[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]
CONDUCTING BUSINESS IN LATIN AMERICA: CHALLENGES AND OPPORTUNITIES
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HEARING
BEFORE THE
SUBCOMMITTEE ON
INTERNATIONAL ECONOMIC POLICY AND TRADE
OF THE
COMMITTEE ON
INTERNATIONAL RELATIONS
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTH CONGRESS
SECOND SESSION
__________
MAY 16, 2000
__________
Serial No. 106-164
__________
Printed for the use of the Committee on International Relations
Available via the World Wide Web: http://www.house.gov/
international--relations
__________
U.S. GOVERNMENT PRINTING OFFICE
68-023 WASHINGTON : 2000
______
COMMITTEE ON INTERNATIONAL RELATIONS
BENJAMIN A. GILMAN, New York, Chairman
WILLIAM F. GOODLING, Pennsylvania SAM GEJDENSON, Connecticut
JAMES A. LEACH, Iowa TOM LANTOS, California
HENRY J. HYDE, Illinois HOWARD L. BERMAN, California
DOUG BEREUTER, Nebraska GARY L. ACKERMAN, New York
CHRISTOPHER H. SMITH, New Jersey ENI F.H. FALEOMAVAEGA, American
DAN BURTON, Indiana Samoa
ELTON GALLEGLY, California MATTHEW G. MARTINEZ, California
ILEANA ROS-LEHTINEN, Florida DONALD M. PAYNE, New Jersey
CASS BALLENGER, North Carolina ROBERT MENENDEZ, New Jersey
DANA ROHRABACHER, California SHERROD BROWN, Ohio
DONALD A. MANZULLO, Illinois CYNTHIA A. McKINNEY, Georgia
EDWARD R. ROYCE, California ALCEE L. HASTINGS, Florida
PETER T. KING, New York PAT DANNER, Missouri
STEVEN J. CHABOT, Ohio EARL F. HILLIARD, Alabama
MARSHALL ``MARK'' SANFORD, South BRAD SHERMAN, California
Carolina ROBERT WEXLER, Florida
MATT SALMON, Arizona STEVEN R. ROTHMAN, New Jersey
AMO HOUGHTON, New York JIM DAVIS, Florida
TOM CAMPBELL, California EARL POMEROY, North Dakota
JOHN M. McHUGH, New York WILLIAM D. DELAHUNT, Massachusetts
KEVIN BRADY, Texas GREGORY W. MEEKS, New York
RICHARD BURR, North Carolina BARBARA LEE, California
PAUL E. GILLMOR, Ohio JOSEPH CROWLEY, New York
GEORGE RADAVANOVICH, Califorina JOSEPH M. HOEFFEL, Pennsylvania
JOHN COOKSEY, Louisiana
THOMAS G. TANCREDO, Colorado
Richard J. Garon, Chief of Staff
Kathleen Bertelsen Moazed, Democratic Chief of Staff
John P. Mackey, Republican Investigative Counsel
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Subcommittee on International Economic Policy and Trade
ILEANA ROS-LEHTINEN, Florida, Chairman
DONALD A. MANZULLO, Illinois ROBERT MENENDEZ, New Jersey
STEVEN J. CHABOT, Ohio PAT DANNER, Missouri
KEVIN BRADY, Texas EARL F. HILLIARD, Alabama
GEORGE RADANOVICH, California BRAD SHERMAN, California
JOHN COOKSEY, Louisiana STEVEN R. ROTHMAN, New Jersey
DOUG BEREUTER, Nebraska WILLIAM D. DELAHUNT, Massachusetts
DANA ROHRABACHER, California JOSEPH CROWLEY, New York
TOM CAMPBELL, California JOSEPH M. HOEFFEL, Pennsylvania
RICHARD BURR, North Carolina
Mauricio Tamargo, Subcommittee Staff Director
Jodi Christiansen, Democratic Professional Staff Member
Yleem Poblete, Professional Staff Member
Victor Maldonado, Staff Associate
C O N T E N T S
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WITNESSES
Page
George Munoz, President and CEO, Overseas Private Investment
Corporation.................................................... 5
Bryan Samuel, Acting Assistant Secretary, Economic and Business
Affairs, U.S. Department of State.............................. 10
Regina Vargo, Deputy Assistant Secretary, Western Hemisphere,
International Trade Administration, U.S. Department of Commerce 12
Carlos E. Loumiet, Chairman, International and Banking Practices,
Greenberg Traurig.............................................. 30
Robert J. Zamora, President, Latin American Financial Services... 34
CONDUCTING BUSINESS IN LATIN AMERICA: CHALLENGES AND OPPORTUNITIES
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TUESDAY, MAY 16, 2000
House of Representatives,
Subcommittee on International Economic
Policy and Trade,
Committee on International Relations,
Washington, DC.
The Subcommittee met, pursuant to notice, at 2:19 p.m., in
room 2172, Rayburn House Office Building, Hon. Ileana Ros-
Lehtinen (Chairman of the Subcommittee) presiding.
Ms. Ros-Lehtinen. The Subcommittee will come to order.
Relations between the United States and Latin America can
be compared to any other relationship between neighbors,
sometimes labored, often strained, but ultimately tempered by
the unshakable knowledge that their mutual interests and
priorities supersede any obstacles. Today, these hemispheric
neighbors find themselves in a historically unique position
during which focused cooperation and thoughtful collaboration
can strengthen the institutions of democracy and a free market
from Alaska to Chile.
For generations, the nature of the relationship between the
United States and its neighbors to the South has been one of
strained accord. Yet, over the past 20 years, there has been a
palpable change in the character of this association as the
nations of Latin America have taken significant steps toward
the institution of democratic systems and market economies.
This series of movements have initiated a dovetailing of
values and interest among the nations of the Western Hemisphere
and has laid the foundation for effective long-term prosperity.
Yet, recent challenges have raised questions about the ability
of these reforms to produce fair and responsive institutions,
for prolonged economic stability, for social justice, and an
attractive environment for future investment.
Some analysts contend that the first challenge to the
reform movement in Latin America is the widespread disparity of
wealth which continues to isolate the poor and disenfranchised
from the success which many Latin American nations have
achieved through market reform. This issue has roots in two
different aspects of the region's socio-political culture.
The first arises from the economies which throughout the
1990's have had difficulties registering average annual growth
above 3 percent. In other words, real growth has come slowly to
this area, even though current average growth far outpaces the
dismal growth seen in the 1970's and in the 1980's.
The second source of wealth disparity springs from the
continued challenges which democratic institutions face in
certain countries. Broad-based economic harmony is the product
of a strong and efficient democratic administration which
endows its citizens with inalienable rights and respects those
rights not only in word but in deed.
Another challenge which analysts of Latin American
economics have alluded to is the uncertainty on the part of
many investors to trust that past financial success will
translate into long-term economic stability. At the heart of
this fear lies the 1990 recession among the economies of Latin
America, which sent demand for United States products down 13
percent in Brazil, 17 percent in both Venezuela and Argentina,
23 percent in Chile, and down 27 percent in Colombia. This fall
in the economic boom could be attributed to the stresses of the
Asian financial crisis, but care must be given to ensure that
underlying structural causes are not at the root of this issue.
One possible reform which analysts have suggested may
relieve some of the effects of a regional financial crisis, and
that is a broadening market access to foreign trading partners.
On average, Latin American import tariffs fell to 11 percent in
1997, after a high of 45 percent in 1985. Nevertheless, market
access has been delayed or even reversed in those countries
facing economic instability or stagnation. Among those
countries, imports represented less than 10 percent of GDP. By
contrast, those countries which have been deemed more
successful than others in opening trade have seen their market
share with respect to imports increase to 20 percent of GDP as
of 1998. Other nations of Latin America which have faced more
severe difficulties in weathering the recession have also been
the nations which have limited their market access to foreign
trade.
Restricting market access among the governments of Latin
America has taken on a number of different guises. Tariffs as
barriers to trade are still an important part of Latin American
business culture and there are three reasons for this. First,
the movement to reduce tariffs has been relapsing in certain
nations in the face of economic hardships. Second, unilateral
tariff reductions have not necessarily favored expanded trade.
And finally, sub-regional pacts, such as MERCOSUR, have limited
the ability for non-member nations to compete fairly for market
access.
Non-tariff barriers provide another possible area for
improvement in the face of the current Latin American economic
environment. The legal and regulatory atmosphere of many Latin
American nations effectively promote domestic industries at the
expense of their foreign competition. And finally, there is the
perennial issue of entrenched powers and the corrupting
influence of undemocratic behaviors.
One example of this corrupting influence can be seen
specifically in the application of regulatory burdens. The
inconsistent employment of such burdens has created an
atmosphere of uncertainty for American investors. Without a
clear blueprint of how they must proceed, investors will
refrain from actively pursuing projects for fear of possible
abuse from those who manage regulatory controls. In a major
step to address the problems of corruption, the United States
and the nations of the Western Hemisphere signed the Inter-
American Convention Against Corruption on June 2, 1996.
Yet, despite those and other concerns to be discussed
today, the current climate of trade with Latin America has
really never looked so favorable. Never before has the United
States looked to its Southern borders and seen so much
potential for mutual growth and prosperity. Times are good, and
I hope that with the assistance of this impressive panel of
Administration officials and private citizens, that we will be
able to shed light upon the opportunities and challenges of
doing business with Latin America.
With that, I would like to recognize the Ranking Member of
our Subcommittee, Mr. Robert Menendez of New Jersey, for his
opening statement. Mr. Menendez?
Mr. Menendez. Thank you, Madam Chairlady. Let me thank you
for agreeing to host a hearing on this important topic. I am
personally very hopeful about the hemisphere. Despite some
problems, I believe that the hemisphere is more stable
politically and economically than ever before and that this is
the time to expand our economic relationships with the region.
After years of turmoil, the hemisphere today is, I think,
more ready than ever to engage in the global economy. Already,
American competitors in Europe and Asia are moving to cement
their place in what is becoming the newest hot spot for
investors. So now is the time for American businesses to stake
out their place in Latin America. I believe within the next
decade, trade between the United States and Latin America will
exceed that of the Western European countries as well as Japan
and some other countries in Asia, and that is an enormous
statement, that within a decade that dramatic level of growth
will take place. That is why I supported the Caribbean Basin
Initiative enhancement that was included in the Africa trade
bill.
Now, having stated my positive outlook for the hemisphere,
let me say that I asked for this hearing because of the
concerns that I have about the investment climate in the
region. In the past year alone, I have worked with at least
half-a-dozen companies that have faced unfair or corrupt
practices by governments in the region. From Peru to El
Salvador, Nicaragua, and the Dominican Republic, American
companies are finding that the region's positive economic
forecast does not always extend beyond the raw numbers. In
practice, investing in the region is often difficult and
investors may find themselves subject to retroactive tax laws,
faced with market access barriers and unclear regulations, and
often without recourse in the judicial system.
One of our witnesses today will talk about their own
experience, and in the context of that experience talk about
over $3 million that was embezzled from their company. And when
they brought it to the authorities of that country and in the
court system of that country, with an enormous amount of
overwhelming evidence created by that country's investigative
authorities themselves, not by the American company but by that
country's investigative authorities, that, in fact, a court
would side with the embezzlers. These are the types of examples
that I have been dealing with with many companies both in my
State as well as across the country who face these types of
hurdles in our trade with Latin America.
There is a tremendous need in many countries for regulatory
reform, transparency, mechanisms to manage corruption. American
companies are subject to the Foreign Corrupt Practices Act.
Competitors throughout other parts of the world are not, and,
therefore, it is increasingly important to us to pursue
agreements in that regard so that we can internationalize that
standard, laws that ensure the sanctity of contracts and
intellectual property rights, judicial reform that provides
real legal recourse to businesses that find themselves in a
dispute. I believe these concerns are reflected in the
lackadaisical response of American investors to the region's
potential.
The United States has an obligation to help American
businesses and our closest geographic neighbors. It is in our
mutual interest to help Latin nations to become economically
strong and stable neighbors. By increasing our funding for
foreign assistance programs and by ratifying the Inter-American
Anti-Corruption Convention that is pending in the Senate, we
can secure our economic ties to the hemisphere by helping to
build an economic infrastructure that will attract and sustain
investment. We are increasingly attracting investment. The
question is, do we sustain that investment if companies
continue to face what they face in doing business within the
hemisphere.
Last, we need to provide more assistance to American
businesses that have already decided to take the plunge by
increasing the Foreign Commercial Service's presence in the
region. I am a strong supporter of the United States and
Foreign Commercial Service, but we desperately need more
officers in Latin America to help American businesses make and
sustain their investments. At a minimum, we should have one
full-time Commercial Service employee in each country in
Central and South America as well as a significant presence in
the Caribbean.
