July 11, 2002

Argentina's problems are 'homegrown'

                 BUENOS AIRES, Argentina (Reuters) -- "Crony capitalism" and corruption
                 helped spark Argentina's economic meltdown and a solution must likewise
                 be home grown, the White House's Latin America policy chief said on

                 "(Private sector people told me) this was not true capitalism... It was distorted by
                 what has been called crony capitalism, or perhaps by the diversion of resources to
                 improper uses," Otto Reich, the U.S. assistant secretary of state for Western
                 Hemisphere affairs, told reporters in Argentina.

                 Asked at a news conference at the U.S. ambassador's residence if he agreed with
                 the comments he was citing, Reich replied: "To a large degree."

                 His statement was yet another sign Washington is taking a get tough approach
                 towards Argentina -- one of the strongest U.S. allies in the region in the 1990s, but
                 now unable to win quick international aid amid criticism of state overspending and
                 incompetence, political analysts and diplomats say.

                 Argentina, which economists say is still Latin America's No. 3 economy, is
                 negotiating with the International Monetary Fund after the worst economic crisis in
                 the country's history sparked a debt default, a currency devaluation and pushed the
                 banking system near the edge of collapse.

                 Questions have been raised about how committed the United States is to helping out
                 Latin America, especially after Argentina failed to win funding quickly.

                 Some analysts say Argentina is being made to pay for the mistakes of its previous
                 governments, despite the risk that a downward spiral in the country, which has
                 been beset by civil unrest and riots, could make for an increasingly troubled region.

                 Carlos Menem's Peronist government in the 1990s was praised for throwing open
                 Argentina's economy, but it was also beset by corruption and is accused of
                 overspending, which paved the way for this year's default.

                 "(President Eduardo Duhalde) said that the problems of Argentina are home grown
                 and solutions therefore have to be home grown and that is what we are saying,"
                 said Reich, who met Duhalde on Wednesday and visited Brazil earlier in the week.

                 His statement contrasted with what he said two days ago about Brazil, Latin
                 America's biggest economy.

                 "We would do whatever is necessary to help Brazil, certainly out of a problem n ot
                 of its own doing," Reich said then.

                 Anti-US sentiment?

                 Reich played down reports of growing anti-U.S. sentiment amid signs regional
                 voters are tired of years of Washington- encouraged free market reforms that have
                 done little to improve the lives of millions of poor people.

                 For some analysts, a rise of economic nationalism in Latin America explains the
                 second place won by Indian coca grower Evo Morales in Bolivia's presidential
                 elections last month, or a strong showing in opinion polls for leftist presidential
                 contender Luiz Inacio Lula da Silva in Brazil.

                 "This is not a surprise (a rise in anti U.S. rhetoric), but ... in fact, I think there is
                 less anti-American rhetoric than

                 historically in Latin America, Reich said.

                 "I've been through this before," he added, referring to his experience in Central
                 America during the leftist guerrilla wars of the 1980s. "(It was) much worse."

                 Reich played a high-profile role in former President Ronald Reagan's fight against
                 Nicaragua's leftist Sandinista rulers in the 1980s. The campaign produced the
                 biggest political scandal of the Reagan era, when U.S. officials were found to have
                 cut a secret deal with Iran to trade arms for money that was then funneled to
                 rightist Contra rebels in violation of U.S. law.

                 Reich said he would not comment on Argentina's negotiations with the IMF, just
                 saying: "I believe they have met all the preconditions (of the IMF).

                 "Argentina has all the economic tools and resources to overcome its current
                 problems. It is a still a wealthy country," he added.

                    Copyright 2002 Reuters