[Congressional Record Volume 146, Number 128 (Friday, October 13, 2000)]
[Extensions of Remarks]
[Pages E1795-E1796]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




          SOUTH AMERICA HAS SUFFERED FROM WHITE HOUSE NEGLECT

                                 ______
                                 

                          HON. PHILIP M. CRANE

                              of illinois

                    in the house of representatives

                       Thursday, October 12, 2000

  Mr. CRANE. Mr. Speaker, I wish to call to the urgent attention of my 
colleagues an important article in the October 6, 2000, Wall Street 
Journal, entitled, ``South America Has Suffered From White House 
Neglect,'' by David Malpass, who is the Chief Economist at Bear 
Stearns.
  This must-read article spells out this administration's culpability 
in the disastrous role which U.S. policy gurus, the International 
Monetary Fund and the World Bank have played in the rapid decline in 
the economies of our Latin American neighbors.
  Malpass points out that the 1990s ``began with a vision of free trade 
across the Western Hemisphere launched with the completion of the North 
American Free Trade Agreement. . . .'' After NAFTA's implementation, he 
writes, there was ``reason to believe that the U.S. would lead the 
region toward trade liberalization.''
  Unfortunately, as the decade progressed the U.S. role in the region 
``turned destructive.'' Washington promoted weak currencies, high tax 
rates, IMF-style austerity, and big government, Malpass observes, 
``ignoring the resulting poverty and political stress.'' Further, U.S. 
opposition to regional currency stability and its insistence on special 
labor and environmental standards resulted in inflation in Latin 
America and a sharp rise in poverty.
  The writer observes that the Clinton-Gore administration has ``wasted 
a decade of U.S. prosperity, making no real effort to share the U.S. 
techniques of prosperity with our neighbors.'' He concludes that ``the 
coming U.S. election offers Latin America the chance for an end to the 
eight-year vacuum in U.S. policy.''
  I urge my colleagues to read this important article carefully.

              [From the Wall Street Journal, Oct. 6, 2000]

          South America Has Suffered From White House Neglect

                           (By David Malpass)

       As Latin America prepares for a new president of the United 
     States, it is right to hope for an improvement in U.S. 
     policies toward the region. Chief among these would be a 
     serious free trade agenda and an end to force-

[[Page E1796]]

