Here is something that stayed with me after reading the deluge of comments run in the op-ed pages of many U.S. and European newspapers on the financial “crisis” and the subsequent congressional debate on a bailout plan.

Mark Brown of the Chicago Sun-Times recently wrote: “I suppose it would be violative of the required spirit of bipartisanship to point out that a Republican administration wants us to nationalize the financial industry, but, unlike some banana republic, the government is only taking over the problems, not the profits. Now, that’s American capitalism.”1

That may be only a journalistic witticism spurned by American voters’ loathing of Wall Street but then I also read some articles by very authoritative conservative opinion makers, such as William Kristol’s piece, “A Fine Mess,” run on the op-ed page of the New York Times: “I’m doubtful—he affirms—that the only thing standing between us and a financial panic is for Congress to sign this week, on behalf of the American taxpayer, a $700 billion check over to the Treasury.”2 So am I.

Let me quote just one more pundit, professor Ben Bernanke, a former chairman at Princeton’s economics department, a long time distinguished student of the Great Depression and the current chairman of the Federal Reserve. He has recently been reported as saying to some of his colleagues: “There are no atheists in foxholes and no ideologues in financial crises.” I would only add that in financial crisis of such magnitude as the ongoing one there are also innocent bystanders.

Latin American vulnerability to financial crisis of its own making and the dire consequences those crises have always had on our “real economies” by aggravating poverty fuels most of the local reactions to Wall Street “fine mess”, as Mr. Kristol would gracefully describe it.

Despite many current Latin American rulers’ recent statements as to the strength of their economies and the soundness of their policies, the awful truth is that we not only live next door to a great country now going through what many specialists think is a grave recession, but in many cases that same country is our main trade partner.

Take Venezuela’s president, Lt. Col. Hugo Chávez. He boasts that his country’s real economy will not be hit by the after-effects of the U.S. financial crunch. That is hard to believe even for the most unsuspecting Venezuelan follower of Mr. Chávez’s “revolution”. For all Chávez’s anti-American rhetoric, the Venezuelan oil sector accounts for more than 25% of GDP, 90% of export earnings, and more than half of the central government’s ordinary revenues. Venezuela remains the fourth-leading supplier of imported crude and refined petroleum products to the United States.

On September 29, in the very wake of the crisis, Brazil’s president, Luis Inácio “Lula” Da Silva, said in his weekly radio talk-show “Café con el presidente” (“Coffee with the president”) that “we are ready to grow even in face of the U.S. crisis because it is limited to the American financial system.” He then affirmed that “Brazil’s exports are growing, and so is our real economy.”

Nevertheless, Lula’s critics have strong evidence that counter his optimism. Indeed, in Brazilian highly volatile financial ambiance, fleeing foreign capitals have heightened the country’s external vulnerability. Many Brazilian analysts anticipate an imminent devaluation of the real, the local currency.

Thus, when it comes to U.S. economic crisis, most Latin Americans can say, along with a celebrated 19th century Mexican dictator, general Porfirio Díaz, “Poor Mexico: so far from God and so close to the United States!”

Which interestingly brings to mind the way the current U.S. financial crisis mimics some traits of Mexico’s 1982 catastrophic financial collapse that led to Mexico’s default on its foreign debt. Large capital inflows preceded that crisis. Capitals inflow triggered a feverish domestic credit boom. The banks’ balance sheets descended into shambles. Absent a tight bank supervision the situation worsened by the day. “In Mexico, for example, the eagerness to lend was particularly strong in the early 1990s, when banks had only recently become privatized and deregulated.”3 Such vulnerable banking system, with mismatched assets and liabilities, was doomed to collapse.

According to Andrés Velasco, Chile’s finance minister, U.S. financial regulators made the same mistakes as their Latin American equivalents in the debt crisis of the early 1980s.4

But what probably is one of the worst effects of the current U.S. financial crisis on Latin America is that the advocates of rescuing banks overflowed by bad debt unwittingly demerit any sound argument against nationalizations in our own countries, so prone to statism and populistic approaches to solve economic problems.

While Mr. Bernanke and Mr. Paulson worked hard putting together a financial rescue plan, something happened in Ecuador that sent shockwaves throughout the region though was barely perceived by the U.S. press: a socialist constitution was approved in a unquestionable referendum by a majority of voters.

This makes Ecuador the second Latin American country, after Cuba, to explicitly declare its socialist goals. The new Ecuadorean constitution draws most of its rationale from the amendments that Venezuela’s Presidente Chávez unsuccessfully tried to have passed by another referendum held last December. These amendments would have cornered all forms of private property and hindered many individual economic liberties. Furthermore, at the core of the ongoing Bolivia’s bloody civil strife is a radically socialist constitution project in which nationalization is supposed to be the panacea for all its economic backwardness.

Here is what Peruvian analyst Alvaro Vargas Llosa has to say on the matter:

From now on, any petty tyrant anywhere in the world who takes over an industry will shut his critics up by saying that an American administration led by the party of free enterprise has done a de facto nationalization of a good chunk of U.S. capitalism.”5

That, of course, may be an overstatement, but it surely addresses another facet of the question and it is what Germans call schadenfreude—being overjoyed by someone else’s troubles; the perfect opposite of envy.

Many failed statist and populist leaders around the world now point at the U.S. financial crisis as yet another proof that capitalism, as it has been predicted time and again since 1848, is rapidly approaching the day of reckoning.

In face of such gloomy predictions, I can only hope that Mr. Bernanke’s dictum—”there are no atheists in foxholes and no ideologues in financial crises”is true.


Mark Brown, “Once again, little guy is left holding the bag”. Chicago Sun Times, Sept. 23, 2008.

William Kristol, “A Fine Mess”.New York Times, September 22, 2008.

Erwan Quintin and José Joaquín López, “Mexico’s Financial Vulnerability: Then and Now,” Economic Letter, Vol. 1, No. 6, June, 2006, Federal Reserve Bank of Dallas.

Richard Lapper, “Credit Crunch “echoes Latin debt crisis”, Financial Times, August 11, 2008.

Alvaro Cargas Llosa, “Wall Street Socialism,” The Independent Group Newsroom, September 24, 2008.


*Ibsen Martinez is a columnist, journalist, and award-winning playwright from Caracas, Venezuela. His writings have appeared in El Nuevo Herald, Miami, Letras Libres, Madrid, and El Pais in Madrid. Since 1995, he has written a weekly column for El Nacional.

For more articles by Ibsen Martinez, see the Archive.