192/YOUR MONEY OR YOUR LIFE!
DEBT NATIONALISATION, COMPANY PRIVATISATION,
DOMESTIC MARKET DOLDRUMS AND INCREASED
DEPENDENCE ON FOREIGN CAPITAL
It was of enormous benefit to local capitalists when their
governments nationalised private debt. In this way, they not only
made huge savings, but also were able to export much of their capital
to the North's financial markets.
And that's not all. Since the state took over company debts,
companies were able to use their new margin for manoeuvre to buy
up state-owned businesses that were being privatised from the mld-
1980s onwards. Some countries, such as Mexico and Argentina,
privatised faster than others. Brazil and Venezuela only began large-
scale privatisations In 1996-97.
It has already been pointed out that, since the beginning of the
1990s, most Latin American governments have pursued a policy of
high Interest rates. The objective Is to attract foreign Investment and
to persuade local capitalists to repatriate a part of the funds they have
Invested In the North. The social costs of such a policy are high. Small
and medium-sized producers, let alone households, cannot borrow.
This has led to a downturn In production for the domestic market.
Growth Is pulled along by exports, on the one hand, and by Imports
aimed at satisfying the needs of the capitalists and the upper middle
classes, on the other. Due to the high domestic Interest rates In effect
In most Latin American countries, the government and local state
bodies pay a high price for money borrowed from local capitalists.
These borrowed funds are used to service both foreign and domestic
debt owed to these same capitalists and to capitalists from the North.
Since state bodies have to pay so much for money borrowed on
domestic financial markets, and since this money Is not enough to
pay off previous debts, governments and private companies Issue debt
paper on International markets. This Is actually less costly, since
Interest rates In the North are currently lower than In countries
like Brazil, Mexico and Argentina. The problem, of course, Is that
these countries become even more dependent on external markets
and trends. Several times a year, the big Latin American countries
Issue debt paper on International markets. The money raised through
such Issues goes mostly towards paying off holders of previous debt
Issues. A striking example of dependence on the US, some Latin
American countries - especially Mexico - have to purchase US