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(a) Overview meeting reaffirmed that negotiations were to be concluded In Latin American and Caribbean countries, democratic by January 2005, determined minimum common obliga- systems, although still vulnerable, have taken root across tions applicable to all the FTAA countries and agreed to a most of the region, and an abundance of natural resources framework allowing for individual negotiations for other and vigorous steps toward economic liberalization and items including additional liberalization. Once the FTAA regional economic integration have stimulated renewed is established, it will be the world’s largest FTA-zone interest in this region as a market with growth potential for (with a population of 800 million and a combined GDP of the future. In addition, the region has been strengthening approximately US$12 trillion) and will be expected to its influence on the international stage through regional contribute to economic development within the region. economic integration. Taking the FTAA negotiations into consideration, , based on its traditionally friendly relations with Latin American and Caribbean countries have promoted Latin American and Caribbean countries and with the negotiations on bilateral and intraregional FTAs as well as above-mentioned developments in the region in mind, has FTAs with countries outside the region. In particular, strengthened the relations through bilateral and multilat- Brazil, standing against the US, aims for solidarity among eral dialogue. At the same time, it has made a variety of the South American countries by reinforcing the unity of efforts to contribute to the stability and development of the MERCOSUR and for strengthening the partnership region particularly through economic and technical coop- between MERCOSUR and the Andean Community (an eration, and support for elections. In 2003, Japan carried FTA among them was agreed to in December). At the out a variety of consultations and cooperation including same time, Brazil is working on concluding economic negotiations on the Japan-Mexico Economic Partnership partnerships with countries outside the region, primarily Agreement (EPA). an FTA between MERCOSUR and the EU. As it promotes regional economic integration, it aims to (b) The Vigorous Movement toward Regional strengthen its political influence in Latin American and Economic Integration Caribbean countries and continues to increase its presence Latin American and Caribbean countries take stands as on the international stage through strengthening its rela- their economic strategies on promoting economic devel- tions with developing countries outside the region, such as opment of themselves as well as domestic structural India and South Africa, and also through forming the reform through strengthening economic partnership rela- at the World Trade Organization (WTO) ministerial tions, primarily Free Trade Agreements (FTAs). meeting in Cancún. Meanwhile, the US has already Moreover, the countries are increasing their international concluded FTAs with Mexico, Canada and Chile, and in influence as a group by strengthening regional economic January 2004 it finished the negotiations on the US- integration. Central America Free Trade Agreement (CAFTA) with In the Americas, numerous bilateral and interregional five Central American countries. In addition, the US has FTAs have been concluded since the early 1990s, in addi- announced the commencement of FTA negotiations with tion to multilateral regional economic integration, such as the Dominican Republic, Panama and four of the Andean the North American Free Trade Agreement (NAFTA), the Community countries excluding Venezuela. Southern Common Market (MERCOSUR) and the There is a danger that due to this progress of economic Andean Community, and vigorous movements were also integration in Latin America and Caribbean, Japanese observed in 2003. companies may be disadvantaged throughout the region in With a view to creating the Free Trade Area of the competition with the companies of the US and Europe. Americas (FTAA), which will encompass the entire The lack of an FTA between Japan and Mexico has actu- Americas (except Cuba), a ministerial meeting was held in ally put Japanese companies on disadvantageous ground Miami in November. The leaders who attended the compared with US and EU companies. Japan is

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Regional Economic Integration in the Americas

Caribbean Community (CARICOM) Jamaica Commonwealth of Dominica The Bahamas Barbados Guyana Grenada Haiti Suriname Belize Saint Lucia Saint Vincent and the Grenadines Trinidad and Tobago Saint Christopher and Nevis North American Free Trade Antigua and Barbuda Agreement (NAFTA) Monserrat, UK Canada Regional GDP: US$33 billion US Regional population: 14.6 million Mexico Regional GDP: US$11.378 trillion Regional population: 415.8 million

