure
enactment of the North American Free Trade Agreement (NAFTA) in 1993,
restored Haiti’s ousted President Jean-Bertrand Aristide to power, and con-
vened the First Summit of the Americas in 1994. Clinton later became
so preoccupied with the conflict in the former Yugoslavia and then his
impeachment scandal at home that, with the exception of the drug war in
Colombia, Latin America largely fell from the agenda.
George W. Bush invited the then Mexican president, Vicente Fox, as the
first guest at a White House state dinner in early September 2001, where
he declared that the US ‘has no more important relationship in the world
than the one we have with Mexico’. The 9/11 terrorist attacks occurred the
following week, and Mexico, along with the rest of Latin America, virtually
disappeared from the US foreign policy agenda for the rest of Bush’s first
term, except for the effort to negotiate a range of bilateral FTAs with regional
allies. It could be argued that, no matter where an American president’s
foreign policy eventually ends up, an early emphasis is often placed on
Latin America; history demonstrates, however, that US policy towards Latin
America does not change quickly, especially during the first year of a new
American presidency.
The Obama administration’s Latin America policy has been shaped by
four important factors. The first was the broader foreign policy environ-
ment facing the US government as well as the overall trajectory and scope
of Obama’s global engagement. Given that the top three priorities of the
Obama administration were the wars in Afghanistan and Iraq and the reper-
cussions of the financial and economic crisis that the White House inherited,
Latin America was generally relegated to a lower priority, as reflected in a
limited number of new initiatives, and the slow and uneven pace of staffing
key governmental positions. Still, Obama recast US international relations
from the Manichean ‘with us or against us’ approach favoured by the Bush
administration to a style that embraced global engagement and direct
diplomacy. The Western Hemisphere was not the primary focus of US out-
reach, but nevertheless it experienced the positive reverberations, whether

Shaw
46 The Obama Administration and Latin America

it meant: the more frequent meetings with G20 countries like Argentina,
Brazil, Canada, and Mexico; the cautious diplomatic openings to Cuba and
Venezuela; or the efforts to back a Latin America-led solution to the political
crisis in Honduras that was precipitated by the ousting of President José
Manuel Zelaya in June 2009.
The second factor was the political and bureaucratic momentum that
drives forward a number of US policies in Latin America, some of which
date back decades while others were created under the Bush administration.
While Obama softened the edges of longstanding policies like the US
embargo of Cuba and the ‘war on drugs’, his administration demonstrated
little enthusiasm for seriously rethinking or reversing these efforts despite
the tensions that these policies produced in the region (see Latin American
Commission on Drugs and Democracy, 2009; Reuter, 2008). The same
was true for a number of more promising Bush-era initiatives, such as the
Merida Initiative (to provide police and military support to the Mexican
government as it battles drug traffickers along its northern borders), and
the expansion of the nearly decade-old effort to help the Colombian govern-
ment establish internal security and dismantle guerrilla groups. In May
2009, the Obama administration requested US$ 1.4 billion to expand
the Millennium Challenge Corporation, a US aid effort created by Bush
officials to reward high-performing governments in poor countries world-
wide, with major poverty-reduction compacts already active in El Salvador,
Honduras, and Nicaragua, and threshold programmes established for
Guyana, Paraguay, and Peru.
Third, the Obama administration, like most of its predecessors, exercised
caution in dealing with high-cost, low-reward policy issues such as immigra-
tion reform, new trade deals, and Cuba. Serious negotiations with the US
Congress over immigration reform were postponed until after the passage
of health care reform, which absorbed an enormous amount of political
effort. While the Obama administration quickly backpedalled from its cam-
paign promise to ‘renegotiate NAFTA’, it has nevertheless shied away from
bucking the strong anti-trade tendencies that dominate the Democratic
Party. Significant trade agreements that the Bush administration negotiated
with Colombia and Panama were left in limbo as a result, and the plans
for the US-backed Free Trade Area of the Americas (FTAA) have essentially
been consigned to purgatory following the breakdown in negotiations that
occurred during Bush’s second term (see Shifter, 2009). A widely acknowl-
edged need to overhaul Cuba policy was muted by concerns about provoking
the ire of strongly pro-embargo Cuban exile legislators in the House of
Representatives and Senate, even though a sea change in the sentiments
of the broader Cuban American community initially seemed to encourage a
broader opening.
Lastly, emerging political trends in Latin America have raised new questions
about how the US should define its relationship with the countries to its

Shaw
 Daniel P. Erikson 47

south at a time when they are exhibiting a greater level of assertiveness (see
Cooper and Heine, 2009). This independent streak is increasingly apparent
throughout South America. During the Lula presidency, Brazil has strength-
ened its role as a continental leader and achieved new political heft on the
world stage. The decision by the International Olympic Committee to award
the 2016 games to Brazil, bypassing Obama’s hometown Chicago, marks
the first time that a South American country has been chosen to host the
Olympics, and represents a major symbolic milestone in Brazil’s rise, much
as the 2008 games in Beijing served that purpose for China. Assuming that
he remains in office despite the rapidly deteriorating economy, Venezuela’s
Hugo Chávez has positioned himself as the regional provocateur and principal
adversary of American dominance in the Western Hemisphere. Leaders in
Ecuador, Bolivia, and Argentina have taken steps to distance themselves
from the US, while Chile and Peru have become more focused on trade
ties with the Asia-Pacific region. Colombia, notwithstanding its reliance
on US military aid, is irritated that its free trade deal with the US remains
indefinitely stalled pending a Congressional vote in Washington. In Mexico,
Central America, and the Caribbean, the region’s economic interconnected-
ness with the US has persisted as the dominant fact of its politics. Mexico’s
President Felipe Calderon pledged to work closely with the US to solve the
problem of drug-related insecurity along the border. Still, all countries are
experiencing a diversification of political relationships, and the Caribbean is
looking increasingly to China (see Phillips, 2009) and Venezuela (see Legler,
2009) as major partners.

The globalization of Latin America

The US has long been wary of foreign powers meddling in the Western
Hemisphere for reasons both real and imagined. In recent years, Latin
America’s increasingly diverse international relations have stoked these fears
anew, as the US has witnessed the region draw closer to global rivals just as
American influence is facing unprecedented challenges. The warm embrace
that Iran’s President Mahmoud Ahmadinejad received from Venezuela’s
President Hugo Chávez and, more recently, Brazil’s President Lula, provides
the most dramatic example of a new trend that has seen Latin America
and the Caribbean seek greater independence from the US while deepening
ties with such emerging powers outside the hemisphere as China, India, and
Russia. To be sure, many US policymakers intellectually understand that this
increasingly complex mosaic of international relations is the product of a
more globalized world. Still, there is an underlying current of unease that
American primacy in the Western Hemisphere is being threatened in subtle
but important ways.
Of course, there has long been a precept in US foreign policy that was
developed to address precisely this problem. It is called the Monroe Doctrine,

Shaw
48 The Obama Administration and Latin America

after its creator President James Monroe, and it represents the iconic assertion
of the US’s right to oppose foreign powers in the Western Hemisphere.
Today, the realities that were the foundation for the Monroe Doctrine have
fundamentally changed, but the US has been slow to adjust its attitudes
and mindset accordingly. In order to be effective in Latin America, the
Obama administration recognizes that it must adapt to an increasingly
globalized era in inter-American relations. As a result, the US has attempted
to forge a middle path between counterproductive efforts to isolate coun-
tries with which it has difficult relations and efforts to engage Latin America’s
rising powers that show little interest in reciprocating American goodwill.
In May 2009, US Secretary of State Hillary Clinton, speaking at a public
forum in Washington, DC, was asked how the US should manage the chal-
lenges posed by Hugo Chávez, the Venezuelan leader who has positioned
himself as the chief opponent of American power in Latin America. Secretary
Clinton (2009) used the opportunity to rebut the George W. Bush admin-
istration’s record in dealing with leftist leaders in the hemisphere, saying
that ‘the prior administration tried to isolate them. … It didn’t work’. She
continued:

I have to say that I don’t think in today’s world, where it’s a multipolar
world, where we are competing for attention and relationships with at
least the Russians, the Chinese, the Iranians, that it’s in our interest to
turn our backs on countries in our own hemisphere.

Clinton also stated that the new engagement between extra hemispheric
actors and certain Latin American countries is ‘quite disturbing’ (Clinton,
2009).
Secretary Clinton is hardly the first US public official to cast China’s
growing presence in Latin America as a sign that the US should deepen its
own engagement in the region. During the 2008 US presidential campaign,
China’s growing influence in Latin America was portrayed as a symptom
of the perceived neglect of the region by the Bush administration. In his
first debate with Republican candidate John McCain, Obama highlighted
China’s role as a potential challenge:

We’ve got challenges, for example, with China, where we are borrowing
billions of dollars. They now hold a trillion dollars’ worth of our debt.
And they are active … in regions like Latin America, and Asia, and Africa.
The conspicuousness of their presence is only matched by our absence,
because we’ve been focused on Iraq.
(New York Times, 2009).

To its credit, the Obama administration has adopted a more nuanced

approach with regard to China in Latin America. The US posture has

Shaw
 Daniel P. Erikson 49

continued in the largely clear-headed and restrained direction that was

initiated by the second Bush administration. Indeed, in the fall of 2009,
Frank Mora, the top official managing Western Hemisphere affairs at the
Pentagon, suggested that China could help Latin America to address the
issues of ungoverned territories, lack of economic opportunity, and narcotics
and arms trafficking in the region (Mora, 2009). Similarly, Russia’s renewed
interest in Latin America has been met with relative equanimity, despite the
fact that Russian arms sales to the region have surged in recent years to over-
take those of the US. According to the International Institute for Strategic
Studies, Russian arms sales to Latin America in 2009 topped US$ 5.4 billion,
principally to Venezuela, although Brazil, Colombia, Mexico and Peru also
made major purchases (UPI, 2010). It is the deepening engagement of Iran
in Latin America that has provoked the greatest alarm in the Obama admini-
stration. In Congressional testimony in January 2009, Secretary of Defense
Robert Gates warned, ‘I’m more concerned about Iranian meddling in the
region than I am the Russians’, adding, ‘I’m concerned about the level of
frankly subversive activity that the Iranians are carrying on in a number of
places in Latin America. … They’re opening a lot of offices and a lot of fronts
behind which they interfere in what is going on in some of these countries’
(Reuters, 2009).
Indeed, while the Obama administration has accepted – even embraced – the
notion of a multipolar world, it continues to indicate that one of the potential
poles, Latin America, should remain off-limits to those powers of which
the US disapproves. These latent tensions were thrown into even sharper
relief in November 2009 when Brazilian President Lula hosted a state visit
by Iranian President Ahmadinejad, despite deep disapproval in Washington
(see Sweig, 2010). The emergence of Iran as a worrisome new actor in the
region has heightened the need for the US to develop effective responses to
the region’s increasing globalization.
The continuing debate over declining US influence in the region is
driven by a confluence of positive and negative trends. The most favour-
able change is that the Western Hemisphere has forged a consensus on
democratic norms, ratified by the Inter-American Democratic Charter signed
by OAS member countries in 2001. Setting aside the troubling case of Cuba,
the spread of democracy has increased the political legitimacy of the govern-
ments throughout the hemisphere – including those at odds with the US.
Foes like Venezuela’s Hugo Chávez and Nicaragua’s Daniel Ortega may seek
to weaken or dismantle democratic institutions, but their ability to win
power through the ballot box still shields them from criticism among Latin
American countries that hold the principle of non-intervention more dearly
than notions about the collective defence of democracy. There is little doubt
that the US helped democracy take root in Latin America and the Caribbean
in the 1990s, but this created new limits on Washington’s ability to intervene in
these countries to pursue its own interests.

Shaw
50 The Obama Administration and Latin America

US policy challenges
Since his election in 1998, Hugo Chávez is the political leader who has posed
the most severe test to US power from within Latin America. Chávez has both
rejected the US’s historical leadership role (which he terms ‘imperialism’), and
strived to create a network of alliances and institutions independent of US
influence. He sought to replace the International Monetary Fund (IMF) and
the World Bank with the Latin America-dominated Banco del Sur, exchange the
FTAA with a social trade pact known as the Bolivarian Alternative for Latin
America (ALBA), and funded a new Spanish-language news station, Telesur,
as an alternative to US media sources. Chávez has won a limited following
for these ideas in the region, and the passage of a recent Venezuelan refer-
endum rescinding term limits has paved the way for him to seek another
term in January 2013.
Brazil, with the world’s fifth largest population and tenth largest economy,
is similarly interested in a realignment of global power that recognizes its
political and economic heft. Unlike Venezuela, however, it has been careful
to ensure that its pursuit of this goal does not veer into open conflict with
the US. Indeed, Brazil’s President Lula enjoyed one of the warmest relation-
ships with President Bush of any Latin American leader, and the personal
rapport between Obama and Lula has been even warmer (see Marinis, 2010).
Still, Brazilian opposition to the FTAA helped fuel its demise in 2005, and
the country has clashed with the US in world trade talks as a leader of the
G77 group of developing countries that includes China, India, and South
Africa. Brazil’s aggressive bid to win a permanent seat on the UN Security
Council has led Lula on a global tour to garner support for the country’s
global aspirations. Brazilian diplomacy has focused on positioning Brazil as
a leader in world affairs ready to hold the US at arm’s length when necessary
(see Simpson, 2010).
The need to manage the increasingly complex relationship with South
American countries will be a critical US policy priority. The early effort
to enhance the US–Brazil agenda was especially vital, because strong
US–Brazilian ties could help the Obama administration handle festering ten-
sions in countries including Colombia, Venezuela, and Bolivia. However,
such an outcome may be overly optimistic, given that Brazil and the US
soon diverged in their responses to the coup against President José Manuel
Zelaya in Honduras, where initial unity in opposing the constitutional breach
quickly gave way to divisions over whether the international community
should recognize the Honduran elections scheduled for November 2009 in
the absence of Zelaya’s restoration (see Sheridan, 2009). The US provided
its tacit support to the elections while Brazil, whose embassy in Tegucigalpa
provided Zelaya sanctuary, disagreed. The Honduran episode illustrates the
degree to which Brazil’s rise has made the complexity of this relationship
more difficult for the Obama administration to navigate. This new dynamic
was also evident in summer 2009, when news emerged that the US had

Shaw
 Daniel P. Erikson 51

signed a Defense Cooperation Agreement with Colombia that gave the US

access to seven Colombian military bases under a ten-year lease. Brazil was
among the countries that reacted with hostility to the spectre of increased US
military involvement in South America, and Foreign Minister Celso Amorim
warned that ‘The presence of foreign bases in South America awakens
sensibilities of a political and even psychological nature that should be taken
into account’ (quoted in Carroll and MacAskill, 2009).
Colombia was also linked to an unpopular political battle in the US over
the merits of expanding free trade during an economic downturn, as one of
the Bush administration’s parting gifts was the contentious and unpopular
trade agreement with Colombia, and another with Panama. (A separate
agreement with South Korea was part of this equation as well.) Given the
current climate in the US Congress, these agreements will not be ratified
unless there is a serious effort to ameliorate concerns about Colombia’s
situation with regards to labour rights – and even then, the anti-trade wing
of the Democratic Party would likely oppose them. Indeed, the Obama
administration appears to have consigned the Colombia trade pact to a
seemingly indefinite limbo, which will likely persist now that Alvaro Uribe,
the chief proponent of the FTA, has been barred from pursuing a third term
as president. In his State of the Union address in January 2010, President
Obama declared that ‘we will strengthen our trade relations in Asia and with
key partners like South Korea and Panama and Colombia’, but he stopped
short of pledging to have the existing agreements ratified.
By all appearances, the Bush administration’s approach of ignoring or
playing down the challenge posed by Hugo Chávez has run out of steam –
a fact highlighted by last fall’s ejection of the American ambassadors to
Venezuela and its close ally Bolivia. Furthermore, Chávez’s relationships
with Iran, Russia, and other unfriendly powers are likely to continue
deepening, and his influence in Bolivia, Ecuador, and Nicaragua is clearly
growing, although the recent decline in oil prices points to new vulnerabili-
ties (see Romero, 2009). At the same time, Obama has little to gain from
engaging in counterproductive sabre-rattling towards Venezuela, and has
expressed interest in setting the US–Venezuela relationship on a sounder
footing. Fashioning a viable policy towards Venezuela, both to check
Chávez’s worrying tendencies as well as to establish a more constructive
diplomatic relationship, will ultimately be a litmus test for the success or
failure of Obama’s policies in Latin America.
The Obama administration will face no shortage of challenges closer
to home. In the area of US–Mexico cooperation, it has faced challenges in
advancing the Merida Initiative, a US$ 1.4 billion military aid package to help
fight organized crime. This major US effort to help Mexico contain an explo-
sion of drug-related violence was initially criticized for adopting a militarized
approach to the problem. In addition, a US government audit in December
2009 revealed that only US$ 24.2 million of the funds had actually been

Shaw
52 The Obama Administration and Latin America

spent, because much of the programme remained mired in red tape and
governmental bureaucracy (Sherman, 2009). Meanwhile, perhaps the most
important issue to Mexico – meaningful immigration reform in the US – was
postponed as the US Congress focused on more pressing domestic concerns
like job creation and health care reform.
Moving forward, two potential flashpoints in the Caribbean pose further
worrying challenges. The lacklustre rule of Raúl Castro and the worsening
economic situation in Cuba have undercut early hopes that the island would
adopt a path of reform following Fidel Castro’s retirement. Nonetheless,
Obama has implemented new travel rules for Cuban Americans and
favoured direct bilateral negotiations on issues of mutual concern, such as
migration and establishing a direct postal service. Haiti, for its part, remains
fragile and poses an ongoing source of humanitarian disaster that needs to
be part of the regional agenda. In January 2010, Haiti was struck by a power-
ful earthquake that devastated the capital city of Port-au-Prince and resulted
in more than 200,000 casualties. The US led in delivering humanitarian
relief immediately after the quake, as well as granting Temporary Protected
Status to Haitian migrants, and made available hundreds of millions of dollars
in aid while promising to deepen that investment in the months and years
ahead (Silva, 2010).
Honduras, as referenced above, emerged as an unexpected flashpoint
in US–Latin American relations in June 2009 when its democratically
elected president, José Manuel Zelaya, was deposed in a coup. The Honduran
military awoke President Zelaya early in the morning and deposited him in
neighbouring Costa Rica while still dressed in his pyjamas (Malkin, 2009).
The resulting outcry against the newly appointed interim government of
Roberto Micheletti prompted a months-long standoff between the de facto
Honduran regime and the inter-American community. President Obama
(quoted in BBC News, 2009) took an early stand in condemning the coup
and called for the restoration of Zelaya, describing the forced removal of an
elected president as a ‘terrible precedent’ for the region. While the US joined
with other Latin American countries in attempting to reverse the coup, that
effort was ultimately unsuccessful, and Micheletti presided over new elections
and a transition to a new president, Pepe Lobo, thereby thwarting Zelaya’s
efforts to return to power.
The Honduran crisis also illustrates how fault lines in US domestic
politics can complicate foreign policy responses to sensitive political issues
in Latin America. Obama’s initial support for Zelaya’s restoration was
strongly challenged by US conservative critics, led by Republican Senator
Jim DeMint, who blocked the nomination of several top State Department
appointments charged with handling Latin American policy. DeMint’s sup-
port for the interim government of Roberto Micheletti, created a situation
where the Obama administration’s stance on Honduras was being actively
undermined by members of the US Congress. This allowed Micheletti and

Shaw
 Daniel P. Erikson 53

his allies to run out the clock until the previously scheduled elections on
29 November, after which they could be reassured that Zelaya would not
return to power. For its part, Brazil (which had hosted Zelaya in its Honduras
embassy when he covertly returned to the country) was not impressed with
the US response and US–Brazil relations suffered strain (see Heine, 2009).
The Honduras situation highlights the increasingly complicated nature
of the US relationship with Latin America and the Caribbean. In order to
pursue the US national interest, the Obama administration is compelled
to navigate between the contentious US politics regarding Latin America,
as well as the issues and concerns of the countries of the region which are
becoming increasingly assertive. The emergence of a regional hegemon in
Brazil has added a new dimension to this difficult balancing act that fore-
shadows the potential for more friction in the years ahead.

The Summit of the Americas and beyond

If the stakes were high for a successful outcome of the Fifth Summit of the
Americas in Trinidad and Tobago in April 2009, the bar was set low. The pre-
vious inter-American summit, which took place in Mar del Plata, Argentina
in 2005, was widely viewed as a disaster. In an effort to play to domestic
sentiments opposed to a visit by President Bush, the government of Nestor
Kirchner had given its blessing to a protest rally of 25,000 demonstrators who
included Argentine soccer legend Diego Maradona. Venezuela’s President
Chávez took advantage of the venue to deliver a scathing, two-hour indict-
ment of President Bush and the US-backed plan to develop the FTAA, over
which summit negotiations later collapsed in acrimony. Against this back-
drop, the 2009 summit provided Obama with an important opportunity
to begin fleshing out specific proposals made during his campaign. Two initia-
tives that were especially highlighted were the ‘Energy Partnership for the
Americas’ to forge a path toward sustainable growth and clean energy (see
Spencer, 2009), and the pledge to increase aid to the Americas through targeted
micro-financing, vocational training, and small enterprise development to
help achieve the United Nations Millennium Development Goals by 2015.
When Obama arrived at the summit, there was anticipation about seeing
the new US leader perform for the first time on the hemispheric stage.
Furthermore, his visit to Trinidad was preceded by a flurry of activity related
to Cuba. A group of legislators from the Congressional Black Caucus became
the first American politicians to meet Fidel Castro since the former Cuban
leader fell ill three years ago. The Obama administration also repealed
restrictions on the ability of Cuban Americans to travel back to Cuba and
send money to their families living on the island, prompting Raúl Castro
(quoted in CNN, 2009) to declare that ‘we have sent word to the US govern-
ment in private and in public that we are willing to discuss everything,
human rights, freedom of the press, political prisoners, everything’. At a

Shaw
54 The Obama Administration and Latin America

press conference en route to the summit, Hillary Clinton responded, ‘We are
continuing to look for productive ways forward because we view the present
policy as having failed … We welcome his comments and the overture they
represent, and we are taking a very serious look at how to respond’ (quoted
in Stolberg and Barrionuevo, 2009).
During his visit to Trinidad, Obama contributed to a possible diplomatic
breakthrough when he announced to 33 of the assembled leaders that
the US was seeking a ‘new beginning’ in its tormented relationship with
Havana (Richter and Nicholas, 2009). Not everyone was convinced, how-
ever. During a 50-minute speech, Nicaragua’s President Daniel Ortega
lambasted US policies and focused on Cuba’s exclusion from the summit:
‘I cannot feel comfortable by being here. I feel ashamed of the fact that
I’m participating at this summit with the absence of Cuba’ (quoted in
Rampersad, 2009). Ortega then blasted the US government’s backing for
the Bay of Pigs invasion in April 1961, led by Cuban exiles, although he
acknowledged that Obama ‘obviously doesn’t have any responsibility for
that historic event.’
Obama told the assembled leaders, ‘We cannot let ourselves be prisoners of
past disagreements. I am very grateful that President Ortega did not blame
me for things that happened when I was three months old. Too often, an
opportunity to build a fresh partnership of the Americas has been under-
mined by stale debates’ (quoted in Fox News, 2009). Obama (2009) went
on to say:

The United States seeks a new beginning with Cuba. I know that there is
a longer journey that must be traveled to overcome decades of mistrust,
but there are critical steps we can take toward a new day. I’ve already
changed a Cuba policy that I believe has failed to advance liberty or
opportunity for the Cuban people. We will now allow Cuban Americans
to visit the island whenever they choose and provide resources to their
families – the same way that so many people in my country send money
back to their families in your countries to pay for everyday needs. Over
the past two years, I’ve indicated, and I repeat today, that I’m prepared to
have my administration engage with the Cuban government on a wide
range of issues – from drugs, migration, and economic issues, to human
rights, free speech, and democratic reform. Now, let me be clear, I’m not
interested in talking just for the sake of talking. But I do believe that we
can move US–Cuban relations in a new direction.

In addition to the attention on Cuba’s absence, the image that came to domi-
nate the coverage of the summit was a handshake that occurred between
Obama and Chávez early in the gathering. ‘I greeted Bush with this hand
eight years ago’, Chávez intoned to Obama. ‘I want to be your friend’.
The Venezuelan President later gave Obama a Spanish-language copy of The

Shaw
 Daniel P. Erikson 55

Open Veins of Latin America: Five Centuries of the Pillage of a Continent, by

Uruguayan intellectual Eduardo Galeano, a classic leftist text that decries
European and US exploitation of Latin America. Obama, who does not read
Spanish, appeared bemused by the gift. He later quipped, ‘I thought it was
one of Chávez’s books. I was going to give him one of mine’ (quoted in
Pickert, 2009). Within hours, the 1973 text soared to the top of the Amazon.
com bestseller list, following in the footsteps of the Noam Chomsky book
that Chávez had praised during his infamous ‘Bush is the Devil’ speech
nearly three years earlier (Fox News, 2006).
Before departing Trinidad and Tobago, Obama defended his handshake
with Chávez against Republican attacks that he was irresponsibly cavorting
with an anti-American adversary, saying that his courteous response to the
Venezuela leader was hardly ‘endangering the strategic interests of the United
States’. Obama also stated that freedom for the Cuban people remained the
top US objective for engagement with the island, saying ‘That’s our lode-
stone. That’s our North Star’ (quoted in Barrionuevo and Stolberg, 2009).
Within days, Fidel Castro wrote, ‘There is no doubt that the President mis-
interpreted Raúl’s statements. When the President of Cuba said he was ready
to discuss any topic with the US president, he meant he was not afraid of
addressing any issue. That shows his courage and confidence in the principles
of the Revolution’ (quoted in Neill, 2009).
Barack Obama is the 11th US president to face the Castro regime at
the helm of Cuba, and his administration has inherited a complex and
frequently contradictory policy that points in multiple directions. The
goal of the US embargo is to deprive the Cuban government of resources,
yet Congressional exemptions for agricultural trade have transformed the
US into Cuba’s fifth largest trading partner, while Cuban Americans send
hundreds of millions of dollars back to their families on the island each
year. Successive US governments have set aside millions of dollars to build
up domestic opposition groups within Cuba, but current immigration law
grants residency rights to every Cuban who makes it onto American soil,
which has allowed the Castro government to systematically export those
who would otherwise be its most likely opposition. Tens of millions of
dollars have been spent on Radio and TV Martí broadcasts intended to
break through the Castro regime’s ‘information blockade’, but the average
American citizen is banned from travelling to the island, despite the fact
that people-to-people contacts have the potential to provide an important
source of information about the outside world. In April 2009, the Obama
administration reaffirmed the Bush administration’s designation that Cuba
is a ‘state sponsor of terrorism’, even though the accompanying State
Department report described Cuba as a country that ‘no longer actively
supports armed struggle in Latin America and other parts of the world’,
documented ‘no evidence of terrorist-related money laundering or terrorist
financing activities’, and determined that Cuba ‘has not provided safe

Shaw
56 The Obama Administration and Latin America

haven to any new US fugitives wanted for terrorism’ (Department of State,

2009). Moreover, the Obama administration, which has placed a special
emphasis on multilateral diplomacy, has been repeatedly confronted with
the fact that virtually none of its allies supports the continuation of the US
embargo of Cuba.

Conclusion: In search of the elusive partnership

Upon entering the White House in January 2009, the Obama adminis-
tration had to move quickly to confront a range of pressing challenges.
There is little doubt that the new president’s to-do list was to be domi-
nated by the economic crisis, Afghanistan, and Iraq. Issues facing Latin
America and the Caribbean, though important, were of less immediate
concern. That does not mean, however, that Obama has not engaged in
serious and substantive work to help repair the damage that the Bush
administration wrought on US–Latin American relations. Moreover,
there is now a window of opportunity to push through significant
changes and lay the foundation for implementing Obama’s vision for
renewing US leadership in the Americas. Indeed, Obama’s election ushered
in a welcome honeymoon period for his administration in a region that
is strategically important for US interests – and the challenge was to
prolong this moment and harness it to rebuild some semblance of hemi-
spheric cooperation.
The path ahead will not be easy, but Obama has already substantially reca-
librated US–Latin America policy in the direction of engagement in small
but important ways. President Obama and members of his cabinet have
frequently met with their counterparts throughout Latin America and the
Caribbean and emphasized multilateral diplomacy as the central instrument
for addressing the region’s concerns. The US supported a resolution backed
by Latin American countries to lift Cuba’s suspension from the Organization
of American States, and has stood with Latin American countries in calling
for the restoration of democratic rule in Honduras. Under Obama, US rela-
tions with Latin America appear to be on the mend, but the progress to
date is fragile and by no means irreversible. The political situation in Latin
America and the Caribbean has shifted considerably in recent years and the
new assertiveness of many regional countries, especially Brazil, has created
an increasingly complex situation.
Although the early hopes for momentous change have begun to dis-
sipate, the presidency of Barack Obama still has the potential to bring
about an important restructuring of inter-American relations. In retrospect,
the initial warm glow of good feelings was always destined to give way to
a more pragmatic understanding on both sides of the relationship regarding
the possibilities and limits of what the US and Latin America can expect
of each other. But throughout the Americas, the desire remains that

Shaw
 Daniel P. Erikson 57

Barack Obama will be attentive and respectful to the region’s concerns.

The 44th president of the United States has already pledged to keep an
open mind and demonstrate a willingness to listen. The next step is to
advance the strategy of substantive, issue-oriented engagement that can
sustain the goodwill that so much of the hemisphere felt upon his election
to the White House.

Note
1. This chapter originally appeared as part of the CIGI Working Paper series and was
written prior to the author taking on his current position. The opinions expressed
in it are solely those of the author and do not necessarily reflect the views of any
affiliated institutions including the United States Government, The Centre for
International Governance Innovation or its Board of Directors and/or Board of
Governors.

References
Barrionuevo, Alexei and Sheryl Gay Stolberg (2009). ‘Hemisphere’s Leaders Signal a
Fresh Start with US’, New York Times. April 20.
BBC News (2009). ‘Obama Says Honduras Coup Illegal’, BBC News. June 29.
BBC World Service (2008). ‘All Countries in BBC Poll Prefer Obama to McCain’, BBC
World Service Poll. Available at http://www.worldpublicopinion.org/pipa/pdf/sep08/
BBCPresidential_Sep08_pr.pdf.
Carroll, Rory and Ewen MacAskill (2009). ‘Outcry in South America Over US Military
Base Pact’, The Guardian. August 27.
Clinton, Hillary Rodham (2009). ‘Keynote Address and Town Hall Meeting at Plenary
Session of Foreign Affairs Day’, US Department of State, 1 May. Available at: http://
www.state.gov/secretary/rm/2009a/05/122534.htm.
CNN (2009). ‘Raul Castro: Cuba ‘Ready to Discuss Everything’ with US’, CNN. April
19. Available at http://www.cnn.com/2009/POLITICS/04/17/us.cuba/index.html.
Cooper, Andrew F. and Jorge Heine (eds) (2009). Which Way Latin America? Hemispheric
Politics Meets Globalization. Tokyo: United Nations University Press.
Department of State (2009). Country Reports on Terrorism 2008. Washington, DC: US
State Department April 30.
Erikson, Daniel P. (2008). ‘Obama & Latin America: magic or realism?’ World Policy
Journal. Vol. 25, No. 4 (Winter). pp. 101–7.
Foley, Connor (2009). ‘‘Good Looking’ Lula’s Revenge’, The Guardian. April 11. Available
at http://www.guardian.co.uk/commentisfree/2009/apr/10/brazil-gordon-brown.
Fox News (2009). ‘Obama Endures Ortega Diatribe’, April 18. Available at http://www.
foxnews.com/politics/2009/04/18/obama-endures-ortega-diatribe/.
—— (2006). ‘Chávez Says US Empire will Soon Fall, Calls Bush “Devil,”’ September 21.
Available at http://www.foxnews.com/story/0,2933,214709,00.html.
Heine, Jorge (2009). ‘A Case of Missed Opportunity’, The Hindu. December 23. Available
at: http://www.thehindu.com/2009/12/23/stories/2009122354720800.htm.
Kentish, Anika (4 August 2009. Available at http://abcnews.go.com/International/
wireStory?id=8249926.

Shaw
58 The Obama Administration and Latin America

Latin American Commission on Drugs and Democracy (2009). Drugs and Democracy:
Towards a Paradigm Shift, Statement by the Latin American Commission on Drugs
and Democracy. Available at http://www.plataformademocratica.org/Publicacoes/
declaracao_ingles_site.pdf.
Legler, Thomas (2009). ‘The Chávez Effect’, in Andrew F. Cooper and Jorge Heine
(eds), Which Way Latin America: Hemispheric Politics Meets Globalization. Tokyo:
United Nations University Press. pp. 221–42.
Malkin, Elisabeth (2009). ‘Honduran President Ousted in Coup’, The New York
Times. June 28. Available at http://www.nytimes.com/2009/06/29/world/americas/
29honduras.html.
Marinis, Alexandre (2010). ‘Obama’s “Man” Goes Nuclear as Global Fixer’, Business
Week. February 23. Available at http://www.businessweek.com/news/2010-02-23/
obama-s-man-goes-nuclear-as-global-fixer-alexandre-marinis.html.
Montoto, Ramón Sánchez-Parodi (2008). ‘Obama to the White House’, Granma. November
5. Available at http://hcvanalysis.wordpress.com/2008/11/05/cuba-on-obama/.
Mora, Frank (2009). ‘Strategic Implications of China’s Evolving Relationship with
Latin America’, November 6. Available at http://www.ndu.edu/CHDS/China-Wksp/
Presentations/CHDS-ChinaSpeech-Frank_Mora.pdf.
Neill, Morgan (2009). ‘Obama Misreads Cuban Offer, Fidel Castro Says’, CNN. April
22. Available at http://edition.cnn.com/2009/POLITICS/04/22/castro.cuba.obama/
index.html.
The New York Times (2009). ‘The First Presidential Debate: Transcript’, September 26.
Available at http://elections.nytimes.com/2008/president/debates/transcripts/first-
presidential-debate.html.
Obama, Barack (2010). ‘Remarks by the President in State of the Union Address’,
Office of the Press Secretary, The White House. January 27.
—— (2009). ‘Remarks by President Barack Obama’, Fifth Summit of the Americas,
Trinidad and Tobago, April 18.
Phillips, Nicola (2009). ‘Coping with China’, in Andrew F. Cooper and Jorge Heine
(eds), Which Way Latin America: Hemispheric Politics Meets Globalization. Tokyo:
United Nations University Press. pp. 100–21.
Pickert, Kate (2009). ‘Chávez’s Gift: Open Veins of Latin America’, Time. April 21.
Available at http://www.time.com/time/arts/article/0,8599,1892801,00.html.
Rampersad, Indira (2009). ‘Let’s Sum-It Up: Cuba Stole the Show’, The Guardian (Trinidad
& Tobago). April 25. Available at http://guardian.co.tt/features/life/2009/04/26/
let-s-sum-it-cuba-stole-show.
Reuter, Peter (2008). ‘Assessing US Drug Policy’, Debate Material for the First Meeting
of Latin-American Commission on Drugs and Democracy, April 30. Available at
http://www.drogasedemocracia.org/Arquivos/peter_reuter_ingles.pdf.
Reuters (2009). ‘Iran playing “subsversive” Latin America role – Gates’. January 27.
Available at http://uk.reuters.com/article/idUKTRE50Q6CT20090127
Richter, Paul and Peter Nicholas (2009). ‘US, Cuba Mutually Signal Thaw in Relations’,
Los Angeles Times. April 18. Available at http://articles.latimes.com/2009/apr/18/
world/fg-us-cuba18.
Romero, Simon (2009). ‘Chávez lets West Make Oil Bids as Prices Plunge’, The New
York Times. January 14. Available at http://www.nytimes.com/2009/01/15/world/
americas/15venez.html.
Sheridan, Mary Beth (2009). ‘US and Some Allies at Odds over Honduras Presidential
Elections’, The Washington Post. December 1. Available at http://www.washingtonpost.
com/wp-dyn/content/article/2009/11/29/AR2009112900989.html.

Shaw
 Daniel P. Erikson 59

Sherman, Christopher (2009). ‘Only Sliver of Aid for US-Mexico Drug Plan Spent’,
Associated Press. December 3.
Shifter, Michael (2009). ‘Managing Disarray: The Search for a New Consensus’, in
Andrew F. Cooper and Jorge Heine (eds), Which Way Latin America: Hemispheric
Politics Meets Globalization. Tokyo: United Nations University Press. pp. 50–63.
Silva, Mark (2010). ‘US is Flying Doctors and Food to Haiti in Massive Earthquake
Relief Effort’, Los Angeles Times. January 16.
Simpson, Jeffrey (2010). ‘The Country of the Future may Finally be Arriving’, The
Globe and Mail. February 22. Available at http://www.theglobeandmail.com/news/
opinions/the-country-of-the-future-may-finally-be-arriving/article1477427/.
Spencer, Nicole (2009). ‘Obama’s Energy Partnership for the Americas’, Latin Business
Chronicle. March 23. Available at http://www.as-coa.org/article.php?id=1545.
Stolberg, Sheryl Gay and Alexei Barrionuevo (2009). ‘Obama Says US Will Pursue
Thaw with Cuba’, New York Times. April 18. Available at http://www.nytimes.
com/2009/04/18/world/americas/18prexy.html.
Sweig, Julia E. (2010). ‘An American in Brazil’, The New York Times. March 2. Available
at http://www.nytimes.com/2010/03/03/opinion/03iht-edsweig.html.
The Telegraph (2008). ‘Venezuelan president Hugo Chávez Hoping for a Barack Obama
Victory’, November 2. Available at http://www.telegraph.co.uk/news/worldnews/
southamerica/venezuela/3369053/Venezuelan-president-Hugo-Chavez-hoping-for-
Barack-Obama-victory.html.
United Press International (UPI) (2010). ‘Russia Displaces US as Latin Arms Source’,
UPI. February 8.

Shaw
3
The Caribbean in a Turbulent World
Norman Girvan

The crisis that overtook the world economy in 2007–9 intersected a long-term
process of global reconfiguration that is marked by declining US power.
Concurrently, this is taking place during a process of global climate change
that presents potentially cataclysmic consequences for small island states.
Caribbean societies1 are vulnerable to both of these global developments and
challenged in their capacity to adapt to them. Political fragmentation and a
‘dependency syndrome’ combined with limitations of size have resulted in
a pattern of reactive rather than strategic decision making and a tendency
to seek solutions through alignment with extra-regional powers. Regional
cooperation represents one means by which Caribbean societies can secure a
greater measure of autonomy vis-à-vis the wider world. However, Caribbean
regionalism contends with a formidable legacy of geography, history and
geopolitics and as such, remains an elusive goal.
In this chapter, I first review the challenges to the Caribbean that have
resulted from the world economic crisis and the nature of responses thus far.
Then I discuss the challenges that are associated with long-term structural
shifts in global geo-economic and geopolitical configuration. Here, I highlight
the momentous changes that have occurred in the Latin American political
economy in the past ten years and review their implications for the Caribbean.
Next I review the changing dynamics of regionalism in the Caribbean, their
relationship to these developments, and assess their future prospects. There is
a brief conclusion.

The financial crisis and the Caribbean

As a region of small, open, trade-dependent economies with strong economic

linkages to the US and Europe, the Caribbean was significantly impacted
by the global financial crisis. The effects were felt mainly through declines
in tourism, merchandise export receipts, remittances and capital flows
(Caribbean Centre for Money and Finance, 2009). The United Nations’
Economic Commission for Latin America and the Caribbean (ECLAC)
60

Shaw
 Norman Girvan 61

projects a 1.2 per cent contraction in Caribbean sub-regional GDP for 2009,
a deterioration of over 8 per cent relative to 2006 (Caribbean Press Releases,
2009). ECLAC expects the slowdown to last through 2010 (Commission for
Latin America and the Caribbean, 2009, p. 46). Most affected were the tourism-
dependent economies of Bahamas, Barbados and Jamaica – the latter
being also crippled by the closure of a large part of its aluminium industry
(International Monetary Fund, 2009a, p. 193). By September 2009, seven
CARICOM countries had turned to the International Monetary Fund (IMF)
for crisis-related financing.2 Jamaica, with the largest package, announced a
20 per cent budget cut five months into the 2009/10 fiscal year (Helps, 2009).
Insofar as IMF loans will require fiscal contraction, this will exacerbate the
effects of contraction in the external sector in the affected countries.
The social impact of the crisis will likely be uneven between countries and
socio-economic groups: some countries will suffer more than others and the
burden(s) will fall on the more vulnerable groups in their populations. Time
lags in the production of social statistics will make it difficult to measure and
analyse these impacts before they become problematic. The potential long-
term social and political repercussions are also not yet clear. There is the
ever-present possibility of social unrest and political instability. Government
approaches to the IMF have aroused opposition (Foster, 2009). Tensions
have arisen within the Caribbean Community over the subject of informal
intra-regional migration. In 2009, Barbados’s announced policy of remov-
ing undocumented CARICOM nationals initiated a major controversy and
elicited strong reactions from Guyana, St Vincent and the Grenadines in
particular (see Bradshaw, 2009; Stabroek Staff, 2009; Office of the President
of Guyana, 2009; and Ramjeet, 2009). A similar policy reportedly under way
in Antigua and Barbuda also became controversial (Jamaica Observer, 2009).
Barbados’s earlier request to review the freedom of movement provisions
of the CARICOM Single Market Economy (CSME) is also thought to be a
response to pressures resulting from the global slowdown.
CARICOM has had its share of financial institution failures that required
costly government interventions. The threatened failure in January 2009 of
the CL Financial group, a major regional conglomerate headquartered in
Trinidad and Tobago with operations in several other CARICOM countries,
led to a government takeover of the group and cash injections of up to TT$
5 billion to finance payouts to depositors and policyholders (see Trinidad and
Tobago News Blog, 2009; Neptune, 2009). The government of Trinidad and
Tobago also financed payouts to other CARICOM countries. The threatened
failure was due to serious deficiencies in the regulatory regime of the host
country (Girvan, 2009). In February 2009, the Stanford International Bank,
based in Antigua and Barbuda, failed after its owner was indicted in the
US on seven counts of wire fraud, ten counts of mail fraud, conspiracy to
obstruct an investigation for the Securities and Exchange Commission (SEC),
obstruction of an investigation by the SEC and conspiracy to commit money

Shaw
62 The Caribbean in a Turbulent World

laundering, all totalling US$ 7 billion (Cricinfo Staff, 2009). Following this,
the chief financial regulator of the state was indicted for having accepted
bribes from Stanford International to overlook financial irregularities at
the bank (Associated Press, 2009). The case has exposed the government to
legal action from the international depositors in the bank, who are claiming
damages of an amount that is approximately equal to 600 per cent of the
GDP of Antigua and Barbuda – estimated to be US$ 1225 million in 2008
(World Bank, 2008). The two cases illustrate how regulatory systems in small
Caribbean countries can be subverted by the resources and influence of large
financial institutions. They underline the need for a seamless, region-wide
regulatory system for the financial sector within the CARICOM region as a
whole. The legal instruments for this have been prepared but have yet to be
approved by governments.3
CARICOM leaders repeatedly stated that the crisis underlined the urgency
of the need to strengthen the Community, and the necessity for a collective
confrontation of the challenges (Pilgrim, 2009). The difficulty has been to
give practical effect to this principle. Three different task forces were set up
by CARICOM leaders between January and July 2009,4 but the net result was
a decision to ‘coordinate approaches’ to the international financial agencies
(Georgetown Communiqué, 2009). In practice, this has meant little more
than information sharing. The basic problem is the absence of institutional
capability within the CARICOM system to undertake coordinated external
financing and macroeconomic policies. There is no CARICOM monetary
union, no CARICOM central bank and no community budget. The CARICOM
Development Fund, which became operational in 2009, is not meant to deal
with short-term emergency financing needs of member states. Hence, they
turn to the IMF and, in one instance, to Venezuela. The ad hoc measures
that have been adopted lack regional coherence, do not strengthen regional
institutions, do not necessarily mitigate the social impact, and come with con-
ditionalities that necessarily involve some loss of policy autonomy. A robust
regulatory and institutional framework would enable the community to better
mitigate the impact of the crisis and to manage it collectively. Hence, there is
a connection between the strength of regionalism, the space for autonomous
policies, and the degree of resilience in response to external shocks.

Global reconfiguration

The financial crisis is accelerating the eastward/southern shift in global

geo-economics that had been underway for some time (see Cooper and
Antkiewicz, 2008), symbolized by the emergence of the BRICs group of
countries (Xinhua, 2009). Asia will decline less, and recover faster, than the
US and Western Europe.5 The US will emerge as a heavily indebted nation,
with the international competitiveness of its production in question, and its
political and ideological prestige severely damaged. The roles of the US dollar

Shaw
 Norman Girvan 63

as global reserve currency and US dominance over the IMF, both remnants
of the defunct Bretton Woods system, are therefore in growing contesta-
tion. The US will resist the calls for change as long as possible; however,
some restructuring seems inevitable. Economically, Caribbean countries are
strongly linked to the centres of world economic power that are in relative
decline – the US and Western Europe. CARICOM’s merchandise exports to
the US grew at a rate of 8.7 per cent per year in the period 1993–2003 (Jessen
and Vignoles, 2005, p. 58) and accounted for approximately 48.7 per cent
of CARICOM’s exports and 35.9 per cent of their imports over the period
2001–6 (CARICOM, 2008, pp. 7, 9); the US is the main tourist market for the
larger Caribbean region and constitutes 53 per cent of the total number of
tourist arrivals, Europe accounts for 23 per cent (ECLAC, 2003); Spain and
the US were the main sources of foreign direct investment (FDI) to the region
in 2008, representing 9 per cent and 24 per cent of the total respectively
(Jamaica Observer, 2010); virtually all of their remittances are concentrated
in the US, Canada, and the European Union. This magnifies the regional
impact of the economic downturn in these countries. China is a major
source of imports and a growing source of aid and investment for the region.
Asia’s share of imports from the CARICOM was averaged to be 14.7 per cent
over the period 2001–6 (CARICOM, 2008, p. 7). Its main trade interest so
far has been in acquiring natural resource products, particularly bauxite,
aluminium and timber. Only 4.1 percent of CARICOM’s export market is in
China (ibid, p. 9), and an insignificant fraction of its tourist market comes
from Asia. This limits the potential spin-offs to regional economies from
the relatively high-growth performing Asian economies. Hence, CARICOM
countries should seek to develop their trade-investment-tourism linkages
with the world’s emerging economies, including value-added products in
agricultural and manufactured exports. Several initiatives have been taken,
individually and collectively, to develop relations with the government of
China. However, individual CARICOM nations evidently lack the capacity to
adequately service relations with the entire Asian continent. A joint ‘Asian
strategy’ carried out by the Community as a whole would help to share costs
and exploit synergies. This requires an improved governance framework and
institutional capability to handle the region’s external economic relations.

Latin America’s new orientation

Developments over the past decade have significantly altered the political,
ideological and institutional landscape of Latin America (see Cooper and
Heine, 2009). This chapter identifies seven features of the ‘New Orientation’
that are of particular relevance to the Caribbean. First, governments have
been elected in the majority of Latin American countries that are critical
of, or opposed to, neoliberalism and the Washington Consensus,6 and are
experimenting with various alternatives.7 Second, new social movements

Shaw
64 The Caribbean in a Turbulent World

have played a key role in this shift. This is exemplified by the large attendance
at the annual gatherings of the World Social Forum since 2001 and the role
of social movements in the elections of Luiz Inacio Lula da Silva in Brazil,
Evo Morales in Bolivia and Rafael Correa in Ecuador. These movements are
the result of consciousness-raising and political mobilization of historically
marginalized groups in Latin American society: indigenous peoples, African-
Latin Americans, campesinos, women and other elements of the poor under-
class. Third, the new ideological orientation often extends to questioning
the prevailing Western models of ‘democracy’ and ‘development’. Notions of
‘participatory democracy’ are being developed featuring the political enfran-
chisement of marginalized groups, community councils and the like;8 and
alternative ‘models of civilization’ are proposed. An example of this is the
following extract from a declaration of indigenous people at the 2009 World
Social Forum:

The crisis of Western capitalist civilization requires us to rebuild and

reinvent new and different options of coexistence between nature and
society, democracy, the state and patterns of consumption. We, the
Indigenous Peoples and Communities … and all the other excluded,
invisible and ‘untouchables’ of the planet (who) continue to resist, to
strengthen and to update alternative forms of social, technological, ethical,
political, economic, cultural and spiritual organization of the human
existence.
(Latin American Information Agency, 2009;
author’s translation from the original Spanish)

A fourth element is the strategic importance given to regional integration

as a means of consolidating Latin America’s geo-political identity and of
projecting its influence globally. Fifth is the renewed importance attached
to the principles of sovereignty, self-determination and non-interference in
a region with a long history of colonization and US intervention. Sixth, the
impact of these developments owes much to the leadership and resources
of two key Latin American players: Brazil and Venezuela. Seventh, the
New Orientation has created several new institutions that provide it with
a certain permanence and outreach. As a consequence of all of the above,
the capacity of the US to influence events in Latin America has steeply
declined with some analysts speaking of the ‘end of US hegemony’ in Latin
America.
Although these developments do not have an equivalent within the
domestic politics of CARICOM countries, they have had a substantial impact
at the level of their inter-state relations. A prime example is the failure of
the Free Trade Agreement of the Americas (FTAA) negotiations as a result
of Brazilian and Venezuelan opposition to the US model of the agreement.
CARICOM members had invested considerable resources in the FTAA: they

Shaw
 Norman Girvan 65

had set up the Caribbean Regional Negotiating Machinery (CRNM) partly

to service these negotiations; they were the principal driver of the Small
Economies Working Group in the FTAA; and Trinidad and Tobago, with
CARICOM’s support, had vigorously promoted its candidature as the head-
quarters of the proposed FTAA Secretariat.9
Another example is the role of Petrocaribe, which was set up by Venezuela
to provide oil on concessionary terms to Caribbean countries. Twelve
of CARICOM’s fourteen members participate in Petrocaribe. Petrocaribe
finances a percentage of the bill for oil imports from Venezuela10 with loans
of between 1 and 2 per cent payable over 25 years with a grace period of
two years.11 The loan is used for approved projects in the state sector, infra-
structure, and poverty reduction. The total ‘savings’ to all 18 importing
countries from Petrocaribe up to mid-2009 was $1.4 billion (Ramirez, 2009).
Petrocaribe has now become the largest single source of concessionary finan-
cial assistance to CARICOM countries, exceeding the traditional bilateral and
multilateral sources (Girvan, 2008a).
Three CARICOM countries have joined the Bolivarian Alternative for the
People of the Americas (ALBA).12 ALBA was founded by Venezuela and
Cuba in 2005, with the stated aim of being an alternative to the neoliberal
model of economic integration, which is based on liberalization of trade and
investment and binding of private-sector-friendly policies (ALBA, 2009, p. 2).
The ALBA integration principles are those of solidarity, complementarity, com-
pensatory financing for the treatment of asymmetries, and differentiated
treatment of countries according to their circumstances (ibid.). ALBA’s pro-
grammes consist mainly of financial cooperation; provision of technical
personnel and of scholarships in health and education; and non-reciprocal
trading arrangements. The ALBA Bank has been established with a paid-up
capital of $1 billion13 and there is also an ALBA Food Security Fund with
an initial investment of $100 million (VenWorld, 2008). ALBA membership
has brought tangible benefits for CARICOM states. Dominica has received
funding for its ‘Housing Revolution’ programme and for a national fuel
distribution plant, as well as scholarships for university training in Cuba
and Venezuela. St Kitts and Nevis, though not an ALBA member, received
a $50 million loan in 2009 at 1 per cent interest payable over 20 years.14
Shortly after joining ALBA in 2009, Antigua and Barbuda received a ‘cash
injection’ of $50 million from the Venezuelan government under ALBA’s
principles of solidarity to finance the country’s immediate fiscal needs
(Spencer, 2009).
Two CARICOM members on the South American continent – Guyana
and Suriname – are members of the Union of South American Nations
(UNASUR), the Brazilian-led project to create a South American Union
modelled loosely on the EU. Under UNASUR’s South American Infrastructure
Integration Initiative (IIRSA), a continent-wide road and river transport
network is being constructed, complemented by a South American Energy

Shaw
66 The Caribbean in a Turbulent World

Ring utilizing natural gas and a regional telecommunications network.

A Bank of the South has been set up with initial capital of $7 billion, and a
South American Defense Council; while a Common Market is targeted for
2019.15 Guyana and Suriname both expect to benefit from IIRSA. Guyana
also hosted a Summit of the Rio Group in 2007 and joined the group as full
member; Jamaica now represents the rest of CARICOM in the Group.
In 2009, events related to the Cuban embargo, the Honduras coup, and
US bases in Latin America showed how influential these new linkages were
in aligning CARICOM nations with Latin America regarding contentious
issues with the US. CARICOM participated in the first Latin American and
Caribbean Summit in Bahia, Brazil in December 2009 where a unanimous
call was made for the lifting of the US embargo on Cuba (Osava, 2008).
Although CARICOM had always opposed the embargo, the demonstration
of a solid and exclusively LAC bloc in opposition to US policy was an historic
development. Immediately prior to the Fifth Summit of the Americas (SOA),
two CARICOM countries16 attended an ALBA summit where a public declara-
tion was adopted stating that there would be no signature of the draft summit
declaration – as the prepared SOA declaration did not include condemnation
of the US embargo on Cuba (Pearson, 2009). This may have embarrassed the
host CARICOM country, Trinidad and Tobago, which had been responsible for
the summit preparations, but in the end CARICOM states maintained their
solidarity with the Latin Americans. The issue resurfaced at the Organization
of American States (OAS) General Assembly in June of 2009, when CARICOM
states supported the Latin America-sponsored resolution to lift the suspension
of Cuba from OAS membership.
CARICOM states also issued individual condemnation of the military
coup in Honduras, and called for the immediate restitution of President
Manuel Zelaya; they also gave their support as individual member states to
similar calls made by ALBA, the OAS, the Rio Group, the Central American
Integration System (SICA, in which CARICOM’s Belize is a member), and
UNASUR. Although the official US position was the same as that of the Latin
Americans, the perceived ambivalence of the US towards Zelaya’s restoration
and their implicit support for the de facto regime (see Heine, 2009) appear
to have aligned CARICOM nations more closely to the Latin Americans.
Guyana and Suriname also attended the UNASUR Summit in August 2009 at
which there was strong criticism of the Colombian decision to grant access
to the US military for the use of bases in its territory (El Universal, 2009).
As its individual member states take up membership in organizations influ-
enced by larger Latin American powers – which entails strong pressures for the
‘Latin Americanization’ of CARICOM’s hemispheric foreign policy relations –
CARICOM is increasingly challenged to maintain its own distinct identity in its
relations with Washington. Can the foreign policy coordination of CARICOM
countries, as required by the Revised Treaty of Chaguaramas, be reconciled
with coordination of foreign policies of ALBA, UNASUR and even SICA?

Shaw
 Norman Girvan 67

Another challenge is to maintain the integrity of the Community’s economic

integration arrangements in the face of emerging hemispheric alliances. For
example, each of the 12 CARICOM states has signed separate agreements with
Petrocaribe, while Trinidad and Tobago and Barbados declined to participate
(Girvan, 2008) – the former is an exporter of petroleum refined products to the
rest of the Caribbean and regards Venezuela as a competitor in energy markets
and a rival in political influence among its CARICOM partners. Trinidad and
Tobago’s initiative to forge a political and economic union with the member
states of the Organization of East Caribbean States was likely partially
motivated by the wish to counter Venezuela’s growing influence in that
sub-region. Barbados has an oil refining arrangement with Trinidad and
Tobago and did not wish to prejudice this by involvement with Petrocaribe.
Barbados also took the view that CARICOM member states participating in
Petrocaribe had a legal responsibility under the CARICOM treaty to seek
prior approval from the relevant CARICOM organs. The problems of having
separate agreements with Petrocaribe were highlighted in 2009 when
Venezuela proposed modifications to the financing terms, which are subject
to separate negotiations with the participating states.
Questions have arisen on the compatibility of ALBA membership with
membership in CARICOM and participation in the CARICOM Single Market
and Economy. ALBA is operationalized by means of inter-governmental
cooperation agreements that do not require reciprocal trade and investment
liberalization and the adoption of common policies. A content analysis of
these agreements provides no evidence of the violation of the Treaty com-
mitments of CARICOM members (ibid). The Revised Treaty of Chaguaramas
does not give the Community exclusive jurisdiction over the conclusion
of trade and economic agreements with external partners, but it provides
for this possibility (see Revised Treaty of Chaguaramas, 2001, Article 80).
A single, collective CARICOM agreement with Petrocaribe and separately
with ALBA would have the advantages of exercising the combined bargaining
power of the member states, securing the best possible terms, and respond-
ing to broader strategic objectives of diversification of the Community’s
international economic relations. In the case of Petrocaribe, such an agree-
ment would help attenuate the financial and political risks associated with
dependency on a single source. It would also help in the monitoring of debt
sustainability in taking on new obligations to Petrocaribe.
The main obstacles to such an arrangement are differences among
CARICOM members in their circumstances and perceived interests, and the cor-
responding wish to retain their sovereign prerogatives over foreign economic
relations. However, to the degree that trade relations, financial cooperation,
and functional cooperation intensify within ALBA and UNASUR, these
groupings may well become competing economic poles of attraction for
CARICOM countries and sources of tension between CARICOM regional
integration on the one hand and hemispheric integration on the other.

Shaw
68 The Caribbean in a Turbulent World

Caribbean integration initiatives

Integration initiatives in the Caribbean have been driven by the need to over-
come the limitations of size as well as by a sense of shared history and
culture. The establishment of the West Indies Federation (1958–62), between
ten British territories in the region, originated with the belief that the indi-
vidual territories were too small to achieve national independence on their
own. Once this rationale was removed the federation foundered. Nonetheless,
economic regionalism and functional cooperation have flourished in the
post-colonial period, with fresh impetus being created by the challenges of
globalization. In recent years regionalism has widened to encompass the
entire Caribbean basin and the different linguistic zones of the region.
Unification of national markets through economic integration, resource
pooling, and the realization of synergies through functional cooperation are
the chief motives for current integration initiatives. The former is presently
centred on the Caribbean Community’s drive to create a CARICOM Single
Market and Economy (CSME). Functional cooperation is also a major element
in the CARICOM programme; and it is the principal raison d’être for the
establishment of the Association of Caribbean States (ACS).

CARICOM

CARICOM was launched in 1973 with the pillars of economic integration,

functional cooperation, and foreign policy coordination.17 The Community’s
fifteen members now include two non-English speaking countries and have
a combined population of 15 million. In respect to economic integration,
little progress was made after 1973; in 1989 CARICOM adopted the creation of
a Single Market and Economy (CSME) as its objective. The Revised Treaty
of Chaguaramas, signed in 2002, provides for integration of the markets for
goods, services, capital, and labour (beginning with skilled labour), for com-
mon macroeconomic and sectoral policies, and for monetary integration.
Progress towards accomplishing this goal has been slow. Officially, the single
market was instituted in 2006, but many legal and administrative barriers to
the full integration of product and factor markets remain in place. To date,
no significant progress has been made in the harmonization of policies and
laws impacting on business, while the goal of monetary union appears to
have been abandoned.
CARICOM’s CSME project is informed by the principles of ‘Open
Regionalism’. Tariffs on extra-regional imports have been sharply cut and market
integration, complemented by common policies and laws, is meant to stim-
ulate domestic and foreign investment, increase international competitiveness,
and promote economic diversification. But intra-regional trade was on average
only17.2 per cent of CARICOM’s total trade over the period 2001–6 (CARICOM,
2008); intra-regional exports are dominated by one country – Trinidad and

Shaw
 Norman Girvan 69

Tobago – and its growth is not attributable to market integration (Jessen and
Vignoles, 2005). The benefits of Open Regionalism are likely to be limited
due to the structurally undiversified nature of CARICOM economies, which
export mainly resource products and services to extra-regional markets
(ECLAC, 2004). The slow pace of CSME implementation has been blamed
on the absence of supranationality in the CARICOM governance arrange-
ments; including the absence of binding Community law, the discretionary
status of implementation of decisions by CARICOM organs, and the absence
of sanctions for non-implementation (Girvan, 2005; Brewster et al., 2002).
Since 1992, proposals have been made for reforms of CARICOM governance
that would give binding effect to the decisions of Community organs and
establish an executive mechanism to oversee implementation. This would
provide CARICOM governance with a degree of supranationality that
would presumably ensure speedier and more efficient implementation. In
the Rosehall Declaration (2003), the governments approved these changes
in principle but they have so far failed to reach agreement on subsequent
proposals aimed at giving effect to the declaration (Lewis, 2006). The
difficulty is that governments tend to perceive supranationality as less
an exercise in collective sovereignty and more a diminution of national
sovereignty. There is also the issue of possible incompatibility with the
provisions of national constitutions and fears that supranationality will
amount to ‘Federation (or political union) in disguise’. Complicating
the matter is the perception that the tangible economic benefits of such
changes are small.
In 2007, CARICOM leaders approved a ‘Single Development Vision’ which
charts a road map towards completion of the CSME by 2015 (Girvan, 2006).
The vision designates five industry clusters that will drive regional economic
growth and will be priority areas for the adoption of common policies and
support measures by regional governments. This will be supported by
measures to establish an enabling economic environment for private sector
activity, and a governance framework that both addresses the need for timely
implementation and engages the involvement of the social partners. The
report established a framework for the phasing of CSME implementation
in ways that would generate tangible benefits for the member states at each
stage. But it became difficult to operationalize after the superimposition of
an Economic Partnership Agreement (EPA) with the European Union onto
the CSME process; as well as several changes in governments. Since 2007,
no significant progress has been made in advancing the CSME or putting
the vision into effect. Currently CARICOM is preparing a Strategic Plan for
Regional Development that will focus on the provision of regional public
goods meant to advance the regional integration process.
The Organization of Eastern Caribbean States (OECS) is a six-state group-
ing within the CARICOM membership that is creating a sub-regional single
market and economy in advance of the CSME.18 The sense of cohesion

Shaw
70 The Caribbean in a Turbulent World

within the OECS derives from geographical proximity, similarity of size

and levels of development, strong historical links through the previously
existing West Indies Associated States, and a common currency and Central
Bank (CARICOM Secretariat, 2005, p. 49). OECS members are designated
as Less Developed Countries (LDCs) within the CARICOM Treaty,19 which
entitles them to special treatment under Chapter 7 of the Treaty titled
‘Special Regimes for the Less Developed Countries’ (ibid., p. 41). The OECS
Economic Union, which is due for completion in 2010, will have an aggregate
population that approximates that of Guyana and a GDP that is marginally
greater than that of Barbados while being approximately 20 per cent of the
GDP of Trinidad and Tobago, the largest CARICOM economy.
In August 2008, Trinidad and Tobago and three members of the OECS20
announced their intention to form an economic union by 2011 with ‘appro-
priate political integration’ by 2013. A task force appointed to report on the
first proposal recommended a ‘new bargain’ of integration based on the
identification of ‘designated spaces’ of integration, namely, (a) economic
spaces (land, maritime and air); (b) human resource spaces; (c) monetary
spaces; (d) security spaces; (e) external relations spaces; and (f) legal and
judicial spaces (Lewis, 2009). There would be a ‘merging of the participating
states decision-making competencies’ for the particular activities under-
taken in the designated areas and an evolutionary approach to building of
further political structures.21
Two potential sources of tension are immediately apparent: one is between
the proposed union and the CARICOM/CSME process; the other between it
and the OECS Economic Union programme. With regard to the first, partici-
pants in the initiative insist that it will in no way breach their obligations
under the Revised Treaty and that it will hasten completion of the CSME.22
Concerns expressed by other governments led to a decision to schedule a
special CARICOM summit to discuss the initiative and review the state of
CSME implementation later in 2009. Regarding the second, at their meeting
in September 2008 OECS leaders reaffirmed their intention to complete the
OECS Economic Union in 2009, which was later changed to 2010, and with
the expectation that Trinidad and Tobago will ‘become a member of the
Economic Union by 2011’ (OECS Secretariat, 2008). This is not the model
presented by the subsequent Task Force Report, however, which foresees
an entity that other OECS (and CARICOM) states may later join. Thus, the
issue of how to reconcile the new union initiative with existing integration
processes awaits resolution.
Another potential threat to the viability of the CSME project is repre-
sented by the Economic Partnership Agreement (EPA) with the European
Union that was signed by 14 CARICOM states and the Dominican Republic,
grouped together as the Cariforum group (Girvan, 2008b). The EPA will
eliminate barriers to the movement of the majority of goods and services
and of current and capital payments among the 12 CSME participating

Shaw
 Norman Girvan 71

countries, the other three members of CARICOM, the Dominican Republic

and the 27 member states of the EU. It establishes binding regulatory polices
among all 42 countries in services, treatment of investment, intellectual
property, public procurement, competition, and electronic commerce – all
subject areas that are contemplated in the CSME but not yet put in place.
It sets up an elaborate institutional machinery to oversee implementation
that in some respects supersedes the governance machinery of CARICOM
organs. When fully implemented, the EPA will render the CSME redundant.
CARICOM would then have lost the economic integration pillar of its raison
d’être and be left with functional cooperation, foreign policy coordination,
and security.
The EPA, UNASUR, ALBA, and the Trinidad and Tobago-OECS Union initia-
tive all represent competing and sometimes cross-cutting currents in the
drive to integrate Caribbean economies within larger economic configura-
tions. CARICOM member states have tended to respond to these developments
in a reactive manner rather than within the framework of a coherent strategy
for engagement with the world economy and its changing configurations.
The CSME, when it was first mooted in 1989, was meant to be such a strategy;
one that would establish a single economic space, governed by common
decision making from which business and governments could transact more
effectively with the rest of the world. But delays in completing the CSME
carry the risk that it will be overtaken by events in other arenas. CARICOM
as presently structured is not equipped with the institutional and gover-
nance frameworks necessary to complete the CSME in a timely manner and
to deal with external partners as a single unit that is capable of following
up on its commitments. Without these factors, the possibility of gradual
fragmentation of the economic dimension of the community – as different
members seek different external alliances – cannot be discounted.

The Association of Caribbean States (ACS)

The establishment of the ACS in July 1994, as a result of a CARICOM initiative,

was a significant step in the development of closer relations between the
English and Spanish-speaking countries of the Greater Caribbean region.
With its 27 members, associate members, and its combined population of
230 million, the ACS could potentially have become a major player in
economic and political affairs in the hemisphere and as a vehicle for sub-
stantial cooperation among the different linguistic zones of the Caribbean
basin, which have been historically isolated from one another. However, it
has failed to realize this potential. There are several reasons for this. It proved
impossible to create an ACS free trade area, due to the launching of the FTAA
negotiations soon after the ACS was founded. Hence the FTAA, and the
already existing free trade arrangements under NAFTA, Mercosur, the Andean
Group, the Central American Common Market, and the CSME left no space

Shaw
72 The Caribbean in a Turbulent World

for a distinct ACS free trade configuration. With its crucial trade component
missing, the ACS was left with the mission to promote functional coopera-
tion in transport, tourism, and natural disasters. Cooperation in these areas
has consisted largely of the exchange of information and the conclusion
of regional agreements. The ACS has not assumed the role of interlocutor
in political matters among its members, or between them and external
powers. This role is carried out by existing regional and hemispheric organi-
zations, including the Organization of American States. ACS members have
also preferred to develop their mutual cooperation in bilateral mode rather
than through the ACS. For example Mexico, Venezuela, and Cuba have
each made bilateral cooperation agreements with CARICOM rather than
channelling their cooperation through the ACS. The US, as the principal
player in hemispheric affairs, has not interacted with the ACS because of
Cuban membership.
A significant achievement of the ACS, however, is the Caribbean Sea
Initiative in which the United Nations General Assembly is to grant recog-
nition of the Caribbean Sea as a Special Area for Sustainable Development,
and promote regional and international cooperation in the common man-
agement of this shared resource. As the Caribbean Sea is the single most
important element that ACS members have in common, cooperation on
its management represents the best possibility for establishing an ACS
‘niche’, one that it is uniquely qualified to fill. The focus here would be
on the sustainable management of the coastal and marine environment,
including cooperation on control of the shipment of hazardous materials
such as nuclear waste, oil spills, and cruise ship waste. Inasmuch as the
ACS members sit astride the major routes for trafficking in illegal drugs and
arms between North and South America, cooperation among themselves as
well as negotiating with the US on these matters is another possible area of
cooperation. Evidently a change in US policy towards the ACS and a willing-
ness to collectively engage the region on these subjects would be necessary.
US willingness to work with the ACS would trigger similar supportive
actions by other external players, such as Canada and the EU. ACS members
would need to decide whether they wish the organization to play this role;
they would need to empower the ACS by making it the focal point of coop-
eration in these areas and giving it the requisite political, diplomatic, and
financial support.

In conclusion

The CARICOM Caribbean needs to strengthen its institutional and intel-

lectual capacity to be informed and to analyse these developments in real
time and to respond strategically to them. It needs a critical mass of scholars
who specialize in global and hemispheric geopolitics and geo-economics in
the breadth and depth required, ‘think tanks’ where these can be deployed,

Shaw
 Norman Girvan 73

and a regional governance machinery that is far more efficient in decision

making and implementation than presently exists. For a variety of historical
and cultural reasons, this is a region that is highly susceptible to seeing the
world and itself through the eyes of others. The effort to develop Caribbean-
centred perspectives and to act upon them must continue.

