pbond at SPAMwn.apc.org
Fri Feb 2 02:54:55 MST 2001
> Date: Thu, 01 Feb 2001 21:23:59 -0800
> From: Sam Pawlett <rsp at uniserve.com>
> ... I mean is there enough
> Anglo-American foreign investment in Africa to justify the costs of a
> military intervention, if a government were to nationalize without
> compensation and default on the debt?
Unintentionally you've invoked the name of the largest "organic"
corporation in Africa, founded in 1917 with a little support from JP
Morgan (who vetoed Ernst Oppenheimer's proposed name, African
American Corporation, because it "would suggest on this side our
dark-skinned fellow countrymen and possibly result in
ridicule"), headquartered 5 km west of my house, and the founding
sponsor of my university. Unintentionally you've invoked the problem
AAC faced when Kabila broke some contracts that the firm enjoyed with
old reliable Mobuto. The SA government--which coincidentally is now
in the process of ordering $5bn+ worth of new military equipment
designed for offensive (but allegedly peace-keeping) use--tried its
damndest to keep Mobutu in power via a proposed power-sharing
agreement with Kabila, which the latter refused. Emblematic was
Kabila's dawdling around in Lubumbashi, refusing to board a jet that
would whisk him out to a landing field near an enormous South African
Navy ship where Mandela was hobnobbing with sickly Mobutu, fiddling
their thumbs, waiting, waiting, waiting for Kabila.
Anyhow, all's well that ends well, for AAC, whose share prices
rocketed on the news of the assassination.
> Or would the inevitable
> financial/economic sanctions be enough to stall such a project? Such a
> country would have a hard time raising money on the capital markets.
So what? Does our hypothetical African People's Republic really
need a DM to fund an irrigation ditch? A dollar to pay for a
teacher's salary, or the construction of a rural school? A yen to
finance radical land reform? A franc for a few water pipes?
The "capital markets" as we know them finance securities which
are nearly invariably either associated with either just the rollover
of foreign debt in general, or some particularly stupid megaproject,
like a big dam, whose merits are now widely understood to be far less
than their costs. And such a vast amount of forex in the hands of
compradors goes into luxury-goods imports and inappropriately
capital-intensive machinery, that once you limit to the bare
necessities such as petrol and spare parts, while turning the economy
around to meet people's needs, the forex constraint is much less
severe. I was in Zimbabwe last month, which is effectively subject to
sanctions (way way behind on WB/IMF repayments and hence on the
shitlist with Iraq, Yemen and the like), and although petrol
shortages due to insufficient forex had been a problem in December,
they have miraculously found a way to keep things coming in while
retaining exchange controls.
Technically, however, it's true that access to forex is vital in the
realm of trade finance. Brazil was squeezed to death by trade finance
sanctions when it defaulted in 1987, and had to come back to the
table. There is a good group of comrades, especially in Jubilee 2000
Canada, trying to work on this dilemma, and to open up Northern
export credit agencies to more democratic impulses. It'll be tough,
but that's probably the best area of int'l solidarity work to pursue
once we see our next Third World socialist revolution.
> The FSLN needed Mexico to negotiate their foreign borrowing.
But those silly-billies agreed to repay Somoza's $1.65 bn debt, which
was the highest per capita in Latin America (indeed the Nica
debt/GDP ratio went from 43% in 1978 to 62% in 1979 to 95% by 1983).
The hope was that they'd get massive World Bank and IDB
financing (George Shultz soon provided a decisive reality check).
They even let Alfonso Robelo in on the NY debt-negotiating team in
1980, which rolled over $565 mn of private bank loans instead of
claiming "odious debt" provisions in int'l law, which would easily
have got them off the hook. The FSLN made every repayment on time
until begging for rescheduling in 1983. From 1980-83, $575 million
went out, but the FSLN got a meagre $12 million back in new
commercial bank loans, and then only on 90-day terms. And they were
paying in full, on time, even during Hurricane Aletta which wiped out
a year's worth of export earnings.
Dupes, eh? Most irritating, is that if they'd tried to fight, and got
their wild&crazy Louis Proyectiles out on Wall Street demanding that
Citi just cancel the Somoza debt, it would have helped the rest of
us in similar circumstances enormously. (e.g, Robert Mugabe was
persuaded to pay Ian Smith's foreign debt to apartheid SA five months
after the FSLN cried financial uncle.) Same criticism is due Mandela,
by the way, but much moreso given the way the US/UK anti-apartheid
movement set the stage for debt default by generating a wicked
financial sanctions campaign that was a central reason for Pretoria's
decision to finally desegregate the SA state.
> Of course one
> of the lessons of the whole 3rd world debt debacle is to keep foreign
> borrowing as minimal as possible (preferably none).
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