Quito, May 31, 2006

I would like to start off by expressing my appreciation for your kind invitation to participate in this important event that will examine the development situation in our Hemisphere and its relationship with international trade agreements.    

This is a subject of immediate importance today, as we in Latin America experience what we could term a new “social time,” brought about by the unsatisfactory impact of the policies advocated by the so-called “Washington Consensus” on the wellbeing of vast sectors of our societies.  In this context, the existing development models, policies for participation in the world economy and regional integration schemes are being hotly debated with a spirit of renewal and I am certain this meeting of the Parliamentary Confederation of the Americas will have a valuable contribution to make.     

Globalization, liberalization and interdependence

In order to determine the best conditions for our participation in the world economy in this initial decade of the twenty-first century, it is important to first note that globalization generally tends to bring down customs duties on trade in goods and services and to facilitate capital flows.   

As a result, it is almost certain that over the next 15 years we will see tariffs reduced through free trade agreements or integration agreements, as well as within the World Trade Organization (WTO), to below 10% for most goods and even on down to zero or almost-zero in some cases.

The emphasis of international trade negotiations in the future will accordingly be placed on the removal of non-tariff obstacles and of measures that distort competition, like subsidies and other forms of hidden assistance to producers in developed countries, as well as on the safeguarding by developing countries of the necessary vehicles for the application of public policies to enhance growth and social equity.   

A second characteristic of contemporary globalization is the high level of dependence of all of the world’s countries on the resources of other countries and regions.  This goes hand-in-hand with the relocation of production, finances and applied knowledge, in keeping with the capacity for competition of the various countries and regions, thus posing further challenges to take part in a globalization that tends to rapidly exclude those that fall behind.

Globalization and regionalism

Nonetheless, and paradoxical as it may seem, there is also a tendency in the world today toward the creation and enlargement of economic and political blocs, not only in the developed countries, but also in the developing world.  In addition, we find developed and developing countries associated in large regional and interregional cooperation groups.  These can be seen in Europe, the Americas, the Asia-Pacific area and Southern Africa, among other places.

Advancing globalization, unlike what was thought in the nineties, does not appear to involve the disappearance of the need for better and broader regional and subregional units, but, rather, its reinforcement, at the same time as there is a growing opening to the world and relationships of varying geometry are built with other regions.   

The challenge of socially inclusive development

For developing countries, like all of those of Latin America, the main problem is how to guarantee development per se through programs and projects that, in a context of open regionalism, should incorporate the following characteristics, among others:  a capacity to attract capital and technology, larger trade flows, endogenous production capacity, and human resource training.   

And in the case of the least developed countries or those that are at an intermediate stage of development --like the Andean countries--, it is imperative to achieve socially inclusive development, which is essential for ensuring democratic governance and generating long-term political consensuses that will give development processes continuity.   

Development and integration

But a further condition that will make it possible to optimize our human and material resources and expand our productive capacity is capacity-building through integration, by enlarging the markets for our manufactures, permitting the creation of small and medium-sized enterprises, linking the production sector to broader population sectors and preparing ourselves to compete more efficiently in the large world scenarios. 

For that reason, we can speak of the effectiveness of integration as a vehicle for building incremental capacities --in other words, as a platform for more complex processes of participation in the world economy. 

Regional and subregional processes (like that of the European Union and its association agreements with other countries and regions of the world, to cite only one example) are an effective demonstration of how participation in the world economy multiplies comparative advantages.    

In order for this to occur, however, those processes must each hold a shared vision of development --or at least compatible visions--, together with common views about how to facilitate participation in the world economy.    

When differences exist over conceptions of development and of participation in the world economy, only pluralism and mutual respect can guarantee the continued existence of community projects. 

Evolution of integration: from trade to development

Let us take a look at what we have done over these 37 years of existence and what can be accomplished within the framework of Andean integration. 

During its early years, the Andean integration process emphasized the improvement of trading conditions among its members.  The growing circulation of goods and the gradual facilitation of the movement of services, capital and people paved the way for the consolidation of an enlarged market.  The formation of a free trade area was indicative of the successful advances made in the initial stage, which even so were not free from some flaws.  The most important of these were not having perfected a customs union early on and, therefore, not having been able to establish a common trade policy with regard to third countries.   

