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Analysis Beyond the Echo Chamber

The Americas Blog seeks to present a more accurate perspective on economic and political developments in the Western Hemisphere than is often presented in the United States. It will provide information that is often ignored, buried, and sometimes misreported in the major U.S. media. For more information, sign up for our Latin America News Roundup or visit the archives.

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As Hurricane Sandy approaches the northeastern shore of the United States, Caribbean countries began cleaning up after the storm left over 60 dead throughout the region. The AP reports that 51 of the 65 deaths reported were in Haiti, where the nation’s Prime Minister declared, “This is a disaster of major proportions.” The Southern region was the worst hit, with large scale flooding causing damage to homes as well as crops. Haiti, which has been grappling with a cholera epidemic for two years, could see increased cases over the next few weeks as the rising water levels facilitate the disease’s spread. For more information on cholera in Haiti, see CEPR’s Haiti Relief and Reconstruction Watch blog. Cuba, Jamaica, the Bahamas and Puerto Rico all reported deaths as well.

The governing coalition led by President Sebastian Pinera took a hit at the polls this weekend in Chile, reports the AP. Parties from the left took roughly 43 percent of seats as compared to 37 percent for the governing right-wing alliance. The left’s largest victory was in central Santiago where Carolina Tohá, who has supported student protests for education reform, defeated the incumbent, “ultra-conservative” Pablo Zalaquett. Former president Salvador Allende’s daughter also won her first major political race, whereas Pinochet’s former intelligence director lost his 16-year hold on the mayor’s office in the upper-class district Providencia. As the BBC notes, the election was marked by low turnout. It was the first election where voting was not mandatory, and abstention was over 60 percent. For more analysis, see the Pan-American Post.

A U.S. appeals court ruled against Argentina in a long running dispute with hold-out bondholders, reports Bloomberg. Argentina appealed a lower court ruling that it must repay the vulture funds before making payments to those bondholders who accepted a restructuring. The ruling comes as a huge victory to NML Capital, a unit of billionaire Paul Singer’s Elliot Management Corp, which has spent millions lobbying against Argentina through the American Task Force Argentina. It was a surprise to many as the United States government had come down on Argentina’s side, having argued to the lower court that their ruling “could enable a single creditor to thwart the implementation of an internationally supported restructuring plan, and thereby undermine the decades of effort the United States has expended to encourage a system of cooperative resolution of sovereign debt crises.” Felix Salmon, writing on the ruling, states, “I've been writing about holdouts, or vultures, or whatever you want to call them, for a good dozen years now, and although they've had victories here and there, there's been nothing remotely as big or precedent-setting as this.”

Ecuadorian president Rafael Correa is pushing a bill that would increase the taxes charged to banks to pay for increased social welfare programs, reports Reuters. The bill, which was submitted to Congress last week, will introduce a 3 percent charge on banks’ income and scrap the exception lowering income taxes for banks to 15 percent, compared to 25 percent for others. The extra revenue would help raise the monthly payments under the government’s Human Development payment from $35 to $50 a month. As Reuters notes, Correa has pushed for significant financial reforms over the last few years, preventing banks from investing in other sectors of the economy, banning some service charges on credit cards, and allowing borrowers to default on loans by giving back the houses or cars to the banks that lent them the money. The government has also mandated that banks repatriate assets that are held abroad so that they can be more productively invested in Ecuador.  Correa, who is widely expected to win another term as President in February when elections are held, has greatly increased social spending during his time in office. For more on changes to the Ecuadorian economy and the government’s social policy, see this recent paper by CEPR researchers Rebecca Ray and Sara Kozameh.

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AP published an article yesterday on the recent electoral success of incumbents in Latin America. Though the article focuses on the advantages of incumbency and the concentration of power in the presidency, there is another far more compelling reason for their success. A quick mention of the “decade of economic growth” in the article gives us a clue that something different may, in fact, have been occurring.

As CEPR Co-Director Mark Weisbrot pointed out in the New York Times, the reelection of incumbents and their political parties has more to do with increasing living standards than anything else. Following a twenty-year economic growth failure associated with neoliberalism, a new wave of leaders campaigned against these policies and for a greater distribution of wealth, and have largely backed up those campaign pledges.

At this point, it might prove fruitful to dig a little deeper into the recent economic context of Latin America, and as it just so happens, CEPR has been doing exactly that for many years now.

A few examples indicate that policies leading to significant economic and social advances are likely playing a strong role in countries where the reelection of incumbents has occurred:

  • Under the consecutive governments of Néstor Kirchner and Cristina Fernández, Argentina’s economy grew more than 85 percent from its collapse in 2002 to 2011, one of the highest economic growth rates in the world. Poverty, income inequality and unemployment have fallen by two-thirds, one-half and more than one-half, respectively, since their peaks after the 2001 crisis. In 2010 poverty had fallen to fourteen percent of the population and unemployment to 8 percent. Cristina Fernández won reelection easily in 2011.
  • In Venezuela, Chávez has presided over a 49.7 decline in the poverty rate. Extreme poverty declined 70 percent from 2004-2011. At 26.7 and 7.0 percent, respectively in 2011, both poverty and extreme poverty have reached historic lows for the country.  From 1980-1998 Venezuela’s GDP per capita actually declined by 14 percent, while it has increased by 2.5 percentage points annually since 2004 once the economy had recovered from the devastating opposition oil strike of 2002-2003. (Of course it grew even faster if measured from 2002). Hugo Chávez was most recently re-elected two weeks ago on a platform of continuing the economic and social gains that his country has seen in the last decade, and which has resulted in the largest decrease in inequality in the hemisphere.
  • Since Rafael Correa became president of Ecuador in 2007, large increases in social spending have led to significant improvements in health and education and have led to substantial and consistent reductions in poverty and unemployment rates. Rafael Correa was reelected by a wide margin in 2009.
  • Bolivia’s economic growth under Evo Morales was also higher than at any other time in the previous 30 years. Morales was reelected under a new constitution in 2009 after his country regained control over their natural resources and used the funds to increase public investment and social spending.

