EDITORIAL: Silver lining to credit crunch?
City share traders and Central American subsistence farmers don’t have much in common. But they’re both likely to feel the chill wind of the crisis that has swept the world’s financial markets in recent months. Economists predict the global credit crunch, rooted in risky mortgage lending in the United States, could lead to a fall in trade between the US and Central America, as North American consumers tighten their belts. And job losses are expected to hit remittances sent home by migrant workers, which provide a lifeline for many impoverished Central American families.
Former Costa Rican central bank president Eduardo Lizano warned in an interview with Inter Press Service that economic slowdown in the US is likely to mean expected short-term benefits from the Central America Free Trade Agreement (CAFTA) won’t be realised “because the chief hope was that Central America would receive increased investment to produce goods for export to the United States”. Some might argue this wouldn’t be such a bad thing, as it could limit the feared exploitation of workers and greater enrichment of major corporations at the expense of the poor.
Central American leaders held an emergency meeting in early October to work out how to respond to the financial turmoil. They decided to focus on strengthening trade between their own countries and with other markets such as Venezuela and China. They also pledged to find new sources of credit, such as the recently established Banco del Sur, and come up with a fresh plan to boost regional food production and distribution. “We want turn the international economic crisis into an opportunity for Central America,” Honduran President Manuel Zelaya told a press conference. “We want to make Central America an attractive place for investors and development [projects], while at the same time demonstrating responsible governance which provides prompt solutions to its people in the areas of education, health care and other social spheres.”
Yet while unfettered free-market capitalism has certainly had pernicious effects in Central America, it’s hard to imagine that this latest wobble will be positive for the region - at least in the short term. Nonetheless, it does raise serious questions about the validity of the neoliberal economic model and opens up some space for alternative visions. One of the good things about globalisation is the way it has helped strengthen solidarity links. This issue of Central America Report highlights some of the successful and extremely positive work being carried out by British groups and individuals in Central America – from English-language teaching in Nicaraguan cooperatives and secondary schools, to small-scale solar energy projects in Nicaragua and Guatemala. The world’s financial crisis may have a silver lining if it leads to greater understanding and support for similar community-based approaches to development which respect both people and the environment.
