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Multilateral Investment Fund Signing 2/11/92 [OA 7568]
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George H.W. Bush Presidential Records
Collection/Office of Origin:
Speechwriting, White House Office of
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Speech File Backup Files
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Chron File, 1989-1993
OA/ID Number:
13798
Folder ID Number:
13798-001
Folder Title:
Multilateral Investment Fund Signing 2/11/92 [OA 7568]
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26
22
3
2
George Jolson
To michelle
To
Michelle
Date 6 Fell Time 5:33
Date 219/0
Time 2:30p
WHILE YOU WERE OUT
WHILE YOU WERE OUT
escorge Colsem
M Lisa Reategui
of
of Phone 566-8243. Extension
Phone 647-9100
Area Code
Number
Area Code
Number
Extension
TELEPHONED
TELEPHONED
X PLEASE CALL
PLEASE CALL
CALLED TO SEE YOU
WILL CALL AGAIN
CALLED TO SEE YOU
WILL CALL AGAIN
WANTS TO SEE YOU
URGENT
URGENT
WANTS TO SEE YOU
RETURNED YOUR CALL
RETURNED YOUR CALL
633-7832
Message
Message
ILLIF speech
7ay 23-021 CARBONLESS
Operator
Operator
mg
AMPAD
AMPAD
EFFICIENCY
23-021 CARBONLESS
EFFICIENCY®
FRIDAY, FEBRUARY 7, 1992
America's Growing Economic Lead
By LAWRENCE B. LINDSEY
striking. Nearly half of America's real eco-
in particular are increasing their pace of
Two leading Japanese politicians,
nomic growth over the past five years has
investment. During 1989, the U.S. exported
Prime Minister Kiichi Miyazawa and
been in exports.
twice as many capital goods to Latin
Speaker of the House Yoshio Sakurauchi
Also contrary to the pessimists' claims,
America as did Japan. The other area of
have caused a firestorm by questioning the
U.S. exports have become less based on
potential investment in the years ahead is
quality and work ethic of America's
farm and other primary goods and more
the former communist bloc, which could
workers and this country's ability to com-
focused on high technology. Capital equip-
become a staggering source of future
pete in the world. But doubts about Amer-
ment has risen to 41% of U.S. exports from
growth of U.S. capital goods exports.
ica are not confined to foreigners. Not too
30% in the late 1960s, largely as a result of
The most urgent message of this
long ago, some American leaders warned
the world-wide investment boom: As other
analysis is that encouraging faster world-
that the country is at risk of a future of
countries develop their economies, they
wide economic development might be the
flipping hamburgers and sweeping up
purchase increasing amounts of American-
single most effective policy for promoting
around Japanese computers.
made machines, computers and air-
the growth of exports. The export-promo-
Fortunately, the evidence is strong that
planes.
tion policy that many suggest as an alter-
those who are bearish about America's fu-
During the past two decades, the invest-
native to freer trade is a reduction in the
ture are wrong about both the past and the
ment share of world product has risen to
exchange value of the dollar. This has
future. But the pessimism about America
26% from 22%. In dollar terms, gross
three potential drawbacks. First, it's not
is SO widespread that talk of protectionism
world investment outside the U.S. in 1992
clear that a country's monetary authorities
and a retreat from active involvement in
will be roughly $5 trillion.
can control the value of their currency.
international economic and political affairs
We should hope that this process con-
Second, If forelgn-exchange markets per-
is again fashionable. The facts suggest that
ceive that devaluation is an intended pol-
those seeking a truly effective industrial
policy should actually favor active Ameri-
In the late 1960s, only
icy of the U.S. government, interest rates
in assets denominated in dollars might rise
can promotion of rapid world-wide eco-
20% of American capital
to offset the exchange-rate loss. Third, de-
nomic growth in the context of free
valuation would reduce Americans' pur-
trade.
goods were exported.
chasing power and standard of living.
Growing Advantage
Today, about 45% of capi-
Recent history provides a good test of
Research by Andrew Warner of Har-
the relative efficacy of world-wide invest-
vard University and the Federal Reserve
tal-goods output is sold
ment and exchange-rate depreciation. The
shows that, contrary to popular belief,
late 1980s were a period not only of rapidly
America's advantage is in the production
abroad. Capital-goods ex-
growing world-wide investment spending,
of high-technology capital goods, and that
ports now amount to 4%
but also of real dollar depreciation. During
this advantage has been growing. A key
the five years following the Plaza Accord
reason for the recent boom in exports has
of GDP.
of 1985, the dollar fell 38% on a trade-
been the rapid rise of world-wide spending
weighted basis. World-wide investment
on capital goods.
tinues, not only for humanitarian reasons,
spending rose 38% over the same period.
Over those five years, total U.S. mer-
Industrial Giant
but also to benefit the American economy.
chandise exports rose $192 billion in infla-
Each 1% in world investment spending
Back in the late 1960s, when by all ac-
tion-adjusted terms. $106 billion of the ad-
produces a 1.5% increase in exports of cap-
counts the U.S. was the world's industrial
ital goods, and almost a full point increase
ditional merchandise exports, or 55%, was
giant, manufacturing amounted to about
statistically associated with the rise of
in total merchandise exports. Strikingly,
22% of real gross domestic product. Much
global investment.
not only does the relationship between
of this manufacturing went into defense
world-wide investment and U.S. exports
Common-Sense Ideas
and the production of consumer goods
pass traditional statistical tests easily, the
Let there be no mistake: Neither Amer-
from shirts to automobiles. Only 28% of
relationship stands up to a wide variety of
ica nor any other country can expect to en-
the manufacturing base was devoted to
mathematical and statistical specifica-
joy an economic free ride. Americans
capital goods such as computers, aircraft
tions. In fact, the link between U.S. exports
should continue their efforts to reform the
and industrial machinery, and only 20% of
and world-wide investment shows some
nation's schools, increase the investment
American capital goods were exported.
signs of having strengthened in recent
rate, encourage the natural entrepeneur-
The total value of U.S. capital-goods ex-
years.
ship of the population and subject govern-
ports was just 1.4% of GDP.
It is interesting to contrast the U.S. per-
ment spending and regulation to rigorous
Today, when some assert that the U.S.
formance with that of Japan. There is no
cost-benefit tests. But these are common-
has lost its manufacturing base, manufac-
evidence of a statistical relationship be-
sense ideas that we would be well advised
turing output has risen to 23% of real GDP.
tween Japanese exports and world invest-
to undertake regardless of the interna-
The share of the manufacturing base de-
ment spending over the past quarter cen-
tional trading situation.
voted to capital goods has risen to 38%.
tury. There does appear to be some im-
There may be some advantage in hav-
This capital-goods boom has been made
provement over time for Japan, although
ing Mr. Miyazawa and his countrymen
possible by exports: About 45% of capital
this improving trend does not pass statisti-
think that America is in decline. It proba-
goods output is now sold abroad, more
cal muster. Further, even at its highest,
bly pays to be underestimated. But we
than double the proportion of the late
the sensitivity of Japanese exports to
would be foolish to underestimate our-
1960s. Capital-goods exports now amount to
world-wide investment spending remained
selves. World economic trends are moving
4% of GDP.
below America's.
our way and we do not need to be pro-
Contrary to the pessimists' view, a ma-
One reason for the popularity of the pes-
tected from them. If anything, we need to
jor part of this improvement occurred dur-
simists' view is that America's strengths
reinforce them and to increase our expo-
ing the 1980s, and particularly the late
are not apparent in goods that consumers
sure to them. The best industrial policy for
1980s. During the 1980s, the growth in real
normally buy. To see them, one has to visit
America to pursue is active involvement in
exports amounted to one-fifth of the real
factories, construction sites and airport
the world's affairs to promote global-eco-
growth of the economy. Inflation-adjusted
hangars-not your usual tourist stops.
nomic development and free trade.
growth in exports of capital goods out-
The regional composition of investment
paced overall growth by better than two to
also appears to be shifting in America's fa-
one. Since 1986, the story is even more
Mr. Lindsey is a governor of the Fed-
vor. Latin America as a whole and Mexico
eral Reserve, in Washington, D.C.
Photo copy Preservation
02/06/92
18:32
202 633 0985
OASIA IDB
001/003
DEPARTMENT OF THE TREASURY
WASHINGTON
Facsimile Transmittal
From
Office of Multilateral Development Banks (OASIA/IDB)
1500 Pennsylvania Avenue, N.W.
Room 5400
Washington, D.C. 20220
(Fax # 202-633-0985)
Date:
2/6/92
Page 1 of 3
Page(s)
To:
michelle nix
Tel. #
456-7750
FAX #
456-6218
From:
George Folsom
Comments:
Draft talking points on MIF
Signing for President Bush
02/06/92
18:33
202 633 0985
OASIA IDB
002/003
Draft Talking Points for President Bush
MIF Signing Ceremony
President Iglesias, distinguished representatives, honored
guests,
--
I am delighted to be with you today to host this
ceremony for the signing of the Multilateral Investment
Fund.
When I launched the Enterprise for the Americas Initiative
in June 1990, I placed a great deal of importance on
assisting Latin American countries to open their economies
to investment.
--
This is good for Latin America and for the U.S.
economy.
The Multilateral Investment Fund, is a critical component of
my Initiative.
--
It will stimulate private investment in Latin America
by promoting reforms that encourage an open investment
climate.
-
In turn, this will promote economic growth in the
region and provide new trade and investment
opportunities for the American people.
Today, Latin America is the strongest and most visible
market for U.S. exports and direct investment.
|
Half of our foreign investment in developing countries
goes to Latin America, and one in seven dollars of U.S.
exports world wide are to this region.
As investment in this region expands, U.S. exports and U.S.
jobs will be generated, which will stimulate economic growth
in our country.
Indeed, all nations will benefit from a more open investment
climate and expanded economic opportunities in Latin
America.
But this is not an objective that any one country can
achieve; international cooperation is key.
--
That's why the Multilateral Investment Fund is widely
supported by the international community -- both by the
countries outside the region as well as those through-
out Latin America and the Caribbean.
02/06/92 18:33
202 633 0985
OASIA IDB
003/003
- 2 -
-- At least $1.2 billion has already been pledged for this
important Fund, and more countries are expected to make
financial pledges soon -- advancing us toward our $1.5
billion funding goal.
For our part, the United States intends to contribute $500
million to the Multilateral Investment Fund.
-- I look forward to early congressional approval of
legislation to authorize and appropriate funds for our
contribution.
And to administer this Fund, the Inter-American Development
Bank will lead the way - adding to its critical role in
promoting economic growth and development in Latin America.
-- I place a great deal of confidence in this institution
and in it's effective President, Mr. Enrique Iglesias.
o
In signing these documents, we bring the Multilateral
Investment Fund into existence.
-- It is my commitment to promote economic growth and
prosperity in our hemisphere -- jobs for our people,
and opportunities for our business communities.
- I believe that the Multilateral Investment Fund will
advance these objectives.
It is, therefore, with great pleasure that I welcome you to
this signing ceremony.
02/07/92 12:16
202 633 0985
OASIA IDB
001/002
3
DEPARTMENT OF THE TREASURY
WASHINGTON
Facsimile Transmittal
From
Office of Multilateral Development Banks (OASIA/IDB)
1500 Pennsylvania Avenue, N.W.
Room 5400
Washington, D.C. 20220
(Fax # 202-633-0985)
Date:
2/7/92
Page 1 of 2
Page(s)
To:
Michelle Nix
Tel. #
456-7750
FAX #
456-6218
From:
Ronda Bresnich for George Folsom
Comments:
attached is material on U.S. exports and
jobs that can be used for the President's
talking points at the MIF signing ceremony
02/07/92 12:17
202 633 0985
OASIA IDB
1
002/002
ENTERPRISE FOR THE AMERICAS INITIATIVE (EAI)
Benefits to the United states and to the Region from the EAI
--
Latin America and the Caribbean represent the fastest
growing regional market for U.S. exports.
U.S. exports to the region have grown by 12 percent
annually during the past 5 years -- much faster than
exports to the rest of the world.
Exports to the region have doubled since 1986 -- to $62
billion.
1 of every 7 dollars of U.S. exports now goes to Latin
America and the Caribbean.
The United States accounts for 57% of the region's
imports, compared to 29% for Europe and 11% for Japan -
- we have the most to gain from stronger economies and
more open markets.
Every $1 billion increase in U.S. exports generates
20,000 export-related jobs.
:
The Enterprise for the Americas Initiative will:
support economic growth and improve individual welfare
throughout the region;
open markets for U.S. exporters;
expand opportunities for U.S. investors; and
ease debt burdens, releasing resources for capital
formation, imports, education, health, and the
environment.
--
The United States will benefit through:
stronger growth at home,
improved investment earnings,
increased exports,
more jobs, and
better regional security.
-
To advance the EAI further, Congress needs to:
provide the necessary authorizing legislation
(currently pending in the foreign aid bill rewrite);
appropriate $310 million in FY '92 and $286 million in
FY '93 to fund debt reduction; and
appropriate $100 million each year for 5 years for the
U.S. contribution to the Multilateral Investment Fund.
Claire
20 dignitures Fouign
See Body
Enrique Idesias
will be
# o jobs created by
depends",Rate of aform
USTR
Bet,
Myles Frechette
1/6 and 1/7
395- 6135
Ast. U.S. Trade
More than
Rep.
'90+'89 2/3 "has gove"
68.5%
Fact Check Copy /
(Duggan/Nix)
February 7, 1992
Draft Two
Invest
PRESIDENTIAL REMARKS:
MULTILATERAL INVESTMENT FUND
SIGNING CEREMONY
ROOSEVELT ROOM
TUESDAY, FEBRUARY 11, 1992
2:30 p.m.
[Acknowledgments]
Today marks another milestone along the path of mutual
progress for the United States and its friends and neighbors. We
move a large step closer to fulfilling the vision of a free,
peaceful, prospering Western Hemisphere. As we sign the charter
NSCDeal
for the new Multilateral Investment Fund, we advance the far-
sighted aims of the Enterprise for the Americas Initiative. Our
new fund is an exciting innovation: It will provide targetted
support for Latin American countries as they transform lumbering
George 566-8243 Folson
state-run industries into efficient private enterprises.
In a neighborhood of free and stable economies, investment
helps everyone. Our effort today will lift the tide of hope and
freedom. It will free up new resources so that men and women
throughout the Americas can carry their dreams and achievements
as far as their God-given talents will take them.
Make no mistake: The future growth of the United States
economy depends on expanding mutual investment and trade with our
neighbors in the Americas. Flourishing trade and investment
throughout the hemisphere will create new jobs for men and women
in Syracuse and St. Louis as well as in Sao Paolo and Santiago.
TimDeal
billion dollars
Right now, we earn one in every seven of our worldwide export
of
George
566-824 566
Folson
DOC
Lindywood AID
7
642-9100
Inter-American
More than
2/3 (68.5%)
George
dollars from Latin America. Over Half of our foreign investment in
566-8243
has goml
Fact Tim Deal
developing countries goes to Latin America. And we're moving
NSC
forward to create in this hemisphere a new free trade area of 360
million consumers and six trillion billion dollars in annual output -- the Bob
Carla soffice
North American Free Trade Area of Mexico, Canada and the United
Fisher
&
States. This commitment will endure -- we're in this to stay.
Dir.
USTR
Mex. Aff.
The future doesn't frighten us. I ask you to look up on the wall
USTR
of this Roosevelt Room: We're sitting beneath a portrait of the
great world leader who said in a truly dark and dangerous time -
395- 3412 DC
Batlets
- a time far more we have difficult, far more threatening than ours --
pg.779
"the only thing to fear is fear itself."
a
I know the people of the United States, and I can assure you
that we will say no to the gloomy spirits that want to make
pessimism a self-fulfilling prophecy. We don't want to "protect"
our future from freedom, opportunity and growth. Working
Americans -- and those looking for work -- have common sense.
They know that when other countries develop their economies, that
results in more sales for America's airplanes, computers, and
Governor
other high-quality capital goods. Over the past five years,
nearly half of America's real economic growth has been in exports
Larry
Linday
-- and exports will carry us to rewarding new destinations in our 452-321
Cond trics
future.
Sysu
Lati America
Latin America?
Our partners in Canada and Japan and Europe already have
joined us in pledging a total at cast of 1.2 billion dollars to this
(mine than
important fund for our future. The U.S. pledge alone is 500
George Folson
million dollars -- one-third of the 1.5 billion dollar goal.
I
566-Am 824
Appreciate
Johnson
equal
Treasury
Inter Ank
Spain
3
urge the United States Congress to act without delay to provide
the funds to fulfill this pledge.
Let me salute all the representatives of the nations
Debbik
Myerst
participating in this promising new effort. I want to commend
the Inter-American Development Bank and its president, Enrique
Folson
George
Iglesias, who will administer the new fund. I am confident you
566 8243
will do an outstanding job with your new responsibility.
This is a moment not so much for us but for future
generations. It is they who will benefit from what we commence
today. It is for them that we invest in a new age of discovery
and opportunity -- from Hudson Bay to the Strait of Magellan.
Thank you, and may God bless all the peoples of the
Americas.
