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 The European Union, which had gone along with US in supporting Guaido has virtually withdrawn its recognition of Guaido.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.