Posted on 06/04/2002 5:05:06 AM PDT by Cincinatus' Wife
WASHINGTON - If the Bush administration is nervous about the possibility of political chaos in Latin America, it is doing a good job of hiding it.
In interviews with several senior U.S. officials last week, I found a guarded optimism about the region's future, despite several recent events that have seriously undermined President Bush's pre-Sept. 11 upbeat forecast that the 21st century would be ``the century of the Americas.''
The Bush administration's positive spin on Latin America's current troubles is in sharp contrast with the gloomy scenario potrayed by several Latin American diplomats, some of whom see a domino effect of crises spreading from southernmost Argentina to the northern tip of South America.
Five months ago, when Argentina's economy collapsed and the country defaulted on its foreign debt, the consensus in U.S. diplomatic and financial circles was that there would be no economic or political contagion beyond Argentina's borders. But that may have changed in recent weeks, the alarmed Latin American diplomats say.
Last week, Uruguay -- a small country of 3.3 million sandwiched between Argentina and Brazil -- announced that it will borrow $3 billion in emergency funds from the International Monetary Fund and others institutions to shore up its economy, which was badly hurt by the Argentine crisis.
Since Argentina devalued its currency in January, Uruguay's exports have fallen significantly, its tourism industry has come to a near standstill, and its banking industry has seen massive capital flight from Argentine and other South American depositors fearful that the country may be forced to freeze bank accounts.
More important, financial nervousness is spreading from Argentina and Uruguay to Brazil, the biggest country in the region, reflecting the domino theory. Brazil's ''country risk'' -- the extra interest rate countries have to pay their creditors because of perceptions of political or financial risk -- has soared from 600 points earlier this year to about 1,000 points in recent weeks.
Investors' worries about Brazil have grown in part because of the rise in the polls of leftist presidential candidate Luiz Inacio ''Lula'' da Silva. If he wins the October elections we may see a regression to protectionist policies of the '70s, which is bound to spread to several other countries, many doomsayers fear.
CYCLICAL POLITICS
In a region where politics has generally moved in cycles -- dictatorships in the '70s, center-left democracies in the '80s, and pro-business governments in the '90s -- a leftist victory in Brazil could influence Argentines to elect a leftist president in their own upcoming elections late this year or next year, and could encourage Venezuela's populist president, Hugo Chávez, to radicalize his ''Bolivarian Revolution,'' the alarmed Latin American diplomats say.
''The regional scenario in the second half of this year will be critical,'' says Argentina's ambassador to the United States, Diego Guelar. ``The anti-free market credo is gaining ground. There is a mistaken perception in the region that Argentina was the best student, that opened its economy the most, and that this was the reason why it ended so badly.''
But several U.S. officials reacted with skepticism to these gloomy scenarios.
''There is a general [regional] commitment to market economies and open trade that remains firm,'' says Lino Gutierrez, the No. 2 official at the U.S. State Department's Latin American affairs office. ``We are encouraged that the Argentine government is beginning to take the steps necessary to put the country on better economic and financial footing.''
SAME OLD THEORIES
Asked about the South American domino scenario, another senior Bush administration official noted that the same kinds of theories were floating around a little more than year ago, when many predicted that populist former President Alan García would win in Peru, and that leftist former Sandinista leader Daniel Ortega would win in Nicaragua, and that the whole region would move left.
It didn't happen.
Bush administration officials are confident that, over the next three months, the U.S. Congress will give President Bush ''fast-track'' authority to expedite new free-trade agreements, and that this will lead almost immediately to expanded trade benefits for Andean countries, and to the signing of a bilateral free-trade agreement with Chile.
''All of these things are going to change the atmosphere in this hemisphere,'' a senior Bush administration official says.
Let's hope so. A ''fast track'' vote without unrealistic strings attached would most likely revive hopes in plans to launch a hemispheric free-trade agreement by 2005, and would give Latin America a new reason for hope. But, unless it happens soon, it may not be enough to offset the growing skepticism in many countries about free trade, and about Bush's stated commitment to the region.
Thank you for sharing those most interesting articles…as depressing as they are. I’d go back to bed and pull the covers over my head, but I have too much to do this morning.
Bump!
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