Companies Pocketing Gas Subsidy for the Poor. Inter-Press Service
Bolivia's Morales Won't Reconsider DEA Expulsion to Court Obama. Bloomberg
An Hour with Bolivian President Evo Morales: "Neoliberalism Is No Solution for Humankind". DemocracyNow!
Bolivia's Morales Won't Reconsider DEA Expulsion to Court Obama. Bloomberg
007 Bolivian socialist?. New Statesman
Ecuador auditor urges debt default. Associated Press
In Rampant Violent Crime, Political Danger for Chávez. Washington Post
Immigrants back Chávez. Miami Herald
Chavez' home state and family becoming election liabilities. MercoPress
Financial pyramids force Colombia into state of emergency. MercoPress
Brazil: Payback Time? Inter-Press Service
Brazil September Retail Sales Rise More Than Expected. Bloomberg
México, Central America and the Caribbean
El Salvador: FMLN Starts Out Ahead. Inter-Press Service
China, Costa Rica to launch trade talks. Associated Press
Cuba won't let our kids leave, medical workers say. Miami Herald
Region: Trade, Security, Economy and Integration
Slowdown doesn't shrink China's LatAm ambitions. Associated Press
Latin America: Not So Insulated After All. Council on Foreign Relations
Castro, Bolivia's Morales Slam G-20 Summit Report. Bloomberg
Companies Pocketing Gas Subsidy for the Poor
Marcela Valente. Inter-Press Service. November 17, 2008
BUENOS AIRES - Companies that produce and distribute liquefied petroleum gas (LPG) in Argentina are benefiting from large government subsidies aimed at bringing down the price of the fuel, which 40 percent of the population depends on for cooking and heating.
But a 10-kg "garrafa" or LPG cylinder, widely used among the poor, cannot be found at the subsidised price because caps were not set for retail sales. IPS asked around in different neighbourhoods where gas cylinders are commonly used, and found that in many cases, the price was double what it was supposed to be under a recent agreement negotiated by the government.
"The supplier still sells me a 10-kg garrafa for 35 pesos (just over 10 dollars)," Norma Gutiérrez, who lives in Villa 31, a Buenos Aires slum neighbourhood, told IPS. "I told him that on TV they said the price had been lowered to 16 pesos (4.80 dollars), but no luck."
Gutiérrez runs a soup kitchen that serves lunch to 150 children a day. "I buy between two and three gas refills of the garrafa per week," she said, adding that she had no idea how to find a 16-peso refill.
That was the price set for sales of LPG to the public in an agreement reached on Sept. 19 by the Secretariat of Energy and companies that distribute the fuel, which in exchange are receiving hefty subsidies.
Consumer defence organisations estimate that the government will spend some 150 million dollars on subsidies to keep the price at 16 dollars a unit through late 2009. But the funds may not serve the stated purpose.
The agreement on keeping the price of gas cylinder refills stable was signed by the national government, the Argentine Federation of Municipalities (FAM), and the oil companies and other firms that produce, bottle and distribute LPG.
The FAM signed the pact with the aim of guaranteeing that the fuel was sold to the public at the agreed price. But most municipal governments do not have safe warehouses for storing the cylinders or trucks to distribute them in the poorest neighbourhoods in their districts.
The text of the agreement, which was seen by IPS, underscores that LPG "is a source of energy used by the lowest income sectors," and states that the aim of the new fund is "to subsidise household consumption of LPG" by keeping the price down.
As a result of the agreement, oil companies like the Spanish-Argentine firm Repsol-YPF, the U.S.-based ESSO, Brazil's Petrobras and the BP-controlled Pan American Energy are selling LPG to the gas bottling plants at a price of 30 cents of a dollar for 10 kgs, while receiving a 1.60 dollar subsidy.
The bottling plant, which pays 30 cents of a dollar for 10 kgs, sells the cylinders to the distributors for 1.51 dollars, while receiving 1.66 dollars per cylinder in compensation from the government.
And the distributor, who pays five pesos per 10-kg cylinder, sells them to the retailer for 16 pesos.
But the price paid by consumers varies widely.
In this South American country, 40 percent of households use 10-kg LPG cylinders for cooking, heating and heating up water. In four northeastern provinces, where there are no natural gas pipelines, that proportion climbs to 100 percent.
Since 2001, the price of a 10-kg refill of an LPG cylinder has risen fourfold, while the price of natural gas piped directly into the home -- the system used in middle and upper-income neighbourhoods -- has been frozen since then by the government.
The gap between the price of piped natural gas and bottled LPG has grown, and by the middle of this year, studies showed that consumers of piped gas were paying seven to 10 times less than people who use cylinders, for an equivalent amount of fuel.
The studies also point out that a large proportion of the subsidies actually end up financing better-off sectors of the population, and that the difference in prices has aggravated inequalities.
In March, at the end of the southern hemisphere summer, when consumers who depend on gas cylinders began to worry about the rise in prices, the distributors of piped gas in Buenos Aires began to offer their wealthier clients special water heating deals to keep their swimming pools warm year-round at a low cost.
In September, the government authorised an increase in rates for customers with middle to high levels of gas consumption, and allowed oil companies to raise the wellhead price. It also signed the agreement for the drop in the price of gas cylinder refills.
The growing subsidies that the government has shelled out to the private sector in the energy, transportation and food industries since 2002 could total 35 billion pesos (10 billion dollars) this year, according to the EcoLatina consulting firm.
"It is doubtful how much of a redistributive impact the subsidies have had," according to the consultancy.
One of the frequent formulas used by the government to transfer public funds to the private sector is through fiduciary funds. Some 96 million pesos (equivalent to 96 million dollars at the time) were channeled through such funds in 2001, compared to six billion pesos (1.8 billion dollars) in 2007.
A portion of the funds raised through the rise in rates for piped gas that was authorised in September goes into the fiduciary fund for residential gas consumption, created to finance the expansion of the natural gas network and to compensate for the reduction in the price of gas cylinder refills that was agreed with the companies.
According to the national budget office's mid-year report, the gas fiduciary fund should hold around 63 million dollars in 2009. But as a result of the price agreement, the total will be higher than that.
There are about 600 gas distributors around the country that sell gas refills to retailers for the agreed-on price of 16 pesos. But it is the tens of thousands of businesses that sell a total of four million 10-kg cylinders a month that have benefited from the reduction in price, rather than the consumers, Pedro Busetti, with the non-governmental consumer defence organisation Defensa de Usuarios y Consumidores (DEUCO), told IPS.
Furthermore, the price is double for home deliveries.
"The price of home deliveries is not regulated; it depends on the distances involved and other factors like safety levels" in the different neighbourhoods, Osvaldo Spanu of the Chamber of Liquefied Gas Distributors, which signed the price agreement, told IPS.
Spanu said the agreement established a mixed commission to monitor compliance with the 16-peso price. But a source with Enargas, the government gas regulatory agency, told IPS that the commission "is just now being set up."
Busetti said the gas subsidy "is not reaching those who need it the most."
"It only benefits the gas producers, who control the entire production chain, up to the distributors," Susana Andrada, with the Centro de Educación al Consumidor (CEC) consumer protection group, remarked to IPS. And the distributor itself raises the price when it delivers directly to people's homes, she said.
In the province of Jujuy, at the extreme northwest tip of Argentina, Rosario Andrada with Warmi, an indigenous women's organisation, told IPS that in the provincial capital, the price of the gas cylinder refill had dropped from 30 to 22 pesos, for customers who go to pick up the cylinder at the city government warehouse.
"For people who live in towns, it's easier, because the municipal governments are having the cylinders trucked in, and some customers even go to pick them up by bicycle. But it's harder to feel the benefits of the price agreement outside of the towns and cities, where gas cylinder refills still cost 32 pesos (10 dollars)," said the social activist.
In the northeastern province of Chaco, opposition legislators are demanding that the provincial government cover the cost of trucking in the cylinders, in order for consumers to benefit from the agreed price reduction negotiated by the central government.
A driver from Chaco, Juan Magallanes, told IPS that gas refills cost 33 pesos in his province. "Out at the YPF plant, you can get a cylinder for 16 pesos, but it's located seven km from Resistencia," the provincial capital, he complained.
Bolivia's Morales Won't Reconsider DEA Expulsion to Court Obama
Bill Varner. Bloomberg. November 17, 2008
Bolivian President Evo Morales said he won't reconsider allowing the U.S. Drug Enforcement Administration to remain in the country as a way to improve relations with the future American President Barack Obama.
Morales last week gave the DEA three months, as of Nov. 1, to leave the country, saying the agency was helping to undermine the Bolivian government. The accusations are "false and absurd," the U.S. embassy in La Paz said.
"The DEA will not return while I am president," Morales told reporters at the United Nations in New York. "That does not mean I am breaking relations with the United States. I want to improve things, but cooperation should not be conditional on other factors. There has to be respect for one government to another."
Morales spoke to reporters after delivering a speech to the UN General Assembly in which he criticized the Group of 20 nations' response in Washington last weekend to the global recession. The solution to the crisis, he said was to abandon the "neo-liberal and capitalist system" and allow all of the 192 UN member governments to contribute to a restructuring of global trade and financial regulation.
"The world has started to change," Morales, 49, said in reference to the election of Obama, an African-American, as the next president of the U.S. "There is an indigenous president of Bolivia and a black man president of the United States. We have a lot of things in common if we are talking about change, because I have a lot of experience with change, and it would be good to exchange experiences with the new president."
Morales, whose government allocated about $20 million to drug eradication efforts in 2009, said Bolivia is prepared to buy helicopters from European nations to carry out its own anti-drug campaign. He said he would also seek to have the coca leaf removed from the UN list of prohibited drugs in order to protect traditional consumption by Indians in the region.
Bolivia is the world's third-biggest producer of coca, the main ingredient for cocaine, after Colombia and Peru. The U.S. is the world's largest cocaine consumer.
"If there were no markets for cocaine in the U.S. and other countries there would not be this diversion of the coca leaf to cocaine," Morales said. "I regret that the DEA does not recognize this."
He said Bolivia, which has the second largest natural gas reserves in South America, `trusts" that the price of oil won't fall any further, is "prepared" for any impact of the global recession. The government can rely on $8 billion in foreign currency reserves, Morales said.
