TCS Daily

Hope and Reform

By Alvaro Vargas Llosa - October 16, 2007 12:00 AM

The recent extradition of former Peruvian President Alberto Fujimori to face charges of human rights violations and corruption is a welcome development. It is also a monumental challenge to the institutions of a country that has not been able to establish the rule of law as successfully as it has been able to generate economic growth in recent years.

Among other charges, Fujimori, who was extradited to Lima by Chilean authorities, will be tried in relation to two civilian massacres at the hands of a military death squad active during his regime. His political organization -- mostly a collection of relatives and cronies -- is using its 13 members of Congress to pressure the government and the magistrates to set him free.

Some Peruvians rationalize the human rights violations and the corruption of the Fujimori years with the argument that the country was at war with the Maoist terrorist organization known as Shining Path and that his government spurred the economic recovery of the last decade.

The greatest challenge in the upcoming trials will not be political pressure on judges or the publicity of a highly charged case at a time when global financial institutions are on the verge of granting Peru an investment grade, the highest economic rating. The greatest challenge will be testing the Peruvian people's capacity to decouple in their minds their personal views of Fujimori's government from the moral and legal implications of the crimes for which he will be tried.

The capacity or incapacity to make that distinction will tell us whether Peru has gone from being a society that puts institutions and moral principles at the mercy of political necessity -- the mark of underdevelopment -- to a society that embraces the principle that the law is an impersonal set of rules over and above personal preference, political convenience or sheer passion.

Because many Peruvians were not ready to make that distinction in the 1990s, Fujimori's government was able to concentrate colossal amounts of power with popular support -- hence the crimes and the corruption for which dozens of his former collaborators have gone to jail. There was a time, shortly after Fujimori fled to Japan and resigned his post by fax in 2000, when many Peruvians, shocked by spectacular revelations of high-level corruption, seemed ready to understand that accountability, limits on government, and the separation of powers are extremely important. However, with the passing of time a substantial number of people have started to forget the tragic events of the recent past. Even if they distance themselves from Fujimori personally, they seem to advocate, for instance with regard to law and order issues or the uncomfortable presence of NGO activists in parts of the country, some of the dictatorial tactics that made human rights violations and corruption systematic in the 1990s.

The mental transition from the idea that strongmen are the solution to a nation's problems to the idea that impersonal institutions should be more powerful than those who rule is crucial. Much of the progress that has taken place in the world in recent centuries stems precisely from that transition. The countries that have not shaken off the tradition of strongman rule need to learn not to subject basic human rights to the whims of politicians acting on a wave of popular fear.

Peru is undergoing Asian-style growth rates and its entrepreneurial class is rapidly adopting new technologies and becoming competitive. But the other part of the development equation -- decoupling the institutions from the political process in order to protect individual rights permanently -- is not yet fully in place. That is an age-old cultural trait that will need to be overcome through leadership and reform.

One way to start is to show the population that Fujimori's trials are not part of any political revenge and that he will be treated more fairly than he treated his enemies. But Peru's still precarious judiciary will also need to show that it is ready to do its job impartially, no matter how much political pressure Fujimori's supporters bring to bear.



In praise of impersonal institutions
It's less than coincidental that this article is written as the House considers passage of HR 3688... the FTA with Peru. And the gist of Sr Vargas' argument, of course, is that rule by impersonal institutions is ever so much more satisfactory than rule by poor, imperfectible humans.

Here's an interesting clause within the bill:


The United States is authorized to resolve any claim against the United States covered by article 10.16.1(a)(i)(C) or article 10.16.1(b)(i)(C) of the Agreement, pursuant to the Investor-State Dispute Settlement procedures set forth in section B of chapter 10 of the Agreement.

What does that mean? It means that in the event Peru wants to slow or stop intrusion of foreign financial interests into its resources... FOR ANY REASON... it must make its case to an international tribunal extremely likely to side with the "investor". And decide that such a move would constitute "restraint of trade". Customarily in such cases the investor is awarded an amount equal to the total sum of all sales they would have realized, had access not been retarded by the Peruvian government.

So what's at stake? Oil. Lots of it. Sadly, this oil sits atop one of the world's remaining centers of maximum species diversity. Not to mention one of the last remaining operating lungs of the earth: the Peruvian Amazon basin.

