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POLITICS: U.S. Ups the Ante Against Latin American Populism

Emad Mekay

WASHINGTON, Jul 6 2007 (IPS) - The United States and the World Bank are launching a new plan to fight poverty in Latin America by removing obstacles to the flow of private investments, a step that observers say is one of many designed to weaken rising anti-capitalist sentiment in the region.

U.S. Treasury Secretary Henry M. Paulson said Friday the programme will initially invest only 17.5 million dollars to "attack the information, technical capacity, and regulatory barriers" that block the flow of private finance to the region.

The International Finance Corporation (IFC), the private sector arm of the World Bank Group, which will help create the programme, says while the initial investment may be small, its impact could spur new investments worth as much as 800 million to one billion dollars.

Some observers believe that plan has an unmistakable political message and complements other measures that Washington has recently taken apparently to undermine the increasingly independent policies of several governments in Latin America and reposition its economic agenda there.

A number of countries, including Argentina, Bolivia, Brazil, Ecuador, Paraguay and Venezuela, say they will found a new development institution called the "Bank of the South" to rival the international development banks that are dominated by industrialised nations.

The idea was championed by Venezuelan President Hugo Chávez as a tool to increase social spending and promote poverty alleviation.

Many leaders in Latin American have blamed the neoliberal policies of Washington, the World Bank and the Inter-American Development Bank (IDB), where the U.S. has the largest share at 30 percent, for continued poverty in the region.

Some are forsaking the economic advice peddled by the trio, which revolved around forcing Latin nations to liberalise their economies and sell national assets to foreign companies and their allies in the local business elites.

The new mood has prompted Washington and the Washington-based development banks to unveil a number of initiatives that say are meant to fight poverty in Latin America.

"Politically what they are doing is trying to counter the influence of Chavez and the other seven countries that are forming the Bank of the South," said Mark Weisbrot, who co-directs the Centre for Economic and Policy Research (CEPR) in Washington.

"I think that&#39s what&#39s behind all these initiatives coming from the U.S. and U.S.-dominated institutions," he said.

But U.S. Treasury Secretary Paulson says Washington has an interest in fighting poverty in Latin America.

"The United States&#39 interest in the Americas is strong," Paulson said. "We are committed to helping the region reduce poverty, fight corruption, build a middle class, and generate more opportunities, including for those who currently feel excluded from the region&#39s growing prosperity."

The programme to be managed by the IFC, which is often viewed in Latin America as an instrument of U.S. economic and foreign policies in the region, will help international investors&#39 pinpoint infrastructure projects and disburse information about them.

The World Bank agency will also provide technical assistance on structuring projects, tendering concessions, and improving regulatory regimes.

The initiative also signals the U.S. interest in the region in face of rising sentiments against corporate-led globalisation, often buttressed by the World Bank and similar international financial institutions, that have had negative impacts in several countries in the region, including an ever widening gap between the rich and the poor majority.

Last month, Washington unveiled another programme to reenergise market-based bank lending to small businesses in Latin America and the Caribbean.

The initiative involves a combination of new lending models, sharing part of the lending risk, and technical, regulatory assistance so that more banks can finance options for small businesses.

Publicly, Washington maintains that the Americas&#39 most serious constraint on economic growth is a lack of infrastructure. It says that Latin America currently spends less than two percent of Gross Domestic Product (GDP), the primary indicator used to gauge the health of a country&#39s economy, on infrastructure annually with underinvestment in electricity, transport and water systems.

In March, the U.S. Treasury Department, the main power broker in most international financial institutions, said it had worked closely with the IDB over the past year to cancel 4.4 billion dollars in debt and interest owed by five of Latin America and the Caribbean&#39s poorest countries.

The same line has been repeated by symbols of the corporate-led capitalism in the region that has mostly fallen from favour. The World Bank and the Inter-American Development Bank, which lends only to Latin America and the Caribbean, both with substantial U.S. contributions, have put forth the same argument.

The World Bank says that investing in the region&#39s infrastructure could reduce inequality by as much as 20 percent.

In March, the World Bank issued a report encouraging foreign investors and businesspeople to start pursuing the world&#39s four billion poor people as a potentially lucrative market worth five trillion dollars, much bigger than previously thought. It estimated that the poor in Latin America could number 360 million people.

The IDB&#39s pro-U.S. president, Luis Alberto Moreno, a former Colombian ambassador to Washington, announced plans last year to target the market for the region&#39s low-income majority.

Donald Terry, manager of the IDB&#39s Multilateral Investment Fund, said earlier this year that the private sector must look at poor people as the consumers that will buy the goods they produce.

The poor, he said, "are an untapped market for the private sector."

Analysts say that what Washington and its allies in international financial institutions are really proposing is a plan to maintain their grip on Latin economies while appearing to be fighting poverty.

"This is a sad spectacle of an administration so trapped in ideology and narrowly defined self-interest that even when it decides to provide assistance in the region, it cannot do it in a pure and genuine way," said Aldo Caliari of the Centre of Concern in Washington.

"The problem of poverty and inequality generated by unfettered market-based solutions, clearly reflected in the support that the public gives to leaders promising a recapture of the state for the promotion of social goods, is finally reaching a level where the administration feels it needs to give some sort of countervailing assistance."

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