How “Good Regulatory Practices” In Trade Agreements Erode Protections For The Environment, Public Health, Workers And Consumers

The following article by Bert-Jaap Verbeek in the Dutch SOMO publication is based on Stuart Trew’s report for the Canadian Centre for Policy Alternatives (CCPA) entitled ‘International Regulatory Cooperation and the Public Good’ published on 22 May 2019. It came to our notice through the daily online news from ; we are grateful to all for their permission to reproduce Bert-Jaap’s article here.

Key words: CETA; trade treaties; TTIP; USMCA; precautionary principle; good regulatory practices; the public good.

By Bart-Jaap Verbeek,        

May 24, 2019

How “Good Regulatory Practices” In Trade Agreements Erode Protections For The Environment, Public Health, Workers And Consumers2019-05-242019-05-24

Seven NGOs, including SOMO, have released a new report that focuses on the significant threats to precautionary environmental, labour, consumer and public health policy from regulatory cooperation and “good regulatory practices” chapters within the EU-Canada Economic and Trade Agreement (CETA), US-Mexico-Canada Agreement (USMCA), and the currently parked EU-U.S. Transatlantic Trade and Investment Partnership (TTIP).

“Regulatory cooperation and Good Regulatory Practices provisions in trade agreements run the risk of locking in a deregulatory framework that seeks to eliminate ‘unnecessary’ barriers to global trade and investment. This poses a serious threat to much needed public interest regulations, including precautionary environmental, labour, consumer and public health policies”, says researcher Bart-Jaap Verbeek.

Warning since 1995

Since the 1995 founding of the World Trade Organisation (WTO), environmental NGOs and public interest watchdogs have warned that overly restrictive language in the WTO agreements unfairly constrains the policy options available to governments for conserving animal and plant habitats, eliminating pollution, reducing greenhouse gas emissions and taking toxic chemicals out of our consumer products, among other public interest priorities. While some progress has been made to remedy this imbalance in newer free trade agreements — through the inclusion of environmental, labour and sustainable development chapters, for example — big business has lobbied successfully for other, less-discussed provisions and chapters that institutionalize an ideology of deregulation.

This report focuses on the significant threats to precautionary environmental, labour, consumer and public health policy from regulatory cooperation and “good regulatory practices” chapters within the EU-Canada Economic and Trade Agreement (CETA), US–Mexico–Canada Agreement (USMCA), and the currently parked EU-US Transatlantic Trade and Investment Partnership (TTIP). It will be argued that, while international regulatory cooperation is often pitched to governments and the public as innocuous or beneficial, the terms under which this cooperation takes place belie its real function as a further entrenchment of corporate bias in the globalisation project. “Good regulatory practices” can, and are intended to, delay or distract the public and decision-makers from introducing a more democratic and sustainable economic and social policy.

Trade bias

Typically, regulatory cooperation and “good regulatory practices” chapters in trade agreements require governments to institutionalise voluntary or mandatory arrangements through which public servants in different countries can and in some cases must work together, usually in close collaboration with industry, to reduce or eliminate differences in domestic laws, policies, standards, regulations and testing procedures — including health, environmental and consumer protections — that are said to impede trade. This trade bias in the regulatory process has roots in U.S. law, but it has since been elaborated in a set of regulatory best practices developed within the Organisation for Economic Cooperation and Development (OECD) and at the WTO.

One important tenet of “good regulatory practice” is that regulation should be based on “risk management”, meaning that its objective is limited, and it is justified by currently available scientific evidence. As the risk-based regulatory framework has evolved, it has come to also require regulators to minimize the costs, or “burdens” on business, consider how they might regulate in ways that encourage trade and innovation and adopt international standards or practices wherever possible. These tenets attempt to strip political or ethical considerations from government rule-making and are, in a fundamental way, directly opposed to the precautionary principle, which states: “When an activity raises threats of harm to human health or the environment, precautionary measures should be taken even if some cause and effect relationships are not fully established scientifically. In this context, the proponent of an activity, rather than the public, should bear the burden of proof.”

A privileged space for multinationals

“Good regulatory practices” (GRP) are, therefore, at once, an ideology of how and when government should intervene in the market (to protect people or nature, for example), a set of institutional arrangements for regulating in a pro-business way and in cooperation with other governments, and a new privileged space for multinational corporations to intervene in national rule-making, frequently and at the earliest stages. This report [by Stuart Trew] begins by exploring the roots of “good regulatory practices” ideology in the WTO, OECD and U.S. law. It then examines how GRP-based regulatory cooperation has functioned between Canada and the United States and compares that to the expected functioning of similar bodies in the concluded CETA and proposed TTIP and USMCA agreements. Following this, we consider what business lobbies have said they hope to get out of transatlantic regulatory cooperation.

The report concludes by considering the benefits of precaution and regulatory leadership, along with some alternative forms that international regulatory cooperation could take that are not based on the deregulatory GRP ideology. The findings here should be of special interest to European policy-makers, activists and the public as the European Commission sets out to revive the stalled TTIP negotiations — even as opposition to the ratification of CETA with Canada remains strong. But the report should also resonate in North America where policy-makers will soon debate the ratification of a NAFTA replacement that includes the most aggressive, short-sighted “good regulatory practices” chapter negotiated to date.

UK signs accord with Central America to ensure continuity of trade deal

Key words: Association Agreement; tariffs; liberalisation.

On 18 July 2019 in Managua the United Kingdom signed an agreement with the Central American nations to guarantee that British companies and consumers would benefit from the same freedom of tariffs when it leaves the European Union as it enjoyed as a member of the EU. The trade deal signed in 2006 between Central America and the European Union was called the Association Agreement.

Commerce between the UK and the six countries of Central America (minus Belize) amounted to US$1.255 billion in 2018 with a balance in favour of the Central American countries. UK consumers will continue to benefit from low prices for goods imported from Central America, such as shrimps, coffee, fruit, vegetables and sugar, amongst others.

Central American consumers will continue to enjoy low tariffs on British products such as alcoholic drinks, medicines, machinery and cars.

The agreement also provides a framework for cooperation and development, especially in matters relating to the environment and human rights.

Despite the balance in favour of the Central American countries, the Agreement requires various market liberalisation measures to be implemented by the Central American governments and allows well-financed UK firms to compete with less well-financed Central American firms in many spheres of economic activity.

Central America Between China and the United States

by Alberto Belladonna

Over the last twenty years, the role of the Chinese in Central American development has grown. Of course it has not been entirely through altruism – China gains considerably from Central American resources. In October 2019 Alberto Belladonna of the Italian Institute for International Political Studies (ISPI – produced a commentary on the geopolitical trends in the comparative influences of China and the United States on the region of Central America. We are grateful to Alberto and to the ISPI for their permission to reproduce the commentary in The Violence of Development website.

