Venezuela's Bolivarian Revolution is Dead, Long Live F1!

Sorry 21st century socialist sympathizers, but the economic and moral bankruptcy of Hugo Chavez's Bolivarian Revolution is becoming more apparent with each passing day as his successor finishes off the job. Even rose-tinted glasses cannot obscure the damage done. First, "oil diplomacy" is sagging as the US ups its domestic production of petroleum care of fracking and a slower world economy has limited Venezuela's ability to fund (costly) PR stunts:

The late President Hugo Chavez's dream of leveraging Venezuela's oil wealth to spread revolution across Latin America is crumbling under the weight of an economic crisis that is forcing his hand-picked successor to cut back on generous foreign aid.

Signs of the country's waning influence are becoming more apparent. In early November, Guatemala withdrew from the Petrocaribe oil alliance launched by Chavez, saying it didn't receive the ultra-low financing rates it had been promised by Venezuela when it first sought to join the 18-nation pact in 2008. Also in recent weeks, representatives of Brazil and Colombia have held meetings with their Venezuelan counterparts to collect overdue payment for food, manufactured goods and other imports. 

As some wiseguy said, the world's largest holder of crude reserves has Egypt-like FX reserves due to spectacular mismanagement aimed at generating publicity for Venezuela as some sort of alt-globalization hero and not at competence in managing a resource-rich economy.  Second, we now receive word that Venezuela is upping its police-state-like characteristics in attempting to ban public access to websites that list black market exchange rates for US dollars instead of taking scarcely believable "official" rates at face value which next to no dealers will sell you greenbacks at in exchange for the local currency (bolivars). These guys even outdo the Chinese in cyber-supression:

Venezuelans have been scrambling for dollars for weeks, taking refuge in the greenback as their own currency is in free fall. Rather than address the economic imbalances behind the bolivar's plunge, the government is going after the bearers of the bad news — it's blocking websites people use to track exchange rates on the black market.

Cyber-activists say the crackdown goes to absurd lengths, even targeting Bitly, the popular site for shortening Web addresses to make it easier to send them as links via Twitter and other social media. For more than two weeks, access to the service has been partially censored by several Internet service providers in Venezuela, apparently because Bitly was being used to evade blocks put on currency-tracking websites.

The New York company says such restrictions have only previously been seen in China, which has one of the worst records for Internet freedom, and even then not for such an extended period. Opponents of Venezuela's socialist government say the controls are designed to obscure reporting of the nation's mounting economic woes.

Can you say "police state"? Despite the country's ongoing descent into socioeconomic hell, what's notable is that state-sponsored F1 driver Pastor Maldonaldo has actually upgraded his ride next season from Williams (which scored exactly zero points this year) to Lotus (which finished fourth in the constructor's tables). How did this happen? Maldonaldo did not get his Lotus ride on merit; rather, the hard-up team is banking on Venezuelan state cash Maldonaldo will bring. In contrast to its former driver, world champion Kimi Raikkonen who the team still owes money, Maldonaldo will presumably bring in cold hard cash for his paid ride:

Lotus’ financial predicament was recently laid bare by their Ferrari-bound Finn Kimi Raikkonen, who revealed in Abu Dhabi that he had been paid “zero euros” by the team all year. It is thought that he is owed around £15 million. PDVSA paid just under £30 million a year for the quick but extremely erratic Maldonado to drive at Williams where he was responsible for the team’s first win in eight years, in Barcelona last year, along with numerous collisions. 

It's odd that Venezuela will plump big cash on this bourgeois sport as one of the last few PR stunts it can still afford even if many folks back home live lives of not-so-quiet desperation. Like in Thailand, this is democracy in action for you for better or (much) worse.

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The Day Venezuela is Fully Nationalized Approaches

The economic implosion of Venezuela is interesting insofar as the voters have repeatedly chosen Hugo Chavez and his anointed successor Nicolas Maduro despite them consigning the country to economic oblivion. Populist policies may have won votes as redistribution continues, but we are fast approaching a point when there is nothing left to nationalize or place under state watch. What then?

Venezuelan President Nicolas Maduro says he plans to extend price controls to all consumer goods, if he is given powers to govern by decree. In a televised address, Mr Maduro said that he wanted to set legal limits on businesses' profit margins. His announcement followed the seizure on Saturday of shops accused of selling electronic goods at inflated prices.

The National Assembly is expected to vote this week on his request to govern temporarily by decree. The president demanded there be "zero tolerance with speculators" in his speech broadcast on Sunday. "This is beyond usury, this is theft," he added...[t]he president announced that he would next turn his attention to stores selling toys, cars, food items, textiles and shoes. 

When all production comes under government control--as things will be at this rate--there will be no one left to blame other than the government. It will be at that point when the full extent of the government's mismanagement--galloping inflation, pathetic reserves despite being one of Latin America's leading energy exporters, and the evisceration of a functional economy--becomes apparent even to Chavez/Maduro voters:

Opposition leader Henrique Capriles said the move proved that the president "is a failed puppet of the Cuban government". "Every time he opens his mouth, he scares away the investments that create employment, and he worsens the crisis," said Mr Capriles, who narrowly lost to Mr Maduro in April's presidential election.

Official figures suggest inflation is running at more than 50%. Price hikes have become an important issue in next month's local elections.

For now, Maduro's perverse strategy involves creating artificial shortages by persecuting all forms of private industry as "speculators." Faced with a steadily deteriorating business environment, the rational thing to do would be to cut production (or flee the country if you're a foreign investor). The resulting government-induced shortage is then blamed on your "hoarding" ways, and the government then claims to "act" by slapping price controls on everything to hopefully win elections.

It will likely take Venezuela taking a turn for even worse before the Bolivarian socialists are ejected. Oftentimes, it takes things to deteriorate before they get better to get the attention of those who have been deluded for quite some time.

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The Political Economy of Int'l Beauty Pageants

OK, some qualifiers about the post title here: First, I am not quite attracted to beauty pageant contestants since I generally find them too skinny. Second, I didn't actually watch the Miss Universe 2013 finals in Russia since I didn't bother to figure out what time it was showing. Third, I am probably biased since our country's bet didn't win despite making it to the last five contestants for yet another year without actually winning. (Then again, if you are looking for unbiased commentary from blogs, you are probably looking in the wrong place.) So, with those caveats in mind, here is what the most recent event has taught me about the international political economy of beauty pageants. Excerpts here from the Manila Bulletin:

(1) It often helps if you *can't* speak English, the language of the event:

Fans expressed disappointment when it was announced that [Philippine contestant Ariella] Arida finished third runner-up. They said she was the only candidate who did not use an interpreter in the field of Latina co-semifinalists [from Brazil, Ecuador, Spain, and Venezuela. In 2011, Filipino fans expressed the same sentiments when [Shamcey] Supsup won third runner-up in the beauty contest in which she was the only one in the Top 5 who did not use an interpreter.

The idea is that you are more "exotic" when you cannot speak English. (I'd like to confess that I've been using Google Translate for six years to write this blog, but few of you will believe me.) Some will say that's a nonsense argument since Miss USA won last year, but consider the rarity of straight English answers in the Q&A portions and that the event's promoter is some Yank with a weird hairdo who stands to benefit massively from a ratings jump in the States.

(2) It doesn't help to be smart. This is a beauty contest, not a brains contest.  Ask the Philippine contestant--a chemistry major--who finished fourth:

Born on Nov. 29, 1988, to public school teachers Alresito and Estella, Arida graduated from the University of the Philippines Los Banos [UPLB] in Laguna...

