Posted on 06/28/2002 6:29:58 AM PDT by Cincinatus' Wife
There are two big problems with the Bush administration's Latin America policy: one, it is being run by the Treasury Department; two, the Treasury Department is being run by Paul O'Neill.
That, at least, is what you keep hearing in Latin American capitals these days, as Argentina's financial crisis seems to be spreading to Brazil, Uruguay and Paraguay, and government officials are increasingly vocal in their complaints about the U.S. Treasury's reluctance to come to the rescue of crisis-ridden countries.
In recent days, O'Neill -- a former chairman of the Alcoa aluminum manufacturing giant who has become known for his ''tough love'' approach to cash-strapped countries -- created a crisis in Brazil by telling Bloomberg radio that he would oppose additional International Monetary Fund rescue loans for that country.
'Throwing the U.S. taxpayers' money at a political uncertainty in Brazil doesn't seem brilliant to me,'' O'Neill said Friday, referring to the run on the Brazilian currency caused by surveys showing a possible leftist victory in the Oct. 6 presidential elections. O'Neill added that Brazil's market volatility ``is not driven by economic conditions.''
Not surprisingly, Brazil's currency fell to a historic low after O'Neill's comments.
REFINED STATEMENT
According to Brazil's daily O Globo, Brazilian President Fernando Henrique Cardoso called President Bush immediately to complain, and ''the American president not only conceded that O'Neill had made an unfortunate statement, but ordered the U.S. Treasury to issue a statement reasserting its trust in Brazil's economy.'' A U.S. Treasury statement later Friday toned down O'Neill's remarks.
It was only the latest O'Neill off-the-cuff remark that sent shock waves through Latin America's financial markets. In July 2001 he had stated that the real problem in Argentina is that ''they don't have any export industry to speak of -- and they like it that way.'' That remark provoked a sharp drop of Argentina's bonds.
*** Asked at a recent news conference why the United States had bailed out Mexico in 1995 but was refusing to do so with Argentina, O'Neill responded that the United States had backed several financial rescue packages for Argentina, only to see the money evaporate within weeks. In order not to continue throwing good money after bad, Argentina has to come up with a sound long-term economic recovery program, he said.
O'Neill's position makes a lot of sense. But Argentina has since taken drastic measures to cut government spending and its economic collapse is threatening to spread to its neighbors. He may be playing with fire by making no exceptions to his anti-bailout doctrine.
Latin American officials and many economists yearn for the days of the Clinton administration's financial rescue packages, which they say were highly successful. In Mexico's 1995 financial crisis, for instance, a $20 billion U.S. financial rescue package was repaid ahead of time, they say.***
NO `BAILOUT'
Jose Antonio Ocampo, the Chile-based head of the U.N. Economic Commission for Latin America, says helping Argentina solve its cash crunch would not amount to a ``bailout.''
''After September 11, the U.S. and European central banks lent $50 billion to banks that were having liquidity problems,'' Ocampo said. 'Nobody called that a bailout. Why do we use the term `bailout' for developing countries, and not for the United States?''
O'Neill's hands-off approach to foreign financial crises is a reflection of the Bush administration's ''compassionate conservatism,'' other Latin American officials say.
In O'Neill's mind-set, there seem to be two worlds, they say. One -- made up of most countries -- must be governed by the market, and countries and corporations must be held accountable for their mistakes, even if it costs them dearly. The other world is made up of the poorest countries, like many nations in Africa, which deserve outside help.
The problem is that such a view of the world seems to leave no room for financially troubled middle-income countries, such as Argentina, Uruguay or, increasingly, Brazil.
''If O'Neill's policy allows for exceptions, if it's flexible, if it creates a system of rewards and punishments, it can be positive,'' said Argentine Ambassador to the United States Diego Guelar. ``But if it becomes a dogma, cast in stone, it will cause disaster around the world.''
Others say O'Neill should be more careful with his remarks.
''He is talking to a U.S. audience,'' said Arturo Valenzuela, a former top White House aide on Latin American affairs during the Clinton administration. ``But he does not understand that his words have a broad international impact.''
I agree. But the main problem may not be O'Neill's big mouth, nor his nonintervention stand, but the Bush administration's apparent decision to leave the fate of Latin America in the hands of the U.S. Treasury. It's time to factor in broader foreign policy and national security considerations, and give a bigger say to other parts of the U.S. government.
I've had my differences with O'Neill, but he's right about this one.
Why would we be bothering with South American problems any way? What strategic interest is there of ours in that part of the world? They've been given tons of chances to reform their economies and get their spending under control. Why haven't they?
God Save America (Please)
America wants stability everywhere, but that is especially true in our back yard, and we are far more heavy-handed with these countries than most Americans realize. Those countries realize it, though, and that's why they have a love/hate relationship with us.
(Monroe doctrine. Oh how soon I forget.)
So you are saying that we are treating these countries like rebellious teenagers and they are acting the part?
GSA(P)
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