Contesting Trade in Central America: Market Reform and Resistance 9780292754614

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Contesting Trade in Central America

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Contesting Trade in Central America Market Reform and Resistance by Rose J. Spalding

University of Texas Press   Austin

Copyright © 2014 by the University of Texas Press All rights reserved Printed in the United States of America First edition, 2014 Requests for permission to reproduce material from this work should be sent to: Permissions University of Texas Press P.O. Box 7819 Austin, TX 78713-­7819 http://utpress.utexas.edu/index.php/rp-­form ♾ The paper used in this book meets the minimum requirements of ANSI/NISO Z39.48-­1992 (R1997) (Permanence of Paper). Library of Congress Cataloging-­in-­Publication Data Spalding, Rose J. Contesting trade in Central America : market reform and resistance / by Rose J. Spalding. — First edition.   pages  cm  Includes bibliographical references and index.  ISBN 978-0-292-75459-1 (cloth : alk. paper) 1. Free trade—Central America. 2. Central America—Commerce. 3. Central America—Commerical policy. 4. Central America—Foreign economic relations. 5. CAFTA (Free trade agreement) (2005). I. Title.  HF1782.S63 2013  382′.91728—dc23 2013019668 doi:10.7560/754591

I dedicate this book to my mother, Bernadette Spalding, who passed away while it was being written, and to my father, Hugh C. Spalding, who celebrated his 100th birthday.

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Contents



List of Acronyms and Initialisms 



Acknowledgments 



Introduction, Overview, and Methods 

1.

The March to Market Reform in Central America 

ix

xix 1 20

2. Rule Makers and Rule Takers: Negotiating CAFTA  3. Resistance: Competing Voices 

61

95

4. Ratification Politics: In the Chamber and in the Street 

126

5. After CAFTA: Anti-Mining Movements, Investment Disputes, and New Organizational Territory  158 6. Electoral Challenges and Transitions 

188

7. Post-­Neoliberalism and Alternative Approaches to Change 

206



Appendix A. Note on Interview Methodology 



Appendix B. Presidential Election Results: Costa Rica, El Salvador, and Nicaragua, 1978–2011  244



Notes 



Bibliography 



Index 

247

305

269

240

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Acronyms and Initialisms

Costa Rica AI Autonomous institution AMCHAM–Costa Rica American Chamber of Commerce of Costa Rica ANDE Asociación Nacional de Educadores; National Association of Educators ANEIT Asociación Nacional de Exportadores de la Industria Textil; National Association of Textile Industry Exporters ANEP Asociación Nacional de Empleados Públicos y Privados; National Association of Public and Private Employees APSE Asociación de Profesores de Segunda Enseñanza; Association of Secondary Education Teachers CADEXCO Cámara de Exportadores de Costa Rica; Costa Rican Chamber of Exporters CDI Consejo de Defensa de la Institucionalidad; Council for the Defense of Institutionality CEFSA Consultores Económicos y Financieros, SA; Economic and Financial Consultants, SA CICR Cámara de Industrias de Costa Rica; Chamber of Industry of Costa Rica CINDE Coalición Costarricense de Iniciativas en Desarrollo; Costa Rican Investment Promotion Agency CINPE Centro Internacional de Política Económica para el Desarrollo Sostenible; International Center for the Political Economy of Sustainable Development CODESA Corporación Costarricense de Desarrollo, SA; Costa Rican Development Corporation, SA

x  Contesting Trade in Central America

COMEX Ministerio de Comercio Exterior, Foreign Trade Ministry CONCAUSA Consejo Empresarial para las Negociaciones Comerciales Centroamérica–Estados Unidos; Business Council for the Central America–U.S. Trade Negotiations CTRN Confederación de Trabajadores Rerum Novarum; Rerum Novarum Confederation of Workers FECON Federación Conservacionista; Conservationist Federation ICE Instituto Costarricense de Electricidad; Costa Rican Electrical Institute MIDEPLAN Ministerio de Planificación Nacional y Política Económica; Ministry of National Planning and Political Economy ML Movimiento Libertario; Libertarian Movement Party PAC Partido de Acción Ciudadana; Citizen Action Party PAE Programa de ajuste estructural; structural adjustment program PEN Programa Estado de la Nación; State of the Nation Program PLN Partido de Liberación Nacional; National Liberation Party PND Plan Nacional de Desarrollo; National Development Plan PROCOMER Promotora de Comercio Exterior; Trade Promotion Agency PUSC Partido de Unidad Social Cristiana; Social Christian Unity Party TSE Tribunal Supremo Electoral; Supreme Electoral Tribunal UCCAEP Unión Costarricense de Cámaras y Asociaciones de la Empresa Privada; Costa Rican Union of Private Sector Chambers and Associations UCR Universidad de Costa Rica; University of Costa Rica UNA Universidad Nacional; National University UPANACIONAL Unión de Productores Agropecuarios–Nacional; National Agricultural Producers Union El Salvador ADES

Asociación de Desarrollo Económico y Social; Economic and Social Development Association AMCHAM–El Salvador American Chamber of Commerce of El Salvador AMPES Asociación de Medianos y Pequeños Empresarios Salvadoreños; Salvadoran Association of Small and Medium-­Sized Business Owners ANEP Asociación Nacional de la Empresa Privada; National Private Enterprise Association

Acronyms and Initialisms xi

ARENA

Alianza Republicana Nacionalista; Nationalist Republican Alliance ASI Asociación Salvadoreña Industria; Association of Salvadoran Industry ASIC Asociación Salvadoreña de la Industria de la Confección; Salvadoran Apparel Industry Association BCR Banco Central de Reserva; Central Reserve Bank CAMAGRO Cámara Agropecuaria y Agroindustrial de El Salvador; Agricultural and Agroindustrial Chamber of El Salvador CCIES Cámara de Comercio e Industria de El Salvador; Chamber of Commerce and Industry of El Salvador CD Cambio Democrático; Democratic Change Party CDU Centro Democrático Unido; United Democratic Center CEDES Conferencia Episcopal de El Salvador; Episcopal Conference of El Salvador CEICOM Centro de Investigación sobre Inversión y Comercio; Investment and Trade Research Center CEMUJER Instituto de Estudios de la Mujer “Norma Virginia Guirola de Herrera”; Norma Virginia Guirola de Herrera Institute of Women’s Studies CES Consejo Económico y Social; Social and Economic Council CISPES Committee in Solidarity with the People of El Salvador COEXPORT Corporación de Exportadores de El Salvador; Corporation of Salvadoran Exporters CONAES Consejo Nacional de Empresarios Salvadoreños; National Council of Salvadoran Business Owners CONAMUS Coordinadora Nacional de Mujeres Salvadoreñas; National Coordinating Committee of Salvadoran Women CONFRAS Confederación de Federaciones de la Reforma Agraria Salvadoreña; Confederation of Salvadoran Agrarian Reform Cooperatives CORDES Fundación para la Cooperación y el Desarrollo Comunal de El Salvador; Foundation for Cooperation and Community Development of El Salvador CRIPDES Asociación de Comunidades Rurales para el Desarrollo de El Salvador; Rural Communities Association for Salvadoran Development CSTS Coordinadora Sindical de Trabajadoras(es) de El Salvador; Trade Union Coordinating Committee of Salvadoran Workers

xii  Contesting Trade in Central America

ENEPASA Asociación Intermunicipal de Energía para El Salvador; Intermunicipal Energy Association of El Salvador FENAPES Federación Nacional de la Pequeña Empresa de El Salvador; National Federation of Small Enterprises of El Salvador FESPAD Fundación de Estudios para la Aplicación del Derecho; Foundation for the Study of the Application of Law FIMES Federación Independiente de Microempresarios Salvadoreños; Independent Federation of Salvadoran Microenterprise Owners FISDL Fondo de Inversión Social para el Desarrollo Local; Fund for Social Investment for Local Development FMLN Frente Farabundo Martí para la Liberación Nacional; Farabundo Martí National Liberation Front FSC Foro de la Sociedad Civil; Civil Society Forum FUNDE Fundación Nacional para el Desarrollo; National Development Foundation FUSADES Fundación Salvadoreña para el Desarrollo Económico y Social; Salvadoran Social and Economic Development Foundation FUSADES-­DEES FUSADES–Departamento de Estudios Económicos y Sociales; Economic and Social Studies Department GANA Gran Alianza por la Unidad Nacional; Grand Alliance for National Unity IUDOP Instituto Universitario de Opinión Pública; University Public Opinion Institute MARN Ministerio del Medio Ambiente y Recursos Naturales; Ministry of the Environment and Natural Resources MPR12 Movimiento Popular de Resistencia–12 de Octubre; October 12 Popular Resistance Movement ODASP Oficina de Apoyo al Sector Productivo para las Negociaciones Comerciales; Office of Assistance for the Business Sector in Trade Negotiations PCN Partido de Conciliación Nacional; National Conciliation Party PDC Partido Demócrata Cristiano; Christian Democrat Party PDDH Procuraduría para la Defensa de los Derechos Humanos; Office of the Human Rights Defense Attorney RST Red Sinti Techán; Sinti Techán Network SHARE Salvadoran Humanitarian Aid, Research and Education Foundation TSE Tribunal Supremo Electoral; Supreme Electoral Tribunal UCA Universidad Centroamericana José Simeón Cañas; Central American University

Acronyms and Initialisms xiii

UES UNES

Universidad de El Salvador; University of El Salvador Unidad Ecológica Salvadoreña; Salvadoran Ecological Unity

Nicaragua ALBANISA ALBA de Nicaragua, SA; ALBA of Nicaragua, SA ALN Alianza Liberal Nicaragüense; Nicaraguan Liberal Alliance AMCHAM-­Nicaragua American Chamber of Commerce of Nicaragua APEN Asociación Nicaragüense de Productores y Exportadores; Nicaraguan Producer and Exporter Association APRE Alianza para la República; Alliance for the Republic BANADES Banco Nacional de Desarrollo; National Development Bank BCN Banco Central de Nicaragua; Central Bank of Nicaragua CA Complementary Agenda CACONIC Cámara de Comercio de Nicaragua; Nicaraguan Chamber of Commerce CARUNA Caja Rural Nacional, RL; National Rural Fund CEI Centro de Estudios Internacionales; International Studies Center CINASE Centro de Investigación y Asesoría Socioeconómica; Center for Socioeconomic Research and Consulting CIPRES Centro para la Promoción, la Investigación y el Desarrollo Rural y Social; Center for Rural and Social Promotion, Research, and Development CNZF Corporación Nicaragüense de Zonas Francas; Nicaraguan Free Trade Zones Corporation CONPES Consejo Nacional de Planificación Económica Social; National Social and Economic Planning Council COSEP Consejo Superior de la Empresa Privada; Superior Council of Private Enterprise CPC Consejo del Poder Ciudadano; Citizen Power Council CST-­JBE Confederación Sindical de Trabajadores–“José Benito Escobar” (formerly Central Sandinista de Trabajadores); José Benito Escobar Union Federation of Workers FENACOOP Federación Nacional de Cooperativas Agropecuarias y Agroindustriales; National Federation of Agricultural and Agroindustrial Cooperatives FIDEG Fundación Internacional para el Desafío Económico Global; International Fund for Global Economic Challenge

xiv  Contesting Trade in Central America

FSLN

Frente Sandinista de Liberación Nacional; Sandinista National Liberation Front FUNIDES Fundación Nicaragüense para el Desarrollo Económico y Social; Nicaraguan Foundation for Social and Economic Development GRUN Gobierno de Reconciliación y Unidad Nacional; Government of Reconciliation and National Unity INIDE Instituto Nacional de Información de Desarrollo de Nicaragua; Nicaraguan National Development Information Institute MAGFOR Ministerio Agropecuario y Forestal; Ministry of Agriculture and Forestry MIFIC Ministerio de Fomento de Industria y Comercio; Ministry of Industry and Trade Promotion MRS Movimiento Renovador Sandinista; Sandinista Renovation Movement PLC Partido Liberal Constitucionalista; Liberal Constitutionalist Party PNDH Plan Nacional para el Desarrollo Humano; National Human Development Plan UNAG Unión Nacional de Agricultores y Ganaderos; National Union of Farmers and Ranchers UNAPA Unión Nacional Agropecuaria de Productores Asociados; National Agricultural Union of Associated Producers UNO Unión Nacional Opositora; National Opposition Union General AFL-­ CIO American Federation of Labor–Congress of Industrial Organizations AFT Aid for Trade ALBA Alianza Bolivariana para los Pueblos de Nuestra América; Alliance for the Peoples of Our America AMCHAM American Chamber of Commerce ASC Alianza Social Continental (also HSA) BCIE Banco Centroamericano de Integración Económica; Central American Bank of Economic Integration BIT Bilateral investment treaty CACM Central America Common Market CAFTA Central America Free Trade Agreement (also CAFTA-­DR)

Acronyms and Initialisms xv

CAFTA-­ DR Dominican Republic–Central America Free Trade Agreement CBI Caribbean Basin Initiative C-­CAA Caribbean–Central American Action CCT Conditional cash transfer CECA Consejo Empresarial Centroamericano; Central American Business Council CELAM Consejo Episcopal Latinoamericano; Latin American Episcopal Council CIEL Center for International Environmental Law CSOP Civil Society Outreach Program ECLAC Economic Commission on Latin America and the Caribbean EIA Environmental impact assessment EPZ Export processing zone EZLN Ejército Zapatista de Liberación Nacional; Zapatista Army of National Liberation FDI Foreign direct investment FECAGRO Federación Centroamericana de Cámaras Agropecuarias y Agroindustriales; Central American Federation of Agriculture and Agroindustry Chambers FLACSO Facultad Latinoamericana de Ciencias Sociales; Latin American School of Social Sciences FTA Free trade agreement FTAA Free Trade Area of the Americas GAO Government Accountability Office (U.S.) GATT General Agreement on Tariffs and Trade GDP Gross domestic product GSP Generalized System of Preferences HIPC Heavily indebted poor country HSA Hemispheric Social Alliance (also ASC) IAHRC Inter-­American Human Rights Commission ICSID International Centre for Settlement of Investment Disputes IDB Inter-­American Development Bank (also IADB) IFI International financial institution ILO International Labour Organization IMF International Monetary Fund IMF-­WEO IMF–World Economic Outlook INCAE Instituto Centroamericano de Administración de Empresas; Central American Business Administration Institute

xvi  Contesting Trade in Central America

INGO International nongovernmental organization Iniciativa CID Iniciativa Mesoamericana Comercio, Integración y Desarrollo; Mesoamerican Trade, Integration, and Development Initiative (also CID) INTAL Instituto para la Integración de América Latina y el Caribe; Institute for the Integration of Latin America and the Caribbean IO International organization IPR Intellectual property rights IPS Institute for Policy Studies ISI Import-­substitution industrialization LAPOP Latin American Public Opinion Project MCC Millennium Challenge Corporation MIPYMES Micro, pequeñas y medianas empresas; micro, small, and medium-­sized businesses MSME Micro, small, and medium-­sized enterprise NAFTA North American Free Trade Agreement NGO Nongovernmental organization OAS Organization of American States OCMAL Observatorio de Conflictos Mineros de América Latina; Latin American Mining Conflicts Observer PDVSA Petróleos de Venezuela, SA PELA Proyecto Élites Parlamentarias Latinoamericanas; Parliamentary Elites in Latin America PETROCARIBE Acuerdo de Cooperación Energética entre Venezuela y Países del Caribe y Centroamérica; Energy Cooperation Agreement between Venezuela and Caribbean and Central American Countries PNUD Programa de las Naciones Unidas para el Desarrollo; United Nations Development Programme (also UNDP) PPP Plan Puebla-­Panamá RMALC Red Mexicana de Acción Frente al Libre Comercio; Mexican Action Network on Free Trade SAPRIN Structural Adjustment Participatory Review International Network SICA Sistema de Integración Centroamericana; Central American Integration System SIECA Secretaría de Integración Económica Centroamericana; Central American Economic Integration Secretariat TCB Trade capacity building TINA There is no alternative

Acronyms and Initialisms xvii

TLC TNC TPA TRIM TRIP UNCTAD UNDP USAID USTR WB/ WDI WOLA WTO

Tratado de Libre Comercio Transnational corporation Trade promotion authority Trade related investment measure Trade related intellectual property United Nations Conference on Trade and Development United Nations Development Programme (also PNUD) U.S. Agency for International Development U.S. Trade Representative World Bank, World Development Indicators Washington Office on Latin America World Trade Organization

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Acknowledgments

I want to begin by thanking the several hundred scholars, activists, and public servants in Central America who contributed to my understanding of the region as I conducted field research in Costa Rica, El Salvador, and Nicaragua over the 2003–2010 period. Many of them met with me repeatedly, read early drafts of my work, provided ongoing commentary, shared archival materials, and offered their own carefully considered analysis of economic reform and resistance in the region. In Costa Rica, these generous contributors include Carlos Denton, Anabel González, Eduardo Lizano, Juliana Martínez Franzoni, Ciska Raventós, Ottón Solís, and Alberto Trejos. In El Salvador, invaluable assistance with documentation and background material was provided by Rick Jones, Raúl Moreno, William Pleitez, Roberto Rubio, Knut Walter, René Zúniga, and Loly de Zúniga. In Nicaragua, I remain heavily indebted, once again, to my long-­term friends and colleagues Mario Arana, Eduardo Baumeister, Alejandro Bendaña, Judy Butler, David Dye, and Carlos Lacayo. It would not have been possible to do this work without them. None of these individuals is responsible for the interpretations and findings offered in this book, for which I alone bear responsibility. Indeed, many of them will take clear exception to at least some of my conclusions. Such is the nature of research on controversial topics. I also want to thank a large network of scholars and friends who have contributed their time and insights to advance my work on this book. For reading early and sometimes multiple drafts of chapters and offering many astute observations, I am grateful to Eduardo Silva, Mimi Keck, Bill Smith, Kathryn Hochstetler, Ludovico Feoli, Marisa von Bülow, Kim Nolan García, Ken Shadlen, Jonathan Fox, Diego Sánchez-­Ancochea, Vince McElhinny, David Close, John Booth, Jack Spence, Bill Barnes, Shelley McConnell, Sal-

xx  Contesting Trade in Central America

vador Martí, Eric Hershberg, Heidi Nast, Mike Mezey, Nancy Jurik, and Katy Arnold. For providing advice on fieldwork and data in Central America, I gratefully acknowledge the assistance of Tommie Sue Montgomery, David Holiday, Héctor Cruz, Devorah Grynspan, Eliza Willis, Janet Seiz, David Lewis, Marc Edelman, Manuel Pérez-­Rocha, LaDawn Haglund, and Ellen Moodie. For all of the above over a long period of time, I want to express my deep gratitude to two incomparable colleagues and friends, Laura Enríquez and Richard Stahler-­Sholk. DePaul University has provided steady support for my research, with multiple grants and leaves approved by the University Research Council and summer support given by the College of Liberal Arts and Social Sciences. My work has benefited immensely from the assistance of a steadily growing team of student researchers from DePaul. Early support was provided by Graciela González, who assisted with the development of a database of civil society and resistance organizations in Central America, and by Phoebe Connelly, who did background research on regional development projects in Central America. Eileen Hyde and Alex Howe conducted research on the CAFTA (Central America Free Trade Agreement) legislative debate and referendum in Costa Rica, and Vanessa Cruz provided materials on CAFTA organizing (pro and con) in Nicaragua. Emily Thenhaus and Gabriela Polo Tomalá both carried out background research on the mining controversy in El Salvador and the Funes election. Nikki Hughes compiled information about Nicaragua under the second Ortega administration. I am most grateful to them all, both for their research assistance and for the thoughtful conversations we had as I began to piece this manuscript together. Carlos Denton of CID-­Gallup generously shared poll results for Central American countries for the critical 2003–2005 period. I also thank the Latin American Public Opinion Project (LAPOP) and its major supporters—(the United States Agency for International Development [ USAID], the United Nations Development Programme [ UNDP], the Inter-­American Development Bank [ IDB], and Vanderbilt University) for making their data available. Part of chapter 3 and a section of chapter 2 borrow from an article I published in Latin American Politics and Society (Spalding 2007) and a chapter I contributed to Latin American Social Movements in the 21st Century, edited by Richard Stahler-­Sholk, Harry E. Vanden, and Glen David Kuecker (Spalding 2008). The book production process advanced smoothly under the editorial sponsorship of Theresa May of the University of Texas Press. Production assistance was skillfully provided by Josh Covell at DePaul University, and by

Acknowledgments xxi

Lynne Chapman and Kathy Bork at the University of Texas Press. Mark Stevens generously lent his talents in graphic arts to the preparation of the cartoon images for reproduction. I am grateful to all of them for their invaluable assistance. Finally, I thank my husband, Will Denton, and our daughters, Claire and Grace, for their support for this very long and time-­consuming project. Their good company during our many trips to Central America made this sometimes difficult work that much easier. I’m grateful for their thoughtfulness and curiosity, and for the times they pulled me away from the research to share their challenges and joys. They give meaning to my work, and my life.

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Contesting Trade in Central America

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Introduction, Overview, and Methods

After sixteen years of “governing from below,” Sandinista leader Daniel Ortega returned to power in Nicaragua in 2007, once again denouncing the forces of imperialism and promising to address economic grievances. Joining Ortega, Honduran president “Mel” Zelaya (2006–2009) linked forces with Hugo Chávez, entering the Venezuela-­sponsored integration initiatives PETROCARIBE and the Bolivarian Alliance for the Peoples of Our America (ALBA) until a 2009 coup brought his unceremonious ouster. In the same year, El Salvador experienced a pivotal electoral transition. Mauricio Funes, presidential candidate of the Farabundo Martí National Liberation Front (FMLN), the political party descendant of a demobilized revolutionary army, emerged victorious following twenty years of government under the Nationalist Republican Alliance (ARENA), a right-­wing business-­aligned party. Even firmly institutionalized Costa Rica felt the regional political roil. One of the bastions of that country’s two-­party system fell into frank collapse in 2006, replaced by the upstart Citizen Action Party (PAC), a rising critic of neoliberal change. In country after country, Central America’s new leaders, coalitions, and political parties called into question the market transitions that had been under way for two decades. Only a few years before, this region seemed a bastion of neoliberal reform. As in much of Latin America, deregulation, trade liberalization, and privatization of state resources served as the reigning policy norms. Governments in Nicaragua, El Salvador, and Costa Rica followed strict International Monetary Fund (IMF) guidelines to stabilize and then restructure their faltering economies in the 1980s and 1990s. The pro-­market reformers who led these nations locked in various policies using new laws and binding international agreements. The most recent addition was the Central America Free Trade

2  Contesting Trade in Central America

Agreement,1 a trade and investment agreement signed by the United States, five Central American countries, and the Dominican Republic in 2004. This agreement, designed to persist across administrations, came to symbolize an enduring commitment to the neoliberal model. How did a region committed to market reform become an area where these principles and policies were so contested? This book offers an answer to that question. I argue that contemporary dynamics in Central America echo Karl Polanyi’s (2001 [1944]) “double movement” in which the “great transformation” to market economics is followed by rising resistance and the search for alternatives. Writing about the nineteenth- and early twentieth-­ century liberal transition in Europe, Polanyi found that hardships associated with marketization of production and the commodification of land and social relations triggered a countermovement of opposition. This double movement juxtaposed two competing principles: “[O]ne was the principle of economic liberalism, aiming at the establishment of a self-­regulating market, relying on the support of the trading classes, and using largely laissez-­faire and free trade as its methods; the other was the principle of social protection aiming at the conservation of man and nature as well as productive organization . . . using protective legislation, restrictive associations, and other instruments of intervention as its methods” (Polanyi 2001 [1944], 138–139). The second movement gathers force in reaction to the first as it attempts to reduce negative consequences for people and the environment through state intervention, market regulation, community solidarity, and cultural affirmation.2 At the dawn of another century, anti-­neoliberal resistance movements again challenged the penetration of market logic and launched a search for alternatives. The accelerated expansion of corporate globalization contributed to multiple local and national movements for “self-­protection,” often intersecting in multistrand transnational networks and alliances. Market transition carries costs as well as benefits, as the burgeoning literature on neoliberalism testifies. Deregulation increased vulnerability to shocks, while competition dislocated traditional producers, and heightened inequalities exacerbated social tensions. New actors emerged during the market transition, and old actors were reconfigured, reweaving but also fraying the social fabric. Resistance movements of varied stripes soon mobilized to contest the ethos of market-­oriented reform. Piecemeal and ad hoc, resistance variations reflected local conditions and customs and emerged as a natural reaction to social and environmental distress. Examination of reform and resistance in Central America, using the debate about CAFTA as the pivot, allows us to construct a refined anatomy of this dual process. The Central America Free Trade Agreement with the

Introduction, Overview, and Methods 3

United States was officially proposed in 2002, negotiated in 2003, signed in 2004, and entered into effect between 2006 and 2009 in its seven signatory states (in order of ratification, El Salvador [2004], Honduras [2005], Guatemala [2005], United States [2005], Dominican Republic [2005], Nicaragua [2005], and Costa Rica [2007]). CAFTA not only mandated liberalization in tariffs on goods and services but also entailed extensive rule migration. The required changes included a host of regulations governing foreign investment, state development roles, intellectual property protections, and business dispute settlement processes. This new round of neoliberal adjustments was to be phased in over two decades, redefining the terms of economic integration for the foreseeable future. A durable monument to market reform, CAFTA was extolled by its advocates as a means of locking in the market model and denounced by its critics as a distortion that heightened regional vulnerability without attention to costs. This book traces the development of both movements and offers the first full-­length academic treatment of CAFTA politics in Central America. Market reform coincided with the renewal of electoral democracy in the region, which opened space for civil society’s participation and the mobilization of competing interests. The new economic rules challenged the identity and livelihood of major social sectors, including public employees, small and medium-­sized businesses, and small farmers who faced the withdrawal of state protection and increased competition from imports. Expanded opportunities to organize combined with a growing perception of threat to energize oppositional social movements. Although market reform won major allies, political winds carried crosscurrents, and public support for reform proved volatile. Building on grassroots organizational networks that laid down tracks during the 1970s and 1980s era of revolutionary upheaval, resistance activists gradually gained momentum. As Central American movement entrepreneurs mobilized over neoliberal reforms, CAFTA served as a highly visible “condensing symbol” (Tarrow 2005, 73) against which to rally. A jerry-­rigged resistance architecture was cobbled together in a process extending across space and time. Internationally, activists welded transnational connections, helping forge common discourses and strategies of resistance across a number of similarly situated locales; domestically, linkages were made to previous mobilizations against privatization and state contraction, allowing activists to build on prior experiences, frameworks, and alliances. Over time, these interwoven networks connected to left-­wing political parties and electoral campaigns, eventually gaining traction. The debate about free trade unfolds into the larger discussion of market

4  Contesting Trade in Central America

reform that has preoccupied policy makers, scholars, and activists for a full generation. At one point the ascendance of market orthodoxy reached such heights that its precepts could be enumerated and declared a “consensus” (Williamson 1990); the “Washington Consensus” construct was a widely and often favorably deployed reference to a specific package of policy reforms that was broadly disseminated in the region. Scholars such as Forrest Colburn (2002) ruminated on the “end of politics” in Latin America after decades of revolution and upheaval. Reviewing the newfound liberalization trends sweeping the region after decades of state interventionism and the 1980s debt crisis, Sebastian Edwards (1995) added the subtitle “From Despair to Hope” to his influential Crisis and Reform in Latin America. Advocates and critics alike viewed the new model as hegemonic (Harvey 2005). British prime minister Margaret Thatcher famously declared, “There is no alternative” (TINA). The new set of economic rules emphasized market deregulation, liberalized trade and investment, reduced state roles, and the centrality of competition, efficiency, and comparative advantage. Polanyi’s florid description of the nineteenth-­century market ethos in Europe suggests the grandness of the adventure: “[a] new way of life spread over the planet with a claim to universality unparalleled since the age when Christianity started out on its career” (2001 [1944], 136). Critics of the model, though never entirely vanquished, found little opportunity to alter the regional economic direction. Tarnished by their association with discredited alternatives, their voices ceased to carry. The region-­wide erosion of organized labor, traditionally a core constituency for the social-­democratic and the populist Left, only seemed to reinforce the outcome, as did the decline of state corporatist alliances with the peasantry (Kurtz 2004). But neoliberalism lost its luster as the new century dawned. Street-­level criticism was reinforced by academic analysis, and escalating skepticism from within those hallowed halls proved difficult to ignore. Objecting to the cookie-­cutter formula applied by the International Monetary Fund during structural adjustment processes, Joseph Stiglitz (2002) brought in-­house disputes to public attention. IMF pressure to eliminate capital controls and dismantle industrial policy was derided as an ideological imposition at odds with the actual experience of development in major parts of the world. Economic analysts found that the growth rate in gross domestic product (GDP) under neoliberal reform trailed the growth outcomes achieved under the earlier, import-­substituting industrialization (ISI) model (Palma 2010; F. Rodríguez 2010). Even countries that “did everything right” under market reform, such as El Salvador, experienced sluggish growth (Hausmann and Rodrik 2005). Evidence mounted that reform, although sometimes producing economically

Introduction, Overview, and Methods 5

and socially desirable results, fell short of stimulating the kind of sustained growth and prosperity that its more fulsome advocates had once predicted (Rodrik 2006, 2011). Although poverty rates tended to decline under neoliberalism following their escalation during the debt crisis, this pattern was inconsistent and subject to rapid reversals. And even when the poverty level fell, it often left behind a pattern of rising inequality, as the beneficiaries of the new economy experienced rapid increases in opportunities and compensation, while reform “losers” experienced little improvement or, in the worst cases, actually suffered further decline. Following two decades of close observation, scholars became increasingly aware that the same neoliberal policy prescriptions did not always produce the same effects, even when methodically implemented (Stiglitz 2002; Stiglitz and Charlton 2005; F. Rodríguez 2010). Market policies, it appeared, could have a wide array of outcomes, some of which might be deleterious. Global recession in 2009 served as a further reminder of the volatility and development costs of inadequately regulated financial markets (Duménil and Lévy 2011; Bárcena and Prado 2010). In Latin America, protests against neoliberal reform flickered and flared. The demobilization that followed democratic transition gave way to new forms of mobilization as disenchantment grew (Oxhorn 2009; Stahler-­Sholk, Vanden, and Kuecker 2008; Almeida 2008). From the Caracazo in Venezuela through the water wars in Bolivia, social movements reemerged and called for resistance, particularly to marketization of basic services and privatization of state resources. For all the benefits in terms of new technologies, low inflation, and a wider array of goods in the market, these reforms entailed costs— both economic and social—that significant sectors of society were unable or unwilling to pay. The consolidation of democratic polities gave these communities greater opportunity to register their objections, and many did. Dissatisfaction with market performance began to have political consequences, supporting the rise of an electoral Left (Baker and Greene 2011; Stokes 2009). By 2006, presidents on the left of the political spectrum governed most of Latin America. The rise of a countermovement did not mean mass conversion to a Left identity; indeed, much of the resistance did not define itself in ideological terms. Heterogeneous and self-­protective instead of ideological and class based, these resistance movements took many forms, as Polanyi’s historical review suggested. Since 2000, we have seen repeated calls for decommodification of services covering basic needs; protection for vulnerable sectors unlikely to survive head-­to-­head competition with larger or foreign industries; food-­ security systems designed to stimulate local production of food; countercycli-

6  Contesting Trade in Central America

cal economic policies aimed at revving up production and employment during downturns; and attention to pluricultural survival that challenged dislocating and homogenizing consequences of economic globalization. This cluster of claims helped shape a rich and eclectic countermovement to market reform. Analysis of this double movement, both toward and away from the market, allows us to take these components apart and explore the ways in which each advanced. Table I.1 provides a schematic overview of competing models, actors, and discourses to be analyzed in the coming chapters, highlighting key features of the CAFTA debate. Each movement organized loosely around a contrasting set of core ideas and was advanced by an alliance that linked external and internal actors; each movement proffered a series of claims about the social order, which aligned with a cluster of competing policy proposals. To achieve their objectives, each camp employed an array of tactics, sometimes divergent and sometimes overlapping, deploying the varied resources to which they had access. Understanding the advance of market reform has been a central task of a generation of scholars. Academic literature on this process can be organized around three major debates. The first asks whether market reform is better understood as the product of international pressure, as new rules were transferred from global power centers to national policy makers, or as a product of internal, domestic actors maneuvering to refashion their own economic architecture. The second explores the complex relationship between economic interests and ideas, or between capital and the epistemic communities that craft and disseminate a pro-­market ideology. The third analyzes whether market reform is better understood as an elite-­led process, with policies imposed on the public through pressure and obfuscation, or as a mass-­led process in which an eager and acquisitive public demands policy reform in hopes of securing material improvement. The first debate, centering on the role of exogenous versus endogenous forces, has powered forceful scholarly exchange. A substantial body of scholarship locates the dominant impetus for reform in global structures centering on the power of multilateral financial institutions, transnational capital, and dominant countries, particularly the United States (Robinson 2003; Harvey 2005; Vreeland 2007; Pop-­Eleches 2009; Copelovitch 2010; Park and Vetterlein 2010). Other analyses center on national elite preferences, focusing on networked sectors of the domestic business class and technocratic state managers who meld economic rationality and ideology to advance economic reform (Golob 2003; Teichman 2001; Domínguez 1997; Cameron and Tomlin 2000; Dezalay and Garth 2002; Lusztig 2004; Bull 2008).

Introduction, Overview, and Methods 7

This debate opened a second, concerning the preeminence of material interests versus ideas in the advance of market rules. Research that focused on the role of business, whether at the transnational (Robinson 2003; Harvey 2005) or national (Lusztig 2004; Schamis 2002) level, tended to accent the struggle for material accumulation; work that focused on the influence of technocrats, whether international (Park and Vetterlein 2010; Chwieroth 2010) or domestic (Golob 2003; Domínguez 1997), clarified the ideational dimensions of the process. As formal democratization advanced in the region, the debate expanded to focus on the relative impact of elite versus mass preferences for reform. Since electoral democracy means that the occupants of key state positions are determined through competition for votes, neoliberal leaders and policies can be sustained over the long run only via public endorsement. This line of argument shifted attention to the degree of support for market reform found in mass public opinion (Stokes 2001; Weyland 2002, which draws on “prospect theory”; and Baker 2009, which emphasizes consumer aspirations, or “consumismo”). The present study addresses these debates by using a nested power construct to examine the sequence in which different actors contributed to market reform in different phases of the process. Globalization of production and distribution builds transnational firms whose business practices are facilitated by the fluid commercial architecture of liberalized trade. Attentive to those preferences and the larger strategic benefits of economic integration, state actors and international organizations deploy various rewards and sanctions to encourage the spread of market reform. These exogenous actors influence domestic leaders, particularly in regions like Central America, which are heavily dependent on trade, aid, and foreign investment and have long been the target of U.S. interventionism (Coatsworth 1994; Leogrande 1998; Schoultz 1998). Yet even there, external actors can hardly control local actions without the cooperation of domestic elites; sustained market reform requires ongoing engagement of committed local actors who filter and redirect according to their own calculations (Dezalay and Garth 2002). As the traditions of electoral democracy developed in the region following decades of electoral manipulation, military interventionism, and civil war, elite calculations were affected in part by the way voters responded to economic restructuring. This book explores the processes by which international and domestic elites shaped public support for the CAFTA agreement in Central America through the mobilization of “knowledge” and top-­down media campaigns, and the way mass publics, moved by the prospect of jobs, investments, and consumer goods, responded to these appeals.

Table I.1. Market movement and countermovement frameworks in Central America Model

Ideology: core concepts

Actors and alliances

Market movement

Free market

U.S. government (USTR, USAID, consultants [CARANA])

Competition Efficiency Consumption Commodification Comparative advantage

International institutions (IMF, IDB, ICSID) Transnational business elite, AMCHAMs Central American export-­oriented firms, regional economic groups, business chambers, C-­CAA Central American finance, trade, economics ministries Pro-­market think tanks, schools (Academia de Centroamérica, CINDE, FUSADES, INCAE, FUNIDES)

Countermovement

Solidarity Social justice Community and self-­protection Decommodification Food sovereignty Economic localism Pluriculturalism “Thick” democracy Regulation and countercyclical intervention Sustainability

Transnational movements/advocacy networks (Hemispheric Social Alliance, OCMAL) Regional networks (Foro Mesoamericano, Iniciativa CID) National networks and movements (“NO” coalition in Costa Rica, Mesa Nacional Frente la Minería Metálica) “Domesticating” and “power node” INGOs (Catholic Church, Oxfam, solidarity organizations, IPS, CIEL) Political party allies (FMLN, FSLN, PAC) Sympathizers (universities [UES, UCR], research centers, NGOs)

Claims

Proposals

Tactics

Neoliberalism produces growth, opportunity, prosperity, modernity, consumer options, free choice, stability

Fiscal balance

Exogenous rewards (aid, loans) and sanctions (loss of market access, resources)

Neoliberal reform is what people prefer

Capital liberalization, dollarization

Neoliberal reform is inevitable, TINA

“Thick” integration (trade agreements include back of the border reforms on government procurement, intellectual property, dispute settlement)

Privatization Deregulation Trade liberalization

Use of international rules and penalties Research, constructed knowledge Mainstream media campaigns to shape opinion “Soft repression” (stigmatize) “Hard repression” (crackdown) Business leader participation in electoral politics (candidates, parties, financing, legitimation) Lobbying, interest-­group politics

Markets need regulation to reduce instability and inequality

Decommodify by guaran‑ teeing rights and basic needs

Marketization destroys social bonds, reciprocity, human connections

Attention to asymmetry, special and differentiated rules for smaller and weaker

Global markets homogenize, lead to loss of cultural diversity and pluralism, erode sovereignty Global markets produce worsening inequalities, uncertainties, instability

Prioritize local and regional economies Cultural survival National control over key sectors, capital controls, industrial policy Stimulus spending Development that emphasizes poverty alleviation, redistribution

Framing and brokerage to activate networks Alliances (regional, transnational) Alternative epistemic communities Popular education Alternative media (Semanario Universidad, Co-­Latino) Protests, takeovers, occupation Legal action, amicus curiae Movement participation in electoral processes Lobbying, interest-­group politics

10  Contesting Trade in Central America

Understanding the subsequent increase in resistance to the market model requires a dynamic approach that traces power shifts and the recalibration of preferences across time. Analysis of neoliberal opposition is woven into this narrative as a counterpoint, which becomes increasingly prominent as gains from market reform are routinized, costs accumulate, and promises of prosperity remain unfulfilled. This component draws heavily on national and transnational social movement theory (Keck and Sikkink 1998; Tarrow 2005; McAdam, Tarrow, and Tilly 2001; von Bülow 2010) to explore the construction of resistance frames and linkages among national, regional, and transnational networks. Social movement literature employs concepts of framing, bridging, and brokering, along with movement entrepreneurship, cycles, spirals, and rivalries, to chart and explain the broadening of resistance. Using conceptual frameworks derived from sociological and ethnographic analysis of “alter-­globalization” activism ( J. Smith 2008; della Porta, Andretta, Mosca, and Reiter 2006; Juris 2008), this book examines internal variations and strategic alliances within distinct CAFTA resistance clusters. Research on the advance of Left movements and political parties in Latin America (Cameron and Hershberg 2010; Weyland, Madrid, and Hunter 2010; Silva 2009; Flores-­Macías 2010; Levitsky and Roberts 2011) provides conceptual grounding for discussion of variation among leftist governments and diverse links between resistance activism and electoral politics. The present study explores the difficult terrain between neoliberal resistance movements and the formal politics of political parties and elections, an intersection that has been underanalyzed and undertheorized (Roberts 2008). It emphasizes the significance of shifting political opportunities, associated with democratic deepening, and the politics of protest, associated with damage claims and dislocation. The three countries examined in this study—Costa Rica, El Salvador, and Nicaragua—all experienced a rapid process of market reform, and in each case, reform was accompanied by waves of resistance. Differences in the ways market-­oriented reforms unfolded and resistance movements coalesced, however, set each of these countries on a different course. As Polanyi’s analysis suggests, mobilizations against the harsh consequences of marketization produce no one outcome, nor do they culminate at the same moment in time. Even when resistance movements are connected through transnational networks, national outcomes carry their own distinguishing characteristics and produce embedded forms of struggle. In Central America, the movement against economic liberalism unfolded in three directions. Ortega’s second coming in Nicaragua, which combined

Introduction, Overview, and Methods 11

revolutionary proclamations and ALBA membership with continued IMF dependence and backroom deals, was distinct from Funes’ cautious pursuit of Lula-­style reform and incremental change in El Salvador. Both of these cases differ from Costa Rica, where, in spite of major mobilizations against CAFTA in 2006 and 2007, resistance forces continued to face off against a pro-­market government, albeit one that embraced a hybrid form of neoliberalism. Methods Drawing on research in three Central American cases, the present study employs a comparative historical research method, in which a small number of similar cases advancing through a particular process are analyzed in close detail to locate general patterns and highlight variations. Use of multiple case studies reduces the risk of privileging factors that are unique to a single case; use of a small number of cases allows thicker description and longer-­term review of sequences than would generally be possible with large-­n quantitative analyses. This research project operates at the crossroads of international political economy, social movement theory, and comparative politics, drawing from and contributing to all three. It combines structural analysis, which demonstrates how concentrated economic resources are used to constrain political options and perpetuate power relations, with attention to agency, which emphasizes the role of choice and change. Mainstream methodological tools derived from path dependency, rational choice, and economic dependency theories provide limited instruments for understanding discontinuity. When long-­standing prior patterns undergo change, as noted in this study, methods that attend to decision making, recalibration, and innovation prove particularly useful. Costa Rica, El Salvador, and Nicaragua were selected for inclusion in this study because these three small Central American countries, all trade dependent and closely aligned with the United States, went through the trade-­ negotiation process together and experienced national debate over the issue, each in its own distinctive way. This case selection reduces the range of variation and allows for more focused research design. In-­depth case analysis permits close observation of the reform-­resistance dynamic that emerged in the local CAFTA discussion and the political developments that followed. The CAFTA debate moved beyond the government and business representatives who traditionally monopolize trade discussions,

12  Contesting Trade in Central America

to involve civil society representatives in the negotiation process, either inside the gatherings as credentialed participants in “side-­room” conversations or outside on the street as CAFTA protesters. Resistance also emerged during the legislative ratification processes in all three cases, and opponents, though in the minority, identified important issues and concerns. Opposition votes by the FMLN and Sandinista National Liberation Front (FSLN) diputados (deputies) in El Salvador and Nicaragua, respectively, reflected substantial legislative disapproval in these cases. The final vote on CAFTA ratification in Costa Rica took place via national referendum, where the 52% to 48% split in the popular vote illustrates the divisiveness of the issue and the breadth of opposition. Systematic analysis of these three cases allows us to explore reform and resistance dynamics in countries that, while similar in some ways, differ strikingly along several important dimensions. Costa Rica, with its relatively well educated population and stronger institutions, might be expected to compete more successfully in an open economy than countries like Nicaragua, where education levels are low, and almost half of the population lives in poverty. Given its greater level of preparedness, one might predict a more rapid and enthusiastic response to CAFTA in Costa Rica than elsewhere in the region. That prediction, in fact, would be wrong; careful study of CAFTA politics can tell us why. Costa Rican democracy is substantially older and better institutionalized than that of its neighbors.3 Nicaragua, in contrast, labors under the duress of strongman rule and institutional weakening. Does better-­quality democracy mean better-­quality debate about market reform? Does it produce fuller implementation of complementary measures that maximize gains and minimize damage? Again, careful process tracing can help clarify the intersection between the operation of a political system and the economic policies that it produces. To answer these questions, this book draws on interviews with over 200 Central American participants in and observers of the regional economic reform debate. (See appendix A, “Note on Interview Methodology,” for details.) Unlike many studies of economic reform that rely solely on secondary analysis, this work offers insights gleaned directly from those who lived the experience. These interviews, carried out in Nicaragua, El Salvador, and Costa Rica between 2003 and 2010, provide concrete information about the roles, alliances, strategies, and assessments of a range of political and economic actors who were involved in the CAFTA debate. Respondents included civil society representatives; government officials; local and transnational business leaders; and officials from the U.S. government, international organizations,

Introduction, Overview, and Methods 13

and international nongovernmental organizations (INGOs) such as Oxfam or Catholic Relief Services. The voice of civil society,4 understood to be the most clearly articulated, ongoing expression of the active and engaged citizenry, is privileged here; almost half of those interviewed for this book come from this sector, substantially more than any other group. This study is further enriched by the author’s direct observation of key events—Nicaraguan government strategy sessions on CAFTA promotion; resistance-­planning meetings in El Salvador and Costa Rica; public-­ information workshops on CAFTA in Costa Rica and Nicaragua; anti-­ CAFTA protests in El Salvador and Costa Rica; and legislative sessions and national elections in Nicaragua. It draws on economic data (Economic Commission on Latin America and the Caribbean [ECLAC], World Bank, IMF, IDB, Central American Economic Integration Secretariat [SIECA], and central banks) to explore growth, investment, and trade trends, with special attention to the downside developments. It employs public opinion data (Latinobarómetro, LAPOP, University Public Opinion Institute [ IUDOP, El Salvador], M&R [Nicaragua], Unimer [Costa Rica], and CID-­Gallup [cross regional]) to trace shifting views of market reform and political realignment over time. The present analysis emphasizes conceptual categories, typologies, and critical junctures based on shifting political dynamics and strategic decision-­ making, rather than causal theory or statistical testing of elaborate models. Other scholars may build on this research, however, to construct testable hypotheses about the circumstances under which free trade agreements are adopted and opposition coalitions converge or diverge, succeed or fail. The growing number of cases in which social movements challenge market reforms, and the marked variation in outcome (ranging from none to delay, partial change, and full stop), invite broader comparative research. The proliferation of free trade agreements (FTAs) between the United States and Latin American countries also begs for comparative analysis. In addition to the FTAs with the five Central American countries and the Dominican Republic (CAFTA-­DR), Mexico (North American Free Trade Agreement, NAFTA, which entered into force in 1994), Chile (U.S.-­Chile Free Trade Agreement, 2004), and Peru (U.S.-­Peru Trade Promotion Agreement, 2009), trade agreements were ratified with Colombia and Panama in 2011 following long-­delayed U.S. congressional approval. As more Latin American countries enter into trade agreements with the United States, the dynamics found in Central America can be compared with those found elsewhere to understand the politics of international economic negotiations and the circumstances under which opposition matters.

14  Contesting Trade in Central America

The Structure of the Book The shift to neoliberal reform has absorbed the energies of a generation of scholars. Much of this work focuses on the onset of market transition. By emphasizing only the opening phase of the reform process, however, analysts may highlight the significance of an early set of factors, missing others that emerge subsequently. The cost of a truncated timeline or narrowly specified topic is that this literature, much of it produced before neoliberalism began to lose its sheen, gives limited attention to the unfolding opposition that followed in its wake. Some more recent research concentrates on the struggle for self-­protection from the harmful consequences of unregulated markets. But attention to the second part absent strong analysis of the first may inadvertently underplay the range of obstacles these resistance movements face. The present study follows the full Polanyian double movement, allowing for a juxtaposition of the forces advancing and those challenging market reform. This book begins by focusing on market advancement in chapters 1 and 2; examines tensions between market reform and resistance in chapters 3, 4, and 5; and highlights the emerging challenges to strict neoliberalism in chapters 6 and 7. This dual analysis permits better-­calibrated conclusions about the dynamics of economic change than does analysis focusing on one dimension alone. Chapter 1 uses theoretically informed process tracing to analyze the development of market reform in Central America between 1980 and the early 2000s. Regional restructuring began in Costa Rica, propelled by the 1980s debt crisis. Costa Rica soon became a Latin American leader in economic openness, in spite of the country’s tradition of social democracy and regulatory intervention. Adjustment for El Salvador and Nicaragua began in the next decade, as programs designed to promote state activism and redistribute basic resources were checked following the defeat of revolutionary forces. In El Salvador, electoral victory by ARENA in 1989 and the 1992 peace process, which demobilized revolutionary soldiers in the FMLN, allowed a modernizing business elite to assert control over the economic model. In Nicaragua, the 1990 electoral defeat of the revolutionary Sandinista government, following almost a decade of counterrevolutionary warfare, gave the temporarily united opposition the opportunity to mount market reform, a move strongly backed by its U.S. allies. Chapter 1 uses a multiphase theoretical framework to divide these market reform processes into three segments: initiation, deepening, and persistence. Drawing on documents and interviews that detail the policy reform process, this chapter finds the primary elements shaping reform to shift with each

Introduction, Overview, and Methods 15

phase. Systematic analysis of these phases provides an answer to long-­running scholarly debate about the determinants (external versus internal, ideas versus interests, and top-­down versus bottom-­up) of neoliberal restructuring in this region. Chapter 2 extends the discussion of Central America market reform by turning attention to the CAFTA negotiation process. This chapter traces the way economic asymmetries and prior trade opening in the U.S. market under the 1980s Caribbean Basin Initiative (CBI) combined with regional rivalries and weak negotiation capacity to shape “rule maker” and “rule taker” roles in the negotiations. Exploring the U.S. agenda-­setting powers and preference for “thick integration,” which increasingly characterizes north-­south trade agreements, this chapter discusses the “back of the border” regulations included in CAFTA. These reforms extended the agreement’s reach far beyond reductions in tariff rates as goods cross borders into areas of government procurement, dispute settlement, investor guarantees, and intellectual property rights protection (Tussie and Saguier 2011; Sánchez-­Ancochea and Shadlen 2008; Manger and Shadlen 2011). To understand how the content of the CAFTA agreement took shape, chapter 2 analyzes the interactions between the government-­ appointed negotiation teams and the international funders who assisted them, local and transnational business representatives, and the civil society activists who joined the trade negotiation process for the first time. It traces the CAFTA drafting processes through the nine rounds of negotiation in 2003. Interviews with participants, including leading civil society activists, business advocates and detractors, and members of the negotiation teams in Nicaragua, Costa Rica, and El Salvador, provide illustrative detail. This chapter concludes with discussion of a parallel CAFTA selling process that used workplace training and positive media messaging to build public support during and after the negotiations. The formal opening of citizen space in the CAFTA negotiation process gave opposition movements the opportunity to construct counterframes that challenged the dominant neoliberal discourse. Chapter 3 offers an in-­depth look at the emerging forms of resistance. Building on prior national mobilizations and connecting with broader “alter-­globalization” movements, two regional networks, the Foro Mesoamericano and Iniciativa CID, were laboriously constructed by movement entrepreneurs. Using “insider/outsider” concepts from social movement theory (Smith and Korzeniewicz 2001; Wiktorowicz 2004; Sikkink 2005) and focusing on the Salvadoran case, this chapter identifies two groups of opponents—critic negotiators, who sought to join the negotiation and introduce modifications in the text, and transgressive resisters,

16  Contesting Trade in Central America

who adopted a confrontational strategy designed to discredit negotiations. The officially designated inclusion process fueled an unresolved intramovement debate: Did participation in trade negotiation processes offer new opportunities for learning and engagement, or did it simply co-­opt and diffuse the opposition, undermining its potential? Divergence on this issue revealed an underlying cleavage in the resistance networks, dividing those seeking opportunities to participate and propose amendments from those rejecting participation in favor of full-­bodied resistance. Competing oppositions proved unable to slow the CAFTA process, and the agreement was completed on a forced-­march schedule, with the official signing in May 2004. Chapter 4 turns to the role of formal government institutions to analyze the CAFTA ratification processes as control over the outcome passed to the national legislatures. This chapter argues that “horizontal accountability” (O’Donnell 2003; Mainwaring 2003), in which different government institutions monitor and check each other to ensure transparency and broad-­based support, was compromised in all three Central American cases. In El Salvador, legislative protocol and rules requiring consultation were systematically violated as the ARENA-­PCN (National Conciliation Party) coalition rammed ratification through in the middle of the night. In Nicaragua, fractious politics produced fuller deliberation and the construction of a “complementary agenda” designed to ameliorate some downside impacts. In the end, however, boss politics and external intervention delivered a CAFTA victory, with no meaningful compensatory provisions in sight. In Costa Rica, legislative-­executive stalemate on ratification led to gridlock. After a two-­year delay, control over the decision shifted to a popular referendum in which CAFTA was narrowly approved. This chapter analyzes the interests and resource flows shaping CAFTA ratification processes and provides a rare examination of the way political institutions actually function in Central America. Chapter 5 turns to the first major international investment conflict unleashed following CAFTA implementation. In 2009, two international gold mining companies alleged “indirect expropriation” when the Salvadoran government denied or revoked their official extraction permits due to concerns about environmental damage. These companies turned to the World Bank’s International Centre for Settlement of Investment Disputes (ICSID) for relief, as authorized in the CAFTA agreement and under the previously approved national investment law. Their multimillion dollar claims provided the first matchup between corporate guarantees embedded in CAFTA and the push for sovereign control and environmental rights that have energized resistance forces.

Introduction, Overview, and Methods 17

Chapter 5 draws on social movement theory (Keck and Sikkink 1998; Tarrow 2005; della Porta, Andretta, Mosca, and Reiter 2006; J. Smith 2008; von Bülow 2010) to dissect the anatomy of a five-­part, transnationally linked anti-­mining network in El Salvador. An abundant literature on “frame bridging” and “brokers” who articulate connections across difference (Tarrow 2005; J. Smith 2008) informs discussion of the linkages between local communities in the mining zone, national environmental-­rights organizations, a transnational epistemic community of activist researchers, international nongovernmental development organizations, and the Catholic Church around the theme of mining resistance. This chapter embeds the antimining campaign in the Salvadoran political landscape, exploring the intersection between market reform, resistance movements, and national electoral processes. This antimining movement, which parallels and is reinforced by comparable movements in Honduras, Guatemala, and Costa Rica (and beyond), suggests new terrain for neoliberal resistance. Chapter 6 follows the erosion of public support for neoliberal reform in the region as it began to be expressed in electoral shifts. It explores the intersection between social movements (informal politics) and parties and elections (formal politics), as movements and parties stitched together an alliance for change in Central America. Several elections serve as barometers, including the reelection of FSLN leader Daniel Ortega in Nicaragua in 2006 and again in 2011; near misses in Costa Rica’s 2006 presidential race and 2007 CAFTA referendum; and the groundbreaking 2009 election of FMLN presidential candidate Mauricio Funes in El Salvador. The question following the presidential victories was how the new leadership would address market reforms that were now legally and economically entrenched. Building on academic analysis of post-­neoliberalism in Latin America (Castañeda 2006; Weyland 2009; Weyland, Madrid, and Hunter 2010; Cameron and Hershberg 2010; Levitsky and Roberts 2011), Chapter 7 identifies three variants found in Central America: a populist Left revival in Nicaragua; an incrementalist leftward shift in El Salvador; and heterodox Center-­Right adaptation in Costa Rica. In Nicaragua, Ortega symbolically fanned the embers of the Sandinistas’ failed revolution as he denounced the U.S. “empire” and secured massive off-­budget aid from Venezuelan president Hugo Chávez. At the same time, the government adhered to CAFTA commitments and remained in the good graces of the IMF, suggesting the sustained constraints within which neoliberal alternatives are pursued when a government depends heavily on foreign aid, lacks rentier prospects, and has undergone substantial elite embourgeoisement. In El Salvador, Funes adopted an incrementalist approach, maintaining

18  Contesting Trade in Central America

friendly ties with the United States while pursuing moderate economic adjustments. His administration pledged to strengthen state development roles, halt privatization, redress entrenched patterns of social neglect, and ban metal mining in spite of CAFTA-­induced claims against the government. Market disciplines were largely retained, much to the consternation of more radical FMLN allies, but further pursuit of orthodox market reform was halted. In Costa Rica, neoliberal resistance forces emerged but experienced repeated, dispiriting defeat. A less polarized, more conservative, and more trade dependent country, Costa Rica maintained a hybrid economic model. Trade opening here combined with relatively strong social spending, regulation, and countercyclical intervention, and social programs inherited from a social-­democratic past left a legacy of basic public services intact. This moderate variant of market reform triggered less public rejection; the narrower arc of the Polanyian double movement in Costa Rica allowed Center-­Right candidates to gain ongoing victories. At the same time, the periodic recurrence of a countermovement demonstrated continuing public concern about Costa Rica’s rising inequality and vulnerability to externally induced economic disruptions. Given the continued tension between reform and resistance, the present study is not a simple celebratory story. Instead, it is a common tale of the ways in which international and domestic elite interests shaped the construction of economic globalization, raising hopes that often went unfulfilled. But it is also not a story of defeat. Following the double-­movement dynamic, this text explores strategies of resistance, moments of empowerment, and the ongoing quest for a way forward. Drawing on learning reinforced by participation in transnational alliances, Central American social movement and civil society actors fueled electoral mobilizations to shift the cast of characters in play. The consequences of this opposition, organization, and electoral change may not be immediately evident but may emerge over time as the double movement plays out. Market-­integration reforms like CAFTA are designed to be durable; even forceful counterhegemonic movements face an uphill battle. But if the market’s promise of generalized prosperity fails to materialize, the push for change can be expected to continue. Whether resistance forces can construct a viable alternative to neoliberalism in Central America (and beyond) remains in question, but many of the region’s citizens are now making this demand. Finally, although the present study focuses on CAFTA and highlights the voices of opposition, it should not be construed as an antitrade treatise. As Polanyi noted in his dreamy anthropological take on early human societies, cross-­cultural exchange is an ancient practice that can thicken human bonds

Introduction, Overview, and Methods 19

and foster emancipatory learning. Increased economic connections may be part of the answer to questions about how to enhance human agency and empowerment. The issue here is how that trade should take place and what kinds of agreements should govern its operation. This book was written in the hope that we can give better answers to those questions in the future.

Chapter 1

The March to Market Reform in Central America

Laissez faire was planned. Polanyi (2001 [1944])

The market is omnipresent. Those outside the market might as well disappear. Colburn and Cruz (2007)

Introduction Market reform made deep inroads in Latin America in the 1980s and 1990s, with Central American countries among the regional leaders. Their market shift was noteworthy, given the strong statist features of these economies in the early 1980s. In Costa Rica, then Latin America’s solitary social democracy, the state maintained a monopoly in the banking, electricity, and telecommunications sectors, as well as a substantial national role in public health and education. Nicaragua had just undergone a revolutionary transition in 1979, and the new Sandinista government controlled banking, foreign trade, and a large slice of agricultural production. A reform government in El Salvador, attempting to forestall a revolutionary takeover, had also expanded state economic roles, with a banking takeover and a push for agrarian reform. Over the next twenty years, however, all three countries would experience a sharp shift toward the market. Databases measuring policy reform permit a detailed analysis of the timing and sequencing of economic change. One of the first, by Morley, Machado, and Pettinato (1999), used annual data from 1970 to 1995 to construct a reform index for seventeen Latin American countries.1 Their scores indicate that Costa Rican economic policy shifted strongly toward a market model in

The March to Market Reform 21

1987, with marked liberalization in four of five economic arenas (trade, the domestic financial system, external capital transactions, and tax reform); only in privatization did it trail behind. El Salvador’s reform effort fell behind the Latin American average in the second half of the 1970s and early 1980s. After the ARENA victory in the 1989 presidential race, however, economic policy moved quickly in a neoliberal direction. Bank privatization occurred in 1990, followed by liberalization of capital accounts in 1991 and tax reform in 1992. With this spate of policy changes in the early 1990s, El Salvador surged ahead of Costa Rica as the region’s neoliberal leader. Nicaragua moved against the regional tide during the 1980s, its decade of revolutionary government, and was not included in the Morley, Machado, and Pettinato data set. Economic collapse and the defeat of the Sandinistas in 1990, however, brought marked policy change under the subsequent National Opposition Union (UNO) government. By the middle of the 1990s, Nicaragua had also undergone extensive market reform. An IDB assessment of Latin American structural reform for 1985–1999 by Eduardo Lora (2001), which includes data for Nicaragua for the 1994–1999 period, placed it above the Latin American average (see table 1.1).2 In this framework, Nicaragua emerged as the leading reformer in Central America at the end of the 1990s, its high overall score driven by light financial and labor regulations. El Salvador, though lagging on financial and labor reform, was among the Latin American leaders on trade liberalization and privatization, giving it an intermediate place on this index in 1999. Even Costa Rica, where modest privatization levels resulted in the lowest of the three scores, had liberalized substantially across this fifteen-­year period. Its 1999 score of .557 was far removed from its score of .306 in 1985. Although each assessment uses a somewhat different measurement of structural reform, they all document a pro-­market shift across time in this region.3 These countries began with numerous constraints on market processes; all of them ended this period with much more open economies. How can we explain the marked shift toward neoliberalism? Market Reform Theory Academic explanations of market liberalization commonly divide along three dimensions. The first division concerns the extent to which the primary impulse for liberalization is traced to external as opposed to internal forces. Analysts emphasizing the role of external actors generally focus on the direct

Table 1.1. Index of structural reform Average Country

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

Costa Rica El Salvador Nicaragua* Latin American average†

.306 .349

.387 .353

.428 .351

.421 .348

.420 .362

.425 .399

.420 .401

.440 .416

.446 .494

.341

.360

.377

.384

.399

.436

.455

.484

.503

.453 .505 .574 .522

.536 .488 .574 .539

.533 .497 .580 .548

.542 .489 .623 .554

.557 .572 .617 .573

.557 .566 .598 .583

Source: Lora (2001, 30). *Nicaragua was not included in this study until 1994. †Average does not include the Dominican Republic, Honduras, and Nicaragua.

The March to Market Reform 23

or indirect impact of international financial institutions (the International Monetary Fund and World Bank), powerful states directing them (the United States or G5 countries), or international capital. Conversely, explanations that focus on internal or domestic processes commonly highlight the role of technocratic officials in charge of lead economic ministries. The second debate focuses on the competing roles of ideas versus material interests in advancing structural reform. Proponents of the ideological position emphasize the impact of epistemic communities and norm entrepreneurs in shaping a value consensus in favor of market reform. Interpretations emphasizing material gain, in contrast, focus on the power of specific business interests to mold a favorable environment and extract rewards using techniques such as marketing, lobbying or bribery. The third debate explores the pivotal roles of political elites (a top down model) versus mass preferences (a bottom up model) in shaping neoliberal reforms. Whereas the former approach concentrates on elite negotiation and decision making, the latter focuses on public opinion and voting behavior to explain how popular pressure affects policy change. The present study contends that much of the previous work on market reform casts the question too narrowly and fails to grapple with the intersections among these various perspectives. My approach develops a multiphase theoretical framework that breaks the reform process into three parts and focuses on the shifting actors that dominate in each. The processes that catalyze and shape the first phase, reform initiation, differ from those that define the second, reform deepening, and the third, reform persistence. Reform initiation refers to the actions that introduce a sharp break from past practices and begin to move a country through the early stages of stabilization and structural reform. Reform deepening focuses on the layering in of additional, complementary policy changes that continue to advance marketization, as in ongoing tariff reduction, segmented privatization processes, or banking liberalization. Reform persistence turns attention to the processes that hold reform in place across multiple administrations, as new norms and practices consolidate. This study argues that external actors are critical agents during reform initiation, providing both financial resources to ease the process and detailed policy templates to chart the course. The government officials with whom they collaborate generally have little expertise or experience with the new approach; in this early stage, local authorities depend heavily on assistance from foreign donors and the multilateral lenders to launch the project. As reform enters the deepening phase, domestic actors assume greater prominence. Local technocrats exercise leadership as norm entrepreneurs

24  Contesting Trade in Central America

and ideational sponsors. Research centers and think tanks foster epistemic communities of market advocates who explain, implement, and legitimize ongoing reform. Business pioneers, some internationally networked, reorganize investment and production around opening opportunities, and state-­ elite relations recalibrate. As economic activities shift, displacing previously privileged elites and forming a critical mass of new economic groups, business actors become important advocates of continuing reform. In the final phase, reform persistence depends on broader political reorganization. Pro-­market political parties and coalitions present a steady sequence of reform candidates, and voters provide them with continuing support. At this point, public preferences for market reform play a critical role in explaining the durability of the new arrangement, even in the face of episodic protests and strikes. What follows is a review of market reform theory, which foregrounds the arguments embedded in a multiphase theoretical framework. International Actors and Reform Initiation: The IMF, Dominant States, and International Capital Studies tracing market reform in developing countries commonly emphasize the contributions of external actors, often focusing on the International Monetary Fund. During the 1980s debt crisis and in subsequent lending agreements, IMF advisers used leverage over vital resources to encourage the scuttling of state intervention and protectionist measures in favor of structural adjustment. A wide array of mechanisms (macro- and microconditionality, tranching, signaling to private creditors, de facto cross-­conditionality, discretionary waivers on benchmarks and targets, etc.) served to leverage and pace policy reform (Vreeland 2007; Stallings 1992; Kahler 1992). Focusing just on nonconcessional loans to middle-­income borrowers, Copelovitch (2010) identified 197 IMF loans to forty-­seven countries between 1984 and 2003. Lending occurred across time periods and regions, moving through the Latin American debt crisis of the 1980s, the postcommunist transitions in the 1990s, and, after a period of decline and internal reform, with new energy in the wake of the 2008 financial crisis (Pop-­Eleches 2009). Beginning with few specified conditions, the IMF loans came to include a large number of performance requirements accompanied by prolonged supervision. Vreeland (2007, 58) identified forty-­nine countries with continuous, long-­term (ten to twenty-­one years) participation in IMF programs between 1967 and 2000. IMF lending tended to follow external financial crisis,4 but terms and con-

The March to Market Reform 25

ditions varied, even when triggered by similar events. Significant differences in loan size, timing, and requirements prompted closer academic examination of lending politics, and competing explanations of Fund behavior emerged. One set of arguments concerned the extent to which IMF lending reflected the preferences of powerful IMF shareholder countries, which manipulated Fund decisions in pursuit of their own national interests. Using statistical analysis of UN voting and IMF lending, and controlling for loan need, Strom Thacker (1999) determined that countries that shifted their voting patterns to favor positions that the U.S. State Department identified as important were more likely to receive IMF loans. This finding, suggesting that the U.S. government used Fund resources to reward geopolitical allies, was supported by Randall Stone’s (2004) research on the link between U.S. foreign aid in Africa and Eastern Europe and IMF flexibility even in the event of noncompliance with loan conditions. Comparing IMF lending across time and regions (in Latin America during the debt crisis, in Eastern Europe during the postcommunist transition, and in Latin America during the 1990s), Pop-­Eleches (2009) also found evidence of geopolitical influence on IMF behavior, at least in the Eastern European cases. Such findings are consistent with Realist theory, which assumes that powerful countries use access to resources to increase their power and advance their strategic interests. Alternative claims about international lending shifted the focus away from geopolitical interests of nation-­states and highlighted the influence of powerful business groups (Cox 2008; Harvey 2005). William I. Robinson’s (2003), neo-­Gramscian analysis employed the construct of a “transnational elite,” formed by a hegemonic bloc of global business leaders. This dominant class was found to direct a “transnational state” comprising international financial institutions (the IMF, World Bank, and regional development banks) along with critical state segments (the U.S. Treasury Department and USAID). Robinson described the emerging economic elite as deracinated, no longer headquartered in or privileging the North, but linked cross-­nationally through corporate mergers, licenses, and subcontracts in ever-­denser global networks. According to this argument, global elites used direct and indirect instruments to compel market openings and the elimination of national barriers that constrain the international flow of capital and production. The removal of impediments to capital and trade flows through market reform in turn facilitated the consolidation of transnationalized elite power.5 Structuralist arguments, which tend to assume homogeneity and durability of elite interests and uncomplicated control over national and international institutions, are ill equipped to explain policy variation, inconsistency, and change over time. They can, however, capture a subterranean exercise of

26  Contesting Trade in Central America

power and general convergence of elite interests. This theoretical approach is reinforced by some finely tuned quantitative studies that identified ways in which the needs of finance capital shaped the behavior of the IMF and its main shareholders. For example, Broz and Hawes (2006) demonstrate that U.S. congressional support for IMF bailouts tended to be stronger when large obligations to U.S. commercial banks were at stake. Mark Copelovitch’s (2010) study of nonconcessionary IMF loans found that lending followed the combined preferences of G5 (United States, United Kingdom, France, Germany, and Japan) countries, preferences that were shaped by the intensity and heterogeneity of G5 commercial bank exposure. Some analysts of IMF lending question this approach and find the emphasis on the power of northern states and national financial interests to be overstated. Using principal-­agent theory to explore the gap between the preferences of powerful states that determine the Fund’s governing board and the policies pursued by the organization, a number of studies have interpreted the Fund as possessing some measure of autonomy.6 Much of this literature centers on how the norms and values that permeate the institution shift over time. Looking at a range of IMF and World Bank initiatives, including debt and poverty relief and gender empowerment, Park and Vetterlein (2010) highlighted the role of ideas and nonmaterially powerful actors in the rise and fall of policy norms. This constructivist approach focused on the role of “norm entrepreneurs” who advanced policy change through a three-­ stage cycle of emergence, stabilization, and contestation. In a careful study of the changes in IMF policy positions, Chwieroth (2010) used data on professional training characteristics of over 400 IMF staff to explore the relationship between different schools of thought in the economics profession, IMF recruitment patterns, and the rise and fall of Fund commitment to capital account liberalization between 1944 and 2009. All of these approaches, whether emphasizing dominant countries, international economic forces, or the internal norms of international financial institutions, highlight the role of external actors in the advancement of neoliberal reform. An alternative approach centers on the impact of domestic actors. Domestic Actors and Deepening Reform: Technocrats and Business Elites The ability of external actors to demand domestic economic policy changes like trade liberalization is obviously limited, even in poor countries historically influenced by the United States or international financial institutions. Except in times of crisis (and, arguably, even during crisis moments), the

The March to Market Reform 27

power of external financial agents to determine policy outcomes is normally constrained by the interplay of domestic forces (competing elite networks, institutional arrangements, bureaucracies, etc.). International lenders may provide a catalyst for reform initiation, but the layering in of market policies (policy deepening) and implementation of reform require internal actors to share leadership. Significant variation in the depth and durability of structural adjustment, in spite of the formulaic tendencies of the IMF, suggests the importance of local forces in this process (Kahler 1992; Vreeland 2007; Pop-­Eleches 2009). As analysis shifts from understanding policy initiation to exploring policy implementation, retreat, durability, or amplification, the role of domestic actors assumes greater importance. Two sets of local actors have drawn close attention: domestic technocrats in key economic ministries, and business leaders, particularly those who dominate business associations. A now-­extensive body of literature explores the training and deployment of domestic technocrats in upper levels of administration and the ways in which they intersect with international agencies to promote an economic reform agenda (Edwards 1995; Domínguez 1997; Dezalay and Garth 2002; Golob 2003). With advanced foreign training in economics, planning, or other technical fields, these elites entered the government at high levels and provided a new ideological orientation to guide policy reform. Persuaded through mainstream academic training and research that economic objectives (growth, efficiency, development) are best obtained through open markets, trade liberalization, and models emphasizing comparative advantage, these proponents used their positions in key government agencies to advance the cause of market reform through advocacy, persuasion, and intimidation. These officials were often aligned with and rotated into and out of key think tanks and universities, which, providing cultural capital and a salaried resting point between government appointments, assisted with recruitment, socialization, and legitimation. Drawing on the cases of Mexico and Canada in the NAFTA negotiations, Golob (2003) argues that the combination of exogenous shock and an internal legitimacy crisis created space for state leaders to redefine traditional “policy frontiers” based on an emerging ideological consensus. She finds that the trade-­policy shift in Mexico and Canada was not due to the rise of new economic sectors that used pluralistic pressures to advance this cause—not even in Canada, where political pluralism was more fully established. Instead, this decision was orchestrated by political leaders based on their own ideological alliances and following an abrupt economic downturn that delegitimized preexisting approaches. This initiative was, in turn, heavily marketed to the public, where it took root (see also Cameron and Tomlin 2000). Sebastian

28  Contesting Trade in Central America

Edwards (1995, 42) observed how key figures such as Pedro Aspe in Mexico and Domingo Cavallo in Argentina “became the core of technocratic reform teams that, from within the national bureaucracies, engineered the practical aspects of the transformation process.” The pivotal role of this nucleus figures prominently in Waterbury’s (1992) work on the “change team” and Teichman’s (2001) on the “policy network,” a broader construct that also includes elected officials, business leaders, think tanks, and civil society representatives who contributed to neoliberal policy negotiations. By virtue of frequently shared academic credentials, technocratic actors may be portrayed as emissaries of the international financial institutions with which they collaborate. However, in their study of developing human rights and neoliberal ideologies in Latin America, Dezalay and Garth (2002) challenged the notion of economic policy migration as simple diffusion. Local actors, they found, exercised discretion over what they imported, and the process of reform domestication was affected by local conditions. Confusion over the respective roles of internal and external technocrats is exacerbated by the tendency of some local authorities to ascribe reforms to the IMF, even when they were locally endorsed. Vreeland (2007, 62–67) identifies three reasons why domestic actors emphasize the role of the IMF in the reform process and minimize their own: blame, signaling, and leverage. Blame allowed domestic authorities to portray the IMF as responsible for policy reforms, which were sometimes unpopular, thus avoiding responsibility and political penalty; signaling allowed local leaders to convey IMF approval of these reforms, thereby reassuring skittish foreign investment; and leverage allowed local officials to use IMF symbolism to push through reforms they desired when they did not have (or want to spend) the political capital required to secure approval, as when there were many veto players that could impede reform. In such cases, local technocrats could present a market reform as an externally imposed requirement when in fact they may have actively pursued the measure. Studies of market reform that focus on technocratic-­elite ideology compete with a second body of domestically oriented analyses—those that highlight the material interests at play in the business sector. Implicitly adopting the structuralist premise that stable states build up and around solid class coalitions, the latter explore the reshuffling of ties between the dominant political elite and the new class segments benefiting from market reform. The new economic model is understood to develop in close consultation with business elites (or an increasingly important subsector thereof ) whose material interests are advanced by the policy reforms. Whereas a traditional agroexport-­based regime may develop in alliance with agrarian oligarchy, and

The March to Market Reform 29

a populist state may be constructed in alliance with domestic industrialists and corporatist labor organizations, the neoliberal state builds off an alliance with exporters, financial interests, and perhaps maquila assembly plant labor. A new equilibrium emerges as (particularly nontraditional) exporters and private financial interests gain organizational momentum, economic leverage, and lobbying capacity. Using these resources, economic elites secure a policy framework and legal environment that allow them to further advance their interests. Various studies of market reform highlight the role of domestic business groups in shaping the trade liberalization agenda (see, for example, Milner 1988; Dur 2010). “Two-­level game” analysis (Putnam 1988) of trade negotiations examines deal making not simply between representatives of states who hammer out trade terms (Level I), but also between each government and its constituents at home (Level II), foremost among them the business lobbies that will be directly impacted by trade reform. In discussion of ten historical attempts at trade liberalization, Michael Lusztig (2004) identifies various conditions and government strategies that weaken business opposition and build business support. Interactions that transform “inflexible rent seekers” into “flexible rent seekers,” or diminish the power of the former while expanding the influence of the latter, allow governing elites to minimize the political risks associated with eliminating protectionist policies. Detailed case studies of bargaining and consultative processes surrounding trade liberalization routinely demonstrate the active role of business lobbyists, whose support must be carefully cultivated (Thacker 2000; IADB, Munk Center for International Studies, and Inter-­American Dialogue 2002; Fairbrother 2007). Business elites have a wide repertoire of strategies they can deploy—­ individual and collective, formal and informal, associational and electoral—to advance their interests. The structural dependence of the state on capital gives the business sector enduring power, which political elites ignore at their peril. At the same time, the ability of business to exercise this influence depends on the extent to which they attenuate the differences among themselves through negotiation, persuasion, intimidation, or exclusion of weaker segments. Although historically state-­dependent and fragmented in many countries, Latin America’s business organizations often gained organizational capacity during market transitions (Durand and Silva 1998). Complex multisectoral peak associations worked to unify the business voice and amplify its impact. In Mexico and Chile, strong business associations were found to play a strategic role in crafting detailed provisions in NAFTA and in the Mercosur trade agreement (Schneider 2004, 221–230; Teichman 2001). Business representatives, who were more expert in their industries than government offi-

30  Contesting Trade in Central America

cials, actively collaborated in these negotiations, advancing recommendations on tariff schedules and timetables.7 In her study of Chilean free trade negotiations, Bull (2008) found that business elites used control over not just capital but also knowledge to influence the shape of the trade text. The professional staff of business associations, some of whom rotated between private sector and government roles, blurred the distinction between public and private and helped to synchronize business and government positions. Market reform deals both winning and losing hands to business elites, leading to fragmentation and organizational reconfiguration. Hierarchies among business groups with differential access to policy makers lead to policy reforms that favor particular interests over others. Detailed case studies of privatization in Latin America and Europe challenge conventional arguments about the ideological or technocratic base of privatization policy, even in neoliberal showcases like Pinochet’s Chile or Thatcher’s Britain, and frequently identify ways in which a handful of conglomerates gained privileged access to policy arenas and shaped particular reforms to their benefit (Schamis 2002; Manzetti 2009). Hellman (1998) notes the problem of “state capture” in postcommunist systems, in which insiders aligned with emerging economic interests to stall economic reforms at an equilibrium point that fell short of full transition, a strategy that allowed them to extract rents and noncompetitive benefits. The particular coalitional formation between state elites and economic elites may direct the reform process to different benchmarks. State and class coalition analysis draws attention not just to which sectors are included but also to which are excluded or expelled. Kurtz’s (2004) analysis of the impact of neoliberal reform on the solidarity structures of rural workers and peasants in Mexico and Chile suggests ways in which old alliances, once undermined, eroded quickly. Neoliberal reforms cut into the small farmer resource base and disrupted peasant organizational capacity, making it easier for the state to dismiss their claims—an argument that also extends to organized labor. As traditional state-­society links deteriorated and new alliances were forged, domestic pressures built in favor of particular market reforms. Political Dynamics and Reform Persistence: Parties, Elections, and Public Opinion Market reform, even when supported by technocratic-­norm entrepreneurs and reconstituted business networks, may still be truncated and temporary. Since economic reform occurred in tandem with political liberalization in much of Latin America and Eastern Europe, its persistence would depend on voter preferences and electoral outcomes. Policy durability is affected by

The March to Market Reform 31

the extent to which candidates and parties come to be identified with market opening and voters come to endorse their ascent. Research on the impact of democratic political processes on the entrenchment of neoliberal reform may be divided between institutional analyses, which focus on formal electoral outcomes and processes, and work that emphasizes the shifting patterns of public opinion. Institutional analysis attends to the formal political processes that advance or constrain policy innovation, with attention to executive mandates, constitutional veto points, party coalitions and fragmentation, legislative behavior, formal decision-­making rules, and electoral timing. The margin of victory in presidential elections and number of institutional checks on presidential power, for example, have been found to affect the pace and extent of economic reform (Haggard and Kaufman 1995; Pop-­Eleches 2009), and the introduction of reform proposals early in an administration has also been found to improve their approval prospects (Frye and Mansfield 2004). Advocates of a “bottom-­up” model, in contrast, focus on the extent to which ordinary citizens come to view market reform as desirable. Empowered with the opportunity to select from among various candidates, citizens may endorse or oppose market reform and, in theory, replace leaders whose performances disappoint them. According to this body of work, the durability and progressive advance of a market-­based economic model in newly democratized countries respond to rising popular preferences for the economic stability and wider consumer choices that these reforms deliver (Weyland 2002; Armijo and Faucher 2002; Baker 2009). In the end, it is the citizens themselves who evaluate the success of market reform and choose officeholders who conform to their preferences. Ongoing market reform, in this model, is ultimately driven by the positive assessments made by ordinary people. Whereas some early analysis of market reform in Latin America suggested that these policies had limited mass support and frequently resulted from elite imposition or subterfuge (Stokes 2001), other studies identified bases of popular support, emphasizing public desire for either avoidance of loss or affirmation of gain. Much of this work builds on the robust finding that linked high levels of inflation with the introduction of market reform (Remmer 1998; Biglaiser and DeRouen 2004). Weyland (2002) explains shifts in public preferences regarding economic reform in Latin America in terms of “prospect theory.” Faced with the prospect of severe economic loss, as under high inflation, people become less risk averse and more willing to accept changes whose outcomes are uncertain. Findings about the power of hyperinflation to elicit support for market reform are echoed in Armijo and Faucher’s (2002) analysis of forces shap-

32  Contesting Trade in Central America

ing reform in industrialized Latin American countries. Noting that ten out of the fourteen presidential elections held between 1983 and 2000 in Argen­ tina (pre-­crisis), Brazil, Mexico, and Chile were won by pro-­market candidates, they conclude that the most significant factors explaining sustained marketization were pro-­reform preferences of the general public and political leaders. Analyses drawing on survey research and public opinion polls permit clearer specification of the social base of reform. A large body of research ties support for market reform to education, finding that those with a higher level of education tend to be more pro-­market (see, for example, Kaltenthaler, Gelleny, and Ceccoli 2004). Much of this literature implicitly draws on a human-­capacity hypothesis; better-­educated people who have skills and resources needed to successfully compete in a market economy favor its adoption, whereas those with less education recognize their vulnerabilities and are more resistant to market transformations. While this literature offers suggestive insights about variations in popular views, it has limited ability to explain why reform support might sweep through a society, even in countries where the general educational levels are low. Baker (2009) develops an alternative consumption-­based theory of market reform. Using Latinobarómetro data on public opinion in eighteen Latin American countries, he argues that support for trade liberalization soon became widespread and multiclass and far surpassed opposition to it. He concludes that respondents tended to approach trade from a consumption perspective (consumismo), where they could see a direct link to lower-­cost imports, rather than from an employment perspective, where the connections between trade liberalization and job loss were less apparent. As we will see in the course of this book, debate continues about the intersection between popular attitudes and market reform. Acceptance of neoliberal policy was hardly uniform, as ongoing protests and social justice campaigns attest. Nor did public approval necessarily arise spontaneously. Endorsement was sometimes accompanied by a hard-­selling campaign designed to achieve that result; public attitudes toward trade reform have been linked to marketing and manipulation (MacArthur 2000), with resulting volatility. Even among those who affirm support, internal inconsistencies in market perceptions have been identified, with privatization eliciting more negative reactions than trade (Baker 2009; Baker and Greene 2011). Many analysts have also noted the onset of “reform fatigue” (Lora and Panizza 2003) as initial gains fade and costs became more apparent. When economic conditions stabilize, the propensity to accept additional reforms may decline, explaining

The March to Market Reform 33

why former supporters of reform may subsequently reverse course, even if reform has brought improvement. Detailed case studies, while not representative of the universe of reform, can help us understand subregional variations in reform processes and clarify particular policy sequences. They also help us tackle the conundrum of why people might endorse market reforms that seem suboptimal or even adverse to their interests. What follows is theoretically informed process tracing of market reform in three Central American countries, moving through initiation to deepening and concluding with an assessment of reform persistence on the eve of the CAFTA negotiations. Central American Market Reform Case studies of market reform in Central America allow us to identify the actors and processes that shaped economic restructuring in the region. Each country had a distinct historical-­institutional profile, and reform processes varied along key dimensions. Costa Rica entered into reform via a debt crisis, and policy changes were negotiated piecemeal through a well-­institutionalized democracy. In both El Salvador and Nicaragua, in contrast, market transitions were driven by economic disarray, institutional weakness, and political polarization associated with revolutionary struggle and war. In spite of these differences, structural and geopolitical similarities created important parallels in the region. These countries were not hermetically sealed; reform processes in one urged reform in others as cross-­regional capital mobility and competition played out across this well-­networked landscape. In that sense, one of the fundamental assumptions of comparative politics— that each unit is discrete—is not fully operative; the tools of international political economy, which explore the larger framework within which countries are embedded, provide crucial assistance. Careful analysis of these neoliberal transition processes permits the sequencing of reform phases and fuller specification of the actors involved at each stage. This analysis concludes that reform initiation depended on external funders, with USAID playing a leading role, subsequently reinforced by the IMF and other international lenders. Their catalytic impact required the cooperation of key state leaders who, during a time of economic crisis, took guidance from the external donors. The deepening of reform depended on the active participation of technocratic leaders and the construction of institutional infrastructure (public and private agencies, research centers, think

34  Contesting Trade in Central America

tanks) that facilitated recruitment and legitimation of reform ideas. Technocrats received assistance from an expanding network of market-­oriented economic elites, who reshaped business associational life and sought reform adjustments. Finally, the persistence of reform across administrations required not just business adaptation but public support, as evidenced by electoral victories of pro-­market candidates and parties across the period. (Appendix 2 provides an overview of the 1978–2011 presidential election results in these three countries.) Although the case study method does not allow generalization beyond the countries analyzed here, this approach suggests several lines of inquiry that can inform future research. In what follows, these cases are discussed in the order that their market reform processes unfolded, beginning with Costa Rica and ending with Nicaragua. Market Reform in Costa Rica During the 1970s, the Costa Rican economy deployed a variant of Latin America’s reigning import-­substituting industrialization model (Hidalgo 2003; Monge and Lizano 1997; Wilson 1998). By comparison with many other countries in the region, the ownership role of the Costa Rican state was relatively modest, and activism was concentrated in the social-­service sector through the provision of health and educational services. Nonetheless, the state did control several core economic activities, the most important of which were in energy and telecommunications and the banking system, which had been nationalized in 1948. State-­owned companies were managed by the Costa Rican Development Corporation (CODESA), a holding company formed in 1972, which included fourteen companies at its peak (Edelman 1999, 64–65; Wilson 1998, 101). The state also created a growing number of autonomous institutions (AIs), with thirty-­six new AIs established in the 1960s and fifty added in the 1970s (Edelman 1999, 61). Local industry was encouraged and protected by a series of tariff and nontariff barriers much like those prevailing elsewhere in the region.8 Rising petroleum prices in the 1970s hit the economy hard, but easy foreign borrowing allowed leaders to postpone adjustments. By 1980, the budget deficit reached 8% of GDP (IMF 1998, 16). External debt stocks, already 59% of gross national income (GNI) in 1980, rose to 165% in 1982.9 In 1983, the per capita debt was the second-­highest in Latin America (Korten 1997, 34). The Carazo administration (1978–1982), facing the collapse of the Central American Common Market (CACM), which had absorbed 80% of Costa Rica’s manufactured exports, declared a debt moratorium and defaulted in

The March to Market Reform 35

July 1981. The inflation rate soared to 90% the following year.10 As economic conditions deteriorated, the government signed a stabilization agreement with the IMF, but the country immediately fell out of compliance (Newton et al. 1988). During the Luis Alberto Monge administration (1982–1986), special U.S. foreign policy interests in the region brought increased attention and financial flows. The Reagan administration’s geopolitical concern about “communist” expansion fueled hostility to the newly installed Sandinista government in neighboring Nicaragua, which was perceived as a Soviet ally and national security threat. With administration officials eager to stabilize Costa Rica and showcase a successful democratic market alternative in the region, U.S. economic assistance to Costa Rica more than tripled between 1981 and 1982, and then quadrupled to $214 million in 1983 (see table 1.2). U.S. aid to Costa Rica averaged 4% of GDP for the critical 1983–1987 market-­transition period. As controversy over Central America policy flared in the United States, a special bipartisan commission chaired by former secretary of state Henry Kissinger proposed a five-­year, $1.2 billion annual aid program for the region. Labeled “the Sandinista windfall” in a 1998 USAID retrospective on the Costa Rica aid program, real average annual USAID funding for Costa Rica in 1982–1995 increased sixfold over the 1973–1981 levels (Fox 1998, 17). This assistance proved a catalyst to a market reform process that carried across subsequent administrations. In all, U.S. economic aid to Costa Rica totaled over $1.4 billion between 1982 and 1995 (see table 1.2). Official development assistance, over 90% of which came from the United States, equaled 25% of general government spending in 1983–1985 (Sauma and Trejos 1999, 353). U.S. funds were used for balance of payments support, covering the dollar costs of private sector imports, with the importers’ local currency payments used to support a series of mutually agreed upon reform projects. According to USAID evaluations and reports, priorities included CODESA enterprise divestiture, promotion of nontraditional exports, and the construction of a network of new public and quasi-­private institutions that would become internal advocates for further market transition (Fox 1998; Newton et al. 1988). The new institutional framework included the Costa Rican Investment Promotion Agency (CINDE) and the Foreign Trade Ministry (COMEX). CINDE, created in 1983, provided a convergence space for pro-­reform policy elites to coordinate recommendations with representatives from domestic and multinational firms. This agency prepared proposals promoting foreign investment and exports and lobbied elected officials to secure passage. During its first five years of operation, CINDE was entirely funded by USAID,

Table 1.2. U.S. economic assistance, 1980–2003

Year

Aid to Costa Rica (current US$)

% of Costa Rican GDP

Aid to El Salvador (current US$)

% of Salvadoran GDP

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

 15.9  15.2  51.8 214.1 169.8 220.1 162.7 181.2 120.6 122.3  95.5  45.2  27.0  27.8  12.2   6.3   2.2   0.4   1.2   2.3   2.1   3.1   3.0   4.7

0.3 0.6 2.0 5.4 3.7 4.6 3.0 3.1 2.0 1.8 1.3 0.6 0.3 0.3 0.1 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

 58.3 113.9 182.2 245.5 215.9 434.0 322.6 462.9 314.2 307.3 246.9 228.0 274.0 215.1  57.0  63.3  78.5  31.8  42.5  60.2  44.4 132.3 143.5  57.9

1.6 3.3 5.4 7.0 5.9 11.4 8.6 11.7 7.5 7.0 5.1 4.3 4.6 3.1 0.7 0.7 0.8 0.3 0.4 0.5 0.3 1.0 1.0 0.4

Aid to Nicaragua (current US$) 38.7 59.9 6.3 0.0 0.1 0.0 0.0 0.0 0.4 3.9 224.5 219.4 76.6 152.5 95.6 32.7 27.7 28.1 56.5 100.0 33.9 66.4 53.6 65.8

% of Nicaraguan GDP 1.8 2.4 0.3 0.0 0.0 0.0 0.0 0.0 0.0 0.4 22.2 14.7 4.3 8.7 3.2 1.0 0.8 0.8 1.6 2.7 0.9 1.6 1.3 1.6

Source: USAID, U.S. Overseas Loans and Grants (Greenbook), http://gbk.eads.usaidallnet.gov, accessed July 11, 2011. Note: Calculations based on GDP (current US$) from World Bank, World Development Indicators (WB/ WDI), http://databank.worldbank.org, accessed July 11, 2011.

