El Sur
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South American Politics and Government

Tuesday, April 30, 2002
VENEZUELA
New economic minister Apparently moving to make promised changes to his cabinet, Hugo Chávez is ready to name a new economic team, reports
El Mundo, quoting official sources. To be named finance minister is economist Francisco Rodríguez, whose negative view of the country's financial situation was noted yesterday in El Sur. Among other things Rodríguez said the Venezuelan state is "broke."

Others to be named are Felipe Pérez Martí as planning minister and businessman Miguel Pérez Abad as minister of production and commerce. El Mundo says "the new ministerial team...will have the challenge of facing a difficult fiscal situation and restoring confidence in the Venezuelan economy" ("del nuevo equipo ministerial...tendrá el reto de afrontar la difícil situación fiscal y rescatar la confianza en la economía venezolana").

posted by Richard 12:29 PM
. . .
CHILE
Chile-U.S. free trade: The
Financial Times wonders: Will the just signed free-trade agreement between Chile and the European Union spur efforts to complete a treaty between Chile and the U.S.?
The Chile agreement, which is likely to be the first bilateral free trade deal concluded by the Bush administration, is being considered by the US Congress as the template for a host of future trade agreements, including a planned Free Trade Area of the Americas.
As a result, it has become embroiled in divisive congressional fights over how labour rights and environmental standards should be incorporated into trade agreements, and whether private companies should have free rein to sue governments for restricting trade.
Tom Daschle, Democratic majority leader in the Senate, and Max Baucus, chairman of the Senate finance committee, warned last month that failure to write labour and environmental standards into the Chilean agreement would jeopardise congressional support for Mr Bush's coveted fast-track trade negotiating authority.
The problem here is U.S. politics. The labor, environmental and anti-globo left, which effectively controls Democratic Party, insists on labor and environmental conditions that make a free-trade treaty impossible in practice. The Bush administration has been unwilling propose labor and environmental provisions because they know they can't negotiate, ratify and implement a treaty containing them with Chile. At the proposal stage, Chile would almost certainly view such conditions as unreasonable assertions of U.S. extraterritoriality, and so deal-breakers. In the unlikely event such conditions did make it into a draft treaty they would either 1) cause its defeat in the U.S. Senate (if the conditions were cosmetic), or 2) render it impossible to implement (if the conditions had teeth). The Bush administration is equally unwilling to propose a treaty without such conditions, because if it did so it would start a very big, very public fight with the Democrats, something the administration is determined to avoid.

The risks of the Bush administration's strategy are put forward in a column by Andres Oppenheimer in Sunday's Miami Herald.
In recent weeks, I have heard growing numbers of top Latin American officials--including some of President Bush's best friends in the hemisphere--complain about the U.S. failure to offer carrots to bankrupt countries such as Argentina or to help more promising nations such as Mexico and Chile become role models for the rest of the region.
(Ignore the very bad idea delaying reform in Argentina by again subsidizing its bad habits.)
The U.S. paralysis in Latin America -- which is as much the fault of the Bush administration as of the Democratic-controlled Senate--could hardly come at a worse time. After more than two decades of relative stability, several political and economic crises are rocking the region.
These are Colombia's worsening guerilla war, Venezuela's increasing polarization and Argentina's financial self-immolation. At a lesser level of crisis, Oppenheimer says, is the perceived failure Vicente Fox's special relationship with George W. Bush to bring concrete results.
And Latin America as a whole is wondering whether Bush will succeed in convincing the Senate to pass a ''fast-track'' bill to expedite a 34-nation agreement to launch a hemisphere-wide free trade area by 2005. A Senate vote on the issue could come as early as Tuesday and, if approved, the bill would go to the full Congress.
Sure, the Bush administration says it remains fully committed to the region-wide free trade agreement and is pressing Senate Democrats to pass it. But skeptics wonder--rightly--why a U.S. president with a 75 percent approval rating has not spent more of his political capital on an issue that he has defined as a top priority of his foreign policy agenda.
The answer to that is U.S. midterm politics, as briefly described above. Time will tell whether the Bush administration's strategic decision to duck fights with the Democrats is a wise one. It all depends....Do the Republicans do well in the November elections, winning back the Senate especially?...Does everything, meanwhile, more or less stay together in Latin America (and other now-backburner areas) until the elections are over? All unknowable today.

posted by Richard 8:54 AM
. . .
VENEZUELA
Army in charge? President Hugo Chávez has begun reshuffling high-level posts in his government. For example, Vice President Diosdado Cabello, an organizer of the "Bolivarian circles" street gangs, has been replaced with Defense Minister Jose Vicente Rangel. Although Rangel too is a Chávez loyalist, the government is attempting to portray the changes as gestures of conciliation directed at the regime's many opponents. An analysis by the
Financial Times suggests something else entirely.
Mr Rangel's move from the defence ministry to the vice-presidency suggests sectors within the military high command are now calling the shots behind President Chavez, according to analysts.
The armed forces supported Mr Chávez's return to power two days after he was unseated by a military coup, but laid down conditions for their help.
The Financial Times suggests that the real purpose of the change is to rid the military of Rangel, a civilian, whose appointment a year ago was resisted in the military, because of "his alleged sympathies towards Colombia's leftwing guerrilla groups, his antipathy towards the US, and his accusations of corruption in the military during his previous career as a journalist."

The paper hints that Cabello is being moved to another post in the government to lower the profile of the "Bolivarian circles."

posted by Richard 8:25 AM
. . .
ARGENTINA
High interest:
Argentina's central bank paid a record 95 percent interest rate to sell 61 million pesos ($20.7 million) of 15-day bills yesterday to help shore up the currency,
reports
Bloomberg.com.
The auctions are aimed at soaking up some of the currency the country is printing to finance a budget deficit and prop up banks.
The last time Argentina did a couple weeks ago the rate was 75 per cent.

posted by Richard 7:08 AM
. . .
Monday, April 29, 2002
VENEZUELA
Money low: The National Assembly's economic advisor, economist Francisco Rodríguez, says that the Venezuelan treasury is bankrupt (quebrado) and that the government should turn to multinational organizations to refloat the economy, reports
El Universal.
'"The Venezuelan state has no money, it is broke. The treasury is at 14 per cent of its normal level, extremely low (a level)," declared Rodríguez to the station Unión Radio.
"El Estado venezolano no tiene dinero, está quebrado. La tesorería está a un 14 por ciento de sus niveles normales, (un nivel) sumamente bajo," declaró Rodríguez a la emisora Unión Radio.
The country's deficit is at a historic high, reaching seven per cent of gross domestic product (Producto Interno Bruto or PIB). The article continues:
Rodríguez classified as socially dangerous the government's strategy of delaying the payment of its obligations in order to control the deficit, citing the fact that there are regional governments that "have not received money in two months, and that in almost a year the universities and national museums have not received even one bolivar."
Rodríguez calificó de socialmente peligrosa la estrategia gubernamental de retrasar el pago de sus obligaciones para enfrentar el déficit, al citar que hay gobiernos regionales que ''no han recibido dinero en dos meses, y que en lo que va de año las universidades y museos nacionales ha no recibido ni un bolívar."
"This situation is unsustainable for the state," argued the economist, and he repeated that of the "few alternatives" that the country has to meet the crisis, the most convenient is "to sit down to speak with the multilateral organizations, like the International Monetary Fund," something that the government has not contemplated until now.
"Esta situación es insostenible para el Estado," agregó el economista, y reiteró que de las "pocas alternativas" que tiene el país para enfrentar la crisis, la más conveniente es "sentarse a hablar con los organismos multilaterales, como el Fondo Monetario Internacional," algo que el gobierno no ha contemplado hasta ahora.
This cannot be advice Chávez wants to hear. Any agreement with the IMF will require Chávez to curb the populism that helps him maintain support among the nation's poor. Still, doing nothing is only an option if Chávez wants to preside over a domestic depression. Obviously, the Venezuelan treasury's cash shortage does insure that Venezuela will maintain, if not increase, oil production.

posted by Richard 11:42 AM
. . .
DOLLARIZATION
Panama shows the way: "Dollarization," is when a country's only currency is the U.S. dollar. It's close cousin is the "currency board," which is when a country keeps its own currency, but backs it with dollars, one-to-one. These measures have been recommended as ways to quiet the financial chaos that plagues many developing countries, especially in Latin America. They are also highly controversial.

Now, proof of their efficacy appears in an item in the
Latin Business Chronicle. The article isn't about dollarization or currency boards, it is about the Milken Institute's Capital Access Index, which measures availibility of capital to entrepreneurs around the world. But the item shows the value of dollarization, nonetheless.

In Latin America, Chile is at the top (29th worldwide) of the index, as expected. But just behind it is Panama (34th worldwide), a big surprise, until one considers the following:
Thanks largely to only using the U.S. dollar during its entire 99-year history, Panama has been able to maintain one of the lowest inflation rates in Latin America and one that often has been lower than that of the United States itself.
In addition to hosting one of Latin America's top international banking centers, Pamama also boasts a relatively large number of domestic banks. And since the dollar is the legal currency, the country's central bank has limited authority, it neither prints money nor owns or bail outs local banks.
The part in that last sentence, about how the state can't print money or bail out banks in a dollarized economy, explains why dollarization remains deeply unpopular among Latin American political elites and has been installed only when they've completely discredited themselves. Dollarization limits what political leaders can do, and they don't like it. Argentina's Eduardo Duhalde, for example, has said he would resign before he dollarizes the economy. On the other hand, the public generally approves, since one primary effect of dollarization is to protect the savings of people who don't have the wherewithall to spirit them to Miami. Argentina's public loved that country's (modified) currency board system, which was blown apart at the end of last year.