Notes
1. In this chapter the term ‘Caribbean’ refers to the islands in the Caribbean Sea as
well as the mainland countries of Belize, French Guiana, Guyana, and Suriname.
The focus of the chapter, however, is on the member countries of the Caribbean
Community, referred to as ‘CARICOM’. The term ‘Greater Caribbean’ encapsulates
all the countries bordering the Caribbean Sea.
2. Jamaica was negotiating a US$1.2 billion standby arrangement; Dominica, St. Kitts-
Nevis, St Lucia, St Vincent and the Grenadines have already begun using either
the IMF’s Rapid Response Facility (RRF) or the Exogenous Shocks Facility (ESF).
Grenada has requested continuation of a poverty reduction scheme; Barbados has
indicated that it will begin to utilize its IMF allocation of special drawing rights
of around US$80m.
3. A CARICOM Financial Services Agreement and CARICOM Investment Code have
been drafted, but not adopted.
4. The first task force was established after the 13th Meeting of COFAP on 29 January
2009. The second and the third were established after the 30th CARICOM Heads
of Government Meeting 2–5 July 2009.
5. Growth estimates for emerging countries have been revised upwards to 5.5 per
cent in 2009 and 7.0 per cent in 2010; growth projects for the US declined from
0.2 per cent to ⫺ 2.6 per cent in 2009 and are estimated to increase to 0.8 per
cent in 2010; Western Europe growth estimates declined from ⫺ 0.6 per cent
to ⫺ 4.8 per cent in 2009 and are estimated to increase to ⫺ 0.3 per cent in 2010
(International Monetary Fund, 2009b).
6. At the time of writing in September 2009, this is the case for Argentina, Bolivia,
Brazil, Chile, Ecuador, El Salvador, Honduras, Guatemala, Paraguay, Uruguay, and
Venezuela.
7. As pointed out by Macdonald and Ruckert (2009, p. 67) there is no single ‘Post-
Neoliberal’ economic model that is practised, and several governments (e.g.
Brazil, Argentina, Chile) retain some elements of the Washington Consensus,
while abandoning others.
8. To this end, constitutions have been rewritten in Venezuela, Bolivia, and Ecuador,
and received popular approval in national referenda.
9. This is not to say that CARICOM countries would have derived significant
benefits from the FTAA, which is debatable. Instead, the breakdown of the nego-
tiations is a clear signal that relations of power in the hemisphere have changed
dramatically.
10. Under the original arrangement the percentage of the oil bill financed as a loan
reached 50 per cent when the price of oil exceeded $100/barrel. In June 2009
Petrocaribe proposed to adopt a flat rate of 50 per cent payable in cash and
50 per cent as a credit.
11. The 1 per cent interest rate applies at an oil price above $40/bbl; below $40 the
rate applied is 2 per cent.

Shaw
74 The Caribbean in a Turbulent World

12. Dominica in 2008, and Antigua and St. Vincent and the Grenadines in 2009.
13. The Bank has more than $ 1 billion in capital, which it uses to make loans avail-
able to member states in order to undertake infrastructural, health, education, and
social and cultural developments. Loans from the Bank of ALBA do not contain
any conditions and the bank is run on a democratic basis (see Hattingh, 2008).
14. $10 million was disbursed on signing of the agreement with the remainder to be
disbursed on approval of projects.
15. UNASUR initiatives include the creation of a single market to eliminate the fees
for non-sensitive products by 2014 and non-sensitive items by 2019.
16. ALBA member Dominica was present at the summit in addition to St Vincent and
the Grenadines.
17. Security was recently added as the fourth pillar.
18. On 18 June 1981, the OECS was established with the signing of the Treaty
of Basseterre. The objectives of the OECS were: (a) promoting cooperation
among member states and defending their sovereignty, territorial integrity, and
independence; (b) assisting member states in meeting their obligations and
responsibility to the international community with due regard to the role of
international law as a standard of conduct in their relationships; (c) establishing
and maintaining, wherever possible, arrangements for joint overseas representa-
tion and common services; and (d) promoting economic integration among the
member states.
19. Article 3 of the original treaty differentiates between LDCs and MDCs. MDCs
are specified as Barbados, Guyana, Jamaica, and Trinidad and Tobago. All other
countries are classified as LDCs (see Treaty Establishing the Caribbean Community,
1973, Article 3).
20. Grenada, St, Lucia, and St. Vincent and the Grenadines.
21. The Task Force Report is currently the subject of consideration and consultation
by the participating governments.
22. According to the Section on the Implementation of the Joint Declaration (b):
‘The signatory countries hereby undertake to conclude a framework agreement
on sustainable economic, social and political development that commits them in
areas of common interest to: (b) facilitate the development and implementation
of the agreements necessary for the achievement of the Single Economy, includ-
ing the Agreement for the Development of Financial Services, the Framework
for the Integration of the Capital Market, the Investment Policy Harmonization
(Caribbean Investment Code), Framework for the Harmonization of Fiscal
Incentives, Framework for Fiscal Policy Harmonization and the Framework for
Monetary Cooperation’ (see Joint Declaration, 2008).

References
ALBA (2009) ‘What is ALBA?’ The Bolivarian Alternative for the Peoples of the Americas.
Available at http://www.alternativabolivariana.org/pdf/alba_mice_en.pdf.
Associated Press (2009) ‘Fired financial regulator arrested in Stanford case – Billionaire
pleads not guilty in Houston court’, The Jamaica Gleaner, 26 June. Available at
http://www.jamaica-gleaner.com/gleaner/20090626/business/business6.html.
Bradshaw, Maria (2009) ‘PM’s Count’, Nation News, 28 June. Available at http://www.
nationnews.com/news/local/only-four-guaynese-deported-FRONT-PAGE-LEAD.
Brewster, Havelock R., Thomas Dolan, and Taimoon Stewart (2002) ‘Implementation of
the Caribbean Single Market Economy’, World Bank: Caribbean Country Management

Shaw
 Norman Girvan 75

Union, Latin America and Caribbean Region. Available at http://www.normangirvan.

info/wp-content/uploads/2007/11/brewster-implementation-of-csme.pdf.
Caribbean Centre for Money and Finance (2009) Caribbean Economic Performance
Report on the CARICOM Region, June 2009: 1–3. Available at http://www.ccmf-uwi.
org/files/publications/economic_report/cepr_2009-06.pdf.
Caribbean Press Releases (2009) ‘Caribbean GDP will fall 1.2% in 2009, says ECLAC’,
Caribbean Press Releases.com, 28 July. Available at http://www.caribbeanpressreleases.
com/articles/5353/1/Caribbean-GDP-Will-Fall-12-in-2009-Says-ECLAC/Page1.html.
CARICOM (2008) CARICOM’s Trade – A Quick Reference to Some Summary Data:
2001–2006, Caribbean Community Secretariat: Statistics Sub-Programme. Available
at http://caricomstats.org/caricomtrade_quick_ref_2001_2006.htm.
CARICOM Secretariat (2005) CARICOM: Our Caribbean Community, An Introduction.
Kingston: Ian Randle Publishers.
Cooper, Andrew F. and Agata Antkiewicz (eds), (2008) Emerging Powers in Global
Governance: Lessons from the Heiligendamm Process, Waterloo: Wilfrid Laurier
University Press.
Cooper, Andrew F. and Jorge Heine (eds), (2009) Which Way Latin America: Hemispheric
Politics Meets Globalization, Tokyo: United Nations University Press.
Cricinfo Staff (2009) ‘Handcuffed Stanford Pleads not Guilty’, Cricinfo.com, 25 June.
Available at http://www.cricinfo.com/westindies/content/story/410506.html.
ECLAC (2003) Caribbean Tourism, Trends Policies and Impact, 1985–2002, Economic
Commission for Latin America and the Caribbean, 10 December. Available at http://
www.eclac.org/publicaciones/xml/4/14504/G0765.pdf.
ECLAC (2004) ‘The Key Role of Regional and Sub-Regional Spaces’, in Productive
Development in Open Economies. Available at http://www.eclac.org/publicaciones/
xml/2/15082/DGI-2234-Chapter12.pdf.
Economic Commission of Latin America and the Caribbean (2009) Economic Survey
of Latin America and the Caribbean, ECLAC Briefing Paper 2008-2009. Available at
http://www.eclac.cl/publicaciones/xml/5/36465/2009-254-EEI-2009-Lanzamiento-
WEB.pdf.
El Universal (2009) ‘US-Colombia Pact Debated at UNASUR Summit’, El Universal,
24 August. Available at, http://english.eluniversal.com/2009/08/28/en_ing_
esp_us-colombia-pact-deb_28A2673367.shtml.
Foster, Patrick (2009) ‘Unions Propose Stimulus Plan’, The Jamaica Observer, 1
September. Available at, http://www.jamaicaobserver.com/news/158659_Unions-
propose-stimulus-plan.
Georgetown Communiqué (2009) ‘Communiqué Issued at the Conclusion of the
Thirtieth Regular Meeting of the Conference of Heads of Government of the
Caribbean Community, 2–5 July 2009, Georgetown, Guyana’, CARICOM Secretariat,
4 July. Available at http://caricom.org/jsp/communications/communiques/30hgc_
2009_communique.jsp.
Girvan, Norman (2005) ‘Whither CSME?’, Journal of Caribbean International Relations,
No. 1 (April), pp. 13–32.
Girvan, Norman (2006) ‘Towards a Single Economy and a Single Development
Vision’, A Report for the CARICOM Secretariat and the Special Task Force on the
Single Economy, 25 October. Available at http://www.caricom.org/jsp/community/
donor_conference_agriculture/towards_single_economy_girvan.pdf.
Girvan, Norman (2008a) ‘ALBA, Petrocaribe and CARICOM: Issues in a new
dynamic’, NormanGirvan.info. Available at http://www.normangirvan.info/wp-content/
uploads/2008/05/alba-petrocaribe-and-caricom.pdf.

Shaw
76 The Caribbean in a Turbulent World

Girvan, Norman (2008b) ‘Caribbean Integration and Global Europe: Implications

of the EPA for CSME’, NormanGirvan.info, 18 August. Available at http://www.
normangirvan.info/wp-content/uploads/2008/08/caribbean-integration-and-
global-europe-18aug08.pdf.
Girvan, Norman (2009) ‘The CLF Financial Debacle: Big Companies Should not be
Allowed to Run Small Countries’, NormanGirvan.info, 6 February. Available at http://
www.normangirvan.info/the-cl-financial-debacle-big-companies-should-not-run-
small-countries-by-norman-girvan/.
Hattingh, Shawn (2008) ‘ALBA: Creating a Regional Alternative to Neo-Liberalism?’,
VenezuelaAnalysis.com, 13 February. Available at http://www.venezuelanalysis.com/
analysis/3154.
Heine, Jorge (2009) ‘A Case of Missed Opportunity’, The Hindu, 23 December. Available
at http://www.thehindu.com/2009/12/23/stories/2009122354720800.htm.
Helps, Horace (2009) ‘Jamaica to Cut Spending 20 Percent Ahead of IMF Loan’,
CaribbeanNetNews, 22 August. Available at http://www.caribbeannetnews.com/news-
18381—9-9—.html.
International Monetary Fund (2009a) IMF’s World Economic Outlook: Crisis and
Recovery, IMF World Economic and Financial Surveys, April. Available at http://
www.imf.org/external/pubs/ft/weo/2009/01/pdf/text.pdf.
International Monetary Fund (2009b) ‘Contractionary Forces Receding but Weak
Recovery Ahead’, World Economic Outlook UPDATE, 8 July. Available at http://www.
imf.org/external/pubs/ft/weo/2009/update/02/pdf/0709.pdf.
Jamaica Observer (2009) ‘Bird Wants Amnesty for Illegal Antigua Immigrants’, The
Jamaica Observer, 2 June. Available at http://www.jamaicaobserver.com/news/152681_
Bird-wants-amnesty-for-illegal-Antigua-immigrants.
Jamaica Observer (2010) ‘Mixed Fortunes for Caribbean Economies in 2009, says New
Report’, The Jamaica Observer, 1 January. Available at http://www.jamaicaobserver.
com/business/Caribbean-story_7293983.
Jessen, Anneke and Christopher Vignoles (2005) CARICOM Report No. 2, Institute for
the Integration of Latin America and the Caribbean, August. Available at http://
idbdocs.iadb.org/wsdocs/getdocument.aspx?docnum⫽806973.
Joint Declaration (2008) Joint Declaration on Collaboration towards the Achievement of the
Single Economy and Political Integration among Grenada, St. Lucia, St. Vincent and the
Grenadines and the Republic of Trinidad and Tobago, August. Available at http://www.
normangirvan.info/wp-content/uploads/2008/08/joint-declaration-140808.pdf.
Latin American Information Agency (2009) ‘Declaration of the Indigineous Peoples’, World
Social Forum 2009, Brazil, 12 October. Available at, http://alainet.org/active/28734.
Lewis, Vaughn A. (2006) ‘Managing Mature Regionalism: Regional Governance in
the Caribbean Community’, Report of the Technical Working Group on Governance
Appointed by CARICOM Heads of Government, October. Available at http://www.caricom.
org/jsp/community/twg_governance_report.pdf.
Lewis, Vaughn A. (2009) Presentation to the CARICOM Heads of State and Government on
the Report of the Task Force on the Trinidad & Tobago-Eastern Caribbean States Integration
Initiative, 24 May. Available at http://foreign.gov.tt/media/introduction/LEWIS%20-
%20PRESENTATION%20TO%20THE%20CARICOM%20HEADS2.pdf?ttmfa_session_
id⫽4449e1706290f3affe4090754619dc74.
Macdonald, Laura and Arne Ruckert (2009) Post-Neoliberalism in the Americas, New
York: Palgrave Macmillan.
Neptune, Peter D. (2009) ‘CLICO too Big to Fail says Finance Minister’, Trinidad and Tobago
Guardian, 15 August. Available at http://guardian.co.tt/business/business/2009/08/15/
clico-too-big-fail-says-finance-minister.

Shaw
 Norman Girvan 77

OECS Secretariat (2008) ‘OECS agree to Trinidad and Tobago Membership’, St Lucia:
Government Information Services, 15 September. Available at http://www.stlucia.gov.
lc/pr2008/september/oecs_agree_to_trinidad_and_tobago_membership.htm.
Office of the President of Guyana (2009) ‘President Jagdeo Slams Rhetoric of
Barbadian PM’, Office of the President of the Republic of Guyana, 2 July. Available at
http://opnew.op.gov.gy/index.php?option⫽com_content&view⫽article&id⫽610:
president-jagdeo-slams-rhetoric-of-barbadian-pm.
Osava, Mario (2008) ‘Latin America: Summit Marks Distance from US’, Inter Press
Service, 17 December. Available at, http://ipsnews.net/news.asp?idnews⫽45153.
Pearson, Tamara (2009) ‘Venzuela and ALBA Promote ‘New Climate’ in Summit of the
Americas’, Venezuela Analysis, 21 April. Available at http://www.venezuelanalysis.
com/news/4382.
Pilgrim, Clarence E. (2009) ‘Economic Task Force – Another CARICOM Step in
the Right Direction’, KaieteurNews Online, 8 February. Available at http://www.
kaieteurnewsonline.com/2009/02/08/economic-task-force-another-caricom-step-in-
the-right-direction/.
Ramirez, Rafael (2009) Petrocaribe produjo ahorro de 1.400 millones de dolares. Venezuela:
Prensa Presidencial.
Ramjeet, Oscar (2009) ‘St Vincent Prime Minister lashes out at Barbados
Immigration Policy’, Caribbean-American Forum, 16 May. Available at http://www.
caribbeanamericanforum.com/?p⫽919.
Revised Treaty of Chaguaramas (2001) Revised Treaty of Chaguramas Establishing the
Caribbean Community including the CARICOM Single Market and Economy. Available
at http://www.worldtradelaw.net/fta/agreements/caricomrevisedfta.pdf.
Rosehall Declaration (2003) The Rosehall Declaration on ‘Regional Governance and
Integrated Development’, CARICOM Secretariat, 2–5 July. Available at http://www.
caricom.org/jsp/communications/meetings_statements/rose_hall_declaration.
jsp?menu⫽communications.
Spencer, W. Baldwin (2009) ‘PM Spencer’s Address to the Nation on Receipt of
US$50 Million from Venezuela’, The Official Website of the Government of Antigua
and Barbuda, 13 August. Available at http://www.ab.gov.ag/gov_v2/government/
speeches/2009/speech_2009aug13_id2.html.
Stabroek Staff (2009) ‘Guyanese are Being Raided in Barbados’, Stabroek News, 17 June.
Available at http://www.stabroeknews.com/2009/news/local/06/17/guyanese-are-
being-raided-in-barbados/.
Treaty Establishing the Caribbean Community (1973) 4 July. Available at http://www.
caricom.org/jsp/community/original_treaty-text.pdf.
Trinidad and Tobago News Blog (2009) ‘Government to Bailout CLICO’, Trinidad and Tobago
News, 30 January. Available at http://www.trinidadandtobagonews.com/blog/?p⫽924.
VenWorld (2008) ‘Venezuela and ALBA Create Food Security Fund’, Venezuela World,
23 April. Available at http://venworld.wordpress.com/2008/04/23/venezuela-and-
alba-create-food-security-fund/.
World Bank (2008) Gross Domestic Product 2008, World Bank Development Indicators
Database. Available at http://siteresources.worldbank.org/DATASTATISTICS/
Resources/GDP.pdf.
Xinhua (2009) ‘BRIC Makes Formal Debut with First Summit Meeting’, People’s Daily,
15 June. Available at http://english.peopledaily.com.cn/90001/90777/90856/6678
396.html.

Shaw
This page intentionally left blank

Shaw
Part II
Responding to Challenges

Shaw
This page intentionally left blank

Shaw
4
Economic Integration in the
Americas: An Unfinished Agenda
Antoni Estevadeordal and Kati Suominen

While the Doha Round negotiations have been at a standstill, countries

have continued to engage in external trade by pursing regional and bilateral
trade agreements. In Latin America and the Caribbean (LAC), Mexico and
Chile have been leaders in spearheading free trade agreement (FTA) expansion
in the region. The drift towards regional trade agreements, sub-regionalism
and preferential trade agreements (PTAs) contrasts with the sentiment and
momentum from nearly two decades ago. In 1990 (then) US President
George H. W. Bush floated the idea of a free trade area that would stretch
‘from Alaska to Tierra del Fuego’, which was later outlined under the vision
of the Free Trade Area of the Americas (FTAA). In 1994, the US, Canada, and
32 LAC1 countries hoped to negotiate an all-embracing FTAA by 2005.
But five years since that deadline, the mood has changed. The US appears
less enthusiastic about trade agreements. Mercosur, the trade bloc led by
Brazil, gave priority to multilateral liberalization under Doha. Meanwhile,
some governments in Latin America are pressured by public backlash against
globalization and are turning their backs on open trade.
However, there are new potential success stories. Eleven countries on the
Pacific side of the Americas are working to unify their trade agreements to
allow seamless cumulation of production among them. Both Mexico and
Central America are also requesting cumulation of origin in their agreements
with the European Union; this would promote closer business linkages and
capitalize on Mesoamerican and European markets. Brazil is promoting
negotiations between Mercosur and Central America, and hosted the Latin
American Summit on Integration and Development in 2007. Further, US
President Barack Obama recently reaffirmed US aspirations for restoring
regional integration by calling for a ‘new beginning’ in the hemispheric
relationship at the Fifth Summit of the Americas, held in Trinidad and
Tobago in April 2009 (for more, see Dan Erikson’s chapter in this volume).
The global financial crisis of 2008–9 adds another potential change
in trade policy in Latin America. The direction, however, is not clear.
According to the Inter-American Development Bank, growth in the seven
81

Shaw
82 Economic Integration in the Americas

largest regional economies – Argentina, Brazil, Chile, Colombia, Mexico,

Peru, and Venezuela – will slow over the next five years, reaching average
annual growth of just 1.9 per cent for the period 2009–13, compared with
the annual average of nearly 6 per cent during the 2003–7 period. Just as the
1929 crisis led to more activist states in the region and the 1982 debt crisis
triggered wider-scale adoption of the Washington Consensus, the current
financial crisis will likely lead to rethinking of the models of economic
development and global engagement.
This chapter focuses on the shift towards new regionalism in the
Americas. By first contrasting ‘old’ and ‘new’ regionalism, this chapter will
then consider the evolution of regionalism in the context of tension with
sub-regionalism. The challenges of implementing an FTAA, recalibration of
hemispheric integration and implications of a shift towards bilateralism for
regionalism today will also be addressed.

Trends in economic integration in Latin America and the

Caribbean

Latin America and the Caribbean encompass diverse countries in terms

of population, economic size, geography, stage of development, linguistic
roots as well as ethnic and cultural backgrounds. In 2007, the LAC region
accounted for about 13 per cent of world population, and contributed about
8 per cent of world GDP. When the US and Canada are included, the hemi-
spheric share of the world economy rises above 35 per cent.
Currently, Latin America is well integrated into the international trading
system – a significant shift from the past. Latin America and the Caribbean
accounted for 5 per cent of world merchandise exports and 3 per cent of
world services exports in 2007. Since 1990, trade openness also expanded
significantly. In some cases, such as Costa Rica, openness jumped from
67 per cent in 1990 to 102 per cent in 2007 (see Table 4.1). While merchan-
dise trade as a share of LAC GDP nearly doubled during the 1990–2007
period, to comprise more than 40 per cent of regional GDP, nearly all of the
countries in the Americas are net importers. Overall, the regional balance of
trade reached a US$ 6 billion deficit in 2007.2
The growth of LAC exports to the US has slowed in recent years, from an
annual average of 19 per cent in the 1990s to 7 per cent during the period
2000–7. At the same time, countries have forged more trade agreements
with one another and intensified regional efforts on trade facilitation.
Notable examples include the adoption of unified customs documents
and harmonization of customs regimes within the Andean Community,
Central American countries harmonizing sanitary and phytosanitary (SPS)
measures (see ECLAC, 2007). As a result, most LAC countries – especially
smaller economies – have seen their regional bias, measured by the share
of regional trade, increase during the period 1990–2007 (see Table 4.1).

Shaw
 Antoni Estevadeordal and Kati Suominen 83

Table 4.1 Trend comparisons of trade openness and regional bias (1990 and 2007)

1990 2007
a b
Openness Regional bias Openness Regional bias
Argentina 15% 22% 45% 29%
Brazil 15% 7% 26% 10%
Canada 51% 11% 70% 12%
Chile 65% 70% 80% 67%
Colombia 35% 71% 38% 68%
Costa Rica 67% 26% 102% 27%
El Salvador 50% 11% 76% 15%
Jamaica 100% 12% 109% 10%
Mexico 38% 27% 58% 29%
US 21% 5% 28% 16%

Note: a (exports + imports)/GDP

b (Regional exports + imports)/(Total exports + imports)
Source: IDB calculations based on WDI (2009) and Comtrade (2009) data

Figure 4.1 Trade with Western Hemisphere RTA partners in 2008

Source: IDB calculations based on UN Comtrade data

Brazil

Jamaica

Colombia

US

Argentina

Costa Rica

Chile

Mexico

Canada

EI Salvador

0 10 20 30 40 50 60 70 80
Imports from Western Hemisphere RTA partners as % of total imports from world

The pattern is also reflected in trade figures. Colombia received 67 per

cent of imports from its LAC PTA partners in 2007 (see Figure 4.1). Smaller
economies experience disproportionate effects on their trade from trade
agreements, as revealed by the jump in Jamaican imports from LAC PTA

Shaw
84 Economic Integration in the Americas

Figure 4.2 Trade with Western Hemisphere RTA partners in 1990

Source: IDB calculations based on UN Comtrade data

Jamaica

Brazil

Colombia

US

Argentina

Chile

Costa Rica

EI Salvador

Canada

Mexico

0 10 20 30 40 50 60 70 80
Imports from Western Hemisphere RTA partners as % of total imports from world

partners, which increased from 5 per cent in 1990 to 19 per cent in 2008
(see Figures 4.1 and 4.2).
Intraregional trade flows seem small compared to total exports in Latin
America and the Caribbean, reaching 19 per cent in 2008. The depth of
intraregional integration also pales in comparison with other regional
blocs with higher ratios, such as the European Union (64%), Asia Pacific
(42%) and the Association of Southeast Asian Nations (ASEAN, 23%) (see
Table 4.2).
However, intraregional trade in the LAC region has been very dynamic,
rising to 19 per cent of the total in 2008.3 Also sub-regional trade has grown
rapidly. For example, intraregional trade for Mercosur grew at an average of
22 per cent between 1990 and 2008, compared with just 14 per cent extra-
regional flows in the same period. By comparison, the difference between
intraregional and extraregional trade growth was smaller for some blocs,
such as the North American Free Trade Agreement (NAFTA) (9% and 8%
respectively), or remained even for others, such as the Central American
Common Market (CACM) (both at 20%).
Many countries are particularly integrated in their sub-regional markets,
including Argentina (39% exports destined to the subregion), Bolivia (63%),
Ecuador (36%), El Salvador (66%), and Guatemala (46%) (see Table 4.3).4
The lower ratios of intraregional trade in CARICOM and Mercosur suggest

Shaw
Table 4.2 Intraregional trade (share of exports), 2008 (changes from 1990 in italics; bold cells are intraregional trade flows)

Direction

Exporting LAC Mercosur NAFTA CARICOM CACM US + Canada EU Asia Pacific ASEAN
Region

LAC 19% 12% 47% 1% 2% 47% 14% 10% 2%

8% 5% 1% 0% 1% 2% −9% −1% 0%
Mercosur 36% 25% 24% 2% 1% 13% 22% 17% 4%
23% 15% −3% 2% 0% −13% −11% 1% 1%
NAFTA 15% 5% 49% 1% 1% 42% 16% 16% 4%
5% 3% 8% 0% 1% 6% −6% −4% 0%
CARICOM 20% 2% 47% 17% 2% 44% 16% 3% 0%
20% 2% −39% 17% 2% −41% 4% 1% −5%
CACM 38% 2% 41% 1% 28% 37% 13% 8% 1%
7% 1% −8% 0% 3% −9% −4% 6% 1%
US + 16% 5% 43% 1% 1% 35% 18% 18% 4%
Canada
6% 2% 3% 0% 1% 0% −4% −3% 0%
EU 2% 1% 8% 0% 0% 8% 64% 7% 2%
1% 0% 0% 0% 0% 0% −3% 1% 0%
Asia 4% 2% 17% 0% 1% 16% 18% 42% 13%
Pacific
2% 1% −13% 0% 0% −13% −1% 10% 0%
ASEAN 3% 1% 12% 0% 1% 12% 13% 56% 23%
2% 1% −8% 0% 1% −8% −4% 7% 3%

Source: UN Comtrade (2009)

85
Shaw
 86
Table 4.3 Intraregional trade in the Western Hemisphere (1990–2009)

Regional Groupings 1990 1995 2000 2005 2008

Intraregional Exports (US$ millions)

Subregional bloca
NAFTA 220,115.00 378,709.06 649,126.80 759,272.51 933,605.12
Mercosur 1,699.00 14,451.00 17,727.00 21,138.00 41,587.00
CACM 561.00 1,677.00 2,927.00 4,368.00 5,903.00
CARICOM 350.00 769.00 1,330.00 2,488.00 4,013.00
% share of overall exports
Subregional bloc
NAFTA 42% 46% 56% 56% 49%
Mercosur 5% 21% 21% 13% 15%
CACM 25% 23% 25% 25% 28%
CARICOM 11% 16% 18% 19% 16%
Country
Argentina 33% 47% 48% 40% 39%
Bolivia 39% 36% 44% 66% 63%
Brazil 11% 23% 25% 23% 25%
Chile 13% 19% 22% 17% 17%
Costa Rica n/a 20% 19% 23% 26%
Ecuador 18% 22% 31% 30% 36%
El Salvador n/a 48% 61% 65% 66%
Guatemala n/a 40% 40% 37% 46%
Mexico 6 6% 4% 4% 7%
Peru n/a 17% 18% 21% 21%

Source: Comtrade (2009)

Note: a: intra sub-regional trade

Shaw
 Antoni Estevadeordal and Kati Suominen 87

future potential for intraregionalism. By deepening regionalism beyond

the development of intraregional production chains linked to integration
schemes, Latin America and the Caribbean should continue to reduce non-
tariff barriers, develop clearer rules, and foster greater legal certainty to
attract foreign investment (see ECLAC, 2007).

Journey towards hemispherism

The origins of hemispheric integration date back to the 1950s when the first
set of agreements were made under the Latin American Free Trade Association
(LAFTA). LAFTA focused on inward-looking protectionist schemes and support
import substitution policies being implemented by Latin American coun-
tries. Other earlier summits in the Western Hemisphere were convened
more than a generation ago, in the context of the Cold War in 1956 and
1967. These focused on the size and shape of US aid programmes and the
relationship between trade preferences and immediate security concerns
(see Feinberg, 1997). Since the Second World War, the intellectual climate and
objectives for hemispheric cooperation have shifted. Throughout the period
of ‘Old Regionalism’ – from 1950 to 1975 – regional agreements such as the
Andean Pact (1969) and the Caribbean Community and Common Market
(CARICOM, 1973) initiated the pathways for developing a common market,
but implementation was at times incomplete.
The debt crisis in the 1980s encouraged countries to replace import sub-
stitution and active state intervention. The US re-engaged the region with
a bipartisan consensus of promoting democracy. In the 1990s, about 15
countries (over a third in the region) turned democratic, and the hemisphere
moved decisively away from trade as aid towards adopting trade liberalization,
structural reforms, and privatizing state-owned enterprises.
The agreements of the ‘Old Regionalism’ were based on PTAs that focused
primarily on market access in goods and to locking-in open regulatory
regimes and tariff phase-outs. With the successful implementation of NAFTA
and the launch of hemispheric FTAA negotiations in 1994, Latin America
re-emerged into a period of ‘New Regionalism’ – exemplified by the launch
of Mercosur (1991), the Central American Common Market (CACM, 1991),
and North American Free Trade Agreement (NAFTA, 1992). Most recently,
11 Latin America countries are exploring methods and modalities for better
integrating themselves into a single bloc. Since the mid-1980s, unilateral
trade reforms by most LAC countries led to a sharp decline in average most
favoured nation (MFN) tariff rates, from 40 per cent to 10 per cent in 2000
(see Estevadeordal and Robertson, 2004).
Recent bilateral and regional PTAs in the Western Hemisphere are modelled
on NAFTA but include more comprehensive provisions for goods, services,
and investment; there are also increased provisions for means of beyond-
border integration, such as government procurement, intellectual property

Shaw
88 Economic Integration in the Americas

rights, competition policy, and dispute settlement mechanisms. Post-2002

PTAs include even deeper disciplines with greater transparency and economic
integration measures. For example, the Canada–Chile PTA includes provisions
to eliminate anti-dumping and substitute safeguard disciplines.
Today, LAC countries are increasingly focusing on trade with Asia. Exports
to Asia have doubled since 2005, to US$168 billion in 2008, with China dis-
placing Japan as the main trading partner with LAC (see Phillips, 2009). For
some Latin American countries, the Asia Pacific region represents a massive
market: nearly 36 per cent of Chile’s exports go to that region; the figure for
Peru and Costa Rica is about 24 per cent each. Chile and Peru have already
signed PTAs with China, in 2005 and 2008, respectively.

Historic turning points

1994 and the road to regional integration

Since the late 1970s, Latin America has undergone a process of political
transformation – from authoritarian to democratic regimes – which has
paralleled economic reforms. During the democratic transformation in the
region, which Huntington (1991) identified as part of the global ‘third wave’
of democratization, the number of democratic LAC countries increased from
three in early 1978 to 15 democracies or semi-democracies in 1992. After the
late 1990s, the pattern has been mixed, with some advances and setbacks,
but continues strongly.
The momentum towards building regional democracy and implementing
market-based policies reached its apex during the initiation of the FTAA process
at the Summit of the Americas (in Miami), December 1994. The FTAA negoti-
ations began in earnest in 1998. Unlike the previous Cold War era summits,
the 1994 Miami Summit provided a unique forum to establish a common
agenda for trade and social issues among democratically elected leaders in
the hemisphere. The US had a keen interest in integration, as evidenced by
NAFTA, the Enterprise for Americas Initiative (EAI), and NAFTA parity for
Central America and Caribbean countries. The Miami Summit renewed aspi-
rations for achieving hemispheric integration beyond post-Second World
War security pacts. Most were also implementing structural reforms and fiscal
responsibilities embodied in the ‘Washington Consensus’.5
Building on the Miami Summit, other institutional mechanisms to enforce
democratic norms emerged. In July 1996, presidents of the Mercosur countries –
Brazil, Argentina, Uruguay, Paraguay, Bolivia, and Chile – signed an agreement
stating that any member nation would be expelled if democracy broke down.
Pressure from neighbouring Mercosur nations initially helped thwart a coup
in Paraguay in April 1996 (see Hagopian and Mainwaring, 2005).
During this period, world trade also increased rapidly, due most notably to
the international General Agreement on Tariffs and Trade (GATT). By 1993, the
GATT Uruguay round was completed, which cut tariffs on goods and created

Shaw
 Antoni Estevadeordal and Kati Suominen 89

the World Trade Organization (WTO). The Uruguay round also made three
major changes to the rules of world trade by opening the process for negoti-
ating liberalization of the most heavily protected industries, agriculture and
textiles; expanding international trade rules to cover services; and introducing
new issues such as technical barriers to trade and intellectual property rights.
The FTAA negotiations were troubled, however. Although NAFTA illus-
trated the possibilities for economic integration between industrial and
developing economies, there were protectionist pressures and growing
tensions in the hemisphere. Negotiating positions over agricultural subsidies
and anti-dumping between countries of the Northern hemisphere and the
Southern hemisphere stalled discussions. The talks collapsed in 2003 in
the face of divergent interests and seemingly irreconcilable bargaining positions
between the main economies of the region: Brazil and the US.

New opening in 2002

The Uruguay round did not go as far as FTAs could go in areas such as dispute
settlement, competition, services, investment, and agriculture. This gave
impetus for the US and other nations to forge bilateral and regional agree-
ments to promote deeper, market-oriented reforms. The US Congress passed
the Trade Promotion Authority (TPA) in 2002, thus better equipping then
President George W. Bush to engage in ambitious trade negotiations. By
mid-2006, the US had completed or was negotiating with 11 LAC countries,
accounting for about 88 per cent of two-way trade.

Future scenarios

There are several new pathways for the future of trade integration in the
Americas to take: multilateralism, hub-and-spoke models, and regional con-
vergence to an FTAA-like agreement.

Multilateral scenario: WTO Doha round

In an increasingly integrated world, multilateral trade liberalization matters
more than ever. One of the key benefits of multilateral trade negotiations
is that the principle of ‘most-favoured-nation’ (MFN) applies, such that
any trade preference extended to one WTO member must be offered to all.
Under a successful conclusion of multilateral liberalization, firms every-
where could bypass overlapping preferential agreements and rules of origin
requirements. Multilateral negotiations would be optimal and prospects
are brightening in light of the December 2009 WTO ministerial to advance
agriculture and services talks.

Sub-regionalism scenario
By deepening sub-regional integration initiatives (such as Mercosur, NAFTA,
CACM and CARICOM), Latin American countries can consolidate regional

Shaw
90 Economic Integration in the Americas

trade preferences and move towards building a common market. CAFTA

provided a pragmatic alternative for convergence of disciplines and multi-
plicity of rules of origin, by cumulating rules of origin requirements in some
textile categories. In the case of Mercosur, consolidation into a customs union
as a bloc – including macroeconomic convergence and the dismantling of
exceptions in common external tariff (CET) and duties – would provide the
political commitment necessary to advance the Mercosur process. Mercosur is
the second largest customs union outside of the EU and seemed to epitomize
the ‘new regionalism’ in the 1990s, which was based on ‘open regionalism’
and shared development goals. The ARCO process is particularly advanced
and aspirations persist for better integrating South American countries.
However, there are still challenges. For example, since the Mercosur cus-
toms union agreement was signed in Ouro Preto in 1994, there have been
persistent tariff exceptions for both intra-zone zero tariffs and common
external tariffs. Trade figures in part reflect this. Intra-Mercosur exports in 2008
totalled just US$ 39.5 billion, or 14 per cent of global exports of the four
countries (down from 20% in 1999). By contrast, intra-NAFTA exports were
valued at about US$ 934 billion in 2008, and accounted for about 49 per
cent of total exports of the three countries that year. Within the Andean
Community (CAN), two of its founding members – Chile and Venezuela –
left the grouping in 1975 and 2006, respectively, because of disagreements
over trade and other issues. Recently, the four remaining full members
have adopted somewhat divergent positions over trade policy. There are
also inadequacies that need to be addressed in regional dispute settlement
mechanisms around Latin America and the Caribbean, as they can abet non-
tariff barriers (see Rosales et al., 2008).

Hub-and-spoke model
In this scenario, the US would serve as the hub, with other countries joining
as spokes in various bilateral PTAs. The US pioneered the idea of competi-
tive liberalization through bilateral and regional PTAs, beginning with trade
agreements with Israel and Canada in the 1980s, and Canada and Mexico
in 1994. US PTAs with Chile, CAFTA-DR, Panama, Andean-3, and continued
deepening integration in NAFTA, can help maintain momentum and establish
negotiating precedents for a broader regional agreement. For example, recent
studies have shown that preferential cuts in tariffs were often followed by
multilateral cuts in the same tariffs (see Estevadeordal, Freund and Ornelas,
2009). The potential drawback of pursuing PTAs is resulting complexity and
foregone scale economies across PTAs. Because of multiple negotiations there
would be overlapping regulatory standards and rules of origin requirements.

Convergence of agreements
A region-wide agreement would yield great economic benefits. It would
better link the major economies in North and South America, whose bilateral

Shaw
 Antoni Estevadeordal and Kati Suominen 91

trade – as projected by gravity models – could expand two or threefold in

response. One way to move towards a regional deal is through convergence
of PTAs – stitching existing PTAs together. The feasibility of such conver-
gence in the area of market access regimes among RTAs in the Americas is
rather substantial (see Estevadeordal and Suominen, 2009). Tariff elimina-
tion – the first precondition for effective convergence – is highly advanced
in the Americas and particularly in NAFTA members’ agreements. The
Mercosur–Andean agreements tariff elimination is also well under way. In
the area of rules of origin, the extent of compatibilities is high within PTA
families built around Mercosur, the US, and Mexico, respectively.
There are also already a number of initiatives seeking convergence that
are at different stages of discussion, such as the Latin America Free Trade
Area initiative (Espacio de Libre Comercio), an 11-country Pacific Basin
Forum formed in January 2007. The 14-country Pathways to Prosperity in the
Americas effort involving the US, Canada, and a dozen Latin American
countries6 also includes discussions on common trade issues. Five countries
of the Americas7 are also involved in convergence discussions in the Asia
Pacific Economic Cooperation (APEC) forum.
There are, of course, some hurdles. For instance, there would have to be an
agreement from Brazil to open its market to foreign competition in goods and
services. As well, the US would need to boost market access for Brazilian
agriculture and competitive manufactures. Any format going forward would
also have to reconcile the NAFTA model and customs union models. Third, as
in any trade negotiation, political pressures – motivated by protectionism
or ideological differences – would need to be overcome. But at the same
time, economic opportunities and joint gains provided by an Americas-wide
agreement are too important to be missed.

Beyond agreements

To date, there are more than 40 extra-regional PTAs being implemented,

negotiated or proposed. However, agreements are not enough. The lack of
adequate physical infrastructure and trade links between Latin American
countries has precluded closer trade integration. Although intraregional
trade posted double-digit growth in 2008 (about 19%), the rate of expan-
sion was slower than in previous years and considerably smaller than other
fast-growing regional economies, such as Asia (about 42%) or the European
Union (64%). Intraregional trade in LAC is lower than a decade ago, which
suggests it has not become an engine of growth as it has in Asia, where a
complex network of vertical supply chains contributed to robust growth of
intrafirm and intra-industry trade.
Experience in Latin America suggests that regional integration benefits
small and medium enterprises more than bilateral PTAs with developed
countries. However, unlike Asia, Latin America has yet to develop extensive

Shaw
92 Economic Integration in the Americas

and fluid integrated cross-country supply chains that would facilitate

competitiveness and provide small and medium-sized enterprises with an
indirect role in targeting industrialized markets.
This is a worthy issue to address. Regional integration in Asia has been
intensified through intra-industry and intra-firm trade. The Asia Pacific
region did not use the proliferation of PTAs to successfully integrate itself
with the world economy. Instead, domestic reforms and the expansion of
‘factory Asia’ supply networks helped boost intraregional trade, which has
grown by 10 per cent since 1990 to reach 42 per cent (compared with about
19%in Latin America).
Positively, there are now efforts to foster trade facilitation in the region.
In 2000, 12 South American8 countries launched the Initiative for the
Integration of Regional Infrastructure (IIRSA), which has developed 348
infrastructure projects across the region – covering transport, energy and
communications – requiring investment of at least US$ 38 billion. Beyond
building physical infrastructure, IIRSA also supports the harmonization of
regulation across the region and improvements in cross-border traffic. The
revival of the South American Community of Nations (UNASUR) and the
Meso-American Integration and Development Project, which stretches from
Mexico to Colombia and includes regional infrastructure and trade reform
are examples of Latin American cooperation in fields other than preferential
trade agreements. The Pacific Basin Forum initiative explores methods for
fuelling regional trade and investment. The US and Canada are participating
in the Pathways to Prosperity in the Americas initiative, which includes
technical capacity building for small businesses, investments in clean
energy, and development.

Conclusion: A future of vibrant, open regionalism

The financial instability caused by the global financial crisis places an onus
on common efforts to safeguard prosperity. One of the key means to guar-
anteeing growth and wellbeing is trade. In times of turmoil, exports have
served as a countercyclical force in hemispheric economies, propelling
growth and economic stability. Through good times and bad, trade has been
the anchor of our economies throughout the post-war era.
The current situation is important and calls not for recoiling and turning
our backs on liberalization, but for closer trade integration and liberaliza-
tion. In the area of trade the gains of hemispheric cooperation are perhaps
the most palpable and immediate. Some of the ideological and political
differences on trade and other issues could be resolved through trade and
integration. Connecting countries via trade would help to set the entire
region on a more prosperous plane and help ignite cooperation in other
areas. Since the 1990s, trade integration has fuelled hemispheric cooperation.
It has created trust, built cross-border networks of stakeholders, and developed

Shaw
 Antoni Estevadeordal and Kati Suominen 93

demands for further openness as well as interaction from cross-border

infrastructure projects to regional environmental protection and security
cooperation. Trade integration has also been integral for solidifying alliances
and the heady gains in democracy in this hemisphere.
Agreements are not enough in a world of fierce competition. The future
agenda has to span beyond agreements and include measures that facilitate
doing business across borders – improving customs, logistics, infrastructures,
as well as building relationships with consumers in foreign markets and
multinational firms (potentially major regional clients for LAC’s small and
medium-sized firms). Only then can the hard-earned integration of the past
two decades be fully harnessed for trade, growth, and development.

Notes
The views expressed are those of the authors and do not necessarily reflect the views
or policies of the institutions they represent.

1. These countries include Antigua and Barbuda, Argentina, Bahamas, Barbados,

Belize, Bolivia, Brazil, Chile, Colombia, Costa Rica, Dominica, the Dominican
Republic, Ecuador, El Salvador, Grenada, Guatemala, Guyana, Haiti, Honduras,
Jamaica, Mexico, Nicaragua, Panama, Paraguay, Peru, Saint Kitts and Nevis, Saint
Lucia, Saint Vincent and the Grenadines, Suriname, Trinidad and Tobago, Uruguay
and Venezuela.
2. In 2007, total exports of merchandise goods and services reached about US$850
billion; and total imports of merchandise goods and services was US$856 billion
(based on the WDI database, 2009).
3. Intraregional trade in Latin America and the Caribbean excludes the US and
Canada.
4. Based on latest year when trade figures are available (see Comtrade database, 2009).
5. The author of the phrase ‘Washington Consensus’, John Williamson, identified
ten key reforms that Latin America should have implemented in 1989: fiscal dis-
cipline, reordering public expenditure priorities, tax reform, liberalizing interest
rates, adopting a competitive exchange rate, liberalization of FDI, privatization,
deregulation, and property rights (see Williamson, 2002).
6. These are Chile, Colombia, Costa Rica, Dominican Republic, El Salvador,
Guatemala, Honduras, Mexico, Panama, Peru, and Uruguay.
7. These are the US, Canada, Mexico, Chile, and Peru (Estevadeordal and Suominen,
2009).
8. These are Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Guyana, Paraguay,
Peru, Suriname, Uruguay, and Venezuela.

References
ECLAC (2007) Latin America and the Caribbean in the World Economy.
Estevadeordal, Antoni and Raymond Robertson (2004) ‘From Distant Neighbors to
Close Partners: FTAA and the Pattern of Trade’ in A. Estevadeordal, D. Rodrik, A. M.
Taylor, and A. Velasco (eds) Integrating the Americas: FTAA and Beyond. Cambridge:
Harvard University Press.

Shaw
94 Economic Integration in the Americas

Estevadeordal, Antoni, Caroline Freund and Emanuel Ornelas (2008) ‘Does Regionalism
Affect Trade Liberalization Towards Non-Members?’ CEP Discussion Papers dp0868,
Centre for Economic Performance, LES.
Estevadeordal, Antoni and Kati Suominen (2009) Bridging Regional Trade Agreements in
the Americas, with Jeremy Harris and Matthew Shearer. Washington: Inter-American
Development Bank.
Feinberg, Richard E. (1997) Summitry in the Americas: A Progress Report. Washington,
DC: Institute for International Economics.
Hagopian, Frances and Scott P. Mainwaring (eds), (2005) The Third Wave of
Democratization in Latin America: Advances and Setbacks. Cambridge: Cambridge
University Press.
Huntington, Samuel (1991) The Third Wave: Democratization in the Late Twentieth
Century. Norman, OK: University of Oklahoma Press.
McKinney, Joseph A. and H. Stephen Gardner (eds), (2008) Economic Integration in the
Americas. New York: Routledge.
Phillips, Nicola (2009) ‘Coping with China’, in Andrew F. Cooper and Jorge Heine
(eds), Which Way Latin America? Hemispheric Politics Meets Globalization. Tokyo:
United Nations University Press, pp. 100–21.
Rosales, Osvaldo, and José. E. Durán Lima, Sebastián Sáez (2008) ‘Trends in Latin
American Integration’, in Joseph A. McKinney and H. Stephen Gardner (eds),
Economic Integration in the Americas. New York: Routledge.
United Nations (2009), United Nations Commodity Trade Statistics Database (UN
Comtrade), available at: http://comtrade.un.org/kb/.
World Bank (2009), WDI 2009, available at: http://data.worldbank.org/data-catalog/
world-development-indicators/wdi2009.

Shaw
5
Building on Sub-Regional Economic
Integration Projects to Forge an
Energy and Climate Partnership of
the Americas
Thomas Andrew O’Keefe

Introduction

By the time US President Barack Hussein Obama appeared at the Fifth

Summit of the Americas in Trinidad in April 2009, the ambitious initiative
to economically integrate the Americas that had previously dominated the
Summit of the Americas process lay in tatters. Accordingly, there was much
speculation as to what Obama would say in Port-of-Spain, especially given
that US relations with the Western Hemisphere had barely surfaced as a topic
of debate during the presidential campaign. The only policy address Obama
had given during the campaign on Latin America and the Caribbean was to
the right-wing Cuban American National Foundation in Miami, in May 2008.
That speech had focused almost exclusively on topics designed to attract
votes from the influential Cuban-American community in South Florida.
Obama’s performance at the Summit of the Americas was masterful, in that
he offered nothing of substance but still managed to charm his audience. By
telling the other heads of state that he was there to listen and learn from them,
he differentiated this summit from previous meetings of Western Hemisphere
leaders – where the US usually proposed an action plan that everyone else was
expected to implement with minimal debate.
At the margins of the 17–19 April 2009 summit, a US proposal to create an
Energy and Climate Partnership of the Americas was floated that coincided
with two of the summit’s three major themes (i.e. energy security and environ-
mental sustainability).1 Details as to what this partnership entailed were left
for a June 2009 meeting of energy ministers in the Peruvian capital.2
At the 15–16 June meeting in Lima, US Energy Secretary Steven Chu was
noticeably absent. Perhaps not surprisingly, the meeting concluded without
any firm commitments on energy security, alternative energy promotion, or
even common goals for confronting climate change. Among the few concrete
achievements was a bilateral agreement signed by US and Peruvian officials
to establish a Regional Energy Efficiency Center. For its part, the Mexican

95

Shaw
96 Energy and Climate Partnership for the Americas

government agreed to fund a Regional Wind Center. The US delegation also

proposed a ‘Low Carbon Communities Program’ by which the US Department
of Energy would ‘partner with countries in the region to provide technical assis-
tance and limited funding to develop building standards and adopt modern
urban planning strategies including transit-oriented development to achieve
low carbon communities’ (see Department of Energy, 2009). Besides being
presumptuous, given that many South American cities such as Bogotá in
Colombia and Curitiba in Brazil are already well ahead of their US counterparts
in substantially reducing carbon emissions, critics point out that this new effort
appears remarkably similar to the Clean Cities partnership first proposed by the
Clinton administration with Chile in 1999. That initiative was hampered by a
lack of funding. ‘Low Carbon Communities’ seems slated to meet the same fate.
Despite the pressing need to establish an Energy and Climate Partnership
of the Americas, the US will be unable to exert a leadership role during
much if not all of Obama’s first term in office. President Obama has spent a
lot of time addressing primarily domestic concerns. Upon taking office, he
inherited an economy that was in free fall with many major banks on the
verge of bankruptcy. Internationally, the country is involved in two costly
wars that are unlikely to result in a decisive military victory. Just over a third
of Americans either lack health insurance or are under-insured and one
catastrophic illness away from financial ruin. The country’s infrastructure
and public education system suffer from decades of under-investment and
threaten the ability of the US to remain globally competitive. As if these
problems were not enough, the Republican Party is engaged in a scorched
earth campaign to bring down the Obama presidency.3
Given the poor track record of previous hemispheric efforts to promote
energy and environmental cooperation as well as the current inability of the
US to take a strong leadership role in constructing a meaningful Energy and
Climate Partnership of the Americas, this chapter explores whether the differ-
ent sub-regional economic integration projects throughout the Americas can
serve as building blocks to subsequently buttress a hemisphere-wide initiative.
Under such a scenario, countries like Brazil, Canada, Trinidad and Tobago, and
Venezuela will have to assume a proactive leadership role within their respective
regions if there is to be a free flow of conventional fuels and alternative energy
resources as well as meaningful reductions in greenhouse gas emissions.

The Andean Community

In 2000 the Andean Commission – one of the supranational bodies within

the Andean Community that can issue new rules that are binding on all
its member states (currently Bolivia, Colombia, Ecuador, and Peru) – issued
Decision 536. Decision 536 seeks to establish a general framework for the
interconnection of electrical grids and the exchange of electricity among the
nations that make up the Andean Community.

Shaw
 Thomas Andrew O’Keefe 97

Decision 536 rests on a number of fundamental principles that are

currently applicable to Colombia, Ecuador, Peru and, as a result of Andean
Commission Decision 639, Bolivia (since 2006). These principles include:

1 A general prohibition on maintaining discriminatory prices for electricity

destined for the domestic market and directed to foreign markets, as well
as engaging in any other type of discriminatory practice related to the
demand or offer of electricity;
2 Guaranteeing free access to international interconnection lines;
3 Ensuring that the physical use of interconnections is based on a coordi-
nated, market-oriented, and economically rational approach;
4 Ensuring competitive conditions in the electricity market, with prices
and rates that reflect efficient economic costs, avoid discriminatory
practices, and abuse of dominant market position;
5 Allowing short-term international transactions for the sale or purchase of
electricity;
6 Promoting the participation of private investment in developing infrastruc-
ture for the transmission of electricity via international interconnections;
7 A prohibition on granting any type of subsidy for the export and import
of electricity, as well as imposing any type of import tariff or specific
restrictions on the import or export of electricity among the Andean
Community countries.

Decision 536 (as modified by Decision 639) also requires that Bolivia,
Colombia, Ecuador, and Peru coordinate efforts to build electrical inter-
connections between their respective national grids, establish a common
methodology for calculating the cost for using these interconnections, and
guarantee a fair price for access under short-term electricity contracts. The
four countries are also expected to make the necessary changes to their
domestic legal frameworks that will harmonize regulations related to the
use of the interconnections and the drafting of commercial contracts for
the purchase and sale of electricity. In order to facilitate the harmonization
effort and oversee implementation of the other goals established under
Decision 536, an Andean Committee of Regulatory and Legal Bodies for
Electricity Services was established.
Decision 557, issued by the Council of Andean Ministers of Foreign
Relations in June 2003, establishes a Council of Ministers of Energy, Electricity,
Hydrocarbons, and Mines of the Andean Community in order to ensure
adequate institutional support for all actions that may be required to assure
the regional integration of the energy sector.
Despite the existence of Decision 536 and its progeny, cross-border trade
in electricity within the Andean Community remains limited. In 2007, for
example, Colombia – considered the electricity powerhouse for the Andean
region – exported 877 gigawatt hours of electricity to Ecuador (out of a

Shaw
98 Energy and Climate Partnership for the Americas

total production of 54,551 gigawatt hours), less than what Brazil exported
to Argentina that year or what Argentina exported to Chile. Although
Colombia has in previous years exported to Ecuador about double the
amount of electricity it exported in 2007 (i.e. roughly 3% of the country’s
total electricity generation), Colombian exports to other Andean destinations
as well as electricity exported by other Andean Community nations within
the subregion have always been negligible.

CARICOM

Although there was much talk at the start of the twenty-first century about
developing a Common Caribbean Energy Policy, little substantive progress
has been achieved to date. This can be partially explained by the Petrocaribe
initiative launched by the Bolivarian Republic of Venezuela in 2005. Under
Petrocaribe, Venezuela agrees to supply a participating country with a set
volume of oil per day for domestic consumption. In return, the recipient
country must create a national oil company (if one does not already exist).
The amount of oil that Venezuela is willing to sell to the participating country
on credit is based upon the international market price for a barrel of oil at
the time of sale, which will also determine the number of years required for
full payment (i.e. the higher the price, the greater the amount sold on credit,
and the longer the payment period). In all cases, there is an initial grace period
of at least two years. Afterwards the interest rate on all outstanding balances
is either 1 or 2 per cent per annum (the exact interest rate again dependent
on the actual price of the barrel of oil). In addition, Venezuela is open to the
possibility of accepting partial payment with goods or services in lieu of cash.
To sweeten the attractiveness of participating in Petrocaribe, the Venezuelan
government has often promised to provide participating countries with
economic development grants that can be used to, among other things, build
storage facilities for imported petroleum shipments.
The Petrocaribe Energy Cooperation Agreements that all CARICOM member
states – with the notable exception of Barbados and Trinidad and Tobago –
have signed with Caracas, have shifted their traditional reliance on petroleum
imports away from Trinidad and towards Venezuela.4 Facilitating this move
has been the fact that Trinidad and Tobago eventually acquiesced in waiving
CARICOM’s 20 per cent Common External Tariff (CET) for oil imported from
Venezuela. The government in Port-of-Spain did so when Venezuela’s President
Hugo Chávez promised to utilize Trinidadian facilities to refine Venezuelan
crude oil bound for CARICOM countries that lack their own refineries. At
present only the Bahamas, Jamaica, and Suriname have refining capacity
(see Bryan, 2007, p. 381). Despite this promise, the loss in market share once
enjoyed by Trinidadian petroleum exports within the Caribbean market has
created internal CARICOM frictions.5 Petrocaribe has also undermined the
economic viability of constructing a 600-mile undersea natural gas pipeline

Shaw
 Thomas Andrew O’Keefe 99

from Tobago to Barbados and then on to St Lucia, Martinique, Dominica, and

Guadalupe.
Just as Petrocaribe has undermined efforts at energy integration within
CARICOM, it also threatens to do the same with respect to weaning the
Caribbean away from its traditional heavy reliance on imported oil to gener-
ate electricity and power vehicles. Some 93 per cent of CARICOM’s energy
consumption is currently fossil fuel-based, while only 4 per cent comes from
renewable energy. In addition to the negative environmental impact, this heavy
reliance on fossil fuels also strains fiscal accounts. While Petrocaribe provides
temporary relief, it does nothing to free most CARICOM countries – already
among the most heavily indebted nations in the world on a debt-to-GDP
basis – from incurring more debt (Bryan, 2007, p. 381).
Among the specific initiatives that Petrocaribe has the potential to under-
mine is the Caribbean Renewable Energy Development Project (CREDP),
launched in 1998. CREDP aims to assist Caribbean countries (including
Cuba but currently excluding Antigua and Barbuda, Montserrat, and Haiti) to
remove policy, financial, and technical barriers to the increased use of renew-
able energy resources,6 thereby helping to reduce implementation costs,
dependency on fossil fuels, and greenhouse gas emissions. Linked to CREDP
is a US$1.6 million Caribbean Renewable Energy Technical Assistance Facility
designed to provide early-stage, high-risk financing for qualified projects, as
well as a Caribbean Renewable Energy Fund that (once capitalized) will
provide equity and debt financing for renewable energy projects.
Another at-risk initiative is the Caribbean Sustainable Energy Project (CSEP)
that is being implemented by the Organization of American States (OAS)
with input from, inter alia, the Caribbean Energy Utility Services Corporation
(CARILEC) and CREDP. CSEP is designed to accelerate the transition to cleaner,
more sustainable energy use (both in terms of renewable energy resources and
enhanced energy efficiency) in seven of the smallest CARICOM countries
(i.e. Antigua and Barbuda, the Bahamas, Dominica, Grenada, St Kitts and Nevis,
St Lucia, and St Vincent and the Grenadines). CSEP provides the funding
necessary to meet the mandate established by the CARICOM Secretariat’s
Energy Programme: by 2010 at least 10 per cent of the energy matrix in all
CARICOM countries must consist of renewable energy. In particular, CSEP
seeks to implement energy-sector policy and regulatory reforms that will:
favour sustainable energy; provide training to public officials, electric utility
personnel, and large consumers; establish national sustainable energy offices
in the appropriate energy ministries as well as a regional coordination office;
and facilitate efforts to obtain required project financing.

The Central American Integration System (SICA)

During the 1990s the Inter-American Development Bank financed the

interconnection of the national energy grids of Costa Rica, El Salvador,

Shaw
100 Energy and Climate Partnership for the Americas

Guatemala, Honduras, Nicaragua, and Panama at a cost of half a billion dollars.

The completion of this interconnection effort improved the reliability of
service and reduced consumer rates throughout the isthmus. The country
that most benefited was Honduras, which had previously been plagued by
constant power outages that disrupted industrial production and reduced
the country’s attractiveness as a locale for foreign investors to set up manu-
facturing facilities.
As a result of the interconnection of all the Central American electricity
grids, a Regional Electricity Market or Mercado Eléctrico Regional (MER) was
established following the entry into force of the Framework Treaty on the
Electricity Market of Central America in January 1999. The Framework Treaty
(and two subsequent protocols) opens the domestic markets of the six Central
American countries to regional operators with respect to the generation, trans-
mission, as well as the sale and purchase of electricity. The second protocol to
the Framework Treaty establishes general regulations for the regional electricity
market. Two institutions with supranational authority were also established
to oversee this regional electricity market: the Regional Commission on
Electricity Interconnection or Comisión Regional de Interconexión Eléctrica
(CRIE), and the Regional Operating Authority or Ente Operador Regional
(EOR). The CRIE is tasked with ensuring that the governments fulfil the com-
mitments made in the 1999 Framework Treaty and subsequent regulations,
while the EOR oversees actual operations of the electrical interconnections
and directs surplus energy flows to where they are most needed.
The Framework Treaty on the Electricity Market of Central America also
authorized the establishment of a new company that could either be a wholly
state-owned entity or a mixed public-private sector enterprise to build and
operate a single 1800-km transmission line stretching from Guatemala to
Panama. This single transmission line is called the Electrical Interconnection
System for the Countries of Central America or Sistema de Interconexión
Eléctrica para los Países de América Central (SIEPAC). The new company that
is supposed to operate SIEPAC is the Empresa Propietaria de la Red (EPR). The
basic idea behind SIEPAC is that a seamless transmission line operating at
the same electrical current will enhance the reliability of electrical flows and
be less prone to bottlenecks than the system operating since 1999, which
relies on bilateral interconnections at border crossings. There are already
discussions about linking SIEPAC to the Colombian electricity grid, which
predominantly relies on hydropower. Construction of SIEPAC began in April
2007 and should be fully operational by 2010.
The existence of two supranational institutions in Central America to over-
see the smooth functioning of the regional electrical grid and electricity market
has not, by itself, resulted in one seamless regional electricity market. To date,
cross-border trade of electricity remains minimal as national governments
appear reluctant to encourage supply contracts that involve international sales
of electrical power if it requires waiving the right to adequately ensure that

Shaw
 Thomas Andrew O’Keefe 101

domestic needs are first met.7 This apprehension could change once SIEPAC’s
single transmission line becomes fully operational.
Another deficiency of the current Central American system is its high
dependency on fossil fuels to generate electricity and the detrimental
impact this has on global efforts to redress climate change. Ironically this
phenomenon responds to the widespread privatization of electricity genera-
tion in individual Central American countries throughout the 1990s. Private-
sector firms tend to opt for projects that have shorter gestation periods in
order to more quickly recoup profits on the initial investment. Accordingly,
electricity generation based on fossil fuels has been favoured in Central
America because the initial capital investment cost is anywhere from half
to two-thirds less than for most hydropower equivalents (see Center for
International Governance Innovation, 2009, p. 11).

Mercosur

In 1998 Mercosur’s highest institutional body, the Common Market Council,

issued Decision 10/98, which contains a Memorandum of Understanding
(MOU) Related to the Exchange and Integration of Electricity in the Mercosur.
Under the MOU, the Argentine, Brazilian, Paraguayan, and Uruguayan govern-
ments committed themselves to ensuring the existence of a competitive,
transparent, and non-discriminatory environment for the generation and
intra-Mercosur trade of electricity. In particular, the four countries agreed
to: not provide subsidies or set rates that do not reflect true economic costs;
permit distributors, wholesalers, or large end-users to freely enter into con-
tracts to meet their electricity needs within any of their territories and not
impose restrictions on the fulfilment of legally sound contracts; establish a
fully transparent online system that permits the rapid flow of real-time data
and other information on the availability of electricity so as to facilitate
cross-border sales; and, ensure free access, at pre-established rates and with-
out regard to nationality or final destination, to any spare capacity for the
transmission and distribution of electricity both domestically and through
international interconnections.
In 1999 the Common Market Council (CMC) issued Decision 10/99
which contains a MOU with respect to the Exchange of Natural Gas and
Integration of the Natural Gas Sector among the Mercosur Member States.
This second MOU on the natural gas sector prohibits the use of discrimina-
tory policies that may favour buyers over sellers or vice versa, and practices
such as subsidies that distort market prices for the transport, distribution, or
the warehousing of natural gas. There are also requirements that domestic
regulations must be drafted so as to guarantee the free import of natural
gas; as well, distributors, wholesalers, and large end-users must be allowed
to purchase the amount of natural gas they need. In addition, governments
should respect executed cross-border sales contracts that comply with

Shaw
102 Energy and Climate Partnership for the Americas

local law and should not impose additional terms that are not required for
transactions involving purely domestic parties. Furthermore, governments
should not discriminate on the basis of nationality, public or private-sector
status of the firm, or the final destination of natural gas in granting access
to excess pipeline capacity nor in what is charged for use of those pipelines.
Governments should also promote transparent methods for communicating
data and information on the natural gas markets, pipeline capacity, and past
transaction history. Finally, there is an obligation to protect consumers from
monopolies, oligopolies, or other abusive practices that may arise when a
company dominates the local market, as well as from bad service.
Unfortunately, CMC Decisions 10/98 and 10/99 have joined the huge back-
log of Decisions, Resolutions, and Directives issued by Mercosur’s institutional
bodies over the years that have never been ratified by all four member states.
Accordingly, neither of these two Decisions are enforceable legal obligations.
In any event, Argentina may already have been in violation of Decision
10/99 when it was signed, as a single company (i.e. the formerly state-owned
Yacimientos Petrolíferos Fiscales or YPF) already controlled at least 60 per cent
of Argentine natural gas production and 80 per cent of the country’s natural
gas sales. A high level of reserves in the hands of one company can act as a
barrier to the entry of potential competitors and prevents existing producers
from increasing their share of sales by lowering prices because the dominant
company can agree with large customers to meet the competition’s lower
prices, a practice that YPF engaged in throughout the 1990s (see Bonderovsky
and Petrecolla, 2002, pp. 110, 114).
The policies that successive Argentine governments have followed since the
country’s economic implosion of 2001–2 are clearly incompatible with
the provisions contained in both Mercosur Decisions on electricity and
natural gas. For example, since 2004 the Argentine government has severely
disrupted natural gas exports to Brazil, Chile, and Uruguay in favour of
domestic users. In March 2005, the Argentine government even balked at a
Brazilian request to purchase Argentine electricity that would be funnelled
through the conversion plants in Garabí (just over the border in the Brazilian
State of Rio Grande do Sul). It was only after Brasilia reminded its counter-
parts in Buenos Aires that it might adopt a similarly truculent attitude if
Argentina ever needed electricity later in the year, during its peak-demand
winter season, that Argentina backed down.

The North American Energy Working Group (NAEWG)/Security

and Prosperity Partnership (SPP)

The North America Free Trade Agreement (NAFTA) has had a direct impact
on the energy sector in Canada, Mexico, and the US. The countries are
prohibited from levying export taxes on energy goods (including oil and
natural gas) or charging a higher price for them than they are sold for in

Shaw
 Thomas Andrew O’Keefe 103

the domestic market. Furthermore, Canada and the US are also required to
maintain energy shipments to each other at the same proportion vis-à-vis
domestic sales as during the preceding three years regardless of any global
energy crisis that might otherwise serve as an excuse to interrupt supplies
(see Johnson, 1994, pp. 114–5, 206).8 NAFTA Section 606(2) also obliges the
Federal governments in Canada, Mexico, and the US to ‘seek to ensure’ that
regulatory bodies within their national territory avoid disrupting contractual
relationships when applying energy measures.
Mexico specifically exempted itself from NAFTA provisions, otherwise
applicable to Canada and the US, that allow private or foreign participation
in the exploration, production, and refining of oil and natural gas. However,
Mexico permits limited participation in the transport and distribution of
natural gas as well as in the generation, cross-border transmission, and sale of
electricity by investors from Canada or the US (ibid., pp. 312–13).9 In doing
so, investors from Canada and the US are protected by NAFTA’s investment
provisions (including its separate dispute resolution mechanism). Similarly,
the Multi-Service Contracts – used by PEMEX since the late 1990s to attract
private participation in its hydrocarbon industry by paying private firms a set
fee for defined exploration and drilling work – are subject to NAFTA’s govern-
ment procurement provisions when the firms are from Canada or the US.
Building on the precedent for trilateral energy cooperation established by
the NAFTA, a North American Energy Working Group (NAEWG) was estab-
lished in 2001 with mid-level officials (as opposed to cabinet level represen-
tatives) from Canada, Mexico, and the US. An ad hoc subgroup of experts
was also established to collect statistics and advise the NAEWG on matters
directly related to electricity, energy efficiency, hydrocarbons in general,
natural gas trade and interconnections, nuclear power, oil sands, energy
regulation, and science and technology. The primary goal of the NAEWG was
to enhance the sharing of information among the three governments so as
to improve cross-border trade in energy. Although the NAEWG established
agreements on conservation programmes and efficiency targets for a variety
of equipment and appliances, some observers feel that its effectiveness was
undermined by excessive secrecy and a generalized failure to include private-
sector input (Dukert, 2007, pp. 134, 152).
In 2005 the heads of state of Canada, Mexico, and the US met in Waco,
Texas and launched the Security and Prosperity Partnership (SPP). The
NAEWG was folded into the SPP as its working group on energy issues.10 In
addition, senior-level officials with direct responsibility for their country’s
energy portfolio would now represent each government on NAEWG. In
response to the criticism levelled at the old NAEWG, the working groups
under the SPP are required to regularly consult ‘stakeholders’ including state
and provincial government officials, the private sector, and non-governmental
organizations. Since it was folded into the SPP, the biggest success story of
the NAEWG has been the development of an adequate system of receiving

Shaw
104 Energy and Climate Partnership for the Americas

facilities for Liquefied Natural Gas (LNG) and supporting infrastructure for
LNG distribution in re-gasified form, as well as the harmonization of rules for
the licensing, issuing of permits, and oversight of the energy sector (ibid.,
pp. 152–3). The more important SPP mandate for designing a common policy
framework for energy issues in North America, however, remains hamstrung
by internal Mexican political constraints that prevent that country’s federal
government from opening its hydrocarbons sector to private enterprise or
eliminating price controls that subsidize consumer petroleum purchases.11
At the North American Leaders Summit in Guadalajara on 9–10 August
2009, Presidents Obama of the US and Felipe Calderón of Mexico along with
Prime Minister Stephen Harper of Canada announced a number of energy
and climate change-related initiatives, including a North American Carbon
Capture and Storage Partnership,12 trilateral efforts to reduce unnecessary
natural gas flaring, enhanced collaboration in devising a harmonized frame-
work on energy efficiency standards, and cooperation in the research and
development of clean energies (including devising smart grid inter-operability
standards). By far the most interesting development, however, was the deci-
sion by the three governments to continue working on energy-related issues
within the SPP framework given previous criticism in Canada and the US
about its alleged democratic oversight deficiencies.
In addition to the initiatives arising under the NAEWG/SPP, Canada
and the US are also engaged in a Clean Energy Dialogue launched when
President Obama visited Ottawa in February 2009.13 This bilateral initiative
produced an Action Plan in September 2009 which calls for a number of
joint efforts related to carbon capture and storage, expanding and modern-
izing the cross-border electricity grid through, inter alia, use of smart grid
technologies and greening the electricity supply, and clean energy research
and development. Among the specific collaborative projects proposed for
immediate launching are those related to sustainable bioenergy, lifecycle
analysis, production of biofuels using algae and mountain-pine-beetle-killed
trees, development of lightweight materials for vehicles, and tools optimizing
energy efficiency.

Overcoming Brazilian and Venezuelan reticence to an energy

and climate partnership of the Americas

Focusing initial efforts to enhance energy cooperation and confront climate

change at the regional rather than the hemispheric level increases the like-
lihood that concrete results can be achieved given the smaller number of
governments involved. It also gets around some of the political limitations
that currently make doing anything at the hemispheric level extremely
difficult if not impossible. The most obvious examples of potential bottlenecks
to a hemispheric accord are Venezuela, with respect to energy, and Brazil, in
terms of climate change.