Nonetheless, the Member Countries recently expressed their political will to launch a program to deepen Andean trade integration that would include a common tariff policy and a flexible framework for compatible convergence with negotiations with third parties.   

Work is underway in this context to, among other things, deepen the free trade area for goods and services; define trade defense measures against third parties; recognize and harmonize phyto and zoosanitary certifications; adopt a common base for the establishment of aligned national technical standards; perfect the customs legislation agenda; approve the new Andean international highway transportation regime; and continue perfecting the Andean dispute settlement system. 

At the same time, the consolidation of an enlarged subregional market and the achievement of quality participation in the world economy call for building up the capacities of small and medium-sized urban and rural enterprises that today have an essential and undeniable impact on the creation of decent employment and equitable income distribution. 

The important role played by cities and regions as favorable vehicles for coordinating participatory strategies has become increasingly evident and for this reason the Andean Advisory Council of Municipal Authorities was created.  In this context, the IIRSA’s South American Integration and Development Hubs have also become a key instrument for promoting sustainable human development in the Hemisphere’s interior and border regions, with the active participation of local and regional communities. 

The Andean multidimensional agenda and the priority of social development

It is a significant fact that the idea has been growing in recent years that integration should reflect an integral vocation, with social development, citizen participation and political cooperation as its essential elements.

As a result, a multidimensional Andean integration agenda has been taking shape, grounded in the human being as the essential mainstay of the process. 

The Presidential Summits of Quirama (2003), Quito (2004) and Lima (2005) marked an important turning point, with the Andean integration process’s recovery of the dimension of socially inclusive development.  A new strategic design was endorsed, incorporating the concepts of development and competitiveness, the importance of political cooperation, and joint and cooperative social action in the conception of integration. 

During these last three Presidential Summits, work was started on building an Andean vision of development and social cohesion that can and should help resolve the poverty, exclusion and inequality of vast sectors of our populations.

The Integral Plan for Social Development (IPSD) is a specific response to this situation.  Its 20 projects along three strategic lines (Community social projects, harmonization of social objectives and targets, and horizontal technical cooperation on social policies) are being executed in duly concerted priority areas like health, education, interculturality, decent employment and labor protection. 

A series of social programs and projects have been launched as part of the IPSD that encompass a wide variety of initiatives, ranging from the establishment of forums and networks for Community policy formulation to concrete actions in border and depressed regions.  These are being implemented in the spheres of sociolabor matters, education and culture, health, rural development, food security, the environment and social development in border regions, among others.    

These initiatives must be broadened and deepened and the networks of citizens and social actors strengthened, if the benefits of integration are to reach a growing sector of society.   

Alternative development and the environment

In the specific case of the Andean countries, we cannot forget the crucial importance of providing social solutions to illegal drug production and related issues.  Whether we like it or not, these are part of the region’s international agenda and it depends upon us whether their negative connotations are the only reason for their inclusion.   

Because of a lack of employment or of having to operate outside the formal economy or due to the pressures brought by illegal national and international groups, sectors of the Andean populations are engaged in illegal drug-related activities.

It was for that reason that in July 2005 the Andean Council of Foreign Ministers adopted the “Andean Integral and Sustainable Alternative Development Strategy” aimed at gradually, in the medium and long terms, providing these population sectors with development solutions that are sustainable.

We are convinced that that is the best way to cope jointly and coordinatedly with the negative effects on our countries of illegal drug activities.  This does not mean, of course, that other measures may not be beneficial, depending upon the type of problem to be dealt with in each case. 

This issue is related transversally to all of the development strategies, one of which has to do with sustainable long-term solutions to rural illegal drug activities.

An important analogous development is to be found in the Andean Environmental Agenda accomplishments, among them the adoption of a Regional Biodiversity and Environmental Management Strategy for Sustainable Development emphasizing water and climate change issues.     

