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Breaking News from South America

Wednesday, November 13th 2002 - 20:00 UTC
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Headlines: Defence Minister Summit; New methanol plant in Punta Arenas; Praise for Mexico and Chile; Lower tariffs; “Hyper-corruption” in Bolivia; Migration to Spain.

Defence Minister Summit

A three days meeting of Defence Ministers of the Americas will begin next Monday in Santiago de Chile with the participation of US Defence Secretary Donald Rumsfeld. The new threats to regional security, basically terrorism and the drug trade figure at the top of the agenda. Chile's Defence Secretary Michelle Bachelet will address the issue of how to confront these threats with coordinated regional efforts; Ecuador Defence Minister Hugo Unda is scheduled to talk about promoting frontier cooperation and preventing conflicts and Mexico will be the moderator of the debate. This is the first meeting of its kind after the September 11 terrorist attacks and although no resolutions are normally approved, Chile that is hosting the meeting, anticipated this time there will be a political declaration stressing the coincidences and agreements of the regional defence summit.

New methanol plant in Punta Arenas

Methanex Corporation announced this week the building of a fourth methanol plant in Punta Arenas that will turn Chile into the world's single main supplier with 26% of world production. The announcement made public in Santiago by the Canadian corporation CEO Pierre Choquete and Chilean President Raúl Lagos will demand an investment of 275 million US dollars. The additional plant to be built by Methanex Chile will have a production capacity of 840,000 tons of methanol adding to the current output of the other three units in Cabo Negro a few miles from Punta Arenas. Methanex Chile CEO Rodolfo Krause said the investment will indirectly create an additional 5,000 jobs in Magallanes and other regions, beginning with 1,000 direct jobs for the actual building that is scheduled to begin early 2003 and must be finished in the first quarter of 2005. Methanol made out of natural gas is used in several industries, plastic, automobile, electricity, tubes and pipes, plus high octane gasoline. The Canadian corporation Methanex begun operations in Chile in 1988 and has since invested 1,2 billion US dollars. Almost the whole Methanex Chile production (98%) is exported to United States, Europe, Latinamerica, South Africa and Japan. The Methanex complex in Punta Arenas is supplied with Argentine natural gas.

Praise for Mexico and Chile

US Federal Reserve president Alan Greenspan said that confidence in the Mexican and Chilean markets have kept both countries "relatively isolated" from the financial turbulences that have ravaged most of Latinamerica, particularly Argentina and Brazil. During a conference in Mexico City Mr. Greenspan added that Mexico and Chile "are reflecting markets confidence' that both countries are fully committed to sound financial policies". "Mexico seems to have become a haven in the region (Latinamerica) for international investors", stressed Mr. Greenspan arguing that the country's integration to North America's Free Trade Association, Nafta, the free floating of the peso and a strong reduction of inflation "has been crucial in the significant reduction of vulnerability to financial crisis". Further on Mr. Greenspan underlined that countries with heavy foreign debts become extremely vulnerable to financial situations. "Periodically when an economy takes credits to the limit of its insolvency and in foreign currency, the government's capacity to further indebt virtually disappears overnight", indicated Mr. Greenspan, apparently referring to Argentina that was forced to default after 97% of its financial commitments last January proved to be in US dollars. The president of the Federal Reserve praised free market policies, going back to Adam Smith, and pointed out that with globalization those principles stand by themselves. However Mr. Greenspan stressed that even when free market policies are the best way to generate wealth, they must have ample acceptance, "because they simply can't be imposed by elected officials or authoritarian governments".

Lower tariffs

Customs duties in Chile will average 3,2% in 2003, one point less than currently, according to a release from Santiago's Chamber of Commerce. The reduction will be a consequence of the annual tariff adjustment that in 2003 will drop from 7 to 6%, in line with Chile's fiscal program established in 1999 with the purpose of opening the country's economy and promoting overseas trade. Further reductions are expected in the current free trade agreements Chile has with several associates including Mexico and Canada. Next year Chile expects to sign similar trade agreements with the United States, European Union and South Korea that need Congressional ratification. The tariff reduction program plus standing trade agreements (excluding those areas specifically protected) reached an average record of 4,7% last April. However the financial turbulence in the area and its impact in the Chilean currency pushed the average to 5% last September.

"Hyper-corruption" in Bolivia

Bolivan president Gonzalo Sánchez de Lozada currently touring the United States sent shock tremors to Bolivia when he publicly remarked that his country suffered of "hyper corruption" and there's no immediate solution for this drama. Mr. Sánchez de Lozada statements were done while addressing students in one of United States elite colleges, Georgetown University in Washington where he said that his administration's main challenge was to combat extended corruption practices at all levels of Bolivian society. "We have honest and patriotic institutions, but they are entirely inefficient since nobody does anything, nobody wants to risk", underlined the Bolivian president. "It's a permanent fight, but in Bolivia we suffer from hyper-corruption". Back in Bolivia "shell shocked" politicians and government officials anticipated they will be calling the president to Congress and are seriously considering impeachment. "Being honest is not enough to fight corruption, you must make sure that the people round you are also honest", added Mr. Sánchez de Lozada. Bolivian president admitted his country was in the fourth year of recession, with unemployment trebling and 40% of businesses forced to shut down. "We are facing an economic catastrophe". Mr. Sánchez de Lozada who took office for a second mandate three months ago remarked he was convinced it's not the best moment to be president of Bolivia, "but I'm optimistic, and you can't be president of Bolivia if you're not naturally optimistic".

Migration to Spain

An estimated 13,000 Uruguayan left for Spain during the first nine months of this year, most of them looking for work and better opportunities, revealed Uruguay's Foreign Secretary Didier Opertti during a recent Congressional hearing in Montevideo. Mr. Opertti was called to Congress following claims of ill treatment of Uruguayan citizens by Spanish migration officials. However Mr. Opertti said that only eleven of the 13,000 Uruguayan travellers to Spain were rejected in Barajas Madrid airport, recalling that all incomers must have a return ticket and 30 Euros for every day they plan to remain. In a similar hearing, but in Madrid before the Spanish Congress International Cooperation Minister Miguel Angel Cortés said "Uruguay has Spain's full support to overcome the current crisis". Mr. Cortés was responding to criticisms from the Socialist opposition who accused the José Aznar administration of ignoring Uruguay and Argentina's plight who decades ago opened their arms to hundreds of thousands of impoverished Spaniards. "Spain has been supporting Uruguay, Argentina and Brazil since the beginning of the current crisis in 1998", indicated Mr. Cortés underlining that this has been particularly evident since Spain is presiding over the European Union. "Mr. Aznar in last year's G-8 summit in Canada was the only world leader in insisting that Argentina and Brazil must have international assistance". Regarding Uruguay, Mr. Cortés said that the country will experience an 11% drop in its GDP this year, inflation is expected to reach 24% and unemployment 17,5%. "However the IMF, World Bank and other multilateral institutions loaned Uruguay 3 billion US dollars, with the support of the European Union and the G-7, and Mr. Aznar was instrumental in this effort", added Mr. Cortés.

Categories: Mercosur.

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