Shaw
 Thomas Andrew O’Keefe 105

Venezuelan participation in an Energy and Climate Partnership of the

Americas is crucial. Not only is it among the world’s most important sources
of crude oil, but Venezuela’s creation of Petrocaribe has disrupted traditional
energy supply patterns within CARICOM and threatens to undermine efforts
to move the Caribbean away from its heavy reliance on fossil fuels in favour
of alternative energy. By building the Energy and Climate Partnership of the
Americas at the regional level first, this increases the possibility that Venezuela
will participate. Otherwise, pushing for a hemisphere-wide initiative at the
outset will be attacked as an effort by the US to further its own hegemonic
interests.
An Energy and Climate Partnership of the Americas that includes a
Clean Development Mechanism (CDM) similar to the current multilateral
version that arises from the Kyoto Protocol would be an important means of
addressing global climate change. Under the CDM, credits can be issued to a
developed country and its companies in exchange for financing projects in
the developing world (e.g. building a more expensive thermal plant fuelled
by natural gas or a hydroelectric dam instead of a cheaper coal-powered
plant) that ultimately reduce global greenhouse gas emissions. The credits
received through the CDM are then used to offset mandated emission reduc-
tion targets at home.
Unlike the multilateral CDM, a hemispheric version would be less suscep-
tible to the type of fraud that plagues the current UN-administered system.14
This is not only because of the smaller number of countries involved, but also
because of the plethora of potential institutions in the Western Hemisphere
that can more effectively oversee and/or administer a hemispheric cap-and-
trade programme. For example, the Andean Development Corporation (CAF)
has already developed a Latin American carbon market through the registra-
tion and issuance of certified reductions in the transport sector. The CAF
has also signed contracts for carbon emission sales with public and private
agencies (including Spain’s Ibero-American Carbon Initiative) and investment
funds resulting in new energy generation facilities using renewable resources,
forestry-related activities, and an expansion of biofuels production.
A CDM limited to the Western Hemisphere provides a way to move the
Caribbean and Central America away from their traditional heavy reliance
on fossil fuels. It also provides a way to sharply diminish Brazil’s role as a
top source of global carbon emissions and preserve the Amazon as a natural
carbon sequestration mechanism.
In contrast to the situation in China or the developed world, the bulk of
Brazil’s greenhouse gas emissions come from the burning of its tropical rain
forests. The continued burning of trees in Brazil, home to 65 per cent of the
Amazon rainforest, also exacerbates global climate change given the important
role the Amazon plays in sequestering greenhouse gases and its impact on
regional rainfall patterns. While forest conservation or reforestation projects
can be used to obtain carbon offsets under the multilateral CDM, Brazil has so

Shaw
106 Energy and Climate Partnership for the Americas

far refused to permit any type of Amazonian conservation or sustainable-use

initiative to generate carbon credits. Brazil will likely resist any effort to utilize
projects in the Amazon to gain carbon offsets under a CDM limited to the
Western Hemisphere as well. However, Brazil is less likely to resist a carbon-off-
set programme that is regional in scope and administered by an entity Brasilia
feels it has more ability to influence.
If a regional CDM process proves successful, a Brazilian government
may then be more amenable to its expansion to encompass the rest of the
Americas. The chances for Brazilian acceptance of a hemispheric mechanism
will be further enhanced if – as part of a grand bargain leading to the establish-
ment of an Energy and Climate Partnership of the Americas – the US agrees to
eliminate its current arsenal of tariffs, hefty surcharges, quota restrictions, and
subsidies that effectively keep out Brazilian sugar-based ethanol.

Using regional projects as building blocks for an eventual

energy and climate partnership of the Americas

While it should be clear by now why developing a framework for enhancing

energy cooperation and controlling greenhouse gas emissions is more likely
to initially succeed at the regional level rather than any effort that imme-
diately tries to encompass the entire Western Hemisphere, less obvious is
which existing regional projects can be utilized to establish this framework.
The high level of energy integration already achieved within North
America, as well as the emphasis given in both the NAEWG/SPP and the
bilateral Clean Energy Dialogue to addressing climate change, offers an exist-
ing regional structure that can be used as a building block for a hemispheric
initiative.15 Because of the pressing foreign policy and domestic problems
confronting the Obama administration, however, Canada will have to take
a leading role in developing a framework for ensuring the free flow of
traditional and alternative energy resources and establishing a workable North
American CDM. Ideally, Mexico should also be taking a leadership role, but
this is impossible so long as the Mexican government is unable to move
away from anachronistic, counterproductive policies that are contributing
to a sharp reduction in Mexican reserves.16
CARICOM and SICA also offer two existing regional groupings within
which to develop a framework that can later be incorporated into a hemi-
spheric energy cooperation and climate change initiative. The fact that
Trinidad and Tobago has large oil and natural gas reserves and major refining
facilities makes it the most credible country to take on a leadership mantle
within CARICOM. While there is no energy powerhouse within SICA that
can assume a similar leadership role, the Central American governments
have shown an ability to work together to resolve energy bottlenecks,
particularly when prodded by generous foreign donors. In addition, the Central
American Bank for Economic Integration has a number of credit programmes

Shaw
 Thomas Andrew O’Keefe 107

in place that work with micro as well as small and medium-sized enterprises
to enhance energy efficiency and encourage greater use of renewable energy
resources.
Using the Andean Community to serve as a regional stepping stone in the
construction of an Energy and Climate Change Partnership of the Americas
is unlikely to bear much fruit. For one thing, the trade bloc is riddled with
serious internal cleavages (between Bolivia and Ecuador on the one hand,
and Colombia and Peru on the other) regarding the most appropriate poli-
cies for achieving economic development and interacting with the global
marketplace. The withdrawal of Venezuela from the Andean Community in
2006 also diminishes the usefulness of working through this economic inte-
gration project. Furthermore, the Andean Community’s impact on integrating
the energy sector regionally has been minimal. For its part, Mercosur has
shown itself incapable of providing a minimum of energy security within
the Southern Cone. Accordingly, in the case of South America, it makes
better sense to use the Unión de Naciones Suramericanas (UNASUR) as the
regional grouping around which to build an energy cooperation and climate
change framework that can later be incorporated into a hemispheric effort.
Officially launched in May 2008, UNASUR seeks to integrate South
American energy markets and address climate change issues. UNASUR also
supports initiatives to develop alternative and renewable sources of energy
and promote the efficient use of all types of fuels. A big advantage of working
through UNASUR is that Brazil and Venezuela are both active members.
Another advantage is that UNASUR includes two CARICOM member states:
Guyana and Suriname. This link can be used to coordinate efforts at energy
and environmental cooperation among both regional groupings.

Conclusion

The golden era of inter-American cooperation was the 1990s. An important

explanation lay in the fact that most governments in the Western Hemisphere
had already adopted or were rushing to implement market-friendly economic
reforms that included dismantling high import barriers. This was encouraged
by the collapse of the Soviet Union and a widespread feeling throughout Latin
America that it stood to lose out to competition with the old Soviet bloc in
the race to secure foreign investment capital if it did carry out these reforms.
Under such a scenario, the creation of a Free Trade Area of the Americas
complemented what many governments were attempting to achieve at the
domestic level.
By the start of the twenty-first century, the inter-American consensus on
economic and trade policy began to collapse. The failure of some governments
to continue the economic reform process beyond the narrow Washington
Consensus mandates focused on fiscal discipline exacerbated wealth concen-
tration in societies with already high levels of income inequality. New leaders

Shaw
108 Energy and Climate Partnership for the Americas

like Hugo Chávez in Venezuela, Evo Morales in Bolivia, and Rafael Correa in
Ecuador emerged to challenge purely market-oriented models as incompatible
with sustainable economic development. Further poisoning the atmosphere
was a Bush White House that continuously disregarded international law and
even invaded a sovereign nation, reviving memories of an imperialistic US
plaguing its southern neighbours with frequent interventions under the guise
of promoting ‘freedom’.
Developing and subsequently facilitating trade in renewable energy resources,
ensuring reliable access to conventional fuels, and reducing the harmful impact
of greenhouse gas emissions is probably one of the few areas where a consensus
can be achieved among the governments in the Western Hemisphere today.
For reasons previously explained in more detail, however, the Obama admin-
istration is beset by pressing foreign and domestic crises that prevent it from
taking the lead in forging a hemispheric initiative that would ensure all three
objectives. Further complicating matters is the fact that governments in the
Americas are no longer united around a single economic vision as may have
been the case in the 1990s. Hence actual or potential energy power houses like
Brazil, Canada, Trinidad and Tobago, and Venezuela are going to have to take
up the leadership mantle within their own respective regions if the concept of
an Energy and Climate Partnership of the Americas is ever to prosper.

Notes
1. Although the high prominence given to energy and the environment at the Fifth
Summit of the Americas in Port-of-Spain was new, both issues had previously
appeared on the official agendas of the first three Summits as well as a Special
Summit on Sustainable Development held in Santa Cruz, Bolivia in December 1996.
For example, the Plan of Action issued at the First Summit of the Americas in Miami
acknowledged that ‘[s]ustainable economic development requires hemispheric coop-
eration in the field of energy’ and launched a Partnership for Sustainable Energy
Use, a Partnership for Biodiversity, and a Partnership for Pollution Prevention.
Based on the mandates of the 1994 Miami Summit, a Hemispheric Energy Initiative
focused on the regional integration of energy markets and developing policies to
facilitate private-sector investment in the energy sector was formally launched in
1995. By 2002, the three partnerships as well as the Hemispheric Energy Initiative
had collapsed into oblivion.
2. A press release put out by the White House on 19 April 2009 noted only that
‘President Obama invited countries of the region to participate in an Energy and
Climate Partnership of the Americas; a voluntary and flexible framework for advanc-
ing energy security and combating climate change’.
3. The Obama White House also needs to resolve a turf battle between the State
Department and the Department of Energy as to which agency will have primary
jurisdiction over international energy cooperation and climate change initiatives.
4. The current 15 CARICOM member states include: Antigua and Barbuda, the
Bahamas, Barbados, Belize, Dominica, Grenada, Guyana, Haiti, Jamaica, Montserrat,
St Kitts and Nevis, St Lucia, St Vincent and the Grenadines, Suriname, and Trinidad
and Tobago.

Shaw
 Thomas Andrew O’Keefe 109

5. One veiled threat initially made by Trinidad’s Prime Minister Patrick Manning to
persuade CARICOM member states not to sign on to Petrocaribe was the sugges-
tion that if they did, his country would be forced to seek extra-regional markets
and ‘guarantees could not be offered to countries attempting to resume buying
oil and petroleum products from T&T if the Petrocaribe arrangement eventually
faltered’ (Bryan, 2007, pp. 383–4).
6. Renewable energy resources include: wind, hydro, biomass (including bagasse
and other agricultural residues, landfill gas, solid waste, and cellulose), biofuels
(including ethanol and bio-diesel), solar energy, and geo-thermal.
7. Cross-border trade in electricity in 2007 represented less than 1 per cent of total
available supply in Central America (see Center for International Governance
Innovation, 2009, pp. 10, 12).
8. From 1973 to 1980, Canadian exports of crude oil to the US were significantly
reduced without any domestic cutbacks. (ibid., pp. 206). As a result of the NAFTA,
Canada can now only reduce shipments to the US in proportion to domestic
cutbacks. Mexico specifically exempted itself in the NAFTA from making any pro-
portionality commitments with respect to trade in energy and basic petrochemical
goods with either Canada or the US.
9. In general, the generation of electricity by foreign investors must be for their
own use (with any excess sold to the Mexican state electricity monopoly CFE), as
part of a co-generation arrangement with CFE, or strictly for export. Interestingly,
the exploitation of radioactive minerals and the generation of nuclear energy in
Mexico are also reserved for the state.
10. Other working groups under the SPP were entrusted with looking at business
facilitation, electronic commerce, environmental issues, financial services, food
and agriculture, manufactured goods, rules of origin, and transport.
11. Recent Mexican presidents have not been able to amend Mexico’s Constitution,
which puts ownership of the country’s hydrocarbons exclusively in the Mexican
nation since the petroleum industry was nationalized in 1938. To pass a constitu-
tional amendment requires two-thirds of the votes of the federal congress as well
as a two-thirds vote in each of the state legislatures (Morales, 2007, p. 26). Attempts
to get around constitutional restrictions by permitting joint ventures or strategic
alliances with private-sector companies have been systematically blocked as well.
12. As a result of this initiative, the three governments have agreed to produce a North
American Carbon Atlas that will result in uniform mapping methodology data sharing
with respect to major sources of carbon emissions and potential storage sites.
13. Following Obama’s visit, three bilateral government working groups were formed
to identify key opportunities for joint collaboration in: developing and deploying
clean energy technologies; building a more efficient electric grid based on clean and
renewable generation; and expanding clean-energy research and development.
14. Research conducted by two Stanford University law professors in 2008 found
that a large fraction of the credits generated under the CDM did not represent
genuine reductions in greenhouse gas emissions as many projects that ‘reduce’
emissions would have been built anyway and at a far lower cost as well. Even
worse, the CDM creates perverse incentives for developing countries to increase
carbon emissions as a way of generating CDM credits that can then be offered to
developed nations desperate to find offsets for their pollution-inducing activities
(see Wara and Victor, 2008).
15. Canada and Mexico are the two top sources of US petroleum imports. Canada and
the United States swap more electricity in a typical year than some South American
countries produce. In fact, the electricity grids in some Canadian provinces are

Shaw
110 Energy and Climate Partnership for the Americas

actually synchronized with those in US states, rather than with adjacent prov-
inces (Dukert, 2007, p. 136).
16. This may also explain why the US is pursuing the Clean Energy Dialogue with
Canada despite the fact that the objectives and programmes of this bilateral ini-
tiative are almost identical to those supposedly being pursued trilaterally under
the SPP.

References
Beato, Paulina and Jean Jacques Laffont (eds) (2002) Competition Policy in Regulated
Industries: Approaches for Emerging Economies. Washington, DC: Inter-American
Development Bank.
Bonderovsky, Diego and Diego Petrecolla (2002) ‘Argentina’s Natural Gas Markets:
Antitrust and Regional Integration Issues’, in Paulina Beato and Jean Jacques Lafont
(eds) Competition Policy in Regulated Industries: Approaches for Emerging Economies.
Washington, DC: Inter-American Development Bank.
Bryan, Anthony T. (2007) ‘Trinidad and Tobago,’ in Sidney Weintraub (ed.) Energy
Cooperation in the Western Hemisphere: Benefits and Impediments. Washington, DC:
The CSIS Press.
Center for International Governance Innovation (2009) Blueprint for a Sustainable
Energy Partnership for the Americas. Waterloo, ON: CIGI, 2009.
Department of Energy (2009) Department of Energy Press Release, 16 June. Available
at: http://www.energy.gov/news/7468.htm.
Dukert, Joseph M. (2007) ‘North America’, in Sidney Weintraub (ed.) Energy Cooperation
in the Western Hemisphere: Benefits and Impediments. Washington, DC: The CSIS Press.
Johnson, Jon R. (1994) The North American Free Trade Agreement: A Comprehensive
Guide. Aurora: Canada Law Book, Inc.
Morales, Isidro (2007) ‘The Politics of Energy Markets in North America: Challenges and
Prospects for a Continental Partnership’, in Isabel Studer and Carol Wise (eds) Requiem
or Revival: The Promise of North American Integration. Washington, DC: Brookings
Institution Press.
Studer, Isabel and Carol Wise (eds) (2007) Requiem or Revival: The Promise of North
American Integration. Washington, DC: Brookings Institution Press.
Wara, Michael and David G. Victor (2008) ‘A Realistic Policy on International Carbon
Offsets’. Program on Energy and Sustainable Development Working Paper # 74. Palo Alto:
Freeman Spogli Institute for International Studies, Stanford University. Available
at http://fsi.stanford.edu/publications/a_realistic_policy_on_international_carbon_
offsets/.

Shaw
6
Demise of the Inter-American
Democracy Promotion Regime?
Thomas Legler

During the 1990s, the member states of the OAS constructed a new regime
to protect democracy from threats of authoritarian reversals. The foundation
of the regime was a set of international legal pillars, including the Protocolo
de Cartagena de Indias (1985), Resolution 1080, the Washington Protocol
(1992/1997) and the Inter-American Democratic Charter (IADC, 2001). It was
put to the test on numerous occasions with varying results: Bolivia (2003,
2005, 2008), Ecuador (1997, 2000, 2005), Guatemala (1993), Haiti (1991–4,
2000–5), Nicaragua (2005), Paraguay (1996, 1999), Peru (1992, 2000), and,
Venezuela (1992, 2002).
Recent developments in the Americas may call into question the future of
the inter-American democracy promotion regime. Democracy no longer seems
a membership requirement for participating in a number of the region’s new
and existing multilateral forums. Despite the persistence of its authoritarian
regime, Cuba has become a member of the Rio Group, the Latin American
and Caribbean Summit (CALC), and the Community of Latin American and
Caribbean States. In 2009, a sizeable number of Latin American and Caribbean
member states pushed for Cuba’s reintegration into the OAS and the Summits
of the Americas. Even though provisions exist in the Democratic Charter, the
OAS has also been unable and/or unwilling to respond adequately to repeated
instances of ‘authoritarian backsliding’ by member state governments,
including at various moments Ecuador, Nicaragua, and Venezuela. Until the
Honduran coup d’état in June 2009, the OAS encountered considerable diffi-
culty in invoking the Inter-American Democratic Charter (IADC) either to pre-
vent or respond to political crises where democracy was clearly under threat. In
the case of Honduras, in spite of unprecedented international condemnation,
isolation, and sanctions, the OAS and the international community failed to
overturn the 28 June coup and restore ousted President Manuel Mel Zelaya to
office. As if that were not enough, the OAS vision of representative democracy
has been challenged by participatory and plebiscitary alternatives.
Are we witnessing the demise of the inter-American democracy promo-
tion regime? I argue that it is premature to talk of regime decline. Rather,
111

Shaw
112 Demise of the Inter-American Democracy Promotion Regime?

we are witnessing contradictory directions in regime change and, overall,

a failure following the IADC’s launch in 2001 to consolidate the regime
beyond a minimalist emphasis on defending against coups d’état. In my
analysis I stress the interdependence between regime prospects and regional
contextual factors.
In what follows, I break down the regime into its constituent components,
a constellation of regional norms. I then sketch how these norms have
consolidated, evolved, or devolved from the 1990s to the present, paying
close attention as well to the shifting terrain of regime construction, which
includes the changing meanings and practices of democracy on the ground
in Latin American countries, evolving regional geopolitics, namely US–Latin
American relations, regionalism trends, and the OAS’s own state of health.

The inter-American democracy promotion regime, 1990s–2001

In addition to a principal agency, the Organization of American States and its

member states, the inter-American democracy promotion regime represents a
constellation of regional norms of varying degrees of consolidation or normali-
zation and, as we shall see later on, legalization. Not only are these norms
concerning how democracy should be promoted or protected, but also norms
that condition and reflect existing sovereignty meanings and practices as
well how multilateral pro-democracy diplomacy ought to be conducted. The
regime as it was elaborated in its formative period, 1990–2001, represented an
interconnected, sometimes contradictory set of norms and values.

An anti-coup norm
In contrast to the Cold War, coups or self-coups were no longer acceptable
or legitimate forms of political change in the Americas, and became subject
to international condemnation and various forms of soft and hard interven-
tion (Legler and Tieku, 2010). This norm was reflected in the creation of
Resolution 1080 (1991) and the Washington Protocol (1992/1997) as well
as strong collective responses by the OAS to real or attempted coups and
self-coups in Guatemala (1993), Haiti (1991), Paraguay (1996), Peru (1992),
and Venezuela (1992).

Representative democracy as the accepted type of democracy

to promote
The construction of the democracy promotion regime was centred on the
promotion of a specific type or style of democracy: representative democracy.
Although countries such as Mexico and Brazil historically resisted the imposi-
tion of a single definition of democracy in the Americas, by 2001 OAS member
states were able to reach consensus on a set of criteria that they considered
should be present in any country that could be categorized as a democracy.
These elements were codified for the first time in Articles 3 and 4 of the IADC.

Shaw
 Thomas Legler 113

Representative democracy membership criterion

With the end of the Cold War, regime type became very important in the
politics of international recognition and sovereignty. Governments in the
Americas could no longer count on automatic international recognition
or full rights of international participation if their political systems were
non-democratic (Cooper and Legler, 2001, 2006; Legler, 2007; Legler and
Tieku, 2010). With the Declaration of Quebec City and the Inter-American
Democratic Charter, representative democracy became a requirement for
membership and participation in the OAS, the Summits of the Americas,
and the Inter-American system. The Washington Protocol and later on
the IADC contained the possibility of membership suspension as an ulti-
mate sanction for any member state in which democracy was undermined.
The Rio Group also reinforced this norm in its own membership requirements.
Indeed, Peru’s membership was temporarily suspended in 1992 following
President Fujimori’s autogolpe.

An anti-authoritarian backsliding norm

Thanks to ten years of creeping authoritarianism during the Fujimori presi-
dency (1990–2000), the Paniagua transitional government that replaced
Fujimori advocated the creation of a Democratic Charter that would not
only protect against coups or self-coups but also backsliding of the type that
Peruvians had suffered painfully (Cooper and Legler, 2006; Legler, 2007). The
nascent form was manifested in Article 19 of the IADC, which acknowledged
both coups/self-coups or ‘unconstitutional interruptions of the democratic
order’ and authoritarian regressions by incumbent elected leaders or ‘uncon-
stitutional alterations of the constitutional regime’ as unacceptable practices
in the inter-American system.

External validation of elections

Several key election observation experiences by the OAS helped establish a
new external validation norm: that the OAS, where invited by a host country
to observe an electoral process, has the authority to validate, criticize, or even
invalidate that election and the organizing authorities (Cooper and Legler,
2006; Legler, Lean and Boniface, 2007). Such was the case in landmark obser-
vations in the Dominican Republic (1994), Haiti (2000), Peru (2000), and
Venezuela (2005). Article 25 of the IADC instructs OAS election observation
missions to advise the General Secretariat and the Permanent Council ‘if the
necessary conditions for free and fair elections do not exist’.1

Graduated response to political crises

Similar to UN diplomatic practice with respect to security provisions in
Chapters VI and VII of the UN Charter, the collective defence of democ-
racy in the Americas also followed a preferred logic of graduated, flexible
diplomatic response to political crises, rather than a rigid, automatic,

Shaw
114 Demise of the Inter-American Democracy Promotion Regime?

one-size-fits-all approach (Cooper and Legler, 2006; Insulza, 2007, p. 14;

Legler, 2007).

Preference for political concertation over legalistic approaches

Coupled with the inclination towards graduated, flexible responses, political
élites and their diplomatic representatives in the region have preferred to
address threats to democracy allowing room for political negotiation and
manoeuvring rather than according to a strict legal logic. The IADC, as has
been oft criticized, fails to establish clear legal benchmarks for defining
what constitutes a serious enough violation as to warrant or trigger action
by the Permanent Council and/or General Assembly (Carter, 2005; Legler,
2007; Ayala and Nikken, 2006). In this way the inter-American democracy
promotion regime differs markedly from the inter-American human rights
regime, where the Inter-American Commission of Human Rights and the
Inter-American Court of Human Rights have evolved a process of stricter
legal jurisprudence based on the American Convention of Human Rights and
other international human rights instruments for advancing human rights.

Separation between democracy promotion and human rights

protection
In a similar vein, although some overlap exists between inter-American
democracy promotion and the inter-American human rights system, the
construction of the former occurred largely in isolation from the latter.
While the Inter-American Commission on Human Rights has produced
human rights reports critical of individual countries’ abuses of democracy,
little coordination or cooperation has existed among the Secretary-General,
the Permanent Council, and the Inter-American Commission and Court
of Human Rights. Although Article 1 of the IADC established democracy
as a human right, in theory linking the protection of democracy to a wide
body of international human rights treaties and other legal documents, the
Permanent Council normally avoids discussion of democracy-related human
rights concerns emanating from the Commission or the Court.

‘By invitation only’ intervention

With the exception of a military coup, the IADC is very clear on the point
that sovereign governments have the final say over most forms of interven-
tions that the OAS might undertake in order to uphold democracy (Cooper
and Legler, 2006; Legler, 2007; Legler and Tieku, 2010; Committee on
Foreign Relations, 2010). Article 17 enables them to request assistance in
the face of anti-democratic threats. Article 18 stipulates that the Secretary-
General or Permanent Council requires the prior consent of the host
government before undertaking pro-democracy collective action. As stated
in Articles 23 and 25, OAS election monitoring also requires a formal invitation
by a member state.

Shaw
 Thomas Legler 115

Executive sovereignty
In conjunction with the ‘by invitation only’ norm, the inter-American
democracy promotion regime reinforces a particular, élitist style of sov-
ereignty: executive sovereignty (Cooper and Legler, 2006; Legler 2007,
Committee on Foreign Relations 2010). That is, as practised in inter-American
diplomacy, sovereignty resides in a head of state or government or his/her
designated diplomatic representatives. Despite occasional rhetoric, it is not
a popular sovereignty, nor is executive sovereignty shared among the presi-
dent/prime minister, judiciary, parliament, and other branches of the states.
The IADC is an instrument at the exclusive disposal of national leaders. It is
a democratic sovereignty only in so far as these leaders are elected and held
accountable through elections.
An important implication of the inter-American tradition of executive
sovereignty is that the Secretary-General of the OAS has a very limited scope
for action independent of the General Assembly and Permanent Council in
defending democracy. As Chapter XVI of the OAS Charter indicates, he is
responsible to the General Assembly in the fulfilment of all his obligations
and functions.
The IADC operative clauses did enhance the good offices of the Secretary-
General, in the sense that Articles 17 and 18 outline a role for him in preven-
tive diplomacy. Nonetheless, it is noteworthy that the execution of his good
offices in this regard requires the express consent of the member state and,
more narrowly, its head of state or government. Article 20 also authorizes
the Secretary-General to convene a meeting of the Permanent Council in the
event of ‘an unconstitutional alteration of the constitutional regime that seri-
ously impairs the democratic order in a member state’. Importantly, it is the
Permanent Council that ultimately decides or pre-vets any course of action
to be taken, reaffirming that any good offices which the Secretary-General
wishes to undertake must await a green light from his state masters.2

Monitoring and peer review

What was absent from the IADC was arguably as important as what was
contained therein. The Paniagua transition government served an impor-
tant norm entrepreneur role not only in its effort to construct a regional
anti-authoritarian backsliding norm but also to craft a new mandate for the
OAS to monitor member states’ democratic performance. Peru’s admirable
proposal to empower the Inter-American Commission on Human Rights to
serve the role of monitoring member state compliance with the Democratic
Charter was soundly rejected by other states (Legler, 2003; 2007).

The shifting terrain for regime construction, 2001–10

As suggested at the outset, the creation of the inter-American democracy

promotion regime has a lot to do with the particular context in which it

Shaw
116 Demise of the Inter-American Democracy Promotion Regime?

arose. The regime was originally constructed during the 1980s and 1990s in
a propitious environment that included the end of the Cold War and the
Third Wave of democratic transitions. With the threat of authoritarian rever-
sals still very real in many countries, the elected leaders of Latin America’s
new democracies had a keen interest to project their new democratic values
through their foreign policies, as well as to create multilateral bulwarks as an
additional line of defence to help them lock in their new democratic con-
stitutional orders.3 The rise of democracy promotion also occurred against a
backdrop of dynamic hemispheric regionalism and a growing consensus con-
cerning how representative democracy was defined and practiced. Finally,
the OAS itself underwent an important revival under the capable leadership
of Secretary-General César Gaviria (1994–2004).
The new millennium has been an altogether different story. As elabo-
rated below, the terrain for consolidating the regime became much more
difficult.

A changing democracy problematic in the region

Some types of problems common during the 1990s persist. As alluded to
above, authoritarian backsliding by incumbent, democratically elected leaders
continues to threaten democracy in countries like Venezuela and Nicaragua,
and even possibly Ecuador. Venezuela (2002) and Honduras (2009) remind us
that coups are still plausible in the present.
Newer threats to democracy have also emerged, presenting new challenges
for a defence-of-democracy regime designed to deal with other types of
problems. A more recent phenomenon is that of executive-legislative or
executive-judiciary power struggles in which these institutions enter into
destabilizing zero-sum conflicts. Where delegative democracy (O’Donnell,
1994), in which presidents attempt to circumvent congress through their
use of decrees, is a continuous concern, nowadays élites opposed to incum-
bent presidents fight back through the influence they enjoy in legislatures
and judiciaries. Prime examples can be found in the intense political con-
flicts between President Bolaños of Nicaragua (2005), President Gutiérrez
of Ecuador (2004–5) and President Zelaya of Honduras (2009) and their
congressional and judicial opposition.
In this context, sometimes executive sovereignty may give presidents a
competitive advantage in these struggles, since they are the only ones who
can invoke or resist the invoking of the IADC. However, legislatures – as
demonstrated in the Ecuadorean case (1997, 2000, 2005) – can use mass
popular mobilizations to their advantage to remove unpopular presidents
like Bucarám, Mahuad, and Gutiérrez via constitutionally dubious means. In
any event, as these countries’ experiences have underlined, presidents are not
always the only actors capable of subverting democratic constitutional orders.
Recalling the famous words of Linz and Stepan (1996), in many Latin American
countries, democracy is still not the only game in town.

Shaw
 Thomas Legler 117

Another recent development has been the emergence of political crises that
are not just narrow intra-élite conflicts but also society-wide processes of
intense political and social polarization. Conflicts in Venezuela, Bolivia,
Ecuador, and Honduras have assumed this form. Acute polarization leads
to the construction of two opposing sides, each with a collective identity
formed in mutual antagonism with the other. One pole assumes the identity
of ‘el pueblo’ (the hitherto oppressed or excluded), and the other perceives
itself as the guardian of the status quo ante and/or opposition to the dicta-
torial projects of Chávez, Morales, Correa, and Zelaya. Both sides come to
perceive a zero-sum situation or existential struggle for survival at all costs.
Politics in these contexts abruptly departs from existing rules of the political
game, abandoning dialogue, tolerance, and political concertation for political
confrontation, intolerance, mobilization, and even violence. In other words,
politics becomes a battlefield where only one side can win and the costs of
losing for either side are unacceptable.
It is worrisome that, for both sides, the ends of political actions can come
to justify the means employed. Democracy can become the victim in these
struggles. As illustrated by the coups in Venezuela (2002) and Honduras (2009),
citizens who would never normally have supported such anti-democratic
actions came to defend them as necessary evils to eliminate those whom they
perceived as threatening their very existence. For their part, locked in bitter
class and ethnic or racial conflict, the leaders of these countries and their fol-
lowers have resorted to growing human rights abuses to advance their causes.
Needless to say, the proposition of defending democracy in these contexts
becomes a real headache. The two sides in these internal conflicts extend
their polarizing logic to their relations with external actors like the US, the
OAS, and the European Union: assuming that these actors are either for or
against their cause. It therefore becomes difficult for international actors to con-
vincingly maintain a stance of impartiality or neutrality. As we shall see below
in the recent case of the 2009 Honduras coup, punitive measures applied in an
intensely polarized context can be counterproductive, as the mutual perception
of a high-stakes, zero-sum struggle makes the option of making concessions
virtually impossible. With the erosion of tolerance, respectful debate, and the
perception of common ground or destiny in society, it becomes even more
difficult for the OAS to promote effectively its preferred diplomatic tool in
crises contexts: the facilitation of intra-élite democratic dialogue processes.
If the defence of democracy were not sufficiently complicated beforehand,
now the OAS and the international community must confront the additional
challenge of how to address and diffuse polarization.

From the hegemony of representative democracy to the participatory

challenge
Within the shifting regional democracy problematic of the new millennium,
there is no longer a consensus on the meanings and practices of democracy

Shaw
118 Demise of the Inter-American Democracy Promotion Regime?

as was the case during the previous decade. Democracy is a socially and
politically contested concept subject to change (Grugel, 2002). On the one
hand, the social construction of democracy on the ground in diverse direc-
tions in recent years is a healthy phenomenon. As the UNDP signalled in
2004, real existing democracy in the region was very problematic, a ‘democ-
racy without citizenship’ in its terms. The participatory and/or plebiscitary
alternative as it has evolved in Venezuela, Bolivia, Ecuador, and elsewhere, has
put democratic citizenship and the fight against poverty and social exclusion
squarely on the agenda.
On the other hand, the lack of élite and popular consensus on the meanings
and practices of democracy obviously makes it harder for the international
community to defend or promote democracy. For example, the separation of
powers is a staple of the representative democracy tradition. It is not neces-
sarily the same case with the plebiscitary and participatory model of democ-
racy espoused by Chávez. Democracy à la Chávez, et al. is notoriously critical
of what is perceived as the élitist representative function characteristic of
representative or liberal democracy (Canovan, 1999; Decker, 2003; De la Torre
and Peruzzotti, 2008; Panizza, 2005). The Chávez alternative eliminates or
weakens institutional mediation between citizens and the executive, creating
more direct links between voter and elected leader. As Seligson (2007, p. 93)
recently found, two-thirds of recent AmericasBarometer respondents across
Latin America indicated that they would accept the kind of reduction of the
autonomy of the judiciary, legislature, and opposition parties undertaken by
Chávez. Therefore, whereas the erosion of horizontal accountability appears
as authoritarian backsliding in Venezuela from a US or Western perspective,
it is not necessarily so from other alternative democratic logics. Indeed,
electoral irregularities notwithstanding, leaders in Venezuela, Ecuador, and
Bolivia can point to the heightened frequency of plebiscites in their countries
as ample evidence of their democratic credentials.

The downturn in US–Latin American relations

As is now well known, the uncommonly friendly ties that existed between
US political élites and their counterparts during the 1990s dissipated
during the new millennium. Latin American trust and confidence towards
the US were replaced by distrust and suspicion. The downturn in US–Latin
American relations on the one hand corresponded to the onset of the George
W. Bush administration, which did not endear itself to the Latin American
public with its invasion of Iraq or its war on terrorism. On the other hand,
new governments in Venezuela, Bolivia, Ecuador, and elsewhere pursued inten-
tionally nationalistic, anti-imperialist, and confrontational foreign policies
vis-à-vis the US.
The democracy promotion issue area was a clear victim of rising tensions
between the two. US credibility on democracy promotion was shattered by
actions such as the Bush administration’s tacit support for the Venezuelan

Shaw
 Thomas Legler 119

coup of 2002, in which democratically elected Chávez was briefly ousted.

The covert actions of the International Republican Institute to criticize and
even possibly undermine the Aristide government in Haiti and Chávez
also hurt the US image, as did electoral intervention by US government
officials or Congressmen against left-wing candidates in Bolivia (2003,
2005) and Nicaragua (2006). The selective use of the Millennium Challenge
Account, the annual Congressional drug certification process, the Andean
Trade Preferences Act, and even human trafficking reporting to criti-
cize and punish the governments of Cuba, Venezuela, and Bolivia also
gained the US growing numbers of critics in the region. Latin Americans
reminded the US government of its own contradictory behaviour: criticiz-
ing Venezuela in particular for endangering democracy while mistreating
Mexican migrants on the US–Mexican border and illegally maintaining
prisoners in its Guantanamo facility. Accordingly, the growing US–Latin
American divide negatively affected possibilities for implementing and
strengthening the IADC.
The Obama administration quickly attempted to distance itself from its
predecessor’s policies and to improve US credibility in the region upon
assuming office in January 2010. It promised a new, equal partnership with
Latin American and Caribbean governments and Obama won points for
his willingness to listen to them at the Trinidad and Tobago Summit of the
Americas as well as signalling a willingness to redefine US relations with
Cuba in a more positive direction.4
Nevertheless, the Honduras crisis revealed that it would be very hard for
the US to overcome perennial perceptions that it always put its narrow
interests before the principles of the inter-American democracy promotion
regime. Although Obama and Hillary Clinton condemned the 28 June
coup and backed the OAS as the key agent for handling the crisis, US
actions in November 2009 once again hurt US credibility on democracy.
US officials won praise after helping to broker an eleventh-hour deal on
30 October 2009 between ousted President Zelaya and de facto President
Roberto Micheletti that would pave the way for the return of Zelaya and the
creation of an interim government of national unity. Just days later, how-
ever, US officials signalled that they would be prepared to accept the results
of the 29 November elections in Honduras, irrespective of whether Zelaya
was reinstated or not. Thanks to the US reversal, the so-called Guaymuras
Accord rapidly unravelled; Zelaya was barred from returning to power, and
Micheletti proudly remained in office, handing over power to president-elect
Porfirio Lobo on 27 January 2010. The unconditional US recognition of the
29 November election results infuriated President Lula, driving a rift between
the US and Brazil and their respective cohorts of supporters in the Americas.
Consequently, the prospects for renewed US–Latin American cooperation in
terms of strengthening the democracy promotion regime remain limited
in the immediate future.

Shaw
120 Demise of the Inter-American Democracy Promotion Regime?

From hemispheric regionalism to regional fragmentation and

bifurcation
‘We are all countries of the Americas’ gained credence during the 1990s. In
the new millennium it has become more difficult to speak of the Americas or
the Western Hemisphere Idea as a single, coherent regional project. Instead,
hemispheric regionalism has been challenged by two other rival regional
projects. First, regional fragmentation has been common, as reflected in the
creation of a plethora of subregional multilateral and integration initiatives
throughout Latin America and the Caribbean. The gradual unification of
South America through UNASUR has been prominent within this frag-
mentation. After the Washington Consensus and the widespread interest
during the 1990s in a hemispheric free trade initiative, there has also
been ideological fragmentation along regional lines in recent years. The
Washington Consensus ideals have found healthy competition from the
socialist proposal of the ALBA camp as well as a more moderate leftist
proposal from Lula and Bachelet.
Second, in the last few years, Latin American countries have constructed
new regional spaces for political concertation and integration which inten-
tionally exclude Canada and the US. In December 2008, these countries
created the Latin American and Caribbean Summit (CALC) for this purpose.
In February 2010, they agreed to found the Community of Latin American
and Caribbean States.
At a minimum, these regional and subregional developments mean that
the defence and promotion of democracy occur in an ever more complex
regional and subregional multilateral context, with the challenges of inter-
institutional coordination, mandate duplication and overlap as well as
organizational competition for scarce resources. However, whereas once the
OAS and organizations such as the Rio Group, the Mercosur, and the Andean
Community shared common concerns and beliefs regarding democracy in
the region, now this is far less evident. The exclusive Latin American and
Caribbean multilateral clubs, for example, have now opened their doors to
Cuban membership, despite that country’s democratic deficit.
From OAS revival to OAS survival
Former Colombian President César Gaviria led a successful effort as OAS
Secretary-General to reform and revitalize the OAS, an organization that
during the Cold War had lost much of its credibility. The protection of
democracy was precisely the issue area that enhanced OAS credibility.5
During recent years the OAS has entered into renewed crisis. In part this
is because the OAS once again finds itself in the middle of strained US–Latin
American relations. The reintegration of Cuba into the OAS fold has been
a key source of contention with countries such as Venezuela and Bolivia
threatening to leave the organization permanently. The 2009 San Pedro Sula
General Assembly managed to prevent the collapse of the OAS by revoking

Shaw
 Thomas Legler 121

the 1962 decision to suspend Cuba, leaving the door open for Cuba’s return
to the organization, should it so desire. The OAS also suffers a chronic
fiscal crisis that limits its ability to fulfil its enormous number of mandates
(Committee on Foreign Relations, 2010).
Part of the blame for the OAS’s current woes must also be attributed to
questions concerning the leadership of its Secretary-General. Although
admittedly he has had to negotiate difficult waters between the US and its
various Latin American adversaries, he has failed to invigorate the OAS as
his predecessor Gaviria did in his time. Indeed, for much of his initial term it
was widely speculated that he was more concerned with positioning himself
as a candidate to succeed President Bachelet in Chile than running the OAS
as it needed to be run. A surprising editorial by the Washington Post depicted
Insulza as the embodiment of the OAS’s dysfunction and accused him of
being intentionally soft on anti-democratic actions by leftist presidents
Chávez and Zelaya (Washington Post, 2010).

The inter-American democracy promotion regime, 2001–10

The past decade should have been a period of regime consolidation. Instead,
the contextual changes mentioned above impeded the realization of the
expectations embodied in the Inter-American Democratic Charter. As I out-
line below, there have been a number of contradictory and worrisome develop-
ments with respect to inter-American democracy promotion norms.

A strong anti-coup norm

The 11 April 2002 coup in Venezuela and the 28 June 2009 coup in Honduras
clearly indicate that this norm remains strong in the Americas, especially
among Latin American countries. For the first time, the OAS invoked
Article 21 of the IADC to suspend Honduras’s membership – its strongest
response yet to a coup. The OAS was not alone, however, in its punishment
of Honduras. The international isolation and an assortment of economic
sanctions directed against the Honduran de facto government involved the
OAS and its member states, ALBA, the Rio Group, UNASUR, Mercosur, SICA,
the European Union, the United Nations, the Ibero-American Secretariat,
the International Monetary Fund, the World Bank, and the Inter-American
Development Bank. To appreciate the magnitude of Honduras’s castigation,
newly elected President Lobos remarked upon assuming office that Honduras
had suffered the loss of more than US$ 2 billion dollars in international aid
(El País, 2010).
However, the strong anti-coup impulse in the region was not without its
problems or contradictions. Oppenheimer (2009) wrote that Brazil deserved
a gold medal for its hypocrisy. President Lula insisted on the continued
punishment of Honduras months after the coup for the failure of the de
facto government to permit the restoration of Zelaya, even after democratic
elections were held for his successor on 29 November 2009. Yet he rolled

Shaw
122 Demise of the Inter-American Democracy Promotion Regime?

out the red carpet for Iranian dictator Mahmoud Ahmadinejad on an official
state visit. Moreover, as Oppenheimer queried, ‘how can Lula da Silva call
for maintaining international sanctions against Honduras while at the same
time urging the world to lift remaining sanctions against Cuba?’
Additionally, the strength of the anti-coup conviction within the inter-
American and wider international community seemed to dissipate as the
Micheletti Government persistently clung to power and as the 29 November
general elections approached. By the time the elections were held, the
original inter-American anti-coup consensus had split into two groups: a hard-
line group containing Brazil, Venezuela, Bolivia, Ecuador, Paraguay, and
Nicaragua that insisted on not recognizing the 29 November elections since
Zelaya had not been restored to office, and a soft-line group including the US,
Costa Rica, Colombia, Guatemala, and Panama that viewed the elections as a
democratic exit from Honduras’s political crisis and intended to recognize the
elections even if Zelaya were not reinstated. According to Raúl Benítez (2009),
the Honduras debacle represented the triumph of realism over principles, as
countries of the Americas invariably weighed how their national interests
were affected.

Representative democracy in trouble

Representative democracy as elaborated in Articles 3 and 4 and elsewhere
in the IADC is a broad rubric that should permit a diverse array of demo-
cratic institutional arrangements and practices from country to country.
Nonetheless, in tune with endogenous developments on the ground in the
Americas, during the new millennium its acceptance came under fire first
from Venezuela’s President Hugo Chávez and soon thereafter from his allies
President Evo Morales of Bolivia, President Rafael Correa of Ecuador, and
President Daniel Ortega of Nicaragua.
Soon after the adoption of the Democratic Charter on 11 September
2001, Chávez advocated the creation of a companion Social Charter on
the grounds that representative democracy was an élitist, Western form of
democracy that concerned itself little with questions of participation or
equality (despite acknowledgement of these factors in the IADC). Caribbean
countries saw the Social Charter as an important opportunity not to under-
mine representative democracy but rather to promote their longstanding
concern for social and economic development. To date, despite numerous
meetings, the OAS has failed to produce a Social Charter.
Even so, Chávez was successful in political discursive terms: in helping to
damage the credibility of representative democracy in the region. Despite
the IADC’s previously mentioned recognition of the importance of citizen
participation and socioeconomic equality, representative democracy was
successfully devalued and portrayed as little more than an élitist project
imposed by the US out of antagonism towards more popular, made-in-
Latin-America, participatory, direct, and plebiscitary democratic variants.

Shaw
 Thomas Legler 123

Sadly, Chávez and ALBA have succeeded in presenting representative and

participatory democracy as antithetical. It must be remembered that follow-
ing the demise of authoritarian regimes in the 1970s and 1980s, the newly
emerging representative democracies in the Americas were hugely popular,
not simply élite-driven projects. Additionally, it was Peru and not the US
that originally advocated the Democratic Charter, the principal expression of
representative democracy. In sum, the OAS could no longer easily promote
representative democracy as an acceptable brand as it had during the 1990s.

Representative democracy membership criterion

There are confusing signals concerning the current import of this norm.
On the one hand, as indicated above, many Latin American countries have
pushed for Cuba’s reintegration into the OAS and other inter-American
multilateral forums, indicating a seeming erosion of the norm. In December
2008, the Rio Group granted membership to Cuba, despite the prior condi-
tion of democracy as a membership criterion. Cuba also became a member
of the newly formed Latin American and Caribbean Summit (CALC) in the
same month. It did not seem to matter much that Cuba’s entry seemingly
contradicted the democracy clauses of existing sub-regional organizations
such as Mercosur or the Andean Community. At the Trinidad Summit of the
Americas in April 2009 and at the OAS General Assembly in San Pedro Sula,
Honduras in June 2009, many Latin American countries, especially members
of ALBA (Alianza Bolivariana para las Américas), demanded Cuba’s restora-
tion as a full member in the OAS. In February 2010, Cuba became a member
of the newly launched Community of Latin American and Caribbean States.
Once again, membership was extended to Cuba with little concern for its
lack of democracy.
On the other hand, the suspension of Honduras’s OAS membership was a
clear vindication of this norm. The OAS suspension also extended to other
regional and subregional bodies, including the Central American Integration
System, the Rio Group, and the CALC. Strangely, while undemocratic Cuba
fully participated, Honduras was barred from participating at the afore-
mentioned Cancun Unity Summit. The differential treatment of Cuba and
Honduras clearly represents a gross contradiction in terms of the democratic
membership norm.6

An anti-authoritarian backsliding norm

The proto-norm championed by Peru through the IADC has failed to take
hold. There is still no consensus on what constitutes a serious enough threat to
democracy by an incumbent elected leader in order to warrant invoking
the Democratic Charter. Countries that have allegedly engaged in authori-
tarian backsliding, such as Ecuador in 2004–5, Nicaragua since 2008, and
Venezuela since 2004 have faced little reaction from the OAS or the inter-
national community for these actions. Given the current lack of consensus

Shaw
124 Demise of the Inter-American Democracy Promotion Regime?

on the meaning and practices of democracy in the region, it is not likely that
this norm will be strengthened any time soon.
It is also possible that the problematic nature of this norm might have an
experiential and intercultural explanation. That is, from the perspective of
Latin American leaders such as Insulza or Lula, who personally endured and
suffered military dictatorships, situations that the US describes as authori-
tarian backsliding fall far short of the brutal reality of military dictatorships
of yesteryear, and, accordingly, do not warrant the same concern as military
coups. Additionally, the self-interest of political leaders may well help explain
the reluctance of many to put international constraints on their own political
room for manoeuvre.

External validation of elections

The OAS’s ability to serve as election judge suffers from two problems. First,
it is worrisome that this norm may have suffered some reversal. While many
countries continue to invite the OAS to observe their electoral processes,
others, such as Venezuela and Nicaragua, no longer invite OAS missions.
These are precisely countries where election-related controversy has occurred
in recent years. Moreover, other countries – such as Canada, the US, Brazil,
Argentina, and Chile – never invite election monitoring missions, hampering
the uniform consolidation of this norm.
Second, since the OAS’s ability to judge the validity of elections is contin-
gent on receiving a formal invitation from the host government, it has been
frustratingly difficult if not impossible for the organization to criticize electoral
processes in the region where clear electoral violations have occurred but
where it has not been invited to monitor. During the electoral process lead-
ing up to the November 2008 local and state elections in Venezuela, several
hundred opposition members were barred by the Venezuelan Comptroller
General (whose decision was upheld by the Supreme Court) from running
for office on alleged corruption charges. This controversy, despite its potential
impact on the fairness of the electoral process, was not questioned whatsoever
by either Secretary-General Insulza or the Permanent Council.

The preference for ‘graduality’ and political concertation

The Honduran crisis provoked a response uncharacteristic of the OAS. Instead
of pursuing its normal gradualist approach and preference for political
concertation, the organization turned rapidly to punitive measures against
the de facto Micheletti Government. On 30 June, in Resolution 1 (OAS,
2009a), the special General Assembly issued an ultimatum to the de facto
government in Honduras: to restore democracy and Zelaya within 72 hours
or have Honduras’s membership in the OAS suspended via Article 21 of the
Democratic Charter. When Micheletti and company failed to comply, the
OAS special General Assembly passed Resolution 2 (OAS, 2009b), in which it
invoked Article 21 to suspend Honduras.

Shaw
 Thomas Legler 125

Interestingly, the OAS employed sticks first and then turned to carrots
afterwards. Just days after Honduras was suspended from the organization,
the US government, the OAS Secretary-General, and SICA decided to opt for a
negotiated solution to the conflict, probably sensing the determination of the
de facto Micheletti Government to resist international diplomatic isolation
and sanctions. Since Insulza’s credibility in Micheletti circles was badly damaged
thanks to his association with the OAS’s suspension of Honduras as well as
his support for the restoration of Zelaya, these actors turned to Costa Rica’s
Nobel laureate President Oscar Arias to foster dialogue between Micheletti
and Zelaya. In the end, neither punitive sanctions nor dialogue were able to
restore Zelaya to power during the remainder of his presidential term.
As both Peter Hakim (2009) and Michael Shifter (2009) stressed, inter-
national punitive measures can be very counterproductive in polarized
contexts. Instead of weakening the Micheletti government and its support,
they argued that the use of such measures actually served to harden posi-
tions on both sides. International condemnation, sanctions, and diplomatic
isolation actually strengthened the resolve of the de facto government and
its supporters.
Even so, Hakim’s suggestion (2009) that negotiations might have been a
more appropriate course of action immediately following the coup is also
problematic. OAS or international-facilitated dialogue between Zelaya and
Micheletti from the outset could also have been counterproductive in the
sense of awarding political legitimacy to the latter after having participated
in a coup. While Hakim is correct in signalling the potential for strong-
handed international measures to be counter-productive, he neglects the
moral hazard that comes with fostering negotiations with coup mongers.

‘By invitation only’ intervention

This norm has been reinforced through recent occurrences, both negatively
and positively. On the negative side, in the case of Haiti, President Jean-
Bertrand refused to invoke the IADC or to permit it to be invoked, fear-
ing its manipulation for US ends. For instance, as mentioned beforehand,
following international criticism of electoral processes in 2009 and 2005
respectively, Nicaragua and Venezuela no longer invite OAS election obser-
vation missions.
On other occasions, heads of state have willingly extended invitations to
the OAS to help them resolve political crises. Via General Assembly Resolution
43 (OAS, 2005), Nicaragua’s President Bolaños authorized the OAS to assist
in the promotion of a national dialogue process. Accordingly, OAS envoy
Dante Caputo was able to help forge an agreement between Bolaños and
former Presidents Daniel Ortega and Arnoldo Alemán. Interestingly, even
though Bolaños approached the OAS for assistance, Resolution 43 invoked
Article 18, which indicates a broader community concern for the situation,
rather than Article 17, in which a member state extends its own invitation

Shaw
126 Demise of the Inter-American Democracy Promotion Regime?

to the OAS. It is possible that, through Article 18, embattled Bolaños wished
to signal to his powerful foes Ortega and Alemán that he could count on
important international support for his cause.
Honduras’s President Zelaya formally invited the OAS to lend its assis-
tance in addressing the mounting crisis his government faced. For the first
time, Article 17 of the IADC was invoked in Permanent Council Resolution
952 (OAS, 2009c). Sadly, Zelaya’s turn to the OAS for help on 26 June proved
too little too late, as he was ousted in a coup d’état just two days later.

Executive sovereignty
During the period 2001–10 there were signs of both the executive sover-
eignty phenomenon’s persistence as well as the possibility of more inde-
pendence for the Secretary-General vis-à-vis his state handlers. On one
side, Secretary-General Insulza (2007, pp. 14–15) recently lamented the
persistence of this diplomatic norm and its negative effect on implement-
ing the Democratic Charter. To paraphrase the Secretary-General, no state
power other than the executive can invoke the IADC, much less civil society
organizations.
The 2009 Honduras saga confirmed that the IADC is an instrument whose
recourse is limited exclusively to heads of state and government. Long
before the 28 June coup took place, a growing number of other govern-
mental bodies voiced their concerns about alleged democratic transgressions
by President Zelaya and an alarming process of political polarization in the
country. Perhaps, had the Honduran Supreme Court or Congress been able
to invoke the IADC, the outcome of the mounting crisis in that country
might have been much different.
On the other side, General Assembly Resolutions 2154 and 2251 poten-
tially enhanced the Secretary-General’s role in defending democracy. In its
third operative clause, Resolution 2154 reaffirmed that ‘the Secretary General
may bring to the attention of the Permanent Council, in the exercise of the
authority contained in the OAS Charter and pursuant to the Inter-American
Democratic Charter, those situations likely to lead to action under the said
Charters’.. Resolution 2251 employed virtually identical words.
Nevertheless, Secretary-General Insulza has yet to test this new prerogative.
In a scathing critique of his immobilism, CNN en Español newscaster Patricia
Janiot took issue with Insulza for not once bringing to the attention of the
Permanent Council the worsening political repression of dissidents and the
erosion of the separation of powers by the Chávez Government in Venezuela
as had been recently reported by the Inter-American Commission on Human
Rights (IACHR, 2009). In a convenient separation of human rights and
democracy, Insulza responded by stating that human rights were the jurisdic-
tion of the Inter-American human rights system, not the Permanent Council.
He also remarked that the Secretary-General’s role is to carry out resolutions
of the OAS’s 34 member states, thereby reaffirming executive sovereignty.7

Shaw
 Thomas Legler 127

Limited monitoring and peer review

The aversion to democratic peer review persists in the OAS and the inter-
American system. Efforts by the Carter Center and its affiliated Friends of
the Democratic Charter, as well as the Andean Committee of Jurists (CAJ) to
promote a democracy watchdog role for civil society went largely ignored
by the OAS and its member states. At the 2005 Fort Lauderdale General
Assembly, the US government attempted unsuccessfully to promote the
creation of a new mechanism for monitoring member states’ compliance
with the Inter-American Democratic Charter that would include civil-society
participation (Legler, 2007). On the occasion of the fifth anniversary of the
IADC in 2006, the Peruvian government proposed a voluntary evaluation
mechanism. Even this modest proposal was soundly rejected on sovereignty
grounds (Insulza, 2007, p. 4). Member states consistently refuse to surrender
sovereignty in this important area that could help combat the erosion of
democracy by elected leaders.

Conclusions

The preceding analysis suggests that there has been regime change, but that
there have been conflicting signals about the direction of that change. The
relative expedience with which the democratic membership criterion was
put aside in the interest of the reintegration of Cuba into the inter-American
system is a cause for concern. So too is the facility with which the external
validation norm can be avoided by countries in which electoral irregularities
occur, by simply not inviting OAS electoral observation missions. Additionally,
representative democracy is no longer hegemonic in the Americas, making
the task of defending democracy even more difficult without a consensus on
the meaning and practices of democracy.
Other norms, such as the anti-authoritarian backsliding norm, have simply
failed to take hold, despite the best intentions of their norm entrepreneurs.
Similarly, various efforts have failed to create a peer review mechanism for
monitoring countries’ democratic performance.
Nonetheless, the experience of defending democracy in the new millen-
nium indicates that not all is gloomy. The anti-coup norm remains very
strong, although not completely unproblematic. After much previous criti-
cism for the difficulty in invoking the Democratic Charter, this document
was used as never before in responding to the Honduran crisis. Moreover,
the international response to the Honduran coup, in terms of international
isolation and sanctions, was the strongest yet.
When all these factors are taken into consideration, it is therefore prema-
ture to conclude that the inter-American democracy promotion regime is in
decline. It is more accurate to speak of the failure to consolidate the early
advances during the 1990s leading up to and including the Inter-American
Democratic Charter. Accordingly, the current state of the regime is one with

Shaw
128 Demise of the Inter-American Democracy Promotion Regime?

a limited but important mandate for countering coups and little else in
terms of consolidated norms and real capacities.
Is there hope in the future for the consolidation of a democracy promotion
regime that has a broader set of capabilities including effective preventive
diplomacy, combating authoritarian alterations by elected leaders, peer review,
and holding governments accountable for fraudulent elections? In this chap-
ter I have stressed the importance of the prevailing circumstances or condi-
tions in which regime development took place. Just at the moment when the
inter-American system finally had a comprehensive toolkit for defending and
promoting democracy via the IADC, dramatic contextual changes prevented
the consolidation of the regime. My analysis underscores the importance of
key factors for successful regime construction: an élite and popular consensus
on what is meant by democracy and how it is practised; favourable US–Latin
American relations and regionalism trends; and a healthy OAS with effective
leadership from its secretary-general. In hindsight, the synergy among these
factors during the 1990s is truly exceptional and striking. It is also note-
worthy how the contextual downturn of the new millennium not only hurt
the future prospects for regime consolidation but also the regime’s ability to
adapt to new challenges. Here I have highlighted new threats to democracy
that arose, such as executive–legislative and executive–judicial conflicts, as
well as new challenges for defending democracy caused by the phenomenon
of extreme polarization in many contemporary political conflicts. Given this
contextual significance, our best hope is to focus on how to make the terrain
for the defence and promotion of democracy more fertile.

Notes
1. On the evolution of OAS election monitoring, see Lean (2007) and Santa-Cruz
(2007).
2. It is instructive that weak secretariats with limited delegation of autonomous
prerogatives is common throughout much Latin American and Caribbean multi-
lateralism, and not just the OAS, reinforcing the idea of executive sovereignty as
a broader regional norm. This is a point that resonates throughout a forthcoming
special issue of Foreign Affairs Latinoamerica. See Legler (2010).
3. Similar to Moravcsik’s (2000) ‘lock-in’ thesis, the construction of the collective
defence of democracy regime signified the willingness of OAS member states to
surrender a certain amount of sovereignty to the OAS in exchange for the OAS’s
support to lock in their newly created democratic constitutional orders.
4. See Dan Erikson’s chapter in this volume for an exploration of this topic.
5. For Gaviria’s ideas and autobiography while serving as OAS Secretary-General, see
Gaviria (1995, 2004).
6. Perhaps part of the confusion is caused by the ongoing debate concerning which is
the appropriate foreign-policy approach to Cuba in order to foster political liberali-
zation and democratization: diplomatic isolation versus constructive engagement.
Interestingly, in recent years the European Union also shifted its approach towards
Cuba, replacing an earlier hardline tack with renewed engagement. The Obama

Shaw
 Thomas Legler 129

administration has also made more moderate overtures toward the country in the
direction of greater engagement.
7. Patricia Janiot, Interview of OAS Secretary-General José Miguel Insulza, CNN en
Español, 28 March 2010.

References
Ayala Corao, Carlos and Pedro Nikken Bellshaw-Hógg (2006) Defensa colectiva de la
democracia: definiciones y mecanismos. Difusión de la Carta democrática Interamericana 5.
Atlanta and Lima: Carter Center and Comisión Andina de Juristas.
Benítez Manaut, Raúl (2009) ‘La crisis de Honduras y el sistema interamericano:
el triunfo del realism sobre los principios’, Foreign Affairs Latinoamérica 9, no. 4
(October–December): 75–84.
Canovan, Margaret (1999) ‘Trust the People: Populism and the Two Faces of Democracy’,
Political Studies 47 (1): 2–16.
Carter, Jimmy (2005) ‘The Promise and Peril of Democracy’, Keynote speech to OAS
Lecture Series of the Americas. Washington, DC, January 25.
Committee on Foreign Relations (2010) Multilateralism in the Americas: Let’s start by
fixing the OAS. Report to the Committee on Foreign Relations, United States Senate,
54–584 PDF. Washington, DC: US Government Printing Office, January 26.
Cooper, Andrew and Thomas Legler (2001) ‘The OAS Democratic Solidarity Paradigm:
Questions of Collective and National Leadership’, Latin American Politics and Society,
43 no. 1 (Spring), pp. 103–26.
Cooper, Andrew F. and Thomas Legler (2006) Intervention without Intervening? The
OAS Defence and Promotion of Democracy in the Americas. New York: Palgrave
Macmillan.
Decker, F. (2003) ‘The Populist Challenge to Liberal Democracy’, Internationale Politik
und Gesellschaft (International Politics and Society) 3: 47–59.
De la Torre, Carlos, and Peruzzotti, Enrique (eds) (2008) El retorno del pueblo: Populismo
y nuevas democracias en América Latina. Quito: FLACSO Ecuador and Ministerio de
Cultura.
Gaviria, César (1995) A New Vision of the OAS. Washington, DC: Organization of
American States, 1995.
Gaviria, César (2004) La OEA 1994–2004: Una década de transformación. Washington,
DC: Organization of American States.
Hakim, Peter (2009) ‘Honduras and the OAS’, Revista América Economía, August 3.
IACHR (2009) Democracy and Human Rights in Venezuela. OEA/Ser.L/V/II. Doc.54.
Washington, DC: Inter-American Human Rights Commission, December 30.
Insulza, José Miguel (2007) La Carta Democrática Interamericana. Informe del Secretario
General en cumplimiento de las resoluciones AG/RES. 2154 (XXXV-O/05) y AG/RES.
2251 (XXXVI-O/06). OEA/Ser.G CP/doc. 4184/07. Washington, DC: Organization of
American States, April 4.
Lean, Sharon F. (2007) ‘External Validation and Democratic Accountability’, in Thomas
Legler, Sharon Lean, and Dexter Boniface (eds) Promoting Democracy in the Americas.
Baltimore, MD: The Johns Hopkins University Press, pp. 152–76.
Legler, Thomas (2003) ‘Peru Then and Now: The Inter-American Democratic Charter
and Peruvian Democratization’, Canadian Foreign Policy 10, 3 (Spring): 61–74.
—— (2007) ‘The Inter-American Democratic Charter: Rhetoric or Reality?’ in Gordon
Mace, Jean-Philippe Thérien, and Paul Haslam (eds) Governing the Americas: Assessing
Multilateral Institutions. Boulder: Lynne Rienner Publishers, pp. 113–30.

Shaw
130 Demise of the Inter-American Democracy Promotion Regime?

—— (2010) ‘Multilateralism in the Americas’, Special issue of Foreign Affairs

Latinoamerica.
Legler, Thomas, Sharon Lean, and Dexter Boniface (2007) ‘International and
Transnational Dimensions of Democracy in the Americas’, in Thomas Legler,
Thomas, Sharon Lean, and Dexter Boniface (eds) Promoting Democracy in the
Americas. Baltimore: The Johns Hopkins University Press.
Legler, Thomas and Thomas Kwasi Tieku (2010) ‘What Difference can a Path
Make? Regional Democracy Promotion Regimes in the Americas and Africa’,
Democratization 17, 3 (June): 465–91.
Linz, Juan J. and Alfred Stepan (1996) Problems of Democratic Transition and
Consolidation. Baltimore: Johns Hopkins University Press.
Moravcsik, Andrew (2000) ‘The Origins of Human Rights Regimes: Democratic
Delegation in Postwar Europe’, International Organization 54, 2: 217–52.
—— (2009a) Resolution on the Political Crisis in Honduras. AG/Res. 1 (XXXVII-E/09),
July 1.
—— (2009b) Resolution on the Suspension of the Right of Honduras to Participate in the
OAS. AG/Res. 2 (XXXVII-E/09), 4 July.
—— (2009c) Situation in Honduras. CP/RES. 952 (1699/09), June 26.
O’Donnell, Guillermo A. (1994) ‘Delegative Democracy’, Journal of Democracy 5, 1
(January): 55–69.
Oppenheimer, Andrés (2009) ‘Brazil, US, OAS Flunked Honduras Test’, Miami Herald,
3 December.
Panizza, Francisco (ed.) (2005) Populism and the Mirror of Democracy. London: Verso.
Santa-Cruz, Arturo (2007) ‘Election Monitoring and the Western Hemisphere Idea’, in
Thomas Legler, Sharon Lean, and Dexter Boniface (eds) Promoting Democracy in the
Americas. Baltimore, MD: The Johns Hopkins University Press, pp. 133–51.
Seligson, Mitchell A. (2007) ‘The Rise of Populism and the Left in Latin America’,
Journal of Democracy 18, 3 (July): 81–95.
Shifter, Michael (2009) The Crisis in Honduras. Testimony before the Subcommittee on
the Western Hemisphere, Washington, DC, 10 July.
UNDP (2004) Democracy in Latin America: Toward a Citizen’s Democracy. New York:
United Nations Development Programme.
Washington Post (2010) ‘Short on Democracy; why the Obama Administration should
press for reform at the OAS’, The Washiington Post, 10 February.

Shaw
7
A More Secure Hemisphere?
Rut Diamint

Introduction

The Dominican Republic in 1978 and Ecuador in 1979 were the countries
that started the third democratic wave in Latin America.1 So began a long,
difficult process of reforms of the political regimes, along with the demili-
tarization of neighbourly relations and the renewal of regional integration.
Hemispheric organizations and sub-regional mechanisms adapted to the
new rules that Juan Linz and Alfred Stepan (Linz and Stepan, 1996, p. 5)
called ‘the only game in town’: a spirit of cooperation based on democratic
principles and the effectiveness of international regimes.
In keeping with this spirit, the Organization of American States (OAS) –
created for the peaceful, democratic solution of inter-state conflicts –
implemented reforms in its organization while creating other instruments to
defend democracy. At the same time, security negotiations were established
at the sub-regional and bilateral levels (see Appendix).
For some time, several Latin American countries had expressed their
disagreement with the Inter-American Treaty of Reciprocal Assistance
(ITRA), the Inter-American Defense Board (IADB) and the corresponding
Inter-American College of Defense (ICD), alleging that they did not con-
stitute effective tools for coping with a new stage of cooperation and
democratization (Diamint, 2001; Radseck, 2004). From 1995 onwards, the
OAS attempted to adapt the logic of the Cold War to the new period of
expansion of democracies.
The Hemispheric Security Commission, Resolution 1080, and the Unit
for the Promotion of Democracy were therefore set up. These were followed
by the Inter-American Democratic Charter and several resolutions and dec-
larations. All these are reflections of a different will to achieve hemispheric
cooperation.
Were these reforms effective in administering hemispheric security? Have
they succeeded in dealing with the risks and threats faced by the continent?
This chapter addresses these questions. It begins with a brief reference to the

131

Shaw
132 A More Secure Hemisphere?

OAS reforms since the end of the Cold War. The second section analyses
the new security concepts and their impact on the hemisphere. The third
describes the contradictions that arose as a result of crime fighting. To this
end, three topics will be explored: first, the logic of repression; second, the
lack of political will of leaders; and third, the false dichotomy of favouring
order over security. The fourth point presents the constraints experienced
by the OAS in solving security problems between incomplete states. The last
section concerns the title of this chapter and addresses whether or not the
changes discussed have made the region safer.

A destructured structure

Recurrent internal political crises combined with pressure from the US during
the Cold War had eroded the OAS’s effectiveness and credibility. The organi-
zation’s inability to respond to the Central American conflicts of the 1980s,
its refusal to have anything to do with the War of the Malvinas and its do-
nothing policy towards Cuba, and the US intervention in Grenada in 1983
and Panama in 1989 were signs that revealed the organization’s uselessness.
The persistence of the principles of sovereignty and non-interference in the
internal affairs of other states dominated hemispheric relations, restricting
the organization’s actions.
During the 1980s, Latin America had more faith in its own resources to
solve its problems than in the mediation of an institution dominated by the
US. This was the philosophy behind the Contadora agreement, the alliance
between the Rio Group and the European Union2 and Mercosur, which
created covert competition with the OAS. George H. W. Bush, realizing
the importance of rescuing the hemisphere, encouraged the Enterprise
for the Americas Initiative and attempted to strengthen the OAS.
The OAS’s legal instruments for establishing peace have been overtaken by
events. The Treaty of Reciprocal Assistance developed under the precepts of
the Second World War and the bipolar confrontation of the Cold War. The
Bogota Pact included the principles of the United Nations charter regarding
mediation, conciliation, arbitrage, and the pre-eminence of international
law but was only ratified by 14 countries and never achieved the legitimacy
of the UN. Years later, the 1991 reforms (the Declaration of the Collective
Defense of Democracy or Santiago Declaration, the 1080 Resolution, and
the Democracy Promotion Unit [DPU]) were the expression of a new form
of liaison between countries in the Western Hemisphere that prefigured a
new period of hemispheric relations.3
The Inter-American Convention against Terrorism (ICTE) was created in
1999 on the basis of an Argentine proposal after the terrorist attacks on the
Israeli Embassy (1992) and the Argentinean Israeli Mutual Association
(AIMA) of 1994; the Inter-American Convention Against the Illicit Manu-
facturing of and Trafficking in Firearms, Ammunition, Explosives, and other

Shaw
 Rut Diamint 133

Related Materials (CIFTA) in1998 and the Inter-American Convention on

Transparency of Conventional Weapons Acquisitions (2002), in addition
to the Inter-American Convention against Drug Abuse (ICCAD) of1986.
During the administration of Bill Clinton (1993–2001), the Washington
Protocol that established the suspension and/or exclusion of a member state
that violates the rules of democracy was ratified.
In 2001, under the administration of George W. Bush, the Inter-American
Democratic Charter was signed, institutionalizing the Republican paradigm.
All these changes were positive for strengthening democratic ideals in the
continent. In any case, this did not substantially modify the individual deci-
sions of each of the national governments that continued to prioritize their
national interests over any regional proposal. National interest and bilateral
negotiations continued to be the main tools of external negotiation.
Within this context, one important progression was the incorporation of
cooperative security and the Confidence Building Measures (CBM) at the
bilateral, sub-regional and hemispheric levels (Carter, Perry and Steinbruner,
1992). This model of cooperation in security, drawn from the European
Conference on Cooperation and Security (ECCS), began in Latin America
in 1995 with the Regional CBM Conference held in Chile. This process had
two obvious consequences: on the one hand, it helped new democracies
strengthen civil control of their armed forces. On the other hand, it was
influential in reducing rivalry between nations by making military capacities of
states more transparent.
To complete the structure of hemispheric security, mechanisms were
simultaneously created such as the Conference of Ministers of Defense of the
Americas, which held its eighth meeting in 2008. The aim of these confer-
ences was to confirm the subordination of the armed forces to democratic
authorities. These Conferences created a certain amount of overlapping
between the agendas of the Ministries of Defense and Foreign Affairs, resulting
in a lack of coordination that gave rise to serious political inconsistencies. This
tension was transferred to the OAS, which is trying to become the executive
secretariat of the meetings; this proposal does not have the approval of the
defence ministers.
Thus security matters permeated the process of the Summit of the Americas,
since during the Second Summit, the OAS Commission for Hemispheric
Security was asked to engage in ‘the follow-up and expansion of issues
linked to measures to boost confidence and security’ (OAS, 1999). This infor-
mation would be used to establish new frameworks in the future Special
Conference on Security.
Finally, security has also been part of a national debate that led to sub-
regional agreements such as the Framework Treaty of Central American
Security (1995) and the Regional Plan against Organized Crime and Related
Crimes (2007) drawn up by the System of Central American Integration (SCAI)
and the National Security and Law Enforcement Agency of CARICOM (2006),

Shaw
134 A More Secure Hemisphere?

