Magazine article Insight on the News

U.S. Profits by Inviting Latins to Join NAFTA

Magazine article Insight on the News

U.S. Profits by Inviting Latins to Join NAFTA

Article excerpt

The March 23 assassination of Mexican presidential candidate Luis Donaldo Colosio has cast doubts on America's partner in the North American Free Trade Agreement. On Jan. 1, the day NAFTA went into effect, there was an armed uprising in the southern province of Chiapas in which 145 people were killed. Last month, Alfredo Harp, one of Mexico's most prominent businessmen, was kidnapped. Bombs have exploded in Mexico City. And the economy, which boomed for the past five years, went off like a wet firecracker in 1993 as the Mexican gross domestic product grew a paltry 0.4 percent.

As Mexico awaits its Aug. 21 presidential elections, the United States should help it through continued trade liberalization and assistance in securing democratic reforms. Still, Mexico's troubles underscore the need to push NAFTA below the Guatemalan border.

By July 1, President Clinton must announce which countries next will enter NAFTA. Many expect him to invite Chile into the pact, with Argentina soon to follow. Opening NAFTA southward to Latin America would be a healthy move for those nations and the United States too.

Chile has been a model for its neighbors and even states as far away as Russia. After 17 years of Gen. Augusto Pinochet's dictatorship, the country is securely on the road to stable democracy. On Dec. 11, it held its second presidential election since Pinochet stepped aside in 1989. The ruling Christian Democratic coalition retained power after a competitive but peaceful campaign.

Even under Pinochet, Chile's free-market reforms led to nine straight years of expansion. Privatization and tax and tariff cuts produced annual growth averaging 7 percent since 1983, though this year's gross domestic product is forecast to rise just 4 percent.

Chile's acceptance into NAFTA would send its neighbors an important message. An invitation to Chile would be "a very good example for the other countries in Latin America," says Barbara Urzua of the American Chamber of Commerce in Chile. "They will say, |Look at what Chile did. If we get our act together, we eventually will have a free trade agreement with the U.S.'"

While Chile's stability, prosperity and market orientation merit its inclusion in NAFTA, questions remain about Argentina's fitness. It has slashed inflation (from 3,400 percent in 1989 to 7.7 in 1993), boosted its economy (growth has averaged 8 percent for the last three years) and bolstered its democratic institutions. …

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