Bolivia's Central Bank reserves fell $181 million, or about 2 percent, from September 30, when the reserves totaled $7.8 billion, to November 12 as the demand for foreign currency increased.
An Hour with Bolivian President Evo Morales: "Neoliberalism Is No Solution for Humankind"
DemocracyNow! November 18, 2008
Bolivian President Evo Morales joins us in the firehouse studio to discuss the election of Barack Obama, US-Bolivian relations, the global economic crisis and more. Morales is visiting the United States at a time when relations between the two countries are deteriorating. Last month, the Bush administration suspended long-term trade benefits with Bolivia over its alleged failure to cooperate in the "war on drugs." Meanwhile, Morales has given the Drug Enforcement Administration three months to leave Bolivia. He accused DEA agents of violating Bolivian sovereignty and encouraging the drug trade. [includes rush transcript]
Guest: Evo Morales, President of Bolivia
JUAN GONZALEZ: Today, a Democracy Now! special. We spend the hour with Bolivian President Evo Morales. He is here in New York for meetings at the United Nations and the Organization of American States.
President Morales told reporters Monday that he hoped to see improved diplomatic and trade relations with the United States under President-elect Obama. Bolivia's first indigenous president noted the significance of the first African American being elected to the White House and said they "had a lot of things in common if we are talking about change."
Relations between the United States and Bolivia have deteriorated in recent months. Last month, the Bush administration suspended long-term trade benefits with Bolivia over its alleged failure to cooperate in the "war on drugs."
PRESIDENT GEORGE W. BUSH: The Andean Trade Preference Act allows us to suspend trade preferences with countries that do not live up to their promises. And unfortunately, Bolivia has failed to cooperate with the United States on important efforts to fight drug trafficking. So, sadly, I have proposed to suspend Bolivia's trade preferences until it fulfills its obligations.
JUAN GONZALEZ: Meanwhile, Morales spoke out about this earlier this month and gave the Drug Enforcement Administration three months to leave Bolivia. He accused DEA agents of violating Bolivian sovereignty and encouraging the drug trade.
This Monday, President Morales told reporters at the United Nations he would never permit the US anti-drug agency back into his country. He said he would launch a new intelligence operation to stop trafficking, as well as campaign to remove the coca leaf from the UN list of prohibited drugs. Bolivia is the third largest producer of coca, after Colombia and Peru. The United States is the world's largest cocaine consumer.
AMY GOODMAN: We're joined right now here in our firehouse studio by the Bolivian president, Evo Morales. We welcome you to Democracy Now!
PRESIDENT EVO MORALES: [translated] Thank you very much.
AMY GOODMAN: First, you come here after the election of the first African American president of the United States. You are the first indigenous leader of Bolivia. What is your message to President-elect Obama?
PRESIDENT EVO MORALES: [translated] First of all, I thank you for the interview. I feel that the world goes round and round. Three or four years ago, it would be impossible to think that a peasant president would be there. Nevertheless, the awareness of the Bolivian people keeps on growing. All the excluded people, all the marginalized people, the most abandoned people in the history of Bolivia have a president now.
And I feel the same thing is happening in the US. According to the information we do have, our brothers, our Afro-American brothers, and Afro-Americans, whatever you call them, they were excluded. And the struggle on this sector has been so important. So there is a growth in the integration of our people. I feel that is what I would say about a brother, as Mr. Obama, as president of the US.
In the same way, in Latin American, women who were excluded had no right to be president. Now we have two women who are presidents, in Argentina and in Chile. And these two presidents are the expression of a plural national state. Fathers of the Catholic Church, Catholics, women, workers-that is Latin America. And now, we have a president-and excuse me if this is offensive, but black. And this is proof of the diversity we have in America. But what is coming, maybe it will be very different, but maybe we can complement each other to look for equality among people, people who are here on Mother Earth.
JUAN GONZALEZ: Mr. President, in the waning months of the Bush administration, relations between Bolivia and the United States have gotten worse. You asked the ambassador, the US ambassador, to leave the country, and now you have suspended relations with the DEA. How do you see-why do you see this getting so bad between the United States and Bolivia? And what's your expectation under the new administration?
PRESIDENT EVO MORALES: [translated] Our government, our culture has a very close relationship with human beings. We are the culture of dialogue. But we also saw in the presence of the ambassador of the US as a constant conspiracy. And I remember that I talked to you, and I actually denounced the ambassador, because he used to call me the Andean bin Laden. And the coca growers, he used to call them Taliban. That's when I was a leader, and I was a candidate for the presidency. Permamently, from the State Department of the US, I have been accused of being a drug trafficker and a terrorist. And even now that I'm president, that continues on on the part of the embassy. I know it does not come from the American people.
I need ambassadors who are diplomats and that if there's a possibility to cooperate, that they cooperate. If they have the possibility of doing good business, they should do it, but also that Bolivia would benefit it. But we don't need aggression, conspiracies. Unfortunately, the financial resources that come from the US-they talk about corporation, that corporation really is financing destabilization. And so, that makes us want to be respected as a country.
Well, secondly, talking about the DEA, already during in the '90s, the ex-commander or leader of the armed forces-his name was Moreira-he requested exclusion, that the DEA be excluded. Why? Because they didn't respect the national police or the armed forces of my country, and they wanted to divide with others or conquer certain loyalties in the national police. I, personally, I've been a victim of the DEA, because sometimes they even protected drug traffickers. If they really fought against drug trafficking, it would be very different.
And when they do an operation against drugs, it's always with political ends. When I was a representative and we had the proper documentation, they asked Evo the information about-personal information about Evo Morales and also the MAS officers. The DEA investigated directly the financial entities. Since they couldn't find anything, they kept quiet. Once, a reporter from the newspaper called Opinion in Cochabamba told me, not publicly, just in person, that he had talked to the DEA, and the DEA were really doing investigations, but just with political ends. And that newspaper man told me that "the DEA investigated you, and they didn't find anything." And lately, when I was already in the government, but when the communications were in hands of the telecom company from Italy, a team of the DEA were listening phone calls to be able to spy on me. This is a political thing. And that is why that happened.
So by talking about drug-trafficking, the fight against that, I mean, this is the most advanced things in Bolivia, because we are talking about the coca growing and the confiscation of the shipments. And so, when we declared persona non grata the US ambassador, we-they say we are protecting, but that is not the culture of the indigenous people-drugs-but we want to reduce, with compensation-well, if we don't do it the proper way, it's not going to be any good.
And our proposal has been very clear. There is not going to be zero coca leaves growing. Therefore, we have to actually control the coca growing, but we have a very small portion, per family. It's forty meters by forty meters-it's not very big-per family. It's very, very small. It's just like the backyard of anybody's house. And that will allow us to have a self-control, the social control. Even though we do have promise, this is how we are fighting. And we will fight drug trafficking with or without the help of the US, because this is an obligation my government has to fight against the evil that it happens, it causes on human beings.
AMY GOODMAN: So you'll never let the Drug Enforcement agents from the Drug Enforcement Administration back in?
PRESIDENT EVO MORALES: [translated] We are getting organized, and we are actually setting up a national intelligence in collaboration with our neighbors Argentina, Chile, Brazil. And that way, the fight against drug trafficking is going to be more effective, but it's going to be something that has a political element into it. If we don't permit the DEA to come back, that doesn't mean we'll break relationships with the US.
AMY GOODMAN: We're talking to the President of Bolivia, Evo Morales. He's joining us in our firehouse studio for the hour. Stay with us.
AMY GOODMAN: Our guest for the hour is the President of Bolivia, the first indigenous president of Bolivia, Evo Morales. He is here in New York. I wanted to ask you about this unprecedented meeting that took place in September, led by the presidents of Argentina and Chile, took place in Chile, as the crisis in Bolivia was deepening. You were accusing the right-wing opposition governors of staging a violent-attempting to stage a coup against you, a violent coup. A number of peasants were killed there in Bolivia. Do you think the United States was involved with this?
PRESIDENT EVO MORALES: [translated] Well, from the time I was sworn in as president of the republic in 2006, the opposition continually tried to stop my presidency. During the first few months, they said, "Oh, poor little Indian," that "he's going to be four, five, six months as president, and then he's going to leave. He's not going to be able to lead, to be in the government." Nevertheless, a year went by, and I was still president. I gave my speech to the Bolivian people.
And from that time on, what did the opposition do? They said, "We think that this Indian is going to stay here for a long time. We have to do something." That something is like, get him out. In the financial and political issues, with false arguments that I was going to end with private property in Bolivia, they tried constantly to wear me down.
AMY GOODMAN: Who is they?
PRESIDENT EVO MORALES: [translated] The opposition, the right-wing parties, the fascists and the racists, the rest of the neoliberalism.
And since they couldn't do anything, well, they also realized with a dirty campaign against Evo Morales, they wanted a hard vote against Evo Morales. And this year in September or October, they decided to do a civil coup, a violent coup, even though last year a commander of the armed forces announced publicly that they wanted to use the armed forces for a military coup.
But this year, what are they doing? These opposition groups, first of all, they try to overtake the national police. They couldn't do it. They hit the members of the armed forces, they attacked them. But they couldn't occupy the headquarters. But they did-they were able to secure some airports in the eastern part of the country, so that when the president and the ministers had to use those airports, they couldn't use it. And they overtook more than sixty communities in Tarija and other places. And this is terrorism. They bring guns. They destroyed gas tax between Bolivia and Brazil. So that is really messing up the patrimony of the state, really.
Finally, there was a reaction of the peasant movement to recuperate INRA, which is the National Institute for Agrarian Reform, the offices. It has the charge of actually giving back the land to the indigenous people and to the peasants. And then there was a massacre. Look, they tried to occupy and take over the armed forces [inaudible]-that is sedition-and then to take the national patrimony and to burn gas. And this is terrorism. And as UNASUL declare, that there was a massacre in Pando, and this is genocide. We went through that.
But in those three aspects, you can see that there was an attempted coup that didn't succeed. And I want to salute that, and that is the reason why I'm here in the US. I want to express my respect to the international community, because everybody condemned the coup against democracy to the rule of law, but-everybody but the US, but the ambassador of the US. It's incredible.
JUAN GONZALEZ: Mr. President, I'd like to ask you, in previous visits, we've talked about the long struggle to craft a new constitution for Bolivia. And our understanding now is it's finally been crafted and that it will go to a referendum in January. What are your expectations on this referendum? And what does the new constitution signify for Bolivia?