Two of dollarization's most important advocates are economists Kurt Schuler and Steven Hanke. Their work, some of which focuses specifically on Argentina, is available at the Currency Boards and Dollarization website.

posted by Richard 10:08 AM
. . .
VENEZUELA
Bolivarianism = Peronism: Did Hugo Chávez spend his two days out of the office studying Argentine economics? It's beginning to look that way.

In the most recent broadcast of his radio program, ¡Aló, Presidente!,
El Universal reports, Chávez annnounced that, in conjunction with the previously announced increase in the minimum wage, the government will decree a 60-day ban on discharging employees (inamovilidad laboral). The wage increase and firing freeze apply to government and private business. (The article in El Universal contains estimates of the cost to each). Small business and rural employers can meet the increase in two steps.

1. While the decree pretends to stop firings, it will instead stop hirings. Employers hire only reluctantly when hiring means a lifetime commitment.

2. So much for the supposedly chastened, cooperative, willing to compromise Chávez who was returned to office two weeks ago. This is left-wing populism pure and simple.

3. Though initiated before the failed coup, this measure will be seen as rewarding the Bolivarian circles and other Chávez loyalists. It will undoubtedly increase Chávez's popularity short-term, especially among his lower ncome supporters. But, short-term is the operative phrase. As with most such populist measures, the immediate fix will be followed by an hangover. And, as noted here before, Chávez has five long years left in his term. So he (in addition to the Venezuelan people) will pay for this excess.

posted by Richard 7:30 AM
. . .
Sunday, April 28, 2002
CHILE
Good News! One country that infrequently appears in the news (and in El Sur) is Chile. That is because, in comparison with its South American neighbors, Chile is successful, prosperous and untroubled. As a result, it doesn't make much news foreigners would find interesting. Now it has.

According to
Bloomberg, Chile has signed a trade agreement with the European Union.
Chile has spent 15 years opening markets abroad for wine, fruit, commodities and other goods and government officials are betting on free trade agreements to rekindle an economic expansion that's slowed in the last four years. The EU hopes the agreement will accelerate free-trade talks with Latin America's biggest trade bloc, Mercosur, which includes Brazil, Argentina, Uruguay and Paraguay.

"I would like to think that this agreement with Chile will be the first step toward other agreements that we have to make as a region with Europe,'' Chilean President Ricardo Lagos said.
Best of all, it will be more difficult for the protectionists in both U.S. parities and the anti-globo leftists who lead the Democrats around by the nose to block free trade with Latin America. The U.S. will have to deal to remain competitive. The Bloomberg piece continues:
Chile expects in the next few months to reach a free-trade agreement with the U.S., its second-largest trading partner after the EU, helping boost exports that account for 42 percent of the country's $69 billion economy. Once that deal is signed, Chile plans to start free-trade talks with Singapore and other Asian countries, Lagos said in a news conference.
Chile's El Mercurio, meanwhile, reports that Chilean President Ricardo Lagos' is confident the agreement will be approved by the legislature. The biggest problem with the accord from a Chilean perspective appears to be the sections on fishing, reports El Mercurio.

posted by Richard 7:07 AM
. . .
ARGENTINA
Does this really still work?:
Hilda González de Duhalde knows well what she wants. It what she wants is to enter history as the woman capable of advancing what few governments achieved since Perón: effective social assistance for the most necessary sectors.
Hilda Hilda González de Duhalde sabe bien lo que quiere. Y lo que quiere es pasar a la historia como la mujer capaz de llevar adelante lo que pocos gobiernos lograron desde Perón: una efectiva asistencia social para los sectores más necesitados.
The article in
La Nacion goes on in this vein, fawning over this low-rent Evita. But Chiche, as she's called, doesn't like this comparison. (Yeah, right.)
The feminine cabinet, in exchange, is made up of the women of various states that control everything that carries the adjective social. Of course: the first lady does not like to be compared, herself or her collaborators, with the mythic Eva Perón. "This was another political and historical moment. More than the practice of giving assistance, we concentrate on education and health," she said, when people probe about the parallel.
El gabinete femenino, en cambio, esta integrado en su totalidad por mujeres de variadas edades que controlan todo lo que lleve el adjetivo de social. Eso sí: a la primera dama no le gusta que la comparen, ni a ella ni a sus colaboradoras, con la mítica Eva Perón. "Ese era otro momento político e histórico. Más que asistencialismo, nosotras nos concentramos en la educación y la salud", dice, cuando la tientan con el paralelismo.
Amazing.

posted by Richard 6:25 AM
. . .
Saturday, April 27, 2002
ARGENTINA
New man, old plan (sorta):
- Pagina12/WEB describes the new economy minister's plans. These are to limit the peso's free-float against the dollar and convert savings into bonds. It was the legislature's failure last week to pass a law converting savings into bonds (the Bonex plan) that stimulated the last economy minister's resignation.

Though neither of these initiatives is new, there are wrinkles. On convertability, the government will not fix a peso-dollar ratio, but will establish upper and lower boundaries between which the currencies can float. As to Bonex, the plan apparently is to give them a coupon that will make them worth holding.

It is doubtful that either of these will work. For example, what happens if the dollar rises beyond the band? Who will sell dollars to bring it down? The central bank? They may say so now, but in the event, very unlikely. In theory there should be an interest rate high enough to induce individuals to hold the Bonex bonds. In practice, given constant government's decrees repudiating its own contracts, and allowing others to repudiate theirs, there may not be. The answer to this question will be known quickly. Last week demonstrators scared the senate out of even considering it.

posted by Richard 7:46 PM
. . .
ARGENTINA
The problem in a paragraph: Here is one paragraph from Friday's Wall Street Journal (International section, no link). The story is no big deal, just a report on the (at the time rumored) appointment of Roberto Lavagna as economic minister and the possible reintroduction of a dollar-peso link, but this one paragraph reveals everything you always wanted to know about Argentina's problems.
Argentines widely supported the previous currency peg, known as convertibility. But the current government lacks the credibility to make such a system stick, economists said. Additionally, under convertibility, the Central Bank was barred from printing money to finance the government and was required to stash away one dollar in hard-currenty reserves for every peso in circulation. Any move to readopt a pegged exchange rate wouldn't incorporate those two conditions, the aide (to President Eduardo Duhalde) said.
That's not convertibility, it's fantasy. How can they possibly expect a three-to-one dollar-peso ratio to hold while the government prints pesos as it sees fit? Who is going to sell people one dollar for three pesos? Does the central bank plan on throwing its reserves away that way?

If Duhalde and his new, supposedly sophisticated economic minister actually go ahead with this, there is only one possible outcome: First, there certainly will very soon be an unofficial price for the dollar, set by the market, that has nothing to do with three pesos. Second, there may be a few central bank sales at three-to-one, but only for purposes and to people the government deems vital to the national interest--importers of critical materials, cronies, relatives.


posted by Richard 6:39 PM
. . .
Friday, April 26, 2002
COLOMBIA
Uribe drops, still leads in poll: The Colombian candidate most committed to combatting the FARC guerillas lost supprt in the most recent poll of voters, according to
El Tiempo. But, Alvaro Uribe Vélez's support, at 47.7 per cent, is still good for a 20 point lead over his nearest opponent, Horacio Serpa, who received 27.3 per cent. Uribe has lost more than 10 points since the last poll in February. The gains corresponding to Uribe's losses were spread out among opponents.

Under Colombia's electoral system, a candidate needs 50 per cent or more to avoid a run off. The poll tested Uribe's support in a run off against his opponents and found him winning easily against all.

The poll of 1400 voters was conducted for El Tiempo, the review Semana, and RCN radio and television.

posted by Richard 5:39 PM
. . .
ARGENTINA
Banks open, sorta:
Yahoo! News - Reuters reports that Argentina's banks are opening on a limited basis.
Banks reopened for five hours Friday afternoon -- but only for bill payments and deposits from anyone who retains faith in the mostly foreign-owned banks, which have hemorrhaged deposits and notched up billions of dollars in losses for their owners.
Bet they got lots of deposits.