#
#
#
Additional Fact Check Entries
(Duggan/Nix)
February 8, 1992
Draft Three
Invest
PRESIDENTIAL REMARKS:
MULTILATERAL INVESTMENT FUND
SIGNING CEREMONY
ROOSEVELT ROOM
TUESDAY, FEBRUARY 11, 1992
2:30 p.m.
[Acknowledgments]
Today marks another milestone along the path of mutual
progress for the United States and its friends and neighbors. We
move a large step closer to fulfilling the vision of a free,
peaceful, prospering Western Hemisphere. As we sign the charter
for the new Multilateral Investment Fund, we advance the far-
sighted aims of the Enterprise for the Americas Initiative. Our
new fund is an exciting innovation: It will provide targeted
support for Latin American countries as they transform lumbering
state-run industries into efficient private enterprises.
In a neighborhood of free and stable economies, investment
helps everyone. Our effort today will lift the tide of hope and
freedom. It will free up new resources so that men and women
throughout the Americas can carry their dreams and achievements
as far as their God-given talents will take them.
Make no mistake: The future growth of the United States
economy depends on expanding mutual investment and trade with our
neighbors in the Americas. Flourishing trade and investment
throughout the hemisphere will create new jobs for men and women
in Syracuse and St. Louis as well as in Sao Paolo and Santiago.
Right now, we earn 62 billion dollars -- one in every seven of
George
2
our worldwide export dollars -- from Latin America. Half of our
foreign investment in developing countries goes to Latin America.
And we're moving forward to create in this hemisphere a new free
trade area of 360 million consumers and six billion dollars in
annual output -- the North American Free Trade Area of Mexico,
Canada and the United States.
This commitment will endure -- we're in this to stay. The
future doesn't frighten us. I ask you to look up on the wall of
this Roosevelt Room: We're sitting beneath a portrait of the
great world leader who said in a truly dark and dangerous time -
- a time far more difficult, far more threatening than ours --
"the only thing we have to fear is fear itself."
I know the people of the United States. I can assure you
that we will say no to the gloomy spirits that want to make
pessimism a self-fulfilling prophecy. We don't want to "protect"
our future from freedom, opportunity and growth. Working
Americans -- and those looking for work -- have common sense.
They know that when other countries develop their economies, that
results in more sales for America's airplanes, computers, and
other capital goods. Over the past five years, nearly half of
America's real economic growth has been in exports. During those
same five years, U.S. exports to Latin America and the Caribbean
George
Folson
increased by 12 percent annually -- much faster than exports to
the rest of the world. Exports will carry us to rewarding new
Treasury 566
destinations in our future. Every billion-dollar increase in
8243
exports generates 20,000 new jobs in the United States.
3
Our partners in Canada, Japan, Spain and other countries in
Europe and Latin America already have joined us in pledging more
than 1.2 billion dollars to this important fund for our future.
The U.S. pledge alone is 500 million dollars -- one-third of the
1.5 billion dollar goal. I urge the United States Congress to
act without delay to provide the funds to fulfill this pledge.
Congress also must provide funds for our Latin American debt
8243
reduction plans. By focusing on the future and advancing the
566
Enterprise for the Americas Initiative, Congress can help me lead
the United States to improved investment earnings, increased
exports and more jobs.
Let me salute all the representatives of the nations
participating in this promising new effort. I want to commend
the Inter-American Development Bank and its president, Enrique
Iglesias, who will administer the new fund. I am confident you
will do an outstanding job with your new responsibility.
This is a moment not so much for us but for future
generations. It is they who will benefit from what we commence
today. It is for them that we invest in a new age of discovery
and opportunity -- from Hudson Bay to the Strait of Magellan.
Thank you, and may God bless all the peoples of the
Americas.
#
#
#
Fact Check Copy /
(Duggan/Nix)
d
February 7, 1992
Draft Two
Invest
PRESIDENTIAL REMARKS:
MULTILATERAL INVESTMENT FUND
SIGNING CEREMONY
ROOSEVELT ROOM
TUESDAY, FEBRUARY 11, 1992
2:30 p.m.
[Acknowledgments]
Today marks another milestone along the path of mutual
progress for the United States and its friends and neighbors. We
move a large step closer to fulfilling the vision of a free,
peaceful, prospering Western Hemisphere. As we sign the charter
NSCDeal
for the new Multilateral Investment Fund, we advance the far-
sighted aims of the Enterprise for the Americas Initiative. Our
and areasury
new fund is an exciting innovation: It will provide targetted
George
support for Latin American countries as they transform lumbering
566-8243 Folson
state-run industries into efficient private enterprises.
In a neighborhood of free and stable economies, investment
helps everyone. Our effort today will lift the tide of hope and
freedom. It will free up new resources so that men and women
throughout the Americas can carry their dreams and achievements
as far as their God-given talents will take them.
Make no mistake: The future growth of the United States
economy depends on expanding mutual investment and trade with our
neighbors in the Americas. Flourishing trade and investment
throughout the hemisphere will create new jobs for men and women
in Syracuse and St. Louis as well as in Sao Paolo and Santiago.
Tim Deal
Right now, we earn one in every seven of our worldwide export
of
George
566-8243
Folson
Inter American
treasury Jon
George
2
566-8243
dollars from Latin America. Half of our foreign investment in
Fact Tim
developing countries goes to Latin America. And we're moving
Deal
NSC
forward to create in this hemisphere a new free trade area of 360
trillion
million consumers and six billion dollars in annual output -- the
Carla Hills
North American Free Trade Area of Mexico, Canada and the United
States.
This commitment will endure -- we're in this to stay.
The future doesn't frighten us. I ask you to look up on the wall
of this Roosevelt Room: We're sitting beneath a portrait of the
great world leader who said in a truly dark and dangerous time -
Batlets pg.779
- a time far more difficult, far more threatening than ours --
we have
"the only thing to fear is fear itself."
n
I know the people of the United States, and I can assure you
that we will say no to the gloomy spirits that want to make
pessimism a self-fulfilling prophecy. We don't want to "protect"
our future from freedom, opportunity and growth. Working
Americans -- and those looking for work -- have common sense.
They know that when other countries develop their economies, that
results in more sales for America's airplanes, computers, and
Governor
other high-quality capital goods. Over the past five years,
Fed Reserve
nearly half of America's real economic growth has been in exports
Larry
-- and exports will carry us to rewarding new destinations in our
452-3213 Lindry
and trics
future.
Spon
the & Latin America contristen
Latin
Our partners in Canada and Japan and Europe already have
America?
joined us in pledging a total at least of 1.2 billion dollars to this
(hose than
important fund for our future. The U.S. pledge alone is 500
George
Folson
million dollars -- one-third of the 1.5 billion dollar goal.
I
566-Am 8243
Appreciate-the Janes Spain equal
Treasury Bank
3
urge the United States Congress to act without delay to provide
the funds to fulfill this pledge.
Let me salute all the representatives of the nations
Debbik Mycrst +
participating in this promising new effort. I want to commend
the Inter-American Development Bank and its president, Enrique
Folson
George
Iglesias, who will administer the new fund. I am confident you
566 8243
will do an outstanding job with your new responsibility.
This is a moment not so much for us but for future
generations. It is they who will benefit from what we commence
today. It is for them that we invest in a new age of discovery
and opportunity -- from Hudson Bay to the Strait of Magellan.
Thank you, and may God bless all the peoples of the
Americas.
#
#
#
February 10, 1992
INFORMATION
MEMORANDUM FOR THE PRESIDENT
THROUGH:
DAVID DEMAREST
TONY SNOW
FROM:
JOE DUGGAN
SUBJECT:
MULTILATERAL INVESTMENT FUND SIGNING CEREMONY
I. SUMMARY
On Tuesday, February 11, at 2:30 p.m., in the Roosevelt
Room, you will deliver remarks to an audience of approximately 40
people gathered for the signing of the MIF agreement. Included
in this audience will be ambassadors from the 16 countries who
have pledged to contribute to this fund.
II. DISCUSSION
Your remarks highlight the benefits of this fund not only
for Latin America, but also for Canada, Europe and the United
States.
Changes made after
Staffing 2/711:35
(Duggan/Nix)
February 7, 1992
Draft Two
Invest
PRESIDENTIAL REMARKS:
MULTILATERAL INVESTMENT FUND
SIGNING CEREMONY
ROOSEVELT ROOM
TUESDAY, FEBRUARY 11, 1992
2:30 p.m.
[Acknowledgments]
Today marks another milestone along the path of mutual
progress for the United States and its friends and neighbors. We
move a large step closer to fulfilling the vision of a free,
peaceful, prospering Western Hemisphere. As we sign the charter
for the new Multilateral Investment Fund, we advance the far-
sighted aims of the Enterprise for the Americas Initiative. Our
new fund is an exciting innovation: It will provide targeted
support for Latin American countries as they transform lumbering
state-run industries into efficient private enterprises.
In a neighborhood of free and stable economies, investment
helps everyone. Our effort today will lift the tide of hope and
freedom. It will free up new resources so that men and women
throughout the Americas can carry their dreams and achievements
as far as their God-given talents will take them.
Make no mistake: The future growth of the United States
economy depends on expanding mutual investment and trade with our
neighbors in the Americas. Flourishing trade and investment
throughout the hemisphere will create new jobs for men and women
in Syracuse and St. Louis as well as in Sao Paolo and Santiago.
2
Right now, we earn one in every seven of our worldwide export
dollars from Latin America. Half of our foreign investment in
developing countries goes to Latin America. And we're moving
forward to create in this hemisphere a new free trade area of 360
million consumers and six billion dollars in annual output -- the
North American Free Trade Area of Mexico, Canada and the United
States. This commitment will endure -- we're in this to stay.
The future doesn't frighten us. I ask you to look up on the wall
of this Roosevelt Room: We're sitting beneath a portrait of the
great world leader who said in a truly dark and dangerous time -
- a time far more difficult, far more threatening than ours --
"the only thing we have to fear is fear itself."
I know the people of the United States, and I can assure you
that we will say no to the gloomy spirits that want to make
pessimism a self-fulfilling prophecy. We don't want to "protect"
our future from freedom, opportunity and growth. Working
Americans -- and those looking for work -- have common sense.
They know that when other countries develop their economies, that
results in more sales for America's airplanes, computers, and
other high-quality capital goods. Over the past five years,
nearly half of America's real economic growth has been in exports
-- and exports will carry us to rewarding new destinations in our
future.
Our partners in
Canada, Japan, Spain and other countries in
Europe and Latin America already have joined us in pledging more
than 1.2 billion dollars to this important fund for our future.
3
The U.S. pledge alone is 500 million dollars -- one-third of the
1.5 billion dollar goal. I urge the United States Congress to
act without delay to provide the funds to fulfill this pledge.
Let me salute all the representatives of the nations
participating in this promising new effort. I want to commend
the Inter-American Development Bank and its president, Enrique
Iglesias, who will administer the new fund. I am confident you
will do an outstanding job with your new responsibility.
This is a moment not so much for us but for future
generations. It is they who will benefit from what we commence
today. It is for them that we invest in a new age of discovery
and opportunity -- from Hudson Bay to the Strait of Magellan.
Thank you, and may God bless all the peoples of the
Americas.
#
#
#
02/08/92 16:27
202 623 3612
IDB US EXD
001
INTER-AMERICAN DEVELOPMENT BANK
WASHINGTON, D.C. 20577
EXECUTIVE DIRECTOR
CABLE, ADDRESS
INTAMBANC
United States
FACSIMILE COVER SHEET
DATE: 6 February 1992
NUMBER OF PAGES TO FOLLOW: 20
TO: Michelle Nix
White House / Speich Writing
ADDRESSEE'S FAX NUMBER: 456-6218
ADDRESSE'S CONFIRMATION NUMBER: 456-7750
FROM:
U.S. Executive Directors office
SENDER'S FAX NUMBER: 623-3612
SENDER'S CONFIRMATION NUMBER: (202) 623-1031
COMMENTS/SPECIAL INSTRUCTIONS:
Here is the MDF Concept Paper and agreement Establishing
the MDF. I will send the countries in a minute.
NATIONAL SECURITY COUNCIL
06-Feb-1992 15:24 EDT
UNCLASSIFIED
MEMORANDUM FOR:
Robert B. Morley
( MORLEY )
FROM:
Pat A. Battenfield
(BATTENFIELD)
SUBJECT:
Call from Speechwriting
Joe Dugan (Speechwriting) has been tasked with preparing remarks for the
President for the MIF signing ceremony. He said he's not familiar with the
subject and would like to talk with someone here as soon as possible.
Tim is out at a meeting for at least another 30 minutes. Do you want to talk
with Dugan or should he speak with Tim?
Dugan's number is: x2930.
CC: Roseanne M. Hill
( HILLR )
CC: O. Ruth Stalcup
( STALCUP )
CONFIDENTIAL
CONF IDENTIAL
8996
The Bush Record on
A
ENTERPRISE FOR THE AMERICAS INITIATIVE
n (The Enterprise for the Americas Initiative) is a
prescription for greater growth and a higher standard of
living in Latin America -- and right here at home, new
markets for American products, and more jobs for American
workers."
-- President George Bush
June 27, 1990
Enterprise for the Americas: Creating Jobs for Americans
President Bush's proposal to create a free trade zone in the
Americas is rapidly becoming a reality.
-
The United States has taken the first step toward the vision
of a hemispheric free trade system by commencing
negotiations with Mexico and Canada on a North American Free
Trade Agreement. In addition, the Bush Administration has
signed trade framework agreements with approximately thirty
hemispheric countries. Our neighbors are responding by
reducing trade barriers and introducing reforms that offer
opportunities for American exports and investment. U.S.
exports to the region grew by 10% in 1990 and are expected
to grow by 14% in 1991, creating more jobs for Americans.
-
The Bush Administration has signed debt agreements with
Chile, Bolivia, and Jamaica on the basis of their commitment
to economic reform. Congress has authorized debt relief for
other countries willing to open their markets and implement
strong economic reform measures.
The Bush Administration's innovative proposal to establish a
Multilateral Investment Fund to provide additional targeted
support for privatization of hemispheric economies is
By it NARA, Date 06/12/23
PER NSC WAIVER,
gaining support and producing results. Chile, Argentina,
Brazil, Mexico, Venezuela, and others have initiated this
difficult process, creating opportunities for local
DECLASSIFIED
businesses as well as American companies.
up to American business and the products of American labor.
A market of close to five hundred million people is opening
Enterprise for the Americas: Strengthening Freedom in the
Hemisphere
Political freedoms are never secure unless people have
economic freedoms that bring opportunity and prosperity. The
three pillars of the Enterprise for the Americas Initiative,
trade, investment, and debt relief, are helping hemispheric
countries grow and develop as never before. Venezuela is
expected to grow by 8% this year, Argentina, Mexico and Chile by
CONFIDENTIAL
2
4-5%. These growth rates produce employment and better living
standards in these countries, reducing immigration pressures and
the threat of authoritarian governments in the hemisphere.
Enterprise for the Americas: Protecting the Environment
In the context of the Enterprise for the Americas
Initiative, the Bush Administration has made a strong statement
in support of the concept of debt relief in exchange for
protection of the environment.
-
It led to the Group of Seven's 1990 Houston Economic
Declaration statement singling out debt for environment
swaps as a mechanism that can play a useful role in
protecting the environment.
-
In the fall of 1990, the Paris Club decided to accept debt
for environment transactions as a strategy for reducing
foreign debt burdens in heavily indebted countries.
-
As part of the Enterprise for the Americas Initiative
process, we have signed debt for environment agreements with
Chile, Bolivia, and Jamaica, and expect more to follow. The
Bush Administration is negotiating a comprehensive plan with
Mexico to deal with border environmental concerns in the
context of the broad Enterprise for the Americas effort.
Enterprise for the Americas: The Next Steps
The Bush Administration remains committed to working with
our hemispheric neighbors to sustain the excellent progress we
have made to date.
-
We hope to conclude the North America Free Trade Agreement
with Mexico and Canada by early 1992.
-
We will promote active use of Trade and Investment Councils
to resolve trade issues, discuss the requirements for free
trade agreements, and facilitate negotiations when the
appropriate time arrives. We are pursuing such discussions
with Chile, for example.
We and the Japanese have pledged $500 million each over five
years to the Multilateral Investment Fund and will solicit
additional contributions from other countries.
Congressional action is needed to provide funding for the
Multilateral Investment Fund and for debt reduction
purposes.
In short, the Bush Administration has made the Enterprise
for the Americas Initiative a high priority because it produces
jobs for Americans, helps assure freedom and prosperity for our
neighbors, and promotes measures designed to protect the
environment throughout the hemisphere.
PB
The Bush Record on
THE ENTERPRISE FOR THE AMERICAS
INITIATIVE
"[The Enterprise for the Americas Initiative] is a
prescription for greater growth and a higher standard
of living in Latin America -- and right here at home,
new markets for American products, and more jobs for
American workers."
-- President George Bush
June 27, 1990
The Enterprise for the Americas Initiative has supported the
economic revitalization of Latin America and the Caribbean.
