Section 4. Latin America


1. Overall Internal and External Situation


(1) Overview

The 1980s have ushered in a drastic change in the political climate of Latin America where a conspicuous tide of democratization effected a shift of political power from military to civilian rule. Nearly all the countries have been democratized and constitutional transfer of political power has become commonplace. On the economic front, however, almost all Latin American countries have run up enormous debts despite a number of international efforts made over the accumulative debt problem which emerged in 1982. They are faced also with problems, such as accelerated inflation and growing budget deficits. The economic uncertainty has posed social unrest leading to a Venezuelan riot in February 1989 (about 300 people killed) and the invoking of martial law in Argentina in May 1989. The economic problems came to affect also the political picture as was evidenced by the growing popular support given to leftist political parties advocating a hard-line policy over the external debt issue. The situation demands careful watching particularly with regard to its impact on the democratization trend which had just begun to take root.

As for their external relations, there are indications that the countries seem eager to forge multilateral economic and foreign ties rather than the traditional way centering on relations with the United States, and to unify the Latin American region. Behind this trend are, in the area of economy, an absolute need for the cooperation of not only the U.S. but also other countries and international organizations in solving their debt issue, and a relative decline of U.S. economic influence. With regard to diplomatic relations, there is a divergence of views between the U.S. and Latin American countries on some issues including Central American and Panamanian problems. More basically, there is a growing interest among Latin American countries in Japan and elsewhere in Asia in addition to the U.S. and Europe with which they have hitherto had close links.


(2) Moves Toward Democratization

Since the beginning of the 1980s, there has been a marked trend toward democratization in Latin America. Elections of presidents and prime ministers were held in many of the countries in 1988 and 1989, putting democratization in the region to a real test. In Argentina and Bolivia, which held presidential elections in 1989, these elections took place for the first time in 61 and 25 years respectively upon the expiration of the terms of their popularly elected presidents. In Paraguay, the Stroessner regime, in power for nearly 35 years, was ousted in a February 1989 coup and a democratic election followed in May. But the Panamanian presidential election was declared invalid in May 1989. These developments indicate that Latin America as a whole is still in a transitory stage of democratization.

Coupled with the economic instability mentioned in the foregoing, some of the countries are faced with deteriorating public order due to terrorism, the problem of drugs and other social problems. Dealing with these problems is another important task that must be accomplished to stabilize the democratic system and political administration.


(3) Central American Disputes

In 1979, the Sandinist regime was established in Nicaragua replacing the Somoza dictatorship. Later the Sandinist government inclined sharply to the left and the country was plunged into civil war between the Sandinist government and the anti-government Contras. This civil war is at the core of Central American disputes with Cuba and the Soviet Union supporting the Sandinist government and the United States behind the Contras. Meanwhile, the Nicaraguan revolution added fuel to a civil war in El Salvador fought between the government and anti-government guerrillas. The Guatemalan Peace Accord was signed in August 1987, thanks to the efforts of Latin American countries concerned. Pursuant to the accord, a provisional cease-fire agreement was concluded in Nicaragua in March 1988. After that, the hostilities ended for all practical purposes, but the talks for a full-scale truce remained unproductive stalling the moves for peace in Central America. In February 1989, however, the presidents of the five Central American countries met in El Salvador and agreed on a peace framework drafted with the participation of the Untied Nations. Under the agreement, a security verification mechanism is to be established and the Central American countries are to jointly draw up repatriation and resettlement plans for the Contras. Also under the agreement, the Nicaraguan government will hold a general election in February 1990 and accept observers from the United Nations, the Organization of American States and other organizations.

Futhermore, on the basis of its bipartisan concensus, the United States came out with a new policy that would limit aid to the Contras to humanitarian aid and seek settlement of the disputes through peaceful means. The Soviet Union, for its part, announced it would end arms aid to Nicaragua from the end of 1988. With these improvements of the situation in place, the forthcoming Nicaraguan general election is being viewed as a key factor in materializing overall Central American peace.

