By Rachel Dickson
Interview with: Lic. Eduardo Ordoñez
CAFTA
will affect many sectors of society, but the intended effect is
the economy. CAFTA will alter the roles of the government multinational
businesses and small national businesses in hopes to strengthen
the economies.
The actual effects have yet to be seen, and many feel the economies
may be impacted negatively. To learn more about the economic implications,
I interviewed Licenciado Eduardo Ordoñez, an economics
professor at San Carlos University in Quetzaltenango, Guatemala.
The economies of the U.S. and Central America are drastically
asymmetrical, and Ordoñez believes that, in general, bilateral
investment treaties lead to the absorption of the economy of the
smaller country by the larger economy. The inequality in production,
income, poverty, education, health, and technology between the
U.S. and Central America limits the success that free trade can
have.
In reality, only a small percentage of the U.S.'s trade is with
Central America, and the U.S.'s economy will not be extremely
affected by CAFTA. Ordoñez believes the U.S.'s motives
behind CAFTA are much more geopolitical than economical in nature.
The small Central American countries will receive the brunt of
the economic impact.
Opening the market between the U.S. and Central America will force
many of the micro-industrial businesses and small agricultural
producers out of business due to their inability to compete at
a global level.
Employment rates will also be affected, but it is hard to predict
how. Although many will lose their jobs when their small companies
go out of business or are relocated, many jobs will also be created,
especially in Central America due to the translocation of many
international companies. But if sufficient investment doesn't
come to compensate for the destruction of productivity in Guatemala,
the rates of unemployment will increase while the wellbeing of
the country will drops.
In general, CAFTA prioritizes trade more than development goals.
The CAFTA investment chapter prevents governments from enforcing
performance requirements on foreign investors. This prevents governments
from requiring foreign companies to hire a certain percentage
of local people or utilize a percentage of domestically produced
goods, and thus weakens the capacity of the government to alter
through regulation the direction and development of the country,
such as the completion of the millennium goals. It's very possible
that sufficient employment opportunities won't be created in Guatemala
to counterbalance bankruptcies of businesses, and the poverty
will rise. There is also a clause in the investment chapter of
CAFTA that says that the multinational companies can sue the state
of Guatemala for failure to comply with conditions outlined under
CAFTA, furthering weakening the government.
A
lot of trade liberalization has already occurred in Guatemala
in the last ten years, and Ordoñez believes that development
has not followed. The per capita production rate of Guatemala
has dropped a lot in the last few years and the inequality of
incomes has risen. As a result, immigration from Guatemala to
the U.S. has risen, and likewise, remittances of the income of
immigrants in the U.S. back to Guatemala have risen. This is the
only thing that has helped the economy of Guatemala. Under CAFTA,
conditions will continue to favor immigration to the U.S., and
remittances will continue to grow, thus securing Guatemala's dependence
on the U.S.
The most important impact of CAFTA will indeed be geopolitical
and not economical. Although trade will increase, the commercial
gap between the U.S. and Guatemala will increase as well. Exports
from the U.S. to Guatemala will increase, and although exports
from Guatemala to the U.S. will increase, the primary exporter
from Guatemala will be U.S. businesses that have relocated to
Guatemala.
Ordoñez believes that CAFTA is not a good trade treaty
for Guatemala, and will not favor development. A beneficial trade
treaty would compensate for the economic asymmetries between the
U.S. and Central America, but CAFTA will only resolve in more
deep social inequalities.
