- The Washington Times - Tuesday, March 27, 2001

President George W. Bush will be meeting with some very nervous Latin American presidents next month, shortly before the 34 elected leaders of the Americas gather for an April 20 summit in Canada. An economic and political crisis in Argentina is becoming so severe that some economists fear that a 1997-style financial crisis could revisit the emerging world market. Next month, Argentina's financial troubles will cast a pall on the Americas summit in Canada, and will test the new administration's strategy for dealing with financial turmoil abroad. Argentine President Fernando de la Rua meets with Mr. Bush on April 19. Some economists see an International Monetary Fund (IMF) bailout as a quick way to contain Argentina's problems, but Argentina has been unable to meet IMF's fiscal guidelines so far.

Fortunately, Economy Minister Domingo Cavallo, who masterminded the country's recovery from hyperinflation under the previous government, has the prominence to restore some investor confidence and to convince the Argentine people of the need to cut back public spending. Mr. Cavallo won't work an overnight miracle, but he is Argentina's best hope, and Mr. de la Rua showed considerable wisdom in recruiting his expertise.

Brazil, in turn, has demonstrated some ability to weather the storm. The troubles in Argentina recently sent Brazil's currency, the real, to its lowest level in two years, but intervention by the country's central bank has helped to buoy the currency. As during the 1999 Latin American crisis, Brazil is seen as a crucial domino for economic stability in emerging markets.

Mr. Bush should help to restore confidence by pledging his commitment to expanded trade with America's Latin American neighbors after he meets with the Argentine, Brazilian and Chilean presidents in April. Calling for an IMF rescue may seem tempting, but Mr. Bush should instead emphasize the benefits of trade and should outline, as specifically as possible, his timetable goals for establishing a free trade zone in the hemisphere.

Washington, meanwhile, should provide a good model for the rest of the world by implementing effective economic policy. Low taxes and wise public spending is the best-known recipe for long-term economic growth and stability.

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