In this issue:

Mexico's Treasury Secretary: Argentina Coming Here

Monitor Mercantil: LaRouche Warns Brazil on Foreign Debt Explosion

U.S. Credibility in Ibero-America Falling Faster Than Financial Markets

IMF Sends 'The Undertaker' to Argentina

Argentina GDP Down 16%—Biggest Drop in History

Venezuela Remains a Flashpoint for Crisis

Gen. Bedoya Supports Peruvian Heroes Against Toledo Gov't

From the Vol.1,No.16 issue of Electronic Intelligence Weekly

IBERO-AMERICAN NEWS DIGEST

Mexico's Treasury Secretary: Argentina Coming Here

Mexico looks like Argentina before its crash, Mexicao's Treasury Secretary Gil Diaz told Mexico's Congress on June 20, 2002. Remember six months ago, the statement issued in January 2002 by Lyndon LaRouche's collaborators, the Ibero-American Solidarity Movement, and titled "We Are All Argentina"? The one that said that Brazil and Mexico, and the financial systems of all the other countries, too, were going to blow, unless people listened to Lyndon LaRouche? Remember all the people who said we were wrong?

On June 20, Francisco Gil Diaz told the Permanent Commission of the Congress that "we are facing a problem similar to that of Argentina." He argued that fiscal revenues were lower than budgetary expenses, and the difference was being made up by selling off state assets—exactly as Argentina did, until it ran out of things to sell, while its debt grew exponentially, and it finally could not meet its debt payments. We sold the Hidalgo Insurance company, and the remaining government stock in Bancomer, Gil DiaZ said; we are securitizing the revenues from the toll roads; and doing things with the Brady bonds, "but at some point we are not going to have anything to sell, and this moment is very soon."

Gil Diaz stated reality publicly, to hammer Congress that they had to pass a killer tax reform. This was too much for President Vicente Fox, however. Already a debate was raging in the media over whether or not Mexico is becoming like Argentina—both economically and politically. Two hours after Gil Diaz spoke, President Fox countered from Chiapas, where he was visiting, that Mexico enjoys economic and political stability, and "things are fine, they are stable."

Reality was also too much for the PRD Party. The PRD Mayor of Mexico City, Andres Lopez Obrador, a fine specimen of the Teddy Goldsmith "anti-globalization" swamp, issued a call on June 21 for people to stop polemicizing about the economic situation in the country, because the "markets are very nervous, and it's better to not issue opinions.... Don't even think about Argentina, forget it. These are big words. A crisis of that magnitude would impoverish us terribly. We are talking about a loss of buying power of 50%," he cried.

Monitor Mercantil: LaRouche Warns Brazil on Foreign Debt Explosion

One of Brazil's leading daily newspapers, Monitor Mercantil, published a prominent front-page article June 17, covering Lyndon LaRouche's high-profile visit to Brazil last week.

Previously, Monitor, which has been following LaRouche's work for years, had run two short items reporting on LaRouche's visit. In 1998, the paper ran a front-page interview with Helga Zepp LaRouche on Aug. 18, in which the newspaper acknowledged that she had been correct when she had warned them earlier that the Russian debt was about to blow out; she had also warned that once Fernando Henrique Cardoso was re-elected President in October of that year, speculators would attack Brazil—which is exactly what occurred.

Monitor's latest article on LaRouche reads as follows:

"The process of the dollarization of the foreign debt of Brazil 'could explode in the first quarter of 2003.' The forecast is from U.S. economist Lyndon LaRouche, in warning of the risks that the world economy, and especially Latin America, runs in the face of the U.S. monetary imposition, with the support of the IMF.

"Close to 30% of Brazil's public debt, which totals R 684.3 billion, are bonds indexed to variations in the exchange rate. In addition to this, the latest operations of the Central Bank in the financial markets leave as a legacy for the next government, R$115 billion in debts which come due by the first quarter of 2003. Of this total, a little more than 10% are paper linked to the dollar.

"LaRouche spoke on 'The Global Systemic Crisis and the End of "Free Trade," ' in the auditorium of the Latin American Parliment. The economist, who suffered persecution by the right wing of the U.S. for his positions against neoliberalism, was honored by the Sao Paulo Municipal Council. In his view, the world monetary system 'is finished,' but 'out of fear, the people responsible deny this reality.' 'You should not think that Argentina and the U.S. are different from one another.'

"According to LaRouche, 'The U.S. lives off not paying the debts of its exports [sic]. Perhaps it would be good if the IMF turned its eyes on the U.S., as it does in Argentina,' he said ironically.

"After characterizing the U.S. strategy as 'a financial swindle,' LaRouche said, that if you compare the debt to the total already paid, 'Latin America doesn't owe anything more.'

"He forecast that, if current conditions continue, August, September, or October could bring conditions identical to those of the First and Second World Wars."