The March to Market Reform 37

which provided grants, between 1983 and 1994, totaling $70 million (Robinson 2003, 139).11 USAID also supported the creation of COMEX, which emerged from modest beginnings as a program within the president’s office to form a separate trade ministry with a full professional staff. International financial institutions soon returned to sign a series of agreements that pulled the Costa Rican economy in a market direction. The IMF provided six loans for Costa Rica between 1985 and 1995, which together contained thirty-­four performance criteria and fifty-­six total conditions (Copelovitch 2010, 321). These loans were coordinated with the World Bank and the Paris Club (bilateral lenders) through a system of cross-­conditionality, in which approval of one became a condition for approval by others.12 Three structural adjustment programs (PAE) developed between 1985 and 1995 provided clear financial and normative incentives to local policy makers to redirect the economy along market lines. The first agreement, PAE I, signed by the Monge administration with the World Bank in 1985, entailed a commitment to launch privatization and reduce state spending. Following a drop in USAID funding during the Arias administration (1986–1990), PAE II was signed with the World Bank in 1988 for $200 million to strengthen the state’s fiscal capacity; cut state subsidies for public services, agricultural price supports, the petroleum refinery, and railroads; and promote nontraditional exports while further reducing trade barriers. Additional debt relief came under the Bush administration’s 1989 Brady Plan, with a Paris Club arrangement allowing Costa Rica to buy back 64% of its $1.6 billion external debt at a discounted rate of 16 cents on the dollar (Booth 1998, 164). Consolidating this phase of trade reform, Costa Rica became a member of the General Agreement on Tariffs and Trade (GATT) in 1990. PAE III, a $150 million loan package from the World Bank and the IMF, was negotiated in 1994–1995 during the Figueres Olsen administration (1994–1998). This agreement pushed for deeper reforms and proved more conflictual (Weisleder 2004, xxiii–xxv). Lacking the party majority in the legislature that was held by his National Liberation Party (PLN) predecessors, Monge and Arias, and by Social Christian Unity Party (PUSC) president Calderón (1990–1994), Figueres Olsen found it more difficult to secure legislative support. With IMF and IDB agreements calling for a sharp cut in public sector jobs and major tax increases, this negotiation triggered a month-­ long teachers’ strike in 1995 and violent protests in Limón in 1996 (Booth 1998, 165). Although the legislature ultimately approved the loan, the World Bank

38  Contesting Trade in Central America

canceled its part of the package when the government proved unable to reach an agreement with the IMF. The IDB came through in 1995 with a series of loans totaling $250 million after an IMF agreement was reached (Edelman 1999, 81). With the economic crisis waning and regional politics normalizing in Nicaragua and El Salvador, Costa Rica moved out of the phase of “tutored reform” under international management (Sojo 2004), and the market reform process slowed, as the structural reform index in table 1.1 suggests. Reform repeatedly elicited resistance, both in the legislature and on the streets, and the results did not converge with an orthodox neoliberal model. The state still played an important role in the national economy, and the Costa Rica variant of neoliberal reform retained several heterodox features, including a substantial state-­run social service sector (Seligson and Martínez 2010). Even after the gradual opening to private competition, state banks continued to dominate the banking sector. The state also controlled sugar commercialization, petroleum imports, insurance, telecommunications, and energy distribution. Economic “distortions” connected to the ISI model were temporarily replaced by new ones associated with export promotion to ease the transition.13 Nonetheless, Costa Rica had launched a significant process of structural reform. The Wall Street Journal/Heritage Foundation Index for Economic Freedom, which includes a corruption indicator, placed Costa Rica among the regional leaders in market liberalization (www.heritage.org/index/expl ore). With an overall score of 67 in 2003 (based largely on its high fiscal and trade freedom and low corruption scores), Costa Rica was ranked fifth in Latin America, behind Chile (76), El Salvador (71.5), Uruguay (69.8), and Panama (68.4). New economic space was created under the Caribbean Basin Initiative, the Reagan administration’s unilateral U.S. market opening for exporters from the region. Established to counter revolutionary agitation and deepen market connections, the CBI eased access to the U.S. market for nontraditional exporters in Central America. Costa Rica responded strongly, and nontraditional agricultural and industrial exports increased quickly. Costa Rica’s export processing zone (EPZ) regime provided investors with 100% tax exemption for eight years and 50% for the following four (PNUD 2003, 133). From 56 companies producing 6.5% of exports in 1990, the country’s EPZs expanded to 229 businesses, generating over 47% of exports in 2001 (PNUD 2003, 129). External actors played a critical role in advancing this market reform, with USAID, for geopolitical reasons, taking the lead and working in close collaboration with the IMF and the World Bank. But restructuring could ad-

The March to Market Reform 39

vance only with the active cooperation of domestic economic policy makers. A new team of technocrats, appointed by President Monge to fill the Central Bank presidency and the major economic ministerial positions in 1984, provided local management for the policy shift. Initially appointed to increase the confidence of foreign lenders during a period of economic difficulty (Church and Loria-­Chaves 2004, 8), this cohort, which centered on the new Central Bank president, Eduardo Lizano Fait, expanded into an array of official roles.14 Lizano served as Central Bank president in parts of four administrations (Monge, Arias, Rodríguez, and Pacheco) between 1984 and 2002, and he worked closely with the IMF and the IDB, subsequently serving as an IMF governor in 2000–2001. The “chief architect and lobbyist” for liberalization measures (Nelson 1990, 187), Lizano collaborated with like-­minded economists to change the dominant economic ideas.15 According to Lizano, the pretransition Costa Rican economy was riddled by distortions and rent-­seeking practices. At a USAID-­funded conference hosted by Costa Rica in June 1991 and attended by prominent neoliberal theoreticians and practitioners from the United States, Chile, Mexico, and Costa Rica, Lizano concluded the following (1992, 173): “For several decades, the Costa Rican economy was characterized by the growing creation of rents that benefited specific groups of producers and certain labor groups. This collection of measures was embodied in laws, regulations, norms, and provisions of a widely varying nature, such as subsidies, exonerations, controls and prohibitions. All of this made the Costa Rican economy highly distorted.” Recommending a strict free market approach, including “severe penalty” for entrepreneurs who failed to adapt, Lizano concluded, “If there is not enough competition, entrepreneurs get drowsy. Only competition obligates them to sleep with their eyes open” (176). Lizano further argued that economic freedom was integral to the cause of liberty in much the same way as political freedom, and that each depended on the other. This forceful pro-­market outlook came to reign in various Costa Rican think tanks and research centers, particularly those like CINDE and the Academia de Centroamérica, which had been established with USAID funding.16 These centers gave resident economists consulting opportunities and a “resting point” between stints of government or quasi-­public service (Church and Loria-­Chaves 2004; Blanco Lizano 2010, 166–171). With Eduardo Lizano as president, the Academia de Centroamérica played a pivotal role generating and diffusing market professionalism. It became a “concept center” for market-­norm entrepreneurship, deliberately focused on creating an epistemic community and preparing a network of emerging economists for graduate work in the United States and Chile (Lizano

40  Contesting Trade in Central America

2005). The Academia’s educational outreach included monthly information sessions for “junior economists” who wanted to engage with peers and continue their education; journalists covering business and financial news; and legislative staff members seeking to deepen their understanding of economic affairs. It awarded cash prizes to junior economists participating in essay competitions and to journalists for outstanding coverage of economic news. It also set up virtual help centers for journalists and clergy members who had inquiries about economic issues. These programs allowed a network of classically trained economists to disseminate a market-­friendly orientation to economic issues and to reach a broad segment of opinion makers in Costa Rican society. Following the leveraging pattern identified by Vreeland (2007, 62–67), local technocrats also urged external funders to withhold resources in order to extract reforms and, well-­positioned to understand the pressure points and timing of domestic political deliberations, helped identify strategic moments at which to act (Wilson 1998). External actors collaborated with domestic technocrats to advance the new model, but, as structuralist analysis suggests, the durability and deepening of market reform would depend on the way it resonated with the local class structures. As industrialists producing for a local and/or Central American market were displaced by the new emphasis on nontraditional products for a global market, the privileged position of that historically favored class fragment eroded. An innovative business subsector would have to develop quickly around the new economic model, or its durability would be jeopardized. An emerging coalition of new exporters and financial interests helped to consolidate the transition, broadening elite support for market reform. The change was facilitated by its steady but gradual nature and by the availability of transition support, which gave exporters time to shift to new products or expand markets into new terrain. Over the course of twenty years, some agricultural producers, for example, were able to reconfigure their crop allocations or adjust their production and shipping practices to gain entry into nontraditional markets.17 Some local firms entered joint ventures or licensing agreements with transnational corporations and adapted operations accordingly. In his study of the local stock market and firm-­level growth, Diego Sánchez-­Ancochea (2005, 697–704) identified three major changes in the Costa Rican business sector during the 1980s and 1990s: the concentration of capital in the largest domestic firms; expansion into the Central American and Mexican markets; and increasing ties with foreign investors and transnational corporations. The opening to private banking created new opportunities for local entrepreneurs (Robles Rivera 2010, 105) and attracted regional and international financial investors, with Nicaraguan and Salvadoran

The March to Market Reform 41

banks among the ten largest private banks in Costa Rica in 2003 (Sánchez-­ Ancochea 2005, 703). Economic groups began to organize politically, ultimately creating an activist network of business associations. Several of the established business chambers initially resisted market reform, concerned about the loss of protection. Pro-­market technocrats engaged in “a little social engineering” and worked with emerging exporters and bankers to create a new set of specialized business chambers (Lizano 2005; see also Lizano 1999, 170–172). Gradually, traditional chambers like the Costa Rican Chamber of Industry (CICR) underwent major internal changes, with a new emphasis on competitiveness and quality controls as the industrial sector strengthened its export capabilities. The business peak association,18 the Costa Rican Union of Private Sector Chambers and Associations (UCCAEP), expanded to include 43 chambers by 2005, many in new economic sectors. Membership in the American Chamber of Commerce of Costa Rica (AMCHAM–Costa Rica) mushroomed to 400 Costa Rican and U.S. companies in 2005, reportedly representing 80% of U.S. foreign investment (Denton, July 8, 2005). As the new business networks emerged, labor and the peasant sector suffered reversals. Organized labor in Costa Rica was concentrated in the public sector, and the contraction of the state in the 1980s and 1990s cut into the unionized workforce. By 2000, organized labor represented only 10% of the workforce, down from 15% in 1995 (PEN 2001, 209). New industrial jobs, many of which were located in the EPZs, generally were organized in solidarity associations, not unions, with limited capacity to press sectoral demands (Mosley 2008). More traditional business elites, particularly those in declining sectors, approached reform with skepticism (Colburn and Sánchez 2000, 53–67) but were losing the ability to influence the private sector political voice. In the rural sector, the organizational capacity of small and medium-­sized agricultural producers (and even large ones in the less successful parts of the economy) eroded over time. As the traditional agricultural economy declined, farmers responded with a surge of protests, and protective tariffs stabilized in the agricultural sector after 2000.19 Many small producers, however, failed to flourish in a more competitive environment. Some peasant organizations became shells almost overnight, although led by feisty leaders whose passionate commitment and internal struggles led them to invent and reinvent their movements (Edelman 1999, 2008). As the portion of the population employed in agriculture continued its steady fall and the regime became more deeply committed to neoliberal practices, ongoing protection of the agricultural sector came under question.20

42  Contesting Trade in Central America

The economic and organizational consolidation of new business sectors in banking, EPZ, tourism, and nontraditional exports, combined with the erosion of public sector unions and small farmers associations, provided sectoral grounding for the economic policy shift. But in an open political system, like that found in Costa Rica, citizens and voters have the final say. Public support for economic restructuring (as opposed to stabilization) may be limited at the outset due to transition costs and uncertainties. Unless voters acquiesce to ongoing change, the turnover of elected officials could soon detain transition. In Costa Rica, parties and officials associated with restructuring repeatedly won reelection or were replaced by others that shared this commitment. Although weak party discipline meant that presidents could not assume uniform support from their party’s legislative bench or from the national party leadership, they strengthened their hold on the government through an increasing use of executive decrees and regulations.21 The historically dominant PLN enjoyed two additional circumstances in the 1980s that helped it launch an economic transition. For the first time, the party won two terms in a row with an outright majority of the vote. The victory margins, with Monge’s 58.8% of the vote in 1982, followed by Arias’ 52.3% in 1986, were historically unprecedented (Booth 1998, 67); previously, party victories had tended to rotate between parties and coalitions. Second, although the PLN lost the elections in 1990, 1998, and 2002, the Center-­ Right PUSC also endorsed the restructuring agenda, and a new elite consensus emerged around what Cornick and Trejos (2009, 155) called “the sensible center.” Indeed, the overlap in PLN and PUSC positions on economic reform was such that critics began using the “PLUSC” label to suggest that these parties had merged.22 Electoral outcomes are based on many factors, only some of which are related to candidate and party policy positions; assumptions about public preferences for particular economic models based simply on election results may be questioned. In fact, PLN leaders initially obfuscated the party’s deepening embrace of the market, as a segment of the leadership began to redefine the party’s economic orientation (Wilson 1999). Over time, however, the PLN position of economic globalization and domestic reform became clearer, and voters still returned its leaders to power. Taken together with information derived from public opinion polls, these electoral results are suggestive. Further evidence of public support for market reform during this juncture emerges from the annual eighteen-­country Latinobarómetro polls. Poll results are sometimes volatile and contradictory, but they can also capture changing preferences. The present study focuses on one broad question and follows the responses across time and cross-­nationally.

The March to Market Reform 43

Asked to indicate their level of agreement with the statement, “The market economy is best for the country,” three-­fourths (76%) of respondents in Costa Rica answered affirmatively (strongly agree or agree) in 1998. After fifteen years of accumulated reform, public acceptance of a market economy was strong in Costa Rica, topping the Latin America average of 66% by ten percentage points at that time (Latinobarómetro 2009, 91). Adjustment had caused some pain, and growth had slowed in 1981–1989 to an average annual 2.4%. But in the 1990s, growth resumed, averaging 4.7% in 1990–1997 and an even stronger 4.8% in 1998–2003 (ECLAC, 2010d, 53). New sectors had emerged, as seen with the rapid growth of tourism and the free trade zones, capped by the 1996 INTEL announcement of a $300 million high-­tech investment in Costa Rica. The country’s two major political parties had converged around a new model, which had trimmed the state sector and deepened Costa Rica’s integration into the global market. And public acceptance of the shift, while neither uniform nor unconditional, as we shall see, was widespread. Market Reform in El Salvador As Costa Rica underwent debt crisis and structural reform, El Salvador was descending into civil war. Before the peace accord was signed in 1992, an estimated 75,000 people would die (1.8% of the population) (Wood 2003, 8). Conflict between the U.S.-­supported government and the FMLN set off a national-­security alarm for the Reagan administration. In an effort to undercut a revolutionary movement and stop “communist” expansion, the U.S. government funneled massive military and economic assistance to El Salvador in the 1980s. Focusing just on economic aid, U.S. assistance rose quickly from $58.3 million in 1980 to peak at $462.9 million in 1987 and remained high until after the war concluded (see table 1.2). Total economic assistance to El Salvador in 1980–1993 topped $3.6 billion. Annual U.S. economic assistance averaged 6.5% of El Salvador’s GDP for the nine-­year period between 1981 and 1993, and exceeded 11% of GDP in 1985 and 1987. In both absolute and relative terms, U.S. economic assistance began earlier, peaked higher, and continued longer in El Salvador than in any other Central American country. During the early years, under the leadership of Christian Democrat José Napoleón Duarte, who served as a member of the reformist civilian-­military junta (1980–1982) and president (1984–1989), the Salvadoran government pursued several state-­centered structural reforms intended to weaken the traditional agroexport elite (Johnson 1998; Segovia 2002, 10–14). With technical and financial assistance from the United States, the government initiated

44  Contesting Trade in Central America

agrarian reform, introduced state control of coffee and sugar exports, and nationalized the banking system. This “communitarian” interlude, in which the government sought to increase state autonomy from traditional elites and undercut FMLN recruitment, won few adherents in this increasingly polarized country. Duarte was soon pushed to reverse course by USAID, his principal ally and financial backer. Economic stabilization and reactivation emerged as central objectives when the war reached a plateau after 1985 (Rosa 1993; Segovia 2002, 95–104). The United States conditioned aid on a currency devaluation designed to stimulate exports, leading to confrontation and eventual concession by the Duarte government. A stabilization plan was approved in 1986, followed by a 1987 program to develop nontraditional exports. Duarte, however, discontinued debt-­service payments in the first part of 1989 as war resurged, and the World Bank and the IDB suspended loan outlays (Segovia, 2002, 32, n43). Duarte’s faltering attempts to slow or resist market reforms were swept aside with the legislative (1988) and presidential (1989) victory of the right-­ wing ARENA party. From its early association with anticommunist death squads, ARENA had emerged as a pro-­business party that recruited leaders from among the economic elite. Its economic reform proposals were heavily guided by research and policy papers crafted by the Salvadoran Social and Economic Development Foundation (FUSADES), a Salvadoran think tank. Created in 1983, FUSADES quickly became a major recipient of USAID funding. As in Costa Rica, USAID helped to build the institutional infrastructure that would serve to advance market reform over time. Given financing of over $150 million between 1984 and 1993 (Robinson 2003, 90), FUSADES provided technical and ideological support for a slate of market reforms. Following the 1989 election of ARENA candidate Alfredo Cristiani (1989–1994), seventeen FUSADES leaders swept into economic ministries, most in high-­level positions (Segovia 2002, 30).23 Several had headed major business associations (Johnson 1998, 143), blending business and policy credentials. In addition to its role as a recruiting ground for ARENA economic ministries, FUSADES’ Economic and Social Studies Department (DEES) played the lead role in policy development. With support from USAID, DEES tapped into an emerging pool of internationally trained economists and contracted high-­profile economic consultants to prepare the Cristiani government program, Hacia una economía de mercado en El Salvador: Bases para una nueva estrategia de desarrollo económico y social (1989–1994). Prominent neoliberal economist Arnold Harberger played a critical technical and symbolic role

The March to Market Reform 45

in preparing the document (Vidal 2010, 93–97) and remained a long-­term FUSADES affiliate.24 Over time, FUSADES developed greater internal technical expertise, and it contributed to economic plans for each of the three successive ARENA administrations (FUSADES, Carta Informativa, April 2004). DEES recommendations emphasized privatization, deregulation, trade liberalization, and capital mobility. Exports were understood to drive growth in the global economy. Attention centered on competitiveness, and proposals drew on diagnoses of problems provided by detailed surveys of the business sector. As the war reached a stalemate and restructuring began, El Salvador entered into a series of discussions with the IMF. Between 1990 and 1998, the government signed six standby loan agreements, with thirty-­four performance criteria (Copelovitch 2010, 323). Unlike Costa Rica, where debt crisis and inflation were drivers for IMF engagement, El Salvador’s external debt stock was a relatively modest 49% of GNI, and the consumer price increase was moderate and falling in 1990.25 Agreements made after 1990 with the IMF focused less on stabilization and more on increasing international recognition for the reform effort and quelling dissatisfaction among dissenting elites (Segovia 2002). Bank privatization and new export-­promotion legislation were approved in 1990, followed by liberalization of prices, the exchange rate, charges for public services, and tariffs. Additional measures (Central Bank autonomy, creation of a stock market, and elimination of export taxes) were designed to attract foreign investment (Segovia 2002, 32, 37–40). As table 1.1 indicates, these market reforms boosted El Salvador’s structural reform scores, with sharp increases in 1993 and 1998. The historic peace process, which ended the civil war in 1992, absorbed the FMLN into the political system but did not derail the marketization agenda. Although Cristiani ally and FUSADES founding member Roberto Murray Meza failed to get the ARENA presidential nomination for the 1994 election, the essential neoliberal framework was not contested. ARENA candidate Armando Calderón Sol’s (1994–1999) election brought a push for additional privatization (of telecommunications and electricity). Economic leadership was conferred on Enrique Hinds, a former World Bank official and free market theoretician known for his advocacy of dollarization (see Hinds 2006; Steil and Hinds 2009). Official dollarization was achieved under Francisco Flores (1999–2004), in the third ARENA administration. In spite of controversy about this policy, Flores announced the dollarization decision on November 22, 2000, and quickly pushed it through a compliant legislature. Implementation began only weeks later, on January 1, 2001 (Towers and

46  Contesting Trade in Central America

Borzutzky 2004). El Salvador’s national currency, the colón, soon in effect disappeared. Export promotion, advanced with USAID support since 1984, was facilitated by the Ley de Reactivación de las Exportaciones (1990) and deepened at the end of the decade with laws encouraging increased foreign investment (the 1998 Foreign Investment Promotion and Guarantee Law, 1998 Free Trade Zones Law, and 1999 Investment Law). The value of nontraditional exports surpassed that of traditional ones in 1991, a gap that widened over the decade. Coffee export value, already down to 5.4% of GDP in 1990, fell to 0.7% of GDP in 2002 (Acevedo 2004, 351). The maquila sector, which provided investors a twenty-­year tax exemption (PNUD 2003, 133), rose quickly from modest beginnings to become a major anchor of the new economy. Whereas maquila exports totaled $81 million in 1990 (1.7% of GNP), they increased to $1.76 billion (12.3% of GDP) in 2002 (Acevedo 2004, 351).26 By 2001, 86,000 Salvadoran workers were employed in 339 enterprises in the export processing zones (PNUD, 2003, 129). As elsewhere, neoliberal policy reform could hardly be sustained unless business activities reconfigured around the new model. The war era had broken the power of the traditional coffee elite, facilitating a shift in economic structure. Although land in the historically dominant coffee sector remained largely unaffected by the agrarian reform,27 agroexport production and distribution processes were disrupted by fighting and labor displacement in the war zones. Production losses, capital flight, and self-­exile hurt the coffee sector, and innovative Salvadoran agroexporters searched for new profits outside of agriculture. Fissures opened in the 1980s between the traditional agroexport elite and those shifting to an emerging industrial-­financial sector, strengthening the latter and laying a groundwork for a change in the economic model in the 1990s (Paige 1998; Madrid 2009). The 1990 bank privatization and 1992 peace process created opportunities for reformulated sectors of the Salvadoran elite to acquire interests in finance, commerce, construction, and real estate—areas that anchored a series of new economic groups. As suppliers and importers and through joint ventures, businesses built links to transnational corporations. Segovia (2005) identified eight postwar corporate clusters in El Salvador, each with shares in multiple local and regional businesses (see also Madrid 2009). Two Salvadoran business groups were anchored in the expanding banking sector (Banco Agrícola and Cuscatlán), whereas others extended from their base in regional airline transportation (Taca), large hotel and mall development (Poma), and retail sales, storage, and real estate (Siman). Market opportunities throughout Central America facilitated cross-­regional investment, and networked economic groups began to redefine regional economic relations.28

The March to Market Reform 47

Salvadoran business elites developed various mechanisms that strengthened their access to political power. As elsewhere in the region, elites used their business associations as a mechanism to advance collective interests. El Salvador’s traditional business peak association, the National Private Enterprise Association (Asociación Nacional de la Empresa Privada or ANEP), founded in 1966, expanded to include almost 40 chambers in the late 1990s ( Johnson 1998, 139). As in Costa Rica, a chamber was created specifically to strengthen the organizational voice of the new export sector. Originally set up as a committee within the Association of Salvadoran Industry (ASI), the Corporation of Salvadoran Exporters (COEXPORT) split off to form a separate chamber with funding from USAID (Orellana Merlos 2005, fn. 5). As ANEP expanded, chambers were added for nontraditional exporters, banking, real estate, construction, insurance and AMCHAM-­El Salvador, which represented firms with U.S. investments or markets. These networks allowed association leaders to link internally with like-­minded others and externally with dominant institutions. Nine of thirteen members of ASI’s 1990–1991 board of directors, for example, also served on FUSADES executive committees (Johnson 1998, 135). In addition to these conventional mechanisms of interest representation, the Salvadoran business sector had direct access to state leaders through ARENA. Unlike many business elites, who steer away from visible partisan alliances for pragmatic reasons, the Salvadoran elite cultivated strong party ties. Three of four ARENA presidents (Cristiani, Calderón Sol, and Saca) hailed from the business elite, as did prominent members of the party’s governing board. A business identity percolated through the party structure and helped to define it. According to official biographical profiles reviewed by Koivumaeki (2010, 91–92), 26% of ARENA deputies in the 2006–2009 legislative assembly self-­identified as businessmen or businesswomen, and biographies of 40% of ARENA 2009–2012 mayoral candidates referred to their status as business owners. This close connection with the business sector provided ARENA with valuable strategic resources. Through financial contributions, public opinion leadership, and direct service as candidates, party leaders, and advisers, business elites played a critical role in the party’s twenty-­year history of electoral victory (Koivumaeki 2010). In the end, of course, electoral outcomes depend not simply on the views of business elites but on the voters. Pro-­market ARENA presidential candidates won four consecutive elections between 1989 and 2009, three of them in the first round of balloting (1989, 1999, and 2004). In conjunction with the PCN, a traditional, clientelistic party, ARENA also controlled the legislative vote.29 The FMLN, which offered an alternative approach, remained a minority party.

48  Contesting Trade in Central America

ARENA’s repeated victories suggest broad acceptance of market reform in El Salvador during this period. As in Costa Rica, electoral results affirming pro-­market parties provide but one indicator of public approval; public opinion polls provide a second. Although not all policies won support (dollarization was particularly unpopular [ IUDOP 2004, 85]), the market system in general was widely endorsed. When asked in the Latinobarómetro poll about their views on the statement, “The market economy is best for the country,” 78% of Salvadorans indicated either strong agreement or agreement in 1998, a support level that surpassed even the high levels found in Costa Rica (Latinobarómetro 2009, 91). Factors contributing to this outcome are undoubtedly complex. Desire to leave behind the trauma of civil war, combined with deep dependence on U.S. government aid and migration agreements, encouraged this view. Steady pro-­market messaging in the conservative mainstream media probably contributed, as did the portrayal of FMLN opponents as violent ideologues bent on destruction. In addition, general economic improvements encouraged a favorable assessment. Whereas average annual GDP growth during the war years 1981–1989 had been –0.9%, it increased to 5.2% as the war concluded in 1990–1997 (ECLAC, 2010d, 53). Although the growth rate declined to an average annual 2.6% in 1998–2003, most Salvadorans remained optimistic about the positive potential of this economic arrangement at that time. Market Reform in Nicaragua Market reform in Nicaragua advanced quickly following the 1990 electoral defeat of FSLN candidate and sitting president Daniel Ortega. The new president, Violeta Chamorro (1990–1996), who emerged at the helm of the 14-­party UNO coalition, brought an end to the turbulent Sandinista decade and shifted the country toward a market system. Over the next three administrations, market-­friendly policies unfolded. In the previous decade, the Sandinista Revolution (1979–1990) had established a mixed economy that prioritized state-­centered accumulation. Following the 1979 ouster of Anastasio Somoza, the revolutionary government seized the assets of the Somoza family and its allies, thus acquiring extensive agricultural holdings and a large network of industrial and commercial activities. Private banks collapsed during the insurrection, and were replaced by state-­owned banks. The new banking system modified credit distribution practices, improving access for small producers and domestic market crops, although in a financially unsustainable way. The government quickly assumed monopoly control over the export of major commodities, eliminating private

The March to Market Reform 49

trading firms, and imposed increasingly complex regulations on trade and domestic transactions. As the decade wore on, other expropriations followed. By the end of this era, about 30% of GDP was controlled by the state sector, and the private sector faced extensive regulation (Spalding 1987; Conroy 1990; Martínez Cuenca 1990; Solà Montserrat 2007). Limited state capacity, deepening internal polarization, and military pressure prevented the Sandinista government from consolidating these reforms. Conflict with the Reagan administration fueled the “contra” war, which the U.S. sponsored and financed. By 1987, the costs of the war absorbed 62% of the Nicaraguan government budget and 30% of GDP; the inflation rate soared, topping 33,000% in 1988 (Conroy 1990, 16; Rodríguez Alas 2002, 38). Government efforts to stabilize the economy had only modest results, and living standards tumbled. With the economy contracting and the war still not fully resolved, Nicaraguan voters chose a change of course in 1990. The George H. W. Bush administration (1988–1992) funded Chamorro’s campaign and greeted her victory with a promise of assistance. During the transition period preceding her inauguration, representatives from USAID and the U.S. Departments of Agriculture, State, Treasury, and Commerce formulated a $300 million assistance plan designed to stabilize the country and advance its economic recovery (GAO 1992, 9). Congress approved the funding in the 1990 Dire Emergency Supplemental Appropriations Act, and USAID reassigned 1991 allocations to meet additional needs in Nicaragua. As in Costa Rica and El Salvador, U.S. support came largely in cash transfers that financed “non-­luxury” imports from the U.S. and Central America, supporting a consumer boost during the Chamorro government’s early years. The U.S. also provided $75 million to help clear the arrears on Nicaragua’s debts to the World Bank (unpaid since 1984) and the IDB (unpaid since 1987), to allow renewed lending from these organizations and the IMF. U.S. economic assistance to Nicaragua, which had been negligible from 1983 through 1989, jumped to a total of $443.9 million in 1990 and 1991 and $1 billion across the decade (see table 1.2). U.S. aid equaled a remarkable 22.2% of Nicaragua’s GDP in 1990 and 14.7% the following year. The 1992 GAO report on U.S. assistance provides a list of conditions governing the aid, which included reducing government spending, re-­establishing private banks, re-­licensing private trading companies, privatization of state-­owned enterprises, and contracting the size of the government workforce (GAO 1992, 16). Nine private banks quickly set up shop, and by 1995 they held over half of all bank deposits (World Bank 1995, 26). State trade monopolies were eliminated in 1991–1992, and import tariffs were unilaterally reduced. Of the 351 state-­owned firms slated for divestiture, the government had privatized,

50  Contesting Trade in Central America

liquidated, or transferred 233 by 1992. The central government Occupational Conversion Program provided a generous severance package (averaging 20 months of salary) to those state workers who were willing to forfeit their jobs. U.S. geopolitical concerns played the central role in USAID’s rapid intervention. This economic assistance was sometimes held hostage to political objectives, as the U.S. government moved to “desandinize” the Nicaraguan state. North Carolina Senator Jesse Helms secured a partial aid suspension in 1992, for example, over Chamorro’s failure to remove FSLN army chief Humberto Ortega, brother to the defeated president. USAID assistance to Nicaragua declined sharply after 1994 (see table 1.2), replaced by rising assistance from multilateral lenders. In spite of the drop off in U.S. aid, total official development assistance from all bilateral and multilateral sources equaled $3.8 billion in 1990–1996, an annual average of 30% of GDP at that time (Solà Montserrat 2007, 123). Sustained, single-­minded attention to economic reform was provided by the IMF, which renewed lending to Nicaragua in 1991 following massive devaluation and a series of policy agreements (Lacayo Oyanguren 2005, 201– 202, 232–233, 239–245). Between 1994 and 2002, three multiyear structural adjustment loans were signed with the IMF. For the ten years between 2002 and 2012, Nicaragua did not pass more than 15 months at a stretch without an IMF lending agreement in place. In collaboration with the World Bank and with support from USAID, the IMF provided close supervision of Nicaraguan economic performance. According to a Government of Nicaragua (2000, 14) report on structural reforms undertaken in the 1990s, public sector employment (including the armed forces) dropped from 285,000 to 89,000 between 1990 and 1999. The state banks retrenched, and BANADES, the main source of agricultural credit, sharply cut staff and branch offices before closing its doors in 1998 (Enríquez 2010). Once the economy stabilized, the government moved to privatize the remaining state banks, telecommunications and electricity, and further liberalized trade under the second structural adjustment plan, which was launched in 1999 (IMF 1999; Solà Montserrat 2007, 130–147). The country periodically failed to meet budgetary benchmarks due to heavy debt obligations, natural disaster and political pressures, but policy change generally advanced along market lines, as Lora’s structural reform index indicates (see table 1.1). This transition took place in spite of the formal opposition of the FSLN and its continuing status as the country’s largest single political party. The rise of an entrepreneurial sector within the FSLN, which entered vigorously into the openings emerging under the new rules, raised complex questions about its role in the process. Nicaragua’s foreign debt had increased from $1.6 billion in 1979, when the

The March to Market Reform 51

Somoza government collapsed, to $10.7 billion in 1990, and the debt rose further to $11.7 billion in 1994. International lenders helped secure some debt forgiveness, repayment, and rescheduling for Nicaragua, but the total debt remained very high (Solà Montserrat 2007, 84, 125). Pressure from civil society and some Western nations eventually pushed the World Bank and IMF to increase attention to debt relief. Under their subsequent Heavily Indebted Poor Countries (HIPC) initiative, Nicaragua became a candidate for IMF monitored debt reduction. Progress was slow, however, and debt obligations still topped $6.6 billion in 2003, equal to 159% of GDP (BCN n.d., table 17). The depth of Nicaragua’s economic crisis, foreign debt, and its exceptional dependence on aid gave external actors special leverage over this transition. But even in this case, market reform depended on the active cooperation of local officials who were responsible for day-­to-­day economic management. As in the other two Central American countries, technocratic officials implemented the detailed schedule agreed upon with the international funders. Unlike Costa Rica and El Salvador, however, Nicaragua had undergone ten years of revolution. This experience had ruptured conventional technocratic recruitment mechanisms in Nicaragua, and with the virtual disappearance of USAID during that period, no counterpart to Costa Rica or Salvadoran neoliberal think tanks was in place.30 Nicaraguan technocrats who had left the country during the revolution to work in international organizations and business or to pursue graduate degrees in the United States were now recruited back from self-­exile to assume high-­level administrative positions.31 Additional administrative support was provided by INCAE, a prominent Central American business school that had transferred programs from its Managua campus to Costa Rica during the period of the Sandinista Revolution. After the 1990 election, INCAE’s Nicaragua program expanded and, with USAID financing, it took on technical training responsibilities for key ministries. According to the 1991 GAO report (1991, 21), 16 top technical advisers in the Central Bank, the newly formed Ministry of Economy and Development, and other economic agencies had INCAE affiliations. With $3.3 million in contracts from USAID, INCAE provided 33 consultants for government and private sector groups and had organized 54 seminars for over 2,000 public and private sector participants by March 1992 (USAID 1992, 3–4). Over time, other joint public-­private agencies and partnerships were created, such as the Export and Investment Center (Centro de Exportaciones e Inversiones, or CEI) and PRONICARAGUA, to promote trade and foreign investment (Gobierno de Nicaragua 1996). Market transition produced some quick benefits. Inflation dropped sharply from 13,490% in 1990 to 12% in 1996 (Solà Montserrat 2007, 117), providing great and general relief. Economic growth resumed in 1994, after almost a

52  Contesting Trade in Central America

decade of contraction. The average annual GDP growth, which in the 1980– 1989 revolutionary period was –1.4%, improved to 2.4% in 1990–1997 and 3.5% in 1998–2003 (ECLAC 2010d, 53). Merchandise exports, which registered an average annual 3.8% decline in 1980–1989, grew an average annual 9.4% in 1990–1999 (ECLAC, 2010e, 69), in part due to the expanding export processing zones. Enjoying a 100% tax exemption for 10 years (and 60% thereafter) in Nicaragua, the number of EPZ companies increased from 5 (with a workforce of 1,000) in 1990, to 45 (with a workforce of 37,000) in 2001. EPZ manufacturing, which represented 1% of export value in 1990, contributed 54% of export value in 2001 (PNUD 2003 129, 133). Non-­traditional agricultural exports became another source of growth, strongly encouraged by USAID.32 Market reform created winners and losers, and even in the new sectors, businesses often struggled. Rapid privatization and new regulations lacked transparency and allowed rent-­seeking behavior, and well-­placed investors moved quickly to extract gains (Mayorga 2007). Hardships associated with the loss of state bank credit and trade protection combined with evidence of favoritism to weaken business cohesion around neoliberal adjustments (Spalding 1994, 180–184; 1987). The gradual consolidation of the new economy, however, allowed the beneficiaries of economic opening to gain momentum and coalesce around market reform. As elsewhere in Central America, powerful economic groups coalesced, such as the Pellas and Lafise groups, some of which built on an economic foundation dating back to the pre-­revolutionary period. The dominant economic groups quickly extended their investments across the region, many of them anchored in the rapidly expanding private banks (Segovia 2005; Mayorga 2007). As new economic sectors began to emerge, business chambers reorganized around growth industries. New chambers were established in the banking, Free Trade Zone and tourism sectors; these associations allowed sectoral leaders to better coordinate around themes of common interest. As in Costa Rica and El Salvador, a specialized association for exporters, the Association of Nicaraguan Producers and Exporters (APEN), was created, with USAID covering its initial operating expenses (Spalding 1994, 185). By 2005, four new business chambers had affiliated with COSEP, expanding its coverage in tourism, fishing, food processing, and exporting (COSEP 2007). Improved relations with the United States restored trade and investment flows, fostering rapid growth of the local AMCHAM (González C. 2006). Business support for the transition was reinforced by the polarized nature of Nicaraguan politics. After the clashes between business elites and the Sandinista government in the 1980s, which resulted in censorship, prison terms, and property confiscations, many business association leaders developed

The March to Market Reform 53

a sharply adversarial relationship with the FSLN (Spalding 1994). Some, such as Enrique Bolaños, long-­term head of the Superior Council of Private Enterprise (COSEP), the business peak association, eagerly sought political leadership in the post-­revolutionary era. Electoral competition in 1990, 1996, and 2001 pitted Daniel Ortega, as the perpetual FSLN candidate, against anti-­Sandinista coalitions led by Chamorro, Arnoldo Alemán, and Bolaños, respectively. To ward off an FSLN victory, a steady majority of both elites and voters swung against the former revolutionaries, in favor of candidates seeking normalized relations with the U.S. and the transition to market economics that this entailed.33 Across a sixteen-­year period, Nicaraguan voters continued to reject the FSLN and elect presidents who pursued market reform. Chamorro, Alemán, and Bolaños all won the presidency with substantial majorities, in elections characterized by strong voter turnout.34 Much like their neighbors in Costa Rica and El Salvador, Nicaraguans accepted the market system in principle and expressed this support by voting for market advocates. Public opinion data reinforces the view that most Nicaraguans supported a general market transition during this period. When asked, in the Latinobarómetro poll, whether “the market economy is best for the country,” 73% of respondents indicated approval (strongly agreed or agreed) in 1998, a figure that rose to 78% in 2002, when it exceeded the Latin American norm by 19 percentage points (Latinobarómetro 2009, 91). After the difficulties of hyperinflation, scarcity, and uncertainty compounded the miseries of warfare in the 1980s, economic stabilization in the 1990s was greeted with relief. The turbulent experience of “socialism” caused many to recoil from the economic insecurity associated with centralized controls and U.S. hostility. External intervention brought high levels of foreign assistance to support transition, and, after a painful adjustment, economic growth resumed. Major development problems endured, and market reform brought its own set of problems, as we shall see, but the reigning perception was that the market system was the best alternative for the moment. Interpretations Close analysis of these three Central American cases demonstrates the usefulness of the multiphase theoretical framework, in which the market reform process is broken into a series of steps and analysis focuses on the factors that shape its advance in each (see table 1.3). Three transition stages—initiation, deepening, and persistence—involved varying combinations of actors and processes.

Table 1.3. Market reform processes: Multiphase theoretical framework Phase

Costa Rica

El Salvador

Nicaragua

Pretransition economic conditions

• Social democracy • Debt crisis • Economic contraction • High inflation

• “Communitarian” episode and civil war • Wartime economic contraction

• Revolutionary regime • Sharp wartime economic contraction • Extreme debt • Hyperinflation

• U.S. geopolitical interests • Sharp increase in USAID funding, followed by IMF and World Bank stabilization and structural adjustment

• U.S. geopolitical interests • Sharp increase in and persistence of USAID funding, followed by IMF agreement, but without sharp economic crisis

• U.S. geopolitical interests • Sharp increase in USAID funding, followed by multiple IMF stabilization and structural adjustment agreements and by World Bank and IMF HIPC relief

• USAID-­funded public-­private agencies and think tank development • Local technocratic control of key ministries • Rising power of exporters, tourism, commerce • New economic groups consolidate • New business associations created, AMCHAM strengthened

• USAID-­funded think tank development • Local technocratic control of key ministries

• USAID-­funded consultancies and technical assistance • Local technocratic control of key ministries, detailed IMF reform agenda

• Rising power of banking, exporters, commerce • New economic groups consolidate • New business associations created, AMCHAM strengthened

• Rising power of banking, exporters, commerce • New economic groups consolidate • New business associations created, AMCHAM strengthened

Reform initiation External funders

Reform deepening Domestic technocrats

Business support

Reform persistence Parties, coalitions, candidates

• PLN and PUSC rotation • Pro-­market alignment

• ARENA hegemony • FMLN minority

• UNO and Liberal Alliance majority • FSLN minority

Public opinion

• Majority vote favors market advocates • General public endorsement of market system

• Majority vote favors market advocates • General public endorsement of market system

• Majority vote favors market advocates • General public endorsement of market system

Outcome

• Market reform: heterodox neoliberalism

• Market reform: neoliberalism

• Market reform: neoliberalism, with sustained supervision

56  Contesting Trade in Central America

Reform initiation Market reform is disruptive and accompanied by costs (Weyland 2002). As such, it is unlikely to be introduced unless local economic performance deteriorates and triggers a crisis, discrediting alternative approaches. The economic crisis is commonly accompanied by strong bouts of inflation and may follow an extended period of contraction. In the Costa Rican case, market transition began with a foreign debt crisis that triggered rising inflation and placed pressure on the reigning social democratic system. In El Salvador, movement toward the market was fueled less by debt and inflation, which remained relatively modest, than by wartime polarization and production decline. Revolutionary Nicaragua experienced all of the above, with extreme debt and hyperinflation following a decade of war and economic contraction. By itself, however, economic decline does not necessarily lead to neoliberal reform. A production fall off would tend to foster change, but not necessarily of the market sort. For marketization to advance, other factors come into play. Polanyi’s (2001 [1944], 147) observation that “Laissez faire was planned” provides a useful point of departure. As the general literature on market reform indicates, external funders often serve as a catalyst in this process. In the Central American case, the key external actor in the initiation phase was USAID. With greater agility than the multilateral lenders and more at stake in the region, the U.S. government responded quickly to the opportunity to project its influence in a region of geopolitical significance and to cure Central American ills with market medicine. In all three cases, USAID provided massive funding, gradually imposing pointed requirements, including provisions to initiate negotiation with the IMF. With a focused mandate, professional staff and training, and the ability to leverage additional resources through cross-­conditionality, the IMF played a critical role in advancing marketization in this region. Its technical teams synchronized a timeline of reforms covering trade liberalization, privatization, and deregulation. The market advance was hardly smooth in any of the cases, and lending sometimes stalled or was suspended, as in Costa Rica and Nicaragua. The agency’s legitimation function, however, enhanced the value of its approval, and the external financial flows it channeled made the process less painful, hence more likely to be sustained (or renewed following interruption). In contrast to findings that link IMF lending to shareholder maneuvers on behalf of major financial lobbies, USAID and IMF intervention in Central America were not driven principally by core state financial interests. Un-

The March to Market Reform 57

like larger Latin American countries with heavy borrowing concentrated in a handful of foreign banks, Central American foreign debts were generally modest in relation to bank portfolios and unlikely to affect bank profitability. The Nicaraguan foreign debt, which was the most substantial of the three, was not primarily with U.S. banks; by the end of the Sandinista period, borrowing came largely from socialist countries. Intense U.S. interest in these cases was more directly connected to the cold war fears of “communist” expansion in a region historically defined as the U.S. “backyard” than to pressure from creditors. This catalyst gave neoliberal transition in Central America some distinctive features, including durable epistemic resource flows into local think tanks and training programs, and unilateral, but temporary, market access under CBI. Reform Deepening External funders could not secure a market transition unless local authorities actively cooperated in this venture. In the Central American cases, economic duress and war weariness fueled electoral transitions, and a new network of officials and technocrats emerged who endorsed policy change. Beyond simply signing onto the agreements reached with external funders, these officials provided on-­going support for transition. Their numbers tended to increase over time, as new government agencies and private partnerships were established, and they gradually populated the corner offices and cubicles of key ministries. These officials came to serve as powerful norm entrepreneurs, reshaping the dominant ideas about how an economy should function. Some who assumed technical leadership at the domestic level had long been persuaded to abandon the old model, and were waiting in the wings for the opportunity to serve. Others had gone into self-­exile or for graduate study abroad during periods of heightened statism, and had served stints as technocrats in multilateral banks and international business management. The change of leadership at home now offered a propitious moment to return and contribute directly to the economic revamping. Prior USAID institution building helped to foster the transition by providing training and networking opportunities for market-­oriented actors. USAID financial support for the market friendly Academia de Centroamérica, CINDE and COMEX in Costa Rica, for example, created a network of public and private institutions that would serve as local sponsors of marketization. FUSADES in El Salvador networked with international economic experts to design policy reforms, over time developing the expertise to complete policy planning in-­ house. Market reform-­oriented governments in Nicaragua drew on resources

58  Contesting Trade in Central America

available at INCAE, and nationals with foreign training and expertise staffed critical ministries in charge of finance, trade, and development. Local bureaucracies, of course, were not completely replaced following election transitions, even when they were substantially downsized, as in Nicaragua. Market-­oriented officials were often layered into agencies formed in an earlier era. Those public officials who failed to display sufficient confidence in liberalization, however, were commonly sidelined as inadequately prepared, anachronistic, and “politicized.” Through executive decrees, administrative rule changes, and hard-­fought legislative battles, market reform policies were propagated. Still, market transition requires more than the creation of a new policy framework. For the reforms to take root, producers and investors need to respond to the unfolding opportunities and reorganize production processes— to become “flexible rent seekers” rather that intractable ones, seeking government support under the new rules rather than insisting on the old. Because business elites tend to pursue concrete economic interests rather than an abstract set of principles, their commitment to market reform can be variable. Privatization and deregulation provide ample opportunities for favoritism, as the general literature on market reform demonstrates, and insider allegations of corruption appear regularly in Central America. In this region too, market transition in practice deviated from market transition theory. But over time, Central American business elites moved into the opening sectors and successfully identified new markets. Once legal changes allowed for the establishment of private banking, elites founded domestic and regional banks that anchored new economic networks in all three countries. The CBI opened markets in the United States for nontraditional products and local producers found niche markets. Real estate revived, sprawling malls sprang up, and, as the transportation and telecommunications infrastructure expanded, tourism, particularly in Costa Rica, became a new growth industry. Importers relished the ease with which they could supply the expanding consumer market with foreign goods and brands. One by one, Costa Rica, El Salvador, and Nicaragua developed new export-­oriented manufacturing activities, distinctively tailored to local labor skills and costs. El Salvador and Nicaragua offered low cost labor and secured jobs in the apparel sector; Costa Rica, where educational levels and salaries were higher, offered safety and quality control and secured investment in the computer and medical equipment sectors. Exports surged in each of these countries, albeit more slowly than imports, and foreign investment generally increased as well, albeit at widely varying rates. Traditional sectors, such as coffee cultivation, declined sharply in the new economy. Except in Nicaragua,

The March to Market Reform 59

the agricultural sector in general lost much of its significance. Business associational life reconfigured around the new economy, with new chambers providing robust support for market reform, as some historical ones lost ground. Reform Persistence Political and economic elites can introduce market change, in cooperation with external allies, but in political systems that are formally democratic, those changes are unlikely to persist unless the new model secures public acceptance. Parties and candidates need to sell the virtues of market reform and to resist the temptation to backslide; voters must demonstrate some buy-­in. Although endorsement of neoliberal reform was far from unambiguous in Central America, as subsequent chapters demonstrate, ideational processes stoked a new “common sense,” (Harvey 2005, 39–43) in which free market competition and global integration were widely understood to provide the only real road to modernity, and the means to leave instability, crisis, and warfare behind. In Costa Rica, the formerly social democratic PLN and the Christian Democratic PUSC converged around the need for market efficiency and global integration, thus stabilizing market reform in spite of party rotation. Although leaders from these two parties tended to endorse market policies that went beyond public preferences, such as telecommunications privatization, elites steered clear of the privatization of social services, and mass sentiment generally lined up behind the hybrid reform model that emerged in this country. In El Salvador, pro-­market ARENA enjoyed solid victories at the presidential level, and its stable working relationship with a traditional clientelistic party generally provided the legislative support needed to advance a pro-­ market agenda. Ideological antagonism toward the opposition FMLN rallied even centrists, as ARENA discourse fanned fears of Left radicalism and the loss of U.S. aid. Opponents of the FSLN in Nicaragua likewise benefited from ideological polarization, recruiting the anti-­Sandinista vote in broad coalitions. Memories of the devastation associated with the revolutionary period tended to strengthen resistance to FSLN campaigns. Business leaders played an active role in these electoral victories; indeed, in El Salvador and Nicaragua, business elites repeatedly vied for and won the presidency itself, and prominent business owners provided critical party leadership and financing. The experience of revolutionary conflict and civil war in this region stiffened the resolution of the Right and tilted the Center away from actors tarred

60  Contesting Trade in Central America

with the “socialist” brush. But voters could hardly be persuaded to endorse candidates and parties that ushered in market reform unless they associated these reforms with prospective opportunities and benefits. These perceptions were assisted by concerted ideational projects that emanated from elite institutions (think tanks, media), but they were not without material grounding. The governments’ success in controlling inflation and restarting growth helped to make this case, as did their ability to secure foreign assistance, which allowed an import boom and increased availability of consumer goods. Positive attitudes toward a market system prevailed, even when these goods were out of reach for many and assessments of actual market impacts were mixed. Central America entered the twenty-­first century having undergone a neoliberal transition, with economies reorganized around trade and foreign investment, and national discourse focused on recovery and competition. These were the circumstances under which CAFTA was introduced.

Chapter 2

Rule Makers and Rule Takers: Negotiating CAFTA

The Agreement clarifies and builds on existing international standards for the protection and enforcement of intellectual property rights [ IPR], with an emphasis on new and emerging technologies. The Agreement ensures that the Central American countries and the Dominican Republic will provide a high level of IPR protection, similar to that provided under U.S. law. Key provisions of the Agreement, such as those on preventing circumvention of anti-­piracy devices and establishing the scope of liability for copying works on the Internet, are modeled on U.S. statutes. USTR (n.d.)

In 2002, political leaders of five Central American countries (Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua) and the United States began preparatory work on a free trade agreement. Formal negotiation started in January 2003 and proceeded through nine brisk rounds; the draft agreement was signed in December 2003, with Costa Rica joining in January 2004 and the Dominican Republic adding on in August. CAFTA provisions would open most markets immediately and others over time and lock in regulatory standards and “back of the border” reforms, some of which exceeded those required by the World Trade Organization (WTO). The United States and Central America obviously differ in size, power, standard of living, and institutional characteristics. Why would Central American countries advance toward this free trade agreement, given this pronounced economic asymmetry? Conventionally, trade policy making is interpreted in terms of business bargaining and interest-­group politics. Sectors and firms that expect to benefit are likely to push for trade liberalization, and uncompetitive opponents are expected to seek protection (Lusztig 2004; Milner 1988; Irwin 2002). This

62  Contesting Trade in Central America

model, while useful for understanding certain aspects of trade policy negotiation, suffers from conceptual limitations. Since the 1980s, international trade negotiation has shifted focus from “shallow integration,” which concentrated on tariffs and market access, to “deep integration,” which incorporates regulatory and institutional reform covering services, government procurement policy, investment protections, and intellectual property rules. Regional trade agreements between industrial and developing countries have also become more common.1 As the number of multidimensional and North-­South trade agreements has increased, the limits to the lateral bargaining model that was developed to explain earlier agreements have become apparent. Understanding trade policy as it now operates requires us to embed the analysis in international power structures. As developing nations increased their participation in regional and bilateral arrangements with dominant powers, debate grew about the extent to which asymmetrical power between states necessarily produces asymmetrical outcomes in their negotiations (Cameron and Tomlin 2000, 17–32). Some theorists claim that unbalanced results are not inevitable and that small powers and weak states may benefit from greater focus and intensity or from institutional parameters that guarantee formal equality. Others question these claims. Tussie and Saguier (2011, 2), for example, contend that under conditions of absolute asymmetry, trade agreements expand to cover a wide range of “elements of interest” to dominant actors and become a “manifestation of coherent geopolitical strategies on the part of the major trading countries.” Seeking a “spiral of precedents” (7), in which the terms of one agreement become the baseline for the next, major powers may impose disciplines that contract policy space and constrain democratic processes in less powerful countries. Recent North-­South trade agreements have been found to undermine the development prospects of developing countries by precluding industrial policies such as protection for infant industries and support for investors in priority areas, which had previously contributed to rapid growth in emerging powers (Shadlen 2005; Stiglitz and Charlton 2005; Gallagher 2008). The requirement of reciprocity in liberalization also meant the loss of “special and differential” treatment for developing countries and of trade preferences that had been granted to former dependencies and designated allies. The mandated administrative reforms, which raised the costs of implementing new rules while reducing revenues from tariffs, imposed a heavy burden on low-­ income nations with weak institutions (Njinkeu and Cameron 2008; Estevadeordal et al. 2008). These new trade agreements introduced numerous obligations that had not been elements of prior trade rules.

Rule Makers and Rule Takers 63

Conventional trade negotiation theory, which assumes that trade partners independently designate their own goals, strategies, and parameters and then negotiate toward agreement, misses the power dynamics and resource realities that characterize “bargaining” between highly unequal nations. Manger and Shadlen’s (2011) concept of “political trade dependence” helps fill that gap. This concept can be used to explain why some developing countries might participate in regional or bilateral trade deals with developed countries, in spite of potential costs. Preferential market access under Generalized System of Preferences (GSP) Programs and GSP-­related arrangements like the Caribbean Basin Initiative (CBI) and the Andean Trade Preference Act involve unilateral openings, and, for GSP extensions, are based on political criteria. These programs offer easier access to the U.S. and European Union markets, stimulating job growth and increased investment, but they are designed as temporary measures. Susceptible to timing out or revocation without compensation, these political deals create a new area of vulnerability and risk. As the economies of developing countries reorient around these openings, an important segment of production and employment becomes dependent on their continuation. State leaders in “partner” countries then pursue regional free trade agreements in order to retain market access and avoid painful losses, especially when the dominant power signals that the preferential pact is under review. Rule Makers and Rule Takers The present study uses a rule maker/rule taker framework to analyze the CAFTA negotiation process. The language of “rule maker” and “rule taker” focuses on the power imbalance in agenda setting and content control. It acknowledges that rule takers may actively seek an agreement and embrace the outcome, but it emphasizes the ways in which their options are constrained and bargaining space is narrowed. The United States as Rule Maker George W. Bush’s (2000–2008) foreign policy toward Latin America emphasized trade, building on the Clinton administration’s (1992–2000) pursuit of a hemisphere-­wide Free Trade Area of the Americas (FTAA). Launched by the Summit of the Americas meeting in 1994, the proposed FTAA had lost momentum by the end of the Clinton years, both at home and in critical quarters in Latin America. President Clinton had requested a renewal of “fast

64  Contesting Trade in Central America

track” authority from the U.S. Congress, by which the legislature allows the president to negotiate trade agreements and confines itself to an up or down vote on the outcome. Clinton’s request had been denied, thwarted by a combination of Democrats having second thoughts about the domestic impact of free trade agreements and Republicans inclined to reject initiatives of their political rival (Lemelin 1999). Resistance to the FTAA also hardened in key parts of Latin America, particularly in Brazil. By the time George W. Bush succeeded Bill Clinton, the prospects for completing the FTAA on schedule (in 2005) were slim. Unable to bring Latin America as a whole into a trade agreement, the Bush administration pursued the agenda piecemeal. The U.S. trade team shifted to “competitive liberalization,” a strategy for “gradually expanding the circle of co-­operation” through sequential regional and bilateral free trade agreements that built on competition among aspiring trade partners (Zoellick 2002). As FTAA negotiations met with rising opposition, the U.S. trade representative (USTR), Robert Zoellick, linked up with Central American leaders to advance formal discussion of a subregional FTA. Explaining the catalytic relationship between CAFTA and the FTAA, a USTR document concluded, “Agreement between the U.S. and Central America on free trade would promote a greater convergence of positions at the FTAA negotiating table. Together with NAFTA and the U.S.-­Chile FTA, an agreement with Central America would improve the likelihood of forging common views on a wide range of topics” (USTR 2003b). By liberalizing trade with subregions in sections, Zoellick attempted to rebuild momentum for regional action by raising the threat of lost opportunities that would be seized by “can do” countries at the expense of their “won’t do” neighbors.2 The U.S. push for global and regional trade reciprocity signaled that the unilateral trade concession under the CBI was timing out, and a more expansive and reciprocal arrangement would replace it. According to an account of the CAFTA negotiation process by Costa Rica’s lead negotiator, Anabel González, Central American trade representatives raised the issue during the FTAA’s 8th Ministerial Meeting in April 2001, and Zoellick responded by inviting the region’s trade ministers to confer about a possible FTA (A. González 2006, 4). Central American presidents, meeting with Bush at the Quebec Summit of the Americas shortly after, confirmed their interest in this initiative. CAFTA became an element in the administration’s 2001 bid for congressional reauthorization of trade promotion authority (TPA), along with the new round of trade talks under way in the WTO, the FTAA, and FTAs with Chile and Singapore. Bolstered by the rally of bipartisan support in the wake

Rule Makers and Rule Takers 65

of the 9/11 attack, Bush emerged victorious in his quest for TPA approval. This measure won the day by a one-­vote margin (215–214) along party lines in the House on December 6, 2001, and by a wider margin (66–30) in the Senate on May 23, 2002 (Sek 2003, 6–8).3 To secure congressional support, the measure included a commitment to incorporate labor and environmental concerns into U.S. trade agreements and to add stronger transition assistance for displaced U.S. workers, along with closer congressional oversight of the negotiation process (Sek 2003). These stipulations enhanced the U.S. rule maker role by creating a nonnegotiable agenda that FTA partners would be required to accommodate. Zoellick quickly pursued FTAs with several nations, getting trade treaties with Chile, Singapore, Morocco, and Australia signed over the next two years. Bush formally announced the U.S. interest in negotiating a trade agreement with Central America on January 16, 2002, shortly after the House TPA vote. This announcement served to launch a prenegotiation process, and preliminary consultations with key actors began even before Senate approval of TPA. A series of six technical workshops were held in 2002 to help negotiator teams prepare for the talks (A. González 2006, 4–5). Central America as Rule Taker The role of Central American leaders in this process has been less well documented, but negotiators in Costa Rica, El Salvador, and Nicaragua confirm their governments’ enthusiasm for a free trade agreement. Costa Rican accounts of the background to the CAFTA negotiation place its origins a decade earlier (A. González 2006, 3), when concerns emerged within the local trade bureaucracy about the impact of the coming NAFTA agreement on investment and markets in Central America. Fearful that NAFTA would privilege Mexico and draw trade and investments away from Central America, proposals and policy papers began to circulate among trade officials about possible further adaptations that could give CBI countries “NAFTA parity,” including a possible FTA. The eagerness with which Central American leaders pursued trade agreements, as El Salvador’s Francisco Flores did with Mexico (2001), the Dominican Republic (2001), Chile (2002), and Panama (2003), and, later, the United States, suggests that the role of local actors merits attention. Whatever their contribution to the CAFTA launch, Central American leaders had few options, and even hesitant officials would have been hard pressed to resist this decision. As production and employment expanded around the CBI sectors, Central American economic stability became increasingly dependent on the retention of the U.S. market. Some CBI market

66  Contesting Trade in Central America

Table 2.1. Central American trade patterns Trade openness coefficient* Country Costa Rica El Salvador Nicaragua

Exports to U.S. as % of total

1997

2003

1997

2003

85 63 71

95 70 76

40 33 46

58 42 45

Sources: Trade openness coefficient—World Bank, World Development Indicators; exports of goods to U.S. as % of total exports (includes EPZ value-­added)—Agosín and Rodríguez (2005, 12). *Imports plus exports of goods and services as % of GDP.

openings, however, had delimited time periods; those based on the Caribbean Basic Trade Partnership Act were scheduled to lapse in September 2008. An FTA was presented, by both U.S. officials and Central American trade advocates, as the means through which the region could secure durable access to the U.S. market. For those countries with a major textile and apparel industry, the approaching end of the Multifibre Agreement and impending China threat exacerbated uncertainties. Fearful of market loss, hopeful about enhanced opportunities, and convinced that a more secure trade deal would entice investment, Central American leaders lined up for the CAFTA negotiations.4 Central American economies were heavily dependent on trade (see table 2.1). National trade openness coefficients, which measure the value of imports plus exports as a percentage of GDP, increased from 85% in 1997 to 95% in 2003 in Costa Rica, 63% to 70% in El Salvador, and 71% to 76% in Nicaragua, rising again after a dip during the 2001 U.S. recession. This dependence on trade created both growth opportunities and vulnerabilities for Central American countries, which had spent over a decade reorganizing production around the market openings created by CBI. By 2003, 50% of Central American exports went to the U.S. market, up from 42% in 1997 (Agosín and Rodríguez 2005, 12). The U.S. market destination was particularly strong for Costa Rican exports, 58% of which went to the United States in 2003 (see table 2.1). Preferential access contributed to this flow; USTR reported that

Rule Makers and Rule Takers 67

74% of Central America’s 2002 exports to the United States entered duty free under concessionary terms (USTR 2003b). This pattern of increased exports and concentration in the U.S. market was accompanied by increased foreign investment in the region, with the United States playing an important role. Foreign direct investment (FDI) came from various countries, including from within the Central American region itself, but the United States was the dominant source (ECLAC 2010a, 49, 55, 56). This pattern was particularly pronounced for Costa Rica, where two-­thirds of FDI in 2002–2005 came from U.S. sources. Export processing zones were significant FDI destinations and became a major source of employment. By 2005–2006, the maquila assembly plant sector was providing over 442,000 jobs in Central America, with an especially strong presence in Guatemala and Honduras, and generated over 80,000 jobs in El Salvador, 75,000 in Nicaragua, and almost 53,000 in Costa Rica (Carciofi and Granados 2007, 30).5 Export growth was accompanied by unilateral tariff reductions across the region (see table 2.2). A World Bank study of Central American trade policy found Costa Rica’s average tariffs falling sharply from 53% in 1985 to a low of 3.3% in 1999–2000. El Salvador followed suit, with average tariffs dropping from 23% to 5.7% across this period. Tariffs fell in Nicaragua as well, from 54% in 1985 to 8% in 1990, before rising modestly across that decade.6 Based on this profile, Central America was a prime candidate for a free trade agreement with the United States. Increasingly dependent on trade, with exports going heavily to the U.S. market, the United States a key source of foreign investment, and with tariffs already falling, the region had become Table 2.2. Average tariffs, 1985–2000 Average tariff (%)

Country

1985

1990

1995

1999–2000 weighted

Costa Rica El Salvador Nicaragua Central America average*

53.0 23.0 54.0 45.0

16.4 16.0  8.0 14.1

11.2 10.2 10.7 10.8

 3.3  5.7 10.9  7.1

Source: Jaramillo and Lederman (2006, 19). *Includes Guatemala for all years and Honduras for 1995 and 1999–2000.

68  Contesting Trade in Central America

deeply integrated into the U.S. trade sphere. When the Bush administration decided to advance its Latin American trade agenda in a piecemeal fashion, ending the CBI arrangement in favor of a free trade agreement, it could hardly have chosen more propitious terrain. What follows is a discussion of the CAFTA negotiation process, participants, and pressures. It draws on personal interviews I conducted in Nicaragua, El Salvador, and Costa Rica between 2003 and 2010 with direct participants in the process, including trade ministers and members of the negotiation teams; heads of business associations and the technical staff with which they collaborated; representatives of civil society organizations who participated in the rounds; and academic, international, and press observers of the process. This material is supplemented with detailed written accounts produced by key ministries (COMEX 2004b; Ministerio de Economía [El Salvador] 2004), negotiators (A. González 2006), business sector representatives (Rodríguez Vargas and Solano Murillo 2004; Weisleder 2004), and civil society coordinators (Iniciativa CID 2003a, 2003c; Cáceres 2003, 2006). National-­level trade-­policy analyses (Monge-­González 2005; Orellana Merlos 2005; Herdocia Sacasa 2005; Carrión 2009), reports by consultants and international organizations (CARANA 2004a, 2004b; Miller 2005; USAID 2005; Carciofi and Granados 2007; Bravo and Ramos 2008), local and international news coverage, and official documents distributed along the way round out the information base on which this analysis is built. My interpretation of the CAFTA story parallels the findings in chapter 1, which demonstrate the way external actors, particularly the U.S. government and international financial institutions, intersected with local officials, technocrats, and an increasingly internationalized business community to launch the inaugural phase of market reform. This chapter gives special attention to the roles of USTR, USAID, and the Tripartite Committee that nurtured the process. As we have seen, external agents operated in conjunction with cooperative officials and domestic technocrats, who managed the local assimilation. Business interests, although varied, had been reshaped by prior economic adjustments, and leading sectors aligned with the push for the FTA. Finally, as with the general transition to market reform over the previous decade, public support helped legitimize this process. The evidence presented here demonstrates that public endorsement was hardly a spontaneous development, however, but was, instead, a carefully orchestrated and, as we will see in coming chapters, volatile outcome. What follows is a discussion of the participants in the rounds, the phases, and outcomes of the negotiations, and the initial efforts to cultivate public support.

Rule Makers and Rule Takers 69

Rounds: Structure and Participation As a fast-­paced, twelve-­month negotiation process began, each country created a negotiation team, an action plan, and a process for consultation. What and how did the Central American countries contribute to the agreement that emerged? This section discusses the three sets of actors that formally engaged the process: government officials; business sector representatives; and civil society participants, who were formally included for the first time in Central American trade talks. Governments: Teams, Technocrats, and Tasks [T]here’s a kind of “minimum content” that all FTAs the U.S. enters into will have, without which that country will not be disposed to negotiate a free trade agreement. Anabel González (2006)

Fear is the most powerful human feeling. For some, this leads them to reject CAFTA, especially with little knowledge of it. For others, they embrace CAFTA as a religion. Sequeira (2006)

CAFTA was launched at a propitious moment in Central America. Elected leaders included several who hailed from the business sector. Nicaraguan president Enrique Bolaños (2002–2007), for example, had soundly defeated perennial Sandinista candidate Daniel Ortega in the 2001 presidential election, just as the CAFTA process was getting under way. As former head of Nicaragua’s peak business association, the Superior Council of Private Enterprise during the turbulent 1980s era of the Sandinista Revolution, Bolaños was deeply committed to Nicaragua’s ongoing market reform. Endorsing economic globalization and trade liberalization, he made CAFTA a significant element in his development strategy. Greeting the delegates to the seventh round of CAFTA negotiations, which Nicaragua hosted, Bolaños (2003, 3) offered this encouragement: “Globalization is not something we can accept or reject. It is like the sun coming up in the morning, whether we want it to or not. We [either] climb on this train of global realities to take advantage of them for the good of our people, or we get off the train and we’re left with nothing to do, and so we become even poorer.”7 Throughout the region, presidents lined up economic ministers and nego-

70  Contesting Trade in Central America

tiation teams led by well-­credentialed technocrats. In Costa Rica, formal sponsorship of the negotiation fell to newly elected president Abel Pacheco (2002–2006), of the Social Christian Unity Party. Officially supportive of CAFTA, Pacheco staffed the economic sector with a network of skilled market reformers. Direct responsibility for the negotiation went to COMEX under the leadership of Alberto Trejos, a University of Pennsylvania–trained economist and dean of the Central American Business Administration Institute (INCAE) in Costa Rica. Anabel González was named to lead the Costa Rican negotiation team, rotating from the Costa Rican Investment Promotion Agency (CINDE) back to COMEX, where she had worked for over a decade (1991–2001) as vice minister and director of trade negotiations. In El Salvador, Nationalist Republican Alliance president, Francisco Flores, named industrial engineer and businessman Miguel Lacayo as economy minister; Eduardo Ayala Grimaldi, formerly director of trade policy and vice-­minister of economy, who headed El Salvador’s prior trade negotiations, led the CAFTA team. In Nicaragua, Bolaños named Mario Arana, a University of Texas at Austin–trained economist, to head the Ministry of Industry and Trade Promotion (MIFIC), the ministry that oversaw the CAFTA process. Longtime INCAE business school professor Carlos Sequeira became Nicaragua’s lead negotiator. The process of negotiating an FTA with the United States would be demanding, covering a much wider range of products and issues than any prior effort. Central America’s earlier experience with trade agreements had been largely confined to internal pacts and scattered deals with Mexico, Chile, and the Dominican Republic.8 The CBI had emerged, not through rounds of negotiations in which the parties carefully calibrated trade gains and concessions, but as a unilateral U.S. opening. To assist government preparation for the CAFTA negotiations, external funders formed a technical commission and mobilized resources. The Inter-­American Development Bank (IDB), the Economic Commission on Latin America and the Caribbean (ECLAC), and the Organization of American States (OAS) had established a Tripartite Committee a decade before to provide Latin American countries with information, resources, and expertise during the FTAA negotiation (Miller 2005). As the FTAA process fizzled and CAFTA discussions advanced, the Committee, now supplemented with USAID support, shifted its attention to Central America. Central American teams were advised by the Tripartite Committee as they drafted their National Action Plans in preparation for the negotiations (Miller 2005, 19–20). With assistance from donors and using step-­by-­step guidelines, each nation specified its “trade capacity building” (TCB) needs

Rule Makers and Rule Takers 71

for each of three phases: the negotiations, implementation, and additional reforms to be undertaken as trade liberalization progressed.9 The IDB chaired the Tripartite Committee and mobilized the bulk of the early financing. Data on funding dedicated specifically to CAFTA are necessarily imprecise, but according to Eric Miller (2005, 28–30), an IDB consultant involved in the process, $439 million was committed to Central American countries for TCB in 2003, three-­fourths of which came from the IDB.10 The IDB continued to be an active partner in the process through the negotiation and implementation phases. The IDB undertook twenty-­five nonfinancial activities and provided five loans in support of the CAFTA process (Carciofi and Granados 2007, 71). The bank’s nonreimbursable technical assistance included the commissioning of a series of research reports on economic challenges and opportunities; assisting with the definition and execution of several National Action Plans; providing training in computable general equilibrium modeling and understanding rules of origin; disseminating information to national legislators and the public; coordinating donor contributions; supporting regional training of labor judges; and facilitating technical training on intellectual property provisions, safeguards, and tariff-­rate quotas, among other issues. IDB financial assistance also included competitiveness loans to Costa Rica and Honduras and trade sector facility loans to Guatemala, Nicaragua, and the Dominican Republic. Further assistance was provided directly by the U.S. government. A USTR (2003a) overview of U.S. government trade assistance to Central America identified a long list of activities it supported in 2003, including buying computers and software to strengthen ministry information systems; providing workshops and training on food safety, intellectual property, government procurement, and antitrust law; funding negotiator English-­language training; training environmental compliance inspectors; training workers about occupational health and safety; setting up programs on child labor; arranging seminars on small business needs; and helping trade ministries develop civil society outreach programs. USAID could not, by law, directly train negotiators who would negotiate against the United States. Nonetheless, it played an extensive role in advancing CAFTA negotiations in Central America, some of this work contracted through a Washington-­based development firm, CARANA Corporation (USAID 2005), as discussed further below. This assistance facilitated the negotiations but did little to alter Central America’s rule taker role. In addition to technical deficits faced by negotiators in Central America, these countries lacked the institutional mechanisms necessary to govern negotiations and ensure that the agreement would adhere

72  Contesting Trade in Central America

to national law and guidelines. The Central American presidents were not required to seek prior authorization from their legislatures before proceeding into a trade negotiation. The generally weak legislatures in the region, unlike the U.S. Congress, had no ability to stipulate the terms and constraints under which negotiators would labor. Central American negotiators, as a result, entered the process on turf defined by the United States, in spite of their talent, effort, and training. Business: Firms, Alliances, and Associations After President George W. Bush announced the exploration of a trade agreement with Central America, ANEP called a meeting of the governing board in February 2002, with participation of 37 member associations. After analyzing different aspects, we agreed to give complete support to the start of the negotiations. ANEP (2003)

In our view, CAFTA is not just a trade agreement; it could serve as a development instrument. It commits future governments to this economic policy. It brings more predictable rules of the game, more stability, greater investments, more and better employment, and, in the end, more prosperity. The whole society gains. Alemán (2003)

Although much of the terrain covered in the CAFTA negotiation would be set by U.S. authorities, some details remained to be negotiated. The business sector eagerly weighed in on issues of “market access,” that is, determining which products would face what tariffs and quotas for how long in which markets. Some business representatives were also concerned about possible U.S. efforts to impose labor obligations on unwilling Central American producers (Orellana Merlos 2010) and entered the CAFTA process defensively to minimize the impact of labor provisions. Others supported the migration of U.S. regulatory practices and standards as a means of attracting foreign investment and technology transfer. To advance these various positions, Central American businesses organized their own delegations and lobbying processes. The resulting multilayered business architecture allowed private sector representatives to gain a visible presence in the CAFTA deliberations, within parameters set by the U.S.-­defined template.

