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Private Bank Profits Don’t Represent the Health of the Economy Print
Written by Arthur Phillips   
Wednesday, 08 May 2013 16:02

Bloomberg’s Nathan Gill wrote a particularly one-sided article on Thursday, in which he states that “Ecuador’s bid to reduce poverty by taxing its banks is threatening to deepen the nation’s economic slump.”

“Slump” seems somewhat dire to describe the state of the Ecuadorian economy. In 2012 the economy grew by 5 percent, and it is projected to grow by 4.45 percent for 2013.

The report also offers no convincing evidence that Ecuador’s taxation of its banks is hurting the economy. 

The article specifically focuses on a set of reforms that took effect on January 1, including the elimination of banks’ tax deductions for reinvested profits and a 0.35 percent tax on assets held abroad. The reporter argues that a sharp drop in bank profits in the first quarter of this year was a result of the taxation. He then argues that an increase in the banks’ interest rates must also be due to the reforms:

Non-government banks, including Citigroup Inc (C).’s local unit, raised rates on corporate loans by an average 0.21 percentage point in the first quarter to 8.88 percent, the highest since November 2010, according to central bank data. That compares with a decline of 0.72 percentage point to 8.81 percent in Colombia and an increase of 0.01 percentage point to 5.79 percent for similar loans in Peru.

However, this causality is not at all clear.  It is more likely that this modest increase in interest rates is attributable to a recent uptick in inflation. Consumer prices increased at an annualized rate of 4.6 percent in the first quarter of this year, as compared to a rate of 0.2 percent in the last quarter of last year.

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Obama and the Militarization of the “Drug War” in Mexico and Central America Print
Written by Alex Main   
Tuesday, 07 May 2013 15:57

During his trip last week to Mexico and Costa Rica, President Obama sought to down play the U.S.’s security agenda in the region, emphasizing trade relations, energy cooperation and other more benign themes.  In a May 3rd joint press conference with his Costa Rican counterpart Laura Chinchilla, Obama stated that it was necessary “to recognize that problems like narco-trafficking arise in part when a country is vulnerable because of poverty, because of institutions that are not working for the people, because young people don't see a brighter future ahead.”  Asked by a journalist about the potential use of U.S. warships to counter drug-trafficking, Obama said “I’m not interested in militarizing the struggle against drug trafficking.”

Human rights organizations from North America and Central America have a very different impression of the administration’s regional security policy.  In a letter sent to Obama and the other region’s presidents on April 30th, over 145 civil society organizations [PDF] from the U.S., Mexico and the countries of Central America called out U.S. policies that “promote militarization to address organized crime.”   These policies, the letter states, have only resulted in a “dramatic surge in violent crime, often reportedly perpetrated by security forces themselves.”  The letter presents a scathing indictment of the U.S.-backed so-called “war on drugs” throughout the region:

Human rights abuses against our families and communities are, in many cases, directly attributable to failed and counterproductive security policies that have militarized our societies in the name of the “war on drugs.”  The deployment of our countries’ armed forces  to combat organized crime and drug-trafficking, and the increasing militarization of police units, endanger already weak civilian institutions and leads to increased human rights violations.

In Mexico, the letter says, “drug-related violence and the militarized response has killed an estimated 80,000 men, women, and children in the past six years. More than 26,000 have been disappeared, and countless numbers have been wounded and traumatized.”  The letter also discusses the situation in Guatemala, where violence is “reaching levels only seen during the internal armed conflict” and “controversial ‘security’ policies have placed the military back onto the streets.  And, in Honduras:

Since the coup d’état that forced the elected president into exile in 2009, the rule of law has disintegrated while violence and impunity have soared. We are witnessing a resurgence of death squad tactics with targeted killings of land rights advocates, journalists, LGBT activists, lawyers, women’s rights advocates, political activists and the Garifuna’s community. Both military and police are allegedly involved in abuses and killings but are almost never brought to justice.

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Washington Insider Eduardo Stein Tries to Protect Ríos Montt from the Genocide Trial in Guatemala Print
Written by Annie Bird   
Friday, 03 May 2013 16:29

On March 19, 2013 Guatemala became the first nation to try a former head of state, Efraín Ríos Montt, for genocide and crimes against humanity in its own courts, an extraordinary achievement that led award-winning investigative journalist Allan Nairn to state that, “Guatemala has reached a higher level of civilization than the United States,” where such a trial would be unthinkable.   Ríos Montt’s took power in a March 1982 coup and his brutal military campaign that human rights defenders have characterized as genocidal received support from President Ronald Regan, though his administration denied it at the time.