Meanwhile, civil wars in Central America have resulted in some 2 million refugees and displaced persons accounting for 10% of the region's total population. Grappling actively with the refugee problem in the region, Japan sent its delegation to the International Conference on Central American Refugees held in Guatemala in May 1989. Japan is also to examine financial and personnel support to the United Nations-led security mechanism and the election surveillance in Nicaragua. Japan desires to extend reconstruction and development assistance when genuine peace becomes a reality in the region.


(4) Debt Issue and Economic Situation

(a) Latin American countries have accumulated debts equivalent to four times as much as their annual exports or to about 60% of their gross national product. In spite of interest payments totaling $150 billion to $200 billion the countries made between 1982 and 1988, their oustanding debts actually rose by $109.3 billion to total $442.5 billion at the end of 1987.

As the amount of their debts grew year by year, these debtor countries became increasingly aware of the need to solve the issue through international coordination. For example, Brazil which had imposed a moratorium on commercial bank interests adopted a policy of international coordination in January 1988.

At its second summit in October 1988, the Rio Group underscored the need for dialogue with industrialized countries. As for creditor countries, the United States advanced a new debt strategy calling for reduction of debts in March 1989. The implementation of the strategy is being promoted with support from Japan and other countries.

(b) Statistics of the United Nations Economic Commission for Latin America and the Caribbean showed that Latin America's gross domestic product growth rate fell to a low 0.7% in 1988 from 2.5% in 1987 while its inflation rate surged to 470% from 200%.

The region's exports rose 15% in 1988 thanks to hikes in non-energy primary products prices and increased exports by some countries, pushing its trade surplus up from $21.8 billion in 1987 to $27.8 billion. This trade surplus, however, was accompanied with interest payments of external debt which totaled $33.2 billion in 1988.

Latin America's external debts accumulated at the end of 1988 are estimated to have declined somewhat from a year earlier to $401.4 billion due to reduction in new borrowing, debt-bond swapping in each country and other efforts.


Debts of Major Latin American Debtor Nations


(5) International Relations and Regional Integration

International relations of Latin American countries are seen diversifying.

The transfer to civilian rule in the region has led to moves to mend ties with communist countries, as evidenced by the restoration of normal relations between Brazil and Cuba in 1986 and inauguration of diplomatic relations between Uruguay and China in 1988. In and after 1986, presidents of Argentina, Uruguay and Brazil paid their first visits to the Soviet Union in stepped-up moves to build closer relations with the communist country.

The Soviet Union for its part has geared up its Latin American diplomacy since General Secretary Mikhail Gorbachev took office. Gorbachev visited Cuba in 1989, the first visit by any Soviet leader to Latin America.

Meanwhile, Latin American countries are moving toward promoting closer ties also with Asian-Pacific countries with which they hitherto lacked intimate relations, paying attention to the high economic growth of Japan and Asia's newly industrializing economies (NIEs).

Despite differences of views with Latin American countries over the Central American disputes and some other problems, the United States has maintained generally friendly relations with those Latin American countries where democratization is well under way. For instance, the United States acted in concert with Latin American countries in May 1989, regarding the problem of the Panamanian presidential election within the framework laid down by the OAS. On the other hand, the United States has criticized some Latin American countries for setting back democratization or for inadequate drug control measures.

The Rio Group, a permanent political consultation organization representing Brazil, Mexico, Argentina and five other countries, has been playing an active role in promoting the integration and unity of Latin America. The group held its second summit meeting in Uruguay in November 1988 and discussed the integration of the region, the external debt issue, the Central American disputes and other matters. Moves by the Rio Group, which announced a joint proposal on the debt issue, have been viewed as independent activities of Latin America. Through these activities, the organization is gradually making its presence bigger throughout the international community.