Rule Makers and Rule Takers 73

Market liberalization over the previous decades had reshaped the Central American business sector, producing capital concentration around large domestic firms, thickened connections with transnational corporations, and the growth of regionally linked economic groups with diverse portfolios (Segovia 2005; Colburn and Sánchez 2000; Sánchez-­Ancochea 2005). The new elite benefited from the space opened by privatization and deregulation, simultaneous liberalization across the region, and transnational corporation (TNC) demand for logistical support and local suppliers and distributors. Reform “winners” included bankers, large exporters and importers, and those in the emerging tourism and real estate sectors. By 2003, these groups had acquired a powerful voice in the business community. Exporters who depended on product placement in the U.S. market and large importers who wanted more fluid access to U.S. goods and services became lead advocates of CAFTA. Many of these firms were interlinked with transnational corporations, either as suppliers or markets, and they supported a regulatory environment that was congenial to international investment (Sánchez-­Ancochea 2008; Cox 2008). Interpreting the agreement as “a tool to make the area even more hospitable to finance by harmonizing supervisory standards and regulations,” Coril Madrid (2009, 202–203) identified financial elites as powerful backers of the negotiation. Osterlof (2009) highlighted the support in Costa Rica given by large national firms, whose expansion was often linked to foreign investment and contracts. The largest firms did not need formal associations to pursue their interests; top business leaders had access to power through political party ties, campaign contributions, media ownership, and family relations (Segovia 2005, 89–120; Osterlof 2009; Colburn and Sánchez 2000, 141–168). But many businesses also drew on their chambers and associations to defend sectoral preferences, with the peak associations and designated coordinators positioned to sort out internal conflicts. The Salvadoran business peak association, ANEP, offered “complete support to the start of the negotiations” within weeks of the initial Bush announcement (ANEP 2003). Peak associations in Costa Rica and Nicaragua likewise became significant allies. Sectoral associations also engaged the process, with different gradations of access and influence.11 As the 2002 preparations for CAFTA negotiations began, special business advisory apparatuses were activated to monitor negotiations and coordinate the national-­level business response. The Costa Rican Union of Private Sector Chambers and Associations resuscitated the interchamber coordination mechanism it had employed during Costa Rica’s previous trade negotiations. Now with a fuller technical support staff, the Business Council for

74  Contesting Trade in Central America

the Central America–U.S. Trade Negotiations (CONCAUSA) coordinated Costa Rican business participation in the CAFTA process (UCCAEP 2005, 27; Ruiz and Solano 2004: 102–122). Likewise in El Salvador, the Office of Assistance for the Business Sector in Trade Negotiations (ODASP), created in 1993, was reactivated for coordination purposes. In Nicaragua, a COSEP-­sponsored team under Oscar Alemán (2006) served as the coordinating mechanism, providing a continuing presence for the sector in and between the negotiation rounds. Divisions within the business community between those who stood to gain and those who did not presented continual organizational challenges,12 and some of the most active business support shifted downward to specific chambers, such as the vulnerable textile sector and the highly concentrated sugar lobby, which organized cross-­regionally (Schyfter 2005; Carrión 2009). The textile and apparel industry was particularly active, facing the double threat of CBI termination and increasing competition from China. Since Central America was initially envisioned as a bloc where countries and business actors would forge a common position, business peak associations also coordinated across the region, creating the Central American Business Council (CECA) in February 2002. New Central America–wide sectoral federations joined preexisting ones to layer in regional coordination around commerce, industry, textiles, and agriculture, among others (Ruiz Maida and Oñate 2004). Perhaps predictably, CAFTA enthusiasm was strongest in the national chapters of the American Chamber of Commerce, a business segment that had long lobbied to lift restrictions on trade and investment. As a representative of U.S. corporations that would gain easier access to both U.S. and Central American markets, along with a host of trade related benefits (government procurement access, intellectual property guarantees, etc.), this organization lent its weight and resources to the effort. The regional AMCHAMs also joined the Business Coalition for U.S.–Central America Trade, a cross-­ national lobbying effort targeting the U.S. Congress (Business Coalition for U.S.–Central America Trade 2003). Although some AMCHAMs focused on U.S. lobbying, such as AMCHAM–El Salvador, which represented a reported 100 U.S. businesses (Bettaglio 2004; Mendoza 2004), others, like the Costa Rican AMCHAM, took on a dual role and lobbied at both ends. With a membership of over 400 and the presidency of the Costa Rican AMCHAM formally rotating between U.S. and Costa Rican citizens, AMCHAM–Costa Rica defined itself as a binational organization, and its leaders moved readily between the two national settings (Pacheco 2005; Denton 2005). AMCHAM-­Nicaragua, though de-

Rule Makers and Rule Takers 75

veloping more slowly than the others, experienced rapid growth during the CAFTA negotiations, with membership reaching 182 firms in 2006; it also participated in lobbying efforts in both the United States and Nicaragua (González C. 2006). A large literature on the mobilization of bias links government and business interests, and this affinity is often starkly evident during trade negotiations. In its most elementary version, the claim about business-­government linkage is constructed around financial incentives, such as business use of campaign contributions and bribery to elicit cooperation, but these links are commonly much more complex and multidimensional. Business ties to state leaders often involve shared social extraction and cultural affinities, reinforced by school ties, social networks, and kinship. In the Central American case, several presidents had their roots in business organizing and tended to privilege the business and private sector organizations from which they came.13 Beyond this value affinity, business interests could also make credible claims that large-­scale layoffs associated with negotiation failure would be economically and politically costly, thereby conjuring support even among diffident officials. The structural dependence of state stability on business success helped ensure careful listening. In the CAFTA negotiations, the relationship between the government trade negotiator teams and the organized private sector was widely described as cooperative, or even “symbiotic” (Carrión 2009, 17). Through close collaboration in and between the rounds, negotiators collected information needed to construct bargaining strategies that would advance producers’ economic goals. This bond was reinforced by a marked pattern of role rotation, especially pronounced between the technical staff working for private sector associations and the technical staff of relevant ministries. My interviews with CAFTA negotiation participants in Costa Rica in 2005, which included questions about prior training and career trajectories, revealed frequent movement back and forth between trade related work in the public and private sectors, a finding that is consistent with Bull’s (2008) observations based on the U.S.-­Chile FTA negotiation process. In addition to blended identities associated with role rotation and access to national negotiators through scheduled appointments and informal contacts, the business sector was formally integrated into the negotiation process through the side room consultations during the rounds. The side room mechanism had been developed for Mexican business representatives during the NAFTA negotiations in 1991 (Alba and Vega 2002, 60–64) and was emulated by Central American business groups during their subsequent trade negotiations with Mexico. This mechanism gave business representatives

76  Contesting Trade in Central America

space on location during the actual negotiations, allowing them sustained input as agreements were hammered out. Its use in the CAFTA negotiation rounds allowed hundreds of private sector representatives to converge at these locations; over 500 business representatives reportedly attended the Salvadoran round alone (Bravo and Ramos 2008). Central American businesses in CBI-­dependent sectors, such as textiles, went beyond national and regional organizing to include hiring lobbyists and consultants in the United States to design their bargaining strategy. Sugar producers hoping to break through U.S. protectionism hired a Louisiana State University research team to model the impact of increased Central American sugar penetration on the U.S. market, producing documentation of modest consequences for U.S. domestic producers (Carrión 2009).14 Central American governments also hired DC lobbyists to enhance the image of their country in the United States (Arana 2006), as CAFTA opposition coalitions in the United States denounced the human, labor, and environmental-­rights failings in the region. At the end of the process, Central American private sector leaders formally endorsed the outcome, praising the accord and the official negotiators, and bathing CAFTA in a warm glow.15 My 2005 interviews in Costa Rica with forty-­two participants in the CAFTA negotiation process found strong approval in the business sector (see table 2.3). In this set of semistructured interviews, respondents were asked for their assessment of CAFTA, and their positions were coded along a 5-­point scale from 1 (strongly approve) to 5 (strongly disapprove) (see appendix A). When comparing overall responses of this nonrandom group of government, business, and civil society elites, approval levels of private sector leaders were striking. Two-­thirds of the business respondents (67%) strongly approved of CAFTA, citing numerous benefits that the agreement would confer, and another 22% also expressed approval, although their answers were more qualified. Among business sector respondents, only one (from the small business subsector) indicated disapproval.16 Although the larger and medium-­sized businesses, whose voices tended to dominate in private sector associations, supported the deal, private sector perspectives on CAFTA were not uniform in Central America, as might be expected, given the “winner” and “loser” divisions in trade agreements. Small businesses lacked the managerial and financial resources needed to take advantage of export opportunities, and they faced the prospects of increased competition from imports. Organizations representing larger producers tended to neglect or even undermine the positions of smaller businesses, although numerically the latter far outweighed the former.17

Table 2.3. Costa Rican views on CAFTA, 2005 Position (%)

1 Strongly approve (N=16)

2 Somewhat approve (N=10)

3 Neutral, no position (N=3)

4 Somewhat disapprove (N=6)

5 Strongly disapprove (N=7)

40

40

0

10

10

100

 0

0

 0

 0

14

57

0

14

14

Private sector N=9

67

22

0

11

 0

Civil society N=19 Social movements, NGOs N=8 Research, think tanks, universities N=11

16

16

16

21

32

 0

25

0

12

62

27

 9

27

27

 9

International actors N=4 U.S. government N=2 International organizations N=2

75

25

0

 0

 0

100

 0

0

 0

 0

50

50

0

 0

 0

Sector (N=42) Costa Rican government N=10 Executive, agencies N=3 Legislature N=7

78  Contesting Trade in Central America

Previous FTAs signed with Mexico and Chile had differentiated impacts on Central American business sectors; a potential agreement with the United States raised well-­worn concerns in vulnerable parts of the business sector. Salvadoran business chambers like the Agricultural and Agroindustrial Chamber of El Salvador (CAMAGRO), which represented agricultural producers, and the Salvadoran Association of Small and Medium-­Sized Business Owners (AMPES), representing small and medium-­sized firms, recognized their special vulnerability to U.S. exporters. CAMAGRO worked with similarly situated agricultural chambers in Central America to develop a proposal for “special and differential treatment” (FECAGRO 2003), especially given the hefty U.S. farm subsidy in the Bush administration’s 2002 farm bill. AMPES convened a conference in September 2003 to present its concerns about threats posed by the advance of large U.S. retailers and to call for additional technical training and credit to meet CAFTA challenges (AMPES 2003). These sectors were largely unsuccessful in their efforts to carve out exceptions within CAFTA or to secure compensatory transfers. They often found stronger champions among the civil society participants than within the business lobby. Civil Society CAFTA legalizes dumping. It’s tragic. Cáceres (2006)

For a few pockets and brassieres, we handed over our telecommunications. Rojas (2005)

Participation in the CAFTA negotiation extended beyond technocratic officials and business organizations and, in a first for Central America, included representatives of civil society. For over a decade, resistance movements had been pushing at the gates of international economic summits, shadowing trade negotiations, and calling for new lending practices. They demanded to have their voices included in deliberations about the global economic architecture. Movement leaders claimed that forceful participation by civil society would make international negotiations more consistent with democratic principles and produce better policy results for society as a whole (Fox and Brown 1998; Edwards and Gaventa 2001; J. Smith 2008). As the centrality of civil society to democracy and development became better recognized, development practitioners caught the wave. Major international organizations, in-

Rule Makers and Rule Takers 79

cluding the World Bank, regional development banks, and the United Nations, began to formalize consultation processes. FTA negotiations provided a new arena for participatory contestation. The NAFTA negotiations had been an insular process; Mexican negotiators had consulted only with business representatives, and even then had prioritized only certain sectors (Thacker 2000; Cameron and Tomlin 2000). Complaints about social deficits in the NAFTA process generated public debate, and demands for greater inclusion mounted. The subsequent FTAA process, contested by activists at every turn, built in layers of political buffering by formalizing a civil society consultation processes (FTAA–Committee of Government Representatives on the Participation of Civil Society 2003; Newell and Tussie 2006). Building on this scaffolding, the U.S.-­Chile free trade negotiation, which was being completed as the CAFTA rounds got under way, opened up the side room process to allow credentialed civil society representatives to participate.18 This mechanism legitimized the presence of non–business sector representatives and gave them easier access to information and the press. A civil society outreach initiative was incorporated into the CAFTA process from the outset, and USAID funding supported this work. CARANA Corporation got the contract under USAID’s Project to Develop Free Trade and Reduce Business Constraints in the LAC Region in September 2002, the month after TPA was approved, and collaborated with each of the Central American negotiation teams to help them design and monitor a Civil Society Outreach Program (CSOP). The amount of CSOP assistance varied by country, with Costa Rica reportedly requiring only modest support and El Salvador heavily dependent on CARANA consultants for outreach project design (USAID 2005, 14). The cross-­national similarities in the outreach template are evident in the official publications on citizen participation in the CAFTA process (COMEX 2004b; Ministerio de Economía [El Salvador] 2004),19 and in CARANA’s reports on the process (USAID 2005; CARANA 2004a, 2004b). In its final report to USAID, CARANA Corporation compiled a detailed CSOP inventory for each country (USAID 2005). This document tallied over 1,350 CAFTA-­specific events and seminars, with over 10,000 participants, conducted between January 2003 and March 2004 in Central America. Staff from economic ministries reported briefings for over 1,000 “leading businesses,” 750 meetings with “productive sectors, NGOs, and industry associations,” and another 110 meetings with “the intellectual and academic community” (125). Outreach efforts involved the creation of CAFTA websites by the

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ministries in charge of negotiations, the distribution of supporting materials to groups and journalists, and various media campaigns. Government negotiators also met with credentialed civil society representatives in side rooms during the negotiation rounds, giving updates and taking questions between working sessions. The civil society side room space varied somewhat from round to round, as did participation levels. Initially, separate rooms were designated for private sector and civil society gatherings, and separate briefings were provided at the region-­wide level (A. González 2006, 11). Over time, civil society representatives made their way into the private sector sessions, hoping to get more and better information (Rubio 2004), and the separate sessions were eventually suspended. As the Central American common front fractured and negotiations became increasingly bilateral, these side room sessions shifted downward to the national level. For civil society representatives, participation in this process was often described as difficult. Each of the nine rounds was held in a different location, rotating between the United States and Central American countries, a process that facilitated participation when the session was local but made regular attendance costly in time and money. Preparation required wading through technical material on sectoral trade and investment regulations. The text on rules of origin, intellectual property, dispute settlement, and investment involved a highly specialized language, and even experts sometimes disagreed on how these provisions should be interpreted. These organizations had little preparation in these areas, weak financing, limited infrastructure, and only modest ability to carry out the research required to partner in this discussion. In spite of the challenges, a small group of NGO leaders moved into this opening space. The most significant actor was the Mesoamerican Trade, Integration, and Development Initiative (Iniciativa CID), a new, Central America–wide network that linked a cluster of organizations working on development, the environment, labor, women, small farmers, and small businesses. Many members of these organizations had become critical of market reform and were skeptical about the benefits of a free trade agreement with the United States. Strongly committed to political engagement, they worked to be more fully included in the formal CAFTA discussion. With affiliates in all five Central American countries, Iniciativa CID crystallized around a hub of the National Development Foundation (FUNDE) in El Salvador, the Central American Council for Development Research (CIDECA) in Guatemala, and Centro Humboldt, the main environmental organization in Nicaragua. Financial backing from a range of international development organizations allowed CID representatives to bid for a role in the process.20

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CID staff members conducted studies on the most controversial aspects of the agreement, including labor rights, environmental implications, sensitive agricultural products, and the special concerns of small and medium-­sized businesses. Troubled by the common complaint that critics were only naysayers incapable of offering alternative recommendations, CID leaders set to work on their own proposals (Rubio 2004; Ordóñez 2006). In the second round of the negotiations, they presented a series of recommendations on ways to remove sensitive products from the tariff reduction schedule, improve labor and environmental protections, increase democratic participation in the negotiations, and address related immigration issues (Iniciativa CID 2003a). More detailed recommendations on agriculture and livestock and on labor provisions followed in July 2003 (Iniciativa CID, 2003c). My 2005 interviews with Costa Rican civil society representatives who participated in one of the rounds or in the subsequent debate revealed divergent perspectives on CAFTA, although with a generally oppositional tilt (see table 2.3). Of the civil society respondents who identified as representatives of social movements or NGOs, almost two-­thirds (62%) expressed strong disapproval of CAFTA. Those who hailed from the research and policy side (research centers, think tanks, and universities) were more divided, with around one-­third expressing support (either strongly or somewhat approve) and around one-­third opposed (either strongly or somewhat disapprove). When combining the two groups in this nonrandom sample, civil society representatives on the whole were dissatisfied with CAFTA, with a little more than half (53%) indicating some (21%) or strong (32%) disapproval. Although the effort to include civil society participation in the negotiation was laudable, the actual experience for participants was often disappointing. The number of civil society representatives attending the rounds was small, leaving them far outnumbered by the business presence,21 and they had no detectable influence on the text. The analytical framework developed by Juliana Martínez Franzoni (2004) in her critique of the Costa Rican participation process is instructive. Differentiating between what it means to inform, to consult, to dialogue, and to negotiate—four forms of engagement with escalating expectations about horizontality and mutual agreement— Martínez Franzoni contended that the CAFTA process fell short of a real consultation (and even more so as a dialogue or negotiation).22 In her view, participants were unable to raise questions about larger social and economic goals or the way CAFTA provisions would affect their society. Interactions with negotiators tended to focus on technical issues such as tariff phaseout schedules, with the basic framework accepted as given. Even some observers from the business sector drew the same conclusion (Orellana Merlos 2005,

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2010), noting the lack of transparency, particularly at the end of the negotiations, and the marginalization of those who did not speak in specialized trade language. The Negotiation Process Central American participants in the CAFTA negotiations commonly divided the process into three stages: the initial, “easy” stage, in which teams presented opening positions; the middle phase, in which differences among and within became more pointed; and the final stage, in which the process became essentially bilateral as each country negotiated specific terms with the United States on the most difficult components of the agreement. A postnegotiation phase, in which Central American negotiators were required to make additional concessions in order to accommodate disgruntled U.S. business sectors and their congressional representatives, concluded the process. In the opening stage, the U.S. team, headed by chief negotiator, Regina Vargo, proposed that the CAFTA framework be based on the text for the U.S.-­Chile Free Trade Agreement, which had been completed in December 2002. This step created a template that included a dense network of trade regulations, intellectual property rights, restrictions on development policy, and investment protections. In keeping with the U.S. rule maker role, issues of great importance to Central American countries, such as immigration and U.S. agricultural subsidies, were excluded from the agenda at the outset. The U.S. team also advanced the principle of confidentiality during negotiations, which conflicted with the goals of transparency and inclusion. The U.S. representatives made it clear that CAFTA would replace the CBI, not simply serve as an option or alternative. Continuing access to the U.S. market would now come with a price. The ability of Central American producers to place their products in the U.S. market free from tariffs would require two changes: Central America would need to reciprocate by opening its market more fully to U.S. products, and these countries would need to accept a “state of the art” regulatory process that was “similar to that provided under U.S. law” (USTR n.d., 8). Central American countries were already committed to rules governing investment and intellectual property as members of the WTO. In that sense, CAFTA obligations were often similar to existing commitments (Cerón and Godoy 2009). But several CAFTA rules were designed to “clarify and build on” WTO obligations and introduce more rigorous enforcement mechanisms (USTR n.d.). CAFTA provisions added a potential five to ten years to WTO

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requirements on patent protection, for example, and necessitated multiple changes in local laws to bring them into compliance. Although some objections to the new rules were registered during the negotiations, particularly by representatives of the health and generic pharmaceuticals sectors concerned about access to medicine, the U.S. characterized these trade disciplines as “rule of law” and “transparency” issues, which, as such, were nonnegotiable. Central American negotiators, for whom CAFTA was regarded as a mechanism to attract FDI, accepted the new disciplines in hope of increasing their country’s attractiveness to skittish foreign investors. As in other FTA processes, negotiators placed products in a set of tariff “baskets,” each with a different phaseout period. Attractive products that were not produced locally could be placed in the zero-­tariff category (“basket A”) and receive immediate access to the country’s market; products that directly threatened local producers could be placed in other baskets, their entry temporarily restrained by a longer tariff phaseout period. Recognizing that Nicaragua and Honduras were among Latin America’s poorest countries and that adjustment to unrestricted U.S. agricultural imports would be a challenge in their deeply impoverished countryside, the United States agreed to a longer phaseout period—up to twenty years for Central America—than had been approved in its trade agreements with Chile (twelve years) or Mexico (fifteen years) (Taccone and Nogueira 2004, 31). The United States rejected the bid by Central American agricultural producers for durable exclusions and allowed each country to remove only one product from the tariff elimination schedule.23 In theory, the phaseout process would give producers time to adjust, either shifting their area of activity or improving their productivity. In practice, the prospects for small farmers and grains producers were less sunny. The significance of the rural sector had been eroding for years with the advance of market reform in Central America (Enríquez 2010; Segovia 2002), and its prospects were unlikely to improve with further trade liberalization, especially when faced with subsidized food imports. Increased agricultural trade did offer some benefits, of course. Imports of subsidized staples like yellow corn, wheat, and rice would hold down the food bill for urban consumers; even staples producers who were not completely self-­sufficient would benefit from falling prices on the portion of their food intake that they had to purchase. Small staples producers who marketed their products, however, would face rising challenges as tariffs were lifted and prices fell (Todd, Winters, and Arias 2004). It was not clear, given the inadequacy of rural credit, infrastructure, and extension services in much of the region, how they would make the necessary adjustments.24

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As originally envisioned, Central American countries were expected to collaborate on a shared tariff reduction process during the negotiation. With a long common market experience and extensive intraregional trade and investment, this region was deemed ready for a joint endeavor. Although apparently unified in their commitment to negotiation, however, these countries had different political, economic, and social characteristics that quickly undermined a common front. Guatemala, in particular, presented a challenge to its neighbors. Decertified by the United States during the third month of the negotiations for noncooperation on narcotics control and changing its chief negotiator twice during the CAFTA negotiation process, Guatemala demonstrated little commitment to regional unity. During the middle phase of the negotiations, its representatives deviated from the agreed-­upon plan by offering immediate zero-­tariff access for 93% of U.S. products (Bravo and Ramos 2008, 27; “Guatemala Again Splits from Other Countries in CAFTA Talks,” Inside Trade, posted June 13, 2003). This position not only failed to protect Guatemalan producers of these items and adhere to the 70%–73% “basket A” goal that had been agreed on regionally, it also placed many producers from other countries at risk due to the ease with which imported goods circulated throughout the Central American market. Several Central American negotiators identified this breakdown in collaboration as the most difficult moment in the process. Fractured proposals weakened Central America’s thin bargaining power and reinforced the region’s rule taker role. Central American participants were also taken aback by the tough U.S. negotiation style. Instead of taking CBI-­related concessions as a point of departure for the negotiation, the U.S. team used continuing market access as a bargaining tool with which to extract additional concessions. Business representatives were disconcerted by the initial U.S. market access proposal, which would have imposed U.S. tariffs on most Central American products that enjoyed zero-­tariff access under CBI. Having assumed that CAFTA would provide Central American producers with at least the CBI level of access, producer representatives registered dismay (C. González 2003). In summing up the negotiation experience, Costa Rican lead negotiator Anabel González (2006, 85) observed, “You might well think, by virtue of the existing asymmetries, that the U.S. could be much more accommodating at the negotiation table with small countries like those of Central America. That was not the case.” The process, she concluded, was “very hard.” The U.S. team did restore CBI-­level access by the end of the negotiations, and improved market access for a small number of products. It further eased business concerns about the imposition of U.S. labor and environmental rules

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by requiring only the implementation of national laws, not the introduction of higher standards, and imposing fines on the government for nonenforcement rather than curtailing market access for companies that violated labor rights. It did little, however, to address the regional concern about U.S. sanitary and phytosanitary standards, which Central American producers often saw as a form of disguised protectionism, but which the USTR defended as “scientific.” In the final phase, negotiations became increasingly bilateral, with Central American countries played off against each other in competition for U.S. concessions. The textile industry in each country had developed in a somewhat distinct way, for example, and each set of negotiators struggled to get special U.S. consideration based on the profile of local operations. Honduras and El Salvador had developed major garment industries (exporting $2.4 billion and $1.7 billion, respectively, to the United States in 2002), whereas higher labor costs eroded the industry in Costa Rica (exporting $730 million) (USITC 2004, appendix I, 4). Late entry into CBI meant that the textile industry in Nicaragua lagged behind (exporting $433 million), particularly in view of its low labor costs. Textile sourcing also varied by country, producing different levels of intensity in negotiations over the rules of origin. CAFTA’s specific rules on textiles, consequently, varied somewhat from country to country. Adding further complexity to the process, concessions that were granted when the draft was completed were cut back under pressure from U.S. textile interests in the months that followed, in a postnegotiation deal that was outside the formal process.25 Rule Making and Rule Taking in the Costa Rican Telecommunications Provisions One outcome of the negotiation that illustrates rule maker and rule taker roles, but that also models some of the complexities in this distinction, is seen in the conflict over the telecommunications sector in Costa Rica. As chapter 1 notes, in spite of the market reforms of the 1980s, Costa Rica had not repudiated the parastate sector with the same intensity as had the ARENA government in El Salvador or the postrevolutionary government in Nicaragua. As a result, Costa Rica entered the CAFTA negotiations with important state enterprises still intact. The most significant of these, employing 12,000 workers (around 10% of central government employees), was the Costa Rican Electrical Institute (ICE).26 An earlier effort by President Miguel Ángel Rodríguez (1998–2002) to open the telecommunications sector to private investment, combining several

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legislative proposals in the Combo del ICE, had failed. That move triggered major opposition demonstrations in 2000, causing the Costa Rican government to back away from this reform effort. Recognizing the unfinished nature of the national debate and the sensitivity of the issue, President Pacheco and the COMEX negotiators stated their intention to keep discussion of the telecommunications industry off the table in the CAFTA negotiations. The COMEX “National Position” document issued in January 2003 concluded that the future of the telecommunications sector should be the result of “a national consensus derived from a full debate by Costa Rican society” (COMEX 2003, 23). In keeping with commitments he made even before his 2002 election (Villasuso 2005, 58), Pacheco proclaimed that the Costa Rican telecommunications sector would not be included in the agreement. Costa Rica’s negotiators took only observer status in the CAFTA working group covering this topic (A. González 2006, 27). In the final months of the negotiation, however, U.S. negotiators pressured Costa Rica to include the opening up of the telecommunications sector. In a press conference held at the presidential office in Costa Rica on October 1, 2003, Zoellick (2003b) made this requirement clear, stating, “[O]bviously Costa Rica retains its right to decide what it wants, but we need this as part of the agreement if the agreement is going to go forward.” During his meeting with Pacheco, Zoellick conditioned Costa Rica’s inclusion in CAFTA on the opening of this sector (A. González 2006, 27). After a year of insisting that telecommunications would not be part of the CAFTA discussions, Pacheco then instructed negotiators to follow up on the U.S. proposals. Costa Rican negotiators refrained from joining the others in signing the agreement in December 2003 and went into a final, tenth, round of negotiation with the U.S. team in January 2004 before completing the process. In this final round, the Costa Rican officials agreed to open aspects of the telecommunications and insurance monopolies to competition, including a phased opening of cell phone and Internet services—important growth sectors in the telecommunications industry.27 This concession wound up being the negotiators’ most politically charged action. Emphasizing that the agreement was to “open,” not to “privatize,” the Costa Rican team claimed a hard-­fought battle in which several last-­minute benefits were received (A. González 2006, 45–52). This maneuver most obviously responded to the U.S. desire to avoid a precedent-­setting exclusion of a major service sector, where the United States had competitive advantages. U.S. trade negotiators faced strong pressure from telecommunications giants to advance their interests in the CAFTA process (Seiz and Willis 2006). With a long list of FTA prospects ahead, the U.S.

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negotiators repeatedly proclaimed the need for full market opening, a stance that, if it held, would mitigate calls for selective exclusions by other trade partners down the road. The push may also have been encouraged by mixed messages from within the Costa Rican camp. Skeptics, for example, noted an IDB policy paper published in mid-­2003 that was coauthored by COMEX minister Alberto Trejos, in which inefficiency in the telecommunications sector was hypothesized as a factor contributing to Costa Rica’s recent economic slowdown (Rodríguez-­ Clare, Sáenz, and Trejos 2003, 53–55). CAFTA critics claimed government deception (Martínez Franzoni 2004); even sympathizers wondered whether Trejos’ unvarnished views had encouraged the Zoellick foray (Garnier 2005). Although perhaps only tacitly, Trejos may have signaled receptivity to this restructuring. As Cameron and Tomlin observed (2000, 29) in their study of the NAFTA negotiations, “international negotiators in weak states can more credibly use their vulnerability to international pressures to impose painful or costly domestic reforms, often implicitly colluding with the more powerful states against domestic constituents.” Various Costa Rican business participants had called for ICE’s privatization, further complicating the question of authorship. Business chamber dissatisfaction with ICE telecommunications services was well established prior to the onset of negotiations, and calls for an opening of the sector were frequent in their position papers and chamber newsletters. In interviews I conducted in 2005, several business representatives described frustrations with ICE, citing long delays in installing new phone lines and quality issues with cell phones or Internet access.28 Costa Rican elite sectors used the opportunity provided by the CAFTA negotiation to advance their preference for a telecommunications opening, maneuvering to bypass a contentious democratic process and the slow national deliberation about the future of the industry. Strategically located support for a mandated opening within Costa Rica, therefore, combined with U.S. government pressure to facilitate the inclusion of this controversial measure.29 This episode demonstrates the U.S. rule maker role while also revealing the complexities of this category. In the drafting of CAFTA, the United States set the agenda and pace and made it costly for Central American countries to resist. Regional governments were required to accommodate, even when they had other preferences. The dissonance that resulted was attenuated by alliances that connected strategic sectors within Central America to the market reform positions that the United States advocated. For transnationalized political and economic elites, tacit alliance with the U.S. position allowed them to accelerate domestic reforms that they, on their own, would have found dif-

88  Contesting Trade in Central America

Figure 2.1. Trade officials from the United States and five Central American countries

shake hands after the Central America Free Trade Agreement was signed on May 28, 2004. (From left to right) Alberto Trejos of Costa Rica, Miguel Lacayo of El Salvador, Robert B. Zoellick of the United States, Marcio Cuevas of Guatemala, Norman García of Honduras (turned away), and Mario Arana of Nicaragua. Photo by Tim Sloan/AFP/Getty Images. Used with permission.

ficult to achieve. They lined up behind, and even agitated for, U.S. rule maker intervention, leaving other sectors of their society to deal with the results. After several months of finalizing text and drafting separate “side letters” and “understandings,” the CAFTA agreement was officially signed by USTR Zoellick and five Central American economic and trade ministers in May 2004 (see figure 2.1).30 The document included twenty-­two chapters, multiple annexes, and, eventually, three sets of amendments (see table 2.4). Well before the ink was dry, an intense selling process got under way. Selling CAFTA Widespread public dissatisfaction with CAFTA in Central America would complicate ratification both at home and in the United States; measurable public support, in contrast, would add to the pro-­CAFTA arsenal. To promote public approval, CAFTA negotiating was accompanied by CAFTA selling. Attitudes toward CAFTA varied in Central America, with much of the public unaware of the measure at the time the negotiation was launched. Even as awareness grew, public opinion polls indicated that respondents knew

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little about what CAFTA entailed, and their views were neither uniform nor firm. Public opinion research on the processes that shape individual trade preferences offers competing interpretations of the primary mechanisms involved. The political economy approach emphasizes the centrality of economic self-­ interest. Using the tenets of standard trade theory and applying them at the individual level, this framework links preferences for free trade to expected impacts of trade on personal economic welfare, exploring variation based on factors such as industry of occupation, skill level, and asset ownership (Scheve and Slaughter 2001; Kaltenthaler, Gelleny, and Ceccoli 2004), and access to consumer goods (Baker 2009). A second approach highlights the role of cultural variables and symbolic values in shaping trade attitudes (Merolla et al. 2005; Skonieczny 2001). Rankin (2004) claims that the mass public often does not know the personal costs and benefits of a trade decision, and, consequently, the economic model provides “a less than complete explanation” (336) of public opinion on trade deals. Rankin emphasizes the impact of “enduring symbolic predispositions” (333), including views about national identity and sovereignty, which provide “cognitive shortcuts” (333) that direct respondents toward specific preferences. Table 2.4. Thematic chapters and contents of the CAFTA agreement Chapter 3: National Treatment and Market Access for Goods Chapter 4: Rules of Origin and Origin Procedures Chapter 5: Customs Administration and Trade Facilitation Chapter 6: Sanitary and Phytosanitary Measures Chapter 7: Technical Barriers to Trade Chapter 8: Trade Remedies Chapter 9: Government Procurement Chapter 10: Investment Chapter 11: Cross-­Border Trade in Services Chapter 12: Financial Services Chapter 13: Telecommunications Chapter 14: Electronic Commerce Chapter 15: Intellectual Property Rights Chapter 16: Labor Chapter 17: Environment Chapter 18: Transparency Chapter 19: Administration of the Agreement and Trade Capacity Building Chapter 20: Dispute Settlement Source: USTR (2004).

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A third interpretation builds on these observations but gives attention to the impact of transitory factors, such as elite cues, media messaging, and events. As Zaller (1992, 55) noted in his seminal review of the field of public opinion research, for most people a survey response depends “partly on purely chance factors, such as what appeared on television the night before or what happened to them that morning at the office, and partly on systematic factors, such as how the question has been framed or what related questions have been asked in immediate proximity to it.” This variability in response is especially significant for complex issues characterized by ambiguity and uncertainty and about which respondents lack a predetermined position. Reviewing these debates, Davis and Bartilow (2007) explore four alternative explanations for varying support levels for NAFTA in Mexico. “Economic-­utilitarian” explanations claim that social class and economic sector play a key role; those who are expected to benefit from an economic agreement are likely to develop a positive assessment, whereas those in classes and sectors that are expected to lose are likely to oppose the measure. “Elite cueing explanations,” in contrast, emphasize the role of elite guidance, especially presidential cues, in the formation of the public’s views. Interpretations drawn from cognitive psychology recognize that the public often has little knowledge of the details of international agreements and relies instead on general, abstract images, which shape policy preferences (130). In a variant on that explanation, the “affective interpretation” emphasizes the extent to which respondents like or dislike the country in question, with a positive view of the country fueling a positive assessment of economic agreements arranged with it. Using data from a 1995 Time/CNN survey in Mexico, Davis and Bartilow found that the respondents’ economic characteristics were less influential in shaping views of NAFTA than predicted. Instead, affective orientation toward the United States had the “primary influence” (135) on Mexican evaluations of NAFTA, particularly among the better educated. Elite cueing was also significant, as NAFTA approval levels rose across the classes in tandem with approval of then president Ernesto Zedillo. These and other findings suggest that attitudes toward FTAs, rather than being fixed by the sectoral characteristics of a national economy, could be affected by variable factors such as the image of a partner nation and elite discourse. Further evidence of attitudinal volatility is found by examining changes in views over time. Morris and Passé-­Smith (2001) documented the shifts in popular views on NAFTA in Mexico by tracing changing patterns in poll results across the early 1990s. Whereas 70% of Mexican respondents expressed support for NAFTA in October 1992, following the “Salinas-­led public re-

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lations campaign to instill optimism about NAFTA, Mexico’s abilities, and the nation’s new relationship with the United States” (137), only 43% held this view in November 1995, after the messaging faded and the peso crisis hit. Close study of Mexican public opinion about NAFTA suggests that varying factors affect popular views, including elite signaling, media messaging, and events, particularly those with a negative impact. Recognizing this attitudinal fluidity and concerned about mobilizing public support, CAFTA advocates launched a series of public relations efforts in Central America using elite cueing and positive media messaging to raise awareness of the agreement and encourage approval. Both government officials and business elites, alone or in collaboration, organized these campaigns, sometimes with support from USAID. Scattered poll data suggest that these efforts paid off, at least in the short run. Three major initiatives were deployed in the 2003–2005 period: targeted government briefings; overtures by business leaders to their workers; and mass media campaigns designed to associate CAFTA with positive images and hopeful expectations. As we have seen, Central American trade officials met with hundreds of groups to provide information and encourage an optimistic view of the gains that the agreement would bring. Although the preponderance of those briefed came from the business sector, itemized documentation of outreach efforts notes numerous meetings with civil society groups as well. According to the final CARANA report on the CSOP process, this “unprecedented effort” was “instrumental in generating the high levels of support for DR-­CAFTA throughout the region” (USAID 2005, 8). Indeed, this activity was considered so successful that CARANA’s contract was extended, and the CSOP methodology was transferred to other Latin American countries in which trade discussions were under way (USAID 2005). Second, several Central American business chambers organized pro-­ CAFTA educational programming for workers, particularly in sectors where a sudden loss of CBI benefits was likely to produce rapid job loss. The broadest campaign of this type was sponsored by Caribbean–Central American Action (C-­CAA), a Washington-­based, USAID-­funded initiative that animated and coordinated the work of pro-­CAFTA business elites across the region. C-­CAA developed the Alliance for CAFTAction, which mobilized teams of prominent Central American business leaders to take an active role in constructing a support coalition. According to the April-­June 2005 quarterly report of the Alliance for CAFTAction, two high-­level business team leaders were named for each country. Memoranda of understanding on CAFTA promotion were signed with AMCHAMs in all five Central American countries, and “workforce briefings” were completed in each country.

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CAFTAction delivered training sessions in the workplace to shape workers’ opinions and build a pro-­CAFTA constituency in the targeted industries.31 The C-­CAA website claimed that over 160 Central American and U.S. businesses ultimately signed the pledge of support and over 119,000 employees were “equipped with educational information about DR-­CAFTA.” Survey results from the Honduras briefings indicated that this activity achieved its goals. Whereas only 47% of these workers supported CAFTA before the session, 88% did so afterward, with the portion that responded “don’t know” dropping by 40 percentage points (C-­CAA 2005, 6). Finally, all three of the Central American governments featured in the present study also organized mass media campaigns in favor of CAFTA. This effort began in Nicaragua about halfway through the negotiations. Informed by a 2003 M&R Consultores poll that only 2% of Nicaraguan respondents felt they understood what CAFTA negotiations entailed, and facing evidence that the opposition was beginning to mobilize, MIFIC launched a major communications campaign in mid-­2003. This effort included radio and TV ads, outreach materials written in a popular education style, short promotional stories posted at the ministry website, and newspaper supplements. A small group of commercial artists and advertising consultants was hired to design simple images and text that would present CAFTA in hopeful terms, built around the slogan “CAFTA, Our Bridge to Progress.”32 MIFIC posted ads featuring a stylized bridge logo and the faces of individual Nicaraguans, with simple messages like “With CAFTA, we will get more products at better prices” and “CAFTA will ensure that we maintain and increase our exports to the United States.” Funded by CARANA under USAID contract, this effort reportedly contributed to greater awareness of and support for CAFTA over the following months. Polled again by M&R in 2005, 66% of Nicaraguan respondents indicated support for CAFTA-­DR; only 23% were opposed (Carrión 2009, 35–36; Craig 2010, 173–175).33 Pro-­CAFTA attitudes were also cultivated in Costa Rica. Before negotiations began, many poll respondents claimed little knowledge of the impending process. CARANA reported that 43% of Costa Rican survey respondents had not heard of CAFTA or did not know what it was in December 2002. By February 2004, at the end of the negotiations, this pattern had reversed. “More importantly,” according to the report, “of the 88% that indicated that they did know what CAFTA was [in February 2004], the ratio of those in favor vs. those against signing the CAFTA agreement was 7 to 2—a significant increase over the initial approval levels reported in a survey conducted a year earlier” (USAID 2005, 126). When polls conducted a year later showed that CAFTA approval had again slipped, leading business represen-

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tatives and former CAFTA negotiators founded Por Costa Rica to reignite the pro-­CAFTA campaign (Osterlof 2009, 183–184). With this effort, which involved a mass media blitz launched in April 2005, support levels again lifted over the following months (UNIMER 2005). Pro-­CAFTA discourse emphasized the enormous size of the U.S. market compared to the small national or regional market, suggesting almost endless possibilities for export growth ahead. CAFTA’s expected impact on foreign investment, which would pump up employment opportunities, became another powerful theme, as was the link between CAFTA approval and complementary flows of international aid. Multilateral lenders and international organizations had accompanied the CAFTA process from the beginning, and many negotiation rounds ended with announcements about new aid commitments. Although the CAFTA chapter on international cooperation carried few funding specifics, the agreement had become associated with international assistance, a connection that also enhanced its appeal. In addition to these positive associations, defenders pointed out the costs of not signing, particularly in terms of lost CBI jobs. With their profitability based on tariff-­free access to the U.S. market, these jobs were expected to migrate to nimbler neighbors unless CAFTA was approved. The choice then became one of jumping quickly on the CAFTA train or staying behind, “with nothing to do,” as Bolaños had warned. Public opinion was thus mobilized to support CAFTA. This outcome was not simply a spontaneous expression of free trade enthusiasm or a reflection of deeply held and closely considered views. It would be naïve to assume that support for this market reform just materialized without careful stoking and cultivation. It would also be a mistake to assume that support, once registered, would simply persist. When a positive spin was replaced with negative images, support levels could fall quickly. CID-­Gallup poll results from Guatemala, for example, found that CAFTA public approval levels of 46% in December 2004 had plummeted to 17% in March 2005 amidst the protests and violence accompanying legislative ratification. These sharp fluctuations suggest that public opinion about CAFTA could shift quickly in response to clashes and conflict.34 The precise impact of the CAFTA promotional campaigns is difficult to estimate. We cannot know how public opinion regarding CAFTA would have evolved in the absence of workplace briefings, optimistic messaging, and public relations efforts. Nor can we know what the results would have been if other kinds of educational outreach efforts had unfolded instead. In any case, evidence of public support was largely disconnected from the nitty-­ gritty work of text drafting. The approval-­stoking process was little related to

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the definition of the template, specification of liberalization schedules, and the listing of rules to govern procurement, dispute settlement, and enforcement of intellectual property rights. In the end, the text of the agreement reflected the ongoing rule maker/rule taker dynamic that had long shaped regional relations.

Chapter 3

Resistance: Competing Voices

[A] deep-­seated movement sprang into being to resist the pernicious effects of a market-­controlled economy. Society protected itself against the perils inherent in a self-­regulating market system—this was the one comprehensive feature in the history of the age. Polanyi (2001 [1944])

The rosy images used to sell CAFTA were not equally persuasive to all. Those who had become skeptical during prior market reforms often resisted these overtures, and some became early critics. For others who were initially hopeful, the exaggerated claims that were characteristic of the campaign gave way to cynicism when the promised jobs and investments did not materialize. Once the pro-­CAFTA media campaign stopped, disengagement tended to regain ground, and so did opposition. This chapter examines the development of Central American civil society activism in opposition to CAFTA. As the Polanyian concept of double movement suggests, when market processes penetrate the social order and redefine nature and social relations in terms of competition, commodification, and profit maximization, various forms of resistance tend to emerge. This countermovement challenges market ascendancy and advances competing principles, as outlined in table I.1. Recurring resistance themes included guaranteed social and human rights, with attendant pressures to remove essential public goods (health, education, water, etc.) from the market (“decommodification”). Attention focused on social solidarity, inclusion, and justice, with community protection and preservation given preference over the heightened individualism that undergirds the advance of the market. The resistance countermovement in Latin

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America often called for “food sovereignty,” which emphasized local self-­ provisioning and increased protection for small farmers on whom the basic food supply depended. Economic localism and pluriculturalism stood as counters to standardization and homogenization. Proponents rejected thin, elite-­driven versions of electoral democracy, calling instead for more participatory and inclusionary forms. Movements against neoliberalism commonly reaffirmed national development policy, strategic state investment, regulation, and countercyclical intervention to address market failure. With deepening attention to the impact of marketization on the environment, countermovement activists labored to identify the path to sustainability. These resistance movements emerged across time and space in Central America, building on a foundation of previous mobilizations and constructing complex networks to connect activists across national and regional boundaries. The earlier phases of neoliberal reform had not unfolded without opposition, and previous campaigns provided the scaffolding on which subsequent resistance movements would build. Revolutionary movements from the previous era, though now moderated and redefined into electoral channels, had not fully dissolved and retained elements of a market critique. Opponents drew on historical symbols of national sovereignty and anticolonial struggle to challenge the new economic transition. The push for economic and social rights was linked with the internationally validated human rights movement, which thickened in the postwar era. Rapid expansion of the maquila sector triggered growing attention to worker rights and new forms of labor organizing. Conflict over privatization proved a recurring catalyst to mobilization, with protest cycles reigniting as major transfers loomed. Once crystallized, these layers of civic life did not fully disappear, even as the campaigns they activated rose and fell. In addition to moving across time in a series of swirls and spirals, resistance movements also built across space. Campaigns that began as local protests, undertaken by a single community or workplace, inspired broader connections that rippled out through national networks. And in a region as thickly interconnected as Central America, national movements frequently linked across borders. Specific kinds of resistance movements, particularly those that confronted global or regional neoliberal projects, led to the formation of transnational networks that linked activists in broader alliances. When successful, these networks developed complex forms of brokerage to connect across multiple layers of difference. The move to intensify global market connections catalyzed the construction of transnational resistance networks. With the 1999 Seattle protests

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against the WTO and the launch of the World Social Forum in Brazil in 2001, “global justice movements” collaborated to define mechanisms of dialogue and resistance. European activists formed regional alliances, targeting the economic and social frameworks emerging in the European Union. In the Western Hemisphere, the Free Trade Area of the Americas negotiation served as a major catalyst for cross-­regional organizing. The Hemispheric Social Alliance (HSA), a network of opposition voices from the Americas, labored to counter positive free trade arguments and imagery with damage claims and critical analysis of social costs. As transnational forms of activism became more common and visible, a body of literature emerged attempting to understand how they operate, the challenges they face, and what they have achieved (Tarrow 2005; von Bülow 2010; Juris 2008; J. Smith 2008; Edelman 1999; Keck and Sikkink 1998). This chapter analyzes the emergence of a CAFTA resistance movement in Central America. It begins by tracing the mobilization of resistance through several major predecessor movements at the national level, focusing on civic activism against telecommunications and electricity privatization in Costa Rica and the campaign against health care privatization in El Salvador. This review highlights contextual factors in social mobilization processes and state responses that shaped variation in national resistance campaigns. The chapter then examines the lateral construction of resistance efforts as alliances extended across borders. It traces the rise of two transnational networks, the Mesoamerican Trade, Integration, and Development Initiative (henceforth, Iniciativa CID) and the Foro Mesoamericano de los Pueblos (henceforth, Foro Mesoamericano), both of which were formally launched in 2001. It offers an overview of four general themes that drove the CAFTA countermovement: the deceptiveness of pro-­market claims; market impacts on those most vulnerable; market reform implications in terms of sovereignty and self-­rule; and the identification of alternatives. Resistance is understood here as a complex phenomenon, with multiple dimensions and internal variations. This chapter examines both the organizational successes of the movement and the challenges within. Divisions over the nature of the problem and correct oppositional stance segmented the resistance, creating tensions and rivalries. Two groups emerged, which I describe as critic negotiators and transgressive resisters. Although neither segment was able to detain CAFTA approval, they left a trace on which subsequent movements would build.

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Resistance across Time: Predecessor Movements The Central American civil wars of the 1970s and 1980s demonstrated the growing organizational capacity of popular movements and the urgent need for more inclusive government in this historically authoritarian region. Social movements erupted in cycles of protest even during periods of military rule. Recurring episodes of repression shifted the dynamic toward guerrilla struggle in Nicaragua, El Salvador, and Guatemala (Brockett 2005; Wood 2003; Almeida 2008). Following the peace processes that ended these civil wars, Central American governments were pressured internally and externally to open political processes to greater participation by civil society (Arnson 1999; Conaway and Martínez 2004). During the 1990s, NGOs and popular organizations proliferated in the region, expanding into the opening political space (MacDonald 1997; Howell and Pearce 2001; Sinclair 1995). In subsequent negotiations about debt and poverty reduction, and in emergency aid consultations following natural disasters (such as Hurricane Mitch in 1998), international donor convocations and “Friends” committees routinely pushed for the inclusion of civil society representatives in consultations with the region’s governments (Gass 2002). The right-­wing governments that tended to dominate in Central America were often skeptical of civil society, viewing new mass organizations and NGOs as vehicles for demobilizing revolutionaries or assertive political rivals (Foley 1996; McIlwaine 1998). “Popular sector” leaders, in turn, frequently found their governments to be impenetrable, if not openly adversarial. As protection for civil liberties strengthened in the region and market reform advanced, resistance forces clashed with political elites at critical junctures. Several early critiques of the new market model came from activists in the labor movement. The rapid expansion of the maquila sector was met with new forms of labor organizing in the 1990s, as local and transnational actors combined to challenge the harsh working conditions that were spreading through the industry. Although the mix of strategies varied somewhat by country, depending on state structures, economic sector, and labor histories, unionization remained weak in much of postwar Central America, particularly in the EPZ sector (Anner 2011; Méndez 2005). The official unionization rate reported in 2001 for the Salvadoran maquila sector was 0.6% of the workforce, much weaker even than the modest 10% in traditional manufacturing. In Honduras, where state structures were less hostile, the unionization rate in the EPZ sector rose to 6.35% in 2000, although it remained far below the 21% in Honduras’ traditional manufacturing sector (Anner 2011, 31, 35).

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Responding to these limitations, Salvadoran labor leaders, particularly those on the Left, prioritized the construction of alliances with other social sectors, including human rights, women’s, and church groups, and they forged innovative ties with transnational allies in the U.S. anti-­sweatshop movement (Anner 2011, 75). These alliances were not free of tension. Conflicts erupted periodically between labor activists and women’s rights organizations, for example, and between national labor rights coalitions and their transnational allies. In spite of these difficulties, Salvadoran Left-­oriented labor networks, such as the Trade Union Coordinating Committee of Salvadoran Workers (CSTS), successfully networked with U.S.-­based allies like the National Labor Committee, the American Center for International Labor Solidarity of the AFL-­CIO, and United Students against Sweatshops to use “naming and shaming” strategies to pressure plant operators through consumer boycotts.1 In the 1990s, these transnational activist campaigns succeeded in exposing the poor labor conditions in these factories, including forced overtime, uncompensated work, and sexual harassment of the largely female workforce. Inroads into labor organizing in the region were slow and hard, with greater membership gains in El Salvador going to clientelistic unions marbled by corruption than to Left-­oriented unions. The resulting union weakness, combined with the rising informality of the workforce, prevented labor from playing a pivotal role in the neoliberal resistance movement. Consistent with a Polanyian framework, resistance emerged from broad networks of disparate groups, which included labor in a heterogeneous mix. Large-­scale mobilizations periodically ignited successful challenges to market-­oriented policy reform, particularly when privatization of basic state services was at stake. Two such multisectoral grassroots campaigns erupted in Central America in the early 2000s: the movement against the Combo del ICE in Costa Rica in 2000; and the 1998–2003 movement against health care privatization in El Salvador. The Combo del ICE mobilization pulled together a broad coalition of citizen groups working to prevent the loss of strategic public services in Costa Rica (Sojo 2004; PEN 2001). The proposed Combo legislation emerged from a Concertación Nacional process that had been called by President Miguel Ángel Rodríguez (1998–2002) early in his administration and built on efforts of previous presidents to force an opening in the telecommunications and electricity sectors. Legislation that combined these reforms was approved in 2000 in the first debate in the National Assembly, with support from forty-­ five of fifty-­seven deputies. To stop the bill from barreling through the assembly, social protesters rallied, leading to twenty days of demonstrations. The number of protests averaged fourteen a day and erupted around the coun-

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try, involving a reported 100,000 people at the campaign’s peak. These protests mobilized multiple sectors of the population, including the public sector unions like ANEP, environmentalists, students, Catholic Church leaders, and a broad group of ICE supporters and clients (PEN 2001, 213–220). Defenders of the ICE noted its success in bringing electrification and phone service into even remote rural areas where private financial incentives for extension were low (Mora Jiménez 2004; Hoffman 2008; Haglund 2010, 90). Service charges were also well below those prevailing elsewhere in Central America, contributing to generally strong measures of satisfaction with ICE in public opinion polls.2 In addition, ICE rates had a cross subsidy component that transferred costs from poorer to wealthier consumers in keeping with traditional Costa Rican principles of social solidarity. As a result, ICE had important symbolic weight and was identified in public opinion polls as one of the pillar institutions of Costa Rican democracy, along with the national social security system and public education (PEN 2001, 214). Following the protest crescendo, government officials and legislators backed away from the measure, and the Combo legislation failed the mandated review by the Constitutional Court (Sala IV) on procedural grounds. A special Mixed Commission of the legislature was charged with the task of strengthening and modernizing ICE, work that was ongoing but slow at the time of the CAFTA negotiations (Sojo 2004; Villasuso 2005; PEN 2001, 213–220). In consensus-­oriented Costa Rica, mass mobilization quickly curtailed the market opening. In polarized and executive-­driven El Salvador, mobilization took longer to build and influence the outcome. Repeated efforts by the Francisco Flores administration to transfer public hospital medical services to private concessionaires triggered large-­scale popular mobilizations that erupted over and over between 1999 and 2003. At its peak, participation in the Salvadoran movement swelled to over 200,000 people. Although requiring multiple mobilizations over an extended period of time, this campaign also halted a move to commercialize basic services (Almeida 2008, 193–204; Smith-­Nonini 2010, 237–256). The push for health care privatization responded not simply to local elite preferences but also to external pressures—in this case, requirements embedded in health-­sector loan agreements with the World Bank and the IDB. The government’s 1999 proposal to contract out ancillary services at two social security hospitals set off a sequence of events in which protests by workers led to firings, triggering strikes that escalated into further mobilizations led by the newly formed social security physicians union. The government responded to rising pressure with a series of feints and thrusts in which it seemed to back

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away from the move but then repeatedly reneged, meanwhile dismissing additional public sector workers. As Flores announced a new plan to set up a voucher system for social security services, a second wave of strikes broke out in mid-­2002. Over the next ten months, strikes, highway sit-­ins, police raids, and legislative actions and reversals reached a crescendo. In a series of “white marches” (marchas blancas), growing numbers of protesters dressed in white in solidarity with health care workers and repeatedly took over the streets of San Salvador and more than two dozen other localities. In the “largest acts of mass defiance in post–civil war and newly democratized El Salvador” (Almeida 2008, 175), protesters shut down normal activities and took center stage. Successfully framing the conflict as a struggle over public access to health services, the movement built a broad coalition involving state workers, NGOs, students, labor organizers, truck and bus drivers, and market vendors. In June 2003, the government backed down, agreeing to rehire striking social security workers and launch a public consultation about the future of health-­sector reform. To explain the success of this mobilization, Almeida (2008, 190–193) highlights the role of newly created “organizations of organizations,” that is, broad multisectoral networks that can quickly frame threats in multidimensional terms and coordinate across the field of civic associations. Postwar democratization allowed for the rise of new forms of civil society in El Salvador, including a wide range of NGOs and mass organizations, many of which came together to create the Civil Society Forum (FSC) in the aftermath of Hurricane Mitch. These new forms of civic collaboration made it possible to build and sustain broad-­based campaigns that challenged elite initiatives.3 These two episodes of successful “mobilization by globalization” (Almeida 2008, 176), in which social conflict erupted over policies associated with neoliberal reform in both Costa Rica and El Salvador, provided a foundation on which the CAFTA opposition would build. Increasingly networked resistance movements challenged neoliberal precepts and embraced a different set of concepts, some radical and some nostalgic. They brought together students and faculty, particularly from large public universities like the University of El Salvador (UES) and the University of Costa Rica (UCR), with unions of public sector employees, like ANEP in Costa Rica and social security workers in El Salvador. Pockets of organized labor such as CSTS in El Salvador and the José Benito Escobar Union Federation of Workers (CST-­JBE) in Nicaragua, joined with women’s groups like Las Dignas in El Salvador to question the impact of market reform on social rights and economic precariousness. Small farmer associations and cooperatives, in organizations like the National Federation of Agricultural and Agroindustrial Cooperatives (FENACOOP,

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Nicaragua), the Rural Communities Association for Salvadoran Development (CRIPDES), the Foundation for Cooperation and Community Development of El Salvador (CORDES), and the National Agricultural Producers Union (UPANACIONAL, Costa Rica), rallied to protest economic displacement under neoliberalism and to push for greater state support. Environmental activists across the region organized around concerns about destructive consequences of unregulated development and natural resource exploitation. These frames linked activists across borders and contributed to cross-­national resistance mobilization. Movements across Borders: Resistance Transnationality Initiatives like CAFTA connected the whole region in coordinated market reform, building on the previous national-­level openings. Unlike privatization processes introduced in individual states—which may be perceived primarily as national processes—or particular infrastructure development projects— which may be perceived in largely local terms—the economic restructuring taking place in Central America developed a distinctive, cross regional logic, following a pattern of “neoliberal regionalism” (Spalding 2008). This form of neoliberalism reshapes economic infrastructure and production processes across a whole region, linking the components according to a transnational trade-­and-­investment logic. It emerges out of a dense network of integration agreements, regional infrastructural development initiatives, and regional trade accords. This widespread, simultaneous, and interconnected pattern of market reform tends, in turn, to promote cross regional resistance collaboration. As international economic agreements and institutions shift power from the national to the international levels, civil society networks elongate and become yet more complex. Resistance activists transnationalize alliances and action repertoires, connecting with like-­minded activists in spatially distinct locales. The regional character of new neoliberal advances helps explain the thickening transnational connections of the opposition networks. At the same time, distinctions within the resistance front create organizational eddies, shaping variations that tip into rivalries and debates. In Central America, the two most important cross regional resistance networks emerging at this juncture were the Iniciativa CID and the Foro Mesoamericano. According to lead CID organizer, Roberto Rubio (2004), this initiative built on the Structural Adjustment Participatory Review International Network (SAPRIN), a civil society consultation process established in the 1990s

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with World Bank sponsorship. Through SAPRIN, networked organizations collected information about the impact of structural adjustment in their home regions. As the dominant policy issue shifted from debt and structural adjustment to trade and integration, a group of Central American civil society leaders decided to refocus their agenda and pursue cross sectoral collaboration. Over time the process formalized, and CID was officially established in late 2001. A regional organization with representation in all five Central American countries, CID quickly became the single most important representative of civil society participating in the CAFTA negotiations. Building on connections with small businesses and farmers, labor organizers, environmental organizations, women’s groups, and think tanks, CID worked to develop alternative proposals, which it presented at the official CAFTA negotiation rounds, as we saw in chapter 2. A second cross regional network, the Foro Mesoamericano, challenged the neoliberal development model more directly. This coalition was inaugurated in May 2001 in Tapachula, Mexico, inspired in part by the Zapatista Army of National Liberation (EZLN) encuentro process.4 Gathering the regional threads of the economic globalization critique, Foro organizers pursued an “upward scale shift” (Tarrow 2005, 120–124), explicitly moving beyond specific local issues to mobilize around shared challenges affecting a cross-­national region. The network initially focused on Plan Puebla-­Panamá (PPP), an IDB-­funded infrastructural development project that aimed to lace the Mesoamerican region with highways, sea- and airports, and an electrical supply network that would facilitate deeper global integration. When CAFTA appeared on the horizon, Foro organizers adapted the resistance frame, and CAFTA soon became the primary target. Unlike the World Social Forum, which initially met only in its inaugural setting, the Foro Mesoamericano was envisioned from the outset as a rotating gathering. A constantly changing locale allowed the network to strengthen local affiliates sequentially and to portion out the burden and rewards of organizing among a short list of those equipped for this undertaking (Bendaña 2003).5 The agendas of the meetings, designed largely by the local coordinators with varying degrees of input from regional partners, were both fixed and fluid. The central critique of neoliberal economic transition was an invariant, defining feature, but other themes emerged in response to prevailing issues of the moment and the central concerns of an expanding pool of participants (indigenous, women, young people). Over time the core forum became encased in a series of pre- and postconference gatherings on additional and overlapping issues.6 As the Foro process became better consolidated and communications

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within the anti-neoliberalism movement moved beyond insider networks, visibility increased and attendance grew. Beginning with an estimated 250 participants in May 2001, reported attendance climbed to around 800 at the gathering in Xelajú, Guatemala, in November 2001, 864 at the 2002 Foro in Managua, and 1,495 at the 2003 Foro in Tegucigalpa (Foro Mesoamericano 2001a, 2001b; 2002a, 2002b [appendix]; 2004a, 125; 2004b). When the fifth Foro gathering rotated to San Salvador in July 2004, registration rose to 1,747 (Foro Mesoamericano 2004c). Attentive to the issues of gender equality, 2004 Foro organizers proudly announced that 43.5% of the participants were women, up from 34% in 2003 (Foro Mesoamericano 2004d; 2004a, 125). Cross regional participation also improved over time. Whereas 81% of the organizations represented at the first gathering in Chiapas were Mexican, by the time of the 2003 gathering in Honduras, host country organizations were only 31% of the total. The Foro brokerage function kicked in as leaders linked actors from different sites of contention (McAdam, Tarrow, and Tilly 2001, 26). In a process defined as “frame bridging” by Snow and Benford (1988), organizers labored to connect the national and sectoral components of their movement to a transnational resistance framework. The celebration of indigenous dress and dance in opening ceremonies and evening retreats, for example, did not only provide a pleasurable nod to the exotica of the neighborhood but also implicitly attached the Foro movement to this cultural lodestone of anticolonial resistance and shared history. The potency of the frequently used image of maíz (maize) or the waving of machetes during culminating protest marches blended the movement with themes of peasant identity and rural resistance. CAFTA became a “condensing symbol” (Tarrow 2005, 73) that melded a cluster of concerns around a single strong image. Resistance Themes and Frames Four elements dominated CAFTA resistance discourse. First, critics called into question the benefits and opportunities that had been advertised as selling points during and after the CAFTA negotiations. Second, opponents highlighted the harm that the agreement could inflict, focusing attention on vulnerable sectors. Third, they asked hard questions about the consequences of this agreement, and others of a neoliberal cast, for national sovereignty and democratic self-­governance. Finally, resisters sketched out alternative development approaches in an attempt to redirect discussion about an imagined future.

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Figure 3.1. Popular education

materials on free trade agreements. Ministerio de Economía, El Salvador, Los Tratados de Libre Comercio (2003, 9). Used with permission.

Figure 3.2. Popular education materials on trade and investment. Ministerio de Economía, El Salvador, Los Tratados de Libre Comercio (2003, 19). Used with permission.

In country after country, Central American governments had launched promotional campaigns to build public support by associating CAFTA with increased exports, investments, and jobs. A TV ad campaign in El Salvador, for example, featured a pupusa maker excitedly describing the future market she was now going to have for this traditional Salvadoran dish in the United States.7 Government officials, like the Salvadoran minister of the economy, Miguel Lacayo, claimed that CAFTA would triple Salvadoran exports in five years and create 250,000 new jobs (“ ‘Ya estamos negociando’ ” 2002). As part of its 2003 pro-­CAFTA outreach program, the Salvadoran Ministry of the Economy distributed a simplified manual describing the benefits of free trade agreements using comics-­style images to convey central ideas (Ministerio de Economía [El Salvador], Programa de Participación Ciudadana 2003). Designed for children and those with limited reading skills, this booklet explained FTA export opportunities using an image of a smiling Salvadoran vendor passing a box across a line labeled “frontera” (border) to a man holding a handful of cash. Both figures stand under a large umbrella labeled “TLC” (FTA) (see figure 3.1). A few pages on, in the section on investment, a dark-­haired man and a blonde woman, each holding a briefcase embossed with a large dollar sign and with bills spilling out the sides, follow an arrow sign labeled “El Salvador” (see figure 3.2). CAFTA critics claimed that these images misled people about the challenges of placing products in

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the U.S. market or attracting skittish foreign investment and obscured the real contents of the agreement, leaving citizens ill prepared to assess the coming challenges. Resistance organizers questioned these optimistic images, noting the intensity of competition and nontariff barriers that would prevent Central American producers from selling their products in the United States. They countered with damage claims that highlighted potential losses associated with the agreement. Cartoons produced by Equipo Maíz, a Salvadoran NGO specializing in popular education in opposition to neoliberal reform, portrayed CAFTA in largely destructive terms. Challenging the image of CAFTA as a job generator and source of wealth, Equipo Maíz cartoons, which were distributed in various anti-­CAFTA publications and workshops, presented CAFTA as a job destroyer. One illustration, printed in La Página de Maíz shortly after the agreement was submitted to the Salvadoran Legislature in late 2004, depicted a surge of U.S. imports unleashed by CAFTA (see figure 3.3). The image shows a group of urban and rural people fleeing the onslaught of U.S.A.-­made products, as several are crushed under the wave, suggesting the threats that these imports posed to diverse groups working in those sectors. A second Equipo Maíz cartoon in the same publication depicts a gathering of anti-­CAFTA protesters (see figure 3.4). This image uses several techniques to draw the reader to the movement. These include a display of protest placards in which some letters are hidden or incomplete, as for example, T[LC] = MUER[ TE] (FTA = DEATH) and N[O] al T[LC] (NO TO THE FTA). This method requires the reader to mentally fill in the missing letters, thereby moving from passive reading to active co-­construction of the message. Although many CAFTA critics focused on government deception and vulnerable sectors, others pointed to intensified controls that would be granted to transnational actors and institutions (Bloque Popular Centroamericano et al. 2004). The requirement that disputes between foreign investors and CAFTA states be adjudicated by international, not national, tribunals, for example, raised questions about both the implications for national sovereignty and biases that would inform the decisions emanating from these elite institutions (Solís 2005). For environmentalists, the obligation that CAFTA signatories subscribe to the controversial agreement governing the International Convention on Protection of New Varieties of Plants (UPOV-­91), provided an additional area of debate (Moreno 2003; Carazo Vargas 2007). Critics of neoliberal reform, who had been struggling for decades with their own governments, saw their hope for change through electoral gains erode as the new global institutional order was superimposed over the local economic frame-

Figure 3.3. Fleeing the deluge of U.S. imports. Equipo Maíz (2004, 2). Used with

permission.

Figure 3.4. Protest against the Free Trade Agreement. Equipo Maíz (2004, 1). Used with

permission.