“The Monroe Doctrine is alive and well”, proclaimed former US National Security advisor John Bolton in April 2019, re-invoking an old vestige of American foreign policy dating back to 1823. A time when an infant United States was attempting to affirm its sphere of influence south of the Rio Grande, declaring that any interference in the region from European powers would be recognised as an unfriendly act against Washington. Bolton’s message, rather than to the “old European colonial powers”, was referring to new powers, as former Secretary of State Rex Tillerson already did one year before, when he warned Latin America against China’s new imperial power. A warning message aimed especially at South American countries but which also concerns Central America (CA), an often-neglected region but with a strategic geopolitical role in the current context of big-power confrontation.


The United States: Central America’s “Big Brother”

Since the foundation of the United States, for Washington CA has always represented a natural sphere in which to extend its geopolitical presence. An inseparable bond, sometimes too tight: “So far from God, so close to the US” Porfirio Diaz, president of Mexico in the end of nineteenth century, once said. But, how could CA not be so close to the United States? A few sheer numbers are sufficient to underline the role played by the US as gravitational pole for the whole region.

Washington has always been the region’s main trading partner. Today, it still accounts for almost 47.5% of total exports and 40.6% of imports; more than doubling the volumes of the European Union (CA’s second trading partner with 24 % of exports; 9.6% of imports) and even surpassing inter-regional trade (which accounts for 30.8% of total exports and 14.8% of total imports).

The US and CA are also bound together by the Central American Free Trade Agreement (CAFTA), a trade deal that goes beyond tariff-cutting and includes the protection of international property rights, investments and norms regarding public procurement procedures and financial services. CAFTA consolidated the role of the US as the major source of foreign direct investment (FDI) (27.3%) for the region, well ahead of the European Union (17.2%) and intra-regional flows (12.3%).

The US is also the major source of official development aid with annual average spending of $700 million between 2016 and 2017 focused on strengthening political, social and economic conditions in the region.  In particular, through the Central America Regional Security Initiative (CARSI), the United States invested almost $500 million to combat criminal organizations and illegal trafficking in CA.

Finally, the US is also the main destination of migration flow from CA: in 2017, 3.5 million CA immigrants resided in the US. They play a pivotal role in developing their countries of origins with their remittances representing on average 7.5% of regional GDP, ranging from 0.9% in Costa Rica to more than 20% in Honduras. But they also constitute an important source of labour force for the US, as CA nationals register a participation rate higher than both the overall foreign and US-born populations. There is, however, a rising fear of a potential demographic revolution caused by uncontrolled Hispanic migration, as well-known political scientist Samuel Huntington contended in “The Clash of Civilizations” (1996) and later reiterated in his in-depth study “Who Are We? The Challenges to America’s National Identity” (2004). Indeed, Mexican and CA immigrants represent 37% of the US’s foreign-born population, and 71% of the country’s 11 million illegal immigrants. This last group was the main target of president Donald Trump’s 2016 election campaign. Rising tensions culminated in April 2019 when Trump froze about $450 million of US foreign aid to Guatemala, Honduras and El Salvador due to their inability to limit migrant outflows to the United States.
China’s ‘Yuan Diplomacy’ in Central America

While the US seems eager to step back from the region, considered mostly a source of instability and constant mismanagement of aid and cooperation funds, China is silently advancing on the chessboard by extending its Belt and Road Initiative (BRI) to ‘America’s backyard’.

China’s presence in CA has been growing since the late nineties with a breakthrough in 2007 when Costa Rica became the first country in the region to end diplomatic relations with Taiwan. “An act of elemental realism, an awakening to the global context we are forced to deal with”, declared at that time Costa Rican president Óscar Arias. Indeed, elemental realism was at the core of Chinese interest in Costa Rica. A small market of almost non-interest for Chinese exports (0.25% of its total in 2018) Costa Rica became a strategic platform after the signing of a bilateral Free Trade Agreement in 2010, which allowed Chinese enterprise to indirectly exploit the US market through CAFTA. Beijing’s plans also called for Costa Rica to become a strategic platform to refine Venezuelan oil directed to China through a joint project worth $1.3 billion: a project that turned out to be a failure, overwhelmed by government scandals, legal restrictiveness and environmental abuse.  Nevertheless, trade with China increased over the last decade at the annual rate of 14.9% with an increasing trade balance in favour of Beijing. Most importantly, in September 2019 Costa Rica decided to scale up its relations with Beijing by signing a memorandum of understanding under the umbrella of China’s BRI as well as by promoting the country’s plans to create a Special Economic Zone (SEZ) in Puerto Limón where Chinese products could be manufactured.

Yet the first CA country to sign a BRI agreement was Panama. With almost 6% of the total global maritime trade passing through the country, China’s main interest undoubtedly was the Panama Canal. After failing to create a similar infrastructure in Nicaragua, Beijing in fact invested massively in Panama, making the country the prime destination for Chinese FDIs ($2.5 billion) in the region. Among major projects, in May 2016 China Landbridge, a privately owned company, bought Panama’s largest port located on Margarita Island. The investment in the Panama Colón Container Port (PCCP), which cost over US$1.1. Chinese Overseas Shipping (COSCO), another key player in the area, also decided to expand its operations on the Atlantic side of the canal. Finally, China also focused on the free port of Colón, where tons of Chinese products are disembarked, transformed and reshipped to Latin America and the US. Here, Huawei installed its sixth global distribution centre.

China’s pragmatic attitude did not prevent the country from doing business with Panama even before formal diplomatic ties were established between the two countries. The same goes for China’s business relations with Guatemala and Honduras, two countries that are still close to Taiwan. Indeed, from 2006 to 2016 Chinese exports to Guatemala and Honduras increased by 300% and 750% respectively. Chinese products found a very receptive market in CA: on the one hand, they were not required to follow the same strict standards of Western markets. For example, China has become the second exporter of vehicles to Guatemala and Honduras with a market share of 11.75% and 14.75% respectively. On the other, thanks to lower prices, China gives CA the chance to access a larger range of products, which would have been impossible otherwise.

The frontrunner of China’s expansion in CA is Huawei. In fact the company has built telecommunication networks throughout the region, works with most major telecommunications providers such as Millicom, and is ready to build an underwater cable link between China and Latin America. A situation which is prompting concerns from the US, which released a document stating that “China’s aggressive telecommunications investments in the region raise security concerns about placing the region’s communications backbone on Chinese networks; an increasing portion of data and message traffic will flow through and come to depend on, Chinese-supplied infrastructure”.

Still, China’s interests in the region are more subtle. Increasing its relations with CA will indeed also increase China’s negotiation power when it comes to Asia Pacific and the South China Sea: a wild card to play switching their respective backyards.

Future perspectives

But is CA de facto shifting into China’s orbit? Probably not. Last May, Mexican president Andrés Manuel Lopez Obrador and the United Nations Economic Commission for Latin America and the Caribbean (ECLAC) presented the Comprehensive Development Plan for Central America, which sets an investment of about $30 billion in production and infrastructure projects in CA. The objective is to integrate CA and Mexico in a way that could also serve the US market through the newly established United States-Mexico-Canada Agreement (USMCA). Although Trump thwarted this project with a new clause, which imposes a minimum wage of $16 per hour in those factories that export cars to the US, CA’s future remains tied to closer integration with the US. Against the backdrop of the ongoing trade tensions between China and the US, CA could benefit from the ongoing decoupling process and a more regionally integrated value chain intercepting more delocalization process from North America. CA is indeed meant to remain bound to the US. However, China will not cease to exploit the US’s inattentions and negligence to increase its influence, as if the two were engaged in a long-term game of Go.