It has bolstered the commitment to market-oriented reforms
and investment liberalization by Latin American leaders, by
producing tangible results for their developing economies,
while also providing new, profitable opportunities for U.S.
trade and investment. As a result:
0
capital inflows to the region more than tripled, from
$4 to $14 billion, between 1989 and 1990;
O
foreign exchange reserves increased by $13 billion, the
largest increase in a decade;
O
as one of the fastest growing markets for American
products, U.S. exports to the region grew by 10% in
1990, with growth forecast at 14% in 1991; and
O
U.S. direct investment in Latin America rose by more
than 15% in each of the last two years.
*
*
*
The three pillars of the Enterprise for the Americas are trade,
investment, and debt. To expand trade -- President Bush proposed
that we begin the process of creating a hemisphere-wide free
trade zone; to increase investment -- that we adopt measures to
create a new flow of capital into the region; and to further ease
the burden of debt, a new approach to debt in the region -- with
important benefits for our environment.
TRADE
President Bush's proposal to create a free trade zone in the
Americas is a goal that is now widely accepted throughout the
Hemisphere. As a first step, the United States has already
successfully negotiated bilateral trade framework agreements with
thirty countries in the Hemisphere: We are engaged in intense
négotiations with our Canadian and Mexican colleagues on the
North American Free Trade Agreement. [Chile could also be a free
trade agreement candidate based on its open trade and investment
regimes and prudent macroeconomic management.)
2
INVESTMENT
Inter-American Development Bank is taking the lead role in a
The investment sector lending program aimed at helping Latin
American new and Caribbean countries undertake dramatic
liberalization of their investment regimes. Four investment
sector loans have already been negotiated with Chile, Bolivia,
Jamaica, and Colombia. Negotiations are now underway with
Argentina, Costa Rica, El Salvador, Guatemala, Honduras, Trinidad
and Tobago, and Uruguay.
The United States has also proposed the creation of a
Multilateral Investment Fund, with a one-time capitalization of
approximately $1.5 billion. The Fund, to be administered by the
Inter-American Development Bank, will provide resources for
privatization, for strengthening the productive capacities of the
work force, and for making capital more easily available to the
smaller entrepreneur. Japan, Spain, Portugal, and Canada have
all expressed their enthusiastic support. Major Latin countries
have also stated their intention to join the Fund. We expect the
MIF agreement to be signed as early as January 1991.
DEBT/ENVIRONMENT
Chile, Bolivia, and Jamaica have already received initial
benefits under the EAI debt pillar, eliminating a total of $263
million in food assistance debt. We are seeking further
authority and appropriations from Congress to reduce foreign
economic assistance debt and to sell a limited portion of
Eximbank and Commodity Credit Corporation assets for debt/equity,
debt-for-nature, or debt-for-development swaps.
Bolivia and Jamaica have already signed Environmental Framework
Agreements with the United States. This enables them to make
interest payments on their reduced debt obligations in local
currency to support grass roots environmental projects. This
element of the EAI has received strong support from the
environmental community, and involves their active participation
through the recent creation of a U.S. Environment for the
Americas Board to review the local environmental programs.
In short, the Enterprise for the Americas Initiative is actively
working to encourage trade, investment, and growth in Latin
America and the Caribbean.
Services of Mead Data Central, Inc.
PAGE
2
4TH STORY of Level 1 printed in FULL format.
Copyright (c) The Bureau of National Affairs, Inc., 1991
BNA INTERNATIONAL TRADE DAILY
Dec. 31, 1991
LENGTH: 1458 words
Export Trends
TORRICELLI, HAMILTON OPPOSE IDEA
THAT CUBAN TRADE EMBARGO BE EASED
MIAMI (BNA) -- Two House Foreign Affairs Committee members said the United
States will not ease its trade embargo against Cuba--as was suggested by
Massachusetts Institute of Technology Professor Rudiger Dornbusch--as long as
Cuban leader Fidel Castro remains in power.
The suggestion that the embargo be eased met with strong opposition from
Rep. Robert Torricelli (D-NJ), chairman of the House Foreign Affairs
Subcommittee on Western Hemisphere Affairs. Easing the embargo at this time,
he said, would give false hope to the communists, prolong the dictatorship in
Cuba, and postpone the "day of reckoning." No change in U.S. relations with
Cuba is coming under Castro's government, he said.
Speaking at the 15th Annual Miami Conference on the Caribbean sponsored by
Caribbean/Latin American Action, which took place in Miami Dec. 2-6,
Dornbusch told Torricelli that Cuba and Castro are not the same thing. Saying
that the United States had won the war, Dornbusch commented that the biggest
risk was losing the peace and making Cuba into another Haiti.
Rep. Lee Hamilton (D-Ind), chairman of the House Foreign Affairs
Subcommittee on Europe and the Middle East, also said it was not possible for
the United States to have normal relations with or lift the embargo on a
Castro-led Cuba. But, Hamilton said, discussions with Cuba on specific issues
should begin. To the extent that Cuba is able to accommodate the United
States, Hamilton said that he would be prepared to take "modest steps" to
improve the situation. The U..S. trade embargo against Cuba has been in place
since 1963.
Need for a Soft Landing for Cuba
Dornbusch said that the greatest challenge to the region is how to
engineer a "soft landing" for Cuba. Caribbean and Central American countries
should seek ways to lighten the U.S. trade embargo against Cuba in order to
facilitate Cuba's re-entry into the region's economy, he said. If re-entry
into the world economy is not facilitated, Cuba could become another Haiti,
Dornbusch suggested. Haiti's economy is being devastated by a trade embargo
imposed Oct. 29 by the United States after Haiti's democratically elected
president was toppled (8 ITR 1583, 10/30/91).
At a panel discussion on Cuba and tourism Dec. 5, attorney Bruce Colan, of
Fine, Jacobson, Schwartz and Nash, said that the extent to which trade
between the United States and Cuba will occur after the embargo is lifted is
heavily dependent on the availability of financing. Products that Cuba will
export include sugar, fish, tobacco, and citrus, he said. Miami should
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BNA INTERNATIONAL TRADE DAILY (c) BNA, Inc., Dec. 31, 1991
receive more benefits from trade with Cuba than any other area in the United
States, Colan added. Efforts should be made to identify and minimize any
"bottlenecks" that could result from a resumption of normal relations with
Cuba, he said.
Substantial Air Traffic Predicted
The air traffic between Havana and Miami will be "very substantial" once
normal relations are resumed, attorney Pedro Freyre of Dow Latin America
said. Antolin Carbonell, who is with the Miami International Airport, said
that a plan has been developed to accommodate the increase in air traffic
that would follow a change of government in Cuba.
Jean Holder, secretary general of the Caribbean Tourism Organization, said
that Cuba is making serious efforts to address conditions for tourism. If the
embargo is lifted, there will be a lot more hotel joint ventures in Cuba,
Colan said, adding that Cuba will have a start-up advantage since it will be
able to offer deals that few countries in the region will be able to match.
Freyre noted that Cuba has fallen off the most preferred trading partner
list of the former communist bloc countries. In his view, there is a "faint
smell of desperation" in the air.
Business Unlikely to Return to Haiti
In the case of the Haitian trade embargo, even if the embargo were lifted
tomorrow, business will not return to the area anytime soon, speakers at the
Dec. 4 session of the conference said.
Andrew Postal, president of Judy Bond Inc., a company that manufactured
blouses in Haiti, said that 20,000 to 30,000 jobs have been lost as a result
of the embargo. However, Haitian Association of Industries President Jean
Baker estimated that more than 60,000 jobs have been lost.
Some U.S. firms have been lost permanently in the area and those that are
thinking of going back will do so on a limited basis, Postal said.
Speakers agreed that the embargo has devastated the already struggling
private sector and that economic recovery would be a slow process for Haiti
after the embargo is lifted.
Doubts about Haiti's Future
Prior to the embargo, Haiti imported about 65 percent of its products from
the United States, and the United States took about 85 percent of its
exports, according to the State Department.
The issue now is whether U.S. companies will go back, Postal said, adding
that there will be the perception in board rooms of "enormous risk" in going
back after the embargo is lifted.
Peter Evelyn, president of Kirk Line Inc., said he did not see trade with
Haiti resuming after the embargo is lifted. "No one will be able to buy
goods," he commented.
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Haitian private sector representative Andre Apaid, who is also a trustee
for Caribbean/Latin American Action, blasted the embargo, saying it was
starving people and ruining the private sector. The embargo is punishing the
private sector, not the army, he said.
The Organization of American States called for the embargo after Haitian
President Jean-Bertrand Aristide was ousted in a military coup (8 ITR 1507,
10/16/91). President Bush prohibited exports and imports of goods and
services to and from Haiti as of Nov. 5, 1991 (8 ITR 1584, 10/30/91).
Postal argued that it would take more than the lifting of the embargo and
the restoration of Aristide to get Haiti on track again, adding that anyone
who thought it would be business as usual after the embargo is lifted is
living in a "fool's paradise."
According to Postal, even if the embargo were lifted "tomorrow," U.S.
business would not return to the area for at least several months "on a
best-case basis."
U.S. Department of Commerce Caribbean Basin Division Director Jay Dowling
said that it will be harder and harder to bring U.S. companies back with each
passing day of the embargo. He added that the United States does not have a
plan to bring back investment to Haiti because the situation changes every
day.
Rick Helfenbein, president of Crystal Brands/Izod Kids, said that while he
said was committed to going back to Haiti after the crisis is over,
guarantees would have to be provided that his goods and people would be safe.
Investment Fund Will Be Finalized
During a luncheon address Dec. 5, Mexican Deputy Secretary of Commerce
Pedro Noyola tried to assuage the fears that NAFTA will be a source of
problems for countries in the Caribbean region. Noyola said that the Mexico
is interested in analyzing the possibilities of negotiations with the
Caribbean region on improved market access and tariff and non-tariff barrier
elimination.
While acknowledging Caribbean concern that new foreign investment may be
diverted to Mexico as a result of NAFTA, Treasury Undersecretary for
International Affairs David Mulford Dec. 3 emphasized that NAFTA is still
being negotiated and the Mexico will "not get duty-free treatment overnight
but gradually over a transition period as a result of mutual concessions."
Mulford said the United States plans to finalize and sign the multilateral
investment fund agreement in early 1992. The MIF concept is contained in
President Bush's Enterprise for the Americas Initiative, a reform package for
Latin America that includes a debt-reduction plan, a vision for hemispheric
free trade, and a stronger emphasis on environmental protection in the
hemisphere (7 ITR 983, 7/4/90).
While the Inter-American Development Bank is the "focal point" for
implementing the investment portion of the initiative, Mulford noted that a
number of non-IDB members, particularly in the eastern Caribbean, are
interested in participating. The U.S. government supports participation by
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BNA INTERNATIONAL TRADE DAILY (c) BNA, Inc., Dec. 31, 1991
non-IDB member countries, Mulford said, adding that the United States is
exploring options with the IDB and hopes to develop a workable solution.
LEXIS'NEXIS'LEXIS NEXIS
Draft Talking Points for President Bush
DRAFT
MIF Signing Ceremony
President Iglesias, distinguished representatives, honored
guests,
--
I am delighted to be with you today to host this
ceremony for the signing of the Multilateral Investment
Fund.
When I launched the Enterprise for the Americas Initiative
in June 1990, I placed a great deal of importance on
assisting Latin American countries to open their economies
to investment.
--
This is good for Latin America and for the U.S.
economy.
The Multilateral Investment Fund, is a critical component of
my Initiative.
--
It will stimulate private investment in Latin America
by promoting reforms that encourage an open investment
climate.
--
In turn, this will promote economic growth in the
region and provide new trade and investment
opportunities for the American people.
Today, Latin America is the strongest and most visible
market for U.S. exports and direct investment.
Half of our foreign investment in developing countries
goes to Latin America, and one in seven dollars of U.S.
exports world wide are to this region.
As investment in this region expands, U.S. exports and U.S.
jobs will be generated, which will stimulate economic growth
in our country.
Indeed, all nations will benefit from a more open investment
climate and expanded economic opportunities in Latin
America.
But this is not an objective that any one country can
achieve; international cooperation is key.
That's why the Multilateral Investment Fund is widely
supported by the international community -- both by
donors and the countries of Latin America.
DRAFT
- 2 -
--
$1.2 billion has already been pledged for this
important Fund, and more countries are expected to make
financial pledges soon --- advancing us toward our $1.5
billion funding goal.
For our part, the United States intends to contribute $500
million to the Multilateral Investment Fund.
-- I look forward to early congressional approval of
legislation to authorize and appropriate funds for our
contribution.
And to administer this Fund, the Inter-American Development
Bank will lead the way -- adding to its critical role in
promoting economic growth and development in Latin America.
-- I place a great deal of confidence in this institution
and in it's effective President, Mr. Enrique Iglesias.
o
In signing these documents, we bring the Multilateral
Investment Fund into existence.
-- It is my commitment to promote economic growth and
prosperity in our hemisphere -- jobs for our people,
and opportunities for our business communities.
-- I believe that the Multilateral Investment Fund will
advance these objectives.
O
It is, therefore, with great pleasure that I welcome you to
this signing ceremony.
02/00/92 17.18
TY202 023 3012
IDB US EXD
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Countries that have pledged to the Multilateral Investment Fund (MIF)
United States
Japan
Canada
Italy
Portugal
France
Mexico
Venezuela
Brazil
Argentina
Chile
Colombia
Peru
Uruguay
02/06/92 17:19
202 623 3612
IDB US EXD
001
INTER-AMERICAN DEVELOPMENT BANK
WASHINGTON, D.C. 20577
EXECUTIVE DIRECTOR
CABLE ADDRESS
INTAMBANC
United States
FACSIMILE COVER SHEET
DATE: 6 February 1992
NUMBER OF PAGES TO FOLLOW
TO: Michelle nix
White Howes /Speech Whiting
ADDRESSEE'S FAX NUMBER: 0/56-6218
ADDRECED'E CONFIRMATION NUMBER: 456-7750
FROM: July Mass
Executive Directors
SENDER'S FAX NUMBER: 623-3612
SENDER'S CONFIRMATION NUMBER: (202) 623-1031
COMMENTS/SPECIAL INSTRUCTIONS:
Here is the list of countries that have pladge/donated
to the MDF
1)
02/06/92
16:28
202 623 3612
IDB US EXD
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MULTILATERAL INVESTMENT FUND
Overview
Most countries in Latin America and the Caribbean have sustained
serious economic losses during the 1980's, with the average per
capita income declining by almost 8%. Low or negative economic
growth, high inflation and frequent balance of payments crises have
led to a lack of private sector confidence in the region. On a net
transfer basis, some $200 billion has fled the region, and the
level of investment has dropped by one-third during the decade.
To resume economic growth in the region, a dramatic increase in
investment is needed. This requires a fundamental transformation
in development strategies. The public sector, which prior to the
debt crisis had been identified as an engine of growth in these
countries, is no longer able, or expected, to provide the
investment required. In fact, many inefficient state enterprises
represent a major drain on these economies.
Latin governments in general now have come to the realization that
private sector investment must play a larger role in promoting
economic growth. However, the private sector remains unable to
make the investment because of severe constraints imposed by
government policies and inadequate domestic or foreign financing.
Moreover, substantial domestic savings are being transferred out of
Latin America and what remains is too small to meet public and
SI
private investment needs.
Many governments have a window of opportunity to make comprehensive
reforms. The transition must be swift and special levels of
picn
international support must be mobilized to stimulate investment and
finance reform efforts during a transition period. Poor economic
fide
performance in Latin America could spill over into domestic
discontent with the national governments, placing added pressure on
the viability of many of the emerging democracies in the region.
awel
To resume private sector oriented growth, three basic elements are
required: (i) macroeconomic stabilization; (ii) an open market
ecdom
system built on private investment; and (iii) a private sector that
can stimulate and respond to new investment opportunities. Much of
the work to foster these conditions can be supported through
existing IMF, IBRD and IDB programs. However, a number of
do
difficult obstacles cannot be reached through the existing
financial structures of these institutions. The institutions are
&
unable to generate the level of net income needed to finance the
for
activities desired. Therefore, grant resources to complement MDB
God heats
efforts are needed over the next several years to facilitate a more
rapid and successful transition to private sector-led growth.
The Enterprise for the Americas Initiative calls for reforms to
cre
establish private sector-led, open market economies. Those
countries willing to undertake investment reforms, will become
02/06/92
16:29
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IDB US EXD
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candidates for official debt relief and improved trade access. To
support investment liberalization, the IDB will design investment needed
sector operations utilizing appropriate loans to finance the
reforms.
To complement and strengthen the efforts of multilateral and
bilateral agencies in identifying and removing investment
constraints in Latin American and Caribbean countries, President
Bush proposed establishment of a Multilateral Investment Fund
(MIF) The Fund would be administered by the Inter-American
Development Bank.
The Fund is designed to augment the IDB, IIC and World Bank's loan
and technical assistance resources. The MIF would support
countries making difficult policy reforms in situations where IDB
or World Bank financing would be inappropriate.
The needed reforms often require far-reaching, costly, and painful
measures, such as reducing government employment and privatizing
public onterprises; opening protected domestic markets; and,
revitalizing private sectors crippled by years of neglect and a
lack of interaction with global markets. MIF funding would also
help develop the mechanisms that support private enterprise, such
as banking and trade finance services.