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work. After a century of U.S. hegemony in the region, some saw CAFTA as yet another mechanism by which to impose U.S. rules and worried that local needs and preferences would fall victim to the extraterritorial extension of U.S. law and legally encrypted biases. Whereas some criticisms emphasized CAFTA content, others focused on the CAFTA process, challenging the “democratic deficit” in the negotiations and the limited ability of Central American actors to affect the shape of the agreement. Much of the criticism, however, was not directed specifically at CAFTA but at the broader neoliberal model in which CAFTA was a culminating piece. Drawing on observations and information about how their societies had changed during the previous fifteen to twenty years, CAFTA challengers called the broader marketization process into question, linking the model to sustained out-­migration, persistent rural poverty, and an income gap that widened over time. In her much-­cited summation of the reasons why the Costa Rican opposition rejected CAFTA, Eva Carazo Vargas (2007) linked that country’s relatively high human development performance to its historical commitment to the “Constitutional Social state,” built on “constitutional obligations to guarantee that certain strategic services be provided by the government in the logic of solidarity and ample coverage—independently of the buying power of families.” This logic had eroded under market reform, leading to a declining quality of public institutions and rising concentration of wealth. Calling Costa Ricans to “deepen what we have learned over our history,” Carazo stoked the CAFTA resistance embers. As an alternative, CAFTA critics commonly called for stronger state roles, particularly on behalf of the agricultural sector and small and medium-­sized producers. They emphasized the idea of a social compact in which the powerful were restrained by community obligations and solidarity edged out competition, or in which broad social and economic rights were enshrined (although commonly not enforced) in their constitutions. In some versions of the resistance canon, local self-­provisioning was to be promoted and basic social goods decommodified, that is, distributed equitably based on guaranteed rights rather than sold to the highest bidder. Critics rejected a regimen of uniform trade rules in a highly unequal world. International economic ties, they argued, should be governed by practices that more fully recognized the region’s development challenges. In sum, CAFTA critics shared a number of concerns. In country after country, resistance groups began to organize, albeit with widely varying levels of visibility and support. In spite of this broad convergence, unity was often

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elusive, as critics divided on important issues of strategy and goals. These divisions point to the diversity within the opposition and the challenges of resistance coordination. Conceptual Discussion of Resistance Variation Ethnographic and social network analysis of resistance movements reveals significant internal segmentation. Opposition to economic globalization may be differentiated along several dimensions, including in the murky territory of civil society versus social movement activism,8 in the terrain of strategic negotiation versus identity formation, and in the differences between system maximizers and system transformers. In his “militant ethnography” of the Barcelona resistance movement, for example, Juris (2008, 68–92) identifies four sectors: “institutional actors” (mainstream parties, NGOs, unions); “critical sectors” (the Left wing of parties and unions); “network-­based movements”; and “militant anticapitalists.” Each of these groups is found to draw on a different social base and embrace a distinct structure and vision. Observing the composition of networks among “democratic globalizers,” Jackie Smith (2008, 111–117) differentiates between those that involve movements (i.e., that challenge basic power structures) and those that do not, and between those organizations with a formal, institutionalized structure and those that operate through informal networks. Analyzing different “pathways to transnationality” among civil society organizations involved in the hemispheric free trade debate in Brazil, Mexico, Chile, and the United States, von Bülow (2010, 25–36) distinguishes between organizations along two dimensions—in terms of their variation “across scale” (in the degree of internationalization) and through time (in durability). Rucht and Teune (2009) differentiate between moderate global justice movement organizations, which use nonconfrontational methods (lobbying, performance, demonstration, and petition) exclusively, and confrontational ones, which, in addition, use blockades, occupations, civil disobedience, strikes, and boycotts. Several typologies of contentious politics draw attention to differences in the amount of change pursued by “reformative” versus “transformative” social movements (McAdam and Snow 1997, xix–xx), or in the strategies deployed by “rule-­conforming” versus “rule-­violating” collective actors (Piven and Cloward 1995). These categories in part reflect variation in ideological and strategic positions, but differences have also been detected in movement “design code.” Bennett (2005) differentiates between older forms of NGO-­

110  Contesting Trade in Central America

based activism, which were centrally controlled, and newer forms of direct activism, which emphasize polycentric structures and permanent, decentered campaigns. Variations in organizational strategy result in part from competing views of state responsiveness and capacity. Michael Menser’s review of images of the state on the global Left identifies two “organizing logics” around which distinct views are positioned. The first, which he labels “cosmopolitan republicanism,” builds on and refashions existing political forms in an attempt to “ ‘prefigure’ the future that is desired.” The second, embraced by “horizontalists” and the “new anarchists” (or, as Menser prefers, maxD, “maximal democracy”), views states, political parties, and representative democracy as inherently hierarchical and coercive and favors “disarticulation” of the state in a search for new forms of popular sovereignty (Menser 2009, 308). Those adopting the latter approach conclude that formal political processes “have created the current global crises and are not able to solve it.” “Cosmopolitan republicans,” in contrast, emphasize the role of the state as protector of human rights and creator of space for public deliberation. For that group of analysts, theoreticians, and activists, building at the intersection between social movements, political institutions, and state power is a central task. Organizational and ideological dynamics identified in Central American cases are consistent with patterns found elsewhere in the region, including the Summit of the Americas and Free Trade Area of the Americas processes, in which transnational civil society networks divided between “insiders” and “outsiders” (Smith and Korzeniewicz 2001, 2007; see also Sikkink 2005 and Wiktorowicz 2004). Tracing the shifting fortunes of these FTAA networks for more than a decade, Smith and Korzeniewicz track the gradual disenchantment and displacement of “insiders” and strengthening of “outsiders” as the FTAA process derailed. Distinctions between these two groups emerged in institutional structures, strategies, and collective action repertoires; the fortunes of these increasingly polarized networks were found to rise and fall with changing combinations of domestic and international political opportunity structures (Smith and Korzeniewicz 2007, 152–155). Several of these distinctions can be captured by the conceptual categories of “contained” versus “transgressive” politics. The trope of transgression, commonly deployed in literary analysis and gender studies, has recently been incorporated into social movement theory, albeit at times in an emaciated way.9 Inherent in the concept is the notion of violation. Transgressors place themselves in opposition to prevailing normative expectations about what is proper or correct behavior and, indeed, in the

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extreme, about what is morally or ethically “right” ( Jenks 2003). They call into question conventional categories and implicit assumptions and insist on a reconceptualization of existing paradigms. At root they challenge current norms, and, to the extent that norms are codified into law, their challenge may also be to the legal order. Movement segmentation of this type is not necessarily counterproductive in the long struggle for social change. Intramovement competition can enhance inclusiveness by providing a wider range of organizational options. It can enrich policy discussion by resisting premature cognitive consensus. It can also promote accountability through mutual monitoring and specific challenges. Interactions among movement subgroups may produce complementarity, with different sectors playing distinct but mutually supportive roles. Core themes can be identified and, through laborious rounds of negotiation, carved into shared platforms, as with the multiple rounds of redrafting for the Alternatives for the Americas by the members of the Hemispheric Social Alliance.10 In their study of transnational activism at the anti-­G8 demonstrations in Genoa in 2001 and the first European Social Forum in 2002, della Porta et al. (2006) celebrate both movement diversity and “tolerant identities” (233), through which activists’ frame bridging succeeded in constructing a common layer of understandings around which to coalesce. At the same time, subgroup variation can produce tensions and internal rivalries as diverse visions compete for ascendance. Organizational rivalries may fragment a movement, diffuse its energies, and reduce its ability to promote change (Wiktorowicz 2004). Segmentation in the CAFTA Resistance Movement In terms of the CAFTA debate, two distinctive opposition networks can be identified, characterized here as critic negotiators and transgressive resisters. My usage of the negotiator/transgressor distinction differentiates between collective action that is conducted within the rules of the prevailing system (albeit pushing at and expanding the margins) and that which challenges the legitimacy of those rules and focuses on transforming them.11 Critic negotiators developed a pragmatic critique heavily referencing local conditions and using the limited participation space opened up by authorities to lobby for reforms. These critics accommodated the restrictions imposed by the prevailing system even as they worked to expand participatory space by pushing at those boundaries. Iniciativa CID is seen here as an example of “contained” mobilization,

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in which marginalized organizations combine to push for redistributive social policy using opportunity structures emerging from domestic and international democracy discourse. Transgressive resisters, in contrast, developed a more fundamental critique of market processes and rejected those narrow participatory parameters. Mobilizing for action, repudiating the formal consultation process, and denouncing accommodation as defection, these actors posed more profound challenges to the neoliberal system and the thin democracy in which it was encased. Foro Mesoamericano provides an example of “transgressive” mobilization, which attempts to redefine identities, repudiate conventional political processes (even as it benefits from changing political opportunity structures), embrace civil disobedience (usually nonviolent), and wield dramatic, emotion-­packed symbols of death and rebirth. Transgressive civil society highlights the politics of passion to help overcome accommodationist tendencies and gives elevated status to radical, transformative visions. Although the line between these two networks was hardly absolute, they represented distinctive tendencies in the free trade debate in Central America. The present study finds “negotiators” to be more prominent in the earlier phases, as processes opened and they labored to carve out consultative space. Their political fortunes declined as consultation closed, however, and attention shifted to the more combative “resisters.” The following sections examine the organization of CAFTA critics, drawing on twenty-­two interviews with leaders in two opposition coalitions in El Salvador. These interviews were conducted in the months following the official signing of CAFTA in May 2004 (see appendix A on interview methodology). Although the specific characteristics discussed in this chapter focus on the Salvadoran case, the distinctions noted here ran like a fault line through the region. The general differences between these two types of oppositions were observed in the Nicaraguan and Costa Rican cases as well, albeit with less polarization and transgressivity in the latter networks.12 Critic Negotiators Iniciativa CID combined active participation in CAFTA negotiation rounds with the crafting of policy proposals and promotion of innovative cross regional lobbying. As Roberto Rubio (2004), the leader of the Salvadoran CID coalition explained, “We wanted to leave behind the dualistic culture, a culture in which everything is black and white. A polarized culture, especially in El Salvador, was not going to produce results. We didn’t want to beatify the FTA, or to demonize it. We approached the process with an open mind, to

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make proposals—first to analyze and then to make suggestions.” Pointedly, leaders of the Iniciativa CID coalition did not object in principle to the idea of free trade, even with an economic behemoth like the United States. In contrast to full-­throated opponents who viewed the debate in more starkly ideological terms, CID affiliates approached the process tactically, even offering the prospect of conditional approval if the negotiations incorporated proposals addressing conditions in Central America. As CID representatives noted in an August 28, 2003, letter to leaders of the Salvadoran National Assembly, “a good commercial treaty with the United States could represent an opportunity for the development of our economy” (Iniciativa CID–El Salvador 2003). The question was how to obtain a “good” agreement. In El Salvador, CID’s work was coordinated by FUNDE. Like many NGOs in El Salvador, FUNDE was created in the wake of the 1992 peace process as part of the demobilization and reinsertion effort to end the civil war. Over the following decade, it developed a research capability and reputation for professionalism. Trade-­policy work was launched at FUNDE in 2000 with an analysis of the emerging FTA agreement between Central America’s “northern triangle” (Guatemala, Honduras, and El Salvador) and Mexico (Góchez, Lara, and Tolentino 2003, 99–104). FUNDE researchers criticized the insularity of that negotiation process, and they called on the Salvadoran Ministry of the Economy for the systematic release of information about concessions and tradeoffs. The FUNDE team’s critical analysis raised tough questions about the impact and advisability of the Mexico agreement for those whose livelihoods were most precarious. Their campaign targeted the National Legislature, which narrowly approved that measure in December 2000.13 As preliminary discussion about an FTA with the United States began to take shape, FUNDE leaders broadened and deepened their organizational effort. FUNDE was vulnerable to the standard criticism made of NGOs— that is, that their claims of representing civil society were suspect due to their small size, capital-­city base, foreign financing, and elite credentials (Clark 2001). As an applied research center served by a well-­trained technical staff, FUNDE’s ability to represent civil society was obviously limited. Its leaders worked to extend their network and incorporate a broad series of like-­minded organizations by building on historical liaisons and service contract work. Though muted through time, civil war–era connections endured through the shared FMLN affiliations of some FUNDE staff and leaders of other social organizations. Newer linkages layered onto these historical alliances through FUNDE’s many research and development projects. Under contract with a range of foundations over the previous decade, FUNDE staff members

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had collaborated with an array of local organizations in capacity building and service delivery. This network of contacts helped FUNDE leaders identify allies who were engaged by the issues that CAFTA raised. In the end, CID mobilized seventeen local affiliates in El Salvador, mostly NGOs but with a sprinkling of membership-­based organizations, divided into five thematic clusters (agriculture, democracy, labor, environment, and small and medium-­ sized producers). CID activists in El Salvador played a series of roles in the CAFTA negotiation and ratification processes. As we saw in chapter 2, CID teams, led by FUNDE, pushed for and participated actively in the side room process during the negotiation rounds. They conducted research to identify impacts on vulnerable sectors; developed proposals for amendments and additions to the agreement; lobbied official and unofficial decision makers; and, in an effort to influence public opinion, disseminated information at public forums, through their website, and in the local press. In a series of research reports and proposals, CID leaders attempted to broaden the trade agenda to include immigration reform in the United States (proposing amnesty and a guest worker program) and an expansion of human rights protections in Central America, including economic and social rights. Emphasizing the positive role of citizen participation in policy deliberations, they called for creation of a Foro Nacional Cívico-­Productivo de Consulta y Debate to launch broad national discussion about the emerging agreement. They pushed for asymmetries to be recognized through the removal of sensitive items from the negotiation and for upward harmonization of Central American tariffs. Their proposals promoted performance requirements for investors, increased resources for small and medium-­sized producers, and labor protections that could lead to the suspension of trade benefits for companies with persistent violations (Iniciativa CID 2003a, 2003c). As the text of the agreement began to take shape, CID representatives concluded that these concerns would not be addressed, and, halfway through the CAFTA negotiations, they formally called for a moratorium (Iniciativa CID 2003b). CID proclamations urged negotiators to suspend the talks and rethink the procedures incorporated into the forced-­march twelve-­month calendar and a prefabricated negotiation process derived from the U.S.-­ Chilean FTA model. Differentiating themselves from more radical CAFTA critics, CID leaders were careful to explain that this was not a call to terminate the process. A moratorium, CID documents claimed, would permit Central American countries to adjust the frenetic pace and complete research on socioeconomic impacts of various concessions. During this pause, Central American legislatures could define a baseline of institutional and eco-

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nomic conditions needed for a successful free trade transition (as had the U.S. Congress during its 2002 trade promotion authority debate). These governments could also fashion a more participatory process through the proposed civic forum and coordinate a regional (as opposed to a national) negotiation strategy to unite and guide their work (Iniciativa CID 2003b). The call for a moratorium failed to slow the process, however, and a draft treaty was signed on schedule in December 2003. As the terms of the agreement were made public, CID staff members evaluated the final results (Tolentino 2004). Concluding that gains were targeted to very small sectors (a modest increase in the U.S. quota for sugar producers, minor increases in flexible sourcing for the textile industry), the CID assessment identified lost opportunities and disadvantages. After the measure moved to the Salvadoran legislature for ratification, the local CID team pursued a lobbying strategy in an attempt to slow the pace of passage. With ratification imminent, they ultimately proclaimed, “under the present circumstances, the FTA should not be ratified by our Legislative Assembly” (Iniciativa CID–El Salvador 2004). When I interviewed Salvadoran CID representatives about their views on CAFTA two months after the agreement was signed in May 2004, they offered an overwhelmingly critical assessment. Asked about their views on CAFTA, they emphasized an array of problems associated with the draft agreement. As a leader from the small business sector observed when describing an official exchange, The economic minister at my table said, “Now we can export shoes made in El Salvador.” I said, “What shoes?” The old handmade shoe industry in Salvador is dead. Here the stores sell shoes from China, Taiwan, Indonesia, Brazil . . . North American products will flood in. What will happen to our poor agricultural producers? Already the kids leave the rural areas for San Salvador when they get to be 17–18, and it will only be more so [with CAFTA]. Some people said [the FTA] would come with palliatives, to compensate, but we’ve read the treaty now and we found there’s none of that. (CONAES 2004)

Unlike their more militant brethren in the Foro alliance, several CID respondents identified possible gains (technology, transition assistance, leverage for improved labor conditions and immigration reform, Central American unity) that could theoretically emerge from a free trade agreement under carefully negotiated conditions. But most of them concluded that this particular trade agreement had failed to deliver. As another small business leader noted,

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Not everything is bad. If we have technology and can motivate small businesses, get into production chains . . . if we were competitive, globalization and the FTA would be a blessing from God—if we had that, plus prepared infrastructure and Central American integration. But as it is, it’s like when the Spanish came and gave the natives glass for gold. The big businesses, finance, TNCs benefit from the treaty [since] they have regional plans, capital, technology. The small businesses lack financial plans, incentives, levels of competitiveness. We should have a system like Japan or Taiwan, where the government helps the small producers with technology, but we don’t. (FENAPES 2004)

When asked about their views on legislative ratification of the agreement, 29% of the CID leaders that I interviewed in El Salvador expressed outright opposition. As a representative of a women’s rights organization stated, “FTAs should be agreements among equals. Central America can’t negotiate with the United States. We [Central American countries] are similar to each other, have the same language, similar history, the same problems. We should focus on trade at this level” (CEMUJER 2004). More commonly, however, CID supporters held on to a wisp of their earlier optimism (“It could be good, but not as it is”), calling for renegotiation rather than outright rejection. As a representative of a rural women’s organization explained, “I don’t want them to not do it, but to do it with more just conditions” (CONAMUS 2004). Although claiming that Salvadoran negotiators had too readily capitulated to U.S. demands without sufficient attention to local consequences, most CID affiliates thought an FTA might merit ratification if negotiation teams went back to the drawing board and more fully addressed issues of asymmetries, food security, and adequate transition support. As a small businesswoman observed, “I would support the FTA if it were designed in a different form, if they weren’t putting up roadblocks to stop our exports, like with the sanitation rules. . . . The big businesses can change and get their technology up. But the smalls?” (FIMES 2004). When asked about their views on civil society participation in the CAFTA negotiation, CID leaders generally expressed disappointment with the process. They divided, however, on the best way to understand the results of their work. Half (50%) described the outcome bitterly as an unadulterated failure that had been disillusioning. As one respondent concluded, the process was “horrible, ugly, uncomfortable. It wasn’t worth it” (CONAES 2004). In a nuanced variation, however, 43%, while agreeing that civil society had no meaningful access or impact, still mentioned indirect or long-­term gains from the process. One small business leader (FENAPES 2004) expressed pleasure in being seated at the table alongside the big business representatives,

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who had previously monopolized trade policy discussions. While recognizing that the gains were limited, in his view, participation provided some benefits. “It’s something,” he said. “At least we could see how they did it.” This subset emphasized the learning associated with participation—that is, their greater ability to frame and defend proposals, their increased knowledge about how a trade negotiation process works, a better sense of where their concerns converged with those of other sectors, and practical experience in building and maintaining cross-­national alliances with Central American counterparts. One observer noted, “As processes mature, there will be benefits from CID participation. As training it will be worth it in time, but it has a cost now” (FUNDE 2004). For this group, participation was a failure, but not an unmitigated one. They did not view their engagement with regret. After the CAFTA negotiation was complete, Oxfam America, an important funder of the CID Initiative, commissioned an evaluation of CID’s work. Acknowledging that CID participants were unable to change the form or pace of the negotiations, this assessment praised their success in identifying new methods for influencing policy debates and breaking through the stagnant polarization characteristic of Salvadoran politics. With an emphasis on long-­term goals of learning about international economic negotiation, identifying possible future alliance partners, enhancing policy-­development capabilities, and building visibility and credibility, the Oxfam evaluation praised CID’s work in spite of the minimal impact it had on the text of the agreement.14 After noting that “we’ve spent more than a decade running behind the neoliberal wave, shouting denunciations, breathing the dust it leaves in its wake, without being able to offer a viable alternative, without being able to detain it,” the report endorsed the shift in strategy toward fuller engagement with the policy process. CID’s advocacy work was praised, “not only because of the results that it produces in the text and annexes of a trade agreement. Advocacy work is good in and of itself, because it allows people to understand processes that otherwise would be secret. We cannot accept [the idea] that the only place in which we encounter our adversaries is in the field of battle. . . . Well-­earned and well-­utilized participation isn’t shameful. Many people know about and are preparing themselves for the threats/opportunities of CAFTA because they’ve been informed by Iniciativa CID” (Díaz Barrera 2004, 12–13). Transgressive Resisters The main alternative to the CID Initiative was constructed by the local Foro Mesoamericano coalition. As a collective action mechanism, with annual gatherings rotating through the region, the Foro Mesoamericano organized a

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recurring expression of anti-­neoliberal resistance. The Foro camp rejected the consultation process that had been built into the CAFTA negotiation. Viewing CAFTA as an unmitigated source of loss and destruction, Foro leaders used a series of confrontational tactics to express opposition. Over the years, their anti-­CAFTA actions included highway and border crossing blockades, authorized and unauthorized marches tinged with transgressive acts, and, eventually, a physical takeover of legislative chambers to forestall ratification. Shortly after the CAFTA text was signed in May 2004, the Foro Mesoamericano gathering rotated to San Salvador for its fifth meeting (V Foro). Organizational leadership was exercised by two Salvadoran coalitions—the October 12 Popular Resistance Movement (MPR12) and the Sinti Techán Network (RST).15 The MPR12 was the larger collectivity, involving a number of mass-­membership organizations.16 A network of networks, the MPR12 emerged from an earlier Foro Mesoamericano meeting in 2002, which concluded with a call to stage simultaneous road blockages throughout the region on October 12, a day that had become a vibrant symbol of anticolonialism and resistance. These activists closed down nodal points emblematic of economic integration (including the Pan-­American Highway and four border crossings) on that date in 2002, marking the first anti-­CAFTA mobilization by Salvadoran “transgressive resisters” (H. Rodríguez 2003; Mejía and Cruz 2002). The MPR12 played a central role in mobilizing Foro attendance in 2004 and the participation in anti-­CAFTA demonstrations that followed. Since head count normally affects movement status, the MPR12’s organizational reach provided an important element in the Foro Mesoamericano’s bid for recognition. RST was a loose network that pulled together a cluster of well-­organized, professional NGOs committed to the cause of fundamental structural change. Although it could not claim a broad membership base, its leaders provided thick links to the broader “altermundista” movement. These ties reinforced the principles and guidelines emerging within the Hemispheric Social Alliance, Latin America’s most significant resistance network.17 Such connections can diminish local movement autonomy by imposing the discipline of a region-­ wide framework, but they also infuse local processes with continent-­wide learning, helping build more coherent transnational processes. The Foro’s purpose was to contribute to the “articulation of a Mesoamerican social movement for the struggle against neoliberal policies and to propose alternatives to the capitalist system.” It aspired “to strengthen the resistance processes for the Mesoamerican peoples of an anticapitalist, antipatriarchal and multicultural character” (Foro Mesoamericano 2004b). Calling the Mesoamerican region an “Area of Humanitarian Disaster,” the final

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2004 Foro declaration promised collective opposition to CAFTA, FTAA, PPP, and other forms of “institutionalized violence expressed in feminicides, ethnocides, genocides, and violence against young people” (Foro Mesoamericano 2004e). The MPR12’s evaluation of CAFTA, distributed at the El Salvador gathering, sharply denounced the local CAFTA selling process. Former president Francisco Flores was criticized for falsely claiming that the agreement would create 100,000 jobs and absorb all the new entrants into the labor market (MPR12 2004a). Participants were reminded that economy minister Miguel Lacayo had made similar claims in 2001 about El Salvador’s FTA with Mexico, and that the Salvadoran government had proclaimed that dollarization of the economy would bring an abundance of foreign investment and new jobs. Just as those promises had proved false, so the claims of general benefit from the FTA were also denounced as illusory. MPR12 activists warned of an inundation of U.S. goods, the ruin of local small and medium-­sized producers, the collapse of basic grains production, deepening fiscal crisis, and further massive emigration. Only sectors dominated by transnational corporations were expected to benefit. Although there were several points of overlap between the two groups of activists, they parted company on the possibility of improving the CAFTA text. Those sectors of civil society that wanted to reform CAFTA, according to Foro leaders, were engaged in self-­deception. As RST leader Raúl Moreno (2003, 89) concluded, “Since CAFTA is determined by and has been constructed from and for the interests of transnational capital, it is not realistic to think that attaching labor or environmental clauses to the treaty could change its logic and its corporate slant. The inclusion of [these] clauses only tries to imprint a ‘human face’ on the treaty, when its content is incompatible with a focus on human rights.” CAFTA opponents were called to block the agreement through acts of resistance. Mass mobilization was defended as an effective strategy, with recent victories celebrated in the water privatization “war” in Bolivia and the halt to airport mega-­project construction on peasant land in San Salvador Atenco, Mexico, as well as the Combo del ICE opposition in Costa Rica and the campaign against privatization of health care and social security in El Salvador (Moreno 2003, 90). These successful confrontations demonstrated that neoliberalism could be stopped—but only with forceful and sustained mass mobilization. Unlike their CID counterpart, the transgressive resisters emphatically rejected the narrow political space opened for civil society participation in CAFTA negotiations. Foro leaders refused to solicit access to the negotiation

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side room or attend any government-­sponsored information sessions about the process. Arguing that such actions would only be used to legitimize an illegitimate process, their strategy called for public confrontation. During the third round of negotiations, held in San Salvador (March 31–April 4, 2003), opponents mounted a “No FTA” march that reportedly culminated in a mortar firing on antiriot troops and a demonstration outside the conference hotel (Rivas 2003). Marches continued episodically through 2003–2004 at negotiation rounds in the region. The July 2004 Salvadoran Foro gathering, the first Foro meeting following the completion of the CAFTA text, concluded with a protest march that stopped traffic along a principal artery in San Salvador, as student activists painted the byways and U.S. fast food restaurants with “No FTA” graffiti. When interviewed in July–August 2004, Salvadoran Foro leaders were emphatic in their denunciation of CAFTA. In contrast with CID leaders, who typically offered a negative appraisal that weighed gains against losses, Foro leaders saw the agreement more starkly. Almost two-­thirds (62.5%) described the agreement in entirely negative terms, often framing it as a form of domination. A leader of RST noted that “all of these FTAs have the same structure,” with chapters on investment and intellectual property that impose “tighter and tighter rules” and dispute settlement mechanisms “that had not even been discussed. . . . These FTAs are about more than trade in goods and services. They are a veritable instrument of annexation” (RST 2004). Other activists focused more directly on the trade impacts, particularly in vulnerable areas. A Foro leader from the agrarian reform sector, noting that agricultural production had been neglected for decades in El Salvador, concluded, “Now we [agricultural producers] don’t have the conditions [to compete]. Products come in, but we can’t get ours out. The U.S. wants to sell its overproduction, not buy. This treaty threatens freedom. It should be called the TA [trade agreement], not the FTA [free trade agreement]. It would be a coup de grâce for us” (CONFRAS 2004). El Salvador’s Foro organizers overwhelmingly opposed legislative approval of the agreement, and most (87.5%, 7 of 8 responses) called for the legislature to bluntly reject the measure (see table 3.1). Believing that CAFTA was an assault on sovereignty that advanced the interests of transnational capital and big business at the expense of the people, they demanded a full stop. Whereas CID leaders generally called for renegotiation (57%, 8 of 14 responses), with some hope that improvements would result, only 12.5% of Foro organizers viewed that option favorably, and none would accept CAFTA with only minor adjustments in the labor and environmental provisions. As one Foro labor leader noted, “It’s not enough to change the labor and envi-

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Table 3.1. CAFTA opposition leaders’ preferred legislative action, El Salvador Preferred action

Sector

Approve with minor modifications Renegotiate Reject Approve (% of responses) (% of responses) (% of responses) (% of responses)

CID (N=14) V Foro (N=8)

0 0

14.0  0.0

57.0 12.5

29.0 87.5

Table 3.2. CAFTA opposition leaders’ assessments of civil society participation in CAFTA negotiations, El Salvador Assessment of participation

Sector CID (N=14) V Foro (N=8)

Positive (% of responses)

On balance, positive (% of responses)

Don’t know, neutral (% of responses)

On balance, negative (% of responses)

Negative (% of responses)

7 0

43  0

0 0

0 0

 50 100

ronment provisions. The FTA is going to have a negative impact in agriculture, privatization, labor flexibilization—it will affect everyone. FTAs aren’t the solution, they respond to the logic of TNCs. In the end, even the labor norms won’t be implemented. There has to be another scheme” (CSTS 2004). When asked to reflect on the role of civil society in the CAFTA negotiations, Foro respondents took a uniformly negative position (see table 3.2). In their view, civil society participation, whether by CID in its collaborative style or even their own protests and days of action, had secured nothing of substance in the accord. In contrast with CID organizers, who split on the participation question, with half mentioning indirect or long-­term organizational gains in knowledge, technical skill, and alliance building, all Foro respondents viewed those efforts as an unstaunched failure that discredited those involved. According to the leader of a Foro-­aligned feminist organization, “CID was at the center of ambiguity. They wanted to be a bridge, a

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crossing point, and said that the FTA has a good side. . . . They wanted to be in the participation design, but they are guilty of the sin of naïveté” (Las Dignas 2004). A rural development activist offered a similar observation: “Some on the Left went into this ‘participation’ and fell into the trap. There was no participation, really. We concluded that they were [just] legitimizing the movement institutionally, and we decided to not participate” (CORDES 2004). “Critic negotiators” were tarnished by their willingness to lend legitimacy to this process, the resisters argued, and the results of the negotiation vindicated rejection of the process. Outcomes and Conclusions Postwar formal democratization altered the political terrain in much of Central America, making it possible for civil society organizations and social movements to operate more freely. Organizational opportunities expanded in the 1990s, supported by domestic movements that demanded inclusion. International allies promoted civil society access, noting its contribution to democratic public culture and efficient service delivery. As the stresses associated with neoliberal reform mounted, new actors layered onto old, replacing, redefining, and reconfiguring the organizational landscape. El Salvador and Nicaragua underwent notable civil society expansion; even Costa Rica experienced organizational change, as new networks and parties emerged and raised tough questions about the social consequences of the unfolding market reforms. Social movements obviously respond to dynamic forces and shifts across time. Many of those interviewed for this study experienced dramatically varied forms of engagement during different moments in Central America’s turbulent history—within the country or in exile; in shifting political parties, mass organizations, or revolutionary movements; within or in opposition to the government. Changing political opportunities during postwar reconstruction and electoral adjustment weakened parts of civil society as they strengthened others, modifying trajectories and reframing debates. When CAFTA negotiations took center stage, differences within the opposition camps crystallized in discursive, ideological, tactical, and even interpersonal terms. One coalition, building on a network of policy-­oriented research centers and service-­delivery NGOs with a reputation for professionalism and connections to international lenders, focused on expanding the participatory spaces within the evolving political system. The other coalition, working with rights-­oriented activists, student protesters, and social move-

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ments, some of which traced their roots to the war years, repudiated these constrained efforts and looked toward system transformation. Critical of the system but believing in the possibility of reform, the CID coalition emphasized a “politics of expertise” (Smith and Korzeniewicz 2007, 152). This network prioritized knowledge acquisition and generation, active participation in officially designated spaces, and policy recommendations framed with reference to the dominant discourse. Its leaders engaged in confidence-­building interactions with political adversaries. They disseminated their findings through polished publications, and they crafted fine-­ tuned legislative lobbying strategies. By focusing on strategies of opposition that emphasized a civil society discourse, system maximization, and long-­ term learning, CID leaders positioned themselves as insiders searching for the outer boundaries of reform. Foro Mesoamericano leaders, in contrast, deployed social movement discourse seeking fundamental change through mass mobilization and the motif of anti-­capitalist resistance. With an organizational “design code” that was less centralized and more fluid than that of its counterpart (Bennett 2005), the Foro promoted a participatory process to mobilize allies around an ongoing social justice campaign. Convinced that the emerging political and economic systems were fundamentally destructive of the interests of the majority, the Foro Mesoamericano leadership explicitly rejected participation in official processes and “realistic” policy proposals. For this group, interaction with officialdom and economic elites was fraternizing with the enemy. They emphasized confrontational politics designed to disrupt daily routines, sometimes at the margins of the law, and emancipatory popular education techniques, including high-­profile theater designed to break through their invisibility in the mainstream press. CID leaders imagined political space to be expanding, both domestically and at the level of the international trade negotiation, and they used their resources to advance that process. Foro leaders, in contrast, imagined those same processes to be closed, less emphatically, perhaps, than they had been in the past, but still unresponsive to public pressure and need. Change required dramatic action to crack open the system and allow a new one to emerge. To some degree, these differences in perception reflected real constraints on the level of access that reformist coalitions could obtain relative to transgressive activists. But they also reflected different calculations about how far a political opening might extend—a calculation that is difficult to make when change is under way and past experience may be an imperfect guide. In the end, the traditional insularity of trade negotiation processes held sway, marginalizing the “critic negotiators” and leaving “transgressive re-

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sisters” to drive the opposition.18 Negotiations devolved into rule maker/rule taker roles following the template outlined by the United States at the beginning. As CID efforts failed to secure adjustments in the pace or gauntlet of requirements, the baton passed to the resisters. Ideological and tactical tensions riddled these movements, and a campaign of mutual “decertification” (McAdam, Tarrow, and Tilly 2001, 121– 122) or “discrediting” (Wiktorowicz 2004, 164–168) emerged. Competition for financial resources, often from the same international funders, tightened the rivalry. Conscious “boundary framing,” where “strategies of polarization accentuate differences and draw sharp ingroup/outgroup distinctions” (Wiktorowicz 2004, 165), thickened coalition edges, making informal migration between the two camps more difficult. Their divergent goals, prospect appraisals, and international alliances created fault lines between these two movements; in brittle terrain, these divisions hardened. Attention to the adversarial dimensions of the negotiator-­resister relationship, however, should not obfuscate complementarities (Evans 2008). In spite of their differences, each of these coalitions at times extracted gains from the activities of the other. Although it is difficult to document “opportunity spirals” (Sikkink 2005, 154) associated with the actions of rivals, the transgressors’ forceful street protests in San Salvador during the third round of negotiations may have encouraged officials to open the consultative process to the tamer representatives of civil society in order to tamp down charges of exclusivity and to enhance international legitimacy. In the same vein, CID team research on the special vulnerabilities of peasant producers and small and medium-­sized businesses helped normalize aspects of the resisters’ critique by providing evidence that their claims were not simply inflammatory discourse. Indeed, a number of CAFTA critics saw these divergent strategies as punctuated by moments of convergence and ultimately serving complementary ends. Reflecting on the dynamics in the relationship during the later phases of the negotiation as reform optimism faded, CID leader Roberto Rubio (2004) observed that we didn’t abandon the protest method. In August 2003, we participated in a large protest at the Managua round, when the governments were giving away too much. . . . We learned from the Vietnamese. They had some people negotiating a peace process in Paris with Kissinger when others made the Tet Offensive. This [August 2003] was when we launched the moratorium idea as our strategy. We said the FTA negotiation is going the wrong way [“va por mal camino”], and we need to redefine the calendar, the process, to gain time. This idea was viewed with sympathy by Costa Rica and by many

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business representatives. The Ministry of the Economy in Nicaragua even began to talk about “sensitive products” and special treatment for them. The United States rejected this, of course, but our goal was to influence what our own governments proposed, not to control the United States.

In the end, CAFTA opponents in Central America—whether “critic negotiators” or “transgressive resisters”—were unable to halt the process. Neither protests nor proposals had much impact on the content of the FTA, or on its advance. Given the region’s long alignment with the United States, forceful elite commitment to market reform, economic dependence on trade and migration, and the right wing’s lock on national power, a CAFTA derailment would have been hard to imagine. But the depth and persistence of the opposition’s critique may have played a role in the gradual erosion of public enthusiasm for the measure and for market orthodoxy more generally, a topic to which we shall return.

Chapter 4

Ratification Politics: In the Chamber and in the Street

[T]he lack of legislative deliberation as policies are formulated and the weakness of oversight may mean that the policies adopted are poorly conceived in technical terms, poorly adjusted to the real needs and demands of organized interests and citizens, lacking consensus and therefore politically unsustainable, and/or ineffectively or unfairly implemented. Saiegh (2010)

Before CAFTA could enter into effect, legislative approval was required. Ratification by the legislature was designed to ensure that support extended beyond the executive branch. In theory, approval at this second level of review would infuse the new rules with greater legitimacy and bolster public acceptance. It would also increase the odds of successful implementation through stronger institutional buy-­in and, ideally, promote parallel policy making to address distributional consequences. This chapter analyzes the CAFTA ratification processes in El Salvador, Nicaragua, and Costa Rica. It emphasizes the domestic politics involved in the process, focusing on institutional characteristics, political parties and coalitions, the relationship between institutions and agency, and the tools of representative versus direct democracy. As such, it highlights the second part of Putnam’s (1988) two-­level game: the exchange between the government that negotiates an international agreement and the domestic constituencies that will be governed by it. CAFTA ratification processes unfolded slowly after the May 2004 signing. Uncertainties surrounding the 2004 U.S. presidential campaign initially deterred rapid action since the Democratic Party’s presidential contender, John Kerry, had pledged to revise the CAFTA agreement if elected. With the U.S. election outcome uncertain, Central American leaders postponed their own

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Table 4.1. CAFTA ratification votes Country

Approved by

Date

Yes votes

No votes

El Salvador Nicaragua Costa Rica

Legislature Legislature Referendum

December 2004 October 2005 October 2007

49 (58%) 49 (57%) 51.6%

35 (42%) 37 (43%) 48.4%

discussion. Once George W. Bush won reelection in November 2004, however, several Central American leaders moved CAFTA toward ratification, none more quickly than Salvadoran president Tony Saca. The Salvadoran government became the first to ratify, securing legislative approval only days after the measure was submitted in December 2004. Ratification came in a 49–35 victory over the FMLN opposition in a middle-­of-­the-­night vote following a day of protests in and around the legislative chambers (AFP 2004) (see table 4.1). Honduras and Guatemala followed suit in March 2005, reflecting a “domino effect” (Condo, Colburn, and Rivera 2005, 28) in which pro-­ CAFTA coalitions in each country competed on ratification speed in hopes that early approval would be taken as a positive signal by foreign investors. The Honduran Congress approved the measure with the support of 123 out of 128 deputies on March 3. The agreement was ratified the following week in Guatemala, on March 10, by a vote of 126 to 12. After only hours of debate in Honduras and little more than that in Guatemala, legislative leaders called a quick vote and delivered the outcome. Deeply dependent on a combination of trade, remittance, tourism, and aid flows (Orozco and Romei 2009, 19), these nations moved quickly to finalize approval. The Salvadoran, Honduran, and Guatemalan governments pushed the measure through with little debate, absent serious public hearings or discussion of complementary programs to prepare the country for the challenges of adjusting. This ratification style provides insight into the operation of these political systems, revealing executive dominance, the influence of a few strong lobbies, weak links between legislators and constituencies, the underdevelopment of congressional research capabilities, and the limitations of state development resources. Participating governments apparently relied on international financial institutions to supply the needed assistance packages and to fund implementation strategies. The United States became the fourth country to ratify, following strong business lobbying (Abetti 2008) and a number of side deals arranged by Republican leaders (Jacobstein 2005). After approval by the U.S. Senate (54–45)

128  Contesting Trade in Central America

on June 30, 2005, the U.S. House narrowly endorsed the agreement (217–215) in another late-­evening decision, on July 27, 2005 (Storrs et al. 2005). Once U.S. ratification was secured, the Dominican Republic acted quickly. Of 29 Dominican Senators, 27 voted to approve on August 25; the Chamber of Deputies did likewise in a lopsided 118 to 4 vote on September 6, 2005 (Peña 2005). Under rising pressure, the Nicaraguan Assembly called the vote on October 10 and ratified with 49 votes. The FSLN mobilized 37 opposition votes but, after months of forceful anti-­CAFTA crusading, became strikingly mute when the decision was taken (Barberena 2005). By October 2005, only Costa Rica, out of the seven signatory states, continued to delay. It took two more years for it to ratify, following long and rancorous public debate. Gridlock there forced the decision out of the legislature and into the country’s first national referendum, where it was narrowly approved in October 2007. “Horizontal Accountability” and “Democratic Chromosomes” Research on the quality of democracy draws attention to questions of accountability, with the concept of “horizontal accountability” generating abundant scholarly discussion (O’Donnell 1994, 2003; Mainwaring 2003; Kenney 2003; Vargas Cullell 2004; Fish 2006; Scartascini, Stein, and Tommasi 2010). When the dust cleared following the electoral democratization of the 1980s and 1990s in Latin America, the limitations of these nascent democracies stood out. As O’Donnell suggested, ongoing adjustment would be required to shift from a “democratically elected government” to an “institutionalized, consolidated democratic regime” (1994, 59, italics in original). Instead of constructing the latter, many Latin American governments entrenched a form of “delegative democracy,” which “rest[s] on the premise that whoever wins election to the presidency is thereby entitled to govern as he or she sees fit, constrained only by the hard facts of existing power relations and by a constitutionally limited term of office” (59). Delegative democracy and presidential dominance may be strongly majoritarian and even highly efficient, in the sense that they facilitate rapid decision making. They suffer, however, from a democratic deficit that, in instrumental terms, produces a “higher likelihood of gross mistakes” and “hazardous” policy implementation (O’Donnell 1994, 62). Rising public dissatisfaction with the performance of new democracies in Latin America led analysts to call for new forms of democracy, characterized by stronger institutions and mechanisms of horizontal or “intrastate” accountability (Mainwaring 2003;

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see also Scartascini, Stein, and Tommasi 2010). In addition to the conventional checks between the executive, legislative, and judicial branches of government operating with separate but partially overlapping powers (which Vargas Cullell [2004] labeled the “democratic chromosomes”), the concept of horizontal accountability applies to a wide array of state watchdog agencies designed to monitor spending, ferret out corruption, improve policy performance, and safeguard human rights.1 Debate endures among specialists in the field about how power is best allocated between the executive and legislative branches in presidential systems. Michael Mezey (2010), for example, celebrates presidentialism, arguing that the disproportionate influence exercised by the president allows for more coherent and better-­quality policy making, provides voters with clearer information about responsibility for outcomes, and may be imperative in a globalized economy when quick responses are needed to complex problems. Analysts of market reform have noted that policy change tends to occur when the executive is relatively insulated and political power centralized (Haggard and Kaufman 1995, 163–165). A higher number of veto points (steps in the policy making process where presidential initiatives may be checked by other political actors), in contrast, reduces policy innovation (Tsebelis 2002). In other words, the concentration of power and the lower number of checks allows the executive to advance initiatives more quickly without making debilitating concessions. In contrast, increased congressional independence, weak party discipline (R. Madrid 2005), strong multipartyism (Biglaiser and DeRouen 2004), the absence of a presidential mandate, and the ruling party’s low share of legislative seats (R. Madrid 2005) present presidents with major impediments to realizing their legislative agendas. For some analysts of legislative power, constraints on the executive are highly desirable. Fish (2006, 5, italics in original) finds that “the presence of a powerful legislature is an unmixed blessing for democratization” in that it contributes over time to the development of other democratic characteristics.2 Carey (2003) argues that legislatures, which represent varied constituencies, can better bring multiple voices to the table. In O’Donnell’s (1994, 62) view, policies constructed through collaboration between relatively autonomous institutions are “usually vaccinated against gross mistakes.” This chapter explores questions of institutional power and democratic quality through the prism of the ratification processes that locked in CAFTA in El Salvador, Nicaragua, and Costa Rica. All of these countries had developed competitive, participatory electoral processes by the time the CAFTA debate came to a head. Their political institutions functioned differently, however, in ways that detailed policy making studies can highlight. Although

130  Contesting Trade in Central America

no single case study can provide a diagnostic of the overall political system, this review of CAFTA ratification processes focuses on dynamics that mirror broader political tendencies in these three countries. Three CAFTA Ratification Stories The CAFTA ratification process in El Salvador reflects presidential dominance, legislative polarization, consultative limitations, and easy disregard for institutional rules, producing a policy making style that Sonja Wolf (2009) has characterized as “dismissive majoritarianism.” The Nicaraguan case illustrates the play of extrainstitutional power and pact making and the ongoing strategic intervention by the U.S. government that have long been characteristic of Nicaraguan politics (Dye 2004; Close 2004; Martí i Puig 2009). In her dim appraisal, Consuelo Cruz (2005, 9) labels Nicaragua “an electoral democracy which, afflicted by extreme venality and polarization, can barely begin to face its representational functions.” Costa Rica, in contrast, has long been characterized by stronger institutional and consultative processes (Booth 1998; Wilson 1998; Cruz 2005).3 Nonetheless, Costa Rican institutions functioned smoothly only in the context of consensus and tended to falter under conditions of acute polarization, as the CAFTA approval process demonstrates. The shift from horizontal to vertical accountability mechanisms, as with Costa Rica’s 2007 referendum, produced a conclusion to the CAFTA debate, but it did so without guiding the country toward greater consensus or introducing compensatory mechanisms with which to address distributional implications. CAFTA Ratification in El Salvador The deputies who were to decide CAFTA’s fate in El Salvador were elected for a three-­year term in 2003. For the second time in a row, the FMLN emerged with a plurality, gaining thirty-­one out of eighty-­four seats (see table 4.2). The ability of the FMLN to affect legislation, however, was diluted by the well-­worked alliance between ARENA and the National Conciliation Party, which secured twenty-­seven and sixteen seats, respectively, in 2003, for a total bare majority of forty-­three votes.4 Ideological polarization in the Salvadoran legislature was acute. Using calculations based on ideological self-­placement data drawn from the Parliamentary Elites in Latin America (PELA) surveys, Alcántara (2008, 101) found that thirty-­four Salvadoran legislators placed themselves on the Right

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Table 4.2. El Salvador: Legislative election results by political party, 2003 Political party

No. of seats

FMLN ARENA

31 27

Political party PCN PDC

No. of seats 16  5

Political party CDU Total

No. of seats  5 84

Source: FUSADES (2010, 50).

40 Number of Legislators

35 30 25 20 15

34 32

10

14

5 0

Left

Center

Right

Source: Data from Alcántara (2008, 101). Response rate 80/84 = 95%.

Chart 4.1. El Salvador: Legislator ideological self-­classification, 2004.

in 2004, and thirty-­two on the Left; only fourteen occupied the Center (see chart 4.1). Mark Jones (2010, 42) identified El Salvador as one of the three most ideologically polarized legislatures among the eighteen Latin American cases he analyzed. Presidential dominance, which was pronounced in postwar El Salvador, was reinforced in March 2004, after ARENA candidate Tony Saca was elected in the first round of balloting with 57.7% of the vote. The turnout rate of 69% marked a remarkable increase over the 39% achieved in 1999 (Artiga-­ González 2007, 328). Saca was inaugurated on June 1, 2004, four days after CAFTA was officially signed. Calls for greater legislative engagement during the CAFTA negotiation led the assembly to create a special five-­person CAFTA Ad Hoc Committee in August 2003, midway through the negotiations. This committee included one representative from each of the five parties holding seats in the assembly.

132  Contesting Trade in Central America

In a rare exception, FMLN deputy Hugo Martínez was elected committee president.5 The Ad Hoc Committee’s mandate was to monitor the negotiation process and report to the legislature about issues and concerns requiring further analysis. In the months following the formal signing of the agreement, the CAFTA Ad Hoc Committee called open meetings about CAFTA in four regions of the country. Its second report, formally presented to the legislature on December 8, 2004, summarized the range of opinions, from strong support to strong opposition, which had emerged at these public hearings. It described a planned third phase of work, which involved commissioning a social, legal, and economic impact study of the agreement. The committee’s timeline for the completion of that study projected the initiation of legislative deliberation around June 2005 (Asamblea Legislativa de la República de El Salvador 2004b). This planning process was preempted by Saca’s December 2 announcement that he was submitting CAFTA to the legislature, where he hoped for an early ratification. Only weeks after Bush’s November 2004 reelection, Saca pushed for El Salvador to be first in line to affirm the agreement. Lest there be any doubt about the administration’s commitment to this measure, five key cabinet officials accompanied the document as it was presented to assembly president Ciro Cruz Zepeda.6 In a sign of what was to come, opponents weighed in as well, filing into the assembly hallways and chanting political slogans (consignas) that interrupted legislative proceedings (“Asamblea inicia debate” 2004). Legislative rules in El Salvador required the assembly president to for‑ ward proposals to the appropriate committee for hearings and deliberation (FUSADES 2010, 137). That committee was charged with drafting a recommendation that, if it received majority support, would be presented to the leadership so that the measure could be scheduled on the plenary agenda. Formal approval by the plenary required a majority vote of 43, as demonstrated by a show of hands. Following its official submission, the CAFTA proposal was referred to the Foreign Relations Committee, bypassing the CAFTA Ad Hoc Committee, which had monitored the negotiation. The Foreign Relations Committee, composed of eleven members, was presided over by ARENA stalwart Carmen Elena Calderón de Escalón. Sister of former president Armando Calderón Sol, Calderón de Escalón was a long-­standing ARENA leader in her own right, already having been elected to the legislature for four terms (1991– 1994, 1994–1997, 2000–2003, 2003–2006) and having served for six years as a member of the legislature’s governing board ( junta directiva).

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As the Foreign Relations Committee began to schedule hearings, a turf war erupted with the CAFTA Ad Hoc Committee, which had its own review process under way. Forty-­five legislators voted to dissolve the latter, giving the ARENA-­led Foreign Relations Committee sole responsibility for advancing CAFTA to a vote.7 This outcome provided a shadow vote on CAFTA itself, allowing leaders to identify supporters and opponents and showing that Christian Democrat votes would add to the margin of victory for CAFTA. On December 6, the Foreign Relations Committee received two U.S. State Department officials—the director of the Office of Central American Affairs in the Bureau of Western Hemisphere Affairs, David Lindwall, and the desk officer for El Salvador, Paul Degler—who were making an official visit to discuss “themes of bilateral interest like immigration” (“Fracciones” 2004). The committee initiated formal hearings on December 9, 2004, with presentations by the minister and vice-­ministers of the economy and El Salvador’s CAFTA negotiation team. The ministry representatives presented PowerPoint summaries of Central American impact studies prepared by the IMF, the World Bank, ECLAC, and the U.S. International Trade Commission (Asamblea Legislativa de la República de El Salvador 2004c, 678–682).

The MadrugO´n As it became clear that the more deliberative process proposed by the Ad Hoc Committee would not take place and that hearings by the Foreign Relations Committee would be a brisk undertaking confined to CAFTA backers, resisters launched another protest. Early in the morning of December 16, 2004, before the legislative session began, MPR12 activists trickled into the assembly chamber. Recognizing that the CAFTA process was quickly advancing to its final stages, these activists, leaders of the “transgressive resisters” wing of the opposition, now moved to disrupt the proceedings. Taking the chamber seats designated for diputados, they called a “people’s plebiscite” to vote against ratification. A simultaneous public protest positioned outside the legislative building was designed to echo their verdict (MPR12 2010). As security arrived, protesters were quickly evicted from the building; inspections at the entrance were tightened, and the parallel demonstration forming outside was dispersed. Now even more motivated to secure rapid ratification, legislative leaders pushed ahead, finally convening the day’s session at 3:55 pm. Escalating tensions around CAFTA and the late hour signaled a madrugón, the label used in El Salvador to describe periodic late-­night assembly sessions in which major decisions were pushed through by the government in the wee hours of the morning. Routine discussion and voting went on for almost twelve hours before the

134  Contesting Trade in Central America

transition was announced. At 3:10 a.m., now on the morning of the seventeenth, Diputado Norman Quijano requested a modification of the day’s agenda so that the CAFTA ratification vote could be added. As deputies took stock of this change of course, CDU representative Héctor Dada, also a member of the Foreign Relations Committee, rose to criticize the madrugón, calling the maneuver “irresponsible” and concluding that it “makes a joke of the institutionality of the assembly” (Asamblea Legislativa de la República de El Salvador 2004a, 194). Unmoved, and with a sufficient number of pro-­ CAFTA votes pledged, assembly president Ciro Cruz Zepeda called for a show of hands on the agenda change. Moments later, 45 votes added CAFTA ratification to the day’s schedule. Expressing outrage, FMLN deputy Arnoldo Bernal (2005), also a member of the Foreign Relations Committee, noted that the committee had not even completed its review of the measure, nor had it held a vote or issued a recommendation.8 Bernal urged committee members to refuse to sign any impromptu resolution, which would require a majority (six signatures) to advance. At 3:45 a.m., Foreign Relations Committee president Calderón de Escalón used a fifteen-­minute recess to produce a resolution and line up the requisite signatures. Chaos broke out as the assembly leadership argued about how to sequence the suspension of the regular rules of operation and what should be formally read into the record. Some FMLN deputies, attempting a middle-­of-­the-­night return to the assembly now that major legislation was on the docket, found the doors locked, leading to more protests from the floor. As multiple members called out to be recognized and launched into proclamations, the sound system reportedly failed, and the official recording was interrupted for six minutes (Asamblea Legislativa de la República de El Salvador 2004a, 207). When I interviewed her a year later about the events of that evening, Calderón de Escalón (2005) described being attacked while holding the chamber floor, with her mike grabbed and thrown, as others from her party came to her defense. Eventually order was restored; Calderón de Escalón continued reading the committee resolution into the record. Ciro Cruz announced at 5:00 a.m. that two hours of debate on CAFTA would be allowed. Debate stretched to six hours, led by FMLN deputies Schafik Handal and Salvador Arias. Finally, at 11:15 a.m., eighteen hours after the session began and eight hours after CAFTA was added to the agenda, the vote was called. The measure was approved by 49 votes, six more than the required simple majority. Responding to FMLN deputy Celina de Monterrosa’s request for a tally of opposition votes, 34 votes were counted as opposed, a tally subsequently amended to thirty-­five.9

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According to Calderón de Escalón (2005), the decision to advance the vote so quickly, with regular deliberative processes suspended, resulted from the leadership’s fears of further anti-­CAFTA mobilizations. Now on high alert, they responded to word that leftist NGO groups were mobilizing in rural areas to initiate a mass protest. The extended comments by FMLN deputies, particularly Salvador Arias, she contended, were designed to hold off the vote until the next wave of demonstrators could arrive. In her view, it was not possible to negotiate with the FMLN on this issue; it was “a point of honor” for FMLN deputies to oppose CAFTA, just as they had opposed previous FTAs with Mexico, Chile, Panama, and the Dominican Republic. Stating that she had no objection to the existence of a Center-­Left in El Salvador (“one you can talk to”) and offering qualified praise of the CDU’s more flexible negotiating position on CAFTA, she concluded that negotiation with the FMLN was impossible: “You can’t reason with them.” In an overnight process that truncated public hearings, circumvented institutional procedures, and precluded meaningful legislative debate, El Salvador became the first country to ratify CAFTA. CAFTA Ratification in Nicaragua As in El Salvador, halfway through the CAFTA negotiation rounds, the Nicaraguan legislature created a special commission to follow the process. The Comisión Especial de Seguimiento y Control Permanente del Tratado de Libre Comercio Centroamérica–Estados Unidos (henceforth, Special Committee) was composed of eight diputados, headed by Carlos Noguera of the Liberal Constitutionalist Party (PLC).10 It was charged with the task of consulting with civil society on concerns about CAFTA, assessing various concerns raised during these consultations, and making a recommendation on agreement ratification to the National Assembly. The commission’s work was complicated by the political rupture between President Bolaños and former president Alemán. As one of Nicaragua’s two preeminent power brokers, who had co-­governed during his administration with Daniel Ortega through a series of pacts,11 Alemán was generally regarded as a local caudillo whose authority was personalistic and little dependent on institutional power (Dye 2004; Close 2004). Bolaños had been Alemán’s vice president (1996–2001), and his presidential victory was widely understood as a vote of continuity that would allow Alemán to exercise ongoing influence even while officially out of power (a departure required by the constitutional prohibition of consecutive reelection). Soon after Alemán left office, however, Bolaños mustered the political re-

136  Contesting Trade in Central America

Table 4.3. Nicaragua: Legislative election results by political party, 2001 Political party PLC (subsequently divided into PLC and Azul y Blanco) FSLN PC Total

No. of seats 53* 38† 1 92

Source: Dye, with McConnell (2002, 60). *Includes seat for outgoing president. †Includes seat for presidential candidate with second-­highest vote.

sources to charge him with corruption, a charge backed by the U.S. embassy. After being stripped of legislative immunity, Alemán was found guilty of money laundering, embezzlement, and corruption and given a twenty-­year prison sentence in 2003.12 The break between strongman Alemán and the man he chose to replace him snapped Bolaños’ base in the National Assembly. The PLC had emerged from the 2001 election with a comfortable majority (see table 4.3). A handful of its deputies defected to Bolaños’ newly constituted Azul y Blanco (later, Alliance for the Republic, APRE) faction following Alemán’s conviction, but Alemán still controlled the party base and around forty-­one of ninety-­ two legislative seats. Now bitterly hostile to the Bolaños government, the PLC formed an alliance with the FSLN, the second-­largest party in the legislature (thirty-­eight seats). Formally ideological foes, Alemán and Ortega had successfully negotiated power-­sharing pacts during the previous administration. Between them, their two parties dominated the legislature (and most other institutions of government); in contrast, Bolaños’ own minicoalition now reliably controlled only nine legislative seats. Since CAFTA ratification would require a majority vote (forty-­seven deputies), the administration’s ability to secure this outcome would depend on collaboration with at least one of its adversaries. Bolaños submitted the CAFTA text and its multiple annexes to the national legislature for ratification in October 2004. Eager to signal his support to the Bush administration, the lifeline of the much-­beleaguered president, Bolaños did not wait for Bush to emerge victorious from the November 2004 presidential contest. The National Assembly, however, was a divided insti-

Ratification Politics 137

tution that tipped ideologically to the Left (see chart 4.2). According to the 2002 PELA legislator survey, only a modest number of Nicaraguan legislators placed themselves ideologically at the Center or the Right; almost half of the respondents self-­classified as aligned with the Left. Hoping to secure a positive committee report and prevent a CAFTA derailment in spite of these political obstacles, Bolaños administration officials stretched across the political fault line to work with former PLC allies in the Special Committee. PLC leaders, however, disgruntled by the U.S. clampdown on Alemán and concerned about their own rural base, failed to respond. As the rift with Bolaños deepened, the legislature moved to reduce presidential powers and resist CAFTA action (McConnell 2010). Attempting to build support for CAFTA, the administration’s economic team in MIFIC then constructed a multifaceted proposal for policy reforms that would accompany the agreement. This initiative included a list of legal and programmatic reforms that the government formally committed itself to enact. These reforms were positioned as measures to address the country’s gaping institutional and legal void and improve the competitive position of local producers. Armed with this Agenda Complementaria del País para el Mejor Aprovechamiento del CAFTA-­DR (henceforth, Complementary Agenda or CA) when it was appended to the CAFTA agreement as Annex 1, the Special Committee majority, composed of four PLC and one Azul y Blanco deputies, issued a majority report in favor of ratification on April 29, 2005 (Asamblea Nacional de Nicaragua 2005b).

The Majority Report The majority report attempted to demonstrate that commission members had investigated concerns voiced by civil society actors during the negotiation

Number of Legislators

30 25 20 15

28

10 5 0

Left

15

15

Center

Right

Source: Data from Alcántara (2008, 102). Response rate 58/92 = 63%.

Chart 4.2. Nicaragua: Legislator ideological self-­classification, 2002.

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process. Fears about the impact on the peasant economy, for example, were found to be addressed by the exclusion of white corn from the list of items subject to tariff elimination. Concern about competition from imports was found to be addressed by the long tariff phaseout process, extending to twenty years for the most sensitive products, and “special agricultural safeguards” allowing tariff increases in the event of import surges. On the unfair competition produced by U.S. agricultural subsidies, rice was identified as the only product grown in Nicaragua that would face this challenge; imports of the other U.S.-­subsidized products would simply reduce local food costs “to the benefit of the consumer.” Nicaraguan rice producers were found to be adequately protected by existing (albeit temporary) policies that required importers to match rice imports with an equivalent purchase of domestically produced rice. Questions about CAFTA’s impact on the availability of generic medicines were addressed by citing the Doha Declaration clauses on universal access to medicines for pandemic diseases and national emergencies. Issues that had not been adequately addressed by the negotiators or existing legislation then became the terrain of the Complementary Agenda. The CA was described in the majority report as a formal agreement the Special Committee entered into with the Bolaños administration (“hemos consensuado con el gobierno”). Divided into six areas, this Annex to the ratification decree gave special attention to the challenges facing the micro, small, and medium-­ sized enterprises (MSMEs). These enterprises dominated Nicaragua’s economy; the informal sector represented 45% of the GDP, and MSMEs provided employment for 74% of the urban workforce (World Bank 2008, 1). With limited ability to compete in the face of a projected import surge or to place their products in a demanding U.S. market, MSMEs were widely expected to be among the CAFTA losers. The CA committed the government to a series of actions to assist this sector, including increasing access to credit and creating a risk-­capital fund and new legal mechanisms for shared loan risks. The document also committed the government to promote MSME linkages (asociatividad) in order to facilitate economic alliances, economies of scale, and sectoral representation up through the national level. The executive agreed to prioritize access to technical training and to coordinate international aid flows targeting this sector. The Complementary Agenda also supported a series of new environmental laws (addressing water, biodiversity, and biosecurity), the identification of environmental crimes and penalties, the strengthening of enforcement mechanisms, and intellectual property law reforms that “protect traditional and ancestral knowledge.” Several provisions focused on institution building and physical infrastructure to support exports. These provisions included commit-

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ments to coordinate government ministry and agency work in quality control, sanitation, and certification; manage the distribution of export quotas; promote customs integration and modernization; pass antitrust legislation to promote competition; and improve the country’s roads, ports, and electrical generation and distribution networks. This long list of mostly behind the border reforms came with no indication of estimated costs or sources of financing (Aráuz 2005).

The Opposition ’ s Position

The Special Committee’s three minority members, all from the FSLN, presented their response on August 3, 2005. Noting that the proposed Complementary Agenda was “not obligatory” and was “insufficient in its content and reach,” the minority report called on the assembly to vote no on ratification (Asamblea Nacional de Nicaragua 2005c). According to the opposition, any trade agreement negotiated by Nicaragua should take the country’s small size and economic limitations into consideration and offer, as the GATT framework had permitted, “special and differential treatment.” From their point of view, the lengthy tariff phaseout period did not constitute such treatment since the end result would be reciprocal tariff elimination. Under CAFTA terms, opponents warned, Nicaragua would be forced to compete with U.S. producers who had been favored with access to advanced technology, easy credit, and subsidies. In that toe-­to-­toe contest, failure was seen as inevitable. According to the minority report, the government should have excluded all sensitive products and pharmaceutical patents from the negotiation. Detailed impact studies should have been prepared for each sector prior to the rounds, along with strategies to mitigate negative consequences. Instead of the Complementary Agenda endorsed in the majority report, the government should be required to create a National Development Agenda, a Transition Plan, and a Special Compensation Fund “that would permit us to prepare ourselves for gradual insertion into this trade exchange, along with the conversion of the production process.” Serious assessment of the fiscal impact had not been done, nor had there been an analysis of the consequences of the anticipated revenue decline on social and productive investment. The FSLN minority report was followed a month later by anti-­CAFTA street mobilizations in which Daniel Ortega assumed the lead. Independent civil society organizations, whether affiliated with CID or the Foro Mesoamericano, had been organizing against CAFTA for years, but these groups were easily pushed to the sidelines when Ortega and his acolytes appeared. In a speech posted to the FSLN website under the heading “We are alert and mobilized; we will not allow the FTA to impose more death, more Yankee

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occupation, on us!” Ortega (2005) denounced CAFTA as an assault on Nicaraguan sovereignty. Attempting to hoist the Bolaños government on its own petard, Ortega claimed that the “Sánchez and Boss” [sic; Vos] study commissioned by MIFIC and the UN Development Program concluded that CAFTA would do little to address poverty and inequality in Nicaragua.13 Instead, he charged, the beneficiaries would be the “oligarchs,” “traitors,” and owners of the maquilas. Fiscal losses associated with tariff termination would leave Nicaragua yet more indebted and subordinate. With characteristic drama, Ortega called on followers to defend economic sovereignty, their rights, and their lives, and he pledged to continue CAFTA resistance, stating, “We swear that we are going to fight against this Free Trade Agreement!”

The CAFTA Vote in Nicaragua The FSLN held CAFTA off for another month in the midst of an ongoing national crisis that threatened the weakened Bolaños government with impeachment. The political climate shifted in early October, however, following a visit by U.S. assistant secretary of state Robert Zoellick. His appearance served to stabilize the Bolaños government and advance CAFTA approval. The U.S. government, long a major player in Nicaraguan politics, continued to have a unique role in policy deliberations. The poorest and most indebted of our three cases, Nicaragua had a century-­long history of vulnerability to U.S. pressure (Gobat 2005; Schoultz 1998). As CAFTA deliberations headed into the home stretch, new forms of aid, and hence influence, were added, primarily through large Millennium Challenge Corporation (MCC) authorizations.14 MCC signed five-­year aid “compacts” with Honduras and Nicaragua in July 2005; total “trade capacity building” funding to CAFTA countries topped US$392 million that year, representing a full 75% of the U.S. trade aid offered to Latin America. Robert Zoellick, who had been the USTR in charge of negotiating the CAFTA agreement before being named assistant secretary of state, now threatened Nicaragua with the loss of MCC funding if the institutional roil did not end. This prospect, plus the near-­simultaneous State Department announcement of a visa revocation for two of Alemán’s children and an ally, reportedly persuaded the PLC to pull back from its alliance with the FSLN, allow Bolaños to finish his term, and move ahead with CAFTA ratification (Storrs et al. 2005, 64–67, 75; Brinkley 2005). Once CAFTA was placed on the legislative docket, the outcome was settled. Threatened with removal if he failed to bring CAFTA to a vote, National Assembly president and prominent Sandinista René Núñez put CAFTA ratification on the agenda for October 10, 2005, one week after

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Zoellick’s visit.15 CAFTA was approved that day, with the Complementary Agenda as Annex 1, by a vote of 49 to 37 (Asamblea Nacional de Nicaragua 2005a). All opposition votes were cast by the FSLN. CAFTA Ratification in Costa Rica As elsewhere, ratification in Costa Rica required that the president first submit the proposed agreement to the legislature, where a committee would be responsible for holding hearings and issuing an initial resolution before the measure could advance to the plenary. Unlike in El Salvador and Nicaragua, legislative measures in Costa Rica required two rounds of approval by the full body, with a mandatory constitutional review following the first vote (and with additional reviews, should revisions be advised) (Ramírez Altamirano 2005; Condo, Colburn, and Rivera 2005, 52–53). The cumbersome quality of this legislative process, which lacked rules of cloture and required a mandatory constitutionality review, implied a lengthy ratification process. In addition to these standard complexities, the CAFTA ratification process in Costa Rica developed five distinctive elements, reflecting both the importance of the measure and the brewing controversy over its impact. First, the president named a special board of luminaries to assess the CAFTA text and pronounce on its expected impact before sending it to the legislature. Second, he did not submit CAFTA to the legislature until October 2005— almost one and a half years after the agreement was signed and after all of the other countries had completed ratification. Third, because of the above, the CAFTA debate in Costa Rica spilled over into the next presidential election, sharply dividing the electorate and leading to a showdown between the top two candidates. Fourth, even when enough legislative votes were secured to comfortably approve CAFTA, ratification was undermined by the skillful maneuvering of a dedicated minority of opposition deputies. And finally, as a result, Costa Rica’s CAFTA decision was made, not through a legislative vote, but by a popular referendum. Claiming personal uncertainty about CAFTA’s social impact, President Pacheco conditioned advancement toward ratification on the approval of other measures—first, a fiscal reform, and subsequently, a complementary agenda—that would be needed to strengthen the country’s competitiveness and assist the adjustment of those who would suffer with the changes.16 The elderly Pacheco, often in ill health, also faced the demoralizing consequences of the corruption charges leveled against two former presidents from his political party, a side issue that made it difficult to advance any agenda.17 As CAFTA opposition began to emerge and Pacheco edged away from earlier

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enthusiasm, his cabinet began to unravel. Core CAFTA negotiation team leaders (COMEX minister Alberto Trejos, vice-­minister Gabriela Llobet, and chief CAFTA negotiator Anabel González) resigned in quick succession in September 2004, following the departure of four other cabinet members the previous month. Searching for neutral, credible consultants, Pacheco announced the creation of a “council of notables” in 2005. This special commission of high-­ profile national figures was charged with the task of reporting on the expected impact of CAFTA, with attention to the consequences for Costa Rican sovereignty and human development.18 Although Costa Rica, with its established tradition of mixed commissions, concertación, solidarismo, and accords, had a penchant for addressing conflictual issues through mediation, the addition of an assessment by a hand-­picked advisory board prior to the opening of legislative deliberations was an unexpected move. By the time these additional steps were completed, Costa Rica was on the brink of the 2006 presidential election. After decades in which the PLN and the PUSC dominated Costa Rican politics and rotated power between them, the party system began undergoing major changes in the early 2000s (Close 2010). The PUSC vote collapsed in 2006, and a fissure that had appeared in the PLN following its conversion to neoliberalism now widened, fueling the expansion of a new alternative, the Citizen Action Party. An offshoot of the PLN that positioned itself further to the Left, the PAC was led by Ottón Solís, former minister of planning during the first Arias administration (1986–1990). Arias and Solís now met again as the two main rivals for the presidency in 2006. The central issue on which the candidates differed was CAFTA. Former president Arias, a forceful proponent of the agreement, lobbied hard for ratification in both the United States and Costa Rica. Solís, on the other hand, denounced the agreement as a poor deal for Costa Rica and claimed he would renegotiate it. The 2006 Arias-­Solís race finished in a near tie. The Supreme Election Tribunal (TSE) confirmed Arias’ narrow victory with 40.9% of the vote (vs. 39.8% for Solís) following a monthlong manual recount. With only twenty-­ five of the fifty-­seven legislative seats, the PLN lacked a majority in the assembly (see table 4.4). In coalition with the Libertarian Movement Party (ML) and three other small parties, however, Arias mobilized a full complement of 38 votes, enough to secure CAFTA passage even in the event that a supermajority of two-­thirds was required.19 This work was made easier by the general weakness of the Left in the Costa Rican legislature. As chart 4.3 indicates, legislative self-­classification in the 2002 PELA survey found only four-

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Table 4.4. Costa Rica: Legislative election results by political party, 2006 Political party PLN PAC ML

No. of seats

Political party

No. of seats

25 17  6

Others Total

 9 57

Source: Tribunal Supremo de Elecciones, Costa Rica.

Number of Legislators

30 25 20

27

15 10 5 0

14 Left

7 Center

Right

Source: Data from Alcántara (2008, 100). Response rate 48/57 = 84%.

Chart 4.3. Costa Rica: Legislator ideological self-­classification, 2002.

teen of forty-­eight legislative respondents placing themselves on the ideological Left, whereas almost twice as many placed themselves in the Center. This kind of ideological configuration might be expected to ease CAFTA passage in Costa Rica, relative to the processes in El Salvador and Nicaragua. However, a minority of determined opponents, armed with hundreds of proposed amendments, slowed the CAFTA process, in spite of fast track legislative rules adopted in 2007. Notwithstanding the agreement’s purported “urgency” and the claim that foreign investment was being diverted to other CAFTA countries where implementation was under way, the plenary had still not conducted its first vote on the measure almost a year after Arias’ May 2006 inauguration and one and a half years after the measure was introduced in the legislature. The logjam was broken in April 2007 when the head of a CAFTA oppo-

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sition group, José Miguel Corrales, secured approval from the TSE to launch a citizen-­initiated referendum. As in much of Latin America, where governments were experimenting with new forms of direct democracy, Costa Rica had created a referendum option, using a 2002 constitutional reform and a 2006 referendum law. The general assumption had been that CAFTA’s tax implications would require approval to be channeled through the legislature. Once the TSE authorized the use of a referendum-­based process, the ratification method shifted quickly. A referendum could be initiated in one of three ways: by citizen petition, by the president, or by the legislature. Arias decreed a president-­initiated referendum, supplanting the slower citizen-­ initiated process and accelerating the much-­delayed (and now appeal-­proof ) decision.20 The TSE set October 7, 2007, as the referendum date.

The “ YES ” Campaign

Why is an FTA with the United States important for Costa Rica? Because the FTA is an effective instrument to promote the creation of more and better jobs, make the productive sector more competitive, [and] bring new options to consumers. COMEX (2004a) For many sectors it won’t make much difference right away if CAFTA is not approved. But the textile industry will leave here as soon as the U.S. approves and CAFTA goes into effect in the other countries. That means all those single moms, with little education, will lose their jobs. What should they become—maids? or prostitutes? Because those are their real options. A. Trejos (2005) I am not a fanatic for CAFTA. I am a fanatic for the development of my country. Small countries cannot grow without foreign trade. Antillón (2005)

The business sectors that depended on U.S. trade and investment joined the executive branch in providing strong support for CAFTA approval. AMCHAM–Costa Rica, representing both U.S. firms operating in Costa Rica and Costa Rican businesses with U.S. markets, worked closely with the Washington-­based Caribbean–Central America Action and its cross regional public-­outreach program, Alliance for CAFTAction. Rotating the presidency between U.S. and Costa Rican members, leaders of AMCHAM–Costa Rica engaged in pro-­CAFTA lobbying in both countries (Denton, July 15, 2005). Business chambers in textiles (ANEIT) and exports (CADEXCO), two sectors immediately affected by CAFTA, were also forceful actors in Costa Rica’s pro-­CAFTA movement (Schyfter 2005; Osterlof 2009). Those

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who were most invested provided both funding and access to their workforce, which was selected for informational workshops on the benefits of CAFTA and was periodically mobilized for marches and public displays.21 Although business advocates played a critical support role, formal leadership of the YES campaign was provided by top government and former government officials. The CAFTA negotiation team stepped up as the initial public defenders. Following their departure from the Pacheco government, Alberto Trejos and Anabel González collaborated with business leaders to form Por Costa Rica, a pro-­CAFTA alliance. This group launched an assertive ad campaign in 2005, reiterating claims of major job loss if CAFTA was not ratified. Once resettled into the presidency, Arias assumed leadership of the pro-­CAFTA forces. As the referendum process got under way in 2007 and a full-­time effort was required, Arias appointed his minister of agriculture and industry, Alfredo Volio, to coordinate the YES campaign (Martí 2008). Both the pro- and anti-­CAFTA coalitions used resonant framing and polarized discourse to accentuate the significance of this contest and mobilize their base (Willis and Seiz 2012a). For the YES movement, CAFTA became linked to modernity and the future; its official slogan proclaimed, “The FTA, Our Big Opportunity.” The campaign attempted a broad public outreach, publishing brochures titled “The ABC of FTA” and “What Happens If It Doesn’t Pass?” which were designed to bring the CAFTA message to people with limited education (Martí 2008, 10). As the referendum process entered into full swing, lopsided media advertising followed. In spite of high-­powered leadership and resources, this campaign met with only limited success. According to the communications coordinator for the YES campaign, the thirty-­point lead enjoyed by the YES position at the start of the campaign dropped to a three-­point margin at the end (Martí 2008, 11). A confidential strategy memo prepared by Costa Rican vice president and minister of planning Kevin Casas and a PLN deputy, Fernando Sánchez, revealed rising panic in the YES camp. They warned that “the campaign about CAFTA is becoming what we should have never allowed it to become: a struggle between rich and poor, and between the government and the people. The coalition against us is formidable: universities, the church, unions, environmental groups, etc. And on the other side, in favor of CAFTA, there is only the government and some of the big entrepreneurs. There is no way to win like this” (Casas and Sánchez 2007). Faced with this situation, Casas and Sánchez recommended a campaign of threats and fear, warning mayors of funding termination if CAFTA did not carry in their municipios. They called for beefing up employer sponsorship of pro-­CAFTA workshops for their employees and recommended inducing

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fear among workers over massive potential job losses. The NO campaign, they argued, should be painted as “the equivalent of violence and disloyalty to democracy.” Although the Arias administration claimed that the Casas and Sánchez memo recommendations were not implemented, several action points were in fact carried out by different actors linked to the campaign.22 Some YES forces characterized the NO campaign as a radical socialist assault, for example, and pro-­CAFTA campaign ads used cutaways to Hugo Chávez, Fidel Castro, and Daniel Ortega to associate the opposition with Latin America’s vilified Left. A NO vote, Arias warned, risked transforming Costa Rica into “the Central American Albania, isolated by our own accord.”23

The “ NO ” Campaign

This FTA, unlike the other agreements that the country has signed, includes chapters that require structural change in the solidaristic and inclusive model enshrined in our Constitution, replacing it with a neoliberal type of model. E. Trejos (2008) We have a strong court system. Why should foreign businesses not use it to settle disputes? Solís (2005) I understand why the U.S. wants to keep its agricultural subsidies. They should have them. And we should have ours too. G. Vargas (2005)

The referendum mobilization in Costa Rica “led to a shift in political debate, from an intra-­elite conflict to a conflict between the political elites and a wide array of civil society organizations” (Raventós 2013, 83). The result was “the largest and most sustained mass mobilization in more than a half a century” (81). The NO coalition organized a heterogeneous, horizontal network that expanded over time. Early activists included Costa Rica’s small, internationally aligned, and Internet-­based altermundista movement, affiliated with Encuentro Popular and other radical sectors. Networked with the Hemispheric Social Alliance, this coalition called for alternatives to capitalism and neoliberal globalization. Following the inclusion of the telecommunications sector in CAFTA’s final negotiation round, the Costa Rican opposition broadened beyond these leftist circles. The NO movement layered in an ideologically diverse collection of national organizers who prioritized Costa Rica’s social democratic traditions and viewed state institutions as a defining part of their national heritage. The leadership included former president Rodrigo Carazo (1978–1982)

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and his Council for the Defense of Institutionality (CDI),24 which had been set up in 1996 to challenge earlier ICE privatization efforts. Albino Vargas, of the National Association of Public and Private Employees, where material interests were directly on the line, also provided visible leadership. This expanding alliance drew on connections forged during previous waves of neoliberal resistance, including the successful Combo del ICE protest seven years before (Mora Solano 2009, 97; Trejos Benavides 2008, 5). The network thickened as it linked up organizations of public sector unions, teachers, students, small agricultural producers, feminists, small business owners, activist environmentalists, and religious leaders.25 Of the country’s four public universities, three issued formal statements recommending that CAFTA be rejected, as did the Defensoría de los Habitantes, the national human rights ombudsman agency (Willis and Seiz 2012b, 11). Repeatedly reconfigured and renamed, the NO coalition concluded the campaign under the official leadership of Eugenio Trejos, president of the Instituto Tecnológico de Costa Rica. Short on funds, periodically rattled by tensions between radical, union, and moderate affiliates, and facing a generally hostile national media, the anti-­CAFTA campaign devised innovative, low-­cost, and horizontal strategies to disseminate its message. It emphasized small-­group, neighborhood-­ based interactions where a growing network of volunteers could be deployed for public outreach and mobilization (A. Vargas 2005; Vega 2005). Approximately 150 “patriotic committees” were organized around the country, providing a decentralized base for the national campaign (Álvarez and Hintjens 2009; Castro 2010). With leadership provided by student activists, unions, community organizations, and environmental groups, the patriotic committees held weekly meetings in private homes and public gathering places. They ran a door-­to-­door campaign in the evenings and weekends, focusing on CAFTA’s expected impact on everyday life. These activists brought extensive experience as civil society organizers, although many were new to electoral work and had only thin ties to political parties. As the referendum approached, the campaign developed a program to train 5,000 supporters to serve as observers at the polling stations on the day of the referendum vote (Raventós 2013, 85–86). As with the YES coalition, the NO forces focused less on the technical aspects of the debate than on the powerful social and moral claims it raised. The heterogeneity of the NO forces challenged thematic coherence, but for many in this sector, national self-­definition and Costa Rica’s traditional values of social solidarity and inclusion were central themes. The campaign used the slogan “My heart says NO,” in which the “O” in “NO” was formed by a stylized heart, and the image was presented in white, red, and blue, the colors of

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the Costa Rican flag. This image of the heart intertwined with the symbol of the country provided a powerful organizational motif for the campaign, linking the imagery of love, country, and CAFTA rejection (Álvarez and Hintjens 2009; Cupples and Larios 2010; Raventós 2013). These themes reflected and animated the emotional intensity that coursed through this debate. Some participants in the NO coalition regarded this emphasis on nationalism and sentiment to be overly conservative and inadequately critical of the prior failings of the Costa Rican state. Others resisted a campaign strategy that used CAFTA as a grand metaphor rather than focusing on precisely demonstrable costs associated with specific provisions in the agreement. Many, however, saw the CAFTA debate as the final battle in a long struggle to preserve Costa Rican social democracy against the onslaught of rising inequality and social fragmentation. Arguing that the country’s future was hanging in the balance, they fought to preserve their heritage. In the end, the CAFTA debate responded to deepening cleavages in Costa Rica’s social class structure. Support levels appeared strongest in the urban middle class (Rojas Bolaños 2009; Hicks, Milner, and Tingley 2009), but middle-­class bifurcation muddied the waters.26 Carlos Denton (2010), the former president of CID-­Gallup, who served as president of AMCHAM– Costa Rica during the CAFTA negotiations and became a leading CAFTA supporter, described the clash in these terms: Right now in Costa Rica you have one group—the old statist middle class— PAC-­type followers who live in little houses in the old middle class neighborhoods like Hatillo 1 and Hatillo 2, much of San Pedro, they send their kids to public schools and high schools and then on [to] the University of C[osta] R[ica], they drive older cars, have to live parsimoniously—who want to go back to the good old days. They can take one trip a year to the beach and every five years go to Mexico or something for a week. These people fought hard against CAFTA. The other group—the new private sector middle class—followers of the new right wing PLN[,] live in bigger houses or condos, live in Escazú, Santa Ana, maybe in Curridabat and certain sections of Heredia, send their kids to private schools and high schools and then to private universities, drive new cars, have credit cards, love to eat out and spend, and they do not want to go back to the old days. They travel abroad, speak English, have computers, and they fought hard for CAFTA.

For Denton, CAFTA opponents “discovered that they were second class to the private sector workers. Their lives had become dingy—they could go to

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Multiplaza and walk around, go to the food courts or to the movies, but did not have the money to buy anything in the stores, etc.” In this analysis, the rise of a new elite class, globally connected and no longer dependent on public institutions, threatened the social and political position of the sectors that had once ruled the country, who responded by mobilizing to halt their own displacement. CAFTA opponents, in contrast, understood their resistance less in terms of middle-­class bifurcation and resentment than in Polanyian terms—as a broad mobilization for self-­protection in the face of increasing marketization and state dismemberment. Leaders and spokespeople in this coalition viewed their opposition to CAFTA as a patriotic effort to preserve the social fabric of their country and to mitigate the deep damage to the social order that they saw under way (Carazo Vargas 2007; Álvarez and Hintjens 2009; Mora Solano 2009; Martínez Franzoni 2010; Raventós 2013). According to Patriotic Movement No to the FTA spokesperson Eugenio Trejos (2008, 3), CAFTA required “structural change in the solidaristic and inclusive model enshrined in our Constitution, replacing it with a neoliberal type of model.” The forced opening of the telecommunications sector was viewed as a critical blow, given the industry’s historical role in redistributing its resources to ensure widespread telephone and energy coverage at accessible prices. In addition, CAFTA was thought to impose intellectual property rights protections beyond those already guaranteed under Costa Rican law, and to the benefit of large transnational corporations with powerful lobbies. Eugenio Trejos further claimed that the agreement would facilitate biopiracy, targeting Costa Rica’s rich biodiversity, and that it mandated juridical “privatization and transnationalization” by obligating the government to submit to the jurisdiction of an international tribunal in disputes lodged by foreign investors (4–5). In this formulation, Costa Rican laws, traditions, and institutions would be dismissed by CAFTA rules, while corporate privileges widened. Outgunned in terms of access to television and print media, the NO campaign turned to face-­to-­face messaging at the neighborhood level and relatively inexpensive media sources, including local radio, the Internet, and university publications. Much as Polanyi had concluded about an earlier phase of marketization, CAFTA challengers raised doubts about the overall consequences of the neoliberal project and the broader community and environmental impact of market ascendance. The resulting heterogeneous countermovement, although it included scattered ideological threads and transnational resistance frames, was largely homegrown and grounded in Costa Rica’s distinct social history. It focused on CAFTA’s expected negative impact on the

150  Contesting Trade in Central America

texture of community bonds and national identity and rising threats to the country’s prior development achievements.

Referendum Outcome In their study of the CAFTA referendum, Willis and Seiz (2012b) identify three theoretical frameworks that can help explain the shifting configuration of trade preferences in Costa Rica. According to their analysis, Costa Ricans made assessments of CAFTA as producers, concerned about jobs and markets; as consumers, concerned about purchasing and prices; and as patriots, concerned about sovereignty and national identity. The multidimensional nature of the agreement and the impossibility of determining outcomes in so many different areas of concern contributed to substantial ambivalence in the electorate and marked attitudinal volatility among those situated between the camps. When complexity and ambivalence are high and preferences uncertain, voters are more likely to be influenced by transient factors, such as elite cues, media effects, and momentary events. A Latin American Public Opinion Project (LAPOP) poll conducted in Costa Rica a year after the referendum found that, although 22% of voters had defined their position on CAFTA before the referendum campaign began, the remainder decided during its course. Fifty-­five percent reported coming to their decision between the launch and the final week of the campaign; 15% reported making their decision on the day of the referendum.27 The timing of these decisions suggests that many voters remained conflicted or uncertain. Campaign effects tend to assume a greater role under these circumstances. Perhaps the biggest challenge facing the NO coalition was the marked imbalance in the resource base of the two campaigns. Although a TSE study of July–October 2007 news coverage concluded that “neutral” news predominated during the campaign (PEN 2008, 282), advertising and editorials ran overwhelmingly in favor of ratification in the main media sources. According to a study from the Universidad Nacional de Educación a Distancia, over 90% of TV and print media advertisements about CAFTA between July 1 and September 26, 2007, favored the YES position. The YES campaign outspent the NO by a ratio of 8 to 1, according to information submitted to the TSE (“Él que paga” 2007; see also Willis and Seiz 2012b, 17; Álvarez and Hintjens 2009, 34–37; and Martí 2008, 7–8). This message imbalance made victory a steep uphill battle for NO forces. In the final days before the vote, when the campaign phase was officially ended, U.S. trade representative Susan Schwab weighed in. At that pivotal moment, she issued a statement invalidating the NO campaign’s call for

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CAFTA renegotiation, declaring, “It is difficult to imagine any U.S. administration renegotiating the current agreement or negotiating a new trade agreement with Costa Rica if this agreement is rejected” (Palmer 2007). With renegotiation, the favored alternative for many anti-­CAFTA leaders, now discredited, Costa Ricans faced a stark set of options. Only a small percentage of voters reported changing their vote based on Schwab’s statement, but in the context of a close race, this interjection may have affected the outcome (Willis and Seiz 2012b, 21–22). In spite of these disadvantages, the NO campaign came close to victory. The vote split 51.6% to 48.4% in favor of CAFTA, with fewer than 50,000 votes separating the two camps. Turnout was 59%, somewhat low for general elections in Costa Rica but well above the required 40% and around average for Latin American referenda (PEN 2008, 274). With the Costa Rican tally completed, the last of the CAFTA signatories confirmed adoption. Comparison of CAFTA Ratification Processes At one level, the outcome in these three case studies suggests that institutional and organizational particularities do not matter. Whether the level of political centralization was high or low, political institutions were strong or weak, the opposition was well organized or faltering, the outcome was the same—CAFTA was approved. This observation could draw us to focus on the explanatory power of variables that are common to all three cases, such as their CBI-­related dependence on exports to the U.S. market or on U.S. foreign investment, to the neglect of distinctive national characteristics and preferences. There are, however, two limitations to that approach. First, outcomes like policy adoption do not magically materialize because of widespread general features like dependence or consumer tastes. Policies must be put in place by concrete human actors, who operate in real institutional settings and make assessments based on their own cognitive frames and calculations. To understand how that happens, we need to piece together the relevant sequences and critical junctures associated with policy change. Second, unlike in large-­ scale, quantitative analyses, our purpose extends beyond tallying outcomes. The work before us involves understanding the dynamics of contentious politics and the way institutions open or close space available for popular mobilization. Research on the advance of market reform through these three ratifications provides insight into the opportunities for critical debate and public engagement around the contentious issue of economic globalization.

