TCS Daily


Three Amigos: Evo, Hugo and Fidel

By Alvaro Vargas Llosa - May 2, 2006 12:00 AM

When Evo Morales was elected in Bolivia, a number of commentators (myself included) were expressing the faint hope that the president would resist the temptation to follow Hugo Chávez's footsteps. Brazil's important economic presence in Bolivia, we thought, might give President Lula da Silva, a more moderate man, the sort of leverage that would persuade Evo Morales to keep Fidel Castro and Hugo Chávez at arm's length even against his deepest instincts. The fact that the United States was avoiding open hostility seemed to give Morales room to maneuver.

Unfortunately, it looks like Mr. Morales' presidency has said "adios" to common sense. He is beginning to pick fights with moderate neighbors, to push away Brazil, to alienate investors, to inundate his country with "social workers" and advisors from Cuba and Venezuela, to reopen old wounds in the separatist region of Santa Cruz, and to undermine the independent electoral system. This week he nationalized the country's oil and gas industry.

His latest brawl with moderate neighbors saw him call Peru's president, "a traitor to indigenous people" for signing a Free Trade Agreement with Washington. Morales did so immediately after Venezuela announced it was abandoning the Andean Community of Nations (a regional trading bloc) because Colombia had signed its own Free Trade Agreement with the U.S. Since Toledo, like Morales, is indigenous, this sounded like an attempt to appeal to ethnicity in order to drive the Andean population away from globalization.

The Bolivian government caused Brazil's Petrobras energy giant to call off a $5 billion investment last month and has now ordered the Bolivian subsidiary of EBX, a Brazilian steelmaker, to stop building a pig-iron plant on Bolivia's south-eastern border (more than $80 million have already been invested and about 1,000 jobs are on the line.) Morales was right at the beginning of his presidency to ask Brazil and Argentina to pay higher prices for their imports of natural gas because they had been getting it at highly subsidized prices. But Morales reached an understanding with Argentina and kept the fight with Brazil. Argentina is closer to the Cuba-Venezuela axis than Brazil, a country that, despite maintaining reservations about Washington's hopes for a Free Trade Area of the Americas, is keeping a clear distance from Castro and Chávez.

Other Bolivian investors are facing problems too. Spain's Repsol has recently announced a big decline in its oil reserves because of a reduction in investment due to Morales' threats to nationalize oil and a law passed by the previous government raising taxes to over 50 percent. Now, Morales has announced his government will take control of the energy prices and the export volumes of foreign companies.

Independent organizations such as FULIDE, a prestigious Bolivian think-tank, and numerous media stories indicate there are already more than five thousand Cuban and Venezuelan advisors in Bolivia. A recent study by the University of Miami mentioned a prominent Cuban Colonel as part of Mr. Morales' personal security. Ostensibly the Cubans provide services in areas such as health and education. They are helping Morales establish something akin to the "missions" that Chávez has set up in Venezuela and which have become vehicles for social handouts. These social services have been welcomed in Venezuela's poorest neighborhoods but have become tools for agitprop and political regimentation.

Mr. Morales is also moving fast to control the electoral system. The most important step he has taken to undermine the system's independence is the new electoral register. The overall objective is to pack his constituent assembly, which will be elected this summer, with his supporters and then re-write the constitution to fit his political needs, "a la Chávez." For that, he needs even more votes than he got in his presidential election. He has given the police control of the process by fusing two separate operations -- the creation of a new identity census and a new electoral register -- with the result that the electoral register, which used to be solely controlled by the National Electoral Court, is now handled by the police. It is not surprising that 650,000 new voters have now been added to the electoral register. Venezuelan advisors are also helping Morales with this process.

As if this were not enough to send the wrong kinds of signals, Morales seems happy to stir up trouble in Santa Cruz, the separatist region that has been at political war with La Paz and which is heavily inclined toward globalization because of its strong business community. The government has stopped the tender process for the development of Mutun, a big iron reserve waiting to be exploited. The Bolivian government recently said it is considering a joint venture with a Venezuelan government-owned company to develop iron. Protests have already begun.

Unlike Venezuela, Bolivia does not obtain $50 billion from oil sales every year. In fact, its national budget is dependent on foreign donations. By allying himself with Venezuela and Cuba, Mr. Morales is not only making a dangerous political calculation that could isolate him from countries such as Brazil, Chile, and Peru but also betraying the expectations of those millions of indigenous Bolivians who need capital in order to start the hard process of overcoming poverty. By concentrating power, this self-styled scourge of "traditional politics" is doing the most traditional thing possible in Latin America.

