Brazilian Neighbourhood

Opinion: The Neighbourhood

Folha SP

9 sept 2014

KENNETH MAXWELL

Brazilians don't pay much attention to foreign affairs, especially in an election year, and most foreigners don't pay much attention to Brazil's aspirations.

In many respects this is not a bad thing when one thinks of the scale and intractability of the murderous violence in the Middle East, or Russia's relentless territorial ambitions in the Ukraine, and of the steps (and missteps) of the United States (and its ill-assorted allies) in both regions.

But foreign affairs are more significant for Brazil than many Brazilians seem to think. And a major problem is the mess in Brazil's own neighbourhood, especially across Brazil's southern border in Argentina, as well as across Brazil's northern border in Venezuela.

Argentinian President, Cristina Fernandez, has now tried to engage the Argentinian Pope Francis, as well as George Soros and his Quantum Fund (which hold 3.5% or US$ 450 million in YPF, the Argentinian National Oil Company), as well as the Chinese (she is seeking a US$11 billion currency swap), in her bitter campaign against what she calls the "vultures," that is the holdout creditors from the mighty Argentinian US$95 billion debt default of 2001.

The question involves the New York Courts. US Federal Judge Thomas Griesa's ruling that Argentina can only pay holders of restructured sovereign debt if it also pays holdouts in full, and because Argentina refuses to do this, it defaulted two months ago, and continues to lack access to international credit markets as a consequence.

The US Court of Appeals for the Second Circuit sustained Judge Griesa's decision, and the US Supreme Court saw no reason to revise his ruling. For President Cristina Fernandez this is all about victimhood .

For the holdouts, who have former US Secretary of State Madeleine Albright's consultancy as an advisor, it is all about justice. In the interim Argentinian currency reserves continue to shrink (they are currently estimated to stand at about US$28 billion), capital flight continues, and inflation has surpassed 40%

Venezuela presents an equally tangled set of dilemmas with international tentacles. President Nicolas Maduro also blames nefarious outsiders. Certainly there has been no love lost between the US and Venezuela since the rise to power of the late Hugo Chavez.

The Chinese meanwhile have loaned Venezuela US$ 50 billion since 2007, paid back in oil. Venezuela also provides subsidized Venezuelan oil to Cuba, Jamaica, and Nicaragua.

Cuba sends doctors in return.The last time (in May) the Venezuelan central bank and national statistics institute published an inflation figure it stood at 61%. Currency reserves are currently estimated to have fallen to about US $20 billion. There are continuing chronic shortages of food and medicines.

Neither the Argentinian nor the Venezuelan problems are new to be sure, and both feed on old narratives of populist nationalism, but since Brazil is tied to both by neighbourhood, by alliances, and by business and political deals, each affects Brazil whether Brazil likes it or not.

fonte: Folha de São Paulo