HOME DV NEWS SERVICE ARCHIVE SUBMISSIONS/CONTACT ABOUT DV

CAFTA Thumb Screws

The Nuts and Bolts of "Free Trade" Extortion

by Toni Solo

Dissident Voice

October 14, 2003

With the Cancun trade talks buried, the United States and the European Union are busy working out preferential bilateral and regional trade deals. These deals will pre-empt moves by developing countries to get some justice out of the World Trade Organization and its fellow enforcers of global "free trade" pillage, the World Bank and the International Monetary Fund. Central America is among the first to savour the bitter taste of the post-Cancun ground rules as the United States hastens to close its grip even tighter on the strategic prize of the isthmus.

The Central American Free Trade Agreement (CAFTA) is inseparable from Plan Puebla Panama [1] in the US hemispheric strategy to consolidate regional political and economic dominance. Large scale investment envisaged under Plan Puebla Panama involves linking Mexico to Panama through Central America. CAFTA is also a necessary step towards creating a Free Trade Area of the Americas. Central America will be crossed by north-south road and maritime links to move goods more quickly east-west across the isthmus via road and rail corridors.

The energy imperative

As usual energy is the key. In 2002, around 600,000 barrels a day of crude oil and petroleum products passed through the Panama Canal. Of that around 63% was moving from the Atlantic to the Pacific. Crude oil made up about 44% of the oil moving from the Pacific to the Atlantic. As energy needs increase and oil reserves elsewhere diminish, the influence of energy transnationals is increasingly driving US and European policy in Latin America.

The first stage of Plan Puebla Panama is the Central American Electrical Interconnection System (SIEPAC). Due for completion in 2006, SIEPAC will install power lines connecting 37 million consumers in Panama, Costa Rica, Honduras, Nicaragua, El Salvador, and Guatemala. The cost is an estimated $320 million. Subsequent stages will develop power links between Guatemala and Mexico and also integrate Belize into the system. A long-term objective is to provide a market for gas and oil exploited by multinational energy companies in Ecuador, Colombia, Venezuela and Mexico.

The wider effects of Plan Puebla Panama will damage local fisheries and agriculture, destroy the already fragile biodiverse environment and multiply maquila sweatshop "free trade" light industrial zones. Political implications of the strategy are profoundly anti-democratic. The constantly encroaching demands of multinational business will mean persistent denial of local people's rights and interests.

Already devastated, the region's remaining precious forestry reserves like the Bosawas reserve in Nicaragua will virtually disappear. Water resources will be ruthlessly exploited by the multinational corporations that take them over. Weak central governments will be unable to control pollution as oil and gas exploration and exploitation increase.

The US and the old colonials

European and US corporate investment buzzards have already landed. They include among many others, International Paper, Monsanto, Coastal Power, Enron, Teco Energy, Duke Energy, Harken Energy through its links with MKJ Exploration and Global Energy Development, Applied Energy Services, Spain's ENDESA, Union Fenosa and Iberdrola, Portugal's Eletricidade de Portugal, the SIT Global dry canal consortium, Bell South, European exploration firm Perenco, Scudder Latin American Power Fund, Sweden's Telia Swedcom and the Dutch ING Bank. Their operations in the region are accompanied and facilitated strategically by the Inter-American Development Bank and the World Bank through straitjacket conditional loans to governments, further increasing the region's external debt.

So people in Central America continue to lose the benefits of their natural resources and infrastructure to multinationals from Europe and the United States. Their governments are coaxed or coerced into taking loans from the World Bank, the Inter-American Development Bank and the IMF to subsidise processes and infrastructure needed to facilitate the multinational jamboree. The multinationals pick up cut-price concessions and preferential investment deals so as to cream off exorbitant profits. The Central American peoples pick up the tab in higher utility bills, public service cutbacks and escalating debt repayment, decade after decade.

CAFTA - the Nicaraguan experience [2]

CAFTA itself involves a tiny proportion of US trade in Latin America and only 0.8% of overall US trade. But it is a vital precedent for the US to carry into future deals with larger blocs like Mercosur, made up of Brazil, Uruguay, Paraguay and Argentina. As ever, by virtue of its position, Nicaragua is a prime target. Its experience is emblematic for the region as a whole.

