In the past decade, for the first time in 500 years, South America has taken successful steps to free itself from western domination, another serious loss [to US primacy]. The region has moved towards integration, and has begun to address some of the terrible internal problems of societies ruled by mostly Europeanized elites, tiny islands of extreme wealth in a sea of misery. They have also rid themselves of all U.S. military bases and of IMF controls. A newly formed organization, CELAC, includes all countries of the hemisphere apart from the U.S. and Canada. If it actually functions, that would be another step in American decline, in this case in what has always been regarded as “the backyard.”

Of course, Chomsky fits this into the master narrative of US decline across the globe. The United States built its superpower rise on lessons from intervention after intervention in Latin America. Does US disengagement from the region signal the loss of America’s superpower status?

With the EU in economic struggles and the BRICS becoming the source of a lot of investment between borders, France and Dassault has been able to capitalise on its position as one of the top technology producers in its field to challenge Boeing and their F/A-18E fighter series for contracts in two of the BRICS nations, India and Brazil. Much like the hard sell of the Mirage IIIs during the Cold War, Dassault has produced the Rafale fighter for export sale but have had little luck in selling it outside of France until recently. Brazil was seeking to update its air force over the last decade but was weary of the French jet as it did not sell outside of France to any nation. With competition from Boeing’s F/A-18E and Saab’s Gripen fighter, Dassault might have had to break even on the Rafale if it could not produce export sales outside of the Armee de L’Air. Interest in the Rafale took hold in India and that lead President Rousseff of Brazil to send officials to India to analyse the deal, as well as express its interest in the Rafale over its main rivals. The firm decision on the fighter has yet to be set in stone, but it looks like the Rafale will arm India and Brazil’s air forces for the next few years.

Export sales by Dassault has often established the firm over decades with the sale of Mirage IIIs, Mirage 2000s and now the Rafales. Success of Dassault fighters in the Falklands War over its British rivals always made French technology one of the most feared by any nation that had to challenge it and has produced a great deal of licensed French technology to be sold abroad, especially to China. China currently does not have Dassault fighters, but does produce variants of the French Dauphin helicopter; one that has also been purchased by the US navy, as well as one of China’s most numerous Anti-aircraft systems, the HQ-7 Crotale. Competition with giants like Boeing has been extremely difficult since companies like Dassault and Airbus are based in the EU and have to compete with American companies, often for American contracts or contracts from US allies. Aviation industry contracts can make or break a firm, or provide it with decades of support sales even after the production line has stopped on a model of a plane. Part of the decision to go with Dassault by Brazilian officials was linked to an issue a few years ago where Brazilian firm Embraer was blocked from selling its Tucano aircraft to Venezuela because it has US technology in its avionics and the US was able to block the sale. Airbus also has challenged American firms under competition regulators when they lost a contract to provide the US military with new refuelling aircraft based on its commercial airliner models. It was claimed by Airbus that there was not a fair assessment of the contact between firms, as political motivations to create American jobs became more of a factor than the quality of the product. While there have been several legal battles in the industry over competition issues, it makes a strong point that for Dassault and France to win any defence contract in a BRICS nation is extremely difficult. A detailed assessment needs to be made on how to approach large procurement contracts towards BRICS nations, please see the article here for more details.

This year Mexico will elect a new President and Senate and the parties are slowly presenting their candidates for the upcoming six-year Presidential term. President Calderon has served his one and only legislated term in office of six years and it will remain to be seen whether his PAN party will be re-elected. With excellent economic numbers in a slow global economy, the PAN has a good chance of being re-elected. What might hurt the party is the open drug war in Mexico currently taking place that was a result of Mr. Calderon pressing for drug security in Mexico and the entrenched drug networks that have been established in Mexico over the last few decades. With former PAN President Vicente Fox pushing for a legalisation of the narcotics trade to reduce violence in Mexico, the PAN may have some soul searching to do before putting the Presidential campaign into full force.

A decent market measure for all economies can often been seen in the aviation industries response to different national economies. In Mexico, the now defunct Mexicana Airlines is showing some signs of re-emerging in Mexico after its financial collapse a few years ago. Emerging markets in general has seen some attention from the aviation industry in general as many companies seek customers in Asia, Latin America and the Middle East, a result of region market growth in general through to 2016. While the aviation industry is not being displaced in North America and Europe, it does show that BRICS and other emerging and frontier markets will produce trade expansion while the US and eventually the EU drag themselves out of economic paralysis. A conference on competitiveness and innovation addressing the aviation industry by GE named “GE American Competitiveness: What Works” will deal with issues of expansion to emerging markets and strategies in the current US market slowdown next week in Washington DC. Anyone who wishes to see how one industry is handling expansion to emerging markets and growth in the time of economic slowdown should seek information from the conference presenters and organizers. With the possible re-birth of Mexicana and troubles in Asia with the A380, it is certain to be an interesting week of presentations. Information on the conference can be found here.

