With the world's fastest growing young population, education remains a primary focus of the Caribbean and Latin American countries, particularly for the growth of the middle class. In particular, technological advances allowing these countries to become part of the global information society will position them better to take advantage of the opportunities in the global economic market.

The Caribbean and Latin American region is estimated to spend more on education and training than any other developing region, indicating the need for an improvement in the quality of investment.

Countries have been making changes in educational financing and resource allocation and, importantly, expanding the scope for private input, recognizing that necessary improvements cannot be supported by public budgets.

Studies by the United Nations Commission for Latin America and the Caribbean estimate that, for the region as a whole, the additional cost of implementing strategies to improve the quality of education would amount to almost 4% of GDP.

Currently, the labor force in the Caribbean and Latin America has an average of only five years of schooling, contributing to the unequal income distribution.

Analysts have predicted that if that level is raised to 6.8 years in the next 10 years, combined with other structural reforms, an average economic growth rate of 6.5% can be achieved.

Indications are that the education system in general is failing to meet the productive sector's needs and risks becoming dysfunctional in terms of response to the demands of the labor market.

Poverty reduction remains the major regional challenge, even amidst phenomenal successes by individual governments to deal with unemployment and inequality, and social development program prioritizing by both regional and multilateral funding agenices.

Empowerment of the poor is essential in a region where almost one-fourth of the population lives below the poverty line, i.e. on less than $1 a day. Continuity of economic growth is crucial to these efforts, with estimates of 6% annually necessary to impact poverty levels.

A Human Poverty Index released by the UN Development Program in 1997 indicated that the success achieved in eradicating poverty in this century indicated that elimination of severe poverty in the first decades of the 21st century could be possible.

Public social spending as a proportion of GDP continues to rise, even in some cases where the public expenditure/GDP ratio has fallen.

Recent studies by the Inter-American Development Bank confirm that the slow advancement on income distribution and other social conditions cannot be attributed to the region's reform programs, including trade and liberalization.

Rather, the conclusion was that further reforms would have addressed income disparities more rapidly, and suggested that governments must be encouraged to accelerate liberalization in order to decrease their countries' vulnerability to the vagaries of international financial markets.

Peace agreements negotiated between former combatants in Guatemala and El Salvador call for specific, measurable investment in social spending from funds acquired through privatization of state industries.

The sustained economic growth necessary to fight poverty will depend to a great extent on infrastructure development, particularly in the area of water, transportation, telecommunications and energy services.

Estimates are that the Caribbean and Latin American region needs some $70 billion a year over the next decade to improve such services. Even though the reform and deregulation process has increased the level of private sector participation in infrastructure projects, projections are that this will not rise above 25%. With bilateral and multilateral financing sources covering another 10% of needs, governments still have the challenging responsibility for the bulk of the funding required. Progress in fiscal reforms has enhanced the essential creditworthiness for mobilizing finance in international capital markets. Project finance mechanisms are being used increasingly to dilute the risk of investment in infrastructure improvements. Along with the multilateral loans and equity investments by private developers, a major source of funding for project financing in the region has been export credits and, more recently, privately administered pension funds.

There has been a call for the development of a political model consistent with the economic one now prevalent region wide. In order to ensure sustained growth, open markets must be complemented by efficient judiciaries and legislatures, which will inspire confidence with the rule of law. Multilateral lending organizations have been unanimous in the assessment that in order to achieve the needed 7-8% growth, quality governance must be pursued to reduce corruption and protect the rights of investors and consumers.

Fortune 1000 companies along with financial and investment institutions participating in a 1997 survey identified corruption as a major problem facing the region. Countries throughout the region are participating in judicial reform projects as a way of attacking corruption and stimulating investment. An Inter-American Convention Against Corruption has been negotiated, with a number of countries submitting their instruments of ratification in 1997.

Also in 1997, the Organization of American States initiated further efforts to fight business-related corruption, with proposals for a hemisphere-wide anti-bribery convention. This followed an agreement by the OECD to negotiate an anti-corruption convention for its 29 member nations.

In addition to corruption, narcotics and arms trafficking and money laundering represented a key focus of discussions mid year 1997 when U.S. President Bill Clinton met with Caribbean and Central American leaders and with the Mexican President. All three meetings resulted in identifying mechanisms for ongoing consultations and mutual pledges of cooperation and partnership, embodied in the case of the former two in the Bridgetown Declaration/Partnership for Prosperity and Security in The Caribbean Action Plan and the San Jose Declaration. Later in the year, on the occasion of the President's visit to Venezuela, an anti-drug pact was signed, including an agreement on a working group to discuss ways to stop money laundering.

"The El Nino weather phenomenon..." was probably the most oft repeated phrase used when discussing 1997-8 harvests. A wet dry season was followed by a dry wet season, which abruptly ended with levels of violent hurricane activity unseen for decades.

