Section 5. Latin America and the Caribbean
For Japan, the Latin American region connotes a special feature non-existent in other regions of the world because of the approximately 1.3 million Japanese descendants living there and the election of a Latin American president of Japanese descent. There have been three major developments in the region recently: the progress in democratization and stabilization, the reforms based on a market economy and the orientation toward regional integration.
1-1. Political Situation
The recent feature of Latin America's political situation is the progress and stabilization of democratization. Since the 1980s, in the Latin American region, changes in governments through elections participated in by multiple political parties have become the norm and most countries in the region now have democratic governments.
Of course, this process has not been simple. Reactive moves have been seen such as the capturing of the parliament by an armed group in Trinidad and Tobago in July 1990, the ousting of the government in Surinam in December with the involvement of the military and the unsuccessful coup d'etat in Haiti at the end of September 1991. Moreover, in some countries there are voices in the military expressing dissatisfaction over corruption and the inefficiency of the democratic government. However, these moves lacking public support, do not represent the majority and it can be said that democratization in this region has been generally secured.
Japan welcomes this development in democratization of Latin America. In order to promote it, Japan has extended not only economic cooperation but other various forms of cooperation as well. For example, other than financial cooperation to monitor elections, Japan dispatched surveillance officials to the presidential elections in Nicaragua in February 1990 and in Haiti in December 1990 and January 1991, as well as to general elections in El Salvador in March and Surinam in May. Furthermore, to support democratization and economic development in the Central American region where moves to achieve peace are notable, Japan is actively participating in the "Partnership for Democracy and Development (PDD)," which is a forum for coordination and communication among the Western industrialized countries of Japan, Europe, the United States and the Central American countries.
In foreign affairs, dialogue between the United States and Latin America is intensifying. From November to December 1990, President of the United States George Bush visited Mexico, Brazil, Uruguay, Argentina, Chile and Venezuela. Coupled with the U.S. announcement in June 1990 of the Enterprise for the Americas Initiative (EAI), this is a clear U.S. indication of its stance to attach importance to Latin America. Visits of Latin American leaders to the United States are also notable. Dialogue between the Latin American countries and European countries is also developing. In April 1991, the first Rio Group-EC Ministerial Conference was held, in addition to other various consultations.
Relations between Latin America and the Asia-Pacific region, including Japan, are also deepening. In May 1991, Mexico, Peru and Chile officially participated in the eighth plenary meeting of the Pacific Economic Cooperation Conference (PECC). Dialogue between Latin America and Japan is also proceeding through various fora including the two Japan-Rio Group Foreign Ministerial Conferences held in September 1990 and in September 1991.
1-2. Economic Situation
The Latin American economies in general declined somewhat in 1990 (the economic growth rate fell 0.5 percent compared with the previous year). Acute inflation, a special feature of the Latin American economy, has not seen an improvement and perennial inflation remains intact with consumer prices rising by 1,491.6 percent. In many countries economic stabilization policies to control inflation have been taken, forcing the economy to slow down.
The problem of the external debt of $420 billion has not substantially improved either. In particular, Brazil, the largest debtor country, failed to reach an agreement with a syndication of private banks and its negotiations with the International Monetary Fund (IMF) have also been delayed. On the other hand, the new debt initiative, or the so-called Brady Plan, which consists of a reduction in both the principal and interest payments, has seen progress and was applied to Uruguay in January 1991 in addition to Mexico, Costa Rica and Venezuela in 1990.
Economic Indicators of Latin America (1990)
Particularly notable in the Latin American economy is the favorable turn of the Mexican economy. In Mexico, aggressive economic structural reform policies, such as privatization, deregulation of foreign capital and improvement in government finances, accomplished effective results. The application of the Brady Plan for debt relief also improved the debt situation, and Mexico is beginning to restore credibility both at home and abroad. On the other hand, Brazil, which has the largest economy among the Latin American countries, continues to suffer from economic stagnation and protracted external debt negotiations, despite the serious efforts of the new government installed in 1990 to reconstruct its economy.
In the recent Latin American economy, the EAI and the intra-regional economic integration have become the major policy issues.
