[Nasional-e] Let Latin America find its own direction

Wed Sep 18 12:12:06 2002

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Let Latin America find its own direction

Debate Duncan Green

Duncan Green

Latin America is again facing economic meltdown, 20 years after Mexico's =
default precipitated a continent-wide debt crisis.
Argentina is enduring the worst peacetime economic crash in history, =
while the international capital markets are threatening to destroy the =
Brazilian economy if voters have the temerity to choose a leftwinger as =
president next month. In the summer rioting against government austerity =
and privatisation plans erupted in Uruguay, Peru and Paraguay.
Political chaos and economic crisis are the legacy of two decades of =
disastrous market reforms. The Mexican crash of 1982 paved the way for =
the=20
 International Monetary Fund and the World Bank to carry out extensive =
economic surgery on the continent. The "adjustment" prescribed involved =
drastic public-spending cuts, privatisation, deregulation and =
liberalisation of trade and finance along crude "market good, state bad" =
lines.
Twenty years on, the patient is not well. The unregulated play of market =
forces has favoured the rich and squeezed the poor, sweeping away many =
of the gains of job security and a welfare state achieved by 50 years of =
state-led development.
In the countryside agrarian reform programmes are thrown into reverse as =
trade liberalisation floods local markets with cheap food imports.
In the 1990s Latin America's desperation for short-term foreign capital =
inflows to ease the pain of=20
 adjustment proved disastrous. Increased reliance on "hot money" created =
new levels of financial instability, whereby external events such as the =
Asia crisis of 1997-98, changes in US interest rates or internal events =
could start a financial panic and produce sudden and deep crises.
There have been successes, of course. Inflation has been conquered, =
running to 7% a year, compared with its high of 1,200% in the late =
1980s. Exports have quadrupled, but they remain based on raw materials =
and cheap labour, which history suggests is a developmental blind alley.
If adjustment, IMF-style, has failed, then in a rational world Latin =
America's decision makers would be encouraged to explore other paths to =
development. Instead, with only minor alterations, the policy pre =
scriptions are the same. Even more alarming, a growing range of legal =
obstacles threatens to block a change of direction. The World Trade =
Organisation, the forthcoming Free Trade Area of the Americas (FTAA) and =
a plethora of bilateral trade and investment treaties effectively lock =
in policies of liberalisation and open access for foreign companies, =
perhaps for ever.
This is not set in stone: last year's WTO meeting in Doha launched a new =
round of trade negotiations; the FTAA is still being designed. As the =
continent ponders its latest crisis, it will need new ideas on how to =
combine growth with equity. The North must not prevent it from doing so.
 Duncan Green is a policy analyst at Cafod=20

The Guardian Weekly 19-9-2002, page 14

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<DIV>Let=20
Latin America find its own direction Debate Duncan =
Green Duncan=20
Green Latin America is again facing economic meltdown, 20 years =
after=20
Mexico's default precipitated a continent-wide debt crisis. Argentina =
is=20
enduring the worst peacetime economic crash in history, while the =
international=20
capital markets are threatening to destroy the Brazilian economy if =
voters have=20
the temerity to choose a leftwinger as president next month. In the =
summer=20
rioting against government austerity and privatisation plans erupted in =
Uruguay,=20
Peru and Paraguay. Political chaos and economic crisis are the legacy =
of two=20
decades of disastrous market reforms. The Mexican crash of 1982 paved =
the way=20
for the &nbsp;International Monetary Fund and the World Bank to =
carry out=20
extensive economic surgery on the continent. The "adjustment" prescribed =

involved drastic public-spending cuts, privatisation, deregulation and=20
liberalisation of trade and finance along crude "market good, state bad" =

lines. Twenty years on, the patient is not well. The unregulated play =
of=20
market forces has favoured the rich and squeezed the poor, sweeping away =
many of=20
the gains of job security and a welfare state achieved by 50 years of =
state-led=20
development. In the countryside agrarian reform programmes are thrown =
into=20
reverse as trade liberalisation floods local markets with cheap food=20
imports. In the 1990s Latin America's desperation for short-term =
foreign=20
capital inflows to ease the pain of &nbsp;adjustment proved =
disastrous.=20
Increased reliance on "hot money" created new levels of financial =
instability,=20
whereby external events such as the Asia crisis of 1997-98, changes in =
US=20
interest rates or internal events could start a financial panic and =
produce=20
sudden and deep crises. There have been successes, of course. =
Inflation has=20
been conquered, running to 7% a year, compared with its high of 1,200% =
in the=20
late 1980s. Exports have quadrupled, but they remain based on raw =
materials and=20
cheap labour, which history suggests is a developmental blind =
alley. If=20
adjustment, IMF-style, has failed, then in a rational world Latin =
America's=20
decision makers would be encouraged to explore other paths to =
development.=20
Instead, with only minor alterations, the policy pre scriptions are the =
same.=20
Even more alarming, a growing range of legal obstacles threatens to =
block a=20
change of direction. The World Trade Organisation, the forthcoming Free =
Trade=20
Area of the Americas (FTAA) and a plethora of bilateral trade and =
investment=20
treaties effectively lock in policies of liberalisation and open access =
for=20
foreign companies, perhaps for ever. This is not set in stone: last =
year's=20
WTO meeting in Doha launched a new round of trade negotiations; the FTAA =
is=20
still being designed. As the continent ponders its latest crisis, it =
will need=20
new ideas on how to combine growth with equity. The North must not =
prevent it=20
from doing so. &nbsp;Duncan Green is a policy analyst at Cafod =
 The=20
Guardian Weekly 19-9-2002, page 14 </DIV></BODY></HTML>

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