Thursday, January 17th, 2008
Published in 2006
South America’s poorest country is back at the centre of attention in the region. Evo Morales’ historic electoral victory has signaled the onset of a government that combines indigenous nationalism and a typically Latin American left-wing populism. Bolivia has always been tightly dependent on foreign investments to compensate for its managerial ineptitude and an inability to take advantage of its own natural resources. This has fostered an influx of foreign capital which has contributed significantly to the maintenance of the country, albeit in a precarious fashion.
During Morales’ electoral campaign against Jorge Quiroga (former President and representative of the Santa Cruz business elite), the indigenous candidate, leader of coca farmers and head of the Movement Toward Socialism (”MAS”), based his agenda upon two pledges in order to secure the election.
The first was to nationalise the extraction process of Bolivian natural resources and “hand it back” to State control. This process includes natural gas and oil fields, mines, and plantations, especially of soybeans.
The second pledge was to retake the path to the Pacific Ocean, lost to Chile during the Pacific War at the end of the 19th Century. An ancient Bolivian dream, this access to the sea is the solution envisaged by Morales for Bolivia’s need to export to other countries swiftly and easily. Also worth bearing in mind is that Evo Morales’ electoral conquest was openly financed by Venezuela’s President Hugo Chávez and made relatively transparent to the media based on Chávez’s addresses to Venezuelan newspapers.
The first electoral promise was put into effect with the occupation of natural gas fields operated by Petrobras, a Brazilian company which alone invested the equivalent of 18% of Bolivia’s GDP. The occupation, marked by nationalist speeches and actions, represented an enormous defeat for Brazilian foreign policy and an immense political conquest for Venezuela’s President Hugo Chávez.
As his hand in the episode became widely known to both Latin American society and media, Chávez began to be recognised as the continent’s chief political strategist and the true regional “leader”, instead of “virtual leader” Luís Inácio Lula da Silva. Besides Petrobras’ operations, fields operated by YPF Repsol (Argentina-Spain), Total (France), and British Gas (UK) are also being targeted for Evo Morales’ nationalisation policy.
The decision of the Bolivian president may have the following impacts on Bolivia:
1. Impoverishing Bolivia’s economy, and consequently its population, due to the flight of capital backing up the internal economy;
2. Undermining foreign confidence in Bolivia during Morales’ government and any subsequent administration, in case an ideologically-aligned successor is elected;
3. Obsolescence of the technology employed in gas exploration due to lack of equipment maintenance;
4. Severance of stable relationships with the following governments: Brazil, Argentina, Paraguay and Chile.
As regards South America, Morales’ actions may lead to the following negative consequences:
1. Political turmoil in the region, causing polarisation between those supporting and those rejecting Morales’ stance;
2. Energy issues emerging from a failure to transport Bolivian gas (in Brazil, 51% of natural gas comes from Bolivia and 5.1% of Brazil’s energy grid is dependent upon Bolivian gas);
3. Economic issues emerging from a lack of gas supply in the continent. Ceramic, glass, food and beverage industries are those more heavily dependent on gas for production;
4. A lack of confidence in the region as a whole on the part of foreign investors, due to feeble responses by the main South American governments towards Morales’ breach of contracts. Such weakness may represent to investors that South American governments are unreliable and do not have the commitment to abide by their own contracts.
In order to grasp a better understanding of the scenario, it is essential to understand the previous situation, and how it has changed, for companies exploiting natural gas in Bolivia. In May 2005, the Bolivian Congress passed a bill to tax prospecting companies 32%, in addition to the current duty of 18% charged in the form of royalties. Arguing that the contracts had been closed “illegally” and in an “unfair” way, Morales’ decree of nationalisation raised duty on gas from 50% to 82%. It was also declared that companies not complying with the new regime will have to leave the country within 180 days.
In addition to this, there is another event worth noting to understand on some forecasts for the continent. A week prior to the nationalisation decree, the Bolivian President announced that his government did not have the technical capability to occupy foreign companies in order to nationalise them. However, upon fulfilling his decree, Morales made it known that the technical portion of the process would be carried out by Venezuelan specialists from PDVSA (Venezuela’s state-owned oil company).
Venezuela’s Involvement
The attitudes adopted in by the Presidents of Bolivia and Venezuela clearly show that Morales was only capable of taking such steps under the auspices of Hugo Chávez. Since taking office as President in 1998, the latter has cultivated an obsession with disseminating the thoughts of Simon Bolívar (the liberator of several South American countries in their struggles for independence) throughout the continent. Bolívar, and likewise Chávez, had dreams of a strong, united Latin America, representing a single Latin American homeland.
Owing to current oil prices on the international market, Chávez relies on a significant budget to sponsor his foreign policy. In addition to several populist measures put into effect in his homeland, the Venezuelan leader has been using the same rhetoric elsewhere in the continent. To forge an ideological coalition around this ideal, he has openly supported the electoral campaigns of certain like-minded candidates in the continent. Morales’ victory in Bolivia was the result of intense involvement by Chávez, and the same support was afforded to the losing candidate in last week’s Presidential election in Peru, nationalist candidate Ollanta Humala.
