RIO DE JANEIRO, July 16 (UPI) -- After months of woeful inaction in a region that is gasping for its political and economic life, it seemed the United States and the International Monetary Fund turned a corner of sorts in the past week, casting a gaze, if only that of a glancing sort, at Latin America.
But as populist politicians find the fields of anti-U.S. sentiment quite fertile, the question is whether Uncle Sam is moving too slowly and blindly to preserve the neo-liberal economic ideals it has sought to foster since the early 1990s.
Throughout the 1990s, the more or less free-market ideas of Washington were finally taking hold in Latin American nations without the help of a dictator -- such as Chile's Gen. Augusto Pinochet -- to ensure their implementation. The best example of this embrace of U.S. capitalism, at least on the surface, was Argentina, which aggressively undertook economic reforms. Now, 10 years on and with key elections coming in Argentina and Brazil -- the continent's two most important economies -- the nascent free-market ideas are in danger of being buried under a wave of populism.
Impoverished citizens are turning to politicians capitalizing on the perceived disregard of the United States and the IMF for the poverty plaguing the region. Ask a South American economist about any of this and snickers fly up sleeves faster than you'll see levels of debt or country risk ratings rise. It is simply absurd, those trained in the art of economics will tell you, to think of an international lender such as the IMF or any outside nation in terms of whether it "cares" for those it is dealing with. And in textbook economic theory, that is, of course, true. It is soft-headed to think otherwise.
But when it comes to textbook political strategy, sweeping generalizations -- based on reality or not -- have been known to decide elections and hand over the reins of economic direction to those with whom the IMF or the U.S. would rather not deal. "One has the sensation that Argentina has returned to the point where we began the 1990s," the Argentine political scientist and columnist Mariano Grondona wrote on the editorial page of the newspaper La Nacion recently. "Not only in the (economic) facts, but also in our ideas. The majority of citizens who yesterday supported massive privatization of public services, today cherish the idea of returning to state controls."
Unquestionably, the majority of blame for the woes of Latin America lies with itself. Rampant corruption, weak economic institutions which blow in the winds of political whims and leaders who flinch at undergoing the austerity measures and economic shocks needed to jolt the economies into the 21st century are at the root of the troubles. These are sovereign nations and it would be egotistical and misguided of the outsider to think the U.S. or Europe has full control of whether Latin American countries prosper or not. That said, the First World has near total say in how aid is allocated and in setting the terms of free trade. That power has been poorly used during the latest economic crisis to hit the region -- see the mammoth Farm Bill and Bush's bewildering steel tariffs as prime examples of the "do what I say and not what I do" method of spreading free-market ideals. A terrible time for the U.S. to go isolationist, in this Latin American downturn that could -- if all goes wrong -- be as treacherous as the 1997 Asian crisis.
This danger now appears to be registering on the radar screen of the Bush administration, who once claimed that Latin America would be a top priority. While American foreign policy understandably turned its attention elsewhere following Sept. 11, it has taken too long for U.S. officials to start plugging holes in the dike which are threatening to unleash the full torrent of economic ruin on an entire continent.
Last week, U.S. Assistant Secretary of State Otto Reich went on a tour of Latin America largely to promote the Free Trade Agreement of the Americas. Whatever your ideological bent, there is no getting around the political fact that Reich -- a former ambassador to Venezuela who was entangled in the Iran-contra scandal while serving as first director in President Reagan's Office of Public Diplomacy -- raises nothing but suspicion in the region. He is the embodiment of the U.S.' Cold War policy in Latin America of subversive operations and support of dictators. Reich, who fled Cuba at 15 for the U.S., is understandably anti-Castro, but so much so that he is accused by leaders in the region of having an unnatural fixation on that situation. It is well-known in the region that Reich's nomination was held up by Congress and he was named to his post while lawmakers were out of session. Is this really the man you want rolling around a South America at its most politically and economically frail point in years? Considering he is the administration's highest-ranking official in charge of the region, there isn't much choice, one supposes.
