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1,800 | <s>[INST] In principle, President Cardoso has [/INST] the votes; in practice, he often does not. </s> |
1,801 | <s>[INST] Critics argue that he was elected on a [/INST] mandate to stabilise the economy, and then tarried too long in exercising it. </s> |
1,802 | <s>[INST] Last year he pushed through constitutional amendments [/INST] ending state monopolies and allowing foreign investment in telecommunications, oil and mining. </s> |
1,803 | <s>[INST] But Congress is yet to approve constitutional changes allowing [/INST] reforms of taxation, the civil service and pensions, which are essential for long-term fiscal health. </s> |
1,804 | <s>[INST] The government has now persuaded Congress to [/INST] scrap a rule that facilitated small minorities' wrecking amendments to constitutional bills. </s> |
1,805 | <s>[INST] It is preparing for a [/INST] fresh attempt at reform after this month's municipal elections. </s> |
1,806 | <s>[INST] Meanwhile, the government is trimming spending and making such piecemeal changes [/INST] as it can; for instance, a recent law to exempt exports, capital goods and energy from local sales taxes. </s> |
1,807 | <s>[INST] Overall, says Pedro Malan, the finance minister, it reckons its measures [/INST] will cut this year's fiscal deficit to 5% of GDP (from 7.4% last year), and push 1997 growth to 4.5%. </s> |
1,808 | <s>[INST] As in Argentina, growth will be partly due to foreign direct investment, [/INST] attracted notably by privatisations in electricity and telecoms; Mr Malan expects at least $7 billion ofthat this year and as much next. </s> |
1,809 | <s>[INST] Outsiders underestimate at their [/INST] peril the Brazilian capacity for creative improvisation. </s> |
1,810 | <s>[INST] Yet they are right to point to a worrying [/INST] rise in the government's internal debt, and the lack of control on spending by state governments. </s> |
1,811 | <s>[INST] Thanks to a sophisticated system of [/INST] indexation, Brazilians were less traumatised by inflation than were Argentines. </s> |
1,812 | <s>[INST] Brazil's elite is correspondingly less [/INST] convinced than Argentina's of the need for fiscal rectitude. </s> |
1,813 | <s>[INST] And the constitutional reform that Mr Cardoso currently appears most excited by [/INST] is one that would allow him to stand for re-election in lgg-for whose approval Congress might well seek to exact a fiscal price. </s> |
1,814 | <s>[INST] Nevertheless both Mr Cardoso and [/INST] Mr Menem (twice) owe their posts to economic stability. </s> |
1,815 | <s>[INST] That augurs well for Mercosur, since [/INST] nothing would damage it more than a round of competitive devaluations. </s> |
1,816 | <s>[INST] But increasingly Mercosur, and the trade opening that lies behind it, will demand agile governments that are [/INST] able to ease the process of adjustment, and to afford (or get private finance to help them afford) the investments in infrastructure required to extract full advantage from an expanded market. </s> |
1,817 | <s>[INST] ___ Document 192 of 400 The road to [/INST] a single market Author: Reid, Michael Publication info: The Economist 341.7987 (Oct 12, 1996): S24. </s> |
1,818 | <s>[INST] accountid=28034 Abstract: Mercosur needs [/INST] less red tape, but more common rules. </s> |
1,819 | <s>[INST] If Mercosur's opportunities are really to be grasped, it needs not just tariff-cutting but [/INST] harmonization of rules on many things from intellectual property to antitrust and the environment; and clearer mechanisms, such as NAFTA has, for the settlement of disputes. </s> |
1,820 | <s>[INST] Full text: WHEN the Brazilian firm of Sadia exports [/INST] its chickens and frankfurters to Argentina, they leave home with a sanitary certificate from Brazil's health ministry. </s> |
1,821 | <s>[INST] When they reach the border, they [/INST] face two further inspections, by Argentina's health and agriculture ministries. </s> |
1,822 | <s>[INST] While today the border police often operate round-the-clock, officials [/INST] from other state bodies may be present only for eight or ten hours a day. </s> |