So I look forward to hearing from our witnesses about their
perspectives on conducting business in the hemisphere. I hope
that they will be straightforward not only about the enormous
possibilities, and we are all very positive about the enormous
possibilities, but I would like to hear some honest opinions
about some of the difficulties of doing business in the
hemisphere and how we deal with some of those difficulties so
that we can facilitate United States American investment in
Latin America. Thank you, Madam Chairlady.
Ms. Ros-Lehtinen. Thank you. Excellent suggestions, Mr.
Menendez.
Now, I would like to introduce Mr. Sherman of California
for his opening statement, as well.
Mr. Sherman. Thank you, Madam Chair. I think there are real
opportunities in Latin America. One country, however, in Latin
America is not a democracy and we should limit our trade with
Cuba. Of course, what worries me is that, as I understand it,
the Agriculture Appropriations Subcommittee has decided,
perhaps without any hearings at all on the foreign policy
aspects, but certainly without any jurisdiction over foreign
policy, that we ought to change with regard to trade with Cuba
and several other nations, rogue states, and I would hope that
our Subcommittee, which would be the subcommittee of
jurisdiction, I believe, would urge the chair of the full
Committee to do everything possible to assert jurisdiction over
any change in our trading policy with rogue states. I look
forward to the hearing.
Ms. Ros-Lehtinen. Thank you so much, Mr. Sherman.
I would like to take this opportunity to introduce the
three Administration witnesses who will share their views on
the current atmosphere of trade relations between the United
States and Latin America. Let me begin with a very good friend
of our Subcommittee, Mr. George Munoz, the President and CEO of
the Overseas Private Investment Corporation, OPIC. An
international lawyer with a J.D. from Harvard Law, Mr. Munoz
served as the Chief Financial Officer of the U.S. Treasury
Department from 1993 to 1997, when he assumed his current
position. We thank Mr. Munoz for holding also a series of
forums that he has held in South Florida to stimulate the
interest in trade with our neighbors. We welcome you once again
to our Subcommittee, George.
He will be followed by Mr. Bryan Samuel, Acting Assistant
Secretary of State for Economic and Business Affairs. Appointed
in August 1999, he is the State Department's senior policy
official directly responsible for all aspects of the Bureau of
Management and Planning. Prior to joining the State Department,
Mr. Samuel was Deputy Assistant Secretary for Inter-American
Affairs, where he oversaw all economic issues of the region. We
thank you for being with us, Mr. Samuel.
And we are also fortunate to have with us again Ms. Regina
Vargo, the Deputy Assistant Secretary for the Western
Hemisphere at the International Trade Administration at the
U.S. Department of Commerce. She is a regular participant in
our Subcommittee hearings and activities. Ms. Vargo joined the
Department of Commerce in 1972 and has been actively involved
in the negotiation, implementation, and enforcement of
bilateral and multilateral agreements to provide greater
commercial opportunities for U.S. businesses in Latin America.
Ms. Vargo was awarded the Department's Gold Medal for her work
on NAFTA.
We thank all of you for being with us. We will include your
entire statement in full in the record, if you could briefly
summarize for us. We will begin with our friend, Mr. Munoz.
Bien venido.
STATEMENT OF GEORGE MUNOZ, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, OVERSEAS PRIVATE INVESTMENT CORPORATION
Mr. Munoz. Madam Chairperson, I have to say that never
before have we been so close to Latin America than today, and
it is your leadership, Madam Chairperson, along with the
ranking Member, Robert Menendez, and this full Committee and
representative chairmen that has sent the right message to
Latin America, that a crucial component of our relationship
with Latin America is in the economic sphere. As those
countries strive for a better standard of living, what not
better to have the Administration's trade and investment
agencies, the Department of Commerce, and others be highly
focused in this area.
I would like to make four points today, Madam Chair.
Strengthening relations with Latin America is in the United
States interest. I would also like to say that there are vast
opportunities for U.S. businesses of all sizes in Latin
America, that economic and political stabilization are
essential for long-term investments, and last, that OPIC is
playing a significant role which will benefit regional economic
development.
Why trade and investment in Latin America is important to
the United States, it started after the Second World War when
President Roosevelt said that in order to assure permanent
peace, it is important that there be a decent standard of
living for every man, woman, and child. That created the
Overseas Private Investment Corporation, and to this day, that
is our mission, to mobilize and facilitate the participation of
U.S. capital and skills in the economic and social development
of less-developed countries in areas, especially countries in
transition from non-market to market economies.
We do four things. First, we ensure investments overseas
against a broad range of political risks. Second, we finance
business overseas through loans and loan guarantees. Third, we
finance private investment funds that provide equity to
businesses overseas. And last, we advocate the interest of
American business and communities overseas, as pointed out by
Representative Menendez.
It is important that we do our business by promoting the
best practices. I am proud to say that we promote investments
in trade by highlighting the importance of environmental
standards in those investments. Second, that we take a look at
the impact of those investments. It is important to note, Madam
Chair, here that OPIC does not support any project that will
eliminate any American jobs. We also make sure that the
countries that we work with respect worker rights.
Trade and investment is important, Madam Chair, because
two-thirds of world trade is done by companies with foreign
operations. That means that the more exports and trade that we
want, it is important for companies to have a foreign
operation. In fact, one-third of all U.S. exports go to the
exporters' overseas operations. That is a dramatic statistic.
The Department of Commerce has come out with statistics that
show that there are more sales done by U.S. companies' foreign
affiliates than through exports. It means that if we are going
to reach the market overseas, it is important that we reach
them through an operation in those countries.
Helping countries to develop is an important part of U.S.
foreign policy. The positive impact that OPIC has, first, we
strengthen our national security and prosperity for the United
States by helping businesses stay competitive on a global
basis. In fact, since 1971, OPIC-supported projects in support
of U.S. foreign policy goals has created more than 242,000
American jobs. At the same time, and more importantly, we are
creating stability and increasing the standard of living in
developing countries. In 1999, for example, OPIC-supported
projects will generate 30,000 jobs in developing countries and
$1.2 billion in taxes for those countries. But best of all is
that we do this at no cost to the taxpayer. In 1999, OPIC
earned $144 million in net income after expenses, creating a
positive cash-flow for the U.S. Treasury.
There are challenges to doing business in Latin America.
Congressman Menendez pointed out that corruption is one
problem. The first generation of reform requires that countries
open up and privatize their foreign ownership, that they
liberalize their foreign laws, reduce trade barriers, and open
their economy to the markets. We have seen much of the first
generation in Latin America, but it is the second generation of
reform that we are still seeing problems.
No. 1, it is important that countries have good governance
and there is much to be learned from countries that have made
it successfully into the global economy that many countries in
Latin America still need help in. There needs to be a social
infrastructure, though the income disparity that, Madam Chair,
you pointed out in your opening comments is very serious and
likely could cause instability that gives us concern. And last,
there needs to be full participatory democracy in these
countries.
I also wanted to point out that in terms of corruption,
that is probably the No. 1 area that businesses will point to
as being the concern in Latin America. We as an Administration
speak out against this. Recently, Central America held a
conference on this, and I am proud to say that it is not
something that just the United States is saying, but presidents
from some of these countries are also saying that this is a
concern to them.
Our current portfolio shows out very proudly, Madam Chair,
that when I came to the Overseas Private Investment
Corporation, it was my objective to leverage the strength of
the small business. It was my objective to leverage the
strength of diversity that our country enjoys in the language
and in the culture of many of those countries in Latin America.
As a result, as this will show you, our portfolio has 49
percent of it is in the Caribbean, Central America, and South
America. I am proud to say that because to the extent American
businesses expand, what not better to strengthen our own
hemisphere. What not better to bring stability to our own
hemisphere and show the model to the rest of the world. We are
proud to be part of that.
This will show you that, in fact, almost every country has
a project that is going on that OPIC has been supportive of in
one fashion or another, but I would like to bring this home to
you in terms of some of the examples.
The areas of investment are very broad. As you may know, in
many of these countries, for the first time, they were opening
up to the private side. So many of these sectors are in the
infrastructure, like power and communications. But I am proud
to say that in the Caribbean, where the only form of dollars
that can come into that area is in tourism, we, too, are
playing a lead role in bringing some tourist development to
that region.
But it all comes down to actual cases. In Haiti, which is a
country that suffers probably the most from poverty and
instability, Haiti was a country that when OPIC came to assist
did not have a flour mill that was in operation. It had been
taken over by the government earlier and then was left in
disarray. Thanks to a Kansas City company that was wanting to
take it over as a privatized venture, OPIC was able to help
provide political risk insurance for its development. It now
has 200 local jobs and there is a local wheat factory for that
poor country.
Nicaragua also is a benefactor of power and electricity
that has come to that country through an American company,
Coastal Corporation of Houston, and we have been instrumental
in establishing them in Nicaragua.
In Dominican Republic, the first private sector airport at
Punta Cana was done with the assistance of OPIC and it was only
a small direct loan of $1.5 million that showed that country
how to lead into the private sector.
We have several initiatives that we wanted to point out to
this Committee. One of the things that when I first took over
this position, Madam Chair, you may remember I met with you
personally and also with Ranking Member Menendez, also with
Representative Manzullo. What I heard was the small business,
the small business, the small business, and especially in the
Caribbean and Central America. We have many families from those
regions in the United States, but more importantly, we want to
stabilize those economies. I am proud to say that we worked
very hard and have now reached an agreement with Panama that
will help stimulate investments in that country.
We also established a Citibank facility. Representative
Menendez had been very clear to me that lack of capital for
many U.S. businesses was what was keeping them from
establishing trade and investment opportunities in Central
America. We quickly moved and discovered that we had
opportunities through this facility that we have established.
So far, it has approved $76 million in seven different projects
in six different countries.
But that is not all we are doing. Unfortunately, the region
suffered from two hurricanes and, therefore, we, together with
the rest of the U.S. administration, especially with the
assistance of AID, Department of Commerce, we established the
Central American-Caribbean Initiative, where we are reaching
out to the business community so that they can bring
investments to this region.
We have, as part of this initiative, we are taking
conferences through five different cities in this country to
Los Angeles, Chicago, Miami, Houston, and New York, culminating
in a meeting in Panama, a regional conference in Panama, where
we are highlighting the business opportunities in this region.
We are also promoting stability in Colombia. We know that
this Subcommittee has also been working on ways to curb the
drug trafficking that is occurring in that country plus the
instability that is going on. I have met with the president
there and we have come up with some initiatives at OPIC to try
to bring investment as an alternative form for the economy in
that country.
A very exciting initiative is our entry into housing.
Housing is probably the most demanded item for all the
developing world, and we know in this country that it was the
ownership of homes and houses that established the middle
class. Well, the housing needs has gone unmet and the formulas
for funding them have been inadequate. As a result, OPIC has
been working for a year and a half, working with investment
banking firms and private sector investors for ways to
structure a commercially viable housing for low- and moderate-
income people in developing countries.
We believe that we are very much at the cusp of coming up
with a solution that will help bring capital from private
investors into the housing area where OPIC can play a role. We
believe we can do it in a prudent manner, in a manner that
continues our long tradition of being successful at these
ventures.
I also want to point out that it was our focus on small
business that has gotten us the respect that we believe we now
have in Congress, and it has been thanks to your leadership,
this Subcommittee's, and all the Members of this Subcommittee
that has made it clear to me that the small business community
needs the extra hand, is the one that needs the extra support
from OPIC.
So, therefore, we established a new interactive small
business training program in our website where businesses do
not have to come to Washington to know about us. They can go
into the Internet and there is an interactive training program.
We streamlined our application process. We reduced the minimum
loan size. We have a new small business hotline.
As a result, just this last year, we doubled our assistance
for small business and 34 percent of projects involved that we
financed were small businesses, and 70 percent of finance
commitments went to small businesses. This is more than a
record for OPIC. It is an astonishing accomplishment and change
of culture that we have brought to the institution. The first
financing project in Angola, Armenia, and Lebanon were also led
in 1999, and we are proud to say that two-thirds of all
suppliers to OPIC projects, even large ones, are from the small
business community.
We know that a small operation in Washington to reach out
to the whole country and to the developing world, we have to
rely on technology. So we have increased our use of technology.
We have a website that is very interactive and provides the
latest information to any investor in the United States in
terms of what we do.
This is part of our small business training site. One of
the sites that is most used by investors is our information
gateway, where an investor can click on any country in this map
and find out the most current information about that country,
our embassy information, as well as online newspapers from
those regions. We have this information that comes to all of
our investors.