It may cost Nicaragua as much as US$1 billion to implement all the provisions of the final CAFTA package. That money will come from loans that will add to the country's already crippling debt. One simple example of this is the introduction of new requirements for farm produce under the US Anti Bio-Terrorism law. Central American produce will have to satisfy stringent inspection, registration and certification requirements before being allowed into the US. That administrative burden will be borne by the region's governments and passed on to producers, cutting their margins even more. Nicaragua's experience of the US CAFTA approach is a touchstone for any country facing US trade negotiators.

US strategy in the CAFTA talks with Nicaragua has been to press for haste and then paradoxically postpone vital issues until the latest moment possible. This maximises the pressure on Nicaraguan negotiators to agree to the deal on offer from the US in order to make the agreed deadline for the whole package. The US team has deployed sharp tactical moves within that general strategy, for example switching negotiating personnel without notice so as to disorientate their Nicaraguan counterparts - a kind of good cop-bad cop psychological warfare.

Another favorite has been to present new undiscussed proposals long prepared by the US team but completely new to the under-resourced Nicaraguans. The Nicaraguans then have to patch up a position in short order with no time to work out in detail the consequences of what they end up agreeing. Ecological issues are almost entirely absent from the substance of the talks. This frees up the option for multinationals to sue Nicaragua for indemnity should it subsequently attempt to cancel CAFTA provisions so as to protect the country's already ravaged natural environment.

In the background lies the anxiety of the Nicaraguan government to qualify for the Highly Indebted Poor Countries (HIPC) debt relief initiative. To do so they have to meet conditions imposed by the World Bank and the IMF. As usual the requirements include privatization and interference in the country's domestic legislation. In this case the privatization bazaar includes completion of sale of the public telephone utility ENITEL [3] and the public energy company Hidrogesa. A favorable report from the US CAFTA trade representatives will help Nicaragua's case with the IMF and World Bank HIPC pawnbrokers.

"Free market" intervention

These pressures are compounded by bullying from individual US companies. The intervention of Bell South in Nicaraguan telecommunications policies is a typical example of a multinational pressuring a weak national government. The Nicaraguan communications regulator Telcor had accepted market proposals from former state owned phone utility Enitel, still not entirely privatized. Bell South disliked the deal and went crying to US Trade Representatives Robert Zoellick and Gloria Blue asking the US government to refuse further concessionary trade deals with Nicaragua until Bell South's interests were satisfied.

Nicaragua is ill-placed to resist these strong arm tactics. It loses out across the board. In terms of public health, environmental pollution, agriculture, CAFTA is the worst of all worlds. But Nicaragua is in deep economic crisis and has few options. The Ministry of Labour announced in September this year that unemployment and underemployment is now at 45% with over 50% of economically active people working in the informal sector. These official statistics certainly understate the reality.

Against that background, pro-business negotiators gush positive about CAFTA's ability to attract investors. Trade officials enthuse that at least four textile companies are interested in moving to Nicaragua as well as a US company considering whether to base its prefabricated housing production in the country. Chiquita (United Brands) has said it is interested in moving its pineapple production to Nicaragua. These are the pathetic employment incentives on offer to justify the CAFTA package.

That kind of investment can only bode ill for Nicaraguan workers. Even now, lock outs and arbitrary dismissals of unionised workers are common in Nicaragua's free trade zones. CAFTA will make things worse. Trade negotiators have referred ominously to US concerns about the Nicaraguan labor code pointing out that CAFTA has made available over US$6 million for regional "improvements" to local employment law.

Public interest and economic policy - a seamless web

In health policy CAFTA will make it harder for Nicaragua to produce or import generic medicines to meet its health needs. The US wants to increase the life of patent controls from 20 to 25 years. No concession is being made to exempt medicines for epidemic illnesses like AIDS, tuberculosis, malaria or other worldwide diseases. Like so much else vital to ordinary people in Nicaragua, the CAFTA talks assign a low priority to public health and the implications for it of economic policy.