During his tour of South America, Reich said that Argentina had met conditions for the renewal of negotiations with the IMF on a new bailout aid package. It was in December that the IMF halted a $22 billion aid package to Argentina, which sparked violent protests that led to the country seeing four presidents rotate through power within a two-week period. But Reich didn't indicate whether the U.S. would actually support renewed aid, leaving critics in the region to label his trip as superficial and more of the "carrot and the stick" foreign policy of holding out vague economic promises in return for good behavior on the economic and political fronts. But with the rise of leftist and outright populist politicians across the region, the U.S. and its convenient policy of non-engagement is not going to be sufficient.
"They don't know what to do in Argentina, in Venezuela, in Peru," Peter Hakim, president of the Inter-American dialogue center, told the Argentine newspaper Clarin. "This government has its attention centered only on the anti-terrorist effort and the legislative elections in November. With Lula in Brazil, Lilita Carrio in Argentina and Evo Morales in Bolivia, the axis of the rebellion is now in progress."
Hakim evoked the names of three politicians who, in one form or another, have reaped the benefits of the renewed sense that Washington could care less about Latin America and its people. Lula da Silva -- the socialist leader of the Workers Party -- commands a strong lead going into Brazil's October presidential elections. The leftist Carrio is Argentina's most popular politician and is preparing for early presidential elections to be held next March. And then there is Morales in Bolivia, a leader of the coca growers opposed to U.S. drug and free-market policies in the country who took second place in presidential voting a few weeks ago. That put him in contention to be chosen by Bolivia's Congress on Aug. 3 as the next president. Morales claims his campaign was helped by the U.S. ambassador calling on Bolivians to not vote for him -- yet another bold stroke of brilliant diplomacy. Imagine this: if you are a U.S. citizen and the French ambassador went on national television suggesting you not vote for "X" candidate, wouldn't you be terribly tempted to do so, if only for spite? These are not complicated emotions we're dealing with, some basic lessons in public relations seem needed.
During his tour, Reich acknowledged the criticism of U.S. policy in the region. "I am well aware that some critics have asserted that the United States has ignored or been insensitive to the needs and interests of the nations in the region in the recent past," Reich wrote in a column printed in the Jornal do Brasil last week. "The United States was, is, and will be engaged in the hemisphere, and my visit to Brazil, Argentina, and Uruguay is another example of the active engagement of the United States with our friends and allies in the Americas." And, if only through the IMF, the U.S. seems finally to be stepping things up a bit.
Treasury Secretary Paul O'Neill will visit the region this month. While this is a welcome development, all concerned are hoping he will behave himself and not blurt out drastic shifts in policy as he did a few weeks back when he mistakenly indicated the U.S. would not support any renewed aid for Brazil. Those comments immediately sent markets in South America's largest economy straight down, though they recovered after O'Neill backtracked on his remarks later the same day. Since then, O'Neill and the IMF have had nothing but good words in regard to Brazil's economic fundamentals.
As for the IMF, it has been vigilant in providing aid for countries threatened by contagion from Argentina. Uruguay has seen its requests for increased credit lines green lighted, and Brazil appears close to reaching some sort of agreement on a new IMF aid package to help ease its transition to a new government. The deal would hinge on all the top candidates agreeing to honor some basic economic terms -- such as making debt payments, keeping inflation in check and working for more central bank independence. This would be a smart move quite similar to the successful $57-billion package South Korea received in 1997 when President Kim Dae-jung was a leftist opposition candidate putting a fright into investors, just like Lula.
With a clever and more attentive policy in the region -- which does not mean providing aid without making tough demands for the implementation of sound economic fundamentals -- U.S. and IMF officials can avoid playing into the hands of those who wish to win elections by inflating fears of imperialist devils seeking control of their countries.
Officials interested in making true progress that will contribute to a cleanly functioning and more just financial system will not only respond quicker to yelps of economic distress, but will make the effort of understanding on-the-ground situations and how their actions, or lack thereof, can make all the difference in Latin America's choice between moving forward with reform or crouching back into economic antiquity.
