Share this story
Close X
Switch to Desktop Site

Mexico Offers Plan to Aid Region's Economy

MEXICO is throwing five small, beleaguered Central American economies an oil-rebate lifeline and offering new hope for economic prosperity with a regional free-trade plan. At a two-day summit meeting with Central American presidents, Mexico's Carlos Salinas de Gortari won high praise for proposing a petroleum rebate and development package that involves Mexico and Venezuela, the two oil suppliers for the region.

``Mexico and Venezuela are giving a lesson to the developed world on how to cooperate with the underdeveloped nations of the world,'' said Costa Rican President Rafael Angel Calder'on Fournier at the close of the summit on Friday.

About these ads

``This marks the start of a new era of regional cooperation for Mexico,'' remarked one diplomat.

Mexico and Venezuela provide all of the oil imported by the five nations at the meeting. The leaders of Nicaragua, El Salvador, Costa Rica, Guatemala, and Honduras came to the summit concerned that high oil prices caused by the Persian Gulf crisis would wreak further havoc with economic development in a region already ravaged by guerrilla wars. They left with an unprecedented protection plan.

These nations will get a 20 percent rebate on oil purchased at prices between $17 and $27 per barrel. The remaining 80 percent of the purchase price will be deposited into an Inter-American Development Bank fund. The bank will make the money available to Central American nations as five-year loans for development projects. Mexico and Venezuela will be paid back by the bank when the loans come due. If crude oil prices top $27 per barrel, the rebate increases from the 20 percent level to 30 percent. If prices drop below $17, the special deal is off.

Central American leaders also agreed to establish a free-trade zone within the region by 1996. Mexico offered to initiate the process by dropping its trade barriers first.

Trade between Mexico and Central American nations is tiny; about $500 million annually and most of it is Mexico shipping goods south. By comparison, Mexico-United States trade exceeds $50 billion annually.

Salinas has been criticized by the leftist opposition at home for pursuing a free-trade agreement with the US and ignoring the plight of Mexico's southern neighbors. But the Central American free-trade plan is more than a response to this criticism, Mexican officials say.

Central American nations owe Mexico $1.4 billion, mostly from oil sales. Nicaragua is the biggest debtor. Until these nations are back on their feet economically, those debts will go unpaid. And, as long as jobs are scarce in Central America, Mexico, like the US, will continue to have illegal immigrants from south of its border.

About these ads

Fernando Solana Morales, Mexico's foreign affairs minister, also argues that the economic support is necessary to stabilize the nascent democracies in the region. ``To fortify democracy, the economy must be fortified,'' he said.

Just as Salinas sees a free-trade pact with his rich northern neighbor as a pathway to prosperity, Central American nations want to be able freely to supply goods to new US factories in Mexico, which are expected if the Mexico-US free-trade pact comes to fruition.

Costa Rica's President Calder'on, who meets with Salinas next month to sign a bilateral trade deal, predicts the Mexican president will go down in history as the man who ``converted Latin America into one grand free-trade zone.''

Follow Stories Like This
Get the Monitor stories you care about delivered to your inbox.