At a Nov. 26 meeting in Caracas, barely mentioned in the U.S. press, the nations that make up Alba (the Bolivarian Alternative for the Americas) agreed to form a regional monetary zone. The idea is to immediately create a new accounting unit to be called the “sucre” (standing for Unitary System of Regional Compensation and also the name of a historical figure) and move toward adopting it as the legal tender. The financial ministers of the six Alba countries (Bolivia, Honduras, Nicaragua, the Dominican Republic, Venezuela, Cuba, with Ecuador) subsequently met to begin the technical studies required to carry out the measure.
Venezuela’s finance minister, Ali Rodríguez, stated to the press, “When there’s a crisis that has among its factors the weakness of the dollar—profoundly affected by extremely high levels of speculation—that means that other regions must seek their own solutions, and that’s what is happening.”
While proposals from Venezuela to reduce U.S. influence in the region are nothing new, the other countries at the meeting showed equal enthusiasm for paths that would enable them to escape the shadow of the now not-so-mighty dollar.
Honduran economic minister Pedro Paez affirmed “At a time when the international financial crisis creates a horizon of compression of traditional markets, we are creating new markets to guarantee the adequate flow of resources and defend employment in our countries.”
Rafael Correa, president of Ecuador which is an “observer” to Alba, excoriated the dollar system. “Imperialism of the XXI century is no longer boots, no longer planes, no longer aircraft carriers, ships, or cannons. It’s called ‘dollars’, that’s how they seek to dominate us, and we’ve had enough of these pressures.” Ecuador switched to the dollar in 2000 (last time I was there you bought your sancochos with Sacajawea dollars, which solves the mystery of whatever happened to the second failed attempt to circulate a woman’s image on U.S. currency).
Other proposals to come out of the meeting include decreasing reliance on the International Monetary Fund and other U.S.-dominated international finance institutions (IFIs). The Group of 20 wealthy nations and President Bush have urged using these to bail out developing economies hard-hit by the same policies they promote.
“We’re not going to wait here with our arms crossed for the World Bank or the International Monetary Fund to come and solve the problems that this great threat unleashed on the world,” Chavez said at the Alba summit in Caracas. Although Chavez stopped short of calling for withdrawal from the IMF, both the IMF and the Inter-American Development Bank came under fire for placing political conditions on loans that limit countries’ political options in dealing with the impact of the crisis.
Chavez also criticized the Andean Development Corporation, a regional bank made up of governments and private banks, for operating along the same lines. Chavez proposed strengthening the role of the Bank of the South, and pledged $500 million of Venezuelan funds to establish a regional “common monetary fund” for the region and asked other countries to commit portions of their reserves to back up economies in crisis.
Correa slammed “certain international bureaucracies” in reference to the IFIs and their legal apparatus. He was quoted in the Ecuadorean newspaper El Telegrafo saying, “As usual, they are accomplices to the lenders and exploiters of our country, but they will find a new Latin America, one full of dignity, that will know how to respond in case they try to blackmail us.” Ecuador recently completed an audit of its foreign debt that shows that a large part of the debt was contracted illegally and under unfair terms. At the Alba meeting he got the support of the other six nations to face down the global financial system regarding payment of the illegitimate debt.
It’s true that experience shows that real results in building Latin American regional integration fall far short of the pronouncements. But the recent flurry of diplomatic activity—to be followed up by more meetings and a summit on Dec. 17 in Brazil—has an unprecedented urgency now: the result of not acting could be chaos.
The World Bank’s “optimistic” estimate is for about 2% average growth in the region, while other estimates predict a slight contraction. This compares to an average 5% growth a year over the past five years. In countries where so many people live on the edge, a few points uptick in inflation or a couple of percentage points drop in GDP affects survival. This isn’t a game of statistics.
The macroeconomic statistics, gloomy as they are, don’t even show the worst of it. In the most unequal region of the world, some will suffer more than others—and some will make money off disaster hand-over-fist. Although a few major companies are taking mega-losses, it’s the poor who feel the pain. In Mexico, the average real wage fell again, as inflation ate up the tiny nominal rise. Currency devaluation has pummeled consumers reliant on U.S. imports, and over a quarter of a million jobs were lost in the third quarter. Central American countries are suffering a drop in remittances from family members working in the United States, strangling the many small businesses and family economies that depend on that money. Inter-American Development Bank analyst Santiago Levy says employment will come to a standstill in the region in 2009, announcing plans to divert $6 billion of Bank funds to address the crisis.
The international financial institutions are salivating at the prospect of lending massive amounts of money to rescue Latin American countries and restore indebtedness in the region. Many countries, sick of the neoliberal conditions placed on loans, have turned their backs on the IFIs in recent years and their portfolios were seriously dwindling. Crisis means new clients—unless the Alba plan and others like it take off.
No-one knows how far this declaration of independence from U.S. financial hegemony will ultimately reach. Or even what “independence” looks like, beyond cutting ties to the dollar system. The Alba group promotes a trade model called the Trade Agreement of the Peoples as an alternative to U.S. Free Trade Agreements. While the Central American members have the Central American Free Trade Agreement (CAFTA) with the United States, the other members have refused to sign FTAs.
The prospect of a unified Latin America that could finally stand up, not only to the U.S., but to the global financial system is not on the near horizon.
Once again, though, a refreshing wind from the south has blown the dust off the conventional “wisdom” of the system. For people in the United States who want to see the crisis open up real avenues for change, building alliances to help our southern neighbors build alternatives makes a lot of sense.
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