posted by Richard 12:23 PM
. . .
VENEZUELA
Interesting slant: A story from
Yahoo! News - AP points to a little remarked, but important, element in the Venezuelan conflict: race.
"They (the opposition) don't like Chavez because he's black, he's Indian, and they're white and beautiful," said Hugo Salvador, a 60-year-old advertising employee. He stood amid a jostling crowd of fellow "Bolivarian Circle" members who shouted, "We're the poor, the ones who have always been kicked around."
Most Venezuelans find the "Bolivarian" rhetoric offensive, given the relatively easy coexistence--outside of politics--among the nation's mixed-blood population. But supporters of Chavez's 3-year-old administration like his speeches demanding better distribution of Venezuela's oil wealth.
"The children of recent immigrants have gotten rich, formed exclusive white ghettos, and have a certain feeling of disgust for the rest of the population," said Guillermo Garcia Ponce, who holds the title of Director of the Political Command of the Revolution in Chavez's government.
Venezuela did indeed attract a large immigration from Italy and Spain in the 1950s, when Spain was stagnant, Italy in turmoil, and Venezuela enjoying the fruits of an oil revenue boom. Wealth from mineral extraction is always a problem; it lends itself to income and social extremes (see examples as various as 19th Century West Virginia and "modern" Saudi Arabia). Chávez could leave no worse legacy than race consciousness where none existed before.
Garcia Ponce insisted that "there is nothing in our ideology that would lead to socialism," despite Chavez's close ties with Cuba's Fidel Castro and his tacit support for leftist guerrillas in neighboring Colombia.
Note how Yahoo! News - AP's easily accepts as fact an allegation that Chávez himself vehemently denies.
"This is not some imported ideology. It's something we invented here. It's Biblical-Bolivarian thought," said circle member Romulo Mendez, 46.
The spread of what is called "Bolivarian thought"--which blurs the distinction between Chavez's Fifth Republic Movement party and the government--worries many. Before the coup, Chavez proposed allowing circle committees to inspect schools and fire teachers at will. "Bolivarian thought" is being taught at "Bolivarian schools."
It is important to recall that Chávez is not popular in Venezuela, as is shown by a recent poll noted in El Sur two days ago. His loyalist core, in fact, is about 3 per cent of the population, according to the poll. It is this part of the population from which the "Bolivarian circles" are drawn.
Leopoldo Puchi, whose small leftist party broke with Chavez because of Chavez's intolerance, said the president chose Bolivar to give a non-Marxist, nationalist face to his own ideas. Chavez's political machine "has achieved very few concrete economic proposals, so all its energy has been channeled into the accumulation of power," Puchi said.
The low intellectual level of Bolivarianism will limit his appeal, as is indicated by the reaction of Leopoldo Puchi, just above. It also limits his appeal among North American sandalistas.

posted by Richard 12:20 PM
. . .
ARGENTINA
IMF part of the problem: Mary Anastasia O'Grady, in The Wall Street Journal's "Americas" column examines Argentina's future under, and perhaps after, late-Peronism. She is firmly in the camp of those who believe that only complete collapse of the "generations-old corporatist economic model" that is "deeply embedded in Argentine culture and reflected in its politics" will permit the "intense national soul-searching" that is needed if reform is to take deep root. So,
It's too bad the IMF won't just stay out of Argentina. Without IMF meddling or hovering in the wings, the highly capable Argentine people would find a way to reconcile their fiscal accounts. They'd also be forced to design trade, labor and regulatory policies that encourage the creation of wealth. IMF interference--whether it's the lure of a deep pocket safety-net, or bad advice--will only distrot domestic politics and make such reform more difficult.
That is just the bottom line. The whole piece is excellent. Unfortunately, it is not on the Net.


posted by Richard 12:02 PM
. . .
ARGENTINA
Last chance Peronist party leaders believe they have just one more chance before elections will have to be called, reports
La Nacion.
This is the reason why no (state) governor accepted a post in the (national) government and only supported a 90-day plan, the success of which is not asssured.
Es ésa la razón por la que ningún gobernador aceptó un cargo en el Gobierno y sólo lo respaldaron en un plan de 90 días, sobre el que no se animan a asegurar que tendrá éxito.
Although no governor called for Duhalde's resignation,
The chief of state believes that to leave his office will only mean that the country is jumping into the void, according to what he told La Nacion last night...
El jefe del Estado cree que dejar su cargo sólo significará que el país dé un salto al vacío, según le dijo anoche a LA NACION...
In the end, 72 hours of meetings between Duhalde and the Peronist governors resulted in the appointment of Roberto Lavagna, an economist and current ambassador to the Eurpoean Union, as Economic Minister, replacing Jorge Remes Lenicov. La Nacion reports this entire series of meetings somewhat breathlessly and in unnecessary detail. The only real news emerging from this mafia summit is that Duhalde is nearing the end and few of his associates want to be with him when he gets there.

If there are elections, the next government is likely to be far left.

posted by Richard 9:59 AM
. . .
ARGENTINA
Still stealing?: Dead Dictator Juan Perón's last wife is in trouble in Spain, reports
La Nacion. María Estela Martínez de Perón was brought into court in Spain by the Fundación por la Paz y la Amistad de los Pueblos, which "accuses her of improperly retaining more than $6 million dollars." ("la acusa de retener indebidamente más de 6 millones de dólares.") The fight is over the former dictator's inheritance.

FUNPAZ says everything Perón left belongs to it, under his will and with her agreement in writing. However, FUNPAZ claims, she received and kept money given her during the presidency of Peronist Carlos Menem, in settlement of a claim against Argentina. Making the foundation's claim is its founder, Mario Rotundo, who happens to be ex-secretary to Mrs. Perón ("Isabelita," as she was known, in imitation of her more famous predecessor "Evita"), which suggests this is something of a family fight dressed up as charity. Any why not? Imitation is the sincerest form of flattery.

Mrs. Perón, who was her husband's vice president during his second term, 1972-1974, assumed the presidency of Argentina upon his death in and held it for two catastrophic years, until she was overthrown in 1976 by the military, who proceeded to create a catastrophe of their very own. She spent five years in prison in Argentina, before removing permanently to Spain in 1981.

And who's the thief here? Whichever one wins the court case.

posted by Richard 4:35 AM
. . .
Thursday, April 25, 2002
ARGENTINA
View from the country: Reading all the news reports detailing the plans and decrees handed down by President Eduardo Duhalde and his Peronist pals, it's easy to forget that these things affect real people in the real world. A small window into the damage these politically driven, practically ignorant impositions can do is provided by the
AgReport website for April 19.
The most important harvest is about to be cropped, but Argentina is going through a shortage of diesel fuel, and producers observe with concern the possible answers that the government will offer to oil companies. Meanwhile, this week, transporters are on strike as a protest for the high prices they must pay for fuel, that is if they can get a hold of any.
The request by agricultural producers and transporters seems quite basic, but the current national crisis continues to tumble even the most elemental suppositions.


posted by Richard 7:27 PM
. . .
ARGENTINA
U-Turn x 2:

U-Turn #1: Last week, resigned Economic Minister Jorge Remes Lenicov proposed to slow the flow of funds out of frozen savings accounts by requiring that court orders releasing funds not be operative until all appeals by banks are exhausted. Duhalde rejected this proposal then, in favor of the Bonex plan to convert savings into five- and 10-year bonds. Then Bonex failed and Remes Lenicov resigned.

Today, reports
Bloomberg, the national legislature passed the required-appeal legislation Remes Lenicov wanted last week.
"This law is vital; it won't fix Argentina's tragedy, but it at least allows banks to exist,'' said Dario Lewkowicz, a fund manager with Exprinter Administradora in Buenos Aires who managed $35 million before the government defaulted on debt and devalued in January. He wouldn't say how much he manages now.
"This law should not be interpreted as a definitive solution for the problem of leakage of funds from the banks, but rather as a stop-gap measure,'' ABN Amro analysts Fernando Losada and Claudio Maulhardt said in a research note.
The government closed banks Friday as cash reserves were being depleted after depositors used court injunctions to pull as much as 350 million pesos ($112 million) a day.
And that's the little U-Turn. Here's the BIG one:

U-Turn # 2: One of the first things Eduardo Duhalde did on assuming office in January was to cut the one-to-one, dollar-peso link. The currencies had been linked for some 12 years; when first made, the link tamed run-away inflation and set the stage for nearly a decade of growth. Now, Duhalde is considering re-linking the dollar and peso, this time at three pesos per dollar.

posted by Richard 1:01 PM
. . .
ARGENTINA
Commentary:

1. Political Analyst Rosendo Fraga in
La Razón:
Immediately, Duhalde will try to reorganize his cabinet, but he will find it difficult to achieve this in a form that ends the crisis. In a climate of strong economic uncertainty and growing social conflict, the current administration only has the capacity to prolong the agony not to resolve the crisis.
En lo inmediato, Duhalde intentará reorganizar su gabinete, pero difícilmente logre hacerlo de forma de revertir la crisis. En un clima de fuertísima incertidumbre económica y creciente conflicto social, la actual administración sólo tiene capacidad para prolongar la agonía pero no para resolver la crisis.
Fraga believes Duhalde will soon be obliged to call a new presidential election.


2. Economic analysis by Juan Alemann, also in La Razón: When Remes Lenicov returned from Washington empty-handed and the Argentine Senate refused to accept his plan to keep savers' funds locked in banks, he was finished, says Alemann.
It is understandable that Argentina does not now enjoy much sympathy in the world. The declaration of default, as if it was a great triumph, applauded with fervor by the Congress, is a grave event. It is also the violation of contracts with public service businesses based in the countries from which it asks help, that the government put in an insolvent condition, by means of high debts in dollars and tariffs frozen in pesos.

