Shortly after becoming president, George W. Bush embarked on a campaign to expand the North American Free Trade Area (NAFTA) to encompass 34 nations in the Western Hemisphere, spanning from Canada in the north to Argentina and Chile in the south. The new trade bloc--the Free Trade Area of the Americas (FTAA)--would include over 800 million consumers and a total economy of some $13 trillion. Bush repeatedly stated that the free trade area would strengthen democracy, promote economic integration and bring peace and prosperity to Latin America, all of which the President, speaking at the Third Summit of the Americas in April 2001 in Quebec City, described as vital to U.S. national interests.

Though grand plans of uniting the Americas have been around for some time (Si­mon Boli­var was the first to come up with the idea), negotiations always faltered on fears that stronger, more economically diverse nations would take control and subvert the sovereignty and national identity of smaller countries. This concern, the old core-periphery argument, was a standard part of all talks on integration issues and was generally invoked against the United States whenever Washington touched on the subject (as the elder President Bush did in 1990). Those countries in favor of free trade with the United States, like Chile, preferred tailored bilateral accords anyway and therefore had no pressing desire to advance regional pan-American integration.

After taking office, George W. Bush was able to allay these fears and rally support for the FTAA. At the Third Summit of the Americas, delegates from 34 countries (every Western Hemisphere country except Cuba) agreed to set January 2005 as the deadline for finalizing negotiations. Heralded as an unprecedented agreement, the FTAA was to be the answer to the region's economic woes. The free movement of goods, technology and labor was proposed as the solution to Latin America's increasing levels of poverty, unemployment and economic stagnation. And to sweeten the deal, the United States was offering up a bevy of substantial perks, including a promise to put on the table all issues, such as those U.S. policies that are viewed negatively in Latin America and the eventual elimination of all tariffs (though this would not have to take place until 2015). Even so, getting all 34 countries to agree, despite very vocal critics, was a miraculous feat.

So what happened? Since April 2001, talks have stalled, and the core-periphery arguments have returned in a new light and with a new slant--and returned with a vengeance. The old cries to close off trade avenues and implement import substitution policies have been left behind. The region today is rallying for free trade, but without relying on the United States to be the sponsor of such initiatives.

The defining moment in U.S.-Latin American relations came on September 11, 2001, after which the United States opted to devote all its energies to the Middle East while essentially turning its back on its closest neighbors. Though the state of affairs following the terrorist attacks could perhaps not have been anticipated, the effects of the U.S. response were eminently predictable. It pulled all attention away from Latin America and polarized the region rather than building a solid coalition grounded in a common purpose. Coupled with a series of unforgivable mistakes--the Treasury Department's diplomatic gaffes with regard to Argentina's economic crisis (which many insist only exacerbated Argentina's problems), the State Department's failure to condemn the coup that briefly ousted Hugo Chávez in Venezuela and the Bush Administration's disparaging remarks about Brazil's 2002 presidential elections--America's policy shift cast the United States in an increasingly negative light.

Spurned countries decided they did not need the United States to help them out of their troubles (Argentina and Brazil), nor did they need to support the United States in its overseas adventures (Chile and Mexico). The war in Iraq widened the divide in relations between the United States and its southern neighbors, and the fallout since the end of the war has only made matters worse. Latin Americans are ever more skeptical of the self-appointed U.S. role as the champion of democracy. Serious questions abound regarding the validity of the war--whether weapons of mass destruction ever existed and what U.S. intentions really were--and the perception of the Bush Administration as bordering on tyrannical has gained much more currency in the region.

Neglecting its once most-favored neighbors will ultimately have steep consequences for the Bush Administration. Politically, the United States will face more open dissension in the international arena. Economically, the United States may end up missing the biggest trade opportunity in its history.

Courting the Locals

Part of understanding the damage of the fall involves realizing what heights we had reached before it. The decision to create the FTAA was a major step in cementing U.S. influence in Latin America. President Bush highlighted his interest in strengthening ties by making direct overtures to regional leaders--his first official presidential trip was to visit Mexican President Vicente Fox at his ranch in Guanajuato, breaking the tradition of honoring Canada with a president's first visit. In addition to the usual promises to increase trade and improve ties across borders, the President touched on the one topic that had been taboo in U.S. politics for decades: legalizing the status of Mexican immigrants. Though most observers knew that an immigration accord would be difficult to pass through Congress--probably even impossible--the willingness of the Bush Administration to at least address the issue was heartening to Fox, the underdog who was able to break the PRI's 71-year monopoly on power and the darling of both domestic and international political analysts. The political outsider and savvy businessman was making moves for Mexico, becoming friendly with the United States and taking on issues that resonated with the average Mexican: jobs, immigration and social improvements.

Talks on immigration issues were decidedly over after the September 11 attacks. U.S. legislators, heeding the calls of their constituencies, formed a united front on such matters. Far from discussing amnesty for illegal immigrants, they discussed laws to increase vigilance on the border under the rubric of homeland security. The domestic price for Vicente Fox was steep. He and his advisors could no longer flaunt their close relationship with the Bush Administration when dealing with the Mexican legislature, as it had now been transformed into a liability. In the buildup to the war in Iraq, Fox became painfully aware that in order to salvage his domestic political bargaining power, he would have to make a bold break with Bush. Fox thus announced that Mexico would support a "compromise solution" and not a U.S.-sponsored invasion. The decision shocked the Bush Administration, which had counted on Mexican support in the UN Security Council. Instead, the Bush Administration saw its close neighbor and second-largest trading partner side with France, the embodiment of an ungrateful ally in the eyes of the United States. Newspaper editorials highlighting Mexico's allegiance with France frightened the Fox Administration and galvanized the feeling that the Fox-Bush friendship was, for all intents and purposes, over.

A similar situation occurred in U.S.-Chile relations. Having witnessed Chile's failure to secure free trade agreements with both the first Bush Administration in the early 1990s and the Clinton Administration several years later, skeptics were wary that any progress would be made with the second Bush Administration. After two years of negotiations, the skeptics were proven wrong, as U.S. Trade Representative Robert Zoellick announced in December 2002 that negotiations for the U.S.-Chile Free Trade Agreement were complete. Ratification and implementation, which were expected to take place quickly, instead stalled on Chile's decision not to support the war in Iraq at the UN Security Council.

Chile's ties to the United States put it between a rock and a hard place: choosing to seek a bilateral trade agreement with the United States had driven a wedge between Chile and its South American neighbors. Brazil and Argentina had long courted Chile to join the Southern Cone Common Market (known as MERCOSUR) in an attempt to form a united front--of sorts--in South America. Chile faced a difficult choice. On the one hand, it could ally with a trading bloc in which individual states always subverted agreed tariff limits by issuing decrees and granting preferential treatment to their domestic industry at the expense of their trading partners. On the other hand, it could follow a trade policy that would result in assured access to the holy grail of markets, the United States.

This was an unenviable position in which to be, but, ultimately, Chile's President Ricardo Lagos opted for the United States. It was a move that MERCOSUR members (Argentina, Brazil, Paraguay and Uruguay) would not soon forget. Chile gained notoriety in the region for having chosen not to join the MERCOSUR club, and when relations with the United States soured over Iraq, it paid dearly in the local media. The Lagos Administration opposed the war, as did most other Latin American nations, but its opposition was especially detrimental to the U.S. campaign for support because Chile, like Mexico, had a seat on the UN Security Council. Although President Lagos tried to reassure business interests that his opposition to the war would not negatively impact the trade agreement, it became obvious that it would. The treaty's ratification was inexplicably delayed, and MERCOSUR members secretly gloated.