Guatemala offers El Salvador a port on the Atlantic Coast

Shortly after the inauguration of Alejandro Giammattei as the new Guatemalan President, he met with President Nayib Bukele of El Salvador and offered a deal of potentially great benefit to El Salvador: namely a port on the Atlantic coast of Guatemala. Lucy Goodman translated and summarised articles about the deal from La Prensa Gráfica (by Melissa Pacheco, 28.01.20) and El Economista (29.01.20), and Martin Mowforth added various commentaries on these for The Violence of Development website.

March 2020

Key words: El Salvador – Guatemala integration; Atlantic port; security cooperation; domestic flights.

El Salvador and Guatemala plan to eliminate the border initially for the passage of persons and later for freight. They have also re-defined flights between the two countries as ‘domestic flights’.

(Melissa Pacheco) The presidents share the announcements between themselves about the removal of the border for the transit of people and goods.


The Guatemalan president offered a concession to create a public-private partnership as the means to enable completion of a Salvadoran port on the Atlantic coast. Land from the Santo Tomás de Castilla National Port Company (Empornac) will be ceded to El Salvador for this purpose. The area to be ceded is known as El Arenal (or The Quicksand) and currently serves as a depot for containers. Last year (2019) Empornac carried out technical studies to determine the feasibility of constructing a pier to accommodate dredgers and cruise ships there.

“We have offered El Salvador something unprecedented in the history of Central American integration and today I want to announce it publicly because we’re going to explore, as soon as possible, the possibility of El Salvador having a port in the Guatemalan Atlantic. We will deliver this Project as a public-private partnership so that El Salvador can develop it. It is an offer that we have made to El Salvador, we consider it to be the right thing to do,” Giammattei announced at a press conference that took place at the Presidential House.

He added that he had spoken with the authorities of SICA (Sistema de la Integración Centroamericana / Central American Integration System) in order to receive the support of the institution in the implementation of the project. He also announced that he made a firm pledge to officially de-categorise flights between Guatemala and El Salvador to ‘domestic’. This comes as part of the initiatives to improve integration in the region.

The Guatemalan Minister of Economics, Antonio Malouf, confirmed that a legal-technical analysis for ceding the land of Empornac will be carried out.

“Basically, it would be our entry to the Atlantic. Our goods will have the power to go from the Atlantic and enter from the Atlantic. I believe what we’re doing is making a real union that is going to spread to other countries in Central America that will want to unite and do similar,” declared the Salvadoran President.

Apart from the possible construction of the Salvadoran port on the Guatemalan coast and the re-categorisation of flights, the leaders announced that in one month they hope to have removed the border for the passage of people and within three or four months the barriers for goods between the two countries.

“We have to sign papers where we can eliminate the customs on goods respecting that goods entering El Salvador and destined for Guatemala have already paid taxes in El Salvador and do not have to pay them in Guatemala and those that have entered Guatemala destined for El Salvador do not have to pay them in El Salvador. We believe it will take us about three months,” the Guatemalan president declared to the media.

The elimination of the borders for the passage of people also requires the implementation of a bi-national arrangement on security. “If someone passes from Guatemala to El Salvador evading an arrest warrant, they will not be evading anything because we are going to have the same approaches in both countries,” Bukele stated.

Giammattei referred to their intention to apply similar security sanctions, one of which was to standardise the criminal codes in both countries. In the language he used to explain this part of the agreement, Giammattei betrayed his profoundly hateful and hardline understanding of crime in society. “Standardising the penalties, the sanctions, the punishments, so that when they spray ‘Baygon’ here the cockroaches do not go there because they think that there they will find it easier, and when they spray ‘Baygon’ the cockroaches won’t come here, as the law will be the same for the two countries,” said the new president

Moreover, he said that they had been monitoring Bukele’s Territorial Control Plan (PCT), the main commitment of the Salvadoran Government to improve security conditions, and he (Giammattei) did not rule out implementing some of the same sanctions in Guatemala.

NicaNotes: What is Significant About the Minimum Wage?

I am grateful for the following piece to Chuck Kaufmann who writes the NicaNotes blog for the Alliance for Global Justice (AFGJ).

 NicaNotes is a blog for Nicaraguan activists and those interested in Nicaragua, published by the Nicaragua Network, a project of the AFGJ. It provides news and analysis from the context of Nicaragua Network’s long history of struggle in solidarity with the Sandinista Revolution.

The Sandinista government’s unique Tripartite Alliance model achieves an agreement on the 2017 minimum wage that gives it a boost totalling 8.25%.

The Tripartite Alliance model functions as a direct negotiation between capital and labour in meetings moderated by the government. Since Daniel Ortega returned to the presidency in 2007 and implemented this system, Nicaragua has enjoyed an extended period of labour stability.

Labour stability in and of itself is not necessarily a positive thing if that stability is due to an uneven playing field such as exists currently in the US where corporations hold most of the cards, or if it is due to ‘company’ unions, such as are dominant in Mexico, which do not defend the interests of the workers. But labour stability in Nicaragua says more about the nature of the State than it does about the relative power dynamics between capital and labour. In the two times I can think of in the past ten years that labour and capital have not been able to come to a consensus about the percentage increase in the minimum wage, the government has sided with labour and imposed an increase equal to or close to the rate supported by the unions.

In February, Paulo Speller, secretary general of the Organisation of Ibero-American States (OEI), said during a visit to Nicaragua, “Nicaragua is a country that has inspired us because it has a different situation compared to the rest of the region. The economy is growing, the people live in peace, and the government is implementing carefully developed policies. The Nicaragua Tripartite Alliance model between government, employers, and labour is a unique and successful model in the region.”

Luis Barbosa, secretary general of the Sandinista Workers Central – José Benito Escobar, said, “We have achieved something great” and Labour Minister Alba Luz Torres called it “a major victory for Nicaragua’s workers.” Employers, represented by the Superior Council for Private Enterprise (COSEP) are also happy with the deal and have repeatedly credited the model for calming foreign investor fears and promoting investment and job growth.

Nicaragua has several minimum wages for various sectors of the economy. The one covered by this agreement is the one covering Nicaragua’s lowest paid workers in agriculture and garment factories. The agreement covers workers in the rapidly growing tobacco industry, as well as coffee workers, Nicaragua’s largest single employment sector. For the first time unskilled workers will earn US$195.60 per month. That doesn’t sound like much, admittedly. Honduras and Costa Rica have minimum wages of US$353 and US$516 respectively, but a one-to-one dollar comparison leaves out the fact that Nicaraguan workers have free health care, free education, subsidized food and housing for low wage workers, all of which increases the buying power of the Nicaraguan córdoba.

Nicaragua is nowhere near full employment; barely a third of workers are considered formally employed and paying into social security. But that is a significant increase over historical norms and few would argue that workers are not better off than they were under the neoliberal governments of 1990-2006.

