From Volume 4, Issue Number 39 of EIR Online, Published Sept. 27, 2005

Ibero-American News Digest

Will Kirchner Give a 'Haircut' to IMF Debt?

An unconfirmed report is circulating, that prior to October's Congressional elections, Argentine President Nestor Kirchner will announce that he intends to write down the $11.5 billion Argentina owes to the IMF. This has already caused panicked commentary among anti-Kirchner banking and financial sectors that are howling about what a terrible precedent this would set.

As the IMF and World Bank prepared to go into last weekend's annual meeting, they had the knives out for Argentina. The World Bank's World Economic Outlook, released Sept. 21, is filled with demands that Argentina implement more "structural reform" or suffer another crisis similar to 2001-2002. It warns that Argentina's "elites" must have good investment opportunities, and complains about the "poor" quality of the country's institutions. World Bank President Paul Wolfowitz warned Sept. 21 that Argentina won't enjoy the "benefits" the Bank offers, unless it quickly makes a deal with the IMF—something Kirchner is in no hurry to do.

In Sept. 21 remarks to Radio Continental, Foreign Minister Rafael Bielsa had some choice words for the World Bank report. Yes, Argentina's institutions need strengthening, but what is in crisis is "international institutionality," he said. Perhaps there are some truthful parts of the report, he added, "but to make dogma out of what these very discredited institutions say doesn't suit us." He concluded, "I always take the warnings of these multilateral institutions with a grain of salt, because they come from old bureaucracies that have to justify their salaries, and more often than not, the prescriptions they make are incorrect."

Argentine Bond Auction Cancelled

Argentina cancelled its Sept. 21 auction of dollar-denominated 2015 Boden bonds, after the "market" demanded unacceptably high interest rates. Against the backdrop of intensifying global financial turbulence, and renewed pressures from the IMF for deeper austerity, the Kirchner government had planned to auction $800 million worth of the 10-year Boden 2015 bond at an annual rate not exceeding 8.4%. But when investors, led by Deutsche Bank, demanded a rate of 8.9%, the government stopped the auction. Finance Minister Roberto Lavagna underscored that the 8.9% rate "was above what is justifiable for Argentina's current economic context." He also pointed out that comparable Brazilian bonds carried a rate of 7.38%, ridiculing the claim that Argentina represents a greater investment risk than Brazil.

The Finance Ministry's official communique said the auction had been abandoned, "consistent with [Argentina's] policy of not accepting yields that aren't aligned with the international market situation." The country's financial needs "will be covered through alternative means of financing," it stated.

Brazil's Foreign Minister Warns vs. Attempts to Divide South America

The South American Community of Nations can be the "motor" by which to achieve continental integration, said Brazilian Foreign Minister Celso Amorim. Speaking in New York Sept. 16, he continued to make clear Brazil's displeasure with U.S. provocations in the Southern Cone, while also making an overture to Argentina, whose President Nestor Kirchner hasn't always been able to rely on Brazil's support. Amorim said Brazil is working "with our primary partner in the region, Argentina," to promote a "prosperous, integrated, and politically stable" South America. The Common Market of the South (Mercosur) could serve as a model for broader cooperation as well, he said.

Unmistakably addressing the Bush Administration's efforts to provoke a war in the region (see "Argentina, Brazil Take Steps To Halt Bankers' Wars and Looting of South America," in last week's Indepth), Amorim called for Mercosur to devise its own common "defense and security doctrine." Reporting that he had spoken that morning with his Paraguayan counterpart Leila Rachid, who had assured him there would be no U.S. military base in her country, Amorim indicated that "President Lula recognizes that there has been tension with Paraguay." He also admitted that for smaller partners Paraguay and Uruguay, Mercosur has "been a source of disappointment" because of trade and economic disparities. "Now we must have a policy to reverse" those problems, he said.

Asked by Istoe magazine (Sept. 21) about a possible U.S. military base on Paraguayan territory, Amorim delivered a new warning: "It is a similar situation to the apparent economic negotiations outside Mercosur." He went on to say that Brazil and other Mercosur nations must "occupy the space positively, [and] provide equipment and military training. In fact, Mercosur has to accelerate the development of a policy of common defense, in order to inhibit the intentions of other countries."

Paraguayan Vice President Luis Castiglioni, who met with Vice President Dick Cheney in Washington on June 10 to set the provocation in motion, continued to strut around like a cock: The only thing Mercosur is good for is to allow "the Presidents to meet every six months, have their pictures taken, and make grand declarations," Castiglioni pronounced. Paraguay hasn't yet analyzed the possibility of leaving Mercosur, he said, but it's something "we don't rule out."

British Arms Producer a Pinochet Moneybags

Britain's largest arms producer, BAE Systems, funnelled millions of pounds to former Chilean dictator Gen. Augusto Pinochet up until last year. The money went through a front company in the Virgin Islands. BAE is under investigation by British authorities for money laundering and false accounting. A Chilean judge is pursuing Pinochet for tax evasion. Chilean prosecutors, through a court order, obtained U.S. bank records from 1994-2004. The records show that Coutts & Co., whose Latin American division is now owned by the Spanish bank, Banco Santander, had accounts managed by Pinochet's financial adviser, Oscar Aitkin. The bank received millions into its Miami accounts.

Mexico's Fox Collapsing in Aftermath of Minister's Death

Mexico's Minister of Public Safety, who headed national anti-drug operations, the Chief of the Federal Police, and a member of the National Human Rights Commission who had been receiving death threats for weeks from the head of the Gulf cartel, along with six others, died in a helicopter crash on Sept. 22, as they headed to the top security prison in Mexico City, for swearing-in ceremonies for a recently-formed national prison security force. The Fox government maintains that bad weather caused the crash (the helicopter crashed into a mountain in dense fog), and its spokesmen demand the media not feed the obvious rampant "speculation" that this was no accident. Mexican police commanders have been dropping like flies, in drug cartel murders around the country. A few days ago, the director of Public Security of the state of Michoacan became the latest official to be assassinated.

Compounding the resulting sense of crisis spreading in the country, is the fact that President Vicente Fox is an emotional wreck. Public Safety Minister Ramon Martin Huerta, killed in the crash, had been Fox's political controller since he first entered politics. When informed of the crash, the President, instead of taking charge, reportedly asked to be left alone, and when he addressed the nation later that evening—repeating the line that bad weather was the cause—he was practically crying.

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