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Return to the Bad Old Days?

Guatemala and CAFTA

by XUAN-TRANG HO

On March 9, 2005, police forces in Guatemala City fired tear gas and beat demonstrators who were protesting the ratification of the U.S.-Central America Free Trade Agreement (CAFTA). President Oscar Berger deployed 500 soldiers wielding truncheons to the city’s historic center armed with water cannons and with the intent to halt nearly 1,000 union members, farmers, students and indigenous people who were demanding a national referendum on the contentious issue.

All told, some 8,000 protesters have been involved in recent demonstrations over CAFTA, making these rallies among the largest protests in Guatemala’s modern history. Despite such public outcries, President Berger and his government have failed to respond to his constituency. Instead, the Berger administration continually has bowed to foreign interests and the country’s landholding elites.

Trade between markedly asymmetrical economies could likely bring catastrophe to relatively uncompetitive Central American markets like that in Guatemala. Central American nations could very well face a fate similar to that of Mexico, where certain agricultural market sectors, confronted by U.S. subsidized agricultural exports, were drowned after the North American Free Trade Agreement (NAFTA) came into effect. Critics contend that in order to prevent this from happening, the government must not settle the matter behind its citizens’ backs, but have them participate in their own social and economic destiny through political means, via lawful manifestations and a referendum. Most importantly, the nations participating in CAFTA should reassess the agreement because it demonstrably will not benefit the majority of the population in its current form. Rather than presenting a win-win situation as its supporters adamantly maintain, CAFTA is likely to produce lofty winners and heavy losers, with the former being U.S. and Guatemalan agri-business entrepreneurs and multinational agricultural interests and the losers being small-scale producers and consumers.


Keep Marching On

On March 10, despite growing protests from opposition forces, the Guatemalan Congress, after only a short debate, overwhelming ratified CAFTA by a vote of 126 to 12. The balloting took place a few days later than originally scheduled because street demonstrators had blocked the entrance to the Guatemalan Parliament, forcing many legislators to seek refuge elsewhere. Protests subsided on March 11 after police warned organizers that they would be arrested and prosecuted for public disturbance. President Berger also threatened to call in the Guatemalan military in order to reinforce police units surrounding the legislative chambers. Such provocative actions tarnish the legitimacy of Berger’s democratic rule because they undermine the ability of Guatemalans to express themselves freely.

When protests picked up the following week after Berger signed the agreement, the president took the fateful action of calling in the military. On March 15, Reuters reported that at least one protester was killed and many others injured during anti-CAFTA demonstrations in the western Guatemalan province of Huehuetengango, after soldiers had fired on a crowd of demonstrators. Police also surrounded the headquarters of Guatemala’s trade unions in order to detain the protest leaders involved in organizing the protests. In Guatemala City, 4,000 people rallied in front of the national Congress on that same day.


"Strong Economies, Stable Democracies"

In May 2004, the U.S. signed CAFTA with Guatemala, El Salvador, Honduras, Nicaragua and Costa Rica, with the Dominican Republic signing on three months later. El Salvadoran and Honduran legislative bodies have ratified the agreement, which is still pending in the U.S. Congress. In order for CAFTA to be implemented, legislative bodies of all nations involved must ratify the agreement. President Abel Pacheco of Costa Rica wisely has announced that he may call for a national referendum due to growing unrest among his populace. Protests even took place in Honduras-anti-CAFTA campaigners stormed congress-following the government having signed the pact on March 4, one month ahead of schedule. Four days later, hundreds of anti-CAFTA Hondurans blocked roads for hours.

The Bush administration believes that the accord will boost exports, productivity, employment and open new markets for U.S. goods and services, while encouraging economic and democratic reforms throughout Central America. Once approved, the trade pact is supposed to immediately make 80 percent of American consumer and industrial exports duty-free in all of Central America, with the remaining tariffs phased out over the next 10 years. Currently, U.S. exports to Central America face tariffs that average 30 to 100 percent, far more than what the U.S. imposes on the region’s exports. According to a major proponent of the pact, the U.S. Chamber for Commerce, CAFTA would "level the playing field" for U.S. workers and businesses. Furthermore, they argue that CAFTA could expand U.S. farm exports by $1.5 billion a year.