Mountain leprosy (leishmaniasis) has now become endemic in Nicaragua in the so-called "mining triangle" between the towns of Jinotega and Matagalpa and the northern Atlantic Coast. But cases are also appearing in the west of the country. 2200 cases were reported in 2002. Medical observers believe the increase is due to increased migration of rural families to mountain areas in search of land. Rural migration patterns have changed over the last year. Rather than move to the capital Managua as in the past, rural families are moving to local urban centres and settling humid inland areas of the Atlantic Coast.

This migration is closely linked to the crisis in production of maize, rice and beans and the climate change that has made subsistence farming on the increasingly dry Pacific Coast untenable for thousands of smallholders. Finance available nationally for basic grain production is less than US$1 per manzana (1.4 acres). At a time when Nicaragua needs to double its basic grain production to be self sufficient in those foods, commercial banks no longer offer finance to basic grain producers. What finance exists comes almost entirely from non-governmental organizations. While basic grain production is left to wither away, Nicaraguan trade negotiators argue for even more development of resource-wasteful cattle farming.

The encroaching desertification of northwest and north central Nicaragua, (and the bordering regions in neighbouring El Salvador and Honduras) makes water policy for the area of crucial importance. With water next up for privatization, consumer organizations and environmental groups in Nicaragua are pressing for an independent water authority to protect the public interest. But despite their calls being backed by the Natural Resources Ministry, the draft legislation promoted by the Ministry of Trade and Commerce contemplates handing Nicaragua's water resources wholesale to private companies with only notional regulation.

The argument offered against an independent water authority is that financing it would be too costly. That may well be the case on current trends. In September this year the Natural Resources Ministry declared it could not do its job for lack of funds. The budget assigned to the Ministry makes it impossible to carry out the environmental impact studies necessary to control industrial polluters.

"Disappeared" states unable to protect their peoples

The fundamental weakness of Nicaragua's government after over a decade of abject loyalty to neo-liberal economic recipes is evident from the budgetary cuts planned for 2004. Average cuts across all Ministries will be around 10% on the already meagre and inadequate allocations through 2003. Plans to cut spending on health, education and social services have already been announced. All the Central American countries except Costa Rica face the same dilemma with CAFTA.

Under-resourced, weak central governments of countries debilitated by decades of war and regional economic crisis find themselves negotiating against the clock facing a ruthless, well-prepared US team who have all the resources they need. The outcome will be a debacle for people in Central America on every front. It may well be true that CAFTA will create wealth for a small elite and for foreign businesses. But even that wealth will be spirited out of the region leaving governments weaker than ever and even more unable to meet the basic needs of their peoples.

CAFTA - a portcullis for "Fortress Western Hemisphere"?

One good way to understand the vision driving US policy in Latin America is to visit the web site of Global Energy Development Plc. [4] This company, quoted on the London Stock Exchange, is a subsidiary of Harken Energy, the vehicle George W. Bush used to dodge and deal his way into big business before the first Gulf War. Global Energy Development shares the same address as Harken Energy in Houston, Texas and all but one of its directors, all long time cronies of George W. Bush. President Bush has still to shake off suggestions of insider dealing while a Harken director back in 1990.

The site uses an interesting graphic to explain its strategic vision. Entitled "Fortress Western Hemisphere" the graphic is a map of the Americas from Alaska to Tierra del Fuego. One arrow curls around from north to south somewhere in the Atlantic. Another curls up south to north somewhere in the Pacific. The label explaining these arrows says succinctly, "Latin American resources will supply North American demand". The language is self-explanatory.

They mean what they say.

Global Energy Development Plc operates mainly in Colombia [5] and Panama but has interests in Peru and Costa Rica. Right now, Harken Energy's long time partner MKJ [6] exploration is about to sign a deal for exploration rights in the most promising area of Nicaragua, 8000 square kilometres off the country's Atlantic Coast. Harken and MKJ are moving into Nicaragua after having their hopes dashed on developing a similar field in Costa Rica.

The Costa Rican government cancelled development of the field following a negative environmental impact report. Harken initially sued Costa Rica under the rules of the International Center for the Settlement of Investment Disputes, a Washington based institution associated with the World Bank. Harken sought an astonishing US$57 billion indemnity (4 times Costa Rica's GDP) to compensate an investment of scarcely US$15 million.

