The effects of the international credit crisis has provoked an exodus of US$ 4.397 billion in Brazil from the 1st of October to the 24th. This number is the difference between the amount of dollars entering the nation and the amount leaving; just last week, there was an exit of US$ 646 million.

The data is part of the monetary flux that monitors the movement of dollars both entering and exiting Brazil and was divulged this Wednesday by the Central Bank. For the entire year of 2008, the monetary flux registers a positive gain of US$ 12.791 billion. The result of US$ 45 billion entering and US$ 32.214 exiting the nation.

Local entrepreneurs anticipate that local politics, specially in the economic area, will hurt because of the dismaying external scenario. Forecasts indicate that the financial crisis will reduce the influx of foreign currency from oil sales as a result of declining oil prices in international markets. This is likely to worsen Venezuela’s fiscal deficit.

In addition, local entrepreneurs anticipate a throttling supply of food in the domestic market. As if such scenario was not enough, data compiled by the Venezuelan Central Bank (BCV) show an annual inflation already at 21.8%.

This gloomy scenario has already caused grief in the local industry. In a recent survey launched by the Venezuelan Chemical and Petrochemical Industry Association (Asoquim), respondents stated that the industry’s production plunged by 40%.

The 100 companies comprising Asoquim evaluated that restricted access to foreign money, administrative bureaucracy and legal uncertainty all have negative implications on production.

With regard to export forecasts for the second semester, 50% of the respondents believe that exports will decrease, 27.3% said that exports will improve and 22.7% stated that export performance will remain the same. A vigilant observer of this new international environment, president Hugo Chávez has called the financial system a target and locked on it.

According to the Venezuelan leader, the International Monetary Fund (IMF) is to be blamed for the crisis. For that reason, says Chávez, the IMF should “dissolve itself”. 

Meetings held at the Casa Rosada to discuss the implications of the financial crisis upon the domestic economy have fuelled rumors that an economic package is in the making. Measures being considered to fight off the crisis include a competitive exchange rate and the improvement of the trade surplus.

Building on these two premises, the Executive Branch will seek greater coordination and control of the State’s neconomic institutions. A reduction in subsidies through increased utility prices is also being entertained. Sources say that president Cristina Kirchner has determined her cabinet chairman, Sérgio Massa, to call for a round table to enter negotiations with those in charge of payment, collection, supervision and control bureaus.

These are to be in charge of monitoring the international crisis. Another issue that has brought concern to the Argentinean government, newspaper La Nación has said, are the effects that the depreciation of Real (the Brazilian currency) against the U.S. dollar may have upon the domestic industry, the main actor behind consecutive months of economic growth since 2003.

It is never too late to remember that Cristina managed to elect herself president and continue with the agenda of her husband, Néstor Kirchner, because of this economic growth. Her campaigning did not present electors with new promises for the future but rather kept on defending the agenda initiated in 2003.

Brazil was slow in reacting to the worsening of the North American crisis. Not with regards to decisions, but in gestures and declarations, in other words “vocal administration”. Brazil, as the rest of the world, expected things to improve following the approval of the North American rescue package. However, what followed was a panic reaction and the Brazilian currency was attacked. Curiously, while the dollar skyrocketed, between September 1 and October 6, Brazil accumulated an ingress of dollars with a net positive balance of over 3 billion.

Only after the two meltdowns of the Stock exchange on Monday, Mantega and Meirelles appeared together to come the markets down. The episode opened up a margin for various interpretations. Henrique Meirelles, as president of the Central Bank, has a delimited margin of public action. He cannot speak about expenditure cutbacks or anticipate monetary or exchange-rate policy decisions.

When he was president of the American Chamber of Commerce in São Paulo, Meirelles heard Pedro Malan, who at the time was FHC’s minister, state that one doesn’t ask a political person about exchange policy. His attitudes are motive for action and not for public discussion.

