hussain (ed) 2007 - west europe & the united

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WEST EUROPE, & THE UNITED STATES IN LATIN AMERICA:

COMPETITION, GRAVITATION, OR INSULATION?

Imtiaz Hussain

Department of International StudiesUniversidad Iberoamericana

Mexico [email protected]

Word Count:Abstract: 165

Text: 6178Appendices: 3393

Prepared for presentation at the International Studies Association annual convention,Chicago, February-March 2007
mailto:[email protected]:[email protected]


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Abstract:

With the 2006 Vienna EU-LA summit failing to enhance the 1999 Ro de Janeiro

summits inter-regionalism spirit, the place of Latin America in transatlantic trade is

reassessed from the familiar competition (Adler & Barnett 1998; Balassa 1961; Belous &

Hartley 1990; Deutsch, et al., 1957; Haas 1958; Nye 1971, et al.), gravitation (Tinbergen

1962; Head 2003; et al.), and insulation (Cardoso & Faletto 1979; Evans 1979; Cockcroft,

Frank, & Johnson 1972; ODonnell 1973) theses. Respectively articulating inter-bloc

rivalry, strongest economy pulls, and state introversion, these show (a) the United States

still remains the largest Latin trading partner, though with diminishing claims; (b) West

European countries collectively match the United States, though not under a European

Union label; (c) Latin countries trade more with each other; and (d) emerging Asian

economies show the fastest Latin trade growth rates. If these 1995-2004 patterns persist,

global trade restructuring would capture Latin America at its most diversified moment, in

turn attenuating gravitation and insulation theories while reformulating competition

counterparts.

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Introduction:

Perennially treated in the global political economy as an up-for-grabs arena, Latin

Americas unfolding 21st Century transformation could wreak empirical and theoretical

havoc. European influence, US dominance, and such unfolding forces as globalization,

diversification, and banding together not only demand empirical attention, but also impose

theoretical concerns. How do we explain these twists of events at the start of the 21st

century? What do they predict for the remainder of the century?

Previewing Findings:

A study of Latin trade directions between 1995 and 2004 finds the underlying

argument of intense inter-bloc rivalry during the 1990s (a) shifting trade from the United

States towards the increasingly larger and more confident European Union (EU) only

marginally; (b) US dominance as the largest Latin trading partner diminishing; and (c)

Latin trade increasingly remaining within Latin America. Yet, the sum of all these parts still

does not fully explain the trading whole. With booming Asian trade as the startling finding,

emerging economies like China, South Korea, and to some extent India, seem to be on a

pace to challenge their established counterpart, Japan, in Latin America, not to mention

West European countries and the US. Growing Latin independence from historically

dominant partners is a not too unimportant finding.

Theoretical Identity: The Long and Winding Road

Understanding developments on the ground necessitates appraising the drawing

board flux. Downsizing paradigms mirrors the trade diversification underway better.

Latin America did not become the theoretical melting pot, or even a playground, by

chance or choice. Dependence theory, for example, evolved in the 1950s, to explain

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European colonialism and US corporations,1 only to be modified as dependent development

or bureaucratic authoritarianism in the 1970s.2 US neorealism also entered Latin America to

account for the Cuban deviation, and, in the diluted form of interdependence,3 the Central

American wars of the 1980s. Once the Cold War was over, a reinvigorated European

Commnity (EC) not only resurrected Latin Americas failed integrative efforts of the

1960s, but also invoked applications from neofunctionalism,4 regional economic

integration,5 and security community paradigms,6 and from all of the above, various forms

of inter-bloc rivalry. In the final analysis, none of these theories unfolded on the ground as

they were depicted on the drawing board: Integration during the Cold War failed because

the US was disinterested, and later owing to openness, both in domestic politics and foreign

economic policy, unleashing too many forces to be adequately captured; neorealism lacked

a sufficiently strong countervailing force in the region, not only with too many dictators,

but also dictators elevating other agendas than systemic power rivalry; and dependence

owing to the growth of nationalized industries under import substitution industrialization

(ISI).7 Of these, integration carries more mileage at the turn of the century, not because it is

1See Ferdinand Enrique Cardoso and Enzo Faletto,Dependency and Development in Latin America,trans. Marjory Mattingly Urquidi (Berkeley, CA: University of California Press, 1979); James D. Cockcroft,Andre Gunder Frank, and Dale L. Johnson Dependence and Underdevelopment: Latin Americas Political

Economy (Garden City, NY: Anchor Books, 1972).2Peter Evans, Dependent Development: The Alliance of Multinational, State, and Local Capital in

Brazil (Princeton, NJ: Princeton University Press, 1979); and Guillermo ODonnell, Modernization andBureaucratic Authoritarianism: Studies in South American Politics (Berkeley, CA: University of CaliforniaPress, Institute of International Studies, 1973).

3One example is Mexico-US cooperation over drug control. See Guadalupe Gonzlez Gonzlez,The drug connection in U.S.-Mexican relations:introduction, The Drug Connection in U.S.-Mexican

Relatsions, eds., Gonzlez Gonzlez and Marta Tienda, Papers prepared for the Bilateral Commission on theFuture of United States-Mexican Relations (La Jolla, CA: Center for U.S.-Mexican Studies, University ofCalifornia, San Diego, 1989), ch. 1. Also see Jorge Chabat, The making of Mexican policy toward theUnited States,Foreign Policy in the U.S.-Mexican Relations, eds. Rosario Green and Peter S. Smith, vol. 5,Bilateral Comsission on the Future of United States-Mexican Relations series (La Jolla, CA: Center for U.S.-Mexican Studies, University of California, San Diego, 1989).

4Term coined by Ernst B. Haas. See The Uniting of Europe: Political, Social, and Economic Forces,1950-1957(Stanford, CA: Stanford University Press, 1958).

5Bela Balassa, The Theory of Economic Integration (Homewood, IL: R.D. Irwin, Inc. 1961).6Emanuel Adler and Michael Barnett, eds., Security Communities (New York: Cambridge University

Press, 1998).7See Ren Villarreal, The policy of import-substituting industrialization, 1929-1975,

Authoritarianism in Mexico, eds., Jos Luis Reyna and Richard S. Weinhart (Philadelphia, PA: Institute for

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the empirically and theoretically most vibrant, but because it serves the rebounding board

of alternate forces.

Behind integration lay the tenets of neofunctionalism,8 as well as Jacob Viners

customs union theory,9 especially as extended into stages of regional economic integration

by Bela Balassa in 1961.Ernst B. Haass explanation of European economic developments

of the 1950s adjusted David Mitranys corporate-based functionalism,10 but still failed to

account for the security substructure, evident through North Atlantic Treaty Organization

(NATO). As others brought him to task,11 increasing theoretical gaps and mismatches

obscured and segmented the central phenomenon addressed by each paradigm, eroding our

explanatory power: By assuming political and security considerations away,

neofunctionalism and regional economic integration simply became castles in the air, and

by not specifically pinning down the essence of realism and neorealism, which belittled

economic dynamics, security community tenets simply blew in the wind, at times towards

military security, at times in the functionalist economic directions.12 Neofunctionalism is so

wrapped up in explaining endogenous dynamics, Henry Nau argues,13 it completely misses

out on exogenous and external developments; while security community depends so much

the Study of Human Issues, 1977), 67-108.8On its updated characterization, see Joseph S. Nye, Comparing common markets:a revised neo-

functionalist model, Regional Integration: Theory and Research, eds. Leon N. Lindberg and Stuart A.Scheingold (Cambridge, MA: Harvard University Press, 1971), 192-231.

9Jacob Viner, Customs Union Issue (New York: Carnegie Endowment for International Peace, 1950);and -----, Trade Relations Between Free-Market and Controlled Economies (Geneva: League of Nations,1943).

10Mitrany, Working Peace System: An Argument for the Functional Development of InternationalOrganization (London: Royal Institute for International Affaire, 1944).

11Karl Deutsch, et al., Political Community in the North Atlantic Area (Princeton, NJ: PrincetonUniversity Press, 1957).

Haas, The Uniting of Political Community and the North Atlantic Area: International Organizationin the Light of Historical Experience (Princeton, NJ: Princeton University Press, 1957).

12For realism, see Hans J. Morgenthau, Politics Among Nations: The Struggle for Power and Peace(New York: Alfred A. Knopf, 1948).On neorealism, see the authoritative works of Kenneth N. Waltz,Man,the State, and War: A Theoretical Analysis (New York: Columbia University Press, 1959). This was latersurpassed by The Theory of International Politics (Menlo Park, CA: Addison-Wesley, 1979).

13From integration to interdependence: gains, losses, and continuing gaps, International Organization33, no. 1 (Winter 1979):119-147.

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on such idiosyncratic tenets as values, we ultimately fail to distinguish between domestic

and regional integration, in spite of the elaborately demarcated amalgamated and pluralistic

community models in the literatures.14 Robert O. Keohanes and Jospeh S. Nyes proposal

of interdependence signals the kind of a hybrid we need today, but it is too simplistic to

survive the post-Cold War explosion of unaccountable dynamics: environmental protection,

human rights promotion, immigration, drug trafficking and money laundering, terrorism--

all demanding greater overall attention, but more so in the United States and West Europe

than across Latin America, where social inequities, political darwinism, and economic

stratification still rule the day.