Nairn had flown to Guatemala City as a proposed witness but once in Guatemala, he was asked not to testify after another witness, a former soldier, unexpectedly named current President Otto Pérez Molina as responsible for crimes against humanity.  In September 1982, Nairn had interviewed then Major Pérez Molina, a commander in the area where the crimes Ríos Montt is being tried for had occurred.  It appears that his testimony would have implicated the current president in crimes, and the victims’ lawyers were afraid that pushing the political establishment any further would endanger the case.

On April 18, the case was unexpectedly annulled by a judge not overseeing the trial, pre-trial judge Carol Patricia Flores.  She made the illegal ruling two days after former Guatemalan Vice President Eduardo Stein signed a communique published in Guatemalan newspapers, along with 11 other former members of the administration of Álvaro Arzú, calling the charges of genocide against Ríos Montt a “threat to the nation” and suggesting that if a sentence for genocide were handed down it could mean a return to political violence.

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ALBA Members Take the Lead in Crafting Alternatives in Arbitrating Investor-State Disputes Print
Written by Dan Beeton   
Friday, 03 May 2013 08:43

In an article this week in the Malaysian Star, South Centre Director Martin Khor describes a move by Latin American and Caribbean countries – most of which belong to the Bolivarian Alliance for the Americas group, or ALBA –  to form an alternative to the World Bank’s International Center for Settlement of Investment Disputes (ICSID) to settle investor-state disputes, noting the predilection of ICSID to rule in favor of corporations:

LEADERS of several Latin American countries have set up a new coalition to coordinate actions to face the growing number of international legal suits being taken against governments by transnational companies.

A ministerial meeting of 12 countries held in Guayaquil, Ecuador, decided on several joint actions to counter the threat posed by these lawsuits, which have claimed millions or even billions of dollars from governments.

Seven of the countries, mostly represented by their ministers of foreign affairs, trade or finance, adopted a declaration with an agreement to form a conference of states affected by transnational interests.

They are Ecuador, Bolivia, Cuba, Nicaragua, Dominican Republic, St Vincent and the Grenadines as well as Venezuela.

But while these are all ALBA members (except the Dominican Republic), Khor notes that several other countries were also present at the meeting are not: “Representatives of another five countries (Argentina, Guatemala, El Salvador, Honduras and Mexico) also attended the meeting and will convey the results to their respective governments.”

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Senator Menendez Meets with President Lobo to Discuss U.S. Funding for Honduras Print
Written by Arthur Phillips   
Thursday, 02 May 2013 14:30

Senate Foreign Relations Committee Chairman Robert Menendez (D-NJ) met with Honduran president Porfirio “Pepe” Lobo on Wednesday as part of a tour through Central America. According to press reports, Menendez characterized the trip, during which the Senator also visited El Salvador and Guatemala, as an opportunity to evaluate regional counter-narcotics and security initiatives that the U.S. is funding at increasing levels through the Central American Regional Security Initiative (CARSI). A Spanish-language press report on the trip quotes Menendez as having said that he intends to “explore the specific points of this funding proposal,” and that he wants to “see what works and what does not.”

The State Department’s 2014 budget proposal, submitted on April 10, requests $161.5 million in funding for CARSI, a $26 million increase from the previous year. The proposal requests $4.5 million in foreign military financing specifically for Honduras, an increase of 450% over the FY2012 total. And Just the Facts, a joint project of nonpartisan groups focused on U.S.-Latin American relations, notes that current budget proposals have total U.S. military and police funding for Honduras in FY2014 at $8.7 million, a 63% increase over 2013 projections. Furthermore, according to a Congressional Research Service report, as of last July the State Department and USAID had planned to allocate a combined $72 million to Honduras in FY2012.

These rising levels of funding for the police and military run counter to the concerns of many lawmakers in Washington around the lack of accountability for U.S. involvement in Honduran security and anti-narcotics operations. It also highlights the seriousness of recent reports that the State Department has been supporting units under the command of National Police Chief Juan Carlos “El Tigre” Bonilla, who allegedly ran death-squads a decade ago, and, more broadly, that the police have been accused of continuing to commit death-squad murders today. In December the National Autonomous University, citing the police’s own reports, announced that police had killed 149 civilians in the previous two years.