Alvaro Vargas Llosa is the Director of the Center on Global Prosperity at the Independent Institute and the author of Liberty for Latin America.

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20 Comments

Latin history lesson
Let's not neglect history as we try to make sense of these leaders' actions. Latin America tried the globalization medicine for a very long time. It nearly killed them. They are not babes in the woods with obstinate notions, but veterans.

From the 1970's, when they were ensnared by cheap development loans into becoming good little citizens in our global community, up to the 1997 meltdown, they did everything they were told, believing that what we said was true, and that they might prosper as we had done. But the only thing that happened was that they came under our thumb, with no wiggle room for local leaders to craft a policy for development, and no way to escape a crushing mountain of debt. It was the debt that made them our slaves.

I think they were quite patient before coming to the realization that if they were ever going to make it they'd have to make their own way in the world. Only then did they stray from the path of the Great White Father.

Look at the results. For twenty years a country like Venezuela languished under the combination of high population growth rates and zero percent GDP growth. Land titles were transferred to the wealthy, and the poor had to walk to the city, where there was no way they could sustain themselves. Austerity programs foisted on them by the World Bank ensured that there would be no social safety net to help hold them up in this transition, and those who began to fall turned to crime to support their families. It was what the sociologists would term a behavioral sink, with an echelon of favored families at the top dining aboard their crafts moored in the harbor.

From being perpetually flat on their backs thy've become a viable economy, enjoying a current growth rate of 9.1% (up from last year's 8.7%. Employment and social support programs are having some effect in alleviating the immense poverty that was created during the period of globalization, and they have still not repudiated their forty billion dollar remaining foreign debt.

http://198.81.129.100/cia/publications/factbook/geos/ve.html

I think all this is not only commendable, but a necessary corrective to the sins of the past.

I'm sure Evo Morales will make his share of mistakes. He's a new man to a new job, and his job description is very different from that of the two hundred Bolivian presidents who have preceded him (that is, to take all the money and pass it around among their friends). EM's work will be to develop his country by bringing up the people to a standard of self sufficient adequacy, where every family can afford to buy the local gas and drinking water at affordable rates. More power to him.

as usual, roy sees everything through his communist lenses
What killed the economies of these countries was the socialism and corruption that roy so highly approves of.

Don't forget Mark...
little brown people aren't responsible for their actions nor are they responsible for screwing up their own economies. It is not the greed of "the wealthy" it is the greed of "the wealthy white man".

You see, according Roy, those little brown people are stupid and listen to white people too much. The only problem with Roy's world view is that it is completely a liberal illusion. Who screwed up Boliva? Bolivian socialists.

Yep. In Roy's world scaring off investment and attempting yet another socialist experiment is the way to throw off the yolk of the "Great White Father".

on the other hand
Socialism is an invention of dead white European males.

So shouldn't the politically correct amongst us be condemning it?

What a load
Inflation is the bane of the poor (the rich have ways of shielding themselves with slick investment strategies). In a period where the dollar wasn't that strong itself, Venezuela's collapsing currency gives pause: bolivares per US dollar - 2,089.8 (2005), 1,891.3 (2004), 1,607 (2003), 1,161 (2002), 723.7 (2001). These kinds of adjustments are murder on the poor, the pensioners, the most vulnerable in society. Some forms of socialist solidarity are downright poisonous.

The economy is growing but what is the trend? It's a roller coaster ride (and you're being ungenerous with Chavez's 2004 results as you ignore 2002 and 2003):
9.1% (2005 est), 16.8% (2004), -9.2% (2003), -8.9% (2002), 2.1% (2001). Let's remember that a 10% drop followed by a 10% rise puts you at a deficit, not at parity with your position from two years prior. After you do the math, it's an average of 1.5% growth over the period. Since Chavez has been in power since 1998, you can't blame the past five years on previous regimes.

Now the path of "the Great White Father" never included mass nationalizations but Venezuela's had half a century of them, much to the detriment of the people. Such things provide a bit of short term gain at the expense of long term pain.



Roy they were foolish to adopt Keynian policiies
Latin America used a combination of Keynesian policies. Dependencey theary and the Russian planning model. Many think that it was the USA in the 1970s that proved Keynesian was bad policy but it was the rampant inflation in Latin America that really proved how dangerous Keynes idea were.

Only Chile went another way.

