U.S. Department of State, Peter F. Romero, "Western Hemisphere Relations in the 21st Century: The U.S. Perspective," Acting Assistant Secretary for Inter-American Affairs before the Miami Herald Conference on the Americas, Coral Gables, Florida, September 18, 1998, Released by the Bureau of Inter-American Affairs, September 18, 1998

It is an honor for me to address this second annual conference. Once
again, the Miami Herald has assembled a distinguished group of speakers.
And from the faces which I recognize in the audience, I can see that I
have the pleasure of addressing an audience which is highly
knowledgeable about Latin America and the Caribbean. I look forward to a
stimulating exchange during the question-and-answer period.

I'd like to lay out very briefly some of the key points of U.S. policy
toward Latin America and the Caribbean as we move into the 21st century.
I assume that the turmoil in financial markets is foremost in many minds
today. Indeed, it is one of my major concerns, but I would like to
discuss this critical issue within a broader context.

Let me start by outlining for you the major goals of U.S. policy toward
the region. These goals represent a continuum from previous U.S. policy,
reflecting our long-term interests in the region but also the growing
closeness of our relationship. We want to:

-- Protect U.S. citizens and our borders.
-- Expand economic growth and prosperity.
-- Consolidate democratic institutions and promote respect for human
-- Improve judicial systems to deliver transparent, equitable justice
for all citizens.
-- Combat transnational crime and stem the flow of illegal narcotics to
the United States.
-- Increase sustainable development and sound environmental practices.
-- Improve education and health.
-- Reinforce military subordination to civilian leadership and support
military professionalization.
-- Strengthen national institutions in each of these areas.

Perhaps more important than our specific objectives is our general
approach. U.S. leadership today expresses itself largely through
multilateral actions undertaken in the spirit of cooperation among
equals. Our policies and programs are aimed at building the capacity of
our neighbors to achieve these goals cooperatively. The Miami and
Santiago Summits provide us with a special policy tool to push forward
in all these areas.

As a long-time observer of the U.S.-Latin American relationship, I am
struck that we have already entered a "new age" in our relationships
within this hemisphere--well before we actually enter the new century
and the new millennium.

First, we are now looking at Latin America in a broader focus--the
Western Hemisphere. For the first time ever, there is wide-ranging
consensus in the whole hemisphere--Latin America, the Caribbean, the
United States, and Canada--on basic political and economic values, on
democracy and free markets. The Summit of the Americas reflects that. So
does the launching of the negotiations for a Free Trade Area of the
Americas. Canada, more than ever, is not only active but a leader in
hemispheric affairs. It is not only the current chair of the FTAA
negotiations but will also chair the next summit and the OASGA in the
year 2000. To reflect this new reality, Secretary Albright decided this
summer to establish a new Bureau of Western Hemispheric Affairs in the
State Department, to cover all the countries of this half of the world.

Second, our policy toward the Western Hemisphere is no longer dominated
by ideological battles. For the past 200 years, history could be
described as a battle between different systems--monarchy vs.
republicanism, conservatives vs. liberals, capitalism vs. socialism,
democracy vs. authoritarianism. Today, the challenges before us are far
more complicated, with outcomes far less certain. They put the essential
needs and expectations of the individual citizen at the center of
government legitimacy.

All this, of course, has resulted in a new U.S. partnership with Latin
America. The word "partnership" has been widely used in the past to
describe U.S.-Latin relations, but in my view now it accurately
describes the reality of that relationship. More and more of our
problems cross borders. Combating drug trafficking, maintaining a safe
environment, fighting terrorism, fighting the spread of disease--these
and other issues require the countries of the hemisphere to work as
partners to develop solutions. The summit process and the FTAA provide
us an opportunity to do so. As in any partnership, all of the
participants share in both the benefits and the obligations.

"Integration" is another word which has been widely used in the past,
but it is only now that there is real momentum toward economic
integration in the hemisphere. The potential benefits of the summit
process and of the FTAA are enormous; they can be life-transforming for
the vast majority of our citizens. Our principal challenge for the next
decade is to make sure that we realize that potential, and that the
benefits of integration will flow to all the people of the Americas, not
just a chosen few.

I have spoken so far in terms which may be taken to imply that a Golden
Age is upon us. Not so, or at least not yet. I am optimistic, but also
realistic. There are formidable obstacles to achieving our goals. Let me
enumerate just a few and outline our basic strategies to overcome them.