U.S. Credibility in Ibero-America Falling Faster Than Financial Markets

As the financial bloodbath spreads to every country in Ibero-America, none excluded, the stature there of the Bush Administration has crumbled. "Crisis Also Threatens Credibility of the Bush Government," Folha de Sao Paulo headlined a June 20 article filed from Washington. "The crisis in the Latin American markets is not only affecting the investments of U.S. banks and companies in the region. The credibility of U.S. Treasury Secretary Paul O'Neill, who conducts his strategy for the region based on the thesis that the risk of contagion is an 'intellectual fiction,' a myth created during the Bill Clinton government to justify mega-packages of aid, is also at stake," the Brazilian daily wrote. O'Neill and his number two, John Taylor, bet that Argentina's bankruptcy would not affect neighboring economies. And that the collapse of Enron, for that matter, wouldn't affect any country either, as long as it adopted "healthy measures," such as flexible exchange rates and fiscal rigor, Folha pointed out.

Folha wrote this, before O'Neill's latest blunder on Brazil! (See LaRouche on the "Hooverville Trolley," in this issue of EIW.)

Washington is sending Assistant Secretary of State Otto Reich to Brazil, Argentina, and Uruguay in the first two weeks of July, because it is beginning to recognize that the Southern Cone is affected by the Argentina crisis, the Argentine daily Clarin claims. But what plans the U.S. may have—if any—to deal with the crisis, are another story. No one knows what Reich is supposed to accomplish by the trip, an Ibero-American ambassador posted to Washington told Clarin. An unnamed senior U.S. analyst in Washington said simply: "As far as I'm concerned, they are trying to cover up the fact that, in reality, they have no policy."

IMF Sends 'The Undertaker' to Argentina

John Thornton, the Brit who heads up the International Monetary Fund mission now in Argentina, and who is known colloquially as "The Undertaker," made his reputation working in Ecuador. There, he pushed through that country's dollarization plan, and is known as a "fanatic of the Ecuadoran model," and particularly for the way it handled the issue of frozen bank deposits. He is said to be on exactly the same wavelength as the IMF's Anne Krueger and Anoop Singh, a fact which makes some Argentine officials yearn for the days of Michel Camdessus and Stanley Fischer, who look good by comparison.

Argentina GDP Down 16%—Biggest Drop in History

For the first quarter of this year, Argentina's GDP dropped by 16.3%, over the same quarter in 2001—the biggest quarterly drop in its history. It is estimated now that the decline for this year will be 15%, which would also be a record. After 45 months of official "recession," the Argentine economy has contracted by 20.1%, with a spectacular 60% drop in investment. Measured in dollars, GDP today stands at $100 billion, representing an extraordinary 70% drop compared to last year's level. Last year's GDP was similar to Belgium's; now, Argentina trails Indonesia and Poland, and is slightly ahead of Chile.

Venezuela Remains a Flashpoint for Crisis

In Caracas, a half-million people turned out for another march against President Hugo Chavez June 15—many more than the 120,000 or so people organizers had hoped for. The rallying cry remains the same: Chavez must go.

Ten thousand civilians joined a march organized by retired military officers June 20, far more than expected. The officers called the march to demand the President's resignation, and an end to the purge of hundreds of "institutional" military officers, who have opposed the transformation of the Armed Forces into Chavez's personal political instrument. Originally, military officers planned to march in their uniforms, but the government threatened to jail for a month any soldier who did so. Some opted to carry their military uniforms on poles, instead! The organizer of the march, Col. (ret.) Hidalgo Valero, was arrested immediately after the march concluded.

This time the Chavez forces did not attempt to counter the marchers in Caracas, but instead organized Chavez support rallies in the interior. At any point, however, armed conflict between the two irreconcilable opposing forces could break out again, as happened in April. The U.S. State Department issued a travel advisory on trips to Venezuela at the beginning of June, reversing their late-April statement that things were "calming down" there.

Gen. Bedoya Supports Peruvian Heroes Against Toledo Gov't

Colombia's General (ret.) Harold Bedoya, former Colombian Army Commander, published June 14 in La Razon, the Peruvian daily, a piece expressing strong opposition to the attempt by the government of Peruvian President Alejandro Toledo to jail the Peruvian commandos who carried out—under the leadership of former President Alberto Fujimori—the spectacular 1997 rescue of 72 hostages who had been held for five months by the narcoterrorist MRTA.

The hostage rescue operation, known as "Operation Chavin de Huantar," by the military forces of Peru "is a successful example of how the war against narcoterrorism should be waged worldwide," Bedoya wrote. "By not following the Peruvian example, Colombia finds itself on the verge of political and territorial disintegration. As in the days of the independence struggle, the freedom and dignity of our peoples have been consolidated through the valor of our soldiers, whose sacrifice lies above the meanness and baseness of those who know nothing about the Nation.

"I want to express my solidarity, and that of the majority of the Colombian people, with the 'Chavin de Huantar' heroes. Thanks to your invaluable effort, terrorism suffered a crushing defeat, although today, using methods of irregular warfare, some are attempting to revive the threat. A people which does not know how to honor its heroes, loses its historic way. In my capacity as president of the 'Fuerza Colombia' movement, I continue to believe that thanks to 'Chavin de Huantar,' the history of Peru and the Americas changed for the good of all humanity."

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