Arida began studying veterinary medicine at UPLB in 2005 but shifted to chemistry on her second year. Her undergraduate thesis entitled “Virtual Binding of Synthetic Nucleoside Analogues and Phyto-brassino steroids to NS5 Dengue Virus mRNA 2’-o-Methyltransferase Domain Using Dock Software” was presented in the 2010 Philippine Chemistry Congress held at Subic Bay in Zambales.

Looks matter, and passable answers will suffice during the Q&A portions--especially if delivered in a language other than English.

(3) So the Latin bloc is not doing so well economically, but hey, they do fantastically well in beauty pageants! 4 out of the top five ain't bad, and the award haul of Latin countries like Venezuela is astounding. I suppose beauty pageants act as the opiate for the masses in an increasingly secularized world--especially in Venezuela, a country run by nutters that has made a successful cottage industry of preparing young women for these events. (And don't speak English for crying out loud.)

Consider that the Philippines was a Spanish colony for over three hundred years and the domination would become even more pronounced. Ah well, roll on 2014; we're bound to win this damn thing sometime soon...

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Puerto Rico...Uncle Sam's Next Bailout Victim?

They could use more tourists right about now

 I don't wanna be your lover...I just wanna be your victim - Elvis Costello's "The Beat"

The post title may strike you as unusual: How can someone be a "bailout victim" when a bailout is some sort of "rescue" from financial calamity? Well, read on. Recently I have been on a tear classifying episodes of economic stagnation combined with depopulation as "Detroitification." Unbeknownst to many, the American protectorate of Puerto Rico is in a major financial bind a la Detroit with increasingly unpayable debt and a declining population:

Puerto Rico, with 3.7 million residents, has about $87 billion of debt, counting pensions, or $23,000 for every man woman and child. That compares with about $18 billion of debt for Detroit, with a little more than 700,000 people, or about $25,000 for every person in the city. Detroit and Puerto Rico have been rapidly losing population, leaving a smaller, and poorer, group behind to shoulder the burden.

Since the start of the year, bond prices have fallen 18.1% in a selloff as investors (suckers?) took fright. Fine then, you say--let Puerto Rico declare bankruptcy alike Stockton, Detroit, or any other Brokebank Yank town. Unfortunately for Puerto Rico, it's not that easy. As a protectorate, its status is unlike that of a municipality but rather a nation-state. In other words, it cannot "work out" its issues with creditors since, well, there's no international bankruptcy court out there. Nor can it go to the IMF since it's not a member. So tough:

Detroit, at least, was able to seek relief in bankruptcy court, but Puerto Rico is in a legal twilight zone. Territories, like states, have no ability to declare bankruptcy. Another territory, the Northern Mariana Islands, tried in 2012, but its case was rejected.  

Now, to the part about being a "bailout victim." The United States has been roiling the world economy at an increased rate with its myriad dysfunctions and financial chicanery since 2007. When all the (premature) talk about tapering introduced panic into global capital markets midyear, it was the United States' collateral damage that dealt Puerto Rico the knockout blow. As bond investors chased yield in a low-to-no yield environment, Puerto Rico abused its peculiar attractiveness to engage in high-risk borrowing. The worst symptom, as you would expect, is borrowing to pay off previous borrowing:

Until a few months ago, Puerto Rico was the belle of the bond markets. As a territory, it can sell bonds that pay tax-exempt interest in all 50 states, a rare and desirable trait. Puerto Rico’s bonds also pay higher interest than many others because its credit rating is relatively low — but not low enough to scare off investors. Some of its bonds were insured against default; others have special legal structures that make them seem bulletproof. The territory’s constitution explicitly states that general bond obligations have first call on all available resources.

Because Puerto Rico’s bonds have these unusual advantages, investors snapped them up year after year, even as the territory’s overall debt load started to snowball. In each of the last six years, Puerto Rico sold hundreds of millions of dollars of new bonds just to meet payments on its older, outstanding bonds — a red flag. It also sold $2.5 billion worth of bonds to raise cash for its troubled pension system — a risky practice — and it sold still more long-term bonds to cover its yearly budget deficits.

So Puerto Rico was pyramid scheming its debt. Let it pay the price, you say. Once more, it's not that easy. Last I checked, the US (federal) government was closed and could not reach agreement on anything dealing with fiscal matters. With Puerto Rico's credit rating set to be downgraded to junk status, things could get even worse. Uncle Sam is aware of the impending catastrophe, but can he get the legislators on board to execute a rescue? It's certainly an open question:

As a result, officials at the White House, Treasury Department and Federal Reserve have been meeting to discuss the matter and to assess the potential consequences for the overall municipal-bond market, people familiar with the discussions said [...]

A Treasury spokeswoman said: "Given the potential for Puerto Rico's financial challenges to impact U.S. markets, including the municipal market, Treasury continues to closely monitor developments." The Federal Reserve Bank of New York and Fed officials in Washington declined to comment. The New York Fed has regulatory jurisdiction over Puerto Rico. The White House advisory group is coordinating with other federal agencies "to make sure that federal resources are fully utilized for maximum impact for the people of Puerto Rico," one senior Obama administration official said.

In a manner of speaking it's partly the American's fault by worrying capital markets for no good reason whatsoever with vapid taper talk. However, a larger part is due to Puerto Rican financial mismanagement plain and simple. Sammy may have delivered the coup de grace, but PR leaders had already done the bulk of the damage to set it teetering. From where I come from, $87 billion is still a lot of money. Nevertheless, just as jurisidiction over working out the debt issues of an insolvent protectorate is uncertain, so is the culpability of the US government.

At any rate, here's another headache for the Brokebank Yanks when it least needs another one. That, dear friends, is the beat.

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Rousseff+Lula Double Act Unloads on US Net Spying

Cybersecurity is not an end unto itself; it is instead an obligation that our governments and societies must take on willingly, to ensure that innovation continues to flourish, drive markets, and improve lives. - Barack Obama [really]

It's been a busy time for followers of Internet governance as Brazil's president and her immediate predecessor unloaded both barrels at the United States' extreme abuse of its dominant position in the World Wide Web's infrastructure. Dilma Rousseff captured global attention not only by snubbing the White House's invitation for a state visit, but more recently by crucifying the double-talking American louse at the United Nations General Assembly.

[I] Here is the key part of her speech where she calls for the much-needed multilateral governance of the Internet to avoid rehashes of Americans spying on world leaders as well as you and me:

The problem, however, goes beyond a bilateral relationship. It affects the international community itself and demands a response from it. Information and telecommunication technologies cannot be the new battlefield between States. [The time] is ripe to create the conditions to prevent cyberspace from being used as a weapon of war, through espionage, sabotage, and attacks against systems and infrastructure of other countries.

The United Nations must play a leading role in the effort to regulate the conduct of States with regard to these technologies. For this reason, Brazil will present proposals for the establishment of a civilian multilateral framework for the governance and use of the Internet and to ensure the effective protection of data that travels through the web.

We need to create multilateral mechanisms for the worldwide network that are capable of ensuring principles such as:

1 – Freedom of expression, privacy of the individual and respect for human rights.
2 – Open, multilateral and democratic governance, carried out with transparency by stimulating collective creativity and the participation of society, Governments and the private sector.
3 – Universality that ensures the social and human development and the construction of inclusive and non-discriminatory societies.
4 – Cultural diversity, without the imposition of beliefs, customs and values.
5 – Neutrality of the network, guided only by technical and ethical criteria, rendering it inadmissible to restrict it for political, commercial, religious or any other purposes.

