"I think that it's a very important thing from the point of view of the United States in relation to Latin America", said Ricardo Lagos to San Diego Union-Tribune. "I hope that the war is going to be over very soon and therefore by the end of May or June that the agreement may be taken to the U.S. Congress", he stated.

Lagos narrowly won Chile's presidency in January 2000 as head of a center-left coalition.

Lagos, now 65, holds a doctorate in economics from Duke University and is a strong proponent of free trade.

During the runup to the Iraq war, Chile held a seat on the U.N. Security Council. The Lagos government resisted U.S. pressure to support a second resolution explicitly authorizing the use of force against Iraq.

Chile and the United States reached tentative agreement on a free trade agreement last December. Ratification of the agreement may be delayed.

Lagos was interviewed by Herbert G. Klein, editor-in-chief of Copley Newspapers, on April 8 at the Moneda Palace in Chile's capital of Santiago.

How would you describe what has happened to the economy in Chile?

We are a country that is extremely open to international trade. More than 60 percent of our gross domestic product is imports less exports. So we depend much on exchange and what's going on in the rest of the world. Fortunately, we have a rather well-balanced geographical distribution of our trade with Europe, with the United States and with Asia. Lastly, with the countries of the Americas, of course. A significant quantity. And this is this reason why our tariffs are extremely low: 6 percent flat for everything.

Is that falling further?

That is decreasing. And this is the reason why we have been pursuing trade agreements with so much interest. We now have trade agreements with Canada, with Mexico, with most of the countries of the Americas. And, of course, with Europe. Also with the United States, which is keenly important for us, and with South Korea. We have had a goal the last few years of more than 12 percent growth in exports. And in terms of our gross domestic product, we are planning this year to have growth of 3.5 percent. We have an autonomous monetary policy. We have a very good management of our fiscal account. We have a deficit of 0.5 percent, a very small deficit.

I saw the banks just got a $4 billion loan.

Oh yes. The country risk is the smallest country risk of all the American economies. We have a very good (credit) standing on Wall Street. And at the same time we have been able to have important progress in the area of health, education. Now we are going for a minimum third year (of high school) education for everybody. It's enforced. On the average, our kids now go to school for 11.5 years. And at the same time we have been able to reduce the proportion of people in Chile living under the poverty line from 40 percent to 20 percent. And now our approach for those who are extremely poor is not to provide them money but to help them to get on their own feet. To teach them, give them on-the-job training, schooling for their kids. We have a very good program in terms of housing.

I don't know if you know Jack Kemp, a statesman in the United States. He's a very strong advocate of that kind of housing. To have public housing and then sell it to individuals. Is that what you're doing?

We provide what we call social housing, housing for those that need it. Depending upon the size of the house, the government will provide the money. And then the private contractor will build the house.

With the idea that if you own it you'll keep it up.

Oh yes, of course. And now those new areas that we have been able to do that are provided with nurseries, schools, things like that. That's provided by the government.

What is the poverty line in dollars?

I would say it is the equivalent in purchasing power of something like $300.

What do you envision the rate of growth in Chile's economy will be by the time you leave office?

We are planning to have at least 5 percent growth in GDP. Investment and trade are bringing in more investment capital. And in addition to our trade agreements, we have been able to arrange a double-taxation agreement with the major European powers. So that if you come to Chile, if you invest in Chile and from Chile you're going to invest in a country that's in the Americas, then the profits in both of their countries are not going to pay taxes in Chile. So we perceive of ourselves like a partner to the rest of the American countries.

Argentina, with its rich heritage is faltering and yet you have come up to the level where you are now.

Yes. For the first time, everybody has agreed that the only way to have progress is to be able to accept the challenge of competing in the world. We are going to be living in a global world. And that is why we are producing salmon for the United States and for the Europeans and for the Japanese people. And we are second only to Norway. We're trying to produce some wine, not to compete with Californian wines, but to add some wines.

To sustain this growth that you're talking about, besides trade agreements what other elements will you need? 

In addition to those trade agreements, we should impose a more flexible labor legislation. We were able to introduce an unemployment insurance, privately run. And that's very important because we have quite a number of temporary workers because of our agriculture. People who normally will work for six, eight months to pick crops. So now these people for the first time will have unemployment benefits.

How do you do that privately?

You put a little percentage of your salary, then the government will put in a little bit. But the money that you have is run privately.

Sort of the way Chile handles its Social Security program?

Yes but it's run by the private sector, not by the public. And from our point of view, this was very important.

It looks like the trade agreement between Chile and the United States may be at risk of not being ratified in the U.S. Congress because of Chile's opposition to the United States going to war with Iraq. What would that do to the relationship between our two countries?