From a standpoint to promote positive support to Latin America, Japan announced in May 1991 its plan to contribute $100 million annually in cash and government bonds for five years to the multilateral investment fund of the EAI premised on the conclusion of a multilateral agreement and the required procedures including its approval by the Diet.
Moreover, from May to June 1991, Japan dispatched an economic mission consisting of more than 40 members from the private sector to Panama, Peru and the five countries in Central America.
1-3. Social Problems
Democratization in the Latin American region has been accomplished politically, but many social problems remain unsolved. The gap between the rich and the poor is one of the major factors of social instability and rectification of the problem is strongly desired. Human rights problems repeatedly emerged during the era of prevalent military dictatorship. But recently, along with the progress in democratization, investigations and trials resulting from human rights violations during the military dictatorship period are being held, paving the way for domestic reconciliations. On the other hand, in the process of investigating terrorist and drug crimes, there are indications that human rights of farmers are being violated.
On the drug problem, in 1990 and 1991 voluntary surrenders by top criminals of the Medellin Cartel in Colombia followed successively, reducing drug terrorism incidents, but no decreasing trend of drug smuggling itself is acknowledged. The drug problem is causing various problems such as crimes related to drugs, terrorism, economic chaos resulting from inflows of dollars acquired through drugs and development of the underground economy. It is a major impediment to the development of sound economic and social systems in addition to causing political instability of Latin America as a whole.
Under such circumstances, efforts of the Latin American countries to eradicate drugs and moves for international cooperation have become active in the region. Acclaiming these moves, the Government of Japan decided to make a financial contribution of $200,000 to the Inter-American Drug Abuse Control Commission (CICAD) of the Organization of American States (OAS) in fiscal 1991. Furthermore, the Government has also implemented technical cooperation, including the accepting of trainees to take measures against drug problems. In order to eradicate drugs, simple preventive measures are insufficient and agricultural development efforts to promote alternative crops are also important.
There are two types of environmental problems in Latin America. One is the deforestation of the tropical forests, including the Amazon, and the other is urban air pollution seen in large cities such as Mexico City and Santiago. As the United Nations Conference on Environment and Development (UNCED) scheduled for 1992 in Rio de Janeiro is approaching, interest on the Latin American environmental problems is mounting. Amid this trend, cooperation is being promoted under the international framework of the Amazon Cooperation Treaty in addition to various efforts of governments concerned regarding the Amazon tropical forest issue.
Japan has provided technical assistance in the forestry sector, including forestation in Brazil. Moreover, regarding the air pollution problem in Mexico, Japan has promoted cooperation in the form of ODA loans. It has also dispatched experts to Chile.
1-4. Movement toward the Regional Integration
The aggregate GNP of Latin America is three times that of ASEAN, and if integration is realized, its potential strength is believed to be substantially larger. From 1990 to 1991, calls for regional integration in Latin America have mounted and various moves have emerged.
Official negotiations for a Free Trade Agreement among the United States, Canada and Mexico started in June 1991, and a conclusion is sought by the end of 1992. In March 1991, the Asuncion Treaty, pledging to establish the South American Common Market (the MERCOSUR) by the end of 1994, was signed by Brazil, Argentine, Paraguay and Uruguay. The Andes Group, through a number of presidential meetings, decided to abolish the intra-regional tariffs and to establish a free trade zone by the end of 1991 and is making efforts to achieve that goal. Moreover, there are also moves to establish a free trade zone between Mexico and the Central American countries as well as among Mexico, Venezuela and Colombia. Furthermore, in the Caribbean Community, revitalization efforts are being promoted. The ultimate goal for the EAI, which the United States is advocating, is the formation of a Western Hemisphere Free Trade Zone.
On political integration, Bolivia, Paraguay, Chile and Ecuador joined the Rio Group in October 1990, increasing the weight of the Group as a political consultative organization. In the OAS, various efforts for reactivation are also being made.