Telecommunications giants have been in the position to create a great deal of wealth as new technologies create new boom markets for their products in a commercial environment dependent on new forms of telecommunications. With technology, come many new IP laws to enforce violations of privacy and competition in those new markets as companies jostle for position and form legacies like Nokia and Microsoft. In the EU, stringent laws enforcing consumer protection within the Common Market have set much of the global standard against overly ambitious telecoms giants. Going from competition laws setting records against companies like Microsoft to investigations into companies like France Telecom regarding a series of employee suicides since privatization a few years ago, the EU has set the hard standard against companies that wish to violate competition laws and as well as all other market and labor standards. It is likely that Mexican competition laws will take much of their precedents from that of the EU and US to enforce any violations against Carlos Slim’s business interests, if evidence provides for enforcement to become necessary.

In reality Mexico is likely not the most expensive country for phone services, and there is a great deal of evidence showing that their NAFTA neighbor, Canada has the highest per-capita telecoms charges in the world. A lack of effective competition policies have created a market in Canada where people not only pay a great deal for services, but services are often out of date and ineffective due to a lack of competition in the Canadian mobile phone market. While many developing nations have modern up to date cellular services due to the reduced cost of setting up such systems in places that historically had poor phone access, Canada’s modern economy creates an expensive and outdated mobile phone market that has existed without proper scrutiny from the last few governments. There have been some moves to protect Canadian consumers over the last few years, but until a true measure to help Canadian consumers takes shape it would be a good idea for those like Carlos Slim and other telecoms to enter a Canadian market that sorely needs proper services in their sector for individuals and businesses. A study of the Canadian, European and Mexican telecoms markets would be a useful and interesting study to provide all consumers with a legitimate and fair market for telecoms usage.

Guillermo Ortiz

Latin America’s technocrats spent the second half of 2011 on mushy footing, unsure what effect the euro zone crisis might have on the region and afraid that China might experience a “hard landing.”

Now some of the region’s wonks are expressing more confidence. “Latin America has never been better equipped to move forward,” said Guillermo Ortiz, a former central banker of Mexico, at Davos. He went on: “This is really the decade for Latin America.”

Two points: First, now it is the Mexicans who are cooing over growth and international clout, not the Brazilians. Fair enough. Brazil’s economy braked fast last year, recording nil growth in the third quarter, while Mexico did an impressive head fake by experiencing a growth spurt just as the region below went into slow-mo.

Second, whatever confidence leaders have recovered since last summer is premature. In his remarks, Ortiz suggested that the region had moved beyond the headwind of Europe’s crisis, and structural adjustments over the past decade ensure that Latin America will be sitting pretty to 2020.

Maybe this will be case for Mexico, which relies more on US consumers rather than European ones. But while forecast growth of 3.5 percent for Latin America in 2012 surpasses Mexico’s trend rate, elsewhere it signals a dangerous slowdown. Inflation will be higher than economic growth across most of South America; in turn, slower growth will increase unemployment, feeding informal sectors that already threaten socioeconomic development. Lower commodity prices could metastasize the bad news.

By now, anyone who’s been watching Latin America is well aware of the red flags raised over the region’s reliance on commodities for economic growth, so I’ll review by way of hyperlink and move on.

What troubles me are recent signs of Latin America’s inability to harvest commodities. A week ago a UN report concluded that a drought in northern Argentina means the world’s second-largest corn exporter will ship about 1.6 million tons of corn less this year than in 2011. A clear-cut case of nature’s wrath no doubt, but it shouldn’t be dismissed given the context of underproduction elsewhere.

Brazil produces over half of the world’s ethanol; the country’s cane-based brew is to biofuel what the bikini is to fashion. Last year though, Brazil was forced to import 1.1 billion liters of ethanol. And Mexico, which counts oil as its second-largest source of tax revenue and sits atop the world’s fourth-largest shale reserves, is importing record levels of natural gas.

Here’s the kicker: the United States is taking up the slack. Despite Argentina’s weak harvest, corn prices are expected to decrease this year because of strong exports from the US. Nearly all of Brazil’s ethanol imports last year came from the USA, as did most of Mexico’s imported natural gas.

Brazil and Mexico are in this situation because of inept government policy. Mexico’s Pemex has said it plans to operate 175 shale gas sites by 2015; to date, it is drilling at one site in the northern state of Coahuila.

Meanwhile, Brazil’s government has dis-incentivized ethanol production in recent years by capping domestic prices and by cutting taxes on oil–but not ethanol– production. The result? Brazil had some 150 million tons of spare mill capacity for ethanol production last year.

Just back from the Davos shindig, Moises Naim chided big talking officials from developing nations for their hubris. Poor management of hallmark commodities in Latin America leads me to agree.