PRESIDENT EVO MORALES: [translated] I feel a great optimism, because we suffered a lot of discrimination, and they have called me monkey, animal, not capable of anything. And I don't think that they have treated [President-elect] Obama the same way they treated Morales, by the opposition. Because I feel this optimism, I think we are going to succeed with the new constitution that will guarantee a united Bolivia, with guarantees for the people and a plural national state with everybody-black, white, mixed breeds, indigenous people-they are going to be united. And the law is going to include a plurality for people. It will guarantee private property, collective communal property, and also state property that belongs to the people, such as the state companies, such as the hydrocarbon industry.
But also, the new constitution will allow the Bolivian state-rather, that we are not going to allow any settlement of any military base on Bolivian soil. We will not. And we also renounce to declaring war against any of our neighbors, because war is not good for any country in any part of the world.
And the most important thing is that public services-water, telephone, energy, electricity-this is a human right. And so, it has to be a public service and not a private business.
Yes, we can talk about a lot of social achievements and civil liberties, and so on and so forth, and equality between men and women, but according some experts, this new constitution is one of the most advanced constitutions socially.
And for the first time in Bolivian history-200 years of republican life, we've had-this draft law will be either approved or rejected by the people, by Bolivians. We had twenty different constitutions, but just a few, a few families, a few politicians were ruling. And they didn't take into consideration the Bolivian people. We will have a referendum, and it will be either rejected or approved, but it will be with awareness through the vote and not through violence, as it happened before with the fascist and racist groups.
AMY GOODMAN: We're going to have to go to break again, but when we come back, I want to ask you about the G20 summit and what is called here "free trade." This is Democracy Now!, democracynow.org, the War and Peace Report. We're talking to the President of Bolivia-he's here in New York in our firehouse studio-Evo Morales. Stay with us.
AMY GOODMAN: Our guest for the hour is the President of Bolivia, Evo Morales. The G20 summit that's just taken place in Washington, what are your thoughts on it?
PRESIDENT EVO MORALES: [translated] Well, finally, everybody has a right to get together, to meet. But if we are talking about a financial crisis, all countries should actually be there, and it also should be talked about at the UN. If there was a meeting of the G20, I can imagine that they are the only ones who are responsible for the financial crisis, so they have to meet, because they are responsible. Well, as I say, we all have the right to meet in groups, but this is a world problem. And the government of the US and the president of the assembly should actually call for a meeting to listen to everybody and to find solutions all together to the problem.
And according to the measures that the G20 decide upon, they are investing millions and millions of dollars, but these millions only go to the people who caused the crisis, not to the people that need the money. So, those millions of dollars should go to the victims and not to the people who caused the crisis. And so, the people that had mortgages, who couldn't pay, or loans, or people who lost their employment, I am sure that everybody would think that it would be better that the G20 would do otherwise. I think it's important not only that the different states participate in this financial crisis. Otherwise, there should be like an authority that will be above nationalities, above the nations that will decide.
So, Bolivia is going to be affected how? Well, the prices of our natural resources are going to go down and also many remittances. But we are ready to face this crisis, this financial crisis, and we will overcome this problem of trade, because the state is an entity that regulates the national economy and not the free market. Besides that, an important question when I became president, the reserves for the Bolivian treasury was $1,700,000. And right now, we have $8 billion. Between 2004, 2005, and in 2004, the reserves were never more than $1 billion in Bolivia. In a little bit of time, we have improved. So this gives us security that we can face this very deep financial crisis.
JUAN GONZALEZ: What do you see this crisis that started in the United States and Britain and other European countries-what does it say about the economic model that the United States has been pressing on the rest of the world now for several decades?
PRESIDENT EVO MORALES: [translated] Well, the present models in place are not a good solution for humanity, for human beings, because it's based on injustice and inequality. And that's why I think there is a rebellion in Latin America against that model, that business model. Trade which is actually posed by the International Trade Organization is not a good solution either. According to my experience in my country, it is important to have the state present to overlook not only in social issues, but basically also looking into structural issues. In summary, I want to tell you that the neoliberalism is no solution for humankind, because it's not viable.
JUAN GONZALEZ: In that vein, Argentina recently decided to nationalize the private pensions that had been developed for many of its workers, something that was not looked upon well by the financial community here in the United States. Do you see Latin American leaders going more in the direction of nationalizing resources that were sold off in previous decades?
PRESIDENT EVO MORALES: [translated] Yes, we started nationalizing in Bolivia the hydrocarbons, for example. That doesn't mean that the investors are going to lose their investment. As a state, we need partners, but we don't want them to be owners of our resources. The national government guarantees that the investment can be recovered, but also we have to watch how much of that is recovered.
We also nationalized Entel, which is the telecommunications company. It was in the hands of a transnational. This company invested only where there was more population and to be able to have a lot of clients. But this is a human right. Communication is a human right, as I was saying before. You have to go into the rural areas. It doesn't matter if you lose money, because we have to give them telecommunications.
And I feel that this process will continue on, because just I'm talking about natural resources and basic services. We want the presence of the state or the different states in social issues and structural issues. But it's important to have the participation of the state nationalizing different companies or entities.
AMY GOODMAN: President Morales, many saw the election in the United States of Barack Obama as a kind of global election. What do you think is the single most important thing President Obama can do?
PRESIDENT EVO MORALES: [translated] I cannot tell him anything or advise. Well, I think that this is a democracy, and this president has been elected through the vote through the people. And I repeat what I said a few moments ago. The same way as I was talking about the discrimination and offenses that I suffered, in the history of Bolivia, the indigenous movement has kept going on, but it has been always the sector that has been the most humiliated and that suffered the most.
In the past, also here, the Afro-American movement suffered great discrimination. And now, since we have a president as we have, maybe this group won't be discriminated against. I say that because I have gone through that same experience, because in Bolivia there are some groups who think that indigenous people cannot govern, they cannot be presidents. They think that they are the only ones who went to school and that are prepared to rule, to dominate.
AMY GOODMAN: In terms of attitude to Latin America, from Cuba to Venezuela, the President of the United States?
PRESIDENT EVO MORALES: [translated] I hope enormously that relations can be improved. I hope that the US, with President-elect, will end the trade blockade. I hope that our relations will improve and that journalists will be able to help us and will be able to go deeper into the issues. We want to complement each other to serve our people. We all need each other. What is good for the people is good for the states. So we have a certain hope for our people, because of the elections that will favor the most discriminated-upon segments of the population.
JUAN GONZALEZ: I'd like to ask you, in today's New York Times, influential paper here in the United States, calls for the Congress to approve a free trade agreement with Colombia. Your sense of how these free trade agreements have been operating in Latin America?
PRESIDENT EVO MORALES: [translated] Any country has a freedom to sign a free trade agreement with any other country. Each region, each nation is different. For Bolivia, this is not a solution, a free trade policy. Trade is important, but we want a fair trade that will allow to solve poverty, that will favor the most poor segments of society. And we also are working on collective companies and also small companies and medium companies. And sometimes we actually have also the collaboration of people who work in these types of businesses. If, for some people, free trade agreements are the solution, well, test time will actually show whether it was good or it was bad. But I can talk about my country. My country, even the agro-industrial people, about five or seven years ago, they were actually protesting against the free importation of goods.
AMY GOODMAN: You are headed from here, New York, today to Washington. You'll go to the Lincoln Monument. You will be honoring Dr. King there, Dr. Martin Luther King. Why?
PRESIDENT EVO MORALES: [translated] I want to honor my brothers, the movement, the Afro-American movement. I have the obligation to honor the people who preceded us, the ones who fought for the respect of human rights and rights in general.
AMY GOODMAN: I want to thank you very much for being with us. We have been joined for the hour by the President of Bolivia, Evo Morales.
007 Bolivian socialist?
Emma Felber. New Statesman. November 14, 2008
A rusty pipe hangs from an improvised water tower, and drips miserably into the desert air. A crowd of simple-looking people in traditional Andean clothes, their dark faces furrowed with worry, surround it with empty buckets and containers, waiting for the water to come gushing out, but the pipe has run dry. They turn away in dismayed resignation.
This is one of the silent set-pieces in the new Bond film Quantum of Solace, set in Bolivia, which takes as its inspiration the struggle to control water and other natural resources in the developing world. Bond is on a mission to stop a faux-environmentalist billionaire from secretly appropriating all of Bolivia's water supply by replacing its left of centre president with a handpicked despot, in a coup which the USA blithely ignores.
As in most Bond films, the 'Bolivian' extras (no footage was shot in Bolivia) provide a voiceless, picturesque background against which the heroics can be played out. The plot of the film makes reference to a real struggle carried out by the social movements of Bolivia to resist privatisation of water supplies, and while it is broadly sympathetic, it is also based on a central conceit: that the Bolivian people need the intervention of a suit-clad British action hero to save them from grasping transnationals and corrupt governments.
However, recent history in Bolivia contradicts this: the long struggle to reclaim sovereign control over natural resources has been fought by everyday women and men, through direct action and democratic participation, and control has been won with nary a high-octane plane chase in sight.
One can't help imagining an alternate version of the scene described above, which would more closely reflect the Bolivian reality. The conversations happening underneath the plaintive music might go as follows. 'Compañeros', an old lady might shout, 'the transnational has taken our water! Something must be done!' More voices rise in protest, 'A march on the capital! We should blockade the road! Demand a meeting with the President! This cannot continue!'
In this astonishingly politically active country, this would be a standard response, not muted resignation. Grassroots-led protests stopped the privatisation of water in Cochabamba in 2000, marking a significant point on the journey to power of current President, Evo Morales. Under his watch, the Bolivian constitution has been rewritten to include access to water as a basic human right, and this stands to be passed into law in January 2009.
As for attempts to topple his government and install a business-sympathetic autocrat, this would meet with short shrift in today's South America, even if the depiction of the US authorities covertly supporting the coup skates uncomfortably close to reality.
After a wave of violence in September which various international bodies recognised as an attempted coup d'etat, the Union of South American Nations (UNASUR) threw their weight behind Morales in a resounding declaration of solidarity.
They recognised that he was recently affirmed in his post by 67 per cent of the popular vote, and stated that any attempt to destabilise or overthrow his government was anti-democratic and would not be tolerated.