Creeping segmentation was matched by a policy-making pot pourri. The United

States was smuggling security considerations into all kinds of non-security policy arenas

even before 9/11, as if some political order had to prevail before any economic

programming.15 NATO, the Central Treaty Organization (CENTO), and the South East

Asian Treaty Organization (SEATO) illustrate this against the hindsight of the purposes and

rationales of the Marshall Plan, the US Agency of International Aid (USAID), and the US

Alliance for Peace pursuits. For its own part, the EU expanded both membership and policy

controls during the 1990s without means matching the ends, with the result of increasing

social protests against the collective entity. Latin countries faced the post-Cold War

maelstrom as they were recovering from a marginalizing lost decade in the 1980s,16

meaning they could neither absorb the political economic reforms nor make the necessary

14My own treatment of North American integration shows this in Elections, political integration, andNorth America:exploring the unknown,Norteamrica 1, no. 1 (January-June 2006):163-202.

15Argument most vociferously conveyed by Robert Gilpin, U.S. Power and the MultinationalCorporation: The Political Economy of Foreign Direct Investment(New York: Basic Books, 1975), ch. 1.

16On the symptoms behind the malaise and roads to recovery, see Sebastin Edwards, Crisis andReform in Latin America: From Despair to Hope (New York: Oxford University Press, for the InternationalBank for Reconstruction and Development, 1995).

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socio-cultural adaptations necessitated by globalization, liberalization, and democratization

(GLAD).17

When multilateralism broke down at the Uruguay Round,18 attention turned to trade-

bloc rivalry.19 ECs 1986 Single European Act and the US acceptance of the free trade

agreement (FTA) proposals from Canada and Mexico in 1986 and 1989,20 respectively, bred

potential transatlantic rivalry, Latin America became one of its first playgrounds: The US-

sponsored 1994 Miami Summit of the Americas (SOA) substantiated the visionary 1989

Enterprise of the Americas Initiative (EAI),21evolving into the meticulously elaborated Free

Trade Area of the Americas (FTAA) after the 1998 Santiago SOA; 22 while the EU launched

an equally grandiose Latin integration program through the 1999 Ro de Janeiro summit,23

which, by the May 2006 EU-Latin America (EU-LA) Vienna summit, was sputtering more

than progressing.24 Nitty-gritty bureaucratic-level negotiations and streamlinings

characterized both endeavors, suggesting the outcomes may not be as barren as they appear

17Acronym utilized and explained in Imtiaz Hussains Parochial globalism? The rock of liberalism,the hard place of democratization, and the Mexico in between, Paper presented in workshop on Democracy

and Globalization,International Studies Association, annual convention, Chicago, February 2001.18See, for example, John Croome, Reshaping the World Trading System: A History of the Uruguay

Round (Geneva: World Trade Organization, 1995); Ernest Preeg, Traders in a Brave New World: TheUruguay Round and the Future of the International Trading System (Chicago, IL: University of ChicagoPress, 1995); and Yash Tandon and Megan Allardice,Paved With Good Intentions: Background to the GATT,Uruguay Round, and WTO (Newlands, Harare, Zimbabwe: SEATINI, 2004).

19Among others, see Richard S. Belous and Rebecca S. Hartley, eds., The Growth of RegionalTrading Blocs in the Global Economy (Washington, DC: National Planning Association, 1990).

20On the SEA, see Andrew Moravscik, Negotiating the Single European Act:national interests andconventional statecraft in the European Community,International Organization 45, no. 1 (Winter 1991):19-56; on the North American FTA proposals, see Michael Hart, with Bill Dymond and Colin Robertson,

Decision at Midnight: Inside the Canada-US Free Trade Negotiations (Vancouver, BC: University of BritishColumbia Press, 1994); and Gilbert R. Winham, Trading With Canada: The Canada-U.S. Free Trade

Agreement(New York: Priority Press, 1988); and Frederick Mayer, Interpreting NAFTA: The Science andArt of Political Analysis (New York, NY: Columbia University Press, 1998).

21Roy E. Green, ed., The Enterprise for the Americas Initiative: Issues and Prospects for a FreeTrade Agreement in the Western Hemisphere (New York, NY: Praeger, 1993).

22Richard Feinberg, Summitry in the Americas: A Progress Report (Washington, DC: Institute ofInternational Economics, 1997); and Paulo Vizenti and Marianne Weisebron, eds., Free Trade for the

Americas: The United States Push for the FTAA Agreement(London: Zed Books, 2004).23European Commission,A Stronger Partnership: The European Union and Latin America (Brussels,

Belgium: European Commission External Relations, 2006).24EU/LAC Vienna Summit,4th EU-Latin American/Caribbean summit in Vienna (Austria), 12 May

2006: Declaration of Vienna, July 2006, from: http://ec.europa.eu/world/lac-vienna/

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at first sight; but as a wider Europe reached the waters edge, questions multiplied as to

how a collective policy could embrace any given single policy area, for example, monetary

policy, the currency, immigration, foreign and security policy, and so forth, for so many

countries. Thus, with the US fully committed to the war against terrorism and the EU

undergoing another identity crisis, rather than wait for the dust to settle, many countries not

only revitalized their own neighborhood relations, but also looked outside North America,

West Europe, and their own neighborhoods.

Latin countries were no exception. As Brazil and others challenged not just FTAA

but also the multilateral order in the Cancn World Trade Organization (WTO) summit,25

the stage was set to confront at least three new packages of old theories: competition,

gravitation, and insulation.

Competition Arguments:

Reflecting the conditions of complex interdependence and trade-bloc rivalry today,

competition remains consistent with the underlying thrusts of both neoliberalism,26 such as

welfare-enhancement and cooperation, and neorealism,27 such as self-help and systemic

power distribution. This mixture does not have a name, but competitiveness is common to

them all. Competition, in turn, may be viewed from specific-country and collective levels.,

Trade, unfortunately, does not flow between collective entities, and although adding up the

trade flows of individual countries is the most realistic collective picture we can draw,

second-best as it is, it at least profiles regional trading possibilities.

Methodologically (a) competition in Latin America is being measured through the

proportion of trade of any given Latin country with the United States and West European

25I have dwelled on this in After Cancn:G21, WTO, and multilateralism, Journal of Internationaland Area Studies 11, no. 2 (December 2004):1-16.

26David Baldwin, ed., Neoliberalism and Neorealism: The Contemporary Debate (New York, NY:Columbia University Press, 1993).

27Kenneth N. Waltz, Theory of International Politics (Menlo Park, CA: Addison Wesley, 1979); andKeohane, ed., Neorealism and its Critics (New York, NY: Columbia University Press, 1986).

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countries compared to its overall trade; and (b) not every Latin American or West European

countries can be included. For reasons of Latin trade size and geographical representation,

the following fit the bill: Argentina, Brazil, Chile, Colombia, Costa Rica, Guatemala,

Mexico, Paraguay, Peru, Uruguay, and Venezuela on the western hemisphere side of the

equation, and France, Germany, Italy, the Netherlands, Portugal, Spain, Sweden, and the

United Kingdom, on the West European side, since, in many cases, they remain the only

Latin traders, while two possessed colonies. Even though Mexico is not traditionally

counted as a Latin American country, it shares many Latin idiosyncrasies about the United

States, West Europe, and Asia, and is grouped under this rubric.

Significant implications abound. First, the study shows, in terms of trade flows, the

collective European Union label is less meaningful than the individual countrys identity:

With each West European country depicting too different trade patterns and volumes,

invoking the EU label seems to be more sentimental than substantive. Second, a country-

specific analysis exposes the survival-of-the-fittest essence of neorealism: The dominant

West European traders with Latin countries remain the larger economies today, while the

colonial powers, Spain and Portugal, exert greater socio-cultural impacts than political

economic. Finally, the absence of any EU trading footprint and the unequal trading patterns

between West European and Latin countries questions the relevance of the previously

seductive West European regionalism model for Latin America: Postulated from as early as

the 1960s, the West European regional model influenced the Latin American Free Trade

Agreement (LAFTA) arrangements in the early 1960s, even to the point of pushing the

doyen of regional theory-making, Haas himself, to examine LAFTA in its infancy,28while

even MERCOSUR tiptoed the West European regional model to become the worlds

28Haas and Philippe C. Schmitter, Economics and differential patterns of politicalintegration:projections about unity in Latin America, International Organization 18, no. 4 (Autumn1964):705-37.

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second customs union in 1995.29 Formidable internal incorrigibilities within LAFTA and

MERCOSUR made the West European regional model irrelevant. On the one hand, the US

neglect of both LAFTA and MERCOSUR contributed/contributes to their

underperformance, yet without enhancing FTAA.

Without a robust Latin presence, formal regional integration cannot automatically

cultivate transatlantic inter-bloc rivalry. A rivalry probably exists, but not through blocs, as

Latin and West European countries pursue their interests individually--very much like the

United States does whether in Latin America, West Europe, or any other part of the world.

