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Latin American Economic Crisis: More ‘Reforms?’

Weekly News Update on the Americas, issue #450, 13 September 1998

Latin American leaders and analysts have insisted repeatedly that their economic problems result from "contagion" from outside, principally from the crises in East Asia and Russia. In an interview on Sept. 10, Mexican stock exchange president Manuel Robleda Gonzalez de Castilla added "the political problems of the president of the United States, Bill Clinton" to the list of factors influencing the crisis. [LJ 9/11/98] On Sept. 11 Mexican foreign relations secretary Rosario Green Macia said that despite 10 years of structural adjustments and neoliberal "reforms," Latin America was suffering from the "harmful impact" of Asian markets and, more recently, European markets. [LJ 9/12/98]

Others suggest that the "reforms" themselves--generally mandated by the US and institutions like the IMF--are the problem. Geoffrey Shepherd, the World Bank's representative for Latin America, said this week that structural adjustments "in some cases" hadn't had the expected success, so that the World Bank was reconsidering some of its economic prescriptions. [LJ 9/11/98] Even on Wall Street there are now doubts about the neoliberal model. "It's only a bit of an overstatement to say that the free-market IMF Bob Rubin and Larry Summers model is in shambles," said John Wadsworth Jr., who runs Morgan Stanley's Asia operations, referring to US treasury secretary Robert Rubin and assistant treasury secretary Lawrence Summers. [NYT 9/13/98]

"[A]fter 16 years" the neoliberal economic policy "has shown its lack of effectiveness by generating greater poverty every day among Mexicans," Andres Manuel Lopez Obrador, national president of Mexico's leftist Party of the Democratic Revolution (PRD), said on Sept. 10. Lopez Obrador announced on Sept. 6 that he was seeking an interview with President Zedillo to discuss the need for a "governability pact" between Mexico's main political forces to meet the economic crisis. Felipe Calderon Hinojosa, president of the center-right National Action Party (PAN), has backed the proposal for a "national unity" approach to what he calls a "critical situation." But the ruling Institutional Revolutionary Party (PRI) answered on Sept. 10 by expressing is confidence in the "demonstrated solidity" of the Mexican economy, which it says is "in the process of consolidating." [LJ 9/6/98, 9/11/98]

On Sept. 9 the United Nations Development Program (UNDP) released its "Human Development Report 1998," indicating that the gap between the rich and the poor continues to widen worldwide. In Brazil, the poorer half of the population received 18% of national income in 1960, while the top 10% received 54%. By 1995 the poor's share had fallen to 11.6% while the rich's portion had grown to 63%. The 20% of the world's population in the richest countries now account for 86% of private consumption, while the poorest 20% consume 1.3%. [ED-LP 9/13/98 from AFP; NYT 9/13/98]

Correction: Update #449 gave an incorrect total for the peso value for the nonperforming loans the Mexican government is seeking to guarantee from the federal Treasury. The total is 552 billion pesos. The amount in US dollars was correct.