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Thursday, March 03, 2005

South America Continues Its Turn Left

With the swearing in of Uruguay's first left-wing president, Tabare Vazquez, Uruguay has become one more country in South America's new collection of left-leaning governments, following the lead of Brazil, Venezuela, and Argentina. Nevertheless, these new leftist governments have not taken any of the dramatic steps that might be offensive to the USA or Europe. Industries are not being nationalized and foreign investment is still welcomed.

So, what does this mean to expatriates living in Argentina and the rest of South America? I'm not quite sure yet, but I'm hopeful these left-leaning governments can do what they've promised and help lift their citizens out of poverty.

It is very easy for politicians in Washington to tell Argentina that they're spending too much on government housing and social assistance when they're a world away. I wonder whether the IMF and US Treasury officials would have the same views if they lived in Argentina -- if they saw street children asking for food while you ate? Would they say the same thing if they witnessed the cartoneros on garbage day, rummaging through everyone's garbage cans to look for cardboard or tin they can sell to the recycling plant?

Pure unrestrained capitalism works a lot better in some areas of the world than in others. There always need to be checks and balances to ensure capitalism doesn't spiral out of control. It is a heartless system by design and so it must be overseen to ensure things don't get out of hand.

Still, it will be interesting to see how these new governments fare and whether South America will continue to trend leftward. It seems that all of South America has spoken and clearly rejected the "Washington Consensus" of the 1990s, with the mass privatization of industry and cuts in social spending. I certainly hope these new governments can find a middle ground.



Anonymous Anonymous said...

March 24th, 2005

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Argentina's dangerous direction
February 11th, 2005

Buried deep in the appalling announcement of Cuba's new place on the UN's Human Rights Commission was the name of the country that nominated that outpost of tyranny for the honor: Argentina.

It's not the first time the southernmost country in the New World has done the bidding of Cuban dictator Fidel Castro. Last December, a Cuban dissident who sought de-facto asylum in Havana's Argentine embassy was unexpectedly denied an exit visa and forced back into the hands of Castro's waiting agents. Such events underline Argentina's political direction.

A few years ago, Argentina was one of the U.S.'s major non-NATO allies. Now, Argentina is undermining the U.S. and its agenda of freedom, in favor of strengthening Castro. Tragically for itself, for America, and for the cause of liberty, Argentina is rapidly emerging as an enemy.

Argentina's descent into the orbit of Castro has unusual roots. It's anti-American alright, with most Argentine voters falsely blaming the U.S. for their country's economic mismanagement. But unlike most run-of-the-mill anti-American states, there's no refuge in the arms of countries like France. In fact, Argentina's estrangement from Europe is far more bitter than its alienation from America. That is why Castro and his fellow pariah states are so attractive to Argentina as political allies now, and why Argentina is gathering momentum to undermine the US.

This ominous state of affairs is complicated. It derives from Argentina's catastrophic economic collapse three years ago. Argentina defaulted on $100 billion in debt in December 2001, amounting to the biggest sovereign default in history. It was a huge ripoff of anyone who had purchased Argentine bonds. Most of the stiffed debt holders were individual investors from countries like Italy, Germany, and Japan - small savers who had trusted in the good faith and good name of Argentina. Although of no interest to the American press, these debt holders are also a powerful political force in Europe, rightly pressuring their governments to force Argentina to make good on its obligations.

But Argentina has no intention of doing so. It wants to sweep the whole matter under the rug and settle the issue with them for 25 or 30 cents on the dollar, an offer so low and so unprecedented as to be insulting. Minus debt servicing, this is a country that posted 9% economic growth in 2004 and enjoys rising tax receipts. It has plenty of money to pay. It just doesn't want to. This week, its offer to swap debt on these fire-sale terms won the approval of only 35% of bondholders. Of these, over half were local Argentine banks who'd been strong-armed into accepting the terms - or else. The remainder, a mere 15%, considered the offer acceptable. The rest were livid.

America has been strangely aloof to this drama, not sticking up for these mostly European bondholders, who bought the Argentine bonds partly because they were issued under U.S. law and in U.S. currency. The Treasury Department instead has been urging Argentina to 'settle' with its creditors on any terms, so that the IMF aid spigot can return to business as usual and the matter no longer be America's problem. It's no pleasure to be critical of Treasury in this unenviable task: their idea is probably to get Argentina back into the Western system of capital and credit as fast as possible.

But there's a difference between 'settling' and 'settling fairly.' The Treasury's desire to close the books on this mess any old way is why Argentina has put forward such 'take it or leave it' nonnegotiable offers to its aghast creditors. It's potentially strong enough as an issue to destroy our critical alliance with Italy. Even more dangerously, Argentina is taking this U.S. impatient indifference as a sign of U.S. weakness and a cue to move boldly into the Castro orbit. The Argentina problem is no longer just a matter of finance, it is becoming a matter of national security.

The U.N. human-rights fiasco is not the only sign of the deterioration in Argentina’s stance.

Italian investors have noted that Argentina's government is now continuously hurling insults at Washington. It's sent government-financed piqueteros (violent leftist vigilantes) to blackmail McDonalds restaurants. It's stalled the investigation of a brutal and deadly Iranian terror bombing of a Buenos Aires Jewish Community Center in 1994, and has let key suspects walk. Meanwhile, synogogue attacks and bombings of U.S. banks are on the rise.

Argentina’s relations with dictator Hugo Chavez of Venezuela, meanwhile, have never been more cordial. "We are on the same team," Chavez told Argentina's president on his visit last week. The Argentine government also has targeted Argentina's only pro-American ex-president, Carlos Menem, a good friend and ally for his entire ten years in office, for repeated prosecutions. Not one of these actions is that of a friend of the U.S, but they all serve Fidel Castro's destructive agenda.

The case of the Cuban dissident denied the visa last December is particularly disturbing. The dissident was a Cuban doctor who objected to fetal stem-cell research on moral conscience grounds. She sought a visa to visit her grandchildren in Argentina. Castro knew very well what that was about and demanded Argentina reject her request. A showdown followed and the doctor took refuge in the Argentine embassy. But suddenly, Argentina declined to issue her the visa and unexpectedly forced the woman back to Castro's henchmen.

To get Argentina out of its Castro orbit, (and save our alliance with Italy) the U.S. needs to be more forcefully hands-on in resolving fairly Argentina's debt issue. It also must unequivocally warn Argentina about its growing ties to Castro. Otherwise, we will watch an anti-American alliance strengthen, with Castro the kingpin.

Argentina is choosing sides, and it's not choosing ours.

A.M. Mora y Leon

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3/24/2005 09:46:00 PM  

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