Then, at the start of October this year Harken dropped its claim pending further action in the Costa Rican courts and more negotiations with the Costa Rican government. It is a fair surmise that Harken dropped its high profile case against the Costa Rican government so as to mollify opposition in Nicaragua to its presence there. Once countries like Nicaragua sign up to the CAFTA agreement, Munchausen-syndrome claims like those from George W. Bush's business associates in Harken Energy will be yet another weapon to intimidate impoverished national governments into giving multinationals what they want, backed up with the political, economic and military might of the United States.

Finding focus on the wider picture

Harken Energy and Global Energy Development merit careful monitoring. Earlier this year cash-strapped Harken nearly lost its AMEX stock exchange rating as a redemption deadline loomed for a term note. [7] Another shady Bush associate, Alan Quasha, also a former director of Harken, mobilised his family's Virgin Island based Lyford Investments to save Harken's skin.

After suspiciously complicated buy-back manoeuvres, Lyford now owns 62% of Harken. Quasha's intervention saved the day. Now with the deal in Nicaragua, signs of a possible settlement between Harken and Costa Rica, and reasonable exploitation news from Colombia and Panama, Harken's share price is edging up. Various factors will affect the market prices of Harken Energy and Global Energy Development.

Ratification of the CAFTA deal whose final details will be worked out in December this year is vital for US multinationals to be able to compete on preferential terms against their European rivals. Increased US support for Colombian President Uribe's neutering of state-owned petroleum company ECOPETROL and the terror campaign against rural families and trades unionists in oil and gas development areas will be seen as protecting foreign oil investments.

Markets will also view positively continued efforts by State Department regional policy hit men, Otto Reich, John Maisto and Roger Noriega, [8] to overthrow Hugo Chavez's democratically elected government in Venezuela. In Ecuador and Bolivia, the success of popular resistance to government attempts to sell off national resources hangs in the balance. CAFTA is an integral part of these wider events. Harken's and Global Energy Deveopment's share prices make an excellent barometer to see how well the Bush regime think they are progressing towards "Fortress Western Hemisphere".

Toni Solo is an activist based in Central America. He can be reached at: tonisolo52@yahoo.com

NOTES

[1] For Plan Puebla Panama see http://www.mesoamericaresiste.org/primeras/segundas/terceras/cuartas/rimbid.html;

http://www.eia.doe.gov (US Government's Energy Information Administration)

[2] Information on CAFTA and Nicaragua is drawn from reports through 2003 in the Nicaraguan dailies :

* El Nuevo Diario (www.elnuevodiario.com.ni)

* La Prensa (www.laprensa.com.ni)

with supplementary material on CAFTA from the NicaNet newsletter (www.nicanet.org)

[3] Honduran power company Emce and Swedish telecommunications company Telia Swedtel, bid US$33mn to win the first 40% of the privatization. Enitel employees hold the remaining 11%.

[4] Information on Global Energy Development Plc is from their web site:

www.petroassist.com/Oil&Gas/jump.asp?Group=G&ContactID=1317

[5] For Harken Energy in Colombia see: http://www.soberania.info/Articulos/articulo_028.htm

* Sean Donahue: The Other Harken Energy Scandal: http://www.counterpunch.org/donahue0712.html

[6] Information on Harken Energy and MKJ exploration dealings in Nicaragua from El Nuevo Diario, La Prensa, and in Costa Rica in:

* Tico Times (www.ticotimes.net)

* Costa Rica AM news (www.amcostarica.com)

[7] For Harken Energy and Global Energy Development stock and share information and analysis try the following:

* www.stockgroup.com;

* www.stockselector.com;

* http://finance.yahoo.com;

* http://cnbc.multexinvestor.com;

* http://www.bizjournals.com;

* http://www.theaxcess.com:

[8] John Maisto is US representative to the Organization of American States. Roger Noriega is Assistant Secretary of State for Western Hemisphere Affairs. Otto Reich is US Special Envoy for Western Hemisphere Initiatives.