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Bolivia Expels USAID: Not Why, but Why Not Sooner Print
Written by Jake Johnston   
Wednesday, 01 May 2013 15:27

At a speech celebrating May Day in Bolivia today, President Evo Morales announced the expulsion of the United States Agency for International Development (USAID) from the country. According to the AP, Morales stated:

"The United States does not lack institutions that continue to conspire, and that's why I am using this gathering to announce that we have decided to expel USAID from Bolivia.”

The role of USAID in Bolivia has been a primary point of contention between the U.S. and Bolivia dating back to at least 2006. State Department spokesperson Patrick Ventrell characterized Morales’ statement as “baseless allegations.” While State Department spokespeople and many commentators will characterize USAID's work with oppositional groups as appropriate, a look at the agency's work over the past decade paints a very different picture.

Documents obtained by investigative journalist Jeremy Bigwood show that as early as 2002, USAID funded a “Political Party Reform Project,” which sought to “serve as a counterweight to the radical MAS [Morales’ political party] or its successors.” Later USAID began a program “to provide support to fledgling regional governments,” some of which were pushing for regional autonomy and were involved in the September 2008 destabilization campaign that left some 20 indigenous Bolivians dead. Meanwhile, the U.S. has continually refused to disclose the recipients of aid funds. As a recent CEPR report on USAID activities in Haiti concluded, U.S. aid often goes into a “black box” where it becomes impossible to determine who the ultimate recipients actually are.

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Does Capriles Have a Plausible Claim, or is He “Venezuela’s Sore Loser”? Print
Written by Dan Beeton   
Tuesday, 30 April 2013 14:37

Reuters reported Sunday that the president of Venezuela’s National Electoral Council (CNE) Tibisay Lucena has criticized opposition candidate Henrique Capriles for not presenting proof to back up his claims of fraud (also the focus of our post earlier today):

"We have always insisted that Capriles had the right to challenge the process," Tibisay Lucena, president of the electoral council, said in a televised national broadcast.

"But it is also his obligation to present proof."

She dismissed various opposition submissions alleging voting irregularities as lacking key details, and said Capriles had subsequently tried to present the audit in very different terms than the electoral council had agreed to.

"It has been manipulated to generate false expectations about the process, including making it look like the consequence of the wider audit could affect the election results," she said.

Lucena's statements that the election audit of the remaining voting machines, as initially called for by Capriles, will not change the results are correct, although perhaps not for the reasons she meant. As noted on Friday, we did a statistical analysis of the probability of the results of the audit of the first 53 percent of voting machines finding the results it did if the remaining 46 percent of voting machines in Venezuela had enough discrepancies to change the results of the election. The probability, according to our calculations, is less than 1 in 25,000 trillion.

The math is pretty straightforward. Considering how many votes by which Nicolás Maduro was declared the winner, and that the initial audit of 54 percent of machines didn't find anything, and considering how many votes there are per machine, it is almost impossible for the remaining 46 percent of machines to have enough discrepancies to change the election results.

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Media Fails to Inform Public about Shifting Opposition Demands in Post-Election Venezuela Print
Written by Alex Main   
Tuesday, 30 April 2013 10:14

“Venezuela to audit votes without opposition conditions” reads the headline of a BBC article published over the weekend.  According to the piece, Venezuela’s electoral authority “will not carry out the full recount demanded by opposition candidate Henrique Capriles.”  A USA Today article from last Thursday notes that “Capriles said the opposition would not participate in the audit because the National Electoral Council did not meet its demand for an examination of registers containing voters' signatures and fingerprints.”  An Associated Press headline – “Government formally rejects top-to-bottom Venezuela vote audit, heightening tensions” – suggests that the Electoral Council’s rejection of the opposition’s demands is stoking the flames of political conflict in the country.

As is often the case in the media’s coverage of Venezuela, a crucial piece of context is missing from these and other articles on the recent decisions of the National Electoral Council (known by its Spanish initials as CNE).  Faithful readers of our blog will remember that Henrique Capriles, after the CNE announced that he’d lost the elections by a narrow margin of around 270,000 votes (narrowed down to 224,000 votes following the final count of votes cast abroad), refused to accept the results and immediately called for a recount, though other opposition spokespeople called instead for a “complete audit” of the voting machine receipts.  After first calling on his supporters to take to the streets, leading to violent clashes in which over half a dozen people were reportedly killed, Capriles finally formally filed a set of demands to the CNE.  Subsequently, on April 18th, the CNE agreed to audit the remaining 46% of boxes of voting machine receipts that had not yet been verified (54% of the boxes had been previously verified in the presence of witnesses from both parties). 

