Document Type: 
Document Number (FOIA) /ESDN (CREST): 
Release Decision: 
Original Classification: 
Document Page Count: 
Document Creation Date: 
December 21, 2016
Document Release Date: 
August 22, 2008
Sequence Number: 
Case Number: 
Publication Date: 
August 25, 1967
Content Type: 
PDF icon CIA-RDP79-00927A006000010002-5.pdf617.26 KB
Approved For Release 2008/08/22 : CIA-RDP79-00927A006000010002-5 Secret DIRECTORATE OF INTELLIGENCE WEEKLY SUMMARY Special Report Progress Toward Economic Integration in Latin America State Dept. review completed Secret N2 45 25 August 1967 No. 0304/67A 25X1 Approved For Release 2008/08/22 : CIA-RDP79-00927A006000010002-5 Approved For Release 2008/08/22 : CIA-RDP79-00927AO06000010002-5 Approved For Release 2008/08/22 : CIA-RDP79-00927AO06000010002-5 Approved For Release 2008/08/22 : CIA-RDP79-00927AO06000010002-5 SECRET PROGRESS TOWARD ECONOMIC INTEGRATION IN LATIN AMERICA Since the inter-American summit meeting last April, some small steps have been taken toward the goal of Latin American economic integration as set forth in the Declaration of Presidents and the Summit Action Program approved at Punta del Este. Any real progress, however, must contend with the traditional nationalism and self-interest of many Latin American politicians and with the protectionism ad- vocated by most area businessmen. Few if any of the countries relish the prospect of giving up freedom of action in implementing domestic and foreign economic policies or of abandoning the dream of developing a complete industrial structure. In addition, major problems are involved in reconciling the wide variation of prices and levels of industrial development. The idea of economic cooperation is, however, at- tractive to Latin American governments as a means of reversing the decline in their share of world trade and of countering the potential threat of discriminatory policies by the European Economic Community. They believe that creation of a regional market through integration will permit them to speed industrialization and will strengthen their ability to compete with the large economies of the United States and Europe. Obstacles to Integration Despite recent moves, there are still many obstacles blocking significant progress toward ef- fective economic cooperation among Latin American countries. Geographical factors, for in- stance, make it far easier to establish ocean trade routes with countries outside Latin America than to move goods over- land. Existing communications and transportation facilities are insufficient to meet present needs, let alone provide for future growth. Political barriers are even more troublesome. Old rivalries and continuing border disputes between neighboring countries militate against agreement on tariff concessions and other moves toward economic coopera- tion. Several nations that pride themselves on their democratic development find it difficult if not impossible to work closely with-countries ruled by military regimes or coup-imposed govern- ments. Traditional nationalism prob- ably will be at least as diffi- cult to overcome as the economic problems. An example of this situation was Ecuadorean President Arosemena's refusal to sign the Declaration of Presidents. His SECRET Page 1 SPECIAL REPORT 25 Aug 67 Approved For Release 2008/08/22 : CIA-RDP79-00927AO06000010002-5 ;,NI; Approved For Release 2008/08/22 : CIA-RDP79-00927A006000010002-5 BB~RPTtSPI HONoURNS ''HONDURAS Latin American Free Trade Associat c n (LAFTA) Central American Common Market (CACM) Canbbean Free Trade Area ((,:AR'RIFTA) ANTIGUA BARBADOS Approved For Release 2008/08/22 : CIA-RDP79-00927A006000010002-5 Approved For Release 2008/08/22 : CIA-RDP79-00927AO06000010002-5 SECRET speeches ignored economic inte- gration and concentrated on sub- jects, such as territorial limits and problems with US aid, that would get attention in Ecuador. Existing Regional Economic Groupings Two regional economic group- ings began in Latin America dur- ing 1961-62--the Central American Common Market (CACM) and the less-ambitious Latin American Free Trade Association. They have followed different paths to integration, and have achieved sharply differing degrees of success. Guatemala, Nicaragua, Hon- duras, El Salvador, and Costa Rica are members of CACM, and Panama attends most meetings as an observer. CACM has acted to remove tariffs on almost all products traded among its members and to unify their tariffs on trade outside the area. In ad- dition, CACM has adopted the principle of cooperative plan- ning for the development of trans- portation, communications, and industries to serve the whole area. Plans exist for the even- tual adoption of a common cur- rency. Under CACM, the value of intraregional trade increased more than fivefold between 1960 and 1966, coming to account for one fifth of the total trade of the member countries. With grow- ing industrialization, the im- portance of manufactured goods in this trade has increased markedly. The Latin American Free Trade Association (LAFTA) is composed of Mexico and all in- dependent countries of South America except Guyana. The main, though distant, goal of this grouping has been the establish- ment of a free trade area through a gradual, product-by-product reduction of tariffs on intra- regional trade. Progress so far has been limited. Although siz- able gains have been made in trade among member countries, these gains to a large extent reflect recovery from unusually low levels of trade at the time LAFTA was established. The difficulty of negotiating product-by-product tariff reductions has been evident at each of LAFTA's annual con- ferences. Most countries made all the easy concessions during the early rounds of negotiations, and subsequent cuts have been in- creasingly difficult to arrange because of the pressure of various influential political and economic groups. Representatives of the gov- ernments that are members of CACM and LAFTA are currently meeting in Asuncion, Paraguay, to try to draft a plan for the eventual merger of the two groups. Colombia proposed that the US be invited to send an observer of ambassado- rial rank to the meeting because of the necessity of obtaining US financing for much of the economic integration