HONDURAS: ‘CAFTA is a buffer against social unrest in South America’
Thomas Cromwell

Honduras’ ambassador to Washington, Norman Garcia Paz, is the right man in the right place at the right time, now that Congress has approved the Central American Free Trade Agreement and the time has come for the United States and its new CAFTA partners to begin strengthening their economic relations. In his previous position, as minister of industry and trade, the ambassador was a leading CAFTA negotiator for his country, and came to Washington to help press for CAFTA to be accepted by Congress.

With that background, the ambassador has a broad perspective on how CAFTA will benefit his country. “If I didn’t believe in the benefits of CAFTA, I would never have negotiated it,” he told DiplomaticTraffic.com in a recent interview. In fact he is such a strong believer in the value of the free trade agreement to Honduras that he joined his government in order to be able to campaign for it.

“I see CAFTA not only as an element of trade that fosters economic development and sustainable job-creation, but also as an element of national security for the United States,” he said. “Obviously, after 9/11 the psychology of doing business with the United States changed, but also you have to really define national security.” 

Explaining this, he said: “I think by having a treaty between the United States and Central America, we can guarantee future investors that they will enjoy the privilege to sell their products, if competitive, to the largest and richest market in the world.”

The ambassador said that the enemies of CAFTA asked why it was necessary to have a free trade agreement, especially with the Caribbean Basin Initiative (CBI) in place. He pointed out that the CBI, which has benefited countries in the region for 20 years by providing access to the US market, was due to expire in 2007 and that CAFTA puts in place a long-term agreement to regulate trade between the United States and Central America (as well as the Dominican Republic).

“Where would all the investments made because of CBI go? How many jobs would have been lost?” he asked. “Probably many losing jobs would have tried to go to the United States as illegal aliens.”

Coming back to the security elements of CAFTA, he said: “I see CAFTA as an element of national security because if due to the fact that we have a CAFTA we are able to foster investment, job creation and economic growth, then the region should become a buffer zone for all the social upheaval that is taking place in South America (meaning from Panama south).”

He said there have been seven coups in South America without army intervention, including Argentina, Bolivia, Peru and Ecuador. In these countries presidents came to power through peaceful uprisings and street protests. “There is a fusion of socialism and populism in South America,” he explained. “There is an anti-American sentiment. There is a tendency to believe that democracies have not delivered the economic goals promised.” He pointed out that some of the recipes the IMF prescribed for countries such as Argentina and Peru brought hyperinflation under control but also created a lot of unemployment. “And they haven’t been able to see the light at the end of the tunnel,” the ambassador said.

He believes some of the social unrest is related to nostalgia for the 1970s, when many Latin American countries went deep into external debt to fund projects and create jobs, creating at least an appearance of greater prosperity for the people, whereas eventually this borrowing led to the worst decade, the 80s, when economies were overwhelmed by debt. “People seem to forget,” he said. “They want to go back to it.”

Alluding to Venezuela, he commented on the role that its president, Hugo Chavez, is playing in the region. “We have one president in South America with money and petroleum that also is inspiring all these new movements.” He said the recent summit of the Americas in Argentina demonstrated this, when Paraguay, Uruguay, Argentina, Brazil and Venezuela prevented a joint declaration for the Free Trade Agreement of the Americas (FTAA). Central America does not have that type of unrest, but it could spread to the region, he said, “…if our economy does not respond to the needs of the people.”

“We have to be respectful to President Chavez’ position. All of Latin America has healthy relations with him. We might not agree in the way that he conducts his revolution, but he is a democratically elected president, and will probably run again and be elected again. He has made offers to countries to minimize the impact of high petroleum costs, and you cannot deny that that is appealing.”

If the region develops economically and in job creation, “first, this might be a disincentive for emigration to America and, second, Central America can become a buffer zone against the spread of social unrest.”

“Honduras has for several years had a positive balance of trade with the US in agricultural goods,” he said. “We have to buy from the US what we don’t produce, products like wheat, yellow corn, sodium…” What we can grow we sell to the US, like oriental vegetables, cucumbers, melons, watermelons, Tilapia fish, etc.” Honduras is the second biggest seller of Tilapia to the US.

“On the other hand, our textile industry is so well integrated with the US industry. We are the number one importer of yarn from the United States. And Honduras is the third largest exporter of garments to the US, after China and Mexico.”

Honduras still has some 70 percent of the population living below the poverty line, and the ambassador noted that: “Our common enemy in Latin America is poverty. And you can only fight poverty through investment and the creation of jobs.”

He said it was also important to satisfy the people by strengthening the health and education sectors, as well as infrastructure for transport, etc. He said Honduras has been working on its inter-Oceanic logistic system, especially with improved port facilities and better links to El Salvador ports. The port at Cortez is about to become only the third in Latin America under the Container Security Initiative, the Homeland Security program to provide security clearance for cargoes in their ports of origin before they are sent to the United States.

