Out of debt: Can US spur an Asian miracle in Latin America?
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There the parable breaks down. You can't foreclose and sell Argentina to Japan. You can only make life miserable for Argentina's government and inhabitants if they default - by garnishing property, boycotting trade, cutting off future capital flow.Skip to next paragraph
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That course, while it might satisfy Scrooge, does no one any good. That's why the only palatable exit is helping the debtors grow out of the debt abyss.
Several steps would help accomplish this end:
* Protectionists - both in steel and other industries waiting in line - ought to be held off by the White House. Modernized US specialty-steel mills are doing all right anyway. More outdated mills should be helped to adopt such technological advances as the rapid-solidification casting process, which permits remarkably faster production and a chance to get ahead of overseas competitors. Other lagging industries should be aided in undertaking joint research and development to move ahead of their cheap-labor competitors overseas.
* The US should use its influence in the IMF to see that debtors helped by the fund are required to improve investment incentives as well as adopt austerity plans.
Since debtor countries are by definition investment risks, IMF officials should be pressing finance-ministry and central-bank officials to reduce penalties and design legislation favorable to outside venture capital. Given a friendly investment climate, some of the debtors might even woo back some of their native capital that has fled to Switzerland, Singapore, or New York.
* American and Japanese aid, trade, and investment have helped make growth tigers out of Korea, Taiwan, Hong Kong, Malaysia, Singapore, and even North Borneo. A similar approach could help create growth jaguars, or at least ocelots , out of some of Washington's Latin American neighbors. To begin, political and business leaders on both sides of the Rio Grande would need to find agreement on trade and investment ideas and sell them to publics skeptical about gringo imperialism.
Some economist is sure to answer that the Koreans, Chinese, Malays, and Thais have a puritan work ethic, while Latin populations are bogged down in a manana society complicated by corruption and class warfare.
That argument should not be hooted out of court as racist. It deserves rational consideration. But those who make it should remember similar doubts expressed about the Asian work ethic as recently as two decades ago. The answer to manana-ism and class strife is support for those business and political leaders who see the same potential the Asians leaders saw.
Not to try these trade and investment solutions is to invite a far more costly result - in terms of economic setbacks, migrants streaming into the US, and possibly open-ended military expenses.
The month of June has seen three major economic meetings: the Western summit in London, the International Trade Commission voting session in Washington, and the Latin debtors parley in Cartagena, Columbia. The six leaders in London gave a better answer than the five commissioners in Washington to the anguish of the 11 Latin American finance ministers. That answer was to plan future hard bargaining for fair and open trade, instead of allowing the moat-builders to gain ground.
IMF lenders can extend that approach if they use their leverage to win not only austerity but also a favorable investment climate in nations that are up against the wall. That's the sequence that created the economic miracles of the German, Japanese, and Asian tigers.