SRA Commentary: The War on Terror in Latin America
The War on Terror in Latin America
“In paragraph 43, I made the following statement: ‘It is believed that FARC terrorists have received training at Al Qaida terrorist training camps in Afghanistan.’ I wish to strike this sentence…Based on information made available to me subsequent to the filing of the declaration, I no longer believe this statement is true and correct.”
From deposition of Assistant Secretary of State Rand Beers in federal lawsuit by Ecuadorian farmers against DynCorp, 8 August, 2002.
Richard Grasso, Chairman of the New York Stock Exchange, embraces FARC commander Paul Reyes during a visit to Columbia in June 1999. Spot the terrorist.
These days the attention of the world is on the Middle East and the imminent invasion of Iraq. This is understandable if only because it is such good theatre. President Bush’s speech to United Nations was a symbolic event redolent with meaning. Bush, with disarmingly insouciant hypocrisy, instructed the United Nations to enforce its resolutions on Iraq or face irrelevance. His address was greeted in all the usual quarters with praise. We saw no comparisons to other, less flattering events, such as the Japanese invasion of Manchuria or the Italian invasion of Ethiopia in the ‘30s. Those two instances of military aggression signalled the irrelevance of the League of Nations. The picture of UN Secretary General Kofi Annan with his head buried in his hands behind the bombastic Bush told the whole story. Bush buried the United Nations last week.
Coverage of Bush’s speech buried as well the news that in the second quarter of the year the US current account deficit surpassed $130 billion, or about 5% of GDP at an annual rate. It will continue to climb as the War on Terror intensifies. America’s military industrial sector is hungry for capital. With private savings so low and government at the state and federal level running huge deficits, the only place that capital can come from is abroad. It is vital for strategic considerations that it continue to do so with little volatility and market disruption. That appears to rule out tolerance for major dollar devaluation in the short run. There is thus a structural tension between the needs of the American economy and the needs of its military machine.
When economics and accounting collide…
At a London dinner last week hosted for a senior economist from a major American bank and a group of currency experts, the economist opined that the US could sustain a current account deficit of 4% of GDP for the foreseeable future. This stupefying prediction was delivered without a hint of irony. He brushed aside the observation that America’s net foreign debt was already approaching 30% of GDP with an airy dismissal of the accuracy of the statistics. He also displayed a remarkable dissociation from the facts: In fiscal year 2001 the United States spent more than 7.5% of GDP on its armed forces. This gentleman had apparently never heard of the Financial Report of the United States Government, nor was he familiar with the difference between cash accounting and accrual accounting; still less was he prepared to contemplate a future marred by the consequences of this budget profligacy.
(NB: If you follow the link above to the pdf version of the Financial Report of the United States Government above, take note of Secretary O’Neill’s covering letter on page 1; the Comptroller General’s report to the president on page 25, detailing the shortcomings of the government’s financial control and accounting process; and the table, page 48, entitled Statement of Net Cost.)
With the cream of Wall Street thinking like this, it is not surprising that little notice was taken to another interesting event: the withdrawal by Mexico on September 6 from the Rio Treaty. The Rio Treaty, known formally as The Inter-American Reciprocal Assistance Treaty, dates to 1947, fifty-five years and one cold war distant. It was conceived and brought into being as part of America’s post- world war security framework of regional alliances. Not coincidentally, it was at about the same time, in 1946, that president Truman created DynCorp, a private corporation established to provide employment for ex-soldiers and to market surplus American military equipment internationally. DynCorp too was and still is, part of that security structure, a corporate fixture in Latin America, Washington, and elsewhere and an important element in the ability of the United States to project its security interests abroad.
DynCorp is a company that most investors have never heard of. No longer a listed firm, it was taken private in a management buyout several years ago. From its home page you can learn that it has over 23,000 employees in 550 locations around the globe. You will not learn there about the fact that it was recently sued in Federal District court in Fort Worth Texas by an employee dismissed for bringing to the attention of the authorities the fact that the company was involved in sex slave trafficking in the Balkans. Nor will you learn that it was DynCorp personnel who were responsible for the death of American missionaries killed when their plane was targeted by a DynCorp aircraft and shot down by the Peruvian air force. Although you can learn that the US Department of Justice is a client, you will not learn that DynCorp actually manages the Department of Justice’s case management system; nor will you discover from the web site that board member Herbert Winokur was also a board member of Enron, where he ran the finance committee. The web site dies not reveal that the company is being sued in a class action suit brought by victims of its widespread spraying of toxic chemicals in Columbia, Ecuador and Peru, ostensibly to eradicate coca cultivation, but which one suspects may really be intended to deprive armed guerrillas of a supportive indigenous population.
Mexico cocks a snook at the US…
In fact, Mexico announced its intention to withdraw from the Rio Treaty a year ago, just before September 11th. Mexico diplomatically postponed acting on their announced intent until last week, reportedly under intense American pressure. Tension between the United States and Mexico has been rising. The US has long promised a deal on immigration that would grant an amnesty to the millions of Mexicans living and working illegally in the US. The Mexican government’s fondest aim would undoubtedly be to have a completely open border. That will not happen any time soon, and no amnesty is going to be granted by an administration whose own electoral prospects are so parlous.
This is a far cry from the first foreign policy initiatives of the Bush administration which were directed south, much to the consternation of Europeans and Asians alike. Bush, it is said, speaks Spanish; and of course he was governor of Texas. The implication is of shared experience and interest. For our part, we were sceptical then and we are sceptical now. Bush hardly speaks English, and it is a matter for one’s imagination what it is that comes out of his mouth when he “speaks Spanish.” More to the point, the United States has never dealt with Latin American countries as equals, whatever the regime in Washington. Fox’s job is to run the plantation, not to ask for a raise or better working conditions for the hired help. As the former head of Coca Cola in Mexico, he presumably understands this. Thus, there is all the more reason to take notice of him, as when he warned that the consequences of an American failure to deliver on an immigration deal would be dire. And of course there is the matter of being the first Latin American nation to pull out of the Rio Treaty.
