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Cablegate: Global Economy; Bolivia

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DE RUEHSO #0484 2601137
ZNR UUUUU ZZH
O 161137Z SEP 08
FM AMCONSUL SAO PAULO
TO RUEHC/SECSTATE WASHDC IMMEDIATE 8517
INFO RHEHNSC/NATIONAL SECURITY COUNCIL WASHDC IMMEDIATE
RUEHBR/AMEMBASSY BRASILIA PRIORITY 9649
RUEHRI/AMCONSUL RIO DE JANEIRO PRIORITY 8846
RUCPDOC/USDOC WASHDC 3171

UNCLAS SAO PAULO 000484

SIPDIS

STATE INR/R/MR; IIP/R/MR; WHA/PD

DEPT PASS USTR

USDOC 4322/MAC/OLAC/JAFEE
E.O. 12958: N/A
TAGS: KMDR OPRC OIIP ETRD XM XR BR
SUBJECT: GLOBAL ECONOMY; BOLIVIA

1. Worse and Worse

Editorial in liberal Folha de S. Paulo (09/16) says: "And here we
are, with Paulson [Secretary of Treasury] apparently believing that
playing Russian roulette with the U.S. financial system was the
better option." The phrase, by economist Paul Krugman, describes
with acuteness the implicit risks of the newest strategy of Bush's
administration in trying to control the crisis. ... Criticized by
having helped other companies threatened by the crisis, by
transferring private damages and risks to the tax payer, the Bush's
administration changed the strategy not only for political reasons.
Behind this action also is the intention of forcing the drying out
of the financial sector, making it free of institutions, like some
investment banks, responsible for speculation, both dense and
uncontrolled, which originated the crisis. The White House message
that there will not necessarily be help to the "losers," increases
the panic among the sellers. The U.S. government's action this past
weekend seemed to be based on the conviction that it is possible to
control the rhythm and distribution of losses in a huge crisis like
this, by emerging from its ruins a stronger system. This is a risky
option. If this hypothesis is not confirmed, the economic and
social costs of this brutal collapse will tend to be even bigger."

2. The Worse is Yet to Come

Lead editorial in center-right O Estado de S. Paulo (09/16)
comments: "The banruptcy of the U.S. fourth major investment bank,
Lehman Brothers, is the prediction of major difficulties for the
world economy and the hardest test for the Brazilian economy since
the exchange crisis of January 1999. ...Its worst effects are yet to
come...Today there are few certainties and none of them seem to be
tranquilizing: the financial crisis is not over, it may get worse
and its worse effects are yet to come. Brazil had never been so
well prepared to face an external shock. ..But invulnerability does
not exist and, besides, the dimension of the crisis is unknown. It
is not time for boastfulness, but to maintain the country prepared
for possible stronger shocks. Fiscal prudence must be a fundamental
part of this preparation."

3. Leave Bolivia Alone

Columnist Marcos Nobre wrote in liberal Folha de S. Paulo (09/16):
"There is nothing more humiliating for a country than not to be
seriously taken. And this is what is happening to Bolivia. .. The
Bolivian crisis is certainly more serious than the Argentinean. But
what calls our attention is that nobody listens to what the Bolivian
government has to say. And President Evo Morales exhausts himself
by saying that he does not want or need help. To accept the help
would mean to recognize that there is in fact an uncontrolled
situation. It would mean to accept, as a last resort, that there is
not a government capable of negotiating an agreement to put an end
to the conflict. Evo Morales understands that he would totally lose
his authority. ...Bolivia knows how to commit its mistakes by
itself. To send the U.S. Ambassador home, for example, was one of
the childish and unreasonable attitudes of recent times. But no
country that praises democracy has little to gain by accepting
interventionist proposals."

4. Tension will be constant without separation from Bolivia

Editorial in economic newspaper Valor Economico (09/16) says:
"...The immaturity of Bolivian democracy, that seems to have
repeated once again the tradition of flirting with the abyss and
then slightly moving back, demonstrates the need of creating
alternatives to the major supplier of natural gas to the Brazilian
economy.... With the lack of cheaper and more viable options, the
country [Brazil] will be condemned to periodic scares due to the
chronic instability of its Andean neighbor. And what the recent
conflicts reveal, in a worrisome way, is that even being contrary to
their own interests; part of Bolivian society is willing to use
Brazil and its gas dependency as hostage of their internal disputes.
...Brazil, as a neighbor country, client and regional hegemonic
power, has a role to play in the Bolivian crisis. But,... as
Ambassador Rubens Ricupero said, one can only help those who accept
to be helped. While the Bolivian people show more effort in
deepening the breaches of the country rather than fixing them,
Brazil cannot stop looking for scenarios that permit the country to
move away from the turbulence of its unstable neighbor."
White

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