The pendulum of history swings again.

• Author: Owen, Michael L.
• Position: Free trade in Latin America

Earlier this century, much of Latin America was wide open to foreign investment and business activity. A unique free-trade opportunity has returned.

During his first visit to Washington D.C., after the 1992 presidential election, President Bill Clinton made his first policy statement regarding Latin America, announcing that he intended to pursue an "even more aggressive" policy than the Bush administration had. He also expressed his desire to see free-trade agreements signed with Chile and Argentina. This is just one example of what many already recognize as an inevitable historical development: the emerging economic importance of South and Central America to the United States.

With a regional population of 400 million, Latin America is the U.S.'s fastest growing export market. In 1991 the region consumed $58 billion of U.S. goods (an increase of 18% over the previous year), and the climb is expected to continue through the decade. This rise is occurring at a time of tremendous challenges for U.S. businesses due to competitive pressures from Europe and Asia. Fortunately, developments in recent years have created a unique historical opportunity for U.S. enterprises seeking to do business within the region.

In the early part of this century, much of Latin America was wide open to foreign investment and business activity. A wave of nationalism responding to actual and perceived abuses by foreign investors, coupled with a belief that incipient local industries could only prosper if protected against foreign competition, led in the 1960s and 1970s to the adoption of restrictions limiting the foreign ownership of enterprises. As the flow of foreign investment capital suddenly stopped, governments began looking to foreign debt to replace that source of hard currency.

During the "lost decade" of the 1980s, it became clear that this nationalist experiment had failed. Latin American governments reeled under the burden of their debt-based economies. Exports were depressed because these incipient industries were not forced in their protected environments to make products of a quality that could compete in the world market. Many publicly owned industries were protected from collapse only by protectionist subsidies and tariffs.

The pendulum of change has now reversed; many of the countries within the region seek foreign investment, which will help their economies employ and train their citizens to produce world-class goods for internal consumption and...