Initially, regional integration of Latin America gained momentum from the 1960s to the 1970s when many organizations were created. But the move for integration subsided in the 1970s. In the 1980s, when many countries were suffering economic difficulties, the momentum was clearly lost. Because of the failure in industrialization and of the conflict of interest among the participating countries resulting from the gap in economic development stages, the efforts for integration did not bear fruit as initially expected. At present, however, prompted by moves for the EC integration in 1992 and the U.S. plan to conclude the free trade agreement, momentum for an integration is re-emerging. This trend is expected to promote extra-regional economic exchanges including trade and investment and eventually contribute to the economic vitality of the region.
1-5. Position of Latin America for Japan
The Latin American region is not only an important supplier of raw materials, but it also plays the role of a market for Japanese products. Japanese trade with the region is expanding both in imports and exports. In 1990, exports totaled $10.29 billion and imports $9.851 billion. Of the exports, 93 percent was in heavy and chemical industrial goods, and of the imports, 96.1 percent was in foodstuffs and industrial raw materials (on a customs clearance basis). Direct investment in Latin America in fiscal 1989 was $5.2 billion (Ministry of Finance statistics), accounting for about 8 percent of the total Japanese overseas investment. This makes Latin America the fourth largest recipient of Japanese investment, following North America, Europe and Asia.
Japan highly evaluates the progressing democratization and reforms based on the market economy that are taking place in Latin America and is actively providing various forms of cooperation. Japan's ODA to the Latin American region in 1989 was about $563 million, the third largest after the United States and France. This amount accounts for 8.3 percent of Japan's total ODA.
In addition to these fields, relations between Japan and Latin America are growing closer. Reflecting the mounting interests and expectations by the Latin American countries toward Japan, visits by high-ranking officials from the region continue. The heads of states and a large number of other officials from Latin America attended the Enthronement Ceremony of Emperor Akihito in November 1990. Moreover, from April 7 to 9, 1991, the Inter-American Development Bank Annual Meeting was held for the first time in Japan, in Nagoya, which President Alberto Fujimori of Peru and many Latin American finance ministers and economic ministers attended.
It can be said that a timely opportunity has arrived to further strengthen relations between Japan and Latin America.
2-1. Brazil
President Fernando Collor, since taking office in March 1990, has coped with the major task of stabilizing the economy centering on curbing inflation, but is yet to accomplish his goals. The inflation rate in 1990 was 1,795 percent, and the economic growth rate was -4.6 percent. This was caused by the prevalent concern for inflation among the people and the decreased investment as a result of measures to restrain liquidity such as the freezing of deposits.
Solving the external debt problem is proving to be tough. While negotiations with the private banking syndication reached an agreement in principle in April 1991, the protracted negotiation on the conditions of the delayed interest payments and other details have further delayed the agreement with the IMF. Amid this climate, President Collor in June 1991 ousted Economic Minister Zelia Cardozo, who had taken a strong stance in the debt negotiations and replaced her with Marcilio Moreira, the Brazilian Ambassador to the United States.
On foreign affairs, President Collor has taken a stance of placing importance on dialogue with the United States. When he visited the United States in June 1991, he signed the Rose Garden Agreement which provides a framework related to the free trade between the United States and South American Common Market countries, including Brazil. Moreover, in November 1990, a joint declaration (Iguazu Declaration) was announced with Argentine.
Relations with Japan continue to be favorable and in September 1990, Foreign Minister Francisco Rezek visited Japan. Some 1.2 million Japanese descendants, the largest overseas Japanese population in the world, live in Brazil and due to the sluggish Brazilian economy and the revision in the Japanese immigration law (enacted in June 1990), the number of Japanese Brazilians working in Japan has increased.
2-2. Mexico
President Carlos Salinas de Gortari took office in December 1988 and has been promoting active and constructive domestic and economic policies. As a result, notable progress is emerging.
Domestically, President Salinas has taken measures to eradicate corruption, amend the election law and control urban air pollution. The Institutional Revolutionary Party, the Government party, won by a majority in the mid-term election held in August 1991.
On economic policies, in addition to succeeding in improving the external debt situation through the application of the New Debt Strategy, as a result of the efforts to restructure the domestic economy through such means as liberalization in trade, deregulation on foreign capital and privatization of public companies, the inflation rate subsided (29.9 percent in 1990) and the economic growth rate turned upward (3.9 percent in 1990), prompting a recovery of confidence in the Mexican economy both at home and abroad.
