THE TWO PHASES OF STRUCTURAL ADJUSTMENT/145classes - and even for the middle classes - means a plunge In
consumption. Short-term credit continues for foreign trade, but the
domestic banking sector grows further and further apart from the
real economy. The policy of high interest rates seen in countries such
as Mexico and Brazil has led to an accumulation of rentier capital
(interested only in speculative financial operations).
This capital 'liberated' for various non-productive activities also
gets entangled with trade in a variety of illegal items, giving a huge
boost to the amount of dirty money floating around. Thanks to
deregulation and the scrapping of exchange controls, it is also much
easier to launder this money.
- Privatisation of State-owned Firms
There is always a link between the privatisation of state-owned
companies and the renegotiation of a country's foreign debt. The
most profitable of these companies are snapped up by foreign capital
or consortiums (involving foreign and domestic capital); the proceeds
from these sales go towards the Paris and London Clubs. In this way,
international creditors and MNCs come to control state-owned
concerns with practically no real investment (see the Argentinian
case later in the book). When a large number of countries sell their
state-owned firms at the same time, the selling price plummets.
In keeping with privatisation and the reform of the banking
system, the IMF demands a complete opening to capital flows. This
fulfils two objectives:
First, foreign countries are allowed to repatriate their profits to the
North in hard currency.
Second, thanks to the new climate of impunity, funds from secret
accounts (including large sums of dirty money) are 'repatriated' to
the South. Targeting the inter-bank market, these funds are soon
converted into local currency to purchase state-owned companies
and lands sold off as part of the Bretton Woods institutions' privati
sation programme.
- Tax Reform
Reforms aim to undermine domestic production, on both the demand
and supply sides. The introduction of value-added taxes (VAT) and
sales taxes, alongside changes in the structure of direct taxation,
mean a greater tax burden for middle-income groups. Registering