Following a week of protests which resulted in the deaths of three people, President Martinelli of Panama said he is willing to cancel plans to sell land in the duty-free zone in Colon. The protests were in response to the passing of a law last Friday which would allow the selling of land to companies which are currently leasing land in Latin America’s largest duty-free zone. Protestors contend that the millions of dollars in leasing fees go to the capital and don’t help provide needed services in Colon. Political Analyst Joe Blandon told the Associated Press, “In Colon, there is an economic system that clearly shows its injustice…On one side is the canal, the duty-free zone, and on the other is the city where half of the population lives in poverty."

Bolivia is breaking the mold in the “war on drugs” in their efforts to contain the cultivation of coca, reports Deutsche Welle. The coca leaf has been used for centuries in Bolivia as a mild stimulant and Bolivia withdrew from a UN convention that labels the coca leaf in its natural state as a narcotic substance. That move, together with expelling the DEA in 2008 angered Washington, which has included Bolivia on a list of countries “failing demonstrably” in the war on drugs. Nevertheless, while previous efforts at crop replacement were failures, a new “social control” policy is proving effective. The program, which began in 2008 with financial support from the European Union, aims to work with the powerful coca growers unions to limit each registered grower to a small plot of coca. Coca planted outside permitted zones is still targeted for destruction, but the unions now support those efforts.  These new programs seem to be effective as the UN recently found that coca cultivation in Bolivia fell 12 percent in 2011.

Venezuelan finance minister Jorge Giordani presented the 2013 budget to national assembly this week, reports Reuters. The budget forecasts economic growth of 6 percent in 2013 with inflation falling to a range between 14-16 percent. While many financial analysts have predicted a sharp slowdown in Venezuelan growth after increased spending in the year before the election falls off, CEPR research has shown that Venezuela’s growth is sustainable. Venezuelanalysis, looks at the budget in terms of social spending, noting that it will make up over 37 percent of the budget. Education receives over 11 percent of the budget, while social security and health are set to receive 10 percent and 8 percent, respectively. As Venezuelanalysis notes, the regular budget doesn’t include all social spending as PDVSA and Fonden also contribute to social investment.

The crew from Argentina’s naval vessel returned from Ghana today, as the ship remains detained by the vulture fund NML Capital, reports the AP. Many members of the crew expressed frustration and dismay at returning to Argentina without the flagship vessel. Nevertheless, President Kirchner has refused to negotiate with the vulture fund, “As long as I am president, they can keep the frigate, but no one will take the liberty, sovereignty and dignity of this country - not a vulture fund, not anyone." Meanwhile, another Argentine vessel, which was forced to dock in South Africa for repairs, is being targeted by NML capital, reports Mercopress. The Argentine embassy is ready to respond should legal efforts to detain the ship go forward, however the news report notes some key differences with the situation in Ghana. For one, Elliot Capital, the parent company of NML, tried buying South African company bonds for cents on the dollar and suing for full value plus interest but has yet to win a court case in South Africa. For more on NML and the other vulture funds lobbying against Argentina, see here and here.

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The killing of indigenous protestors by the Guatemalan military has raised fears about the militarization of police duties, reports the New York Times. The killing has also raised questions about U.S. military aid to Guatemala, as U.S. Marines have been stationed there for the last two months assisting in anti-drug trafficking operations. During the country’s civil war, the military was found to be responsible for the vast majority of human rights violations, including the Dos Erres massacre carried out by the Kaibiles special forces. Current President Otto Perez Molina was himself a former Kaibil. The criticisms echo those in Honduras, where the U.S. is reassessing their assistance to the Honduran armed forces after U.S. agents were involved in a series of deadly raids.  A number of recent op-ed and articles highlight these issues further.

While the killing of protestors by the military is bringing up fears of the past, the relative success at holding those responsible accountable is giving hope that the history of impunity in Guatemala is ending, reports the Associated Press. Claudia Paz y Paz, the attorney general, has the strong support of the international community, and responded quickly in arresting 8 army privates and a colonel, who could face up to 500 years in prison for “extrajudicial assassination.” Kelsey Alford-Jones, director of the Washington-based nonprofit group Guatemala Human Rights Commission/USA, told the AP, "It is an important departure from Guatemala's long history of impunity for similar crimes…Justice in this case, along with the demilitarization of citizen security, will be a significant step toward ensuring non-violent resolution of social conflict in the future."

Jamaica is pushing forward with a new IMF agreement, reports Go Jamaica. An IMF delegation traveled to Jamaica recently to begin negotiations for a new agreement, and Prime Minister Portia Simpson-Miller said over the weekend that the “government is working as hard as possible to conclude an agreement”. Jamaica returned to the Washington-based lender in 2010, yet the agreement put in place contractionary austerity measures, as documented by CEPR at the time. Jamaica has struggled through years of slow growth and high debt, with some 50 percent of revenues dedicated to debt service. Per-capita GDP is projected to remain below its pre-recession level through 2017. Never the less, indications are that a new IMF agreement would contain many of the same problematic requirements as the previous agreement, despite opposition from within the IMF.

The Ecuadorian government has found new supporters of the Yasuni conservation plan, reports Reuters. The plan, which involves the protection of one of the most bio-diverse places on earth, requires donors to compensate Ecuador for conserving the area and not drilling for oil in the reserve, estimated to hold $7.2 billion worth of oil. Thus far the plan has received some $200 million, mostly from bilateral donors, though corporations are increasingly donating as well.

Argentina is ordering the evacuation of the ARA Libertad, the naval vessel held in Ghana by the vulture fund NML Capital since early October, reports the Associated Press. A judge in Ghana, who denied Argentina’s appeal to have the seizure reversed, also prevented to ship from refueling leaving the 326 crew members without power on board. Foreign Minister Hector Timmerman responded, calling the move “an attack that is nothing more or less than a kidnapping, an extortion and an act of piracy against a sovereign nation." To read more on the vulture fund, their lobbying efforts in DC and their history, see here and here

Fox Business’ John Stossel knows better than the Honduran constitution and your Economics 101 class, he revealed over the weekend. The pesky Honduran Supreme Court recently ruled 13-2 that proposed libertarian utopia charter or “model cities” – called “free cities” by Stossel – would go against Honduras’ constitution. Remember, this is the same constitution which we have been repeatedly told “socialist,” “Chavez-ally” former president Zelaya was trying to subvert before he was bravely ousted in a coup by the Honduran military, leading to Honduras’ status as a beacon of liberty and human rights today. But sadly for Stossel and model city proponent Michael Strong, apparently the Honduran constitution and Honduras’ post-coup institutions are not as freedom-loving as they seemed during the military coup.

