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 The European Union, which had gone along with US in supporting Guaido has virtually withdrawn its recognition of Guaido.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

 

Conquest of Latin America by Chinese capitalists continues...

Chinese acquisitions, investment and projects in six countries of Latin America  amount to an impressive 35.3 billion dollars since 2019. 

The investment is going into power generation, railways, renewable energy and vaccine production..different from the past when they were maligned as predatory extractors of minerals, oil and food crops..

This is is the highlight of an October report of Americas Quarterly 

https://www.americasquarterly.org/article/latin-americas-evolving-relationships-with-china/

There has been no significant new investment in Venezuela and Panama, the other two countries covered in the report. They have not published (may be they are still doing the research) information on the remaining 11 countries of Latin America  

Country-wise share is as follows:

 

Peru 7.98 billion dollars

Chile 6.99 bn

Colombia 6.42 bn

Argentina 5.8 bn

Brazil 5.37 bn

Mexico 2.73 bn

 

Of the total 35.3 billion dollars, the power sector has got the maximum of 12.5 billion followed by railways with 9.8 billion dollars.

 

Detailed break-up below:

 

 

ARGENTINA

 

MAJOR CHINESE ECONOMIC ACTIVITY SINCE 2019

$2.6 billion	Reconstruction of San Martín cargo railway by China Railway Construction Corp. Ltd.
$1.02 billion	Malal-Hue UTE consortium, headed by PowerChina subsidiary Sinohydro, won the bid to build the Portezuelo del Viento hydroelectric dam in Mendoza province
$816 million	China Machinery Engineering Corp.’s improvement of the Belgrano freight railway
$784 million	Northern Patagonian train line built by PowerChina, linking Vaca Muerta shale reserves and Bahía Blanca port
$580 million	Investment by Ganfeng Lithium in solar-powered lithium plant in Salta province

 

BRAZIL

 

 

MAJOR CHINESE ECONOMIC ACTIVITY SINCE 2019

$1.7 billion	China General Nuclear Power Group 2019 acquisitions of Atlantic Renewable Energies and Enel’s Brazilian wind and solar assets
$1.3 billion	China Communications Construction Co. (CCCC) to build a 130-mile railway between Marabá and the port city of Barcarena in Pará state
$1.2 billion	Consortium of three Chinese firms signed a public-private partnership with Bahia state to build a 7.7-mile bridge connecting the capital city Salvador and Itaparica Island
$719 million	China’s BYD company to construct SkyRail monorail system in the city of Salvador
$450 million	CCCC co-invested in a steel rolling mill in Pará state with Brazilian mining company Vale

 

 

CHILE

 

 

MAJOR CHINESE ECONOMIC ACTIVITY SINCE 2019

$3 billion	State Grid bought CGE, the Chilean subsidiary of Spanish company Naturgy
$2.2 billion	State Grid bought U.S. firm Sempra Energy’s Chilean business Chilquinta Energía
$922 million	China’s Joyvio Agriculture Development Co. acquired Chilean salmon producer Australis Seafoods
$804 million	Consortium of CRCC International Investment Co. Ltd. and China Railway
$60 million	Sinovac Biotech to build a vaccine production plant in the Santiago region and a research and development center in northern Chile

 

 

Colombia

 

MAJOR CHINESE ECONOMIC ACTIVITY SINCE 2019

$4 billion	Consortium of two Chinese companies to build the elevated 15-mile metro line in Bogotá
$1 billion	China Civil Engineering Construction Corporation to build a tram line connecting Bogotá to its suburbs
$1 billion	Zijin Mining Group bought Canadian firm Continental Gold, gaining access to the Buriticá gold project in Antioquia department
$418 million	China Development Bank’s financing of the $652 million Mar 2 highway project connecting Medellín to the country’s port

 

Mexico

 

MAJOR CHINESE ECONOMIC ACTIVITY SINCE 2019

$1.8 billion	CRRC Zhuzhou Locomotive to modernize Line 1 of Mexico City’s subway system and add 30 new train cars
$630 million	A consortium including China Communications Construction Company to construct a section of the Maya Train on the Yucatán Peninsula
$300 million	Zhongtong Bus Holding Co. Ltd. and Mexican firm Golden Star 400 to build a plant in Nuevo León state to produce buses that run on natural gas

 

Peru

 

MAJOR CHINESE ECONOMIC ACTIVITY SINCE 2019

$3.59 billion	China Yangtze Power Co., Ltd. bought U.S. firm Sempra Energy’s Peruvian assets, including a 83.6% stake in Peru’s largest power utility company, Luz del Sur
$3 billion	Chinese-Peruvian consortium constructing Chancay port north of Lima
$1.39 billion	Consortium led by China Three Gorges Corp. bought Chaglla hydroelectric power plant

 

record number of illegal emigrants at US-Mexico border despite the covid risk

1.66 million illegal immigrants were apprehended at the Mexico-US border by the US Border Patrol in the 2021 fiscal year, which ended in September.

608,000 arrestees (36.6%) were Mexicans

308,931 from Honduras

279,033 from Guatemala

95,930 from El Salvador

95,000 from Ecuador

57,000 from Brazil

50,000 from Nicaragua

48,000 from Venezuela

45,000 from Haiti

38,000 from Cuba

2,600 from India

The large numbers from Brazil, Ecuador and Nicaragua are new and surprising.

More than 90,000 people entered Panama via the deadly Darien Gap from January to September including hundreds of people from Bangladesh, Ghana, Nepal and other distant countries.

There are no numbers of how many died, got killed and were lost in the gang violence at the US-Mexico border and attacks from venomous snakes in the Darien Gap between Colombia and Panama.

The number of illegal entrants stopped at the US border in 2021 is the highest ever since 1960. The earlier record was 1.61 million in 1986. The number was around one million in most years between 1983 and 2006. After this, it declined to between three and four hundred thousand until 2018. It jumped to 851,000 in 2019 but decreased to 400,000 in 2020.

It is heart breaking that so many people took the deadly risk of migration journey even at this dangerous covid times.

Such large numbers is also indicative of the booming business of the human trafficking agencies.

Sources:

Forbes 22 October report, based on US government statistics.

US Border patrol https://www.cbp.gov/sites/default/files/assets/documents/2021-Aug/US59B8~1.PDF