The fundamentals of the world economy have not changed. Neoliberal capitalism is still making the rules. But in Nicaragua the nature of the State and what economic actors are defended by the State has changed, and that has made all the difference.

 NicaNotes website:

AFGJ website:


Maquilas in Central America

Maquila refers to a system of production, or a factory, in which imported materials undergo a process of assembly or manufacturing, before being re-exported and sold abroad. In Central America maquilas are predominantly for the clothing industry, and are owned by companies from the US, Asia and Europe. They enjoy special tax and tariff regimes and provide cheap goods for markets in the north.

The maquila industry in Central America has been referred to as neoslavery,[1] and these ‘sweatshops’ are notorious for their poor working conditions. Organisations such as No Sweat, and War on Want have campaigned to bring awareness to this issue and forge a mental connection between the cheap garments available in high street stores and the abuse and violation of labour rights which goes on in the factories in which they were made.[2]

Maquila employees endure hazardous working conditions; lack of ventilation, excessive heat, dust, noise and lack of adequate safety equipment are frequent complaints. Bathroom breaks are monitored and timed. Shifts can range between ten and sixteen hours, and forced overtime, often unpaid, is also commonplace. 75% to 85% of maquila workers are women. They may be forced to take birth-control pills, take pregnancy tests, and pregnant women are routinely dismissed without notice or benefits. Workers may face verbal or sexual harassment. The staff turnover in maquilas is high; unemployment perpetuates the situation, as there are always more people desperate for work.[3]

Attempts to organise unions are often crushed, despite national and international labour rights legislation. Unionisation is difficult and minimal due a variety of factors including mass firing, intimidation, fear, death threats, unemployment and capital mobility.[4] When a worker is illegally fired for participating in union activities, they are commonly blacklisted, making it impossible to find similar job elsewhere.[5]

A report by the Maquila Solidarity Network suggests that that shrinking consumer markets due the global financial crisis will impede efforts to improve workplace conditions. They predict an increase in short-term and temporary contracting, less job security, factory closures, and greater anti-union pressure.[6]

[1] MacEoin. G., 13 August 1999 ‘Maquila neoslavery, under conditions from bad to inhuman – maquiladora industry in Central America’ National Catholic Reporter (accessed 13 August 2009)
[2] See;
[3] See Armbruster-Sandoval, R. (2005) Globalization and cross-border labor solidarity in the Americas: The anti-sweatshop movement and the struggle for social justice, Routledge, New York; also Washington Office on Latin America (2009) ‘DR-CAFTA and worker’s rights: Moving from paper to practice’ (May) (accessed 17 August 2009)
[4] Op.cit. (Armbruster-Sandoval)
[5] Op.cit. (Washington Office on Latin America)
[6] Maquila Solidarity Network (2009) ‘How will the global financial crisis affect the garment industry and garment workers?’ (February) (accessed 14 August 2009)

Another way is possible: fair trade, cooperation and solidarity with ALBA in Nicaragua

3While the Euro zone plunges into meltdown and the governor of the Bank of England predicts the worst crisis in the UK since the depression, innovative new ideas based on relationships of solidarity between countries are being successfully put into practice in the countries of the Bolivarian Alliance for the Peoples of our America (ALBA).

Trade between these countries is being turned into a tool to combat poverty, rather than the enrichment of powerful countries at the expense of the systematic impoverishment of poorer countries. Membership of ALBA has played a key role in the success of Nicaragua in rebuilding its economy, and infrastructure and implementing social programmes that have contributed to reducing high levels of poverty.

Nick Hoskyns from London has worked in Nicaragua since 1997 with rural cooperatives and is now quality manager for ALBANISA, an ALBA food social enterprise. He talks to David McKnight, from the Wales Nicaragua Solidarity Campaign. .

Can you explain what ALBA is?

ALBA is made up of Venezuela, Cuba, Nicaragua, Bolivia, Ecuador, the Dominican Republic, Antigua and Barbados, St Vincent and the Grenadines. It was set up to counteract the free trade agreements promoted by the western world; in Latin America it was ALCA (the Free Trade Area of the Americas). ALBA is everything that ALCA and the free trade agreements are not. Free trade agreements only talk about economics, only talk about trade, ALBA is all about the poor, solidarity, Latin American peoples coming together to resolve their problems.

ALBA means ‘daybreak’, hope, it’s the first rays of the sun. In a country like Nicaragua that has always had people against it – it’s always been a struggle, within ALBA you have a group of countries willing to understand revolution and in a very practical sense willing to support you and help you. I think it’s also important to understand it’s a real southern initiative.

How does ALBA differ from other trading blocs like the European Union for instance?

The difference is that ALBA is about giving and supporting and solidarity. It’s about how countries help each other to develop and it’s about how poor Latin American countries work together to resolve their problems. When ALBA countries get together, it’s not a negotiation of who gets most and who gives least, it’s the complete opposite, it’s what can they do, how can I help you?

…in the European Union when you hear that countries go to negotiate they are mandated to get the best possible deal for their country.

ALBA is an incredible space for innovation, putting ideas into practice within a politically, socially, clear model for the poor and the disadvantaged. I just feel that ALBA is talking sense when I listen to the debates around the bailouts of the banks at the European Union, “what are we going to do with Italy, Spain and Greece, these countries that are bringing the whole European Union down?” It’s all about economics, it’s all about money, whereas ALBA works within a framework which talks about solidarity, which talks about social development, which talks about the health of people, the education of people, for everyone not just those that can afford it.’

21I think ALBA is going to provide an alternative for us in the western world. From what I can see we are pretty lost, we haven’t really got any ideas of where we are going. It can’t be about bailing out bankers and their bonuses. So for me, ALBA really does provide that framework.’

How does the fair trade agreement [between Nicaragua] and Venezuela work?

Venezuela sells its oil to Nicaragua and Nicaragua pays the market price but 50% of the value of the oil is on payment terms of 25 years at 2% interest. Nicaragua invests this money in infrastructural projects – roads, energy – and long-term development. The other 50%, that Nicaragua has to pay in 90 days, Venezuela said to Nicaragua ‘you can pay me back in cash or if you’ve got anything that Venezuela needs then we’ll take your products’. So Nicaragua is now selling very large amounts of products to Venezuela under that fair trade agreement. The major product is meat and livestock, then there’s coffee and beans then there’s milk, cooking oil and sugar. The priority is given to the small farmers organised into cooperatives.

The principle is making sure that the farmers can produce at a price which works for them but also making sure that consumers get a good quality product at a fair price. Fair trade within ALBA is making an enormous difference to both peoples.

In 2008 Nicaraguan exports to Venezuela totalled $27 million. That went up to well over $250 million in 2010 and we are heading for way over $350 million in 2011. Venezuela has now become the second most important destination for Nicaraguan exports. The first of course is the US. So the importance of the US to the Nicaraguan economy can’t be minimised but this is a very different trading agreement.

What are the benefits of ALBA for Nicaragua?

