Metal is sweeter than sugar in Canada - Central America FTA

January 24, 2009

Metal is sweeter than sugar in Canada - Central America FTA

After a visit to Nicaragua, Peter Kent, Canada's junior foreign affairs minister continued on to Guatemala, Central America's most populous country, and the site of one of the most horrific wars in the Western Hemisphere.

Kent participated in a high profile ceremony with President Alvaro Colom, where he announced a $10 million donation from the Canadian International Development Agency destined for rural development in the Sololá region.

Getting down to business, Kent concentrated on expanding Canada's trade relations with Guatemala, through the Central America Four free trade deal.

Kent allegedly agreed that Canada would loosen some of the terms in the deal, long seen as having been killed by Canada's refusal to open up the sugar market.

Today, Canadian mining interests are of utmost importance in Guatemala, and it may be politically expedient for Canada to agree to up sugar quotas in order to guarantee that the mining sector has better investment conditions.

Canada's mining companies have generated serious controversy in Guatemala, both in the gold laden highlands and in the nickel rich tropical lowlands (see video below).

Of concern to Canada's mining sector is the possibility that the government of Guatemala adjust the country's mining law to raise taxes. A free trade agreement would protect Canadian businesses from increased taxation, among other benefits.

"Canadian businesses in the region have expressed some frustration that without these agreements, they don’t have that level playing field," Kent was quoted as saying in a recent blog entry in the Financial Post.

Kent's gift of $10 million of public money for a development project in Sololá is the kind of gesture that many find hard to criticize. Injecting public monies into a poverty stricken region provides a release valve to avert the risk of social and political crisis. But held against the backdrop of the larger policy goal of improving the investment climate for Canadian companies by guaranteeing that the government of Guatemala will not raise taxes, the donation takes on a familiar dimension: the socialization of risk and the privatization of profits.

[[From Foreign Correspondence.]]