Monday, June 18, 2012

Barroso wears economic blinkers in Mexico

Los Cabos sounds like a splendid destination. The tourism website TripAdvisor promises “old-fashioned fun in the sun” at Lovers’ Beach and the “more tempestuous” Divorce Beach. Whales can be spotted around El Arco, a geological formation designated as a world heritage site.

I hope that José Manuel Barroso and Herman Van Rompuy will enjoy their stay in this resort during the forthcoming G20 summit. Yet I fear that the guaranteed luxury treatment will prevent them from exploring the real Mexico. To compensate for this wasted opportunity, they should pack a copy of Walden Bello’s book The Food Wars into their suitcases, alongside their swimming trunks.

If they read Bello carefully, they might realise that Mexico has undergone the kind of brutal economic transformation now being undertaken in parts of Europe.

To service its massive debts in the 1980s, Mexico received a multi-billion dollar “bail-out” from the International Monetary Fund and the World Bank. This meant that its debt became more onerous, with the rate of interest charged on repaying the “bail-out” loans climbing from 19% in 1982 to an outrageous 52% in 1988. Half the population was driven below the poverty line largely as a consequence of the conditions set by the IMF. Health expenditure was slashed from 4.7% of overall public spending to 2.7%; infant mortality linked to inadequate nutrition rose to three times the level it was in the 1970s.

“Structural adjustment” was the term that Washington-based economists used to bracket the various measures together. “Fiscal consolidation” is the term now in vogue to describe comparably cruel measures being inflicted on a number of European countries. Both mean the same thing in the real world: the rich soak up the rays in Los Cabos or sip cocktails in Cannes; the poor are stopped from realising their full potential.

The tortilla question

Barroso has been known to take holidays on a billionaire’s yacht and to implement policies that delight tycoons. Doubtless, then, Barroso knows of Carlos Slim, the world’s richest man. Slim made a fortune from the privatisation of telecommunications in Mexico and now seems keen to increase his investments in Europe’s mobile phone market.

The question of how Slim got so wealthy is fascinating: could his close relationship with a globe-trotting political elite make him a poster boy for crony capitalism? But there is a more fascinating question about Mexico and it is one posed in Bello’s book. How did the land of the tortilla become dependent on imported corn?

The answer has a lot to do with NAFTA, the North American Free Trade Agreement. After this accord came into effect in 1994, US corn flooded into Mexico, forcing a sharp reduction in the prices commanded by Mexican farmers. The concept of “free trade” was perverted as Mexico slashed its farm subsidies dramatically, while America’s aid to its corn sector was stepped up.

As peasants saw their incomes fall, the prices that Mexicans pay for tortillas in towns and villages has increased in recent years. This has partly been the result of the biofuels craze, whereby corn is used to power SUVs rather than to feed people. Barroso continues to favour the greater use of biofuels on Europe’s roads, despite evidence – gathered by reputable bodies like the World Food Programme - that his support for this environmentally destructive source of energy has increased global hunger.

Unfortunately, I wouldn’t bet on EU leaders being receptive to Bello’s analysis. When the Philippino scholar and politician flew into Brussels from New Jersey last month, he was refused entry to Belgium and put on the first available flight back to the US. The reason given for his expulsion – that he lacked a visa - was spurious; Bello has a diplomatic passport, so doesn’t need a visa to travel here.

Are left-wing academics now banned from visiting Europe?

Lethal ideology

There is one thing that might prevent the EU delegation from enjoying the scenery in Los Cabos: a tendency to wear blinkers. The letter that Barroso and Van Rompuy sent to other G20 participants ahead of the summit could only be written by those who are blinkered by an ideology that is outdated, yet remains lethal.

In their epistle, the two presidents decry the “surge in protectionism” that they observed through their blinkers. Their gripe is based on a recent report from the European Commission, which complains that some countries are erecting obstacles to trade and foreign investment as a deliberate policy. One major bugbear for the EU executive is Argentina’s decision to expropriate a 51% shareholding owned by the Spanish company Repsol in the energy firm YPF.

YPF was established as a state enterprise in 1922 but privatised 70 years later. Cristina Fernández de Kirchner, the Argentinian president, is now taking steps to renationalise it. By contesting her efforts, the European Commission is saying that Argentina’s energy policy should be decided in Madrid boardrooms, not by elected representatives in Buenos Aires.

There is a subtext here. With some exceptions (Colombia), Latin America is not swallowing the economic medicine prescribed for it by the US and the European Union. By announcing the largest debt default in history in 2001, Argentina has proven that it is possible to reject the strictures of Western institutions like the IMF and survive. Argentina is in many respects a beacon for everyone seeking alternatives to what the EU demands of troubled economies. To see the beacon, you have to take off your blinkers.

●First published by New Europe, 17-23 June 2012.

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