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CEPR Paper on Ecuador’s Financial Reforms Helps Explain Why Voters Likely to Re-Elect Correa Print
Written by Alex Main   
Thursday, 14 February 2013 19:53

On Sunday Ecuadorians will head to the polls to vote for a president and vice president, members of the National Assembly, mayors, and other elected officials. As we’ve done ahead of other elections in Latin America, CEPR has published a report offering some economic context to help understand the choices that voters are likely to make.

The report, entitled Ecuador’s New Deal: Reforming and Regulating the Financial Sector, focuses on the innovative financial reforms that have been implemented since President Rafael Correa took office in 2007.  The report explains how these measures helped Ecuador recover from some of the hemisphere’s worst shocks during the world recession.  It also shows how the reforms contributed to a substantial increase in government revenue much of which has been channeled toward health, education, housing and other social spending.  Given these advances, it is not surprising that the latest polls put Correa at 50 percentage points ahead of his closest opponent. 

Earlier today, CEPR issued the following press release outlining the contents of the paper:

A new paper from the Center for Economic and Policy Research (CEPR) examines the financial reforms carried out by the Rafael Correa administration, reforms which the paper concludes are in large part responsible for the economic success Ecuador has experienced over the past several years, including its successful counter-cyclical policies during the global recession after 2008. The paper, “Ecuador’s New Deal: Reforming and Regulating the Financial Sector,” examines the Correa government’s taking control of the Central Bank, implementation of capital controls, increased taxation of the financial sector, and other regulatory reforms. It concludes that these played a major role in bringing about Ecuador’s strong economic growth, increased government revenue, a substantial decline in poverty and unemployment, and other improvements in economic and social indicators.

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Administration Rejects Congressional Request for Investigation of Ahuas Killings Despite Evidence of DEA Role Print
Written by Alex Main   
Wednesday, 13 February 2013 21:28

At the end of January, I blogged about a Congressional letter to Secretary of State John Kerry and Attorney General Eric Holder asking, among other things, for a U.S. investigation into the May 2012 killing of four Honduran indigenous villagers in Ahuas, Honduras during a counternarcotics operation that involved agents from the U.S. Drug Enforcement Administration (DEA).  The letter, signed by 58 House representatives, argues that a credible U.S. investigation of the incident is necessary given the “deeply flawed” nature of the investigation carried out by Honduras’ Public Prosecutor and that, according to media reports, Honduran police agents stated that “they took their orders from the D.E.A.”

On February 12, the Washington Times reported that despite “pleas from liberal lawmakers on Capitol Hill, the State and Justice departments have no intention of investigating purported human rights violations and misconduct by Drug Enforcement Administration agents in Honduras.”  Times’ correspondent Guy Taylor spoke to an anonymous State Department official who indicated that the Department was satisfied with the Honduran official investigation and stated that “there will be no separate investigation.”  Furthermore,

In a statement last month, DEA spokeswoman Dawn Dearden told The Times that the investigation conducted by Honduran authorities “concluded that DEA agents did not fire a single round” and that “the conduct of DEA personnel was consistent with current DEA protocols, policies and procedures.”

The anonymous State Department official reaffirmed this position stating, “as we have confirmed previously, DEA agents were involved in a supporting role, and did not fire their weapons.”

The basis for this determination, as the DEA spokeswoman made clear in her previous comments to the Times, is the report summarizing the conclusions of the Honduran Public Prosecutor’s office.  Though cited by the DEA and State Department, this report has not been made public.  However, there is abundant evidence that the investigation that generated the prosecutor’s report was indeed “deeply flawed.”  Last year’s in-depth report on the May killings, co-authored by CEPR and Rights Action, explained how key forensics tests were performed long after the incident occurred and how the autopsies of the victims took place a month after the incident and, according to numerous eye witnesses, were carried out in a stunningly unprofessional manner.  Key participants in the counternarcotics operation – including at least ten DEA agents and several State Department contractors – were never questioned, nor were their weapons submitted to ballistics tests.