“These developments will make a difference, as Central America prepares to implement CAFTA by the beginning of next year,” the ambassador said.

“In this world you have to be highly competitive, and to be highly competitive you have to be highly productive,” he noted. “Both the private and public sectors have committed themselves to the development of Honduras, including sound economic policies, good education and health services, fiscal discipline, the rule of law and personal security.” He also recognized that democratic systems have to be strengthened across Latin America, noting the transformation of movements like the Sandanistas in Nicaragua and FMLA in El Salvador from guerrilla groups to political movements. He said, “there is a chance they will go back to their radical pasts if economic development is weak, but probably not in the same form.”

The Central American countries have diplomatic relations with Taiwan, but Beijing has been aggressively moving into the region and Latin America as a whole to increase its presence there, offering various packages of trade incentives, infrastructure projects, grants and the like.

The ambassador noted that: “China is growing so rapidly that it is starving for commodities, and is already the second largest importer of oil.” His view is that with 1.3 billion people, some 26 percent of the world’s population, and because of a lack water for agriculture in much of the interior, China will have to move hundreds of millions of people closer to the coastline while importing ever more wheat, soy beans and other agricultural commodities. “Hence they are laying their eyes on Latin America, because just Argentina could furnish China all the agricultural commodities it needs.” And, “in exchange for that, China is willing to invest in infrastructure.” Central American countries, on the other hand, lack the land to grow sufficient crops for China.

Honduras and other CAFTA members have to compete with China in textiles at home and in the United States. Most US manufacturing has moved to China. “This is one reason we in the Americas have to act as a bloc, to compete with the European Union, China, India and ASEAN,” he said. “This is the purpose of the FTAA that President Clinton proposed in Miami in 1994. This is what some countries rejected in Argentina.”

“China needs 15 to 20 years of peace to strengthen itself to a point where it wants to be. It doesn’t want problems with other nations now. But you have to watch them carefully. They have such great needs for energy, agriculture, even water.”

Speaking on the impact of hurricanes, he said the damage from Wilma would not be long-term, and could not be compared to Mitch in 1998. “Our losses were in the neighborhood of $5 billion, according to UN estimates. We have recovered and we have improved on what we had in the past.”

Biography of Norman Garcia Paz

As of October 3, 2005, Mr. Norman García is Ambassador Extraordinary and Plenipotentiary of Honduras to the United States of America.  Prior to this post, Mr. García was the Minister of Trade and Industry of Honduras from October 2002 to July 2005.

From February 2000 until October 2002 he was Executive President of FIDE (Fundación para la Inversión y Desarrollo de Exportaciones – Foundation for Investment and Development of Exports).   In 1998 he was appointed Minister of Tourism.  He held the post until January 2000 when the leave granted by the FIDE Board of Directors expired.

Minister García had joined FIDE as Executive Vice President in 1987.  He became Executive President in 1990.  FIDE  (Fundación para la Inversión y Desarrollo de Exportaciones – Foundation for Investment and Development of Exports) is a Foundation that works in the promotion of investment that is oriented to the export of non-traditional manufactured products.  It has offices in Tegucigalpa, San Pedro Sula, Miami and a representation in Taipei and has 53 employees. 

From 1982 to 1987 he was General Manager of Industria Hondureña de Televisión, S.A. (INHTEL), a company that assembles television sets and stereos under the Zenith Electronic Corporation license.

As Promotion Manager of Corporación Nacional de Inversiones (National Investment Corporation) from 1975 until 1982, he directed the department responsible for identifying investment opportunities, the evaluation of new projects and their follow – up.

Upon conclusion of his studies, in 1968, he was hired as planner IV of the Industrial Sector in the Council of Economic Planning.  From 1971 to 1972 he worked as “Trouble Shooter” in Zacarías Bendeck Consortium (firms: Honduras Fosforera, Fabrica de Cajas, Centro Mecánico Industrial, etc.) and Sales Coordinator of Machinery and Equipment for the Ingersoll-Rand y Allis Chalmer lines.  He was transferred to  Químicas Dinant de C.A., where he was Production Manager for the Chemical Specialties Department. At the end of 1972 he returned to the Council of Economic Planning as Planner V in the Specific Project Unit.  In 1974 he was promoted to Chief of the Industrial Programming Department.

Mr. García started his studies in Architecture at the Instituto Tecnológico de Monterrey, México (1961). In 1963, he moved to the United States of America, obtaining a degree in Industrial Engineering from California State Polytechnic University (Calpoly). In 1973 he pursued studies in the preparation and evaluation of industrial projects at the World Bank in Washington, D.C.

Background and Interests
He has been part of official and private sector missions abroad, traveled throughout Europe, Latin America and the Far East and is also the Director of several industrial companies.

Born in San Pedro Sula in February 17, 1943, he is an only son.  His father was a primary and high school teacher. Mr. Garcia is married to Nancy Bonilla. 

His interests include reading, playing tennis and travel.  His native language is Spanish and he speaks English fluently.