New Internationalist

Flight of the Swallow

Issue 356

For the first time in decades, Latin America has stolen from Africa the trophy for the worst economic performance in the developing world.

After the ‘lost decade’ of the 1980s, Latin America has once again become a net exporter of capital, sending out more money than it receives. In 2002 $39 billion haemorrhaged out of the region in this way.

In the same year seven million more Latin Americans joined the ranks of the absolutely poor. In 1982 15 per cent of the population were classified as ‘indigent’ - without enough income to feed themselves. By 2002 that number had risen to 20 per cent.

What has gone wrong? Sponsored by the Washington Consensus, speculative ‘flight’ capital - known in Latin America as ‘swallow’ capital - has flown in and out, gobbling up juicy profits. Time and again foreign speculators have acted together, targeting vulnerable governments and forcing them to spend billions of dollars in vain attempts to defend their currencies.

The only real solution now is to reschedule the debt over a long period - or to default. Yet all governments - including the Lula administration in Brazil - are fearful of leading the way. They are aware of the price they could be made to pay for cutting off the foreign banks’ biggest source of profit.

Latin America’s debt crisis, which was declared officially over in the late 1980s, is very much alive - and kicking.

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