New Generation Leftist, promising to bury Neoliberalism, is elected as President of Chile.

Gabriel Boric, the leftist candidate who won yesterday in the presidential elections of Chile, had promised to bury the Neoliberalism imposed by the military dictator Augusto Pinochet. Boric said, “If Chile was the cradle of neoliberalism, it will also be its grave.” Boric is part of the  brave new millennial generation seeking justice and equality.  With his age of 35, Boric is the youngest ever to become the President of Chile. He has a bold and ambitious vision of Inclusive Development much different from the old style moderate leftist leaders like Michelle Bachelet, who was president for two terms. With her limited leftist agenda, she did not pursue reforms strongly and vigorously. 
 
Boric is the most left-wing President of Chile since President Salvador Allende was overthrown in 1973 by General Pinochet. The US supported the coup in the name of the ‘war on communism’. Boric’s coalition includes the Communist Party of Chile. Allende should be smiling in his grave.

 
Boric has pledged to reduce inequality by raising the minimum wage, reducing the cost of education and healthcare, expanding social safety net, fighting climate change and extending rights to native peoples as well as gay and transgender. Although the Chilean economy has been stable with high growth rates, the poor and middle class people have been struggling with high cost of living while the private sector business makes high profits and pay low taxes. To pay for the expanded social programs Boric plans to  raise the taxes on the rich, increase mining royalties, increase efforts against tax evasion, and impose a “green tax.” Boric has further pledged to replace Chile’s private pension system with a universal public one.
 
Boric is unmarried, has no children and is an avid reader of poetry and history. He rose to prominence during the 2011 student protests against the high cost of education and other social injustices inherited from the neoliberal economic model devised by the Chicago Boys (economists trained in Chicago) hired by Pinochet. Boric was president of the Student Federation of the University of Chile in 2012 when he was studying in the Faculty of Law. But he left his studies incomplete and entered politics. In 2013, at age of 27, he was elected to the Congress as an independent, along with many other young leftist activists. He declared, “Don’t be afraid of the youth who want to change Chile.” He got reelected in 2017. Boric, who has tattoos caused an uproar when he showed up on the first day in the Congress without a tie and suit jacket, calling political decorum a “tool of the elite” that separates lawmakers from the people. 
 
Boric combines his idealism with a realistic and pragmatic approach. In 2019, he broke with his leftist allies and backed a political accord with center-right President Sebastian Pinera to begin a process to replace the dictatorship-era constitution in order to restore calm. In November, he distanced himself from his communist allies who offered glowing praise for the reelection of Nicaragua’s leftist authoritarian President Daniel Ortega. Boric will not be a radical pushing for unilateral extremist ideas. He knows the formidable challenges of the rightists and the fear of the people which drove them to vote for Kast. In any case, he does not have his own political party in the Congress to push through his legislative reforms. He needs to work with the parties of both the left and right to get his bills passed in the Congress. 
 
The election of Boric complements the centre-left Constitutional Assembly which is drafting a new constitution for better social justice. The Assembly has gender parity and is being presided over by Elisa Loncon, a female Mapuche language scholar. The Assembly includes 17 members from the indigenous communities who were excluded from political power by the Pinochet constitution. 
 
If Kast, the rightist, had won it would have been an anticlimax to the new movement for social justice and the new constitution currently being drawn up. Kast is opposed to the new constitution  and is an admirer of dictator Pinochet. His own brother was a member of the cabinet of Pinochet. Kast had shown solidarity with Trump and Bolsonaro. The defeat of Boric is a clear message to Bolsonaro and other aspiring far right extremists in Latin America.
 
The victory of Boric comes in the wake of the recent election of leftist candidates Xiomara Castro in Honduras in November and Pedro Castillo in Peru in June this year. Leftist candidate  Lula, is already leading in the opinion polls for the Brazilian presidential elections to be held in October next year. 
 
The peaceful elections and the graceful acceptance of defeat by the loser have demonstrated yet again the strength and maturity of Chilean democracy. The Chilean voters have given chance alternately to the left and the right in the last five presidential elections. Both the leftist president Michel Bachelet and Sebastian Pinera, the billionaire conservative had avoided extremist positions and preferred stability and continuity. When the protests erupted in 2019, President Pinera recognized that the protestors had legitimate grievances and quickly agreed to their demand for a new constitution. In the May 2021 elections for the new constituent assembly, the Chilean voters punished both the mainstream leftist and rightist coalition parties and elected mostly centre-left independent activists. Out of the 155 seats, the rightist coalition won only 37 votes while their leftist counterpart got just 25 seats.
 
It is heartening to see that Kast has accepted the defeat gracefully and promptly. He has declared even before the final count, "From today, Boric is the elected President of Chile and deserves all our respect and constructive collaboration". Kast made a remarkable and admirable gesture by visiting Boric's campaign headquarters to congratulate personally. This is in sharp contrast to  Trump’s disgraceful refusal to accept the electoral verdict and Bolsonaro’s threat to follow Trump’s shameful approach. 
 
With the election of Boric and the drafting of a new constitution, the stable and strong democracy of chile is poised to become a more inclusive and equitable democracy. This should be an inspiration for Latin America which has  similar challenges of poverty and inequality. 
 
 
 

Bolivia, rich in Lithium reserves, is missing out on the global boom..

Bolivia has 21 million tons of Lithium reserves, the largest in the world and one fourth of the total world reserves of 80 million tons, according to the US Geological Survey.

Argentina has the second largest with 17 million tons, followed by Chile with 9 million, the third largest.

Demand for Lithium was around 360,000 tons in 2020 and is growing fast thanks to the global drive for electric vehicles, in which Lithium batteries are used. Lithium is also used in many electronic devices.

But Bolivia produces a paltry 600 tons of Lithium Carbonate, while Chile produces 134,000 tons and Argentina 36,000 tons.

Australia, which has 6.3 million tons of reserves, is the largest producer of Lithium for now. Australia earned 1.6 billion dollars in 2019 from Lithium exports.