On foreign affairs, Mexico places importance on its relations with the United States and is attempting to vigorously promote cooperative relations with the Asia-Pacific countries. In particular, in June 1991, official negotiations started to conclude the North American Free Trade Agreement among the United States, Canada, and Mexico. Moreover, in May, Mexico became a member of the Pacific Economic Cooperation Conference (PECC).
The Government of Japan is watching carefully and at the same time supporting the economic reconstruction and reform efforts of the Salinas Administration. Moreover, in May 1991, the first meeting of the Japan-Mexico 21st Century Commission was held in Tokyo, which began discussions on a desired form of long-term relations between Mexico and Japan.
2-3. Argentine
President Carlos Saul Menem is promoting external policies of international cooperation and reforms for an open and free economy including privatization. While still suffering from those problems such as economic recession and fiscal deficit, the political and economic situations have been relatively stable.
On the external debt problem, which amounts to about $64.7 billion, the government has maintained cooperation with the IMF and at the same time, resumed partial payments of interest to the private bank syndication in June 1990.
On foreign affairs, Argentine cooperated with the multinational forces by sending naval ships during the Gulf Crisis, and the United States lauded Argentine's cooperation. Moreover, in June 1991 the government signed the Rose Garden Agreement and is making an effort to strengthen her relations with the industrialized countries, forging closer economic relations with Japan and the EC. On arms control, its policy to participate in the international nuclear non-proliferation system was made clear as a result of concluding the Iguazu Declaration with Brazil in November 1990. And in May 1991, it announced its pledge to adhere to the Missile Technology Carrier Regulation (MTCR). Japan, based on its stance of strengthening the non-proliferation of missiles and weapons of mass destruction, welcomes these policy measures.
On relations with Japan, Mr. Yoshihiko Tsuchiya, Speaker of the House of Councillors, visited Argentine in July 1990, and in May 1991, Their Highnesses Prince and Princess Takamado visited Argentine. President Menem attended the Enthronement Ceremony of the Emperor. Furthermore, in order to cooperate with Argentine which is endeavoring to utilize its large potential growth power based on its enormous territory and abundant natural resources, the Japanese Government is providing ODA centering on technical assistance. At the same time, the Japanese Government has supported private economic exchanges such as the Japan-Argentine joint economic committee meeting held in September 1990.
2-4. Peru
The newly inaugurated administration of President Alberto Fujimori in July 1990, amid serious economic and social difficulties, is endeavoring to reduce inflation and eliminate fiscal deficits. To do so, it implemented various stabilizing measures such as a hike in public utility fees and gasoline prices, abolition of the price control system and restricting issuance of currency. As a consequence, Peru accomplished fairly satisfactory results of holding inflation to a monthly increase of less than 10 percent since September and a balanced budget. At the same time, under the cooperation of the IMF and the World Bank, the Government of Peru has implemented a structural adjustment policy. Externally, it has endeavored to return to the international financial world and has resumed debt repayments to the World Bank and the Inter-American Development Bank (IDB).
At the same time, Peru has asked international financial institutions and major industrialized countries to organize an international support system for the country. The Fujimori Administration, which does not have a powerful supporting party, relies on public support for its mandate. For this reason, revitalization of its economy by introducing new money has become necessary.
The Fujimori Administration is strengthening its policy to face extreme leftists by force, such as providing weapons to self-guard groups made up of farmers as an anti-terrorism measure. But terrorist crimes still persist, becoming a major cause of social unrest. Quite regrettably, the Vegetable Cultivation Technique Center in Huaral, one of the projects supported by Japanese economic cooperation, was attacked by terrorists in July 1991, with three Japanese experts shot to death.
On foreign affairs, in May 1991, Peru signed a long-standing anti-drug agreement with the United States. Through this agreement, increased economic assistance from the United States to Peru is anticipated.