It’s an integrated approach with lots of different programmes, very specific, very concrete, that benefit the Nicaraguan population. There was Miracle Operation, where every Nicaraguan who had eye problems such as a cataract has had a free operation here in Nicaragua or they’ve been flown to Venezuela or Cuba. People who thought they were never going to have full vision again, have had their sight given back to them. And that’s a successful programme right through all the ALBA countries.

Then there’s the solidarity bonus, where employees who earn less than C$5000 (£150) get a solidarity bonus which is just a top up or a bond, now worth C$700 a month, this is particularly important for low paid women workers.

Electricity was an enormous problem in Nicaragua – we used to have eight hours power cuts a day – we were trying to run our sesame and coffee plants and you never knew when the energy was going to be cut off and now we have got energy production funded through ALBA.

…it is an integrated approach coming from so many different angles. Poverty has gone down 7%. Exports are growing at around 30% ay year. The economy is growing at 4% whereas in the West it is stagnating. So ALBA is working for people directly and it’s also working for the economy as a whole – for big businesses, for medium businesses, for small businesses and for individual families. It really feels like Nicaragua is on the move.

What does Nicaragua contribute to ALBA?

It is very important for Venezuela to have a secure market for its oil. Also Nicaragua provides a great ally within Central America that speaks out on international issues in favour of the ALBA countries. Nicaragua is out there at the United Nations giving a clear, strong voice – an independent opinion from any lobbying from Western countries.

The cooperative movement in Nicaragua has been identified as a possible model for the whole of ALBA. I’ve personally been privileged to have been involved in an interchange between the Cuban and Nicaraguan cooperative movements, Cuba is looking at the cooperatives in Nicaragua as a model for them in the development of their economy. So that’s a great privilege for Nicaragua and Nicaragua is just there, chomping at the bit to help and give something back to any of the ALBA countries. And I truly believe that in the future, Nicaragua is going to provide a real model for the other ALBA countries of how to work in a way that is inclusive, incorporating large companies, medium-sized companies but without compromising commitments to the small farmers and the cooperatives. I think that’s going to be a valuable example for the rest of ALBA.

What’s the future for ALBA?

The thing to understand about ALBA is that it’s about doing and it’s about achieving. So in Nicaragua where you had power cuts, it was decided to invest in energy so there were no more have power cuts. They decided that all disadvantaged children should get at least one good meal a day, that’s happening. Because of the rains and the hurricanes it was decided that everyone should have a roof, ALBA Plan Techo [Roof Plan] provides 12 large corrugated iron sheets to each family that needs it.

ALBA is a group of countries that’s there to develop and to make a difference for the poor and disadvantaged. And, in Nicaragua it’s successful. This is real and it’s working and it’s developing.

Source: NSC website

Highlights of the trade pillar of the Association Agreement between Central America and the European Union

Mariah Jen 20 June 2011

The Association Agreement between the EU and Central America (Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama) marks an important step forward in the relationship between the two regions. The Parties have finalised the legal review of the Association Agreement which includes a comprehensive trade part. Once ratified, this agreement will open up markets on both sides, help establish a stable business and investment environment, increase benefits for citizens and will foster sustainable development. The Agreement is also meant to reinforce regional economic integration in Central America and the EU hopes for it to have a positive spill-over effect on the overall political integration process and contribute to the stability of the region. In 2010, bilateral trade in goods between Central America and the European Union was worth €12 billion.

Negotiations of the Association Agreement between the European Union and Central America were finalised in May 2010. The Agreement can enter into force once the legislative procedure involving the Council and the European Parliament has been concluded.

The Association Agreement consists of three pillars: political dialogue, cooperation and trade. The key elements of its trade pillar are presented below:

1. Substantially improved market access for EU exports to Central America

Tariff elimination – manufactured goods, fisheries and agriculture
The Agreement will largely eliminate tariffs for manufactured goods and fisheries with complete liberalisation at the end of the tariff phase-out period, generally within a ten-year period and with only a small amount (4 percent) of products after 15 years. Upon entry into force of the Agreement, Central America will liberalise 69% of its existing trade with the EU. Once the trade pillar of the Agreement is in force, EU exporters will save €87 million annually in customs duties.

In agriculture, tariffs on key agricultural products will be largely eliminated whilst “sensitive areas” for local markets are being respected. Panama, for example, is a main importer of European whiskeys to the region. 70% of its whiskey imports come from the EU and those will be liberalised on day one of the entry into force of the Agreement. All other Central American countries will liberalise this market after six years. Wine, another key product for the EU, will be fully liberalised at entry into force of the Agreement. EU exporters of wine and spirits can expect savings of €6 million annually in customs duties.

Tariffs on dairy products will be entirely eliminated with the exception of milk-powder and cheese, for which the EU has obtained duty-free quotas. These quotas cover the currently traded quantities and will be increased on an annual basis.

Addressing obstacles to trade in goods
Tariff elimination is only of real benefit if technical or procedural obstacles to trade are also being tackled. The proposed Agreement will ensure more transparency and better cooperation in the areas of “standards” and market surveillance. The agreed provisions go beyond the WTO Agreement on Technical Barriers to Trade (TBT). The requirements for marking and permanent labelling have been simplified. The Parties agree to cooperate when drafting technical regulations, setting standards and establishing conformity assessments. Most importantly, the parties will promote the development of harmonised regulations and standards within each region with a view to facilitate the free movement of goods.

It has been agreed to move towards international standards in customs legislation and simplify their procedures. This will improve trading conditions, while at the same time maintain an effective customs control. Central America has not yet harmonised standards, but has agreed to promote the development of regional customs regulations. This will facilitate operations for traders and business both within and outside the region.

As regards sanitary and phytosanitary (SPS) barriers, the Agreement also goes beyond WTO SPS requirements in key areas such as the regionalisation of animal diseases and pests, and the transparency of SPS import requirements and procedures. It includes other useful trade facilitation tools such as the listing of establishments, exports can come from. Further improvements, e.g. in the field of animal welfare have been agreed. These will help strengthen capacity building in the Central American countries and hence facilitate their market access.

Improved market access to government procurement, services and investment
The services and establishment commitments obtained from Central America are significant and meet the EU’s key interests in telecommunication, environmental, financial and maritime services. Further commitments cover cross-border services, investment and non-service sectors as well as key personnel, graduate trainees and business service sellers. The Agreement also liberalises current payments and capital movements between the Parties. These sectors will benefit from an easier access and possibilities to expand onto all markets of the Central American countries.

The opening of Central America’s public procurement market varies in terms of levels of liberalisation, with Costa Rica and Panama opening their markets more significantly than the other countries covered by the Agreement.

2. Common rules to level the playing field

Intellectual property rights & Geographical Indications
Protection of intellectual property rights is an important part of the Agreement. It includes a chapter on the effective protection of intellectual, industrial and commercial property rights and other rights covered by the WTO Agreement on trade-related aspects of intellectual property rights (TRIPS). As a result, EU rights holders will profit from improved procedures to defend their rights more effectively in case of infringements.

The Central American countries have adopted new or amended their legislation to incorporate regional specialities, so-called ‘Geographical Indications’ (GI) in a manner similar to the EU. Additionally, over 200 geographical indications, such as Champagne, Parma ham and Scotch whisky, are also specifically protected on the Central American markets to the benefit of producers of GI products in the EU.