China is the largest consumer of Lithium. China controls 80% of the world’s raw material refining, 77% of the world’s cell capacity and 60% of the world’s component manufacturing.

Excessive resource nationalism and suspicion of foreign companies by ex-President Evo Morales and absence of proper vision and policies by the Bolivian governments have held back Bolivia from monetization of the valuable Lithium reserves...Pity..

Hope President Luis Arce will move fast and get Bolivia in the Lithium production map of the world.

Harsh Times – the latest novel of Mario Vargas Llosa

Harsh Times (Tiempos Recios) is the latest offering of the Peruvian nobel prize winner Mario Vargas Llosa. 

The novel is about the overthrow of the leftist Guatemalan president Jacobo Arbenz by CIA at the behest of the United Fruit Company. This crude regime change to safeguard the profits of a private company was labelled as “war on communism” by the US propaganda. 

It is based on the real life events of what happened in Guatemala in 1954. Even the names of most of the leading characters in the novels are real names. So the novel reads like real history. There is no Magical Realism. It is pure realism. Of course, the Latin American reality is more fantastic than fiction sometimes. Llosa has embellished the characters and exaggerated events to spice up the story. But the spice is much less in comparison to Llosa’s other historical novel “ The Feast of the Goats” ( about the Trujillo dictatorship in Dominican Republic) which has more fantasy and labyrinths. Llosa has made an interesting link between the two novels through the character of Marta Borrero Parra (Miss Guatemala), the wife of attorney Arturo Borrero Lamas who leaves him to become the mistress of President Carlos Castillo Armas, (Gloria Bolaños Pons was the real life mistress of Armas) later as lover of Trujillo’s intelligence chief Johnny Abbes Garcia followed by becoming radio propagandist for President Trujillo in Dominican Republic, and as informant of CIA which arranges asylum for her in US in the end. Llosa has also brought in the role played by Trujillo directly and in collaboration with CIA in the overthrow of the Arbenz government and assassination of President Castillo Armas.

Harsh Times is not one of the best novels of Llosa. It is a bit lame by Llosa's standards. But this is understandable given his ripe old age of 85. He continues reading (every morning) and writing even now.

It is unusual to see that Llosa, the political conservative, has shown sensitivity and sympathy to the Left in this novel. But in his political discourses he continues his right wing positions. He supports the right wing Chilean Presidential candidate Antonio Kast standing against the leftist Gabriel Boric in the elations to be held on 19 December. In the last Peruvian elections held in June 2021, he supported the rightist Keiko Fujimori who stood against the leftist Pedro Castillo.
 
The story starts with the American company United Fruit which owned banana plantations in Guatemala and exported to US. The company was the largest land owner in the country. It had bribed and coerced the Guatemalan governments to let them have such large land, own the infrastructure such as railways, power stations and ports, subject to virtually no tax and get away with very low payments to the workers who were kept in miserable slave-like conditions. President Arbenz tried to correct this injustice. He passed a land reform bill through which unused land of the company was to be taken away by the government for distribution to landless peasants. The government agreed to pay compensation to the company based on the value declared by the company itself for tax purposes. The government also proposed to tax the company and improve the conditions of their workers. But the company would have nothing of it. The company complained to the Dulles brothers, who were their shareholders and former legal advisors. One of them ( John)  was the Secretary of State and the other one (Allen) Director of CIA. The two used their combined clout and the whole weight of the mighty US government to overthrow the Arbanz government. The CIA recruited and armed mercenaries, bombed Guatemalan cities and spread terror and panic.
 
The new American ambassador to Guatemala John Emil Peurifoy was given a clear mandate to overthrow the democratically elected government at any cost. He worked on the colonels and majors in the army pushing them to rise against their own government.  He threatened President Arbenz that the American marines were ready to invade and advised him that the only way to avoid bloodshed was for him to quit. Ambassador Peurifoy told Washington DC, “Noncombatants will have to die. Panic will have to break out among the civilian population. That is the only provocation that will allow us to intervene against Árbenz”.  Peurifoy had experience of managing a successful coup in Greece where he was ambassador before. So after the Guatemalan coup, when he was posted to Thailand he asked if there was going to be a coup there too. This reminds me of a Latin American saying that “there will not be any military coup in Washington DC because there is no US embassy there”.
 
The US imposed an embargo against supply of armaments, munitions and even spare parts to Guatemala. It blockade the Guatemalan ports. This was a blow to the Guatemalan armed forces and a severe handicap at a time when there was need for them to fight against the mercenaries invading the country. This created concern among the military officers and pitted them against President Arbenz. The American bombing of the Guatemalan military academy buildings was the final nail in the coffin and pushed the Guatemalan armed forces against  their president. 
 
The US government justified their regime change operation in the name of the so-called war on communism.  The United Fruit company hired Edward Bernays, a pioneering publicist and called as the Father of Public Relations, who worked the American and Guatemalan media and portrayed a false narrative of impending communist takeover of Guatemala and the region. Although Arbenz and some of his allies had leftist outlook and sympathies the propaganda that they were communists was a blatant lie and fake news. Guatemala did not have relations with Soviet Union and there was no Russian presence in the country.
 
The American intervention in Guatemala changed the history of Latin America in the second half of the twentieth century. It generated a wave of  anti-Americanism in Latin America all over again, and invigorated the Marxists. It paved the way for the success of the Cuban revolution and spread of leftist guerilla movements in the region. It hardened the anti-American conviction of Che Guavara, the leftist icon, who was in Guatemala and saw first-hand the exploitation of the country by United Fruit and the overthrow of democracy by CIA.  In fact, it was the Guatemalans who gave the nick name of “Che” to Ernesto Guevara.
 