As I mentioned before, the turmoil of the last few weeks in Latin
American financial markets has been a major concern to the U.S.
Government not only for how it will affect our foreign policy, but also
how it will affect the people of the hemisphere. Is this the end of our
vision of a democratic and prosperous community of the Americas?

I believe not. First, the whole issue of global financial instability is
a major priority for the United States. President Clinton made this very
clear in a far-sighted speech several days ago at the Council on Foreign
Relations. He said that the United States had an "inescapable
obligation" to lead and to seek ways to find concrete solutions to the
recent instability in global financial markets. He outlined a 6-point
program to help contain the spread of financial contagion and to spur
economic growth. On Latin America, President Clinton said:

"We have to be ready to respond immediately and with financial force, if
necessary, to the currency crisis if it spreads, especially if it
threatens the economies of Latin America, where nations have struggled
to make progress to do the right thing only to find themselves buffeted
by economic storms outside of their control."

He also said he would be urging "the major industrial economies to stand
ready to use the $15 billion in IMF emergency funds to help stop the
financial contagion from spreading to Latin America and elsewhere."
(Note: He is also urging our Congress on IMF replenishment legislation.)

Global markets responded favorably to the President's commitment to
restore stability to global markets and to seek to reform the
international financial architecture. Those measures can begin to repair
some of the damage done to several Latin American economies caused by
the fraying of investor confidence in emerging markets, and by recent
drops in commodity prices such as oil. We must remember that it was the
financial conditions of countries in Asia and of Russia that triggered
the turn-around in investor confidence in emerging markets in general.

Overall, a decade of market-based reforms has made the economies of
Latin America stronger and more resilient than they have ever been. I am
reminded of the well-known economist, Arnold Harberger, who points out
that economies, like the human body, need to be maintained in good
condition. Exercise and proper diet do not guarantee good health, but
they ensure that when the inevitable malady strikes, the body will be
better prepared to deal with it and recovery will be faster. In effect,
economic reforms properly done make an economy more limber in dealing
with new challenges, more resilient in dealing with setbacks, and more
prosperous in times of good health.

Latin America's commitment to the market model has already been tested
once, in the financial crisis which followed the Mexican devaluation of
the peso in December 1994. That crisis left a lot of suffering in its
wake. But the Mexican economy recovered quickly and has been growing
since. That crisis reinforced the commitment of the region's leaders to
continue with market-based reforms within a framework of democracy and
hemispheric cooperation. In some ways, the crisis actually strengthened
the region's economic institutions.

In 1997, Latin American economies as a whole had their best performance
in a generation, with real growth of 5% and inflation of 11%--the lowest
in 50 years. As Secretary Rubin said when he met with Latin America's
finance ministers and central bankers 2 weeks ago, this region is the
world's "most forward-looking" in carrying out reform.

It is unfortunate that many investors look at emerging markets as if
they are all alike. The savviest investors, of course, differentiate the
strong reformers from the others, and evaluate each country on its
merits. In this age of instantly available information, our challenge is
for investors to absorb it and make informed decisions that
differentiate between countries by way of their macro-economic

Inevitably the new spirit of partnership in the hemisphere will be
tested as we address the lower growth and social problems resulting from
this crisis. But by working together in bad times as well as good, we
will develop an even stronger partnership and trust among us, and
eventually stronger democratic and market institutions.

Another one of my major concerns is to explain more clearly and
persuasively to my fellow-citizens that we have an enormous stake in our
relations with our hemispheric neighbors. U.S. trade with our
hemispheric neighbors has been growing faster than with any other region
in the world. Canada has long been our largest trading partner. Mexico
is now our second-largest, having overtaken Japan last year. Our
merchandise exports to the hemisphere in 1997 amounted to $285 million,
substantially more than to Western Europe ($155 million), or the Pacific
Rim ($194 million). The projections are that by the year 2010 this
hemisphere will be a larger market than Western Europe and the Pacific
Rim combined. I believe that only the most knowledgeable Americans know
that trend, or the fact that U.S. trade in the broadest sense (goods and
services of both imports and exports to the world) now accounts for
close to one-third of our GNP. Or the fact that air travel within the
hemisphere is projected to pass travel to Europe plus the Pacific Rim by
the year 2008. My sincerest expectation is that along with the
"delights" in the U.S. that Latins will enjoy, that my fellow Americans
will sample the "flavor" of the Caribbean islands, the Amazon, the
Galapagos and the Pampas and conclude (as I have) that there is much
that binds us together by way of a shared history and values and a dream
of a better future.