1,823 | <s>[INST] That, laments Luiz Fernando Furlan, Sadia's chairman, means that [/INST] the extra checks can take up to two days, days that come off the products' shelf-life. </s> |
1,824 | <s>[INST] Sadia must also pay Argentina's value-added tax [/INST] at the border, rather than when the products are sold to consumers. </s> |
1,825 | <s>[INST] Were it selling them to an import wholesaler, they [/INST] would have to be paid for neither in Argentine nor Brazilian currency but in dollars. </s> |
1,826 | <s>[INST] And any foreign-exchange transaction in [/INST] a Brazilian bank requires much form-filling in quadruplicate. </s> |
1,827 | <s>[INST] Mr Furlan quickly adds that [/INST] Argentina's red tape is not uniquely dense. </s> |
1,828 | <s>[INST] There, importers can wait up [/INST] to six months just to register for sanitary certificates. </s> |
1,829 | <s>[INST] The IDB has found that in the Mercosur countries a [/INST] journey of 100km (62 miles) that crosses any frontier costs 40% more than one that does not. </s> |
1,830 | <s>[INST] If Mercosur's opportunities are really to be grasped, it needs not just tariff-cutting but [/INST] harmonisation of rules on many things from intellectual property to antitrust and the environment; and clearer mechanisms, such as NAFTA has, for the settlement of disputes. </s> |
1,831 | <s>[INST] Through joint working parties, the [/INST] four members are moving to tackle these non-tariff questions. </s> |
1,832 | <s>[INST] With luck, Mercosur should introduce a single [/INST] customs document, valid for exports to all members, by next year. </s> |
1,833 | <s>[INST] Mutual recognition of sanitary certificates, and a common register of products and common technical [/INST] standards, should come by 1998 (it is hoped; as the Eu has shown, dill-dallying about standards is a great way for closet protectionists to delay competition). </s> |
1,834 | <s>[INST] Big firms have found ways to cut [/INST] through the red tape, but for small ones it is much harder. </s> |
1,835 | <s>[INST] The small guy who has a truck [/INST] can't get across the river," says Marcos Azambuja, Brazil's ambassador in Buenos Aires. </s> |
1,836 | <s>[INST] In Brazil, they are part of the [/INST] tax department, reflecting their traditional function of levying tariffs rather than assisting trade. </s> |
1,837 | <s>[INST] Equally urgent is improvement [/INST] in the mechanisms for settling trade disputes. </s> |
1,838 | <s>[INST] In 1991 Mercosur drew up a procedure, [/INST] involving an ad hoc arbitration tribunal, but it has never been tested. </s> |
1,839 | <s>[INST] In practice, disputes have been [/INST] settled politically, by the Mercosur presidents themselves. </s> |
1,840 | <s>[INST] Until now, this system has worked: to safeguard the [/INST] whole project, the presidents have been prepared to compromise and, when need be, rewrite the rules. </s> |
1,841 | <s>[INST] Until a tested and politically-neutral dispute-settlement mechanism is in place, investors [/INST] thinking of setting up in, say, Uruguay, cannot be certain of guaranteed and barrier-free access to the Brazilian market. </s> |
1,842 | <s>[INST] If it is to deserve its name as a common market, Mercosur will also [/INST] have to move to open up trade in services, especially financial services, and to tackle such difficult issues as harmonisation of tax and of macroeconomic policies. </s> |
1,843 | <s>[INST] Its members are unlikely to [/INST] feel ready to do any of this soon. </s> |
1,844 | <s>[INST] The central banks have held preliminary talks about [/INST] harmonising bank regulatory systems, and finance officials have similarly discussed their tax regimes. </s> |
1,845 | <s>[INST] Uruguay, for example, has a [/INST] large off-shore financial business and a liberal corporate-tax regime. </s> |
1,846 | <s>[INST] Brazil (and Chile) has [/INST] exchange controls, while the others do not. </s> |
1,847 | <s>[INST] Banco Itau, a large Brazilian private-sector bank, has moved [/INST] vigorously into retail banking in Argentina, with ten branches so far and plans for 35 by 1998. </s> |