The American intervention in Guatemala set the stage for destabilization of Central America for the next half century. The region went through a bloody civil war. Later, the US government repeated their Guatemalan play book in Nicaragua against the leftist Sandinista government in the seventies and virtually destroyed the country. The US-supported military dictatorships in the region killed hundreds of thousands of civilians including indigenous people. The end of the civil war was followed by gang wars, which have been fought with illegal American weapons. This has added to the insecurity of the Central Americans to flee from the violence in their countries. This is the fundamental reason for hundreds of thousands of Central Americans to reach the US border to get in legally or illegally. The immigration issue at the US border is nothing but US reaping what it sowed in Central America.
 

Return of the Left in the Honduras elections

Xiomara Castro de Zelaya, the socialist candidate, got elected as President of Honduras in the elections held on Sunday. 

She is the first woman to become President of the country. Her victory puts the Left back in power after twelve years of right wing governments in the country. Her election assumes significance for more reasons:
 
It is a sweet revenge for her husband Manuel Zelaya, who was overthrown from presidency by a rightwing coup in 2009, with the support of US. The rightists had justified their action on the ground that President Zelaya was planning to hold a referendum asking the people if they would approve a change in the constitution to extend the mandate of president to two terms from the existing single term limit. But the US administration and the American mainstream media accused Zelaya of trying to commit a crime of violation of the constitution by proposing to change the term limit. They called Zelaya as a Honduran Chavez with dangerous leftist tendencies. The Honduran military barged into the presidential palace, picked up Zelaya in his pyjamas, put him in a plane and dumped him in Costa Rica. This was the first-ever coup in the twenty first century in Latin America which was seeing the strengthening of its democratic foundation in the first decade of the new century. 
 
Manuel Zelaya himself could not stand for elections since the rightwing administration has banned him from public office. 
 
President Juan Orlando Hernandez, elected in 2013 from the right wing National Party, changed the constitution, removed the term limit and got elected for a second term in 2017. The military, supreme court, the human rights council and other organisations which had opposed removal of single term limit during President Zelaya’s time had reversed their stand and endorsed the action of Hernandez. The American administration and media kept quiet and did not raise the issue of constitutional violation. 
 
Hernandez’s victory in 2017 was controversial. There were allegations of fraud in vote counting. When Hernandez started losing, the counting was stopped. Later, the computers started showing winning numbers for Hernandez. There were protests against the rigging and over two dozen protestors were killed in the violence. But Hernandez managed to escape the fate of President Evo Morales who tried the same trick in Bolivia but was thrown out of power.
 
Hernandez’s government is also accused of massive corruption and links with drug trafficking. Juan Antonio, brother of the President, is already in a US jail for life after drug trafficking conviction. The US Justice Department has accused President Hernandez of links to drug trafficking. The U.S. federal prosecutors in New York have accused him of running a narco state and fueling his own political rise with drug money. They might start prosecuting him when he leaves the presidency in January 2022.
 
The ruling party’s candidate Nasry Asfura, who got the second largest number of votes after Castro, was accused in 2020 of embezzling public money when he was Mayor of the capital Tegucigalpa. The third major candidate in the presidential race, the Liberal Party's Yani Rosenthal, spent three years in a US jail for money laundering.
 
The victory of the Left in Honduras should give some satisfaction to Lula of Brazil. As President, Lula tried to help the exiled Zelaya to get back to power. The Brazilians helped Zelaya return to Honduras secretly three months after his exile and gave asylum to him in the Brazilian embassy. This was a huge embarrassment for the anti-Zelaya US administration. It was the first time that Brazil challenged US in Central America which is a traditional backyard of US and playground for CIA. The Americans wanted to cut down the overreach of Brazil and President Lula and reacted ruthlessly. They put pressure on the illegitimate Honduran regime which sent its military and police to surround the Brazilian embassy. There was a war of words exchanged between the Brazilian government and the Honduran regime. Eventually the Honduran regime let Zelaya go on exile to Dominican Republic. This was a bitter lesson for President Lula who had ambitions to check American hegemony and assert Brazilian leadership in Latin America.
 
The return of the Left to power is important for the Honduran masses, majority of whom are below the poverty line. It is the extreme poverty which is the main reason for thousands of Hondurans trying to emigrate to the US legally and illegally. There is desperate need for pro-poor and Inclusive-development policies and Castro is promising to give priority to these. Further, she wants to decriminalize abortion, reduce bank charges for remittances, create a U.N.-backed anti-corruption commission and repeal laws which feed corruption and drug trafficking.
 
On the external front, Castro wants to open diplomatic relations with China and close the Taiwanese embassy. Honduras is one of the remaining fifteen countries in the world which recognize Taiwan. But the US administration is putting pressure on the Hondurans not to recognize China. It is one of the typical hypocritical examples of US foreign policy lectures to other countries: “Do not do what we do but do what we say”. Earlier the US government had unsuccessfully pressurized Panama, Dominican Republic and El Salvador with similar advice. 
 
The election of Left to power in Honduras is a boost to the larger Latin American Left which has returned to power in Argentina and Peru. Castro will resume relations with Cuba, Venezuela and Nicaragua, earlier shunned by the previous right wing administration of Honduras. 
 
Honduras is the original “Banana Republic” exploited by the United Fruit Company of US in collusion with local oligarchs. The United Fruit company is no more but the local oligarchs continue their exploitation with their deeply entrenchment. They will not let Xiomara Castro to make any significant reform to bring about social justice. 
 
Although Honduras is a small country of just ten million people, India’s exports were 163 million dollars last year. There is scope to increase the exports to 300 million dollars in the next four years. It is time for India to consider opening an embassy in Honduras. The Chinese  export about 1.5 billion dollars of goods to Honduras. 
 

Light at the end of the dark tunnel of Venezuelan political and economic crisis.

In the regional and mayoral elections held on 21 November, President Nicolas Maduro’s socialist coalition won 20 of 23 governor posts and about 200 of the 335 Mayoral posts. The opposition got 3 governorships including in the oil-rich state of Zulia. In the Municipal elections, the opposition won about a hundred Mayoral posts.  

