the latin american integration process in · pdf filethe latin american integration process in...

The Latin American Integration Process in 1980

INSTITUTE FOR LATIN AMERICAN INTEGRATION

INTER-AMERICAN DEVELOPMENT BANK

INSTITUTE FOR LATIN AMERICAN INTEGRATION Cerrito 264 (Casilla de Correo No. 39, Sucursal 1) Buenos Aires

FOREWORD

The Institute for Latin American Integration is pleased to present for the benefit of government officials, economists, business executives, and scholars of Latin American affairs in general its report on the region's progress in economic integration and cooperation during 1980.

This report is the latest in the series which began in 1968 with the publication of The INTAL Report: The Economic Integration of Latin America, covering the period from 1960 to 1967. In 1972 a second report was published, covering the 1968-1971 period; and in 1972 INTAL began to issue its reports on a yearly basis.

The report for 1980 comprises eight chapters. Chapter I is an inter-pretation of the main factors which influenced the world economy during the course of the year and their specific effect on Latin American economic developments during that time. Chapters II, III, IV, and V give an analysis of the progress made in 1980 by the region's four formal inte-gration schemes—namely: a) the Latin American Free Trade Associa-tion (LAFTA), recently restructured as the Latin American Integration Association (LAIA); b) the Cartagena Agreement or Andean Group (GA); c) the Central American Common Market (CACM); and d) the Caribbean Community (CARICOM). Chapter VI describes the eco-nomic cooperation activities carried out under the aegis of the Latin American Economic System (LAES or SELA). Chapter VII describes the 1980 economic cooperation progress within the River Plate Basin and Amazon Cooperation Treaty countries specifically; this Chapter also contains a section on financial cooperation activities and one on the bilateral agreements within the region during 1980. And Chapter VIII provides a general timetable of the main developments which oc-curred within the region's integration and cooperation schemes over the past year.

This report is the product of teamwork by a group of economists and lawyers, and was coordinated by Martin Arocena, the head of

INTAL's Integration Schemes Division, and Luis I. De Maria, an official of this same Division. Credit for the writing of each chapter should be given as follows: Jaime Campos, INTAL consultant (Chapter I); Martin Arocena (Chapter II); Luis I. De Maria (Chapter III); Roman Mayorga Quiros, INTAL consultant (Chapter IV); Earle W. Sealy, IDB official (Chapter V); Alfredo Echegaray, INTAL consultant (Chapter VI, and Chapter VII, Section C); Eugenio 0. Valenciano, head of INTAL's Technical Assistance Division (Chapter VII, Section A); Eudes Bezerra Galva°, Deputy Director of INTAL (Chapter VII, Section B); Ray-mundo Barros, head of INTAL's Legal Studies Division (Chapter VII, Section D); and Jose Maria Martinez, head of INTAL's Documen-tation Service (Chapter VIII).

This report was completed in April of 1981.

Eduardo R. Conesa Director

TABLE OF CONTENTS

CHAPTER I—Developments in The World and Latin American Economies during 1980 1

INTRODUCTION 1 A. ECONOMIC DEVELOPMENTS IN OECD

COUNTRIES 3 B. THE ECONOMY OF LATIN AMERICA IN 1980 5 C. GROWTH, TRADE AND INTEGRATION 7

1. Growth and Trade 7 2. International Financing: A True Alternative? 11 3. Trade and Latin American Integration 13

D. PROGRESS IN INTEGRATION DURING 1980 14 E. THE OUTLOOK FOR INTEGRATION 19

CHAPTER II—The Latin American Integration Association (LAIA).... 22

INTRODUCTION 22 A. INSTITUTIONAL ASPECTS: THE RISE OF LAIA 26

1. The Negotiating Meetings for the New Treaty 30 2. The Second Negotiating Meeting 35 3. The Acapulco Conference 40 4. The Project for the New Treaty 40 5. The Meeting of the Council of Foreign Relations

Ministers 50 6. The XX Special Conference of LAFTA's Contracting

Parties 53 B. LAFTA's PROGRESS DURING 1980 57

1. Trade Negotiations and Other Developments in the Trade Picture 57

2. Sectorial Meetings 60 3. Agricultural Sector 63 4. Monetary and Financial Aspects 64 5. The Multilateral Reciprocal Payments and Credits

Systems 64 6. Utilization of the Santo Domingo Agreement 67 7. Customs Matters 68

CHAPTER III-Andean Group 71

INTRODUCTION 71 A. INSTITUTIONAL ASPECTS 73

1. Meetings of Chiefs of State 73 2. The Andean Integration System 75 3. The Meetings of the Commission 78 4. The General Long-Term Orientation of the Process 79

B. TRADE ASPECTS 80 1. Liberalization Program 80 2. Tariff policy 82 3. Special Rules of Origin 86 4. Intrasubregional Trade 87 5. Export Promotion 90

C. INDUSTRIAL SECTOR 91 1. Industrial Programming 91 2. The Automotive Program 92 3. Petrochemical Program 93 4. The Metalworking Program 94 5. The Iron and Steel Program 95 6. Other Industrial Programs 96 7. Integral Development Projects 97 8. The Rationalization Programs 99

D. AGRICULTURAL SECTOR 101 1. Agricultural Sector's Institutional Framework and the

Planning of the Sector 101 2. Specific Projects in the Area of Agricultural

Integration 103 3. Agricultural Marketing 104 4. Animal and Plant Sanitation 105 5. Program for the Agricultural Development of Bolivia 105

E. PHYSICAL INTEGRATION 105 1. The Institutional Framework 105 2. Evaluation of the Needs of the Transportation Sector 107

F. TECHNOLOGY 108 1. Technology Policy 108

2. Andean System of Technological Information 110 3. Andean Technological Development Projects 111 4. Programs of Technological Disaggregation and Survey

of Technological Capacities 114 G. EXTERNAL DIMENSION 115

1. The Andean Council 115 2. Andean Position on the Restructuring of LAFTA 117 3. Cooperation Agreement with the Latin American

Economic System (SELA) 118 4. Negotiation with the European Communities (EC) 119 5. Trade Relations and Scientific and Technological

Cooperation with the United States 119

CHAPTER IV—Central American Common Market (CACM) 121


1. General Peace Treaty between El Salvador and Honduras 125

2. Activities of IntegAtion Organizations and Forums 127 3. Creation of New Subregional Organizations, Forums and

Programs 129 4. Calls for Restructuring the Central American Integration

Program 131 B. TRADE ASPECTS 134

1. Intrazonal Trade 134

2. Tariffs and Customs Activities 138 3. Reform of Instruments for Regulating International

Trade 139 C. INDUSTRIAL SECTOR 140

1. Regulations Governing Industrial Production 140

2. Preparation and Promotion of Industrial Projects of Interest to the Subregion 141

3. Greater Attention to Scientific and Technological Aspects of Industrial Development 141

D. AGRICULTURAL SECTOR 142

1. Activities within the Central American Basic Grain Program 142

2. Preparation of a Central American Plan for Agricultural Research and Extension 142

3. SIECA Technical Assistance to El Salvador on Agricultural Policy 142

E. INFRASTRUCTURE 143 1. General Infrastructure Development 143

2. Major Projects Initiated or Completed in 1980 144 3. Other Aspects of Physical Integration 149

F. MONETARY AND FINANCIAL ASPECTS 150 1. Central American Clearinghouse 150 2. New Exchange Regulations 152 3. Central American Bank for Economic Integration

(CABEI) 155 G. THE EXTERNAL DIMENSION 159

1. Efforts to Include Panama and the Caribbean Countries 159

2. Joint Positions vis a vis International Forums and Third Countries 159

3. Multinational Institutions Dedicated to Improving Conditions for Marketing Commodities 161

4. SIECA's Relations with UNIDO and UNCTAD 161 5. CACM Relations with the European Economic

Community 162

CHAPTER V—Caribbean Community 163


1. Review of Integration Movement by Group of Experts 165 2. Special Measures for LDC's 166 3. Ratification of New Rules of Origin 166 4. Complementarity of National and Regional Resources 166 5. Reorganization of the Caribbean Development Bank 166

B. COMMERCIAL ASPECTS 167 1. Trade Liberalization 167 2. Common Protective Policy—Establishment of a Common

External Tariff 169 3. Trade 170 4. Coordination of External Trade Policies 173 5. The Agricultural Marketing Protocol (AMP) and the

Guarantee Market Scheme (GMS) 173 6. The Regional Food Plan (RFP) 174 7. Other Areas of Cooperation Affecting Trade 174

C. SECTORIAL DEVELOPMENT 175 1. The Agricultural Sector 175 2. Industrial Sector 176 3. Energy 177 4. Transportation 177

D. FINANCIAL AND MONETARY ARRANGEMENTS 179 1. The Caribbean Development Bank 179

2. The Caribbean Investment Corporation 180 3. Development Finance Corporations 180 4. The Caribbean Multilateral Clearing Facility 180

E. FUNCTIONAL COOPERATION 181 1. Health 183 2. Education, Training and Culture 184

CHAPTER VI—The Latin American Economic System (LAES) 186

A. VI Regular Meeting of the Latin American Council and Institutional Matters 186

B. Latin American External Consultation and Coordination 190 1. International Fora 190 2. Countries or Groups of Countries 195

C. REGIONAL COOPERATION 198 1. General Cooperation Activities 200 2. Specific Activities in Cooperation: The Action

Committees 202

CHAPTER VII—Multinational Programs and Other Forms of Cooperation 214

INTRODUCTION 214 A. THE SYSTEM OF THE RIVER PLATE BASIN 214

1. The Eleventh Meeting of Ministers of Foreign Relations 215

2. The Intergovernmental Coordinating Committe 217 3. Groups of Experts 217 4. The Financial Fund 218 5. Outlook 219

B. AMAZON COOPERATION TREATY 221 1. The Treaty 222 2. First Meeting of Ministers of Foreign Relations of

Signatory Countries of the Amazon Cooperation Treaty 223

3. Outlook 225 C. FINANCIAL COOPERATION 226

1. Financial Cooperation at Government Level 226 2. Latin American Multinational Banks 228 3. Projects for Latin America—Sectorial Financial

Mechanisms 230 4. Cooperation among Latin American Banks 231

D. PARTIAL COOPERATION ACTIONS BY PAIRS OF COUNTRIES 232

1. Conditions in 1980 234

2. Infrastructure, Transportation and Communication 235 3. Economic Cooperation: Industry and Trade 237 4. Scientific and Technical Cooperation 241 5. Social Security 242 6. Cooperation in The Sanitation Sector 242

CHAPTER VIII—Chronology of the Main Regional Economic Integration Events in 1980 244

INTRODUCTION 244 A. LATIN AMERICAN FREE TRADE ASSOCIATION

(LAFTA) 244 B. ANDEAN GROUP 247 C. CENTRAL AMERICAN COMMON MARKET

(CACM) 251 D. CARIBBEAN COMMUNITY (CARICOM) 260 E. LATIN AMERICAN ECONOMIC SYSTEM (LAES) 264 F. RIVER PLATE BASIN 267 G. AMAZON COOPERATION TREATY 268

CHAPTER I

Developments in the World and Latin American Economies

during 1980

Introduction As the 1980's begin, there is widespread acceptance of the idea that the basic trends found in the world economic development picture in the years prior to the 1973 crisis have changed quite significantly in character since that date. Although no one has been able thus far to present an irrefutable argument showing this belief to be perfectly well-founded, we still cannot deny that it persists and that it has reasonable substan-tiation in actual economic fact.

The salient feature of this new period of history is the ever-threat-ening specter of an extremely debilitating and deep-rooted slowdown in general world economic growth. This is closely related, obviously, to the fact that for several years now the more developed countries—considered by some schools of thought to be the driving force behind international economic growth—have shown lower levels of economic activity than in previous decades, a phenomenon which will not be likely to change in the short term. Let us note that between 1974 and 1980 these more developed countries grew at an average rate of only three per cent per year, as compared with the approximately five per cent average annual rate registered over the quarter of a century leading up to 1974. The outlook is not encouraging; even the most optimistic fore-casters are not predicting a rapid recovery.

As the world situation stands today, even those who think of the slowdown in economic activity in the industrialized nations as only a temporary phase within the overall economic cycle and thus predict that recovery will be quick, must recognize that the high inflation rates still affecting many of those more developed countries are obliging govern-ments to refrain from stimulating economic activity there. As we shall see later, even on into 1980 many of the countries of the Organization

2 DEVELOPMENTS IN THE WORLD AND LATIN AMERICAN ECONOMIES

for Economic Cooperation and Development were showing two-digit annual price increase rates.

The severity and persistence of the long-standing slow growth sit-uation in the developed countries have given rise to a whole set of interpretations pointing to structural, as opposed to situational, causes.' Some economists, for example, emphasize that the present crisis stems from the scarcity of minerals (oil, copper, bauxite, etc.), which in corn-bination with the level of inflation had to lead directly or indirectly to a slowdown in economic activity. Others state that the present-day ab-sence of a labor surplus in Western Europe's rural areas does away with one of the factors which had in the past contributed to a rapid expansion in industrial activity there. And still others give interpretations of the slowdown based on technological considerations; one of the most in-teresting of these suggests that it has been many years now since the industrialized countries have produced any volume of discoveries or innovations significant enough to stimulate investment and accelerate economic growth.

It seems reasonable to suggest that of all the interpretations offered, the most relevant ones for the purpose of making any general economic projections would be those which stress the supposed limitations or obstacles of internal origin which are currently blocking growth in the developed countries. This is because the main issue at present is the actual ability of the developed countries themselves to change the cur-rent state of affairs. And few would doubt that it is in the technological arena, by and large, that this drama will be played out.

The available data concerning the supposed slowdown in the rate of technological innovation in the developed countries over the past few years is by no means conclusive. But there is certainly a growing con-viction that the United States, at least, has suffered a serious setback in this area.2 This type of situation, to be sure, has not been felt as keenly in such countries as Japan or the Federal Republic of Germany, but the question naturally taking shape in the minds of many is the degree to which this lowered level of technological innovation in the United States—the most advanced country and many times a bellwether nation in economic matters—presages a more generalized setback in the rate of technological development in all the rest of the industrialized countries.

Whatever the degree of validity of the foregoing interpretations, one thing is sure: the slowdown in the developed countries' general economic activity constitutes a severe blow to the growth aspirations of

'W.A. Levis mentions still other possible causes in addition to the ones mentioned here: W. Arthur Lewis, "The Slowing Down of the Engine of Growth," The American Economic Review, Vol. 70, No. 4, September, 1980, pp. 558-9. 2See, for example, the following report: National Academy of Sciences, Technology, Trade, and the U.S. Economy, Washington, D.C., 1978.

ECONOMIC DEVELOPMENTS IN THE OECD COUNTRIES 3

the developing countries, which traditionally have depended greatly on the more developed nations as markets for their exports. Any decrease in this export flow is reflected directly as decreases in the volume and rate of domestic production in the less developed countries. In addition, lessened economic growth and the resultant unemployment in the in-dustrial nations breed protectionist attitudes there, further hindering the flow of exports from the developing nations.

As if this were not enough, the inflation which is currently plaguing the industrial nations naturally affects their export prices, which in turn further burdens certain developing countries that do not produce oil or other relatively scarce products and which consequently must accept the less than favorable terms of trade which result.

The developing nations which do not export oil have been able to maintain relatively high growth rates since 1973 at the cost of running up tremendous current account deficits. For 1980 alone, this negative balance was estimated at 70 billion dollars. Many observers have, in point of fact, been greatly surprised by these countries' ability to attract loans on the international money market. But concern is now growing as to the ultimate advisability of this particular financial trend, especially given the inherent limitations of an international financing apparatus fed by the oil-exporting nations' surplus capital, as channeled largely through financial organizations based in the industrial countries.

One of the basic goals of the developing countries should be, then, to find ways of achieving a pattern of constant and sustained growth in their exports. The markets of the industrialized nations will, of course, continue to be the prime target for these exports, and no effort should be spared in continuing to encourage this vital export trade flow. How-ever, this effort alone will not be sufficient, as we shall explain presently. The current international crisis is calling for novel and imaginative so-lutions to this marketing problem—a search for new outlets.

It is the belief of INTAL that the current world crisis gives added relevance to the concept of economic integration in Latin America.3 The Institute is convinced that by means of formulas designed and car-ried out cooperatively by the countries of the region, increased growth in trade can be achieved in Latin America to compensate, at least in part, for the slowdown in trade with the more industrialized nations. Part C of the present Chapter will deal in greater detail with this concept.

A. Economic Developments in the OECD Countries During 1980, the economic area comprising the member nations of the Organization for Economic Cooperation and Development (OECD)

3 Eduardo R. Conesa, "Las exportaciones intralatinoamericanas como motores del desarrollo," Latin American Integration, No. 52, November, 1980.


once again experienced a significant recession, surpassed during the past decade only by the 1974-75 crisis. This deceleration in the rhythm of economic activity has, however, affected the main OECD countries unevenly. While the United States, the United Kingdom, and Canada experienced negative growth rates, the same was not true for Japan, the Federal Republic of Germany, Italy, and France,4 although all of them did, to be sure, experience some degree of decline in their growth rates. (See Table 1).

As a result of this decline in economic activity, the already worri-some unemployment rates soared even higher. For the first half of the year, OECD estimated average unemployment for the countries of the area at about 5.5% of their total work force. This figure is considerably higher than the 1964-73 average (3.0%) and is higher even than the 1974-79 average (4.9%). Of course, we should mention that there were rather large discrepancies among the unemployment rates of the seven largest (economically speaking) countries of the Organization. Japan and the Federal Republic of Germany showed rates of less than 3%, while the remaining five countries had rates ranging from 6 to 7.7%.

Inflation has been, to a large extent, the culprit in creating the discouraging economic scenario we have just described. Its effects have been felt both directly (such as its negative impact on the public's real income) as well as indirectly (through the dampening of economic ac-tivity by inflation-fighting monetary and, to a lesser degree, fiscal pol-icies). In effect, inflation continued to be a critical problem indeed for the industrialized nations, with 1980 prices increasing at a faster rate than the year before in all 24 OECD member countries.5 As a result, 17 of them found themselves in the unenviable position of having two-digit inflation rate figures for the year.

Table 1. Growth of the Real GNP in Various OECD Countries (Percentage changes over the preceding year)

Average for 1966-67 to 1976-77 1978 1979 1980"

United States 2.8 4.4 2.3 -0.75 Japan 7.8 6.0 5.9 5.0 Federal Republic

of Germany 3.6 3.5 4.5 1.75 France * 4.6 3.3 3.3 1.75 United Kingdom * 2.1 3.5 1.5 -2.25 Italy * 3.9 2.6 5.0 3.75 Canada 4.7 3.4 2.8 0.50

* Gross domestic product.

** Estimated. Source: OECD, Economic Outlook, No. 27 and 28, July and December, respectively, 1980.

4 0ECD, Economic Outlook, December 1980, No. 28, p. 14. 5 OECD, op. cit., p. 47.

THE ECONOMY OF LATIN AMERICA IN 1980 5

The price hikes in imported goods (obviously including hydrocar-bons) and services have without a doubt played a large part in bringing about these high inflation rates in the industrialized countries. However, recent indications are that the inflation rates of domestic prices them-selves are also on the rise. GNP deflators, which are the appropriate indexes for this type of phenomenon, show average annual rates of around 9% for the seven largest OECD countries, a figure much higher than in previous years.6 The existence of rising domestic unit cost in-crease rates may suggest that inflation could well be getting more un-manageable in the short term, to the extent to which domestic economic sectors incorporate into their plans expected or inflated values—which are, in fact, hitting closer and closer all the time to the actual price levels which ultimately prevail. In addition to this, the effective coor-dination of inflation-control policies among the OECD nations is ren-dered more difficult by the fact that inflation rates (or the GNP deflators) vary so widely from country to country.

B. The Economy of Latin America in 1980 According to preliminary estimates by the Economic Commission for Latin America (ECLA)7, Latin America's average gross internal product increased by around 5.3% in 1980, a rate somewhat lower than in 1979, but still higher than the 1975-78 average. It comes as no surprise that the 1980 figure still represents a two-point decline from the 1970-74 rate of increase.

There were marked differences in product growth among the var-ious countries of the region (see Table 2). Among the relatively more developed countries, only Argentina showed no growth at all, while Brazil and Mexico both showed increases of 7.5%. The countries of intermediate development shaped up as follows: Chile:5.5%; Colom-bia:4.0%; Peru:3.5%; and Venezuela:l.0%. Among the remaining coun-tries, only El Salvador showed a decrease in its gross internal product in absolute terms, presumably as a result of its domestic political situ-ation.

The average rate of inflation in Latin America was seen not to have varied much at all from 1979, maintaining a level of around 54% per year. However, there were great individual variations from country to country in terms of the level of price increases when these occurred, and in terms of the direction which price changes actually took. By way of illustration, let us note that both Argentina and Brazil experienced variations of 90% in consumer prices during 1980, but that in the case of Argentina, prices were 90% lower than in previous years, while in

6lnternational Monetary Fund, Annual Report 1980, Washington, 1980, p. 5. ECLA, "Balance preliminar de la economia latinoamericana durante 1980," mimeographed, December

22, 1980.


Table 2. Latin America: Development of the Gross Domestic Product (Annual growth rates)

1970-74 %

1975 %

1976 %

1977 %

1978 %

1979 %

1980 * %

Argentina 5.2 0.9 -1.7 4.9 -3.4 8.5 0.0 Bolivia 5.8 5.1 6.8 3.4 2.8 1.4 1.0 Brazil 11.5 5.7 9.0 4.7 6.0 6.4 7.5 Chile 2.6 11.3 4.1 8.6 7.8 8.5 5.5 Colombia 6.9 4.3 4.2 4.8 8.8 5.1 4.0 Costa Rica 7.1 2.1 5.5 8.9 5.7 4.3 2.5 Dominican Republic 10.1 5.2 6.7 5.5 2.3 3.6 3.0 Ecuador 8.6 6.8 9.3 7.5 5.4 5.4 4.5 El Salvador 4.9 5.6 4.0 5.9 4.4 -3.1 -6.0 Guatemala 6.4 1.9 7.4 7.8 5.5 5.0 3.0 Haiti 4.7 2.2 5.3 1.3 3.9 1.9 3.5 Honduras 3.5 2.0 7.0 5.8 7.9 6.8 1.0 Mexico 6.2 4.1 2.1 3.3 7.3 8.0 7.5 Nicaragua 5.3 2.2 5.0 6.3 -7.2 -24.8 14.0 Panama 5.2 0.6 -1.1 0.2 3.7 5.0 5.0 Paraguay 6.4 5.0 7.5 11.8 10.3 9.0 9.5 Peru 6.3 3.3 3.0 -1.2 -1.8 3.8 3.5 Uruguay 0.8 4.5 2.6 3.4 3.9 8.4 5.0 Venezuela 5.2 5.9 8.4 6.8 3.2 0.7 1.0 Latin America 7.2 3.3 4.6 4.5 4.6 6.3 5.3 (19 countries)

* Preliminary estimate, subject to revision.

Source: ECLA: "Balance preliminar de la economia latinoamericana durante 1980," mimeographed, December 22, 1980, p. 5.

Brazil, they were 90% higher. In Mexico, the rhythm of price increases accelerated to around 30% per year. And in other countries-notably the Dominican Republic, Haiti, Nicaragua, Paraguay, and Uruguay the rate of domestic price increases was significantly reduced during 1980.

The external sector, according to ECLA's preliminary report, fared very poorly in 1980, with a current account deficit amounting to 25 billion dollars-representing a 30% increase over 1979. Once again, there were notable variations in this regard from country to country. All of the oil-exporting nations of Latin America watched their current account deficits melt away to nearly nothing, while the non-exporters of oil saw their own deficits skyrocket to nearly 23 billion dollars.

These same two groups of countries underwent significant changes in regard to the behavior of their exports and imports. As we can see in Table 3, the value of the exports of the oil-exporting countries of the region increased by 49%, while the corresponding increase for the non-exporters of oil was only 19%. It is interesting to note that in the former case, much of the increase in total export value was simply the result of higher prices for the exported goods, primarily hydrocarbons, al-though this phenomenon did not carry equal weight in all six of the oil countries in question. For the non-oil-exporting countries, the increase in unit export prices was greater than the regional average in only four cases (Barbados, Jamaica, the Dominican Republic, and Guyana). Bra-

GROWTH, TRADE, AND INTEGRATION 7

Table 3. Latin America: Exports and Imports of Goods in 1980

Exports Imports

Value in Millions of

Dollars

Indexes 1980 (1979 =100) Value

in Millions of Dollars

Indexes 1980 (1979 =100)

Value Unit

Value Volume Value Unit

Value Volume

94,150 133 127 104 92,630 131 118 111

47,180 149 144 103 37,950 133 112 119 910 117 133 88 800 86 111 77

2,590 121 134 90 2,170 112 111 101 16,600 176 138 127 17,900 154 113 136

3,900 112 117 96 3,130 150 112 134 2,580 159 158 101 1,450 127 111 114

20,600 145 160 91 12,500 115 111 104

46,970 119 114 105 54,680 131 124 106 8,000 102 120 85 9,000 150 118 127

180 136 131 106 450 119 113 105 20,000 131 113 116 23,000 128 132 97 4,600 113 102 111 4,400 135 113 119 1,000 108 110 98 1,400 110 118 93 4,800 125 115 109 5,500 139 120 116 1,010 116 140 83 1,430 131 123 107 1,000 88 104 85 960 101 118 85 1,440 118 113 104 1,570 112 116 97

510 175 160 110 420 145 126 115 180 130 112 116 280 122 123 99 820 109 108 101 930 119 118 101

1,130 139 134 103 1,180 134 126 106 510 83 115 71 640 165 120 137 410 123 119 102 1,400 127 124 102 380 99 101 99 610 106 116 91

1,000 127 121 105 1,510 134 128 105

Latin America

Oil-exporting Countries Bolivia Ecuador Mexico Peru Trinidad and Tobago Venezuela

Non-oil-exporting Countries

Argentina Barbados Brazil Colombia Costa Rica Chile Dominican Republic El Salvador Guatemala Guyana Haiti Honduras Jamaica Nicaragua Panama Paraguay Uruguay

SOURCE: ECLA: "Balance preliminar de la economia latinoamericana durante 1980," mimeographed, December 22, 1980, pages 14 and 16.

zil and Haiti deserve special mention within this non-oil-exporting group for their significant increase in export volume.

Latin America's 1980 imports from other countries increased in value by 31% over 1979, with little difference here between the two groups of countries mentioned above. A more detailed, country-by-country analysis would show that Nicaragua, Mexico, Argentina, and Peru experienced an increase of more than 50% in the value of their imports, owing in large part to increases in the actual volume of goods imported by them. In general, the more notable increases in the import unit value index correspond to the group of countries which do not export oil, showing the effect on them of price increases on their imports of hydrocarbons.

C. Growth, Trade, and Integration 1. Growth and Trade The difficulties which the more developed nations have had to face over the past few years, particularly in regard to their lowered rate of eco-


nomic growth, have been reflected naturally onto the economies of the less developed nations as well, primarily in the form of decreased trade. The developing nations are closely bound to the more industrialized nations in several ways, one of the more significant of which is trade in goods or products; some economists would even contend that any weak-ening of that vital link would tend to jeopardize the growth aspirations of the economically less developed nations.8 In spite of its undeniable drawbacks, however, a situation such as this could lead these countries to strengthen their own internal trade relations as a group, intensifying their already existing processes of economic integration. In short, then, the challenge presented by the now years-old economic crisis in the more industrialized nations could well force the developing countries to look at each other through new eyes, as potential partners in trade, for purposes of maintaining their rates of economic growth.

This viewpoint was expounded by Professor W. Arthur Lewis in his acceptance speech for the Nobel Prize in the Economic Sciences, in February of 1979.9 According to Dr. Lewis, and based on his historical studies covering the past one hundred years, the rate of growth of the developing countries' product has depended on the rate of growth of the developed countries' product. Beginning in 1950 on up until 1973, the world experienced a period of extremely high rates of growth, during which world trade grew at 8% per year in real terms, or at twice the rate of any previous period in history. During that same time, the de-veloping countries saw a 6% yearly growth rate in their own total prod-uct. But, what happens when the more developed countries reduce their growth rate and fall back to only a 4% yearly trade increase? Would the developing countries, Lewis asks, necessarily have to see their own growth rate fall back below their established 6% per year?

Naturally, one of the first theoretical alternatives which comes to mind would be for the developing countries to continue increasing their exports to the industrialized countries at a rate similar to that which existed before 1973, which would imply a continuous growth of the role played by these imports within the total import picture of the indus-trialized nations. Lewis, however, discards this possibility in regard to exports of commodities, at least, with the convincing argument that the demand for commodities is established in the industrial nations on the basis of actual physical volume needed and is not affected by variations in price. What, then, can be said of exports of manufactured products

'There is another school of thought which maintains that the opposite phenomenon, i.e., delinking, would best serve developing nations' interests. See an excellent discussion of the topic in C.F. Diaz Alejandro, "Delinking North and South: Unshackled or Unhinged?" in the collection "Rich and Poor Nations in the World Economy," McGraw Hill, 1978. 9 See a revised version of this speech in W. Arthur Lewis, "The Slowing Down of the Engine of Growth," op. cit.

GROWTH, TRADE, AND INTEGRATION 9

(as opposed to commodities) from the developing nations to the more developed ones?

A recent study by the United Nations Conference on Trade and Development (UNCTAD) may cast a little light on this particular sub-ject.1° To begin with, as we can see in Table 4, the value of manufactures exports from developing countries and territories to 21 developed coun-tries having market economies amounted to some 42.4 billion dollars in 1976, a figure 30% higher than in 1975. Even for the countries of Latin America, manufactures derived from oil were clearly significant, in the case of Venezuela, Trinidad and Tobago, and Panama, as were those related to unworked nonferrous metals, in the case of Chile, Jamaica, and Peru. The bulk of the exports of "other" kinds of manufactured goods did come, as we might have expected, from Mexico, Brazil, Ar-gentina, and Colombia, or the relatively more industrially developed countries of the region. Proportionally speaking, however, such smaller countries as the Dominican Republic, Uruguay, Haiti, El Salvador, and Ecuador did as well as or better than the larger ones in terms of their 1976 exports of "other manufactures," as compared to their total ex-ports.

Secondly, we might note that the volume of manufactures exports from the developing countries to the developed countries having market economies grew during 1970-76 at an average annual rate of 14%, quite a bit higher than the same figure for exports to these markets from other countries. If we bear in mind that imports of manufactures from de-veloping countries make up only 2% of the total consumption of man-ufactures by the OECD countries, then we might well conclude that there exists a good opportunity for rapid growth in that area of trade. Alas, however, that would not seem in fact to be the case.

In effect, figures from the UNCTAD study mentioned earlier would suggest that exports of manufactured goods or products from the de-veloping countries to the developed, free-market ones are sensitive to cyclical fluctuations in the latter's own production of manufactured goods. We should emphasize especially the fact that this sensitivity phenomenon has become even more pronounced in the years subsequent to 1970, during which time the manufactures exports from developing countries to the developed ones with market economies ebbed and flowed in almost total accordance with fluctuations in the developed countries' own industrial production. What all this really boils down to, then, is just that much more evidence that the demand for imports for manu-factured goods or products from the developing countries by the de-veloped countries is quite significantly influenced by the level of activity (this time, industrial) in those developed countries themselves.

10 United Nations Conference on Trade and Development, Study on Trade in Manufactured Goods from United Nations, New York, 1980.


What cannot be so concisely proven, in spite of abundant but scat-tered evidence, is that the industrialized countries tend, when their rhythm of growth slows down, to employ different mechanisms in order to impede imports of manufactured goods. These measures have a tre-mendous effect on exports from the developing countries.

When the more developed countries find themselves in a period of recession, the so-called "readjustments" or transformations in economic activity become more complex, since it is no simple task to transfer capital and labor from those sectors of decreasing comparative advan-tage to those sectors offering more favorable prospects.11 More often than not, the manufactured goods exported by the developing countries are made up of items which compete with products from these sectors of decreasing advantage, and thus the fact that their competing imports often receive less than a warm welcome at times such as this should not surprise them.

To carry out their objectives, the developed countries employ a sophisticated arsenal of economic policy instruments, some of the most important of which are certain industrial policies which, according to a recent report, "are used more and more as protectionist devices,"12

Table 4. Principal* Countries of Latin America Exporting Manufactures** to 21 Developed Countries with Market Economies (Value in millions of dollars)

Exporting Countries 1976 1975

Percentage Increase

1975-1976

Products from Petroleum

1976

Unworked non-ferrous

Metals 1976

Other Manufactures***

Millions of Dollars 1976

Percentage Increase

1975-1976

Venezuela 2,474 1,745 42 2,524 0 46 —19 Mexico 2,416 2,116 14 53 251 2,105 15 Brazil 1,930 1,478 31 1 13 1,916 33 Trinidad & Tobago 1,002 703 43 953 3 46 — 4 Chile 821 644 27 0 711 110 144 Argentina 564 371 52 13 0 550 55 Peru 308 273 13 14 267 27 59 Colombia 240 243 — 1 58 2 180 11 Jamaica 227 283 — 20 0 199 45 — 6 Dominican Republic 173 118 47 — 1 172 46 Uruguay 119 64 86 — 2 118 84 Haiti 116 81 43 — 0 116 43 El Salvador 82 46 78 3 79 80 Ecuador 57 39 46 9 1 48 66 Panama 50 103 —51 35 0 15 7

* Countries whose exports to the markets in question had a value of 50 million dollars or more in 1976. ** The Appendix of the UNCTAD gives a list of the products included in this category. *** This category does not include petroleum products, gas and electricity, or unworked non-ferrous metals.

SOURCE: United Nations Conference on Trade and Development (UNCTAD), op. cit., 42.

"See the General Agreement on Tariffs and Trade (GATT) study, "Perspectivas del comercio inter-nacional," published in Comercio Exterior, INCOMEX, Bogota, July-August 1980, pp. 3-17. 12 UNCTAD, "The industrial policies of the developed countries with market economies, and their effect on exports of manufactured and semimanufactured goods from the developing nations," TD1230ISupp. 1, Manila, May, 1979, p. 35.

GROWTH, TRADE, AND INTEGRATION

11

blocking the way for structural change in the industrial sectors of the developing countries, partially to protect the developed countries' in-dustries from having to compete with more manufactures from abroad. As seen from another vantage point, these policies economically impede the allocation of certain lines of production to the developing countries, which in fact are actually in many cases ideally qualified to undertake them, thus facilitating in the long run a more rational use of the world's limited resources. In the same vein, it is easy to understand that the obstacles created to discourage exports of manufactures from the de-veloping countries necessarily limit these countries' potential demand for goods—usually of higher technological content—produced in the industrialized countries. Finally, and most important of all in terms of the long range perspective, the developing countries' limited access to the developed countries' markets may ultimately force them to begin to produce locally certain goods for whose manufacture they are actually ill-equipped, further endangering their potential for increasing trade with the developed countries.

We do not know whether it was because of the hope that economic activity would pick up, or because in some countries leaders came into power who promised to implement more liberal policies, but the fact is that, according to some observers, beginning in 1978 the developed countries' trend toward increased protectionism seemed to stabilize, and even to abate somewhat. These changes may well have played a part in the 15-16% increase in the volume of manufactures exports of devel-oping countries in 1978 as compared to the 7-8% increase in 1977.13

Of course, as Bela Balassa makes it abundantly clear, we should not jump to the conclusion that a complete and lasting turn-about has taken place in this regard, since there still exist restrictions on textiles and clothing, steel, and other products of vital importance to the export sectors of the developing nations, and protectionist trends could crop up again very quickly if the recession worsens. At the same time it is interesting to note that for the developing countries this trade liberali-zation, translated into tariff reductions at the Tokyo Round, will signify a shrinking of the margins of preference for the products included in the General Preference System."

2. International Financing: A True Alternative? The developing countries which do not export oil responded to the decrease in their exports and the impairment of their terms of trade by incurring a significant increase in their international indebtedness. In the case of the non-oil exporting nations of Latin America, foreign debt

°Bela Balassa, "La Ronda de Tokio y ios paises en desarrollo," Integracion Latinoamericana, No. 52, November 1980, p. 6. "Bela Balassa, op. cit., p. 7.


increased eightfold from 1965 to 1978. In 1979, the debt amounted to twice the value of exports—some 143 billion dollars—which is a ratio significantly higher than in previous years. '5 As far as a country-by-country breakdown, it was estimated that Brazil and Mexico alone ac-counted for some 70% of the total figure for the region, followed at some distance by Argentina, Colombia, Chile, and Peru.

The extraordinary growth of the international Eurocurrencies mar-ket has brought about an important change in the structure of this debt, in the sense that it is now based, much more than in the past, on financing from private sources. Some estimates place the level of participation of private financing at around 75%. This change logically signifies that the role played by financing from official sources has diminished signifi-cantly—a situation which will doubtlessly have many kinds of interesting ramifications.

One of these has to do with the fact that some countries of the region have found it much more difficult than others to obtain private financing—particularly so in the case of the less diversified economies with a lower income level, some of which, unable to secure other-source financing, had to moderate their rates of growth more sharply than their more "financiable" counterparts. Another ramification of increased pri-vate versus official source financing is that very often the private loans obtained by the developing countries have not been ideally tailored to the individual needs of the country. This fact is brought home by the not infrequent shortness of the private loans' granted time periods, which are many times not of long enough duration for the investments made to reach fruition. It also shows up in the criteria chosen by the lenders for evaluating the proposed uses of this financing, with most of the loan funds going to projects whose main goal is private profit.

The extraordinary liquidity of past years is the result of actions which have not depended on consensus by the countries of the region, or which have no underlying regional or group orientation. This liquidity has fluctuated significantly in the past and could well do so again in the future; it would be risky to design a long-range strategy on the basis of financing whose fluidity and requirements are virtual wild cards. And even more importantly, the ready availability of capital frequently leads to a less than optimal utilization of resources, obviously restricting future growth opportunities. For example, if financing conditions are not fa-vorable to investment in exportable goods, then we can only expect an aggravation of the indebtedness problem, which, according to most ob-servers,16 can only be solved by increasing exports. The following section deals with precisely that concern.

15 See Economic Commission for Latin America (ECLA or CEPAL), "Balance preliminar . . .,"

p. 21. ' 6 See, among others: A. Fishlow, "A New Latin America in the International Money Market," Revista

de la CEPAL, United Nations, April, 1980, p. 59; and the collection "Economic Indebtedness and

World Economic Stagnation," special issue of World Development, Vol. 7, No. 2, February, 1979.

GROWTH, TRADE, AND INTEGRATION

13

3. Trade and Latin American Integration What has been presented thus far in the present Chapter clearly suggests that it would not be a reasonable strategy for the countries of Latin America, nor for the other developing countries, to direct their efforts exclusively towards increasing their exports of commodities or manu-factured goods to the markets of the industrialized countries. Nor would it be wise of them to go the route of building up their burden of in-debtedness abroad. These two conclusions then lead us to a third-- namely, that the developing countries should greatly expand their re-ciprocal trade in order to be able to continue showing the same relatively high growth rates in their product achieved over the past few years. Needless to say, all this will represent quite a challenge for the economies in question. In 1977, the reciprocal trade among developing nations which do not export oil made up only 20.5% of their total trade", and, perhaps even more importantly, this percentage has shown no significant growth trend over the past few decades. In addition, the developing countries will probably not be thirsty markets for each other's exports of commodities. All of this simply goes to say that the needed trade increase within this special group of countries should be sought after fundamentally within the area of manufactured products. The various economic integration schemes of Latin America, after having been in operation for a number of years now, have made a real contribution to the expansion of the role of manufactured products within the whole intraregional trade picture. What is more, for most of the countries of the region, the region itself constitutes the most significant market for a good part of their manufactures exports (as we can see in Table 5). This clearly suggests that the actual challenge will be to increase and diversify this reciprocal trade, with the advantage of being able to build on the respectable trade base in manufactures which has already been established, with its accompanying years' worth of experience in national and regional trade policy, which will undoubtedly prove quite valuable.

Intra-Latin American trade in manufactured goods, to be sure, still has plenty of growth potential. Since some of the countries of the area have carried out vigorous programs of industrial development, there exists in the region a considerable installed capacity for creating man-ufactured goods. And in addition to this, the ratio of the value of exports of manufactures to the gross value of total production of manufactures is still quite low in some countries of the area. In 1974 this coefficient was estimated at 5.2% for Argentina; 3.2% for Brazil; 4.4% for Mexico; and 3.6% for the member nations of the Andean subregion.18

17 The remainder of their exports went to industrialized nations (61.8%), developing nations which export oil (8.4%), countries with centrally-planned economies (6.1%), and oil-exporting nations with a capital surplus (3.1%). See World Bank, Report on World Development 1980, Washington, August, 1980, p. 120. " 'ECLA, "The multinational businesses and Latin America's present mode of economic growth: Some Reflections," E/CEPAL/R. 229, June 19, 1980, p. 22.

Oth

er d

eve

lopi

ng c

ount

ries

-13 Ks) LL1

cC 4'6

Larg

e co

untr

ies

E

co at :E Lu o

Lu

L CU

•E

U CU

7,1 o E CU a

U)

0 w w

iC O

O

911, cr) CD

O

V

en

C CD 2 "6

0.

O

O CD C tr.

0 is

CD

0

U)

CD

r. CD E C

en u) —I a)

w 8 .0 w

eL

CC

CNJ LO CC)

C=) CD LC)

N- c»

CO C7) CO .4- CNJ T--

.4- ,-- c.1

CO c,) c.)

Inte

rmed

iate

cou

ntrie

s


Cr) CV r CY) CO

CD CD r CD

LC) C:) CNJ

T-- T-- C:7

LA CO CO

CD 1-- T- T— c ,=,

N c,) r,.

CO CO LO CO CO T-

co CO ,--

O 1— 0 T— C) CD

CO C:) LC)

CO LC) ,--

.4 .4- CD

(:) C:)

CO —N- .or cc, T-- ti .4- CD LC) CC) f,- N

LC) CY) CO CY) Lr) CO .4.- O T-- T-- c:, CD CY) CD .4-

CC) LC) CO .:r CO LC) CD CC) CY) CO CO CJ) Ce) CO (7) CO

00 N-- cNJ r.- c) r rMOLC)O C7) r,-

C,J N-- r CNJ 1--

N-- T-- C,J .4- .4- .4- CM CD CY) CC) CC) LC) LC) ON

N- CY) 1-- CC) LC) CO CY) CC) CO r,- cri cc)

CNJ LC) CNJ CY) .4- CY)

•N-N-N-• (• CY) C Lim CY) LC) C D 4 CO 00

• •

N- c.) .4- ,-- cc) c) C31 CO CO LC) CO CD CC) .4- CY) LC) N-- .4- co LC) CNJ r,-

r.. CY) 0) C7) C,J O m-- CY) C,J T-- (7)

N-- N-- C) T-- CY) CNJ r.. c..1 .4- LC) C7) v--

T-- CNJ 1--

r,- cc) cc) CC) .or r,- c»

.or C,J CNJ CC) T-- Lc) cc) h- r.. CO CO LC) CO

CNJ C) CO Cy) CM 00 CC) CNJ CO

CY) CD T--

LC) 1-- LC) CY) ..gr r.- r CO 1-- CO •.or LC) cNJ • • • • P,: CY)

CNJ LC) CO

LC) CD T--

CNJ CO CY) T-- 0 (7) LC) CD .4- LC)

CO mtP: 14) N- CV CO C:D Orr 4

CO LC) CO .4- C3, C7) 0) 0) C73

CNJ LO CO

CO

mo

"*C.

0 CZ o cc

— cf) CV =

a:

Cr3

- tTJ 03 Ecv co 1R3 a) 10 ,- :5 7s cocr) C

41) o C.) g Cg E COW1J

C.) O ioc

gi?

ai

TI;) O

O c'i To _i

CD O LL s z

0 CC 0 CD <

o w

0 "C"

2 (2) 0 co E 2 U)

C)

c.-.

IT)

cC ui

45 2

C .11 CZ —1

0 6 .E Sig w Cu

O .)) a E

°,73 -(8) O

3 .o ai

cci■ W w

5 c! U) (i) ~ Cl)

PROGRESS IN INTEGRATION DURING 1980 15

In spite of these positive signs, experience over the past few years has taught us that in order to achieve a significant increase in intrazonal trade in manufactures, it is necessary for measures to be adopted which will stimulate intra-industrial specialization and encourage manufactur-ers to take advantage of the economies of scale which would result, in the case of certain goods, from increased production. In practical terms, this can best be brought about through regional agreements, be they bilateral or multilateral, which would guarantee a certain degree of stability for the participating economic sectors.

The measures to which we have referred must go beyond what might be called strictly trade-related considerations. The hard fact is that it is highly unlikely that regional policies aimed at increasing trade solely by granting tariff advantages will be able to generate sufficiently strong trade currents, unless they also entail high levels of protection vis a vis third, or non-participating, countries. For the participating countries will obviously not relish the idea of assuming the costs asso-ciated with this trade-diversion alternative unless other compensatory factors can also be shown to exist.

The growth of intra-Latin American trade in manufactures is limited for the relatively more developed countries of the region by the lack of incentives for specialization and intra-industrial complementation, as we mentioned earlier. In the economically less developed or smaller coun-tries, this growth is hampered as well by the low level of diversification of their manufacturing sector. In both cases, trade development will demand a high degree of mobility of existing resources, whether they are related to technology, finances, or actual business capability. Latin America has already shown undeniable signs of having local businesses with the initiative and vigor necessary to undertake operations involving the international transfer of production resources. Now what is missing is a more clearly defined institutional framework to help these business efforts to multiply and prosper.

Thus, intraregional cooperation among people engaged in public and private businesses would seem to be a vital instrument for encour-aging the desired growth of desired trade in manufactured goods. This cooperation would help overcome people's natural initial resistance to any process of trade liberalization, and would allow those engaged in business to adopt policies favoring specialization and modernization. For the relatively less developed countries, the influx of capital and technology from other countries of the region would be conducive to diversification of their own industrial structure and will, indeed, be a determining factor in their ultimate degree of success in reaching out to the other markets of the region.

D. Progress in Integration during 1980 The most significant event of the past year in the area of Latin American economic integration was the signing of the Treaty constituting the Latin


American Integration Association (LAIA or ALADI). Let us say at the outset that if one compares LAIA with its predecessor, LAFTA—some-thing of an unavoidable exercise, it would seem—then he will certainly notice that the most significant differences between the two institutions are functions primarily of the experience garnered during the more than twenty years in which LAFTA was in operation.

The keynotes of the new Treaty are its flexibility and pragmatism, both of which are qualities the regional government representatives felt to be somewhat lacking in the original institutional framework of LAFTA. The idea of flexibility involves the acceptance of the many different forms in which the countries might wish to pursue economic integration, while never losing sight of the fact that all of these partial integration actions must be designed so as to converge ultimately into one overall multilateral scheme.

Among the mechanisms established by the member countries for carrying out LAIA's basic functions is an area of economic preferences, consisting of a regional tariff preference, as well as region-wide and partial agreements. In addition, the countries decided to implement a system of support for the relatively less economically developed member nations, by virtue of which the economically "larger" countries of the region agreed to open up their markets without reciprocity to the prod-ucts originating in the less economically developed members. Another aspect of this system of support is the commitment to negotiate partial agreements calling for Special Programs of Cooperation, which will help the less economically developed members to be able to utilize to the fullest the tariff reductions granted.

Along with the new Treaty, the Ministers of Foreign Relations of the member countries also signed several resolutions, one of the most important of which deals with existing commitments stemming from the countries' participation in LAFTA's trade liberalization program. The resolution calls for the renegotiation of the concessions granted on na-tional or special lists, or in complementation agreements, with an eye to strengthening trade currents, encouraging a higher ratio of manufac-tures to total goods traded; supporting the less developed countries, and correcting quantitative imbalances. The renegotiations will be carried out on either a bilateral or multilateral basis and their results will be given formal expression in partial or regional agreements.

During 1980, the presidents of the Andean Group countries ex-pressed their support of the Andean subregional integration process, as well as their conviction that the new economic ties formed through this integration scheme will allow the member countries to arrive at new heights of political cooperation as well, built on democratic forms of government. As far as developments in the Andean Integration System are concerned, there were frequent meetings of the Andean Council during the course of the year; the first meeting of the Andean Parliament was held, and progress was made in the definition of a permanent mech-

PROGRESS IN INTEGRATION DURING 1980

17

anism of coordination among the various elements making up the Sys-tem.

In the area of trade, the Group moved ahead in its continuing liberalization process and in its studies on the Common External Tariff. In the area of industry, the list of products to be included in the iron and steel industry program was approved, and progress was made in the selection and clarification of the criteria which will govern the ra-tionalization programs.

Progress was made as well in the areas of agriculture, physical integration, and technology. In the first of these, issues having to do with agricultural marketing and plant and animal sanitation were re-solved. The importance of the physical integration aspect was stressed at all levels in the ongoing planning of subregional integration strategy. And as far as technology is concerned, important developments included the creation of the Andean System of Technological Information and the progress made in the Andean technological development programs.

On the other hand, we must also mention certain areas of Andean integration in which not as much progress was made in 1980, such as the failure to conclude the ratification of the Cartagena Agreement's Court of Justice. In addition, with respect to other areas, it should be said that intrasubregional trade did not increase as much as in previous

-years; the time limits set for approving the Common External Tariff were not met; and the Sectorial Programs of Industrial Development showed much less progress than what might reasonably have been ex-pected.

The political crises in which many of the countries of the Central American Common Market are, to a greater or lesser extent, involved have done little to further the cause of economic integration. Never-theless, contrary to what one might have assumed would be the case, 1980 saw a measurable degree of progress there in integration, both institutionally and in the area of trade. On the one hand, the labor of integration forums and bodies was infused with new energy, and there was a definite trend toward incorporating new fields of action into the integration movement. And on the other hand, intrasubregional trade itself within CACM saw a growth movement, going over the one billion dollar mark for the year. In other areas, such as tariff and customs harmonization, physical integration, and the adoption of joint positions visa vis third countries, the common desire of member countries to move ahead was everywhere in evidence, in spite of the practical lim-itations imposed by the political conditions mentioned earlier.

The Caribbean Community made significant progress in two main areas, the first of which was the coordination of the region's external economic policies, as manifested in the implementation of the first phase of the agreement with Mexico, which it is hoped will bring measurable benefits for CARICOM. The second area was intra-CARICOM trade, which is beginning to bounce back after a slow period brought on by restrictions imposed by some of the member countries.


On the negative side, the Conference of Heads of State did not meet during 1980, which means that it has now been five years since this important institutional organ has functioned as scheduled. In a sense, the Council of Ministers has assumed the responsibilities of the Conference of Heads of State and has dealt satisfactorily with a number of issues which technically should have been handled by the latter.

During 1980, the Latin American Economic System (LAES or SELA) once again showed progress in its two basic areas of activity: Latin America's external dimension; and intraregional cooperation through its Action Committees. With respect to the region's external dimension, at the Council's annual meeting decisions were made defining the area's joint positions in the Special General Assembly of the United Nations; on the codes of conduct for multinational businesses and for the transfer of technology, as negotiated in UNCTAD; and on Latin America's relations with the United States, the EEC, and other areas of the world.

In regard to the Action Committees, in 1980 the activities of the Action Committee on Fertilizers drew to a close, while the other six Committees continued their activities, each in its respective area—namely: Handicrafts; Fishing; establishment of a Latin American Network of Technological Information; Reconstruction of Nicaragua; Tourism; and Housing and Buildings of Social Interest.

The member countries of the River Plate Basin system continued, in 1980, their practice of independently conducting discussions on bi-lateral or trilateral issues from outside of the institutional framework of the system, even when these issues were directly related to the River Plate Basin itself. However, it must at least be said that the system has led to increased communication among its members, contributing in-directly to an improved atmosphere for these negotiations, wherever they may have been held.

During the XI Meeting of Foreign Affairs Ministers of the River Plate Basin countries, 29 new resolutions were approved, bringing to 167 the total number of resolutions passed since the system's inception—resolutions which for the most part have not actually been implemented. All of the foregoing would seem to suggest that the time has come for considering certain redefinitions of the system, an undertaking which could make excellent use of the new framework provided by LAIA.

In October of 1980 there took place the first meeting of the Ministers of Foreign Relations of the member countries of the Treaty of Amazon Cooperation. During their meeting the Ministers approved the regula-tions and organization of the Treaty's central body, the Meeting of Foreign Relations Ministers, and provided for a general commission and three smaller commissions to deal with: 1) scientific and technical co-operation; 2) natural and physical infrastructure resources; and 3) social, cultural, and economic matters.

The Ministers also approved the Declaration of Belem, which rei-terates the original principles of the Treaty, establishes the Amazon

THE OUTLOOK FOR INTEGRATION

19

Cooperation Council, and gives a summary of the Ministers' most im-portant recommendations concerning the Council. These recommen-dations focus on the designing of a program of cooperation for the development of the Amazon area, and a joint program in science and technology to be carried out cooperatively by the principal research institutes of the Amazon countries.

A description of all the major developments in Latin American integration would be incomplete without mentioning the progress made in the multifaceted area of financial cooperation. During 1980 this prog-ress was manifested in four major areas, as follows: 1) government-level cooperation; 2) operations of the multinational Latin American banks; 3) the existence of projects designed to create sectorial financing mech-anisms within the region; and 4) technical and financial cooperation within the Latin American banking system.

And finally, 1980 saw the creation of a large number of bilateral agreements undertaken either by the governments themselves or by non-governmental sectors, all designed to promote cooperation among the countries of the region.

E. The Outlook for Integration At the end of Section C we emphasized the need for the countries of Latin America to increase their intraregional trade as a way of com-pensating for their decreased exports to the more developed countries. This particular concept represents the essence of what can be learned from examining the world situation as it relates to Latin America's economic reality in 1980, especially in terms of the practical significance which this interaction might have for integration. And in fact during 1980 intra-Latin American trade did continue to grow, as can be seen in the figures presented in the following chapters. This phenomenon has been especially noteworthy in the case of the LAFTA/LAIA countries, which in 1979 (the last available data) increased their exports to other countries of the zone by 47.7% , a figure which is higher than the cor-responding growth figure for their exports to countries outside the re-gion.

Changes in the overall international economic situation are decisive factors in determining the exact nature of the adjustments which must be made over time to ensure greater harmony between the social and economic processes underlying any integration effort and the actual institutional framework which gives shape to that effort.

In Latin America there is abundant evidence that the vitality of the actual economic interaction process has not always been accompanied by the necessary changes in the institutional framework. Furthermore, the region has not lacked for instances of pointless legalism, which in many cases has hindered the spontaneous evolution of certain integra-tion processes.


At the present time, however, there can be felt throughout Latin America a greater awareness of the need for pragmatism in approaching the various processes of regional integration. The recent restructuring of LAFTA into LAIA is a precise reflection of that new mood. In effect, LAIA incorporates into the process certain elements of flexibility which were not even dreamed of when the Treaty creating LAFTA was signed. Of course, the example which comes immediately to mind is the present-day acceptability of partial agreements between pairs or groups of coun-tries seeking to travel, if not all the way, then at least part-way down the long road to total integration.

Naturally, in the final analysis this increased flexibility in the legal framework will prove helpful only if the countries are guided by a true spirit of integration. If, as is feared by some, the countries take advan-tage of the new order of economic relations, with each one seeking only to ensure the greatest possible degree of liberty for itself alone, then the hoped for results will not materialize.

This new flexibility in the institutional framework of integration could easily lead to knotted-up situations if adequate care is not given from the very outset to the systematic harmonization of the many agree-ments which will be created. Latin American history prior to 1960 as well as the experience of other regions of the world show quite clearly that the indiscriminate signing of bilateral agreements almost always calls for an eventual mammoth untangling effort, in the interest of the ultimate convergence of the agreements into a single multilateral frame-work. Therefore, it would be in Latin America's best interest to estab-lish, a priori, certain criteria which the countries must employ in order to avoid the complex labor of negotiating at some future time the har-monization of their many already existing partial agreements.

Another challenge which the region's integration processes will have to continue to meet relates to improving the situation of the relatively less economically developed countries of the area. In the past, and there is no reason to assume that there has been any recent change in this, the representatives of these economically "smaller" countries have vo-ciferously espoused the need for the more developed members of the various integration schemes to adopt measures which go beyond their usual merely "liberalizing" approach to trade, in order that these smaller countries may share fully in the possibilities created by integration. And in fact the progress of Latin American economic integration does depend greatly on the satisfactory definition of the less developed countries' optimum role in the process. Measures such as the "generous" tariff concessions granted by the more developed countries have proven de-finitively inadequate—as is expressly recognized in the new Treaty of Montevideo—to the task of promoting the development of new man-ufacturing activities, which would give the needed boost to these "smaller" countries' economies.

In the decade which is just beginning, Latin American economic

THE OUTLOOK FOR INTEGRATION 21

integration will extend into areas of activity which have not yet received the attention they deserve. In this vein, let us mention the enormous amount of progress yet to be made by the countries in the area of agricultural cooperation. The same could be said of the energy sector, where much more also remains to be done in order to reduce the region's energy dependency. Physical infrastructure is another area in which regional integration will probably play an expanding role, since it con-stitutes a vital instrument for increasing the economic interactions of the countries of the region.

The outlook for integration is determined to a large extent by the energy and initiative shown in the efforts of the region's businessmen and women, whether in the public or private sector. The 1980's should witness a significant growth in intraregional investment operations and transfers of technology, leading to real growth in Latin American in-tegration. The experience of other integration areas of the world shows that following an initial period in which trade dominates the interactions of the member countries, there comes another stage in which factor mobility gradually assumes a role which is at least equally significant.

CHAPTER II

The Latin American Integration Association (LAIA)

Introduction On August 12, 1980, the twenty-month-long process of restructuring the Latin American Free Trade Association (LAFTA) was brought to a close with the signing of the Treaty creating the new Latin American Integration Association (LAIA).

In December of 1978 the Conference of Contracting Parties of LAFTA had approved Resolution 370, entrusting the Standing Exec-utive Committee with carrying out the preparatory studies and estab-lishing a program of specific tasks and negotiations which would be oriented towards restructuring the Association.1

In response to this directive, in 1979 the Committee arranged sev-eral different meetings with the purpose of evaluating LAFTA's present situation and its future role. This period of diagnosis and forecasting led to the Committee's December 6, 1979 approval of Resolution 410, calling for two negotiating meetings, a special conference, and a meeting of all eleven LAFTA country Ministers of Foreign Relations to be held during the course of 1980.2

We should like to emphasize the fact that the entire program for 1980, in all its complexity, was carried out within the time limits estab-lished, to the astonishment of many who had thought the program's commitments over-ambitious, especially given the relatively short time period allotted for carrying them out.

The first negotiating meeting took place in Venezuela (Caraba-lleda), from the 17th to the 28th of March, and its purpose was to define the elements which would shape the structure, functions, and operation of the new scheme of regional integration.3

1 Resolution 370 (XVIII), Articles 1 and 3. 2See The Latin American Integration Process in 1979, IDB/INTAL, p. 45, ff. 3 SEC (CEP) Resolution 410, Article 2.

INTRODUCTION

23

The second negotiating meeting was held May 5-16 in Asuncion, Paraguay, with the purpose of determing the requirements of an insti-tutional framework for the new integration scheme.4

From June 16th to the 27th there was held in Acapulco, Mexico, the XIX Special Conference of Contracting Parties, attended by high-level government representatives of the LAFTA countries, with the purpose of adopting the necessary resolutions for consolidating these agreements on the restructuring of the Association.5 After intense ne-gotiations, the representatives came to terms on the main features of the new Treaty, which was subsequently signed (August 12, 1980) in Montevideo, Uruguay, by the Ministers of Foreign Relations of all eleven participating countries.

Thus ended an extremely important stage in the restructuring proc-ess which had begun around the end of 1978. The new instrument, known officially as the 1980 Montevideo Treaty, has not yet been put into operation, pending its formal ratification by the signatory countries, in accordance with the Treaty's own provisions regarding the nature and details of the process of transition.

During the meeting of Ministers of Foreign Relations, in addition to the new Treaty, signing of the nine basic resolutions were approved, which will govern the transition process mentioned as well as the actual implementation of the mechanisms of the new Treaty. Article 69 states that "The resolutions approved by the Council of Ministers of the Latin American Free Trade Association in their August 12, 1980 Meeting will be incorporated into the legal provisions of the present Treaty once it becomes effective," thereby assuring the legal continuity necessary for easing the transition from one Treaty to the other.

Among these nine resolutions, the ones designed specifically to ease the transition—four in number—deal with the following topics: a review of the commitments stemming from LAFTA's negotiation program; the general legal and institutional situation created by the new Treaty's coming into effect; the establishment of guidelines for the 1980 and 1981 work programs, for the Secretariat's organizational structure, and the Association's 1981 budget; and the designation of LAFTA's Executive Secretary and LAIA's future Secretary General.6

The remaining area, the actual implementation of the mechanisms of the 1980 Treaty, is covered by the other five resolutions, which deal specifically with the following concerns: partial agreements; the opening up of markets to the relatively less economically developed member countries; the special programs of cooperation for the benefit of these less developed countries, and the Economic Promotion Unit being cre-ated for them; the basic regulations concerning the regional tariff pref-

4SEC (CEP) Resolution 410, Article 3. 'SEC (CEP) Resolution 410, Article 4. 6 LAFTA/Council of Ministers Resolutions 1, 7, 8, and 9.

cc 0

Tcs 0

fV 5_

ca 0

O

rig

LAF

TA

/LA

IA C

oun

trie

s: B

asic

Dat

a 19

80

LAFT

A/L

AIA

THE LATIN AMERICAN INTEGRATION ASSOCIATION (LAIA) 24

cr, co co co Lr., co CD CNJ

1-- 1--

LC)

N. CT) LC) 0 T LC) 0 h.- C:) CV CV

CO N- r r.-- 0 CV 0 LC) CT)

1"-- CV CV LC) CC) 01 LC) CS LC)

N 1-- ,f LC) r CV' 1-- 1--

C0 ..;r CT) LC) LC) L• ,I" CV

LC) 00 ..;r LC) 1.--- Lc" co c.i ,--

c)

oo oo c.." Lc, c, ,r c"., c=, c, cc, co

co CC) c., CO r cp co c, ,-- cc,

r r--- cr, CO c.c, .4 r-- cr,

,-- CD c...-5

CC) CO CT) CY) CC) r-- r--

4 cr.; 4 ofi 06 06 06 cc)

.zr co CV CV CV CV

LC)

CV LC) -,..r .,r r.-- c:, Lc, c, Cr) CV

r 7.-- 1-- cr, ,r c:, r--- cD co c...1

LC) c:, Lc-, I-- cD .4 c, .4 co

cc CM 4 T-- CZ).- C4 cf.; c.i Lc; CJ T C \ I C \ I T C \ I

CID CO CO ,-- (JD 0 C:)

LC) T-- C) T 0,1 C)

C)

Cr) 00 LO CO Cr) T C=, 00 C., 01 C,

CY) CID CID .1- rCVc, LC) LC)

0 0 N.- LC) 0, CV 00 CV T

/..- LC) C\T

CY) r.-- -,1- co o., c., cp C..)

4 oo ,— CT) CV r I,- -

r r CV r r CV

0

I,- ..c• 0 0 I,- 0 0 C■1 0 0 CV

Il■ CV T T T CD i' . C) co ...1-

f•-- 1-- I,- 0 0 00 4 1—..

C\i N- C OCT CV (7) ,-- CC) CV LC)

u..., c..., co c..., c., Lc; c=:, cp c:, N.- C7)

CT) CO T 00 LC) 00 CO CV CO CD

CNI CO CO LC) CO I,- LC) LC) LC)

ai c:5 T-- 1.-- co- cs5 6 cci cr;

,-- ,-- co co co Cc) •Cr

O CA

Cn 17,7i

"7' = Cis ..

as cu

E --7:' c.., _.

as = 0 15

as E MO 1:' 'in 7.

— ,c 0 co .? .

▪

65 CT m "'

cn 0- N- 705 ° EL CT" C))

V ---""

E5 c5 "5 cf, c_, ,-- :E. F2

c) 1") "' )9- ' E

cf) ...= C/) Cf)

C.1,

•

E5 cr3 .1 CT (2) CD 0 0 0

C as E ci) . , tz, a. „, .L1Fii 0-7-

CZ M. C'5 _

a g CI) a) x . E .

0 . 2._ . (1)

= .

0 = -0

...% C'S Cn = 8 co c..,

o o . 67" :-S

Cl)0 1

Cl N". 0) 155 83 === -a cics ro 6 -- ..- ,-- 4-, ,--

-17: :IS ws ":

a- ,-- ,,_. C:L 130 E o 15 o 15 ,-. ......, CD '''' . CD 0 CL)

----I— I--

I.--

cC

ca

a) a)

a)

CC O

O

cC O

O

a) cC O

O

73

CC

O

(Co

ntin

ued

). L

AFT

A/L

AIA

Co

unt

ries

: B

asic

Dat

a 19

80

E CC

CC cts

sali

E

w a, .0

CC

O co

S; CC C)

a) E

CC

"5

E O

8 a) _c 1.7

C O LL

CC a) 0 2 CC

0 cC

X

a) E

O

C)

(/) ro

C CC c

C O

CC C a) C

c73 mm

0 O = O

dor,

•-• co F2

O

13 O 0 ;c

O c cC

c o SP- = 43

Q

rCT) cis

cc 0 Cn

V

0

cn c)CD

-7- . cz m

cz E o

6i- _c

- ,, o

cn 6- cl-

1E5 = o (A C..)

0tA P I

Cf) 47-1 CO cn

D CO 1:7 C

C -5 C cz E

cv, ci. 2 15 °

it = o = C)

0 o 0- 0 2 cn

-.-- 1:: 7,-, .= C/3 C y"E — +r— = ,..-.....-. 0 co o cu

1.-- 1— C) CD

Ct? Ca

0

CO N- 0)

O

O E . -

7:.

C.

INTRODUCTION 25

CD LC)

.cr CD CY) LC) v-- 0

CO gcr r,- LC) m-- 0)

CV w-- r 1--

CD

C3) CY) CD LC) Cr) T-- CD T-- CD CD c» co CD ..,T c) LC) CC) CO CD .1. 0) CD C0 LC) 0) CO

-4:- ,-- c \ c=i- c\i- CDi 1,.. C,J T--

0)

CNJ CC) 0) T-- ,r CD T-- co ,-- LC)

CD

r,.. CD CO cr Lc) LC) CD LC) CD CD 0) CO 0) 1-- 1--- CY) CD T-- T-- ..q- CD T CO M CO CD CY) LC) ...I. ,T

c\i LC) I-- - -

co) cx) r,- CD c» r,- CD CC) C,J CY) C,J LC)

LC)

00 CD LC) CC) 0) CYD CD c) T. ,tr. co ,-- LC) ,,,r c) cc) co co CNJ

C,J CO CY) r,- 0) CC) T-- CNJ CO

Y.... 1..... CC) Vi C.6. T 1...- T

▪ C3)

CD LC) CNJ CO cr C<I C)

CD T— ON C

LC)

N T-- CO CNJ I-- 0) CD ,4- c:) c) LC) O CD .*- co CO CD T-- T-- CO ..*. c) c» cl) co ,-- CD c., CD

CY) 0) CC) C‘J CC) CY)

O (-6 CN.1 O 0) -1- CV CD N

CNJ

CC) N- co N- CO I-- r,. CD CO CD 0) .i. CD CD co ,cr CD c) ,-- a> cc) co 0) 0 0) Cr) CD ...*. C3) LC) ,T ,-- ,-- N- ,-- CD ti

N- 0)

-zr CD CD cc) r,- r,- CO

1-- CY) CV CV CNJ

LC,

c» c) ,r c) CD c) LC) C,J CNJ CD LC) 0) T r,- CY) r,.

CNJ 0) LC) 0) CC) CY) T-- CNJ CO

C•1

C as ...--.

as ms O

6 a.0

C)

CI- 1--

26 THE LATIN AMERICAN INTEGRATION ASSOCIATION (LAIA)

erence; and, lastly, the classification of the member countries of the Association according to their relative degree of economic develop-ment.'

Resolution 1 of the Council of Ministers stated that the renegotia-tion of the concessions granted under LAFTA should begin as soon as the Resolution itself entered into force, and should be completed by December 15, 1980. In addition, it called for a Special Conference to be held during the second half of that same month, for the purpose of analyzing the results of the renegotiation and evaluating them multilat-erally, arranging longer time periods for those contracting parties which desire them.8

On August 21, 1980, Uruguay's permanent mission notified the Standing Executive Committee (SEC) of the agreement reached by Uruguay with Argentina, Brazil, Chile, Mexico, and Paraguay, which contains the fundamental elements for a joint understanding for carrying out Resolution 1. The agreement includes a series of negotiation stages which will conclude in a multilateral partial action among the six coun-tries, to go into effect on December 31, 1981.

In further compliance with Article 6 of Resolution 1, the XX Special Conference of LAFTA countries was held (December 15-19, 1980) following the approval of new regulations concerning the handling of: the renegotiation of national lists and non-extensive advantages; the multilateral evaluation of the same; and the approval of lists of specific market openings for the countries of relatively less economic develop-ment.9 In addition, Argentina and Brazil's partial agreements with Bo-livia were approved, and became effective on January 1, 1981.11' It was also resolved that the industrial complementation agreements and the bilateral agreements authorized by Resolution 354 (XV) should be brought into line during 1981 with accepted convention regarding partial agree-ments, whether trade-related or not."

With respect to the ratification of the 1980 Montevideo Treaty, both Uruguay and Argentina had carried out their respective ratification procedures by the end of the year, and it was expected that Paraguay would follow suit during the early part of 1981, bringing the new Treaty formally into effect, as established in Article 57.

A. Institutional Aspects: The Rise of LAIA During 1979 there had been a series of official work group meetings, seminars, and the like, both within LAFTA itself and in other forums,

7 LAFTAICouncil of Ministers Resolutions 2, 3, 4, 5, and 6. LAFTAICouncil of Ministers Resolution 1, Article 6.

9 Resolution 398 (XX-E). mResolution 399 (XX-E). "Resolution 400 (XX-E).

INSTITUTIONAL ASPECTS: THE RISE OF LAIA

27

such as INTAL, with the idea of carrying out an in-depth analysis of the historical evolution of the Association and of the factors which led to its eventual stagnation. LAFTA organized five diagnostic seminars and two work groups in order to determine the general outlines of its successor organization. And INTAL itself organized, in September of 1979, a work group of eminently qualified authorities on integration that produced a report containing recommendations which were by and large incorporated into the text of the new Treaty. '2

The main conclusions of the two LAFTA seminars were the fol-lowing:

a) Under LAFTA, there were undeniable achievements in the area of growth and diversification of intrazonal trade. However, certain fac-tors, including especially the uneven levels of the member countries' economic development, held growth back and made it impossible for the Association to achieve fully the goals set forth in the 1960 Treaty.

b) The mechanisms designed to compensate for this disparity in development levels were ineffective. In point of fact, the differences tended to become even more pronounced over time.

c) The industrial complementation agreements did not bring about effective complementation among the economies of the zone; they ended up being used instead as tariff reduction mechanisms, pure and simple-- and mainly by the multinational businesses with branches in other mem-ber countries.

d) The structural inadequacies of the less developed countries kept them from fully utilizing the mechanisms designed to speed their de-velopment, especially the lists of non-extensive advantages; these coun-tries were able to make use of only around 5% of the more than 7,000 tariff concessions made available to them.

e) The principal objective of the 1960 Treaty—the establishment of a free trade zone—was beyond any doubt incompatible with the wide range of development levels of the member countries, and with the diversity and instability of their individual economic policies.

f) As a result of these differences, it was impossible for the LAFTA countries to create an environment of free competition, which must exist if there is to be a free trade zone.

g) It would therefore be acceptable simply to create an area of trade preferences, especially in view of the region's external conditioning and its particular internal characteristics.

h) During the LAFTA years, policy coordination and the harmo-nization of various mechanisms were very successful in permitting trade currents to build up strength and become more diversified—so much so, in fact, that in spite of the stagnation of negotiations during the past

' 2 See The Latin American Integration Process in 1979, IDB/INTAL, p. 45, ff and p. 75 ff.


decade, the area's trade continued to grow, and, over the past few years, showed more intense growth actually in the area of non-negotiated products.

i) With respect to the legal consequences of the termination of the transition period, the negotiations carried out within the LAFTA frame-work would still remain fully valid after December 31, 1980.13 However, no new negotiations could be carried out after that date.