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A sophisticated trade-­politics anatomy helps us map the institutions and processes that shape this arena of democratic struggle. This chapter concludes with observations about three sets of issues: (1) the relationship between concentrated power and horizontal accountability; (2) opportunities and challenges associated with direct democracy; and (3) the intersection between trade reform and the complementary agendas that may or may not accompany it. Concentrated Power and Horizontal Accountability The above ratification summaries indicate that political power was most centralized in El Salvador, where legislative deliberation was truncated by the dominant party’s ability to lock in control, giving the executive cross institutional management of national politics.28 Executive power faced few checks, allowing for rapid decision making with little input from other actors. Much like the CAFTA decision, other major economic policy changes, such as dollarization, had been adopted abruptly by ARENA governments, even in the face of popular disapproval (Holiday 2005; Towers and Borzutsky 2004). Rapid implementation of pro-­market measures was the regime’s forte; deliberative construction of enduring national consensus was not. Democratic agonism (debate, tension, protest) was blunted in El Salvador, and with it the prospect for democratic deepening. A network of resistance activists, shut out by El Salvador’s insular processes, employed transgressive confrontation in a nonviolent takeover of the legislative chamber. In the end, ironically, their action only accelerated ratification. A middle-­of-­the-­night agenda change added CAFTA to the schedule before the committee responsible for the initial vetting had completed its hearings, discussed the measure, drafted a resolution, or voted out its recommendation. Complaints about irregularities were brushed aside, and the leadership called the vote. Beatrice Alamanni de Carrillo, the Salvadoran human rights ombudsman (Human Rights Defense Attorney, or PDDH), condemned this process, describing it as an “embarrassing legislative act that violated the process for passing laws established in the Constitution and in the legislature’s internal regulatory rules” (PDDH 2005, 6)—although again to no avail, horizontal accountability mechanisms being what they were.29 In contrast to the ARENA government in El Salvador, the Bolaños administration in Nicaragua had a tenuous grasp on power and little influence over legislative action. With no ability to rule, the government was required to negotiate—and to await outside assistance. To increase CAFTA’s appeal and soften opposition, the government pursued a parallel discussion of com-

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plementary measures, that is, supplemental reforms that would accompany deepening integration in order to maximize benefits and minimize harm. Vulnerable sectors were identified, legal gaps were pinpointed, and state support was promised. But without adequate funding or institutional capacity, this discussion functioned largely at a ritualistic level. In the end, CAFTA advanced, not because of a well-­wrought compensatory process but because local political bosses, calculating their own interests, gave the go-­ahead following the strategic intervention of a high-­level U.S. government representative. Contention was piped through the dominant political parties, which responded to centralized power brokers. Nicaraguan political institutions, in contrast, remained weak. Assessing horizontal accountability in Nicaragua, Leslie Anderson (2010, 219–221) points to occasional episodes in which the legislature exercised autonomous power (ruling out nepotistic power transfers under Violeta Chamorro, lifting Alemán’s immunity). But noting that only 6.6% of Nicaraguan legislators identified checking presidential power as one of their top two duties in her 2003 survey, Anderson concludes, “Nicaraguan legislators are surprisingly inattentive to that responsibility, despite the clear need for it in the contemporary politics of Nicaragua” (235). In contrast to both El Salvador and Nicaragua, Costa Rica had more firmly institutionalized political processes that included both horizontal and vertical accountability mechanisms. Costa Rican authorities were usually obligated to take a deliberative approach to decision making. As we saw in chapter 1, many of the neoliberal reforms introduced there in previous decades, such as banking privatization, proceeded only in stages and produced hybrid forms, in part because of legislative or popular resistance to radical marketization (Seligson and Martínez Franzoni 2010; Wilson 1998). In addition to the complications that CAFTA raised elsewhere in the region, the agreement entailed significant changes in the sensitive telecommunications sector. State enterprises in El Salvador and Nicaragua had been dismantled in the 1990s, and CAFTA did not mandate further privatization there. In Costa Rica, on the other hand, some state enterprises had survived the earlier phase of neoliberal reform and still enjoyed considerable popular support. Whereas in El Salvador and Nicaragua, the sectors most negatively affected by CAFTA provisions (small farmers, small and medium-­sized businesses) were politically or economically marginal, in Costa Rica the agreement affected core interests of still-­significant public sector unions. A credible threat of political disruption in the event of passage in Costa Rica urged pro-­CAFTA legislative leaders to proceed with caution. At the same time, weak party discipline in the Costa Rican legislature,

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attributed by Wilson (1998) to the fragmenting tendencies associated with the prohibition on reelection, had long made it difficult to round up supportive votes, even in the past, when the president’s party dominated the legislature. Rather than consolidating around a core leadership, legislators engaged in public disputes with national party leaders outside the chamber, and candidates campaigned by repudiating the actions of their predecessors, in spite of their common party affiliations (Wilson 1999). These maverick tendencies sometimes made it difficult for the president to mobilize the support needed to advance legislative initiatives. The final phase of Costa Rica’s structural adjustment programs (PAE III), for example, won legislative approval only after years of negotiations, modifications, delays, and exclusions (Weisleder 2004, xxiii–xxv). Factionalism, decentralization, and institutional rules designed for a less divisive era fueled resistance to rapid change. These trends, along with rising abstention in elections, raised red flags for close observers of Costa Rican politics and triggered self-­scrutinizing discussions about problems of governability (Seligson 2001; Lehoucq 2005). In spite of the variation in executive power and legislative autonomy, mechanisms of horizontal accountability suffered from debilitating weaknesses in all three cases. In El Salvador and Nicaragua, legislative approval was delivered automatically following instruction by party warlords. In Costa Rica, the inability of the legislature to process this decision pushed adjudication over to the citizenry; new forms of vertical accountability emerged to supplant a sometimes sclerotic legislature. Direct Democracy Public dissatisfaction with the performance of Latin American democracies, registered in public opinion polls and the voting booth, fueled discussion of “democratic deficits” and invited experimentation with alternative institutional arrangements (Peruzzotti and Selee 2009; Anderson and Goodyear-­ Grant 2010; Barczak 2001). Breuer (2007, 562, 565) notes that, following constitutional reforms in the 1990s, fifteen of Latin America’s eighteen presidential democracies introduced a referendum option, and twenty-­four popular consultations were carried out in nine countries between 1978 and 2004. Optimistic interpretations of referenda emphasize their ability to promote “citizen engagement, legitimacy, and democratic restoration” (Willis and Seiz 2012a, 124). At their best, mechanisms of direct democracy reflect faith in the self-­governing abilities of ordinary people, and they reinforce vertical accountability. Anderson and Goodyear-­Grant (2010, 230) note a connection between direct democracy and increased political efficacy. Ballot initiatives

Ratification Politics 155

may also draw in voters who abstain during regular elections, thus strengthening participation (Donovan, Tolbert, and Smith 2009). Political analysts of a Rousseauian bent claim direct democracy offers a more authentic form of popular expression than conventional forms of representative democracy. Skeptics, however, identify a series of problematic aspects that adhere to these processes. Questions about citizen competence and ability to withstand elite manipulation point to a downside of this instrument (Anderson and Goodyear-­Grant 2010, 230). The majoritarian nature of a referendum vote can also clash with adequate protection of minority rights. Breuer (2007, 570–571) notes a tendency in Latin America for presidents to use referenda to circumvent legislative opposition, thereby undermining horizontal accountability. In positive terms, the decision of Costa Rican elites to accept a referendum on CAFTA could be seen as an affirmation of elite trust in the citizenry. Rarely are regular citizens given the chance to directly control the outcome of a significant political economy debate.30 The referendum created an exceptional opportunity for citizens to define a national policy direction. This episode provided Costa Rican voters with the chance to deliver a definitive decision, one for which there was no appeals process. At the same time, years of public opinion tracking had demonstrated both the volatility and the malleability of popular perceptions about CAFTA.31 CAFTA sponsors in Costa Rica and beyond had tracked public attitudes toward the agreement off and on for years, especially during periods when pro-­CAFTA coalitions were running campaigns to promote public approval. Close observation of the rhythm of public opinion variation demonstrated that public support could be bolstered with a well-­targeted push. The Por Costa Rica campaign to mobilize public support for CAFTA in 2005, for example, used monthly polls to assess its effectiveness. These polls, conducted by UNIMER, documented support for CAFTA ratification increasing from 53% in May to 67% in October 2005 as the campaign unfolded (UNIMER 2005).32 Given the malleability of public opinion and the previous success of pro-­CAFTA campaigns, the opportunity to shift the decision away from the assembly, where the opposition’s delaying tactics proved a persistent headache, toward a public referendum, where a skilled media campaign could be arranged, must have been attractive to some agreement sponsors. These observations suggest that a referendum is not simply a reflection of democratic preferences, nor does it necessarily increase democratic legitimacy and quality. In fact, noting a drop in public support for democracy (from 83% to 67%) between the 2007 and 2008 annual Latinobarómetro polls in Costa Rica, Willis and Seiz (2012a, 145) suggested that this conflictual and divisive

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referendum might have exacerbated democratic disenchantment rather than fueling a rising sense of efficacy. As a one-­shot, up or down decision-­making process, a referendum also does little to nudge adversaries to look for common ground or to reassure the “losers” about their place in the political world. With all of their limitations, the conventional mechanisms of representative democracy may offer more effective tools for this kind of decision making—tools that require trade-­offs, the negotiation of transfers from winners to losers, a sequencing of complementary measures to diminish costs and enhance future gain, and the identification of alternatives. Decision making through a referendum, in contrast, strips out compensation for losers and collateral adjustments that could prove vital in attenuating damage. This argument holds regardless of the side that wins. Trade Reform and Complementary Agendas In general terms, the complementary-­agenda discourse envisioned a parallel reform advancing either prior to or in tandem with CAFTA, forestalling negative developments, fixing problems that emerged, and expanding trade and investment opportunities to new sectors so that the benefits could be experienced more widely. Much of the World Bank and IDB technical research attempting to predict CAFTA’s impact emphasized the importance of instituting complementary and compensatory measures in order to promote general benefit (see, for example, Jaramillo and Lederman 2006, 231–266; Carciofi and Granados 2007). In both Nicaragua and Costa Rica, the inability or unwillingness of the executive to press for quick ratification created opportunities for discussion of complementary measures. The need to work out a compromise created space in which to begin conversations about parallel adjustments. As political events unfolded, however, this step proved stillborn. A workable complementary agenda was never defined in Nicaragua, and the yes-­no nature of the Costa Rican referendum also thwarted contingent policy making. The initiation of this discussion, however, suggests a meaningful role that legislatures could play in trade policy reform. Debates about trade and investment, with their collateral implications for development strategy, legal systems, institution building, and the distribution of wealth, could open a multiphase deliberative process that a legislature could mediate. Round one of this discussion, introduced at the outset of a trade-­reform process, could set parameters and guidelines to delimit the agenda. Round two could promote rigorous and public cross-­examination of projected outcomes. If ratification

Ratification Politics 157

is warranted, round three could provide careful calibration of the additional steps needed to promote positive distributional consequences. This unfinished agenda in Central America took on increasing urgency as the clock started ticking on the CAFTA-­mandated twenty-­year phaseout of tariffs on “sensitive” products and the rules governing investor guarantees kicked in. Without adequate adjustments to prepare for intensified competition, tariff revenue losses, enforcement challenges, and penalties assigned for rule violations, Central America soon found CAFTA costs on the horizon. Ratification Coda CAFTA ratification was followed by legislative approval of another round of legal reforms labeled the “implementation agenda” by the USTR. These were changes required to bring existing local laws into compliance with the terms of the CAFTA agreement. In Nicaragua, for example, five existing laws underwent revision before the USTR certified Nicaragua as CAFTA-­ ready and the agreement went into effect.33 Costa Rica was required to reform thirteen domestic laws, a laborious process that took more than two years to complete. Throughout Central America, legislatures were corralled into nonnegotiable approval of new laws focusing on intellectual property (brand names, copyrights, patents) and advanced technology to give domestic legal status to CAFTA provisions. Carciofi and Granados (2007) criticized this additional step in which the United States used the “political economy of pressure” (69) and “north-­south regulatory and institutional migration” (68) to impose heavy administrative requirements, including some that went beyond the terms stipulated in the CAFTA text (70n89). Indeed, throughout the ratification process, Bush administration officials used strategic interventions to secure CAFTA’s advance and the dissemination of U.S. standards. Perhaps persuaded that CAFTA not only was good for the United States but also offered development opportunities to Central America, U.S. government agencies and officials used power and resources to press that outcome. Strategic reminders to Central American legislative committees of the larger issues (migration, security) at stake, pointed high-­level visits in the midst of crisis, threats about aid and visa cutoffs, invalidation of opposition positions on the eve of an election—all served as evidence of U.S. government pressure during the ratification debate. Beyond the economic structures marked by dependence on U.S. trade and investment flows, a host of agentic factors were in play.

Chapter 5

After CAFTA: Anti-­Mining Movements, Investment Disputes, and New Organizational Territory

Local communities and NGOs, including amici, in reflection of their hard-­ fought empowerment and awareness of their own rights, and in a legitimate exercise of the democratic process in the post–Civil War political environment, refused to accept Pac Rim’s plans to dig mines under their own lawfully owned land, build dangerous waste ponds, and otherwise threaten the continuity of their environment, livelihoods, and way of life.

Mesa Nacional Frente a la Minería Metálica de El Salvador (2011)

By 2010, four publicly disclosed complaints had been filed against Central American governments under CAFTA-­DR, two of them by gold mining companies against the government of El Salvador (Antell, Carlson, McCandless 2010). As gold mining turned controversial and the Salvadoran government halted its advance, Pacific Rim Mining Corporation and the Commerce Group brought their cases to the World Bank’s International Centre for Settlement of Investment Disputes. As elsewhere in Latin America, mining controversies in Central America provoked new forms of resistance and innovation. In Building Transnational Networks, Marisa von Bülow (2010, 17) concludes that trade-­resistance coalitions “are often fragile and remain valid for short periods of time.” Analyzing anti-­F TA movements in Mexico, Brazil, Chile, and the United States over a twenty-­year period, von Bülow found that not only did transnational networks tend to lose strength over time, but so did their domestic building blocks. Chile’s anti-­F TA organizational hub faded out several times during the U.S.-­Chile FTA process and the FTAA debate, for example, and the Mexican Action Network on Free Trade (RMALC), an umbrella coalition opposed to NAFTA and the FTAA, also declined, in part due to its leaders’ unpopular efforts to centralize authority (133–142).

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My analysis, which focuses not just on particular resistance networks but also on the broader mobilizations against the neoliberal project, points to a different conclusion. While alert to the organizational challenges of maintaining cohesion and adjusting to change, this book argues that neoliberal resistance movements, as opposed to specific alliances, demonstrate remarkable adaptive capabilities. Repeated defeats can be dispiriting, and mobilizations are commonly punctuated by lulls. But in the absence of forceful repression, opposition movements can prove quite resilient, even in the face of recurring failure. Advances in market reform, to the extent that these measures result in displacement or create unrealized expectations, fuel successive iterations of resistance. The decline of one opposition network is often followed in quick succession by the development of others, sometimes more specialized as subgroups form, and sometimes broadened by frame bridging as subgroups coalesce. As Cumbers, Routledge, and Nativel (2008, 186) note describing the fluid history of global justice networks, “people, actions and ideas spill from one network to another.” Informed both by the shape of prior connections and the development of new opportunities, resistance movements regenerate through the shape-­shifting and protean processes that underlie movement persistence. As El Salvador’s anti-­CAFTA forces registered their defeat in 2004, new issues arose from within the broader neoliberal resistance canon and reconfigured their work. Concerns deepened over water access, fueling a broad-­based movement for water rights (Haglund 2010). Resistance to pressures for labor flexibilization merged with an ongoing push for improved labor conditions, sometimes, ironically, using CAFTA-­based rules and resources in the process (Anner 2011; Asociación Movimiento de Mujeres Mélida Anaya Montes 2010; Quinteros 2005). Unresolved debates about health rights fed into mobilizations over health care delivery and the price of medicine (Smith-­Nonini 2010). Threats to local communities and environmental deterioration fueled yet another debate, this one focused on the development of metal mining. This chapter uses the case of the anti-­mining movement in El Salvador to explore two phases in the resistance process following CAFTA implementation. It begins by tracing mobilization at the domestic level, as the movement pressured its own national government for ongoing adjustments in the market model. It then moves to the international level, as the movement challenged mining investors in an international investment-­dispute tribunal. The first part uses politically embedded campaign analysis to examine the intersection of resistance activism and formal politics at the national level. This approach analyzes standard agentic features of movement campaigns (networks, resources, opportunities, frames, brokers) but embeds them within

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political processes to explore linkages between social mobilization, electoral competition, public policy, and programmatic reform. The second part traces resistance organizing as it undergoes a change of venue, with a scale shift from the national to the international level. Earlier market reforms, combined with CAFTA rule changes, helped transfer the adjudication of conflicts with investors away from the nation-­state and into international institutions. Foreign investors gained new protections and points of leverage through which to enforce market discipline on uncooperative states. This chapter examines the use of the World Bank’s ICSID by gold mining companies attempting to secure access to mining rights. When the deepening of democracy led the Salvadoran government to question this access, the relationship between foreign investors and the host government entered choppy waters. Corporations then drew on the legacy of investor-­ friendly legislation to access ICSID’s international legal architecture and advance their claims. Popular resistance forces in El Salvador struggled to adapt to the venue shift as the mine dispute played out in ICSID. New multiscaler networks emerged as part of an attempted deleveraging process designed to reduce external pressure on the state and improve access for citizens. In the continual search for self-­protection, the anti-­mining movement struggled to prevent the ICSID tribunal from pressuring the Salvadoran government to authorize gold mining. Resistance organizing proved a recurring, dynamic, and iterative process drawing on multiple layers of connections across time and space, rather than a single-­shot, ideologically driven, routinized maneuver that quickly dissolved on defeat. This chapter is composed of five sections: (1) an anatomical analysis of the anti-­mining alliance in El Salvador; (2) a discussion of processes through which the mining industry asserted claims to extraction rights, even as opposition networks thickened; (3) a review of the political recalibration leading to informal shifts in government mining policy; (4) a report on the activation of international investor-­state dispute provisions; (5) an analysis of new techniques employed by resistance forces as they adapted their struggle against corporate control, now in uncharted and inhospitable terrain. As Polanyi’s model suggests, local community activism unfolded around broad-­based damage claims, and resistance groups constructed multisectoral networks that extended far beyond the narrow confines of class identity and ideology. In Polanyian terms, democracy mobilized against the market, challenging its ascendance. This chapter illustrates how diverse sectors, each with its own set of transnational alliance partners, converged around environmental justice frames and, using the tools of democratic politics, built a national

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resistance movement. It develops a refined anatomy of national-­transnational advocacy networks, identifying two subtypes of international nongovernmental organizations (INGOs)—“domesticating” INGOs, which focus on national-­level reform, and “power node” INGOs, which target international institutions and actors. As the political balance began to shift, anti-­mining networks in Central America broadened and thickened, and, collaborating in sequence with both kinds of transnational allies, designed innovative strategies to reinvent market resistance. The Anti-­Mining Movement in El Salvador As we saw in chapter 1, market architects in El Salvador introduced various reforms to encourage foreign investment after the war, including privatization, deregulation, and rapid-­fire dollarization. The 1999 investment law gave foreign investors additional protection, including the right to file claims with the World Bank’s ICSID in the event of unfavorable treatment. This provision empowered an international tribunal, rather than domestic courts, to oversee foreign-­investment disputes. This step was designed to reduce perceived investment risks and, it was hoped, attract increased flows. One promising area for new foreign investment was gold mining. Small-­ scale gold production predated the civil war but had languished during the conflict, and some old concessions had lapsed. To attract new investment, the mining law had been rewritten in 1995; further mining code revisions in 2001 cut royalties by half (from 4% to 2%) (Henríquez 2008, 28). Eight international gold mining companies soon established a presence in El Salvador.1 When the exploration phase verified commercial quantities of gold and silver, the push to pioneer was on. Interest in mine promotion in El Salvador mirrored a Latin American trend in extractive sector expansion in the 1990s and early 2000s (Bebbington et al. 2008). With active encouragement from the World Bank, governments throughout the region redefined mining regulations, privatized ownership, and relaxed tax provisions to encourage new investments (Fox, Onorato, and Strongman 1998; Sánchez Albavera, Ortiz, and Moussa 2001). Generous terms drew investor attention to Central America, and rising gold and silver prices created an incentive for exploratory work. This investment, in turn, triggered new forms of resistance. In the wake of the 2004 CAFTA ratification, a national anti-­mining network emerged in El Salvador. Over the next five years, this movement expanded and drew on international alliances to orchestrate a national confrontation over the future

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of the industry. The Mesa Nacional Frente a la Minería Metálica (henceforth, Mesa Nacional) was launched in September 2005 by thirteen organizations, including many that were previously active in the transgressive resisters wing of the anti-­CAFTA movement (see chapter 3).2 This movement connected local, national, and, ultimately, transnational actors, with each sector making a distinct contribution. In his study of anti-­ mining conflicts in Peru, Guatemala, and Honduras, Keith Slack (2009) found that anti-­mining coalitions commonly linked two sets of domestic actors: community groups, which focused on the physical or sociological dislocation in nearby towns caused by mine development; and national environmental organizations, which highlighted long-­term environmental costs and helped identify sustainable alternatives. Social movement theory suggests that community networks construct a shared interpretation of an issue around which diverse groups can mobilize, and they disseminate evidence of local wrongdoing on which a campaign builds. Frame bridging between community groups and activist-­oriented environmental organizations layers in ecological principles and knowledge, which allows the movement to align the claims of various publics. Over time, frame bridging can advance toward frame transformation (Faber 2005), as environmental concerns become the anti-­mining movement centerpiece. In the Salvadoran case, the focus on damage to communities located near the proposed mines expanded as questions arose about the impact of acid mine drainage in the regional river system and the release of cyanide and other contaminants into the Lempa River watershed, the main source of the nation’s water supply (Mesa Nacional 2011). Prior organizing around water rights by environmentalists had already identified water shortages and contaminated water as important national concerns (Haglund 2010). That baseline work on water rights added another dimension to mining resistance. Over time the anti-­mining network expanded further to link five sets of actors: a local resistance network with strong ties to affected communities; a group of tenacious advocacy organizations focused on environmental and social rights; an emerging network of activist-­oriented researchers and specialists; a religious network, led by Catholic Church bishops, who undertook a doctrinally based intervention to stop the mining advance; and an expanding cluster of domesticating INGOs that supported the work of the other sectors. Each of these sectors had linkages with transnational partners that helped strengthen components of the anti-­mining movement. Neoliberal resistance often involves the construction of networks that are both grounded locally and linked transnationally. Successful transnational networking builds on a foundation of national actors who provide vital

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Map 5.1. “Gold Belt” region of El Salvador. Pacific Rim Mining Corp. PowerPoint

Presentation, February 2009, http://www.pacrim-­mining.com/i/pdf/ 2009-­02_PMUP.pdf, accessed August 7, 2012. Used with permission.

grounding for collaborative activities (Tarrow 2005; see also Hochstetler and Keck 2007). This chapter explores the ways that local movements interlaced both among themselves and with transnational allies to slow the implementation of market reforms and advance adjustments in the development model in the aftermath of the neoliberal reform. Local Community Resistance and Grassroots Transnationalism Most of El Salvador’s Mesa Nacional affiliates represented communities located in or near what the investors labeled the “Gold Belt” (see map 5.1). An area identified as resource rich by mining companies during the exploration process, the Gold Belt ran across northern El Salvador, traversing a mountainous zone where conflict during the civil war had raged fifteen years earlier. Some communities in the departments of Chalatenango, Cabañas, and Morazán had a long history of organizing around land rights; this area included several communities where the values and ideas inspired by liberation

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theology had previously sparked social action (Wood 2003, 89–99). Military sweeps and scorched-­earth campaigns in the early 1980s dislocated communities throughout the region but proved unable to wipe out rebel forces. Protection provided to fleeing residents by sectors of the FMLN sometimes forged a durable alliance and reinforced local resistance (Silber 2011, 41–69). As the war intensified, thousands of refugees from the zone scattered across the border to Honduran encampments, particularly at Mesa Grande, near where the borders of El Salvador, Honduras, and Guatemala meet. The subsequent return and the repopulation of “guerrilla towns” in El Salvador, even as the war continued in 1987 and 1988, often deepened community solidarity. Smith-­Nonini’s (2010) study of grassroots health care initiatives in two repopulated communities documents their organization, autonomy, and cohesion. The postwar period, which brought demobilized guerrillas home but offered little in the way of basic government services, reinforced the local commitment to self-­reliance and crystallized antagonism toward the central government in these scattered outposts of civic rebellion. Built around small-­ scale agricultural production, these communities emphasized traditional ideas about the primacy of land and water, food cultivation for local needs, collectivism, and reciprocity. The Salvadoran refugee experience in Honduras, which involved whole families and endured up to a decade for some, built grassroots, binational ties that contributed in a distinctive way to transnational activism. Relationships between dislocated Salvadorans and Honduran sympathizers forged a sense of connection anchored in lived experience. Refugee children were born in Honduras, or lived much of their childhood there; parents and grandparents were buried near the refugee camp in Mesa Grande. The subsequent return of these refugees to El Salvador and the repopulation of their communities at the end of the 1980s left behind a layer of cross border connections on which future mobilizations could build. Return visits were organized, even after the camp was dismantled, to keep these memories alive. Tarrow (2005, 101–102) identifies three ways a movement expands beyond the local level: through “relational” mechanisms (trust networks); through “non-­relational” means (mass media, Internet); and through movement brokers (“mediated diffusion”). The origin stories presented by Salvadoran anti-­ mining leaders contain references to both relational and broker mechanisms (Belloso 2010; Rivera 2010). In explaining the initial linkages of their movement to cross border networks, several community leaders focused on personal relationships and contacts forged out of their wartime refugee experience in Honduras, highlighting elements of relational networking. More conventional brokerage networks, built out of conscious frame-­building ex-

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ercises in cross regional resistance gatherings, were also identified as a tool for cooperation and information sharing. With no prior experience in gold mining, Salvadoran community activists claimed they were initially uncertain about how to respond to the prospect of mines opening in their region. Cross-­national interactions with kindred resistance activists in Honduras reportedly convinced them to be skeptical. According to Bernardo Belloso (2010), vice president of CRIPDES and Mesa Nacional leader, these connections facilitated cross border information sharing as the mining issue emerged. Belloso explained: “This [exchange with Honduran activists] helped us to open our eyes. We asked them, does mining help there or not? We need jobs. Mining, they said, would be here only five, seven, eight years, it depends. It brings maybe 100 jobs, but 50 will be only during measurement and construction. In one year, those people will be out of work. Experts from outside will be brought in to fill jobs after the building is done.” Convinced that mining would bring no real local employment benefits, these community activists honed in on the costs, particularly the loss of land and water available for agriculture, the breakdown of community cohesion, and, increasingly, health dangers associated with the industry. Activists in Honduras, where gold mining had developed quickly following mining law reform in 1998, had begun mobilizing several years before. Their campaign focused on two open-­pit mines, San Andrés (Santa Rosa de Copán) and San Martín (Valle de Siria), and highlighted concern about both population displacement and environmental contamination (Slack 2009, 125– 126). Honduran anti-­mining forces received important support from Catholic Church leaders, with Cardinal Óscar Andrés Rodríguez leading a protest march in March 2002. Ongoing community complaints about contamination of local water sources, including a cyanide spill at the San Andrés mine that killed fish in the Lara River, led to repeated marches and demonstrations. With conflict escalating, the Honduran government suspended new mining permits in July 2004, a position sustained by the Mel Zelaya administration prior to his ouster in July 2009. Salvadoran community activists visiting the Valle de Siria in Honduras received firsthand exposure to community health complaints.3 This grassroots transnationalism, fashioned from direct, cross border community experiences, fostered movement alignment and “diffusion,” that is, the “transfer of claims or forms of contention from one site to another” (Tarrow 2005, 32; see also Giugni 2002). Similarly situated in terms of social and economic power, residents of the town adjacent to the mine were identified as trusted counterparts. Their description of damage to skin and vital organs and developmental delays associated with exposure to mine waste was perceived as credible; re-

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jection of these claims by mine officials was interpreted as a display of arrogant indifference to the well-­being of the poor. These direct experiences reinforced the resistance to gold mining among Salvadoran community activists, who brought back educational materials and organized meetings throughout their networks to share their observations (Rivera 2010). Interactions between Honduran, Salvadoran, and, subsequently, Guatemalan anti-­mining coalitions helped identify commonalities and shared vulnerabilities. These links were reinforced by the cross border migration of gold mine capital and of mine waste flowing through interconnected water systems passing inexorably across national borders. Environmental Rights and Mesoamerican Alliances In addition to the “relational” mechanisms that built on personal connections between community activists in neighboring countries, contentious mining politics spread through “mediated diffusion” that employed purposeful bridging processes undertaken by movement brokers. Information sharing over the Internet (“nonrelational mechanisms”) plays a well-­documented role in building transnational networks (della Porta et al. 2006, 92–117), but social movement theory also emphasizes the usefulness of international gatherings where brokers can perform coalition building in person (Fox and Brown 1998). As we saw in chapter 3, annual meetings of the Foro Mesoamericano helped introduce activists across the region to each other. As attendance grew and subthemes became more numerous, specialized miniforums and spin-­offs developed, offering more focused discussion of specific issues within the master framework of neoliberal resistance. Concerns about the impact of neoliberal development on the environment and local communities had become a recurring theme (see, for example, Foro Mesoamericano 2002b, 27–30). In 2004, Central American anti-­mining activists held their first regional meeting, launching an annual gathering that culminated in the formal constitution of the Alianza Centroamericana contra la Minería Metálica in Cabañas on May 21, 2007. Denouncing metal mining as a “nefarious activity” that negatively impacted the right to life, health, food sovereignty, and natural resources, the Declaration called for “incorruptible struggle” against metal mining in the region (Alianza Centroamericana contra la Minería Metálica 2007).4 Interpersonal cross border connections being built at the local level and the bridging work undertaken by regional brokers facilitated frame diffusion. Salvadoran activists appropriated and adapted core ideas and strategies deployed by resistance movements in neighboring countries, where contentious mining politics was a step ahead.

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El Salvador’s Mesa Nacional provided an organizational vehicle through which transnational learning could be diffused and local information disseminated. With two paid staff, monthly press conferences, friendly coverage from the small-­run Diario Co-­Latino, and a blog (http://esnomineria.blog spot.com), the Mesa Nacional set up shop in an office building shared with CRIPDES and the Sister Cities project. The 2007 arrest of protesters, including top CRIPDES leaders, on “terrorism” charges during the Suchitoto mobilization against water privatization served as a strong reminder of the state’s repressive capacity (Ladutke 2008; Tutela Legal del Arzobispado 2007). Still, activists from local communities in the mining zone continued their resistance by blocking the entry of mining company vehicles and equipment.5 The network’s “repertoire of contention” also included organized marches (with the symbolic burial of Pacific Rim), petition campaigns (that collected more than 10,000 letters), and production of radio “sociodramas” focusing on government trickery and company abuse. Alternative Epistemic Communities, or “In [Our] Scientists We Trust” In the meantime, gold exploration advanced in El Salvador. The Canadian company Pacific Rim, holder of the exploration license for the El Dorado project in Cabañas, took the lead (see map 5.1). The company had incorporated as Pac Rim Cayman in the Cayman Islands, a regional tax haven. Having acquired an exploration concession in El Salvador in 2002, Pacific Rim applied for an extraction permit in 2004. The first step in the process for securing authorization to mine required the company to produce an environmental impact assessment (EIA). A feasibility study was to follow, demonstrating, among other items, legal rights to the land where the mine would be located. Resistance groups rose to respond. The Economic and Social Development Association (ADES), a resistance-­oriented community development association in the repopulated town of Santa Marta, Cabañas, contracted Robert E. Moran, a U.S.-­based hydrologist and geochemist, to produce an evaluation of the EIA for the nearby El Dorado project. Thus began a process of layering in rival scientific and expert analysis to expose the environmental problems posed by mining. With over two decades of U.S. government and corporate experience in mining, Moran underwent a career shift in 1998 when he published “Cyanide Uncertainties: Observations on the Chemistry, Toxicity, and Analysis of Cyanide in Mining-­Related Waters” with the Mining Policy Center (subsequently Earthworks). Activist networks forming around mining hazards

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brought him a string of consulting invitations from alternative development and environmental coalitions in Latin America. Beginning in Honduras in 2001, as the conflicts around the San Andrés mine erupted, Moran rotated through eight Latin American countries over the next nine years (and more than two dozen assignments in other parts of the world). In several cases, scrutinized mines were subsequently closed or extraction permits were suspended (Moran 2010).6 When approached by Salvadoran activists, Moran was working in Guatemala, assessing the controversial Marlin Mine project. His subsequent El Dorado report, released at a public gathering in October 2005 in Cabañas’ capital, Sensuntepeque, questioned the quality of the preparatory work done by Vector Colorado, the U.S.-­based consulting company that prepared the EIAs for both the El Dorado and Marlin mines. Among the many deficiencies he cited, Moran targeted inadequate discussion of remediation measures to be taken in the event of a cyanide spill, residual hazards posed by tailings solutions produced in the cyanide detoxification process, insufficient baseline research on current water levels and quality, and missing financial guarantees to cover compensation in the event of mine disaster. In addition, Moran denounced the public feedback and community consultation processes stipulated in Salvadoran mining regulations. The community had been given only ten days to respond to the single copy of a complex and confusing 1,400-­page report. Adding insult to injury, they were required to consult the document at the Environmental Ministry office in San Salvador—no photocopying was allowed. In area after area, Moran noted how far short the EIA fell relative to the standards and safeguards that governed mining permit processes in the United States and Canada. Moran’s assessment was the opening salvo in the resistance network’s effort to mobilize support from an alternative epistemic community of scientists and experts. As Thomas Kuhn’s Structure of Scientific Revolutions (1962) reminds us, scientific subcultures are communities of knowers that are constituted both socially and historically. In bidding for authority, expert actors bargain with other actors in an often-­conflictual strategic game where outcomes are fluid and winning coalitions are temporary (Dunlop 2000). The relationship between knowledge and power, following Michel Foucault, has increasingly become a subject of critical inquiry. Dezalay and Garth (2002, 8) show how “universals” in neoliberal economics and the legal human rights agenda migrated between dominant intellectual and policy centers in the United States and Europe and such circles in Latin America, locating epistemic communities in national and international “fields of power.” Kütting and Lipschutz (2009) advance this inquiry, focusing on the way the knowledge

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debate informs disputes over environmental concepts and governance. Power webs shape the way knowledge is variously absorbed, challenged, redefined, and deflected, and even what counts as worthy information. El Salvador’s Mesa Nacional included a research center, CEICOM, which produced and distributed mission-­driven publications written by its own staff or by consultants. A second member, UNES, combined research and activism to highlight the environmental costs of free trade agreements and the protection of water rights. While largely directed by local experts, these networks periodically incorporated specialists with experience in the mining sector from U.S. or European universities. Collaboration with external experts allowed Salvadoran resistance networks to tap the cultural capital possessed by heavily credentialed scientists from the global North, making it more difficult for mine advocates to dismiss their work. In quick succession, Moran’s review was supplemented by the work of other international specialists from the opposition camp.7 This cluster of expert reports challenged the adequacy of El Salvador’s environmental-­review process, in terms of both risk assessment and citizen engagement. It questioned the economic benefits and development impact of mining and raised a red flag about the country’s institutional and regulatory capacity. The construction of rival assessments provided an additional tool for resistance networks seeking to counter the monopoly on claims to mining knowledge held by mine promoters. The availability of alternative expertise derived, in part, from years of support provided by a set of international development- and social justice–oriented nongovernmental organizations.8 Religious Communities, a Variant Neoliberal resistance networks are often small, attracting only a fraction of the total population. If they aspire to influence the direction of national life, they must cultivate alliances and build broader coalitions. In times of extreme volatility and crisis, when established authority structures are in question, antineoliberal alliances may be able to expand their influence quickly and successfully challenge a neoliberal regime, as Silva (2009) documents in Argentina, Bolivia, Ecuador, and Venezuela. In the absence of a disarticulating crisis and other key conditions, the process of constructing a reform coalition may be long and hard. The job requires a capacity for both “bonding” (connecting with socially homogeneous others) and “bridging” (building connections with those outside or beyond, producing a heterogeneous alliance) (Putnam 2000). In the Salvadoran case, the anti-­mining coalition found a critical ally in the upper echelons of the Catholic Church, a generally

170  Contesting Trade in Central America

conservative political actor. The loose networks constructed around shared objections to metal mining allowed the movement to expand its influence and recruit beyond its base. The hierarchical structure of the Catholic Church and its formal lines of authority distinguish this organization from the kinds of networks that normally populate international social movement and civil society theory. Syncretistic characteristics of the church, however, suggest elements of dialogue and convergence in which local and international actors within the church negotiate strategies of cooperation and alignment. In this sense, discussion of the church as a special kind of INGO, one that both domesticates and globalizes, may be useful. Church involvement in the Salvadoran anti-­mining campaign added another dimension to the transnational-­national dynamic. Liberation theology as a religious orientation had been severely weakened in El Salvador by years of warfare and antagonism from official church leaders. Some church activists retained the calling, however, particularly in faith-­in-­ action nodes and resistance communities. Caritas, the Catholic Church’s official international relief, development, and social-­service agency, promoted advocacy on issues such as access to water, climate change, dam construction, mining, health, and prisons in El Salvador.9 Leaders of this organization became active participants in the anti-­mining coalition; Cáritas–El Salvador was one of the Mesa’s founding members. Networking with Caritas organizations elsewhere in Central America, Cáritas–El Salvador leaders worked to persuade local bishops of mining dangers (R. Jones 2010). Although bishops in Honduras and Guatemala were already in the forefront of anti-­mining coalitions, church officials in El Salvador were initially reticent. The archbishop of San Salvador (1995–2009), Fernando Sáenz Lacalle, was a politically conservative Opus Dei member, and the Episcopal Conference of El Salvador (CEDES) over which he presided was a badly fractured body. Cross regional networking, however, drew Salvadoran bishops into the fray. In 2007, when CEDES presented its position on the issue, its statement, “Let’s take care of everyone’s home,” attested to the power of peer consultation: “The experience of our brother and neighboring countries, which have permitted gold and silver mining, is truly sad and lamentable. The bishops of those nations have raised their voice. We also wish to pronounce on this issue, before it is too late” (CEDES 2007). The bishops declared that “this class of mining causes irreversible damage to the environment and surrounding communities,” with resulting health problems, water and subsoil contamination, and harmful effects on vegetation, agriculture, livestock, and fish. In a small and densely populated country like El Salvador,

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the effects would reverberate widely. Metal mining in El Salvador, they concluded, “should not be permitted.” Trained as a chemist at the Universidad de Zaragoza in Spain, Archbishop Sáenz Lacalle remained unpersuaded by company claims about cyanide evaporation and the detoxification processes associated with “green mining.” Under his leadership, the bishops’ comunicado was signed by all eleven CEDES members, a rare expression of unity among El Salvador’s often divided bishops. Bonding processes, built along doctrinal lines with fellow Central American bishops, facilitated bridging connections, which linked top Salvadoran church officials with more ideologically radical resistance activists at home. The Salvadoran bishops’ position not only echoed the concerns of other Central American bishops, it also anticipated the environmental pronouncements issued only a few days later at the V Latin American Episcopal Council (CELAM) conference of 160 Latin American bishops in Aparecida, Brazil. The “Care for the Environment” section of that CELAM declaration concluded: Today the natural wealth of Latin America and the Caribbean is being subjected to an irrational exploitation that is leaving ruin and even death in its wake, throughout our region. A great deal [of ] responsibility in this entire process must be attributed to the current economic model which prizes unfettered pursuit of riches over the life of individual persons and peoples and rational respect for nature. . . . A similar warning must be made about resource-­extraction industries which, when they fail to control and offset their harmful effects on the surrounding environment, destroy forests and contaminate water, and turn the areas exploited into vast deserts. (CELAM 2007, para. 473)10

Although the Catholic Church’s reach in El Salvador had tended to decline over time, as elsewhere in Latin America, Catholicism remained the dominant religion.11 In addition, the Catholic Church consistently received the highest institutional trust scores in the country, with 41% of respondents indicating “much” confidence in this institution in 2008 (versus 7% for businesspeople, 6.5% for political parties, and 6% for the national legislature), a figure that rose to 47% in the 2009 survey (IUDOP 2008, 57; 2009b, 54). The call by the Salvadoran bishops for greater environmental protection, in keeping with pronouncements from other church authorities in Central America and beyond, presented the mining industry with a serious challenge.

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“Domesticating INGOs” and “The Allies” As political systems become more responsive to popular pressure and civil society organizing, local activists can benefit from transnational network support that is tailored to a more open political climate. They may need validating information from alternative epistemic communities, as we have seen, or funding to assist with operating expenses and communication strategies. Different kinds of transnational alliances have emerged to address these varying needs. At the conceptual level, we might distinguish between power node INGOs, which help local groups connect to powerful external actors, and domesticating INGOs, which help local allies organize at home. The former are discussed more fully later in this chapter; this section focuses on the latter. Domesticating INGOs are characterized by their long-­term presence in a country, close mission identification with local allies, and dense, multistrand linkages with a network of partners. They may present themselves as active agents in local debates, organize and participate in policy forums, and lobby government officials directly. Deeply knowledgeable of the local political scene, these INGOs are well positioned for a “downward scale shift” to support the national-­level policy work of their domestic allies. According to a 2010 report for Freedom House, El Salvador had 145 legally registered INGOs (Holiday 2010). Some of them had deep roots and functioned as quasi-­local organizations. The brutality of the civil war in El Salvador in the 1980s and debate about the U.S. role in it generated solidarity activism and cross-­national bonds (Perla 2008), and a network of INGOs was built on that foundation. The return migration and repopulation discussed above was achieved with “accompaniment” from organizations like the Salvadoran Humanitarian Aid, Research and Education Foundation (SHARE), the Committee in Solidarity with the People of El Salvador (CISPES), and the Sister Cities project. With a nontransferable mission defined by work focused on El Salvador, these organizations nurtured deep and enduring ties to local “communities in resistance,” attempting to validate their alternative development model and to support these partners financially. Not focused on mining, these solidarity-­based INGOs shared a strong commitment to Salvadoran sovereignty and opposition to neoliberal globalization, which they saw as destructive to the poor and vulnerable. Informally calling themselves simply “the allies,” these deeply anchored transnational actors began coalescing around mining as conflict escalated, looking for ways to help their partners advance the cause (Sister Cities 2010). A second group of domesticating INGOs in El Salvador was rooted in the

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international development and human rights communities. Central America’s postwar peace processes and repeated reconstruction efforts following natural disasters drew in an array of human rights, social justice, and development-­ oriented INGOs from Europe and the United States. Although there was considerable convergence in terms of goals between these organizations and their local allies, these INGOS had a formally geocentric mandate and global vision. Though not defined by a country-­specific mission, their long-­term presence and dense, multilayered project support tightly connected this particular subgroup of INGOs to local networks, allowing some degree of domestication. As internationally recognized organizations with professional staff and funds to support campaigns, these actors financed local conferences, research, and public outreach, providing information and operating expenses.12 One of these development-­oriented INGOs, Oxfam America, became an early backer of the Mesa Nacional. In keeping with its “Right to Know, Right to Decide” campaign, which challenged common arguments about the benefits of the extractive sector, Oxfam America provided important operational funds and early visibility for Salvadoran mining critics (McKinley 2010). In addition to supporting local partners, Oxfam America representatives lobbied Salvadoran government officials directly, cultivating contacts in the Ministry of the Economy and distributing the organization’s growing body of research on mining problems. Adding much-­needed information to the debate, they commissioned public opinion research and economic analyses that interrogated mining industry claims (IUDOP 2007; Power 2008). Research on transnational activism demonstrates that high levels of external support can be a mixed blessing: while providing needed support, transnational alliances can also damage local networks. Petras (1997), focusing on top-­down service sector delivery by not-­for-­profits, accused NGOs of introducing a new kind of colonialism and “deradicalizing whole areas of social life” (6) in Latin America. Edelman (1999, 2008) finds that intervention by external allies and funders can overwhelm a local group, disconnecting it from its membership base and its locally derived mission. Overfunding and intense attention given to some local actors combined with neglect of equally meritorious others can leave a wreckage of intramovement competition and ill will (Bob 2005). Efforts by local coalitions to assert autonomy and set limits on external partners (Andrews 2010), or to circumvent and adapt an externally derived campaign message (Hertel 2006), respond to real contradictions. At the same time, in settings where resources are scarce and confrontation means a lopsided battle with wealthy and powerful antagonists, multilayered collaboration with INGOs is often critical to the development and durability

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of popular resistance networks. Many INGO leaders, particularly those of the domesticating variety discussed above, are alert to the problems caused by top-­down control. The best ones struggle, with varying degrees of success, to navigate these shoals. The “tug of war over meaning” and norm definition between local and external allies may be attenuated through sustained dialogue and mutual transformation (Hertel 2006, 3). Engaging this issue, Jenny Pearce (2010) has called for a national-­transnational activist commitment to “critical reflexivity” in order to promote ongoing dialogue about “the coherence of their internal dynamics with the values that they espouse” (632). In the Salvadoran case, the positions on mining taken by the Mesa Nacional and Oxfam America were not identical, and tensions were sometimes apparent. Whereas the Mesa Nacional supported an outright ban on metal mining in El Salvador, for example, Oxfam America endorsed community control, a position that, in theory, could result in mining approval. Substantial overlap in their positions on mining myths and dangers and the need for community consultation, however, facilitated sustained collaboration. Although some contradiction is inherent in a relationship when power and resources are unequal, tensions may be reduced when orthodoxy and uniformity are not preconditions for collaboration and when INGO staffing draws on well-­rooted local leaders.13 The Mining Industry Fights Back As the network of mining critics expanded in El Salvador, the process of authorizing mine openings slowed. Corporate pack leader Pacific Rim then adopted a two-­part strategy to push the government forward. First came the carrot—the public relations push that emphasized the corporation’s good citizenship and environmentally friendly technologies. Then came the stick—the threat of costly international legal action against the government unless it complied. Using guarantees provided under the 1999 Investment Law and the newly implemented CAFTA agreement, Pacific Rim officials threatened to present a claim of “indirect expropriation” and to demand full compensation if the government halted the advance of the permit process. Pacific Rim’s economic and environmental case was put forward in a 2007 report by Manuel Enrique Hinds (henceforth, the Hinds report). As a former finance minister (1995–1999) and long-­term advocate of dollarization, Hinds had played a central role in El Salvador’s market transition.14 Having worked with the World Bank during the postcommunist and market transitions of

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the 1980s, he brought the message of market orthodoxy home to El Salvador when he returned as an architect of market reform. Now defending the government’s decision to encourage gold exploration, his argument turned on two points: the country would derive important economic benefits from gold mining; and mining would be done without environmental damage (Hinds 2007). Projecting additional discoveries that would extend the volume of gold extracted, and assuming a twenty-­year timeline before mine exhaustion, Hinds (2007, 16) offered optimistic estimates of the impact of mining on exports and public revenues (for example, royalties and taxes equaling 10% of 2006 corporate income tax revenues). He argued forcefully that, given the mining zone’s location in some of the poorest municipios in the country, the jobs and municipal tax revenues generated by mining would be particularly valuable. Focusing just on the El Dorado mine in Cabañas, he projected an 8.4% increase in the department’s GDP, with a consequent 23% drop in extreme poverty levels (from 36.8% to 28.3%) (27). Extrapolating from four potential mines already identified in exploration concessions, he projected that the industry would generate 35,787 jobs (1,800 direct plus 33,987 indirect), equal to almost 1.3% of the total national workforce (29).15 Hinds dismissed the opposition’s negative environmental prognosis as inadequately attentive to the specific subsoil characteristics and design features in the El Dorado mine proposal. He drew on Pacific Rim documents to highlight new technologies for detoxification of cyanide and containment of mine wastes. He countered claims that the planned mines would deplete already-­ scarce national water sources (water used in the mine would be runoff rainwater collected during the rainy season; water returned from the mines to the waterways would be treated so that river quality would not further deteriorate). In fixing standards against which to evaluate mine performance, the Hinds report used a lower standard than the U.S. and Canada benchmarks preferred by Moran. Extraction, his report claimed, “can be done without any environmental costs” because new technologies reduce risks “to levels far below those considered acceptable in activities that are normal in the country” (2007, 4). This new message was accompanied by a vigorous media campaign to advance the idea of “green mining.” TV and radio ads announced the benefits of green mining technology, and protesters gathered outside the National Cathedral and the Oxfam office to denounce church and INGO opposition as “antiworker.” Collaborating with local mayors in the proposed El Dorado mine region, Pacific Rim developed a social-­investment portfolio to demon-

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Table 5.1. Public opinion in prospective mining zones about expected mining impact, El Salvador, 2007 Expected damage to sector (%) Sector

None

Little

Some

Much

Fishing Agriculture Livestock Ecotourism 4-­question average

12.0 13.0 13.0 17.0 14.0

10.0 15.0 13.0 15.5 13.0

11.0 15.0 14.0 15.0 14.0

66.0 57.0 59.0 53.0 59.0

Source: IUDOP (2007, 50–53), and author’s calculations. Notes: Percentages may not add to 100 because of rounding. Q: “If a mining project were to open, how much damage do you think would result for . . . ?”

strate good citizenship and cultivate public support.16 Company representatives claimed to have secured the elusive “social license” provided by community approval. Testing the claim that mining companies had consulted adequately with the affected communities and won local consent for these projects, Oxfam’s regional office commissioned a survey of attitudes in the mining region. In October 2007, the University Public Opinion Institute, a well-­regarded public opinion polling institute located at the Jesuit-­run Central American University (UCA), ran the survey in twenty-­four municipios where mining exploration permits had been authorized. When asked, “Do you consider El Salvador an appropriate country for metal mining?,” 62% of those surveyed responded no (IUDOP 2007, 54). Cued to think about mining in relation to their own community, a modest majority (54%) disagreed with the statement, “The mining companies promote the development of the municipio” (37).17 Concern was particularly pronounced when people were asked about the impact of metal mining on the environment or the trade-­off with alternative economic activities (see table 5.1). When framed in these terms, the majority indicated “much” concern about the damage that would be done to fishing (66%), agriculture (57%), livestock (59%), and ecotourism (53%). This concern was particularly strong among women and better-­educated respondents.18 Across these four questions, on average only one in seven respondents (14%) indicated a concern level of “none”; in contrast, three out of five (59%) registered “much” concern. These results suggest that the mining industry had not won the war of public

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opinion, in spite of outreach efforts and the imbalance in resources available to the two camps. The Political Tide Turns A decade after the peace process, the electoral capacity of the FMLN began to grow. The party still drew unrelenting hostility in some quarters, and it stumbled over internal divisions and poor candidate choices in the early years. With time, however, its performance improved, and it achieved significant gains in the 2003 local and legislative elections, before sharp defeat in the 2004 presidential election. Learning from that experience, the FMLN chose Mauricio Funes, a Center-­Left independent, as its candidate in the 2009 presidential election. Funes, a popular journalist and political commentator, was well known for his independent and critical style and scored a highly positive response in early polling. ARENA, in contrast, suffered from a deteriorating public image after two decades in power. In a November 2008 IUDOP poll, for example, 65% of respondents agreed with the statement: “If ARENA wins the elections again, the rich will become richer and the poor will become still poorer” (IUDOP 2009a, 135). As the FMLN position improved and that of ARENA declined, for the first time in twenty years, the presidential election outcome was uncertain. Under these circumstances, ARENA president Tony Saca began to publicly distance his administration from some traditional party positions. One area where this division can be seen is in his emerging position on the mining concessions.19 Questioned in March 2008 about permits for metals extraction, Saca stated bluntly, “I don’t agree with granting these [mining] permits.” Still treading lightly into opposition terrain, he added, “But if they show me through studies done by the Ministry of the Environment, and if the minister of the economy shows me that gold can be extracted and make the economy grow, without damaging natural resources like water through the use of cyanide, I am disposed to work with the Legislative Assembly on a law, to set things up right [establecer las cosas bien].”20 Perhaps a mining industry could emerge, he suggested, but only if it presented compelling no-­harm evidence to an increasingly skittish government. As Pacific Rim became insistent and electoral challenges loomed, Saca went further. In February 2009, on the eve of the March presidential election, the president called into a Catholic radio station program on the mining controversy and proclaimed, “While Elías Antonio Saca is president, he will

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not grant a single permit, not even environmental permits, which are required prior to those granted by the Ministry of the Economy. . . . No president, knowing that this is damaging to public health, would dare order his ministers to give out these permits. And I am going to join in this campaign with you” (López Piche 2009). Concerning the legal complaint that Pacific Rim threatened to bring against the government, Saca continued, “They are about to file an international claim, and I want to make this clear: I would prefer to pay the $90 million than to give them a permit” (López Piche 2009). Saca’s anti-­mining position coincided with that taken by Funes on the campaign trail. During a stop in Cabañas by his Caravan of Hope a year before the election, Funes had declared, “As long as [the mining companies] fail to demonstrate that these projects do not contaminate the environment and [do not damage] the health of our population, we are not going to permit metal mining” (Redacción Diario Co Latino 2008). The official position of the FMLN, as declared in its campaign platform, was that the mining law should be changed to ban metal mining outright (FMLN 2008, 19). ARENA candidate, Rodrigo Ávila, in contrast, reportedly took no position on the issue,21 leaving open the possibility that mining would advance under his administration. The 2009 election, discussed more fully in chapter 6, gave Funes a narrow victory (51.3% to Ávila’s 48.7%). In the months that followed, Funes pledged to maintain the country’s de facto mining moratorium. The Mesa Nacional, working closely with FMLN allies, advanced a legislative proposal to ban metal mining, a measure that Funes promised to sign if approved (Quintanilla 2010). Investor-­State Disputes and Venue Shifting With its investment stymied and another mining opponent soon to take office, Pacific Rim served a Notice of Arbitration to the Salvadoran government in April 2009, using both CAFTA-­DR provisions and El Salvador’s 1999 Investment Law. Drawing on the precedent established in the NAFTA agreement, CAFTA Chapter 10 allowed companies to sue the government for compensation in case of an “indirect expropriation.” This concept has been interpreted by international arbitrators to mean government actions, including environmental and health measures, which result in a significant reduction in the value of a foreign investment. Both CAFTA and the Investment Law permitted investors to have these disputes resolved by the World Bank’s ICSID rather than through domestic legal processes.

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Presenting its case to the ICSID tribunal in Washington, Pacific Rim challenged the “unlawful and politically motivated measures” taken against its investments by the Saca government (Pacific Rim Cayman LLC 2009, 3). Its arbitration notice was followed by a second, in July 2009, from the U.S. mining corporation Commerce Group, which claimed that the Salvadoran government had breached its obligations under CAFTA through the revocation of its existing environmental permits and inaction on subsequent applications (Commerce Group Corp. 2009). The Commerce Group’s Notice of Arbitration claimed, among other things, that the government’s “ban on development of gold and silver mines applies in practice exclusively to foreign companies,” and that the government permits “the operation of coffee beneficios which dump liquid residue directly into rivers and other activities which are more intrusive on the environment” (Commerce Group Corp. 2009, 5). Claiming discriminatory treatment, both Pacific Rim (Pacific Rim Cayman LLC 2012, Part 1, 3) and Commerce Group (2009, 5) alleged violations of CAFTA Section A, Article 10.3 (National Treatment), Article 10.4 (Most-­Favored Nation Treatment), Article 10.5 (Minimum Standard of Treatment), and Article 10.7 (Expropriation and Compensation). Pacific Rim sought compensation of $77 million plus unspecified losses, an amount it subsequently raised to $315 million in 2013 (Pacific Rim Mining Corp. 2013); Commerce Group sought no less than $100 million plus the permits allowing it to mine. Traditionally, Latin American countries had attempted to ward off pressures from foreign corporations and their powerful home states by embracing the Calvo doctrine (Tawil 2010; Schoultz 1998). Embedded in constitutions, legislation, and international agreements across the region in the early twentieth century, the Calvo doctrine restricted the ability of foreign investors to call on their home states in the event of unfavorable treatment by host governments and required foreign companies to submit their claims to domestic courts, as national companies were required to do. With the advent of market reform in the 1980s, Latin American governments began to forfeit their adjudication role and agree to transfer investment arbitration over to international tribunals (L. Martínez 2009). The U.S. government attempted to strengthen investment rights, signing a growing number of bilateral investment treaties (BITs) in the 1990s. Trade related investment measures (TRIMs) and trade related intellectual property (TRIPs) protections became part of the institutional architecture of trade in the Uruguay Round of the General Agreement on Tariffs and Trade. Pursuing a more comprehensive FTA agenda at the turn of the century, U.S. trade negotiators incorporated investment protection, intellectual property rights, and international arbitration commitments into

180  Contesting Trade in Central America

these texts and included guarantees that extended beyond those endorsed in the Uruguay Round or the fitful Doha Round.22 Bolstered by these new arbitration commitments in both domestic law and international agreements, foreign investors turned increasingly to the ICSID when disputes arose. The number of new cases registered by ICSID climbed rapidly in the early 2000s, jumping from an annual average of 1.2 cases in 1990–1994 to an average 29.4 cases a year in 2007–2011 (ICSID 2012, 7). As of June 30, 2012, ICSID had 390 cases registered under the ICSID Convention and Additional Facility Rules (7). Conflicts in the oil, gas, and mining sectors represented 25% of the cases (12). Resistance Adaptation and New Transnationalism As the Salvadoran mining conflict advanced in Washington, it also came to a head in Cabañas, where local anti-­mining activists faced rising threats and violence. Three activists in the anti-­mining campaign were murdered between June and December 2009, in a surge of violence that triggered national and international alarm.23 The rising salience of mining conflicts and of ICSID, and the intersection between these controversies and deteriorating human and environmental rights in these communities, promoted engagement by another cluster of advocacy organizations—this one located in global power centers. Whereas the domesticating INGOs, such as SHARE and Oxfam America, focused on building close alliances with national networks and setting roots in local political processes, power node INGOs focused on the interface between local organizations and powerful external agencies and actors. Power node INGOs cultivated specialized knowledge of pressure points in international relations and tailored communication strategies to influence the actions of dominant global powers. They used techniques like lobbying the U.S. Congress and Canadian Parliament, monitoring international dispute-­resolution processes, working on legal briefs regarding international agreements, targeting mining company shareholder meetings to raise awareness of conflicts, and mobilizing public opinion in power centers through media outreach. In the Salvadoran case, special support was provided by two Washington-­ based power node INGOs, the Institute for Policy Studies (IPS) and the Center for International Environmental Law (CIEL).24 IPS, a human rights and economic justice organization headquartered in Washington, DC, became involved in the Salvadoran mining work in 2009 as violence felled anti-­ mining activists in Cabañas. By giving the Mesa Nacional its 2009 Letelier-­

After CAFTA 181

Moffitt Human Rights Award and highlighting the Salvadoran struggle in the DC community, IPS called attention to the human rights conflicts erupting around mining in Central America. IPS researchers also drew on the Salvadoran case as they documented the emerging profile of ICSID. In a series of reports criticizing the use of international arbitration tribunals to settle investor-­state disputes, IPS highlighted the democracy deficits associated with embedding investment rules in trade agreements and removing them from the sphere of public debate (Anderson, Dreyfus, Pérez-­Rocha 2010; Earthjustice et al. 2010). As the Pac Rim case advanced at ICSID in 2011 and 2012, an IPS subgroup circulated an “Open Letter for World Bank Officials” calling for dismissal of the case and quickly tallied 244 signatories from across the Americas (IPS 2011). Mobilizing DC-­ area activists, it staged weekly protests in front of World Bank headquarters in Washington in December 2011 and January 2012, as rumors circulated of an imminent decision on whether ICSID would accept the case. Washington-­based human rights organizations often collaborated on justice initiatives, and IPS and CIEL found common cause in the Salvadoran mining dispute. Founded in Washington, DC, in 1989 as an environmental law advocacy group, CIEL developed a research and advocacy specialization in conflicts that emerged between laws governing environmental protection and trade promotion. One of its initiatives focused on improving transparency and public participation in international dispute settlement. To support the Salvadoran government’s legal response to mining company claims in ICSID arbitration, CIEL representatives prepared an amicus curiae brief on behalf of Mesa Nacional in the Pacific Rim dispute (Mesa Nacional 2011).25 In this brief, the eight member organizations of Mesa Nacional claimed the dispute was not a legal one, but was rooted in “Pac Rim’s dissatisfaction with the fact that El Salvador’s public policy has begun to turn against metals mining, in recognition and reflection of the deeply destructive environmental and social effects that metals mining can pose to local communities. In short, this is clearly a political dispute” (Mesa Nacional 2011, 5). This document characterized El Salvador’s mining moratorium as the outcome of a democratic process in which local civil society organizations used the opening political system to mobilize around community needs and press their government to respond. Presenting this brief, CIEL representatives claimed that investors had not properly assessed the impact of the proposed mines on the environment. Denouncing the “devastating impact on the local environment and on the human rights of the people that depend upon that environment,” CIEL defended the Salvadoran government’s moratorium on new mining permits (CIEL 2011).

182  Contesting Trade in Central America

These power node INGOs, and others generally located in the global North, attempted to modify the institutional architecture governing trade to improve its alignment with democratic practices. They looked for ways to defend local activists and governments in the global South that were struggling to impose constraints on neoliberal globalization when new market rules conflicted with constitutional principles, environmental rights, and community protection. Using an evolving set of tools and tactics, power node INGOs worked to strengthen the access and influence of these market-­resistance movements in international centers of power. This struggle was an uphill battle. The government of El Salvador first challenged Pac Rim on jurisdictional grounds, labeling Pac Rim’s attempt to use CAFTA-­DR protections an “abuse of process.” Its ICSID brief contended that the company lacked legal standing under CAFTA-­DR given that its U.S. branch was a shell operation, without an office, employees, or even a U.S. bank account. It also claimed that Pac Rim had formally relocated from the Cayman Islands to Reno, Nevada, in 2007 in an opportunistic gambit to claim eligibility to litigate under CAFTA-­DR (Pacific Rim Cayman LLC 2010). Responding to company claims under the 1999 Investment Law, the Salvadoran government alleged that Pac Rim failed to meet the definition of foreign investor under this law, since its engagement in El Salvador had only reached the exploratory stage, and production investment had not begun. The government further argued that Salvadoran law required investors to seek “conciliation” before advancing to arbitration, a process the company had sidestepped. The ICSID Tribunal, in its June 2012 ruling on the jurisdictional issue, concluded that Pac Rim’s resort to CAFTA-­DR was not an abuse of process, but that the company’s lack of substantial business interests in the United States did disqualify it from using CAFTA-­DR protections (Pacific Rim Cayman LLC 2012). Its claim to have legal standing under El Salvador’s Investment Law, however, was accepted by the Tribunal. As of March 2013, this ICSID case was continuing to unfold, now under the terms of one of El Salvador’s earlier neoliberal reforms, the 1999 Investment Law.26 In the meantime, the Funes government contracted an international consulting firm, Tau Consultora Ambiental of Spain, to conduct a “Strategic Environmental Evaluation of the Metallic Mining Sector of El Salvador” and make recommendations about domestic policy reforms.27 The Ministry of the Environment and Natural Resources appointed a blue ribbon commission of international scientists and experts to ensure that this evaluation met scientific standards. The Tau Consultora Ambiental (2011) report highlighted the

After CAFTA 183

environmental and social vulnerability of the country and the opposition to mining by an important part of civil society, identifying these as factors that weighed strongly against the development of the industry (72). At the same time, the Tau consultants did not reject the development of mining outright, claiming that the country needed to consider various ways to promote its development. Arguing that, in the end, the decision must be the product of political debate and discussion by Salvadorans, the report identified two alternative paths. Either metal mining could be banned altogether or, alternatively, El Salvador could halt mining temporarily while it developed the appropriate legal and regulatory infrastructure to control risks and make mining serve the national interests. In the latter event, the report identified seventeen areas in which legal and institutional reforms were needed and sixty-­four actions that would be required, many of which would take major investments and a substantial period of time to execute (Tau Consultora Ambiental 2011, 70–90). Acting on these recommendations, the ministers of the economy and the environment presented a bill to the legislature in August 2012 calling for the indefinite suspension of the mine licensing process. Meanwhile, a multifaceted plan to strengthen regulatory control would be developed and, if there was sufficient legislative support, put into place (Flores Alemán and Rosa Chávez 2012).28 Conceptual Overview and Conclusions As this chapter demonstrates, the linkage and leverage mechanisms constructed by resistance networks are quite varied, privileging shifting constellations of coalition partners in different phases and venues. This chapter identifies four kinds of linkage patterns that aligned national and transnational actors at different junctures. In addition to the classic “boomerang” (Keck and Sikkink 1998, 12–13) and the “corporate boomerang” ( J. Smith 2008, 80–81) models that have been defined in social movement theory, this analysis presents two new models—a domestic loop and a deleveraging hook—to expand the range of our conceptual tools. In Activists beyond Borders, Keck and Sikkink pioneered the concept of a boomerang to map a prominent pattern in transnational activism. The boomerang emerges when “domestic NGOs bypass their state and directly search out international allies to try to bring pressure on their states from outside” (1998, 12). Although sometimes found in formally democratic countries, boomerang patterns often develop in nondemocratic settings, “where govern-

184  Contesting Trade in Central America

ments are inaccessible or deaf to groups whose claims may nonetheless resonate elsewhere” (13). In these cases, governments may be more responsive to external pressures from international organizations or powerful states than to their own citizens. The boomerang pattern has been particularly notable when domestic and transnational networks link up in campaigns for human rights, environmental protection, women’s rights, and indigenous rights. This tactic has been found less successful in campaigns for social justice and economic change (della Porta and Tarrow 2005, 6). As formal democratization advanced in Latin America in the 1990s, large-­ scale episodes of state violence abated and space for rights monitoring and social mobilization expanded. The blockage between civil society organizations and the state loosened, creating new possibilities for organized publics to advance their cause directly. Formal and informal mechanisms developed, allowing local actors to exert more pressure on their own state apparatus through protests, lobbying, issue education, media outreach, coalition building, candidate placement, campaigns, and elections. The boomerang pattern remained significant, particularly for minority sectors or rights-­based movements with limited political capital, but was joined now by other processes reflecting the shift in political opportunities. In a second process (described here as a “domestic loop”), national networks used information, material resources, frames, and symbols, some of which were constructed through participation in transnational networks, to pressure their own states for reform. Movement transnationalism thus plays a role in various kinds of multiscale leveraging processes. In the classic boomerang pattern, local organizations collaborate with transnational allies to engage external actors (including other states and international governmental organizations) in order to apply exogenous pressure for change on the home state. The domestic loop, in contrast, traces interactions between local organizations and transnational networks that strengthen domestic coalitions struggling to influence their own national governments directly (see figure 5.1). In the Salvadoran case, transnational links emerged in interactions between local community groups and their Honduran counterparts; environmental and human rights organizations that networked across the Mesoamerican region; alternative epistemic communities that connected around anti-­ mining campaigns in Central America; cross regional networks of Catholic Church bishops; and externally based solidarity and development organizations working on mining, sovereignty, and human rights issues. These domestic loop processes, in which resistance networks pressured the Saca and Funes governments directly, succeeded in shifting state action, leading to the

After CAFTA 185

Figure 5.1. The domestic loop.

Figure 5.2. The deleveraging hook.

replacement of corporate-­friendly policy and weak regulation, with a mining moratorium and greater state vigilance. A domestic loop, in turn, can contribute to a dynamic cascade in which other types of transnational linkages shift into action. As the anti-­mining movement became better articulated and the Salvadoran state became increasingly responsive, the domestic loop process activated a third stage, which Jackie Smith (2008, 80–81) has labeled a “corporate boomerang.” As defined by Smith, a corporate boomerang involves transnational corporations’ appeals to international organizations or powerful external state actors. The goal is to seek interventions that will push vulnerable states to provide favorable treatment for local company branches or partners through the use of external pressure. As with the classic boomerang, this pattern emerges when actors (in this case, corporations) are blocked from exercising leverage over the government in their country of operation. Local corporate branches then collaborate with the company headquarters abroad to bring external pressure to bear on a resistant government. They use political, economic, and legal instruments to secure favorable intervention by powerful global actors, such as the corporation’s home state or agencies like ICSID, which penalize noncompliance with corporate-­friendly rules. In the fourth model, represented in figure 5.2, the resistance alliance,

186  Contesting Trade in Central America

threatened with the loss of protections that the government had pledged, looks for its own ways to influence international organizations and other states, using a deleveraging process to deflect external pressures that would undermine domestic reforms. Unlike the domestic loop model, where the direct target is the home state, the deleveraging model targets international organizations or other powerful states. The effort here is to reduce the ability of external actors to pressure the home state, thus allowing it to respond to domestic political forces instead. The directional arrow reverses as national and transnational networks shift their gaze outward to external power centers and international organizations. This process, which may link domestic resistance networks with a different set of transnational allies, follows the sweep of the boomerang pattern. As figure 5.2 suggests, however, the intention in the deleveraging hook is to reduce rather than intensify external pressure on the home state (in this case, El Salvador). The domestic loop may work best when national networks collaborate with international organizations that are strongly invested in local partnerships, as in solidarity and development organizations with thin bureaucracies and a willingness to accommodate ally autonomy (domesticating INGOs). Power node INGOs, in contrast, prove to be important partners during deleveraging processes, helping resistance networks in the South frame their struggle and mobilize resources in contextually strategic terms. In Dynamics of Contention, McAdam, Tarrow, and Tilly (2001) challenge social movement scholars to avoid static, single-­actor models in favor of process-­oriented, interactive approaches to the study of contentious politics. The study of mining policy in El Salvador presented in this chapter explores movement dynamism by tracing the recrudescence of neoliberal resistance in the post-­CAFTA era. Building off of discursive frameworks and organizational strategies constructed in prior debates about privatization of health care and public utilities, infrastructural development, and trade, opposition networks reconfigured to support investment regulation, environmental sustainability and citizen consultation. This chapter traces the way this loosely bounded network forged links internally and engaged multilayered transnational allies to press national political actors for policy change during a critical political juncture. But neoliberal reforms diminished the authority of national government in a number of areas. Controversial investor-­state provisions shifted power to international arbitrators, who could impose substantial financial penalties on states (and their taxpayers) for noncompliance with previously agreed upon economic principles. In the process, international investment arbitration transforms investor-­state relations and poses new challenges for demo-

After CAFTA 187

cratic governance. As Rogers and Alford (2009, 2) note, under the new arbitration rules, “states’ power is circumscribed to the procedural avenues that are available to a litigant and are equal to those of the complaining investor. In investment arbitration, the state and the investor stand as rival but equal litigants seeking to persuade an ostensibly neutral adjudicator of the correctness of their legal positions through established procedures. It is this shift in the power and orientation of states, and its related policy implications for those states, that has prompted some commentators to characterize investment arbitration in constitutional terms.” This “new international constitutionalism” (Wilske and Raible 2009), builds on emerging international rules that bind states and limit the ability of local voters to determine national policy. As such, it raises questions about the meaning of democratic governance, a concept long-­premised on a foundation of national sovereignty. As neoliberal rules facilitated a venue change from the national to the international level in the adjudication of these investment disputes, the resistance movement in El Salvador attempted an upward scale shift to contest the authority of ICSID and to interrogate its tendency to privilege corporate claims over local preferences. Resistance activists struggled to refashion this market instrument into a mechanism that would acknowledge their environmental rights, community preservation, and pro-­democracy claims. Market reform left a legacy of legal and institutional constraints, even as the political tide began to turn. In the end, long-­term change will require ongoing civil society engagement, continued democratic deepening, and an international economic architecture that is consistent with these principles.29

Chapter 6

Electoral Challenges and Transitions

Both democratization and social movements built on the same basic principle, that ordinary people are politically worthy of consultation. Goldstone (2003)

In the first decade of the twenty-­first century, market fundamentalism lost its luster and Latin American politics shifted leftward.1 This transition is commonly understood to be the result of two simultaneous developments: the region-­wide consolidation of democracy, and popular disappointment with the consequences of neoliberal reform. As market transition failed to ignite a sustained round of growth and development, voters threw their support to parties and candidates who would explore alternatives. The 1990s defeat of Central America’s leftist movements had opened a wide swath of political space for the Right, which was only weakly challenged for almost twenty years. Left-­oriented political campaigns struggled with repeated losses in Central America, as elsewhere, but the same combination of economic disappointment and expanded political opportunity that fueled the advance of the Left in South America played out in Central America, and it gradually registered an impact. As we trace the electoral challenges faced by neoliberal leaders in Central America, we can document the way regional critics of marketization attempted to modify their social and political order. A Polanyian framework helps to connect the pieces by linking the rapid shift toward the market model with a dawning awareness of its costs, and the construction of oppositions seeking to address disappointment with dislocation. Desire for greater market regulation and state assistance does not mean simplistic rejection of market processes or opposition to global economic exchange. Nor does the scattered emergence of opponents mean the development of a broad-­based, well-­articulated political countermovement. Opposi-

Electoral Challenges and Transitions 189

tion movements may be transitory, stunted, and even misdirected; they will certainly take many forms. But given the freedom to organize and exert political pressure, open expression of concern about social disconnection and sustained economic insecurity is a predictable outcome, as are vocalized claims about government responsibility for the public welfare. What follows is an analysis in three parts. The first examines shifts in public opinion concerning market reform and the role of the state, focusing on the three Central American cases. The second explores the rise of electoral alternatives to market orthodoxy in Latin America and the post-­2002 political shift leftward in the region. The final part traces recent electoral contests in Nicaragua, El Salvador, and Costa Rica, concluding with discussion of the transitions that resulted. Shifting Views of the Market in Central America In his assessment of CAFTA’s “resounding success,” John Murphy (2008), U.S. Chamber of Commerce vice president for international affairs, declared CAFTA a “win-­win for workers, farmers, and companies.” Although it is too early for a detailed empirical analysis of CAFTA impacts, academic evaluations of earlier market reforms in Central America were less sanguine. Hausmann and Rodrik (2005) found that El Salvador suffered from stagnant real gross national income per capita, in spite of its extensive liberalization and investment-­grade credit rating. Pisani’s (2003) assessment of the impact of structural adjustment in Nicaragua in the 1990s concluded that the size of the informal sector increased dramatically and wages decreased, particularly for informal sector workers and women (see also Babb 2001). Jonakin (2012) demonstrated the relationship between market reform, low growth, low-­wage-­job creation, and emigration in Central America. Even positive empirical findings tended to be partial and were carefully conditioned. Comparing the impact of pre-­CAFTA trade liberalization (1966–2005) on the agricultural trade balance in El Salvador and Costa Rica, for example, Gingrich and Garber (2010) found the impact was negative in El Salvador although positive in Costa Rica, and they recommended a series of interventions (credit access, controlling the pace of change, etc.) that could diminish disruptive results. These outcomes are a far cry from the pretty picture of prosperity that market advertisers deployed to advance approval of this model. Although the neoliberal transition brought benefits along with problems, it was vulnerable to three kinds of criticisms: (1) that it created or exacerbated some negative

190  Contesting Trade in Central America 90 80 70 60 50 40 30 20 10 Costa Rica

El Salvador

1998

2000

Nicaragua

2002

2007

La�n America average

2009

Source: La�nobarómetro 2009, 91.

Chart 6.1. “A market economy is best for the country” (strongly agree and agree,

percent).

conditions; (2) that it failed to provide a remedy for others; and (3) even when it did produce a positive outcome, that it fell short of meeting the elevated expectations that its advertisers had raised. Trade volume did rise, for example, following trade liberalization in the region, but poverty rates, which initially declined, proved sticky and/or volatile during the second decade of reform in all three cases and resisted improvement in spite of the continuity or deepening of marketization. Latinobarómetro data on public opinion indicate that attitudes toward the market model shifted in Central (and, more broadly, Latin) America during the early 2000s. Whereas around three-­fourths of the respondents in our three Central American countries agreed with the statement, “A market economy is best [“lo más conveniente”] for the country” in 1998, surpassing the Latin American average by a large margin, subsequent enthusiasm proved fluid (see chart 6.1). In Costa Rica, the level of support for this model fluctuated across the following decade, with 70% endorsing a market economy in 2002, but only 56% so disposed in 2007. In El Salvador, support for a market economy fell sharply between 1998 and 2000 and continued to erode though 2007; in that year, only 52% of respondents agreed that this model was best for the country, although support levels recovered in 2009. In contrast, market support initially held up in postrevolutionary Nicaragua, increasing steadily be-

Electoral Challenges and Transitions 191

tween 1998 and 2002; the level of support for this model in Nicaragua in 2002 (78%) was the highest of the seventeen countries polled, well above the regional average. But support dropped sharply thereafter in Nicaragua, falling to 51% in 2009. Only Ecuador, where just 44% of respondents supported the market model, registered less enthusiasm (Latinobarómetro 2009, 91). As public enthusiasm for the market wavered and drooped in the 1998– 2007 period, respondents often looked favorably on state interventions and protections.2 This finding of support for state intervention also appears in data compiled by the Latin American Public Opinion Project, particularly in regard to social services. Popular support for the state as the principal health care provider was pronounced, with more than 80% endorsing this idea in nineteen of the twenty-­four Latin American and Caribbean countries surveyed in 2010 (Corral 2010). Support for this view was strong in all three of the Central American cases: 90% of Nicaraguan, 89% of Costa Rican, and 87% of Salvadoran respondents endorsed this position. In sharp contrast, only 47% of U.S. respondents held this view (1). Although the link between policy preferences and ideological identity is complex, self-­identification with the Left was also fairly common in a number of Latin American countries, including two in Central America. Asked in the 2008 LAPOP survey to place themselves on a 10-­point scale from Left (1) to Right (10), 21.7% of respondents in El Salvador chose 1 or 2, results that were similar in Nicaragua (21.4%) (see table 6.1). Combining the Left (score of 1–2) and Center-­Left (score of 3–4) results, a total of 35.8% and 30.4% placed themselves on the Left side of the spectrum in El Salvador and Nicaragua, respectively. Using the Combined Left total, these two countries ranked among those with the strongest Left identification in Latin America, along Table 6.1. Ideological distribution, by country, 2008 Ideological self-­identification (%)

Country

Left

Center-­ Left

Combined Left

Center

Center-­ Right

Right

Combined Right

El Salvador Nicaragua Costa Rica

21.7 21.4  8.8

14.1  9.0  6.1

35.8 30.4 14.9

32.4 33.1 39.2

13.2  8.2 18.6

18.5 28.3 27.2

31.7 36.5 45.8

Source: Zechmeister and Corral (2010, 1), and author’s calculations. Note: Ideological self-­placement score of 1–2 = Left; 3–4 = Center-­Left; 5–6 = Center; 7–8 = Center-­Right; 9–10 = Right.

