From Volume 4, Issue Number 25 of EIR Online, Published June 21, 2005

Ibero-American News Digest

Financiers Oust Lula's Cabinet Chief, Demand More Austerity

The brawl within the Lula government of Brazil, over which official would be the first sacrificed to head off a gigantic corruption scandal, was decided on June 16, when Chief of Cabinet Jose Dirceu announced his resignation. The scandal started with charges of kickbacks within the postal system, but quickly escalated to accusations that the ruling Workers Party (PT) was bribing Congressmen with suitcases of money. But while the sordid charges and counter-charges occupy the public's attention, the real battle being fought out, is over the existential issue facing Brazil: As the international crisis comes down, will the Lula government break with the IMF, and join the battle for a new world financial order?

The two top targets for ousting came from opposing economic camps: former FleetBoston banker Henrique Meirelles, who heads the Central Bank, or Dirceu, who had been the leading voice within the cabinet warning that the PT will lose the 2006 Presidential elections, unless the government changes economic policy. Visiting Lisbon in the first week of June, Dirceu once again attacked Lula's economic team for raising interest rates to 20%, and for extracting an incredible 7% primary budget surplus (money "saved" for debt payments) in the first part of 2005.

Were there any doubt that the issue at stake in the alleged "corruption" scandal was never morals but economic policy, the point was made starkly clear by "the markets'" gleeful response to Dirceu's ouster. Folha de Sao Paulo celebrated on June 17 that no sooner had Dirceu's ouster been secured, than Finance Minister Antonio Palocci began moving to "deepen" fiscal austerity. With Dirceu out, Palocci has no strong rival left in the cabinet, Folha wrote. The only question now, is how far the bankers' team can go: increasing the primary budget surplus is easy; the question is, can the economics team go further, and ram through the IMF's "third generation of reforms," such as cutting Constitutionally-mandated expenditures on education and health, Folha pondered.

Jornal do Brasil echoed this financier line in its June 17 editorial. The importance of Dirceu's ouster, is whether Palocci can now implement his proposal that Brazil adopt a ten-year commitment to zero-deficit public spending. Brazil must reduce its "vulnerabilities" to international financial crises, and that requires "broad-ranging fiscal reform," and a "radical restructuring of the state," Jornal pronounced.

South American Officials Punt on New Development Bank

The Economic Ministers of Venezuela, Argentina, and Brazil met on June 13, to discuss the creation of a South American Bank to finance infrastructure projects, as had been discussed at the May 9 summit of their three Presidents in Brasilia, where the President agreed that it was necessary to take steps to further the physical union of their countries.

The idea was to find, or create, alternative financing—outside the IMF/World Bank/Inter-American Development complex. One idea floated was to create a bank that would use "excess" reserves that each of the three countries possesses as start-up cash. Another was to unify the Andean Development Corp. (CAF), and Fonplata (La Plata Basin Development Financing Fund) which includes Argentina, Brazil, Paraguay, Uruguay and Bolivia, as the basis for a new regional financing entity.

But following the meeting, Argentina's Roberto Lavagna told reporters that "rather than propose the creation of a new structure, we analyzed the functioning of the existing ones... and possible joint action in the World Bank and the Inter-American Development Bank so that our countries will have a greater voice and vote than they do now."

Current "structures" aren't going to finance development or give anyone a "greater voice," but some people are clinging to their illusions. Brazil's Finance Minister Antonio Palocci is not interested in bucking the IMF, and Lavagna has a pragmatic approach, especially as he is maneuvering now to be considered as a possible replacement for outgoing president of the Inter-American Development Bank, Enrique Iglesias. Lavagna indicated that there had been discussion on "a draft that has to do with new means of financing." As for a South American Bank, "we don't rule it out, but right now we're going to concentrate on seeing how we can improve what we have."

Raul Salinas Freed From Jail

Raul Salinas, brother of Mexico's Mr. NAFTA, former President Carlos Salinas, was freed from jail on June 14, after a judge, suddenly discovering "insufficient evidence" after Raul had spent 10 years in jail, overturned his conviction as the mastermind of the murder of PRI Secretary General Jose Francisco Ruiz Massieu in 1994. Raul's family did have to "scrape" together US$3 million for bond, because he still faces separate charges of spectacular graft during his brother's presidency (1989-1994). Raul could easily have paid the bond, except that his $100 million in Swiss bank accounts has been frozen, since the Swiss and French want to try him on money-laundering, and possibly drug money-laundering charges. French prosecutors told the Financial Times that an Interpol warrant has already been issued for Salinas' arrest, but they do not expect the Mexican government to extradite him.