Central American Common Market (CACM) Guatemala El Salvador Honduras Andean Community Nicaragua Ecuador Costa Rica Venezuela Regional GDP: US$57 billion Peru Regional population: 33.8 million Colombia Bolivia Southern Common Market Regional GDP: US$287 billion (MERCOSUR) Regional population: 115.3 million Brazil Argentina Free Trade Area of the Americas Paraguay (FTAA: Under negotiation for 2005 start) Uruguay (Chile, Bolivia and Peru are associate members) All 34 states of the Americas, except Cuba Regional GDP: US$797 billion Regional GDP: US$12.7 trillion Regional population: 218.9 million Regional population: 830 million

conducting EPA negotiations with Mexico to prepare a relations with Latin America and the Caribbean. Among legal framework to eliminate these competitive disadvan- others, Japan held in November the first bilateral tages and the concerned ministers of both countries economic consultations with Chile, which has been espe- reached agreements in substance on major elements in cially active in concluding FTAs, to reinforce further trade March 2004. and investment relations between the two countries. Current economic relations between Japan and Latin Moreover, Japan is also working to strengthen a wide American and Caribbean countries remain at a low level, range of relations with Latin American and Caribbean relative to the potential of the region with abundant countries through regular consultations with regional mineral and energy resources and high production economic organizations such as MERCOSUR, the capacity in food. Taking the above-mentioned progress of Caribbean Community (CARICOM) and the Central regional economic integration in Latin American and American Integration System (SICA), and through partici- Caribbean countries as well as movements to strengthen pation in the Forum for East Asia-Latin America partnerships with countries outside the region into consid- Cooperation (FEALAC), which aims to strengthen rela- eration, it is necessary for Japan to intensify economic tions between East Asia and Latin American and

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Caribbean countries. Senior Vice-Minister for Foreign people who had been excluded from the benefits of Affairs Masatoshi Abe attended the Second FEALAC economic reform, over domestic issues such as poverty, Foreign Ministers’ Meeting (FMM II), which was held in has accelerated their protests, resulting in a change of Manila on January 30Ð31, 2004. the president in October. In Venezuela, the confronta- tion between the government and dissidents continues, (c) The Political and Economic Situation and the two-month long general strike came to an end in Latin American and Caribbean countries have been February, but steps are currently being taken to dismiss advancing the transition to democratic government since the president. the 1980s, and currently almost all countries have adopted Moreover, regional disparities continue to widen democratic systems. Throughout the 1990s, the region among the Latin American and Caribbean countries which implemented neoliberal economic reforms such as trade advance economic reforms. While there are countries such liberalization and the privatization of state-owned enter- as Chile that enjoy sound economic performance owing to prises, and enjoyed stable economic growth. Although a the progress in economic reforms, others are facing diffi- slowdown in global economic growth and the Argentine cult economic management: Venezuela has experienced financial crisis caused a deceleration of the economy in large negative growth caused by the backlash against this region since 2001, a price of region’s major export liberalization; Argentina has been confronted with a products and demand growth through a certain recovery of severe economic crisis; and Uruguay has been suffering the global economy led to an overall recovery of the from the effects of the Argentine crisis. In addition, economy in the region, albeit a slight one, in 2003. Colombia has been struggling with serious problems such There are many challenges, however, that must be as narcotics and terrorism, but under the new Uribe tackled such as a widening gap between the rich and poor, administration, a degree of progress has been seen. For increasing unemployment and worsening public security. example, the disarmament of private military organiza- Against this background, new administrations were inau- tions has been commenced and the public security situa- gurated in 2003: the Lula administration in Brazil, the tion has come to improve since then, albeit only slightly. Kirchner administration in Argentina and the Gutiérrez Japan has provided a variety of support for the efforts administration in Ecuador, all of which place importance that Latin American and Caribbean countries have made, on responding to those challenges. In Brazil, the govern- toward adhering to democratic systems, reducing the gap ment has been advancing social policies to tackle between the rich and poor, and carrying out economic domestic poverty and carrying out food distribution to the reforms to achieve sound and stable economic growth poor. The key element is whether, under the budget while maintaining the conservation of the natural environ- restrictions, the government can set the economy, which ment. For the issues of poverty and the environment as has been stabilized under the austere fiscal policy, on to a well as economic reform, Japan has provided financial and growth path that will bring an increase in employment. In technical cooperation through Official Development Argentina, while the government has been carrying out Assistance (ODA). As for the assistance in strengthening policies that place importance on the popular strata that democracy, the Japanese Government has provided finan- have been suffering in the economic crisis, the foreign cial assistance as well as the dispatch of election observers debt issue remains a huge impediment to those policies, for the Election Observation Mission of the Organization and, as such, the necessity of domestic structural reform of American States (OAS) on the occasion of the presi- has been pointed out. In Ecuador, though sound economic dential election in Guatemala held in November and management has been carried out in coordination with the December 2003. Japan will continue to work on international community, the current administration has supporting the consolidation of democracy and economic difficulty running the government due to the secession of reform efforts in Latin American and Caribbean countries. peoples including indigenous ones from the ruling party, Japan and Latin American and Caribbean countries which resulted mainly from economic problems. carried on their efforts to strengthen relations through The widening disparity in wealth gives rise to social high-level VIP exchanges in 2003. From Latin America instability and sometimes there is a danger that it can and the Caribbean, President Ricardo Lagos Escobar of shake democratic systems. In Bolivia, the increased Chile visited Japan in February and agreed to set up discontent of the people, particularly the indigenous Japan-Chile bilateral economic consultations in the