Hugo Chávez seeks to unify the continent by means of an energetic coalition, merging Venezuela’s oil and Bolivia’s gas into an expensive network of oil and gas refineries and pipelines throughout the whole continent. Part of this agenda has already been put into action with the construction of refineries in Bolivia, Argentina and Uruguay. The current scenario in Bolivia stands as a major victory for Chávez, who intends to fill the vacuum left by foreign companies as they depart Bolivia or reduce investment in the country.
Morales’ second pledge
The (partial) fulfillment of the first of Morales’ pledges raises yet more concerns with respect to the second banner of his campaign. The whole continent dreads that, incensed by the national passion of the Bolivian people and Chávez’s support, Morales will engage in a more drastic attitude while seeking to secure access to the sea.
It is very clear today that Chile will not relinquish the northern region of the country, and is thus in opposition to Bolivian intentions. However, the odds of military conflict remain low. Chile has one of the best-trained and best-equipped armies in South America, having purchased eleven F-16 fighters during the last days of Ricardo Lago’s administration, now strategically and significantly stationed at Iquique military base, 200 km from the Bolivian border. At the time of the purchase of these aircraft, the country’s Minister of Defense was current President Michelle Bachelet.
It is likely that in order to ward off tense entanglements with Chile, Morales will adopt measures even more populist in his own country to offset a failure to recover the area lost to Chile. This will imply greater involvement for Chávez, as Morales does not have the budget to carry out significant reforms.
Thursday, January 17th, 2008
Date: Monday 3 July 2006
Alan Garcia’s Background
The victory of the social democrat Alan Garcia in Peru is of no less concern for the South American community than the victory of the extreme-nationalist Ollanta Humala would have been. The reason for such concern, besides the ruinous government of Alan Garcia between 1985 and 1990 in Peru, is the image it presents to the world. In recent speeches, Garcia stated he would not hesitate to close the Congress if his projects were opposed.
Nowadays, Alan Garcia is the major name in the Peruvian Aprista Party (A.P.R.A), the legendary left-wing party created by Haya de la Torre at the beginning of the 20th century. A.P.R.A., which has been considered the best-structured left-wing party in the Americas by political specialists and analysts, is presently experiencing a recovery. Its decline began at the end of Alan Garcia’s last government, who allowed the country to sink into a deep economic and political crisis, without any control on the mythical ‘Sendero Luminoso’, the Maoist faction of Abimael Guzman. The sequence of failures in the parliamentary elections showed that A.P.R.A. depended exclusively on its historical legacy for future support.
The Appearance of Humala
This year’s presidential elections were characterised by some surprising dynamics. Valentim Paniágua and Lourdes Flores started as the favourite candidates, while the image of previous administrative failure tormented Alan Garcia before the electorate. The appearance of Ollanta Humala was crucial for Garcia’s victory. Ollanta Humala was an electoral phenomenon for a number of reasons:
1. The populist-nationalist speech replaced the old “leftist” speech which attracted the votes of poorer classes.
2. The victory of Evo Morales in Bolivia brought about the image of Humala as a liberator of the Peruvian aboriginal people. An indigenous electoral success was made plausible by the victory of Morales.
3. The charisma of Hugo Chávez amongst the poorer classes benefited Humala´s political support in the beginning of the electoral process, but weakened in its final moments, because Chávez was seen to have intervened in the Peruvian elections.
4. Humala´s opponents concentrated their campaign in Lima, leaving a gap in rural areas - poorer regions that had not been approached enough by the other candidates.
Why Humala lost
These factors brought Humala to a condition of apparent electoral supremacy. However, his radical position polarised opinions about him. He was the ‘marmite candidate’ - the voters either 100% supported or rejected him. There was no halfway house. This polarisation created a niche to be fought for between Lourdes Flores, Alan Garcia and Valentim Paniágua. What set Garcia apart, in this battle to be Humala’s main opponent, was his attacks against Hugo Chávez for his intrusion in Peruvian domestic affairs. This strategy worked well, spoiling Humala´s image.
In the end of the first round, Humala won, coming just four percent above Garcia, who defeated Lourdes Flores by only one percent. Paniagua came was just behind Flores. This four way split practically guaranteed the final victory of Alan Garcia.
In the second round it was easier for Garcia to attract the votes of Lourdes Flores and Valentim Paniagua. Despite Garcia´s last government being disastrous for Peru, the idea of having Humala in charge provoked even more apprehension. Most voters of Flores and Paniagua therefore migrated to Garcia or simply annulled their votes. Humala was only able to attract the votes of those people who deeply rejected the first government of Alan Garcia. In the end of the first round, it became clear that any opponent of Humala would win the second round.
