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NEW YORK-Insurance is one area in which the United States is losing out on opportunities by standing on the sidelines of trade integration in North and South America, a former diplomat says.
Latin American countries are forging strong trade links and integrating their economies, while U.S. politicians are preventing the United States from playing a role in the process, he said.
But while Latin American countries are agreeing to free trade and economic integration in principle, the practical application of the principles often is difficult, Latin American insurance officials say.
The varying stages of liberalization in the many markets makes integration of financial services particularly difficult, they say.
The United States is watching Latin American integration rather than trying to influence the process, said Michael Skol, the former U.S. ambassador to Venezuela and now senior vp at Diplomatic Resolutions Inc., a consulting firm in Washington.
"More is going on amongst Latin countries in terms of genuine trade integration than is going on in Washington," he said during the Roundtable on Insurance Conditions in Latin America, sponsored by the International Insurance Council last month in New York.
If the United States continues to remain outside the integration process, it will not win economic advantages, Mr. Skol said.
"The future of the U.S., the future of U.S. commerce, and the future of our economy is in integration," he said.
Although the United States negotiated the North American Free Trade Agreement with Mexico and Canada in 1993, efforts to further integrate the United States with Latin America have stagnated, Mr. Skol said.
The NAFTA agreement sparked arguments among politicians over the effect the availability of cheap labor in Mexico would have on U.S. employment levels, and those arguments still are holding back trade negotiations, Mr. Skol argued.
Meanwhile, countries in Latin America continue to forge trade links among themselves.
For example, the Mercosur agreement linking Argentina, Brazil, Paraguay and Uruguay is gathering strength, and Chile was admitted as an associate member in 1996.
"We cannot be second to Brazil and Argentina in terms of the political commitment to change in this hemisphere," Mr. Skol said.
But while the Mercosur group is making rapid progress in principle, it faces difficult problems in its attempt to integrate its insurance sectors, said Francisco Susmel, undersecretary of banking and insurance in the Ministry of Economy and Public Works in Argentina.
The Mercosur countries signed a customs agreement in 1995 and are working toward the creation of an integrated common market, similar to the European Union, as early as the year 2000, he said.
The process of integrating insurance will resemble the process of dismantling insurance trade barriers in the European Union, which started off with the recognition of licenses issued in other countries, Mr. Susmel said.
But while the European Union took more than 30 years to agree to evolve into a fully integrated market, the Mercosur group is trying to attain similar goals much more quickly, he said.
"We are going at a much faster pace than the European experience," Mr. Susmel said.
That rapid pace is challenging for officials involved in the integration of insurance among the member countries, said Helio Portocarrero, superintendent of insurance in Brazil.
Although all Latin American countries are liberalizing their insurance markets, the level of liberalization varies greatly, he said.
For example, the liberalization of the insurance industry in Chile and Argentina was largely completed several years ago, while in Brazil the process is ongoing, Mr. Portocarrero said.
And while Mercosur countries are attempting to integrate their insurance sectors, there is resistance from some who prefer the old state-authorized monopolies, he said.
"In Brazil, many people throughout the insurance industry would prefer that it had not started," Mr. Portocarrero said of integration.
In particular, the integration of the reinsurance business is proving difficult. In Argentina, the state reinsurance monopoly was ended in 1992, but in Brazil the state monopoly still is in place, and the liberalization process is moving forward slowly, he said.
Also, workers compensation de-regulation in Brazil is lagging behind Argentina, according to Mr. Portocarrero.
Argentina set up a private workers comp system last year, but in Brazil the system still is state-controlled, he said.
To overcome the difficulties, the different countries in the Mercosur group will have to work together to develop more easily aligned insurance systems, Mr. Portocarrero said.
"It's not that we should have the same regulatory framework, but we shall have to agree on some principles," he said.