Here is an element of realism/neorealism lost in the worlds of neoliberalism, integration,

and globalization. Yet, if the competition balance sheet shows muddling on the drawing

board and in the trenches, how does gravitation fare? After all, the US still exerts more

influence than any other country over Latin America.

Gravitation Arguments:

Gravitation presumes competition, but competition need not necessarily produce

gravitation. Much in newtonian style, gravitation trade theory originated with Jan

Tinbergens 1962 trade-flow indexing reflecting the economic mass of any two countries

and the geographic distance between them.30 The realist/neorealist expectation of the larger

the size, the more the trade flows, crept in. 31 With the United States serving as the worlds

largest economy, gravitation theory carries a built-in US bias: In the absence of an EU

trading entity, at least on the ground where trade flows, transatlantic comparisons with the

29On MERCOSUR, see Jaime Behar, Cooperation and Competition in a Common Market: Studies onthe Formation of MERCOSUR (New York, NY: Physica Verlag, 2000); Francesco Duina, SocialConstruction of Free Trade: The European Union, NAFTA, and MERCOSUR (Princeton, NJ: PrincetonUniversity Press, 2006); and Riordan Roett,Mercosur: Regional Integration, World Markets (Boulder, CO:Lynne Rienner, 1999).

30The seminal piece, in my research, turned out to be Shaping the World Economy: Suggestions foran International Political Economy (New York: Twentieth Century Fund, 1962), appendix 6.

31Also see Keith Head, Gravity for beginners, Class presentation, University of British Columbia,January 2003. See: www.economics.ca/keith/gravity.pdf, or email: [email protected]

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United States cannot be meaningful. If we then review routine EU and US trading

restrictions, gravitation theory becomes even less useful: With Great Britains market-

driven and Frances supply-controlled approaches to the Common Agricultural Policy

(CAP), for example, EU agricultural restrictions cannot speak for all members. With fewer

restrictions than the EU in an export-driven age, the US attracts more exporters than the

EU: As evident in trade statistics compiled each year by the International Monetary Fund,

US ranks higher than any single EU member for more countries of the world. If

individually no EU member can match the US, speaking in one voice seems to be more a

EU problem than waging a collective crusade against a trade rival.

Gravitation theory faces its greatest potential obstacle in globalizing processes:32

These are too many, too varied, and far too unpredictable to render overpowering authority

to any single paradigm, or, as Peter Gumbel postulates, any single country. 33 Before their

growth into formidable economies, no paradigm predicted the rise of China, India, and

other Asian economies; even as an established economy, Japan was admitted into the

theoretical plane only reluctantly, and fruitlessly: It was supposed to have anchored a

regional trading bloc,34 for example, which was a ludicrous idea given Japans hostile

neighborhood, while alignment with the Association of Southeast Nations (ASEAN),

enhanced, not regionalism, but Japans bilateral trading preferences elsewhere. Japan also

seriously threatened the US economy in the 1980s, as many contended,35 only to sink

economically during the 1990s just when Chinas unpredictable surge began cresting.

Certainly across Latin America, where Japan was better established as a trading partner

32James N. Rosenau, Turbulence In World Politics: A Theory of Change and Continuity (Princeton,NJ: Princeton University Press, 1990), especially ch. 1.

33His example is the United States. See Peter Gumbel, The global question:who needs the U.S.?Time, January 29, 2007, 48-9.

34See Richard Gibb and Wieslaw Michalak, Continental Trading Blocs: The Growth of Regionalismin the World Economy (New York: John Wiley, 1994).

35Clyde Prestowitz is one. See Trading Places: How We Allowed Japan to Take the Lead(New York:Basic Books, 1988).

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than any other Asian country, China, India, and South Korea, for example, show more

impressive growth rates than Japan, which, in fact, is facing more negative growth rates

than positive. Once the worlds second largest economy, Japan never really exerted the

second largest gravitational impact--a lesson not lost on China as it ascends to that rank. If

Japans Latin fate is consistent with gravitation theory because of the greater distance, why

is Chinas more difficult to assert when it is navigationally even farther away?

There may be many explanations of the differences between China and Japan in

their rise to economic superpowerdom.36 Heavy government regulation vaulted both Japan

and China up the global economic ladder. Unfortunately for Japan, deregulation produced

the longest recession in the industrialized world, from 1989 to at least 2003.37 Unfortunately

for neoliberalists, it was not the private sector but the public responsible for Chinas ascent

in an age of neoliberalism. Whether some misfortune awaits China or not, one observation

is clear: Without effectively distinguishing private sector catalysts from the public, it

becomes less suitable in a world of (a) government intervention, and (b) globalization

processes, whose very definition must reflect how distance is being conquered.

Trading with Asia is theoretically rattling. In addition to challenging gravitation

theory, it also strengthens the competition thesis as more trading partners demand a share of

each Latin countrys trading pie. Yet, by shifting Asian production to Latin America to

36Joshua A. Fogel, ed., Teleology of the Modern Nation State: Japan and China (Philadelphia, PA:University of Pennsylvania, 2004); Hanns Gnther Hilpert and Ren Haak, Japan and China: Cooperation,Competition, and Conflict (Houndsmills, Basington, Hampshire, UK: Palgrave, 2002); Jeong-Pyo Hong,

Regional Integration in Northeast Asia: Approaches to Integration Among China, Korea, and Japan (Seoul,Korea: Korea Institute of internacional Economic Policy, 2004); Saadia M. Pekkanen and Kellee S. Tsai, eds.,

Japan and China in the World Political Economy (London: Routledge, 2005); and Edith Ferry,How Asia GotRich: Japan, China, and the Asian Miracle (Armonk, NY: M.E. Sharpe, 2002).

37Junichiro Koizumis deepening reforms may become the dividing line between the Japaneserecession and renewed long-term growth. He did not initiate the reforms, but became their most vociferouslysupporting leader. On the nature of the reforms, see Charles W. Calomiris and Joseph R. Mason, How torestructure failed banking systems:lessons from the United States in the 1930s and Japan in the 1990s,Governance, Regulation, and Privatization in the Asia-Pacific Region, eds., Takatoshi Ito and Anne Krueger(Chicago, IL: University of Chicago Press, 2004), 375-424; and Tsuruhiko Nambu, What has been achievedin the Japanese telecommunications industry since 1985, ibid., 343-74.

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access US markets, as the Japanese have done with automobiles in Mexico (and Canada

from 1965), and inspired China and South Korea to emulate in other industries, do the

breakdown of gravitation and growth in competition increase or decrease Latin insulation?

Introversion Arguments:

Given the communications revolutions (not just highways, ships, and aeroplanes,

but also the internet), introversion is no longer synonymous with nationalism, though it

could be, inviting more like-minded countries within its contours than hitherto. Intra-Latin

trade seems to be expanding, first, because the lack of appropriate infrastructures prevented

any conscious collective action previously; second, dictators before reflected narrower

geographical horizons than Latins foreign-educated and more cosmopolitan leaders today;

third, trade with partners outside the hemisphere established some of the werewithals with

which to build intra-regional trade, a factor not sufficiently present before; and fourth, trials

and errors from past regional experiences, such as LAFTA, provided the foundations.

Sparking these secular developments seems to be a fractious leftist resurgence, with

a different, more pragmatic breed embracing a number of neoliberal policy positions their

radical counterparts previously rejected. Many of Latins economic heavyweights belong

here: Argentinas Nestor Kirchner, Brazils Luis Inacio Lula da Silva, and Chiles Michelle

Bachelet in Chile. Under leftist governments at the start of the new century, all

MERCOSUR members have gone out of their way to invite Hugo Chvezs Venezuela by

extending his countrys membership, while Bolivias Evo Morales and Ecuadors Rafael

Correa, also leftist presidents, in spite of bilateral policy differences with Brazil, remain

eager membership applicants.

As a market for 250m people, MERCOSURs US$1tr gross domestic product

represents 76% of South Americas (Mexico excluded), and between its creation in 1990 to

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2006, intra-MERCOSUR trade went up from US$4b to US$30b. Michael Astor, who

supplies these figures, might be right in contending, at the time of MERCOSURs January

2007 summit in Ro de Janeiro, South Americas lunge towards the left is overshadowing

the goal of free trade . . . . Chvezs November 2006 re-election put beef into his 21 st

century socialism pledge by announcing a 6-year nationalization plan for key industries,

thereby challenging free trade commitments.38 Whether MERCOSUR transforms into a

political stage of Western-style free trade, as Astor puts it, or a political forum for

bashing the market economy in Michael Shifters words, or even take increasingly anti-

globalization, anti-Doha positions, as Riordan Roett fears, or contain Chvez through

membership before he dilute[s] Mercosur, in Agustin Cornejos view, remains the critical

questions.39 Behind them all lies indisputable latinization, and emerging desires to explore

Asia--the continent expanding trade more rapidly with Latin America than any other. For

example, behind the brouhaha, the January 2007 MERCOSUR summit also signed an

agreement authorizing trade discussions with the Gulf Cooperation Council (GCC),

consisting of Bahrain, Kuwait, Oman, Qatar, Saudia Arabia, and the United Arab

Emirates,40 thus bringing other dynamic Asian economies into the Latin fold.