Two incredible women that must be mentioned here is President Dilma Rousseff, who was once a victim of assaults by Brazil’s past military government to become the President of the country. Another astonishing person and the recently appointed head of Petrobras, Maria das Gracas Foster will be made the CEO of one of the largest oil companies in the world. Foster was announced as the next CEO of the company after running one of its most profitable divisions of the company over the last few years. Foster’s 34 years with the company and her recent leadership of her division during one of the most difficult and exciting economic and regulatory periods in Brazil’s economic history lead her to the position. Foster, who has worked with President Rousseff in the past, is delegated with expanding Petrobras’ output and profits, taking charge of access to new oil deposits founds in Brazilian waters and with growing the company during Brazil’s still viable economic boom.

Foster grew up in a working class suburb of Rio and ended up studying Chemical Engineering. She worked her way up in the company over her 34 year career and demonstrated her skills in dealing with company issues and government agencies, having a lead role in almost every division in the company since 1978. Past working relationships with the current President Dilma Rousseff lead President Rousseff to support the appointment of Foster to the head of Petrobras. It is likely that beyond Foster’s qualifications, the tenacity and symbol of a working class hero becoming the head of the 5th largest oil producer in the world will not be lost on those young women who are working hard to punch above their weight and their position in society to become the next CEO in Brazil and throughout Latin America and abroad. The number of inspirational leaders taking Brazil into the future is an example for every country in the world of what is possible for anyone to work for their best self in their career and personal lives. For more information on Foster please see FT.com as well as the article here.

Parallels between Mexico’s and Colombia’s drug violence is often compared as it involves two simple elements, namely violence coming from the narcotic trade and extreme violence that affects society as a whole. The article argues that there are many differences between the two countries and the drug issues beyond extreme violence. She makes a very important point as an analysis of extreme violence could also link Mexico to Iraq or Afghanistan a few years ago as much as it could be linked to Colombia in the 80s and 90s. The article points out that the structural elements of corruption and a lack of justice in Mexico differs than that in Colombia, although it exists in each country and contributes to the drug trade. Poverty, while not the reason for a drug trade, enables the movement of many in society to take risks to gain immediate rewards. With a lack of confidence in the system and the government, it creates rationale actors in an environment where money and the narcotics market has a real impact on society as a whole.

Natalia points out correctly that the complex system making true O’Donnellian democracy difficult in Mexico even today was not as much of a challenge faced in Colombia. Historically Colombia was blessed with relatively functional institutions and a traditionally democratically motivated system to help manage drug violence that arose over thirty years ago. Whereas Mexico’s complex democracy and systemic difficulties contribute to the difficulties in forming and anti-narcotics strategy, Colombia’s drug violence was linked to past revolutionary movements that existed in a past era that were married to drug cartels in the 1970s. The way cartels were formed is also highlighted by Natalia, where Colombian cartels often were run by well know figureheads, Mexican cartels reflected our networked society, working off networks that often are not understood nor do officials know who exactly runs the drug gangs. While Colombia could target the FARC, and affect the drug cartels in the process, Mexican gangs are comprised of many smaller, unknown elements that can evade authorities by way of being covert. This allows Mexico’s smaller gangs to have the ability to cross borders, maintaining lucrative markets by establishing them from Vina del Mar to Vancouver or displacing defunct cartels that are stopped by authorities or eliminated by competitors. These broad networks also create access to weapons that can be easily obtained in the US for use against Mexican authorities in Mexico.

Suggestions by the author that the demand for narcotics in the US and weapons proliferation across the border is a main source for the cartel violence in Mexico is tied to the ease of access Mexico has to the US border. While she makes a solid point that a lot of the problems can be sourced in the US demand for narcotics, it is not likely that the US would legalise narcotics or even take Mexican cartels as serious as Iraq, even though they are a greater burden on American society than any country in the Middle East. President Obama for all the criticisms has made a lot of strides in US foreign policy, just not in Latin America yet, hopefully the COHA.org article will reach those policymakers in Obama’s Administration for positive policy development.

http://www.campeche.com.mx/noticias/nacional/pan-y-pri-marcan-ruta-del-2012/6942

Mexico’s presidential election, to be held July 1, looks like a foregone conclusion. President Felipe Calderón’s right-wing National Action Party (PAN) has fallen far out of favor due to Mexico’s terrible drug violence. In the past 5 years, the drug wars have killed over 45,000 people. The Northern border city of Ciudad Juarez had 300 murders in 2007; in 2010, the figure was 3,622, giving this place the highest murder rate in the world. As Mr. Calderón’s critics like to point out, Juarez’s murder rate is higher than anywhere in Iraq or Afghanistan. With the PAN’s national security policy in disarray, Enrique Peña Nieto of the rival Institutional Revolutionary Party (PRI) led a recent presidential poll by 25%. Seeing these numbers reminds me of last time around in 2005, when President Calderón and the PAN trailed but went on to win the election, and wondering if the upcoming result will be as everyone expects.[1][2]

Is it truly unthinkable that the PAN could win again? Polling evidence says it is indeed unthinkable. Mitofksy’s November 2011 poll of voter preferences gave 44.6% to Peña Nieto (EPN), 19.7% to the PAN’s Josefina Vázquez Mota (JVM), and 16.1% to Andres Manuel López Obrador of the left-wing Party of the Democratic Revolution (PRD). PAN optimists observe that at the same point before the 2006 election, Mr. Calderón was third place in the polls before coming back to win. The difference is that the PAN’s current deficit is much higher at 25%, versus the 5% deficit Mr. Calderón faced in November 2005. However, not all commentators agree that a PRI victory is inevitable. I will discuss three reasons the PAN has a shot: EPN’s recent campaign gaffes, Mexico’s growing economy, and the Vázquez Mota factor.