Most importantly, the report’s apparent findings – at least as they have been represented by the State Department and the DEA – are directly contradicted by another report produced by the Honduran National Human Rights Ombudsman.  This report, which we also discussed in a previous post, is largely based on the testimonies of the Honduran police agents of the “Tactical Response Team” (TRT) that participated in the counternarcotics operation.  Whereas, according to State and DEA, the prosecutor’s report confirms that the DEA merely played a “supportive role” during this operation, the Ombudsman’s report concludes that the DEA essentially led the entire operation:

All members of the TRT have stated that they only receive orders from American superiors and that they don't report anything, neither before nor afterwards, to their legal Honduran superiors, given that they ultimately don't deal with orders or logistics of any sort.

Furthermore, though State and DEA adamantly claim that the DEA agents “did not fire their weapons,” the Ombudsman’s report suggests that the DEA was directly responsible for the discharge of one of the helicopter’s high caliber automatic mounted guns against the boat carrying those who were killed in the incident.  The report states that:

According to the account of various TRT (Honduran Tactical Response Team) members, as the Barra Patuca pipante was approaching the pipante transporting the drugs, which in that moment was adrift down river, a burst of fire could be heard, supposedly coming from the boat coming from Barra Patuca causing the member from the FAST Team of the DEA to communicate by radio with the foreign pilot on helicopter number four, who proceeded to give the order to the artilleryman from Honduras who was on the same helicopter to support his teammates by opening fire on the boat with the victims that was coming from Barra Patuca.

In other words, according to the testimony of Honduran police agents, the helicopter pilot – identified as non-Honduran – gave instructions to the helicopter gunner to open fire on the “boat with the victims” after being contacted by one of the DEA agents involved in the operation.  Given this second “official” version of events, which appears to directly contradict the conclusions of the Public Prosecutor’s report and suggests that the DEA may bear much responsibility for the lethal outcome of the May incident, it is difficult to see how U.S. officials can continue to maintain that there is no need for a separate, U.S. investigation. 

 
Venezuela Devalues its Currency Print
Written by Mark Weisbrot   
Friday, 08 February 2013 19:02

En Español

Venezuela devalued its currency today, from 4.3 bolivares fuertes to 6.3 at the official exchange rate.   As with most economic news from Venezuela, it was not well reported.  A Reuters news article stated, as though it were a fact, that the move will “spur galloping inflation.”  But the biggest devaluation during the Chávez years, in January 2010, produced no increase in the core rate of inflation, and only a temporary increase in the headline rate; it then fell for more than two years, even as economic growth accelerated to more than 5 percent in 2012. Annual inflation was 19.5 percent in 2012.  At the time of the devaluation in January 2010, there were reports in the Washington Post predicting 60 percent inflation as a result of the devaluation.

Of course we would expect some temporary increase in inflation from a devaluation, as there was in 2010 – because the devaluation will increase the price of imports – but how much and how long it lasts depends on other government policies as well. 

The devaluation will increase the cost of capital flight, and by making imports more expensive, provide a boost to import-competing industries. For this reason, and because it reduces the black market premium and reduces capital flight, the move will overall be good for the economy.

 It is widely reported, as in the Reuters article, that the devaluation will help with government finances because each dollar in oil export earnings will now exchange for more domestic currency; in fact this is often stated as the reason for the devaluation. But government spending in domestic currency is not dependent on the exchange rate.   

 
Senate Foreign Relations Chair Implicated in Corruption Investigation Print
Written by Arthur Phillips   
Thursday, 07 February 2013 14:21

A front-page article in the print edition of today’s Washington Post details how New Jersey Democratic Senator Robert Menendez twice approached federal health-care officials about Dr. Solomon Melgen’s outstanding $8.9 million debt to the Centers for Medicare and Medicaid, which the doctor claims was the result of being overbilled. Melgen, personally and through his ophthalmology company, has made major contributions to Menendez’s political campaigns.

This is the latest news to follow reports that on Wednesday, January 30, the FBI raided Melgen’s offices, soon after which the senator’s office described the doctor as “a friend and political supporter of Senator Menendez for many years.” Two days later, following John Kerry’s resignation from his seat as chairman of the Senate Foreign Relations Committee to become Secretary of State, Menendez took over the position, one of the most powerful and prestigious in Congress.

