Chile and US Explore Bilateral Agreement, with Implications for the FTAA and Mercosur

 
Chile's return to the bilateral negotiating table with the United States on the eve of a Mercosur presidential summit could undercut the FTAA more than Mercosur. The US-Chile negotiations could signal the return of bilateral trade relations that George W. Bush hinted at in his Latin American policy address at FIU during the presidential campaign. In the short run, Chile's move away from Mercosur undermines Brazil's ability to carry out an independent trade policy.

The decision could have even greater implications for Mexico's new president, Vicente Fox. With the ratification of a free trade agreement with its Central American neighbors, Mexico hopes to be the conduit for trade between the US and the countries to its south. The untarnished Fox, sweeping clean 70 years of PRI rule in Mexico, is an attractive alternative to the frayed image of the Cardoso government in Brazil. If, as it appears, George W. Bush becomes the next US president, he could be more amenable to the idea of dealing with Latin America through his comfortable bilateral relation with a Fox-led Mexico. The FTAA is not a priority for Mexico, to put it lightly. After all, Mexico already has NAFTA and a series of bilateral agreements throughout the Americas as well as with the European Community.

Brazil will become further isolated as Argentina, pressured by its economic crisis, is driven into the arms of the United States. Jos� Luis Machinea, Argentina's economics minister, has said that "Chile should be congratulated" for its action and that his country too "should accelerate its integration" into the free trade area with the United States. For this to succeed, Argentina will have to return to former President Carlos Menem's tactic of attempting to tie the country's economy and political loyalties to Washington. This may have been possible for Menem in a "Nixon to China" parody after decades of Peronist anti-US posturing. but it will not be easy for a Radical government tenuously allied to the left-wing Alliance.

Still, it was a provocation for US Ambassador to Brazil Anthony S. Harrington, a political appointee, to announce that "a free trade agreement between Chile and the United States will be an important building block in the creation of an equitable and balanced Free Trade Area of the Americas." This reference to "building blocks" is a malicious misuse of a term that Brazil has been championing in seeking first to unite South America before entering into serious FTAA negotiations with the US. It also seems farfetched to believe that, as the New York Times commented, "If talks between the United States and Chile, which are expected to start this month, lead quickly to an agreement, American and European investment could be drawn away from Brazil and toward Chile." Brazil has 170 million inhabitants. Chile has 15 million. Need we say more?

The real news is the blow to Brazilian leadership and the stability of South America represented by Chile's decision. Chile's retreat from a firm agreement with Mercosur significantly reduces Cardoso's ability to assume the leadership and pull together the faltering economies and democracies of South America. A stronger, more cohesive South America was certainly more in Brazil's interest than in that of the US, as evidenced by the lack of US interest in gaining South American consensus on the Plan Colombia. The US is more interested in big emerging markets; Chile's announcement helps make Brazil, Argentina and Mexico easier to manage - one by one.

The US position is not hegemonic, however. A stronger and more stable South America, and especially stronger Brazilian and Argentine economies, are important for Florida. Mexico is not a key a trading partner for the state or a major source of tourist dollars, whereas South America certainly is. Without a champion for an all-inclusive development effort for all of Latin America and the Caribbean, the market on which Florida's economy depends will not grow and could even shrink. The US economy could and quite possibly will concentrate on a limited number of large Latin American markets. This strategy might not be in the best interests of Florida.