Enrique Peña Nieto, the PRI’s man in 2012, is photogenic, well-known, and liked. At age 45, he has already served 6 years as Governor of Mexico State, the country’s most populous. While his image is attractive, some are questioning his ability to relate to ordinary Mexicans. At the 2011 Guadalajara International Book Fair, EPN was asked to name three books that had influenced his life. He struggled with the answer in an awkward speech eerily similar to Sarah Palin’s inability to name her own preferred newspapers.[3] In another gaffe, EPN was unable to state the price of the tortilla, a staple food in Mexico. EPN explained that he was not “the lady of the house.”[4] While these are hardly political killers, it is unimaginable that the President of Mexico could not know the price of a tortilla. EPN’s party has also suffered from disgrace at the leadership level. On December 2, PRI President Humberto Moreira resigned due to a debt accounting scandal in Coahuila State, where Moreira had been Governor. The PRI led Mexico for 71 years until 2000, and its detractors call it a bastion of corruption. The Moreira scandal provides more ammunition.

Another concrete issue where the PAN can directly challenge the PRI is Mexico’s economic progress. Duncan Wood of the Center for Strategic and International Studies writes “it is undeniable that successive PANista governments have been successful in…preparing the way for long-term prosperity.”[5] According to data from the IMF and government sources, real GDP grew 5.4% in 2010 and about 3.8% in 2011, after falling 6.2% during the 2009 recession. On January 3, the Mexican Government sold $2 billion in 10-year bonds at lowest-ever coupon and yield rates. This means that the bonds pay lower interest rates than past issues, and that investors demanded a very small discount when buying them. There has also been progress on unemployment, which soared up to 6.41% in September 2009, but had declined to 4.97% in November 2011 (Source: INEGI). Inflation will be a challenge due to the recent depreciation of the peso, which declined in value from 11.5 per dollar in May to around 13.7 per dollar currently. However, analysts are confident that the Central Bank has both the reserves and the strategy to stabilize the peso. Mexico is also expected to run a negative trade balance of around $4 billion and a current account deficit of $7 billion for 2011. However, the current account deficit will be easily offset by foreign direct investment, projected at around $20 billion annually for the next couple of years. The PAN can use its record to show that it is best poised to help the economy take next steps. These include liberalizing the labor market, widening the tax base, and incentivizing private companies to invest in state-owned oil producer PEMEX. The latter reform is necessary because PEMEX’s refining capacity has lagged domestic demand, forcing the government to subsidize imported gasoline. This reform is also controversial, as PEMEX’s unionized workers are extremely opposed.

The third factor that should keep EPN up at night is the woman to whom The Economist attributes “a flash in the PAN.” Josefina Vázquez Mota, most recently PAN leader in the Chamber of Deputies, served as Education Minister under President Calderón (2006-2009) and Minister of Social Development under President Fox (2000-2005). She is now in the driver seat to become the PAN’s candidate for the highest office. The popularity of JVM’s party has waned – public opinion of the PAN was 27% favorable and 30% unfavorable in November according to Mitofsky. However, she has solid anti-establishment credentials. As Education Minister she argued with the head of Mexico’s powerful teachers’ union, Elba Esther Gordillo, a political ally of President Calderón. Calderón has also endorsed a competitor, former Finance Minister Ernesto Cordero, to be the PAN’s nominee.[6]

Separation from Calderón has not hurt JVM within the party where 52% of members prefer her to be the nominee as of November, up from 38% in August. She is also making strides with the public at large: in the 3 months from August to November, the percentage of the public that recognizes JVM increased from 56.4% to 67.4%. In the same period her share of preference in a head-to-head contest with EPN and López Obrador (AMLO) increased 3%. JVM’s campaign may have more potential to win supporters through advertising than her competitors, who are both known by over 90% of the public. The PAN’s official primary in February will give her a boost through media exposure. Her key issues, strengthening education quality and the justice system, will be used to accuse the PRI of failing to develop Mexican institutions during the PRI’s long period in power. JVM may be the breath of fresh air the PAN needs, and the PRI should be concerned: its polling lead over the PAN has declined from a gargantuan 42% in November 2010, to a less gargantuan 25% one year later.

Despite impressive growth in Asia and Latin America, places that were thought to be eternally booming after surviving the negative effects of 2008, have had some negative economic news at the end of 2011. As logically expected, the unease in Europe has been having an effect on countries like Brazil, Canada and others. While Brazil is still expecting future growth, it had to reduce its forecast in recent weeks, as did many economies not residing in the EU. Some recent growth numbers in the United States will likely change the flows of investment as BRICS, the US and EU interchange economic losses and gains, making investors nervous and numb to sporadic economic news within the EU and abroad.