[II] Less noticed is a recent interview with Hindu News of former Brazilian President Lula. (Alike his country's soccer stars, he seemingly goes by one name.) For better or worse, he and his handpicked successor will forever be entwined alike Putin and Medvedev or Chavez and Maduro. While leaving Rousseff to steal the limelight at the UN, he nevertheless two put in his two cents' worth, as the Yanquis would say:

The U.S. president should apologise to the world for thinking that it can control global communications and ignore the sovereignty of other countries. The U.S. can’t just capture the activities of India, Brazil, China and several other countries. This is very serious. We need to force the United Nations to make a decision on this. Where is the security in the world today, with the U.S. intelligence agency snooping on everything? Where is the confidence in mobile communication or emails? When the NSA revelations came out, the U.S. vice-president (Joe Biden) called Brazil to apologise. It’s not the vice-president who has to apologise, it’s the U.S. president who should apologise to us. What would happen if the U.S. was target of spying? Now, they can steal any information and industrial secrets; they have access to information of our scientists. It means the end of freedom within the territory of a nation state [...]

The independence and economic growth of countries such as India and Brazil seem to bother the U.S, which is now committing a crime against democracy. The argument that they are doing this to take care of the security of other countries is absurd. Nobody asked them to do so. Nobody hired the American espionage system. Democracy is less democratic if one nation has the power to intervene in others. 

Be a man, Barack. Own up to your nation's cowardly actions and welcome those to make Internet governance better reflect its changing user base.

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Venezuela Nationalizes Toilet Paper Factory

"I am the Great MADURO", etc., etc.

[NOTE: For those unfamiliar with the "Beavis and Butt-head" reference, see here and here.] If this is an example of socialists taking over the "commanding heights" of the economy, I am at a complete loss for words. To me at least, toilet paper manufacturing as a strategic sector bog-gles the mind, but it may make sense in Venezuela. It is no big secret that the Chavistas have nationalized broad swathes of the Venezuelan economy. Supply problems? Central planning will solve them, free market be damned. From Economics 101, I was taught that price controls and import controls create rather than alleviate goods shortages. Apparently this stupid bourgeois logic holds no water in modern-day Venezuela. Silly me. Instead of relenting on government controls to remedy the supply situation for various goods including toilet paper, the ultimate solution apparently involves nationalizing these enterprises lock, stock and barrel. You got it--TP users of Venezuela, unite!

On Saturday, Vice President Jorge Arreaza announced the "temporary occupation" of the Paper Manufacturing Company's plant in the state of Aragua. The aim, he explained, is to review the "production, marketing and distribution (of) toilet paper [...] The People's Defense from the Economy will not allow hoarding or failures in the production and distribution of essential commodities," the vice president said. 

By the "People's Defense," Arreaza was referring to a government agency created on September 13 by President Nicolas Maduro to "defeat the economic war that has been declared in the country," according to a report from state-run ATV. This group is charged with looking at inefficiencies across various industries in the nation, including foods and other products, and taking action presumably in the South American nation's best interests.

For what it's worth, Venezuela's leaders see a conspiracy to hoard toilet paper--presumably to, ah, dump them when prices have risen sufficiently:

But the government has said private companies aren't doing their part, accusing them of hoarding their products in hopes of selling it later at a higher price. They've also suggested the problem is tied to a broader conspiracy. "There is no deficiency in production," Commerce Minister Alejandro Fleming said in May according to ATV, "but an excessive demand generating purchases by a nervous population because of a media campaign."

Be afraid. Be very, very afraid. To paraphrase Marx, the TP expropriators have been expropriated (or something like that).

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US Now Sends More Immigrants to Mexico

What would Cheech and Chong do about the United States now sending more migrants to Mexico than Mexico sends to the United States? That comedy act is stuck in a time warp where the supposedly backward Mexico always sends its unwashed masses to the United States in search of employment. So are today's uniquely Amerocentric debates about whether to give amnesty to illegal immigrants. Wake up to today's North American reality, boys and girls: On balance, the United States has sent more people to Mexico than vice-versa over the most recently recorded five-year period. The graphic above is from the New York Times, which also offers the thought-provoking companion article about how the real land of opportunity is Mexico:

Rising wages in China and higher transportation costs have made Mexican manufacturing highly competitive again, with some projections suggesting it is already cheaper than China for many industries serving the American market. Europe is sputtering, pushing workers away. And while Mexico’s economy is far from trouble free, its growth easily outpaced the giants of the hemisphere — the United States, Canada and Brazil — in 2011 and 2012, according to International Monetary Fund data, making the country more attractive to fortune seekers worldwide [...]

The shift with Mexico’s northern neighbor is especially stark. Americans now make up more than three-quarters of Mexico’s roughly one million documented foreigners, up from around two-thirds in 2000 [my emphasis], leading to a historic milestone: more Americans have been added to the population of Mexico over the past few years than Mexicans have been added to the population of the United States, according to government data in both nations.

In previous posts I've covered how Mexico is increasingly becoming the North American economic dynamo contrary to outdated beliefs that it is merely an entry route for drugs to the USA or a perennial source of migrants. The implications are meaningful and interesting. First, the emergence of Mexico as a manufacturing hub in the Americas challenges China's role as factory to the world given the latter's geographic disadvantage. Second, the US Census folks do not--and probably cannot--account for such migratory shifts as nearby countries become more progressive than the United States. Hence, expectations that declines in US birth rates will be more than compensated for by migration to the US are probably overstated. Detroitification or depopulation of the US is a very real threat if so. Third, it does bother me that the rest of the world so easily imbibes American prejudices about Mexicans when the latter hold the better cards in today's global political economy.

Make no mistake: the real Americans us folks from the developing world are better off emulating are probably those south of the border with their young, dynamic and manufacturing-savvy economy. Their football team may be doing poorly at the moment, but hey, I would readily forego the World Cup finals for a place at the top of the World Economy league table. Go south, young Yank, go south--but learn Spanish before you do.

Things change, my dear. At this rate I may be laughing my head off hearing Mexican policymakers debating what to do with all those Yanqui "illegals" in a few years' time.

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Can Brazil Escape Abusive, US-Centric Internet?

Absolute power corrupts absolutely - Lord Acton

Think of Barack Obama as the cyber-equivalent of Bashar al-Assad. Just as Assad does not own up to his chemical-attacking ways, so does Obama not own up to his Internet-abusing ways. All his pleas for "Internet Freedom" as they turn out, are meant to make it easier to spy on you and me. American digital hypocrites are thick on the ground, and Obama is just another one of their sorry lot. It is digital entrapment plain and simple.

Internationally, the US-centric Internet infrastructure which makes it so very easy for the US government to ask companies to disclose information about their users over alleged (yawn) national security concerns has come under sustained attack in the wake of disclosures that citizens and their leaders the world over have been hit by American snooping. Importantly, the Internet Corporation for Assigned Names and Numbers remains a US-based concern despite being responsible for allowing the Internet to function by maintaining control over IP addresses and suchlike. Given the increasing number of Internet users worldwide, many other countries have become concerned that the Internet's increasingly "global public goods" nature is not matched by changes in governance.

That introduction then brings us to Yanqui snooping: (mostly American) critics make the fallacy that since the strongest proponents of imbuing UN agencies with more voice in Internet governance are purportedly China, Iran, Russia, and Saudi Arabia, what they really are after is to improve their ability to wall off their Internet users from the rest of the world. Especially in the wake of disclosures about the extent of US spying, however, there are any number of other nations with legitimate concerns about near-absolute US power over the Internet corrupting absolutely. It is thus fascinating that Brazilian President Dilma Rouseff has been so aggrieved that she put off a state visit to America. What's more, she is urging Brazil to better insulate its telecoms infrastructure from more dastardly Yanqui deeds:

[Brazilian] President Dilma Rousseff ordered a series of measures aimed at greater Brazilian online independence and security following revelations that the U.S. National Security Agency intercepted her communications, hacked into the state-owned Petrobras oil company's network and spied on Brazilians who entrusted their personal data to U.S. tech companies such as Facebook and Google. The leader is so angered by the espionage that on Tuesday she postponed next month's scheduled trip to Washington, where she was to be honored with a state dinner...