No wonder everyone's so anxious to belittle the notion of global warming. They're making all their money contributing to it.

oil in peru
What do suggest then re the oil, let it sit there? Or perhaps nationalize like your hero Chavez did? In that case instead of foreigners with expertise in oil, you might get those "by poor, imperfectible humans", running it.
And here's another reason why so many people might be so anxious to belittle GW, it's because it probably isn't caused by burning oil.

You didn't understand the comment
First, there is no need for Peru to "nationalize" their oil. They already own it. Or do you dispute the right of a nation to own and control the development of resources that lie within its borders?

When you answer, as I assume you will, I would like your answer to that one. Does Peru now own its own oil?

One can assume that owning such a resource, they will want to develop it. And that to do so they will invite in oil companies for exploration. And one can also assume that they will want to put rules in place, so that their precious natural resource, the Amazon biosphere, will be minimally disturbed in the process. And one can assume also they will want to impose their own national rules for safety and other worker protections.

The entire point to the FTA they are being offered is to impose NAFTA and CAFTA style rules on the proceedings, so they lose the right to demand that their development partner follow national law once they are invited in to do business. It's there to take sovereignty out of national hands and put it with a board of international arbiters charged ONLY with deciding whether the rules an oil developer is being asked to follow will impact their bottom line.

And of course, taking care of the environment and the work force costs money. So Peru shall be found guilty if they impose any restriction at all on the activities of their development partner.

That way the company gets to operate free of any law.

Roy wants Rule by Men (and Women) in place of Rule by Law

Who is going to get the oil out?
If Peru can't drill the oil they will have to hire someone to do it.

Given the experiences in Venezuela, any smart company that takes the job should get paid cash, up front.

Crimes and crimes

We should not forget to compare the crimes of which Fujimora is accused with the misrule of a Mugabe or a Kim Il Song. The latter regimes destroyed the property and savings of millions, beggaring the nation individually and collectively. It was a crime against people and against The People. Fujimora is accused of using and misusing excessive force in a nation threatened by a growing Maoist army and lining his own pockets and those of his families and cronies. Perhaps his populist style would have led him to worse things, yet he helped to dismantle enough of the bureaucracy to make life bearable for people and undercut the Shining Path.

My verdict? Get a confession to the non-capital charges, make him give back a lot of money, distribute it to victims, make him swear before an international tribunal that he will never seek public office in Peru again, and find a country that will keep him under some kind of house arrest while he enjoys the rest of "his" money.

How do you get that?

The FTA rules would actually suspend enforceability of any Peruvian laws that restricted the actions of foreign companies working in Peru. They could not, for instance, enforce environmental, labor or safety laws. Because doing so would entail extra expense. Such an agreement would subvert the rule of law in Peru, and subject them to the dictates of foreign players.

Read what I wrote. Then you can respond more intelligently.

not understanding
Yes I dispute. I don't think governments own anything. I like more the Jedd Clampett model; the hillbilly owned his land and the oil under it, till he sold it to some company that knew how to get the stuff out of the ground, and refine it etc. I don't mind if the company is Exxon, or BP, or PetroChina. They will all pay about the same price, depending on the value of the commodity. But in such situation that say, some foreign oil company causes some horror on that land they bought from Jedd, and the neighbours get affected etc. then this is all subsumed under normal normal rule of law; hurt somebody else and you have to pay up, or restitution and all that. Nothing out of the ordinary about this.

Good solution, NJ Commuter
I agree with NJ Commuter. I would also execute Guzman and the other leaders of the Shining Path, who are are really responsible for any human rights violations. Too bad we never see THEIR crimes talked about in the international media.

Looting the government is an accepted practice in much of the world; I have heard from my Peruvian friends that the current president of Peru lined his pockets last time he was in office, and that many Peruvians voted for him because they thought he'd stolen so much last time that he would not steal if given another term.

At any rate, it will be good to have at least one politician held to account for stealing money from the public. Maybe it will establish a precedent.

Oil exploration basics
"Given the experiences in Venezuela, any smart company that takes the job should get paid cash, up front."

Exploration leases don't work that way. Any country that had the necessary investment capital to bankroll the entire initial outlay wouldn't need an investment partner. They'd hire their own talent, and do it themselves.