The Supreme Court ruling is a surprising blow to a project that has attracted much interest – and little skepticism – from media outlets such as the New York Times. “Freedom-haters” in Honduras meanwhile, such as Garifuna communities who say their land rights are threatened by a model city plan, were handed a significant victory in a country where the rule of law is weak are institutions are notoriously corrupt.

Previous backers of the “model city” concept – notably idea man Paul Romer – also recently walked away from the project, shocked at the lack of transparency and fair-dealing by the Honduran government.

“Honduran free city founder” Strong (who actually is from the U.S.) knows when he isn’t wanted. He’ll just find someone else who appreciates him and his ideas:

"We hope and expect that another country will choose prosperity over poverty, but for now advocates of poverty have won in Honduras," Strong says.

Stossel agrees:

I wish him luck in finding other places to start a "free city." It has worked before. Hong Kong was once just as poor as Africa -- but thanks to a government that enforced property rights but did almost nothing else, it is now even wealthier than the United States.

Several new op-eds and articles highlight problems with the U.S. government’s support for the post-coup government of Pepe Lobo in Honduras. New U.N. data reveals that the homicide rate in Honduras – already infamous as the “murder capital of the world” -- has gone up even further, to 92 murders per 100,000 people, over 82 a year ago. This makes Honduras far and away the most murderous country in Latin America (despite what some journalists have contended), and well above that of violent neighbors such as El Salvador (69 per 100,000) and Guatemala (38.5 per 100,000).

As scholars such as Dana Frank, in numerous articles in The Nation, The New York Times, and now Foreign Affairs, have pointed out, the increase in killings has resulted from the climate of instability in the wake of the 2009 coup, which was supported by the Obama administration. While coup opponents, journalists, the LGBT community, and women have been targets of post-coup violence across the country, Honduras is also now home to more than one “hot spot” of bloodshed since the coup.

The 2009 coup against democratically elected president Manuel Zelaya cut short a land reform process that sought to resolve conflict in the Aguán Valley region where a few rich landholders have been able to acquire huge swaths of land at the expense of impoverished peasants. “Armed commandos pass[ed] menacingly through defenceless villages during the days after the coup,” as “The government has converted the area of these agrarian conflicts in Bajo Aguán into a war zone” with “low-flying military helicopters and planes" and “the peasants of the region’s organized movement suffer from kidnappings, torture and murders,” a September 2011 report [PDF] by the International Federation for Human Rights noted. The most notorious of these land owners is Miguel Facussé, uncle of former president Carlos Flores Facussé. Miguel Facussé is considered by the U.S. government to be involved in drug trafficking, and is frequently described as the “most powerful man in Honduras.” Facussé also has tourism interests in the Gulf of Fonseca area, on the other side of the country on the Pacific Coast, where forced evictions are also occurring and community radio stations and journalists covering them have been targeted with death threats, shut downs, and arrests.

The Honduras Supreme Court struck down a plan to build private “charter” cities, reports the Associated Press. The project, which envisioned areas of Honduras turned over to private investors and run with their own laws, was opposed by civic groups and the indigenous Garifuna, whose land was threatened by the project. Lawyer Fredin Funez told the BBC, “This is great news for the Honduran people. This decision has prevented the country going back into a feudal system that was in place 1,000 years ago.” The Honduras Culture and Politics blog has more on the American company, MGK, which was planning on making the first investment under the law.

President Dilma Rousseff of Brazil signed the country’s forest code into law yesterday, reports AFP. The president, who used a line-item veto to rid the bill of some parts that had been included by the pro agri-business bloc in congress, touted the law, saying, “No to amnesty, no to encouragement of illegal logging.” Environmentalists were less optimistic, however. Paolo Adario of Greenpeace noted that, “"The presidential veto slightly improves the text approved by Congress, which was awful, but the result continues to be very bad.” While former Presidential candidate Marina Silva agreed, “We can conclude that illegal loggers won and society lost."

Uruguay became just the second country in South America after Guyana to effectively legalize abortion, reports the New York Times. The bill, which narrowly passed the Senate, would allow for “abortion in the first trimester, permits abortion through 14 weeks of pregnancy in cases of rape and allows later-term abortions when a woman’s health is at risk.” While the bill is a step in the right direction, women’s groups criticized some aspects of the legislation, hoping that it would have gone further, reports Inter-Press Service. Women who are seeking an abortion must first explain to a doctor the “economic, social, family or age difficulties that in her view stand in the way of continuing the pregnancy.” The spokeswoman for Mujer y Salud en Uruguay, an NGO which is leading the push for legalization, told IPS, “We see this law as minimal; it is not what we were hoping for… It has many gaps, and satisfies no one.”

Hospital managers in Peru’s public health system have walked off the job, in solidarity with striking doctors, reports Reuters. This is the latest in a string of labor conflicts between Humala, who was elected on a center-left platform, and labor unions. Peru, which ranks last in Latin America in public health spending as a percent of GDP has refused to provide wage increases to doctors and teachers, a decision unions blame on conservative finance minister Luis Miguel Castilla. Jesus Bonilla, a leader of the doctor’s union, told reporters, “Our country has been growing strongly but pay in the public sector for the last decade has fallen substantially. We haven’t received a cent of increases. Our buying power has fallen 30 or 40 percent.” Criticism hasn’t just come from the left, conservative politician Lourdes Flores told Peruvian radio, “The president told the country he believed in a strong state. But the state is a disaster.”

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Last week I wrote about the American Task Force Argentina (ATFA), which has spent more than $3 million lobbying against Argentina. One of the primary players behind ATFA, NML Capital, detained an Argentina naval ship in Ghana earlier this month in an effort to force “full” repayment on defaulted Argentina bonds, which were purchased for just a fraction of their face value.

