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and - 16 years of the San José Dialogue -

Heinrich Kreft1 Bülowstraße 45 10783 Berlin/Germany Tel.: 0049-1888-172757 Fax.: 0049-1888-174711 Email: 02-8@auswärtiges-amt.de

Paper prepared for the workshop

"Dollars, Democracy and : The External Influence on Economic Integration in the "

Los Angeles, CA, May 18, 2000 The Pacific Council on International Policy The Center for Applied Policy Research, Munich Abstract The EU maintains the longest-standing and undoubtedly closest relations with the countries of Central America. These relations stretch back to the early 1980s, when bloody civil war raged in , and , and the USA too was pulled further and further into these conflicts. In contrast to the USA, the EU viewed the conflict in Central America not so much as part of the East-West conflict, but rather as part of the North-South confrontation. Politically the EU supported the Latin American peace initiatives - first those of the and then the Arias peace plan. The European-Central American San José conferences, which stem from a German-Costa Rican initiative, are an expression of this active policy on Central America. Beginnng in 1985, they regularly brought the warring parties to one table. In this way and with its support for the peace initiatives originating from within the , the EU has made an essential contribution to the successful movements towards peace in Central America since 1990. The EU and its member states have also made a significant financial contribution towards the reconstruction and democratization of the American isthmus. For instance, the region receives the most aid per capita from EU funds, and together the EU Commission and member states have been the biggest donors to Central America since 1988. Against this background and given the fact that, despite all the political and economic successes, the region is one of the poorest in the , the Central were keen to secure the San José Dialogue and thus the EU's commitment in the long term. Since the EU side also saw a need to reform the San José process, it was decided at the San José XII conference in Florence in March 1996 to revitalize the San José Dialogue. Since then, greater emphasis has been placed on economic cooperation. In its cooperation with Central America, the EU concentrates on three fields: consolidation of the rule of /modernization of public administration, economic and social development measures and support for the process of integration in Central America and for its integration into the global economy. At the XVI San José Ministerial Conference in Vilamoura (Portugal) on 21 and 22 February 2000, Europe and Central America took the opportunity to further the consolidation and diversification of biregional relations that have been evident in recent years. Over the sixteen years of the San José process, the European-Central American dialogue has shown resilience and dynamism and has demonstrated a notable capacity to adapt to changing conditions both in Central America and in the international environment.

1 The author expressed solely his personal ideas - 2 -

I. Central America as a centre of conflict

Europe's relations with Central America began in the year 1502, when landed on Guanaja, an island in the Gulf of . However, Europe's interest in the land bridge between North and remained low over the centuries, until in the 1970s the Sandinista revolution in Nicaragua and the conflicts in El Salvador and Guatemala sparked a lasting European interest in the region which has persisted - albeit with reduced intensity - to this day. Today the maintains the longest-standing and undoubtedly closest relations in with the six countries of Central America.22 These relations were institutionalized back in the mid-1980s - in the form of the San José Dialogue - when Central America became the setting for one of the last major conflicts in the Cold War.

During the 1970s and particularly the 1980s, the mainly internal power-politics and socio-economic conflicts on the American isthmus were top-loaded with the ideological and military Cold War rivalries. Thus in Nicaragua and El Salvador it was no longer primarily a matter of internal power struggles and internally-defined alternatives for development, but of belonging to the big blocs, their spheres of influence and models for development. Central America evolved into a subject of sometimes passionate debate in domestic confrontations in large parts of Europe, especially Germany, the Nordic states and .

II. The development of a common policy on Central America within the EU3

Given the relative unimportance of economic interests (little exchange of trade, scarcely any direct investment) and the huge geographical remove, it at first appears surprising