Es comprensible que la Argentina no goce actualmente de mucha simpatía en el mundo. La declaración del default, como si fuera un triunfo, aplaudido con fervor por el Congreso, es un hecho grave. Lo es también la violación de contratos con empresas de servicios públicos originarias de los países a los que se pide ayuda, a las que el Gobierno colocó en situación de insolvencia, por altas deudas en dólares y tarifas congeladas en pesos.
3. From blogger T.L. Wilson, an American in the Paris of South America, in his treasaigh.com.
Things are bad and the people in charge are corrupt and incompetent. It is impossible to see how, staring into the abyss as this country is, the national government can not come to agreement with the provinces or with the unions or the other sundry groups that represent some sub-sector of society or the other. It is the actions of the leaders of this country which show what is wrong here... and it is them.
4. From the English-language Buenos Aires Herald:
Anything could happen and nothing is happening as chaos deepens. But what can be expected without any new economy minister in sight and with a president who boasts of his ignorance of economics? President Eduardo Duhalde seems ready to consider any ministerial candidate and any economic policy although he seems at a loss when it comes to deciding which. The only course he does not seem ready to contemplate (despite some hints from senators yesterday) is calling for immediate elections.
Duhalde is very welcome to prove us wrong but there is no indication that he has the least clue of how to hold things together. In a scenario where the lack of confidence is so much more decisive than any tangible or material asset, elections would have the virtue of forcing a shattered leadership and a people devoured by systematic suspicion into a relationship of trust with each other.


posted by Richard 8:23 AM
. . .
Wednesday, April 24, 2002
VENEZUELA
Chávez support falls: A new poll reveals that only 21% of Venezuelans have confidence in the leadership of President Hugo Chávez.
El Universal contains a complete report.

El Universal also has a Chart showing the country's declining confidence in Chávez. The poll classifies Venezualans into four groups, according to their attitudes toward the president: antichavista, 37.5%; decepcianados (the deceived), 31%; chavista tolerante, 18.5%, and talibán (get it?), 13%.

Asked to assess how things are going in the country, Venezuelans generally responded negatively.
Only 22.3% of Venezuelans believe that things are going well in the country. This number last year was about 30.4%.
Sólo 22,3% de los venezolanos cree que las cosas están yendo bien dentro del país. Esta cifra el año pasado se ubicaba en 30,4%.
According to the poll, the country's biggest problem is unemployment. The public has confidence in the universities, the church and the media (which Chávez has often attacked).


posted by Richard 1:23 PM
. . .
VENEZUELA
Was Chávez prepared to have troops fire on public? There is no question that President Hugo Chávez ordered ordered implementation of "Plan Ávila," the military's plan to protect the government if public order breaks down despite the efforts of the police and national guard, during the big April 11 demonstration. There are tapes to prove it, reports
Reuters. The question is, what did he want the to do?
Opponents of the left-wing former paratrooper, including military officers who staged a short-lived coup against him this month, said the tapes indicated Chavez had been prepared to use military force against civilian demonstrators.
"In which other country, and in what kind of mind, is it conceivable that a peaceful demonstration by citizens would be quelled with weapons of war, with tanks?" National Guard Gen. Luis Camacho Kairuz told reporters.
But Chavez's current armed forces chief Gen. Lucas Rincon denied this had been the intention, saying the troops and tanks deployed had not acted against the demonstrators but were called out to prevent sabotage and guarantee public order.
According to El Universal:
Nevertheless, Lucas Rincon assured that "Plan Ávila is not to maltreat or repress the population" but to guarantee security,prevent sabotage and the disturbance of public order," he informed Venpres.
No obstante, Lucas Rincon aseguró que ''el Plan Ávila no es para maltratar o reprimir a la población'' sino para garantizar la seguridad, prevenir saboteos y la alteración del orden público'', informó Venpres.
The tapes, which have been played over Venezuelan media, record Chavez ordering the military out of the barracks and into the streets. But, they do not appear to contain a, shall we say, smoking gun.

posted by Richard 1:16 PM
. . .
ARGENTINA
Farther to fall, say Uruguayan economists:
El Pais interviews Uruguayan economists and finds them unanimously believeing that Argentina has farther to fall and that the fundamental problem is political, not economic.
"It is clear that the coalition that is now governing cannot take the country forward because they are partly responsible for the current disaster. Argentina needs to fall one or two rungs more, because it needs to begin at zero in many aspects," he (Michele Santo) said.
"Es claro que la coalición que está gobernando actualmente no puede sacar el país adelante porque son responsables de parte del descalabro actual. Argentina necesita caer uno o dos escalones más, porque necesita empezar de cero en muchos aspectos", opinó.
"What exists in Argentina is an institutional and political crisis, not a question of the person that is the head of the Economic Ministry. For example, an agreement with the provinces to reduce their fiscal deficit is a political question," she (Mercedes Rial of KPMG) indicated.
"Lo que se vive en Argentina es una crisis institucional y política, no se trata de la persona que esté al frente del Ministerio de Economía. Por ejemplo, un acuerdo con las provincias para reducir su déficit fiscal es una cuestión política", señaló.
Gabriel Oddone, investigator for the Center of Economic Investigations (CINVE), said that the fall of the Argentine minister reveals that "the political system cannot trace a clear and coherent direction in order the leave the crisis. This is an enormous political problem."
Gabriel Oddone, investigador del Centro de Investigaciones Económicas (Cinve), expresó que la caída del ministro argentino revela que "el sistema político no puede trazar un rumbo claro y coherente para salir de la crisis. Este es un problema político mayúsculo."
These read as epitaphs for the Duhalde regime.

posted by Richard 11:27 AM
. . .
ARGENTINA
Full circle:
Clarin quotes government spokesman Aníbal Fernández saying that President Eduardo Duhalde intends to replace resigned Economic Minister Jorge Remes Lenicov and to reveal a new fixed-rate financial plan today.
The official confirmed moreover that the dollar will be "anchored" in a fixed value, that would be between 3 and 3.50 pesos, and that the bank freeze will continue until the Senate approves a new law covering the corralito. He insisted moreover that for now the only resignation Duhalde had accepted, from
the members of the cabinet, was that of Jorge Remes Lenicov.
El funcionario confirmó además que el dólar será "anclado" en un valor fijo, que estaría entre los 3 y 3,50 pesos, y el feriado bancario continuará hasta que el Senado apruebe una nueva ley contra el corralito. Aseguró además que hasta ahora la única renuncia que Duhalde aceptó, de los miembros del Gabinete, fue la de Jorge Remes Lenicov.
Just three months ago this same government held that a floating exchange rate was the way out of the country's problems.

posted by Richard 8:05 AM
. . .
COLOMBIA
War: The public face of the Irish Republican Army, Gerry Adams, is refusing to testify in the U.S. Congress about links between the Irish terrorist group and the Colombian terrorist group FARC. His lame excuse, reports
Reuters: "he refused in the interests of Northern Ireland's peace process." For its part, the congressional committee that wants him to talk, is not mincing words:
In a preview of its findings after a nine-month investigation, the House of Representatives Committee on International Relations said on Tuesday the IRA had operated as part of an international terror network that trained Marxist FARC guerrillas in southern Colombia.
The House committee launched the investigation after three suspected IRA members were arrested in Bogota on August 11 and charged with training rebels of the Revolutionary Armed Forces of Colombia (FARC). Traveling with false passports, they allegedly spent weeks in an enclave controlled by the FARC.
In its preview, the House committee said the IRA, along with Iranians, Cubans and possibly members of the ETA Basque separatist group, had been training the rebels, said to be deeply involved in the drugs trade.
To this, the IRA's own Sergeant Schultz says "I know nothing, nothing."
Adams said he had been on holiday when the IRA members were arrested and "didn't even receive the news about their arrests for three or four days afterwards."
Sandalistas: IRA terrorists aren't the only foreigners doing their best to make Colombia's already daunting problems worse. The country also seems to be facing a plague of peaceniks. AP (via The Las Vegas Sun) reports on one such adventure.
American college professor and peace activist Bernard Lafayette came to Colombia hoping to meet with Colombian rebels. He got his wish--and almost wound up being kidnapped by them.
Lafayette, along with a state governor and several Colombian priests, was leading a march of almost 1,000 peace activists to an embattled mountain village when they were stopped Sunday by rebels of the Revolutionary Armed Forces of Colombia, or FARC.
Knowing the idiot they'd kidnapped is a useful idiot, the FARC let him go.
But the FARC continue to hold Antioquia state Gov. Guillermo Gaviria, and former Defense Minister Gilberto Echeverri, who were spirited deep into the mountains on horseback. Echeverri serves as the governor's peace adviser.
In addition to the two last named, the FARC continues to hold presidential candidate Ingrid Betancourt, a dozen state legislators, five members of the national parliament, about 40 government troops and a former Cabinet member, Fernando Araujo.