The lobbying group also lists many farmers associations and education groups amongst its members. These groups have often been cited by ATFA when it has argued that the issue of Argentina being forced, to pay back “full” value is important to mainstream America, and not just hedge fund managers. Never mind the fact that Argentina has reached agreement with 95 percent of bondholders.  But a report from the Wall Street Journal reveals that ATFA is really closer to a “vulture funds…lobby facade,” as Argentina ambassador Jorge Arguello has referred to it. The Journal reports:

Mr. Matlack is president of American Agriculture Movement, a farmers' advocacy group that was listed among about 40 members of American Task Force Argentina, whose stated mission is to help investors recoup money from Argentina's 2001 bond default and subsequent restructuring.

But Mr. Matlack and some leaders of other groups representing ranchers, teachers and farmers, are baffled about why the task force listed their organizations as members "united for a just and fair reconciliation" of Argentina's default.

Reached while he was planting wheat on his farm, Mr. Matlack said he had never heard of American Task Force Argentina. "We don't have anything to do with Argentina's debt," he said.

Also perplexed are leaders of the Colorado conference of the American Association of University Professors, which was listed under members and supporters. "This is absolutely foreign to me," says Ray Hogler, legislative director of the academic group.

Both groups were dropped from the list after the Wall Street Journal alerted the task force to the discrepancies.

This abuse of the names of professional associations to further the interests of vulture funds should give additional pause to those in the House and Senate who have argued in favor of bending the foreign policy of the United States in favor of those funds’ interests.

To read the rest of the article, click here. For some more background information on Argentina and their default and restructuring see here and here

As I have noted previously, fake polling and other suspicious activities in previous Venezuelan elections had helped those with a political agenda, including some journalists, advance their interests.  There was less of this in Venezuela’s October 7 election than in some previous elections, but still plenty to go around.  The dubious achievement awards for this election go to:

  1. Barclays, one of the world’s biggest banks:  put out a report two days before the election stating that “an opposition victory looks likely,” and recommending to its investors that they buy Venezuelan bonds.  Two days later Chavez won by 11 percentage points, and Venezuelan bonds fell by about 5 percent, although they have since recovered much of this loss.  (As an intermediate to long term investment, Venezuelan dollar-denominated bonds are most likely a good buy, since the return is quite high and the risk of default is low.  But those who took Barclays’ advice were betting on the election, and they lost.)
  2. Varianzas, a major Venezuelan polling firm, published an exit poll on the day of the election showing Chavez losing by a margin of 3.2 percentage points.  A result this far off the mark has an extremely small probability of occurring by random error.

So, what I want to know: was anybody fired for these mistakes?  Bloomberg noted that the lead analyst for the Barclays report was a Venezuelan who had “run unsuccessfully for public office as a member of Capriles’s Primero Justicia party.”  Was it incompetence or just a desire to help the cause of the opposition that led to this gross error?  You make the call. Polling firm Consultores 21 predicted a Chavez loss by 4.6 percentage points before the election.  Consultores 21 had a track record of significant bias toward the opposition, but it was used by many media outlets to say that the election would be close.  Will any of these people be taken seriously in other forecasts?  If they made these enormous errors in the U.S. presidential race, the answer would be an obvious no.  But there are special standards for sources on Venezuela  . . .

Seven polling houses in September showed an average lead for Chavez of 11.7 percentage points.  (The Wilson Center reported this as “Though major polling firms differ on where the race stands, they seem to agree that the final outcome is almost impossible to predict.”)  So just taking the average would have gotten you within 0.7 points of the actual result.  CEPR’s statistical analysis of the polling, correcting for past bias, estimated a 13.7 percent lead for Chavez, and gave Capriles a 5.7 percent chance of winning.

Some of the pre-election analysis was not dishonest but still difficult to understand.  Political scientist Iñaki Sagarzazu analyzed past and current polling data and concluded on Oct. 2 that “As it stands the race is extremely close.”  An 11 point margin is not extremely close, in the sense that pollsters with reasonable skill should to be able to predict the winner of such and election in advance.  

_______

As bad as the major English-language media coverage was, the Spanish-language media coverage was worse.  ABC in Spain reported wild stories of a Chavez government “plan” to take over the country by military force if they lost the election – stories that were completely ignored in the major English-language media, but picked up in major Latin American newspapers.  The Latin American media is the main reason that most people in Latin America have a view of Venezuela that is as distorted as, or worse than that of most U.S. residents.

Peru’s La Republica ran a piece this week by political scientist Steven Levitsky, who invented a new label for Venezuela under Chavez, “Competitive Authoritarianism.”  For him, the Chavez government is “equally authoritarian” as the Fujimori government in Peru.  Fujimori carried out a presidential coup in 1992, dissolving the Congress and suspending the constitution; the legitimacy of his government was widely questioned internationally throughout most of his tenure.  He is currently serving a prison sentence for murder, kidnapping, and corruption that he was found to be personally responsible for during his presidency.   Venezuela, by contrast, has had 15 elections or referenda under the Chavez administration, without any serious question of legitimacy; it has vastly increased voter registration and participation (more than 96 percent and 80 percent, respectively in the most recent election, which Jimmy Carter called the best electoral process of 92 countries that he had observed).  

But for Levitsky, “there is not democracy in Venezuela,” but rather a form of authoritarianism like Fujimori’s Peru.   This is a bit like asserting that the United States and Saudi Arabia have the same political systems, since in both countries the vast majority of the people have little or no input into the most important national policy decisions that affect their lives.  Probably no political scientist could get away with such an exaggeration.  But hey, this is about Venezuela – exaggeration is the norm, and anything goes.

Ecuadorian plaintiffs, seeking to collect $19 billion in damages from Chevron, will be able to seize some $200 million of the company’s assets in Ecuador, a court ruled Monday. Reuters reports that the court in Lago Agrio, Ecuador ruled that assets, including money in Chevron bank accounts in Ecuador and money the Ecuadorian government owes to Chevron, be turned over to the plaintiffs. Just last week the U.S. Supreme Court dealt Chevron another blow, rejecting an attempt to block enforcement of the $19 billion ruling in the U.S. The plaintiffs have filed suits in Brazil and Canada to try and enforce the ruling. On the victory Monday, Pablo Fajardo, the lead lawyer for the affected Ecuadorian communities, told Reuters, “This is a huge first step for the rainforest villagers on the road to collecting the entire $19bn judgement.”