With Meirelles taking care of the “back-office”, it is up to Guido Mantega take action to calm the market down in relation to economic issues: revenue collection, expenditure, growth, etc. Mantega did not act, as the Castilians say, with “protagonism”.  For some, he lacks the necessary charisma to be a Minister in times of crisis. Lula’s candidate Dilma Rousseff also disappeared.  She had nothing to say.  She probably felt it better not to commit herself to anything. Focusing her attention on the consolidation of her candidacy, she acted aloof up to the weekend, when she said what she really didn’t have to say about help for companies that suffered losses due to the skyrocketing dollar. “The government has no intention of socializing any losses and has not been approached by any company in this sense”, she stated.

The spokesperson role was left to Lula. Firstly, he stated that the crisis would not cross the Atlantic. Then, that it was global. Further ahead, that we may have to make cutbacks. Without a qualified spokesperson to address the market and society, now and then, the President transforms himself into a “Minister of Finance”.

It’s clear that the government lacks a figure like Antonio Palocci, who transmits security to the market, companies and economic agents.  In fair weather sailing, it’s easy to be the Minister of Finance of a country that is raking it in, has abundant reserves, a healthy financial system, plenty of credit from BNDES (and other public and private institutions), food and energy self-sufficiency and a president with enormous popularity and support from labor union and business leaderships, amongst other advantages. Most importantly, in a world that was doing very well.

With the crisis, besides the technical competence of the team, there is a psychological component that moves market decisions. Thus, the currency was attacked at a moment in which reserves were extremely high, the foreign exchange balance positive and also the capability of raising some US$ 50 billion from the IMF. When the situation gets complicated, the minister’s “protagonism” becomes fundamental. Not only as far as decisions are concerned, but most importantly, as far as attitudes and dialogue with society and the market are concerned.

To President Hugo Chávez, the US financial crisis is also the result of a lack of ethics and of “unjust law”. His words came during the 3rd Summit of Presidents of Judicial Branches of the Union of South American Nations, taking place on the Margarita Island, off the Venezuelan coast.

Due to his stance since the beginning of the global financial crisis, Chávez will use the current scenario to extend his anti-American rhetoric and domestically strengthen the idea that capitalism “is a system in crisis”.

Based on that, he will try to reunite his allies around the “21^st century socialism” thesis. Since Chávez’s project relies on structures rather than conjunctures, the longer the crisis sustains, the better for him. That way, he can resume the discourse that fell into disrepute after his defeat in last-year referendum.

However, he may experience trouble if there is a sharp fall in international oil prices. Even with domestic unity, such a scenario can bring even more alarming economic developments.

The US financial crisis is being used as an excuse by Argentine President Cristina Kirchner to justify the economic policy implemented by former president Néstor Kirchner and heavily criticized by analysts and opponents. In a defiant tone, Cristina said that the world’s financial situation has proven that the State plays an irreplaceable role in the economy in any global scenario.

To her, the moment has come for “old theories to be put aside”. In her opinion, Argentina is on the right track given that the State is present.

Despite the President’s optimistic rhetoric, independent economic analysts are not so certain of this alleged “solidity”. The general assessment by financial experts is that, in a globalized world, it is difficult to say that a given nation is immune from the effects of the current crisis. Therefore, it is too early to predict how the current crisis will affect Argentina.

Another controversial issue is the debt with the Paris Club. Even though the government’s commitment to pay it off has been welcomed by international agencies, some argue that the payment should be revised.

Theoretically, paying off the debt means easier financing for infrastructure works. However, given the adverse global scenario, it is believed that hardly anybody would lend money under the current situation. 

The financial crisis will certainly affect the Colombian economy. The dependency on various aspects of the country to the United States might lead to a rise in unemployment and a reduction in export rates. The oil and coffee prices will suffer a reduction, affecting directly two important items of the Colombian export network.

A “tranquilizing” aspect is the US$24 billion dollars international reserves that could handle an eventual dollar flow. Due to the characteristic of the Colombian economic team, local investments and pension funds are not in risk.