When the villains in Quantum of Solace affirm 'we have twenty neighbouring governments ready to recognise the incoming administration as legitimate', it rings false.
Not only has the Morales government secured natural resources for the benefit of the Bolivian people, but it has also cultivated a strong base of regional support which provides a counterweight to interventionism from the USA or elsewhere.
Isolated left-wing governments falling prey to US-backed coups only to be replaced with bloody dictatorships? Too bad the updated Bond didn't take into account the political changes in Latin America: like his martinis and speedboat chases, the plot of Quantum of Solace all looks a bit dated.
Ecuador auditor urges debt default
Jeanneth Valdivieso. Associated Press. November 17, 2008
QUITO - The official overseeing an audit of Ecuador's foreign debt said his committee found evidence of abuses and irregularities tied to almost all of the country's bonds and will recommend a default on $10.3 billion in national debt.
Auditors have uncovered "indications of illegality" in the debt contracts and negotiation processes, said Hugo Arias, coordinator of the Special Commission for Foreign Debt Audit, in an interview published Monday by the Ecuadorean newspaper El Universo.
Arias did not respond to telephone calls Monday.
If Ecuador defaults, one debtor left holding the bill will be the government of close Correa ally Venezuelan President Hugo Chavez, though it is unclear how much of the debt Venzuela holds.
Ecuador has delayed $30.6 million in interest payments that was due Saturday on 2012 bonds, using a 30-day grace period to assess the results of the audit scheduled for release on Thursday.
President Rafael Correa suggested that previous governments mishandled debt negotiations and abused privileged information for personal financial gain, ordering the audit in 2007. Finance ministers allegedly forced down the price of Ecuador's bonds by threatening to default, then bought them on the cheap before refinancing the nation's debt and restoring the value of their holdings.
Arias, the auditor, did not give names, but called the debt "a giant and unpayable monster" and said a default on the bonds - held by foreign governments, private investors and others - would be "a historic achievement for the country."
Suspending the interest payment already sent Ecuador's benchmark bonds plummeting and will likely freeze already tight credit flows and investor interest in the nation's oil and mining sectors.
Standard & Poor's has slashed Ecuador's long-term debt rating.
Correa ran for president in 2006 vowing to default on Ecuador's foreign debt and use the money to fund anti-poverty programs. He has not acted on that threat, but recently warned that falling oil prices may force his hand. Oil is Ecuador's top source of foreign income, and prices have dipped 60 percent since July.
Exactly how many Ecuadorean bonds Venezuela holds is unknown, but market speculation is that the country could lose up to $800 million in the case of a default, said Enrique Alvarez, head of research for Latin American financial markets at IDEAglobal in New York.
"At no time do I believe we are going to get a solid figure, these are mere speculations of the market born from parties with a stake in the matter," Alvarez told The Associated Press from New York.
Chavez and Correa have called for a new brand of "21st century socialism" and have agreed to develop joint oil and natural gas projects in Ecuador.
Alvarez said defaulting on the debt would be an unprecedented and isolating decision, though he does not expect Correa to go through with it.
Analysts say despite falling oil prices, Ecuador has the resources to make the payment due Saturday, including $6.5 billion in foreign currency reserves.
But budget shortfalls are expected for next year, as oil is now trading at less than half of what the government anticipated in its 2009 budget and the country's new constitution calls for more social spending programs.
Irregular activity was identified under every administration the country has had for more than 30 years, with the exception of Abdala Bucaram's six-month presidency in 1996-1997, which did not negotiate any debt, Arias told the newspaper.
According to the audit, the most troublesome debt is the country's so-called Global 2012, 2015 and 2030 bonds, which Arias called "the most expensive and the most corrupt."
The 2012 and 2030 paper was sold in 2000 in exchange for so-called Brady Bonds, which had been issued in 1994 to refinance the country's overdue loans.
Ecuador's total foreign debt reached $10.3 billion in August, or 21 percent of gross domestic product. Just one-fifth of those bonds were issued to raise money for development, while the rest correspond to refinancing costs, Arias said.
(This version CORRECTS that interest payments were $30 million, instead of billion.)
In Rampant Violent Crime, Political Danger for Chávez
Juan Forero. Washington Post. November 18, 2008
CARACAS - Three of Miriam Sánchez's sons had already been shot dead in neighborhoods where the crackle of gunfire is a nightly occurrence. So she feared the worst when word arrived one recent night that her 24-year-old son, José Luis Arias, had been shot.
Sánchez found his bullet-riddled body off one of the narrow passageways of a violent slum -- another murder among thousands that have made Venezuela one of the world's most violent countries. Those slayings have exposed the government's inability to formulate a response to the sharply rising crime rate, a central theme of opposition politicians vying for governorships and mayoral posts in Sunday's regional elections.
For the first time in years, Venezuela's political opposition is poised to break President Hugo Chávez's nearly complete hold on local and state offices. Sánchez is one reason why.
She is among those who supported Chávez in the past but is now considering a vote against the president's candidates because of the government's hapless response to rising crime rates. Of her four slain children, three were killed since Chávez took office in 1999.
"This is a nightmare for any mother," said Sánchez, 45, sitting in her tiny, stuffy home high in a poor barrio. "I tell you it hurt, and it still hurts, because I see there are more criminals than police, and there is no safety in this country."
As Chávez completes a tumultuous decade in power, polls show that Venezuelans are most concerned about rampant crime in this oil-rich country. Homicides have soared from fewer than 6,000 in Chávez's first year in office to 13,156 last year, according to official government statistics collected and released by private research organizations. That amounts to a homicide rate of 48 killings per 100,000 people, among the highest in the world and more than in neighboring Colombia, which suffers from a slow-burning internal conflict.
Here in the capital, the rate is even higher -- 130 homicides per 100,000 people, translating last year to a total of 2,710 killings.
"Venezuela is going through the biggest crisis in public security in years," said Luis Cedeño, director of Incosec, a crime policy analysis group in Caracas. "Most Venezuelans live in fear of being in a public space, of being victims in public transportation, and they live in fear of being victims in their houses."
For years, the government has ignored the problem, even as violent crime became a staple of news reports. Some Venezuelans took to the streets to protest the state's inability to protect them. Chávez, although he speaks publicly almost every day, rarely mentions the crime rate. With criticism of government inaction mounting earlier this year, Ramón Rodríguez Chacín, then interior and justice minister, announced in a news conference that homicides had plummeted 27 percent in the first half of the year. "You have to be very careful with the figures," he explained. "It all depends on who handles the numbers and what are the variables that are taken into account."
In fact, for three years now, the government has kept homicide statistics secret, although the data are made public by crime research organizations and criminologists who receive the information surreptitiously from law enforcement sources.
The Interior and Justice Ministry, now led by Tarek El Aissami, did not respond to requests for an interview about how the government is responding to the crime surge.
Critics of Chávez , among them prominent opposition politicians, say his government has contributed to the problem with rhetoric that accentuates class warfare. It has also armed citizen militias and radical political groups.
"Here, violence is not controlled. It is either fomented on purpose or is allowed to take place," said Mónica Fernández, a former judge who is director of Penal Forum, which analyzes legal issues.
"There is no recognition of the real problem," said Fernández, who was shot this year in a robbery. "It is not in the state's interest to reveal homicide statistics, and if you deny the problem, you cannot find ways to resolve the problem."
Some criminologists note that cities elsewhere have reduced homicide rates by reforming police departments, using high-tech methods to identify crime trends and starting community policing programs, among other measures. Many of those factors played a role in New York, for instance, where homicides fell from 2,245 in 1990 to 496 last year. But other cities have also registered homicide declines, even here in Latin America, which has traditionally registered high murder rates.
"These are policies that require continuity and take time, and this government just does not do that very well," said Cedeño, of Incosec. "Cities that have had success -- Bogota, Medellin, Naples or New York -- all of them resolved the problem with a multifaceted response."
In Caracas, perhaps the biggest problem is the police, who are considered ineffective and brutal and sometimes are directly involved in crime. Concern over police prompted the government, under Interior Minister Jesse Chacón, to establish a commission to reform the police in 2006.
The commission, which included representatives of the business community, criminologists, neighborhood representatives and officials from the judicial sector, issued a report that highlighted police corruption and proposed reforms. But crime experts here said the findings were ignored after Chacón, who had championed the commission, was replaced as minister by Pedro Carreño in January 2007.
Instead, the government approved a law that will merge police departments into one national force under a central command.
Aristóbulo Istúriz, a longtime confidant of the president who is running for mayor of greater Caracas, said the next step is to start up a disarmament program and establish community policing patrols.
"That is fundamental," said Istúriz, who acknowledged that crime is among the principal concerns in Caracas. "The people have faith in community policing."
In Caracas, the vast majority of people live in fear of being victimized, pollsters and criminologists say.
Fifty-six percent of those recently polled by Datanalisis, a Caracas polling firm, said crime was their top concern, ahead of inflation and economic problems. And a poll by a well-known sociologist who studies crime, Roberto Briceño-León, showed that 64 percent feared being attacked in the streets.
Those who are victimized most often come from the ring of slums around Caracas -- Chávez's base of support -- but they also include people like Luis Horacio Lemoine, a radio program host and magician. Last November, Lemoine awoke to find three men in his bedroom, brandishing a gun.
"I couldn't believe it," recalled Lemoine, who lives in an upscale neighborhood. "I thought it was a bad dream." The robbers tied him up and made off with money Lemoine had kept in his home.
In her hillside home, Miriam Sánchez said she is focused on making sure her five remaining children are safe. She escorts them along the maze of streets when they go to school or work. Sánchez said she prefers that they do not spend too much idle time outside.
Though she acknowledges improvements spurred by the government's generous social spending, Sánchez said she has little confidence that the streets will be getting safer anytime soon.
"I get angry because I feel that Chávez is the one to blame for everything that is happening because he is not watching out for Caracas," she said. "He should be watching more television to see how much crime there is and all the killings there are."
Immigrants back Chávez
Jeff Farrell. Miami Herald. November 18, 2008
SAN CRISTOBAL - Colombia native Berta Cecilia sighs at her 10-year-old son Alejandro, who is rubbing his red, infected eyes, which have troubled him since birth. But she's pleased the Venezuelan government picks up the tab for his ongoing medical care.