After the seminars were held, the Standing Executive Committee or-ganized two meetings of government experts to deal with topics con-cerning the Association's future role. In these meetings it was agreed that LAFTA had carved out a useful place for itself in the area of trade promotion and regional cooperation, and the Association's future func-tion was envisioned as that of an organization for integration and mul-tilateral economic cooperation, an ideal home base for regional activities directed towards the future convergence of the partial actions which would play an increasingly important role in integration. The salient features of the new stage would be flexibility and pragmatism.

In these meetings, four areas of future action were identified: a) The multilateral area, based on a regional system of trade pref-

erences vis-a-vis third countries; b) The signing of various kinds of partial integration agreements; c) The need for designing and putting into operation a well-con-

sidered system for gradually decreasing the differences in the levels of development among the countries of the region; and possibly,

d) A better-defined plan of action in the area of economic coop-eration, especially with regard to stimulating the growth of regional trade. 14

On September 6-8, 1979, INTAL held a seminar on the restructuring of LAFTA, during which a group of distinguished experts expressed their own personal views on the subject. This seminar complemented the opinions and recommendations given by the official government representatives at LAFTA's meetings with the opinions of private cit-izens possessing great personal experience and competence in the subject matter.

The conclusions and recommendations of the group of experts sum-moned by INTAL may be summarized as follows:15

a) The restructuring of LAFTA should be visualized within the broader context of general Latin American integration.

13 However, during the 1980 negotiations, the Andean Pact countries were not in agreement with this point. "For a more detailed description of these topics, see The Latin American Integration Process in 1979, IDB/INTAL, p. 45 ff. 15 Ibid, p. 7 and ff.

INSTITUTIONAL ASPECTS: THE RISE OF LAIA 29

b) In turn, the integration of the region should be based on a realistic contemporary vision of Latin America and on an understanding of the present world situation as well as the situation which is likely to exist in the coming decades.

c) The existing world situation puts a new premium on the concept of Latin American integration.

d) The restructuring of LAFTA should be undertaken with the purpose of a substantive redefinition of its objectives and its institutional structure, and a commitment to making its operating mechanisms in-creasingly efficient.

e) LAFTA should be made into an effective integration system through the adoption of regulations which would ensure : reciprocity of benefits; a regional investment policy; equality of opportunity for in-dustrial development; intensification of financial integration; and cre-ation of an institutional system with capacity for making proposals and taking action.

f) The formation of the expanded market should not be considered as the only or even as the main instrument of the integrative process, but rather as just one of the many tools to which the process has access—thereby avoiding the distortions which result from integration's total dependence on the liberalization of trade within a region of countries of extremely disparate levels of economic development.

g) The area's markets should be opened up to the countries of relatively lower levels of economic development, in conjunction with a program of adequate financing for these countries, so that they may diversify their production.

h) It is necessary to make regular evaluations of the progress of the integration process.

i) With regard to trade considerations:

• It was not considered feasible at the present time to try to establish a free trade zone in the region.

• It was recommended that concessions which had already been negotiated be respected (historical patrimony).

• It was recommended that the Association adopt flexible and gradualist mechanisms, and realistic ones from the point of view of the actual situation existing in the region today, in pursuit of tariff liber-alization and the elimination of restrictions on trade; it should also seek to design the regulations governing the complementation agreements in such a way that these agreements may become an effective driving force behirid sectorial integration.

• The system of product-by-product negotiations was considered to be -no longer very productive, and the adoption of a new kind of central negotiating mechanism was recommended.

• Given Latin America's current economic and political realities, pragmatic and very workable formulas should be sought for strength-


ening intraregional trade relationships and building a sturdy foundation for future developments in the integration process. It was suggested that one such formula should certainly be the establishment of a general system of preferences based on a tariff margin of preference, differ-entiated by tariff level and degree of relative economic development, which should be widened periodically, and which should be of flexible application—meaning that the level of tariffs would never be perma-nently defined. In addition to this, measures should be adopted for correcting the imbalances in intraregional trade.

j) It is necessary to continue making progress in the harmonization of instruments related to trade with third countries and in the coordi-nation of economic policies, especially in the areas of industry, taxes, money exchange, the treatment of foreign capital, etc.

k) Because of modern-day political realities, the LAFTA Treaty's Multilateral System will have to be made more flexible; however, the partial actions which are agreed upon must absolutely be made con-vergent with each other. In addition, the most-favored-nation clause must be applied unconditionally in member nations' dealings with third countries.

The seminars and work groups organized by LAFTA and the seminar carried out by INTAL produced the basic ideas for the new integration scheme, which was to become defined in more detail at other meetings which were later held.

Towards the end of 1979 there was enough material available for negotiations to begin on a new Treaty to replace the one signed in 1960. In December of 1979 the Standing Executive Committee approved Res-olution 410, calling for the convening, during 1980, of two negotiating meetings, a special conference, and, finally, the Meeting of the Council of Ministers, to conclude the renegotiation process, as established in Article 2 of Resolution 370.

1. The Negotiating Meetings for the New Treaty The first negotiating meeting for the new Treaty was held on March 17– 28, 1980, in Caraballeda, Venezuela, for the purpose of "defining the elements which would determine the structure and operation of the new scheme of regional integration."16 Negotiation guidelines had been given in Resolution 410, to cover the discussions on the new Association's basic objectives, its functions, features, and mechanisms.

After two weeks of complex negotiatiotis, the member countries arrived at following points of agreement:

a) The ultimate goal of the new regional integration scheme will be the gradual and progressive establishment, beginning in 1981, of a

' 6 Standing Executive Committee Resolution CEP/410, Article 2.


31

Latin American Common Market, to be achieved through use of the following mechanisms: a zonal margin of preference, and agreements-- multilateral or partial in scope—between countries or groups of coun-tries.

b) The basic features of the new Treaty should be its pluralistic nature; convergence of the partial agreements; flexibility; and prefer-ential treatment according to each member country's relative level of economic development.

c) The zonal margin of preference should cover, if at all possible, the whole range of products which are subject to tariffs, and the first negotiation should yield a basic "minimum" margin, which can be in-creased through subsequent agreements. The margin may vary according to the economic sector in question or the level of economic development of the member nation concerned. It may also include complementary rules concerning product origin, safeguard clauses, export incentives, and import restrictions.

d) It was decided, in principle, that the most-favored-nation clause would be strictly applied in cases of advantages agreed upon with non-member nations, while the definitive rules in this regard would not actually be established until the next negotiating meeting (Asuncion). There was general agreement that the clause would be applied in a more conditional manner among the member nations themselves.

e) With respect to d) above, the negotiators decided that pairs or groups of countries would be permitted to carry out partial actions of integration which, in all cases, would be open to participation by any or all of the remaining member countries, following a prescribed process of negotiation. In addition, all of these partial actions or agreements should contain clauses conducive to their eventual convergence within a general multilateral framework, and they should provide for differ-ential treatment for the member countries according to each one's rel-ative level of development. These partial actions should also include flexible and previously negotiated regulations concerning their actual process of implementation. As to the variety of possible partial actions, the countries agreed to decide on specific regulations for the following types: a) Trade Agreements, which will be guided by rules similar to those on complementation agreements (Resolution 99–IV); b) Eco-nomic Complementation agreements, designed to encourage maximum utilization of production factors: their central element may be tariff liberalization or industrial programming; they must have a minimum term of three years; they may be sectorial or multisectorial; they should include some type of tariff reduction program and should not overlook the possibility of reducing or eliminating non-tariff restrictions as well; they should comprise measures which will ensure the balanced and har-monious distribution of resultant benefits, especially as a function of the various developmental categories of countries; and lastly, it was agreed that the countries should consider incorporating into these eco-


nomic complementation agreements certain other economic policy co-ordination and harmonization measures; c) Agricultural Agreements, which would involve measures similar to those included in the economic complementation agreements, as well as other measures relating more specifically to agriculture, on sanitary requirements, marketing condi-tions, etc. , and d) Trade Promotion agreements, which would comprise the nontariff measures which the member countries decide to adopt for the promotion of intraregional trade.

With regard to the institutional aspect, the negotiators decided that there would be meetings held every three years to evaluate the func-tioning of this scheme and the convergence process of the partial actions, and to make any necessary adjustments.17

During the first negotiating meeting, then, the basic outlines and main features of the new Treaty were defined.

It can be fairly said that the points of agreement reached during this meeting represented the culmination of many years of defining and redefining ideas and enduring the frustration of failed negotiations, which had occurred within the LAFTA framework beginning most notably after the 1969 Caracas Conference.

Let us note that the negotiators reiterated the long-term goal of establishing a Common Market in Latin America, as stated in the Pream-ble and Article 54 of the 1960 Montevideo Treaty, and eventually in Article 1 of the new Treaty, in which the countries agree to pursue this goal in a gradual and progressive manner. There were many attempts by one delegation or another at the Caraballeda meeting to spark con-sensus on the setting of certain time goals and other specific baseline commitments for achieving this Common Market objective. But in the end, what prevailed was the lesson garnered through the many years of experience in LAFTA—namely that definite time limits and quantitative goals such as these are usually not able to be met, with the result that the countries begin to develop a pessimistic outlook on the whole process of Latin American integration.

The features recommended for the new integration scheme reflect a trend away from the rigid "multilateralism" which had characterized LAFTA's approach and which was ultimately to be blamed for the stagnation of integration negotiations within that particular context. The negotiators restated most emphatically their belief that the pluralism, the heterogeneity, and the economic distances which currently exist in Latin America make it unrealistic to expect all the countries to join together at the present time and begin to move at exactly the same rate towards implementing a thoroughgoing integration program. They reit-erated the resultant need for multiplicity and flexibility in the new sys-

17 Recording secretary's report on the first of the negotiating meetings, as provided for in SEC's Resolution 41. ALALCIRNII.


33

tern, which will lead to the success of the partial actions, which in turn, and in conjunction with multilateral actions and appropriate instruments of convergence and differential treatment, will imbue the process with renewed vigor.

It is clear that too much flexibility in the area of partial agreements could also contribute to the stagnation of the process, given the absence of predetermined commitments. In addition, progress through partial agreements could also create greater imbalances in the existing subre-gional agreements, which could, however, conceivably lead to the sign-ing of new agreements among those countries which are falling behind in the process.

Given the choice between continuing to act in accordance with a strictly multilateral policy which had proved to be an obstacle many times in the past or accepting a conditional internal application of the most-favored-nation clause, the countries opted for the latter in this new stage of integration under the 1980 Montevideo Treaty.

As an initially obligatory multilateral mechanism, since it is not the only one that could be adopted by the countries, the negotiators agreed upon the establishment of a preferential trade system in the region by means of the implementation of a tariff margin of preference with the characteristics already described.

It should be noted that the application of a margin of preference fulfills an old aspiration within the region, first voiced in 1958 by ECLA (CEPAL) in a consultation meeting with government experts and later rejected in the negotiation of the first Montevideo Treaty as not having been included in the list of exceptions to the most-favored-nation prin-ciple in the General Agreement on Trade and Tariffs (GATT)'8, and because of the less developed nations' fear of adopting automatic tariff reduction mechanisms which could jeopardize their later industrial de-velopment because of unbridled competition. However, the idea of in-stituting some kind of general preferences came up again and again during the LAFTA period, most notably, perhaps, during the collective negotiations of 1974 in which the possibility of tariff preferences received considerable attention, along with the idea of partial agreements them-selves. Neither of these proposals, however, was able to be taken up and acted on at that time.

During GATT's Tokyo Round, which ended in 1978, the developing nations were given the freedom to enter into agreements for the creation of preferential trade schemes among themselves, which made it possible for the LAFTA countries to agree to the regional tariff preference system during their subsequent negotiating meeting at Caraballeda.

During 1980, INTAL published an econometric study analyzing the preferences granted over the twenty year LAFTA period. '9 Many spe-

"In 1960, four signatory countries to the Treaty of Montevideo were members of the GATT group. 19"The tariff margin of preference and its effects on intra-LAFTA trade: an empirical study."


cialists maintained that, given the failure to create the hoped-for free trade zone, LAFTA ended up as nothing more than a partial zone of preferences comprising the different products negotiated through the Association's various instrumentalities. The detailed analysis of this ex-perience, as presented by INTAL, permits the establishment of the correlation existing between the negotiated margins of preference and the trade which these preferences generated, for a sample of products representing more than 80% of the total trade between pairs of LAFTA countries. The conclusions of this study showed the exact circumstances, the exact groups of products, and the exact levels of tariff reductions (and the like) at which the margins of preference have had a positive effect20, it was shown that for more than 60% of the products analyzed, the margin of preference has indeed been instrumental in stimulating intraregional trade , and that its future effect can be quite positive as well, as soon as it is put into operation for the greatest possible range and volume of products, as recommended, and at levels of tariff re-ductions which go well beyond that threshold at which such preferences can first begin to be effective.

The fact that pairs or groups of countries will be permitted to carry out partial actions of integration is closely linked to the conditionality of the application of the most-favored-nation principle. Proposals on this type of agreement had been made and put off until later, time and time throughout LAFTA's history, much like the idea of margins of preference, although a certain conditionality did show through in the early resolutions creating complementation and subregional agreements, in which there were clauses making the "automatic" granting of the agreed-upon concessions extensive to the non-signatory countries con-ditional to previous payment of adequate compensation to the signa-tories. Later on, Uruguay was granted, albeit temporarily and subject to later resolution, the right to make trade agreements with her neigh-bors, Argentina and Brazil, in which they granted each other advantages which were non-extensive to the other members of the zone. During the collective negotiations of 1974, there were discussions on projects conducive to the signing of agreements between pairs or groups of coun-tries, and although no resolution was actually approved at the time, the seed had been sown for the idea of allowing the countries to progress along those particular avenues, owing in large part to the well-known difficulties of achieving success exclusively through the multilateral route.

The points of agreement reached during the first negotiating meet-ing of 1980 on the basic definition of partial actions presents an almost infinite variety of partial agreements which can be drawn up by the countries. But care must be taken that these agreements meet several vital conditions, and in particular, that one which requires that they be

20Op. cit.


35

designed so as to be able eventually to become multilateral in scope through the negotiated accession of other LAIA members.

During this meeting the negotiators recommended that the most-favored-nation clause be maintained unconditionally in the Association's dealings with non-member nations. However, even this was left open to the possibility of being made more flexible at a later date, as the countries agreed to decide on the final dispositions in the matter during the second negotiating meeting.21

2. The Second Negotiating Meeting The second negotiating meeting was held in AsunciOn, the capital of Paraguay, on May 5-14, 1980. The agenda, as established by Resolution 410 of the Standing Executive Committee, included the following points: a review of the commitments made under the LAFTA liberalization program and of the concessions granted on national and special lists and in complementation agreements; an analysis of the situation of the coun-tries of relatively less economic development; actions of convergence and cooperation with other countries and economic integration areas of Latin America; and the institutional and legal aspects of the new inte-gration scheme.

With respect to the first point, the renegotiation of LAFTA's so-called "historical patrimony," which comprises more than 11,000 conces-sions granted on national lists, more than 7,000 on special lists for the less developed countries, and another 3,000 or so negotiated in 24 com-plementation agreements, there were two widely discrepant interpre-tations set forth by the member nations of the Association concerning the future status of said tariff reductions. On the one hand, the Andean Pact countries believed that the concessions should no longer be valid after December 31, 1980, the date on which LAFTA's trade liberali-zation program was to end, since this was the end date for the transition period which had been agreed upon for the completion of the free trade zone. On the other hand, the other members of the Association main-tained that although the end of the transition period meant that the tariff reduction program was to be discontinued, the concessions which had already been negotiated should certainly still be valid.

However, both sides agreed that all of the concessions should be reviewed in the interest of updating or broadening them—or even elim-inating them altogether, especially in the case of those products which were the subject of no discernible trade activity at all within the zone, in spite of the tariff reductions, and which in fact constitute the majority of the products included on the lists mentioned above. Of course, the countries agreed that they must take into consideration the cases of

21 LAFTAIRNIIIRecording secretary's report/Rev. 1, note (9).


members who were developing new projects with an eye to utilizing the agreed upon concessions sometime in the near future.

The existence of two differing interpretations, and the Andean countries' own admitted desire to renegotiate certain concessions which had proven useful to them in creating trade led to an agreement to renegotiate LAFTA's entire "historical patrimony" before the end of 1980.

The concessions granted on the national lists, it was decided, would be renegotiated either bilaterally or multilaterally; in the first case, triennial convergence meetings would be held in an effort to make the concessions multilateral in scope. It was agreed that a renegotiating group would carry out the necessary labors between August 15 and December 15, 1980, and that in the last two weeks of December there would be held the first evaluation and convergence conference to analyze and appraise the results of the renegotiations from a multilateral point of view.

In addition, it was agreed that the complementation agreements still in force should be adapted to conform to the new trade agreements modality which was recommended at the first negotiating meeting. The concessions stemming from these complementation agreements should also be renegotiated.

The existing lists of non-extensive advantages would be taken as the foundation for related partial agreements, and the concessions granted on these lists should be handled in the same way as the countries ulti-mately handle the concessions granted on the national lists.

The negotiators agreed that the complementary measures (elimi-nation of restrictions, safeguard clauses, margins of preference, rules of origin, and withdrawal of concessions) should be redefined as far as possible during the Special Conference to be held in Mexico.

It was further agreed that special treatment for the countries of relatively less economic development would involve the following three elements:

i) A coordinated joint action by the members of the Association to promote more active participation by the less developed coun-tries, through opening up the area's markets to them. In this regard, it was agreed that the new integration scheme should formally in-corporate the market-opening mechanism in the form of previously negotiated lists of products, preferably industrial, originating in the less developed countries which will be the object of unreciprocated elimination of tariffs and other trade restrictions by the other coun-tries. This recommendation was accepted by Brazil and Mexico, with certain qualifications. It was decided that these less developed countries would be assisted as well by agreements concerning special programs of cooperation for carrying out the following: market studies; technological and business management cooperation; fi-


nancing of projects of zone-wide scope; promotion of multinational businesses; and cooperation in preinvestment programs and activ-ities. ii) The creation of an economic promotion unit was recommended,

with a definite place in the budget of the new integration scheme, and designed primarily to obtain additional resources for the less economically developed members. iii) It was decided also that these countries would be aided in the establishment of free ports, zones, or depositories within the ter-ritories of the other countries, especially in the cases of Bolivia and Paraguay, in view of their landlocked condition.

With respect to actions of convergence and cooperation with other, nonLAIA countries and economic integration areas of Latin America, it was agreed that the members of the Association would be permitted to sign partial agreements with other countries and integration areas for preferential treatment in matters of tariffs and import restrictions in accordance with the following:

a) the trade concessions granted by LAIA countries will not have to be made automatically extensive to the other member countries, except to the less economically developed ones;

b) when the concessions are related to products already negotiated with other member countries, the preferences may not be greater than the ones already agreed upon within the Association, and if they are, the larger preference will automatically be extended to the fellow mem-ber country;

c) the agreements will be open to accession by the other LAIA members, following the prescribed negotiation procedure; and

d) the agreements must be declared compatible with the commit-ments of the Association.

Brazil's delegation proposed that the concessions be extensive to fellow members only when they relate to already-negotiated products, and that they be subject to the declaration of compatibility in cases in which the country in question is seeking authorization of an exception to the most favored-nation clause. Mexico's delegation was of the opin-ion that the declaration of compatibility is unnecessary.22

In the Asuncion meeting there surfaced two different positions on institutional aspects: a) the member countries of the Andean Group proposed that there be a Council of Foreign Relations Ministers, or some similar body, to serve as the highest political organ of the Asso-ciation, as well as a non-permanent Intergovernmental Conference as the decision-making organ, and a General Secretariat as the permanent technical organ, with its own initiative and process-evaluation capacity

22 LAFTAIRNIII Recording Secretary's report; notes.


as well as the expected technical and administrative attributes; b) the non-Andean Group countries, on the other hand, proposed that LAIA consist of three political organs (the Council of Ministers, the Evaluation and Convergence Conference, and the Committee of Permanent Rep-resentatives) and two technical organs (the Technical Secretariat and Auxiliary Organs). The Inter-American Development Bank, the Or-ganization of American States, and the Economic Commission for Latin America would continue on in their present capacity as advisory organs.

With regard to the voting process, the Andean countries proposed that resolutions might be approved by an affirmative vote by two-thirds of the member nations, with or without dissenting votes, while the remaining six countries wished to keep the existing voting procedure23 for the approval of amendments or additions to the Treaty, as well as for general high-level political decisions related to the basic operations of the Association.

And with regard to the final point, the negotiators decided that questions relating to the law-giving aspect of LAIA as well as to the actual legal status of the Association's basic organ would best be dealt with in depth at a specialized meeting of jurists to be held in Acapulco at the same time as the Special Conference called for in SEC's Resolution 410. During this Acapulco Conference the main topics of discussion were to be the agreements achieved to date and the positions of the member countries, as expressed in the first two negotiating meetings.

Although the topics discussed at Asunci6n were not the same ones discussed at Caraballeda, their importance to the process is clear. The question of the status of existing concessions once the transition period was over precipitated the first disagreement among groups of countries within the Association, and in order to resolve this issue, the countries, as we have already noted, agreed to renegotiate the Association's "his-torical patrimony" before the end of 1980—while fully acknowledging the fact that there were bound to be difficulties up ahead since twenty years' worth of negotiations had produced a tremendous number of concessions. In anticipation of just such difficulties as these, the coun-tries agreed beforehand that the renegotiation period might be extended if the parties concerned so desired.

The problem of the different levels of development among the LAIA Member States was addressed only briefly at the AsunciOn meet-ing, but the negotiators did agree that a series of joint actions should be undertaken to ensure the less developed countries (LDC's) greater benefits from their participation in the process. The opening up of mar-kets to goods—especially manufactured products—originating in the LDC's, as well as the special programs of cooperation and the creation

23 Two-thirds of the members voting affirmatively with no negative votes.


39

of an economic promotion unit expressly for obtaining financial and other resources for these countries were all extremely valuable rec-ommendations, which could well serve as the basis for a real and, ef-fective support system for the less developed members—without which the entire integration process will be seriously jeopardized, in the final analysis. In fact, INTAL itself has given special attention to this very problem, and is analyzing the possibility of the countries' creating a special fund to finance integration projects in the less developed coun-tries with resources made available by the increased regional tariff in-come which would accrue to the member countries if they would fully rationalize their customs and tariff systems.24 In addition, the Institute has undertaken an in-depth study which should enable it to analyze and evaluate the results of the LDC support systems employed by the world's different integration schemes and to develop proposals for increasing the total exportable product of the LDC's, as well as proposals for stimulating the real demand for these exports, and for building an ad-equate institutional structure for the suggested support system.

The possibility of a member's entering into partial agreement with nonLAIA countries or integration areas of Latin America is most in-triguing, and constitutes a mechanism with great economic potential for the region. The rules agreed upon in AsunciOn eased the way for new arrangements such as these without curtailing the effectiveness of the trade concession agreements already existing among the member coun-tries. This new modality would obviously make it possible for the LAIA integration process to expand geographically, covering integration areas and countries of Latin America which do not at present belong to the Association, without jeopardizing in any way, of course, their possible formal accession to the process at some future date.

These areas and countries are taken to mean at present the nations of the Isthmus of Central America, including Panama, and the countries of the Caribbean area.

The topic of LAIA's future institutional organization stirred as much controversy at the AsunciOn negotiating meeting as the rene-gotiation of the Association's historical patrimony. The specific issues which proved most volatile were those related to LAIA's political or-gans, the role of the Technical Secretariat, and the voting system, as mentioned earlier. The heated debate over these issues actually came as no great surprise, however, following as it did years of controversy in LAFTA over the same topics, in which two opposing camps could usually be discerned—namely: the countries which were willing to com-mit themselves to accepting more powerful decision-making and tech-nical bodies in the Association in order to help strengthen the integration process; and those countries which felt it more in their interest to move

24 Eduardo R. Conesa: "Las exportaciones intralatinoamericanas como motores del desarrollo," 1980.


ahead slowly, making as few concessions as possible in the decision-making arena, the better to defend their national autonomy.

These two camps will certainly continue to be philosophically at odds with each other in the future as well, as long as the old differences in development levels among the member countries continue to exist, and until the region fully recognizes the possibilities offered by integra-tion as a potent factor for the development of all the economies of the region.

3. The Acapulco Conference The progress made during 1979 and 1980 in the negotiation of the re-structuring of LAFTA led up to the XIX Special Conference of Con-tracting Parties of the Treaty of Montevideo held in Acapulco, Mexico, on June 16-27, 1980.

One of the most important activities on the agenda for the Con-ference was the consideration of the project which would ultimately evolve into a new regional integration treaty. For this reason, there were many high-level government officials present at the Acapulco meetings.

The agreements reached in Caraballeda and AsunciOn had made it possible for the Secretariat of LAFTA to draft beforehand a prelim-inary project for a new Treaty, which would serve as the basis for discussion at the Conference.

The work commissions and the ad hoc group of jurists which were formed held deliberations not only on the preliminary project mentioned and an additional protocol, but also on a preliminary project on the review of the commitments stemming from the Treaty of Montevideo's liberalization program and another pre-project on the regulation of the transition period between the current and the future integration schemes.

As a result of these wide-ranging discussions, resolutions on the following ten topics were approved:

1) the Project for the new Treaty; 2) review of the commitments arising from the liberalization program; 3) partial agreements; 4) pre-liminary studies for the review of the commitments stemming from the liberalization program; 5) support system for the countries of relatively lesser economic development; 6) meeting of the LAFTA Council of Ministers; 7) the legal and institutional situation created by the coming into force of the new Treaty; 8) categories of countries; 9) basic prin-ciples concerning the regional tariff preference; and 10) the signing of the new Treaty.

4. The Project for the New Treaty The Project which would ultimately evolve into a new regional integration Treaty contained a total of 69 articles comprised by nine chapters.25

25 Resolution 388 (XIX-E).


The first chapter concerns basic objectives, functions, and princi-ples, and Article 1 expresses the countries' agreement to continue on with the process of regional integration, for which purpose they wish to institute the Latin American Integration Association. Their long-term objective is defined as the formation of a Latin American Common Market, but exact time goals for this are not established, since experi-ence during the LAFTA years has shown a high level of non-compliance, for one reason or another, with quantitative goals and the specific time limits set for reaching them. Once again, mention is made of the many special difficulties facing the region as it seeks to achieve economic integration and of the negative effect which is felt when the countries are unable to meet specific time limits and goals which have been set for them.

In Article 2, the Association's basic functions are defined as the promotion and regulation of reciprocal trade; economic complemen-tation; and the development of economic cooperation activities which will contribute to the broadening of members' markets. The countries note here their desire to make use of the Association not only to promote intrazonal trade, but also to carry out joint actions which will help them expand the region's markets in third countries.

Article 3 establishes the principles upon which the new scheme will be based and which are the result of much careful analysis of Latin America's actual present situation and of the countries' need to ac-knowledge that situation and adapt to it so that the process may move forward. The countries express here their wish for economic integration above and beyond any political and economic diversity which may exist within the region.

Another principle which is established is the great variety of forms which integration activities may take, while still remaining true to the basic objectives and functions of the process; this permits members to make use of any and all instruments which may help them reach their legitimate integration goals. Closely related to this principle of prag-matism is the idea of flexibility, which allows for the signing of partial agreements between two or more countries; these partial agreements will, as we know, also adopt many different modalities. The advent of these two principles signals the decline, at least for the moment, of the staunchly multilateral approach which characterized most of LAFTA's activities under the original Treaty. The multilateral ideal itself, how-ever, still goes forward under a different banner, i.e. , the thrust towards ultimate convergence by all of the partial actions, with the final goal of region-wide integration.

The last, but of course not the least important, principle to be mentioned is the differential treatment which should be accorded to member countries in all of LAIA's mechanisms according to their rel-ative level of economic development. Three specific development cat-egories are defined, and, as one might expect, more favorable treatment


will be given to those countries of intermediate development, while the most favorable treatment of all is reserved for those countries of lowest relative development levels.

The mechanism for carrying out the basic functions mentioned ear-lier are described in Article 4 as follows: "the member countries (will) establish an area of economic preferences, composed of a regional tariff preference, as well as region-wide and partial agreements."

The preference mechanism is being adopted to serve as the scheme's basic multilateral instrument, made possible in part by the GATT de-cision to permit "regional or general agreements between developing countries designed to reduce or eliminate the obstacles to their reciprocal trade ."26 The area of preferences, however, is not the only multilateral mechanism provided for in the project for the new Treaty, since that function would also be performed by the region-wide agreements, in which all the member countries participate. As we have already noted, the idea of establishing an area of trade preferences has been in existence since the very beginning of the integration process in Latin America, but it was never before translated into action because GATT's provisions did not yet permit it.

The actual preference level itself will be determined as a function of the level of tariffs on goods from third countries and in keeping with more specific regulations on the subject, which will be the subject of later commentary.

Another important functional mechanism is the partial agreements, in which all of the member countries do not necessarily participate (although the agreements may be entered into by any of the other member countries who so wish, through a prescribed negotiation proc-ess.) It is believed that the partial agreements will serve as a catalyst to the integration process as it now stands, given the fact that agreements can be reached more easily and tangible progress can be made more quickly if all of the member countries do not first have to reach con-sensus. The success of the partial agreements, it is hoped, will spark the signing of similar agreements among the other member countries, who will certainly not want to get left behind.

Emphasis is placed on the need for these agreements and integration activities to converge steadily into a multilateral frame of reference; and the periodic convergence meetings, which will be called for in special clauses to be contained by the agreement's, are defined as vital if this multilateral goal is to be achieved. The agreements should be for a time period of at least one year.

The general framework for these agreements, as defined by the Project, provides that they may be of many types, including the follow-ing: trade agreements; economic complementation agreements; agri-

26 Treaty of Montevideo 1980, Preamble.


43

cultural agreements; trade promotion agreements; or other kinds of agreements which will enable the countries to design any type of ar-rangement they feel to be to their advantage, as long as it is in line with the objectives and minimum requirements of the LAIA process as de-fined by the Project.

The trade agreements are to be solely for the purpose of promoting trade (Article 10). The main objectives of the economic complemen-tation agreements will be to facilitate the maximum utilization of factors of production and to stimulate economic complementation among the member countries (Article 11). The objective of the agricultural agree-ments is the development and regulation of agricultural trade within the region (Article 12). And the trade promotion agreements are to be for the promotion of trade, too, but only through non-tariff measures (Ar-ticle 13).

Chapter III deals with the system of support for the relatively less economically developed countries—a topic with great significance for the future of Latin American integration, since the general consensus of opinion is that the great disparities in development levels among the member countries were largely responsible for the ultimate stagnation of the process under LAFTA.

Although the 1960 Treaty of Montevideo did seek to improve the situation of the less developed countries with the special measures in-cluded in Article 32, the application of these measures throughout the entire twenty LAFTA years did not achieve the hoped-for results as far as decreasing the countries' differences in development levels.27

The Project which was approved at the Acapulco Conference in-cludes a series of measures which give shape to a true system of support for the LDC's. To begin with, it states that these measures will be based on the principles of non-reciprocity, and cooperation as one large com-munity of fellow nations (Article 15). It goes on to state that the more developed countries should open up their markets to the LDC's and arrange for programs of cooperation with them. Article 18 calls for the drawing up of lists of products—preferably manufactures—originating in each one of the LDC's on which tariffs and other restrictions will be eliminated on a non-reciprocal basis. These lists should be expanded periodically, and will be included in related partial agreements.

In addition, special programs of cooperation will be set up, through partial agreements, in such areas as preinvestment, financing, and tech-nology, which should help the LDC's make the best use of their new tariff concessions. The landlocked LDC's will be subject to especially favorable treatment in that they will be given facilities for establishing free ports, zones, or depositories in the other member countries.

27 For an analysis of the application of these measures, see LAFTA/CEPI (SEC)ISem 11, final document, 1979.


Chapter IV refers to convergence and cooperation with other non-LAIA countries and economic integration areas of Latin America, and speaks of programs of association or multilateral ties which might include the possibility of these countries or areas agreeing to the establishment of a generalized Latin American tariff preference, together with the LAIA countries. Partial agreements may also be reached between a member and nonmember country or area, but if it wishes to grant conces-sions on products which it has previously negotiated with a fellow LAIA country, and if these concessions are larger than the already negotiated ones, then the member country in question must first consult with the affected member country and arrive at a solution which is satisfactory to all parties. In addition, these agreements must be "evaluated from a multilateral point of view" by the Committee of Representatives. Here, there is evidence of greater flexibility than in the recommendation from the AsunciOn negotiating meeting, which was that these larger conces-sions automatically be made extensive to the other LAIA countries with whom the product had already been negotiated.

In any case, all concessions made to these non-LAIA countries and integration areas will automatically be extended to the member countries of relatively less economic development (Article 27).

Chapter V deals with the concept of cooperation with non-Latin American areas of economic integration. Article 27 establishes the pos-sibility of a LAIA member's signing partial agreements with these areas, under the condition that any concessions agreed upon, if larger than existing concessions on the same product as previously negotiated with a LAIA member, will be extended automatically to the affected member country. These partial agreements must also be first declared compatible with the commitments entered into under the Treaty.

No formal recommendation as to partial agreements with non-Latin American integration areas had been made at the earlier negotiating meetings, although Brazil's delegation had made a proposal in this re-gard, as we have already mentioned.

It cannot be denied that the possibilities in Chapters IV and V for reaching partial agreements with non-LAIA members would compro-mise to a certain extent the philosophy of the unconditional application, to third countries, of the most-favored-nation clause that was so strongly recommended to LAIA at the seminar of experts organized by INTAL.28 This is brought home by the possibility of agreements with integration areas which are not even Latin American (Article 27), since the pos-sibility of establishing ties with the rest of the countries of Latin America has been an often-expressed desire of the member countries since the very beginning of the LAFTA process.

Chapter VI of the Treaty Project from the Acapulco Conference

28The Latin American Integration Process in 1979, IDBIINTAL, p. 86.


deals with certain general provisions, and was eventually to become Chapter VII of the definitive version of the Treaty as signed by the Foreign Relations Ministers.

Some of these provisions relate to the unconditional most-favored-nation treatment which will be applied to all customs exemptions, ad-vantages, favors, immunities, and privileges conceded in agreements or decisions not provided for in the Treaty or the Cartagena Agreement (which serves mainly to define the Treaty and the Cartagena Agreement as two separate entities.)

The other clauses of the Chapter relate to the so-called "no-less-favorable treatment" for zonal enterprises in internal tax matters; treat-ment of zonal products and capital; the application of insurance laws and regulations; the protection of public morality, and other such topics, similar to ones mentioned in the 1960 Treaty.

Chapter VII of the Project (which became Chapter VI of the final Treaty) deals with LAIA's institutional organization, and establishes that the Association's political bodies will be the Council of Foreign Relations Ministers, the Evaluation and Convergence Conference, and the Committee of Representatives, and that the General Secretariat will be its technical organ.

The Council of Foreign Relations Ministers is LAIA's organ of highest authority, and its functions will be to formulate general rules and regulations in the interest of ensuring the proper fulfillment of the Association's objectives. It will periodically evaluate the results of the process, adopt any needed corrective measures, issue basic directives, approve or refuse the accession of new members, decide on amendments and additions to the Treaty, appoint the Secretary-General, and so forth. The Council will be made up of the member countries' Ministers of Foreign Relations, or whichever of their Ministers deals with economic integration matters. All members must be present at each Council ses-sion, which may be called by the Committee of Representatives.

The Evaluation and Convergence Conference will evaluate the ef-fectiveness and the functioning of the process and the convergence of the partial agreements (which the countries should be making progres-sively more multilateral in scope) and it will recommend to the Council the necessary corrective multilateral measures. It will review the appli-cation of the differential treatment to be given the various countries according to their development level, and evaluate the results of the system of support for the LDC's. It will also carry out the multilateral negotiations for increasing the regional tariff preference, and encourage the reaching of agreements of region-wide scope, etc. The Conference is made up of plenipotentiary representatives of the member countries, and will meet regularly every three years and in special sessions, as determined by the Committee.

The Committee of Representatives is the Association's permanent body, and its duties will include the promotion of agreements of regional


scope through government-level meetings held at least once a year, partially to encourage sectorial or multisectorial negotiations leading to said regional agreements (which will basically be on tariff reductions). The Committee will also perform the following tasks: set the specific rules and regulations which are needed to flesh out the Treaty; set the member countries' dues; represent the Association; declare the com-patibility or incompatibility of partial agreements; create auxiliary or-gans; and so forth. It will be made up of one permanent representative of each member country, all of whom will have one vote apiece; two-thirds of the members must be present to constitute a formal Committee Meeting.

The Secretariat will be headed by a Secretary-General and made up of technical and administrative personnel. The Secretary-General is elected by the Council of Foreign Affairs Ministers to a term of three years, and he or she may be reelected to one additional term. The Secretary-General functions as Secretary to all of the political bodies (the Council, the Committee, and the Conference) of the Association. His tasks and those of his staff will include the following: to formulate proposals to the political bodies, through the Committee; to carry out studies conducive to progress in the integration process; to propose to the Committee the creation of any necessary auxiliary organs; to eval-uate periodically the progress of regional integration; to organize and put into operation an economic promotion unit for the LDC's in order to obtain technical and financial resources for projects in the LDC's; to make an annual report to the Committee on the results of the application of the Treaty; and so forth.

In addition, there will be auxiliary bodies for consultation, advisory services, and technical support—and in particular, a body composed of the officials entrusted with formulating integration policies in their re-spective countries.

With regard to the voting system, the political bodies will arrive at their decisions through the affirmative vote of two-thirds of their mem-bers, except in the case of votes on extremely vital issues, which will require, in addition, the presence of no negative votes. The 1960 Treaty had stipulated the need for no negative votes on all decisions, except for the election of the Secretary-General.

The institutional structure provided for in the new Treaty is quite similar to that described in the 1960 document with respect to the po-litical bodies and their duties and powers. However, in the 1980 Treaty, the Secretariat is given the power of making proposals, and its duties are expanded, so that it serves not only the Committee, as before, but also the Council and the Conference—all of which gives the technical team a greatly expanded role in providing the elements which go into the final decision-making process.

The new Treaty will enter into force for the ratifying countries thirty days after the third instrument of ratification is deposited. For the re-


47

maining countries it will enter into force on the thirtieth day after each one's respective instrument of ratification is deposited.

Once the Treaty becomes fully effective it will be open to accession by any Latin American countries who wish to become members of LAIA. (The Council has the final word on the acceptability of each accession, as mentioned earlier.) And any amendments or additions to the Treaty should be formally expressed as protocols, which will go into effect after their ratification by all the member countries.

To continue, however, once thirty days have elapsed following rat-ification of the Treaty by the third country, the dispositions of the 1960 Treaty will be applied for one year to those member countries which have not yet ratified, to govern their relations with each other and with the countries which have already ratified. In addition, the resolution adopted at the August meeting of the Council of Foreign Relations Ministers in Montevideo will also apply equally to the member nations which have not yet ratified the Treaty by the date indicated.

These countries also may participate fully, during that one-year period, in discussions and votes within the new Association. At the Acapulco meeting it had been decided that they would not be permitted to vote until after they had ratified the Treaty—a decision which was later overturned.

All of the foregoing, then, constitutes a brief description of the basic provisions, objectives, and mechanisms of the new Treaty, which in many ways is quite similar to its predecessor, signed in 1960.29

In the Conference of Acapulco the representatives approved nine other resolutions, which are actually just complements to Resolution 388 (XIX-E) containing the basic Project for the new Treaty. Most of these additional resolutions contain projects concerning certain funda-mental aspects of the main Project, and were submitted, along with Resolution 388, to the Council of Foreign Relations Ministers for con-sideration.

Resolution 389 (XIX-E), for example, concerns a most basic matter: the commitments stemming from LAFTA's liberalization program. It proposes that a project be prepared for the Council's approval which would incorporate into the new integration scheme the concessions granted on national lists, lists of non-extensive advantages, and in complemen-tation agreements. The Resolution further proposes that the concessions be renegotiated in accordance with the following criteria and objectives: to strengthen and stimulate the flow of trade; to correct quantitative imbalances; to encourage growing participation of manufactured and semimanufactured goods in total reciprocal trade; and to provide in-creasing benefits for those countries of lowest and intermediate levels

29"Comparative Analysis of the 1960 and the 1980 Treaties of Montevideo," Raymundo Barros Charlin, September, 1980.


of economic development. The concessions should be either updated, broadened, or eliminated, in an effort to strengthen zonal trade. The renegotiations will be carried out by the countries concerned, on a bilateral or plurilateral basis; their results will be expressed as partial, or even regional agreements, and will be subject to evaluation in terms of their multilateral potential. The renegotiations should be completed by December 15, 1980, and soon after this date a special evaluation and convergence conference will be held. The countries which have not completed their renegotiations by the date indicated may sign partial agreements to the effect that they will carry out the renegotiations at a later date.

Existing complementation agreements should be adapted to the new trade agreements modality, and their concessions renegotiated. The bilateral agreements authorized by Resolution 354 (XV)3() will be adapted to the partial agreement modality. In addition, the countries are en-couraged to approve and put into operation as quickly as possible the lists of market openings for products from the less economically devel-oped member nations, as provided for in Article 18 of the basic Project. And, last, specific rules should be adopted concerning the following aspects of the concessions stemming from the renegotiations: safeguard clauses; withdrawal of concessions; non-tariff restrictions; rules of ori-gin; and preservation of margins of preference.

Resolution 390 (XIX-E) refers to certain basic principles and pro-cedures which should be observed by the signers of partial agreements: the agreements should be open to accession by other member countries, following the prescribed negotiations; they should be strictly in line with the principle of convergence; they should contain provision for differ-ential treatment according to the established developmental categories of countries; they should cover a period of at least one year; and they should also be announced in advance by the Committee so that other countries may, if they desire, participate in the negotiations. The variety of possible forms of partial agreements is wide, encompassing such areas as trade, economic complementation, agriculture, and trade promotion, in accordance with the results of the first negotiating meeting, which we described earlier.

Two projects for resolutions were submitted to the Council in regard to the system of support for the LDC's—one related to the opening up of markets, and the other to the special cooperation programs and the creation of an Economic Promotion Unit. In the first project, mention is made of the principles of non-reciprocity and LAIA-wide community cooperation which should apply in negotiations with the less developed countries. It is suggested that "the contracting parties determine the exact market openings, and establish formal programs and other specific

"Authorization for Uruguay to sign agreements with Argentina and Brazil.


49

modes of cooperation." For these purposes, each of the relatively more developed member countries is to draw up and approve a list of prod-ucts—preferably manufactured or semi-manufactured goods—from the LDC's on which it will totally and without reciprocity eliminate tariff charges. The project calls for these lists to be expanded at regular in-tervals, although it does not specify time periods or actual number of additions to be made.

The second project deals in further detail with the special programs of cooperation with the LDC's, which may include: market studies; promotion of Latin American multinational businesses; technological and business management cooperation; and joint actions on projects of mutual interest. The project proposes the creation of an Economic Pro-motion Unit, within the LAIA Secretariat, to secure financial, and other, support for the countries of relatively lower levels of economic devel-opment.

Another project establishes the three specific categories of coun-tries, according to each one's particular economic and structural char-acteristics: i) countries of relatively lower levels of economic develop-ment (Bolivia, Ecuador, and Paraguay); ii) countries of intermediate development levels (Colombia, Chile, Peru, Uruguay, and Venezuela); and iii) other member countries (Argentina, Brazil, and Mexico).

Uruguay will be granted more favorable treatment than the other intermediate-level countries. In addition, special provisions were later made for the landlocked LDC's, in view of the handicap which this particular geographical condition signifies in terms of their economic development.

Still another of the resolution projects mentioned establishes the basic guidelines for the regional tariff preference, as follows: i) the preference implies that tariff levels towards fellow LAIA members will always be lower, in a specified and constant amount or degree, than tariffs toward third countries; ii) the preference will cover, if at all possible, the entire range of goods subject to tariffs; and iii) it will not imply the consolidation of tariffs, which means that the countries may raise or lower their tariff levels towards third countries as they see fit, as long as they maintain the agreed upon tariff preference towards their fellow LAIA members. It is agreed that the initial regional tariff pref-erence should be rather small—a token, really, but expandable through later negotiations. Thus, when the actual preference is negotiated, some-time in 1981, its initial amount will be merely symbolic, implying that the countries' interest lies in seeking progress in this area through partial agreements.

The Special Conference held in Acapulco represents an important milestone in the total Latin American integration process. As one twenty-year-long experience draws to a close, it is making way for a new ex-perience which will draw on its predecessor's strengths and avoid some of its weaknesses. It is obvious that the general conditions prevailing in


1980 were substantially different from those existing twenty years earlier. In the first place, in 1960 there were none of the GATT restrictions which we have described; and the creation of a subregional grouping such as that formed by the Andean Pact countries, together with rec-ognition of the difficulties, as manifested through the LAFTA experi-ence, of progressing through strictly multilateral instruments produced a sharp change in direction which—while not aimed at bringing all ne-gotiations back down to the bilateral level of the 1950's, did bring the integration effort to a position midway between the two extremes, more in keeping with a realistic assessment of the region's actual capacity to create and benefit from integration agreements. We should reiterate the new Treaty's intentional lack of specific commitments in terms of time limits and quantitative objectives; in this regard, it has been agreed that the immense variety and undeniable unpredictability which exist within the region have almost always made it impossible for the countries to fulfill the time limits or quantitative goals which have been set, leading in turn to frustrations which further inhibit the progress of the integration process. As a result, the countries have agreed upon this wide-ranging framework Treaty, under which they can move ahead in integration at their own pace, step by step, at the precise moment in which they feel that it is to their particular advantage to do so, instead of in keeping with specific rigid commitments assumed at some earlier date.

5. The Meeting of the Council of Foreign Relations Ministers The Special Conference at Acapulco had entrusted the Committee with organizing a meeting of the Council of Foreign Relations Ministers for sometime in August, as opposed to the July date which had originally been called for in Resolution 410.

So it was that on August 11 and 12, the LAFTA Council of Ministers met officially for the first and last time.31

The Committee had also been asked to request the Government of Uruguay to invite the other member governments to participate in a ministerial-level meeting to take place at the same time as the August Council Meeting, with the purpose of signing the Treaty.32 This formal maneuvering was necessary because the powers of LAFTA's Council of Ministers as such did not include the signing of a new Treaty.

So as a result, the Ministers held plenary sessions as members of the LAFTA Council, during which they approved nine resolutions, and they met also as ministerial-level representatives of their respective countries, at the invitation of the government of Uruguay, in order to sign the new Treaty.

31 Although the Foreign Relations Ministers had in fact held meetings in previous years, 1980 was the first year in which the Council met formally as such, as the LAFTA body of highest authority, having been ratified by all eleven member countries. 32 Resolution 397 (X1X-E).


On the morning of August 12, 1980, in solemn session, and in the presence of the President of the Republic of Uruguay and other top-level officials from that same country, the ministers signed the new Treaty, which was to be known thenceforth as the 1980 Treaty of Mon-tevideo. The signatory session was held in the Legislative Palace of the host country.

On the afternoon of that same day, at LAFTA headquarters, the Council of Ministers approved the resolutions mentioned earlier.

The resolutions approved by the Council of Ministers, numbered 1 through 7, correspond to the projects approved at the Special Con-ference at Acapulco, and are related to the following topics: A review of the commitments stemming from the LAFTA liberalization program; the partial agreements; the market openings, special programs of co-operation, and creation of an economic promotion unit for the countries of relatively lower levels of economic development; the basic rules on the regional tariff preference; the various categories of countries; and the legal and institutional situation created by the coming into force of the 1980 Montevideo Treaty.

The new Treaty and the resolutions mentioned were all approved with very few changes—which, in any case, have already been described.

In addition, the Council approved two resolutions, one giving guide-lines for the 1980 and 1981 program, for the institutional structure of the Secretariat, and for the Association's 1981 expense budget; and the other designating the Executive Secretary of LAFTA's Standing Ex-ecutive Committee.

The ministers present in Montevideo named the future Secretary-General of the Latin American Integration Association. Subsequently, and in view of the advantages of having LAIA's Secretary-General Designate serve also as the Executive Secretary of LAFTA's Standing Executive Committee until the new Treaty entered into force, the Coun-cil of Ministers named the same person for the similar LAFTA post, which had been occupied on an "interim" basis for more than five years. In this way, the Council ensured the continuity of administration of the technical organ during the period of transition from one Treaty to the other.

In one of the sessions of the Council, the Director of the Institute for Latin American Integration (INTAL) made a speech as the repre-sentative of the President of the Inter-American Development Bank, in which he spoke mainly of the new Treaty's scope and its significance for Latin America, as well as the support which the Bank has given over the years, and will continue to give, to the regional integration process. He spoke of the unmistakable signs of originality displayed by the new Agreement, and of its realistic basis in Latin America's actual political and economic situation. He made reference as well to the causes of LAFTA's lamentable stagnation, singling out its rigidly multilateral ap-proach as the chief culprit, while voicing his belief that significant prog-


ress can be made in the integration process by means of the partial agreements provided for in the 1980 Treaty—as long as the countries are careful to see to the convergence of these partial instruments and to the application of the multilaterally-oriented system of regional pref-erences provided for in Article 4.33

INTAL had played an active role throughout the entire LAFTA restructuring process, and continued to do the same following the signing of the LAIA Treaty. At the request of LAFTA's Standing Executive Committee, INTAL had prepared background documents for the analy-sis of LAFTA which was carried out in 1979, and the Institute had also participated in the entire process of seminars and meetings held that year and the following one. In 1980, both before and after the signing of the new integration instrument, INTAL carried out studies on certain basic issues of great importance for the new Association, including the already-mentioned examination of the effect of tariff preferences on intrazonal trade, and the comparative analysis of the 1960 and the 1980 Treaties of Montevideo. It also sponsored studies on the outlook for the partial agreements and on their convergence , which were carried out by distinguished special consultants on Latin America ,34 because of the significance which these two topics hold for the future of LAIA.

Felipe Salazar Santos points out that, unlike the conditions existing in Europe before the signing of the Treaty of Rome, the conditions existing in Latin America before the signing of the 1960 Treaty of Mon-tevideo did not include the necessary infrastructure in the form of a pre-existing market which could serve as the launching pad for the integra-tion process; the partial actions of LAIA will help to create just such an infrastructure, connecting the different national markets in accord-ance with the particular characteristics and development potential of each of the participating countries, and making possible the creation of subregional and sectorial groupings which will ultimately lead to the formation of the common market. Salazar emphasizes the countries' need to provide solid regulations for these partial actions to ensure their ultimate convergence into the desired common market. There must be very strict rules, he says, to make sure that the contracting parties to any partial agreement will extend the benefits of their agreement to any and all other LAIA countries, once certain previously defined conditions are met. In addition, he recommends strict rules regarding the agree-ments which Association members sign with non-LAIA parties, so that the reciprocal tariff preference which LAIA members enjoy within the region will never be neutralized.35

""Speech of Dr. Eduardo Conesa, Director of INTAL, in the name of the President of the Inter-American Development Bank, Dr. Antonio Ortiz Mena," August 1980. ""Evaluation of the 1980 Montevideo Treaty and the Outlook for LAIA's Partial Actions," by Miguel S. Wionczek; and "Convergence of the Partial Actions within the LAIA Framework," by Felipe Salazar Santos. Integracion Latinoamericana, Nos. 50 and 52, respectively. 35 Felipe Salazar Santos, op. cit.


53

In his study, Miguel Wionczek contends that the world economy and its bleak outlook for the next few years do not necessarily sound the death knell for Latin America's continued ability to maintain its economies' established rates of growth. The gloomy world picture does, however, make regional integration more urgent than ever, and new modalities of effective intraregional economic cooperation must be put into operation, while assiduously avoiding the perilous fragmentation of the region into isolated economic or political blocs.

Wionczek contends that Latin American integration occupies very marginal positions within the member countries' individual national de-velopment policies—a state of affairs which certainly detracts from the forward momentum of the process. He emphasizes the members' need for common policies with respect to long-term regional goals, and points to the scarcity, if not outright lack, of such goals in the new Treaty. He believes that the regional tariff preference should be substantial—not just a token—and that it should be complemented by new provisions on non-tariff restrictions affecting intra-Latin American trade. Further-more, the partial agreements should not be restricted to trade concerns only, since in that case their total effect would be quite limited. The countries should sign other agreements as well, conducive to the growth of production of goods and services within the countries of low and intermediate levels of development—for if this growth does not take place, the region will find itself in real danger of splitting up into more or less isolated economic zones surrounding the three largest countries of the area—Argentina, Brazil, and Mexico.

Therefore, the countries should do everything within their power to reach economic cooperation agreements, agricultural agreements, and partial agreements of other possible types as enumerated in the Treaty, aside from the trade agreements. Wionczek further states that these economic complementation, and other varied types, of partial agreements will be simpler to make convergent than the trade agree-ments.36

6. The XX Special Conference of LAFTA's Contracting Parties Article 6 of Resolution No. 1 of the Council of Ministers, approved August 12, 1980, establishes that: "The renegotiation (of concessions) will begin on the date on which this Resolution is approved, and will be concluded during the first half of December, 1980.

During the second half of December, 1980, a special conference will be held, for the following purposes:

a) To analyze and evaluate from the multilateral point of view the results of the renegotiations, and to negotiate, insofar as possible, the

36 Miguel Wionczek, op. cit.

04050$$$$4 11-16-81 22-55-21


extension of the planned partial agreements to include the other member countries;

b) To get on with the formalization—by December 31, 1980, at the latest—of the partial agreements resulting from the renegotiations, which will then go into effect beginning on January 1, 1981; and

c) To decide on the way in which any unusual situations which arise will be handled. By common agreement, those contracting parties which have not concluded their renegotiations by December 31, 1980, may sign a partial agreement to the effect that they will conclude this re-negotiation by a specific, mutually agreeable date."

Thus, as soon as Resolution 1 came into effect, the contracting parties undertook the process of renegotiating the national lists, special lists, and complementation agreements which were in effect at that time.

During this first stage of renegotiation, which culminated in the Special Conference held December 15-19, 1980, the countries took po-sitions consonant with those they had adopted during the LAFTA re-structuring process, especially during the negotiating meeting held in Asuncion.

The five member countries of the Andean Group still held that the "historical patrimony" of LAFTA should terminate on December 31, 1980, while the remaining six countries maintained that the concessions negotiated under LAFTA should still be valid after that date.

As we can see, Article 6 quoted above sought to reconcile these two positions as far as possible, calling for the renegotiations to take place during the last months of 1980, but providing that those renego-tiations not concluded by the end of 1980 could be carried on over into 1981, if the contracting parties so desired, by the signing of a partial agreement to that effect.

The period between the middle of August and the 15th of Decem-ber, 1980, was hectic with renegotiations, especially between the Andean countries and the other six countries, as we might have assumed would be the case from the Andean position described above. In turn, Ar-gentina, Brazil, Chile, Mexico, Paraguay, and Uruguay agreed upon "the bases for a joint understanding on the way in which they will approach their review of the commitments stemming from the liberal-ization program of the Treaty of Montevideo of February 18, 1960."37 These countries agreed to carry out various stages of renegotiation fol-lowing the basic guidelines established in Rtesolution 1 of the Council of Ministers, beginning with bilateral renegotiations, the final results of which will be formalized in a plurilateral partial action, with the appli-cation of the most-favored-nation clause. This plurilateral partial action will go into effect on or before the 31st of December, 1981; meanwhile, in their reciprocal trade relations, these six member countries will con-

37 Standing Executive Committee—CEP/Repartido 1970. 'Representation of Uruguay, August 22, 1980.


tinue to observe the concessions granted on their respective national lists.

The national lists of the Andean Pact countries were to expire on the 31st of December, 1980, since these countries had signed partial agreements by then with most of the non-Andean LAIA members, containing lists of products on which negotiations would take place during the first months of 1981. These lists included, in some cases, products which had not previously been on the national or special lists—in other words, products on which concessions were to be granted for the first time ever.

In Tables 7 and 8 we can see the number of products which the Andean countries agreed to negotiate in partial agreements with the other member countries of the Association. There was a marked de-crease in the number of items with respect to the original number of items existing on the national and special lists which expired at the end of 1980: the total number of concessions included on the Andean coun-tries' national and special lists as of the end of 1979 was 5,027, while the number of items they agreed to renegotiate bilaterally was 1,071, to which we should add the 107 new products which might be negotiated in partial agreements.

The six non-Andean LAIA countries, as we have mentioned, de-cided that their existing national and special lists would remain in effect for their reciprocal trade during 1981; however, they would renegotiate 996 existing items and negotiate 126 new ones with the Andean Pact countries, while their existing national and special lists had previously contained some 13,886 total concessions on products from the Andean Group.

As a result of all this reshuffling, more than 90% of the concessions negotiated between these two groups of countries during the LAFTA years were to be no longer valid—a loss which is made up for in part by the possibility of their negotiating concessions on more than two hundred new products.

Resolution 398 (XX-E) provided for the Contracting Parties to hold two special conferences, to move ahead in the renegotiating process and in other areas:

a) The first conference, April 30 through May 16, 1980, for eval-uating, from a multilateral perspective, and formalizing the partial agreements reached up until that time; and

b) The second conference, during the last quarter of 1981, held to finish carrying out the instructions given in Article 6 of Resolution 1 of the Council of Ministers, with regard to the Agreements formalized by the previous 1981 conference and the ones to be reached later.

In both Conferences, there would obviously be a need for well-defined criteria for use in the multilateral evaluation of the partial agreements, as prescribed by Resolution 1 of the Council of Ministers. Therefore, the Standing Executive Committee would issue such criteria

t 2 0 .2

z

c O

-° E )

E. 2 .2

z

C (i)

C:7))Co .!7 cn .n

O 2 EL2

0 .2

t o" z 0

ta3 Co.!t g)) O

`1)) Co 8 :7,

t) 0 .52

a c(2) Z

2 c% 1'1; 1') Co 0 ET2

t 0 0 . 'aul) z

O t co Jo o 9g) o 0

Co n

cess

ions

gra

nted

to:

O O a-

0 co

O c.)

Co

-0- m

Con

cess

ions

gra

nted

by:

C\I C\I

c)

CY)

N-

0)

CY

)

CO

SO

UR

CE

: IN

TAL,

with

data

fro

m t

he F

ina

l Act

of t

he X

X S

pec

ial P

erio

d of

the

Con

fere

nce

of LA

FTA

's C

ontr

actin

g P

art

ies.

1-- C..0 C:)

CN.1

CD

CO LI) CNJ

CC

CO

CY, 0.) CD

O CO

C\J

N- CO ti

CD ti


Cl) C I I CO

CY) r•••• C\J I

g), Cl)

CO CO ,,r LC)

1 1 1 LI)

12:9 — E2

LC) CNJ CY) CD 1- C\I C\I CY) C\1 c\I

•r- co Lc)

LO LC) 0 cr) ZTO Cr)

IT 1

T- T 0, I 0) 1-- CT) 0 1-- I

1 1 1 1

L'13 1 1 L%' 1

R 1 1 1 "' 1

LO CY) T-- I m-- CO NO I CC)

1 111"

1- CY) C\I I 1.--• C\I 0) T-- T--

LO 1- I I CO 0)

CCS CIS >,

- C.) Cr)

E' OLE cFs 2

U)

6 0

Co

co

0

a)

7.; a)

0

co 4C)

a. 6 L.

E

u_ —I ° co cr) 734) C D

a) c

C.5 E cn c o .— th CD 75 C 0 0 as CD C

o CO o

-251

Q .

CA co a) c x cc w

ai v 63 c ca w

.c E

xiI" co a)

1—

CO

2

o c C.) .2

O

u) Co .! .0 -0- ?a" 9 e 0 (7) 0 L_

O RS

(s.2

o 0 .2 3 in) a) a) Z

e) 5")) 076

O

2 g O C 0 E'

8

t 0 .g g z

u) -0 C

.52

Nam!

T3.;

0

0. 0.g g ogai z

-43 O Y." Co 8

O 2 g O g 0

0 c 0 .2

z

g .5

o 0

O

O C)

Co

O

7 C O

O

O

Co n

cess

ions

gra

nted

to:

cc)

ti

ti

CD CO

O O CD

ti

CC)

0)

• Cl)

-C)

CC

LAMA'S PROGRESS DURING 1980 57

before March 15, 1981, as well as instructions for the contracting parties to the planned Agreements to present these Agreements to the Secre-tariat within a specific amount of time, so that the other member coun-tries may familiarize themselves with them before the Conferences.

With regard to the countries of relatively lower levels of economic development, Resolution 398 establishes that the April-May, 1981 Con-ference, in order to ensure the effective application of the agreed-upon market openings to benefit the LDC's, will approve negotiated lists of products from those countries, thus carrying out Article 4 of Resolution 3 of LAIA's Council of Foreign Relations Ministers:

"The member countries will approve the various negotiated lists of products—preferably manufactured or semi-manufactured—from each of the less economically developed countries on which tariffs and other restrictions will be totally eliminated, without reciprocity, by all the remaining countries of the Association.

"The member countries will establish the necessary procedures for achieving the progressive expansion of their respective lists of market openings for the LDC's, holding the appropriate negotiations when they feel it is necessary.

"In addition, they will establish efficient mechanisms for compen-sating the landlocked LDC's for the negative effects which this particular geographical characteristic has on their intraregional trade."

Let us also mention Resolution 400 of the Conference, which has to do with the industrial complementation agreements, stating that, until they are adapted to fit the "trade agreements" modality (in accordance with Article 8 of Resolution 1, and Article 6 of Resolution 2 of the Council of Ministers) the industrial complementation agreements and the bilateral agreements authorized by Resolution 354 (XV), as well as their respective concessions, will remain in effect in the form in which they existed on December 31, 1980, unless the countries participating in these particular agreements decide otherwise.

B. LAFTA's Progress during 1980 1. Trade Negotiations and Other Developments in the Trade Picture The year 1980 will be remembered as the year in which most of the negotiations for the restructuring of LAFTA took place, preempting to a great extent many of the Association's usual activities and concerns. Thus it was that, at least in regard to the liberalization program, the process came practically to a standstill; not only were no new tariff concessions added to the national lists, but the national lists of the Andean countries, as we have already seen, had been virtually decimated by year's end.

The LAIA countries not belonging to the Andean Group decided to keep their national lists of concessions on each other's products for the time being, while they continue to carry out negotiations for partial


agreements incorporating the agreed-upon concessions, for completion on or before December 31, 1981.

By virtue of the foregoing, these six countries extended until the end of 1981 the concessions on national lists and lists of non-extensive advantages which were to have expired on December 31, 1980.

In addition, the industrial complementation agreements will con-tinue to be honored in their present form until they can be adapted to fit the trade agreements category, or until they expire, as we have noted earlier.38

The temporary concessions included in the complementation agreements were also extended.

The bilateral agreements authorized by Resolution 354 (XV), con-cerning the temporary granting of non-extensive advantages to Argen-tina and Brazil by Uruguay, should also be adapted to fit the partial agreements category.

Between 1962 and 1979, all the LAFTA countries increased their exports to the zone as well as their imports from the zone, in absolute terms. The same is true as well in real terms, since the rates of growth of all the LAFTA countries exceeded the price increases which occurred during that period. (Table 9)

We might add that during the LAFTA period the countries were able also to diversify their trade in quite an impressive manner, going from a preponderance of commodities in the earlier days to mostly semi-manufactured and manufactured products, as things stand now.

These increases and changes did not occur solely as a result of tariff reductions, but also because of the harmonization of instruments and the coordination of policies in the various economic sectors of the region over the twenty LAFTA years. Credit must be given also to the man-agement-level business contacts and sharing of knowledge which took place on many occasions during that period, as well as to the improve-ment and development of the infrastructure of communications, trans-portation, and other services within the region.

Between 1962—when the first tariff reductions came into effect—and 1979, the intraregional exports of Argentina, Brazil, and Mexico increased by a factor of 21, in current value dollars; the intraregional exports of the countries of "insufficient markets" (Colombia, Chile, Peru, and Uruguay) increased 26–fold; and those of the countries of "relatively lower levels of economic development" (Ecuador and Para-guay) grew by a factor of 22. Bearing in mind that total intra-LAFTA exports increased 25–fold39, then we can see that the different groups of countries experienced similar increases.

Intraregional imports grew by a factor of 19, 15, and 40, respec-

38 Council of Ministers, Resolution 1, Article 8. 39 Not including Venezuela and Bolivia, which were not yet members in 1962.

Cl)

a) Ca

a) ca

a)

a)


CK) CD C7) LC) (7) C7) CY) N. cc) c) • • - • • • • • • • • • N-

LC) -Po- ,cr C:D CD r,. CY) CV C,J CNJ qtr T M ,--

• ,cr CNJ C7) T-- icr cc) CK) CD CO ,cr (7) • • • • •

C6 CY; C'i r,: LI') cci 0) 0) 0) cc> CO Lc) cc) ,-- Lc) co cc) c) CY) CY) ,cr cc) ,cr N. c) CNJ LC) CNJ CNJ 'Cr C7) LC)

1— CNI

CO CC) CV CC) CC) LC) 0) /-- CV CD LC) LC)

LC) cci cci f LC) c:i CVCVrTNr CID /-- .cr

a E

C)

0)

a

a E

CDrN-LC)NTO)OOCY)N- T C70

gicr c» cc) NI- Lc) c) 0) m-- C,J N. LC) CV T-- T-- CD CC) icr LC) C:) C\J ,cr cc> (7) CY) ,cr ,-- cc> c,) CC) r..

GO

• CY) (7) CY) CNJ cc) cc) LC) CD C7) CNJ • •

CV N- C:i CY; C:i c.j cNj co v-- CNJ r r CNJ m-- CV T CY) 1.—

M Lc) cc) r,- ,cr C3) CNJ CD LC) CC) CC)

N: c7i CO CY; .41: 4 C\i c) N. cc) CY) CC) CD r,- Lc) CY) CY) v-- m-- CY)

(C) CO C,J CNJ CD C7) NI- a> LC) CY) /—

CD C7) T-- T-- 1-- CD r,- cx) cc) CV -.tr. c) • T 1-- 1— m— Cr) T ■—•

co

0

CO 1-- CD m-- 0) /-- LC) CC) LC) CV N. Ll) CVC'r)C')N-ONATMC7)CDN- cc) c) cx) co CNJ (7) CNJ CC) CNJ co r,- co co ,-- CNJ

CD r-- C\J CD LC) r,. CO 0) • cci r LC) c:i N- CD

CO (7) c> CV 1-- CD CD CD N- N A CO Lci cci cc5 c:i c) CV

`Zr

CO CNJ CY) CY) CD CV CC) CY) CD . . . . . . . . m— CC) ,-- cao C,J CNJ CK) LC) 6. ti

co

C') CKD C7) C.) CD C3) LC, CNJ

• cci Lci ad. cci c:i co -cr LC)

C',

CO co -= >s 0)

• cz AG) 0 0 — E 13.7 C-) C70

cu'xi 0 .92 e t El iv ct Zr, 2 g .4C CO CZ3 LLJ dd: Cl. Cl. ::) .4C

a E

Cl)a) -

CO C7)

a a)

cv

O

Cl) a) C) a)

C/) a)

E

0)

o

•c

• Ja

in a Iii 122 E'

• cr, 32 O

S

-

0 ca

CA t O

-ci

cts

o _0. E v c

co g

• .

t o O ct

clx -cc., ILI co • W LL 0

C

1:3 cES ..I CD -

C / 0 Cti

t 6 im as

.2

,

•

t2 E • C


tively, for these groups of member countries, while the total intrare-gional import growth factor for LAFTA was 18. Although there was impressive growth in this area by the countries of lesser economic de-velopment, we should not forget that their actual 1962 intra-LAFTA imports figure ($11.2 million) was exceedingly small (Table 10).

In 1979 there was tremendous growth in intrazonal trade, with the value of exports jumping from $5.84 billion in 1978 to $8.76 billion in 1979—a 50% increase overall (Table 11). During that same period, the LAFTA countries' exports to non-member nations grew by 32.2%.

Colombia and Peru showed the highest rate of import growth during the 1978-1979 period (85.7% and 82.6% respectively) while Mexico showed the lowest (9.8%) (Table 11).

Table 12 shows that Argentina was the member country with the highest rate of growth in its intrazonal imports (75.5) for the period in question, while Peru was the one with the lowest (5.2%).

2. Sectorial Meetings During 1980 there were 13 sectorial meetings 40, in which some 462 delegates from different businesses participated—most notably from Ar-gentina, Brazil, Mexico, and Uruguay.

The efforts of these business representatives were directed mainly

Table 10. Intra-LAFTA Exports (In millions of dollars)

1962 1979 1979 1962

More developed countries, 233.1 4,904.2 21 Countries with inadequate markets2 99.4 2,566.0 26 Countries of relatively lower economic

development levels3 18.9 420.1 22 Total for LAFTA4 351.4 7,890.3 22

Intra-LAFTA Imports (In millions of dollars)

1962 1979 1979 1962

More developed countries, 237.8 4,492.1 19 Countries with inadequate market2 161.7 2,440.8 15 Countries of relatively lower economic

development levels3 11.2 445.2 40 Total for LAFTA4 41Y. 7,378.1 18

Argentina, Brazil and Mexico. 2 Colombia, Chile, Peru, and Uruguay. 3 Ecuador and Paraguay. 4 Does not include Bolivia and Venezuela, which were not LAFTA members in 1962. SOURCE: Prepared by INTAL with figures from LAFTA's Secretariat.

40 The chronology given in Chapter 8 presents exact names, numbers, and dates for the meetings held in each sector.

"0 (SS

g

N N 0)

LAFTA'S PROGRESS DURING 1980

▪ co (c) CNJ T-- CD CO C)) CO LC) . . . . . . . . CO ci Lri O T-- c) LC) CO CO C\J T-- 1-- T-- LO CO ,et cc) I LC)

C:) CO CO T-- C7) CX) 0 CC) CY) N-

o., r,- C,J LC) CY) N- 0) co C,J ,,r C\J CO -LOoOLOM CC) CO CO ,,r

C,J LC) CO T-- 01 T-- T-- ,er CO CC)

,,r CV CY) 0) T-- 0) CO T-- T-- I C,J C,J T-- I T--

C,J CY) CO ,,r 0) CO CO T-- C,J CY) CY)

• a; c.i T-: cis oj a; T-: I I CO T-- C,J ,,r

a CO CY) ,r C,J LO T-- CNJ CT) CO

. . . . .

-2 cri C7; C,j CC) it" T-- cc) co

:E 0) CNJ CC) CY) CNJ CY) CO

g CD r,- r,- CC) r,- T-- C\J P-- ..str

O Lri c.1 T— 06 c\1

CY)

< T-- LC) CNJ T-- C7) CY) N- o • • • • • • • • • • •

T-- CO ,,r 0, N.- cc) N.- ,,r ,er Lr) c=.) • T-- cv N Lc) C,J T-- T-- C:) CC) T-- - CNJ .1. CO C)) CY) ,,r T-- CC) CO CC)

CO Lr) CD T-- N cg) 0) C,J co 0) CNJ

CC) C.C) 0) CO LC) CO CO C:) C7) 0) CO CO CV CY) CO CV CY) CY) CS) CO ,T CO LC) C:) CO CO CO ,11.- T-- CO ..,Jr co

T-- T-- Lri CO

co N

• r,- co cv C\J LC) CO C:) 0) T-- • • •

C\i CO C7; Lci cri cti Lr) 0) T-- 01 1-- LC) CD C\J CX) CC) CO 0) .1- LOT-CC) CO CC) C\.I CO CNJ T-- ,,r

T-- CD ,:r 0) CO CO C,J

0 0i C7i ccis Lci cri CO CO CO co cv c:) c:) co LC) CO CNJ LC) CC) C:) LO T-- CO C,J ,T 01

c:cNiT-- T-- co T-- CO

T-- C:D LC) LC) CO C)) C,J T-- ,,r C,J • • • • • • • • • •

T-- O O LC) CY) LC) C:) CO ,et r,- CO CK) CD T-- CK) CY) CY) CY) T-- ,,r co cc, CY) CY) C,J T-- CC)

co 03 03

C= >,

15 8, Cti — E

•Ri o 30,m ti3=s

.., op a5 me Cl- Cl- :5 2).