A large portion of MIF support would be in the form of grant
funding to assist countries that are experiencing large budget
deficits and are unable to increase revenues or borrow
internationally. MIF funding would also provide the funding for
training needed to speed the rebuilding of a vigorous private
sector.
We are proposing a Multilateral Investment Fund totalling $1.5
billion to be paid in at $300 million per year for five years. The
United States would contribute $100 million per year. Other IDB
non-borrowing countries would fund the remaining $200 million per
year. Funding levels for the various facilities and allocations
for individual programs are to be determined by the donors.
Structure of the Multilateral Investment Fund
The Multilateral Investment Fund will have three separate
facilities for activities:
an expanded technical assistance facility to identify and
implement the policy changes needed to transform recipient
economies;
a human resources facility to mitigate the social costs of
economic restructuring by retraining displaced workers, and to
strengthen the productive capacities of the workforce, from
laborer to manager; and,
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an enterprise development facility to stimulate investment and
private sector financing while broadening participation of
low-income groups, women and minorities in the economy.
The three facilities provide the flexibility to design assistance
tailored to a specific country's situation. Funds can be shifted
among facilities depending on need, in consultation with donor
governments.
I. Technical Assistance Facility
The and scope of reform differs substantially from country to
country. pace Many governments are not in a position to identify
constraints to investment or the reforms that are needed.
Therefore expert technical assistance is required to evaluate
national and sectoral policies. Creation of a positive policy
environment for investment will often require a more facilitating
regulatory environment and a legal code compatible with
international standards. In addition, reforms involving
privatization require highly trained expertise capable of assisting
in valuing and selling public-owned assets. Technical assistance
grants are needed to contract the required advisory services. This
is especially true for those countries unable to incur additional
foreign indebtedness or in cases where foreign exchange generally
is a binding constraint.
The Technical Assistance Facility would provide grant assistance in
the following areas:
--
Country diagnostic studies to identify investment constraints
and advisory services for legislation and regulatory reform,
Design and implementation of privatization programs,
--
Financial sector development,
--
Business infrastructure development.
A. Country Diagnostic Studies and Reform. AS a first step, MIF
funds would be used to finance country diagnostic studies to
identify investment constraints and to develop options for removing
them. These studies would examine legislative, financial and
regulatory constraints among other investment impediments. This
exercise would serve as the basis for comprehensive reform of the
investment climate. Many countries in the region subsequently will
need substantial assistance to bring their investment and
commercial codes, tax systems, regulatory procedures and agencies
and their judicial systems up to international standards. Some
countries are already revising their investment codes; other should
do it if funds were available.
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would B. be used for designing privatization programs at the national
Design and Implementation of Privatization Programs. Funds
level and for implementing the privatization of specific
enterprises. Technical assistance grants of this type are needed
in the larger economies but also would be ideally suited for the
smaller state-owned enterprises located in Central America and the
Caribbean. MIF resources are needed to help in the valuing,
restructuring, marketing and sale of small and medium state-owned
enterprises.
C. Financial System Development. Tecnnical assistance in the
banking sector and capital markets is needed to review a country's
[inameial syctom to identify impediments to the mobilization and
allocation of resources. The primary objective would ne to creale
new capabilities for the financial system. This could entail
improving operations of existing institutions or examining the
possibilities for developing new institutions where needed.
Technical assistance for countries with weak financial systems,
such as many in Central America, would focus on basic reforms to
eliminate practices that inhibit or distort the financial system.
Countries with more sophisticated financial institutions would be
candidates for targeted innovations, such as creation of an over-
the-counter equity markets or a metals exchange, building where
possible on institutions and infrastructure already in place.
Overall objectives in addressing the financial system would be to:
create improved investment instruments and improve the
availability of longer-term financing from private sources;
eliminate interest rate distortions;
increase the security of the financial sector through
prudential regulations, improved accounting and disclosure
standards, and training of professional staff in risk and
credit analysis; and,
assist in the modernization of technical infrastructure to
access and process information more quickly.
D. Business Infrastructure Development. Technical assistance in
this area would be used to assist governments to identify, In
prioritize and develop needed business infrastructure.
addition, substantial technical assistance is needed to assist
governments to develop strategies that promote private sector
integration and support for government initiatives to develop
needed infrastructure such as telecommunications, roads, ports,
power, etc.
II. Human Resources Facility
While human resources development has long been an objective of the
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IDB and other international financial institutions, circumstances
today demand additional and urgent efforts to mitigate the social if
cost of the transformation to open market economies. And
investment is to be attracted, the skills needed to support a
dynamic business environment must be developed quickly. Human
resource programs most often require grant financing. While they
build the capacity of individuals to participate in the economy
they often do so without any assured means to recover the cost.
And addition, workers displaced by a shrinking public sector
generally lack the finances needed for retraining and relocation.
The human resources facility would provide grant assistance in the
following areas:
--
Restructuring work forces,
--
Vocational education,
-- Management training.
A. Restructuring Work Forces. Many governments have been heavily
over-staffed, especially in their public enterprises. Unless this
overstaffing can be eliminated in an acceptable manner and public
unrest and fiscal imbalances. Democracies need to support
expenditure cut quickly, economic reforms can be defeated by social
redundant workers with a social safety net and train them for
economically viable jobs elsewhere. The needs here are often
massive and compelling, given the level of restructuring required.
Often the retraining of displaced workers can be carried out
through government programs or through local NGO's. A minimum
family support package to include basic housing and food may be
required for a defined period while the training is in progress.
B. Vocational Education. In many countries skilled labor is in
short supply and unable to service the manpower needs of growing,
export-oriented enterprises. It is essential that business be able
to obtain appropriately trained workers. This will require the
development of vocational training programs that are responsive to
the manpower needs of the private sector. In particular, workers
have to be trained to international standards of production if
these countries are to attract foreign investors. Vocational
educational programs often may require institutional development to
carry out the training. Such programs are traditionally recognized
as requiring public sector support because the financial benefits
are hard to capture as workers enter the workforce or move from
business to business. Grant funding to governments launching such
programs is often essential as the only means of financing
available.
C. Management Training. As the private sector expands and a
country integrates further into the global economy, a variety of
management skills must be available at international standards.
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Managers need to improve quickly their capabilities in
international norms of finance and accounting, dispute settlement,
transportation, computers, etc. In several poor countries where
markets were protected from external competition, there is both a
lack of trained managers and the absence of an institutional
structure to develop managers able to function in these areas. In
these special instances, where government budgets are constrained
and the country is over-indebted, some of these areas should be
considered for grant technical assistance.
III. Enterprise Development Fund
Throughout the region, micro and small enterprises lack the
necessary skills to respond to business opportunities that arise
from changing economic conditions and policy reforms. But even
with the appropriate skills, many entrepreneurs are handicapped
by lack of access to essential financing.
Stimulating small businesses activity is a key element in
promoting sustainable economic growth. Growth in this sector can
produce important economic and social benefits that extend well
beyond improving the living standards of the owners. These
benefits include job creation and significant participation by
women who make up a large percentage of micro-entrepreneurs. For
countries in recession, the growth of smaller enterprises also
contributes to a broader-based recovery of domestic demand.
The Enterprise Development Facility is designed to improve the
responsiveness of smaller enterprises to changing economic
conditions and policy reforms. The Facility has three basic
objectives:
--
Business Development Program to improve the ability of micro
and small enterprises to identify and pursue business
opportunities; and
--
Financial Services Program to create or expand financial
services to small and micro enterprises,
Investment Fund to provide loan and equity financing to
small entrepreneurs.
A. Business Development Program
Throughout Latin America there is a desire to broaden the
participation of low-income groups, women and minorities in the
economy. Typically these groups do not have the skills to
exercise their entrepreneurial instincts. Street vendors and
microenterprises are unable to plan their businesses, apply for
working capital and other financing and interact successfully
with the government for licenses and contracts. In many
countries this has led to the development of a large informal
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economy which is highly efficient given the constraints within
which it operates, but inefficient as regards the overall economy
and its development.
The Business Development Program will organize or provide grants
to existing non-governmental organizations (NGOS) (such as
foundations, educational institutions, business cooperatives and
associations, and community organizations) and to local financial
institutions that provide services to micro and small business.
These grants can be used to help individuals develop business
plans, to assist smaller entrepreneurs solve business problems
such as production or distribution, to work with smaller
enterprises to identify sources of financing, and to bring
entrepreneurs together with business opportunities.
B. Financial Services Program
Domestic financial institutions throughout the region are most
often unwilling or unable to provide financial services to micro
and small entrepreneurs. In general, transaction costs for
lenders are high relative to revenue and risks are perceived to
be great. And even if financing is available to small
businesses, it is usually very short term and expensive.
Finally, financial institutions are often physically remote from
where smaller entrepreneurs live and work and may be
intimidating, especially for microentrepreneurs in the informal
sector.
Financial requirements of smaller businesses include working
capital loans, leasing, seed capital for start-ups, finance for
recovery or expansion, and equity to create a solid capital base
from which to grow.
These capital needs are diverse and there is no single type of
financial service or form of organization that can address the
requirements of all smaller businesses. The purpose of the
Financial Services Program is to promote "institution-building"
of NGOS and domestic financial intermediaries to expand the
volume and range of services for smaller businesses. The goal is
to establish self-sustaining channels for resources to flow to
those businesses. These objectives will be pursued by (1)
technical assistance grants to fund development costs associated
with creating or expanding financial services to smaller
businesses (including innovations in deposit taking, rediscount
facilities and interbank markets, credit analysis and risk
management, supervisory techniques and information management)
and (2) equity investments and long-term loans to NGOs and
intermediaries to build their capital base.
C. Investment Fund. An Investment Fund will provide financing
through NGOs and domestic financial intermediaries that are
creating or expanding services to smaller businesses. Small and
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micro enterprises to be funded through these intermediaries will
be selected according to guidélines determined by the management
of the Multilateral Investment Fund. In general, financing
techniques will be chosen to maximize the "multiplier" effect of
the Fund's resources. Financing will be in the form of equity,
quasi-equity, loans or guarantees.
The Investment Fund will be "revolving": income and proceeds from
the Investment Fund's loans and investments will be reinvested in
new projects. The Investment Fund will also be available for
financing specific companies where this would be more efficient
than using intermediaries and the projects are too small for
direct investment.
Loans and investments made by the Investment Fund will be priced
at market-based rates rather than subsidized rates. This policy
will avoid contributing to price distortions in the domestic
financial system, will encourage efficient allocation of
Investment Fund resources, and will build viable, self-sustaining
financial institutions to service target enterprises.
March 19, 1991 4:00pm
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MULTILATERAL INVESTMENT FUND
1. When President George Bush Launched the Enterprise for the Americas; one of
the pillars of the program was the creation of a Multilateral Investment Fund to
be administered by the Inter-American Development Bank. During the latter half
of 1991. intensive discussions took place among a group of member countries of
the Bank to establish the parameters of the Fund, to reach agreement on how it
would be operated and to discuss its possible contribution to said Fund.
2. The Fund is being established with a number of goals in mind, all related to
the desire to provide critical support for the landmark economic reforms now
belug undereaken throughoue the region. Thus, the purposes of the Fund are to:
(a) encourage the development and implementation of investment
reforms and facilitate significantly increased levels of private
investment, both foreign and domestic, thereby accelerating the economic
and social growth and development in the reglonal developing member
countries of the Bank, and the developing member countries of the
Caribbean Development Bank;
(b) encourage those members in their efforts to implement
development strategies based on sound economic policies which encourage
increased private investment and an expanding private sector, as those
policies will increase employment opportunities and foster small
businesses and micro-enterprises, and thus help alleviate poverty, improve
income distribution, and strengthen the role of women in development;
(c) stimulate micro enterprises, small businesses and other
entrepreneurial activities in those members;
(d) provide financing to help enable those members to (i) identify
and implement policy reforms which will increase investment, (ii) bear
certain of the costs associated with investment reforms and an expanding
private sector, and (iii) broaden participation of smaller entrepreneurs
in their economies; and
(e) promote in the full range of its operations environmentally
sound and sustainable economic development.
3. Principal decisions relating to the use of the resources of the Fund will be
taken by the donors who will, for that purpose, constitute a Donors Committee.
These decisions include final approval of proposals for grants or loans and
allocation of Fund resources among the various facilities. However, the
administration of the Fund would rest with the Bank. which would be responsible
for, among others, identifying appropriate operations, developing proposals,
submitting those proposals In the Donors and evenuting the operations that Are
approved. In addition, the Bank would administer the Fund resources and keep the
Bank's Board of Executive Directors fully informed of the Fund's activities to
ensure that they are consistent with the Bank's policies and, where relevant, the
policies of the Inter-American Investment Corporation.
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4. The arrangements which would govern the Bank's administration of the Fund are
contained in an Agreement for the Administration of the Multilateral Investment
Fund, which would be signed by the Bank and all of the donors, if it is approved
by the Board. The donors would also sign, among themselves, an Agreement
Establishing the Multilateral Investment Fund. The Agreement Establishing the
Fund would enter into force only when at least five prospective donors with
contributions of at least $800,000,000 had deposited instruments of ratification,
asceptance or approval. Within sixty days of ratifying. accepting or approving,
the respective donor must deposit an instrument of Contribution and then pay its
first installment within 30 days of that deposit.
5. There is transmitted to the Board the following documents:
(a) The Agreement for the Administration of the Fund, for its
consideration and discussion by the Board;
(b) A Proposed Resolution which, if approved by the Board, would
authorize the President of the Bank, or such person as he shall designate,
to sign the Administration Agreement on behalf of the Bank;
(c) The Agreement Establishing the Fund, for the information of
the Board; and
(d) For the information of the Board, a Memorandum to the
President from the General Counsel of the Bank setting forth the legal
considerations pursuant to which the privilages and immunities of the Bank
extend to the resources administered by the Bank on behalf of others.
If the Board is in agreement, If is requested to Approve the attached Proposed
Resolution.
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AGREEMENT ESTABLISHING THE
MULTILATERAL INVESTMENT FUND
WHEREAS, many leaders in Latin America and the Caribbean have embraced
market-based economic reform, recognized the need to reduce external debt
burdens to manageable levels and recognized the need for liberalized
investment regimes;
WHEREAS, the need to attract private capital is critical to the economic
development of the countries of Latin America and the Caribbean, and
investment reform is needed to stimulate foreign and domestic investment
in these countries;
WHEREAS, the prospective donor members of the Inter-American Development
Bank listed in Schedule A of this Agreement (each considered a "Donor" on
adherence to this Agreement and so referred to hereinafter) have agreed to
establish a multilateral fund in the Bank as a transitional measure to as-
sist in investment reform;
WHEREAS, such a multilateral fund can provide critical resources to sup-
plement and complement the activities of the Inter-American Development
Bank, the Inter-American Investment Corporation and other multilateral
development banks, to provide support for their policies and their
initiatives to promote investment reform and stimulate in particular the
activities of micro-enterprises;
WHEREAS, the Inter-American Development Bank (hereinafter referred to as
the "Bank"). to fulfill its purposes and in pursuit of its objectives, has
agreed to administer such a fund, and on
has signed
the Agreement for the Administration of the Multilateral Investment Fund
(hereinafter referred to as the "Administration Agreement");
THEREFORE, the Donors agree to establish the Multilateral Investment Fund
(hereinafter referred to as the "Fund") as follows:
Article 1: General Purposes
The general purposes of the Fund are to:
(a) encourage the development and implementation of investment
reforms and facilitate significantly increased levels of private invest-
ment, both foreign and domestic, thereby accelerating the economic and
social growth and development in the regional developing member countries
of the Bank, and the developing member countries of the Caribbean Develop-
ment Bank;
(b) encourage those members in their efforts to implement de-
velopment strategies based on sound economic policies which encourage
increased private investment and an expanding private sector, as those
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2
policies will increase employment opportunities and foster small
businesses and micro-enterprises, and thus help alleviate poverty, improve
income distribution, and strengthen the role of women in development;
(c) stimulate micro-enterprises, small businesses and other
entrepreneurial activities in those members;
(d) provide financing to help enable those members to (i) identify
and implement policy reforms which will increase investment, (ii) bear
certain of the costs associated with investment reforms and an expanding
private sector, and (iii) broaden participation of smaller entrepreneurs
in their economies; and
(a) promote in the full range of its operations environmentally
sound and sustainable economic development.
Article 2: Contributions to the Fund
Section 1. Instruments of Contribution.
(a) As soon as reasonably possible after depositing the instrument
indicating that it has ratified, accepted, or approved this Agreement
under Article 6, Section 1 (hereinafter referred to as an "Instrument of
Acceptance"), but no later than sixty days after depositing. that instru-
ment, each Donor shall deposit with the Bank an Instrument of Contribution
in which it agrees to pay to the Fund the amount set forth for it in
Schedule A in five equal annual installments (such Contribution herein-
after referred to as an "Unqualified Contribution"). Donors which have
deposited an Instrument of Contribution prior to the date this Agreement
enters into force pursuant to Article 5, Section 1 (hereinafter referred
to as the "Effective Date") may postpone payment of the first installment
until the 30th day after that date. Donors depositing an Instrument of
Contribution on or after the Effective Date shall pay their first install-
ment within 30 days after such deposit, but no later than the first an-
niversary of the Effective Date or such later date as determined by the
committee established under Article 4 (hereinafter referred to as the
"Donors Committee"). Donors shall pay each subsequent installment before
or on the corresponding anniversary of the first installment.