Menendez, who is Cuban American, has taken a hard line against easing travel restrictions to Cuba and has been described as “fiercely pro-embargo.” The New Jersey Democrat has also worked closely with lawmakers across the aisle on policy towards Iran, including his co-authorship of sanctions legislation with Republican Senator Mark Kirk last year.

Early reports of the FBI’s search focused on allegations that in 2010 Senator Menendez accepted free flights to the Dominican Republic from Dr. Solomon Melgen and had sex with prostitutes during these trips, a claim he has vehemently denied. It was also noted that Menendez is not married, and that prostitution is legal in the Caribbean nation. The Senate Ethics Committee is investigating the senator, who in January of this year wrote a $58,000 personal check to reimburse Melgen for two trips.

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AP Investigation: U.S. Spends $20 Billion Over 10 Years on Increasingly Bloody Drug “War” in Latin America; Rejects Drug Policy Reform Print
Written by Alex Main   
Tuesday, 05 February 2013 13:58

It started in Colombia in 2000, moved on to Mexico in 2008 and now rages in Central America.  Since the beginning of the century, the U.S.-backed “war on drugs” has progressively spread throughout the northern part of Latin America, leaving tens of thousands of lost lives in its wake. An in-depth investigative piece published by the Associated Press over the weekend explains how this so-called “war” – which relies on U.S. funding, training, equipment and troops – has grown in recent years to become “the most expensive initiative in Latin America since the Cold War.”

The article, authored by Pulitzer-prize winning reporter Martha Mendoza, describes how the U.S. has “spent more than $20 billion in the past decade” and deployed U.S. army, marine and navy troops to support a heavily militarized campaign to fight drug trafficking throughout the region.  The fact that the efforts have been accompanied by soaring violence – with, for example, 70,000 Mexican lives lost in the last six years – doesn’t seem to trouble the U.S. officials in charge of implementing U.S. drug policy internationally.  In fact, they seem to consider spikes in violence to be a sign that the “strategy is working.” 

William Brownfield who heads the State Department’s Bureau of International Narcotics and Law Enforcement Affairs, told Mendoza that “the bloodshed tends to occur and increase when these trafficking organizations… come under some degree of pressure.”

For others in Washington, the shocking number of lives lost suggests that the strategy is in fact not working.  New York Congressman Elliot Engel, a moderate Democrat who is now the ranking minority member on the House Foreign Affairs Committee, told the AP that he supports a congressional review of counternarcotics programs in the Western Hemisphere.

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Fifty-eight Members of Congress ask for investigation of Honduras killings and policy review – will Kerry and Holder act? Print
Written by Alex Main   
Thursday, 31 January 2013 19:33

On January 30th, incoming Secretary of State John Kerry and Attorney General Eric Holder received a letter from fifty-eight members of Congress asking for a U.S. investigation into a DEA-led counter-narcotics operation in Ahuas, Honduras that went badly wrong.  Four indigenous Mosquitia villagers, including at least one pregnant woman and a 14 year-old boy, were shot and killed in a small boat in the Patuka River during the May 11, 2012 operation.  Three other passengers were critically injured.  CEPR visited the site of the killings last Summer and, together with Rights Action, published a detailed report describing the central role that the DEA played during that operation and the flawed nature of the Honduran official investigation of the incident.  The Honduran human rights group COFADEH and the Honduran government’s Human Rights Ombudsman have asked the U.S. to carry out its own investigation, but so far U.S. officials have rejected the idea.

This letter, initiated by Georgia Democrat Hank Johnson, marks the first time that members of Congress have publicly called for a U.S. investigation of the shooting and shows that, despite the U.S. Administration’s attempt to brush the incident under the rug, the issue continues to fester.  The surviving victims and the victims’ families have received no form of compensation and have great difficulty obtaining vital medical care (one of the wounded victims’ hands would probably have been amputated had COFADEH not helped pay for surgery).  As our August report described, the killings generated outrage and a strong sentiment of injustice among members of the communities near Ahuas, and as a result, resentment toward U.S.-led counternarcotics operations has grown stronger in the Mosquitia region.