Upon being freed, Lafayette proceeded Medellin to lead a conference on nonviolence. With him at the conference, Nobel Peace Prize laureate Mairead Corrigan Maguire of Ireland. It looks like the heroes of the struggle for peace in Ireland, like the heroes of the struggle for Ireland, are looking to foreign fields now that the home conflict appears on the way to settlement.

posted by Richard 5:50 AM
. . .
Tuesday, April 23, 2002
ARGENTINA
Production falls: Industrial production continued to fall in March, reports
La Nacion.
Industrial production in March fell 19.7 per cent with respect to the same month last year and 7.1 per cent from February, in the seasonally adjusted measurement, according to the National Institute of Statistics and Census (INDEC) today.
La producción industrial en marzo cayó 19,7 por ciento respecto a igual mes del año pasado y 7,1 por ciento contra febrero, en la medición estacionalizada, según confirmó hoy el Instituto Nacional de Estadística y Censo (Indec).
How could it be otherwise with a government that refuses to respect private property rights and steals every loose dollar. Customers can't buy with cash, because their funds are tied up in the account freeze. They can't buy with credit, because no one's extending it (repayment not being enforced). Companies can't import parts, because their foreign suppliers can't be sure of getting paid. Foreign banks won't reliquify their subsidiaries, because anything they put in will be grabbed. If Argentines want a functioning economy they need to get a government and legal system that respects property and enforces contracts, even those in the other guy's favor.

posted by Richard 8:08 PM
. . .
ARGENTINA
Fatalism: Today's
Pagina/12WEB contains this quote from President Eduardo Duhalde:
If the situation arrives in which the legislators evade the wishes of the executive, "the banks will open all the same and what will be is what God wants," said the chief of state, in perfect harmony with the demand of the banks.
Llegado el caso de que los legisladores eludan los deseos del Ejecutivo, "los bancos igual abrirán, y que sea lo que Dios quiera," dijo el jefe de Estado, en perfecta sintonía con el reclamo de los bancos.
Pagina12 is a leftist paper. Here's where they're coming from:
Amidst an economic earthquake, the big banks have declared war.
En medio del terremoto económico, los principales bancos se declararon la guerra.


posted by Richard 6:12 PM
. . .
ARGENTINA
Big news: It's overall strategy coming undone, the Duhalde government is in danger of collapse. To review: That strategy was to make cosmetic changes and whatever promises it took to get the IMF to turn on the cash spigot.

With IMF funding seemingly no closer than when Duhalde took over in January, and temporizing measures like the account freeze (installed by the previous government, it must be said), pesification and devaluation reaching their inevitable dead ends, Duhalde seems out of ideas and out of time.

Evidence he's out of ideas is that his latest scheme to keep savers' cash in the banks is a repeat of a much hated scheme from the 1980s (called Bonex) to turn savers cash into "bonds." Evidence he's out of time is that his government has begun resigning.

Economic Minister Jorge Remes Lenicov resigned first,
La Nacion reports. (Last week, when the minister wasn't getting his way on solutions to the banking crisis, El Sur said: "The question is, is Remes Lenicov considering resigning?" Today he did.) The resignation came after the Argentine Senate refused to consider the Bonex plan this afternoon.

Later in the day, reports Clarin, the Chief of Cabinet, Jorge Capitanich, and the Minister of Production, José Ignacio de Mendiguren, also resigned.
There are still no names of possible successors for the officials, whose resignations were presented with an indeclinable character.
Todavía no hay nombres de los posibles reemplazantes para los funcionarios, cuyas renuncias fueron presentadas con carácter indeclinable.
Meanwhile, La Nacion reports, Duhalde met with provincial governors, legislators and others on the crisis. La Nacion also reports that Duhalde himself has no plans to resign, according to his spokesman Eduardo Amadeo.

Reuters reports includes the following comment:
"The only thing helping Duhalde here is that no one else wants his job. On the one hand, nobody wants Duhalde to do anything, but nobody wants him to leave, either," said Christian Stracke, emerging market debt strategist at Commerzbank.



posted by Richard 5:18 PM
. . .
VENEZUELA
Compromise: Recent announcements and actions suggest that things are simmering down in Venezuela. Two questions: Are real compromises being reached? Or, compromises apparent and temporary only, until Chávez obtains complete control? Answers should emerge relatively quickly in two critical areas. The answers from these two will likely provide the answer to the above questions.

1. April 11 shooting deaths:
Reuters reports that Chávez has ordered a probe into the killings of April 11. Tape reportedly exists that shows one instance in which Chávez partisans shot into the anti-Chávez demonstration. Witnesses report other instances by known Chávez associates. While promising an investigation, Chávez continues to claim that it was his side that was victimized: Chavez has already denied any responsibility in the killings.
"Me, a murderer?" he asked at a news conference one day after he was restored to power. His ministers say pro-Chavez militants were among those killed.
In short, it remains to be seen whether the investigation will be fair and place the blame where it belongs, wherever that is, even if that is, as evidence so far suggests, on Chávez partisans.


2. State oil company control: One of the first things Chávez did upon his return was remove the chief executive and directors of Petroleos de Venezuela SA (PDVSA), whom he had just appointed, helping trigger the nationwide lockout/strike of April 9. The executives and employees of the state oil company considered them cronies, without the qualifications necessary to run the company. He has since appointed as company president (and board member) Ali Rodriguez, currently OPEC secretary general and formerly Venezuelan energy minister. Rodriguez was reportedly accepted by PDVSA staff because he is an expert. Now, reports Bloomberg News, Chávez has appointed the remaining board members. They are:
Jorge Kamkoff, a PDVSA vice-president (held over from the prior board);
Jose Rafael Paz, president of PDVSA's petrochemical subsidiary;
Ludoviko Niklas, executive director of exploration, production and refining;Nelson Nava, president of PDVSA's natural gas unit;
Clara Cloro, an adviser to Energy Minister Alvaro Silva;
Arnoldo Rodriguez Ochoa, a retired Army general (held over from the prior board);
and
Hugo Hernandez Rafalli, president of Venezuela's Petroleum Chamber.
Clearly this is an insider group. To that extent, the victory would seem to have gone to the PDVSA demonstrators. Still, it remains to be seen what, if anything, they had to agree to get the deal. And, as noted in El Sur last week, PDVSA's leaders have agreed to abide by Venezuela's OPEC-mandated production quota and the hyrdrocarbon law, which restricts investment and is widely credited with sending foreign oil companies elsewhere.

posted by Richard 9:23 AM
. . .
VENEZUELA
Opposition wants more than talk: Since his return to power, President Hugo Chávez has talked reconciliation between his government and the opposition. Now, reports
The Financial Times, the opposition is demanding concrete steps to back up his words with deeds.
"One of the things President Chávez has to sort out for the nation to really believe he is sincere in his call for dialogue and national unity is that he must dismantle most, if not all, of his Cabinet," said anti-Chávez union leader Manuel Cova.
Another diehard foe of Chávez, Caracas Mayor Alfredo Pena, called on him to form a new "national salvation" Cabinet and give priority to relations with the United States, the main buyer of Venezuelan oil.


posted by Richard 7:29 AM
. . .
ARGENTINA
No reform, no aid: A column in
Latin Business Chronicle by Ana Eiras, Latin America Policy Analyst in the Center for International Trade and Economics at The Heritage Foundation, urges no international aid for Argentina until that country's government reforms.
Only profound reforms of Argentina's economy, political system, and judiciary can begin to restore the people's trust and set the country on the path to recovery.
Eiras says the newest aid-getting strategy of the government of President Eduardo Duhalde is raise fears that a lawless Argentina might become a terrorist haven.
This new strategy is politically smart but economically unwise. It reveals, however, how far Argentine authorities will go to avoid reform.
The column links to a Heritage Foundation Briefing Paper on Argentina, in PDF format.

posted by Richard 7:08 AM
. . .
Monday, April 22, 2002
ARGENTINA
Bank run stops banks running: Argentina's financial crisis has reached a new stage. The government of President Eduardo Duhalde has closed the country's banks until further notice. The bank "holiday" is intended to stop further court-ordered withdrawls of funds from the banks, until the government can gain legislative approval of a plan to convert savings in frozen bank accounts into 5-year (peso) or 10-year (dollar) bonds. This is very unpopular. Today's Wall Street Journal (no link) has a front-page article on the crisis and the "Bonex" solution, as its called.
The announcement Friday night capped a chaotic week in which renewed outflows from Argentina's battered banks, many owned by European and U.S. parent companies, heightened fears that Latin America's third-largest economy would be unable to avoid a wholesale collapse of its financial system.
What's really going on here is a slow-motion bank run. As savers carrying court orders have retrieved millions of dollars daily from their banks, the government has sought measures to stop the withdrawls. Last week, Duhalde rejected a proposed law that would have permitted banks to appeal such court orders.

On Friday, a crisis point was reached. Scotiabank Quilmes SA ran out of money and was closed when the parent company, Bank of Nova Scotia, refused to recapitalize it.
Friday afternoon at the headquarters of Scotiabank Quilmes...dozens of desperate depositors--stepping around leaflets dropped by a bank employees' union saying, "Canada, Fork Over the Money"--formed long lines in hopes of retrieving funds.
Scotiabank blamed its problems on the government's currency devaluation and refusal to provide emergency funds.
A spokeswoman indicated the bank had no interest in pumping money into its Argentine unit until the government dealt with the larger crisis. "We are not able to entertain any capital injection until there are clear rules for the system," said spokeswoman Diance Flanagan.
And that is the problem in Argentina. No clear rules. No rules any government of Argentina feels bound to obey. Even the IMF doesn't believe them anymore.
"The IMF has no faith in the Duhalde regime--zero," said Walter Molano, head of research at BCP Securities in Greenwich, Conn. "What the IMF is doing is saying, 'We'll just wait you out.'"
From the beginning, the Duhalde government's strategy has been to promise what they had to to get the money, then to meet their commitments, or not, as convenient. Early on it looked as if that might work. Now that's not so clear. Increasingly it appears that the IMF is stringing Duhalde and company along, never granting assistance, never denying it, always demanding a few more reforms that would be ever more difficult to make--if Duhalde had any intention of honoring an agreement. At first, Duhalde promised Argentines an agreement and cash infusion in February. Then it was March; then it was April (when the IMF's Anoop Singh visited); now it's May. But, just this weekend, according to The Journal article, rather than accept a national government promise to limit local spending, the IMF has begun to insist that every province sign an accord in which they agree to limit it. Needless to say obtaining these signatures will be very difficult. Even the asking will be an unpleasant exercise for the Duhalde government.

