Ibero-American News Digest
Brazilian Government Unprepared for Crisis About To Hit
Leading central bankers from around the world huddled together at the Bank for International Settlements headquarters in Switzerland on May 9, to discuss the implications of what they euphemistically called a global shift out of "risky" investments, such as "emerging market" debt. Brazil is the largest "emerging markets" debtor; its Central Bank chief, Henrique Meirelles, emerged from the meeting to announce with bravado, that Brazil has been expecting this negative shift, and is prepared to face it.
Back home, Economics Minister Antonio Palocci declared dramatically at a forum in Rio de Janeiro the same day, that Brazil needs "at least a decade more of fiscal effort" to restore investors' confidence. Therefore, this former Trotskyite turned Wall Street lackey demanded that the Brazilian Congress pass legislation which would require automatic cuts in public expenditures by the same amount which tax revenue falls, not for one year, as is currently the case, but for 10 years, so that whoever is elected to govern the country, cannot change the rules. Why? This would "send a signal to the markets that the whole country is committed to fiscal adjustments." With the resulting renewed "confidence" in Brazil, the country will be able to get loans on the international markets at lower interest rates, he hallucinated.
President Lula da Silva has stood firmly beside his Economics Minister and central banker, but getting such a law passed in the run-up to the 2006 Presidential elections, will not happen under current democratic conditions. The proposal reflects the growing desperation over the global disintegration by the synarchist financiers and their lackeys.
Argentina: 'We Are Not Subjects of the IMF'
"We are not subjects of the IMF," said Argentine President Nestor Kirchner, during an event held over the weekend of May 7-8. He added, "I again repeat to the head of the Fund, Mr. [Rodrigo] Rato, that the [restructuring] debt swap will not be reopened," as the IMF has been demanding.
But the synarchists keep trying. During the Q&A period at May 11 hearings of the U.S. House Appropriations Subcommittee on Foreign Operations, Acting Treasury Undersecretary Randal Quarles again demanded that Kirchner come to the aid of those bondholders who chose not to participate in the debt restructuring swap. Responding to questions from Arizona Republican Rep. Jim Kolbe, Quarles complained about the legislation passed by the Argentine Congress last February, which makes any reopening of the debt swap illegal. This is a "serious problem," Quarles said, because the government has approved a law which says "that they will not come to an agreement" with those so-called "holdout" bondholders. Kolbe demanded that the IMF and the Bush Administration take a hard line with Kirchner, and pressure him to make a deal with the holdouts.
Brazil's IMF Policy: Thorn in Argentine-Brazilian Relations
Argentine President Nestor Kirchner had wanted to get a clear sign from Brazil's President Lula da Silva that Brazil fully backs Argentina's fight with the IMF, as well as its attempts to finally emerge from default status, when he met with Lula on the eve of the May 10-11 South American-Arab Summit (see In-Depth, this issue). The Argentine President is determined to organize coordination among all the Mercosur (Southern Cone common market) countries in dealing with the IMF.
He did not get the support he was seeking when the two met in Brasilia May 9, prior to being joined by Venezuelan President Hugo Chavez. Thus far, Brazil is happy to be held up as the IMF's new model pupil, even when it officially has no agreement with the Fund. Even though adoption of further austerity guarantees Brazil will face a financial and debt blowout, Lula isn't willing to jump ship and fully back Argentina.
This is probably why Kirchner left the summit one day earlya second scheduled meeting with Lula for May 10 was cancelledwhich caught the Brazilian government by surprise. Representatives of both governments scrambled to insist that the Kirchner-Lula meeting went well and that relations were fine.
Brazil's Industry Minister Insults Argentine Businessmen
"You Argentines have no vision of greatness," said Brazil's arrogant Industry Minister Luiz Furlan to a group of executives from the Argentine Industrial Union (UIA) who attended the May 10-11 summit in Brasilia. Furlan, who recently publicly criticized his own President's foreign policy, did not endear himself to the visiting UIA leaders who, together with Finance Minister Roberto Lavagna, came to Brazil to try to address serious trade imbalances between the two countries. Furlan, the owner of a large agro-industrial complex, is known for his anti-Argentine views, and accused the visiting businessmen of thinking on "too small" a scale.
The reality of the situation is that Brazil has dealt with lowered domestic demand caused by the application of IMF austerity policies, by dumping large quantities of cheaper industrial exports onto the Argentine market, particularly hurting the textile, shoe, and electrical-appliance industries in that country. These Brazilian imports have doubled over the last year, while Argentina's exports to Brazil have declined, and consist largely of raw materials.
Lavagna proposed that while Argentina is engaged in rebuilding its industry, the two countries should agree to allow Argentina to apply a "competitive adaptation clause" which would restrict certain categories of Brazilian imports. Monetarist Finance Minister Antonio Palocci cordially promised to take steps to resolve the trade problem (although the likelihood of his doing anything positive is nil). But Furlan threw a fit, threatening that should the Brazilian government permit the imposition of any Argentine safeguards or protectionist measures, he would resignnot a bad idea. A similar violent response came from the Brazilian National Confederation of Industry (CNI), which termed the Argentine proposal "unacceptable."
Argentina's Industrialists Propose Development Bank
The new president of Argentina's Industrial Union (UIA) is organizing for the creation of a National Development Bank, which would function something like Brazil's National Economic and Social Development Bank (BNDES). Hector Mendez, who will shortly assume the UIA presidency, also told Pagina 12's "Cash" supplement (May 9): "I would like to see industry return to what it was in the 1950s and '60s when Argentina had extraordinary development possibilities."
It was during the 1950s and '60s that Argentina achieved record living standards and industrial capabilities. Mendez points out that it was during this era that "you could produce a product from nothing, thanks to the large number of parts factories that existed in the market. Small and medium-sized businesses were the real builders of a fantastic future. It's true that the modern world demands change, but I'd like to work to rebuild that national industry."
Mendez said that the state must create an environment friendly to industry. A national development bank must exist to grant credit, together with a policy of support for national companies "at interest rates equal to those that other world business groups obtain, to achieve the rebuilding of our industry."
Chile's Labor Movement Shows Some Life
"Chile's problem is the application of a model of savage capitalism," said Arturo Martinez, President of Chile's Unified Labor Federation (CUT), in a tough speech on May 1. Martinez denounced the free-market economic model imposed on the nation after the 1973 Pinochet military coup, and warned that today, "we workers and our organizations must be the builders of our own destiny, and exercise the right to be protagonists in building a nation for everyone."
The May Day rally addressed by Martinez in the capital, Santiago, drew 70,000 people, a big jump from recent years' attendance of only 10,000. Some estimate that 300,000 rallied around the country, reflecting the growing re-politization in Chile, after years of a general acquiescence to the free-trade model, as the country heads into Presidential elections in December of this year.
Martinez described how Chile's labor force was destroyed by the fascist economic model imposed by Pinochet's "Chicago Boys." They ripped up labor rights, froze wages, deregulated everything, and imposed a privatized pension system which left millions defenseless, living in poverty, and up to their ears in debt. He stopped short of calling for the privatized system to be abolished, but repeated the recent announcement that the CUT is suing Jose Pinera's AFPs (private pension funds) for false propaganda. Those who "have profitted off workers' funds" will be brought to justice, he said. "They must be held accountable for this theft." There must be "profound changes" in the private system, Martinez said, so that workers are adequately protected.
Those who use their "dark powers" to run the country any way they want, Martinez concluded, should know that "we don't like this Chile.... [T]here are more of us workers; we are a force, the ones who create wealth. Now is the time to act."