Latin America: MERCOSUL in crisis

The annual report released this week by CEPAL (Economic Commission for Latin America) is sombre in tone and depressing in its forecast. The crisis which affected Argentina at the end of last year has set into neighbouring Uruguay, Paraguay and Brazil, all members of the economic community, MERCOSUL.

The CEPAL report shows that Latin America has seen more capitals flowing outwards than investment inwards, for four consecutive years. Foreign investment has dried up. The result has been dramatic for economies linked to a model which no longer appears to function: economies linked to influx of foreign investment oriented solely to the external market make them extremely vulnerable and susceptible to critical turns of events.

Such was the case with Argentina, which under ten years of government under Carlos Menem in the late 1980s and 1990s, saw its foreign debt duplicate from 61 bn. USD to 140 bn., despite his process of privatisation. The Argentinean economy decreased by 16.3% in the first quarter of 2002, having decreased further since then, continuing a downward spiral of 15 consecutive quarters in freefall. Half of the population lives in poverty.

Washington however opposes IMF loans because it is “dissatisfied” with the economic reforms made in Argentina. Treasury Secretary Paul O’Neill recently inflamed public and political opinion in Latin America by saying that loans ended up in Swiss bank accounts, calling for Brazilian President Fernando Henrique Cardoso to demand an immediate apology from Washington, one which was received in the watered-down version of a lame excuse.

Cardoso himself leaves the Brazilian economy after two terms in office as President in a deplorable condition. His modernisation programme did not modernise Brazil. Brazil continues to be rent between a 5% clique at the top which owns 95% of the country and the 95% who have little or nothing. The ruling political class presents a Jose Serra as Presidential candidate for the government party (PSDB, Social Democrats, which are anything but democratic or social) but he is floundering in third place on less than 15% of voting intentions. Only Lula, currently leading the polls, has the integrity and the vision to fundamentally restructure Brazil, but from the bottom up, not the top down as sop many investors fear. Lula is the most under-rated politician in Latin America and it is the foreign investors, wrongly terrified that they will lose their investment, who are doing everything to push Ciro Gomes and his corrupt clique currently in number two spot, to become the next President of Brazil.

In Uruguay, which had one of the highest living standards in Latin America, poor boys in the suburbs scavenge for pieces of rotting food to eat. 16 supermarkets were robbed by starving bands of thieves last week and the GDP has decreased by 10% in just one year.

While South America continues to kow-tow to Washington, which knows how, when and where to pull the strings, who to inflate and who to take out clinically with a putsch or an assassin’s bullet, it will go nowhere. What Latin America needs is leaders who have their people’s well-being at heart while at the same time treading a sensible line between demagogy, financial pragmatism and political common sense.


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