That's why most oil countries invite investors in. You can't start an oil industry on fifty cents. You need a money partner. And usually the money partner ends up being the senior partner.

They sell it, but don't own it?
I thought you were more investment savvy than that. No one ever sells oil in the ground outright. Review the concept of production sharing agreements (PSAs). The actual split is always a very complicated one.

Also, let's say it's like you imagine, and the country "sells" its oil to some company.

How the hell do they sell something they don't own? This is a very poorly thought out argument.

Why would anyone partner with a government?
Especially one that could take it all?

Another dumb question
You could think this one through by yourself, if you only allowed yourself to think about it. Oil companies partner with a country that has oil because they have the oil. The companies want a share of it.

How else are they going to gain access? Do you think they don't have to ask anyone, just come in and take it?

The way production sharing agreements work is to arrange the details of the split. And in cases where a country subsequently gets a new government and they are unhappy with the old split, they "nationalize" the oil. But that almost always just means the split has to be renegotiated. The country nearly always still needs the developer, to conduct the operation.

sell it
It's because most countries don't have free economies, but have governments that think they own all resources(and the people too), so these mercantilists, or dictators then do sell the stuff. But I prefer if Jedd owns it and he sells it. So governments get away with controlling what they want because they control the guns, and statists like you seem to really like that. But libertarians like me prefer private property and free markets.

How do I get that?
Here is what you wrote

"And the gist of Sr Vargas' argument, of course, is that rule by impersonal institutions is ever so much more satisfactory than rule by poor, imperfectible humans."

Doesn't it follow?

Another dumbass response
having absolutely nothing to do with the question posed.

are impersonal?

Were they all taken over by cats or something?

I think not
Marjon asked why anyone would ever want to partner with a government. And I answered that when the government owns the oil, and you want to make some money on it, you don't have a choice. You partner with them.

Do you see it some other way? If so, spell it out so we can see what's on your mind. Don't just carp mindlessly, with no notion of what we're talking about.

No one owned the diamonds in Sierra Leone
Your comment doesn't make any sense. First you imply that you think dictators saying they own the resources is a bad thing. And even if a government owns it in the name of its people, that's also bad. Then you say you like if Jedd (Clampett, I suppose) owns it and sells it.

So which is it?

You're all fired up about private property, free markets and all your other glow-words. So before anyone is aware the oil, or the diamonds, or the gold is in the ground... who owns it then?

Who is it that all these free marketeers have to go to to get it from? If no one owns it, as you seem to be saying, is it okay for them just to come in, guns blazing, and dig it up?

What about the people who live on top of it? Do they have any rights? Or is this all just a matter of the big fish eating the little fish, and whoever is the biggest fish is the guy you like?

The trouble with your philosophy is that there's no way anyone can connect it with the real world.

This requires trust.
Why should any company trust any government?

Who owns the land?
We've been over this before.

There is no reason that you should not be able to define volume ownership. You have a plot of land, you own what's below to the center of the earth up to the limit of the atm.

If music and movie residuals can be accounted for, there is no reason water or oil flowing under your property can't be accounted for.

Of course, you many need to hire someone to find out what's below.

The function of the government is to protect YOUR right to your property not to steal your property when something valuable is found in it.

who owns
Yes, I like the Jedd Clampett side. He owned the land and what's underneath, but couldn't get it out himself, so sold to somebody who could, and I didn't care if an american, or british, or even if the French Total company does it. I recommend you read up on Murray rothbard's comments re property ownership; he's an austrian economist like me, only his english is better.

"own in the name of the people"
That's for sure the marxist position. But governments don't own anything, they just take things from people because they control the guns. I don't recall reading anywhere where people rose up in protest, demanding that the government control land and just let the people live on it, under very strict conditions, at the pleasure of the government, till they decide to take it away if they feel like it.

Man created the government
Man as the right to destroy the government and to own the land.

Who owns the air?
You're going down two very different paths.

The first has to do with mineral rights. And you maintain everyone who owns the surface should own that chunk down to the center of the earth.

I'd very likely agree with you. Air rights would be a little harder to enforce, if you lived near an airport and wanted to charge rents from the overflights.

But the other question you don't address. Private individuals or groups own a bunch of the world's land. They all bought it from someone else. Trace the chain of ownership back and you come to a government granting lawful title.

Now, how about all the land no one owns? That's all owned by the government too.