Summary:

All these clusters profile emerging trading patterns. Given the overlaps between

them, it is more probable than not no single cluster will dominate: Simultaneous claims not

38See Venezuella:with Marx, Lenin and Jess Christ,Economist, January 13, 2007, 33-4.39All quotes from Michael Astor, What price free trade for South, The Standard: Chinas Business

Newspaper, January 19, 2007, from:http://thestandard.com.hk/news_detail.asp?we_at_=9&art_id=36377&sud=11794063&con_type=3&d_str=20070119; and -------, Unification remains elusive at Mercosur,Daily Democrat(Woodland, CA), January 20,2007, from:http://customwire.ap.org/dynamic/stories/B/BRAZIL_MERCOSUR_SUMMIT?SITE=CAWOO&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2007-01-19-09-53-46

40See South American leaders refocus Mercosur trade bloc on needs of poor,International HeraldTribune, January 17, 2007, from: http://iht.com/articles/ap/2007/01/18/ame3rica/LA-GEN-Brazil-Mercosur-Summit.php

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http://thestandard.com.hk/news_detail.asp?we_at_=9&art_id=36377&sud=11794063&con_type=3&d_str=20070119http://thestandard.com.hk/news_detail.asp?we_at_=9&art_id=36377&sud=11794063&con_type=3&d_str=20070119http://customwire.ap.org/dynamic/stories/B/BRAZIL_MERCOSUR_SUMMIT?SITE=CAWOO&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2007-01-19-09-53-46http://customwire.ap.org/dynamic/stories/B/BRAZIL_MERCOSUR_SUMMIT?SITE=CAWOO&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2007-01-19-09-53-46http://iht.com/articles/ap/2007/01/18/ame3rica/LA-GEN-Brazil-Mercosur-Summit.phphttp://iht.com/articles/ap/2007/01/18/ame3rica/LA-GEN-Brazil-Mercosur-Summit.phphttp://thestandard.com.hk/news_detail.asp?we_at_=9&art_id=36377&sud=11794063&con_type=3&d_str=20070119http://thestandard.com.hk/news_detail.asp?we_at_=9&art_id=36377&sud=11794063&con_type=3&d_str=20070119http://customwire.ap.org/dynamic/stories/B/BRAZIL_MERCOSUR_SUMMIT?SITE=CAWOO&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2007-01-19-09-53-46http://customwire.ap.org/dynamic/stories/B/BRAZIL_MERCOSUR_SUMMIT?SITE=CAWOO&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2007-01-19-09-53-46http://iht.com/articles/ap/2007/01/18/ame3rica/LA-GEN-Brazil-Mercosur-Summit.phphttp://iht.com/articles/ap/2007/01/18/ame3rica/LA-GEN-Brazil-Mercosur-Summit.php


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only befit todays complicated world facing neoliberalism, globalization, and regionalism,

but also predict the increasing paradigm irrelevance.

Empirical Evidence:

Data in nine appendices assess the abovementioned arguments along three

theoretical clusters:41 Appendix 1 presents US dollar values of Latin imports over time, with

Appendix 2 placing these figures in proportional terms; appendices 3 and 4 do likewise to

Latin exports; appendices 5 and 6 repeat the same exercises for Latin imports from and

exports to Asian and Latin American countries, respectively, with both absolute and

relative data on the same appendix; appendices 7 and 8 respectively place aggregate Latin

imports from and exports to the United States, eight prominent West European countries,

three emerging Asian countries, four Asian countries (the same three with Japan), and Latin

America; and Appendix 9 aggregates US-EU performances between 1998 and 2004.

Discussions begin with gravitation, shift to competition, and conclude with insulation.

Gravitation Argument:

Posting proximity and economic size as the salient determinants of trade expansion,

appendices 1, 2, 3, and 4 show only Mexico supporting this argument: An astounding 88%

of its exports in 2004, up from 83.6% in 1995, went to the United States; while US imports

as a proportion of total Mexican imports actually fell from 74.5% in 1995 to 55% in 2004--

a decline sharp enough between two-next door neighbors of two top-ten economies to

question gravitation, were it not for the 2004 figure still accounting for more than half of

Mexican imports. Imports from the US as a proportion of total imports, however, declined

between 1998 and 2004 in every country south of Mexico, as Appendix 9 reveals, with

Paraguays 16.3% being the steepest and Argentinas 2.6% the most modest. As appendices

41I have relied on the 2001 and 2005 volumes of the following for all data: International MonetaryFund,Direction of Trade Statistics: Yearbook(Washington, DC: 2001 and 2005), check appropriate countrypages. All figures rounded to the nearest full number in all appendices.

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1-4 indicate, increases were posted in Argentina (of .2%), Brazil (2.8%), Costa Rica (5%),

Paraguay (8%), Peru (5.8%), Uruguay (2.1%), and Venezuela (.9%) between 1998 and

2004, suggesting a number of contending explanations: gravitation was unchallenged until

the EU embraced LA in 1998; they reflect a brief 1994 SOA-sparked US honeymoon with

the US; global challenges were still brewing and not threatening; or Latin recovery from the

lost decade could no longer be sustained.

The gravity theory scores its points largely by default. Of the above plausible

explanations, the 1998 EUs Latin initiative did not bring desired results: Appendix 9

reaffirms imports from the eight West European countries declined for all Latin countries

between 1998 and 2004, except Costa Rica and Mexico; yet Costa Ricas and Mexicos

increases were paltry (.3% and .6%, respectively) and more than offset by declines as large

as Colombias 6.8% or as low as Paraguays and Perus 2.2%. Between 1995 and 2004,

Asian trade and Latin insulation boomed, shown in Appendix 7, and discussed later.

If imports from the US and West Europe did not enhance gravity model claims for

Mexico and Latin countries, exports to both the US and West Europe show a better, though

quite mixed picture--invoking yet other theoretical propositions. Exports to the US between

1998 and 2004 declined (by .3% for Chile and 3% for Peru), remained unchanged

(Mexico), or increased for all other countries (by as much as 11.5% for Uruguay, to as low

as .8%, for Paraguay). Similar increases were posted for European destinations by

Argentina (.9%), Chile (.2%), Peru (2.6%), and Uruguay (5.4%), while others registered

declines: Brazil (by 2.2%), Costa Rica (4.1%), Guatemala (4.9%), Colombia (7.1%),

Mexico (1.0%), and Paraguay (15.5%).

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One might argue US markets were more open to imports than the European

counterparts because of its world leadership claim,42 supplying a collective good;43 and how,

when it comes to trade, even the most organized regional trading bloc, the EU faces too

many different commercial needs and priorities to make a single policy sustainable. The

slightly better 2005 EU trading positions, compared to 1995, or 1998, in addition to the

slightly worse US position for those same years, further dilute the relevance of the

gravitational thesis.

Competition Arguments:

Appendices 5 through 9 support competition arguments. By and large, they show (a)

the eroding positions of the United States and the 8-country West European average over

time; (b) the increasing Asian presence; and (c) the US-EU trade rivalry, though the most

important across Latin America, losing its bite over time due to the Asian entry. Like their

gravitation counterparts, competition theses also face limits: Gravitation necessitates

competition, as previously observed, but a competition in which the fittest trading economy

explicitly and robustly emerges. Without a clear and single leader, gravitation dissolves into

full-blown competition. In other words, competition does not always require gravitation, as

21st Century Latin experiences reveal.

Except for Peru, every Latin country tabulated imported proportionally less from the

United States in 2004 than in 1995; while, with the exceptions of Chile and Paraguay, every

Latin country tabulated exported more to the US in 2004 than in 1995. Appendices 7 and 8

provide the numbers and proportions, respectively for Latin imports and exports. With the

42As shown in the works of hegemonic stability theorists, Charles Kindleberger, The World inDepression, 1929-1939 (Berkeley, CA: University of California, Berkeley, 1973); and Gilpin, U.S. Powerand the Multinational Corporation.

43On this concept, see William Poehr, Collective goods and international cooperation:comments,International Organization 27, no. 3 (Summer 1973):421-30; Mancur Olson, The Logic of Collective Action:Public Goods and the Theory of Groups (Cambridge, MA: Harvard University Press, 1965); andKindleberger, World in Depression.

17


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exception of Mexico, Latin imports from the 8-country West European aggregate declined

during the same years, while Latin exports to West Europe, inverting the US pattern,

declined for all Latin countries with the exception of Chile (increase from 15.2% to 18.4%),

Peru (from 22.9% to 28.6%), and Uruguay (from 19.6% to 19.8%). Both oil-exporters,

Mexico and Venezuela, depended on the US for more than half of their exports, in both

1995 and 2004, while coffee-exporting Colombia remained the next most dependent on the

US export market (increasing from 34.1% in 1995 to 42.0% in 2004). If the 1999 EU-LA

Ro Summit heralded the EU-US competition in Latin America, at least on paper, Appendix

9 does not deliver the theoretical expectations: Latin imports from both the United States

and West Europe fell between 1998 and 2004 (with Costa Ricas and Mexicos above-

mentioned exceptions); while Latin exports showed, at best, a mixed picture (falling US

trade for Chile and Paraguay showing a reduction with the United States, and falling West

European trade for Brazil, Colombia, Mexico, Paraguay, and Venezuela). Clearly, neither

the United States nor the EU could knock the other out of the trading ballpark, or profit

from the others constraint to strengthen its own claim. Neither gravitation nor competition

proves robust.

