|
21-Jun-02
Latin America suffers the "Tango Effect" The "Tango effect" has begun to bring a halt to Latin America's ascending curvature of growth. In
some cases, such as Brazil and Uruguay, the influence of the Argentine crisis is causing serious macro-economical disruptions. The region is going through a difficult phase, product of the economic debacle in
Argentina, and the consequences are threatening to turn this into a vicious circle that may end up ruining the country. Last Thursday Uruguay's government decided, following the advice of the International Monetary
Fund (IMF), to let the dollar float freely in the market. This caused an immediate 7% devaluation of the Uruguayan currency. At the same time, Brazil also lived a dark day after Moody's lowered its rating. The
distrust and uncertainty that today dominates the Argentine economy are spreading to other countries of the Mercosur in a worrying manner and this, aside from damaging the global image of the commercial block, marks
another negative trend for Argentina's agonizing situation. Competitiveness: a promise unfulfilled When, during the beginning of 2002 the Law of Convertibility (a law that tied the
Argentine peso to the American dollar) was repealed, the great promise of Eduardo Duhalde's government was that the devaluation of the peso would improve Argentina's competitiveness. By increasing the volume of
exportations to foreign countries, Argentina guaranteed the income of fresh dollars in order to inject them into a depressed internal market that borders on hyperinflation. The main buyer of Argentine products, inside
Mercosur, is Brazil. A great amount of Argentine food products are destined to Brazil. Dairy products, wheat, corn, fruit and petroleum are some of the products Brazil imports. From January to May, Argentina has
showed a surplus with its neighbor of $1.3 billion, up from $388 million in 2001. A similar situation goes on with Uruguay,
although –through Decree 113/02- they have established measures that restrain the entry of Argentine products to their country, with the goal of "protecting national production against disloyal commercial competition
caused by the devaluation of the Argentine peso." If the expansion of the crisis causes strong devaluations in both of Argentina's neighbors, or
in other countries of the region, the competitive advantages that Argentine products offer in those markets will be seriously affected. This will culminate in a reduction of sales to those countries, absolutely
fundamental in Argentina's new commercial structure. For Argentina, the "positive" effects of the devaluation will not bring any benefit, while the region in general will be submerged in an atmosphere of distrust and
legal insecurity.Perhaps this current negative scenario, marked by imminent presidential elections in Brazil and Argentina, offers the opportunity of turning Mercosur into a truly united block, integrated by partners
and not competitors. Perhaps this crisis will bring its unity and jumpstart definitive interaction. Perhaps new authorities will make decisions that benefit the entire group without being detrimental to everyone else.
But another possibility also exists: that pettiness and a lack of future planning may end up destroying a project of commercial, social and economic integration that holds the key of progress for South American
countries in the coming years. E-campo.com
|
|