Seated outside her rented, ramshackle bungalow on a dusty dirt road, Cecilia says she's grateful to President Hugo Chávez, whose government has also paid to educate her vision-impaired son in a nearby special needs school.
Her partner, Luiz Antonio Gómez, 56, also earns better pay than in neighboring Colombia by selling produce in local markets, including peppers he grows on an acre of rented farmland next to their home. It helps the couple and their three children enjoy a better life. "We were cultivating tobacco in Colombia. It was bad for us there," said Cecilia, who hails from the Colombian state of Norte de Santander.
Cecilia and many of her Colombian neighbors here in the farming community of El Llanito, on the outskirts of Tachira's state capital of San Cristobal, are among the estimated three to four million Colombians who crossed into oil-rich Venezuela in recent decades to seek refuge from their home country's civil war or to seek better-paying work.
But Cecilia numbers among an estimated two million of Venezuela's Colombian population who live here without proper residency papers, some for up to 30 years. That is changing for many under the government's fast-track citizenship program called Mission Identity.
Colombians living in Venezuela are largely supportive of Chávez's United Socialist Party of Venezuela (PSUV) and citizenship gives them the right to vote in the Nov. 23 regional elections.
Although Cecilia doesn't yet qualify for a Venezuelan identity card, she says she would vote for Chávez's party if she could.
"I'd vote for them; all they've done for me is good," said Cecilia, who arrived here two years ago and must show seven years of unbroken residency before qualifying for the Mission Identity program.
Opposition politicians in Tachira, however, say the Mission Identity program is a bid to pad the electorate.
Chávez has rallied both his own and coalition parties to win the election and accelerate his "21st century socialism." Venezuelans will vote for governors and mayors in 22 of 23 states. All but four states are in the hands of the government now.
Immigrants in Venezuela, of which Colombians form the largest group, are generally grateful to the government for access to social programs such as health, education and food programs, often unavailable or hard to access in their home countries.
"Most would be generally sympathetic to the government, either directly or indirectly due to [the social programs]," said Miguel Tinker-Salas, Latin American studies professor at Pomona College in California.
In early September in Tachira, Venezuelan officials bestowed citizenship on thousands of Colombians and other immigrants, including Cubans.
"They are always doing this before the elections to get votes," said Carlos Casanova, an independent opposition politician and former member of the National Assembly.
But political analyst Gregory Wilpert said Mission Identity was merely a bid by Venezuelan officials to legalize Colombians who had lived here for up to 30 years without proper residency papers.
"This is an effort to integrate into society Colombians who have been here for decades, and long after they would have been required to be [naturalized] by law."
The process to obtain an identity card can be expensive for many immigrants, costing as much as a year's salary at minimum wage. And many find it hard to prove their residency because they are paid in cash, without pay slips, bank accounts or rental agreements.
Colombian Alfonso Carrillo Aruvala stood in line for hours in September at one makeshift citizenship office in the Tachira town of Capacho. He said government officials handed out refreshments to hopeful citizens, saying "give thanks to the president."
The 23-year-old, who has lived in Venezuela since he arrived with his family at age 2, said the opportunity to have a national identity card would allow him to obtain a high school diploma, four years after he graduated, and go to college.
Chavez' home state and family becoming election liabilities
MercoPress. November 18, 2008
With less than a week left for next Sunday's municipal and governor elections Venezuelan president Hugo Chavez arrived in his homeland to boost the campaign of his family who are candidates for the main posts of the province of Barinas and the city of Sabanera.
Barinas province has become a feud of Hugo Chavez family: his father is the current governor and one of his brothers hopefully will take over from him; another brother is fighting re-election as mayor of the city of Sabanera, and holding on to the feud has become a symbolic icon for the Venezuelan leader's political standing.
Thousands of followers from the ruling United Socialist Party of Venezuela, PSUV turned out to cheer Chavez, an overwhelming majority employed by government at different levels.
For President Chavez and his political project of a Socialist constitution (with indefinite re-election and limited private property) rejected in a December 2006 referendum, has become crucial almost an obsession and he must win in Barinas by an undisputed margin.
"Barinas has been called to become an example for the Socialist revolution" said Chavez addressing the crowd at the political rally, "but we can't loose a single vote".
And this because although his father has been governor for the last ten years, the ruling party has divided and the current mayor of Barinas City until recently a most loyal member of President Chavez club has decided to run as an independent for the seat of governor.
Julio Cesar Reyes has mounted his campaign on the growing discontent with the corruption allegations surrounding the Chavez family and their concentration of power, which rings a bell among the electorate.
President Chavez describes Reyes as a "traitor", "infiltrated" and has re-baptized him as Judas Caesar.
But President Chavez is well aware what is at stake: he has visited Barinas three times in the last two months of campaigning that ends next Friday.
"The opposition, old and new, are saying that Chavez will loose next November 23, that they will be winning Barinas, a direct blow to my liver", said Chavez at the rally.
"And if they win Barinas, it will be a blow to my liver, they'd be pounding me at my nest; that is why we have to clear the place of "rats" and end with the political corruption of these rats".
The fact is that the five brothers of the president have done well. The youngest, Adelis, is a vice president of Banco Sofitasa, which does business with the state. Argenis has held the important post of secretary of state in Barinas under his father.
Anibal is mayor of the president's hometown of Sabaneta, and up for re-election Sunday.Adan, a year older than Hugo, is the eldest, and has been the president's aide, education minister and ambassador to Cuba. A bespectacled former physics professor, he has his brother's beefy build and features but lacks his charisma and fiery speaking manner.
In 1998, their father became governor and Hugo Chavez was elected president.
The latest reliable public opinion polls indicate that Chavez could loose to the opposition between four and eight governorships.
Andean Region [contents]
Financial pyramids force Colombia into state of emergency
MercoPress. November 18, 2008
Colombia, a country that has adjusted to living with four decades of guerrilla warfare and drug cartels declared a 30 day state of emergency Monday to crack down on illegal investment schemes that lured millions of people with promises of high payouts, only to collapse amid rioting.
Government officials vowed to repay the poorest investors and sent police to shut down other alleged pyramid scheme operations on Monday, even though some loyal clients marched through the streets to defend companies that had offered interest rates as high as 150% a month.
"Citizens should understand that the government is protecting them" Interior Minister Fabio Valencia said as he announced the emergency measures. They include boosting prison terms for those who illegally collected money to 20 years from six, and giving mayors and governors police powers to shut down such businesses.
Millions of Colombians had invested cash with unlicensed companies, and panic set in last week when one company, DRFE, collapsed amid news that its owner had left the country.
Furious clients stormed and looted local branches in rioting that left 13 towns under police curfew and two men dead last week. Officials seized 92.4 billion pesos (42 million USD) from 68 of the company's offices and arrested 52 employees, police said.
Pyramid schemes can offer dramatically high returns by using later investors' cash to pay off those who invest first. But they collapse when the flow of incoming money isn't enough to pay the growing pool of investors.
On Monday, police occupied 59 offices of the largest such investment company, DMG, in 20 of Colombia's 32 states, national police Gen. Orlando Paez said. Federal financial regulator Hernando Ruiz said his office had found irregularities in DMG's balance sheets.
Officials have said weak laws and legal manoeuvring kept them from stamping out the fast-growing schemes earlier. President Alvaro Uribe has expressed regret that authorities did not act sooner, and Colombia's top banking regulator resigned last week.
Uribe vowed to help poor investors regain their savings, but said wealthier clients should have known better and will "have to take some blows to the chest."
Finance Minister Oscar Ivan Zuluaga on Monday announced the government plans to repay investors' principal - though not interest. Money would go first to those who had contributed the least, in an effort to protect the small investors who are most likely to be poor.
Southern Cone [contents]
Brazil: Payback Time?
Mario Osava. Inter-Press Service. November 17, 2008
RIO DE JANEIRO - This is a good time for all those who resisted the "neoliberal" free market economic model of the past few decades, often as lone voices preaching in the wilderness. Politicians, experts and social activists want to take advantage of the current financial crisis to bury this model once and for all, together with all forms of speculation.
"We must be radical and propose structural changes" to the international financial system, because "such a serious crisis is the best time to demand them," French economist Bruno Jetin, a professor at the University of Paris North, told IPS.
All banks should be nationalised, but that is not enough: they must also be "democratised, and subjected to social oversight," because many public banks, like the Bank of Brazil, "operate as if they were private concerns," said Jetin, who is also a member of the scientific committee of the Association for the Taxation of Financial Transactions for the Aid of Citizens (ATTAC).
There is an ongoing "ideological dispute among schools of economic thought," that goes above and beyond operational measures to contain the damage done by the crisis, said Rogerio Sobreira, a professor at the Getulio Vargas Foundation, a centre for research and teaching on public administration in Rio de Janeiro.
The conflict between a greater role for the state, and a free market, is a crucial debate. When the crisis became acute, everyone was in favour of strong state intervention, even the nationalisation of banks, in all sorts of countries, but this was "emergency action by the state as saviour," and the continued presence of the state will be questioned by the economic liberals later on, according to Sobreira.
Some internal contradictions within governments, especially between Central Banks and Economy Ministries, are becoming more acute. In Brazil, the dominance of the monetary authority (the Central Bank) suffered a blow when emergency measures were needed to avoid a greater economic slowdown.
The finance ministers and Central Bank presidents of the Group of 20 (G20), who met Nov. 8-9 in Sao Paulo, supported anticyclical measures, such as increasing public spending and cutting interest rates, in the face of the recession unleashed by the U.S. subprime mortgage crisis.
The disagreement between Brazilian Finance Minister Guido Mantega over the conservative policies of the Central Bank, which advocates high interest rates and an unrestricted floating exchange rate, was already common knowledge.
But the crisis and the recommendations of the G20 strengthened Mantega's position. As chairman and spokesman of the meeting, he emphasised the need for anti-recession measures.
The president of the Central Bank, Henrique Meirelles, tried to soft-pedal this approach, underlining instead the concerns over inflation that were also expressed in the meeting's final communiqué, and the special characteristics of each country.
Panic, followed by recession in rich countries and its repercussions in the developing world, are fuelling a rapid expansion in unemployment, which is sure to provoke reactions from trade unions and social movements in general, although labour organisations have been weakened in the past few decades, and will have difficulty in leading protests.