The Agreement also makes specific reference to the importance of promoting access to medicines as well as protecting the biological diversity.

More competition and enhanced transparency on subsidies
Once the Agreement enters into force, it ensures a level playing field for European operators by calling upon national governments to ban all types of anticompetitive practices including restrictive agreements, cartels and abuse of dominance. This will help guarantee a fair and reliable competition environment for European companies.

In an effort to increase transparency particularly on subsidies, the EU and Central American countries will regularly report on the subsidies given to companies that trade in goods and also exchange information about matters related to subsidies in services. The Agreement goes beyond existing WTO rules in setting up a platform to discuss subsidies in the services sector.

A transparent way to settle trade disputes
The Trade pillar of the Association Agreement between the EU and Central America includes an efficient and streamlined dispute settlement system in accordance with the principles that the EU considers to be most important such as transparency (open hearings and amicus curiae briefs) and sequencing (no right to impose retaliation until such time as non-compliance is verified). A mediation mechanism for non-tariff barriers is also foreseen.

3. Regional Integration

The Agreement responds to Central America’s commitment to strengthen regional economic integration in the region and thus facilitate the movement of EU goods within Central America. Regional rather than “national” regulations and using a single administrative document for customs declarations will considerably ease the administrative burden on European exporters. Customs procedures as well as customs itself are going to be harmonized. Eliminating double duties over time, an importer will have to pay a single duty for the region rather than at each country’s borders. The transition period for this elimination is 2 years.

Regional integration will also help reduce the current regulatory divergences between Central American countries in the services sectors, including maritime transport. Dairy products and processed pig products, for example, will see a harmonisation of sanitary and phytosanitary requirements within the region in the coming years so as to facilitate the free movement of goods in the region.

4. An agreement for sustainable development

Further economic development through trade
Thanks to this Agreement Central American countries will benefit from liberalised access to the European markets in numerous sectors. This entails important economic and social benefits in Central America with gains in national income for Central America as a whole expected to amount at € 2.6 billion. The change in national income is estimated to vary from 0.5% in Nicaragua to 3.5% for Costa Rica in the long run due to the Agreement. In addition, the Agreement is expected to have an overall poverty-reducing effect across the Central American region.

According to an independent Trade Sustainability Impact Assessment commissioned by the EU, the Agreement is expected to contribute to large sectoral gains in the fruits, vegetables, and nuts (FVN) sector, especially for Panama and Costa Rica. Guatemala and Nicaragua are expected to become more competitive in the textiles and clothing sector for example, while El Salvador and Honduras will see an increase in their export of transport equipment.

By granting Central American countries immediate and fully liberalised access to European markets in industrial goods and fisheries, the Agreement will help exporters from these countries to move up the value-added chain. When fully enacted, the reduced costs of trade will have a beneficial impact on growth and jobs in all Central American countries.

Sustainable development
An overarching objective of the Association Agreement is to contribute to sustainable development in both Central America and the European Union, taking due account of the differences and specificities of each region. This objective is embedded in all the sections of the Agreement and finds a specific expression in the trade part through a chapter addressing the interrelation between trade and social and environmental policies. The chapter reflects the Parties’ commitments as regards internationally recognised core labour standards and multilateral agreements addressing environmental issues of international concern. It recognises the right and the responsibility of the Parties to adopt social and environmental regulations in the pursuit of legitimate objectives, and puts much emphasis on the effective enforcement of domestic labour and environmental laws. The Parties also undertake to encourage and promote trade and marketing schemes based on sustainability criteria, and to work towards a sustainable management of sensitive natural resources.

An important element in the overall structure of the Association Agreement is the role of civil society in the follow-up. A Joint Consultative Committee is foreseen and, specifically in the trade area, consultation of civil society stakeholders at domestic level goes hand in hand with a “Bi-regional Civil Society Dialogue Forum” to facilitate exchanges across the Atlantic regarding sustainable development aspects of the trade relations. Should divergences between the Parties arise in the implementation of this chapter’s provisions, recourse to an impartial panel of experts is possible under conditions of transparency.

Cooperation in trade areas
Both Parties have agreed to improve cooperation in areas such as competition, customs, intellectual property or technical barriers to trade. Enhanced cooperation in the production of organic products or the promotion of sustainable development have also been agreed.

Trade flows
In 2010, EU was Central America’s second trade partner after the US (and intra-regional trade), representing almost 9.4% of the trade flows.

In 2010, the main exporters from Central America to the EU were Costa Rica (53.9%), Honduras (21.6%) followed by Guatemala (12%). Exports consisted mainly of coffee, bananas, pineapples and microchips. EU’s exports to Central America went first to Costa Rica (36.3%) then Guatemala (28.1%) and El Salvador (15.2%) and were mainly medicines, petroleum oil and vehicles.

For more information
Text of the Association Agreement:
More details on the benefits of the Association Agreement:


Aims and effects of CAFTA-DR, according to UNES

In March 2011 to mark the fifth anniversary of the signing of CAFTA-DR, UNES (the Salvadoran Ecological Unit) sent an open letter to Deputies of the Salvadoran Legislative Assembly demanding an evaluation of the trade agreement, whose effects they claimed included the following:

  • The 60,000 new jobs to be created each year, as promised by those who promoted the agreement, have not been realised; in fact unemployment is greater than it was five years before.
  • Small farmers and small businesses have not been able to export their goods to the US market; in fact the crisis experienced by the campesino sector and by small businesses has deepened.
  • Food cannot be bought cheaper than it was in 2006; in fact the price of basic foodstuffs is much more expensive; similarly with the price of medicines.
  • There is no greater stability or security for Central Americans who migrate to the USA; in fact the humiliation and deportations have increased.
  • The commercial deficit between El Salvador and the USA has widened; although exports from US, European and Korean TNCs in El Salvador have increased, imports from the USA have increased much more. Also, despite their stagnation, dependence on remittances from family members has grown.
  • Two mining TNCs have claims against the government of El Salvador in a foreign tribunal for US$170 million as compensation for the cancellation of their permits for gold and silver extraction in El Salvador.
  • Central American regional integration is experiencing greater difficulties now than it did in 2006 when CAFTA-DR came into force.
  • CAFTA-DR is particularly beneficial for transnational corporations that the European Union has also begun free trade treaty negotiations with the region; this is euphemistically called an ‘Agreement of Association’.

Source: Revista Ecotopia 272 (March 2011) ‘Organizaciones Sociales Demandan Evaluación y Denuncia del CAFTA-DR’, San Salvador: UNES.

The failure to industrialise

The following section also appears in the book under the same sub-heading, but the section which appears her is a much fuller version.