The elections were relatively fair and free, although the government had misused its powers to some extent. The European Union and the Carter Centre, who had monitored the elections, did not report any blatant rigging or other serious irregularities. The turnout was 42%.

 

This is the first time that the opposition parties have participated in the elections since 2017. They had boycotted the previous presidential (2018) and parliamentary (2020) elections.

 

The opposition could have won more posts if they were united. There were many cases of vote splitting between the main opposition coalitions, the MUD (Democratic Unity Roundtable) and the Democratic Alliance. MUD won 59 of the mayoral contests, while the Democratic Alliance, won 37.

 

Juan Guaido, the so-called interim president recognized by US, had boycotted the elections and did not vote. He stands further isolated and discredited. The Lima Group which stood by Guaido has also lost its credibility after the new leftist government of Peru has switched back to recognition of President Maduro. The European Union, which had gone along with US in supporting Guaido has virtually withdrawn its recognition of Guaido. It has started dealing with the government of Maduro and sent an observer mission to monitor the 21 November elections. This is a significant blow to Guaido. Realising his helplessness,  Guaido has now called for unity of the opposition and continuation of engagement with the Maduro regime. 

 

President Maduro has ruled out continuation of the negotiations with the opposition until "the kidnap" of a prominent government envoy Alex Saab - who was extradited to the United States - comes to an end. Last month Venezuela's government withdrew from negotiations in Mexico which had started in August following Saab's extradition in October. Saab, a Colombian businessman, is accused by U.S. prosecutors in Miami of money laundering for the Maduro regime. 

The election results have strengthened President Maduro’s regime while exposing the weakness of the divided opposition. President Maduro has now an upper hand in dealing with the opposition as well as with the US which seeks ‘regime change’ in Venezuela. It seems that the opposition has to live with the reality of Maduro as president till 2024. This means the temporary end of the internal political crisis for the time being. 

The US remains as the only challenge for President Maduro. The American sanctions continue to  cripple the economy. The bounty on his head as well as the members of his family and the regime announced by the Trump administration are hanging like the sword of Damocles.

It is time for the opposition leaders for some serious introspection and formulation of effective strategies to put an end to the authoritarian Chavista regime and restore proper democracy. They need to do this internally and constitutionally without running to the Uncle Sam for external intervention.

On the other hand, the economy has stopped its bleeding and started healing. After having suffered consecutive GDP contraction since 2014, the country will see positive GDP growth of 1% in 2022. Even the inflation which had soared to five digits (132,060 % in 2019) has now come down to 2719% in June 2021. 

 

Learning from its mistakes, the government has changed its strategy. It has opened the door for private sector to do business and make money. It has lifted price controls on basic goods and allowed tariff-free imports. There is virtually no tax enforcement on businesses and individuals. Most important, the U.S. dollar, which was long scorned by the ruling regime as a tool of imperialist control, is now considered the de facto national currency. Remittances from the Venezuelan emigrants are adding to the foreign exchange reserves. At the same time the rich who had kept dollars abroad are bringing them back to the country to take advantage of the new profitable business opportunities. The government no longer subsidizes food, fuel or services, and private companies are given the opportunities to fill the gap.  Shortages of food and medicines have been eased, namely because vendors, who used to be burdened by rigid state-set price caps, can now charge hefty prices for their goods and services. Stores are filled with imported goods for those who can afford to pay in dollars. The government has allowed even the opening of casinos.

For now, Venezuela’s dark days are over both on the economic and political front. The situation can only become better in the coming years. 

Chile’s presidential elections

The rightwing  candidate Antonio Kast emerged as the lead winner with 28% votes in the presidential elections held on Sunday. This was predicted in the opinion polls before the election. He will now face the leftist Gabriel Boric ( who got 26%) in the second round to be held on 19 December. The young Boric (35 years) was a student leader who participated in the anti-government protests and later got elected as deputy in the Congress.

 

The third and fourth positions went to two centre-right candidates who got around 12% each. Right-wing politicians also did better than expected in a congressional vote, taking about half of the seats in the senate. Going by this arithmetic, Kast could win the second round. 

If Kast wins it will be an anti-climax to the mass protests of recent years seeking inclusive development and reduction of inequality. The political protests resulted in the formation of a historic new  Constituent Assembly which is seeking to correct the neo-liberal course set by the Pinochet military dictatorship. Most members of the Assembly are from the centre-left who seek to meet the expectations of the poor and middle class people, left out in the cold with high cost of education and healthcare while private business has been raking in high profits. This sin of omission was recognized publicly even by the right wing Pinera himself who is doing his second term as President. Kast’s win is a huge disappointment for those framing the new constitution and the masses who have been fighting for social justice. Kast is opposed to the new constitution.
 
Kast wants to continue the Pinochet-era system and advocates reduction of social spending and taxes on business. He is unapologetic about the military dictatorship. His brother was a minister in the Pinochet cabinet. So if he becomes President he should be prepared for the revival of violent agitations against social injustice. However, Kast is not an extreme rightist like Bolsonaro and Trump. He would be a little more right than the current president Pinera and he has already seen the limits and challenges faced by Pinera’s presidencies.
 
The Chilean voters have been voting for the Left and Right alternately in the last four presidential elections. Both the leftist and rightist presidents have been moderates and had avoided extreme positions. The Chileans might vote for a leftist next time if they elect a rightist this time. 

In any case, the victory of Kast is not assured. It depends on how much the leftist and rightist candidates succeed in moving the centrist voters. Boric needs to take into account the frustrations of the centrists who were appalled by the extreme violence used by protestors who destroyed metro stations, burnt churches and fought with the police violently. Kast has pledged to strengthen law-and-order by cracking down on crime and violent protests. At the same time Kast has to give some assurance to those who have been protesting for social justice. 

The results of the elections show the continuing check and balance between the right and the left in the country whose democracy has become mature and resilient. The Chilean voters have forced both Kast and Boric to move towards the centre and be more pragmatic. This means that there cannot be a Bolsonaro or Chavez in Chile. 

