Saturday, June 08, 2013

Bring Back Latin American Debt!

Kevin Gallagher argues that the United States needs to make Latin American countries more indebted to it. Way, way, way more indebted, in fact, because since China is throwing tens of billions to the region, and therefore the U.S. should do as much or more than China.

For too long, the United States has relied on a rather imperial mechanism – just telling Latin America what it needs. Compare that with China’s approach: It offers Latin America what it wants (in the form of financing and trade from China)

This just puzzles me. For many years the United States did what it could to shovel money to Latin America, which went further and further into debt. That did not happen because U.S. policy makers told presidents that is what they needed. It happened because corrupt presidents saw it as a way to keep clientelist structures in place without any apparent cost.

What the U.S. ultimately got in return was economic shock that produced conflicts which in turn led to the election of governments that were either wary or openly antagonistic to the United States.

If the U.S. were to start lending on a massive scale, this would not necessaraily happen again. But at the very least it should signal caution, and lending with the sole logic of keeping up with China seems the definition of throwing that caution to the wind.


Vicente Duque 2:14 PM  

What a pain to watch the VIDEOS of Cuba and see a Communist Oligarchy that kills, tortures and opresses. They put good people in jail without any trial or open democratic process.

And the Chavistas want to turn Venezuela into

a Cuba without singer Celia Cruz and the "Sonora Matancera" tropical band

Venezuela now : Blackouts, Rationing of Foods, Medicines, and Electric Energy, shortages, scarcity. And jail for those that don't kneel before


Rationing Cards very soon in Venezuela !

The World Around Me 7:47 PM  

The federal deficit definitely needs to be sorted out and bringing back the Latin American debt will only increase it.

Kevin Gallagher 9:29 PM  

Thanks a lot for bringing attention to my work. I guess I'm not being clear enough though. I'm not implying the US should try and out gun China with financing. Heck, I'd rather see us finance the homeland to boost demand such that we import LAC products, that would be better..

But all I'm doing here is juxtaposing US foreign economic policy toward LAC--trade deals with draconian conditions--vs. China'new financial diplomacy.

We need a rethink. We could reform the World Bank to let LAC and China have more say and have less conditionality and more green industrialization in the loan portfolio. We could scrap our little trade deals for a balanced approach at the WTO. And, we could lead by example where our companies and banks held themselves to best practices.. A start.

Greg Weeks 11:00 AM  

Then the question is what policy goal would these reforms contribute to? I guess I don't see the status quo as a major problem.

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