If a EU-US knockout appears less likely than more in 2004, compared to 1995, one

reason could be increasing Asian presence. Appendix 7 again shows how imports from the

3 emerging Asian countries selected for this study, China, India, and South Korea,

expanded between 1995 and 2004 for all Latin countries with the exception of Venezuela,

and when Japan is added to this Asian list, Asian countries actually accounted for more

exports in proportional terms than their West European counterparts for Chile, Colombia,

Mexico, and Paraguay, while closely trailing West Europe in Peru and Uruguay. Exports to

the 3 emerging Asian countries climbed during that time, as Appendix 8 shows, for all

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Latin countries except Colombia (from 1.8% in 1995 to 1.5% in 2004); and when Japan is

added to the Asian list, Chile ends up selling proportionally more to Asia than to West

Europe (28.5% versus 18.4% in 2004, as against 25.8% to 15.2% in 1994), with Paraguay

closely trailing Chile (4.8% in 2004 versus 5.9%). In fact, Paraguay was selling more to

these Asian countries than even to the United States in 2004 (4.8% to 3.4%), a situation

also echoed in Argentina (12.7% versus 10.1%) and Chile (28.5% versus 14.0%) in the

same year. Only Paraguay was importing proportionally more from these Asian countries

than from the United States in 2004 (19.1% versus 4.0%), with Uruguays 8.4% imports

from Asia closely behind its 9.2% from the United States in 2004. That two landlocked

countries trade more with distant Asian countries than their hemispheric giant, the United

States, not only strengthens the competition thesis over gravitation, but also challenges two

popular refrains: of Latin America belonging to the US sphere of influence, or becoming

the key playground of transatlantic market access rivalry.

Surging Asian trade, furiously led by China, blatantly defies any trading bloc

identities. The highest growth rate in Latin America belongs to China, that is, both Hong

Kong and the Peoples Republic of China put together. Except with landlocked Uruguay,

Chinas imports increased from Latin America and Mexico as a proportion of overall Latin

and Mexican trade spiraled significantly between 1998 and 2004, from 2.8% to 9.2% for

Argentina, 2.6% to 6.4% for Brazil, 3.2% to 10.3% for Chile, .1% to .9% for Colombia,

.2% to .6% for Mexico, .5% to 3.3% for Paraguay, and 4.8% to 10.1% for Peru. Uruguay is

not a steadfast exception, since in 2001 the 1998 figure of 4.4% shot up to 6.2% before

collapsing to 3.8% in 2004. Except in Mexico, Chinese exports also increased in all Latin

countries between 1998 and 2004: from 3.8% of Argentinian imports to 5.1%, from 2.4%

to 6.4% for Brazil, 3.8% to 7.8% for Chile, 1.8% to 6.6% for Colombia, 9.0% to 17.5% for

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Paraguay, 1.7% to 4.4% for Peru, and 3.3% to 6.7% for Uruguay. Mexicos 1998

proportion of 1.6% of Chinese imports actually climbed to 2.6% in 2001 before retreating

to .9% in 2004. In other words, there is no stopping the Chinese trading machine, no matter

which country the partner--a factor devastating theoretical formulations right, left, and

center. Chinas market search, and not free-trade agreements nor regional trading

arrangements in the western hemisphere and West Europe, undermines gravitation theses

and spheres-of-influence interpretations.

Chinas exceptional Asian case, both with the volumes of trade and the robust

increases, is paralleled only on a miniscule scale by India: Imports remained static at 1.3%

for both years with Argentina, and also with Peru (.4%); they climbed from .2% to .7%

with Brazil, from .3% to 1.3% with Chile, from .02% to .04% with Colombia, from .02 to

.2 with Mexico, from .03% to .2% with Paraguay, and from .04% to .2% with Uruguay.

Indian exports mirrored these patterns, remaining static for the same years at .6% with

Uruguay, and increasing from .5% to .8% with Argentina, from .4% to .9% with Brazil,

from .3% to .4% with Chile, from .3% to 1.0% with Colombia, from .2% to .4% with

Mexico, from .2% to .6% with Paraguay, and from .3% to .5% with Peru. Though

theoretically and empirically not worrisome at this time, Indias trade growth rates echo the

China-effect, and if it continues, may also attenuate existing Latin trading patterns with the

Untied States and West Europe even more.

One Asian country not fitting the new Asian pattern any more is Japan. Decades

ago, Japan itself became synonymous of a trading snowball, swallowing markets with

cheap products. Today, it is not only not matching Chinas market access in Latin America,

but is also falling behind China in actual volumes traded. In 2004, for instance, Chinas

exports accounted for more than Japans in Argentina (5.1% versus 2.1% of overall

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Argentinian trade), Brazil (6.4% versus 4.6%), Chile (7.8% versus 3.3%), Colombia (6.6%

versus 3.8%), Paraguay (17.5% versus 3.3%), Peru (4.4% versus 1.6%), and Uruguay

(6.7% to 1.6%). The only exception was Mexico (.9% versus 5.3%), which signed a 2005

trade agreement with Japan. China also purchased more from all Latin countries than Japan

in 2004, with the exception of Chile (10.3% versus 11.4%), Colombia (.9% versus 1.6%),

and Mexico (.6% versus .6%). Japan is not only tip-toeing the fading Latin pattern of the

United States, but in the last 12 years, was also displaced as the second largest US trading

partner, after Canada, by Mexico in 1993, and then China in this century. Is this a sign of

emerging countries slowly displacing their more established counterparts? A rough test

could be across South America.

Insulation Argument:

With the exception of Mexico, intra-Latin trade has been robust and, in some cases,

getting stronger--showing signs of country-specific growth spilling into increasing regional

identities. If a trading bloc is evolving, it will not be in the FTAA image, laden with all

kinds of arrangements, but one exclusively Latin, either formal, such as MERCOSUR, or

informal, such as the concurrent leftist surge, showcasing not just trading arrangements but

also cultural components and, of course, an ideological difference, no matter how

marginally, with the United States. Argentina led the 2004 list of intra-Latin imports, with

62.3% of its overall imports originating in the same continent. It was followed by fellow

MERCOSUR partners, Paraguay with 59.8% and Uruguay with 55%. The other partner,

Brazil, was surprisingly, last on the intra-Latin import list, with only 16.6% of its trade

originating in the same continent, and in fact falling from the 1998 figure of 21.7%. Here

may be a case of a Latin emerging economy making waves not only in Latin America and

the western hemisphere, but as far and wide as possible--an international player, and

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thereby defiant of gravitational pulls or pushes at this initial stage of rank-climbing. If so,

Brazil may be the Latin leader in this diversification game, going heavily international

before others. Argentina, Paraguay, and Uruguay all showed higher 2004 figures than in

1998. Chile, Colombia, and Peru also showed increasing intra-Latin imports, respectively,

from 24.7% to 37.1%, 24.3% to 28.9%, and 28.4% to 31.6%.

Intra-Latin export performances were not so clear-cut. Paraguay was the leader with

72.1% of its exports headed for other Latin destinations, an increase from its 66.9% 1998

figure. Argentina came next with 38.3% of its exports going to other Latin markets, but this

was significantly lower than the 50% in 1998. Uruguays 2004 figure of 37.2% fell from

1998s 62.9%, while Brazils 24.3% also fell from 27.9% in 1998, as too did Chiles 16.7%

from 22.3% in 1998. Only Colombia and Peru showed increases, from 29.9% to 33.8% and

17.9% to 19.4%, respectively.

Mexicos pathetically single digit figures convey two messages: the lesser

importance of Latin over North American trade; and at least the growth rate of its Latin

imports, from 2.3% in 1998 to 5.6% in 2004, suggests an overdue reconnection underway.

Mexicos northern orientation interestingly matches Brazils global outlook.

Although the leading member of MERCOSUR, Brazils trading pattern suits its UN

permanent Security Council membership claim, and how Mexicos isolation in Latin

America also cuts into its own half-hearted UN permanent Security Council membership

claim. Both orientations undermine regionalism: Brazils by suggesting there is more than

just regionalism as a policy option, and Mexicos by isolating itself from not only the rest

of the world but also Latin America, unlike its two other NAFTA partners. Trade figures

and patterns suggest Brazil and Mexico may be learning their respective lessons--Brazil not

abandoning nor sacrificing regionalism, and Mexico, at least in its imports, seeking

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diversification. While these feed into Latin introversion, as previously defined, they also

serve as stepping stones towards greater trading competitiveness and globalization--two

additional options in case of future need in an unpredictable global political economy. So

far Brazil is farther ahead.

Conclusions:

A quick survey of recent trade figures offers a fairly convincing response to the first

question asked in this study: Can any paradigm explain the clustered trading field today?

With no as the obvious answer, the study, by clustering traditional theoretical arguments of

Latin trade into gravitation, competition, and insulation, shows all three offer useful, albeit

partial, insights, replete with strengths and weaknesses.