2 Historically, Central America comprises Guatemala, Honduras, El Salvador, Nicaragua und , which from independence until 1838 formed the "United Provinces of Central America". As is now also Central-America oriented and is participating in the integration process, it is included here, unlike , which, although it takes part in Central American summits as an observer, is otherwise oriented to the states. 3 Since the entry into force of the Maastricht Treaty on 1 November 1993 the European Community (EC) has been known as the European Union (EU). For simplicity, this article uses the term EU even for the period before this. - 3 -

that the EU has developed a policy on Central America at all. Various internal and external factors have led to Western European engagement on the American isthmus. The Sandinista revolution and the USA's reaction to it met with considerable attention in Europe, where the conflict in Central America was viewed not as part of the East-West conflict, but as part of the North-South confrontation. Thus it was felt that lasting peace could be established only by removing the internal causes of the conflict while at the same time ensuring that it did not become embroiled in the East-West confrontation. To this end, the revolutionary movements had to be accepted as partners in dialogue, and a sustainable process of democratization and socio-economic development had to be set in motion. The most important external factor for the EU's engagement was without doubt the USA's Central America policy, which was severely criticized in Europe even in conservative circles. These circles feared that US military involvement in Central America could lead to the withdrawal of troops from Europe, with negative repercussions for stability on the old . Furthermore, US intervention in Central America would have given a new boost to the anti-Americanism latent in Europe particularly among the political Left. However, the Central American conflict also offered the Europeans a chance of rapprochement with Latin America: during the Falkland/Malvinas war in 1982, when the EU stood by the United Kingdom and thus against , which had the support of the whole of Latin America (except Chile), the EU's relations with Latin America had sunk to a low. In addition, the Central American conflict offered the EU an opportunity to raise its political profile on the stage at a time of rampant "Euro- pessimism".4 For the EU these were such weighty considerations that it even took the risk of provoking a conflict with its most important alliance partner, the USA. Initially relations were established by the EU Commission5 and the European Parliament6 and not by the Council, the organ that was actually responsible for the EU's foreign policy under

4 Cf. Heinrich Kreft, Zentralamerika in der internationalen Politik - Eine deutsche Perspektive, in: Albrecht von Gleich, Heinrich-W. Krumwiede, Detlef Nolte, Hartmut Sangmeister (eds.), Lateinamerika Jahrbuch 1996, a.M. 1996 5 In 1975 Sir Christopher Soames was the first member of the EC Commission to pay an official visit to Central America. He was followed up to 1981 by Commissioners Wilhelm Haferkamp (External Relations) and Claude Cheysson (Development Cooperation). 6 Even before the Sandinista revolution the European Parliament had denounced the human rights violations under the Somoza regime. It welcomed the Sandinista takeover of power and called upon the EC and its member states to provide effective aid. - 4 -

EPC (European Political Cooperation).7 As early as 1980 the European Parliament began to formulate a European policy on Central America based on democracy, human rights, development assistance and non-intervention.8 These principles were taken over by the Commission and the Council.

III. From the Contadora initiative to the peace plan

From the outset the EU supported the peace initiatives stemming from within Latin America, i.e. first the Contadora initiative and then the Esquipulas peace plan. In 1984 the Contadora Group,9 which had been formed a year earlier, presented an Act for Peace and Cooperation in Central America in which the military security aspect was particularly dominant. In the face of general resistance from the USA and its allies in Central America (in particular Honduras and El Salvador), however, the group did not succeed in getting a regional agreement signed.

In February 1987, in the wake of the Contadora Group's failure, the initiative passed to the Central Americans themselves, when Oscar Arias, the President of Costa Rica, presented his Nobel Peace Prize-winning peace plan to the public. This peace plan eventually became the basis for the agreement signed in Esquipulas (a Guatemalan place of pilgrimage) in August 1987 by the five Central American Presidents (including President Ortega of Nicaragua).10 Under this agreement the Presidents pledged to conclude ceasefire agreements with the armed opposition and to enter into dialogue with the civil, unarmed opposition, committed themselves to democratization and non- intervention, and undertook not to provide any support whatsoever for irregular units in neighbouring states and to establish a commission to draw up and monitor adherence to a peace plan.11 The waning of the East-West confrontation had a positive impact, as did the

7 In the Maastricht Treaty EPC became the Common Foreign and Security Policy (CFSP). 8 Cf. Hazel Smith, European Union Foreign Policy and Central America, London et al. 1995, p. 63 f. 9 The Contadora Group included , , and Panama. It took its name from the venue of the first meeting, an island belonging to Panama. 10 Original title of the agreement: "Procedimiento para establecer la paz firme y duradera en Centroamérica", better known as "Esquipulas II". 11 Cf. Heinrich Krumwiede, Der Arias-Friedensplan für Zentralamerika, in: Außenpolitik, 1, 1988, p. 63 ff. - 5 -

fact that the Reagan administration felt itself forced to take a more flexible approach to Central American policy following the Democrats' victory in the congressional elections in November 1986 and the uncovering of the Iran Contra scandal at the end of that year. In the face of constant economic and military pressure, Sandinista Nicaragua also abandoned its hardline stance.