Chilean student leaders, Camila Vallejo and Noam Titelman, are in the United States this week where they will receive the 2012 International Letelier-Moffitt Human Rights Award presented by the Institute for Policy Studies. Democracy NOW! speaks with the two student leaders, who have helped organize some of the largest protests in Chile since the Pinochet dictatorship. Titelman said, “our public education is dying, we have only 36 percent of students going to public schools. Here in the States, it’s almost 90 percent. It’s really a very special example of how privatized can a state become.” Meanwhile, back in Chile, thousands of students took to the streets in Valparaiso to demand urgent action on education reform, reports the Associated Press.

State intervention is back in Latin America, and helping to create social policies and reduce inequalities, according to the regional director of the UN Development Program, Herlado Muñoz reports Mercopress. As opposed to the 90s when the Washington Consensus dictated that the government was the problem, Muñoz notes that, “For the first time in many decades the State is back in Latin America.” CEPR research has shown that there is a relationship between moving away from the Washington Consensus and reducing inequality. Juan Montecino, using econometric techniques to look at the data, determined that left-of-center governments have on average decreased inequality more than their counterparts. 

As Colombian government and FARC negotiators head to Norway to begin peace talks, a judge in Colombia ordered the return of some 160 acres of land to 14 families in the country’s first land restitution ruling.  President Santos enacted the Victims and Land Restitution law last year, yet since then progress has stagnated and violence against those seeking restitution has continued. The issue of land reform is one of the main demands being sought by the FARC in peace negotiations.

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The second presidential debate will take place tonight at Hofstra University in Hempstead, New York. The topics will range from domestic to foreign policy, meaning the issue of “free” trade* is sure to come up. On this topic, there is little daylight between the two candidates. In 2008, candidates from both the Republican and Democratic Party participated in an “anti-NAFTA off”, competing in Rust Belt states that have lost hundreds of thousands of manufacturing jobs. Sherrod Brown (D-OH), stated clearly after the election that the “results demonstrated Americans’ continued rejection of NAFTA style trade agreements."

Nevertheless, the last four years have seen a series of “NAFTA-style trade agreements” passed despite significant opposition from within the Democratic Party. President Obama has signed trade agreements with Colombia, Panama and Korea and is now negotiating the Trans-Pacific Partnership (TPP), a trade deal with at least 10 countries that Public Citizen’s Lori Wallach describes as “NAFTA-on-steroids with the world.” During the last debate, President Obama touted the trade deals as boosting exports while Romney said he would push for even more “free trade.” Wallach writes:

In an election dominated by the urgent agenda of U.S. job creation, it is a sorry statement about the domination of corporate money in American elections that both presidential candidates tout these NAFTA-style "free trade" deals. Repeated polls show that opposition to these NAFTA-style deals is one of the only issues that unites Democratic, Republican and Independent voters. 

Reforms to Mexico’s labor law have faced growing resistance, writes David Bacon for In These Times. The law, which Benedicto Martinez Orozco, president of the Authentic Labor Front (FAT), calls “a monstrous law,” would allow for greater flexibility on the part of owners to hire and fire workers. It would replace daily wages with hourly wages, allow for hiring through labor contractors, and limit employer’s liability for back pay, among other changes. One aspect of the reform that unions had fought for, the right to a secret ballot, seen as key to diminishing the power of the PRI-backed non-democratic unions, was stripped from the bill. Over the past weeks, a broad sector of groups have protested the bill, going so far as blocking the doors of congress last week to prevent them from considering the labor reform.

Paraguay’s foreign minister, Jose Felix Fernandez Estigarribia, confirmed that he traveled to the US last week to meet with a South American ambassador about Paraguay’s reincorporation into UNASUR and Mercosur, regional groups which Paraguay was suspended from following the ouster of Fernando Lugo. Mercopress also reports that two ambassadors will be returning to Paraguay, expected to be from Colombia and Panama. Following the 2009 coup in Honduras, both Panama and Colombia sided with the US and supported the electoral process under the coup government, while the rest of the region refused to recognize the results.

What place will the FARC have in Colombian politics if the peace negotiations are successful, asks Chris Kraul in the Los Angeles Times. While a main plank of the negotiations will be ensuring a political voice for the rebels, they will try and avoid the fate of Union Patriotica a former party with ties to the rebels. Over 1,100 members of the party were killed during the 80s and 90s by right wing paramilitaries. Some analysts believe the FARC will try to enter the political debate through Marcha Patriotica, an agrarian reform movement that has launched large demonstrations throughout Colombia recently.

News Corp., Rupert Murdoch’s media conglomerate, is expected to add Alvaro Uribe, the former President of Colombia to their board today, reports Roque Planas for The Huffington Post. Free press advocates note that it seems like an odd choice given the wiretapping scandals that both News Corp. and Alvaro Uribe have been embroiled in. Many ex-aids to Uribe are facing criminal probes into the illegal wiretapping of supreme court judges, human rights workers and journalists by the Colombian intelligence agency. News Corp., for their part, is still dealing with the aftermath of the phone hacking scandal at News of the World last year. Political scientist Claudia Lopez notes one difference, “News Corp., as far as I know, never threatened anyone with death…Institutions that answered directly to Alvaro Uribe did.”

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The New York Times reported Saturday on U.S. drug efforts in Honduras. Following a series of bungled raids and downed airplanes, the Times reports that “All joint operations in Honduras are now suspended,” while U.S. officials develop a new plan which will encompass other areas of reform. On the deadly raid in Ahuas, which CEPR policy analyst Alexander Main and Annie Bird of Rights Action documented in detail here, Senator Patrick Leahy (D-VT) told the Times, “This operation was bungled in its conception, in its implementation and in its aftermath.”