Slow down on the South America generalizations. I've been there over a dozen times.
Well success breeds success and look at the successful. Brazil is booming and is now the fastest growing economy in the Americas and in the top 10 in the world. Brazils relationship despite this "Free Trade Agreement" foolishness has a growing relationship with US and Europe. Chile has a huge trade relationship with the US and now China.

So do not worry about Brazil and Chile. As for everyone else. The oil and gas prices will soon decline and they ALWAYS DO!!!! With it, will come the decline of these Communist throwbacks. I do feel sorry for the poor folks in these countries but they used their votes to get them and now they are stuck.

The funny part is that it is not the Communist philosophy that has caused this current and soon to be misery, but the UN-FREE trade relationships the US maintains with this part of the world. The US should immediately stop subsidizing everything including agriculture(Brazil and Chile are mighty good at growing things) and cut all Tariffs to zero. The ensuing wave of cross border trade will force the Communists to stop their policies or face violent retribution from their envious populations.

Nationalized?
Okay great article. One thing though:

All uses of the term 'nationalized' should be replaced with the correct concepts of 'stolen' or 'looted.'

The Economy is Not Growing
Contrary to what Judgmental Roy Bean says, the Venezuelan "economy" is not growing, it is dropping like a rock. The apparent large jumps in the Venezuelan economy starting in 2004 correspond exactly with the rise in oil prices, meaning that there has been a large increase in oil receipts. But if you read up on Venezuela, the oil facilities are not being maintained, the infrastructure is declining, investment has stopped, and individual jobs are being eliminated. Venezuela has just contracted to buy 100,000 bbl/day of Russian oil to meet its contractual obligations.

https://registration.ft.com/registration/barrier?referer=http://www.google.com/search?sourceid=navclient&ie=UTF-8&rls=RNWE,RNWE:2004-18,RNWE:en&q=Financial+Times+Venezuela+Russia+oil&location=http%3A//news.ft.com/cms/s/1d5dfe3a-d653-11da-8b3a-0000779e2340.html

http://www.rigzone.com/news/article.asp?a_id=31765

Venezuela has always been corrupt and inefficient, and, as you can well imagine, a short, fat Army Colonel did nothing to improve the moral or business climate. So Venezuela will soon be more corrupt, more inefficient, and totally broke when the price of oil goes down and Chavez is contractually obligated to buy Russian oil and pay for Russian arms.

Tackling Poverty - You mean like the United States has tackled it?
The Author of the article states:
"By allying himself with Venezuela and Cuba, Mr. Morales is... betraying the expectations of those millions of indigenous Bolivians who need capital in order to start the hard process of overcoming poverty."

Capital ALONE does not cure poverty.

Giving impoverished people more money improves their condition and outlook in the short term, but the problem persists if there is not a social system integrated into the fabric of the region that eschews the concept of homelessness.

The United States has more capital than all of the Socialist Countries in the world combined yet every person over the age of 5 in the United States understands perfectly the concept of Homelessness.

Even with economic sanctions, however, the people of Cuba have no idea whatsoever what the concept of homelessness means... not to mention ever having seen it. They have never seen it.



And yes capitalism does provide the opportunity for each individual to achieve the greatest material riches the world has ever seen. But it also provides the opportunity for each individual to ignore their basic needs of food, clothing and shelter.

And yes socialism provides adequately for each and every individual in terms of basic necessities such as food, clothing, and shelter. But it does so at the expense of the capping the opportunity of each individual to achieve the unlimited material success.

So yes capital is required to ensure that the weakest in a particular society have basic necessities that are paid for, but capital alone does not solve the problem of poverty. Eliminating poverty also requires a governing body that makes a daily policy of ensuring that those who cannot provide for the essentials of food, clothing and shelter are MANDATED, not given the opportunity, to accept those essentials.

Perhaps
You're right about the inflation. It's been their worst failure under Chavez. Even though income is good there has been way too much public sector spending. You'd think he would resist the temptation. Maybe they should dollarize, eh? Look at Ecuador, with two percent inflation now.

In all fairness, after the coup in 2002, wasn't there a one time blip in inflation, while the oil industry was shut down? I understand that accounted for a 30% rise. Since that episode I would agree it's way above what it should be.

As for the nationalisations, I wasn't in the room when those were going down. So I can't comment intelligently. Yes, companies like Total-Fina had infrastructure at stake. And Venezuela had their oil at stake. Who was righter, and who was wronger? That depends on who you read. It would have been nice had it worked out to everyone's satisfaction... but it didn't.