For Mexico to do this implies that its government is under considerable pressure. One does not have to look far for possible sources of such pressure. The United States could scarcely be less popular among young Mexicans. A Zogby Poll conducted in May this year found that a majority of Mexicans regard the southwestern United States as Mexican territory and that they shouldn’t have to ask permission to cross the border in the first place. Perhaps the best barometer of this pressure is the extent of Mexican militarisation . Mexican purchases of US arms have risen hugely in the last twelve years, reversing decades of Mexican reluctance to become dependent on America for its security. This is ironic, since the targets of those arms are Mexicans. Mexican-American military cooperation intensified in the run-up to the signing of the North American Free Trade Agreement and since then has grown even more. At the same time, unrest in the country has also grown, in what has become a familiar cycle of protest, repression, reaction, and more violence. For Fox to withdraw from the Rio Treaty is thus a highly symbolic act, even if the reality of close collaboration with the US on security matters suggests that it is also largely cosmetic.
…while Brazil looks to Argentina for military cooperation
And it isn’t just Mexico that is doing some interesting things. Brazil has proposed that it and Argentina integrate their respective military force doctrines to facilitate joint operations. Brazil’s concerns are immediate and growing. America’s escalating intervention in Columbia’s civil war threatens Brazil’s northern border with Columbia. America’s attack on Afghanistan and the coming invasion of Iraq are setting precedents for international behaviour for years to come. By deeming the FARC in Columbia a “terrorist” organisation the US is extending its Central Asian and Middle Eastern precedents to Latin America. No responsible leader in that area could conceivably fail to take notice of this.
It is scarcely eight years since Brazil and Argentina renounced their nuclear weapons development programs. Both countries are, however, widely regarded as being in the “everything but” club; that is to say, they could have a deliverable nuclear weapon fairly quickly if they set their minds to it. What is more, the precedent of the US attacking another state because of its alleged possession of weapons of mass destruction and America’s reluctance to accede to the Comprehensive Test Ban Treaty provide both an incentive for both countries to acquire nuclear weapons (because how else are they to protect themselves) and the example to follow in reneging on their treaty obligations.
The “left” is gaining electoral ground as crisis sweeps the region
This radically raises the stakes for international investors in the region. What is striking to us is the increasing disconnect between outcomes that investors appear to want and public opinion. This is not a good sign. In Brazil, the latest polls show Lula of the Workers Party actually increasing his lead in the last week. The probability is growing that left of centre parties will win not just the presidency but control the legislature as well. Whatever happens the stage is being set for a hardening of positions. America’s War on Terror only makes things worse. The attempted coup in Venezuela begs the question: can governments opposed to the United States be elected and survive?
In Columbia the civil war is claiming between 25 and 30 thousand lives a year; this in a country with a population of 44 million. This is a staggering casualty rate, a half a percent or more of the population each year. In Argentina, 9 million people - nearly 25% of the population - has slipped into indigence, which is to say that they cannot obtain the basic requirements of life. This sort of collapse in civil order and economic life cannot be sustained for long in democracies, which is to say that something has to give.
Washington’s euphemism for its war in Columbia is Plan Columbia, a banality that makes calling the Korean War a police action seem positively forthcoming. Having tried half heartedly to buy off the FARC, the US has reverted to type and is backing the extreme right wing. Richard Grasso’s visit to Columbia in June 1999 was in our view part of the pitch to bring the FARC into the fold. It is no secret that the FARC has financed itself by trafficking in narcotics. Equally it is no secret that the same is true of the right wing death squads that operate in Columbia. The difference is that the former reinvest their money in Columbia and the latter ship it out. It is tempting to infer a link between Grasso’s visit in June that year and the New York Stock Exchange’s effective peak the following month. As http://www.scoop.co.nz/mason/stories/HL0202/S00069.htm Catherine Austin Fitts pointed out not long ago, days after Grasso embraced Reyes the US General Accounting Office of forecast a 50% rise in narcotics shipments out of Columbia “…due largely to the growing strength of Marxist rebels.” Looking at the chart, one wonders. Did Reyes tell Grasso to take a hike? Or did he take those high priced stocks off his hands?
The System is the crisis
In retrospect, it is clear that Latin America’s current economic problems began with the bond market debacle in 1994 and the rise in international interest rates that year. In fairly steady succession we have since experienced the Mexican Crisis, The Asian Crisis, The Russian Crisis, and the Brazilian Crisis. What seems equally clear to us is that the international system hasn’t really any idea of how to deal with this.
The System is problematic by virtue of its very structure. It is probably unfair to blame the IMF and the Word Bank for problems in Argentina, Indonesia or wherever for the simple reason that solving those problems is not really their brief. Like the Federal Reserve, a corporation that is owned by the very institutions that it is supposed to regulate, the IMF is actually a creditors’ representative. Its objective is to protect their investment. Acting within the framework of the dollar-based international reserve system further complicates matters from the point of view of the debtor countries, because the country at the centre of the system, the United States, enjoys the power to settle its external obligations effectively by printing money. That hasn’t stopped it from demanding that everyone else pay on time, with real money, or accept its conditions for helping. These conditions have typically meant losing control over one’s economy, and ultimately ownership of the assets in it worth owning.
It isn’t hard to see how eventually this can only mean one thing: war.