O

a 2 - +E. g

0

O

61

C\1

C\1 CY)

O

O Lc)

C\I

0)

CD

L.r) 0)

LC)

0) LC)

CO

ti

O

O c:s 0) co

SO

UR

CE

: Pre

par

ed by

IN

TAL

wit h

dat

a fr

om t

he

LA

FT

A S

ecre

taria

t. CO

01. CY) CO

LC)

ti O LC) co

ti CO

Lti

U)

O F-

0 0

x (7) CO

C7) CO

12 3

g

12

O

g c.)

0

Rat

es of G

row

th

E 17! L"?'_

0

g LL 5

EL r L . u. 1— 3

0

g ri u_

E ?1 2 E c.L. I- 2

g LL

E S C LL H g

0

on a: 5

E 2 E Li e)

u_ 5

ti

N

LC)

O

c), (xi co

ti LC)

0)

CO CO LC)

Co

C:D

0)

.:r

CC

OO

CO

CA CO co

Cr)

CC

Lei CO ti

ct) O

Rat

es of G

row

th

THE LATIN AMERICAN INTEGRATION ASSOCIATION (LAIA) 62

O

X

100

C:) C:) C)) 0) Lt) Cr) C:) CV

LC) C:) CK) LC) -:11- CD (0 CII) CO CC) CL) /-- p._ NN CC, CO Co, .tr CV LC) .:r Cv)

LC) r,- 0) 0) 0) 0) ,T CNJ CC) CC) LC) CD CC) CD CD C,J CC) LC) CO CO N- LC) LC) LC) ,tr (c) .1r 0)

0) C.,- C.,- c:, LC) C,J T-- T-- CO LC) CO 0) c,J CC) 0) CO C,J

.:r T-- co co CNJ .,r

CNJ co T-- C,1 c0 CO 0)O CX) CO CO .qr C\I CC) CD .1- co a) co co

.:r T-- cv co T-- I I I I

.:r

0) CO LC) cNJ CO c\I O LC) CD . . . . . . . . . . .

T-- c‘J CD v-- LC) C:) T-- C) CC) T-- LC) 0 PN. T-- (0 LC) C,J T-- T-- C,J C:D C,J r-- T-- c), T-- .tr c), r-- T-- • ~MMTT T -

0)

0)

C,J 0)T co co c:, OOH OOc7N N Lci Oi T-: CD Lt) CO T-- LC) or) CO C:) CO Cr) .4- ,r CD C,J Lr) CNJ CNJ C)) 1.- T.-

LC) cNJ LC) CNJ CT) CC) r,. CX) CC) ,--

1-- LC) CY) C:) 0, CC) CD 0) CY) ,:r CD CK) CY) CC) CNJ CX, cr) .,r 0) T-- CD Lr) C:D CO 0) cr) C,J C,J r,- cr.; v-

00

0)

N-

C,J CY) Cr) CO T-- CV T-- CO LC) ,T Lc) • • • N c:i Lri cci ai c.i cr) T-- co co CO CD CO .1- CNJ CO cK) T-- LC) .tr-CA T C,J C,J CY)

CO T-- 0, Lr) CX) CO (0 CO CO CO LC) • • • • • • • • • CO Oi cv) T-- CX) LC) CO CD CC) ✓.. C)) 0) (C) .1. CNJ CO CK) T-- c:) :) cc) c:) co T-- cNJ (C) LC)

CC) LC) r-- CX) CO CO CO r-- Lc) c,i c:5 c:5 N 0)ON.1OO ti CX) 0) C:D C.) r,- c.) cc) C,J CD C,J 0)T Lf) CO LC) T-- CNJ T-- LC) CNJ Cr)

CZ CKS i... 00

0 - •••■• .". 03 >, T.-

4= c,3 -1-' oo= Cz= c--..,—E -Duo) r%J CL) ....- 'M 0 C LI c0 - 3-,- cc, = CI) CL)

0 0 ... T61-6- 3 a3 e% 45 E g .0C CO ( CD CD w ME 0_ o S

OU

RC

E:

Pre

pared

by I

NTA

L w

ith da

ta f

rom

the

LA

FTA

Sec

reta

riat

.

LAFTA'S PROGRESS DURING 1980 63

at analyzing the concessions granted in various complementation agreements, which resulted in a proposal to renegotiate the concessions and arrange for concessions on new products.

The business sector was most eager that the concessions that had been agreed upon to date on national lists, special lists, and comple-mentation agreements be maintained; in fact, there was a general con-sensus of opinion in the sectorial meetings to that effect, and the busi-nessmen and women present issued a series of recommendations to the governments of the member countries of the Association that they leave the existing concessions intact during their upcoming rounds of nego-tiations.

Several business sectors organized independent work meetings out-side of the schedule of programmed sectorial meetings, with the technical advice of the Secretariat and for the purpose of analyzing LAFTA's "historical patrimony" and adopting joint positions to be relayed on to the respective governments.

3. Agricultural Sector During 1980 the activities of this sector were limited to the continuation of already-existing operations and the carrying out of procedures related to cases of application of safeguard clauses. Although basic economic conditions in the sector, developments in world prices, and increasing food shortages in many countries would have made increased institu-tional activity in this area quite appropriate, the countries chose instead to put many of LAFTA's agricultural functions and meetings on hold until the new Treaty was defined and until they could get an idea of the short-term operational particulars to be established by the new LAIA organs.

In keeping with the region's current food supply situation, the new Treaty gives the agricultural sector a more clearly defined role than before. As we look at the 1980 Treaty's provisions concerning agricul-ture, we can infer that the sector will receive treatment on a par with that accorded to the other sectors of the economy, which implies a great improvement over its former lot. Our early observations here obviously may or may not be borne out by the actual priorities established through LAIA's final operational strategy, but the important thing is that the agricultural sector has definitely been taken into account with respect to the set of integration activities which the Association plans to un-dertake.

Although many of the agricultural sector's 1980 meetings were post-poned, the activities of the Marketing Information System for agricul-tural products went on as usual. The programmed activities in the area of quality standards for agricultural products were also carried out ac-cording to schedule. On May 21, 1980, LAFTA'S Standing Executive Committee registered as Agricultural Quality Standard No. 1 the text concerning standards for corn (document CEP/OAP/GE. NCA/III/In-


forme) and decided to initiate an 18-month test period for it. This activity is entrusted to the pertinent national bodies designated by the govern-ments, and forms part of the methodology already approved by the Committee. In conjunction with this, a study was begun on a common certificate of quality for agricultural products of all the member coun-tries. In addition, the quality standards projects on bread wheat, hulled and unhulled rice, and polished or processed rice were presented to the governments for their comments, so that the following stage of the planned process could begin as soon as possible.

4. Monetary and Financial Aspects The financial sector continued to show the same high level of activity during 1980 as it has ever since the first meetings of public and private bankers were organized by LAFTA as far back as 1963.

The member countries' need for flexible and responsive financing and payments mechanisms to keep up with the growth of intrazonal trade stemming from LAFTA's tariff reduction program led them in 1965 to put into operation their Multilateral Reciprocal Payments and Credits System. This System allows the central banks to extend lines of credit to each other, bilaterally and up to a certain predetermined amount; at the end of each four-month period, a regular multilateral clearing process takes place, thus eliminating the need for costly transferrals of foreign exchange, since only the balances resulting from the clearing process are actually transferred.

In addition, in 1969, as we know, at a meeting of the Financial and Monetary Policy Council, which is made up of the presidents of the central banks of the LAFTA countries and of the Dominican Republic, a new financial mechanism was approved and put into operation for remedying temporary lack-of-liquidity situations created by trade im-balances resulting from intrazonal trade. This mechanism is known as the Santo Domingo Agreement.

5. The Multilateral Reciprocal Payments and Credits System During 1980 the agreement on reciprocal payments and credits contin-ued to function quite satisfactorily, channeling through its system fi-nancial operations amounting to some $8.656 billion—a figure which is equal to the 1979 total intrazonal imports figure of $8.587 billion. Uti-lization of the reciprocal payments and credits system is not obligatory, but even so, as these figures show, the countries do make great use of it, because of its operational effectiveness. We should add that the figure given covers additional transactions which are also channeled through the system, and which are not necessarily related to trade per se (tourism and other services).

The total funds transferred to cover the balances existing at the end of each 4–month clearing period or in advance of anticipated credit


"overdrawals" (when the negative balance of a country exceeds the line of credit it has been given by the other) amounted to $2.01 billion in 1980, which means that on 77% of the total transactions channeled through the system last year, the countries did not have to transfer any foreign exchange funds, thanks to their multilateral clearing process-a great time and money-saver for them (Table 13).

In the column showing the total of operations channeled through the system, we note a tremendous growth trend in the years covered. It can be seen as well that total operations for 1980 were around 35% greater than those in 1979.

Table 14 shows the lines of reciprocal credit existing between pairs of central banks of the twelve participating countries at the end of 1980, as well as the additional lines of credit which are sometimes established, since the rules of some banks do not allow them to extend open lines of credit. We can see that the total number of bilateral credit agreements signed is 61, and if we look at the central bank agreements among LAFTA countries only, an impressive 54 of the possible 55 agreements have already been put into operation, while the remaining one agree-ment, between Brazil and Paraguay, has already been signed, but has not yet gone into force, pending approval of the pertinent technical banking procedures.

The interest rates on the debits or negative balances stemming from exercise of these agreements were 15.15%, 11.82%, and 13.33%, re-spectively, during the three four-month clearing periods of 1980. This -interest rate is calculated as 90% of the prime rate paid by the New

Table 13. LAFTA: Multilateral Reciprocal Payments and Credits System-Actual Transfers of Foreign Exchange as Compared to Total Operations Handled, 1966-19808 (In thousands of dollars)

Total end-of compensation period

balances

Transfers in advance Total foreign exchange of anticipated credit transferred

"overdrawals" (1)

Total operations handled

(2) (1)•100 (2)

1966 31,438 31,438 106,441 30 1967 93,815 93,815 332,765 28 1968 129,525 129,525 376,575 34 1969 80,959 80,959 479,212 17 1970 94,508 15,046 109,554 560,471 20 1971 111,944 24,026 135,970 708,055 19 1972 179,858 8,703 188,561 984,403 19 1973 271,137 9,400 280,537 1,403,076 20 1974 309,632 77,754 387,386 2,288,286 17 1975 608,756 51,667 660,423 2,396,304 28 1976 546,878 105,371 652,249 2,925,541 22 1977 717,216 170,113 887,329 3,935,999 23 1978 1,079,223 55,658 1,134,881 4,458,994 25 1979 1,329,597 299,954 1,629,551 6,420,740 25 1980 1,338,637 674,736 2,013,373 8,655,920 23

a Not all trade exchanges are channeled through this system-only those stemming from bilateral agreements.

SOURCE: Standing Executive Committee-CEP Repartido 1960.1, 19/11/81.

O co Lc-)

t t 88 8 05

a) w cp

•

)

76 EE

.FTE12 it- E 22

u

•

"6

-51-2T2 a) 2 7 2 2

(1)

f=

▪

- 2 6. 0 .9

0. " co ,

C), a) Ca 22?

g

CC

N

gi: C7) CL> >

c 2 ,E W

El

• s

m mU 6 oco

s sa Ja

ON 88' UD O Co a) cu

ccs

45 as 13 cc .ro - —

El2

g g () 'o 6 6 .0 2- 12

0E

7D oD c0 0, co CY) r-

uD T

CIJ- g

u_ cr) cri

1116J cc

0 (1)

CC O

ttruttme ITEMICalg 2222222222 ..........

co co n co a, t2

O c) LCD LCD czr)

CD C=) co r c

O 1,- CD Co

O .zr a)

O

CD ti

CD c=..) ti

O

c) cr) O

LC) cf)

O CD O

ti

O O CD O (c)

CD C:D LC) ti 00 CV

c) LCD cr) O V)

CD CD LC)

ti


C:D C:) C:) C:) C:D C:D C:) C:D C:) CD CD C:) C) LC) C:) C:) C:) LC) CD I.,- CD CD LC) CY) LC) CD CD C:) co CD) C:) LC)

NOI`OeO LC) CD • CO (C) r,. CY) ,-- C:) CV O') C)) CNJ CNJ r r r C,J

4c5

a) . E E CC 0 0

a)

a) a)

a)

rn 2

a)

cC

cr)

0

O

O

cC

w

O — — ..,- .-

C:) I I I I 8 I CD LC) C:) CD C:D CD CD

,-- Or -.-- ,— CY' L6 ,-- r..-

cn cn cn cn cn cn cn cn cn cn

CD CD CD CD CD CD CD C:D CD C:D CD C, C) C:D CD C:) C:) C:) CD C:) C:) LC) C:D LC, C=D C:D CD Lf, C:) CO

Lri ,-- co LC) CV

oo cn

CD CD CD CD CD CD C:) CD CD I CD CD CD C:) CD C:) CD CD C:) I C:, C) ,-- CD LCD CD C:D CD C:) (CD 00

06 00 ,-- (C)

"- O " 2 ." CD C:D CD C:D CD CD CD CD I C:) CD CD CD C, CD CD CD CD N.. CD CD CD C:) CD C:) C:D CD oj CO cD)

Lri LCD o o6 (6 CV r T T-- CNJ

r- r- r- r- cn

CD C:) I CD CD CD C) I C:) C) (:) CD CD I C:) CD C:) C:) I CD CD C:) CV LC) LC) LC) CV CV CD LC)

p- ICJ ICJ cn UD ICJ C4 OD CM

CD C:) CD CD C:) CD I CD ZE) CD C:) CD CD CD C) CD C:) CD 0000 CD C:) LC, C:, CD C:) CD CNJ CD CD CD CD

O c O Coi cc L.6 (ci

cn vo cn

CD C:) C:) CD CD I C:) CD CD CD C:) CD CD LC) CD CD CD I C:) CD C) CD C) CD LC) C:) C:) CD C:) LC) C:D CD CD C:3

• c.1 co. cNi

•-•

a) 0000 I CD CD CD CD CD CD C:D CD CD CD CD I CD CD CD CD C:) C) CD CD LC) CD CD CD CD LC) CD CD C:D CD

OcNiOO (c,— Lc) .qrT LC)

of o 000 I CD C:) C:) C:) C) C:) C:) CD CD CD CD I CD CD CD CD C) CZ, C:, CD CD LC) CD C:) CD C:D Lc) CD Lt) LC, CD

Lc; N. ONO Co Lri

CD

CD CD I CD CD CD CD ----C:D C:D C:) ZE) (:) c) 1 0000 XOOCD CD C:) CD 0000 C:) CD LCD O.-- c5,-- 0000 c.1 ,crT co

O LC) P.- cn

CD

-

I C:) C:) CD C=D CD CD ED CD CD CD I CD CD CD LCD CD CD CD CD CD CD CD LC) LC) LC) CNJ CD T LCD

csi uri CNJ

cn r- cn

I D D D : D D D D : D D

CD C) CD CD C:) CD CD CD C:D CD CD CD CD CD CD LC) CD CD CD C:D CD C:D

LCD tri o6

. c..)

,_ L cc a3 ccs 3., _-- 10 JD —

-43 ID O0. m .1 = — o. m .3 cm g2 = ,,,,..

ci) T) id F) .E. 3 , 0 m Cr, 2 CD 8 L j — Cr CO ai C.) C-, LU der 0_ Cl- = :D. CM

ca

E

fp)

77J

co

Ca

oD

C

a) 0)

8

O O CD

ti

E 1)

C a) E U) a

;:t u_

C

C

Zr)

co co

;12

a)

• 0 C o -o E cts • co

o

.) 'a o') O

• °

O o cz

o _c stp rs

ccD C

= 12 CM 03 LE


York City commercial bank with the highest assets as of the beginning of each clearing period.

The total accumulated value of balances shown during 1980 by the various central banks was negative in the case of the following countries: Argentina (mainly with Brazil, Chile, and Paraguay, and having a pos-itive balance with Bolivia and Uruguay, mainly); Bolivia (mainly with Argentina and Brazil); Brazil (especially with Chile, Mexico, and Ve-nezuela, and having a positive account with Argentina and Colombia); Colombia (with Brazil, Chile, and Mexico); Ecuador (with Brazil, Mex-ico, and Peru, and having a positive account with Argentina); Uruguay (mainly with Argentina and Brazil); and the Dominican Republic (mainly with Venezuela). The following countries showed total accumulated balances on the positive side for the year: Chile (especially with Ar-gentina and Brazil, and "in the red" mainly with Venezuela); Mexico (mainly with Brazil); Paraguay (with Argentina); Peru (with Ecuador, and "in the red" with Mexico, mainly); and Venezuela (mainly with Brazil, Chile, and the Dominican Republic). (See actual figures in Stand-ing Executive Committee document ALALC/CEP/Repartido 1970.2).

6. Utilization of the Santo Domingo Agreement During 1980, this multilateral agreement of support for the countries in cases of temporary lack of liquidity owing to intraregional trade was used only once, on the second of May, by Bolivia, for $21.9 million, or exactly six times the amount of credit Bolivia itself extends to its fellow participants in the Agreement. This limit (6 times the credit which the country itself extends) on credit available under the Santo Domingo Agreement holds for the central banks of all twelve participating coun-tries. The credit to Bolivia was given for a period of four months, at a rate of interest of 19.5%.

This was the seventeenth time that the Santo Domingo Agreement has been called into use since its creation in 1969; it had been exercised five times before by the Central Bank of Uruguay; four times by the Central Bank of Chile; six times by the Central Reserve Bank of Peru; and once previously by the Central Bank of Bolivia.

The total value of the lines of credit which may be extended under the Santo Domingo Agreement was increased to $263,307,600 beginning May 1, 1980, by decision of the Financial and Monetary Policy Council, in its April, 1980, meeting in Lima. When the Treaty was first signed, the lines of credit available through it totaled $30 million. In addition, the Central Banks of Venezuela and Argentina made available an ad-ditional $30 million per year each.

At present the Monetary and Financial Policy Council is studying the possibility of broadening the scope of the Santo Domingo Agree-ment, to include all the countries of Latin America, making sufficient funds available through the Agreement to give medium-term financial support to its signatory countries, for alleviating negative balance of


payments situations in general, or situations of lack of liquidity stemming from natural disasters.

During 1980, LAFTA's Advisory Commission on Monetary Matters considered this possibility of a broader Santo Domingo Agreement dur-ing meetings held in March, August, and December, and its conclusions will be studied at the next meeting of the Council, made up of the presidents of the central banks.

7. Customs Matters On August 11-15, 1980, the thirteenth meeting of national Customs Directors of the member nations was held at LAFTA headquarters. The Directors approved the text of a project for a multilateral agreement on cooperation and mutual assistance among all the national Customs Administrations of the region.

They expressed their desire for this technical agreement to become operational as soon as possible, since it would constitute an effective mechanism for stimulating greater cooperation and mutual assistance among the customs systems of all the LAFTA member countries. To this end, the Directors agreed that they would request the appropriate authorities in their home countries to support the agreement.

They also stated their intention of broadening the scope of the agreement to include all the countries of Latin America—a topic to be discussed at the next meeting of the Customs Directors of the entire region, to be held in 1981 (as proposed by Argentina's Customs Di-rector), during which the cooperation and mutual assistance agreement itself would also be discussed, as well as a project for an international agreement on regional customs traffic, and another one concerning the optimum structure of a body or agency with sufficient independence to implement these agreements. The Directors agreed that this 1981 meet-ing would be held in Buenos Aires on May 4-8, and they recommended that a work group composed of experts in the various areas concerned be formed in order to lay the technical groundwork for the May meeting.

The project for the multilateral cooperation and mutual assistance agreement" among LAFTA country Customs Administrations consists of an introduction; six chapters on a) definitions, b) the agreement's area of application, c) general forms of assistance or cooperation, d) various provisions, e) duties of the National Customs Directors and the Association's Secretariat, and f) final provisions; and finally, fourteen appendices in which the following topics are discussed: a) the official communication of information, b) the making available of facilities for speeding emergency aid shipments in cases of natural disasters, c) the supplying, upon request, of information for determining taxes and duties

41 See actual text in the report of the 13th meeting of Directors of National Customs Offices: Doc./ ALALCIDNAIXIIIIInforme, P. 31 ff.


on imports and exports, d) the supplying, upon request, of information on controls and establishment of prohibitions, and on statistical move-ment, e) cooperation in facilitating the flow of merchandise and/or peo-ple over common borders, f) special alerts, upon request of another contracting nation, g) the presence of customs officials from one country in the territory of another, h) investigations and notifications carried out by a contracting party upon request, i) participation in investigations in another country, j) the declarations of customs officials in courts of other countries, k) the centralization of information on customs viola-tions, 1) actions against customs violations involving narcotics and other psychoactive substances, m) actions against customs violations involving art objects, antiques, and other cultural artefacts, and n) cooperation in the modernization of national customs services and the technical training of customs staff.

Upon request of Argentina's National Customs Administration, INTAL got together a group of regional experts in customs matters to do much of the background work for the coming meeting of National Customs Directors from all areas of Latin America.

This work group met at INTAL headquarters on December 2-4, 1980. Some of the most important basic points for further consideration were defined as follows by the customs experts present: a) the harmo-nization of instruments; b) the simplification of procedures; c) technical training; and d) the modernization of customs structure to permit the reasonably unencumbered development of international trade, through the resultant increase in fluidity and decrease in costs.

The work group agreed that a Latin American customs meeting would be quite beneficial in terms of achieving optimum utilization of the advantages offered by cooperation and mutual assistance in this important area, and in terms of encouraging greater harmonization and coordination of customs policy and operations among the region's var-ious integration schemes, thus facilitating trade and transport within Latin America and with the rest of the world.

The group of experts recommended the following four general ob-jectives for consideration at the coming meeting of Latin American Customs Directors: a) to increase cooperation and mutual assistance through appropriate institutional mechanisms; b) to facilitate increas-ingly the customs procedures related to foreign trade and international transport operations; c) to harmonize the customs instruments used for regulating the Latin American countries' foreign trade; and d) to con-tribute cooperatively to improving the professional training and prep-aration levels of customs personnel within the area.

The specific topics suggested by the work group for discussion at the Directors' Meeting include the following:

a) Background information on the actual level of development reached in customs matters, from a regional or subregional point of view.


b) Likely benefits from regional harmonization of national customs instruments and systems. c) Need for simplifying customs procedures for trade purposes and for the movement of persons and merchandise across national bor-ders. d) Professional training and development of customs personnel at the regional level. e) The formalization of the cooperation and mutual assistance ef-forts of the national customs administrations. Consideration of the project for a multilateral agreement. f) Convenience of creating a specific mechanism for coordinating the cooperation and mutual assistance among the national customs administrations. g) Other matters.

CHAPTER III

Andean Group

Introduction During 1980, the presidents of the Andean Group countries, in addition to reaffirming their political support of the Andean integration process, also stated their belief that the new ties established among the countries as a result of the economic integration scheme should at this point allow the countries to achieve a degree of political coordination as well. In this regard they indicated their conviction that democratic forms of government constitute the best guarantee for the achievement of integral development, generating a controversy on the nature and objectives of the process with one member country, which at the end of the year announced its decision to abstain from participation in the Commission until the differences of opinion could be settled.

With regard to the Andean Integration System, 1980 witnessed several meetings of the Andean Council, and the first meeting of the Andean Parliament, while the ratification process for the Cartagena Agreement's Court of Justice had still not been completed. The Andean Development Corporation (CAF) made great strides in terms of its organization and portfolio, making increased use of its resources; the Andean Reserves Fund (FAR) broadened its relations with the inter-national financial system, where its standing underwent great improve-ment. In addition, progress was made in defining a permanent coordi-nating mechanism for the Andean System, which would include the principal organs of the Cartagena Agreement, CAF, FAR, and the Andres Bello, Simon Rodriguez, and Hipolito Unanue Agreements.

With respect to trade, the liberalization program is quite advanced now, but the deadlines set for the process of approval of the Common External Tariff (CXT) have not been met, even though more in-depth studies were made in 1980 on the levels and adoption procedures of this important tariff instrument. In addition, the estimated figures on intra-subregional trade in 1980 reflect an insignificant level of nominal growth, in contrast with growth figures from previous years.

In the industrial sector, the end of the year brought with it the end of the time period allotted for approving new Sectorial Industrial De-

CY)

CD

cx) cc) qtr (c) C,J T-- CY) C:)

Co CC) -/-- CD CY) CD LC) CC) N.-

.1- LC)

,-- c., CD CD C75 CX) T--

C\1

LC)

N CD CD CD CD

C7) C75

LC) CNJ

CD T-- CD 0) CC) ..tr CD C3)

CO T-- C,jT-- C'i CO CY) C,J

,--

CD LC) T--

LC) (7) LC)

C') T

C') N-

C75 CO LC) 05 CC) CD CD

r..... CO LC, CO C7) T-- CD C7)

Ci N-

a) J

C ca O

O a)

at O

Tts O H

a) E :+p) 0

O

And

ean

Gro

up

Co

unt

ries

: B

asic

Dat

a, 1

980

72

'Inte

rnat

ional

Fina

ncia

l Sta

tistic

s."

Vo

lum

e X

XX

IV, I

MF

; "L

atin

Am

eric

an E

con

omy

in 1

980," Eco

nom

ic

C,J CO CC) C,J •44- CY) C,J CD

C75 C75 CC) CY) gl- cp C75 T T cc) ,-- Lc)

CD

05 C) CC) LC) CY) T CD LC) CD CO -,r C7) M ,-- CY) LC) CD N- CD C35 CC) CO CD c)) cc) ohi Lc) cY) cc)

‘1".. 1-- (-4 O c. (.6 T CV y--

CY) T-- CD C75 CY) CC) CX)

N : LC) LC) T-- CY) CC) CY) CNJ C,J T T-- CY) 1--

Lc)

cp Lc) ..1.- CC) 05 CY) CD CY) CD 1...- ..tr CO CY) T-- LC) qtr cp -.1- co cc) CNJ CNJ CO CY) N- C75 LC) T-- CO

I-- l', CY"; vi C') ,-- -- ,--

CO CV

LC) c7) co `Cr cc) LC)

CEO N- CX) C71 CD CC) CNJ

LC)

0) CD CD CO O tt N-

•

C,J CNJ CC) LC) a) T-- r,- CNJ C75 LC) C75 LC) T-- T-- CNJ

C\1

CY) CX, CO

CD CD g,r C‘i CY) 1-- C=3 C,J CY) CNJ /-- 1-- C,J CY)

CD

Co CY) LC) CD v CD ti CD CC) CD CY) CY) C,J CD T C.) LC) C) T CEO

N-- CD g,r C,J CD

T- C6 CNJ C,J

ANDEAN GROUP

CZ;

O ,C)

4.■ O

N

0 E FEE

--- E cei IL, -,,

U — C)

as , -0 cr o ,,_ cn u, ..,

cr) .c _,c ,- co f■- as = -c p. r--- -5

zi . u) _,-, T._ V1 TA "c:' E cLx 4---'" Q-E al N V) V) 17,7., 4.- ...-...., cl, CT) C) .... T.,.. CD .- ._ 1.-

7:3 5:1 -4-. `" 0 ' CO CD 0 0 C CID -C (7, CL,

C C ci, Ci. CC CI cr$ (V (.,:i c a, . _ ,c . E Li ' . E - 0 = - • - ., E x . E .

>., u, 0 u, la 9 o — 03 CD o COO 0 -- 0 2

.... . 2 — :- ar-- - 0 2 : — - - c, 3 c4 7 's L_ = 4-0 = CCI

ti.: ■17..., CI :::! C :=, 0 ..... CL. C ....., ...., I- E I.... E 45 CD 0 CD 1.- r.:) '.....' = E2

I.--

O C) CD CD .1C I— __. 1E5

ca

O

0 g, E O CT

4E- < 0 tig Ea ,T)

co 0 0 EL) 2 • 8 — a; O oco

0 1:1 CL CD CD Si Pc

Ca C1 m

g

G) ui • C o E ...Q

O T2 Q

ui E

2) a 2' 32)

mow ? 63 .0 C.) VJ

-Z7s) TA'

INSTITUTIONAL ASPECTS

73

velopment Programs (PSDI). The list of products considered under the iron and steel industrial development program was approved, leaving the definition of its remaining instruments for 1981. The programs which had been previously approved made generally slow progress, marked by the successive postponements of time limits set, in the case of the automotive program, and the resultant difficulties in defining the basic models. On the other hand, tangible advances were made in the defi-nition of parameters for the rationalization programs, which will grow increasingly important now that the time limit has passed for approving new Sectorial Industrial Development Programs, and once the Common External Tariff is approved.

There was progress made in the planning aspect of the agricultural sector, as well as in the definition of specific projects, through the work methodology which has been employed within that sector's institutional framework. In addition, some progress was also made in the marketing of agricultural products and in plant and animal sanitation.

With respect to physical integration, greater political push could be felt in this area in 1980, increasing the relative importance of this aspect of the subregional integration process. Nonetheless, there still exists a degree of nonfulfillment of the common commitments made within the sector, and the facts point to the continuing absence of an integrated transport system—all of which has led the subregional technical organ to call for modification of the sector's original strategy.

With regard to the area of technology, the Andean Technological Information System was created, and the need was recognized for cre-ating an advisory council in the area of science and technology. In addition, formal progress was made in the Andean technological de-velopment programs, and the subregion continued its joint participation in the relevant United Nations forums.

The external dimension of the Andean Group came into play many times during the course of 1980, in activities such as the actions carried out by the Andean Council, and the Group's intensive participation in the negotiations related to the restructuring of LAFTA. Negotiations were undertaken as well with the European Economic Community, in the interest of arriving at an economic cooperation agreement; the spe-cial group on trade with the U.S. held its first meeting; and a cooperation agreement was signed with the Latin American Economic System (SELA).

A. Institutional Aspects 1. Meetings of Chiefs of State' During 1980 there were three meetings of the presidents or personal representatives of the presidents of Colombia, Ecuador, Peru, and Ve-

Because our report is mainly technical in nature, we shall quote only those paragraphs of the pertinent documents which reflect the most important aspects of the different positions taken with respect to the nature and objectives of the Andean integration process and which illustrate Bolivia's participation in the dialogue.

74

ANDEAN GROUP

nezuela, in which they sought to stimulate various facets of Andean integration, all the while emphasizing certain of the political implications of the integration process.

The first of these meetings was held in Lima on July 29, 1980, upon the occasion of the swearing-in of the President of Peru, which was attended by the Presidents of Colombia and Venezuela, and the personal representative of the President of Ecuador, as well as the President of Costa Rica, a member of Nicaragua's Government Junta, and the Pres-ident of the Government of Spain. During this meeting, the Andean Presidents present signed the "Declaration of Lima,"2 which touched on, among other things, certain political aspects of the process and issues having to do with its general orientation, with special emphasis on the various elements of the Andean system and model, and the subregion's joint dealings with third countries.

From the political angle, the "Declaration of Lima" states that "the strengthening of the democratic institutions constitutes the best guar-antee for the attainment of integral development and the enhancement of the quality of life for the peoples of the subregion," linking the forums of democratic government with the objectives of the Cartagena Agree-ment, and "condemning the interruption of the process of the institu-tionalization of democracy which was just about to be consolidated in Bolivia."

During the second meeting of presidents, which took place on Sep-tember 11 in Riobamba upon the occasion of the 150th Anniversary of the first Constitution of the Republic of Ecuador, the Presidents of Colombia, Ecuador, and Venezuela, and the personal representative of the President of Peru signed an "Orientation Statement"3 ("Carta de Conducta") in which they stated the following: "The Andean Group has now reached a relatively advanced stage of economic integration and the member countries have established new ties which have allowed them to achieve some measure of political cooperation . . . the coop-eration among the manifest expressions of political will of the various member countries should contribute decisively to the affirmation of the democratic system and its fundamental values."

The third meeting of chiefs of state took place on December 16 at Santa Marta, upon the occasion of the 150th anniversary of the death of the Liberator, Simon Bolivar; present were the Presidents of Co-lombia, Ecuador, Peru, and Venezuela, and other presidents as well from non-Andean countries. The Presidents signed the "Declaration of Santa Marta," in which, among other important considerations, they state the following: "The upcoming entry into force of the Andean Court of Justice, the exercise of the functions of the Andean Parliament, and

2"Declaration of the Presidents of the Andean Group," JUN/di 490, August 5, 1980. 3JUN/di 504, September 23, 1980.

INSTITUTIONAL ASPECTS 75

the range of powers given to the Council of Ministers and to all the other specialized bodies which go to make up the System should strengthen the faith of our peoples and governments in the political and economic potentialities of integration."

However, in view of all the foregoing, Bolivia's Ministry of Foreign Relations issued a declaration4 on December 18 to the effect that Bolivia, "given the ideological interpretation which some of the member coun-tries are seeking to make of the Cartagena Agreement, debasing its essential objectives, . . . hereby declares its abstention from active par-ticipation, although this does not imply a definitive rupture with the Treaty nor a denunciation of its specific objectives". In addition, on December 19, the office of Bolivia's Secretary General for Integration issued a press communiqué stating that "The Andean integration proc-ess is economic and social in nature, and its objectives and mechanisms are defined in the Cartagena Agreement and its modifying proto-cols. . . . which leads to the Government of Bolivia's recognition of the Commission, the Junta and the Andean Court of Justice as the only valid organs of the Agreement . . . since in this case there exists a controversy requiring a legal interpretation of the Agreement's basic objectives and the procedures to be followed in achieving them, the Government of Bolivia will present the case before the court of arbi-tration for the solution of controversies within the Latin American Free Trade Association. Until such time as the court of arbitration makes its pronouncement on the correct interpretation of the issue which has arisen, Bolivia will abstain from participating in the Commission of the Cartagena Agreement."

2. The Andean Integration Systems By the end of 1980, the Court of Justice of the Cartagena Agreement had been ratified by four member countries, leaving Venezuela as the only member which had not yet carried out this necessary legal proce-dure. This delayed the establishment of the Court, as well as the impact it might have already had on the internal legal ordering of the subre-gional economic integration process, particularly in regard to the ful-fillment of the countries' common obligations as set forth by the per-tinent organs of the Cartagena Agreement.

In this same vein, during the Commission's XXX Period of Regular Sessions, the president of the Commission of the Cartagena Agreement had the following to say with respect to the obstacles blocking the way of the Agreement's progress: "These obstacles have taken the form of the countries' generalized non-compliance with their common Andean

4See "El Comercio," Lima, December 19, 1980. 'Concerning the definition of the Andean Integration System, see "The Process of Andean subregional integration during 1979," Luis De Maria, IntegraciOn Latinoamericana, No. 48, July, 1980, pp. 4-8.

76

ANDEAN GROUP

Group obligations, which is holding back the fulfillment of integration objectives. We are not just talking about their not meeting certain dead-lines here and there, within this or that program or activity; we are talking even more importantly about confidence in the process itself, about its viability, and the degree of seriousness with which third coun-tries and regions of the world community are going to take their relations with the Andean Group." Among the many issues which have been left dangling, he pointed out the following in particular: "the seemingly endless postponement of the Common External Tariff (CXT) and the rules of origin, the imminent expiry of deadlines for the approval of sectorial industrial development programs; the definition of lists of prod-ucts to be taken off the reserve list and the resultant reserving of some of them for production by Bolivia and Ecuador; the slowness of progress in the metalworking and automotive industrial programs; the continuous nonfulfillment of commitments by all the member countries . . . we should make an effort to put the Andean Court of Justice into operation as soon as possible in order to salvage confidence in and respect for the agreements made within this process of integration."6

The Andean Parliament held its first regular meeting in Bogota on August 30, 1980, during which it issued fifteen recommendations and seventeen decisions concerning, among other things, compliance with the Commission's decisions, relations with other parliaments and with the Andean System, participation of all the social sectors in the process, and strengthening of the social aspect of the process.'

The Andean Council (Council of Foreign Relations Ministers) held its first meeting in January 1980 in Santa Cruz, in which the following agreements in support of Bolivia were signed: one having to do with international financing bodies, one having to do with the United States' decision to sell its tin reserves, one related to Bolivia's desire for access to the sea, one on the placing of Bolivian cotton thread on the European Economic Community market, and one on the promotion of a multi-national Andean agency for the development of Bolivia. In addition, the Council members signed an agreement on physical integration, and the Santa Cruz de la Sierra Declaration on the Democratic System.8

The Andean Council met several times during 1980, and the most noteworthy events related to the meetings include the signing of a Mem-orandum of Understanding with Brazil and a Document of Understand-

6 "Speech of Bolivia's Integration Secretary and President of the Commission of the Cartagena Agreement, at the beginning of the Commission's Thirtieth Period of Regular Sessions," COMIXXIdi 5, October 14, 1980. With respect to unfulfilled and still pending obligations, see also "The Decisions of the Commission and Member Countries' Internal Laws, JUNIR.EJIlldi 1, February 4, 1980; and "Com-mitments Made by the Member Countries which should be kept, Beginning in 1980," JIPRI1021Rev. 1, May 19, 1980. 7 "Meeting of the Andean Parliament," JIREI12, October 27, 1980. "First Meeting of the Council of Andean Group Foreign Relations Ministers," JUN/di 445, January 30, 1980.


77

ing with Argentina, the meeting concerning Peru's Embassy in Havana, the meetings with Spain, and the meeting with the Commission of the European Communities. With regard to exactly how the Andean Coun-cil will fit into the Andean Integration System as the ultimate source of guidance and orientation of the Andean integration process, the Coun-cil, the Commission, and the Junta agreed, during their March 15 meet-ing in Quito, upon a mechanism of coordination and interchange of information between the Council and the Commission, with the aid of the Junta, in order to carry out the pertinent clauses of the Cartagena Mandate.9

With regard to the Hipolito Unanue, the Simon Rodriguez, and the Andres Bello Agreements, during the year, meetings were held by the Coordination Committee and Ministers of Health; the Commission of Delegates; and the Junta of Planning Directors and the Ministers of Education, respectively, to evaluate and program the development of activities under these treaties.

The Andean Development Corporation (CAF) carried out an in-ternal administrative reform during 1980; it also achieved a higher ratio of loans made to loans approved (approximately 80%), and improved the system of financial intermediation through lines of credit made avail-able through the national development organizations in order to ensure easier access to this kind of financing for small and medium-range busi-nesses. CAF's high-priority areasi° are as follows: 1) Industrial Programs approved through Cartagena Agreement decisions; 2) Agricultural Sec-tor; 3) Health; 4) Physical Integration; and 5) Tourism, all of which will be subject to a more flexible criterion to be applied by CAF in the future in determining the integration content of the various specific projects to be financed. This should definitely bring about a need for greater financial resources for the countries, but as of the end of 1980, CAF had still not initiated the necessary procedures for obtaining them.

During 1980 the Andean Reserve Fund (FAR) arranged a credit agreement to aid Bolivia's Central Bank in ameliorating Bolivia's bal-ance of payments situation; it also established relationships with Eu-ropean banks in order eventually to expand its credit capacity with resources from the international money market, and it was qualified by the International Monetary Fund to acquire, possess, and exercise Spe-cial Drawing Rights (DEG).

During the course of the year the Junta presented to the Commis-sion the project" for the permanent system of coordination among the various Andean integration bodies, which the Commission approved during its XXX Period of Regular Sessions (October 13-16), along with

9"Third Meeting of the Andean Council," JUN/di 455, April 1, 1980. 10 "Operational Modes", CAF informational publication, August 1980. ""Permanent Coordination System for agreements within Andean Integration," JUN/dt 147, October 15, 1980.

78

ANDEAN GROUP

the procedure to be followed for formally establishing the coordination system. This system will involve the following elements: a) an Annual General Coordination Meeting convened by the president of the Com-mission, with the participation of representatives of CAF's Board of Directors, FAR's Assembly, and the Meetings of Ministers of Educa-tion, Health, and Labor; b) a Committee of Technical Coordination, headed by the Junta's Coordinator, and composed of the executive presidents of CAF and FAR, and the executive secretaries of the Andres Bello, HipOlito Unanue, and Simon Rodriguez Agreements; and c) the function of permanent secretariat for the system of coordination, which will be carried out by the Junta.

Some of the tasks of such a system of coordination would be a) to formulate directives concerning joint or concerted action by the organs of the system; and b) to contribute to the formulation of general policy concerning the subregional integration process. It should also keep the Andean Council and the Andean Parliament informed as to its opera-tions, and it would carry out any pertinent recommendations which might come from these two groups.

3. The Meetings of the Commission During the last of the six stages (December 11 and 12) making up its quite prolonged XXV Period of Special Sessions, the Commission was still unable to come to any definite decision regarding the topics which this particular Session Period dealt with—namely, the Common External Tariff and the Special Rules of Origin.

During its XXVI Period of Special Sessions, the Commission ap-proved Decision 152, extending certain deadlines related to the selection of the basic models assigned to the countries through the sectorial de-velopment program for the automotive industry (Decision 120).

In its XXIX Period of Regular Sessions, the Commission approved Decisions 153-158, concerning sanitary regulations and the Andean subregional program on African Swine Fever; the Andean technological information system; the expansion of the Junta's budget for 1980; the updating of Decision 146 which restructures the metalworking program; the Andean program concerning television; and the modification of the automotive program, extending the deadlines for selection of basic models. These deadlines were extended once again through Decision 159, ap-proved in the XXVIII Period of Special Sessions.

On October 13-16, 1980, the Commission held its XXX Period of Regular Sessions, in which it analyzed the situation of non-compliance with some of the decisions approved, and adopted the project concerning a system of coordination among the elements of the Andean System. In the XXXI Period of Regular Sessions, it approved Decision 160, related to the sectorial development program for the iron and steel industry, and Decision 161, concerning the Junta's 1981 budget.

The XXVIII Period of Special Sessions was carried out in both


79

Bogota '2 and Lima, during the month of December, and resulted in the approval of Decision 162, concerning the mechanisms to be applied to unprogrammed products from the fertilizer industry, and Decision 163, concerning the extension of deadlines for beginning production of goods specifically reserved for Ecuador, by virtue of Decision 108.

4. The General Long-term Orientation of the Process The Cartagena Agreement (Article 25) and the Cartagena Mandate both state that the subregional and national integration bodies must even-tually devise a set of general principles to provide long-term orientation for the Andean integration process, and to define certain key pragmatic elements for running the system.

A study carried out by the Junta" deals with the following elements which the general orientation statement should take into consideration: a) industrial development; b) agricultural development; c) projects of broad scope; d) development of the infrastructure; e) creation of ties between the member countries; f) financial aspects; g) technology and energy; h) international role; i) balanced and harmonious development; j) social problems; and k) institutional structure.

In order first to define the way in which the subregional integration bodies and the national integration and planning bodies should go about the joint planning of a position statement on the long-term orientation of the process, the Fourth Meeting of the Andean Group Planning Council was held, and in it four projects for resolutions" were worked out, for presentation at the next meeting of the highest planning officials from all the member countries.

On May 8 and 9 there took place in Quito the third meeting of presidents, ministers, and heads of the planning offices of the Andean Group countries, during the course of which three resolutions15 were approved, as follows: Resolution 1, to the effect that "national devel-opment plans should explicitly include integration policy in those areas and sectors which have been singled out as being of high priority;" Resolution 2, which recommends that a meeting of high-level national and subregional officials be held in order to lay the groundwork for the system of horizontal cooperation among the Andean countries; and Resolution 3, which recommends that the Junta function as subregional coordinator in the preparation of the statement on long-range orien-

12 The Bogota sessions, held on December 1-3, were attended as well by the Ministers of Industry, Development, Tourism, and Integration of the member countries. 13 "The Junta of the Cartagena Agreement's Ideas Concerning the Preparation of the Statement on the General Orientation of the Integration Process until 1990," JUN/dt 132, Janury 31, 1980. 14 "Final Report of the Fourth Meeting of the Andean Group Planning Council," CPL/IV/Informe Final, May 7, 1980. 15 "Final Act of the Third Meeting of Presidents, Ministers, and Heads of Planning Offices of the Andean Group," JUN/R. MPLIIIIIActa Final, May 9, 1980.

80

ANDEAN GROUP

tation policy, and asks that the national planning bodies carry out the appropriate preparatory studies.

In addition, during 1980 there could be noted a new emphasis on the physical dimension of integration, especially in the "Lima Decla-ration" signed by the Presidents of the countries of the subregion who had gathered for the swearing-in of the President of Peru, in the sense that higher priority was now given at the subregional level to the joint actions called for in the Cartagena Agreement for the solution of in-frastructure problems, and greater emphasis was given, at the level of national development plans, to the project for creating modern road systems to link the Andean countries.

B. TRADE ASPECTS 1. Liberalization Program During 1980, no significant progress was made in the formation of the expanded subregional market—a process made up of the liberalization program, the common external tariff, and the harmonization of foreign trade instruments.

With respect to the liberalization program, at the end of 1979, Colombia, Peru and Venezuela16 were to proceed with the programmed automatic internal tariff reductions, reducing by a total of some 74% their initial level of tariffs as applied to other member countries. On December 31, 1980, another automatic reduction of 6% was to occur, as well as at the end of 1981 and 1982, finishing off with an 8% internal tariff reduction at the end of 1983, which would conclude the liberali-zation program for the three relatively more developed countries of the subregion.

Bolivia and Ecuador, which are already enjoying the exporting benefits of the expanded subregional market, were to begin carrying out their active part of the Liberalization Program on December 31, 1980, starting their formal reduction of tariffs towards the other three countries on December 31, 1981, until they achieve the total elimination of these internal tariffs by 1990, as established in Article 100 of the Cartagena Agreement. We should mention the fact that these latter time limits can be modified by the Commission in keeping with the results obtained by Bolivia and Ecuador in their trade with the other member countries and the degree to which they are benefiting from the expanded market (Article 101 of the Cartagena Agreement).

In addition, the Junta considered it necessary to present to the Commission an appropriate background study before Bolivia and Ec-uador undertook their part of the liberalization program. The study

16 By the end of 1980, however, Venezuela had still not given notice of having made the tariff reduction corresponding to 1979.

TRADE ASPECTS

81

would clarify the following points, among others: 1) precisely what is meant when referring to Bolivia's and Ecuador's "national tariff taxes;" 2) guidelines for defining initial tariff levels; and 3) guidelines for the elimination of every other type of restriction.''

In addition to all this, the Junta presented Proposal 12218 containing a definition of the mechanisms which might apply to those products which, although they were originally reserved for Sectorial Industrial Development Programs, were never actually included in any of the programs. Among other things, this proposal contains formulas for de-termining Colombia and Peru's initial tariff reduction point and Ve-nezuela's starting point on these products such that on December 31, 1981, the liberalization program on these initially reserved items can begin. A definition of Bolivia and Ecuador's possible method of liber-alizing imports of these products is also suggested.

This proposal additionally establishes the specific subsets of items which, since their production has not been undertaken as planned by the "larger" countries, could well be reserved for production by Bolivia and Ecuador, who should begin said production by December 31, 1984, with the reserved product status being maintained subregionwide until December 31, 1990.

At the request of Bolivia and Ecuador, the Junta presented the Commission with Proposals 123 and 124,19 seeking an extension of the time limits set for their commencing production on certain products reserved for them by Decision 108, as well as an extension of the period during which the market will be reserved for them on these same prod-ucts. The Commission in partial response handed down its Decision 163, effectively extending Ecuador's production start-up deadline for re-served items from the paper industry until December 31, 1981.

Table 16. Distribution of Reserved Products Referred to in Proposal 122

No. of products Percentage

Products produced 321 34.9 Unproduced products reserved for Bolivia 12 1.3 Unproduced products reserved for Ecuador 19 2.7 Remaining unproduced products 568 61.7

Total 920 100.0

SOURCE: "Additional data for the analysis of Proposal 22," JUN/dt 156, December 10, 1980.

""Groundwork for the commencement of fulfillment of the liberalization program by Bolivia and Ecuador," JUN/dt 155, December 2, 1980. 18 "Junta's proposal of a definition of the mechanisms applicable to those products which, having been reserved for sectorial programs of industrial development, were never actually included in any of them," JUN/Propuesta 122, November 26, 1980. ' 9"Extension of time period allowed for production start-up and reserved market for products from Decision 108, to be produced in Bolivia," JUNI Propuesta 123, December 10, 1980; and "Extension of time period allowed for production start-up and reserved market for products from Decision 108, to be produced in Ecuador," JUN/Propuesta 124, December 10, 1980.

82

ANDEAN GROUP

2. Tariff Policy With respect to the Common External Tariff (CXT), the proposals presented by the Junta reached a new level of definition and precision in 1980, and progress was made in technical negotiations as well, but no decision emerged capable of stemming the tide of noncompliance at the formal level and the lack of clear direction from the countries them-selves, at the economic level.

The time limits established in the Cartagena Agreement for the approval of the CXT (December 31, 1979, at the latest) and for Colom-bia, Peru, and Venezuela to begin the process of adapting their actual tariff levels to the CXT (December 31, 1980) have not been met, in spite of the best efforts of those involved, because of many factors, including the political difference of opinion described at the beginning of this Chapter, and changes in some member countries' economic policy, which influenced their negotiating positions.

Another possible cause for the delay could be the fact that the CXT is the only important mechanism negotiated lately over which the coun-tries can exercise full veto power—which makes it quite tempting for them to make their acceptance of the CXT conditional upon their sat-isfaction with the definition of any other mechanisms which are even slightly related to the CXT.

Following the guidelines20 suggested by the Commission at its XXV Period of Regular Sessions, the Junta presented a modified proposal for the CXT and the harmonization of mechanisms of foreign trade21 , which consists of an approach to CXT levels through application of a gradually shrinking belt of acceptable tariff levels delimited by specific maximum and minimum tariff levels for each item, all in the interest of protecting subregional production when necessary.

The final CXT arrived at in 1990, if the proposal is accepted, would consist of a belt of maximum and minimum protection for each item, whose minimum level would carry an effective protection range of from 0 to 70 points, and would be determined specifically by the Andean Group's desire to encourage or provide incentives for each item of production, as judged by two different sets of criteria—basic and cor-rective. The basic criteria would be the degree to which the particular production in question: a) generates employment; b) makes a techno-logical contribution; and c) needs protection because the industry is new.22 Corrective criteria for determining tariff levels would involve the following considerations: the item's import propensity; whether or not it is an agricultural input; if it is a product traditionally exported by the

20"Bases for the preparation of a modified project on the CXT and harmonization of foreign trade instruments," COM/XXV-E (SIC)Idt 2, February 29, 1980. 21 "Junta's proposal on the CXT and the harmonization of foreign trade instruments," JUN/Propuesta 96/Mod. 1, May 17, 1980. 22The Latin American Integration Process in 1979, INTAL, August, 1980, pp. 133-136.

TRADE ASPECTS

83

subregion; if it is a product of certain social interest; if it is not produced or is not producible within the subregion; whether or not it is a capital good; and if certain countries' tariffs on the item in question are so low that they should be increased.23

The maximum level of nominal protection would be two and a half times the minimum nominal tariff level on the product (a percentage figure) as long as the resulting tariff is not more than 100% of the ad valorem CIF value, and the average minimum nominal level of the CXT in 1990 will be 25% , allowing a 10% standard deviation.24

The process of approximation to the 1990 CXT will be carried out in two stages, the first of which would have Colombia, Peru, and Ve-nezuela begin in 1980 to bring their external tariff levels up to the minimum level set for attainment by 1983, implying a range of minimum effective protection of from 0 to 80 points, and a minimum nominal level of 29% , with a 12-point standard deviation.

The second stage of the Junta's proposal for Colombia, Peru and Venezuela's approximation to the CXT would begin in 1987, when the minimum tariff levels should have reached a percentage mark repre-senting a value halfway between the 1983 and 1990 levels.

Because of the preferential treatment accorded to Bolivia and Ec-uador, their process of approximation to the 1990 CXT would not begin until 1981, when these two countries would start gradually to raise or lower their tariffs, as necessary, so that by 1990 they would fall within the CXT belt of acceptable protection levels. In addition to the delayed starting date, Bolivia and Ecuador may request from the Junta a tem-porary reduction (starting on December 31, 1988, at the latest) of the CXT corresponding to a maximum of 65 items a piece, effective until December 31, 1993.

With respect to the "corrective criteria" mentioned earlier, which the Andean Group would use to determine the specific minimum tariff level to be applied to each imported item, the Junta decided to modify the "capital goods" criterion, reducing its weight from the 40 to 50 point range of effective protection (Proposal 96) down to the 15 to 40 point range (Proposal 96/Mod. 1), since capital goods do have significant technological contribution and employment—generating components (although the employment generated is mainly for highly skilled labor—a factor which has also been taken into account).

Another relevant consideration is illustrated in Table 19. The CXT is to be applied to a total of 3,322 items, classified according to CUODE (ClasificaciOn por Uso o Destino Econ6mico). While individual na-tional tariffs on some items will be lowered, the tariff levels on many

23 "Analysis of Proposal 961 Mod. 1 's corrective criteria for the Common External Tariff," JUN/di 517, November 27, 1980. 24 "Statistical information on the minimum levels of the common external tariff belt for 1983 and 1990, and national tariffs now in effect," COM/XXV-E/dt 4, March 5, 1980.

BE2 C.P.

Average Level of the CXT

B 2

Maximum Protection 100 %

90 %

80 %

Maximum Average Level 70 %

60 96

60 %

40 96

30 96

Minimum Average Level

%

10 % -

1980 1981 1983 19117 11100

84

ANDEAN GROUP

CHART 1

Average Protection Range of the Common External Tariff

1 Colombia, Peru and Venezuela 2 Bolivia and Ecuador

— - — - Annual Approximation

Source: Proposal of the Board on the Common External Tariff, op. cit.

others will have to be raised, gradually and automatically, until they are within acceptable CXT levels, with three exceptions: a) formal excep-tions; b) cases in which, although the existing national tariff is lower than the CXT, the CXT itself is only 10 points or less; and c) cases in which the CXT is less than 5 points higher than the existing national tariff. That leaves some 1,458 instances in which the national tariff will have to be raised. A country-by-country breakdown of the ratio of

L) CO

O LC)

CC)

r)-

CO 0) CO

ti

Cgi

0

CU

OD

E =

Cla

ssifi

caci

On

por

Uso

o D

estin

o E

conO

mic

o.

TRADE ASPECTS 85

00 LC) CY) Cg) 00 (,) CO

T-: C:5 Lci cri cci r,: T-: co go- T-- T-- CNJ CNJ CNJ CNJ CNJ

CNJ CC) m-- co ,cr co (0 T-- . . . . . .

CKi C,j CC> CO 1-- 'Cr CD CO ggr NM CNJ CV CNJ Cg) CNJ

.tr (C) qtr qtr qtr cp co LC) C:) • • . CM MM T-- c\I co CO CNJ

Cg) CY) Cg) C,J CNJ CNJ CC)

C:i T: LCi CO CY; 1-- C:i CC) LC) Cg) Cg) LC) Cg) CNJ CNJ

..44- cc) CNJ LC) .cr cr.) LC) • Cr; cci cci CO CO LC) r,: LC) N- COT—CJicr Lc) Cg, Cg) CV

(g) 00 CO go- CNJ • Cgi 06 Cti C:i CC) CT; 00 CO CNJ ,cr T-- T-- T--

1-- LC) C:) LC) (C) (C) C:)

CO CV Cg) CY) Cg) CY) CY) T-- .tr Lr) T-- T-- co cf) co Cl) Cg)

CV CO w-- CO P.. C)) go- • • • • • • • c:) c:, co cp CID CY) (C) Cg) gcr C,J T-- CNJ Cg) TTY

cr.) Lc) T-- cr.) (NJ CY) qtr-ca Lc) cp CO CO LC) Cg) LC) CO -o-

QJ

U

0) CV

8 8 ED_ Co cn N ci)

0, 2 u) CD

=

cv, • CD c — —

c 4— a" co E

Cr) E C.) CCS CCS 0 o

0 cn cn CI) CI)

C) ,C) Cr 0— t-i...000 ,D

a, -47.• 0 0 .= IT '3 CY,

g EE RSA 0

C

▪

r) cti CY) "CZ 735 3 3 c fl. CI. CO MI .3 0 MI L-. CI- U- CC CX: C)

1-- CV Cg) 4 C CCNCO C) : C C 0 = z (:)

co) 0 a. O

i- x 0 .c

C co

C O

U)

O 0

U)

co

E U)

O

6

wQ

C) U) U)

U) a)

E a) 2

ti 4E. a) w

co

E E

*E

x 1— 8 0 z7...

c--;)

I- X

CO 0,

0

Ca a)

a) C a)

a)

O Ca

w

cC

E O O

C>1 O

03

O g O ZC

C O

a) a

w

0

0

86 ANDEAN GROUP

Table 18. Member Countries' Actual External Tariff Situation vs. the CXT (Nominal protection, in percentage)

General average

Standard deviation

Bolivia's tariff 21.3 18.1 Colombia's tariff 40.2 23.0 Ecuador's tariff 40.9 37.7 Peru's tariff 60.8 34.0 Venezuela's tariff 54.7 57.5 Minimum Common External Tariff (MCXT) 28.6 15.8 CXT 1983 (effective protection range: 0-80 points) 29 12 CXT 1990 (effective protection range: 0-70 points) 25 10

SOURCE: "Andean countries' tariff situation for the products which are subject to the application of the CXT," J/PE/ 102/Rev. 1, September 21, 1980.

Note: The national tariffs used for calculation here are from 1978.

Table 19. National Tariffs Which Must Be Increased to CXT Levels* (No. of NABANDINA items)

Difference between CXT equal to CXT and national Items whose tariff

National tariff 10 points or tariff less than 5 level will have to be Country lower than CXT Exceptions less points raised

(1) (2) (3) (4) (5)1 Bolivia 1,246 398 76 180 592 Colombia 275 20 6 115 134 Ecuador 701 163 130 84 324 Peru 262 45 7 96 114 Venezuela 533 13 12 214 294

* Based on effective protection levels of 80 for Colombia, Peru, and Venezuela, and 70% for Bolivia and Ecuador.

1(5) = (1) — (2) — (3) — (4).

SOURCE: "List of national tariff increases as a result of approximation to the CXT," JUN/di 453, March 13, 1980.

(NABANDINA) items due for tariff increases (Table 19) over total CUODE items (3,322) (Table 17) would go as follows: Bolivia-17.8%; Ecuador-9.7%; Venezuela-8.8%; Colombia-4%; and Peru-3.4%. As we can see, Bolivia and Ecuador have higher ratios here—a phenomenon explained in part by the fact that Colombia, Peru, and Venezuela had already raised their tariffs to adequate CXT levels by the time the Table was compiled.

3. Special Rules of Origin Closely related to the CXT are the special rules of origin. In fact, the proposal25 on special rules of origin was analyzed together with the CXT proposal during the course of the negotiations carried out in 1980, al-though no formal decision on the subject was yet approved.

This proposal defines as originating in a member country those products: 1) which are produced totally within the territory of any mem-

25 "Junta's proposal on special rules for classifying the origin of merchandise," JUN/Propuesta 39/Mod. 2, May 17, 1980.

TRADE ASPECTS

87

ber country; 2) which meet the specific rules of origin set by the Junta; or 3) in whose preparation are used materials from outside the subregion or of indeterminate origin, if certain conditions are met.

These conditions stipulate that: a) the product must be the result of a "process of production or transformation" carried out in the ter-ritory of a member country; b) this process must result in a final product which is of a distinct nature from that of its imported inputs and which has a different NABANDINA classification from theirs;26 and c) the product must incorporate a certain minimum percentage of subregional value-added. 27

The "process of production or transformation" is not taken to mean any of the following, which—when they are extremely simple in nature and are the only steps involved in readying the imported inputs—do not qualify the product as having originated in one of the member countries:

a) simple manipulations to provide or check the numbering of mer-chandise during shipment or storage;

b) disembedding, sifting, culling, classification, selection, cracking, washing, painting, or trimming;

c) formation of product sets; d) crating or packaging; e) division or grouping of packages; f) stamping or labeling; g) mixing materials or products; h) combining, assembling, or mounting totally imported parts or

pieces; i) slaughter of animals; or j) combinations of these operations.

With respect to the subregional value-added, the products produced by Colombia, Peru, and Venezuela should have at least 50%, and prod-ucts made in Bolivia and Ecuador, at least 30% until 1987, going up to a minimum of 40% until December 31, 1993, and 50% from then on, to qualify as being "of national origin."

4. Intrasubregional Trade During 1980, total Andean Group intrasubregional trade was estimated at around 1.4 billion dollars, in accordance with the following country-by-country breakdown: 28

26 With the express exception of the production process of assembly or mounting of products from Sections XVI, XVII, and XVIII of NABANDINA (Metalworking). 27 Subregional value-added is understood to be the difference between the product's FOB price and the value of materials imported from third countries plus the Common External Tariff corresponding to these materials. 28 The figures showing total 1980 intrasubregional exports were taken from "Press Notices," No. 144, 80, JUNAC. The disaggregated figures by type of products were available only for the first semester of 1980 when this report was written, so these available figures were projected onto the second semester to give the annual disaggregated figures which are used in this Chapter.

88 ANDEAN GROUP

Table 20. Total Intrasubregional Exports for 1980 (Including fuels)

Exporting Country Millions of dollars Percentage

Bolivia 23 1.7 Colombia 457 32.2 Ecuador 118 8.4 Peru 543 38.3 Venezuela 275 19.4 Subregion 1,416 100.0

SOURCE: "Press Notices," No. 144/80, JUNAC.

If we compare these figures with 1979 intrasubregional total export figures, which were around 1.22 billion dollars, we note a 16% growth; however, considering intrasubregional exports excluding fuels, (Table 21) the export forecasts of the Junta show 1.11 billion for 1980, as compared with 1.04 billion for 1979, which means that figures for both years were quite similar, indicating insignificant levels of growth.

This conclusion is corroborated by comparison of 1979 fuels-ex-cluded figures with first-semester 1980 figures as projected over the whole year (Table No. 21), and also by comparison of past subregional annual rates of growth (Table No. 22).

With respect to the proportional participation of the member coun-tries in intrasubregional exports, the forecasts of the Junta indicate that Peru and Colombia will be the subregion's largest exporters for 1980; Ecuador will have about the same share it did at the beginning of the 1970's, while Bolivia's relative share will have decreased since then.

From the point of view of the composition and structure of intra-subregional trade, non-traditional products (Type B) represented more than 80% in 1980, while in 1970 they represented only 38.7%. This is because non-traditional products have had higher growth rates during the decade than traditional products, and more stable growth trends, within the intrasubregional trade picture (Table No. 22).

In addition, from the country-by-country analysis of growth rates of intrasubregional trade during the 1970-1980 period, it is clear that Peru's greatly increased share is a result of the high rates of growth of its non-traditional exports over the past five years, during which Peru had an average annual rate of growth of more than 60%.

With respect to the participation of Bolivia and Ecuador in intra-subregional trade, each of these two countries has its own particular pattern of trade structure as well as different levels of effective utilization of the margin of preference resulting from the Common External Tariff, the opening of markets to Bolivian and Ecuadorian products, and the liberalization program. As to the first of these, export structure, while Ecuador's non-traditional exports to the subregion were 80% of its total 1980 intrasubregional exports, the corresponding figure for Bolivia was only 37.8% (Table No. 21).

TRADE ASPECTS

89

Table 21. Traditional and Non-traditional Intrasubregional Exports (Excluding fuels)

Exporting Country 1969 1970 1975 1977 1978 1979 1980*

Bolivia A 3,228 4,907 2,491 7,933 12,807 14,686 16,264 B 70 33 1,613 3,346 3,147 7,416 9,924 Total 3,298 4,940 4,104 11,279 15,954 22,102 26,188

Colombia A 5,394 15,947 50,602 60,109 65,690 31,355 16,704 B 20,860 18,277 115,270 236,178 300,850 520,907 378,434 Total 26,254 34,224 165,872 296,287 366,540 552,262 395,138

Ecuador A - 5,308 7,079 21,355 25,111 26,574 32,612 20,542 B 2,213 1,941 14,755 38,243 47,206 63,697 82,138 Total 7,521 9,020 36,110 63,354 73,780 96,309 102,680

Peri A 12,644 13,085 19,279 20,507 42,010 46,309 38,714 B 4,651 6,487 22,414 49,106 101,679 276,746 294,982 Total 17,295 19,572 41,693 69,613 143,689 323,055 333,696

Venezuela A 3,289 6,583 9,568 7,214 7,677 18,138 30,726 B 4,334 3,394 14,646 19,342 16,000 33,918 101,770 Total 7,623 9,977 24,214 26,556 23,677 52,056 132,496

Subregion A 29,863 47,601 103,295 120,874 154,758 143,100 122,950 B 32,128 30,132 168,698 346,215 468,882 902,684 867,248 Total 62,021 77,733 271,993 467,089 623,640 1,045,784 990,198

Thousands of dollars

A: Traditional products

B: Non-traditional products, or manufactures

* The 1980 figures are actually first semester, 1980 figures projected over the whole year.

SOURCE: Prepared using "Estimates of 1980 intrasubregional trade," J/DS-E/100, November 6, 1980.

As to the margins of preference which Bolivia and Ecuador enjoy in their exports to other member countries, and the margins which they themselves apply to products imported from other member countries29, Table No. 23 shows that Bolivia sold 14.7 million dollars' worth of exports with a received margin of preference of 23% in 1978, for an estimated margin of preference export benefit factor ("sobre costos") of some 3 million dollars, while Ecuador sold 98.4 million dollars' worth of exports to the subregion, enjoying a 62% margin of preference, and attaining a margin of preference benefit factor of 38.5 million dollars.

The 1978 intrasubregional imports of Bolivia and Ecuador represent margin of preference benefit factors of 0.6 million and 1.2 million dol-lars, respectively.

29"Evaluation of Bolivia and Ecuador's trade with the Andean countries (1969-1978)," J-PE-D-240, October 29, 1980-preliminary analysis, subject to revision.

90

ANDEAN GROUP

Table 22. Growth of Intrasubregional Exports, 1969-1980, According to Type of Product (Excluding fuels)

Exporting country

Rates of Growth (Percentages)

1970-1980 1970-1975 1975-1980 1979-1980

1) Type A Exports' Bolivia 12.78 -12.6 45.5 10.7 Colombia 0.5 25.9 -19.8 -46.7 Ecuador 11.2 24.7 -0.7/0 -37.8 Peru 11.5 8.0 14.9 -16.4 Venezuela 16.6 7.8 26.3 69.4 Andean Group 9.9 16.8 3.5 -14.1

2) Type B Exports 2 Bolivia 76.9 117.7 43.8 33.8 Colombia 35.4 44.5 26.8 -27.3 Ecuador 45.4 50.0 40.9 28.9 Peru 46.4 28.1 67.4 6.5 Venezuela 40.5 33.9 47.4 200.0 Andean Group 39.9 41.1 38.7 -3.9

3) Total Exports (A+B) Andean Group 28.9 28.5 29.5 -5.3

SOURCE: Table No. 21. 'Traditional 2 Non-traditional, or manufactures

All the foregoing would suggest that to date, Ecuador has taken greater advantage of subregional margin of preference benefits than Bolivia.

5. Export Promotion During their ninth meeting, the directors of Subregional Export Pro-motion analyzed the progress made in the 1980 Andean Export Pro-motion Plan,3" which covered various areas, such as support for exports in intraregional trade, support for industrial programming, exports of products of special interest to Bolivia and Ecuador, and general pro-motion of intrasubregional trade. Among the activities included in the Plan are the International Trade Center's Export Promotion Training Project and the programs of technical cooperation with the EEC and The Netherlands.

In addition, during 1980 the Andean Development Corporation (CAF) and the Junta signed a memorandum specifying their allotted tasks and areas of responsibility and coordination with respect to the Andean export promotion plans.'" The Andean Development Corpo-

,'"Progress in the 1980 Andean export promotion plan," JUNIRD.PEIIXIdt. 4, June 19, 1980. 31 "Memorandum between the Andean Development Corporation and the Junta of the Cartagena Agreement in the area of export promotion," JUNIRD.PEIIXIdi 2, June 20, 1980.

INDUSTRIAL SECTOR 91

Table 23. Subregional Trade of Bolivia and Ecuador with Relation to the Liberalization Program, 1978 (Millions of dollars)

Bolivia Ecuador

Exports Imports Exports Imports

Categories of items with reduced tariffs 14.7 1.7 98.4 3.5 Categories still unaffected by liberalization program 0.9 25.4 1.6 96.1 Others 0.3 — 0.6 — Average margin of preference on items moved 23% 56% 62% 56% Margin of preference benefit 3.0 0.6 38.5 1.2

Notes:

1) The margin of preference benefit is calculated as 1 X, where MP is the margin of preference, T is the tariff level, and X is exports (or imports).

2) Bolivia's list of imports with tariff reductions includes only the metalworking program.

3) The average margin of preference estimates made by JUNAC are of a preliminary nature and are subject to revision.

SOURCE: "Evaluation of Bolivia and Ecuador's trade . ," op. cit.

ration's main areas of initial responsibility in this area will be "to arrange ties with the Andean Trade Financing System (SAFICO), support for the creation of export businesses through whichever modalities it es-tablishes and to the degree in which it has the necessary resources, and finally, the obtaining of technical cooperation resources for studying and—if the recommendations are favorable—promoting the creation of an Underwriting Concern for consolidating export credit insurance sys-tems."

With regard to tax incentives for exports of non-traditional goods, or manufactures, the Junta's proposal on the Common External Tariff and the harmonization of foreign trade suggests certain rules whose application would tend to harmonize incentives such as these. For ex-ample, Article 47 states that the countries should abolish the tariff ex-emptions applicable to imports of raw materials, intermediate products, and capital goods used in the production of goods exported to other member countries under the liberalization program, and Article 49 seeks to harmonize domestic tax exemptions, discounts, and/or tax returns on exported goods, as well as on the materials used in their production.32

C. Industrial Sector 1. Industrial Programming Although the Cartagena Agreement establishes the possibility of even-tually creating a more thoroughgoing system of industrial programming, the countries sought initially to concentrate their efforts in this area on a limited set of high-priority industries, for which they established time

32 "Guidelines for the harmonization of tax incentives for non-traditional exports," J/PE/133, September 23, 1980.

92

ANDEAN GROUP

limits for determining a list of products reserved for industrial programs, and for approving the corresponding programs.

Based on the reserve list established by Decision 25, the Junta prepared proposals concerning eight different industrial sectors, namely: metalworking; petrochemicals; automotive; iron and steel; fertilizers; electronics and telecommunications; chemicals; and pharmaceuticals. By the beginning of 1980, sectorial industrial development programs for the first three sectors had been approved, through Decisions 57 and 146; 91; and 120, respectively.33

In addition, Decision 143, approved last year, extended the term of the industrial programming reserve period until December 31, 1980. -

Of the five Junta proposals which were analyzed last year—steel and iron sector (Proposal 66); fertilizers (Proposal 47); electronics and telecommunications (Proposal 69); chemicals (Proposal 91); and phar-maceuticals (Proposal 92)—only two were the subjects of formal deci-sions, namely steel and iron, and fertilizers.

In its XXXI Period of Regular Sessions, the Commission approved Decision 160, concerning the Sectorial Program of Industrial Devel-opment for the Iron and Steel Industry, which contained only a list of the items which will be included in the program; the remaining instru-ments of the program will be included in a proposal by the Junta, to be approved by the Commission by December 31, 1981. Until the remaining instruments of the program are approved, the member countries may keep the products to be included in the program on their list of excep-tions, if they were previously included.

With respect to the fertilizer industry, Decision 162, approved by the Commission in its XXVIII Period of Special Sessions, defines the liberalization program and the common external tariff for fertilizer in-dustry products, since these products had not been included in sectorial industrial development programs as of the end of the reserve period; the Decision also approves the list of fertilizer industry products which are not produced in the subregion.

Thus, as 1980 drew to a close, so did the period of time officially allotted for approving sectorial industrial development programs, with the understanding that in 1981 the definition of the iron and steel pro-gram will be completed.

2. The Automotive Program Of the three programs already approved, the automotive industry pro-gram was the one which had generated the most expectations with regard to the positive impact its implementation could have on the economies of the member countries. During 1980, three decisions concerning this

33 "Junta's report on the preparation of sectorial and intersectorial industrial development programs," JUN/dt 127, January 17, 1980.

INDUSTRIAL SECTOR

93

program were approved, changing the deadlines for the definition of its basic models.34 At the beginning of 1980, the time limit for basic model definition was to have been December 31, 1979, as established by De-cision 149 of the Commission's XXIV Period of Special Sessions, but this deadline was not met.35

In March 1980, during its XXVI Period of Special Sessions, the Commission approved Decision 152, extending the deadline for defining the basic models until April 30, 1980, in categories A 3, A 4, B 2.1, B 3, B 4, and C, which had been assigned to Peru, Colombia, and Ve-nezuela. In addition, in its XXIX Period of Regular Sessions, the Com-mission approved Decision 158, extending until July 15, 1980, the dead-line for basic model definition in these same categories.