1,848 | <s>[INST] Brazil's central bank has indicated it [/INST] would allow banks from other Mercosur countries to come in. </s> |
1,849 | <s>[INST] But Brazil is unlikely to agree to a full-scale financial [/INST] opening, or to freeing trade in services, until its programme of stabilisation and economic reform is consolidated. </s> |
1,850 | <s>[INST] On this, says Jorge Campbell, Argentina's chief [/INST] Mercosur negotiator, diplomatically, "There is a difference of emphasis, rather than a clash". </s> |
1,851 | <s>[INST] Nevertheless, at Brazil's prompting, Mercosur rejected a [/INST] Chilean request to include trade in services in its association agreement. </s> |
1,852 | <s>[INST] Here too the EU offers a warning: for all its supposed good intentions and [/INST] zeal for integration, directives opening up crossborder sales of financial services had to wait till the 1990s, and in the real world there are problems still. </s> |
1,853 | <s>[INST] Harmonisation of macroeconomic policies within Mercosur [/INST] so far extends no further than the exchange of information. </s> |
1,854 | <s>[INST] When he sacked Mr Cavallo, Mr Menem sent [/INST] an envoy by private jet to brief Mr Cardoso before the news was made public. </s> |
1,855 | <s>[INST] And at least policies [/INST] are headed in broadly the same direction. </s> |
1,856 | <s>[INST] But Argentina's fixed exchange rate could yet prove a problem: neither [/INST] the peso nor the real is yet solid enough to play a role like that of the D-mark or the dollar. </s> |
1,857 | <s>[INST] As for policy co-ordination, Mercosur, like the [/INST] EU, will probably find that the hardest part of living together. </s> |
1,858 | <s>[INST] The only thing that rivals [/INST] it is allowing free movement of labour. </s> |
1,859 | <s>[INST] Although the four Mercosur countries now issue a special businessman's visa, Uruguay and [/INST] Argentina will resist giving the mostly poor and unskilled citizens of Brazil's north-east the right to work, let alone settle, in their richer countries. </s> |
1,860 | <s>[INST] Yet Mercosur's members cannot afford to let [/INST] it turn into an instrument that makes already unequal societies more unequal. </s> |
1,861 | <s>[INST] But this deepening process will be [/INST] all the more complex because Mercosur is already growing wider. </s> |
1,862 | <s>[INST] ___ Document 198 of 400 Private means [/INST] Author: Anonymous Publication info: The Economist 340.7985 (Sep 28, 1996): 91-92. </s> |
1,863 | <s>[INST] Maturities are getting longer [/INST] - a reflection of growing investor confidence. </s> |
1,864 | <s>[INST] Yet neither the IMF nor [/INST] some emerging economies are taking any chances. </s> |
1,865 | <s>[INST] The Fund is keeping a [/INST] much closer eye on emerging economies and financial markets. </s> |
1,866 | <s>[INST] Remember the doomsters' predictions [/INST] about the end of the emerging-market phenomenon? </s> |
1,867 | <s>[INST] But for the hundreds of bankers and other financiers descending on [/INST] Washington for next week's annual meeting of the International Monetary Fund (IMF) and the World Bank, such gloom is long past. </s> |
1,868 | <s>[INST] Emerging economies issued $57 billion-worth of bonds in [/INST] the first eight months of 1996, compared with $45 billion for the whole of 1995. </s> |
1,869 | <s>[INST] And maturities are getting longer, a reflection of [/INST] growing investor confidence: this year's new bonds have an average maturity of 8. </s> |
1,870 | <s>[INST] Yet neither the IMF nor [/INST] some emerging economies are taking any chances. </s> |
1,871 | <s>[INST] The past 18 months have seen the emergence [/INST] of a lot of ideas about how to head off future currency collapses. </s> |
1,872 | <s>[INST] The Fund now keeps a [/INST] much closer eye on emerging economies and financial markets. </s> |
1,873 | <s>[INST] And it is prodding countries into [/INST] publishing better, and more frequent, statistics on their economies. </s> |
1,874 | <s>[INST] Investors can now even turn to the Internet to [/INST] find out about-countries whose statistics are up to scratch on a newly established IMF Web-site (http://dsbb. </s> |