(b) Notwithstanding the provisions of paragraph (a) of this Sec-
tion regarding Unqualified Contributions, as an exceptional case, each
Donor may deposit an Instrument of Contribution in which it agrees that
payment of all installments except the first is subject to subsequent bud-
getary appropriations, and in which it undertakes to seek to obtain the
necessary appropriations to pay the full amount of each installment by the
payment dates set out in paragraph (a) (such Contribution hereinafter re-
ferred to as a "Qualified Contribution"). Payment of an installment due
after any such date shall be made within 30 days after the requisite ap-
propriations have been obtained.
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3
(c) If any Donor which has made a Qualified Contribution has not
obtained the appropriations to make payment in full of any installment by
the dates indicated in paragraph (a), then any Donor which has paid the
corresponding installment on time and in full, may, after consultation
with the Donors Committee, direct the Bank in writing to restrict commit-
ments against that installment. That restriction shall not exceed the
percentage which 4.0 unpaid porsion of the installment, Lo be paid by the
Donor which has made the Qualified Contribution, bears TO the entire
amount of the installment to be paid by that Donor, and shall be in effect
only for the time that unpaid portion remains unpaid.
(a) Any member of the Bank which dues who appoul 3A askadula A,
and which becomes a Donor in accordance with Article 6, Section 1, shall
make a contribution to the Fund by depositing an Instrument of Contribu-
tion in which it agrees to pay an amount and on dates and on conditions
approved by the Donors Committee under that Article.
(e) The Fund shall not be increased beyond the total of the
amounts set out in Schedule A plus the amounts set out in Instruments of
Contribution deposited pursuant to paragraph (d).
Section 2. Payments.
(a) Payments due under this Article shall be made in any freely
convertible currency determined by the Donors Committee, or in non-
negotiable non-interest-bearing promissory notes (or similar securities)
denominated in such currency and payable on demand in accordance with
unIteria and procedures to be established by the Donoro Committoo to moot
the operational commitments of the Fund. Payments to the Fund in a freely
convertible currency, which are transferred from a trust fund of a Donor,
shall be deemed to be paid towards the amount due from that Donor when
transferred.
(b) Euch paymontc chall be made to an account nr accounts
established specially for that purpose by the Bank, and such notes shall
be deposited in that account or with the Bank, as the Bank shall
determine.
(c) To determine amounts due for each Donor paying in a con-
vertible currency other than the United States dollar, the U.S. dollar
amount opposite its name in Schedule A shall be converted into the cur-
rency of payment at the IMF representative exchange rate for that currency
calculated by averaging those rates on a daily basis during the six-month
period ending on November 30, 1991.
Article 3: Operations of the Fund
Section 1. General. The operations of the Fund shall be managed
through three Facilities, namely, the Technical Cooperation Facility, the
Human Resources Facility and the Small Enterprise Development Facility.
It is the responsibility of the Donors Committee to ensure that all Fund
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operations shall be consistent with the Bank Group's general programs and
policies applicable to its own operation, and the Bank Group's strategy
and program for the respective country resulting from the continued policy
dialogue and the development priorities of the country concerned through
the formal mechanisms set out in the Administration Agreement.
Section 2. The Technical Cooperation Facility. Under the Technical
Cooperation Facility, grants shall be provided for technical cooperation,
as appropriate to governments, government agencies, privatization
agencies, stock exchanges or others, to achieve the purposes of the Fund,
and, in particular, to finance:
(a) country diagnostic studies to identify investment constraints,
including legislative, financial and regulatory impediments to investment;
(b) the development of national country plans for comprehensive
reform of the policy and legal environment for investment, in conjunction
with, and complementary to, Bank country programs;
(c) advisory services Lu Implement plans mentioned 11's paragraph
(b), which may involve advice on reforming investment laws, laws on
intellectual property rights, commercial laws, tax systems, labor laws,
laws to protect the environment and legal procedures, as well as advice on
implementing those laws, and regulatory agencies;
(d) advice on the design and implementation of privatization
programs, including advice on the valuation and techniques for privatizing
particular enterprises; and
(e) assistance on developing and strengthening financial systems
(i) to remove impediments (such as interest rate distortions) and support
healthy competition; (11) to develop sound prudential safeguards, in-
cluding accounting and disclosure standards, and institutions to
administer them; (iii) to expand the capabilities of the banking sector
and capital markets by more direct, transparent and technically-current
information networks; and (iv) to take other measures to strengthen the
financial sector, such as advice on the creation and development of
capital or commodity markets.
Section 3. The Human Resources Facility. Under the Human Resources
Facility, grants shall be provided, as appropriate to governments,
government agencies, educational institutions or others. t.n develop the
human resource base needed for increased investment flows and an expanded
private sector, and, in particular, to finance:
(a) the training of workers who may be displaced as governments
implement investment reforms, reduce public expenditures, restructure or
privatize;
(b) the training of workers and managers to assure that skilled
workers and managers are available to meet the manpower needs of investors
and an expanded private sector, and that managers are familiar with
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5
international practice in such areas as finance, accounting, planning,
marketing and distribution, management information systems and so forth;
(c) the training of individuals who can serve those regulatory
functions essential for the operation of a market-oriented system,
including training in such disciplines as consumer protection, worker
protection, the administration of competition laws and the protection of
the environment;
(d) the training of professionals who are considered important to
the development of the local economy, through strengthening the scien-
tific, technical and managerial capabilities of the human resource base;
and
(e) the strengthening of vocational training and other institu-
tions which will serve the purposes set out in (a), (b), (c) and (d).
Section 4. The Small Enterprise Development Facility.
(a) Under the Small Enterprise Development Facility, financing
shall be provided to indigenous micro-enterprises and smaller businesses
directly or through intermediaries, and to institutions serving them, to
achieve the purposes of the Fund, as set out below.
(b) For the purposes set out in paragraph (a), grants may be pro-
vided for technical cooperation to non-governmental organizations and
domestic financial institutions (including financial intermediaries) to
expand the volume and range of services available to micro-enterprises or
smaller businesses. Such grants for technical cooperation may be used to
help those organizations and institutions to:
(i) improve financial and business practices so that they may
become self-sustaining;
(ii) develop innovative financial services, such as leasing and
rediscount facilities, and participate in interbank markets; and
(iii) develop services to assist micro-enterprises or smaller
businesses to prepare business plans, identify business oppor-
tunities and sources of financing, and solve particular marketing or
other business problems.
(c) To also achieve the purposes of paragraph (a), a Small Enter-
prise Investment Fund shall be established, and shall at all times
and in all respects be held, used, obligated, invested and accounted
for separately from other resources of the Multilateral Investment
Fund. The resources of the Small Enterprise Investment Fund may be
used to make loans, equity investments, and quasi-equity investments
to smaller business and micro-enterprises, and to non-governmental
organizations and domestic financial institutions which are creating
or expanding services to micro-enterprises or smaller businesses, or
which are lending to or investing in micro-enterprises or smaller
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6
businesses. The Donors Committee shall determine the basic terms
and conditions of such loans and investments. Any amounts, whether
dividends, interest or otherwise, received by the Bank from the
operations of the Small Enterprise Investment Fund shall be
deposited to the account of the Multilateral Investment Fund, for
allocation by the Donors Committee pursuant to Article 4, Section 3.
Section 5. Principles for Fund Operations.
(a) Financing from the Fund shall be provided under the terms and
conditions of this Agreement consistent with the rules set out in Articles
III, IV and VI of the Agreement Establishing the Inter-American
Development Bank (hereinafter referred to as the "Charter"), the policies
of the Bank applicable to its own operations, and the rules and policies
of the Inter-American Investment Corporation where relevant. In addition,
while all developing member countries of the Bank are potentially eligible
recipients, financing from the Fund shall be provided only if
(i) in the case of grant assistance, the recipient has established
that the assistance will likely have a catalytic impact on invest-
ment flows;
(11) the developing member country of the Bank, in the territory of
which the resources will be utilized, either
(A) is in compliance with an investment sector loan agree-
ment between that country and the Bank, or
(B) (1) in the case of financing under Section 2(a), (b) or
(c) of this Article, is committed to sound macroeconomic
policies and to investment reform; or
(2) in the case of any other financing under this Agree-
ment, is implementing both sound macroeconomic policies
and policies and practices which have removed and
continue to remove impediments to increased investment
flows, and which are resulting in a significant expan-
sion of the private sector; and
(iii) the developing member country of the Bank, in the territory of
which the resources will be utilized, is in compliance with
agreements with relevant international financial institutions.
(b) In deciding on providing grant funds, the Donors Committee
shall pay particular attention to the commitment of specific member
countries to poverty reduction and investment reform, the social costs of
economic reforms, the financial needs of the prospective recipients and
the relative levels of poverty in specific member countries.
(c) Financing in the territories of countries which are members of
the Caribbean Development Bank, but not the Inter-American Development
Bank, shall be conducted in consultation and agreement with, and through,
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7
the Caribbean Development Bank and under such conditions, consistent with
the principles of this Section, as the Donors Committee shall decide.
(d) Fund resources shall not be used to finance or pay for project
expenses which have been incurred prior to the date the Fund resources may
be made available.
(a) Comito from LL may ha made available an A hnnin which
permits contingent recovery in appropriate cases of funds disbursed. Any
amounts so recovered shall be deposited to the account of the Multilateral
Investment Fund, for allocation by the Donors Committee pursuant to
Article 4, Section 3.
(f) Only nationals or companies from Donors, or regional de-
veloping countries which are members of the Bank, shall be eligible for
procurement from Fund resources, except that developing member countries
of the Caribbean Development Bank shall be eligible for procurement from
financing provided pursuant to paragraph (c) of this Section.
(g) The Fund shall not be used to finance any undertaking in the
territory of & regional developing member country of the Bank if that
member objects to such financing.
Article 4: The Donors Committee
Section 1. Composition. Each Donor may participate in and appoint
a representative, on the basis of a nomination by its Governor of the
Bank, to meetings of the Donors Committee.
Section 2. Responsibilities. The Donors Committee shall be
responsible for the final approval of all proposals for grants from the
Technical Cooperation Facility, the Human Resources Facility and the Small
Enterprise Development Facility, and all proposals for loans, equity
investments or other financings from the Small Enterprise Investment Fund,
Section 3. Allocation Among Facilities. The Donors Committee may
allocate the resources of the Fund at any time to any Facility, including
the Small Enterprise Investment Fund, and may decide that a specific
percentage of total Fund assets be reserved for a particular Facility,
provided that no more than forty (40) per cent of total resources of the
Fund may be allocated to any Facility.
Section 4, Meetings. The Donors Committee shall meet at the prin-
cipal office of the Bank as often as the business of the Fund requires.
The Secretary of the Bank (serving as Secretary of the Committee) or any
Donor may call a meeting. As necessary the Donors Committee shall
determine its organization, rules of operation and procedure. A quorum
for any meeting of the Donors Committee shall be a majority of the total
number of representatives representing not less than four-fifths of the
total voting power of the Donors.
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Section 5. Voting. Unless otherwise specified in this Agreement,
the Donors Committee shall reach decisions by a three-quarters majority of
the total voting power. The total voting power of each Donor shall con-
sist of the sum of its proportional votes and its basic votes. Each Donor
shall have one proportional vote for each one hundred thousand United
States dollars it has contributed in cash or notes (or similar securities)
under Article 2, Section 2, or the equivalent in cash or notes (or similar
securities) which it has contributed in freely convertible currencies
under Article 2, Section 2. Each Donor shall also have basic votes con-
sisting of such number of votes as results from the equal distribution
among all the Donors of twenty (20) per cent of the aggregate sum of the
basic votes and proportional votes of all the Donors.
Section 6. Report. When approved by the Donors Committee the
annual information statement submited under Article 5, Section 2(a) of the
Administration Agreement shall be forwarded to the Bank's Board of
Executive Directors,
Article 5: Term of the Agreement
Section 1. Entry into force. This Agreement shall enter into force
on the date when at least five prospective donors listed on Schedule A,
the proposed contributions of which on that Schedule total at least
800, United States dollars, have deposited the instruments referred
to in Article 6, Section 1.
Section 2. Term of this Agreement. This agreement shall remain in
force for a period of ten years after the Effective Date, and may be
renewed for no more than one additional renewal period of five years.
Prior to the end of the initial period, the Donors Committee shall consult
with the Bank about the advisability of extending the operations of the
Fund or any Facility for the renewal period. At that time the Donors
Committee, acting by a vote of at least two-thirds of the Donors
representing not less than three-quarters of the total voting power of the
Donors, may extend this Agreement or any of the operations of any Facility
or Fund for the renewal period or a period shorter than the renewal
period.
Section 3. Termination by the Bank or the Donors Committee. This
Agreement shall terminate in the event that the Bank suspends or ter-
minates its own operations under Article X of the Charter. This Agreement
shall also terminate in the event that the Bank terminates the Administra-
tion Agreement under Article 6, Section 3 of that Agreement. The Donors
Committee may decide to terminate this Agreement or any Facility. or the
Small Enterprise Investment Fund, at any time by a vote of at least two-
thirds of the Donors representing not less than three-quarters of the
total voting power of the Donors.
Section 4. Winding up of Fund Operations.
(a) On termination of this Agreement, the Donors Committee shall
direct the Bank to make a distribution of assets to Donors after all the
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liabilities of the Fund are discharged or provided for. Any such dis-
LIIbution of remaining assets shall be in proportion to contributions made
by Donors in cash or by encashment of notes or similar obligations under
Article 2, Section 2. Balances remaining in any such notes or similar
obligations shall be canceled.
(b) On termination of any Facility or the Small Enterprise Invest-
ment Fund, and after all relevant liabilities are discharged or provided
for, the Donors Committee, by a vote of at least two-thirds of the Donors
representing not less than three-quarters of the total voting power of the
Donors, may decide on the allocation or distribution of funds remaining in
the Facility. Any distribution to Donors shall be in the proportions
referred to in paragraph (a) above.
Article 6: General Provisions
Section 1. Adherence to this Agreement. This Agreement may be
signed by any prospective donor. Any such signatory may become a Donor
under this Agreement by depositing with the Bank an instrument of
ratification, acceptance or approval, setting forth that it has ratified,
accepted or approved this Agreement. Any member of the Bank not on
Schedule A may adhere to this Agreement by depositing an Instrument of
Acceptance and an Instrument of Contribution in an amount, and on dates
and conditions, approved by the Donors Committee, which shall reach
decision by a vote of at least two-thirds of the Donors representing not
less than three-quarters of the total voting power of the Donors.
Section 2. Amendment.
(a) This Agreement may be amended by the Donors Committee, which
shall reach decision by a vote of at least two-thirds of the Donors
representing not less than three-quarters of the total voting power of the
Donors. The approval of all Donors shall be required for an amendment to
this Section, to the provisions of Section 3 of this Article which limit
the liabilities of Donors, or an amendment which increases the financial
or other obligations of Donors, or an amendment to Article 5, Section 3.
(b) Notwithstanding the provisions of paragraph (a) of this
Section, any amendment which increases the existing obligations of the
Donors under this Agreement or involves new obligations of the Donors
shall take effect for each Donor which has notified its acceptance in
writing to the Bank.
Section 3. Limitations on Liability. In the operations of the
Fund, the financial liability of the Bank shall be limited to the
resources and reserves (if any) of the Fund, and the liability of Donors
as Donors shall be limited to the unpaid portion of their respective
contributions that has become due and payable.
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9
7TH STORY of Level 1 printed in FULL format.
Business America Copyright (c) 1991 Information Access Company; U.S. Government
Printing Office 1991
September 23, 1991
SECTION: Vol. 112 ; No. 19 ; Pg. 6
LENGTH: 3147 words
HEADLINE: The Enterprise for the Americas Initiative: supporting a 'silent
revolution' in Latin America; Includes related articles
BYLINE: Clark, Carrie B.
BODY:
The almost daily headlines about revolutionary changes occurring in the
Soviet Union and Eastern Europe tend to overlook the silent revolution occurring
in the Western Hemisphere. To the surprise of many, changes similar to the
political and market-opening measures taking place in the Soviet Union and
Eastern Europe have been under way in Latin America since the mid-1980s.
Drawing little attention from world media, democracy has flourished
throughout the Latin American region. Latin American countries are shaping
models of political and economic liberty by pushing aside military and
authoritarian governments, and restructuring their inward-looking economies to
adopt open market-oriented practices.
AS of 1990, every country in Latin America (except Cuba) had, for the first
time in history, a democratically elected president. These newly elected
officials have taken bold steps by turning their backs on the traditional closed
policies of the past to implement positive market-oriented reforms. Translated,
this means abundant trade and investment opportunities for U.S. firms in the
region. Gradually, U.S. firms are awakening to these opportunities.
The allure of the Latin American market has always been its considerable size
and huge resource base. The combined population of Latin America reaches 445
million, 8.4 percent of the world total. This is the same as the entire
population of the European Community and almost one-half greater than that of
the Soviet Union or the United States. Based on population alone, the Latin
American market provides tremendous potential for U.S. firms.
