THE WORLD FROM ...Guatemala City

The countries of Central America open their borders for an experiment in free trade - and taste the future

By

CENTRAL America is planning to throw a block party - of the free trade variety. The region has already received an invitation from Mexico to participate in borderless trade, beginning in 1996. But folks here can't wait.

Guatemala, El Salvador, and Honduras held a test run for two weeks last month. Normally officious and suspicious border personnel were told to smile and wave. Maybe they didn't go that far, but people and products flowed across borders unimpeded.

"It was like driving from Texas to New York. You didn't need a passport. We've had a taste of what's to come," says Federico Pola, an official of Guatemala's largest business organization.

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After the experiment, Nicaraguan President Violeta Barrios de Chamorro signed on to the regional trading bloc's organizing committee. The idea is catching on here for several reasons.

Foremost, the experiment is seen as an act of economic self-preservation. South America, North America, and Europe all are forming trading blocs. The former president of Ecuador, Rodrigo Borja Cevallos, made headlines on a visit here last week with his comment: "I don't see any other option. We integrate or we commit economic suicide."

If that is true for Ecuador, it is doubly so for the tiny nations of Central America. The cold war attention (and international aid) so lavishly bestowed on this region in the 1980s is fading away. The combined population of Guatemala, Honduras, Nicaragua, and El Salvador is a mere 24 million. Economic production is a dribble compared to Mexico. But the hope is that, united, these nations might produce goods at lower costs by developing economies of scale, and perhaps gain a bit of political leverage whe n the time comes to negotiate free-trade ties with northern and southern neighbors.

Also for the first time in more than a decade, these nations here are walking down similar political and economic paths. Honduras, Nicaragua, and El Salvador have closed the chapter on their civil wars. Guatemala is making its first serious attempt at peace talks in 30 years. The presidents' economic philosophies and challenges are similar. The four nations met recently to devise a common strategy to combat low coffee prices.

Some business people paint a vision of a region united with "one flag, one currency, one judicial system, and the free flow of capital and goods."

Of course, this has been tried before and it flopped. The same three nations got the ball rolling for a Central American common market in the late '50s and early '60s. But it shattered on the distrust created by the regional wars, political turmoil, and economic decline of the '70s and '80s.

Some locals don't want to attend this revived regional dance. Panama has not decided if it wants to unite with northern or southern neighbors. Its relatively undeveloped industrial sector is not sure it can compete in a free trade environment. Costa Rica has its nose in the air, say Guatemalans; it will negotiate its own free trade pacts directly with Mexico and the United States. What Costa Ricans worry about is opening their doors to mass migration from their poorer neighbors. A sudden influx would not

only ruin the local economy, Costa Ricans say; it could bankrupt their highly developed education and social services system.

Within every country are those who question the return to past practices that failed. If economic integration means further concentration of wealth in the hands of a few, and little attention is paid to growing ranks of the poor, then the turmoil that doomed economic integration the first time may eventually throw cold water on this block party as well.

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