Another key issue within the United States is to demonstrate that trade
is not a zero-sum game, where one country's gains are offset by another
country's losses. This widely held assumption is certainly reinforced by
the actual language of trade negotiations, including such terms as
"trade concessions" and "reciprocity." Somehow we need to get across the
notion that the U.S. economy--like any economy-- benefits not only from
opening up other markets for our exports, but also from opening up our
own market to imports. It is ironic that "trade" and especially
"imports" have become dirty words to much of the public at a time when
the U.S. is experiencing extraordinarily good economic times--the
longest period of sustained growth in postwar history, combined with
remarkably low inflation. Since 1993, about 13 million jobs have been
created, and the unemployment rate is the lowest in a generation. With
the budget deficit approaching zero, we are now engaged in debates about
what to do with the coming budget surplus--a situation which was
unthinkable even a few years ago. The globalization of the U.S. economy
has contributed enormously to this happy state of affairs. But the vast
majority of U.S. citizens are unaware of the connection between non-
inflationary growth and open markets.

Clearly, when it comes to trade and globalization, the attention of the
media and the public is focused primarily on those cases where jobs are
lost and the lives of individual families (and sometimes communities)
are disrupted. Trade is often blamed when in fact it is technological
change which accounts for the biggest share of changes in production and
employment patterns.

Nevertheless, it is undeniable that open trade may cost some jobs and
may lower wages in those parts of the economy where we are less
competitive. Generations of economists have shown that such losses are
more than offset by gains to workers in other sectors, and society as a
whole experiences a net benefit. Somehow, we must make that clearer to
our public.

And we must continue to mitigate the painful effects of job losses where
they do occur. We must above all maintain the U.S. economy's
extraordinary job-creating power by continuing sound economic policies.
And we must continue to invest in our workers, both through retraining
and other assistance to help them adjust, and through education to
prepare our young people with skills for the 21st century.

This is a challenge which all hemispheric leaders have in common--the
need for continual reform and never-ending renewal. Building democracy
and free markets and addressing the basic needs of the people will
always remain a work in progress. American prosperity and democracy are
built on the assumption of equal opportunities. But with galloping
globalization and the dizzying pace of technological progress, those
individuals who are ill-prepared will not get the benefits of the modern
economy. The challenge is to make our people not only literate, but also
science literate and computer literate and politically literate. Our
electorates need to be knowledgeable and involved. And we need to help
our people continually update their skills in response to new technology
and new consumer demands. Over the long run, universal quality education
(and whether it is provided) will be key to achieving our vision of a
democratic and prosperous community of the Americas.

As you know, education--improving its quality and expanding its
availability--was a major theme of the Santiago Summit in April. Indeed,
the Santiago Plan of Action is a commitment of the Americas to move into
what has frequently been called "a second generation of reforms"--to
expand the capacity of all our citizens to participate in the economy
and society. The World Bank, IDB, and USAID have responded to the
leaders' call by programming $8.3 billion of loans and grants for
education projects in this hemisphere between now and 2001. Today's
financial crisis shows more forcefully than ever that appropriate macro-
economic policies are indispensable. And also that they are not enough.
Resilient societies are those whose institutions are efficient,
transparent, and responsive to present and future human needs.

With technology shrinking the globe at an ever faster rate, issues which
were not so long ago considered to be purely domestic--like the
environment, drugs, crime, or health--are now clearly transnational. And
areas which were considered too sensitive even for international
dialogue--like human rights, corruption, or judicial reform--have now
become the subjects of multilateral cooperation.

We in the Americas have an extraordinarily ambitious agenda before us.
It will require extraordinary effort and extraordinary leadership to
achieve it. But I see no alternative to this agenda if we are to fulfill
the expectations which the ideas of democracy and free markets have
aroused in the people of the Americas. The hemisphere is blessed with a
wealth of natural and human resources. I am confident that the coming
century will witness some of our most remarkable, collective
achievements ever. Thank you for your attention.

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