In this issue:

IMF: Infrastructure Costs Too Much for Indebted Ibero-America

Labor Opposes Drive To Dismantle Mexican Social Security Institute

Rio Shaken by Drug-Gang Warfare

More Defections from Brazil's Ruling Coalition

Argentine Poverty Levels Surpass Brazil, Mexico

One Out of Four Argentine Children Now Work

Transparency Agent Takes Over Security in Buenos Aires

Governors Meet To Discuss Bi-Oceanic Corridors

From Volume 3, Issue Number 16 of Electronic Intelligence Weekly, Published Apr. 20, 2004

Ibero-American News Digest

IMF: Infrastructure Costs Too Much for Indebted Ibero-America

IMF External Relations Director Thomas Dawson threw cold water last week on Ibero-America's pleas to be allowed to exclude infrastructure investments from the calculations of their fiscal surpluses.

Every major Ibero-American country, except Chile and Venezuela, operate under IMF accords which require them to run high primary fiscal surpluses (revenues minus all expenditures except debt payments), in order to siphon off a fixed percentage of GNP for foreign debt payments, at the expense of everything else, most particularly infrastructure. At the last Inter-American Development Bank meeting on March 29, eleven countries signed the so-called "Lima Declaration," requesting the IMF, to allow them to invest more.

Asked about the request at the April 8 IMF press briefing, Dawson reiterated the IMF's bottom-line: Government "investments do indeed create, in most of these cases, debt, and the debt needs to be financed. And the Latin America region in particular, but other regions as well, are ones where deficits and debt levels still raise questions of sustainability."

The IMF held an informal seminar April 2 to discuss a paper prepared on this subject (which is to be made public in due course), he said. Everyone agrees public investment has been relatively low in Ibero-America, and the "declining share of government activity and of the economy has been an issue of some concern." But, he concluded, "there are still trade-offs. Resources are still scarce."

Translation: The debt comes before your desire to live. So much for the strategy of begging for "fair" treatment from a dying system.

Labor Opposes Drive To Dismantle Mexican Social Security Institute

The Mexican government is claiming the Mexican Social Security Institute (IMSS) is bankrupt, in a poorly-disguised prelude to privatizating it. IMSS claims it faces a 400 billion peso hole in its pension fund (approx. $40 billion), and is trying to pass the costs onto the IMSS workers' union (SNTSS). On April 8, the SNTSS rejected the government's various proposals, which included raising the retirement age for any new Social Security workers from 60 to 65 years, and a sharp increase in the percentage of wages deducted as a contribution to their pension fund.

Despite the barrage of media propaganda blaming alleged union "perks" for IMSS's "bankruptcy," and wild corruption charges against the SNTSS leadership, the union called marches nationwide in their defense, and in defense of IMSS, on April 14. Various unions, including the electrical workers, participated. Some 7,000 marched in the city of Monterrey.

The head of the IMSS workers, Roberto Vega Galina, denounced the whole charade, pointing out that no new IMSS workers have been hired in 20 years, so what "future generations" is the government talking about? He emphasized that there is no solution to IMSS's financial problems, separate from solving the problem of growth, employment, and wages overall in the country.

Rio Shaken by Drug-Gang Warfare

A shooting war broke out on April 9, when a drug gang from the Vidigal favela—as the giant urban slums of Brazil are known—launched an armed assault on rivals in the neighboring favela of Rocinha. By April 12, with 10 people killed, commerce in Rio in shambles, and over 10,000 students kept out of schools near the crossfire, the state authorities sent in over a thousand armed police into Rocinha, where 150,000 people live. The Defense, Justice, Civil Affairs, and Institutional Security Ministers met in Brasilia also, to discuss what action to take, after which Justice Minister Marcio Thomaz Bastos announced that the government might be willing to send the military back into Rio de Janeiro, to reestablish order.

The Vice Governor of the state of Rio, Luiz Paulo Conde, who doubles as the state's secretary of the environment, called for a 10-foot-high wall to be built around the slums, "immediately." "Not to stop the violence," he specified, but "to mark off territory." The favelas not only border upon wealthy neighborhoods and Rio's famous Ipanema beach (drug wars are bad for tourism), but, according to Conde, the growth of the favelas is encroaching upon environmentally protected forests, which are "part of Rio de Janeiro's beauty," which he considers "an important economic factor for the city."

Other officials quickly moved to shoot down the idea. Justice Minister Bastos said he was "completely against" the construction of such a wall, while the Mayor of the city of Rio de Janeiro, Cesar Maia, denounced the proposal as "unbelievable.... They want to create some sort of theme park on drug and cocaine trafficking."

As background to this story, remember that in Nov. 2002, the Cheneyacs around Defense Secretary Donald Rumsfeld identified the slums of Rio de Janeiro and Sao Paulo as "ungovernable areas," which, as hideouts of terrorists and drug-traffickers, could become targets for deployment of future regional rapid deployment forces.

