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Ukraine and its economic situation

Ukraine and its economic situation

Marcelo Rech

Ukraine is a strategic partner of Brazil mainly in the aerospace field with the project Cyclone-4. Since the beginning, the project has been marked by problems, essentially economical. Last year,

I was in Alcântara (state of Maranhão) and could note in loco the situation of neglect of what should be the tower of launch and the base of the binational Alcântara Cyclone Space.

Even if urgent resources appear, part of the infrastructure is already lost. With the crisis in Ukraine, we also could wonder if Kiev will be able and will have conditions and interest in maintaining the project.

It isn´t news for nobody that Ukraine is almost broke. International experts have no doubts as for the complexity of the problem and the uncertainties regarding the capacity of regional and central authorities of the country in honoring the debts.

The country lives a chaos in the capital and in the west regions, faced the overthrow of a government and was already dealing with a catastrophic process of its economy.

The temporary leaders declared to have found the coffers empty. There is no tax revenue and there is no money to pay pensions and salaries to the public sector. The National Bank is incompetent in containing the quick decline of the local currency, while the people keep on withdrawing their resources and buying dollars.

The situation has worsened to the point of many banks limit the sale of the foreign currency and impose limits and restrictions to the withdrawals and deposits. The value of the dollar soared and, for those same experts, it is still far from the top.

The collapse of the Ukrainian economy and of its finances may still be confirmed this month. Presently, Kiev has not the necessary money to pay for the basics and counts on the promised external help, for example, by the European Union.

However, all the help that the EU can provide still depends on approval of the bloc, something that also is not that simple, once the European Union itself has its internal problems.

Is it known that the objective of the Europeans is, through money, to minimize the impact of the crisis that also is political, but obviously many people will wonder why the EU gives money to Ukraine, since the country is not a member of the bloc and has no agreement with it. Why will Ukraine receive money and other member-countries of the EU, and with so many and serious economic problems, won´t? Why don´t Ukrainian billionaires help their country in this moment?

Meanwhile, the estimates show that the economic salvation of Ukraine passes necessarily for a contribution of at least US$ 35 billion in the next two years. In this context, few people believe that an extern loan of this spread will be returned ever.

The sceneries show that Ukraine will be able to receive extern help from the International Monetary Fund (IMF) in the period of creation of the temporary government up to the elections of May. The credit speculated is of up to US$ 15.5 billion.

Since few believe that these resources will be paid, Ukraine will receive them in exchange of a squeeze in the economy that will impact strongly in the reduction of the pensions payment, increase of the age for retirement and abolition of all the privileges for housing, increase in the prices of gas for companies and individuals, and much more.

Marcelo Rech is a journalist, specialist in International Relations; Strategies and Policies of Defense; Terrorism and Counterinsurgency; Human Rights in the Armed Conflicts; and director of the Instituto InfoRel de Relações Internacionais e Defesa. E-mail: inforel@inforel.org

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