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Table 6.2. Mean ideological self-­placement, by country and year Mean ideological self-­placement Country

2004

2006

2008

2010

Nicaragua El Salvador Costa Rica

6.18 6.89 6.16*

5.26 5.74 5.90

5.74 5.30 6.45

5.68 5.22 6.18

Source: LAPOP, AmericasBarometer database. Notes: 1 = Left, 10 = Right. *2002

with Uruguay (39.4%), Ecuador (31.3%), Venezuela (29.4%), and Bolivia (29.3%) (Zechmeister and Corral 2010, 2). In contrast, Costa Rican results reflected a relatively weak Combined Left (score of 1–4), with 14.9% of respondents choosing those scores, and a strong Combined Right (score of 7–10), with 45.8% of respondents selecting those scores. Self-­identification with the Right end of the spectrum was stronger in Costa Rica than in any of the other sixteen Latin American countries in the study, a point to which we return below. Mean ideological self-­placement scores reveal shifts across time, with average scores at the end of the decade further away from the Right end of the spectrum than they had been in 2004 in both Nicaragua and El Salvador (see table 6.2). Biennial data for El Salvador suggest a steady shift leftward, with the mean dropping monotonically from 6.89 in 2004 to 5.22 in 2010. In Nicaragua, a leftward move occurred between 2004 and 2006, followed by a lighter shift back to the Right in 2008. Changes in ideological self-­placement were less pronounced in Costa Rica, and not unidirectional. The 2010 mean in Costa Rica was similar to that for 2002, although the change in the standard deviation indicates wider dispersal around the mean at the end of the decade. Where public support for the Left grew, parties and leaders strongly associated with privatization, deregulation, and liberalization began to face new challenges. The once-­confident and frequently dominant parties of the Right faced the prospect of defeat, and fractures appeared in a façade of unity. Internal cleavages opened, as market fundamentalists battled those more heterodox in their approach. Even right-­wing leaders began to make some adjustments, as we saw in chapter 5’s discussion of ARENA president Tony Saca’s

Electoral Challenges and Transitions 193

gradual disassociation from gold mining investments. This opening invigorated parties on the Left, and they gained traction. Electoral Contests and the Shift to the Left in Latin America Beginning with the election of Hugo Chávez in Venezuela in 1998, Latin American politics shifted leftward. By 2009, almost two-­thirds of the population of the region was governed by a president from the Left side of the spectrum (Levitsky and Roberts 2011, 1). Research on this leftward trend fostered a powerful set of theories and debates. Some analysts hypothesized that the change was just a routine democratic rotation, and they questioned the claims about ideological change in the region. Seligson (2007), for example, pointed out that a shift leftward was not the same as a shift to the Left; he reminded his colleagues that, although the Right might have weakened, most Latin Americans still did not identify with the Left. Murillo, Oliveros, and Vaishnav (2010) argued that the election of leftist candidates might simply reflect an effort to register disappointment with existing leaders rather than a shift in voter ideological preferences. Other analysts, however, have pointed to substantive shifts in public policy preferences and conclude that those voting for leftist parties and candidates also tend to embrace policy positions associated with market resistance. Using cross-­national quantitative studies of public opinion and voter preferences in eighteen Latin American countries, for example, Baker and Greene (2011, 73) find that voters “have given the left a moderate mandate to stall or partially reverse market reforms,” although they conclude that dissatisfaction focuses on privatization policies and not trade openness. In her quantitative study of Left-­Right party voting in eighteen Latin American countries, Stokes (2009) found that leftist party vote share was statistically related to two indicators of “globalization” (capital market openness, and reduced government spending) under rightist party governments, thereby linking leftist voting patterns to the presence of market features that increased economic insecurity. Arditi (2008) cautioned left-­turn analysts against an excessive emphasis on electoral outcomes, noting that a shift to the Left can take place with or without an electoral change. The overidentification of leftward transitions with electoral processes, he suggested, may miss critical cultural dimensions of opposition and resistance. In addition, adjustments in the market model may take place even under non-­Left administrations; governments of the Right may advance market regulation or a softening of market policies. When mar-

194  Contesting Trade in Central America

ket dislocations deepen social tensions, expected benefits fail to materialize, or crisis hits, pragmatic adjustments may be adopted even in the absence of Left-­oriented electoral change. Beyond the challenge of determining what an electoral shift does and does not mean, scholars face the problem of understanding the considerable variation within the Left camp. Castañeda (2006), paralleling mainstream media discourse, divides the Latin American Left governments into a moderate “Right Left” and an undesirable radical variant. This polarized model is frequently rendered in terms of a “populist” versus a “social democratic” divide (Lustig 2009). Subsequent analysts have questioned the accuracy of the populist label, since historical populists were as often on the Right as on the Left (Beasley-­Murray, Cameron, and Hershberg 2010), and of the social democratic label, since this European-­derived reference centered on organized labor power, which registers more faintly in Latin America (French 2010). Weyland, Madrid, and Hunter (2010) adopt the rubric of “moderate” versus “contestatory” to differentiate between the gradualist, institutionalized Left model found in Chile and Brazil and the radical, “refoundational” variant in Venezuela and Bolivia. Levitsky and Roberts (2011), on the other hand, question the accuracy of the bipolar vision, dividing the populist camp into three subgroups that vary in terms of their main organizational mechanisms. The dualistic model is also challenged by Beasley-­Murray, Cameron, and Hershberg (2010), who label it “tendentious” (9) and, in the end, reminiscent of the “good” and “bad” formulation with which Castañeda began. My analysis distinguishes between the populist Left and the incrementalist Left as I analyze countermovements that unfolded in Nicaragua following the 2007 return to power of FSLN leader Daniel Ortega and with the 2009 election of FMLN candidate Mauricio Funes in El Salvador. I deploy the populist label in Nicaragua in spite of the analytical difficulties, because of this concept’s long association with centralized and personalistic political power, dependence on mobilizational and deinstitutionalizing authority structures, and the frequently nationalistic and redistributive discourse that animates it. I differentiate this variant from the incrementalist Left, found in El Salvador, in which the leadership is more deeply bound by internal and external constraints, builds on pre-­established protocols rather than introducing sharp policy innovation, and emphasizes painstaking coalition building. This framework loosely situates these two Central American cases within the broader dualistic model used more generally in discussion of the Left in Latin America. This typological debate has been enriched by scholarly efforts to identify the economic and political characteristics that give rise to variation within

Electoral Challenges and Transitions 195

the Left. Weyland (2009) associates the radicalization of populist or contestatory Left governments with state dependence on commodity rents, as with the Venezuelan government’s dependence on volatile oil revenues. The rentier state thesis is challenged by Flores-­Macías (2010), whose interpretation emphasizes the strength of the party system. In his formulation, strong party systems provide an institutional constraint that deconcentrates power and encourages gradualism and negotiation, whereas party system collapse accelerates deinstitutionalization and allows for power centralization and action intended to transform. Refocusing on root issues, Beasley-­Murray, Cameron, and Hershberg (2010, 13) link “illiberalism” in more radical states to their “deeper social cleavages and inequalities.” Silva’s (2009) study of the rise of radical anti-­neoliberal governments in Venezuela, Bolivia, Ecuador, and Argentina gives greater attention to the role of debilitating crisis and social movement networking. His model hones in on the ability of protest groups to link across disparate sectors and pursue vigorous reform while avoiding the trip wire of violence and armed insurrection (46–53). In addition to these efforts to interpret divergence within the Left, other work tackles the “so what” question. What difference does it make for the development of the country and in the lives of citizens if a government of the Left comes to power? Powerful constraints, both internal, in terms of domestic alliance structures, and external, including the nature of national integration into the global economy, delimit the policy options available to these regimes (Luna 2010). These constraints suggest that the impact of a rising Left on policy may be minimal. Several analysts, however, have found measurable differences in the political, social, and economic outcomes produced by new Left governments as compared to those of their predecessors or contemporaneous governments of the Right, and of one type of Left government as opposed to another. Lustig (2009) finds tentative evidence about positive impacts of Left victories on poverty and inequality, but she raises questions about the sustainability of the Left variant that depends on commodities, such as petroleum, because of price volatility and the resulting financial instability. Weyland, Madrid, and Hunter (2010) denounce what they label the “contestatory” Left, linking it with the erosion of democratic quality due to the concentration of power, even as they note an attendant surge in citizen satisfaction with democracy in these more radical regimes. Reygadas and Filgueira (2010) turn down the normative voice and suggest that most Left governments are hybrid models situated somewhere between the moderate Chilean and the radical Venezuelan poles. Detailing and categorizing the social policies deployed in Left regimes, they note that Latin America’s Left governments commonly use a

196  Contesting Trade in Central America

combination of liberal, radical, and social democratic approaches, generally including all three, though the balance between them varies. Although not well developed, literature on the rise of the electoral Left has also begun to explore the relationship between public opinion, social movement mobilizations, political party organization, and electoral results. Many factors affect the outcome of elections, as the large library of electoral studies attests. Even when economic problems are serious and prolonged, people do not automatically organize around them. And even when people organize for economic change, they do not necessarily channel their energies into the electoral sphere. In fact, some of the social movement activists who opposed economic globalization consciously rejected engagement with formal politics. As we saw in the discussion of resistance variation in chapter 3, these critics often called for a direct, contentious, and participatory politics that was designed to change the social order, rather than routine institutional politics, which they characterized as bureaucratized, professionalized, and sterile (Menser 2009; Smith and Korzeniewicz 2007; Juris 2008, 118–120; della Porta et al. 2006, 199–231).3 Other social movement activists, however, pushed forcefully into the electoral process, viewing it as an arena in which their numbers and intensity gave them potential leverage. The rise of an electoral Left in much of Latin America has invigorated this discussion by improving the political access of some social movement activists. Almeida and Walker’s (2006) comparative study of popular movements in Nicaragua, Costa Rica, and Guatemala concluded that the availability of a strong Left party ally played a critical role in determining social movement success. As Left electoral prospects improved, many resistance activists came to see the state and even political parties as significant, though not exclusive, mechanisms for promoting change. Research on these linkages requires us to examine the intersections between movements, parties, elections, and public policy in the region, a heretofore underexamined juncture (J. Smith 2008, 231–242; Roberts 2008; Silva 2009, 268–271). Electoral Change in Central America The following section explores the ways in which dissatisfaction with the results of neoliberal restructuring unfolded into political alliances and intersected with electoral campaigns in Nicaragua, El Salvador, and Costa Rica. Shifting perspectives realigned party systems and fueled the construction of

Electoral Challenges and Transitions 197

new broad-­based coalitions, contributing to policy and leadership changes at the decade’s end (see appendix B). Electoral Transition in Nicaragua Neoliberal reform advanced over a sixteen-­year period in Nicaragua, leading to deep economic restructuring and growth, as we saw in chapter 1. Nicaragua’s average annual GDP growth rate for 1990–2008 was a modest 3.2%, equal to the Latin American average for this period (Bárcena and Prado 2010, 53). The high poverty rates that followed the 1980s decade of revolution and counterrevolution began to decline, and trade and aid flows recovered as the new model stabilized. The national poverty rate fell, albeit very slowly, dropping from 50% in 1993 to 45.8% in 2001; extreme poverty, measured in terms of income needed to meet minimum caloric needs, fell likewise, from 19.4% in 1993 to 15.1% in 2001 (INIDE 2007, 11). Progress halted, however, during the Bolaños administration (2002–2007). Early gains proved hard to sustain as the country was hit with the coffee price crisis and natural disaster. Emphasizing fiscal balance in order to secure heavily indebted poor country (HIPC) debt relief and a growth strategy that privileged market forces, the Bolaños government saw progress erode on the poverty front. Instead of marking a painfully slow but steady decline, the poverty rate rose to 48.3% in 2005 while extreme poverty increased to 17.2%.4 The Gini coefficient also registered evidence of increasing inequality between 2001 and 2005 (Lustig 2009, 21).5 The sharp drop-­off in public support for the market model in Nicaragua between 2002 and 2007, as described in chart 6.1, occurred during this period. The principal political alternative to neoliberal reform was represented by the FSLN.6 Although its transformative vision had waned even during the final years of the Sandinista Revolution, the party remained the politically dominant repository of resistance discourse and learning. Evidence of opportunism and the presence of prominent Sandinistas in the business sector cast its leftist credentials into question, but the party’s history, platform, and symbols, combined with former president Daniel Ortega’s sometimes fiery discourse, honed its public image as a critic of “savage capitalism” and “the empire” (Ortega 2005; “Daniel Ortega promete” 2006). Ortega had increasingly taken over the FSLN, using purges and pressure to excise internal opposition (Martí i Puig 2010). Opposition to the FSLN program and to Ortega’s leadership kept him out of the presidency for three consecutive elections (1990, 1996, 2001), although the party maintained a

198  Contesting Trade in Central America

strong presence in the legislature, at the municipal level, and, as a product of Ortega’s pact with Alemán, in other state institutions, including the courts. The other parties held on to the presidency and legislative majorities by mobilizing a united front behind a single anti-­FSLN candidate. This anti-­Sandinista coalition ruptured following the corruption conviction of Alemán, as we saw in chapter 4. In 2006, opposition to the FSLN ceased to function as the central pivot in Nicaraguan politics, in contrast to the three previous presidential races. The Liberal camp now divided between two rival candidates: José Rizo, heading the PLC ticket and firmly backed by Alemán, and Eduardo Montealegre, a former banker and minister of finance who created the Nicaraguan Liberal Alliance (ALN) to carry his campaign. Fear of an FSLN victory became less compelling to its rivals than antagonism toward the opposing liberal group. In spite of a strong appeal for reunification by U.S. ambassador Paul Triveli (Hanson 2006), each faction ran its own candidate, hoping to draw close enough to Ortega in an inconclusive first round to force a second-­round election that they might win, or, in the event of an Ortega victory, to have at least denied their liberal rival the crown. Although the PLC-­ALN rivalry is commonly portrayed as simple power competition, political style and substance were also on the block. Montealegre’s trajectory and elite associations made him a reliable proponent of continuing market reform; Alemán, in contrast, was at best unreliable on this issue, as evidenced by his administration’s absence of financial transparency, weak fiscal accountability, periodic clashes with the IMF, and the PLC’s subsequent foot-­dragging on CAFTA ratification and the legal reforms required for CAFTA implementation. The 2006 PLC campaign proclaimed a commitment to “social liberalism,” an amorphous concept designed to suggest increased attention to the previously neglected social consequences of reform. Although LAPOP data indicate that PLC supporters tended to hail from the Right end of the spectrum, an ideological pulse in the Alemán (officially, Rizo) camp was difficult to identify. Ortega won the 2006 election under rules that allowed a first-­place candidate with more than 35% of the vote and at least a 5-­percentage-­point lead to gain the office, terms that emerged from the Ortega-­Alemán pact. With 38% of the vote and an almost 10% lead over next-­ranked Montealegre, Ortega was reelected with a smaller percentage of the vote than he had secured in his 1990 and 2001 defeats.7 The FSLN had not succeeded in broadening its base, in spite of overtures to the church hierarchy and the former Contra leadership.8 Ortega had, however, retained the support of the country’s best-­organized political party and of voters on the Left. According to 2010 LAPOP survey data, 86% of the vote of those who identified with

Electoral Challenges and Transitions 199

the far Left (self-­placement of 1 on a 1–10 Left–Right ideological scale) went to Ortega.9 Overall, the 2010 mean ideological self-­placement of proclaimed Ortega voters was 4.7 versus 6.9 for Montealegre and 7.3 for Rizo (Booth and Seligson 2010, 136). With the campaign slogan borrowed from the “Internationale,” “Arriba los pobres del mundo” (loosely, Arise, poor of the world), Ortega presented himself as the defender of the impoverished and the best alternative to unstaunched neoliberalism. Electoral Transition in El Salvador In the Salvadoran case, weakening economic performance combined with slow erosion of support for government policies to undermine ARENA’s electoral base. Real GDP growth in El Salvador had fallen off during ARENA’s second decade in office, and the economy had become heavily dependent on remittances, which equaled 17% of GDP in 2008 (World Bank 2009, 3). The average annual real GDP growth rate, which reached 4.6% in 1991–2000, declined to 3.0% in 2001–2007 (UNCTAD 2010, ix). Although growth picked up in 2007, with the GDP rising by 4.7% (World Bank 2009, 7), the poverty rate reversed its prior descent and began to climb, pushed up by rising fuel and food prices. According to the World Bank (2), the poverty rate had declined from 43.6% in 2001 to an historic low of 35% in 2006 before a U-­turn to 42.3% in 2008 wiped out almost a decade of improvement on that front. The downturn in the U.S. economy in 2008–2009 exacerbated the problem of slowing and uneven growth in El Salvador. Public support for a market economy trended downward in El Salvador, even before the United States recession induced losses at the end of the decade. Although public opinion data can be volatile and should be approached with caution, the annual Latinobarómetro poll indicated a falloff in support for a market-­oriented economy in El Salvador between 1998 and 2000, during the protests against health care privatization, when agreement that a “market economy is best” dropped from 78% to 57% (see chart 6.1).10 This falloff continued through 2007. The percentage of respondents who agreed with the statement, “A market economy is the only system through which to become a developed country,” declined from 56% in 2003 to 47% in 2007 (Latinobarómetro 2009, 93). As the decade advanced, CAFTA also lost much of its appeal, as least as a policy that would bring poverty relief (see table 6.3). Whereas 43.1% of Salvadoran respondents thought free trade agreements would help combat poverty in 2003, when CAFTA was being negotiated, this response dropped to 36.8% in 2004, the year the agreement was signed. By that time, 37.9% of

200  Contesting Trade in Central America

Table 6.3. Public opinion on free trade agreements, El Salvador % agreeing with statement Statement

2003

2004

2005*

2006*

2007*

FTAs help combat poverty FTAs generate more poverty FTAs do not affect poverty Don’t know, no response

43.1 28.3 18.5 10.2

36.8 37.9 22.3  2.9

28.6 42.8 25.4  3.2

24.5 49.6 22.8  3.1

22.0 49.6 26.8  1.6

Source: IUDOP (2003, 31; 2004, 28; 2005, 33; 2006, 31; 2008, 30). *Surveys in 2005–2007 referred specifically to CAFTA.

respondents thought FTAs generated, rather than combated, poverty. After the CAFTA promotion campaign ended, support levels declined further. Almost half of the respondents felt that CAFTA would have a negative impact on poverty in 2006 and 2007, up from 42.8% in 2005. By 2007, less than a quarter (22%) of the respondents thought CAFTA would help combat poverty, whereas more than twice as many (49.6%) thought the agreement would make it worse. In spite of these signs of shifting public opinion, El Salvador bucked the regional leftward trend for several years with continuous ARENA victories at the presidential level, in part through well-­worked fears about “communism” and concerns about the hostility a Left victory would inspire in the United States (Wolf 2009). By 2008, however, these fears had dissipated.11 As Azpuru’s (2010) study of ideology and presidential elections in El Salvador from 1994 to 2009 demonstrates, mean ideological self-­placement had also shifted leftward. From its rightward peak of 6.89 in 2004 (on a 10-­point Left-­Right scale), mean ideological self-­placement dropped to 5.3 in 2008 (124). By 2008, El Salvador’s mean ideology score was one of Latin America’s lowest (furthest to the Left, albeit with marked polarization), along with Uruguay (5.09), Bolivia (5.17), Venezuela (5.25), and Ecuador (5.37) (123). Still, most Salvadorans did not define themselves as leftists, nor were they affiliated with the FMLN. Victory in the 2009 presidential election depended on Mauricio Funes’ ability to mobilize votes beyond the ideological Left and the FMLN base. As a popular TV journalist and frequent critic of the ARENA government, Funes was selected to carry the banner over established FMLN leaders in order to build those broader connections. External links were forged through the Amigos de Mauricio coalition, which included

Electoral Challenges and Transitions 201

wealthy businesspeople who defected to Funes’ campaign from the ARENA camp (Arauz 2008; “La proyección política” 2009). While members of this group provided critical funding, particularly in the final stretch, and helped reassure backers who feared radical change, elite support alone could not deliver a victory. A winning electoral coalition required a mobilized base to bring the campaign message to the voters far outside elite circles. Outspent by ARENA by more than two to one,12 the Funes campaign depended heavily on a volunteer base of activists to mobilize support and get out the vote. Through shared participation in mass mobilizations and protests, FMLN leaders had worked closely with multisectoral social movement coalitions in resistance to various neoliberal reforms, as seen in the struggle against health care privatization. During the intense ten-­month antiprivatization battle in 2002–2003, FMLN mayors and deputies participated actively in protests and demonstrations; the party’s 85,000–95,000 members were encouraged to join the mass mobilizations that, at their peak, drew over 200,000 (Almeida 2008, 201–202). In the years that followed, the FMLN legislative delegation supported the call of CAFTA opponents to reject ratification, and they collaborated with social organizations during the 2006–2007 campaigns against water privatization and in support of a ban on metals mining. Some leaders of these organizations and coalitions had signed agreements with the FMLN pledging collaboration during previous local and national election campaigns (Almeida 2010). As the 2009 election campaign geared up, the resistance networks that had mounted campaigns against privatization and mining and in favor of labor and environmental rights joined with the Concertación por el Cambio coalition to support Funes’ election (Almeida 2009, 2010; Menjívar 2010). Some resistance organizations were heavily populated by FMLN militants.13 Many activists, however, regarded themselves as independent or more casually linked by virtue of a common adversary (ARENA) and shared aspirations (social protections, economic solidarity, consultative government). Their mobilization allowed the campaign to reach beyond core party activists and secure support from the critical wavering, disenchanted, and undecided voters. Expanding on collaboration networks, the Funes campaign used the “Caravan of Hope” theme, traveling each weekend to different municipios and working closely with popular radio stations to organize nationally and disseminate its message (Almeida 2010). Although the race tightened in the final lap, Funes received 51.3% of the total vote to Ávila’s 48.7%, and El Salvador joined Latin America’s leftward shift.

202  Contesting Trade in Central America

Electoral Nontransition in Costa Rica Unlike Nicaragua and El Salvador, Costa Rica did not register an electoral victory of the Left. The anti-­CAFTA camp lost the presidency by a slim margin in 2006, when PLN candidate Oscar Arias was returned to office, and vice president Laura Chinchilla followed him into the post in 2010. Resisters were also defeated in the 2007 CAFTA referendum, albeit narrowly. The Costa Rican case allows us to raise two new questions. First, how did a CAFTA resistance movement develop electoral momentum so quickly in a relatively conservative country with no strong party of the Left? And second, are leftist governments the only ones capable of adjusting the market model, or can governments of the Right also attenuate neoliberal policy if citizen pressure for social inclusion and market regulation is strong? In contrast with other cases in which economic growth was slow or volatile following neoliberal transition, economic growth in Costa Rica was robust. With an average annual GDP growth rate of 5% between 1990 and 2008, Costa Rica was one of the region’s star performers (Bárcena and Prado 2010, 53). The average annual per capita growth of 2.8% between 1989 and 1994 helped bring the poverty rate down. According to official poverty statistics, this rate declined from 31.7% in 1989 to 22.9% five years later (World Bank 2007, xi).14 By regional standards, Costa Rica’s social and economic problems were modest, as the large-­scale migration from Nicaragua attested. Over the next ten years, however, poverty levels stagnated, in spite of continued economic growth. Almost a quarter (23.9%) of the Costa Rican population still lived below the national poverty line in 2004 (World Bank 2007, xi), fostering renewed concern about the development strategy. This issue was exacerbated by evidence of continued rapid income growth at the top. Between 1994 and 2004, the percentage of increase in per capita household income for the richest quartile was more than three times that for the poorest quartile (xviii). Costa Rica’s historically low Gini coefficient, which, along with that of Uruguay, reflected the lowest levels of inequality in Latin America, had begun to climb, rising from .44 in 1989 to .48 in 2004 (xi). As evidence of inequality mounted, this issue became a source of social and political tension, as did the persistent poverty of a substantial sector of the population (PEN 2004; Sojo 2010). In spite of the perception of Costa Rica’s social welfare system as comprehensive and universal, the poor lagged behind the nonpoor in access to health insurance and educational attainment.15 Persistent development gaps in a country where constructs of solidarity and equality shaped national identity raised cultural and political challenges that reached into the electoral arena.

Electoral Challenges and Transitions 203

Unlike the Nicaraguan and Salvadoran cases, where CAFTA had been approved prior to the next presidential contest, delays and gridlock in Costa Rica placed the issue into the middle of the 2006 presidential election, as we saw in chapter 4. The PLN candidate, Oscar Arias, had pushed hard for structural reforms leading to increased trade and foreign investment during his previous presidential term (1986–1990). Now returning as a candidate, he served as a prominent CAFTA advocate in both Costa Rica and Washington. The decline of the PUSC, the PLN’s traditional rival, left Arias as the principal standard-­bearer for continued market reform and the CAFTA-­mandated opening of state enterprises. PAC presidential candidate Ottón Solís, Arias’ former PLN minister of planning, took up the banner of CAFTA opposition. CAFTA, he claimed, offered no solution to Costa Rica’s real problems of persistent poverty and lagging social development (Solís 2005). The agreement would, in fact, exacerbate these issues by forcing local producers into competition with subsidized agricultural exports from the United States. In addition, CAFTA undermined the state’s development capacity by opening the state’s autonomous agencies to privatization and called the quality of Costa Rican institutions into question by imposing external dispute arbitration. As Solís increasingly became the spokesperson for the anti-­CAFTA cause, relations between him and the heterogeneous resistance movement tightened, and Solís’ campaign gained momentum. Because CAFTA became the dominant issue in the 2006 election, the narrow split in the presidential vote (40.9% for Arias to 39.8% for Solís) demonstrated the national divide on this front. These results were remarkable in two ways. First, public opinion data in Costa Rica generally indicated that its citizens were more politically conservative than those of Nicaragua and El Salvador. As table 6.1 demonstrates, 45.8% of LAPOP respondents in Costa Rica classified themselves on the Combined Right in 2008, whereas only 14.9% placed themselves on the Combined Left. Even in 2006, when Costa Rica registered a slight leftward shift from 2002, average ideological self-­placement was 5.9 on a 10-­point scale, compared to 5.74 in El Salvador and 5.26 in Nicaragua (see table 6.2). To the extent that self-­classification reveals preferences about state roles and trade liberalization, Costa Rica was less primed for CAFTA resistance than its neighbors to the north. Second, absent the recent history of struggle that gave rise to postrevolutionary political parties in Nicaragua and El Salvador, Costa Rica also lacked an established party base from which a left-­wing electoral challenge could be launched. The rightward migration of the PLN had left a void in the Costa Rican party system. Early leadership in the neoliberal resistance came from

204  Contesting Trade in Central America

a heterogeneous social movement, as in the Combo del ICE mobilization, rather than from a political party. And yet, almost 40% of the electorate departed from traditional parties and voted for PAC when the central issue concerned CAFTA ratification. These results suggest that concern about CAFTA, and the “visión de país” (vision of the country) it represented, extended beyond the small self-­ identified Left and reached into moderate political circles.16 Even conservative voters might be drawn into opposition if market reforms threatened a treasured national identity. Although not strong enough to win the day, these concerns drew together a broad coalition of Costa Rican voters who raised serious questions about the direction of market reform in this country. Conclusions As Goldstone (2003) notes in his collection on states, parties, and social movements, the boundary between movement politics and formal institutional politics is “fuzzy and permeable” (2). Arguing that “both democratization and social movements built on the same basic principle, that ordinary people are politically worthy of consultation” (8), he finds these forms of participation to be complementary, and the transitions between them to be frequent and rapid. This chapter demonstrates how public dissatisfaction with market reform in Central America, which was expressed repeatedly in social mobilizations, spilled over into the electoral arena. The development of civil society organizations and movements that pressed for expanded human rights, including social and economic rights, drew participants into political contests, where policy priorities and leadership could be affected by the vote. Although some proponents of contentious politics rejected engagement with the state, the transfer of activism into the formal sphere managed by parties and elections became routine in Central America as political opportunities opened and resistance mounted. The nature of the intersection between formal and informal politics depends on local conditions, and electoral consequences are quite varied. In each of these cases, the noninstitutional politics of social movements energized the party politics of campaigns and elections, helping construct a new political dynamic. In Nicaragua, where resistance activism tended to be dominated by the FSLN, partisan mobilization combined with a rupture on the Right to allow the FSLN to win, largely by tapping its base. This victory was secured with only minimal coalition support from independent social net-

Electoral Challenges and Transitions 205

works and with few inroads into the opposition. Ortega’s return to the presidency in 2007 provided him with greater access to institutional and symbolic resources, allowing him to build a broader constituency as he moved toward his 2011 reelection. In El Salvador, a vibrant network of social movements and civil society organizations, which organized independently of but often worked in tandem with the FMLN, provided critical support for the party’s candidate in 2009. Building well beyond the party base, this alliance brought about an important transition, as formal power crossed party lines with the defeat of ARENA and the political rise of Mauricio Funes. In Costa Rica, a heterogeneous social movement arose as well, animated by opposition to the privatization mandate embedded in CAFTA and by growing questions about the social consequences of the market model. Unlike the other cases, where a strong party of the Left provided the gateway into electoral politics, in Costa Rica the movement did not have a major, well-­established party ally. Without a party base or a sizable population with a leftist identity, market-­resistance forces fell short. Seizing electoral opportunities as they opened, this broad, multisectoral movement made common cause with the emerging PAC and aligned with the Solís campaign in 2006. Although unable to defeat the dominant PLN, narrow vote margins in 2006 and in the 2007 CAFTA referendum sent a sobering political message to the victor. How would these electoral outcomes play out in terms of the incoming governments’ economic policies and priorities? Public endorsement of ongoing marketization had been called into question, and parties and candidates most closely associated with neoliberal reform had lost their grip on power or nearly done so. What would follow, however, remained unclear. Chapter 7 turns to that topic.

Chapter 7

Post-­Neoliberalism and Alternative Approaches to Change

Victorian England and the Prussia of Bismarck were poles apart, and both were very much unlike the France of the Third Republic or the Empire of the Hapsburgs. Yet each of them passed through a period of free trade and laissez faire, followed by a period of anti-­liberal legislation in regard to public health, factory conditions, municipal trading, social insurance, shipping subsidies, public utilities, trade associations, and so on. Polanyi (2001 [1944])

As market reform creates displacement, disenchantment, and doubt, it builds tension and pressure for change. In different ways, post-­neoliberal regimes begin to tip away from further market liberalization and move toward the goal of market regulation, attenuating damages, providing transition assistance, introducing safeguards, and protecting the population from market excesses. These “countermovement” processes share the goal of regulating and constraining market forces, but they unfold in different ways in different contexts. Adjustment may follow a crisis, in which the reigning model falls from grace, or develop more gradually as change is negotiated by a variety of stakeholders. It may be authored from above, as elites look for ways to reduce instability and preempt popular challenge, or advanced from below by movement participants who act defensively and seek self-­protection. Through diverse processes, market heterodoxy becomes generalized, with distinct “anti-­liberal” variations defining new directions. Polanyi’s (2001 [1944]) work gives special attention to the intersection of marketization and democracy, two forces that he understood to be in opposition. In his framework, the nineteenth- and twentieth-­century rise of democracy allowed heterogeneous, multiclass coalitions to advocate for pragmatic policy innovations in order to reduce the costs associated with market ascen-

Post-­Neoliberalism and Alternative Approaches 207

dance. As an alternative to “disembedded” markets, which prioritized profit maximization over human connection, community, and environmental sustainability, Polanyi endorsed a distinctive version of democratic socialism. His vision called for new forms of locally controlled market regulation and the decommodification of survival goods as “essentials are removed from the jurisdiction of the market” (260). This model called for deference to the dynamics of the natural world and increased space for collectivism, all within a democratic political order that affirmed the right to nonconformity and expanded the list of citizen guarantees (259–267). Actual outcomes of democratic countermovements respond to particular alliances and configurations of resources, and they tend to be partial, varied, and hybridic. As we have explored the processes of market movements and countermovements in the contemporary Central American context, we have seen different varieties of resistance and electoral mobilizations emerge. Even in this small region, the outcomes of these processes are hardly identical. Economic resources and needs, the structure of domestic political coalitions and electoral processes, and international alliances varied by country; the consequences in terms of post-­neoliberal adjustments reflect that variation. What will develop in the wake of two decades of market reform throughout Latin America is difficult to predict and almost certainly will be different from what new regime leaders have projected. As Luna (2010) argues, both endogenous and exogenous factors limit the kinds of innovations that can be introduced by Latin America’s new Left. For Central American countries, endogenous constraints emerge from the fragility of the leftist coalitions and the absence of a well-­established national consensus in favor of market regulation. Exogenous constraints are shaped by the long history of multilayered dependence on foreign investment, trade, remittances, and aid, and the continuing influence of externally rooted epistemic communities. These realities limit how far the countries can depart from the neoliberal formula without painful dislocations. Although all three of the countries featured in this study saw shifts away from market fundamentalism, space for reform was restricted, suggesting the continued usefulness of path-­dependent analysis (Luna 2010; Mahoney 2001), even in the face of electoral change. In spite of internally and externally imposed constraints, the new governments that emerged out of these heightened electoral contests were hardly identical to their predecessors. This chapter identifies three approaches to post-­neoliberalism that emerged in the region. The 2006 election of Sandinista leader Daniel Ortega in Nicaragua brought to power a populist Left variant increasingly aligned with the Chávez regime. As a major recipient of Venezuelan aid, the Ortega regime designed new social programs and lined

208  Contesting Trade in Central America

up domestic support from disparate allies, winning reelection in 2011 with growing popular support. El Salvador produced a moderate, incrementalist version of post-­ neoliberalism under the Funes-­FMLN alliance. Coming to power in the midst of economic crisis, Funes nonetheless expanded social services in El Salvador, launched a countercyclical program to contain recessionary economic damage, and envisioned a greater role for the state in economic development. Costa Rica, in contrast, pursued a heterodox Right variant of economic adjustment. Oscar Arias, whose 2006 election represented continuity rather than change, pushed ahead with the CAFTA-­mandated opening of the telecommunications sector and vision of deepening global integration. At the same time, he increased social spending and worked to stem rising inequality, proving a nimble Keynesian in the face of economic crisis. Following a distinct variant of double movement dynamics, not only the leftist governments but even the one tilting to the right moved to make pragmatic adjustments in the market model. The following case studies briefly describe adaptations associated with post-­neoliberal reform in these three cases. Each case allows us to examine three themes: (1) modifications in the form of public participation and political institutions that organized citizen engagement; (2) changes in the government’s interpretation of the state’s economic roles and responsibilities; and (3) the development of new social services and antipoverty initiatives required to address the legacy of neoliberal exclusion. Taking Reygadas and Filgueira’s (2010) point about the hybridity of reform in the region, we note that each case involved multiple processes, some of them contradictory, and that differences in outcomes emerged from the balance among these elements, not the presence or absence of a single feature. In concluding, this chapter re-­engages the larger discussion of post-­neoliberal reform in Latin American. Post-­Neoliberalism in Nicaragua: Populist Left Transitions This study identifies the second Ortega government as a populist Left regime with hybrid economic features. Ortega’s self-­proclaimed “second stage of the Sandinista revolution” combined several characteristics found in the government of Venezuelan president Hugo Chávez. Key features included the centralization of power, use of radical discourse and clientelistic distribution mechanisms, and a coalition strategy that linked urban and rural marginals and elements of the domestic business class. Under Ortega, the govern-

Post-­Neoliberalism and Alternative Approaches 209

ment capitalized the productive activities of small urban and rural producers through microcredit and livestock transfers, expanded basic health and education services, and raised the wages of government workers, even as it remained under close IMF supervision. Comparative-­left-­turn analysts generally associate the 2007–2012 government of Daniel Ortega, now returned to power in Nicaragua after a sixteen-­year hiatus, with the “populist” (Luna 2010, 25; Lustig 2009) or the “contestatory” Left (Madrid, Hunter, and Weyland 2010, 167–171), along with Hugo Chávez in Venezuela, Evo Morales in Bolivia, and Rafael Correa in Ecuador. Ortega’s second government, however, was clearly a step removed from the “refoundational” Left cluster. Several characteristics separate this regime from the radical end of the spectrum and complicate the populist classification. Unlike other regimes in this category, the Ortega regime was characterized by its slower uptake and the greater continuity of its institutional framework. President Ortega’s postrevolutionary electoral base was initially much smaller than those found in Latin America’s more radical democracies, and his voter support built more slowly. Although the FSLN had enjoyed broad popular support in the early 1980s, it secured only a plurality vote (38%) in 2006, far short of the sweeping majorities won by contestatory counterparts. Only after five years of distributive politics did Ortega’s voter base build, reaching 62.5% of the electorate in 2011, a level similar to that registered in his 1984 victory and to those of the region’s twenty-­first-­century refoundational leaders. In addition to this slower mobilization, Ortega’s return to power took place via an established political party and was not accompanied by a constitutional rewrite. In spite of some early gestures in the direction of constitutional change (Chamorro, Jarquín, and Bendaña 2009), Ortega’s modest base did not allow the FSLN to redefine the country or its institutional structure, although several institutions were weakened in practice. Also, Ortega did not attempt the redistributive interventions and transgressive economics (nationalizations, price controls, land reform, debt default) pursued by his more radical counterparts. These actions had all been defining characteristics of the Sandinista Revolution twenty years previously, when the government had taken over the extensive properties of the ousted Somoza family, the banking system, the marketing of exports, and the distribution of basic foods (Spalding 1987; Martínez Cuenca 1990). In this sense, some economic policies of the Sandinista Revolution may have been two decades “ahead” of those adopted by the radical Left regimes in South America. By the time Ortega returned to power in 2007, Nicaragua’s postrevolutionary populism was shorn of refoundational and redistributive elements, in

210  Contesting Trade in Central America

part because these had been previously deployed, often with negative results. Ortega’s resuscitated populism, now with fewer economic illusions, pursued a more modest agenda. In their analysis of the Left in Latin America, Levitsky and Roberts (2011, 13–16) argue that the populist label is too broad, given the substantial internal variation in the populist camp. They differentiate between “populist left” regimes, which emphasize movement politics, as under Hugo Chávez in Venezuela and Rafael Correa in Ecuador, and “populist machine” politics, as under the Ortega government in Nicaragua and Kirchner-­managed Peronism in Argentina. This approach emphasizes Ortega’s deployment of a top-­down, party-­based machine, which allowed him to tack left or right, depending on contingencies and strategic calculations. The existence of an organized political machine gave the leadership a captive base on which to build. Unlike other populists, whose support depended on their ability to distribute symbolic and material resources, Left machine populists enjoyed an element of autonomy that allowed them to combine radical discourse with business-­friendly behaviors. Eager to avoid investment losses, economic officials in the Ortega government emphasized their support for domestic and foreign investors (AMCHAM, MIFIC, PRO­‑ NICARAGUA 2010). In spite of Ortega’s (2005) denunciations of CAFTA, the U.S. State Department (2010) found that his administration “stayed current” on CAFTA requirements and enjoyed disproportionate benefits from the agreement. The Ortega government negotiated a three-­year Extended Credit Facility from the IMF in 2007, accepted the close supervision this entailed, and generally met the IMF performance requirements (IMF 2010c). High-­ranking FSLN government officials established monthly meetings with COSEP leaders to consult on business interests and promote investment. The business wing of the FSLN, which had developed both party and personal assets during the sixteen-­year period of market reform, was sometimes credited with (or blamed for) the party’s deradicalization. This cooperation with market institutions has prompted questions about whether the Ortega government actually represented an alternative to the neoliberal order. Martí i Puig (2010) documented FSLN efforts to undermine the independent Left and build an alliance with the Right and detailed the centralization of power in Ortega’s hands, leading to top-­down control and organizational malleability. Departing from its origins as a cadre party of the Left, the FSLN was now found to have “elements of a professional electoral or catch-­all party” (95). Alejandro Bendaña (2009) claimed that the shift in Nicaragua under Ortega was to the right, not the left, and that many policies were indistinguishable from those of his predecessors.

Post-­Neoliberalism and Alternative Approaches 211

In an article subtitled “The Sandinista Revolution Betrayed,” Roger Burbach (2009) drew attention to the Ortega government’s conflicts with the MRS, an opposition party led by respected former FSLN luminaries who had broken with or been expelled from the party, and to the new alliances with former Contra and Catholic Church leaders. Focusing on Ortega’s work to deny legal stature to abortions performed to save the mother’s life, Karen Kampwirth (2008) concluded that his government “may be a left-­wing project drained of principle,” which could alternately be described as either flexible or cynical (34). Debate about how to interpret Ortega ideologically led country specialists to give him an average rating of 8.55 on a 20-­point Left-­Right scale, only modestly to the left of the center point. Based on these expert scores, Wiesehomeier (2010, 6) labeled Ortega the “most moderate representative of the left-­wing leaders.” Although Ortega’s second era disappointed critics who expected a display of revolutionary principles (and relieved those fearful of a revolutionary redux), it did, in fact, introduce a shift in the line of march. With unchallenged control over the FSLN, a residual power-­sharing pact with former president Arnoldo Alemán, and increased financial support from new external allies, Ortega departed from the programmed market plan by layering in a second set of post-­neoliberal reforms. This study focuses on the three dimensions of change: political processes to reshape participation and challenge institutional constraints; actions to expand state economic roles and shape further marketization processes; and state interventions to expand basic social services and address the legacy of poverty. Political Change Under the slogan “The People Are President” (El Pueblo Presidente), Ortega touted the virtues of direct democracy. A new network of base organizations, the Citizen Power Councils (CPCs), was created by presidential decree in 2007, and First Lady Rosario Murillo, named the coordinator of the Communication and Citizenship Council, provided CPC leadership. In theory, these councils served to facilitate expression of popular preferences and allow citizens to play a direct role in decisions about budgetary allocations and service distribution. However, these FSLN-­aligned community groups paralleled and competed with previously established citizen consultation processes, prompting charges that the Ortega government was undermining established institutions, replacing them with partisan groups (Envío Team 2012). Although mass participation in the CPCs was modest and strongly tilted toward FSLN sympathizers,1 the portion of citizens who reported involve-

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ment increased over time. Whereas 5.2% of respondents in the LAPOP survey reported participating in a CPC in 2008, this percentage had increased to 10.2% in 2010 (Booth and Seligson 2010, 126) and to over 16% in 2012 (Booth, Smith, and Seligson 2012). Critics alleged that CPC participation was driven by clientelistic expectations, and that the increasing CPC role in determining the distribution of government services undermined citizens’ rights and independent organizing (Chamorro 2009). Madrid, Hunter, and Weyland (2010, 141) claim that the most significant change introduced by Latin America’s contestatory Left was a weakening of democratic institutions. Although some forms of participation were strengthened, several developments in Nicaragua during the second Ortega administration reflected and contributed to institutional fragility. Vulnerable institutions included the electoral apparatus, the court system, and other institutions designed to enhance horizontal accountability. Electoral fraud in the 2008 municipal elections, especially in Managua, triggered deepening concern about the accuracy of the vote count, leading to a reduction in U.S. and European aid. The 2009 decision of the Constitutional Chamber of the Supreme Court allowing Ortega to run for reelection, in spite of an explicit constitutional ban on consecutive terms and on serving more than two terms in total, undermined both the Constitution and the credibility of the court (Pérez-­Baltodano 2010; EU 2012; Carter Center 2011). The Ortega administration also used discarded rules designed for the transitory period of constitutional reform to keep officials in office past the completion of their terms when, as regularly happened in Nicaragua, a divided legislature was unable to agree on a replacement. This mechanism allowed several mid-­level Sandinista leaders to retain putatively rotating positions indefinitely. Institutional problems, along with evidence of media bias and the inability of election monitors to conduct an effective international observation led the European Union Election Observation Mission (2012, 3) to conclude that the 2011 election “constituted a deterioration in the democratic quality of Nicaraguan electoral processes.” Market Reform Ortega’s fiery discourse against “savage capitalism” and the U.S. “empire,” while suggesting a radicalism that was little evident, did fuel several policy adjustments. The government’s development agenda was summarized in its National Human Development Plan (NHDP, PNDH in Spanish), presented publicly in April 2008. Revised twice over the next eighteen months as the global economic crisis hit, the updated document stated that “the main prem-

Post-­Neoliberalism and Alternative Approaches 213

ise behind this plan is that markets are imperfect and that to correct such imperfections the state must intervene through an appropriate regulatory framework. Further, the NHDP is based on the premise that the market can produce socially-­undesirable outcomes in terms of inequality, the correction of which again requires state intervention” (GRUN 2009, 5). Privatization now moved off the agenda and state economic intervention increased. Years after the Sandinista-­era state banks had been eliminated by market reformers, a state development bank, Banco Produzcamos, was reestablished in 2010, albeit as a small, nondepository institution. The government declared a monthly wage bonus for low-­income public sector workers in 2010 and 2011, a benefit which the state budget was inadequate to cover. This decision, which the IMF monitors regarded as “unfortunate” and “regrettable” and which led to a delay in IMF loan disbursement, was eventually financed by an extrabudgetary grant from Venezuela (IMF 2010c, Staff Report, 15, 21).2 Labeled the Bono Cristiano Socialista y Solidario, this bonus provided around a 13% monthly salary boost for 150,000 low-­wage state workers in 2011 and 2012 (BCN 2012, 12; BCN 2013, 11). Increased flexibility in negotiations with some international financial institutions, in spite of episodes of confrontation with others, also facilitated an expansion of the state’s economic role by the end of the decade.3 New state ventures included the acquisition of 16% of the shares in Gas Natural, the Spanish consortium responsible for electricity distribution (“Nicaragua on Board,” 2011). Other power projections fell into the gray zone of quasi-­state enterprises that were legally located in the private sector. These included ALBANISA (ALBA de Nicaragua, SA), the joint venture between PETRONIC (Petróleos de Nicaragua), the state oil firm that managed Nicaraguan petroleum imports, and PDVSA (Petróleos de Venezuela, SA), the Venezuelan state petroleum company, which supplied heavily discounted petroleum to its PETROCARIBE partners. This discount oil plan required only 50% immediate repayment, with the remaining funds released as donations and long-­term loans. ALBANISA managed this rapidly mounting fund, which was divided between donations directed to the Ortega government’s priority social programs and long-­term, low-­interest loans that went to a variety of “socio-­productive” projects. One major loan recipient was ALBA-­CARUNA, a microcredit lender that financed a growing number of co-­ops and businesses. In addition to the petroleum aid, the Venezuelan government also made direct investments in Nicaragua, primarily in the energy sector. Over time, a network of Venezuela-­financed businesses (colloquially labeled “Albitas,” little ALBAs) emerged, some directed by FSLN officials and Ortega family

214  Contesting Trade in Central America

members (Salinas Maldonado 2011; Riley 2010). Although officially designated as private sector activities, these businesses reflected the Ortega administration’s economic activism and efforts to reshape several sectors. As state-­managed “private sector” firms, these activities remained outside the budgetary supervision of the legislature. Addressing Poverty The government launched a series of new social policy initiatives, including the From Martí to Fidel national literacy campaign, which used the Cuban “Yo, Sí Puedo” (Yes, I can) method and deployed 50,000 volunteers. It eliminated unpopular user’s fees for education and health services, increased spending on and recentralized control over public health and education, and expanded the reach and quality of basic services (GRUN 2009, 16). Giving increased attention to low-­income populations and food security, it created the Zero Hunger food production program and the Zero Usury micro-­loan program, both of which targeted new resources to poor women (GRUN 2011; Spalding 2011). The central bank reported that social spending increased from 37% of central government spending in 2002 to 48% in 2008 (BCN 2009, 35), facilitated in part by HIPC debt relief. Official government antipoverty spending, which had averaged 11.7% of GDP during the Enrique Bolaños administration (2002–2006), rose modestly to 13.5% under Ortega (2007–2010) (World Bank 2010, 3; GRUN 2011, 55). The government’s 2011 PNDH progress report found that the poverty rate had declined from 48.3% of the population in 2005 to 42.5% in 2009, with the strongest decline in the rural areas (GRUN 2011, 33–34).4 Reygadas and Filgueira (2010, 176) describe the “equalization strategies” assembled by the Ortega administration as heterogeneous. As with the other Left governments of the region, these policies followed no single development logic. In Reygadas and Filgueira’s analytic scheme, Ortega’s social policy divided into three clusters. The Zero Hunger transfer of livestock, plants, and production inputs was a liberal social policy, similar to the conditional cash transfers (CCTs) and housing or education vouchers used elsewhere in the region. Free health and education were defined as social democratic policies, which focus on universal rights. The use of literacy campaigns, creation of CPCs, and “renationalization” of health and education services were interpreted as radical populist policies, which emphasize state intervention, redistribution, and social mobilization. Although quite far removed from Venezuela’s model of twenty-­first-­century socialism, or even the mixed economy

Post-­Neoliberalism and Alternative Approaches 215

Table 7.1. Venezuelan aid and public investment in Nicaragua, 2007–2011 Amount (million US$) Assistance type

2007

2008

2009

2010

2011

Petroleum-­based assistance Bilateral aid Direct investment Total

70 69 46 185

293  37 131 461

236  60 147 443

337 185  11 533

557   7  45 609

Source: BCN (2010, 17; 2012, 12).

model that the Sandinistas themselves had pioneered twenty years before, these initiatives turned away from the neoliberal emphasis on deregulation, state contraction, privatized service provision, and market-­based approaches that had dominated under previous administrations. This shift was supported by new sources of funding. Nicaragua depended heavily on external funds to cover even basic government activities. Traditionally, aid had been provided by multilateral banks, principally the IDB (BCN 2010, 7). Official foreign aid totaled $1.05 billion in 2008, equal to 16.6% of GDP (World Bank 2010, 10), revealing an important reform constraint. Ortega’s alliance with the Chávez government, formalized in early 2007 when Nicaragua joined the Bolivarian Alternative (subsequently, Bolivarian Alliance for the Peoples of Our America), yielded a significant new source of financial support (see table 7.1). By 2012, Venezuelan cooperation totaled $766 million, representing 57% of all aid received, up from 18% five years before (BCN 2013, 6, 11; BCN 2010, 17, 20). One-­third (33%) of the 2009 assistance was classified as direct investment, which focused on the energy sector, particularly two thermoelectric plants that significantly improved the stability of the electrical supply. Through the 2009 ALBA Solidarity project (classified under bilateral aid), the Chávez government also replaced much of the aid canceled by the United States following the disputed 2008 municipal elections. Much of the Venezuelan aid was classified as petroleum-­based assistance and transferred through the PETROCARIBE agreement described above. The donation portion of that aid supported several of the Ortega government’s priority projects, including the Zero Hunger livestock transfer program, the Streets for the People road paving project, the urban public transportation

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subsidy, sports programs, and projects designed to reduce deforestation by providing energy-­efficient cooking alternatives. The loan portion of petroleum aid provided funding for rural cooperatives, the home-­building and home-­renovation Houses for the People project, Zero Usury micro-­loans, and an upgrade of the urban bus fleet (BCN 2010, 15). Venezuelan largess had an important impact on the Ortega administration’s ability to finance its priority social projects. Added to the official social spending and antipoverty resource transfers allocated through the official government budget, as noted above, this extrabudgetary flow made various new initiatives possible. In addition to these substantial aid transfers, Venezuela and Nicaragua also advanced their own trade-­promotion arrangement, which proved economically important when Nicaragua’s conventional markets contracted in 2008 and 2009. The value of Nicaragua’s exports to Venezuela quintupled between 2007 and 2008 (GRUN 2009, 23), as the economic bonds between these two countries thickened.5 Venezuelan support reduced some of the endogenous and exogenous constraints (budgetary restrictions, aid and trade dependence) that would have circumscribed policy innovation and redistributive change in its absence. Taken together, these changes in political processes, economic activities, social policies, and trade and investment flows suggest that the Ortega government was not simply reproducing the previous administration’s neoliberal patterns but was introducing significant ad hoc adaptations. The Nicaraguan case suggests that a shift toward the populist Left may not be confined to rentier states, as Weyland (2009) has suggested, although access to Venezuelan largess might make Nicaragua a rentier state by proxy. Ortega’s return to power was also not due to party system collapse, as Flores-­Macías (2010) would suggest, although Ortega did benefit from the fracture in the liberal camp, which allowed his 2006 plurality victory. Nor did this shift emerge in response to a broad-­based protest movement that incorporated a wide swath of organized society (Silva 2009). In the absence of the fuller development of these conditions, the changes introduced by the Ortega administration were less extensive than those found in the more radical Left transitions, and the system remained more hybridic, with competing tendencies coexisting in tension with each other.6 Reflecting on the impact on democracy of Ortega’s second administration, Anderson and Dodd (2009) noted that processes of democratization and de-­democratization can proceed simultaneously. According to their assessment, whereas institutional erosion and electoral anomalies may have undermined democratic practices in Nicaragua at the national level, a “vibrant local

Post-­Neoliberalism and Alternative Approaches 217

democracy” (160) continued to emerge at the subnational level, which followed a separate political dynamic and electoral calendar. Citing the Center for Socioeconomic Research and Consulting’s (CINASE) surveys of public opinion conducted after Ortega’s return to power, they found that mayors (overwhelmingly FSLN-­backed) enjoyed positive assessments, and local governments were perceived as more responsive and less partisan and corrupt than the national government (160, 163–164). As with Anderson and Dodd, Booth and Seligson (2010) found a high level of satisfaction with local government services (56%) in the 2010 LAPOP survey data, where Nicaragua ranked fourth in the Americas on this issue, after Colombia, Canada, and Uruguay (155). The Ortega government’s strong verbal emphasis on government responsibility for social welfare resonated with citizen expectations. According to the 2010 LAPOP survey, 85% of Nicaraguan respondents wanted the government to ensure the welfare of the people, a view that cut across party identification and age groups (Booth and Seligson 2010, 180). Nicaraguans initially disapproved of the legal machinations that allowed Ortega to run again in 2011, with 69% of respondents opposed to the court’s decision to accept his candidacy a year before the election (107). However, there were several indications of increasing support for his government over time. In spite of the 2008 electoral tensions and sharp economic contraction in 2009, the percentage of respondents expressing trust in the president increased from 33% in 2008 to 42% in 2010. Booth and Seligson (2010) also found that support for the system, which had fallen to 45% in 2006, had risen to 52% in 2010 (93), and support for democracy, which had fallen to 60% in 2006, had reached 71% in 2010 (107). Presidential approval, which plunged to 32% in 2008 from Ortega’s honeymoon peak of 54% in 2007, rose again to 58% in 2010 (Latinobarómetro 2010, 77).7 Ortega’s sweeping victory in November 2011, with 62.5% of the vote, reflected this widening popular base. Not only was he returned to the presidency for a third term (2012–2017) but the FSLN also captured sixty-­two of the ninety seats in the National Assembly.8 This dual process—weakening democratic institutions combined with indicators of increasing citizen satisfaction—has been observed in other contestatory Left regimes (Weyland, Madrid, and Hunter 2010) and raises challenging questions about what citizens want democratic politics to deliver. Although Ortega’s performance rattled democratic institutionality, his post-­ neoliberal policy adjustments, supported by Venezuelan aid flows, increased his approval levels by the end of his second term and helped secure his continuation as president.

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Post-­Neoliberalism in El Salvador: Incrementalist Left Transitions After twenty years of ARENA orthodoxy in El Salvador, expectations were high that the 2009 election of FMLN candidate Mauricio Funes would bring change. Following Funes’ inauguration, key social ministries were assigned to FMLN leaders, and independent civil society actors long critical of the performance of ARENA governments populated upper-­level offices. As in Nicaragua, the question was how this new Left-­identified government would proceed in terms of deepening democratic inclusion, adjusting the state’s economic roles, and addressing the now worsening problem of poverty. The present study interprets the Funes government as an incrementalist Left regime that has pursued modest, sustainable change within the established institutional order. In contrast to Nicaragua under Ortega, the Funes government in El Salvador rejected ALBA membership and close ties with the Chávez government.9 When Vice President Salvador Sánchez Cerén, a long-­term FMLN leader, indicated that ALBA membership was under study in El Salvador, Funes warned off his FMLN allies, declaring, “the decision of this president is to not join ALBA; I could not be more clear” (“ALBA no” 2009). Instead, Funes followed El Salvador’s traditional strategy of prioritizing the relationship with the United States. He pledged repeatedly during the campaign to adhere to CAFTA, honor sovereign debt obligations, and maintain the controversial policy of dollarization. With perhaps a quarter of the Salvadoran population residing in the United States, many under legally precarious terms, the country’s economic stability had long depended on U.S. support. Heavy reliance on the United States for a combination of remittances, trade, and aid encouraged the cultivation of supportive bonds with Washington, now under a Democratic president who was less entrenched in cold war dynamics. Funes took office in the middle of the 2009 economic crisis, during which the Salvadoran GDP contracted −2.4%, remittances fell −8.5%, exports declined by −17%, and imports plummeted by −26% (IMF 2010b, 5, 9). Inheriting a $1.2 billion budget shortfall in 2009, the new government desperately needed immediate external financial support. In this case, financing came from conventional sources. The World Bank and the IMF were both tapped for large-­scale, urgent funding, and the reform variant introduced by Funes bore the imprint of that relationship. A precautionary standby arrangement with the IMF, approved two months prior to Funes’ election, was now extended for three years, and previous loans of $650 million from the World Bank and the IDB were redirected to meet urgent needs. Like other Left governments, the Funes administration increased resources for poverty relief. In

Post-­Neoliberalism and Alternative Approaches 219

contrast with that of the Ortega administration, social programming under Funes was guided by a poverty map and databases that helped ensure technocratic efficiency and minimize clientelism. Political Change Attempting to reassure a citizenry still scarred by memories of civil war, the Funes government pledged that existing political institutions would be maintained and strengthened. One institutional innovation involved the creation, by presidential decree, of the national Social and Economic Council (CES). This advisory board was set up to promote civil society’s participation in policy discussions, formalize connections to the business community, and facilitate cross sectoral dialogue. As a mechanism for cross sectoral consultation that included civil society, the CES represented the government’s most ambitious effort since the 1992 peace accords. It was not designed as a device to mobilize new sectors of the citizenry or to construct a new form of direct democracy. Instead, it focused on breaking the prior tradition of backdoor consultation between the government and business leaders by institutionalizing a more broad based consultation process that included currently organized civil society groups, many of which played a role in Funes’ 2009 election. The CES was composed of sixty representatives divided equally between civil society and the business sector. To facilitate negotiation across this wide divide, the CES included nine nonvoting representatives from universities and think tanks and a nonvoting government representative.10 The UNDP office in El Salvador, on which the Funes administration drew heavily for policy research and planning support, was designated as the initial CES coordinator. Under ARENA administrations, ANEP had acquired formal representation on the advisory boards of over forty government agencies, whereas civil society organizations were generally excluded (Gobierno de El Salvador 2012, 125n31). The new consultative mechanism undid this preferential treatment, introducing a balanced formula that was replicated in consultative roundtables formed by several ministries and local governments. Since top business chambers were accustomed to a compliant government and unaccustomed to collaboration with civil society actors, which were normally seen as adversaries, the CES process advanced slowly. Business representatives frequently registered their dissatisfaction with the new body’s structure and performance. A FUSADES assessment of the CES at the two-­ year mark denounced the government’s “low interest in dialogue” with the private sector and its practice of not submitting major initiatives, such as tax

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reform, to the CES for deliberation (DEP/ F USADES 2011, 158–161). Under the auspices of the newly established Partnership for Growth, a collaborative plan launched in November 2011 by the U.S. and Salvadoran governments to promote broad-­based economic growth, the Funes administration agreed to create a national Growth Council composed of five top business leaders and five cabinet officials. This council was designed to “remove bottlenecks to growth by facilitating a climate of trust, communication, and collaboration between the two sectors” (Government of El Salvador–United States Department of State 2011, 18).11 This consultation process remained intermittent, however, and the private sector members of the Growth Council “temporarily withdrew” from participation through most of 2012 (Barboza 2012). In its third-­year self-­assessment, the Funes government complained of a “boycott” of consultation processes by the extreme Left and the Right and by some of the business chambers (Gobierno de El Salvador 2012, 54). In spite of these challenges, the government identified twenty-­seven new and reformed laws and decrees that had been approved in the 2009–2012 period, thereby introducing measurable policy change (Gobierno de El Salvador 2012, 103). Market Reform The Funes government’s main project during its inaugural year was drafting a planning document, the Plan Quinquenal, which was presented publicly in May 2010 (Gobierno de El Salvador 2010). This plan announced a new approach to governing that would expand antipoverty initiatives, promote countercyclical interventions, and introduce strategic planning—all departures from the orthodox market model. According to the Plan Quinquenal, the “neoliberal paradigm” resulted from “an antihistorical and dogmatic reading of the national reality” and was now “very much questioned.” That model imposed policies “that almost always responded to particular interests” and produced the “progressive and deliberate dismantling of the state’s institutionality.” The result was the “absence of sectoral development policies . . . above all corresponding to the micro, small, and medium-­sized enterprises and to agricultural and livestock producers of all sizes” (27–28). The Funes government’s policy, according to the Plan Quinquenal, was designed to first provide immediate poverty relief and, using countercyclical policies, check the damage produced by the U.S. downturn. Once the economy stabilized, the next step would involve strategic planning and sectoral economic policy to support small and medium-­sized producers, resuscitate agriculture, and expand tourism, among other plans. The small state banking system (controlling only 4.7% of the national banking portfolio) that had

Post-­Neoliberalism and Alternative Approaches 221

survived bank privatization in the 1990s was to be reorganized and expanded, with specific banks supporting credit for small and medium-­sized producers, long-­term loans, housing, and agriculture (Gobierno de El Salvador 2010, 33–37, 68–72). The government also pushed for increased transparency and progressivity in the tax structure and claimed, in its 2012 midterm report, to have reduced tax evasion and raised the tax burden (tax revenues as a percentage of GDP) to an historically unprecedented 15% (Gobierno de El Salvador 2012, 78). The new model was designed to ease away from the twenty years of orthodox economic reform that had advanced under the ARENA governments. Funes’ economic reforms faced stern business opposition. Displaced from their position as influential advisers to the government, prominent business leaders and the business think tank FUSADES faulted the Funes administration for the “deterioration in the investment climate” (FUSADES 2011, 161–162). Citing a raft of declining ratings from sources like Moody’s and the World Bank’s annual Doing Business report, the FUSADES report challenged Funes’ suggestion that the Salvadoran private sector was waging an ideologically motivated investment freeze at home. ANEP president Jorge Daboub countered, stating that Salvadoran entrepreneurs kept their capital abroad because of “the insecurity that is generated in the messages, the proposals for change in our system of liberties” (Labrador Aragón 2011). Although the FUSADES report credited Funes with rejecting socialism and exercising a moderating influence on FMLN leaders, his administration was faulted for failing to promote “democratic consensus,” among other concerns (Labrador Aragón 2011, 163–179). Addressing Poverty Claiming a constitutional obligation to guarantee social rights and redistribute resources, the Funes government developed several measures to reduce poverty. In a highly popular initiative, it guaranteed free school uniforms, shoes, and supplies, produced by local microenterprises, for public school children. As in Nicaragua, unpopular user’s fees for public health services were eliminated. The new comunidades solidarias rurales program, built on the Saca administration’s Solidarity Network (Red Solidaria, a small CCT program), was to expand rapidly to 100 of the poorest municipios (up from 47 in 2008). The government also introduced a housing and community infrastructure program, Piso y Techo (floor and roof ), and expanded seed distribution and property titling programs. Going beyond the rural programs, the Funes administration introduced

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urban programs (the comunidades solidarias urbanas) that included temporary assistance, providing $100/month to young people and single mothers in twenty-­five of the poorest urban municipios in return for community service. It also announced educational subsidies for 100,000 youths in precarious urban settlements and a “casa para todos” (home for everyone) home-­ building and home-­improvement program. Other new cash transfer programs included $50 noncontributory monthly pensions for those over age seventy in the poorest municipios (Gobierno de El Salvador 2010; World Bank 2011b). As international financial institutions registered the magnitude of the global hit, financial support for various initiatives was secured from the World Bank (for targeted cash transfer programs) and the IDB (for public investment in health, education, and infrastructure) (IMF 2010b, 16). The 2009– 2011 Anti-­Crisis Plan pumped a reported $600 million (2.8% of GDP) into the ailing economy (World Bank 2011b, 3). According to the government’s interim report, over half of the population had received assistance through these initiatives by 2011 (Gobierno de El Salvador 2012, 64). The national poverty rate, reportedly 40% in 2008, declined to 38% in 2009 (WB/  WDI database), even as the overall economy contracted. The new government’s policy innovations, which emphasized the expansion of targeted cash transfers, more attention to the development of human capital, and the reintroduction of sectoral economic development strategies, along with improved civil society consultation and institutional continuity, generally paralleled trends in the moderate, “social democratic” (Weyland, Madrid, and Hunter 2010) or “social liberalism” (Levitsky and Roberts 2011) Left emerging in South America. Rejecting twenty-­first-­century socialism, Funes identified the Lula government as a source of inspiration (Johnson and Wyss 2010).12 Absent the trade union links that helped build the Brazilian alternative, Funes emphasized his grounding in liberation theology, which had deep roots in the Salvadoran Center-­Left. He described himself as a “disciple” of Óscar Romero and formally dedicated his government to the slain archbishop. In 2010, Funes publicly honored the six Jesuit leaders who were murdered by the military in 1989, three years after his graduation from the UCA, the university they had led (Salinas and Bull 2010). Funes’ moderate and technocratic reforms, shorn of the mobilizational discourse and grassroots strategies of his contestatory counterparts, disappointed many on the Left who had voted him in.13 Tensions between Funes and the FMLN, largely papered over during the campaign, became more apparent when the administration was faced with the challenges of governing.

Post-­Neoliberalism and Alternative Approaches 223

Although generally supportive of the president’s initiatives, FMLN diputados aired disagreements publicly and occasionally voted against his proposals (for example, on basic landline phone tariffs, some international loans and tax code changes, and prison sentences for minors). Funes sometimes built his legislative coalitions with parties on the right, particularly the Grand Alliance for National Unity (GANA), the ARENA offshoot associated with former president Tony Saca, who was expelled from ARENA in December 2009 (Garrett 2010, 26). WikiLeaks revealed that Funes suspected some FMLN intelligence operatives of spying on his newly inaugurated government and had requested U.S. assistance in detection and prevention (“Cable sobre la preocupación” 2009). The FMLN’s general coordinator, Medardo González, attempted to downplay tensions (M. González, 2009), but the party abandoned the alliance strategy for the 2014 presidential contest and designated Funes’ vice president, Salvador Sánchez Cerén, a longtime FMLN cadre leader, as its candidate. Funes and his core cabinet officials left the market framework largely in place and worked toward gradual change. Juxtaposed against ARENA’s market orthodoxy, the quick expansion of antipoverty measures, the embrace of countercyclical measures, and the re-­introduction of the idea of sectoral planning represented a noticeable departure. But the slow pace of change also limited its impact. As Beasley-­Murray, Cameron, and Hershberg (2010, 10) caution, “social democracy in the current Latin American context may turn out to be another liberalism, and one that, in Latin America, conceals an inhuman face.” Modest reforms may fail to address the intensity of the demand for change. Only 16% of Salvadorans thought that the distribution of wealth in their country was “just” in 2010, even fewer than the low 21% average for all Latin American countries (Latinobarómetro 2010, 20). Political support for greater change might have existed in El Salvador, at least among the FMLN rank and file, but both internal and external factors militated against it. Internally, the Funes-­FMLN link was fragile, and the FMLN itself lacked a majority in the legislature. Even with full FMLN support, Funes still needed to find additional allies to get legislative initiatives approved. The new president brought into government only a thin layer of politically disparate ministerial officials, who presided over bureaucracies constituted during the ARENA years. ARENA maintained an ongoing campaign against his government, with billboards soon popping up around San Salvador lambasting him as “INCAPAZ” (incompetent). In addition to internal political pressures, external economic conditions restricted the government’s scope of action. Coming into office in the middle

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of a financial crisis and soon faced with a series of costly natural disasters, sharp budgetary constraints limited Funes’ ability to launch policy reforms. Dependence on the vagaries of the U.S. market and on multilateral funding for basic initiatives encouraged a policy of careful diplomacy and piecemeal reform. Unlike Ortega, who, though a minority president in 2007–2012, enjoyed absolute control over his party, pact-­partnership with a large segment of the opposition, substantial off-­budget Venezuelan funding, and a less severe pounding from the global economic crisis, Funes faced daunting internal and external constraints. Chosen for his credentials as a moderate reformer rather than as a former revolutionary, Funes rejected any pretense of transformative change. Nonetheless, Funes’ victory was a turning point in El Salvador. After two decades of ARENA control and the persistent marginalization of the FMLN, this new government broke through tall barriers. The previous push for record-­level adherence to free market principles was now halted, and public opinion poll data suggested that the shift was well received. The LAPOP survey found that “support for the system” increased from 52% to 59% between 2008 and 2010, along with a more positive perception of the government’s economic performance (which rose from 36% in 2008 to 53% in 2010)—in spite of the fact that 41% of respondents reported that their own household income had declined in the last two years (Córdova Macías, Cruz, and Seligson 2010, 27, 50, 57). Reported “satisfaction with democracy” also increased, rising from 44.5% in 2008 to 55% in 2010 (138). Although 42% of the 2010 IUDOP survey respondents concluded that Funes was not fulfilling his promise to focus on improving the situation of the country’s poorest sectors, 58% felt that he was, at least in part, fulfilling that promise (IUDOP 2010, 5, 9). According to Latinobarómetro (2010, 77), the Funes government’s public approval rating was 71% in 2010, the third highest in Latin America. Although down from the electoral year peak of 83%, the 2010 government approval levels in El Salvador were well above the 35% to 58% achieved by Salvadoran presidents in the 2002–2008 period. Consulta Mitofsky (2012) polls found that Funes’ approval level declined from 82% in May 2009 to 67% in May 2011 but held steady at 66% in May 2012, after three years in office. The modest and piecemeal changes under way in El Salvador failed to inspire erstwhile allies further to the left but did tip the direction of development away from market orthodoxy and toward gradual reform. The new president was rewarded with broad public support, even though slow growth and a high crime rate took their toll over time.

Post-­Neoliberalism and Alternative Approaches 225

Post-­Neoliberal Adjustments in Costa Rica: Heterodox Right Transitions In their study of political trends in Latin America, Navia and Walker (2010) note that opposition to orthodox neoliberalism has now become generalized throughout the region. For these analysts, the main political division is not between Left and Right, but between populists, who emerge in weak political systems and tend to de-­institutionalize, and nonpopulists, who emerge in stronger political systems and tend to accept institutional constraints. In their view, nonpopulists on the left, such as Lula da Silva, and on the right, such as Vicente Fox, both introduced “heterodox corrections” (255) to the neoliberal model. In this scheme, the heyday of dogmatic adherence to marketization is over, even among prominent figures on the Right. Although Navia and Walker may underestimate the impact of a left- versus a right-­wing electoral victory (certainly millions of voters believe that this distinction matters), they call attention to the increasing deviation of even right-­wing candidates and parties from the original tenets of the Washington Consensus. The failure of market fundamentalism to produce the predicted positive results and the onset of several deleterious outcomes; the growing recognition of the limitations of this model, even on the part of the multilateral lenders that had advanced it; and the rise of candidates and parties that question its premises have undercut this model across the board. Indeed, as Polanyi (2001 [1944], 153) analyzed the market countermovement in nineteenth-­century Europe, he found that policies advancing business regulation and worker protection were adopted by regimes “of widely dissimilar political and ideological configuration.” Responses “of a predominantly practical character” (151) to the dangers and dislocations unleashed by unregulated market growth led countries as varied as Victorian England, Bismarck’s Prussia, France’s Third Republic, and the Hapsburg Empire to introduce various forms of market regulation. Similarly, in Central America, diverse regimes have called market fundamentalism into question. The Costa Rican case, where candidates of the Center-­Right continued to claim the presidency, allows us to explore the phenomenon of post-­neoliberal policy adjustments by the heterodox Right. Costa Rica has been historically regarded as a social democracy, and the PLN has traditionally been defined as a Center-­Left party (Wilson 1999; Seligson 2002; Lehoucq 2005; Sojo 2010). In the 1980s, however, this party increasingly embraced market reform, and it shifted rightward across the following two decades. Its major competitor, the PUSC, shared this commitment, leading to general elite consensus on market reform.