More recently, the UNASUR Defence Council was organized (2008),

establishing a series of principles, although the purpose of this Council is
as yet unknown. There are also a series of bilateral initiatives for confidence
and security-building measures, transparency, combined operations, and
combined monitoring systems.
An evaluation of all these agencies shows that all aspects of security are
covered. Nevertheless, it is obvious that the lack of safety on the streets
increased, which gradually became a source of political instability and risk
for the population.

A new security paradigm

A few years after the transition to democracy and in the midst of the convic-
tion that coups d’état staged by the armed forces were unlikely to succeed,4
security concerns led to other issues. In 2003, a Security Conference was held
where a new hemispheric frame of reference was expected to be achieved to
jointly deal with the problems of defence and public order.
There was division between OAS members regarding their security
priorities and, therefore, about the main missions of their armed forces.
This disparity was reflected in the Final Declaration of the Special Security
Conference in Mexico, which ended up as a long shopping list that did little
to coordinate the extremely diverse needs and concerns of the states of the
continent. It was a complex agenda that reflected the different realities of
each of the subregions.
The crux of the debate was the overlapping of external defence and
public security tasks. Some representatives argued that the sharp division
between the two fields had been blurred. Separation was a requirement
during the time of the transition to democracy to ensure that the military
did not threaten their own citizens. This situation belonged to the past.
In response to the emergence of armed players that were neither terrorist
groups nor national armed forces (such as gangs, drug traffickers and organ-
ized crime), it was necessary to defend the political stability of nations by
resorting to the state’s instruments of defence.
Other countries rejected the overlapping of public-order affairs with
those of defence, which was activated by the US desire to redirect Latin
American armed forces towards the job of combating drug trafficking, strictly
in keeping with its own interests: ‘calling for cooperation between regional
partners whilst at the same time identifying crucial security matters from an
exclusive and very narrow American point of view’ (Varas, 2008, p. 6). This
particular point of view translated into an obvious interest in modifying
military roles towards police tasks by preparing Latin American armed forces
for the fight against drug trafficking and radical rebel groups (Withers et al.,
2008).5 To this end, as the Washington Office on Latin America (WOLA)
points out, ‘The United States funded the training of 13,076 Latin American

Shaw
 Rut Diamint 135

personnel in 2002, of a total of 34,013 soldiers worldwide (excluding NATO

countries). … The US military trains considerable numbers of police in Latin
America’ (WOLA, 2008, p. 2).
This tension between the military and police functions was transferred to
the OAS. The North American representative suggested that the Inter-American
Defense Board (IADB) should be transformed into the Inter-American Council
of Defense and Security, while its college should become the Inter-American
College of Defense and Security. The organization was engaged in a process
of defining institutional relations between the OAS and the IADB. This
deliberation, which took ten years, ended with the tight consensus that the
Council should be a specialized organization of the OAS (Eastman, 2002)
and that it should not modify either its structure or its name. This ensured
that the OAS’s political representatives would determine the military functions
of their delegates.
Finally, in 2006 and in keeping with this agreement on new threats, the
OAS Secretariat of Multidimensional Security was created with the following
objectives: the abuse limiting the use of psychotropic substances, preventing
crime and violence; reinforcing democratic institutionalism; improving the
juridical and legal issues; and promoting health and education. This secretariat
has four departments which in turn coordinate several offices.
For its part, Canada promoted the concept of human security. The idea
emerged from the 1994 United Nations Development Program Report, which
sought to focus problems on the security of the individual, rather than on state
security alone. Mahbub ul Haq’s concern (Haq, 2008) was that the assistance
offered in countries in conflict usually failed to deal with the suffering and
poverty of the weakest sectors in society (Ball, 2001). In the UNDP Human
Development Report, he states his ideas for human development, human
security and women’s empowerment (Haq, 2008). Canadian Minister of
Foreign Affairs Lloyd Axworth made this the axis of his international coopera-
tion policy and promoted its acceptance among other countries. The Canadian
initiative highlighted the states’ responsibility to protect their populations and
create the conditions for their development by not only dealing with defence
through the military instruments but including other vulnerabilities that affect
the individuals in a state (The Human Security Report, 2005).6
One consequence of that conception definition of multidimensional
security and the notion of human security is that the inclusion of new
social and human aspects in the field of security authorizes human inter-
ventions for protecting the inhabitants of territories in conflict. This was
established through the United Nations proposal on the Responsibility to
Protect (R2P) – promoted by Secretary-General Ban Ki-Moon – which chal-
lenges the traditional principles of Latin America regarding sovereignty and
non-intervention in the internal affairs of other states.
Lastly, the Security Sector Reform (SSR) emerged in the 1990s to address the
necessity to develop and strengthen efficient, effective security institutions

Shaw
136 A More Secure Hemisphere?

that meet the needs of citizens and the state. The SSR includes all the
organizations that have the authority to use and order the use of force,
or the threat of force to protect individuals, groups, and the state: security
forces, the judicial and penitentiary system, the armed forces, and the state’s
foreign policy. This covers four types of global response: political (demo-
cratic control mechanisms of the security sector); institutional (reform of
state institutions); economic (support reforms using economic resources);
and social (call on society to support security sector reforms). This approach
acknowledges the fact that democracy depends as much on development,
the consolidation of peace, and democratization as on the rule of law
and the state’s capacity for democratic control (Schnabel and Ehrhart,
2005, pp. 1–16; Ball and Brzoska, 2004). Although the concept has been
accepted, particularly in the European Union, to improve stability in Africa,
it has been less used in the Latin American context. The case of Haiti is the
only one in which developed cooperating countries promote SSR ideas. But
within the sphere of the OAS, although its criteria were debated, it did not
lead to any political action.
These three new kinds of thought on security – multidimensional, human
and SSR – entail other contradictions. For example, suggesting that the
new threats, concerns, and other challenges of hemispheric security are
transnational in nature and require hemispheric cooperation overlooks
the fact that the greatest shortfall in security is domestic in nature. What
fails centrally is state capacities to provide justice, control illegal migration,
review customs, train police forces, and plan social integration and cohesion
policies. In short, as Secretary-General of the OAS José M. Insulza notes, ‘Most
countries completely lack security plans or policies’ (Insulza, 2008a, p. 3).
The inadvertent consequence of these tendencies is that they authorize
the armed forces to act in spheres that historically have not corresponded
to national defence. Some authors argue that the excessive expansion of the
concept of security to areas that do not traditionally belong to it runs the risk
of making the term meaningless, which results in the potential failure of the
state to protect its citizens (Buzan, Weaver and de Wilde, 1998, pp. 21–47).
Implementing the multidimensional concept is therefore perceived as a
bridge towards the securitization of socio-economic problems and the sub-
sequent militarization of solutions. Chillier and Freeman point out four
factors that contribute to this risk: first, the historical tendency towards
political intervention during authoritarian regimes; second, the US ‘war’
on drugs, which encourages a broader role for the armed forces in ensuring
compliance with the law; third, the crisis of the public security systems
of most of the countries in the region; fourth, ‘the war against terrorism’,
launched by the US, which encourages an expansive, nebulous definition of
terrorism (Chillier and Freeman 2005, p. 1).
Consequently, the modernization of the concept of security places greater
demands on the OAS, since each conceptual advance also implies a new risk

Shaw
 Rut Diamint 137

about which the organization is expected to give a reply. Reviewing the term
therefore provides neither clarity nor solutions. On the contrary, it creates
a broader, more complex agenda that adds regional tensions and hampers
hemispheric cooperation.

Internal security and organized crime

Despite having more institutional resources, all the countries on the con-
tinent are suffering the effects of the increase in violence and organized
crime. Virtually all governments and most studies on the topic agree that
poverty does not create the conditions that lead to the emergence of criminal
gangs.7 It is generally held that the increase in organized crime – as stated
by OAS Secretary-General José Miguel Insulza, too – is due to the increase
in drug consumption, the easy acquisition of firearms, modern communi-
cation and banking systems, the presence of porous borders, the weakness
of institutions linked to the criminal justice system, police corruption, and
a judicial branch which, according to opinion surveys, is regarded as inef-
ficient, slow, and unfair in virtually all the countries in the region (Insulza,
2008). Inequity and social exclusion, among other factors, contribute to
disenchantment, illegality and tolerance towards criminal forms of occupy-
ing a place in society.
Inequality in Latin America is extreme. The average Gini8 coefficient in
Latin America is 0.52, reflecting greater inequality than in Sub-Saharan
Africa (0.46); and obviously higher than the 0.41 of the US, the 0.40 of East
Asia, or the index between 0.25 and 0.35 of European countries. Brazil has
a coefficient of 0.60, reflecting the extreme inequality and discrimination
that offsets the progress of its economy (Barshefsky and Hill, 2008, p. 5). The
richest decile earns 48 per cent of the country’s income while the poorest
decile earns 1.6 per cent (Lustig, 2007, p. 231). This divergence means that
the obvious changes in the macroeconomic profile of Latin America and the
Caribbean go hand in hand with an increase in crime.
Exclusion and social fragmentation, together with the lack of expecta-
tions of improving the quality of life, encourage people to band together in
criminal gangs. This occurs particularly within the young population. Laura
Tedesco remarks that ‘One of the social costs of violence is that paradoxically,
although it creates social capital, it does so perversely. Maras or violent gangs
help young people join groups or communities that have their own codes
and create an identity that neither families nor schools have managed to
give them’ (Tedesco, 2009, p. 8).
In short, the diagnoses have achieved a fairly broad level of coincidences.
However, not even these accurate diagnoses have managed to provide effec-
tive answers to reduce the threat to citizens. Common responses include
proposals that seek the professionalization of the police force, different
forms of policing that tend to provide community responses, the re-education

Shaw
138 A More Secure Hemisphere?

of those affected, and the control of the sale of arms, drugs, and alcohol, etc.
(Buvinic, 2008, pp. 40–50). I would therefore like to draw attention to three
topics that could shed light on some of the sources of this inefficiency. First,
the logic of repression; second, the leaders’ lack of political will, and third, the
false antinomy of favouring order over security.

The repressive response

From the 1980s onwards, a form of discourse began to be structured
whereby drugs were seen as a threat to state security. Former US President
Ronald Reagan had suggested that Congress modify the Posse Comitatus Act
that prohibited the armed forces from enforcing civil laws. Reagan signed
a National Security Decisions Directive that provided assistance to foreign
countries for drug control measures and an increase in military activities to
counteract drug trafficking, which was understood as an issue of national
security. During the George H. W. Bush administration, military participa-
tion was reinforced through a declaration by the Legal Advisory Office
of the Department of Justice authorizing military forces to arrest alleged
drug traffickers outside the US without the approval of the host country,
and an order by Secretary of Defense Richard Cheney to the Pentagon
to assume a leading role in operations against drug trafficking (Bagley,
1993, pp. 181–206).
The design of the Colombia Plan confirmed the militarized, repressive
response to the problem of drug trafficking. As Youngers and Rosin confirm,
‘The narrow approach of the measures adopted by the United States gave rise
to what those familiar with issues in the region generally call “militarization”
which refers to the expansion of the role played by US and Latin American
military forces, to training provided to civil police in military operations and
strategies, and the tendency to prioritize US military and police assistance over
aid for socio-economic purposes or for democratic institutions’ (Youngers
and Rosin, 2005, p. 16).
Thus a threat, which began with the war on drugs, was constructed using
the same friend/foe logic of the past and replaced the threat of the expan-
sion of communism, which was diluted in the early 1990s, with the threat
to public security. With the changes in world power, the so-called national
security ideology was shelved and substituted by a public discourse of Civic
Security as an ideology (Zaffaroni, 2006, pp. 1117–47).
This ideological construction is not new. It was developed by the tradition of
Marxist thought in the late 19th century and completed by Louis Althusser
and Michel Foucault in the twentieth century to explain institutional
mechanisms of social control (Althusser 1988; Foucault 1992). Power rela-
tions are not abstract since they are the expression of a particular moment
in history. In the absence of a modelling doctrine, a role previously filled
by the empire’s opposition to evil, the dominant sectors created another
ideological construction that functions as a moderator for subordinates as

Shaw
 Rut Diamint 139

well as justifying the security apparatuses of the state on which resources

and interests converge. The threat of organized crime is ideological because
it justifies states’ responding repressively by announcing a war on poverty,
and creates confusion between immigration, social movements, terrorism,
and criminality.
The US government led this ideological battle by attempting to solve
political and social problems through improved persecution and penalization.
Its strategy for combating the threat of criminal gangs in Central America
and Mexico (OAS, 2008), the Colombia Plan and the Merida Initiative,
reproduced the militarized response to organized crime (Olson, 2009;
Mckinley, 2009).9
However this repressive logic is not exclusive to the US. It is also common
in other countries. Reducing the age of accountability for crimes, using the
armed forces to establish law and order, building new prisons, purchas-
ing more sophisticated military equipment, fortifying emergency towns,
limiting migration, establishing restrictive visas, recording DNA, and other
methods are means that have already been proved in several countries in the
hemisphere to limit the problem but not solve it.
A study undertaken by three Argentine economists for the World Bank
proves that, contrary to the hypotheses that led to the research, the inclusion
of young people in compulsory military service does not reduce – and in fact
probably increases – the chances of establishing criminal records in adult-
hood (Galiani et al., 2006, p. 17). This is another indicator that repressive
measures do not encourage the integration of gang members or instil more
harmonious norms of coexistence with the established order. On the basis
of their data, the authors conclude that military service has detrimental
effects on the future performance of the labour market and the profits to
be obtained.
A repressive model creates more violence. A WOLA report reflects that
‘Most Central American government policies have treated gangs as enemy
combatants that must be eliminated rather than as the result of various
social problems that should be solved through integral strategies that include
an intelligent application of the law, combined with prevention and reha-
bilitation programs’ (WOLA, 2006, p. 5). A community social vision, with
supportive, horizontal, social links is eschewed in favour of a vertical, hierar-
chical, corporate model, focusing on authority, discipline, and control. Thus,
if the national and international resources assigned for purchasing police
equipment and computer systems, funding the training and mobilization
of troops, and the construction of prisons were directly allocated to creat-
ing institutions, sources of employment, education, inclusive settings, and
housing, the effectiveness of these institutions would be increased. Crime
would not disappear. But it should be quite clear that in Latin America the
state cannot win the war on organized crime if it fails to offer alternatives
to the seductive weapons and money offered by organized crime. Or are we

Shaw
140 A More Secure Hemisphere?

to believe that a 12-year-old boy who consumes paco is the main threat to
regional security (Legrand, 2009)?10

Leadership and political will

Governments have been negligent in dealing with the consequences of
dictatorships. The transition to democracy entailed enormous challenges.
Many governments preferred not to increase the civil management of the
armed forces in order not to add another conflict to the necessary economic
and social reforms linked to the changes in regime. Broad prerogatives were
maintained such as the intelligence sector, legal concessions, the lack of tri-
als for human rights abuses, and the democratization of the police who had
been under military leadership (McSherry, 1998).
Latin American police, who are endemically corrupt and ineffective, are
a product of the political system itself. While they served dictatorship and
authoritarian governments, security forces were strongholds of illegitimacy.
These police, criminal, penitentiary institutions and the justice system itself,
which were previously accessory to the abuses against citizens, cannot be
the linchpin of the application of the Rule of Law.
Democratic consolidation depended largely on reinforcing republican
institutions, one of whose functions is the civil control of the armed
forces. Guillermo O’Donnell created the concept of ‘delegative democ-
racy’ to describe the Latin American government model, in which power
was concentrated in the figure of the president, with a weak parliament
and an apathetic party system. O’Donnell stated that representativeness
deviated towards the introjection of authoritarianism, understood as the
denial of public issues and the effective legality of the democratic state
(O’Donnell, 1992, 1993). This deficit influenced the role of the police as
guarantors of the law, a basic flaw that was compounded by the growing
complexity of illegal organizations which, using resources acquired from
illegal trafficking, made it even more difficult for security forces to establish
law and order.
In short, in Latin America, democracy had raised enormous expectations
but had re-emerged with enormous shortcomings. The political system
tended to exacerbate mistakes rather than establish a form of leadership
firmly committed to republican institutionalism. Within this context, pop-
ulism weakened the construction of democracy since, as former Argentine
President Raúl Alfonsín admitted, the main enemy of democracy was
populism, ‘which, with its promises, won elections yet on failing to ful-
fil them, exacerbated the crisis, discouragement and poverty’ (Alfonsín,
2004, p. 96). Julio Cotler confirms this idea by pointing out that populist
leaders denounced the injustices of the institutional system and gained
power and prestige by promising to fulfil the aspirations of the marginal-
ized populations by basing their legitimization on trust in the leader rather
than in institutions (Cotler, 1995, p. 121).

Shaw
 Rut Diamint 141

Given this situation, the dominant classes opt for laws with a greater
punitive content as the only alternative to social demands. This enables
them to avoid meeting the innumerable demands produced by democracy
and the requirement for inclusion and social cohesion that this political
system creates. Governments’ responses increase discrimination, exclusion,
and authoritarianism. That is why although the OAS convened a conference
of Security Ministers for the first time, this meeting may have very few tangible
effects. The General Secretariat offered a plan based on six lines of work and
three action mechanisms: orientations and assessment for the development
of legislative proposals, public policies, and institutional reforms; construction
of periodic, reliable, and comparable indicators; strengthened rehabilita-
tion and reinsertion; improved police training; involvement of the private
sector in violence prevention, rehabilitation and social reinsertion actions;
collaboration with the mass media. This plan will be achieved by promoting
permanent consultations with governments, coordinating with other inter-
national institutions, and involving civil society and academia (Insulza,
2008, pp. 2, 10–11).11 But the OAS cannot respond unless there is demand
from the member states.
At this stage, one should stop being disingenuous and at least ask
whether this violent tension favours populist leaders who use social
inequality as a campaign slogan, or leaders who use the threat of the
lack of law and order as a source of credibility and legitimacy. Are govern-
ments really willing to combat organized crime? Or, as happened with the
democratization of the armed forces, does avoiding a thorough reform
end up being functional in that it permits the survival of regimes based
on privileges? What additional benefits can be obtained from using
criminal networks as the main source of Latin American and Caribbean
problems?

Neither order nor progress

This section will question the arguments that prioritize order over societal
construction. In other words, I would like to reject the initiatives that
merely stress force, at least as a first stage of democratic construction.
As one can see from the case of Haiti, there are two contradictory types
of logic at work. One assumes that without establishing a certain prior
level of order, internal and external cooperation are wasted. This is
the logic of the countries cooperating in MINUSTAH, the logic of the
Organization for Economic Co-operation and Development (OECD) and,
in more sophisticated terms, what underlies the idea of Security Sector
Reform. The central concern is the low level of effectiveness of inter-
national cooperation in countries undergoing internal conflicts. In order
to resolve this issue, they attempt to ‘pacify’ the country before offering
the basic resources that could inspire hope among the most disadvantaged
populations.

Shaw
142 A More Secure Hemisphere?

The other logic states that unless the population perceives concrete benefits
and everyday improvements, no military response will be able to prevent
violence. This was the experience of the forces operating in Haiti, an argument
repeatedly wielded by the Brazilian commander in charge of the UN military
forces when asked to increase the repression of dissident groups. He said that
there can be no social peace without social cohesion (Ribeiro Pereira, 2007;
Carmona, 2005). This statement does not imply that the forces will not meet
their task of imposing law but rather that force is not the only component
of cooperation or stabilization.
Obviously, measures such as those offered by the OAS General Secretariat
or those proposed by the United Nations Convention against Transnational
Organized Crime (to boost international, coordinated responses; agree on
standards for domestic legislation; combat money laundering; protect wit-
nesses that declare against organized crime, and prevent and combat people
trafficking) are initiatives that can improve the control of international
criminal trafficking. There are also a series of public and private initiatives
that attempt to understand the complexity of the problem and seek more
efficient solutions (WOLA, 2006, pp. 2–3).
International institutions serve to establish these patterns. The problem
is that the application of these guidelines is left in the hands of incomplete
states. Therein lies the main problem of the lack of law and order. In
the Latin American region, there are stateless territories within states. The
authorities do not cover the entire territory, the state does not exist for
many inhabitants, and many abandoned populations are exposed to other
non-state forms of domination. As a top US government official reported,
in Colombia there are 1098 municipalities with no state presence and over
7000 villages with fewer than 1000 inhabitants who do not have a per-
manent presence of police or armed forces.12 In Colombia, there are places
where the state authority has been absent for decades (Villalobos, 2006, p. 1).
Guillermo O’Donnell describes this:

The main issue and problem of the state in Latin America in the past, and
even in a present in which democratic regimes predominate, is that, with
few exceptions, the state fails to penetrate or control its entire territory. It
has implemented a frequently limited form of legality and the legitimacy
of the coercion that supports it is challenged by its scant credibility as an
interpreter and producer of the common good.
(O’Donnell, 2003, p. 149)

The neoliberal model played a role in increasing violence by reducing

the state’s role. Joseph E. Stiglitz, the Nobel laureate in economics, said
‘Washington’s politics of consensus pursued a single goal, to reduce the
state’s role’ (2005, p. 54). Neoliberal policies increased injustice, prompting
the swing to the Left in much of the region (see Cooper and Heine, 2009).

Shaw
 Rut Diamint 143

Moreover, citizens experienced the lack of state protection as a disappointment

with democracy, including the political system and the parties that inter-
vened in it. This spawned both populist expressions and a nostalgia for
authoritarian regimes.
The cases of a number of countries in the region demonstrate the conse-
quences of this absence of state. Although the 1998 Constitution defined
Ecuador as a multiethnic, multicultural state, the Ecuadorian state has been
unable to comply with this legal mandate. Moreover, the armed forces
operate as a substitute state, since they are present in towns where they are
the only state authority present. Bolivia has a historically exclusive, political
tradition that exploded in 2003 and has yet to be re-established, despite the
indigenous legitimacy of President Evo Morales (Mercado Camacho, 2005). As
well, in 2003, President Óscar Berger of Guatemala came to power following
an extremely low voter turnout, since several indigenous peoples feel little
inclination to cast their votes for a traditionally oppressive state (Cabañas,
2007). Similar situations occur in Chiapas, Honduras, and Paraguay. As
Guillermo O’Donnell (2004, pp. 32–47) argues, ‘state legality is absent:
whatever the existing system of norms, it is applied intermittently in the
best of cases’. This imbalance produces political chaos and a breakdown of
public order.
Imposing security and the prevention of conflicts in scenarios with
so many deficiencies would be an impossible task, even if the OAS were
able to set highly rational objectives. Security is not merely a question of
establishing law and order, investing in armed forces or security forces.
If the state does not work for broad sectors of the population, neither
the military nor the police will be able to end the violence resulting
from injustice and exclusion. At least, that would never be possible in
a democracy. The regulations and codes of conduct offered by the OAS
and the United Nations are sound. But multilateral institutions lack the
capacity to ensure compliance or to sanction transgressors. And looking
at some of the proposals being implemented today, in their attempt
to become more effective, multilateral organizations are failing in their
most essential and urgent mission, namely to defend the human, social,
political, and economic rights of the inhabitants of Latin America and the
Caribbean.

An eternally challenged OAS?

The hemisphere advanced in the integration and activation of sub-

regional agreements, despite the fact that many countries have anti-
cooperative concepts of national security, defence, and foreign policy. But
conflicts are increasing and the OAS has shown that it lacks the resources
to cope with them. For example, the Inter-American Democratic Charter,
an initiative proposed by the Peruvian government in 2001 to prevent

Shaw
144 A More Secure Hemisphere?

situations such as Fujimori’s self-imposed coup d’état in 1992, has authority

in the event of the alteration of constitutional and democratic order. In
other words, it is able not only to address instances of coup d’état but
also other political acts that compromise representative democracy. Any
measure that violates the regulations of the rule of law or the separation
and independence of the three branches of government entitles the OAS
to intervene in national government. The democratic charter was applied
in the case of Venezuela following the 2002 coup; during the re-establishment
of the Supreme Court of Justice in 2005, and in support of political
dialogue in Nicaragua (OAS, 2006). Nevertheless, it is the members of
the OAS who have the power to convene and agree on the corresponding
sanctions.
The coup d’état in Honduras in 2009 provided an opportunity to analyse
many of these shortcomings. Honduras – the Central American country least
exposed to the violence of civil wars, although the poorest in comparison
with its neighbours – had shown signs of the approaching constitutional
crisis. Before the internal political deterioration had been revealed, it was
reported that:

The two majority parties in Honduras, the PL and the PN13 have been
affected by a tendency towards internal division and increasing power
struggles; the co-opting of factual groups with enormous economic power
and the deterioration of their relations with civil society organizations,
which has been compounded by the weakness of the Electoral Court. All
this encourages conflictive conditions within the political parties due to
power struggles.
(Medrano, 2009, p. 22)

But it was only when the conflict had broken out that the OAS reacted with
all the force its instruments allowed: its member states condemned the coup
and called for the return of President Zelaya. In response to the de facto
government’s refusal to reinstate Zelaya, OAS members unanimously voted
to suspend Honduras’s membership and the OAS accompanied the negotia-
tion proposed by Costa Rican President Óscar Arias. Nevertheless, all this
legal apparatus appears to be insufficient in nations that are states without
the rule of law.
The structure from which the new role of the OAS should emerge in conflict
prevention is based on three pillars: peace building – the peaceful solution of
inter-state conflicts and the concept of multi-dimensional security linked to
a new agenda of hemispheric security; the protection of human rights; and
the defence and promotion of democracy together with the reinforcement
of representative institutions (Serbin, 2009, p. 20). This is now a greater
challenge than during the Cold War.

Shaw
 Rut Diamint 145

Previously, the enemy was the state, with moderately predictable policies,
which ultimately acted on the basis of international norms, either to
implement or to prevent them, but the normative-institutional framework
existed. Nowadays, the enemies of democracy are also non-state actors who
ignore the rules of the international system. They are linked to the illegal-
ity and the informality of the extra-legal economy entailed by these new
wars (Kaldor, 2001, p. 119–38) and attempt to corrupt government and
co-opt individuals on the basis of a project involving financial power rather
than installing a new political regime. The old agenda of territorial issues,
regional security, and national defence continues, with the addition of new
forms of violence and non-traditional threats.
Within the sphere of the United Nations, progress has been made in R2P
policies to defend the most vulnerable sectors of the population: children,
women, refugees. The UN is committed to a humanitarian agenda that
will reinforce institutions and society (Miller and Rudnik, 2008: 7–10;
see UN, 2005, Para. 9). This approach poses challenges to the OAS. The
future of its effectiveness will be linked to the response member states
provide for social problems involving law and order. If the agenda
remains confined to the principles of sovereignty and non-interference,
the new humanitarian agenda will not be able to be undertaken by the
regional organization. This would therefore alter both the concepts of
multidimensional security and of human security. The OAS’s capacity to
respond to the new threats will be seriously affected and its credibility will
be reduced in the eyes of the community. If, on the contrary, progress is
made on the humanitarian agenda, the OAS must determine the instru-
ments it will use to achieve these objectives without resorting exclusively
to the armed forces. Since the organization only has resources to act after
a conflict has emerged, and has no early warning mechanisms (Milet,
2004, pp. 143–76), one option would be to create a conflict prevention
centre. But centrally, if states don’t yield effective sanction capacity, the
organization will be unlikely to make a difference in combating the multi-
dimensional lack of law and order.
The OAS may only act with the consensus of its members and according to
their instructions. This consensus has never been easy to achieve and is more
difficult now that the hemisphere is profoundly divided politically and ideo-
logically (Hakim, 2009). Multilateral projects must emerge from the domestic
policy of every state. Defence and security must therefore be regarded as state
policies rather than government policies, while both the armed forces and
the police must internalize the notion that they are civil servants. Above all,
nations must complete their institutional development. If certain govern-
ments set illegal rules, if these nations accept leaders who build their power
illegally by challenging republican constitutional principles, if civil society
fails to make a concerted effort to desecuritize the repressive logic, the OAS
cannot be expected to implement the new security agenda on its own.

Shaw
146 A More Secure Hemisphere?

Appendix

Security mechanisms

OAS

Institutions Year Mechanisms Year (Initial)

Meetings of 1948 American Treaty of Peaceful 1948

Consultation of Solutions
Ministers of Defense Advisory Board 1951
Foreign Affairs Inter-American Treaty of Reciprocal 1947
Assistance
Hemispheric 1995 Santiago Declaration on Measures to 1995
Security Promote Reliability and Security
Commission
San Salvador Declaration on 1998
Confidence- and Security-Building
Measures
Miami Consensus, Declaration 2003
by the Experts on Confidence
and Security-Building Measures
Multidimensional 2005 Inter-American Commission for 1986
Security Drug Abuse Control (ICDAC)
Secretariat
Santiago Declaration on Confidence 1995
and Security-Building Measures
Inter-American Convention Against 1997
the Illicit Manufacturing of and
Trafficking in Firearms, Ammunition,
Explosives, and other Related Materials
OAS Register of Anti-Personal 1997
Landmines
Meetings of Ministers of Justice 1997
or Ministers or Attorney
Generals of the Americas (REMJA)
Inter-American Committee against 1998
Terrorism (IACAT)
Inter-American Committee for 1999
the Reduction of Natural Disasters
(ICRND)
Inter-American Convention on 1999
Transparency of Conventional
Weapons Acquisitions
Inter-American Drug Observatory 1999
Inter-American Convention 2002
against Terrorism

(Continued)

Shaw
 Rut Diamint 147

OAS

Institutions Year Mechanisms Year (Initial)

Special Conference on Security 2003

and Declaration on Security in the
Americas
Special Security Conference 2003
‘Declaration on Security in the
Americas’
Special Commission on 2005
Transnational Organized Crime
of the Permanent Council
Special Commission on 2005
Transnational Organized Crime
Combating people trafficking 2006
Office of Humanitarian Mine 2007
Action
Department of Public Security and 2008
Meeting of Ministers Responsible
for Public Security of the
Americas (MISPA)
Deny MANPADS to terrorists 2002

Inter-American 1942
Defense Board
IADB (2005 Review)
Inter-American 1979
Court of Human
Rights (CIDH)

Notes
1. Samuel Huntington (1994, p. 1723) developed the concept of the third democratic
wave to refer to states’ movement towards democracy, begun in 1974 with the
carnation revolution in Portugal and continuing in Southern and Eastern Europe,
Latin America, Africa and Asia. In 1979, Alvin Toffler (1980) had used the concept
to predict the new global phase of capitalism.
2. In 1983, the Contadora Group – Mexico, Panama, Colombia, and Venezuela – met
to promote pacification in Central America. In 1985, Brazil, Argentina, Peru, and
Uruguay formed a Support Group for the Contadora initiatives, known as the
Group of Eight. In 1986, they formed a group to continue supporting efforts to
solve the Central American crisis and provide collective answers to Latin American
issues. Chile, Ecuador, Bolivia, and Paraguay joined in 1990 as well as representa-
tives from Central America and the Caribbean.
3. The Santiago Declaration forces member countries to engage in collective action
if the democratic institutions of a country are threatened. Resolution 1080 states

Shaw
148 A More Secure Hemisphere?

that the OAS Permanent Council will immediately be convened if a country suspends
its democratic process, and that a special session of the General Assembly will be
held within a maximum of 10 days. The UPD is an agency that reports on and
follows up democratic mechanisms.
4. This belief was destroyed by the coup d’état in Honduras on 28 June 2009.
5. See also Hill (2004), Stavridis (2007), and USSOUTHCOM (2008).
6. In order to promote this agenda, the United Nations created the Commission on
Human Security in January 2001.
7. See among others: ‘Promoción de la Cooperación Hemisférica para el Tratamiento
de Pandillas Delictivas’, presented by the Salvadoran delegation with the joint
sponsorship of the delegations of Honduras, Nicaragua, the US, Bolivia, and
Guatemala, and approved during the 12 May 2008 session, OEA/Ser.G, CP/CSH-
990/08 rev. 4 May 2008, p. 2; ‘Organised Crime and Terrorism,’ Standing Group
Organised Crime, European Consortium for Political Research, 12 May 2006,
http://www.essex.ac.uk/ECPR; Alex Stevens and Dave Bewley-Taylor; The Beckley
Foundation Drug Policy Programme (BFDPP), January 2009; Paoli (2008); Luis
Esteban Manrique (2006).
8. This is a measure of inequality devised by Italian statistician Corrado Gini,
where 0 corresponds to perfect equality (everyone has the same income) and 1
corresponds to perfect inequality (one person has all the income and all the rest
have none).
9. In April 2009, auguring an opposite trend to this repressive model, US Secretary
of State Hillary Clinton admitted the joint responsibility of her country, particu-
larly as regards drug consumption and the provision of light arms.
10. The paco is a mix of cocaine, crushed glass, kerosene, chemical product and even
rat poison.
11. The issue was also on the agenda at the Summit of the Americas 2009 in Trinidad-
Tobago (Final Declaration, 2009, Para. 68).
12. Mail interview, 30 January 2008.
13. Honduran Liberal Party (PL) and Honduran National Party (PN).

References
Alfonsín, Raúl (2004) Memoria Política, Buenos Aires: Fondo de Cultura Económica.
Althusser, Louis (1988) Ideología y aparatos ideológicos del Estado: Freud y Lacan. Buenos
Aires: Nueva Visión.
Bagley, Bruce (1993) ‘Los mitos de la militarización: las fuerzas armadas en la guerra
contra las drogas’, in Peter Smith (ed.), El combate a las drogas en América, México,
DF: Fondo de Cultura Económica.
Ball, Nicole (2001) ‘Human Security & Human Development: Linkages and Opportunities’,
Report of a conference organized by the Programme for Strategic and International
Studies, Geneva, Graduate Institute of International Studies, 8–9 March, http://www.
humansecuritynetwork.org/report_may2001_3-e.asp.
Ball, Nicole and Michael Brzoska (2004) ‘Voice and Accountability in the Security
Sector’, BICC Paper 21. Bonn, Germany: Bonn International Centre for Conversion,
http://www.bicc.de/publications/papers/paper21/content.html.
Barshefsky, Charlene and Hill, James T. (eds) (2008) US-Latin America Relations: A New
Direction for a New Reality. Independent task force report No 60, New York, Council
on Foreign Relation.

Shaw
 Rut Diamint 149

Buvinic, Mayra (2008) ‘Un balance de la violencia en América Latina: Los costos
y las acciones para la prevención’, Pensamiento Iberoamericano, Número: 2. Madrid,
pp. 37–55.
Buzan, Barry, Ole Weaver and Jaap de Wilde (1998) Security: A New Framework for
Analysis, Boulder, London: Lynne Rienner Publishers.
Cabañas, Andrés (2007) ‘Guatemala 2007: Elecciones sin población’, Revista Pueblos,
Madrid, 16 de agosto, http://www.revistapueblos.org/spip.php?article632.
Carmona, Ernesto (2005) ‘Recrudecen las críticas a la intervención ONU en Haití’,
Voltairenet.org, 23 de marzo, http://www.voltairenet.org/article124351.html.
Carter, Ashton B., Perry, William J., and Steinbruner, John D. (1992) A New Concept of
Cooperative Security, Washington, DC: Brookings Institution.
Chillier Gastón y Freeman, Laurie (2005) ‘El Nuevo Concepto de Seguridad
Hemisférica de la OEA: Una Amenaza en Potencia’, Un Informe Especial de WOLA,
Washington, DC: julio, pp. 1–16.
Cotler, Julio (1995) ‘Crisis política, “outsiders” y democraduras: El “Fujimorismo”’, en
Carina Perelli, Sonia Picado y Daniel Zovatto (eds), Partidos y clase política en América
Latina en los 90. San José de CR: IIDH-CAPEL, 1995, pp. 117–41.
Diamint, Rut (2001) ‘La OEA ¿debe desaparecer?’, en Archivos del Presente, Buenos
Aires, Año 6, No 22, pp. 81–95.
Eastman, Jorge M. (2002) ‘Análisis de las Respuestas de los Estados Miembros al
Cuestionario sobre los Nuevos Enfoques de la Seguridad Hemisférica, solicitado por
la Presidencia de la Comisión de Seguridad Hemisférica’, OEA/Ser.G, CPSH-430/02
rev.1 Add.1, 10 de octubre, Washington, DC, http://www.oas.org/csh/spanish/
documentos/cp10315s04.doc.
Final Declaration (2009) Declaration of Commitment of Port-Of-Spain, Organization of
American States, 19 April. Available at http://www.summit-americas.org/V_Summit/
decl_comm_pos_sp.pdf.
Foucault, Michael (1992) Microfísica del poder, Buenos Aires: Editorial La Piqueta.
Galiani, Sebastian, Rossi, Martín, y Schargrodsky, Ernesto (2006) ‘Conscription and
Crime’, World Bank Policy Research, Working Paper No. 4037, 1 October.
Hakim, Peter ‘El golpe hondureño a la OEA’, AméricaEconomía.com, 3 de agosto de
2009, http://www.americaeconomia.com/314136-El-golpe-hondureno-a-la-OEA.
note.aspx.
Haq, Khadija (2008) ‘Pioneering the Human Development Revolution: An Intellectual
Biography of Mahbub ul Haq’, Introduction of the book at the New York launch
by the UN Human Development Report Office on October 17, http://hdr.undp.
org/en/media/Mahbub_ul_Haq.pdf.
Cooper, Andrew F. and Jorge Heine (eds) (2009) Which Way Latin America? Hemispheric
Politics Meets Globalization, Tokyo: United Nations University Press.
Hill, James T. (2004) ‘Testimony of General James T. Hill, United States Army
Commander, United States Southern Command, Before The House Armed Services,
Committee’, Washington, United States House of Representatives, 24 March.
Huntington, Samuel (1994) La tercera ola: La Democratización A Finales Del Siglo XX,
Barcelona: Paidós.
Insulza, José Miguel (2008a) ‘Informe sobre la situación de seguridad pública en las
Américas’, Primera Reunión de Ministros en Materia de Seguridad Pública de las
Américas, OEA/Ser.K/Xlix. 1, 7 y 8 de octubre, México DF, México.
Insulza, José Miguel (2008b) ‘Insulza presenta en México Informe sobre la Situación
de Seguridad Pública en las Américas’, Comunicado de Prensa, OEA, C-381-08,
Washington, DC, 7 de octubre.

Shaw
150 A More Secure Hemisphere?

Kaldor, Mary (2001) La nuevas guerras: Violencia organizada en la era global, Barcelona,
España, Tusquets.
Legrand, Christine (2009) ‘En Argentine, des mères se mobilisent contre le “paco”, la
drogue des pauvres – Amériques’. Le Monde.fr. http://www.lemonde.fr/ameriques/
article/2009/03/26/en-argentine-des-meres-se-mobilisent-contre-le-paco-la-drogue-
des-pauvres_1172844_3222.html#ens_id=1170226. 26 de marzo.
Linz, Juan J. and Stepan, Alfred (1996) Democracy and its Arenas, Baltimore: The Johns
Hopkins University Press.
Lustig, Nora (2007) ‘América Latina: la desigualdad y su disfuncionalidad’, en José
Luis Machinea y Narcís Serra (eds) Visiones del desarrollo en América Latina, Santiago
de Chile: CEPAL-CIDOB, pp. 231–46.
Manrique, Luis Esteban (2006) ‘Un poder paralelo: el crimen organizado en América
Latina’, Real Instituto Elcano, ARI No 84/2006, July 25 pp. 1–9.
Mckinley Jr., James C. (2009) ‘US is a Vast Arms Bazaar for Mexican Cartels’, The New
York Times, February 26.
McSherry, J. Patrice (1998) ‘The Emergence of Guardian Democracy’, NACLA, Vol. 32,
No. 3, noviembre-diciembre 1998, pp. 16–24.
Medrano, Celia, Daniel Matul, David Morales, Alonso Ramírez Cover,José Manuel
Ugarte, (2009) Conflictividad y focos de conflicto en Nicaragua, Guatemala, Honduras y
El Salvador: Una evaluación preliminar, Buenos Aires: Editorial CRIES.
Mercado Camacho, Orlando (2005) ‘Visiones contrapuestas de país’, Los Tiempos,
Cochabamba, Bolivia, 2 de febrero.
Milet, Paz Verónica (2004) ‘El rol de la OEA. El difícil camino de prevención y reso-
lución de conflictos a nivel regional’, Pensamiento propio, Buenos Aires, Editorial
CRIES, No 9, enero-junio, pp. 143–78.
Miller, Derek B. and Rudnik, Luisa (2008) The Security Needs Assessment Protocol:
Improving Operational Effectiveness trough Community Security, Geneva, UNIDIR,
April.
OAS (2008) ‘United States Strategy for combating the threat of criminal gangs in
Central America and Mexico’, presented at the Special Session for Analyzing
the Phenomenon of Criminal Gangs’, held on 17 January. OEA/Ser.G, CP/CSH/
INF.148/08, p. 2.
OAS (2006) ‘La stabilité démocratique dans les Amériques: le rôle institutionnel de
l ⫻ OEA’ Funglode, Ministère des Affaires étrangères et du Commerce international
du Canada, Santo Domingo, 3 June.
OAS (1999) ‘Programa de trabajo de la Comisión de Seguridad Hemisférica con miras
a la preparación de la Conferencia Especial sobre Seguridad’, Organization of
American States, RES. 1643 (XXIX-O/99), 7 June.
O’Donnell, Guillermo (1992) ‘¿Democracia delegativa?’ Cuadernos de CLAEH No. 61,
Montevideo, pp. 9–19.
O’Donnell, Guillermo (1993) ‘Acerca del estado, la democratización y algunos prob-
lemas conceptuales. Una perspectiva latinoamericana con referencia a países posco-
munistas’, Desarrollo Económico: Revista de Ciencias Sociales No 130, Buenos Aires,
IDES, julio-septiembre, pp. 163–84.
O’Donnell, Guillermo (2003) ‘Gobierno y estado en América Latina: Algunos problemas
y desafíos’, Anuario Elcano América Latina 2002, Madrid, España, pp. 142–53.
O’Donnell, Guillermo (2004) ‘Why the Rule of Law Matters’, Journal of Democracy, vol.
15, No. 4, 2004, pp. 32–46.
Olson, Georgina (2009) ‘Hillary juzga intolerable la narcoviolencia’, Diario Excelsior,
México, 28 de marzo.

Shaw
 Rut Diamint 151

Paoli, Letizia (2008) ‘Organized Crime: New Label New Phenomenon Or Policy
Expedient?’ Annales Internationales de Criminologie, Vol. 46, No 1/2, pp. 37–60.
Radseck, Michael (2004) ‘El sistema interamericano de seguridad: ¿quo vadis?
Posiciones del Cono Sur a la luz de la Conferencia Especial sobre Seguridad
Hemisférica’, presentación, Segundo Congreso Latinoamericano de Ciencia Política,
Asociación Latinoamericana de Ciencia Política (ALACIP), 29, 30 septiembre y 1 de
octubre, Ciudad de México, http://www.giga-hamburg.de/dl/download.php?d= /
content/ilas/pdf/radseckalacip04.pdf.
Ribeiro Pereira, Augusto Heleno (2007) ‘El componente militar en la Misión de las
Naciones Unidas para la Estabilización en Haití’, Military Review, enero-febrero
2007, pp. 2–33.
Schnabel, Albrecht and Ehrhart, Hans-Georg (2005) ‘Post-Conflict Societies and the
Military: Challenges and Problems of Security Sector Reform’, in Albrecht Schnabel
and Hans-Georg Ehrhart (eds) Security Sector Reform and Post-Conflict Peacebuilding,
Tokyo, New York, Paris: United Nations University Press, pp. 1–16.
Serbin, Andrés (2009) ‘La Organización de los Estados Americanos, las Naciones
Unidas, la sociedad civil, y la prevención de conflictos’, Documentos CRIES, No 11,
Buenos Aires, marzo.
Stavridis, James G. (2007) ‘The Posture Statement of Admiral James G. Stavridis,
United States Navy Commander, United States Southern Command, Before The
110th Congress’, Washington, 21–22 March.
Stevens, Alex and Dave Bewley-Taylor with contributions from Pablo Dreyfus
(2009), ‘Drug Markets and Urban Violence: Can tackling one reduce the other’,
The Beckley Foundation Drug Policy Programme, January. Online at: http://www.
beckleyfoundation.org/pdf/report_15.pdf.
Stevens, Alex and Bewley-Taylor, Dave ‘Drug Markets and Urban Violence: Can
Tackling One Reduce the Other?’
Stiglitz, Joseph E. (2005) ‘Le cap des réformes: Vers un nouveau programme pour
l’Amérique latine’, Revista de la CEPAL, Santiago de Chile, Número Especial, junio,
pp. 35–70.
Tedesco, Laura (2009) ‘Violencia urbana: Un desafío al fortalecimiento institucio-
nal. El caso de América Latina, Working Paper No 78, FRIDE, Madrid, España,
pp. 1–28.
The Human Security Report 2005: War and Peace in the 21st Century, University of British
Columbia, Canada, New York, Oxford: Oxford University Press, http://www.human
securityreport.info/index.php?option=content&task=view&id=28&Itemid=63.
Toffler, Alvin (1980) La Tercera Ola, Barcelona: Plaza & Janés.
UN (2005) ‘Resolution 60/1’, United Nations General Assembly, 16 September,
A/RES/60/1.
USSOUTHCOM (2008) ‘The United States Southern Command (USSOUTHCOM)
Command Strategy for 2018. Partnership for the Americas’, December. Available at
http://www.southcom.mil/AppsSC/files/0UI0I1177092386.pdf.
Varas, Augusto (2008) ‘Latin America and the US: An Agenda Adrift’, FRIDE Comment,
Madrid, June, pp. 1–8.
Villalobos, Joaquín (2006) ‘Colombia en negociación, desmovilización, reconciliación
y guerra’, Fundación Ideas para la Paz, Bogotá, Colombia, Comentarios, www.ideaspaz.
org/publicaciones.
Withers, George, Isacson, Adam, Haugaard, Lisa, Olson, Joy, and Fyke, Joel (2008)
‘Ready, Aim, Foreign Policy: How the Pentagon’s Role in Foreign Policy is Growing,
and Why the Congress, and the American Public Should be Worried’, A joint project

Shaw
152 A More Secure Hemisphere?

of the Center for International Policy, the Latin America Working Group Education
Fund, and the Washington Office on Latin America, Washington, DC March.
WOLA (2006) ‘Pandillas juveniles en Centroamérica: Cuestiones relativas a los dere-
chos humanos, la labor policial efectiva y la prevención’, Informe Especial de Wola,
Washington, DC, Octubre.
WOLA (2008) ‘Themes and Debates in Public Security Reform: A Manual For Civil
Society, Criminal Investigations’, Washington Office on Latin America, Washington,
DC, November 10.
Youngers Coletta A. and Rosin, Eileen (2005) “La «guerra contra las drogas» impul-
sada por Estados Unidos: su impacto en América Latina y el Caribe, en Coletta A.
Youngers y Eileen Rosin, editoras, Drogas y democracia en América Latina: el impacto
de la política de Estados Unidos, Buenos Aires: Editorial Biblos, pp. 13–28.
Zaffaroni, Eugenio Raúl (2006) ‘La Legitimación del Control Penal de los Extraños’,
en Cancio Meliá y Gómez-Jara Díez (coordinadores), Derecho Penal del Enemigo. El
Discurso Penal de la Exclusión, Vol. 2. Madrid: EDISOFER S.L., pp. 1117–47.

Shaw
8
Poverty Reduction and the Role of
Regional Institutions
Nicola Phillips

From the 1970s onwards, the proposition that development cannot be

approached purely as a matter of economic growth became conventional
wisdom in both scholarly and policy debates. These debates yielded a flour-
ishing of alternative approaches to development that proposed to supplant
the established focus on growth with a commitment to ‘human’ or ‘people-
centred’ development, and the problem of poverty moved to the heart of
this agenda. This focus on poverty evolved through its early expression in
the ‘basic needs’ framework and the ‘human development’ agenda associ-
ated with the work of the United Nations Development Programme (UNDP),
to its explicit articulation as the centrepiece of the global development
agenda, encapsulated in the Millennium Development Goals (MDGs) at the
start of the 2000s.
It is unsurprising that these trends in development thinking should have
been reflected both in national development strategies across Latin America
and the Caribbean (LAC) and in the inter-American agenda. From the mid-
1990s onwards, the Inter-American Development Bank (IDB) became, with
the World Bank, the institutional protagonist in elaborating and promoting
a poverty reduction agenda for the region, and subsequently the MDGs
were centrally integrated into the Summit of the Americas process after their
unveiling in 2000. An important part of an evaluation of the role and effec-
tiveness of regional institutions in the contemporary period, as well as the
wider agenda for inter-American cooperation encapsulated in the Summit
process, concerns the record of poverty reduction strategies. It is argued
here that this record reflects negatively on the institutions and strategies
which have shaped the social and economic trajectory of the region in the
contemporary period. The positive ‘headline’ news on poverty reduction for
the region as a whole since the start of the twenty-first century masks the
persistence and, at times, deepening of poverty for large parts of LAC societies.
This is particularly the case when poverty is measured not solely in terms of
per capita and household income, but also with reference to the absence of a
wide range of opportunities and ‘freedoms’ (Sen, 1999).
153

Shaw
154 Poverty Reduction and the Role of Regional Institutions

This chapter sets out to justify this critical appraisal of the record on poverty
reduction in the region, and considers why the poverty reduction strategies
of the IDB and other regional institutions have met with scant success.
It suggests that the explanations that are usually given, which focus on the
political and institutional problems which have impeded effective imple-
mentation at the national level, offer only a partial and rather distorted
understanding of the poverty reduction agenda and its results. Rather, this
chapter argues that the poor record of the poverty reduction agenda owes
much to the problematic conceptual basis on which the institutions have
articulated their strategies. On the one hand, the emphasis on national-level
politics obscures the ‘vertical’ dimensions of poverty dynamics (Ponte, 2008)
associated with the terms of incorporation of Latin American economies,
producers, and workers in global production networks (GPNs) and associated
labour markets. The argument here pivots on the notion of ‘adverse incor-
poration’, which stands as a challenge to the IDB’s and other institutions’
emphasis on ‘exclusion’ (from globalization) as the cause of persistent pov-
erty, and by extension greater ‘inclusion’ as the strategic priority for poverty
reduction. On the other hand, the focus in both the regional poverty reduc-
tion agenda and more widely the MDGs prioritizes poverty in its ‘absolute’
incarnations, neglecting its complex structural connections with ‘relative’
poverty – that is, with socio-economic and other forms of inequality. It is
thus suggested that alongside any due consideration of national-level politics
and institutions, recognition of the importance of these ‘vertical’ and struc-
tural influences is central to an adequate understanding of poverty dynamics
in the region; indeed, their omission from policy frameworks developed by
the IDB and other institutions constitutes an important explanation for the
shortcomings of the poverty reduction agenda.
The discussion proceeds in three sections. The first offers an empirical
summary of the nature and trajectory of poverty in the region as a backdrop
to the discussion. The second considers the approach and strategies of the
regional institutions (principally the IDB) in relation to poverty reduction.
The third seeks to advance an explanation for the shortcomings of the record
on poverty reduction, emphasizing the links with the functioning of global
value chains and global labour markets, and the associated connections with
the dynamics of inequality.

Poverty in Latin America and the Caribbean

The problems and pitfalls of measuring poverty have been amply docu-
mented. Differing methods of measurement yield sharply different esti-
mates of overall global, regional, and national levels of poverty and
contradictory interpretations of observed trends. The most common mea-
surement of ‘absolute’ poverty – that is, the absence of the basic necessities
for human survival – relies on a calculation of ‘purchasing power parity’

Shaw
 Nicola Phillips 155

(PPP),1 and the standard categorization of absolute poverty is the propor-

tion of the population existing on the PPP equivalent of US$ 1 per day.
Using this system, most estimates have indicated a fall in overall global
poverty levels over the 2000s: although the number of people living below
the PPP US$ 1 per day line has risen, world population growth has meant
that levels of global poverty have in fact fallen. However, these improve-
ments have been almost entirely the result of strong economic performance
in East Asia, especially in China. The population living below the PPP
US$ 1 per day poverty line has increased significantly in most other parts
of the world, and the recorded increase has been even greater using the
PPP US$2 per day measurement (World Bank, 2002a; Kaplinsky, 2005). Yet
the figures are disputed: some contend that World Bank figures represent a
considerable overestimate of global poverty levels (Sala-i-Martin, 2002) and
others that they may be a substantial underestimate, not least because the
PPP US$ 1 per day line is considered an absurdly low baseline (Reddy and
Pogge, 2003; Wade, 2004; Kiely, 2007; Reddy, 2008).
The regional picture mirrors these trends. It is generally accepted that the
proportion of the region’s population living in poverty is declining, with the
figures for the 2000s indicating substantial progress, especially in reducing
extreme poverty. Yet it is unquestionably the case that ‘lost in the statements
about progress are serious discrepancies in the available data, questions about
the correct methodology for measuring poverty, and overgeneralizations
about regional progress’ (Helwege and Birch, 2007, p. 1). The discrepan-
cies between the data generated by the World Bank and the UN Economic
Commission for Latin America and the Caribbean (ECLAC) do not differ
substantially in their depiction of trends, but they feature very stark discrep-
ancies in their assessment of levels of poverty in the region. In the middle of
the 2000s, for instance, ECLAC put moderate poverty levels at around 40 per
cent of the total population, and the World Bank at around 20 per cent. The
former arrives at its figures based on estimated costs of a basic food basket,
while the latter uses the PPP-based system of measurement (Helwege and
Birch, 2007). The problems for accurately assessing regional poverty in this
context are clearly considerable.
Yet, to avoid falling at the first hurdle, let us here take the data produced
by ECLAC and published annually in its ‘Social Panorama of Latin America’
report to gain an impression of the profile and trajectory of poverty in the
region. The 2008 report estimated the proportion of the region’s population
living in poverty in that year to stand at 34.1 per cent (184 million people),
and those living in conditions of extreme poverty or indigence at 12.6 per
cent (68 million). Since 2002, the decline in regional poverty levels was
described in the report as ‘remarkable’: 9.9 percentage points in the case of
poverty and 6.8 points in the case of indigence. The overall trend since 1990
has also been to declining levels of poverty, but the highest incidence was
recorded in 2002 and the bulk of the decline has been recorded since that

Shaw
156 Poverty Reduction and the Role of Regional Institutions

time (ECLAC, 2008, pp. 10–11). By 2007 the region, taken as a whole, looked
highly likely to yield figures for poverty reduction which met the first target
of the MDGs.
Yet these aggregate figures are ultimately misleading. The data are heavily
skewed by trends in the large economies, specifically in Mexico and Brazil.
Those two countries, along with Chile and Ecuador (the latter using data
for urban poverty), had already met the first MDG in 2007, with Costa Rica
close behind.2 ECLAC then reported progress towards the MDG targets that
had been faster than expected in a handful of other countries: Venezuela,
Colombia, El Salvador, Nicaragua, and Peru. Yet, by 2008, the remaining
countries of the region were showing few signs of approaching the targets.
It is thus clear, as ECLAC conceded, that the ‘subsidy’ represented by Brazil,
Mexico, and Chile – which together account for around 60 per cent of the
region’s population and have all already exceeded the target of the MDGs –
distorts the regional picture substantially. Assessments of the levels of growth
that would be required for the region as a whole to meet the first MDG are
consequently very low (ECLAC, 2008: 15).
Equally, the achievement of the goal by ‘the region’ would not indicate
significant poverty reduction in all the countries encompassed within it, nor
necessarily for a significant proportion of the region’s poor. Indeed, it may
mask a persistence or worsening of poverty levels for large parts of the poor
population. For the Dominican Republic, for instance, ECLAC recorded
poverty levels of 47.1 per cent for 2002, 44.5 per cent for 2006, and 44.5 per cent
for 2007. Indigence levels for the same years were recorded as 20.7 per cent,
22 per cent, and 21 per cent. For Paraguay, the stasis is comparable: poverty
levels were recorded as 61 per cent in 2001 and 60.5 per cent in 2005 and
2007; indigence levels for the same years were 33.2 per cent, 32.1 per cent,
and 31.6 per cent. Especially given the small size of these two countries’
populations, these figures indicate at best negligible progress in terms of the
numbers of people lifted out of poverty and indigence since the start of the
decade. Likewise, for Uruguay, data on indigence in urban areas registered
a rise between 2002 and 2005, but then a slight fall by 2007; nevertheless
poverty levels exhibited an increase of some three percentage points over
this period.
This aggregate data also conceals substantial variations in patterns and
levels of poverty between particular groups in society. Women are in the
majority among the populations vulnerable to poverty and indigence, also
disproportionately carrying the burden of dealing with poverty, as recog-
nized in the now influential ‘feminization of poverty’ discourse (Chant,
2008). Likewise, poverty among indigenous groups is substantially higher
across Latin American societies. The general point is that poverty is strongly
associated with patterns of disadvantage, discrimination, and inequality
operating along diverse axes, including gender, age, ethno-racial identity, and
migration status.

Shaw
 Nicola Phillips 157

Approaches to poverty reduction and the role of

regional institutions

Since the mid-1990s, there has been a significant refocusing of both national
and international strategies under the ‘poverty reduction’ banner. At the
national level, a restructuring of welfare regimes and the emergence of
new forms of social assistance have been implanted across the region, the
Brazilian Bolsa Escola/Familia, the Mexican Progresa/oportunidades and the
Chilean Chile Solidario programmes being among the most visible examples
(Barrientos, 2009). These national-level initiatives have been accompanied
and supported by a central concern with poverty reduction strategies in
regional institutions and within the inter-American agenda. The IDB’s first
major statement on the subject appeared in 1997, and, after a flurry of reports
and papers on the subject in between, an updated document was issued in
2003 which outlined a strategy ‘to promote poverty reduction and social
equity as well as environmentally sustainable growth’ (IDB, 1997; 2003b).
The 1997 document set out clearly the IDB’s conceptual understanding
of poverty. The aim was stated baldly on the first page of the document,
‘to help the poor earn their way out of poverty’ (IDB, 1997, p. 1), to which
end the strategy was formulated as one of helping to enhance the inclusion
of the poor in labour markets, increase their productivity, and cajole the
private sector into cooperating with this agenda by providing better quality
employment opportunities. The 2003 document preserved this market-based
understanding of the causes of and remedies for poverty, but claimed to have
updated this into a more ‘multidimensional’ approach which incorporated
issues of income, participation, vulnerability, and quality of life. An integrated
strategy would therefore involve mobilizing this multidimensional concep-
tion of poverty and emphasizing the issues of equity (and its consequences
for poverty), social protection, social exclusion, the institutional capacity of
states in respect of policy formulation and implementation, and the centrality
of poverty reduction in all areas of the Bank’s activities (IDB, 2003b, p. 14).
The resulting strategy since that time has emphasized lending strategies to
support poverty reduction strategies at the national level. First, the IDB has
collaborated with the World Bank, International Monetary Fund (IMF), and
other multilateral and bilateral agencies in the Poverty Reduction Strategies
(PRS) process, under which poverty reduction assistance and debt relief to
poor countries were tied to their governments’ preparation and implemen-
tation of a poverty reduction strategy paper (PRSP). The PRS approach was
adopted in 1999 as a comprehensive, ‘locally-owned’ approach to poverty
reduction, encapsulating the market-oriented approach to poverty reduction
built around three key components: ‘promoting opportunity’ and pursuing
‘pro-poor growth’; ‘facilitating empowerment’, particularly by promoting
‘good governance’; and ‘enhancing [human] security’, involving such areas
as health, education, and sometimes ‘social safety nets’ or ‘social protection

Shaw
158 Poverty Reduction and the Role of Regional Institutions

measures’ (Craig and Porter, 2003, pp. 53–4). The four countries identified in
the ‘highly indebted poor countries’ (HIPC) initiative were obliged to parti-
cipate (Bolivia, Guyana, Honduras, and Nicaragua), and a range of other
countries (Belize, the Dominican Republic, Guatemala, Paraguay, and Peru)
were also involved in the PRS process over the 2000s.
The second emphasis has fallen on supporting social policy schemes aimed
particularly at social assistance programmes such as those outlined above,
which were promoted as ‘a key element in the fight against the intergenera-
tional transmission of poverty and inequality and … good complements to
efforts to increase the quality and coverage of health and education services
through supply-side interventions’ (IDB, 2003a, p. 19). Education and health
sectors constituted the priority areas for IDB investment strategies. A third
strategic focus on ‘improving tax revenues for equity’ and associated institu-
tional reforms has aimed to create macroeconomic conditions favourable to
sustaining these poverty reduction strategies based on social assistance and
conditional cash transfer schemes.
Yet the primary emphasis in this market-based understanding of develop-
ment has continued to fall heavily on employment – that is, the opportunity
for the poor to exploit their key endowment of labour – as the primary means
to realizing human development potential and reducing poverty. In this
respect, the contemporary poverty reduction agenda deviates very little from
the much earlier basic needs and human development agendas, which took
shape from the 1970s onwards (Payne and Phillips, 2009). The IDB empha-
sizes the importance of ‘close collaboration with the private sector’ in order
to further the goals of inclusion of the previously ‘excluded’ in the labour
market (IDB, 2003a, p. 21). One of the most visible new initiatives to this
end, promoted by the IDB and a range of other multilateral and donor orga-
nizations from the 1990s onwards, involved the expansion of ‘microcredit’
schemes – an ‘entrepreneurial’ model of development which aimed to provide
the poorest in society, particularly women, with the possibilities of setting up
and sustaining small businesses (see Ferguson, 2007).
The goals relating to education and health policy are also clearly tied into
this casting of the poor as actual or potential workers, increasing their skill
levels and capacity to function effectively in the labour market. Notably, this
point has been highlighted as a critique from within the IDB itself. An evalu-
ation report of 2003 drew particular attention to the instrumental nature of
the market-based strategy in taking other goals of social development, such
as health and education, as a ‘means to an end’: such interventions would
improve the productivity of poor workers and consequently their income-
earning capacities as a means to contribute to the overall goal of economic
growth (IDB, 2003c, p. 7).
The conceptual foundations of the regional poverty reduction agenda
are clear. First, the dynamics of poverty and the substance of the poverty
reduction agenda are articulated in strongly national terms, built as they are

Shaw
 Nicola Phillips 159

around the PRS approach and the national-level reform of welfare systems
and social policy. Likewise, the bulk of assessments of the record of the
poverty reduction agenda locate explanations in national-level politics and
institutions, in either a positive or a negative sense: the positive evaluations
would be enthusiastic about the social policy innovations of various leftist
governments, such as those of President Luiz Inácio Lula da Silva in Brazil
or Hugo Chávez in Venezuela; the negative ones would focus on the myriad
political and institutional impediments to effective implementation, policy
consistency, and/or constructive relations with regional and international
donors. The market-based understanding of poverty necessarily takes some
account of ‘globalization’, but again this is usually cast in nationalized terms.
The goal of ‘promoting inclusive globalization and regional integration’ (IDB,
2003b, pp. 22–3) is to be furthered through macroeconomic coordination
and ‘appropriate’ forms of exchange rate, investment and trade policy; that
is, through national-level interventions to deal with the implications for the
poor of the functioning of markets. Again, the failures of implementation in
these policy areas are often offered as an explanation for the uninspiring out-
comes of poverty reduction strategies. To this extent, the poverty reduction
agenda has been consistent with the overall thrust of the neoliberal develop-
ment framework within which it is encased; that is, it has constituted a
programme of internal reform which has excluded any serious consideration
of the ways in which the workings of the global economy condition both the
causes and the dynamics of poverty.
Second, the ‘causes’ of poverty are strongly related to notions of ‘exclusion’ –
as both a general issue of social exclusion or marginalization and as a more spe-
cific, although intrinsically related, issue of exclusion from the labour market.
The poverty reduction agenda is thus articulated as one of achieving greater
levels of ‘inclusion’, in order, as the World Bank (1990) put it, to enhance the
‘productive use of the labour of the poor’. Such a conceptual frame conforms
with the orthodox view, which has achieved prominence in the interna-
tional development community, that the poor are those who have failed
to engage with globalization and that a ‘deepening’ of globalization will
lift nearly (and eventually) all of the world’s poor out of destitution (see
Kaplinsky, 2005, p. 49; Milanovic, 2003). A direct connection is posited
between the acceleration of globalization and liberalization and a decline
in the absolute numbers of people living in poverty and indigence across
the world. The case is therefore made for an expansion of globalization
and the elaboration of strategies that will enable the benign forces of globali-
zation to reach the world’s poor more effectively (World Bank, 2002a, 2002b;
Dollar and Kraay, 2002; Sala-i-Martin, 2002).
Third, the accent in the poverty reduction agenda is on poverty in its
‘absolute’ manifestations, largely disconnected from the problem of ‘relative’
poverty (inequality). The connections between the two are well recognized
in scholarly research and indeed in policy debates within and between

Shaw
160 Poverty Reduction and the Role of Regional Institutions

institutions, and the IDB has perhaps gone furthest of all the multilateral
institutions towards recognizing the importance of inequality in its focus on
‘equity’ and ‘social exclusion’. Nevertheless, the resulting policy frameworks tend
systematically to marginalize questions of inequality – their absence is particu-
larly striking in the MDGs – and/or to focus on economic inequalities without
sufficient attention to their complex relationship with other forms of inequal-
ity, particularly those relating to gender, ethno-racial identity, and migration
status. The assumption is that economic inequalities are amenable to redress
through a form of market-based ‘empowerment’ (that is, through the extension
of employment and entrepreneurial opportunities), and that this empower-
ment will have a ‘trickle-down’ effect, as it were, on other forms of inequality.
Let us turn now to consider the problems and implications of this con-
ceptual frame in more detail. The first and second points – the focus on the
national level and the emphasis on an exclusion/inclusion duality – form the
basis for a set of arguments concerning the ‘vertical’ dynamics of poverty,
focusing in particular on the workings of global value chains and associated
labour markets. The third – the interest in absolute poverty at the expense
of relative poverty – invites a consideration of the links between poverty and
inequality that need to be incorporated into an adequate understanding of
poverty dynamics and appropriate remedies.

‘Adverse incorporation’ and the ‘vertical’ dimensions

of poverty

The critique of the orthodox view of poverty outlined above is well established
in academic debates. Poverty in this view is cast as a ‘residual’ phenomenon –
the result of exclusion from globalization processes, and amenable to
resolution through the extension of (labour) markets and appropriate sup-
porting policy interventions. The thrust of critical arguments has been that
poverty is instead a ‘relational’ phenomenon (Bernstein, 1990; Kaplinsky,
2005), which is in important respects generated and reinforced by global-
ization processes. Not disputing partial improvements in data on poverty,
and accepting that the general direction has been towards a reduction in
the proportion of the world’s population living in poverty, the contention
is that there is no directly causal or uniformly positive association between
global socioeconomic restructuring and patterns of poverty, and indeed that
globalization has acted to perpetuate poverty and vulnerability to poverty
at least as much as it could be said to have contributed to its lessening. The
picture, in other words, is substantially more mixed than the orthodox view
allows. The task is therefore to understand how exactly the relationship
between global socio-economic change and the dynamics of poverty works,
and sophisticated studies have taken up this challenge.
These ‘residual’ and ‘relational’ notions of poverty are related to a further
set of concepts which are of particular value to the present discussion, namely,

Shaw
 Nicola Phillips 161

those of ‘social exclusion’, on the one hand, and ‘adverse incorporation’,

on the other. Social exclusion became established in debates about poverty
from the 1970s onwards as a way of understanding its social roots and the
‘multidimensionality’ of deprivation (see Hickey and Du Toit, 2007; de Haan,
1999). Indeed, we have seen the emphasis placed by the IDB and other organi-
zations on the causal links between social exclusion and poverty. The notion
of ‘adverse incorporation’ was proposed subsequently as a corrective to the
perceived emphasis in the social exclusion discourse on the ‘residual’ rather
than the ‘relational’ dimensions of poverty, which, according to the pro-
ponents of the adverse incorporation perspective, impeded an appropriate
understanding of how particular kinds of power relations underpin poverty
(Hickey and du Toit, 2007, p. 5). The further, insightful objection was that
by the late 1990s the growing prominence of the social exclusion discourse
had come to displace the notion of ‘exploitation’ in explanations of the
causes and dynamics of poverty (Byrne, 1999, pp. 44–59; Hickey and du
Toit, 2007, p. 5) – a displacement immediately conducive to legitimizing an
approach to poverty based on the extension of market forces.
The notion of ‘adverse incorporation’, by contrast, leads us to focus not
on a condition of socioeconomic ‘exclusion’ as the principal determinant
of poverty and marginalization, but rather on the terms on which different
social groups are included and incorporated into global economic activity.
That is, it is often the case that poor people are not in fact ‘excluded’ from
markets or indeed societies, but rather are included on adverse terms in
ways that either perpetuate conditions of chronic poverty or heighten
their vulnerability to ‘transient’ forms of poverty. Both chronic poverty and
transient poverty are in this sense intimately linked to the terms of inclusion,
which may in some circumstances be beneficial for the poor and may in
others amount to forms of ‘adverse incorporation’ which are both neglected
and obscured by the ‘residual’ understanding of poverty and its emphasis on
an exclusion/inclusion duality.
This notion of adverse incorporation and its complex relationship with
social exclusion therefore provides us with a useful platform from which to
think about the ‘vertical’ influences on poverty, and indeed to challenge a
predominantly state-centric focus in our understandings of poverty (Ponte,
2008). The question, from this perspective, concerns the relationship
between the workings of GPNs and the dynamics of poverty and margin-
alization, and concretely how the terms of incorporation into GPNs shape
the actual and potential relationships between the processes of economic
upgrading in GPNs and particular social trends associated with poverty,
marginalization, and exploitation (Barrientos et al., 2008). As we have seen,
the poverty reduction agenda orchestrated by regional and international
institutions, in Latin America and the Caribbean as elsewhere, rests on an
assumption that processes of economic upgrading and greater inclusion in
GPNs will lead to processes of social upgrading, with employment being the

Shaw
162 Poverty Reduction and the Role of Regional Institutions

key mechanism for lifting people out of conditions of poverty. The focus
on adverse incorporation instead contends that economic upgrading is at
least as often associated with social downgrading as a result of the dis-
advantageous terms on which poor producers and workers are incorporated
into the (labour) markets associated with particular sectors. The terms on
which incorporation takes place are consequently of decisive importance in
shaping the relationship between global economic restructuring and social
upgrading, and the task for poverty reduction agendas is to take due account
of what Stefano Ponte (2008, p. 27) calls the ‘normal functioning’ of global
value chains (GVCs). The pressures arising from competition between firms
and the pronounced squeezing of suppliers by retailers to reduce costs and
therefore maximize profit are among the characteristics of this ‘normal
functioning’ which produce the ‘symptoms’ of poverty and deprivation
(Ponte, 2008, p. 27).3
The social consequences of economic restructuring are also shaped by the
functioning of particular kinds of labour markets. In the Latin American
and Caribbean context, ECLAC (2008) has well documented that the bulk
of progress in alleviating poverty and indigence over the 2002–7 period was
due to an increase in the average household income, driven predominantly
by labour income. In most cases, including in those countries which regis-
tered the highest reductions in poverty levels, the increase in labour income
was due to a rise in the wages of the employed person(s), whereas in others,
including those where levels of change have been negligible, the key factor
was the net employment rate, even while wage levels played a part. While
unemployment rose considerably across the region during the 1990s, there is
evidence of a decline in urban unemployment in the majority of the region’s
major cities. It should nevertheless be noted that gender disparities are
significant in the data – unemployment among women remains higher than
among men, and their participation and employment rate markedly lower.
This indicates that both employment and income levels are crucial in
understanding the dynamics of poverty and the means of alleviating it. Yet
the point is that the bulk of employment growth (as opposed to economic
growth) has been in low-productivity, low-wage sectors of the informal
economy, and both the 1990s and 2000s have seen an arresting expansion
of precarious employment and low-quality jobs. This has occurred as a result
of both the workings of GPNs – particularly in sectors where demand for
low-cost labour is paramount – and, by extension, of extensive processes
of ‘labour flexibilization’ reforms that have been put in place to meet the
generalized demand for more flexible and lower cost labour. Questions
concerning the quality of employment and the terms on which workers are
incorporated into particular labour markets are therefore central to the way
we think about poverty in the region, inasmuch as the absence of decent
work conditions or access to good-quality jobs is strongly correlated with
levels of vulnerability to poverty.