Venezuelan economy has stopped bleeding and has started healing

Venezuela’s GDP is forecast to grow by 1% in 2022. 
What a pleasant surprise ! What a relief !.. after seven consecutive years of GDP contraction.
 
The country had suffered a brutal -124.4% GDP contraction cumulatively since 2014. The economy shrank by  -30% in 2020,  -28% in 2019, -19.6% in 2018, -15.7% in 2017 and -17% in 2016.  
 
Even the inflation which had soared to five digits (132,060 % in 2019) has now come down to 2719% in June 2021. 

 

The ruling Socialist party is seeking to reinvent itself, offering economic liberties while maintaining its authoritarian grip on the country. Earlier, the government nationalized whatever it could and strangled the private sector with price control, foreign exchange and import restrictions. The private sector reduced production and investment to cut the losses. This lead to shortages of essential goods and long queues before supermarkets. 

 

Now the government has changed its strategy. It has opened the door for private sector to do business and make money. It has lifted price controls on basic goods, allowed tariff-free imports. There is virtually no tax enforcement on businesses and individuals. Most important, the U.S. dollar, which was long scorned by the ruling regime as a tool of imperialist control, is now considered the de facto national currency. Remittances from the Venezuelan emigrants keep sending dollars and the rich who kept the dollars abroad are bringing them back to the country to take advantage of the new profitable opportunities.
 

The government no longer subsidizes food, fuel or services, and private companies are trying to fill the gap. Private internet companies, importers and healthcare providers are slowly trying to fill the holes left by the collapse of the once sprawling public sector. 

 

Shortages of food and medicines have been eased, namely because vendors, who used to be burdened by rigid state-set price caps, can now charge hefty prices for their goods and services. Stores are filled with imported goods for those who can afford to pay in dollars.

 

Among the businesses finding new life are gambling casinos. President Chavez, had closed all of the country’s gambling houses, saying they were rife with vice and only enriched “the bourgeoisie.” But under Mr. Maduro, a National Casinos Commission overseen by army generals has sold licenses—for $350,000 each—to 30 new casinos around the country with names such as Baywatch, Bellagio and Hotel Dubai.

It seems that the economy cannot get any worse and it has already started bouncing back. The political crisis caused by the  system of two Presidents ( Juan Guaido was the president recognized by US and its allies) is discredited now. The European Union which had gone along with the US in recognizing Guaido has already sent observers to monitor the elections being held by Maduro regime this weekend. The Lima Group, which recognized Guaido as the legitimate interim president, has lost its credibility after the new leftist government of Peru has recognized Maduro as the President. The US attempts for “regime change” has failed. The Biden administration has stopped the bullying and intimidation tactics practised by the Trump gang. The opposition Parties are now participating in the regional and local elections scheduled for this Sunday. 

Of course, the US economic sanctions continue to strangle the Venezuelan economy. But the US government seems to have become less strict in implementation of the sanctions. In October- November this year, two cargoes of methanol reached the US from Venezuelan ports directly. From January to October, Venezuela has exported globally about 1.75 million tonnes of petrochemicals and byproducts, increasing from 1.03 million tonnes exported for the whole of 2020. The oil exports have also picked up in 2021 at a time when the oil prices are rising. 

President Ortega’s reelection victory is a betrayal of democracy and socialism

 President Daniel Ortega, won a fourth consecutive term in the elections held on Sunday. His wife Vice President Rosario Murillo, will continue as Vice President.

 Ortega had prevented opposition candidates from contesting by imprisoning seven would-be presidential candidates including Ms. Chamorro who had higher favorability rating of 53% approval, compared with 39% for Ortega. Ms. Chamorro is the daughter of Violeta Barrios de Chamorro, who defeated Mr. Ortega in the 1990 presidential elections.

Ortega is in power continuously since 2007 after removing the constitutional term limit. He was earlier president from 1985-90 and part of the ruling Junta from 1979 to 1984. He and his wife Rosario are running the country like a family dynasty similar to the Somoza dynasty which ruled from 1937 to 1979.

Ortega was part of the glorious Sandinista revolution which overthrew the Somoza dynasty in 1979. He was admired when he accepted the defeat in the 1990 election gracefully and waited for his time till 2007. But since then he has eroded democracy by his authoritarian way of rule. He has promoted his wife and children to positions of power which they use for corruption. Most of the other leaders of the Sandinista revolution have turned as opponents to Ortega’s family regime.

US, Europe and some Latin American countries including Costa Rica have condemned the elections as a fraud. The US has imposed sanctions on Nicaragua and personally against Ortega’s family members.  Due to the political oppression and economic difficulties, over 100,000 Nicaraguans have migrated to Costa Rica as refugees and thousands have sought asylum in the US.

Nicaragua has joined Venezuela as another sham democracy in Latin America. Both the Bolivarian revolution of Venezuela and the Sandinista revolution of Nicaragua had started off with lofty socialistic ideals. Both have now betrayed their ideals and given a bad name  to socialism and revolution, besides ruining the two countries.

The role of IMF, US Treasury Department and the Wall Street in the financial crises of Asia, Latin America and Russia

  
 
The role of IMF, US Treasury Department and the Wall Street in the financial crises of Asia, Latin America and Russia
 
The Asian, Russian and Latin American financial crises in the 1990s revealed again the unsavoury role played by IMF, the American Treasury Department and the Wall Street. While the countries involved were primarily responsible for their misfortunes, it is a fact that IMF and the American Treasury forced and encouraged these countries to open their markets for free movement of capital when the countries did not have adequate macroeconomic fundaments for such risky exposure. This opened the door for the Wall Street bankers and brokers to bring in short term hot money to get the benefit of higher interests than in their developed home markets where the interest rates were low. The bankers encouraged the emerging countries to issue bonds in dollars and marketed them aggressively to the global investors by hyping the bond-issuing country’s economy. But at the first sign of crisis, these firms would quickly pull their money  out causing foreign exchange crisis for the countries. The hedge funds would then sweep in and make a run on the currency worsening the crisis and driving them to bankruptcy. When the country reaches a situation of default on its debt or bonds, the IMF  would lend large sums to ostensibly rescue the country in crisis but most of the money goes to repayment of debt to the Wall Street bankers and bond holders. The country is forced into IMF debt and tied to the Fund’s conditions of austerity causing misery to the common people. The greedy bankers, the reckless brokers and slimy hedge funds would not have ventured into Russia or Thailand but for the guarantee that uncle IMF could be counted on for rescue. 
 