Many former recipients of IMF loans spoke out at the annual meetings this week against the conditionalities imposed by the IMF, Reuters reports. The IMF released new research last week showing that the austerity policies they imposed as lending conditions caused up to three times more economic damage than they had previously estimated. Argentina, which defaulted on their debt after an economic crisis triggered in part by IMF austerity policies in the early 2000s, noted the IMF’s admission was a “first step”, but Finance Minister Hernán Lorenzino added, “Once again... the IMF is endorsing policy conditionalities and reform strategies that are bound to fail, worsening recession and unemployment levels in programme countries and leading to unsustainable debt paths and social failure.” A CEPR report in 2009 looked at all the IMF’s borrowing agreements, finding that 31 of 41 contained pro-cyclical policies that could lower economic growth.

At the annual IMF meetings in Tokyo, Colombia announced it would leave the voting bloc aligned with Brazil in favor of Mexico, reports Bloomberg. Brazil, a member of the BRICS countries, has been one of the most vocal advocates of IMF reform. An agreement to shift more voting rights to developing countries has been held up for years as the traditionally dominant European countries have resisted moving their voting shares more in line with their share of world economic output. Colombia’s Central Bank chief Dario Uribe commented on the move to Mexico’s voting  constituency, “It’s a group where there’s a receptivity toward a country like Colombia, where there are great historical and commercial ties.”

Last week a “vulture fund” belonging to American Task Force Argentina, a lobbying group seeking to recoup the “full” value of Argentina’s defaulted bonds which were bought for cents on the dollar, detained an Argentine naval ship in Ghana to try and force repayment. The lobbying group lists some 40 members of their organization on their website, including many farmers associations, yet this weekend the Wall Street Journal reported that many of them had no idea how they became affiliated with the group. "We don't have anything to do with Argentina's debt,” Larry Matlack president of the American Agriculture Movement told the Journal.

The long-running dispute between Argentina and the “vulture funds” took a turn to the bizarre this week.  “Vulture funds” buy up defaulted debt of developing countries for pennies on the dollar then use lawsuits and other means to attempt to force repayment of the full face value. Now, the vultures have become pirates, holding an Argentine naval ship for a $20 million ransom, Reuters reports:

A court in Ghana upheld as legal on Thursday the detention of an Argentine naval vessel seized under a court order by creditors pursuing the South American nation over its 2002 debt default.

Argentina declared a sovereign default a decade ago and now faces a raft of lawsuits in U.S. courts by bondholders seeking state asset freezes to recover the value of defaulted bonds.

The Libertad, a navy frigate with 200 crew, was detained in Ghana's eastern port of Tema on October 2 under a court order sought by NML Capital Ltd, an affiliate of the investment firm Elliott Management.

Elliot Management is run by billionaire Paul Singer, who has a long history of this sort of action. Singer took both Peru and Congo to court, eventually receiving at least $140 million for debt which he paid just a fraction of that for. Even the former head of Goldman Sachs called the vulture funds’ investment strategy of targeting poor countries immoral: “I deplore what the vulture funds are doing,” said Former Treasury Secretary Paulson to the House Financial Services Committee in 2007.

The backstory: in 2001 Argentina defaulted on some $81 billion (plus interest) of debt as a result of a severe economic collapse. Argentina has since reached agreement with holders of some 95 percent of this debt.  Yet some “vulture funds” have refused to make a deal, seeking instead to use legal recourse to try to recoup the debt’s “full value”. Of course, these funds bought the debt for extremely low prices – in the case of NML, Bloomberg reported that they bought at least $182 million in debt for just 20-30 cents on the dollar. Of 15 bondholders who hold at least $25 million, nine of them are based in the Cayman Islands, including NML.

Nevertheless, they have enlisted the help of the U.S. congress to fight Argentina. The American Task Force Argentina, made up of many of the vultures, has spent over $3 million since 2007 lobbying against Argentina, while Singer himself has given over $1 million to Presidential candidate Mitt Romney. A “Stop VULTURE Funds Act” introduced in the 111th Congress by Rep. Maxine Waters never made it off the ground, and was not even introduced this legislative cycle. Meanwhile, Western Hemisphere Subcommittee Chair Connie Mack (R-FL) is the main sponsor of a bill designed to get Argentina to pay NML nearly $2 billion. While it is highly unusual for a bill to focus on a single country, it is not a surprise given that NML is Mack’s largest contributor. Fortunately, FiveThirtyEight gives Mack a 3 percent chance of winning the race for Bill Nelson’s Senate seat.

If the U.S. government wants to root out pirates in Africa, it should start with our own.

 

An Associated Press article dated October 9 states that Venezuela has

“ at least 2.4 million national government employees, making up 8 percent of the country's population. By comparison, the United States, with tenfold the population, has almost the same number of federal employees, at 2.7 million.”

If Venezuela really had 10 times as many public employees as the U.S., relative to its labor force, this would be amazing.  However it is not true.

Venezuela actually has, according to the latest statistics, 2.49 million public employees – including all levels of government.  With a labor force of about 13.5 million, this is about 18.4 percent of the labor force. (Labor force is a better denominator than total population because of different demographics between countries). 

The U.S. as of September 2012 had 22 million public employees, or 14.2 percent of the labor force.  Thus the difference in public employment between Venezuela and the U.S. is therefore about 4 percentage points.

One reason for the AP’s misleading comparison is that it does not take into account that most public employees in the U.S. (19.2 million of 22 million) are employed at the state and local level.  In most other countries, including Venezuela, the reverse is true.

Of course the U.S. has a relatively low level of public employment compared to other high-income countries.  France, Finland, Denmark, Sweden, and Norway all have public sector employment percentages in the 20s, with France at 22 percent and Norway at 29 percent.

In this article, the author is using Venezuela’s public employment to argue that Chávez had a big advantage over his opponent in the recent election.  However this is not clear.  Most of the wealth and income of the country still belongs to people who oppose the government, and several studies show that the majority of the media (pdf) was biased in favor of Capriles. Whether Chávez’s speeches on television could compensate for this overall media bias against him is not at all clear.

Political scientist Justin Delacour, who has studied media coverage of Venezuela for many years, argues that this article shows a considerable double standard on the part of AP.  He writes:  “I cannot recall one time in all my years of reading AP reports that these sorts of electoral advantages have ever been discussed by your newswire.  It is only when a left-wing party acquires significant PR resources that your newswire is suddenly so concerned about fairness on the PR front in a country's electoral process.” He notes that most media in Latin America are biased in favor of right-wing or center-right parties, but that has not been an issue in AP reporting.