Subsequently, in its XXVII Period of Special Sessions, the Com-mission approved Decision 159, once again extending the deadline, until August 31, 1980, for categories A 3 and A 4, and until October 15, 1980, for categories B 2.1, B 3, B 4, and C. By the end of 1980, the definition of the basic models had still not been completed.

Let us point out, however, that during its meeting in Lima at the beginning of the year, the Council of Directors of the Association of Boards of Andean Group Manufacturers of Automotive Products (CA-FANDINA) reiterated its total support of Decision 120 and requested that the governments of the member countries "put Decision 120 into effect, not only on the legal level, but more basically, on the operational level, and that they comply with the deadlines established for the def-inition of the basic models of vehicles."36

The causes of the delay in defining the basic models might well include the complexities involved in negotiating with multinational com-panies, as well as a possible temporary lapse in interest on the part of some member country, in any program which might entail tariffs higher than the CXT average.

3. Petrochemical Program During 1979, the Petrochemical Committee and the Junta of the Car-tagena Agreement made several different studies and analyses of the progress being made in the petrochemical program.37

34 The basic model is the one which each country chooses within each of the categories which have been assigned to it. The definition of the model is made via a description of the technical characteristics desired in each of the following basic areas: Motor, manual gearbox, automatic gearbox, tractor axle or axles, trailer axles, manual steering box, power steering box. 35 The original deadline for the definition of basic models was December 31, 1978, as established by Article 86 of Decision 120. This time limit for basic model definition applies only to Peru, Colombia, and Venezuela; Bolivia and Ecuador have been made subject to no particular time limit in this area. 36 "Automotive Bulletin," No. 2, October 1980, JUNAC. "The Latin American Integration Process in 1979, op. cit.; "Evaluation of the petrochemical program," JUN/di 374, March 25, 1979; "Report on progress in the evaluation of the petrochemical program," JUN/dt 114, August 23, 1979.

94

ANDEAN GROUP

Based on these evaluations, studies were made in 1980 on the pos-sible updating of this particular sectorial development program. 38

In its XX Period of Regular Sessions, the Commission familiarized itself with the content of these studies and resolved to create a Work Group39 for the purpose of analyzing the guidelines on the changes to be made in Decision 91.

Based on the report of this Work Group and the suggestions of the Commission, the Junta prepared its Proposal 1194°, delineating the nec-essary changes in the Petrochemical Program.

The proposal suggests that the list of products assigned to Chile be withdrawn; that the new item corresponding to polyol polyesters derived from propylene oxide, assigned to Bolivia and Venezuela, be incorpo-rated into the program; and that several different deadlines established by Decision 91 be extended, thus creating a new timetable of deadlines for the execution of the program. The proposal also allows for the possibility that the countries may want to apply financial measures to promote intrasubregional exports of petrochemicals, and thus estab-lishes a maximum amount for any eventual transfers, payments, or re-funds which may result, as well as a gradual process for their application, preferential treatment in this particular matter for Bolivia and Ecuador, and one additional instance of preferential treatment for Bolivia.

4. The Metalworking Program Decision 146, approved in 1979, concerning the restructuring of the metalworking program and the incorporation of Venezuela into the program, establishes in its Article 33 that its Appendix XII, containing the assignments made to countries with verified existing production, should be updated as soon as possible after formally verifying all per-tinent production existing in Venezuela at the time of the Decision. Based on Resolution 141, which notified the countries of productions existing within the subregion, the Junta prepared its Proposal 116,41 related to the updating of metalworking production assignments based on present verified existing production.

Proposal 116, analyzed by the Commission during the XXIX Period of Regular Sessions, led without delay to Decision 156, actually updating Appendix XII. The Appendix now includes the changes necessary so as to comply with the accurate verification of productions originally mandated in Decision 57, and updated by merit of Decisions 146 and

38"Junta's report on the petrochemical program and progress in the modification of Decision 91," COM XXIX/dt 2, April 17, 1980. ""Report of the Commission's Work Group on point 7 of the petrochemical program-agenda," COMI XXIX/dt 17, May 31, 1980. 4°"Proposal of the Junta concerning adjustments in the sectorial development program for the petro-chemical industry," JUN/Propuesta 119, June 24, 1980. 41 "Proposal of the Junta concerning the updating of Appendix XII to Decision 146," JUN/Propuesta 116, April 23, 1980.

INDUSTRIAL SECTOR

95

156, to include Venezuela. In addition, Unit 6 of the Metalworking Program products (milling industry machinery) has now been defined as including only mills for producing flour for bread—machinery whose production has still not been initiated within the subregion—and in regard to Unit 35.14 (taximeters and parking meters), no previously existing production has been verified in the new member country which now shares this production Unit.

5. The Iron and Steel Program During the first part of the year the Government experts on the iron and steel industry held their Fourth Meeting42, in which they analyzed the basic characteristics of the sector's future industrial programming, as proposed by the Junta. Among other important aspects touched on in the meeting, the countries had definite ideas on the multinational companies proposed as instruments of the program. Venezuela's experts thought that these companies should be redefined as money-making or profit-oriented businesses so that they could be self-financing; Colom-bia's spokespersons said that the companies should not be formed by the governments, but rather by the iron and steel industry from each country; and the experts from Ecuador stated that these multinational companies should be created by mutual agreement of the national iron and steel concerns and not as an obligation imposed of them by the governments.

In its XXIX Period of Regular Sessions, the Commission analyzed the Junta's Proposal 66/Mod. 143, and in November of 1980 the Com-mission's High Level Group held its first meeting, to study this pro-posa1.44

Subsequently, the Junta worked out a new version45 of the iron and steel program, in which the following specific objectives are established:

a) To promote the development of the iron and steel industry in each one of the member countries.

b) To meet the Andean Group's demand for steel products, pref-erably with goods of subregional origin.

c) To rationalize the iron and steel production of the member coun-tries so as to ensure the rapid, efficient, and harmonious future devel-opment of the sector.

d) To encourage the establishment of the iron and steel industry in Bolivia and Ecuador.

42 "Final Act of the Fourth Meeting of government experts on the Iron and Steel Industry," JUN/REG. 1511VIActa Final, February 28, 1980. 43 "Content and description of the Junta's proposal for the development program for the iron and steel industry," COMIXXIXIdt 11, May 23, 1980. 44"Final Act of the first meeting of the Commission's High Level Group to study the Junta's Proposal 66/Mod. 1," COM/GAN. 15111Acta Final, November 7, 1980. 45 "Junta's proposal on the sectorial development program for the iron and steel industry," JUNI Propuesta 66/Mod. 2, November 27, 1980.

96

ANDEAN GROUP

e) To make rational use of the resources existing within the subre-gion, and particularly of the non-renewable resources.

f) To establish trade flows among the member countries, in prod-ucts from the sector and in the necessary inputs for iron and steel man-ufacture.

g) To promote exports of subregional products to third-country markets.

h) To promote the utilization of subregional capacity in the areas of engineering, consultation, fabrication of equipment, and technolog-ical research.

i) To encourage the modernization of existing plants when neces-sary, adapting them to the new iron and steel technologies.

In addition, the Junta's proposal also contains the following iron and steel program mechanisms: liberalization program; common exter-nal tariff; rules of origin; policy harmonization; and specific action ben-efitting Bolivia and Ecuador. Among other program commitments, the Junta is responsible for organizing a system of price information for the sector, on partially finished and finished goods, which would cover prices on the internal markets, the export markets, and of third countries that supply the subregion. In turn, the member countries will be responsible for: providing information on their national production programs; es-timating internal demand and production shortages and surpluses; co-ordinating their investment plans in order to promote rationalization activities; promoting the satisfaction of national demand, with products preferentially from the subregion itself; and undertaking the setting of common standards on products included in the iron and steel program.

It should be noted that in the second version of its proposal for the sector (Proposal 66/Mod. 2), the Junta makes no direct reference to the multinational companies originally considered in the document which laid the groundwork for the iron and steel program46.

And finally, during the XXXI Period of Regular Sessions, the Com-mission approved Decision 160, concerning the Sectorial Development Program for the Iron and Steel Industry, which establishes the set of products to be included in the program. It established, in addition, that the remaining instruments of the program are to be approved by the Commission, at the proposal of the Junta, in accordance with the pro-visions of Chapter IV of the Cartagena Agreement, on or before De-cember 31, 1981.

6. Other Industrial Programs In December of 1977, the Junta presented to the member countries for their consideration Proposals 69/Mod. 1; 91; and 92 on the sectorial

46 "Basic considerations for the Junta's proposal on the development of the iron and steel industry," JUNIdt 120, October 30, 1979.

INDUSTRIAL SECTOR

97

industrial development programs for electronics and telecommunica-tions; chemicals; and pharmaceuticals, respectively. These proposals, however, were never analyzed jointly by the member Countries —a proc-ess necessary for their eventual approval.

Subsequently, approval was given to Decision 139, on Integrated Industrial Development Projects; Decision 140, on Intersectorial In-dustrial Development Projects; and Decision 143, which stipulated that the reserve period would end on December 31, 1980. In addition, certain technological advances and structural variations in the markets of these sectors were made.

Bearing all the foregoing, as well as other considerations, in mind, the Junta prepared a basic document on how the countries might go about programming the industrial development of the sectors in ques-tion.47 This document suggests that the programming efforts here might best be channeled through an Intersectorial Industrial Development Program (PIDI), because, among other reasons, the three sectors, when considered individually, contain relatively few assignable products and comprise only a limited number of projects which are considered es-pecially desirable by all the countries of the region. In many instances the cost of one project alone would work out to be much greater than a country's total national demand figures for the whole sector in ques-tion.

Therefore, the Junta considered it appropriate to propose the cre-ation of an Intersectorial Industrial Development Program covering the products from all three sectors, so as to achieve the fair distribution of the benefits of the expanded market, which would be extremely difficult to do if each sector were to be considered separately. Intersectorial programming would, however, in no way keep any of the sectors from maintaining its own separate and distinct identity with respect to the application of the instruments and mechanisms which would best suit its specific individual needs.

However, by year's end no decision had been reached on the Pro-gram, and the products from the three sectors mentioned were therefore considered to be in the same category as the other reserved products which had not been included in sectorial or intersectorial development programs as of the end of the reserve period, as stipulated by Decision 143.

7. Integral Development Projects Decision 139, approved in 1979, created a new mechanism in the area of industrial programming—namely, the Integral Development Pro-

47"Basic points for the preparation of the proposal on the industrial programs for the electronics and telecommunications; chemicals; and pharmaceuticals sectors," JUN/dt 140, August 13, 1980.

98

ANDEAN GROUP

jects.48 Decision 146, restructuring the metalworking program, estab-lishes as one of the Integral Development Projects an industrial complex in Bolivia which produces machine tools.49

During the Commission's XXIX Period of Regular Sessions, the Junta presented a progress report on the project, which has been the subject of studies carried out by the Junta through its Program of Co-operation with Bolivia, with the participation of experts and government officials from that same country.5" In this progress report, the Junta defines the joint actions necessary to move the project along in its preinvestment and feasibility phase, which are as follows, in the order given: a) promotion; b) formation of the Andean Subregional Machine Tool Company (SSA); c) execution by the Company of the necessary official procedures for getting the project underway; and d) constitution by the Company of the firms which will physically carry out the project.

The Andean Subregional Machine Tool Company will be an in-vestment company, structured as a joint stock company or corporation, with an authorized, subscribed, and paid capital in the amount suggested by the studies carried out during the promotion stage, and made up of the contributions made by the member countries, whether directly, through their national public industrial investment development companies, or indirectly, through the Andean Development Corporation.

During its XXIX Period of Regular Sessions, the Commission formed a work group which, among other things, analyzed the Junta proposal just mentioned and arrived at the conclusion that, as a first step, it would be advisable to centralize the functions of technology negotiation and capital formation under the aegis of an Andean Subregional Company. In addition, the work group suggested—on a purely preliminary basis, subject to later revision by the member countries51—that for the suc-cessful development of the project, Decision 146 must be fully applied, and the private sector should provide needed assistance by participating in the constitution of the manufacturing companies and the marketing company in the machine tools project.

In addition, Decision 139 established June 30, 1980, as the deadline for the approval of Integral Development Projects for Bolivia and Ec-uador, and December 31, 1980, for Colombia, Peru, and Venezuela. By year's end, however, no formal decisions regarding such projects had been reached, although the Junta had made significant strides in the formulation of possible undertakings in this modality.

48The Andean Subregional Integration Process during 1979, op. cit. 49 "Background on the formation of the integrated development project on machine tools for Bolivia," JIPABI13, April 25, 1980; "Machine tools in Bolivia," JUN/di 475, June 18, 1980. ""Junta's report on the studies made and the joint actions necessary for progress in the integral project on machine tools in Bolivia," COM/XXIX/dt 3, May 13, 1980. 5i "Report of the Commission's work group on points 6, 9a, and 9b of the agenda," COMIXXIXIdt 16, May 30, 1980.

INDUSTRIAL SECTOR

99

8. The Rationalization Programs The Cartagena Agreement establishes joint industrial programming as a mechanism which is essential to the achievement of its objectives, particularly the fair and equitable distribution of the benefits arising from the integration process. This programming mechanism, as defined by the Agreement, consisted principally of the Sectorial Industrial De-velopment Programs (PSDI) and the Programs for Rationalizing Exist-ing Industry (PRIE).

While the Development Programs are regulated in some detail by the Agreement, the Rationalization Programs were merely created by it, leaving their actual formulation and application to the dictates of whatever needs might arise as the rationalization process evolved.

Nonetheless, Article 37 establishes that the Junta, in its promotion of rationalization programs, will bear in mind the following factors, among others:

a) The installed capacities of existing plants. b) The financial assistance and technical requirements involved in

installing, expanding, modernizing, or converting industrial plants. c) Requirements in terms of worker training. d) The possibilities for creation of horizontal specialization agree-

ments among companies in the same branch of industry, and e) The outlook for establishing joint marketing or technological

research systems, or other forms of cooperation, among similar com-panies.

In addition, Article 57 stipulates that higher priority should be given, in terms of establishing rationalization programs, to those in-dustries whose products are on the lists of exceptions, in order to prepare them as quickly as possible for facing subregional competition. With regard to the possible range of the rationalization programs, any prod-ucts not included under a Sectorial Industrial Development Program are considered to be potential candidates.

This broad area of applicability and the intentionally loose for-mulation of the Rationalization Programs have led the Junta to carry out studies52 suggesting some basic general criteria for determining which industries or productions might best be rationalized first, and which ones might wait. These criteria are four in number, and they involve the following considerations:

a) product's frequency of appearance on lists of exceptions; b) heterogeneity, dispersion, and level of national tariffs on the product in question; c) maximum permissible decrease in protection levels once

52 "Classification of industrial sectors as to their industrial rationalization priority," JUN/dt 126, January 16, 1980.

100 ANDEAN GROUP

the CXT becomes the only protection which the product has; and d) certain other considerations of a qualitative nature.

Of the products which were not disqualified for rationalization be-cause of qualitative considerations or because their tariff levels were already low and homogeneous, the ones which finally were put on the high priority list for rationalization studies were the ones which appeared most often on national lists of exceptions and the ones which would become too vulnerable once the CXT became the only protection being applied to them. Table No. 25 shows, by Brussels Tariff Nomenclature Chapters, which productions were determined by the Junta's study to be of high priority for rationalization studies, as well as the second and third-priority productions, as determined by the application of these four criteria.

In determining these industrial sectors of high priority for imple-mentation of the Programs of Rationalization of Existing Industry, the Junta decided that the textile industry would not be eligible for appli-cation of an orthodox rationalization program, given the great impor-tance of this industry in all the member countries and in view of the opportunities/problems which would most likely arise from liberalization of the subregional trade in that particular product. In order to ensure the availability of adequate specialized information on the matter, the Junta, with technical assistance provided by the Inter-American De-velopment Bank, prepared a document of terms of reference53 for the

Table 24. Electronics, Chemicals, and Pharmaceuticals: Assignable Products of Greatest Demand in each Sector

1985 demand Percentage of total (millions of dollars*) demand in the sector

Electronics and Telecommunications Sectors

Sector's Total 110.5 100

Unit 7: printed circuit plates 15.9 14.9 Unit 15: teletypes 18.3 16.6 Unit 16: transmitters and receivers 20.6 18.6

Pharmaceuticals Sector

Sector's Total 77.8 100

Ampicillin and penicillin 34.8 44.7 Erythromycin, tetracycline, and streptomycin complex 19.4 24.9

Chemicals Sector

Sector's total 204.0 100

Titanium dioxide and pigments based on titanium

dioxide 36.4 17.8 Float glass 39.4 19.3 Coloring agents 29.4 14.4 Organic phosphate pesticide complex 30.3 14.8

*1977 dollars

Source: "Basic points for the preparation of the proposal . . .", op cit.

""Terms of reference for the study on the rationalization of the textile industry in the Andean Group," JUNIdt. 128, January 17, 1980.

AGRICULTURAL SECTOR 101

Table 25. Rationalization of Existing Industries: Products Considered as being of High Priority for Rationalization, Applying the Four Criteria Given (Brussels Tariff Nomenclature)

First priority 20 Ready-cooked or prepared legumes, fruits, vegetales 21 Various other ready-cooked or prepared foods 39 Plastics 42 Leather products 48 Paper, cardboard, their manufactures and those of cellulose paste 51 Continuous (round loom) synthetic and artificial textiles 53 Wool, fur 55 Cotton 58 Manufactured textile products 60 Knitted cloth 61 Clothing and woven accessories 62 Ready-to-wear articles made of woven cloth 64 Shoes 68 Stone, plaster, and cement manufactures 69 Ceramic products 70 Glass and its manufactures 73 Steel and ironworks 83 Manufactures of common metals 85 Electric machines and elements or materals for electronics use 94 Home and office furniture, and bedding

Second priority 15 Edible oils and fats 19 Ready-cooked or prepared foods based on cereals or pastry 40 Rubber and its manufactures 76 Aluminum

Third priority 32 Leather-tanning chemicals, coloring agents, paints, lacquer and varnishes 36 Gunpowder, explosives, inflammable products 56 Discontinuous (straight loom) synthetic and artificial textiles 74 Copper

SOURCE: "Classification of industrial sectors...," op. cit.

study on the rationalization of the textile industry, which was submitted during the course of the year to the member countries, for their con-sideration.

D. Agricultural Sector 1. Agricultural Sector's Institutional Framework, and the Planning of the Sector The Agricultural Plan of the Cartagena Agreement establishes that the member countries will harmonize their various national agricultural pol-icies and coordinate their agricultural development plans, with the ul-timate goal of adopting a common subregional policy and formulating a general steering plan for the agricultural sector. Among the agricultural integration measures provided for in Article 70 of the Agreement are the joint programs of agricultural development by products or groups of products, and the promotion of agreements among the national bodies entrusted with planning and carrying out agricultural policy.

In fulfillment of the general objectives established by the Agree-

102

ANDEAN GROUP

ment and based on recommendations from the First Meeting of Agri-culture Ministers, the Commission in 1974 issued Decision 76, creating the Agricultural Council, whose function is to advise the principal An-dean Pact bodies on matters relating to agriculture—namely, the har-monization and coordination of national agricultural policies, prepara-tion of the corresponding programs and joint actions, and analysis of the progress being made in agricultural integration. Parallel to this, an institutional structure in keeping with the characteristics of the sector has been taking shape over the past five years, allowing the countries of the subregion to put greater emphasis on their agricultural integration activities.

Decision 121 of the Commission, approved in 1977, establishes the Meeting of Agriculture Ministers of the member countries, as part of the institutional system called for in the Cartagena Agreement, with the responsibility of advising the Commission and formulating recommen-dations on the following:

a) The subregional policy for the integrated development of the agricultural sector.

b) The harmonization of the national agricultural policies and co-ordination of member countries' development plans.

c) The joint programs of agricultural development; common mar-keting systems and agreements on the supplying of agricultural products; planning and execution of agricultural policy; export promotion; applied research; technical and financial assistance for agriculture; and plant and animal sanitation.

d) The countries' general compliance with the provisions of the Cartagena Agreement and with the decisions of the Commission which are related to the agricultural sector.

In their Second Meeting, the Ministers of Agriculture agreed that the heads of the various national agricultural planning offices should meet on a yearly basis, with the purpose of analyzing the member coun-tries' agricultural development programs and promoting the gradual harmonization of their different objectives, in order to begin carrying out the subregional agricultural plan defined in the Cartagena Agree-ment. In turn, during the course of their second meeting, the heads of the national planning offices recommended the initiation and develop-ment of the System of Agricultural Planning (SAPA), an idea which was considered and accepted by the Agricultural Council during its fourth meeting.

Bearing in mind all of the foregoing considerations, in their Third Meeting the Ministers of Agriculture issued Resolution No. 3,54 calling

54 "Final Act of the Third Meeting of Ministers of Agriculture of the Andean Group," JUN/di 283/Rev. 2, April 3, 1979.

AGRICULTURAL SECTOR

103

for the initiation of the Andean Agricultural Planning System, which should help provide the orientation needed for carrying out the subre-gional agricultural integration process. The Planning System consists of the following:

a) Subregional level i) The Meeting of the heads of national agricultural planning

offices. ii) The Junta's Department of Agricultural Development, which

will act as the system's technical secretariat. b) National level

iii) The national agricultural planning offices. In 1980, at their Fourth Meeting, the Ministers of Agriculture approved Resolution 1, concerning the medium-term general orientation for the agri-cultural integration process, and the countries' possible approach to complying with the provisions of the Andean Agricultural Plan-ning System.55 This general orientation establishes two groups of priorities, presented in order:56

1. Increase the production, productivity, and availability of the products which are currently in short supply; speed up Bolivia's and Ecuador's agricultural development; accelerate scientific and techno-logical agricultural development; and develop the physical and institu-tional marketing infrastructure.

2. Complete the expanded market; consolidate the Andean Agri-cultural Planning System; and strengthen the Andean Agricultural San-itation System.

2. Specific Projects in the Area of Agricultural Integration The specific projects have been defined as the set of activities carried out by two or more member countries for purposes of specifying, for-mulating, designing, financing, executing, and conducting definite ac-tions having to do, among other things, with the generation of tech-nology, the increasing of production and productivity; development of marketing infrastructure; development of agroindustry; internal and subregional supply; and supplying of agricultural goods with third coun-tries.57

In their Fourth Meeting, held in 1980, the Ministers of Agriculture approved Resolution 3, entrusting the Junta with carrying out the fea-sibility studies on the specific projects related to the production, certi-fication, and marketing of seeds; the production and processing of Af-

55 "Final Act of the Fourth Meeting of Ministers of Agriculture of the Andean Group," COM/XXIX/dt 9, May 27, 1980.

""General medium-term orientations for the agricultural integration process," JUNIR.MAIIVIdt 6, June 14, 1980. 57 "Final Act of the Fourth Meeting of the Ministers of Agriculture. . .", op. cit.

104 ANDEAN GROUP

rican oil palm;58 and the production and joint purchases of wheat. With respect to the beef and cowsmilk sectors, feasibility studies were re-quested for projects on a network of cattle collection terminals, slaugh-terhouses, and wholesale markets for the beef industry; and on the rationalization of collection terminals for milk for industrial processing.

In addition, the Junta was entrusted with preparing a proposal outlining the harmonization procedure for the laws on the operation of systems in the beef industry; laws on meat sanitation and quality; and on technical and hygiene standards for the construction, equipping, and operation of plants which produce milk and/or milk products.

In August, 1980, the first Andean subregional seminar on beef cattle was held. Among the conclusions and recommendations which emerged from this seminar were the following: the creation of the Andean Cattle Breeders Association (CONFEGAN); and a recommendation to the Andean Group governments and subregional bodies that studies be undertaken soon on the beef and cowsmilk production projects, giving priority to the specific projects on the network of cattle collection ter-minals, slaughterhouses, and wholesale markets; milk collection ter-minals; and harmonization of the laws related to the beef and milk industries.59 Subsequent to this, the Junta presented a study containing an operations manual with terms of reference for evaluating the beef and milk industry and identifying needed projects.6"

3. Agricultural Marketing In the area of marketing, 1980 saw the preparation of a study on the subregional marketing structure for grains and oilseeds, and the com-pletion of an evaluation of subregional needs in terms of the future network of cold-storage plants, including specific projects to be under-taken. 61

In addition, in the area of technical standards for the sector, a set of work documents directed at specific common subregional standards was produced, and progress was made on the proposal concerning the creation of the subregional technical agricultural standards system. Stud-ies were made of the intrasubregional trade in some twenty different agricultural products, and the terms of reference were defined for the project on joint purchases of milk.

""Specific project on the production and agro-industrialization of the African oil palm," JUNIR.MAI IV/dt. 12, March 15, 1980. ""Final Act of the First Seminar for the Analysis of the Beef Cattle Industry," JUN/di 495, August 27, 1980. 6° "Manual of operations and terms' of reference for evaluation of needs and identification of specific projects on the production of beef and cow's milk in selected areas," JUNIdt 150, December 9, 1980,

Rev. 1. 61 "Andean network of cold-storage plants: Pilot Project of Collection Terminals," JUN/RT. RFAIlldt 3, April 9, 1980.

PHYSICAL INTEGRATION

105

4. Animal and Plant Sanitation During 1980 the Andean Group updated its ongoing evaluation of subre-gional needs in the area of agricultural sanitation, as well as its registry of subregional plant and animal sanitation standards. The subregion's needs in terms of its plant quarantine program were evaluated,62 and the Commission was presented with a proposal on the sanitation stand-ards and the subregional program on African Swine Fever,63 which it approved through Decision 153, during its XXIX Period of Regular Sessions.

In addition, a proposal was prepared in hopes of a decision on the control and eradication of hoof and mouth disease in certain areas. In its VII Meeting the Technical Committee on Coffee Rust made an evaluation of the progress of the Andean Coffee Rust Eradication Pro-gram, analyzing the work carried out thus far by the national commit-tees, the informational-campaign, technical training courses, sanitation-oriented reconnaissance of coffee-producing areas, and the creation and equipping of groups of quarantine-related inspection posts.64

5. Program for the Agricultural Development of Bolivia During the course of the year, a feasibility study was made of the fruit-producing potential of ten provinces in Bolivia's Chuquisaca state, and the feasibility study on the organization and creation of a national seed company in Bolivia was completed. In addition, a pre-feasibility study was made for the possible construction of a slaughterhouse in the city of Santa Cruz de la Sierra.

E. Physical Integration I. The Institutional Framework Article 86 of the Cartagena Agreement establishes that the countries of the subregion will undertake joint action to solve the infrastructure problems which negatively affect the Andean integration process.

The main bodies of the Andean Group have focused their attention on the transportation sector, with no direct participation in the areas of energy and communications infrastructure. The main subregional activ-ities in the telecommunications sector are channeled through the As-sociation of State-Run Telecommunications Enterprises (ASETA).

Since the signing of the Cartagena Agreement, the Commission has approved five basic (and several complementary) decisions on the high-

62"Plant quarantine in the Andean subregion," JUNIR.MAIIVIdt 16, March 17, 1980. 63"Junta's proposal on sanitation standards and the program against African Swine Fever," JUN/Pro-puesta 114, April 2, 1980. 64 "Final report of the seventh meeting of the Andean Technical Committee on Coffee Rust," JUN/RCTI VII/Final Report/Rev. 1, June 27, 1980.

106

ANDEAN GROUP

way transportation system, without obtaining, in the Junta's opinion65, the hoped-for results, owing largely to the fact that the member countries have not kept their agreed-upon commitments, and, in some cases, have not yet even incorporated these Decisions into their national laws.

The Commission approved Decisions 50 and 69, concerning the subregional policy on temporary excursions of privately-owned out-of-country vehicles into any Andean country, and the rules and regulations thereon, upon the recommendation of the First Meeting of the Subre-gional Tourism Council; these Decisions have not as yet been incor-porated into the national laws of Bolivia and Ecuador. Decision 54, concerning the reduction of transport costs affecting Bolivia, has not as yet been fully implemented, since the Government of Bolivia is, at present, carrying out an integral study on transportation, with the tech-nical and financial assistance of the World Bank and the United Nations Development Program.

With the purpose of achieving maximum simplification of intra-subregional highway traffic and vehicular control, the Commission ap-proved Decision 56, concerning international highway transportation. Based on this Decision, an Administrative Committee was formed for the purpose of administering and seeing to the application of its pro-visions. This Committee met for the second time around mid-year 198066, and concluded that Ecuador would be invited to incorporate Decision 56 into its national laws, and to adopt the complementary measures necessary for its observation; the Committee also approved a set of measures to be adopted by all the member countries in order to bring about the gradual application of Decision 56.

In addition to this, the Physical Integration Council, created by Decision 71, carries out the necessary task of advising the main bodies of the Cartagena Agreement on the definition of common policies in the area of transportation, communications, and energy, and on the corresponding investment and joint action programs. During 1980 the Physical Integration Council held its Fourth Meeting, during the course of which it analyzed the Junta's formal evaluation of the needs of the transportation sector and adopted a subregional action plan for the improvement and/or construction of the highways constituting the Cen-tral Axis of the Trans-Andean-Group Trunk Line Highway System (De-cision 94)—to mention just a few of its conclpsions and recommendations during the year.67

Decision 94, approved in 1975, establishes that the Trans-Andean

65 "Actions and decisions of the principal bodies of the Cartagena Agreement in the area of physical infrastructure and transports," JUN/di 498, September 3, 1980. 66 "Final Act of the Second Meeting of the Administrative Committee for Decision 56 of the Commission of the Cartagena Agreement," JUN/RCA. Decision 56/11/Final Act, July 9, 1980. 67 "Final Act of the Fourth Meeting of the Physical Integration Council," C-IF/IV/Acta Final, November 21, 1980.

PHYSICAL INTEGRATION

107

Group Trunk Line Highway System will be made up of three different axis lines—namely: a) the central axis, serving as the continuous and direct interconnection between all the countries of the subregion; b) the interregional axis lines, serving to join areas of the Andean Group with other regions and countries of Latin America; and c) the complementary axis lines, serving as links between other internal development areas and the other two sets of axis lines. However, the Junta states that five years after its adoption, this important Decision "is still not being im-plemented in the member countries, since many road improvement pro-jects for the central axis did not receive the priority which they rightfully deserved;"68 it is hoped that the action plan approved in the Fourth Meeting of the Physical Integration Council will remedy this unfortunate state of affairs.

Still on the physical infrastructure front, Decision 141, approved in 1979 and having to do with group measures in support of Bolivia, states in its Article No. 1 that "the Commission, at the proposal of the Junta and before December 31, 1980, will adopt the measures of Andean Group support necessary for helping to solve the special problems which Bolivia faces as a result of its landlocked geographical situation, partic-ularly as regards the development of its highway, railroad, air, com-munications, and transport infrastructure linking it to the other member countries and to Pacific ports." In compliance with this Decision, the Junta carried out several different related studies; by the end of the year, however, no new decisions on the subject had been issued.

2. Evaluation of the Needs of the Transportation Sector69 In the area of highway infrastructure, the most difficult stretch of road will doubtlessly be the one connecting Bolivia with the central subregional axis running down the coast of Peru. However, the improvement of this section of highway will probably depend on the nature and volume of the traffic traveling over it; and the amount of international traffic on that particular section is still small, although infrastructure improvements there would obviously be quite appropriate in any case. In addition, there are also serious problems in Latin American interregional transportation in general because of transshipments and the excessive number of controls, bureaucratic procedures, and documents involved.

With respect to improvement in railroad transportation (feasible at present only between Bolivia and Peru), a program is needed to facilitate the document-related and administrative aspects of rail cargo service so that the length of time required to ship goods by train will be shortened.

68 "Actions and decisions of the main bodies of the Cartagena Agreement in the area of physical infra-structure. . .," op. cit. 69 "Evaluation of the needs of the Andean Group transportation sector," JUNIdt 139, July 25, 1980.

108 ANDEAN GROUP

The sea ports which fill the subregion's maritime transportation needs stay fairly busy, although traffic in some of them is easily backed up because of frequent delays in the laying in of ship's stores or because of low efficiency in the loading and unloading of cargo. River trans-portation offers few opportunities for intrasubregional traffic—in fact, only on the Amazon and its tributaries. The rivers are in actual practice reserved more for the member countries' internal trade. And in the area of air transportation, passenger service is usually quite adequate in the subregion, in terms of the equipment available at airports, but air cargo service stands greatly in need of upgrading.

With respect to multimodal ("door-to-door") transport, although a certain amount of "container" traffic does exist, it is not intrasubre-gional in nature, and no agreements yet exist for regulating the activity and responsibilities of the operator, or for processing the multimodal transport document, nor do there yet exist appropriate customs regu-lations for handling this comprehensive type of customized transport service.

Bearing these and other considerations in mind, the Junta, in its 1980 evaluation of the needs of the transportation sector, stated that "there exists no Integrated Transportation System for achieving the physical integration of the region, one which might offer real alternatives in terms of which transportation mode might be the most efficient in a given set of circumstances, greatly facilitating subregional trade. . ." "The initial strategy of the transportation sector emphasized highway transportation, and the main bodies of the Cartagena Agreement have been trying to build a subsystem based on a highway network which has not been given high enough priority by the member countries them-selves, and on an agreement concerning vehicle traffic for simplifying the system of highway usage and controls, which has still not been put fully into effect."

As a result, the Junta's evaluation of the needs of the transportation sector suggests that since the sector's initial strategy has not brought about the desired results, it should be modified, taking into account the future orientation of the integration process, and the actual existing conditions within each transport sector.

F. Technology 1. Technology Policy The technological development policy and strategy of the subregion are contained mainly in Decisions 24, 84, and 85. The policy and strategy were both based on the countries' recognition of the weakness of their own technology infrastructure and on the lack of subregional coordi-nation then in the sectors of production and in the various national development plans, leading to the prevalence of technology imports

TECHNOLOGY

109

from third countries as the means of obtaining the needed technical "know-how. ''7°

Through the common set of rules on the treatment of foreign cap-ital, Decision 24 established a mechanism of control for the marketing of technology. Decision 84 defined the basic points to be taken into consideration in defining the subregional policy on technology. And Decision 85 established the rules covering the application of industrial property regulations. However, in spite of the progress made in the observation of the guidelines established for the sector, "the application of the Decisions has still not been fully realized, since some countries have still not incorporated them into their national laws, or they have not yet defined the necessary complementary elements to the laws."

In 1980 the member countries held the first Andean subregional science and technology meeting, during which the following topics were discussed: the establishment of a Science and Technology Council; co-operation with the United States in scientific and technological matters; the United Nations Conference on an International Code of Conduct for the Transfer of Technology; and evaluation and follow-up of the United Nations Conference on Science and Technology.

With respect to the proposal on the creation of a Science and Tech-nology Council, the basic objective was defined at the meeting as being the strengthening of national scientific and technological systems and capacities, and the formation of a solid subregional science and tech-nology system. With respect to relations of cooperation in this area with the United States of America, those attending the meeting were of the opinion that the bases and procedures for this cooperative effort should be defined first, followed by a definition of specific areas and projects. With regard to the United Nations Conference on the International Code of Conduct for the Transfer of Technology, it was pointed out that member countries hardly participated at all in the Conference and that there had been virtually no subregional coordination on this topic. And as regards the subregion's participation in the United Nations Con-ference on Science and Technology, emphasis was given to the countries' need to continue to act in concerted fashion, both in the Intergovern-mental Committee on Science and Technology for Development and in the Intergovernmental Group of Experts on the Financing System.72

70"Junta's report on the first Andean subregional science and technology meeting," JUN/ESA. 1, Rev. 1, April 18, 1980. 71"Speech of Mr. Pedro Carmona Estanga, Coordinator of the Junta of the Cartagena Agreement, at the inaugural ceremony of the first Andean subregional science and technology meeting," JUN/ESA. CT/1/di 7, April 16, 1980. 72 "Junta's report on the first Andean subregional meeting on science and technology," COM/XXIX/dt. 7, May 27, 1980.

110

ANDEAN GROUP

2. Andean System of Technological Information Based in part on the recommendations from the first meeting of gov-ernment experts, held in 1979, the Junta presented Proposal 112 for consideration by the member countries; this proposal dealt with the creation of the Andean System of Technological Information (SAIT) and the program for its progressive establishment. In this proposal the Andean System of Technological Information is defined as an instrument of subregional technology policy, made up of a set of information mech-anisms necessary for the carrying out of many vital government and business activities."

In accordance with the Junta's proposal, this System would carry information on the following topics: foreign investment; international prices; technology transfer; industrial property; and technological know-how. It should, of course, be hooked up with other informational net-works or systems, both within and outside of the subregion. The System is envisioned as a modality of cooperation through which the countries seek to: avail themselves of more, and better, information; systemati-cally record and analyze this information; and develop mechanisms and procedures for "delivering" this information to subscribers in an ap-propriate and timely fashion.

In May of 1980, the government experts on the Andean System of Technological Information held their second meeting, in which they analyzed the Junta's proposal and agreed that they would recommend that it be approved by the Commission, following certain modifications, particularly as regards Project II of the program for the progressive establishment of the system.74

During its XXIX Period of Regular Sessions, held in May and June of 1980, the Commission approved Decision 154, which actually creates the Andean System of Technological Information, whose main objec-tives are as follows:

a) To make available the information required for carrying out the subregion's technological development policy and for applying Decisions 24 and 85.

b) To strengthen the subregion's bargaining power with foreign investors and suppliers of technology.

c) To generate information flows among the bodies which define and carry out technological and foreign investment policy, in order to ensure the maximum possible autonomy in decision-making.

d) To adopt regulations concerning the selection, acquisition, re-trieval, and transmission of technological data.

73 "Junta's proposal on the creation of the Andean System of Technological Information and the program for its progressive establishment," JUN/Propuesta 112, January 30, 1980. 74 "Final report on the second meeting of government experts on the Andean System of Technological Information," JUN/REG. SITIIIIInforme Final/Rev. 1, June 16, 1980.

TECHNOLOGY

111

e) To promote the marketing of the member countries' own tech-nologies.

f) To establish relationships with other informational networks or systems, with the purpose of supporting the efforts made in this area by developing countries.

In order to carry out these objectives, the national operating units will organize sectorial as well as specialized information networks. The System's specialized networks will carry information on the following: a) foreign investment; b) international prices; c) transfer of technology; and d) industrial property.

A list of the organs of the System gives an idea of its basic structure; they are as follows: a) the Steering Committee, made up of one rep-resentative from each member country—preferably the directors of the respective national units entrusted with formulating and carrying out technological information policy; b) the Coordinating Committees of each one of the sectorial and specialized networks; and c) the secretariat of the System, whose duties will be entrusted to the Junta. Through this same Decision 154, the Commission also approved the first stage of the program for the actual establishment of the Andean System of Tech-nological Information, and its respective budget.

In turn, the System's Steering Committee would hold its first meet-ing near the beginning of 1981, to determine appropriate criteria for establishing priorities in the selection of projects to be carried out.75

3. Andean Technological Development Projects76 The first Andean Projects in Technological Development (PADT) to be approved by the Commission were the ones established by Decision 86 (on copper metallurgy) and 87 (on copper hydrometallurgy). Both projects were designed for carrying out in Bolivia and Peru the transfer, adaptation, and development of the technologies required for extracting copper from low-grade ore.

The Andean Technological Development Projects on copper are now in their final stages, and the technical report and final evaluation are slated for completion sometime in 1981. The main results of these two PADT's include the training of professional personnel from both countries; and expansion of research capability through the creation of the COMIBOL hydrometallurgy laboratory in Bolivia, and the reequip-ping and resupplying of Peru's Centromin laboratory.

The main purpose of the PADT on tropical forest resources, as established by Decision 89, is to contribute to the incorporation of the forestry sector into the economies of the countries of the Andean Group,

75 "Criteria for establishing priorities in the carrying out of projects in the program for the progressive establishment of the Andean System of Technological Information," CDISAITI Ildt. 2, October 7, 1980. 76 The information presented in this section was provided by technical officials from the Junta.

112 ANDEAN GROUP

through the development of subregional technologies for the planned use of forest land and wood resources. The first phase of this project, which was completed in 1978, included the performing of more than 100,000 experiments in wood technology, involving the efforts of some 200 technicians, working at 11 different laboratories within the subregion.

The second phase of this Andean Technological Development Pro-ject on Forest Resources includes three main programs, namely: the wood engineering research program, which involved the creation of the Andean Wood Engineering Laboratory (LADIMA); the analysis of the structure of the wood-processing industry; and the carrying out of fea-sibility studies for the construction of habitational groupings of one hundred wood houses in each member country. The results achieved to date in the execution of this project include the following: the estab-lishment of a system for selecting and transmitting technical and scientific information; the evaluation of forests through the use of remote sensors; an integral study on wood for construction; and the development of the Andean system of classifying wood for structural use.

The basic goal of the Andean Technological Development Projects in the area of foods and nutrition, as approved through Decision 126, is to promote the production of foods which are high in nutritional value and relatively low in cost, making use of the subregion's existing food, science and technology infrastructure and the idle installed capacity of the member countries' food industry, and creating, when appropriate, multinational companies for the production of food products. Following is a brief description of the progress made in each of the food-related projects during 1980:

Project I. Utilization of dried peas and beans, cottonseed flour, and fishmeal: as regards the industrialization of dried peas and beans, studies on fine-milling technology and pneumatic classification have been made; in Colombia and Peru there was industrial production of bread, crackers, and soups using cottonseed flour; in Colombia studies were made to improve the processes of production of protein isolates and flour from gossypol-free cottonseed; progress was made in the creation of appealing food products based on cereals and fish; and it was decided that the subregion's fishing potential should be determined, as well as the pos-sible future role of this abundant protein-rich resource in the feeding of the peoples of the subregion.

Project II. Experimental production and the putting on the market of new, low-cost foods. Progress was made on milk substitutes, insofar as the technology of dextrinization-gelling; models of food rations have been designed in Colombia and Venezuela for the institutional feeding of children; and technicians were trained in the preparation of mixed flour, using the raw materials which might be most acceptable or available in each particular country (such as rice, corn, quinoa, or soy) and the use of this mixed flour in finished products such as bread and noodles.

Project III. Technology, production, and marketing of protein and

TECHNOLOGY

113

foods designed especially for children. Work groups have been formed to begin the project, and the collaboration of the United Nations Center on Multinational Corporations has been secured.

Project IV. Study of cases of technological innovation. The follow-ing cases were chosen: protein concentrate from fish (Peru); mixed flours (Colombia); texturized vegetable protein (Colombia); and precooked corn flour enriched with soy (Venezuela).

Project V . Information: bibliographical revisions and updating were carried out for these topics: the utilization of cottonseed flour for human consumption and the production of protein isolates from cotton.

Project VIII. Food distribution strategies and infrastructure studies; and Project IV: Designing and testing of strategies for the promotion of the industrial production of foods of high nutritional value and low cost. Both of these are additional projects, financed mainly by the EEC, and initiated during the course of 1980.

In addition, the Junta has carried out activities and studies over the course of the year directed at the adoption of two additional Andean Technological Development Projects (PADT)—one on coal and the other on the rural area.

With respect to the former project, in April of 1980 the first meeting of the government experts on the PADT on coal was held,77 and making use of the recommendations which came out of this meeting, the Junta prepared Proposal 120, for presentation to the Commission.

The Junta's proposal defines the basic objectives of the PADT on coal as the promotion of the use of coal within the subregion, and the transfer and adaptation of the technology on the production and use of this raw material. The actions which have been considered necessary in this sector have been grouped under seven main project headings—namely: administration; prospecting and exploring; mining; preparation; coking; combustion and conversion; and coal-based chemicals.78

With respect to the PADT for the rural area, the government ex-perts on the matter held their second meeting during 1980, in which they analyzed, among other things, the report made by the Junta on the progress made in readying this project. The project itself will be made up of two parts—one on the creation of technology for integrating the production of capital and intermediate goods, the distribution of inputs, agricultural and forestry production technology, and agro-in-dustrial transformation technology; and the other on the selection and transfer of technology for the rural sector.79

77 "Final report of the first meeting of government experts on the Andean Technological Development Program on Coal," JUNIREG. PADT. Carbones111 Informe Final, April 11, 1980. 78 "Junta's proposal for an Andean Technological Development Program on Coal," JUN/Propuesta 120, October 20, 1980. 79"Junta's report to the second meeting of government experts for the rural PADT," JUN/REG. PADT. RURAL/II/di. 1, September 5, 1980.

114 ANDEAN GROUP

4. Programs of Technological Disaggregation and Survey of Technological Capacities The Technological Disaggregation of Projects and the Surveys of Tech-nological capacities are defined by Decision 84 of the Commission of the Cartagena Agreement as mechanisms whose purpose would be to facilitate technological development within the Andean Subregional Group.

Therefore, the Junta of the Cartagena Agreement, in conjunction with the member countries of the same Agreement, is carrying out a program designed to promote the use of Technological Disaggregation and Surveys of Technological Capacities within the subregion.

The Technological Disaggregation of Projects and the Technolog-ical Capacity Surveys are analytical instruments which should help the countries in the following endeavors:

• To increase their abilities to study, plan, evaluate, and execute Projects; • To improve their position in the negotiation and acquisition of technology, goods, and services; and • To identify in an orderly fashion the resources necessary for developing Projects while making maximum use of national re-sources, such as personnel, capital goods, and technical services.

Technological Disaggregation covers all the phases of a Project, from its financing through its execution. The countries are to have an active role in all Projects, which will be coordinated and carried out in each country by representatives of: 1) the national integration office; 2) the national body responsible for the development of technology policy; and 3) the pertinent industrial sector. Other organizations may also be called in when appropriate, as well as businessmen, industrialists, ed-ucators, or other professionals with special knowledge which might be useful to the Project.

The countries of the Andean Group have become more aware of the need to employ these two instruments; accordingly, their national development plans are beginning to include provisions calling for their increasing use. The Andean countries' imports of capital goods account for around 30% of their total imports, and because of this, many of them have created agencies to promote domestic industries that are producers of capital goods, and are contemplating as well the creation of a body to coordinate government purchases of capital goods and technical services, in order to promote the development of these tech-nological capacities within their own borders. Therefore, in Project de-velopment as well as in the countries' efforts to promote their capital goods industries, the Disaggregation and Survey instruments will serve as needed tools of analysis.

During 1980, a new Technological Capacity Survey was completed on manufacturers of capital goods for the industrial, chemical, and pe-

EXTERNAL DIMENSION

115

trochemical sectors. Seminars, courses, and workshops have been held to analyze and provide information on the Basic Disaggregation Model and a Work Group was formed to improve and broaden the content of the model created in 1978 and 1979.

G. External Dimension 1. The Andean Council Among the main functions of the Andean Council of Ministers of For-eign Relations8° is the formulation of the subregion's external policy, covering its relations with third nations or groups of nations. The Council met several times during 1980, and made various determinations with regard to the Andean Group's external dimension.

In its first meeting, which was held in Santa Cruz de la Sierra, Bolivia, in January, 1980, the Council of Foreign Relations Ministers of the countries of the Andean Group signed an agreement in support of the initiative of the Commission in seeking to place Bolivian cotton thread on the EEC market, and a declaration of solidarity with Bolivia as well, concerning the decision of the United States to sell 35,000 tons of its non-commercial strategic tin reserves.81

During its second meeting, held in April in Lima, Peru, the Council signed a memorandum of agreement between the Andean Group and Brazil, to serve as a mechanism for consultation, cooperation, and the interchange of information. In political terms, this mechanism consists of: 1) meetings between the Andean Council and Brazil's Minister of Foreign Relations; 2) committees on specific topics; and 3) the Standing Mixed Committee formed by the Andean Group countries' respective ambassadors to Brazil, in Brasilia, and their Brazilian counterparts, accredited in the capitals of the various Andean Group countries. The main objectives of the memorandum are: to promote relations between Brazil and the countries of the Andean Group; to stimulate cooperative efforts in various areas; to encourage Latin American cooperation and integration; and to stimulate the convergence of Latin America with the developing nations. 82

In its third meeting, which was held in Quito, Ecuador, the Andean Council signed an agreement submitting to the Andean heads of state an "Orientation Paper"83 (Carta de Conducta) (which was later signed by the Presidents at their Riobamba meeting), in which, among other pronouncements of a political nature, they called for greater . partici-pation by the Andean countries, in cooperation with the other Latin

8tThe Latin American Integration Process in 1979, op. cit. 81 "First meeting of the Council of Foreign Relations Ministers of the Andean Group," JUN/di. 445, January 30, 1980. 82 "Second Meeting of the Andean Council," JUN/di 456, April 11, 1980. 83"Third Meeting of the Andean Council," JUN/di 455, April 1, 1980.

116

ANDEAN GROUP

American and Third World countries, in the negotiations on the political and economic problems which arise and are discussed in the international community—especially those which have to do with world peace and security, and with the New International Economic Order.

During this same meeting, the Council met with the Minister of Foreign Relations of Argentina, and a joint declaration as well as a document of understanding were signed.84

In the joint declaration, Argentina and the Andean Group reiter-ated their support of the Latin American Economic System (SELA); they reconfirmed their political agreement with the restructuring of LAFTA, for the achievement of a new order of regional integration; they deemed it appropriate to begin the study and negotiation of a cooperation and development agreement within the framework of the Mixed Andean-Argentine Commission; and the Foreign Relations Min-ister of Argentina expressed-his country's continuing desire to abide by the Andres Bello Agreement.

In turn, the document of understanding established a mechanism for consultation, coordination, and the interchange of information, made up—at the political level—of meetings between the Andean Council and the Minister of Foreign Relations of Argentina, specific committees or work groups, and the Standing Mixed Committee composed of the An-dean countries' Ambassadors to Argentina at Buenos Aires, and of representatives from Argentina. In addition, the document of under-standing entrusts the Andean-Argentine Mixed Commission with the definition and development of specific activities of cooperation on the economic front.

In response to the invitation of the EEC, in May of 1980 a meeting was held between the Andean Council and the Ministers of Foreign Relations of the member nations of the European Communities, and a joint declaration was signed, in which the European and Andean sig-natory parties reconfirmed their commitment to cooperation between the two integration processes and expressed their shared points of view on several topics of international significance .85 On the other hand, the Andean and EC Foreign Ministers also spoke of the agreements reached during the Tokyo Round of the GATT negotiations; while the EC Min-isters expressed their satisfaction with these particular GATT negotia-tions, the Andean Ministers stated that, in their view, the Tokyo Round agreements had left much to be desired. With respect to the specific projects in which the Communities would provide their financial and technical cooperation to the Andean subregion, the Ministers of the EEC made known the Communities' special interest in agricultural pro-

84JUNIdi 455, op. cit. * EEC = European Economic Community; EC = European Communities. 85 "Meeting of the Andean Group Council of Ministers of Foreign Relations with the Ministers of Foreign Relations of the member nations of the European Communities," JUN/di 469, May 14, 1980.

EXTERNAL DIMENSION

117

jects, and the members of the Andean Council expressed their desire for this financial and technical assistance to be extended to the areas of infrastructure and industry, as well.

In addition, during May of 1980, a meeting was held in Madrid, Spain, between the Andean Council and Spain's Minister of Foreign Relations, during which all the Ministers signed a joint declaration. With respect to the negotiations between the Andean Group and the EEC, Spain expressed its pleasure at this act of drawing together part of the two integration organizations, and both the Spanish Foreign Relations Minister and the Andean Council agreed that it would be advantageous for studies to be made of the possibilities for cooperation, in areas of mutual interest, between Spain and the Andean Group in their respec-tive relations with the pertinent organs of the EEC. In addition, Spain's Minister gave formal expression to his country's desire to join the Andres Bello Agreement.

2. Andean Position on the Restructuring of LAFTA The Andean Group's position on the restructuring of LAFTA, defined during the course of several meetings of the high level group created for that specific purpose, was oriented towards "the satisfaction of the short and medium-term needs of the Andean integration process, in its internal consolidation effort as well as its external relations with other countries of the LAFTA region, and towards the performance of the tasks related to Latin American integration within a framework which would facilitate the long-term convergence of subregional schemes and cooperation agreements by pairs or groups of countries, with a minimum area of multinational commitments."86

The Junta expressed its view that LAFTA/LAIA's convergence ideal is more on the level of a political pronouncement, while the Andean countries' shared orientation to regional integration points to the route of active cooperation among the countries of the Association, to create economic ties among them over the short and medium term. The Junta stated that the world situation which exists today and in which Latin American integration will be carried out is on the threshold of a process of changes whose early phases will see increasing economic and financial imbalances in the developed countries, which will, in turn, all be com-peting ever more intensely for access to and control of strategic natural resources—which signals Latin America's need to strengthen its intrare-gional capacities for harmonization of development plans, cooperation, and integration.

The Junta also carried out studies87 on the effect which the restruc-

""The Junta Coordinator's inauguration speech for the IV Meeting of the High Level Group for defining the Andean Group's joint position on LAFTA," JUNIGAN GA. ALALCIIVIdi 3, February 27, 1980. g7 "Evaluation of LAFTA's historical patrimony and its implications for the Andean Group," JUNI GAN. GA. ALALCIVIdt. 3, April 25, 1980.

118

ANDEAN GROUP

turing of LAFTA's "historical patrimony" will have on the Andean Group's CXT and on the various mechanisms of the Cartagena Agree-ment, seeking to strike a fair balance as regards the trade currents established with other Latin American countries through commitments made under LAFTA. The Junta recommended that LAIA's margin of preference be calculated on the basis of actual Andean-country national tariffs, as opposed to the scheduled minimum CXT levels, which are often higher. It also recommended that the Association's level of pro-tection not be greatly altered, and that the relative margin of preference should not be greater than five per cent—just to name a figure.88

In turn, the presidents of the Andean countries, upon the signature of the Declaration of Lima, issued the following joint statement in regard to the new Latin American Integration Association (LAIA): "We give our political support to this new wide-ranging regional integration scheme which replaces a traditional model which was not in keeping with Latin America's special circumstances, nor with the principles of equity and harmonious development. We believe it to be of the utmost importance that the member countries of the Cartagena Agreement participate ac-tively and in coordinated fashion in this new order of regional integra-tion, in a way that would be compatible with the consolidation of the Andean Group."

3. Cooperation Agreement with the Latin American Economic System (SELA) In June of 1980 an agreement of cooperation was signed between the Junta of the Cartagena Agreement and the Permanent Secretariat of the Latin American Economic System89, in which both bodies reiterated their willingness to hold regular consultations with each other in order to stay up to date on each other's respective program of activities. In addition, they expressed their desire to coordinate their activities in areas of mutual interest in which their respective work plans may co-incide or overlap.

The agreement further provides that priority in these cooperation efforts will be given to those SELA Action Committee projects in which one or more of the Andean Group countries participate, and the initial program of cooperation was slated to cover joint activities with SELA's Action Committees in the following areas of mutual concern, to mention several in particular: housing and buildings of social interest; the tech-nological information network; agriculture and food; pharmaceuticals; and the marketing of fertilizers.

g8 With regard to the scope of a relative margin of preference of similar levels, see "Integracion Lati-noamericana," No. 49, pp. 5-9. ""Cooperation agreement between the Junta of the Cartagena Agreement and the Permanent Secretariat of SELA," JUNIdi 476, June 20, 1980.

EXTERNAL DIMENSION

119

4. Negotiations with the European Communities (EC) Negotiations were held during 1980 between the Andean Group and the European Communities (EC), with the idea of creating additional ties of friendship and cooperation between these two schemes of eco-nomic integration. The negotiations were part of the preparations for the signing of an eventual EC-Andean Group agreement, and served as a forum for the European Economic Community (EEC) to define through its proposals, the general considerations on which its formal position in the Agreement will be based.9° During the first quarter of the year, the Executive Commission of the European Economic Com-munity (which forms a vital part of the European Communities) had approved the proposals to be presented at the beginning of the nego-tiations with the Andean Group, which were subsequently discussed at EEC headquarters.

One of the general guidelines proposed by the EEC was that the EC-Andean cooperation established should not be preferential in na-ture, that it should be evolutionary, and that it should not exclude a priori any sector of economic activity of either integration scheme. The EEC also proposed that the agreement should entail the application of the most-favored-nation clause, which would tend to intensify and di-versify the trade relations between the two integration regions, and that it should also clearly define the bases for economic cooperation in the sectors which the contracting parties find most interesting.91

During the course of the year there was frequent contact between representatives of the Andean Group and the European Communities, including the meeting we have already mentioned between the Andean Council and the Foreign Relations Ministers of the EEC, as well as visits to the Junta's headquarters in Lima by the EEC Commission official in charge of the Community's external relations, and by the Minister of Foreign Relations of Great Britain.

This process of preliminary definitions culminated in the holding of the first round of negotiations, in June of 1980, in Brussels, with the participation of the members of the Junta of the Cartagena Agreement and the members of the Commission of the European Economic Com-munity.92

5. Trade Relations and Scientific and Technological Cooperation with the United States In November 1979 a memorandum of understanding was signed between the Commission of the Cartagena Agreement and the United States

9° The Andean countries defined the basic elements of their position in 1979. See The Latin American Integration Process in 1979, op. cit., pp.177-178. 91"Newsletter of the Junta of the Cartagena Agreement," No. 101, June, 1980. 92 "Newsletter of the Junta of the Cartagena Agreement," No. 101, op. cit.

120

ANDEAN GROUP

government, establishing the interest of these two parties in developing effective cooperation in the areas of trade; financing; science and tech-nology; and industrial, agricultural, and infrastructure development, including transportation. They agreed to form special groups for each one of these areas, with an eye to an eventual economic cooperation agreement to be based on the results of the groups' efforts.

During October of 1980, in Washington, D.C. , the special Andean Group-United States trade group held its first meeting, in which the following topics were discussed: the generalized preference system of the United States; the multilateral GATT trade negotiations; measures to improve relations between the United States and the Andean Group; and matters related to commodities exports.93

The conversations on the generalized preference system centered around specific products and the regulations of the system; guidelines and procedures were set up to facilitate the joint presentation of products of interest to the subregion. In addition, during the meeting the Andean Group formally petitioned the United States to consider the subregion as a "regional association" for purposes of cumulative origin.

With respect to the multilateral trade negotiations related to the General Agreement on Tariffs and Trade, the United States asked the Andean Group to consider accepting the codes of conduct approved during the Tokyo Round, a subject which is currently under analysis and evaluation by the main bodies of the Cartagena Agreement.

In the area of commodities, the countries of the subregion expressed their concern about the difficulties being experienced in the exportation of certain of their products to the United States; and in regard to the measures which might be adopted to improve and diversify trade be-tween the subregion and the United States, the two parties agreed to move ahead during 1981 in the area of trade promotion.

In addition to this, during the First Subregional Meeting on Science and Technology, held in Lima during April of 1980, the Junta received many suggestions and observations from the experts present concerning the specific actions to be negotiated with the United States in this area. Based on these suggestions, the Junta has made progress in the definition of the conceptual framework for the negotiations, and has settled on a set of specific projects to be discussed with the United States in the area of science and technology. It presented a list of these projects to the Commission of the Cartagena Agreement for consideration during its XXIX Period of Regular Sessions.

93 "Junta's report to the Commission on relations between the Andean Group and the United States," COMIXXXIdt. 3, October 10, 1980.

CHAPTER IV

Central American Common Market (CACM)

Introduction' During 1980 the member countries of the Central American Common Market experienced an extraordinary political crisis. The situation in El Salvador was practically one of civil war, in which approximately twelve thousand persons died during this period as a result of the internal conflict. Political violence also increased notably in Guatemala. In Hon-duras, elections for the Constitutional Assembly were held in a climate of widespread political agitation and union activity. Nicaragua experi-enced the initial stage of its revolution, making bold efforts to recon-struct the economy and restructure the entire social order which existed prior to the insurrection. The social peace and democratic stability which have long characterized Costa Rica did not appear to have been affected greatly by the Central American crisis, in spite of a perceptible increase in internal tensions.

The subregion as a whole appeared to be debating between fun-damentally opposing options related not only to the nature of the eco-nomic system but to the cultural and prevailing values in the society and, of course, to the future of integration.

The internal disintegration (lack of coherence in society as a whole and dispersion of its individual elements) of the countries of northeast Central America, added to the greater political differences among the regimes of the subregion, are factors which easily explain the absence of important advances in Central American integration. These factors could even have produced major setbacks in the integration process. However, no particularly negative event took place within the scope of

, The principal sources of information used for this section were: a) Secretaria Permanente del Tratado General de Integracion Econ6mica, SIECA, Carta Informativa, Nos. 219-228, 1980; b) Inforpress Centroamericana Nos. 375-424, 1980; c) Central American Report (CAR) Nos. 1-48, Vol. VII, 1980. Other references are indicated in the same text.

Cos

ta R

ica

cc z

cc

cc 0

cc O - 0

0 I cc

0

eo cc E cc cc 0 To

O co

cc Cf)

cc O

Cen

tral A

me

rica

n C

om

mon

Ma

rket

Co

unt

ries

: B

asic

Dat

a, 1

980

cc O

Vo

lum

e X

XX

IV,

IMF

; an

d

w

412 CA

ec

cc G LL

cc C O cc C cc

w

0 co C)

S;

E O C O

O E

cc O .c

ec

V

O

0 co

cc C

77; E a (5)) ci) 0 -o O

0

a rr cc

4t oi O <

CC)) I :6 7 (7)

>.12 E 0 E E "6. cc O

LIJ et 0 !a o (/)

co Lc) C7) T LC) •cr 4.,=• • • c:; - Lc --LC)

CV N N CV

122 CENTRAL AMERICAN COMMON MARKET (CACM)

CC) LC)

CCi CNJ C,J

cc) c)) Lc, .0-

.4- O c:) CD CNJ CD CO

▪ C\-J CD v-- CO gor CC) CO LC) CO N- Lo CO CNJ

CNJ CNJ

0) CNJ CC) 01 0) CO

h.: CO

CD CO T-- 0) CNJ

T--

1-- CD

CNj LC) CO CD C7) I-- CD r,- /-- r.--- ce) co r.-- cv co r.) cp cv m— CO N .4 cc) a) ,- cv

cei T--

Lc) N- CO CNJ LC) C:) C35

CO CD C:) CO CO .,r CO N CO .4- cv, .4- CNJ LC)

0) CD

00 CD .,,or Lc) N- c,) C:) CO C:) CNJ r,- C:) CO 0) (NJ .zr N- CNJ LC) T-- .r 0) .1. LC) LC) CNJ CO

r,-

• 0.1 T 0) LC) LC) CO CO

to Cvi CD CD N- N- CO CO CV r NTT

0) CD

ci co .4- co CD CNJ CD LC) CO CNJ 0) CNJ CO

▪

LC) CD CD CO .4- r,. CO CNJ LC) LC, 1 CD CNJ 0) CY)

.4--

N

C) LC)

C:i CO LC) N- .-- CNJ CD r... CD 0) LC) CO gtr LC) ...-- CD h. CD CO CD

CNJ go- O c) c\I go- CNJ ,--

C4 Cei T T T

CNJ "Cr c,..i cp

;11-- c) go- 0) 0) CNJ CD r,-

r,- LC) cp r,- Lc) r,- .-- Lc) ,-- .-1

ci CO .4..-. Lgi T T CNJ T--

O- M

= ,ram ,,_, 4_, cc; = = ,.

...v .E. z

▪

, Q_ f••■ 4— 4—* — ... c, ... ...- ".... 0 = 0 0) (-) ..--. U) a) Oy u) x ra -0

0 . eti .= (/) • — 0) CI) TZ 4—,.., :1:-' CC1 V '-• CD 4— = a, -- ,- 4- o o -o cc "CI 'CI ■—•.. a, •-• 0._ ..- CU B 0 _ o _ _ . — " as o o 0- ca u, 0. as CL =5 CV u,3

Ct ay cS _, eE 8 cc , -2 1 D 0 - , a , _ _ oc c t g . E_ g g g 5 00

CL0CO co - ,_ . — as e2 a 12 a ....

a., ..........., ..... C2....... cs ........, ........ ,-., s— ,..4.-- --- 1.-- --- a, ,-, 1.... 0 0

Cr ....

CIC I..... a. CD CD Cr LA- -..

ti 0:1

INTRODUCTION 123

subregional integration in 1980 and the advances, although modest, offer a relatively positive outlook in this regard. The major achievements are described below:

In the first place, an undeniable reactivation of the institutional apparatus can be observed. In Section A and in the chronology of events in this report, there are no less than 60 activities of integration orga-nizations and forums in 1980, or an average of more than one activity per week. This reactivation was accompanied by the creation or insti-tutionalization of new subregional organizations, which demonstrates a trend toward extending the integration movement to sectors not pre-viously included within it.

A treaty was signed by Honduras and El Salvador formally ending the differences which for more than a decade had impeded commercial and diplomatic relations between the two countries and hindered the development of the Central American integration program. The Treaty does not definitively resolve the problem of border delimitation and is looked upon by the opposing sectors of both governments as a maneuver on the part of both armies to aid in coordinating activities against the insurrectional movement in El Salvador. Nevertheless, this coordination could be accomplished with or without formal agreements; what the Treaty does is establish a basis for renewing trade between the two countries and reincorporating Honduras into the integration process, as well as reestablish normal intra-Central American land transportation and diplomatic and consular relations among all countries of the area.

With regard to intra-Central American trade, it recuperated from the setback which it had experienced during 1979 and managed to exceed one billion dollars for the first time in 1980. Contrary to fears of the possible negative influence of the Nicaraguan revolution on the func-tioning of the Central American Common Market, Nicaraguan imports from the rest of the countries of the area showed an extraordinary dynamism in 1980, representing more than a third of Nicaragua's total imports. This emphasizes the importance of real economic interde-pendence among the Central American countries, as explained below in the section on intrazonal trade.

To complement the achievements mentioned steps have been taken in other limited integration related areas such as tax and customs har-monization, identification and promotion of production projects of subregional interest, physical integration, unification of positions vis a vis other countries and in international forums, etc. In no case were spectacular advances made, but rather small milestones on the long road to unifying societies, whose significance only has relevance as a whole.

Finally, during 1980 there were many declarations calling for a complete restructuring of Central American integration, although these declarations were not translated into any kind of clear basis for carrying them out effectively. This subject acquired particular relevance due to the expiration on June 4, 1981 of the initial 20—year duration of the General Economic Integration Treaty.


At present there are basically two proposals regarding the content and form of the next stages of the Central American integration process. In the first, the emphasis is on a complete restructuring of the integration program, which would involve the creation of a Central American Eco-nomic and Social Community with closely coordinated policies oriented toward the integrated development of the community.2 The second limits its scope for reasons of pure political feasibility to a revival of the integration process without substantially changing the present legal in-struments, concentrating on carrying out specific projects and activities which in themselves would offer tangible benefits to the member coun-tries 3

The heart of the problem of restructuring appears to lie in the fact that in the abstract everyone would like for it to be accomplished in an integral fashion. There is, however, a fundamental obstacle in the dif-ferent conceptions (arising from the political and ideological heteto-geneity of the Central American states) of what should be considered an integrated community development that truly would benefit the peo-ple.

A careful review of each of the integration-related events in 1980 reveals that while the formal declarations attempt to proceed in the direction of "integrated development", the Central American integra-tion process is in practice adopting a style of "integration by projects", although the trade-off between the optimum and the feasible has not been ignored.

A. Institutional Aspects The most outstanding institutional aspects of the Central American in-tegration process in 1980 were the following: a) the signing of the Gen-eral Peace Treaty between El Salvador and Honduras; b) a significant level of activity in the integration forums; c) the creation or institution-alization of new subregional organizations; and d) numerous calls for the reactivation and restructuring of the Central American integration program. Each of these aspects is explained below.

'This possibility is discussed in detail in SIECA's "El Desarrollo Integrado de Centroarnerica en la Presente Decada" (11 volumes), IDB-INTAL, Buenos Aires, 1973. SIECA's proposal resulted in the Informe del Comite de Alto Nivel (CAN) para el perfeccionamiento y la reestructuracion del Mercado Cormin Centroamericano presentado para los presidentes de las republicas Centroamericanas, in March of 1976 which appears in Temas sobre Integracion Centroamericana (pp. 121-145), IDB/ICAL, San Jose, 1979. This report presented the so called "framework treaty project" or Proyecto de Tratado de la Comunidad EconOmica y Social Centroamericana, which appears in full in Estudios Centroam-ericanos (ECA), Volume XXXII, Nos. 339-340, pp. 95-144, Universidad Centroamericana Jose Si-meon Callas, San Jose, January-February, 1977. 'With regard to this possibility, see ECLA's proposal "Sugerencias para reactivar a corto plazo la integraciOn Centroamericana", (E/CEPAL/CCE/367/ Rev. 3), June 1975.


125

1. General Peace Treaty between El Salvador and Honduras On October 30, 1980 in Lima, Peru, the Foreign Ministers of the re-publics of Honduras and El Salvador representing their respective gov-ernments, signed the General Peace Treaty which formally put an end to the differences which had existed between the two countries since 1969. The Treaty became effective on December 10, 1980 when the two governments exchanged ratification instruments in a ceremony in Te-gucigalpa, Honduras which was attended by several chiefs of state from Latin America and numerous representatives from other countries.

Since 1861 Honduras had claimed 345 square kilometers distributed in six sections along the border strip which were also claimed by El Salvador. The conflicting claims of these border areas impeded the precise demarcation of the entire border between the two countries. During the present century El Salvador's population density together with problems resulting from its system of land holdings, provoked massive migrations of Salvadorean workers into Honduras, causing in-ternal political conflict and periodic tensions between the two countries. In addition, the development of the Central American Common Market in the decade of the sixties under eminently free trade principals led to a notable industrial concentration in El Salvador and an increasing trade deficit in Honduras. This led to disputes concerning the advisability of "balanced development" of the region and the appropriate distribution of the costs and benefits of economic integration.

These basic elements of friction, added to other factors of the mo-ment, culminated in July 1969 in a military skirmish which lasted 100 hours. Diplomatic, consular, and trade relations were suspended. Both parties claimed indemnization for war damages caused by the other. Transit of persons and goods by land in El Salvador to the countries in the south of Central America became impossible. Honduras denounced the economic integration treaties and signed bilateral treaties with the rest of the countries in the Common Market. The old border controversy was revived. All of this contributed to a considerable reduction in the dynamism of trade among Central American countries and virtually paralyzed the development of the integration program.

The Organization of the American States (OAS) began mediation during the days of the military conflict, which helped avoid its prolon-gation. To avoid the continuous explosion of border clashes, a safety zone 6 kilometers wide was established in 1970 between the two coun-tries. After several unfruitful attempts at negotiation, Honduras and El Salvador signed a "Mediation Agreement" on October 6, 1976 which initiated a new stage of negotiations with the mediation of an ex-pres-ident of Peru and the International Court of Justice. This stage ended with the signing of the General Peace Treaty under discussion.

The Treaty contains 48 articles distributed under nine titles which basically cover the seven topics into which it was agreed that the dif-


ferences should be divided, plus two topics covering formalities of rat-ification, period of effectiveness and observance. Essentially, the agree-ments on the seven basic topics are as follows:

a) Peace and treaties Both governments renounced the use of force in their relations; they pledged to maintain and consolidate the peace between them to resolve any differences by pacific means and in accordance with the principles and standards of international law and to comply with all bilateral and multilateral treaties which are in effect between them.

b) Free transit Both governments pledged to permit free transit through their territory of persons, goods and vehicles from the other country, from the date the Treaty becomes effective, without any additional requirements other than those applied by each of the contracting states to persons, goods and vehicles from any other Central American country.

c) Diplomatic and consular relations Both governments agreed to the immediate reestablishment (beginning with the date of effectiveness of the Treaty) of diplomatic and consular relations.

d) Border questions The contracting parties agreed to delimit the border between the two republics in those sections in which there is no existing controversy, which are explained in detail in the Treaty. The final resolution of the border demarcation in the controversial zones is postponed for a period of five years beginning with the date of effectiveness of the Treaty. During this period a mixed commission will determine the border line in those zones, which should be ratified by means of a Protocol signed by both governments. If at the end of the 5—year period a complete agreement has not been reached regarding the border differences in the controversial zones, both governments will submit the difference to the decision of the International Court of Justice, whose decision they pledge to carry out completely and in good faith, giving authority in the present Treaty to the Mixed Border Commission to demarcate the border line as established by the court.

e) The Central American Common Market Both governments agreed on the need to restructure and strengthen the Central American Common Market. As an initial stage in the full rein-corporation of Honduras into the Central American integration process, the governments will regulate trade relations between both countries by means of a bilateral trade treaty whose preparation will begin within three months after the General Peace Treaty becomes effective.

f) Claims and disputes Both governments agreed not to make claims implying indemnization


127

from state to state or from person to person as a result of the events which occurred in the month of July 1969 or in the period immediately previous to that date, or as a consequence of any occurrence directly or indirectly connected with those events.

g) Human rights and family Both parties pledged to respect and protect the rights and the essential personal liberties of the citizens of the other country according to the principals and standards established by international agreements (spec-ified in the Treaty). Citizens of one of the states may reside in the other state subject only to the migratory regulations which apply to the citizens of any other Central American country.