Eduardo Galeano’s classic work ‘Open Veins of Latin America’ explains how the imperialist states of Europe and the United States kept Latin American countries relatively free from the development of domestic industry by two particular means. First, a system of loans and interest-inflated repayments absorbed finance that would otherwise be available for domestic investment – the recent debt crisis is nothing new. Second, the development of a railway network, normally seen as a necessary condition for industrial development, was designed to link areas of primary production with ports (for export) rather than linking internal areas with one another: “thus railroads, so often hailed as forerunners of progress, were an impediment to the formation and development of an internal market.”[1]

To break out of what were seen as the chains of imperialist domination through which Central America had served simply as a supplier of primary produce to the industries of Europe and the USA, the strategy of domestic industrialisation was followed by some nations from the 1930s onwards. “These measures included increasing tariffs on imported goods. In Central America this was largely to help raise revenue, rather than promote import substitution.”[2] As British academic Victor Bulmer-Thomas admits, however, this industrial expansion did not amount to much. He cites five particular obstacles to industrial growth:

  • energy supplies were woefully inadequate;
  • virtually no credit was available;
  • foreign exchange for essential capital equipment was hard to obtain;
  • the market remained too small; and
  • efforts at regional integration at this time came to nothing.[3]

The post-WWII development of the dependentistas or the Dependency School of thought associated the development of independent national industry with the notion of import substitution industrialisation (ISI). ISI was “an attempt to restructure the nature of economic relations with core economies [Europe and North America] … This would reduce dependence on imported goods, so helping the balance of payments, and would also provide employment.”[4]

Although dependency theory draws on the work of Marx, it is particularly associated with economic historian and sociologist André Gunder Frank[5], although his work simply became the most famous expression of what many had been thinking and saying around Latin America for some time. Dependency theory argues that western capitalist countries have grown as a result of the expropriation of surpluses from the Third World, especially because of the reliance of Third World countries on export-oriented industries (coffee, bananas, bauxite and so on) which are notoriously precarious in terms of world market prices. The theory uses the notion of core–periphery relationships to highlight the inequality, where the core is the locus of economic power within a global economy.

André Gunder Frank[6] takes matters one step further in his notion of the ‘development of underdevelopment’ which stresses that it is the underdevelopment of the structures in Third World countries created by First World capitalist development that creates dependency – see Cristóbal Kay[7] and Walter Rodney[8]. As anthropologist Arturo Escobar bluntly asserts, “Europe was feeding off its colonies in the nineteenth century, the First World today feeds off the Third World.”[9] In other words, dependency theorists see development of the core through exploitation of and extraction from the periphery, leaving the periphery in a constant state of underdevelopment.

Above all else, theories of dependency are in general agreement that the interdependence resulting from global economic expansion and the suppression of autonomous growth results in unequal and uneven development. The dependentistas explain Latin America’s failure to industrialise as a result of this unequal power relationship between the core (USA and Europe) and the periphery (Latin America, and of course Africa and parts of Asia).

Success in Central American ISI was rather limited for a number of reasons, chief amongst which were the small size of the Central American domestic markets, poor infrastructural development and the fact that many industrialisation efforts within the region produced similar products. Additionally, “although some consumer goods were relatively straightforward to produce, attempts to replace the import of other goods (particularly industrial machinery) highlighted the limits of ISI at that time.”[10]

In the 1970s, attempts to industrialise for the sake of independent development changed motivational tack as flows of international finance into the region became the major stimulus to limited industrial development. The debt crisis which followed “these vast flows of credit”[11] is well documented elsewhere[12] and seemed to represent a new form of dependency – ‘new’, but as noted above by Galeano, one that was already well-rehearsed in the nineteenth century.

In the late 1970s and particularly through the policies pursued by the Reagan-Thatcher axis of the early 1980s, Third World attempts at ISI were replaced by an export-oriented model of development, “building on ideas of free trade and foreign direct investment (FDI) as the way forward for indebted nations.”[13] The simplistic notion of comparative advantage was used to justify the need for Third World nations to produce goods or crops for which they have a natural advantage. This effectively justified the continuation of the colonial model of development, and the debt crisis served as a mechanism to ensure the continuation of a relationship of First World dominance over Third World nations.

The economic model mandated by the USA and Britain in the 1980s was later imposed on developing countries by the international financial institutions (IFIs) – the World Bank, the International Monetary Fund (IMF) and in Latin America the Inter-American Development Bank (IDB). The model advocated cuts in public spending and the privatisation of state-owned enterprises, especially utilities such as energy companies.[14]

Free trade and economic growth are regarded as essential pre-requisites of development by the supranational and national agencies: the World Bank, IMF, World Trade Organisation (WTO), Organisation for Economic Cooperation and Development (OECD), European Union (EU) and G8 governments. The discourse of these agencies is commonly referred to as the Washington Consensus and its ideology of free trade is captured in the term neoliberalism. Free trade is synonymous with economic globalisation which is synonymous with the spread of capitalist relations of production, and whichever of these terms is employed, it amounts to an ideology.

Neoliberalism sees development as a single linear progression of economic growth and well‑being, a model that has been portrayed by a number of theorists as a series of steps or stages (such as Rostow’s The Stages of Economic Growth[15]) to the ‘promised land’ – a developed state. There is an almost universal acceptance, at least among those who hold power, that there can be no ‘development’ without economic growth and no economic growth without free trade, an equation that commands near universal respect but which development scholar Gilbert Rist and others insist needs to be questioned.[16]

The notion of free trade itself, however, manages to hide the uneven and unequal economic interdependencies manifest for example in trade protectionist measures adopted by First World governments. In this regard the hegemony of the United States of America is noteworthy, though equally the power vested in the WTO, the G8 and key trading agreements (especially the North American Free Trade Agreement and the Association Agreement with the EU) should not be underestimated.

Free trade fundamentally requires open and deregulated markets which supposedly provide a level playing field to those who operate business such that there exist no restrictions to trade. As the WTO explains, “In order to do business as effectively as possible, companies need level playing fields so that they can have equal access to natural resources, expertise, technologies and investment, both within countries and across borders.”[17] In theory this would allow national economies to specialise in producing goods or providing services that they are supposedly best at producing or providing. They would export these goods or services and import the things that they are not so good at producing. This is the notion of comparative advantage, one of the theoretical planks on which the ideology of free trade is built.

Comparative advantage is based on the theories developed by David Ricardo in the nineteenth century[18], but as Rist points out, “it assumes a number of hypothetical facts which rarely occur in reality”[19], and he proceeds to list thirteen of these assumptions. Activist and writer Teresa Hayter refers to the advice given to Third World governments as being based on the “apparently unimpeachable doctrines of comparative advantage, to the effect that they should concentrate on what they are supposed to be good at: the production of raw materials and primary commodities.”[20]

The theoretical level playing field belies the inequalities of development, economy and power which exist between and within the First World and the Third World. In the case of Latin American and Central American countries, Wooding and Moseley-Williams tell us that “before the current phase of globalisation, [this] was the region of the world where the greatest inequalities were found”, and that “today it is even more unequal.”[21]

Writer Fred Rosen is also critical of the theoretical framework of the Washington Consensus, arguing that it exists “at the height of abstraction, de-linked from reality”,[22] and Wayne Ellwood suggests that “talk of ‘level playing fields’ and ‘pure competition’ obscures the evidence that poor countries are severely disadvantaged to begin with”.[23] Oscar Guardiola-Rivera refers to this supposed playing field as being one “where players are unequal and competition unfair.”[24]

In the existing circumstances of inequality, it can be forcefully argued that there can be no such thing as free trade or a level playing field.

