editorial at/@
tortillaconsal punto/dot com
by Karla Jacobs, December 11th
On December 5th the XXXIII Presidential Summit of the Central American Integration System (SICA) took place in San Pedro Sula, northern Honduras. The main purpose of the summit was to discuss the impact of the international financial crisis on the region and approve a plan of urgent measures aiming to reduce the damage caused by that crisis.
Also during the summit a 59 point declaration was signed by the regional heads of state and government representatives. The declaration includes agreements as diverse as : the continuation of the negotiations of a Central American Water Convention, the creation of a statistic commission as part of the SICA institutional framework, the creation of a special group to study the viability of an interregional rail network and the decision to request SICA's Executive Committee to carry out an analysis of the regional migrant protection program.
The Presidents that took part in the meeting were Guatemala's Alvaro Colom, El Salvador's Elias Saca, Honduras' Manuel Zelaya and Nicaragua's Daniel Ortega. Belize was represented by First Minister Gaspar Vega, Panamá, by Vice President Samuel Lewis and Costa Rica, by Minister of External Commerce Marco Vinicio Ruiz. The Dominican Republican, which is an associated member of SICA, was represented by Vice President Rafael Albuquerque.
Also present at the summit were representatives of SICA's observer countries Germany, Spain, Italy, Taiwan, Argentina, Chile, Brazil and Mexico as well as representatives of the Central American Parliament, the Central American Court of Justice and the Central American Economic Integration Bank (BCIE) among other institutions that form part of SICA's institutional framework.
During the conference Honduran President Manuel Zelaya handed over SICA's rotating presidency to Nicaraguan President Daniel Ortega. As is the organization's tradition, Ortega will hold the presidency for a period of six months. At a press conference after the summit Ortega emphasized the need to reinforce existing regional integration mechanisms and create new ones as part of the "only possible solution to Central America's problems" which he described as "the unity of our peoples."
Financial crisis is already affecting Central American economies
At a previous SICA Presidential Summit which took place on October 4th earlier this year the region's presidents instructed the Department for Central American Economic Integration (SIECA) (made up of the Council of Economic Ministers, the Central American Monetary Council and the Central American Economic Integration Bank, BCIE) to work together to come up with a plan of action which would reduce the potentially devasting effects of the international financial crisis. The finished plan entitled, "Plan of Urgent Measures to Reduce the Impact of the International Financial Crisis" was presented at the December 5th summit and approved by the heads of state.
It is expected that the worst of the global crisis on Central America's small economies will begin to be felt forcefully in 2009. Although, as the authors of the plan point out, "the financial crisis has already begun to affect the real economies of developing countries. ... The economies of the [Central American] region are experiencing slowing rates of growth due to reductions in exports, family remittances and tourism. Additionally the productive sectors in Central America have limited access to credit." The region's main disadvantage considering the current international financial context is that the US is its most important trading partner.
The main aims of the recommended measures are, to increase employment, to activate mechanisms that provide incentives to agricultural producers, to strengthen inter-regional commerce and to encourage investment in infrastructure. These measures are very similar to programmes proposed both by the Chinese and United States governments to address the crisis in their respective countries. The underlying objective is to increase demand in the economy via productive investment that will minimize the risk of damaging inflation.
Urgent Measures recommended
SIECA recommends that the region's Central Banks : maintain prudent monetary policies; use available mechanisms to provide liquid funds to the national financial systems; increase, strengthen and systematize communication with the general public about the financial situation, inflationary perspectives and the financial policies being adopted; look to guarantee the continuity of lines of credit with regional and international organizations.
The BCIE, meanwhile, was recommended : to increase the speed at which the "Program of Support for Inter-Regional Commerce, Financial Institutions, the Agricultural Sector and Infrastructure" is being carried out; to design a program of credit for and construction of social housing for the region; increase the speed at which the program of Industrial Modernization is carried out; and arrange for the trading of debt subordinated with multilateral organizations and / or current partners of the BCIE to take place with the aim of strengthening the capacity of the bank to fund and support diverse activities within the region.