El Nino was alternately credited, usually blamed, for a bountiful grain harvest in Argentina, a terrible cotton crop in Argentina and Paraguay, low sugar production in the Caribbean, and low coffee and banana production in Central America.

As the countries across the hemisphere continue to prepare for the FTAA, issues being worked on include harmonization of standards and regulations, reduction of export and other trade-distorting subsidies, and improvements in transportation infrastructure. Organismo Internacional Regional de Sanidad Agropecuaria (OIRSA) is a regional phytosanitary organization working to harmonize regulations in Central America.

The Caribbean Rice Association has formed a Caribbean Rice Industry Development Network (Cridnet) to coordinate efforts to assure traditional and new markets for the sub-region's rice exports.

Direct shipment would result in a system that is transparent, and allow ACP exporters to deal as far as possible with buyers/distributors, avoiding middlemen. This in turn would allow them to attract premium prices for their rice at a time when the industry is becoming more and more competitive, and there are necessary adjustments to global trade liberalization. Recognizing the need to diversify their markets, Guyana and Suriname have taken steps to identify other export markets; both are looking to increase exports within CARICOM as well.

Accounting for almost 70% of export earnings in the region, and employing over 20% of the labor force, the agricultural sector is considered a key to sustainable development. Latest figures peg agricultural exports (including livestock, fisheries and forestry) from the Caribbean and Latin America at 13% in terms of world agricultural exports.

Despite the move away from subsidies, it has been recognized that small farmers need assistance, with proponents of technological advancement suggesting that governments still have to be the intermediary to technology. They must intervene in the credit system to enable small producers to buy technology, and parastatals must play a role in the supply.

Declining production and changing patterns in world markets have necessitated diversification as a means of sustaining economic growth in a number of countries. In addition to advising the region's governments on strategies for export diversification, multilateral organizations have been promoting private sector commodity price risk management as a key to global economic survival. The use of financial hedges or derivatives mechanisms minimize the risk of price downturns and become increasingly important to those countries dependent on commodity export revenues.

Cigar production in the region has been experiencing a boom in recent years, with predictions for continued strong growth in the European market, potential growth in Asia, and moderate growth in the United States. In Europe, where Spain is the leading importer, estimates are that sales of Latin American cigars could double by the year 2001. Major exporting Caribbean Basin countries include Cuba, the Dominican Republic, Honduras, Jamaica and Nicaragua.

In some of the larger Latin American countries, the fishing sector contributes significantly to economic growth, ranking the region high among the world's largest producers of fish. Officials in the Eastern Caribbean are moving to promote greater emphasis on the development of the fishing industry, particularly in light of falling revenues from banana exports. The Food and Agriculture Organization (FAO) has indicated that global demand for seafood products will explode between 1997 and 2010, and that aquaculture will have to play an increasing role to meet this demand. By 2010, total seafood demand was projected at 140-150 million tons, with potential supply from aquaculture reaching 39 million tons.

Under a Lome Convention Protocol, The European Union's banana regime allows preferential access from former European colonies, and also provides additional funds to offset losses caused by price fluctuations. Latin American producers are subject to quotas, with only Colombia, Costa Rica, Nicaragua and Venezuela enjoying preferential tariffs under special Protocols. The United States maintains that existing regulations are discriminatory and restrictive, violating free trade rules. In February 1996, the U.S., along with Ecuador, Guatemala, Honduras and Mexico, filed a formal complaint with the World Trade Organization (WTO). In March 1997, the WTO dispute panel ruled in an initial report that the regime violates open trading rules and recommended that the WTO ask Brussels to bring the regime into line with its obligations under global trade accords. A final report and subsequent ruling confirmed the earlier finding, and stipulated that the regime violated free trade (GATT and GATS) rules on 19 counts.

The US and its allies had claimed that the preferential access enjoyed by the ACP producers damaged the national economies of Latin American countries and undermined the profitability of multinational companies. The Latin American producers, in particular, stressed that their interest was not in undermining market share of the ACP countries, but to seek just and fair access to the most important banana market (40%) in the world. This was in reference to the licensing allocation system thought to favor European companies controlling the ACP and EU banana trade.

Caribbean producers and governments have complained that the U.S. is insensitive to the fragility of Caribbean banana producers' economies, and that erosion of their traditional banana markets would leave them highly susceptible to narcotics traffic wo covet the islands as refuges and stopover points between drug producing countries and their markets. The issue still has not been settled and Caribbean producers retain their 857,700 tons a year quota from the EU.

Meanwhile, Windward Islands fruit quality scores have been rising since price incentives based on quality scores were put into place.

The U.S. State Department announced a $4.7 million economic diversification program for the Windward Islands in 1998, in response to "a very serious problem in public perception where we were seen as not only indifferent to, but hostile to, Eastern Caribbean interests."