In conclusion, I would like to say that, in fact, Latin
America is a priority for OPIC. The results are in our
portfolio, as it has now grown to 49 percent out of $18.3
billion in our portfolio. There is a profound interest to U.S.
economic and security interests. We know that the people
leaving the Caribbean and Central America coming to the United
States, some of them drowning along the way, some of them
suffering through all torturous violations of human rights, are
doing it because they want a better standard of living, what
President Roosevelt said in 1945. He said that that was the
only way to bring about peace and stability. We believe that we
have that profound interest here in our own hemisphere.
We also believe that there are exciting opportunities
available to U.S. businesses and that economic and social
progress must accompany democracy and political reform. That is
not just a desire for the business to invest, but these
countries must have social progress in education, eliminate the
income disparity, and work with their constituents in order to
have the free markets and democracy fully at work.
We very much appreciate you allowing us to make this
presentation. We are very proud that this Administration, in
fact, has made Latin America a priority, and thanks to the help
of this Subcommittee, we believe that our word is going out.
Thank you very much.
Ms. Ros-Lehtinen. Thank you so much, Mr. Munoz. It
certainly is going out. We thank you for a very high-tech
presentation, as well.
I would like to recognize Ambassador Ambler Moss, who is in
our audience, the head of the University of Miami North-South
Center. It is always good to have you with us, Ambassador.
I would like to recognize Mr. Samuel for his remarks, as
well. Thank you.
STATEMENT OF BRYAN SAMUEL, ACTING ASSISTANT SECRETARY OF STATE
FOR ECONOMIC AND BUSINESS AFFAIRS, U.S. DEPARTMENT OF STATE
Mr. Samuel. Thank you very much, Madam Chairlady and
Members of the Committee. I am very pleased to be here today to
join this panel and have the opportunity to discuss with you
the business environment in Latin America.
The past decade has been one of remarkable achievement for
this hemisphere. Broad agreement now exists that governments
should be democratic, that economies should be market-based,
and that the benefits of growth should be widely shared. In
most countries, democracy is becoming deeply rooted and
democratic institutions are growing stronger.
Most Latin countries are also firmly on the path of
economic reform, taming inflation, privatizing state-owned
enterprises, modernizing regulatory mechanisms, and
liberalizing financial and trade systems. Following the recent
financial crisis in Asia, the hemisphere is again growing
strongly. Opportunities for trade and investment are immense,
and the United States is particularly well placed to take
advantage of them.
Reform, however, is still a work in progress.
Administration programs in Latin America support deepening of
the reform process and strengthening the rule of law. In so
doing, we are increasing opportunities for U.S. firms and
making it, we hope, easier for them to operate in Latin
America.
We are particularly concerned with the protection of
intellectual property rights. Piracy of sound and video
recordings and of computer software, as well as abuse of
pharmaceutical patents costs U.S. firms millions of dollars in
lost sales. The U.S. Government and State Department, in
coordination with our private sector, is working hard with
individual countries to improve IPR enforcement. We have
established training programs and seminars, which include a
particular focus on prosecutors and the judiciary.
Judicial reform overall is another key area. Our Latin
American programs center on criminal procedures, effective
representation, and other areas of criminal law. The lowering
of trade barriers has heightened the need for improved
enforcement of contracts and other commercial arrangements and
we are working with individual governments to improve
commercial law facilities. Legal security is essential to all
those who engage in commerce, not just international investors.
We are also looking to ease the regulatory environment for
U.S. companies in Latin America. We have signed an antitrust
cooperation agreement with Brazil and we are in the process of
negotiating accords with Argentina, Mexico, and Panama. These
accords will open up direct lines among our competition
authorities.
Corruption, as Representative Menendez mentioned,
undermines companies' ability to operate in a transparent and
predictable environment in Latin America. We are proud of the
Inter-American Convention Against Corruption which we
negotiated and signed. It is the first instrument of its kind
in the world. It requires parties to criminalize acts of
corruption. U.S. ratification of this agreement would send a
strong signal to the hemisphere.
We are facilitating trade and investment through the
negotiation of a series of bilateral civil aviation agreements.
These have greatly expanded passenger and freight services
throughout the hemisphere. We now have open skies agreements
with Chile, Peru, Argentina, the Dominican Republic, Aruba, the
Netherland Antilles, and all of Central America except Belize.
We concluded a new agreement on code sharing with Mexico worth
hundreds of millions in additional annual revenues and have
agreed to new services with Colombia that will provide the
United States with over $125 million in direct benefits each
year. We have continued to work hard on behalf of further
liberalization in our hemispheric civil aviation arrangements.
Negotiating bilateral investment treaties in Latin America
is another top priority. These treaties protect U.S. investment
abroad and encourage adoption of market-oriented domestic
policies that treat private investment equitably. BITs also
support the development of high-quality international law
standards for investment. BITs with Argentina, Ecuador, and
Panama are now in force, while agreements with Honduras,
Nicaragua, El Salvador, Bolivia, and Jamaica will surely be
submitted to the Senate.
Trade preference programs, such as the Caribbean Basin
Initiative and the Andean Trade Preference Act, carry
conditionality that fosters transparency and creates improved
competitive conditions for U.S. business. For instance, the
recently passed CBI enhancement legislation requires
beneficiary countries to take steps to become party to the
Inter-American Convention Against Corruption. CBI beneficiaries
must also meet their WTO commitments and maintain a transparent
government procurement system.
The State Department and U.S. embassies throughout the
hemisphere are also working closely in support of U.S.
business. Commercial outreach and advocacy are critical
priorities for our Ambassadors. Our embassy staff, working in
many countries with the Foreign Commercial Service, include
experts working to develop opportunities for U.S. firms and to
remove impediments to U.S. exports.
All of these initiatives dovetail into our efforts to
launch the Free Trade Area of the Americas. The more we can
help countries develop accountable transparent systems where
the rule of law is respected, the better they will be able to
undertake the obligations of the FTAA. When negotiations end by
2005 and after Congress passes implementing legislation, the
FTAA will be the largest free trade zone in the world,
establishing a market exceeding $10 trillion with more than 800
million people.
Nine FTAA negotiating groups are now at work on issues
ranging from market access in agriculture to competition
policy. The completed FTAA should eliminate tariffs, establish
better protection of intellectual property, encourage
competition, transparency, and impartial regulation and create
an effective means of resolving trade disputes. The FTAA
process includes a civil society committee, which I would be
honored to chair for the United States It is designed to advise
governments on the use of business, labor, consumers,
environmentalists, academics, and other citizens' groups.
Before I conclude, I would like to take the opportunity to
welcome the recent House and Senate passage of legislation to
enhance the Caribbean Basin Initiative. Enactment of this
measure will support the favorable economic and political
trends in the region as described and will help enable these
countries to undertake the obligations of the FTAA agreement.
Thank you for the opportunity to testify today and I look
forward to further discussion.
Ms. Ros-Lehtinen. Thank you so much, Mr. Samuel.
Ms. Vargo.
STATEMENT OF REGINA VARGO, DEPUTY ASSISTANT SECRETARY FOR THE
WESTERN HEMISPHERE, INTERNATIONAL TRADE ADMINISTRATION, U.S.
DEPARTMENT OF COMMERCE
Ms. Vargo. Thank you, Madam Chair and Members of the
Committee. I would like to first commend the Subcommittee for
its continued focus on our commercial relationship with Latin
America and the opportunities that it presents for U.S. firms.
As they say, timing is everything and Congress just voted a
landmark bill, the so-called Africa and CBI bill, which will
further advance United States-Latin commercial relations.
The Western Hemisphere comprises all the Americas and makes
up the group of 34 nations that are negotiating to build a Free
Trade Area of the Americas. Today, the Western Hemisphere
accounts for 1 out of every 5 dollars that the United States
exports. More impressively, the Western Hemisphere has been
responsible for almost half of all U.S. export growth since
1995.
This is despite the fact that beginning in late 1998, the
global financial crisis and lower commodity prices and then
Hurricanes Georges and Mitch took their toll on Latin American
economic growth. The regionwide downturn, coupled with currency
devaluations in several markets, seriously lessened the
region's demand for U.S. exports. Total two-way trade with
Latin America, excluding Mexico, fell in both 1998 and 1999,
and our trade balance with the region swung from a record
surplus of $13 billion in 1998 to a deficit of $3 billion in
1999, our first regional trade deficit since 1991.
Our exports to the region continue to founder so far in
2000, but are expected to revive with the region's fortunes.
The World Bank predicts a 4-percent gain for the region's
economy this year, with imports rising by as much as 10
percent. But in order to make the most of the opportunities in
Latin America, we must address several existing challenges.
First, we need to find a way to move forward with Latin
America on an ambitious trade agenda. Congressional passage of
CBI enhancement should reassure our hemispheric partners that
the United States remains steadfast in its desire for closer
economic relations and help propel momentum for the FTAA. FTAA
countries are already implementing an initial package of
business facilitation items. These are hemispheric-wide
solutions to real world trade problems, like our common
agreement to move express shipments through customs in just 6
hours. Our target for the next FTAA ministerial in April 2001
is a second round of agreed measures and a comprehensive
bracketed draft text.
Electronic commerce offers another avenue for forward
progress. This was the theme of Secretary Daley's recent
mission to South America, where he signed a joint policy
statement with Chile, the first of its kind in Latin America
and secured Argentina's support for the Administration's e-
commerce framework. Tomorrow, Secretary Daley will sign a
similar e-commerce policy agreement with Colombia's trade
minister, and at Thursday's Binational Commission here in
Washington, the United States and Mexico will review our
cooperative efforts to make North America a seamless web for
online commerce.
Progress on these fronts is important because we face a
second challenge, a significant increase in foreign competition
for Latin American markets. Increasingly, U.S. exporters find
themselves competing against firms located within the region
that enjoy lower tariffs as a result of sub-regional trade
agreements. We have encouraged this integration because it
contributes to greater economic growth, reinforces Latin
economic reforms, and buttresses the emerging democratization
of the region.
But recent agreements are now looking outside the region.
Last November, the European Union and Mexico concluded a free
trade agreement. The EU is intensifying negotiations with
MERCOSUR toward consolidating the two regional blocks. And
Chile is making overtures to Asia, beginning free trade talks
with Korea, and considering talks with Japan.
Our third challenge concerns ongoing market access issues
that continue to affect the competitive potential of U.S.
firms. This month, super and special 301 reports highlighted
two of the most important, the use of reference import prices
by Mexico and Brazil and intellectual property issues with
Argentina and Brazil.
Finally, we wholeheartedly agree with Assistant Secretary
Bryan Samuel's point regarding the problem of corruption, as
well as Director Munoz's comments on the important role that
OPIC plays in the region.
The Commerce Department's International Trade
Administration also plays a number of critical roles in
promoting U.S. commercial opportunities with the Latin American
market, ranging from export promotion to trade policy
implementation to enforcing our unfair trade laws.
I want to again thank the chair and the Subcommittee for
your past support of ITA's market access and compliance unit,
of which I am a member. MAC continually develops and advocates
strategies that the Administration can adopt to address market
access and compliance problems in the region, and we are
carefully monitoring the new regional sub-agreements to ensure
that they do not unfairly disadvantage U.S. exports.
Thank you, and I will be pleased to answer any questions.
Ms. Ros-Lehtinen. Thank you so much, Ms. Vargo, for your
testimony, and thank you to all of you.
Mr. Munoz, I would like to ask you about the impact thus
far on the United States and on host countries of OPIC's
Central America and Caribbean initiative. What is the projected
long-term benefits for U.S. investors of this initiative and
are you planning on embarking on other similar initiatives in
other areas?
Mr. Munoz. Yes, Madam Chair. From the unfortunate
occurrence of the hurricanes, there does come an opportunity.
The countries of Central America and the Caribbean have
expressed an interest in a transformation so that their
countries were not trapped into the old agricultural economy
that they were at. Some of the new investments that are taking
place in Central America and the Caribbean have to do with
building the infrastructure, from transportation in Panama and
in the Caribbean to electricity being brought for the first
time on an integrated system basis to many of the countries in
Central America.
We believe that the long term bodes well. The fact that the
American government is willing to help finance or provide
political risk insurance for some of these investments is
sending the right signal to the business community in the
United States that this region is of a high level of importance
to us.
We already see by something as simple as bringing a flour
mill to Haiti that had to import its bread and any of its
products that required flour, we are already seeing a much more
positive impact from that, but there is a long, long way to go.
But we do know that getting the private business sector
involved is the solution.
I just want to conclude by saying that the best candidates
for investment in the Central America and the Caribbean region,
interestingly enough, are from families that came from those
regions. Recently in Los Angeles, we met with the Salvadoran
and Guatemalan community that had already been successful in
the United States and they were expressing interest in
returning to those countries, not to return permanently but to
return as investors in those countries, and we were able to
bridge those investments.
