Panorama of the International Economy – Dr. Mauricio Herman

Interviews to Dr. Mauricio Herman, professor of International Economy of the John Hopkins University, of the United States of North America and International Consultant. Dr Herman worked for more than two decades in the Inter-American Development Bank and has been also professor of analysis of projects and development banking in the American University.

1.What opinion deserves the results of the last meeting of the World Trade Organization (WTO), held in Cancún, Mexico? ¿Really everything was a failure or there are some positive things that to rescue of there?
From a point of view of the concrete results, the meeting of the WTO in Cancún doubtlessly was a failure. It did not advance in any of the commitments adopted in Doha. However, I consider that the confrontation had between the rich countries and the developing countries, on the necessity to eliminate the subsidies to the agricultural producers of the rich countries, served to clarify, once and for all, that the World Trade Organization must also serve the interests of the poor countries and not respond to the agenda of the rich countries exclusively. Let us hope that in future negotiations both sides be more careful in offering concessions and not simply to demand them.
2.After Cancún Towards where we go, to a greater bilateralism, a less ambitious and excluding multilateralism, to a disguised protectionism?
The danger after Cancún is that the United States is concentrated in advancing in bilateral negotiations with the countries of Latin America, as it has already done it with Chile. Doubtlessly it is easier to conclude multilateral than bilateral negotiations successful. But the bilateralism, like the regionalism, must be seen like transitory instances for a possible multilateral agreement, since of another way it can be finished with antagonistic economic blocks (“the Fortress Europe”).
3.What effects will have in the developing countries, in particular of Latin America, the occurred with the meeting of the WTO?
Let us hope that the meeting of Cancún by a side serve to open of eyes of the developing countries in the sense that obtaining the elimination of subsidies to the agricultural producers in the rich countries, even though it is a very praiseworthy economic objective, implies very difficult political decisions. On the other hand, it is possible to also suppose that the Latin American countries, particularly in South America, intensified its actions towards the integration of the region, and thus to offset the bilateral efforts of the United States.
4.Another event of singular importance has been the Meeting of the International Monetary Fund and the World Bank held recently in Dubai, where treated subjects relative to the economy and the world-wide development ¿What sensation the meeting leave you? What can comment to us on the matter?
The meetings of the World Bank jointly with the International Monetary Fund that were held recently in Dubai did not offer concrete advances to improve the situation of the world economy. There were recommendations to the Government of the United States to watch his fiscal and of balance of payments deficits by the international imbalance that these came causing. Also calls to the governments of the rich countries became so that they increase his allocations to the programs of international aid to reach the level decided -for already enough a long time- of the 0,7% of the gross domestic product of its respective economies, and the President of the World Bank called the attention to the fact that the rich countries spend USS300,000 million annually in subsidies to their agriculturists. But decisions of great importance, none.
5.Argentina in the last days again has been news because it closed an Agreement with the IMF in very favourable conditions according to the analysts, and because it has presented a very audacious proposal of renegotiation of the debt of US$94.300 million in which it considers a trim of 75% ¿What indicates this to us, mainly now that Brazil has announced that in the next negotiations with the IMF hopes to obtain at least conditions similar to the granted ones to Argentina?
It is possible to suppose that the Brazilian monetary authorities, in their negotiations with the International Monetary Fund, use the argument of the negotiating position of Argentina that asked for a trim of 75% of the main one of its existing external debt. Nevertheless, the economic and financial situation of these two countries is totally different. Argentina practically does not have anything to lose assuming extreme positions. The Administration of President Lula in Brazil, in spite of the initial fears of the international financial community, has demonstrated that it is disposed to maintain a line rather conservative in the handling of his external debt.
6.The external debt once again is a problem without solving in the Latin American countries and a restriction for its development? What must become in relation to the debt?
We are not called to deceits. The accumulation of external debt probably is the problem more serious than face the poor countries in his fight by the development. And this affirmation is applicable not only to the poorest countries of Africa, that are object of attention by programs such as HIPC (“Highly indebted poor countries”) of the IMF and the World Bank, but also for countries of intermediate development like Brazil, Argentina and other Latin American countries. It is hour to constitute what we could denominate a “Alliance for the Development”, by means of which reaches agreements between indebted countries and creditors to temporarily reorient the resources that the service of the debt demands, towards projects with development aims.
7. The last projections of the IMF and the World Bank with respect to the perspective of the world economy are enough optimists, Do you share that optimism? ¿In its opinion has begun the recovery of the world economy?
Personally I have serious reserves respect of the projections that try to foretell the future with differentiations of tenth of point. These are the result of mathematical abstractions that give the appearance us of great exactitude but which they depend sometimes on supposed quite heroic. I believe that Ex-Secretary of the Treasure of the United States – during the Clinton Administration- and now President of The Harvard University, Lawrence Summers, said it very well when he affirmed that “the world-wide economy is flying with a single motor”. That motor is the North American economy, and as it were mentioned in Dubai, serious preoccupations exist by deficits fiscal and of balance of payments that this country comes registering. There is a serious international desequilibrium that seems to be threatening the dollar.
8.Finally, to finish a last question ¿What is going to happen to the North American economy? ¿How it would affect to Latin America?
To respond this question, I would have to support in that which said the British economist Lord Maynard Keynes, who was possibly the one that made the greater intellectual contribution for the creation of the International Monetary Fund and the World Bank. He said: “If you are going to foretell, it foretells in the short term, because in the long term, all we will be dead”. In spite of this warning, I would like to foretell that until the next elections in this country, the decisions of economic policy that adopt the United States they are going to respond to political considerations. From January of the 2005, it is going much to depend on the one who is elected president. The danger that can be watched is that the international desequilibrium existing forces to the new Administration to assume a protectionistic position to reduce the amount of its imports, affecting therefore the potential of growth of the developing countries by means of the increase of its exports.

October, 2003