The New York Times coverage of Venezuela’s election must have been a disappointment to anyone who, even if they don’t like President Hugo Chávez of Venezuela, wanted to find out how he managed to win yet another election, this time by an 11 percentage point margin.  In the two articles following the election, there was almost nothing about how people’s living standards had improved, or how that might have affected the election result.  As I mentioned in this op-ed yesterday in the International Herald Tribune and New York Times, the election result is similar to the re-election of left governments throughout South America.  In Venezuela, since the Chávez government got control over the oil industry, poverty and extreme poverty have been sharply reduced (see below), access to health care and education greatly increased (with college enrollment doubling and free tuition for many students), and four times as many people eligible for public pensions.  (For a first hand view from the ground on what some of these things look like, see Lisa Sullivan’s report here; and for a nice review of some of the awful media reporting on the elections, see Keane Bhatt’s blog here ).

But the Times articles on the election result are about an “ailing and politically weakened winner facing an emboldened opposition that grew stronger and more confident as the voting neared.” (In most countries an 11 point margin would be considered a landslide).  And it’s about how disaster must strike the economy soon. Hope springs eternal.  I have challenged the “unsustainability” thesis in detail here. As is customary, yesterday’s article relies heavily on opposition sources, such as economist Ricardo Hausmann, for predictions of doom and gloom ahead.  It is worth noting that Hausmann co-authored a paper claiming that the 2004 presidential recall referendum that Chavez won by a margin of 58-41 percent was actually stolen through fraud. Since the Venezuelan election process is one of the most secure in the world, he offered an unbelievable conspiracy theory as well as statistical evidence that turned out to be worthless. (See here, and links in here).

Hausmann also recommended a NYT op-ed published on Saturday, by the Venezuelan opposition blogger Francisco Toro. This is truly an opinion piece, as there are few facts; but unfortunately some of those facts are wrong. The author asserts that the Venezuelan government has been “less effective at reducing poverty than the Brazilian alternative.” But as can be seen in the table below, although the Workers’ Party government in Brazil has done very well in reducing poverty, Venezuela has done better during the same period. And these poverty rates measure only cash income; they do not count the value of free health care to the poor, which if included would show even more poverty reduction in Venezuela.

The author also asserts that “Venezuela’s child mortality and adult literacy statistics have not improved any faster under his government than they did over the several decades before he rose to power.”  Leaving aside literacy, which is poorly measured, the second table below shows infant mortality for the 12 years before Chavez, compared with the 12 years of his administration. As can be seen, infant mortality declined somewhat faster during the Chavez years.

Pop star Lady Gaga visited WikiLeaks founder Julian Assange this week at the Ecuadorean embassy while in London, meeting with him for a reported five hours.

Gaga and Assange

Perhaps Lady Gaga understands some things that seem to elude the majority of the media: Assange's importance as a defender of freedom of the press and freedom of information.

Assange remains at the embassy while the Ecuadorean government attempts to negotiate a solution to the stand off with Swedish authorities - who refuse to guarantee Assange would not be extradited from Sweden to the U.S., to face possible charges under the Espionage Act, despite appeals from the likes of Amnesty International - and the U.K. - which refuses to guarantee Assange safe passage.

Gaga dressed as a witch, in a possible reference to the "witch-hunt" against Assange, which Assange denounced in an August speech from the embassy.

UPDATE 11:21: CEPR press release:

Chávez Re-Election Continues Trend of Left Governments Re-elected in South America

Economic Growth, Expansion of Welfare State Likely to Continue for Many Years

For Immediate Release: October 7, 2012

 

Washington, D.C.- Hugo Chávez’ re-election to another 6-year term shows that Venezuela, like the rest of South America, prefers governments of the left that have improved living standards and greatly reduced poverty and inequality, said Mark Weisbrot, Co-Director of the Center for Economic and Policy Research (CEPR) in Washington, D.C.

“Chávez is often portrayed as though he were from Mars, but really the similarities between what he has done and what his neighboring left governments have done are much greater than the differences,” said Weisbrot. 

Contrary to many press reports, the vote was not close, as CEPR had predicted it would not be.

[More here.]

UPDATE 11:04: Henrique Capriles now making concession speech.

UPDATE 10:41: Official results: With 81 percent voter participation, Chavez - 54.43 percent; Capriles - 44.47 percent of the vote. (Remaining going to minor candidates.)

UPDATE 10:34 PM: RESULTS BEING ANNOUNCED NOW, HERE.

UPDATE 10:00 PM: Election monitors await the announcement of official results:

CNE

UPDATE 9:55 PM: An election monitor in Tachira state reports:

turnout here approached 90%, a tribute both to the CNE's preparation and organization, the dedication of the civil servants who spent long hours at the stations and, most important, to the Venezuelan people who are actively engaged in who leads their government. Despite the huge numbers, and the early difficulties with long lines and a couple of malfunctioning machines, no one reported any significant problems or concerns about the security of the process.

UPDATE 9:49 PM: An election monitor in Zulia state reports:

in Maracaibo [at] Unidad Educativa Nacional Privada Nuestra Senora del Pilar with 14 mesas and 7482 voters.  This is our largest voting place. ...but was almost empty with vote at 70- 84%. Only minor problems with one machine eating paper receipts; one could be read the other one could not. All quiet.

X vs x with 4 null were results 388 voters 433 entitled to vote. They are now doing paperwork. The null votes were because people pressed the vote button without first pressing the candidate button. Pulling ballots out one at a time and reading them off while another woman is writing results on large form.

UPDATE 9:27 PM: An election monitor reports:

Just spent almost 2 hours at a school in Pq Altagracia, a few blocks from the Presidential palace, witnessing the closing of two mesas and audit (citizens' verification) of one. To ensure all the electronic votes exactly match the paper receipts reviewed by the voters and deposited in the boxes, a random selection of 54% of the 39,000 machines are audited in an open process with witnesses from both parties and, in our case, a group of 15-20 international acompañantes.

Venezuela has "fusion" voting, where a single candidate can run for any number of parties. Chavez is running for 12 parties, Capriles for 19. When you vote you press a picture of your candidate in the box of the party you support.
...

