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? THE TERM PROJECT Intermediate Macroeconomics ?

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International Relations:United States, Colombia, and

As the United States looks to strengthen its position as the “World Power” and looks for new avenues to invest in, it has taken an interest in “the upliftment and development” of its foreign affairs with various countries. In doing so, the United States has begun pumping money and media attention into a lot different countries around the globe, in amounts usually reserved for European nations. Ultimately, all policy and relations that the United States has are centered on trade and commerce. In making these assumptions, I am in no way implying that any nations and peoples will not greatly benefit from the United States’ “generosity”. Assistant Secretary for Foreign Affairs Susan Rice has greatly publicized the United States’ need to implement aid and investment programs into some countries and transitioning nations. Nonetheless, there are countries that were always in America’s special list that need some sophisticated elaboration. These two countries are Colombia and Cuba and to understand the importance of the relations between the three nations one needs to have a closer, “domestic” look from the inside.

The honor to be the first in that elaboration is given to the USA for all of the good reasons. World’s “third-largest country by size after Russia and Canada and by population, which is 290,342,554, (as for July 2003) after China and India. North America, bordering both the North Atlantic Ocean and the North Pacific Ocean, between Canada and Mexico.” (Sweeney, p.25)

The US has the largest and most technologically powerful economy in the world, with a per capita GDP of $37,600. In this market-oriented economy, private individuals and business firms make most of the decisions, and the federal and state governments buy needed goods and services predominantly in the private marketplace. US business firms enjoy considerably greater flexibility than their counterparts in Western Europe and Japan in decisions to expand capital plant, lay off surplus workers, and develop new products. At the same time, they face higher barriers to entry in their rivals’ home markets than the barriers to entry of foreign firms in US markets. US firms are at or near the forefront in technological advances, especially in computers and in medical, aerospace, and military equipment, although their advantage has narrowed since the end of World War II. The onrush of technology largely explains the gradual development of a “two-tier labor market” in which those at the bottom lack the education and the professional/technical skills of those at the top and, more and more, fail to get comparable pay raises, health insurance coverage, and other benefits. Since 1975, practically all the gains in household income have gone to the top 20% of households. The years 1994-2000 witnessed solid increases in real output, low inflation rates, and a drop in unemployment to below 5%. The year 2001 saw the end of boom psychology and performance, with output increasing only 0.3% and unemployment and business failures rising substantially. The response to the terrorist attacks of 11 September 2001 showed the remarkable resilience of the economy. Moderate recovery took place in 2002, with the GDP growth rate rising to 2.45%. A major short-term problem in first half 2002 was a sharp decline in the stock market, fueled in part by the exposure of dubious accounting practices in some major corporations. The war in March/April 2003 between a US-led coalition and Iraq shifted resources to military industries and introduced uncertainties about investment and employment in other sectors of the economy. Long-term problems include inadequate investment in economic infrastructure, rapidly rising medical and pension costs of an aging population, sizable trade deficits, and stagnation of family income in the lower economic groups.

The study of Cuba, in the twentieth century, has been very hard for researchers and analysts to carry out in most instances. Until 1959, Cuba was often ruled by military figures who either obtained or remained in power by force. Thus the military regimes within the country made it almost impossible to document any government information. Now Cuba has become more “media-orientated” over the last forty years. Because its leader, Fidel Castro, has overseen the political involvement of Cuba with other countries such as the former USSR and the United States, people all over the globe have wanted to know more about this communist state. It is due to this interest in knowledge that information on many issues from Cuba has emerged, including records on governmental and social problems. Some of the biggest problems constantly facing Cuba deal with issues behind the economy, foreign relations, and social conditions. “Main exports of Cuba are sugarcane, tobacco, citrus, coffee, rice, potatoes and beans.” (Sweeney, p.30) The unemployment rate is currently at 6.8%. The National Cuban Debt equals $10.1 Billion (Another $20 Billion owed to Russia) Economic Aid- Recipient $46 million annually. (1998 statistics) In relation to history, Spanish settlers established sugar cane and tobacco as Cuba’s primary products. Cuba is a totalitarian state controlled solely by Castro, who is Chief of State, Head of Government, First Secretary of the Communist Party (PCC), and commander in chief of the armed forces. Castro exercises control over all aspects of Cuban life through the Communist Party and its affiliated mass organizations, the government bureaucracy, and the state security apparatus (Shifter, p.162). Executive and administrative power is vested in the Council of State and the subordinate Council of Ministers, over which Fidel Castro presides, supported by six vice presidents. Legislative authority rests with the National Assembly of People’s Power, which only meets annually for about five days and is state-controlled. Beyond this everything is run with power and influence stemming from the Communist Party. The party’s “Politburo” and Central Committee together include most of the country’s military and civilian leaders. The largest reason Cuba still has such a weak economy today deals with the collapse of European Communism. In 1989, approximately 70% of Cuba’s trade was conducted with the Soviet Union and another 15% with Eastern Europe, all of which was disrupted when these communist states came to an end (Shifter, p.156). The biggest blow in this was the loss of Soviet economic assistance, which estimated between $3 and $4 billion a year. Throughout the next four years, Cuba’s GDP fell an estimated 35%. Since this collapse, which subsidized the Cuban economy, Castro has sought Western foreign investment. Most of this investment has come from Europe and Latin America, but still these funds have not made up the billions of dollars in annual Soviet subsidies. Therefore since most means of production are owned and run by the government (about 75% of labor force employed directly by the state), much of the population has no choice but to live in a state of poverty. Minimal public services are provided by the state, either free of charge or for nominal fees. Access to education generally is adequate, but urban housing and medical facilities have deteriorated, as has transportation. Solutions to all these economic problems have been short-lasted for Castro and his government. Throughout the mid-1990’s, there was some economic growth in Cuba due to tourism and investment. Tourism, on the one hand, is said to be the “heart of the economy” in Cuba. The Cuban Government has been stressing its beaches as well as actively encouraging “sex tourism” to attract Europeans, Canadians, and Latin Americans.