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The return of Oscar Arias as the PLN presidential candidate in 2006 reaffirmed the party’s embrace of neoliberalism, as his previous administration (1986–1990) had overseen rapid market opening.14 Arias’ enthusiastic commitment to economic globalization, growth through exports, the breakup of state monopolies, and expansion based on foreign investment had become a defining feature of his public life. Additional evidence to support his placement as a figure on the Right comes from voter profiles and expert analysis.15 Of the four major presidential candidates in the 2006 contest, Arias’ supporters placed themselves furthest to the Right (Seligson 2007, 85). Country-­ expert surveys assessing the public policy positions of eighteen Latin American presidents in late 2006–early 2007 also placed Arias on the right side of the spectrum (Wiesehomeier 2010). The Costa Rican variant of market reform, however, had a number of distinctive characteristics. As Seligson and Martínez (2010) note, during the “critical juncture” in which Costa Rica shifted from the import-­substitution industrialization model to export promotion in the 1980s, the leadership adopted a heterodox approach pursuing a “balanced response” characterized by gradualism and avoiding shock therapy (311–312). Emphasizing “piecemeal, contradictory, and selective” reform (315–316), Costa Rican leaders deviated from the strict Washington Consensus prescriptions in both the economic and the social arenas. Economically, only modest privatization took place, and services generally remained in the public sector. The bank “privatization,” for example, opened the state banking system to private competition without forcing the collapse of the state sector; the state banks continued to hold 56% of market share as late as 2002 (Seligson and Martínez 2010, 318). State regulatory capacity was increased rather than dissolved with the creation of 117 new autonomous institutions between 1990 and 2003 (322). The strengthening of state institutions advanced in Costa Rica, even before “second-­generation” reforms came to be added to the Washington Consensus model. In the social policy sphere, social expenditures were initially increased, not cut to ensure fiscal balance. Social programs included not just narrowly targeted benefits but universal services, such as health and education initiatives, that built on the broad base established during the social democratic phase. In their analysis of successful social policy regimes in Latin America, Huber and Stephens (2010, 183) note Costa Rica’s remarkable success in “resisting pressures from external agents for neoliberal social policy reforms and instead concentrating on strengthening public schemes.”16 By the time Arias returned to the presidency in 2006, however, the quality of these much-­vaunted social services had declined (Seligson and Martínez

Post-­Neoliberalism and Alternative Approaches 227

2010; PEN 2004). The Costa Rican variant of neoliberal reform entailed less regulatory dismantling and better maintenance of state-­provided social programs than was common, but over time several stresses associated with marketization (rising inequality, inadequate tax collection, underfunding of social services) became apparent. As the Arias government’s National Development Plan 2006–2010 noted, government social spending had stagnated since 2000 (MIDEPLAN 2007, 46). Overall educational levels remained low relative to the region’s other star performers; the average number of years of education for Costa Rica in 1991–2001 was a modest 5.9, compared to 8.3 for Argentina, 7.3 for Chile, and 7.1 for Uruguay (Huber and Stephens 2010, 158). Fewer than four out of ten Costa Rican students completed high school in the early 2000s (Seligson and Martínez 2010, 327–328). Years of social sector underfunding combined with aggressive economic opening had taken a toll. The social consequences were most visible in the rising inequality rates. Whereas the per capita income of the top decile was 12.4 times that of the bottom decile in 1988, this multiple had increased to 28.4 in 2004 (MIDEPLAN 2007, 46). The rapid rise of the Citizen Action Party as a new challenger in 2002, the narrowness of Arias’ victory in 2006, and the squeaker passage of CAFTA in the 2007 national referendum reflected a groundswell of dissatisfaction with the PLN-­PUSC (“PLUSC”) approach. Even though the PLN continued to win elections, the ability of market critics to mobilize substantial electoral opposition served as a forceful reminder to the victors of the need to address these lingering concerns. Now in his second term, Arias introduced three adjustments in social and economic policy: he took on the task of bringing down the poverty level; he increased budgetary commitments to social spending; and, as the impact of the U.S. economic downturn spread, he used borrowing and stimulus spending to check the decline. Analysis of the Arias government’s performance in the areas of political change, market reform, and antipoverty initiatives allows us to examine the distinctive mix of heterodox adjustments that characterized the Costa Rican adaptation. Political Change In terms of the mechanisms of democratic participation, the second Arias administration introduced no major change (Feoli 2009). With Latin America’s longest continuous democracy, the Costa Rican political system was well institutionalized and already among the region’s most democratic (Mainwaring, Scully, and Vargas Cullell 2010; Cruz 2005). Several signs of political stress

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had accumulated across time, however, including an increase in voter absenteeism relative to the 1980s, recurring gridlock in the legislature, and government inaction on public priority concerns. With the decline of the PUSC, Costa Rica’s long-­standing two-­party system collapsed (Close 2010; Lehoucq 2005; Seligson 2002). Some of these tensions went unaddressed and lingered; others were managed within the existing institutional framework, which was generally perceived as legitimate.17 The Arias administration did oversee one institutional innovation: the first exercise of a national referendum, which occurred with the 2007 vote on CAFTA, as discussed in chapter 4. Although Arias had initially opposed this step, pushing instead for rapid legislative ratification of CAFTA, he issued an executive request for a national referendum after legislative processes stalled. The closely divided referendum vote, in which well-­financed, pro-­CAFTA forces emerged victorious, reignited conflict over the national development model. Market Reform As the Arias government’s forceful push for CAFTA ratification implies, this administration maintained a strong commitment to ongoing market reform. Prior public resistance and popular mobilizations had preserved state ownership of the telecommunications sector in Costa Rica, however, even as privatization swept the region. The CAFTA agreement now obligated Costa Rica to allow the entry of private investment into this sector. This provision, which was enthusiastically endorsed by Arias, designated a major new area into which foreign corporations might expand. Once CAFTA ratification was secured, the government’s legislative coalition tenaciously pushed through the thirteen changes in Costa Rican law required by the U.S. government so that CAFTA rules could enter into effect. Additional foreign investment was pursued with enthusiasm and success, even in highly conflictive areas. Facing down resistance in the streets and in his own government bureaucracy, Arias signed a 2008 executive decree declaring investment by the Canadian gold mining company Infinito Gold to be in the “national interest,” allowing the controversial open-­pit mining investment in Las Crucitas to advance.18 Overall, FDI rose from $861 million in 2005 (4.3% of GDP) to over $2 billion in 2008 (6.8% of GDP) (Villarreal F. and Gómez 2010, 277). The GDP growth rate reached 8.8% in 2006 and 7.9% in 2007, and the government achieved its first fiscal surpluses in thirty years (Soto Jiménez 2010, 7). At the same time, the openness of the Costa Rican economy and the links

Post-­Neoliberalism and Alternative Approaches 229

with the U.S. economy that contributed to this growth, particularly in terms of tourism and foreign investment, made the country especially vulnerable to the U.S. downturn in 2008 and 2009. On average, 60% of Costa Rica’s 2002– 2009 FDI was from the United States.19 As the Costa Rican economy slowed and then contracted, Arias, like other regional leaders, was pushed toward a Keynesian response. The central government’s deficit spending reached 3.6% of GDP in 2009 (4% for the combined public sector), as the government attempted to counteract the decline (IMF 2010a, 4). Government spending reportedly increased 45% between 2007 and 2009, suggesting the magnitude of the countercyclical effort (Soto Jiménez 2010, 21). Following two years of budgetary surpluses, Costa Rica was better positioned to respond to the crisis than El Salvador and Nicaragua, but external support was also critical in Costa Rica. As elsewhere, multilateral lenders were forthcoming, with fiscal support provided by the IMF and World Bank and infrastructural loans approved by the IDB. Pragmatic countercyclical intervention, which was antithetical to the neoliberal framework, helped halt the freefall and position the economy for gradual recovery. Addressing Poverty The government also intervened forcefully in the social policy arena, which, even before the U.S. recession, exhibited signs of stress. Following a decade of stagnating poverty levels that left one in five Costa Rican households in poverty, Arias’ 2006–2010 National Development Plan proclaimed a commitment to reduce the poverty rate. Stated goals were to cut poverty by four percentage points by the end of the administration and to position the country for more inclusive future growth (MIDEPLAN 2007, 47). Poverty levels did fall sharply in 2007, dropping from 21.2% of households in 2005 to 16.7% in 2007, in part as a result of high GDP growth rates and rising social investment (Villarreal F. and Gómez 2010, 277). But these gains were lost as foreign investment fell, economic growth slowed, and the economy contracted. The poverty rate increased to 18.5% in 2009 as the United States dipped into recession. The Gini coefficient rose from a reported .406 in 2005 to .439 in 2009, which, while low by regional standards, was troubling in a country with Costa Rica’s relatively egalitarian social history (Villarreal F. and Gómez 2010, 277; World Bank 2011a, 2–3; Sojo 2010). As the GDP fell in 2009, Arias issued the Plan Escudo (Shield Plan), an emergency economic plan designed to staunch the downturn. This measure deployed an array of policies, including increasing noncontributory pensions by another 15%; lowering interest rates at state banks for microenterprises

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and small and medium-­sized businesses; extending social security coverage from three to six months for those losing employment; using subsidies for food, transportation, and petroleum; negotiating employee training and job-­ stabilization programs with employers; and creating weekend child-­feeding programs in the thirty-­seven poorest districts of the country (Arias 2009; ECLAC 2010b, 20–21). Public social investment as a percentage of the central government’s budget increased from 77% in 2005 to 88% in 2009, representing the greatest level of budgetary effort in thirty years (Trejos S. 2010, 7). Enrollment in the school scholarship programs almost tripled between 2007 and 2009, with targeting to the bottom income quintile improving every year (Trejos S. 2010, 40).20 Avancemos, the Arias administration’s new CCT program for low-­income families who kept adolescent children in secondary school, provided monthly stipends for over 150,000 students in 2009 (Román 2009, 36). According to the MIDEPLAN end-­administration assessment (2010, 18), without the increased spending on noncontributory pensions and student scholarships when the crisis hit, the poverty rate would have been 3% higher in 2009. Forceful state intervention limited fallout from the crisis and helped raise Arias’ faltering public approval level (Villarreal and Gómez 2010, 279). Even though both the poverty rate and the Gini coefficient worsened, presidential approval levels rose to 75% in 2009, an increase of 30 percentage points over the previous year, as the country struggled through the crisis (Latinobarómetro 2010, 77). This outcome suggests that pragmatic adaptation and avoidance of neoliberal dogma could attenuate political opposition. Arias himself resisted the neoliberal label, likening his government to that of the left-­leaning Concertación administrations in Chile. In his view, both Costa Rica and Chile were eager globalizers and avid signatories of trade agreements who combined market discipline with strategic state interventions to promote social inclusion and poverty abatement. In his final speech to the Legislative Assembly in May 2010, Arias challenged his critics, saying, “those who rushed to accuse us of being neoliberals would do well to investigate what neoliberal government in the world puts half of its budget into social spending” (Arias 2010a). Increased social spending also helped the PLN expand its political base. With a well-­established and well-­financed electoral machine and a successful crime-­focused campaign by Arias’ vice president, Laura Chinchilla, the PLN secured the presidency again in 2010 (Villarreal and Gómez 2010, 285). The social movements that had mobilized repeatedly to oppose the ascendance of the market had, after back-­to-­back narrow defeats in 2006 and 2007, now lost momentum. Arias’ use of stimulus spending and antipoverty initiatives,

Post-­Neoliberalism and Alternative Approaches 231

which minimized social damage and built human capital, allowed the PLN to recover. The transition between social movement activism and electoral politics, always difficult to negotiate, became even more so without the galvanizing impact of the CAFTA debate. As CAFTA-­NO activist Juliana Martínez Franzoni (2010) explained, “The NO campaign was a struggle for an ideal, a vision of the country. It was hard to turn that idealistic struggle into a partisan campaign to back a particular candidate.” Infighting on the Left delayed the formation of a common front, and Ottón Solís, once again running as the PAC candidate, received only 25.1% of the vote to Chinchilla’s 46.9% in 2010. Although market enthusiasts have dominated elections in Costa Rica and neoliberal critics have experienced repeated defeat, market reform has been attenuated in this country by a series of factors. First, Costa Rica’s earlier commitment to universal social services and relatively inclusive political traditions pushed market reformers to proceed in a gradual fashion, with the state’s responsibility for basic services largely maintained. In addition, technocratic assessment of development needs encouraged the construction of regulatory capacity and promoted institution building. This initiative anticipated the second- and third-­generation reforms that began to reshape the Washington Consensus model as its limitations became increasingly apparent (Serra and Stiglitz 2008; Rodrik 2006, 2011). Finally, repeated political and economic challenges pushed government elites to adapt the model and demonstrate policy flexibility. Deep divisions over CAFTA and the repeated electoral cliffhangers that they produced encouraged even the pro-­market Arias government to give increasing attention to the growing social divide. As the global economic crisis took its toll, a government long identified with economic opening and market “clearing” processes began to step in to slow the losses. These shifts and adjustments suggest that elements of the “double movement” can emerge even in governments formally identified with the Right as long as basic democratic processes are in place. This finding supports Polanyi’s claim about the broad nature of defensive movements away from market fundamentalism and the role of democracy in halting its advance. The Costa Rican leadership proved able to respond quickly to crisis, but the internal tensions in the country’s development model did not disappear. José Cordero and Eva Paus (2008) note that the pattern of tax exemptions for foreign investment long undermined the state’s revenue collection; the country’s low tax burden, while attractive to investors, impeded state investment in education and infrastructure over the long run, ultimately making it more difficult for Costa Rica to attract high-­quality investment. With few backward linkages and little spillover into the domestic economy, FDI retained enclave

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characteristics that reduced its ability to stimulate broader economic benefits. And in spite of the country’s many human development achievements, careful studies have called attention to persistent social gaps (Seligson and Martínez 2010; PEN 2004). A new national development program, with sustained support for equity-­enhancing social services and effective constraints on negative market by-­products, remains a future project. Alternative Post-­Neoliberalisms As Latin America began shifting away from the neoliberal development model, three broad alternatives emerged. The radical Left presented a sharp critique of the market model and called for active state intervention, including nationalization and the construction of state enterprises in strategic sectors. This variant, found most prominently in Venezuela and, to a lesser degree, in Bolivia and Ecuador, tended to erode preexisting institutions and introduce plebiscitary processes in which a mobilized base aligned directly with the leadership to bypass obstacles and accelerate change. In contrast, the incrementalist Left, sometimes understood as a Latin American variant of social democracy, retained the basic institutional framework through which it had acquired control and made gradual adjustments in development policy. This alternative, found in Chile, Brazil, and Uruguay, introduced regulatory policy to reduce market damage and pushed toward universal social citizenship via piecemeal reform. But political life in Latin America was hardly confined to the Left, nor should continuous Left victories be assumed. The third post-­neoliberal variant began to emerge in governments that remained on or returned to the right side of the spectrum. In Mexico and Colombia, electoral victory eluded the parties and candidates on the left, and the right continued to hold power. In Chile, the left-­leaning Concertación coalition stumbled after a twenty-­year stretch and was replaced when pro-­business candidate Sebastián Piñera was elected president in 2010. These governments on the right, however, were now less insular and technocratic than their predecessors had been, and, facing strong rivals to the left, less dismissive of the demands made by their opposition. In rough terms, the Nicaraguan, Salvadoran, and Costa Rican cases map out these three lines of adaptation and allow us to explore their intricacies and variations (see table 7.2). The Ortega government in Nicaragua adopted radical discourse as it tilted toward a Left-­populist variant of post-­neoliberalism. Politically, the government pushed for grassroots organization and mass

Table 7.2. Post-­Neoliberal Development in Central America Post-­neoliberal type

Country

Political change

Market reform

Addressing poverty

Nicaragua

• CPC created • Institutional weakening, partisan penetration • Power concentration

• Neoliberalism formally rejected • Growth of state-­managed “private sector” firms • Substantial off-­budget Venezuelan aid • New generalized subsidies • Stimulus spending

• Increased social spending • Health and social service access improved • Productive input transfers and new financing for rural producers and small and medium-­sized producers

Populist Left

El Salvador

• CES created • Multiple dialogue roundtables

• Neoliberal paradigm “questioned” • Sectoral development planning endorsed • Stimulus spending

• Increased social spending • Targeted CCT expansion • Noncontributory pensions created

Incrementalist Left

Costa Rica

• First national referendum

• Ongoing privatization (CAFTA-­ mandated telecommunications opening) • Stimulus spending

• Increased social spending • Targeted CCT expansion • Pension program growth

Heterodox Right

234  Contesting Trade in Central America

engagement through the Citizen Power Councils, as Ortega attempted to build a direct leader-­mass bond, albeit with only partial success. Public sector wages were raised repeatedly, provoking a tussle with multinational funders over the budget balance. State-­managed “private sector” activities and Venezuelan funding provided government leaders with off-­budget, discretionary resources. The Nicaraguan government did not nationalize businesses or restrict foreign investment, as did its counterparts in Venezuela and Bolivia, and it maintained a steady dialogue with COSEP. At the same time, it expanded the state’s responsibilities for targeted development, rolled back the user’s fee for health and education services, relaunched a national literacy campaign, promoted food security, and deployed economic resources for countercyclical spending. Drawing on Venezuelan funding, the government developed a series of subsidies, credits, and services, with formal priority given to small and medium-­sized urban and rural producers. Targeting was imprecise, but poverty rates and inequality began to decline. Satisfaction with democracy increased alongside Ortega’s broadening base, although institutions were weakened through partisan penetration, and power was increasingly concentrated in Ortega’s hands. As in Nicaragua, the new Salvadoran government shifted away from neoliberal orthodoxy. In contrast with Ortega, the Funes administration proceeded incrementally and took pains to avoid alienating the United States and the business elite. It struggled to soften the country’s historical polarization with broad-­based political appointments and the creation of cross sectoral consultation mechanisms like the CES. After decades dominated by neoliberal reform, discussion began about how the state might support sectoral economic development in priority areas. To address resurgent poverty, Funes focused on rapidly expanding the CCT model, building on groundwork developed by the previous government. Targeting the municipios that had been previously identified as most impoverished, the Funes government programmed more widely dispersed assistance covering noncontributory pensions, cash payments to particularly vulnerable populations, and expanded health and education services. Growth and investment remained anemic, however, which, along with ongoing violence, had a political cost. Although the Funes government in El Salvador was generally linked to the turn to the left and the Arias government in Costa Rica was perceived by voters and scholars as part of the electoral Right, there were important similarities in the policies they adopted. They both used IFI-­sanctioned CCT

Post-­Neoliberalism and Alternative Approaches 235

mechanisms to reduce poverty levels, and when hit hard by the U.S. economic downturn, they both used deficit financing, stimulus spending, and the remaining state development tools to cushion the blow. In addition, the rhetoric of human capital development and global competition served to justify increased state intervention in market-­driven processes in both El Salvador and Costa Rica. Unlike El Salvador and Nicaragua, however, Costa Rica experienced less political polarization and its institutions were more firmly established, leading to less structural innovation in the political system during this period. Market reform had been less extreme in Costa Rica, and social policy development more advanced. The Arias administration had both a stronger social program base on which to build and a better regulatory infrastructure. This entrenched state capacity helped protect the citizenry from market downsides, even as Arias pushed for further economic opening in the telecommunications sector, as mandated by CAFTA. As electoral rhythms shift power back to the Right in Latin America, Center-­Right leaders and parties will face pressure to strengthen social commitments, improve market regulation, and use state power to promote more inclusive development. In sum, the three Central American cases all reveal some adjustment, even where the forces of continuity were victorious in elections (Costa Rica) and in spite of formidable constraints that made change difficult (El Salvador, Nicaragua). The balance of political forces, economic vulnerabilities, institutional characteristics, and cultural preferences in each of these cases fostered variation in adjustment processes. But all three deviated from the neoliberal guidebook and adopted policies that had been rejected during the heyday of the Washington Consensus. In the face of the economic downturn at the end of the decade, these Central American governments supported forceful government intervention and engaged in countercyclical spending, abandoning the belt tightening of the previous era. New or remaining state development banks were put back to work, and sectoral initiatives designed to prevent layoffs and promote activation returned to the policy agenda. Social spending, which had often languished, now increased. Recognizing that neoliberal reform had not only failed to protect against economic volatility and contagion but had also failed to adequately address the problems of poverty, these governments developed new kinds of antipoverty initiatives. Even before the economic crisis hit, administration officials began focusing on the limitations of the market model’s ability to remedy entrenched poverty, particularly in rural areas, where a comparative advantage was hard to discern. Over time, faith in the power of mar-

236  Contesting Trade in Central America

kets to generate prosperity faltered, and a hard struggle to design alternatives began. Conclusions For over two decades, market reform advanced briskly in Latin America, bringing new patterns of employment, investment, trade, and growth. This process was encouraged by the dominant regional power, pro-­market technocrats at home and abroad, and a thickening network of business interests. Unilateral policies provided temporary preferential access to the U.S. market for favored allies, and externally oriented business elites consolidated around the new model. As reform advanced and national economies reorganized, special trade regimes were made permanent with the adoption of free trade agreements. These agreements contained a fixed timetable for tariff liberalization and introduced new guarantees for foreign investment and intellectual property rights. Market reforms brought certain benefits. In Central America, the outward economic orientation reinforced by CAFTA pushed producers toward greater efficiency and technological innovation, a challenge that some will meet. CAFTA helped preserve the maquila sector, which faced increasing challenges due to Asian wage competition, at least for the immediate future in the lowest-­wage countries. Dispute settlement guarantees and IPR protections encouraged foreign investment. CAFTA labor and environmental provisions and programmed U.S. government funding in these two areas have helped governments and activists monitor compliance with domestic laws and press for improvements.21 These developments and others, proclaimed in the press and in mass-­marketing campaigns, encouraged public endorsement of the transition. But there are also costs, some of which will grow increasingly visible as tariffs on sensitive goods are phased out and the price of enforcing investor guarantees is paid. To the old concerns—about the impact of U.S. agricultural subsidies on rural producers and about intellectual property rights that impose obligations unmatched by benefits—have been added new ones, about contagion from U.S. economic volatility and penalties for restricting foreign investment in environmentally and socially harmful activities. Rising concern about the persistence of endemic poverty, inequality, and displacement under the neoliberal model, and the limits of democracy under external economic jurisdiction, soon fueled a new round of political debate. As the challenges associated with marketization became more visible,

Post-­Neoliberalism and Alternative Approaches 237

belief in the neoliberal model was called into question throughout Latin America. Decades of market reform, culminating with the adoption of free trade agreements, gave way to rising doubt and new forms of opposition. The choice described by former Nicaraguan president Enrique Bolaños of either jumping aboard the CAFTA train or being left in the dust has been diagnosed as a false polarity. Staying off the train does not mean perpetual stagnation; it may mean looking for, or constructing, another kind of train. Since 2000, Central America has been the scene of major developments that challenge the bucolic claims of the market marketers. Social movements have led the way, calling attention to the costs of the model and the illusions that have accompanied its advance. The most successful of these movements were characterized by three features: multisectoralism, transnational alliances, and domestic political embeddedness. The opening of political space throughout Latin America facilitated the mobilization of diverse sectors and organizing around shared concerns. The construction of new frames around themes of justice and environmentalism and the resuscitation of old ones around ideas of community and solidarity helped groups forge links across difference. Weaving together neighborhood groups, labor, students, ethnic groups, environmentalists, women’s groups, and human rights and church activists, these ideologically heterogeneous networks called for pragmatic adjustments to ensure the right to survival and to minimize market dislocation. Although periodically fragmenting due to internal tensions over strategies and rivalries, successful coalitions have proved capable of strategic reunification in pursuit of common goals. Multisectoral resistance networks often cultivated transnational alliances, seeking additional resources and reinforcement. Market reforms that restructured economic processes across whole regions, including infrastructural development plans like Plan Puebla-­Panamá, regional free trade agreements like CAFTA, and cross border investments like gold mining in Central America, fostered activism that quickly transnationalized. This study has documented repeated episodes in which resistance movements in Central America came together around common threats. These transnational networks fostered strategic consultation and mutual learning, advancing both mobilizational capacity at the local level and the ability to project into the international arena through thickened networks of international allies. Many of these resistance movement networks also demonstrated a capacity for political embeddedness, softening the distinction between contentious, informal politics and formal electoral politics. By aligning with political parties and campaigns in electoral contests and mobilizing voters in plebiscites or referenda on strategic decisions, resistance coalitions played a role

238  Contesting Trade in Central America

in replacing government officeholders and the laws and policies they enact. These alliances, which are often fluid and temporary, allow activists to help shift the line of march by shifting the line of marchers. As evidence has mounted that the neoliberal model was at best oversold and at worst deleterious, stronger doubts have emerged within the epistemic communities that leveraged its advance. The multilateral lenders who encouraged market restructuring began to patch the framework with proposals for second- and third-­generation reforms—the “Washington Consensus Plus Plus,” in Stiglitz’ rendition (2008, 49–50). Early advocates of the Washington Consensus model began to note large gaps in the framework. John Williamson (2008, 24–29), whose work helped frame the original Washington Consensus model, pointed to lacunae in the areas of stability and equity and proposed additional reforms to address these gaps. Birdsall, de la Torre, and Caicedo (2010, 27–31) identified four neglected reforms (volatility, institutions, technological innovation, and equity) and added a possible fifth— environmental sustainability. Many development economists now reject the single-­model approach inherent in the neoliberal model, arguing that development problems often vary with the context, and workable solutions should reflect that variation (F. Rodríguez 2010; Sachs 2005; Hausmann and Rodrik 2005; Rodrik 2008). Newer approaches have turned away from centralized, top-­down, or uniform “remedies” in favor of flexible and piecemeal interventions based on detailed knowledge of local conditions. The magnitude of the 2009 global economic crisis cast further doubt on optimistic claims about fortuitous consequences of market self-­regulation. As country after country, particularly those like the Central American countries that had tied their fate closely to the U.S. market, underwent sharp economic contraction, Keynesian principles resurfaced to provide policy guidance. Multilateral financial institutions, which had long touted the virtues of fiscal discipline, were required by the magnitude of the crisis and the threat of a downward spiral to adjust their lending practices.22 Fearing global contagion from the financial crisis and deepening economic contraction, the international financial institutions themselves stepped away from their traditional emphasis on fiscal constraint and provided emergency resources to reduce the damage. Growing evidence of popular dissatisfaction with rigid market reform combined with vacillation on the part of IFI policy makers (the market’s “visible hand”) to encourage a countermovement away from market maximalism. As we have seen in our discussion of the three Central American cases, the way in which hybridity was pursued depended on local history and operating constraints. The Nicaraguan case under Ortega, who built on the legacy

Post-­Neoliberalism and Alternative Approaches 239

of unfinished revolution, institutional weakness, and major aid flows from Venezuela, illustrates a thin variant of the populist Left. El Salvador under Funes, balancing between a precarious alliance with the FMLN and deep dependence on U.S. approval, demonstrated a light or incrementalist leftward shift that kept well within institutional boundaries. Costa Rica under Arias showed how the country’s tradition of heterodox reform, now with a pro-­ business, Center-­Right government at the helm, could be adapted to expand social services and amend the market model in an effort reduce some of its downside costs. Whether these new efforts can produce a sufficient counter to the perils of inadequately controlled markets remains an open question. It would be unwise to be optimistic about easy or quick solutions. But if Polanyi’s observations about double movement dynamics hold true, social movements and political activists will continue to struggle to find new approaches that tailor innovation to national realities. Construction of alternative development policy involves not just the design of appropriate policy mixes and sequences, but also the hard work of building sustainable and inclusive political coalitions, ones that prioritize the quality of social bonds over raw economic freedom. This approach requires new kinds of commercial arrangements in which trade promotion takes place within a public interest framework. In the end, consolidation of market constraints will depend on a new civic mobilization and global economic architecture, to be built on the mosaic of reforms that are only beginning to emerge.

Appendix A

Note on Interview Methodology

This manuscript draws on interviews with 208 direct participants in and observers of the Central American economic reform debate. These interviews were conducted with participants from Nicaragua (2003, 2006, 2007, 2008), El Salvador (2004, 2005, 2010), and Costa Rica (2005, 2010). Most respondents were chosen based on their public roles in the CAFTA negotiation and ratification processes. Officials who presided over earlier phases of market reform were interviewed primarily for chapter 1, and additional figures in the mining debate, electoral campaigns, and post-­CAFTA administrations were interviewed for chapters 5, 6, and 7. The interview pool was designed to focus on “civil society” as the most vital expression of active, organized, and engaged citizens. To trace processes shaped by other actors, and to situate civil society perspectives within a larger political context, this study included interviews with key government officials, business leaders, and other international actors. Table A.1 provides a breakdown of the interviews by country and sector. In order of numerical distribution, respondents are divided among civil society (101); Central American government officials (45, with 28 from the executive and 17 from the legislative branches); private sector leaders (32); U.S. government representatives (13); international organizations (IOs) (8, primarily multilateral banks); and international nongovernmental organizations (9). The civil society interviews included representatives of both nongovernmental organizations and social movements (76) and researchers from major think tanks and universities and consultants (25). Together, the Central American civil society representatives constituted almost half (49%) of those interviewed for this study. Given the enormous variation in civil society, the interview pool design for this sector was particularly complex. I began by constructing a database using three lists of civil society organizations that were involved in economic development discussions in Central American during the 2002–2003 period. The first list was composed of the affiliates of Iniciativa CID, a network formed in 2001 to coordinate participation in and research about trade negotiations. This list, most fully elaborated for El Salvador, provided information about the lead organizations and primary contacts in each of the Central American countries.

Note on Interview Methodology 241

Table A.1. Interviews by country and sector No. of respondents Sector Civil society Government Private sector U.S. government International organizations International nongovernmental organizations Total

Nicaragua

El Salvador

Costa Rica

Total

34 21 15  6  5

47 13  8  5  1

20 11  9  2  2

101 (49%)   45 (22%)   32 (15%) 13 (6%)   8 (4%)

 4

 5

 0

  9 (4%)

85

79

44

208 (100%)

Note: In total, 242 interviews were conducted.

The second list was composed of organizers and organizations attending the IV Foro Mesoamericano por la Autodeterminación y Resistencia de los Pueblos gathering held in Tegucigalpa, Honduras, in 2003 (Foro Mesoamericano 2004a). The Foro Mesoamericano was the main network organizing in opposition to corporate globalization in the Mesoamerican region. Document annexes provided names of lead contacts for the Foro Mesoamericano transition teams by country, as well as the names of participating organizations and their delegation size. The third was a list of organizations invited to send delegates to national-­level workshops on Plan Puebla-­Panamá, a regional infrastructure project whose advance was coordinated by the Inter-­American Development Bank (Spalding 2004). These 2002 workshops, organized by the IDB and national PPP commissioners, brought together representatives of major development-­oriented NGOs and social movements, unofficially privileging those organizations with a mainstream orientation. When interviews were targeted to address specific questions, interviewees were pulled from relevant subsections of the database. Interview participants were not selected at random, and their representativeness cannot be assumed. These contributors did, however, include a large number of leaders who participated actively in the market reform debate and who brought different perspectives to bear on this process. Initial respondents were occupants of official positions, participants in formal activities, or organization spokespeople. Those in the first pool of respondents often mentioned other actors and organizations, helping me identify those actors regarded as significant in their networks and producing an additional pool of potential respondents, typically from within the same sector. Twenty-­eight participants (13% of the total) were interviewed between two and four times, often at length, for a total number of 242 interviews with 208 respondents.

242  Contesting Trade in Central America

Interviews in El Salvador in 2004 focused on two subgroups of CAFTA critics. In an effort to examine the range of perspectives held by the opposition, interviews were targeted to include respondents in different segments of these networks. Although the total number of interviews in this set was modest, these respondents represented approximately four-­fifths of the organizations affiliated with Iniciativa CID and Foro Mesoamericano in El Salvador and all organizations identified as “most important” by others in their cluster. These interviews included representatives of fourteen of CID’s seventeen Salvadoran affiliates, with at least one organization chosen from each of CID’s five work teams. In addition to the leadership of the central coordinating organization, the Fundación Nacional para el Desarrollo (FUNDE), representatives of the following organizations were interviewed: small and medium-­sized business team—the National Council of Salvadoran Business Owners (CONAES), the National Federation of Small Enterprises of El Salvador (FENAPES), and the Independent Federation of Salvadoran Microenterprise Owners (FIMES); labor team—the Norma Virginia Guirola de Herrera Institute of Women’s Studies (CEMUJER), the Center for Study of the Worker (CENTRA), the Salvadoran Women’s Movement (MSM), the Salvadoran Women’s Organization (ORMUSA), and the Comisión Intersindical; agriculture team—the Association for Health and Intercommunity Social Service in El Salvador (APSIES) and the Foundation for Leadership Development (FUNDACAMPO); environment team—ASDEMA; democracy team—the National Coordinating Committee of Salvadoran Women (CONAMUS) and the Salvadoran Foundation for Social Promotion and Economic Development (FUNSALPRODESE). For the Foro Mesoamericano movement, interviews were conducted with representatives of eight organizations affiliated with either the Sinti Techán Network (RST) or the October 12 Popular Resistance Movement (MPR12), the two lead coalitions organizing the V Foro Mesoamericano meeting in San Salvador in 2004. Sinti Techán Network representatives were drawn from the Center for the Defense of the Consumer (CDC) (consumer protection); the Women’s Association for Dignity and Life “Las Dignas” (feminist organization); and the Salvadoran Ecological Unity (UNES) (environmental organization). MPR12 representatives were selected from the leadership of the Civil Society Forum (FSC); the Foundation for Cooperation and Community Development of El Salvador (CORDES); the Confederation of Salvadoran Agrarian Reform Cooperatives (CONFRAS); the Trade Union Coordinating Committee of Salvadoran Workers (CSTS); and a large FSC affiliate, the Rural Communities Association for Salvadoran Development (CRIPDES), which represented repopulated communities. This research also drew on the author’s field notes from the three-­day regional meeting of the V Foro Mesoamericano in San Salvador, July 19–21, 2004. Civil society respondents who were interviewed in El Salvador in 2004 are identified by organizational affiliation, with the exception of lead coalition spokespeople and public officials. Respondents from Nicaragua and Costa Rica, and from El Salvador in 2005 and 2010, are identified by name unless they elected an alternate designation. Interview questions included both open-­ended and closed-­ended items, with follow-­up prompts tailored to each sector. This approach allowed respondents to reconstruct the processes and rationales involved in their CAFTA-­related activities, details of which were then plotted against a timeline of events derived from official

Note on Interview Methodology 243

records and media accounts. For the subset of respondents who were asked specifically about their views on CAFTA, the “approve” or “disapprove” classification was determined by their answers to closed-­ended questions. Open-­ended questions allowed respondents to qualify their views; qualifications were coded to produce the final categorization of their response (strongly approve, somewhat approve, neutral/don’t know, somewhat disapprove, strongly disapprove). The seven-­year time period during which this research was under way allowed repeated interviews with key respondents in all three countries. Interviews conducted with the same individual across several years offered insight about how perspectives consolidated or adapted during different phases of the market reform process and with the passage of time. Interview data were supplemented with published and unpublished firsthand accounts describing CAFTA negotiations and by unpublished archival material from the transcripts of legislative debates and ephemera from social movement forums and the planning meetings, as cited in the bibliography.

Appendix B

Presidential Election Results: Costa Rica, El Salvador, and Nicaragua, 1978–2011

Costa Rica Year

President

Party

1978 1982 1986

Carazo Monge Arias

1990 1994

El Salvador % of vote

Year

President

Unidad PLN PLN

50.5 58.8 52.3

1984

Duarte

Calderón Figueres Olsen

PUSC PLN

51.5 49.6

1989 1994

Cristiani Calderón Sol

1998 2002

Rodríguez Pacheco

PUSC PUSC

1999 2004

Flores Saca

2006 2010

Arias Chinchilla

PLN PLN

47.0 1st round: 38.6; 2nd round: 58.0 40.9 46.9

2009

Funes

Sources: Costa Rica, all years—http://www.tse.go.cr/elecciones.htm, accessed July 2011. El Salvador, 1989—Krennerich (2005, 290); other years—http://pdba.georgetown.edu /Elecdata/ElSal/elsal.html, accessed July 2011. Nicaragua, 1984—Booth, Wade, Walker (2010, 93); 1990–2006—http://pdba.georgetown.edu/Elecdata/Nica/nica.html, accessed July 2011; 2011—http://www.cse.gob.ni/md5/res1dipparl.php, accessed November 18, 2011.

Presidential Election Results 245

El Salvador (cont.)

Nicaragua

Party

% of vote

Year

President

Party

% of vote

PDC

1984

Ortega

FSLN

63.0

1990 1996

Chamorro Alemán

UNO AL

54.7 51.0

ARENA ARENA

1st round: 43.4; 2nd round: 53.6 53.8 1st round: 49.3; 2nd round: 68.3 52.0 57.7

2001 2006

Bolaños Ortega

PLC FSLN

56.3 38.0

FMLN

51.3

2011

Ortega

FSLN

62.5

ARENA ARENA

THIS PAGE INTENTIONALLY LEFT BLANK

Notes

Introduction 1. The Dominican Republic was added to the agreement in the final stage, making the official acronym CAFTA-­DR. Since my study focuses on Central America and includes analysis of negotiation processes prior to the addition of the Dominican Republic, I use the acronym CAFTA, as is common in Central America. 2. Use of Polanyi’s conceptual framework in this study is not meant to deny the unresolved tensions and anachronistic claims that inhabit his analysis. See Block (2003). 3. Bowman, Lehoucq, and Mahoney (2005) constructed a long-­range evaluation of Central American democracy using a procedural definition based on five dimensions (freedom of press and association, free and fair elections, inclusive participation, civilian supremacy, and national sovereignty). Their “BLM Index” assessed democracy levels in each Central American country by year from 1900 to 1999 and concluded that all three were democratic, with Costa Rica becoming democratic (index score of 1) in 1958, Nicaragua in 1990, and El Salvador in 1995 (965–967). 4. The present study adopts a conventional approach to the concept of civil society, defining it as those forms of formal and informal association that are neither private (business or familial) in character nor part of formal political institutions involved in governance (political parties, government offices, etc.); see Macdonald (1997, 3). Chapter 1 1. Morley, Machado, and Pettinato (1999) measured “reform effort” in relation to the level established by the region’s leader in a particular year (designated as 1). This measurement device allowed standards to be set by regional rather than absolute indicators. 2. Scores were based on indicators for trade (tariff averages and dispersion), finance (reserve requirements and interest rate freedom); taxes (maximum marginal income tax rates, value-­added tax rate, and a measure of efficiency in tax collection); privatization (cumulative value of sales and transfers as percentage of GDP), and labor

248  Notes to Pages 21–38

flexibility (cost of hiring, firing, social security, and extra workdays and hours). Performance was scored from 0 to 1 based on the “worst” and “best” observations for each policy variable across the whole sample of countries and years. The summative score averaged the indices across the five policy areas (Lora 2001, 19). 3. Note that a third database, the Index for Economic Freedom, developed by the Heritage Foundation and Wall Street Journal (www.heritage.org), uses yet another set of indicators that give more weight to government spending, property rights, and corruption. That method produced 1999 scores of 67.4, 75.1, and 53.8 for Costa Rica, El Salvador, and Nicaragua, respectively. According to that source, Nicaragua was the group laggard, not leader, due to greater government spending relative to GDP, weaker property rights, and higher corruption estimates. 4. Large-­N studies of IMF lending have linked program initiation to low international reserves, high inflation, and/or heavy foreign debt obligations (Pop-­Eleches 2009, 56–57, 67–79). Remmer’s (1998) quantitative analysis of ten South American countries over a fourteen-­year period, for example, confirmed the link between low international reserves and the initiation of market reform. She also found a link between higher levels of international aid flows and the durability of market reforms. 5. Robinson’s (2003) study of market reform in Central America gives particular attention to the catalytic role played by USAID. With greater agility and range than international financial institution (IFI) counterparts, USAID moved quickly to advance structural adjustment, packaging standard economic policy reforms together with educational, legal, and civil society programs that supported pro-­ market transitions. 6. In an institutionalist variation, Pop-­Eleches’ (2009) study of IMF lending in twenty-­one Latin American and twenty-­six Eastern European countries demonstrates that the IMF gave preferential treatment to larger economies, whose size implied a system-­wide impact in the event of prolonged distress, a preference found to be consistent with the organization’s mandate to stabilize the international economic system. 7. In the Chilean case, business leaders were delegated to take charge of specific aspects in the Mercosur negotiation (Schneider 2004, 228). 8. Costa Rica’s score on the Morley, Machado, and Pettinato (1999, table A-­2) commercial policy index was .511 in 1970, slightly above (more open than) the regional average of .501. The Central American Common Market, which Costa Rica joined under pressure from the Kennedy administration, had high external tariffs, and by 1973, Costa Rica’s trade openness scores began to fall behind the Latin American average, a gap that widened until 1986. 9. Data from World Bank, World Development Indicators. 10. Data from World Bank, World Development Indicators. 11. As questions increased in the national legislature about the obligations and priorities embedded in the new loans, the aid flow shifted from loans to grants that did not require repayment or, consequently, legislative scrutiny and approval (Wilson 1998, 120). 12. See Newton et al. 1988, 24–25; Korten 1997, 41–42. The Kemp-­Kasten Act of 1984 officially prohibited the cross-­conditionality of U.S. aid with multilateral lenders, but the conditionalities introduced in Costa Rica were “mutually supportive” (Newton et al. 1988, 24), albeit with greater aid attention to private sector development. 13. Costa Rica’s export subsidies, developed to reward nontraditional exporters breaking out of the Central American market, were eliminated in 1999.

Notes to Pages 39–44 249

14. For reflections on Lizano’s work and influence, see López and Herrera (2004). 15. Interviews with nine officials in charge of defining policy and ten who executed it during the Monge and Arias administrations found that policy makers overwhelming identified a “change of ideas” as the main factor behind the transition (Hidalgo 2003, 95–98). This was particularly so for those holding decision-­making positions in the Monge administration; 72% of those respondents identified the “change of ideas” as the main explanation for the shift. 16. The Academia de Centroamérica had been established in 1969 with encouragement and financial support from USAID, then under the directorship of Lawrence Harrison. The technical preparation of its researchers and contracts with international financial institutions helped position its affiliates for advancement when the debt crisis opened the door for change. With financial support from a range of sources over time (including USAID, the Banco Centroamericano de Integración Económica, the IDB, the World Bank, CINDE, and Philip Morris International), the Academia de Centroamérica fostered the development and diffusion of the new perspective. See Di Mare (1990), Church and Loria-­Chaves (2004, 16), and background information provided at the Academia’s website: http://www.academiaca.or.cr. Blanco Lizano’s (2010) detailed analysis of the institutional affiliations of Costa Rica’s top economic cabinet members from 1986 to 2010 demonstrates the close connections with the Academia, CINDE, and, for PLN administrations, Economic and Financial Consultants (CEFSA). 17. Nontraditional exports can be defined in at least three ways—as the export of new products (for example, ornamental flowers); as traditional exports being exported to new markets (bananas to Europe); and as products traditionally consumed domestically being exported (mango). 18. A business peak association is an encompassing national organization made up of diverse sectoral and regional business chambers, which claims to represent the business community as a whole. 19. Average tariffs in the agricultural sector were more than double those in the industrial sector and tended to decline more slowly. The average agricultural sector tariff was 17.1% in 1995 and declined to 12.7% in 2003; the average industrial sector tariff was 10.6% in 1995 and declined to 4.7% in 2003; see http://www.comex.go.cr /estadisticas/Aranceles/Aranceles%20Promedio.pdf (accessed June 28, 2011). 20. Although the rural portion of the population continued to be significant (40% in 2002), the portion employed in agricultural activities tended to decline, equaling only 16% of the economically active population in 2002, substantially less than elsewhere in Central America. Value added in the agricultural sector was only 8.5% of GDP in 2002. See Todd, Winters, and Arias (2004, 3, 6). 21. The number of decrees and regulations increased from an annual average of 239 in 1960–1979 to 772 in 1980–1990 (Gutiérrez, as cited in Booth 1998, 63). Another technique to induce cooperation involved a twenty-­four-­hour sequestration of the legislature during a critical vote (Edelman 1999). 22. According to the Central American business sector–political party alliance classification developed by Colburn and Sánchez (2000, 27), the private sector in Costa Rica maintained a neutral position on the PLN-­PUSC competition, suggesting that neither party was perceived as adversarial. 23. Members of FUSADES’ first board of directors who went into the Cristiani administration (and the government positions they held) included Roberto Murray

250  Notes to Pages 45–53

(president, Social Investment Fund), Roberto Orellana Milla (president, Central Bank), and Óscar Santamaría (Ministry of the Presidency). See Robinson (2003, 346, n86). 24. The first ARENA government economic plan was a joint USAID-­F USADES project that involved twenty-­five international consultants. The FUSADES project coordinator for this plan, economist Mirna Liévano de Marques, became Cristiani’s minister of planning. Harberger collaborated with FUSADES on the first two five-­year plans and was named an honorary member of the organization in 2004 (FUSADES 2004, 3). 25. Data from World Bank, World Development Indicators. 26. Net maquila exports increased much more modestly (from 0.3% of GDP to 3.3% of GDP). 27. Agrarian reform targeted 472 estates larger than 1,235 acres in its first phase and, in Phase III, rented or sharecropped land under 17.3 acres in a “land to the tiller” program. Phase II, targeting estates between 605 and 1,235 acres (where coffee production was concentrated), was not implemented. In all, 22% of farmland was affected (Brockett 1990, 157). McElhinny (2001, table 6) found that, between the 1980s agrarian reform and the 1992 peace accord land agreement, 30% of farmland was redistributed in El Salvador. See also Wood (2003, 259). 28. The other three economic groups in El Salvador were ADOC, Agrisal, and Quiroz. Segovia identified four major business groups in Costa Rica (Corporación de Supermercados Unidos, Dos Pinos, Durman Esquivel, and La Nación) and three in Nicaragua (Fogel, Lafise, and Pellas) (Segovia 2005, appendix, 154–165). 29. ARENA won 50% of the legislative seats only in the 1989–1991 period. ARENA and the PCN formed a legislative coalition in the nine legislative periods between 1988 and 2009, including the PDC in 1997–2000 (FUSADES 2010, 126). 30. No dominant think tank emerged to house neoliberal policy research in Nicaragua until 2006, when the Nicaraguan Foundation for Economic and Social Development (FUNIDES) was established with financial support from USAID and the Nicaraguan private sector. 31. Eduardo Montealegre, for example, who returned from the Miami financial sector to open a private bank after the Sandinista defeat, served as Chief of Staff in the Arnoldo Alemán (1996–2001) and Enrique Bolaños (2001–2006) administrations and as Finance Minister under Bolaños when cancellation of Nicaragua’s foreign debt was negotiated. 32. Unlike Costa Rica, where the contribution of agriculture to GDP fell from 12.7% in 1990 to 7.9% in 2004, and El Salvador, where it fell from 16.5% to 9.2%, in Nicaragua, it remained essentially the same, falling only from 18.8% to 18.1% (Solà Montserrat 2008, 104). This outcome in Nicaragua was in part due to the 62% increase in land in production between 1990 and 2003 (Solà Montserrat 2008, 107), following the end of the contra war. 33. As elsewhere in the region, Nicaraguan leaders often shun the “neoliberal” label, understanding it to be a term of opprobrium. But the thrust of policy development in Nicaragua was generally consistent with the Washington Consensus agenda, albeit with particular variations that represented critical junctures and local conditions. 34. Average turnout in presidential elections for 1978–2004 was 81% in Nicaragua, the highest in the region. Costa Rica followed with 78%; average turnout in El Salvador was a relatively low 52% (Cerdas Cruz 2010, 316).

Notes to Pages 62–73 251

Chapter 2 1. Whereas only 14% of WTO-­notified regional trade agreements that entered into force in 1990–1994 involved developed–developing country partners, this proportion had increased to 33% in 2003–2006 (Fiorentino, Verdeja, and Toqueboeuf 2007, 10). 2. The language of “can do” and “won’t do” countries was deployed by Zoellick (2003a) in his critique of countries he held responsible for the September 2003 breakdown of the WTO meeting in Cancún. 3. Whereas 194 of the 221 Republicans voted to approve TPA, only 21 of the 211 Democrats supported the measure (Sek 2003, 6). 4. Each country had somewhat different goals, depending on their economic profile, although there was substantial overlap. The Costa Rican Foreign Trade Ministry (COMEX) (2002, 7) identified that country’s CAFTA objectives as consolidating and expanding exports to the U.S. market; eliminating nontariff barriers and unjustified trade distortions; establishing clear, stable, and transparent rules to govern trade relations and for dispute settlement; creating a stable juridical framework and propitious environment for investment; promoting competition through product improvement; and establishing an aid agenda with the United States and international organizations. See Arana (2010) for discussion of Nicaragua’s goals. 5. Although El Salvador’s dependence on U.S. trade and foreign investment was lower than the regional average, the country had become heavily dependent on remittance transfers from the United States. Salvadoran remittances climbed from $322 million in 1990, equal to 6.7% of GDP, to $1.9 billion in 2002, equal to 13.6% of GDP (Acevedo 2004, 354–355). In addition, the vulnerability of many Salvadorans to possible revocation of their temporary protected status visas reinforced the rule maker position of the United States in El Salvador. 6. Tariff dispersion (standard deviation) also declined during the 1986–1999 period, aided by Central American Common Market harmonization efforts, as did nontariff barriers, which eroded more rapidly in Central America than elsewhere in Latin America (Lederman, Perry, and Suescún 2002, 13, 16). 7. All translations are mine unless otherwise noted. 8. At the end of 2001, the five Central American countries had signed three different trade agreements with Mexico and collective trade agreements with Chile and the Dominican Republic. Costa Rica had also completed a trade agreement with Canada (Góchez, Lara, and Tolentino 2003, 80). 9. See, for example, Ministry of the Economy, Trade Policy Department [El Salvador], 2003. 10. According to Miller (2005, 28–30), the IDB commitments for CAFTA trade capacity building projects in 2003 totaled $323 million. In addition, the World Bank committed $70 million, the U.S. government covered $34 million, and the Central American Bank of Economic Integration (BCIE) provided $4.35 million. 11. According to FUSADES’ main trade policy analyst, Carlos Orellana Merlos (2005), five Salvadoran business associations participated “intensively” in trade-­policy making: the peak association (ANEP), industrialists (ASI), commerce and industry (Chamber of Commerce and Industry of El Salvador, CCIES), exporters (Corporation of Salvadoran Exporters, COEXPORT), and the clothing industry (Salvadoran Apparel Industry Association, ASIC). Marginal participants included the associa-

252  Notes to Pages 74–79

tions for construction, banking, agriculture, and small and medium-­sized enterprises (Orellana Merlos 2005, n.p.). Osterlof (2009, 180–185) identifies the lead chambers in the Costa Rican pro-­CAFTA lobby as the peak association (UCCAEP), industry (CICR), AMCHAM, textiles (National Association of Textile Industry Exporters, ANEIT), and exporters (Costa Rican Chamber of Exporters, CADEXCO). 12. The Costa Rican export chamber, CADEXCO, had withdrawn from UCCAEP in 1999 to pursue export interests more aggressively, although some CADEXCO affiliates were also members of other UCCAEP chambers (Osterlof 2009, 156–157). At the other end of the spectrum, some business sectors were CAFTA critics. Rice growers, sectors of the dairy industry, and the generic pharmaceutical industry raised concerns about CAFTA in Costa Rica (Chaves 2005). For discussion of business sector opposition to CAFTA in Costa Rica, see Osterlof (2009, 157–158). 13. In addition to Nicaraguan president Bolaños’ long-­term leadership of COSEP, Salvadoran president Tony Saca (2004–2009) served as president of ANEP immediately prior to assuming the executive office. 14. Attempting to counter the impact of the U.S. sugar lobby, Central American sugar producers ran a pro-­CAFTA ad campaign in the United States. See, for example, the Azucareros del Istmo Centroamericano ad, “The Legitimacy of Sugar in CAFTA,” posted at Inside Trade, January 23, 2004. 15. See, for example, the statement of support by Federico Colorado, president of ANEP, as quoted in Lafitte Fernández (2004). See also Jiménez (2003); Ruiz Maida and Oñate (2004). 16. The Costa Rican pattern in 2005 was generally consistent with the distribution of views registered in my interviews in Nicaragua (2003, 2006, 2007, 2008) and El Salvador (2004, 2005, 2010). Interviews in Nicaragua and El Salvador were spread out over a longer time period, were conducted at different phases in the CAFTA process, and occurred in the midst of other political and economic changes. To reduce variation which could be introduced by these extraneous factors, only the 2005 Costa Rica results are reported in table 2.3. 17. According to one calculation, the micro, small, and medium-­sized business sector in Costa Rica represented 98% of businesses, whereas “large” operations constituted only 2% of the total (Osterlof 2009, 152). 18. In the Chilean case, separate side rooms were set up for representatives of business, unions, and small and medium-­sized producers (FTAA–Committee of Government Representatives on the Participation of Civil Society 2003, 4–5). 19. The Costa Rican report on CAFTA outreach efforts (COMEX 2004b) notes COMEX’s establishment of a library and webpage, publications (including free CDs) of COMEX documents, public events and press statements, and an interactive question box linked to the ministry’s webpage. COMEX reported 289 meetings about trade in goods with representatives of 900 firms and 69 chambers, associations, unions, and institutes; another 54 meetings about services and investment were recorded with 136 representatives of chambers, associations, public and private institutions (14, 16). See also Rodríguez Vargas and Solano Murillo (2004); Rodríguez Vargas (2005). The Salvadoran report, presented by the Ministry of the Economy’s (2004) Citizen Participation Program, also noted information sessions, publications, and a website (Ministerio de Economía 2004). It listed 394 consultations and briefings, largely directed to the private sector. Seventy-­four percent of those sessions (292) were with

Notes to Pages 80–86 253

business organizations, including ODASP (41), business chambers and sectors (200), individual companies (44), and other business commissions (7). Twelve percent of the sessions (46) were with social organizations, including Iniciativa CID (16), academic institutions (29), and Catholic Relief Services (1). Most of the remaining 14% (56) were workshops for government ministries and agencies. The Nicaraguan government did not publish an outreach summary. However, CARANA’s CSOP inventory for Nicaragua (2004b, A54–61) reported 70 ministry consultations with individual firms, 82 meetings with business associations, production sectors, NGOs, legislators, and the public, and 15 meetings with “academic and intellectual” sectors. Unlike the other Central American trade ministries, MIFIC opened a reading room, allowing accredited participants in Nicaragua to review (though not copy) the CAFTA text as it unfolded. 20. CID’s international funders included the Ford Foundation, NOVIB Holland, Oxfam America, Oxfam Great Britain, Diakonia Sweden, MS Denmark, CARE, Catholic Relief Services, UNDP, the Heinrich Böll Foundation, and Project Counseling Service (Iniciativa CID 2002, 8–9). 21. Bravo and Ramos (2008) reported only around 20 civil society representatives attending the third round in San Salvador, compared to 500 private sector representatives, and around 10 civil society representatives at the sixth round in New Orleans, compared to 100 from the private sector. 22. See also Mora Jiménez (2004). 23. The Central American countries all excluded white maize, except Costa Rica, which selected onions and potatoes. The United States selected sugar. 24. To provide a measure of protection against sudden sector collapse, a one-­use safeguard mechanism was added to the agreement to guard against sudden surges during the period of tariff reduction. Negotiators in Nicaragua, the country most dependent on staples production of these three cases, regarded the safeguard provisions allowing temporary tariff restoration as protection for the sector (Arana 2006). Small grains producers, however, were not convinced that this measure would actually be called into force or would provide effective protection (Cáceres 2003, 2006). 25. In view of the underdeveloped state of Nicaragua’s garment industry, the country was allowed to acquire 100 million square meters’ equivalent of cloth from outside the region. This concession triggered opposition in the U.S. textile industry and, following completion of the rounds, was replaced by a 1-­to-­1 rule, which required the Nicaraguan exporters to match each unit acquired outside the region with one produced inside it (Carrión 2009; Sequeira 2006). 26. For the history of ICE, see Sojo (2004). 27. Costa Rica accepted the nondiscriminatory opening of private network services, Internet services, and mobile wireless services. See “Annex 13” at the end of chapter 13 (telecommunications) in the Dominican Republic–Central America– United States Free Trade Agreement (USTR 2004). In its preliminary evaluation of the telecommunications commitments in the agreement, the Internal Front of ICE Workers challenged the characterization of the opening as “selective,” based on several qualifying clauses, and, noting that cell phones generated the majority of ICE’s telecommunications income, highlighted the financial damage that would result from opening the “most profitable and strategic” sectors of the industry (as quoted in Villasuso 2005, 55–57).

254  Notes to Pages 87–93

28. Denton (2005); Pacheco (2005). See also Colburn and Sánchez (2000, 66) on the criticism of ICE by Costa Rican business leaders in 1999, and A. Mora (2004, 237–260) for a forceful critique of state telecom services by the president of Infonet Central America and the CADEXCO vice president. 29. This kind of alliance, in which one sector of Costa Rican elites, unable to win a domestic policy contest, allied with a powerful external actor to press the issue from the outside, has been found repeatedly in the neoliberal policy story of that country. See Wilson (1998, 128) for a discussion of the way in which inside reformers encouraged USAID to condition its 1984 release of funds on legislative approval of the Ley de la Moneda, launching the first phase of bank privatization. 30. “Understandings” are side letters circulated among the parties to the agreement. Costa Rica issued eleven side letters, many more than El Salvador (six), the Dominican Republic (five), Guatemala (four), Honduras (three), and Nicaragua (one). See USTR (2004). 31. This program funded trainers in each country for Workforce Briefings offering “unbiased information” about CAFTA-­DR. It organized a Leadership Coalition to recruit business leaders who pledged to donate time and resources to this cause. For program descriptions and documentation, see http://www.c-­caa.org/programs /usaid_initiatives.html and http://www.c-­caa.org/programs/caftaction_overview.html, accessed July 7, 2012. Team leaders for the three countries included in this study were Carlos Denton and Harry W. Strachan (Costa Rica), Francisco Escobar-­Thompson and Roberto Murray Meza (El Salvador), and Adolfo Argüello Lacayo and Ernesto Fernández Holmann (Nicaragua). See http://www.c-­ caa.org/programs/caftaction _components.html (2). 32. This description is based on personal observations of a working group session with MIFIC personnel and pro-­CAFTA campaign designers as the project was in development, July 22, 2003. The team rejected the slogan “Our Chance” as unfocused and lacking a link to economic progress, along with various color schemes that were too closely identified with commercial brands. 33. In their final report (USAID 2005), CARANA consultants expressed reservations about Nicaragua’s pro-­CAFTA media campaign because of questions about its cost and effectiveness. CARANA’s other projects in Nicaragua involved providing financial and administrative support for the Managua negotiation round; getting CAFTA news articles into the national press (reporting an average of three per week for the first six months of 2003); contracting international specialists to give lectures and presentations in Nicaragua; and financing the construction of a general equilibrium model to estimate possible CAFTA effects. See CARANA (2004b). 34. The question posed was, “Do you believe that approval of the agreement called CAFTA would benefit Guatemala, harm Guatemala, or have no effect?” Only those who indicated that they had heard or read at least “a little” about CAFTA were asked this question. In the December 2004 poll, 35% said CAFTA would harm Guatemala. This increased to 65% in the poll conducted in March 2005, following ratification and attendant protests. See CID-­Gallup (2004, table 13) and CID-­Gallup (2005, table 8A).

Notes to Pages 99–112 255

Chapter 3 1. CSTS, founded in 1998, networked thirty-­seven labor organizations at the end of the 1990s (Almeida 2008). 2. ICE reported that charges per minute on a fixed-­line phone in Costa Rica were $0.01 in 2003, compared with $0.04 in Guatemala and $0.12 in El Salvador (as cited in Villasuso 2005, 61). Sojo (2004, 30–31) found that ICE’s rates for local calls and cell phones were among the lowest in Latin America, although its international calling rates were at an intermediate level (Costa Rica ranked thirteenth of twenty-­two nations in the latter category). In public opinion polling by UNIMER in 2000, 71% of respondents expressed satisfaction with ICE (as cited in Sojo 2004, 29). 3. To this organizational explanation, Smith-­Nonini (2010) adds the idea that struggles over health rights may have particularly broad mobilizational characteristics, and health workers may exercise a distinct form of leadership due to “medicine’s moral symbolism as a defender of life and hope” (254). 4. Zapatista leaders and allies had convened international gatherings in Chiapas (1996) and Spain (1997) to construct an international network of resistance. 5. Bendaña was director of CEI, an organizational sponsor of the 2002 Foro Mesoamericano, which was held in Managua, and served as a coordinator of the Nicaraguan delegation to the 2004 Foro in San Salvador. 6. The 2004 Foro Mesoamericano in San Salvador, for example, was interlaced with eight formal companion gatherings, each focused on a different topic—women, peasants, young people, biodiversity, dams, labor unions, popular education, and community. 7. Pupusas, thick, handmade corn tortillas stuffed with cheese, beans, spices, or meat, are a staple in the Salvadoran diet. 8. Although civil society organizations and social movements share many characteristics, social movements are normally found to differ from other forms of “contentious politics” by the density of the networks they develop, the social solidarities and sense of common purpose they inspire, their use of “culturally resonant, action-­ oriented symbols,” and the durability of their confrontational interactions with the elites (Tarrow 1998, 2, 4). 9. As described in McAdam, Tarrow, and Tilly (2001), for example, the distinction between “contained” versus “transgressive” social movements refers to whether the movement is drawn from “previously established” groups using conventional strategies or from “newly self-­identified” groups using an innovative repertoire of tactics (7–8). That distinction would seem to lend itself to labels like “preexisting” versus “novel” rather than “contained” versus “transgressive.” By common understanding, the concept of transgression carries more emphatic meanings than simply “new” or “different.” 10. See von Bülow (2010, 155–175). Initiated in 1998, the fifth version of the draft was finally completed in 2005. 11. My use of the “critic negotiator” category roughly parallels the “insider” designation used by Smith and Kororzeniewicz (2001, 28); my “transgressive resister” category is similar to their subcategory of “rejectionist outsiders,” who, under the leadership of the Hemispheric Social Alliance, boycotted official and semiofficial consultation processes. 12. CID affiliates in Nicaragua were Centro Humboldt (environmental), CST-­

256  Notes to Pages 113–118

JBE (labor), FENACOOP, the National Union of Farmers and Ranchers (UNAG), and the National Agricultural Union of Associated Producers (UNAPA), all rural sector associations. The CID network in Costa Rica was much thinner, but included UPANACIONAL (small farmer association) and CINPE, a UCR development research center (Iniciativa CID 2003c). The more radical Foro Mesoamericano network also built alliances in each of these countries, with delegation size varying substantially. For example, the fourth Foro meeting, which was held in Honduras in 2003, was attended by representatives from ninety-­two Salvadoran, sixty-­three Nicaraguan, and thirty-­two Costa Rican organizations (Foro Mesoamericano 2004a, appendix 5, 108–124). CAFTA opposition developed later in Costa Rica than in the other two countries, and the organizational bifurcation found in El Salvador was less apparent. Costa Rica’s anti-­CAFTA movement did, however, display marked diversity and internal divisions, some of which became more apparent in the aftermath of their defeat. See Álvarez Rudín and Hintjens (2009, 51) on the “reformist-­revolutionary tension” within the Costa Rican leadership. For discussion of divisions within the anti-­CAFTA forces in Nicaragua, see Carrión 2009; Craig 2010; Finley-­Brook and Hoyt 2009. 13. Forty-­five of the eighty-­four deputies voted in support. According to Góchez, Lara, and Tolentino (2003, 101), “this was the first commercial accord that had any level (minimal) of legislative debate since the previous ones were signed without having been studied.” 14. Participation in the negotiation process revealed some common ground with a segment of agricultural producers. The Salvadoran minister of agriculture invited CID representatives to attend the Fifth Meeting of Central American Agriculture Ministers in Comalapa, El Salvador, on April 27, 2003, where CID leaders found that their agricultural concerns had much in common with those presented by the regional agricultural business chamber, the Central American Federation of Agriculture and Agroindustry Chambers (FECAGRO) (Iniciativa CID 2003a, 2003c; FECAGRO 2003). 15. V Foro sponsors included Oxfam, Pan para el Mundo, NOVIB, Share, and Desarrollo y Paz (Canada) (MPR12 2004a). 16. CRIPDES, a key MPR12 affiliate, reportedly worked in 300 communities, many of them repopulated by returning refugees during the 1980s, and it claimed to represent over 100,000 people (MPR12 2004b). The Confederation of Salvadoran Agrarian Reform Cooperatives (CONFRAS), which represented agrarian reform cooperatives forged during and after the war, claimed 11,500 direct and 75,000 indirect associates (CONFRAS 2004). Although these organizations had a strong base, MPR12 affiliates had generally lost members in the 1999–2004 period. The FSC, which claimed over 70 affiliated organizations when it emerged, fueled by international donor support for civil society participation in post–Hurricane Mitch aid deliberations, reported only 10 affiliates in July 2004 (FSC 2004). Disillusionment about the lack of government compliance with agreements, the defection of women’s organizations claiming inadequate representation, the unwillingness of the Flores administration to consult with civil society, the withering of donor financial support, and the generally dispiriting consequences of economic duress were cited by FSC organizers as factors contributing to the network’s decline. 17. RST leadership included Raúl Moreno, an active participant in the Hemi-

Notes to Pages 124–134 257

spheric Social Alliance, which sponsored his research and publications. See Moreno (2003); Bloque Popular Centroamericano, Alliance for Responsible Trade, and Alianza Social Continental (2004). 18. Comparative studies of the impact of social movements on international agreements note the particular resistance of trade negotiations to civil society inclusion. Smith and Korzeniewicz (2007) compare the Summit of the Americas process, where insiders had some impact, with the FTAA track, which was “shaped by the dominant logic of exclusion” (263). Della Porta and Tarrow (2005, 6) also note the difference between arenas governed by internationally established norms, such as human rights, and those directed by “internationally hegemonic discourse,” such as market liberalization, where activists have had less influence. Chapter 4 1. In contrast to horizontal accountability, vertical accountability refers to the power of voters to exercise control over public officials and policies through use of the electoral process to retain or replace them. 2. Analyzing twenty-­five postcommunist political systems, Fish (2006) found that legislatures with a higher number of legally mandated powers and resources tended to subsequently receive stronger democracy scores in Freedom House surveys. For a critical review of the Parliamentary Powers Index, see Melia (2010). 3. Freedom House classified Costa Rica as “free” every year from the launch of its annual scoring process in 1973 through 2010; El Salvador as “partly free” from 1977 to 1996 and “free” from 1997 to 2010; and Nicaragua as “partly free” every year from 1973 to 2010. See also Bowman, Lehoucq, and Mahoney (2005). 4. See FUSADES (2010, 126) on the 1988–2009 ARENA-­ PCN coalition pattern. 5. Dismayed by ARENA support for the Christian Democrat Party (PDC) member as committee president, the PCN representative reportedly threw his vote to Martínez, who, with backing also from the CDU representative, obtained the post (Dada 2005). 6. The delegation was composed of the ministers of the economy (Yolanda de Gavidia), foreign relations (Francisco Laínez), agriculture (Mario Salaverría), environment (Hugo Barrera), and labor (Roberto Espinal). 7. See Portillo (2004). According to Ad Hoc Committee president Hugo Martínez (2005), USAID had already approved funding for the proposed impact study, and consultants were bidding for the contract when the legislative leadership moved to dissolve this committee. 8. Indeed, committee records include letters dated December 16 inviting the directors of “ODAPS” [sic; ODASP] and CAMAGRO to discuss CAFTA with the committee at a work session planned for December 20 (Asamblea Legislativa de la República de El Salvador 2004c). 9. Legislative voting in El Salvador in 2004 did not include roll call voting or an official registry of the votes. Supporters simply raised their hands, and a visual count was taken. A tally of opposition votes would also be made if requested (C. Cordero 2005; Artiga González 2007, 332–333; see general discussion of this practice in Cen-

258  Notes to Pages 135–141

tral America in Carey 2003). Since there was no official roll call report, there was no official record of the party breakdown for legislative votes. Fluid party affiliations further complicated these calculations and led to slightly different reports, even among expert observers. In her description of the CAFTA vote breakdown, Calderón de Escalón (2005) identified the pro vote as ARENA, 29; PDC, 2; PCN, 14; a PDC offshoot, 3; and FMLN dissident, 1, for a total of 49 votes in favor. The opposition vote was FMLN, 30, and CDU, 5, for a total of 35. See also AFP (2004); “Dijeron sí TLC” (2004). 10. The commission was created on July 14, 2003. In addition to Noguera, it included David Castillo, Eduardo Mena, and Noel Ramírez of the PLC; Alba Palacios, Rita Fletes, and Jacaranda Fernández of the FSLN; and Delia Arellano of Azul y Blanco. 11. The “pact,” described by its architects as a “governability” agreement, allowed Ortega and Alemán to divide up the distribution of positions in the Corte Suprema de Justicia, the Consejo Supremo Electoral, Consejo Superior de la Contraloría, Procuraduría de la República, and Superintendencia de Bancos—that is, key monitoring mechanisms through which horizontal accountability should, in theory, be exercised. 12. As outgoing president, Alemán held an automatic seat in the National Assembly and enjoyed immunity from prosecution until this protection was lifted through legislative action. Much of his prison term was spent under a very loose form of house arrest. His sentence was overturned by the Nicaraguan Supreme Court in January 2009. 13. The econometric analysis by Sánchez and Vos (2005) (produced for MIFIC under CARANA contract and with UNDP cofinancing) found that CAFTA’s impact would be positive, particularly in the maquila sector, “but this would not occur automatically with just the implementation of the agreement” (11). Social and economic benefits from CAFTA would require macroeconomic reforms and measures to increase human capital and productivity. 14. George W. Bush created the MCC as a new way to organize bilateral aid transfers. Using a government corporation model, which allowed easier hiring, firing, procurement, and contract decisions than were allowed in conventional aid programs, this program was designed for efficient implementation of aid “compacts.” A set of seventeen indicators, organized around measures of rule of law, social investment, and economic freedom, was used to determine eligibility; Nicaragua was the fourth country to receive aid through this program (Tarnoff 2009). According to the USAID trade capacity building database, in 2005, MCC committed $123 million ($93 for physical infrastructure) to Nicaragua. See http://tcb.eads.usaidallnet.gov/query/do, accessed October 1, 2011. 15. The legislative process in Nicaragua gave the leadership considerable latitude in determining the order in which proposed bills were placed on the agenda and the pace at which they progressed to a vote. According to Núñez (2005), the FSLN and the PLC had made an agreement to hold off CAFTA passage until the new laws envisioned in the Complementary Agenda were in place. The FSLN leaders’ acceptance of the vote acceleration after Zoellick’s visit may have been a pragmatic response to the PLC defection. It may also have been designed to signal FSLN flexibility to the U.S. government in hopes of mitigating hostility as Nicaragua’s 2006 presidential election came into view. See chapter 6 for additional discussion. 16. Explaining his delay, Pacheco commented, “We’ve already talked about how

Notes to Pages 141–148 259

the FTA will have a place when we’re sure that it’s for the benefit of all the Costa Ricans. And when I say ‘all the Costa Ricans,’ I’m referring to the poor” (EFE 2005). 17. Evidence based on the ratio of executive proposals submitted versus approved during the first year of his administration suggests that Pacheco was less successful in advancing his legislative agenda than his three immediate predecessors. According to an analysis by the State of the Nation Program (PEN 2004, 346–348), during the extraordinary sessions (periods when the president determines legislative deliberation priorities) in the first year of the administration, Pacheco succeeded in getting only 8% of projects approved, a success rate substantially below Calderón’s 18%, Figueres Olsen’s 29%, and Rodríguez’ 23%. 18. The five notables were Franklin Chang Díaz, NASA astronaut; Gabriel Macaya Trejos, chemistry professor and former rector of the University of Costa Rica; Alvar Antillón Salazar, lawyer, political scientist, and diplomat; Rodrigo Gámez Lobo, president of the Biodiversity Institute (INBIO); and Guido Villalta Loaiza, a priest named to represent the Catholic Church. The notables’ review was criticized for directing the process away from constitutionally authorized ratification mechanisms, for the members’ inadequate economic expertise, and for the alleged partisanship of its members (Franklin Chang as a U.S. citizen and U.S. government employee, Alvar Antillón as an aspiring legislative candidate for the PAC, etc.). 19. A supermajority would be needed if the Constitutional Court (Sala IV) judged CAFTA provisions inconsistent with the Constitution and its approval to require a constitutional change. Sala IV’s July 2007 judgment found CAFTA terms to be consistent with the Constitution. 20. The citizen initiative would have required the signature collection and audit of 5% of registered voters, a process that could have taken up to ten months before the active campaigning on the issue began. Referendum by executive decree, in contrast, required only a simple majority vote by the assembly (29 votes). See Willis and Seiz (2012a). 21. According to the Alliance for CAFTAction’s quarterly report for April–June 2005, over eighty-­five companies operating in Costa Rica received workforce briefings between February and June 2005, with 7,909 workers “trained” through this process (C-­CAA 2005, 4–5). 22. Following exposure of the memo, Casas resigned the vice presidency and later took a position at the Brookings Institution. He subsequently issued an apology for the role he played in what he characterized as a low-­quality debate deformed by “half truths and mutual denigration” (Casas-­Zamora 2008). 23. As quoted in “Bravo, Costa Rica,” Wall Street Journal (October 9, 2007). 24. Castillo Méndez (2002, 71–72) emphasized Carazo’s historical connection to ICE, reporting that the length of the electrical grid doubled and home electrical service was extended to 600,000 people during the Carazo administration. 25. An Encuentro Popular website posting in May 2004 listed ninety-­six organizations that had responded to their anti–free trade convocatorias, including the Association of Secondary Education Teachers (APSE), the National Association of Educators (ANDE), COECE/CEIBA–Amigos de la Tierra, the Rerum Novarum Confederation of Workers (CTRN), the ICE workers’ union, and UPANACIONAL. See http://www.encuentropopular.org/org, accessed May 26, 2004. 26. Competing claims have been made about the role in the CAFTA debate played by the PLN, the country’s dominant political party. Although Arias’ leadership in the

260  Notes to Pages 150–162

pro-­CAFTA movement points toward partisan influences, the gap between the social and geographical regions of PLN strength in 2006 and the regions with pro-­CAFTA majorities in the referendum suggests some disconnection. Arias won the 2006 presidential race in Guanacaste and Puntarenas, provinces where CAFTA was defeated in the referendum, and he lost in 2006 in the major urban areas of San José and Heredia, provinces where pro-­CAFTA forces were victorious the following year. See Hicks, Milner, and Tingley (2009); PEN (2008, 70); and Rojas Bolaños (2009, 39). 27. LAPOP, AmericasBarometer, 2008 Costa Rica survey. 28. In his study of the size of legislative majorities in El Salvador, Artiga-­González (2007, 322) found that, of the 538 laws, reforms, and interpretations approved by the legislature between 1998 and 2005, 75% received more than two-­thirds support. 29. The PDDH’s report (2005) criticized the “nonconsultative and antidemocratic form” (2) in which the CAFTA process had been managed in El Salvador and described its legislative ratification process as “an overt regression in the democratic construction of our present and future” (5). 30. The exception is found in the frequent use of referenda on European integration (Hobolt 2006). 31. Much research on public opinion about trade policy operates on the assumption that trade attitudes are stable; little effort has been dedicated to monitoring variation in the distribution of these opinions across time. Analysts such as Andy Baker (2009) contend that public attitudes toward trade liberalization in Latin America are both positive and durable, being rooted in consumerism and a taste for product diversity. Actual attitudes toward particular free trade agreements, however, display considerable temporal variation, as we saw at the end of chapter 2. 32. At the end of this campaign in October 2005, when President Pacheco submitted CAFTA to the legislature for ratification, 87% of respondents associated CAFTA with the phrase “generates employment,” up from 78% in June 2005 (UNIMER 2005). 33. Reformed laws in Nicaragua were the Ley Especial del Delito de Cohecho y Delitos contra el Comercio Internacional e Inversión Internacional; Ley de Reformas y Adiciones a la Ley No. 380, Ley de Marcas y Otros Signos Distintivos; Ley de Reformas y Adiciones a la Ley No. 354, Ley de Patentes de Invención, Modelo de Utilidad y Diseños Industriales; Ley de Reformas y Adiciones a la Ley No. 322, Ley de Protección de Señales Satelitales Portadoras de Programas; and Ley de Reformas y Adiciones a la Ley No. 312, Ley de Derecho de Autor y Derechos Conexos. These laws were approved, with FSLN support, by the Nicaraguan legislature between March 14 and 22, 2006, and published in La Gaceta #60 (March 24, 2006). Chapter 5 1. For a complete list of investors in 2006, see Henríquez (2008, 19). Six of these companies were Canadian; the others were U.S. and Australian. 2. Mesa Nacional members included organizations from local communities, environmental and human rights organizations, and research affiliates. The local communities from the proposed mining region were represented by the Rural Communities Association for Salvadoran Development and several of its affiliates from “repopulated communities.” High-­profile national-­level organizations included Salvadoran

Notes to Pages 165–171 261

Ecological Unity (UNES), an activist-­oriented environmental organization, and the Foundation for the Study of the Application of the Law (FESPAD), a legally oriented human rights organization that gave special attention to economic, social, and cultural rights (Moreno et al. 2009). Research support was provided by the Investment and Trade Research Center (CEICOM). Formed initially as a research project on trade and the environment with Böll Foundation funding, CEICOM gave increased attention to mining as these investment projects advanced. For a complete member list, see Henríquez (2008, 29n15). 3. See, for example, the Mesa Nacional Frente a la Minería (2008) blog about an October 17, 2008, youth delegation to Valle de Siria. 4. The Mesa Nacional and two of its members subsequently affiliated with the Latin American Mining Conflicts Observer (OCMAL, http://www.conflictosmine ros.net), a continent-­wide network monitoring mining conflicts, particularly in the Andes, that was launched in Oruro, Bolivia, in March 2007. OCMAL had registered 133 mining conflicts in fifteen Latin American countries by August 2010. 5. See testimony by Pacific Rim Mining Company president and CEO, Thomas Shrake (2010), during committee hearings on mining law reform in the Canadian Parliament, about acts of intimidation and violence directed against company personnel, and the rejection of those claims by Mesa Nacional (2010). 6. Moran received a doctorate in geological sciences from the University of Texas at Austin, followed by six years spent in the Water Resources Division of the U.S. Geological Survey and twenty years as a hydrogeologist for private clients, including mining companies. His subsequent work in Latin America included critical research reports on mine projects in Honduras, Peru, Argentina, Chile, Guatemala, El Salvador, Bolivia, and Colombia. See Moran (2005a, 2005b) for reports on projects in Guatemala and El Salvador. 7. UNES leaders collaborated with Florian Erzinger of the Environmental Science and Development Studies Program at the Federal Institute of Technology in Zurich to produce El lado oscuro del oro (The dark side of gold; Erzinger, González, and Ibarra 2008). Dina Larios de López, a Salvadoran geochemist and hydrogeologist and professor of geology at Ohio University with a specialization in acid mine drainage, coauthored “Riesgos y posibles impactos de la minería metálica en El Salvador” with CEICOM (López, Guzmán, and Mira 2008). Other academic specialists were contracted directly by INGOs. Thomas M. Power, an economist at the University of Montana, for example, wrote Metals Mining and Sustainable Development in Central America, a 2008 Oxfam research report that, reviewing academic and policy literature, showed that the link between mining production and economic development was weak. 8. Robert E. Moran’s consulting and research reports on Latin American cases, for example, were funded by a host of INGOs, including, among others, Oxfam, Friends of the Earth, Christian Aid, Greenpeace, the International Development Research Center, Diakonia, Heinrich Böll Foundation, and Pax Christi. 9. See Cáritas–El Salvador information at http://www.caritas.org/worldmap /latin_America/elsalvador.html, accessed August 19, 2010. 10. Concern about the moral and ethical meaning of environmental destruction has long roots in various religious traditions, Catholicism among them (Jenkins 2008). 11. In a 2007 national survey, 52% identified themselves as Catholic, 29.5% as Evangelicals, and 17% as having no religious affiliation (IUDOP 2008, 11).

262  Notes to Pages 173–178

12. Evidence of such INGO support looms large on the websites of El Salvador’s neoliberal resistance-­oriented NGOs and the back covers of their many publications. The Mesa Nacional’s research affiliate, CEICOM, for example, lists five funders on its website: the Heinrich Böll Foundation of Germany, the Netherlands-­ based ICCO, Eusko Jaularitza of the Basque government, the Swedish Diakonia, and Oxfam America. In addition to these sources, CEICOM’s publications on the history of mining in El Salvador, the environmental and social problems it generated, and the processes involved in the ICSID case received financial support from the Spanish labor rights foundation Paz y Solidaridad, and two Salvadoran organizations, the Universidad Luterana Salvadoreña and ADES, themselves recipients of INGO funding (Henríquez 2008; Ramos 2009). 13. During the CAFTA debate, for example, Oxfam America provided financial support for two rival networks (Iniciativa CID and Foro Mesoamericano) to avoid stifling discussion or intensifying rivalry by assisting only one (Spalding 2007). 14. Hinds received an MA in economics from Northwestern University in 1973, and he served as El Salvador’s minister of the economy in 1979–1980. Following a stint with the World Bank, he returned as finance minister during the Calderón Sol administration (1994–1999), and he helped usher in dollarization under Francisco Flores (1999–2004). As a fellow at the Council on Foreign Relations, Hinds authored Playing Monopoly with the Devil (2006), where he makes a forceful case for dollarization. His coauthored book (with Benn Steil) Money, Markets, and Sovereignty (2009), an argument in the style of Friedrich von Hayek for the globalization of economic liberalism, was awarded the 2010 von Hayek prize by the Manhattan Institute. A regular contributor to El Salvador’s second most widely read newspaper, El Diario de Hoy, Hinds also served as a consultant to FUSADES, as well as the World Bank and IDB. 15. The methods and findings in the Hinds report are critiqued in Power (2008). 16. See testimony by Pacific Rim Mining Company president and CEO, Thomas Shrake (2010), during committee hearings on mining law reform in the Canadian Parliament, in which he discusses the company’s community eye-­care and reforestation projects. 17. “Strong” disagreement was indicated by 37%, and “somewhat disagree” by 17.5%. On the other hand, 30% indicated “somewhat agree,” and 10% agreed strongly, revealing a broad minority base of mining support (40%) (IUDOP 2007, 37). 18. On ecotourism, for example, 57% of women indicated that there would be “much” damage to this sector if a mining project opened, whereas 49% of men chose that response. In terms of variation by education level, 76% of those in the top grade classification (“superior”) indicated that there would be “much” damage to ecotourism, whereas 47% of those with less than a primary school education chose that response (IUDOP 2007, 53). 19. Factors other than public opinion and electoral demands may have played a role in Saca’s rejection of mining. Internal tensions in ARENA, which ultimately led to a party fissure (the defection of a faction of ARENA diputados in fall 2009 and Saca’s expulsion from the party in December), may have played a role, as might intra-­elite disputes over investment alternatives. Within ARENA, pro-­mining interests competed with sectors promoting tourism, and environmental disruptions associated with multiple mine openings became a source of tension. 20. E. López (2008); see also Pacific Rim Cayman LLC (2009, 30n47). 21. See Mesa Nacional Frente a la Minería (2009).

Notes to Pages 180–196 263

22. In contrast with assertions that CAFTA-­DR intellectual property provisions required Central American countries to raise guarantees provided to the pharmaceutical industry, Cerón and Godoy (2009) and Cartagena and Attaran (2009) found that while CAFTA-­DR raised the standard over TRIPs guarantees, several Central American countries had previously approved domestic laws that guaranteed protections even beyond those mandated by the free trade agreement (for example, on years of test data exclusivity). This finding suggests a prior under-­the-­radar advance of corporate protection that escaped the public scrutiny received by CAFTA. 23. See Steiner (2010), which includes reports from PDDH, the office of El Salvador’s human rights ombudsman; Holiday (2010). 24. These Washington-­based organizations were identified as significant U.S. actors in von Bülow’s (2010, 71) survey of trade-­resistance networks in the Americas. Other power node INGOs involved in this and related mining disputes include Ottawa-­ based organizations such as MiningWatch Canada and the Council of Canadians. 25. Amicus curiae briefs are legal statements in support of a disputing party issued by nonlitigants whose interests are affected by the outcome. 26. The Commerce Group case at ICSID was dismissed on a technicality in March 2011, as the company had not withdrawn its legal case from the Salvadoran court system at the time it filed the ICSID claim. Commerce Group filed an application for annulment of the ICSID decision on July 12, 2011, claiming that the Tribunal had exceeded its powers and failed to provide the reasons on which the decision was based. The outcome of the appeal was pending as of March 2013. 27. Funding for this evaluation was provided by the Spanish Agency for International Cooperation and Development. 28. As of March 2013, this bill remained under consideration. 29. Three Latin American governments have withdrawn from ICSID (Bolivia in 2007, Ecuador in 2010, and Venezuela in 2012). Argentina, which was found noncompliant in multiple investment disputes following its 2001 economic crisis, has remained a member but has used leverage over payments to whittle down ICSID awards during postlitigation negotiations. Chapter 6 1. The distinction between “Left” and “Right” is difficult to make with precision since these terms are often applied in a relative way that is tightly context bound. In general, however, governments and parties of the Left are characterized by their focus on issues of equality, skepticism about the social consequences of deregulated markets, and a stronger belief in the ameliorative power of state intervention. The Right, in turn, tends to deploy the discourse of freedom over equality and, in the arena of political economy, to emphasize the value of market dynamics while viewing state intervention more negatively. See Noël and Thérien (2008); Zechmeister and Corral (2010). 2. When asked in the 2000 Latinobarómetro poll about the state’s ability to resolve their country’s problems, on average, 29% of respondents in Latin American countries said the state could resolve all or the majority of the problems. The portion of respondents choosing this response increased 10 percentage points in 2007 (Latinobarómetro 2009, 88). 3. In their survey of neoliberal resistance activists at the G8 protest in Genoa in

264  Notes to Pages 197–201

2001 and the European Social Forum in Florence in 2002, della Porta et al. (2006) found generally low levels of confidence in political parties and national legislatures, although the degree of distrust varied by national delegation. 4. The Nicaraguan government used the World Bank’s methodology to determine poverty rates, but discrepancies arose over the interpretation of the 2005 data. Although the World Bank team claimed continued, if small, reductions in the poverty rate, Nicaraguan National Development Information Institute (INIDE) technicians contested those results. See the discussion in Spalding (2011). 5. Lustig (2009, 21) reported the Gini coefficient for Nicaragua as 50.22 in 2001 and 52.26 in 2005. 6. Opportunism, the concentration of power, and ousters by the FSLN gave rise to a competing Sandinista party, the Sandinista Renovation Movement (MRS), which provided a political home for prominent former FSLN leaders and renowned intellectuals. In spite of the caliber of its candidates, this party was unable to attract the FSLN base and, with few electoral victories, lost its legal registration in 2008. 7. Ortega’s electoral base was, however, larger than the 35.9% that gave Felipe Calderón the presidency in Mexico in 2006, and only modestly smaller than the 40.9% with which Oscar Arias was reelected in Costa Rica, also in 2006. 8. Ortega’s 2006 vice presidential running mate was Jaime Morales Carazo, a former banker and Contra commander. 9. In contrast, Rizo was backed by only 8% of the self-­identified far Left respondents, Montealegre by 5%, and MRS candidate Edmundo Jarquín by 2%. See LAPOP, AmericasBarometer, Country survey: Nicaragua (2010). 10. Note that support for a market economy rebounded in El Salvador in 2009, following the March election of Mauricio Funes. Agreement that a “market economy is best” rose to 70% in 2009, up from 52% in 2007 (see table 6.1). Although further analysis is required to determine the cause(s) of this reversal, it may be that those Salvadorans polled in 2009 were responding to the idea of a market economy that would be better regulated, as under the popular Funes administration, whereas participants in prior surveys responded to the idea of a deregulated market system, as pursued by the ARENA governments. 11. Asked in an IUDOP 2008 poll, “If the FMLN wins the elections, will El Salvador turn into another Cuba and will Venezuela have a strong influence?” 64% rejected that view; the same percentage said no when asked if they thought an FMLN presidential victory would negatively affect diplomatic relations with the United States (IUDOP 2009a, 131, 133). 12. A detailed study of campaign spending in the 2009 election found that ARENA and its allied groups were responsible for 67% of total spending whereas the FMLN and its allied groups were responsible for only 28% (Rodríguez, Padilla, and Torres 2009, 38, 35). 13. Many activists in the anti-­mining movement, for example, had at least an historical association with the FMLN. In my interviews with Salvadoran social movement activists in 2004, 2005, and 2010, respondents tended to describe the extent and current meaning of their relationship with the FMLN as variable and complex. Leaders of resistance-­oriented organizations often characterized this connection in tactical terms, and they sometimes expressed skepticism about the deals, trade-­offs, and political calculations made by the FMLN’s national leaders.