1,875 | <s>[INST] The IMF is also in better [/INST] shape to cope with the consequences of a crisis. </s> |
1,876 | <s>[INST] A new emergency financing mechanism [/INST] allows it to dole out cash quickly. </s> |
1,877 | <s>[INST] Most importantly, it has convinced its [/INST] members to cough up more money for use in such emergencies. </s> |
1,878 | <s>[INST] Although some details have not yet been hammered out, the Fund's "general [/INST] arrangements to borrow"-a $25 billion credit line provided by a dozen of the world's richest economies-is, in effect, to be doubled. </s> |
1,879 | <s>[INST] About 12 new countries, including several Asian [/INST] tigers, look set to contribute to this new pot of cash. </s> |
1,880 | <s>[INST] But not all emerging economies are [/INST] relying entirely on the IMF for help in a currency squeeze. </s> |
1,881 | <s>[INST] Shocked by the effect on their markets of the fall-out from Mexico, [/INST] several central banks (in Australia, Thailand, Malaysia, Indonesia and Hong Kong) have pledged to offer each other liquidity in a future crisis. </s> |
1,882 | <s>[INST] When Thailand suffered a mini-speculative attack in late August [/INST] this year, the central bank stabilised the baht by selling some of its own foreign reserves. </s> |
1,883 | <s>[INST] But in a future pickle the [/INST] Asians might also look to their neighbours for help. </s> |
1,884 | <s>[INST] Stuck with a strict currency-board mechanism, which means that each peso in circulation [/INST] and in bank deposits must be backed by a dollar of foreign reserves, Argentina is especially vulnerable to a loss of investor confidence. </s> |
1,885 | <s>[INST] It cannot, for example, simply [/INST] print money to help out troubled banks. </s> |
1,886 | <s>[INST] After Mexico's crisis, Argentina lost a net [/INST] $8 billion-or 18% of total bank deposits-as fearful investors fled the country. </s> |
1,887 | <s>[INST] To insure against another loss of confidence, [/INST] the country has set up a unique financing arrangement with international banks. </s> |
1,888 | <s>[INST] In return for an annual "commitment fee" of o.3% of the [/INST] total, the banks have agreed to provide Argentina's central bank with up to $5 billion in a future crisis. </s> |
1,889 | <s>[INST] As collateral for the money, [/INST] the bankers would hold dollar-denominated Argentine government securities. </s> |
1,890 | <s>[INST] If Argentina ever used the cash, it would pay an average interest [/INST] rate of just over 2% above the London Interbank Offered Rate (LIBOR, the rate at which international banks lend to one another. </s> |
1,891 | <s>[INST] At first, Argentina thought that it might raise about $3 billion through this [/INST] scheme, but demand from international banks was so great and their pricing so competitive that the central bank decided to go up to $5 billion. </s> |
1,892 | <s>[INST] Chase Manhattan, America's biggest bank, is [/INST] the chief contributor: it has of fered $1.5 billion. </s> |
1,893 | <s>[INST] The beauty of such a scheme [/INST] is that its very existence should act as a deterrent. </s> |
1,894 | <s>[INST] The central bank is betting that once investors know that [/INST] Argentina has access to this cash, they will be less likely to lose confidence in its currency. </s> |
1,895 | <s>[INST] With luck this will prove to be right-though recent [/INST] spats between unions and the government still have many investors worried about the country's future. </s> |
1,896 | <s>[INST] Inevitably, the IMF will remain the world's [/INST] main lender of last resort in the event of a currency crisis. </s> |
1,897 | <s>[INST] But Argentina's search for private-sector [/INST] means of forestalling one are well worth copying. </s> |
1,898 | <s>[INST] ___ Document 210 of 400 Argentina after [/INST] Cavallo Author: Anonymous Publication info: The Economist 340.7977 (Aug 3, 1996): 17. </s> |
1,899 | <s>[INST] accountid=28034 Abstract: Five years as Argentina's economy [/INST] minister deservedly made Domingo Cavallo an emblem of Latin American reform. </s> |
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