Latin America and the financial crisis

October 6, 2008
By Nidia Díaz

The eruption of the global financial crisis, unprecedented since the time of the Great Depression of the 1930s, has occurred in the very heart of the capitalist system, in the center of the U.S. Empire, although its effects are extending to a shocked Europe and other regions and countries that – to a greater or lesser degree – are associates or tributaries of that empire and the world system that it heads.

In relation to Latin America, the neoliberal debacle that had as its starting point the U.S. mortgage crisis, is taking place at a particularly significant moment after a number of years – more than 10, in some cases – in which certain countries have resolutely undertaken new strategies, including social ones, and have begun to detach themselves from what President Hugo Chávez has described as "a perverse international system."

In this context, while the U.S. government is trying to inject billions of dollars with the aim of containing its financial crash, a group of Latin American nations like Brazil, Argentina, Ecuador and Chile – to quote just some – are confident that the work undertaken in their economic sectors, as well as the effective application of strategies in the social sphere, will maintain the sustained economic growth of recent years, while their international reserves have been seen to grow as never before. They have done all of that, moreover, against Washington’s dictates and the prescriptions of the financial and credit agencies under its protection.

Those nations, in one way or another distancing themselves from the disastrous neoliberal road that the powerful neighbour to the North imposed on them, not only are not only cushioning themselves but reducing to the minimum or even, escaping from the world impact generated by the shock being experienced by the U.S. system. At the same time they are demonstrating the need to continue deepening and extending the direction that they have taken on the basis of strength, independence and self-determination, thus raising themselves as an example for some less developed countries in the region and other Third World nations.

It is not by chance that what began as initiatives by Venezuela , Brazil, Bolivia or Argentina, have been taken up by the vast majority and made concrete in the Union of South American Nations (UNASUR), the Bank of the South, the Great National companies in the energy sphere and others that are currently serving as a support to member countries and others that are beginning to analyze the possibilities and convenience of a cooperative road with no political conditions or coercion, and in defense of sovereignty.

Precisely, the current session of the UN General Assembly has served for various heads of state to comment on the exceptional measures that the U.S. government – renouncing the same deregulated and neoliberal policies that it promoted and imposed on the world – is now adopting in terms of state interventionism and the rescue of the banks at the cost of U.S. taxpayers squeezed to the limit.

It has been the Latin American leaders, basically, who have made an impassioned defense of multilateralism in the international order and have warned of the consequences of continued financial speculation. The days when Washington sneezed and Latin America caught pneumonia are over.

In that context, Brazilian President Luis Inacio Lula da Silva stated that he was observing "with sadness, how very important banks which passed opinions, telling us what we should do or not do, measuring the risk to the country, advising investors whether Brazil was trustworthy or not, are going bankrupt, are calling in their creditors."

Those banks, "what they determined… was not the free circulation of capital, generating employment and wealth, but speculation… they transformed some sectors of the financial system into a casino, lost at roulette and we didn’t want Brazil to be the victim of the game," he added. The South American giant has international reserves calculated at $200 billion, which will enable it to confront the possibility of a liquidity problem. Brazil, said Lula, "has found its own way" and will continue growing.

For his part, the Bolivarian leader, Hugo Chávez, took advantage of the occasion to recall how firms like the Lehman Brothers and Merrill Lynch put out negative reports on Venezuela and now the ones crashing are "the giants. How strange that is. Now it’s the United States that cannot be invested in."

Venezuela confirmed that its hard-currency reserves are safe and that just 1% of these, which amount to more than $39 billion, is located in U.S. territory.

In similar vein Argentine President Cristina Fernández added her voice to the criticisms made by her Venezuelan counterpart against Lehman Brothers, for having predicted "calamities" for her country, when, as she said, "We are seeing how that first world once portrayed as the goal that we had to reach is bursting like a bubble."

She continued, "South America was told that the market solves everything, but now we have the strongest state intervention since the point when the U.S. told us that the state was not necessary."

In his speech to the General Assembly, Evo Morales described capitalism as "the worst enemy of humanity," while expressing his firm conviction that "one cannot have peace under capitalism."

For his part, addressing Congress with the request of $700 billion for that unprecedented rescue operation, the chairman of the US Federal Reserve warned that if financial conditions do not improve over a prolonged period, the consequences for the economy in general could be very adverse, the labor market and income are entering a slump, inflation is growing and consumption diminishing.

Without excluding the possibility of some kind of consequence for the Latin American economies, the recent meeting of the Inter-American Development Bank in Miami confirmed the current capacity of the sub-continent’s economies, in a general sense, to absorb the most disastrous consequences of the U.S. financial crisis, while making an exception of the Central American countries and Mexico, which could be the most compromised given their close economic links with the United States, including their free trade agreements.

Never before has Latin America had in its power the political weapons with which to protect itself. The national liberation movement that is gaining ground on the continent, or simply the pragmatism of some countries in breaking loose from the powerful neighbor to the North, has resulted in the opportune antidote to prevent our region being dragged more deeply into the U.S. financial debacle. It is a lesson from which we all should learn.

Source: http://www.granma.cu