While Brazil isn't proposing to bar its citizens from U.S.-based Web services, it wants their data to be stored locally as the nation assumes greater control over Brazilians' Internet use to protect them from NSA snooping...

There is also a fairly comprehensive set of actions Brazil intends to take to better deal with those Yanqui spies:

Rousseff says she intends to push for international rules on privacy and security in hardware and software during the U.N. General Assembly meeting later this month. Among Snowden revelations: the NSA has created backdoors in software and Web-based services.

Brazil is now pushing more aggressively than any other nation to end U.S. commercial hegemony on the Internet. More than 80 percent of online search, for example, is controlled by U.S.-based companies. Most of Brazil's global Internet traffic passes through the United States, so Rousseff's government plans to lay underwater fiber optic cable directly to Europe and also link to all South American nations to create what it hopes will be a network free of U.S. eavesdropping.

More communications integrity protection is expected when Telebras, the state-run telecom company, works with partners to oversee the launch in 2016 of Brazil's first communications satellite, for military and public Internet traffic. Brazil's military currently relies on a satellite run by Embratel, which Mexican billionaire Carlos Slim controls. Rousseff is urging Brazil's Congress to compel Facebook, Google and all companies to store data generated by Brazilians on servers physically located inside Brazil in order to shield it from the NSA.

Internet freedom has become a laughingstock since the most egregious violator of this principle is the United States. If Silicon Valley is hit by commercial fallout over spying, it is well-deserved anyway for meekly playing along with the US government. (Hear that, my blog service provider?) Will the Internet become "Balkanized" or further fragmented as others follow Brazil's example? European governments have been targeted by similar intrusions but do not complain as loudly. OTOH, what benefit do we Internet users gain from the present system which facilitates American intrusion as it abuses its position?

There are legitimate reasons for placing more Internet governance in an international organization contrary to the claim that doing so will simply allow authoritarian regimes to keep better tabs on their citizens. Go ask Brazil. Even if its efforts are for naught as some security experts say, I applaud its courage in raising a question that others have cowered from asking and, better yet, doing something about it. Moreover, I suspect the solution is not for individual countries to try and wall themselves off from the rest of the world but to join nearly-unimpeachable critics of US Internet abuse in asking for basic guarantees concerning security. The pressure being applied at the moment is insufficient, but think of what may occur if millions threaten to flee Facebook, Google, etc. if such concerns remain unaddressed.

In the meantime, do yourselves a favor by not posting sensitive information online. Obama's operatives are definitely watching.

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Third World Solidarity? Petronas Ditches PDVSA

Just when you thought things could not get worse for Venezuela's economic situation, they do. In recent times, Venezuela has sought to partner with other developing countries for exploiting its energy reserves in the likely belief that they would be more understanding of its political-economic situation. Having offended American oil giants through forced nationalization, it arguably had little choice but to look East.

Today's case in point is Malaysia. Just as Venezuela uses its control over a state-owned oil firm to further national objectives, so does Malaysia. Alike that of Venezuela, Malaysian leadership has also been accused of despotic tendencies--especially its perennial party in power UMNO. Allegations of electoral irregularities? Check that too. Despite similarly relaxed attitudes towards Western-style platitudes about good governance, however, it appears Malaysia has its limits and is now fed up with Venezuela. As a result, Malaysia's state-owned oil firm Petronas wants to sell its stake in a partnership with Venezuela's counterpart PDVSA:

Malaysian oil company Petronas said it is exiting one of the biggest petroleum projects in Venezuela's Orinoco belt, after what sources close to the venture and within the firm said were disagreements with Venezuelan authorities and state-run PDVSA. The flagship project, called Petrocarabobo, has planned investments of about $20 billion over 25 years and calls for building a 200,000 barrel per day upgrader to convert heavy crude into light crude oil.

When the venture was formed in 2010, Venezuela touted it as a sign that oil companies were willing to put up with demanding fiscal conditions in exchange for access to the world's largest oil reserves. Petroleos de Venezuela (PDVSA) has 60 percent of the project. Petronas belongs to a consortium that holds 40 percent. Its other partners are Spain's Repsol, India's ONGC and two smaller Indian firms, Oil India and Indian Oil Corp. Petronas holds an 11 percent stake. Sources close to ONGC and Oil India said on Wednesday they were unlikely to buy the stake being shed by Petronas. 

I wonder why there are no takers. To begin with, Venezuelan crude in the Orinoco is heavy and sour, which makes it difficult to refine unlike light, sweet crude oil. On top of this challenge, you have the Venezuelans constantly changing revenue-sharing arrangements adding to the confusion:

"This should not come as a surprise. We have not been excited about this project for the past two years because of the dealings with the government," said the source, who requested not to be identified as he was not authorized to speak to media [...]

One source close to the project told Reuters that frequent changes in the fiscal framework, disagreements with the government of Chavez's successor - Nicolas Maduro - about the business terms, and long delays led to the decision to withdraw. 

So much for third world solidarity since even Malaysians are no longer willing to put up with the arbitrariness of Chavez's successor Maduro. If even the Chinese withdraw next given their unconcern over Western conceits alike transparency and good governance, who will be left to provide the technical capabilities to extract this heavy and sour crude? 

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MEDSploitation: Pol Eco of Cuban Doctor Exports

A longstanding fixture of Cuba's outreach has been sending physicians to fellow Latin American nations. Witness the still-ongoing Venezuela-Cuba oil-for-doctors scheme: 90,000 barrels per day for 30,000 doctors. Despite its proto-communist economy being in shambles for decades now, Cuba still retains a reputation for training physicians--in quantity if not necessarily in quality. With a surplus of them at home and a perpetual shortage of foreign exchange, it was perhaps inevitable that they became one of the island nation's top exports. TIME talks about the current controversies over Cuban doctor exports to Brazil and the differentials in terms of physicians to population:

According to the World Health Organization (WHO), Brazil — despite its recent economic boom and constitutional guarantee of universal health care — has only 1.8 doctors per 1,000 people. (Cuba, despite its endless economic bust, has 6.7.) Almost two-thirds of all health care spending in Brazil is private, even though three-fourths of the population depends on public medical services.

Coming from a self-styled worker's paradise, what exactly is in it for the Cuban physicians working in Brazil? Unfortunately, it appears the ratio of wages paid to these doctors relative to Cuba's remuneration from host states is very low:

But Cuba’s medical-diplomacy mission, which currently has 40,000 doctors serving abroad and brings the Cuban government some $6 billion a year (of which the doctors themselves get only a tiny fraction), is a fixture in the third world, and was generally praised for its work in Haiti after the 2010 earthquake. And it points up the fact that Brazil’s problems are hardly unique. In fact, six of Latin America’s seven largest economies have two or fewer doctors per 1,000 people. (The exception is Argentina, which has 3.2.)

The Havana Times complains about this opaqueness over how much Cuba receives relative to what the physicians do:

In different comments, we read of “new slaves”, that the Cuban State is a kind of “foreman” and that Cuban doctors are “sheep” denied the right to demand their rights, individuals subjected to that which Jose Marti, when writing of a certain form of socialism much spoken of in his time, called “modern slavery.” Unfortunately, I do not know how much money will be paid directly to the doctors under the agreement entered into with the pertinent agencies of Cuba’s Ministry of Public Health. Our local and biased press has not published this detail, and we will have to find out from the doctors themselves [...]