The signers of the letter include Representative John Conyers who is the ranking Democrat on the House Judiciary Committee, Rep. Meeks who is a high-ranking Democrat on House Foreign Affairs and Rep. Van Hollen who is the ranking minority member on the House Budget Committee.  As State Department titled helicopters and contractors were a key part of the operation along with at least ten DEA agents, the letter is addressed to the top officials of both State and the Department of Justice.  Eric Holder, the Attorney General, has proven to be a staunch supporter of the current course of the so-called “war on drugs”.  John Kerry, however, has been critical of human rights abuses allegedly perpetrated by Honduran security forces, and recently backed the limiting of U.S. police assistance to Honduras. His quick and disconcerting mention of Honduras during his confirmation hearing last week provides little indication of whether he intends to review any aspect of policy toward that nation as chief diplomat of the U.S.

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Piñera Praises Chávez at CELAC Summit; Media Influences Public Opinion on Venezuela But Not So Much Governments Print
Written by Mark Weisbrot   
Tuesday, 29 January 2013 17:52

el pais fake alien as chavez

Image: This satire of El País' publication of a fake photo of President Hugo Chávez on its front page last week captures the quality of much media reporting on Venezuela.  El País is the most influential paper in Spain and has much influence also in Latin America.

 

In writing about the media’s ongoing hate-fest for Hugo Chávez, I pointed out that the major media’s reporting had been effective, in that it has convinced most consumers of the Western media – especially in the Western Hemisphere and Europe – that Venezuela suffers from a dictatorship that has ruined the country.

But there is an important sense in which it has failed.  Of course it has failed to convince Venezuelans that they would be better off under a neoliberal regime, and that is one reason why Chávez and his party have won 13 of 14 elections and referenda since he was first elected in 1998.  Perhaps of equal importance, it has also failed to persuade other governments that President Chávez is motivated by some kind of irrational hatred of the U.S. – as the media generally reports it.  Most foreign ministries have some research capacity, and although they are influenced by major media, at the higher levels they have better information and make their own evaluations.

That is why Chávez has been able to play a significant role in the growing independence and regional integration of Latin America, despite his vilification in the media, and years of effort by the U.S. government to isolate Venezuela from its neighbors.  For example, the governments that decided to form the Community of Latin American and Caribbean States (CELAC) – a new hemispheric organization including all countries other than the U.S. and Canada – don’t care whether the media dismisses it as “Chavez’s project.” When Brazil, Argentina, and Uruguay decided to admit Venezuela as a full member of the trading bloc Mercosur, they didn’t care what the media in any of their respective countries would say about it.

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World Bank and IMF Forecasts Follow Predictable Pattern for Haiti, Venezuela Print
Written by Arthur Phillips and Stephan Lefebvre   
Monday, 28 January 2013 14:22

The World Bank has joined the “doom and gloom” chorus on Venezuela’s economy. And in Haiti, the Washington-based institution again appears overly optimistic.

On Tuesday, January 15, the World Bank released its latest global economic forecast, which projects 2013 global GDP growth at 3.4%, up 0.4% from its preliminary estimate for 2012 and down a half a percentage point from its previous forecast in June. The Bank emphasized that the low rates were largely a result of sluggish growth in the U.S. and Europe. As for Latin America and the Caribbean, the regional predicted growth for 2013 is listed at 3.6%, up more than half a point from the estimated figure for 2012.

As with many media commentators over the past few years, the World Bank predicts that Venezuela’s economic recovery from the global recession cannot hold up. The Bank forecasts 1.8% growth in 2013, a sharp drop from an estimated 5.2% last year. Since the Venezuelan economy is not slowing, there is no obvious reason to predict a collapse in economic growth.