2. Situation in Major Latin American Countries


(1) Brazil

(a) Amid a tide of democratization there was promulgated in October 1988 a new constitution which upholds such characters as strengthened nationalistic overtone, stepped-up protection of human rights, stronger authority of the legislature and stricter foreign capital regulations. In the nationwide mayoral elections held in November 1988, the leftists achieved good results, reflecting the people's discontent with deteriorating living standards due to runaway inflation.

(b) Brazil's diplomacy has continued to be characterized by traditional realism and diversification. While promoting friendly and cooperative relations with Japan, Brazil has stepped up exchanges with communist countries as well. With the United States, friction over the information industry and intellectual property rights has become pronounced.

(c) Brazil's gross domestic product suffered a 0.28% fall in 1988 and the inflation rate surged to 934%, while registering a trade surplus of $19 billion, the third largest in the world after that of Japan and West Germany. The percentage of manufactured products in total exports has increased year by year reaching 71% in 1988. In January 1989, prices and wages were frozen to restrain inflation, but the measure has proved unproductive. As the freeze has been successively adjusted since March, the inflation rate has been deteriorated gradually.

As regards the debt issue, Brazil is following a policy of international coordination. At the end of 1988, however, the International Monetary Fund suspended loans to Brazil because it failed to live up to its economic targets. Negotiations on this matter are under way between the IMF and Brazil .


(2) Mexico

(a) Ex-Planning and Budget Minister Carlos Salinas de Gortari of the ruling Institutional Revolutionary Party (PRI) was elected president in July 1988, and took office in December. In his inaugural address, the new president called for expansion of democracy, rehabilitation and stabilization of the economy as well as improvement of national welfare as his priority policy targets.

Domestically, President Salinas encroached on what had been regarded as sanctuaries by his predecessors. The president aims at reorganizing labor unions, by having leaders of petroleum industry workers' unions arrested and teachers' union leaders asked to resign, ending structural corruption and positively enhancing the country's process of democratization.

Externally, the Salinas Administration stands for promotion of smooth relations with the United States and multilateral diplomacy based on realism. The government has made it known that it gives priority to promoting cooperative relations with Japan.

(b) The external debt is the predominant economic problem facing the country, which has energetically negotiated with creditors in an attempt to reduce its debt burden. Thus far, progress has been made toward materialization of the new debt strategy through the efforts such as the World Bank and IMF loans, and the Paris Club accord. The Mexican economy suffered in 1988 from declining oil prices and other unfavorable factors, which caused a sharp deterioration of its international balance of payments compared to 1987.

Internally, the fight with inflation has met a measure of success. Giving top priority to economic growth without inflation, the new government has announced an economic stability and growth agreement calling for a continued clampdown on public utility charges, step-by-step devaluation of the Mexican currency and other measures. It is to remain valid till the end of March 1990.


(3) Argentina

Carlos Menem of the opposition Peron Party was elected president with the support of labor unions in May 1989, against the backdrop of a sharp economic setback, and took office July 8. The transfer of power through an election has been viewed as a sign of successful democratization in Argentina.

On the other hand, destabilizing factors to its democratic system still exist as indicated by a military revolt in December 1988, staged by some troops displeased with the continuing human rights trials as well as a shop looting incidents amid rapid price rises in May 1989.

In the area of the economy, lagging structural reforms and unrest stemming from the presidential election caused such difficulties as a freefall of the Argentine currency value and the worst ever inflation. Under these circumstances, talks with the IMF on the debt issue had rough sailing and debt-service payments have been suspended since April 1988. It remains to be seen if the Menem government will be able to firmly maintain an international coordination policy.


(4) Panama

A new government came into being in Panama in February 1988. But the United States seeking to promote pro-democracy movements in Panama, with the return of the Panama Canal scheduled for the end of this century, has refused to recognize the new government. The United States has been imposing such measures as economic sanctions on Panama to date in a bid to oust and expel from the country Gen. Manuel Antonio Noriega, who is a major obstacle to U.S. policy.

A presidential election was held on May 7, 1989, in the presence of observers from the United States and other countries. As ballot counting was being delayed far behind schedule, however, violence erupted injuring an opposition candidate and other people. The Election Management Commission declared the election void on May 10 on the ground as of political parties' illegal acts as well as outside intervention.