So if there's a region in Peru that you think might contain oil, and you want to drill some holes to find out, you'll just have to speak with the Peruvian government and obtain their permission. Like it or not, they control such activities.

Whose land is it?
I do read a little Rothbard. And I agree with you, if Jed Clampett owns some land and can sell it to some wildcatters, more power to him. Although I think it would be a little savvier of Jed to enter into a PSA with them. Otherwise, he's selling too cheap.

Now how do we say Jed "owns" this land? Simple. He bought and paid for it. From someone else. And if we go all the way back through the chain of ownership (this is what's involved in perfecting title-- a necessary step prior to finalizing any sale-- who do we get to?

God? Nahh. He doesn't own the land. It was someone's federal government that laid down the laws and authorized the first legal sale.

So we still have the fact in every organized government today, that you can deal with a private owner if you can find one. But if it's public land, you have to talk with the government about it. They'll tell you what the rules are.

Here's how it works
"PDVSA’s 2006-2012 Strategic Plan calls for the assessment and certification of the extra heavy crude oil reserves in the Orinoco oil tar belt (Faja). Memoranda of Understanding have been signed with various state-owned oil companies to certify 27 blocks with the participation of state oil companies from signatory countries. Investment under the strategic plan is supposed to reach USD $56 billion between 2005-2012, of which 70 percent will come from PDVSA and the rest from the private sector."

In this case, solicitations are being made for investment from companies that are themselves state-owned.

If they trust the deal, they'll put their money down. If they don't, they won't.

State owned oil companies
Why shouldn't a state owned oil company trust the state?

That's correct, Beanie Baby.
You think not.

Owning the air
If people could exercise complete ownership of the volume above and below their land surface, imagine what the property values would be around an airport?

If you could make a small royalty for every airplane that transited your airspace, it would more than compensate the owners for the inconvenience.

Living downwind from a power plant would be profitable for the owner of the land. And it might be more profitable for such power plant to buy that land instead of paying royalties.

Sounds like a win-win all around, except for government power.

As for oil under the sea floor, we have the technology to map such a volume. Start homesteading the ocean floor.

That's way too simple
You're asking if I think the rule of law trumps the rule of men. And in fact I do. I also think there can come a time when laws instituted by groups of men are onerous, and oppressive to the rights of others, and are to be resisted in acts of civil disobedience. Just because it's a law doesn't necessarily mean it's a good one.

Our founding fathers broke the laws of their country. And I think they did so for good reason.

The problem with the FTA is that one set of laws, those of the nation, would be trumped by the laws of an international trade regime. It is inconsistent, for one thing, with libertarian philosophy to submerge the will of the people gather together into a state, under a body of foreign law. Further, it's a body of law with no appeal.

you read Rothbard?
Then you must have missed the part where he describes about the first users or finders etc. of land. Your notion is phoney about going all the way back and finding some government owning it. Whether in europe, or new world, no governments were around to own it, but the first cave men who moved to a new valley, occupied it and thus owned it. the first red indians who showed up in american occupied it and thus owned at first, same everywhere. Only later when tribes formed kings etc.(usually the first most ruthless or powerful guy) then to governments. So no god, no government. This has all been worked out long ago by libertarian economists, way before Rothbard. He's just a better know american guy on this; it goes back to von Menger, von Mises, and all those early guys, and some would claim much further back, with Bastiat, adam smith et al.

The founding fathers fought FOR individual Rights. What are your "heroes" fighting for?
It is not sufficient to know what somebody is fighting against, Roy.

We must also analyze what they are fighting FOR.

The US founding fathers fought for EACH individual's Rights to that individual's own Life, Liberty and Pursuit of Hapiness.

What are the rulers you so eagerly support fighting for?

You are equating the US founding fathers with collectivist rulers?

Roy's reading of the Peru--US FTA
Roy--I went back and read what you wrote about the FTA and then looked at the FTA itself.

Your reading appears to be made up out of whole cloth and to be totally inaccurate, just as your reading of the Bible and other people's comments are. The FTA has provisions REQUIRING each country to enforce its labor and environmental laws, for goodness sake. See Sections 17 and 18.

In fact, your interpretation of the arbitration provision of the enabling act you quote is not even a reasonable interpretation of that provision.

In short, you are full of it!