Right now our bus is taking us down streets packed w Chavistas blowing horns, setting off firecrackers and shouting.

We're on our way the CNE headquarters to hear Tibisay Lucena announce the results. Probably we'll be there for several hours.

UPDATE 9:20 PM: Some Venezuela observers are noting that Chavez campaign head Jorge Rodriguez apparently predicted the early release of an exit poll, via the ABC newspaper in Spain, that would show Capriles in the lead, and thereby give the opposition the pretext to claim fraud if the results do not turn out that way. As we have already noted, ABC ran such a story earlier today.

Deutsche Press Agentur reported Rodriguez's prediction on October 2. (H/T to Lee Brown of the Venezuela Solidarity Campaign).

 

The Carter Center released its pre-election report on the Venezuelan electoral process yesterday. The response from the U.S. media has, with the exception of a few wire service articles, been silence. Instead, papers such as the Los Angeles Times, New York Times, and Washington Times have, in recent days, raised the specter of possible fraud, government recrimination against opposition voters, and possible violence that could result from people not accepting the election’s outcome. The Washington Times, for example, began an article Thursday by reporting:

With Venezuelan President Hugo Chavez facing the most serious re-election challenge of his 14-year reign, international observers are bracing for the possibility of social unrest if the outcome is close when voters go to the polls Sunday.

“I think the probability of upheaval and protests increases the closer the vote gets,” said Christopher Sabatini, senior director of policy at the Americas Society and the Council of the Americas in New York.

A close vote count between Mr. Chavez and his fresh-faced challenger Henrique Capriles Radonski may trigger a street-level clash between viscerally opposed supporters of the two.
“There are rumors that Chavista armed organizations are ready to come down from the hills should Capriles win,” said Mr. Sabatini. “The other side is that if Capriles loses in a squeaker, his supporters have some pretty good basis to claim fraud.”

The New York Times, as we noted yesterday, interviewed an opposition voter who claimed to be afraid to vote for Capriles since it might put her future career in jeopardy – despite being perfectly willing to be cited by name in the Times article, and despite making her political inclinations very clear on social media.

The Los Angeles Times, meanwhile, reported yesterday:

For Capriles to win, many voters who lean in his direction will have to overcome fear that they will lose their jobs or benefits in the event of a government change, that there will be an increase in political violence if Chavez loses, or that the government somehow will find out they voted for Capriles and take retribution.

So what does the Carter Center say about the possibility of fraud, and ballot secrecy?

In a stunningly one-sided article two days before the Venezuelan election, the New York Times creates a frightening picture of a deteriorating society in which citizens are afraid to vote against the incumbent president, Hugo Chavez:

“I’m not going to take the risk,” said Fabiana Osteicoechea, 22, a law student in Caracas who said she would vote for Mr. Chávez even though she is an enthusiastic supporter of Mr. Capriles. She said she was certain that Mr. Chávez would win and was afraid that the government career she hopes to have as a prosecutor could be blocked before it begins if she votes the wrong way.

“After the election, he’s going to have more power than now, lots more, and I think he will have a way of knowing who voted for whom,” she said. “I want to get a job with the government so, obviously, I have to vote for Chávez.”

OK, so she is giving the NYT her name but afraid to vote in an election that international observers believe to be conducted by a secret ballot.  Strange.  This might have made an inquisitive reporter do a google search on her name.

He would have found this among dozens of opposition tweets:

obo6sxqj tw1


So, she tweets constantly against the government but is afraid to vote against it in an election process that Jimmy Carter said, a few weeks ago, was the best in the world.

The rest of the article is about as believable as this witness.  For those who don’t follow the NYT coverage of Venezuela, for years it has not been very distinguishable from that of Fox News.  Or the Washington Post.  Hence the consensus of all Very Serious People on Venezuela that it is a scary, authoritarian place to live.

The article also pretends that Chávez has an advantage in the media; however the government has only a small portion of the media, with most remaining pro-opposition.

UPDATE (5:00pm): The Carter Center has told the media that fears of electoral fraud in Venezuela are unfounded.

Newsweek has a commentary piece this week by Venezuelan journalist Boris Muñoz which cites anonymous sources as suggesting that Hugo Chávez’s cancer is but a cleverly designed conspiracy meant to distract Venezuelans from the country’s problems:

As someone very close to Chávez told me (anonymously as he feared falling out of favor with the supreme commander), it was a welcome distraction from the wear and tear of years of failed policies. Chávez “has drawn attention away from the big problems of his administration such as its incompetence, corruption, and bureaucracy, and the nation’s criminal violence,” the source said. “He has created this dramatic scenario to ... seduce the masses because he knows that, terminally ill or not, this is his last chance.”

Indeed, even some members of his inner circle suspect that Chávez’s long battle with cancer is really an elaborate charade masterfully orchestrated in complicity with the government of Havana— and one that might win him yet another term, perpetuating his presidency for another six years.

Never mind for a minute the idea that someone “very close to Chávez” describes his administration as “incompetent” and “corrupt” – “members of his inner circle” suggest Chávez never had cancer at all! With the help of those ingenious Cubans, he successfully duped the Venezuelan people – and so many naïve journalists, including Dan Rather – into believing he was in a life and death struggle against illness, even appearing take on a more plaid complexion, and have his hair fall out! In publishing this article, Newsweek has moved into Weekly World News territory, ala stories such as “Dick Cheney is a Robot” or the harder to believe “Hillary Clinton Adopts Alien Baby.”

While considering this sinister plot, recall how derisively the media generally reacts to Chávez’s assertions regarding assassination plots and U.S. government subterfuge in Venezuela – even though the U.S. role in the 2002 coup, in which Chávez was removed from office is well documented.

Newsweek has never reported the Venezuelan government’s slashing poverty in half, cutting extreme poverty by 70 percent, or even Venezuela’s strong economic growth once the government got control over the oil sector. And Newsweek has barely reported (save for this 2004 article) on one of the most important stories in Latin America’s modern history, one which helps explain the region’s shift to the left: the historic and unprecedented economic failure from 1980 – 2000. But it has plenty of space for wild Hollywood-style conspiracy stories.


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