At least the losers had many good years before being shown the door. BTW I will compliment you on raising intelligent issues about Chavez. Your level of argument is well above the norm here.

capitol
You are right that money alone cannot solve the problem of poverty. You are wrong to claim that the missing ingredient is govt.

The missing ingredient is morality and a sense of personal responsibility.

Without those, money is wasted, and everyone becomes poor.

With those, even without a ready source of capitol, income improves.

Govt cannot force morality, govt can't force people to take responsibility for their own lives. The only thing govt can do is take money from those who work, and give it to those who would rather not. This does not help the poor, it just shields them from the immediate results of their mistakes. As a result, they don't learn from their mistakes and go on to make more and bigger mistakes requiring ever larger measures of public assistance.

Govt doesn't end poverty, govt causes poverty.

Personal Responsibility
I think you are onto something with your "personal responsibility" statement.

I have always had morals, but there was a time when I was not taking personal responsiblity for my situation. I let my diabetes get way out of whack. I was working sporadically... only a few hours a week at most.

My spirit was impoverished even though my wife had a good income and provided for me and our family.

Only when I took personal responsibility for my diabetes did things start to turn around. Once my diabetes was suitably under control (not anywhere near perfect but under control) I took the next step and found work that I could do and that allowed me to go out of the home to work on a daily basis.

Now almost two years later I am contributing in so many differnet ways to my immediate family, my extended family, and to society in general.

My spirit is alive!!!

Although we don't have a lot of material things our family spends less than we earn, we save some, and we donate some. And our lives are very very full.

Tradgedy has hit our family in the past few days with my wife's aunt, uncle, and first cousing dying tragically in a car crash and I am helping to support many many members of our family during this very dark hour.

All because I took and take responsibility for my situation and do things to fulfill my responsibilities on a daily basis.

The question is does everybody have the support system in place that allowed me to start taking responsiblity for myself.

I do not believe that everybody does. I was very lucky to have a supportive wife and a mother and father who encouraged me to take responsibility for my situation.

In the absence of those supports I feel that it is a government who can provide that sort of encouragement and support when the financial and caring resources just are not there.

Morality... not so much.

Taking personal responsibility... yes

Financial and encouragement assistance by someone... absolutely.

But who is that someone if not the taxpaying public?

Please advise.

How does one look at homelessness and not see...
Governments’ slow growth policies and excessive building code regulations contribute to homelessness. Another problem is mental illness. In your beloved Cuba it may not be the socialism that keeps homelessness down but dictatorship. Dictators can deal with mental illness efficiently but we cannot because people have rights here. Even the mentally ill have rights here. You may not like the looks of result of the mentally ill having rights but I like it that even the mentally ill have rights here. Cuba may or may not have a homelessness problem that is impossible to know, but if they do not it is because Fidel will not stand for it. If so Fidel can throw the would be homeless in an asylum where none of us would like to go. Better to be homeless on the street.

BTW please contribute to a homeless shelter near you.

support systems
You do not need a support system in order to take responsibility for your own actions. You just need to do it.

Okay
Alright Mark, but I am sure, as night follows the day, that I would be writing to you from heaven right now if it weren't for my wife's capital assistance and the emotional support and gentle prodding of my father, wife, and mother.

We'll just have to agree to disagree on this one Mark.

All the best.

Also in North Korea people are starving...
...In the USA even the homeless are not starving!

If socailist France has homeless people (and is does) and Cuba does not what does that tell you?
If socailist France has homeless people (and is does) and Cuba does not what does that tell you? People are pretty silly to believe what information comes out of Cuba.


help
Would you have been as willing to get back on your feet if the capital assistance had been coming from the govt, instead of your family?

Do you believe that you would be doing as well today had you not changed your attitude?

Re: help
Thanks for the questions Mark.

To answer your second question first... NO... I would not have been doing as well today if I had not changed my attitude.

The ONLY thing that allowed me to become as well as I am today is the fact that I changed my attitude... I took responsibility for my own health.

But the thing is that if I were left to my own devices (i.e. without the capital and emotional of people who cared about me even though I was bringing misery into their lives)...

If I were left to my own devices I would have been MUCH more likely than not taken my own life.

So the "government" you are asking about is not merely the funder of a "place to stay"... it is that AND a substitute caring AND prodding organization that will give individuals a reasonable CHANCE to start taking responsibility for their own health.

I hope that helps.

Best Regards,
Mark

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