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By Karla Jacobs
On October 4 the Presidents of the member countries of the System of Central American Integration, SICA, (Guatemala, Honduras, El Salvador, Nicaragua and Costa Rica) met in the Honduran capital Tegucigalpa to discuss the US financial crisis, its impact on the region and an appropriate regional response to minimize the inevitable damage likely to the Central American economies. The meeting was called at very short notice in response to the unfolding collapse of the US financial system.
A study carried out by financial experts of the region about the possible impact of the financial crisis on the region was presented at the presidential meeting. The study predicts substantial reductions in family remittances sent by Central American emigrants working in the US, a sharp decrease in Central American exports, (over 50% of which are sold to the US), and a steep fall in the number of US investors looking to invest in Central America. The report recommended that governments invest in basic food production and infrastructural works and implement all other available measures aimed at generating employment and economic activity.
After discussing the potentially catastrophic implications of the collapse of the US financial system, the SICA presidents signed a declaration in which it was agreed that efforts should be focused on strengthening trade within Central America and other existing alternative markets (like those certain countries in the region already have with Venezuela, China and the Caribbean Community, CARICOM) and on opening new markets, for example with the European Union and MERCOSUR (Common Market of South America). In order to establish trade links as a regional block with other countries and regions of the world it was agreed that vital integration mechanisms like the Central American Customs Union be consolidated as soon as possible.
The need to seek new lines of credit was also emphasized. One possibility mentioned here was the Banco del Sur, which was set up recently with capital from South American countries in order to provide alternative lines of credit for developing countries. Currently, the Banco del Sur is still mired in negotiations over its role and institutional management
It was agreed that an emergency fund of US$2,000 million would be requested from the Central American Economic Integration Bank to help the region's governments and banking systems deal with the imminent financial fall out. US$200 million of this fund would be loaned to the Central Banks of each SICA country to help the institutions deal with insolvency within the financial system. Another US$200 million would be loaned to private banks in each country so as to be made available for social projects and productive activities.
The SICA presidents also agreed to instruct their Agricultural Ministers to draft a concrete plan to promote regional food production and distribution with the aim of avoid food shortages as a result of the medium and long term consequences of the economic fall out.
Finally it was agreed that another SICA presidential meeting would be held in November for the presentation of a regional financial plan in the light of the unfolding US financial collapse. This plan is currently being drafted by SICA's Economic Integration Ministerial Council.
Below is a translation of extracts from the press conference given after the presidential meeting, as transcribed by the Nicaraguan government:
Nicaraguan President Daniel Ortega: I think that this meeting has been an appropriate [medium] to tackle the issue of this global crisis, generated by the mechanisms put in place by capitalism and its own economic policies. ... The crisis, seen most clearly in the New York stock exchange in the US, is no more than the manifestation of the disease suffered by the system. The system is terminally ill! And now that even the US President is talking about reviewing the [way the] system [works], ... we should be more than convinced that [capitalism] is not the path, this is the not the option which will permit people to enjoy the fundamental principles of the [UN Universal] Declaration of Human Rights.
Logically, today we have spoken about the crisis. It was the main theme [of the meeting], but we have also spoken about other matters like SICA's different mechanisms, ... the normal functions of the different instruments that the Central American community has, and how to use these instruments, the institutions at our disposal, in the middle of this crisis so as to defend, strengthen and develop Central America's capacities.
We have agreed ... to strengthen the regional [internal Central American] market. For Nicaragua the Central American market is the first [most important] market, the US market is the second [most important] market. And now we are opening a very important market within the ALBA framework, where Venezuela is becoming an enormously important market for our country. A market based on the concept of fair trade where the asymmetries of our countries are taken into account. This is something inconceivable for the developed countries. The developed countries, the US and European countries, they do not understand about asymmetries! They talk about free trade, but they don't practice it. They prefer implementing protectionist policies which are detrimental to the economies of developing countries.
What is happening in the US [at the moment] is really the biggest economic crisis the planet has seen, it is the result of policies of greed, of the individualism that capitalism [provokes], and it obliges us to think hard and take action. [It obliges us] to realize that we cannot depend on one market, especially when that market does not take into account our asymmetries, because if that market fails ... as it is doing, then we become victims. ...
[The recently passed US government bailout] of the forces of capital which provoked this crisis is totally ridiculous, absurd. But then [the bailout itself] is a manifestation of the characteristics of the system. This type of measure is transient, it is not a solution, ... it is just a plaster which is being put on a very deep wound... We must not put trust [in this sort of measure] because the tendencies are dangerous, we do not know how far this crisis will go, this crisis which affects the global economy and has a direct impact on us.
Honduran President Manuel Zelaya: The attendance of the presidents today speaks very well about the [integration of the] Central American region, especially when there are urgent matters to which we have to give joint answers, not unilateral answers. ...
[During the meeting] we were able to draft a document ... about the need to homogenize economic, trade and social policies within Central America in order to provide solutions to the people of Central America, to our communities, with regard to the international economic crisis, which we know is affecting us, but as time goes on its impact will be felt more and more by our governments, our people and the entire productive apparatus of Central America.
That is why the document ends with very clear conclusions. We are not committed only to global capitalism's commercial operations. We know that the licentiousness of capitalism ... provokes corruption within the system, and we must combat it with all the mechanisms of control necessary for our countries.
But as regards all those commercial, social and economic activities, the Presidents, Vice Presidents and their Ministers of Central America here today have a very clear mandate. So therefore we want turn the international economic crisis into an opportunity for Central America.
We want to make Central America an attractive place for investors and development [projects], while at the same time demonstrating responsible governance which provides prompt solutions to its people in the areas of education, health care and other social spheres. We have instructed our ministers to come up with a plan to this end over the coming weeks, which will be presented to the public.
President Elias Saca of El Salvador, representative of a far right government with troops in Iraq, was asked whether, given that the need to take advantage of concessional programs such as Petrocaribe was confirmed during the meeting, the government of El Salvador is considering joining the Venezuelan promoted regional integration project.
President Elias Saca: We consider that one of the most important measures [in light of the US financial crisis], apart from the food production plan, ... is to continue to broaden our trade links [with other countries and regions]....
Today we have spoken at length about our commercial relations with other regions. SICA has always been open to trade links with all regions, South America, the Caribbean, North America, etc. ...
El Salvador respects each country's decision with regards to a commercial agreement, a petroleum or social agreement with the Bolivarian Republic of Venezuela. We respect that. But in El Salvador's case, the state does not import petroleum, nor does it buy petroleum, nor refined gasoline. and at the moment, El Salvador is not considering incorporating itself into Petrocaribe.
President of Costa Rica, the pragmatic center right politician Oscar Arias, was asked whether his government is considering joining Petrocaribe, given that the overriding vision to come out of the meeting was based on the need to look to the South for solutions to the devastating repercussions which the financial crisis may inflict on the region.
President Arias: Yes we are considering our incorporation into Petrocaribe. We consider [Petrocaribe] to be a very important project which permits countries that import petroleum from Venezuela access to generous credit over 25 years with 1% interest.
For many years Costa Rica's answer [to a potentially unstable global economy] was not to look to the South, but to look in all directions, to look to all continents and to diversify its market. The US is our most important economic partner. ... Central America is also an important partner. But our second most important partner is China. Once Central America finishes the negotiations of the association agreement with the European Union, our aim in Costa Rica is to start to negotiate a free trade agreement with China.