Against all odds: U.S. policy and the 1963 Central America Summit Conference

Journal of Third World Studies, Spring 2003 by Leonard, Thomas M

Beyond this, however, a number of problems needed to be addressed. For example, complete regional economic integration implied the establishment of a central agency, such as a secretariat responsible for over-all economic, fiscal and financial policy and central allocation of available resources for development purposes. U.S. policymakers anticipated a long transition period before this could be accomplished because of the Central American governments' preoccupation with the resolution of local problems at the same time they were addressing the issues of economic integration. Rather than rushing pell-mell into regional discussions the United States encouraged and offered financial support for a step-by-step procedure via regional organizations assuming responsibilities for sectoral programs such as transportation and communications, regional power projects, storage and marketing, a monetary union and so on.24

Two recently established regional institutions which Washington looked favorably upon included the Central American Clearing House (CACH) and the Central American Bank for Economic Integration (CABEI). With contributions of $300,000 from each of the five republics, CACH, in operation since 1961, provided small automatic credit facilities and a mechanism for cash settlements of imbalances in intra-regional trade. CABEI, also in operation since 1961, had $18 million in resources, $8 million from the member countries and an equal amount in U.S. aid grants, to finance public or private development projects that filled a regional need or expanded intra-regional trade. U.S. policymakers, however, found premature the Central American discussions to achieve by 1970 a monetary union, patterned after the U.S. Federal Reserve System. In fact, the State Department avoided any detailed discussion of "the final steps of financial integration, such as a common money or a complete pooling of foreign exchange reserves." Instead, the U.S. encouraged Central Americans to increase their existing financial cooperation, intra-regional security investment, and to work toward the elimination of trade barriers and the avoidance of exchange restrictions.25

The Central American Common Market (CACM) presented a contiguous area of 12 million people, considerable natural resources and many other prerequisites to achieve economic growth, but to exploit the resources and to expand intra-regional trade, isthmian transportation needed to be improved. Toward that objective the U.S. government was willing to invest another $32 million (one-third of the projected $96 million cost) to complete paving the Inter-American highway, widen its substandard sections, and complete grading, drainage and bridges in Guatemala, Nicaragua and Costa Rica. While $12 million was immediately available to the U.S. Bureau of Public Roads to initiate the work, the U.S. Congress awaited guarantees from the republics that they would maintain the highway once the work was completed. By March 1963, the Central American legislatures had yet to approve their $64 million in construction costs, but that fact did not prevent the regional Publics Works Ministers from proposing the establishment of an Inter-American Highway Authority, capitalized at $16 million, to provide for subsequent road maintenance. The Export-Import Bank expressed interest in granting loans to individual countries to meet the capitalization requirement. Only Nicaragua remained reluctant to participate in the project.26 At San Jose U.S. officials hoped to persuade the Central Americans to appropriate the funds necessary to complete the highway and to establish the Inter-American Highway Authority. But U.S. policymakers did not limit their vision to the expansion of intra-regional trade. They anticipated the establishment of development and travel divisions within CABEI to promote Central America's trade, tourism and investment opportunities in the United States and Western Europe, and possibly elsewhere in Latin America. The U.S. offered to cost-share the implmentation of the two CABEI offices and to provide expert consultants in the fields of development and tourism promotion.27