The modus operandi of IMF, US Treasury Department and the Wall Street in the financial crises of Asia, Latin America and Russia are brought out in the book “ The Chastening: Inside the crisis that rocked the global financial system and humbled the IMF by Paul Blustein, a reporter of Washington Post. 

 
In late 1992,  IMF encouraged and supported the creation of Bangkok International Banking Facilities (BIBFs), aimed at enhancing Thailand’s lure as a banking center. The theory was that banks based in Thailand (both Thai banks and the local branches of foreign banks), spurred by the incentive of special tax breaks, would attract money from around the globe that they could either relend abroad or at home in Thailand. Most of the international hot money ended up being lent to Thai businesses and converted into baht. Since interest rates in Thailand tended to be several percentage points higher than rates in the United States or Japan, foreign lenders got higher interest rates on the money they deposited in Thai banks than they could get at home. The Thai borrowers paid lower interest rates on the dollars they borrowed than they had to pay on regular baht loans. And since the baht’s value was fixed against the dollar, neither lenders nor borrowers had to make bothersome calculations about how much they might lose on a swing in the Thai currency’s exchange rate. By 1997, these transactions totaled $56 billion, triple the 1994 level. Private capital flows into the country in 1995 were equal to 13 percent of gross domestic product. That was a much larger percentage than most other developing countries received at any time during the emerging market craze of the 1990s. When the Thai Central Bank faced shortage of foreign currency, the foreign investors pulled out their dollars adding to Thai difficulty. Then the hedge funds attacked baht causing further depreciation of the currency. Thailand reached a crisis situation due to its inability to meet foreign currency and short term debt obligations. The IMF stepped in with a large rescue loan which was used up quickly to pay the foreign lenders.
 
With IMF encouragement, Russia had loosened the rules in 1996 to allow foreigners to buy and sell freely short term Russian treasury bills called as GKOs.  American and European banks, hedge funds and brokerage firms had heavily invested in GKOs, to the tune of about $20 billion in early 1998. The chief attraction was the yield, which offered very high returns in the 20-30 percent range (on an annualized basis) during this period, and the short maturity—often three months—which made the risk seem low. Russia became one of the world’s prime destinations for international portfolio managers looking for high-yielding paper to fatten their returns. Portfolio investment in Russia surged to $45.6 billion, or roughly 10 percent of the country’s $450 billion GDP. Russia-dedicated mutual funds sprang up and found themselves deluged with foreign cash. But when Russia started facing financial difficulties, these investors who made obscenely high profits on the Russian GKOs, were imploring the IMF to mobilize a bolshoi paket—a “big package”—for Moscow. When IMF lent to Russia $4.8 billion, the money was used by the Russian central bank to pay the foreign investors exiting the country’s market.
 
In 1995 when IMF extended a large loan to rescue Mexico from the Tequila crisis, even the Germans fumed that the IMF loan to Mexico was essentially going to bail out Wall Street. American investors and brokerage firms had bought tens of billions of dollars worth short-term Mexican government bonds. The rescue money went mainly to the Wall Street bond holders. The American bond holders had dumped their Mexico bonds and switched to US treasury bills since the interest rates in the United States rose at the same time. 
 
This why the IMF loan is termed as more of a “foreign investor exit facility” than a rescue for the borrower country.
 
The Korean crisis was caused by the private sector corporations and banks who had overborrowed short term funds from Japanese, American and European banks. When IMF was negotiating the Korea loan, the US Treasury sent its officials to demand from Seoul to allow greater business opportunities for foreign brokerage firms. The Americans forced Korea to increase the ceiling on aggregate foreign ownership of publicly traded companies from 26 percent to 50 percent and the ceiling on individual foreign ownership from 7 percent to 50 percent.
 
The US and the IMF have systematically forced less developed countries to remove and relax capital control restrictions so that the Wall Street could make enormous fortunes by playing  the currencies, bonds and debt of the less mature markets. Fortunately India has resisted this and that’s why India escaped from the so-called Asian crisis. There is a limit on the purchase of bonds, stocks and treasury bills by foreign funds. 
 
Even Chile, which has a free market liberal economy had imposed restrictions in the 1990s on entry and exit of short term capital flows with a minimum lock-in period and some other conditions. But the Americans got these restrictions relaxed through the US-Chile FTA signed in 2004
 
The Americans played such games since these crises in Asia, Latin America and Russia had proved more of a stimulant than a drag on the U.S. economy. In fact, the crises had a positive overall contribution to the robust U.S. growth rate. The turmoil in emerging markets produced many gains for American firms and workers, mainly because of the favorable impact on inflation and interest rates.

The above are not the complaints of a third world leftist. These are the considered conclusions of a Washington Post staff writer, who is part of the Washington DC establishment with privileged access to documents and the principal players.

Debt addiction of Argentina and the debt traffickers of the Wall Street

Argentina is in the news these days with speculations about the possibility of debt default, yet again.... 

The country does not have enough foreign exchange reserves to make repayments and interests to the 40 billion dollars IMF loan and the 70 billion dollars of Argentine bonds held by foreign bond holders. 

When I asked an Argentine amigo (friend), he shrugged his shoulders and told me that he had seen the movies of debt and default many times before. According to him, the current crisis is nothing in comparison to the catastrophic economic, political and social collapse of the country in 2001.
 