IV. The beginning of the "San José Dialogue"

The contribution made by the European Community towards the establishment of peace in Central America is expressly stated in the preamble to the Esquipulas peace agreement. From the outset the aim was to promote democratization as a precondition for political stability and the protection of human rights. Other goals includeed the creation of peace through demilitarization of the region, the withdrawal of foreign military and the commencement of a dialogue between the warring parties. The Europeans placed great value on Central American integration as a vehicle for long-term socio-economic development in the region and as a basis for the consolidation of the peace process and of democratization.12 In order to operationalize these political goals, former German Foreign Minister, Hans-Dietrich Genscher, and President Monge of Costa Rica, drew up a framework for an inter-regional dialogue between the EU and the countries of Central America. As a result, a first meeting of the foreign ministers of the two took place in San José, the capital of Costa Rica, in September 1984. At the follow-up meeting in Luxembourg in November 1985, both parties agreed to hold annual meetings of the foreign ministers and an agreement on economic cooperation was concluded to underpin the dialogue.13

It is not easy to measure the contribution made by Europe and the San José Dialogue to the Esquipulas peace process, but it is generally regarded as substantial. The mere fact that the San José conferences regularly brought the Central American Governments to the

12 The basic concept underlying European policy on Central America is contained in a statement adopted by the Stuttgart European Council under the German Presidency in June 1983 (Guido Heymer, Die Außenpolitik gegenüber Mittelamerika, in: Lateinamerika-Zentrum et al. (eds.), Die Beziehungen zwischen Deutschland und Mittelamerika - Das Potential einer guten Partnerschaft, Frankfurt a.M., pp. 3-13 1996). 13 Initially the participants in the annual conferences were the EU Commission and the foreign ministers of the then ten EU member states, Portugal, Spain, the five Central American states (Costa Rica, Guatemala, Honduras, Nicaragua, El Salvador) and the four Contadora states (Mexico, Venezuela, Colombia, Panama). - 6 -

same table was of a significance that should not be underestimated for the course of the peace processes and democratization in the region.14 In the joint final communiqué of San José VI (Dublin) the European and Central American Governments called upon all irregular forces in the region to integrate into the constitutional order of their respective country. Political appeals for development in Central America (particularly for the peace process, democratization and respect for human rights) have been included in the final communiqués of all foreign ministers' conferences to date.

The incorporation of Nicaragua into the San José Dialogue prevented the country's complete isolation from the West. The majority of EU member states also stepped up their bilateral relations with the Sandinista regime.15 Thus the Europeans made an essential contribution towards establishing a climate of trust which was necessary for the holding of free and fair elections. The Europeans also participated in the financial and technical aspects of the election process as well as in the monitoring of key provisions of the Esquipulas agreement as part of a UN observer group (ONUCA).

V. Successful peace and democratization process in Central America

The situation in Central America has changed markedly over the past decade. Long- standing, bloody conflicts in Nicaragua and El Salvador came to an end in the early 1990s. The negotiated peace agreements were largely respected and implemented. In 1996 Guatemala too made the breakthrough to a final peace settlement. For the first time since independence in 1821, democratic governments have become established simultaneously in all six Central American states. Notwithstanding remaining structural deficits (e.g. inaccurate electoral polls and low turnouts, for instance in Guatemala), the elections that have taken place in recent years have been judged free and fair by international election observers and have been recognized as correct by the vast majority

