Despite Broad Brush Of Gloom Most South American Economies On Rebound World Bank Officer Says
By Paola Iuspa
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While some South American countries are battling economic crises and political flux that fuels front-page headlines in international newspapers, the message from the experts is that the outlook nation by nation is not necessarily gloomy, with most countries experiencing modest economic growth over the past year.
"The difficult period we are seeing in the region is not one story or four stories," said David DeFerranti, vice president for Latin America & the Caribbean with the World Bank. "It is 10 or 20 different stories. Each country is a different story," contrary to what some people see as one problem affecting all Latin America.
Mr. DeFerranti spoke to about 50 people Monday in the downtown Miami Hyatt Regency Hotel to a luncheon of the Association of Bi-National Chambers of Commerce. With more than 40 bi-national chambers as members, the association’s mission is to inform and foster trade opportunities for the South Florida international business community.
"Except for Argentina, Uruguay and Paraguay," Mr. DeFerranti said, "the rest of Latin America experienced small economic growth" this year. "And 2003 is projected as a recovery year. It will be better than this year."
Mr. DeFerranti stopped in Miami on his way to Washington from Colombia, where he said he met with a new team put together by recently elected Colombian President Alvaro Uribe.
The World Bank makes loans to 184 member countries at varying interest rates based on each nation’s assessed wealth. Its focus is to strengthen education, health care and infrastructure by lending money to governments or the private sector.
Contrary to the International Monetary Fund, which injects money into economies to prevent them from running in the red, Mr. DeFerranti said the World Bank helps fund development programs that have a more lasting effect, usually in areas such as education and health care. He said last year World Bank issued $19.5 billion in loans.
Before issuing a loan, he said, its bankers analyze the causes of troubles in the country applying for a loan and how legitimate the government and its policies are to its own countrymen.
Except for Argentina, Mr. DeFerranti said, many South American countries are weathering financial crises that were started by external shocks, such as the financial turnaround in Asian countries in 1997, the collapse of the Russian economy in 1998 and the US slump that started in 2001.
"Most of the them have the fundamentals in place," he said, "but outside shocks caused their current crises."
Argentina’s calamity, which peaked with a four-year recession and led the country to default on repayment of its external debt, is rooted in weak fundamentals, including how business is done between federal and provincial governments, Mr. DeFerranti said.
The nation has been driven to its current situation, he said, in part based on who sets limits for provincial governments borrowing activity and who is responsible for taking up debt. He said the World Bank lent Argentina $100 million for urgent matters such as buying medicine and school supplies. Since the government has already used up that money, his group is discussing a possible second loan.
The global organization has an International Finance Corporation division that provides loans to private groups, Mr. DeFerranti said. He said the World Bank would focus on helping Argentina overcome its crisis by lending to the private sector to help get exports going as an almost year-old devaluation has made Argentine products very price competitive.
The Argentine ambassador to the US, Diego Ramiro Guelar, said last week in a visit to Miami that many of his country’s exporters do not have access to capital to manufacture and deliver purchasing orders. The monetary fund cut almost all credit lines in December after Argentina repeatedly missed its spending targets, forcing the country to default on $95 billion owed private investors.
Currently the monetary bank is trying to figure out how to help to prevent Argentina from failing to pay the only debt it is still current on, $32 billion owed to the International Monetary Fund, World Bank and the Inter-American Development Bank.
Argentina will hold presidential elections in March.
On the other hand, Mr. DeFerranti said, Brazil, Uruguay and Colombia have good polices in place to help those nations recover. Except for Argentina and Peru, which show an increasing sympathy for Leftist governments, he said, the rest of Latin America supports democracy.
Brazil has good fundamentals and its way of doing business makes sense, said Mr. DeFerranti. In the past 10 years, he said, the largest economy in Latin America has been rewriting many of its policies – especially those on education and health care – to become a trustworthy nation. Mr. DeFerranti said that while Brazil is facing elections in less than a month and one of the leading candidates is from the Left, the World Bank is confident Brazil will not deviate from an open economy.
Uruguay, Paraguay and Bolivia have been affected by Argentina’s chaos, Mr. DeFerranti said.
Ricardo Bernasconi, president of the Uruguay-American Chamber of Commerce, said at Monday’s lunch that a drop in Argentine tourists and exports and the sudden flight of Argentine capital in Uruguayan banks to the US and Europe has weakened his country’s economy and banking system.
He said about 60% of Uruguay’s businesses depends on Argentina and Brazil.
Mr. DeFerranti said Venezuelan populist President Hugo Chavez recently put together a new team that inspires hope.
"The new team seems to be a taking a better direction," he said. "We recently met with him and, while still there are challenges ahead, President Chavez said he would support the changes."
Colombia, still fighting a 40-year civil war against guerrilla forces, has a stable economy, Mr. DeFerranti said. He said World Bank officers are optimistic that the new administration in Colombia will make the right decisions.