Latin American melt-down By Ian McDonald
Stabroek News
September 22, 2002

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As the forces of “globalisation” continue their depredations in the weaker countries of the world, the region of Latin America and the Caribbean finds itself in a growing and almighty mess. Most political, and business, leaders in the region seem alarmingly matter-of-fact about this mess. They still speak far too often of the “challenges and opportunities” of globalisation without mentioning that these challenges are not being met and without defining these mirage-like opportunities.

They still seem reluctant, frightened even, to oppose or even question the iron consensus of the developed, rich and powerful countries and the international institutions dominated by them.

However, this consensus in favour of the neo-liberal free trade model seems to be breaking up.

Disasters here, there and everywhere in Latin America are accelerating out of control. Dogmas that omit the fundamental needs of ordinary people in favour of mechanistic market requirements are being seriously questioned.

A huge sign of the times is the disaster in Argentina, for a long time beloved of free-market ideologues. Put simply, Argentina went bust. It defaulted on its debt, its currency is down to a quarter of its value, unemployment is over 20%, about three-quarters of its population are living in poverty.

The infection of the failed free market model is spreading. Argentina’s financial crisis has spilled over into neighbouring Paraguay and Uruguay.

Intense confrontations between haves and have-nots are growing. Colombia, meanwhile, more than most, is suffering from the increasingly virulent effects of globalisation’s terrible twin scourges - the illegal trade in narcotics and the growth of well-armed criminality.

But Colombia is by no means alone - as we in Guyana are beginning to appreciate first-hand.

Brazil, with about half the continent’s population, is the most important country by far and there a sort of panic seems to be growing as a new election approaches and an “unreliable” Workers Party candidate, “Lula” da Silva, leads the polls. Brazil’s currency has lost a quarter of its value.

Thus the whole continent, so nicely sewed up in the economic and financial system sponsored by the dominant developed countries and supervised by the international financial and trade institutions, seems to be coming apart at the seams.

It is easy to trace the road to perdition. In the 1980s one Latin American country after another fell into the hands of the IMF to avoid defaulting on huge loans taken out in the 1970s when Western banks were desperately, and negligently, eager to lend petrodollars accumulated in their vaults due to the gigantic jump in oil prices.

Once in the grip of the IMF the medicine had to be swallowed: drastic cuts in budgets and public services, privatization, de-regulation, lowering of tariffs, free trade. More often than not such IMF restructuring actually lowered living standards.

However, the process was not opposed, intellectually or otherwise, after the ignominious collapse of its opposite extreme - Soviet-style state socialism. Nobody had the inclination, or the nerve, to question the new extreme dogma.

But now the intellectual tide is turning - not, certainly, in favour of rigid state socialism (inevitably accompanied by dictatorship) but, it is to be hoped, much less in the direction of trade mainly favouring multinational corporations and much more towards measures protecting local workers and employers from unfair foreign competition.

Let us be clear: there is nothing whatsoever wrong in going in that more sensible direction. After all, the developed and rich countries fervently preach free trade now but, remember, when they were industrializing themselves they made very sure they protected themselves behind high tariffs - and still do whenever they consider their interests are at stake.

US President William Mc Kinley summed up the situation very well as the 20th Century began when he said the following: “We lead all nations in agriculture; we lead all the nations in mining; we lead in manufacturing. These are the trophies we bring after several decades of a protective tariff’.

Yes, indeed. And when the upper hand is established, the tune changes and the tariffs that served you so well are now anathema when used by others!

The facts are clear. Latin American economic growth was much faster in 1960-1980 than it has been since.

And in this more recent period social welfare systems which existed were largely dismantled with the result that ordinary, lower-income people have become more and more desperate and disillusioned.

It is time to turn away from reliance on trade designated free by developed countries and pay more attention to perceiving and protecting our own interests.