Colombia is the third-most populous country in Latin America, after Brazil and Mexico. Movement from rural to urban areas has been heavy. The urban population increased from 57% of the total population in 1951 to about 74% by 1994. Thirty cities have a population of 100,000 or more. Their population is about 42 million people with an annual growth of 1.8%. The Republic of Colombia is roughly 1.2 million km in area, or about the size of Texas, Arkansas, and New Mexico combined. Its capital city is Bogot? with a population of 6 million. The religion is primarily Roman Catholic, and the official language is Spanish. The education is nine years compulsory, but in most rural areas children are only offered about five of those years. Colombia is a republic nation gaining their independence in 1810. They have six different branches of government including the executive, legislative, judicial, constitutional, council of state, and superior judicial. The main parties are the conservative and the liberal. The per capita GDP of Colombia is $2,087. Their natural resources include: Coal, petroleum, natural gas, iron ore, nickel, gold, silver, copper, platinum, and emeralds. They have quite a bit of manufacturing, which is made up of textiles and garments, chemicals, metal products, cement, cardboard containers, plastic resins and manufactures, and beverages. Also included in their GDP is agriculture. Some of their agricultural products are: coffee, bananas, cut flowers, cotton, sugarcane, livestock, rice, corn, tobacco, potatoes, soybeans, and sorghum. Some other sectors include: Financial services, commerce, transportation and communications services, mining and quarrying, construction and public works, electricity, gas, and water. Colombia’s trade is as follows: Exports--$14.5 billion: petroleum, coffee, coal, ferronickel, bananas, flowers, chemicals and pharmaceuticals, textiles and garments, gold, sugar, cardboard containers, printed matter, cement, plastic resins and manufactures, emeralds. Their major export markets are the U.S., Germany, Netherlands, and Japan. Their “$12.7 billion (2001 projected) in imports include: machinery/equipment, grains, chemicals, transportation equipment, mineral products, consumer products, metals/metal products, plastic/rubber, paper products, aircraft, oil and gas industry equipment, and supplies.” (Shifter, p.78) Major suppliers are the U.S., Venezuela, Germany, Japan, and Panama. Notwithstanding the country’s commitment to democratic institutions, Colombia's history also has been characterized by widespread, violent conflict. Two civil wars resulted from bitter rivalry between the Conservative and Liberal parties.