The United States is economically tied to Latin America. Latin American
markets produce output (in terms of gross domestic product) valued at more than
$ 825 billion. Almost 60 percent of the merchandise trade of Latin America is
transacted with countries in the Western Hemisphere. The United States provides
more than 40 percent of Latin America's imports and buys a similar share of its
exports. U.S. exports to the region have prospered, growing by 74 percent since
1986.
Additionally, the mix of U.S. and Latin American cultural and historical
ties, and geographic proximity make a formula for natural partners. Common
values and democratic traditions play an important role in easing U.S. firms'
movement into the Latin American market.
Enterprise for the Americas Initiative
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It was this in mind that the Bush Administration launched the Enterprise for
the Americas Initiative (EAI) on June 27, 1990. The EAI is a program designed
to strengthen Latin American and Caribbean economies through increased trade,
investment, and reduction of official debt to the United States. These three
components are packaged to work independently but toward a common goal.
The EAI serves as the blueprint for the eventual creation of a hemispheric
free trade area from the "Northern tip of Alaska to the southernmost point of
Tierra del Fuego." It will take a lot of time, hard work, cooperation, and
patience to build this free trade area.
The goals of the EAI and the Uruguay Round are mutually complementary.
Success of the Uruguay Round is of utmost importance to hemispheric free trade
initiatives. A successful Round will establish international baseline baseline
standards for services trade, intellectual property protection, investment
performance requirements, and other areas that will facilitate negotiation of a
free trade agreement.
Trade
With the shift to democratically-oriented political environments, countries
in Latin America and the Caribbean have undertaken widespread economic and trade
policy reforms. These reforms show a broad shift away from the inward-looking
policies of import substitution and protectionism toward recognition of the
benefits of uninhibited forces and the advantages of participating fully in the
global economy.
To encourage this emerging trend, President Bush proposed a three-point plan
in the trade portion of the EAI that establishes free trade relationships based
on a balance of benefits and obligations.
Keeping in mind the long-term goal of a hemispheric free trade area,
President Bush announced a willingness to enter into free trade agreements with
other countries in the Latin American region. The negotiation of a North
American Free Trade Agreement (NAFTA) with Mexico and Canada represents the
first step in this process. Chile also may be an eventual candidate for a free
trade agreement.
Framework Agreements
Recognizing that some countries may not be ready to take the dramatic step
toward negotiating a comprehensive free trade agreement in the current "fast
tract" authority period which extends to June 1, 1993, the President invited
interested countries to negotiate bilateral framework agreements with the United
State. These framework agreements will enable us to move forward on a
step-by-step basis to eliminate counter-productive barriers to trade and
investment. They also provide a forum to resolve disputes with individual
countries.
Much progress has been made on the trade front during the past year. The
United States has signed framework agreements with Colombia; Ecuador; Chile;
Honduras; Costa Rica; Venezuela; E1 Salvador; Peru; Panama; Nicaragua; the South
American Quadripartite Common Market (MERCOSUR), which consists of Argentina,
Brazil, Uruguay, and Paraguay; and CARICOM, which consists of Antigua and
Barbuda, Bahamas, Barbados, Belize, Dominica, Grenada, Guyana, Jamaica,
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Montserrat, St. Kitts-Nevis, St. Lucia, St. Vincent, and the Grenadines,
Bilateral framework agreements were signed with Mexico and Bolivia before
creation of the EAI, and negotiations with Guatemala are currently in progress.
The remarkable pace in negotiating framework agreements with such a broad range
of countries in the Americas testifies to the commitment of so many nations in
the Western Hemisphere to economic reform, liberalization, and democracy.
The bilateral framework agreements negotiated to date generally contain
similar objectives. They are based on a statement of agreed principles
regarding the benefits of open trade and investment, increased importance of
services to economies, the need for adequate intellectual property rights
protection, the importance of observing and promoting internationally-recognized
worker rights, and the desirability of resolving trade and investment problems
expeditiously.
The parties agree that a bilateral/plurilateral consultative mechanism is
useful, and accordingly have established a Council on Trade and Investment. The
Council's objectives are to monitor trade and investment relations, hold
consultations on specific trade and investment matters of interest to both
sides, and work toward removing impediments to trade and investment flows.
Framework agreements do not bind signatories to implement specific trade
liberalization commitments.
The signing of a framework agreement with a country, or group of countries,
does not imply that the United States will propose free trade negotiations with
such countries immediately. Indeed, many countries are not ready politically or
economically for such a relationship.
Investment
The investment portion of the EAI is designed to unlock the potential for
domestic and foreign investment, encourage capital flows, and improve the
environment.
U.S. direct investment in the region amounts to almost $ 72 billion. To
increase this level, sectoral and structural reforms are encouraged in the Latin
American region. Restrictive investment regimes in Latin America and the
Caribbean have hampered efforts to attract capital and induced existing capital
to move offshore.
The investment component of the EAI seeks to support countries' efforts to
liberalize investment regimes and thereby generate foreign and domestic
investment and the return of capital held by nationals overseas. To compete
effectively for capital in a world of scarce resources, countries need to
establish clear and predictable regulatory systems that are hospitable to all
investors.
To help fuel investment reform, the Initiative includes two proposals
administered by the Inter-American Development Bank (IDB), an investment sector
loan program and a multilateral investment fund (MIF).
Investment Sector Loan Program
The EAI proposes creation of a new lending program in the IDB to support
investment sector reforms. The IDB has been evaluating the need for reform in
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individual countries and has been negotiating investment sector loans. The
first of these was approved in June, with Chile receiving $ 150 million to open
its copper and transport sectors to foreign investment, sign inheritance tax and
investment agreements, and pass legislation allowing international dispute
settlement mechanisms to arbitrate foreigners' investment disputes.
Negotiations on loans for Jamaica and Bolivia have been completed, and are
awaiting IDB Board approval.
Multilateral Investment Fund (MIF)
In a parallel effort, the EAI proposes a five-year $. 1.5 billion MIF for the
years 1992-96. The Fund will serve as a complement to the new IDB investment
sector lending program. Because the Fund is designed to serve as an incentive,
funds would be disbursed after reforms are enacted.
The Fund would provide program and project grants to advance specific,
market-oriented investment policy initiatives and reforms and encourage domestic
and foreign investment in Latin America and the Caribbean. It also would
finance technical assistance for privatizing government-owned industries,
enterprise development, business infrastructure, and worker training and
education programs to develop supporting human capital. To combat micro-and
small-sized enterprises' lack of access to capital, the Fund could provide them
with credit and equity financing through arrangements to be developed with local
nongovernmental organizations and other financial intermediaries.
The "Enterprise for the Americas Initiative Act of 1991," currently being
considered by Congress, requests and appropriation of $ 500 million in the next
five years, to be transferred to the IDB in five installments of $ 100 million,
beginning in fiscal year 1992. Japan has committed $ 100 million per year for
five years in grant resources to the Fund. Spain, Portugal, Canada, and France
have indicated a willingness to contribute to the Fund, in amounts not
specified. The United States also is seeking contributions from other European
and Asian countries.
Debt
The large amount of debt owed by Latin American and Caribbean countries
(approximately $ 425 billion) to commercial banks and official creditors has
inhibited economic growth and discouraged investor interest over the last
decade. Debt reduction can restore the confidence of domestic and foreign
investors and encourage repatriation of flight capital.
Debt reduction also is an important tool for encouraging countries in the
region to persist in their economic reform efforts. The overhang of external
debt has tested the resolve of nearly every government in the region. By easing
the burden of debt on Latin American and Caribbean economies, the rewards of
reform will develop immediately and visibly.
The debt component of the EAI proposes to reduce official concessional and
nonconcessional bilateral debt. U.S. concessional debt owed by Latin American
and Caribbean countries totals $ 6.9 billion. The EAI works to reduce this
amount substantially for eligible countries. This covers Agency for
International Development (AID) and PL-480 loans, $ 5.1 and $ 1.9 billion,
respectively. The old debt would be exchanged for new, reduced obligations.
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Concessional debt
The stock of concessional debt would be substantially reduced at the outset,
depending on circumstances in each country. New dollar payments on this reduced
debt would be applied to retire principal. Hence, a country's concessional debt
would be eliminated in a designated time period.
Interest on new, reduced debt would be assessed at a concessional rate and
payable in local currency, contingent on negotiation of a bilateral
environmental framework agreement establishing an Enterprise for the Americas
Environmental Fund. Otherwise, interest would be paid in U.S. dollars.
Currently, Bolivia, Jamaica, and Chile are eligible to negotiate Environmental
Framework Agreements.
Local currency interest payments would be deposited in the Environmental
Fund, administered by local committees comprised of host country and U.S.
government representatives and local nongovernmental organization members. This
structure will nurture local support for the environment.
The public/private Environment for the Americas Board has been established in
Washington, D.C., to review implementation. The Board's three primary functions
will be to advise the Secretary of State on negotiation of environmental
framework agreements; ensure, in consultation with local governments and groups,
proper constitution of local administering bodies; and review the programs,
operations, and fiscal audits of these bodies.
Nonconcessional debt
Total nonconcessional debt owed to the U.S. government as of December 1990
by Latin American and Caribbean governments is about $ 4.9 billion. About $ 4.0
billion is owed to the U.S. Export-Import Bank, and $ 0.9 billion to the
Commodity Credit Corporation (CCC).
Under the EAI, a portion of this nonconcessional debt would be sold to
facilitate debt-for-nature, debt-for-development, or debt-for-equity swaps in
eligible countries. These swaps would retire part of a country's
nonconcessional obligations to the U.S. government. About 10-15 percent could
be eligible for swaps.
Countries eligible for debt reduction under the EAI will be implementing
strong economic reform programs. The statute providing the Administration with
authority to reduce PL-480 obligations (1990 farm bill) identifies eligible
countries as those which have an IMF program, or in exceptional cases, are close
to one; have a World Bank adjustment loan, as appropriate; are undertaking major
investment reform, possibly in conjunction with an IDB investment sector loan;
and have negotiated a financing program with commercial bank, if commercial
loans are a significant share of the country debt portfolio.
The legislation enacted to date allows flexibility in applying criteria to
take into account individual country circumstances. This flexibility would be
used, as needed, to allow countries with strong economic reform and investment
liberalization programs to benefit from debt reduction.
Two-Way Street
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Unlike aid packages of the past, the EAI is a "two-way street." It is
designed to benefit both the United States and Latin American countries. To
reap the benefits, however, Latin American countries must undertake the
necessary structural economic reforms to liberalize their economies and open
their markets.
Many Latin American countries are making important strides toward these
goals. Just to illustrate a few examples:
* Venezuela has implemented significant reforms in the two years since
President Carlos Andres Perez took office. Under his leadership, Venezuela has
eliminated quantitative restrictions on manufactured imports, established a free
foreign exchange market, will cap tariffs at 20 percent by 1993, joined the
GATT, and improved the investment environment b allowing 100 percent foreign
ownership in most sectors, and eliminating remittance restrictions and prior
approval. He also reformed the tax structure and lowered corporate rates
substantially, and privatization is under way in the telecommunications,
airline, ports, and banking sectors.
* Colombia has aggressively liberalized the external sector. Effective Sept.
10, 1991, tariffs now range from 0-15 percent, and 40 percent of import items
enter duty-free. The country has also dismantled the import license system,
eased foreign exchange controls, reduced or eliminated export subsidies via
accession to GATT Subsidies. Code and bilateral subsidies agreements with the
United States, and dramatically liberalized the investment regime, including the
highly lucrative financial sector, and begun a privatization process with
several financial institutions.
* Brazil is gradually implementing important structural reforms by reducing
tariffs from a current average of 32 percent to a 14 percent average by 1994,
eliminating one of the most pervasive import barriers - the Law of Similars,
beginning an ambitious privatization program, and developing a new Industrial
Property Code to strengthen intellectual property rights protection and to
provide patent protection for pharmaceuticals.
* Chile has already accomplished extensive structural reforms and continues
to do 50 by improving its investment climate with the passage of enhanced
intellectual property legislation which further reduces its import tariff rate.
* Argentina is moving to resolve past economic problems by privatizing 11
state public sector companies in the past two years, including the airline,
telephone, electric utility, natural gas, and water/sewerage sewtors,
eliminating domestic price controls, lowering the average tariff rate to 9
percent - with a maximum rate of 35 percent on some consumer and intermediate
goods, simplifying the tax system, and extending foreign investors' national
treatment in virtually all sectors.
Many U.S. Businesses are Flourishing
Many U.S. companies have watched their businesses flourish since the
beginning of the wave of democratic fever and implementation of structural
reforms. Latin American countries have a tremendous internal market that is
desperate for goods after a lengthy period of repressed demand. This success
signals an important turn of market events for American companies which have had
only limited market access in the past. Recent successes include increasing
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Business America (c) 1991 IAC
market access to the telecommunications, transportation, oil and gas, pulp and
paper sectors in several Latin American countries, with even greater prospects
for the future.
With positive political and structural changes taking place during Latin
America's silent revolution, the resulting U.S. private sector opportunities,
and U.S. government programs of the TPCC/EAI, U.S. businesses should take
advantage of the opportunities presented and include Latin America as a high
priority in their marketing plans.
GRAPHIC: ;Photograph
SUBJECT:
Enterprise for the Americas Initiative, Evaluation ; Latin America,
International trade ; Free trade and protection, Political aspects ; Export
marketing, Political aspects ; Caribbean Area, International trade ; United
States, Relations with Latin America
NAME:
Quayle, Dan, Foreign relations ; Mosbacher, Robert A., Foreign relations
GEOGRAPHIC:
Caribbean Area ; South America ; Central America
11316690
LOAD-DATE-MDC: November 01, 1991
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Section 4. Withdrawal.
(a) After full payment under a Qualified or Unqualified Contribu-
tion, any Donor may withdraw from this Agreement by delivering to the Bank
at its principal office written notice of its intention to do so. Such
withdrawal shall become finally effective on the date specified in the
notice but in no event less than six months after the notice is delivered
to the Bank. However, at any time before the withdrawal becomes finally
effective, the Donor may notify the Bank in writing of the cancellation of
its notice of intention to withdraw.
(b) When a Donor has withdrawn from this Agreement, it shall
remain liable for all its obligations under this Agreement which shall
have been in effect before the effective date of its notice of withdrawal.
(c) Arrangements for settling respective claims and obligations,
entered into by the Bank and a Donor pursuant to Article 7, Section 7 of
the Administration Agreement, shall be subject to approval by the Donors
Committee.
IN WITNESS WHEREOF, each of the prospective donors, each acting through
its authorized representative, has signed this Agreement.
Done at Washington, District of Columbia, on
, in a single
original, whose English, French, Portuguese and Spanish texts are equally
authentic, which shall be deposited in the archives of the Bank which
shall transmit a duly certified copy to each of the prospective donors
listed in Schedule A of this Agreement.
FEBRUARY 6, 1992
MEMORANDUM FOR JOE DUGGAN
FROM:
MICHELE NIX
SUBJECT:
MULTILATERAL INVESTMENT FUND SIGNING
On Tuesday, February 12, at 2:30 p.m., in the Roosevelt
Room, the President will deliver remarks (5 minutes) to an
audience of 40 people for a signing ceremony for a Multilateral
Investment Fund Agreement. The entire ceremony will last 15
minutes. POTUS will walk in -- no introduction.
The agreement will be signed by: Enrique Iglesias,
President of the Inter-American Development Bank and Brady.
Secretary Baker will probably be at the event. He is slated to
meet with the President right before the signing.
The audience makeup will include: approximately 16 foreign
ambassadors and private sector reps from corporations such as
American Express and others.
Claire Sechler has no info on the agreement; she has been
scrambling to get Treasury to get info to us by the end of the
day; their working on a fact sheet on the agreement and other
items.
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6
6TH STORY of Level 1 printed in FULL format.
Copyright 1991 Buraff Publications, a division of
Millin Publications, Inc.
International Securities Regulation Report
October 7, 1991
LENGTH: 1693 words
HEADLINE: MOUS ABOUND AT ANNUAL MEETING; SEC SIGNS FIVE UNDERSTANDINGS
BODY:
WASHINGTON -- If Richard Breeden felt a little soreness in his writing hand
Sept. 23-26, there was good reason.
The U.S. Securities and Exchange Commission chairman picked up the pen on
five occasions at the J.W. Marriott Hotel in Washington, site of the 16th annual
conference of the International Organization of Securities Commissions, to sign
"statements," "communiques," and "memoranda of understanding" with several
countries and institutions.
The SEC signed MOUs with Norway and the United Kingdom, a statement
reaffirming an earlier communique with Sweden, a joint statement with the
European Community, and a joint understanding with the Inter-American
Development Bank and the United Nations Economic Commission for Latin America
and the Caribbean.
The U.S. Commodity Futures Trading Commission also signed a financial
information sharing memorandum of understanding with the Ontario Securities
Commission, the Commission des Valeurs Mobilieres du Quebec, the Toronto Futures
Exchange, and the Montreal Exchange.
U.S., U.K. MOU Expanded
Five years after their initial memorandum of understanding, the SEC and U.K.
regulators entered into a new MOU Sept. 25 providing for a wider range of mutual
assistance in securities law enforcement.
