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.