The CAN Member Countries consider that integrated water resource management and the valuation and quality of and access to water should be basic topics on the Andean and South American agendas, considering that the Andean countries constitute a significant world reservoir of water resources and river basins. 

Foreign relations in the context of open regionalism: the Latin American dimension

The Andean integration model, as you can see, not only offers a better platform for the Member Countries’ foreign and trade relations, but also tends to favor the involvement of varying actors and the development of multidimensional strategies centering on the human being as both the subject and essential target of the integration process. 

In our relations with the world, however, it is necessary to boost the potential for joint efforts by the Andean Community Member Countries, with a view toward strengthening better balanced foreign relations and enhancing their presence on multilateral regional stages.   

One of the priorities in this context should be an organized Andean relationship with the other Latin American countries and with the emerging powers.   

In the case of our relations with Latin America, the growing progress --despite current problems-- in building the South American Community of Nations, as expressly willed by the Heads of State meeting in Cuzco on December 8, 2004, is a driving force for this process.   The reason for building this South American Community of Nations is, as the South American Presidents declared at that time,

“to develop a politically, socially, economically, environmentally and infrastructurally integrated South American area that will contribute to strengthening the unique South American identity and, from a subregional standpoint and in coordination with other regional integration experiences, that of Latin America and the Caribbean and will give it a greater weight and representativeness in international forums.”

Following this approach and under the express mandate handed down by the Heads of State at their later meeting in Brasilia (2005), the Secretariats of the CAN, MERCOSUR and ALADI have been working on the design of a South American free trade area by harmonizing and dovetailing existing trade agreements in South America.  Efforts are also underway to harmonize the judicial systems and institutions of those integration schemes and to deal with existing asymmetries among countries in the region, in order to work out an interesting SACN political and development project.    

This endeavor encompasses important initiatives, such as the development of specific working proposals and plans concerning “the priority” agenda defined by the Foreign Ministers: political dialogue, physical integration, the environment, energy integration, South American financial instruments, asymmetries, telecommunications and the promotion of cohesion, inclusion and social justice. 

Furthermore, in an effort to foster the convergence of the South American countries, the commitments assumed within the reciprocal association process between the CAN and MERCOSUR are being deepened. 

Another of our important tasks with regard to Latin America is to serve as a link between South America, on the one hand, and Central America, Mexico and the Caribbean, on the other, thereby broadening and diversifying our foreign relations.   

In order to accomplish this, a better organized relationship with those countries and their integration bodies is needed.  Along this line, we consider it necessary to complete the network of free trade agreements with Mexico and to negotiate, first, association agreements and then later, free trade agreements with Central America.  We have also made the first contacts toward signing a cooperation agreement with the Association of Caribbean States (ACS) that will include the CAN’s incorporation as an observer and are advancing in working out intersecretariat agreements with SICA and CARICOM.   

Relations with the United States: toward a new agenda

The relations of the CAN Member Countries with the United States are extremely important in areas like trade, investment, migration, economic complementarity in various sectors, and cooperation.   We seek friendly relations with the U.S. that will benefit our nations.  We revindicate the right to a concerted agenda and to harmonious, smooth and decent relations with the foremost economic power in the Hemisphere and in the world.   

We believe that guaranteed access to its vast markets is basic, particularly for Andean manufacturers, but also for exporters of farm products and minerals.  The worst case scenario for our countries would the closing of U.S. markets and of the markets of the developed world in general to our products.    

We would like to continue working shoulder-to-shoulder on the sensitive matter of illegal drugs and related offenses, based on shared responsibility and a balanced treatment of the issues.  This means addressing the problem not only by combating the drug supply, but that each country should fulfill its commitments to reduce the demand for drugs, control money and asset laundering, and control trade in chemical precursors.   

A key aspect of our relations with the United States today is the opportunity for significant cooperation in addressing an energy agenda of growing importance to the Andean countries, consisting of oil, gas, hydroelectric energy and coal, with the addition of biodiesel fuel in the immediate future. 