2. Activities of Integration Organizations and Forums In 1980 the following integration related events took place:4

a) Meetings of heads of state, ministers and vice-ministers Meeting of the President of Guatemala with a member of the Gov-

erning Junta of El Salvador. Meeting of the President of Costa Rica with three members of

Nicaragua's National Reconstruction Board. Meeting of the Presidents of Guatemala, Honduras, Costa Rica,

and Panama, three members from the Governing Junta of El Salvador and one member of Nicaragua's National Reconstruction Board, for the purpose of exchanging ratification instruments for the General Peace Treaty.

Meeting of Foreign Ministers of the Central American Isthmus. Meeting of the Foreign Ministers of Guatemala, El Salvador and

Honduras. Four meetings of Foreign Ministers of El Salvador and Honduras. Four meetings of Planning Ministers and Secretaries of the Central

American Isthmus. Meeting of Education Ministers of Central America and Panama. Meeting of Public Health Ministers of Central America. Three meetings of Ministers responsible for Central American Eco-

nomic Integration (the name was changed from meeting of Central American Economic Ministers beginning with the meetings of February 21st and 22nd, 1980 in San Jose, Costa Rica, because in January 1980 Nicaragua created its Foreign Trade Ministry and assigned it responsi-bilities in the area of integration which formally had been under the Ministry of Economics. The same name change also applies to the forum of Vice-ministers of Economy).

4 See chronology of events at the end of this report.


Four meetings of Vice-ministers Responsible for Central American Economic Integration.

Meeting of Foreign Vice-ministers of Honduras and El Salvador.

b) Meetings of other integration organizations and forums Meeting of the Central American Monetary Council.

Two meetings of the Assembly of Governors of the Central American Bank for Economic Integration.

Two meetings of the General Directors of Central American Cus- toms.

Four meetings of Coordinators in charge of reviewing tariff policies in Central America.

Two meetings of the technical working group on Central American standardized customs forms.

Five meetings of the Coordinating Commission for Marketing and Price Stabilization in Central America (including meetings of its tech-nical group).

Two meetings of experts on beef cattle held by the Central Amer-ican information, coordination and consultation Mechanism.

Meeting of the Central American Permanent Agricultural Research and Extension Committee.

Meeting of the Regional Electric Interconnection Group. Meeting of the Central American working group on tires and related

parts. Meeting of Central American Integration and Industry Directors. Meeting of the Central American Commission for Scientific and

Technological Development. Meeting of the Central American Group of the Latin American

Railroad Association. Meeting of trade promotion organizations. Joint meeting of Integration and Industry Directors with public

health authorities. Meeting of the Central American Maritime Transport Commission. Meeting of the Federation of Central American Chambers of Tour-

Meeting of Central American Tourism Directors.

c) Other integration related events Meeting of the President of Costa Rica, representing the Central

American Common Market, with the Commission of the European Economic Community (EEC).

Signing of an agreement between the governments of Costa Rica and Nicaragua for technical assistance on labor matters.

Initiation of the masters program of the Central American Public Administration Institute (ICAP).

Exchange of ratification instruments for the electric interconnection agreement between El Salvador and Guatemala.

ism.


Extension of an agreement between the Central Banks of Central America and the Mexican Central Bank.

Signing of an agreement for technical assistance on agricultural policy between the Permanent Secretariat of the Central American Eco-nomic Integration Treaty (SIECA) and the government of El Salvador.

Signing of a corporation agreement between SIECA and the United Nations Industrial Development Organization (UNIDO).

Meetings of the Secretariats of SIECA and UNCTAD (United Nations Conference on Trade and Development).

Joint participation by Central America in the meeting of Governors of the Inter-American Development Bank (IDB).

Three meetings of the Union of Banana Exporting countries (UPEB). Meetings of experts on international trade and transportation de-

velopment. Conference of Latin American Planning Ministers and Technicians. International conference on food and nutrition planning of the Cen-

tral American and Panamanian Nutrition Institute (INCA). Miscellaneous conferences, seminars and meetings on integration

and related topics.

3. Creation of New Subregional Organizations, Forums and Programs The subregional organizations, forums and programs created and insti-tutionalized in 1980 are listed below in chronological order:

a) Technical Cooperation Committee for the Central American Isthmus At their meetings on January 18 and 19 in San Jose, Costa Rica, the Central American Planning Ministers and Secretaries agreed on the need for "institutionalizing the meeting of Technical Cooperation Directors" of the Central Planning Organizations of the Isthmus. The same min-isters agreed at their meeting on June 12 in Tegucigalpa, Honduras "to establish a technical cooperation committee for the Central American Isthmus" which would be made up of the above-mentioned directors of technical cooperation units.

In all the Central American countries and Panama, the central planning organizations are responsible for programming, negotiating, evaluating and following-up the technical cooperation lent to their re-spective country by the international community. This work is carried out through the technical cooperation units established by all the or-ganizations, which until now have not become involved in international technical cooperation for regional and subregional projects or for in-tegration organizations. The new subregional technical organization (the Technical Cooperation Committee) was created to insure "appropriate coordination and complementation between national and subregional and regional programs and projects". This Committee will act as an advisory body to the meeting of planning officials on regional and subre-


gional technical cooperation and will carry out coordination functions among the different integration entities.

The creation of this Committee demonstrates greater involvement by the planning organizations in the Central American integration proc-ess, as international technical cooperation for integration projects and organizations will be analyzed on a technical level by the Committee and will be approved by the Meeting of Ministers.

b) Latin American Association of Meat Exporters On February 13, 1980 the Latin American Association of Meat Ex-porters (ALEC) was formed in San Jose, Costa Rica as a private in-ternational organization. Initially it was made up of 40 meat-exporting enterprises of which 26 were from the Central American Common Mar-ket countries and 14 from Mexico and Belize. The Association's purpose is to defend and promote the interest of beef producers, processors and exporters. The ALEC will participate in negotiating export quotas, opening new markets, coordinating matters of interest with exporters and de-fending the quality of the exported product.

c) Meeting of Foreign Ministers of the Central American Countries The Foreign Ministers of the six countries of the Central American, Isthmus resolved on March 15, 1980 in San Jose, Costa Rica to insti-tutionalize the meeting of Foreign Ministers of the Central American Isthmus, which will hold regular sessions three times a year "for the purpose of reaching agreement on common positions regarding matters of mutual interest" . It will also hold ad hoc meetings whenever any matter should require immediate consideration by this new subregional forum.

At the same meeting of foreign ministers it was agreed "to insti-tutionalize meetings at the level of director generals of the foreign min-istries", which will be held two or three weeks before the ministers' meeting to carry out preparatory functions.

The foreign ministers also agreed "to institutionalize meetings of the representatives of these countries in international organizations and conferences", who should consult with each other monthly on those topics under consideration at the meetings lin which they participate and attempt to define and adopt common positions.

With this institutionalization of relations among the Central Amer-ican foreign ministries and their dependencies, as well as the reactivation of the Organization of Central American States (ODECA), a study of which was ordered at the meeting of the Directors General of the Min-istries, the foreign ministers continued to take active part in the restruc-turing of the Central American integration program and to improve the coordination of Central American foreign policy, particularly with re-gard to the formation of a common front and increased bargaining power in various international forums and organizations.


d) Federation of Schools and Professional Associations of Economic Sciences in Central America and Panama On March 21st, 1980, the Federation of Schools and Professional As-sociations of Economic Sciences in Central America and Panama was formed in Guatemala City, Guatemala. On that same date the statutes were approved and the authorities of the new organization were elected. The objectives of this federation are the normal ones for this type of professional association, concentrating on the promotion of the union interests of its members and the advancement of knowledge and proper application of the discipline in question.

e) Masters Program-of the Central American Institute for Public Admin-istration On June 23, 1980, ICAP initiated a Masters Program in Public Admin-istration in San Jose, Costa Rica. The purpose is to train professionals in this discipline so that they may later strengthen the public adminis-tration school in the universities of their respective countries and con-tribute to the training of government staff.

f) Central American Commission for Maritime Transport (COCA- TRAM)This Commission was created by the XXII Meeting of Ministers re-sponsible for Central American Economic Integration (held in Mana-gua, Nicaragua on July 4 and 5, 1980), for the purpose of handling in an institutional and permanent fashion all aspects related to the devel-opment of subregional maritime transport. COCATRAM replaces the former Central American Port Authority Commission (COCAAP), whose functions were more limited. The new Commission was installed in Managua, Nicaragua on September 30, 1980.

4. Calls for Restructuring the Central American Integration Program During 1980 there was a proliferation of declarations on the necessity of carrying out an integral restructuring of the Central American inte-gration process. By way of illustration, declarations from four principal organizations of the subregion are quoted below.

a) Meeting of Planning Ministers and Secretaries of Central America and Panama On January 19, 1980 in San Jose, Costa Rica, this organization declared that "important changes have occurred in political, social and economic aspects of the member countries" and that "it is necessary to restructure and improve the Central American integration process in order to make it responsive to the present and future needs of the social and economic development of the Central American countries". To this end it was agreed "to recommend to the governments" that an evaluation be made of the entire Central American integration process and its organizations and institutions, "that all necessary measures be taken to activate the


process of restructuring and improving the integration process", that the national planning organizations be encouraged to participate in in-tegration related activities, and "that Panama be invited to take part in these activities so that in the future it can participate fully in the Central American integration process".

At the same meeting the ministers resolved "to recommend and request that the heads of state of the Central American Isthmus, at their next meeting, proceed with the establishment of the basis" , and with the immediate determination of the "mechanisms and channels through which the process of restructuring the integration program should be initiated", with an explicit declaration of the "political will to overcome problems which have been obstacles in the past".

b) Meeting of Central American Vice-ministers of Economic (Or Vice-ministers Responsible for Central American Economic Inte-gration). After examining the role of the vice-ministers' forum in the administration of the Common Market, it was considered appropriate to recommend that the Central American Economic Ministers (or min-isters responsible for Central American integration) resolve in their next meetings to adopt all measures contributing to the restructuring of the economic integration process. This resolution was adopted at the meet-ings in San Jose, Costa Rica on February 21 and 22, 1980.

c) Meeting of Central American Economic Ministers (Or Ministers Responsible for Central American Economic Integration). At this meeting in San Jose, Costa Rica on February 24, 1980, the recommendations of the vice-ministers that special attention be given to questions related to the restructuring of the integration process were accepted and approved.

d) Meeting of Foreign Ministers of the Central American Isthmus In San Jose, Costa Rica on March 14 and 15, 1980, considering that "the different regional forums have pointed out the limitations of the integration instruments in adequately meeting the present requirements and advancing the process", it was resolved to "emphasize the political will of the Central American states to restructure the Central American integration process in an integral fashion", to urge the economic min-isters to take steps to speed the study of this restructuring and initiate discussions to establish the basis for negotiation on other aspects of integration and to reactivate the organization of Central American states (ODECA). For this last purpose, the meeting of Directors General of the Foreign Ministers was instructed to embark on an exhaustive study of ODECA in the near future.

The above declarations, as well as many other formal and informal declarations which have been issued in Central America in 1980, leave two overall impressions. On the one hand there appears to exist a general consensus on the need for integration of the Central American countries,


which is not surprising considering the traditional desire for unity in the countries in the subregion and the many limitations resulting from the limited size their individual economies. On the other hand there is an acute dissatisfaction with the existing integration instruments and a no-table inability to determine on what basis these instruments should be reformed.

It should be noted what the four organizations quoted recognize, either implicitly or explicitly, that no general basis for restructuring has been established. With regard to the determination of this basis and the activation of the process, there appear to be discrepancies in the re-spective declarations or at least important differences of emphasis. Thus, while the vice-ministers of economics recommended to their ministers that they "take all measures to promote restructuring", the planning ministries on their part recommended to their chiefs of state that they should be the ones to determine the "bases, mechanisms and channels" for the restructuring process, and the foreign ministers, in addition to "reemphasizing the political will of the Central American states to res-tructure the integration process" decided to "initiate discussions to es-tablish the basis for negotiation" and resolved to reactivate the ODECA.

After several months of inability to determine the appropriate forum to carry out the task of restructuring the integration process, the min-isters in charge of integration agreed at their XXIII Meeting (July 4 and 5, 1980 in Managua, Nicaragua), to charge their respective vice-ministers with these tasks, who should then present the results of their work and the pertinent recommendations to the Meeting of Ministers. They also clarified that the termination of the 20—year period referred to in Article XXXI of the Central American Economic Integration Treaty does sig-nify the expiration of the Treaty, except for the states which expressly denounce it.

The vice-ministers in charge of integration, at their meetings of August 21, 1980 in Managua, Nicaragua and September 8 and 9 in San Jose, Costa Rica, discussed aspects of methodology and organization of the tasks with which they have been charged, defining the following topics on which the restructuring process will be based: free trade zone, common external tariff, industrial programming, agricultural policy, ex-ternal economic policy, energy, transportation, social policy, science and technology, treatment of foreign investment, mobility of persons and capital, free contracting of labor, integrated development program-ming, Central American monetary zone, financing of integration and its institutions, physical integration, safeguard policies, rules of origin, institutional aspects, regional mechanisms, balanced development, dis-tribution of costs and benefits, bargaining mechanism, full process of convergence with Honduras, bilateral treaties and the possible incor-poration of Panama.

In spite of the definition of these topics at the forum of vice-min-isters it was unclear at the beginning of 1981 what basic orientation


would be given to the restructuring process. According to recent studies5, political conditions do not presently exist for advances in integration in accordance with the integrated development focus proposed by SIECA ten years ago, nor for advanced stages in the traditional integration of markets as would be the case with an economic union with a common currency and perfect mobility of factors, persons and capital. In these circumstances, while it is impossible to take the most difficult steps toward integrated development, the real options of restructuring appear to be two: a) to simply extend the Central American Economic Inte-gration Treaty, or b) to incorporate all the objectives of this Treaty (and those proposed by the draft treaty of the Central American Economic and Social Community) into a new treaty framework which in addition would promote integration by projects.

B. Trade Aspects 1. Intrazonal Trade The figures for intra-Central American trade during the decade of the seventies provide the most important evidence that in spite of the in-stitutional stagnation and multiple problems experienced by the Central American Common Market in this decade there existed a real basis for economic interdependence among the member countries. From 1970 to 1978 intrazonal exports increased from approximately 300 to slightly more than 900 million dollars as shown in Table 27. In 1979 the overall figures remained at about the same level as the previous year due to the falling off of Nicaragua's trade as a result of its civil war.

In 1980 intrazonal trade showed renewed vitality. Preliminary fig-ures for the year reveal that intra-Central American trade had overcome the slowdown experienced in 1979, increasing to one billion dollars (Table 28). In percentage terms, intrazonal commerce increased in 1980 by 33.9% over the previous year, which appears somewhat surprising in view of the political situation experienced in the subregion.

When the overall figures are broken down by country, a consid-erable increase can be observed from 1979 to 1980 in the imports of two countries, Nicaragua (140.8%) and El Salvador (34.2%), accom-panied by a large increase in the exports of two other countries, Gua-temala (49.8%) and Costa Rica (64.4%). Although Honduras also in-creased its exports in percentage terms, reducing its traditional trade deficit with the other countries of the Isthmus, the absolute magnitudes of its intra-Central American trade actually were reduced in comparison with the other countries. In more specific absolute terms the increase in intrazonal trade during 1979 and 1980 consists largely of an increase

'See the study included in No. 51, October 1980, INTAL Monthly Magazine, Integracion Latinoam-

ericana, dedicated to "Centroamerica, redefinicion integracionista".

TRADE ASPECTS

135

in Nicaraguan imports from Costa Rica and Guatemala by 72.3 and 49.7 million dollars respectively, plus an increase in Salvadorean imports from Guatemala by 97.7 million dollars. This indicates that the cause of the dynamism in intrazonal trade in 1980 can be found paradoxically in the internal situation of El Salvador and Nicaragua.

In the case of Nicaragua, its imports from the rest of Central Amer-ica during the first quarter of the year rose to 66.2 million dollars, or almost double the level of imports during the first quarter of any of the four previous years (1976 US$29.8 million; 1977 US$37.5 million; 1978 US$30.4 million and 1979 US$33.4 million). Nicaraguan exports to the rest of Central America, in contrast with its imports, experienced a drastic reduction in the first quarter of 1980, representing half (17.3 million) of the 1979 level (34.7 million) and producing a trade deficit with Central America of US$48.9 million in only three months of the year. At the end of the second quarter of 1980 this deficit had increased to US$95.8 million. This situation, which reflected the country's general situation in international trade, obliged the Nicaraguan government to adopt import restrictions on September 8, 1980, which are explained further in this report.

The data reveal the following: the behavior observed in Nicaragua's trade with Central America in 1980 is a result of the destruction of the production apparatus and upheavals in the economy caused by the civil war of 1979. As the productive capacity of the country was reduced, in particular that of the industrial sector, its exports to other Central Amer-ican countries were reduced and it became necessary to increase overall Nicaraguan imports to satisfy the internal demand. A considerable por-tion of this increase in total imports came from the rest of the Central American countries, who put credit facilities at the disposal of the Ni-caraguan Central Bank to finance the dollar settlements of its uncom-pensated balances in the Central American Clearing House. Nicaraguan imports from Central America thus came to represent more than a third of its total imports in 1980.

With regard to El Salvador, the most notable aspect of its intrazonal trade in 1980 was the continuous increase throughout the year of imports from its neighboring country Guatemala. These imports, which tradi-tionally have been the highest among any two Central American coun-tries, increased by more than 50% over those of 1979. This behavior clearly has its origin in the turbulent political situation of El Salvador during the year. The closing of numerous factories, increasing unem-ployment and the considerable fall in the gross domestic product made it necessary to replace local production with imports from its most im-mediate supplier, Guatemala, in order to maintain certain minimum levels of consumption. The situation of El Salvador's international mon-etary reserves at the end of 1979 was not extraordinarily grave (254.4 million dollars), which permitted the financing of the considerable trade deficit resulting from the factors described.

cr) CX) . . . .tr c.1 .tr

C,J C) T--

1

CO CO C:)

LC)CY) C,J

C,J CY C:) )

ti ' ti

CON C) LC)C')

U)N-

cD T-- • • •

T-- LC) CNJ LC) C,J

LC) CC) C3)

CNJ N (3) T-- CJ)

O CO .T 6 C7; CD CD U)

O cc) .T - • • T-- CO

CX) CO 1.--

+

cc) c,j co Lci 0) CO C,J

0 CO

CA N CA

CO N CA

N

0)

CO

0,

LA

a)

O

0

C)

Lai

CD

C

oi • - CD E

s-5 CD 1:3 0 5

co

'ff co c

N

0)

CA

O


CO .i- cc> c:) cc co co r..... T-- 0)

CCi Or

1,.. N.: Lri cci cci CC) 1,....

CO CD T-- CO CC> CO r,- C) co r,- ,-- C,J T-- C,J CNJ 1--..‘

1 1

+ 1--

CD 01 T-- CC) 0) CO LC) LC) CD TNT .1- T-- CO CX)

.:.1- c» .tr CNJ cc) .:f CO CON CO T- C) U) c) 4 Oi

LC) 0, LC) 0) LC) CO LC) 0) v- cp T-- co T-- .tr r,..

co ,-- .-- TN T. 1" TN CO

+ I I I I

01 CO 0) CO 0, OM CY)

CO Co r•,.: CC) CO CO CY) .1- CD CT c,) CD CNJ CO

T-- T T-- C,J CO

LC) .1- T-- Lc) co c,J Lc, CNJ l',. CD LC) LC) .1. cp .T. CXD

CV LC) f,.. Lri 6 Lri • • •

C) T-- f",.. 4 Ci CD 4 CO CCi Oi

NOT- 1-- T-- .gr r,.. ou cp cc) co r,.. CO 1--

C,J T-- T-- C,J C,J 1-- 1-- 1." T" r....

± + I I +

cp cc)

CO 0) CY)

LC) ti N.:. CY) CT; Co LC)C:D

CY) Cf) C,J CNJ

C,J C,J

cp .1- cc) T-- cri (15 c,j cci Lri CO CD CX) titi

T-- 1--

C) NTT CO 0)••

cci Lti ,-- cc) CD cp cc)

T"

NTT CO CY) LC, cyj csi c.j cc) C,J T M

1-- T--

CO CY) LC) I,- CO 0) CY)

tiON c:i Lri 4 C,J MM T--

T-- 1" 1" T" CO

CC) ti T--

C,J r•-■ LC)

C,j CNj C:i

N .zr r,. O 0) T-- C,J

C) T--

r,- cp co Lc) CV CY) C) P,- C:) . . .

CI) C,J CO TOO) .:11- 0) COD C,J .r T-- 0) CY) CY) C:) m-- C,J

T" TT

TAM co 0, CC) LC) r,- CNJ CNJ

CD C‘J CNJ CD O UT

CY) CY) CX5

1-- C‘J CO COO N CCU) CO

CO

I I I

ti C3) LC) CY) C,J CO CY) LC) C,J CO cc) v- LC) T-- • • •

CO CO a; NLCDN- LC) C,J CO CO CD ,-- C3) CX) CO

0) CO CV 0, N- T-- NT LC, CO LC) r,- CNJ CD CC

+ + I I I

...ar CO 0) co C,J C) LC) LC)

Lc) cc> CD CY) cc) cci cri CD,-- P LC) N- CV

C,J

I I I

MOM

CD CC) CY)

CO CO CV CD 0) C3) T-- T-- CD T-- I's CO CY)

CO CD CY) CO 4 csi. COOS CD CON 0; r,- CDT Lr) co PLC) U) CV C3)

C,J

..--.. ,......, CO CO CO CO

C) LI- C) Li- O. Li- C) LA- C) CC: LL- --- —......... LA- 7.7 ......-._.

c

c .. c 2 •c C.) LD --- C.D LD — C.)

,a) C.D C.) C.D LD sw c-.., a.,

E E E E cz

0 o 0 -i= 0 . o ...- ..., . ,_ 8 0 - 03 0 L- CL) CD 4-. ..-

C) ,_. 4-. C.) 4-• ..... u 4-, m— c.,

CCS v, cn = E cn

ct cr, LA 0 0, CI, C cn cr, cn = ,,, i u, F,==CC. -C:3==CVS ost=a$ ===C. C.)

0300 -F1 ,-,00Cif cr) PQM U-0 0 C. E., ..0 ,0 cr,c's ,c)3> Luc=,,, _goo = p_ CLCO CO CI- CLO3 : -C,...:C: <C'j =Ea

465 al E 'z' x c w — c, x ,.., LU -- 17.., iii

C ■■•• = o LI 1-1-1 = ..Z. c_

0 D C.

cu )

00 CO ti C

CO00

Z.;

C)

c.; 00

Co

E O

E Ezi - 6

cr

co

CO

8 al o

(7, CO O

,̀L.

2

00 I I C

CO C)

0 CO

> 0 co a CO

E

)9-

N a)

co a)

a,

O cc a)

a) N

O co

a, C3)

a) N rn

cob

op° rn

TRADE ASPECTS 137

co CT)

CO CO

C V") C

CT) LC)

a; CO 00 r

•

a;

C) LC) a) - 00

co

N- Lc) LC)

CO N LC)

cr) c=i cr; Lc) cr)

co

LC) CO

T-

N CO CC; C\

CO

CO

C:)

N 00 -cr C:)

LC,

c71

a_c) x 0

00 O LC) N LC) CO

- LC)

N 0) CT)

c.; N. 0 C \ I

CT)

'---. CC)

CV 0 C\.1

CV 1N••• a) T

`CT CO

Lr) coCC)

▪

c::; • Lc)

N.. a) co .,-. o c:5

00 Lr

o

cco

o Ir-- CO

94)

w 0 . 8 . — ....-.... co

cc- 1, -.) 7). . CV Cn . = (/) . • 2 cr, , ., 'IC 2: Lii E t a) c) c"..„. t a) c, ..- t a) c) co a) c, cc = a, c) c a ) c) Co 0 c„, 0 N. co - a„,, r.-- CO 0 1,... CO cc 0 I,- CO cc 0 6.., CA/ - — I's co E , 4.- a, o., ,,:s gas", o., .. ..cr) cr, c‘i ci.a, a,

w-ci) , - ,..- ..., i .-- .--- - ,-- (-1-6 CT) CT) 1.7), , E E oE .9E1-Y- ccgE'-'-- ti w 0 CD- -- LLI :.::- = :::-.. Z :::...., C..3 :.=. }...- « cn

C) V C as C)

C)

C

CD

C

CD

-0

C

CD

▪ 0) E

1?. ▪ O a)

co

" • -2-

CD :E B

1—


As a logical consequence of these events, the percentage share of Nicaragua and El Salvador in intrazonal imports increased in 1980 to 23% and 29% and their share of exports decreased to 7% and 17% respectively. The reverse occurred in the cases of Guatemala and Costa Rica. Their respective percentage shares of intrazonal trade fell in the case of imports to 19% and 20% and increased in the case of exports to 45% to 24% (Table 29).

Most of the increase in Salvadorean and Nicaraguan imports was represented by non-durable consumer manufactured goods; it was pos-sible to increase the supply from Guatemala and Costa Rica very rapidly probably due to the existance of a substantial unutilized productive capacity in these countries.

Thus, trade within Central America in 1980 revealed an interesting case of complementary factors in critical situations: needs arising from the reconstruction of one country and the survival of another contributed to satisfying the needs of two other countries in utilizing part of their idle productive capacity.

The profound transformations taking place in the subregion, from having a negative effect on intra-zonal trade, have in fact given rise to a clear, though temporary, demonstration of the real economic inter-dependence of the Central American countries.

2. Tariffs and Customs Activities During the period covered by this report several meetings of the tech nical working group on standardized customs forms for all Central Amer-ican countries were held. This technical group was established by the Director General of Customs who also held two meetings in the same period. These meetings represent an attempt to harmonize custom pro-cedures in order to facilitate trade among the countries of the area through the preparation of a standardized import form to be adopted by the five countries of the Common Market. In preparing this form, account will be taken of the previous decision to adopt a new customs nomenclature based on the one used by the Brussels Customs Coop-

Table 29. Participation of Central American Countries in Intrazonal Trade (1970 -1980) (In millions of dollars)

Countries

Exports to the CACM Imports from the CACM

1970 % 1975 % 1980 % 1970 % 1975 % 1980

Guatemala 102.3 36 168.2 31 530.3 45 65.0 22 103.1 20 222.3 19 El Salvador 73.8 26 141.8 27 201.9 17 60.6 20 136.9 26 344.7 29 Honduras 18.0 6 26.6 5 86.8 7 54.9 18 51.7 10 104.4 9

Nicaragua 46.1 16 92.6 17 82.0 7 50.1 17 112.7 22 267.8 23 Costa Rica 46.1 16 107.2 20 276.8 24 68.7 23 114.7 22 238.7 20

Total 286.3 100 536.4 100 1,177.9 100 299.3 100 519.1 100 1,177.9 100

SOURCE: SIECA.

TRADE ASPECTS

139

eration Committee, and the ease with which the document can be used in data processing systems.

In their meetings the Directors General of Customs also considered matters related to the establishment and improvement of customs lab-oratories, the establishment of a career in customs administration and the review of the Central American Standard Customs Code (CAUCA), and its Regulations (RECAUCA) and the standards for customs eval-uation.

The Regional Customs School, headquartered in the Central American Institute for Public Administration (ICAP) completed its first stage of instruction having trained 20 Central American professionals in customs related subject.

There were also several meetings of the Coordinating Group in Charge of Reviewing Central American Tariff Policy, who continued their efforts to establish a new common tariff for all of the Central American countries. At these meetings tariff levels were pre-negotiated for several hundred CAUCA classifications representing 93 industrial branches. The technical work of pre-negotiating future tariff levels was practically concluded at the end of 1980. Advances were also made in the preparation of a draft agreement on Central American tariffs and customs schemes, particularly with regard to the standards for mer-chandise valuation.

Along with the tariff revision and preparation of the draft agree-ment, studies have been carried out which will demonstrate the fiscal impact and effects on the balance of payments and prices which the new tariffs will have. All of the above will contribute to the final negotiation of the new instruments which it is hoped will take place during 1981.

3. Reform of Instruments for Regulating International Trade The Twenty Second Meeting of Economic Ministers held in San Jose, Costa Rica on February 24, 1980, reformed item b) on Measures to Defend the Balance of Payments of the Central American countries, of Article 17 of the Rules on Standards and Procedures for the Application of the Economics Stabilization Tax. This reform concerns the elimina-tion of operative problems stemming from the specification of data used solely for statistical purposes.

Modifications to Article IX of the General Treaty which prohibits the issuing of import permits or reductions in import duties for articles from third countries when they are adequately produced in the Treaty countries, were also approved.

On September 8, 1980, the Government of Nicaragua required importers of durable and non-durable consumer goods to obtain pre-vious permission from the Ministry of Foreign Trade. Some imports such as medicinal and pharmaceutical products, textiles, hardware ar-ticles, and all products classified as raw materials, intermediate goods and capital goods were excluded from this requirement. The Ministry


of Foreign Trade supplied the Central Bank with a list of articles for which foreign exchange can be sold at the official exchange rate. Other articles can be imported only with foreign exchange acquired at a higher price in the parallel market. This measure applies even to imports from the other countries of the CACM and is intended to halt non essential imports and alleviate the current account deficit in the balance of pay-ments.

For the same reasons which prompted the government of Nicaragua to take this action, the Costa Rican Government adopted on September 24, 1980 a set of measures designed to restrict imports and encourage exports. The other Central American countries are not affected by some of these measures such as the prohibition of imports of certain articles not produced in the subregion, temporary surcharges, and import de-posits. The following regulations, however, do apply to imports from the CACM: a) the Central Bank would authorize foreign exchange for the payment of goods and services only in an amount equivalent to 50% of its value; the remaining 50% would have to be bought in the free market, which implies a higher cost of imports in terms of Costa Rican colones; b) the Central Bank would not sell foreign exchange to cover expenses of foreign travel; c) public sector entities would be obliged to give preference in their purchases to goods produced in Costa Rica when they are competitive in price and quality. In addition, several measures were established to stimulate Costa Rican exports including exchange policies which effectively increase the income of exporters in terms of colones.

The Bilateral Treaty governing trade relations between Honduras and Nicaragua, which was due to expire in September of 1980, was extended for four months, during which period another bilateral treaty would be prepared which would be effective for two additional years. Nicaragua declared that in view of the new situation in which it finds itself after the civil war, it would object to some aspects of the prefer-ential treatment given to Honduras in the present treaty.

In November 1980 the government of Honduras requested that the Guatemalan government broaden the bilateral trade treaty between the two countries by removing import duties from a list of 23 products produced in Honduras. At the end of the year no agreement had been reached in this regard.

C. Industrial Sector 1. Regulations Governing Industrial Production The forum of Vice-ministers Responsible for Central American Eco-nomic Integration (in charge of short-term matters related to the func-tioning of the Common Market) fixed 1980 import quotas for powdered milk in accordance with the Central American market demand which could not be satisfied with the supply from Nicaragua's PROLACSA,

AGRICULTURAL SECTOR 141

approved a new list with new prices of types and sizes of tires and wheels produced by GINSA enterprise of Guatemala, and approved new prices for caustic soda produced by Nicaragua's ELPESA.

In a joint meeting of Integration and Industry Directors and public health officials, recommendations to the Meeting of Vice-ministers were agreed upon which would prohibit the use of certain artificial coloring in Central American industrial production.

2. Preparation and Promotion of Industrial Projects of Interest of the Subregion

The meeting of Planning Ministers and Secretaries identified a series of projects of interest to the subregion and instructed the IDB/CABEI advisory group to further their analysis, preparation and promotion. These projects are related to tuna fishing and canning, sodium com-pounds, aluminum sulphate, Central American shipbuilding and ship-ping fleets, synthetic fibers, cellulose fabrics, copper sulphate, indus-trialization and marketing of vegetables, fertilizers and bleaching agents. It also recommended to the CABEI that it attempt to make more re-sources available for preinvestment activities and for the establishment of a specialized unit within that institution to provide advisory services and promote these types of activities. It also pointed out to CABEI the need for it to act more as a "promotor and financial agent" for the area's major projects".

3. Greater Attention to Scientific and Technological Aspects of Industrial Development At the meeting of Planning Ministers and Secretaries it was agreed that more attention should be devoted to the scientific and technological aspects of the industrial and general development of the Central Amer-ican countries. In order to partially satisfy this need the ministers agreed to present a common front in international efforts to establish a code of conduct for the worldwide transfer of technology, to modify the International Agreement for the Protection of Industrial Property (Paris Agreement), and to adopt a code of conduct for transnational enter-prises. They also agreed to support the preparation of projects for the Regional Center for the Transfer and Development of Technology and the National Licensing Agreement Registries to promote the incorpo-ration of the science and technology variable in national, subregional and regional projects, and to strengthen the science and technology units in national planning organizations.

During the months of September and October 1980 an expert from the technological policy group of the Secretariat of the Cartagena Agree-ment provided technical assistance to SIECA on formulating a basis for a subregional science and technology program.


D. Agricultural Sector 1. Activities within the Central American Basic Grain Program The Coordinating Committee for Marketing and Price Stabilization and the vice-ministers responsible for economic integration frequently ex-amined the production and supply data for basic grains in Central Amer-ica during the 1979-1980 agricultural season, giving particular attention to the deficit situation of beans and corn. In addition to carrying out arrangements of an administrative nature to facilitate the exchange of these products, the Commission approved a "standard methodology for studies on production costs of basic grains" and a "guide to determining support prices" as basic references to equalize these prices as far as possible and bring order to the grain trade flows in the Central American area.

The Committee also approved in principle a SIECA study on mech-anisms for regularizing intraregional trade in basic grains and for estab-lishing a system of purchasing on the future's market, agreeing to include the subjects in its work program with a view to adopting and putting the mechanisms into practice in the future.

2. Preparation of a Central American Plan for Agricultural Research and Extension The Permanent Commission on Agricultural Research and Extension in Central America approved the terms of reference for a technical group to formulate a Central American plan for agricultural research and extension which would emphasize the satisfaction of rural community needs, the appropriate transfer of technology, and an increase in the productivity of small and medium-size producers.

3. SIECA Technical Assistance to El Salvador on Agricultural Policy Technical assistance will be provided by the Center for Central American Integration and Development Studies (ECID) on the planning of ag-ricultural policies, with emphasis on the production and consumption of food, employment of appropriate technology, and planning of human resources for agriculture. The Agreement was signed by the Secretary General of SIECA and the Salvadorean Planning and Agricultural Min-isters to support an agrarian reform program decreed by the Salvadorean government on March 5, 1980.

The Basic Agrarian Reform Law of El Salvador applies nationally on all the Republic's territory, without distinction by crop, location, productivity, system of land holding, quality of soil or other variables. The lands affected by the law are those owned by one or more individ-uals, societies or heirs which exceed 100 hectares of real estate with a certain type of soil and 150 hectares for other types.

The state, through the Salvadorean land reform institute (Instituto Salvadoretio de TransformaciOn Agraria (ISTA), acquires the land either by purchase or by expropriation by the legal ministry. The price

INFRASTRUCTURE

143

or indemnization for the lands and other related possessions acquired by the state is paid in part in cash (25%) and in part in agrarian reform bonds (75%) except when the property exceeds 500 hectares or was expropriated, in which case the total is paid in bonds. The amount of the payment or indemnization is made according to the average of the values declared for income tax purposes in the years 1976 and 1977.

After a period of provisional administration of the affected lands by ISTA, they are transferred to agricultural cooperatives, rural com-munity associations or other organizations of agricultural workers reg-istered with the Agricultural and Cattle Ministry. These organizations should be made up exclusively of landless agricultural workers (those working on salary, renting or share cropping) and small landholders. The recipients of the land pay ISTA by means of long term credit mechanisms. The program includes training, technical assistance, credit and marketing aspects.

The same day the Basic Law was issued, another decree affecting the confiscation and holding of lands by the state was passed. This decree refers to holdings of over 500 hectares, which represent the group of lands affected by the first stage of execution of the agrarian reform program. These lands, covering approximately 125,000 hectares, were expropriated by the Legal Ministry.

On May 6, 1980, the Salvadorean Government issued another law governing the selection of agricultural land and its transfer to the direct cultivators, which provides for the expropriation of lands subject to rental contracts or share-cropping arrangements. These lands (with cer-tain limits to their extension) would be turned over to the farmers who cultivated them. These farmers would work them for 30 years at the end of which time they would become the owners having paid the value of the land in monthly installments during that period.

E. Infrastructure 1. General Infrastructure Development a) Projects completed from 1970 to 1979 From July 1970, when the first inventory of Central American fiscal infrastructure projects was carried out, until December 31, 1979, the Central American governments completed 126 projects with an invest-ment of 1,163.7 million dollars (Central American pesos). The projects referred to were classified by SIECA as "regional" because they pos-sessed one or more of certain "integration attribdtes": multinational agreement, multinational financing, multinational service, material con-tinuity, programatic continuity, geo-economic unity and "certain inte-gration content". 6

6 See the definitions of concepts like these in SIECA's Noveno Informe sobre el Inventario de Proyectos Regionales de lnfraestructura en Centroamerica, SIECA119791INF.IPF128, Noviembre 1980, pp. 6-8.


The breakdown by year of termination of these projects, which appears in Table 30, shows large annual fluctuations in investment due to the impact of the conclusion of big projects in a certain year. Table 31 presents the projects by country and type of financing and Table 32 shows the projects by sector. The biggest investments were for local projects in Guatemala, followed by Honduras, then El Salvador, Costa Rica and Nicaragua. By sector, the largest investments were in trans-portation, which absorbed 50.9% of the total, followed by energy with 26%, mining 19%, communications 3.2% and natural resources with 1%.

b) Development plan for the period 1979-1989 For the period 1979-1989, SIECA has prepared an inventory of 249 regional infrastructure projects, of which 16 had been completed as of December 31, 1979, 165 were programmed and 67 unprogrammed. The total investment foreseen was over 8.2 billion dollars, of which 76.7% was programmed and 37.4% was assured of financing (Table 33). Almost two thirds of this planned investment was for the energy sector and approximately one fifth for the transportation sector. The rest was dis-tributed among communications, water control, geo-economic zones and mining (Table 34).

2. Major Projects Initiated or Completed in 1980 a) Completed projects In February 1980, the new international airport of El Salvador, located in the coastal zone of Comalapa, 35 kilometers southeast of San Sal-vador, began operation. The expressway joining the airport to the capital is not yet finished and in the meantime the old Comalapa highway is being used.

In February 1980 the Government of Honduras completed the sec-ond stage of the Port of San Lorenzo, with installations at Boca del Henecan, on the Pacific Coast. The last and largest work completed was the dredging of the canal joining Boca del Henecan to the Golf of Fonseca.

In April 1980 the recently-constructed oil pipe-line joining the oil fields of Rubelsanto and Chinaja to the Atlantic Port of Santo Tomas de Castilla was used for the first time to export Guatemalan petroleum. The first shipment of Central American petroleum, amounting to 136,000 barrels, was made on April 11.

In May 1980, the 150 kilometer long highway in the Darien zone between Panama and Penonome was inaugurated. This highway extends to the bridge over the Canglon river, which is only 82 kilometers from the Colombian border.

The new highway permits the incorporation of a million and a half hectares of cultivable land into the production and marketing process and in addition represents one of the last stages in the removal of the

INFRASTRUCTURE 145

"Tapon del Darien" which has impeded land communication along the entire American continent from Alaska to Argentina.

In November 1980, work was almost completed on the first stage of the Aguacapa hydroelectric project, with an installed generation ca-pacity of 90MW in the department of Santa Rosa in southern Guatemala. Nevertheless, due to faults in the tunnel, the project will not begin operation before June 1981. In accordance with the initial project, the central plant at Aguacapa will later be joined with the transmission line which will connect Guatemala and El Salvador.

In November 1980 the petroleum dock at Moin, located in the bay of the same name in the Province of Limon on the Atlantic coast of Costa Rica will begin functioning. The dock is part of a more extensive complex under construction which includes a banana dock and other port facilities. When the port complex is completed, at a cost of 116.6 million dollars, it will be able to hold ships of up to 60,000 tons.

Table 30. Central America: Infrastructure Projects by Year of Termination (1970 -79)

Inventory update

June 1971 June 1972 December 1973 December 1974 December 1975 December 1976 December 1977 December 1978 December 1979

Total

Number of Projects Completed

Investment (Million of CA$)

23.6 85.2 75.4 11.9

125.0 56.4

155.4 418.5 212.3

1,163.7

12 16 15

6 20

8 18 15 16

126

SOURCE: SIECA.

Table 31. Central America: Infrastructure Projects Completed, by Country and Type of Financing (1970-79) (In thousands of CA$)

Financing

Total No. of Projects

Countries Completed Amount %

Guatemala 33 54.9 16.1 258.6 83.9 340.5 100.0 El Salvador 18 109.5 46.2 127.3 53.8 236.8 100.0 Honduras 28 59.0 22.8 199.3 77.2 258.3 100.0 Nicaragua 20* 45.2 32.7 93.2 67.3 138.4 100.0 Costa Rica 21 32.5 23.0 108.6 77.0 141.1 100.0 Central America 6 14.6 30.1 33.9 69.9 48.6 100.0

Total 126 315.7 27.1 847.9 72.9 1,163.7 100.0

External Total

Amount

cY0 Amount (3/0

* The Nicaraguan projects were completed in 1978. SOURCE: Prepared by SIECA.


Table 32. Central America: Infrastructure Projects Completed, by Sector (1970 -79)

By Sector and

Subsector

No. of Projects

Completed

Investment Millions of CA$

Percentage by

Sector

Percentage by

Subsector

TRANSPORTATION 592.3 50.9 100.0

Roads 82 411.3 69.4 Railroads 1 0.5 0.1 Air 7 70.6 11.9 Sea 11 87.0 14.7 River 3 18.8 3.2 Cargo terminals 2 4.1 0.7

ENERGY 302.0 26.0 100.0

Hydroelectric 3 170.6 56.5 Geothermal Thermal 4 72.9 24.1 Transmission lines 3 25.4 8.4 Hydrocarbons Alcohol 1 15.0 5.0 Rural electrification 2 18.1 6.0

COMMUNICATIONS 37.0 3.2 100.0

Telecommunications 2 37.0 100.0 Postal Service

NATURAL RESOURCES 3 11.8 1.0 100.0

WATER REGULATION - - - -

GEOECONOMIC AREAS - -

MINING 2 220.6 19.0 100.0

Total 126 1,163.7 100.0

SOURCE: Prepared by SIECA.

b) Projects initiated In March the World Bank approved loans of 125 million dollars to help finance the central hydroelectric project at El Cajon, located 80 kilo-meters southeast of San Pedro Sula, Honduras, which will use water from the Sulaco and Humaya rivers. This central plant will have a capacity of 292 MW, and an annual average energy production of 1.312 GWH, which will be partially sold to other Central American countries. Also contributing to the financing are the Inter-American Development Bank (US$90 million), the Venezuelan Investment Fund (US$45 mil-lion), the Japanese Overseas Economic Corporation Fund (US$34 mil-lion), the CABEI (US$30.6 million) and other smaller sources. The work was begun in June 1980, will cost approximately 588 million dollars, and is expected to be concluded in 1985.

In May 1980 the Guatemalan Government signed a contract with the French company Dragages et Travaux Publics to construct the Port

cNi 00 O

ti CC; ti

C,)

0)

C.C)

00

CO C\J

CC;

r-- Ca

00

co CNJ

CC 0

a)

0)

cTs

a)

g

iTs Tt. vi

a) 0

2 t 1.)) 0 V

ca co V (7,

CAS a)

2

2 0

a) 0 a) rn

mo

a)

0 a) a) V a)

La a) CC 0

vi

a) 2 <

. a_ 0

Lu (7)

E E V. 10m

O

S • LIJ • (...)

cc

a 8

INFRASTRUCTURE 147

fA

c) „

.'cts "6

.rs iz 0

g

a) < E 0 E E mo-?cin g 2 c

E

0

•

CL

w

<

arj. °

(1) • L

--

-

C.)

Cl)

C

•

o E cr, E

•

z t .97

c.)

T.0. a. 0 — c f!"

a-

•

6 E z

CO rg -Cs 2 ft

Iti

CD z t.) CC Ta E

c.)

▪

o 2

0

wC

• ci V • z t

--ca &) 6 1—"6 a.

U)

co co

•

1 CO O)

co 8

CNJ C)) CC) CC) LC) CD . • • • • • C)) 00 T-- CC) CD CO CO CO CC) CO CD

C)) qtr C)) ,cr CD LCi C,5 4 Co 00 CC) CO CNJ CO C,J

▪ gcr CC) CNJ C7)

LC) LC) CD CD CD

~tM UO c:i C)) CC) ,cr cr.) c:›

T--

C)) 00 I-- CO CC) CC)

(C) CO .cr CO CC) T-- CNJ CO CI) 1--

CX) 00 CO CO CC)

C0 C6 NI: Cti CC; N-- CC) CC) ,cr CC) CO CNJ -̀',11r CC) CO CO LC)

N 1-- C \

C:) (C) CY) CNJ CO

• T-- CX) CI) CO CNJ C,) C\1 CO

Ttr T-- CO gcr CO

CY) CI) N-- CI) 0) 1-- CC) CNJ CO CO

O

0 C

O a. AI' O

t

O

(7, co

O O

CV

0

O O

CO

CO CY")

00

SO

UR

CE

: P

repa

red

by S

IEC

A.

CO O F-

• CV C7) /-- M CO

c.i cos c.i cc; cci cri cr c:) cr) o) CV O co

of CO 1--

C4


C,J 1-- Cv) CV r,- Lc) C,J (7) CX) cr cr LO N

co ,-- LC) LC) (7) cr Lri c.i c.i c:i

00

00 CO

0,

O CD CD O CD

T CD T

LC) CD

LA Lci ri CV CC)

C,J C:) 1-- Cv) r,. CX) LC) CV CI) C:) C:) r,- C,i CA CC) cci cxi cci c.i c.i c:5 cri .4; Lci LC) .:r C,) C7) CNJ CK) 1-- 1-- C,3

CV /-- C:) C:) CC) 1-- CD NTT

00

O

CC) co cr ,-- .-- CNJ

cr C:i CT; .4: C:) Cf) LC)

cc) cr ,-- Lc, co cx, c:i c:i c:i N. 01 0 1.■ L

ciA

vr ,-- I-- T T

C/) cf,

0 = CC C.) 0 <

. 03 2 ,-, a, --r--- a c c MI C..) "... E .2 o — +LI 0 co = cn = E (.0 E CO ,,, .c., r- CL, C7, t CA 1-- .. E c. E E = cu cc ci, 0 0 -0 O.

. Cli 11T' -e 7— . E u) cc F,

CIL RS ›, CO ---' CO Cl) CA 0

"0 L.. 6- 0 0, Ca = E CA -i" = E S 73- t- = CD CD ..- = CD C. " 1... ....

CO.)

(0 = ii, .., ._ cu ID 0 CD co 4-* E . c. 4-, cti 0 Es o co ._= CU.— ccs c >, cu = ,_ cu a 7,,, 0 CCI ...,. CD .....- 1-- CK: Cl: .0C C/) CX: C.) LIJ 2: (-1 1— F.-- Cl. .0C C.) 1— CI. 2: 25■ C.7

N. CD CD LC) Cy) LC) CO 0 C) C7) LC) Cf) CD

c0 0 c, CO T-- Cvi

CD C:) C:) C:)

cr) co NT C7) LC) CV T-- CsJ 1-- (C)

CD LC) CV Cil C:) CD r... r,. r,.. c.j .-- obi c:i Lri cr Lc) cc) .-- c:, c) co ,-- CO CJ) NTT .--

cr=

L. a) E

z 8 t; S C act ■

Ccn 0

a. 8 z

0 Cl)

L. •

•

2

e

•

a) ▪ E To C .o 2 C7) a.

CC 2

O al

0 (1) u

▪

s. c os. a. s.

E co • w E Cu It) 0) Cu >

c

INFRASTRUCTURE 149

of the Pacific, near the port of San Jose. The contract is for 108 million dollars and the preliminary work was begun in July. The project is being financed by the sale of national bonds. The total cost of the project will reach 160 million dollars.

In June 1980 construction was begun with financing from the IDB on 204 kilometers of roads in Olancho, Honduras, essential for the development of its forest reserves. This reserve covers approximately 1.500.000 hectares and represents the largest unexploited pine forest in Latin America. The construction of these roads is linked to the future operations of the Corporation Forestal Industrial de Olancho (COR-FINO) which includes the construction of 3 sawmills and a pulp and paper plant with the capacity to supply part of the Central American demand as well as export to European markets.

In September 1980 the Costa Rican Electricity Institute (Instituto Costarricense de Electricidad—ICE) obtained loans of 34 million dollars from the World Bank and 90 million dollars from the IDB for the Corobici Hydroelectric Project which will have an installed capacity of 174 MW and will generate 750 million kilowatt hours annually. Prelim-inary work began in the last quarter of the year.

3. Other Aspects of Physical Integration a) Electric interconnection In February 1980 the United Nations Economic Commission for Latin America (ECLA) completed a regional study on electric interconnection in the Central American Isthmus (E/CEPAL/SC.5/GRIE/VIII/3), pre-pared in close consultation with the governments and electricity enter-prises of the countries of the Isthmus. The cost of the study was approx-imately 1.4 million dollars, covered by contributions from CABEI, the IDB, ECLA and the UNDP. Several state electricity enterprises from other Latin American countries also collaborated in its preparation.

The study determines alternatives, schemes and programs for in-tegrated electricity development, estimates the economic benefits to the countries interconnecting their electricity systems and identifies the ac-tions which should be taken to achieve integration in the field of elec-tricity in the Central American; Isthmus.

According to the study in the period 1984-1999 the Central American countries could obtain net economic benefits on the order of 760 million dollars by integrating their national electricity systems.

The situation in Central America with regard to interconnection was the following as of the end of 1980:

An interconnection line has been in operation between Honduras and Nicaragua since 1976.

On the basis of the interconnection agreement in effect between the two countries, Costa Rica obtained a loan of 5.2 million dollars from CABEI and Nicaragua was in the process of obtaining another loan for


4.3 million dollars from the same bank to carry out work on the inter-connection which is expected to be completed in early 1982.

In May 1979, the Foreign Ministers of El Salvador and Guatemala signed an agreement to interconnect the electric systems of the two countries. In March 1980 the Guatemalan Congress approved the agreement. In July of the same year the two governments exchanged instruments of ratification for the agreement, and in August the CABEI granted a loan to El Salvador for 6.8 million dollars and one to Gua-temala for 10.4 million dollars to carry out the interconnection works between the two countries.

Procedures and negotiations for interconnecting the systems be-tween Guatemala and Honduras and Costa Rica and Panama are in progress. This would complete the interconnection of the entire electric system of the Isthmus.

The advances in this field are a product of the close contacts main-tained among the state electrification enterprises of the six countries, whose presidents and managers meet formally each year. The Regional Electric Interconnection Group (GRIE) functions at the technical level. The formation of a Central American Electrification Council is being contemplated, which would institutionalize relations among the six coun-tries. The draft statutes and articles of agreement of this new council are under discussion among the authorities of the countries of the Isth-mus.

b) The Land Transportation Regulation Agreement At the meeting of Ministers responsible for Central American integra-tion, SIECA proposed the adoption of a regional transportation agree-ment which would replace the regulations on this subject contained in the multilateral treaty of 1958. Included in the proposal was the prep-aration of standards for regulating each country's treatment of Central American transportation enterprises. The adoption of new road signs was also recommended.

According to SIECA's studies, 75% of the trucks and wagons em-ployed in intra-Central American transport have been in use for more than three years and a large percentage of them are in badly deteriorated condition. In order to modernize intra-Central American land trans-portation, SIECA recommended that CABEI lend the resources re-quired by Central American enterprises and that their financing be given high priority for the development of the subregion. The proposal is under study by the meeting of ministers responsible for integration.

F. Monetary and Financial Aspects 1. Central American Clearinghouse Almost all intra-Central American payments arising from commercial or financial transactions within the zone are channelled through the

MONETARY AND FINANCIAL ASPECTS 151

Central American Clearinghouse headquartered in Tegucigalpa, Hon-duras. The Clearinghouse registers the clearing operations in individual accounts for each of the member Central Banks, recording remittances sent by each bank payable to its order and those drawn against it. The uncompensated balances are cancelled in dollars every six months if the negative balances do not exceed certain amounts and more often if they are in excess of these amounts. In registering the operations, a unit of account called the Central American peso is used, whose value is equiv-alent to the US dollar.

For several years a generally indebted position has been observed in four of the member central banks in the system, while the Guatemalan Central Bank has been in a very strong creditor position. Thus in the years 1977 and 1978 the Bank of Guatemala's net claims rose to 75.1 and 65.5 million Central American pesos respectively (Table 35). The situation primarily reflected Guatemala's trade surplus with the rest of the member countries of the Common Market.

Beginning in 1979 Guatemala's creditor position increased notably due to the internal political situations of Nicaragua and El Salvador, which provoked capital flight from these countries through their neigh-boring countries. The official records of the Clearinghouse indicate that the Bank of Guatemala's net claims in 1979 amounted to 141.9 million Central American pesos, or double the average of the amounts for the two previous years. The 1979 liabilities of the Banco Central de Reserva of El Salvador and the Nicaraguan Central Bank to the Bank of Gua-temala grew to 65.9 and 43.1 million Central American pesos respec-tively.

The 1980 figures for the Clearinghouse reveal that the trend de-scribed has become more evident due to El Salvador and Nicaragua's trade deficits explained in the section on intrazonal trade and probably also due to capital flight from El Salvador. The latter appears to be confirmed by the adoption of stricter exchange controls in El Salvador and by the establishment of controls on capital movements in Guate-mala.

In 1980 Guatemala accumulated net credits in the Clearinghouse of 273.5 million Central American pesos, which was practically double the amount of 1979 and four times that of 1978. Guatemala's net claims on El Salvador and Nicaragua rose in 1980 to 129.7 and 102.3 million Central American pesos, respectively (Table 36).

On December 7, 1979 in San Jose, Costa Rica, the members of the Central American Monetary Council signed an agreement to create the Fund to Finance Negative Balances in the Central American Clearing-house (FFISDECA).

This decision originated with the financial difficulties faced by the Central Bank of Nicaragua in 1979 in trying to settle its uncompensated balances in the Central American Clearinghouse in dollars. Although in principle the Central Banks of some member countries were willing


to solve this problem on a bilateral basis, it was decided to take advan-tage of this opportunity to establish a multilateral fund with Central America and external resources which would be capable of resolving the present difficulties and any others which might arise in the future with respect to settling these balances. The fund would consist of per-manent deposits in the national currency of all the central banks, as well as resources obtained from external sources.

In accordance with the Central American Monetary Agreement signed in San Jose, Costa Rica in 1975, each of the Central American banks had extended to the others a line of credit of up to three million Central American pesos for a period of six months to temporarily finance their negative positions in the multilateral clearinghouse operation. In the second half of 1979 these bilateral lines of credit were extended. The FFISDECA represents an attempt to provide the existing payments mechanism with a multilateral financing component for settling the neg-ative positions created by trade and at the same time to extend the periods within which these balances should be cancelled. Nevertheless, when regulations were being established for the agreement, difficulties arose over the fact that if the mechanism were to depend solely on its own resources, the adjustment burden would fall almost exclusively on the Bank of Guatemala which is the only creditor bank in the subregion. For this reason several steps were taken in 1980 to obtain external resources to aid in eliminating the considerable obstacle to the growth of intrazonal trade represented by the scarcity of financing for negative positions in this particular Central American situation.

At the annual meetings of the World Bank and the International Monetary Fund in October 1980 in Washington, D.C. , an agreement was signed by the Central American central banks and the Bank of Mexico which increased the amount of reciprocal credit available for financing negative positions resulting from the trade between Central America and Mexico from 10 million to 20 million dollars.

2. New Exchange Regulations The Guatemalan monetary authorities began controlling capital move-ments in April 1980. They stated as the principal cause for the adoption of these measures the fact that "in the month of July 1979 an abnormal and persistent outflow of private capital began which has been increasing during the course of 1980". This reduced the country's net international reserves (150 million less in March 1980 than in July 1979) to below the level considered appropriate by these authorities. In the explanation made public by the Bank of Guatemala it was pointed out that the situation in Nicaragua and El Salvador was the "extra-economic factor responsible for this outflow of capital". The increase in Guatemala's net claims on the Central American Clearinghouse, as well as the drain-ing of its foreign currency to countries outside of Central America, confirmed that this country served as a vehicle for capital flight from

153

CD

LC) CN.1

T-7

CC)

LC)

Ch

ti Cg) O

Cr) O

CNJ

CO C7) CO

C

rn co

O

SO

UR

CE

: C

entr

al A

mer

ican

Cle

arin

ghou

se.

.7.

Z

2 cr

C a) CA

; z L- C.)

a) a)

cc

▪ a) co

a) a)

cc

a) cn

= 13 Z

a) a) cc

a) Cn

0 co 0)

0)

a) C

To

a) a) C CD

x uJ C 0)

0

■

LL.

0

a) C

CD

.c

C.) C co .r.

E 4 8 16:03 <

r 0

13 U)

tri c r) .2 2 -E .0 61 C

1980

Tra

nsfe

rs

1979

Tra

nsfe

rs

1978

Tran

sfer

s 19

77 Tr

ansf

ers

MONETARY AND FINANCIAL ASPECTS

Lc) c» c» cvi tri (xi cti CNJr,- Cg) CNJ CNJT--

T--

+ I ± I +

Cg) LC) LC) LC)

QC; CCE. cri oi CO Cg) 1-- CC) CNJ CNJ Cg) T-- CNJ CNJ

• • • • • Cg) 1-- Cg) CC) LC) CM LC) CC) -.or

LC) CNJ CNJ

Cg) C.7) LC) T-- . . . . . N-- CC) 1-- CC) CO cr qtr. CNJ CC) qqr

+ 1 + 1 I

r,. CO CC) ,pir co • -

Lf)M CVCh T-O)CDCVNCM CNJ CNJ CNJ

CC) LC, CC) OD LC)

• LC; Cgi CC; Cgi Cg) N-- ...tr LC) CO

LC) co C c) ,tr .4-

C:D g) c N- + 1 1 + 1

LC) Cg) Cg) LC) CC)

CO CV if; cri cNJ co r,- co • CNJ N-- N--

C:D CNJ Cg) N-- . . . . . q-cr ,ur ,--co LC) CY) r,- r,- r,- OC) CNJ T T-- N--

N- T-- CNJ C:)

LC) -tr ,-- co r.- Cg) Cg)

± 1 1 + I

CNJ T-- C)) C7.) CNJ

CV CCi Cgi CNi LC; CC) CNJ T-- LC) T-- CNJ CNJ N-- T-- CNJ

Cg) N-- r,- T-- CNJ

r,: C)i C7; Cgi Csi Cg) CC) C:) LC) CO (g) m-- N-- N--

CV C, E T. 's gcc

_as cn u) = o .9 0 COW= ZU

1,25

4,54

4,59

1.89

1,

254,

5 44,

591.

89

CC

SO

UR

CE

: C

entr

a l A

mer

ican

Cle

ari

ngho

use.

CUI CO

cn CC es

C CC CA 0 CC._ 0

CD C) Ea)a) lc)

C) 10 10

TJ 1g • CI, 4.4

CD CD CD C) CD "x" CD CD 0 0 0 0

C) C-3

CO CO CU CO CO CO CO CO

03 m EE

:: u5 c:: 0 CC G3

E a, C, 4, 1:7

(!) , CO CD a, CD • -10 CD CD 0000

•

U C) C.3

CC CC CO CO CO C13 CO

0 ,c) CC > COcC

LLJ

: "C3 03

DC c

CC

O cO CD

03 CD CD O C) 77 '0

03 03 03

• (.7 cucpcuci3

1:, CD CD 0000

C..) C.)

CO CC cts cc) CO CO CO CO

Banc

o Ce

ntral de R

eser

va d

e E

l Sal

vado

r

Banc

o Ce

ntra

l de

Nic

arag

ua

Banc

o C

e ntra

l de

Cost

a Ri

ca


I + + + + + + + I I + I I I I 1 1 1 + HOC LC) m-- m-- C,J CNJ CD 1-- m-- CC) CV m-- LC) C,J CO CY) CO CO .4- ci) co LC) CV CO O CO LC) C,J LC) C,J CV M O C7) CO Lf) CO (7) 4 6 C7) C:7) .1: CC) T- 4 4 CI) 06 C:i ai CY) C7)

• • • • C7) m-- CO (7)

CO LC) N. c:) CO ,-- N. U) r.. c:, N- qtr 0) 0) C7) CO C:) (3) co O C7) v- CO N. CO CV r (:) co CV N CO Lri CO qa CO CO N- CO 0 N: CX) CD 00 LC) CO Cy) C7) .4- a> co ,-- c)3 LC) -4- co c:)

r,. C7) C7) r,. csJ r.. .4- co r 0) CJ CO go- csi cf.;

• co ANON O NN N CO CD CV CC) r T-- CNJ CO r T-- NT--

286,

267,

506.

10

338,

5 06,

595.

98

• CO C:3 CD C3 C7) ,-- CO c:i N: C,) CNI CC) LC) 1-- CC) CNJ LC)

m-- 1-- CY; CNJ N. cc)

CY) LC) C:) C))

CDO Lri Lri CC) m-- LC) 28

5.73

6,00

0.74

229,

501,

493.

82

c,J CO cxD ,qr cx) cc) Lc)

- • • CO cc) cm ,-- (:) CO

CNJ Cf) T--

05 CV' CV. C4 CO CD C,) r,. -4- CM CO CY) CY; CNI CY; h: CI) CD LC) CV

01 CY) T-- CV N- C7) C)

LC) Ce) CC) ,tr CY) CO C7) CNJ T-- T--

CO.- LOCOi • qqr C7) CO C:) C7) CO v-

oci so; C.0 COCO 55

9,73

1,97

7.96

233,

350,

594.

46

63,6

30,4

97.4

6

246,

435,

662.

86

N- (DO co co CY)

CO qtr c:5 co .4- Lc) CO CV CO LC) -4- • cri CO LC) CO CC) co r-- c)3 co CO tri a; C,J )CO

10 ,C3 RS CC > > CC CC Ci) CO

U..I LLI

a) cu cc „,

Ts as ,as.., cn -cm as ., —

CC co CC r_. ,,3 enE

i, E! 03 -co CU L- = cz

cc U) U) C U) , 9 cn CU 4,2 0

irs cC 0 c-, = cr Z c.) 0 CD .= a

E a" a) CD iv CD CD CD CD

CD 'CI '0 17 ID TO '0 -0 ...a 03 03 03 03 03

a, 4.... 4... 4... 4... ..... 4.. 4....

= = = = = = =

CD CD CD CD CD CD CD CD

-a c.) c.) c_, LI c_, LI CD

0 0 0 0 0 0 0 0

c.3 c., c..3 c.3 c.3 c..) c.) .

c c c c c c c c

CO CO CO CO 0 CC CC CO CO

CO Ct3 CO CC) C Ct3 CC) CO CCI

O

a)

C 7- =

3

t'

to.C

E O

C O

U) U) C

O

to E E

O .c a) C

co a)

ea

U)

E

U) E: 73-

C.)

• CI Ea CD 'CC ° C

36,8

62,8

63. 9

0 +

Tra n

s fer

s R

ece i

ved

114,

532,

995.

25

Tran

s fe r

s S

en t

151,

395,

859.

15

Banc

o Ce

ntral de H

ondu

ras

2 Ba


other countries as well as its own, which had increased due to the political situation in the area.

The capital control regulations, administered by the foreign ex-change department of the Bank of Guatemala, contain 67 articles which establish an entire set of exchange regulations and mechanisms for car-rying out operations involving the inflow and outflow of foreign ex-change.

The measures adopted represent the second time in 18 years in which capital controls were applied. In October 1962 the Guatemalan Government decreed an "exchange control" which was revoked in Feb-ruary 1973. The present emergency measures for the control of inter-national capital transfers are nevertheless less restrictive than the meas-ures of 1962, and are applied almost exclusively for the purpose of avoiding as far as possible large flight of capitals.

In order to prevent Costa Rica from becoming a vehicle for capital flight from the subregion, in July 1980 the Central Bank adopted meas-ures restricting the sale of foreign exchange, which include the obligation to make all payments stemming from intra-Central American trade through the Clearinghouse. Similar measures were adopted by the Central Bank of Honduras in October 1980.

As explained previously in reference to the regulation of interna-tional trade, the governments of Nicaragua and Costa Rica took steps in September 1980 to reduce non-essential imports. Included in these were various exchange control measures. In the case of Nicaragua, the Central Bank would not sell foreign exchange for imports of certain consumer articles and in Costa Rica the Central Bank would only sell 50% of the amount appearing on the import bills. In both cases the remaining foreign exchange had to be purchased in the free exchange market at a less favorable rate than the official one.

Finally, in November 1980 the Banco Central de Reserva of El Salvador strengthened its exchange regulations by restricting the amount of foreign exchange sold for travel and other expenses abroad and in-creasing the deposits required for some imports.

3. Central American Bank for Economic Integration (CABEI)

a) Resources At the close of the 1979/1980 period, the financial resources mobilized by CABEI to carry out its credit activities amounted to 1.114 billion dollars, or 109.1 million dollars more (10.9%) than the previous period. Of this total 208.9 million dollars represented the net worth of the institution, and 905.1 million dollars were funds attracted from inter-national sources of capital.

The net worth varied during July 1979—July 1980 period as follows: the Bank's authorized capital of 200 million Central American pesos (dollars) was totally subscribed by the member countries. The paid-in capital (including some "special contributions") rose from 98 to 110


million dollars after the countries made their last payments agreed upon, and the reserves and grants increased by 17.5 million dollars to 98.9 million dollars, of which .5 million was from grants and 17 million from profits obtained during the period.

The external resources obtained by CABEI in the international capital markets grew by 81.6 million dollars. In addition, the Bank obtained approval from the Agency for International Development (AID) for a 25 million dollar guarantee for negotiating loans for housing pro-grams in the countries of the subregion.

The general situation of CABEI's resources, both its own and ex-ternal, are shown by period in Table 37.

b) Loans In the 1979/1980 period CABEI approved 55 loans for a total of 187.1 million dollars, representing an increase over the previous year of 32.3 million dollars (20.9%). The Bank's Central American Fund for Eco-nomic Integration granted 64% of this financing; the Ordinary Fund 19%, the Fund for Housing Financing 13% and the Social Development Fund 4%. Investment projects received 177.6 million dollars and prein-vestment studies (which determine the feasibility of new projects) re-ceived 9.6 million dollars; 87% of the financing went to the public sector and 13% to the private sector.

The infrastructure sector continued to absorb the largest part of the resources lent by the Bank during the period. Following in order

Table 37. CABEI: Situation of Internal and External Resources by Period (In millions of CA$)

Period

Internal Resources

External Resources

Total Resources

Paid-in Capital Grants

Reserves and

Profits Subtotal

1961/1962 8.0 - (0.1) 7.9 - 7.9 1962/1963 8.0 - (0.3) 7.7 11.0 18.7 1963/1964 10.0 - (0.3) 9.7 35.5 45.2 1964/1965 11.4 - (0.4) 11.0 41.7 52.7 1965/1966 16.5 - 0.1 16.6 82.7 99.3 1966/1967 19.4 2.2 0.5 22.1 102.9 125.0 1967/1968 20.0 2.2 1.2 23.4 143.3 166.7 1968/1969 22.0 2.2 2.6 26.8 173.3 200.1 1969/1970 25.0 2.2 5.1 32.3 198.5 230.8 1970/1971 27.5 2.2 8.0 37.7 265.2 302.9 1971/1972 32.0 2.2 11.4 45.6 270.2 315.8 1972/1973 37.5 2.2 15.9 55.6 334.9 390.5 1973/1974 41.0 2.2 21.2 64.4 375.7 440.1 1974/1975 47.5 2.2 28.7 78.4 446.6 525.0 1975/1976 52.5 2.3 37.9 92.7 520.9 613.6 1976/1977 65.0 2.4 47.9 115.3 560.2 675.5 1977/1978 75.0 2.7 62.2 139.9 730.6 870.5 1978/1979 98.0 3.2 78.2 179.4 823.5 1,002.9 1979/1980 110.0 3.7 95.2 208.9 905.1 1,114.0

SOURCE: SIECA.

Total 55

Agriculture 4 Mining 1 Manufacturing 10 Electricity and Water 7 Infrastructure 12 Transportation, Storage

and Communications - Tourism 4 Intermediary Financing 6 Social Services 2 Housing 9

187.1 100 39 162.6 16

13.1 7 4 13.1 2.0 1 1 2.0 -

15.9 8 2 2.2 8 29.9 16 7 29.9 - 76.2 41 12 76.2

- - - - - 5.1 3 - 4 5.7 3 4 2.0 2

10.1 5 2 10.1' - 29.1 16 7 27.1 2

24.5


Table 38. CABEI: Loans Approved by Sector, 1979-1980 Fiscal Year (In millions of CA$)

Total Public Sector Private Sector

Sectors No. Amount % No. Amount No. Amount

Table 39. CABEI: Cumulative Loans Approved by Sector, 1961-1980 (In millions of CA$)

Total Public Sector Private Sector

Sectors No. Amount % No. Amount No. Amount

1,379.1 100 421 1,105.5 443

46.6 3 19 33.1 15 8.3 1 1 2.0 6

159.6 11 30 12.0 280 198.9 14 58 198.6 3 553.1 40 180 553.1 -

91.2 7 45 83.0 9 79.4 6 9 26.5 70 36.6 3 31 24.3 23 23.5 2 16 20.9 4

181.9 13 32 152.0 33

Total 864

Agriculture 34 Mining 7 Manufacturing 310 Electricity and Water 61 Infrastructure 180 Transportation, Storage

and Communications 54 Tourism 79 Intermediary Financing 54 Social Services 20 Housing 65

273.6

13.5 6.3

147.6 0.3 -

8.2 52.9 12.3 2.6

29.9

were electricity and water, housing, manufacturing industry, agricultural sectors, social services, intermediate financing, tourism and the mining sector (Table 38). The distribution by sectors, cumulative for the 1961- 1980 period, appears in Table 39.

Some of the projects for which CABEI provided financing in the 1979/1980 period were the following: the highways of Guatemala City-Don Justo, Transversal del Norte of El Salvador, Tegucigalpa-Rio del Hombre in Honduras, Ciudad ColOn-Puerto Caldera in Costa Rica and general highway improvements in Nicaragua; electric interconnection of Guatemala-El Salvador and improvements in the electricity system of Nicaragua; industrialization of the African Palm in Honduras, shrimp fishing and processing in El Salvador; production of chemical products in Nicaragua and leather processing in Costa Rica; various agricultural projects in Nicaragua such as cacao cultivation, tobacco planting, in-

CD C\J CC) CD

C7) LC) LC) N- CO 4 C7) P,- CNJ CNJ

Tim

CO Ps- CO 1-- . . .

T-- cr Lc) Lc) Lc) CO • T. T.

• r,- ,-- 4 • • N- CO T-- co 4 T CC)

CNJ CO CY) CO CNJ

CC5- • • : • T

__. T

T T. T.- CNJ T

P,- 00 0) C:) N-N- N-CO C7) C7) C7) CY)

Ps. 00 C7) CD 1-- CO CC) CO r,- 0) c)) CY) 0) C7)

C,J C'D 4 LC) CC) Ps. r,. Ps. C7) C7) CY) C7) CY)

co C)

(0 0)

.'

z a)

a)

E

131 0

C co

0 0

a)

2 o. 0.

U) C ca 0

te CO < < ° 0 a

c .c2 .E

.0 co

CO

CO

O 0

CO 0) CO CO

z

CO

CO

O I

O CO

CA

CC

E CO

0

C O 0 E

O z

E' O E

O z

E O

O z

8

z

2

0 z

O E

O z

O U) 0.