What AP, USA Today, BBC and others fail to mention in their most recent articles is that Capriles accepted the CNE’s April 18th decision to proceed with the audit of the remaining voting receipt boxes, and said that the opposition would participate in the process.  According to AFP and other sources, Capriles said that the opposition campaign “accepts what the CNE (…) has announced to the country. We will be there in the audit.  We consider that the problems are in these 12,000 boxes (that will finally be opened in this audit).  We will undoubtedly be able to show the country the truth.”

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The Venezuelan Presidential Vote -- What is the Probability That It Could Have Been Stolen? Print
Written by CEPR   
Friday, 26 April 2013 11:45

Opposition candidate Henrique Capriles is currently “boycotting” a second audit of the voting results for the April 14 presidential election, which the National Electoral Council has agreed to undertake.  Capriles claims that the election was stolen through fraud.

In a CEPR press release we note that it is practically impossible to have obtained the results of the audit that took place after the polls closed on April 14, if the election were actually stolen through fraud. 

When the polls closed, a random sample of 53 percent[i] of all the machines (20,825 out of 39,303) was chosen, and a manual tally was made of the paper receipts.  This “hot audit” was done on site, in the presence of the observers from both campaigns, as well as witnesses from the community.  There were no reports from witnesses or election officials on site of discrepancies between the machine totals and the hand count.

The following is a calculation of the probability of auditing 20,825 machines and finding zero errors when there are actually 50 among all 39,303 (this means that there are 50 machines with errors among the ones that were not audited).  The assumption here is that there would have to be at least 50 bad machines -- i.e. where the machine count did not match the paper ballot – in order to reverse a margin of 272,000 votes.

This assumption is of course understating the number of bad machines that would be necessary to reverse the result. The average machine has only about 360 votes, and the maximum was about 564. And here we are assuming the election is stolen by moving about 2700 votes per machine from Capriles to Maduro,  on 50 machines.  If more machines were bad, then the probability below gets even (vastly) smaller.  So the calculation below is actually a very high estimate of the probability of obtaining the April 14 audit results, if the election were stolen.

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Paid to Trash Argentina, Raben Does Just That, Without Disclosing Financial Interests Print
Written by Jake Johnston   
Friday, 26 April 2013 09:22

Taking to the Huffington Post this week, former Assistant Attorney General Robert Raben attacks Argentina’s position regarding the ongoing litigation with vulture funds, a case readers of this space are familiar with. Raben states that, “The Argentine government's behavior toward U.S. courts and U.S. judges has gone beyond contempt, and its ongoing defiance of our legal system must come to an end.” Anticipating the possibility of the case going to the Supreme Court, Raben saves some criticism for the United States, which has sided with Argentina in the court case:

the U.S. executive branch made the disappointing and unfortunate decision to support Argentina at the lower-court level, on the unsubstantiated grounds that holding Argentina accountable would somehow undermine the vague U.S. foreign-policy goal of promoting the orderly restructuring of defaulted sovereign debt.

Raben concludes that, “It would be downright dangerous for the Department of Justice to maintain its support for Argentina after its disgraceful displays of disrespect for the U.S. judicial system.”Raben would have you believe that his conclusion and expertise in the matter is simply based on his previous experience:

As a former assistant attorney general, I am familiar with the struggles and the balancing involved in weighing various legal and policy questions and deciding whether to ask the Supreme Court to review a case.

But readers of the Huffington Post might be interested in something else not mentioned in Raben’s article: that his lobbying firm, The Raben Group, has been paid over $2.1 million by a group representing the same vulture funds that are suing Argentina, according to lobbying disclosure documents. In fact, the American Task Force Argentina (ATFA), of which Raben is the Executive Director, has spent nearly $4 million lobbying the White House, Treasury Department and U.S. Congress. Nowhere in the article does Raben disclose this relationship. His 382 word Huffington Post bio notes his past working for Barney Frank, his time as Assistant Attorney General and his current position “on the boards of the American Constitution Society and Alliance for Justice,” yet never mentions his management position at ATFA or even the existence of his lobbying firm.

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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.

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