Wall Street Journal - 10/28/98
By WILLIAM HOKE
SANTIAGO, Chile -- While El Nino's fickle currents and global financial turmoil have already made it a bad year for Latin America,
some analysts say things could get even worse because the region's governments have been ignoring the ticking time bomb of the
Year 2000 computer problem.
The Year 2000 problem, also known as Y2K, has its roots in a programming shortcut designed to save on once-expensive computer
memory by identifying years using their last two digits only. That system works well -- as long as the century doesn't change. Once
it does, however, unmodified computers won't be able to distinguish the current day from the same date a century earlier.
A large part of the corporate world was also slow to address the Year 2000 problem issue, but widespread publicity of the problem's
seriousness has prompted many companies to implement crash programs to come to terms with it.
Analysts say that while the Year 2000 problem is no less serious a problem for Latin American governments, the level of awareness
among many public officials has been disturbingly low.
"At least at the beginning of this year, most Latin American countries weren't doing much serious about Y2K," said Juan-Francisco
Roque, an economist based in Washington, with a computer consulting operation in Bolivia.
Many observers doubt, however, that come Jan. 1, 2000, the machinery of state will come grinding to a sudden halt throughout Latin
America. They add that while some disruption is inevitable, it should prove manageable. The extent of the disruption that will surface
in the early days of the next century is still unclear, especially since few governments in the region have disclosed much hard
information about the situation.
But given the degree to which many Latin American governments involve themselves in their citizens' lives, their increasing
dependence on computers, and their widespread reputation for inefficiency, the potential for problems with far-reaching
consequences occurring can not be ignored.
"One thing misleading governments in developing countries is they think that they won't be as affected," said Carlos Guedes,
Deputy Controller of the Inter-American Development Bank. "They may not have the most modern systems, but what they have is
basic and critical."
Analysts say that regional governments already have a hard enough time keeping their fiscal deficits from ballooning out of sight
without having to worry about the tax collection computers falling victim to the Year 2000 problem as well. And even if they are able
to keep the tax tap flowing, the social, political and economic consequences could be severe if governments suddenly found
themselves unable to pay their employees, their pensioners or their suppliers.
Systems failures at government hospitals could represent a major health hazard while disruptions at state-owned companies such
as Mexican oil giant Pemex or Chilean copper producer Codelco could put a serious crimp into a country's economic growth rate as
well as its fiscal revenue stream.
Perhaps the area most fraught with danger is the region's regulated banking system. A breakdown there could erode public
confidence still on the mend after years of hyperinflation. Back when money lost value to inflation as it sat in a bank, the typical
Latin American worker was far more likely to spend his paycheck than he was to deposit it.
Observers say central banks and regulators are well ahead of the rest of government in ensuring that their sector's computers are
ship shape for the next century.
"They're trying to prevent runs," said a Buenos Aires-based banker. "They want to make the results [of their Y2K efforts] public to
persuade Joe Public that everything will be okay so he doesn't take his money out of the bank."
Indeed, the banking sector could turn into a leading indicator of public confidence in governments' Y2K efforts. Analysts say if
depositors start reaching the conclusion their funds might not be available after Jan. 1, 2000, large-scale withdrawals could begin
well before that date.
And while the Asian financial crisis is causing considerable concern today about whether Latin America will be able to pay off its
foreign and domestic debt, Year-2000-problem failures could make it impossible for regional governments to meet bond payment
schedules even if they do have the money available to do it.
No matter how thorough governments might be in minimizing the Year 2000 problem's potential for creating havoc, they are still only
part of an interdependent web of public- and private-sector organizations in which the weakest link could cause a larger system to
crack.
"It's like a food chain," says Mr. Roque the economist. "Everything's interconnected. If the phone company's not working, it doesn't
matter if the banks are because you won't be able to send wire transfers to get money."
Many analysts say Latin American governments have started addressing the Year 2000 problem too late to solve most of the
problems by the turn of the century. The IDB's Mr. Guedes says inventorying and planning for Y2K consume 15% of the total time
required for the job. Testing represents a whopping 60% of the total. That leaves just 25% of the time available for actually patching
up the system.
When Mr. Guedes factors out the weekdays between now and the year 2000, he finds there are only about 75 days left for
correcting computer code. "There's no way!," Guedes said. He suggests many governments would be better off implementing a
triage system whereby the most critical systems are worked on first and contingency plans established for continuing other
important operations with a high likelihood of failure.
Money and manpower are in equally short supply. Cash-strapped Latin American governments have little slack in their budgets for
major computer-related outlays. Indeed, Brazil is expected to announce major budget cuts later this week. With that constraint in
mind, Mr. Guedes said Friday that the IDB's executive directors have authorized a Year-2000-problem line of credit of around $2
billion to assist regional governments in dealing with the problem.
But money and time count for little if there's nobody available to do the work. Programmers are a precious -- and increasingly scarce
-- commodity in Latin America.
"The U.S. is taking whatever staff is available," Mr. Guedes said. "They're loosening visa requirements on programmers. Lots of
Brazilians and Argentines are going there. It's a Year 2000 brain drain." |