T-- cr cr

•-- MOO

,-- 4 C,J ' T ON. CNJ T-- Ps- CNJ

N 00 ri 4 4 ,-: c,i r,: TT c,) co cNJ Lc) c..1 ,-- 4 co

I I LC) CC) LC) CO CY) 1-- C:) C:) CC) T-- 4 co T-- LC) LC) CNJ

T-- T-- T-- T-- T-- CNJ T-- T-- T-- T-- T--

• T-- 0) r,-

c:) ,-- CO 4

T— LO CO CC) CO

CC) CO CNJ C:) 0)

CO CXD 0) CO C:)

..Zr CO CD T-- T-- T-- T-- C‘J

CY) C:) C31 LC) P,-

4Lri O 4 NT-- T-- T-- CNJ CO

C) CO 4 T--

Lri c.i r,: co T-- 4

C,J C,J CX) CO

CY) CD CO CY) CO

0 CY) C) C

CYD LC) cr cc, T-- 1--

C\J CO y- C)

CNJ LC) 00 C,J CO T-- T-- C,1 C,J

CO LC) CO LC) C71 'CP CD N.- CY) CO P,- CO cr. T-- c» 0) T-- 0 T.-- 1-- 4 P,- T-- CO CY) LC) C,J CNJ CC) CC) 4 CNJ OTT CO

NT m-- CY) CO 4

CNJ CC) CID LC) C3) CO CY) CNJ 4 CD LC) P,- C:) Lr) CO Ps- 1-- CO T

CD CD CO CD LCI T-- 0) CC) P,- T.- 1--

c)) 4 Lc) CY) CD

(:) CO LC) C:) C:) CNJ 4

Ps- LC) cr. LC) Ps- CNJ CNJ T-- P,- CD cr Ps- C:) C7) CNJ CNJ 4 LC)

CNJ OJ CO CY) CY) CNJ CO LC) P,- LC) CO LC) P,- cr LC) cr LC) LC)

C,J co cr. LC) CO CO CO CO CO CO 0) 0) CY) 0) 0)

,13 4 clJ 4- ,11) 0) d) c, C■J CYL1 PjL C4) CO CO CO CO CO CO GC) CD CO P,- Ps- r,- r,- Ps. r,-

0 0) 0) 0) 0) CY) CY) 0) 0) 0) 0) 0) 0) 0) 0) CY) 0) 0) 0) CY)

CO C:) LC) P,- P,-

C) CNJ T-- T-- GC)

C\I 03 LC) CD CD

0) 1-- T-- CO LC)

CD CO CD CNJ CC) T--

LC) LC) CO CY) CD

• C,J CD CD CY)

c.) 4 cp CO 4 T-- CY) LC) CY) 4

ti

ti

co ai CO C\I

0)

4,P CNj 0) C‘J

Cr) CM C

LC)

4 C\J C\J

c7)

CNJ CC) 0) CNJ T-- CNJ 0) CO LC)

CO N- LC) T-- C')

CNJ CY) CNJ CY) 00 T-- T-- CO T--

CNJ CO CD LC)

T-: C\i 4 C7; CY) CY) LC) T--

CY) LC) CNJ 4 LC) CNJ CNJ cr co T-- T-- T-- T-- T--

THE EXTERNAL DIMENSION

159

dividual irrigation and control of erosion and reforestation in the Mar- ibios Mountain Range; rural community development in Guatemala, higher education in Costa Rica; and two hotels in San Jose, Costa Rica.

The distribution by member country of the loans approved during the period was as follows: Nicaragua 25 percent, El Salvador 25 percent, Costa Rica 21 percent, Guatemala 18 percent and Honduras 11 percent. The distribution of the cumulative loans approved in the 1961-1980 period was as follows: Costa Rica 25 percent, Honduras 21 percent, Nicaragua 20 percent, Guatemala 18 percent and El Salvador 16 percent (Table 40).

G. The External Dimension 1. Efforts to Include Panama and the Caribbean Countries The Central American Common Market countries have been expressing special interest in including Panama in its integration process. In 1980 Panama was invited and participated in the meetings of the Ministers of Planning, Foreign Relations and Education, as well as in various lower level forums. On numerous occasions on which the need to re-structure the Central American Integration Program was expressed, mention has been made of the advisability of Panama's participation in the process and this country has expressed interest. The term Central American Isthmus could be more properly applied officially with the evident intention of including Panama in all that this implies.

With regard to the Caribbean countries, the Economic and Foreign Trade Ministers have instructed SIECA to undertake a study of ways to increase the CACM's trade relations with the Dominican Republic and the CARICOM, and the Foreign Relations Ministers have agreed to invite the minister from the Dominican Republic to their meetings.

2. Joint Positions vis-à-vis International Forums and Third Countries The advantage of forming a common front vis-a-vis third countries and international forums as well as engaging in joint efforts to increase the influence and bargaining power of the Central American countries is a consideration which is becoming more and more important in foreign policy. It appears in all the 1980 meetings of the chiefs of state and ministers of planning, foreign relations, education and economics and foreign trade in relation to the following topics: technical assistance from the international community, code of conduct for the transfer of technology, modification of the international agreement for the protec-tion of industrial property, code of conduct for transnational enterprises, meeting of Latin American Planning Ministers, renegotiation of Nica-ragua's external debt, participation in committees created within the GATT, procedures for obtaining preferential treatment in energy sup-plies and lower tariffs, strengthening of the Union of Banana Exporting Countries (UPEB) and of the Multinational Banana Marketing Union


(COMUNBANA), joint diplomatic and consular missions, tourism pro-motion, external financing and assistance from international organiza-tions.

Some of the most outstanding joint activities carried out by the Central American countries in 1980 were the obtainment of preferential treatment in petroleum supplies from the Governments of Mexico and Venezuela, the support given to Nicaragua with regard to international financial assistance required for its reconstruction, and the obtainment of 2 billion dollars of financing from international financial institutions for a group of projects of interest to the region.

In San Jose on August 3, 1980 the presidents of Mexico and Ve-nezuela in the presence of the president of Costa Rica signed an agree-ment in which they promised to supply up to 160,000 barrels of petro-leum daily to the countries of Central America and the Caribbean at international market prices with the option of considering up to 30 per cent of the sales as a loan from the supplying country to the buyer. The amortization period for these loans would be five years at an annual interest rate of four per cent but if the credit were used for energy development, the conditions of the loans would be for twenty years at two per cent annual interest. The countries benefitting from this Agree-ment are Barbados, Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, Jamaica, Nicaragua and Panama. The Govern-ment of Costa Rica which had been appointed by the Central American countries to represent them as a group before the Governments of Venezuela and Mexico contributed to the drafting of the Agreement which was signed in San Jose.

The Central American countries frequently expressed in interna-tional forums support for the renegotiation of the external debt of Nic-aragua. The Nicaraguan government and a commision made of 13 pri-vate international banks representing 115 creditors signed an agreement in early September in which Nicaragua was to pay its existing debt with these banks beginning in December 1980 with a new loan which covers the agreement reached in the negotiation. The amount of the debt is 582 million dollars of which 62 per cent is with private banks in the United States and the remainder with European, Canadian and Japanese consortiums. The debt is to be paid in twelve years, including a five year grace period with an interest rate based on the LIBOR.

The Planning Ministers of the Central American Isthmus presented a wide array of subregional programs to the World Bank and the IDB requiring financial resources which will be channeled through CABEI. The proposal is under study and includes electric interconnection and geothermal programs, improvement of postal services, Central Amer-ican highway network, water supply and sewerage, plant and animal health, regional telecommunications, Central American railroad net-work, improvement of port installations, Central American maritime fleet and border development.

THE EXTERNAL DIMENSION 161

3. Multinational Institutions Dedicated to Improving Conditions for Marketing Commodities The creation in Costa Rica of the Latin American Meat Exporters As-sociation (AsociaciOn Latinoamericana de Exportadores de Came ALEC) composed primarily of Central American meat exporters has already been discussed.

The Latin American Coffee Producers (Grupo de Bogota) made up of Brazil, Colombia, Mexico, Venezuela and the CACM countries decided to create a company called Pancafe, with headquarters in Pan-ama city and 500 million dollars of capital. This company immediately began buying and selling operations in the international coffee markets for the purpose of "preventing artificial reductions in the price and marketing speculation". Nevertheless at the meeting of the coffee in-ternational organization in October 1980, it was agreed to establish a system of export quotas to be regulated by the third International Coffee Agreement of 1976. The coffee consuming countries succeeded in ob-taining an agreement that Pancafe be dissolved in one year.

The Union of Banana Exporting Countries (Costa Rica, Honduras, Guatemala, Nicaragua and Panama) held three meetings in 1980 to discuss the possible extension of the activities of COMUMBANA to the eastern European countries and the possibility of holding a world banana agreement. Nevertheless, no final resolutions have been adopted in this regard.

4. SIECA's Relations with UNIDO and UNCTAD On January 14 and 17 the SIECA and UNCTAD (United Nations Con-ference on Trade and Development) Secretariats agreed on a program of cooperation dealing primarily with studies and seminars on integration and its related topics.

The Secretary General of SIECA and the Executive Director of the United Nations Industrial Development Organization (UNIDO) signed an agreement in Vienna on April 21, 1980 "to coordinate efforts and cooperate in the area of the industrial development of Central America".

This cooperation will be in the following fields: a) preparing and carrying out development policies in industry, productivity and appro-priate technology for Central America; p) identifying ways of solving problems in specific industrial branches of particular interest for Central America; c) carrying out studies to identify industrial branches whose establishment will be of high priority for Central American development and d) improving technical information services and statistics on indus-trial policy and development.

5. CACM Relations with the European Economic Community In 1980 the European Economic Community (EEC) cooperated with the countries of the Central American Isthmus in several technical as-


sistance and development programs whose cost amounted to approxi-mately 40 million dollars. This sum represents a third of the total re-sources allotted by the EEC to Latin America in 1980. Among the projects financed are the following: 15 million dollars for Nicaragua for food, technical assistance and the illiteracy campaign; 7 million dollars for programs involving fishing, milk and inland road systems in Hon-duras; for Costa Rica and Panama, assistance in increasing their exports to Europe by contracting advisory experts engaging in trade missions and participating in international fairs and expositions. The EEC also collaborated with the Center for Tropical Agronomy Research on ap-plied research projects and with CABEI in financing subregional studies of the rural sector.

The chief of the Latin American EEC commission visited Central America to renew cooperation ties between the two integration systems.

During the visit of the President of Costa Rica to the EEC Com-mission in June 1980, new areas of cooperation were discussed and a joint communiqué was issued expressing the intention to achieve closer relations between the European Economic Community and the Central American Common Market.

CHAPTER V

Caribbean Community

Introduction For Caribbean Community and Caribbean Common Market (CARI-COM) countries, the year 1980 may be described as a period in which the regional movement maintained the revival efforts which began to take shape in 1978-1979, following the period of decline in 1976-1977.

One of the most promising indicators of a continued CARICOM revival is in the area of intra-regional trade. The figures reveal that the level of trade activity surpassed that of the pre-crisis period of 1978-79, when import restrictions imposed by some member countries seriously threatened to dislocate the integration movement.

Another area in which gains have been scored is that of foreign-policy coordination. Not only was progress made in the preparation of a regional program to be financed by the European Economic Com-munity, but the first phase of the Mexico-CARICOM Agreement was implemented. Among other things, this Agreement will ensure technical cooperation benefits for CARICOM. Progress was also made on benefits to be derived from the Mexico-Venezuela Oil Facility, available initially only to Jamaica and Barbados.

In terms of the scope and functioning of the Treaty of Chaguaramas (the Treaty establishing the Caribbean Community and Caribbean Com-mon Market), a Caribbean Group of Experts was appointed in March, 1980 to review the functioning of the Caribbean integration movement and to make recommendations for its improvement in the decade of the 80s.

By the end of the year, the work of the Experts had not yet been concluded. Nevertheless, their final recommendations are expected to make a significant difference in the focus and direction of the integration movement. In 1980, for the fifth consecutive year, a Head of Govern-ment Conference again failed to materialize. This Conference, with the CARICOM Council of Ministers, make up the two Organs of the Com-munity. By Treaty, they share responsibility for running the Community as far as major policy decisions and directing its financial and admin-istrative work.

O T:Ss e '12

0 c ■E

"5 4 e

-"C;)i COE

-6 Ti e ,2

CO

cC

-6 Ts. e ,2

O cC

164 CARIBBEAN COMMUNITY

NO) 1-- LC) CM cc)

cNJ cc) r.: c:i cci

CNJ C) CC) CC) LC) CNJ C35

,-7 LC) CNJ

CD CC) CID

,T C3) Cr) 0) CD

CNJ Cr) m-- cr CO m-- ,-- 1....

LC) LC)

CNJ

,--

CNJ CNJ C3)

OS 1--

LC) CNJ m--

c .1 c.; (7) ,--

I` LC) h.. C3) CK) LC) 00 r...

X00 LCD c:i cci cri c:i. LC) CNJ m-- CNJ CNJ

m-- (3) CI) C3) m-- Cr) NCO C75 NO CD LC) CNJ LC) CNJ

m-- aoM ' CO CD m--

C m--

• CNJ t7 CO CC) m-- LC) C71

NQ) 00 I`c.r 000 C:i

C3) w-- m-- CI)

LC) CO c,)c»

Lc) r0 CD r,. CNJ

N00 LC) CC) CI) CI)

CNJ LC) OD CaN-OO CNJ

CD LC) CX) CI) C7) CD CD CI) m-- CNJ

c:i co Lc) c,) c C CI) C m

CLNCJ)

C

CNJ CO LC) CNJ ,zr c.■

0 LC) CI) CO

m-- LC) (3) CNJ m-- CD LCD c) CK) C35 C3)

CI) r'. 1....... 00 00 C,J Lr) Lr) LC) CC)

CNJ ,T ,-- cg) CO CI) CK) (NJ 1--..

.1-- C6 Y-- cv c-vi c...1

EP_ as ■-...--, . ...-cn 4 g . . ---- 4-, cz Cn

E ' o --a _ co 0 av ...0

:2 ig f.:4 u„ E CU ' ...c ,..., i3'' m ..... ,_ "V = = ...-. .1. cn CV . - - -cs CA .., 0 '',, tr, a, = CO 2 w a_ -c, -= t ar .._ c, o .., = C) CL Cn = 7- 0, .o CD 0 -€. c:1-'' °- w

"CD -CC) C) C.) N. CL C/) ' x u) E cl, .-- cu - -'1 o) ca "a .= Uj — — '- ,,, ......- ,_, cn

, acts . ,'" C.D cu ci_rts CL as cii ci, . s''

E 2 E, — 0 -- ,.. — E LL r4 — ‘--KI -- ----

E . c , , 1 74 =. 7 ). < , . _ .= E ,..9 - - — , ,

""'" 7J: 25 g"": ;:ii,! : ,:!! i ! :: c‘, . . E cn LD . — c) 4-- a L- a a, C:1- CL 0 .--- L.- Co cz — — .4... L.- 0 0 ,- a, " &■

C,C CL 0- CO 0- CD I— — =

Co

untr

ies

in t

he

Car

ibb

ean

Eco

no

mic

Co

mm

un

ity

: Bas

ic D

ata

198

0

E

O

CO C/)

0)

U-

O

0 O

O

0) CC ci co co

.1'12 <

OE-

C cr

L (.12

O co)


Yet, the continued absence of a meeting of one of the supreme Organs emphasizes, in an ironic fashion, one of the strengths of the Community since, in a certain sense, the Council has acted as a surrogate for the Conference. By maintaining regular meetings, the Council has successfully dealt with a number of crucially important policy issues that would normally have been handled by the Conference.

In this way, the Council has been the main vehicle for maintaining the momentum of the integration movement.

In addition to the regular meetings of the Council, several meetings of Standing Committees of Ministers responsible for specific areas of policymaking were also held during the year. Among the areas covered were: Transportation, Health, Labor and Communications.

Referring specifically to the area of functional cooperation, there were important developments in the field of Training and Culture, Labor and Industrial Relations, Cooperative Development, and Tax Admin-istration, among others.

A. Institutional Aspects 1. Review of Integration Movement by Group of Experts In 1980 the Caribbean Community celebrated the seventh anniversary of its formal establishment. During this period, several major problems relative to the objectives and efficient functioning of the enabling Treaty had surfaced. In recognition of these problems, and with the aim of steering a course that would best represent the goals and aspirations of member-countries, CARICOM decided in March 1980 to appoint a Group of Caribbean Experts, who would be invited to prepare for the Council, a new strategy for the Caribbean Integration Movement during the decade of the 80s.

The specific mandate given to the Group was to review the func-tioning of the Caribbean Integration Movement and to make recom-mendations for its improvement in the decade of the 1980s.

Among the many events leading to the need for such a mandate the following may be cited: balance of payments problems triggered principally by the international energy crisis and by high costs for im-ported foodstuffs; lack of progress in regional industrial programming; lack of progress in the joint development of natural resources; insuffi-cient progress in the marketing of agricultural products; insufficient progress in the rationalization of agricultural production; problems in the development of tourism; the need to develop agreements on the regulated movement of capital; the need to increase economic coop-eration between CARICOM and the rest of Latin America.

The Group of Experts, which met several times during the year, was expected to submit its final recommendations early in 1981. When Council acts on those recommendations, it is likely that the direction, if not the basic structure of CARICOM, will be significantly different.


2. Special Measures for LDCs At the institutional level, the Council also endorsed several special meas-ures designed to improve the status of the Less Developed Countries (LDCs) within CARICOM. Among these measures were the following: a Country Officer Scheme, under which a trained professional will be-come a "desk officer" stationed in each LDC or group of LDCs and will serve as the permanent liaison for coordinating the work-program of the CARICOM Secretariat in these countries; a recommendation that would exempt all LDC exports entering intra-regional trade from balance of payments induced restrictions; special treatment for the LDCs in reference to Article 29 of the Common Market Annex to the Treaty of Chaguaramas under which the More Developed Countries (MDCs) of CARICOM may impose certain restrictions on imports from other member countries, when it is believed that these imports might disrupt a particular industry in the importing country.

The special treatment seeks to have the LDCs continue to export at the most favorable level existing under old rules without objections from other MDCs.

3. Ratification of New Rules of Origin During the year the process of ratifying the New Rules of Origin was completed by all CARICOM members. These new rules will govern the free entry of goods exported from one CARICOM country to another. By year's end, however, the enactment of enabling legislation in all States had not been completed. Thus, actual implementation of the new system did not begin in 1980.

4. Complementarity of National and Regional Resources Another interesting development at the institutional level is the for-mulation or furtherance of regional objectives through the use of re-sources or institutions already existing at the national levels to serve national purposes. Examples of this development include: the imple-mentation of the CARICOM Travellers Cheque Scheme and the Mul-tilateral Clearing Facility by using the respective resources of the Na-tional Commercial Bank of Trinidad and Tobago and the Central Bank of Trinidad and Tobago; the use of Jamaican facilities for the Regional Dairy Industry Training Project and the Regional Training Project for mid-level Agricultural Farm Managers.

This kind of development is significant for Caribbean integration because it emphasizes the commitment of member countries to utilize available resources in the interest of the regional integration movement.

5. Reorganization of the Caribbean Development Bank At the monetary and financial level, the Caribbean Development Bank, an Associate Institution of the Caribbean Community, underwent some

COMMERCIAL ASPECTS 167

organizational changes at the operational level. Under the new arrange-ments, all project activities are located within a single unit, consisting of two operational and three service departments. The reorganization is designed to bring about a more coordinated approach to all project activities.

B. Commercial Aspects In 1980, intra-regional trade continued to revive from the slump that occurred in 1976-77 when the balance of payment difficulties of some member countries necessitated imposing restrictions on imports from other regional members. The two countries principally involved in the restrictions took further steps to eliminate as many of the restrictions as possible and the result has been a positive growth in intra-regional trade.

Two regional arrangements have facilitated this growth, in spite of continuously escalating international prices for oil and food-stuff: the Caribbean Multilateral Clearing Facility (CMCF) and the Trinidad Oil Facility, both of which are described elsewhere in this chapter. The CMCF, by setting up a subsidized line of credit, makes it easier for debtor countries to meet their obligations and thereby assists the growth of trade. Similarly, the subsidized purchases under the Trinidad Oil Facility, facilitate the purchases covered under the arrangement. In addition, the Facility frees up for other purposes, short-term foreign reserves that would normally have been utilized for those purchases.

1. Trade Liberalization The process of trade liberalization in CARICOM includes the following measures:

a) New Rules of Origin Agreement on a relatively liberal set of Rules of Origin was reached by member States in 1978 after considerable discussion and debate. The agreement has already been ratified by all the national legislatures, but at the end of 1980 implementation was dependent on the passage of enabling legislation in two of the member States. Under the New Rules, eligibility for Common Market treatment will depend more on the extent of manufacturing or process operations performed within the Common Market than on the origin of the materials used in the process.

The basic consideration is that where a finished product derives from imported materials, the manufacturing or processing performed within the Common Market must result in a change of classification under the Brussels Tariff Nomenclature (BTN) between the imported starting materials and the finished product.

The implementation of the New Rules of Origin will go a long way to assist in the liberalization of trade. Note however, that even the New


Rules are hedged by and contain exceptions in reference to the LDCs. This provision recognizes the special needs of the LDCs within the integration process.

b) Import Duties CARICOM states have eliminated the imposition of import duties on goods of Common Market origin. Again, special consideration has been given to the LDCs which were allowed up to May 1983 to eliminate the duties on certain specific goods on a progressive basis.

c) Revenue Duties and Internal Taxation Within the same context, member States.have agreed not to apply direct or indirect fiscal charges in excess of those applied to domestic goods or to apply fiscal charges on imported goods of a kind they do not produce in order to protect domestic production of substitutes which are in direct competition with imported goods and on which fiscal charges are not levied.

d) Prohibition of Export Duties Member States have also eliminated export duties in connection with the exportation of goods to any other member State. The elimination of such duties was phased out over a period of five years ending in 1978.

e) Freedom of Transit Another important procedure that has helped the liberalization process was the elimination of transit barriers for goods imported into or ex-ported from a member State. By this provision, CARICOM members enjoy freedom of transit within the Common Market, subject only to the payment of normal rates for services rendered.

f) Quantitative Import Restrictions CARICOM States are in agreement that they may not apply quantitative restrictions on the importation of goods which are of Common Market origin. The agreement, however, is considerably weakened by several "loop-hole" mechanisms, including a provision that a State which finds itself in balance of payments difficulties may indeed introduce quanti-tative restrictions on imports for the purpose of safeguarding its position (Article 28 of the Treaty). The question was so important to the lib-eralization of regional trade that it evoked a reconsideration of the subject of quantitative restrictions, resulting in a review of Article 28.

g) Review of article 28 of the Common Market Annex Article 28 of the Common Market Annex is a provision of the Treaty which permits a country facing balance of payments difficulties to apply quantitative restrictions on imports from its Common Market partners. The years 1976 and 1977 were disastrous ones for two of the regional MDCs in particular, in the sense that the balance of payments situation in both countries deteriorated to the point that they were running un-manageable deficits. Faced with this problem, both countries invoked


Article 28 thereby creating grave strains in CARICOM operations. It was on this basis that the decision was made to review the Article, with a view to preventing or minimizing the effects of future problems of this nature. CARICOM recognized the need for an escape mechanism for countries with balance of payments difficulties, but nevertheless sought a procedure that would cause the least possible disruption of trade activities. As a result the CARICOM Council set up a Permanent Re-view Mechanism that will keep the balance of payments situation of all countries under constant review, thereby enabling Council to make sug-gestions to member countries that would minimize the effects of trade restrictions that might be imposed. At the same time, the LDCs, whose economies were particularly vulnerable to such restrictions, are to be given special consideration, either for totally exempting them from the restrictions, or if this cannot be done, for preferential treatment in the manner in which the restrictions are applied.

h) Quantitative Export Restrictions Member States have also agreed not to impose quantitative restrictions on the exports of other CARICOM members, establishing thereby an important concession to the relatively more efficient regional producers.

2. Common Protective Policy—Establishment of a Common External Tariff A restructured Common External Tariff (CET) was established by the Common Market Council. The new structure is based on the 1978 edition of the Customs Cooperation Council Nomenclature (CCCN) which of-fers the advantage of using a single CCCN-based classification number which reflects both the tariff and the statistical classification for each imported and exported item.

The level of rates in the CET covers a wide range and is levied on all commodities imported from third countries. The objective of the CET is to provide a common protective policy against non-member States.

The range varies from no tariff at all (e.g. live domestic animals) to 50 per cent of value (e.g. chocolate products). Between these ex-tremes, the tariff is 5 per cent on items like pork and beef and 15 per cent on processed poultry (reflecting the region's dependence on basic food imports). At the other end of the average scale, the tariff is 25 to 45 per cent on edible vegetables, certain roots, tubers, coffee and spices and 30 to 45 per cent on items like refrigerators, television receivers and motor vehicles (reflecting a discriminatory levy designed to protect regional agriculture and industry).

As far as the LDCs (except Belize and Montserrat) are concerned, their old tariff rates under the East Caribbean Common Market Agreement will be phased out not later than August, 1981 at which time the new


CET will be put into effect. For Belize and Montserrat, the effective date for the new CET will be August, 1985.

3. Trade The data on total trade in Table 42 show that between 1973 (the year that CARICOM was inaugurated) and 1979 total external exports of CARICOM countries as a group grew by 199.0 per cent. Other relevant growth rates for total external exports were: 6.1 per cent from 1971-72, 21.5 per cent from 1972-73 (the immediate pre-CARICOM period-data not shown in Table 42); 136.3 per cent from 1973-75, 6.7 per cent from 1975-77 and 18.6 per cent from 1977-79 (the post CARICOM period).

Table 43 shows that between 1973 and 1979 intra-regional exports of CARICOM increased by 148.3 per cent. Other relevant growth rates

Table 42. CARICOM: World Trade, 1973-79 (In millions of U.S. dollars)

COUNTRIES 1973 1974 1975 1976 1977 1978 1979

BARBADOS Exports 54.0 84.7 106.5 86.4 95.4 129.8 139.0 Imports 168.5 204.1 216.0 236.8 273.4 312.6 414.8 Balance (114.5) (119.4) (109.5) (150.4) (178.0) (182.8) (275.8)

GUYANA Exports 138.0 268.0 362.9 268.6 252.1 291.2 301.2 Imports 175.7 253.2 342.3 363.7 314.0 260.1 310.9 Balance (37.7) +14.8 +20.6 (95.1) (61.9) +31.1 ( 9.7)

JAMAICA Exports 390.0 730.7 783.9 608.3 745.8 764.5 802.6 Imports 664.5 935.9 1124.0 933.3 861.7 870.1 1021.4 Balance (274.5) (205.2) (340.1) (325.0) (115.9) (105.6) (218.8)

TRINIDAD AND TOBAGO Exports 697.0 2037.9 1775.2 2213.2 2175.8 2018.1 2582.1 Imports 788.4 1847.3 1471.8 1967.9 1788.8 1961.0 2110.7 Balance (91.4) +190.6 +303.4 +245.3 +387.0 +57.1 +471.4

Less Developed Countries

GRENADA Exports 7.4 8.3 11.8 13.0 14.2 17.0 24.9 Imports 21.7 18.1 16.4 18.4 22.7 26.6 31.2 Balance (14.3) ( 9.8) ( 4.6) ( 5.4) ( 8.5) ( 9.6) ( 6.3)

BELIZE Exports 24.3 47.8 57.4 36.0 47.2 65.0 69.8 Imports 43.8 64.6 71.1 72.9 79.2 101.9 142.5 Balance (19.5) (16.8) (13.7) (36.9) (32.0) (36.9) (72.7)

TOTALS Exports 1310.7 3177.4 3097.7 3225.5 3330.5 3285.6 3919.6 Imports 1862.6 3323.2 3241.6 3593.0 3339.8 3532.3 4031.5 Balance (551.9) (145.8) (143.9) (367.5) ( 9.3) (246.7) (111.9)

Source: Direction of Trade Yearbook, 1980

COMMERCIAL ASPECTS

171

Table 43. CARICOM: Regional Trade, 1973-79 (In millions of U.S. dollars)

COUNTRIES

1973 1974 1975 1976 1977 1978 1979

BARBADOS Exports to CARICOM 14.6 18.4 19.6 23.2 23.2 31.9 33.6 Imports from CARICOM 19.2 31.5 31.2 35.6 39.6 35.6 52.3 Balance (4.6) (13.1) (11.6) (12.4) (16.4) (3.7) (18.7)

GUYANA Exports to CARICOM 27.4 37.1 50.4 43.1 41.2 41.3 43.6 Imports from CARICOM 32.0 57.2 63.9 80.9 69.6 56.6 79.2 Balance (4.6) (20.1) (13.5) (37.8) (28.4) (15.3) (35.6)

JAMAICA Exports to CARICOM 24.5 32.3 34.4 43.9 34.7 36.4 58.6 Imports from CARICOM 30.7 61.1 82.1 47.9 41.7 30.8 54.2 Balance (6.2) (28.8) (47.7) (4.0) (7.0) +5.6 +4.4

TRINIDAD AND TOBAGO Exports to CARICOM 76.3 141.1 163.3 162.8 152.7 148.1 213.4 Imports from CARICOM 27.6 35.4 41.4 50.4 50.4 64.3 74.3 Balance 48.7 105.7 121.9 112.4 102.3 83.8 239.1

Less Developed Countries

GRENADA Exports to CARICOM .8 .5 .5 .4 .6 1.1 1.4 Imports from CARICOM 4.7 4.9 6.8 8.0 7.4 6.9 9.7 Balance (3.9) (4.4) (6.3) (7.6) (6.8) (5.8) (8.3)

BELIZE Exports to CARICOM NA NA 1.6 2.7 1.3 2.8 6.0 Imports from CARICOM 2.9 4.4 2.6 6.7 .7 .3 2.3 Balance - - (1.0) (4.0) + .6 +1.5 +3.7

LEEWARD ISLANDS Exports to CARICOM NA NA NA NA NA NA NA Imports from CARICOM 8.7 11.2 14.2 22.0 20.0 20.7 28.7 Balance -

WINDWARD ISLANDS Exports to CARICOM NA NA NA NA NA NA NA Imports from CARICOM 16.9 23.7 27.3 24.7 24.4 23.9 35.8 Balance

TOTAL CARICOM EXPORTS 143.6 229.4 269.8 276.1 253.7 261.6 356.6

Source: IDB Computer Printouts

for intra-regional exports were: 8.9 per cent from data not shown in Table 43; 87.9 per cent from 1973-75, minus 6.0 per cent from 1975- 77, minus 5.3 per cent from 1976-78 and 36.3 per cent from 1978-79.

Intra-regional exports as a percentage of total external exports were as follows: 9.7 and 10.0 per cent in 1971 and 1972 respectively based on data not shown in the Table (the pre-CARICOM period); 11 per cent in 1973 (the year CARICOM was established; 7.3 per cent in 1977, the year in which a slump in CARICOM trade began; and 9.1 per cent in 1979.

Several conclusions can be drawn from the CARICOM data. Ex-


ternal exports grew by 24.4 per cent between 1971 and 1973 (immediate pre-CARICOM). Average annual growth was 12.2 per cent. The com-parative growth figure for 1973-1975 (immediate post-CARICOM) was 136.3 per cent or an average annual growth of 68.1 per cent.

The growth figure for 1973 to 1979 (the entire post-CARICOM period) was 199.0 per cent or an average annual growth of 33.1.

The growth in trade partly reflects the new dynamism ushered in by increased revenues from sugar, bauxite and oil in the period 1973 to 1975 and from oil in the entire period after 1973. Sugar is one of the principal earners of foreign exchange for several CARICOM countries; bauxite is among the principal exports of two MDCs and oil is the chief export item and money earner of one of the MDCs.

Between 1975 and 1978, there was a dramatic slowdown in export growth, reflecting a combination of factors that included a policy of restraining a too rapid growth of revenues from oil by Trinidad and Tobago and decreased revenues for sugar and bauxite-producing coun-tries as a result of fluctuations in the demand for, and prices of, these commodities.

Intra-regional CARICOM exports grew by 39.4 per cent in the 1971-73 pre-CARICOM period or an average of 19.7 per cent annually. In the 1973-75 post-CARICOM comparative period, growth amounted to 87.9 per cent or an average of 43.9 per cent annually.

Growth for the entire 1973-79 post-CARICOM period was 148.3 per cent or an average of 24.7 per cent per annum.

A comparison of the immediate pre-CARICOM and post-CARI-COM periods shows that annual average growth in the latter period was more than twice as much as that of the former. On the other hand, annual average growth in the entire post-CARICOM period was only 5.0 per cent higher than that of the earlier period.

The relative decline in the average annual growth between that of the immediate post-CARICOM period and the entire post-CARICOM period is attributable in part to certain restrictions on intra-regional trade during the 1976-77 period. These imposed restrictions, placed by some CARICOM member countries on the imports of other member countries became necessary as a result of serious balance of payments difficulties they were experiencing at the time.

By 1978, these difficulties became less acute and there was an up-turn in the level of intra-regional trade.

The proportion of the post-CARICOM growth that may be attrib-uted to integration activities has not been determined. Yet, the data suggest that intra-regional trade did reap significant benefits after CAR-ICOM came into being.

Table 44 shows intra-regional exports as a percentage of total ex-ports for the period 1973-79. While the value of exports increased sig-nificantly in both areas, intra-regional, as a percentage of total exports, fluctuated relatively little.


Table 44. CARICOM: Intra-Regional Exports as a Percentage of Total Exports 1973-1979

1973 1974 1975 1976 1977 1978 1979

TOTAL EXPORTS 1310.7 3177.4 3097.7 3225.5 3330.5 3285.6 3919.6

INTRA-REGIONAL EXPORTS 143.6 229.4 269.8 276.1 253.7 261.6 356.6

PERCENTAGE 11.0 7.2 8.7 8.6 7.6 8.0 9.1

If we disregard the peak of 11.0 percent in 1973 and the low of 7.2 per cent in 1974, the range is from 7.6 per cent to 9.1 per cent.

It is therefore clear that in 1979, as in earlier years, CARICOM's exports depend more on the non-regional than on the regional markets. This dependence is a function of the small-size of the regional market.

4. Coordination of External Trade Policies The English-speaking countries that comprise the Common Market also provide a good example of ideological pluralism. The coordination of external trade policies has therefore provided an opportunity to under-take delicate negotiations, not only because it impinges on concepts of sovereignty, but also because it involves foreign policy considerations on the part of some countries that have not yet achieved full political independence. In addition, not all member States follow the same ide-ological paths. Nevertheless, at the practical level, member countries have been able to reach agreements on matters of trade liberalization and a common protective policy. Moreover, CARICOM countries have consistently adopted a common policy in cooperating with the larger team of African, Caribbean and Pacific (ACP) States. This team, in turn, has consistently formed a United Front that has won important conces-sions from the European Economic Community (EEC) in negotiations that led to the two Conventions of Lome. The second and latest Con-vention, Lome II, gives preferential treatment of ACP commodities to the EEC market on a contractual and nonreciprocal basis. The Agree-ment also provides for a system for stabilizing earnings from agricultural commodities against fluctuations in world prices (STABEX), a program of technical cooperation and financial assistance on concessionary terms.

Additionally, CARICOM countries have !negotiated en bloc to com-plete an Agreement to replace the Canada-West Indies Agreement of 1925. This Agreement provides opportunities for the expansion of trade between Canada and the members of the Community.

5. The Agricultural Marketing Protocol (AMP) and the Guaranteed Market Scheme (GMS) The AMP and the GMS are two other important instruments for the expansion of trade. Under the AMP, certain specific agricultural prod-


ucts are traded on the basis of agreed prices as well as of export and import allocations to surplus and deficit countries. The arrangement is supplemented by the GMS under which the MDCs agree to purchase specified quantities of certain agricultural products from the LDCs.

A Common Agricultural Policy (CAP) is another area that has received much attention. However, apart from the specific case of a Regional Food Plan to which all countries are committed and in respect of which some projects have already been launched, agreement on a CAP has been reached only in principle. The importance of such a policy cannot be over-emphasized because, in practice, the elaboration of a comprehensive general policy for agriculture would permit national ap-proaches to be harmonized into a more systematized pattern of pro-duction and marketing consistent with national and regional objectives.

6. The Regional Food Plan (RFP) This plan represents, in practical terms, that area of agriculture that has achieved the greatest amount of cooperation among member States. Under the Plan, a Caribbean Food Corporation has been established as the executive arm of the Plan.

A number of studies in about six subsectors have been launched. Several projects which have emerged as a result of these studies, are now at different stages of development. Additionally, two pilot projects in corn/soy bean production have made successful starts in Guyana and Belize.

7. Other Areas of Cooperation Affecting Trade Among other areas of importance, it is worthwhile to mention the pro-gram to harmonize fiscal incentives to industry, whose main objective is providing incentives to nationals to encourage them to invest in the industrial development of member States in an atmosphere that would reduce disruptive competition between States for foreign investment in manufacturing.

CARICOM members have put much effort into this question of harmonization. Yet, many policy problems remain to be solved before a regional industrial program becomes a reality. One reason that helps to explain this failure is the fact that industrial programming, by its nature, requires very heavy capital outlays and that the region, with the exception of Trinidad and Tobago, chronically runs a balance of pay-ments deficit. Additionally, since it appears that few of the countries have a clearly defined investment code established by legislation (Guy-ana published an Investment Code in November, 1979), it is very difficult to coordinate group activities in this area. A third and related handicap is the fact that economies of scale are difficult to achieve, since CAR-ICOM's population is still under five million. The net effect of these conditions is that the amount of investment capital which moves from one CARICOM State to another is very minimal.

SECTORIAL DEVELOPMENT 175

In the light of these difficulties facing regional industrial program-ming the CARICOM Secretariat and the CDB have initiated a study designed to provide data and information on production possibilities in the region that could lead to the preparation of pre-feasibility studies.

C. Sectorial Development The cornerstone of Caribbean Regional Development continues to be the agricultural sector. This is exemplified, both in the emphasis placed on efforts to develop projects emanating from the Regional Food Plan and on steps taken by CARICOM to transform the Caribbean Food Corporation (CFC) from a mere existing formal institution into a fully operational enterprise. The Rhymesbury Regional Project, located in Jamaica and under which agriculturists are to be trained as mid-level farm-managers for attachment to national and regional projects, is an-other indication of the importance attached to the development of the agricultural sector.

In addition to the agricultural sector, CARICOM has begun to place new emphasis on Article 46 of the Annex to the Treaty of Chag-uaramas, which outlines a critical role for the industrial sector in the achievement of the objectives of the Community. As a consequence, the development of the export sector (both public and private) is being vigorously pushed.

Other sectors which will receive considerable attention in the future are energy and transportation.

1. The Agricultural Sector The concept of the Regional Food Plan underwent significant changes during the year as a result of experiences gained from earlier projects and in the light of new realities and goals.

One of the major changes involves a switch from the historical pattern of the development of the agricultural sector to a course in which resources are specifically allocated for the joint development of food production. Another significant change has as its objective, a program aimed not only at increasing food production, but also at increasing food production with due consideration given to the nutritional value of the food produced. This additional dimension is leading to the adoption of a Regional Food and Nutrition Strategy.

The implementation of the Regional Food Plan has moved slowly through the years because Caribbean agricultural development has his-torically been geared to the production of traditional export crops. As a result, the infrastructure and institutional underpinnings required for increased production of domestic foodstuffs were inadequate or non-existent. To fill this gap, the CFC was created in 1976, but it required time to move it out of that stage where it represented a formal act of "creation" and into an operational institution with the full capacity to


undertake the function that it was created to undertake. This function is to serve as the main implementing agency for the Food Plan projects.

With assistance from various international institutions, including the IDB, the CFC is now fully operational and in 1980, was working on some 25 projects as part of its investment program over the next three years.

Another important development was to give a dominant role in food production to the Caribbean Agricultural Research and Devel-opment Institute (CARDI). CARDI's role stems from the need to trans-fer technology that would lead to increased efficiency in food production.

Parallel with this, the Caribbean Agricultural and Rural Devel-opment Advisory Training Service (CARDATS) was established for the purpose of transferring technology to the small farmer who, in the Car-ibbean, is responsible for a significant proportion of food crop produc-tion.

In addition to giving key roles to these three regional institutions, individual Caribbean countries are developing some of their national institutions in such a way that the regional institutions can serve as extensions of the national agricultural programs. Thus, for example, a deliberate policy has been to make an effort to promote the Develop-ment Finance Corporations (DFCs) as local sources for farmer credit and to strengthen the local Marketing Agencies.

When the Rhymesbury Training Project in Jamaica is completed, the region will have at its disposal some sixty trained mid-level farm managers who would be available for managing livestock projects and other projects in dairy farming which will ensue from the Regional Food Plan.

2. Industrial Sector CARICOM recognized the need to diversify the regional economy and Article 46 of the Annex to the Treaty of Chaguaramas specifically ad-dresses the question of developing a regional industrial program.

Over the years, little headway was made in this direction, but the international energy crisis and expenditures for imported foodstuffs that continued to increase, and which came to be mainly responsible for a growing deficit in the regional balance of payments, caused CARICOM to renew efforts to establish a regional industrial plan.

The deliberations stressed that a revitalized export sector geared to light manufactures and in which both the public and the private sectors participated, could make a significant contribution to the other side of the equation to be provided by increased food production for domestic purposes. That is, where increased domestic production of food would decrease the outflow of foreign reserves used for the purchase of these commodities, increased regional production of light manufactures for export would increase the inflow of foreign reserves and thereby help to reduce the overall deficit in the balance of payments. Thus, in an

SECTORIAL DEVELOPMENT 177

effort to increase its industrial export capacity CARICOM has been seeking ways to improve its export potential and is taking measures to promote the manufacture and export of light manufactured goods, both in the public and the private sectors.

3. Energy Spurred by the international energy crisis which reared its head in 1973 and has continued since that time, CARICOM has been seeking ways to alleviate its energy problems. The sector has therefore emerged as one of the principal factors in the development of the regional economy.

Among the strategies used is the development of a Caribbean Al-ternative Energy Systems Project. Sponsored by the United States Agency for International Development (USAID) the project is jointly imple-mented by the Caribbean Development Bank (CDB) and the Caribbean Community Secretariat (the Secretariat).

The Project is designed to last five years and has as its objective, the establishment and strengthening of the institutional capability of Caribbean States, including CARICOM Member States, in the area of alternative energy systems.

Four areas of institutional capability have been targeted: Policy Planning and Assessment; Technical and Analytical Training; Com-munication and Information; Field Testing and Applied Energy Tech-nologies. The program emphasizes the special energy needs of the region and will go a long way to assist the problems of development stemming from increasingly high energy costs.

The other important contribution to the energy sector is the estab-lishment and financing of the Trinidad Oil facility by the Government of Trinidad and Tobago.

Administered by the Central Bank of that country, the "Facility for Financing Oil, Fertilizer and Asphalt Purchases by CARICOM States became effective in January, 1980. Under the arrangement, the Gov-ernment of Trinidad and Tobago provides significant subsidies of these purchases by CARICOM Member States. The soft loans involve a 3 per cent interest rate (2 per cent in the case of the LDCs) on loans that mature in 15 years with a grace period of 3 years (interest is capitalized during the grace period) and will go a long way to ameliorate the energy problems of the region as well as help to reduce the regional balance of payments deficit of the near future. The immediate impact would be reduction of the amount of foreign exchange needed to pay for these products.

4. Transportation The Caribbean Community is unique among integration groupings in the sense that member countries are not only geographically non-con- tiguous, but also that the two most distant countries are separated by


almost a thousand miles of ocean. Since intra-regional trade represents a significant proportion of the life-blood of the Common Market aspects of the integration movement, the availability of transportation for this purpose is of prime importance. For example, when food production under the Regional Food Plan comes on full stream, it will be absolutely essential that facilities be available to take the products to their "over-seas" regional markets.

In the past however, regional shipping and air cargo transportation facilities have been inadequate to meet the needs of the region and have acted as major constraints to the operations of the Agricultural Mar-keting Protocol (AMP) and the Guaranteed Market Scheme (GMS). The AMP is an agreement for marketing agricultural products under which specified commodities are traded on the basis of agreed prices.

Satisfying the present transportation needs of intra-regional trade is not easy because most of the goods involved are of the perishable kind. Additionally, supplies vary considerably, from country to country and from period to period; meeting all demands for transportation at all times—assuming the availability of transportation—is therefore not economically feasible.

The West Indies Shipping Corporation (WISCO) and the Leeward Islands Air Transport Company (LIAT), both of which are partly sub-sidized by regional Governments have borne the brunt of the service. Additionally, small privately owned schooners ply the routes between the LDCs on irregular schedules. Both WISCO and LIAT have tradi-tionally operated at a loss, partly as a result of the nature of these operations.

The combination of circumstances indicate that regional transpor-tation needs to be rationalized and steps have been taken in this direc-tion. Rationalization of transportation of passengers who travel intra-regionally is also indicated, because the growth of the tourist industry, as an independent and separate consideration, is particulary important to the economy of almost all CARICOM countries, but this growth will depend to a large degree on the availability of adequate and convenient transportation services.

A full-blown CARICOM program to rationalize regional trans-portation has not yet emerged. Nevertheless, the Caribbean Develop-ment Bank (CDB) has done a great deal to promote the development of regional transportation services.

In the first place the CDB has provided loans to WISCO for the purchase of container cargo vessels to ply the route between the four MDCs of the region. Additionally, the CDB has also provided loans to LIAT for the purchase of aircraft. LIAT provides the principal inter-island transportation service to the Eastern Caribbean.

The most recent development is the action of the CDB in preparing a report on the feasibility of WISCO's acquiring two additional vessels for the LDC route. The proposal is to have the project funded from the

FINANCIAL AND MONETARY ARRANGEMENTS 179

resources of the European Development Fund, via the CDB. In 1980, WISCO was able to increase the range of its activities and the total tonnage carried. Service now includes Miami, Puerto Rico and Guyana and more frequent calls at LDC ports. It is also expected that Belize will shortly be included in the itinerary. WISCO also expects its service to provide much needed support for the marketing activities of the Caribbean Food Corporation.

Likewise plans to establish Maritime Training Centers in the region continued during the year. The project involves a training college for ships' officers to be established in one of the MDCs and a training center for other ships' personnel in one of the LDCs.

The preliminary work is being undetaken by a group of consultants with funding from the United Nations Development Program (UNDP).

D. Financial and Monetary Arrangements 1. The Caribbean Development Bank The Caribbean Development Bank is the principal regional financial institution specifically engaged in the process of the economic devel-opment of the region. Established in 1969, it commenced operations in January, 1970. The main purpose of the CDB is to contribute to the harmonious economic growth and development of the member countries of the Caribbean and to promote economic cooperation and integration, having special and urgent regard to the needs of the less developed members of the region.

As of December 31, 1979 total resources available to the CDB for Ordinary and Special Operations amounted to US$377.6 million. This figure is made up of ordinary capital resources (paid in capital and ordinary reserves plus borrowings), a Venezuelan Trust Fund, several other Special Funds, (contributions and loans) and non-reimbursable grants. A detailed breakdown of these funds is shown in Table 45.

In its operations, the Bank has taken the special measures required of its members and has provided significant resources to the LDCs in an effort to channel a meaningful share of the benefits of regional economic integration to them.

Between 1970 and 1979 total loan approvals to regional members amounted to US$256.5 million of which the LDCs received US$130.3 or 50.8 per cent and the MDCs received US$126.1 or 49.2 per cent. The "soft funds" component of this total was US$157.5 million of which the LDCs received US$111.6 or 70.8 per cent and the I■4DCs US$45.9 of 29.2 per cent. A detailed breakdown of these figures is shown at Table 46.

The Bank has also concentrated on the promotion of multi-country projects. Out of this program came loans for the improvement of ship-ping and air transportations. (Loans to the West Indies Shipping Cor-poration (WISCO) and to Leeward Islands Air Transport (LIAT).


Table 45. Total Resources

As of December 31, 1979, the sums available to the Bank for its Ordinary and Special Operations amounted to the US dollar equivalent of $377.6 million, an increase of $115.9 million over the previous year. Total resources are made up as follows:

CDB: Total Resources 1979 and 1978 (In thousands of dollars)

1979 1978

I Ordinary Capital Resources (a) Paid ,in Capital and Ordinary Reserves (b) Borrowings

II Venezuelan Trust Fund

III Special Funds Resources (a) Special Development Fund (b) Other Special Funds Resources by Contributors

Country Contributions/Loans (i) Canada

Contributions (ii) Nigeria

Loan (iii) Trinidad & Tobago

Loan (iv) U.S.A. (through USAID)

Loans

Institutional Contributions (i) Inter-American Development Bank (ii) International Development Association

Non-Reimbursable Grants USAID Grant Programs Other Grant Funds

GRAND TOTAL

116,731 80,827 44,169 72,562

25,022

41,946 38,881

25,022

235,808 155,779 97,127

9,362

5,000

4,167

72,800

12,500 8,000

24,916 1,936

79,612

9,251

4,167

44,900

12,500

2,536 2,813

377,561 261,628

Table 46. Loan Approvals (In thousands of dollars)

Year

Total Loan Approvals 1970-1979 Loan Approvals from 'Soft' Funds Between

MDCs and LDCs 1970-1979

Developed Countries

Less Developed Countries Total

Developed Countries

Less Developed Countries Total

1970 - 534 534 - - 1971 1,096 3,998 5,094 - 3,729 3,729 1972 2,518 9,171 11,689 7,657 7,657 1973 8,629 9,323 17,952 - 7,341 7,341 1974 9,59 17,192 26,789 1,100 15,148 16,248 1975 7,348 15,949 23,387 1,074 15,013 16,087 1976 13,731 11,157 24,888 3,085 9,571 12,656 1977 6,324 23,661 29,985 1,085 20,588 21,673 1978 19,159 20,575 39,734 19,986 16,940 36,926 1979 57,703 18,732 76,435 19,527 15,678 35,205 TOTAL 126,195 130,292 256,487 45,857 111,665 157,522

% Distribution 49.2 50.8 100 29.2 70.8 100

Source: CDB Annual Report 1979

FINANCIAL AND MONETARY ARRANGEMENTS 181

In addition to those activities, the Bank also actively promotes national projects which are complementary to regional projects.

2. The Caribbean Investment Corporation Independent of the CDB is the Caribbean Investment Corporation (CIC) which began operations on a relatively small scale as a supporting fi-nancial institution to promote Caribbean integration. Its purpose was to sponsor industrial and agro-based industries in the LDCs. Under CARICOM arrangements, the CIC served as one of the implementing mechanisms for industries allocated to the LDCs under an industrial allocation program designed to accelerate the industrial development of these countries. The authorized share capital of the Corporation is ap-proximately US$7.0 million of which an initial issue of US$2.3 million was paid in for the period ending 1978.

Due to inadequate funding, the CIC was never able to become a dynamic institution and to carry out the objectives for which it was founded. As a result, the CIC has been winding down operations and by 1980, it became increasingly clear that the CIC would be playing an even more reduced role in the economic development of the LDCs.

3. Development Finance Corporations National Development Finance Corporation (DFCs) are financial in-termediaries which channel savings for projects which are in accordance with the economic and social development objectives of a country. The link with the integration process is that CDB's activities include the channelling of resources to DFCs located in the LDCs for onlending in support of worthwhile development projects. The objective of the pro-gram is to assist the small businessman and farmer of the region. Once again, however, the program has suffered, due to inadequate funding and also because the DFCs lack the autonomy they need to operate as viable economic enterprises. CDB has been engaged in a scheme which calls for a restructuring of the DFCs through the provision of equity capital on soft terms to national governments. CDB has also granted technical assistance to the DFCs in several forms. To date however, the DFCs have made minimal contribution to the integration process.

4. The Caribbean Multilateral Clearing Facility This facility was established among regional Central Banks and other Monetary authorities of the Caribbean Community early in 1977 and began operations in June, 1977. Its main objectives are to facilitate settlement on a multilateral basis of payments of eligible transactions, to promote the use of regional currencies and to pronwte monetary cooperation among members. In the beginning, the Facility was hardly used, partly because the settlement period was too short (3 months) and


partly because the upper limit for transactions was too low (US$40 million). In 1978, the operating conditions of the Facility were amended to increase the upper limit of transactions to US$80 million and to extend the period for settlement to six months. The reorganization of the Fa-cility brought noticeable benefits to regional commerce and was partly responsible for the dramatic turnaround in the trade of both Jamaica and Guyana which had earlier imposed quantitative restrictions on im-ports from other CARICOM States as a result of serious balance of payments deficits they were experiencing at that time. The reorgani-zation of the Facility also included the initiation of Letters of Credit and the use of travellers' cheques, both of which have helped the in-tegration process. The availability of credit in regional commerce is of crucial importance to both exporters and importers. Locating this mech-anism within the uniformly administered Facility helps to promote trade that would not otherwise have been possible. At the individual level, the use of travellers' cheques will facilitate regional travel and assist the growth of regional tourism.

Administered by the Central Bank of Trinidad and Tobago, the Facility has been an important element in promoting regional integra-tion. A crucial input of the financial arrangement is that the Government of Trinidad and Tobago partially subsidizes the cost of the program through low interest rates.

The program of Regional Travellers Checks is also administered by the Central Bank of Trinidad and Tobago. By substituting for hard foreign currency, the travellers checks pre-empt the use of that scarce commodity for intra-regional travel transactions and services. The pro-gram therefore also makes an important contribution to regional inte-gration in that it helps to reduce the deficit on the regional balance of paymehts.

In addition to the measures named above, CARICOM countries have worked as a team in the recently formed Caribbean Group for Cooperation in Economic Development (CGED). Sponsored and estab-lished in 1977 by the World Bank in cooperation with other donor agencies, the group functions to promote and coordinate external fi-nancial and technical assistance to the Caribbean. Programs and projects handled or to be handled on a regional basis include: tourism, trans-portation, energy, export promotion, agriculture, development of the private sector, special assistance to the LDCs.

E. Functional Cooperation During 1980 there were important developments in the areas of Health, Education, Training and Culture, Labour and Industrial Relations, Co-operatives Development, Tax Administration, Youth and Sports and Women's Affairs. Among these developments were the following:

FUNCTIONAL COOPERATION 183

1. Health a) Principal Activities

• A series of meetings in Grenada on the Special Problems of Small States; Primary Health Care; and Health Information Systems and a meeting between representatives of the Health Section and of PAHO/ WHO (Caribbean Office);

• Participation in a multisectoral exercise in Barbados to prepare the main working document on a Food and Nutrition Strategy, for consid-eration at a meeting in November.

b) General Subjects

• Primary Health Care Under the aegis of the Health Management Development Project, a planning meeting was conducted in Grenada in Preparation for a major workshop scheduled for June 1981. A basic document on Primary Health Care commissioned by the Secretariat was circulated to Governments.

• Special Health Problems of Small States The Special Committee of Officials met in Grenada in July. The Sec-retariat initiated action to address the issues identified including that of health manpower.

• Health Information Systems A regional workshop held under the aegis of the Health Management Development Project, was conducted in Grenada. The recommenda-tions of the workshop were supported by a subsequent resolution of the Health Ministers Conference; a study of the specific needs of Member States was carried out.

c) Management Development Activities of the USAID-funded project continued in the following area of training, technical assistance and evaluation:

d) Health Manpower Development

• General Exploratory discussions were conducted with USAID in connection with the provision, through the National Council for International Health (NCIH), of assistance in the promotion of health manpower develop-ment in the Region.

• Nursing The recommendations of the Eighth Annual General Meeting of the Regional Nursing Body were being followed up. A grant of Can. $20,000.00 was received as support for the initial activities of the Project on Re-gional Examinations for Nurse Registration.

• Training of Allied Health Personnel The proposal for the transfer of the administration of the Project from


PAHO to the Secretariat was considered. A proposal for funding for the continuation of Project activities was submitted to the EEC. The Secretariat in collaboration with PAHO and UNICEF convened a meet-ing to discuss the effective utilisation of UNICEF funds made available for the training of Community Health Aides.

e) Food and Nutrition Work continued in preparation for a regional workshop in connection with the formulation of a Food and Nutrition Strategy, scheduled to be held in Jamaica in late November. The report of a workshop to prepare a curriculum guide in Food and Nutrition for the first three grades of secondary school was circulated. The Secretariat participated in a meet-ing convened by the Caribbean Food and Nutrition Institute (CFNI) to consider assistance by CFNI and the Secretariat in the implementation of nutrition programs in the Region.

f) Environmental Health The Secretariat continued efforts to secure the signatures of Member Governments to the Agreement establishing the Caribbean Environ-mental Health Institute. An agreement was concluded with the United Nations Environment Project (UNEP) for the funding of a project for the Protection of the Caribbean Coastal and Marine Environment. The Secretariat participated in a UNDP-sponsored Seminar on Water Re-sources Development and Management in Small Islands. The Secretariat has also initiated activities in connection with a USAID-funded mission to redefine the functions and training requirements of Environmental Health Officers (public health inspectors) with a view to enabling them to play a more meaningful role in the implementation of the Environ-mental Health Strategy.

g) Policy on Pharmaceuticals A joint UNCTAD/CARICOM Workshop on Trade and Technology Policies in the Pharmaceutical Sector, held in August, produced a num-ber of important recommendations including the outlines of a program of action leading to the establishment of the Caribbean Centre for Phar-maceuticals.

h) Relations with Other Agencies The Secretariat was represented at the Sixth Conference of Common-wealth Health Ministers, held in Tanzania.

2. Education, Training and Culture Significant action took place in formulation of the educational compo-nent of the Regional Food and Nutrition Strategy; Educational Broad-casting; Adult Education; implementation of the Regional Training Pro-J ect.

a) The Educational Component of the Regional Food and Nutrition Strategy The Education and Cultural Section participated in the workshop held

FUNCTIONAL COOPERATION 185

in Barbados to prepare the main working document on the development of the Strategy, for consideration at a meeting in November. The Sec-tion's input related to more relevant education at school and adult levels; and increased and more effective educational and cultural support for all sectors of the Strategy. b) Educational Broadcasting A proposal prepared by the Caribbean Institute of Mass Communication and submitted by the UWI to the Secretariat has been circulated to Member Governments for consideration. The proposal designed to show how the Institute could be made central to a regional training facility in Educational Broadcasting, supported the University's view that the establishment of a regional training facility in Barbados, as recom-mended in the Report on the Survey of Educational Broadcasting Fa-cilities in the Region, would constitute a waste of scarce resources.

c) Adult Education The Secretariat participated in a Meeting of Representatives of Adult Ed-ucation Institutions in the Region held in Saint Lucia. An important rec-ommendation of the Meeting required the Secretariat to present to the IV Meeting of the Standing Committee of Ministers responsible for Educa-tion a proposal that the Caribbean Council for Adult Education (CAR-CAE) be recognised as the regional agency for Adult Education.

d) Regional Training Project Implementation of the USAID-funded Caribbean Regional Training Project continued with the organisation and conduct of: —Public Sector Regional Special Focus Seminars on Labour Adminis-

tration held in Grenada and directed by the Caribbean Labour Admin-istration Centre; and on Preparing Women for Effective Leadership, held in Trinidad and Tobago.

e) Labour and Industrial Relations Implementation of the programme in this area was enhanced by the Seminar on Labour Administration held within the framework of the Regional Training Project. The exercise, aimed at Employment Service Personnel, emphasised international labour standards, the functions of an Employment Service in relation to the needs of special groups of workers, the procedure and processes of an Employment Service, labour market information systems and employment promotion.

The Secretariat was represented at the Seventh Triennial Delegates' Conference of the Caribbean Congress of Labour. Involvement in the Conference facilitated information gathering for the purpose of the ex-ecution of the mandate from the Standing Committee of Ministers re-sponsible for Labour to the Secretariat to undertake an examination of the constitution, scope and objectives of the CCL as an organization representative of workers in the Region. Such an examination was a prerequisite to a review of the status of the CCL at a meeting of the Standing Committee.

CHAPTER VI

The Latin American Economic System (LAES)

During 1980, as in previous years, the activities of the Latin American Economic System focused on consultation and Latin American coor-dination, as well as on regional cooperation through its Action Com-mittees.

During its VI Regular Meeting, the Latin American Council ap-proved a wide range of resolutions covering institutional matters, ex-ternal policy harmonization, and regional cooperation activities.

In addition, with respect to specific areas of cooperation within LAES, the following Action Committees were hard at work during 1980: The Action Committee on Fertilizers (whose period of operations ex-pired at the middle of the year); the Action Committee on Handicrafts; the Action Committee on Fisheries; the Action Committee for the Es-tablishment of a network of Latin American Technological Information (RITLA); the Action Committee for the Reconstruction of Nicaragua; the Action Committee on Tourism, and the Action Committee on Low Cost Housing and Urban Development (CAVEIS). Likewise, in 1980, LAES carried out activities in the fields of monetary and financial co-operation, electric energy, agriculture, and nutrition.

A. VI Regular Meeting of the Latin American Council and Institutional Matters The Latin American Council held its VI Regular Meeting from May 22 to 24, 1980, after a preparatory meeting which took place from May 19 to 22, in Caraballeda, Venezuela, thus fulfilling the mandate of its Con-stituent Agreement which establishes the necessity of holding an annual meeting of LAES' higher executive organization.

During this meeting—and in spite of the fact that it took place within a 10-month lapse from the previous meeting of the same executive body-30 resolutions were approved, which totals 80 resolutions so far, considered to be the highest number of resolutions yet approved at any

VI REGULAR MEETING OF THE LATIN AMERICAN COUNCIL 187

of its meetings. This means that 38% of all the decisions adopted by LAES so far correspond to the VI Regular Meeting. Since then, LAES has had six regular meetings and one special one.

The above reflects the degree of accumulation of specific activities facing LAES, which require the Latin American Council to establish guidelines with respect to each one of them.

In addition it is worth mentioning that the VI Regular Meeting of the Latin American Council adopted several decisions setting medium-term guidelines to be used as a general orientation for the activities of the Permanent Secretariat, such as: Decision 59, which authorizes the Council to enter into agreements or cooperation pacts with the economic integration and regional cooperation organizations of the area; Deci-sions 69 and 73, on general guidelines to direct the Action Committees and on regional cooperation in general; and Decision 76, which sets budget guidelines. If classified by subject matter, six decisions dealt with institutional matters, nine had to do with external harmonization, and the remaining fifteen decisions were devoted to regional cooperation.

Decision 51 is one of the six decisions of the Council relating to institutional matters. In this decision, the President of Venezuela is thanked for his government's valuable political support of LAES' work, which was ratified by his speech at the inaugural session. Decision 52, also institutional in nature, confirms the enthusiastic acceptance by the Council's members of the new Deputy Permanent Secretary. Decision 59, already mentioned; Decisions 75 and 76, approving the 1980 budget and setting budget guidelines for the coming years; and Decision 77, which acknowledges the job performance of the first Deputy Permanent Secretary, were other decisions approved in this area.

In the area of consultation and Latin American coordination (ex-ternal harmonization), the Council's nine 1980 decisions included: De-cision 53, which deals with the Regional Coordination Meeting, held in preparation of the Special General Assembly of the UN in 1980; De-cision 54, on cooperation among developing countries; Decision 55 on the Code of Ethics ruling Transnational Enterprises, and the Interna-tional Code of Ethics on Transfer of Technology; Decision 56, dealing with the Latin American bloc position versus the IV Programming Pe-riod of Sessions of the Management Council of the UNDP; Decision 57, establishing guidelines for relationships between Latin America and the EEC; Decision 58, pertaining to the Cooperation Agreement signed between the LAES and the Kingdom of Spain; Decision 74, on the recognition of the Permanent Secretariat of LAES by the System of Organizations of the United Nations; Decision 78, on sales of tin reserves by the United States; and Decision 80, dealing with economic relations between Latin America and the United States.

The Council's fifteen 1980 decisions in the area of regional coop-eration are as follows: Decisions 61-68 establish the consensus of the Council on the activities of the Action Committees on Fertilizers, Han-

188 THE LATIN AMERICAN ECONOMIC SYSTEM (LAES)

dicrafts, Housing, Food and Nutrition, Fisheries, the RITLA, Recon-struction of Nicaragua, and Tourism, and Decisions 71 and 72 set general rules on regional cooperation possibilities in the fields of pharmaceutical products and capital goods. Decision 60 establishes action guidelines aiming at strengthening technical cooperation among the countries of the region; Decisions 69 and 73, already mentioned, set guidelines for future action regarding the activities of the Action Committees and regional cooperation matters in general; by means of its Decision 70, the Latin American Council adopted the resolutions on financial co-operation and monetary matters already studied at the Meeting of Fi-nance Ministers and Presidents of Central Banks convoked by LAES and CEMLA; and Decision 79 requests the Permanent Secretariat of LAES to prepare a study on the implications of the restructuring of international industry to aid the Latin American manufacturing indus-try's adaptation to it.

In his speech before the Latin American Council, the President of Venezuela stressed LAES' prestige as the "most important political and economic center in Latin America and the Caribbean". He reaffirmed his government's willingness to make LAES an effective financial co-operation system within the region, "to make the countries of higher economic capacity realize that they should come to the aid of the less developed countries now facing difficulties".

The Venezuelan President also remarked that "in order to practice the Latin American solidarity demanded by its international policy," the Venezuelan Government had designed a special petroleum policy favoring the Central American nations and the Caribbean, which was subsequently adopted by Mexico and Trinidad and Tobago as well. This policy provides supply guarantees for these nations and gives them ad-vantageous terms for obtaining and paying for petroleum.

In turn, the Minister of Planning of Nicaragua stressed the need to establish a New International Economic Order based on equitable ex-change where transnational capital shows total regard for the sovereignty of the developing countries, with sufficient soft loan financing from the more developed countries. For this, it is necessary that the solidarity and cooperation among the Third World countries be reinforced as a means of guaranteeing their will to modify the existing Economic Order.

During the course of 1980, several Chiefs of State of Central Amer-ica ratified their support of LAES and the accomplishments it has shown in the field of regional cooperation to harmonize its external economic policies.

In regard to its membership, LAES is institutionally constituted by its 26 member states from Latin America and the Caribbean. Only Paraguay has not yet ratified its accession to LAES' Constituent Agree-ment.

VI REGULAR MEETING OF THE LATIN AMERICAN COUNCIL

189

On the other hand, and complying with the terms of Decision 59, which states that the Permanent Secretariat enters into cooperative agreements with other regional and international organizations to avoid duplication of efforts and tasks, LAES signed an agreement with FAO's regional office, Latin American Division; and the Economic Commis-sion for Latin America (ECLA), in March; with the Board of the Car-tagena Agreement (JUNAC) and the Latin American Association of International Finance Institutions (ALIDE), in June; and with the United Nations Industrial Development Office (UNIDO), in July, 1980.

The agreements entered into with ECLA and FAO make the col-laboration with these organizations official in order to better serve the mandates and agreements of the Latin American Council. For this, annual programs of operations are foreseen within the sphere of regional cooperation and in the areas of coordination and external cooperation, to be implemented, as deemed necessary by LAES and in accordance with the work program possibilities of FAO and ECLA. This way, complementation is sought between the specialized analytical capacity available from ECLA and FAO, and LAES' basic nature as an admin-istrative organization and political decision-making mechanism.

The document signed with the Board of the Cartagena Agreement gives priority to collaboration possibilities in those Action Committee projects in which more than one Andean country would be involved, as well as to the external relations of Latin America.

Initially, cooperation with the Action Committee on Low Cost Housing and Urban Development, and cooperation between RITLA and the Andean Technological Information System are sought. Like-wise, it is believed that this agreement would simplify cooperation in the agricultural field; with the planned Action Committee on Pharma-ceutical Products of High Demand; and with the Multinational Fertil-izers Marketing Company (MULTIFERT).

The agreement entered into with the Latin American Association of Financial Development Institutions (ALIDE) is intended to foster regional financial cooperation, particularly in compliance with the man-dates of the First Meeting of Ministers of Finance of LAES, of April, 1980. Specifically, cooperation activities would be expanded to carry on studies on financing of multinational projects, on medium and long-term projects, and on Latin American preinvestment financing.

The cooperation agreement signed between the Secretariats of LAES and UNIDO seeks systematically to obtain UNIDO's support for LAES' work program in the fields of industry and electric energy cooperation, stressing industrial restructuring strategy and regional cooperation in the capital goods industry. The agreement became active on September 1, 1980, and stipulates that a high-ranking UNIDO official is to be appointed to work at the offices of the Permanent Secretariat of LAES, as permanent advisor.


B. Latin American External Consultation and Coordination In 1980 LAES has approached its continuing task of defining the joint position of the region's countries in international negotiations now tak-ing place with countries or groups of countries in a systematic and productive way, and has obtained an advantageous bargaining position. Nevertheless, the tangible results of these negotiations have yet to show substantial benefits for the region, mainly due to the lack of political support from similar organizations of the developed world.

1. International Fora The Latin American Council, complying with the terms of Decision 40, which selected the international negotiations with which LAES should start external consultation and coordination, made some progress in the following fields of the international sphere, during 1980:

a) General Special Assembly of the UN. In May 1980, the Latin American Council adopted its Decision 53, which sets the Regional Coordination Meeting to take place in New York from August 25 to September 5, immediately preceding the General Special Assembly of the UN and the Ministerial Meeting of the "Group of the 77" .

The Assembly of the UN intended to evaluate the accomplishments in the establishment of the New International Economic Order and to adopt appropriate measures for the promotion of development in de-veloping countries especially with the approval of the New International Development Strategy of the Third Decade of the United Nations De-velopment Program, as well as the initiation of global negotiations on international cooperation for development.

Consensus was reached during the meeting regarding the notorious lack of political initiative of the developed countries before the Assem-bly, and the intention of the developing countries to withdraw from certain agreements already active.

In regard to global negotiations of the New International Economic Order, it was stated that they not only should comprise matters of utmost urgency for the developed countries, such as the stability of supply and basic products' prices, including energy prices, but also the reform of the International Monetary System, the protectionism in the developed countries, the financing of development and the equitable framework for the transfer of technologies, all matters of great importance for Latin America.

Likewise, the meeting observed the importance of economic co-operation among developing countries as a tool to establish the New International Economic Order. Also, the meeting restated the Latin American position regarding the form that the global negotiations should have, in the sense that they should be centralized within the highest

LATIN AMERICAN EXTERNAL CONSULTATION AND COORDINATION 191

forum of the United Nations, and not scattered over several fora and organizations. In regard to the New International Development Strat-egy, the convention reaffirmed that it should be conceived of as an integral part of the efforts toward the establishment of a New Inter-national Economic Order.

The Ministerial Meeting of the "Group of the 77" took place in New York from August 21 to 23, 1980, and it considered the Latin American requests. Due to the pronounced deterioration of the inter-national economic situation during the last few years, and of its negative effects on the developing world, a single solution was presented to improve the situation, suggesting the restructuring of the existing fun-damental international economic relations.

Since the Special General Assembly adjourned without reaching an agreement to convoke a North-South Assembly to study the Global Negotiation for restructuring the Economic International Order, the Permanent Secretariat of LAES continued carrying on the work de-scribed in the agenda for the Meeting of the "Group of the 77", and to that effect convoked a meeting of consultants to define the Latin Amer-ican joint position before the general negotiations of North-South, and South-South relations.

Because of the failure of the negotiations to request a meeting among industrialized countries and developing countries, it was decided in December, 1980, that a meeting of the "Group of the 77" should convene to study the relationships among developing countries. The Work Program for the South-South negotiation meeting was defined later on, and the date of same tentatively set for May 1981. The meeting was to take place at the Ministerial Level in Caracas, Venezuela. The agenda of the meeting would cover five main topics: energy; nutrition; finance and the reform of the international monetary system; raw ma-terials and trade; and industry and technology. Technical cooperation among developing countries would have an ad hoc character on each one of the aforementioned topics. Competent organizations within the United Nations would be in charge of the organization of the event and preparation of the corresponding work to carry out the meeting of the "Group of the 77".

b) Technical and Economic Cooperation Among Developing Countries The V Regular Meeting of the Latin American Council took place a few months after the IV Ministerial Meeting of the "Group of the 77" convened in Arusha, Tanzania, in February 1979, and UNCTAD's 5th Meeting at Manila, the Philippines, in May of the same year. This allowed the Council to be able to appreciate and evaluate the results derived from both fora, regarding the economic cooperation among developing countries. On the one hand, Chapter II of the Short and Medium-Term Action Plan on Global Priorities of Economic Cooper-ation, incorporated in the Arusha Collective Self-Sufficiency Program,


and on the other hand, Resolution 127 (V) of the Manila Conference were the essential elements considered by the Council on this matter. In accordance with that ministerial decision, the priority areas, as set forth in Arusha, should be the object of regional coordination study in order to eventually carry on preparatory interregional meetings for a special session of the Economic Cooperation Commission among de-veloping countries of UNCTAD.