The Journal notes that the Bonex plan is likely to be taken to court as well.
Economist Aldo Abrain of the consulting firm Exante termed the plan unconstitutional. He added, "I think the likelihood that this government won't complete its term is growing."


posted by Richard 9:52 AM
. . .
Sunday, April 21, 2002
ARGENTINA
A successful coup II? Now it's Domingo Cavallo who is saying the President Fernando De la Rúa was pushed out of office last December in a coup, according to a report of his courtroom testimony in
La Razón. De la Rúa himself had made that charge in testimony reported by La Nacion and Clarin on April 15 (and noted in El Sur). Essentially, the allegation is that conspirators in both the then-governing Radical Party and the now-governing Peronist party encouraged on-going demonstrations against the De la Rúa government to turn violent then allowed, until De la Rúa quit.

Cavallo also told the court that he is certain that De la Rúa's successor, Adolfo Rodríguez Saá was the victim of a coup. Rodríguez Saá resigned after a week in office facing almost constant violent protests and riots. And he named names:
He said that those most guilty of the taking down the ex-leaders were "the president of the Radical Party, the governor of Chacao Angel Rozas, and the Radical Deputies Leopoldo Moreau and Jesús Rodríguez."
Dijo que los principales culpables de las caídas de los ex mandatarios fueron "el presidente del radicalismo, el gobernador chaqueño Angel Rozas, y los diputados radicales Leopoldo Moreau y Jesús Rodríguez."
It is interesting that he names only Radicals; is he curring favor with the current Peronist government by exculpating it even as he attempts to establish that there was a coup, revenging himself on Radical opponents? Cavallo's wife, Sonia Abrazian, has also testified to this effect. Former President Carlos Menem previously made similar charges to Chilean newspapers.

Domingo Cavallo was the last Economic Minister in De la Rúa's government and had previously held that office under former President Carlos Menem. Cavallo's work under Menem was celebrated; by the end of his service with De la Rúa he was widely reviled.

As to the truth of the allegation: First, this would not be out of character for Argentina politics. Second, while demonstrations have continued since Duhalde took office, none has had the scale, purposefulness or violence of those that toppled De la Rúa and Adolfo Rodríguez Saá, this despite the fact that the Duhalde has presided over continued failure and decline. So, yes, it's entirely possible that these allegations are true.

posted by Richard 5:44 PM
. . .
LATIN AMERICA AND THE U.S.
Protectionism No! Latin American countries attending the IMF conference in Washington formally asked the developed countries to end protectionism, reports
El Universal (Bogata).

Pedro Pablo Kuczynski, Peru's economic minister, spoke for Argentina, Bolivia, Chile, Paraguay, Perú and Uruguay at the meeting. He particularly focused on subsidies by developed countries' governments to their agricultural sectors.
Kuczynski said that the countries he was representing are convinced that access to the markets of the rich countries is the "most effective" way to achieve development, but that until now this has not been possible becaure of protectionist measures.
"The support to agriculture in the developed countries is concentrated in a small number of operatons. It costs $350 billion a year, or six times the total amount of assistance" from the industrialized world for the developing world, he said.
Kuczynski dijo que los países en cuya representación habló están convencidos de que el acceso al mercado de los países ricos es la manera "más efectiva" de lograr el desarrollo, pero que hasta ahora esto no ha sido posible por medidas proteccionistas.
"El apoyo a la agricultura en los países desarrollados está concentrado mayormente en un pequeño número de agricultores. Cuesta 350 mil millones de dólares al año, o seis veces el monto total de la asistencia" del mundo industrializado para el mundo en desarrollo, señaló.
Protectionism in the U.S. and Europe is a big barrier to development in the world's poorer countries. Protectionism makes it difficult for the developed countries to credibly excoriate Argentina, for example, for failing to reform.

In one of the most ominous developments to emerge from the 1990s, protectionism is no longer the sole province of companies seeking to protect domestic markets and labor unions seeking to protect domestic jobs. The cause has been taken over by western leftists, environmentalists and anti-globos, none of whom wants to see poorer countries prosper by following the capitalist or new-liberal model. These groups are extremely influential in U.S.'s Democratic Party, which controls U.S. Senate, through which any free-trade legislation and treaties must go. It is hard to see how significant trade liberalization can occur while these political conditions exist in the U.S.

This is a scandal.

posted by Richard 4:07 PM
. . .
Saturday, April 20, 2002
VENEZUELA
Unbeaten, unbowed: Opponents of President Hugo Chávez are surprisingly determined and aggressive after the failure of the April 9-12 demonstrations to lead to his removal from office.

1. Top military officers arrested in after the interim government collapsed strongly defended their actions in court, resports
Yahoo! News - AP.
"We still consider this to be an illegitimate government," said Rear Admiral Carlos Molina Tamayo as he was whisked away by military police. "The armed forces are very beaten down and divided." Tamayo had denounced Chavez in February.
Asked if Chavez was reorganizing the military to his liking, Molina Tamayo replied: "Maybe. But he can't remake the country to his liking."
Army Gen. Nestor Gonzalez has defended the coup as "a humanitarian act meant to avoid having the army attack the people and produce a massacre." Gonzalez said generals balked at Chavez's order to activate "Plan Avila," calling out troops to defend the palace by any means necessary during the march by hundreds of thousands of civilians.
2. In El Universal the Mayor of Baruta, Henrique Capriles charged pro-Chávez activists with operating "a laboratory to falisfy scenes of violence" ("laboratorio para falsificar escenas de violencia
The official commented that he has received confidential information according to which various deputies, among them Juan Barreto, discovered editing some films in order to blame opposition groups.
El funcionario comentó que le han llegado informaciones confidenciales según las cuales varios diputados oficialistas, entre ellos Juan Barreto, se encuentran editando algunas filmaciones para inculpar a los grupos opositores.
3. El Nacional reports that the Confederación de Trabajadores de Venezuela (CTV) intends to stage another march on May 1. In his first public appearance after the events of April 11, the union's leader Carlos Ortega also said he is willing to meet with President Chávez.
"If it is to resolve the things we are disposed to meet even with the devil," he indicated.
"Si es para solucionar las cosas estamos dispuestos a reunirnos hasta con el demonio," indicó.
4. Also according to El Nacional, the head of the Organización de Periodistas Iberoamericanos (OPI) wrote Chávez asking compensation for the family of the news photographer assassinated on April 11.
In a letter directed to Chávez, the president of the OPI, Alvaro Julio Martinez, asked the chief of estate to take all measures necessary to insure that the killer of (Jorge) Tortosa does not remain immune and those responsible for the crime are carried before justice.
En una carta dirigida a Chávez, el presidente de la OPI, Alvaro Julio Martínez, le solicita al Jefe de Estado que tome las medidas necesarias para que la muerte de Tortosa no quede en la impunidad y los responsables del crimen sean llevados ante la justicia.
Why is this?

First, while Chávez's opponents made mistakes, his supporters committed crimes. There is at least one video showing "Bolivarian circle" members shooting at the crowd. There are witnesses. Pro-Chávez crowds mobbed newspapers and TV stations. (See El Sur.) All of this creates a problem of legitimacy, without which there is only force. For Chávez this is a dilemma. If he fails to protect his Bolivarian shooters, he defeats the purpose of the organization. The circles are the street-fighting arm of the MVR (Fifth Republic Movement); when circle members shot demonstrators and mobbed the media, they were doing what they wer designed to do. If he protects the Bolivarian shooters--the likely course--he loses legitimacy. (The Organization of American States, human rights organizations and press-protection organizations are all watching.) Legitimacy is a problem because there is no Soviet Bloc into which Chávez can take the country anymore.

Second, nothing fundamental has changed. Chávez has some five years still to go into his term and already he is unpopular enough to be beseiged. His economy is stagnant. Oil revenues are capped, now by his voluntary acceptance of Venezuela's OPEC quota, in a few years by capacity (see El Sur). There isn't the slightest prospect conditions in the country will improve enough to lift his popularity. Sometime between now and 2007 there will be another crisis just like this.

Third, if Chávez decides to meet his next crisis with force, who can he trust? According to the picture of events that has emerged, Chávez lost the support of the military on April 11 when he tried to call the military out into the streets to head off the demonstrations. This can't give him confidence the military will fight the public for him next time. A post-restoration shake-up will let Chávez raise up a new, military hierarchy, of course. This new handpicked leadeship should be more loyal, except that Chávez had appointed the old leadership, which, in the crunch, turned out not to be.

Fourth, at the heart of Chávez's "Bolivarianin Revolution" and "Fifth Republic Movement" are absolutely nothing. Bolivarism is entirely contentless. It consists of populist solganeering and local pride (Simon Bolivar came from the part of Great Colombia that is now Venezuela). This was enough when the country was focused on the wholy negative task of ousting the previous, corrupt government. But it is not something like Scientific Socialism or Islamism, that can be studied, believed and committed to. For Venezuelans well-enough placed to not be particularly moved by generalized appeals to envy--indeed well-enough placed to be threatened by Chávez's verbal assaults on the relatively well off (which includes the officer corp)--it has little intrinsic appeal. Since there's nothing to Bolivarism except appeals to lower-class envy, the attachment of MVR officials officials is largely opportunistic. This is not the foundation for loyalty.