Shaw
 Nicola Phillips 163

If we think not only of those living in conditions of ‘chronic poverty’, but

also those who are vulnerable to slipping into poverty and those who live
in conditions of ‘transient poverty’ – the latter populations being generally
neglected in the rubrics of poverty reduction – then the question of precari-
ous employment in the informal sector becomes key to both our conceptual
compass and appropriate policy strategies. ECLAC data document a very
slight contraction of the percentage of the economically active population
working in the informal sector between 2002 and 2006. Yet, while aggregate
monthly wage income levels increased slightly from the start of the decade,
this was not in line with the growth of per capita gross domestic product
(GDP) for the region. The reason was a fall in the monthly labour income
of urban workers in low-productivity sectors. Consequently we have seen a
widening gap between formal and informal employment in terms of wages
(ECLAC, 2008, p. 26), as well as an increasing number of workers who are
incorporated into economic activity without access to social security, labour
protections, and possibilities for collective organization. Women are also dis-
proportionately represented in figures for employment in the informal sector,
as well as significantly more excluded from access to protections and security.
All in all, ECLAC reports that labour productivity and levels of employment
increased for the region as a whole in the 2000s, and poverty among the
employed population fell, but the vulnerability of workers (the proportion of
own-account workers and unpaid family members) remained stable.
The additional element that needs to be included in this picture, and yet
is usually entirely excluded, concerns the increased emphasis on migrant
labour across a vast number of sectors, including those associated with GPNs.
Migrant workers in the low-productivity and low-wage informal sector, in
Latin America and the Caribbean as elsewhere, are usually among the most
vulnerable to the various forms of ‘adverse incorporation’ under discussion
here. The poorest in Latin American societies, as elsewhere, do not move
as they lack the resources to do so. But the dynamics which position poor
migrant workers as an underclass in both richer and poorer destination coun-
tries are well documented (Harris, 1995; Sassen, 2001; Bauder, 2006; Phillips,
2009). While net employment among poor migrant workers is high, it is also
extremely precarious, reflecting both a high level of under-employment and
high levels of vulnerability in terms of employment conditions. Migration
status thus impinges heavily on the ways in which adverse incorporation acts
to trap people in conditions of chronic poverty, and also to heighten vulner-
ability to transient poverty.

Poverty and inequality

The second conceptual emphasis that has dominated national and interna-
tional policy debates has been on poverty in its ‘absolute’ incarnations. The
focus has been on measuring the numbers of people living in poverty and

Shaw
164 Poverty Reduction and the Role of Regional Institutions

indigence, and devising strategies to address the conditions of those parts

of the population. Even while in much of the scholarly debate, and indeed
in research publications disseminated by international institutions such as
the IDB, the links between poverty and inequality are recognized and taken
seriously, these are not incorporated substantively into policy responses
and rarely find a place in the same policy debates as questions of absolute
poverty.
It is generally accepted, even from the orthodox standpoint, that there
has been a pronounced widening of inequality in this contemporary phase
of global restructuring. Latin America and the Caribbean remains the region
with the most striking levels of inequality in the world. ECLAC data in the
2008 ‘Social Panorama’ report indicates that average per capita income in
the tenth decile of the region’s population is about 17 times greater than
among the poorest 40 per cent of households, and for the richest quintile
about 20 times higher than for the poorest one. National variation is
significant: in Colombia, for example, the per capita income of the richest
10 per cent is 25 times higher than that of the poorest 40 per cent. Crucially,
this has been strongly associated with the acceleration and concentration
of wealth accumulation in the richest sections of societies across the world
and the region, which has been far greater than any increase in the rate of
absolute poverty. As Peter Edward (2006, p. 1667) observes, ‘growth did help
the poor, but it was much better for the rich’.
High levels of inequality are correlated strongly with poverty, particu-
larly in terms of the prospects for poverty reduction. This connection is
recognized as taking a number of forms (IDB, 2003a). First, while inequality
does not cause poverty, it is associated with higher levels of poverty as the
poor obtain a smaller share of total income. The IDB itself (2003a, p. 5) cites
estimates that in the mid-1990s, the Gini co-efficient for Latin America and
the Caribbean was 25 per cent higher than the level that would have been
expected given its per capita GDP, and suggests that in several countries
the decrease in poverty that would have resulted from income growth
was counteracted by increases in poverty associated with increases in
inequality.
Second, inequalities in levels of education reduced the benefits of growth
for poverty, inasmuch as economic growth was concentrated in sectors char-
acterized by higher skill levels and greater capital intensity. Workers with no
education saw their wages stagnate or decline over the 1990s, with significant
implications for chronic poverty and vulnerability to poverty.
Finally, inequality is associated with higher vulnerability to poverty
inasmuch as poverty of opportunity is strongly connected with exclusion
from access to healthcare, education, social security and so on, and in highly
unequal societies the extent of investment in public and basic services
tends to be considerably lower than investment in services oriented to the
high-income groups in societies (particularly in education and healthcare).

Shaw
 Nicola Phillips 165

Gender inequalities are also important as causal explanations for the

particular forms of poverty experienced by women.
Given these connections, the absence of questions of relative poverty
from dominant policy frameworks is clearly significant – we have already
noted the MDGs in this respect. Given that the question of inequality is
‘highly contentious, politically difficult to handle in a global capitalist and
neoliberal order, and much less amenable to global political consensus than
absolute poverty’ (Payne and Phillips, 2009), the default focus on absolute
poverty is thus a means of dissipating the political charge of questions about
inequality and diminishing poverty reduction strategies to a set of ‘techni-
cal’ and ‘technocratic’ issues associated with the extension of market forces
(Pieterse, 2002, p. 1033). Yet, even where questions of inequality are taken
seriously, as they are ostensibly by the IDB, the central problem is the faith
in the labour market as a means of mitigating inequalities and thereby elimi-
nating their implications for poverty. Economic ‘empowerment’ through
‘inclusion’ in the labour market is thus advocated as a key mechanism for
poverty reduction on the assumption, noted earlier, of its potential ‘trickle-
down’ impact on various forms of inequality.
A clear illustration can be found in the case of microcredit which, as we
have seen, has been central to the IDB’s poverty alleviation strategies. It
achieved prominence in particular for its associations with the empowerment
of women as workers and market actors: the direct targeting of women was
seen as a means of increasing their economic status and independence,
and increasing the participation and employment rates of women which,
as we have seen, were and remain very low relative to those of men. By the
start of the 2000s, it was estimated that more than half of poor people in
Latin America and the Caribbean earned their income in the microenter-
prise sector, and that in most countries the private sector consisted almost
entirely of these enterprises (IDB, 2003a). In short, the IDB’s contention by
the early 2000s was that the microenterprise sector had ‘become a stabilizing
force and has contributed greatly to overall employment, production, and
national income’ (IDB, 2003a, Foreword).
Yet the problem has been an inattention to the structures of inequality
that are underpinned by particular social norms, beyond merely questions of
income inequality between households. The persistence of gendered norms
associated with inequalities between men and women has been shown to
have limited the effectiveness of microcredit schemes in Latin America and
elsewhere, inasmuch as control over household finances and ownership of
land remained resolutely in the hands of the male members of households,
despite the fact that women carried the liability for microcredit loans.
Focusing on women’s home-based work, in this sense, has been criticized for
its inattention to the ways in which the ‘empowerment’ of women through
their integration into the market economy is constrained by the persistence
of norms which value their traditional social roles and undermine their

Shaw
166 Poverty Reduction and the Role of Regional Institutions

capacity for ownership and control of their means of subsistence (Ferguson,

2008; Goetz and Sengupta, 1996). This then reveals further shortcomings of
the focus on poverty to the exclusion of inequality – in this case, the forms
of gender inequality which are central to the dynamics of poverty and vulner-
ability to poverty.

Conclusions

As a central element of the inter-American agenda, poverty reduction

efforts in the region have yielded disappointing results. Notwithstanding
some improvements in overall data for the region and positive trends in
some countries, the economic and social outcomes of the regional insti-
tutions’ strategies have featured the persistence or worsening of poverty
for large parts of the region’s population. It has been suggested here that
this is in part due to the flawed conceptual foundations on which these
strategies have been articulated, lacking as they do an understanding of
what we have called the ‘vertical’ dimensions of poverty associated with
the terms of inclusion of Latin American workers and producers in global
productive activity, on the one hand, and the structural connections
between poverty and inequality, on the other. The implications of neglect-
ing these factors are perhaps particularly striking in Latin America and the
Caribbean, given the scale of integration of the region’s economies into
global production networks and its ongoing status as the most unequal
region in the world.
An adequate approach to understanding poverty, and indeed elaborating
an effective poverty reduction strategy, thus needs to incorporate the dynamics
of ‘adverse incorporation’ alongside an emphasis on social exclusion, in place
of the excessively simplistic emphasis on ‘inclusion’ and ‘empowerment’
through participation in the market as the key mechanism for poverty
reduction. In other words, we need, as Stefano Ponte (2008, pp. 7, 12) has
argued, to explore ‘how participation in value chains exposes poor people to
risks, as opposed to how it affects income opportunities’, and to accept that
‘integration and incorporation are not necessarily empowering. Sometimes
exclusion and separation can be valid strategies for the poor’. The structural
connections between inequality and poverty need to be recognized, not
simply in the sense of acknowledging the connection between high levels
of inequality and the persistence of poverty, but also in understanding how
diverse forms of inequality impinge on the ‘terms of inclusion’ of poor
people in economic and social activity. Especially in view of the dire predic-
tions of a substantial worsening of poverty as a result of the global financial
crisis of the late 2000s and the global food crisis that is expected to take hold
over the coming decades, understanding the adverse and unequal incorpora-
tion of the poor needs to be much more central to academic debates, policy
approaches, and political action.

Shaw
 Nicola Phillips 167

Notes
1. This system estimates what a US dollar could buy at a given point in time, translates
this into other currencies, and maps income levels across countries on this basis.
2. The availability of data only for urban areas (which in the ECLAC report applies
to Ecuador, Uruguay, and Argentina) is to be noted as, although the incidence of
poverty remains higher in rural areas (as a percentage of the total rural population),
the number of people living in poverty in urban areas has increased significantly as
a result of both accelerating urbanization and rapid population growth (Ravaillon
et al. 2007; IDB 2003a).
3. Much more detailed research is also needed to establish when, where, how and
under what circumstances a positive relationship does or can exist between economic
restructuring and social outcomes. Among the important variables are the char-
acteristics of the global value chain in question (including the extent to which it
is dominated by buyers or by producers); the manner in which it is governed by
firms, states, labour organizations, and other non-state actors; and the variegated
impact of regulatory innovations such as ‘sustainability’, codes of conduct, and
standards relating to fair/ethical trade.

References
Barrientos, Armando (2009) ‘Labour Markets and the (Hyphenated) Welfare Regime
in Latin America’, Economy and Society, 38:1, pp. 87–108.
Barrientos, Stephanie, Gary Gereffi and Arianna Rossi (2008) ‘What are the Challenges
and Opportunities for Economic and Social Upgrading?’ concept note for the work-
shop on ‘Capturing the Gains’, University of Manchester, December.
Bauder, Harald (2006) Labor Movement: How Migration Regulates Labor Markets (New
York: Oxford University Press).
Bernstein, Henry (ed.) (1990) The Food Question: Profits vs. People (London:
Earthscan).
Byrne, David (1999) Social Exclusion (Milton Keynes: Open University Press).
Chant, Sylvia (2008) ‘The “Feminisation of Poverty” and the “Feminisation” of
Anti-Poverty Programmes: Room for Revision?’ Journal of Development Studies,
44:2, pp. 165–97.
Craig, David and Doug Porter (2003) ‘Poverty Reduction Strategy Papers: A New
Convergence’, World Development, 31:1, pp. 53–69.
De Haan, Arjan (1999) ‘Social Exclusion: An Alternative Concept for the Study of
Deprivation’, IDS Bulletin, 29:1, pp. 10–19.
Dollar, David and Aart Kraay (2002) ‘Spreading the Wealth’, Foreign Affairs, 81:1,
pp. 120–33.
Edward, Peter (2006) ‘Examining Inequality: Who Really Benefits from Global
Growth?’ World Development, 34:10, pp. 1667–95.
Ferguson, Lucy (2007) ‘Production, Consumption and Reproduction in the Global
Political Economy: The Case of Tourism Development in Central America’,
unpublished Ph.D. thesis, University of Manchester.
Goetz, Ann Marie and Rina Sen Gupta (1996) ‘Who Takes the Credit? Gender, Power,
and Control over Loan Use in Rural Credit Programmes in Bangladesh’, World
Development, 24:1, pp. 45–63.
Harris, Nigel (1995) The New Untouchables: Immigration and the New World Worker
(London: Penguin).

Shaw
168 Poverty Reduction and the Role of Regional Institutions

Helwege, Ann and Melissa B. L. Birch (2007) ‘Declining Poverty in Latin America?
A Critical Analysis of New Estimates by International Institutions’, Global
Development and Environment Institute, working paper no. 07–02, Tufts University,
September.
Hickey, Sam and Andries du Toit (2007) ‘Adverse Incorporation, Social Exclusion and
Chronic Poverty’, Chronic Poverty Research Centre, Working Paper no. 81, June.
Inter-American Development Bank (IDB) (1997) A Strategy for Poverty Reduction
(Washington DC: IDB).
—— (2003a) ‘Inequality, Exclusion and Poverty for Latin America and the Caribbean:
Implications for Development’, by Cesar P. Bouillon and Mayra Buvinic, back-
ground document for EC/IDB ‘Seminar on Social Cohesion in Latin America’,
Brussels, 5–6 June.
—— (2003b) Poverty Reduction and the Promotion of Social Equity: Strategy Document
(Washington DC: IDB).
—— (2003c) ‘Poverty Reduction and the IDB: An Evaluation of the Bank’s Strategy
and Efforts’, Office of Evaluation and Oversight, Washington DC, November.
Kaplinsky, Raphael (2005) Globalization, Poverty and Inequality (Cambridge: Polity).
Kiely, Ray (2007) ‘Poverty Reduction through Liberalisation? Neoliberalism and the
Myth of Global Convergence’, Review of International Studies, 33:3, pp. 415–34.
Milanovic, Branko (2003) ‘The Two Faces of Globalization: Against Globalization as
we Know It’, World Development, 31:4, pp. 667–83.
Payne, Anthony and Nicola Phillips (2009) Development (Cambridge: Polity).
Pieterse, Jan Nederveen (2002) ‘Global Inequality: Bringing Politics Back In’, Third
World Quarterly, 23:6, pp. 1023–46.
Phillips, Nicola (2009) ‘Migration as Development Strategy? The New Political
Economy of Dispossession and Inequality in the Americas’, Review of International
Political Economy, 16:2, pp. 231–59.
Ponte, Stefano (2008) ‘Developing a ‘Vertical ‘ Dimension to Chronic Poverty
Research: Some Lessons from Global Value Chain Analysis’, Chronic Poverty
Research Centre, Working Paper no. 111, June.
Ravaillon, Martin, Shaohua Chen and Prem Sangrula (2007) ‘New Evidence on the
Urbanization of Global Poverty’, Population and Development Review, 33:4, pp. 667–701.
Reddy, Sanjay (2008) ‘The World Bank’s New Poverty Estimates – Digging Deeper into
a Hole’, working paper, Institute for Social Analysis.
Reddy, Sanjay and Thomas Pogge (2003) ‘How Not to Count the Poor’, working paper,
Institute for Social Analysis.
Sala-i-Martin, Xavier (2002) ‘The Disturbing “Rise” in Income Inequality’, NBER
Working Paper No. 8904, April.
Sassen, Saskia (2001) The Global City: New York, London, Tokyo (Princeton, NJ:
Princeton University Press).
Sen, Amartya (1999) Development as Freedom (Oxford: Oxford University Press).
UN Economic Commission for Latin America and the Caribbean (ECLAC) (2008)
Social Panorama of Latin America: Briefing Paper (Santiago: ECLAC).
Wade, Robert (2004) ‘Is Globalization Reducing Poverty and Inequality?’ World
Development, 32:4, pp. 567–89.
World Bank (1990) World Development Report 1990: Poverty (New York: Oxford
University Press).
—— (2002a) Globalization, Growth, and Poverty: Building an Inclusive World Economy
(Washington DC: World Bank).
—— (2002b) Global Economic Prospects and the Developing Countries 2002: Making Trade
Work for the World’s Poor (Washington DC: World Bank).

Shaw
Part III
The Effectiveness of Other
Institutions

Shaw
This page intentionally left blank

Shaw
9
The Successes, Failures and Future
of Mercosur
Marc Schelhase

Introduction

The signing of the Tratado de Asunción (Treaty of Asunción) in 1991 marked

the foundation of the Mercado Común del Sur (Mercosur) and with it one –
and in many ways the – most ambitious integration project in terms of scope.1
Globally, it is the fourth largest trading bloc – after the European Union (EU),
the North American Free Trade Agreement (NAFTA), and the Association of
South East Asian Nations (ASEAN) – constituting a market of 270 million
people (Klonsky and Hanson, 2009, p. 1).
From the beginning, the Mercosur project has centred on the political
and economic aims of its two biggest member states, Argentina and Brazil.
As such, the primary focus of the analysis presented in this chapter will
focus on these two, who together account for approximately 92 per cent of
intra-Mercosur trade (IDB, 2009, pp. 29, 31). The dynamic between the two
countries continues to dominate Mercosur politics, both inside and outside
the organization. With the changing landscape of regional integration in
the Americas, and new trends and patterns of cooperation and integration
emerging, it is now – after nearly two decades of regional integration – timely
to reassess the Mercosur project.
In order to provide a balanced evaluation, the measures of success applied in
this chapter are the original aims and objectives of Mercosur. These were the
consolidation of democracy in the region, the integration of the Southern Cone
economies into the global trading system, the acceleration and the lock-in of
economic reforms while strengthening development in its member states, and,
finally, the creation of a regional economic space through moving from a Free
Trade Agreement (FTA) to a customs union and later to a common market.
The chapter is divided into two sections. First, it reviews Mercosur’s first
decade, which is marked by both notable achievements and emerging ques-
tions about its continuing existence. Second, it explores the growing tensions
within Mercosur in its second decade of integration, focusing on both the
internal and external challenges to the organization and how they interrelate.

171

Shaw
172 The Successes, Failures and Future of Mercosur

Mercosur: The first decade

Mercosur has its origins in the process of bilateral cooperation between

Argentina and Brazil that started in 1985 with the Declaración de Foz de
Iguazú (Foz de Iguazú Declaration) by the then Presidents of Argentina and
Brazil, Raúl Alfonsín and José Sarney, respectively; it culminated in the Acta
de Buenos Aires (Buenos Aires Agreement) in 1990, in which both countries
agreed to establish a common market by 1 January 1995.2 The Acta de Buenos
Aires in turn gave rise to the Acuerdo de Complementación Económica No
14 (ACE-14 – Economic Complementation Agreement 14), which aimed
to facilitate the creation of a common market by confirming previous
agreements and by establishing clear timelines for tariff reductions (Hírst,
1999, p. 392). As such, ACE-14 formed the nucleus for the trade liberalization
measures contained in the Tratado de Asunción one year later.3
The first decade of the Mercosur project was marked by a convergence of the
domestic economic policies and the wider political objectives of its two biggest
member states. Here it is important to note that in the first few years of the
integration project, Mercosur enabled politicians to push through unpopular
economic reforms. The reforms themselves and their implementation sus-
tained the rationale of regional integration while at the same time helping
to create a regional economic space after decades of national fragmentation
(Schirm, 2002, pp. 131–3). It was this creation of a more open regional
market through the systematic reduction in tariff barriers which subsequently
attracted a significant inflow of Foreign Direct Investment (FDI) and a restruc-
turing of, for example, production networks along regional lines (Leipziger
et al., 1997, p. 599; Pearce and Tavares, 2000, p. 26; Schelhase, 2008, p. 53).
The initial growth in intra-regional trade and FDI investment was substan-
tial. By 1998, intra-bloc trade as a percentage of total trade increased to 25 per
cent (IDB, 2009, pp. 29–30), and by 1999 annual FDI inflows into Mercosur
were over US$ 50 billion; on average this accounted for 17.7 per cent of all
FDI received by developing countries in the second half of the 1990s (IDB,
2009, pp. 59–60).
These early successes were institutionally supported by the signing of the
Protocolo de Ouro Preto (Ouro Preto Protocol) in December 1994 to further
develop the provisions of the Tratado de Asunción. This protocol created
the two main institutional bodies of Mercosur, namely the Consejo del
Mercado Común (CMC – Council of the Common Market), representing
ministers of foreign affairs and the economy, and the Grupo Mercado
Común (GMC – Common Market Group) as the executive organ of Mercosur,
consisting of members of the two ministries plus the central banks.4 The
institutional structure of Mercosur reflects the intergovernmental nature
of the regional integration process. Unlike the EU, there is no suprana-
tional bureaucracy charged with proposing, developing and ultimately
implementing a vision or purpose for Mercosur. At an institutional level,

Shaw
 Marc Schelhase 173

this is left to the intergovernmental process and, as we will see later on, this
weakens the effectiveness of the organization and therefore accounts for
some of the challenges and difficulties that Mercosur continues to face.
As a result, and building on the significant increase in intra-bloc trade
in the first half of the 1990s, the realities of increasing economic intercon-
nectedness and therefore interdependencies resulted in a reconfiguration of
organized business interests vis à vis the regional integration process. The
business community was initially sceptical about the benefits of Mercosur,
primarily based on the lack of competitiveness of the domestic industries
after decades of ISI.5 However, with increasing levels of intra-bloc trade and
cross-border investments, business interests shifted. The increasing region-
alization and globalization of the Southern Cone markets also resulted in a
reconfiguration of business-interest representation on the domestic level and
the emergence of new regional forms of interest representation.6 Also, the
significant inflows of FDI brought the growing presence of Trans-National
Corporations (TNCs). The combination of cross-border investments, TNCs
investment, widespread privatization (first in Argentina, then in Brazil) and
structural reforms on the domestic level fundamentally changed the economic
landscape of the Southern Cone (Schelhase, 2008, pp. 97–8) and gave rise to
what Phillips (2004) has called the Southern Cone model of regional capitalist
development.
Consequently, Mercosur in the mid-1990s could be considered a success.
This is particularly the case in comparison to other regional integration
schemes at the time (Bouzas, 2001, p. 3) and in the context of enabling
economic reforms, sustaining economic growth, and the substantial increases
in FDI in the region (Schirm, 2002, pp. 117–18; 124–8). As Bouzas notes, ‘in
just four years Mercosur made more progress towards intra-regional trade than
in the previous three decades. In effect, by January 1995 the bulk of intra-
regional trade was subject to zero tariff rates’ (Bouzas, 2001, p. 3). The growing
economic interdependence between Argentina and Brazil was so significant
that the same author has called the period 1995–8 the ‘age of the markets’,
where ‘the prevailing view was that Mercosur was so successful that it could
move forward pushed solely by private sector interests’ (Bouzas, 2001, p. 4).
Yet, both externally and internally, the agenda of Mercosur became increas-
ingly congested. With the formal launch of talks in 1994 to establish a Free
Trade Area of the Americas (FTAA) and the start of negotiations in 1999 to
conclude a FTA between Mercosur and the EU, the organization was faced
with developing agreed common negotiating positions, which are explored
further below. This external congestion happened at a time when Mercosur’s
internal progress was already lagging behind, something Bouzas has called
‘a widening “relative enforcement gap”’ (2001, p. 4), and its aims to deepen
integration by 2000 (Agenda 2000) were stagnating (Bouzas, 2001, p. 4).
At the same time, the global economic conditions exacerbated the grow-
ing internal tensions. The region had to cope with the fall-out from the

Shaw
174 The Successes, Failures and Future of Mercosur

Mexican Peso crisis of 1994, which saw the end of the fixed-exchange rate
regime and a devaluation of the Mexican currency. In addition, the 1997
Asian crisis and the crisis in Russia in 1998 weakened the confidence of
investing in, and lending to, emerging economies (Schelhase, 2008, p. 92).
The turmoil in the international economic environment had a direct impact
on Mercosur countries, and here in particular Argentina and Brazil. An
important factor was also the substantial devaluation of the Brazilian Real in
1999, as a result of the end of its peg against the US Dollar. With a depreciat-
ing Real, Brazilian exports to Argentina became more competitive, and with
diverging currency regimes the Argentine Peso, still pegged to the US Dollar,
appreciated and made Argentine exports increasingly expensive with a direct
impact on its trade balance with the rest of Mercosur and Brazil in particular
(IDB, 2004, p. 24).
However, it is important to point out that devaluation of the Real
was just one factor contributing to the deteriorating economic climate
(Bouzas, 2001, p. 5). Indeed, persistently high unemployment levels in
Argentina (14.2% in 1999) and negative GDP growth rates (–3.39% in 1999
and ⫺ 0.79% in 2000) combined with a fiscal and monetary policy con-
strained by a currency peg, demonstrated the increasingly difficult situation
the country was in (IDB, 2004, p. 20). In contrast, Brazil’s unemployment
rate was 7.6 per cent in 1999 with a GDP growth rate of 0.79 per cent in
1999 and 4.36 per cent in 2000. At the same time, intra-Mercosur trade col-
lapsed from 25 per cent of total trade in 1998 to 11.5 per cent in 2002 with
the volume of trade in US$ billions shrinking by 50 per cent during the
same period (IDB, 2009, p. 29). Furthermore, overall levels of FDI dropped
by approximately 70 per cent between 1999 and 2003, with FDI inflows
into Argentina being particularly badly hit in the years 2001–3 due to the
country’s financial crisis (IDB, 2009, pp. 59–60).
This increasingly difficult economic climate provides the context and
explanation for the growing tensions within Mercosur. Whereas the initial
phase of the regional integration project was characterized by the economic
and political convergence of the countries’ aims vis à vis regional integra-
tion, the second half of the 1990s was now characterized by an increasing
divergence of these aims as a direct result of domestic economic problems.
As a consequence, the CET came increasingly under pressure, both in terms
of lowering it to make extra-bloc trade (meaning cheaper imports in the case
of Argentina) and in the form of tariff increases as anti-dumping measures
(in the case of Paraguay and Uruguay) (Phillips, 2004, pp. 94–5). As Phillips
(2004, p. 94) puts it, ‘unilateral changes to the rules governing the bloc prolif-
erated further and government responses were progressively atomised rather
than collective’. At one point, Argentina’s Minister of the Economy Domingo
Cavallo even suggested suspending the Mercosur project of a customs union
and eventual common market and focusing on an FTA instead (Schelhase,
2008, p. 92). These tensions finally culminated in the economic crisis in

Shaw
 Marc Schelhase 175

Argentina in 2001/2, in the wake of which the US Dollar peg for the Peso was
abandoned and the Peso devalued.
The crisis in Argentina marks the end point of the first decade of the
evolution of Mercosur and in many ways reflects the internal problems and
challenges of regional integration in the Southern Cone. However, it also
provides the link to the next section of this chapter, which starts by looking
at the re-launch of Mercosur in the aftermath of the crisis.

Mercosur’s problems in context: The challenge of coordination

The economic crisis in Argentina in 2001/2 followed an attempt in

1999/2000 to re-launch Mercosur by focusing on comprehensive insti-
tutional strengthening, an ambition to broaden the regional integration
agenda and, above all, re-emphasizing the role of Mercosur as a platform
for a regional developmental model (Mecham, 2003, pp. 369–70; Phillips,
2001, pp. 565–6). Arguably, the most important aspect of this re-launch was
the focus on macro-economic coordination between Argentina and Brazil
in particular, called a ‘mini-Maastricht’ by the presidents of both countries
(Phillips, 2001, pp. 573–4). Yet, with the Argentine crisis, this revitalization and
refocusing of Mercosur ground to a halt. What followed on from the crisis is best
described as an initial convergence of Argentina and Brazil’s views on the priori-
ties for the regional project, followed by an increasing divergence with regard
to the economic, political, and social dimensions of the project. To reflect this,
the following section of the chapter is divided into three broad themes in order
to clearly delineate the different strands of the argument. First, there are the
institutional challenges Mercosur is facing. Second, the domestic economic
policies, and with them the economic ‘vision’ of what the regional project
should achieve, have increasingly diverged. Third, Mercosur is facing a range of
external challenges, both political and economic, which reinforce the problems
and challenges that will be discussed in relation to the first two themes.
Ironically, in institutional terms the Argentine crisis of 2001/2 could –
initially at least – be understood as positive for the reinvigoration of the regional
project. Indeed, as O’Keefe notes, ‘the crisis provoked by the collapse of the
Argentine financial system in January 2002 underscored that Argentina’s real
friends in its hour of need were its Mercosur partners’, with Brazil initiat-
ing the removal of further tariff and non-tariff barriers (O’Keefe, 2003, p. 8).
Moreover, for Argentina this also marked a shift away from a focus on the US
(especially towards the end of the convertibility regime) and the International
Monetary Fund (IMF) in the direction of a more regional focus in terms of
economic and social development.7
The overall context was therefore – at least temporarily – favourable to
another re-launch of Mercosur, also supported by the strong support given
to the regional project by – in 2002 – Brazil’s then newly elected President Luiz
Inácio Lula da Silva and followed in 2003 by Argentina’s new President

Shaw
176 The Successes, Failures and Future of Mercosur

Néstor Kirchner. The desire was to return to the previously high levels of
intra-bloc trade and cross-border investments by accelerating regional political
and economic integration and in the process creating and strengthening
globally competitive industries (O’Keefe, 2003, p. 3). The emphasis was
placed on macro-economic policy coordination now that all Mercosur
members had similar currency regimes (O’Keefe, 2003, p. 3), on the more
robust implementation of Mercosur-related legislation, and also on regional
infrastructure projects to physically integrate the region better and facilitate
trade (Schelhase, 2008, p. 96).
Yet, despite this short revival and re-launch of the integrationist agenda,
to date key problems have remained unresolved, partly because different
domestic economic agendas resurfaced (as we will see later in this chapter),
but also because of the clear lack of long-term political commitment to
make the institutional structure of Mercosur work more effectively and thus
deepen the integration process. Essentially, the organization continues to
suffer from (very) weak institutional structures. These are intergovernmental
rather than supranational in character, as mentioned above. The promised
strengthening of the capacity of the Mercosur Secretariat to include the
monitoring of technical norms and the implementation of Mercosur decisions
(Schelhase, 2008, p. 10) has been weakened by the decision of member states
to maintain a veto about what work the Secretariat will be allowed to conduct
in this area (Bouzas, 2008, p. 360). The primary motivation here is to main-
tain national vetoes but also to prevent a more centralized decision-making
capacity, which would potentially weaken national autonomy (Kaltenthaler
and Mora, 2002, pp. 72–97) through the creation of a ‘common vision’, as
Bouzas (2008, p. 360) calls it.
The desire to maintain national control over the integration process is also
underlined by the poor implementation of Mercosur decisions and norms
into national law. This is due to the provision in Article 40 of the Protocolo
de Ouro Preto that stipulates how decisions made by Mercosur institutions
have to be incorporated into the domestic law of each member state before
they can enter into force. This three-step process asks member states first to
take the necessary measures to incorporate the decisions into domestic law,
second to inform the Mercosur Secretariat that they have been incorpo-
rated, and third – once the decisions have been incorporated in all member
states – the Secretariat then informs all member states accordingly, after
which it takes 30 days for the decisions to actually take effect.
Thus, attempts by the Common Market Group and the Common Market
Council to improve the implementation process and to widen the scope of
Mercosur to include, for example, intra-regional investment protection, are
curtailed, as the resolutions and decisions of both bodies cannot supersede
the provisions contained in Article 40, unless the Protocolo de Ouro Preto is
revised to remove the national ‘second-level’ veto contained therein (Bouzas,
2008, pp. 361–3). Furthermore, the widening of the Mercosur process has

Shaw
 Marc Schelhase 177

resulted in increasing the backlog of resolutions and decisions requiring

incorporation at the national level. As Bouzas summarizes, ‘the effectiveness
of the rule-making process when rules require legislative approval has been
no better than in the case of norms that do not require such action. On
the contrary, the ‘horizontal’ expansion of the Mercosur agenda has simply
multiplied the number of rules that remain unadopted at the national level’
(Bouzas, 2008, p. 363).
Similarly, the arbitration process in Mercosur has evolved from the Brasilia
Protocol in 1991 through the Protocolo de Ouro Preto to the Protocolo
de Olivos (Olivos Protocol) in 2002, which came into force in 2004.8 The
Protocolo de Olivos is important in this regard as it enhances the arbitration
process by strengthening the ad hoc tribunals set up to deal with disputes
between member states in relation to their obligations under Mercosur’s trea-
ties and protocols, and also establishes a Tribunal Permanente de Revisión
(Permanent Review Tribunal) to achieve a more consistent interpretation of
Mercosur norms (O’Keefe, 2003, pp. 10–11). The protocol also enables the
tribunal to give advisory opinions to, for example, lower courts, thus poten-
tially increasing the consistency of the application of Mercosur norms. A key
remaining weakness of the arbitration process, however, is that it is fully
open only to state actors, thus making it very difficult for individuals and
companies (among others) to enforce Mercosur obligations vis à vis a member
state (Bouzas, 2008, pp. 363–4; O’Keefe, 2003, pp. 9–11). Moreover, as the dis-
pute between Argentina and Uruguay over the environmental impact of the
Botnia paper mill shows, the dispute settlement procedure is not fully trusted
by the member states themselves. In the case of the paper mill, Uruguay’s
claim in relation to Argentina’s refusal to stop protesters blocking a key
bridge, thus inhibiting the free movement of trade and therefore violating its
obligations under Mercosur, was submitted to an ad hoc tribunal which ruled
against Argentina. However, the tribunal and later on the Permanent Review
Tribunal imposed no sanctions. Additionally, both countries also went to
the International Court of Justice in The Hague in order to pursue the case,
thus effectively pursuing a dual-track strategy both inside and outside the
Mercosur framework (IDB, 2009, p. 117; The Economist, 2009d).
The next section of the chapter will now focus on the economic dynamics
of the regional integration process to see how the institutional challenges
and difficulties outlined above are linked to the economic challenges the
bloc has been facing since the 2001/2 crisis.
In terms of the immediate effects on Mercosur, the Argentine devaluation
removed the Brazilian exchange rate advantage and made Argentine exports
significantly more competitive. The resulting economic expansion resulted
in impressive economic growth rates of 10.82 per cent of GDP in 2003, albeit
from a relatively low level due to the financial crisis and years of economic
stagnation before the crisis (IDB, 2004, p. 20). This was accompanied by a
recovery in exports from 2003 onwards, largely driven by the global rise in

Shaw
178 The Successes, Failures and Future of Mercosur

commodity prices, from which Argentina and Brazil benefited significantly

(IDB, 2009, p. 34). The resulting tax revenues and foreign currency inflows
contributed substantially to the economic recovery of Argentina in par-
ticular. It enabled the government of President Néstor Kirchner to pursue a
broadly populist economic and social policy, combined with an increasing
role for the state in the economy and a move away from Menem’s neo-liberal
policy agenda. This was initially supported by spare capacity in the economy
and the cancellation and subsequent restructuring (or, in the case of money
owed to the IMF and the Paris Club, repayment or planned repayment)
of external debt originally defaulted on as a result of the financial crisis
(The Economist, 2005, 2006, 2008a, 2008b).
Although initially successful, Kirchner’s policies have increasingly run
into difficulties. The conversion of energy prices from the US Dollar into the
Peso combined with price controls (the latter a measure designed to keep
inflation under control) has resulted in energy prices that are on average 40
per cent lower than elsewhere in the region. This has resulted in a lack of
investment in energy generating capacity at a time when demand is soaring
due to high economic growth (The Economist, 2006, 2007). Predictably, this
led to energy shortages and outages, affecting industrial output and requiring
Argentina – controversially – to disrupt natural gas deliveries to Chile and to
import electricity from Brazil and Uruguay (The Economist, 2007).
This brief analysis of Argentina’s economic and fiscal policies is impor-
tant for two reasons. First, it highlights the divergence of the economic and
fiscal policies of Argentina and Brazil. In contrast to Argentina, Brazil has
continued to pursue a set of (neo)liberal policies aimed at providing eco-
nomic stability, a stable investment environment, and predictable political
environment, while ensuring social development and reduction of poverty
(The Economist, 2008c, 2008d). Furthermore, funded by its growing currency
reserves, Brazil announced an early repayment of its debt owed to the IMF in
2005, a move followed by Argentina, as noted earlier. Despite the financial
crisis that started in 2007 and a subsequent fall in global commodity prices,
Brazil has become the first country in Latin America to emerge from a short
recession that started in the last quarter of 2008 and lasted until the first
quarter of 2009 (The Economist, 2009c). Indeed, Brazil has now agreed, for the
first time in its history, to participate in the planned capital increase for the IMF,
so in effect lending money to the organization (MercoPress, 2009a).
Second, this divergence has resulted in the emergence of new challenges
for the regional integration process. As a consequence of Argentina’s poor
relationship with international investors, primarily due to its protracted
renegotiations of debt defaulted on during the 2001/2 crisis, access to inter-
national capital markets was very limited. This only changed from 2008
onwards as a result of renewed attempts by President Cristina Fernández de
Kirchner, who succeeded her husband in 2007, to reach a settlement with
creditors and manage the debt more effectively (The Economist, 2008b). Yet,

Shaw
 Marc Schelhase 179

despite these measures, the credibility of Argentine economic management

is still weak. Among other things, this is due to the continuing manipula-
tion of the inflation rate, estimated at 15 per cent (twice the official rate),
an unsuccessful attempt to repeatedly raise taxes on agricultural exports to
increase tax revenue and thus shore up the budget, and the nationalization
of the private pension funds in late 2008 (Raszewski, 2008; Schelhase, 2008,
pp. 147–9; The Economist, 2009a, 2009b). Consequently, in order to raise cap-
ital, Argentina has in recent years borrowed approximately US$ 8.4 billion
from Venezuela in the form of bond issues, albeit at an increasingly punitive
interest rate (The Economist, 2008b; Raszewski, 2008).
In addition to this dependence on Venezuelan finance, the severely
restricted access to other external financing, and an economic slowdown due
to the global financial crisis, the Argentine government has increasingly rein-
forced a degree of economic nationalism that is directly affecting Mercosur.
Measures have focused on reducing imports and stimulating exports through,
for example, non-tariff barriers such as delayed issue of import permits and
other import restrictions (MercoPress, 2009f). These measures, coupled with
a weakening Peso, have resulted in a very significant increase in the coun-
try’s trade surplus for the first half of 2009 to US$ 9.86 billion (MercoPress,
2009c). Although Brazil is openly complaining about the Argentine mea-
sures (MercoPress, 2009b), its smaller partners in Mercosur – Paraguay
and Uruguay – are equally, if not more, affected by the import restrictions
imposed by Argentina and are equally concerned about similar measures that
Brazil has imposed on, for example, Uruguayan dairy exports to the country
(MercoPress, 2009d, 2009e). These tariff and non-tariff barriers to intra-
Mercosur trade undermine the rationale of the integration project and point
to both Argentina and Brazil’s reluctance to provide a more positive economic
framework for their two substantially smaller partners. Additionally, both
countries increasingly aim to solve disputes through sectoral agreements, as
has been the case in the automobile industry from the inception of Mercosur,
thus favouring bilateral agreements to Mercosur-wide solutions (MercoPress,
2009e). Similarly, to protect their industries from a sudden increase in
imports, Argentina and Brazil in 2006 agreed on a Competitive Adaption
Mechanism outside the Mercosur framework (Hornbeck, 2006, p. 7), thus
harming intra-regional trade and integration.
This observation is also reflected in the development of Mercosur’s
intra-regional trade patterns since the 2001/2 crisis. In terms of the effects
on the bloc, intra-regional trade has recovered to 15.3 per cent of total
trade in the first half of 2008, yet this is still significantly lower than the
25 per cent achieved in 1998 (IDB, 2009, p. 29).9 This relatively low level
of intra-regional trade is also reflected in the share of exports to Mercosur
as a percentage of total exports for each country. In 2008, for Argentina
exports to Mercosur represented 22.3 per cent of total exports, for Brazil
the figure was 11.5 per cent, for Paraguay a high 51.1 per cent (reflecting

Shaw
180 The Successes, Failures and Future of Mercosur

the particular characteristics of its economy), and for Uruguay 26 per cent
(IDB, 2009, pp. 38–51). Although significant in themselves, in the context
of a regional integration project that aims to become a full customs union
and eventually a common market, these figures are low (except in the case
of Paraguay). They reflect the importance of extra-regional trading partners
to Mercosur member states and, as they are still substantially below the
levels achieved by the end of the 1990s, an increasing diversification rather
than a consolidation of trading partners and the inability of members to
deal effectively with the bloc’s asymmetries.10
Levels of FDI have also recovered, but in 2007 Mercosur’s share of 8.3 per
cent of all FDI received by developing countries was still below the average
of 9.4 per cent for the period 2001–5 and the 17.7 per cent share recorded
during the height of privatizations in Argentina and Brazil in the 1990s
(IDB, 2009, pp. 59–60). Although FDI inflows into Argentina have gradually
recovered, Brazil accounts for approximately 75 per cent of all FDI inflows
into Mercosur between 2000 and 2008 (IDB, 2009, pp. 60–1). Conversely,
Brazil is now the biggest investor in Argentina, partly as a result of the
Mercosur integration, but also as a result of a fall in Argentine asset prices in
the wake of the 2001/2 crisis (IDB, 2009, p. 62).
Indeed, these tensions vis à vis the internal market mirror the problems
encountered with the CET and explain its only partial implementation,
resulting in an increasingly ‘perforated’ tariff. As Mesquita Moreira (2008, p. 14)
argues, ‘the main problem with the Mercosur … is … one … of policy design …
[The CET] closely reflects Brazil’s industrial interests’. As the CET on capital
goods of 16 per cent is relatively high, the result of fully implementing it
would be to ‘[shift] demand from producers outside the bloc to producers in
Brazil … and … [thus] asking consumers in Uruguay and Paraguay to help
pay the extra cost without getting any of the benefits’ (Mesquita Moreira,
2008, p. 14). Yet, without a fully functioning CET, the benefits of a common
market in terms of economic growth and inward investment cannot be fully
realized (Mesquita Moreira, 2008, pp. 14–15), thus undermining Mercosur’s
overall potential.
Following on from this focus on the internal economic dynamics of
Mercosur, the next section of the chapter will map some of the external
challenges facing the organization.
Similar to the institutional and internal economic challenges, Mercosur’s
external agenda is, as previously noted, equally complex and congested.
Throughout the 1990s and into the new millennium the twin dynamics that
dominated Mercosur’s external trade agenda, and which to some extent pushed
the member states to attempt to develop common negotiating positions, were
that of the FTAA and Mercosur–EU FTA negotiations (Schelhase, 2005).
With the FTAA process at the time of writing still stalled, what has
emerged from the failed FTAA is the increasingly important role of Brazil
as a regional leader, and Mercosur is seen by Brazil as a useful vehicle to

Shaw
 Marc Schelhase 181

provide that regional leadership (Schelhase, 2005, p. 1). However, as noted

above, the economic tensions between the member states (partially caused
by Brazil’s trade preferences being strongly reflected in the way the CET is
established, for example) reflect Brazil’s unwillingness to provide the public
goods necessary not just to sustain but to propel the project forward. As the
most recent Mercosur report of the Inter-American Development Bank (IDB)
very succinctly summarizes:

[I]n the issue of asymmetries, while Paraguay, Uruguay, and Argentina

act as petitioners [in improving the treatment of asymmetries], Brazil is
capable of selecting, filtering, and driving the initiatives it considers most
realistic or least expensive in light of its own interests. In this sense, its
leadership is purely reactive
(IDB, 2009, p. 68)

Furthermore, especially for Uruguay but also Paraguay, the increasing amount
of bilateral agreements between Argentina and Brazil are undermining the
core functions of Mercosur, thus diminishing its benefits by encouraging
fragmentation (IDB, 2009, p. 67). As a result, Uruguay has repeatedly sought
to be allowed to negotiate bilateral trade agreements outside the Mercosur
framework, something that is not possible under the bloc’s founding treaties,
in order to overcome the perceived lack of progress and diminishing returns
in the context of Mercosur. However, these attempts have been repeatedly
blocked (MercoPress, 2009g).
The Mercosur–EU FTA, which is at the time of writing (summer 2009) still
being negotiated, and which was initiated and at times largely sustained by
the business communities of the EU and Mercosur, has also suffered repeated
attempts at re-launch amid tensions over agricultural subsidies in relation to
the EU and industrial goods and services in relation to Mercosur.11 These are
areas that have also halted the negotiations to conclude the World Trade
Organization’s (WTO) Doha round of trade negotiations. The Mercosur–EU
FTA was put on the back burner following the collapse of the FTAA and the
aim to solve the outstanding disputes in the context of the WTO negotia-
tions. However, with these now stalled, the EU and Mercosur will try to start
the negotiations again in late 2009 in order to reach an agreement in 2010
(Radowitz, 2009). An FTA between Mercosur and the EU would only be
Mercosur’s second, after it concluded an agreement with Israel in 2007 and
after embarking on South–South initiatives with Southern Africa, Asia – and
here in particular India – and the Middle East (Schelhase, 2008, p. 151).
Yet, over recent years another set of external challenges has emerged in
the form of a gradual merger of the Comunidad Andina (CAN – Andean
Community) with Mercosur, to form the Unión de Naciones de Suramérica
(UNASUR – Union of South American Nations), and the attempt to enlarge
Mercosur through the inclusion of Venezuela.12 In the case of UNASUR, the

Shaw
182 The Successes, Failures and Future of Mercosur

overall aim is to develop an organization that covers all of Latin America,

thus potentially providing a counterweight to any future efforts to resusci-
tate the FTAA process. However, it remains to be seen to what extent this
new integration initiative will bear fruit, particularly as the CAN has only
recently started to negotiate its own FTA with the EU, thus somewhat chal-
lenging Mercosur’s efforts in this area.13 Moreover, the summit in Ecuador’s
capital, Quito, in August 2009, was marked by conflict between Colombia
and Venezuela about American bases in Colombia. Brazilian attempts to
mediate failed, and UNASUR as an integration project now looks decidedly
weak (The Economist, 2009e).
Furthermore, Mercosur’s decision in 2006 to admit Venezuela as a new
member has still not been ratified by all member states. The formal ratifica-
tion of its accession to the bloc has been delayed in the Brazilian Senate, and
Paraguay’s President Lugo has also withdrawn the necessary ratification bill
from parliamentary deliberation due to increasing concerns about it being
voted down (MercoPress, 2009h). The critique in both countries centres on
President Chávez’s increasingly harsh treatment of media outlets critical of
his government, the treatment of the opposition in Venezuela, and more
broadly Chávez’s commitment to democracy (MercoPress, 2009h). Indeed,
membership of Venezuela is problematic in the light of Mercosur’s com-
mitment to democracy and fully functioning democratic institutions, most
recently reaffirmed by the Protocolo de Ushuaia (Ushuaia Protocol) in 1998,
following the attempted military coup in Paraguay.14 Bearing in mind that
one of Mercosur’s explicit aims was to consolidate democracy in the Southern
Cone, Venezuela’s full membership, despite being based on very tangible
trade and resource interests by both Argentina and Brazil, would be problem-
atic, at least if Chávez continues his current political and economic polices,
both inside and outside Venezuela.15

Concluding remarks: Mercosur – Entre la Realidad y la Utopía16

When looking back at the definition of success introduced at the beginning

of this chapter it becomes clear that Mercosur has achieved some success,
experienced a few failures, and in many respects faces an uncertain future.
The aim to lock in economic reforms in the region was achieved, although
the 2001/2 crisis in Argentina and a shift to the left under the Kirchner presi-
dencies has brought about an increasingly pronounced divergence of views
in Argentina and Brazil in relation to economic policy and about the wider
role of Mercosur as a developmental project. Even though the bloc has con-
solidated democracy in its member states, the planned inclusion of Venezuela –
although currently on hold – might test the bloc’s commitment.
The current attempts to widen and deepen Mercosur internally, for example
through the planned introduction of a directly elected parliament with
mainly advisory capacity17 and the setting-up of modestly funded structural

Shaw
 Marc Schelhase 183

funds to aid economic and social development and cohesion,18 and externally,
through its trade negotiations, its planned merger with UNASUR, its incor-
poration of Venezuela and its South–South initiatives have deflected from its
main weakness. This is the inability of its members, particularly Argentina
and Brazil, to implement the bloc’s original aim of achieving a fully func-
tioning free-trade area, followed by a customs union and complemented by
a common market, in the wider context of a comprehensive development
agenda. As such, Mercosur’s ambitious external agenda has not provided the
glue that holds the organization together (Phillips, 2001, p. 577), but has
provided a fig leaf to cover the inability of the member states to implement
the internal reforms necessary to make Mercosur effective and develop a clear
and credible vision for the organization (Carranza, 2006, pp. 802–29). As
Enrique Iglesias, former President of the IDB, notes, ‘[Mercosur has] over ambi-
tious targets and little pragmatism. … We are trying to refine very ambitious
objectives which in practice are difficult to achieve’ (MercoPress, 2009g).
Mercosur as a significant developmental project is drifting as a result of
members’ diverging political and economic views about its aims and objec-
tives. The integration process is too dependent on presidential initiatives,
and successive attempts to re-launch the organization have not addressed the
institutional weaknesses and the lack of political will previously discussed.
However, by implementing the original aims of Mercosur, the member states
would provide a much more effective framework for significantly increasing
intra-regional trade, thus providing political and economic incentives to cre-
ate stronger and more robust regional governance structures while supporting
development. In turn, this would also better utilize the existing efforts of the
private sector and other civil society actors aimed at creating and sustaining
a vibrant, dynamic, and expanding regional vision, potentially encompassing
the whole of South America.

Notes
I would like to thank Andrew Cooper, Gordon Mace, and Tim Shaw for the invita-
tion to participate in the colloquium and the participants for their comments and
encouragement. Although I am affiliated with King’s College London, Defence Studies
Department, Joint Services Command and Staff College at the UK Defence Academy,
the analysis, opinions, and conclusions expressed or implied in this chapter are mine
and do not necessarily represent the views of the JSCSC, the UK Ministry of Defence,
or any other government agency.

1. The founding members of Mercosur – and still the only full members of the
organization – are Argentina, Brazil, Paraguay, and Uruguay. At the time of writing
(summer 2009), Venezuela’s full membership is still pending ratification in Brazil
and Paraguay (Klonsky and Hanson, 2009, p. 1). The delay is mainly due to con-
cerns about Venezuela’s democratic credentials under Hugo Chávez’s increasingly
authoritarian leadership. Bolivia, Chile, Colombia, Ecuador, and Peru are associated
members.

Shaw
184 The Successes, Failures and Future of Mercosur

2. It is important to note that a common market is the logical end point of an

integration process that started as an FTA, followed by a customs union with a
Common External Tariff (CET), which then evolves into a common market with
the free movement of goods, services, and labour.
3. For more information see Acta para la Integración Argentino-Brasileña ⬍ http://
www.iadb.org/Intal/instrumentos/picab1.htm:; Tratado de Integración, Cooperación
y Desarrollo ⬍ http://www.iadb.org/Intal/instrumentos/picab2.htm ⬎; Acta de
Buenos Aires ⬍ http://www.iadb.org/Intal/instrumentos/picab3.htm ⬎; Acuerdo
de Complementación Económica No 14 ⬍ http://www.sice.oas.org/Trade/ARG_
BRA/ARGBRA_ind_s.asp ⬎; Tratado de Asunción ⬍ http://www.sice.oas.org/Trade/
MRCSRS/MRCSRINS.ASP ⬎. For a discussion of the initial process of integration see
also Phillips (2004, pp. 87–8).
4. In addition, the Comisión de Comercio del Mercosur (CCM – Mercosur Trade
Commission), the Comisión Parlamentaria Conjunta (CPC – Joint Parliamentary
Commission), the Foro Consultivo Económico-Social (FCES – Economic and Social
Consultative Forum), and the Secretaría Administrativa del Mercosur (SAM –
Mercosur Administrative Secretariat) were also created. For the protocol see
Protocolo de Ouro Preto ⬍http://www.mercosur.org.uy/⬎.
5. A notable exception is the chemical industry (see Schelhase, 2008, pp. 99–113).
6. Examples for this on the level of Mercosur are the Consejo Industrial de Mercosur
(CIM – Industry Council of Mercosur) and the Consejo de Asociaciones de
la Industria Ouímica del Mercosur (CIQUIM – Chemical Industry Council of
Mercosur).
7. For a more in-depth discussion of the role of the IMF in relation to the Argentine
financial crisis, see Mussa (2002).
8. For the protocol see Protocolo de Olivos ⬍http://www.mercosur.int⬎.
9. It is important to note that the share of intra-regional trade might be underesti-
mated, as extra-regional trade in US$ terms has grown substantially due to the
increase in commodity prices, whereas commodities are significantly less impor-
tant for intra-regional trade, thus potentially undervaluing intra-Mercosur trade
(IDB, 2009, p. 29).
10. For a discussion of attempts to strengthen regional production networks in order
to deal with the economic asymmetries in Mercosur see IDB (2009, p. 82–90).
11. For an in-depth discussion of the Mercosur–EU FTA and the Mercosur–EU
Business Forum see Schelhase (2008, Chapter 5).
12. CAN was founded in 1969 as the Pacto Andino by the Cartagena Agreement
and renamed CAN in 1997. Its members are Bolivia, Columbia, Ecuador, Peru,
and Venezuela. In addition to the member states of CAN and Mercosur, Chile,
Guyana, and Suriname are also members of UNASUR.
13. For an overview for the CAN–EU negotiations see the CAN website: ‘Negociaciones
CAN-UE para un Acuerdo de Asociación’ ⬍http://www.comunidadandina.org/
exterior/can_ue.htm⬎.
14. For the protocol see Protocolo de Ushuaia ⬍http://www.mercosur.int/⬎.
15. For a discussion of Mercosur in the wider context of regional integration in the
Americas see Schelhase (2011).
16. With reference to Campbell et al. (1999).
17. For the Mercosur Parliament see Parlamento del Mercosur ⬍http://www.
parlamentodelmercosur.org/index1.asp⬎.
18. The Fondo para la Convergencia Estructural del Mercosur (FOCEM – Mercosur
Structural Convergence Fund) was agreed in 2005 and was implemented in
2006 for an initial duration of ten years. The total money available annually

Shaw
 Marc Schelhase 185

from Year 3 onwards is US$ 100 million, with 27 per cent being contributed
by Argentina, 70 per cent by Brazil, 1 per cent by Paraguay, and 2 per cent by
Uruguay. The funds will be disbursed to the member states according to fixed
shares. Paraguay will receive 48 per cent of the money available, Uruguay 32 per
cent, and Argentina and Brazil 10 per cent each. For FOCEM see Fondo para la
Convergencia Estructural del Mercosur ⬍http://www.mercosur.int/focem⬎.

References
Bouzas, Roberto (2001) ‘Mercosur Ten Years After: Learning Process or Deja-Vu?’.
Mimeo. Buenos Aires: FLACSO/Argentina.
Bouzas, Roberto (2008) ‘Regional Governance Institutions, Asymmetries, and
Deeper Integration in Mercosur’, in Juan S. Blyde, Eduardo Fernández-Arias and
Paolo Giordano (eds) Deepening Integration in Mercosur – Dealing with Disparities.
Washington: IDB, pp. 355–79.
Campbell, Jorge (ed.) (1999) Mercosur – Entre la Realidad y la Utopía. Buenos Aires:
Grupo Editor Latinoamericano.
Carranza, Mario E. (2006) ‘Clinging Together: Mercosur’s Ambitious External Agenda,
its Internal Crisis, and the Future of Regional Economic Integration in South
America’, Review of International Political Economy 13 (5), pp. 802–29.
Hírst, Mónica (1999) ‘Brasil – Argentina a la sombra del futuro’, in José María
Lladós and Samuel Pinheiro Guimarães (eds) Perspectivas Brasil y Argentina. IPRI,
pp. 387–99.
Hornbeck, J. F. (2006) Mercosur: Evolution and Implications for US Trade Policy.
Washington, DC: Congressional Research Service – The Library of Congress.
Inter-American Development Bank (2004) Mercosur Report No. 9. Buenos Aires:
IDB-INTAL.
Inter-American Development Bank (2009) Mercosur Report No. 13. Buenos Aires:
IDB-INTAL.
Katenthaler, Karl C. and Frank Mora (2002) ‘Explaining Latin American Economic
Integration: The Case of Mercosur’ with Frank Mora. Review of International Political
Economy. Vol. 9, No. 1: 72–97.
Klonsky, Joanna and Stephanie Hanson (2009) Mercosur: South America’s Fractious
Trade Bloc. Council on Foreign Relations.
Leipziger, Danny M., Claudio Frischtak, Homi J. Kharas and John F. Normand (1997)
‘Mercosur: Integration and Industrial Policy’, The World Economy 20 (5), pp. 585–603.
Mecham, Michael (2003) ‘Mercosur: A Failing Development Project?’ International
Affairs 79 (2), pp. 369–87.
MercoPress (2009a). ‘Lula da Silva Proud to Lend Money to the IMF’, MercoPress,
4 April [online edition].
MercoPress (2009b). ‘Brazil Threatens to Take Argentina to WTO on Import Licences’,
MercoPress, 4 July [online edition].
MercoPress (2009c). ‘Brazil could Restrict Credit to Argentina in Retaliation for Trade
Barriers’, MercoPress, 11 July [online edition].
MercoPress (2009d). ‘Uruguay Rejects Proposals to Grant Mercosur More Powers’,
MercoPress, 22 July [online edition].
MercoPress (2009e). ‘Uruguay Criticizes Mercosur Trade Barriers and Integration
Delay’, MercoPress, 24 July [online edition].
MercoPress (2009f). ‘Argentina Ignores Mercosur; Rallies Domestic Support for
Protectionist Policies’, MercoPress, 29 July [online edition].

Shaw
186 The Successes, Failures and Future of Mercosur

MercoPress (2009g). ‘The Mercosur Dream has “Over Ambitious Targets and Little
Pragmatism”’, MercoPress, 13 August [online edition].
MercoPress (2009h). ‘Paraguayan Government Withdraws Bill for Venezuela’s
Mercosur Incorporation’, MercoPress, 14 August [online edition].
Mesquita Moreira, Mauricio (2008) ‘Brazil’s Trade Policy: Old and New Issues’, INT
Working Paper 11. IDB.
Mussa, Michael (2002) Argentina and the Fund: From Triumph to Tragedy. Washington:
Institute for International Economics.
O’Keefe, Thomas Andrew (2003) ‘A Resurgent Mercosur: Confronting Economic
Crises and Negotiating Trade Agreements’, The North-South Agenda – Paper Sixty.
Miami: North-South Center.
Pearce, Robert and Ana Teresa Tavares (2000) ‘Emerging Trading Blocs and their impact
on The Strategic Evolution of Multinationals’, Managerial Finance 26 (1), pp. 26–40.
Phillips, Nicola (2001) ‘Regionalist Governance in the New Political Economy of
Development: “Relaunching” the Mercosur’, Third World Quarterly 22 (4), pp. 565–83.
Phillips, Nicola (2004) The Southern Cone Model. London and New York: Routledge.
Radowitz, Bernd (2009) ‘Spain, Argentina Push for restart of Mercosur-EU Talks’. Dow
Jones Newswire, 9 February. Available at www.bilaterals.org.
Raszewski, Eliana (2008) ‘Fernández May Elude Curbs on Argentine Pension Funds
(Update 1)’. Bloomberg.com, 19 November [online edition].
Schelhase, Marc (2005) ‘Mercosur’s External Trade Agenda: Regional and Global
Linkages’, Evian Group Policy Brief, July.
Schelhase, Marc (2008) Globalization, Regionalization and Business. Basingstoke; New
York: Palgrave Macmillan.
Schelhase, Marc (2011) ‘The Changing Context of Regionalism and Regionalization
in the Americas: Mercosur and Beyond’, In T. Shaw, S. Cornelissen and J. A. Grant
(eds) The Research Companion to Regionalisms. Aldershot: Ashgate.
Schirm, Stefan A. (2002) Globalization and the New Regionalism – Global Markets,
Domestic Politics and Regional Cooperation. Cambridge: Polity Press.
The Economist (2005). ‘Screeching to the Precipice’, The Economist, 24 February [online
edition].
The Economist (2006). ‘Tucking into the Good Times’, The Economist, 19 December
[online edition].
The Economist (2007b). ‘Caught Short’, The Economist, 14 June [online edition].
The Economist (2008a). ‘Satisfying the Creditors’, The Economist, 4 September [online
edition].
The Economist (2008b). ‘Better Late than Never’, The Economist, 25 September [online
edition].
The Economist (2008c). ‘The Delights of Dullness’, The Economist, 17 April [online
edition].
The Economist (2008d). ‘Making the Grade’, The Economist, 2 May [online edition].
The Economist (2009a). ‘A Chance to Change Course’, The Economist, 18 June [online
edition].
The Economist (2009b). ‘A Vote for Change’, The Economist, 30 June [online edition].
The Economist (2009c). ‘Late In, First Out’, The Economist, 14 September [online edition].
The Economist (2009d). ‘Pulp Friction’, The Economist, 10 March [online edition].
The Economist (2009e). ‘Lula and his Squabbling Friends’, The Economist, 13 August
[online edition].

Shaw
10
Ruling the North American Market:
NAFTA and its Extensions
Louis Bélanger and Richard Ouellet

In 1994, the governments of Canada, Mexico, and the US created what was
at that time a very modern free trade area by promulgating the entry into
force of NAFTA, the North American Free Trade Agreement. NAFTA was
essentially an amended version of the then five-year-old Canada–United
States Free Trade Agreement (CUSTA). The new agreement not only enlarged
CUSTA by adding Mexico as a third party; it made economic integration
stronger and deeper in the fields already opened to free trade and it covered
new sectors and new trade-related issues.
Aimed at creating ‘an expanded and secure market for the goods and
services produced in [the] territories’ of the signatory governments and at
‘ensur[ing] a predictable commercial framework for business planning and
investment’ (NAFTA, 1993, Preamble), NAFTA delivered the main commer-
cial and economic results it was designed to produce. It eliminated a fair
number of non-tariff barriers between Canada, the US, and Mexico. With the
exception of the dairy, poultry, egg, and sugar subsectors, NAFTA gradually
led to the elimination of the tariff duties that were previously applicable
between the three countries. It also brought the three national govern-
ments into a new era of cooperation and harmonization of standards,
regulations, and policies.
Chapter 4 and Annex 401 created a new regional set of rules of origin that
is easy to apply and that allowed North American importers to qualify more
goods for NAFTA preferential treatment (Hufbauer and Schott, 2005, p. 60).
Chapter 5 enhanced the harmonization of the procedures applied by the
customs authorities. In Chapters 8 and 9, the signatory governments agreed
upon important conditions of application for safeguard measures and for
standards-related measures. NAFTA also changed the practices followed by
federal government departments and entities of the NAFTA countries in
procuring goods, services or construction services for public uses. When the
estimated value of the contract exceeds specific thresholds, Chapter 10 on
Government Procurement prohibits discriminatory practices and forces the

187

Shaw
188 Ruling the North American Market

covered entities to open the tendering processes to all admissible Mexican,

American, and Canadian suppliers.
With regard to foreign direct investment, NAFTA created, in its Chapter 11,
an innovative set of rules that, despite all the controversies that surround it,
has to be recognized as providing North American investors with improved
protections that enhance the flow of investments in the NAFTA zone. For
more than ten years, Chapter 11 has been totally or partly copied in numerous
free-trade agreements or foreign investment protection agreements (FIPAs)
signed by Canada, the US, and many of their other international trading
partners.
NAFTA provisions also affected other subsectors like telecommunications
or financial services, trade-related issues like competition policy, monopo-
lies, state enterprises, temporary entry for business persons, and intellectual
property. Despite their weaknesses, which will be addressed later, these pro-
visions contributed to the harmonization of numerous national regulations
in these fields and helped bring the economic integration of North America
to its current level.
Assessing the real economic impacts of NAFTA is not an easy task, but men-
tioning a couple of commercial facts helps illustrate how North American
markets are integrating. Since NAFTA came into force on 1 January 1994,
trilateral merchandise trade has tripled, reaching US$ 946.1 billion in 2008.
Canada and Mexico are currently the two top purchasers of US exports and
the first and third suppliers of goods imported to the US market.
Beyond those figures, NAFTA has proven to be a factor of economic growth
for each of the NAFTA countries. For the US, it secured access to Canada’s
large energy-exporting market. For Canada, it guaranteed access to the US
market for manufactured goods and services. Mexico is now one of the most
liberalized economies in the world and one of the largest exporters because
NAFTA forced it to diversify its production and economic activities.
The trade agreement appears at first sight to be a huge success. During its
first years of implementation, plans to further enlarge or deepen NAFTA were
envisaged (Weintraub, 1994). For example, Chile was seen by the Clinton
administration as a serious candidate for accession and, under President Fox,
the Mexican government tabled an ambitious proposal to upgrade the free
trade area into a fully fledged common market. More recently, during the
2008 Presidential campaign, Barack Obama promised to renegotiate the deal
in order to incorporate labour and environmental standards into its core
body. However, none of these plans to significantly redraw NAFTA went very
far. Therefore, the North American market continues to be governed by an
agreement that was negotiated fifteen years ago.
Has NAFTA revealed itself to be flexible enough as an institution to accom-
modate new developments in the absence of such renegotiation? In this
chapter, we will propose a negative, but qualified, answer to this question.
First, we will show that not only does NAFTA lack effective amendment

Shaw
 Louis Bélanger and Richard Ouellet 189

procedures, but also that its governing bodies have not been granted the
rule-making capability needed to effectively tackle twenty-first century
trade issues such as regulatory harmonization. We will then examine some
regional cooperation mechanisms that can be considered as institutional
extensions of NAFTA, and point out that they offer practical, but imperfect,
attempts at compensating for NAFTA’s secondary rule-making deficit. This
post-NAFTA cooperation circumvents the original agreement’s rigidities by
operating exclusively on the basis of executive-to-executive arrangements.
However, while such an institutional strategy can bear fruit, in order to be
truly effective it would need to be pursued in a more comprehensive and
formal fashion.