Twelve further general recommendations were made. These included: strengthening the process of regional economic integration (by, among other things, coordination of productive policies and consolidation of a regional customs union); support to productive sectors, particularly small and medium sized businesses, both urban and rural, with direct credit, access to training and technology; stimulating food production and consumption so as to ensure food sovereignty in the region; reducing costs of commercial transactions at regional border points so as to increase inter-regional trade; giving immediate priority status to investment in infrastructure to facilitate commercial activities, especially rural roads; creating a Common Fund of Economic and Financial Credit for the development of the region; promoting activities and programs which facilitate the reincorporation of migrants into national economies.
Central America likely to align with other emerging integration initiatives
During the summit the BCIE was urged to look for additional funds and lines of credit given its failure, as yet, to provide the US$400 million for each member state requested at the previous SICA summit in October so as to ensure liquidity in the region's financial systems. According to Guatemalan President Alvaro Colom, the BCIE is obliged to look to non-traditional sources of fundings given that the World Bank and the International Monetary Fund (IMF) have been unable to provide necessary lines of credit. It is likely the BCIE will look to emerging banks like the ALBA bank, Banco del Sur and other financial institutions linked to emerging international powers for alternative sources of funding.
Certain aspects of both the declaration and the plan of urgent measures which came out of the SICA summit suggest that the Central American region is indeed preparing to make moves towards strengthening links with other emerging regional integration initiatives. The decision to strengthen commercial and other relations with both the Caribbean Community (CARICOM) and the Union of South American Nations (UNASUR), for example, was stated in the final declaration.
It is possible that the SICA countries will decide to form monetary and financial alignments with ALBA along the lines of the the latter's proposed virtual common currency, the SUCRE, for cross-border trading. Pedro Páez, the Ecuadorian Minister for Economic Policy, attended the summit as a special invitee of President Manuel Zelaya so as to present the Ecuadoran government's proposed Latin American Currency Agreement. This proposal constitutes an attempt to recuperate financial and monetary sovereignty in Latin America. The proposal was first presented at the last ALBA summit in Caracas in November.
Although the SICA has made no formal announcement about the possibility of implementing such a move, Páez' presentation was greeted with great interest by the officials taking part in the San Pedro Sula summit. In the final declaration the SIECA was instructed to carry out a study into the implications of a regional common currency.
Possible role of SUCRE currency innovation
It is interesting to note that a joint ALBA-PETROCARIBE summit is being planned for the first trimester of 2009 to discuss an appropriate regional response to the international financial context. All SICA countries except El Salvador and Panama are members of PETROCARIBE, the Caribbean region's energy integration initiative. Costa Rica's membership should be ratified by the end of this year. It seems more than likely that during the joint summit meeting the ALBA country leaders will propose that the SUCRE be used for trading within PETROCARIBE.
This may well be as significant a proposal as Russia's proposal to its Euorpean trading partners that Russian oil and gas be paid for in euros rather than in dollars. Another example of an important regional effort to escape the dollar's inflationary kiss of death is the recent agreement by Argentina and Brazil to trade in their own local currencies rather than in dollars. The SUCRE may well fulfill a currency stabilization role for the ALBA countries of Latin America and the Caribbean.
With the current instability and volatility of the international economy it is impossible to predict future economic events and institutional reactions in Central America, or anywhere else in the world. With Daniel Ortega at the head of SICA for the next six months, however, what one can anticipate are decisive moves towards greater institutional consolidation of Central American unity. Considering Ortega's and other SICA presidents' express commitment to regional integration, we are also likely to see SICA maximize existing links with other regional integration initiatives as part of an attempt to finally break free from damaging economic and commercial moulds which have been imposed on the region by European and North American governments for as long as anyone can remember.