In a profound crisis, active social movements will be essential to the fulfilment of the dream of a financial system that serves social needs, like cooperative banks, said Jetin, who went so far as to say that the economy, even a capitalist economy, "can function without a financial market," as it did in the past.
Jetin and Sobreira took part in a workshop of economists and experts working in the "third sector" (non-governmental, non-profit social organisations) on Nov. 13 and 14, to discuss ways of helping civil society develop strategies to influence a possible future reform of the financial system.
The goal is to reduce its "democracy deficit," according to the group's coordinator, Fernando Cardim, a professor at the Federal University of Rio de Janeiro.
The international discussion group, which brings together academics and activists, is a project of the Brazilian Institute of Social and Economic Analyses (IBASE). It began in 2006 by discussing the Basel Accords on banking laws and regulations, but in the light of the current crisis it has broadened its scope.
Another economist in the project, Marcos Cintra, a professor at the University of Campinas, is sceptical about any changes in the global financial and monetary system other than "cosmetic" ones. In his view, the world is caught in an irreversible "trap."
If the United States reduces its external current account deficit, which amounts to nearly seven percent of its gross domestic product (GDP), the world would experience a "catastrophic depression," he said.
Therefore, "the U.S. economy has to go on working," with the rest of the world, led by China, financing its deficit. This is a consequence of "functional asymmetry," he said.
The global financial architecture will remain the same, with perhaps more regulation and other minor modifications, because "only a war" -- also unlikely -- could bring about structural changes in the system, since the United States continues to enjoy hegemonic power, which means it can "veto any changes," Cintra told IPS.
Derivatives contracts worldwide totalled 596 trillion dollars at the end of 2007, according to the Bank for International Settlements (BIS), said Cintra, stressing the extent of financial globalisation on which the whole world depends. That is over 10 times the value of the gross world product, and the present crisis has caused the loss of "only" a few tens of trillions of dollars.
Daniela Prates, a colleague at Cintra's university, presented a paper at the workshop recognising that the present crisis is different from previous ones because it has its epicentre in the United States, but concluding that peripheral countries are still vulnerable to its shocks, shattering "the illusion that they would be unaffected" by any crisis arising in the central countries.
Given the reality of this situation, she proposed the limited goals of preventing sharp exchange rate fluctuations such as have occurred in recent months, mainly in countries like Brazil, Mexico, South Africa and South Korea, by "controlling capital" with some restrictions on short-term speculative investments.
This measure has been adopted by many countries, including some with conservative governments, but it has been rejected by the countries mentioned.
This is another issue that puts the Central Bank of Brazil on the defensive, because of the damage caused to the economy of this country by a currency that has lost more than 30 percent of its value against the dollar in the past two months.
Brazil September Retail Sales Rise More Than Expected
Joshua Goodman. Bloomberg. November 18, 2008
Brazil's retail sales rose more than economists forecast in September, a sign that consumer demand in Latin America's biggest economy remained resilient as the global credit crisis began to deepen.
Retail sales jumped 9.4 percent in September from a year ago, pushed by a 51 percent surge in computer sales, the national statistics agency said today. The increase beat 20 of 28 estimates in a Bloomberg survey of economists, whose median forecast was 8.8 percent. Sales growth was less than the 9.9 percent increase in August.
Brazilian President Luiz Inacio Lula da Silva, seeking to build on consumer demand growth, is using state banks to boost lending to carmakers, homebuilders and consumers and meet an economic growth target of 3.7 percent next year. Economists such as WestLB's Roberto Padovani in Sao Paulo said the September sales report is a sign that consumer sentiment was holding steady.
"We won't know the full impact of the crisis on consumer demand until October," said Padovani. "But it's looking more like a soft landing."
Companies are lowering sales forecasts and slashing output in anticipation of scarcer credit conditions and slower growth next year. Cyrela Brazil Realty SA Empreendimentos & Participacaoes, the nation's largest real-estate developer, cut its 2008 sales forecast by 10 percent to 15 percent. The stock fell 58 percent in the past two months through Nov. 17.
Carmakers are also slashing output and giving workers early vacation after sales in October fell for the first time in 2 years, forcing state and federal governments to announce $3.8 billion in rescue financing to boost industry sales.
Central Bank President Henrique Meirelles said yesterday that consumer credit for automobile purchases has almost returned to pre-crisis levels and lending across all industries is improving.
Brazil remains one of the world's economic bright spots in the context of the first simultaneous recession in the U.S., Japan and euro region since World War II. Together with China, India and Russia, the Latin American country is being counted on to spur global economic growth of 2.2 percent next year, the International Monetary Fund said Nov. 6.
Consumers in September pushed forward the purchase of items like computers and televisions that may be hurt by disappearing credit and a two-month, 17 percent slide in the local currency against the dollar, which is stoking inflation for imported products.
"If you want to buy something on credit and you think credit will disappear, you probably rushed to buy," said Sergio Goldman, head of Brazilian research at Bulltick Capital Markets in Sao Paulo.
México, Central America and the Caribbean [contents]
El Salvador: FMLN Starts Out Ahead
Raúl Gutiérrez. Inter-Press Service. November 17, 2008
SAN SALVADOR - As the campaign gets underway, the left-wing Farabundo Marti National Liberation Front (FMLN) is the favourite in the polls for El Salvador's March 2009 presidential elections.
A win for the FMLN would be historical in a country traditionally governed by the right, analysts point out.
Since this Central American country declared its independence from Spain in the 19th century, it has been governed by conservatives, economic liberals or military dictatorships (from 1931 to 1979).
And since 1989, it has been ruled by the right-wing Nationalist Republican Alliance (ARENA).
Christian Democratic and Social Democratic parties won the presidential elections in 1972 and 1977, but the military resorted to fraud and repression of opponents, forcing many of them into exile.
In 1980, civil war broke out, with the leftist FMLN guerrillas fighting government forces. The insurgent group became a political party after a peace agreement was signed in 1992.
Today, the party's presidential candidate, Mauricio Funes, is leading the polls by a margin of two to 15 percentage points over his main rival, ARENA's Rodrigo Ávila.
Although the campaign did not actually begin until Friday, Nov. 14, political scientist Napoleón Campos told IPS that the Supreme Electoral Court has allowed the parties to informally campaign for nearly two years.
Under the country's electoral laws, campaigns can only last four months in the case of presidential elections, two months in the case of parliamentary elections, and one month for municipal elections.
For the first time ever, the FMLN -- the main opposition party -- stands a real chance of winning the presidency, after four unsuccessful attempts since 1994.
But despite the natural wear and tear suffered by ARENA after nearly 20 years in power, and the impact of the current international financial crisis, Campos said the scenario could change from here to Mar. 15.
Local media outlets have estimated that the country's six political parties will spend a combined total of 30 million dollars in the campaign. The parties taking part in the elections, besides the FMLN and ARENA, are the Christian Democratic Party, the National Reconciliation Party, Democratic Change and the Democratic Revolutionary Front.
The FMLN is also ahead in the polls for the Jan. 18 legislative and municipal elections.
Nelson Zárate, director of the Centre for Research on Public Opinion (CIOP), whose latest poll found that Funes is 15 points ahead of Ávila, told IPS that the leftist candidate has generated "a wave of credibility that is drawing people to vote for the FMLN" at all levels, not only in the presidential elections.
Funes, a popular journalist and talk-show host, did not even actually belong to the FMLN until August, which in the view of analysts puts him in a position to draw voters who would not have cast their ballots for one of the party's long-time leaders.
The FMLN kicked off its campaign with a caravan of hundreds of cars that set out from San Salvador on Saturday with Funes at its head. They were joined by more and more cars until thousands were driving from city to city around the country.
The aim of the caravan, said the head of the party, Medardo González, is to awaken people's "confidence" in the change that the FMLN proposes to bring to the country.
ARENA's campaign opened, as always, in the western city of Izalco, which is a symbol for the governing party. In 1932, an estimated 30,000 indigenous peasants were slaughtered there by the anti-communist dictatorship of General Maximiliano Hernández Martínez, who took power in a January 1931 military coup.
China, Costa Rica to launch trade talks
Marianela Jimenez. Associated Press. November 17, 2008
SAN JOSE - China and Costa Rica will launch free trade talks in January and hope to seal a deal by 2010, Chinese President Hu Jintao said Monday during his first visit to a Central American country.
Hu spent most of the day in Costa Rica with a delegation of 100 businessmen as part of China's investment march into resource-rich Latin America, before heading to Cuba for a two-day visit aimed at strengthening ties with Havana.
China's trade with Latin America has jumped from $10 billion in 2000 to $102.6 billion last year and it is now Costa Rica's second most important trade partner.
Hu said Monday during a joint news conference with Costa Rican President Oscar Arias that free trade talks will start Jan. 19 and the countries hope to have an agreement before Arias leaves office in May 2010.
The two leaders said their nations also signed 11 cooperation agreements, including a joint venture for China's National Petroleum Corporation to help modernize Costa Rica's state-owned oil refinery. China also agreed to help Costa Rica build a national sports stadium.
"We would like to see an increase in Costa Rican imports and we invite Costa Rican companies to explore the Chinese market," Hu said.
While the rest of Central America still grants diplomatic recognition to Taiwan, Costa Rica switched to recognizing China in June 2007. China says Taiwan is part of its territory.
Costa Rica's Foreign Trade Minister Marco Vinicio Ruiz said a free trade accord with China means "there will be many sectors that benefit, especially those tied to agricultural and meat products."
Costa Rica last year exported $848 million in goods to China.
The Chinese president then flew to Cuba late Monday and was met at the airport by Vice President Jose Ramon Machado Ventura and a throng of chanting Chinese citizens who clutched tiny Cuban and Chinese flags.
Cuba and China were expected to sign a serious of trade agreements during a visit "aimed at increasing friendship and cooperation between our two nations," Hu said in a statement.
China is Cuba's second-largest trading partner behind Venezuela.
China's Hu strikes deals in Cuba
BBC. November. November 18, 2008
President Hu Jintao of China is set to meet Cuban leader Raul Castro later in the day as part of his multi-stop tour of the US and Latin America.
The two nations are agreeing multiple deals on trade and loans as China bid to strengthen its links with Latin American and Caribbean nations.
Mr Hu was met at the airport by senior Cuban officials and cheering members of the local Chinese community.
Cuban TV broke into Monday's nightly news to go live to Mr Hu's arrival.
