LATAM: Development Panorama Gloomy in Globalised World

By Mario Osava Reprint | | Print |

Mario Osava

BRASILIA, May 9 2002 (IPS) - The developing world is suffering the consequences of global uncertainty, which threatens the benefits that arise from the globalisation process, agreed officials and experts gathered in the Brazilian capital this week for the biennial session of the Economic Commission for Latin America and the Caribbean (ECLAC).

At least five phenomena are clouding the global climate and undermining optimism, Rubens Ricupero, secretary general of the United Nations Conference on Trade and Development (UNCTAD), said in an address at the ECLAC meeting Thursday.

The battle against world terrorism – as a result of the decisive attitude of the United States in the wake of the Sep 11 attacks on New York and Washington – has become an “organising and defining factor of international relations,” he said.

Furthermore, the crises in the Middle East and in Argentina, the advance of the extreme right in some countries, and “the deepening of protectionism in countries that should be leading the liberalisation of trade” contribute to a gloomy international panorama, according to Ricupero, former Brazilian treasury minister and diplomat.

These circumstances together are cause for great concern, particularly because there are no definitive solutions on the horizon and the problems tend to grow worse.

There are speculations in the press, said the UNCTAD official, that the United States is planning a massive military strike against Iraq, but postponed it because it would cause oil prices to rise, while preventive measures are needed because the Israeli offensive against the Palestinian territories created difficulties with the Arab allies.

The Argentine economic crisis has spread to the political and social systems, and is dragging down the neighbouring countries, while no international financial aid is in sight to halt the continued deterioration.

The extreme right and xenophobia are growing among the electorates of Europe, a trend that runs counter to lowering the obstacles for international migration which ECLAC, a United Nations agency, defends as a mitigating mechanism for the asymmetries between rich and poor countries, said the UNCTAD chief.

Insecurity and uncertainty are “enemies of long-term investment,” and therefore affect the development of the countries that need those resources, like the nations of Latin America and the Caribbean.

The lack of economic dynamism today in the United States, Europe and Japan – the main centres of world power – is another major obstacle for the region’s development, commented Ricupero.

Raúl Prebisch, an Argentine economist and ECLAC’s founding father who died in 1983, taught that the development of poor countries requires accelerated growth of the world’s main economies, he added.

Ricupero mentioned, as examples of the growing protectionism of wealthy countries, the U.S. decision to impose surcharges and quotas on steel imports and the passage of a U.S. law, Wednesday, dramatically increasing farm subsidies.

Brazil’s President Fernando Henrique Cardoso, at the inauguration of the ministerial phase of the ECLAC sessions Thursday, called on industrialised countries to “comply more effectively and less rhetorically” with the principles of free trade.

Cardoso stressed the need to establish mechanisms that put an end to international financial instability, reducing the volatility of speculative capital, which he said has created “a deficit of governability in the global economy.”

The Brazilian president also criticised the actions of the financial risk assessment companies, many of which are linked to banks, for lowering Brazil’s rating, which he blamed for causing public debt titles to plummet.

The assessments of these companies are thus able to cause difficulties for attracting foreign capital and a rise in interest rates, he said.

These agencies are “behind the times” and demonstrate their inability to comprehend the democracy in place in Brazil, charged the president.

But some analysts say that the investment risk in Brazil has increased in part due to the ascent in opinion polls of presidential candidate Luis Inacio “Lula” da Silva, of the centre- left Workers Party (PT).

According to Enrique Iglesias, president of the Inter-American Development Bank (IDB), the globalisation process of the last decade has been “beneficial” in disseminating progress in technology, commerce and communications.

But he stressed among the “costs of the decade of reforms” the contagion of financial crises that erupt in one country to other countries, even on the other side of the planet. “This is a new phenomenon that globalisation created,” said Iglesias.

These crises destroy wealth that is not recovered later, as in the deterioration of a country’s social conditions, he said, pointing to the case of Argentina, where the full consequences of the crisis are not yet known, though millions of people have fallen below the poverty line in the last few months.

International financial flows increased, but remain concentrated among a few countries, following a completely “pro- cyclical” trend, in other words, they are abundant during economic booms, but dry up when they are most needed, said the IDB president.

As a result, banking crises have become more common, forcing governments to intervene, thus “socialising the losses.” In some cases, this costs the country a large portion of its gross domestic product.

José Antonio Ocampo, the executive secretary of ECLAC, touted the regional agency’s launch of a “positive agenda” aimed at correcting the negative effects of globalisation, with a new global institutional structure that reduces economic disparities.

Latin America has a long tradition of working together for a more balanced international order, “but there are ambivalences, which have been reflected recently in the loss of motivation in the region’s processes of integration,” admitted Ocampo.