From Volume 4, Issue Number 33 of EIR Online, Published Aug. 16, 2005

Ibero-American News Digest

Where's the Real Corruption in the Brazil Scandal?

"Nightmare. Storm Reaches Lula" in Brazil, Jornal do Brasil's Aug. 12 front-page headline, captures the sensationalist coverage given the latest twist in the corruption scandal engulfing the Lula government and its allied parties, which is thoroughly destabilizing that country, to Wall Street's delight.

As the media inundates Brazilians with every detail of the now-daily accusations and confessions of illegal election payoffs and vote-buying, relegated to the back pages was the Supreme Court's remarkable ruling on Aug. 8, that it would not grant prosecutors' request to lift bank secrecy on Brazil's Central Bank chief's personal bank accounts, because that could threaten the stability of the national banking system. Central Bank president Henrique Meirelles is under investigation for violation of electoral and financial laws, and tax evasion, involving companies and accounts he set up in Caribbean tax havens when he was the international head of BankBoston, before taking over the Central Bank in 2002.

Could Brazil be that close to the edge of collapse, that merely investigating the central bank chief's offshore accounts could bring down its banking system?

The answer is: Yes. Brazil's ability to pay its gigantic debts depends entirely on whether they get a pass from Wall Street to do so. Any fine day J.P. Morgan Chase decides to raise their country risk by any significant amount, Brazil will be unable to pay its debts, no matter how large its trade surpluses may be.

Therein also lies the motive driving the political scandal which now threatens to overthrow the government of President Lula da Silva. The bankers' boys in the country are open that the scandal is being fine-tuned to blackmail the government into granting the concessions they want: a genocidal increase in fiscal austerity, and the official burial of the Brazilian government's efforts to help build an independent, integrated South American community, joined by cross-continental infrastructure projects.

The outcome of this battle will be decisive for the continent as a whole, whose future hangs on how Brazil tilts: succumbing to the financiers' pressure, which could lead to civil war and disintegration, or joining the world battle for a return to sane economics.

The latest escalation of the scandal was kicked off by Duda Mendonca—the slick "image man" who staged the 2002 Workers Party (PT) presidential campaign selling Lula as a market-friendly candidate—who testified to a parliamentary investigatory committee on Aug. 11 that the PT had paid him, in part, through an offshore account.

Turmoil hit Brazil's markets with the news. PT Congressmen cried, and the head of the PT issued a public plea to members not to leave the party. Lula addressed the nation on Aug. 12, saying he had been betrayed, and those responsible would be punished. The head of the Chamber of Deputies, Severino Cavalcanti, pointed out that no evidence of criminal activity by the President has been presented, but opposition parties, led by former President Fernando Henrique Cardoso's PSDB, met to get the impeachment ball rolling. Nothing precipitous will be done, they promised, because the President can mobilize significant social forces, and they certainly don't want to upset "the markets," but their lawyers were ordered to draft grounds for impeachment. "We are nearing the end," said PSDB Senate head, Arthur Virgilio.

London's Financial Times pronounced on Aug. 12 that Lula's "political survival [has been] thrown into doubt."

Right on cue, Planning Minister Paulo Bernardo announced on Aug. 11 that the economics team has drafted constitutional amendments setting a fixed percentage of the budget which could be spent on operating costs, and making it unconstitutional for Congress to pass any bill which increased expenditures, without identifying where the money would come from to pay them.

PT party head Tarso Genro complained, also, that the economics team has prepared legislation to increase the Primary Budget Surplus from its current 4.25% of GNP, to 5%. Since the economic team is running a 5% surplus when they say 4.25%, if they now say they intend to increase it to 5%, they intend, in reality, to increase it to 6%, Tarso pointed out. The primary budget surplus is the amount of tax revenues over expenditures set aside to pay government's debts.

Pinochet Family Goes Down in Fraud Scandal

Lucia Hiriart, wife of former Chilean dictator Augusto Pinochet, and their son Marco Antonio, were indicted Aug. 10 in Santiago by Judge Sergio Munoz, on charges of tax evasion and fraud against the state, related to Pinochet's $27 million fortune stashed away in 128 secret accounts in U.S. and other foreign banks.

According to investigators working on the case, this action by Judge Munoz could be just the tip of the iceberg, as there is evidence that the entire Pinochet family—parents, children, and grandchildren—was complicit in the building of a huge, illicit financial and real-estate empire over decades, sustained by money-laundering, tax evasion, theft of state funds, and other related crimes. Following the Aug. 10 indictment, Chile's internal revenue service, the SII, requested that Judge Munoz stiffen the charges against the two, naming them as "co-authors" rather than "accomplices" in the tax evasion scheme. Mrs. Pinochet has been released on 2 million pesos bail, but her son Marco Antonio remains jailed, as he is considered a "danger to society," due to the nature of his crimes.