China is now Cuba's biggest trading partner after Venezuela, with bilateral trade at $2.3bn (£1.5bn) in 2007.
And across Latin America, China has seen its trade climb from $13bn in 2000 to more than $100bn in 2007.
"My visit is aimed at increasing friendship and co-operation between our two nations, and working together with our Cuban comrades to build a promising future," Mr Hu said in a statement.
Throughout the Cold War Cuba was traditionally a much firmer ally of the Soviet Union than China, but that changed when the Soviet Union collapsed in 1991, leaving Cuba almost bankrupt, says the BBC's Michael Voss in Havana.
China offered Cuba soft loans to help it through the difficult 1990s, and these loans are now beginning to come due.
Restructuring their repayment is likely to be one topic on the agenda when the two leaders meet on Tuesday, our correspondent says.
Other agreements already signed or set to be signed reportedly include Chinese purchases of nickel and sugar from Cuba, Chinese-backed energy prospecting in Cuba, and other deals in education and health.
Mr Hu arrived in Cuba from Costa Rica, where he signed co-operation and investment agreements and discussed setting up a free-trade agreement between the two countries.
He will travel on from Cuba to Peru where he will attend the Apec (Asia-Pacific Economic Co-operation) summit in Lima on 21 and 22 November.
But China is not the only power interested in securing greater access to the raw materials and other resources that Latin America offers. President Hu will be followed next week by Russian President Dmitry Medvedev, whose tour of the region includes a visit to Cuba.
Although both Cuba and China are run by Communist parties, they have pursued very different economic models.
China has adopted market economics while Cuba still has a command system with most of the economy under state control.
On Monday, Cuban state newspaper Granma praised the Chinese model but highlighted "an unequal distribution of wealth in the country, marked difference between city and countryside and the erosion of the environment".
When Mr Hu last visited Cuba in 2004 Fidel Castro was still in charge of the country.
His younger brother, Raul Castro, officially took over the presidency in February 2008 and has introduced some reforms.
Raul Castro saw China as a potential model for Cuba to follow, says BBC regional analyst Emilio San Pedro.
China, a modern-day economic powerhouse in a world of financial uncertainty, sees Cuba with its need for investment and political support as an important ally in its long-range plans to strengthen and expand its ties with the rest of Latin America, he adds.
Cuba won't let our kids leave, medical workers say
Frances Robles. Miami Herald. November 18, 2008
Inside her bedroom on Cuba's Isle of Youth, 7-year-old Daviana González prays to be reunited with her mother after more than five years, relatives say. In Camagüey, Marta Daniela Batista, another little girl separated from her parents, is said to suffer from mental health problems.
The girls are children of Cuban medical professionals living in Miami who deserted their posts in various nations where the Cuban government sent them to help spread ideology and earn income for their cash-starved homeland.
But the price for desertion was higher than the families believed possible: The Cuban government is denying the little ones permission to leave, even though they have U.S. visas that would allow them to come here.
"Marta isn't to blame for what her parents did, and yet they punish her," said her mother, Melvis Mesa, 42. "She's just a child, and children have a right to be with their parents. What the Cuban government is doing is a terrible abuse."
Mesa and Daviana's mother -- Yaisis González -- are among more than a dozen Cuban health workers working with the Cuban American National Foundation, or CANF, on a campaign to get their children back. CANF representatives plan to file complaints against the Cuban government with international organizations, such as the Organization of American States' Inter-American Commission on Human Rights and the United Nations.
A press conference is planned for Tuesday morning to call for other Cuban medical professionals in the same situation to come forward and join their cause.
The Cuban government is "holding the children hostage" to punish those who leave official missions, López said.
AFRAID TO SPEAK OUT
Many Cuban medical professionals who have deserted their posts over the years and are struggling to be reunited with their children have remained silent until now in fear that speaking out would further jeopardize their children's release.
"It's the normal mindset to stay quiet. But after a while, when they realize they're not getting anywhere with that attitude, they figure if they make a lot of noise, they might get results," said Omar López, CANF's human rights director. "With the Cuban government, contrary to what most people believe, the more you talk, the more chance you have of getting results."
González, 34, is a nurse who came to Miami in January 2007 after working three years in Qatar. She compared her separation from her daughter Daviana to the 1999-2000 case involving Elián González [no relation], the Cuban migrant boy returned to his father despite a protracted attempt by his extended family in Miami to prevent it.
"It's basic human right that parents should be with their children," she said. "My child is my child."
A 2005 report by Human Rights Watch said the Cuban government regularly denies exit visas to medical professionals, children of defectors and relatives of Cubans living abroad legally. Cuba uses the exit visas as a tool for revenge against the disloyal and as leverage to force the return of Cubans who have government permission to live abroad temporarily, the report said.
The report blasted both Cuba and Washington for violating people's "freedom of movement."
Experts say taking the issue to an international court would be at best a legal long shot, but would be worth it -- if just for sometimes helpful international publicity.
"There's tremendous symbolic value in proceeding before international tribunals, because of the moral force that such proceedings can create," said former U.S. Attorney Kendall Coffey, who was part of the legal team that represented the Miami family in the Elián case.
"And moral force combined with consensus of support throughout the hemisphere could be meaningful, but ultimately it would be a verdict that could not be enforced by a judge's gavel," Coffey said. "Ultimately the question is: What tribunal can enforce an order against the Castro government if the Castro government refuses to comply?"
José Cohen, a former Cuban intelligence agent who in 1994 began his fight to get his three children off the island, said he went to Geneva, to U.S. members of Congress opposed to the embargo and everywhere else he could think of, to no avail.
"I never took it to an international court, because I did not have the money, and Cuba does not respect international laws anyway," said Cohen, who now lives in Miami Beach. "But at least it's a public denouncement. They should do it. They should struggle every way they can."
Cohen's youngest son still lives in Cuba; his daughters, now 20 and 24, left the island on a fast boat to Mexico this year and now live in Miami.
González said she has learned to parent by phone. Her daughter lives with her grandmother on the Isle of Youth.
"She already thinks she's a little woman," González said, adding that Daviana often asks for shoes and stylish tops as gifts from the United States.
In their daily conversations, Daviana recites math equations -- "two-plus-two-equals-four!" -- and reads passages out of her text books to show her mother the progress she's making in class.
"She does it to show me that she deserves all the gifts she's asking for," said González. "Anything she asks me for, I give her, because it's the only thing I can do for her."
Mesa, 42, often weeps when she speaks of her daughter in Camagüey.
Mesa and her husband, both physical therapists, said the couple deserted from a medical mission in Venezuela last March and came to the United States through Colombia a short time later.
Doctors in Cuba say their daughter Marta's mental health is suffering because of the separation from her parents.
Sensitive and intelligent -- she's at the top of her elementary class -- Marta cries constantly for her family.
'Sometimes it's hard to even speak on the phone, because she says over and over, `Mama, when are we going to be together?' " Mesa said. "It tears up your heart."
Region: Trade, Security, Economy and Integration [contents]
Slowdown doesn't shrink China's LatAm ambitions
Frank Bajak. Associated Press. November 17, 2008
LIMA - China isn't letting the global financial crisis shrink its ambitions in Latin America, where it has sunk billions into mining and replaced the United States as Chile's top trading partner.
Chinese trade with Latin America has grown more than tenfold since 2000, and shows little sign of slowing. The world's fourth-largest economy is now racing to seal a free-trade deal with Peru ahead of this weekend's Pacific Rim economic summit of 21 nations.
"Some foreign companies are basically canceling their projects in Peru," said China's press attache in Lima, Zhu Jingyang. "That's not the case for China."
China is known for thinking long-term - and long-term, there's no sign that its voracious appetite for raw materials will diminish.
Top on its shopping list is the copper and iron that South America's Andean ridge so abundantly possesses. It continues to buy: In May, it signed a $2.2 billion deal to extract more than 7 million tons of copper ore from a single bald Peruvian peak known as Toromocho.
China is also negotiating to build a $3 billion steel mill in Brazil, where the Bank of China plans to open a branch next year with $100 million in initial lending capital. And it has invested in oil exploration in Ecuador, Colombia and Venezuela.
But it's not just raw materials the Chinese crave. It's also markets.
Chinese President Hu Jintao is bringing a delegation of about 600 people, including 12 ministers, to this weekend's Asia-Pacific Economic Cooperation summit, known as APEC. That's every bit as big as the one that accompanied him to Chile four years ago, when a global slowdown wasn't crimping his economy.
That delegation is mainly made up not of mining officials, but of business leaders in telecommunications, agriculture and other sectors.
Chinese and Peruvian officials say they hope to have a free-trade agreement ready for signing at the summit, though Peruvian manufacturers of textiles, shoes, machine tools and other products fear the agreement could decimate their industries.
The pact would be China's second with a Latin American nation. It signed the first with Chile in 2005, and last year China eclipsed the United States as the top trading partner of Peru's southern neighbor.
Hu stopped off on his way to APEC in Costa Rica, the first Central American country to recognize China diplomatically, and said Monday the two countries would begin free-trade negotiations in January and hope to wrap them up by early 2010.
"China's relations with Latin America and the Caribbean have never been so close," Hu told Lima's leading newspaper, El Comercio, in a full-page interview published Monday. More than 400 Chinese companies are now registered to do business in Latin America.
China is a low-key diplomatic presence in these countries, far from a political or military rival to Washington in a region the U.S. has long considered its backyard. But China's commercial clout is growing in leaps.
China's trade with Latin America was $102 billion last year, but already in the first nine months of this year it reached $111 billion, Chile's ambassador to Beijing, Fernando Reyes, told The Associated Press. That compares with U.S.-Latin American trade of $560 billion last year.
Hu's government insists its interests are not just commercial. In its first policy paper on ties with the region, China's foreign ministry suggested it might help Latin American countries reduce their debts. It also said it wants to help Latin American nations narrow the gap between rich and poor.
To that end, China last month bought into the Interamerican Development Bank with a very modest $350 million investment for social, anti-poverty related projects. That compares to Washington's 30 percent stake in a fund that exceeds $100 billion.
The money may be small, but the symbolism is big: The United States isn't the only world power Latin America can turn to for help.
"The reality is that to some degree the fate of Latin America has been decoupled from the United States. Or at least it's not as tightly entwined as it used to be," said Daniel Erickson of the Inter-American Dialogue, a Washington think tank.