More Defections from Brazil's Ruling Coalition

Leading members of Brazil's Liberal Party (PL) have officially left the governing coalition's bloc in the Senate, another sign of disintegrating support for President Lula da Silva's policies. Three Senators—Magno Malta (Espiritu Santo), Marcelo Crivela (Rio de Janeiro), and Aelton Freitas (Mato Grosso)—said they were pulling out of the bloc in order to act more independently, and by so doing, they put themselves in a position to deprive the government of support it needs for crucial pieces of legislation. If Lula wants those three votes, he will have to negotiate for them.

Vice President Jose Alencar, who has been publicly critical of the government's high interest rate policy, belongs to the Liberal Party. A few weeks ago, PL President Valdemar Costa Neto, a Congressman, called for the resignation of Finance Minister Antonio Palocci, on grounds that Palocci's economic policy has been incompetent, and on April 14, he called for Henrique Meirelles, a former top executive of the BankBoston, to be removed from his post as head of the Central Bank.

The PL is only one of several parties making up the governing coalition that is irate about the Lula government's economic and other policies.

Argentine Poverty Levels Surpass Brazil, Mexico

Poverty levels in Argentina, once the country with the most advanced living standard in all of Ibero-America, have caught up to the rest of the continent, according to the private Argentine think tanks, Idesa and Fundacion Capital. By 2002, Argentina's poverty levels had surpassed those of Brazil and Mexico—32% of the population in both these countries are classified as poor—and now approach those of Ecuador, Paraguay, and Colombia. Idesa points to the salary gap between workers who are legally on the books, and the growing number who work off the books. The legally employed earn more than double those trapped in the "informal" sector.

This is only a relative advantage. According to a survey done by the Equis consulting firm, 65% of legally employed private-sector workers earn less than the cost of the basic monthly market basket of goods and services. The government's statistical agency, Indec, reports that wages have improved by 20.4% in the last two years, but the value of the monthly market basket has increased by 55%! Worse, the subsistance market basket, which only includes food, increased during the same period by 75%! Earnings of those in the informal sector don't even come close to the minimum threshold that the legally employed might reach.

Public-sector wages and pensions remain frozen. Not even government-issued family subsidies for lower-income families have been increased, even though inflation is increasing, estimated to reach 8-10% this year. The argument is that payment of the foreign debt, which absorbs 3% of GDP, precludes any increase.

One Out of Four Argentine Children Now Work

One and a half million Argentine children under the age of 14 work to help support their families. This is at least one out of every four children, as there were more than 6 million children between the ages of six and 14 in 1998, Clarin reported April 4.

The director of the Argentine office of the International Labor Organization (ILO), Ana Lia Pineyrua, warns that "available statistics don't reflect the magnitude of the problem, due to the invisibility of the jobs, such as domestic labor, and worse, all too intolerable kinds, such as sexual exploitation."

Transparency Agent Takes Over Security in Buenos Aires

In the midst of the very volatile situation in Buenos Aires, the British hit-squad, Transparency International (TI), has succeeded in getting one of its people, Leon Arslanian, named Security Minister for the province of Buenos Aires. according to Clarin April 13. In 1999, as a former Justice Minister, he worked closely with TI's President for Caribbean and Latin America, Luis Moreno Ocampo, to "reform" the Buenos Aires provincial police, whose "corruption" he said, was responsible for growing crime rates.

Now, he's spouting the same line, to explain the extraordinary increase in violent crime in the region, which in reality is the result of IMF destruction of jobs and living standards. He promises to purge the police force, whose corruption, he argues, is "the result of the model of authoritarian centralization aggravated by the military dictatorship and lack of political control." He's promoting "citizen participation"—self-policing—and decentralization as his solution.

Governors Meet To Discuss Bi-Oceanic Corridors

Governors from states in northern Argentina and southern Brazil and Bolivia, met in Salta, Argentina on April 13, to map out bi-oceanic corridors as key to physically integration the continent. El Tribuno reported April 14. The Governors ratified the integration agreement ("the Campo Grande Charter") signed last Feb. 4 in Campo Grande, capital of the Brazilian state of Mato Grosso do Sul, which identified key integration projects for the region. In the "Declaration of Salta," which came out of the April 13 meeting, the governors identified as their main priority, the building of a "Railroad Corridor," with a 4,300 kilometer railroad from the Brazilian port of Santos to the Chilean port of Antofagasta. The railroad would go through the region known as the Central-Western South American Integration Zone or ZICOSUR, which also includes northern Chile and southern Paraguay.

On April 26-27, at the ZICOSUR meeting in Antofagasta, both the Campo Grande Charter and the Declaration of Salta will be presented to Chilean President Ricardo Lagos. There is great excitement among the participating national delegations over the potential which this project holds for developing the region under discussion. The governors hope that such institutions as Brazil's national development bank, BNDES, the South American Infrastructure Integration Initiative (IIRSA), the Andean Development Corporation, and Fonplata (La Plata Fund), among others will offer financing for this project.

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