Ms. Ros-Lehtinen. Thank you. I would like to ask Mr. Samuel
and Ms. Vargo a question. One of the witnesses in the second
panel will be testifying about a horrific experience that his
company has had in El Salvador with judicial corruption, and
his company lost $3.3 million when they were embezzled from his
company, and despite the overwhelming evidence, the judge in
the case ruled in favor of the embezzlers. We understand that
the U.S. embassy in El Salvador was aware of the situation and
I want to know how it happened that neither State nor Commerce
were able to help them.
And the bigger part of this problem, not only do I want to
know what steps were taken to protect the rights of Mr. Zamora
and Mr. Arguello, who are constituents in my district and are
in the audience today, to protect them against these
embezzlers. What protections are being taken and what can
individuals expect from our government or what could be
available for any legal recourse, what protection? What steps
are we taking and concrete progress in the areas of judicial
reform or anti-corruption investment enforcement measures
before we enter into further trade agreements or granting NAFTA
parity to other countries, El Salvador and others, and what are
your views on creating a corruption certification process and
an index for countries in the region as a prerequisite of U.S.
trade and economic benefit to be conferred?
So I want to know first about this specific case, and then
in general terms what proactive steps we can take to make sure
that this does not happen in the future and what protection can
our U.S. businesses expect from our U.S. agencies.
Mr. Samuel. Thank you very much, Madam Chairman. I learned
about this case just today, and certainly the circumstances
look appalling. I understand that our embassy has been in
contact with the company over the number of months, in fact, I
guess, for the last few years that this has been going on.
As a general practice, we do not intervene directly with
the courts of a country the same way we would expect that
embassies here do not intervene directly with our courts. That
being said, we have and will continue to press the government
in El Salvador that we expect that this situation is handled in
a transparent manner, in a fair manner, and that the courts
act--we expect of the Salvadoran government that the courts do
act.
Ms. Ros-Lehtinen. If I could just interrupt you----
Mr. Samuel. Sure.
Ms. Ros-Lehtinen [continuing]. You said we will continue to
carry on those conversations with the government of El
Salvador.
Mr. Samuel. Right.
Ms. Ros-Lehtinen. What has your Department done thus far?
Mr. Samuel. As I say, I have just learned about this today,
Madam Chairman, and I am told that our embassy has, in fact,
made several representations to the government of El Salvador,
and my guess would be at the foreign ministry, and I can get
you the specifics of that. I will be very glad to do that.
Ms. Ros-Lehtinen. Yes, if you could. Thank you.
Mr. Samuel. I will certainly do that.
Ms. Ros-Lehtinen. Now, the normal procedures would be, if I
could interrupt you for a minute----
Mr. Samuel. Sure.
Ms. Ros-Lehtinen [continuing]. The embassy would normally
notify you or they would not, meaning if there is some problem
here, if the embassy, the U.S. embassy in a country knows about
a problem, but yet does not notify a person in your position,
you would be the one, the individual who would be tasked to
know about this problem, so I do not know who they would have
contacted if it did not go up to you.
Mr. Samuel. Well, in this specific instance, I understand
that it had gone back to the geographic bureau and to our Latin
American bureau and that officials there certainly have been
aware of it. I found out about it today, so it is an oversight.
I should probably have known about it sooner. But again, we
have now taken care of that.
Ms. Ros-Lehtinen. Well, perhaps it is the structure of the
way that the communications take place in the Department, to
make sure that the individual who would be most likely to help,
which I believe would be you----
Mr. Samuel. Right.
Ms. Ros-Lehtinen [continuing]. Would be immediately
notified by our embassy, because I would imagine that this
could happen in many other places and, in fact, probably does.
Mr. Samuel. I think that is right. That is right. We will
look at that.
Ms. Ros-Lehtinen. And if you could get back to our
Subcommittee on the actions that our U.S. Government took to
protect and help these individuals.
Mr. Samuel. I will be glad to.
Ms. Ros-Lehtinen. Yes, Ms. Vargo.
Ms. Vargo. Thank you. I am also distressed to say that I
was unaware of this case before today. I would be happy to go
back and see what kind of reporting took place about it to make
us aware of this particular incident because it had not
previously come to my or my managers' attention. So we would be
happy to look into this.
Ms. Ros-Lehtinen. Thank you. I think that this points to a
problem in communication because I think that is part of the
frustration that U.S. businesses are feeling, that they get
into a problem with corruption in another country and it does
not seem like our U.S. agencies are helping them and it is
because they are not getting the information. So if Mr. Munoz
is correct in saying that it does seem to be an overriding
concern of U.S. businesses, the problem of corruption in other
countries, it would seem that we would have a department set up
and a host of folks who would be able to deal with that and we
wonder why we are not doing enough in investment and trade in
countries, yet we do not seem to have a system set up that
could handle those complaints.
Also, what thoughts do you have about any corruption
certification programs? Is this something that you have thought
of doing in order to get some comfort factor at the very least
for U.S. businesses to feel like if they run into trouble, that
there is some agency to turn to and that, in fact, corruption
is an important factor for the United States to consider before
we enter into trade agreements with other countries.
Mr. Samuel.
Mr. Samuel. Certainly, Madam Chair. We have not looked
specifically at the question of corruption certification and
related to trade and then to entering the trade agreements. We
have, however, as we looked toward negotiating a Free Trade
Area of the Americas, are looking at the larger problem of
proactively addressing corruption problems. Part of this is
through the negotiation of the international agreement.
It is interesting that Transparency International, which is
a very good NGO that puts a lot of attention onto corruption
issues, has, in fact, an index that it maintains, and of that,
17 Western countries, of which 11 are listed as the most
egregious. So it is an endemic problem in Latin America that we
are trying to find ways to address through the convention,
through various training programs.
We have brought judges up here from a number of countries.
I do not know that the country involved has been involved in
judiciary training, but we have brought them up. I have, in
fact, been involved in meetings where we have had even members
of the Supreme Court meet with visiting judiciaries and try to
bring some idea of what a properly functioning judiciary would
look like.
Ms. Ros-Lehtinen. Thank you, and I hope we----
Mr. Samuel. So it is a proactive approach.
Ms. Ros-Lehtinen. We look forward to your responses to our
concerns about this ongoing corruption problem.
I would like to recognize Mr. Menendez for his questions.
Mr. Menendez. Thank you, Madam Chairlady.
I want to thank you all for your testimony. I do not know
whether it was our failure to give you the sense of what we
really were looking for or your diplomatic decision to avoid
some of the issues that I think are really crucial, so let me
try to explore them with you in this period of time.
I have for 8 years on this Committee, sometimes alone, been
the greatest rooter for Latin America and for having our
Committee and the Congress pay attention to what is happening
in Latin America in a variety of ways, so I take a back seat to
no one in that advocacy. But I also recognize that we have some
serious problems in doing business in Latin America.
We have one of our airlines who recently was told, we are
not going to renew your license because the FAA is going to
downgrade us. Well, that airline cannot do anything about it.
We have Mr. Zamora's testimony about his case. We have
companies in one of my own districts in Nicaragua who,
notwithstanding judicial decrees, cannot get their property
back. We have a set of circumstances where our business people,
incredibly competitive, offering lowest, best price with all of
the attendant issues being met in a bid and continue to lose
them. We have judicial decisions going against our citizens and
companies that are unbelievable. We know that a court is
always, to some degree, a roll of the dice, but should not be
when the country's own information is so overwhelming that its
judiciary could not just overlook that it.
And so what I would like to hear from you is, in part, how
do we intend to deal with that? I think that the Inter-American
Anti-Corruption Convention is a great step forward. Of course,
enforcement is important because any agreement, any convention
is only as good as its enforcement. I mean, we have that
problem with a variety of trade issues. So enforcement, I would
like to hear you discuss that.
I would also particularly like to hear from you, Mr.
Secretary, on the question of whether you really do believe
that the State Department is the appropriate vehicle and our
embassies, are they really the best vehicle for advocacy of
American businesses when they are finding themselves in the
difficulties such as, just by way of example, Mr. Zamora's
company, because it is the same Ambassador from our country in
that foreign country who is going to go to the foreign ministry
on a variety of bilateral issues.
I do not know what the triage is for that Ambassador, but I
have visited with many of them and I have listened to some of
the issues they face and, of course, priorities that they
receive from the Administration and the State Department and
that is why I would like to hear whether really if the State
Department is the best, given the embassy's situation, with the
number of issues it has to face, given the fact that it is
looking to maintain general good relationships with that
country, is it really the best entity to respond to these
disputes or should we not, in turning to Ms. Vargo, have a
greater Foreign Commercial Service presence in the hemisphere,
which we sorely lack, as I said in my opening statement, which
would be, I think, in some respects greater advocates of the
interest of our companies that are doing business in Latin
America.
I would like to start there, because we all talked about
the trade potentials and the opportunities and that is great. I
think we all recognize it. The question is, how do we overcome
the challenges, because before you will convince some of us to
continue to broaden the scope of the engagement in ways you
would like to see, you have got to also show us that when we do
engage, that, in fact, we have a fighting chance here. And for
so many of my companies--I have only touched the tip of the
iceberg of the story as I can tell you--large and small, it is
a great obstacle. So is the State Department and, i.e., the
embassies, really the best vehicle? Should we not have a
greater Foreign Commercial Service?
Maybe, Mr. Munoz, you could tell us how OPIC could leverage
what it has to offer to try to promote greater transparency and
the anti-corruption process. Mr. Secretary, we could start with
you.
Mr. Samuel. Thank you very much. With regard to the classes
of cases that you raised, they are all very serious. The idea
that an airline would be denied license because FAA is making a
legitimate appraisal of the safety of its airports is something
we just would not tolerate. We have gone back and we have again
been in diplomatic discussions with the country involved. There
are ways that we can turn up heat one way or another and that
as the situation develops, we will have to see what can be done
diplomatically in that area.
On property problems, we have--in fact, I have sent the
letter, made the determination just recently to deny visas and
we have sent out notifications for certain individuals in
Nicaragua because of the seriousness in the property area from
the recent legislation that was passed. So we do have some
mechanisms to go on, but each one is sort of individually
tailored, I would say. Overall, it is primarily through a
proactive training program that we have mentioned with the
judiciary.
On procurement here, it is looking at something more long
term. This is one of our goals in getting either both through
the WTO negotiations and through FTAA negotiations, to try to
bring transparency into government procurement operations in
these countries. So I think in each of these areas, we are
active. We are trying to move forward.
On the question of the State Department's role, I think the
State Department has to do a lot of things. First and foremost,
Secretary Albright has made clear that our Ambassadors are
representing the United States. Our clients are the United
States and if a business has problems, they should feel free.
The Ambassador should be looking first and foremost at taking
care of that. If that is not being done, that is an oversight
on our part and there should be no problem, that this is
priority No. 1 for the State Department, is to look out for
U.S. interests there.
The FCS component of the embassies, of the FCS team, is an
integral part of the Ambassador's overall team and should be
working with that. In those areas where it can be beefed up,
indeed, I think we would be happy to see more resources brought
into the FCS sections. Again, it is always a question of
resources.
Mr. Menendez. Before we move on, could I just ask you,
though, it is interesting to hear you, Ms. Vargo, did not know
about this specific case and any specific case you might not
know about, but what do the embassies do in terms of reporting
that brings it up so that you understand when you are talking
to your counterparts in the hemisphere, or in a country that
has, for argument's sake, 100 similar cases--this is a country
that obviously needs some attention to it.
I get a sense--my sense is that this basically stays at a
much lower level within the State Department. It basically
stays with the Ambassador in that country and, I do not know,
maybe the country desk, but I do not get a sense that it
percolates upwards at a level where you should all know so that
you are advocates of saying, you know, we have a wide scope of
problems in your country in terms of these issues and here are
a variety of examples of them. What do you get in that regard?
Mr. Samuel. Well, certainly in this one instance, or in
this instance, it has not risen up to the level it should in
Washington and we are taking care of that today and we will
look back into that.
Mr. Menendez. Well, we cannot afford a hearing for each
case, so----
Mr. Samuel. No, I understand that. Thank you. But with
certain other countries, I think that there is a level of
problem. We have talked about the expropriations in Nicaragua,
where we have just taken some recent action. I know that there
are some other countries in Latin America where the level of
concern has reached a point where the Secretary of State has
raised it with her counterparts during visits. So again, I
think where it is widespread and endemic, it certainly does
reach the top levels of the State Department.
Ms. Vargo. Thank you. Let me just add to that a thought up
front. First of all, there are two different issues of
corruption in Latin America and different ways the U.S.
Government can address them. One is corruption that may occur
within an administration. Another is corruption that might
occur through the court.
Obviously, part of what we are trying to do right now is to
encourage the development of an independent judiciary. There
are approaches that the U.S. Government makes, but we usually
stand back to at least let the process play itself out to see
if the courts cannot function in a way that they should.