At that time, the Latin American Council, by its Decision 40, de-cided to call for a Consultation and Coordination Regional Meeting to study the individual topics in the Arusha Program with a view to estab-lishing a global system of trade preferences among developing countries, cooperation among government trade organizations and the establish-ment of multinational trade enterprises among developing countries. This meeting took place in Montevideo, Uruguay, in November 1979.

A number of conclusions on the three subjects under consideration were reached at this meeting. Regarding the Global System of Trade Preferences (GSTP) the members of the meeting agreed on the objec-tives, principles and characteristics it should have. A preparatory phase was defined as well as a negotiation phase in the process of establishing the GSTP, with the help of a Committee to be created for that purpose.

With respect to the area of cooperation among government external trade organizations, the meeting defined their nature and the possible areas of cooperation, as well as specific measures such as the ones recommended during the First Seminar of Entrepreneurial Organiza-tions of External Trade, held in Lima during the same month. Finally, the meeting recommended the creation of multinational trade organi-zations, both at the regional and interregional level in identified sectors of potential cooperation.

Later on, the Preparatory Meeting of Government Experts of De-veloping Countries specializing in technical cooperation among devel-oping countries took place in Geneva, Switzerland, from March 17 to April 3, 1980.

The establishment of a Committee on a Global System of Trade Preferences was recommended at this meeting. The Committee would have a preparatory phase to delineate its tasks throughout the second half of 1980, in order to start the negotiation phase by January 1981. Furthermore, the African proposal requiesting that that region be classified as "less developed" was rejected. Nevertheless, the meeting recommended the adoption of special measures favoring the less developed countries, such as an exception to the reciprocity principle of the GSTP.

In the area of cooperation among governmental organizations for external trade, the experts present reached a flexible and practical definition of such organizations aimed at identifying the largest possible number of institutions dealing with external trade operations as an important and regular sector of their activities in developing countries, and which are in any way subject to directives or are under the direct


control of their respective governments. Recommendations were also adopted on personnel training and consulting services, and the meeting welcomed the decisions reached by the three regions to promote sectoral and multisectoral meetings at the regional and subregional level among those organizations. Likewise, it was stressed that UNCTAD, the In-ternational Trade Center and the International Center of Public Enter-prises in Developing Countries should convoke, under the sponsorship of the UNDP, interregional meetings of the Directors of these organi-zations to discuss areas appropriate for interregional financing. Fur-thermore, the meeting adopted decisions on trade information, joint trade and various forms of common action, such as long-term contracts, mutual representation, mutually shared storage facilities, priority trade counterpart treatment, cooperation in the nutrition sector, preparation of an index of government organizations of external trade and several other less important matters.

The general orientation on promotion of multinational trade en-terprises agrees largely with the concepts established in the Panama Treaty regarding the characteristics and requirements of said coopera-tion enterprises. The assembly welcomed the concomitant decisions of the three regions to accentuate and give priority to the promotion, at the regional and subregional levels, of this type of enterprises, requesting for this purpose the active support of international organizations like UNCTAD, the International Trade Center and the UNDP.

As regards trade promotion activity at the interregional level, the meeting studied the lists of likely products and groups of products for trade promotion at this level, which were included in the reports pre-sented by the three developing regions.

The VI Latin American Council adopted by means of its Decision 54, the recommendations from the Montevideo Regional Meeting, and endorsed the results of the General Meeting, requesting the Permanent Secretariat to continue its support of its member countries in this area, including the making of contacts with other international organizations working in the same area, particularly those located in Africa and Asia.

The meeting endorsed, as well, the conclusions of the regional consultation meeting on Technical Cooperation among Developing Countries (TCDC), which took place shortly before the Preparatory Meeting of the Latin American Council. The Council also decided to convoke a new regional coordination meeting to deal with the subject in order to define its position before the Second High Level Meeting on the TCDC to take place in 1981 as part of the United Nations program of activities. To this effect, during the last quarter of 1980, the Permanent Secretariat initiated a study on multinational level technical cooperation activities in the region, to obtain the necessary recommendations to broaden and improve its technical cooperation operations.

In October, 1980, the Second Seminar on Cooperation among Latin American State External Trade Enterprises took place in Lima, Peru,


to follow up on the recommendations arising from the First Seminar, in November 1979. The purpose of the follow-up was to ensure better conditions for the distribution and marketing of foodstuffs. The meeting was attended by 13 organizations from 12 member countries of LAES. Those present at this seminar agreed to create a Cooperation Committee within the organization to deal with the nutrition sector, as a temporary mechanism which would be replaced eventually by an Action Commit-tee. The group also defined the Committee's permanent functions, its immediate activities and future projects on market information, tech-nical cooperation and training, as well as its organization and budget.

c) Code of Conduct for Multinational Companies, and International Code of Conduct for the Transfer of Technology In compliance with the recommendations of the Latin American Coun-cil, the Permanent Secretariat continued giving assistance to the Latin American Groups (GRULA) of New York and Geneva, in regard to the Codes of Conduct, which are still in their final stages of negotiation within the United Nations. In spite of the fact that both Codes are of fundamental importance for the creation of the New International Eco-nomic Order, negotiations on their final structure are still incomplete.

With respect to the International Code on the Transfer of Tech-nology at present being discussed in Geneva, agreement could not be reached at the III Session of the Conference held in April 1980, as was hoped, and so negotiations will continue in March 1981.

In February 1980, the Permanent Secretariat, at the request of GRULA, in New York, prepared and presented before its member countries a new draft project of the Code of Conduct for Multinational Enterprises, to serve as basis for the negotiations. This was done by adapting the code previously prepared by GRULA in 1979, to the new document, which will be the basis for a discussion by the Intergovern-mental Group.

During the VI Regular Meeting, the Latin American Council ap-proved its Decision 55, which delegates authority to the Permanent Secretariat to continue its advisory services to its member governments and to the Latin American Groups of New York and Geneva, respec-tively, until negotiations on the Codes reach an end. Likewise, the Council decided to convoke a meeting of government experts from the member countries to examine the Draft Project of the Code of Conduct for Multinational Companies submitted by the Permanent Secretariat, as well as the strategy to be adopted to obtain approval of this Code by the Conference once it has been approved by the Intergovernment Work Group, which is studying it at present. The Council expressed its desire for the entire process to have been completed by the end of 1982.

d) Programming of UNDP's Third Cycle of Activities (1982-1986). During the Latin American Council's V Regular Meeting, the member


states decided to coordinate their regional position regarding the Pro-gramming of UNDP's Third Cycle of Activities (1982-1986).

The Administrative Council of the United Nations Development Program (UNDP) had a special meeting in February, 1980, to conclude its debate series and reach understandings that would give the Admin-istrator a clear perspective on resource distribution and technical co-operation tasks to be implemented by UNDP during its third five-year period.

Prior to this, LAES convoked a regional consultation meeting in New York, to coordinate the Latin American position on this matter, inspiring active participation by all of its member countries in the meet-ing itself and even in UNDP's Administrative Council, even though only seven of LAES' countries belong to this Council. Parallel to this, intense negotiations were taking place among developing countries, which yielded a very special draft-decision describing the Latin American position on the above.

The guidelines and criteria adopted at the Latin American Con-sultation meeting in New York were subsequently and unanimously confirmed by the Latin American Council's Decision 56. These guide-lines were basically to: Reaffirm the universal and voluntary nature of the UNDP; increase voluntary contributions by a total of at least 14% a year; reject a substantial reduction in the percentage paid by the developing countries with a per capita income of more than 500 dollars a year; adopt a 500 dollar per capita income as the top limit for a country to qualify as a "beneficiary country"; ensure that all recipient countries are allotted, during UNDP's third programming cycle, a sum based on their "national planning indicative figures" not less than the allotment made available to them during the second programming cycle; and the introduction of additional criteria (other than per capita income and size of population) to estimate the by-country distribution, such as the magnitude of the effort being made by the country towards its devel-opment, structural changes being made by the government for pro-motion of development and fair income distribution, as well as data on external debt, the general deficit in the country's balance of payments, and the increasingly unfavorable terms of trade.

e) Recognition of LAES by the UN Due to the fact that LAES did not have observer status in the various organs of the United Nations, the VI Latin American Council recom-mended that its member governments work towards the admission of the Secretariat as an intergovernmental observer at the General Assem-bly of the United Nations.

2. Countries or Groups of Countries The list of countries or groups of countries with which the LAES countries wish to negotiate as a unified bloc has been expanded. At the same


time, progress was being made in defining working relations with those countries with which the LAES countries have long desired to have different negotiating bases.

a) European Economic Community Decision 44 of the V Latin American Council defined the bases for a common position of the Latin American region vis-a-vis the EEC. The Decision established that the Permanent Secretariat would collaborate with and assist the GRULA in Brussels in order to improve the region's representation before the EEC.

During February 1980, the Permanent Secretariat called a meeting of consultants to discuss this subject, which, in turn, recommended the appropriate preliminary tasks: the identification of specific areas where medium and long-term interests of both regions coincide, and the pre-liminary exploration of optimum ways to foster cooperation.

In turn, GRULA's President at Brussels requested in November, 1979 that the Permanent Secretariat of LAES prepare a study on the institutional and trade impact on Latin America of the admission of Spain, Greece and Portugal into the EEC.

Decision 57 of the VI Latin American Council approved the real-ization of these studies by means of inter-institutional collaboration, and effectively established the need to know the impact on Latin America's exports of the aforementioned countries' accession to the EEC.

Therefore, LAES' Permanent Secretariat prepared two studies, with the cooperation of the Secretariats of UNCTAD, GATT and other organs of the UN—one on imports from the EEC during the last two decades, and the other on the effects of the expansion of the EEC on Latin America's exports. Both reports were presented in November 1980 at a meeting of GRULA, in Brussels, during which GRULA requested LAES to draft some basic ideas for a framework agreement between Latin America and the EEC, to be discussed at another consultation meeting in 1982, on the relations between the two regions.

b) United States of America Decision 45 of the V Latin American Council charged the Permanent Secretariat with preparing a technical analysis of the relevant aspects of United States trade policy and its effects on Latin America.

LAES' Secretariat presented the report to the VI Latin American Council. The study gives a detailed economic analysis of the recent historical evolution of exports from Latin America, export structure, significance of this, and the main market access problems experienced. The analysis was based on a broad conceptualization of U.S. import structure, in order to determine the effect of both variables on the external debt of the U.S., which would allow LAES to see the main effects that this process has in turn on the development rhythm of Latin America, through its export sales.

Chapter Two of the LAES report summarizes the effects of the


1974 International Trade Law of the United States, and of the restric-tions arising from its application, as well as the effects of the 1979 Trade Agreements Law, and multilateral trade negotiations in GATT. The chapter also presents updated information on the General Preference System and its decline. All of these considerations served to define the existing conceptual legal framework of trade relations between Latin America and the United States, which determines the import structure of the letter and forms the basis for its trade policy.

In its conclusions concerning Chapters I and II, the report high-lighted the urgent need for the countries of Latin America to undertake a joint and systematic analysis of the region's economic relations with the United States, aimed at increasing their bargaining power and bring-ing about a qualitative change in these relationships. With this in mind, and in accordance with the contents of Article 2 of Decision 45, the study proposed that the LAES countries hold a Consultation Meeting to examine, within a strictly Latin American frame of reference, the salient aspects of economic relations between Latin America and the United States. This meeting is conceived of as an integral part of a joint regional process of, and exercise in, analysis and decision making, similar to the one at Punta del Este, Uruguay, in November, 1978, on the European Economic Community.

In view of the aforementioned, the Council adopted Decision 80, which sets the tentative date for the Consultation Meeting during the first half of 1981. The purpose of this meeting, as said before, is to examine economic relations between Latin America and the United States. Nevertheless, the date planned for this meeting may turn out to be too early, if the newly installed administration of the United States has not defined its policy towards the region by then. This matter is of utmost importance, naturally, to the Consultation Meeting.

c) Relations with the Mutual Economic Aid Council (MEAC) Contacts between the Secretariats of LAES and MEAC have continued through 1980, so that, in accordance with the terms of Decision 40, a Consultation Meeting on the relations between Latin America and the Socialist countries of Eastern Europe may be arranged.

The Permanent Secretariat has been requested to continue these contacts in order to inform the Latin American Council of their results so that it may decide on the date and place of the meeting. Nevertheless, it is still early, and therefore arrangements have been made only for a formal meeting between the Secretariats of LAES and MEAC, during the first half of 1981.

d) Relations with Spain The VI Latin American Council studied the terms of the Agreement signed in September 1979 between LAES' Permanent Secretary and the Kingdom of Spain's representative, the President of the Iberian-American Institute of Cooperation.


The Council amended some of the terms of said agreement and authorized the Permanent Secretary to subscribe a new cooperation agreement.

The Agreement's revised version maintains its basic structure, but modifies some of its operational aspects, such as the part that specifies that the cooperation between Spain and the Action Committees is to be coordinated directly by the latter and that financial cooperation through LAES' work program would be mainly for contracting Latin American consultants and firms. It also deletes the obligation to exchange recip-rocal economic and technical information relevant to the advancement of the cooperation.

Spain presented a counterproposal of its own, requesting that Span-ish consultants and firms be included among the possible bidders eligible for contracts to be paid with funds from the Spanish technical cooper-ation program.

The VII Latin American Council should make a definite decision on the amended agreement so that it may become effective as soon as possible.

e) Other countries Some of the member countries of LAES voiced an interest in having a study made on the economic relations between Latin America and Ja-pan. The Council recommended that the Permanent Secretariat consult ECLA on this possibility and on the appropriate time to carry out a study of this nature.

The Permanent Secretariat is also making preparations to establish closer ties with the Scandinavian countries, which have shown great sensitivity and understanding of the problems facing the developing countries.

C. Regional Cooperation A point of decision has been reached this year in the upward trajectory of regional cooperation within the framework of LAES. The first phase of progressive maturation of the System has been completed this year, due mainly to the diversified and fruitful work of the Action Commit-tees. At this time, in order to intensify regional cooperation activities, it is necessary to set new guidelines to direct the regional cooperation process, using as a model the experien1e garnered throughout the First Work Program Phase of LAES, approved in 1976.

To this end, the Latin American Council approved Decision 73, during its VI Regular Meeting, which entrusts the Permanent Secretariat with reviewing the areas and mechanisms of regional cooperation, with the idea of reinforcing these important activities.

To help in this review, each one of the member countries of the System was encouraged to present its suggestions and ideas on the sub-ject.

REGIONAL COOPERATION

199

The Permanent Secretariat, using the countries' and its own ideas, has distributed a document among its member governments setting the guidelines for a new Work Program for Regional Cooperation.

Decision 73, already mentioned, also established that the VII Latin American Council should make a detailed evaluation of LAES' First Work Program, of the level of fulfillment of the Action Committees' goals, and of ways to improve their performance.

It is important to remember that the Action Committees were cre-ated in response mainly to the political wish of some countries which agreed to strengthen the regional cooperation process, initially contem-plating wide areas of possibilities, but growing increasingly able to define specific projects. The agreements entered into were characterized by their vast scope, and led to the discovery of an extremely broad range of objectives, when both the member countries' and the incipient Com-mittee Secretariats' activities programs were being drafted. This war-ranted careful multilateral consideration and analysis, as well as the preparation of various technical studies, to enable the countries to pin-point and select, from among the many viable cooperation alternatives, the ones most fitting for them.

"In order to shorten this time-consuming process, with its attendant waste of funds and delays in the adoption of multilateral political de-cisions, it was necessary to accelerate the phase of studies at the level of the Committees which were then functioning, and to restructure new studies, still maintaining their global action base, within the sectorial order (with additional specific projects) of the Action Programs. This action eased the decision of the countries to join the Committees, and allowed better and simpler ways of operation both for the member countries and the respective Secretariats."'

The above prompted the VI Latin American Council to approve Decision 69, which recommends that the "Action Committees, at the time of approving their respective activity programs, select priority areas and projects, and have a very specific idea of their objectives and goals. This would directly benefit their member countries and yield the ex-pected results sooner".

The Action Committees were requested, also, to prepare in advance of their meetings adequate programming to enable their discussions to be purposeful; and the Latin American Council was asked to include a performance evaluation of the Action Committees in its regular meet-ings.

LAES's regional technical cooperation activities can be classified as general or specific according to their level of involvement in concrete actions. The general ones refer to the support work accomplished in

1 LAES, "Annual Report of Activities of the Permanent Secretariat" SPICLIVI.OIDT No. 4, April 18, 1980, Caracas, pp. 67 and 68.


areas of vital importance to the economic policy of the countries, whereas the specific regional technical cooperation activities refer to specific operations of the Action Committees.

1. General Cooperation Activities a) Financial and Monetary Cooperation The Secretariats of LAES and of CEMLA convoked the First Meeting of Ministers of Finance and Presidents of Central Banks of LAES' member states, to take place in Lima, Peru, on April 10 and 11, 1980.

This meeting was able to make use of an earlier documentary study carried out by ALIDE, IDB, CEMLA and LAES.

During the meeting, important decisions were made on specific cooperation in the financial and monetary fields, such as the financing of multinational projects, exports, and preinvestment; medium and long-term financing mechanisms; the intraregional trade payments system; and the handling of external debt.

By means of its Decision 70, the Latin American Council adopted the agreements reached at the April meeting, and noted the importance of the meeting as a specialized instrument of regional financial coop-eration.

The creation of a Latin American Preinvestment Fund to broaden and speed up preinvestment financing for studies and multinational pro-jects is one of the most important financial cooperation activities carried on by LAES. Several of the Action Committees were having difficulties in this financing field.

To consider the Fund's feasibility, the Permanent Secretariat pro-posed a meeting of experts to analyze several alternatives for financing studies and multinational projects. At the VI Preparatory Meeting for the VI Latin American Council several delegations agreed that, since the constitution of a regional preinvestment fund was not foreseen for the immediate future, there was a need to make in-depth studies seeking alternate solutions to the problems in this area.

b) Cooperation in the Area of Energy The importance of the energy factor for Latin American economic de-velopment warrants the definition of action guidelines for political har-monization and financial and technical cooperation among the Latin American countries to foster a regional energy strategy based on the best interests of the region.

Ever since the creation of OLADE,2 Latin America has tried to find some type of solution that would keep the energy problem from becoming a limiting factor on its development. Up until now, the gov-ernments have acted and reacted pretty much on an individual basis to

2 The Latin American Energy Organization.

REGIONAL COOPERATION

201

the energy "crisis", with no unified regional policy to guide them. The only exception to this so far has been the San Jose Declaration, ratified by the V Latin American Council.

The Permanent Secretariat of LAES has maintained close inter-institutional cooperation in the field of energy with OLADE, ECLA and the UNDP, and has determined that there are three main objectives essential to energy cooperation.

The first one is that the region must obtain its hydrocarbon supply at official prices, and preferably through government-to-government negotiations. This is particularly important now that the conflict between Iran and Iraq has limited some of Latin America's traditional sources of supply.

Something has already been accomplished in this area, with the August, 1980, commitments of Venezuela and Mexico to supply petro-leum to the Central American and the Caribbean countries at partially financed prices.

The second objective to be taken into consideration is the formu-lation in the medium term of a regional planning system aimed at the region's adaptation to the new world energy situation.

And, third, the increasing pressure on Latin America's growing petroleum industry during the past few years warrants the constitution of a joint regional petroleum policy for the protection of this coveted energy resource.

c) Cooperation in the Agriculture and Nutrition Fields After five years under the Panama Agreement, there still has been no evidence of progress in agricultural and nutritional cooperation, in spite of the importance given to this basic area of concern by the Agreement itself, LAES' first work program, and some of the decisions of the Council.

It is therefore necessary to find alternate means of cooperation, based on an in-depth evaluation of the procedures employed to date.

While other sectors of economic activity have been increasing their levels of cooperation by directing their efforts towards specific actions, the agricultural and nutritional fields have gone in the other direction, using their basic ideas and objectives as springboards to the envisioning of broad, far-ranging generalized ideals, which are often out of reach, in pragmatic terms.

Therefore, Decisions 7,13,29 and 30 of the Latin American Council have defined LAES's position on matters of agricultural and nutritional cooperation, calling for conceptual modifications in such things as the evaluation of the sector's exact needs, and the scope and direction of this particular area of regional cooperation.

The Secretariat circulated a paper among its member countries in 1980, defining the scope and direction of agricultural and nutritional cooperation in terms of the nine products dealt with in Decision 7. This


paper helped LAES to ascertain the member countries' common wishes with respect to each one of the specific possible alternatives of technical cooperation in the area in question.

2. Specific Activities in Cooperation: The Action Committees In the specific areas of cooperation within the LAES framework, the efforts of the Action Committees throughout the past year have been extremely valuable. (We should note that the Action Committee on Fertilizers concluded its activities at mid-year 1980.)

A look at the Action Committees' activities will show the progress they have made over the years, and a long list of hard-won accomplish-ments to their credit.

Progress has been made in the specification and drafting of terms of reference for new sectors of regional cooperation to complement the existing Committees.

In the areas of agriculture and nutrition, the Action Committee on Nutritional Supplements of High Nutritional Value called its labors of-ficially to a close after trying to hold its III Regular Meeting twice, and unsuccessfully, due to lack of quorum. Nevertheless, the representatives of several countries on Committee prepared a study containing a series of action proposals in the field, which incorporate the rewarding ex-perience and knowledge gained through the Committee. The Latin American Council entrusted the Permanent Secretariat (Decision 64) with identifying the main nutritional problems of the region, including national food shortages, and to propose recommendations on specific action to follow. The Permanent Secretariat has distributed a report on this matter, but, so far, no proposals for defining priority actions have been received from the countries.

The installation process of the Action Committee for the Devel-opment of the Panama Canal Area, as had been decided on at the V Regular Meeting of the Latin American Council, was halted until the Government of Panama can restructure its policy on the administration of the Canal.

Progress was made in the drafting of the agreement establishing the Action Committee on High Demand Pharmaceuticals, and in the definition of specific multinational projects in this area. The Latin American Council also charged the Permanent Secretariat (Decision 71) with sponsoring a promotion and consultation mission preparatory to the installation of this Committee, and with calling a meeting of gov-ernment representatives to make plans for the installation, but so far there has not been a sufficient number of countries interested in the subject to warrant such a meeting.

Since other kindred international organizations are now preparing diagnostic and definitional studies in the field of capital goods, aimed at defining the most convenient strategy for the development of this industry, the Latin American Council continues its contacts with those

REGIONAL COOPERATION 203

organizations in order to coordinate the definition of appropriate meth-ods of cooperation for Latin America, for subsequent submission to the member countries of LAES for their ideas and recommendations (De-cision 72).

a) Action Committee on Fertilizers This Action Committee, established in March 1977 with an initial mem-bership of 12 countries (Nicaragua joined at the end of 1979) had two specific basic projects:

The first one was the creation of a multinational company providing consulting and engineering services on fertilizers. However the conclu-sions of the feasibility study did not support the political decision to establish the joint corporation. Although from the technical point of view this horizontal cooperation seemed feasible, and even necessary, from the business point of view, the corporation under consideration would hardly be profitable, therefore becoming an unwise investment.

The results of the feasibility study for the creation of a Latin American Multinational Company for the Marketing of Fertilizers (MULTIFERT) were totally different. Once the by-laws of the enterprise were signed in November of 1979, the representatives from Costa Rica, Cuba, Mex-ico, Nicaragua, Panama, Peru and Venezuela proceeded to sign the Partnership Agreement. The constituent assembly of the organization took place in Panama (where its headquarters would be) during April 28 and 29, of 1980.

The Action Committee on Fertilizers had its V Regular Meeting in Mexico City between the 13th and 15th of February, to discuss the various points of view pertaining to the extension of the time period allotted for the Committee. Those present at the meeting agreed that, although the objectives and purposes for which the committee was cre-ated cover a wide variety of activities, the accomplishments of the Com-mittee in the field of marketing should be considered more than suffi-cient. Because of that, and due to the absence of specific short-term cooperation projects, the members of the meeting concurred that the Action Committee's effectiveness should be extended only enough for the preparation and realization of the First Stockholders' Assembly of MULTIFERT.

Therefore, on April 30, this Action Committee held its last meeting, and considered its tasks completed.

In Decision 61 of its VI Regular Meeting, the Latin American Council expressed its satisfaction with the accomplishments of the Com-mittee and invited the member countries to sign the papers making official their partnership in MULTIFERT. The Council also asked the Permanent Secretariat to give its support and to keep the company abreast of the latest information in the area of fertilizers, in order to make progress in the definition of cooperation formulas for eventual fertilizer production as well.


During 1980, MULTIFERT held two stockholders' meetings (Au-gust and December) at which its main executives were appointed, op-erational guidelines were set, and administrative matters resolved. By the end of the year, the company had negotiated placement of 67,000 metric tons of fertilizers and had 137,000 metric tons available and in the process of negotiation.

b) Action Committee on Handicrafts This Committee was created in 1977 to stimulate economic cooperation by the region's countries in the area of handicrafts promotion and mar-keting, as well as to help increase the income of the professional artisan. Membership totals 15 countries, including Nicaragua, which joined the Committee in November, 1980.

The Committee set an initial deadline of two years to carry out a program of activities with exact goals and mechanisms. When this period expired, in 1979, the Committee decided to extend its effectiveness for two additional years, starting in October, 1979. This was done because of the important progress made in regional handicrafts development and the fact that there were still some projects in their initial phase of study, diagnosis, and structuring.

In its present stage, the Handicrafts Committee intends to: i) Channel internal resources contributed by each one of the coun-

tries for the benefit of the others of the group. ii) Strengthen its bargaining power vis-a-vis third parties, by acting

concertedly in different arenas. iii) Stimulate the process of the joint marketing of handicrafts,

especially in its present initial stages. iv) Promote the national values conveyed by the artistic component

of the handicrafts.

To meet these goals, the Committee is structuring at present two operating units: the Cooperation and Information Unit, and the Pro-motion and Marketing Unit.

The Cooperation and Information Unit has prepared several studies on the needs of the Latin American handicrafts sector, and some "hor-izontal studies" that cover important aspects of common interest for the craftsmen of the member countries. Likewise, it has prepared a Latin American Handicraft Catalogue which is being distributed among im-portant dealers in the international market.

The Marketing Unit has begun with sales of regional handicrafts, leading up to its eventual constitution of the Latin American Handicrafts Organization. A meeting was called in October 1979, for the Coordi-nation of Activities for the Sale of Handicrafts Group (CADIVAR), to agree on a series of guidelines for the adoption of sales policies.

In April 1980, the Action Committee held its V Regular Meeting, attended by representatives of nine member countries, who agreed to


the participation of regional artisans in international fairs and exhibits to expand the market for Latin American handicrafts. Furthermore, the group decided to endorse the commitment entered into by CADIVAR on the marketing methods to be adopted by the Promotion and Mar-keting Unit, especially as regards the addition of a 15% commission to the FOB price of handicrafts.

In addition, the Committee decided to include information derived from the experience of the Unit during its trial stage into the technical-economic profile prepared in April, 1979. This updating would enable the Committee to recommend ratification of the profile for the creation of a Latin American multinational company for the marketing of han-dicrafts.

During its VI Regular Meeting, held in November, 1980, the Com-mittee created the Board of Directors of the Marketing Unit, to give it more vigor in terms of getting definite results from its work, in a time-efficient manner. During the meeting, constitution, operation and func-tions of the Unit were defined.

The 1980 activities of the Committee led to three main accomplish-ments: the initiation of joint handicrafts marketing by fifteen countries; agreements and negotiations with international trade organizations; and the implementation of horizontal cooperation among the countries of the Committee.

The joint marketing was initiated with the presentation of 1,180 handicrafts samples, available for export from 15 countries, at the Berlin and Utrecht International Fairs. The results of this action, supported by the wide distribution of the Latin American Catalogue of Handicrafts, and the price lists, have been encouraging, since orders have been placed and trade contacts for permanent distribution outlets have been estab-lished. The catalogue has been distributed to 1,000 potential clients, thus initiating commercial correspondence.

The agreements and negotiations entered into with international organizations have made it possible for the EEC to collaborate in the financing of participation expenses of the Committee at six international European fairs during 1981. In addition, the Iberian-American Coop-eration Institute (Spain) will cooperate with the Committee in activities of training and trade, the latter through the appointment of a trade expert to the Committee. Furthermore, the Committee has obtained the support of offices specializing in promotion of imports in West Ger-many, England, Italy and the Netherlands.

Mobilization of resources from the region itself has been undertaken through the identification of the supply of salable handicrafts items and input needs of each country, in the name of horizontal cooperation. Financing for this activity has been obtained as well. This type of co-operation, besides encouraging Latin American solidarity, avoids, in the case of handicrafts, artistic influences from outside received when co-operation comes from nonregional sources.


c) Action Committee on Fishing Resources The Action Committee on Sea and Fresh Water Resources came into being in October 1977, and includes 15 member countries: Bolivia, Costa Rica, Cuba, Chile, Ecuador, Guatemala, Guyana, Haiti, Honduras, Jamaica, Mexico, Nicaragua, Panama, Peru, and Venezuela.

This committee sprung up as the answer to the need to exploit rationally Latin America's fishing potential, in the face of the urgent nutritional needs of the region's populations, particularly in the area of proteins of animal origin. Its main purpose is to establish mechanisms for cooperation, and to promote joint action for strengthening the ex-isting nutritional policies of member countries, creating permanent in-struments for joint regional action in this area.

During its three years of activities, the Committee has developed its work program through intraregional interchange of experiences, and the definition and formulation of specific projects in the various areas of the fishing industry, taking into account each one of its 15 member countries.

In addition, the seven technical fora and regional seminars held during 1978-1980, dealing with fishing agreements, hydroponics, trade, marketing information, small-scale fishing, evaluation of fishing re-sources, evaluation of fishing projects, and organization and manage-ment of the fisheries' industry, not only allowed the 300 Latin American, experts participating to update their knowledge and exchange infor-mation, but constituted also the basis for the formulation of regional policies on each particular field, and contributed to the implementation of the projects identified.

A Seminar on financing of fishing projects took place in Mexico in February, 1980. Its main purpose was to identify the best alternatives for financing multinational fishing projects as well as those being pro-moted by the Committee. The participants recommended that in the short term, negotiations be stepped up so that preinvestment needs of multinational fishing projects could be considered eligible for co-fi-nancing. They also proposed that a regional-level specialized financial organization, of independent legal status and financial capacity, be cre-ated as soon as possible, to contribute to the formulation, execution and financing of the regional fisheries projects.

The Latin American Council of LAES, conscious of the Commit-tee's concern, issued Decision 65, which intensifies negotiations with IDB to obtain financial aid for the projects under consideration by the Committee. Likewise, the countries and the Secretariat of the Com-mittee were asked to create as soon as possible a specialized financial organization, as well as to structure a permanent policy on regional cooperation in the fishing sector, within the LAES framework.

The News Bulletin "Aquarius" has been issued throughout 1980, to give the member countries access to valuable information on the fishing sector in other Latin American countries, and activities of the


Action Committee itself. The Annual Report on the situation of the Fisheries Sector in the region could not be completed in 1980, which has triggered the formulation of a new procedure for the collection of basic information from the countries.

At the beginning of 1980, a technical support mission was sent to Nicaragua to study the areas in need of aid, and to begin a cooperation program with that country to reactivate its fishing activity as soon as possible. The mission was organized following recommendations issued at the III Regular Meeting of the Committee held in 1979.

The Regional Program on the Development of Small Scale Fishing Operations started with the identification of the most urgent infras-tructure needs in terms of unloading the caught fish, in those areas where fishing is less developed. For this purpose, technical missions have visited Guyana and Haiti.

In June, the Forum on Fishery Organization and Management, which gathered in Tegucigalpa, Honduras, recommended that in view of the magnitude of the nutritional problem in the region, the fishing sector should be treated as a distinct and extremely important economic activity in its own right.

The eight specific projects prepared by the Committee have entered their instrumentation phase. The project on the Evaluation of Fishing Resources (sardines, jurel and mackerel) in the Southwest Pacific and the one on Economic Exploitation of Other Forms of Seafood found in Shrimping Areas have been submitted to the IDB for consideration, but are experiencing certain difficulties in fulfilling requirements for fi-nancing eligibility. Regarding the project on Tuna Resources, prelimi-nary studies to establish a Latin American Multinational Tuna Business have now been made. To date, the Hydroponics (Water Farming) Re-search Centers project has sent out four different issues of its Latin American Hydroponics Magazine. Also, the implementation of the Pis-ciculture Pilot Project has been started under the sponsorship of the Hydroponics Centers. The IV Regular Meeting of the Committee con-sidered the project on the development of Low-cost, Easily Prepared and Stored Fish Products as a basic activity. In addition, the project on the Regional Fishery Training System continues to function, by virtue of training offers from Mexico, Peru and Spain, financed under schol-arships granted by UNDP.

The IV Regular Meeting of the Committee took place in Lima, from October 13 to 17, to consider the program of activities for 1980— 81 and to define the priorities to be observed by the Committee in carrying out its projects.

On October 17, following the Regular Meeting of the Committee, the Commercial Fishing Ministers of the member countries held their First Special Meeting. During the meeting, the Ministers decided to "establish a permanent integration and cooperation mechanism, able to respond to the increasing needs of the Latin American region, both from


the nutritional and the employment points of view." The Ministers also decided to institutionalize their annual meeting in order progressively to define regional fishing policies within the LAES framework. The next meeting is to take place in Quito, in October, 1981.

d) Action Committee for the Establishment of a Latin American Tech-nological Information Network (RITLA) This Committee was legally established by Brazil, Mexico, Peru, Bolivia and Venezuela on August 1, 1979, and its activities formally began in March, 1980, with the installing of the Secretary of the Organization and the preparation of a draft work program to be followed by the Committee.

A promotional mission to publicize the goals and activities of the Committee visited several member countries at a later date. And the Latin American Council approved its Resolution 66, encouraging the LAES countries to join RITLA, since a significant membership is re-quired in order to create the broad regional network of subscribers and sources of information which the project envisions. This would make possible a steady flow of information on a group of variables affecting directly or indirectly the technological development of the countries of the region. Three or four more countries are expected to announce their accession to RITLA in 1981.

The first Regular Meeting of the Committee convened in Rio de Janeiro, from September 22 to 26, 1980, with the participation of rep-resentatives from 5 member countries, and an observer from Ecuador, as well as delegations from various international organizations also in-volved in this field of operations.

The meeting approved the program of activities and the fiscal budget covering the period between October 1, 1980 and September 30, 1981.

It was agreed that RITLA's objective was the exchange of infor-mation, as a way to increase technological and scientific cooperation tending to aid the development process of its member countries and to contribute to the decrease of technological dependence, through infor-mational activities basically aimed at the region's sectors of production.

This meeting also approved the bases and procedures to be con-sidered in the design and planning of the Network, as the permanent task of the Committee. Likewise, the meeting approved three specific projects to be implemented, selecting as being of top priority the one on improvement of conditions for negotiating and importing technology; the other two—on support and integration of the technological institutes, and on support of regional engineering and advisory services—should be approached gradually as the activity program of the Committee gets fully underway.

The project for the improvement of conditions of the negotiation and importation of technology is meant to diminish the dependency on external technology characteristic of almost all of the region's countries.


A training program and an information exchange program on technology contracts, international prices, and direct foreign investment have been set up in hopes of remedying the situation. The training program has already devised a 3-week intensive course, for employees of Latin American companies, to be held every six months.

e) Action Committee for the Reconstruction of Nicaragua This Action Committee began functioning in August, 1979, with 17 participating countries and a Managua-based Secretariat. On that same date it embarked upon its activities-programming stage.

The Committee took steps to coordinate its programs with the immediate expressed needs of the various areas covered by the Nicar-aguan Government, and to coordinate its activities with the member countries as well, to facilitate their participation in the reconstruction programs.

In addition, other LAES Committees were asked to help Nicaragua, especially those on Fisheries and Housing, and Nicaragua in turn was encouraged to join and participate in several selected Action Commit-tees.

The Committee gave advice on the foundation-laying and deci-sionmaking process now facing the Nicaraguan Government, in such areas as the constitution and implementation of the International Re-construction Fund, Nicaragua's accession to the UPEB, the definition of a fiscal policy for the banana industry, the organization of the Ni-caraguan Banana Enterprise (BANANIC), the definition of the banana industry policy, the programming of the Nicaraguan Meat Enterprise, and the evaluation of the situation and outlook for the country's meat industry.

In January, 1980, the Secretary of the Committee toured several South American countries in an attempt to promote the Literacy Cru-sade in Nicaragua, and to identify possible bilateral cooperation pro-grams.

The Committee held its first regular Meeting in Managua from the 14th to the 16th of February, attended by representatives from 12 mem-ber countries and 10 international organizations. The program of activ-ities and the 1980 budget for the Committee, as well as the creation of two technical support groups to help define the Meat and the Banana Marketing Policies, were approved during the meeting.

The 1980 program of activities includes cooperation efforts in the following areas: education, social welfare, health, housing, technical assistance, the International Reconstruction Fund, agricultural and in-dustrial development, external trade and tourism.

The Latin American Council, through its Decision 67, acknowl-edged the effective work of this Committee, which has translated into concrete action the region's solidarity with Nicaragua, giving high prior-ity to the support of Nicaragua's sectors of production and the financing of investment in that country.


f) Action Committee on Tourism This Committee was constituted in September 1979 by nine countries, with the subsequent accession of Nicaragua in 1980. By then, it had developed its work program and a wide range of activities aimed at stimulating tourism and aiding the countries in reaching the goals set in their national tourism plans, through the improved comprehensive use of their human, natural, technical and financial resources.

The Committee's program of activities included the preparation of studies to create a regional financial system for tourism; to establish a related post-graduate training program; to aid in the establishment of a program of cooperation in the field of commercial air travel; and to define a methodology for measuring tourism's contribution to the na-tional economy. It also included the realization of meetings on Latin American commercial air travel; meetings on financing and project in-vestments in the area of tourism development; and on the evaluation of contracts for technology and tourism services.

The Committee believes that the development of regional coop-eration in this area depends upon the active participation of the pertinent official organizations and of the commercial tourism sectors of each country.

The first regular meeting of the Committee took place in San Jose, Costa Rica, from February 5 to 8, 1980. The Committee approved the program of activities and budget for 1980 and authorized its Secretariat to initiate a promotion program and begin to implement the other pro-jects, as resources permit. The Program of Activities was carefully stud-ied so that the countries might avoid unnecessary activities and begin only those programs of real priority, which could realistically be imple-mented during 1980. This action led to the selection of the commercial air travel project and the tourism training project.

On April 22 to 25, 1980, and in accordance with the air travel project, representatives of pertinent private and public organizations gathered to hold a Technical Forum on Commercial Air Travel, in order to relate their experiences in this area and discuss the possibility of creating multinational agreements on air travel and tourism cooperation.

As a result, the Secretariat made adjustments in the Program of Activities adopted in February, since information from the Air Travel Meeting showed that the feasibility study for the establishment of a program of regional cooperation in air travel and tourism would be carried out by other international organizations.

This made room for two additional projects that had been contem-plated for 1981, which were recommended at the Commercial Air Travel Forum.

These projects are the study on the establishment of a Latin American Financial System for Tourism, and the Latin American Tourism Ex-change.

The first of these new projects is a feasibility study to determine if


there is sufficient technico-economical justification for the creation of a multinational development finance body or system in Latin America which would specialize in the financing of tourism and commercial air travel, with possible public and private participation. The study was initiated in October, by the appointment of two complementary work groups to carry out the field work for Central and South America, respectively. The work is expected to be completed by April, 1981.

The second of these two new projects deals with the establishment of a periodic Latin American tourism industry "fair" or Exchange, to foster the reaching of private tourism transactions between travel agen-cies which arrange or contract tours and services for travelers to the different countries of Latin America, and the Latin American businesses which actually cater to the tourists. This would enable these professionals to plan and improve sales conditions on package tours to the countries of Latin America, on the International Tourism Market. This project is considered the best way of improving Latin America's attractiveness in this very competitive international market.

The first Latin American Tourism Exchange will take place in 1981 under the coordination of the Action Committee and the Confederation of Latin American Tourism Organizations (COTAL). The pertinent by-laws have been approved already, and the host country for the first meeting is being selected.

The second original project on the 1980 work program, namely the feasibility study for the creation of a Latin American tourism personnel training system, would involve the evaluation of the technical, econom-ical and financial justification for the creation of a system or organization of post-graduate level training in the tourism field, for the preparation of professionals with managerial capability, for tourism enterprises. The methodology for such a study has been prepared by an expert from Spain, and if resources permit, it could be finished by the middle of 1981, so that a year later the definitive course program might begin.

The Latin American Council, through Decision 68, supported the Committee's determination to concentrate its efforts on projects offering the best possibilities for quickly achieving formulas of permanent co-operation and coordination.

g) Action Committee on Housing and Urban Development (CAVEIS) This Committee, established in May, 1977, expanded its membership in 1980 through the accession of Nicaragua and Bolivia, which brings the present total up to 11 associated countries.

In accordance with the priorities set during the II Regular Meeting of March, 1979, the Committee has concentrated its efforts on the de-velopment of activities in three projects: the information system, the marketing of housing materials, and the development group.

The first agreement reached by the Committee established the need to create a CAVEIS information network. Therefore, at its III Regular


Meeting in June, 1980, the Committee decided to proceed immediately to adopt the definitive operational modality of the CAVEIS information system and to establish a horizontal technical cooperation program in the area of information, to accelerate development of the national in-formation centers. The Committee recommended as well that during the implementation of the project there should be close coordination with other regional information networks, such as the LATINAH (on the areas of concentrated population settlement) and RITLA, so that its activities might have a broad international and informational base.

Through cooperation in the imports-marketing area the Committee had hoped to achieve a considerable reduction in construction costs and an increase in productivity. However, the figures showing the total im-port component in low cost housing of conventional technology are quite low (about 3 to 5 per cent). At its III Regular Meeting the Committee decided at any rate to "properly complete the studies already started, to show the technical and economical feasibility of joint marketing of housing construction inputs."3

CAVEI's third project has been titled the "development group", and it has to do with the drafting of economic and social policies in the housing field compatible with the cultural standards, income levels, and resources of each country; the development of emergency housing pro-jects; and the promotion of specific cooperation actions in the area of do-it-yourself construction, progressive housing, appropriate technol-ogy, the use of wood for construction, particle board, housing, and energy.

Because of the need to plan and formally organize the region's activities in the area of safe design, maintenance, and rehabilitation of housing in cases of emergency situations, the Committee, during its III Regular Meeting, decided to create a permanent, or standing, committee for just such purposes.

Furthermore, CAVEIS has successfully executed technical assist-ance programs for the reconstruction of Nicaragua, to help with its housing and human population settlement problems, since 1979. CAV-EI's III Regular Meeting approved the continuation of this program, and the initiation of a second phase of the same, as specific housing requirements in Nicaragua are gradually defined.

In addition, the Committee decided to prepare an evaluation of the technological and scientific infrastructure needs of each country, in the fields of low-cost housing and urban development. This would enable the Committee to make the necessary decisions in this area.

Lastly, since CAVEI's operations were to draw officially to a close in May, 1981, the III Regular Meeting agreed that there should be a study on the creation of a permanent multinational mechanism of co-

'Art. I, Agreement VIII of the III Regular Meeting of CAVEIS, June 19 and 20, 1980, Quito, Ecuador.


operation in order to carry on the valuable work which has been un-dertaken by the region through the Committee in the area of housing, both as a political and technical forum.

Decisions 63 of the Latin American Council supports the action priorities observed by CAVEIS and has totally backed the Committee's work program and its accomplishments to date, encouraging it to follow through completely with its plans.

In December, 1980, the III Special Meeting of the Committee rec-ommended that CAVEIS consider the preparation of feasibility studies for the creation of a Permanent Latin American Institute on Housing and Human Population Settlements to be a matter of utmost priority, since the project would ensure the continuation of CAVEIS's other projects. Basic guidelines have been prepared, and the final report should be presented at the IV Regular Meeting of CAVEIS, in March, 1981, so that the Committee members can make the pertinent decisions.

The Committee also acknowledged the lack of suitable conditions for cooperation in multinational marketing of cement, iron, wood and aluminum—the basic inputs for low cost housing—at this time.

The International Information Network of CAVEIS is currently in operation, but its formal institutionalization has been postponed so that it may be included in the permanent system being planned.

CHAPTER VII

Multinational Programs and Other Forms of Cooperation

Introduction The present chapter reports the developments which took place in the system of the River Plate Basin and in the Treaty for Amazonian Co-operation, which are the main multinational cooperation programs in the region, as well as the financial cooperation initiatives which are not directly comprised by the integration schemes analyzed in the preceding chapters, and the more important bilateral undertakings among the countries of the region which took place in 1980.

A. The System of the River Plate Basin In 1980 the system of the River Plate Basin, which is made up by Argentina, Bolivia, Brazil, Paraguay, and Uruguay completed eleven years of operation. The system was chartered under the Treaty of Bras-ilia, with the following objectives in mind:

"To join forces for the purpose of promoting the balanced devel-opment and physical integration of the River Plate Basin and direct influence areas. With this end in mind they will promote within the confines of the Basin the identification of common interest areas, and they will make studies, prepare programs and execute construction works, as well as enter into operational agreements, and they will draft the necessary legal instruments for the purpose of:

a) Facilitating and giving assistance in matters pertaining to navi-gation;

b) Fostering the rational utilization of water resources, particularly through the regulation of water courses and their multiple purpose and equitable exploitation;

c) Conserving and promoting animal and vegetable species; d) Perfecting all types of communications networks, such as roads,

THE SYSTEM OF THE RIVER PLATE BASIN 215

railroads, by river and by air, as well as electrical and telecommunications •

e) Achieving regional complementation by promoting and favoring the installation of manufacturing plants which may benefit the devel-opment of the Basin;

f) Achieving the economic complementation of border areas; g) Reaching reciprocal cooperation in the fields of education, san-

itation, and the fight against disease; h) Promoting other projects of common interest and particularly

the inventory, evaluation and utilization of the area's natural resources; and

i) The integral knowledge of the River Plate Basin."

The system of the River Plate Basin does not make up an inter-national organization as it is traditionally understood, but it is a system of organs or of bodies, one of which has an international legal status. In this system the different National States carry out functions which are more relevant than in most international organizations, since they themselves are the ones who implement this multinational development.

The organs of the Treaty are the Meeting of Foreign Relations Ministers and the Intergovernmental Coordinating Committee. The Fi-nancial Fund for the Development of the River Plate Basin, which started operations in 1976, is part of the system, although it is admin-istratively and functionally independent. Its own organs are the Assem-bly of Governors, the Executive Directorate, and the Executive Sec-retariat.

1. The Eleventh Meeting of Ministers of Foreign Relations The Annual Meeting of Ministers of Foreign Relations was held in Buenos Aires in December 1980 and as a result 29 resolutions were approved, mainly in the social, health and education fields. This meeting of the highest organ of the River Basin was characterized by the lack of important resolutions or of directives of a political nature. The list of resolutions approved follows:

No. 139 (XI) — Approval of Intergovernmental Coordinating Committee report

No. 140 (XI) — On programs for water control and water quality

No. 141 (XI) — On Documentation and Hydrometeorological Data Center

No. 142 (XI) — On the High Basin of the Bermejo river No. 143 (XI) — On complementation of routes 4 and 14 in the

Oriental Republic of Uruguay No. 144 (XI) — On utilization of the energy resources of the

River Basin countries No. 145 (XI) — On the exploration of oil fields

216 MULTINATIONAL PROGRAMS AND COOPERATION

No. 153 (XI) —

No. 154 (XI) —

No. 155 (XI) — No. 156 (XI) —

No. 157 (XI) —

No. 158 (XI) — No. 159 (XI) —

No. 160 (XI) —

No. 161 (XI) —

On the formulation of a soil conservation program in the River Plate Basin at the regional level On giving priority to the Puerto Busch project On financing the studies of the Muyupampa-Camiri-Fortin Villazon highway On assigning priority interest to the Challapata-Trapaya highway section On the improvement of the conditions for navigation of the Corumba-Asuncion section in the Paraguay River On giving training courses to measurers of hydrological conditions On the work of regulating, channeling, dredging, marking with buoys, and maintaining the Asuncion-Confluencia section of the Paraguay River On the study of the periodic floods of the Paraguay River On Paraguayan railroad connections with overseas ports On convening the navigation subgroup On project for multiple utilization of the Pilcomayo River On studies for hydroelectric construction on the Pilcomayo River On prevention of schistosomiasis Determination of priorities on the basis of the degree of compliance with the resolutions adopted by Meeting of Ministers of Foreign Relations On the monitoring and eradication of aeries aegypti On coordination of campaigns against the foot-and-mouth disease and standardization of regulations for the inspection of meats and by-products On the fight against calker of citrus trees On food and nutrition programs On programs for nutrition professionals On the regional development of tourism On project of resolution on the creation of a Cultural Book Fund On predatory bird plagues and on technical assistance to combat them

No. 146 (XI) —

No. 147 (XI) — No. 148 (XI) —

No. 149 (XI) —

No. 150 (XI) —

No. 151 (XI) —

No. 152 (XI) —

No. 162 (XI) —No. 163 (XI) —No. 164 (XI) —No. 165 (XI) —No. 166 (XI) —

No. 167 (XI) —

There has been criticism on the part of some member countries on


using a meeting of a political nature like the one of the Foreign Relations Ministers to approve a great number of resolutions of varying impor-tance, most of them already analyzed by the ICC; however, no corrective measures have been forthcoming. During the 11th Meeting a resolution which was not approved, presented by one of the member countries, relayed the whole package of projects of resolutions to be decided upon by the ICC, which would relieve the Meeting of Ministers from this routine and would have permitted it to fulfill a higher orientation func-tion, as had been originally provided. However, it is proper to ask whether the ICC would have been equal to that task.

It is well to remember that the diplomatic composition of the ICC and the fact that it does not have a permanent technical secretariat hinders the rapid handling of the matters before it, since the ambassadors must consult their countries or receive the approval of groups of experts.

2. The Inter-governmental Coordinating Committee The ICC is the only body of the system which has an international status. It operates as a permanent adjunct of the organization with the backing of a unipersonal secretariat as far as its functions are concerned, which are mainly administrative, although they have been enlarged in practice, and it must be recognized that they impose a severe limitation on the scheme. It should be pointed out that on several occasions before this there were several initiatives tendered with a view to increase the func-tions of ICC and of its Secretariat by giving it permanent technical support, but no agreement was reached on this matter.

In 1980 ICC performed the work of evaluation entrusted to it by Resolution 120 (X) and took an active part in summoning and in setting up the six Groups of Experts which are described elsewhere in this report.

3. Groups of Experts Between 1979 and 1980 six groups of experts met to discuss five of the six basic areas which had been established, to wit: Transport, Water and Natural Resources, Economic Cooperation, Social Sectors, and Public Services, to which an ad hoc group was added. These groups, made up of national experts, meet at the request of the ICC, which also prepares their agenda. As a result of their work, recommendations are prepared which are presented to the ICC and, through its intermediary, to the governments or to Meetings of Foreign Relations Ministers. These recommendations become ICC's recommendations when the latter ap-proves the report of the meeting of experts.

The first of these groups examined several transport infrastructure projects, learned of the conclusions arrived at in the Meeting of Ministers of Public Works and Transport of the Southern Cone, and analyzed the situation of the resolutions adopted by the Ministers of Foreign Relations which have not been put into force.


The Group of Experts on Hydrometeorology studied the possibility of setting up a Documentation and Data Center on Hydrometeorology.

The Group on Hydraulic Resources and Other Natural Resources studied two main subjects, the quality of the waters and petroleum exploration, and they took into account the reports of groups of experts and the information provided by the national governments.

The Working Group on Economic Cooperation studied previously produced information and recommended that countries hand over to ICC within ninety days a list of the goods they believe are most important for their economic development.

The Group for Cooperation in Social Sectors dealt with the subjects of health and education. This group studied cooperation possibilities to prevent sexually transmitted diseases, for the border control of schis-tosomiasis and of Chagas' disease, and for the fight against the rabies.

With reference to education the main subjects were the discussion about the establishment of a Cultural Book Fund in the River Plate Basin and the operation of a Multinational Center for the Professional Training of Adults.

Finally, the Ad-hoc Group of Experts monitored compliance of the 138 resolutions adopted by the Ministers of Foreign Relations up to their tenth meeting. The results of this evaluation are mentioned else-where in this report.

4. The Financial Fund In 1980 the Financial Fund had its own agenda. The Third Assembly of Governors was held at the same time as the Meeting of Ministers of Foreign Relations, while the Executive Directorate met three times during the year.

At close of operations in June 1980 the Fund had ample resources available, since with a paid-up capital of US$22,770,000 outstanding loans amounted to US$5,583,000. It will be remembered that in the Second Assembly of Governors it was resolved to raise subscribed capital to US$100,000,000, while paid-in capital and capital to be paid-in amount to US$60,000,000 and callable capital to US$40,000,000, which will in-crease even more the availability of financial resources of the Fund.

The purposes, beneficiaries and amounts of the loans granted by the Financial Fund for the Development of the River Plate Basin (FON-PLATA) as of December 1980 are listed below:

Feasibility and final design of the Tartagal-Mision La Paz Highway

Feasibility of railroad between Vallegrande and Zudariez

Completion of final design of Motacucito-Mutun-Puerto Busch route

Argentina

Bolivia

Bolivia

US$ 900,000

585,000

423,000


Feasibility of Mariscal Estigarribia, Paraguay 675,000 Pozo Rondo, Filadelfia, and Sargento Rodriguez highways

Preinvestment Program Paraguay 3,000,000 Total US$5,583,000

With reference to loans already approved, it should be mentioned that Uruguay decided not to take the one for US$362,000 to finance the feasibility study for a gas pipeline from Fray Bentos, Montevideo and Ramales Paysandu to Minas and Colonia.

As may be seen, with the exception of the loan to Paraguay, which is jointly financed by the International Bank for Reconstruction and Development (IBRD) and the United Nations Development Program (UNDP) granted for preinvestment studies, the remaining four loans are for the transportation sector.

In this connection, it should be mentioned that the following fi-nancing operations may take place in the future:

• Feasibility study of Las Pavas dam and aerophotogrammetric sur-vey of the Bermejo River Basin;

• Study on sedimentation, fluvial morphology and the setting up of priorities for dams on the Pilcomayo River;

• Study of improvements to be made in the Sucre airport; • Development Program for the Paraguayan Northeast; • Final design study for the Mariscal Estigarribia-Pozo Hondo high-

way; and • Feasibility study of roads and bridges of the Uruguayan highway

system.

In the course of the 15th Meeting of the Board of Directors it was decided to extend financing to projects of a social nature in the fields of education and health, and it was established that "financial conditions for these loans will be the most favorable permitted by Fund standards."

In 1980 progress was also made in contacting the Inter-American Development Bank (IDB) to obtain its cooperation in the fields of technical assistance and to enter into joint financing arrangements with it.

In the financial field, the Executive Secretariat of FONPLATA is now placing directly financial resources in international markets, a serv-ice which was performed before this by the Central Bank of Bolivia.

5. Outlook In 1980 there were no important changes in the operations of the River Plate Basin. Until 1979 lack of an agreement on utilization of the waters of the international rivers between Argentina and Brazil was the main obstacle to the operation of the Financial Fund; however, the Tripartite


agreement entered into by Argentina, Brazil and Paraguay in October 1979, which ended this conflictive situation, has not accomplished much.

As usual, countries have discussed bilateral or trilateral matters outside the purview of the Treaty, as was the case with Paraguay's request to have the waters of the Pilcomayo River diverted, a question which was settled bilaterally between Argentina and Paraguay. Practi-cally the same thing happened before that on the utilization of the waters of the High Parana River. Notwithstanding, it should be recognized that the system has favored communications between countries by creating, indirectly, better conditions for bilateral or trilateral negotiations.

One of the main problems of the system, which has been mentioned before, is that only a small percentage of the resolutions approved by the Meetings of Ministers of Foreign Relations are implemented. This situation was specifically taken up in the course of the Tenth Meeting, during which Resolution No. 120 (X) was approved directing the ICC to oversee the compliance of the 138 resolutions approved up to that time (1979). However, the diversity of the subjects covered and the importance of the resolutions approved coincides with the findings of the ICC with reference to the difficulties to enforce compliance with the mandates of the higher body. Out of the 138 resolutions under consideration, 45 were being studied by the Groups, 14 lacked back-ground information to allow for a determination of their scope, 13 are in need of action on the part of the countries, 17 set out project priorities, 29 consist of directives to be complied with uninterruptedly, and 10 of them are formal in content.

This classification, which at times includes the same resolution in one or more categories, confirms the basis for Resolution No. 120(X), which assumed a low level of efficiency on the part of the implementation mechanism.

During the 1 lth Meeting 29 resolutions were approved, so that their total number in the course of eleven years reached 167.

One of these new resolutions—No. 159 (XI)—entrusts the ICC with the task of proposing "an up-to-date list of priorities in accordance with the letter and spirit of the Treaty of Brasilia." This would impart con-tinuity to the evaluation presented by ICC as a result of the work of the Ad-hoc Group.

During the same Meeting of Ministers of Foreign Relations of the Countries of the River Plate Basin, held in Buenos Aires, a statement was made expressing the importance of fully utilizing the resources and infrastructure of the Basin, the need to develop its energy resources, to promote the production of foodstuffs, to facilitate the transportation thereof, and to promote the exchange of technological knowledge, chiefly in the field of non-traditional energy, and the employment of new tech-niques in food production.

Insofar as the areas mentioned in the Declaration of the Ministers of Foreign Affairs can be interpreted as a choice of areas, we would be

AMAZON COOPERATION TREATY

221

facing a set of priorities that would help to straighten out one of the dimensions of the set of approved resolutions, such as the diversity of subject matters, which would allow for efforts to be concentrated in those areas which are thought to be more important for the system.

On the other hand, the operation of the Fund is proof that it has political backing, as shown by the increase experienced in its resources, although without having as yet attained an adequate flow of projects so as to increase the portfolio of projects which are capable of being fi-nanced.

Thus, the promotion activities of the Fund and the cooperation agreements it will enter into with regional or international financial organizations may contribute to the attainment of this objective by speeding up the period required by these organizations in order to create their own demand.

It is opportune to point out that to the extent that the Meetings of the Ministers of Foreign Relations are able to offer political directives that will define priority criteria for the selection of projects, the work of the Fund and of countries will become easier as to the type and area of projects that may be financed with the Fund's resources.

The global evaluation of the operation of the System of the River Plate Basin System suggests that there is a need for important changes. These might even include an institutional redefinition and a modification of the objectives to be sought, if it were decided to make use of the margins for maneuvering offered by the new ALADI Treaty.

B. Amazon Cooperation Treaty In 1980 the "Amazon Pact", as the Amazon Cooperation Treaty 1 is commonly known, definitely entered into force and got off to a good start after having been lastly ratified by Colombia (February 25, 1980) and by Venezuela (July 3, 1980).

Before this, the Treaty had been signed in Brasilia, by Bolivia, Brazil, Colombia, Ecuador, Guyana, Peru, Surinam and Venezuela on July 3, 1978, and it had been ratified by Brazil on December 18, 1978; by Ecuador and Guyana on March 14, 1979; by Surinam on July 23, 1979; by Bolivia on August 20, 1979, and by Peru on October 16, 1979 in accordance with the dates on which the respective ratification instru-ments were deposited in the Brazilian Ministry of Foreign Affairs.

If account is taken of the last ratification made by Venezuela on July 3, 1980, then the Treaty entered into force on August 2, 1980,2 or

'Cf. "Amazon Cooperation Treaty," IntegraciOn Latinoamericana (Latin American Integration), No. 27, August 1978, pp. 62-64. 'Ratification dates and date upon which the Treaty went into force were given to INTAL by the Brazilian Foreign Relations.


exactly thirty days after the above ratification in accordance with the first paragraph of Article XVIII.

1. The Treaty The Amazon Cooperation Treaty establishes the general guidelines for reaching the objectives it pursues. It has enough flexibility to allow its signatories to adapt it to the circumstances and exigencies that may come up in the course of its implementation. Its twenty-eight articles make of it a legal and technical instrument whose main purpose is to set up a permanent mechanism, not only to regulate, but also to stimulate contacts among signatories in specified fields.

Basically, the Treaty aims to reach the following objectives: a) The signatories are exclusively empowered to deal with the de-

velopment and protection of the Amazon Region; b) National sovereignty will prevail in the utilization and preser-

vation of natural resources of the respective countries; c) Each member country will have priority with reference to its

domestic policies for the purpose of developing its own areas in the Amazon region;

d) Regional cooperation will be made use of to attain the foregoing objectives;

e) It will be indispensable to strike a balance between the devel-opment policies and the protection of the environment and of native cultures; and

f) The enforcement of the most strict equality will prevail among the contracting parties in order to avoid the occurrence of unilateral gain.

The Treaty will not have a permanent secretariat, since this function will be performed pro-tempore by the country in whose territory will be held the next meeting of the Amazon Cooperation Council (Article XII). This organ will be the technical and executive arm of the con-tracting parties, and in addition it will promote the objectives and aims of the Treaty and will comply with the decisions adopted at the Meetings of the Ministers of Foreign Relations (Article XXI).

As to the matter of regional cooperation, the Treaty clearly accepts other understandings of a bilateral or multilateral nature insofar as they are not contrary to the common objectives of Amazon cooperation (Article XVIII). In addition, the coming into force of the Treaty will not affect any other international treaty entered into by its member countries.

The Treaty—which is of unlimited duration—"will not be open for adherence" (Article XXVIII), a fact which makes of it a truly subre-gional instrument.


223

2. First Meeting of Ministers of Foreign Relations from Signatory Countries of the Amazon Cooperation Treaty In accordance with the Amazon Cooperation Treaty the First Meeting of Ministers of Foreign Relations of its member countries should be held within two years of the date on which the treaty went into force (Article XX, paragraph 2). Thus, barely three months after the treaty had been in force this meeting took place in the city of Belem (Brazil) on October 23 and 24, 1980, which left no doubt as to the interest of two of the member countries in promoting the treaty.

In the course of this meeting the Ministers of Foreign Relations approved two important documents:

a) Regulations governing the conduct of Meetings of Ministers of Foreign Relations of the Amazon Cooperation Treaty, and

b) The Declaration of Belem.3

The approved regulations constitute an important document of an operational nature which made out of the Meeting of Ministers of For-eign Relations ". . . the highest organ of the Amazon Cooperation Treaty" (Article I) and made it mandatory that its ordinary meetings should take place every two years, or else any of the Parties could call for an extraordinary meeting as long as four other member states are in agreement (Article III).

By means (Article XIII) of these Regulations the General Com-mission was created, which will be made up of chiefs of delegations. In addition to two other commissions of an administrative nature (creden-tials and style) three other important commissions were also created (Article XV):

• Scientific and Technical Cooperation, • Natural Resources and Physical Infrastructure, and • Social, Cultural, and Economic Matters.

It is fitting to point out that each of these Commissions will be able to create the subcommissions and working groups it may deem necessary endowing them with the specific functions they may need, and in their meetings any of the delegations may participate (Article XX). The Reg-ulations also empower the Meetings of Ministers of Foreign Relations to create other commissions which may be deemed necessary.

In the course of the Meeting the Ministers of Foreign Relations accepted Peru's offer for the first meeting of the Amazon Cooperation Council' to be held in that country in July 1981.

As a result of the next meeting of the Amazon Cooperation Council

3"The Declaration of Belem," IntegraciOn Latinoamericana (Latin American Integration), No. 52, November 1980, pp. 101-103. 'Created by Article XXI of the Amazon Cooperation Treaty.


the ministers of the signatory countries decided to hold sectoral meetings which will take place on the dates and places agreed upon among the Parties prior to the meeting of said Council, to which these technical meetings will submit their reports. In addition, special commissions, as those contemplated in the Treaty (Article XXIV), may be created. At the recommendation of the Ministers of Foreign Relations the corn-missions will devote themselves to the preparation of the following pro-grams:

a) Technical cooperation in the field of regional development,5 b) Cooperation in the fields of science and technology, and c) Planning the transport and telecommunications infrastructure.

s At the end of this meeting, because of the offer made by the Gov-ernment of Colombia, it was resolved that the 2nd Meeting of Ministers of Foreign Relations of Countries Members of the Amazon Cooperation Treaty will take place in that country within two years if it is an ordinary meeting, unless an extraordinary meeting is called for before that.

The Declaration of Belem is a document which reaffirms the prin-ciples of the Amazon Cooperation Treaty—which will shape up by means of the three aforementioned programs—and creates the Amazon Co-operation Council. In addition, it contains the general recommendations made by the Ministers of Foreign Relations to the latter which are necessary for the implementation of these programs. The main rec-ommendations formulated to the Council were the following:

a) National Development In this field the Council of Amazon Cooperation will design a cooper-ation program on the subject of development of territories of the Am-azon that will make it possible to exchange experiences among them with reference to planning, financing, and project implementation.

In like manner, the Council will study the creation of a preinvest-ment fund for the purpose of financing the preparation of projects of common interest.

b) Science and Technology In the field of science and technology it was recommended to the Council to prepare and coordinate a vast joint program that shall be distributed among the main research institutes of the Amazon countries in accord-ance with the sectors that will be defined in due course by the com-missions created at the Meeting. This program will take into account the following matters:

• Elimination of cultural and technological dependency in relation

5 This includes the preparation of a report for the creation of a Preinvestment Fund (in cooperation with the Parties, the 1DB, the World Bank, the UNDP, and SELA (Latin American Economic System), among others.


225

with the industrialized centers, as a function of Amazon values and needs.

• The granting of a high degree of priority to cooperation in the field of research on science and technology techniques which are appropriate for tropical conditions.

• To emphasize the need to exchange experiences among countries of the region and with similar areas in Africa and Asia.

• Harmonization of policies for promoting economic and social de-velopment and protecting the environment.

• To engage in research in the following fields: a) agroindustry, b) agriculture and cattle raising, and c) hydroelectric.

• Participation of the University of the Region in these activities.

c) Transportation and Telecommunications With reference to transportation and telecommunications the Meeting decided to start a program that will take into account these two factors as an important liaison instrument among Amazon countries. In this connection, the Council was given authorization to promote national planning coordination6 so as to achieve the effective establishment of a physical infrastructure for transportation and telecommunications that will make it possible to interconnect the Amazon countries with their respective capital cities.

It was also recommended that studies be made of the hydrological resources of the region so as to utilize them for the production of energy.

d) Reference to Countries The Declaration makes two specific references to countries. The first one of these asks Guyana and Suriname that they consider the possibility of adhering to the Technical Intergovernmental Committee for the Pro-tection and Defense of Amazon Fauna and Flora, created in 1975 and made up, at the present time, by signatory countries of the Treaty, with the exception of these two. The second reference is a declaration of intent on the part of signatory countries of the Treaty to eliminate the trade in live animals and in pelts of animals of an endangered species, and so that their efforts will also seek to obtain the effective cooperation to this end from the industrialized countries where the main markets for these animals and pelts are located.

3. Outlook The institutional achievements obtained by the Amazon Cooperation Treaty in 1980 have been satisfactory. This was due to the deliberate decision of the signatory countries to set in motion this integration plan that had been devised as far back as 1978.

6 The planning of the above-mentioned coordination will be made consultatively by the governmental technical sectors of the Parties, as established by Article 13 of the Declaration of Belem.


The results expected from the numerous reports requested by the First Meeting of Foreign Relations of the signatory countries, which are very important for the region and which should be ready by July 1981 to be submitted for the consideration of the coming meeting of the Amazon Cooperation Council in Peru, offer a dynamic outlook of the Amazon Pact in the course of the next few years.

Once these reports are made use of, the Parties will arrive at the next Meeting of Ministers of Foreign Relations (to be held in Colombia, in 1982) with the necessary specialized knowledge which will enable them to provide the correct orientation on the cooperation initiatives within the framework of the Treaty.

C. Financial Cooperation Various initiatives to promote multinational cooperation for the purpose of hastening development and regional integration by means of more advantageous financing conditions took place in 1980. This type of fi-nancial cooperation, which developed outside of the institutional inte-gration framework of Latin America may be attributed to four factors: financial cooperation at the government level; the achievements of Latin American multinational banks which are not a part of the integration process; the projects for creating sectoral financial mechanisms in the region, and technical and financial cooperation among Latin American banks.

1. Financial Cooperation at Government Level At the request of the Latin American Economic System (SELA) and of the Center for Latin American Monetary Studies (CEMLA) on April 10 and 11, 1980 there was convened in Lima the First Meeting of Finance Ministers and Central Bank Governors of Latin America for the purpose of adopting monetary and financial cooperation measures in line with the financial needs of the development and integration of the region.

The agenda of the meeting contained four main subjects, to wit, joint regional initiatives on financial and monetary matters, the strength-ening of the compensatory and payments mechanisms and those in sup-port of the balances of payments, the financing of trade and investment, and Latin American banks and reciprocal technical cooperation in the financial field.

Seven resolutions were adopted in this meeting. The first one of these pledges anew the support of Latin American governments to the Action Program for International Monetary Reform which was sub-mitted by the "Group of 24". At the same time this resolution seeks to promote by means of joint action increasing official government assist-ance for development, as well as the revision of the criteria and con-ditions this entails.

Resolution No. 2 backs the decisions adopted by the governing

FINANCIAL COOPERATION 227

bodies of the compensatory and payments mechanisms and existing regional balance of payments support systems so as to enlarge their fields of operations and make them more flexible, as well as to foster the gradual establishment of a greater degree of linkage among these mechanisms.

On the other hand, it was recommended that a program of con-sultation and cooperation be established among the organizations en-gaged in the promotion and financing of exports in order to join re-sources and to devise mechanisms that will promote a better utilization thereof (Resolution No. 3).

Another study suggested by the meeting was the one having to do with mechanisms for the medium and long term mobilization of re-sources, both domestic and foreign, so as to recommend the adoption of measures to promote the development of Latin American capital markets and to favor a greater degree of integration among them, as well as to strengthen regional cooperation in order to attract foreign resources (Resolution No. 4).

Also requested was a study of the institutional, legal, financial, and operational aspects that will make it feasible for Latin American mul-tinational projects, particularly in the field of energy (Resolution No. 5).

Lastly, approval was given to the work of the Latin American Association of Development Institutions (ALIDE), the Center for Latin American Monetary Studies (CEMLA), and the Latin American Fed-eration of Banks (FELABAN). At the same time these organizations were asked to devise ways in which the banks of the region could strengthen and widen their efforts for increased technical and financial cooperation. As for intraregional technical cooperation, it was decided to start a program to exchange experiences and knowledge in the field of man-agement of foreign indebtedness (Resolutions 6 and 7).

As a result of the mandates of this meeting studies have been started to recommend measures for a later stage that will improve the different alternatives available for financing multinational projects, the study of mechanisms for the promotion and financing of exports so as to devise practical plans of action for Latin American coordination similar to the ones that are already in existence in the European Organization for Economic Cooperation and Development (OECD), and studies for strengthening and integrating Latin American capital markets. These studies will be submitted to a forthcoming Meeting of Ministers of Fi- nance on Financial and Monetary Cooperation slated for August 1981.

The other important achievement at the official level in 1980 was the San Jose Agreement, signed on August 3, 1980 by the Presidents of Costa Rica, Mexico, and Venezuela, by means of which the last two countries established an energy and financial cooperation program which guarantees the supply of imported petroleum to Central American and Caribbean countries, under favorable financing conditions which will be


channelled through the official financial organizations of Mexico and Venezuela. These "will grant credits to beneficiary countries for 30 per cent of their respective petroleum invoices for a term of five years at an annual rate of interest of four per cent. However, if the resources derived from these credits are destined to finance high priority economic development projects, especially those related to the energy sector, these credits may be converted into other obligations with maturities of up to 20 years having an annual rate of interest of two per cent."'