On March 10, the Hispanic Alliance for Free Trade, a grouping of U.S.-Hispanic business-oriented interest groups and organizations which believe that "free trade helps to build strong economies and stable democracies, and offers significant benefits to both the United States and our trading partners throughout the Americas," urged Congress to approve CAFTA. The Alliance calls it the best option to build the economies of Central America and provide new markets for American business and agriculture. It also emphasized the foreign policy aspects of the agreement. Another CAFTA supporter is Al Zapanta of the U.S.-Mexico Chamber of Commerce, who said in a March 10 press release by the Alliance, that he believes CAFTA will "help prevent a return to the political instability that characterized much of the region during the 1970′s and 80′s."

CAFTA countries provide the second-largest U.S. export destination in Latin America, receiving $15 billion of U.S. exports, and are the 13th largest export market for the U.S. in the world, exceeding exports to Russia, India and Indonesia combined. Bilateral trade between U.S. and CAFTA amounts to approximately $32 billion.


The "Fair" Deal for Whom?

Not surprisingly, CAFTA’s opponents claim that the agreement is not in the best interest of workers in the U.S. or Central America. Some Guatemalans believe that it will dramatically affect their country in a negative way, especially hurting the nation’s poor by undermining the economic viability of small farmers, as well as by limiting access to public health and other social services. They worry that small farmers may not be able to compete against U.S. subsidized agriculture and that CAFTA will only make Central American countries more dependent on the U.S. They strongly oppose their government giving concessions to private companies for infrastructural projects. Additionally, opponents do not see how Guatemala will really benefit from CAFTA since almost 80 percent of Central American products already enter the U.S. duty-free under agreements like the Caribbean Basin Initiative and the Generalized System of Preferences.

A number of business and labor groups in the U.S. have opposed the accord as well, fearing that competition from low-wage Central American countries would encourage outsourcing and lead to cheaper imported goods that would skewer the U.S. domestic market. To counter this argument, U.S. proponents of CAFTA claim that the pact would make it less likely for factories and businesses to move to China where labor is even cheaper. The proximity of Central America to the U.S., they say, will serve as an incentive to keep businesses in the region.

Human rights activists opposed to the pact claim that the Bush administration failed to incorporate a requirement for signatories to uphold universal workers rights, such as outlawing child labor, which is a pervasive problem in Central America. In its current form, CAFTA encourages nations to abide only by their current labor laws. Ironically, these countries suffer from the same ineffective labor regulations and poor work standards that the U.S. State Department, the International Labor Organization, and other human rights-oriented enterprises have criticized over the years for rampant abuse by their officials.

The pending ratification of CAFTA and the dire consequences associated therein have won the attention of Guatemalan Bishop Monsignor Alvaro Ramazzini, who declared in front of demonstrators in San Marcos, Guatemala on March 10 that "CAFTA is much more than a simple trade agreement, as it includes a range of mechanisms that combine prohibitions on governments with rights for foreign investors on such issues as investment, national treatment, intellectual-property rights, market access, public services and access to bidding on public contracts. If implemented, CAFTA will transfer privileges for corporations into rights." Like many of its other opponents, Bishop Ramazzini fears that CAFTA would give foreign companies the ability to exploit workers once they gain status similar to domestic ones.


Mexico and NAFTA – a Lesson Learned?

Many of its opponents believe that CAFTA is another NAFTA in disguise. When NAFTA was created, the signatories presumed that it would open markets for U.S. goods and services, create high-paying jobs in the U.S. and increase both countries’ prosperity. However, after more than 10 years later, Mexico has seen little such prosperity and many would argue NAFTA has caused an enormous and negative social impact there. Arguably, environmental degradation, heinous labor conditions and poor living standards have been exacerbated by this agreement. In the U.S. alone, NAFTA already has caused the loss of nearly 900,000 jobs and helped create a $111 billion trade deficit with Canada and Mexico. According to AFL-CIO President John Sweeney, as reported in The Boston Globe ("A bad deal on free trade," March 21, 2005), this NAFTA deficit is 12 times higher today than 10 years ago.

Although investments and exports have risen, opponents of NAFTA claim that it has increased inequality and poverty while reducing real wages for the vast majority of Mexican workers. One million Mexican farmers have lost their land due to low-priced, subsidized U.S. agriculture exports now swamping their country. Another reflection of NAFTA’s cloudy success story is that investors in Mexico maquiladoras assembly plants are moving their assets to China where human labor is significantly cheaper.

