WEEKLY NEWS UPDATE ON THE AMERICAS ISSUE #449
September 6, 1998

NICARAGUA SOLIDARITY NETWORK OF GREATER NEW YORK
339 LAFAYETTE ST., NEW YORK, NY 10012 (212) 674-9499

*4. COLOMBIA DEVALUES, LATIN AMERICA JITTERY

Late on Sept. 1 the Colombian government announced a de facto 5%
devaluation of the peso by allowing the band in which it trades
to slip down by 9%. Theoretically, the peso could slide as much
as 26.6% for the year, according to the central bank, which spent
more than $200 million from Aug. 28 to Sept. 1 trying to defend
the currency. The move "is introducing a bit of the jitters in
Latin American markets," said Mexican finance secretary Jose
Angel Gurria Trevino. Brazil and Venezuela are now under stronger
pressure to devalue their currencies, which many analysts
consider overvalued. All Latin American markets have been in
turmoil since Russia devalued its currency and declared a debt
moratorium on Aug. 17, causing foreign investors to pull their
money out of other "emerging markets" [see Updates #446, 447].
[Wall Street Journal 9/3/98]
 
On Sept. 3 Moody's Investor Service downgraded Brazil and
Venezuela's country ceiling for foreign-currency bonds and notes
from single-B-1 to single-B-2. The new Moody's rating was one of
the causes of Latin America's second consecutive "Black
Thursday," a major plunge on Sept. 3. Argentina's Merval fell by
6%; the Bovespa in Sao Paulo, Brazil by 8.6%; Chilean stocks by
3.4%; Venezuela's market by 7.5%. The Brazilian stock exchange
has lost some 40% since the beginning of August, and the central
bank spent more than $12 billion in four weeks to shore up the
real, leaving foreign reserves of less than $60 billion. [WSJ
9/4/98] The markets slipped again on Sept. 4, with Brazil falling
by 5.8%. From Sept. 1 to Sept. 4, Brazil's central bank spent
foreign reserves at a rate of $1.3 billion a day. [New York Times
9/5/98]
 
Economy and finance ministers from Argentina, Brazil, Chile,
Colombia, Ecuador, Mexico, Peru, Uruguay and Venezuela met with
officials of the International Monetary Fund (IMF) and the World
Bank in Washington on Sept. 3 and 4. IMF head Michel Camdessus
and the Latin American ministers repeatedly assured the media
that Latin America's current problems were the result of
"contagion" from Asia and Russia. Latin American economies had
been strengthened by years of neoliberal adjustments, they said,
but they might have to impose new austerity measures to fight
their way out of the crisis. [NYT 9/4/98; La Jornada 9/5/98]
 
On Sept. 4 US treasury secretary Robert Rubin and Federal Reserve
chair Alan Greenspan met with Japanese finance minister Kiichi
Miyazawa; in public statements, the US officials suggested that
Japan was at fault for the global crisis. "How can Japan's
recession be responsible for an economic malaise in Latin America
or Russia?" an unnamed senior Japanese official asked. [NYT
9/6/98] On Sept. 5, US president Bill Clinton assured the public
that "the American economy is on the right track." [NYT 9/6/98
from Reuter]