BRASILIA -- The reform-minded South American governments that President Bush plans to visit this week are hoping to take him up on what they see as potentially one of the best offers they have received from the United States in many years: a hemispheric free-trade agreement proposed by the White House last June.
Although it has received relatively little attention in the United States, the trade initiative is seen here as a handhold that Latin American nations might use to help pull themselves out of the mire of inflation, stagnation and debt.
"It is more important than the administration thought when it was launched," Enrique Iglesias, president of the Inter-American Development Bank and a former foreign minister of Uruguay, said of the trade initiative. "It can change the nature of the dialogue with the United States."
Bush leaves today with an itinerary that will take him to Brazil, Uruguay, Argentina, Chile and Venezuela.
Postponed in September because of the Persian Gulf crisis and budget negotiations in Washington, the president's visit is designed principally to reassure Latin American nations that despite the conflict in the gulf and the sweeping changes in Eastern Europe and the Soviet Union, the United States is paying attention to the substantial changes underway in its own hemisphere.
"We want to ensure that they feel there is a healthy amount of respect north of the border for what they're doing," a White House official said. "We want to reinforce democratic values . . . as well as free-market values and trade."
Bush's trip will be long on rhetoric and short on agreements or new proposals. He plans to tout his June trade, debt and investment proposal, known as the Enterprise for the Americas Initiative, throughout the region and boost the efforts of the democratically elected governments to restructure their economies. He also will conduct some nation-to-nation business in each of the countries on the itinerary.
But his attention will not be focused entirely on the trip's agenda. Back home in Washington, top administration officials will be testifying before Congress on the gulf crisis, and he is likely to be preoccupied with preparations for Secretary of State James A. Baker III's proposed mission to Baghdad.
Bush expects a warm welcome here in South America. Argentine President Carlos Menem was impressed enough with the Bush trade and debt plan to say recently that relations between the United States and Latin America have never been better.
Even the Santiago, Chile-based United Nations Economic Commission for Latin America and the Caribbean, always cautious about throwing open Latin markets to U.S. goods, said in a recent report that the initiative "represents a potentially important opportunity" to develop local export industries.
The trade proposal comes at an important moment for Latin America's young democracies, which find themselves under pressure to deliver real economic benefits. The 1980s were a lost decade for the region, a period of rising inflation and falling living standards.
After the fall of the Berlin Wall last year and the opening of Eastern Europe, Latin leaders began to worry that the world might forget them. Now economy ministers and diplomats are jetting around the continent to discuss bilateral trade pacts, regional blocs and a coordinated response to the Bush proposal.
The impetus for the initiative came from Bush himself, administration officials say, not long after he returned from his one-day "drug summit" in Colombia last January with presidents of the Andean countries. "He commissioned it and he followed it very closely," said Treasury Undersecretary David C. Mulford, who headed the administration task force that drafted the plan.
Administration officials, particularly high-ranking Texans such as Baker and Commerce Secretary Robert Mosbacher, have been bullish on the new South American leaders -- Menem, Brazil's Fernando Collor de Mello, Chile's Patricio Aylwin, Venezuela's Carlos Andres Perez -- who have launched ambitious reform programs.
Bush's visit comes at a crucial make-or-break juncture for the Uruguay Round of the General Agreement on Tariffs and Trade talks, which promote the expansion of international trade in accordance with an accepted body of reciprocal rights and obligations. If the talks should fail, the proposal gives the United States an opportunity to solidify its economic relations with its Latin neighbors, who already constitute a major market for U.S. goods.
The U.S. initiative covers trade, investment and debt. The trade component is perhaps the most audacious, proposing that the U.S.-Canada-Mexico free-trade pact be used as the basis for a free-trade zone stretching from the Arctic Circle to Tierra del Fuego.
Of the five countries that Bush will visit, only Chile already is oriented toward free markets, as Aylwin's new civilian government continues the economic policies that strongman Gen. Augusto Pinochet imposed during his 17-year reign.
Other governments will have to change their policies substantially if they are to participate. A Western diplomat here said this week that Brazil has, by some measures, one of the most closed markets in the world. Foreign-made computers, for example, are completely barred from entry, and Collor was rebuffed when he sought approval for a quick end to the ban.
Manufacturers here and in other Latin countries, the diplomat said, have reason to fight for the tariffs and restrictions that keep many U.S. products out. "They can sell their goods at whatever price they want," he said.
Brazil, Argentina, Paraguay and Uruguay have been discussing formation of a common market that could negotiate as a bloc with the United States -- an approach U.S. officials consider preferable to holding bilateral talks with each of the nations of the hemisphere.
U.S. officials see expanded trade with Latin America as a boon to the American economy. Saying the United States enjoys a competitive advantage with its Latin neighbors, one administration official said, "Their growth and prosperity can only redound to our benefit."
The initiative offers the region potential foreign debt relief of about $12 billion -- a sum that would have little overall impact on the more than $400 billion owed by Latin countries, mostly to international lending organizations and private banks.
But some of the smaller Central American and Caribbean nations might benefit significantly, and big debtors such as Brazil and Argentina are already asking the United States to help them get better deals by twisting the arms of unwilling bankers.
In addition, the proposal aims at attracting private foreign capital and convincing Latin investors to bring back the billions of dollars they have stashed overseas. According to some estimates, for example, Argentines alone have up to $50 billion abroad, an amount that rivals the country's foreign debt of more than $60 billion.
"This is how their financial problems will be resolved," said Mulford. The Latin countries, he said, "have to get competitive enough to attract their own capital."
Recognizing the political sensitivity of U.S. involvement in Latin investment policies, the administration turned to the Inter-American Development Bank.
The bank will help Latin nations revise their investment laws to reduce domestic content requirements for manufactured goods, curbs on foreign ownership and other impediments to private foreign investment. Then, under the initiative, the United States, over a five-year period, would contribute $500 million to a multilateral investment fund, with other industrialized nations such as Japan and Germany putting up another $1 billion.
Staff writers Stuart Auerbach and Dan Balz in Washington contributed to this report.