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AFTERWORD The Winner May Already Be a Loser BY GABRIELA BOCAGRANDE This past August, the International Monetary Fund lion loan agreement with Brazil, the largest economy in South America, even though the country is about to elect a semi-socialist president.. Sounds risky for the International MFers, doesn’t it? Well, it’s not. According to Marcos DePaiva, of Brazil’s Finance Ministry, who helped negotiate the bailout package, the IMF controlled for all political contingencies. He told the press that democracy works best when foreign President, whoever he is, will do just the voters will have little or no influence on their newly elected leader where money is concerned. “If you are trying to change the usual patterns of what happens with a change of government in a Latin American democracy,” said De Paiva, “you need to change the incentives. In this case, the new administration would have access to resources guarantee [good] governance in the first year.” So, that’s a relief. Our banker friends were feeling queasy about the intimidating lead in the polls held by Luis Inacio Lula da Silva, the presidential candidate of the Brazilian Workers’ Party who may well win the October election. For some years now, Mr. Lula has stumped the country with disturbing promises of jobs and land for poor people. He has made even more upsetting observations about excessive wealth, lack of sovereign control over Brazil’s economic policy, and the poorly concealed disadvantages for the popular classes built into the negotiations for the Free Trade Area of the Americas, the treaty beloved by G.W. Bush, Paul O’Neill, Trent Lott, Henry Observer archives Kissinger, and almost every other old white man with an income of over a million a year that we can think of. The Bankers, actually, had plenty to be uneasy about in Brazil besides Lula’s impending election. Like Argentina, Brazil has an external debt equal to roughly half of the annual “Defense” budget of the United States, which is therefore more than anyone can expect to repay ever. Over the years, Brazilian capitalists have borrowed huge pots of money from willing creditors such as Citigroup, J.P. Morgan Chase, Bank of America, Fleet Boston, Deutsche Bank, the Bank ofTokyo-Mitsubishi, Standard Chartered Group, and Banco Santander of Spain. In exchange for the high risk assumed in lending to Brazilians, whose country could go up in flames at any time thanks to millions of highly mobilizedand steaming madjobless proles and landless peasants, the banks also exacted steep interest payments and allowed only short-term borrowing. As the debts come duewhich is all the time nowthe borrowers have to buy large sums of dollars to pay them back, driving up the cost of the dollar in Brazil and driving down the value of the real, the Brazilian currency. As this occurs, the Central Bank of Brazil attempts to control the continuing rise in the price of the dollar by selling billions of its own dollars, thus drawing down its reserves to dangerously low levels and igniting fears of a default on public debt, which, for the most part, must also be paid in U.S. dollars. Of course, once the Big Banks begin to fear a default on the Government’s debt, they start calling in all their loans and refusing to lend any more to anyone. Unfortunately for everyone concerned in Brazil, under the current 30 THE TEXAS OBSERVER 10/11/02