Bush Proposes Free Trade With Latin America in New Partnership : Hemisphere: He stresses economic growth to overcome the region’s debt burden. Congress’ approval is needed.

President Bush unveiled an ambitious plan Wednesday for a “new economic partnership” with Latin America that is designed to boost trade and investment in the region and reduce its staggering debt.

He proposed the creation of a hemisphere-wide free-trade zone that would benefit nations willing to move resolutely toward free-market economies.

“We must shift the focus of our economic interaction toward a new economic partnership because prosperity in our hemisphere depends on trade, not aid,” Bush said to a hastily assembled group of Latin American diplomats and Cabinet officials.

If the program’s numerous provisions are enacted by Congress and accepted by other Western Hemisphere nations after lengthy negotiations, it could be as sweeping as John F. Kennedy’s “Alliance for Progress,” a foreign aid program that attempted to bolster democracy and counter Cuban leader Fidel Castro’s influence in Latin America.

The cost of Bush’s program, “Enterprise for Americas Initiative,” is uncertain. Officials said that its reliance on increased trade rather than outright grants and loans would limit its budgetary impact.

In the one element of the program that would involve direct grants to Latin America, Bush called for the creation of a $300-million-a-year fund that would provide money in response to “market-oriented investment reforms” intended to boost private enterprise in Latin American economies. He said the United States would contribute $100 million to the fund and would seek matching contributions from Europe and Japan.

“We must forge a genuine partnership for free-market reform,” Bush said in a speech in the White House East Room.

He said that his initiative would create “incentives to reinforce Latin America’s growing recognition that free-market reform is the key to sustained growth and political stability.” Economic growth, he said, is the key to reducing the multibillion-dollar debts that burden many Latin American countries.

The President criticized “over-restrictive trade barriers that wall off the economies of our region from each other and from the United States, at great cost to us all. These barriers are the legacy of the misguided notion that a nation’s economy needs protection in order to thrive.”

Saluting what he said is a trend toward free markets in the hemisphere, Bush said he looks forward to the day when the nations of the Americas have created “a free-trade zone stretching from the port of Anchorage to the Tierra del Fuego,” at the southern tip of South America.

The United States already has concluded a free-trade agreement with Canada, and Bush proposed June 10 that the United States and Mexico reach a similar accord.

The President warned that his hemisphere-wide effort will not bear fruit immediately.

“We won’t bring down barriers to free trade overnight,” he said. “Changes so far-reaching may take years of preparation and tough negotiations, but the payoff in terms of prosperity is worth every effort.”

Bush, who received polite applause at the end of his speech from the assembled diplomats, said that the effort would benefit the United States by creating “new markets for American products and more jobs for American workers.”

The President also said that it is necessary, in the effort to attract greater investment for Latin America, to “clear away the thicket of bureaucratic barriers that choke off Latin America’s aspiring entrepreneurs.”

The President’s proposal comes at a time when the major Latin American governments are moving, even without his encouragement, toward free-market economic systems.

Over the last year and a half, Mexico has undertaken sweeping steps to slash its trade barriers, convert state-run industries into private corporations and invite more foreign investment.

On Tuesday, Brazil announced major economic reforms that include enormous reductions in tariffs, elimination of quotas and the welcoming of additional foreign investment. Argentina and Venezuela have moved more slowly but are heading in the same direction.

The initial reaction to Bush’s proposal from Latin American leaders was favorable.

Brazilian President Fernando Collor de Mello told Bush in a phone conversation that his proposal is “comprehensive, bold and innovative.”

Mexican President Carlos Salinas de Gortari’s foreign press officer called Bush’s statement “a very important redefinition of the U.S. position regarding economic development in Latin America.”

Honduran President Rafael Callejas said he is “very satisfied with the Bush proposal,” calling it “encouraging news.”

Bush’s steps essentially parallel those the United States and other governments have taken recently to aid the newly emerging democracies of Eastern Europe.

Although the Western powers have provided some initial emergency aid, most of their help is expected to be in the form of technical advice and seed money to encourage private ownership in Eastern Europe economies. In late May, the Western nations established an East European development bank to help the move toward private enterprise.

White House sources said the offer Bush outlined for Latin America reflects his interest and involvement in the region.

The policies he is seeking to promote in Latin America are similar to those that such organizations as the International Monetary Fund and the World Bank have been prodding the nations of the region to accept for years, largely without success.

One reason that Latin America seems to be moving in this direction now, analysts say, is the example provided by Eastern Europe and the fear that private investors who are the Latin American governments’ best hope for obtaining needed cash will flock to Eastern Europe and ignore the Western Hemisphere.

Bush’s plan reflects the work of a team of foreign trade experts over several months. Administration officials accelerated the project so that it could be unveiled before the economic summit of the world’s major industrial democracies next month in Houston. One official acknowledged that the program was completed in haste and had not been fleshed out.