VZCZCXYZ0000
OO RUEHWEB

DE RUEHSO #0484 2601137
ZNR UUUUU ZZH
O 161137Z SEP 08
FM AMCONSUL SAO PAULO
TO RUEHC/SECSTATE WASHDC IMMEDIATE 8517
INFO RHEHNSC/NATIONAL SECURITY COUNCIL WASHDC IMMEDIATE
RUEHBR/AMEMBASSY BRASILIA PRIORITY 9649
RUEHRI/AMCONSUL RIO DE JANEIRO PRIORITY 8846
RUCPDOC/USDOC WASHDC 3171

UNCLAS SAO PAULO 000484 
 
SIPDIS 
 
STATE INR/R/MR; IIP/R/MR; WHA/PD 
 
DEPT PASS USTR 
 
USDOC 4322/MAC/OLAC/JAFEE 
E.O. 12958: N/A 
TAGS: KMDR OPRC OIIP ETRD XM XR BR
SUBJECT: GLOBAL ECONOMY; BOLIVIA 
 
¶1. Worse and Worse 
 
Editorial in liberal Folha de S. Paulo (09/16) says: "And here we 
are, with Paulson [Secretary of Treasury] apparently believing that 
playing Russian roulette with the U.S. financial system was the 
better option."  The phrase, by economist Paul Krugman, describes 
with acuteness the implicit risks of the newest strategy of Bush's 
administration in trying to control the crisis. ... Criticized by 
having helped other companies threatened by the crisis, by 
transferring private damages and risks to the tax payer, the Bush's 
administration changed the strategy not only for political reasons. 
Behind this action also is the intention of forcing the drying out 
of the financial sector, making it free of institutions, like some 
investment banks, responsible for speculation, both dense and 
uncontrolled, which originated the crisis.  The White House message 
that there will not necessarily be help to the "losers," increases 
the panic among the sellers.  The U.S. government's action this past 
weekend seemed to be based on the conviction that it is possible to 
control the rhythm and distribution of losses in a huge crisis like 
this, by emerging from its ruins a stronger system.  This is a risky 
option.  If this hypothesis is not confirmed, the economic and 
social costs of this brutal collapse will tend to be even bigger." 
 
¶2. The Worse is Yet to Come 
 
Lead editorial in center-right O Estado de S. Paulo (09/16) 
comments:  "The banruptcy of the U.S. fourth major investment bank, 
Lehman Brothers, is the prediction of major difficulties for the 
world economy and the hardest test for the Brazilian economy since 
the exchange crisis of January 1999. ...Its worst effects are yet to 
come...Today there are few certainties and none of them seem to be 
tranquilizing: the financial crisis is not over, it may get worse 
and its worse effects are yet to come.  Brazil had never been so 
well prepared to face an external shock. ..But invulnerability does 
not exist and, besides, the dimension of the crisis is unknown.  It 
is not time for boastfulness, but to maintain the country prepared 
for possible stronger shocks.  Fiscal prudence must be a fundamental 
part of this preparation." 
 
¶3. Leave Bolivia Alone 
 
Columnist Marcos Nobre wrote in liberal Folha de S. Paulo (09/16): 
"There is nothing more humiliating for a country than not to be 
seriously taken.  And this is what is happening to Bolivia. .. The 
Bolivian crisis is certainly more serious than the Argentinean.  But 
what calls our attention is that nobody listens to what the Bolivian 
government has to say.  And President Evo Morales exhausts himself 
by saying that he does not want or need help.  To accept the help 
would mean to recognize that there is in fact an uncontrolled 
situation. It would mean to accept, as a last resort, that there is 
not a government capable of negotiating an agreement to put an end 
to the conflict.  Evo Morales understands that he would totally lose 
his authority. ...Bolivia knows how to commit its mistakes by 
itself.  To send the U.S. Ambassador home, for example, was one of 
the childish and unreasonable attitudes of recent times.  But no 
country that praises democracy has little to gain by accepting 
interventionist proposals." 
 
¶4. Tension will be constant without separation from Bolivia 
 
Editorial in economic newspaper Valor Economico (09/16) says: 
"...The immaturity of Bolivian democracy, that seems to have 
repeated once again the tradition of flirting with the abyss and 
then slightly moving back, demonstrates the need of creating 
alternatives to the major supplier of natural gas to the Brazilian 
economy....   With the lack of cheaper and more viable options, the 
country [Brazil] will be condemned to periodic scares due to the 
chronic instability of its Andean neighbor.  And what the recent 
conflicts reveal, in a worrisome way, is that even being contrary to 
their own interests; part of Bolivian society is willing to use 
Brazil and its gas dependency as hostage of their internal disputes. 
...Brazil, as a neighbor country, client and regional hegemonic 
power, has a role to play in the Bolivian crisis.  But,... as 
Ambassador Rubens Ricupero said, one can only help those who accept 
to be helped.  While the Bolivian people show more effort in 
deepening the breaches of the country rather than fixing them, 
Brazil cannot stop looking for scenarios that permit the country to 
move away from the turbulence of its unstable neighbor." 
White