Re: Argentina

In a message dated 12/26/01 4:26:58 PM Pacific Standard Time, 
konbor@ecopress.org.by writes:

<< Surprisingly, the events in Argentina seem to be outside the sphere of
 interests of the learned public.
 Though, triggered this time by purely economic factors, they should have
 become an object of most diligent scrutiny by pundits of "core"and
 "periphery".
 Respectfully,
 Konstantin Borodinsky >>

I tried to post this to wsn yesterday.  I've noticed this list can be a 
little unpredictable about what gets posted--sometimes it seems tolerant of 
e-mail addresses not officially subscribed, sometimes not.   Anyway, it is 
the only news story I've seen with any clarity about the US role and 
implications.

Steven Sherman

Consequences for the United States in Argentina's Collapse
By LARRY ROHTER
 




THe Associated Press
Santa is not the only Argentine whose pockets are empty as South America's 
second-largest economy slides toward debt default and devaluation.


------------------------------------------------------------------------------

--
 
UENOS AIRES, Dec. 24 — Argentina's declaration of a moratorium on repayment 
of its foreign debt marks the end of a failed economic experiment that has 
cost this country dearly. But it is also a blow to the United States and the 
International Monetary Fund, which had invested much of their credibility and 
prestige here, yet proved unwilling to help when things began falling apart.

"I think this is going to end up being a very costly experience for the 
United States," Walter Molano, chief of research for BCP Securities, a 
brokerage firm based in Connecticut that focuses on Latin America, said 
today. "It was very clearly the Department of the Treasury that pushed 
Argentina over the edge and allowed it to collapse, so I think the issue of 
accountability has to come up."

A decade ago, Argentina decided to tie its peso to the dollar at a value of 
one to one, a decision that at first dramatically reduced inflation and 
imposed fiscal discipline, but eventually led to the current crisis. The 
first Bush administration had strongly urged that step on Argentina, and the 
United States tried to sell the same system to other doubtful Latin American 
countries.

There is plenty of blame to go around. But from the start, the second Bush 
administration found it convenient to overlook the United States's earlier 
role as advocate and cheerleader of that policy and to distance itself as 
much as possible from Argentina's growing problems. The bluntest statement of 
official indifference came from Treasury Secretary Paul H. O'Neill this 
summer and helped accelerate the loss of capital and confidence here.

"They've been off and on in trouble for 70 years or more," Mr. O'Neill said 
dismissively in an interview with the British magazine The Economist. "They 
don't have any export industry to speak of at all. And they like it that way. 
Nobody forced them to be what they are."

What was missing from Mr. O'Neill's analysis, however, was any mention of the 
high tariffs the United States imposes on Argentine exports or of the 
aversion to easing those barriers to help Argentina regain its footing. Nor 
was the Bush administration particularly helpful in "creating some kind of 
framework for how the international system could respond, rather than saying, 
`It's all up to you,' " said Peter Hakim, president of Inter-American 
Dialogue, a Washington-based conference of hemisphere leaders.

As a result, "the Argentines were operating in a vacuum, without a clear 
sense of what the United States was thinking and what it was prepared to do 
to be helpful," Mr. Hakim said. "The real blame is passivity: the U.S. did 
not want to engage, and so it stayed on the sidelines."

Taking its cue from the Bush administration, the International Monetary Fund 
kept "raising the bar" on Argentina, in Mr. Molano's words — requiring 
increasingly harsh austerity measures — in return for the disbursement of 
money already promised. That was followed by the fund's public declaration on 
Dec. 18 of its lack of confidence in the Argentine authorities, which helped 
hasten the government's fall.

"It's clear that the mix of fiscal policy, debt and the exchange rate regime 
is not sustainable," said Kenneth Rogoff, the fund's chief economist. He also 
maintained that "everyone recognizes that to a large extent the problem lies 
in Argentina," a statement that did not ring true to other governments in the 
region.

"The fund is partly to blame for this because the fund did not sound the 
alarm in time and then took a very hard line when things were incredibly 
difficult," said Pedro Pablo Kuczynski, the finance minister of Peru, which 
has itself been in in talks with the organization recently.

But the abandonment of Argentina represents more than just an economic policy 
failure. It also has a strategic effect, because it confirms to the rest of 
Latin America what many leaders have always maintained: that the United 
States is a fickle and undependable ally.

Over the past decade, Argentina has aligned itself more closely with the 
United States on foreign policy questions than any other country in the 
region. It was the only Latin American country to participate actively in the 
Persian Gulf war, and in recognition of that and numerous other 
demonstrations of support, the Clinton administration formally designated 
Argentina a "non-NATO ally."

Even with its economy disintegrating, Argentina has not wavered from a 
commitment to send up to 600 troops as part of the peacekeeping force in 
Afghanistan and to open a field hospital in Pakistan. That effort, which will 
cost Argentina up to $20 million, has been criticized here as an expenditure 
that would be better directed at creating jobs for the millions of unemployed.

Six months ago, Turkey's situation was very similar to Argentina's. But while 
Argentina has been left to fend for itself, Turkey has been showered with 
financial and political support, which most people here regard as proof the 
United States regards Turkey as vital to American geopolitical goals in a way 
that Argentina, despite its demonstrated support of the United States, is 
not.Now, other Latin American countries are likely to draw the conclusion 
that there is no payoff for being America's friend, at a time when the United 
States hopes to draw its neighbors into a Free Trade Area of the Americas.

"On the whole, I think this bodes very badly for building a long-term 
economic community in the hemisphere," Mr. Hakim said. "If this is what 
community means, it doesn't really mean much."