     feeding the region International Monetary Fund austerity 
     programs.
       The 1990s began with a vision of free trade across the 
     Western Hemisphere, launched with the completion of the North 
     American Free Trade Agreement at the end of the Bush 
     administration and President Clinton's signature on the 1993 
     enabling legislation. Hemispheric free trade offered a chance 
     to expand the economic pie dramatically during the decade. 
     With U.S. unemployment falling toward 4% and Nafta a notable 
     success, there was reason to believe that the U.S. would lead 
     the region toward trade liberalization. International trade 
     was at the core of the U.S. economic breakout of the 1980s, 
     and Latin America hoped to become a partner.
       But beyond rhetoric and a summit full of promises, the U.S. 
     basically lost its interest in Latin America. The Clinton 
     administration offered no follow-though on the free trade 
     vision, no substitute vision, and barely an apology. The 
     free-trade vision morphed into fair trade, code language for 
     maintaining the status quo. U.S. demands for special labor 
     and environmental standards as conditions for an agreement 
     effectively ruled out U.S.-led trade liberalization. Latin 
     America's disappointment at U.S. indifference deepened, as 
     U.S. promises of trade and engagement proved hollow.
       As the decade progressed, the U.S. role in the region 
     turned destructive. Washington's policy gurus promoted weak 
     currencies, high tax rates and big government, ignoring the 
     resulting poverty and political stress. A cycle of damage, 
     financial crises and flat-footed U.S. responses ensued. The 
     U.S. dragged its feet on IMF/World Bank reform and proposed 
     no pro-growth model for international development. Colombia's 
     civil war worsened, fed by bad economic policies, high 
     inflation and U.S. disinterest.
       Through its own efforts, Latin America has had some 
     important successes in the last decade, including Mexico's 
     2000 election and Brazil's quick return to a stable currency 
     after its 1999 devaluation. But the 1990s should have been 
     much better for the region given the strength of the U.S. 
     economy and the high hopes of 1992 and 1993.
       Latin America's growth is now well short of its potential, 
     leaving millions unemployed and impoverished. Worse yet, 
     because many of these countries defended their anti-market 
     policies in IMF-speak and Washington's ``no-pain, no-gain'' 
     view that capitalism should hurt, disillusioned populations 
     are now blaming free-markets for their declining 
     circumstances.
       Rather than free trade, the administration championed IMF-
     style austerity for Latins. No tax rate was too high, as 
     witnessed by President Clinton's outspoken support of 
     Argentina's failing experiment with tax hikes and a broad-
     based 21% value-added tax. In places like Brazil, Ecuador and 
     Colombia, the U.S. and IMF have encouraged financial 
     transaction taxes, one of the most harmful types of taxes for 
     the development of sound financial markets. While Europe is 
     turning to tax cuts to bolster its competitiveness, the 
     Washington elite has pushed Latin America forcefully into 
     higher tax rates and militant revenue extraction.
       The U.S. policy failure toward Latin
       The vacuum in U.S. international policy is equally apparent 
     in energy issues. By 2000, Mr. Chavez became OPEC's 
     cheerleader for expensive oil, joining Saddam Hussein in 
     Bagdad to discuss strategy. It is inexplicable that Mexico, a 
     Nafta partner, participated actively in OPEC quotas in 1999. 
     The U.S. and Mexico should work closely together to develop 
     new North American energy resources, an undertaking that 
     would be hugely profitable for Mexico and would lessen U.S. 
     dependence on OPEC.
       The 1990s began auspiciously for Latin American currencies 
     with the establishment of Argentina's currency board. 
     Inflation fell, and both the economy and financial markets 
     surged. The brain drain that had plagued Argentina for years 
     reversed as business school graduates headed back home to 
     build companies.
       Soon, however, the U.S. administration's opposition to 
     regional currency stability asserted itself, leaving 
     Argentina the odd country out. The Clinton administration and 
     the IMF, working closely together, declined to work for 
     currency stability in Russia, Venezeula, Mexico, Brazil, 
     South Africa, or Southeast Asia. This culminated in their 
     outright rejection of a currency board in Indonesia in early 
     1998 and the Russian default later that year. The U.S. 
     intoned that ``a strong dollar is in our national interest,'' 
     but did nothing to share this approach abroad. Ecuador has 
     recently dollarized, embracing a foreign currency in the hope 
     that its grinding fall into poverty will stop. But in 
     Ecuador's words, the IMF's only role in this progress was to 
     do no further harm.
       The result of the weak-currency policies of the 1990s was 
     predictable. The poor could not protect themselves from the 
     ensuing inflation and the middle class fell backward, undoing 
     years of hard work. Latin American poverty grew sharply. The 
     World Bank found ``no clear evidence of progress in reducing 
     poverty'' in the 1990s, counting 183 million people living on 
     less than $2 per day in 1998, up from 162 million in 1993. A 
     United Nations study found that 51% of rural Latin households 
     lived in poverty in 1997. In Colombia, where civil war 
     threatened, the currency sank and rural poverty rose to 54% 
     in 1997 from 45% in 1980.
       The coming U.S. election offers Latin America the chance 
     for an end to the eight-year vacuum in U.S. policy. The 
     Clinton-Gore administration has wasted a decade of U.S. 
     prosperity, making no real effort to share the U.S. 
     techniques of prosperity with our neighbors. The policy 
     vacuum has hurt both the U.S. and Latin America and deserves 
     to be corrected. A U.S. policy built on free trade, stable 
     currencies, lower tax rates, smaller government, more 
     economic freedom and a genuine interest in Latin America's 
     success would begin to undo the damage.

     

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