Overall, both CAFTA and NAFTA are based on the logic that the end justifies the means-a rationale which puts revenue and short-term profit ahead of human rights, environmental sustainability and decent living standards. Critics argue that the neoliberal reforms carried out by thegovernments end up facilitating one goal: the further concentration of wealth among the rich, regardless of its effects on the destitute sections of the populace.


Berger: Mr. Nice Guy Becomes Mr. Not-So-Nice-Guy

Guatemala has had continued problems of political fragmentation, social exclusion and criminal violence. In 2001, violent crime killed 8,120 people and the number increased to 8,767 in 2002, according to the federal attorney general’s office (Associated Press, "U.S. Releasing Military Aid to Guatemala," March 24). One year after Berger took office, various crises continue to plague his administration. Incidents of assault, kidnapping and homicide more than doubled in 2004, with at least 2,000 murders and an alarming spike in the number of violent crime against women.

Instead of helping Guatemala tackle its insecurity crisis, the Bush administration has managed to cut development aid to Guatemala by one third, from nearly $60 million in 2002 to $38 million in 2005 (The Miami Herald, "Emerging from the darkness," March 20). Ironically, Washington has decided to grant $3.2 million in military aid to Berger’s armed forces for their overall progress. The aid is intended for training and modernizing the military, which while having decreased in size from 27,000 to 15,000 under Berger’s and previous administrations, continues to pose a threat to the population. The proposed reform is to renovate its forces for peacekeeping missions instead of domestic counter-guerrilla warfare as it had often done during the 1980s. Berger’s use of the military to suppress a peaceful demonstration was little short of a shocking reversion to the bad old days when Guatemala was the worse human rights violator in the hemisphere.

Although the human rights situation in Guatemala has once again deteriorated after some slight improvement in the 1990s, perhaps the U.S. has chosen to make the aid available to Guatemala as a reward for its acquiescence to CAFTA and its participation in peacekeeping efforts in Haiti. DefenseSecretary Donald Rumsfeld may have been somewhat overly optimistic when he proclaimed on March 24 that he was very impressed by the reforms that have been undertaken in the Guatemalan armed forces. The fact is that the Guatemalan military was guilty of notorious human rights abuses in the country from 1960 to 1996, when it slaughtered approximately 200,000 Guatemalans, mainly poor indigenous Mayans. The military remains unrepentant.

If the Bush administration successfully manages to ratify CAFTA, it must demand that the Berger government deal with its country’s chronic problems by strengthening implementation of the peace accords and addressing the plight of Guatemala’s poor. It would be beneficial to U.S. policy makers to pay greater attention to Guatemala because it possesses the largest economy, population, and one of the largest militaries in Central America, and its success at addressing its own problems would be pertinent to regional stability.


What the People Really Want

Although prospects for the passage of the "state-of-the-art" trade agreement (as it has been referred by the Office of the U.S. Trade Representative) have dimmed somewhat as the opposition gains momentum, the U.S. Congress is planning to hold CAFTA hearings on April 6 and vote on the issue by May 30. The Bush administration will be hard pressed to make the case that CAFTA is good for the U.S. economy and the well-being of its citizens, as well as for the 45 million Central Americans from the six countries involved. Lessons must be learned from NAFTA so that the same mistakes are not repeated. What NAFTA tells us is that record numbers of Mexicans had to flee to the U.S. in search of jobs after their old jobs in Mexico had been eliminated by the trade pact. If CAFTA is implemented, the same is likely to occur, as several million more Guatemalans and Salvadorans will join the existing millions from those countries who have already entered the U.S. without documentation.

The incorporation of labor rights in a fair-minded CAFTA pact must be on par with internationally accepted labor practices, such as the right to engage in collective bargaining, the right of freedom of association, the elimination of forced and child labor and the ability to work free from discrimination so that poor workers are no longer mercilessly exploited. But most importantly, if the people of Guatemala demand a national referendum to express their opinions democratically, President Berger must make this demand a priority and grant it.

XUAN-TRANG HO is a research associate at the Council on Hemispheric Affairs.