It is both just and necessary for the Cuban State to take in a reasonable part of the money paid by Brazil, in order to re-invest it in Cuba’s public health programs. This money represents investments in many areas, including the country’s educational system, capable of creating a highly qualified labor force. It is also both just and necessary to respect the individual rights of our medical professionals, to pay them a percentage of the earnings that will guarantee their professional and personal dignity, as well as that of their families (without which they will not be able to practice their profession adequately).

What we need is transparency, on the basis of broader democratic, socialist concepts, throughout the selection, hiring and other processes related to the work of our professionals beyond Cuban borders. If Cuban doctors working in Brazil, for instance, were entitled to openly discuss their payment conditions and to arrive at an agreement with public health authorities that isn’t simply imposed on them, then we would be wrong to speak of any kind of slavery.

Call it Transparency, ah, Internationale. I too would love to know exactly what these Cuban physicians earn relative to the amount of treatment they give to better calculate the rate of exploitation, but alas, the Cuban government is perhaps not the best model of public transparency [!?] Rest assured though that economic necessity drives this increasingly controversial trade.

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U R in Trouble: Brazilian Forex Intervention

 Here's another victim of the so-called "taper" of Federal Reserve purchases of US Treasuries worth $85 billion a month or so. To make a long story short, rising interest rates Stateside in expectation of less American bond market intervention from the Fed are causing those who've invested abroad in search of higher yields to reassess their strategies. For several years there was a Brazil "carry trade": borrow in dollars, convert to Brazilian real, then lend in real while pocketing the interest rate spread (after charges and fees, of course). 

The end of Fed Treasury purchases has whiplashed many developing countries like Brazil. Not only are their economies slowing down as China does and demand for raw materials dwindles accordingly, but the carry trade becoming less profitable also has negative repercussions for their currencies. Brazil, already encountering an economic slowdown--remember those protests and riots a few weeks back--is simultaneously trying to combat higher inflation. The latter cause will not fare especially well as the real continues its slide.

So, faced with few alternatives, it's back to the time-tested solution: currency intervention...

Brazil's central bank announced a currency-intervention program on Thursday that will provide $60 billion worth of cash and insurance to the foreign-exchange market by year-end, a move aimed at bolstering the country's currency, the real, as it slips to near five-year lows against the dollar.

The bank said in a statement it will sell, on Mondays through Thursdays, $500 million worth of currency swaps, derivative contracts designed to provide investors with insurance against a weaker real. On Fridays, it will offer $1 billion on the spot market through repurchase agreements. Both are designed to prevent companies and individuals with dollar obligations from scrambling to the market at the same time, afraid that waiting will force them to pay more to buy dollars. When that happens, the real tends to weaken further and faster.

What Brazil is essentially trying to do is ensure that not everyone heads for the (Brazilian real) exit at the same time. Still, you have to wonder if this kind of "demand management" is enough to stop the real's slide. At any rate, the irony is not lost here: As the United States winds down its market intervention (Fed Treasury buying),  other countries like Brazil must step up their market intervention (through FX intervention and the like).

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Why Venezuela Has Egypt-Like Forex Reserves

Unlike many (left-leaning) colleagues, I remain profoundly unimpressed by the "post-capitalist" stylings of countries alike Argentina and Venezuela. When it comes to the geopolitics of the world economy, I am generally unconcerned about whether countries style themselves as "pro-American" or "anti-American" since it's largely beside the point. The point being, of course, that perceived friendliness to the world's largest economy has little to do with sound economic management.

Today we have an excellent case in point: How the heck can Latin America's second largest oil exporter after Brazil have Egypt-like foreign exchange reserves? With sustained high oil prices for years and years, it's hard to imagine but it's true in the case of [surprise!] Venezuela. Nor did it help that Hugo Chavez stashed a lot of foreign exchange in state-owned enterprises, which are now likely to be recalled to help repay the debts of this financial basket case:

Venezuela can more than double its reported reserves, which fell to a nine-year low of $22.9 billion on Aug. 5, if it chooses to take control of all the dollars held by state enterprises as of March 31. Increasing its foreign-currency holdings would bolster Venezuela’s ability to repay $40.5 billion in obligations at a time when its borrowing costs, at 11.59 percent [!!!-such confidence in this socialist paradise], are almost double the developing-nation average, according to Bank of America Corp. in New York. 

Alike many gold bugs, Venezuela (wrongly) bet on ever-rising prices of gold, in which it has kept much of its forex reserves. So, when gold prices headed south, you know what happened to its reserves:

Venezuela’s liquid cash reserves fell 31 percent in the first half of the year to $3.1 billion, the central bank said yesterday. The bank had 11.8 million troy ounces of gold as of June 30, which it valued at $18 billion, down from $20 billion as of Dec. 31...

The 23 percent decline in reserves this year is mostly due to a 43 percent plunge in the price of gold, which accounts for 72 percent of holdings [my emphasis], Rodriguez said. Because the central bank values its gold holdings using a six-month moving average, reported reserves may fall by $1.1 billion more if gold remains at current prices, Rodriguez said in an Aug. 8 report.

“The fact that Maduro has given control of these funds to the central bank is definitely a credit positive move,” Bianca Taylor, senior sovereign analyst at Loomis Sayles & Co. in Boston, said yesterday in an e-mailed response to questions. “However, it is not a panacea. Venezuela’s problems are deeply structural.”

In other words, Venezuela has precious little cold, hard cash. ($3.1 billion? What's that, 1.25 seconds'  worth of US deficits?) Moreover, there is some doubt as to whether much dollars--currency of el diablo--are actually stashed away in SOEs. At any rate, I am still gobsmacked at the level of financial mismanagement here. You must be radically incompetent to turn Latin America's second largest oil exporter into a holder of Egypt-like forex reserves. Hoarding gold? Puhleeze.  

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Belo Monte, Brazil's "Ethical Megadam"

 Here at the IPE Zone, we are true aficionados of oxymoronic terms, many of them wrought by those famously tongue-twisted Yanquis. For starters, try "financial stability," "Internet freedom," and my current favourite, "American savings." Today, though, we have some other (Latin) Americans engaging in these entertaining if oftentimes hypocritical exercises in linguistic flights of fancy. Still, it's perhaps a worthwhile attempt to reduce the rest of the world's gaping Orwellian doublespeak deficit with the United States.

With the cessation of large development lenders funding them (at least until recently), we are supposedly in the post-megadam age. Having courted endless controversy with them, the likes of the World Bank and various regional lenders funding these projects had become negligible. The list of no-no's is familiar and almost endless: forced relocation of indigenous communities, flooding of culturally important low-lying areas, disruption of wildlife migration patterns, destruction of natural ecosystems, etc.

It was thus with some interest that I read Brazil has not weaned itself off the megadam habit. In terms of power generation, it supposedly has 2 out of 5 of the world's largest--Itiapu and Tucurui. So awed was American composer Philip Glass by Itaipu--then the world's largest before being overtaken by China's Three Gorges Dam--that he was even inspired to compose a symphony about it. Now that development lenders have been cowed by activists, Brazil is following China's example in putting up its dam by itself (and dam[n] what the critics say).

On second thought, let me take that back. For, Brazil is styling Belo Monte, which is expected to be the world's third largest dam upon completion after Three Gorges and Itaipu, as an "ethical megadam." But first, a little about its controversial history:

Belo Monte has had a long, turbulent history of clashes between national interest and local concerns. When dam plans were first made public in 1987, they met strong public backlash and were eventually shelved. When the government revived the project in 2002, high-profile protestors such as James Cameron led the international community to halt what the opposition considered an environmentally destructive and inefficient project. Despite their efforts, today Belo Monte is becoming a reality. Opposing groups hold that Belo Monte is being constructed illegally. Local indigenous populations claim that they were never properly consulted about Belo Monte, a violation of the Brazilian constitution.