The major issue it seems at the end of 2011 is the status of Southern Europe, and whether or not larger countries like Italy and Spain will avoid economic collapse. Another issue that should be seriously considered however is whether or not a bureaucratic response to the economic crisis can avoid turning the EU into an institution lead only by unelected political appointments. While the crisis may require more immediate decision making by technocrats like Mr. Monti, the underlying sense of an unelected Brussels dominating the lives of Britons, Danes and other Europeans has always been felt by the average European citizen and is the main criticism of European institutions since the creation of the EU.

A few generations ago the collapse of Austria-Hungary in the midst of individual national ambitions and internal conflict pulled apart the Empire. The pressures on the Austro-Hungarian Empire from its various discontent members broke apart its ruling government towards the closing months of the First World War. The mistrust the Empire had of the governing leadership in Vienna at the time ended the Habsburg’s Empire while its soldiers were still fighting on its borders. While more countries wish to become part of the EU as opposed to wanting to leave it as was the issue in Austria-Hungary, sentiments in the UK and external and internal pressures on the Euro might result in a change or accommodation that will change the face of the European Union. While the end of this second modern multinational union will not break apart, cracks need to be address quickly and in a flexible fashion. This week Estonia joined the Euro and added to the large number of small nations that will have a voice opposing or supporting France and Germany while they try to deal with Europe’s economic troubles. It seems that Central Europe will not be the ones this time to oppose this modern Union, but pressure on citizens in some older member nations and economic pressure from nations abroad might shake the foundations of Europe’s institutional pillars in 2012. We wait to see if these pillars are flexible enough to stand the change that will likely come to the EU.

Caracas last week welcomed all leaders from across Latin America in order to establish CELAC, a new regional organisation that seeks to create an OAS without a United States (or Canada!) and create a forum for one voice for Latin America.

CELAC might assist leftists in Latin America to pull the region away from the United States and assist independent nations in Latin America to develop relations apart from US economic policy and trade. The problem with CELAC is that the overlap with the OAS and the differing interests of countries in the region might turn CELAC into another forum that loses its influence over a decade. The history of regional cooperation in Latin America always peaks at the main issue that not all states in the region agree with each other, and some are currently in a cold peace at best. Considering the cold peace between Colombia and Venezuela, Colombian President Santos attended the CELAC meeting, but maintains his popularity due to his policy to challenge FARC and Chavez’s support for militants within Colombia. Considering the current growth between Argentina and Brazil with China, President Kirchner and President Rousseff left on the second day of the conference as ties with China and the US are key components of growth for both economies and takes priority over regional cooperation on many issues. It should be noted that China did congratulate CELAC on its establishment, as they are aware that its trading partners are a part of a forum that would send trade from the US towards China. Mexico also supported the creation of CELAC, but maintains extremely strong ties with the United States with millions of its citizens living abroad still being part of the dialogue of Latin American culture and economics in the Americas. CELAC, while erasing the US from its forum, did go further to include Cuba in the CELAC forum. There could positive developments beyond a victory for leftists in the region, as by allowing an opening Cuba to develop in a forum that involves the entire region enables all of Latin America to smooth Cuba’s opening and include rights for its citizens in future discussions. While Cuba may not develop as Syria has done, the effect of a Latin America Arab League in CELAC might produce positive results.

CELAC is not the first regional forum to occur in Latin America, but may be the next one to fail as the majority of regional agreements tend to meet their end within a decade. The latest agreements to fail have been the FTAA from 2001 and it can be argued that MERCOSUR, while not defunct, has little potential for expansion and lacks attention from its members since Argentina’s economic problems in 2001. Beyond those two agreements, there are lists from past decades of regional agreements and treaties that have never met their objectives, and CELAC as an Americanless OAS might displace the OAS or disappear from the scene. Two elements come into play as well, as individual countries like Brazil can make a large impact on their own within the region and globally without a CELAC or OAS. As well, the lack of a United States that has done little to present itself in Latin America in almost a decade has little effect in the region with or without the OAS. The OAS would do well to include Cuba and include offices in Brazil in order to displace CELAC, but for individual countries it makes little difference but to create further forums for discussion between very individualistic nations. Despite this, it never hurts to speak face to face on more occasions and CELAC might be of interest over the next few years.

Summary 2011

Latin America in 2011 became more important and influential on the world stage as the economies of the United States and Europe could not achieve the growth it required after the 2008 economic crisis, placing emphasis on the BRICS nations, particularly Brazil in Latin America to be the engine of global growth for the next few years. Barak Obama’s visit to the region in March 2011 sought to reengage the United States with Latin America, and Brazil in particular as Obama and Dilma promised to construct stronger ties in person.

