From Volume 5, Issue Number 1 of EIR Online, Published Jan. 3, 2006

Ibero-American News Digest

Chile Ruined by Free Trade, Just Like Everyone Else

Chile's free-trade agreement with the U.S., touted as a key factor in its economic success, is a total fraud. At the Nov. 4-5 Summit of the Americas in Argentina, Chilean President Ricardo Lagos argued that by refusing to discuss implementation of the Free Trade Area of the Americas, Ibero-America was plunging itself into "the Middle Ages."

But Argentine consultant Carlos Pereyra Mele revealed Nov. 17 that Chile's own FTA with the U.S., signed two years ago, has done enormous economic harm to Chile. The country supposedly benefitted from selling certain agricultural products in the U.S. market, free of tariffs. But for nine types of fresh Chilean fruit, prior tariffs were already very low, so the benefits were minimal. And, it will take another 12 years for tariffs to be lifted on other agricultural goods, including beef and dairy products.

Meanwhile, traditional agricultural products destined for the internal market, cannot compete with cheaper U.S. imports which enter Chile duty-free. The Chilean National Agricultural Society reported that 150,000 hectares of wheat, 40% of national production, will be taken out of cultivation this year, and beet producers who can't compete with cheaper U.S. sugar and other sweeteners, face a similar fate. Some 85% of Chilean landowners are small farmers with limited access to credit or technology, and they won't survive under these conditions.

Chilean manufacturers are doing no better, facing tough U.S. anti-dumping and sanitary laws for their exports—while U.S. manufacturing goods enter Chile with only a 6% tariff, soon to be lowered to zero. The Chilean government can't force U.S. companies operating in the country to buy inputs produced nationally. Nor can it prevent them from competing against Chilean companies whose major customer is the state. The U.S. even convinced Chile to eliminate the capital controls it had in place to limit the entry of speculative capital.

'Nestor Unbound'

International Monetary Fund board members are bemoaning the Fund's lack of control over Argentina's economic policy, once the Kirchner government pays off its outstanding $9.8 billion balance (to be completed by Jan. 2). Argentina's representative to the IMF, Hector Torres, reported that several board members expressed the fear that Argentina will quickly "stray" into a policy far from the Fund-recommended "fiscal and monetary discipline."

That "straying" is already reflected in Planning Minister Julio De Vido's Dec. 16 announcement that the government will ignore the IMF's oft-repeated demand, and not raise the rates charged by privatized, largely foreign-owned utility companies through the end of 2006.

German, French, and British IMF directors lament that with Argentina (and Brazil) paying off the Fund, that institution's already questioned legitimacy will be further weakened. The only major debtor with which it still has an agreement is Turkey. "Black sheep" like Argentina, which should have been punished, will—God forbid—instead be free to determine their own policies.

In its inimitable style, London's Economist magazine summed up the financiers' fury at Argentina's daring to challenge their would-be Olympian stature, in the headline to its Dec. 24-Jan. 3 issue's story on Argentina and the IMF: "Nestor Unbound."

IMF Hurting as Brazil, Argentina Make Early Payments

Without continued interest payments from Argentina and Brazil, the IMF is scrambling to find a way to pay its annual expenses of close to $1 billion. With Brazil having paid $15.56 billion already, and Argentina scheduled to complete its $9.8 billion by Jan. 2, the IMF's largest exposure in Ibero-America is now a much smaller loan to Uruguay. American Enterprise Institute fellow Desmond Lachman lamented that the IMF's "loan book is going to be really rather small." The Fund may have to increase interest rates to other borrowers, or cut its target for reserve accumulation, to generate funds.

Meanwhile, Venezuelan President Hugo Chavez has announced that he intends to follow in Argentina's and Brazil's footsteps, and pay off in 2006 the entirety of what Venezuela owes to the World Bank, the Inter-American Development Bank (IADB), and the Andean Development Corporation. This would represent a 25% reduction in that country's debt.

Mexico Escalates Mobilization vs. Bush-Cheney's Border Wall

Mexico's Foreign Minister, Luis Ernesto Derbez, met with Under Secretary of State Robert Zoellick at his Northern Virginia home Dec. 26, to register his country's outrage over what Derbez called the "xenophobic" plan to build a border wall to keep out Mexican and Central American migrants attempting to enter the United States. No public comments followed the "cordial" meeting, and Derbez returned to Mexico on Dec. 27 having received no sign of flexibility on the part of official Washington.

Before heading to the U.S., Derbez made it clear that Mexico's position was shared by many of the countries in Latin America, and he will be meeting on Dec. 29 with the foreign ministers of all the Central American countries to prepare a joint strategy for blocking the U.S. Senate's expected February passage of the bill, which was approved Dec. 16 by the House of Representatives, and which is supported by the White House.

At the same time, the Mexican Congress has called on all of Ibero-America's national Congresses—in Latin America, Spain, and Portugal—to join them in "an act of unity," by denouncing the wall project. The call, in the form of a letter drafted by the Mexico's Speaker of the House, insisted that the migration issue had to be addressed with justice, and in "a bilateral framework," to prevent the violation of human rights and the exacerbation of xenophobia and racism.

And in Other News:

* Much to his dismay, former Chilean dictator Gen. Augusto Pinochet was fingerprinted and photographed, front and side views, like a common criminal by the police Dec. 28, as mandated by law for his indictment in the killing and disappearance of nine dissidents. No details were made public.

* The Presidents of Brazil, Argentina and Venezuela will meet in Brasilia on Jan. 19 for further discussions of regional integration. One day earlier, President Lula da Silva and Argentina's Nestor Kirchner will meet to discuss further "revitalizing" Brazilian-Argentine relations.

* FARC narcoterrorists in Colombia ambushed and killed 28 soldiers involved in drug-eradication efforts on Dec. 27, presaging a violent escalation against government forces as the May 2006 Presidential elections—and President Alvaro Uribe's highly likely (as of now) re-election—approach.

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