MercoPress. South Atlantic News Agency

After early dismissals, fears of “contagion” from Argentina are voiced

The conclusion that there would be no 'contagion' from the Argentine crisis seems to have been premature Ïor so a growing number of personalities have been suggesting.

The most outspoken of these is the executive secretary of Eclac, José Antonio Ocampo, who on 25 April said, 'The vision of some analysts that Argentina is an isolated case is totally false: the crisis is affecting Latin America and will continue to do so. Of this there is no doubt.'

The Argentine crisis, in his view, has already translated into a cautious attitude on the part of investors towards the region as a whole. On the outlook for Argentina, he said, 'There will be no viable fiscal programme if there is no return to economic growth, and there will be no stable exchange rate if there is no return of confidence.'

Ocampo said other countries should learn one lesson from the Argentine case: 'Credibility is not provided by rigid rules, but by good management of discretionary powers. Rigid rules can also collapse and that happen because they eliminate the flexibility required to cope with the multiple shocks many economies must face.'

Another Colombian, OAS secretary-general Cesar Gaviria, was only a little less categorical. 'There will be no contagion if the crisis is resolved well. If not, have no doubts that there will be contagion.' This, he said, could take the form of less access to capital, as in 1995 at the time of the Tequila crisis.

'Markets nowadays,' said Gaviria, 'are much stricter. Anything can upset financial confidence in a government, and this makes countries very vulnerable. This volatility affects democracies, because, if a country cannot offer guarantees to its citizens, democracy is weakened.'

Gabriela Ramos, director of the OECD's Latin American office, said, 'There has been no contagion [from Argentina] in the case of Mexico and, interestingly, in Brazil and Chile contagion has not been as strong as we would have expected.'

One top executive at Brazil's central bank, Teresa Grossi, dared proclaim that there would be no 'contagion' in her country because Brazil had become 'immune'. Responses were instant and sharp. Brazilian treasury secretary Fábio Barbosa said, 'Brazil must be prepared to face difficulties, because we are not immune.' Visiting IMF mission chief Lorenzo Pérez concurred: 'Apparently there has been no contagion in Brazil, but this does not mean that it is immune to what happens in [Argentina] or anywhere else in the world.'