There is no doubt that Raul's release is the result of a major deal between the Bush-Salinas apparatus and the Synarchist Fox regime. EIR is still investigating, however, the specific terms of the deal, in this run-up to the Mexican Presidential elections of 2006.

Bush "Dirty Tricks" Team Meddling in Chilean Presidential Fight

Chilean Presidential candidate Michele Bachelet charged this week that George W. Bush's "dirty tricks" operatives are working for the campaign of her opponent, Pinochetista Joaquin Lavin, smearing her, just as they did John Kerry in last year's U.S. election campaign. At the end of last week, one of Lavin's staff workers, Romulo Aitken, a shady character who used to head up the Organized Crime Investigative Brigade (Brico), tried to implicate socialist Bachelet in the 1991 kidnapping of Cristian Edwards, son of fascist Agustin Edwards who helped organize the 1973 Pinochet coup.

Under current conditions, there is obviously concern among synarchist financiers that Bachelet might begin to address changing "the Chile model," as some of her coalition partners have already suggested must be done. In comments to Radio Cooperativa June 12, Bachelet charged that Lavin had hired some people who worked in Bush, Jr.'s campaign to run his campaign strategy. Noting that she has already been the target of slanders and lies, Bachelet said she had been in New York last year and was in touch with the Kerry campaign, and saw first-hand how the Bush operatives, experts in "electoral dirty war," smeared him with lies about his military service, Vietnam, etc. "It's dramatic," she said, "that there are still people in our country willing to wage a terror campaign" against candidates.

Bachelet is all too familiar with such terror. Under the military dictatorship, she was arrested, tortured and sent into exile along with her mother. Her father, a top military officer and Pinochet opponent, was murdered.

Lavin, candidate of the Mont Pelerinite Independent Democratic Union (UDI), loudly proclaimed he had nothing to do with Aitkin's dirty tricks, and made the laughable assertion that Aitkin, a highly-trained experienced detective, served only a low-level security function in the campaign. Aitkin was already under investigation and had been arrested on charges of having ties to drug-traffickers and obstructing justice.

Argentine Government Raises Wages and Pensions

This June, the Argentine government has raised the minimum wage, expanded unemployment insurance for workers who are unregistered, or work off the books, and increased pensions. The National Salary, Unemployment and Productivity Council, a tripartite entity including government, labor, and business representatives, voted on June 1 to raise the minimum wage over the next three months, arriving at 630 pesos ($217) from the current 450 pesos ($155). A monthly unemployment subsidy of 300 pesos will also be offered to any worker who get fired and was working off the books. On June 14, officials announced a 16% increase in the minimum pension payment.

President Nestor Kirchner has stated he is committed to restoring the purchasing power of the Argentine people, who have been devastated by the debt and devaluation crisis of 2001-2002 and the rising inflation of the past two years. Clarin's veteran economics editor Daniel Muchnik warned in the paper's May 30 edition that low wage levels and 16% unemployment are a "social time bomb" that can't be ignored. According to an April Finance Ministry report, the average income of those who are employed is 26.7% below the level of 1999 (a high-point of the IMF-induced recession), while unemployment is 30% higher than it was in 1998. Moreover, 48% of the national labor force works in the informal or "unregistered" economy, without medical insurance or pensions. In some of the poorer sections of the country—the northeast and northwest—up to 70% of the workforce is "informal."

Castro Named "Godfather" of 2005 Army Promotion

Venezuelan President Hugo Chavez announced on June 12 that Fidel Castro has been invited to serve as the official "Godfather" of this year's graduating class of the Military Academy of Venezuela. Every year the promotion chooses a Godfather and the name of a forefather on whose ideals that promotion is supposed to be dedicated. This year, in addition to inviting Castro, the class "chose" Simon Bolivar as its name, precisely the same as Chavez's class of 1975. This is the first class trained entirely under Chavez's six-and-a-half-year government, and its totally new military policy curriculum.

Naming Castro is one of the most provocative moves that could have been taken to heat up the dangerously polarized domestic situation. Just for starters, both Defense Minister Garcia Carneiro and Army Chief Commander Raul Baduel announced that the traditional military parade of June 24, which celebrates the Carabobo Battle with which Venezuela won its Independence, has been suspended this year for security reasons, citing the danger of a assassination.

The graduation ceremony occurs generally on July 6, the day after Independence Day, whose traditional parade will also be changed this year for the same reasons. So it's still up in the air whether. Castro will actually make it to Venezuela on that date.

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