Chávez is reported to have said on his return something to the effect that, while under guard, he always believed he would return, just not so soon. For him, sooner almost certainly was not better. Chávez would have a much brighter future if it was Pedro Carmona dealing with Venezuela's problems, amidst the uproar from Chávez partisans, returning himself in triumph later, perhaps even winning another term as president. Instead, it is Chávez who is dealing with the country's problems amidst an anti-Chávez uproar. Though it's too soon to be sure, the officers who stripped Chávez of power probably did him a better turn than those who restored him to it.


posted by Richard 7:16 AM
. . .
Friday, April 19, 2002
VENEZUELA
Post-coup positioning: An eyewitness report in
El Nacional says that Hugo Chávez did indeed resign.
Attorney and Army Colonel Julio Rodríguez Salas, who drew up the decree that attempted to formalize the resignation of President Hugo Chávez and was present in La Orchila when the lieutenant colonel drew up the manuscript by means of which it was announced to the country that he had abandoned his office, gave assurance that "Hugo Chávez resigned from the presidency in the early morning of Friday and because of this the High Military Command announced it..."
El abogado y coronel del Ejército Julio Rodríguez Salas, quien redactó el decreto que pretendió formalizar la renuncia del presidente Hugo Chávez y estuvo presente en La Orchila cuando el teniente coronel redactó el manuscrito mediante el cual anunciaba al país su abandono del cargo, asegura que "Hugo Chávez sí renunció a la presidencia en la madrugada del viernes y por eso el Alto Mando Militar lo anunció..."
Academic? Perhaps. But if Chávez did resign, the coup would not be a coup, the countercoup might be a coup and many acts taken by many people during interim government might suddenly become legal.

Meanwhile,Chávez, who earlier this week said of the coup, "the root is here," as noted in El Sur, is now coyly hinting that it was in fact, made in USA. According to El Nacional:
The president of the republic, Hugo Chávez admitted this Friday that he hopes that it is false all the information that links Washington with the brief coup de etat against him on Friday, April 12.
El presidente de la República, Hugo Chávez admitió este viernes que las relaciones con Estados Unidos han estado perturbadas, pero que espera que sean falsas todas las informaciones en que se vincula a Washington con el fugaz golpe de Estado en su contra del viernes 12 de abril.


posted by Richard 4:28 PM
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VENEZUELA
Economic problems mount: Money's legendary timidity is on display again in Venezuela.
As Venezuela has descended into something resembling a class war, capital flight from the wealthy and erratic policy making by the government have set the economy up for a bruising fall,
reports The Wall Street Journal (International Section, no link).The IMF now projects Venezuela's economy will contract .8 per cent; an economist at Andrés Bello Catholic University, in Caracas, Orlando Ochoa, projects a two- to three-per cent fall.
Economists say the growing political and social tensions made raw by the coup and swift countercoup are certain to increase jitters among moneyed Venezuelans, who have already shipped $3 billion out of the country this year.
Chávez's relentless attacks on Venezuela's middle class and well-to-do people have been one of the major causes of Chávez's strong emotional appear to the country's poorer people. Now appearing is the price of this populism, in the form of economic stagnation.
Staggering interest rates, currently running around 50% for short-term transactions, are making it nearly impossible for domestic industries to expand demand. The steep rates are needed to keep the currency, the bolivar, from entering into a free-fall and to keep the flow of capital at least partly under control.
Bank reserves are falling, leading to fears of a bank run. If this appears imminent, the next step could be exchange controls. And exchange controls are uncomfortably close to the frozen bank accounts that are such a plague in Argentina today.


posted by Richard 11:16 AM
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VENEZUELA
Bolivarian circles:
El Sur recently noted the investigaton of sniper shootings of anti-Chávez demonstrators April 11, which apparently were the immediate catalyst for the military's short-lived ouster of Hugo Chávez. Now, reports Yahoo! News - AP, police have linked the circles to the snipers.
Authorities say some of the shooters belonged to pro-Chavez neighborhood groups known as "Bolivarian Circles," and the violence has brought new criticism of what Chavez's foes call Cuban-style snoops and enforcers.
It's unknown exactly who fired into a massive opposition march April 11, killing at least 16 that day and wounding dozens, if not hundreds. Globovision television captured horrific images of snipers and gunmen firing repeatedly into the throng. Chavez supporters insist opposition gunmen fired, too. Others blame police and troops.
But Caracas police, who have arrested at least three people, say some of the shooters belonged to the circles--neighborhood committees that were created after Cuban President Fidel Castro urged Chavez's followers to organize themselves to defend Chavez's leftist revolution. Castro made the appeal during a 2000 visit.
The circles--named after South American liberator Simon Bolivar--bear similarities to Cuba's Committees for the Defense of the Revolution, who watch over their neighborhoods and maintain socialist principles.
This is a nice way of describing groups that are nests of informers, whose primary jobs is to create a list of "enemies of the people."
Chavez says he formed the circles to improve their communities. Despite their country's oil riches, 80 percent of Venezuela's 24 million people live in poverty. Circle members say Chavez is the first leader in memory to show concern for the poor.
In fact, however,
Chavez's supporters have led "countermarches" to successfully halt demonstrations by the president's opponents. They have clashed with students in Caracas and warned newspaper vendors in eastern Venezuela they will burn kiosks unless they stop selling a newspaper, Correo del Caroni, that is critical of the government.


posted by Richard 8:19 AM
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Thursday, April 18, 2002
ARGENTINA
Another try at keeping people from their money: Chile's
El Mercurio explains the Duhalde government's newest plan to prevent depositers from getting their money out of frozen bank accounts. As El Sur noted yesterday, Economy Minister Jorge Remes Lenicov's plan to let banks appeal court orders ordering banks to return depositers money fell apart when President Duhalde wouldn't sign the decree. Now Duhalde has a plan--give them have scrip, called "bonds."
The Minister (of the economy Jorge Remes Lenicov) said: "It is probable," emphasized the source consulted about the possibility that the deposits will be converted to bonds.
"El ministro (de Economía Jorge Remes Lenicov) dijo: "Es probable," destacó la fuente al ser consultada sobre la posibilidad de que los depósitos sean convertidos a bonos.
The measure responds to the fear of the Economy Minister that the collapse of the financial system could follow a series of judicial decisions that permit savers to withdraw some 50 millions of dollars daily from the banks in spite of the freeze imposed in December by the government.
La medida responde al temor del Ministerio de Economía de que colapse el sistema financiero debido a una serie de fallos judiciales que permiten a ahorristas retirar unos 50 millones de dólares diarios de las entidades a pesar del congelamiento impuesto en diciembre por el gobierno.
There is no doubt that the problem is acute:
According to sources at the Association of Banks of Argentina, some banks in the interior of the country had to close their doors some days because it was impossible to return in cash and in dollars deposits to clients that have succeeded in obtaining favorable judicial decisions. "There is no more liquidity in the system," affirmed the secretary general to the presidency, Aníbal Fernández.
Según fuentes de la Asociación de Bancos de la Argentina, algunos bancos del interior del país debieron cerrar sus puertas algunos días ante la imposibilidad de devolver en efectivo y en dólares los depósitos a los clientes que habían logrado fallos judiciales favorables.
"No aguanta más el sistema", afirmó el secretario general de la Presidencia, Aníbal Fernández.
But is more funny money really the solution?

Meanwhile, unrest continues. Reports, like this in Clarin, appear almost daily.

And, also as reported by Clarin, the IMF projects that Argentina's economy will contract by 10 to 15 per cent this year.
"Internal demand probably will fall significantly this year due to the impact of the growth of unemployment, the lack of public confidence, the freezing of the bank deposits and other negative pressures over revenue and spending," added the text (of the report).
"La demanda interna probablemente caerá mucho este año dado el impacto del creciente desempleo, la desconfianza pública, la congelación de los depósitos bancarios y otras presiones a la baja sobre el ingreso y el gasto", añadió el texto.
Which takes us full circle.

posted by Richard 6:29 PM
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VENEZUELA
Whatcha gonna do when the well runs dry? It should be clear, in the wake of last week's coup/countercoup, that Hugo Chávez has two sources of support, the military and much of the lower class.

Chávez must know now that the military is unreliable; before some of them restored him others of them deposed him. He will make efforts to identify and remove disloyal officers and replace them with loyal ones, but in the absence of an overarching ideology that he and they share--communism, say--this is an uncertain process at best. With few exceptions, every political leader who's overthrown by the military is overthrown by military men he thought were loyal when he appointed them.

So, Chávez is left to rely on the lowest third or so of the population, and their "vanguard," the "Bolivarian circles." These certainly served him well during Saturday's counter-demonstrations and riots. Part of this group's loyalty is in response to Chávez's bullying; Caracas slum dwellers and rural campesinos absolutely love to see him do--out loud on TV--what they wish they had the power to do, tell off their richer, lighter "betters." But this goes just so far, and Chávez seems to have toned down his rhetoric, post-coup, at least temporarily. The problem is that, for all the theatrics, Chávez can lose their has to deliver the goods to the poorer segments of society, in terms of money, jobs and services. He can't afford a failing economy, yet that's where his populist, statist economic choices leade.