It is in this context of yet another Argentine debt crisis that I read the book “And the Money Kept Rolling In (and Out) Wall Street, the IMF, and the Bankrupting of Argentina” by Paul Blustein, a Washington Post staff writer. He was a first hand witness to the Argentine crisis when he was posted in Buenos Aires in 2002. He has done extensive research and interviewed IMF, Argentine and US officials as well as the bankers. He had already written a book “ The Chastening: Inside the crisis that rocked the global financial system and humbled the IMF" following his coverage of the crisis in Asia, Russia and Brazil in the 1990s. With such deep expertise, he has brought out the role of Wall Street and IMF in the Argentine financial crisis in 2001. 
 

The primary responsibility, of course, lies with the Argentines themselves. It was the Argentines who made the crucial decisions and took the money happily from the Wall Street and IMF.  The Argentine government spent more than they should have, taxed less than they should have and borrowed more than they should have. In 1991, they started the Convertibility system of 1:1 fixed exchange rate of peso with dollar which lasted for a decade. This system should have been used as an anesthesia for a short period to fix the system and move on to a sustainable long term exchange rate policy. There was no way for the Argentine peso to maintain its parity with US dollar in the long term. It was a no brainer, as the Americans say. But the Argentines kept up the system beyond its expiry date and paid a huge price. In 2001, the economy collapsed accompanied by an unprecedented political and social crisis.
 
The Wall Street and IMF are equally responsible for helping the Argentine addiction to debt. In the 1990s, the Wall Street hyped Argentina as a success story, encouraged the country to issue bonds and sold them in the international financial market. Argentina was one of the biggest bond issuers in the world during the period 1997-99. At a time when Argentina’s indebtedness was mounting in the late 1990s, the Wall Street bankers lauded the country as a paragon of the developing world and poured money in, lulling the government into complacency. 
 
The Wall Street firms whose analysts peddled optimistic reports were generally the same ones collecting fees from bringing Argentine government bonds to market—a business that generated nearly $1 billion for big securities houses during the period 1991–2001. 
 
A little over a year before Argentina’s default, J P Morgan, the firm that brought more Argentine bonds to market than any other, sent clients a report taking issue with pessimists worried that the country was destined for bankruptcy. The report’s title was “Argentina’s debt dynamics: Much ado about not so much.”. The basic thrust of that report was that fixing the fiscal problem was essential but that a modest adjustment would enable the country to avert default.
 
In March 2001 another Morgan report said: “The government’s capacity to service its debt this year is not in question.... We believe that the fears of abandoning convertibility are overdone and point out that devaluation is not a policy option due to the limited benefits.” 
 
ABN-AMRO, assured its clients at the end of June 2001: “Argentina has neither devalued its currency nor defaulted on its debt obligations and we continue to believe that neither scenario is in the cards.”
 
“A Bravo New World.” So proclaimed the title page of a report on Argentina and other Latin American markets that Goldman, Sachs & Co. sent to clients in January 1996. The report hailed Argentina “for adhering to the prescriptions of the Washington Consensus and keeping the peso tied to the dollar through thick and thin. President Menem and Finance Minister Domingo Cavallo not only did not retract on their promises, but accelerated their economic reform efforts. For Argentine citizens and for those investors who were willing to believe in those promises, the benefits are now becoming apparent.”
 
The investment firm of Dresdner Kleinwort Benson assured clients that they should not worry unduly about Argentina following countries like Thailand or Indonesia into turmoil. “Argentina has come through the first phase of the Asian crisis with flying colors,” the firm said in a June 1998 report, and this was “no coincidence. The economic fundamentals are considerably stronger than three and a half years ago. The decade of reform has strengthened Argentina’s economic foundations dramatically and the asset prices should rebound as the market once again is impressed by Argentina’s capacity to overcome a difficult global financial period.”
 
The 1998 award for “Issuer of the Year,” bestowed by Latin Finance magazine, went to Argentina, which issued large quantities of bonds. Were it not for Argentina, the magazine said, many emerging-market investment bankers “would probably have been twiddling their thumbs” that year, because the currency crises in Asia and Russia had caused capital flows to dry up to the markets they usually served. “Argentina above all other issuers, both sovereign and corporate, was the bankers’ saving grace in 1998,” the magazine said.
 
Besides optimistic analyses, another factor propelling the excessive amount of capital to Argentina was Wall Street’s system for rating the performance of professional money managers. The system created bizarre incentives by rewarding money managers for investing heavily in the bonds of emerging-market countries that already had lots of bonds outstanding. Put more simply, the system strongly encouraged people who controlled huge pools of money to lend to countries with huge piles of debt.
 
The Wall Street traders and brokers make a living out of the up and down swings of markets. They make a killing when the swings are extreme. Argentina had one of the most extreme swings from 1991 to 2001. Having made money during Argentina’s boom period by bringing the country’s bonds to market, those same firms—albeit different departments—were profiting again by speculating on the bonds’ decline. The vulture funds made a killing by buying up the junk bonds cheaply and later blackmailing and suing the Argentine government and forcing them to pay the original prices of the bonds plus interest and penalty. 
 
Blustein notes, “ The conduct of the markets in Argentina is redolent of the scandals that rocked Wall Street following the bursting of the stock market bubble in the United States. Striking parallels can be seen between Argentina’s crisis and some of the most notorious flameouts of recent years, such as Enron, WorldCom, and Global Crossing , in which major brokerage firms pumped up the companies’ securities prices, issuing bullish forecasts that were later seen to be tainted by self-interest”.
 
It is the same trick the bankers used to hype up and over sell the sub prime mortgages before 2007 and caused the financial crisis. Just as the Rating Agencies gave triple A ratings and mislead the investors, the Wall Street analysts and bankers praised Argentina as the best emerging market for investment in the nineties. 
 
