Lessons from the financial front

Argentinian President recently seized YPF (South America's largest oil company,) the company is seeking compensation for this, the nationalised pension fund and the renationalised flagship airline has been popular with the Argentines – they maintain that the 1990's devastating economic crises (and the debt default of 2001/02) was because of free-market policies. They do have a great point. Here's why.

When the IMF (International Monetary Fund) get together with countries that are unable to meet their external debt, it comes at a price: in Brazil, 43% of the budget had to be redirected to debt servicing it's social programs had to be phased out as a pre-condition, a salary ceiling had to be established in the public sector, health, education and housing were frozen and had to become fiscally autonomous. The result was that the landless peasants from the country side moved to the cities, a new layer of urban poverty no less. Salaried workers and white collar employees who could no longer afford their homes were also excluded from the slum areas.

Rwanda (after the war) had to sell off state assets (at bargain prices) to service 'debts' the loans (1990-94) was used for military build-up. After Rwandan and Ugandan forces intervened in former Zaire it come to light that the U.S. Army had trained not only the Rwandan army and the Ugandan army but... the Zairian rebels... for those who are unaware, the regime in Rwanda is a US client regime. Why would the US be interested in the Congo? Cobalt. It is crucial for the US defence industry. Barely a month after hostility's stopped the IMF recommended that 'halting currency issue completely and abruptly' as part of the economic recovery. The average public sector wage dropped to NZ 30 000 a month, equal to $1. The civil war in Rwanda was supported by France and the US, in a nut shell to use Prime Minister Henri Balladur 'I don't want to portray a showdown between the French and the Anglo-Saxons, but the truth must be told.'

When the markets are opened, in every country, grain imported from the USA is brought in, because it's cheaper than locally produced grain, the farmers go bankrupt as no-one is able to buy it, in some cases (Vietnam with rice) the exported grain is exported at a loss. Then re-imported....

In Peru, August of 1990, the price of fuel increased by 31 times (2 968%) and the price of bread increased by more than 12 times (1 150%) in one day. Wage earnings dropped – less than 15% of the 1974 value! In 1990, Brazil 360 000 people had to be fired as a pre-condition to a loan being approved!

This is part of the problem of getting a loan from the IMF. Outside from the fact that the funds never ever reach the country it's meant to go to – multinational companies get the work, who then hire the locals at a far lower wage and take the lions share of the cash, leaving the country worse off then before. Ethiopia's biodiversity (for example) was genetically manipulated, and patented by agribusiness – Ethiopians today are getting bills from foreign companies demanding payment for using the 'patented' native species of barley, teff, chick peas, sorghum etc.

The only lesson to be learnt here is that should the Cape of Good Hope government decides to build a nuclear station that it shouldn't look at banks from other countries to finance them. It should be self-financed.