'Whilst none held back in reproaching the US, their dependence on their northern neighbour was evident.'

Martin Piper reports on how the global financial crisis has been seen in the south American country of Bolivia

The day after Washington’s initial bailout plan was rejected by the House of Representatives, leaders from Brazil, Venezuela, Ecuador and Bolivia met to discuss the repercussions of the US financial crisis for the region and how, through increased integration they can minimise the worst of its effects.

Set against the backdrop of political instability in Bolivia, apprehension over the military relationship between Venezuela and Russia and heightened tension due to Ecuador’s recent decision to suspend Brazilian construction contracts, the dignitaries had much to discuss.

Chavez, Lula da Silva, Correa and Morales met in Brazil’s Amazonian city of Manaus on Tuesday and whilst none held back in reproaching the US, their dependence on their northern neighbour was evident.

Jittery

The House’s original rejection of the bank bailout proposed by Treasury Secretary Henry Paulson provoked outrage and finger pointing from around the globe, not least in South America. Now that the revised plan has been passed, the markets still look jittery and many still expect a crash.

There is strong criticism aimed at the culture of “casino capitalism” practiced on Wall Street and its lack of financial regulation, a culture that puts all the world’s economies in jeopardy. “They spent the last three decades telling us to get our house in order, they didn’t” said Brazil’s President Lula Da Silva at a press conference.

Recession in the US will imply the abatement of its purchasing power. Venezuela exports nearly all of its oil to the US, a decline in oil prices, combined with lower demand, could cripple its economy.

Chavez, whilst assuring that the nation is prepared for the crisis due to its strong economy, high growth and unprecedented international reserves, also added that “Nobody knows the scope of this economic crash. I believe that the crisis will be worse than that of 1929 and will affect the whole world”.

La Paz daily La Razon, reports that Bolivia’s main concern is that a deep global recession could precipitate the return of many Bolivian emigrants who work in the US and Europe. Such an influx could increase unemployment and result in a loss of capital from foreign remissions, which, according to the Central Bank of Bolivia, brought in $452 million in the first half of this year.

Programs

Bolivia is also worried about the long term effects of the fall in price of primary products such as hydrocarbons and minerals, instrumental to the nation’s wealth and controversial social programs.

Ecuador ’s president, Rafael Correa was more sanguine, asserting that “such a crisis doesn’t frighten us as much as before, I hope the day comes when what occurs in the US is irrelevant to South America”. He did however concede that the effects on exports, especially oil will be detrimental.

The four presidents discussed the strengthening of regional mechanisms that will allow South American economies to resist the “contamination” of the international financial crisis.

Chavez pushed for the activation of Banco del Sur, a regional development financing institute which was created last year, but is yet to become a working institution for technical and bureaucratic reasons. “We must not lose a single day in activating the bank” he said.

Lula da Silva stated that “we must not become victims of the “financial casino” created by the US. He implored the government and congress in Washington to take whatever steps needed to avert the crisis before its effects spread and destroy the developing world’s hard earned gains.

Hypocrisy

Now that the bailout has been agreed, many developing countries have been quick to highlight the hypocrisy of the US in telling them (developing countries) how to run their economies with minimum government intervention along free market principles.

Now that the free marketeering of Wall Street has shown its shortcomings, the government has intervened with $700 billion of US taxpayers’ money and the repercussions for the global economy are still to be seen.

Bolivia ’s president, Evo Morales told a press conference “In Bolivia, we nationalise our assets so that the people have wealth, whilst in the United States they want to nationalise the debt and the crisis created by the wealthy”.

Martin Piper is a former employee of Christian Aid who now lives and works in South America.

These are personal comments and not necessarily the position of Christian Aid or its partners.

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