September 08, 2006

The confusion is global

Sir, yes globalization is indeed a difficult and confusing issue when even a Nobel Prize winner as Joseph Stiglitz can tell us that “We have become rich countries of poor people” (September 8), totally ignoring that this has less to do with globalization and much more with how the richness is distributed locally in each country.

Also on the issue that “so many countries end up with unmanageable debt burdens” he seems to blame it primarily on that those debts were contracted in foreign currencies, exposing it to global volatility and suggests as a solution that developing countries should be able to borrow in their own currencies or in a basket of currencies, but blithely ignoring the fact that most unmanageable debt burdens are just the logical consequence of the governments having contracted excessive debts for the absolutely wrong reasons.

As a citizen from a developing country I can testify that when your country cannot pay its debts because its government has wasted away the resources you really do not care whether you problem is in dollars or in pesos. Besides, if in dollars perhaps the mistakes are even more globally shared (haircuts) since, if in pesos, most of the cost, through inflation, would fall mostly on your own poorest poor.

Finally as to the high volatility of the global markets, I cannot but invite Mr. Stiglitz to try some of our attractions and then he would really be able to talk about volatility. As a financial consultant, I have seen hundreds of good projects go belly up precisely because they were not funded in dollars but in local currencies, when inflation and interest rates teamed up to overnight transform what were ten year repayment terms into effective ten months.