Thursday, December 13, 2018
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Crisis threatens region
Andrés Gaudin
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Financial meltdown signals worrisome impacts ahead.

The global economic crisis, whose epicenter is the United States, has put in doubt the neoliberal school of capitalism, putting governments around the region on alert, especially those that have signed free trade agreements with the US government or receive trade benefits for backing Washington politically.

Even though the crisis has unfolded throughout the course of the last year — stemming from the US housing crisis in August 2007 — Latin American governments are trying to calm fears, claiming that the region has been prepared to confront the consequences. But at this stage, Latin American heads of state have been more realistic and are warning about the grave and immediate economic and social repercussions that this crisis may cause.

“There is no national solution to this. We have to adopt group measures,” said Brazil´s Finance Minister Guido Mantega, in early October in São Paulo. Representatives from 33 countries in Latin America attended the meeting there, in preparation for a mid-December summit called by Brazil’s President Luiz Inácio Lula da Silva to discuss the crisis.

Depression to come
Within 12 days in September, the Mexican peso depreciated 14.4 percent against the US dollar, and following denials of a strong economic impact at home, Communications Minister Luis Téllez finally said: “The depression that’s coming will be monumental.”

“Until now, I´ve transmitted to you various ´calming reports,´ but today, I want to tell you that I am conscious of the risks that are approaching sensitive issues such as employment and poverty,” said Colombian President Álvaro Uribe, one of US President George W. Bush’s top allies in Latin America. “We run the risk that the slowing of the economy will become a recession and that it affects employment, and [with] more unemployment, more poverty.”

The economies of Central America that signed a free trade deal with the United States in 2005 will also suffer severely. Central America is forecast to grow 3.9 percent this year, down from 6.4 percent in 2007 and 6.8 percent the year before, according to a reported by the Central American Monetary Council. The council added that weak growth would cut short hopes to reduce poverty levels in the region.

Some 16 million people of the 40 million Central Americans live in poverty, according to figures from the Central American Economic Integration Secretariat, and the financial crisis is now hinting at a humanitarian crisis if remittances from the United States drop, foreign investment leaves the country, and trade and tourism declines.

In Uruguay, whose fragile economy is highly dependent on the Argentine and Brazilian markets, Central Bank President Walter Cancela said that the country “is prepared to handle the effects of the crisis” but he admitted that “there will be less demand for our export products — oil, soy and other commodities — that will be sold at lower prices.”

During an Oct. 9 meeting with his counterparts from Argentina and Brazil, Cancela was the first to warn: “We are before the deepest crisis of the last 80 years,” referring to the 1929 bust that led to the Great depression in the United States.

“Controlling it is requiring a fabulous amount of resources, which will translate to worldwide inflation in the future.”

Cancela pointed to the small and fragile economy of his own country.

“The amount of US$700 billion sought by Bush for his supposed financial system rescue plan is equivalent to 23 times the gross domestic product of Uruguay, estimated at $30 billion,” he said.

Economic and social fallout
“The First World that was painted to us as a Mecca, is falling apart,” Argentine President Cristina Fernández told an auditorium of business executives during the United Nations General Assembly in September. “I was asked whether Argentina has a Plan B to face this crisis and I responded: ‘We are standing firmly. The ones who need a Plan B are the United States and European Union, and they could have it just by applying responsible management of their economies.”

Three weeks later, on Oct. 9, the president had changed her discourse.

“We are not the poorest continent, but we are the most unjust, where there is the more unequal distribution of wealth,” she said at an international women´s summit in Buenos Aires. “The crisis will surely have economic and social consequences that Argentines will have to take on and address with a lot of sacrifices.”

Brazil´s Lula spoke in the same line
“We have $207 billion in reserves, which is a lot more than what we owe,” he said as the crisis began to break. “We paid the International Monetary Fund and we are calm to face this crisis because we have our Sovereign Fund,” a fund created in mid-2008 to help spur the growth of Brazilian businesses.

But his positive tone soon grew harsh. On Sept. 29, Lula complained: “Even though Brazil is prepared to weather the storm, we poor countries, which made a financial effort, which we did everything to have a period of growth, cannot be victims of the casino set up in the US financial system.”

In addition to the December meeting, Lula called an emergency meeting of the Southern Common Market in which “we must profoundly debate how to confront this crisis with which the United States and the speculative economies are hitting us with.”
—Latinamerica Press.

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