A foolish novice
eats only moss.

The Founding Fathers did not break any laws of "their country". They overthrew the existing order to create a new country, whereby they came to have a country of their own for the first time.

Modern Americans have largely succeeded in bringing back that body of "law" that their forefathers overthrew.

The law was made for man, not man for the law.

"Always the loud angry crowd,
Very angry and very loud,
'Law is We';
And always the soft idiot softly, 'Me'."

Trade agreements
Sections of the renegotiated (final) version of the Peru-USA FTA would seem to cover labor and environmental concerns. These were not present in the earlier drafts, pre-May, 2007. I wish Peru all the best if they ratify this agreement.

My arguments stemmed from well-known holes in earlier FTAs, such as CAFTA, where these concerns were not adequately addressed. As I'm sure you know, many countries signing trade agreements with the US (also with Europe) found they could not enforce labor and environmental laws without being brought to arbitration. Customarily such binding actions would charge the host country damages due to loss of trade-- i.e. the cost of enforcing their labor & environmental laws was seen as a taking, and the host country was assessed the amount of that loss.

This made most emerging countries, having entered into such agreements, hesitant to even try enforcing such laws. It also made their assemblies not even bother passing new laws, as they would be useless.

You quibble with my interpretation of the arbitration provision. But you will have to agree that it has been so used, many times and successfully, in previous trade agreements elsewhere.

Trade agreements have always been written such that the developed country-- the senior partner-- holds the upper hand. There are many arguments that have been made about the disadvantages a country accepts when they sign such agreements. On the positive side, there is only the etxortionate promise that if they jump through all the hoops the agreements force on them, the senior partner will lower its tariffs.

Most developing countries reluctantly agree to this. In Peru there was a plurality, with most of the voting public against it. The initial agreement, you'll recall, was entered into by a lame duck president on his way out of office.

That, no doubt, has been the stick that forced the language of sections 17 and 18 to appear in this trade agreement before Peru backed out of the deal altogether.

Assuming it goes through, again I wish them the best in their new arrangement.

Clearing the land
Dietmar-- The whole issue about land ownership in the New World is that the original ownership rights you describe were totally disregarded by the Europeans arriving at our shore. The considered themselves the "discoverers" of what they considered to be virgin lands. And cleared away the original inhabitants exactly the same way they cleared the trees from the forest-- and later, the buffalo from the plains.

They went to elaborate lengths to justify tat taking by saying the Indians were savages, and had not properly occupied the land by clearing, holding lawful title, defining metes and bounds, etc. This was blatantly inaccurate as most tribes they met were sedentary, recognized both collective and individual ownership rights and used the land in the same ways Europeans did.

So as a practical matter, the colonists cleared the land of everything they didn't want to keep, including the humans that lived on it. Those they didn't shoot, starve or kill outright ended up on wasteland-- places that had no cash value.

The land that did have value was claimed by the government of the United States, and sold to settlers or occasionally given to them outright. THAT is the basis of our actual rules of property ownership.

You should come to the US to take a look at the Green River Reservation in Utah, or any reservation country in South Dakota or Wyoming. This is land you can't make a living on, just dry shortgrass or sage-- and so the red man has been reduced to accepting a pittance in welfare, and spending it on drink.

That's my definition of extermination.

"the rulers" I "so eagerly support fighting for?"
Your whole line of questioning is predicated on the thought that somewhere here I have advocated rule by some set of "rulers".

Please quote the passage where I have said that. Or anything like it.

I don't support anyone's right to rule over me. A candidate may represent me, if he chooses to court my vote. But the moment he stops representing my wishes I'll vote for someone else next time around.

That's pretty much the standard American way. Show me where I support something else.

A rolling stone husks many oats
That's quite a saying you came up with. Where'd you find it? The Nordic Book of Reindeer Sayings?

First, there's no need to put the word law in quotes. It's law, all right. Just not law that you or I might agree with. I suspect the ones you like, I don't. And the ones I like, you don't. So the legislators have compromised.

As for the Founding Fathers breaking the laws of their country: up to the moment they initially resolved to declare independence, the British Colonies WERE their country. Then they changed it.

I kind of wish you and your friends would come out into the open, and declare independence yourselves. Then maybe the country could wake up and find they have a few problems on their hands.

TCS Daily Archives