The U.K.-U.S. MOU -- which also was signed by CFTC Chairman Wendy Gramm;
John Redwood, minister of state for corporate affairs, U.K. Department of Trade
and Industry; and David Walker, chairman of the U.K. Securities and Investments
Board -- supersedes the previous MOU signed in 1986. According to the SEC, the
-
new agreement "builds on the experience of operating the earlier MOU and the
excellent working relationship the parties have developed during the five years
it has been in effect."
In particular, the SEC said, the new MOU provides for mutual assistance
"across a wider range of laws and regulations," and expands the forms of
assistance the regulators may provide. The MOU also "sets out procedures for
more effective cooperation" between the parties, and prescribes the manner in
which the SEC and the DTI will use their newly obtained power to compel the
production of documents and testimony on behalf of a foreign counterpart. CFTC
reauthorization legislation "will provide similar powers," the SEC stated.
It said the MOU "makes assistance available in virtually all types of cases
that could arise" under U.K. and U.S. futures and securities laws, including
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disclosure violations, fraud or manipulation, prohibited futures trading
practices, and failure to comply with reporting requirements.
The SEC said the MOU contemplates that the parties will provide assistance
making information available, taking testimony, obtaining specified information
and documents, conducting compliance inspections, and permitting representatives
of the requesting authority to participate in conducting inquiries.
SEC, Norway Sign MOU
Meanwhile, on Sept. 24, Breeden and Svein Aasmundstad, director general of
Norway's Banking, Insurance and Securities Commission, signed an MOU that
"provides for mutual assistance and cooperation in the full range of enforcement
and regulatory matters," the SEC said.
Under the MOU, assistance will be provided in the form of access to agency
files, taking testimony and obtaining information and documents, and conducting
compliance inspections. "Such assistance is intended to facilitate the
investigation, litigation, or prosecution of securities matters in both
countries where information needed by one authority is located in the territory
of the other," the SEC said.
It added that assistance is contemplated in securities law matters involving
insider trading and other fraudulent or manipulative conduct, disclosure
requirements, and financial qualifications. "Each party also represents its
intention to engage in consultations to enhance the coordination of their
respective market oversight functions," the SEC said. It noted that over the
past 10 years, "there has been a substantial increase in cross-border securities
transactions between the U.S. and Norway."
Also at the IOSCO meeting, Breeden and Stig Danielsson, deputy director
general of the Swedish Financial Supervisory Authority reaffirmed on Sept. 25
their respective agencies' commitment to the terms of a June 27 communique
between the SEC and the SFSA's predecessor agency, the Swedish Bank Inspection
Board (ISRR, July 15, P. 4).
The SEC also signed a joint statement with the Commission of the European
Communities on Sept. 23 to promote information sharing and mutual assistance
efforts between the SEC and relevant national authorities in EC countries (ISRR,
Sept. 23, P. 6).
CFTC, Canada Agree
The financial information sharing MOU between the CFTC and Ontario and
Quebec establishes a framework for sharing information on a "routine" and "as
needed" basis, the CFTC's Gramm said at the Sept. 23 signing.
The FISMOU provides for information sharing with respect to Ontario and
Quebec futures brokers selling Canadian futures contracts to U.S. customers.
These firms are exempted from registration with the CFTC based on their
compliance with applicable Canadian law.
The agencies also agreed to share financial information for "key related
firms," which are Ontario and Quebec futures brokers directly or indirectly
controlling, controlled by, or under common control with a U.S. futures
LEXIS'NEXIS'LEXIS`NEXIS
Services of Mead Data Central, Inc.
PAGE
8
1991 Int'l Securities Regulation Report, October 7, 1991
broker, or U.S. futures brokers with a similar relationship to a Quebec or
Ontario futures broker.
The FISMOU was signed by Gramm, Robert J. Wright, chairman of the OSC; Paul
Fortugno, chairman of the CVMQ; James S. Gallagher, president of the TFE;
Giovanni Giarrusso, executive vice chairman of the ME; and Robert K. Wilmouth,
president. U.S. National Futures Association.
Finally, the SEC signed on Sept. 26 an understanding with the IDB and the
UNECLAC to conduct consultations and provide technical assistance for the
development of capital markets in Latin America and the Caribbean.
The understanding provides for consultation with the SEC's Emerging Market
Advisory Committee, which has been active in providing assistance to developing
markets. The understanding was signed by Breeden, Enrique V. Iglesias,
president of the IDB, and Gert Rosenthal, executive secretary of UNECLAC.
No specific funding arrangements have been made for providing technical
assistance, but Iglesias said that funding could come from the IDB's newly
established multilateral investment fund, set up in response to President
Bush's Enterprise for the Americas Initiative. Rosenthal said the work done
under this agreement will be funded as part of UNECLAC's "ongoing work
program."
LEXIS NEXIS LEXIS'NEXIS
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INTFR-AMERICAN DEVELOPMENT DANK
WASHINGTON, U.C. 20577
EXECUTIVE DIRECTOR
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United States
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DATE: 6 February 1492
NUMBER OF PAGES TO FOLLOW:
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02/08/02 17:20
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IDD US EXD
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Countries that have pledged to the Multilateral Investment Fund (MLF)
United states
nature
Canada
Spain
Portugal
France
Mexico
Venezuela
Brazil
Argentina
Chile
Colombia
Peru
uruguay
THE WHITE HOUSE
Office of the Press Secretary
For Immediate Release
February 11, 1992
REMARKS BY THE PRESIDENT
DURING THE MULTILATERAL INVESTMENT FUND SIGNING CEREMONY
Roosevelt Room
2:33 P.M. EST
THE PRESIDENT: Welcome -- especially excellencies --
and may I single out President Iglesias of the IDB -- thank him for
being here; and of course, Secretary Brady who has been so
instrumental from the U.S. side in all of this.
Today marks another milestone along the path of mutual
progress for the United States and its friends and neighbors. And we
move another stop closer to fulfilling the vision of a free, peaceful
and prospering Western Hemisphere.
As we sign the charter for the new Multilateral
Investment Fund, we advance the far-sighted aims of Enterprise for
the Americas Initiative. Our new fund is an exciting innovation. It
will provide targeted support for Latin American countries as they
transform lumbering, state-run industries into efficient private
enterprises.
This fund assures our neighbors that together we share a
stake in a better future and that we will stand by them and help them
as they carry out some very difficult reforms.
In a neighborhood of free and growing economies,
investment helps everyone. Our effort today will lift the tide of
hope and freedom, and will free up new resources so that the men and
women throughout the Americas can carry their dreams and achievements
as far as their God-given talents will take them.
Make no mistake: The future growth of the United States
economy depends on expanding mutual investment and trade with our
neighbors in the Americas. Flourishing trade and investment
throughout the hemisphere will create new jobs and raise the quality
of life for people in Syracuse and St. Louis as well as Sao Paolo and
Santiago.
Right now, we earn $62 billion -- one in every seven of
our worldwide export dollars from Latin America. Well over half of
our foreign investment in developing countries goes to Latin America.
And we're moving forward to create in this hemisphere a new free
trade area of 360 million consumers and $6 trillion in annual output
-- the North American Free Trade Area of Mexico, Canada and the
United States.
This commitment will endure because we're in this to
stay. And I know the people of the United States. And I can assure
you that we will say no to the gloomy spirits that want to make
pessimism a self-fulfilling prophecy. We embrace a future founded
upon freedom, opportunity and growth.
Working Americans and those looking for work have common
sense. And they know that when other countries develop their
economies, that results in more sales for America's airplanes and
MORE
- 2 -
computers and other capital goods. The world is buying U.S. products
at a record pace.
Over the past five years, nearly half of America's real
economic growth has been in exports. During those same five years,
U.S. exports to Latin America and the Caribbean increased by 12
percent annually -- much faster than the exports to the rest of the
world.
Exports will carry us to rewarding new destinations in
our future. And remember what exports do right here at home. Every
billion-dollar increase in exports generates 20,000 new jobs in the
United States. So the long and short of it is, the prophets of
American decline simply don't grasp the facts. The 21 countries
represented here already have pledged more than $1.2 billion to this
important fund for our future. The U.S. pledge alone is $500
million, one-third of the $1.5 billion goal; Japan pledging an equal
amount.
I urge the United States Congress to act without delay
to provide the funds to fulfill our pledge. And I also urge Congress
to support debt reduction under the broader Enterprise for the
Americas Initiative which will provide further support for U.S.
exports, investment and jobs.
Let me salute all of the representatives of the nations
participating in this promising new effort. I want to commend the
Inter-American Development Bank, its President, Enrique Iglesias, who
will administer the new fund; and I am confident, sir, that you will
do an outstanding job with your new responsibility.
This is a moment not so much for us, but for future
generations, really. It's they who will benefit from what's
beginning here today. And it is for them that we invest in a new age
of discovery and opportunity from Hudson Bay to the Staits of
Magellan.
And now I would like to invite all the signatories who
are here today with us -- those that have signed this agreement
already -- to come up here and we can muster behind the two
remaining, two final signatures.
But thank you all for being here and for your
constructive work on this wonderful project. Thank you. (Applause.)
END
2:38 P.M. EST
ENTERPRISE FOR THE AMERICAS
INITIATIVE
A VISION
FOR ECONOMIC GROWTH
IN THE WESTERN HEMISPHERE
PRESDENT THE OF VISIT UNUM OF STATES the UNITED
February 1992
" The Enterprise for the Americas
is a prescription for growth and a
higher standard of living in
Latin America and, right here at
home, a new market for
American products and more jobs
for American workers. "
President George Bush
Washington D.C.
June 27, 1990
Executive Summary
A quiet revolution for political and economic freedom is under way in the Western Hemisphere. In
its own right, it is just as profound as the revolutionary events in Eastern and Central Europe and the
new Commonwealth of Independent States. Elected civilian governments hold office in virtually
every nation, encompassing 96 percent of the Hemisphere's population. The "open market" outlook
now embraced by most countries in the region is a far cry from the discriminatory and protective
trade and investment policies of the past. While the pace of economic reform varies, each country in
the region offers significant commercial opportunities for the United States.
With a population of 451 million, a gross domestic product valued at more than $860 billion, and
total world trade of $236 billion, Latin America and the Caribbean provide natural partners for U.S.
business. The established market presence puts U.S. business in a uniquely competitive position to
profit from the expanding and increasingly diversified production, as well as the growing consumer
market in the region. U.S. exports to Latin America and the Caribbean have risen from $31 billion in
1986 to an estimated $62 billion in 1991, creating an additional 620,000 U.S. jobs. Much of this
increased trade and investment is occurring in Mexico, where the government has acted aggressively
to make the changes necessary to bring about the economic growth which attracts U.S. business. As
the rest of the region undertakes similar reforms, it will be up to U.S. business to capitalize on the
increased opportunities for trade and investment in the Hemisphere.
President Bush introduced the Enterprise for the Americas Initiative (EAI) in June 1990 to create a
private-public partnership that will assure continued growth and stability throughout the
Hemisphere. The appeal of this initiative is an appeal to economic self-interest. It serves the
interests of both U.S. and Latin American and Caribbean businesses and governments and ushers in
a new era of U.S.-Latin American and Caribbean relations--one that is based on mutual respect and
mutual responsibility. The benefits, like the responsibilities, are two-way.
The program's three pillars--trade, investment, and debt reduction--are mutually reinforcing. The
goal of the trade pillar is to expand free trade throughout the Hemisphere, creating growth, jobs,
productivity, and new private sector initiative. The investment pillar is designed to stimulate
economic reform and investment liberalization that will create an attractive environment for new
capital and repatriated flight capital. The debt reduction pillar, by alleviating the region's financial
burden, will strengthen economies, generate demand for traded goods, and stimulate investment. In
addition, by allowing the repayment of interest on remaining debt in local currency to support
grassroots environmental projects, the EAI includes an innovative mechanism to support sustainable
use of the environment.
A successful EAI is essential to a strong U.S. economic future. For the vision of the EAI to become a
reality, governments and private sectors from every nation must work together as partners. The U.S.
government is already working with other governments to move toward a free trade area and to
create more attractive investment climates throughout the hemisphere. It is now time for the private
sector to capitalize on the improving economic climate and maximize the new opportunities
generated in Latin America and Caribbean. As they have done in Mexico, U.S. companies must
reconsider the benefits of doing business with the region, identify opportunities for entering the
market, and stimulate a broader commitment to the Hemisphere. Doing so will strengthen the U.S.
economy and create U.S. jobs.
Why Latin America and the Caribbean
is Important to U.S. Businesses
Latin America and the Caribbean as a
More than 50 percent of that trade is with
Market for U.S. Exports
the United States. Of the total exports to
Latin America and the Caribbean from
The attraction of the Latin American and
industrialized countries, the United States
Caribbean market has always been its
considerable size, its large resource base,
commands a 57 percent share, as compared
and its close proximity to the United States.
to only 11 percent for Japan and 29 percent
for Europe.
For 1991, the total population in the region
is estimated at 451 million, 8.4 percent of
Industrial Country Exports
the world total. This population base rivals
to Latin America and the Caribbean
that of all of Europe.
The gross domestic product of Latin
1989
America and the Caribbean exceeds $860
U.S.
57%
billion. This makes the region's economy
nearly 40 percent larger than that of
Canada, the number one export market for
the United States. It is over three times
Other
3%
larger than that of Eastern and Central
Europe and it is larger than the entire
South-East Asia market.
Japan
11%
Europe
29%
Gross Domestic Product
Source: United Nations
1989
$ Billions
1000
Encouraging Trends in the Region
Political Stability
800
Almost all Latin American and Caribbean
600
countries have replaced authoritarian
regimes with elected civilian governments.
400
Armed conflict has diminished. Most
citizens now live in peace throughout the
200
Hemisphere. The growing political stability
in the region encourages investment and
0
sustained economic growth.
LAC
Canada E. Europe SE Asia
Economic Growth
LAC: Latin America and the Caribbean
Source: World Bank
Real gross domestic product in the region is
Latin American and Caribbean trade with
estimated to have risen by 2.4 percent in
the world is estimated at $236 billion.
1991, a significant improvement over the
0.3 percent figure for 1990 and the average
$140.5 billion in 1986 to an estimated $236
growth rate of 1.3 percent from 1981 to
billion in 1991. During that same period
1990. For several countries the growth rate
merchandise trade with the United States
in 1991 was much higher: Mexico estimates
grew from $72.1 billion to an estimated
4-4.5 percent growth, Venezuela 6 percent
new record high of more than $125 billion.
growth, and Chile 5.5 percent growth. In
As a result of the market-oriented
1992, economic growth for the entire
region is projected to accelerate to 3.5
economic policies it has implemented since
the mid-1980's, Mexico is experiencing the
percent.
fastest growth in trade in the region. Total
U.S.-Mexican merchandise trade has risen
from $29.5 billion in 1986 to $57.9 billion
Gross Domestic Product
for Latin America and the Caribbean
in 1990. Other countries in the region have
begun to adopt similar reforms and are
4%
beginning to see increases in trade, from
$42.5 billion in 1986 to $58.6 billion in 1990.
3%
2%
Increased Investment
1%
Capital inflows into Latin America and the
Caribbean accelerated to $14 billion in
0%
1990, up from only $4 billion in 1989. U.S.
-1%
direct investment in the region has risen
-2%
U.S. Direct Investment Position
-3%
in Latin America and the Caribbean
1982
1984
1986
1988
1990
1992
proj.
$ Billions
Source: United Nations ECLAC
80
Reduced Inflation
60
For the most part, hyperinflation has been
brought under control. The weighted
40
average annual inflation rate for the region
in 1991 is expected to be down over four
fold from the average of 1,200 percent in
20
1989 and 1990. Except for Brazil and Peru,
where prices are still rising by more than
o
100 percent a year, inflation is generally
1980
1982
1984
1986
1988
1990
expected to range from 10 to 35 percent.
Source: U.S. Department of Commerce
Growing Trade
substantially over the past five years, from
$36.8 billion in 1986 to $72.5 billion in
Latin American and Caribbean trade with
1990. Mexico's market-based policy
the world has risen dramatically from
reforms have attracted a large portion of
2
this new investment. As other countries in
by more than 7 percent over each of the last
the region follow suit they too will attract
five years.
new U.S. investors.
Because of this strong export growth, the
U.S. trade deficit with the region has
Impact on the U.S. Economy
declined from $10.8 billion in 1986 to less
U.S. merchandise exports to Latin America
than $1 billion in 1991.
and the Caribbean totalled $54 billion in
Much of the gain in U.S. exports to Latin
1990 and are expected to reach about $62
America is attributed to rapidly growing
billion in 1991. This represents almost 14
demand for manufactured goods, which
percent of U.S. exports worldwide.
now account for 83 percent of total U.S.
Latin America and the Caribbean is the
exports to the region. Leading U.S.
fastest growing regional market for U.S.
manufactured exports are motor vehicle
exports. For the last five years, U.S. exports
parts, aircraft, telecommunications,
to the region have averaged 12 percent
electrical switching gear, construction and
annual growth. In 1991, exports are
mining equipment, and electrical
expected to grow almost 14 percent. This
machinery.
rate of increase is well above U.S. export
growth to the rest of the world which is
Industrial Countries
expected to be about 5 percent in 1991.