Somewhere along the line, if we start getting warning bells
about how the process is going or we know a piece of
information up front that we find objectionable we may
interview. For example, there is a dispute going on right now,
I believe it is in one of the countries in the Andean region
where the complainant against the U.S. company has his brother-
in-law as the judge. Needless to say, we have already been in
to state our objections about the chances for this company
getting a fair trial.
So there are some obvious things you can do and some things
that you have to wait out. This takes a bit of patience and
that is difficult. But you also need something to enforce. For
example, a lot of the WTO rules are going to become applicable
to these countries this year. Take customs valuations as an
example. Up until now countries have not had a set of
obligations so that every instance when we interviewed, we had
to go in and just ask for the right thing to be done. We did
not have a lot of leverage in raising these issues.
We spend a lot of time dealing with issues like the one we
resolved just a week ago in Colombia for a small company called
Trade Power. It had $200,000 worth of merchandise that it could
not get through Colombian customs. It took a lot of hands-on
work. So we do work with these companies' problems to resolve
them but better trade rules, expanding those trade rules in
this region in the FTAA through things like the Government
Procurement Code will, I think, help us address this issue.
Regarding the comment, though, about greater FCS resources,
Congressman Menendez, I think there is no doubt about the value
of the role that the USFCS plays in each of these countries.
They are the direct and daily link with the business community.
They would be among the first ones to hear of a problem or a
systemic pattern of problems that companies are having in the
market.
Having said that, I do not want to get into the issue of
who is best to raise it, but the fact that they are a critical
part of the link within an embassy is clear I just want to
point out that in the case that we are discussing here today in
El Salvador, that the Department does not have any commercial
presence in El Salvador.
Mr. Menendez. How many full-time Commercial Service
officers do you have in the hemisphere?
Ms. Vargo. We have 42, I believe, 42 officers in 33
countries. Now, our total staff approaches 298.
Mr. Menendez. How many of those are in Mexico?
Ms. Vargo. I can tell you that if you will bear with me for
a moment.
Mr. Menendez. Sure, I will bear with you, as long as the
Chairlady will bear with me.
Ms. Vargo. Nine of those officers are in Mexico.
Mr. Munoz. I just wanted to--I am sorry.
Ms. Vargo. I just wanted to mention one other thing,
though, which is the step-wise nature of this process. Because
the Congressman just brought up Mexico, and, of course, we have
had NAFTA there, to provide a rules-based trading environment.
We have had some share of difficulties from time to time in
certain provisions of that agreement, but I think we can see
progress. What I wanted to point out was the Mexican Congress
just last month, I believe, passed an administrative procedure
bill. This is the first time in Mexico that a ministry will be
required to provide advance notification of its intent to
change a regulation and to establish a comment period to bring
in the advice from relevant parties. I just wanted to point
that out as a positive step, I think, in the direction of
increasing transparency, which I believe is the point that you
raised earlier.
Mr. Menendez. On the Foreign Commercial Service, let me
just say that when you take away the nine from Mexico, that
leaves you with between one or none in each country and that is
to do all of the advocacy, all of the problem solving, all of
the opportunity search that goes on with that country. It is an
enormous--it is the equivalent of the 1,800 children that my
wife has as one counselor in a school. I mean, you just do not
reach what you need to do.
And obviously, one Foreign Commercial Service officer,
particularly, maybe in some smaller countries, but particularly
in Brazil, in Argentina, in Venezuela, in Colombia, in Chile, I
would hate to be that Foreign Service officer doing all that
work.
Mr. Munoz.
Mr. Munoz. One comment is that many of our American
businesses actually see OPIC as mitigating the very risk that
you speak of. Corruption, when allowed to exist, does, in fact,
exist, and many of these countries that are in transition are
trying to adapt to the international standards but they will
come at it very slowly unless forced to do so.
So, No. 1, American businesses do have an alternative, for
a price, but we believe it is a fair price, to mitigate some of
that risk with the presence of the U.S. Government if we, in
fact, attach ourselves to the project, we do the kind of due
diligence that will assure the government that we ourselves
approach it, our American investor approaches it in a very
transparent manner.
But where I believe Congress can be very helpful and this
Committee can help take that lead is the best eliminator of
corruption is alternatives for capital to go to other countries
that have less corruption. Many of our Western counterparts,
European Western countries that are as well off as the United
States to send investments to the developing world, they do not
have a Foreign Corrupt Practices Act as we do, Representative
Menendez. They do not have some of the standards that we have
for our American businesses. I believe that harmonizing upward
is a good thing for us to do and every opportunity that this
country has to bring it up to our counterparts, developed
industrialized countries, that we expect their companies to
also promote this will be the best way to go.
We are already seeing that those countries, like Singapore,
that have low corruption and a high level of transparency
actually attract more money, more capital inflows. So to the
extent we could set the model in Latin America that the
countries like Chile and a few others, maybe Costa Rica that
have reasonable reputations in this regard, as we show that
they are attracting more capital, hopefully, that will set the
trend for the other countries to follow.
Mr. Menendez. Thank you, Madam Chairlady, for the time. I
appreciate it.
Ms. Ros-Lehtinen. Thank you. Mr. Manzullo.
Mr. Manzullo. Thank you very much. Mr. Samuel, if you need
some help on how to resolve a complicated international case, I
would suggest you look at the man to your left. He and I had
some earnest discussions about 6 months ago and he got it
resolved, so he knows how to do it.
Mr. Munoz, I am going to ask you a question about this. I
have never seen questions asked about a witness to come
afterwards, but in that particular case where embezzlement took
place by, I believe, employees within the company, would there
be a form of OPIC insurance that would insure against that type
of risk?
Mr. Munoz. Indirectly, yes. We have instances where an
American business expects the court systems to work, and if, in
fact, the judicial system is not independent, if, in fact, we
see that the government is either not fulfilling its
responsibilities or, in fact, siding with the locals on it, we
could view that as a corruption on the part of the government
and interference with the judicial system that could trigger
our political coverage. It all depends on actual facts. But we
have one in other parts of the world where what would look like
a private dispute with the counterpart actually ends up
triggering political risk insurance because the government, in
fact, assisted the local as opposed to abiding by independent
judicial----
Mr. Manzullo. Because of a corrupt judiciary?
Mr. Munoz. Yes.
Mr. Manzullo. That is interesting.
Mr. Munoz. If the government, in fact, supports it, yes.
Mr. Manzullo. That would be another reason to tout the use
of OPIC in countries like that.
Mr. Munoz. We believe, as the U.S. Government, we have been
wanting these countries to become democratic and open up to
free markets. We have an unprecedented amount of response to
that call. It is important that those countries succeed in
their democratic ways and in free market ways. If they do not,
we are afraid of a rebellion or a backlash toward both
democracy and free market. So we do go the extra mile, as all
of our departments do, to go the extra mile for it to make sure
that those businesses succeed. But our political risk
insurance, in fact, is one that adapts to today's problems.
Mr. Manzullo. But you do not really want to advertise that
because that could encourage----
Mr. Munoz. For a fee, we will definitely protect whoever
wants it.
Mr. Manzullo. I have two questions. What tools would be
available by the United States against El Salvador with regard
to this corruption that took place? Second, I am intrigued by
OPIC's entry into the housing market in Latin America. George,
could you comment on that second question? How would that
practically work?
Mr. Munoz. Yes, sir. There has always been a demand for
housing. The problem is accessing long-term capital to finance
the homes. A local buyer will not default on their home
mortgage, even in countries--however, if their currency loses
value because of devaluation, they can still only afford to pay
in local currency what they obligated themselves to pay. So
that devaluation risk has been keeping the capital markets from
financing mortgages in the developing world.
OPIC has been working and analyzing ways in which to look
at devaluation over time, and we have discovered that there is
investor appetite to provide long-term lending for countries
that have reasonable property rights so that if, in fact, there
are defaults, there are good mechanisms by which to recover
your investment. And as long as we are able to do it prudently
and have investors walk in and for us to provide political risk
insurance against the inconvertibility of local currency, so
that if there is local currency we can still convert it to
dollars, to provide some level of risk similar to what a
private mortgage insurer might provide, a small pool of funds
that gets up during the good times and gets utilized during the
hard times, we believe that, over time, you can still have a
commercially viable housing project.
But we are still in the process of doing that, and as I
said, we are very, very close to coming forward with a model.
We have been working with Wall Street. We have been working
with the housing industry. By the way, I am sure you know this,
but the housing industry in the United States, everywhere from
the construction side to the financing side to the mortgage
servicing side, is the best in the world, and so we have the
expertise of what would be required of these countries, and we
have the cooperation. The countries that we have made contact
with, which have been in Central America because of the
hurricanes, and that is where the Administration has been
focused----
Mr. Manzullo. So how would that practically work?
Mr. Munoz. Well, there are various models.
Mr. Manzullo. Or have you worked that out yet?
Mr. Munoz. There are various models, but one way to do it
is that we can have investors buy bonds that will fill up a
pool of funds for financing mortgages.
Mr. Manzullo. Would those be American bonds?
Mr. Munoz. Yes, sold in the United States, and that would
trigger OPIC's ability to wrap its political risk insurance
coverage against those bonds. Those bonds, the financing, the
money raised from those dollars from America would be used to
finance housing in these countries. To the extent that there is
no devaluation or during the good times, as I call them, then
that pool of funds would actually grow because you are charging
an interest rate that has a premium attached to it.
When and if there is a devaluation, then you would tap into
that fund very much like private mortgage insurance does, and
studies show that, over time, you will come out even or ahead,
and those are the ones--we are trying to calculate how much
money will have to be in that fund and what is the right break-
even time period.
Mr. Manzullo. So OPIC would provide some type of risk
insurance to the investors in those bonds----
Mr. Munoz. Yes, which would be American investors.
Mr. Manzullo. That is pretty interesting.
Mr. Munoz. It would be a breakthrough, and I have to say
that that is what built this country's middle class. All of
these countries, that is what they are asking for, No. 1, and
if I could just say, right now, the jury is still out on all of
this globalization, privatization. Many of the people in these
countries are viewing the upper class, economic class, doing
well in the new economy, the new privatized economy that they
are going into.
But the masses of people are still seeing what Chairperson
Ros-Lehtinen pointed out. They are seeing income disparity.
They are still seeing poverty. And we believe that the housing
program is one thing that can address the masses, and if the
masses see light at the end of the tunnel in this new open
markets and democracy, we believe that they will stick to the
direction that their countries are headed in.
Mr. Manzullo. Thank you very much. I did not leave time for
anybody to answer my first question, is that OK? Maybe, Mr.
Samuel, you would know what tools would be available.
Mr. Samuel. Yes.
Mr. Manzullo. Or at least what tools you would like to talk
about.
Mr. Samuel. Exactly. There is the full range of diplomatic,
I guess, options. At this point, because it is still in the
courts and it is under appeal, we continue to just put direct
pressure on the Salvadoran government to make sure that the
case is held in a transparent and proper way. Beyond that,
because it is the area of criminality, let me, in fact, because
of the time issue, get back to you with a better answer in
terms of what our options are in the criminal area.
Mr. Manzullo. I can understand that. Thank you very much. I
appreciate it.
Ms. Ros-Lehtinen. Thank you. Mr. Delahunt.
Mr. Delahunt. Yes, thank you. Let me just say, Mr. Munoz,
that is a great concept and I think you are so right. I was not
here when the Chairlady spoke to the issues of income and
wealth disparity, but it is certainly echoed everywhere, not
only in the developing world but in the developed nations in
terms of the impact of privatizations. Housing is something
that could well assuage some of the concerns that we hear
expressed and that I think are very real. But I had never,
until now, heard this particular proposal.
But it does, it plays to our strength, which is housing.
Once the concept is fleshed out and the details are developed
and you are ready to presumably go public, I would appreciate a
call, because I know there are a bunch of developers up in New
England that are real proficient in terms of affordable housing
that would be very interested in this particular concept. I
would like to be right at the top of your call sheet on the
issue and would suggest that maybe even an unveiling of this,
or at least a conference in Boston, I am confident would
produce a very strong response. So having said that----
Mr. Munoz. We will, if Madam Chair, who is the chair, says
that it is OK to put you on top of the list above her name.
[Laughter.]
Mr. Delahunt. I asked first, though----
Mr. Munoz. Yes, you did.
[Laughter.]
Mr. Delahunt [continuing]. So it comes not in honor of
seniority or even ability, but just----
Mr. Munoz. That does not work that way.
Mr. Delahunt. It does not? I keep learning that.
Mr. Munoz. It is a good try.
[Laughter.]
Mr. Delahunt. But the issue here in terms of challenges and
encouraging investment, so much of it goes back to the issue of
the courts, the rule of law and the ability to have a
confidence level in terms of an independent judiciary, and that
is really what we are talking about. And the question, I think,
that Mr. Menendez asked relative to asking about specific
cases, that is tough because we have, in terms of our own
constitutional history, this concept of separation of powers.
