SUNS4372 Thursday 11 February 1999

Finance: Soros gambling on Mercosur?

Montevideo, Feb 9 (IPS/Daniel Gatti) -- George Soros, the Hungarian-American billionaire notorious for his role in the Asian financial crisis and his predictions on the fall of the "Plan Real" in Brazil, is now one of the most vital foreign investors in MERCOSUR.

Soros who has made money through the operations of his highly leveraged hedge-funds, but, in his books, also a critic of the "excesses" of capitalism, has stressed the need for controlling capital flows, Soros is gambling on the recovery of the Brazilian economy. Just one week ago, 24 hours after calling on the Group of Seven most industrialized countries to "invest in Brazil" and the International Monetary Fund (IMF) to support the country, one of his top aides, Arminio Fraga Neto, was appointed head of the Central Bank of Brazil.

The appointment was hailed as a positive step by financial circles in Brazil and elsewhere in the region because of the "peace of mind" for investors having "one of Soros' men" at the top. "It's very important that the person that Soros trusted for his own investments in Brazil is now sitting in the bank's main seat", said Luis Pretti, Director in Argentina of the Brazilian investment bank Bozano Simenson.

Although there is no precise estimate of his millions, Soros currently is the biggest investor in real estate, land and cattle in Argentina, and has strong interests in Brazil and Venezuela. The newspaper Pagina 12 labelled him "the new owner of Argentina", a country in which he began investing only seven years ago.

Through the real estate firm of IRSA, Soros has become the largest real estate entrepreneur in Argentina. He is the owner of the main shopping centres in Buenos Aires, where annual sales total $800 million, and of
130 buildings throughout the country. This week he acquired 27.5% of the capital of Argentina's Loans Bank, which controls 40% of the market for mortgage credit and which the government of President Carlos Menem
has begun to privatize.

Soros also has managed to become the biggest landowner in Argentina, with 500,000 hectares, and the largest livestock owner - with some 150,000 head of cattle - and has plans to invest in industrialization and the commercialization of food products. IRSA has also allowed Soros to build alliances in other South American nations.

In Brazil, he owns 35.9% of shares in Brazil Realty, while in Venezuela he controls 34.5% of the Fund for Real Estate Values and 50% of the Velutini Group.
In 1992, Soros played a key role in forcing the British government to devalue the pound sterling.

His methods of investment were held responsible for sparking the Asian financial crisis, and a letter that he sent last year to the Financial Times newspaper - proposing the devaluation of the ruble - was considered the beginning of the exchange crisis in Russia. Soros is an "agitator, a maverick thinker on global capitalism", said Pagina 12 in a special report on the international investor and his policies.

In his book "The Crisis of Global Capitalism. The Open Society in Danger", Soros lays out proposals "of a social-democratic sort", the application of which could go against his own interests, the newspaper said. The "rescue of society's moral values", and the need to put limits and rules on transnational capital that today moves with total freedom in the world, are some of the opinions that Soros sets out in his book.

Soros criticizes the role played by the IMF in the recent international financial crises, which, together with the "growing social conflicts, are incubating the collapse of capitalism and of open society." But U.S. economic analyst Paul Krugman ironically declares that the billionaire's message is "stop me before I speculate again".

Krugman says that Soros "is saying that the rules of the game, under which he and other like him have prospered, are dangerous to society as a whole. This is not what one expects to hear from a speculator." Soros
is in favour of the application of a tariff on international financial transactions in order to reduce the volatility of capital, and a change in policy in the management of the IMF.

But the magnate "has two faces", says Pagina 12.

In the case of Brazil, a country for which he is calling for strong support from international economic and financial institutions, Soros is playing a role that goes against the one he played in Russia, where he acted as a pure speculator, in the South American country he has put on the mask of "saviour," the newspaper concluded.