Wayne O'Leary

Free Trade Agonistes

A funny thing happened on the way to implementation of the Central American Free Trade Agreement (CAFTA): Somebody said no. The negotiated trade pact between the US and six Latin American countries (the Central American five of Guatemala, Honduras, Nicaragua, El Salvador and Costa Rica, plus the Caribbean island nation of the Dominican Republic) was supposed to gain immediate unanimous ratification south of the border. Despite CAFTA's bare survival in the American Congress last year, where the controversial measure passed by just two votes in the House, pressure from Washington and the international free-trade establishment was expected to quickly seal the deal.

To date, however, only El Salvador has made the necessary changes in its economic laws and regulations to meet CAFTA requirements; it came aboard on March 1, two months behind schedule, in the face of severe domestic protests. Most of El Salvador's neighbors, which have already formally ratified, are expected to follow suit by late spring or summer, if their reluctant legislatures comply. But one signatory to the agreement won't be with them. Costa Rica, the model democracy of Latin America, will almost certainly opt out.

Costa Rica occupies a unique position in the constellation of Latin American states. With a population of only four million, it is among the smallest, but also among the most democratic and highly developed, of the hemispheric nations. Costa Rica has been independent since 1821, a republic since 1848, and a modern constitutional democracy since 1902 (except for brief interruptions in 1917-19 and 1948); its revised constitution, which includes a bill of rights, dates from 1949. In contrast to its turbulent neighbors, the country has maintained a stable, peaceful democracy -- it has more teachers than soldiers -- for over half a century.

Materially, Costa Rica boasts a modern, mixed economy revolving around tourism, agricultural exports (coffee, bananas, sugar) and a growing industrial sector (textiles, clothes, plastics, electronics) that has provided its largely European-based population with comparative prosperity and a large middle class. Costa Ricans are highly educated; their literacy rate is 96%, among the region's highest, and they have a university system with a long lineage. Their government maintains a strong and highly prized (though presently threatened) social safety net, and poverty is relatively low. They are, in short, a lot like us.

Contemporary Costa Rica differs from its leading trade partner to the north in one significant respect, however: It has never been persuaded (certain of its leaders excepted) to fully buy into the current free trade/limited government regime known among economists as the Washington Consensus and, throughout Latin America, as neoliberalism. The neoliberal construct of deregulation, privatization, decreased social spending and totally open markets, which has been pushed for 20 years as the key to prosperity by the International Monetary Fund (IMF), the World Bank, the World Trade Organization (WTO) and the last several US administrations, has been met with widespread skepticism in the small but influential republic nestled between Panama and Guatemala.

Costa Rica's intermittent rebellion against the world financial establishment and its dictates began in the mid-1990s. The catalyst was President José Maria Figueres Olsen of the National Liberation party (PLN), the more liberal of Costa Rica's two major parties, which traditionally alternated in power with the conservative Social Christian Unity party (PUSC). Figueres, elected in 1994, was an advocate of expanded government intervention in the economy, a stance that angered the IMF and led to the World Bank cutting off $100 million in previously arranged financial loans. The resultant turmoil returned the rightist PUSC to office in 1998, setting the stage for several years of failed controversial attempts to accede to IMF demands and privatize the economy.

The struggle over economic liberalization, which elsewhere in Latin America brought leaders like Venezuela's Hugo Chavez and Brazil's Lula da Silva to power, broke up Costa Rica's venerable two-party system and splintered the long-dominant PLN. In the larger Western democracies, globalization led to a takeover of established liberal parties by a new generation of neoliberal leaders -- Clinton in the US, Blair in the UK, Schröder in Germany -- and to a triumph of market-oriented centrism. In Costa Rica, it led to an entirely new multiparty system.

Fast forward to February 2006 and the Costa Rican national election, which became for all practical purposes a referendum on CAFTA, the latest regional manifestation of neoliberalism. The country entered the contest with two nominally left-of-center parties, the old PLN and a new anti-globalization, anti-free trade party, the Citizens' Action party (PAC). The discrediting and implosion of the ruling conservatives made the PLN-PAC battle for Costa Rica's liberal soul the electoral centerpiece.

In an effort to arrest the slide precipitated by their gradual abandonment of social democracy, the PLN leadership nominated a star, popular former President Oscar Arias Sanchez, Nobel Peace Prize winner (for his mediation of the Central American civil wars) and pro-CAFTA economic integrationist. Against the aristocratic Arias, the upstart PAC put forward its cofounder, Otton Solis, a onetime PLN member who left his former party in disillusionment over its move to the right and its embrace of the multinationals.

Solis's campaign was premised on the need to offer Costa Ricans the real economic choice denied them by their sclerotic two-party system, whose mainstream leaderships were mutually committed to IMF structural adjustment policies, trade liberalization and foreign investment. He called instead for land reform, protection of local agriculture and small business, and (especially) the renegotiation or rejection of CAFTA. In its existing form, he said, CAFTA would increase poverty, displace farmers and workers, and add to health costs, as well as force the privatization of Costa Rica's public telecommunications and electrical power systems. "The law of the jungle benefits the big beast," Soils argued, adding that "we are a very small beast."

The Solis campaign ultimately fell short, polling 40.3% of the vote to Arias's 40.5%. Nevertheless, it resulted in more than just a moral victory. As presently formulated, CAFTA cannot now pass in the Costa Rican legislature and will limp unsteadily toward implementation, badly wounded. Most importantly, Costa Rica's precedent-setting stand can't be dismissed as the anarchic opposition of a benighted, backward population, a charge that might stick in the case of, say, Bolivia. After all, Costa Ricans are far too similar to their Yankee big brothers.

Wayne O'Leary is a writer in Orono, Maine.

From The Progressive Populist, May 1, 2006

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