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GUATEMALA: Fears and Hopes Raised by Free Trade with US

Alberto Mendoza

GUATEMALA CITY, May 22 2006 (IPS) - With just a few days to go before the removal of trade barriers between Guatemala and the United States, social organisations are afraid that living standards in Guatemala will decline, while the government and the business community predict an influx of investment, economic growth, and the creation of thousands of new jobs.

The Central American Free Trade Agreement (CAFTA) signed by the United States with five countries from this region plus the Dominican Republic overcame the last obstacle to implementation last week in Congress, and is due to be signed into law this week by President Óscar Berger.

The legislature passed a bill last week to adapt the country’s legislation to CAFTA provisions on government procurement, trade in services, the financial sector, patent protection and the environment.

After Berger signs the bill, it will be sent to Washington to be reviewed by the Office of the U.S. Trade Representative, which will give the green light to Guatemala’s incorporation in the treaty, which has already been fully approved by El Salvador, Honduras and Nicaragua.

The legislature of Costa Rica, the fifth Central American signatory, has yet to ratify the free trade agreement.

Guatemalan society is divided over CAFTA, which has been staunchly opposed by campesino, labour and indigenous movements since the start of the negotiations in January 2003. Meanwhile, big business, the export industry and the government defend the accord as a path for drawing foreign investment and boosting development.

The agreement, which creates a free trade zone by instantly removing a large number of import tariffs and gradually phasing out the rest, will facilitate the cross-border movement of merchandise between the participating nations. It will also enforce intellectual property rights.

The United States is already the top trading partner of Guatemala, whose exports to the U.S. amounted to 917.9 million dollars in 2005.

Cotton and knit garments are Guatemala’s chief export products, followed by tropical fruit and coffee.

According to Guatemalan Economy Minister Marcio Cuevas, the treaty will guarantee market access for Guatemalan products like jewelry, textiles, apparel, footwear and canned tuna. In addition, it will reduce barriers for Guatemalan sugar, alcohol and cheese.

Cuevas noted that the Bank of Guatemala projects that gross domestic product (GDP) will increase 0.6 percent as a result of the agreement in the first year after it goes into effect.

But not all Guatemalan products will enjoy advantages under CAFTA. Corn, beans, rice, chicken, pork and beef are seen as vulnerable to the expected flood of cheaper products from the United States, according to a report drawn up for Congress by Pablo Rodas Martín, director of the Association of Social Research and Studies (ASIES).

The cases of corn and beans are especially worrisome, as they are staples of the Guatemalan diet.

Social and campesino movements are worried that small farmers will be unable to compete with lower cost products from the United States. However, they are not opposed to the opening of markets, but are demanding better access for their products.

Analyst Erwin Pérez, with the Incidencia Democrática association, said “those who already have the financial capacity to export to the United States will continue to do so, but poor campesinos could run into even greater difficulties in placing their products on the local market.”

To mitigate the possible negative effects of CAFTA, the political parties agreed to approve a package of compensation measures before the treaty went into effect – but during last week’s debate, the lawmakers forgot their promise.

The measures were to focus on agricultural reconversion, improvement of infrastructure and social protections, and support for technological change, said Carlos Barreda, with the Collective of Social Organisations (COS).

But in order to adopt such measures, “the state would need funds, which it should collect through taxes on income, property and unproductive land,” said Barreda.

With respect to the fears of negative impacts, the Committee of Agricultural, Commercial, Industrial and Financial Associations of Guatemala (CACIF) – the country’s leading business association – stated that with the increase in investment, “up to 60,000 new formal sector jobs will be created, and the market will become orderly, so that the state, workers and businesses will all benefit.”

The more than 70 percent of Guatemalans who depend on the informal economy for a living, such as those who hawk their fake brand name goods at the myriad street stalls crowding the cities, will also be hit hard by CAFTA.

Pérez told IPS that many jobs were at risk due to CAFTA’s intellectual property rights provisions. He pointed out that in El Salvador, clashes have already broken out between the security forces and street vendors.

The stringent intellectual property protection stipulated by the free trade deal has come under fire with regard to pharmaceutical products. Analysts like Pérez believe that medicine prices will be driven up, further complicating access to, and the right to, health care by the poor.

For instance, the treaty requires governments to guarantee exclusive use of test data on pharmaceutical products for five years, to prevent copying. Until now, Guatemala’s legislation did not offer that protection for new medicines.

Up to 40 different pharmaceutical products will enjoy that protection, including antiretroviral drugs used to treat people living with HIV/AIDS, said Luis Velásquez, head of the Association of Guatemalan Pharmaceutical Industries (ASINFARGUA). Thus, the country will not be able to produce generic versions of these drugs nor import cheaper versions of them from countries like Brazil or India.

The U.S. Embassy has stated that there is no reason that drug prices should rise after CAFTA goes into effect. It also pointed out that the United States is itself a major consumer of generic pharmaceutical products.

If the issues negotiated within the framework of CAFTA have generated controversy, so have questions that have been left out. Juan García, the head of the Immigrants in Action Committee, complained that “freedom of movement is guaranteed for capital, but not for workers.”

He also criticised the fact that the agreement does not address migration problems. “Nor does it facilitate the sending of remittances,” or the design of methods and mechanisms for taking advantage of this significant flow of money, he added.

The controversy has not ended with last week’s approval of the bill to adapt Guatemala’s national laws to CAFTA provisions. On behalf of development, human rights and women’s groups, COS filed legal action with the Constitutional Court, arguing that the treaty is unconstitutional. The Court is to hand down its verdict in three weeks.

The groups argue that CAFTA violates the country’s economic and social laws, that it will limit access to health care, and that it fails to respect the identity and culture of indigenous groups. They also say the public was not consulted before the trade agreement was signed.

In addition, there are complaints about the way Congress dealt with the treaty. After several days of street demonstrations and disturbances, the legislature hurriedly ratified the agreement on Mar. 9, 2005, by a vote of 126 to 12.

The next step, the bill for adapting the country’s legislation to the trade agreement, remained at the mercy of political party disputes until May 11, when half of the chapters were unexpectedly approved after more than eight hours of debate.

Activists suspect that secret agreements were reached by lawmakers in order to push the bill through. Lucrecia Ardón, secretary of the Mesa Global, an umbrella group that brings together 27 of the country’s most prominent social organisations, said that just before the vote was taken, “there were under the table deals for the divvying up of power and an increase in the salaries” of legislators.

May 10 was a busy day for Guatemala’s lawmakers. On one hand, they approved a budget increase equivalent to one million dollars, supposedly for the purchase of computers for Congress, but which actually went towards the salaries of advisers, temporary staff and expense allowances.

At the same time, the heads of CACIF were lobbying hard for approval of the bill, holding meetings with the legislators who voted to ratify CAFTA last year.

Human rights activist and parliamentary Deputy Nineth Montenegro, with the Encuentro por Guatemala party, told IPS that on the night of May 10, around 90 lawmakers were invited to a meeting which neither she nor other representatives of her left-leaning sector were allowed to attend.

On May 18, the conservative governing Great National Alliance and the right-wing opposition Guatemalan Republican Front of former dictator Efraín Ríos Montt (1982-1983) joined forces to give the final shove to the removal of trade barriers with the United States.

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