A Wasted Opportunity: Shortcomings of the Caribbean Basin Initiative Approach to Development in the West Indies and Central America

By Corbett, William P., Jr. | Law and Policy in International Business, Summer 1992 | Go to article overview

A Wasted Opportunity: Shortcomings of the Caribbean Basin Initiative Approach to Development in the West Indies and Central America


Corbett, William P., Jr., Law and Policy in International Business


Since it was proposed by President Ronald Reagan in 1982,(1) the Caribbean Basin Initiative(2) (CBI) has been a highly visible component of the United States' Western Hemisphere policy which, despite promises to the contrary, has yielded neither sustained economic development for the nations of the Caribbean and Central America nor significant profit opportunities for companies interested in investing in the region. It is also true, however, that the flaws of CBI are not of such a character as to have a negative impact on the economies of the region.(3) In fact, the Initiative has had a positive effect on certain economies that were particularly well-equipped to take advantage of it.[4] However, for the most part, the Caribbean Basin Initiative embodies a wasted opportunity for the United States to participate in the economic vitalization of its neighbors to the south.

U.S. policy motives in the Caribbean and Central America are manifold, including political and national security concerns, economic interdependence, and outright humanitarianism.(5) The Caribbean Basin region in particular forms the nation's "third border,"(6) and contains vital sea lanes, such as the Panama Canal, through which more than three quarters of the United States' oil imports must flow.(7) The Caribbean Basin is also a significant market for U.S. exports,(8) and it is our second largest source of illegal immigration after Mexico.(9) Prosperity in the region would enable the United States to safeguard these interests and reduce the unwanted incentives produced by narcotics production and transportation from or through the region.(10) Thus, it is of vital importance for the United States to assist in the economic revitalization of the Caribbean and Central America.(11)

CBI's reliance upon the invisible hand(12) of the marketplace is misplaced in a region possessing woefully inadequate institutions to support such a system. First, free trade, without the structural supports that must necessarily accompany it, is unlikely to have a substantial impact on the underdeveloped economies of most Basin nations. Second, although U.S. policy was originally motivated by a perceived need to maintain the hegemony between the United States and the threat of Communism, the United States has not shifted in its approach to capitalize on the demise of the Cold War. Third, although CBI was designed to stimulate business interests in the Caribbean region, the Reagan administration's confrontational foreign policy in Central America, where the bulk of CBI resources were concentrated, actually threatened the "restoration of investor confidence."(13) In sum, it appears that the emphasis on free trade manifested by CBI is not directed towards the objective of economic health of our underdeveloped neighbors to the south as was originally claimed. Rather, free trade itself has become the ultimate objective.

This Note will examine CBI as first conceptualized in 1982 and as subsequently modified. Next, the Note will identify the barriers that prevent Caribbean and Central American nations from achieving economic health and evaluate the effectiveness of the Initiative in dismantling these barriers. Finally, the Note will propose certain modifications for U.S. policy in the Caribbean region that will further the objective of sustained economic development.

Historical and Economic Background

Although historically impoverished,(14) the countries of the Caribbean and Central America have been particularly affected by the vicissitudes of the world oil market and declining prices of their traditional major exports such as sugar, coffee, and bauxite. This situation has exacerbated chronic structural deficiencies and has caused high unemployment, declining growth in gross domestic product, huge balance-of-payments deficits, and a growing liquidity crisis.(15) "This economic crisis threatens political and social stability throughout the region, and creates conditions which Cuba and others seek to exploit through terrorism and subversion. …

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