SUNS 4302 Thursday 15 October 1998
LATIN AMERICA: PUNISHED DESPITE DOING ITS HOMEWORK, SAYS SELA
Caracas, Oct 13 (IPS/Jose Zambrano) -- Latin American and the Caribbean are being punished by the crisis in Asia and Russia, even though they have "done their homework," Carlos Moneta, permanent secretary of the Latin American Economic System (SELA), said here Tuesday.
For example, said the SELA chief, the region leads the field in reducing public spending to levels befitting its Gross Domestic Product (GDP), inflation has shrunk and banking systems have improved on their 1994 status.
But these indicators lack leverage in the face of the "frivolity" of many investors, added Moneta, the Argentine leader of the body which represents 27 states of the Latin America/Caribbean region.
The crises are being handled inadequately by the international organs which simply keep prescribing "more adjustments," he added.
The crisis is now lashing Russia, but "there are no important channels, neither financial nor commercial, by which this can be transmitted to us," commented Moneta, explaining that in spite of the Russian debacle, capital is being withdrawn from Latin America. This shows, he argued, that "some investors are not well acquainted with the map of the world".
The result is that Latin America and the Caribbean are seeing "reduced growth, increasing difficulty in accessing markets and capital and the expanding cost of debt translating into new and greater indebtedness." Chile will lose two billion dollars in copper sales to Asia this year, Mexico, more than one billion in textiles, Peru's Pacific trade is suffering and Venezuela lost seven billion dollars due to the effect of the world crisis on the oil markets.
Moneta used the presentation of the 1998 Report on the global and Latin American economy - a pamphlet produced by SELA and the French Centre for Prospective Studies and International Information - to stress the defects of globalisation.
"The process differs in speed and depth, and is imbalanced in its consequences. The financial system is the most globalised, ahead of trade and production, and therefore its movements affect us more rapidly," he stated.
The asymmetry is demonstrated by the fact that 1.3 billion dollars move on the financial markets each day - a sum equivalent to the annual GDP of France or four months of world trade in goods and services.
Another problem is that the multilateral bodies entrusted with guiding the process are being overwhelmed, and the political measures are concentrated in the hands of the Group of Seven (G- 7) most industrialised countries plus Russia, a de facto "Economic Security Council outside the United Nations."
The flow-recipient countries, emerging or developing economies like those of Latin America, play only a very minor role in orienting the system, which is also guided by the so-called "moral risk" code.
This mechanism favours the defence of investors, and while it is fundamentally private companies which go into debt, governments are made to assume back up commitments and therefore whenever the system fails, it is the whole of society which pays," said Moneta.
"If I am a financial operator and things are not going well where I put my money, I wait for the IMF (International Monetary Fund) to help me, for the respective government to make adjustments, going further into debt and finally paying," he explained.
He stated "this is the fundamental issue which must be examined by our governments in order to start building responses, beyond short-term figures, changing from day to day, on how one crisis or another affects us."
Moneta said the international community should consider the reforms in the Bretton Woods system (the IMF and the World Bank) redefining the role which must be played by the various players of the process.
On top of the traditional players, like the G-7 plus Russia and the multilateral bodies, there are others which are new and enormously influential, like the risk-qualifiers, said Moneta.
The response demands, firstly, that Latin America and the Caribbean "stand firmer on our own two feet," with mechanisms like the monitoring and exchange of subregional information on capital flow, and critical assimilation of theories coming in from abroad.
Secondly, dialogue is pertinent, for example between Latin America and Asia, to join forces on many proposals "now that institutions like the IMF are being criticised by leading economists of the North."
The European Union must also have a different voice, "now it is launching the euro."
And more than anything, Latin America must make it clear it is paying a high cost despite the fact it "has behaved well and done its homework," concluded Moneta.