Latin America Catches
the “Asian Flu”
NEW YORK, DECEMBER 10, 1997
Traders love to invent cute
names for proliferating finan-
cial panics. Collateral damage
done to Latin American stock and
currency prices by Mexico’s
1994-95 crisis was called the
“tequila effect.” Late 1997
brought an outbreak of the “Asian
flu,” to which the Western hemi-
sphere has not been immune.
One measure that captures the
twin afflictions of a collapsing
currency and an equally collaps-
ing stock market is the Inter-
national Finance Corporation’s
(IFC) “emerging market” in-
dexes, which convert local cur-
rency prices into U.S. dollar val-
ues. The IFC’s ten-country Asia
index fell 43% between its
February peak and December 10.
The seven-country Latin America
index peaked in July, and fell
17% in the last half of the year. Of
the major Latin markets, Brazil
was hit hardest, falling 29%,
prompting the government of
Fernando Henrique Cardoso to
impose a stiff austerity program.
The crisis started in Thailand.
After its 1997 peak of financial
fortune in January, the economy
slid a bit in the first part of the
year, and then collapsed in the
summer. Indonesia, Malaysia and
the Philippines quickly followed
Thailand down. Hong Kong,
thought to be solid, trembled in
October, and by year’s end, Korea
seemed to be going under. Japan,
meanwhile, is still stuck in a six-
year financial crisis. If it, or
China, succumbs to the flu, then
the financial world would be in
fairly serious danger. In the
fevered interpretation of the
Asian melodrama, this is the first
sign of a global recession-an
implosion of prices and output
similar to that of the early 1930s.
The more relaxed version is that
the authorities can craft a bailout
on conditions very favorable to
foreign, especially U.S., capital.
While Thailand’s President
blamed international financier
and philanthropist, George Soros,
for the crisis, much more was at
work. All the Asian countries
were capitalized for growth:
banks and firms borrowed heav-
ily, often in foreign currencies,
and expanded quickly. There was
also quite a bit of corruption,
grandiosity and waste. It all
worked fine while currency val-
ues were stable and GDP and
export growth were strong. But
growth slowed in both 1996 and
1997 and the balance of payments
deteriorated. With inflation
higher than U.S. rates, currencies
became worth less than the gov-
ernments’ posted prices.
Asia now faces structural
adjustment, prescribed by the U.S.
Treasury and the Bretton Woods
institutions. Washington is writing
the reconstruction guidelines
without providing much money, which has provoked some resent-
ment in Asia and Europe, but not
enough to stop it from happening.
Since other governments are no
more forthcoming than the United
States, the International Monetary
Fund (IMF) and World Bank are
providing the cash to manage the
restructuring. But the IMF itself is
also very strapped, and if another
big country or region were to
stumble, then it would need a big
cash infusion.
Elite newspapers are full of sto-
ries about how the model for what
Asia needs to do now is Latin
America; the Wall Street Journal
used its front page to tout Mexico
as an example. These articles are
usually spare with the human
consequences of debt restructur-
ing–deliberately engineered un-
employment, impoverishment
and bankruptcy. The real econ-
omy is put through a wringer as
vast sums are transferred to sup-
port stock and currency prices
and repay loans. Sure enough,
Mexico’s IFC stock index was off
only 9% off from its peak by the
end of 1997, the least of any
major Latin American market.
Latin America has been caught
up in the Asian melodrama
largely because financial markets
are driven as much by sentiment
and psychology as by economic
fundamentals. Since one region
of the so-called developing world
was in turmoil, investors on Wall
Street and similar outposts around
the world got nervous about all
developing markets. Brazil, long
seen as the economy that has
most resisted structural adjust-
ment in Latin America, was the
hardest hit. Like Asia, it has been
running a large current account
deficit, but unlike Asia, its gov-
ernment has also been running
deeply in the red. Brazil didn’t
even need the IMF to tell it what
to do: the government quickly
proposed an austerity package
with 50 components, including
sharp tax increases, budget cuts
and public-sector layoffs. To its
neighbors, this will seem like
familiar medicine. What has most
surprised Latin Americans is that
their economic experience-basi-
cally a 15-year depression for the
bottom half to three-quarters of
the population-is being held up
as a model for Asia, a part of the
world that had, up until only six
months ago, been touted as a
model for Latin America. It’s not
only in fashion that models have
brief careers.
-Doug Henwood
Six Generals Headed for
the Chilean Senate
SANTIAGO, DECEMBER 15, 1997
rtle former chief of the uni-
I formed police, retired Gen.