NAFTA: Trade liberalization without secondary ruling

In terms of the breadth of its sectoral coverage and the precision and depth
of its legal disciplines, NAFTA is an impressive piece of work. The agreement
is divided into 22 chapters, some of which are entirely devoted to one sector
or subsector of trade such as Energy and Basic Petrochemicals, Agriculture,
Services, Telecommunications, or Financial Services. Each chapter contains
highly detailed provisions that must be read in conjunction with definitions,
reservations or exceptions placed in numerous annexes. Some provisions go
into great detail, such as specifying that Bourbon Whiskey and Tennessee
Whiskey should be recognized as distinctive products (NAFTA, Annex 313),
or stating that, on Canadian territory, Canada Post Corporation has the
exclusive privilege to collect, transmit, and deliver ‘letters’ as defined in
the Canadian Letter Definition Regulations (NAFTA, Annex V, Schedule of
Canada). NAFTA was drawn up as a business contract (Pastor, 2001, p. 96)
full of complex and lengthy legal contortions (Weintraub, 1993).
These highly detailed pre-established rules are coupled with a quasi-absence
of ex-post rule-making capability (Bélanger, 2007). NAFTA is equipped with
a minister-level Free Trade Commission (FTC), a decentralized secretariat,
sophisticated dispute settlement mechanisms (DSMs), and several technical
working groups and committees (TWGs). However, none of these bodies
has real authority to create new rules or modify existing ones. The central
decision-making body provided for by NAFTA is the Free Trade Commission.
The FTC was not granted the power to directly amend the agreement, apart
from technical modifications to the classification of products for origin
determination or to the schedule for tariff elimination (NAFTA, 1993, Art.
414 & 512). The NAFTA agreement nonetheless gives the FTC the mandate
to monitor the implementation of the agreement and, to this end, grants
it some interpretative and procedural decision-making authority, which has
been used with great restraint. The FTC used its interpretative authority once,
in 2001, when it attempted to clarify some provisions pertaining to the opera-
tion of Chapter 11’s arbitration tribunals (Canada, 2001). The tribunals have

Shaw
190 Ruling the North American Market

since operated in accordance with the Commission’s interpretative note, but

this move has not gone unchallenged, being criticized as an illegitimate and
indirect way of amending the agreement (see Pope and Talbot, 2002, p. 23).
During its first months of existence, the FTC realized how severely its power
to decide on procedures was limited when it attempted to establish a cen-
tralized North American Trade Secretariat in addition to the three national
sections provided for in the original agreement. In the absence of clear pro-
visions for this administrative body in the text of NAFTA, the US Congress
simply refused to appropriate the necessary budget and the FTC decision
was never implemented (Grijalva and Brewer, 1994, p. 5).
In a regional trade agreement that left its signatory governments with
very little power or room to amend its provisions or include new ones, it was
obviously of the greatest importance to provide for clear sets of procedures
that would apply when the parties disagreed on the interpretation of this
complex set of rules. The NAFTA DSMs are thus recognized for their preci-
sion and effectiveness. While a very useful instrument for the enforcement
of existing provisions, NAFTA’s judicial institutions did not engage in ‘law
making from the bench.’ Intergovernmental disputes over the interpretation
and application of the text of NAFTA are to be settled in accordance with
the Chapter 20 DSM. So far, only three panel decisions have been issued
under this procedure. The first provided hope that Chapter 20 panels would
render some rulings that would inevitably produce secondary rulings. In
this case, Canada and the US were split over how to conciliate the tariffication
process imposed by the Uruguay Round Agriculture Agreement and the tariff
elimination provided for in Chapter 3 of NAFTA. In its Report issued on 2
December 1996, the Panel found that Canada had properly reconciled its
World Trade Organization (WTO) and NAFTA obligations with regard to
the tariffs applied to US-origin agricultural products. To reach this conclu-
sion, the panel affirmed that Article 710 of CUSTA, which was included in
NAFTA, had to be seen as a ‘forward-looking’ provision (NAFTA Arbitral Panel
Established Pursuant to Article, 2008, 1996). If reaffirmed, this progressive
vision of the interpretation of NAFTA could have led to a continuous adap-
tation of the application of the agreement. Unfortunately, the two other
cases brought before Chapter 20 Panels concerned much tighter and sector-
based issues and did not require the panels to decide on the way NAFTA
should evolve.
To date, the most commonly used NAFTA DSM has been the panel review
of final anti-dumping and countervailing duty (AD/CVD) determinations.
This procedure, established in Chapter 19, provides an option of binational
panel review in place of domestic judicial review of domestic decisions
regarding AD/CVD matters. Between January 1994 and October 2009,
over 100 cases were brought for review before such binational panels,
which essentially apply national laws using standards of review that would
be applied by national courts (NAFTA, Article 1904(3); Cannon, 2009).

Shaw
 Louis Bélanger and Richard Ouellet 191

Binational panel decisions are binding on the Parties involved (NAFTA,

Article 1904.9). In its decision, a Panel may uphold a final determination
or remand it back to the competent investigating authority for action
consistent with its decision (Johnson, 1994), and the vast majority of the
final decisions have indeed remanded determinations of domestic trade
authorities (Macrory, 2002). Some observers believe that Chapter 19 failed
to bring peace to the industrial sectors that needed it most (Adams, 2008).
Others point out that the fact that AD/CVDs have virtually disappeared from
use – with a notable exception for the softwood lumber sector – constitutes
evidence that Chapter 19 has been a success (Hart and Dymond, 2007).
Aside from the disputable impact of Chapter 19 on the application by States
of trade remedies applied in the NAFTA zone, there is also the question of
the contribution that Chapter 19 has made to the creation of secondary
norms. Since they apply national laws, as opposed to the international law
applicable to all NAFTA Parties, and can only go as far as requiring the
remand of a decision, Chapter 19 Panels cannot contribute to the evolution
of NAFTA’s obligations. As will be seen below, the necessity to conceive,
negotiate and sign the 2006 Softwood Lumber Agreement outside of
NAFTA may be the best evidence that Chapter 19 has not been conducive
to secondary rulings.
Chapter 11 provides for the arbitration rules applicable to the settlement
of disputes between a Party to NAFTA and an investor of another Party. To
date, at least 53 cases have been filed by investors against one of the three
governments. Chapter 11 arbitration panels decide on the treatment that
each government must accord to complaining foreign investors. As was the
case for Chapter 19, these rulings do not help improve and adapt NAFTA’s
obligations over time. While it is possible to see in Chapter 11 arbitral
sentences a form of supranational law binding the three NAFTA partners
(Westbrook, 2007–8), this supranational law is, by nature, part of traditional
international investment law, a sector of international economic law that
existed long before the adoption of NAFTA.
A final potential source of secondary rulings in NAFTA lies in the moni-
toring mandates given to its different sectoral TWGs. In short, the TWGs
are responsible for facilitating and harmonizing the application of NAFTA
provisions. Many of the TWGs have contributed to tightening the links
between various domestic administrative authorities charged with the
application of trade-related regulations and norms, but none has produced
real secondary rulings. One exception, discussed below, may be the NAFTA
Technical Working Group on Pesticides. The rules produced by this group,
however, are not binding and find their legal ground in the regulating
power of domestic agencies rather than in the authority entrusted in the
regional body. Thus, we must agree with Robert Wolfe (2006) who, when
reviewing the TWGs listed in NAFTA Annex 2001.2, evoked the notion of
dead letters.

Shaw
192 Ruling the North American Market

Be they political (the commission), judicial (the DSMs), or technical (the

TWGs), the different decision-making bodies instituted by NAFTA have, by
design, all been prevented from engaging in secondary ruling. As this very
brief overview of the actual functioning of these institutions has shown,
fifteen years of operation have consolidated rather than diluted this structural
characteristic. Therefore, the only way to adapt NAFTA, short of built-in
secondary ruling mechanisms, would be to go through the exact same process
of domestic ratification that was used to create it in the first place, but this has
never been done. Not all international treaties are designed in such an inflex-
ible manner. Many agreements, to which the US is often party, provide for
amending mechanisms that do not require full domestic ratification on the
part of the contracting parties. They can contain provisions for secondary
ruling that explicitly isolate parts of the binding rules, and allow for a more
expedient and secure way of modifying these rules than what is normally
called for in more basic commitments. NAFTA also does this, but only in the
very limited cases mentioned above. In other instances, ‘tacit amendment’
becomes binding on a Party if the latter acquiesces simply by failing to object
after a given period of time, which means that there is no need for ratifica-
tion (Bradley, 2006). In many other cases, non-binding standards produced by
international bodies are assimilated as domestic regulations when administra-
tive agencies are required by statute to adopt them. According to Swaine (2004,
p. 1519), ‘(t)he US Code is replete with (such) international assimilations’.
However, because NAFTA, despite its scope, was negotiated in the US treaty-
making process as a standard free trade agreement, such levels of flexibility
are out of its reach. This has little to do with the fact that, in the American
system, NAFTA is considered as a congressional-executive agreement (therefore
requiring a majority vote in both houses of Congress to be ratified as well as
amended) rather than as a treaty (whose ratification requires a supermajor-
ity vote in the Senate). More important is the fact that Congress has always
exercised firm and direct control over tax and other revenue-raising policies,
and has closely guarded its rule-making authority in these areas. Therefore,
trade policy, composed of tariff measures and the like, has traditionally been
a policy area where delegation to the executive branch, through interna-
tional as well as domestic means, has been minimal. Accordingly, traditional
trade agreements negotiated by the US have been carefully crafted as defini-
tive agreements, and the implementing legislations passed in Congress take
extra precautions in making sure that no ex post decisions coming from the
few bodies created by these agreements could ever be interpreted as self-
executing (House of Representatives, 1993).

The consequences: Erosion and shallowness

In order to be effective, a free trade agreement must provide economic actors

with a high level of predictability. Agreed-upon rules must be precise,

Shaw
 Louis Bélanger and Richard Ouellet 193

enforceable, and shielded against future opportunistic temptations to

renege. There is a broad consensus in the literature that, while not perfect,
NAFTA should be considered as exemplar in this regard (see Bernier and
Roy, 1999; Abbott, 2000). Too much fixity, however, can lead to less than
effective results. First, it makes it difficult and costly to adapt the free trade
agreement to changes in the environment or to unforeseen endogenous
developments, which can lead to rapid erosion. Second, it reduces the actual
depth of the agreement by leaving important areas of trade liberalization,
which specifically require ongoing rule making, outside of its reach. Both of
these phenomena can be seen in the case of NAFTA.
While at the time when NAFTA came into force the signatory govern-
ments could assert that the deal was attuned to the North American economy
of the 1990s (see, for instance, Canada 1994, pp. 68–74), one has to admit
today that many of its provisions have lost relevance and applicability
over time. For example, Chapter 13 on Telecommunications, Chapter 14
on Financial Services, and their annexes are all still of use but they would
certainly benefit from some rejuvenation to take account of the evolution
and deregulation that have taken place in the markets in these sectors over
the last 15 years. Some of the provisions related to tariff elimination, draw-
backs, textiles, or emergency action proved their usefulness in the first years
of NAFTA’s implementation but have since fallen into obsolescence. Today,
agricultural issues are also much more effectively dealt with inside the WTO
than in the normative context provided by NAFTA Chapter 7A. Such examples
of the erosion of the usefulness of the text of NAFTA abound. But this is
not the only adverse effect of the way NAFTA was originally structured and
drawn up.
Because NAFTA was meticulously structured to avoid secondary ruling
mechanisms, it imposes strict limits to the depth of market integration in
North America. For example, its structure makes the adoption of a common
external tariff unthinkable, since this would require an ongoing coordina-
tion of the three states’ trade policies (Dymond and Hart, 2005). NAFTA
instead has to rely on the suboptimal solution of a rules-of-origin regimen
that not only opens the door to protectionist manipulations, but has also
revealed itself to be costly for both governments to administer and business
to comply with (Kunimoto and Sawchuck, 2004). Another clear example of
the sub-efficiency of avoiding built-in rule-making capability in NAFTA can
be found in its approach to trade remedies. Ideally, countries in a free trade
pact would exempt each other from the application of their AD/CVD duty
laws and adopt a common system of rules and policies related to competi-
tion. Again, such a system would necessitate the ongoing adjustment of
regional rules on dumping and other distorting practices such as subsidies.
The chosen alternative, which was to avoid policy coordination and instead
establish the judicial mechanism described above, has been plagued by
bureaucratic delays and lengthy extraordinary challenges fuelled by the

Shaw
194 Ruling the North American Market

absence of a common standard of review (Hufbauer and Schott, 2005,

pp. 249–52). That said, rules-of-origin and protection against abusive
trade remedies may be important aspects of any conventional free trade
agreement, but they essentially pertain to twentieth-century trade issues.
The new frontier of regional liberalization is clearly the reduction of regula-
tory obstacles to trade, and here again there is a need for secondary ruling
(Hart, 2006).
‘Protective regulations’ (the regulatory activity aimed at protecting
consumers, the environment, labour rights, public health and safety) and
‘economic regulations’ (the regulation of infrastructural and utility sec-
tors such as communications, railways, energy, and water distribution) have
steadily increased over the past 25 years and have had a significant impact on
trade (Vogel, 1995). Differences in these domestic regulations impose signifi-
cant compliance costs on producers who are willing to operate in different
jurisdictions; simply put, there can be no true regional market without a
concordant set of rules. In a recent communication to the WTO, the three
North American governments estimated the amount of their reciprocal
trade affected by regulatory barriers to be US$ 715 billion (WTO, 2009,
p. 2). The problem is that the coordination or harmonization of regula-
tions – from those affecting food safety to those relating to professional
accreditation aimed at guaranteeing the free flow of goods and services –
cannot be carried out successfully without ‘dynamic rule-making’ (Hart,
2006, p. 21). This is necessary for the simple reason that governments are
permanently making new rules and unmaking others, and regulatory activity
is a central and sensitive function of the modern state that cannot be pre-
ordained. In the US alone, federal agencies produce 4000 new regulations
every year (Gattuso, 2008). Because it lacks secondary ruling capability,
the concordance of regulations is an area that has largely been left out of
NAFTA. Chapter 7B (Sanitary and Phytosanitary Measures) and Chapter 9
(Standards-Related Measures) do cover the issue of standards and regulatory
matters, but only encourage Parties to make their regulations compatible
‘to the greatest extent practicable’ rather than establishing a mandatory
process of harmonization. There is simply no obligation for any country to
accept this compatibility; rather, it is up to the exporting party to assume
the burden of demonstrating, to the satisfaction of its trade partners, that its
own regulation should be recognized as equivalent to that of the importing
party (Irish, 2009, pp. 338–42). This is a fastidious process which, further-
more, does not cover state, provincial, or municipal regulations. Here again,
NAFTA would be a much more effective tool for economic integration if it
provided for the negotiation and promulgation of regional standards and
technical regulations, especially given that the equivalence of the national
rules has to be verified in any case.
To sum up, as a contract that favours the fixity of pre-established rules
over the flexibility of ex-post ruling, NAFTA provides a highly predictable

Shaw
 Louis Bélanger and Richard Ouellet 195

normative environment for the development of trade in North America.

Too much rigidity, however, comes with a price. NAFTA cannot be efficiently
upgraded in the face of a rapidly changing economic reality. Moreover, with-
out the required secondary-ruling capability, it is not suitable in itself or as a
model to address twenty-first century trade issues, the most important being
the whole issue of regulatory coordination. In a global context of competi-
tive liberalization, all this inevitably leads to a gradual erosion of the NAFTA
advantage.

Executive-level extensions

Unavoidably, over time, the insufficiencies of NAFTA have become increas-

ingly manifest. The day-to-day business of trade in North America has
changed since 1994 in ways that could not be foreseen when the agreement
was created. One obvious example of this is the tightening of the borders
which has taken place since the 2001 terrorist attack, but other develop-
ments, such as the Internet revolution, are also at play. Moreover, the
implementation and expansion of WTO rules domestically and abroad, and
the aggressive pursuit by Washington of competitive liberalization in every
corner of the globe, have shrunk the competitive advantage of NAFTA. These
developments have forced the North American governments to consider the
necessity of supplementing the restrained NAFTA institutions with other
coordination mechanisms. In this section, we will consider three of these
mechanisms or sets thereof: the Security and Prosperity Partnership (SPP);
the Canada–US Softwood Lumber Agreement (SLA); and the border security
agreements. In spite of their differences, these instruments share an impor-
tant commonality: they are all designed to function within the perimeter
of the executive branch of government. As will be seen below, the SPP is
not an international treaty or agreement, whereas the SLA and the border
security agreements are legally binding instruments. Nevertheless, they all
escaped legislative involvement in the US by having been concluded as ‘sole
executive agreements’, which means they were negotiated and signed by the
President without congressional ratification (Van Alstine, 2006).
The SPP was launched in 2005, during a trilateral summit hosted by then
President George W. Bush in Waco, Texas. Its clear objective has been to
keep North American borders closed to security threats while open to the
movement of legitimate people and goods. The SPP itself is essentially an
agenda-led intergovernmental process. It is not a formal, legally binding
agreement, and the Waco joint declaration did not even mention the con-
vening of regular summits in the future (White House, 2005). Decisions were
subsequently made to convene in Cancún (2006), Montebello (2007), New
Orleans (2008), and Guadalajara (2009). The Guadalajara Summit, however,
the first to take place under the Obama administration, was conducted without
activating the SPP apparatus of ministerial meetings and action plans, raising

Shaw
196 Ruling the North American Market

the question of whether the SPP process will be dismantled, redesigned, or

rebranded. These agenda-setting summits at the presidential and prime-
ministerial level have been supported by a loose structure of cabinet-level
coordination with one minister in each country responsible for each of two
pillars, security and prosperity. In order to function without requiring the
ratification of a treaty or even a congressional-executive agreement, the SPP
was carefully designed to operate within the limits of the constitutional and
administrative authority of the executive branch of each state (Ackleson
and Kastner, 2006, pp. 215–18; Anderson and Sands, 2007, p. 18).
At the bureaucratic level, 20 trilateral working groups have been operating
under the SPP umbrella, ten for each pillar. On trade issues, the mandates
of many SPP working groups duplicated those of the NAFTA working groups
in an attempt to reanimate some technical discussions and provide the kind
of cooperation at the operative level that NAFTA failed to sustain. This,
according to Anderson and Sands (2007, p. 14), was a clear recognition by
the three governments that ‘the soft political mandate for such negotia-
tions … contained in NAFTA (the built-in agenda) had been insufficient’.
Since the SPP itself was prevented from creating new legal and enforceable
commitments, it made sense to have the working groups fully exploit the
reservoir of untapped commitments that could be found in NAFTA. In at
least one instance (pesticide certification) the combination of SPP processes
and NAFTA’s institutional base seemed to produce some regional ruling
activity, although not legally binding, through executive-level coordination.
The NAFTA Technical Working Group on Pesticides (NAFTA TWGP) was first
created in 1997 by the NAFTA Committee on Sanitary and Phytosanitary
Measures (NAFTA TWGP, 1997) and was enlisted into the SPP process in
2005 as a component of its Food and Agriculture Working Group. Since
2007, the NAFTA TWGP has used a harmonized system of classification of
chemicals as a basis for a joint certification of pesticides, the ‘NAFTA Labels’
(NAFTA TWGP, 2009, pp. 9–10). So far, nine pesticides have received a NAFTA
Label joint certification by American and Canadian agencies. Indeed, while
Chapter 7B of NAFTA calls for equivalence in sanitary and phytosanitary
measures, it in no way provides for the establishment of regional labels for
pesticides, nor does it entrust this power to a technical working group that
is not even mentioned in the agreement. The legal ground for the labels are
thus found neither in NAFTA nor in the SPP, but rather in the simultaneous
registration of products by domestic agencies, which was propelled by the
SPP process.
Despite its confinement to the existing perimeters of executive power,
the SPP has clearly shown serious rule-making potential, especially in areas
where federal agencies in the three countries already benefit from relatively
high levels of discretion in exercising their regulatory mandates (Ackleson
and Kastner, 2006; Bélanger, 2009). As demonstrated by the case of standard
harmonization in the certification of pesticides, this rule-making activity

Shaw
 Louis Bélanger and Richard Ouellet 197

could be directed at ‘completing’ NAFTA. It is also interesting to note that

decisions made under the SPP can later be formalized by an executive agree-
ment and become binding. This is exactly what happened when talks in the
SPP Border Facilitation working group led to the difficult negotiation of a
Canada–US land preclearance agreement (SPP, 2006, p. 74).1 However, current
uncertainty with regard to the status of the SPP clearly shows the limits of
operating outside of binding cooperative agreements.
The second main illustration of the evolution of North American integration
operating outside the framework of NAFTA is the 2006 Softwood Lumber
Agreement. This agreement put a temporary end to the fourth phase of
a 25-year-old dispute between Canada and US, conducted largely through
NAFTA DSMs, over the fair price of Canadian softwood lumber sold in the
US. This major agreement provides for all the rules, figures, and methods appli-
cable to the calculation of quantities and the price of softwood lumber that
can be exported from Canada to the US. To make the deal sustainable, the
SLA includes a Termination of Litigation Agreement which confirmed
the settlement of at least 20 outstanding actions or proceedings related
to AD/CVD measures. The SLA also revoked, as of May 2002, all AD/CVD
orders related to wood products covered by the SLA. Parties also committed
not to self-initiate any AD/CVD investigation unless very specific condi-
tions are met. As an indication of the legally binding nature of the SLA,
a clause provides that disputes should be brought before the London Court
of International Arbitration (SLA, Article XIV, para. 6). In order to imple-
ment the agreement in Canada, the House of Commons adopted Bill C-24,
but no legislation was considered necessary in the US since the SLA was
concluded as a sole executive agreement. The SLA thus modifies NAFTA by
suspending its applicability to softwood lumber and devising specific rules
for this sector, but does so by creating a parallel legal instrument, one which
is not subject to congressional approval or action.
Finally, some post-9/11 agreements concerning joint venture programmes
applicable along the Canada–US border, such as NEXUS or PIP/C-TPAT, or
along the Mexico–US border, such as SENTRI, were also negotiated outside
the NAFTA framework. The key international components of these new
border management systems, aimed at reducing the impact of security
measures on the fluidity of trade, are the 2001 US–Canada Smart Border
Declaration and the 2002 US–Mexico Border Partnership Agreement. Both
bilateral accords are executive–level, politically binding – but not legally
binding – agreements. However, the implementation of the Canada–US
declaration required the negotiation of one legally binding, executive-
level agreement dealing with cooperative research and development on
infrastructure protection and border security (Agreement, 2004). One might
argue that, since they primarily deal with security issues, it is not surprising
that such border agreements are negotiated and implemented outside
of NAFTA. However, when one looks at the detailed provisions found in

Shaw
198 Ruling the North American Market

NAFTA on Customs Procedures (Chapter 5), the application of Sanitary

and Phytosanitary Measures (Chapter 7B), or Temporary Entry for Business
Persons (Chapter 16), on the one hand, and at the action plans contained in
both declarations, on the other hand, the complementarity is striking (Parks,
2004; Meyers, 2003). Here again, NAFTA’s provisions are rendered more or
less obsolete. For instance, one of the main by-products of the Canada–US
declaration is the Free and Secure Trade Program (FAST/EXPRES), a joint
initiative between the Canada Border Services Agency and the US Customs
and Border Protection agency that enhances border and trade chain security
while making cross-border commercial shipments simpler and subject to
fewer delays (Canada Border Services Agency, 2009). Clearly, this is an area
of cooperation which could or, if possible, should have been discussed
within the terms of NAFTA or, at least, been directly tied to NAFTA.
These few examples show how, in the absence of built-in mechanisms
to adapt and extend NAFTA, the three governments have responded to
the different challenges they have faced in order to preserve the North
American market by creating a disparate set of arrangements. While efforts
have been deployed, through the SPP, to bring some comprehensiveness
to the process, this cooperative activity has mainly been ad hoc and bilat-
eral in nature rather than integrated and regional. And now the future
of the SPP itself, which has more often than not operated at the working
group level as two parallel bilateral processes, looks rather uncertain. As
pointed out above, it should be noted that while these arrangements have
taken very different institutional forms, from the essentially non-binding
border declarations to the legally binding SLA, all of them, contrary to
NAFTA, have been negotiated and operated strictly at the executive level.
This raises the interesting question of the efficiency of completing or comple-
menting NAFTA with executive-to-executive institutions. Analysing
the specific case of the SPP, Anderson and Sands (2007) argue that
regional economic governance through executive-level agreements is not
sustainable, because, at the end of the day, it is the US Congress that has
constitutional authority on trade and controls funding for border security
measures. However, it is difficult to imagine how the flexibility govern-
ments seek in manoeuvring outside of NAFTA could be obtained by inviting
the legislative branches back to the table. An alternative view is that lessons
should be drawn from the extent of what has been achieved so far by
cooperating at the executive level. Furthermore, the failure of the SPP to
adequately coordinate and deepen cooperation could well be attributed
to the hesitation of the Bush Administration, not in terms of involving
Congress but rather in fully deploying its executive prerogative because
of its well-known mistrust of international institutions (Bélanger, 2009).
Whatever the reason, an effective institutional mechanism for the main-
tenance of a cohesive and competitive North American market remains
to be found.

Shaw
 Louis Bélanger and Richard Ouellet 199

Conclusion

When, during the Democratic primaries of 2008, Barack Obama raised the
argument that NAFTA should be renegotiated in order to include environ-
mental and labour obligations in the core text of the agreement, the response
from the Canadian government came swiftly and directly from the Prime
Minister himself. Stephen Harper declared that if Washington ‘made the mis-
take’ of opening the agreement (Reuters, 2009), Canada would present itself
at the negotiation table with its own list of amendments, notably the revo-
cation of NAFTA’s proportionality clause which guarantees exports of energy
at current levels to the US. Such a direct linkage between environmental
and labour issues and the trade of energy was possible because NAFTA is a
package deal, a single undertaking agreement. Any reopening of the deal
closed in 1992 and put into force in 1994 would ultimately be a full and
comprehensive one.
This episode, which has had no follow-up to date, perfectly illustrates
the political stakes that lie behind the legal and institutional state of affairs
described in this chapter. North American integration needs more than a
constitution written in stone, which is what NAFTA has offered to date.
In order to evolve and adapt to a globally competitive environment, it
needs a solid but more flexible institutional framework. As shown here,
developments that could not be reflected by amendments in the text of
NAFTA or obtained through its decision-making bodies have been negoti-
ated in more flexible agreements that have become extensions to NAFTA.
However, if the three signatory governments of NAFTA are going to accept
that, when required by circumstances, necessary changes to their commercial
relations will be worked out in à la carte agreements they should consider
the consequences.
As discussed above, the current trend of evolution in the North American
institutional framework is causing the gradual obsolescence of NAFTA
and the guarantees provided by its legal stature and recourses. It also signals
the erosion of the single undertaking approach guaranteed by NAFTA and
a return to ad hoc behaviours. For Canada and Mexico, this can only mean a
decrease in their bargaining power vis-à-vis the US on trade issues. It is the
single undertaking approach inherent to the NAFTA model that made it
possible for Prime Minister Harper to forcefully suggest a linkage between
Barack Obama’s preoccupations and Canada’s possible second thoughts on
energy security. Moreover, neglecting the comprehensive and coherent set
of rules provided for in the 1994 agreement, rather than building on it, will
inevitably reinforce the position of the two smaller North American partners
as ‘eternal supplicants’ (Gotlieb, 2004, p. 39), which is exactly what NAFTA
was intended to avoid.
This being said, we would not want to end this chapter leaving the
reader with the impression that NAFTA is the only trade agreement in the

Shaw
200 Ruling the North American Market

Americas to have experienced inefficiencies due to a lack of flexibility and

secondary-ruling capability. It has actually even been the case for Mercosur,
which was built on the very opposite institutional model of trade liberaliza-
tion, with its reliance on vague initial commitments and apparently strong
ex post decision-making bodies (Bernier and Roy, 1999). At first sight,
Mercosur looks like an exemplar case of dynamic regional liberalization. Its
different political organs have progressively completed the original skeleton
contained in the 24 articles of the 1991 Treaty of Asunción with more than
1700 acts of secondary regulations (Malamud, 2007, pp. 11). Which makes
Bouzas, Da Motta Veiga and Torrent (2002, p. 109) observe that ‘at present,
a consolidated version of the Asunción Treaty would be much longer than
the European Community Treaty or even NAFTA’. However, these secondary
rules are not self-executing in the Mercosur system, which has given rise to
extremely low levels of domestic assimilation. Not unlike what happened in
the case of NAFTA, this situation has prompted the Southern Cone countries
to rely on executive-level intergovernmental cooperation (Malamud, 2005)
and to supplement the Mercosur agreement with several ad hoc extensions
covering strategic areas of liberalization such as investments, intellectual
property, services, trade remedies, and dispute settlement (ibid., pp. 450–3).
The lack of efficient secondary-ruling capability has had far worse conse-
quences for Mercosur than for NAFTA. One has to realize that, despite its
name and initial ambitious goals, Mercosur has yet to become a mere coher-
ent customs union. Even the common Customs Code agreed on in 1994
has not made its way through the countries’ legislative processes. Thus, it
seems that, whatever their initial design, the regional free trade institutions
put in place in the 1990s like NAFTA and Mercosur (to which we could
add the 1993 Central American Common Market and the 2001 Caribbean
Community), all suffer from a lack of secondary-ruling capability which
hinders their development and adaptation.

Note
This research was supported by grants from the Social Sciences and Humanities
Research Council and the ‘Fonds québécois de recherche sur la société et la culture’.
The authors would like to thank Kim Fontaine-Skronski for her excellent research
assistance, and the editors of this volume for judicious comments.
1. Negotiations that were later suspended due to irreconcilable positions on funda-
mental rights issues (GAO, 2008).

References
Abbott, Frederick M. (2000) ‘NAFTA and the Legalization of World Politics: A Case
Study’, International Organization. 54(3), pp. 519–47.
Ackleson, Jason and Justin Kastner (2006) ‘The Security and Prosperity Partnership of
North America’, The American Review of Canadian Studies. 36(2), pp. 207–32.

Shaw
 Louis Bélanger and Richard Ouellet 201

Adams, Daniel N. (2008) ‘Back to Basics: The Predestined Failure of NAFTA Chapter 19
and Its Lessons for the Design of International Trade Regimes’, Emory International
Law Review. 22, pp. 205–45.
Agreement Between the Government of the United States of America and the
Government of Canada for Cooperation in Science and Technology For Critical
Infrastructure Protection and Border Security (2004) Signed at Washington, 1 June.
Anderson, Greg and Christopher Sands (2007) Negotiating North America: The Security
and Prosperity Partnership, Washington: The Hudson Institute (White Paper Series),
Summer.
Bélanger, Louis (2007) ‘NAFTA: An Unsustainable Institutional Design’, in Gordon
Mace, Jean-Philippe Thérien, and Paul Haslam (eds) Governing the Americas: Assessing
Multilateral Institutions. Boulder, CO: Lynne Rienner Publishers, pp. 195–212.
Bélanger, Louis (2009) ‘Governance for a Competitive North America: A Canadian
Strategy’, in From Correct to Inspire: Blueprint for Canada-US Engagement. Background
Papers, Ottawa: Carleton University, 19 January, pp. 165–78.
Bernier, Ivan and Martin Roy (1999) ‘NAFTA and Mercosur: Two Competing Models?’
in Gordon Mace and Louis Bélanger (eds) The Americas in Transition: The Contours of
Regionalism, Boulder, CO: Lynne Rienner Publishers, pp. 69–91.
Bradley, Curtis A. (2006) ‘Unratified Treaty Amendments and Constitutional
Process’, Unpublished manuscript prepared for the Duke Workshop on Delegating
Sovereignty, 6 February.
Bouzas, Roberto, Da Motta Veiga and Pedro and Ramon Torrent (2002) In-Depth
Analysis of Mercosur Integration, Its Prospectives and Effects Thereof on the Market Access
of EU Goods, Services and Investment. Barcelona: Observatory of Globalization.
Canada (2001) Pettigrew Welcomes NAFTA Commission’s Initiatives to Clarify Chapter
11 Provisions, Ottawa: Department of Foreign Affairs and International Trade (Press
Release No. 116), August 1.
Canada. Extract Canada Gazette, Part I, January 1, (1994) North American Free Trade
Agreement, Department of External Affairs. Canadian Statement on Implementation,
pp. 68–220.
Canada Border Services Agency (2009) Description of the NEXUS Program. Available
online at http://www.cbsa-asfc.gc.ca.
Cannon, Kathleen W. (2008–9) ‘Trade Litigation before the WTO, NAFTA, and US
Courts: A Petitioner’s Perspective’, Tulane Journal of International & Comparative Law.
17, pp. 389–434.
Certain Agricultural Products [North American Free Trade Agreement, Arbitral Panel
Established Pursuant to Article 2008. In the Matter of Tariffs Applied by Canada
to Certain US Origin Agricultural Products, Final Report of The Panel] (1996)
December 2.
Dymond, Bill and Michael Hart (2005) Policy Implications of a Canada-US Customs
Union. Ottawa: Policy Research Initiative (‘North American Linkages’ series), June.
Gattuso, James L. (2008) The Rulemaking Process and Unitary Executive Theory,
Testimony before the Subcommittee on Commercial and Administrative Law of the
House Judiciary Committee, May 6. Available at http://www.heritage.org/research/
regulation/tst050708a.cfm.
Government Accountability Office (GAO) (2008) Various Issues Led to the Termination
of the United States-Canada Shared Border Management Pilot Project (Report GAO-
08-1038R).
Gotlieb, Allan (2004) Romanticism and Idealism in Canada’s Foreign Policy. Toronto: C.
D. Howe Institute (Benefactors Lecture).

Shaw
202 Ruling the North American Market

Grijalva, J. Ernesto and Patrick T. Brewer (1994) ‘The Administrative Bodies of the North
American Free Trade Agreement’, San Diego Justice Journal, 2(Winter), pp. 1–18.
Hart, Michael (2006) Steer or Drift? Taking Charge of Canada-US Regulatory Convergence.
C. D. Howe Institute (‘Commentary,’ No. 229), March, p. 9.
Hart, Michael and Bill Dymond (2007) ‘Free Trade and Dispute Settlement: Time to
Declare Victory’, Policy Options/Options Politiques, 28(9), pp. 45–51.
House of Representatives (1993) An Act To Implement the North American Free Trade
Agreement, 103d Congress, 1st Session (House Document 103–159, Vol. 1).
Hufbauer, Gary C. and Jeffrey J. Schott (2005) NAFTA Revisited: Achievements and
Challenges. Washington DC: Institute for International Economics.
Irish, Maureen (2009) ‘Regulatory Convergence, Security and Global Administrative
Law in Canada-United States Trade’, Journal of International Economic Law, 12(2),
pp. 333–55.
Johnson, Jon R. (1994) The North American Free Trade Agreement – A Comprehensive
Guide. Aurora, Ontario, Canada: Canada Law Book Inc.
Kunimoto, Robert and Gary Sawchuck (2004) ‘Moving Toward a Customs Union:
A Review of the Evidence’, Horizons, 7(1), July, pp. 23–31.
Macrory, Patrick (2002) NAFTA Chapter 19: A Successful Experiment in International
Trade Dispute Resolution, C. D. Howe Institute (Commentary, No. 168).
Malamud, Andrés (2005) ‘Presidential Diplomacy and the Institutional Underpinnings
of MERCOSUR: An Empirical Examination’, Latin American Research Review, 40(1),
pp. 138–64.
Malamud, Andrés (2007) ‘The Internal Agenda of Mercosur: Interdependence,
Leadership and Institutionalization’, Paper for presentation at the conference
‘El Derecho de Integracion Suramericano en su Contexto’, Max-Planck Institut,
Heidelberg, 6–7 December.
Meyers, Deborah Waller (2003) ‘Does “Smarter” Lead to Safer? An Assessment of
the US Border Accords with Canada and Mexico’, International Migration, 41(4),
pp. 5–42.
North American Free Trade Agreement (NAFTA) (1993) Ottawa: Acquisitions and
Services Canada.
North American Free Trade Agreement Technical Working Group on Pesticides
(NAFTA TWGP) (1997) Terms of Reference for the NAFTA Technical Working Group on
Pesticides, June 4. [http://www.epa.gov/oppfead1/international/naftatwg/general/
terms-of-reference.pdf, consulted 5 October 2009].
North American Free Trade Agreement Technical Working Group on Pesticides
(NAFTA TWGP) (2009) Accomplishments Report for the Period of 2003–2008.
Parks, Joseph L. (2004) ‘The United States – Canada Smart Border Action Plan: Life in
the FAST Lane’, Law and Business Review of the Americas, 10(2), pp. 395–416.
Pastor, Robert A. (2001) Toward a North American Community: Lessons from the Old
World for the New. Washington DC: Institute for International Economics.
Pope and Talbot [In the Matter of An Arbitration Under Chapter Eleven of the North
American Free Trade Agreement Between Pope & Talbot Inc. and Government of
Canada. Award in Respect of Damages] (2002), May 31.
Security and Prosperity Partnership (SPP) (2006) Report to Leaders. Security Annex
[available at http://www.spp-psp.gc.ca/progress/reports-en.aspx].
Softwood Lumber Products Export Charge Act (2006) ‘Canada, House of Commons,
Bill C-24’, 39th Parliament, 1st Session.
Softwood Lumber Agreement between the Government of Canada and the Government
of the United States of America (2006), September 12.

Shaw
 Louis Bélanger and Richard Ouellet 203

Swaine, Edward T. (2004) ‘The Constitutionality of International Delegations’,

Columbia Law Review, 104, pp. 1492–614.
Thomson Reuters (2009) Obama Wants to Reopen NAFTA but Keep Trade Flowing. 17
February.
Van Alstine, Michael P. (2006) ‘Executive Aggrandizement in Foreign Affairs
Lawmaking’, UCLA Law Review, 54(2), pp. 309–71.
Vogel, David (2005) Trading Up: Consumer and Environmental Regulation in a Global
Economy, Cambridge MA: Harvard University Press.
Weintraub, Sidney (1993) ‘The North American Free Trade Agreement as Negociated:
A US Perspective’, in Steven Globerman and Michael Walker (eds) Assessing NAFTA,
A Trinational Analysis, Vancouver BC: The Fraser Institute, pp. 1–31.
Weintraub, Sidney (1994) NAFTA: What Comes Next? Westport: Praeger.
Westbrook, Jay Lawrence (2007–8) ‘Legal Integration of NAFTA Through Supranational
Adjudication’, Texas International Law Journal, 43, pp. 349–58.
White House (2005) Joint Statement by President Bush, President Fox, and Prime Minister
Martin. Security and Prosperity Partnership, Office of the Press Secretary, March 23.
Wolfe, Robert (2006) ‘Decision-Making and Negotiations: Comparisons with WTO’,
presentation at ‘NAFTA and the Modern Tools of Global Trade Governance’, The
Canada Institute and the Mexico Institute, Woodrow Wilson International Center
for Scholars, Washington DC, 13 March.
World Trade Organization (WTO) (2009) The Importance of Regulatory Cooperation for
Improving Governments’ Ability to Fulfil Legitimate Policy Objectives While Facilitating
Trade: The North American Experience. Committee on Technical Barriers to Trade
(document G/TBT/W/317), 15 June.

Shaw
11
New Forms of Integration: ALBA
Institutions and Mechanisms
Josette Altmann

Introduction

ALBA (the Bolivarian Alternative for the Americas) is an integration initiative

from the Venezuelan government and an alternative vision to free trade
agreements. Venezuelan President Hugo Chávez announced the initiative at
the III Summit of Head of States of the Association of Caribbean States
(ACS) that took place in Isla Margarita, Venezuela, on 11–12 December
2001. ALBA can be understood in the context of the early twenty-first
century. The unfeasibility of the Free Trade Area of the Americas (ALCA,
after its initials in Spanish; FTAA, in English) and the increasing growth
in the political and ideological discourse against US hegemony are two
very important causes for ALBA’s conception and later consolidation on
14 December 2004, when its constitutional agreement was signed by Cuba
and Venezuela.
ALCA was established in the First Summit of the Americas (1994) and
sought the gradual elimination of all barriers to trade and investment within
the Western Hemisphere. In contrast, ALBA seeks to reinforce the self-
determination and sovereignty of the people of the Americas by proposing an
alternative integration initiative, which opposes the economic policies that
have been proposed and implemented at the end of the 1990s by the US and
international organizations such as the World Bank and the International
Monetary Fund. ALBA is the antithesis of the so-called Washington
Consensus (FLACSO, 2007).
Even though it was created with a defined ideological (and even radical)
tone, it has had an impact on various Latin American countries. ALBA poses
new options for cooperation and its projects constitute viable options for
accessing different resources and combating some consequences of the
current international situation.1
While an alternative integration proposal, ALBA is not the only proposal
at play in the Americas. Currently, the Latin American situation has been
hampered by an oversupply of integration processes. There are many initiatives

204

Shaw
 Josette Altmann 205

and even more actors involved in a great array of proposals in economic,

cultural, commercial, political, and security issues (see Rojas-Aravena,
2007, 2008).
Among all of these initiatives, three stand out by concentrating the
principal commercial and integration proposals of the region: first, the
Mesoamerican Project – formally known as the Puebla Panama Plan – extends
from Mexico to the south, including Colombia, and has even reached as far
as Ecuador; second, ALBA, which includes countries from South America,
Central America, and the Caribbean; and third, the Union of South American
Nations (UNASUR), which is made up of 12 countries of the region. All these
initiatives are superposed over the different formal and institutionalized
multilateral mechanisms of integration that have been established on each
of the sub-regions: the Caribbean Community (CARICOM), the Central
American System of Integration (SICA), the Andean Community of Nations
(CAN), and the Southern Common Market (Mercosur). These initiatives
operate at the same time as other mechanisms striving for cooperation in
the region, such as the Amazon Cooperation Treaty Organization (OTCA),
the Association of Caribbean States (ACS), as well as organizations like the
Latin American Integration Association (ALADI). Finally, the only regional
initiative that includes all Latin American and Caribbean countries, which
in spite of obstacles throughout its history maintains the potential for
continued development, is the Rio Group.
This amount of proposals and integration initiatives leads to three nega-
tive consequences that hamper the integration processes; first, it generates a
strong demand on the agendas of the heads of state and their government,
which have to schedule and attend meetings as often as every three months in
what can be called a context of ‘meetings diplomacy’; second, the oversupply
leads to a lack of coordination, which ends up limiting the opportunities for
convergence and the search for common interests and perspectives; third,
the multiple proposals possess a weak institutional structure because some
countries do not wish to transfer part of their sovereignty and autonomy to
greater supranational structures.
This reality has been made clear in multiple statements. ALADI has stated
that since 2004, integration efforts have begun to disintegrate with the
creation of different proposals causing a dispersal of attention and resources;
none has achieved a relevant impulse (ALADI, 2008). As a result, and in
spite of the political relevance that each integration initiative acquires in
the presidents’ declarations, until now none of these projects has had the
capacity to articulate an overarching view of the region; in fact, this situa-
tion has tended to fragment Latin America and the Caribbean into ‘many’
Latin Americas.
It is in this context that ALBA seeks to position itself as a viable and alter-
native integration proposal for Latin American and Caribbean peoples. This
chapter examines the ways in which ALBA is attempting this. It begins by

Shaw
206 New Forms of Integration

briefly explaining the philosophy and main principles of ALBA. Second, its
main institutions and mechanisms are presented. The focus then shifts to the
impact of ALBA in the Latin American region. Finally, the chapter concludes
by reflecting on the future of ALBA as an integration proposal.

ALBA: Philosophy and main principles

Hugo Chávez announced the creation of the ALBA in 2001; however,

the constitutive agreement and official birth of the initiative took place
in December 2004 at Havana, Cuba. Both Hugo Chávez and Fidel Castro
signed the agreement. The first meeting took place in 2005 (Table 11.1).
In 2006, Bolivia joined, followed by Nicaragua and Dominica in 2007
and Honduras in 2008. Saint Vincent and the Grenadines, Ecuador, and
Antigua and Barbuda joined in 2009.
In 2005 Petrocaribe was created (also a Venezuelan initiative) promoting
cooperation with Central American and Caribbean countries. The main

Table 11.1 ALBA and Petrocaribe summits

ALBA Petrocaribe

Meeting Date Meeting Date

Agreement between presidents 14 December 2004 II Summit 6 September

of Venezuela and Cuba for of Montego 2005
ALBA’s application Bay
I Cuba–Venezuela Meeting 28 April 2005 III Summit 10 August
for ALBA’s application Petrocaribe 2007
Meeting of the agreement for 29 April 2006 IV Summit 21 Dec 2007
ALBA’s and TCP’s applications Petrocaribe
Signing of agreements 24 January 2007 V Summit 13 August
between Cuba and Venezuela Petrocaribe 2008
V ALBA Summit 29 April 2007 VI Summit 12 June 2009
Petrocaribe
VI ALBA Summit 26 January 2008
Extraordinary Summit 22 April 2008
Presidential Summit, 7 May 2008
sovereignty, and food
security: food for life
III Extraordinary Summit 26 November 2008
IV Extraordinary Summit 2 February 2009
V Extraordinary Summit 17 April 2009
VI Extraordinary Summit 24 June 2009
VII ALBA Summit 17 October 2009
Source: ALBA (2009a)

Shaw
 Josette Altmann 207

objective of this is to contribute to energy security. Under Petrocaribe, six

meetings of the heads of state have taken place, and many important energy-
related treaties have been signed by the members of ALBA and various
Central American and Caribbean countries that make up Petrocaribe. This
has made it easier for these countries to get closer to the policies and initia-
tives discussed within ALBA.
Petrocaribe is a model for energy cooperation based on the principles
of special and differentiated treatment and solidarity. It is based on the
Venezuelan policy of establishing subsidized prices and developing mixed
enterprises to operate the oil market. However, Petrocaribe must be seen as
an ALBA instrument of cooperation that transcends strictly energy-related
issues. In fact, one of the projects of Petrocaribe is the development of aerial
and maritime transport in the sub-region, as this is one of the indispensable
requisites for achieving integration.
In their treaties and international agreements, both ALBA and Petrocaribe
emphasize the ‘terrible consequences of the inequality of the international
economic order’ that negatively affects the prices of basic products and
raises the prices of oil and other fuels.
They base their policies on the thesis that, after the failure of the FTAA
(ALCA in Spanish), the US, in response to its inability to promote alternatives
that lead to development, has carried out bilateral commercial agreements
which contribute to the disintegration and weakening of the region.
President Chávez suggests the idea of the state as a ‘producer’, based on
the philosophy of ‘more state and less market’. Is this viable with today’s
globalization, in which the main players behind large flows of capital are
not only states but also private entities such as media conglomerates, finan-
cial organizations, and multinational corporations? Even now, arguments
in Latin America between neoliberals and Keynesians – or free marketers vs
interventionists – revive the old clash between development-oriented
economists and ‘structuralists’ (in the 1960s) and between liberals and planners
(in the 1930s). The well-known dilemma of ‘market or state’ does not help
clarify things much, either.
The political, economic, social, and cultural debate stemming from globali-
zation and its social effects is fuelled by the ‘concentration vs equality’
dilemma. The theoretical clash on development centred on these issues in
the second half of the twentieth century. Today this debate seems to have
been overtaken by the emergence of new problems such as improving living
standards in conditions of freedom, democracy, sustainable development,
climate change, and the importance of citizen participation.
The economic reforms undertaken in the region led to inequality and a
lack of opportunities, both among poor and vulnerable people as well as
indigenous communities, women, the young, and the elderly.
At the same time, the concentration of wealth in certain sectors of the polit-
ical and business élites, mainly linked to multinational corporations, has

Shaw
208 New Forms of Integration

Table 11.2 Latin America and the Caribbean: Poverty evolution

Poverty Extreme poverty

Year Percentage Millions of people Percentage Millions of people

1980 40.5 136 18.6 62

1990 48.3 200 22.5 93
1997 43.5 204 19.0 89
1999 43.8 211 18.5 89
2002 44.0 221 19.4 97
2004 42.0 217 16.9 88
2005 39.8 209 15.4 81
2006 38.5 205 14.7 79
2007 34.1 184 12.6 68
2008* 33.2 182 12.9 71
Note: Estimation for 19 countries of the region, including Haiti
a
Projections
Source: CEPAL (2008)

fuelled corruption and created even greater inequality. This has increased
the unequal distribution of wealth and privileges (see Table 11.2). At the
same time, this hinders institutional changes that would end privileges for
certain social, political, and business classes. These factors have generated
significant discontent and disillusionment with politics for many in the
region. To some extent, these sentiments are responsible for the governance
problems which affect the region and have made it easier for a new breed of
politician to emerge, many of them clearly anti-globalization, anti-US and
anti-free trade. It cannot be ignored, though, that the US continues to be the
main investor and the most dynamic recipient of exports for most of the
countries in the region, and that some of them, such as Venezuela, are major
trading partners (Altmann, 2008).
Trade agreements or treaties with the US are an important aspect of the
overseas agendas of the countries of the region (see Table 11.3). Following
the failure of the FTAA proposal, Washington has devised a kind of commer-
cial diplomacy with a strong ideological component. Lively debate has swept
the region in relation to free trade accords that prompted serious conflicts
in some sub-regional integration entities, such as Venezuela’s withdrawal
from the Andean Community of Nations (in April 2006) and the decision
by Uruguay and Paraguay to start talks with the US on possible trade trea-
ties due to asymmetries in Mercosur and the limited benefits the countries
obtain from belonging to that bloc. Venezuela has threatened to pull out
of Mercosur because of a trade focus that Chávez says ignores social issues.
Costa Rica has gone so far as to suffer a congressional and governmental
paralysis because of pre- and post-referendum debate on the free trade agree-
ment between Central America, the Dominican Republic and the US. While

Shaw
 Josette Altmann 209

Table 11.3 Latin America: Main trading partners by sub-region (2007)

Mercosur Andean MCCA CARICOMa Mexico Chile
Community
of Nations

European United States United States United States NAFTA Asiab

Union (29.0%) (32.7%) (50.5%) (84.7%) (35.2%)
(19.2%)
Mercosurc European Central America European European European
(16.1%) Union Common Market Union Union Union
(15.0%) (27.1%) (14.6%) (6.0%) (21.5%)
United Andean European Union CARICOM Central Latin
States Community (13.6%) (12.9%) America America
(13.5%) of Nations Common (15.9%)
(8.0%) Market
(1.8%)
Note: The numbers in each case represent the percentage of exports towards the country or region.
a
Only includes merchandise trade
b
Includes South Korea, China, India and Japan
c
Includes Venezuela
Source: ALADI (2009); SIECA (2008); Comunidad Andina (2008); DIRECON (2008); INEGI

this agreement was based on the policy of trade, not aid, ALBA is anchored
more on the idea of a barter system rather than free trade.
In this context, Latin American integration processes are mired in doubt,
as evidenced by the region’s growing fragmentation. Rather than a rise of
the Left, as some observers suggest, what is occurring is the resurgence of
populism in some leaders plus the fragility in most democratic systems in
the region. Everything points to problems in terms of weak mechanisms for
political agreement, fights over leadership, and differing versions of regional
integration. Latin America has achieved a functional democracy without, at
the same time, improving its democratic governance. Economic integration
becomes a point of contention between the regional blocs because of trade
disputes and different ideas about joining the international system.

ALBA and the People’s Trade Treaty

The People’s Trade Treaty was signed in Havana on 30 April 2006 by

Venezuela and Bolivia – the two countries in Latin America with the largest
energy reserves – and Cuba, giving an excessive ideological slant to political
and economic relations in Latin America. ALBA offers an alternative to free
trade accords, on the basis of three principles: (a) opposition to free market
economic reforms; (b) not limiting the regulatory action of the state in
favour of economic liberalization; (c) harmonizing relations between the
state and the market.

Shaw
210 New Forms of Integration

President Chávez is of the opinion that, although they agree on the

fundamentals of regional integration, the countries of Latin America lack
an adequate strategy for implementing it. He says it is also necessary for
integration projects to ‘stop serving imperialism and national oligarchies’
and become a tool for economic development among social sectors of the
peoples of Latin America. It is in this sense that ALBA has a bottom-up type
of arrangement in which the main actors are the people. ALBA is a proposal
built with the people of the Americas as it basis. The initiative is inconceivable
without people’s participation, and the alliance between the government
and the people is a basic principle of ALBA.
Even though ALBA is an ideologically charged plan and is often denounced,
it merits examination. Since it was announced in 2001, it has taken shape
in the programmes of the Venezuelan government, especially through links
with the strategies spelled out in the National Development Plan for 2001–7,
which seeks to balance five areas: social, economic, political, territorial, and
international. Through ALBA, the Chávez government is pursuing a kind of
endogenous development, both national and regional.
Another feature of ALBA is its focus on social, cultural, historical, economic,
and environmental issues. These are the main topics over which ALBA is at
odds with the ALCA/FTAA free trade agreement proposition. ALBA makes
a nine-point proposal based on criteria that are more sensitive and socially
oriented in terms of the relationship between the state, society, and the
environment. The proposal is based on respect for human rights, labour
and gender civil rights, plus biodiversity. It places a special emphasis on
a differential treatment for the poorest countries by creating a Structural
Convergence Fund as a tool for reducing regional asymmetries.

Main institutions and mechanisms

The efforts stemming from ALBA take concrete shape in three strategies. The
first one is the creation of a television station, Telesur, which is a political
project that seeks to fortify the ‘Bolivarian Revolution’ across the continent.
Its main goal is to become a multi–state company; though initially started
between the governments of Venezuela, Argentina, Uruguay, and Cuba, it has
the possibility of taking on new members. In the case of Uruguay, the contract
to be a part of Telesur was signed in 2005; however, the law to approve
its joining the organization has not yet been approved by the Uruguayan
Congress (Anon., 2009).
The second strategy is aimed at using oil as a foreign policy tool by
associating it with the process of consolidating ALBA through the Petro-
caribe Cooperation Agreement (established in 2005). This is a Venezuelan
initiative with the Caribbean countries whose main objective is to contribute
to energy security. In the context of Petrocaribe, energy agreements between
ALBA countries and Caribbean and Central American countries have also

Shaw
 Josette Altmann 211

contributed to draw other countries closer to the policies and initiatives set
up in the framework of ALBA.
Petrocaribe has become ALBA’s conduit for implementing energy policy.
Clear evidence of this is a scale for financing oil sales on the basis of crude
prices. In conditions in which oil prices exceed US$ 50 a barrel, 40 per cent
of the transaction is financed, the payment period is extended to 25 years,
and the interest rate is reduced to 1 per cent; and if it is a short-term payment,
the period is extended from 30 to 90 days.
The third strategy is the creation of major national projects (proyectos
Grannacionales or PG) and companies (empresas Grannacionales, or EG) in which
two or more countries of ALBA participate. On 27 February 2009, during
the VIII Reunion of ALBA-TCP Permanent Political Commission, held in
Caracas, a new commission was established to follow up on the results and
impacts of the Grand National Projects. As of today, there are energy, food,
cultural, health, communication, commercial, industrial, and educational
projects (ALBA, 2007).
The Bank of the South (Banco del Sur) was founded on 9 December 2007 by
six South American countries (Argentina, Bolivia, Brazil, Ecuador, Paraguay, and
Venezuela). The idea was to devise an alternative to the International Monetary
Fund and the World Bank, with ‘financial sovereignty’ to control resources and
set terms for loans in South America. The plan is for the member countries
to come up with a total of US$ 800 million, but it has not been decided how
much each will contribute and where the money will come from.
The ALBA Bank was created on 26 January 2008 with initial reserves of
US$ 1 billion and the authorization for this sum to double. Its goal is to encour-
age economic and social integration by easing inequality and promoting a
more even distribution of investments, while urging Latin American countries
not to depend on the US economy or place their reserves in it. Hugo Chávez
criticized how the majority of governments use their reserves to pay their
debts with international organizations and put the rest in the form of US
treasury bonds or deposited them in US banks. With the ALBA Bank they
want to use the reserves of Latin American countries to finance projects in
the region (Bossi, 2008). Initially, it was established that the funds for the
ALBA Bank would come from each of the member countries. However, up
until now, the funds have come almost exclusively from Venezuela.

ALBA’s impact on the region

Poverty and exclusion in Latin America helps ALBA

Poverty and exclusion continue to be among Latin America and the
Caribbean’s great problems, as shown in Table 11.2. Since the 1990s, the
percentage of people in the region living in poverty has been reduced, partly
as a result of the end of political instability; however, in this period the total
number of poor people has increased. In any case, the incidence of poverty

Shaw
212 New Forms of Integration

Table 11.4 Latin America: Poverty and extreme poverty (%)

Country Year Poverty Extreme poverty
a
Argentina 2006 21.0 7.2
Bolivia 2007 54.0 31.2
Brazil 2007 30.3 8.5
Chile 2006 13.7 3.2
Colombia 2005 46.8 20.2
Costa Rica 2007 18.6 5.3
Dominican Republic 2007 44.5 21.0
Ecuador 2007 42.6 16.0
El Salvador 2004 47.5 19.0
Guatemala 2006 54.8 29.1
Honduras 2007 68.9 45.6
Mexico 2006 31.7 8.7
Nicaragua 2005 61.9 31.9
Panama 2007 29.0 12.0
Paraguay 2007 60.5 31.6
Peru 2006 45.5 16.1
Uruguayb 2007 18.1 3.1
Venezuela 2007 28.5 8.5
Latin America 2007 34.1 12.6
Notes: a The data correspond to only 28 urban agglomerations
b
Urban total
Source: CEPAL (2008)

is high in almost every country, with the exceptions of Chile, Uruguay, and
Costa Rica. In Bolivia, Guatemala, Honduras, and Nicaragua, poverty affects
almost two-thirds of the population or more. This incidence is higher than
the Latin American average of 34.1 percent (in 2007). Also – except in the
cases of Chile, Uruguay, and Costa Rica – the gap between poverty and
extreme poverty is significant (see Table 11.4).
However, poverty is not the only problem. Significant differences in
the distribution of wealth continue to make Latin America an incredibly
unequal region. This is true not just among different countries, but also
within each country (see Table 11.5). On average, the poorest segment of the
population possesses less than 5 per cent of total wealth, while the richest
segment of the population possesses more than 50 per cent.

ALBA and Petrocaribe funds

As mentioned before, the efforts of ALBA have manifested themselves in

three strategies. The first is the continental station Telesur, today made up of
six countries – Argentina, Bolivia, Cuba, Ecuador, Nicaragua, and Venezuela.
This multi-state enterprise is considered as the instrument to aid the Latin
American integration process, even though its messages always have a clear
ideological tone.

Shaw
 Josette Altmann 213

Table 11.5 Latin America: Distribution of wealth in the wealthiest and poorest
segments of the population (%)
Country Year of the study Poorest segment Wealthiest segment
Argentinaa 2006 3.6 56.4
Bolivia 2007 2.0 60.5
Brazil 2007 2.6 63.3
Chile 2006 4.1 57.7
Colombia 2005 2.9 63.0
Costa Rica 2007 4.3 53.9
Dominican Republic 2007 2.8 59.9
Ecuador 2007 3.5 59.0
El Salvador 2004 3.5 53.5
Guatemala 2002 3.7 59.3
Honduras 2007 1.9 61.1
Mexico 2006 4.2 56.0
Nicaragua 2005 3.5 58.3
Panama 2007 3.0 56.3
Paraguay 2007 3.1 58.4
Peru 2003 3.8 55.2
Uruguayb 2007 4.9 50.3
Venezuela 2007 5.1 48.3
Note: a 31 urban agglomerations
b
Urban total
Source: CEPAL (2009)

The second strategy is to the use of oil as an instrument of foreign policy.

The signing of the Energy Agreement of Caracas in 2001, the creation of
Petrocaribe in 2005, and the project of creating a South American Energy
Cone – presented at the Mercosur meeting of June, 2005 – set the base for
the creation of new spaces for cooperation and regional integration.
The Fourth Summit of of Petrocaribe, that took place in Cuba in 2007, made
it clear that the Venezuelan policy of barter and inexpensive loans is generat-
ing important proceeds. Many local products and services, such as doctors
and medical training from the Cubans, are accepted as ways of paying for the
costs of oil imports, thus allowing many countries to incorporate themselves
within Petrocaribe that would not otherwise be able to do so. With the wel-
coming of Honduras and Guatemala, plus the formal request from Costa Rica,
Petrocaribe will comprise 19 countries: Antigua and Barbuda, Bahamas, Belize,
Costa Rica, Cuba, Dominica, Dominican Republic, Grenada, Guatemala,
Guyana, Haiti, Honduras, Jamaica, Nicaragua, Saint Kitts and Nevis, Saint
Lucia, Saint Vincent and the Grenadines, Suriname and Venezuela.
The discourse that positions ALBA as an alternative for ‘the people’ makes
joining Petrocaribe much more flexible. Independent from the regional
articulations or other prior commitments that each government has
engaged in, membership to ALBA, in theory, does not create an obstacle for
its members to be part of other integration projects. And even though in

Shaw
214 New Forms of Integration

practice the strong ideological tone of ALBA has generated some frictions
and divisions in each country, countries in Latin America are responding to
its proposals, particularly in the case of Petrocaribe as part of a process of
searching for commercial agreements that offer additional advantages to the
region (Castillo, 2008).
Under this state of affairs, Petrocaribe has turned into one of the major
sources of cooperation for Central America and the Caribbean. Much of
the fear that the initiative generated was related to the perception that
adherence would necessarily imply a commitment to the political and ideo-
logical project that its founders defend. However, it has been possible to
note that in the case of a few countries adherence to Petrocaribe and ALBA is
explained more by the economic benefits generated by the agreement than
by any ideological affiliations.
According to data from the Venezuelan Centre for Economic Research
(CIECA, after its initials in Spanish), the funds the country has allocated to
the member countries of ALBA since its foundation up to September 2008
have reached as high as US$ 32.952 million, a figure that represents 23.51
per cent of taxes collected by the Venezuelan government. This amount
reflects the total funds of ALBA, including Petrocaribe, and the estimate is
based on official announcements from the government. However, in some
instances, these announcements might not have been put into practice,
and in other cases, the formal announcement of the giving of resources to a
certain country does not include a specific total, which is why the estimate
could be even larger.
In all of the cases, though, these are large sums of money for all the
countries (see Table 11.6). However, it is important to note that the funds
shown in that table correspond to an official source of information. Up until
now there have not been outside analysis or verification about the fund-
ing provided. Currently FLACSO is working on a new project that seeks to
analyse the real role that ALBA has had in the region, both as an integration
proposal and also by means of the ALBA Bank.

Table 11.6 Venezuelan funds destined to

the countries of the ALBA (in US$ millions)
Destination Amount

Cuba 18,776
Bolivia 6724
Nicaragua 5523
ALBA Bank 1350
Haiti 440
Honduras 130
Dominica 8
Source: CIECA, cited in Olivares (2008)

Shaw
 Josette Altmann 215

The economic aid provided by Venezuela is an important source of income

for the receiving countries. This can be seen in Central America for example,
where assistance from the US and the European Union has diminished con-
siderably. According to the Costa Rica’s President Oscar Arias, Venezuelan
aid to the region is four or five times larger than aid received from the US
(Anon., 2008).
The president is referring to both the funds of ALBA and benefits obtained
from Petrocaribe. The funds from Petrocaribe are considerable. Between
June 2005 and December 2007, the total credit given to member countries
reached US$ 1.170 million; annually this represents US$ 468 million in
credit lines. According to the International Monetary Fund (IMF), it is esti-
mated that in countries like Guyana, Jamaica, and Nicaragua, financing from
Petrocaribe represents about 5 per cent or 6 per cent of the Gross Internal
Product (Gómez, 2008). The importance of these sums is made clearer when
it is compared to the US$ 100 million allocated by the Inter-American
Development Bank (BID after its initials in Spanish; IDB, in English) to the
member countries of Petrocaribe in 2005–8.

ALBA and Petrocaribe in Central America and the Caribbean

Both Cuba and Nicaragua are the main beneficiaries of ALBA. In Nicaragua,
aside from the economic benefits, there are shared ideological concepts, self-
proclaimed as ‘anti-imperialist’ and ‘anti-American’. However, even with
the constant invocation of these adjectives on behalf of President Daniel
Ortega, the truth is that the relationship between Nicaragua and the US still
stands, the Free Trade Agreement is still in force, and the main market for
the Nicaraguan entrepreneurs continues to be the US.
Despite its association with the integration initiatives promoted by
Venezuela and in spite of the signing of agreements with Iran, the status of
Nicaragua in other integration systems has not suffered any alterations.
Its relationship with the US – regarded as the main opponent of Venezuela’s
proposals – did not suffer either. In fact, the American Undersecretary of
Foreign Commerce, Christopher Padilla, visited Nicaragua in early 2008 and
stated that the relationship with Venezuela through the ALBA and Petrocaribe
is not a problem for Washington (Altmann, 2009).
Almost two years after first joining ALBA, the benefits obtained by
Nicaragua depend on who is judging the situation. For some opponents, the
benefits that have been generated in the social sphere have been very limited
and are mainly related to issues of energy and transport. The Venezuelan
energy aid is considered with doubt by these same groups who state that
the high dependency on oil has caused energy prices in these countries to
be some of the highest in the region. However, the defenders of ALBA state
that important social aid has been achieved due to the agreement, and that
oil shortages are now in the past.

Shaw
216 New Forms of Integration

Looking at Honduras, the other Central American country that has joined
ALBA, the economic rationale for joining on 25 August 2008 is demonstrated.
Honduras’s ideological position is quite different from the rest of the ALBA
countries – to the point that President Manuel Zelaya was removed from office
through a coup, partly due to his position vis-à-vis ALBA and democratic
institutions. At first, the Zelaya government seemed to represent the position
of the rest of the ALBA member countries, especially as Zelaya expressed his
solidarity with Bolivia when the country expelled the American ambassador
for allegedly interfering in domestic affairs. As a result, Zelaya delayed the
reception of credentials from the new US ambassador in Honduras, Hugo
Llorens. However, its position has gradually softened since which leads to
doubts about the real extent of its ideological adherence to ALBA.
In fact, on 19 September 2008, President Zelaya told a group of Honduran
entrepreneurs that the decision to join ALBA was in response to the coun-
try’s lack of resources. According to Zelaya, the Honduran private sector
did not help him and cooperation received from the World Bank or the
Inter-American Development Bank was insufficient. While the World Bank
offered to loan Honduras US$ 10m, the Venezuelan government gave it
a credit for US$ 130m after the country joined ALBA (Laínez, 2008). The
economic, rather than political, tone of the Honduras’s adherence to ALBA
can also be seen in the ratification of the agreement voted by the Honduran
Congress on 9 October 2008. The ratification included a series of restrictions
related to the use of the resources and the choice to reject any military and
political commitment that could be derived from ALBA.
On 28 June 2009 the aforementioned coup d’état in Honduras against
constitutional President Manuel Zelaya took place. Almost immediately the
members of ALBA called for a meeting of ALBA’s heads of state in Nicaragua
on the following day. They declared the actions taken by the Honduran Army,
Congress, Judicial Courts, Catholic Church, the Ombudsman, and almost
all the political institutions of the country illegal and unconstitutional.
ALBA also encouraged the Organization of American Sates (OAS) and the
international community (United Nations) to apply economic and politi-
cal sanctions to the country, as well as to denounce the coup and regard
the newly established government of Roberto Micheletti as a dictatorship
(ALBA, 2009c). The UN, OAS, Rio Group, Mercosur, SICA, ALBA, and other
Latin American regional institutions expressed their firm condemnation of
the coup (FLACSO, 2009). These institutions affirmed their recognition of
Manuel Zelaya as Honduras’s only legal president. In late September 2009,
ALBA declared its non-recognition of the de facto government’s calling of
elections in Honduras, which were set for that November. The ALBA presidents
supported Zelaya’s return to power as a main condition for the reintegration
of Honduras into international institutions.
At the VII ALBA Summit, which took place in Bolivia on 17 October
2009, ALBA took concrete steps to deal with the situation in Honduras.

Shaw
 Josette Altmann 217

They agreed not to allow any of the main parties responsible for the coup
to enter any ALBA country; they would apply economic and commercial
sanctions; they would not recognize the winner of Honduras’s November
elections (Porfirio Lobo); they would promote international legal actions
against those responsible for the coup; and would call for summits of the
different integration initiatives in order to promote the agreement of sanc-
tions against any new government in Honduras (ALBA, 2009b). They also
reiterated that Manuel Zelaya was the only legitimate president of Honduras
and that he should be restored as the constitutional president so that he
could finish his presidential term (which was to end on 27 January 2010).
The opinions of the ALBA countries have been a part of attempts to find a
solution to the Honduran constitutional crisis.
In the cases of Costa Rica and Guatemala, their relationships with the
Venezuelan projects have been limited to Petrocaribe. Guatemala joined on
13 July 2008, and Costa Rica waits for its joining to be finalized. Neither of
these countries has shown a desire to construct a political-ideological alliance
with Venezuela through their adherence to ALBA.
After the incorporation of Honduras into ALBA and the announcement of
the possibility of Costa Rica joining Petrocaribe, attention has turned to El
Salvador, the only Central American country that has not built any type of
alliance with Venezuela. On 6 October 2008, former president Elías Antonio
Saca stated his respect for the choices of the other Central American coun-
tries, but added that in the case of El Salvador he did not find any benefit
in joining any of its initiatives. Mauricio Funes, the current president, has
yet to express his intentions as to whether or not the country will become
part of Venezuela’s initiatives, although he earlier expressed his willingness
to strengthen his country’s relations with Brazil and the US as well as with
Venezuela.
With regard to ALBA and the political-ideological implications of the
Venezuelan projects in Latin America, it is important to understand that
these have not manifested themselves, with the exception of Nicaragua and
Bolivia. But even in Nicaragua, as was previously stated, the anti-American
discourse of Ortega has not had serious consequences on the country’s
relationship with the US. And threats have not transcended mere discourses;
like the one formulated in January 2008, affirming that in the hypothetical
case of aggression from the US to Venezuela, all the member countries of
ALBA would create a military alliance.

What’s next?

In building a stronger regional integration, Latin America faces a series of

important challenges related to the asymmetries between countries and
to the absence of necessary funds to eradicate those asymmetries. As
well, there has been a lack of political will to generate improvements in

Shaw
218 New Forms of Integration

the regional integration and the weakness of the national and regional
institutions.
The threat to democratic governance generated in some countries of
the region, like the one recently created in Nicaragua after the municipal
electoral process of November 2008, added an additional worrisome chal-
lenge to Latin America’s strengthening of its democratic systems. In this
case, it is important to emphasize that in Venezuela the electoral results
have not been questioned. Many people’s perspective – that the Obama
Administration will not be able to produce significant changes in its rela-
tions with the region (at least in the short term) – is also of concern. These
perceptions arose after the visits of US Vice-President Joseph Biden to Chile
and Costa Rica in March 2009. On these trips, he acknowledged that uni-
lateral actions from the US had ended, and that they were now willing to
listen more. However, he also asked the region to be patient in waiting for
US responses to regional demands, due to the difficult financial situation
the country is confronting as a result of the global crisis. Biden’s comments
are not good news for many Latin American countries because of the inter-
connectivity of their economies with the American economy and because
of the challenges the US economy faces due to the international financial
crisis as well as other problems such as unemployment, migration, and the
attendant impacts on remittances. All these imply a hard blow to the inter-
national economy as well as to Latin American economies, which had been
experiencing a gradual process of recuperation before the financial crisis.
At the last Summits of Heads of State and Government of the different
subregional blocs, it was decided to strengthen efforts to capture other markets
outside of the US. Therefore, markets such as China, Asia-Pacific, and Latin
American countries gain new relevance to the region.
In this context, the projects promoted by Venezuela represent a viable
option for creating new cooperative opportunities to face some of the con-
sequences caused by the new international situation. Petrocaribe has helped
to soften the shock of the financial crisis among its members. However, the
sustainability of this mechanism depends on how Venezuela confronts
the effects of the lowering of oil prices: despite Chávez’s discourse, many
specialists consider that Venezuela will not be able to maintain its levels of
expenditure if the oil prices go below US$ 75 per barrel.
The international financial crisis, the policies of the new US government
towards the region, and the political changes occurring in Latin America
open a new political cycle characterized by great polarizations and the
appearance of different types of leadership.
Even though the urge for integration manifests itself in political dialogue
and public acts, the difficulties of making this process a reality limit the
possibilities that Latin American countries have to deal with common prob-
lems, especially the ones derived from globalization processes. With greater
difficulties for facing in an integrated manner such regional and global

Shaw
 Josette Altmann 219

challenges as security, global warming, pandemics, and other emerging threats,

Latin America faces important obstacles to achieving improved develop-
ment for the majority of its population. The absence of ‘one voice’ not only
inhibits any advances, but also favours fragmentation.