program. The resolu- tion, which the US favored, was voted down in a secret session, however. The Central American countries, moreover, are wary of forging too close a connection with LAFTA, fearing that their SECRET Page 3 SPECIAL REPORT 25 Aug 67 Approved For Release 2008/08/22 : CIA-RDP79-00927AO06000010002-5 Approved For Release 2008/08/22 : CIA-RDP79-00927AO06000010002-5 SECRET smaller economies may be at too great a disadvantage in the compe- tition for markets within the regional grouping. Negotiations toward the Latin American Common Market therefore are expected to be long and difficult. Guyana, Barbados, and Antigua have already formed a Caribbean Free Trade Area (CARIFTA), which is due to begin operation early in 1968. The involvement of these territories in the system of British Commonwealth trade pref- erences will be an obstacle to their full participation in any Latin American Common Market. Summit Action Program The Summit Action Program is the major substantive document to emerge from the Punta del Este meeting. As the second part of the Declaration of Presidents, it sets forth in some detail the aims of economic cooperation and the means of achieving them. This document pledges the Latin Amer- ican governments, with US as- sistance, to work toward formation of a common market by 1985, with the formal part of the process scheduled to get under way by 1970. To achieve the regional common market, the Action Program advocates the progressive elimina- tion of internal trade restric- tions, the gradual harmonization of external tariffs within LAFTA, and the fostering of closer ties between LAFTA and CACM. Special treatment has been provided for the less-developed countries dur- ing the establishment of the Latin American Common Market. Trade policy occupies an im- portant place in the Summit Action Program. The Latin American ral- lying cry has become "Trade, not aid," and in furtherance of this objective, the Latins are press- ing the US to become their advocate before the developed Western Euro- pean countries. Much of the pro- gram is phrased in general terms, but in essence it expresses the belief that the trade preferences received by the former British and French colonies in Africa put Latin America at a disadvantage in the competition for world mar- kets. The Latin Americans want the US to press the Europeans to end their preferential systems, but at the same time they want similar trade preferences from the US for Latin American goods. The Summit Action Program does not deal directly with the sensitive subject of Latin Amer- ican military expenditures. It does not specifically call for a diversion of funds from mili- tary spending to economic devel- opment, but it does urge limit- ing military expenditures "in proportion to the actual demands of national security." Progress Since Punta del Este The initial steps toward implementing the decisions of Punta del Este have been primarily in the cultural and economic fields. SECRET Page 4 SPECIAL REPORT 25 Aug 67 Approved For Release 2008/08/22 : CIA-RDP79-00927AO06000010002-5 Approved For Release 2008/08/22 : CIA-RDP79-00927A006000010002-5 SECRET Shortly after the summit meet- ing, Venezuela called a special meeting of the Inter-American Cultural Council to discuss the implications of the Declaration of Presidents. This meeting set up an advisory group to consider sharing technological knowl- edge among the member countries of the Organization of American States. This is clearly a small step, and one that is unlikely to offend important interests in Latin America. It is, however, an attempt to carry out at least partially the obligations in- curred at Punta del Este. the other LAFTA countries toward the formation of the larger Latin American Common Market. The vitality of the group led Bolivia to sign the Declaration of Bogota at the current meeting of the Mixed Commission, and it now has become a member of the Andean group. The members of the Andean Development Corporation are aided by the relatively strong commit- ment of all the governments to the idea of economic integration. Furthermore, the fact that all except Ecuador have democratically elected reform governments pro- vides another common interest. A more significant develop- ment occurred at the Inter-Amer- ican Economic and Social Council meeting at Vina del Mar, Chile, from 15 to 26 June 1967. Chile, Colombia, Ecuador, Peru, and Venezuela agreed to begin im- plementation of a subregional trade association within the LAFTA structure. This idea re- ceived its start in August 1966 at a meeting in Bogota of pres- idents and presidential represent- atives of the countries concerned. At the June 1967 meeting, the five countries agreed to set up an Andean Development Corpora- tion. This group's Mixed Com- mission has held several meet- ings and appears to be developing into an active force for economic integration. The Andean Corpora- tion will work to coordinate in- dustrial development and to finance multinational infrastruc- ture projects. There is specula- tion that the five Andean coun- tries might form their own common market--say by 1975--and then ne- gotiate as a group with CACM and The Vina del Mar meeting also recommended the establishment of an Inter-American Export Agency. This organization would be an autonomous part of the Inter-Amer- ican Economic and Social Council, charged with seeking new markets for Latin America's traditional products and with developing mar- kets for new products. This pro- gram would be aimed primarily at increasing Latin America's trade with European and African coun- tries. The major problem facing the Latin American countries in their drive to economic integration re- mains the political decisions that will have to be made. Although the enthusiasm generated by the Andean Development Corporation may carry over into other fields, the initial sense of commitment to a common market could cool as the complexities of resolving inte- gration problems become apparent. SECRET Page 5 SPECIAL REPORT 25 Aug 67 Approved For Release 2008/08/22 : CIA-RDP79-00927A006000010002-5 Approved For Release 2008/08/22 : CIA-RDP79-00927AO06000010002-5 Secret Secret Approved For Release 2008/08/22 : CIA-RDP79-00927AO06000010002-5