Double-edged Observations:

Built as it was on proximity of the United States to Latin America, gravitations

strengths are in the prominent example of Mexicos openness, NAFTA, and NAFTAs

extension to the FTAA, as logical consequences of the US western hemispheric weight.

With its diversifying import tendencies, Mexico is too firmly footed in the US sphere to

stray too far too quickly; and in NAFTAs initial years, both US neighbors became its top

two trading partners, a development solid enough to augment the FTAA pursuit.

Yet, latinization was neglected, as too the increasing Asian role in Latin America.

FTAA could not steamroll idiosyncratic Latin developments: Not taking Brazils initial

complaints against US farm subsidies too seriously culminated in the WTO Cancn

breakdown first, then the FTAA breakdown; and instead of utilizing MERCOSUR as the

instrument to win other South American countries, the US injudiciously utilized those other

countries to outweigh MERCOSUR. Just as George W. Bushs competitive liberalism

policy unsuccessfully sought to platform Latin America to galvanize African and Asian

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economies against the European Union,44 Asias newly emerging economies platformed

Latin America for accessing US markets and opening Latin markets. Latin countries found

the trade diversification opportunity more profitable than consolidating US options.

Competition theses bring their own advantages and shortfalls. Among the strengths:

they received a refurbished lease of life in Latin America after the Cold War; and in the

process, led European Union to experiment with collective trade policy-making.

Neofunctionalism and regional economic theories could be profitably applied to NAFTA

and MERCOSUR, among other Latin regional arrangements; and unlike in the 1960s, more

mileage could be accumulated in the 1990s, illustrated most vividly with MERCOSUR

becoming the first customs union among less developed countries, and the second overall,

after the European Community. Amidst the much-heralded EU-US trade rivalry, there was

also the lesser known EU-LA trade bloc cooperation, an occasion utilized by the EU to

develop a panoply of trading arrangements collectively with the external world. Although

constrained, EU-LA summits have not been abandoned: Too much has been invested;

finessing those arrangements through trials and errors is consistent with the very evolution

and development of the EU.

Inherent weaknesses include the failure of collective EU action to translate into

trade; and with the growth of independent Asian economies, the EU and US no longer

remain the only competitors, in fact, the proliferation of competitors invites more disorder

than order in the global political economy.45 As the Latin cases show, trade with West

European countries is more individualized than collectivized; and though EU members can

collectively match, even surpass, the US trade weight, this is not a serious concern at all

since trade volumes, arrangements, and priorities show no collective patterns. Trade ties

44Richard E. Feinberg, Bilateral trade arrangements in the Asia-Pacific:origins, evolution, andimplications,Berkeley APEC Study Center(BASC) March 21-22, University of California, Berkeley, 2003.

45Argument consistent with themes in Keohane, After Hegemony: Cooperation and Discord in theWorld Political Economy (Princeton, NJ: Princeton University Press, 1984), ch. 1.

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with Asias emerging countries highlight this individualized, country-to-country approach,

a feat more remarkable in the absence of a regional trading bloc between China, India,

Japan, and South Korea.

Turning to those Latin countries themselves, insulation carries its own beauty spots

and warts. Among the strengths: No longer just a nationalistic notion, insulation is bringing

like-minded countries together, in the process becoming a synonym of regionalism; it offers

the most untapped Latin safeguard against dependency, especially US dependency.

Regional arrangements reached a higher threshold across Latin America after the lost

decade; and though irreversibility is still a long way away, increasing intra-Latin trade is an

encouraging sign and catalyzer. With industrializing pockets either sprouting as

maquiladoras or deepening, the hitherto parallel Latin economies complement each other

increasingly, making intra-Latin trade more virtuous than vicious.

Behind this growth lie inevitable weaknesses: development differentials also breed

dependence; and flavoring economic growth with political or ideological colors could, as in

the past, undermine development. MERCOSUR illustrates the developmental differentials

between the two larger and two smaller economies, one reason why integration has been

slowed. With Brazil more interested in diversifying globally, regional efforts would not

only play second-fiddle, but also encourage nationalism. Be that as it may, if Latin

Americas current leftist surge becomes more trade unionist than pragmatist, balancing both

fringes may become too tough a nut to crack--and another Latin Achilles Heel.

Summary:

Given the strengths and weaknesses of all three clusters, diversification may still hold the

magic formula for Latin America. It builds upon competition, thwarts gravitation, and

facilitates insulation. Its exact opposite of survival-of-the-fittest builds upon competition

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26/36

until a single winner emerges, exerting greater gravitational pulls and discouraging

insulation. Having experienced more instances of the latter than the former, Latin America

could avoid inter-bloc rivalry and adjust to the variegated propensities of globalization by

accelerating diversification. Against the threats and opportunities of unfolding

globalization, diversification may be more viable over the long-term and predict a safer exit

from cut-throat competition--the soundest investment Latin countries may make today.

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28/36

APPENDIX 2: SOURCES OF LATIN IMPORTS (in % of overall country imports):

LatinCountries: United

States:France: Germany

:Italy:

TheNeth-

erlands:Portugal

:Spain: Sweden: United

Kingdom:

Argentina:1995:1998:2001:2004:

19.019.218.616.6

5.25.03.63.4

6.36.05.15.7

6.45.02.01.6

1.1.7.7

1.3

.02.2.2.2

4.34.23.52.7

1.21.1.9

1.0

2.02.52.01.6

Brazil:1995:1998:2001:2004:

21.224.023.418.3

2.83.53.73.6

10.09.18.68.0

5.85.63.93.3

1.11.21.01.0

.3

.3

.3

.3

1.62.02.21.9

1.11.92.21.9

2.02.62.22.2

Chile:1995:1998:2001:2004:

24.520.316.014.0

2.93.43.22.0

5.14.03.93.7

3.33.42.41.9

.7

.5

.61.0

.2

.2

.3

.3

2.93.32.61.8

1.21.21.01.0

1.61.31.11.0

Colombia:1995:1998:2001:2004:

39.132.134.729.0

2.43.22.71.8

5.95.34.44.0

2.12.73.11.9

.8

.8

.7

.7

.02.1

.04

.03

2.13.01.91.5

1.41.11.0.5

1.62.31.41.2

Costa Rica:1995:1998:2001:2004:

45.350.322.946.1

1.01.01.11.1

3.12.11.92.1

1.91.41.01.1

1.3.8

1.61.6

.03

.06

.09

.04

1.81.61.61.3

.2

.4

.2

.3

.8

.8

.71.6

Guatemala:

1995:1998:2001:2004:

44.938.234.134.0

.6

.8

.7

.9

3.52.72.52.0

1.11.61.61.2

.9

.81.61.6

.03

.04

.07

.03

.91.11.51.3

.3

.3

.3

.7

1.21.3.9.6

Mexico:1995:1998:2001:2004:

74.574.466.055.0

1.41.1.9

1.2

3.73.63.53.6

1.11.31.21.4

.3

.2

.3

.1

.03

.03

.05.1

1.01.01.01.4

.3

.2

.5

.4

.7

.8

.8

.7Paraguay:

1995:1998:2001:2004:

12.320.35.94.0

1.2.9

1.01.3

2.61.72.51.7

2.12.21.3.7

.4

.2

.5

.1

.04

.05

.03

.01

.71.21.0.7

.4

.9

.41.0

3.21.81.81.1

Peru:1995:1998:2001:2004:

26.732.524.030.3

1.22.01.81.0

3.84.33.03.0

2.52.11.91.4

.91.1.4.9

.01

.03

.05

.04

4.27.42.31.1

1.31.0.7.6

1.31.61.21.2

Uruguay:1995:1998:2001:2004:

9.912.08.99.2

3.54.74.22.4

3.63.33.12.6

5.14.63.33.0

.9

.7

.8

.8

.1

.1

.1.07

3.73.73.32.0

.8

.6

.5

.5

1.41.51.21.6

Venezuela:1995:1998:2001:2004:

42.643.530.228.8

2.32.21.51.1

4.84.83.03.1

3.03.92.92.5

1.31.21.1.9

.07

.08.1

.05

2.32.22.52.2

.3

.8

.4

.3

2.02.11.82.2

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APPENDIX 3: LATIN EXPORT DESTINATIONS (in US$m):


States:France

:Germany

:Italy

:

TheNeth-erlands

:

Portugal:

Spain:

Sweden:

UnitedKingdom

:

Argentina:

1995:1998:2001:2004:

1497/203632057/260042884/265433697/36415

313320273388

635571455

1119

7237468531097

116211118131038

84157135180

67382410931589

20202163

302256291454

Brazil:1995:1998:2001:2004:

8799/466059899/5115514379/5898020342/97671

1038125616652235

2158300625024036

1713193118092904

2918274428635917

413439506962

877105610421984

159189175503

1324133917052117

Chile:1995:1998:2001:2004:

2398/165382360/164433428/185544568/32548

4044516031286

583570518901

3596758011338

3464065351653

12112129

219280345730

6711180

169

52311571232857

Colombia:1995:1998:2001:2004:

3365/98594163/108735345/123077042/16730

261237140211

734684417265

185215196361

345289114386

586671113

187151141211

89873329

194239287361

CostaRica:1995:1998:2001:2004:

1085/27022674/5528814/5006

2957/6302

52853135

173215106236

1321389370

8820484

332

1294

11

26992026

25544574

10122041128

Guatemala:

1995:1998:2001:2004:

606/19362011/38282497/45652669/5032

2242189

1131177861

23362729

38495042

5722

12183220

2624104

13361713

Mexico:1995:1998:2001:2004:

66475/79541103306/117494140564/158899164522/187812

483403373335

515115215941689

197182240235

242399508246

7987149154

77971512712027

30463780

504655673840

Paraguay:1995:1998:2001:2004:

228/91933/126429/990

55/1625

20125

10

105

1314

29254225

902072933

3.15

5.113.45

920119

--.1.93.5

7231

Peru:1995:1998:2001:2004:

956/55131873/56991772/6944

3682/12468

648869

106

279232208383

199191140284

23214397

385

48

266

77154213422

481126

402281941

1120

Uruguay:1995:1998:2001:2004:

126/2121160/2770177/2057565/3264

24211734

1191129673

667971

108

56543280

464

21

545564

117

109614

89946673

Venezuela:1995:1998:2001:2004:

9646/190938775/1705412849/2693623924/43027

976853

243

345239289308

158116169275

318369289251

34131019

78243555368

1041013

141

532317103355

29


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APPENDIX 4: LATIN EXPORT DESTINATIONS (in % of overall country exports):


States:France: Germany

:Italy:

TheNeth-

erlands:Portugal

:Spain: Sweden: United

Kingdom:

Argentina:

1995:1998:2001:2004:

7.37.910.810.1

1.51.21.01.1

3.12.21.73.0

3.62.83.23.0

5.74.21.72.8

.4.6

.5

.4

3.33.14.14.3

.09.07

.07.2

1.5.91.01.2

Brazil:1995:1998:2001:2004:

18.919.324.320.8

2.22.42.82.2

4.65.84.24.1

3.73.73.02.9

6.25.34.86.0

.9

.8

.8

.9

1.92.01.72.0

.3

.3

.2

.5

2.82.62.82.1

Chile:1995:1998:2001:2004:

14.514.318.414

2.42.11.11.2

3.53.42.82.7

2.24.14.34.1

2.12.42.85.0

.07

.06.1

.08

1.31.71.82.2

.4

.6

.4

.5

3.27.06.62.6

Colombia:1995:1998:2001:2004:

34.138.243.442.0

2.62.11.11.2

7.46.23.41.6

1.82.01.62.1

3.52.6.9

2.3

.6

.6

.5

.7

1.91.31.11.3

.9

.8

.2

.1

2.02.22.31.7

Costa Rica:

1995:1998:2001:2004:

40.248.316.246.9

1.91.5.6.6

6.43.92.13.7

4.92.51.91.1

3.23.71.75.3

.4

.2.08.2

1.01.8.4.4

.91.0.9

1.2

3.74.0.82.0

Guatemala:

1995:1998:2001:2004:

31.352.554.753.0

1.11.1.4.2

5.83.01.71.2

1.2.9.6.6

2.01.31.1.8

.3

.2.04.04

.6

.5

.7

.4

1.3.6.2

.08

.7

.9

.4

.3

Mexico:

1995:1998:2001:2004:

83.6888888

.6

.3

.2

.1

.6

.9

.9

.9

.2

.1

.2

.1

.3

.3

.3

.1

.1.07.09.08

1.0.6.8

1.1

.04

.03

.02

.04

.6

.5

.4

.4Paraguay:

1995:1998:2001:2004:

24.82.62.93.4

2.2.9.5.6

1.1.3

1.3.8

3.22.04.21.5

9.816.32.92.0

.3.01.5.2

1.01.61.1.5

--.007.09.2

.8

.1

.3.06

Peru:1995:1998:2001:2004:

17.333

25.530

1.21.5.9.8

5.04.03.03.1

3.63.42.09.0

4.22.51.43.1

.07.1.3

.04

1.42.73.03.4

.07.1.1.2

7.34.9

13.59.0

Uruguay:

1995:1998:2001:2004:

5.95.88.617.3

1.1.7.8

1.0

5.64.04.76.3

3.12.93.53.3

2.61.91.52.4

.2

.2

.2

.6

2.52.03.13.6

.5

.3

.3

.4

4.23.43.22.2

Venezuela:1995:1998:2001:2004:

50.551.547.755.6

.5

.4

.2

.6

1.81.41.1.7

.8

.7

.6

.6

1.72.21.1.6

.2.08.04.04

.41.42.0.9

.5.06.05.3

2.81.9.4.8

APPENDIX 5: LATIN IMPORTS FROM ASIA & LATIN AMERICA

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LatinCountries:

China: India: Japan: South Korea: Latin America:

Argentina:1995:1998:2001:2004:

667: 3.6%1216: 3.8%1109: 5.5%1151: 5.1%

61: .3%143: .5%151: .7%171: .8%

674: 3.5%1442: 4.5%767: 3.8%479: 2.1%

347: 1.8%639: 2.0%410: 2.0%263: 1.2%

6021: 31.2%12901: 40.7%12243: 60.2%13947: 62.3%

Brazil:1995:1998:2001:2004:

1473: 3.2%1393: 2.4%1676: 3.0%4047: 6.4%

166: .4%202: .4%543: 1.0&556: .9%

3279: 7.0%3253: 5.7%3064: 5.5%2868: 4.6%

1322: 2.8%992: 1.7%

1574: 2.8%1730: 2.8%

10185: 21.9%12486: 21.7%10157: 18.3%10407: 16.6%

Chile:1995:1998:2001:2004:

498: 3.2%759: 3.8%1042: 5.8%1953: 7.8%

--67: .3%75: .4%

101: .4%

1013: 6.5%995: 5.0%556: 3.1%818: 3.3%

527: 3.4%562: 2.8%540: 3.0%540: 2.2%

4145: 26.8%4907: 24.7%6057: 34.0%9271:37.1%

Colombia:1995:1998:2001:2004:

93: .7%269: 1.8%517: 4.0%1110: 6.6%

22: .2%55: .3%73: .6%

181: 1.0%

1046: 7.5%990: 6.7%559: 4.4%644: 3.8%

184: 1.3%300: 2.0%266: 2.0%453: 2.7%

3511: 25.3%3570: 24.3%3258: 25.4%4836: 28.9%

Costa Rica:1995:1998:2001:2004:

40: 1.2%89: 1.4%118: 1.8%331: 4.0%

2: .06%5: .08%6: .09%8: .09%

123: 3.8%385: 6.2%215: 3.3%484: 5.9%

3: .09%6: .1%

3: .05%126: 1.5%

1004:31.3%1232:19.8%1421:21.6%2181:26.4%

Guatemala:1995:1998:2001:2004:

27: .8%171: 3.0%214: 3.5%713: 7.5%

3: .09%5: .08%21: .3%47: .5%

121: 3.7%248: 4.4%171: 2.8%417: 4.4%

35: 1.0%293: 5.2%518: 8.6%648: 6.8%

1103: 33.5%1840: 33.0%2073: 34.3%2848: 30.1%

Mexico:1995:1998:2001:2004:

680: .9%2034: 1.6%4469: 2.6%1845: .9%

121: .2%232: .2%392: .2%868: .4%

3608: 5.0%4553: 3.6%8086: 4.7%

10583: 5.3%

974: 1.3%1951: 1.6%3532: 2.0%5228: 2.6%

2154: 3.0%2919: 2.3%5541: 3.2%11193: 5.6%

Paraguay:1995:1998:2001:2004:

123: 4.4%347: 9.0%231: 11.6%464: 17.5%

8: .3%6: .2%7: .6%16: .6%

236: 8.4%99: 2.6%86: 4.3%87: 3.3%

182: 6.5%60: 1.6%24: 1.2%27: 1.0%

1283: 45.9%2024: 52.5%1226: 61.7%1585: 59.8%

Peru:1995:1998:2001:2004:

213: 2.8%134: 1.7%383: 5.3%429: 4.4%

17: .2%26: .3%41: .6%53: .5%

382: 5.0%344: 4.3%393: 5.5%156: 1.6%

177: 2.3%240: 3.0%245: 3.4%190: 2.0%

2838: 37.72261: 28.4%2637: 36.6%3082: 31.6

Uruguay:1995:1998:2001:2004:

73: 2.5%124: 3.3%146: 4.8%257: 6.7%

16: .6%24: .6%23: .8%24: .6%

73: 2.5%93: 2.4%50: 1.6%60: 1.6%

50: 1.7%82: 2.2%45: 1.5%44: 1.1%

1492: 52.0%1864: 48.9%1654: 54.3%2121: 55.0%

Venezuela:1995:1998:2001:2004:

62: .6%124: 1.0%524: 2.5%72: .4%

14: .1%24: .2%53: .3%50: .3%

431: 4.4%600: 4.6%782: 3.8%496: 2.9

93: .9%189: 1.5%

----

2411: 24.6%2924: 22.6%6304: 30.4%5508: 31.8%

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APPENDIX 6: LATIN EXPORTS TO ASIA & LATIN AMERICA

LatinCountries:

