U.S. Reviews Latin Policy, Will Push for Free Markets

The White House has ordered a full-scale review of U.S. policy in Latin America with the intention of developing a new package of economic aid for the region similar to that now in place for Eastern Europe’s emerging democracies, sources said Saturday.

Senior U.S. officials said the effort reflects a personal desire by President Bush to adopt a more activist policy on Latin America. The President hopes to encourage countries such as Brazil and Argentina to abandon their state-run economic systems and adopt more of a free-market stance.

In a related move, Bush is expected to announce during a June 10-12 visit by Mexican President Carlos Salinas de Gortari that the United States and Mexico will begin preliminary work on a broad free-trade agreement similar to the pact Washington has signed with Canada.

Although the effort in Latin America is in its early stages, an interagency task force already has begun assessing current U.S. strategy in the region. The goal is to have a series of proposals that Bush can announce during a trip to the region in September.

Bush and top Administration policy-makers--especially Secretary of State James A. Baker III--are said to believe that with state-run economies clearly having failed in Latin America, Washington has a rare opportunity to push Latin governments toward market economies.

The Administration hopes to cite Salinas’ success over the past few months in opening up Mexico’s economy as an example to prod other Latin governments to follow Mexico’s lead. Brazil’s new president, Fernando Collor de Mello, has said he plans to move in that direction.

The possible new moves would constitute the Administration’s first major policy initiative on Latin America and the first in several years by any U.S. administration. Bush unveiled a narrower plan to reduce Latin American debt in March, 1989, but it has received mixed reviews.

Senior Administration strategists say Washington may float at least some of the ideas at the annual economic summit of leaders of the seven largest industrial democracies, which will be held in Houston in July. Bush wants to persuade the other countries to take part.

U.S. officials said it still is too early to say what kind of policy measures will be proposed. But they said any new moves probably will parallel those that the major Western governments have taken in Eastern Europe, where the goal is to help governments nurture their private sectors, rather than just providing cash aid as in the past.

Among the ideas being considered:

* Creation of a centrally coordinated multilateral aid program, such as the one now being run for Eastern Europe under the aegis of the so-called Group of 24, which comprises the United States and 23 other Western governments.

* Establishment of a Latin American counterpart to the new European Development Bank that was formally created on May 29. There already is an Inter-American Development Bank, but proponents argue that a new institution could provide added resources.

* Stepped-up efforts to attract more foreign investment to Latin America--if the Latin governments can overcome their history of objections to foreign ownership of some of their firms--by hammering out treaties designed to improve the climate for investors.

* Eventual creation of a regional trade accord that would reduce trade barriers throughout the hemisphere. There already is talk of broadening the proposed free-trade agreement with Mexico to include Canada, if the negotiations go well.

The possibility of a free-trade agreement with Mexico was broached privately by Salinas during a visit here in February. The Mexican president had hoped to propose it publicly sometime this summer, but word leaked out early, killing any hope of surprise.

The Bush Administration’s reaction has been cautious, partly to avoid jeopardizing the idea by offending Mexican political sensibilities, and partly because Washington wants to make sure the two governments are thinking along the same line before endorsing the proposal publicly.

Nevertheless, senior Administration officials have begun quietly discussing the possibility with key figures on Capitol Hill. And Baker is said to be convinced that the Mexican plan--and the prospect of an even broader new economic package for Latin America--are both good ideas.

U.S. Trade Representative Carla Anderson Hills leaves today for a weeklong tour of Latin America that will include a meeting of the Organization of American States in Paraguay and visits to Argentina and Brazil, where she will sound out Latin leaders on economic issues.

The preliminary assessments on the new Latin American package are being carried out under the direction of the Cabinet-level Economic Policy Council, chaired by Treasury Secretary Nicholas F. Brady.