Many countries issued statements denouncing the developments: the United States resorted to a series of measures including recall of its ambassador and reinforcement of U.S. troops in Panama. Meanwhile, the OAS has organized a mission consisting of the Foreign Ministers of Ecuador, Trinidad and Tobago, and Guatemala and has been making diplomatic efforts to solve the Panamanian issue. Close attention is being paid to the response of other Latin American countries as well as the United States, and negotiations within Panama.


3. Relations with Japan


(1) Overall Relations

(a) Japan has traditionally had friendly and cooperative relations with Latin American countries. These countries had tended to orient themselves toward Europe and the United States due to their geographical, historical and cultural proximity. But as Japan's role in the international community has grown significantly in recent years, Latin American countries have greatly increased their expectations of and interest in Japan. This is demonstrated by the increased support they have been giving Japan at the United Nations and other international forums. Japan, for its part, has been mounting vigorous diplomatic efforts with Latin America, including promotion of political dialogues, active exchange visits and broadening of economic cooperation.

In September 1988, Foreign Minister Sousuke Uno visited Mexico and attended the ceremony meeting marking the centennial of friendly relations between the two countries. From Latin American countries, more than 30 leaders of ministerial rank visited Japan in 1988, attesting to their growing expectations of Japan.

(b) Under its capital recycling program, Japan has decided to recycle up to $4 billion to Latin American countries out of $12 billion for bilateral recycling. Aid commitments under the program reached some $2,352 million to Latin American countries by June 1989. As Latin American countries are keenly interested in the capital recycling program, its smooth implementation and follow-up have become an extremely important task.

(c) The scope of Japan's relations with Latin America, which had previously centered on the economic sector, has been expanded to include stepped-up exchanges also in the fields of culture, science and technology. One prominent performance in this direction is the Latin America Festival held from September to November 1988, with the support of the government and private sectors. Keyed to the Oct. 12 Columbus Day to mark Christopher Columbus' discovery of the American continent, this highly successful festival included sports, music, art and other cultural events intended to acquaint the Japanese public with Latin America. The festival has demonstrated a new direction of future relations between Japan and Latin American countries.

(d) Citizens of Japanese ancestry and Japanese immigrants in Latin America total almost 1.3 million. Having earned a good reputation through hard work, they have taken an active role in government and the business community in Latin American countries. Some of the Japanese-Latin Americans have been appointed as Cabinet ministers in Brazil and Mexico. They have recently increased their interest in Japan and a growing number of them are visiting this country. Latin Americans of Japanese ancestry and Japanese immigrants are expected to continue contributing as a bridge between Japan and Latin America to the promotion of mutual understanding.


(2) Economic Relations

(a) Japan has taken various steps to promote economic exchange with Latin American countries in meeting their huge expectations for economic cooperation with Japan to revitalize their economies.

A number of Japanese economic missions went to Latin America. In April 1989, the government and private sectors held a joint meeting in Venezuela for the first time in 17 years. On the other side, many Latin American economic ministers and missions have visited this country seeking more aid, investments and increased export to Japan, which show their growing expectations of Japan.

(b) Japan's imports from Latin America in 1988 rose 30.8% from the previous year to total $8.3 billion and its exports to the region were up by 6.1% to total $9.3 billion. While Japan's trade with Latin America has thus been on the upward trend, its direct investment accumulated in the region totaled $31.6 billion at the end of March 1988, accounting for 17 percent of Japan's overall overseas investment. This amount made Latin America Japan's third largest investment destination after North America and Asia.


(3) Environmental Problems 

Latin American countries suffer from a variety of environmental problems ranging from air pollution in Mexico and Chile to the depletion of Amazon forests in Brazil as well as destruction of the natural environment and urban pollution. Aware of the seriousness of these hazards, Japan sent an environmental survey mission to Mexico and Brazil in June 1989.


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