Rodolfo Stange, won a senate
seat in midterm parliamentary
elections held on December 11.
He will be joined in the Senate by
five nonelected generals this
coming March. The constitutional
amendments negotiated by the
Pinochet regime as conditions for
the return to democratic rule man-
date a total of nine “designated”
senators in the upper house of
Congress, plus senate seats for
former presidents who have
served six-year terms. Earlier this
year, Pinochet announced his
intention to take his senate seat
after he steps down as comman-
der-in-chief of the armed forces in
March, 1998. Chilean human
rights activists and other progres-
sive sectors have expressed
intense concern about this milita-
rization of the legislature. “The
fact that Pinochet and the other
generals are members in the
Senate is a setback for the transi-
tion to democracy,” says Mireya
Garcia, a leader of an association
of family of people who disap-
peared during the dictatorship.
“Our democracy is a prisoner of
the military.”
Designated senators serve
eight-year terms, like their elected
counterparts. Three are appointed
by the Supreme Court, two by the
president and four by the National
Security Council. These institu-
tions will announce their new
appointments before the end of
1997. The 1980 Constitution-
drafted by the Pinochet regime-
requires that three of these sena-
tors be former heads of each of
the three branches of the armed
forces and one be a former com-
mander of the Carabineros, the
uniformed police. Admiral Jorge
Martinez Busch and Gen. Fern-
ando Cordero, heads of the navy
and the Carabineros respectively,
have already resigned their posts
to pave the way for their Senate
appointments. Gen. Ram6n Vega
and Gen. Fernando Matthei, a for-
mer member of Pinochet’s mili-
tary government, are candidates
from the air force. Political ana-
lysts say that this new cohort of
appointed senators could carry
more weight than those currently
holding seats.
The midterm elections did not
disturb the overall balance of
power in the Senate. The ruling
Concertaci6n lost one elected seat
to the conservative Uni6n Por
Chile opposition coalition, leav-
ing the balance at 20 to 17 respec-
tively. An important shift occured,
however, within the opposition.
The big winner was the Indepen-
dent Democratic Union (UDI), an
ultra right-wing party that was the
junior partner in the coalition led
by the more moderate National
Renovation (RN). The UDI has
long been cashing in on RN’s
internal problems, and after the
midterm elections, in which it
won seven seats to RN’s two, it
has taken command of the right-
wing opposition in the Senate.
The electoral victory of the
hardliners has serious implica-
tions for the current government’s
ability to legislate. The few polit-
ical reforms that have been passed
have necessarily been negotiated
with votes from RN legislators.
UDI politicians, on the other
hand, are unequivocally loyal to
the project of the Pinochet
regime. Gen. Stange was elected
on the UDI ticket. He was the
center of controversy in 1994,
when he refused President Frei’s
demand that he resign as chief of
the Carabineros because of his
alleged involvement in the cover
up of the deaths of three commu-
nist leaders killed in 1986.
The presence of the generals
and the increased leverage of
ultraconservatives in the Senate
makes any constitutional reforms
unlikely. Last year, a bill backed
by the current government to do
away with the designated senators
was blocked by the elected oppo-
sition and the very senators it
sought to eliminate. In the new
legislature, such initiatives are
likely to be dismissed even earlier
in the legislative process.
This authoritarian fait accompli
is perhaps what explains the
Bogota, December 15, 1997-Family members mourn the death of a guard killed in one of several prison riots that erupted after the Senate delayed voting on a sen- tence-reduction bill designed to ease severe overcrowding in Colombia’s jails. Controversy arose over provisions that would have included drug traffickers among the beneficiaries of the proposed law.
widespread apathy among the
Chilean electorate evidenced in the
December election. Over 15% of the
ballots were anulled by voters and
another 5% were left blank. Gov-
ernment sources also estimate that
over a million people who have
reached voting age since 1993 have
not registered in the country’s elec-
toral rolls.
-Latinamerica Press
and La Epoca
Sandinistas Propose
Internal Party Reform
WASHINGTON, D.C., DECEMBER 1, 1997
The Assembly of Nicaragua’s
Sandinista Front for National
Liberation (FSLN) has called for a
special session of the Second
Sandinista Congress, to be held May
15-17, 1998, to decide on a series of
proposed measures designed to rad-
ically reform the party. In its fourth
regular session of 1997, held in El
Crucero last November, the
Assembly asserted the need to carry
out profound structural changes in
the Frente Sandinista.