Case in point: Today's Wall Street Journal (International section, no link) reports on how Chávez is harming the state oil company, Petroleos de Venezuela SA (PDVSA).
Venezuela is the only major member of the Orgaqnization of Petroleum Exporting Countries whose output is declining markedly. Luis Giusti, a former PDVSA chief executive replaced by Mr. Chávez in 1999, says Venezuela's capacity has fallen to around three million barrels a day from 3.7 million barrels three years ago.
Production is expected to fall this year by an additional 200,000 barrels a day (bpd), bringing the country close to the point where the 2.7 million bpd OPEC production limitation it now observes voluntarily will be an involuntary capacity restriction. The reason is lack of investment, and the reasons for that are decisions made by President Hugo Chávez and his government.
Former officials of Venezuela's energy establishment reckon PDVSA needs to invest as much as $4 billion annually just to keep output capacity steady..."I don't think PDVSA is going to get the cash it needs from the government," says Mr. Giusti, who was instrumental in the strong buildup of Venezuela's output capacity in the 1990s...Mr. Chávez "doesn't have a free hand now," Mr. Giusti added, implying that the president may be so committed to using oil money for social spending that he won't have any to arrest the erosion of output capacity.
Meanwhile, large-scale foreign investment seems unlikely to come unless President Chávez bakctracks on a controversial hydrocarbons law he decreed in November. The focus of widespread protests by both business and labor, the law could deter foreign investment because it raises government royalties on most new projects to 30 % from 16.7%. It also requires that PDVSA hold a majority interest in new joint ventures with foreign companies, effectively making the ventures state-owned companies.
The hydrocarbon law is one of more than 40 expanding government control of the economy passed by the Chávez-dominated National Assembly at his request.


posted by Richard 11:35 AM
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VENEZUELA
Fighting moves indoors: Though the popular demonstrations are over for now, the political representatives of Venezuela's pro- and anti-Chávez publics continue to fight.

A
Yahoo! News - AP story entitled "Offensive Against Chavez Resumes" describes conflict in the National Assembly, still dominated by members of Chávez's MVR (Fifth Republic Movement) elected when he was popular.
During a stormy parliamentary debate Wednesday, most opposition parties insisted Chavez resign and presidential elections be held.
Short of that, many proposed the National Assembly call a referendum to decide whether Chavez should stay. The existing constitution would allow such a vote in 2004. Chavez's term runs to 2006.
"It's not enough to talk," said Liliana Hernandez, whose Justice First party also proposed that the entire National Assembly resign.
"Fascist!" shouted ruling party legislators after Hernandez spoke.
At the same time, Yahoo! News - AP reports, Chávez partisans have launched an assault on the media, which they say encouraged efforts to overthrow the president last week. Two government investigations have been announced.
Jesse Chacon, president of Venezuela's telecommunications agency, is heading one of them. Chacon had previously drafted media regulations that were condemned by the Inter-American Press Association as an attack on press freedoms.
Reporters have been under attack in Venezuela almost since Chávez was elected.
A bomb damaged the offices of Asi Es La Noticia newspaper earlier this year. Two prominent reporters received multiple death threats. Chavistas blockaded El Nacional newspaper about the same time, threatening journalists. At least one publisher in eastern Venezuela reported that Chavistas were threatening to burn newsstands that sold his paper.
The situation has worsened as the country has polarized. Chávez supporters claim the media, mostly welcoming his ouster, refused to cover pro-Chávez demonstrations. Media representatives say they believed their reporters would not have been safe.

Both the Organization of American States and independent media groups, such as the New York-based Committee to Protect Journalists, have called on the Venezuelan government to protect freedom of the press.
"We remain deeply concerned for the safety of Venezuelan journalists," Ann Cooper, the executive director of the group, said in a written statement.


posted by Richard 7:08 AM
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Wednesday, April 17, 2002
VENEZUELA
Another post mortem: José Rodríguez Iturbe, the foreign affairs minister in the short-lived Pedro Carmona government gives his not very flattering impressions of its military arm to
El Mundo
He (Rodríguez Iturbe) adds that in Fuerte Tiuna (Caracas' military headquarters), Carmona found friction among those who aspired to direct the ministry of defense, the hierarchy and the commandos. "Problems that were pygmies in comparison to the urgent situation that they had ahead of them."
Añade que en Fuerte Tiuna, Carmona halló roces entre quienes aspiraban dirigir el ministerio de la Defensa, la jerarquía y los comandos. "Problemas que eran pigmeos en comparación a la situación apremiante que tenían frente a sí."
No question Rodríguez Iturbe faults the military for the government's failure. But, he also believes Chávez cannot rest easily:
He insists that the offers of reconciliation by Hugo Chávez are not to be trusted and that the political base of the president reposes in the firepower of the forces that are loyal to him. "Napoleón said that the bayonets served all except those that sit down on them. I don't know if Chávez intends to sit on them. But already, they were with him, ceased being with him, and can cease being with him again. I know that he is convinced of this."
Rodríguez Iturbe concludes with an affirmation. "Today Chávez ought to know that he doesn't have all the weapons, all the tanks, all the guns and if they were with him and they stopped being with him and returned to be with him, possibly a moment will arrive in which the military also tells him definitively 'we don't follow you.'"
Precisa que las ofertas de reconciliación de Hugo Chávez no son de fiar y que la base política del Presidente reposa en el poder de fuego de las fuerzas que le sean leales. "Napoleón decía que las bayonetas sirven para todo menos para sentarse en ellas. No sé si Chávez está intentando sentarse en ellas. Pero ya estuvieron con él, dejaron de estar con él y pueden volver a dejar de estar con él. Sé que él tiene esa convicción."
Rodríguez Iturbe concluye con una afirmación. "Hoy Chávez debe saber que no tiene todas las armas, todos los tanques, todos los fusiles y que si estuvieron con él, dejaron de hacerlo y volvieron con él, posiblemente llegue un momento en que los militares también le digan definitivamente, no seguimos con usted."
El Mundo is relatively favorable to Chávez and Rodríguez Iturbe may have some designs of his own... But, its revealing, nevertheless.

Update: Another thought. Chávez is a populist, not a Communist. This is important. Communism was a religion, with its own Holy Book, authoritative commentaries, and Vatican and curia in Moscow. Because they shared a faith, a Communist leader could trust his subordinates, if not in in-fighting, certainly when it came to dealing with non-believers; Communist military officers did not rebel against party leaders. Populism is half political strategy, half emotional identification with el pueblo (the people, the nation)--which is why it slides so easily toward fascism (see Peron). A populist can follow almost any policy, so long as it has a soak-the-rich component. Beyond that it is utterly without content. Since populism is so individual--protestant one might say--literally anyone who can sieze power can declare himself the people's representative and his regime the embodiment of the nation. That includes elected presidents, the officers who overthrow them and the officers who overthrow them. Chávez can't be anointed by the Soviet Union because it no longer exists; his friend Castro is too old and Cuba is too poor to offer the service. That is why, in the end, Chávez is served only by bayonets.

posted by Richard 9:11 PM
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ARGENTINA
Trouble in paradise: As noted yesterday in
El Sur, the government had prepared for President Eduardo Duhalde's signature a decree authorizing banks to appeal court orders permitting people to get their money out of frozen accounts. Today, reports La Razón, Duhalde has refused to sign the decree, apparently upsetting Economic Minister Jorge Remes Lenicov, who postponed a trip to the United States to deal with the issue. The question is, is Remes Lenicov considering resigning?
This morning, according to Radio Continental, Duhalde said that the minister "is not bothered" by the situation and that "he had not thought of resigning." But Economy already had to reverse several times in recent days. For example, in the negotiation over light and gas prices (finally had to accept an increase) and on the subject of salaries (Monday Remes said that "he was not able to speak now about the increases" and yesterday the government winked at the unions).
Esta mañana, por Radio Continental, Duhalde dijo que el ministro "no está molesto" por la situación y que "no pensó en renunciar". Pero Economía ya tuvo que dar marcha atrás varias veces en los últimos días. Por ejemplo, en la negociación por las tarifas de luz y gas (finalmente debieron aceptar el aumento) y en el tema salarios (el lunes Remes dijo que "no se puede hablar ahora de aumentos" y ayer en Gobierno le dieron un guiño a los sindicalistas).
Pagina12/Web also has a story on this subject, titled "Battle in the government to close the corralito" ("Batalla en el Gobierno por cerrar el corralito") that ascribes Duhalde's decision to "motivos políticos." Pagina12/Web explains why Remes Lenicov's is unhappy:
On separate occasions, (central bank chief Mario) Blejer advised that the constant opening of the corralito could result in hyperinflation. Moreover, it is calculated that a great part of the pesos that leave the banks are destined for sale for dollars.
En distintas ocasiones, Blejer advirtió que la constante apertura del corralito podría desembocar en una hiperinflación. Además, se calcula que una gran parte de los pesos que salen de los bancos se destina a la compra de dólares.
Duhalde and Remes Lenicov are close. When Duhalde was governor of Buenos Aires province, Remes Lenicov was his finance minister.

Meanwhile, Clarin reports that industrial activity fell 18.1 per cent in March, compared with a year ago, and fell 3.1 per cent compared with February.

posted by Richard 5:54 PM
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