I have a little difficulty myself. I mean, I presume that
what we will hear from this next witness about the case is
outrageous, egregious, and something ought to happen, but
viscerally, coming from the justice system myself, what does
any executive foreign government or legislature have a right to
interfere, particularly when we are trying to nurture judicial
independence. So I can see some philosophical issues there.
At the same time, my other committee, my primary committee
is the Judiciary Committee, and I have had a lot of
conversations with members of the judicial conference that are
doing a lot of training in Latin America and they really feel
encouraged by what is happening. Is that information coming
into the executive branch? Are you aware of that and is there a
gap between what is happening as far as the executive branch is
concerned and what our judiciary is doing? That is just one
quick question.
Then I thought that this idea of certification, corruption
certification, maybe it is embraced in the treaty. I do not
know whether it was simply a concept or a term put forth by the
Chairlady. I am only musing here, the idea of the certification
of an independent judiciary prior to maybe access to certain,
well, whether it is FTAA or whether it is CBI or whatever it
holds might be worthy of consideration.
Let me just be specific, too, about CBI for a moment. What
we see happening, at least I believe, in a very cursory way in
terms of the Andean region countries, there are some real
problems going on in these nations right now. In Peru, we have
a lot of social unrest. We have an election that is, at best,
raising concerns among not just the United States but other
nations within the hemisphere. In Ecuador, we have an economy
that is so bad that they have had to resort to dollarization.
In Colombia, that speaks for itself. In Venezuela, it is my
understanding that after the contraction of about 7.5 percent
to date, there is a further contraction of some 2 percent,
despite the fact that there has been an upsurge in revenues
because of the increase in oil prices.
I mean, I see that as an area of potential great
instability and I wonder your thoughts, now that CBI has
passed, about the addition, particularly in the area of
Venezuela and Colombia, to add those particular nations since
they are Caribbean nations to the CBI. I guess that is it, and
if in the area of both Venezuela and in Colombia, where there
has been such a huge issue and for decades now about the
independence of the judiciary, to make access to CBI predicated
on some sort of certification, using the Chairlady's phrase,
predicated on finally a process through which it verified
that--I just heard a nasty word from my right, but I will
desist. Anyhow, you get the drift. Thank you.
Ms. Ros-Lehtinen. The nasty word was ``sanctions.''
[Laughter.]
Mr. Delahunt. I almost thought he said ``embargo'' for a
minute.
Mr. Samuel. Mr. Delahunt, thank you. I hope that there is
not a gap in our knowledge of what is going on with the
judiciary training. In fact, we actually paid to bring a lot of
the judges up here to meet with our judiciary through AID
programs, and I hope that we are tracking that, and, in fact,
we have been invited to a number of those sessions.
We agree with you that the situation in all of the Andean
regions is precarious, and part of it, and through the
Colombia, Plan Colombia that the Colombians have come up with
and some of the legislation that we have proposed addresses not
just Colombia but its neighbors, as well, and would look at
some of these issues.
Right now, Peru, Ecuador, and Colombia are subject to the
Andean Trade Preferences Act and that Act comes up for renewal,
I think, in December of next year, and at that time we
certainly would again revisit the whole question of
conditionalities that might apply to----
Mr. Delahunt. Could I just interrupt for 1 minute?
Mr. Samuel. Yes.
Mr. Delahunt. But that certainly does not compare with the
benefits of CBI.
Mr. Samuel. You are exactly right, because----
Mr. Delahunt. And both, if I can just go further for a
minute, both officials at the highest level of both governments
have indicated to me that it would absolutely in a significant
way benefit those nations and could very well, in the case of
both Colombia and Venezuela, significantly--in the case of
Colombia, significantly advance the peace process, bring
stability to Colombia and as far as Venezuela could advance the
cause of real democracy in Venezuela substantially.
Mr. Samuel. No, agreed, and especially with this passage of
an enhancement of CBI just in the last week. That does make a
distinction between the Andean preferences and the CBI
preferences, and so certainly textile production in Colombia
would be put at a disadvantage compared to textile production
in the rest of CBI. The Colombians have raised this with us. We
do not have a solution yet. We need to see--to continue to talk
to the Congress to see whether the time is right to bring them
in, to bring them into the CBI.
Ms. Ros-Lehtinen. Thank you so much. Mr. Cooksey.
Mr. Cooksey. Thank you, Madam Chairman. You can choose to
answer this question, but specifically, I would like to know
your opinion about Venezuela, Chavez. What are the chances for
stability, proper judicial procedures, nationalization of
industries, American-owned industries, American-owned
businesses?
Mr. Munoz. Representative, I have some concerns about
President Chavez's administration, at least in part. The
signals have been mixed at times. The president has talked
about ridding the country of corruption and making sure that
there is transparency, but yet there are some experiences of
American investors that we know of and that we are working with
where, clearly, the obstacles put in the place of those
investors have every indication that they are meant to dissuade
and break away from what seemed to be a transparent process
beforehand.
I believe that the signals are mixed. Nonetheless, I do
believe that we have to work closely with the country. It is an
ally. It has very important economic ties to the United States.
We understand that it is going through an election process and
perhaps some of the mixed signals that we are getting on the
investment side are due to that. But I would have to say, I
know that the State Department looks at it in a much, much
broader area. We just look at it from the international
investor community and the signals are mixed. Some of them are
very worrisome.
And at OPIC, anyone right now that is requesting assistance
for financing especially in Venezuela, we want to make sure
that if it is strictly private to private sector, we have
fairly good confidence at that level. If it involves the
government in any fashion or way, especially the government
agency Le Pedevesa, which does now have some of President
Chavez's people in that parastatal, it would give us pause. It
would not stop us, but it would give us pause and we would have
to do some very close review of the facts plus dialogue with
the Administration.
Having said that, I have to say that we are very well
represented. Our embassy there is very strong, has very strong
ties with the Administration and usually our voice does get
heard.
Mr. Cooksey. So OPIC is still in Venezuela and still
supporting some investments by Americans there?
Mr. Munoz. Yes, sir. We are still there, and because OPIC's
total existence is to confront these kinds of political risks,
we do not walk away from them, but we do try to point them out
to the Administration and to the investor community worldwide
about what concerns might exist or might not exist. We will
remain active, but it just means that the projects that are
there require a lot more time and effort on our part.
Mr. Cooksey. Ms. Vargo, I am directing this question to you
assuming this interpretation of your title and position is
correct. I understand that the European Community and the Latin
American community have negotiated a bi-regional trade
agreement. How will this affect U.S. investors? What will be
the short-term impact, long-term impact?
Ms. Vargo. Well, we have two different things going on
right now in Latin America. One, we have the agreement that the
EU has concluded with Mexico and then we have the talks that
they have initiated with MERCOSUR. I think the MERCOSUR talks
have a long time horizon. In fact, it is pretty clear that the
EU is trying to take advantage of the breathing space that they
see between our lack of fast track, and the conclusion of the
FTAA in 2005. They have tried to arrange their time table in
the same way.
But looking to the Mexico-EU agreement, we did take a look
at whether or not it would in any way encourage the movement of
investment to Mexico. About 60 percent of Mexican output
already entered the EU duty-free under a variety of different
schemes. So we did not see it making a big difference in terms
of attracting more E.U. investment.
What we have found in taking a look at the agreement is by
line in comparison to NAFTA that the EU will end up with better
tariff treatment than the United States in about 400 tariff
line items. So we will be going back to the Mexican government
with this through the NAFTA tariff acceleration process and try
to find a way to level that playing field. Mexico did not do
anything to break the terms of the agreement, but we obviously
want to see the interests of U.S. companies well represented to
make sure that they are not disadvantaged.
Going back to your investment question for a moment, I
think that many of the investment provisions and protections
that are in the NAFTA remain, if you will, the state-of-the-art
in terms of providing a way to avoid recourse to the local
judiciary. A lot of people forget that Chapter 11 of the NAFTA
was set up to allow an investor to take a dispute settlement
case directly to binding arbitration and avoid the court
system.
So, I do not see a big investment impact in the short term
from the EU-Mexico deal. I do see some potential trade impacts
that we will need to address, although they will be relatively
minor. It is still too early to say on the other one, frankly.
Mr. Cooksey. Thank you. A quick question, and hopefully a
quick answer. How about Spain? Are they the biggest trading
partner in Central and South America and do they negotiate for
all the rest of the EU their competitive and language advantage
or not?
Ms. Vargo. Well, the circumstances are always changing.
Yes, Spanish companies are some of the biggest investors in
Latin America, especially in the MERCOSUR region. Europe is
actually the biggest trading partner for MERCOSUR, not the
United States. And you have very large Spanish companies like
Telefonica, being very active throughout Latin America.
It is not really clear if Spanish companies negotiate or
operate on behalf of other European countries. What you do
have, though, is a rotating system of the presidency in the
European Union and you tend to find that when Spain or Portugal
is in the presidency, there is a greater political momentum to
enhance the commercial relations with Latin America than you
might find, say, when there is a Northern European country in
the chair.
Mr. Cooksey. Well, fortunately, Spain has a booming economy
now. They are moving away from the socialism that so much of
Europe has been bound to for so many years, but it is good for
Spain.
Mr. Samuel, an open-ended question, Colombia. What is the
potential for solving the narcotics problem there, the
economics problem, the judicial problem, and what is the
potential for long-term future investment, participation,
relationship with Colombia?
Mr. Samuel. OK. Thank you. Colombia is a gigantic question
mark. It has been the center of our attention on
counternarcotics for a long time. With the changing government,
with the Pastrana administration coming in, we see the
opportunity to, in fact, get improvements in that cooperation.
The economy, which used to be a model economy in Colombia, has
just suffered from the corruption, the narcotrafficking that
has been there.
Long-term, Colombia should be able to get itself in order,
should be a great opportunity, but it is going to be uphill. It
is totally uphill for it to get that way, and that is why the
various plans that the Colombian government has put forward,
the request that the Administration has made for supplemental
funds to address Colombia.
Secretary Albright has, in fact, identified Colombia as one
of the four democracies that provide the biggest challenges to
U.S. foreign policy in the world, and so the attention we are
putting on it is second to none in terms of the political
attention for Latin America.
So again, long-term, it has the potential to be a great
place to invest, a great place to do business. But until we get
the narcotrafficking taken care of, before we can do something
better with the narcotics, we are not there yet.
Mr. Cooksey. When we voted the legislation in the House for
the $1.7 billion or whatever it ended up, there were some
Members of Congress that questioned that but voted for it
anyway. What did you do, Bill, did you vote for it?
Mr. Delahunt. I know the gentleman is looking at me, so
presumably he is yielding some time. I voted against the final
bill because it did not include the Kasich-Frank amendment
dealing with the issue of European participation in the post-
Kosovo conflict.
Mr. Cooksey. Well, you can say there were mixed opinions,
and I will not put the chairwoman on the spot, I will try to be
a little bit more gentlemanly, but----
Mr. Delahunt. I would suggest you could do that.
Mr. Cooksey. All right. What did you do on the bill?
Anyway, there were mixed opinions, there were real passions on
that vote when we voted in the House, and you can see what is
happening in the Senate, zero. The Senate is like a bunch of
gray-headed old men that cannot make up their minds anyway,
that do not have any courage----
[Laughter.]
Ms. Ros-Lehtinen. Watch out for those gray-headed old men.
Mr. Delahunt. You can tell these self-term-limited members.
Mr. Cooksey. But anyway, it is a problem and it is a valid
concern. That is a lot of money for the American taxpayers to
be expected to put down there, put into a country that, Lord
knows who will end up with these Blackhawk helicopters. I was
in the military 30 years ago and I believe in using the
military effectively as an instrument of foreign policy. I am
not always sure it has occurred the last few years. It has been
done wrong in previous administrations and this administration,
and yet I really would like to have the people of Colombia get
rid of the narcotraffickers because it impacts us.
Mr. Samuel. Yes, it does.
Mr. Cooksey. It impacts our children, our society. It is a
real issue. Thank you.
Ms. Ros-Lehtinen. Thank you so much, Mr. Cooksey, and thank
you so much, all of the panelists who are here.
Mr. Munoz, if you would like to make some concluding
statements.
Mr. Munoz. I just wanted to say that thanks to the help
that I received from this Committee, OPIC, in fact, has put a
lot of effort in small business in the Caribbean, and if I
could just call up, we have been always asked about what
projects we are helping and who is being helped, and thanks to
the encouragement of this Committee, as you can see, this is on
our website and anybody around the world, certainly American
businesses, can click on any country, let us say the Dominican
Republic.
