From the "Lost Decade" to a New Boom
PRESIDENT BILL CLINTON will have to decide soon what stance to take toward the countries of Latin America and the Caribbean. Should he embrace former President George Bush's soaring vision of a "free trade system that links all of the Americas-North, Central and South-as regional partners in a free trade zone stretching from the port of Anchorage to Tierra del Fuego"? Are America's neighbors in the western hemisphere ready for such a partnership? What priority should relations with Latin America have when the U.S. public is so concerned with domestic issues?
At the end of the 1980s, with the Cold War winding down and Russia and the other countries of eastern and central Europe turning toward free market competition, it was widely asserted that Latin America would become less important. After the "lost decade" of economic depression throughout Latin America, invidious comparisons were made with East Asia and Europe. Latin America seemed unable to compete in a world economy that requires fiscal discipline, investment and technological prowess. It was said that as investment and trade flowed increasingly to the former Council for Mutual Economic Assistance (COMECON) nations and those of East Asia, Latin America would lose any hope of foreign investment or sustainable recovery. An impoverished Latin America, with little remaining strategic significance to Washington in the post-Cold War world, might well drop off the map of U.S. concerns.
Far from ignored, however, Latin America has attracted enhanced attention in the early 1990s. By the beginning of 1992, the region was often portrayed as poised for a new boom. International financial officials were singing Latin America's praises, and investors had rediscovered its virtues. Nearly $40 billion in private capital entered Latin America in 1991, more than twice the flow in 1990, the first year of net positive capital flow in almost a decade. New foreign direct investment in Latin America increased in 1991 by more than 150 percent. Five of the six fastest rising stock markets in
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