For Freedom and Free Enterprise: The Origins, Development, and Legacies of Ronald Reagan's Caribbean Basin Initiative A thesis presented to the faculty of the College of Arts and Sciences of Ohio University In partial fulfillment of the requirements for the degree Master of Arts Tyler P. Esno June 2012 © 2012 Tyler P. Esno. All Rights Reserved. 2 This thesis titled For Freedom and Free Enterprise: The Origins, Development, and Legacies of Ronald Reagan's Caribbean Basin Initiative by TYLER P. ESNO has been approved for the Department of History and the College of Arts and Sciences by Chester Pach Associate Professor of History Howard Dewald Interim Dean, College of Arts and Sciences 3 ABSTRACT ESNO, TYLER P., M.A., June 2012, History For Freedom and Free Enterprise: The Origins, Development, and Legacies of Ronald Reagan's Caribbean Basin Initiative Director of Thesis: Chester Pach In 1982, Ronald Reagan unveiled the Caribbean Basin Initiative (CBI). CBI was an aid, trade, and investment program intended to foster economic growth in the Caribbean Basin, thereby alleviating the socio-economic misery that led Basin people to embrace Communism. Although Reagan claimed the program was an urgent priority, it took Congress two sessions to pass CBI, and it had mixed economic results. This study uncovers the origins of CBI, the reasons Congress hesitated to act, and CBI’s impact. CBI was the Reagan administration’s response to Communist expansion in the Basin, and conservative think tanks and Reagan’s political philosophy shaped the initiative. In Congress, CBI became entangled in debates over the administration’s controversial Central American policies and fears that the initiative would hurt the U.S. economy during a severe economic recession. Although CBI had mixed economic results, it increased U.S. economic and political dominance in the region. Approved: _____________________________________________________________ Chester Pach Associate Professor of History 4 TABLE OF CONTENTS Page Abstract.......................................................................................................................................... 3 List of Figures ................................................................................................................................. 5 Introduction ................................................................................................................................... 6 Chapter One: The Origins and Development of Reagan’s Caribbean Basin Initiative................... 17 The Challenge in the Tropics ............................................................................................... 19 Reagan and the Origins of CBI ............................................................................................. 23 Policy Development and CBI ................................................................................................ 34 Chapter Two: The Reagan Administration, Congress, and Interest Groups in Making CBI ........... 51 Forging a Coalition for CBI ................................................................................................... 53 Congress and CBI, 1982 ....................................................................................................... 61 Congress and CBI, 1983 ....................................................................................................... 82 Chapter Three: The Impact and Legacies of CBI ........................................................................... 89 CBI’s Early Economic Results ............................................................................................... 90 CBI, Reforms, and the Making of Hegemony ....................................................................... 98 CBI’s Legacies and Informal Empire ................................................................................... 116 Conclusion.................................................................................................................................. 122 Bibliography ............................................................................................................................... 130 Primary Sources ................................................................................................................. 130 Secondary Sources ............................................................................................................ 135 5 LIST OF FIGURES Page Figure 1: Sea Lanes, Oil Fields, and Refineries in the Caribbean Basin ...................................... 26 Figure 2: U.S. Imports from CBI Countries 1983 – 1991 .......................................................... 112 Figure 3: Composition of U.S. Imports from CBI Nations in 1983 ............................................ 115 Figure 4: Composition of U.S. Imports from CBI Nations in 1991 ............................................ 116 6 INTRODUCTION It was a partly cloudy and warm afternoon on February 24, 1982 when President Ronald Reagan entered the Hall of Americas at the Organization of American States (OAS). Minutes later, the president would unveil an unprecedented socio-economic program for the Caribbean Basin that one congressional member later described as the “first salvo in the new American effort to renew our dedication to the American idea” of political, economic, and social freedom.1 The administration worked tirelessly with the private sector, foreign governments, and officials from the U.S. territories to develop the initiative over the previous year, and now the White House was prepared to officially announce the Caribbean Basin Initiative (CBI). Banker David Rockefeller invited Reagan to deliver this speech before the Americas Society, an association dedicated to the hemisphere’s development. But the White House decided the OAS was a more appropriate forum since, as Reagan stated in his address, the organization’s principles of “democracy, self-determination, economic development, and collective security are at the heart of U.S. foreign policy.”2 After the Ambassador of Trinidad and Tobago introduced the president, Reagan delivered his address to the OAS, and it was broadcast live over the Voice of America system. “What happens anywhere in the Americas affects us in this country. In that very real sense, we share a common destiny,” stated Reagan. “From colonialism to nationhood, our common quest 1 Schedule of the President for Wednesday, February 24, 1982, February 23, 1982, folder “02/24/1982 [Organization of American States and Voice of America Tour] (OA 8494),” box 4, Advance: Office of Presidential: Records, Ronald Reagan Library; Statement of Jack Kemp, U.S. House, Congressional Record, December 17, 1982, p. 31902. 2 Letter, David Rockefeller to the President, December 18, 1981, ID # 055400, IV082, WHORM: Subject File, Ronald Reagan Library; “Remarks to the Permanent Council of the Organization of American States on the Caribbean Basin Initiative February 24, 1982,” The Public Papers of President Ronald W. Reagan, Ronald Reagan Presidential Library, http://www.reagan.utexas.edu/archives/speeches/1982/22482a.htm (accessed 14 October 2011). 7 has been for freedom,” the president continued, “in this profound sense, we are all Americans.” Once he established the American nations shared traditions and commitments to freedom and independence, Reagan explained his intentions to “approach our neighbors not as someone with yet another plan, but as a friend seeking their ideas, their suggestions as to how we could become better neighbors.”3 To become better neighbors, Reagan believed that the United States should aid the “well-being and security” of the nations in the Caribbean Basin that were enduring civil strife and “economic siege.” By the 1980s, extreme income inequality, rigid class structures, and government corruption led to civil wars in El Salvador and Nicaragua. In El Salvador, a U.S.- backed government battled leftist guerrilla movements, and the Sandinistas, a Marxist political group, assumed power in Nicaragua. At the same time, Caribbean Basin governments intervened heavily in their economies in an attempt to weather economic troubles. The White House viewed these developments with dismay and believed the Caribbean Basin was moving into the Soviet Union and Cuba’s sphere of influence in the Cold War. Communism was “a new kind of colonialism stalk[ing] the world today and threaten[ing] our independence,” Reagan declared. As a result, Reagan proposed the Caribbean Basin Initiative before the OAS, calling the initiative “as unprecedented as today’s crisis in the Caribbean.” Reagan intended CBI to harness the power of the private sector through aid, trade, and investment incentives to help Basin economies and alleviate the misery that destabilized the Basin leading many of its peoples towards Communism.4 3 “Remarks to the Permanent Council of the Organization of American States on the Caribbean Basin Initiative February 24, 1982,” Public Papers, Reagan Library, http://www.reagan.utexas.edu/archives/speeches/1982/22482a.htm (accessed 14 October 2011). 4 Ibid.; William M. LeoGrande, Our Own Backyard: The United States in Central America, 1977 – 1992 (Chapel Hill & London: The University of North Carolina Press, 1998), 14-45; Carmen Diana Deere, Peggy 8 Aid, trade, and investment were the main components of the Caribbean Basin Initiative. Since many Caribbean Basin nations were having trouble with their balance of payments—the costs of international economic transactions—Reagan