By Benjamin Lessing
American ProspectAugust 14, 2002
Looking out from the tip of the harbor here, all you can see is water -- the flat, endless waters of the Río de la Plata, at this point in its course the widest river in the world. It is some 80 kilometers to the far western shore, and the only visible sign of another country across the river is a dull, luminous patch in the sky: the lights of Buenos Aires reflecting off clouds at night. The hydrofoil ferry that links the two cities takes about three hours; on the pier there are a few people waiting patiently for it to appear out of the blank mist on the horizon, carrying family members back from shopping trips to the suddenly affordable Argentine capital.
Such is -- or was -- life in Uruguay: staring out at the river, awaiting goods, news and visitors from the outside world. "The bad news is that everything arrives in Uruguay 30 years late," goes a popular saying. "The good news is that when the end of the world comes, it will take 30 years to reach Uruguay." Since last December, when the world came to an end in Argentina, Uruguayans have been wondering how long it would take the crisis to make the watery crossing. Last week, folk wisdom suddenly looked too optimistic: After nine months of poker-faced anxiety, Uruguay gave in to full-fledged panic, and the international media picked up the irresistible story, something along the lines of "Last Bastion of Financial Security in South America Succumbs to Chaos; U.S. Cavalry to the Rescue."
Footage of looting and tear gas on CNN and Associate Press stories such as "5,000 Cops Guard Uruguay Streets" probably made the situation seem worse, and certainly more Argentine, than it really is. The violent incidents of August 1 -- about 30 cases of attempted and successful looting of supermarkets and shops -- do not represent a nation- or even citywide phenomenon. They were concentrated in a swath of low-income neighborhoods on the periphery of Montevideo, and appear to have been planned and synchronized, suggesting an organized effort to spread chaos and destabilize the situation.
But if the rumors of Uruguay's unraveling are exaggerated, big media aren't the only culprits. The city is in the throes of a "war of gossip." Heavy police presence the day after the semi-riots prevented any serious incidents, but most stores closed by early afternoon in response to a rash of false rumors that an angry, thousand-man mob was sweeping down Montevideo's principal avenue, 18 de Julio. Other rumors, spread by what authorities are calling "telephone terrorists," paralyzed whole neighborhoods and brought police out on numerous false alarms. Helicopter patrols, something totally unheard of in this placid, genteel city, added a nice Apocalypse Now touch. Local papers described the mood as "generalized psychosis."
If that seems a bit overstated, it bears remembering that for nine months Uruguayans have been hearing reports of misery and mayhem from Argentina; now that the spotlight is on them, maybe we're seeing a bit of crisis envy. But Uruguay's flirtation with panic may be brief. Unlike Argentina, where the entire political apparatus has collapsed under its own corruption-fattened weight, Uruguay's crisis is almost exclusively economic. Actually, it's not even economic; it's psychological -- the fear of a run on banks brought on a real run on banks. Now that the banks are open again, Uruguay seems to be back to its tranquilo self. A mysterious, politically motivated group of organized agitators spreading pandemonium isn't exactly good news, but it's also highly unlikely to succeed in bringing down the government of President Jorge Batlle. And that is where the cavalry comes in.
Less than 24 hours after declaring a mandatory bank holiday last week to negotiate an emergency credit from the International Monetary Fund, Batlle's government had already received crucial public support from Washington. U.S. Treasury Secretary Paul O'Neill told reporters that "Uruguay deserves the ongoing support of the international financial community for its commitment to sound economic policy." In the same speech he stated that Brazil would also receive aid, but that Argentina would not -- because it has yet to make necessary institutional changes. Whether O'Neill's feelings about Uruguay were sincere or Batlle was simply cashing in the chips he earned last May when Uruguay sponsored an obviously U.S.-inspired United Nations resolution condemning Cuba (ultimately cutting off diplomatic relations with Havana), the implication is the same. Batlle's Washington Consensus-inspired politics have bought him the good favor of the United States, and now that the America's help is needed, nobody will be able to touch him politically for a long time.
Meanwhile, commentators in Brazil and in Uruguay are wondering just what to make of O'Neill. His rude and disparaging comments on July 28 (to the effect that South American governments would receive no further aid until they can prove it won't end up in "Swiss bank accounts") helped bring about the collapse of the real, which only rebounded after O'Neill's sudden about-face four days later. And like so many Bush administration actions, what appears at first glance to have been no more than a hotheaded (not to mention flat-footed) diplomatic blunder nevertheless ends up serving the direct interests of the hard-right foreign-policy elite.
Threatening Brazil and Uruguay with no further aid, at a time when doubt is growing about their abilities to service the interest on their debts, was guaranteed to kick their legs out from under them. Now that they are down, we turn around and offer them a hand. Critics of the IMF will continue to focus -- sometimes justly, sometimes not -- on the structural-adjustment programs these countries must enact as a condition of their loans. But there is a more profound, though less obvious, price to be paid as well.
In the short run, it may be beneficial, even vital, for South American countries to court the favor of the IMF (and thus of the United States). Nor are the IMF's conditions always unreasonable, much less malicious: Nobody in their right mind would lend money to Argentina in its current state, so why should the IMF? The typical Latin American Old Left condemnation of anything that comes from Washington is not constructive, but neither is everything that Washington does benign. When Bush massively increased agricultural subsidies this spring, it dealt a body blow to the Uruguayan -- and, to a lesser extent, the Brazilian and Argentine -- export sectors. With friends like that, who needs enemies? Or, to put a finer point on it, what good is an IMF bailout if your economic future is to sell agricultural products to the United States on ridiculously poor terms of trade?
By fostering these "special relationships" with cooperative leaders, and by brokering individual aid deals with each country, the United States is helping to create a South America of separate, dependent nations whose primary relationships are with the United States, rather than with their neighbors. "A continent of multiple, small Puerto Ricos" is how Alberto Methol Ferré, a history professor at the Uruguayan Foriegn Ministry's Artigas School of Diplomacy, describes such a possible future. "And who knows, it might even 'Puerto-Rico-ize' the U.S., no matter how many electric fences it puts up," he writes.
The alternative -- a South America of vibrant, integrated national economies with some degree of regional autonomy and, more importantly, some capacity to help one another absorb market shocks -- may not be, under the Bush administration's narrow vision, in the United States' interest. A strong, or at least nondependent, South America would just be one more global player with whom we would have to seek consensus, and we all know how Bush's foreign-policy team feels about consensus. It would not be surprising if the Henry Kissinger-era fear -- that a strong Latin America is a dangerous Latin America -- lives on in his disciples.
Of course, the United States cannot by itself make Latin America strong, much less united or autonomous. Even the best-off Latin American countries will need to make profound and difficult changes, and the common practice of blaming the United States for all their problems is, in the end, habit-forming and counterproductive. But by dictating terms via the IMF and interfering in democratic political processes (abetting a coup in Venezuela, say), the United States reinforces this sense of hopelessness and lack of choice. As the eventual implementation of the Free Trade Area of the Americas draws closer, we may want to ask ourselves what is more important: Driving a strong bargain that opens up Latin America to our investors and exporters while protecting our industries, or creating a long-term framework for a healthy, integrated family of nations that look to us with something better than the current mixture of resentment, envy and fear.
FAIR USE NOTICE: This page contains copyrighted material the use of which has not been specifically authorized by the copyright owner. Global Policy Forum distributes this material without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. We believe this constitutes a fair use of any such copyrighted material as provided for in 17 U.S.C § 107. If you wish to use copyrighted material from this site for purposes of your own that go beyond fair use, you must obtain permission from the copyright owner.