14 Cf. Andrew Crawley, Die Beziehungen Europas zu Zentralamerika oder: Vom Anschein der Selbstlosigkeit, in: Petra Bendel (ed.), Zentralamerika: Frieden - Demokratie - Entwicklung? Politische und wirtschaftliche Perspektiven in den 90er Jahren, Frankfurt a.M. 1993, pp. 207-321, p. 222 15 When Nicaragua declared its willingness at the Central American summit at Costa del Sol (El Salvador) in February 1989 to introduce democratic reforms, the Federal Government expressed its willingness in principle to embark upon development cooperation with Nicaragua. During this phase there was an official visit to Bonn by President Ortega (May 1989) and a return visit to Nicaragua by the Federal Minister for Economic Cooperation, Warnke (June 1989). - 7 -

of losers. For the first time in the history of the isthmus lasting, democratic development seems possible. But the peace and democratization process is by no means consolidated. While one political cause of the emergence of the hotbed of conflict has largely been removed through the democratic opening-up of political systems, the socio-economic causes, in particular the extreme poverty of the majority of the population and the unfair distribution (for instance, insufficient direct taxation), have not yet been eliminated. On the contrary: The process of economic adjustment, which unfortunately became necessary at just the same time as the political transformation and which is being coordinated by the and the IMF, exacerbated poverty still further. The adjustment programmes could be cushioned to a certain degree through social funds, but such funds are no substitute for a sustainable revitalization of the economy that can be felt by the individual. In the year 2000 the region is still far from this goal, although the macroeconomic data for El Salvador and Guatemala have improved. Nicaragua and Honduras suffered a large setback in 1998 owing to the devastation caused by . The region will remain dependent on international assistance in the long term.16

VI. Political and economic integration as the key to development

Regional integration is generally seen as the key for Central American countries to improve their competitiveness, attract investment and improve their bargaining power in international fora. In order to relaunch the sub-regional integration which started back in the 1960s via the Central American Common Market (CACM), its members founded SICA in early 1993. The region-wide market which resulted has created larger economies of scale, helped to boost the influx of investment - particularly in the and tourism sectors - and stimulated intra-regional trade. According to the IMF, intra-regional commerce grew by 179.1% between 1990 and 1998 and came to account for 7.4% of the SICA members' total foreign trade.

The main regional bodies - PARLACEN, the Central American Court of Justice and the Central American Bank for Economic Integration (CABEI) - have gradually been institutionalized, while SICA has established a number of secretariats covering issues such as agriculture, education, the environment and maritime transportation. Integration has proceeded on several other fronts, too, e.g. in the integration of electricity networks

16 Cf. Heinrich Kreft, Nach dem Frieden der Wirtschaftsaufschwung? Zur Lage in Zentralamerika, in: Internationale Politik, 7, 1996, pp. 33-38 - 8 -

or common legislation against drug-trafficking and corruption in the sub-region. There are currently more than sixty sub-regional organizations working on a variety of issues common to the countries of the isthmus.

Despite the substantial progress, Central American integration has been tested by the persistently uneven economic performance of the different countries, by their divergent views on and varying commitment to the goals of integration, and by the incomplete implementation of regional agreements. The degree of sub-regional economic integration remains somewhat low. Regional trade has at times been jeopardized by the application of retaliatory tariff measures, and the CACM still lacks free movement of labour and capital as well as legislative and fiscal harmonization. Participation in the regional institutions is inconsistent: Costa Rica has not yet joined PARLACEN and Panama remains outside CABEI. The Central American Court of Justice comprises only El Salvador, Honduras and Nicaragua. Integration has also been undermined by unresolved questions of order and immigration. Relations between Costa Rica and Nicaragua have been affected by differences over navigation rights on the San Juan river, as well as by heavy Nicaraguan migration to Costa Rica. Guatemala's post-Mitch restrictions on the entry of Nicaraguan, Salvadorian and Honduran citizens also led to an increase in tension. Honduras and Nicaragua are engaged in a border dispute stemming from the ratification by the Honduran Congress on 30 November 1999 of a treaty with Colombia which delimits the maritime border between the two countries but acknowledges Colombian sovereignty in areas claimed by Nicaragua.