Conflicts worldwide such as Greece’s debt problems, Libya and the continuing drug war in Mexico dominated much of the news as Latin American countries had to redefine their relationships with the Middle East among changes resulting from the Arab spring. Hugo Chavez’s loss of his ally in Libya and a futbol stadium named after him in Tripoli were overshadowed when the world found out that Mr. Chavez has cancer and was undergoing treatment for his illness. Despite these ancillary issues, most of the news in 2011 was about the positive growth in countries like Mexico, Colombia and Brazil. Recently Cuba decided to open its economy to foreign investors who can now purchase Cuban cars and property, more importantly allowing Cubans to purchase a larger range of foreign goods themselves. Latin America in 2011 was clearly about investment and growth, something that would have thought to be unrealistic just a few years ago.

Most Unexpected Event

There were many events this year that could have been mentioned as the most unexpected, but the one that I believe would have never happened and will have a massive effect in the region and for foreign relations for many countries in Latin America is the announcement that Venezuelan President Hugo Chavez has cancer. Despite Mr. Chavez making the announcement that he has beaten his illness for now, the effect on him physically and mentally is very evident and it is hard to say whether or not it will continue to affect his health and his decision making in 2012. Hugo Chavez who has sought to be re-elected in perpetuity may not be able to achieve this goal if his personal health is not stable, and it leaves the future of Venezuelan political open to challengers to Chavez’s revolution of policy.

Person or People of the Year

It is hard to choose one individual who stood out this year in the region as the person of the year, so I will mention a few that have been noteworthy in 2011. I believe despite criticism of his popularity, Mexican President Felipe Calderon has been able to achieve some growth in Mexico’s economy beyond what many have forecasted while still fighting an intense battle with drug cartels within Mexico. His critic and fellow PAN party member, former President Vicente Fox is pushing against Calderon’s policy as it creates extreme violence and is suggesting a legalisation of the narcotics trade in Mexico, an idea that will likely gain further attention as the Mexican Army and police continue to fight with Mexico’s well funded and well armed cartels.

Another round of praise should be giving to President Santos of Colombia and President Dilma of Brazil for keeping both countries on the path of positive and impressive economic growth despite international economic instability in 2011. The re-election of Cristina Kirchner this year also reflects positive economic developments in Argentina during her time in office, despite the loss of her husband and dealing with recent economic difficulties and trying to recover from the economic collapse in 2001. While many still criticise her actions, she was able to be re-elected due to her positive efforts.

Forecast for 2012

The economic issues with Europe and the US will dominate the international news as well as that of Latin America. Prolonged economic issues in Europe and the US may start to have a negative effect in Latin America despite all efforts for positive growth. Brazil will get increased attention as an economic superpower as the international community will place more dependency on the BRICS. Conflict between BRICS will increase as countries like Brazil and the United States challenge China on its low currency policies and seek to turn around the US and European economies. The news will be dominated until Nov 2012 by the US election, overshadowing many other news reports in the region, unfortunately…

The Arab Spring may turn into a Persian Spring, or simply direct conflict with Iran as more information comes out about its nuclear program and sanctions continue on Iran. Support for Iran and the Arab Spring will take an interesting route as Venezuela and Brazil redefine its relationship with Iran and the Arab countries as political change takes hold and then changes again and again. Latin America, especially Brazil and perhaps Mexico will become more dominant and more modest players on the world stage as the US and Europeans start to recognise many BRICS as partners and allies. The result is that Latin American nations will be forced to choose where their foreign policy lies in relation to outside global conflicts of interest. The health of Hugo Chavez will have a great impact on leftists in the region as if a power vacuum is created in Venezuela, the ideological core of leftist policies in Latin America could lose its strongest voice, and it will undoubtedly affect Venezuela’s and Brazil’s relations with Iran as having an ally in Latin America.

As a recap, Dilma’s Cabinet has been turbulent to say the least. 6 officials of the administration have left since June, and 5 did so due to corruption allegations. All 6 were part of the government of Dilma’s mentor Luiz Inácio Lula da Silva. The timeline goes as follows[2]:

• June 7: Chief of Staff Antonio Palocci resigns over allegations that he used his government position to profit through a private consulting business.
• July 6: Transport Minister Alfredo Nascimento resigns due to allegations that kickbacks were collected on transportation and infrastructure contracts.
• August 4: Defense Minister Nelson Jobim resigns after insulting other ministers; no corruption this time.
• August 17: Agriculture Minister Wagner Rossi resigns after allegations of cash kickbacks throughout the ministry. This scandal featured “reports of a man who walked the halls of the Agriculture Ministry making payoffs from a wheeled suitcase.”[3]
• September 14: Tourism Minister Pedro Novais resigns after allegedly misusing public funds. These allegations include the claiming of costs at a sex motel as government expenses; it is not clear if this charge refers to Novais or someone else at the ministry.
  • October 26: Sports Minister Orlando Silva resigns due to reports of R$40 million (US$ 22.5 million) in kickbacks for himself and the Communist Party of Brazil. Silva allegedly took funds in the ministry parking garage.

Commentators have tried to diagnose the exodus; explanations I will discuss here include both competition for scarce government patronage resources and philosophical disagreement over the proper relationship between government and the governed.

