Trade decline worries Latin Americans

Press, 18 February 1983, Page 16

Trade decline worries Latin Americans

From

GEOFFREY MATTHEWS,

in Bogota

In the aftermath of last year’s Falklands fighting much attention has been focused on possible damage to Latin American relations. with Britain and the United States. In fact, these relations have probably suffered very little. More important is the deterioration in relations between the Old World and the New — between Europe and its onetime colonies — a deterioration that began long before Argentina's temporary conquest of the Malvinas.

The main complaint — over sharply declining trade — was symbolised vividly in Latin American eyes when the European Common Market imposed sanctions on Argentina at the start of the conflict.

The E.E-C. action, while hardly unexpected, disappointed and saddened a region which has long looked to the Old World as a political and economic alternative to its stifling and often controversial dependency on Washington (never more keenly felt than under the Reagan Administration).

The aim of many countries and economic blocs, like the Andean Pact - (comprising Bolivia, Colombia, Ecuador, Peru, and Venezuela) was to nurture trade relations with Europe so that eventually the Old World would, replace the United States as the main market for exports. Until 1973 that goal looked not only possible but even likely. Trade between Latin America and Europe has quadrupled since 1958. If oil purchases are excluded, the E.E.C. still emerges as Latin ■ America's biggest market, buy.ing 26.2 per cent of exports, against 20.6 per cent by the

United States. In recent years Latin American exports to Europe have suffered a serious relative decline compared to the rest of the world, and the possibilities of better trade relations are viewed as unlikely.— although Latin America has never looked to Europe with a greater sense of need and desperation. This year threatens to plunge the Latin American economies into the worst crisis since the 19305, due to overwhelming foreign debt, stagnation in industry and agriculture, a growth rate of less then 1 per cent, as well as declining export income. Foreign debt in such regional giants as Mexico, Brazil, and Argentina could, in the view of many observers, trigger social unrest on a scale which would make the conflict in tiny El Salvador look like a playground scuffle. In large measure. Latin Americans blame stereotyped thinking by Europe: a belief that the region is somehow the exclusive domain of its big super-Pow’er neighbour in the north.

Carlos Alzamora, secretary of the Latin American Economic System, whose Spanish acronym is S.E.L.A. regards the European Economic Community as a threat to Latin America. “Our continent has suffered the cost of European integration and could be the first victim, once again, when the Community expands,” he says. The admission of Greece to the E.E.C. and the likely entry soon of Spain and Portgual the two countries with the closest historical and cultural ties with the southern New World, could

cost Latin America $4 billion S.E.L.A. calculates. The new members will have to give up old trading partners in Latin America and replace them with countries with which the E.E.C. has preferential agreements.

Things started to turn sour in 1975 when the E.E.C.'s Lome Convention, favouring. African and Caribbean countries, came into operation. Six Latin American exports — meat, corn, sugar, cotton, wool, and oil — have been particularly affected. So there could be no breaking away from the United States as the region’s principal client and provider, although the United States market's relative importance has been reduced as a result of interregional trade (accounting for 20 per cent of Latin American trade) and the opening up of new markets such as Japan. If trade relations between the Old and New Worlds are a source of despair in Latin America, the picture is improved by the scale of European investment in the region. Over the last decade, Latin America became the most important, subject of new investment from Europe. In some countries — notably Brazil, Argentina and Chile—European investment has started to overtake that from the United States.

At the start of what threatens to be a grim year, that is not enough. As one editorialist put it: "If a policy of genuine co-operation on the part of the industrialised countries is not urgently put into effect, Latin America’s dark panorama will only become darker.” — Copyright, London Observer Service.