This is live right now on the Internet. They can click on
and look at what we have done here in this country. You will
notice it will tell how much we are invested in the country. In
this case, if you look at this, our support has created over
21,000 jobs in the Dominican Republic. We think that people
from New York, from New Jersey are very appreciative of those
efforts.
The small businesses can also take a look at all of the
programs that we can have here and download from the Internet
our applications, our small business forms. We also have a
section here on challenges, and what Representative Menendez
was speaking about we also point out as some of the challenges
that are striking the community. We believe that this is the
best way to leverage what the U.S. Government has to help the
U.S. business person. Thank you.
Ms. Ros-Lehtinen. Thank you so much. Thank you to each and
every one of you. We look forward to getting further
communication from you regarding the corruption practices in
other countries and streamline the levels of communication so
that the people who do have some jurisdiction over these
problems can get the information in a timely manner. So thank
you for coming here today.
To complement the expertise of our first panel, I would
like to introduce two gentlemen who will be our second
panelists. They have been in the field and know firsthand the
prospects, and more importantly, unfortunately, the problems of
doing business with Latin America.
First, I would like to introduce Mr. Carlos Loumiet, the
principal shareholder of the law firm of Greenberg Traurig,
where he heads the firm's banking and international practices.
In addition, Mr. Loumiet currently chairs the Florida Latin
America Internet Task Force, which was established to promote
the emergence of South Florida as a center for Latin American
and Caribbean e-business.
Finally, I would like to introduce Mr. Robert Zamora,
President of the Latin American Financial Services Corporation,
one of the largest financial organizations in Central America,
Venezuela, and the Dominican Republic. Mr. Zamora is also the
President of the Central American Credit Bank in Managua.
Thank you, gentlemen, for your testimony. We all look
forward to hearing your insight. Your statements will be placed
in full in the record and we would like for you to summarize
your thoughts. Thank you. Mr. Loumiet.
STATEMENT OF CARLOS E. LOUMIET, CHAIR OF INTERNATIONAL AND
BANKING PRACTICES, GREENBERG TRAURIG
Mr. Loumiet. Thank you very much, Madam Chairwoman, Mr.
Menendez. Thank you for having invited me to come today to
testify before this Committee.
You have already mentioned that my written comments will go
into the record, so I would like to digress a little bit from
my written submission and touch on some of the issues that have
been raised today.
The first thing I want to note is that we have come a long
way. I have been working with this hemisphere for 23 years now.
There are still many problems throughout the hemisphere, but if
you look back almost a quarter of a century, the period of time
that I have been representing U.S. businesses abroad, there is
no question that the rule of law has come a long way throughout
the hemisphere over that period of time, and particularly over
the last 10 years. I am not trying to present a rosy picture,
but I am trying to give some perspective.
Obviously, one of the areas that is still a major concern
is the area of corruption, as Mr. Menendez pointed out. I have
to say, I did not focus on corruption in my written statements
today, but I have certainly had to deal with it often enough
throughout the hemisphere over the last 23 years, and I have to
say that it is a very prevalent problem. It is something that I
have personally seen over the years, probably 10 or 12 times,
severely affect U.S. business and its ability to compete
throughout the hemisphere.
I have to say, in all honesty, that in my experience, the
State Department has been, certainly in my experience, very
ineffective at dealing with the problem of corruption abroad
and in representing U.S. companies abroad, and I do not know if
that is because the State Department has to deal with the
relationships with a foreign government on so many levels that
it cannot focus solely on the problems of a company in the
country but has to worry about the whole span of interaction
between our country and the country involved. But there is no
question in my mind that on the occasions in the past where I
have heard of or I have been involved in trying to obtain State
Department assistance in this field, that the State Department
has been very slow to move and really not as supportive as one
would have hoped of U.S. business.
Now, in terms of the FCS, the Foreign Commercial Service,
as Mr. Menendez suggested, the local people are completely
overwhelmed. There are not that many of them to begin with. And
at the same time, I am not sure that they are equipped to
investigate instances of corruption--I do not think that is
their training--or even to advocate in situations like that as
effectively as, for example, the Justice Department might be
able to do.
I wanted to suggest that as I listened to the conversation
earlier, I thought that there might be some advantages to
having the Justice Department involved in this area in terms of
helping U.S. business abroad. One of the advantages that I see
is, frankly, that the Justice Department is better trained in
terms of investigating instances of corruption and presenting a
case that would be perhaps much more compelling in terms of
trying to convince a foreign government as to what had
happened.
Second, the Justice Department already has jurisdiction
over the Foreign Corrupt Practices Act, and they are also
responsible for the implementation of the treaty, the OECD
treaty, which was enacted in late 1997, which parallels the
Foreign Corrupt Practices Act and requires all of the OECD
member countries, I believe there are 37 of them, to
progressively implement steps that will lead to a similar
result to what we have now under the Foreign Corrupt Practices
Act, prohibiting companies and individuals from their countries
in bribing overseas in connection with obtaining foreign
business.
If and when Congress passes the Inter-American Convention
on Corruption, that, too, would be the jurisdiction of the
Justice Department, the implementation of that treaty.
So as I think of this, I think that it might be wise to
think in terms of creating some sort of a joint effort between
perhaps the State or Commerce Department and Justice in this
field and allowing Justice to play a relatively important role
in that area.
I also want to mention the obvious, which is that, frankly,
for the individuals who may have engaged or may have been
involved in the corruption abroad, the idea of the U.S. Justice
Department being involved is far scarier than the idea of
having either the Commerce Department or the State Department
involved. Those individuals may want to come to the United
States at some future date. They are going to worry about what
the implications might be for them when they came here. So I
would like to suggest that perhaps we could more effectively
assist U.S. companies in dealing with corruption throughout the
hemisphere, and it clearly is a problem, if we use some of the
abilities of the Justice Department and not just rely on the
State Department and the Commerce Department in this field.
Having touched on the issue of corruption, a lot of my
presentation was about the Free Trade Area of the Americas.
Well, one of the problems with not being one of the first
people to testify is that by the time you get to speak about
your presentation, it may already have been beaten to death,
and I think that the panel here did a very effective job
talking about the Free Trade Area of the Americas in general,
and to spend a lot more time on it would be a little bit like
bringing coal to Newcastle, as my English friends would say. So
I would just like to make a couple of points about the Free
Trade Area of the Americas.
First of all, obviously, the devil is in the detail, and
the question is what is this treaty going to be. If it is
properly drafted and prepared, then I think it could help a lot
with a lot of the problems that the chairperson and Mr.
Menendez have already identified as problems that face U.S.
companies abroad throughout this hemisphere. So the actual
drafting of the treaty and the preparation of the treaty will
be crucial.
For now, that process is still underway and it will be
underway for several more years. For now, what I would like to
recommend and urge is that we have a--I know that in the
pending budget for fiscal year 2001, there is a request for an
appropriation to help with the temporary secretariat, the
administrative secretariat which has been operating in South
Florida for the last couple of years, and I would like very
much for this Committee and for Congress to look favorably on
that appropriation. I think it would speak volumes to the
interest of the United States in such a treaty. Congress has
already passed, both houses have already passed a sense of the
Congress resolution to the effect that if the FTAA is enacted,
that the appropriate place for it to be headquartered if that
headquarter is in the United States would be South Florida.
I think that if Congress were to pass this requested budget
appropriation, it would be a very strong statement by Congress
that all of the preparatory work being done is not going to go
to waste and that the U.S. interest in this FTAA remains as
strong as ever and that we believe that, sooner or later, we
will implement such a treaty, even if we have to go through
some pains to get to a treaty that we think is appropriate.
Next, I would like to mention the area of foreign
competition. As someone who represents U.S. companies and also
foreign companies active throughout Latin America, I want to
emphasize what Ms. Vargo said. Foreign competition throughout
Latin America is very, very--foreign competition to the United
States is very active today. In particular, there are Spanish
corporations that have become very prominent throughout the
region, have undertaken a series of acquisitions and very
visible investments over the past few years.
If the United States does not move forward with its own
plans in terms of creating a Free Trade Area of the Americas,
we may wake up 1 day and find that we are at a competitive
disadvantage with Europe and the Far East in terms of trade
with this hemisphere. That would be extremely ironic, given the
long-term relationship that we have had over the last two
centuries, the close ties that we have had throughout this
hemisphere and the fact that this hemisphere is one where,
overall, the United States is seen extremely well. It is
admired overall and American goods, American products, American
services are valued. It would be absolutely disastrous for the
future of the United States to find ourselves in a secondary
position in terms of business and trade throughout this
hemisphere vis-a-vis Europe.
Finally, I would like to mention the issue of the rule of
law, and everything that, Mr. Menendez, that you have been
speaking about today really has to do with the rule of law, and
that has a series of interrelated dimensions. Yes, it has to do
with corruption and it has to do with the importance of an
independent judiciary, an independent and honest judiciary
which is capable of acting as a check and balance on an
otherwise unbridled executive. It has to do with the adherence
by governments to their own laws and to due process. It has to
do with the honoring by governments of contractual and treaty
obligations that they have incurred.
It has to do with the tolerance of a free press, which
itself is an incredible check on excesses of government. I am
reminded that over 200 years ago when Thomas Jefferson was
asked whether he felt it was more important to have a
legislature or a free press in terms of a body that could act
as a check on the excesses of the executive, he responded that
he felt that a free press was even more important than a
legislature in terms of protecting individuals against excesses
of the executive. It also has to do with the observance of
human rights and the respect for private property.
There are some trouble areas right now in this hemisphere.
They have already been touched on. For reasons that I think are
coincidental, they tend to revolve primarily around the Andean
Pact countries. Peru, of course, has been a very troublesome
situation for the last few years. This Congress on at least two
occasions has criticized certain actions by the Peruvian
government, particularly in connection with the press, the
freedom of the press and, among others, the case of Baruch
Ircher and the TV station that he had down there. The Peruvian
government has been criticized by our Secretary of State,
Madeline Albright, by the European Union, by every major
international press association and many leading newspapers in
the United States, and by all of the principal international
human rights organizations. There is an election coming up in
12 days. It is very important that the United States remain
keenly observant of that election to ensure that it is fair and
just and that the result does, in fact, reflect the interests
of the Peruvian people and their desires.
Ecuador is another country that right now is going through
a lot of difficulties. They need our assistance as they
implement a dollarization plan which is absolutely crucial to
the future of that country. However, somewhat disturbingly, in
recent months, the Ecuadorian government simply intervened, a
75-year-old U.S. power company operating in that country, a
company called Empresa Electrica del Ecuador, EMELEC, a Maine
corporation, and the government simply, on March 31, 2000,
simply had troops move into the main operations of the power
plant and since then there have been a series of negotiations
which so far have proven fruitless, but one would hope that the
Ecuadorian government would realize the importance of due
process and respect for private property as well as its own
obligation to honor its treaty and contractual promises as a
key point of being able to promote the development of Ecuador.
Certainly, this is a bad precedent in terms of the
impending privatizations of other enterprises in Ecuador, and
as well in Colombia, as have already been discussed here at
length today, so I do not want to spend a lot of time on them
other than to mention that I personally believe that the aid
package for Colombia is crucial. I think of a Colombian
government controlled by the FARC or the other terrorist
organizations and it fills me with dread in terms of what those
consequences might be for the entire Southern Hemisphere, not
to mention the consequences here in the United States in terms
of the drug problem that we have.
Thank you very much, and again, I am very grateful for the
opportunity to appear before you today.
Ms. Ros-Lehtinen. Thank you so much.
Mr. Zamora.
STATEMENT OF ROBERT J. ZAMORA, PRESIDENT, LATIN AMERICAN
FINANCIAL SERVICES
Mr. Zamora. Thank you. Honorable Chairperson Ileana Ros-
Lehtinen and Mr. Robert Menendez, Subcommittee on Economic
Policy and Trade, I would like to thank all of you for giving
me the honor to testify on this official hearing about
conducting business in Latin America, challenges and
opportunities.
We have experienced and continue to see how the world of
business and politics has changed dramatically in the past two
decades. The landscape of the investment in the United States
has evolved, making financial markets accessible to the
individual investors. In this new era of information, the
Internet and faster telecommunications have shortened the
distance between countries. In the political aspect, the Cold
War has ended and the expansion of democracy has taken place.
Latin America has not been an exception to these changes.
We have seen how countries that 20 years ago were dictatorships
have transformed into incipient democracies. The investment
climate in the region has become more favorable in many aspects
to U.S. companies who have increased their investment in the
area, interested in Latin America as a large market of 500
million people. However, there are still many situations that
need to be changed so that U.S. investors can take full
advantage of the potential of doing business in Latin America
free of risks associated with social problems, inefficient
laws, and a weak judiciary system.