Furthermore, we can see that the projection numbers follow a trend. Both the World Bank and the IMF have been consistently underestimating growth projections in Venezuela.

vz gdp projection2011 vz gdp projection2012 1

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Kerry on Latin America: More of the Same? Print
Written by Alex Main   
Saturday, 26 January 2013 17:20

Senator John Kerry, President Obama’s nominee for Secretary of State, spoke for close to four hours at his Senate confirmation hearing on Thursday.  He discussed U.S. policy in the Middle East and Asia at length, mentioning Afghanistan thirty-five times, China thirty-three times, Iran twenty-four times and Vietnam twenty-one times, according to the Wall Street Journal.  With the exception of Mexico – which came up a total of twelve times – hardly any of the hearing touched on the Western Hemisphere, which was mentioned only four times.  Senate Foreign Relations Chair Bob Menendez, who is of Cuban-American descent, was the only one to ask a question about Kerry’s vision for relations with Latin America.

Menendez started off his question by saying “2013 will be a year of great change in the Western Hemisphere,” then mentioned “the impending change of leadership in Venezuela,” the new PRI administration in Mexico, and the recently-launched peace talks in Colombia.  “So,” he asked Kerry, “can you briefly talk to me about your views and vision as it relates to what I think is a new and momentous opportunity in the hemisphere?”

Kerry’s response [PDF] was indeed brief and elicited no reaction from his Senate colleagues. His statements suggested that, with Kerry as chief diplomat, U.S. policy toward the region will remain on automatic pilot, cruising along on more or less the same course that the State Department has followed since the Bush administration.  His response also showed a startling disregard for the perspectives and policy priorities of the governments and peoples of Latin America. Here’s what Kerry replied to Menendez:  

Well I agree with you, Mr. Chairman. It is an opportunity that's staring at us, and I hope that we can build on what Secretary Clinton has done and the Obama administration has already done in order to augment our efforts in that region.

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Jamaica and the IMF: How Not to Learn From Past Mistakes Print
Written by Jake Johnston   
Thursday, 24 January 2013 14:45

Once again it seems that Jamaica and the IMF are on the verge of a new lending agreement. And once again, it sounds like more of the same failed policies as before. Last week, after a three-day retreat with Cabinet members, the AP noted that Prime Minister Portia Simpson Miller “said the Cabinet recently signed off on all fiscal consolidation matters to forge a new IMF deal.” Reason to celebrate? Not so fast. As Jamaican analyst Dennis Chung was quick to point out, “further expenditure cuts and tax increases will only pave the way for further economic contraction.” The Economic Commission for Latin America and the Caribbean (ECLAC) is predicting even more job cuts in 2013 precisely because of the impending IMF agreement. Unemployment is already nearly 13 percent.

As Chung notes, also relevant to the discussion is the recent research by the IMF showing that austerity policies have much larger negative effects than previously thought (at least by the IMF). But one need not look outside Jamaica or do a regression analysis to see the deleterious effects of austerity. Faced with extremely high debt payments, and having spent the last few years trying to court the IMF by cutting spending (following a previous IMF agreement which mandated such austerity), Jamaica has been a prime example of the pitfalls of this failed economic policy making. Debt levels haven’t come down, economic growth hasn’t returned, and the downward spiral has continued apace. Even a few dissident IMF directors have expressed concern.

Jamaica was the only country in the Latin American and Caribbean region to see three consecutive years of negative growth from 2008-2010 according to ECLAC, and it hasn’t exactly rebounded nicely since. GDP actually shrank in the first half of 2012 compared to 2011 and ECLAC predicts a paltry 0.1 percent growth rate for 2013, “assuming that an agreement is signed with IMF,” as the Jamaica Gleaner reported.

Unfortunately, while Jamaica needs serious debt relief in order to free up resources for the type of investment that will get the economy moving again, that seems to have already been taken off the table. Last week Finance Minister Peter Phillips stated, “[l]et me make it clear, since there are lot of rumours around, no haircut is contemplated.” The rumors concerned the possibility of a second debt exchange, but the main problem with the first one was that it never went far enough and there was no haircut. Just like with the continued austerity policies, the IMF in Jamaica is providing a great example of how not to learn from past mistakes. 

 
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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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