China: India: Japan: South Korea: Latin America:

Argentina:1995:1998:

2001:2004:

562: 2.8%745: 2.8%

1224: 4.6%3368: 9.2%

152: .7%359: 1.3%

435: 1.6%471: 1.3%

438: 2.2%660: 2.5%

351: 1.3%404: 1.1%

118: .6%126: .5%

390: 1.5%383: 1.1%

9728: 47.8%12901: 50%

12243: 46%12947: 38.3%Brazil:

1995:1998:2001:2004:

1609: 3.5%1312: 2.6%2371: 4.0%6208: 6.4%

320: .7%145: .2%285: .5%652: .7%

3102: 6.7%2202: 4.3%1986: 3.4%2768: 2.8%

827: 1.8%467: .9%736: 1.2%

1429: 1.5%

10739: 23.0%14278: 27.9%13536: 23.0%23764: 24.3%

Chile:1995:1998:2001:2004:

375: 2.3%524: 3.2%1049: 5.7%

3344: 10.3%

86: .5%54: .3%

111: .6%426: 1.3%

2906: 17.6%2074: 12.6%2134: 11.5%3696: 11.4%

897: 5.4%422: 2.6%553: 3.0%

1804: 5.5%

3089: 18.7%3668: 22.3%4119: 22.2%5450: 16.7%

Colombia:1995:1998:2001:2004:

128: 1.3%16: .1%36: .3%156: .9%

4: .04%2: .02%3: .02%8: .04%

364: 3.7%269: 2.5%165: 1.3%262: 1.6%

45: .5%35: .3%44: .4%93: .6%

2924: 29.7%3253: 29.9%4352: 35.4%5652: 33.2%

Costa Rica:1995:1998:2001:2004:

55: 2.0%79: 1.4%18: .3%

301: 4.8%

1: .04%2: .04%1: .02%8: .1%

28: 1.0%64: 1.2%15: .3%41: .7%

----

.05: --11: .2%

573: 21.2%949: 17.2%869: 17.4%1571: 24.9%

Guatemala:1995:1998:2001:2004:

34: 1.8%.8: .02%1.5: .03%1.4: .02%

--1: .03%

.3: --.23: --

54: 2.8%76: 2.0%66: 1.4%28:.6%

2: .1%60: 1.6%136: 3.0%40: .08%

777: 40.1%905: 23.7%1193:26.1%1799: 35.7%

Mexico:1995:1998:2001:

2004:

543: .7%323: .2%402: .3%

1159: .6%

25: .03%25: .02%160: .1%

446: .2%

928: 1.2%856: .7%621: .4%

1191: .6%

89: .1%73: .06%293: .2%

219: .1%

4505: 5.7%5584: 4.8%6578: 4.1%

8482: 4.5%Paraguay:

1995:1998:2001:2004:

7: .8%6: .5%

23: 2.3%54: 3.3%

--.5: .03%28: 2.8%3.4: .2%

1: .1%59: 4.7%11: 1.1%18: 1.1%

2: .2%--

.26: .02%4: .2%

612: 66.6%845: 66.9%711: 71.9%1172: 72.1%

Peru:1995:1998:2001:2004:

405: 7.3%274: 4.8%446: 6.4%

1269: 10.1%

2: .04%24: .4%36: .5%50: .4%

501: 9.0%217: 3.8%375: 5.4%

548% 4.4%

159: 2.9%42: .7%

109: 1.6%202: 1.6%

941: 17.0%1018: 17.9%1384: 19.9%2421: 19.4%

Uruguay:1995:1998:2001:

2004:

173: 8.2%122: 4.4%127: 6.2%

124: 3.8%

6: .3%1: .04%2: .1%

5: .2%

19: .9%22: .8%12: .6%

57: 1.7%

10: .5%4: .1%5: .2%

13: .4%

1131: 53.3%1741: 62.9%1050: 51:0%

1214: 37.2%Venezuela:

1995:1998:2001:2004:

6: .03%1: .01%48: .2%575: .6%

6: .03%3: .02%4: .01%3: .01%

293: 1.5%188: 1.1%148: .5%215: .5%

36: .2%14: .01%6: .02%85: .2%

6505: 34.0%5325: 31.2%8205: 30.5%8407: 19.6%

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APPENDIX 7: LATIN IMPORTS: SOURCES IN AGGREGATGE AND RELATIVE TERMS

Countries:United States:

8-CountryWest European

Average:

3-CountryAsian

EmergingCountry

Average:

4-CountryAsian Average

(includesJapan)

LatinAmericanAverage:


19.0%16.6%

26.5%17.5%

5.7%7.1%

9.2%9.8%

31.2%62.3%

Brazil:1995:2004:

21.2%18.3%

24.7%22.2%

6.4%10.1%

13.4%14.7%

21.9%16.6%

Chile:1995:2004:

24.5%14.0%

17.9%12.7%

6.6%10.4%

13.1%13.7%

26.8%37.1%

Colombia:1995:2004:

39.1%29.0%

16.3%11.6%

2.2%10.3%

9.7%14.1%

25.3%28.9%

Costa Rica:

1995:2004: 45.3%46.1% 10.1%9.1% 1.4%5.9% 5.1%11.8% 31.3%26.4%Guatemala:

1995:2004:

44.9%34.0%

8.5%8.3%

1.9%14.8%

5.6%19.2%

33.5%30.1%

Mexico:1995:2004:

74.5%55.0%

8.5%8.9%

2.4%3.9%

7.4%9.2%

3.0%5.6%

Paraguay:1995:2004:

12.3%4.0%

10.6%6.6%

11.2%19.1%

19.6%22.4%

45.9%59.8%

Peru:1995:2004:

26.7%30.3%

15.2%9.2%

5.3%6.9%

10.3%8.5%

37.7%31.6%

Uruguay:1995:2004:

9.9%9.2%

19.1%13.0%

4.8%8.4%

7.3%10.0%

52.0%55.0%

Venezuela:1995:2004:

42.6%28.8%

16.1%12.2%

1.6%.7%

6.0%3.6%

24.6%31.8%

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APPENDIX 8: LATIN EXPORTS: DESTINATIONS IN AGGREGATGE AND RELATIVE TERMS

Countries: United States:8-Country

West EuropeanAverage:

3-CountryAsian

EmergingCountry

Average:

4-CountryAsian Average

(includesJapan)

LatinAmericanAverage:


7.3%10.1%

19.2%16.0%

4.1%11.6%

6.3%12.7%

47.8%38.3%

Brazil:1995:2004:

18.9%20.8%

22.6%20.7%

6.0%8.6%

12.7%11.4%

23.0%24.3%

Chile:1995:2004:

14.5%14.0%

15.2%18.4%

8.2%17.1%

25.8%18.5%

18.7%16.7%

Colombia:1995:2004:

34.1%42.0%

20.7%11.0%

1.8%1.5%

5.5%3.1%

29.7%33.2%

Costa Rica:

1995:2004: 40.2%46.9% 22.4%14.5% 2.1%5.1% 3.1%5.8% 21.2%24.9%Guatemala:

1995:2004:

31.3%53.0%

13.0%3.6%

1.9%.1%

4.7%.7%

40.1%35.7%

Mexico:1995:2004:

83.6%88.0%

3.4%2.8%

.8%

.9%3.0%1.5%

5.7%4.5%

Paraguay:1995:2004:

24.8%3.4%

18.4%5.9%

1.0%3.7%

1.1%4.8%

66.6%72.1%

Peru:1995:2004:

17.3%30.0%

22.9%28.6%

10.2%12.1%

19.2%16.5%

17.0%19.4%

Uruguay:1995:2004:

5.9%17.3%

19.6%19.8%

9.0%4.4%

9.9%6.1%

53.3%37.2%

Venezuela:1995:2004:

50.5%55.6%

8.7%4.5%

.3%

.8%1.8%1.3%

34.0%19.6%

34


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APPENDIX 9:

PROPORTIONAL TRADE TRENDS (1998 versus 2004):

LATIN AMERICA, WEST EUROPE, AND THE UNITED STATES

Latin Countries: Imports from US: Exports to US: Imports from

Europe:

Exports to

Europe:Argentina: Down (2.6%) Up (2.1%) Down (3.4%) Up (.9%)

Brazil: Down (5.7%) Up (1.5%) Down (5.6%) Down (2.2%)Chile: Down (6.3%) Down (.3%) Down (4.6%) Up (.2%)

Colombia: Down (3.1%) Up (3.8%) Down (6.8%) Down (7.1%)Costa Rica: Down (4.2%) Down (1.4%) Up (.3%) Down 4.1%)Guatemala: Down (4.2%) Up (.5%) Down (.3%) Down (4.9%)

Mexico: Down (19%) Same Up (.6%) Down (1.0%)Paraguay: Down (16.3%) Up (.8%) Down (2.2%) Down (15.5%)

Peru: Down (3%) Down (3%) Down (2.2%) Up (2.6%)Uruguay: Down (2.8%) Up (11.5%) Down (6.2%) Up (5.4%)

Venezuela: Down (14.7%) Up (4.1%) Down (3.9%) Down (3.6%)

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hussain (ed) 2007 - west europe & the united

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