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Latin America

My Lords, I, too, congratulate the noble Viscount on securing this debate. However, I am very sorry that he referred to the area as Latin America, as I believe that one reason we in this country focus so seldom on that part of the world is that we use that all-embracing and rather misleading term and the term ““the Americas””, which is even more so. I always prefer to refer to the USA, Canada and Mexico when talking about north America, and when talking about points south I prefer to refer to central America and south America, because the focus thus becomes much more closely aligned to what one is talking about. South and central America together make one of the most important developing regions of the world, one that after a somewhat chequered history is starting to stumble to its feet, with increasing political stability working hand in hand with growing economies. We saw the flexing of some of its muscle during the Cancun trade round. Overall, as this debate has shown, this region of the world is very much on the up, although, admittedly, not without difficulties—some of them not unconnected with left-leaning governments. The country on which I would like concentrate my comments is Argentina. I knew it well between 1955, when I witnessed the removal of a particularly corrupt and oppressive dictatorship, and 1971. I have followed with great interest the fluctuating fortunes of Argentina ever since. During the debate of my noble friend Baroness Hooper last year, I commented that Argentina,"““always seems to be able to pull out of its difficulties””.—[Official Report, 26/5/05; col. 634.]" It is interesting to compare her situation now to that of last year. Then there had been a massive restructuring of Argentina’s debt, creditors had to accept a cut in principal, a lengthening of maturity and a reduction in payment of interest. As we all know, this followed an economic fall from grace in 2002, when Argentina went from a country widely held up as a model of successful free market reform to one that defaulted on its public debt of some $155 billion. However, during the past three years there has been an annual growth in the economy at an average of roughly 9 per cent, reaching 9.2 per cent in 2005—the fastest rate for 13 years, with forecasts for this year expecting that growth to continue. January’s figures show that it was the 38th consecutive month of constructive growth, with industrial activity and tax collection percentages rising and unemployment figures starting to decline. The start of this year has also witnessed President Kirchner paying off in full the IMF loan of some $12.5 billion agreed in 2003. With no further defaults since 2002, investors in Argentina’s debt have started to receive benefits from the GDP warrant scheme, which last year decoupled warrants from the bonds issued, enabling the warrants to be traded independently on the secondary market. These warrants mean that in any year when the economy grows faster than expected, creditors will receive 5 per cent of the difference between the size of GDP in that year and that predicted by the prospectus. It sounds a convincing catalogue of progress. However, as usual, a degree of uncertainty hovers not far behind and there are increasing concerns regarding the control of inflation. The president has opted to keep growth going at all costs rather than having to raise real interest rates or to allow the currency to appreciate to damp down inflation. Instead, he has sought ““voluntary”” price freezes from retailers in the hope that they will keep inflationary expectations in check while he tightens fiscal policy. Consumer prices rose by some 12.3 per cent last year, causing unrest—naturally—in labour unions whose disruptive demands could, as one commentator put it,"““throw a spanner into the President’s strategy””." An unprecedented measure was announced in March in an attempt to address inflationary pressures—a near-total ban on beef exports, with the aim of flooding the national market for six months and making beef more affordable to ordinary Argentines. Naturally, meat industry observers fear that the export market will be badly damaged and that prices in the politically sensitive home market will, after initial falls, start to climb inexorably as farmers switch to alternative crops—quite apart from the eventual effect on the balance of payments. Can the Minister update the House on the plight of the isolated communities in the mountains of Salta, Jujuy and Formosa, where an estimated 3, 000 to 6,000 people have been affected by flooding and landslides in the past few months? What resources have Her Majesty’s Government provided to help food and medical supplies to reach these cut-off communities where there is a high level of need? I could not make a speech about Argentina without mentioning the Falkland Islands. In 1990, eight years after the Falklands conflict, diplomatic relations between the UK and Argentina were restored. There is now a sovereignty umbrella arrangement whereby both countries can respect each other’s position on sovereignty while allowing them to resolve common interests such as fisheries and mineral deposits. Indeed, there have been very recent tensions over fishing rights, and Argentina recently impounded a British trawler in a dispute over squid-fishing. It is believed that squid is being used as a sovereignty tool over the Falklands. Can the Minister explain what has happened, how the situation has been resolved—if it has been—and whether it was simply yet another example of sabre-rattling for home consumption to show how macho the president is? I am very fond of Argentina and wish it well on its road to recovery. It is a part of the world where we need to support and encourage good governance, democracy and the rule of law. Argentina has enormous advantages, and is a very attractive and varied country that stretches from the freezing and windy Tierra del Fuego—I have been there, so I know how windy it is—to the tropical forests of the north. I strongly recommend it to your Lordships if they are thinking of paying it a visit. Finally, I shall make one small point about the new president of Chile, to whom noble Lords have referred. I remind your Lordships that there was a very feisty lady in the 19th century called Madame Lynch, who, as president of Paraguay, conducted a war against Brazil, Argentina and, I think, Bolivia, all at the same time, and lost.