Tigers bite back
So, you think Asia is in trouble? And you think banks are getting hurt? Think again. Economic problems faced in Brazil and Argentina in 1990, and the way in which these difficulties rippled around the globe, demonstrate the integrated nature of late 20th century capitalism.
In 1990, Mercedes's German production increased 15 percent, however worldwide production of vehicles declined due to the poor performance of the Brazilian and Argentine branches. Ford lost US$89 million compared with previous profits ranging as high as $324 million in non-U.S. automotive business. This loss was in part attributable to government action in Brazil and Argentina.
Caterpillar announced that its second quarter profit could fall to less than half its first quarter level of $99 million. Caterpillar's main problems lay in Brazil. Fiat also recorded a drop in profit in the first half of 1990, brought about through troubles in its Brazilian wing. Autolatina, a VW and Ford joint venture in South America returned a profit of DM 500 million in 1989. In 1990, VW calculated a loss of between DM 200 million to 300 million.
The same year, Henkel, a specialty chemical group, saw it's share value drop DM34.80 (6 percent) to DM 546 as a result of events in Brazil. Profits from Rhone-Poulenc in 1990 were half the $809.2 billion posted in 1989. Rhone-Poulenc said the weak dollar, worldwide economic slowdown and the effects of Brazilian government policy were to blame.
Furthermore, some economists believe that for every billion dollars Brazil paid in interest on its debt in the 1980s, 70,000 Americans were rendered jobless. Simply stated, if you export capital, you can't import goods.
Nineteen ninety eight news: Loral, a satellite manufacturer, will cut 10 percent of its workforce due to the cancellation of three Asian orders, one of them Indonesian.
Indonesia needs to import again. But first, Indonesia needs to export. Indonesia should ask its trading partners to lift trade restrictions in sectors such as textile and agriculture. These sectors contain many industries that should be generating exports that would take Indonesia out of the economic doldrums. These are the industries that provide jobs for the majority of the population.
Asia has bitten back before: A British quota on Indonesian textile imports caused the Indonesian government to cancel orders for textile machinery and aircraft. The textile quota was subsequently raised by 181 percent.
The Chinese substantially reduced their grain purchases from the USA because of restrictions on textile imports, and threatened to reduce them even further. When the USA agreed that it would not impose further restrictions, the Chinese agreed to make up the shortfall in grain purchases.
Indonesia does not need aid. Indonesia needs trade.
OSVALDO COELHO
Jakarta