The legality of granting an installation license was also called into question when two biannual inspections by IBAMA, Brazil’s equivalent of the Environmental Protection Agency, found that Norte Energia had fulfilled only five of the 40 installation conditions. This included things such as proper disposal of felled forest, installation of basic infrastructure in impacted communities, and compensation of people facing displacement. Currently, over 50 lawsuits at all levels of court charge Belo Monte’s planners and builders with environmental and human rights violations. 

Ooh, James Cameron...celebrity protesters! Hence Brazil's efforts to promote the proverbial "inclusion"--with a boatload of cash to buy acquiescence besides:

The scale of protests has created more public input on regional development, for example. A presidential decree in 2010 established a 30-member steering committee to control Norte Energia’s $233 million investment in the region. The 30 officers represent every walk of life affected by the dam, including fishermen, indigenous tribes, rural farmers, labor unions, entrepreneurs, and environmentalists, as well as every branch of government – federal, state, and municipal. Every month the committee meets for two days, hashing out the best plans for developing the Xingu. The public is encouraged to participate, making for a dynamic democratic process. “This [space] has a life of its own,” says Peter Klein, a PhD candidate in sociology at Brown University who has spent time in the communities around the dam. The conversation taking place "is constantly changing and constantly being created … it’s one of a kind," he says.

This type of community inclusion and oversight has never been attempted at a dam site in Brazil before. Environmental concerns are also being addressed in new ways. In response to environmental and indigenous outcry, Belo Monte was redesigned as a run-of-the-river dam, an emerging hydropower alternative that uses the flow of the river to generate power, eschewing large reservoirs. Scaled down from a six-dam reservoir complex, Belo Monte will now only flood 516 square km of rainforest instead of the original 1,225 square km. As a result, the dam will emit less greenhouse gases and avoid construction on indigenous lands.

Somehow I am not entirely convinced. You have to admit though that $233 million is a lot of moolah to try and buy off the protesters with--even if it's less than the forthcoming revenues from "Avatar 2" or suchlike. They must be thankful the stakeholders in question aren't A-list Hollywood directors.

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Forcing Argentines to Accept Evita Peron Bank Notes

It won't be easy--you'll think it strange--when I try to explain why so many Argentinians refuse to honour Evita Peron bank notes issued a year ago. Over half a century after her early death, she remains a polarizing figure in Argentina. Peronists including the present leader of Argentina (and the person largely responsible for these bank notes), Cristina Fernandez, style Evita as a champion of the poor and women's rights besides. Others think she was simply an opportunist who was at the right place at the right time. Obviously, being associated with General Juan Peron is tough. American media labelled him a dictator; others played up his fascist sympathies.

Regardless, can you imagine what sort of controversy would occur if, say, George W. Bush's image graced the $500 bill sixty years from now? While he has his admirers--he was voted US president twice, was he not--his detractors are legion. People have long memories, and many have still not gotten over Evita in Argentina it seems:

Argentina's central bank has warned businesses to stop rejecting commemorative bank notes bearing the image of Eva Peron to mark the 60th anniversary of the iconic former first lady's death. President Cristina Fernandez, whose fiery speaking style often prompts comparisons with that of “Evita”, unveiled the 100 peso bills emblazoned with her profile a year ago.

But publicity surrounding the newly-minted notes was not wide enough to overcome doubts from small businesses where cashiers have rejected the bills for being unfamiliar. So the central bank this week launched a hotline for people to report those who refuse to accept the bills, threatening to fine those who keep turning them away.

The yuck factor remains strong after all these years among some:

Some cashiers have snubbed the Evita notes because they did not recognize them as legal tender. Others turned their backs on the bills for political reasons. “There are always people who don't like Fernandez and Evita and just don't want to touch them,” said a cash register worker in Buenos Aires, declining to give his name.

And no, I would probably not take your George W. Bush bank notes if I'm still around sixty years from now.

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Agents of Imperialism? Bolivia Expelled USAID

I have become captivated by the twists and turns of the Edward Snowden real-life spy caper. While the original accusation that the US was using its advantageous position in the Internet infrastructure to spy on its own citizens and its allies was expected--absolute power corrupts absolutely--its unfolding implications are far more interesting. Call it Frederick Forsyth...on crack. The IPE implications I've covered in some detail, from Ecuador unilaterally disavowing trade preferences given to it by the US to European lawmakers deliberating on whether to delay the start of EU-US FTA negotiations. The latest word is that EC President Manuel Barroso wants negotiations to occur alongside investigations of American spying. The sideshow is at least as interesting: I enjoy the (calculated) titillation as that master of self-promotion, former Russian spy Anna Chapman, has offered to marry spyboy / boytoy [!?] Edward Snowden and thus grant him rights to remain in Russia.

Back in Latin America, though, we recently had this misadventure of Bolivian President Evo Morales being harassed on his flight home from Russia by European nations France, Italy, Portugal and Spain--allegedly on suspicion that the Latin leftist may have been flying Snowden to Bolivian asylum. Just as spying has created a US-EU row, so too has perceived maltreatment of a Latin leader occasioned (surprise!) yet another continental conflict between the US and the Latin left. Where's Che Guevara when you need him--or Fidel Castro for that matter?

The story above pointed out something I was not previously aware of, though. Did you know that Bolivia expelled the US Agency for International Development (USAID) just last month? Just a short time ago Russia did the same as it was wary of the agency's "democracy promotion" agenda when it ought to have stuck with the task of development instead. Besides, who the heck needs all of that tied aid, anyway? At any rate, different country...same result. From Missus Clinton's favourite media outlet:

Bolivian president Evo Morales has expelled the US development agency from his country for allegedly seeking to undermine his leftist government. Morales claimed on Wednesday that the USAID is involved with "alleged political interference in peasant unions and other social organisations." He made the announcement before a crowd outside the presidential palace during a May Day rally. "Never again, never again USAID, who manipulate and use our leaders, our colleagues with hand-outs," Morales said in announcing the expulsion.

Given the United States' history of interfering in Latin America, you'd think USAID would have been more circumspect about "democracy promotion": fiddling with organized groups and so on. As with many things involving these parties, there is no real moral to the story, US protestations notwithstanding. Americans can be meddlesome hypocrites, while Latin blowhards like Morales blame the Latin left's repeated failures to lift their countries out of poverty on US interference. Same old, same old.

There are no protagonists here, but it does make you wonder if Morales has set himself up for additional harassment by expelling USAID.

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Ecuador's Eco-Econ Gimmick: Pay Us NOT to Drill

Ah, Ecuador, home of central bankers with fake degrees and would-be destination of Edward "And the Truth Shall Set You Free" Snowden. Regardless of its harrumphing and chest-thumping, there's no getting away from the fact that Ecuador is a really, really hard-up nation. Just a few days ago, some faction of the Ecuadorian government claimed that it would unilaterally walk away from trade preferences given to it by the United States. More recently, though, Rafael Correa has implied that no such thing will happen and that Edward Snowden is not being granted asylum in Ecuador. Can't afford to upset the flower growers who provide one of Ecuador's few sources of foreign exchange, right?

So what is it, really? Let's just say these guys lurch from flights of fancy to the cold light of reality in the blink of an eye. Speaking of which, our friends over at the Bulletin of Atomic Scientists have an interesting feature wherein Ecuador's government--supposedly mindful of the environmental consequences of oil drilling but dependent on oil revenues at the same time--has a unique gambit to solve the environment / state revenue quandary. Get this: it is asking others to pay it NOT to drill, baby, drill in its ecotourism sanctuary known as Yasuni National Park:

This poses a quandary for Ecuador, a poor country that relies heavily on oil exports for income but is also an eco-tourism destination. As oil development continues to push deeper into the Ecuadorian rainforest, the government has put forth a unique proposal to protect a still-pristine tract covering about 700 square miles: It has invited other nations—most pointedly, those that grew rich on fossil fuels and are now worried about global climate change—to pay to leave the oil underground. At a time when the United States and other relatively wealthy nations are doing far too little to combat climate change, Ecuador’s proposal represents an innovative way to reduce emissions, and to protect habitat for monkeys, other wildlife, and indigenous humans in the process...