Notes to Pages 202–217 265

14. Official poverty lines are set by national governments and are not comparable across countries. The World Bank poverty measure of $2/day PPP and the indigence line of $1/day PPP (subsequently raised to $1.25) was commonly criticized for setting a bare survival standard (Damián and Boltvinik 2006) and has not been adopted by all countries. By the World Bank standard, the Costa Rican poverty rate in 2005 was 9%, and extreme poverty was 2% (World Bank 2007, xi). 15. Nor could the poverty lag be attributed to the growing population of Nicaraguan migrants; excluding the Nicaraguan households from the poverty calculations reduced the 2004 poverty rate by only 0.8 percentage points (from 23.9% to 23.1%) (World Bank 2007, 15). 16. Seligson (2007), using LAPOP survey data, found that the mean ideological self-­placement score for Solís voters in the 2006 race was 5.7, to the Left of the country average (5.9), but still on the Right of the spectrum. The mean score for Arias voters was 6.3. Interestingly, voters supporting Otto Guevara of the Libertarian Movement Party placed themselves furthest to the Left (5.3) among the voters supporting major candidates (85). Chapter 7 1. The 2010 LAPOP survey in Nicaragua found that respondents who identified as Sandinistas were 4.5 times more likely to be involved in a CPC than those who did not (Booth and Seligson 2010, 182). 2. According to the IMF’s fourth and fifth reviews under the Extended Credit Facility, the off-­budget wage bonus cost the Nicaraguan government $31 million in 2010 and $43 million in 2011 (IMF 2010c, Staff Report, 38), equivalent to 0.7% of GDP (7). 3. With the IDB embrace of countercyclical spending and allocation of additional funding for this purpose, Nicaragua doubled its borrowing from the IDB’s highly concessionary Fund for Special Operations, with loans rising from $80.2 million in 2008 to $170 million in 2010 (IMF 2010c, Informational Annex, 8). 4. Nicaragua’s extreme poverty rate reportedly dropped from 17.2% in 2005 to 14.6% in 2009 (GRUN 2011, 33). The accuracy of these measurements has been questioned, as has the extent to which the policies of the Ortega administration contributed to these results (Olivares 2010; Rogers 2010). 5. According to the monthly economic database of the Banco Central de Nicaragua (which excluded the export processing zones) for January–September 2010, 13% of Nicaragua’s non-­maquila exports went to Venezuela (versus 11% to all European countries combined and 32% to the United States). Venezuela accounted for 19% of Nicaragua’s imports, comparable to the 20% that came from the United States. See www .bcn.gob.ni/publicaciones/mensuales/externo/exterior, accessed December 6, 2010. 6. Heavy dependence on Venezuelan aid and trade raised the stakes for Nicaragua associated with Hugo Chávez’ death in 2013. 7. Given local and international concern about electoral manipulation in Nicaragua, Booth and Seligson (2010) found surprisingly little evidence of clientelistic vote buying. The percentage of respondents who reported that they perceived corruption as common declined sharply, falling from 83.5% in 2006, at the end of the Bolaños ad-

266  Notes to Pages 217–226

ministration, to 67.5% in 2010, leaving Nicaragua with a lower percentage of respondents reporting perceived corruption than the United States and Chile (72–73). Only 4.1% of respondents reported being offered a favor or benefit in exchange for their vote, and 76% of those who reported this experience indicated that it had no impact on their vote (192). Using alternative, indirect methods, however, González-­Ocampo et al. (2012) found evidence of pervasive vote buying in the 2008 election. 8. The opposition complained of electoral fraud, and official and unofficial international observers reported numerous irregularities (EU 2012; Carter Center 2011). Serious institutional problems notwithstanding, pre- and postelection surveys and partial counts by independent actors provide evidence of Ortega’s broad support (M&R Consultores 2012; McCoy 2011). 9. Prior to Funes’ election, a group of FMLN mayors formed the Intermunicipal Energy Association of El Salvador (ENEPASA) and signed an agreement with a subsidiary of PDVSA, creating their own joint venture, ALBA Petróleos, through which to import discounted petroleum. This 2006 agreement generated some local development funding to support the extension of potable water services, but remained a local initiative. See http://www.albapetroleos.com.sv, accessed March 30, 2013. 10. The thirty civil society representatives were divided into three equal parts, with ten representatives from the labor sector (Unitary Trade Union and Guild Movement of El Salvador, MUSYGES); ten from a coalition organized for Funes’ electoral campaign (Popular Consensus Building for Change, CPC); and ten from a more radical coalition that also supported Funes’ election (Social Front for a New Country, FSNP). The thirty business representatives were all drawn from ANEP. The nine academic institutions represented were the UCA, UES, Universidad Dr. José Matías Delgado, Universidad Don Bosco, FUNDE, FUSADES, the Ungo Foundation, the Salvadoran Development and Environment Research Program (PRISMA), and the Latin American School of Social Sciences (FLACSO) branch in El Salvador. The secretary of the presidency, Alexander Segovia, represented the Funes government (PNUD–El Salvador 2010a). 11. The Partnership for Growth focused on reducing crime and insecurity and addressing the low productivity found in El Salvador’s export sector. The initial private sector members of the Growth Council were Francisco Callejas, Francisco de Sola, Juan Carlos Eserski, Roberto Murray Meza, and Ricardo Poma (Barboza 2012). 12. This link was reinforced by the Brazilian origins of Funes’ wife and her previous role as representative of Lula da Silva’s Workers’ Party in El Salvador. 13. Ayala and Morán (2010). The average ideological self-­placement of Funes voters in 2009 was 4.1 on a 10-­point, Left-­Right scale, far removed from the 7.3 average of the ARENA party’s Ávila (Córdova Macías, Cruz, and Seligson 2010, 165). 14. When Arias (2010b) was asked in a 2010 interview about whether other PLN leaders shared his support for CAFTA, global economic insertion, and the breakup of state monopolies, he responded, “This is part of the conventional wisdom of the PLN. He who does not believe in this cannot be in the party.” 15. Some large-­n quantitative analyses by nonspecialists still use a badly dated interpretation of the PLN and, by extension, its candidates, and place them on the Left. See, for example, Murillo, Oliveros, and Vaishnav (2010). 16. Huber and Stephens (2010, 197) suggest several possible explanations for this distinctive pattern, including the Costa Rican tradition of multisectoral consultation,

Notes to Pages 228–238 267

the relative weakness of the private sector, and the social spending emphasis on health and education rather than pensions, a tilt that was less objectionable to international financial institutions. 17. Uncertainty about the meaning of the constitutional ban on reelection, a provision that could have prevented former president Arias from seeking a second term in 2006, was resolved in a court ruling that allowed the participation of former presidents in nonconsecutive contests. Although regarded by some as violation of the rules, Arias’ return to the fray and his narrow 2006 victory were generally accepted, given institutional affirmation of these outcomes. 18. An administrative tribunal annulled this decree and the mining concession in November 2010 on grounds that the required environmental impact assessments had not been completed. The first chamber of the Constitutional Court upheld this annulment in November 2011. 19. In contrast, the U.S. portion of 2002–2009 FDI averaged only 17% in Nicaragua and 24% in El Salvador (ECLAC 2010a, 49, 55, 56). 20. The number of beneficiaries of these scholarship programs increased from 91,392 in 2007 to 251,542 in 2009 (Trejos S. 2010, 40). Overall social spending, while also redistributive, was less well targeted because the wealthiest quintile absorbed disproportionate benefits from the social security sector (14). 21. In 2008, the AFL-­CIO and six Guatemalan labor unions filed a complaint with the U.S. Office of Trade and Labor Affairs (OTLA) in the Department of Labor concerning the repeated violation of Guatemalan labor laws and the Guatemalan government’s inaction despite recurring notification. In 2009, OTLA found that these claims were valid and called for a more active response from the Guatemalan government. USTR Ron Kirk began formal consultations with Guatemala on this complaint in July 2010 and, as it remained unresolved, requested the formation of an arbitral panel under CAFTA-­DR in August 2011. These steps may be viewed as evidence that the agreement can promote labor rights in the region by threatening noncompliant governments with fines of up to $15 million per case per year. Human rights organizations, including Human Rights Watch (2004) and WOLA (2009), however, contend that labor standards in CAFTA are too low (set by local laws, not international standards), enforcement processes too cumbersome, monitoring institutions too weak, and penalties too modest. 22. ECLAC (2010c, 6–7) reported that as of December 2009, twelve of eighteen Latin American countries had secured multilateral financing as one policy measure to address the international economic crisis. The IMF had provided $780 million in financial support for the region, and the IDB approved $850 million in infrastructure investments (21).

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Index

The letter f following a page number denotes a figure; the letter t following a page number denotes a table. Academía de Centroamérica, 8–9t, 39, 40, 57, 249n16 ADES (Economic and Social Development Association), 167, 262n12 advocacy networks, 8–9t, 161, 162. See also resistance movements; specific networks AFL-­CIO (American Federation of Labor-­Congress of Industrial Organizations), 99, 267n21 agrarian reform, 44, 46, 242, 250n27 agricultural sector, 41, 59, 78, 242, 250n32; and CAFTA negotiations, 81, 256n14; in El Salvador, 78, 120, 165, 176, 176t; in Nicaragua, 48, 52. See also farmers Alamanni de Carrillo, Beatrice, 152 ALBA (Bolivarian Alliance for the Peoples of Our America), 1, 213, 215, 218, 266n9 ALBA-­CARUNA, 213 ALBANISA (ALBA de Nicaragua, SA), 213 ALBA Petroleos, 266n9 Alemán, Arnoldo, 53, 72, 135, 198, 244–245t, 250n31; and corruption charges, 136, 153, 198, 258n12; and Daniel Ortega, 135–136, 198, 211,

258n11; and Enrique Bolaños, 135– 136; U.S. clampdown on, 137, 140 Alemán, Oscar, 74 Alianza Centroamericana contra la Minería Metálica, 166 Alliance for CAFTAction, 91, 144, 259n21 ALN (Nicaraguan Liberal Alliance), 198, 244–245t alter-­globalization activism (altermundista movement), 10, 15, 118, 146 alternative epistemic communities, 6, 8–9t, 167–169, 172, 184 Alternatives for the Americas, 111 AMCHAMs, 8–9t, 47, 52, 74–75, 91; and Costa Rica, 41, 54–55t, 144, 148, 252n11 American Center for International Labor Solidarity, 99 American Chamber of Commerce. See AMCHAMs; specific AMCHAMs Amigos de Mauricio, 200–201 AMPES (Salvadoran Association of Small and Medium-­Sized Business Owners), 78 Andean Trade Preference Act, 63 ANEIT (National Association of Textile Industry Exporters), 144, 252n11

306  Contesting Trade in Central America

ANEP (Costa Rica) (National Association of Public and Private Employees), 100, 101, 147 ANEP (National Private Enterprise Association): and CAFTA negotiations, 72, 73, 251n11, 252n15; and CES, 219, 266n10; and Funes administration, 221; structure of, 47, 220; and Tony Saca, 252n13 anti-­CAFTA campaigns, 10, 121t; in Costa Rica, 146–150, 256n12; and demonstrations, 13, 118, 135; divisions within, 109, 122–125, 256n12; in El Salvador, 106, 112–117, 117– 122, 159. See also specific organizations anti-­F TA movements, 158 anti-­G8 demonstrations, 111 Antillón Salazar, Alvar, 144, 259n18 anti-­mining movement in El Salvador, 17, 161–174, 264n13; and allies, 172–174; and alternative epistemic communities, 167–169; and brokerage networks, 164–165; and Catholic Church, 169–171; and deleveraging hook model, 185f, 186; and domesticating INGOs, 172–174; and domestic loop process, 183, 184, 185, 185f; and Honduran gold mining disputes, 162, 165–166, 168; and ICSID Tribunal, 160, 161, 178–182; overview of, 158–163; and relational networks, 164; and transnational activism, 163–167. See also metal mining; specific organizations APEN (Association of Nicaraguan Producers and Exporters), 52 APRE (Alliance for the Republic). See Azul y Blanco Arana, Mario, 70, 88f arbitration: vs. conciliation, 182; and Salvadoran gold mining disputes, 178–180. See also ICSID archbishop of San Salvador (Fernando Sáenz Lacalle), 170, 171 ARENA (Nationalist Republican Alliance), 1, 14, 21, 59, 131f, 152, 177, 257n5; and 2009 election of Mauri-

cio Funes, 177–178, 200–201, 218; and ANEP, 47, 219; and CAFTA, 70, 130–135, 258n9; and economic elite, 44, 47; and elections, 47–48, 199–201, 250n29, 264n12; and ­F USADES, 44, 250n24; and market reform, 44–46, 47, 48, 59, 221; and PCN, 16, 130–135; and presidential elections, 45, 47, 244–245t; and public opinion, 47, 48, 177, 192–193, 224; and Tony Saca, 131, 177, 192, 223; and USAID, 250n24. See also El Salvador Argentina, 28, 32, 210, 227, 261n6, 263n29; and anti-­neoliberalism, 169, 195 Argüello Lacayo, Adolfo, 254n31 Arias, Oscar, 37, 39, 42, 134, 142, 208, 244–245t; administration of, 228, 230, 249n15; and CAFTA, 144–146, 203, 259n26, 266n14; and countercyclical spending, 227, 229; and heterodox Right, 234–235, 239; and presidential elections, 202, 226, 264n7, 267n17. See also Costa Rica; PLN Arias, Salvador, 134, 135 ASI (Association of Salvadoran Industry), 47, 251n11 ASIC (Salvadoran Apparel Industry Association), 251n11 Aspe, Pedro, 28 autonomous institutions, 34, 129, 226 Avancemos, 230 Ávila, Rodrigo, 178, 201, 266n13 Ayala Grimaldi, Eduardo, 70 Azul y Blanco, 136, 136t, 258n10 BANADES (National Development Bank), 50 banking sector, 23; in Costa Rica, 153, 226; in El Salvador, 46, 220–221; in Nicaragua, 48, 50, 52, 213 Barrera, Hugo, 257n6 BCIE (Central American Bank of Economic Integration), 249n16, 251n10 Belloso, Bernardo, 165

Index 307

Bendaña, Alejandro, 210, 255n5 Bernal, Arnoldo, 134 bilateral investment treaties, 179 biodiversity, 138, 149, 255n6 Bolaños, Enrique: administration of, 138, 140, 152, 197, 214, 250n31, 265n7; and Arnoldo Alemán, 135, 136; and CAFTA, 69, 70, 136–137, 140; and corruption, 265n7; and COSEP, 53, 69, 252n13; election of, 53, 244–245t; and PLC, 137; and pro-­CAFTA campaign, 93, 237. See also Nicaragua Bolivarian Alliance for the Peoples of Our America. See ALBA Petroleos Bolivarian Alternative. See ALBA Petroleos Bolivia, 194, 209, 263n29; and anti-­ mining movements, 261n4, 261n6; and anti-­neoliberalism, 169, 195; and ideological self-­identification, 192, 200; and post-­neoliberal government, 232, 234; and water wars in, 5, 119 Bono Cristiano Socialista y Solidario, 213 boomerang model, 183–184, 185, 186 Brazil, 32, 194, 222, 232, 266n12; and anti-­F TA movements, 64, 97, 109, 115, 158. See also Lula bridging. See frames brokerage networks, 10, 164, 166 Burbach, Roger, 211 Bureau of Western Hemisphere Affairs, 133 Bush, George H. W., 37, 49 Bush, George W., 65, 78, 157, 258n14; and Latin American trade agenda, 63, 64, 68, 72; reelection of, 127, 132, 136. See also CAFTA; USTR business associations, 29, 69, 73, 250n28; in Costa Rica, 41; in El Salvador, 47; in Nicaragua, 52–53; and trade negotiations, 251n11. See also specific associations Business Coalition for U.S.–Central America Trade, 74 business elites, 6, 26–30, 58, 91, 250n28;

and campaign contributions, 73, 75; and CES, 219; in Costa Rica, 41, 87; in El Salvador, 47, 59, 201, 268n11; and market reform, 7, 28, 34, 59, 236; and methodology, 240; in Nicaragua, 52–53, 59 business-­government links, 75 business interests: and CAFTA negotiations, 72–78; and CAFTA referendum, 144–145 business peak associations, 73–74, 249n18. See also specific peak associations Cabañas, El Salvador, 163, 167, 175, 178, 180 CACM (Central American Common Market), 34, 248n8, 251n6 CADEXCO (Costa Rican Chamber of Exporters), 144, 252nn11–12, 254n28 CAFTA (Central American Free Trade Agreement), 1–3, 13, 15, 66, 243, 247n1, 252–253n19; as condensing symbol, 3, 104; contents of, 88, 89t; and Costa Rica, 77t, 85–88, 141–151, 203, 227–228, 235; and El Salvador, 112, 130–135, 201; and implementation agenda, 157, 228, 260n33; and intellectual property, 263n22; and investment disputes, 158, 174, 178– 179; and labor standards, 85, 267n21; and NAFTA, 65; negotiation of, 61, 68, 69, 71, 80, 82–85, 122, 257n8; and negotiation rounds, 76, 124; and Nicaragua, 135–141, 210; and poverty rates, 199–200; and public opinion, 88–94, 155–156; ratification of, 16, 126–128; and resistance movements, 5–6, 10–12, 97, 119, 256n12; and safeguards, 253n24; and side rooms, 75–76, 79–81; and small farmers, 83, 101–102; and understandings, 88, 254n30; and winners and losers, 76, 189. See also CSOP; ICSID; rule makers; rule takers; tariffs; trade agreements; USTR; specific

308  Contesting Trade in Central America

countries; specific negotiators; specific organizations CAFTA Ad Hoc Committee, 131–133, 257n7 CAFTAction, 91–92, 144, 254n31, 259n21. See also C-­CCA; public opinion CAFTA-­DR. See CAFTA Calderón, Felipe, 37 Calderón, Rafael Ángel, 244–245t, 259n17 Calderón de Escalón, Carmen Elena, 132, 134, 135, 244–245t, 258n9 Calderón Sol, Armando, 45, 47, 132, 244–245t, 262n14 Callejas, Francisco, 266n11 Calvo doctrine, 179 CAMAGRO (Agricultural and Agroindustrial Chamber of El Salvador), 78, 257n8 Canada, 27, 168, 175, 180, 217, 251n8 CARANA Corporation, 8–9t, 71, 79, 91–92, 254n33, 258n13. See also CAFTA; CSOP; public opinion; USAID Carazo, Rodrigo, 34, 146–147, 244– 245t, 259n24 Carazo Vargas, Eva, 108 Caribbean Basic Trade Partnership Act, 66 Caribbean Basin Initiative. See CBI Cáritas–El Salvador, 170, 261n9 Casas, Kevin, 145–146, 259n22 Castro, Fidel, 146 Catholic Church, 8–9t; in Costa Rica, 100, 259n18; and mining disputes, 17, 162, 165, 169–171, 177, 184, 261nn10–11; in Nicaragua, 211. See also Cáritas–El Salvador; Catholic Relief Services; CEDES; CELAM; liberation theology; Sáenz Lacalle, Fernando Catholic Relief Services, 13, 253nn19– 20 Cavallo, Domingo, 28 Cayman Islands, 167, 182 CBI (Caribbean Basin Initiative), 15,

38, 57, 58, 70; and CAFTA negotiations, 64, 65, 66, 68, 82, 84; and CAFTA ratification, 91, 93, 151; and political trade dependence, 63; and textile sector, 74, 76, 85. See also Reagan, Ronald C-­CCA (Caribbean-­Central American Action), 8–9t, 91, 92. See also USAID CCIES (Chamber of Commerce and Industry of El Salvador), 251n11 CDI (Council for the Defense of Institutionality), 147 CDU (United Democratic Center), 131t, 134, 135, 257n5, 258n9. See also El Salvador CECA (Central American Business Council), 74 CEDES (Episcopal Conference of El Salvador), 170, 171. See also Catholic Church CEFSA (Economic and Financial Consultants), 249n16 CEI (Centro de Estudios Internacionales), 255n5 CEI (Export and Investment Center), 51 CEICOM (Investment and Trade Research Center), 169, 261n2, 261n7, 262n12 CELAM (Latin American Episcopal Council), 171. See also Catholic Church Center, political: in Costa Rica, 143, 143f; in El Salvador, 131, 131f; in Nicaragua, 137, 137f Center-­Left, political: in El Salvador, 135, 177, 222; and ideological self-­ identification, 191, 191t Center-­Right, political, 17–18, 42, 191t, 225, 235, 239 Central America, 7, 57, 64, 73, 98, 122, 235; and AMCHAMs, 74–75; and effects of CAFTA, 102, 157, 189; and market reform, 6, 33, 83, 225; and mining disputes, 161, 184; and public opinion, 93, 190, 191, 204; and

Index 309

resistance movements, 10, 80; as rule taker, 65–69, 71, 87; and tariffs, 67t, 84; and trade, 40, 66–67, 66t, 70, 251n8. See also specific countries Central Bank of El Salvador, 45, 250n23 Centro Humboldt, 80, 255n12 CES (Social and Economic Council), 219–220, 233t, 234, 266n10 Chamorro, Violeta, 48, 49, 50, 53, 153, 244–245t Chang Díaz, Franklin, 259n18 Chávez, Hugo, 1, 146, 193, 209, 210; and Nicaragua, 17, 207, 208, 215, 265n6. See also Venezuela Chile, 32, 38, 39, 78, 83, 227, 261n6, 266n7; and anti-­F TA movements, 109, 158; and FTA with United States, 13, 64, 65, 75, 79, 82, 83; and post-­neoliberal government, 194, 230, 232; and trade agreements with Central America, 65, 70, 78, 135, 251n8; and trade negotiations, 29–30, 248n7 China, 66, 74 Chinchilla, Laura, 202, 230, 231, 244– 245t CICR (Costa Rican Chamber of Industry), 41, 252n11 CID. See Iniciativa CID CIDECA (Central American Council for Development Research), 80 CIEL (Center for International Environmental Law), 8–9t, 180; and amicus curiae brief, 181, 263n25 CINASE (Center for Socioeconomic Research and Consulting), 217 CINDE (Costa Rican Investment Promotion Agency), 8–9t, 35, 39, 57, 70, 249n16 CINPE (International Center for the Political Economy of Sustainable Development), 256n12 CISPES (Committee in Solidarity with the People of El Salvador), 172 civil disobedience, 109, 112 civil society, 184, 241t; and bridging and

bonding, 169; and CAFTA, 3, 12, 78–82, 91, 123, 247n4, 253n21; and CES, 219; in Costa Rica, 81, 146, 147; in El Salvador, 101, 112–122, 181, 205, 218, 222; and methodology, 13, 240; and neoliberal policy negotiations, 28; in Nicaragua, 135, 137; and postwar democratization, 122; and right-­wing governments, 98; vs. social movement activism, 109, 255n8; and transnational activism, 102–104, 110; types of, 109– 112. See also specific countries; specific organizations Clinton, Bill, 63–64 CODESA (Costa Rican Development Corporation), 34, 35 COEXPORT (Corporation of Salvadoran Exporters), 47, 251n11 coffee exports, 44, 46, 58, 197 Colombia, 13, 217, 232, 261n6 Colorado, Federico, 252n15 Combo del ICE, 86, 99–100, 119, 147, 204. See also ICE; telecommunications sector COMEX (Costa Rican Foreign Trade Ministry), 35, 37, 57, 70, 86, 144; and Alberto Trejos, 87, 142; and CAFTA negotiations, 70, 251n4, 252n19 Commerce Group, 158, 179, 263n26 commodification, 2, 8–9t, 95 community organizations, 8–9t, 147, 162, 165, 166, 184, 211 comparative advantage, 4, 8–9t, 235 comparative historical research, 11 comparative politics, 11, 33 competition, 8–9t, 139, 157, 251n4; between Central American states, 33, 85; centrality of, in market reform, 4, 39, 59, 95; from China, 66, 74; and dislocation of traditional producers, 2; from imports, 3, 76, 138; and maquila sector, 236; and privatization, 38, 86, 226; and resistance movements, 108, 111, 173; and U.S. farm subsidies, 138, 203

310  Contesting Trade in Central America

Complementary Agenda (Nicaragua), 137, 138, 139, 141, 258n15 complementary agendas, 16, 156–157 comunidades solidarias rurales, 221 comunidades solidarias urbanas, 222 CONCAUSA (Business Council for the Central America–U.S. Trade Negotiations), 73–74 concentration of power, 129, 195, 233t, 264n6 Concertación, 230, 232. See also Chile Concertación por el Cambio, 201. See also El Salvador CONFRAS (Confederation of Salvadoran Agrarian Reform Cooperatives), 242, 256n16 consumption, 7, 8–9t, 32, 83, 144, 150 contestatory Left, 209, 212, 217 Contras, 49, 198, 211. See also Reagan, Ronald CORDES (Foundation for Cooperation and Community Development of El Salvador), 102, 242 corn, white, 138, 253n23 Corrales, José Miguel, 144 Correa, Rafael, 209, 210 COSEP (Superior Council of Private Enterprise), 52, 74, 210, 234, 252n13 cosmopolitan republicanism, 110 Costa Rica: and business associations, 74, 250n28; and CAFTA debate, 77t, 108, 146–150, 252n12, 256n12, 259n20; and CAFTA implementation agenda, 157; and CAFTA negotiations, 61, 70, 124–125, 251n4; and CAFTA ratification, 93, 127t, 141– 151, 153–154, 228, 259nn18–19; and CAFTA referendum, 12, 16, 128, 150–151, 155–156, 205, 227, 259n20; and CAFTA side letters, 254n30; and countercyclical spending, 18, 229; and debt crisis, 14, 33, 45, 56; and democracy, 12, 14, 20, 225, 227, 247n3; educational levels in, 12, 58, 227; elections in, 17, 143t, 155, 202–205, 231, 244–245t, 250n34; electricity sector in, 21, 97, 99–100;

elite class in, 149, 155; and exports, 66, 248n13; and foreign investment, 67, 73, 229, 230, 231; and FTAA, 64; Gini coefficient of, 202, 229; and heterodox Right, 208, 233t, 239; and IDB, 71, 88, 229; and ideological self-­identification, 143f, 191t, 192, 192t, 203; and IMF/World Bank, 56, 229; and import-­substituting industrialization in, 34; and Index for Economic Freedom, 38, 248n3; and inequality, 227, 229, 230; and legislative process, 259n17; and market reform, 10, 34–43, 54–55t, 57, 59, 226, 248n8; and methodology, 13, 68; microenterprises in, 229–230, 252n17; and mining, 228, 276n18; and National Development Plan of 2006–2010, 227, 229; and patriotic committees, 147; and post-­neoliberal government, 208, 225–232, 233t, 234–235; and poverty rates, 202, 229–232, 265n14, 265n15; and privatization, 21, 40–41, 86, 254n29; and public opinion, 77t, 92–93, 190, 190f, 191, 203, 230; and resistance movements, 18, 37, 122, 196, 202, 204, 205; and social policy, 20, 100, 226, 229–230, 267n16, 267n20; structural reform index of, 22t; and tariffs, 67t; and taxes, 38, 144, 227, 231; and telecommunications sector, 85–88, 99–100, 101, 119, 235, 253n27; and trade openness, 14, 38, 66, 66t; and USAID, 57, 79, 248n12. See also Combo del ICE; specific Costa Rican officials; specific organizations; specific political parties Costa Rican Central Bank, 39 countercyclical economic policies, 5–6; in Costa Rica, 18, 229; as countermovement, 8–9t, 96; in El Salvador, 208, 220, 223; in Nicaragua, 234, 265n3; and post-­neoliberal government, 235. See also stimulus spending CPCs (Citizen Power Councils), 211– 212, 214, 233t, 234, 265n1

Index 311

CRIPDES (Rural Communities Association for Salvadoran Development), 102, 165, 167, 242, 243, 256n16 Cristiani, Alfredo, 44, 46, 47, 244–245t, 249n23, 250n24 critic negotiators, 15, 97, 111–112, 112– 117, 121–122, 123, 125, 255n11. See also resistance movements Cruz Zepeda, Ciro, 132, 134 CSOP (Civil Society Outreach Program), 79, 91, 252–253n19. See also CAFTA CST-­JBE (José Benito Escobar Union Federation of Workers), 101, 255n12 CSTS (Trade Union Coordinating Committee of Salvadoran Workers), 99, 101, 242, 255n1 Cuevas, Marcio, 88f currency devaluation, 44 cyanide, 162, 165, 168, 171, 175, 177. See also anti-­mining movement in El Salvador; gold mining Daboub, Jorge, 221 Dada, Héctor, 134 da Silva, Lula, 11, 222, 225, 266n12. See also Brazil debt crisis, 4, 5, 14, 24, 25, 249n16; and Costa Rica, 33, 43, 45, 56 debt relief, 98; and Costa Rica, 37; and Nicaragua, 51, 197, 214 decommodification, 5, 8–9t, 95, 207 DEES (Economic and Social Studies Department of FUSADES), 44, 45 Defensoría de los Habitantes, 147 de Gavidia, Yolanda, 257n6 deleveraging hook model, 183, 185f, 186. See also social movement theory democracy, 8–9t, 10, 78, 96, 126, 257n2; in Central America, 4, 7, 13, 236, 247n3; in Costa Rica, 20, 33, 54–55t, 100, 144, 148, 152, 225–228; direct vs. representative, 154–156; in El Salvador, 160, 181, 219, 223, 224; in Latin America, 128–129, 188, 195,

232; and market reform, 206, 236; maximal, 110; in Nicaragua, 130, 211, 216–217, 234; in Polanyian terms, 160–161, 206–207, 231; and transgressive resisters, 112. See also elections; horizontal accountability; vertical accountability Democrats, 64 demonstrations: against CAFTA, in El Salvador, 118; against G8, 111; against mining, in Honduras, 165; against privatization, in Costa Rica, 86, 99–100; against privatization, in El Salvador, 99, 100, 201; in protest of CAFTA, 118, 120 de Monterrosa, Celina, 134 Denton, Carlos, 148–149, 254n31 deregulation, 1, 2, 4, 56, 58, 73, 192– 193; in El Salvador, 45, 161; and market ideology, 4, 8–9t; in Nicaragua, 215. See also regulation de Sola, Francisco, 266n11 development assistance, 50, 69 development models, 238–239; and CAFTA negotiations, 62, 72, 80–81, 82; and CAFTA ratification, 144, 156, 157, 202–204, 228, 231–232; and civil society, 78; and INGOs, 173, 186; and neoliberal reforms, 4, 26, 53, 163, 166, 250n33; and post-­ neoliberal government, 188, 195, 212–213, 214, 220, 222, 224; and resistance movements, 96, 102–104, 108–109, 113–114, 122; and role of the state, 3, 18, 127, 208, 234–235; and Salvadoran gold mining disputes, 167, 169, 170, 172, 183, 262n7 Diario Co-­Latino, 8–9t, 167 dispute settlement, 8–9t, 106; under CAFTA, 3, 15, 80, 94, 120, 251n4; and Salvadoran gold mining disputes, 178–181 distribution of wealth, 156, 223 Doha Round of the GATT, 138, 180 dollarization: in El Salvador, 48, 119, 152, 161; and Manuel Enrique Hinds, 45, 174–175, 262n14; and

312  Contesting Trade in Central America

market ideology, 8–9t; and Mauricio Funes, 218 domesticating INGOs, 8–9t, 161, 162, 172–174, 180, 186 domestic loop model, 183, 184, 185, 185f, 186. See also social movement theory Dominican Republic, 13, 61, 70, 128, 135, 247n1, 251n8, 254n30 Duarte, José Napoleón, 43–44, 244–245t Earthworks (formerly Mining Policy Center), 167 Eastern Europe, 25, 30 ECLAC (Economic Commission on Latin America and the Caribbean), 70, 133, 267n22 economic reform. See market reform economic rights, 96, 108, 184, 204 economic self-­interest, 89 economic stability, 31, 65, 218 economists, 39, 40, 44, 238 ecotourism, 176, 176t, 262n18 Ecuador, 169; and ICSID, 263n29; and ideological self-­identification, 192, 200; and post-­neoliberal government, 195, 209, 210, 232; and public opinion, 191 educational levels, 12, 32, 202, 227 education services, 209, 214, 234 Edwards, Sebastian, 4, 27–28 efficiency, 4, 8–9t, 27, 59, 219, 236 EIAs (environmental impact assessments), 167, 168 El Dorado project, 167, 168, 175– 176. See also Pacific Rim Mining Corporation elections, 257n1; and competition, 160; and democracy, 3, 7, 96, 131; and fraud, 212, 266n8; and post-­ neoliberal electoral shifts, 17, 18, 196, 204; and process, 8–9t, 196. See also democracy; voter turnout electricity: in Costa Rica, 21, 97, 99– 100; in El Salvador, 45; in Nicaragua, 50, 213

elite cues, 6, 8–9t, 90–91, 150 El Salvador: and 1999 Investment Law, 46, 161, 174, 178–180, 182; and 2009–2011 Anti-­Crisis Plan, 222; and agrarian oligarchy, 28–29, 43; and anti-­mining movement, 161–166, 167–171; and business associations, 219, 221, 250n28; and CAFTA negotiations, 70, 252n19; and CAFTA ratification, 16, 127, 130–135, 257n9, 260n29; and CAFTA side letters, 88, 254n30; and capital mobility, 21, 45; and civil society, 122, 266n10; civil war in, 43, 45, 48, 54–55t, 59; and concentration of power, 152–154; democracy in, 247n3; and domesticating INGOs, 172–174, 180; and ecotourism, 176, 176t, 262n18; and elections, 244t–245t, 264n12; and electoral shifts, 196, 199–201, 205; and environmental networks, 162; gross national income per capita in, 189; growth rate in, 48, 218; and horizontal accountability, 16, 152; and ICSID, 158, 160, 161, 180–182; and ideological self-­identification, 191t, 192, 192t, 200; and IMF, 218; and incrementalist Left, 17–18, 208, 233t, 239; and Index for Economic Freedom, 248n3; and legislative process, 257n9, 260n28; and manufacturing, 58; and maquila sector, 46, 98; and market reform, 10, 14, 21, 33, 38, 43–48, 54–55t; and methodology, 13; and mining disputes, 161; peace process in, 14, 43, 45, 46, 113, 177; and Plan Quinquenal, 220–221; and post-­neoliberal government, 233t, 234–235; and poverty rates, 199–200; and power node INGOs, 180–182, 263n24; and privatization, 21, 45–46, 97, 99, 100–101, 120, 161; and public opinion, 190, 191, 199– 200, 224, 264n10; and reform deepening, 54–55t, 57; and reform initiation, 54–55t, 56; and reform

Index 313

persistence, 54–55t, 59; and remittances, 199, 219, 251n5; and repopulated communities, 164; and resistance movements, 99, 101, 159, 161; and Robert Moran, 167–169; and social movements, 196; strikes in, 101; structural reform index of, 22t, 45; and tariffs, 67, 67t; and taxes, 21, 46, 175, 219–220, 221, 223; and textile sector, 85; trade openness coefficient of, 66, 66t; and union organizing, 99; and United States, 224; and voter turnout, 250n34; wartime polarization, 56. See also specific organizations; specific political parties; specific Salvadoran officials El Salvador-­Mexico FTA, 119 employment: and CBI, 65, 93; vs. consumption, 32; in Costa Rica, 37, 41, 230; during downturns, 6; and market reform, 6, 58, 63, 67, 72, 95, 236; in Nicaragua, 50, 51, 138; and pro-­CAFTA campaign, 7, 93, 105, 119, 144, 150; and public opinion, 260n32; and Salvadoran gold mining disputes, 165, 175 Encuentro Popular, 146, 259n25 encuentro process, 103 environmental concerns, 65, 138, 184, 186, 242; and CAFTA, 106, 236; and CAFTA negotiations, 76, 80–81, 84–85, 103, 119–120, 138; and Catholic Church, 171, 261n10; and gold mining disputes, 159, 160, 165 environmental organizations, 242, 260– 261n2; and CAFTA, 103, 145, 147, 149, 255–256n12; and Salvadoran gold mining disputes, 17, 162. See also specific organizations environmental rights, 16, 166, 180 EPZs (export processing zones), 38, 41, 52, 67 Equipo Maíz, 106, 107f Erzinger, Florian, 261n7 Escobar-­Thompson, Francisco, 254n31 Eserski, Juan Carlos, 266n11

Espinal, Roberto, 257n6 European Social Forum, 111, 264n3 European Union, 63 executive dominance, 127, 128, 152 exports: and CAFTA negotiations, 73; in Costa Rica, 40; and exporters, 29; in Nicaragua, 48; quotas on, 139. See also nontraditional exports external actors: and CAFTA negotiations, 68; and Costa Rican market reform process, 38; and market reform process, 26; and reform initiation, 23–26; and technocrats, in Costa Rica, 40 extractive sector, 161, 173. See also gold mining; metal mining EZLN (Zapatista Army of National Liberation), 103, 255n4 Farabundo Martí National Liberation Front. See FMLN farmers, 41, 42, 80, 83, 103, 153, 189, 256 fast track authority, 64, 143 FDI (foreign direct investment), 67, 83, 228, 230–231, 267n19. See also foreign investment FENACOOP (National Federation of Agricultural and Agroindustrial Cooperatives), 101, 256n12 Fernández Holmann, Ernesto, 254n31 Figueres Olsen, José María, 37, 244–245t fiscal balance, 8–9t, 197, 226 fishing, 52, 176, 176t Flores, Francisco, 244–245t; administration of, 256n16; and CAFTA negotiations, 70; and dollarization, 45, 262n14; and resistance movements, 100–101, 119; and trade agreements, 65. See also ARENA FMLN (Farabundo Martí National Liberation Front), 1, 8, 14, 43, 44, 45, 47–48, 59; and CAFTA ratification, 12, 127, 130–135, 258n9; and elections, 177, 194, 200–201, 218, 244–245t, 264n12; and electoral

314  Contesting Trade in Central America

shifts, 205, 223; and Funes administration, 218, 221, 222, 223; and ideological self-­identification, 131f, 239; and public opinion, 224, 264n11; and resistance movements, 8–9t, 164, 177, 264n13. See also Funes, Mauricio food security, 5, 116, 214, 234 food sovereignty, 8–9t, 96, 166 foreign aid. See international aid foreign investment, 7, 28, 58, 60, 67, 207; and anti-­CAFTA campaign, 106, 143; and CAFTA, 3, 72–73, 93, 151, 160, 236; in Costa Rica, 35, 41, 43, 203, 226, 228–229, 231; in El Salvador, 45, 46, 119, 161, 178, 251n5; in Nicaragua, 51, 215, 234. See also FDI; specific countries Foreign Relations Committee (El Salvador), 132, 133 Foro Mesoamericano, 8–9t, 15, 255nn5– 6; and CAFTA resistance, 97, 119, 120, 121t, 139, 262n13; funders of, 256n15; and methodology, 241, 242; in San Salvador, 255n6; as transgressive resisters, 112, 117–122, 123; and transnational activism, 97, 102, 103, 104, 166, 256n12 Fox, Vicente, 225 frames, 10; bridging of, 104, 111, 162; building of, 164; transformation of, 162 Freedom House, 172, 257nn2–3 free market, 8–9t, 39, 45, 224. See also market reform; specific countries free trade agreements. See FTAs From Martí to Fidel, 214 FSC (Civil Society Forum), 101, 242, 256n16 FSLN (Sandinista National Liberation Front), 54–55t, 59, 136, 194, 209–214, 258n10, 264n6; and business wing, 210; and CAFTA ratification, 12, 128, 139–141, 258n15; and countermovement ideology, 8–9t, 17, 50; and CPCs, 210–211;

and elections, 48, 53, 136t, 198–201, 204, 217, 244–245t. See also Ortega, Daniel; Sandinistas FTAA (Free Trade Area of the Americas), 63–64, 70, 79, 97, 110, 119, 158, 257n18 FTAs (free trade agreements), 64–65, 75, 78–79, 83, 119, 158, 179. See also CAFTA; tariffs; trade agreements; specific agreements; specific countries FUNDE (National Development Foundation), 80, 113–114, 242, 266n10. See also Iniciativa CID; Rubio, Roberto Funes, Mauricio, 1, 17–18, 177, 244– 245t, 264n10, 266n12, 266n13; administration of, 182, 184, 266n10; and elections, 177–178, 194, 200– 201, 205; and incrementalist Left, 11, 194, 208, 218–224, 234–235, 239. See also FMLN FUNIDES (Nicaraguan Foundation for Economic and Social Development), 8–9t, 250n30 FUSADES (Salvadoran Social and Economic Development Foundation), 8–9t, 47, 57, 251n11, 262n14, 266n10; and ARENA, 44–45, 249n23, 250n24; and Funes administration, 219, 221 G5 countries, 23, 26 Gámez Lobo, Rodrigo, 259n18 GANA (Grand Alliance for National Unity), 223 García, Norman, 88f GATT (General Agreement on Tariffs and Trade), 37, 139, 179 GDP (gross domestic product), 4, 36t, 48–49, 66, 247n2, 250n32; in Costa Rica, 34–35, 202, 228, 229, 249n20; in El Salvador, 175, 199, 218, 221, 222, 250n26, 251n5; in Nicaragua, 49–52, 138, 197, 214, 215, 248n3, 265n2; and U.S. aid to El Salvador, 43, 46. See also growth rate

Index 315

generic pharmaceuticals sector, 83, 138, 252n12 Gini coefficient: of Costa Rica, 202, 229, 230; of Nicaragua, 197, 264n5; of Uruguay, 202. See also poverty global economic crisis of 2009, 24, 33, 212, 235, 267n22; and Costa Rica, 229, 230, 231; and Keynesian principles, 208, 238; and Mauricio Funes, 208, 218, 224 globalization, 2, 6, 7, 18, 151, 193; and Costa Rica, 42, 226; and INGOs, 172, 182; and Nicaragua, 69; opposition to, 10, 15, 101, 103, 109, 116, 241 Gold Belt region, 163f gold mining: and CAFTA, 16, 158, 160; in Costa Rica, 228; in El Salvador, 16, 161, 192–193; and Hinds report, 174–175; in Honduras, 165; and resistance movements, 165–166, 237. See also extractive sector; Mesa Nacional Frente la Minería Metálica; specific companies; specific countries González, Anabel, 64, 69, 70, 84, 142, 145 González, Medardo, 223 government monopolies, 48, 49, 86, 226, 266n14 government procurement, 8–9t, 15, 62, 71, 74, 94, 258n14 green mining, 171, 175 gross domestic product. See GDP growth rate: in Costa Rica, 4, 202, 228; in El Salvador, 48, 199; in Nicaragua, 197. See also GDP; specific countries GSP (Generalized System of Preferences) Programs, 63 Guatemala, 98, 113, 164, 196, 254n30, 267n21; and anti-­mining movements, 17, 162, 166, 168, 170; and CAFTA, 61, 71, 88f; and CAFTA negotiations, 80, 84; and CAFTA ratification, 93, 127; and maquila sector, 67; and public opinion, 93, 254n34 guerrillas, 98, 164

Handal, Schafik, 134 Harberger, Arnold, 44–45, 250n24 Harrison, Lawrence, 249n16 health care privatization, 97, 99, 119, 201 health sector, 83, 100–101, 159, 202, 214, 221, 234, 255n3. See also specific countries Helms, Jesse, 50 Hemispheric Social Alliance, 8–9t, 111, 118, 146, 255n11, 257n17 Heritage Foundation, 38, 248n3 heterodox Right, 208, 225–232, 233– 234t. See also post-­neoliberalism Hinds, Manuel Enrique, 45, 174–175, 262nn14–15 HIPC (Heavily Indebted Poor Countries), 51, 197, 214 Honduras, 1, 83, 85, 98, 140, 164, 254n30; and CAFTA ratification, 92, 127; and resistance movements, 17, 162, 256n12 horizontal accountability, 16, 128–130, 152, 155, 257n1, 258n11; in Costa Rica, 153, 154. See also democracy Houses for the People, 216 human rights, 28, 110, 129, 168, 173, 257n18; and boomerang pattern, 184; and CAFTA, 114; and Defensoría de los Habitantes, 147; and PDDH, 152, 260n29; and resistance movements, 95, 96, 99, 114, 119, 204, 237; and Salvadoran gold mining disputes, 180–181, 260–261n2, 263n23 Hurricane Mitch, 98, 101, 256n16 hyperinflation, 31, 53, 56 ICE (Costa Rican Electrical Institute), 147, 253nn26–27, 254n28, 255n2, 259nn24–25; and CAFTA, 85–87, 100, 253n27. See also Combo del ICE; telecommunications sector ICSID (International Centre for Settlement of Investment Disputes), 8–9t, 158, 160, 185; and Salvadoran gold

316  Contesting Trade in Central America

mining disputes, 16, 161, 178–180, 182, 263n26. See also arbitration; CAFTA; Pacific Rim Mining Corporation; Salvadoran gold mining disputes; transnational corporations IDB (Inter-­American Development Bank), 8–9t, 21, 87, 249n16, 267n22; and CAFTA negotiations, 70, 71, 156, 251n10; and Costa Rica, 37, 38, 39, 87, 229; and El Salvador, 44, 100, 218, 222, 262n14; and methodology, 13, 241; and Nicaragua, 49– 51, 215, 265n3; and Plan Puebla-­ Panamá, 103, 119 IMF (International Monetary Fund), 1, 4, 8–9t, 13, 27, 56, 133, 248n6; and Costa Rica, 35, 37–39, 229; and El Salvador, 45, 133, 218; and global economic crisis, 267n22; and market reform, 23, 28, 56, 248n4; and Nicaragua, 11, 17, 49–51, 198, 209–210, 213; and reform initiation, 24–26, 33, 54–55t immigration, 81, 82, 114, 115, 133, 218 import-­substituting industrialization, 4, 34. See also market reform INCAE (Central American Business Administration Institute), 8–9t, 51, 58, 70 incrementalist Left, 17–18, 194, 208, 218–224, 232, 233t, 239. See also El Salvador; Funes, Mauricio; post-­neoliberalism Index for Economic Freedom, 38, 248n3 indigenous rights, 103, 104, 184 indirect expropriation, 16, 174, 178 inequality, 2, 5, 8–9t, 195, 236; in Costa Rica, 17–18, 202, 208, 227, 229, 230; in Nicaragua, 197, 213, 234. See also Gini coefficient Infinito Gold, 228, 267n18 inflation, 248n4; in Costa Rica, 35, 45, 54–55t, 56; and market reform, 5, 31, 60; in Nicaragua, 49, 51 informal sector, 138, 189 INGOs (international nongovernmental organizations), 8–9t, 13, 161, 162,

170, 241t, 261nn7–8, 262n12. See also domesticating INGOs; power node INGOs; specific INGOs Iniciativa CID (Mesoamerican Trade, Integration, and Development Initiative), 8–9t, 15, 255–256n12; and CAFTA negotiations, 80–81, 102– 103, 121, 121t, 139, 253n19, 256n14; as critic negotiators, 111–117, 123, 124; and Foro Mesoamericano, 102, 120; international funders of, 253n20, 262n13; and methodology, 240, 242. See also FUNDE Instituto Tecnológico de Costa Rica, 147 integration, 8–9t, 15, 62, 139 intellectual property protections, 8–9t, 62, 149, 179; and CAFTA, 3, 15, 61, 236; and CAFTA compliance, 157, 236, 262–263n22; and CAFTA critics, 138, 149; and CAFTA negotiations, 71, 74, 80, 82, 89, 94, 120. See also trade agreements international aid, 138, 248n4; and CAFTA, 70–71, 91–92, 93; and market reform, 35–38, 36t, 43–45, 49–51. See also United States; specific agencies; specific countries international arbitration, 106, 159, 179, 181, 186. See also ICSID International Convention on Protection of New Varieties of Plants, 106 International Monetary Fund. See IMF Internet, 61; and Costa Rican telecommunications sector, 86, 87, 253n27; and resistance movements, 146, 149, 164, 166 interview methodology, 12, 68, 112, 240–243, 241t, 252n16 investor guarantees, 15, 82, 157, 179, 187, 236. See also trade agreements investor-­state disputes, 160, 178–180, 181, 186. See also ICSID IPS (Institute for Policy Studies), 8–9t, 180–182 ISI (import-­substitution industrialization), 4, 34, 38, 226

Index 317

Jarquín, Edmundo, 264n9 jobs. See employment Kerry, John, 126 Kirchner, Cristina Fernández de and Nestor, 210 Kirk, Ron, 267n21 Kissinger, Henry, 35, 124 labor, 4, 21, 58, 65, 76, 194, 247–248n2, 262n12; and CAFTA, 89, 236, 267n21; and CAFTA negotiations, 71, 72, 80–81, 84–85, 115; and Costa Rica, 39, 41; in El Salvador, 46, 99, 101, 119–121, 201, 255n1, 257n6, 266n10; and methodology, 242; and neoliberal reforms, 29–30; and resistance movements, 96, 98, 103, 114, 159, 237, 255–256n12, 255n6. See also maquila sector; wages Lacayo, Miguel, 70, 88f, 105, 119 Lafise group, 52 Laínez, Francisco, 257n6 LAPOP (Latin American Public Opinion Project), 13, 150, 191, 198, 203, 212, 217, 224 Lara River, 165 Larios de López, Dina, 261n7 Las Crucitas, 228, 267n18 Las Dignas, 101, 242 Latin America, 25, 28, 34, 70, 140, 226; and democracy, 128–129, 144, 155, 184, 201; and FTAA, 63, 64; and ideological self-­identification, 191– 192; and inequality, 202, 223; and the Left, 10, 188, 191–192, 193–196, 210; and market reform, 1, 4, 20, 22t, 30–31, 38, 207, 236; and post-­ neoliberalism, 17, 189, 225, 232, 237; and public opinion, 32, 43, 190–191, 224; and resistance movements, 5, 64, 158, 168, 171, 173; and the Right, 188, 235 Left: contestatory, 3, 195, 209, 212, 217, 263n1; in Costa Rica, 142–143, 143t, 203, 230; electoral, 5, 196; in El Salvador, 131, 131f, 218–224; and ideo-

logical self-­identification, 191t, 200; incrementalist, 218–224, 233t; in Latin America, 10, 188, 193–196; in Nicaragua, 137, 137t, 198–199, 208– 217; populist, 4, 17, 207, 208–217, 233t; and post-­neoliberal government, 234–235; and public opinion, 191; radical, 216, 232; varieties of ideology within, 194. See also Funes, Mauricio; Ortega, Daniel Lempa River, 162 Letelier-­Moffitt Human Rights Award, 180–181 liberation theology, 163–164, 170, 222. See also Catholic Church Liévano de Marques, Mirna, 250n24 Limón, Costa Rica, 37 livestock, 81, 170, 176, 176t, 209, 214– 215, 220 Lizano Fait, Eduardo, 39, 41, 249n14 Llobet, Gabriela, 142 lobbyists, 8–9t, 29, 72, 74–76, 115. See also critic negotiators; specific organizations local laws: required reforms of, under CAFTA, 157. See also specific countries Lora’s structural reform index, 21, 22t, 50 Lula, 11, 222, 225, 266n12. See also Brazil Macaya Trejos, Gabriel, 259n18 madrugón, 133–135 Managua, Nicaragua, 51, 104, 124, 254n33, 255n5 maquila sector, 46, 52, 96, 140, 250n26; and labor, 29, 67, 96, 98; and market reform, 58, 236, 258n13. See also labor; textile sector marchas blancas, 101 market access, 8–9t, 57, 62, 63, 72, 82, 84–85, 89t market reform, 6, 8–9t, 14, 23, 28, 83, 129, 193; in Central America, 33–34, 68, 87, 151; and civil society, 80; in Costa Rica, 18, 34–43, 57, 108, 203– 205, 225–231; and countermove-

318  Contesting Trade in Central America

ment, 2, 149; and dispute settlement, 160, 179; in El Salvador, 43–48, 175, 187, 220–221; and IMF lending, 56; in Latin America, 207, 236, 237; in Nicaragua, 48–53, 69, 198, 210, 211, 212–214; and post-­neoliberalism, 206, 233t; and poverty rates, 190; and public opinion, 3, 30–33, 93, 125, 189, 204, 238, 264n10; and resistance movements, 96–98, 101–104, 153, 159, 163, 188; and social movements, 5, 10; theory of, 21–33, 53, 54–55t, 56–60. See also CAFTA; privatization; reform deepening; reform initiation; reform persistence; specific countries Marlin Mine, 168 Martínez, Hugo, 132, 257n5, 257n7 Martínez Franzoni, Juliana, 81, 231 MCC (Millenium Challenge Corporation), 140, 258n14. See also U.S. foreign aid media campaigns, 8–9t, 80, 90, 91; in Costa Rica, 93, 150, 155; in El Salvador, 175; in Nicaragua, 92, 254n33; and public opinion, 7, 91, 95, 105 Mercosur, 29–30, 248n7 Mesa Grande, Honduras, 164 Mesa Nacional Frente la Minería Metálica, 8–9t, 158, 174, 178, 261n2, 261n4, 261n5; member organizations of, 162, 163, 169, 173, 180–181, 260n2, 262n12; and transnational activism, 165, 167, 261n3. See also gold mining; Salvadoran gold mining disputes; specific organizations metal mining, 176; and Catholic Church, 170–171; in Costa Rica, 228; and resistance movements, 159, 166, 174; suspension of, in El Salvador, 18, 178, 183, 201. See also anti-­ mining movement in El Salvador; extractive sector; gold mining; specific mines and companies Mexico, 30, 39, 83, 109, 148; and anti-­ FTA movements, 135, 158; and

elections, 32, 232, 264n7; and FTAs with Central America, 65, 70, 78, 251n8; and NAFTA, 13, 27–28, 29–30, 75 microenterprises, 221, 229–230, 252n17. See also MSMEs MIFIC (Ministry of Industry and Trade Promotion), 70, 92, 137, 140, 253n19, 254n32, 258n13. See also Nicaragua: and CAFTA negotiations; Nicaragua: and CAFTA ratification Miller, Eric, 71, 251n10 mining. See anti-­mining movement in El Salvador; gold mining; metal mining Mining Policy Center (now Earthworks), 167 ML (Libertarian Movement Party), 142, 143t Monge, Luis Alberto, 35, 37, 39, 42, 244–245t, 249n15. See also Costa Rica Montealegre, Eduardo, 198, 199, 250n31, 264n9 Morales, Evo, 209 Morales Carazo, Jaime, 264n8 Moran, Robert E., 167–169, 175, 261n6, 261n8 Morazán, El Salvador, 163 Moreno, Raúl, 119, 256–257n17 Morley, Machado, and Pettinato mar‑ ket reform index, 20–21, 247n1, 248n8. See also Index for Economic Freedom MPR12 (October 12 Popular Resistance Movement), 118–119, 133, 242, 256n16 MRS (Sandinista Renovation Movement), 211, 264n6, 264n9. See also FSLN; Sandinistas MSMEs (micro, small, and medium-­ sized enterprises), 138, 220, 252n17. See also small and medium-­sized businesses multiphase theoretical framework, 14, 23–24, 53, 54–55t. See also reform

Index 319

deepening; reform initiation; reform persistence Murillo, Rosario, 211 Murphy, John, 189 Murray Meza, Roberto, 45, 249n23, 254n31, 266n11. See also FUSADES NAFTA (North American Free Trade Agreement), 87; and business associations, 29–30, 79; as CAFTA model, 75, 178; and public opinion, 27–28, 90–91; and resistance movements, 158; and U.S. trade policy, 13, 64–65 nationalizations, 49, 232, 234 national sovereignty, 89, 247n3; and Costa Rican CAFTA debate, 142, 150; and dispute settlement, 106, 187; and Nicaraguan CAFTA debate, 140; and resistance movements, 8–9t, 96–97, 104, 120, 172, 184 neoliberalism, 8–9t, 21, 54–55t, 199, 233t; in Costa Rica, 11, 18, 142, 225–227; costs of, 2, 4; and external actors, 26; and internal actors, 28–29; and resistance movements, 5, 10, 96, 102, 119. See also post-­ neoliberalism; specific countries neoliberal reform. See market reform; neoliberalism NGOs (nongovernmental organizations), 8–9t, 77t, 98, 109–110, 183; and CAFTA, 79–80, 81, 122, 253n19; in El Salvador, 101, 113–114, 158; and methodology, 240, 241; and transnational activism, 173, 262n12. See also INGOs; specific organizations NHDP (National Human Development Plan), 212, 213, 214. See also Nicaragua; post-­neoliberalism Nicaragua, 12, 14, 250n28, 250nn30– 34, 257n3, 258nn14–15, 265nn1–6; under CAFTA, 157, 260n33; and CAFTA negotiations, 15, 69–70, 73–75, 92, 125, 156, 253n19, 254nn30–33; and CAFTA ratification, 16, 88f, 127t, 130, 135–141,

152–153, 154, 258n10; and civil society, 122; and democracy, 212, 216–217, 247n3; and elections, 136t, 244–245t, 265–266n7; and electoral shifts, 1, 17, 196, 204; foreign aid to, 36t, 49–51, 213–215; and foreign investment, 267n19; Gini coefficient of, 197, 264n5; and IDB, 71; and ideological self-­identification, 137f, 191t, 192, 192t, 203, 264n9; and Index for Economic Freedom, 248n3; and market reform, 10, 21, 33, 48, 52–53, 54–55t, 189; and methodology, 13, 68, 240, 241t, 242, 252n16; and populist Left, 194, 207; and post-­neoliberalism, 208–211, 215t, 232–234, 233t, 238–239; and poverty rates, 264n4, 265n4; and public opinion, 190–191, 190f, 198– 199; and Reagan administration, 35; and reform deepening, 57–59; and reform initiation, 56–57; and reform persistence, 59; and resistance movements, 80, 98, 101, 255–256n12; structural reform index of, 22t; and tariffs, 67t, 83, 253n24; and textile sector, 85, 253n25; trade openness coefficient of, 66, 66t. See also NHDP; Venezuela; specific Nicaraguan officials; specific organizations; specific political parties Noguera, Carlos, 135, 258n10 nontariff barriers, 34, 106, 251n4, 251n6 nontraditional exports, 29, 58, 249n17; and Costa Rica, 35, 37, 38, 40, 42, 248n13; and El Salvador, 44, 46, 47. See also exports norm entrepreneurs, 23–24, 26, 30, 57 Núñez, René, 140 OAS (Organization of American States), 70 OCMAL (Latin American Mining Conflicts Observer), 8–9t, 261n4 ODASP (Office of Assistance for the Business Sector in Trade Negotiations), 74, 253n19, 257n8

320  Contesting Trade in Central America

Orellana Merlos, Carlos, 251n11 Orellana Milla, Roberto, 250n23 organized labor, 4, 30, 41, 101, 194. See also labor; public employees; specific countries; specific organizations Ortega, Daniel, 1, 146, 224; and anti-­ CAFTA campaign, 139–140; and Arnoldo Alemán, 135, 136, 211, 258n11; electoral defeat of, 48, 53, 69, 197; and family members, 50, 213–214; and populist Left, 194, 207–210, 232; and post-­neoliberal government, 234, 238–239; and poverty rates, 265n4; and public opinion, 217; reelection of, 198–199, 205, 212, 244–245t, 264n7, 266n8; and Venezuela, 10–11, 17, 213–216, 215t, 234. See also FSLN Ortega, Humberto, 50 Oxfam America, 8–9t, 13, 117, 173, 174–176, 180, 253n20, 262nn12–13. See also domesticating INGOs; INGOs PAC (Citizen Action Party), 1, 8–9t, 143t, 148, 227, 259n18; and presidential elections, 142, 203–205, 231. See also Costa Rica; Solís, Ottón Pacheco, Abel, 39, 244–245t; administration of, 145, 259n17; and CAFTA, 258–259n16; and CAFTA negotiations, 70, 86; and CAFTA ratification, 141–142, 260n32 Pacific Rim Mining Corporation, 262n16; and arbitration under CAFTA and 1999 Investment Law, 178–182; and Pac Rim Cayman, 167; and presidential election of 2009, 177–178; and Salvadoran gold mining disputes, 158, 163f, 174–176, 261n5. See also El Dorado project; ICSID; Saca, Tony; Shrake, Thomas PAEs (structural adjustment programs), 37, 154. See also Arias, Oscar; structural adjustment Palacios, Alba, 258n10 Panama, 13, 38, 65, 135

Partnership for Growth, 220, 266n11 party systems, 28, 195, 203 path dependency theory, 11, 207 Patriotic Movement No to the FTA, 146–150 PCN (National Conciliation Party), 16, 47, 131t, 250n29, 257n5, 258n9. See also ARENA; El Salvador PDC (Christian Democrat Party), 43, 131t, 244–245t, 250n29, 257n5, 258n9. See also El Salvador PDVSA (Petróleos de Venezuela, SA), 213, 266n9. See also PETROCARIBE; PETRONIC peasants, 30, 41, 104, 119, 124, 138, 255n6. See also agricultural sector; resistance movements Pellas group, 52 pensions, 222, 229, 230, 233t, 234, 267n16 Peru, 13, 162, 261n6 PETROCARIBE, 1, 213, 215. See also PDVSA petroleum, 34, 195, 213, 215–216, 215t, 230, 266n9. See also PDVSA; PETROCARIBE PETRONIC (Petróleos de Nicaragua, SA), 213. See also PDVSA; PETROCARIBE Piñera, Sebastián, 232. See also Chile Pinochet, Augusto, 30. See also Chile Plan Escudo, 229. See also Arias, Oscar Plan Quinquenal, 220. See also Funes, Mauricio PLC (Liberal Constitutionalist Party), 135–137, 136t, 140, 198, 244–245t, 258n10, 258n15. See also Azul y Blanco; Nicaragua PLN (National Liberation Party), 143t, 244–245t, 249n16, 249n22, 266n15; and CAFTA debate, 142, 145, 148, 202–203, 205, 259–260n26; and market reform, 37, 42, 54–55t, 59, 225–226, 266n14; and post-­ neoliberalism, 227, 230–231. See also Arias, Oscar; Costa Rica pluriculturalism, 8–9t, 96

Index 321

PLUSC (PLN-­PUSC), 42, 227. See also Costa Rica; PLN Polanyi, Karl: on cross-­cultural exchange, 18–19; on democracy vs. market, 206–207, 231; and double movement concept, 2, 4, 5, 239, 247n2 (introduction); on laissez faire, 20, 56; on regulation, 225; and resistance movements, 10, 95, 149, 160 Polanyian framework: and double movement concept, 2, 14, 18, 95, 206– 207, 239; and resistance movements, 99, 149, 160, 188, 225 political economy theory, 11, 33, 89, 263n1 politically embedded campaign analysis, 159, 177–178 political parties, 8–9t, 110, 263n1; and CAFTA ratification, 126; in Costa Rica, 42–43, 122, 142, 147, 203; and electoral shifts, 188, 192–193, 205; in El Salvador, 48, 131, 171, 198, 223; and market reform, 30–31, 34, 54–55t, 59, 60; in Nicaragua, 136, 153; and post-­neoliberalism, 225, 232, 235; and pro-­market coalitions, 24; and resistance movements, 3, 10, 17, 109, 196, 204, 237, 264n3. See also specific parties Poma, Ricardo, 266n11 popular education campaigns, 8–9t, 255n6; opposing CAFTA, 106, 107f, 123; promoting CAFTA, 92, 105, 105f populist Left, 4; in Nicaragua, 17, 194, 207–209, 216, 233t, 239. See also post-­neoliberalism; Venezuela Por Costa Rica, 93, 145, 155. See also pro-­CAFTA campaigns; public opinion post-­neoliberalism: in Central America, 17, 232–239, 233t; in Costa Rica, 225–232; in El Salvador, 208, 218– 224; in Latin America, 17; in Nicaragua, 208–217. See also heterodox Right; incrementalist Left; neoliber-

alism; populist Left; specific countries; specific leaders; specific political parties poverty, 5, 8–9t, 26, 190, 195, 236; in Costa Rica, 202–203, 227, 229– 232, 265nn14–15; in El Salvador, 175, 199–200, 200t, 218–219, 220, 221–224; in Nicaragua, 140, 197, 211, 214–217, 264n4, 265n4; and post-­neoliberalism, 208, 233t, 234– 235; and resistance movements, 98, 108 power node INGOs, 8–9t, 161, 172, 186; and El Salvador, 180–182, 263n24 PPP (Plan Puebla-­Panamá), 103, 119, 237, 241 presidential elections, 17, 21, 31, 32, 34, 244–245t, 250n34; in Costa Rica, 42, 141, 142, 203, 208, 226, 260n26; in El Salvador, 45, 47, 59, 131, 177, 200, 223; in El Salvador 1989, 44; in El Salvador 2009, 1, 178, 194, 201, 218, 219, 264n11, 264n12; in Nicaragua, 53, 198; in Nicaragua 1990, 14, 48, 49, 51; in Nicaragua 2001, 69, 135; in Nicaragua 2006, 207, 258n15, 264n8; in United States 2004, 126, 136. See also specific can‑ didates; specific countries private sector. See business associations; business elites; specific organizations privatization, 8–9t, 21, 73, 247n2; in Costa Rica, 37, 149, 153, 203, 205, 226, 254n29; and electoral shifts, 192–193; in El Salvador, 18, 45–46, 161, 186, 199, 201, 221; of ICE, 87, 147, 228; and IMF lending, 56; in Latin America, 1, 30; in Nicaragua, 49, 50, 52, 213; and Oscar Arias, 226; and post-­neoliberalism, 233t; and public opinion, 32; and reform deepening, 23, 58; and reform persistence, 59; and resistance movements, 3, 5, 96, 97, 99–100, 119, 121. See also market reform pro-­CAFTA campaigns, 88, 95, 127, 252n14; in Costa Rica, 144–146,

322  Contesting Trade in Central America

155, 228, 252n11, 260n26; in El Salvador, 105, 134; in Nicaragua, 254nn32–33 Project to Develop Free Trade and Reduce Business Constraints in the LAC Region, 79 PRONICARAGUA, 51 prosperity, 10, 18, 189 protectionism, 76, 85 protests, 5, 8–9t, 96–97, 181, 184, 263n3; against CAFTA, 13, 93, 121, 125, 254n34; in Costa Rica, 37, 41, 99–100, 101; in El Salvador, 101, 118, 124, 127, 133, 175; against neoliberal reforms, 24, 32, 201; in Nicaragua, 93, 139–140; against privatization in El Salvador, 100, 167, 199. See also resistance movements; social movements; transgressive resisters public education, 100, 214 public employees, 3, 47, 50. See also labor; organized labor public opinion, 7, 23, 48, 196, 223, 260n31; and CAFTA, 68, 88–89, 90–91, 93; in Costa Rica, 42–43, 155, 203, 260n32; in El Salvador, 199–200, 200t, 224, 264n10, 264n11; in Guatemala, 148, 254n34; and market reform, 189, 190–191, 190t, 238; in Nicaragua, 53, 197, 217; and reform persistence, 31, 59; and Salvadoran gold mining disputes, 176, 176t, 262n19. See also CAFTAction; CARANA Corporation; Por Costa Rica public policy, 160, 181, 193, 196, 226 public-­private agencies, 51, 54–55t public relations, 91, 93, 174 public sector: and unions, 41, 42, 100, 101, 147, 153; and workers, 37, 50, 213, 234. See also labor; organized labor; specific countries; specific organizations public services, 18, 37, 45, 99. See also specific countries; specific services PUSC (Social Christian Unity Party), 37, 55t, 59, 225, 228, 249n22; and

presidential elections, 42, 142, 203, 227, 244–245t Quijano, Norman, 134. See also madrugón Reagan, Ronald, 35, 38, 43, 49. See also CBI; Contras referenda, 151, 154–156, 237, 260n30. See also Costa Rica: and CAFTA referendum reform deepening, 23, 26–30, 33–34, 54–55t, 57–59. See also market reform reform initiation, 23, 24–26, 33, 54–55t, 56–57. See also market reform reform persistence, 23, 24, 30–33, 34, 54–55t, 59–60. See also market reform refugees, 164, 256n16 regional development banks, 25, 79 regulation, 8–9t, 73; and CAFTA negotiations, 3, 15, 80, 82; in Costa Rica, 18, 39, 42, 249n21; in El Salvador, 168, 185; and mining, 161; in Nicaragua, 21, 49, 52; and post-­ neoliberalism, 2, 193, 206, 207, 225, 235; and resistance movements, 96, 186, 188, 202. See also deregulation relational networks, 164, 166 rent-­seeking, 39, 52, 58 repression, 8–9t, 98, 159, 167 Republicans, 127, 251n3 resistance movements, 5, 10, 18, 146, 163; and CAFTA, 78, 95–97, 99, 112–117, 117–121, 121t; in Central America, 207, 237; in Costa Rica, 203–204; in El Salvador, 159, 187, 201; and intramovement competition, 111–112, 122–125; in Latin America, 193; and methodology, 240; themes and frames of, 104–109; and transnational activism, 101, 166, 183, 255n4. See also critic negotiators; protests; social movements; transgressive resisters

Index 323

Right, political, 263n1; in Costa Rica, 143t, 203; in El Salvador, 130, 131f, 220; and ideological self-­ identification, 191t, 200; in Nicaragua, 137, 137t; and Oscar Arias, 226; and post-­neoliberal government, 234–235. See also heterodox Right Rizo, José, 198, 199, 264n9 RMALC (Mexican Action Network on Free Trade), 158 Rodríguez, Miguel Ángel, 39, 85–86, 99, 244–245t Romero, Óscar (archbishop), 222 RST (Sinti Techán Network), 118, 119, 242, 256n17 Rubio, Roberto, 102, 112, 124–125. See also FUNDE rule-­conforming actors, 109 rule makers, 15, 124; and CAFTA ratification, 94; and rule takers, 63; United States as, 63, 82, 84, 87, 251n5. See also CAFTA rule takers, 15, 124; and CAFTA negotiations, 84; and CAFTA ratification, 94; Central American countries as, 65–68; and rule makers, 63. See also CAFTA Saca, Tony (Elías Antonio), 127, 131, 132, 244–245t; and ANEP, 252n13; and anti-­poverty programs, 221; and GANA, 223; and public opinion, 192–193; and resistance movements, 184; and Salvadoran gold mining disputes, 177–178, 262n19. See also Pacific Rim Mining Corporation Sáenz Lacalle, Fernando (archbishop of San Salvador), 170, 171. See also Catholic Church Sala IV, 100, 141, 259n19 Salaverría, Mario, 257n6 Salvadoran civil war, 48, 161, 164, 172 Salvadoran gold mining disputes: and relational networks, 164, 166; and royalties, 175; and scientific analysis, 167; and transgressive resisters, 117– 122, 162; and transnational activism,

165. See also ICSID; Mesa Nacional Frente la Minería Metálica Salvadoran Ministry of the Economy, 113 Salvadoran National Legislature, 113, 257n9, 260n28 San Andrés (Santa Rosa de Copán), 165, 168 Sánchez, Fernando, 145, 146 Sánchez Cerén, Salvador, 218, 223 Sandinista Revolution, 48, 197, 209 Sandinistas, 1, 49, 215, 265n1. See also FSLN; Nicaragua; Ortega, Daniel San Martín (Valle de Siria), 165 San Salvador Atenco, Mexico, 119 Santamaría, Oscar, 250n23 SAPRIN (Structural Adjustment Participatory Review International Network), 102–103 scholarship programs, 230, 267n20 Schwab, Susan, 150–151 Segovia, Alexander, 46, 220–221, 266n10, 268n10 Sensuntepeque, Cabañas, 168 Sequeira, Carlos: and CAFTA negotiations, 69; and INCAE, 70 SHARE (Salvadoran Humanitarian Aid, Research and Education Foundation), 172, 180 shareholder meetings, 180 Shield Plan, 229 Shrake, Thomas, 261n5, 262n16. See also Pacific Rim Mining Corporation side-­room conversations, 12, 75–76, 80, 114, 117, 120, 252n18 side letters, 88. See also understandings side-­room conversations, 12, 75–76, 80, 114, 117, 120, 252n18 Sister Cities, 167, 172 small and medium-­sized businesses, 3, 80–81, 103, 230, 242, 252n17 small farmers, 3, 30, 41, 42, 80, 83, 101, 103 social class, 90, 148 social democracy, 148, 223, 225, 232 social democratic Left, 222 Social Investment Fund, 250n23

324  Contesting Trade in Central America

social justice, 8–9t, 184 social liberalism, 222 social license, 176 social movements, 109, 160, 255n9, 257n18; vs. civil society organizations, 109, 255n8; and elections, 18, 196, 205. See also protests; resistance movements; transnational activism social movement theory, 11, 15, 17, 109, 122–125, 164, 183; and anti-­mining movements, 162, 166; spirals in, 10, 124. See also deleveraging hook model; domestic loop model social protection, 2, 8–9t, 95, 96, 101; in Costa Rica, 100, 108, 202 social security, 100, 119, 230 social services, 38, 191, 202, 227 social spending: in Costa Rica, 226– 227, 229–230; in El Salvador, 221– 222; in Nicaragua, 214, 216, 217; and post-­neoliberal government, 235 Solidarity Network (El Salvador), 221 solidarity organizations, 8–9t, 172, 184 Solís, Ottón, 142, 146, 203, 205, 230 Somoza, Anastasio, 48, 51, 209 sovereign control, 16, 104 Special Committee (Nicaragua), 135, 137, 138 Special Compensation Fund (Nicaragua), 139 state development roles, 3, 189, 235 state enterprise, 85–87, 96 state intervention, 191, 232 Stiglitz, Joseph, 4, 238 stimulus spending, 8–9t, 227, 230, 233t, 235. See also countercyclical economic policies Strachan, Harry W., 254n31 Streets for the People, 215 structural adjustment, 4, 8–9t, 27, 37, 50, 102–103, 248n5. See also market reform; PAEs structuralist theory, 11, 25–26, 28, 40 structural reform. See market reform structural reform indexes, 20–22, 22t, 38, 45, 50 student activists, 100, 101, 120, 147

Suchitoto, El Salvador, 167 sugar lobby, 74, 76, 115, 252n14 Summit of the Americas, 63, 64, 110, 257n18 tariffs, 3, 23, 249n19, 251n6, 253n24; and CAFTA negotiations, 72, 82, 83–84, 114; CAFTA phaseout of, 62, 83, 138, 157, 236; in Costa Rica, 34, 41, 67, 67t, 248n8, 249n19; in El Salvador, 45, 67, 67t, 223; in Nicaragua, 49, 67, 67t, 140. See also CAFTA; FTAs; GATT; trade agreements Tau Consultora Ambiental, 182–183 taxes, 247n2; in Costa Rica, 227, 230; in El Salvador, 45, 175, 219–220, 223 TCB (trade capacity building), 70–71 teachers’ strikes, 37 technocratic officials, 39, 51, 68, 230; and reform deepening, 6, 23–24, 26–28, 33–34, 57 technology transfer, 72, 115 telecommunications sector, 45, 50, 58; in Costa Rica, 34, 85–87, 97, 146, 149, 228, 253n27. See also ICE textile sector, 66, 74, 76, 85, 115, 144. See also maquila sector Thatcher, Margaret, 4, 30 thick integration, 8–9t, 15 think tanks, 24, 51, 60, 240 tourism, 42, 43, 52, 58, 220, 229 TPA (trade promotion authority), 64, 65, 79, 251n3 trade agreements, 89, 179, 190, 263n22; and democracy, 152–157; between North and South, 62–63; and trade capacity building, 70–71. See also CAFTA; FTAs; intellectual property protections; investor guarantees; tariffs trade negotiation theory, 29, 63, 126 transgressive resisters, 15, 97, 110–111, 112, 117–122, 133, 162; and altermundista movement, 118; and social movements, 255n9. See also protests; resistance movements

Index 325

Transition Plan (Nicaragua), 139 transnational activism, 102–104, 164– 165, 173–174, 183, 237. See also social movements transnational capital, 6, 25, 120 transnational corporations, 46, 116, 119, 121, 185, 228. See also ICSID transparency, 82, 83 Trejos, Alberto, 70, 87, 88f, 142, 145 Trejos, Eugenio, 146, 147 Tripartite Committee, 68, 70, 71 Triveli, Paul, 198 TSE (Supreme Electoral Tribunal), 144, 150 UCA (Central American University), 176, 222 UCCAEP (Costa Rican Union of Private Sector Chambers and Associations), 41, 73, 252n11, 252n12 UCR (University of Costa Rica), 8–9t, 101, 256n12 UES (University of El Salvador), 101 UNAG (National Union of Farmers and Ranchers), 256n12 UNAPA (National Agricultural Union of Associated Producers), 256n12 understandings, 88, 254n30. See also side letters UNDP (United Nations Development Program), 140, 219 UNES (Salvadoran Ecological Unity), 169, 242, 261n7 Unidad, 244–245t United States, 13, 63, 67, 82, 109, 168, 191; and CAFTA, 11, 70, 127; and El Salvador, 172, 200; and market reform, 6, 23; and Nicaragua, 215, 265n5; and recession, 66, 199; and resistance movements, 125, 158. See also international aid; specific agencies; specific officials; specific programs United Students against Sweatshops, 99 Universidad Nacional de Educación a Distancia, 150 universities, 8–9t, 101, 240. See also specific universities

UNO (National Opposition Union), 48, 244–245t UPANACIONAL (National Agricultural Producers Union), 102, 256n12 Uruguay, 38, 192, 200, 202, 217, 232 USAID (U.S. Agency for International Development), 8–9t, 25, 56, 79, 91, 249n16; and CAFTA negotiations, 68, 70, 71, 257n7; and Costa Rica, 35–40; and El Salvador, 44, 46, 47; and market reform, 33, 57, 248n5; and Nicaragua, 49, 52, 92. See also C-­CCA; MCC; U.S. foreign aid U.S. Chamber of Commerce. See AMCHAMs U.S.-­Chile FTA, 75, 82, 114 U.S. Congress, 64–65, 72, 127, 128, 180 U.S. farm subsidies, 78, 82, 138, 236 U.S. foreign aid, 25, 35, 36t, 43, 157, 251n10; to Nicaragua, 49–50, 212. See also USAID U.S. government, 7, 68, 179, 241t U.S. State Department, 25, 133, 140, 210 U.S. telecommunications giants, 86–87 USTR (U.S. Trade Representative), 8–9t, 64, 68, 85, 150, 157. See also CAFTA; Zoellick, Robert U.S. Treasury Department, 25, 49 Valle de Siria (San Andrés), 165 Vargas, Albino, 147 Vargo, Regina, 82 Vector Colorado, 168 Venezuela, 169, 194, 209; and aid to Nicaragua, 215t, 234, 239, 265n6; and anti-­neoliberal governments, 195; and exports from Nicaragua, 216, 265n5; and exports to Nicaragua, 265n5; and ideological self-­ identification, 192, 200; and nationalizations, 234; and Nicaragua, 208, 213; and oil revenues, 195; and post-­ neoliberal government, 232; and socialism, 214; and withdrawal from ICSID, 263n29. See also Chávez, Hugo

326  Contesting Trade in Central America

vertical accountability, 153, 154, 257n1. See also democracy Villalta Loaiza, Guido, 259n18 Volio, Alfredo, 145 von Hayek, Friedrich, 262n14 voter turnout, 53, 250n34. See also elections voting patterns, 193 wages, 189, 209, 234, 236. See also labor Wall Street Journal/Heritage Foundation Index for Economic Freedom, 38 Washington Consensus, 4, 225, 226, 230, 238, 250n33 water rights, 138, 201; and Catholic Church, 170; and resistance movements, 159, 167; and Salvadoran gold mining disputes, 162, 175; and water wars, 5, 119 white marches, 101 WikiLeaks, 223 women’s rights organizations, 80–81, 99, 103, 104, 116, 184 workplace training, 15, 93 World Bank, 25, 26, 133, 156; and

Academía de Centroamérica, 249n16; and CAFTA negotiations, 251n10; and civil society, 79; and Costa Rica, 37–38, 229; and El Salvador, 100, 218, 222; and gold mining companies, 160; and Manuel Enrique Hinds, 174–175, 262n14; and market reform, 23; and mine promotion, 161; and Nicaragua, 49, 50, 264n4; and poverty lines, 265n14; and Salvadoran gold mining disputes, 161, 178–180; and SAPRIN, 103 World Social Forum, 97, 103 WTO (World Trade Organization), 61, 64, 82–83, 96–97, 251n1 Zapatistas, 103, 255n4 Zedillo, Ernesto, 90 Zelaya, Mel, 1, 165 Zero Hunger, 214, 215 Zero Usury, 214, 216 Zoellick, Robert, 64–65, 86, 88, 88f, 251n2; and Nicaragua, 140, 141, 258n15. See also USTR