The heart of the proposed reform
is the replacement of the FSLN’s
thirteen-member National Direct-
orate by a new seven-member
National Executive Committee,
with each representing one of the
proposed party secretariats-general,
finance, organizational and electoral
affairs, international relations,
women, youth, and training and
public relations. While there would
be “new faces” among the seven,
Daniel Ortega would continue on as
the Party’s general secretary. Also
proposed was the creation of an
Advisory Council consisting of
party members with at least 15 years
experience in organizational and
political affairs, but limited to those
who have not held an executive
position in the last two years. The
Sandinista Assembly would also be
reduced in size from its current 120
members to 80 and restructured to
provide more equitable territorial
representation.
In his speech to the Sandinista
delegates, Daniel Ortega cited seri-
ous structural weaknesses in the
way the party is run. One problem
he pointed to was declining levels of
mobilization, evident in the national
protest against President Alemin
last April and the July student
protests against cuts in state funding
for education. The FSLN, said
Ortega, is based on forms of organi-
zation and conceptions no longer
adequate in an age of globalized
capitalist hegemony. While the
Front has been reduced to parlia-
mentary forms of struggle, said
Ortega, it has not been able to effec-
tively contest and win elections.
“We need a new Frente Sandinista,”
said Ortega. “Our success in parlia-
mentary battles depends on our
strength in the popular struggle.”
A special commission has been
appointed to seek input from the
party rank-and-file on the final pro-
posals. Dissenting voices are
already being heard. Some argue
that the reduction in size of the
National Directorate and Sandinista
Assembly will actually concentrate
power and make the party less rep-
resentative. Another polemic issue
is the proposal to redefine the
Frente’s ideological orientation as
“social democratic,” and the ques-
tioning of the term “anti-imperial-
ist” in the FSLN Charter. Whatever
the outcome, the old slogan of the
1980s, “the National Directorate
Commands,” has already been con-
signed to the dustbin of history.
-Pierre LaRamie
Che’s Ambiguous
Return to Cuba
HAVANA, NOVEMBER 1, 1997
“For ten days in October, Cuba was
I transformed into a living shrine
to Ernesto “Che” Guevara on the
thirtieth anniversary of his death.
The corpses of Guevara and six
companions, who were killed by the
Bolivian army 30 years ago, were
unearthed in Bolivia last July and
returned to Cuba. On October 11, an
estimated 200,000 Cubans lined up
in Havana’s Revolution Plaza to pay
their respects to Guevara and his
comrades.
After three days in Havana, the
caskets were transported to Santa
Clara, 180 miles east of Havana and
site of the final battle against the
Batista dictatorship, which was led
by Guevara. The caravan then
returned to Havana, following the
route that Guevara’s army took in
1959 to join Fidel Castro and the
rest of the insurgent forces to cele-
brate their triumph. On October 17,
a formal military procession
brought the caskets to a new mau-
soleum at the base of a large statue
of Che that overlooks a plaza
NACIA REPORT ON THE AMERICAS
named in his honor. Before a crowd
of some 10,000 people, Fidel Castro
gave a brief and adulatory speech.
“We do not come here to say good-
bye to Che,” Castro told the crowd,
“but to welcome him home.” Castro
spoke of Guevara and those who
died with him as “invincible fight-
ers” who had returned to fight
alongside Cubans “to save the revo-
lution, the country and the con-
quests of socialism.”
Che’s return comes at a time
when Cuba is suffering an acute
economic crisis following the col-
lapse of the former Soviet Union
and the socialist bloc, the island’s
major trading partners until 1989.
The tightening of the U.S. embargo
last year has only made matters
worse. Given these harsh economic
realities, it is not surprising that lit-
tle attention was paid to Guevara’s
vehement anti-capitalist and anti-
imperialist views. Instead, the gov-
ernment chose to highlight his self-
sacrifice for the revolution, sending
the message that Cubans must do
the same in order to strengthen the
economy. But now that the govern-
ment has fully incorporated capital-
ist schemes into the economy, it is
hard to know exactly what “until
victory always,” Che’s final words
to Fidel, might mean in Cuba today.
-Wendy Patterson
Sources
Doug Henwood is editor of the Left Business Observer, and the author of Wall Street (Verso Press, 1997).
Latinamerica Press is a weekly publica- tion edited in English and Spanish. For subscription information: Juan de la Fuente 647, Lima 18, Peru.
La Epoca is a Chilean news daily. It can be read online at www.reuna.cl/lae- poca/.
Pierre LaRam6e is executive director of NACLA. This report is based on a inter- view in Washington, D.C. with Madga Enrfquez, the FSLN’s representative in the United States.
Wendy Patterson is a U.S. journalist based in Mexico City.