VII. The EU's contribution to reconstruction, democratization and integration

Each year since the beginning of the San José process fifteen years ago, the European Union has stepped up its development cooperation with Central America, cooperation being substantially expanded in particular since the end of the armed conflicts. The region's needs are still regarded as considerable, and assistance as essential for the consolidation of the peace and democratization process. The EU's development cooperation with Central America is based on the Cooperation Agreement of November 1985.17 At the San José VI conference in San Pedro (Honduras) in February 1989 greater emphasis was placed on economic cooperation. The San José VIII meeting in

17 A "Third-Generation Cooperation Agreement" concluded at the 1993 San José IX conference in has not yet entered into force as two Central American states have not yet ratified it. - 9 -

Lisbon in February 1992 led to a substantial EU contribution to the reconstruction programme for El Salvador (150 million ECU in 1993). In addition, a "multiannual programme for the promotion of human rights in Central America" was planned for four years, with annual financing of 1.5 million ECU. At the San José IX conference, held in San Salvador in 1993, a new, expanded cooperation agreement was signed. The new agreement adds cooperation in the fields of commerce, science and technology, including investment promotion, environmental protection and anti-drug measures, to traditional cooperation.

Since 1980, the EU's cooperation with Central America (and thus with all of Latin America) has concentrated on Nicaragua, the poorest country on the isthmus after El Salvador, Guatemala and Honduras. The main instrument of cooperation is traditional financial and technical cooperation, which has accounted for over half of all resources since 1980, followed by humanitarian assistance (36%). Since 1992 the EU has been trying to diversify its aid, for instance by extending environmental projects. One special feature of the EU's cooperation is the high proportion of regional projects: over the last twenty years the EU Commission has made about one-quarter of its resources available for regional cooperation projects.

In parallel to this increase in the EU's contribution, most EU member states have also considerably stepped up their cooperation with Central America since the start of the San José Dialogue. As a result of the reduction in US assistance and the simultaneous continual expansion of the EU's commitment, the EU and its member states are now the biggest donors to the region. Per capita, Central America is by far the largest recipient of EU assistance.

Among the EU member states, Germany is cleary the biggest donor to Central America. According to statistics from the OECD, the average annual volume of development cooperation since 1990 has been almost 500 million US dollars. The Federal Republic of Germany was the third-largest source (after the USA and Japan) of national development cooperation for the countries of Central America. The EU and its member states are together by far the largest providers of development cooperation to Central America (1990-1998: over 56%), and the gap is widening due to the fact that the US has been drastically reducing its (financial) commitment in Central America for several years. - 10 -

The EU rapidly stepped up its assistance to the isthmus in the wake of hurricane Mitch by providing support in the form of donations, soft loans, debt relief and expert assistance. In addition, in April 1999 the EU Commission approved a four-year plan to the tune of 260 million euro for reconstruction in Central America. The plan's key component is the Regional Programme for the Reconstruction of Central America (RPRCA), which focuses on fostering sustainable social development on the isthmus, particularly in health and education.

VIII. Results and perspectives of the San José Dialogue

For sixteen years the San José process has been a successful example of inter-regional dialogue between two very different and geographically distant regions. It is a rare example of a "symmetrical dialogue between unequal partners"18 from which both sides have benefited. In Central America the San José process has restored contacts for discussion between enemy states and thus helped to end the bloody civil wars. Moreover, the institutionalized European-Central American dialogue has led to the EU's substantial financial commitment on the isthmus. Within the EU, the San José Dialogue has undoubtedly promoted cooperation among the member states on foreign policy. The close dialogue with Central America also acted as a catalyst for the improvement of political and economic relations with the whole of Latin America.

