Brazil Blowout is Not "Contagion"
by Cynthia R. Rush
July 3 (EIRNS)As we go to press, Brazil's debt bubble is exploding, just as Democratic Presidential pre-candidate Lyndon LaRouche said it would, during his historic June 10-14 trip to the South American giant.
In this, the Third World's largest debtorat $500 billionthe national currency, the real, is falling almost daily, and now stands at a record low of 2.9 to the dollar. Add in the fact that 40% of the more than $250 billion in public debt is indexed to the dollar, and another significant percentage to fluctuating high interest rates, and the result is the highly volatile mix which makes Brazil so vulnerable to default at any time.
The reverberations of this crisis are being felt throughout Ibero-America, and internationally. In Chile, Uruguay, Paraguay, Mexico, and other Ibero-American nations, currencies are plummeting, investors are pulling their money out, and anything resembling real production is rapidly coming to a standstill. Argentina is so close to economic and political disintegration, that President Eduardo Duhalde has called early elections, in an attempt to stem the collapse. - 'Contagion'? -
Yet in their lunatic insistence on avoiding reality, Wall Street and London analysts, as well as Washington policymakers, are explaining Brazil's blowout as just "contagion" from the Argentine catastrophe, rather than a reflection of the systemic global collapse of which LaRouche has repeatedly warned.
Exemplary of the Bush Administration's foolish and dangerous foreign policy blunders, on June 21, Treasury Secretary Paul O'Neill loudly announced that Brazil's crisis had nothing at to do with economics, but "is driven by politics." People are worried that Workers' Party candidate Inacio "Lula" da Silva (a leader of the continental narcoterrorist umbrella group, Sao Paulo Forum) might win next October's Presidential election, and repudiate the debt, O'Neill said. So, "throwing U.S. taxpayers' money at a political uncertainty in Brazil doesn't seem brilliant to me."
Brazilian President Fernando Henrique Cardoso was so enraged at O'Neill's remarks, that he called up George Bush to complain. Bush didn't take the call, but shortly afterward, O'Neill "clarified" his remarks, praising Brazil for having strong "economic fundamentals," and calling it "a critical regional and global partner of the United States." - Dangerous Folly -
But this didn't undo the damage to U.S.-Brazilian relations, which have suffered as a result of U.S. neo-imperial follies. Reflecting the anger felt by many Ibero-American governments, Cardoso told the Mexican TV program "Zona Abierta" on June 28, that President Bush "doesn't care about Latin America," and the latter's lack of knowledge about the region has condemned it to "irrelevancy." A day later, Argentine President Duhalde echoed those sentiments in his weekly radio program.
Cardoso also reported that he had intervened with Bush many times on Argentina's behalf, urging the U.S. to aid that country, to no avail. The Bush Administration has allowed O'Neill and the IMF to deal with Argentina in the most brutal way possible, effectively writing it off as a basket case.
But there are signs that some factions are beginning to grasp the implications of letting Brazil or Argentina go under. A panicked New York Times editorialized June 30 that Bush and the Treasury would be committing a "costly mistake" if they thought "they can continue to punish Argentina ... without any spillover effects or contagion." Moreover, this "callousness" toward Argentina, could provoke a "dangerous backlash against free markets and economic liberalization" with an "anti-American flavor," it warned.
Somewhat more positive statements from O'Neill and the IMF over the weekend of June 29-30, suggesting they are backing off from total confrontation with Argentina, are said to be the result of pressure from European banks and companies, which have enormous investments in Argentina and Brazil. The Bush Administration appears to have agreed to such a shift, in exchange for European support to try to stop the dollar's plunge against the euro, but no one is betting that this can hold, even over the medium term.
Argentine President Duhalde has talked timidly of the need for Ibero-American countries to unite and form a "common front" to deal with the U.S. and the IMF. But such unity would have to be based on LaRouche's New Bretton Woods proposal, and on breaking with the IMF, to be effective.
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