The New Government
The new government of Alan Garcia will last until 2011. It will be a government of opposition to Hugo Chávez and Morales, but it will not be similar to the Colombian social democrat, Alvaro Uribe. Populism is an intrinsic characteristic of Garcia that, allied to his economic thought, may well isolate him within the continent. Garcia supports the intervention of the state in the economics of the country, but also encourages investment. It is still not clear whether these two forces are compatible under his leadership. To govern, Garcia will have to make arrangements with other parties, including Humala´s party, which occupies the majority of the seats in Congress. Despite stating that he would dissolve Congress in case his projects were not approved, he will not dare to adopt such a radical position at the beginning of his government. If the Congress does block his projects, he will simply behave in a populist and inefficient way, letting things slide to maintain public opinion among the poor.
During Garcia´s government, we can expect that the economic growth experienced by the country will lose ground due to the lack of confidence on the part of some investors. The Free Trade Treaty that was being arranged by Alejandro Toledo should be maintained and will provide important fuel for the economy. Garcia’s regional policy will consist of verbal confrontations with Chávez, but it shouldn’t bring Peru to the position of a protagonist on the stage of South American external politics.
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Thursday, January 17th, 2008
Published in England, 2006
By Thiago de Aragao
After the elections of the July 2nd, the situation in Mexico gives the impression of being better, but it is just an impression.
The seven judges responsible for the decision on a new counting of the votes have unanimously decided on the legitimacy of the electoral process occurred in July. With the confirmation of the victory of the former-minister of Energy of the president Vicente Fox, Felipe Calderón not only becomes the second president belonging to PAN (Accion Nacional Party), but also the president elected in the most troubled way. His official victory does not seem to be the last chapter of this novel. We can wait for an increase in the political temperature in Mexico.
In recent statements and actions, the defeated candidate Andrés Manuel López Obrador (PRD) stated he will not surrender so easily. He also promises to call a general convention and to announce the creation of a parallel government in Mexico.
Unquestionable favorite during the whole campaign, Obrador has seen the possibility of becoming the first Mexican president of the Democratic Revolution Party sink. Obrador says that a general fraud occurred, especially in those states where he counted on the main popular support. Similarly to other Latin American Populists, Obrador made a good government as mayor of Mexico City. He labeled himself as the guardian of the poor and justified this denomination attracting millions of Mexicans to his famous parades and speeches. Due to this special attention to the needs of the people, Obrador started to make speeches that are typical of the Latin American left wing, in order to conquer those hesitant voters who voted in Vicente Fox in 2001, and who used the same ideas Obrador used in this campaign.
Felipe Calderón, the elected president was one of the major ministers of Vicente Fox, and acted as a counselor for general issues. His actions are opposite to Obrador´s. He defends the free initiative, the attraction of investments and uses the entrepreneurs´ language when he speaks to the people. He showed to be consistent when he presented a government plan, something that Obrador was not able to do during his campaign. This factor determined the advantage over Obrador until the end of the elections.
If there has been fraud or not, this is something that we will hardly know. After the ballot defeat, Obrador claimed the votes were recounted. According to his assessors, about 800 thousand votes have been defrauded. Outstanding numbers, since the victory of Calderón over Obrador has been of only 230 thousand votes. There are reasons to believe in certain irregularities in the Mexican electoral process. However, an irregularity so huge as the one pointed out by Obrador is very difficult to be proved.
At the end, the country loses. Philip Calderón will be installed on December the first, and up to then Obrador would have already taken his decision on the creation of a parallel government. The occupation of the main avenue in Mexico City by his supporters evidences the support he has and increases the possibility of materializing the promise of a parallel government. Obrador has also clearly stated that he will try at most to prevent a peaceful installation of Calderón in December and, if necessary, he will start a movement to dismiss him. We must know how serious are these statements, or if they derive from the heat of the emotion. In case this is confirmed, we will have a political crisis, which has never been seen before in Mexico. After achieving expressive results in the legislative elections, Obrador´s party, PRD, will make difficult the approval of projects wished by Felipe Calderón. In case of a parallel government, the things can get even worse. Obrador´s voters promise to take the streets and we fear for the most rampant acts of violence and vandalism.
Some comments can be made on the American continent. The official victory of Calderón represents a great relief for Washington. The present wave of populist governments in the continent is losing strength with Calderón´s victory. However, the internal destabilization that this victory can generate will favor populist governments in the continent. Hugo Chávez, Venezuelan president, has already demonstrated its repudiation to the “democratic fraud” in Mexico, and promised his unconditional support to Obrador. It is feared that, in case of a parallel government, Chávez can acknowledge it and impair the Mexican stability.
In case the actions of López Obrador cool down, we can expect a pragmatic government in Mexico. Calderón will continue Fox´s government, will maintain the economic growth without intervening in the economy, and will pay more attention to the social area, exactly to attract Obrador voters, who will feel abandoned. The attraction of external investment will be an important focus for the new Mexican government, and a political approximation with Washington is being planned, too.
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