One-fifth of Ecuador’s known oil reserves are located beneath the three easternmost blocks of Yasuní National Park—the Ishpingo, Tambococha, and Tiputini sections, collectively known as ITT. They lie beyond the Tiputini Biodiversity Station in a remote area populated by only a few small groups of native people, some of whom live in voluntary isolation from the rest of the world. In a proposal called the Yasuní ITT Initiative, Ecuadorian president Rafael Correa has offered to forego oil drilling in these blocks in exchange for $3.6 billion from the international community. In so doing, the country would leave some 850 million barrels of oil untouched, and about 400 million tons of carbon dioxide un-emitted.

And how many takers have there been for this blackm...indecent prop...flimf...rack...I mean, financial arrangment? Few and far between. You see, it estimates the value of its 846 million barrels of recoverable oil in Yasuni National Park at $7.2 billion. If it collects half this amount in contributions for it not to drill by 2024, it won't do so. Otherwise, you know the, ah, drill::

The initiative was announced in 2010 and is hugely popular within Ecuador, but only a few European and South American nations have agreed to support it, promising about $50 million to the fund so far. Major outreach efforts just began this year, though, and Ecuador has a 13-year timeline for reaching its $3.6 billion goal.

The financial details on this fund to keep Ecuador from drilling are hosted by UNDP. You can even make a donation there if you wish. Me? I am generally sceptical of all things that have the words "official" and "Ecuador" in some combination.

Maybe that Snowden guy will "expose" the contrivances behind this plot if and when it becomes evident to him that he's been well and truly spurned by Ecuador.

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Snowden Files: Ecuador Cuts US Trade Benefits + More

It's probably not the wisest thing to do, but at least Ecuador may be accepting the consequences of putting its foot in its mouth. Famously harbouring WikiLeaks' Julian Assange in its London embassy, it appears ready to up the stakes in testing America's (quite frankly idiotic) "Internet Freedom" concept by also harbouring former NSA contractor Edward Snowden. He famously leaked documents showing massive data gathering on Internet users on behalf of the US government and is under a global interdict from US authorities.

While this erstwhile hero to the nerdcore set has been sitting around in a Moscow airport waiting for a flight to Ecuador, a US senator threatened to remove American trade preferences granted to Andean nations:

The head of the U.S. Senate Foreign Relations Committee said on Wednesday he would seek to end preferential treatment for Ecuadorean goods if the South American nation offers political asylum to fugitive former spy agency contractor Edward Snowden.

Senator Robert Menendez [D-New Jersey], chairman of the foreign relations panel, warned in a statement that accepting Snowden "would severely jeopardize" preferential trade access the United States provides to Ecuador under two programs that are up for renewal in Congress. Our government will not reward countries for bad behavior," Menendez said.

The trade preferences, by the way, are a continuation of a 1991 pact (the Andean Trade Preference Act) wherein the US granted Bolivia, Colombia, Ecuador and Peru improved access to the American market in exchange for better cooperation fighting drug production. In Iran-Contra lingo, it was a "trade for drugs" deal. As it turns out, it needs to be renewed every two years by lawmakers, thus occasioning Menendez's threat of non-renewal the next time around. Given its meagre trade, Ecuador benefited from this trade benefit with the US significantly as demonstrated by lobbying quite hard to continue it despite a steady stream of anti-American rhetoric. Really, Correa, like his purported opponents, is quite the hypocrite.

But I suppose things may have changed and Latin brio has overcome common sense: Ecuador's government has recently said, "go ahead, make my day":

Ecuador's leftist government thumbed its nose at Washington on Thursday by renouncing U.S. trade benefits and offering to pay for human rights training in America in response to pressure over asylum for former intelligence contractor Edward Snowden. The angry response threatens a showdown between the two nations over Snowden, and may burnish President Rafael Correa's credentials to be the continent's principal challenger of U.S. power after the death of Venezuelan socialist leader Hugo Chavez.

"Ecuador will not accept pressures or threats from anyone, and it does not traffic in its values or allow them to be subjugated to mercantile interests," government spokesman Fernando Alvarado said at a news conference.

I especially like the part about how Ecuador will gladly pay for the human rights training of Americans who keep yakking about them while acting in...let's just say inconsistent ways:

In a cheeky jab at the U.S. spying program that Snowden unveiled through leaks to the media, the South American nation offered $23 million per year to finance human rights training.

The funding would be destined to help "avoid violations of privacy, torture and other actions that are denigrating to humanity," Alvarado said. He said the amount was the equivalent of what Ecuador gained each year from the trade benefits.

The Latin Left is alive and well. If it weren't, then nobody would be making PR stunts of this nature to contest the seat vacated by the late Hugo Chavez. That said, let's just say that Ecuador has some way to go before topping Chavez's stunt of subsidizing heating oil purchases of poor Americans via the CITGO subsidiary of state-owned firm PVDSA.

Meanwhile, like his immediate predecessor, Obama should just shut the hell up and think before making more retarded statements about "Internet freedom" and so on if his government is always so hellbent on prosecuting these evildoers. Making folk heroes out of ninnies is a quintessentially American government pastime. This guy isn't even on Ecuadorean soil, fer cryin' out loud.

UPDATE: Note that the US has already cut Andean Trade Preference Act benefits with Bolivia, another repeat transgressor of the Will of America. However, Bolivia's case was over its nonchalance in combating drug production there whereas Ecuador's concerns...unusual and unrelated things.

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Liberation Theology, Leonardo Boff & 'Fixing' Catholicism

What is the difference between a socially active priest and one who dabbles in leftist politics? The dividing line was much clearer during the Pope John Paul II and Benedict XVI eras when the latter was strictly verboten and priests were discouraged from engaging directly--especially in electoral politics. A few weeks ago I discussed the changes that may be in store at the Vatican given that someone from Latin America-- homeland of liberation theology spurred by the world's highest rates of inequality--has become pope. While Pope Francis has disavowed liberation theology in speech, in practice, many alienated (former) Latin Catholics believe that the hardline of the past will be replaced by a more tolerant and receptive outlook.

The highest profile critic of the Catholic Church so far as liberation theology is concerned is of course Leonardo Boff. Yet even he believes that while rhetorical disdain for godless Marxist elements of liberation theology may remain, in practice we may have a more nuanced and socially aware church emerging. Boff is positive, while the many priests killed in Latin America during the liberation theology period may even be regarded positively once more:

"Pope Francis comes with the perspective that many of us in Latin America share. In our churches we do not just discuss theological theories, like in European churches. Our churches work together to support universal causes, causes like human rights, from the perspective of the poor, the destiny of humanity that is suffering, services for people living on the margins."

The liberation theology movement, which seeks to free lives as well as souls, emerged in the 1960s and quickly spread, especially in Latin America. Priests and church laypeople became deeply involved in human rights and social struggles. Some were caught up in clashes between repressive governments and rebels, sometimes at the cost of their lives.

The movement's martyrs include El Salvador's Archbishop Oscar Romero, whose increasing criticism of his country's military-run government provoked his assassination as he was saying Mass in 1980. He was killed by thugs connected to the military hierarchy a day after he preached that "no soldier is obliged to obey an order that is contrary to the will of God." His killing presaged a civil war that killed nearly 90,000 over the next 12 years. The case for beatification of Romero languished under popes John Paul II and Benedict XVI due to their opposition to liberation theology, but he was put back on track to becoming a saint days after Francis became pope.

