From Volume 37, Issue 19 of EIR Online, Published May 14, 2010

Ibero-American News Digest

Brazil Enters Disintegration Phase Under 'Hari Kari' Trade

May 6 (EIRNS)—Having served as the pivot of the Inter-Alpha Group's unsustainable, usurious carry trade for the past decade, Brazil has entered a phase of hyperinflationary blowout, with the disintegration of the British system in Europe.

The huge speculative carry trade into Brazil has led to a 47% annual increase in the growth of credit, but London is demanding continuing increases in interest rates to ensure continuing carry trade flows, and keep the bubble from bursting. The Central Bank raised the benchmark interest rate (SELIC) by 0.75% on April 29, to 9.5%, but market traders are betting they will be jacked up several times more in the course of this year. London's Financial Times editorially warned Brazil on May 5, that "complacency" is dangerous: "The worst falls often come just when you are strutting your stuff." They point to the fact that Brazil is awash in liquidity, and that housing prices in Rio de Janeiro are rising by about 50% per year, "just two early warnings of a post-boom headache to come."

BRIC-inventor Goldman Sachs, and its ilk, lie that Brazil's finances are solid, because they are based on sustainable growth of the Brazilian domestic middle class market. In reality, Brazil's middle class growth is based on a usurious swindle, which deliberately burdens the elderly and working people with huge debts, to create a financial bubble for foreign financiers to securitize and feed into the Brazilian carry trade. This Brazilian version of London's subprime swindle is now popping, too. Naturally, the Inter-Alpha Group's Spanish Banco Santander, is found at the center of it.

In his first year as President (2003), Inácio Lula da Silva issued a decree allowing banks to sell payroll-deductible loans to private sector workers, retirees, and pensioners affiliated with the government's National Social Security Institute. Such loans had previously been available only to public employees and retirees. These are loans in which a fixed payment for the banks is automatically deducted monthly from a worker's salary or pension, before his or her check is issued. Banks love them; once hooked into these loans, no family involved can put food or medicine before their debt payments. It's like a modern version of indentured servants who "owe their soul to the company store."

At first, people could hock "only" up to 20% of their salary or pension, but as this credit boomed, the law was changed to permit banks to take 30% off the top, every month, for terms running anywhere from three to 72 months, with an average 2.5% a month—around 40% annually—collected in interest! Pensioners and workers rushed to take out these loans to pay off other consumer loans, which run an average 75% a year in the usurers' haven which Brazil has become.

Some courts tried to declare them illegal, and pension auditors in Rio de Janeiro called them a "crime"; but automatic payroll deduction loans took off, sending personal debt soaring by over 20% per year. By June of 2005, 30% of all personal loans in Brazil were such payroll/pension loans. Banco Santander executives bragged they intended to increase issuance of these loans by 10-fold over the next five years.

In October 2005, a mere two years after the law was passed, Moody's hailed payroll loans as the key force in the doubling of Brazil's "domestic" securitization market. By 2007, when London's international system entered its final phase of disintegration, such loans totalled $34 billion, and foreign banks began moving in to get their share. Santander's expansion in this area "steered the whole market dynamic" in this area, CBS Moneywatch reported in March 2008.

It is estimated, that through this mechanism, banks seize a portion of the pensions of an astounding 89% of Brazil's pensioners, a sly step towards the full privatization of the pension system demanded by London, which no Brazilian politician could be caught supporting directly.

Argentina's President Slams Greek EU-IMF Deal

May 8 (EIRNS)—Commenting May 6 on the mass demonstrations in Greece, Argentina's President Cristina Fernández de Kirchner compared the situation to Argentina's financial crisis of 2001: "Those images that we see on the television are too much like the ones of 2001," Kirchner said in Buenos Aires yesterday, Bloomberg reported. In December of 2001, more than two dozen people were killed in Argentina in mass protests against IMF-dictated economic austerity. The country had five Presidents in the space of two weeks as the situation unraveled, and before that year's end, Argentina defaulted on its $95 billion foreign debt.

Fernández de Kirchner said that the IMF and EU prescription of spending cuts and brutal austerity is "almost identical" to the measures that consecutive Argentine governments had imposed on the population, at the bidding of the IMF. "The international multilateral lenders, which keep offering the same old prescriptions, still don't understand what's going on in the world," she said.

In contrast, on May 8, Brazilian President Lula da Silva criticized Europe for waiting so long to bail out Greece's creditors, and huffed about how Brazil is going to give a big $286 million towards the IMF package for Greece, because Brazil is now a "creditor country."

Haiti Still a Catastrophe, Four Months After the Earthquake

May 5 (EIRNS)—President Obama's murderous refusal to adopt Lyndon LaRouche's Feb. 22 proposal to relocate 1.3 million people out of Haiti's flood-prone capital of Port-au-Prince, using the U.S. Army Corps of Engineers, has trapped this impoverished nation in a situation that is still catastrophic—almost four months after the Jan. 12 earthquake.

More than a million people in the capital are homeless, living in as many as 1,300 makeshift camps that are unsafe, filthy, and a breeding ground for infectious disease. People report that they spend the night "domi pandeye"—creole for sleeping while balancing upright, standing under their plastic sheeting because there's no room for everyone to be sheltered and lie down. So far, there is only one camp, Corail Cesselesse, that meets the standards for human habitation, and this is the one that is showcased for visiting dignitaries. Located north of the capital, it is only intended to house 7,500 people.

Worse, the rainy season has begun. Aid workers told CNN they fear that the constant rains will overflow canals filled with garbage and rubble, and flood the encampments that have sprung up on the canals' banks, making them "life threatening." Diarrhea, malaria, dengue fever, and malnutrition are just some of the diseases caused by these living conditions.

Moreover, prices for basic foodstuffs—rice, beans, cornmeal, cooking oil and charcoal for cooking—have risen by 15% to 30% since Jan. 12. Those who are lucky enough to obtain food coupons must travel long distances to pick up food, often finding that it has run out when they arrive. And the locations for food pick-up can change daily, creating anxiety among traumatized Haitians.

It is in this chaotic environment that threats of Jacobin violence have surfaced, from gangs linked to former President Jean-Bertrand Aristide. Readers may recall that the trademark of Aristide's satanic Lavalas movement was "necklacing"—tying a victim's hands, dousing a rubber tire with gasoline, placing it around the victim's neck and upper torso, and then setting it afire.

The Empire's Martínez de Hoz Arrested

May 5 (EIRNS)—Chicago Boy economist and Argentine oligarch José Martínez de Hoz—whom David Rockefeller used to refer to affectionately as "my friend Joe"—was finally arrested yesterday in Buenos Aires, for involvement in the 1976-77 kidnapping and disappearance of two Argentine businessman whose company business was deemed threatening to the then-ruling military junta's economic goals.

Martínez de Hoz was the economics minister and eminence grise of the 1976-83 London-run military dictatorship in Argentina, which implemented Pinochet-style Nazi policies in that country, designed at George Shultz's University of Chicago. To this day, he is rightfully hated by the Argentine people.

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