The deregulation of the local business environment – deregulation is another of the theoretical planks on which the ideology of free trade is built – to create the hypothetical level playing field actually creates the conditions which clearly favour those with access to wealth and resources. Stealing Bernard Crick’s phrase, we might describe deregulation as “the dramatic bonfire of the controls needed to make free markets tolerable”.[25] Without those controls which protect the national industries, those who stand to gain are those who already have the advantage of wealth and power that enable them to access even greater levels of capital and technology.

Elsewhere in the world beyond Central America, the idea of promoting a strategy of import substitution industry had been dealt a blow by the rise of the South-East Asian ‘tiger’ economies, and after the 1970s few nations in the world clung onto or placed great hope in achieving development through the rise of an economy led by national industrial growth. For those nations which did not willingly embrace neoliberalism, it was forced upon them by the USA and Europe and by the debt crisis. The crisis was and still is managed by the world’s two major international financial institutions (the IMF and the World Bank) in which the interests of the two major political centres (the USA and Europe) hold sway.

The debt crisis was managed through structural adjustment programmes which later metamorphosed into Poverty Reduction Strategy Papers (PRSPs), although the PR part of the initials might have more accurately signified ‘Public Relations’. Through these the international financial institutions imposed on indebted nations loan conditions which included trade liberalisation, the deregulation of industry and the privatisation of state-owned industries and services. This is what Martin Khor (Director of the Third World Network) describes as the ‘de-industrialisation’ of the developing world[26], preventing governments from managing their country’s basic services such as health, education and water and from protecting the livelihoods of small producers and manufacturers by placing tariffs on unfairly subsidised imports.

But how does this process of de-industrialisation fit with the evidence of increasing manufacturing importance in national statistics for the Central American economies? The Table on Exports of manufactured goods as a percentage of total exports demonstrates that from 1970 to 2010 the value of the export of manufactured goods as a percentage of all exports increased in five of the seven countries. The answer to the apparent contradiction is found in the maquilas or sweatshop assembly factories which have been established in the region over the decades since the 1970s. As labour costs increased in the developed capitalist or metropolitan nations, transnational corporations (TNCs) found it profitable to re-locate the most labour-intensive elements of their production to low-wage countries which would serve simply as a platform to receive components which were altered in some way and then ‘sprung off’ the platform either to markets in the metropolitan nations or to other platforms elsewhere in the world where further alterations or additions were made to the product.

The maquila process is one which contributes to a globalised economy rather than to a national economy. Very often there is little advantage accruing to the host nation other than the employment opportunities offered to local populations, but the maquilas are associated with extremely poor wage levels and abusive conditions of employment. The development of maquilas is covered again in more depth later in this chapter.

To some extent this inequality of access to modern business infrastructure is illustrated by the example of the Plan Puebla-Panama given in the following section. This brings us very suitably to ask the question: how have the effects of these global policies shown themselves in the economies of Central America? And that in turn brings us to an examination of the most recent twenty years of free trade treaties negotiated between the Central American nations and other trading blocks.

[1] Eduardo Galeano (1973) Open Veins of Latin America: Five Centuries of the Pillage of a Continent, New York and London: Monthly Review Press, p. 218.
[2] Katie Willis (2002) ‘Open for business: strategies for economic diversification’, in Challenges and Change in Middle America, edited by Cathy McIlwaine and Katie Willis, Essex: Pearson Education.
[3] Victor Bulmer-Thomas (1987) The Political Economy of Central America Since 1920, Cambridge: Cambridge University Press, pp.80-81.
[4] Op.cit. Katie Willis..
[5] André Gunder Frank (1967) Capitalism and Underdevelopment in Latin America, Monthly Review Press, London.
[6] Frank, A. G. (1966) ‘The development of underdevelopment’, Monthly Review 18, 4: 17–31; (1969) Latin America: Underdevelopment or Revolution, New York: Monthly Review Press; (1970) Lumpen-Bourgeoisie: Lumpen-Development, Dependency, Class, and Politics in Latin America, New York and London: Monthly Review Press.
[7] Kay, C. (1989) Latin America Theories of Development and Underdevelopment, London: Routledge.
[8] Walter Rodney (1988) How Europe Underdeveloped Africa, London: Bogle L’Ouverture Publications.
[9] Arturo Escobar (1995) Encountering Development, Princeton: Princeton University Press, p.83.
[10] Op.cit. (Willis).
[11] Ron Ayres and David Clark (1998) ‘Capitalism, Industrialisation and Development in Latin America: the Dependency Paradigm Revisited’, Capital & Class, 64 (Spring) (pp.89-118), London. (Quote from p.110).
[12] For example, see: Duncan Green (2003) Silent Revolution: the rise and crisis of market economics in Latin America, Latin America Bureau; Susan George (1988) A Fate Worse Than Debt, Penguin; Susan George (1992) The Debt Boomerang, Pluto Press; and refer to the work of the World Development Movement and the Third World Network.
[13] Op.cit. (Willis).
[14] John Perry (2008) ‘The debate on energy and climate change – a different perspective’, Ch. 17 (pp 229-244) of ‘Opening Doors – Improving housing services for refugees and new migrants’, Chartered Institute of Housing.
[15] Rostow, W. (1960) The Stages of Economic Growth: A Non-communist Manifesto, Cambridge: Cambridge University Press.
[16] Gilbert Rist (1997) History of Development, London: Zed Books.
[17] WTO/OMT (1995) GATS and Tourism, Madrid: WTO/OMT, p. 1.
[18] David Ricardo (1817) The Principles of Political Economy and Taxation, London, J.M. Dent, 1973.
[19] Op.cit. (Rist, p.114).
[20] Teresa Hayter (1982) The Creation of World Poverty: An Alternative View to the Brandt Report, London: Pluto Press, p.96.
[21] Bridget Wooding and Richard Moseley-Williams (2004) ‘Worlds Apart’, Interact, Spring 2004. London: Catholic Institute for International Relations, p. 9.
[22] Fred Rosen (2003) ‘Changing the terms of the debate: a report from Antigua’, NACLA Report on the Americas, XXXVII (3), November/December 2003, page 25. New York: North American Congress on Latin America.
[23] Wayne Ellwood (2004) ‘The World Trading System’, New Internationalist, no. 374, December 2004, Oxford: New Internationalist.
[24] Oscar Guardiola-Rivera (2010) What if Latin America Ruled the World? How the South Will Take the North into the 22nd Century, London: Bloomsbury, p.3.
[25] Bernard Crick (2004) ‘How the rich stole the dream’, The Independent, London, 11 June 2004. Crick was referring to the manipulation of the capitalist tax system to benefit the rich, but in the context of the development of the capitalist economic system. We consider that the contexts of his remark and of ours are similar enough for it to be used to describe deregulation.
[26] Martin Khor (21 June 2006) ‘Beware of NAMA’s slippery slope to de-industrialisation’, TWN Info Service on WTO and Trade Issues (June 06/18), (accessed 30.07.12).