In their piece “The Price of a Disproportional Cabinet: The Paloccigate in Brazil,” Carlos Pereira and Carlos Aramayo of the Brookings Institution identify a key challenge of Dilma’s Cabinet as under-representation of minority parties.[4] The relative size of Dilma’s Worker’s Party (PT) in the Chamber of Deputies demonstrates Dilma’s reliance on these minority parties. While Dilma’s multi-party Coalition holds about 64% of seats in the Chamber of Deputies (326 seats out of 513), the PT itself holds 88 seats (27% of the Coalition, and 17% of the entire Chamber). According to data from Pereira and Aramayo, PT members hold 17 out of 37 Cabinet posts, or 46% of the total. In analyzing Palocci’s resignation as Dilma’s Chief of Staff, Pereira and Aramayo note that Palocci had been forced to resign from Lula’s government due to prostitution allegations, but that he never lost support of his party. In the case of his recent resignation the Cabinet, and specifically its PT members, withdrew support. Pereira and Aramayo imply that PT members turned on Palocci because his recent misdeeds led to personal profit, while explaining rebellion in the rest of the Coalition “as the price Rousseff paid for allocating a disproportionate cabinet.” Pereira and Aramayo also note that Dilma missed an opportunity post-scandal to equitably realign the Cabinet. Further internal discord may ensue, particularly given another expected Cabinet realignment prior to mid-term elections next year. Analysts note that the key catalyst in Dilma’s drive has been the Brazilian press, who originated many allegations of wrongdoing, and will be eager to publish further allegations in the inter-Coalition struggle for government resources.[5]

The Economist posits that Dilma’s key challenge may be larger than a misaligned Cabinet; rather, she does not agree with her Coalition partners on how Brazilian government should be run. The Economist optimistically notes Dilma’s focus on government efficiency; she has left many government jobs unoccupied, and added independent technocrats to the government at the expense of party stalwarts. Combined with the firing of unclean Cabinet ministers, these actions have caused senior leaders within her Coalition to regard Dilma as “dangerously naïve.”[6] According to the report, senior politicians in the Coalition’s two largest parties are worried that in the anti-corruption campaign, Dilma “may have started something she cannot stop.” These parties are the PT and the Party of the Brazilian Democratic Movement (PMDB), a powerful partner who has the second-most Chamber seats in the Coalition and is the party of Vice President Michael Temer. The PMDB is known for utilizing government handouts, and is likely at odds with Dilma over the use of patronage in government. Current disagreement has hamstrung the government, taking up Dilma’s capacity and preventing any major reforms for now. A need for disciplined fiscal policy to check inflation (6.97% on a rolling 12-month basis, source: IBGE) and control government spending will not be preferred by those wanting a patronage system either. Dilma’s actions against the departed ministers have led to a shakeup of political foundations that is not favored by ostensible allies whom she relies on. It is therefore possible that a popular leader with a strong mandate could decapitate her own ability to govern.

Because Brazil’s political establishment knows that the Cabinet will change again in 2012, an incentive for jockeying remains. According to Pereira and Aramayo, Dilma has exacerbated this by not using chances to bring members of smaller Coalition parties into the Cabinet during the shakeup. Perhaps Dilma has felt pressure to keep Lula’s allies around, or perhaps she believes her own party to be more popular than suggested by the composition of the Chamber of Deputies. Over the next year, we should examine Brazil to see if the political cleanup continues, and if it tragically causes Dilma’s Coalition to shatter.

In the event the core group is challenged they will go beyond all means in quell any dissent, but with no focus or goal for the institution such actions to silence dissent often crosses the line of civil behaviour. An Idiotocracy cannot function if there are individuals claiming challenges through any existing sensible regulations and policies created by the institution itself, and laws created by the community, as it would naturally balance out the organisation to create a win-lose or win-win scenario. Often such apathy and actions to promote the Idiotocracy is sourced in the negative personal attributes in the leadership of such institutions, as they would likely be the only ones with the power and ability to go beyond regulations, policies and laws to establish their own personal imprint on an institution and guarantee the lose-lose scenario in exchange for their own personal gains. Even if there are no concrete wins for the core group of mangers or leaders, the extreme response needed to maintain the Idiotocracy is certainly a career focused lawyer’s dream as the core group tends to not only be personally negligent, but may tie the organisation into a dilemma without considering the overall effect. While many institutions could be labelled as Idiotocracies in the current economic problems in the West, the core elements of democratic economic traditions need to be re-mended towards its source if the economic crisis will ever be resolved.

