THE ASIAN CRISIS AND ITS INTERNATIONAL REPERCUSSIONS/231Those Third World countries who depend heavily on exports of a few
raw materials will be hit harder by the Asian crisis than will the most
industrialised countries. Take the example of copper. Asian countries
are major copper importers. What will be the impact of the drop in
copper prices on Chile, which receives much of its revenue from
copper exports? The negative effects could be particularly dramatic
given that Chile has recently invested in an increase in its copper
production capacity.
Second, countries like Mexico and Brazil hope to profit from the
Asian crisis by being the new Shangri-La for global investment flows.
Their reasoning is simple. Funds fleeing Asia have gone in various
directions. They have gone into bonds issued by the governments of
advanced industrialised countries in order to finance payment of
their public debts. They have gone into short-term loans with interest
rates that are particularly high due to 'country-risk' premiums. In
this second category, large quantities of investment flooded into
Mexico from Asia, primarily in 28-day government paper with an
option to renew. Suffice it to say that this is highly volatile money.
How long will it stay in Mexico? Who can prevent it from suddenly
picking up and leaving - much to the chagrin of the Mexican
authorities - if greener pastures appear elsewhere? Finally,
investment fleeing Asia has inundated emerging-market stock
markets, primarily the Mexico City stock market. But for how long?
In any event, such a hefty influx of capital leads to an over
valuation of the recipient country's currency, thereby cutting its
competitive edge. If exports drop, the country can become less
attractive, leading to an enormous outflow of capital, which causes
a dramatic decline in the value of its currency. Is this not one of the
vicious circles of financial globalisation?
A third point should be taken into consideration. Asian countries'
exports have become more competitive following the devaluation of
their currencies. Will this not create problems for the exports of other
Third World countries? Indeed, will these other countries not see
their markets 'invaded' by Asian products competing with domestic
merchandise?
There is a fourth point. Myanmar (Burma), Vietnam, Bangladesh
and other countries in the region depend on the remittances
regularly sent by migrant workers in the 'dragon' countries. Yet the
authorities in the 'dragons' are planning a massive expulsion of these
immigrants. What consequences await the poorest Asian countries?