Boff narrates the familiar difference between theory and practice, with the idea that Pope Francis is oriented towards social action in a way his predecessors were not, really, despite lip service supposedly being paid to its features palatable to the Church (i.e., the non-Marxist ones):

While even John Paul embraced the "preferential option for the poor" at the heart of the movement, most church leaders were unhappy to see intellectuals mixing doses of Marxism and class struggle into their analysis of the Gospel. It was a powerfully attractive mixture for idealistic Latin Americans who were raised in Catholic doctrine, educated by the region's army of Marxist-influenced teachers, and outraged by the hunger, inequality and bloody repression all around them.

In the late 1960s and early 1970s, hundreds of Argentine priests were affiliated with a movement that proclaimed Christian teaching "inescapably obliges us to join in the revolutionary process for urgent radical change of existing structures and to reject formally the capitalistic system we see around us ... We shall go forward in search of a Latin American brand of socialism that will hasten the coming of the new man."

John Paul and his chief theologian, Cardinal Joseph Ratzinger, drove some of the most ardent and experimental liberation theologians out of the priesthood, castigated some of those who remained, and ensured that the bishops and cardinals they promoted took a wary view of leftist social activism.

Monsignor Chavez of San Salvador may make liberation theology more palatable by saying that there are many varieties of liberation theology (eat your heart out, Hall and Soskice), with Pope Francis being on the least extreme end in terms of Marxist overtones--Catholic social vision instead of Marxist social vision, if you will:

"There are many theologies of liberation," he said. "The pope represents one of these currents, the most pastoral current, the current that combines action with teaching." He described Francis' version as "theologians on foot, who walk with the people and combine reflection with action," and contrasted them with "theologians of the desk, who are from university classrooms."

Then again, even the would-be Pope Francis acknowledged that there are certain leftist overtones one can readily read into the Gospels if one is not careful:

"The option for the poor comes from the first centuries of Christianity. It is the Gospel itself," said then-Cardinal Jorge Mario Bergoglio during a 2010 deposition in a human rights trial. He said that if he were to repeat "any of the sermons from the first fathers of the church, from the 2nd or 3rd century, about how the poor must be treated, they would say that mine would be Maoist or Trotskyite."

In other words, leftist critics hope that Pope Francis will ask the faithful to do as he does, not as he says.

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Island Lovin': Chasing Revenue in Cyprus, Falklands

No pina coladas for you I'm afraid. On today's blogging menu are--can you believe it--tax cheats and squid. In the past I've enumerated the generic ways island nations or protectorates generate revenues:

1. tourism
2. tax havens (paradis fiscaux)
3. offshore gambling sites
4. flags of convenience
5. nationality for sale

How it managed to get into the EU despite unresolved conflicts between its Greek and Turkish parts aside, there is not much of a mystery about what is happening in Cyprus. Like that of Greece which it highly resembles, Cyprus has few competitive advantages. What's more, after the global financial crisis, it has not been able to take much advantage of traditional revenue-generating measures listed above. End result? Ho-hum, another Eurozone banking crisis.

What is notable here however is the EU's apparent willingness to destroy a pillar of the Cypriot, erm, "economy": its status as a tax haven for wealthy Russians. Alike Iceland, the creation of an outsized financial industry relative to the "real" economy did not bode well when global economic conditions turned sour. Sure it does the touristy and shipping stuff as well, but its bread and butter has really been (dodgy?) finance. With the EU-IMF bailout in place, things will change drastically in this respect:

The overall impact will be a dramatic change for Cyprus’s economy. Over the past 30 years, since the fall of the Berlin Wall, the island has banked on its ability to attract money from Russia and elsewhere as an offshore center. Oversight has been tightened up since Cyprus joined the E.U. in 2004, but it remains relatively lax by international standards, and foreign companies pay a flat tax rate of just 10%. For a while the strategy seemed to work well; Cyprus built up a gargantuan banking industry, which is currently about five times the size of its total economy, according to Standard & Poor’s.

About one-third of the $88 billion in deposits in those banks are from Russians, who have increasingly used the island’s banking system as a tax-sheltered conduit for their financial transactions worldwide. Indeed, Cyprus shows up in international statistics as a huge investor in Russia itself, as a result of “round-tripping” by Russians who didn’t entrust their money to their own national banking system. According to European Central Bank statistics, more than 40% of the deposits in Cyprus banks are in excess of $650,000

Estimates vary as to the Russian portion of deposits in Cyprus; another source says it's more like 40% for a total of $32 billion. Whatever the source, the EU-IMF brokered deal is going to inflict a massive haircut on deposits over EUR 100,000 not covered by insurance since (a) the losers are not EU citizens anyway and (b) the European Union has been cracking down hard on tax havens anyway after the global financial crisis to shore up member states' revenue losses. There was some loose talk about how Russia might offer an alternative (read: more attractive) bailout package to the Cypriots, but it has not materialized.

So, to pile on more woes, Cyprus needs to find another way to make ends meet now that the EU has effectively scuttled its status as a tax haven.

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Another island economy which is having some challenges making ends meet are the Falklands. Obviously, it does not have many natural trade partners in South America since it's not only the Argentines who regard its British rule as an imperial-era throwback but nearly everyone else in the Southern hemisphere. Apparently, the list I prepared above was incomplete since the Falklands have been relying on fishing licenses for squid for revenues:

Squid licenses have provided about half the Falklands government's revenues over the years, ever since it showed it meant business by chasing an unlicensed Vietnamese shrimper all the way to South African waters, and firing into its hull along the way.  

That said, the Falkands conflict has created difficulties for this potentially lucrative activity insofar as both the British and the Argentines are suffering from the presence of a huge flotilla of illegal fishing vessels in search of squid that is said to be of largely Chinese origin. And speaking of their conflict, Argentina's navy hasn't fully recovered from the Falklands War, making it even more difficult to deter poachers:

Argentina pulled out of a fisheries management organization it had shared with Falklands in 2005. The lack of cooperation has left both sides ill-equipped to deal with the fleet scooping up squid just beyond their maritime boundaries, and sometimes within. "It's like the Wild West out there," said Milko Schvartzman, who campaigns against overfishing for Greenpeace International. "There are more than 200 boats out there all the time," and many routinely follow squid into Argentina's economic exclusion zone, he added. "Unfortunately the Argentine government doesn't have the naval capacity to continually control this area."

The Falklands are defended by British warships, planes and submarines, giving the fisheries agency considerable muscle to enforce licenses in its waters. But Argentina's navy has never recovered from its 1982 war against Britain for the islands, and its coast guard has just eight ships to cover more than 1 million square miles (2,800,000 square kilometers) of ocean, said its chief of maritime traffic, Mario Farinon.

Farinon says the lack of seizures doesn't mean Argentina isn't trying. The coast guard always has at least one enforcement boat monitoring the squid fleet," he said, and "the important thing is not capturing them, but preventing them from coming in." Still, the problem is so big that it can be seen from space: Images of the Earth at night, taken by a NASA satellite last year, show darkness at sea the world over, except for this spot in the South Atlantic. There, 200 miles from the nearest coasts, the lights of this renegade fleet shine as brilliantly as a city.

As literally a common pool resource, both the Falklands and Argentina are harmed by the latter's inability to prevent overfishing as squid stocks diminish. After all, why pay for a fishing license what you can get for free in Argentina's supposed area of jurisdiction? It's interesting how formal Argentina-China economic cooperation in currencies is set against the backdrop of the latter being unwilling to discourage this kind of rampant poaching.

Make no mistake: island life ain't one of permanent vacation. Go ask the Cypriots or the Falklanders.

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