Recent World Bank figures indicate that in all countries in
Latin America, poverty levels remain very high, despite an
expansion in their economies. Moreover, the gap between those
who have the money and power and those who live in misery has
increased tremendously. So how is it that investment has
increased and there is more poverty than before?
The answer is simple, yet complicated to solve. First of
all, government corruption is seen in many countries. The
persons who in a true democracy have to rule in representation
of their people are only taking advantage of their position.
Thus, the social programs make no difference in the poverty
levels.
Second, the judicial systems are obsolete and inefficient.
They are not independent and impartial institutions, but
systems that contribute to the chaos and unfairness in these
countries.
An increase in poverty brings social discontent, which in
turn may lead to social crisis and/or to the return of populist
dictatorships in the region. Some examples of this situation
have been observed in Ecuador, Bolivia, Venezuela, Colombia,
Peru, and Argentina. The danger is imminent also in Central
America.
Social crisis, united with investment risk due to the
nonexistence of fair and clear rules of the game will not only
inhibit more investment from coming to the region, making it a
lost cost of opportunity to explore the large market. It will
also affect negatively the existing U.S. companies who do
business in the area.
As an American citizen who has been doing business in the
region for 15 years, I have had a terrible and frustrating
experience in El Salvador. On September 3, 1996, the manager of
our corporation was assassinated in San Salvador. Months later,
auditors of KPMG, Peat Marwick discovered that $3.3 million had
been embezzled from our company by a group of individuals who
opened accounts at El Salvador's two largest banks using fake
information.
We filed a lawsuit against these persons, and to our
dismay, in December 1999, despite overwhelming evidence
collected by Salvadoran authorities--the attorney general, the
police, and the superintendent of the bank--indicating that
fraud was committed, the judge presiding the case ruled in
favor of the embezzlers.
This action has caused a tremendous consternation in El
Salvador, to the point that the head of the supreme court has
called for an investigation of both the proceedings and of the
judge. Additionally, editorials written by the country's main
newspaper, El Diario de Hoy, and the highest rated TV station,
Channel 12, have asked the supreme court to overrule the
judge's decision.
Four Members of Congress have written letters to President
Francisco Flores requesting that Salvadoran laws are respected
and that the presidency conduct an investigation on this
matter. These actions have been unproductive since, to our
surprise, 4 days ago the court of appeals dismissed the case in
favor of the embezzlers.
Our case is only an example of the danger of conducting
business in Latin America under the actual circumstances,
showing the economic insecurity that prevails in the region.
Three conditions have to be improved in order to truly
develop the high potential and excellent opportunities that
Latin America may present to U.S. investors. First, to
strengthen democracy, along with its institutions and
governmental branches and decrease corruption to the minimum.
Second, to define clear and fair rules of investment and make
the judiciary system become independent and reliable. And
third, change the quality of life of the poor people.
The United States can play a big role in the enhancement of
those three conditions. Every year, the United States
administration by law certifies foreign governments in their
willingness to eradicate the drug trade. This certification
process has proved to be effective. I believe the U.S. Congress
should very well include as part of this certification process
a ``zero tolerance corruption index.'' Is this is successfully
implemented, we can be sure that the dream of a better region
with growth, prosperity, and peace will be achieved. Thank you.
Ms. Ros-Lehtinen. Thank you so much.
Mr. Menendez.
Mr. Menendez. Thank you, Madam Chairlady. Again, let me
thank you for the hearing.
Mr. Loumiet, I appreciate some of your comments and we
might be calling upon you in pursuit of some of the issues that
you raised. I think the observation, including the potential of
an interagency approach with the Justice Department on these
corruption issues, might very well be of value, so we will look
forward to speaking to you and for your insights on that, as
well.
Mr. Loumiet. Thank you, Congressman.
Mr. Menendez. Mr. Zamora, let me just say I have privately
spoken to you about your case and your company's case and I am
glad that you were able to come before the Committee because it
is only by way of example that we can sometimes dramatize the
reality of many, many companies that are in a similar set of
circumstances, maybe not the facts of their specific issue, but
the consequence of doing business in a country in which there
is either lack of transparency or a system of law that does not
enforce the law fairly in the process.
I know one of our colleagues mentioned that it was somebody
from the company, but I think your statement clearly says that
someone was assassinated and then subsequently in an audit it
was found out that others were in the midst of such an
embezzlement. Even if it were so, it is not necessarily the
facts at hand that it was individuals in the company, but even
if it were, that does not go ahead and undermine the fact that
you should be able to prosecute those individuals in a court of
law and be able with those facts obtained by the authorities of
that country to be able to pursue your claims against those
individuals, both criminally and civilly. So I think you do a
service to many others who are similarly situated in doing
business in Latin America to come forward with your specific
case and we appreciate it.
For myself, I think we got some attention here today, but I
think that our point, Madam Chairlady, is we cannot hold a
hearing for every meritorious claim and we need a system by
which, in fact, we do our advocacy on behalf of U.S. citizens
and businesses who are doing business within the hemisphere and
that we have a systemic approach to dealing with these issues,
both in terms of the agreements that we sign as well as with
the State Department and the embassies working to do so on
behalf of businesses and we look forward to working with you on
that. Thank you.
Ms. Ros-Lehtinen. Thank you so much, Mr. Menendez. Thank
you for your participation and for your interest in this. I
hope that the agencies heard our clear call for reform and for
their involvement in this corruption problem.
Mr. Loumiet, I wanted to followup on what Mr. Menendez was
talking about, the importance of the rule of law and the
adherence to democratic principles. Why do you believe that it
all stems from the implementation of the rule of law throughout
the region? Would you agree that a totalitarian regime which
controls the modes of production, which does not adhere to what
we could consider to be participatory democracy, which does not
have a truly independent judiciary, which does not observe
human rights, does not tolerate a free press, all of those
aspects, that would point to a country that would not be a
reliable trading partner for U.S. investors, and please
elaborate on what would happen to investors and investments who
deal with such regimes. What do you think is the possible
scenario for them?
Mr. Loumiet. I do not believe that if you look back through
history you will find regimes that do not respect the rule of
law that have been reliable regimes for investment. One of the
things that I see very clearly, 25 years ago, the perspective
of U.S. companies was a little bit different because they had
different expectations in terms of the region. What is very
clear now is that U.S. companies have come to realize that the
only way that their own investments are safe is if they are in
a country that respects the rule of law, because a country that
does not respect the rule of law can turn on you very quickly
and can treat you shabbily and can take over your investments
without any type of compensation.
So U.S. investors have learned that they have to look for
countries that have all of those qualities that you just
mentioned, Madam Chairperson, that they are real democracies,
that they have an independent judiciary, that they observe due
process, that they respect human rights, because all of those
things come as a package. You cannot unbundle that package. You
cannot have some of those elements but not all of them. They
all go hand in hand and they all are subsumed under the
category of the rule of law and that is what investors now look
for.
I think it is very clear, if you look at the success story,
for example, that Chile has become in the last few years, that
Chile has become that success story because of its adherence to
the rule of law. I had one investor jokingly tell me not too
long ago, when he explained to me why his company had selected
Chile as opposed to any other Latin American country for a
major investment that they carried out, he said, ``You know, in
Chile you cannot even find somebody to bribe even if you were
looking for him,'' and Chile has now developed that kind of
reputation as a country that really cares about being a
government of laws and not of men, and that is the kind of
country that is going to prosper.
Ms. Ros-Lehtinen. Thank you. As chairman of the Florida-
Latin America Internet Task Force, I would like for you to
elaborate and describe the role of e-commerce in expanding
trade to Latin America and to improve our United States-Latin
America commercial relations. How will brainpower industries
redefine this partnership and the nature of U.S. investments in
the region and how can the Internet be used to better prepare
investors for the challenges that they will face, and from a
legal standpoint, what challenges could this present for both
us and our Latin American neighbors?
Mr. Loumiet. Well, it is cliche to talk about how the
Internet is business without frontiers, but cliches are always
based on truth and that is exactly the case here. It is now
possible for a company based anywhere in the United States to
reach an international market far more effectively than they
ever have in the past, than they have been able to do in the
past. And once we get, as we will in a couple of years, real-
time video and real-time audio over the Internet, the whole
nature of business and how it is conducted, I believe it is
going to change, not just in this hemisphere but throughout the
globe.
Before I had the opportunity to make my presentation here,
I was talking earlier today to a lawyer who was telling me that
he had been in the Philippines recently and that in the
Philippines, he had been told that because of the way that the
Internet, the Philippine Internet operates, which is that they
really operate in connection with U.S. portals, that the people
from the Philippines felt extremely close now to people in the
United States because the interaction that they had with people
in the United States now was greater than it ever had been in
the past. So you have a country that is thousands of miles away
and yet they feel that they have this incredibly close
interaction with the United States.
I think e-commerce is going to do--I am as excited about
the Internet in terms of its non-business possibilities as I am
about its business possibilities. I am particularly excited
about its educational possibilities throughout this hemisphere,
and, of course, promoting education is part of promoting
development, which in turn promotes stability throughout the
hemisphere.
But from the e-business perspective, I just see remarkable
developments on a daily basis. We now have, for example, I
learned recently that the Commerce Department is now setting up
a website where small businesses from throughout the hemisphere
will be able to have access to the Internet through the
Commerce Department page and will be able to do business
through that page. I think this is a terrific idea, what the
Commerce Department is doing.
The Internet is going to revolutionize business. One of the
things that we have to do in order to keep pace with the
Internet is to create the legal environment necessary for it to
prosper, and part of that, a lot of that is going to be
removing, for example, tariff barriers that exist, removing
customs or making uniform customs regulations and rules, forms.
For example, it is very difficult right now to import things
into different countries because of the different forms that
are used and the different customs practices. There is a lot
that we can do that will make e-commerce far more possible
throughout the hemisphere and it is upon us.
There is no question, if you talk to any startup person in
the Internet who works with Latin America, that regardless of
how small they are, they have big dreams. They see themselves
as regional companies. They no longer think of themselves as
belonging to a particular country, but they see themselves as
operating throughout the hemisphere and it is a very exciting
time.
Ms. Ros-Lehtinen. It is. Thank you so much, Mr. Loumiet.
Mr. Zamora, thank you for your excellent testimony. You
referred to the three conditions that you think should be
present and need to be improved in order to truly develop the
potential for Latin America in terms of investment
opportunities. I would like to ask you about the hemispheric
investment plan of action which we could develop to define
clear and fair rules of investment. What specific provisions
would you include if you were given the opportunity to draft
this hemispheric investment plan, and related to that, what
specific variables or indicators would you include in the zero-
tolerance corruption index which you referred to in your
testimony?
Mr. Zamora. Thank you. In reference to the negotiation for
the ICA program to be headed to the year 2005, if I were there,
the first action to take is transparency. I think that is the
key element of trust because I feel that that deadline of 2005
may be disappearing because so many problems are going on into
the region that we may some difficulties to achieve that goal.
The other is that to have a harmonization in the judicial
system because it is the way that all these free trade
agreements are going to work. There are going to be many
disputes and the only way is that the investors all over the
hemisphere could come forward.
In the second one, of the zero-corruption tolerance and
index, will be the governability, transparency of the old
member of the government in a way that could be classified. For
example, the U.S. embassy has all the records, has all the
information and has to be to establish who is corrupt and who
is not. Therefore, to have as a list to put some sanctions,
because the other members of the panel were discussing before
an agreement has been signed but is difficult to implement.
When you deal with these situations that are creating more
problems to the hemisphere because of the corruption process
is, I am putting in the same category of the drug traffickers
because it is corrupting the people. It is destroying the
investment. It is a group of people, a small group of people
but it is affecting the majority. Then, therefore, you have to
analyze more details. But the idea is to have something that
could be quickly implemented without this big signing ceremony
that is difficult to have accountability on that.
Ms. Ros-Lehtinen. Thank you. Thank you, both of you, for
your testimony. Mr. Zamora, we will be following up with the
agencies that were here today to followup on your particular
situation, which I think is reflective of so many other U.S.
investors who have had a difficult time with the corruption
practices in Latin America and a system here in the United
States that is not responsive to the problems of U.S.
investors. If we want to stimulate better trade relations,
addressing the problems of corruption is essential because we
will not be able to encourage further investment in that region
if investors are fearful of what could happen to them and the
potential of losing millions of dollars, as you have done. So
we will be glad to help you and other U.S. investors who have
faced these difficult challenges.
But thank you so much, all of you, for being here today.
Mr. Zamora, you wanted to add something?
Mr. Zamora. Yes. I would like to give you a copy of all the
documents of the case.
Ms. Ros-Lehtinen. We will be glad to. Thank you, and I will
share it with our Subcommittee Members.
The Subcommittee is now adjourned. Thank you.
[Whereupon, at 4:40 p.m., the Subcommittee was adjourned.]