In Central America, estimates were that Honduras' three largest banana producers, Standard Fruit, Dole and Tela Railroad Co, had lost 70-80% of their crops in October 1998 as a result of Hurricane Mitch. Further losses were expected in Guatemala.

Total production of sugar in the Latin American and Caribbean countries accounts for about a third of world production, topping 30 million tons annually, and with net exports of more than 10 million tons representing about 40% of world exports.

Total production for 1997 was approximately 900,000 tons. The 1998/9 harvest was predicted to be lower, due to widespread drought.

The United States has introduced a new administrative plan for managing its Sugar Import Tariff Rate quotas. Although establishing quota at the beginning of the year, it retains a portion, and uses a stocks-to-use ratio formula for managing the remaining quota. At the beginning of the 1996/1997 year, 1.7 million tons of the 2.3 million-ton sugar quota was allocated, with two subsequent increases made during the year.

In September 1997, 1.2 million tons were allocated for the 1998 fiscal year, based on assessed domestic demand, and reflecting the high sugar beet crop in the US. Country allocations are based on historical trade to the US. Haiti and St. Kitts and Nevis were included in the allocations as minimum quota-holding countries, and the allocation to Mexico was increased to fulfill obligations pursuant to NAFTA.

The sugar industry in the United States underwent significant reforms in the 1996 Farm Bill, intended to assure consumers of an adequate supply of sugar, provide a safety net for domestic producers and provide protection from foreign dumping of subsidized sugar.

Sugar exports to the European Union are also subject to quotas, under a Sugar Protocol which commits the EU to purchase specified amounts from the ACP countries, and also to negotiate annually to establish guaranteed prices within the range of EU prices for domestic sugar.

The current EU sugar regime is for a 6-year period ending June, 2001. In 1997, under safeguard measures, the EU imposed a ceiling of 3,000 tons on sugar to be imported via the Overseas Countries and Territories (OCTs), with indications that the quota could be increased in the event of rising EU demand.

In 1997, the drought that destroyed about a third of Brazil's coffee-bearing trees four years earlier was still seen as largely responsible for the slump in coffee production and the resulting dramatic price surges.

Brazil's 1998-9 crop was predicted to be the largest in several years, and prices declined throughout most of 1998. Colombia, the world's number two producer after Brazil, was expected to have a reasonably good crop but faced the problem of labor shortages in the countryside.

Hurricane Mitch appeared to have devastated the Central American coffee crop just as the harvest was beginning in many areas, causing losses of about 1.3 million bags. In early November, the price had risen from a low of about $105 per bag in October to $124.

The specialty coffee market has experienced strong growth, creating a tight supply situation for high-quality mild coffees. There has been a deficit of arabica production over consumption since 1993.

In 1997 Colombia's National Coffee Federation announced a 10-year plan which aims to boost and stabilize coffee productivity. The Federation's plans to restructure the industry include state of the art technology and improvement in administrative techniques on farms.

Estimates are that the growth market for coffee consumption over the next decade will be Eastern Europe, China and coffee producing nations, as North American and Western European markets are reaching maturity. In the European Union, which now accounts for almost 45% of total world coffee imports, mild arabica coffees in particular (mostly from Colombia and Central America) have gained substantial market share.

Declining world prices and reduced sustainability over the last decade have influenced agricultural diversification and growth in non-traditional products.

National policies and special incentives from trade-partner countries have contributed to this significant growth, which is helping prepare the countries to compete in hemispheric free trade. The expansion in the sub-sector has been welcomed as well because of job creation benefits in rural communities.

The European Union has extended preferential treatment to non-traditional agricultural products from Central America under its Generalized System of Preferences scheme, effective January 1, 1997. Traditional agricultural products such as coffee and tobacco have enjoyed preferential treatment since 1992.

Non-traditional fruit exports from the region include berries, mangoes, melons and pineapples, with asparagus, broccoli, cucumbers, french beans, leeks, limes, okra, onions, radishes, and snow peas representing some of the vegetable exports.

The Central American sub region has seen significant growth in this area, with substantial inroads made into the US markets and some expansion into Europe. The melon export industry in particular has become very competitive within Central America and Mexico also is looking to increase its market share in the United States. Agricultural products remain the leading commodity exported from Central America into the U.S., with refrigerated exports from the sub region growing 34% in 1996 and expected to register a further 7% increase in 1997.

Countries in the LA/C region are adding more value to their fresh produce exports through vertical integration, with growers developing ties with exporters, wholesalers and retailers to link different segments of the market.

The international tropical fruit market is expected to grow 3-5% annually to the year 2000. The European Union will continue to be the largest market, accounting for more than 39% of the volume of world trade, followed by the United States, which will be the most important destination for fruit from Latin America and the Caribbean.