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Since Colombia was the last country to mention, we will discuss its relations with the other two. In 1822, the United States became one of the first countries to recognize the new republic and to establish a resident diplomatic mission. Today, about 25,000 U.S. citizens are registered with the U.S. embassy living in Colombia, most of them dual nationals. Currently there are about 250 American businesses. Despite the strain which desertification and related issues placed on bilateral relations during the Samper administration, the U.S. and Colombian Governments continued to cooperate and consult. In 1995-96, the U.S. and Colombia signed important agreements on environmental protection and civil aviation. The two countries have signed agreements on asset sharing and chemical control. In 1997, the U.S. and Colombia signed an important maritime ship-boarding agreement to allow for search of suspected drug-running vessels. “During the period 1988-96, the United States provided about $765 million in assistance to Colombia. In 1999, U.S. assistance exceeded $200 million.” (Curry, p. 245) This funding supported Colombia's counter narcotics efforts, such as arresting drug traffickers, seizing drugs and illegal processing facilities, and eradicating coca and opium poppy. Under the Pastrana administration, relations with the United States have improved significantly. The United States responded to the Colombian Government’s request for international support to Plan Colombia by approving a $1.3 billion aid package in July 2000, in addition to previously programmed assistance of nearly $300 million for FY 2000. U.S. programs are a combination of military and police assistance to increase counternarcotics capabilities and also include a package of nearly $230 million for human rights, humanitarian assistance, alternative development, and economic and judicial reforms. These programs are an integral component of our support for Plan Colombia's overall goals. Close cooperation continues with passage by the United States of legislation providing approximately $400 million in additional funding for these programs. Since the end of the FARC safe haven, the United States has responded to the Colombian Government's request for increased intelligence support, expedited delivery of spare parts paid for by Colombia, and support for counter narcotics operations in the former demilitarized zone. The U.S. and Japan remain important trading partners, as do Andean community countries, especially Venezuela. With the help of soaring international oil prices and a highly competitive exchange rate beginning in 1999, the external sector posted trade and current account surpluses in 1999 and 2000. “However, weakening oil prices and falling oil export volumes during 2001 sent the trade balance back into a small deficit and put the current account deficit at about 2.4 percent of GDP, compared to a surplus of .4 percent of GDP in 2000.” (Curry, p.69) Within the current account, Colombia ran trade deficits through much of the 1990s, in part due to imports associated with oil and gas infrastructure development, but that pattern reversed in 1999 and 2000 with the depreciation of the peso stimulating industrial exports and oil prices expanding oil export values. In both the services and international income accounts, Colombia has typically run deficits of US$1-2 billion in the recent past, so the trade balance primarily drives the current account balance. Given the urgent need for foreign investment just to maintain the current level of oil exports and the very uncertain prospects for achieving the internal security environment required to more fully develop Colombia’s oil export potential, it seems likely that Colombia will be running current account deficits in the early years of this decade. President Clinton signed an Executive Order that bans any investment in businesses associated with certain drug cartels and companies associated with them. There are currently about 250 American Businesses with operations in Colombia. Recent Events In recent news Colombia’s lower congress approved a freeze in government spending for the next two years to reduce deficit spending. This is in hopes to strengthen the government.