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State guests President Vicente Fox Quesada of Mexico and Mrs. Fox making a State Call on Their Majesties The Emperor and Empress (October Photo: Imperial Household Agency) summit meeting with Prime Minister Koizumi. President role in Latin America and the Caribbean and also take an of the Council of State Fidel Castro of Cuba stopped off in active part in the international arena, a wide range of Japan in March and held a summit meeting with Prime dialogues not only on bilateral relations but also on global Minister Koizumi. The two leaders exchanged a wide issues were held at the meetings. In addition, President of range of opinions about the bilateral relationship and inter- the House of Councillors Hiroyuki Kurata visited Chile national issues. Minister of Foreign Affairs Frederick A. and held talks with President Lagos and the presidents of Mitchell of the Bahamas visited Japan in August, and in the Congress in the same month. Her Imperial Highness the foreign ministers’ meeting with Minister for Foreign Princess Sayako visited Uruguay and Honduras in Affairs , the two ministers carried out a November and held informal talks with President Jorge meaningful exchange of views about their bilateral rela- Luis Batlle of Uruguay and President Ricardo Maduro of tionship. In October, President Vicente Fox Quesada of Honduras respectively, attended a variety of ceremonies Mexico visited Japan as a state guest and it was confirmed and deepened the friendly bilateral relations. Furthermore, that Japan and Mexico would build a partnership suitable Senior Vice-Foreign Minister Abe visited the Dominican for the new age. Minister of Foreign Affairs Rafael Bielsa Republic and Mexico in December. In the Dominican of Argentina visited Japan in November for the first time Republic, he held talks with President Rafael Hipólito since the inauguration of the new administration in Mejía Domínguez and informal talks with Japanese immi- Argentina, and in the foreign ministers’ meeting with grants, and in Mexico he attended the signing ceremony Foreign Minister Kawaguchi both countries shared the for the UN Convention against Corruption besides discus- views concerning the necessity for developing relations sions with VIPs. between the two countries from a mid and long-term It is important for Japan to hold high-level dialogue perspective. through more vigorous VIP exchanges and to continue to From Japan, Senior Vice-Minister for Foreign Affairs work on strengthening relations with Latin American and Toshimitsu Motegi visited Mexico, Brazil, Argentina and Caribbean countries in the future. Chile in August. As these four countries all play a central

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