Japan highly evaluates the economic policies of the Fujimori Administration, and provided $3.5 billion in grant aid to support Peru's structural adjustment efforts in fiscal 1990, as well as dramatically expanded grant aid cooperation to Peru. Moreover, in April 1991, Prime Minister Toshiki Kaifu conveyed to President Fujimori, who was visiting Japan to attend the Annual Meeting of the Inter-American Development Bank in Nagoya, Japan's intention to actively cooperate toward the early establishment of an international support system for Peru.
2-5. Cuba
Amid the tide of democratization permeating Latin America, Cuba continues to adhere to the revolutionary socialist line and takes highly ideological foreign policy as seen in its deep involvement with the Central American conflicts.
However, in recent years, with the improvement of relations between the United States and the Soviet Union, and reflecting the political changes in Central and Eastern Europe and the Soviet Union, the trend of Cuban isolation has become conspicuous. Moreover, with diminishing trade relations and assistance from the Soviet Union and the Central and Eastern European countries, economic difficulties are becoming acute, making the Cuban moves a destabilizing factor in the Caribbean region.
The Castro Administration declared a "special period in peace time" amid the dramatically changing climate surrounding Cuba. Cuba has tightened its domestic economy to overcome its predicament and at the same time has endeavored to extricate itself from isolation by expanding relations with China, North Korea and Latin American countries. The Fourth Communist Party Congress, which was held in October 1991, for the first time in five years, resulted without any major changes of the traditional lines, confirming "the adherence to the Communist one party system" and "the refusal of the introduction of a market-oriented economy."
While Japan wishes for Cuban reforms toward democratization for the stability of Latin America and the Caribbean, as well as for the country to improve its relations with the United States, the accumulated Cuban debt problem with Japan leaves bilateral relations stagnated.
2-6. The Central American Countries (Nicaragua, El Salvador)
In the Central American region, the five democratic governments are established for the first time in the history of this region with the inauguration of the government of President Violeta Barrios de Chamorro in April 1990. Progress toward peace in Central America was also seen in peace negotiations in El Salvador and Guatemala.
The Chamorro Administration of Nicaragua overcame the political instability resulting from major strikes provoked by the unions affiliated with the Sandinistas in May and July 1990 and accomplished substantial success in bringing about peace domestically by reducing the military forces (from 80,000 to 28,000) and disarming the Contra guerrilla groups (about 20,000) that stood against the Sandinistas. On the other hand, the economic situation continues to be strenuous, as seen in the inflation rate of more than 13,000 percent (estimate in 1990), and the economic growth rate of -5.7 percent, despite efforts of the Nicaraguan Government. However, in March 1991, as a result of the introduction of a new economic policy with monetary reform as the main pillar, the sharp inflation began to recede. Moreover, the problem of Nicaragua's arrears ($360 million) to international financial institutions is now ready to be solved by the establishment of an international cooperation mechanism with the assistance of Japan and of other countries.
From the standpoint that an improved living standard and an early recovery of the economy are vital to the stability of Nicaragua, Japan is providing ODA to the country. Specifically, Japan extended an ODA loan amounting to $70 million to clear Nicaragua's arrears to international financial institutions, and already provided grant aid exceeding \3.4 billion after the Chamorro Government had started. Moreover, as for the technical assistance, Japan increased the number of trainees from Nicaragua and dispatched specialists as well as members of the Japan Overseas Cooperation Volunteers.
In El Salvador, amid the dramatic progress made toward peace in Central America, great strides were made in peace negotiations intermediated by the United Nations between the government and the Farabundo Marti National Liberation Front (FMLN). Various arrangements to fulfill the conditions for a cease-fire were made, including the agreement on human rights in July 1990, the Mexico City Agreement on the Constitution in April 1991, the establishment of the United Nations Observer Mission in El Salvador (ONUSAL) in May 1991 and the New York Agreement under the mediation of the United Nations Secretary-General Javier Perez de Cuellar. Through this process, the conditions toward a cease-fire have been gradually settled and the final talks will be held on the dissolution of the FMLN and the reform and purification of the government military forces. Japan is not only making active financial and human resource contributions through the United Nations for the peace of Central America, but is also providing ODA for the economic development and stability of El Salvador.