It is impossible to compare U.S. and Cuba government without thinking of the U.S. trade embargo with Cuba. The United States instituted an economic blockade against Cuba in 1960 as a result of their Soviet dealings. Formal government relations were suspended in 1975 when Cuba deployed troops to Angola. Beginning in 1976, Cuba saw increased improvement in relations with the U.S. Travel tensions were eased and political prisoners were released in Cuba. Cuban troop deployment to Ethiopia in 1977 deteriorated relations once again. The Cuban embargo has since restricted all trade and travel with Cuba. Exceptions made by the U.S. State Department are made to those with relatives in Cuba and journalists and diplomats. Today we are seeing the drastic impact the embargo, and communism, has had on Cuba. Energy shortages in Cuba force them to selectively ration out electricity, shutting off whole districts from power for hours at a time with no warning. Monthly government rations are hardly substantial for families of the lower class, which applies to the majority of Cuban citizens. The sanctions placed on Cuba are not as stringently guarded as they were when first implemented. In today’s society, many US businessmen bypass the sanctions placed on Cuba by traveling to another country first and then into Cuba to entertain business ventures and find quality cigars. It could be said that the goals of the sanctions were met, since Castro’s regime is slowly dying, but it is not due to the sanctions themselves but instead to the lack of monetary income from the Soviet Union. For almost forty years, the United States has not imported any Cuban products, nor allowed any American food, medical supplies, or capital to enter Cuba. President Clinton, like each of his predecessors, supports the trade embargo. Two recent pieces of legislation have tightened the economic restrictions on Cuba. The Cuban Democracy Act, passed by Congress in 1992, further isolates Cuba from the world economy by prohibiting any foreign-based subsidiaries of U.S. companies from trading with the country. “The bill’s goal was to cripple the Cuban economy in order to bring down Castro within weeks, according to the bill’s primary advocate Robert Torricelli” (Downes, p.134). The Helms-Burton Act states that American citizens can sue foreign investors who utilize American property seized by the Cuban government. In addition, those who “traffic” in this property or profit from it will be denied visas to the United States. Supporters of the legislation believe that prohibiting foreign investment will quicken Castro’s downfall. Many debate on the issue of why the U.S. should or shouldn’t keep the embargo against Cuba. These debates deal with the effects of the Embargo on Cuba’s economy, humanitarian rights and health of the people of Cuba. The embargo today places a ban on subsidiary trade, Licensing, shipping and humanitarian aid. In 1992, the Cuban Democracy act imposed a ban on subsidiary trade with Cuba. This ban restricted Cuba’s ability to import medicines and medical supplies from third country sources. There have also been corporate buy-outs and mergers between U.S. and European pharmaceutical companies thus adding to the number of companies permitted to do business with Cuba. Under the Cuban Democracy Act, The U.S. Treasury and Commerce Departments are allowed to license individual sales of medicines and medical supplies, supposedly for humanitarian reasons to make up for the embargo’s impact on health care delivery. According to the U.S. corporate executives, the licensing provisions are so tough as to have had the opposite effect. With this statement, it is assumed that there are fewer licenses given out for humanitarian reason therefore favoring the embargo and aiding in the downfall of health in Cuba. Since 1992, the embargo has prohibited ships from loading or unloading cargo in U.S. ports for 180 days after delivering cargo to Cuba. This has discouraged shippers from delivering medical equipment to Cuba. Due to this, shipping costs have risen and further constricting the flow of food, medicines and medical supplies to Cuba. Another result of this is Cuba’s increased spending on shipping medical imports from Asia, Europe and South America rather than from the neighboring United States. Charity hasn’t been enough for an alternative to free trade in medicines, medical supplies and food. With the delays in licensing and other restrictions have discouraged charitable contributions from the U.S. The effects of the bans on subsidiary trade, licensing, shipping and humanitarian aid has contributed to malnutrition, poor water quality, lack of medicines and equipment and updated medical information. The ban on the sale of American foodstuffs has aided in nutritional deficits. These food shortages were linked to an outbreak of neuropathy numbering tens of thousands. Poor water quality is due to restrictions on Cuba’s access to water treatment chemicals and spare-parts for the islands water supply system. Spokesman Nicholas Burns released a press statement about the misinformation about the U.S. government and the embargo against Cuba. The U.S. is not all to blame but at the same time cannot be ruled out. Everyone seems to be blaming the U.S. but Castro plays a big part as well. Speaking of the small details that supporters of the embargo seem to leave out. As stated earlier, the Cuban Democracy Act of 1992 does permit companies and their subsidiaries to sell medicine and medical equipment to the United States and has approved 36 of 38 license requests for commercial sales of medicines and medical equipment to Cuba. “During the same period, the U.S. has licensed over $150million in humanitarian assistance which is more than the total world wide foreign aid received by Cuba in those years much of which came in medicines and other health-related items.” (Downes, p.63) This contradicts the statement made by the U.S. corporate executives that licensing provisions are tough. They may be tough but they get the job done. The corporate executives may be bias in their judgment in saying this only because it is harder for them to be able to make the money.

America’s, Colombian and Cuban interests have greatly intersected in regard to the ongoing war in Colombia. It is probably the greatest threat to regional security in Latin America today. It pits Colombian government troops against leftist guerrilla armies and right-wing paramilitaries in a three-decades-old conflict that is fueled by huge profits from the drug trade and has been marked by gross human rights violations. While American involvement through its support of Plan Colombia, which is the U.S.-backed military and economic aid program aimed at eradicating cocaine and heroin production in Colombia, and ending the Colombia conflict has been widely noted, Cuba also has played a role as a facilitator of dialogue between the Colombian government and one of the major guerrilla groups. Both the United States and Cuba want to see an end to the conflict, but there is much disagreement on how to achieve a settlement. Another element one has to take into account is the military structure that has been created there, the groups that are acting outside the government and which are also complicating the Colombian situation very much. The Cuban position regarding this Colombian conflict has been quite clear. Cuba has agreed to cooperate in the peace process, taking into account, first of all, the historic links we have with the Colombians. The Cuban and Colombian people have had their close links practically from the very founding of the two nations. But what has been underscored in Cuban policy is that in Colombia, as was the case in Angola, Cuba is not seeking its own benefit. Cooperation has been noticed, and besides, it has been extremely careful and unselfish. And in this sense, something, which is key to us has been taken into account: namely, it is an internal situation. Colombia is an extremely complex problem with many actors, and there’s no simple solution. It requires a comprehensive solution and the problem couldn’t be solved through the application of purely military means.

Curry, Frick. Altered States: Post-Cold War US Security Interests in Central America. Washington D.C.: Center for International Policy, 1995.

Downes, Richard. The Challenge of Cuba in the 21st Century. New York: Penguin Books, 1999.

Marcella, Gabriel. Colombia’s Three Wars. Chicago: Dry Publishers, 1998.

Shifter, Michael. Central America: Current Trends and Recommendations for US Policy. New York: Free Press, 2000.

Sweeney, John, P. Latin America and Caribbean. London: Oxford Press, 1996.

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