This type of financial cooperation, that benefits nine countries of the region—Barbados, Costa Rica, El Salvador, Guatemala, Honduras, Jamaica, Nicaragua, Panama, and the Dominican Republic—but that may be extended to others in the future is equal to US$600 million a year at present day petroleum prices. This annual volume of financial resources will be lent at medium and long term (5 and 20 years) at notably concessional rates of interest (four per cent and two per cent, respectively), since both the IDB and the World Bank allocate their limited resources for similar purposes at 8.25 per cent annual interest, while Euromarket credits cost at present 20 per cent annually.

2. Latin American Multinational Banks The Inter-American Development Bank (IDB) has kept up its rising rhythm of activity in financing the development and integration of Latin America. When in 1979 the Bank granted credits for US$2,051 million, thereby surpassing the level of US$1,870 reached in 1978, it placed itself at the forefront as the first credit institution dedicated to the develop-ment of the region.

On the other hand, there is the fact that in 1979 loans for US$409 million were obtained in international capital markets, while another US$100 million were obtained from the complementary financing pro-gram, which shows that the solidity and prestige of the IDB has served, in only one year, to obtain more than US$500 million from sources from outside the region for the development needs of Latin America.

Likewise, effective support continued to be given to the physical and economic integration of Latin America to the tune of US$90 million in loans with an integration component, an additional US$11 million having been granted as technical cooperation credits for integration projects. Table 47 shows the breakdown by sectors of credits granted by the Bank for Latin American integration during its first two decades of operation.

In 1980 Portugal was admitted to the IDB becoming its forty-second member country. Moreover, in the course of that year member countries increased the resources of the IDB by US$9,750 million, of which US$8,000 million went to increase the capital of the Bank and US$1,750 million

7 The San Jose Agreement, Article V.

FINANCIAL COOPERATION 229

Table 47. IDB: Financial Cooperation to Promote Integration, 1970- 1979 (In millions of dollars)

Bank resources

Total Cost of Projects

Loans 1.784,6 8.694,3

Export financing 252,7 362,8

Regional projects 1.531,9 8.331,5

Transport 562,8 1.025,0 Energy 470,4 6.341,3 Telecommunications 83,7 158,3 Industry 247,2 425,1 Agriculture 110,7 271,5 Education 9,9 25,9 Housing 15,0 30,0 Tourism 29,2 50,7 Others 3,0 3,9

Technical cooperation 136,6 386,3

Preinvestment studies 87,9 216,1

Sectoral and general 41,1 96,1 Transport 5,7 8,8 Energy 4,1 6,9 Telecommunications 1,3 4,6 Industry 4,1 5,8 Agriculture 30,5 90,1 Border and multinational regions 1,1 3,8

Training and research 42,7 151,2

Institutional support 6,0 19,0

TOTAL 1.921,2 9.080,6

SOURCE: Inter-American Development Bank

to the Special Operations Fund, as the Fifth Replenishment of Capital which had been agreed upon at the end of 1978.

In November 1980 the Board of Governors of the IDB reelected its President for a period of five years, from 1981 to 1986.

The Swiss Government signed an agreement with the IDB whereby the latter will manage the Swiss Fund for Technical Cooperation and Small Projects whose purpose is to improve !the standard of living and productivity of low income sectors in Latin American countries which are members of the Bank.

The Arab Latin American Bank (ARLABANK), created in 1977 with 60 per cent of its capital from Arab and 40 per cent from Latin American institutions, continued acting in 1980 as a financial bridge between these two regions, and an innovative answer to the traditional manner of cooperating between developing countries.

Its credit portfolio includes direct financing or in partnership with


others for a wide range of development projects in Latin American countries, such as hydroelectric works, merchant fleets, metropolitan rapid transit, sugar production, petrochemical industries, mining, steel making, infrastructure works and foreign trade. For these purposes AR-LABANK has two types of resources: its own, mainly its paid in capital which amounts at present to US$100 million (which increased by US$25 million in December 1980) and those it obtains from its normal oper-ations in Euromarket deposits.

In 1980 total assets of ARLABANK almost doubled, having reached US$1,524 million on December 31, 1980, while two years before they only amounted to US$261 million, which gives an idea of its growth. For the third year in a row its net profits grew, having reached US$10 million. In like manner, in 1980 the credit portfolio doubled, having reached US$706 million,_of which 45 per cent have a maturity of more than a year, compared to 15 per cent at the end of 1979.

In order to be able to fulfill more effectively its role as a financial bridge between the Arab and Latin American worlds and to contribute to finance the needs of Latin America this year, a branch office of the bank was opened in Bahrein, a financial center of the Middle East, and two representative offices in Bogota and Rio de Janeiro.

The Latin American Export Bank (BLADEX) completed two years of operations and was very successful in financing Latin American ex-ports. By September 30, 1980 its total assets had almost tripled with respect to the previous year, when they went up from US$132 million to US$339 million, while its loan portfolio grew from US$78 million to US$127 million, and its deposits tripled to reach US$227 million. Also, during this period the paid in capital of BLADEX grew from US$27 million to US$32.8 million, and during the first nine months its profit amounted to US$2 million.

3. Projects for Latin America Sectoral Financial Mechanisms Several plans have been put forward for such projects, including the decision to allocate resources to study the technical, economic and fi-nancial justification of creating specialized financial mechanisms at the Latin American level.

In this connection, mention must be made of the decision taken by the Inter-American Federation of Chambers of the Construction In-dustry. jointly with housing and construction financing organizations in several Latin American countries to study the feasibility of creating a Latin American Bank for the Construction Industry (BLIC).

At a meeting of all of the aforementioned institutions, held in April 1980, it was decided that ALIDE should make this feasibility study and an organizing committee was appointed for BLIC. The feasibility study has been finished and in 1981 the case for BLIC will be intensely pro-moted so as to determine the participation in the share capital of in-terested sector organizations.

FINANCIAL COOPERATION

231

This initiative has been taken to take care of sector enterprises which are a special type of borrower. In fact, these enterprises require banks to accept greater risk margins than are traditional in accordance with their credit policies, since because of the nature of their activities their capital is disproportionately low relative to the value of the con-struction work for which they apply for credit.

In accordance with the terms of reference of the feasibility study, the main purpose of BLIC will be to provide financial resources to construction companies under conditions in accordance with their needs and with special operational practices, all of this lending to come from two main sources of finance: its own capital and the resources they obtain from international financial markets.

It is expected that BLIC will make its contribution not only in the form of the financial support needed by local contractors in their own countries, but also that it will help to export services and equipment made by Latin American contractors, who find themselves at a great disadvantage with respect to non-regional contractors who benefit from the financial facilities of their own countries. Latin American contractors may thus be able to compete on even terms in international bidding in the countries of the region.

Another initiative of the same type is the one undertaken by the Action Committee on Tourism of SELA which is conducting a feasibility study for the creation of a Latin American financial organization to give credit for the development of tourism and for commercial air transpor-tation.

This is due to the fact that people woring in these two sectors feel uneasy because they do not receive adequate credit from credit insti-tutions in the region. Because of the nature of their activities these enterprises have small fixed assets (travel agencies) or are dependent on rapid disadjustment (transportation companies), or else they make doubtful investments because of the scarcity of statistics in the field of tourism, which makes them less desirable as subjects of credit.

This specialized institution would finance both the public and pri-vate sectors, whether in the preinvestment, investment, or operational stages of tourism and of tourist transportation.

On the other hand, because of similar difficulties in the financing of multinational projects sponsored by the Action Committee on Fishing of SELA, the latter has set up as a medium term objective the creation of a Latin American specialized financial institution to take care of the credit needs of the fishing sector of the region, particularly with refer-ence to multinational projects. In this instance, no feasibility studies have been started as yet on the subject.

4. Cooperation among Latin American Banks Technical and financial cooperation among Latin American banks has kept on developing in accordance with the existing institutional channels for the different types of banks.


The central banks of the region, under the sponsorship of the Center for Latin American Monetary Studies (CEMLA), took part in the 18th Meeting of Governors of Central Banks of the American Continent and the 30th and 31st Meetings of Governors of Latin American Central Banks and of Spain, respectively, held in Lima in April 1980 and in Buenos Aires in September of the same year.

At these meetings various papers were presented on current aspects of central bank operations given present conditions obtaining in inter-national financial markets and the state of Latin American economies This led to a fruitful exchange of experiences and ideas on necessary adjustments in central bank policies.

On the other hand, central banks have continued to give support to one another which has allowed some of them to transfer excess li-quidity to others in need of it under the guise of interbank deposits.

Technical cooperation efforts to strengthen the work of Latin American development banks have been kept up under the guidance of the Latin American Association of Development Institutions (AL-IDE). However, the most far-reaching achievements have been the measures taken to strengthen financial cooperation among the devel-opment banks of the region. In this connection, attention should be called to the promotion of investment projects in Latin America during the 10th Ordinary Meeting of ALIDE's General Assembly held in Pan-ama in May 1980. At the same time, work is being done to devise mechanisms for fostering cofinancing techniques among development banks which are members of ALIDE for national or multinational in-vestment projects in Latin America, as well as other bank cooperation alternatives for attracting external resources.

Commercial banks in the region, which are grouped in the Latin American Federation of Banks (FELABAN) have held several inter-national meetings to exchange experiences and to improve its services in areas such as bank security and bank automation, international trade, banking law and bank marketing. In 1980 the phase of technical prep-aration ended whereby in 1981 banks of eight Latin American countries will take part in the SWIFT world telecommunications network, a service which is given exclusively to banks. The 15th Meeting of the Council of Governors of FELABAN was held in Mexico City from November 10 to 14 and at this gathering, attended by a great many bankers of the region, an analysis was made of the many challenges facing Latin American banking in the coming years.

D. Partial Cooperation Actions by Pairs of Countries The field to be covered by the present section includes the main legal instruments having to do with partial aspects of bilateral cooperation among Latin American countries. On August 12, 1980 LAFTA countries signed the Montevideo Treaty 1980 that gave birth to the Latin American

PARTIAL COOPERATION ACTIONS BY PAIRS OF COUNTRIES 233

Integration Association (ALADI). As is well known, this Agreement promotes partial scope agreements within the same legal structure of the new Association, by regulating them in a flexible way. From this point of view, it represents a clear innovative step in comparison with the legal framework of LAFTA. In view of this, it seems appropriate to define the legal framework which will regulate in the future these partial actions.

In accordance with the Montevideo Treaty 1980 these partial scope agreements may be of different types. Thus, the only purpose of com-mercial agreements will be the promotion of trade among member coun-tries and they will be bound by the specific rules established to attain these ends. (Article 10)

The objectives of economic complementation agreements will be, among others, to promote the maximum utilization of the factors of production, to stimulate economic complementarity, to insure equitable conditions for competition, to facilitate the access of goods to interna-tional markets and to foster the balanced and harmonious development of member countries. These agreements will be governed by the specific rules established for the purpose (Article 11).

Agricultural agreements will promote and regulate intraregional agricultural trade, and they will be flexible enough to take into account the socioeconomic features of production in participating countries. These agreements will refer to specific commodities or to groups of commod-ities, and through them will be granted temporary, seasonal, quota, or mixed concessions, or they may take the form of contracts between government or quasi-government agencies, and they will be bound by the specific regulations established for the purpose (Article 12).

Trade promotion agreements refer to non-tariff matters and their purpose will be to promote intraregional trade flows. They will be gov-erned by the basic rules established for the purpose (Article 13). Partial scope agreements are regulated by Resolution 2 of the Council of Min-isters (August 1980) and in order to analyze them it must be borne in mind that they must contain certain mandatory legal clauses and other legal regulations of an optional nature. With reference to the latter aspect the legal principle of autonomy of the will of the contracting parties prevails.

a) Mandatory clauses in partial scope agreements: • After negotiation they shall be open for adherence by all other

member countries. • They will contain provisions in favor of convergence so that its

benefits may reach all member countries. • They will contain differential treatments in accordance with the

three categories of countries which have been mentioned be-fore.

• They will have a minimum duration of one year, except the


economic complementation agreement, which will have a min-imum duration of three years.

b) Optional clauses in partial scope agreements: • They may contain clauses to favor convergence with other Latin

American countries. • The lowering of tariffs they may contain will be made for the

same goods or tariff sub-items and on the basis of a percentage reduction with respect to the tariffs applied to imports origi-nating in non-participating countries.

• They may contain, among others, specific rules on the subject of origin, safeguard clauses, non-tariff restrictions, withdrawal of concessions, renegotiation of concessions, denunciation, policy coordination and harmonization.

The procedure to be followed in entering into such agreements is contained in article 5 of the above-mentioned Resolution 2/CM. At this juncture it does not seem fitting to analyze these regulations. All the same, the procedure suggested for the purpose is quicker and more flexible than the one provided for in LAFTA.

1. Conditions in 1980 In order to present in a systematic way the picture of the partial scope agreements developed in 1980, we have grouped the pertinent agree-ments, or the legal national texts approving agreements previously signed in accordance with their content and scope, under the classifications listed below. This was done even though some texts regulate several subjects. In these cases they have been grouped in accordance with the most important aspects that these agreements regulate. In this way, it is easy to perceive a clear trend for entering into agreements on the following subjects:

• Physical infrastructure including transportation alid communica-tions.

• Economic cooperation, chiefly industrial and commercial. • Scientific and technical cooperation. • Social Security aspects. • Sanitation aspects.

Since few partial scope agreements were signed in the course of the year, the countries of the region were presumably waiting until shortly before the month of August 1980 for the approval of the new Treaty that would thenceforth regulate Latin American integration. After that date, ratification of the Treaty that gave life to ALADI proceeded at a rapid pace. By year's end Argentina and Uruguay had ratified the Treaty. The new regulations governing "partial scope agreements," in which not all countries of ALADI necessarily participate, will allow for many bilateral understandings or by groups of countries, to take place. On


the other hand and due to the new orientation of the mechanism of the most-favored-nation clause it will be easier for the ALADI countries to reach an understanding with other countries of the region.

2. Infrastructure, Transportation and Communications a) Uruguay-Argentina On March 11, 1980, (Resolution 5160) approval was given to the Agreement for Cooperation among Business Enterprises in the field of air transportation and allied activities which had been signed in Mon-tevideo on September 27, 1979 between Aerolineas and Primeras Li-neas Uruguayas de Navegacion Aerea (PLUNA) with the backing of the air authorities of Uruguay and Argentina.

b) Brazil- Uruguay The President of Brazil visited Paraguay on April 9-11, 1980. The pres-idents of the two countries signed a joint declaration reaffirming their adherence to the fundamental principles of international law and to the promotion of the economic, social, cultural, scientific and technological progress of the developing countries, for which purpose they decided to cooperate with all the countries of the region.

They approved the efforts to restructure LAFTA taking into ac-count the present-day realities of Latin America, and they were in agreement as to the special importance of the Treaty of the River Plate Basin.

They were optimistic with reference to the Agreement on Technical-Operational Cooperation they both signed with Argentina for utilization of the Itaipu and Corpus rivers on October 19, 1979, and called attention to the importance of the Railroad Interconnection Treaty, signed be-tween Paraguay and Brazil on April 11, 1980.

They were also in agreement as to the importance of financial cooperation for development, such as the line of credit opened by Brazil for the construction of a steel plant in Paraguay. Likewise, they signed two contracts for the interconnection of the Paraguayan and Brazilian electric systems linking the networks under the AdministraciOn Na-cional de Electricidad (ANDE) and those under Compariia Paranense de Energia (COPEL) and the Empresa de Energia Electrica de Mato Grosso do Sul (ENERSUL).

c) Brazil-Paraguay On April 11, 1980 the Railroad Interconnection Treaty was signed by Paraguay and Brazil under the spirit of the Treaty of the River Plate Basin, one of whose main principles is the physical integration of the region.

The contracting parties decided to interconnect by railroad Para-guay with port installations in Brazil, on the Atlantic Ocean, and par-ticularly with those at Paraguana.

For obvious reasons, the contracting parties adopted uniform spec-


ifications in projects covering stretches between Asuncion and Guar-apuava.

The two countries agreed to exchange continuously information on the progress of the construction projects and they will prepare a doc-ument setting out the termination dates of the work so as to finish construction at the same time from both ends.

It is estimated that it will take four years to finish the work of construction starting from the date of exchange of the ratification in-struments.

d) Uruguay-Colombia By means of Law 15003, of April 22, 1980, the Commercial Air Trans-port Agreement between Uruguay and Colombia was approved, and it was signed in Montevideo on October 25, 1979.

By means of this Agreement reciprocal specific rights are granted by the contracting parties to each other in order to establish the services agreed upon, and it spells out the conditions for exercising the rights granted.

The agreement also stipulates everything relative to the exemption of customs duties, profit taxes on operations, transfer of surpluses, rec-ognition of certificates, licenses and so on.

e) Argentina-Paraguay By means of Decree No. 1093, of May 23, 1980, Argentina' approved the Agreement on Tariffs and the Exploitation of Telecommunications Services which had been signed on July 26, 1979 between the National Telecommunications Company (ENTEL)—a government agency of Ar-gentina—and the National Telecommunications Administration (AN-TELCO) of Paraguay.

The tariffs were approved in gold francs (GF), they will be received from consumers in their equivalent in pesos, and will be automatically readjusted when there are variations in conversion of gold francs under the conditions determined by the provisions regulating these matters.

f) Venezuela-Dominican Republic The Treaty on Boundaries of Marine and Submarine Areas between Venezuela and the Dominican Republic was approved by Venezuela by Law on July 26, 1980, and it was signed in Santo Domingo on March 3, 1979.

The maritime boundary lines set by the Treaty are the boundaries between the two countries with respect to the continental shelves, ex-clusive economic zones or any other marine or submarine area that may have been, or may be, established by the parties in accordance with international law.

The contracting parties waive their soverign rights or jurisdiction on the marine or submarine areas of the other party and they will also


adopt the necessary measures to preserve the marine environment from all types of contamination. For this purpose each party will:

• provide information about legal provisions and experience about preservation of the marine environment;

• give information to the competent authorities to know about and decide upon matters having to do with contamination;

• communicate any information about actual or potential contam-ination, of a grievious nature that may affect the other party; and

• give cooperation so as to control, reduce, avoid and eliminate contamination of the marine environment that may affect any of the two countries.

g) Argentina-Cuba On October 6, 1980, by means of Law 22295, by an exchange of notes an Agreement was approved in Argentina to avoid double taxation on income and capitals from the operation of ships in international waters, which was signed in Buenos Aires on December 15, 1978 between Ar-gentina and Cuba. By this agreement both nations will reciprocally exempt each other from payment of the tax and profits from interna-tional maritime traffic. This exemption also covers domestic taxes on this activity.

h) Uruguay-Argentina-Brazil On December 22, 1980 Uruguay approved, by means of Law 15094, the Agreement signed in Montevideo between Argentina, Brazil and Uruguay on July 8, 1980 by means of which the allocation of canals for maritime traffic is coordinated.

3. Economic Cooperation: Industry and Trade a) Venezuela-Dominica In the city of Caracas, on December 21, 1979 the representatives of Venezuela and Dominica signed a Treaty of Friendship and Coopera-tion.

In order to speed up economic development the contracting parties included the following areas of cooperation in the agreement: energy, industry and trade, agriculture, finances, public works, technical assist-ance, transportation and communications, health, science and technol-ogy, sports, tourism, scholarships and training.

They also agreed that they will be able to enter into complementary agreements in order to define additional cooperation sectors and areas.

In spite of the date of this Agreement, it is included in this Chapter because it did not appear in INTAL's publication "The Integration Process in Latin America in 1979."

b) Mexico-El Salvador By Decree of February 11, 1980 Mexico gave its approval to its Economic Cooperation Agreement with El Salvador. Cooperation will be achieved


through: a) projects to promote reciprocal trade; b) the provision of facilities for marketing goods and services; c) participation in the in-stallation of new plants or in enlarging existing ones; d) organizing Mexican-Salvadorian production companies; e) promoting the exchange of patents, licenses, technology, and technical information; f) exchange of scientific, technical, commercial and industrial missions.

Mutual assistance will be given in the following areas: trade, in-dustry, agricultural production, finances, joint investments, tourism and transportation. In order to monitor the implementation of the Agree-ment a Mixed Mexican-Salvadorian Economic Cooperation Commission was created, which will also study technological matters and suggest joint investment operations to the two countries.

c) Colombia-Dominican Republic In February 1980 Colombia and the Dominican Republic entered into an agreement that will promote economic, commercial and technical cooperation between the two countries. Both governments will put into practice policies leading to balanced economic growth and to greater commercial activity so as to reach higher levels of productivity, foster trade, and stimulate and strengthen cooperation among their official agencies and private enterprises.

d) Brazil-Uruguay By Decree 180, of March 26, 1980, Uruguay authorized industrial com-plementation and integration operations between packing plants located in this country and the ones in Brazil.

These operations will consist of sending to Brazilian processing plants near the Uruguayan border unindustrialized meat to obtain boiled meat and other products and by-products which will be returned to Uruguay. Should they be destined for the internal market, the added value and foreign packaging will be nationalized.

This type of operation will receive a general authorization for all approved packing houses if foreign exchange is obtained when the proc-essed products are exported and if they do not receive reimbursements from the afore-mentioned operation.

This is the mechanism that was set up: i) Temporary dispatching of unindustrialized meat to Brazil from

approved Uruguayan packing houses with no foreign exchange opera-tions taking place or any customs duties imposed.

ii) Processing of meat in Brazilian packing houses. iii) Return of the processed meat under the following conditions:

the amount corresponding to reimbursement of the price of the raw material, without any foreign exchange operation taking place or cus-toms duties being imposed, and for the value added abroad (processing and packaging) with foreign exchange operation and without customs duties.


iv) The processed product is definitely exported for the total free on board (f.o.b.) value, with foreign exchange operation and without customs duties, with payment of added value and of foreign packaging.

e) Uruguay-Argentina On April 29, 1980, by Law 15004, approval was given to the reciprocal notes exchanged between Uruguay and Argentina having to do with changes introduced to the Additional Protocol to the Economic Co-operation Agreement signed on August 20, 1974 which was substituted by the agreement signed in Gualeguaychu on September 18, 1976.

f) Argentina-Brazil The President of Brazil visited Argentina from May 14 to 17, 1980 and signed several agreements for cooperation on scientific, technical, economic, sanitary and tax matters. At the same time a closer relation-ship was established by the government and business sectors of both countries. At the end of this visit the Presidents of the two countries issued a joint communiqué in which they pointed out "the need there is to revitalize LAFTA by means of a far reaching reform to take place this year to adapt it to the new economic realities of the continent." The communiqué also includes "ratification of the support to be given to the Latin American Economic System (SELA) that has proved its usefulness as a consultative body, as a coordinator among the countries of the region in the different areas having a political-economic interest of a multilateral nature, without prejudice to other competent fora."

The following presents in résumé form those areas of agreement reached in the course of that visit:

• Joint cooperation for development and for the application of pa-cific uses of nuclear energy.

• Cooperation for scientific research in nuclear energy and in the promotion of a wider use of radioisotopes and of radiation.

• Complementary agreements for binational cooperation for re-search in the nucleoelectric field, prospection for, exploitation and production of uranium; uranium mining, manufacturing of circalloy; uranium enrichment services; manufacturing of com-bustible elements; design, construction, and operation of nuclear installations; provision of services, materials and equipment; in-tegration of industry of the two countries as to legal aspects of nuclear electricity.

• Agreement for utilizing the hydrological resources in the common boundary stretches of the Uruguay River and of its tributary, the Peripi-Guazu.

• Agreements to avoid double taxation and to prevent income tax evasion, applicable to people residing in one or both countries.

• Agreement on animal sanitation in border zones, so as to carry out a coordinated campaign in border areas of the two countries


by the adoption of measures for improving control of illnesses through the exchange of technical information.

• Subject to the termination of studies being made, both countries ratified their intention of carrying out shortly the interconnection of their electrical systems.

• A bridge will be built on the Iguazd River, in the Argentinian-Brazilian border area to enlarge and improve the communications infrastructure between the two countries and with Paraguay.

At the same, the private sector met twice to exchange views and decided to engage in a deeper analysis of complementation areas be-tween the two countries by means of joint meetings and the installation of a permanent system for reciprocal consultations.

Following joint meetings on maritime and land transportation, met-allurgical industry, large hydroelectric developments, nuclear-steel in-dustry, textile, agroindustry, agricultural and cattle, plastics, and bank-ing,

it was decided to carry out certain binational projects in third countries,

to utilize idle capacity for mutual benefit and to cooperate financially in certain fields.

While these meetings were being held, an exhibit by Brazilian pro-ducers and service firms was held in Buenos Aires in order to comple-ment initiatives carried out at other levels.

For the purpose of carrying out the mandate of this Agreement in August 1980 several other agreements were signed, which, although specialized in scope, are generically considered as falling within the field of economic cooperation. The list of instruments follows:8

• Complementary Agreement to the Scientific and Technological Agreement between Argentina and Brazil, on Scientific and Tech-nological Research.

• Complementary Agreement to the Scientific and Technological Agreement between Argentina and Brazil, on Cooperation in the Field of Reforestation and Forestry Law.

• Complementary Agreement to the Scientific and Technological Agreement between Argentina and Brazil, on Cooperation in the Field of Communications.

• Complementary Agreement to the Scientific and Technological Agreement between Argentina and Brazil, on Cooperation in the Field of Agriculture and Cattle Research.

g) Mexico-Venezuela During the first few days of August the Presidents of Mexico and Ven- ezuela signed, in San Jose, Costa Rica, an agreement whereby they

'Institute for Latin American Integration, Latin American Integration, No. 48 (July 1980); No. 52 (November 1980).


pledge to supply petroleum to the Caribbean countries—Cuba ex-cepted—under favorable financial conditions.

In accordance with this agreement, Venezuela and Mexico each will supply half of the total amount of petroleum up to a maximum of 160,000 barrels a day to Barbados, Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, Jamaica, Nicaragua and Panama.

Up to the time of the agreement, Venezuela was supplying about 130,000 barrels a day to the Central American and Caribbean areas, while Mexico was supplying 20,000 barrels a day to Costa Rica, Nica-ragua and Jamaica. The rapid growth of its production, however, will enable it to supply half of the petroleum needed by the subregion, as stated in the agreement.

There will be a term of five years provided for paying one third of the agreed upon price at annual interest of 4 per cent. This financial flexibility will increase if the countries thus benefitted devote the amount of the deferred payment to the development of the energy sector. In this instance, the financing period may be extended up to 20 years, with an even more advantageous interest rate, such as one or two per cent.

h) Venezuela-Costa Rica The Basic Agreement for Economic and Business Cooperation between Venezuela and Costa Rica was signed on June 18, 1980 in San Jose, Costa Rica, whereby the parties pledge to promote the exchange of information and to analyze and develop economic, industrial and busi-ness cooperation formulas by adopting adequate measures to prepare and execute economic development projects of mutual benefit in order to guarantee the development and diversification of their business re-lations and to improve and widen the scope of transportation and com-munications between the two countries.

The contracting parties will, in accordance with their respective laws, provide a stimulus to the investments that will be necessary to promote economic cooperation in both the public and the private sec-tors, particularly in the following areas: agriculture and cattle raising, agro-industrial, and the construction of infrastructure.

i) Argentina-Costa Rica The Commercial Agreement between Argentina and Costa Rica, was approved on October 6, 1980 in Argentina by means of Law 22297. The protocol thereof had been signed in the City of Buenos Aires on October 30, 1979. Comments on this agreement were made in The Integration Process in Latin America in 1979.

4. Scientific and Technical Cooperation a) Chile-Guatemala By means of Decree-Law No. 3393, of 1980 Chile approved the Basic


Agreement on Scientific and Technical Cooperation which had been signed by Chile and Guatemala in May 1979.

b) Uruguay-Chile Approval was granted in Uruguay on March 25, 1980, by means of Law 14995, to the Cooperation Agreement in the Field of the Pacific Uses of Nuclear Energy, entered into with Chile on July 9, 1979, within the framework of the Agreement for Economic, Scientific, and Technolog-ical Cooperation between the two countries which had been signed on September 20, 1975.

The contracting parties agreed to assist each other to the limit of their abilities and to ask their respective national commissions on atomic energy to prepare joint cooperation programs in that sector. Cooper-ation will be achieved through the exchange of information, personnel, nuclear materials and equipment.

The representatives of the Chilean Commission on Nuclear Energy and of the National Commission on Atomic Energy will meet at the request of any of the two bodies to examine how the projects are pro-gressing and to make recommendations to the two governments for improving the operation of the agreements.

c) Peru-Colombia On June 11, 1980 Peru approved an Agreement on Technical and Sci-entific Cooperation with Colombia, which had been signed in Lima on March 30, 1979.

5. Social Security a) Peru-Argentina On April 15, 1980, by Decree-Law 22985 Peru approved the Social Security Agreement which had been signed in Buenos Aires with Ar-gentina on June 17, 1979, whose basis is equal treatment for members of the social security system of the two countries and which aims to preserve acquired rights and those being acquired.

6. Cooperation in the Sanitation Sector a) Argentina-Bolivia On July 16, 1980, by means of Law 22253, approval was granted by Argentina to the Sanitary Agreement with Bolivia, which had been signed in the City of La Paz on February 14, 1978.

By means of this Agreement the parties aim to eradicate epide-miological problems of transmissible diseases between the two countries, as well as other matters closely connected with health which are of common concern.

In order to attain this objective, the contracting parties are planning to carry out reciprocal activities in a spirit of cooperation. With this in mind, the Agreement addresses itself to different matters, such as ep-


idemiological outbreaks, sanitary personnel, exchange of information, purity of drinking water, the environment, vigilance systems for epi-demics, transmissible diseases and sanitary problems of migrant popu-lations, particularly those of seasonal workers.

b) Uruguay-Brazil On December 23, 1980, by means of Law 15099 approval was given by Uruguay to the Agreement on Sanitary Cooperation between Uruguay and Brazil which had been signed in Brasilia on September 11, 1980.

CHAPTER VIII

Chronology of the Main Regional Economic Integration Events

in 1980

Introduction

The present chronology presents a listing of relevant events that have taken place during the year 1980 within the areas of the Latin American Free Trade Association (LAFTA), the Andean Group (ANCOM), the Central American Common Market (CACM), the Caribbean Com-munity (CARICOM), the Latin American Economic System (LAES-SELA), the River Plate Basin, and the Amazon Cooperation Treaty.

The information compiled for the Chronology was organized by integration scheme where the events took place, and thereunder by chronological order. In addition to presenting a brief summary of each event, the Chronology also serves as an analytical index.

A. Latin American Free Trade Association (LAFTA)

MARCH

10-14 The 22nd Meeting of the Advisory Commission on Monetary Matters takes place in Montevideo.

17-20 In Montevideo, Uruguay, the 6th Sectorial Meeting of the Aluminum Industry Entrepreneurs takes place.

17-28 The First Negotiating Meeting for the Restructuring of LAFTA takes place in Caraballeda, Venezuela. Agreement was reached to hold meetings every three years to examine the working of the scheme and of the partial actions during the convergence process, as well as to make any adjustments deemed necessary.

23-26 The 4th Meeting of the Clothing Manufacturers Indus- try convenes in Montevideo, Uruguay.

LATIN AMERICAN FREE TRADE ASSOCIATION 245

APRIL 7-11 The 18th Meeting of the Council of Financial and Mon-

etary Policies takes place in Lima, Peru. 14-18 The Advisory Commission on Transportation holds its

9th Meeting, in Montevideo, Uruguay. 15 The XII Meeting of Experts on Customs Assessment is

held in Montevideo, Uruguay. 17 The Manufacturers of Lamps and related Lighting Units

hold their 13th Sectorial Meeting in Montevideo, Uruguay.

17-18 In Montevideo, Uruguay, the Manufacturers of Equip- ment for Generation, Transmission and Distribution of Electric Power hold their 16th Meeting.

21-27 The 13th Meeting of Directors of Customs Schools convenes in Montevideo, Uruguay.

23-24 In Montevideo, Uruguay, the 16th Industrial Meeting of the Electronics and Electric Communications Sectors takes place.

MAY 1 As of this date, the Council on Financial and Monetary

Policies increased the volume of Credit Lines set in the Santo Domingo Agreement to an amount surpassing 263 million dollars.

2 The Central Bank of Bolivia is the only organization to take advantage of the Santo Domingo Agreement's concessions during 1980.

5-16 The 2nd Round of Meetings for Restructuring LAFTA convenes in AsunciOn, Paraguay.

21 The SEC adopts Agricultural Standards No. 1 on corn and decides on an 18-month trial period.

26 In Montevideo, Uruguay, the Chemical and Pharma- ceutical Industry holds its 16th Sectoral Meeting.

JUNE 10-12 In Montevideo, Uruguay, the 17th Sectoral Meeting of

the Chemical Industry takes place. 16-27 The 19th Special High-level Government Meeting of

the Contracting Parties convenes in Acapulco, Mexico, to adopt the necessary resolutions aiming to consolidate the pertinent agreements for restructuring LAFTA. The new draft agreement, which contains 69 articles and nine chapters, originated at the meeting.

246 THE MAIN REGIONAL ECONOMIC INTEGRATION EVENTS

AUGUST 11-15 The Advisory Council on Monetary Matters holds its

23rd Meeting in Montevideo, Uruguay. 11-12 The Council of Ministers of Foreign Relations of the

LAFTA Member Countries meets in Montevideo, Uruguay.

11-12 The Council approves the new Treaty and seven resolutions relating to the projects discussed at the Aca-pulco Meeting. No significant amendments are made to the resolutions

11-15 In Montevideo, Uruguay, the Directors of Customs of the LAFTA member countries hold their 13th Meeting.

12 Signing of the Treaty establishing the Latin American Integration Association (LAIA), thus finishing the re-structuring process of the Latin American Free Trade Association (LAFTA) which has been under study for 20 months. The Treaty is signed in Montevideo, Uru-guay, and is to become effective as of March 18,1981.

Mr. Julio Cesar Schupp is appointed Secretary General of LAIA. He is appointed as well to be interim Executive Secretary of the SEC until the new Treaty becomes effective.

21 The Permanent Representation of Uruguay before LAFTA informs the SEC of its agreement with Argen-tina, Brazil, Chile, Mexico, and Paraguay on the mutual understanding to comply with the instructions contained in Resolution CM/1.

SEPTEMBER 20-23 The Council on Financial and Monetary Policies holds

its 19th Meeting in Buenos Aires, Argentina.

DECEMBER 2-4 INTAL sponsors in Buenos Aires, Argentina, a meet-

ing of the Work Group whose task is to make arrange-ments for the upcoming meeting of National Customs Directors of Latin America.

8-13 The Advisory Council on Monetary Matters meets in Santo Domingo, Dominican Republic, and hold its 24th Meeting.

15-19 The 20th Special Conference of the Contracting Parties takes place in Montevideo, Uruguay.

ANDEAN GROUP 247

B. Andean Group

JANUARY 13-14 The Andean Council holds its First Meeting in Santa

Cruz, Bolivia. 16-17 The 2nd Meeting of the Andean Council takes place in

Lima, Peru.

FEBRUARY 4-7 In Lima, Peru, the Committee on the Automotive In-

dustry (Decision 120) holds its 9th Meeting. 11-13 The members of the Metalworking Committee convene

in Lima for their 5th Meeting. 11-15 The 6th Meeting of the Agricultural Council of the

Andean Community takes place in Santa Cruz, Bolivia. 20-29 In Lima, Peru, the 1st Special Meeting of Legal Coun-

selors of ANCOM studies the incorporation of the Commission's Decisions into the Domestic Laws of the member countries.

26-28 The Government Experts of the Steelworking Industry gather in Lima, Peru, for their 4th Meeting.

27-29 The High Level Group to study the bloc position of the Andean Group before LAFTA holds its 4th Meeting.

MARCH 3-7 In Lima, Peru, the Commission of the Cartagena

Agreement holds the second round of the 25th Period of Special Meetings'.

12-15 The Andean Council gathers in Quito, Ecuador, for its 3rd Meeting.

14 In Quito, Ecuador, the Andean Council meets with the Minister of Foreign Relations of Argentina.

15 The Andean Council, the Commission of the Cartagena Agreement, and the Junta meet in Quito, Ecuador.

26-28 The 5th Meeting of the Contracting Committee of PADTs on the Food Sector (Decision 126) takes place in Coch-abamba, Bolivia.

27-28 In Oruro, Bolivia, the 16th Period of Regular Meetings of the Contracting Committee to study Decision 87 (Hy- drometallurgy of Copper) convenes.

28-29 The 26th Period of Special Meetings of the Cartagena Agreement meets in Caraballeda, Venezuela.

Decision 152, which extends deadlines for the se-lection of basic models assigned to the countries under

'The First Round took place on December 15, 1979, in Lima, Peru.


the sectorial program of the automotive industry (De-cision 120), is approved.

APRIL 7-11 In Lima, Peru, the 1st Meeting of Government Experts

in the Coal Sector of the PADT program takes place. 16-18 The Meeting on Science and Tecnology takes place in

Lima, Peru. Member countries are represented at the event.

28-30 The Andean Council and the Minister of Foreign Re- lations of Spain meet in Madrid, Spain.

30 to The High Level Group to study the bloc position of the Andean Community before LAFTA meets in Lima, Peru.

MAY 2 5 Members of the Andean Council meet the Ministers of

Foreign Relations of the European Communities (EC) in Brussels, Belgium.

5-7 In Quito, Ecuador, the 4th Meeting of the Planning Council of the Andean Group takes place.

6-8 The 6th Special Meeting of the Metalworking Industry Committee takes place in Lima, Peru.

8-9 The Presidents, Ministers, and Chiefs of Planning Or- ganizations of ANCOM meet in Quito, Ecuador, for the 3rd time.

19-21 The 4th Meeting of Ministers of Agriculture of the An- dean Community convenes in Lima, Peru.

26-28 In Lima, Peru, the 1st Meeting of the Andean Cold Storage Network takes place.

28 The 2nd Meeting of Government Experts on the Tech- nological Information System is held in Lima, Peru.

28 to The 29th Period of Regular Meetings of the Cartagena JUNE Agreement Commission takes place in Lima, Peru. Ap- 5 proved during the meeting were Decisions 153 through

159. 3-5 The 3rd Round of Sessions of the 25th Period of Special

Meetings of the Cartagena Agreement Commission takes place in Lima, Peru.

17-18 The First Round of Negotiations between members of the Cartagena Agreement and members of the Euro- pean Economic Community's (EEC) Commission con- cludes in Brussels, Belgium. The meeting seeks to cre-

ANDEAN GROUP 249

20

23-27

25-27

30 to JULY 2 7-9

11-12

12

15

29

ate a cooperation agreement between the two integration groups. A cooperation agreement between the Junta of the Car-tagena Agreement and the Permanent Secretariat of LAES is signed. The Andean Technical Committee on Coffee Rust holds its 7th Meeting in Lima, Peru. The Directors of Exports Promotion of ANCOM hold their 9th Meeting in Bogota, Colombia.

In Lima, Peru, the Contracting Committee of the PADT on Tropical Forests Resources holds its 12th meeting.

The Administrative Commission for Decision 56, on International Road Transportation, holds its 2nd meet-ing in Lima, Peru. The Work Group assigned by the Commission to study trade between ANCOM and the United States holds its 1st meeting in Lima, Peru. The Contracting Committee of the PADT, Food Sec-tor, holds its 6th Meeting in San Felipe, Venezuela. The Commission of the Cartagena Agreement holds its 27th Period of Special Meetings in Santa Cruz, Bolivia. The "Declaration of Lima" is signed by the Presidents of Peru, Colombia and Venezuela and the represent-ative of the President of Ecuador while at the 1st meet-ing of Presidents held this year. Lima, Peru.

The Government Experts of the PADT on Rural De-velopment, hold their 2nd Meeting in Lima, Peru.

The 4th Meeting of the Contracting Committee of the PADT, Food (Decision 126) takes place in Lima, Peru. In Lima, Peru, the 6th Meeting of the High Level Work Group to study the bloc position of the Andean Group on LAFTA takes place.

AUGUST 8 to SEPTEMBER 12

AUGUST 23 25-27

30 The Andean Parliament holds its 1st meeting in Bogota, to Colombia SEPTEMBER 2 11 The 2nd meeting of Presidents of the Andean Group

held during the year takes place in Riobamba, Ecuador.


The Presidents of Colombia, Ecuador and Venezuela and the representative of the president of Peru sign the "Carta de Conducta" at the meeting.

18 In Lima, Peru, the 26th regular meeting of the Con- tracting Committee on Copper Metallurgy (Decision 86) takes place.

OCTOBER 2-3 The Special Group assigned to study Andean Group-

United States trade holds its 1st meeting in Washington, D.C.

13-15 The First Meeting of the Group of Government experts on the Electronics, Telecommunications, Pharmaceut-ical and Chemical Industry Programs takes place in Lima, Peru.

13-16 The Commission of the Cartagena Agreement holds its 30th Period of Regular Meetings in Lima, Peru. The guidelines for establishing a formal system of perma-nent coordination among the Andean integration or-ganizations is approved.

NOVEMBER 6-7 The High Level Group of the Commission meets in

Lima, Peru, to examine the Board's Proposal 66/Mod. 1, (Steelworking Industry.)

7-19 The Commission of the Cartagena Agreement holds its 25th Period of Special Sessions, 4th Round, in Lima, Peru. (pp. 95-96).

10-12 The Directors of Exports Promotion of ANCOM convene in Bogota, Colombia, for their 10th meeting.

17-21 In Lima, Peru, the 4th Meeting of the Council on Phys- ical Integration takes place.

20-21 The 1st round of the 31st Period of Regular Meetings of the Cartagena Agreement Commission takes place in Lima, Peru.

DECEMBER 1-3 In Bogota, Colombia, the 5th Round of the 25th Period

of Special Meetings of the Cartagena Agreement Com-mission takes place.

1-3 The 1st Round of the 28th Period of Special Meetings of The Cartagena Agreement Commission takes place in Bogota, Colombia.

1-3 Also in Bogota, the 2nd round of the 31st Period of Regular Meetings of the Cartagena Agreement Com-mission is held.

ANDEAN GROUP 251

11-12 In Lima, Peru, the 6th Round of the 25th Period of Special Meetings of the Cartagena Agreement takes place. This round constitutes the last one of the year. The 25th Period remains open to consider the proposals on the Common External Tariff, and the Special Rules of Origin. The Commission reaches no decision on the forementioned issues.

11-12 The 28th Period of Special Meetings of the Cartagena Agreement Commission, 2nd (and last) round is held in Lima, Peru. Approved are Decisions 162 and 163.

11-12 In Lima, Peru, the 31st Period of Regular Sessions of the Cartagena Agreement Commission, 3rd (and final) round, is held. Approved are Decisions 160 and 161.

16 The Presidents of Colombia, Ecuador, Peru and Ven-ezuela, gather in Santa Marta, Colombia, for their 3rd meeting of the year. During the meeting the Presidents sign the Declaration of Santa Marta.

18 The Ministry of Foreign Relations of Bolivia issues a communiqué regarding the Declaration of Santa Marta, stating that "in view of the ideological interpretation that some of the members of the Agreement give its principles, which tends to detract from its essential ob-jectives . . . Bolivia abstains from active participa-tion. . .".

19 The General Secretariat of Integration of Bolivia issues a press release describing the criteria used by the coun-try regarding its participation in the subregional inte-gration process.

C. Central American Common Market (CACM) JANUARY 14-17 Conversations held at SIECA's headquarters to define

the terms of collaboration between the Secretariats of SIECA and UNCTAD.

18-19 In San Jose, Costa Rica, a meeting of Ministers and Chiefs of Planning Offices of the Central American Isthmus is held. Consensus on the following was reached:

1) The need to restructure and complete the Central American Integration Program.

2) The need to invigorate the implementation of re-gional projects.

3) The need to pay special attention to science and technology matters in the region.

4) The belief that the planning organizations of the


area have a greater participation in the regional and subregional programs of technical cooperation.

FEBRUARY 11-12 The 2nd Meeting of Central American Experts of the

Beef Trade is held. (The organization is a Central American Office of Coordination, Information and Ad-visory Services dealing with livestock and meats).

13 The Latin American Association of Beef Exporters is established in San Jose, Costa Rica, as a private sector organization.

18 The Ministers of Foreign Relations of Honduras and El Salvador meet in San Jose, Costa Rica, to settle the differences between the two countries and agree to pre-pare a schedule of work meetings to facilitate the me-diating process.

At the end of February, the Vice Ministers of For-eign Relations of El Salvador and Honduras meet in San Jose, Costa Rica, and declare that "diplomatic re-lations and trade will resume between the two countries in due time," although they do not specify when this will take place.

21-22 The 25th Meeting of Vice-Ministers of the Economy of the countries of Central America takes place in San Jose, Costa Rica. The Meeting considers the following proposals:

1) To set import quotas for powdered milk during the first half of 1980.

2) Recommend to the Meeting of Ministers of Econ-omy of Central America that item b) of article 17 of the regulation on the application of economic stabili-zation duties be amended.

3) To examine the present situation of the produc-tion and supply of basic grains during the agricultural, cycle of 1979-1980 (with special emphasis on the pro-duction deficit of beans and corn).

4) To examine the situation of production costs of two factories, GINSA, in Guatemala, and ELPESA, in Nicaragua, the latter of which produces caustic soda.

5) To recommend that SIECA prepare feasibility studies on sponsoring the opening of new markets in the Caribbean region.

6) To consider the role of the meeting of Vice-Min-isters within the integration program, and agree in re-questing the Ministers of Economy that in future meet-

CENTRAL AMERICAN COMMON MARKET (CACM) 253

ings they "implement the adoption of measures to restructure the economic integration process".

21-23 In Guatemala City, Guatemala, the 4th Meeting of the Standing Commission on Research and Agricultural Extension Services of Central America takes place.

22-23 The Governors of the Central American Bank for Eco-nomic Integration hold their annual meeting in San Jose, Costa Rica. The Governors agree, among other things, "to instruct the Board of Executive Directors of the Bank to study possible alternatives that would allow CABEI to give priority and effectiveness to significant social development programs in the member coun-tries".

CABEI should also study the possibility of creating "an organization that allows the granting of working capital loans to enterprises of strategic importance, which loans could be administered through government fi-nancial institutions or directly to the borrower with the guarantee of the prospective borrowers".

24 The Ministers of Economy of Central America hold their 22nd meeting in San Jose, Costa Rica. The fol-lowing topics were dealt with:

1) In the future, the Meeting of Ministers of Econ-omy of Central America will change its designation to "Meeting of Ministers Responsible for the Economic Integration of Central America". The numbering se-quence of the regular and special meetings will continue as it has so far.

2) The Vice-Ministers' recommendations to give spe-cial attention to matters dealing with the restructuring of the integration process, were approved.

3) Amendments to item b) of Article 17 of the reg-ulation for the application of economic stabilization du-ties were approved.

4) The Ministers agreed to "give special considera-tion to the trade in basic grains among the member countries, allowing the stabilization of prices and in-suring the adequate supply of same in the local mar-kets." (p. 178).

5) The appointment of the Minister of Economy, Industry and Trade of Costa Rica, to represent the CACM before the governments of Mexico and Vene-zuela, and the international fora, to negotiate prefer-ential treatment in the supply of petroleum to the Cen-tral American countries.


MARCH 5 The Government of El Salvador decrees the Agrarian

Reform Program. 14-15 The Ministers of Foreign Relations of the Central

American Isthmus gather in San Jose, Costa Rica. Among the resolutions approved were those pertaining to international cooperation and Central American In-tegration. Also, the Ministers signed the Declaration of San Jose.

17-18 The 8th Meeting of Directors of Customs takes place in San Jose, Costa Rica.

21 The Federation of Colleges and Professionals' Associ- ations of the Economic Sciences in Central America and Panama is established in Guatemala City, Guate-mala.

26-28 In Guatemala City, Guatemala, the Trade and Price Stabilization Coordinating Commission of Central America convenes.

27-29 The 16th Meeting of Coordinators charged with the Revision of Customs Duties Policies in Central America takes place. The "basic concepts" for the revision of customs duties policies and procedures are evaluated.

The Guatemalan Congress approved the agree-ment for energy exchange with El Salvador.

APRIL 10-11 Central America participates in the 1st Meeting of Min-

isters of Finance and Presidents of Central Banks or-ganized by LAES and CEMLA, in Lima, Peru. The topics under consideration at the meeting include mul-tinational projects, preinvestment activities and inter-national trade.

15 Central America attends the XXI Meeting of the IDB Board of Governors, in Rio de Janeiro, Brazil. Aspects relating to the Central American countries include:

a) The Central American recognition given to the IDB for its support in the development and integration of the member countries.

b) The Central American concern for the delays in the implementation of the 5th replenishment of re-sources of the IDB.

c) A survey of areas in Central America where IDB could consider financial aid.

d) International financial support required by . Nic-aragua in order to aid the country's reconstruction.

15-18 The Nutrition Institute of Central America and Panama


(INCAP) sponsors the International Conference on Food Planning and Nutrition, in Guatemala City, Guatemala.

21

SIECA and UNIDO sign a cooperation agreement in Vienna, Austria.

MAY 5-7 In Guatemala City, Guatemala, the Technical Work

Group on Customs Policy Standardization meets. The work on making decisions and reaching consensus on recommendations for a well defined Import Policy for Central America continues.

7-9 The 3rd meeting of Experts of the Information, Co- ordination, and Consultation Mechanism on Beef takes place in Guatemala City, Guatemala.

8 The 2nd National Congress of Industrialists convenes in San Jose, Costa Rica. The group agrees to "support the participation of Costa Rica in the Central American Common Market," but at the same time agrees "not to accept the drastic reductions of customs protection as proposed by the Costa Rican government" in regard to the revision now being done on Central American customs policy.

15-16 In Managua, Nicaragua, the Vice Ministers responsible for Central American Economic Integration hold their 26th meeting. The Vice Ministers approve new prices for products originating from two integration factories (GINSA, headquartered in Guatemala which produces tires and inner tubes, and ELPESA, established in Nic-aragua, which produces caustic soda).

22-23 The Work Group of Technicians on Standardization of Customs Policies meet in Guatemala City, Guatemala. The group approves a preliminary policy draft for the consideration of the General Assembly of Customs Di-rectors.

22-24 In Guatemala City, Guatemala, the 9th Meeting of Di- rectors of Customs of Central America convenes. The draft of the proposed policy for standardization duties on Central American Imports is considered during the meeting although the same remains pending of ap-proval.

28-30 The 17th Meeting of the Coordinating Group in charge of the Revision of Customs Policy takes place in Gua-temala City, Guatemala. The Group discussed the quantitative hypothesis to be used in determining a new taxation system.


Latin American producers establish the "Multi-national Coffee Corporation".

JUNE 11 SIECA signs a Technical Cooperation Agreement on

Agriculture Policy for El Salvador. 12 In Tegucigalpa, Honduras, the Ministers and Chiefs of

Planning Offices of the Central American Isthmus con-vene. The group approves the proposed package of regional programs to be submitted for the consideration of the IDB and the IBRD in a future meeting, where a request of financial resources to be channeled through the CABEI is to be presented. During the meeting the Ministers establish the "Technical Cooperation Com-mittee".

23 ICAP starts a program of Masters Degree in Public Administration.

23-25 The Technical Group of the Coordinating Commission on Central American Price Standardization and Trade holds a meeting in Guatemala City, Guatemala. A Joint Communiqué issued expresses the intention of closer cooperation between the EEC and the Commission, as a result of negotiations which took place during the visit of the Costa Rican President to the EEC.

JULY 4-5 The Ministers responsible for the Economic Integration

of Central America convene in Managua, Nicaragua, for their 23rd meeting.

The Ministers agree to delegate responsibility to the Vice-Ministers, who hold negotiations for restruc-turing the economic integration process.

The assembly also considers the various aspects of the increasing trade deficit of Nicaragua and El Sal-vador as well as possibilities to finance same once the custom duty revision and the external economic rela-tions of Central America are resolved. (The process also includes revision of a SIECA document on trade relations with the Caribbean Countries). During the same meeting, the Central American Commission on Transportation by Water, which will serve as a technical and advisory organization to the Ministers' Meeting and to the member Governments of the Common Market in the area of port and shipping activities and maritime trade, is established.


5

Costa Rica prevents flight of capital from Guatemala and El Salvador.

9-11

The 8th Meeting of the Regional Group of Electric Energy Interconnection takes place in Managua, Nic-aragua.

9-11

In Guatemala City, Guatemala, the Ministers of For- eign Relations of Guatemala, El Salvador and Hon-duras meet to discuss negotiations aimed at finding a solution to the differences between Honduras and El Salvador.

10

The exchange of Instruments ratifying the agreement on interconnection of electric energy between Guate-mala and El Salvador takes place in Guatemala City, Guatemala.

14-15

The Work Group on substitutes for tires in Central America meets in Guatemala City, Guatemala.

15 The 7th Meeting of Directors of Integration and In-dustry of Central America is held in Guatemala City, Guatemala. Studied are the observations of Nicaragua in relation to Article IX of the General Treaty of Eco-nomic Integration, which forbids the granting of ex-emptions or reduction of duties on goods imported from third countries.

In Panama City, Panama, the Union of Banana Exporting Countries holds a meeting. Among those present were representatives of Costa Rica, Guatemala, Honduras, Nicaragua, Panama, Colombia and the Do-minican Republic. The possibility of reaching a world-wide agreement for banana exports and the draft budget for the 1981 fiscal year are studied. The improvement of a statistical system for the organization is approved.

AUGUST 3 Mexico and Venezuela sign an agreement helping the

Central American and the Caribbean countries to meet their oil needs.

5-8 The experts in charge of studying the facilitation of international transportation and trade hold a meeting in Guatemala City, Guatemala.

ECLA calls upon 23 experts of the Central Amer-ica, Mexico and Panama area to attend the meeting in order to help identify and discuss problems in the sector of international transportation and trade. During this meeting, special attention is given to the financing needs of local transportation enterprises in the Central Amer-ican subregion.


5-8 The Commission for the Scientific and Technological Development of Central America and Panama meets in Guatemala City, Guatemala.

8 The Ministers and the Chiefs of Planning Organizations of the Central American Isthmus hold a meeting in Guatemala City, Guatemala.

18 The Central American Bank for Economic Integration holds its 19th Governors' meeting in Managua, Nica-ragua.

21 The Vice-Ministers responsible for Central American Economic Integration hold their 27th meeting in Man-agua, Nicaragua. The Vice-Ministers schedule pro-grams aimed at restructuring the Central American Common Market. Also, amendments to Article IX of the Regulations of the General Treaty are studied dur-ing the meeting.

25-27 The 18th meeting of coordinators in charge of revising the Central American Customs Policy takes place in San Jose, Costa Rica.

Tariffs for 197 taxable items are revised. The meet-ing considers and approves the proposed work program.

25-27 The 19th Regular Meeting of the Central American Coordinating Commission for Marketing and Price Sta-bilization is held. Among the topics discussed are basic grain production and supply for the Central American subregion, and the operating problems arising from the application of the basic grains protocol.

SEPTEMBER 1-30 A technician from the Junta de Cartagena Agreement

gives technical assistance to SIECA in the field of Sci-ence and Technology.

6 Nicaragua and Honduras extend the period of their bilateral trade agreement.

8 Nicaragua sets import controls. 8-9 In San Jose, Costa Rica, the Vice-Ministers hold their

1st meeting on studies for restructuring the Central American Common Market.

8-11 The 3rd meeting of the Central American Regional Group of the Latin American Railroad Association takes place in San Pedro Sula, Honduras.

The group analyzes the present situation of each of the countries' railroad systems, and agrees to estab-lish a "Central American Railroad Commission". Like-wise, the group approves the action plan of the Regional


Group which has been formed for technical and finan-cial cooperation activities.

22-27

The 19th Meeting of Coordinators in charge of revising the Central American Customs Policy takes place in San Jose, Costa Rica. Nominal tariffs for 26 areas of activity are revised on an "item-by-item" basis.

24 The Costa Rican government adopts economic meas-ures encouraging economic integration, restricting im-ports and encouraging exports.

30

The Central American Commission of Maritime Trans- portation is established in Managua, Nicaragua.

The 6th Conference of Ministers of Banana Ex-porting countries takes place in San Jose, Costa Rica.

The agenda includes plans to control the Sigatoka fungus; access to European markets, and the possibility of establishing a general banana exports agreement.

OCTOBER 1 Extension of the terms of the agreement between the

Central American Central Banks and the Mexican Cen-tral Bank. The available reciprocal credit is increased from US$10 million to US$20 million to cover deficits in Central American-Mexican trade balances.

30

In Lima, Peru, representatives of the governments of Honduras and El Salvador sign the General Peace Treaty.

NOVEMBER 6-7 The Conference of Ministers and Chiefs of Planning

Offices of Central America and Panama convenes. 7 The Ministers responsible for Central American Eco-

nomic Integration gather in Tegucigalpa, Honduras, for their 27th meeting. No resolutions are approved.

10 El Salvador stiffens its monetary exchange regulations. 14-15 A meeting of the Union of Banana Exporting Countries

takes place in San Jose, Costa Rica. The Union ana-lyzes the possibilities of signing a General Banana Ex-ports Agreement and agree that for the time being, an instrument of that nature is not feasible.

18 The General Peace Treaty between Honduras and El Salvador is deposited at the OAS headquarters in Wash-ington, D.C.

21 Honduras establishes the Advisory Council for Inte- gration, and a Technical Commission of Studies and Analysis to act as advisor to the President of the Re-public on matters of Central American Integration.

26-29 The 3rd Conference of Ministers and Experts from the


Planning Offices of Latin America convenes in Gua-temala City, Guatemala.

28 The Honduran Congress approves the General Peace Treaty between Honduras and El Salvador.

Honduras requests Guatemala to grant an exten-sion of the Bilateral Trade Treaty.

DECEMBER 10 In Tegucigalpa, Honduras, exchange of the ratification

instruments of the General Peace Treaty takes place. The Treaty is thereby in force.

The 7th Special Meeting of the Coordinating Com-mission on Trade and Price Stabilization of Central America takes place. The general situation of Central America's production and supply of basic grains is ana-lyzed during the meeting.

D. Caribbean Community (CARICOM) JANUARY 7-11 The CARICOM/AID meeting to study the Project on

the Development of Managerial capacity of the less developed countries takes place in St. John's, Antigua.

14-16 A meeting related to the implementation of a training project for the health sector is held in Barbados. This project is being sponsored by UNDP and AID.

15-16 In Georgetown, Guyana, a meeting to consider the role of the Caribbean woman in the economic integration process takes place. Two main subjects are discussed during the meeting:

a) Promotion of activities which could yield financial benefits; and

b) The creation of national offices to deal with mat-ters relating to the woman's role, and the creation, within CARICOM, of a division responsible of dealing with the Caribbean woman's role in the economic in-tegration process.

19 A national and regional meeting on health information services systems takes place in Barbados.

FEBRUARY Members of CARICOM gather in St. Kitts to discuss the subregion's bloc position at the 3rd United Nations Conference on Maritime Rights. Only three items on that agenda are of concern to the Caribbean: the use of sea bottom resources; national jurisdiction on coastal limits; and the situation of the developing land-locked

CARIBBEAN COMMUNITY (CARICOM) 261

countries. The meeting analyzes various control systems to be imposed to freighters from areas other than the member countries, supervision to avoid ocean pollu-tion, and an inventory of the Caribbean's potential mar-itime resources. The new Subsecretary General of

_ CARICOM, Mr. Roderick Rainford, takes over his new functions.

6-8

The 5th Meeting of the Standing Committee of Min- isters of Foreign Relations takes place in Castries, St. Lucia. The meeting dealt with the impact of oil prices on the Caribbean economy, and with the preservation of harmony within the CARICOM area. In regard to the latter issue, consensus is reached that "ideological pluralism does not constitute a barrier to the CARI-COM process."

11-15

Members of the CARICOM Secretariat, representatives of USAID, and officials from the CARICOM countries hold a meeting to discuss strategies for im-plementing the training project within the Caribbean Region in Georgetown, Guyana.

MARCH

APRIL 28-30

The Council of Ministers of CARICOM holds a meet-ing. The agenda included measures for the less devel-oped countries of the region. A special group is ap-pointed to study the regional integration outlook during the decade of the 80's. The report is to be issued within the following six month period (September). Amend-ments to the Chaguaramas Treaty are also under study.

The 2nd Meeting of Experts on Exports Promotion takes place in Georgetown, Guyana.

The group recommends the creation of a Trade Information Office within CARICOM, to foster na-tional activities of export promotion.

MAY 12 The Caribbean population census takes place. CARI-

COM had furnished tentative demographic figures in the past.

14-15 The Ministers of Labor of the CARICOM area hold their 5th Standing Committee meeting in St. Kitts-Nevis- Anguilla. The Committee reviews the tasks accomplished in compliance with the resolutions approved at


the 4th meeting, and likewise considers and approves a Work Program for 1980-1981.

19-21

A meeting of experts of the Caribbean Development and Cooperation Committee is held in Bridgetown, Barbados. The meeting deals mainly with proposed ac-tions to be included as part of the 3rd Development Strategy of the United Nations.

MAY The 2nd Meeting of Chiefs of Planning Offices of the 29 to Caribbean takes place in Kingston, Jamaica. The meet- JUNE ing recommends establishing Work Groups to deal with 2 various areas of planning activity as well as selected

planning training methodologies. 2-6 A Seminar to study the results of Multilateral Trade

Negotiations of the GATT takes place in Georgetown, Guyana.

4-10 In Kingston, Jamaica, the members of the Caribbean Development and Cooperation Committee hold their 5th period of Sessions. The group followed up on the activities within their various areas of interest.

23-27 In Washington, D.C. , the 3rd Meeting of the Coop-eration Group for the Economic Development of the Caribbean takes place at the World Bank's headquar-ters. The group studies financial needs and technical cooperation grants both at the national and regional levels.

JULY 15-17 The 6th Conference of Health Ministers of CARICOM

convenes in St. George's, Grenada. Among the deci-sions approved are:

1) To make sure that the health programs in favor of less developed countries in the area are receiving appropriate financing.

2) To develop training schools for all levels of the the health sector.

3) To implement a Health and Environmental Strat-egy for the Caribbean, and in order to accomplish this, to establish a regional institute to be headquartered in St. Lucia.

23-24 The Council of Ministers of CARICOM gathers in St. George's, Grenada, to hold its 17th meeting. The council studies, basically, the following issues:

1) The establishment of a new system of products origin. It is decided that there still should be a three-month transition period from the old to the new system.

CARIBBEAN COMMUNITY (CARICOM) 263

2) A new methodology proposed by the EEC on a regional program within the European Development Fund which would be based on individual treatment for the CARICOM members, is rejected.

3) The Argentinian proposal to initiate economic co-operation agreements with CARICOM member coun-tries to purchase equipment and pre-assembled plants, as well as to grant technical cooperation to the CAR-ICOM member countries, is studied.

SEPTEMBER 15-16 The 2nd Meeting of Experts to discuss the "Lome II"

Regional Program of the Caribbean takes place in Georgetown, Guyana.

OCTOBER 1-2 A joint meeting between the newly created UNIFSTD

(United Nations Interim Fund for Science and Tech-nology for Development) and CARICOM represen-tatives convenes in Georgetown, Guyana. A package of suggestions on science and technology, and more specifically, on agriculture, energy and industrial pro-jects is studied during the meeting.

8-9 In St. John's, Antigua, the 1st meeting of Ministers of Information takes place. The Ministers reach consensus on, and stress, the importance of communications in the development and integration areas. The agenda in-cludes: regional collaboration in information matters; an inventory of the typographic and electronic media, and of those organizations involved. The new inter-national order of communications, the responsibility of the mass media in the development of the countries; and study of a Development Support Communications Plan.

13-24 A seminar for training women to play an effective leadership role is conducted in St. Augustine, Trinidad. The Seminar is financed with USAID funds and organized by CARICOM and the Independent Studies Unit of the West Indies University, in St. Augustine.

20-22 The Joint "Caribbean Community/Mexico" Commis-sion holds its first meeting in Bridgetown, Barbados. The main objective of the meeting consists of studying the strengthening of relations between the Community and Mexico in a number of identifiable areas: Trade, industry, tourism, technical cooperation, education and cultural collaboration, energy and financial aid.


NOVEMBER 6 The 6th Meeting of the Standing Committee of Min-

isters of Transportation of CARICOM convenes in Be-lize. At the meeting Belize announces its intention to join WISCO (West Indies Shipping Corporation) as of January 1, 1981.

7 The Meteorological Council of the Caribbean convenes in Belize to hold its 20th meeting. The most important decision approved at the reunion proposes the estab-lishment of an operational hydrological institute for the Caribbean.

DECEMBER 1-4 The proposed 18th Meeting of the CARICOM Council

is postponed. It finally takes place in Kingston, Jamaica, from the 15th to the 16th of January, 1981, thus becoming the first important integration event of the year.

E. Latin American Economic System (LAES) FEBRUARY 5-8 The 1st Regular Meeting of the Action Committee on

Tourism convenes in San Jose, Costa Rica. The 1980 program of activities and budget are approved during the meeting.

13-15 The 5th Regular Meeting of the Action Committee on Fertilizers takes place in Mexico City, Mexico. The Committee agrees to terminate its operations after the Multinational Corporation for Marketing of Fertilizers (MULTIFERT) is established.

14-16 The Action Committee for the Reconstruction of Nic- aragua holds its 1st Regular Meeting in Managua, Nic-aragua. The Committee approves the program of ac-tivities and budget for 1980, and creates two technical groups on Policies for Marketing of Beef, and of Ba-nanas.

25-29 A Latin American Seminar on Identification of Sources for the Financing of the Fisheries Sector takes place in Mexico City, Mexico. The Seminar is organized by the Action Committee on Fisheries and the Latin American Association of Development Finance Institutions.

MARCH The Meeting of Government Experts from Developing 17 to Countries on Economic Cooperation Among Devel- APRIL oping Countries, takes place in Geneva, Switzerland. 3 The meeting studies how to carry out the South-to-

LATIN AMERICAN ECONOMIC SYSTEM (LAES) 265

South Cooperation Program in three priority areas de-fined in the Arusha Program.

10-11 In Lima, Peru, the 1st Meeting of Finance Ministers and of Presidents of Central Banks take place. The meeting is sponsored by LAES and CEMLA, with the collab-oration of IDB and the Latin American Association of Development Finance Institutions. Important resolu-tions on monetary and financial cooperation are ap-proved during the meeting.

14-17 The Action Committee on promotion and marketing of handicrafts holds its 5th meeting at Puerto Ayacucho, Peru.

22-25 In San Jose, Costa Rica, the Latin American Forum of Commercial Air Transportation holds its meeting, within the framework of activities of the Action Com-mittee on Tourism.

29 The Multinational Corporation for Marketing of Fer- tilizers (MULTIFERT) holds its constituent assembly in Panama City, where the Corporation will be head-quartered.

30 In Panama City, the Action Committee on Fertilizers gathers for the last time thus ending its period of op-erations.

MAY 19-22 The Preparatory Meeting for the 6th Regular Meeting

of the Latin American Council of LAES takes place in Caraballeda, Venezuela.

22-24 The 6th Regular Meeting of the Latin American Coun- cil of LAES convenes in Caraballeda, Venezuela.

28

Nicaragua joins the Action Committees on Tourism and on Low Cost Housing.

JUNE 16-20 The Forum for the Organization and Management of

Fisheries, part of the framework of activities of the Action Committee on Fisheries, gathers in Tegucigalpa, Honduras.

19-20 The Action Committee on Housing and Urban Devel- opment holds its 3rd Regular Meeting in Quito, Ec-uador. The Committee decides to speed up completion of three programs presently under execution, and ex-presses interest in extending its operations beyond May, 1981. Bolivia joins the Committee during this meeting.

20

The Permanent Secretariat of LAES and the Junta of the Cartagena Agreement sign a cooperation treaty in


Lima, Peru, to coordinate action in projects of mutual interest.

21 In Lima, Peru, the Permanent Secretariat of LAES and the General Secretariat of the Latin American Asso-ciation of Development Finance Institutions sign an agreement for joining efforts towards stimulating re-gional financial cooperation, and to execute jointly the mandates of the 1st Meeting of Finance Ministers of member countries of the Association.

JULY 4 The Secretariats of UNIDO and of LAES sign a co-

operation agreement in Geneva, Switzerland, to estab-lish a permanent representation office of UNIDO at LAES' headquarters, thus strengthening LAES' indus-trialization and energy projects.

AUGUST 11-13

21-22

21-23

SELA calls a regional coordination meeting in New York City, on the occasion of the Special General As-sembly of the U.N., in order to evaluate progress made in establishing the new international economic order and to adopt the new International Development Strat-egy. In Panama City, Panama, stockholders in the Multi-national Corporation for the Marketing of Fertilizers (MULTIFERT) hold their 1st Assembly to deal with administrative matters of the corporation. In New York, City, the Ministerial Meeting of the "Group of 77" convene, prior to the General Assembly of the U.N.'s meeting, in order to ratify various requests pre-sented by Latin American countries.

SEPTEMBER 22-26 The Action Committee on the RITLA holds its lst meet-

ing in Rio de Janeiro, Brazil. The Action Committee's program of activities is approved during the meeting.

OCTOBER 6-10 A Training Seminar is held in Quito, Ecuador, as part

of the program of activities of the Committee on Hous-ing and Urban Development (CAVEIS).

8-10 The 2nd Seminar on Cooperation among External Trade Enterprises of Government Sponsorship is held as part of LAES' program of activities in the area of cooper-ation among developing countries. (p. 248).

LATIN AMERICAN ECONOMIC SYSTEM (LAES)

267

13-17

The 4th Regular Meeting of the Action Committee on Fisheries takes place in Lima, Peru. The work program of the Committee is studied during the meeting.

17 In Lima, Peru, the Ministers of Fisheries of the LAES' Action Committee member countries convene at their 1st Special Meeting. Regional cooperation in the sector is stressed during the reunion.

NOVEMBER 7 Nicaragua joins the Action Committee on Handicrafts. 24-26 The Permanent Secretariat of LAES presents two stud-

ies requested by GRULA in Brussels, containing an analysis of trade and economic relations between the EEC and Latin America. GRULA requests that, in addition, LAES should work on ideas for the imple-mentation of a basic agreement between the two regions and present it as a supplementary report to the studies.

24-28 The Action Committeee on Handicrafts holds its 6th Meeting in Panama City, Panama. The Committee de-cides to strengthen the activities of the Promotion and Trade Unit by means of the creation of its Board of Directors, which would give it executive authority.

DECEMBER 4-5 The 2nd Stockholders' Meeting of the Multinational

Corporation for the Marketing of Fertilizers (MUL-TIFERT) takes place in Panama.

Administrative matters and operational proce-dures of the Corporation are discussed therein.

4-5 In Managua, Nicaragua, the 3rd Special Meeting of the Action Committee on Low Cost Housing and Urban Development is held. Attending are representatives of eight member countries. The meeting stresses the prep-aration of the feasibility studies for the creation of a Permanent Latin American Organization for Housing and Human Population Settlements.

F. River Plate Basin JUNE 4-6 The Group of Experts on Economic Cooperation2 con-

venes in Buenos Aires, Argentina.

2 The other groups of experts of the System held meetings in 1979; the "Ad Hoc", in Buenos Aires, from March to November; the one on Social Sectors Cooperation in Buenos Aires, from the 27th to the 31st of August; the Hydrometeorology Group, in Buenos Aires from the 8th to the 10th of October; and the one on Transportation, in Asuncion, Paraguay, from the 22nd to the 24th of October.


JULY 1-3

DECEMBER 2-4

The Group of Experts on Water and Natural Resources holds a meeting in Brasilia, Brazil.

In Buenos Aires, Argentina, the 11th Annual Meeting of Ministers of Foreign Relations takes place. Twenty-nine resolutions are approved during the meeting.

G. Amazon Cooperation Treaty FEBRUARY 25 Colombia ratifies the Treaty.

JULY 3 Venezuela ratifies the Treaty.

AUGUST 2 The Treaty becomes effective.

OCTOBER 23-24 The Ministers of Foreign Relations of the signatory

countries of the Amazon Cooperation Treaty hold their 1st Meeting, in Belem, Brazil.

The two following important documents are ap-proved during the meeting:

a) By-laws of the Meeting of Ministers of the Sig-natory Countries.

b) "The Belem Declaration". The assembly recommends the preparation of nu-

merous studies, which should be ready in July, 1981, to be presented for the consideration of the 1st Meeting of the "Council of Amazon Cooperation" (Peru, July 1981).

The Council's conclusions, in turn, are to be sub-mitted for consideration at the next Meeting of Min-isters (Colombia, 1982).

the latin american integration process in · pdf filethe latin american integration process in...

Documents