MercoPress. South Atlantic News Agency

Hot News from South America

“I'm coming back” promises Fujimori / Nobel Prize questions IMF / Three reasons

"I'm coming back" promises Fujimori
Former Peruvian president Alberto Fujimori, currently exiled in Japan, in a video message to his supporters commemorating Mother's Day, anticipates his return to politics in Peru. "You well know I'm assessing the most convenient moment to return to Peru, I've never stopped thinking about my fellow millions of countrymen", says a serious Fujimori in a video that was displayed over the weekend in a hotel in downtown Lima. "Truth will emerge and I will not hesitate to return to politics for I care for my people", adds the former president. This is the first time Fujimori announces his intention of returning to Peru since fleeing to Tokyo in November 2000 after Congress replaced him on charges of alleged corruption during his ten years tenure. Fujimori has a double nationality and therefore is protected by Japanese law. "All claims made against me, secret accounts in Uruguay, bribes from Spanish banks, summary execution of prisoners, nothing has been proved, it was only an excuse for political persecution", states Fujimori in the video message addressed to "Fujimorista" mothers. Political analysts in Peru believe the former president irruption in local politics is based in recent opinion polls that indicate Fujimori's ten years in power has a 31,5% support, while President Alejandro Toledo who took office last July, 25% and falling. Disapproval of the former president is still high 62,4% but less than Mr. Toledo's 67,6%."Let's hope the government keeps its electoral promises and supports mothers and children", underlines Mr. Fujimori. Meantime following judicial orders, Peruvian police arrested ten Special Forces officers involved in the April 1997 hostage rescue operation of the Japanese Embassy, allegedly accused of the cold blooded execution of several kidnappers wounded or taken prisoners.

Nobel Prize questions IMF
Economics Nobel Prize and former World Bank vice president Joseph Stiglitz criticized the International Monetary Fund, IMF, for insisting with "budget deficit reduction" policies that have only worsened the current Argentine crisis. In an article for the Washington Post, Mr. Stiglitz argues that in a recession a budget deficit is normal since revenue collapses and social expenditure increases. Mr. Stiglitz currently Finance and Economics Professor in Columbia University, adds that the Argentine situation has two perspectives: the American, which insists that the problem is a wasteful government and populist policies that have ruined the country; and the one form Latinamerica which would like to know what happened with a country that was a model of economic neo-liberalism and what about the precept that a free market ensures prosperity. "If Argentina did the right things for so long, how could it have fallen so deep?", questions Mr. Stiglitz. The Nobel Prize goes on to say that the American perspective is the most erred, since if Argentina had followed IMF recommendations strictly the crisis would be even worse. "In times of recession cutting expenses makes things worse, since tax revenue, employment and confidence decline", writes Mr. Stiglitz, insisting in the unfairness towards Argentina with a 3% budget deficit under a serious recession, while the United States in 1992 with a mild recession had a 4,9% budget deficit. Mr. Stiglitz argues that the fixed exchange rate system, with the peso pegged to the US dollar was the real culprit of the Argentine disaster. "IMF knows very well that fixed exchange rates are condemned to failure. Assuming that if Argentina cuts its budget deficit investors will return to the country with the necessary funds is silly".

Three reasons
In a recent conference talking about the current Argentine financial situation, Economy Minister Roberto Lavagna identified three reasons, in his opinion, of why the fixed exchange rate of one peso-one US dollar, or "convertibility" failed or rather should have been changed before virtually exploding. "Convertibility worked and was most efficient in eliminating hyperinflation and inflationary expectations", said Mr. Lavagna. "However the system which began in 1991 was exhausted by 1994/95". According to Mr. Lavagna three main reasons disrupted the system. Locally the growing budget deficit. Since the convertibility system is based in a one peso-one dollar equation, and the more pesos in circulation, means the price of the dollar should increase or be compensated with overseas borrowing, which are also dependent on interest rates. Internationally the failure of the GATT Uruguay Round which much promised when it began in the mid eighties but finally kept the clamps on agriculture markets in the rich countries, limiting exports of the efficient producers such as Argentina, Brazil, Uruguay, Oceania. Finally in 1992 the devaluation of the British pound began a chain of similar events that extended to much of Europe, then moved to Far East, Russia and eventually Brazil in January 1999, at that moment Argentina's main trading partner. It was an accumulative explosive cocktail, according to the current Argentine Economy Minister.