Manufactured Exports
to Latin America and the Caribbean
U.S. Trade
60%
with Latin America and the Caribbean
50%
$ Billions
80
40%
60
30%
40
20%
20
10%
0
0%
U.S.
Japan
Europe
Other
-20
1980
1985
1989
-40
Source: United Nations
1981
1983
1985
1987
1989
1991
est.
US Exports
US Imports
Trade Balance
The U.S. market share of industrialized-
Source: U.S. Department of Commerce
country exports to Latin America and the
Caribbean has gained relative to that of
U.S. export growth is strong not only in
Japan and Europe, rising from 50 percent
Mexico, where it is averaging 18 percent
in 1980 to 57 percent in 1989. For
annually since 1986, but also in the rest of
manufactured goods the U.S. share rose
the region, where U.S. exports have grown
from 47 percent to 54 percent.
3
U.S. Exports to Latin America and the
Elected civilian governments are in office
Caribbean Create U.S. Jobs
in virtually every nation, with 96 percent of
It is estimated that each $1 billion in U.S.
the Hemisphere's population governed
democratically. Just ten years ago, nearly
exports creates 20,000 U.S. jobs. The $62
40 percent was living under authoritarian
billion in U.S. exports to Latin America
regimes.
and the Caribbean in 1991 thus supported
more than 1,000,000 U.S. jobs. More than
Countries in the Hemisphere are also
one-half of those jobs were created since
turning away from the failed statist
1986, as a result of U.S. export growth to
economic model of government-owned
the region. This steady growth in
enterprise, excessive regulation and import
U.S.-job-creating exports to Latin America
substitution. Instead they are turning
and the Caribbean since 1986 stands in
toward market-oriented economic policies
sharp contrast to the bleak economic times
which open up trade and private investment
in the region from 1981 to 1983. During
opportunities as a basis for broad
that period U.S. exports fell by $16 billion
participation in lasting economic growth.
at a cost of over 300,000 jobs.
The "open market" outlook now embraced
The strong U.S. market share in the region
is a far cry from the panoply of licensing
indicates a preference in Latin America
requirements, price controls, high tariffs,
and the Caribbean for U.S. goods. The
and discriminatory investment policies of
principal constraint on growth in U.S.
the past. The new liberalization measures
exports to the region is the limited
are designed to generate economic growth,
purchasing power of Latin Americans and
attract foreign and domestic investment,
Caribbeans. Economic growth in Latin
and reverse the economic stagnation
America and the Caribbean means
engendered by past economic policies.
increased ability to purchase which is
While the pace of economic reform varies,
translated into U.S. export growth and into
each country in the region offers significant
more jobs in the United States.
commercial opportunities for U.S. business.
As a result of the changes occurring in the
A New Era of U.S.-Latin American and
region, U.S. relations with Latin America
Caribbean Relations
and Caribbean are increasingly
A quiet revolution for political and
characterized by mutual respect and mutual
economic freedom is underway in the
responsibility, based on shared interests
Western Hemisphere which, in its own
and values.
right, is just as profound as those
revolutions in Eastern Europe and the new
Commonwealth of Independent States.
4
Enterprise for the Americas Initiative
Overview
the U.S. already enjoys a competitive
advantage, is a natural partner for trade and
The Enterprise for the Americas Initiative
investment.
(EAI), introduced by President Bush on
June 27, 1990, crystallized a vision of
The EAI's three pillars--trade, investment
promoting economic growth through
and debt reduction--are interrelated and
increased trade and investment and has
mutually reinforcing components which
served as a catalyst for furthering this
should all move forward in order to achieve
vision. The EAI offers market access,
the economic growth that is necessary to a
financial and technical resources and debt
peaceful, democratic and prosperous
reduction opportunities to countries that
Hemisphere.
liberalize their trade and investment
regimes, maintain sound economic policies
Trade
conducive to investment and competition,
The long-term goal of the EAI is a free
and manage responsibly their international
trade area stretching from Point Barrow,
debt obligations. A few countries are at the
Alaska to Argentina's Tierra del Fuego, the
forefront of the swing toward market-
southernmost tip of Latin America.
oriented liberalization in the region. The
However, hemispheric free trade is not a
pattern of reform they have set is clear, and
substitute for an open global trading
the EAI seeks to encourage further
system. The successful completion of the
progress in these and other countries.
Uruguay Round of the General Agreement
The appeal of the Initiative is an appeal to
on Tariffs and Trade (GATT), therefore,
self interest. It serves the interests of both
remains the first priority of the United
U.S. and Latin American and Caribbean
States in assuring our own access--and that
businesses and governments. It ushers in a
of Latin America and the Caribbean--to the
new era of U.S.-Latin American and
markets of the world. A concurrent priority
Caribbean relations which is no longer
for the region is to complete the
characterized by dependency. It envisions a
negotiation of the North American Free
partnership among all of the countries in
Trade Agreement (NAFTA) with Canada
the Hemisphere. The benefits, like the
and Mexico. Additional free trade
responsibilities, are two-way.
agreements will be negotiated with other
countries or groups of countries in the
To realize the vision of the EAI requires a
region under the EAI.
partnership of the public and private
sectors working together to make it a
As an important first step toward this vision
reality. Building business linkages
of hemispheric free trade, the EAI calls for
throughout the hemisphere will improve
the negotiation of trade and investment
the position of U.S. businesses in the region
framework agreements between the United
for the future. If U.S. businesses are to
States and the countries of Latin America
remain competitive and continue to grow,
and the Caribbean. These framework
they must focus on the international arena.
agreements establish commissions to
Latin America and the Caribbean, where
identify and discuss steps for the
5
elimination of obstacles to expanded trade
flight capital must be encouraged to
and investment. Successful implementation
return;
of the trade pillar will greatly expand trade
open investment policies must be
within the region, opening markets,
codified so that the "rules of the game"
enhancing opportunities for U.S. businesses
are clear;
and creating more U.S. jobs.
state owned businesses should be
privatized;
Investment
credible and internationally accepted
Businesses throughout the region will
dispute settlement procedures must be
benefit from the open investment climates
adopted.
that the EAI strives to create. The
The IDB has already negotiated Investment
removal of government restrictions and
Sector Loans with the Governments of
disincentives will stimulate employment,
Chile, Jamaica, Bolivia and Colombia.
increase investment in industry, and
encourage the return of flight capital. By
increasing market access, protecting
The five year, $1.5 billion Multilateral
intellectual and physical property, and
Investment Fund (MIF) will facilitate the
providing recourse for resolving disputes,
adoption of investment reform by providing
Latin American and Caribbean countries
grant and loan financing for the following
can compete for scarce investment capital
three purposes:
in the global marketplace.
technical assistance to implement policy
To support such reforms, President Bush
reforms such as the privatization of
has called upon the Inter-American
government owned enterprises and
Development Bank (IDB) to implement
business infrastructure development;
two programs which will help create a
human resource development to meet
positive investment climate in the region:
the needs of an expanded private sector
the Investment Sector Loan Program and
including retraining of former
the Multilateral Investment Fund.
employees of privatized state owned
enterprises; and
The Investment Sector Loan Program
credit and equity financing and technical
provides adjustment loans to countries
assistance to small enterprises.
committed to reforming their trade and
investment regimes. These loans
Open investment regimes will allow for the
encourage the further opening of
free flow of capital throughout the
investment regimes which will help
Hemisphere, increasing opportunities for
recipient countries mobilize and attract
U.S. investors. The strengthening of the
Latin American and Caribbean economies
private capital and strengthen private
sector contributions to development.
will allow the region as a whole to compete
Specific investment reforms encouraged by
for scarce resources on the global market.
the loans include:
Debt Reduction
financial sectors must be open to
competition, and financial services and
The large amounts of debt owed by Latin
markets must be modernized to facilitate
American and Caribbean countries have
private investment;
slowed economic growth and investment
6
flows into the region. Debt reduction can
Environment Component
restore the confidence of domestic and
foreign investors, and will encourage
The debt reduction pillar of the EAI
repatriation of flight capital and help renew
includes an innovative mechanism to
access to international financial markets.
support environmental protection and
conservation in Latin America and the
The EAI will work to reduce bilateral debt
Caribbean. Each country that benefits
owed to the U.S. Government, which
from a reduction of its P.L. 480 and/or
totalled about $12 billion at the end of
A.I.D. debt can pay the interest on the debt
1990. Such debt includes both concessional
that remains in local currency. These local
debt and non-concessional debt.
currency payments will be used to support
Eligibility for reduction of concessional
grassroots environmental projects.
debt resulting from USDA food aid loans
Following the negotiation of an
(and upon Congressional authorization,
Environmental Framework Agreement,
Agency for International Development
each debtor country will set up an
loans) requires that the beneficiary country
administering body, with U.S. membership,
meet the following conditions:
to make decisions about the use of these
funds. Local non-governmental
have an IMF program or its equivalent
organizations will hold a majority of the
in place;
seats on these bodies. The U.S.
have in place a World Bank adjustment
Environment for the Americas Board, a
loan, if appropriate;
body combining government and
have undertaken major investment
non-governmental members, will provide
reform in conjunction with the IDB
general oversight of the program.
investment sector loan program, or
otherwise implementing or making
Conclusion
significant progress towards an open
investment regime; and
The future prosperity of the United States
have negotiated a financing program
and our neighbors in the Western
with commercial banks if commercial
Hemisphere is dependent upon our
loans are a significant share of country's
capacity to build mutually beneficial
debt portfolio.
economic partnerships. In order for this to
happen, business and government must
The Administration is also seeking
work together to create healthy and
Authority to swap non-concessional
expanding economies throughout the
Export-Import Bank and Commodity
region. The EAI builds upon the positive
Credit Corporation assets under the EAI to
trends within the Hemisphere by offering a
facilitate equity investment, development
partnership that through investment policy
and environmental activities.
reform and trade liberalization will expand
U.S. commitment to the debt reduction
Latin American and Caribbean economies
pillar is critical to continue to reinvigorate
and increase demand for U.S. goods and
the confidence of the global market in the
services.
region.
7
Status of the EAI
Progress to Date
negotiation of the North American Free
In the year and a half since President
Trade Agreement (NAFTA) with Mexico
Bush's June 1990 announcement of the
and Canada and furthers the trade pillar of
Enterprise for the Americas Initiative,
the EAI. The NAFTA negotiations are
significant progress has been made toward
currently underway in six broad categories:
realizing the program's objectives. With
market access, trade rules, investment,
each step, new opportunities are opening
services, intellectual property rights and
for trade with and investment in the Latin
dispute settlement. The NAFTA will
America and the Caribbean region.
greatly increase U.S.-Mexico trade and
Important advancements include:
bring more jobs to the United States.
Stimulus of Economic Reform throughout
Opening up of Trade Negotiations
the Region
The U.S. has signed 16 Trade and
The EAI is supporting dramatic reforms in
Investment Framework Agreements with
31 countries in Latin America and the
the region to open up economies. These
include the reduction of trade barriers, the
Caribbean, leaving only three small
countries outside the Initiative. These
reform of investment regulation, the
privatization of nationalized industries, and
agreements provide a forum for discussing
sub-regional free trade negotiations. Such
restrictive trade and investment policies
reforms open markets for U.S. goods and
that limit business opportunities, allow for
services as well as opportunities for U.S.
the resolution of disagreements, and
advance efforts at trade liberalization and
investment.
opening of markets.
Increased Support of U.S. Positions in
Meetings have been held or are scheduled
GATT Negotiations
for all of the trade and investment councils.
This process will help the parties to identify
In conjunction with the increased
and put in place the measures that will be
cooperation brought about by the EAI,
necessary for the future negotiations of free
many countries in the region are committed
trade agreements.
to the GATT process, taking an active role
in the Uruguay Round of multilateral trade
The EAI has also served as a stimulus to
negotiations and actively pursuing global
regional arrangements which are lowering
agreements on agriculture, balance of
barriers to trade within groups of countries
payments and trade related investment
in Latin America and the Caribbean. Trade
measures negotiations, among others.
groups such as the Andean Pact, Central
America, MERCOSUR and CARICOM
Progress in the Negotiation of the NAFTA
are simultaneously expanding regional
markets.
The extension by Congress of fast track
authority until June 1993 allows for the
8
Implementation of the Investment Sector
negotiation of Environmental Framework
Loan Program (ISLP) and the Multilateral
Agreements, to ensure appropriate
Investment Fund (MIF)
non-governmental participation in local
administering bodies, and to review the
ISLP loans totaling $485 million have been
operation of funds established in
made by the Inter-American Development
participating countries. This Board is
Bank (IDB) to Chile, Jamaica, Bolivia and
chaired by a representative from the
Colombia. Seven additional loans are
Treasury Department and includes
under review for approval by the end of
representatives from the Agency for
1992.
International Development, the
The U.S. and Japan will each contribute
Department of State, Environmental
$500 million to the MIF. Spain, Canada,
Protection Agency, the Inter-American
Portugal, and several Latin American
Foundation and four private sector
countries are also committed to
representatives. Two additional seats will
contributing. Additional countries are
soon be added to the Board to include a
considering participation, which will
representative from the Department of
continue to advance the MIF toward the
Agriculture and a fifth private sector
$1.5 billion funding target.
representative.
Full implementation of the ISLP and MIF
With the advice of the Board, the U.S.
programs will greatly enhance U.S.
Government has now negotiated and
investment opportunities in the region.
signed Environmental Framework
Agreements with Bolivia and Jamaica.
Reduction of Concessional Food Aid Debt
Negotiations are underway with Chile, and
an agreement is expected to be signed early
Pursuant to the authorization gained under
in 1992. It is hoped that authorization and
the 1990 Farm Bill, in fiscal year 1991 the
appropriations for reduction of A.I.D. loans
Administration reduced concessional food
and for debt swaps of non-concessional
aid debt owed by Chile, Jamaica and
CCC and EXIMBANK debt will be
Bolivia by a total of $263 million. These
obtained.
countries have implemented extensive
economic and investment reforms,
Status of Pending Legislation
demonstrating strong commitment to
expanding their economies through the free
While remarkable progress has been made
market approach.
over the past year and a half, full
implementation of the President's Initiative
Signing of Environmental Framework
remains contingent upon the passage of the
Agreements
Administration's "Enterprise for the
Americas Act of 1991." Submitted to
In September 1991, President Bush named
Congress in February 1991, the Bill seeks
the Environment for the Americas Board, a
authorization to work actively on the
joint public and private body established by
investment and debt reduction pillars of the
Congress. The functions of the Board are
Initiative.
to advise the Administration on the
9
The Enterprise for the Americas Initiative
Once these authorizations are granted,
Act has two major components:
Congress must then appropriate funding for
A $500 million contribution over five
both components. Congressional support
years (1992-1996) of U.S. funds for the
for both the Enterprise for the Americas
Initiative Act of 1991 and the
Multilateral Investment Fund (MIF) to
be administered by the Inter-American
corresponding appropriations is essential to
the success of the Initiative.
Development Bank. This contribution
will match the Japanese commitment
and, when combined with amounts
pledged by other donors, will
substantially fulfill the $1.5 billion target
for the MIF.
The authority to reduce official debt
owed by the Latin American and
Caribbean countries to the U.S.
Government. Congress already
authorized the reduction of PL 480 food
debt, in the 1990 Farm Bill. Additional
legislative authority is needed to reduce
debt owed to the Agency for
International Development, the
Export-Import Bank and the Commodity
Credit Corporation.
10
Why U.S. Business Must Act Now
The possible benefits of increased economic cooperation among the
nations of the Western Hemisphere are tremendous. The region is
rapidly stabilizing and improving both economically and politically.
Most countries are experiencing positive economic growth. Nations
are eliminating laws and regulations that restrict trade and
investment. Because of strong U.S. competitiveness and established
market presence, the United States is uniquely positioned to
participate in and benefit from such cooperation. Working together
will result not only in the strengthening of the economies throughout
the region, but also in the creation of U.S. jobs.
From a national perspective, the consequences of failing to strengthen
economic ties with Latin America and the Caribbean could be severe.
By the year 2020 the region's population is estimated to grow to more
than 700 million. The question that should concern us is whether
those 700 million people will be living in poverty and desperation,
disillusioned with the principles of democratic government and
market economies, and vulnerable to the false appeals of extremists.
Or will they be informed, productive citizens and consumers with
whom we share common interests and values grounded in individual
liberty, the rule of law, and free enterprise? If both the U.S.
government and the U.S. business community are actively engaged in
the region, prospects for success are greatly increased.
The positive trends and growing opportunities in Latin America and
the Caribbean are becoming increasingly evident to investors from
other industrialized countries. As they have done in Mexico, U.S.
companies should reconsider the benefits of doing business in the
region, identify new opportunities for entering the market, and make
a sustained commitment to the Hemisphere. Doing so will stimulate
growth in the region, strengthen the U.S. economy and create U.S.
jobs.
The EAI provides governments and businesses with a framework for
assuring that the region is marked by strong, interdependent
economies. In order for the vision of the EAI to become a reality, it
will take the coordinated effort of governments and private sectors
from every nation in the Hemisphere to work together as partners.
The United States is both a critical partner in and a beneficiary of this
process.
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