Up until 1990, the joint efforts by the Europeans and Central Americans concentrated on ending the bloody conflicts and establishing democracy throughout the region. Subsequent years were devoted to reconstruction, reconciliation, the return of refugees and the consolidation of peace and democracy. While the consolidation of peace and democracy remains a prime objective, the focus has increasingly shifted towards the promotion of social justice and economic development. In late 1994, concerned that the EU might do as the US had done and reduce its assistance for Central America following the end of the armed conflicts and the successful process of democratization, Costa Rica proposed to relaunch the San José Dialogue. The aim of this initiative was to adapt European-Central American cooperation to the changes that had taken place in both Europe and Central America since the institutionalization of the dialogue and above all to secure the future financial commitment of the EU and its member states in Central America. This was also the purpose of the Central American Alliance for Sustainable

18 IRELA, The San José Process: Current Situation and Prospects, Madrid 1996, p. 43 - 11 -

Development, a Costa Rican initiative designed as a joint development strategy for the Central American states, which was officially adopted at the regional summit in in 1994. These reform proposals coincided with ideas which had long been held by the European side (especially by France and Germany). Against the background of the shift in priorities from politics to economics and in view of the proliferation of foreign ministers' meetings,19 the Europeans' main aim was to slow down the rhythm of conferences and instead to expand the role of an existing Mixed Commission and to set up a joint trade forum to discuss bilateral trade issues. At the San José XI conference, held in Panama in January 1995, agreement was reached on the need to revitalize the San José Dialogue.20

At the San José XII conference in 1996, the Europeans and Central Americans completed the reform of the San José Dialogue with their Florence Declaration, thereby placing inter-regional relations on a new, contemporary footing.

Since then, the prime objectives of the dialogue have been the consolidation of the peace and democratization process, respect for human rights and self-supporting, sustainable development in Central America. These goals are to be achieved through the modernization of public administration, the consolidation of the rule of law, the fight against crime (and particularly drug-related crime), the dismantling of social inequality and the efficient integration of Central America into the world economy.

The traditional annual foreign ministers' meetings now take place only every other year, the venue alternating between Europe and Central America. In the years when there is no conference, the Central American ministers meet the EU Troika21, the venue again alternating between Europe and Central America.

The Central Americans' interest is increasingly becoming the obtaininment of greater support for the integration of their small economies into the global economy in the form of investment and particularly increased market access. The revitalization and expansion

19 This proliferation combined with the falling political value of the foreign ministers' conferences led to the conferences being attended in person by only a few of the European ministers. 20 Joint Declaration San José XI Ministerial Conference, Panama, 23 February 1995, printed in: IRELA, The San José Process: Current Situation and Prospects, Madrid 1996, Annex III, pp. 63-66, p. 66 21 The Troika consists of the current, past and future Presidencies of the Council. - 12 - of the competences of the Mixed Commission and the establishment of a trade forum have gone some way towards fulfilling this wish. The Mixed Commission, which monitors cooperation between the ministerial conferences, meets every eighteen months, and the sub-commission for cooperation generally every nine months. The new trade forum for the discussion of basic trade issues (e.g. questions of the Generalized System of Preferences or of the trade in ) can be convened by either side.

The EU's commitment in the countries of the American isthmus is set for the long term. This is in keeping with the EU's political (and development policy) goals and principles -- frequently formulated with regard to Central America. To turn away from Central America by substantially reducing or even stopping assistance at this juncture, when peace and democratization are as yet by no means consolidated, would jeopardize the political prestige the EU has acquired with its Central America policy and could even lead to internal controversy in Europe.

At the XVI San José Ministerial Conference in Vilamoura (Portugal) on 21 and 22 February 2000, Europe and Central America took the opportunity to further the consolidation and diversification of biregional relations that have been evident in recent years. Today's biregional agenda includes: - enhancing democratic consolidation - boosting economic growth - improving social conditions - fostering cooperation against illegal drugs and corruption - responding to intensified global competition by fostering integration.

Given the persistently high rates of poverty on the isthmus, the poor social conditions and the devastating impact of natural disasters, development cooperation and efforts towards reconstruction will remain a priority. In the political arena, European support for the consolidation of democracy and the rule of law in Central America will remain an indispensable element of biregional integration. As with European support for pacification in Central America in the 1980s, the EU can also play an important role in diplomatic efforts to identify solutions to those territorial questions in the sub-region that have recently given cause for concern. The EU is particularly well-qualified to share its experiences of conflict reduction and confidence-building through closer regional cooperation and integration. - 13 -

Over the sixteen years of the San José process, the European-Central American dialogue has shown resilience and dynamism and has demonstrated a notable capacity to adapt to changing conditions both in Central America and in the international environment.

Select Bibliography

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