Analysts are nevertheless skeptical that China could become a political counterweight to U.S. influence in the region. It's simply not Beijing's style.
"The United States maintains deep cultural and economic ties in Latin America that the Chinese won't come close to matching," said Washington-based Nicholas Consonery of the Eurasia Group. "I don't think the Beijing paradigm is to undermine U.S. influence in the region. Instead, it's about gaining access to resources."
Many economists believe China's economy will continue healthy growth as more developed economies retract, and that China could show leadership by offering lines of credit to the developing world from its $1.9 trillion in cash reserves.
IDB President Luis Alberto Moreno told the AP that he anticipates Latin America's economic growth rate to drop from 4.5 percent this year to 2.5 percent in 2009, which he said would spark greater unemployment.
That's worrisome for opponents of a China-Peru free-trade agreement, considering how others in the region have fared in commerce with China. Mexico has a 16-to-1 trade imbalance with China, although APEC's third Latin American member, Chile, has fared well in bilateral trade because of its well-developed economy.
Peru's external trade minister, Mercedes Araoz, says the still-unfinished trade pact would protect 20 percent of Peruvian products - including textiles, shoes and clothing - with import duties.
But critics still fear it would cost jobs. And the president of the Peruvian Congress' external trade commission, opposition Rep. David Waisman, is also concerned about an absence of environmental and labor safeguards.
"Ninety percent of what Peru exports to China are goods without added value, purely minerals," he said. "The people who create jobs in Peru are the small and medium-sized companies. Not the mining industry."
Latin America: Not So Insulated After All
Council on Foreign Relations. November 17, 2008
In recent years, commentators and policymakers alike have praised Latin America for its growing financial independence and maturity. Fiscal discipline, high commodity prices, and sustained economic growth brought down external debt levels, built international reserves, and strengthened government and corporate balance sheets, placing the region on firmer economic footing. When crisis hit U.S. financial markets, many at first assumed that Latin America's increasing openness and growing trade with China and India would cushion the impact of a U.S. slowdown. In September 2008, President Luiz Inácio Lula da Silva of Brazil boasted, "People ask me about the crisis, and I answer, go ask Bush. It is his crisis, not mine."
Expert BriefsYet the widely touted financial "decoupling" between the United States and Latin America (and emerging economies in general) was a myth. Contrary to initial expectations, the spiraling worldwide credit crisis is hitting Latin American nations hard. The region may be free ofsubprime mortgages, but plummeting access to cross-border financing is stifling lending and investment. In Brazil, the state-owned oil company Petrobras has announced delays in the exploration of its new deepwater oil finds. In Peru, funding for two iron-ore projects has also been delayed. As in the United States, once-boisterous consumer demand across the region is waning. After several quarters of robust private consumption growth, demand has weakened in Brazil, Mexico, and other countries, and overall consumer spending may stall in the coming quarters. With both firms and families holding back, future economic growth remains uncertain.
Capital Flight Takes Off
Rather ironically, money is flowing out of the region and seeking the safe haven of U.S. treasuries. This outflow is pressuring national currency reserves and precipitating steep declines against the U.S. dollar. The Brazilian real is down 27 percent against the dollar since July and the Mexican peso has plummeted 23 percent against the dollar since August. The trend also hammered stock markets across the region, with the Brazilian Bovespa and the Mexican Bolsa both falling 50 percent between August and November. Poor currency bets have brought to their knees economic stalwarts such as Comercial Mexicana in Mexico and Grupo Votorantim in Brazil that are nearly a century old. Concerns about bad future loans encouraged the marriage of two of Brazil's largest banks--Banco Itau and Unibanco--forming the largest bank in Latin America.
Much of the pain is still to come. With credit scarce, investment down, and the United States and other parts of the world edging toward recession, demand for basic economic goods--commodities--is already declining. Prices for Latin American staples like wheat and corn fell over 35 percent and 30 percent respectively between August and November, while sugar slumped 20 percent until a recent uptick.
Petro-Economies Hit Twice
Oil--the most watched of Latin America's commodity exports--has plummeted from its $147-a-barrel high three months ago. It has now fallen to below $60 a barrel. Given this volatility, the region's endemic vulnerability to commodity price swings bodes ill for the future. Oil economies across the ideological spectrum will struggle to keep their economies afloat. The Mexican and Venezuelan governments, in particular, will suffer, as oil profits comprise 40 percent and 50 percent respectively of their public budgets. Oil at its current price level will curtail ambitious plans to cushion the impact of a U.S. recession through public infrastructure investment in Mexico, as it will hamper Venezuela's wide-ranging petro-diplomacy. Venezuela's capacity to borrow abroad to finance ambitious social programs may well atrophy, reinforcing the decline in President Hugo Chavez's standing at home on the eve of local elections, scheduled for November 23.
Countries less dependent on oil income also will suffer from a global downturn. The price of soy already has fallen 40 percent since its recent peak in September and analysts anticipate further declines. As a result, economists have substantially lowered 2009 economic growth projections for Argentina, the world's third-largest soy supplier, from 6.2 percent in January to 2.2 percent today. Chile's dependence on copper prompts concern, too, since world prices have halved since April. Peru, second only to Chile in terms of copper production in the world, will also feel these declines. The Economist Intelligence Unit predicts Chilean economic growth will fall below 3 percent in 2008, and shaved off 1.5 percent from its estimates for Peru's gross domestic product (GDP) growth to 5.5 percent. Even more diversified economies, such as Brazil's, will see their first downturn in export earnings in a decade. Brazil's growth projection for 2008 has almost halved from 4.3 percent in January to 2.4 percent in November.
Finally, countries receiving substantial remittances from their nationals abroad, such as Mexico and Central American countries, may feel pinched. Already Mexico, El Salvador, and Guatemala report significant decreases in returning funds, which support the poorer segments of their populations. Further declines could lead to worrisome increases in national poverty levels.
Reasons for Guarded Optimism
Given the region's volatile economic history, these developments may seem nothing more than the recurrence of crises past: 1982, 1995, and 2001. But this time key differences provide some room for optimism. Latin American countries hold some of the lowest debt to GDP ratios in the world today, a sharp contrast with previous crises. Chile and Brazil, for instance, have become net creditors. Latin America's governments now run more balanced budgets and pursue healthier fiscal policies. In April, both Peru and Brazil received investment-grade sovereign-debt ratings for the first time, joining Mexico and Chile. Lastly, Latin America now boasts a number of large "multilatinas"--multinational Latin American companies--with presences from Hudson Bay to Patagonia and beyond. Among these are Televisa, Gerdau Ameristeel, Cemex, Embraer, and Grupo Bimbo.
Still, a number of questions remain. As China, and soon the United States and perhaps other major economies, introduce massive economic stimulus packages, what might their effect be on Latin America? Could the region lose more capital absent similar domestic stimulus efforts?
The Geopolitical Dimension
Also unclear is the impact of the financial crisis on politics and political thought in the region. Despite obvious differences among Latin American governments' approaches to the market, social policy, globalization, and the role of the state, most now believe that Washington failed to heed its own prescriptions for fiscal discipline. In the last few years, as Latin America's left has gained in popularity and political power throughout the hemisphere, commentators have tended to group the region into "good" left governments (Brazil, Chile) and "bad" left governments (Venezuela, Bolivia). Following this superficial conceit, it may be tempting to conclude that the current financial crisis will reinforce the positions of those on the "bad" left, who will trumpet the end of market dominance. Yet after the dust settles, Latin America may also realize that weathering a global financial crisis will take more then ideology. Today, every goverment in the Western Hemisphere, including the United States, faces the same challenge: how to finance domestic programs that advance the common good, enhance global competitiveness, and ultimately deliver votes. Starting with the United States, a Western Hemisphere focused on solving problems rather than on market or political orthodoxy would be the best--if improbable--outcome, not only for the poor, but for working class sectors, middle class professionals, and economic elites as well.
While there is little in Latin America's history to suggest that an end to political polarization is near, the region's leaders do generally recognize what is at stake, and a political center with a global consciousness seems to be emerging, as Brazil's leadership of the G-20 industrial and developing economies attests. The downturn also provides Latin American nations with an unexpected opportunity to demonstrate the region's newfound fiscal prudence, creditworthiness, and accountability. If governments are able to ride out the crisis while providing for the most vulnerable populations in the region, Latin America should remain an increasingly attractive destination for investment once international funds begin to flow again. These trends would augur well for the emergence of a new financial architecture that reinforces Latin America's path toward socially inclusive economic prosperity.
Castro, Bolivia's Morales Slam G-20 Summit Report
Matthew Walter and Bill Faries. Bloomberg. November 17, 2008
Former Cuban President Fidel Castro and Bolivian President Evo Morales said the summit of Group of 20 nations was dominated by U.S. President George W. Bush and didn't focus on problems that plague poorer countries.
The so-called G-20, composed of developed and emerging nations, met in Washington on Nov. 14-15 to discuss stimulus measures and tighter financial markets regulation amid the global economic crisis. Latin American nations participating in the G-20 summit included Argentina, Brazil and Mexico.
The statement published at the end of the two-day summit didn't address any of the "abuses" caused by the U.S. economic system that led to the current crisis, Castro said in a "reflection'' sent via e-mail.
"It's boring, filled with platitudes," the communist leader said in the statement. "It says absolutely nothing. It was approved by Bush, a champion of neo-liberalism, who is responsible for killings and genocidal war."
Morales said developed countries have provided more money to help distressed banks than they have committed to poor countries to improve health, education and development.
"The so-called consensus of the G-20 continues to emphasize market principles and free trade," Morales said during a speech to the United Nations General Assembly. "To get out of this crisis we have to break with the neo-liberal economic model and the capitalist system."
Castro, who resigned in February after ruling the island country for 49 years, also criticized the G-20 statement for failing to address the U.S. policy for "converting food into fuel," unequal trade terms for poorer countries and the global arms build-up.
The Center for Economic and Policy Research is an independent, nonpartisan think tank that was established to promote democratic debate on the most important economic and social issues that affect people's lives. CEPR's Advisory Board of Economists includes Nobel Laureate economists Robert Solow and Joseph Stiglitz; Richard Freeman, Professor of Economics at Harvard University; and Eileen Appelbaum, Professor and Director of the Center for Women and Work at Rutgers University
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