Progress in the Alliance

To most Americans the movement of U.S. Latin American policy from "gunboat diplomacy" through the era of the "good neighbor" to the Alliance for Progress probably marks an improvement, and no doubt most Latin Americans would agree. Many have felt for some time, however, that new efforts and perhaps some change of course are needed if the goals of the Alliance are to be reached. (The point was stressed by Harvey Perloff in his book Alliance for Progress, published in December for RFF by Johns Hopkins Press.) With this in mind, representatives from 21 Latin American nations met in Viña del Mar, Chile, early in the year to consider the region's relations with the developed countries, particularly the United States, on matters of trade, aid, and development.

The meeting produced a set of proposals—known as the Consensus of Viña del Mar—which was subsequently presented to President Nixon at a White House meeting with Gabriel Valdez, foreign minister of Chile. The President made no immediate response, as the Administration was still in the process of formulating its Latin American policies. When finally these were revealed, however, they proved to be highly responsive to the Latins' desires on key issues. The result may be to give new impetus to the Alliance and new strength to U.S. trade relations with Latin America.

Few, if any, of the proposals in the Viña Consensus are new. There are, however, some significant changes in emphasis. Early in the life of the Alliance the Latin Americans put considerable stress on increasing grants of aid as a way of meeting their rising needs for foreign resources. In the Viña Consensus official grants received relatively little attention. Instead, emphasis is put on increasing the flow of loans to Latin America from governments, international financial agencies, and private enterprise, and on ways of easing the burden of servicing these loans.

The question of debt service, in fact, probably receives more attention in the Consensus than in any previous statement dealing with these issues. The point is made that debt service charges have risen so much in recent years that, coupled with increasing repatriation of profits, they have largely offset the flow of foreign resources into Latin America, even though this flow is considerably greater than in the early years of the Alliance. If present financing terms are not eased, the debt service burden will become even heavier in the future. Hence the Latins want to renegotiate existing loans to achieve longer maturities, if not lower interest rates, and they want a similar easing of terms on the higher volume of loans they will need in the years ahead.

The Viña Consensus also marks a significant change in thinking about the role of exports in Latin American development. The region traditionally has been an exporter of primary products, and for many years the Latins have stressed the damage inflicted on their economies by the tendency of the prices of these commodities to fall relative to the prices of manufactured goods. In the Consensus this theme is muted. To be sure, attention is given to removing barriers to exports of primary products in markets of the developed countries, and to ensuring "fair" prices for these products. However, the main argument is that Latin America must expand its exports of manufactured and semi-manufactured goods to the developed countries.

The Latins recognize that most of their manufacturers are high-cost producers and that they must contend with tariffs, quotas, and other protectionist devices used by the developed countries. The Viña Consensus wants these trade barriers removed. It asks the developed countries to put into effect a system of general, nonreciprocal, nondiscriminatory tariff preferences favoring exports of manufactured and semi manufactured goods of all the less developed countries, not just those of Latin America. The nonreciprocity feature means that the less developed countries would maintain existing barriers to imports from the developed countries. The nondiscriminatory feature is aimed at removing the trade preferences now granted by European countries to their former colonies, and would, therefore, be of special benefit to the countries of Latin America.

The U.S. response to the proposals set out in the Viña Consensus was given in the President's address of October 31 on Latin American policy and in his subsequent comments when the Rockefeller report on the same subject was released. On one issue of major concern to the Latins—increasing the flow of foreign resources to Latin America—the President made no promises. He touched on the matter only in connection with private foreign investment, which he commended highly to the Latins while at the same time warning them obliquely that such investment might be frightened off by too frequent expropriations.

In several other respects, however, the President moved some distance toward meeting Latin wishes concerning foreign assistance. He indicated that loans under AID programs would no longer be "tied" to purchases in the United States, but could be spent in Latin America also. While the Latins probably will regard this as an improvement, its significance is limited since many the goods needed for development either are not produced in Latin America or can be bought more cheaply in the United States.

With regard to the growing burden of foreign debt service, the President's October address suggested only that the Inter American Committee for the Alliance for Progress (CIAP) urge the international financial agencies to recommend possible remedies. But in releasing the Rockefeller report he revealed that he had instructed Treasury Secretary Kennedy to begin studying ways to refinance the huge debt now owed by Latin American countries to the United States.

It was the President's position on trade policy that elicited the greatest interest, and probably some surprise, among Latins and others concerned with the region. On this key issue he made a major concession. In his October address he noted the importance to Latin America of increasing its exports, not only of traditional primary products but also of manufactured and semi-manufactured goods. With particular reference to the latter, he recognized the need for readier access to the expanding markets of the developed countries, and he committed himself to a number of measures to assure this. The most important of these by far, and the one marking a major shift in U.S. foreign trade policy, was the pledge to press the developed countries of the world to grant generalized, nondiscriminatory tariff preferences to the less developed countries on a wide range of latter's exports and with no ceilings on the amounts so privileged. In releasing the Rockefeller report, the President not only renewed this pledge but added that if the other industrial countries fail to act promptly to adopt the preferential system for all less developed countries, the United States will unilaterally extend such preferences to the Latin American countries alone.

The impact of this policy on Latin exports, of course, cannot now be foreseen. In particular, it remains to be proven that the region's exports of manufactured and semi-manufactured goods can compete effectively in the industrialized countries, even with the help of preferential tariffs. But the United States, in a major shift, is now committed to an even more forthcoming trade policy for Latin America than the Latins themselves had proposed at Viña del Mar Mar. For years U.S. spokesmen at world trade conferences vigorously resisted all proposals to establish preferential tariff systems. At the United Nations Conference on Tariffs and Trade, held in Geneva in 1964, the United States again was the foremost spokesman against preferences. For this it was subjected to considerable criticism by the less developed countries generally, and by those of Latin America in particular. Now the latter have at last won their point.