Lastly, in regard to migration, we are concerned over the situation of our countrymen who are seeking other horizons and economic possibilities.  The status of Andean inhabitants in the United States and other developed countries concerns us deeply and should be a foreign policy issue for our countries. It also, however, leads us to the conclusion that the best way to regulate migration is to advance the development of the countries of origin, in keeping with the investments made by the developed countries.  This is an important task that also has to do with human resource training programs.   

Association with Europe and with the Asia-Pacific countries

The CAN countries are situated midway between Europe and the Asia-Pacific Rim.  This fact, which is not always obvious, is extremely important.    

In this connection, an association with the European Union is crucial for our participation in the world economy, for several reasons: it guarantees us stable and lasting access to the markets of the 25 Union member countries, without having to depend upon lengthy periodic extensions of the GSP Plus System, and it motivates us to seek a more politically and socially structured relationship, perfecting and boosting the contents of the bioregional Political Dialogue approved several years ago.  This organized relationship with Europe also contributes to better balanced Andean foreign relations, for the benefit of more balanced participation in the world economy. 

In the case of the Pacific Rim, our geography undoubtedly calls upon us to act as a link in two ways: first, and above all, with the other countries of the American Pacific Rim, and second, as actors from one part of the Asia-Pacific developing world.  Two privileged actors have emerged in that connection: China and the ASEAN countries.    

Insofar as our relations with China are concerned, as a result of the meeting held by the Andean Council of Foreign Ministers with the Chinese Vice-President in January 2005, that country expressed its political will to cooperate with the Andean Community in ten specific areas.   

The most important steps that should be furthered in this connection are: the establishment of an entrepreneurial forum to promote a mutual knowledge of the two parties’ trade and investment opportunities; the exchange of experiences in order to transfer appropriate technology, particularly in the area of telecommunications and in the approval and application of information technologies; the signing of agricultural sanitary agreements; the creation of a specialized dialogue mechanism to produce an exchange of information about recorded trends in illegal drug trafficking, pertinent drug control legislation in effect, and prevention and treatment policies, and cooperation in controlling chemical precursors and alternative development tasks.    

The exchange of institutional information with the Association of Southeast Asian Nations (ASEAN) is extremely important for the Andean Community today.  That Association’s experience with crucial matters like political cooperation and economic cooperation, in addition to the incorporation of knowledge about production processes, is of great importance for our work in the near future.     

The holding of the APEC Summit in 2008 in an Andean country, Peru, will give us the opportunity to work toward the goal of building stronger ties between the CAN and the Asia-Pacific region. 

Conclusion: the lessons learned

We have learned a great many things over the 37 years of existence of the Andean integration process, among them:

· That regional processes are essential for confronting the advantages and challenges of globalization from a better position.   

· That while trade integration is highly important, it cannot be the sole concern of the Andean integration process. 

· That, at the same time, we cannot talk about integration without trade and without the international competitiveness of our economies, but this does not mean disregarding the virtues of solidarity among the members of an integration process.

· That integration is of little use unless we resolve the basic problems of social exclusion, not only to ensure democratic governance, but also to maximize the potential of our countries and our peoples for the benefit of all, inasmuch as social equity is an increasingly important requirement for comprehensive development.   

· That contemporary integration cannot be considered a bulwark against the rest of the world, but should be viewed as a platform for building the capacities that will enable us to participate in the world economy in an economically and socially beneficial way, for the world we live in is growing more open and interrelated every day.      

· That integration requires a strong local content and for that reason should work toward decentralization, with the growing participation of the citizens and organized civil society.  

· That the relations of our countries with their regional environment and with the world are vary geometrically and are multiple in nature. 

· We have finally learned that it is worthwhile to devote our efforts to regional integration, because of the role that process plays in maximizing our possibilities in today’s world. 

Despite problems, the notion of integration today is more alive than ever, both in our region and among the large world actors; only the content of that idea has changed over time.   

We are at a point where we must be alert, in order to help define the nature of integration and the actors involved in the next stage of our countries’ history.   

Events like this seminar undoubtedly help produce the best possible diagnosis of the alternatives and the most appropriate policy designs for our countries’ more inclusive development and participation in the world economy and, at the same time, constitute a contribution by the Andean countries to the peace, security and wellbeing of mankind. 

Thank-you very much.