Those crimes get to the heart of how the Nazi-style Operation Condor killing apparatus functioned throughout the Pinochet dictatorship. Several investigative journalists who have scrutinized Marco Antonio's "business" activities point to his ties to international drug and weapons trafficking, frequently involving, and protected by Gen. Manuel Contreras, head of the DINA secret police agency. Notable are Marco Antonio's business dealings with Yamal Edgardo Bathich, the Chilean-born cousin of Syrian drug-trafficker Monzer al-Kassar, and a drug trafficker in his own right. Bathich's close friend was Mohamed Kashoggi, son of the infamous Iran-Contra figure Adnan Kashoggi. Marco Antonio was an expert in stashing his father's illicit earnings in offshore entities explicitly set up for that purpose with the aid of Citibank and other foreign banks.

According to Argentine investigative journalist Juan Gasparini, the 82-year-old Mrs. Pinochet, whose main concern as First Lady was said to be charity, was in fact the real power behind the dictator; she is described by Gasparini as "merciless, ambitious, and proud of the crimes" committed by her husband. Journalists who reported on the activities of the Pinochet dictatorship recalled, according to the daily La Nacion, that Hiriart de Pinochet had her own staff on the 17th floor of the Diego Portales building in Santiago, and that if one wanted to get information on the government's "hardline" policies, her office was the place to go, "because it was there that high-level decisions were made."

UAW Leader Joins LaRouche Rep. on Mexico Tour: Save the Auto Industry!

Saving North America's auto industry and its critical machine-tool component was the centerpiece of a recent ten-day tour in Mexico by Lyndon LaRouche's Midwest spokesman Bob Bowen, and Ohio UAW leader Mark Sweazy. By the time they returned on Aug. 4, nervous officials of Delphi auto parts multinational were calling Sweazy's office in Columbus, to find out what he had been up to in Mexico, and whether he had bad-mouthed the company.

Bowen and Sweazy, who is the President of UAW local 969, had much bigger fish to fry. Throughout the trip, they held in-depth discussions with labor leaders, industrialists, Congressmen, and students in the cities of Monterrey, Saltillo, Toluca, Mexico City, Guadalajara, and Leon on what their nations must do to solve the world economic breakdown crisis, and the changes that requires of every individual. They were also interviewed by some of the country's important media, particularly in the northern cities of Monterrey, Nuevo Leon and Saltillo, Coahuila, and in the industrial center of Guadalajara.

Lyndon LaRouche emphasized the significance of Sweazy's participation in the tour: "This is a layer of the labor movement, a high-quality part of the labor movement, the machine-tool-oriented sector; a tough group, which represents a kind of thinking in the labor movement, that you would want to see come to the fore as a still greater influence than it already is."

Mexicans had little problem understanding that it is in their interest, and in the interest of Mexico itself, to save the industrial capabilities of General Motors in the United States, Bowen and Sweazy found. LaRouche's program for saving the U.S. industrial sector through converting the U.S. auto industry for the purpose of using its machine-tool capability to rebuild infrastructure, especially in rail and aerospace, in the United States and globally, met with enthusiasm and support. Briefing people on the resolutions which numerous U.S. city councils and state legislatures have passed or are considering, Bowen and Sweazy urged the Mexican officials they met with to consider similar resolutions in their local and state legislatures.

On the Mexico City leg of the trip, a prominent leader of a national labor federation, who is also a Federal Congressman, expressed his wholehearted agreement with LaRouche's proposals: "We in the union are in constant discussion about the neoliberal model, which is fragmenting the social security and education systems into individualized pieces—and it is clear that the same thing is happening in the U.S., in Europe, and elsewhere." He said that his organization was demanding a change in economic policy, and hoped to influence the next Presidential term (elections are in 2006) toward such a change. "We are ready to join you," and pledged a continuing exchange of ideas and collaboration between his organization and the LaRouche movement.

As important as the institutional meetings, were the two visitors' discussions and classes with Mexican youth in a number of cities. Eagerly attending Bowen's history and science classes, LaRouche Youth Movement organizers were also particularly excited by a U.S. labor leader, with a good sense of irony and a passion to change the world, organizing with them, and adopted Sweazy as one of their own.

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