Conclusions

The predominant discourses of ALBA, derived from the ideological posi-

tions of Venezuela and Cuba, seem favour more autocracy and endogenous
forms of development. This process of development within the context of
globalization seems to be linked to a greater extent to the major international
markets, which drive economic development with effective social policies
that help ease poverty, inequity, and inequality in a democratic context.
ALBA discourses seem to have hit home in the region. But its proposals
for integration – including its military project – are not viable. However,
its concrete actions, through mechanisms such as Petrocaribe, display a
viability and impact that are greater than those attributed to it by the main
international players.
New factors in Latin America are opening a new political cycle in the region,
characterized by significant polarization and different kinds of leadership.
The current status of integration processes gives the impression of a region
that is increasingly splintered and that lacks a clear direction on issues of
integration and political agreement.
Even though in recent years various integration proposals have emerged
or re-emerged – such as ALBA, UNASUR, the Mesoamerican Plan or even the
Rio Group, to cite just a few – none has managed to consolidate and serve
as a regional model for all of Latin America. For this reason, it is necessary to
debate whether the proposals should be for all countries or, on the contrary,
to simply accept that there are several Latin Americas that have increasingly
diverged from one another. In this debate, ALBA appears to be an alternative
project for Latin America and the Caribbean.
The spirit that leads the agreements approved by the six ordinary meetings of
ALBA, the six extraordinary meetings of the Heads of State and Government
of the ALBA-TCP, and the six meetings of Petrocaribe should be underlined.
All of them emphasize the need to find new ways of commercial cooperation
and to secure the strengthening of the member countries’ economies.
In the future, one of ALBA’s main challenges will be its capacity to
develop some of the mega-projects that it has announced since its creation,
especially in a context of lowering oil prices. Another challenge is that its
political and ideological tone has caused some resistance in some countries,
which fear that if they join the proposal they would implicitly adhere to
radical ideological principles. Some countries fear that ALBA is producing
a wide ideological polarization inside Latin America, and that this could
hinder efforts for wider integration proposals. This explains why the

Shaw
220 New Forms of Integration

greatest challenge of ALBA will be its ability to attract as many members as

Petrocaribe has. If ALBA maintains itself as just a political and ideological
alliance it will be an ineffective alternative that will fluctuate based on elec-
toral cycles. However, even if ALBA’s political-ideological proposal has not
yet had the impact hoped for by its promoters, its proposals of cooperation
are considered valuable opportunities for developing countries.

Note
1. For further information on the history, philosophy, and principles of ALBA see
FLACSO (2007).

References
ALADI (Asociación Latinoamericana de Integración) (2008) Informe del Secretario General
sobre la evolución del proceso de integración regional durante el año 2007. [Online] Available
at http://www.aladi.org/nsfaladi/estudios.nsf/d61ca4566182909a032574a30051e5ba/
39f2505e2691d0a90325740f006b4edc/$FILE/2136.doc.
ALADI (2009) Sistema de Informaciones de Comercio Exterior (SICOEX). [Online]
Available at http://nt5000.aladi.org/siiespanol/.
ALBA (Alianza Bolivariana para los pueblos de nuestra América) (2009a) Acuerdos de
Integración. [Online] Available at http://www.alternativabolivariana.org/modules.php?
name=Content&pa=showpage&pid=230.
ALBA (2009b) VII Cumbre del ALBA. Cochabamba, Bolivia, 17 de octubre de 2009.
Available at http://www.flacso.org/fileadmin/usuarios/documentos/Integracion/
Octubre/Declaracion_VII_Cumbre_ALBA_sobre_Honduras.pdf.
ALBA (2009c) Proclama del Consejo Presidencial Extraordinario. Managua, Nicaragua, 29
de junio de 2009. Available at http://www.flacso.org/fileadmin/usuarios/documentos/
Integracion/Junio_09/Declaracion_Reunion_ALBA.pdf.
ALBA (2007) V Cumbre del ALBA. Proyecto Grannacional. Barquisimeto, República
Bolivariana de Venezuela 29 de abril de 2007. Available at http://www.alternativa
bolivariana.org/modules.php?name=News&file=article&sid=1802.
Altmann, J. (2008) The ALBA Bloc: An Alternative Project for Latin America? Translated from
Spanish. [Online] Real Instituto Elcano. Available at http://www.realinstitutoelcano.
org/wps/portal/rielcano_eng/Content?WCM_GLOBAL_CONTEXT=/Elcano_in/Zonas_
in/Latin+America/ARI17-2008.
Altmann, J. (2009) El Alba, Petrocaribe y Centroamérica: ¿intereses comunes? Nueva
Sociedad, Nº 219. pp. 127–144. Also available at http://www.nuso.org/upload/articulos/
3587_1.pdf.
Anon. (2008) ‘Cooperación venezolana en Latinoamérica es mayor que la de EEUU’.
Terra [Online]. 29 September. Available at http://www.terra.com.ve/actualidad/
articulo/html/act1441413.htm.
Anon. (2009) ‘Uruguay no integrará directiva de Telesur durante 2009’, El Universal,
[Online]. 25 February. Available at http://www.eluniversal.com/2009/02/25/pol_
art_uruguay-no-integrara_1280633.shtml.
Bossi, F. (2008) ¿Qué es el ALBA? (Construyendo el ALBA desde los pueblos [Online]
Available at http://www.alternativabolivariana.org/modules.php?name=News&file
=article&sid=470.

Shaw
 Josette Altmann 221

Castillo, R. (2008) CA: entre CAFTA y Petrocaribe. El Confidencial [Online] 12–18 October.
Available at: http://www.confidencial.com.ni/2008-605/economia_605.html.
CEPAL (Comisión Económica para América Latina y el Caribe) (2008) Social Panorama
of Latin America 2008. [Online] Available at http://www.eclac.org/cgi-bin/getProd.
asp?xml=/publicaciones/xml/3/34733/P34733.xml&xsl=/dds/tpl/p9f.xsl&base=/
tpl/top-bottom.xslt.
CEPAL (2009) Statistical yearbook for Latin America and the Caribbean 2008. [Online]
Available at http://www.eclac.org/cgi-bin/getProd.asp?xml=/publicaciones/xml/
7/35437/P35437.xml&xsl=/deype/tpl-i/p9f.xsl&base=/tpl/top-bottom.xslt.
Comunidad Andina (2008) Exportaciones Intra y Extra Comunitarias 2007. Documento
Estadístico. [Online] Available at http://intranet.comunidadandina.org/IDocumentos/
c_Newdocs.asp?GruDoc=13.
DIRECON (Dirección General de Relaciones Económicas Internacionales) (2008)
Comercio Exterior de Chile. Segundo Trimestre 2008. [Online] Available at http://www.
sice.oas.org/ctyindex/CHL/DIRECON20082_s.pdf.
FLACSO (Facultad Latinoamericana de Ciencias Sociales) (2007) Dossier ALBA.
Alternativa Bolivariana para América Latina. San José, Costa Rica: FLACSO-Secretaría
General. Also available at http://www.flacso.org/integracion/cuadernos/alba.pdf.
FLACSO (Facultad Latinoamericana de Ciencias Sociales) (2009) Crisis hondureña:
diálogo estancado. Available at http://www.flacso.org/programas-y-proyectos/observ
atorio-integracion-regional-latinoamericana-oirla/noticias-de-integracion-regional/
noticia-integracion/se-estanca-dialogo-en-honduras/.
Gómez, O. (2008) FMI: Nicaragua el más beneficiado por ALBA. El Nuevo Diario. [Online]
26 October. Available at http://www.elnuevodiario.com.ni/nacionales/30717.
INEGI (Instituto Nacional de Estadística, Geografía e Informática). www.inegi.gob.mx.
Laínez, L. (2008) Zelaya pactó con Chávez por falta de dinero. La Prensa Gráfica. [Online]
28 September. Available at http://www.laprensagrafica.net/lodeldia/20080928/
18468.asp.
Olivares, F. (2008) Cuánto cuesta el ALBA. El Universal, [Online] 28 September.
Available at: http://www.eluniversal.com/2008/09/28/pol_art_cuanto-cuesta-el-alb_
1062204.shtml.
Rojas-Aravena, F. (2007) La integración regional: Un Proyecto Político Estratégico. III Informe
del Secretario General de FLACSO. San José, Costa Rica: FLACSO-Secretaría General.
Also available at http://www.flacso.org/download/III-INFORME-SECRETARIO-
GENERAL-2007.pdf.
Rojas-Aravena, F. (2008) Integración en América Latina: Acciones y Omisiones; Conflictos
y Cooperación. IV Informe del Secretario General de FLACSO. San José, Costa Rica:
FLACSO-Secretaría General. Also available at http://www.flacso.org/imagenes/iv_
informe_sg.pdf.
SIECA (Secretaría de Integración Económica Centroamericana) (2008) Estado de
Situación de la Integración Económica Centroamericana. [Online] Available at http://
www.sieca.org.gt/site/VisorDocs.aspx?IDDOC=Cache/17990000002788/17990000
002788.swf.

Shaw
This page intentionally left blank

Shaw
Part IV
Reconstructing a Regional System
for the Americas

Shaw
This page intentionally left blank

Shaw
12
Middle Powers and Hemispheric
Diplomacy: Towards an A10
Jorge Heine

The year 2009 marked a turning point in inter-American affairs. The inaugu-
ration of President Barack Obama, the United States’s first black president,
on 20 January; the Fifth Summit of the Americas in Port-of-Spain, held
from 17–19 April; the lifting of the Organization of American States (OAS)
1962 resolution that suspended Cuba’s membership, on 3 June; and the
subsequent unanimous suspension of Honduras on account of the 28 June
military coup there; all combined to generate a new dynamic in the Western
Hemisphere. The present situation is very different from the low point reached
following the Fourth Summit of the Americas held in Mar del Plata, Argentina
in October 2005, remembered for, among other things, President George W.
Bush ostentatiously taking off his earphones, refusing to listen to the speeches
of his Latin American counterparts.
The very fact that US Secretary of State Hillary Clinton attended the June
2009 inauguration of President Mauricio Funes in El Salvador (the candidate of
the former guerrilla-movement-turned-political-party Frente Farabundo Martí
de Liberación Nacional (FMLN) and that country’s first left-wing president) is
an indication of the considerable changes that have taken place in US–Latin
American relations under the Obama administration. Moreover, it was on this
occasion that Secretary Clinton said: ‘Some would say that President Obama
is centre-left, and that of course means that we will work well with countries
that share our commitment to improve and enhance human potential’.
The election of Barack Obama generated great expectations in Latin
America, as in the rest of the world.1 In the US, where Hispanics now com-
prise 15 per cent of the population, and where Hispanic voters have not
always been ready to throw their support behind black candidates, Obama
did well (better than Al Gore in 2000 and John Kerry in 2004), beating
Senator John McCain in Florida.
President Obama himself, with a Kenyan father and a Kansas-born mother,
born in Hawaii and partly raised in Indonesia, has a personal trajectory that
enhances his understanding of international affairs in a way that President
George W. Bush’s (who first set foot in London, Great Britain as president)
225

Shaw
226 Middle Powers and Hemispheric Diplomacy

did not. Obama’s African roots and his exposure to Asia have made him
especially sensitive to issues affecting the Global South (see Obama, 2004).
In one sense, then, these changes were predictable. In another, however,
they were not. For the vast majority of observers, Obama’s packed agenda,
dominated by the global economic crisis that began in 2008, two wars (in Iraq
and Afghanistan) and an ambitious programme of domestic reforms, meant
that the Hemisphere would get short shrift (see Lowenthal et al., 2009). Yet,
from January to September, President Obama made a state visit to Mexico,
took part in the Fifth Summit of the Americas in Port-of-Spain, hosted at the
White House Presidents Luiz Inácio Lula da Silva of Brazil, Michelle Bachelet
of Chile, and Álvaro Uribe of Colombia, regularized diplomatic relations with
Venezuela, went along with the unanimous lifting of the 1962 OAS resolu-
tion that suspended Cuba, and took measures to ease US links with Cuba.
The latter move, in particular, reflects a considerable change from pre-
vious US policies. The obstacles within the US to these changes are not
minor. The gap between current Latin American realities and the way
they are perceived by many opinion-makers in the US is considerable, and
was reflected in the Port-of-Spain summit. The fact that President Obama
rose from his seat to respond to the greeting of President Hugo Chávez
of Venezuela, that he smiled in so doing and that he accepted a gift from
his Venezuelan counterpart, generated considerable criticism, even in the
mainstream US media.2
And this leads us to the new Latin America that has emerged in the course
of this decade, marked by the distancing, if not downright estrangement,
from the US. This chapter addresses how the changed dynamics of inter-
American politics are affecting hemispheric cooperation and how best to
redress this situation. The state of affairs in Latin America has transformed
the region’s relationship with its northern neighbours. A ‘new Latin America’
has evolved that is more assertive in global affairs and international relations.
Region-wide rejection of the Washington Consensus has diminished reliance
on the US and overt anti-US sentiment appears in countries across the region.
The region’s hierarchy has also begun to shift, with some countries, such as
Canada and Chile, becoming more active and other countries’ importance
rising and falling – Brazil and Argentina, respectively.
Latin America’s resurgence, combined with the obstacles forced upon it
by the OAS and the Summit of the Americas (SOA) process, have left current
inter-American institutions at a standstill. At the same time, Latin American
summitry has flourished as groupings such as the Rio Group, ALBA, UNASUR,
and Mercosur allow the countries of the region to meet – although there are
concerns of summitry overload. All of this has created the need for a sustain-
able and effective pan-American summit to deal with issues on a hemispheric
level – common concerns, from the environment, to security, to drug traffick-
ing require transnational responses. This chapter argues that the creation of
an A10 – a small, informal grouping of Western hemispheric countries – can

Shaw
 Jorge Heine 227

resolve these issues and promote greater inter-regional cooperation. Middle

powers, including Canada and Chile, could be an integral part of this
initiative, offering diplomatic skill and initiative to reconcile the differences
that the region’s players have.

A New Latin America

Painting with a broad brush, six trends stand out:3

1. Political stabilization and economic growth.

Both military coups (pace Honduras) and inflation have been eradicated.
Democratic institutions, albeit with imperfections, are in the processes of
consolidation, and economic opening and export-led development made
the region benefit considerably from the commodities boom of 2002–8.
Six years of uninterrupted growth at close to 5 per cent allowed a number
of Latin American countries to pay down a large part of their foreign
debt, increase their foreign currency reserves, and, in some cases, to save
for a rainy day.
2. Abandonment of the neoliberal dogma.
The rise of the Left, of which the FMLN’s victory in El Salvador (which put
an end to 20 years of right-wing ARENA rule) is but the latest expression –
in this case, the first time a former guerrilla movement has morphed
into a political party and won in free elections in Latin America – is in
many ways a reaction against the Washington Consensus imposed in the
1990s. Though accepting certain elements of the Washington Consensus
(economic opening and low-inflation policies), electorates lost faith in pro-
grammes of never-ending reforms that hardly ever delivered, and started
to favour leaders and parties that offered alternatives to market funda-
mentalism (see MacDonald and Ruckert, 2009; Silva, 2009). Responding
to what his colleagues had expressed to him at the Port-of-Spain summit,
Obama said: ‘They are tired of the Washington Consensus’.
3. Expansion of international markets.
Latin America’s traditional markets were the US and Europe. However,
the rise of Japan, first of the ‘Asian tigers’, then of China and now India,
opened new opportunities. Argentina, Brazil, Chile, and Peru were at the
forefront of this ‘shift to Asia’. Oil, iron ore, copper, and soya, among
other commodities, have been in heavy demand by the Asian giants and
their neighbours to feed their double-digit growth. In the case of several
South American countries, Asian markets have displaced those of North
America and Europe both in terms of volume and value of exports, thus
forging a very different type of international insertion.4
4. Diversification of diplomatic ties.
From 2003–8, Brazil opened 32 new embassies around the world, some-
thing never seen before in the region’s diplomatic history. In the same

Shaw
228 Middle Powers and Hemispheric Diplomacy

period, the number of Latin American and Caribbean missions estab-

lished in New Delhi rose from 13 to 17. Mexico joined the Organization
for Economic Co-operation and Development (OECD), and Chile also
became a member on 7 May 2010. Chile, Mexico, and Peru are members
of the Asia Pacific Economic Cooperation (APEC) forum, and Brazil has
participated in the creation of new groups such as the IBSA (India,
Brazil, South Africa) Initiative and BRIC (Brazil, Russia, India and
China). Argentina, Brazil, and Mexico are members of the newly cre-
ated G20.
5. Keeping up (sub)-regional integration
Over the past 20 years, regional integration has undergone many ups and
downs in Latin America. The notion of a single, integrated market from
the Rio Grande to Tierra del Fuego remains a dream, and may never come
to pass. But this does not mean that myriad sub-regional integrations do
not continue to flourish, sprout anew, and bring the various economies
together in different and often unpredictable ways. From Mercosur in
the Southern Cone, to the Andean Community on the Pacific Rim of
South America, the Central American Common Market in the isthmus,
the Caribbean Community (CARICOM) in the archipelago and its
surroundings, and to the Bolivarian Alternative for the Americas (ALBA),
governments continue to explore ways to expand markets and benefit
from comparative advantage in the region.
6. Fostering political cooperation.
For better or for worse, summit diplomacy in its regional (as opposed to
hemispheric) expression has established itself, and even become routine.
The Rio Group, the Ibero-american summits, the more recent UNASUR
(South American Union of Nations) and the yearly heads of government
meetings of the above-mentioned regional integration schemes have all
contributed to a heavy schedule of summitry, which poses a challenge
of its own. Yet, this flexible, variable-geometry type of approach to
regional problem solving has its benefits. It has allowed the region to
sometimes skip the heavy-handed formalities of older and more estab-
lished regional organizations such as the OAS. The expeditious manner
in which the Rio Group during its meeting in Santo Domingo in March
2008 solved the impasse between Colombia, Venezuela, and Ecuador is
a good example. The same goes for the UNASUR meeting in Santiago,
Chile in September 2008, called for by the pro tempore chair, Chile’s
President Michelle Bachelet, to deal with Bolivia’s domestic political
crisis.

None of this means that Latin America does not still face enormous chal-
lenges or that it does not still have a long way to go before becoming fully
developed. It just means that some progress has been made and that some
learning from past mistakes has taken place.

Shaw
 Jorge Heine 229

Obama’s challenges

The fact that the US no longer plays the dominant role it played in the
region in the past does not mean that it has become irrelevant for it. A fifth
of all US foreign trade (the US is still the largest economy in the world, with
a quarter of the world’s product) is with Latin America. Close to a third
(30%) of its oil imports come from the region, a larger share than from the
Middle East. Of the 45 million US residents born abroad, 18 million are Latin
Americans. Many Latin American and Caribbean nations (especially Mexico,
Guatemala, El Salvador. and Guyana) have come to depend very heavily on
remittances, whose value in some cases reaches as much as 20 per cent of the
GDP of the recipient country, and whose total value is only slightly less than
the overall FDI flow into the region in any given year.5
Moreover, the dependency on the US by countries like Mexico, as well as
those of Central America and the Caribbean, has increased in the course of
the past 20 years, something very different to what has occurred in South
America, and especially in the Southern Cone. Whereas some 80 per cent of
Mexico’s exports go to the US, less than 20 per cent of Chile’s exports do so,
despite the existence of a US–Chile FTA, in effect since 2003.
In short, and despite the considerable progress that has taken place in
Latin America in the past decade and the less prominent role of the US in
the hemisphere, there continues to be a shared problematique. In addition to
Latin America’s own development challenges and the degree to which they
are linked to the US economy and society (in matters such as immigration,
drug trafficking, and crime, among others), there are also broader transna-
tional challenges that demand collective action and some degree of policy
coordination (such as those of poverty, energy, and climate change).
President Obama and Secretary Clinton, two deft politicians, have also
grasped something else. The fact that there are no major crises, wars, or terror-
ism in Latin America means that the region can engage Washington in a dif-
ferent type of relationship, one based on maturity and mutual respect. It is thus
ideal for the new US administration to display its new diplomatic approach, based
on dialogue, multilateralism, and joint efforts to address common challenges,
with the real possibility of showing results in the near future – something less
easy to achieve in the more conflict-ridden areas of the world.
The question then becomes one about how to move ahead and take
advantage of this window of opportunity. As important as the content of
the newly emerging inter-American agenda is the process to manage it. And
this is where middle powers come in.

Middle-power diplomacy in the Americas

Canada is, of course, the ultimate middle power, one with a very distinctive
foreign policy tradition. A commitment to multilateralism and the rule of

Shaw
230 Middle Powers and Hemispheric Diplomacy

international law, as well as to such classical international citizenship duties

as peace keeping are among its features. From the days of Lester Pearson,
Canada has worked with ‘like-minded’ nations to foster these values, and in
so doing has managed ‘to punch above its weight’.6
Canada’s joining of the OAS in 1990 has made quite a difference in the
inter-American system, on many fronts, such as electoral assistance, human
rights, and in Haiti. The country also hosted the Third Summit of the
Americas in Quebec City in April 2001 and played an important role in
the gestation and approval of the Inter-American Democratic Charter.
From its traditional self-image as a strictly North Atlantic nation, closer to
countries like Norway and Denmark than to Nicaragua and the Dominican
Republic, Canada has recently evolved towards a broader view of itself and
its role in the world, including the Americas. In fact, the first Free Trade
Agreement between a country of the developed North and one from the
developing South was signed between Canada and Chile in 1996.
As Andrew F. Cooper (2009) has pointed out, though, Canada has under-
gone a significant shift in its profile as a middle power. Whereas under the
Liberal governments of Jean Chrétien and Paul Martin the country engaged
in ‘niche diplomacy’, giving high priority to issues such as banning land-
mines, the International Criminal Court, and R2P, working closely with ‘like-
minded’ countries and with NGOs; under the Conservative government of
Stephen Harper, Canada has projected a different approach. The latter is
much closer to the US’s and Israel’s, and has expressed itself most vividly
in the steadfast commitment to the NATO mission in Afghanistan, where
Canadian forces have in many ways borne the brunt of the war against
the Taliban in Kandahar province. Interestingly, though, Canada, through
its Americas Initiative, has also assigned a high priority to the Western
Hemisphere. Prime Minister Harper undertook a high-profile visit to the
region in July 2007, visiting Chile, Colombia, Costa Rica, Barbados, and
Haiti, and Free Trade Agreements have been signed with Peru, Colombia,
and Panama, in addition to the one extant with Chile (see Canadian Foreign
Policy, 2008).
The democratic crisis in Honduras, triggered by the 28 June 2009 coup
that ousted President Manuel Zelaya, though, has become a litmus test
for this policy. Canada chaired the OAS Permanent Council meeting that
unanimously suspended Honduras from the organization after the coup.
Canada’s Minister of State of Foreign Affairs (Americas) Peter Kent took an
active role in attempting to broker a solution to the impasse, being part
of the delegation of foreign ministers that visited Tegucigalpa in August
and met with the head of the de facto government, Congressman Roberto
Micheletti, in an effort to persuade him to adopt the Arias Plan and resolve
the crisis. Yet, whether Canada will follow the US lead and apply sanctions
to Honduras after these efforts failed remains an open question at the time
of writing.

Shaw
 Jorge Heine 231

What about Latin American middle powers? Traditionally, the Latin

American middle powers were identified as Argentina, Brazil, and Mexico,
with everybody else in a second or third tier. However, over the past 15
years, under the presidencies of Fernando Henrique Cardoso (1994–2002)
and Luiz Inácio Lula da Silva (2002–10), Brazil has emerged as a power to
be reckoned with in international affairs. This in itself is an objective lesson
in international affairs: the reason Brazil made the jump from just another
Latin American middle power to a different status is not structural – its
growth has been rather low in this period, and so has its defence spending.
Rather, it has to do with a different way of approaching its international
environment, embracing ambitious foreign policy projects and reaching out
to Asia and Africa.7 Rather than positional or relational (Brazil has always
been the largest Latin American nation), this new status is behavioural in
origin. It is rooted in an assertive foreign policy undertaken by two presidents
with a clear understanding of how to project Brazil abroad, not necessarily
something that could be said of their predecessors.8
Thus, Brazil can no longer be considered merely a Latin American power.
It is now a regional power with global ambitions, eager to become a per-
manent member of the United Nations Security Council, willing to invest
heavily in foreign policy endeavours (thus the unprecedented opening of
32 new embassies in 2003–8) and otherwise determined to make a world-
wide impact. One example should suffice. Fully aware of the significance of
Brazil and the need to work with the South American giant, the incoming
Obama administration mooted the possibility of a US–Brazilian partnership
on renewable energy sources in the Americas. The answer from Brasilia was
swift: for something of that nature, Brazil didn’t need the US, and could
do it on its own. Now, if Washington was ready to consider a US–Brazilian
partnership on renewable energy sources with a global mandate, Brasilia was
prepared to consider it.
Part of the reason Brazil and Mexico had such difficulties in projecting
themselves abroad and making the most of their recognized middle-power
status for much of the latter part of the twentieth century was because they
were too absorbed by the ‘national question’ and internal governance issues.
It was only after that was successfully resolved – in the case of Brazil by
bringing inflation under control and acquiring a measure of continuity in
presidential leadership, and in that of Mexico, after fully democratizing the
political system – that they were able to take on foreign policy responsibilities
commensurate with their size and weight.
Much as Brazil and Mexico ended up transcending their original regional
middle-power status to join the club of emerging powers in the Global
South, Argentina may be seen as a fascinating case of downward mobility
in the hierarchy of the international system. After the humiliation inflicted
on it by the UK in the Falklands/Malvinas War in 1982, it has wavered from
one extreme to the other in its foreign policy positions, the net result being

Shaw
232 Middle Powers and Hemispheric Diplomacy

one of utter unpredictability, not exactly an asset in international society.9

Its great achievement has been the creation of Mercosur, which, by joining
the two South American giants, Argentina and Brazil, put an end of sorts
to the historical rivalry between them. This increased intraregional trade
for a number of years, but has since stagnated, being unable to grow and
expand as its early promise suggested it might.
On the broader international arena, however, Argentina has continued to
pose more of a puzzle than most potential partners feel comfortable with.
Under the Raul Alfonsín presidency (1983–9) it embraced non-alignment
with great gusto, became a founding member of the G15 and tried by a vari-
ety of means to raise the Third World credentials of Argentina, in some ways
harking back to the earliest positions of Juan Domingo Perón. Ironically, it
was a Peronist president, Juan Carlos Menem (1989–2000), who jettisoned
this by quitting the Non-Aligned Movement (NAM), proclaiming there was
only one world, and having Foreign Minister Guido di Tella say that ‘it’s not
that we want close relations with the United States; we want carnal relations
with them’. Argentina did all it could to ingratiate itself with Washington,
including sending ships to the Gulf in the First Gulf War to support the US
Navy fleet there, and becoming a special, ‘out of area’ NATO partner. Yet, all
of this was to no avail when, in 2000–1, Argentina, on the verge of default-
ing on its international obligations, found that the US was adamant it would
not move a finger to help, and that neither would the IMF, a very different
position from the one taken by Washington on Mexico’s crisis in 1994–5,
or Brazil’s in 1998.
During Néstor Kirchner’s Presidency (2003–7) and that of Cristina
Fernández (2007–11), Argentina has, to all intents and purposes, ceased
to have a foreign policy, being fully absorbed by the challenge of bring-
ing back the economy from the brink. It has dallied with Venezuela and
embraced Hugo Chávez’s oil diplomacy, championing the latter’s entry into
Mercosur, but has otherwise found it difficult to develop a proactive foreign
policy agenda of its own.10 Much as was the case in earlier eras for Brazil
and Mexico, for Argentina the ‘national question’ is too overwhelming and
unresolved to allow for any serious international agenda, let alone such
ambitious undertakings as the projection of middle statehood into the con-
struction of hemispheric regionalism (see Levitsky, 2008).

Chile’s emergence

Yet, over the past 20 years, there has been another South American nation
that has emerged as a strong contender for middle-power status, namely
Chile. The fastest growing economy outside Asia during the past two decades,
Chile is one of the countries in the developing world that has managed to
make the most of the opportunities offered by globalization. It has done so
through an aggressive international economic policy (leading it to become

Shaw
 Jorge Heine 233

the country with the highest number of FTAs – 56 as of last count in 2009)
as well as diplomatic ‘charm offensives’, that have allowed it to increase its
exports through this market access from US$ 9 billion in 1990 to US$ 63
billion in 2008, and to attract considerable amounts of FDI, whose stock
is now 65 per cent of GDP, one of the highest in the world. A key factor
here has been the diversification of Chile’s foreign markets. In 2007, China
displaced the US as Chile’s largest export market, and four of Chile’s largest
export markets that year were to be found in Asia (first China, third Japan,
fifth South Korea, and tenth India).11
Revealingly, it has been this very diversification of markets and open-
ing to global opportunities that became a source of criticism, both in the
region and at home. Chile is the one country in Latin America that is not a
full member of any regional integration scheme (although it has FTAs with
many of them). It explicitly declined invitations to join Mercosur when
it was first established in 1991, and once again in 2000 (it did become
an associate member in 1996), and it is often accused of prioritizing Asia
(which gets 40% of its exports) over Latin America (which gets only 20%).
At home, the centre-left ruling coalition (the Concertación de Partidos por
la Democracia) which has ruled the country since 1990, has also exposed
itself to the critique that it doesn’t pay enough attention to the region, a
sensitive subject given the Pinochet Regime’s explicit distancing itself from
Latin America on many fronts.
One result of this is that under the presidencies of Ricardo Lagos (2000–6)
and Michelle Bachelet (2006–10), Chile continued with its global international
trade policy, but added to it a more visible commitment to Latin American
concerns. The election of Chilean Home Affairs Minister José Miguel Insulza as
secretary general of the OAS in 2005, in a hard-fought election against Mexican
Foreign Minister Luis Derbez (the first time an OAS SG who was not the pre-
ferred candidate of Washington was elected to the office) was a significant
instance of this (see Heine, 2006). Something similar can be said of President
Michelle Bachelet’s election as the first chair of the Unión Sudamericana de
Naciones (UNASUR) in 2008, a new entity seen by some as designed to assert
a measure of South American independence from North America.
And although the contrast between this policy and the one followed by
Chile’s military regime (1973–90) is considerable, Chile has been able to
draw on its own, rich foreign policy traditions from the pre-1973 period to
assert its commitment to certain permanent principles in the conduct of
its foreign relations, principles that have stood it in good stead in the new,
twenty-first century environment. These include the rule of international
law, the principle of non-intervention, the significance of multilateral insti-
tutions, and that of pacta sunt servanda, principles which are not too different
from those that have inspired Canadian foreign policy.
However, Chile’s strong democratic institutions and political stability as
well as its prosperous economy, mean that the ‘national question’, if not

Shaw
234 Middle Powers and Hemispheric Diplomacy

totally resolved, is sufficiently addressed in order to allow for a meaningful

foreign policy (see Valenzuela and Dammert, 2008). While Chile’s high per
capita income and burgeoning foreign trade more than compensate for
its relatively small population and territory (relatively speaking, by South
American standards), it is these former factors that undergird Chile’s
emergence as a middle power.

The hemisphere’s conjuncture

Because they are seen as non-threatening and because, by definition, they

do not have hegemonic aspirations of their own, middle powers are ideally
placed to act as honest brokers and problem solvers in international affairs,
taking on tasks that are too intractable for either the big powers or for small
and mini-states. At a time when regionalism in the Americas is in transition,
middle powers such as Canada and Chile are in a good position to take ini-
tiatives for a new policy framework and for new policy tools that respond to
this different environment.
This is especially significant today because Latin America’s international
relations are being buffeted by many forces. On the one hand, new actors
such as China, India, Russia, and Iran are starting to play significant roles in
the region, reflecting the latter’s diplomatic diversification and its quest for
new markets. On the other hand, nations such as Brazil and Mexico, because
of their sheer size, find themselves drawn into broader diplomatic arenas,
being labelled as members of entities such as BRICSAM (see Aggarwal, 2008).
Ideological divisions within the region itself, which often put the member
countries of ALBA (Venezuela, Cuba, Nicaragua, Bolivia, and Ecuador) at log-
gerheads with some of their neighbours, add to these centrifugal tendencies.
A natural response to these challenges would be to strengthen existing
regional institutions, such as the OAS, which has undergone a revival over
the past few years and has played a prominent role in the Honduras crisis.
Canada’s joining the OAS in 1990 was an important milestone in the organi-
zation’s history. Yet, the basic problem of the OAS is not so much (as it is
often argued) the lack of US willingness to pay its quota and thus undergird
its perennially underfunded budget. At US$ 80 million the OAS budget is
so small that Itamaraty, Brazil’s foreign ministry, could pay for it all if it so
desired. The real problem is that Brazil has steadfastly opposed raising the
OAS budget because it is leery of any such regional organization that could
somehow limit Brazil’s freedom of action in the Americas – much as it has
opposed the creation of formal conflict-resolution mechanisms within
Mercosur, whose effects would also limit Brazil undisputed hegemony within
that subregional integration scheme. Thus, the tragedy of the OAS is that
it is distrusted by Latin Americans, who see it as a potential (or actual, as it
did in the 1950s and 1960s) instrument of US foreign policy, and by the US,
which regards it as a bit of a Latin American ‘talking-shop’ where nothing

Shaw
 Jorge Heine 235

much gets done, where overheads and pensions eat up much of an already
meagre budget, and innovation and initiative are scarce commodities.
That said, there is little doubt that, at a time of increasing political differ-
ences within the Americas, and despite its somewhat chequered past, the
OAS has raised its profile as the Western Hemisphere’s premier regional
forum, taking up such ‘hot-button’ issues as ‘bringing Cuba back in’ and
contending with the Honduras crisis in a forceful and decisive manner. As
Feinberg and Haslam (2007) have shown, the OAS has also taken on with
great verve the assigned task of becoming the administrative structure for
the SOA process, and redefined its mission accordingly, giving a new impe-
tus to the organization.

The nature of the problem

The central paradox of inter-American relations in the first decade of the

twenty-first century is that, precisely at the time when Latin American
nations have substantially increased their interactions with each other and
with the rest of the world, giving rise to terms such as a ‘new regionalism’,
formal exchanges between the US and Latin American nations reached an
all time low.
Over the past decade or so, the Free Trade Area of the Americas (FTAA)
project has died, the Washington Consensus has been discredited, and the
US has become far less significant for most Latin Americans. Hemispheric
cooperation and regionalism, in other words, are very much at a crossroads.
In 2008–9, a number of reports on US–Latin American relations were
released.12 They all coincide in their diagnosis: the US has a much weaker
presence in the region. They are also very cautious in their proposals, argu-
ing for modest, incremental changes that would tinker at the margins of the
established patterns of inter-American relations. This is predicated on the
not unreasonable assumption that President Obama has his hands full with
many pressing matters and that Latin America, where there are no wars to
speak of, and no Islamic terrorists to hunt down, will not be his foremost
concern.
Yet, I am not sure this is the way forward. Middle powers like Canada and
Chile can play a constructive role in rebuilding regionalism in the Americas.
This is not something that will happen by itself, nor out of the inertia of
existing institutions. It certainly will not result from timid tinkering at the
edges of current arrangements.
There seems to be a consensus that the three issue areas on which US
policy towards Latin America has been based in the past two decades – that
is free trade, democracy, and the ‘war on drugs’ – have been exhausted, and
that some fresh issues (like transnational crime, migration, poverty, and
inequality in the Americas) ought to take centre stage. In other words, what
is needed is a different, expanded policy framework.

Shaw
236 Middle Powers and Hemispheric Diplomacy

The main concern of this chapter though is not just with the substance
of this new agenda, but with restoring a semblance of intra-hemispheric
dialogue. Ever since its launch in 1994, the Summit of the Americas (SOA)
process has been the linchpin of it. Yet, it has now reached a stage of ever-
diminishing returns. The SOA from the very beginning was linked to the
FTAA project. Now that the latter is dead, this cannot but affect the SOA.
But the crisis of the latter goes beyond that. In some ways, the SOA is the
Americas’s equivalent to the United Nations General Assembly, only held
every four years rather than every September. To sit 34 heads of government
around a table to discuss common concerns is not a good working formula.
To hold it every four years does not help to make it more operational either:
most heads will attend only one SOA in their term of office. There are thus
few incentives for follow-up. Add to that an under-funded and thus unem-
powered secretariat – with a US$ 700,000 yearly budget – and you do not
exactly end up with a winning formula.

Towards a working summit approach

The heart of the problem of hemispheric diplomacy is the following: there

has been an enormous expansion of intra-Latin American and Caribbean
political cooperation, leading to a plethora of summit meetings and min-
isterials; yet, there has been no concomitant increase – in fact, it could be
argued that there has been a decline – in political cooperation between
the US and the rest of the hemisphere. Given the realities of power and
economic resources, this makes it very difficult to make progress on common
challenges.
Today, the very real regional and global issues that demand collective
action and coordination in the Americas – from climate change to transna-
tional crime and drug trafficking – are addressed partially and insufficiently
by an ever larger number of Latin American summits, which have neither
the capacity nor the resources to solve them. However, meetings of Latin
American and Caribbean leaders with their US and Canadian counter-
parts to address multilateral (as opposed to bilateral) issues are few and far
between, in some cases only once every four years, with weak follow-up
mechanisms. This is not sustainable.
To renew a sense of hemispheric regionalism, different policy tools are
needed. These should increase the conditions for informal dialogue, genuine
exchange of ideas, and a sense of collegiality between leaders of the Americas –
not on the basis of ‘best-friendism’ but on that of common purpose.
On the occasion of the G20 meeting at leaders’ level, the proposal that
the five countries of the Americas (the US, Canada, Argentina, Brazil, and
Mexico) should liaise and, if possible, coordinate common positions was
mooted. Given the considerable differences of opinion among these countries
as how to best move forward on fixing global financial architecture (the main

Shaw
 Jorge Heine 237

item on the G20’s agenda), this is unlikely to occur. Yet, the seeds of an
interesting idea are there.
Along the same lines, one report on the state of US–Latin American rela-
tions has suggested the creation of an A8 – that is, an informal group, along
the lines of the G8, that would meet once a year, bringing together eight
heads of government from around the hemisphere to address issues of com-
mon concern (see The Brookings Institution, 2008). I would expand it to an
A10. Few would question the sense of common purpose and even identity
that the G8 created among the world’s leading industrialized democracies
in the course of its more than 30 years of existence. Their yearly meetings,
generally in July, elicit considerable media attention. More importantly,
they are highly valued by the principals who take part in them because they
are precisely what the UNGA and the SOA are not: an occasion to exchange
views informally, within a small group, with no ready-made speeches,
among colleagues, with no attempts at public posturing. The premium is on
private exchanges among top leaders.
A number of observers have underscored the cyclical nature of inter-
American relations. Bursts of seeming energy and creativity in the develop-
ment of hemispheric institutions are followed by steep downturns, periods
in which nothing much happens, or, even worse, acrimony and bitterness
between North and South prevail. The contrast between the state of inter-
American relations in the 1990s and what obtained in the first decade of this
century is a prime example of this cycle.
The reasons for these pendular movements that go from the extremes of
euphoria and warm optimism to near-depression are manifold. One of them
is the lack of trust between North and South, between the developed part
of the Americas (i.e. the US and Canada) and the developing one (i.e. all
the rest). No other part of the world presents such a stark contrast between
its component units as the Western Hemisphere in terms of the enormous
income and wealth disparities between North and South of the Rio Grande.
To that one should add the cultural and linguistic differences between an
English and French-speaking North and a largely Spanish and Portuguese-
speaking South.
According to this view, the problem arises when, at certain moments, the US
wishes to believe in the existence of certain common values in the Americas,
a belief that is taken at face value by many Latin American nations eager ‘to
score points’ with Uncle Sam – only to be disappointed when the latter returns
to its traditional unilateralist behaviour as soon as the opportunity arises.
From John F. Kennedy’s Alliance for Progress to Lyndon Johnson’s invasion of
the Dominican Republic, from Jimmy Carter’s human rights agenda to Ronald
Reagan’s consorting with dictators, from Bill Clinton’s NAFTA moment to
George W. Bush’s Mar del Plata nadir, the pattern is much the same.
If that is the case, and distrust has been the hallmark between the leaders
of the Americas, it follows that there is a need to create the conditions for

Shaw
238 Middle Powers and Hemispheric Diplomacy

establishing this trust in the first place. These conditions do not obtain in
large meetings with set speeches aimed at public opinion back home rather
than at the presumed interlocutors in the room. They do exist in the equiva-
lent of the G8 meetings, which have been so successful that many others
wanted to join as well.13 To compress the 35 countries in the Hemisphere
into a working group of ten would not be an easy exercise. But then, nobody
said harnessing hemispheric regionalism was a cakewalk; the Rio Group
started much the same way, and middle powers are better placed than most
to make such a project happen.

Middle powers and the A10

The shifting architecture of international relations has opened the door

for effective middle-power diplomacy in the Americas. Leadership is not
necessarily dependent upon the size of the actor, it also relies upon ‘a
combination of imagination in inventing institutional options and skill
in brokering the interests of numerous actors to line up support for such
options’ (Young, 1989: 335). As Andrew F. Cooper (2009) points out, there
are certain characteristics that give middle powers the position to affect
change: ‘working well with others, a mix of commercial and NGO strengths,
and an ability to modify the state’s brand’. Canada and Chile, in particular,
are well positioned to influence the regional leaders – the US and Brazil.
In a small, informal setting – such as the proposed A10 – regular discussions
and engagement can foster greater solidarity and understanding among
the countries involved. Canada and Chile contain their own unique mix
of middle-power characteristics and are perceived as capable of generating
consensus building and inter-regional dialogue.
Canada’s recent reengagement with the hemisphere (see, Canada and the
Americas, 2009), traditional role as a US ally and position as a classical middle
power provide it with the diplomatic will and skill to affect change in
the region. To do so, Canada must shed perceptions that it is not truly committed
to inter-American reforms and that its present engagement is a passing fad. As
Jean Daudelin writes, ‘every twenty years or so, it seems Canada rediscovers
the Americas’ (Daudelin, 2007: 2).
Chile’s dynamic foreign policy and its institutional strengths make it
an ideal partner for furthering hemispheric cooperation, which is one
reason President Obama invited President Bachelet to visit him in June 2009,
the second Latin American head of state to be invited to the White House
after President Lula of Brazil. Chile’s recent surge in international trade
and engagement with the rest of the world (specifically China and India)
demonstrate the country’s capacity for diplomatic engagement. The grow-
ing strength of the Chilean economy and its government’s commitment
to combating social inequalities make it a viable role model on the inter-
American stage.

Shaw
 Jorge Heine 239

Conclusion

The creation of an A10 grouping would provide a necessary mechanism

for promoting greater inter-American cooperation. Freed from historical
baggage, and perceptions of ineffectiveness, of the OAS and SOA process,
such a grouping would help to bridge the concerns and interests of the
region’s North and South. The US and Brazil would be given a sufficient
platform to express their competing desires for regional leadership, while
middle powers – such as Canada and Chile, and to a lesser extent Mexico,
Argentina, and Venezuela – would be able to exert niche and middle-power
diplomacy. Trinidad and Tobago – which has gained considerable working
knowledge from its summit hosting duties in 2009–10 – could be added as
a Caribbean representative, helping to balance representation from each of
the hemisphere’s sub-regions. An A10 grouping would provide a workable
and sustainable model for inter-regional cooperation. Important dialogue
would be facilitated through a pan-American network, providing impetus
and guidance for further inter-American initiatives.

Notes
1. For some reflections on these Latin American expectations, see the special issue
of Foreign Affairs Latinoamérica 8:4 (2008), ‘Propuestas para un mundo sin Bush’,
and especially the articles by Jorge Castañeda, Luis Maira, and Roberto Russell.
2. The occasion has even given rise to the term ‘to pull a Chávez’, and is referred
to by The New York Times as ‘the now-infamous handshake’ – an extraordinary
expression for the meeting of two heads of state in a summit whose very pur-
pose is for participating heads of state to, well, meet each other. See Cooper, H.
(2009).
3. For a broader discussion of these trends, see Cooper and Heine (2009).
4. For the case of China, which has been at the forefront of this trend, see Ellis
(2009); for India, see Heine (2009a).
5. For these figures, see Inter-American Dialogue (2009). A useful companion report
is Council on Foreign Relations (2008).
6. On Canadian foreign policy, see Tomlin et al. (2008) and Bothwell and Daudelin
(2009).
7. This and the following paragraph draw on Heine, (2009b).
8. For a comprehensive assessment of the state of Brazil’s domestic and foreign
policy challenges, see Foreign Affairs Latinoamérica (2009).
9. As one scholar put it, ‘Argentina has historically had an erratic, inconsistent
and often ambiguous foreign policy. Examples abound of frequent and sudden
changes in orientation, opposite stances along time (within and across admin-
istrations), contradictory positions depending on issues/countries and swinging
between alignment and confrontation with the US’ (Margheritis, 2007).
10. For a devastating critique of Argentina’s foreign policy under President Kirchner
by one of Argentina’s leading IR specialists, see La Nación (2006).
11. On Chile’s international trade policy, see Heine (2009c); on relations with India,
see Heine (2007).

Shaw
240 Middle Powers and Hemispheric Diplomacy

12. In addition to the ones mentioned above (Council on Foreign Relations [2008]
and the Inter-American Dialogue [2009]) one should also include The Brookings
Institution, (2008).
13. The result of that, after many somewhat awkward combinations like the ‘Eight
plus Five’ and others, has been, of course, the G20, which met for the first time in
Washington, DC in November 2008, and subsequently in London in April 2009
and in Pittsburgh in September 2009.

References
Aggarwal, Manmohan (2008) ‘The BRICSAM Countries and Changing Economic
Power: Scenarios to 2050’, CIGI Working Paper 39.
Bothwell, Robert and Jean Daudelin (eds) (2009) Canada Among Nations 2008: 100
Years of Canadian Foreign Policy. Montreal and Kingston: McGill-Queens University
Press.
Canada and the Americas: Priorities and Progress (2009) Department of Foreign Affairs
and International Trade. Ottawa: Government of Canada.
Canadian Foreign Policy (2008) ‘Special Issue: Canada and the Americas: Defining
Re-Engagement’, 14:3 (Fall).
Cooper, Andrew F. (2009) ‘Middle Powers: Squeezed Out or Adaptive?’, Public
Diplomacy 1:2 (Summer), pp. 29–34.
Cooper, Andrew F. and Jorge Heine (eds) (2009) Which Way Latin America? Hemispheric
Politics Meets Globalization. Tokyo: United Nations University Press.
Cooper, Helen (2009) ‘The Politics of Face Time’, The New York Times, 20 September.
Council on Foreign Relations (2008) ‘US-Latin American Relations: A New Direction
for a New Reality’, Independent Task Force Report 60.
Daudelin, Jean (2007) ‘Canada and the Americas: A Time for Modesty’, Behind the
Headlines. Canadian Institute of International Affairs, 64 (3).
Ellis, R. Evan (2009) China in Latin America: The Whats & Wherefores. Boulder: Lynne
Rienner.
Feinberg, Richard and Paul Haslam (2007) ‘Problems of Coordination: The OAS and
the IDB’, in Gordon Mace, Jean-Philippe Thérien and Paul Haslam (eds) Governing the
Americas: Assessing Multilateral Institutions. Boulder, CO: Lynne Rienner, pp. 51–70.
Foreign Affairs Latinoamérica (2009) ‘Brasil: ¿potencia americana?’ 9:2.
Heine, Jorge (2006) ‘Between a Rock and a Hard Place: Latin America and Multilateralism’,
in Edward Newman, Ramesh Thakur and John Triman (eds) Multilateralism under
Challenge: Power, International Order and Structural Change. Tokyo: United Nations
University Press, pp. 481–503.
Heine, Jorge (2007) ‘From the Southern Cone to South Asia: Growing Links between
Chile and India’, Indian Foreign Affairs Journal 2:1 (January–March), pp. 29–43.
Heine, Jorge (2009a) ‘Playing the India Card’, in Andrew F. Cooper and Jorge Heine
(eds), Which Way Latin America? Hemispheric Politics Meets Globalization. Tokyo:
United Nations University Press, pp. 122–39.
Heine, Jorge (2009b) ‘Middle Powers and Conceptual Leadership’ Public Diplomacy 1:2
(Summer), pp. 41–5.
Heine, Jorge (2009c) ‘Chile’s International Trade Policy’, World Focus 350 (February).
Inter-American Dialogue (2009) ‘A Second Chance: US Policy in the Americas’.
Washington, DC, March.
La Nación (2006) ‘Roberto Russell: es muy difícil explicar a Kirchner’, La Nación: la
entrevista, 24 September.

Shaw
 Jorge Heine 241

Levitsky, Steven (2008) ‘Argentina: Democracy and Institutional Weakness’, in Jorge

I. Domínguez and Michael Shifter (eds) Constructing Democratic Governance in Latin
America. Baltimore: Johns Hopkins University Press, pp. 99–123.
Lowenthal, Abraham F. and Theodore J. Piccone and Laurence Whitehead (eds) (2009)
The Obama Administration and the Americas: An Agenda for Change. Washington, DC:
The Brookings Institution.
MacDonald, Laura and Arne Ruckert (eds) (2009), Post-Neoliberalism in the Americas.
London: Palgrave Macmillan.
Margheritis, Ana (2007) ‘Argentina’s Foreign Policy and the Promotion of Democracy
in the Inter-American System’, paper delivered at the 48th Annual Meeting of the
International Studies Association, Chicago, 28 February–4 March.
Obama, Barack (2004) Dreams from My Father: A Story of Race and Inheritance. New York:
Three Rivers Press.
Silva, Eduardo (2009) Challenging Neoliberalism in Latin America. New York: Cambridge
University Press.
The Brookings Institution (2008) ‘Rethinking US-Latin American Relations: A Hemispheric
Partnership for a Turbulent World’, Report of the Partnership for the Americas Commission,
November.
Tomlin, Brian W. and Norman Hillmer and Fen Osler Hampson (2008) Canada’s Inter-
national Policies: Agendas, Alternatives and Politics. Toronto: Oxford University Press.
Valenzuela, Arturo and Lucia Dammert (2008) ‘Problems of Success in Chile’, in Larry
Diamond, Marc F. Plattner and Diego Abente Bruin (eds) Latin America’s Struggle for
Democracy. Baltimore: Johns Hopkins University Press, pp. 139–53.
Young, Oran (1989) ‘The Politics of International Regime Formation: Managing
Natural Resources and the Environment’, International Organizations, 43 (Summer).

Shaw
13
What Role for the Private Sector in
Inter-American Multilateralism?
Richard E. Feinberg

Why private sector participation in inter-governmental

diplomacy?

At the core of the inter-American system – the Organization of American

States (OAS) and the Summits of the Americas (SOA) – are inter-govern-
mental institutions. Quite properly, these inter-American institutions are
driven by governments. The region’s democratically elected governments,
as expressions of their sovereign peoples, are entrusted to define and
advance their national interests. State institutions, therefore, are the pri-
mary drafters of OAS and SOA documents and are primarily responsible for
their implementation. This is so also for the Inter-American Development
Bank (IDB) which I treat towards the end of this chapter in the penulti-
mate section as the third, ‘missing’ leg of the hemispheric stool of inter-state
agencies.
At the same time, both the OAS and SOA have sought to involve non-
governmental actors, including academics, non-governmental organizations
(NGOs) and the private sector. From the Summit in Punta del Este, Uruguay
in 1967 (the last summit before the current series begun in Miami in 1994),
there are accounts of consultations with well-known business and labour
leaders and intellectuals. But it was the Miami Summit that first sought
broad-based and sustained involvement of civil society, including the private
sector, in inter-American summitry. The Miami Summit’s Plan of Action
listed ‘initiatives in which public and private sector partnerships play an
important role’, that included, inter alia, hemispheric infrastructure, coop-
eration in science and technology, universal access to education, equitable
access to basic health services, encouraging micro-enterprises and small
businesses, and three partnerships for sustainable development including
sustainable energy use.
In 2006, the OAS General Assembly formally codified and sanctified
OAS and SOA engagement with the private sector, in a resolution entitled

242

Shaw
 Richard E. Feinberg 243

‘Promotion of Private-Sector Participation in OAS Activities’. The OAS

resolved:

To invite the member states to continue the dialogue with the private
sector and to strengthen the means of dialogue with that sector, at the
national level, in OAS activities, and in the Summits of the Americas
process. … To continue supporting the dialogue with the ministers of
foreign affairs before the inaugural sessions of the OAS General Assembly
and the Summits of the Americas. … To continue exploring ways in
which linkages with the private sector may contribute to attainment of
the essential purposes of the Organization, in particular those that relate
to integral development.
(OAS, 2006)

The resolution also urged member states to promote voluntary programmes

on corporate social responsibility.
In fact, there are a number of good reasons to include the private sector
in OAS and SOA activities:

• To render the inter-American system more transparent and accountable

to a wider citizenry and a key component of civil society;
• To engage private sector resources and expertise, especially vital in light
of the severe gap between the many ambitious OAS/SOA mandates and
available public resources with which to realize them;
• To catalyse the private sector to invest in projects that complement OAS/
SOA initiatives and are in harmony with public sector goals and activities;
• To benefit from the ideas and recommendations of the private sector;
• To gain private sector buy-in and support for the OAS/SOA, widening the
constituencies interested in the inter-American system;
• To provide forums in which private sector players from around the
hemisphere can exchange ideas and best practices among themselves,
strengthen their own regional associations, and promote regional integra-
tion and a community of the Americas;
• To conform to what has become an increasingly common practice of for-
mally involving the private sector in multilateral diplomacy, pioneered
by the Asia-Pacific Economic Cooperation Forum (APEC).

Certainly, there are differences between the cultures of private business

and multilateral bureaucracies. They operate on separate calendars, time
horizons, and incentive structures. These differences need to be understood
and taken into account but can and have been overcome in many projects
around the world, and should not be allowed to block mutually advanta-
geous collaborations. Further, as it consults and collaborates with business,

Shaw
244 What Role for the Private Sector?

the OAS does and should regularly engage other components of civil society,
many of whom can join with private firms and government entities in forming
more inclusive and more effective partnerships.
Such partnerships have been instituted and continue to evolve in other
regions, in both the North and South from the UN Global Compact to Africa
and Asia as well as European and hemispheric private–public partnerships
(PPPs). These have increasingly become the focus of analytic and applied
attention (see Utting and Marques, 2009; Utting, 2008). In particular, Utting
(2008) abstracts several distinctive types of contemporary global regulation:
certification schemes, global framework agreements, and standard setting
(see also Utting and Zammit, 2009). Such typologies inform and contrast
with those around international agencies as identified from the hemisphere
in the third section below.

Historical context

Historically, relations with the hemisphere’s private sector have not been at
the core of the OAS’s mission or programmes. The world’s oldest regional
multilateral institution, the OAS, is the premier multilateral political institu-
tion of the Western Hemisphere. The most senior governing body of the
OAS, the General Assembly, consists of the foreign ministers of the 34 active
member states. As the OAS’s primary responsibilities lie in the spheres of
foreign policy and the politics of inter-American relations, its primary rela-
tions have been with member governments and their foreign ministries and
with such inter-American judicial institutions as the Inter-American Court of
Human Rights. Moreover, as over three dozen interviews for this study with
officials of the OAS and executives of the private sector made clear, there are
significant gaps between their respective cultures and incentives. In seeking
to increase its engagement with the private sector, the OAS will have to work
forcefully and creatively to overcome these inherent roadblocks.
Most importantly, today the OAS is desperately short of financial resources,
an essential input into business investment and operations, as member states
for well over a decade have nearly frozen its regular budget in nominal terms –
less than US$ 90 million in 2008 – and hence have allowed it to shrink in
real purchasing power.1 A high percentage of this restricted budget is allocated
to personnel, leaving an even smaller amount for programmatic spending
and much of the programmatic spending is allocated to projects undertaken
by governments or NGOs. Resources available for partnering with business,
therefore, are very modest.
The Summits of the Americas, initiated in Miami in 1994, opened new
horizons for both the OAS as an institution and for engagement of the private
sector in the inter-American System. Summits drew the heads of state and gov-
ernment into an expanded inter-American system, which came to include not
only the OAS and related organs and institutions but also the summits and

Shaw
 Richard E. Feinberg 245

the follow-up ministerial meetings and other specialized working groups. In

Miami and subsequent summits, rather than create new bureaucracies, sum-
mit leaders chose to rely heavily on existing institutions, particularly the OAS
and the IDB (arguably, a component of the de facto inter-American system)
to implement the wide range of summit initiatives. In response, the OAS – its
Secretary General, Permanent Ambassadors and senior management – took
steps to align its agenda to summit mandates, created an internal summit sec-
retariat, increasingly took on responsibilities for the logistics of the numerous
specialized ministerial meetings and for the Summit Implementation Review
Group (SIRG) which oversees summit implementation and drives summit
planning (OAS, 2001, 2004). In addition, the OAS drove creation of the Joint
Summit Working Group which encompasses the major multilateral institu-
tions seeking to foster regional economic development.2 Arguably, during
the 1990s, the improvement in the region’s perceptions of the OAS – of its
relevance and authority – was attributable in significant measure to the summits
and the mandates and procedures passed on to the OAS.
Nevertheless, there have been major problems in the summit process
(Leadership Council for Inter-American Summitry, 1999). Most notable has
been the glaring gap between the many summit pledges and the instrumen-
talities and resources allocated to their implementation.3 There have also been
shortcomings with regard to monitoring and reporting of compliance with
the leaders’ pronouncements. More recently, the hemispheric convergence
of interests and values that the entire enterprise of summitry is based upon
are under challenge by some participating states. The deepening ideological
fragmentation and inter-state tensions plaguing the Western Hemisphere are
particularly damaging to institutions with traditions of consensus governance.
Realistically, summits have a number of functions. They can improve the
chemistry among leaders and their senior staffs and may reduce tensions
among states. They provide an opportunity for leaders to tackle pressing
issues of the moment, as when during the 2004 Monterrey Summit leaders
consulted on the Bolivian political crisis. Similarly, the Port of Spain Summit
in April, 2009 provided a most auspicious opportunity for leaders to address
regional tensions and, if not to restore a full convergence on interests and
values, at least to find some common ground behind specific initiatives of
broad appeal. Port of Spain offered the new US president, Barack Obama,
the opportunity to meet the broad range of hemispheric leaders early in his
administration, and to present the new face of American diplomacy – less
confrontational, more multilateral, more collaborative (Feinberg, 2009a).
Despite its inherent institutional and financial limitations, over the years
the OAS has accumulated a surprisingly large number of programmes that
engage the hemisphere’s private sector. These programmes are directed from
several OAS entities including: the OAS’s Executive Secretariat for Integral
Development (SEDI) and its various specialized offices; the OAS-affiliated
Pan American Development Foundation whose programmes systematically

Shaw
246 What Role for the Private Sector?

include private sector partners; the OAS-affiliated Trust of the Americas

which was established in 1997 explicitly to promote private participation in
projects that reflect the principal goals of the OAS; and the Young Americas
Business Trust. Sector-specific commissions, including the Inter-American
Telecommunications Commission (CITEL) and the Inter-American Committee
on Ports (CIP), also engage interested private firms. These activities are impres-
sive in their creativity and in their resourcefulness in the face of very restricted
resources, and frequently address the hemisphere’s most urgent needs.
In 2005 the OAS also began to experiment with convening a Private Sector
Forum (PSF) just before the annual General Assembly. The PSF is organized
jointly by the OAS, the host government, and the Private Sector of the
Americas, an association of private sector leaders created in large measure to
assist in this event. The OAS also intends the PSF to build bridges between
the organization and the hemisphere’s private sector, to help promote
public–private dialogue, and to help catalyse concrete initiatives to promote
PPPs as a tool for development. A PSF also met just prior to the Fourth
Summit of the Americas in Argentina in 2005 and convened again just prior
to the Fifth Summit of the Americas in Trinidad and Tobago.

Public–private partnerships: A strategic development tool

Public–private partnerships, in their diverse forms, offer a major set of mecha-

nisms to help the OAS and inter-American summitry realize their core missions.
Summit declarations and private sector consultations have repeatedly called
for PPPs, and OAS programmes are actively engaged in their formation. For
example, SEDI’s Department of Trade and Tourism’s project, ‘Public–Private
Partnerships for Workforce Development’, is examining successful cases of PPPs
that match worker training and the requirements of the labour market, in order
to elaborate guidelines to promote PPPs for human capital development.4
Broadly speaking, there are two categories of PPP:

1 Cooperation between public authorities and the private sector in order to ensure
the financing, construction, renovation or management of physical infrastruc-
ture. These PPPs may take a number of forms: management and service
contracts, leasing, concessions, and build-operate-transfer (BOT) contracts.
A study by the Pacific Economic Cooperation Council (PECC), a predecessor
and observer to the APEC process, concluded that successful PPPs require
trust and cooperation among the parties, a clear definition of the roles of
all stakeholders involved, transparency of procedures, performance evalu-
ation criteria, review mechanisms, and a framework for the settlement of
disputes (PECC, 2006).
2 Cooperation across sectors to address social issues. Cross-sector social-oriented
partnerships (CSSPs), often involving civil society organizations as well
as public and corporate entities, address challenges such as education,

Shaw
 Richard E. Feinberg 247

healthcare, community capacity building, and environmental sustainability

(Selsky and Parker, 2005). In the corporate social responsibility realm, CSSPs
are typically voluntary partnerships where each partner retains organiza-
tional autonomy while bringing a unique value, expertise, or legitimacy
to the alliance. The PPPs sought by the OAS and inter-American summitry
often fall within this category.

For either category of PPP, public policy plays a critical role in establishing
an enabling framework. Governments can provide regulatory stability and
predictability, and a legal framework for contract enforcement and remedies.
Governments can catalyze PPPs through their powers of persuasion and
convocation, education and training, and through fiscal and other monetary
incentives. Governments can set standards and encourage monitoring, evalu-
ation, and public reporting of PPPs. For example, the Multilateral Investment
Fund (MIF) of the IDB is preparing a project to help the government of
Trinidad and Tobago to promote PPPs in infrastructure, by strengthening its
capacity to design and regulate PPP project performance.

Building on best practices

In light of such programmes and lessons learned from best practices, there
are a number of steps that the OAS and the inter-American system can take
to promote PPPs, building on valuable existing programmes. In particular,
Summits offer a special opportunity to bring together public and private
actors, and to motivate them to participate in the implementation of initia-
tives that arise in the high-profile summit context. The summitry process
(as will be discussed at greater length below) contains a number of follow-up
mechanisms, including ministerial meetings and possibly issue- and sector-
platforms, which can cultivate PPPs.
In this regard, it is important to take into account the Inter-American
Development Bank, notably its Multilateral Investment Fund (MIF), which
is already engaged in promoting PPPs and has the huge advantage of com-
manding large budgets that facilitate dialogues with governments and that
offer incentives to private firms.5 Therefore:

• In seeking to encourage the formation of PPPs, the OAS should seek to coor-
dinate initiatives and programmes with the Inter-American Development
Bank (IDB). To encourage such coordination, leaders at the Summit should
set it in motion, and the top management of both institutions should
establish strong inter-agency mechanisms that foster programmatic
collaboration between the two Washington, DC-based institutions.
• Together, the OAS and IDB can encourage member states to establish
well-designed enabling frameworks that facilitate the formation of PPPs.
Frameworks can apply to the national and local levels of government,

Shaw
248 What Role for the Private Sector?

provide for legal and administrative transparency, encourage an equitable

sharing of risk, and provide for positive and realistic incentives for all parties.
Programmes of technical assistance and seminars that focus rigorously on
specific sectors (e.g. infrastructure, energy, ICT, health, education) can be
useful in spreading best practices.
• Sharing of best practices can be stimulated through interactive databases
and regional and national workshops, and by exposing the experiences
of more advanced economies in Latin America to other member states.
Exchanges with Europe and Asia, where PPPs are commonplace, could
also be beneficial. The IDB’s extra-hemispheric membership can be use-
ful in this regard. Also, experts from the World Bank, Asian Development
Bank, and OECD can be usefully engaged.
• Tripartite dialogues – government, business, civil society – can be par-
ticularly fruitful, as each brings to the table a specific set of resources and
expertise, as well as its own constituencies and legitimacy-enhancing rep-
utations. Many non-governmental organizations have built track records
of experience in such tripartite partnerships, often linked to corporate
social responsibility practices.
• The Summit of the Americas, and the preceding Private Sector Forum
(PSF), can stimulate the formation of PPPs around summit mandates.
The agenda of the Private Sector Forum in Port of Spain highlighted
and encouraged firms to perceive the advantages of PPPs (see Feinberg,
2009b). Ideally, in the interaction between representatives of the PSF and
senior government officials, private firms will commit to forging PPPs
around summit mandates, and the official interlocutors will embrace
their participation and direct their ministries to follow up with atten-
tion, resources, and durable implementation mechanisms. Follow-up
mechanisms can include monitoring and evaluation of PPPs, providing a
public visibility that will encourage the sharing of best practices and the
participation of a widening number of firms in constructive PPPs.

Summits of the Americas and the private sector

The periodic Summits of the Americas are the highest form of regional
multilateralism in the Western Hemisphere, as they assemble the leaders of
the states to engage in collective decision making. Initiated in their current
form in Miami (1994), subsequent summits have been held in Santiago,
Chile (1998), Quebec, Canada (2001), Monterrey, Mexico (2004), Mar del
Plata, Argentina (2005), and Trinidad and Tobago (2009). Institutionalized
summitry involves not only these periodic meetings of state leaders but also
related implementation mechanisms (secretariats, oversight instruments,
working groups, ministerial meetings, conferences, projects, consultative
groups, multi-stakeholder partnerships), which provide organic continuity
between summits.

Shaw
 Richard E. Feinberg 249

The 1994 Miami Summit engaged the private sector by proposing an

initiative of great interest to business: the negotiation of a Free Trade Area
of the Americas (FTAA), a concept that the private sector (among others)
had formally proposed during pre-Summit consultations (Katz and Fisher,
1995). The private sector had a strong self-interest in the FTAA process, as
business would gain freer access to expanding markets for their goods and
services. After Miami, the ministers of trade began to meet regularly and
on an annual basis convened a private sector forum for business executives
that preceded the ministerial meeting. The early forums gathered a large and
enthusiastic number of senior executives who would break out into working
group sessions and present formal recommendations to the ministers. Of
course, with the suspension of the FTAA negotiations, these trade-related
forums no longer occur. But what the FTAA experience demonstrated is that
the private sector will come – if there is a strong enough agenda that engages
its interests.
The strategy of linking trade negotiations to a strong private sector
presence has also been manifest during some negotiations for free trade
agreements. For example, during the negotiations for the US–Central
America FTA (CAFTA-DR), countries typically included significant numbers
of business executives in their delegations. While ministers maintained
leadership in the negotiations, many incorporated private sector sugges-
tions into their bargaining positions. The CAFTA-DR negotiating sessions
also provided opportunities for business executives to network among
themselves and to formulate common positions, notably for sector-specific
items on the negotiating agenda.
The OAS asserted an active presence in these trade-related initiatives by
joining the IDB and the UN Economic Commission for Latin America and
the Caribbean (ECLAC) to house a Tripartite Commission that boasted a
strong professional staff, maintained valuable databases, and published
expert studies. As already noted, informed by cases in Latin America, Peter
Utting (Utting and Marques, 2009; Utting and Zammit, 2009) has proposed
typologies of different PPPs or certification, standards, processes etc.
The Port of Spain Summit Declaration of Action contains many initia-
tives that could potentially be of great interest to a very wide range of business
sectors. The coherence among OAS programmes, Summit of the Americas
mandates, and private sector engagement, now require a thorough review.
Summit mandates come from the leaders who, after all, are the principals
to whom the foreign ministers and the OAS permanent representatives and
ambassadors must report. At the same time, it is in the interests of the OAS
to take ownership of the Summit and to identify with its authoritative decla-
rations, many of which will be of great interest to the private sector and can
help to catalyze PPPs. This review for coherence among OAS programmes
should be led by the Secretary General and the Permanent Council, with
support from the OAS Summit Secretariat.

Shaw
250 What Role for the Private Sector?

Pre-summit consultations

The OAS organizes two series of opportunities for private sector inputs into
the summit agenda, as with other components of civil society: a series of
pre-summit consultations, which for businesses are organized at the regional
level; and the Private Sector Forum immediately prior to the summit itself.
Since summit documents are largely complete prior to the PSF, the earlier
series of consultations offers more propitious opportunities for actually
influencing the summit drafts.
The OAS General Secretariat, through its Department of Trade and
Tourism (DTT), and the Summits of the Americas Secretariat, in coordi-
nation with the Trinidad and Tobago National Secretariat for the Fifth
SOA, organized a series of consultations with various regional and sub-
regional business associations including: the Caribbean Association of
Industry and Commerce (CAIC); the Federation of Chambers and Industry
Associations of Central America (FECAICA); the Federation of Chambers
of Commerce of Central America (FECAMCO); the Economic-Social
Consultative Forum of Mercosur (FCES); the Council of the Americas; the
Andean Consultative Business Council; the Latin American Organization
for Micro, Small and Medium Enterprises (OLAMP); the Business Council
of Latin America (CEAL); and the Business Technical Advisory Committee
on Labour Matters (CEATAL). Inputs were collected and distributed to
member countries, and private sector representatives were invited to make
a presentation at a SIRG preparatory session in Sonsonate, El Salvador on
11–12 December 2008.6
However, this robust series of pre-summit consultations is not adequately
wedded to the PSF. No doubt the organizers of the PSF take into account
the pre-summit soundings in drafting the agenda for the PSF. But more
could be done to knit the two mechanisms together. For example, the
various business associations consulted during the pre-summit meetings
might be asked to organize one or more of the PSF panel discussions. There
might also be an opportunity at the PSF for business leaders to compare
and contrast their earlier recommendations with the final summit texts;
where their recommendations successfully found their way into the sum-
mit texts, the private sector could focus on next steps, such as the roles the
private sector could play in further advancing their proposals, including
through summit-established mechanisms, in their implementation at
the regional and national levels. As such the Private Sector Forum should
move forward to identify specific PPPs, linked to the final summit text.
A cross-cutting theme of the PSF, of its keynote speakers and panellists,
could be the usefulness of PPPs in driving summit initiatives. The PSF
would not, itself, attempt to implement projects (it lacks the means to do
so); rather, it would seek to identify summit initiatives where private firms
might usefully engage, and partner with national or regional agencies, to

Shaw
 Richard E. Feinberg 251

catalyze the formation of such PPPs. Where appropriate, the collaborative

roles of the OAS and IDB should be underscored (more on this below).

