Message to the Congress Transmitting the Enterprise for the Americas Initiative Act of 1990

To the Congress of the United States:

I am pleased to transmit a legislative proposal entitled the "Enterprise for the Americas Initiative Act of 1990." This proposal sets forward key measures to implement the investment, debt, and environmental components of my "Enterprise for the Americas" initiative announced on June 27, 1990. It will build more constructive relations in the Western Hemisphere and a more hopeful future.

The last 14 months have been a remarkable time for the world. Yet the rapid changes at which we have marveled in Eastern Europe are not unique. Freedom has made great gains in our hemisphere, as a resurgence of democratic rule has swept through the Americas.

Parallel to this political shift has come a realignment of policies in the economic sphere. As the people of Latin America and the Caribbean search for prosperity following a difficult decade of painful economic adjustment, their governments are focusing on economic growth and the free market policies needed to nourish it.

For the benefit of all people of this hemisphere, the United States needs to reach out to support the efforts of these countries as each undertakes its own approach to economic reform. My new Enterprise for the Americas initiative aims to build a broad-based partnership for the 1990s that will strengthen our economic ties and encourage economic growth and development throughout the Western Hemisphere.

This initiative rests on three pillars -- actions on trade, investment, and debt -- through which we can reach out to our neighbors and support economic reform and sustained growth. First, we want to expand trade both by cooperating closely with the nations of Latin America and the Caribbean as the Uruguay Round comes to a close and by entering into free trade agreements with the ultimate goal of a hemisphere-wide free trade system. Second, we want to encourage investment and help countries compete for capital by reforming broad economic policies and specific regulatory systems. Third, we want to build on our successful efforts to ease debt burdens and to increase the incentives for countries to reform their economies by offering additional measures in the debt area. As part of our efforts on debt, we want to support the environment by promoting sustainable natural resource management as a key element of building a strong future for the hemisphere.

The proposal I am transmitting to the Congress today focuses on the investment, debt, and environment components of the Enterprise for the Americas initiative.

The proposal provides for contributions by the United States to a multilateral investment fund to be established by the Inter-American Development Bank (IDB) to foster a climate favorable to investment in Latin American and Caribbean countries. This Enterprise for the Americas Investment Fund will provide additional support for reforms undertaken as part of the new IDB investment sector lending program. It will do so by advancing specific, market-oriented investment policy initiatives and reforms and financing technical assistance.

The proposal establishes the Enterprise for the Americas Facility to support the objectives of the initiative through administration of debt reduction operations for those nations that meet the investment reform and other policy conditions. Latin American and Caribbean countries can qualify for benefits under the Facility if they:

d

have in effect International Monetary Fund/World Bank reform programs;

d

have in place major investment reforms in conjunction with an IDB loan or are otherwise implementing an open investment regime; and

d

for countries that owe a substantial part of their debt to commercial banks, have negotiated a satisfactory financing program with commercial banks, including debt and debt service reduction if appropriate.

The proposal authorizes the reduction of concessional obligations extended under the Foreign Assistance Act of 1961 and credits extended pursuant to title I of the Agricultural Trade Development and Assistance Act of 1954. The agency whose loans or credits are affected will exchange -- at the direction of the Facility -- new obligations for obligations outstanding as of January 1, 1990. Principal on the new obligation will be paid in U.S. dollars. Interest will be at a concessional rate and paid in local currency if an eligible country has entered into a framework agreement establishing an Environmental Fund; otherwise, interest will be paid in U.S. dollars.

The Environmental Fund into which local currency interest payments are deposited will be owned by the debtor country but be subject to joint programming by the debtor country and the United States Government. An environmental framework agreement will establish joint programming requirements and will also specify the use of the Environmental Fund to support environmental projects and programs. It is envisioned that local committees in each eligible country will include strong representation of local private environmental groups, as well as the United States Government and the host government, and will initiate overall country plans and carry out a fundamental review of proposed projects. In setting up this broad framework and establishing relationships in each eligible country, we will consult closely with nongovernmental organizations with expertise in natural resource management and conservation.

The proposal also authorizes the sale, reduction, or cancellation of loans made to eligible countries under the Export-Import Bank Act of 1945, as amended, and assets acquired under export credit guarantee programs authorized pursuant to the Commodity Credit Corporation Charter Act or section 4(b) of the Food for Peace Act of 1966. These sales, reductions, or cancellations will be undertaken only when purchasers confirm that they will be used to carry out debt-for-equity or debt-for-nature swaps in eligible countries.

We believe that these investment, debt, and environment measures will provide significant support to the efforts of Latin America and the Caribbean to build strong economies.

The United States has not gone untouched by the economic crisis faced by Latin America and the Caribbean over the last decade. As countries in the region cut imports, postponed investment, and struggled to service their foreign debt, we too were affected. We lost trade, markets, and opportunities.

Latin American and Caribbean leaders have made a great deal of progress in coping with this crisis. A new generation of democratically elected leaders is turning the tide away from economic decline. Enactment of the Enterprise for the Americas Initiative Act of 1990 will permit the United States to support the efforts of these leaders, increasing the prospects for economic growth and prosperity throughout the hemisphere.

George Bush

The White House,

September 14, 1990.