Hernando de Soto is a consultant who took to examining the relationship between property rights and economics in his native Peru, and has done similar research in Egypt and other developing countries. Mr. de Soto is an expert in creating viable systems of ownership in order to create specific policy frameworks in those countries. He claims to be a true capitalist and works to create healthy economic development through the core values of property ownership. In the interview in the video below, Mr. De Soto discusses how Latin America has spent the last twenty years focusing on tying ownership to assets so that economic progress can be labelled and claimed. When growth can be measured as wealth and ownership of assets, you also tie the economic actors into a system where profits result from intelligent entrepreneurship and losses can be governed by healthy policies. He discusses how the current economic solutions in the West may never produce an end to the economic crisis as there has been very little done to tie the ownership of property and assets to those who bought and sold the assets in the financial system. While Latin America worked hard to clarify their economic systems and reduce corruption and shocks, the West had worked to erase the basic elements of property ownership in their financial systems and the demise of healthy American and European regulations was the end result. Without knowing who is investing in what products and without a label to reward entrepreneurs and guard against the creation of Idiotocracies, it created a lose-lose situation for those banks and national economies. Without the basic elements of ownership in capital markets the right to claim wins and be accountable for losses no longer exists. Without a means to profit from investments and to be accountable to the regulations and laws regarding the loss of assets the end result is either a corrupt system or a pure Idiotocracy as people become worn down and apathetic with the absolute instability with their investments and complete lack of leadership from their elected officials.

Some first basic steps to trying to resolve the current system mired in economic and political difficulties is to acknowledge that in Western countries there is no physical loss of capital value in most assets, but the impression of loss and a bad future as opposed to the physical reality of the current economy. Confidence and facts will affect the markets in a great way. When media focuses on debates that argue the future losses with candidates that are in no position or power or leadership, it places the anarchy of partisan politics above the stability of the true economy. Read and ask questions of political leaders after researching those like Hernando de Soto, and do not just vote but contribute and challenge your community and leaders with arguments that make for better dialogue. If you protest, make sure you protest for something, as past generations fought for this very basic and important right, and it is our obligation to respect our society and system and make it better beyond trying to destroy it, this has to involve some compromise. The Arab Spring is a good example to follow, but one needs to understand that it is a result of a lack of rights, rights that have established a means to challenge and elect our ways out of major crisis in Western countries. They are on the streets, in often dangerous circumstances because a healthy system does not exist for them. To prevent further economic problems, we must not only work to reduce corruption, but also fight against apathy as we are at the verge of becoming a pure Idiotocracy in many of our public and private institutions. The only way to stop it is to acknowledge we are responsible for our own communities and take a serious intelligent challenge to improve our situation. It is each individual’s responsibility to become a part of their community, as the reality is that it is easier in our societies to create a healthier system as the current troubles could be a lot worse.

Please see Michael Coren’s Interview with Hernando de Soto below:

http://www.sunnewsnetwork.ca/video/search/hernando/latin-american-analysis/1275286073001

Video

1275286073001

A recent report from COHA about the current relationship between the UK and Latin America was published last week in order to outline the lack of ties between a UK mired in European economic Telenovela and the great need to expand ties beyond traditional economic and cultural sources. UK links to former colonies and ties within Europe, the Middle East and Africa limit the UK to the European spheres of influence and ignore regions of growth like Latin America. While the UK often pursued stronger ties with natural allies and left Latin America to the Yanks, the loosening ties between the United States and Latin America have been met with increased investments from BRICS nations and BRIC candidate nations, thus displacing the United States in its backyard that currently has healthy growth rates and increasingly stable economies.

The author of the COHA report does an excellent job of outlining the main issues and current relationship between the UK and Latin America, tying in historical relationships with current political realities. A key point he addresses is the lingering pride that came out of the Falklands War that still draws attention in the UK, as well in Argentina, as an unresolved disagreement and an issue that will not be broached in any serious way for at least another generation. The need for a new UK strategy comes from the reliance on past relationships that are currently frozen in economic difficulties. The hope of a reinvigorated UK governmental and commercial strategy that will use the best of British innovation and creativity to expand economic interests beyond the slowing traditional environment is highly recommended in the report. Realities however place the UK in a position of reliance on its continental power brokers in Germany and France to lift the European markets back into a position of health and leaves Britain in the position between a nervous Europe and unconfident United States. The UK has all the potential, but with a lack of focus in government and motivation beyond its secure position between Europe and America, it will take more than intentions to create future agreements to create increased UK-Latin America trade. Britain may benefit from a change in its relationship with Europe and the US to have a serious break into new markets, non-post colonial markets and new products and innovation.

What was not addressed in the article when focusing on the international drugs trade and the increase in trafficking between Europe and Latin America, is the increase in sex trafficking from Latin America to Europe and the UK. A major issue and one that often gets little press is the movement and active recruitment of young girls towards Germany, Holland the UK and the rest of Europe as a whole. Many countries in Latin America, with a organised focus in Colombia and Brazil specifically, collect many girls from cities and towns and ship them off to Europe. Trapped by language, having their passports stolen, and even violence is common for many of these young women forced into the European sex trade. Brazilian author Paulo Coehlo, known mostly for his books about spirituality wrote a novel about one girl who was taken from Brazil to Switzerland, based on the life of a real woman now living in Switzerland. This issue is one of major concern and should be addressed in any discussion of UK-Latin American relations. I thank the author of the COHA article, it can be read in the link here.