OAS engagements with the private sector

The OAS has several entities and affiliated bodies that engage with the
private sector through dialogue and projects. These include its Executive
Secretariat for Integral Development (SEDI), three non-profits – Pan-American
Development Foundation (PADF), the Trust of the Americas, and the Young
Americas Business Trust (YABT) – and the sector-specific CITEL and Inter-
American Committee on Ports.
In 2008 SEDI had a budget of US$ 47.1 million, nearly one-third of the
OAS’s total budget.7 An umbrella secretariat, SEDI houses the departments
of social development and employment, sustainable development, science
and technology, education and culture, human development, and trade and
tourism. Among SEDI’s key missions is to promote multi-sector dialogue
and PPPs, and the secretariat is charged with maintaining relationships with
organizations of the private sector and civil society that work on integral
development. To varying degrees, SEDI’s component departments engage
private firms in their programmes and projects. To cite a few examples: the
Department of Science and Technology partners global high-tech firms in
the Engineering for the Americas education programmes; the Department
of Social Development and Employment includes the regional employer
organization, CEATAL, in forums on labour and employment issues; and the
Department of Sustainable Development has held dialogues with the private
sector on energy strategies; the Department of Trade and Tourism organizes
the OAS Private Sector Forums in the context of the General Assemblies and
Summits of the Americas.
However, the general orientation of most SEDI programmes is towards
member government agencies and other multilateral institutions, with a lesser
focus on the private sector. In conversations with the staff of SEDI depart-
ments, there was a clear awareness of the challenges inherent in a public
sector development agency seeking to engage the private sector with its for-
profit paradigm. Nevertheless, among SEDI staff there was also a widespread
interest in more coherent and enhanced engagement with the private sector
and confidence that there exist many opportunities for mutual benefit.
In 2003, the OAS/SEDI signed a pioneering cooperation agreement with
Forum Empresa, a non-profit association of some 19 national organiza-
tions in the Western Hemisphere dedicated to promoting corporate social
responsibility among its private sector membership. Through this partner-
ship, the OAS/SEDI, in conjunction with the Multilateral Investment Fund
(MIF) of the Inter-American Development Bank (IDB), contributed with
Forum Empresa in a joint project for the promotion of CSR within small and
medium-sized enterprises (SMEs) in Latin America. Through this partnership,

Shaw
252 What Role for the Private Sector?

Forum Empresa was able to develop a CSR methodology and supporting

materials as well as a network of businesses interested in promoting CSR that
today numbers some 4000 firms. In addition, SEDI has scaled this initiative
to the Caribbean region and has successfully stimulated the creation of CSR
national associations within the five participating Caribbean countries.
Founded in 1962, the Pan-American Development Foundation is a US 501
(c)(3) non-profit organization affiliated with the OAS. Its primary donor is
USAID. Expenses in fiscal year 2007 were US$ 47.7 million. The private
sector is well represented on PADF’s board and advisory committee. Partners
include the Association of American Chambers of Commerce in Latin
America (AACCLA), and many projects engage corporate partners (PADF’s
2007 Annual Report lists 34 corporate donors and partners). The Foundation
aims for a 1:1 leverage ratio from partners (business, NGOs, and govern-
ments) and staff estimate that the private sector (corporate and individual)
contributes, in cash and in-kind, roughly US$ 7 million per annum to joint
projects. Projects that include significant corporate participation include
the Disaster Management Alliance, the Disaster Management Emergency
Response Programme, Joining Hands for El Salvador, and various education
programmes. PADF also offers to assist firms with strategic corporate social
responsibility programmes through services such as media strategies, govern-
ment relations, and business development and that include evaluation,
monitoring, and reporting.
Also a non-profit affiliated with the OAS, the Trust of the Americas was
established in 1997 to promote private sector and other public sector partici-
pation in OAS development projects. The Trust’s board of directors includes
leading executives from prominent companies, and its website lists 17 private
sector partners. In 2006–7 the Trust averaged just under US$ 2m in adminis-
trative and project expenses. Trust projects that include significant corporate
participation include Partnerships in Opportunities for Employment through
Technology (POETA) and Promoting a Culture of Labour Rights Compliance.
Also, the Trust/OAS presents an annual corporate social responsibility award
to a worthy private firm: past winners include Chrysler, for a programme
that promoted sustainable development in the Brazilian rainforest; Conoco
Philips, for a public, private and not-for-profit collaboration benefiting
small-scale fishermen in the Gulf of Paria, Venezuela; and Pantaleon, for a
programme to benefit worker families in Guatemala.
Another more recent non-profit is the Young Americas Business Trust
(YABT), which is grouped within OAS/SEDI. In part, the YABT is a response
to declarations at Summits of the Americas addressing private sector engage-
ment in development and the employment of young people. With an
annual core project budget of about US$ 2 million (short of original aspira-
tions), the YABT seeks to promote entrepreneurship among young people
through a network of national chapters. With the support of the Canadian
International Development Agency (CIDA) and its partnership with SEDI,

Shaw
 Richard E. Feinberg 253

the YABT promotes corporate social responsibility in small and medium

enterprises, notably in the Caribbean.
Other specialized OAS activities that include significant interface with
the private sector are the Inter-American Committee on Ports (CIP) and the
Inter-American Telecommunications Commission (CITEL). CIP includes port
authorities among its member state institutions, and the lead objective of its
2008–11 Action Plan is ‘to assist in the strengthening of hemispheric port
competitiveness by promoting complementarity between the public and
private port sectors.’ For its part, CITEL seeks to promote common telecom
standards and effective public-policy frameworks, and its 200 associate
members include many private telecommunications associations and firms.
This is an impressive array of programmes engaging with the private sector.
As is so often the case with development assistance programmes, while many
of these activities are worthy, their capacities to impact member country
development programmes are clearly constrained by their modest budgets
and, it seems, limited abililty to leverage private sector resources. Inevitably,
the variety of the programmes, especially in contrast to the available resources,
raises questions of administrative and programmamatic fragmentation, even
as SEDI extends its umbrella over a number of them. It is uncertain whether
the various projects build in sufficient capacity for replication and scaling up,
and thereby for engaging a wider universe of private sector firms.
This review of internal OAS programmes suggests the following findings
and recommendations:

• Across its various programmes, OAS engagement with the private sector
would benefit from coordinating, synergistic structures, the imposition
of some common disciplines and guidelines, and the systemic sharing
of information and plans. From the viewpoint of the private sector, such
institutional discipline would facilitate engagement. Private firms would
see a more purposeful, focused inter-American system, easier to navigate
and more partner-friendly. There would be more added value with less
administrative strain.
• As a concept that has gained increasing currency in the Western
Hemisphere and has been incorporated into a number of valuable OAS
programmes, corporate social responsibility (CSR) could be given greater
visibility and centrality in a variety of OAS development programmes.
By building on existing programmes, the OAS could further strengthen
its relations with the many national CSR associations in member states,
thereby facilitating the attraction of private firms to OAS programmes.
• In addition to including private firms on programme advisory boards, as
is already the case, the OAS should consider the creation of an institution-
wide private sector advisory board or commission (more on this later).
• The Hemisphere could both learn from and contribute to comparative PPPs
in other regions, both South and North (see Utting and Marques, 2009).

Shaw
254 What Role for the Private Sector?

Intensifying OAS and business interaction: Optional

frameworks

Interviews with leaders from the private sector and from other multilateral
institutions, and the experiences of other multilateral entities, suggest the value
of institutional mechanisms that provide for two-way channels of communi-
cation between the OAS, and specifically the office of the Secretary General,
and the business sector. For the OAS, such mechanisms would promise regular
business input while channelling private sector support for the institution’s
own priorities and programmes. There are several possible mechanisms for
private sector engagement with the OAS. The weightiest is the APEC model.
The least complex is an informal advisory board. An intermediary option is the
formation of a standing, representative, private sector committee.

Option 1: The APEC/ABAC model

APEC has been a pioneer among regional multilateral organizations in
institutionalizing a private sector role (see Feinberg, 2009c). In 1995 APEC
officials created the APEC Business Advisory Council (ABAC) to provide
them with a business perspective and to respond when the various APEC
ministerials and working groups requested information about business-related
issues (Mullen, 2003; see also Feinberg, 2000). ABAC comprises up to three
members of the private sector from each economy (hence up to 63 members
from the 21 APEC members). ABAC members are appointed by their respec-
tive governments, represent a range of business sectors, including small and
medium enterprises, and typically serve for three years. ABAC maintains
a modest secretariat in Manila, the Philippines, meets quarterly, and sub-
mits a detailed annual report to APEC officials with recommendations on
a range of issues of interest to business. Each year ABAC members engage
in an informal, face-to-face dialogue with APEC leaders. Consequently, busi-
ness leaders perceive a self-interest in deep engagement in ABAC/APEC, in
spending time and resources in attending meetings and helping to prepare
detailed reports, and in some cases in engaging in sector-specific working
groups (in chemicals, life sciences, transport security) that focus on projects and
programmes of interest to business.
The ABAC model is more state-centric than would be appropriate for
the Western Hemisphere where civil society and the private sector exercise
greater autonomy. But the concept of a standing private sector body, with
the authority and capacity to meet periodically, provide regular business
input, and to track implementation of their proposals, is deserving of
consideration. Issues to be considered would include funding and staffing,
selection of representation, and the modalities of interaction with official
OAS and summit bodies. Certainly, business executives willing to devote
significant energies to such an endeavour would anticipate meaningful
access to public sector decision makers.

Shaw
 Richard E. Feinberg 255

Option 2: Formal private sector commission

The OAS could draw on the APEC/ABAC model of a standing private sector
entity, but one tasked with a less elaborate and less costly set of activities.
More in keeping with Western Hemisphere realities, membership could be
a combination of representatives of existing, independent regional and sub-
regional business associations (such as those consulted during the summit
preparatory process) supplemented by leading CEOs appointed by the OAS
Secretary General in consultation with member governments. Additional
members might well be drawn from the boards of standing OAS-affiliated
programmes. Activities of such a commission would include substantive
inputs into OAS programmes and meetings, including general assemblies
as well as the PSF and summits. In return, members would be expected to
partner in OAS programmes and summit initiatives and to help disseminate
information and participation in such activities among their peers and
in their respective business associations. Members would serve as bridges
between the OAS and the business world. Among issues to consider: funding
and staffing would still be necessary, and clarification of the selection proc-
ess and member responsibilities might be matters for the OAS Permanent
Council.

Option 3: Informal SG advisory group

The OAS Secretary General could ask a number of corporate executives in
whom he has confidence to serve as his informal advisors on matters that
he considers important and relevant to the private sector. On occasion, the
Secretary General could ask them to prepare brief papers on specific topics; they
might be convened once or twice a year, as deemed necessary. They would
offer input prior to general assemblies and summits, but they would not
have primary responsibility for representing the private sector in preparing
such conclaves. Individually, participants might be interested in partner-
ing in OAS programmes and assisting in OAS outreach to their peers in
the private sector. The obvious advantage of this option is its low cost and
simplicity. Conceivably, it could be paired with either of the two previous
options.
Thinking fully outside of the box, the OAS could partner with the IDB
in constructing any one of these three options. The IDB and its president
would also be well served by strengthening ties to the Hemisphere’s private
sector. From the viewpoint of the private sector, interacting at the same time
with both pillars of the Inter-American System would likely be efficient and
attractive. Simultaneously addressing the leading political and economic
institutions of the Hemisphere could also foster a more holistic perspective
on regional problems. Certainly, both the OAS and IDB have come to recog-
nize that the development challenge demands an approach that integrates
economics and politics, just as it requires partnerships between the public
and private sectors.

Shaw
256 What Role for the Private Sector?

The Inter-American Development Bank: The missing partner

In contrast to the stringent treatment accorded to the OAS, member states

doubled the capital base of the Inter-American Development Bank in 1994
to US$ 100 billion and at the time of writing were considering yet another
major increase in lending capacity. The governors of the IDB are members’
ministers of finance or development. For the private sector, therefore, the
IDB’s resources and senior governors are natural attractions.
Yet, the OAS and the summitry process have struggled to fully engage the
IDB. There is an inherent tension between institutions that are governed,
respectively, by political ministries and economics ministries. Indeed, the IDB
has resisted submission to the summitry process, even as important compo-
nents of Bank programmes do share summit preferences and the growth of
some IDB programmes can be attributed to summits (Feinberg, 2006).
Notwithstanding these cleavages, if mechanisms can be found to increase
cooperation between the OAS and IDB, especially with regard to their
engagements with the private sector, there is room for mutual advantage
among these fundamental pillars of the de facto inter-American system.
Cooperation is ongoing in some areas but much more could be done. The
draft Declaration of Commitment of Port of Spain calls upon the IDB, as a
member of the Joint Summit Working Group, to strengthen its commitment
and to develop coordinated programmes of action to deliver summit goals.
To do so, the OAS and IDB should reach an understanding, formalized
in a new Memorandum of Understanding (MOU), enumerating areas and
programmes for cooperation. Special attention should be paid to implemen-
tation of SOA mandates and the formation of related PPPs, and both institu-
tions should report on how current and planned programmes support these
goals. The MOU should invite the IDB to participate more fully, along with
the interested private sector, in the various specialized ministerial meetings
organized by the OAS. The MOU should encourage broad inter-institutional
cooperation, from the top leadership down to the functional offices. The
MOU should also open doors to greater IDB participation in the planning
of summits, and explore collaboration in the mounting of private sector
forums. Importantly, the MOU should facilitate IDB financial support for
effective OAS programmes of mutual interest.
In short, notwithstanding its historic private sector concentration and
limited communication with civil society, the IDB could benefit from the
experience of both the OAS and UN in PPPs (see Utting and Marques, 2009).

Conclusions: The way forward

The Organization of American States and the private sector are not a natural
fit. The OAS is primarily a political body responsive to ministries of foreign
affairs and is struggling under severe budget constraints. Nevertheless, over

Shaw
 Richard E. Feinberg 257

the years the OAS has built a number of innovative programmes that engage
the private sector, including PPPs. More recently, the OAS has added the
Private Sector Forum as an instrument to engage the private sector in its
development dialogue.
The Summit of the Americas and its follow-up mechanisms offer power-
ful instruments for elevating OAS engagement with the private sector to
much higher levels. The Port of Spain Summit declaration contains many
proposed initiatives congruent both with OAS objectives and private sector
interests; it is important for the OAS to take charge and to partner other
institutions in implementing important portions of that economic agenda.
In 1959, the OAS gave birth to the Inter-American Development Bank,
and it is time that the two Washington, DC-based agencies become strategic
partners, forging a genuine political economy paradigm for development.
Together, the OAS and IDB can make the encouragement of PPPs a common
focus, assisting members to create enabling frameworks that promote both
infrastructure and social-oriented partnerships. Together, the two pillars of the
inter-American system can gather the expertise, resources and leverage neces-
sary to provide the value that will attract the interests of the private sector.
To optimize its capacity to engage the private sector and to leverage the
profile and mandates of summitry, the OAS should strengthen its internal
organization, take full advantage of the maturing Private Sector Forum, and
build a new mechanism to formalize a permanent dialogue with private
sector leaders.
Taken together, these recommendations can help to more effectively
engage the private sector in the inter-American dialogue and agenda for sus-
tainable development and in the implementation of summit mandates. The
2009 Summit of the Americas and follow-up activities can serve to launch
specific initiatives and new mechanisms for the forging of PPPs, while
strengthening the core institutions of the inter-American system and their
relations with the Hemisphere’s private sector and each other.
The progress noted in engaging the private sector has occurred despite
the long-standing ambivalence in many foreign ministries and some
governments regarding the political legitimacy and representativeness of
their national private sectors. Some foreign ministries see themselves as
more reflective of a national interest than self-interested and more narrowly
focused private firms. Some governments question whether the private sector
should play more than a subordinate role in national economic life. These
conflicts, deeply rooted in Latin American institutions and society, have
taken on greater force with the re-emergence of nationalistic populism in
some countries. Without doubt, these ideological cleavages make consensus
more difficult to achieve; the refusal of some countries to ratify the official
Summit communiqué in Trinidad and Tobago signalled these deep fractures.
Nevertheless, engagement by the inter-American system with the private
sector has occurred and will continue. Most countries are pursuing an

Shaw
258 What Role for the Private Sector?

economic development strategy guided primarily by the market and private

sector investment; most countries, to varying degrees, advocate PPPs in an
expanding array of economic and social sectors. And even in those countries
where political leaders routinely criticize capitalism and call into question
the patriotism of private investors, a space remains for private investors
(with preferences for those with connections to political authorities) and
for PPPs, and governmental entities remain unable to meet basic socio-
economic needs without the participation of private firms.
In turn, the proliferation and sophistication of such PPPs implies the
imperative of developing innovative forms of diplomacy. The OAS must
begin reaching out from the established ‘club’ to what Jorge Heine (2006)
has characterized as ‘network’ diplomacy, and engage with myriad, hetero-
geneous actors.
At the inter-American level, many of the activities outlined in this chapter
benefit from their own constituencies and built-in bureaucratic inertia. Often,
governments favourable to these programmes can support them with ear-
marked funds. Looking ahead, interested governments can form coalitions to
advance specific initiatives of mutual interest, pursuing an ad hoc functional
multilateralism; for example, governments that wish to cooperate on energy
can work together on promoting sustainable investments, while other govern-
ments interested in targeted social programmes can share best practices on
conditional cash transfers (e.g. linked to school attendance); multilateral
institutions can provide a blanket of inter-American legitimacy for such
initiatives by endorsing them in a very general way, leaving active participa-
tion and the more detailed programmatic design to voluntary associations.
Public–private partnerships can contribute to these functional alliances.
Ideological cleavages at the level of grand strategy should not block creativity
at the level of practical programmes that bring together the core competen-
cies of public and private actors to advance inter-American cooperation.

Notes
This chapter draws on a report prepared for the Organization of American States
(OAS), Department of Trade and Tourism, ‘Private Sector Participation in the Inter-
American System and in the Summits of the Americas: Strengthening Dialogues,
Catalyzing Actions’, March, 2009.

1. Indeed, the OAS’s own Board of External Auditors has issued this warning: ‘The
Board feels that this is a very critical time for the future of OAS. If the Member
States do not begin to take this looming budgetary crisis seriously, within a few
years, OAS will no longer be able to continue, without dramatic cutbacks in
programs and activities’ (OAS, 2007, p. 16).
2. The membership of the Joint Summit Working Group includes, in addition to
the OAS: Inter-American Development Bank (IDB), UN Economic Commission
on Latin America and the Caribbean (UN ECLAC), Pan-American Health
Organization (PAHO), Inter-American Institute for Cooperation on Agriculture

Shaw
 Richard E. Feinberg 259

(IICA), Central American Bank for Economic Integration (CABEI), Andean

Development Corporation (CAF), Caribbean Development Bank (CDB), World
Bank, International Organization for Migration (IOM), International Labour
Organization, and the Institute for Connectivity in the Americas (ICA).
3. Unfunded mandates are a common problem in global governance; see Simmons
and Oudraat, (2001).
4. Case studies are available at ⬍http://www.sedi.oas.org/dttc/comp/⬎.
5. For a review of 10 PPP projects by the IDB’s Multilateral Investment Fund, see
Bloomgarden and Maruyama (2008).
6. The OAS also posted the various inputs on the Internet: ⬍http://www.sedi.oas.
org/dttc/psf/TandT/About_e.asp⬎.
7. SEDI’s 2008 budget of US$47.1 million included US$20.2 million from the regular
fund, US$20.9 million from special funds and US$6.0 million from the volun-
tary fund. The OAS’s total appropriations for 2008 of US$157.3 million included
US$87.5 million from the regular fund, US$63.8 million from special funds and
US$6.0m from the voluntary fund. In 2008, the country quota assessments for
the regular fund totaled US$78.4 million and included: for the US US$45.7 mil-
lion, Canada US$10.6 million, Brazil US$6.4 million, Mexico US$5.0 million and
Argentina US$3.7 million.

References
Bloomgarden, David and Asako Maruyama (2008) Infrastructure and Public–Private
Partnerships in Latin America and the Caribbean, MIF Retrospectives, September.
Feinberg, Richard (2009a) ‘The Eclipse of the Americas’, ForeignAffairs.com, 5 May.
Available at, http://www.foreignaffairs.com/articles/65081/richard-feinberg/the-
eclipse-of-the-americas.
Feinberg, Richard (2009b) ‘Promoting Private Sector-Led Prosperity’, Summary of the
Private Sector Forum Panel Discussions and Keynote Addresses, Hemispheric Private
Sector Forum, Port of Spain, Trinidad and Tobago, 15–16 April. Available on www.
oas.org.
Feinberg, Richard (2009c) ‘Private Sector Participation in Inter-American Summitry:
From Inputs to Outputs’, paper submitted to FOCAL/Inter-American Dialogue
Workshop, Washington, DC.
Feinberg, Richard (2006) ‘Presidential Mandates and Ministerial Institutions: Summitry
of the Americas, the OAS and the IDB’, Review of International Organizations, Vol. 1,
pp. 69–94.
Feinberg, Richard (2000) ‘Comparing Regional Integration in Non-Identical Twins:
APEC and the FTAA’, Integration and Trade, Vol. 4, No. 10, pp. 3–30.
Heine, Jorge (2006) ‘On the Manner of Practising the New Diplomacy’, CIGI Working
Paper, No. 11, October. Available at http://www.cigionline.org/publications/2006/10/
manner-practising-new-diplomacy.
Katz, Julius and Robert Fisher (1995) ‘Agenda for the Americas’, reprinted in Robin
Rosenberg and Steve Stein (eds), Advancing the Miami Process: Civil Society and the
Summit of the Americas. Miami: North-South Center Press, 1995. Paper commis-
sioned by the Association of American Chambers of Commerce in Latin America,
the Chamber of Commerce of the USA, and the Council of the Americas.
Leadership Council for Inter-American Summitry (1999) Mastering Summitry: An
Evaluation of the Santiago Summit of the Americas and its Aftermath. Coral Gables:
North-South Center Press.

Shaw
260 What Role for the Private Sector?

Mullen, Michael (2003) ‘Business Involvement in APEC’, in Richard E. Feinberg (ed.),

APEC as an Institution: Multilateral Governance in the Asia-Pacific. Singapore: Institute
of Southeast Asian Studies, pp. 199–214.
OAS (2001) ‘Restructuring the Organization of American States to Address the
Challenges of the Summit Process in Response to Resolutions AG/RES 1812, 1824,
1936 and 1839’, CP/doc.3537/01, December. Washington, DC: OAS.
OAS (2004) ‘Advancing in the Americas: Progress and Challenges’, in Summit Report
2001–2003. Washington, DC: OAS.
OAS (2006) ‘Promotion of Private-Sector Participation in OAS Activities’, Organization
of American States, AG/RES. 2244, XXXVI-0/06. Washington, DC: OAS.
OAS (2007) OAS: Annual Audit of Accounts and Financial Statements, Organization of
American States. Washington, DC: OAS.
PECC (2006) Guidelines for Effective Public Private Partnerships. Pacific Economic
Cooperation Council, Singapore: PECC.
Selsky, John W. and Barbara Parker (2005) ‘Cross-Sector Partnerships to Address Social
Issues: Challenges to Theory and Practice’, Journal of Management, Vol. 31, pp. 849–73.
Simmons, P. J. and C. de Jonge Oudraat (2001) Managing Global Issues: Lessons Learned.
Carnegie Endowment for International Peace. Washington, DC.
Utting, Peter (2008) ‘Rearticulating Regulatory Approaches’, in Volker Rittberger
and Martin Nettesheim (eds) Authority in the Global Political Economy. Basingstoke:
Palgrave Macmillan.
Utting, Peter and Jose Carlos Marques (eds) (2009) Corporate Social Responsibility
and Regulatory Governance: Towards Inclusive Development. Baskingstoke: Palgrave
Macmillan.
Utting, Peter and Ann Zammit (2009) ‘UN-Business Partnerships’, Journal of Business
Ethics, 90, pp. 39–56.

Shaw
14
Conclusion: The Fragile Legitimacy
of Inter-American Institutions
Gordon Mace and Jean-Philippe Thérien

In this concluding chapter, we start with a brief summary of the main

conclusions arrived at by the contributors to the volume regarding the per-
formance of hemispheric and sub-regional institutions over the past 15 or so
years. We then argue that an uneven performance raises a question concerning
the legitimacy of regional institutions in the Americas. Finally, we look at
possible ways to improve the performance of hemispheric regionalism and
offer some ideas on the immediate future of the regionalist project.

A mixed record

In a global environment where some believe there is now a ‘democratic

regression’ and even a ‘freedom recession’ (Burnell, 2010, p. 1), having helped
establish a democracy regime for the Americas is probably the most impor-
tant contribution of the OAS and hemispheric regionalism since 1990. As
pointed out by Thomas Legler in his contribution to the volume, the OAS
was able to develop a set of norms that may not have been perfect but that
nevertheless played a central role in consolidating the democratic rule in
the hemisphere. However, the Americas of 2010 are quite different from the
Americas of the 1990s. Diana Tussie shows that the new regional environ-
ment is now one of ‘fuzzy boundaries’ and contending projects. Despite
conflicting signals concerning the future of the democracy regime in the
Americas and the difficulty of defending democracy without a consensus
on the meaning and practices of democracy, Legler believes that enduring
gains have been made, such as opposition to coups, but that more needs to
be done to increase democratic capacities. In this sense, the major challenge
for the OAS and the democracy regime in the future will be to deal with ‘less
conspicuous threats’ to democracy such as manipulation of courts and elec-
toral systems, and other forms of abuse of power (Boniface, 2009, p. 194).
A great leap forward would be made if all regionalist projects in the Americas
incorporated democratic protocols and adopted incentives to make member
states comply with them (ibid., p. 196).
261

Shaw
262 Conclusion

The success of hemispheric regionalism was not so evident with regard

to overall security, but Rut Diamint argues in her chapter that hemispheric
institutions nevertheless had a positive impact in the case of reduction
of tensions between member states. The Special Conference on Security,
held in Mexico in 2003, demonstrated that the countries of the region,
through the OAS, the defence ministerials, the justice ministerials, and
various committees and conventions, have accepted to enlarge the notion
of security. Security in the Americas is now considered a multidimensional
phenomenon covering both threats to the state and to the individual. The
achievements of the past twenty years are certainly not sufficient to deal
effectively with all the causes of insecurity in the Hemisphere, particularly
those coming from organized crime (Kegö, 2010), but, as Diamint writes,
the region would be still less secure without OAS and member states’ actions
over that period.
The record is more problematic when it comes to regional trade arrange-
ments, energy cooperation, and poverty reduction. The problem with trade
relations in the Americas is not a lack of growth. As shown in the chapter by
Antoni Estevadeordal and Kati Suominen, intraregional trade has increased
in most sub-regions over the period 1990–2008, with some countries like
Argentina, Bolivia, and Ecuador having become strongly integrated in their
sub-regional markets. The main problem is the absence of a hemisphere-wide
trade agreement. The failure of the FTAA negotiations in November 2003
because of apparently irreconcilable bargaining positions between Brazil
and the US made that impossible. The resulting spaghetti bowl of bilateral,
trilateral, and sub-regional trade forums and agreements, among them the
recent Pathways to Prosperity in the Americas initiated in December 2008,
is certainly a manifestation of vibrant trade discussions but it is far from
an optimal solution. The resulting overlapping regulatory standards and
rules of origin requirements create confusion and uncertainty for the actors
involved in inter-American trade relations.
Even though energy cooperation was included on the official agendas of
the first three Summits of the Americas, including the Special Summit on
Sustainable Development held in Santa Cruz, Bolivia, in December 1996,
this is one sector where hemispheric regionalism has delivered very little,
according to Thomas O’Keefe in his contribution to this collection, to the
point where whatever progress was made with regard to energy cooperation
in the Americas happened inside existing sub-regional schemes. This being
the case, it is clear that hemisphere-wide energy cooperation would have a
better chance to succeed if built on existing sub-regional initiatives but it is
less obvious which regional projects offer the strongest base. Energy cooper-
ation seems to be one of the few areas of consensus among the governments
of the Americas, but cooperation, here as in other areas, is complicated by
the domestic situation in the US, regional politics, and the uncertainties
of the energy investment climate (Farnsworth, 2010). It remains to be

Shaw
 Gordon Mace and Jean-Philippe Thérien 263

seen if the Energy and Climate Ministerial of the Americas, which met
in Washington, DC, in April 2010, can start implementing some of the
measures included in the Energy and Climate Partnership of the Americas
proposed by the Obama administration at the Trinidad and Tobago Summit
a year earlier.
With regard to poverty reduction, Nicola Phillips writes that even though
official figures indicate a decline in the overall trend since 1990, and most
particularly since 2002, the aggregate figures are somewhat misleading. The
trend is overly influenced by the performance of a few countries (notably
Brazil, Chile, Mexico, and Ecuador), and masks a ‘persistence or worsening
of poverty levels for large parts of the poor population’ of the region. By no
means is the IDB solely responsible for the sad situation, but it does bear
some responsibility in relation to the strategy used. The IDB strategy has
been framed too much in national terms without giving enough consider-
ation to the ‘vertical’ dimensions of poverty, which refer to the mode of
inclusion in the global production processes and the structural connections
between poverty and inequality. This situation will be complicated by the
increasing phenomena of migrations and diasporas with their mix of positive
and negative effects on national and regional policies.
If the record of inter-American institutions is a mixed one then, did it
fare better or worse than that of the institutions at the sub-regional level?
Answers to this question are provided in the third part of the volume and
reveal that the performance of sub-regional institutions was also lower than
what was expected initially. In their respective chapters on Mercosur and
NAFTA, Marc Schelhase, and Louis Bélanger and Richard Ouellet argue that
these trade agreements initially performed well but had difficulty afterwards.
In both cases, the integration process generated economic benefits as trilateral
merchandise trade tripled in the case of NAFTA, reaching US$ 946.1 billion
in 2008, while growth in intra-regional trade and FDI was substantial in the
Mercosur for most of the 1990s. The negative side concerns the functioning
of regional institutions and, in the case of Mercosur, the negative impact of
global economic conditions resulting from the Mexican Peso crisis of 1994,
and the crises in Asia and Russia in 1997–8, followed by that of Argentina in
2001–2. Since the second half of the 1990s, Mercosur has been handicapped
by problems of coordination and enforcement. The attempts to deepen
and widen the integration process have created a congestion that reveals
the inability of member states to develop Mercosur according to a clear
blueprint. As for NAFTA, the main problem is that of an institutional deficit
whereby the governing bodies lack the ‘rule-making capability needed to
effectively tackle twenty-first century trade issues’. Up to now, the member
states have only agreed to improve NAFTA by ‘à la carte agreements’. The
danger therein is to bring about a gradual obsolescence of NAFTA.
ALBA, for its part, is quite a different institution as demonstrated in the
chapter written by Josette Altmann. More a multidimensional integration

Shaw
264 Conclusion

project than a free trade agreement, it offers an alternative strategy to the

neoliberal model of economic integration. Initiated and controlled by
President Chávez of Venezuela, and based on instruments such as Petrocaribe,
Telesur, Banco del Sur, and local MNCs, it seeks to promote local, autonomous
strategies of development for the LAC region. It is too early to judge the long-
term effectiveness of the ALBA project and instruments, although it seems
clear that Petrocaribe did contribute to softening the effects of the recent
financial crisis. The viability of the ALBA integration strategy remains uncer-
tain as it rests heavily on the vision and the financial capacity of the Venezuelan
government. Much will depend on the realization of Grannacionales projects
and on tolerance concerning ideological pluralism.
The contributions included in the second and third parts of the volume thus
illustrate clearly the difficulties for regional institutions in the Americas to
respond adequately to expectations and to perform the duties assigned to
them. Hemispheric regionalism, particularly during the third phase of its
evolution, has not been a great success despite the resources and energy
invested in the effort. Other, sub-regional projects have delivered some
economic benefits for member states, but their institutional set-up lacks
the capacity to deal effectively with the demands of the current political
and economic environment, and with the needs of their populations. As
Michael Schifter has argued convincingly, ‘existing arrangements appear to
have provided little added value and offered scant interest in cooperating
more systematically’ (2009, p. 57). This can be explained by a combination
of factors, chief among them the lack of political will on the part of the
governments of member states. The mitigated performance of hemispheric
and sub-regional institutions in the Americas is problematic in many regards
and it does raise the question of the legitimacy of these regional actors.

A question of legitimacy

Legitimacy has been central to political theory since the writings of

Max Weber. It gives meaning to authority, and it is instrumental to the
effectiveness of political systems (Scharpf, 1999, p. 6). In modern liberal
societies, legitimacy constitutes the foundation of democratic life. In
international institutions, legitimacy is primarily the result of the relation-
ship between actor and institution, as perceived by the actor, be it state
or individual. The perception of the actor may concern the substance of
norms and decisions or the procedure through which norms and decisions
are generated and implemented (Buchanan and Keohane, 2006, p. 407;
Hurd, 1999, p. 381; Risse, 2004, p. 5). Legitimacy thus refers to stakeholders’
perceptions towards the political inputs or outputs of an institution. An
institution lacking legitimacy can thus be severely handicapped when it
comes to convincing stakeholders to contribute resources, to participate,
or to comply with decisions.

Shaw
 Gordon Mace and Jean-Philippe Thérien 265

Since 1994, hemispheric regionalism has encompassed two sets of institu-

tions: the Summit of the Americas process (SOA) – including the summits
themselves, the meetings of ministers and the Summit Implementation
Review Group (SIRG) – and the multilateral agencies centred on the OAS and
its specialized agencies. In addition to the difficulties identified in the preced-
ing part of the conclusion concerning these institutions, what can we say
about the legitimacy of inter-American institutions?

Input-oriented legitimacy
The input aspect of legitimacy refers to inclusiveness and diversity of
representation which both relate to the availability of channels for voice
opportunity and to the actors that can access these channels with the
possibility of influencing regional decision making.
Up to now, two categories of actors have been successful at using regional
fora in order to shape the agenda of hemispheric regionalism: national
governments and the private sector. Governments are the prime movers of
the integration process while the private sector is seen as a legitimate actor
because of its importance for economic growth.
States are formally equal in international law but they differ in terms of
their relative weight, in addition to having different views of the world. With
regard to hemispheric regionalism, the US is traditionally the main force
supporting the integration process. It is only the hegemonic position of the
US in the Americas that enabled inter-American institutions to exist over
the years. In 1994, as with other initial phases of institution building at the
hemispheric level, the US administration was able to build a consensus with
other governments in the region in favour of a renewal of the inter-American
system. In 2003, however, the consensus was broken as many South
American governments became critical of US policies regarding regional and
world affairs. Diverging views were expressed not only by governments of
the ALBA coalition but also by Brazil and its Mercosur partners. This opposi-
tion of values and policy objectives on the part of member states now creates
an important legitimacy problem for inter-American institutions that are
again accused by some ALBA governments of promoting a US agenda that is
detrimental to the interests of other countries of the region.
The private sector was also very much involved in the consultations
around the negotiations for the establishment of a Free Trade Area of the
Americas (FTAA) and in preparatory meetings concerning the drafting of
summits’ declarations and of plans of action. Private sector participation in
the building of a hemispheric agenda is accepted because of the particular
expertise of business organizations and because firms make investments,
create jobs, and are the main architects of international trade. This is why
the OAS developed the Private Sector of the Americas Initiative to help
organize the Private Sector Forum, which holds pre-summit meetings before
every Summit of the Americas. The private sector was also able to provide

Shaw
266 Conclusion

inputs for the negotiations toward an FTAA through the Business Forum,
which was convened before every meeting of the trade ministerials. But
firms and business organizations are not the only representatives of societal
interests.
What about the capacity of other actors to influence the decision-making
process of hemispheric institutions? One category of actors, which is notable
by its absence inside inter-American institutions, is that of parliamentarians. In
a context of representative democracy, legislators have as much legitimacy as
government officials to represent the interests of national societies. However,
they have been kept at the margins of inter-American fora except for a small
incursion on the part of the COPA (Confederation of Parliamentarians of
the Americas). The COPA was established in 1994 and is composed of 400
parliamentarians pertaining to 28 countries of the Americas. The grouping
made some recommendations regarding summits’ mandates, but it clearly
hopes to play a larger role in the functioning of hemispheric regionalism.
This is also the case for trade unions, which have not been given a special
status inside hemispheric institutions as is the case for most sub-regional
integration processes (Milet and Sanhueza, 2002, p. 22). This is somewhat
surprising because trade unions are regularly consulted by governments in
national contexts and because they are generally more organized, with better
resources, for action at the transnational level.
The other category of actors is that of civil society organizations (CSO).
Even though CSOs are accused sometimes of representing narrow interests,
it is true that collectively they express the views of a large segment of the
population. The literature on civil society participation at the hemispheric
level is abundant (Grugel, 2006; Icaza, Newell and Saguier, 2009; Milet and
Sanhueza, 2002; Smith, 2008; Smith and Korzeniewicz, 2007; Tussie and
Botto, 2003) and relatively unanimous in its assessment of the influence of
CSOs on decisions taken at the regional level. Its two major conclusions are
that regional institutions did make an effort to open up the decision-making
process, but that the results fall well below expectations.
The impetus for establishing channels to facilitate civil society participation
came from the governments of Canada, Chile, and the US. As a result of the
pressure exerted by these governments, two mechanisms were established con-
cerning the participation of CSOs. One was the Committee of Government
Representatives on the Participation of Civil Society (CGR), which was the
only channel that CSOs could use to express their preferences with regard
to the negotiations concerning the establishment of the FTAA. The CGR
was created in March 1998 and held 24 meetings from 1998 to 2004. The
other is the Committee on Inter-American Summits Management and
Civil Society Participation in OAS Activities. An outgrowth of the former
Committee on Inter-American Summits Management and of the Committee
on Civil Society Participation, it is responsible for facilitating civil society
participation at the OAS, during and between general assemblies, and prior

Shaw
 Gordon Mace and Jean-Philippe Thérien 267

to summits and ministerial meetings. Finally, the OAS, through its Unit for
Sustainable Development, devised in 1999 the Inter-American Strategy for
Public Participation in Sustainable Development Decision-making (ISP) as
a follow-up to the Santa Cruz Declaration of 1996 on sustainable develop-
ment (Mace and Loiseau, 2005, p. 128).
Despite these efforts by regional institutions, CSOs rapidly became dis-
illusioned with the space offered to them for expressing their preferences.
This is especially true with regard to trade negotiations (Tussie and Botto,
2003, p. 37; Icaza, Newell and Saguier, 2009, p. 6; Shamsie, 2000, pp. 14–15),
where CSOs came to see the mechanisms of consultation as merely ‘invited
spaces’ and ‘drop-boxes’ whose only purpose was to get social support to
legitimate the negotiation process (Saguier as cited in Icaza, Newell and
Saguier, 2009, p. 6).
As to the other channels for consultation, they were also seriously flawed
from the point of view of CSOs. Even though the OAS still officially recog-
nized 171 organizations in 2006, these mechanisms remain handicapped by
problems related to both participation and influence. Participation is made
difficult by the fact that convocations are often sent late, generally by email,
and sometimes only one week in advance, with CSOs having to fund their
travel costs. This results naturally in unequal representation among CSOs
and among countries.
Influence is also extremely limited (Grugel, 2006, p. 209; Smith and
Korzeniewicz, 2007, p. 158) as the rules for participation determine that
positions are expressed verbally (generally lasting two to three minutes) or
through documents submitted to the appropriate secretariat. Direct partici-
pation to these gatherings and to encounters with ministers for foreign
affairs reveal the limited consideration given by most governments to
CSOs’ inputs.
This state of affairs fuels a perception on the part of a vast majority of
CSOs that there is unequal access to decision making. There is a clear sense
on the part of CSOs and in academic circles that the present phase of hemi-
spheric regionalism, which started in 1994, is essentially characterized by
corporate governance with executive branches of governments and business
organizations as main actors. It is felt that the voices of other categories of
actors are not heard and, consequently, that their preferences and the inter-
ests they represent are not really taken into consideration.
On this basis, input-oriented legitimacy of hemispheric institutions can
be categorized as relatively low in the present context.

Output-oriented legitimacy
Output-oriented legitimacy refers to the effectiveness and accountability
of an institution. With respect to effectiveness, two aspects can be distin-
guished: the clarity of an institution’s objectives and the implementation of
these objectives.

Shaw
268 Conclusion

Clarity of objectives has to do with the sense of direction that is given

to an institution or a group of institutions. In the context of hemispheric
regionalism, this sense of direction results fundamentally from the plans
of action elaborated at each summit and containing a certain number of
mandates given by the heads of state to regional institutions and national
bureaucracies. The role of the mandates is to trace the guidelines for collective
action from one summit to the other with, ideally, a sense of what the
priorities are.
The problem in the case of hemispheric regionalism is that the plans
of action did not fulfil this role of parameter setting and guide for action.
One reason has to do with the sheer quantity of mandates that have been
produced from one summit to the other, the total surpassing 800 if the
special summits of Santa Cruz and Monterrey are included (Roberts, 2008,
p. 3). Furthermore, each mandate has been given equal importance without
indications given to those who will implement the mandates as to what the
priorities are. Finally, the formulation of many of the mandates lacks the
necessary specificity for guiding the action and for monitoring the results
(Feinberg, 2006, p. 90; Cruz Diaz, 2008).
Effectiveness also has to do with implementation. The literature on that
aspect of hemispheric regionalism is also relatively substantial (Feinberg,
2006; Mace and Loiseau, 2005; Roberts, 2008; Smith and Korzeniewicz,
2007) and pointing in the same direction in terms of its assessment of
the situation. According to the institutional design put in place in 1994,
implementation of summits’ mandates was to be done by both national
governments and regional institutions. National governments were
then supposed to report to the SIRG on progress by tabling annual reports.
Regional institutions, for their part, were supposed to coordinate their
strategies through a Joint Working Group which would then supervise
implementation.
The design appeared to work well on paper but it failed miserably in reality.
Only half of the member states produce annual reports and these reports
often look like grocery lists. It is impossible to link the items identified in
the reports to the mandates with any precision. As the OAS itself admitted:
‘it should come as no surprise that it is difficult to conduct a painstaking
evaluation of each and every mandate emanating from the Summit Process
through the lens of national realities’ (OAS, 2006, p. 11). And at the regional
level, the mechanisms put in place to coordinate implementation never
really functioned so that even when examining the work of regional institu-
tions it is impossible to determine what mandates have been implemented
and what mandates have not been implemented. Consequently, the absence
of an efficient machinery to monitor progress made by regional institutions
and national bureaucracies with regard to the implementation of summits’
mandates fuels a strong perception of ineffectiveness on the part of a majority
of stakeholders outside government circles.

Shaw
 Gordon Mace and Jean-Philippe Thérien 269

Although it is widely recognized that member states’ decision not to

increase the budget of regional institutions is a major handicap for the
monitoring of implementation (Feinberg, 2006, p. 70), this is not the only
problem with respect to output-oriented legitimacy. Hemispheric institu-
tions are also criticized for a lack of transparency and the near absence of
accountability. Problems of transparency are related essentially to difficulties
of accessing the information and to the often technical nature of the infor-
mation provided (Icaza, Newell and Saguier, 2009, p. 21).
Transparency is one aspect of accountability. The other is responsibility. In
the present institutional framework, hemispheric institutions and national
bureaucracies are not really responsible to anyone for implementing or not
implementing summits’ mandates. There is no real and immediate conse-
quence if a member state does not report on implementation at the national
level or if a regional institution is unable to document precisely how it
succeeded or failed in its own strategy to implement the mandates given to
that institution.
All in all, inter-American institutions and hemispheric regionalism itself
are severely hindered by failures in effectiveness and accountability. When
these elements are added to the low level of inclusiveness of the process
and its limited diversity of representation, the conclusion becomes inescap-
able. Whether examined from the point of view of inputs or from that of
outputs, the overall legitimacy of contemporary hemispheric regionalism
is now quite low. It is particularly revealing that the majority of CSOs now
meet and work outside of regular channels put in place by inter-American
institutions, such as for example the ‘people’s summits’ occurring at each
regular summit meeting. Clearly, these parallel summits represent a form
of sanction of hemispheric regionalism on the part of a substantial portion of
its stakeholders.

The need for a stronger performance

Given the analyses offered in this volume, in what ways can the perform-
ance of hemispheric regionalism be improved? Is there a role to be played by
specific groups of actors and what innovative strategies could be envisaged
in the present, difficult, context of inter-American relations?
With regard to actors, Norman Girvan’s chapter reminds us that initial
expectations concerning the positive effect on hemispheric cooperation of
the arrival of the Caribbean Commonwealth countries in the OAS in 1990,
along with Canada, were somewhat exaggerated. Small states have limited
resources at their disposal to influence international negotiations, particu-
larly when – as in the case of the Caribbean – they are negatively affected by
‘structural shifts’ in the global geo-economic and geo-political environment.
The recent financial crisis increased the fragility of the small Caribbean states
and reduced their capacity to shape the course of events in the Americas.

Shaw
270 Conclusion

The situation is different for middle powers, as Jorge Heine argues in his
chapter, because the changing landscape in the Americas offers a unique
moment for hemispheric cooperation. It provides a window of opportunity
to rethink and reorganize the inter-American agenda. Middle States – such
as Argentina, Canada, Mexico, and Chile – possess the resources and the for-
eign policy tools to conduct a diplomatic effort that could lead to renewed
inter-American cooperation. Acting as a cohesive unit, middle-power diplo-
macy could ‘help to bridge the concerns and interests of the region’s North
and South’ and, in so doing, could give a new breath of life to the inter-
American agenda.
The private sector is also an actor that could play a very positive role in
hemispheric cooperation, according to Richard Feinberg. Since 1994, and
particularly but not only in the context of the FTAA negotiations, business
representatives have been actively involved in hemispheric affairs as men-
tioned earlier. Through mechanisms such as the Business Forum and the
Private Sector Forum, the private sector has been part of regular consultations
concerning hemispheric affairs. Yet as Feinberg suggests, much more could
be done. In particular, an increase in public–private partnerships could provide
a unique boost to inter-American cooperation.
There is certainly a place for input by various kinds of actors inside inter-
American cooperation but there is also a pressing need for new strategies,
new attitudes, and different ways of doing things. Suggestions have already
been made concerning the OAS specifically and summitry more generally.
The OAS needs more resources but must also rethink its priority-setting
process (Meacham, 2010). And more than anything else, it must remain
an effective defender of regional democracy because, when all is said and
done, the organization will be judged by ‘its ability to act effectively in line
with its doctrinal commitment to the defense of democracy’ (Meacham,
2010, pp. 15–16). Summitry, for its part, is the object of profound scepti-
cism even though it does have useful functions in terms of moving the
hemispheric agenda, setting priorities, and facilitating dialogue between
leaders (Feinberg, 2010, pp. 2–3). But it must work to eliminate its short-
comings with, among other things, a more workable agenda, stronger
monitoring of implementation, more efficient use of resources, better coor-
dination among regional agencies, and stronger participation from external
actors (ibid., pp. 6–9).
These are the nuts and bolts of cooperation, but there are also some funda-
mental issues to address if hemispheric cooperation is to have a chance to
survive. Profound changes will need to be made in two directions at least.
The first concerns states’ attitudes and positioning. As the dominant state of
the region, it is natural for Washington to be the main mover of hemispheric
regionalism just as it is natural for Brazil to be the main force behind South
American integration. However, Washington would profit immensely by
learning from Brazilian foreign policy in a context of regionalism, particularly

Shaw
 Gordon Mace and Jean-Philippe Thérien 271

with regard to restraint and responsiveness towards other member states’

preferences. In the context of hemispheric regionalism, more needs to be
done to try to accommodate the needs of smaller states and to understand
the rationale behind opposing points of view. It is unclear, however, if and
how the Obama administration can rethink and re-target US policy towards
the region. As Dan Erikson argues in his chapter, that policy ‘does not
change quickly’ for reasons of path dependency, because it is part of a larger
foreign policy agenda, and because there are more pressing domestic issues
for the immediate future. But it is clear, as Christopher Sabatini aptly writes,
that Washington’s Latin American policy is in need of a new rhetoric and a
new course of action (Sabatini, 2010).
It is also true that a more open-minded attitude on the part of some
Latin American governments with regard to US positions would be helpful.
Cooperation among a group of actors is impossible if only a few of them
work to make it possible. Hemispheric regionalism cannot succeed if impor-
tant LAC governments are not really interested in taking part because they
have other priorities.
The second issue is access to decision making. Steps that should be taken
here concern channels for participation and diversity of representation.
There is an urgent need for better, more institutionalized channels of parti-
cipation for actors other than national governments and private sector
representatives (Serbin, 2008, pp. 11–12). Participation must not be limited
to gatherings at the time of summits, ministerial meetings or general assem-
blies of the OAS. It cannot be limited either to presentation of briefs to
ministers or formulating an opinion through the Internet. Ways must be
found to increase participation of parliamentarians and civil society repre-
sentatives in regular activities of inter-American institutions so that their
input will have a real influence on the decisions. One possible mechanism
could be a regular consultation process when a new regional strategy or a
new policy is being devised and implemented. What is important is that
diversity of representation is assured and that the agents taking part in the
process perceive that they are listened to.
With regard to output-oriented legitimacy, steps must also be taken to
make sure that hemispheric regionalism generates, and is perceived to gen-
erate, tangible benefits for the citizens of the Americas as a whole. There
is little chance for that to happen if summitry tries to deal with too many
issues, some of them not necessarily best dealt with at the regional level.
Improving education standards, students’ performance, or access to school
are certainly noble objectives, but is this a problem that should be dealt with
at the regional level in a context of limited resources? Would it not be bet-
ter to concentrate on issues where the regional level has a clear comparative
advantage with regard to problem solving?
A solution in that sense would be to concentrate on issues of a specifically
transnational nature. Transnational crime with its related issues of violence

Shaw
272 Conclusion

and corruption would certainly figure at the top of the list in the present
context. That is a problem which cannot be dealt with successfully at the
national level only because it now forms a grid involving all the countries
of the region. The same could be said for energy, environmental security,
terrorism, food security, regulatory frameworks for economic relations, and
so on. Effectiveness would therefore be increased considerably if govern-
ments and hemispheric institutions focused on fewer issues and adopted
more articulated strategies to deal with these issues. Naturally, effectiveness
will be improved if adequate resources are available. Although governments
always want to make sure that funds are used in an effective manner, they
need to understand that the credibility of engagements rests in good part on
the financial support that regional institutions receive to implement their
mandates.

Conclusion

Inter-American institutions are once again at a crossroads. This is so in

part because they were not able to deliver on most of the complex agenda
imposed on them by the member states, thereby losing a fair amount of
legitimacy, and in part because the regional environment of the Americas
has become much more confrontational over the past fifteen years. Other
regional institutions, as we have seen, have not fared a lot better. In this
sense, both Monroe and Bolivar have been contradicted.
Is it possible for hemispheric regionalism to regain its momentum?
Perhaps, but it is difficult to be as optimistic as it was only a few years ago
(Mace, Thérien, Haslam, 2007). A lot will depend on how legitimate inter-
American institutions are perceived to be. Unfortunately, the consequences
of the financial meltdown and the history of US–Latin American relations
do not provide strong signs of encouragement. On the one hand, decision-
makers in Washington do not seem to care very much about the impact
of US behaviour on the rest of the Hemisphere (Schifter, 2009, p. 60). On
the other hand, many Latin American and Caribbean governments do not
appear to be very interested in a regionalist project that promotes values
they do not share anymore and that is incapable of delivering clear benefits
for their populations. As a result, their attention is increasingly focused on
developing regional institutions that they will control entirely. It remains
to be seen if these institutions will be more efficient for the peoples of the
region but, here again, the past is not a major source of optimism.
So what will the regional architecture look like in the foreseeable future?
It may be that we have seen the end of large, encompassing regionalist
projects of the EU type in the Americas. What we are witnessing is the
emergence of a parcelled out, divided, region, both geographically and
functionally, dominated by diplomatic fora without serious attempts at deep
economic integration. The drama of the Americas as a region may be that

Shaw
 Gordon Mace and Jean-Philippe Thérien 273

it is now dominated by two great powers, both having global aspirations

without necessarily sharing similar worldviews. The rest of the Hemisphere
may therefore become only a theatre for their diplomatic interplays. The
pace of change in the politics of the Western Hemisphere could thus be only
beginning to accelerate.

References
Boniface, Dexter S. (2009) ‘Dealing with Threats to Democracy’ in Andrew F.
Cooper and Jorge Heine (eds) Which Way Latin America? Hemispheric Politics meets
Globalization, Tokyo: United Nations University Press. 182–201.
Buchanan, Allen and Robert O. Keohane (2006) ‘The Legitimacy of Global Governance
Institutions’, Ethics and International Affairs, 20, 4: 405–37.
Burnell, Peter (2010) ‘Is there a New Autocracy Promotion?’ Working Paper 96,
Madrid, FRIDE. Available at http://www.fride.org.
Cruz Diaz, Juan (2008) ‘The 2009 Summit of the Americas: A New Opportunity’.
Online at http://www.as-coa.org/article.php?id=1143.
Farnsworth, Eric (2010) ‘Setting a Hemispheric Energy Agenda’, Poder, April. Available
from Americas Society at http://www.as-coa.org/print.php?type=article&id=2272.
Feinberg, Richard (2006) ‘Presidential Mandates and Ministerial Institutions: Summitry
of the Americas, the Organization of American States (OAS) and the Inter-American
Development Bank (IDB)’, Springer Science ⫹ Business Media, 1: 69–94.
Feinberg, Richard (2010) ‘Summitry in the Americas: The End of Mass Multilateralism?’
Focal Policy Paper, March. Available from FOCAL at http://www.focal.ca.
Grugel, Jean (2006) ‘Regionalist Governance and Transnational Collective Action in
Latin America’, Economy and Society, 35, 2: 209–31.
Hurd, Ian (1999) ‘Legitimacy and Authority in International Politics’, International
Organization, 53, 2, Spring: 379–408.
Icaza, Rosalba, Peter Newell and Marcelo Saguier (2009) ‘Democratizing Trade
Politics in the Americas: Insights from the Women’s, Environmental and Labor
Movements’, IDS Working Papers Series.
Kegö, Walter (2010) ‘Organized Crime: A Major Threat to State Security’, Policy
Brief, 19, 19 February, Institute for Security & Development Policy. Available at
http://www.isdp.EU/images/stories/isdp-main-pdf/2010_Kego_organized-crime.
pdf.
Mace, Gordon and Hugo Loiseau (2005) ‘Cooperative Hegemony and Summitry in
the Americas’, Latin American Politics and Society, 47, 4: 107–34.
Mace, Gordon, Jean-Philippe Thérien and Paul Haslam (eds) (2007) Governing the
Americas: Assessing Multilateral Institutions, Boulder: Lynne Rienner Publishers.
Meacham, Carl (2010) ‘Multilateralism in the Americas: Let’s Start by Fixing the
OAS. A Report to the Committee on Foreign Relations. United States Senate’,
Washington, DC: Government Printing Office. Available at http://www.gpoaccess.
gov/congress/index.html.
Milet, Paz and Andrea Sanhueza (2002) El Proceso de Consultas a la Sociedad Civil en la
III Cumbre de las Américas, Santiago; FLACSO-Chile.
Organization of American States (OAS) (2006) ‘Achievements of the Summits of the
Americas: National Accomplishments’. Online at http://www.cumbre-americas.org/
Documents%20for%Argentina%20Summit%202005/IV%20Summit/Publications/
summit_eng.pdf.

Shaw
274 Conclusion

Risse, Thomas (2004) ‘Transnational Governance and Legitimacy’. Online at http://

www.atasp.de/downloads/tn_governance_benz.pdf.
Roberts, James M (2008) ‘Rethinking the Summit of the Americas and Advancing Free
Trade in Latin America’, Backgrounder, 2170, 8 August: 1–9 found at www.heritage.
org/Research/latin America/bg2170.cfm.
Sabatini, Christopher (2010) ‘Obama’s Latin American Policy: Talking Like It’s 1999’,
The Huffington Post, 8 April. Available from Americas Society at http://www.as-coa.
org/print.php?type=article&id=2273.
Scharpf, Fritz (1999) Governing in Europe, Oxford: Oxford University Press.
Schifter, Michael (2009) ‘Managing Disarray: The Search for a New Consensus’ in
Andrew F. Cooper and Jorge Heine (eds), Which Way Latin America? Hemispheric
Politics meets Globalization, Tokyo; New York; Paris: United Nations University Press:
50–63.
Serbin, Andrés (2008) ‘The Organization of American States and Conflict Prevention’,
Center on International Cooperation, New York University, November. Available at
http://www.cic.nyu.edu.
Shamsie, Yasmine (2000) ‘Engaging with Civil Society: Lessons from the OAS, FTAA
and Summits of the Americas’, Discussion Paper, Ottawa: North-South Institute.
Smith, Raquel (2008) ‘Summit Reform and Civil Society: Taking a Deeper Look’, Focal
Point, 7, 6: 9–11.
Smith, William C and Roberto P. Korzeniewicz (2007) ‘Insiders, Outsiders and the
Politics of Civil Society’, in Gordon Mace, Jean-Philippe Thérien and Paul Haslam
(eds) Governing the Americas: Assessing Multilateral Institutions, Boulder: Lynne
Rienner Publishers. 151–74.
Tussie, Diana and Mercedes Botto (2003) El ALCA y las Cumbres de las Americas: una
Nueva Relacion Publico-Privada? Buenos Aires: FLACSO-Argentina.

Shaw
Index
Acharya, Amitav & Alastair Iain
Johnston 9, 17
ALBA see Bolivarian Alternative for the
Americas
Americas viii, 1, 4, 6, 7, 9, 12, 13, 16,
23, 25, 81, 82–84, 95–108, 111, 120,
124–127, 229–239, 261, 264
see also US
Andean Community of Nations (ANC/
CAN) x, 5, 28, 31, 34, 96–98, 107,
181, 182, 205, 208, 209, 228
Andean Pact ix, 24
Argentina 3, 16, 17, 33, 34, 46, 53,
101–102, 132, 171–183, 231–232, 263
see also Mercosur
Asia 62
see also financial crisis
Association of Caribbean States (ACS)
68, 71–72, 204, 205
see also Caribbean, CARICOM
asymmetries xi, 2, 4, 217
A10 226, 237–239
BASIC (Brazil-South Africa-India-China)
3 Castro, Raul 52, 53
see also BRICs, climate change
Bolivarian Alternative for the Americas
(Alternative Bolivariana para America
Latina) (ALBA) ix, 16, 25, 35–36,
38, 50, 65, 67, 71, 120, 123, 204–220,
226, 228, 263–264, 265
ALBA Bank 211, 214, 234
see also Hugo Chavez, UNASUR,
Venezuela
Brazil x, 3, 4, 11–12, 13, 16, 29, 31–33,
38–39, 40, 43, 44, 46, 47, 49, 50, 51,
53, 56, 66, 96, 101–102, 104–106,
108, 171–183, 226, 227, 231–232,
234, 262, 265, 270
Amazon 105–106
see also BRICs, climate change, Lula da
Silva
BRICs 2, 3, 4, 40, 47, 62, 228, 234
see also Brazil, Russia, India, China
275
Shaw
Bush Administration 2, 8, 43, 44, 45,
46, 48, 49, 53, 55, 81, 108, 132,
133, 138, 195, 198, 225, 237
see also Clinton Administration, FTAA,
NAFTA, Obama Administration, US
CACM ix, x, 5, 9, 24, 31, 84, 85–96,
87, 200, 228
see also Central America
CAFTA-DR 30, 31, 249
Canada x, 7, 9, 11, 38, 43, 44, 46, 63,
72, 91, 96, 102–104, 108, 187–200,
226, 229–230, 234, 238, 269
as a middle power 229–230
see also NAFTA, OAS
Caribbean 3, 5, 9, 11, 12, 43, 60–73,
206–207, 214, 215–220, 269, 272
see also ACS, CARICOM, Petrocaribe
CARICOM ix, x, 5, 13, 14, 61, 62, 63,
65, 66, 68–71, 72, 85–86, 98–99,
200, 205, 209, 228
see also ACS, Caribbean
Castro, Fidel 44, 52, 53, 206
see also Cuba
see also Cuba
Central America 3, 4, 6, 11, 30, 38,
99–101, 132, 139, 205, 214,
215–220
SICA 99–101, 205
Chavez, President Hugo 16, 29, 31, 35,
36, 37, 38, 39, 44, 48, 49, 50, 51,
53, 54, 55, 98, 108, 118, 122, 159,
182, 204–220, 226, 264
see also ALBA, Venezuela
Chile 4, 17, 81, 188, 209, 226, 228,
230, 232–234, 238
as a middle power 232–234
China 4, 13, 25, 38, 48, 63, 218, 227,
233
see also BRICs
civil society 11, 37, 248, 266
civil society organizations (CSOs)
266–267, 269
276 Index
climate change 3, 60, 68, 95, 96,
104–106
see also BASIC
Clinton Administration 5, 45, 133,
188, 237
see also Bush Administration, Obama
Administration, US
Clinton, Hilary 48, 54, 68, 225, 229
Cold War 25, 113, 131, 132
Columbia 11, 38, 46, 50–51, 66, 142,
182
Columbian Plan 138–139
see also crime, drugs
corporate social responsibility (CSR)
11, 253
coup 52, 114, 121, 227, 261
see also Honduras, Jose Zelaya
crime 31, 52, 132, 133, 137–141, 142,
229, 235, 262, 271
see also drugs
Cuba 8, 25, 35, 44, 45, 46, 52, 53, 54,
55, 56, 66, 72, 95, 111, 120–121,
123, 127, 204, 206, 209, 215, 218,
225, 226, 235
see also ALBA, Fidel Castro, Raul
Castro
debt 7, 67, 82, 87
see also financial crisis
democracy x, xi, 7, 12, 14, 15, 17, 49,
64, 111–128, 131, 140, 261, 270
Democratic Party (US) 43, 51
see also Bush Administration,
Clinton Administration, Obama
Administration, Republican Party
diaspora 11, 43
drugs 10, 12, 46, 47, 138–141, 235
see also crime
ECLAC 5, 60, 61, 155, 162, 163, 164,
249
see also UN
electricity 96–98, 99–101
energy 95–110, 189, 213, 231, 242,
262
clean development 105–106
clean energy 105–106
Energy & Climate Partnership of the
Americas 95–106
see also electricity, natural gas, Petrocaribe
Shaw
EPA (with the EU) 69–71
see also EU
EU 7, 23, 63, 69, 72, 84, 171, 181, 182,
209, 292
financial crisis 2, 4, 23, 60–65, 81,
272
financial services 189, 193
foreign direct investment (FDI) 63,
172, 180, 233
formal regionalization 1, 205
see also new regionalism
Free Trade Agreements (FTAs) 8, 29, 45,
51, 81, 89, 91, 92, 171, 174, 181,
182, 187, 193, 229, 230, 233
see also Mercosur, NAFTA
Free Trade Area of the Americas (FTAA)
1, 12, 13–14, 16, 17, 25–30, 31–34,
37, 50, 53, 64, 65, 71, 81, 82, 88,
89, 173, 180, 204, 207, 208, 235,
249, 262, 270
GATT 26, 88
see also WTO
globalization 1, 6, 27, 47, 218
G7/G8 12, 238
G20 2, 3, 12, 40, 46, 228, 236
Haiti 3, 52, 136, 141–142, 230
Honduras 50, 52, 66, 111, 117, 121–122,
123, 126, 127, 144, 216–217, 225,
230, 235
see also coup, Jose Zelaya
human development 11, 153
human rights x, xi, 5, 7, 8, 14, 114
see also OAS
human security 11, 135, 153,
Huntington, Samuel 23, 88
IBSA (India- Brazil- South Africa) 3,
228
see also BRICs
India 3, 4, 227
see also BRICs
indigenous communities 64, 156
inequality 137, 163, 164
see also poverty
institutionalization 1, 9–11, 12, 261,
263, 269
see also new regionalism

Inter-American Development Bank (IDB)
58, 81, 99, 151, 153, 154, 158, 164,
165, 181, 183, 215, 216, 242, 245,
247, 249, 251, 256, 263
see also OAS, Washington Consensus
International Monetary Fund (IMF) 40,
61, 62, 157, 175, 204, 232
see also Washington Consensus, World
Bank
legitimacy 264–269, 271
input-oriented 265–266
output-oriented 266–269
Lula da Silva, Luiz 38, 44, 46, 47, 49,
119, 121, 124, 159, 175, 231, 238
see also Brazil, BRICs
Mercosur ix, x, 5, 9, 15–16, 29, 30,
31, 32, 33, 34, 35–36, 101–102,
171–183, 200, 205, 209, 232, 233,
234, 263, 265
Mexico x, 3, 4, 5, 7, 10, 11, 12, 17,
43, 45, 47, 51, 81, 102–104, 106,
139, 187–200, 209, 229, 231–232,
262, 263
see also NAFTA
middle powers 225–227, 229–239, 270
migration 11, 61, 235
see also diaspora, remittances
Monroe Doctrine 2, 23, 47, 48
multilateralism 56, 229, 242, 265
multinational corporations 11, 173
see also CSR
Myrdal, Gunnar 23, 24, 38
natural gas 98–104
see also energy
neo-liberal regionalism 7, 8, 26, 63,
65, 142
new regionalism 6, 10, 82, 87, 157,
235
see also regionalism
Nicaragua 3, 54, 215, 217
see also Daniel Ortega
North American Free Trade Agreement
(NAFTA) ix, x, 7, 10, 16, 24, 26, 45,
46, 84, 85–86, 87, 88, 91, 102–104,
171, 187–200, 263
Free Trade Commission 189–190
see also Canada, Mexico, US
Shaw
Index 277
Obama Administration 13, 14, 17,
43–57, 95, 119, 188, 199, 225, 226,
229–239, 245, 263
see also Bush Administration, Clinton
Administration, US
open regionalism 26, 68–69
see also regionalism
Organization for Economic
Cooperation & Development
(OECD) 7, 12, 141, 228
Organization of American States (OAS)
ix, 1, 5, 8, 9, 10, 14, 17, 39, 49, 56,
66, 111, 112, 113, 115, 117, 120–121,
123, 124, 127, 135–147, 216, 225,
230, 233, 234, 235, 239, 242–258,
261, 265, 266, 267, 268, 270, 271
Organization of Eastern Caribbean
States (OECS) 67, 69–70
Ortega, Daniel 54, 217
see also Nicaragua
poverty 15, 153–166, 208, 211–212,
213, 263
poverty reduction 153–166
see also inequality
private sector 17, 242–258, 265, 270
see also multinational corporations
Public-Private Partnership 244–249,
253, 257, 258
Regionalism viii, 1, 6, 8, 9–12, 13, 17,
60, 62, 71, 82, 95–108, 112, 120,
261, 262, 265, 272
sub-regionalism 95–108
see also new regionalism, open regionalism
remittances 11, 60, 229
see also diaspora, migration
Republican Party (US) 43, 96
see also Bush Administration, Democratic
Party
Russia 25, 48–49, 107, 263
see also BRICs
security 15, 131–147, 262
Security & Prosperity Partnership
(SPP) (NAFTA) 195–197, 198
Security Sector Reform (SSR) 135–136
Softwood Lumber Agreement (SLA)
(Canada-US) 195, 197
see also NAFTA
278 Index
Spain 11, 25, 38, 63
see also EU
Summit of the Americas (SOA) 4, 8, 9,
10, 13, 26, 27, 53–56, 81, 88, 153,
225, 226, 230, 236, 242–258, 262,
265, 268
see also OAS
tourism 60, 61, 63, 246
transnationalism 1, 2, 3, 271
see also crime, diaspora
Trinidad & Tobago 4, 13, 53, 54, 55,
61, 65, 66, 67, 69–70, 81, 95, 96, 98,
106, 108, 123, 226, 39, 246, 250, 263
see also Summit of the Americas
Union of South American Nations
(UNASUR) ix, 5, 34, 39, 65, 71, 92,
107, 120, 134, 181, 183, 205, 228
see also ALBA
United Nations (UN) 3, 53, 72, 113,
132, 135, 143, 145, 153, 216, 231,
244, 256
UNDP 135, 153
see also ECLAC
United States (US) ix, x, 2, 4, 5, 6, 7,
8, 12, 13, 23, 24, 25, 27, 29, 32, 33,
39, 43–57, 62, 63, 72, 82, 91, 95–98,
Shaw
102–104, 119, 132, 139, 187–200,
204, 208, 209, 215, 217, 218, 2225,
226, 229, 235, 262, 265, 272
US Congress 190, 192, 198
see also Bush, Clinton & Obama
Administrations
Venezuela ix, 3, 4, 12, 25, 28, 29, 32,
35, 37, 38, 44, 46, 48, 50, 65–68, 96,
98–99, 104–105, 108, 117, 118, 182,
183, 204–220, 226, 264
Petrocaribe 98–99, 206–207, 210,
211, 212, 214
see also ALBA, Hugo Chavez
Washington Consensus 12, 16, 26, 63,
82, 120, 204, 226, 227, 235
see also IMF, World Bank
women 8, 64, 157, 165
World Bank (IBRD) 157, 159, 204, 216
see also Washington Consensus
World Trade Organization (WTO) 26,
30, 33, 89, 181, 190
see also GATT
Zelaya, Jose 50, 52, 66, 111, 119,
121–122, 124–125, 126, 144, 216, 230
see also coup, Honduras