The bankers got even the thinktanks to sing the chorus with them. The Heritage Foundation, a conservative think tank that evaluates countries according to an “Index of Economic Freedom,” rated Argentina in 1999 as tied with Chile for the best policies in Latin America, and almost equal to Australia and Taiwan. (The criteria include the degree of government intervention in the economy, respect for property rights, extent of black-market activity etc.)
 
What was the role of IMF?
 
IMF provided a kind of guarantee and cover to the irresponsible Wall Street lenders to Argentina. The lenders know that uncle IMF will come to the rescue of Argentina at the end of the day. And when that happens, the Wall Street bankers get the priority to collect their Argentine dues. If there is no IMF rescue, these bankers would never touch Argentina, knowing the country’s history. Thus the IMF has become an accomplice to the Wall Street who profits from the Argentine addiction to debt. 
 
During the presidencies of Nestor Kirchner and Cristina Fernandez Kirchner (2003-15) , Argentina was ex-communicated from the international financial markets after the audacious and successful  self- restructuring (against the advice of IMF and in defiance of the Wall Street) of the 90 billion dollar debt by 30 cents to a dollar by Nestor Kirchner. Argentina’s external debt was the lowest in this thirteen year period since no one was willing to lend to the country. The Chinese and Chavez helped with some loans and purchase of bonds. Argentina freed itself from IMF surveillance after paying off the IMF debt in full in 2006 ahead of its scheduled period. President Cristina rejected the claims of vulture funds and refused to settle with them even when they started blackmailing her and the country through legal and illegal channels.
 
In the 1990s, the IMF kept up a positive image of Argentina through its statements and lending even when some staffers of the Fund had raised the alarm several times. IMF chief Camdessus raved in a speech in 1997 in Buenos Aires praising the latest economic indicators of high growth and low inflation. “My friends, this may not be paradise,” Camdessus declared. “But the situation is far better than we would have dared imagine not so very long ago.” He invited President Menem to address the annual meeting of the IMF and World Bank 1998 saying, “ the experience of Argentina in recent years has been exemplary, including in particular the adoption of the proper strategy at the beginning of the 1990s and the very courageous adaptation of it when the tequila crisis put the overall subcontinent at risk of major turmoil.... Notable, too, are the efforts of Argentina since that time to continue its excellent compliance with the performance criteria under our arrangements and much progress in implementation of the structural reforms. So clearly, Argentina has a story to tell the world: a story which is about the importance of fiscal discipline, of structural change, and of monetary policy rigorously maintained”.
 
One would have expected Argentina, the IMF and the foreign lenders to have learnt some lessons from the unprecedented tragic crisis of 2001. No, they have not.. They are at it again…
 
The IMF extended a massive 57 billion dollar loan to Argentina in 2018, the largest in IMF history. Christine Lagarde, the chief of IMF, justified the unprecedented large loan saying that it was to bolster market confidence. But it was an open secret that the US and the Wall Street encouraged the IMF to help out the market-friendly centre-right President Mauricio Macri to help in his campaign for reelection. But Macri lost the 2019 election to the anti-IMF Peronist party. The market did not gain any confidence and the IMF money simply disappeared into the usual Argentine labyrinth. The currency has kept up its momentum of rapid devaluation while the inflation has remained high. Now Argentina is stuck with a huge IMF loan.
 
The Argentines have taken seriously the words of Camdessus that ‘Argentina has a story to tell the world’. The University of Buenos Aires has set up a “Museum of External Debt” which tells the story of Argentina’s addiction to debt. It displays documents and charts alongside  a rogues' gallery of photographs of finance ministers and  presidents who had leading roles in the country’s foreign debt. The IMF has a central place among the exhibits.
 

The US blames the Mexican and Colombian cartels as responsible for the American drug addiction and wages even a war to stop the supply of drugs, although it is a completely consumer-driven business. My Argentine amigo uses the same supply side logic to claim that Pobrecito (poor darling) Argentina is a victim of the debt addiction caused by the Wall Street debt traffickers.
 

Latin America’s economic outlook

Latin America’s GDP is projected to grow by 5.2% in 2021 and 2.9% in 2022, according to the latest (October 2021) Economic Survey of ECLAC ( UN Economic Commission for Latin America and the Caribbean)

The growth is coming back after a GDP contraction of 6.8% in 2020. The region is recovering slowly after having  suffered disproportionate deaths and devastation caused by covid.

 

GDP growth:

 

country	2021	2022
Brazil	5.2	2.2
Mexico	6.2	3.2
Argentina	7.5	2.7
Colombia	7.5	3.8
Peru	10.6	4.4
Chile	9.2	3.2
Venezuela	-4.0	1
Central America	5.5	4.6

 

 

Venezuela is expected to show a positive GDP growth of 1% in 2022. 

What a pleasant surprise ! 

What a relief !.. after seven consecutive years of GDP contraction.

Venezuela has suffered an astonishing -124.4% GDP contraction cumulatively since 2014. The economy shrank by a brutal -30% in 2020,  -28% in 2019, -19.6% in 2018, -15.7% in 2017 and -17% in 2016.  

 

The rise in international price and demand for commodities exported by Latin American countries will help in the recovery and growth.

 

Average Inflation of the region was 5.4% in June 2021 on a year-on-year basis. The region has managed to keep the rate of inflation in single digits in recent years. The exceptions are Venezuela and Argentina.

 

Venezuela’s inflation stood at 2719% in June 2021. It has come down from a sky-high 132,060 % in 2019. Argentina’s inflation continues to be in double digits of over 25% in the last several years.

 

Venezuela’s economic catastrophe is compounded by its political crisis and the crippling US sanctions. Argentina is again staring at large external debt and inadequate reserves to meet the payments. 

 

Brazil, which has suffered excessive covid deaths due to the irresponsible policies of the extreme rightist Bolsonaro, is in for political crisis in 2022 when Bolsonaro is likely to challenge his expected defeat in the next year’s elections.

 

Except for Argentina and Venezuela, the other 17 countries of Latin America show relatively positive and encouraging macroeconomic fundamentals.