Well, I think the trade agreement is good for both countries. And good partners have to be able to be very open and very frank with each other. And I explained this to President Bush. I felt it was possible to have a bench mark to be fulfilled by Saddam Hussein in a three-week period. If this were not met, then you would have to use force. Later, I discovered that apparently there were some elements linked to the defense policy of the United States that the war had to start on a particular day so that the three-week period was too much. We had a long talk with British Prime Minister Tony Blair on how... to present things to get a majority in the Security Council. And I thought that it was possible to get the majority through our ideas. Unfortunately, that was not the case. We worked very hard with Prime Minister Blair.

But not with the United States?

Now with United States I hope that they will understand the reasons in this particular case. All political parties in Chile were in favor of our position. Now, to answer your question, I think that we may lose some votes (in the American Congress) but I still think that it is very important to pass the agreement for Chile and for the United States. We are not an economic superpower, of course, but I think that it's a very important thing from the point of view of the United States in relation to Latin America. I was talking this morning with President Fox on this issue. Mexico and Chile are in the same position in regard to the situation in Iraq. And I think that if the trade agreement is approved by the U.S. Congress it is going to be a very important message to the other American countries. We've worked so hard on this agreement that I think it would be a tremendous disappointment if the agreement were not passed. Clearly, I don't think that is going to happen. I hope that the war is going to be over very soon and therefore by the end of May or June that the agreement may be taken to the U.S. Congress.

Do you have any signals that the United States may delay it?

No, because we keep working on that agreement very hard. Now the agreement is in legal terms. It's on the Internet. And now it's being translated to Spanish because the agreement is in English.

Have labor unions taken a stand on this issue?

Our trade union movement is in favor of the agreement, which is very interesting. I remember President Bush told me once how did you get that (union support) and I said I didn't get that, they realized that this is important from the point of view of the Chilean economic growth. The majority of the workers in Chile are in favor.

A good part of a trade agreement with Chile is about agriculture and seafood, is it not?

Still, in the area of agriculture it is going to be very difficult for our farmers to compete with the wheat that is coming from the United States, for instance, given the subsidy system that you have in your own agriculture. But at the end, it's true that you're going to destroy some jobs but you are going to create more jobs than the ones you destroyed.

From the reading of your ambassador in Washington, how much animosity did your stand on Iraq generate among the American people?

I don't think too much because I think that our position was a very balanced position because we were against the French position. I said I wanted a bench mark with a date. And if you don't have a date – French President Jacques Chirac didn't want to have a date. I said if he would have a bench mark without a date then the U.N. resolution wasn't going to be respected. And with this kind of bench mark, with Dr. Hans Blix with the inspectors, he said he could question 30 scientists. So I hope that our American friends will understand that what we were trying to do was to present a very balanced position vis-a-vis the position of the U.S. and the UK on the one hand and Germany, France and Russia on the other.

What is your view on the war with Iraq?

I understand that there is going to be a time where the security forces that belong to the coalition will have to remain there. And I think that after the security questions are tackled in the right way, there will be some kind of opportunity for the coalition and the United Nations to have some kind of agreement on trying to form a future government. And I think that President Bush has been expressive in his views and I think this is very important.

So you're in favor of the coalition taking the lead and then turning to the United Nations?

For a very practical reason. The coalition is in the field and they have to respond from the point of view of security. And therefore it will take some time after some kind of international involvement or whatever you want to call it is able to take care of that. But at the end everybody agreed that it's up to the Iraqi people to decide what kind of government they are going to have. And this I think is important because this is the moral persuasion that the Americans have to make to the world. Why they did what they did. What President Bush keeps saying, 'that we are not conquerors,' and that's important. This is something that I think President Bush was very courageous when he decided to go to the U.N. and to present the case to the U.N. And I think that if we are thinking in terms of what to do after the war, I think that you should have some kind of multilateral agreement.

Under your proposal to give the inspectors an additional three weeks, what would have happened if they did not find weapons of mass destruction?

For a particular country to have the weapons of mass destruction cannot be accepted by the civilized community. Therefore, the international community had the right to use force. And if Iraq had not met the bench mark, then it would have been necessary to use force. And I put that in my statement.

From your point of view, the quicker we get the trade agreement approved the better?

I think so. In this century you will have major trading blocs. Here you have the Americas, here you have Europe, and you even have something in Asia. The United States already has an agreement with Canada and with Mexico.

It has been quite a long road to achieving a trade agreement, hasn't it?

Yes. We started with Bush's father.

Are you negotiating agreements with other countries?

We are starting negotiations now with Singapore and New Zealand. The three of us: Singapore, New Zealand and Chile. And the prime minister of Australia was optimistic it might be able to join and make the negotiations for four countries, instead of three.

As the leader of a small country, you mentioned that you have talked to President Fox of Mexico this morning. You talked to President Bush at least twice during the negotiations. How do you enjoy such prominence?

What normally happens is that once you are on the Security Council, you end up talking with almost everybody.