Wednesday, February 26, 2014

Protests in Venezuela

The protests in Venezuela in the last three weeks have escalated to violence and face off between security forces and protestors causing the death of six protestors including a beauty queen. The protesters have demanded the resignation of President Maduro on the issues of uncontrolled crime and violence, shortage of essential items in supermarkets and the repression of opposition parties. The government accuses the opposition of conspiracy to foment instability through the riots and has detained a number of protestors including a politician Leopoldo Lopez.
The protests have now assumed external dimensions. The Venezuelan government expelled three US diplomats accusing them of conspiracy with the opposition. They have revoked the press credentials of CNN journalists and have removed a Colombian Channel NTN 24 from Venezuelan cable system for biased coverage. While right wing US legislators and leaders from Latin America have made statements expressing sympathy with the protestors, the leftist governments of Latin America including Brazil and Argentina have reiterated their solidarity with the Venezuelan government.

The protests by themselves are just a minor political headache for the government and are controllable at the moment. What the government has not been able to control are the deterioarating economic situation and the spiralling of every day crime and violence.  Venezuela has the highest inflation in the world with fifty eight percent in 2013. The Leftist government has crippled the productive capacity of the private sector ruining the industry and business. The inefficient state control of distribution and imports have converted Venezuela into a Cuba with long queues in front of super markets with empty shelves and acute shortage of essential items. Despite the very large annual oil export earnings of over 80 billion dollars, there is a severe shortage of foreign exchange reserves. The government has imposed draconian restrictions on foreign exchange, imports and foreign travel and these have given rise to a rampant black market and corruption. Caracas has become one of the most dangerous cities in the world where criminal gangs kidnap even diplomats for ransom. 

It seems that the Chavistas do not have the the capacity to solve the current problems, some of which were created by themselves over the years. They survive by handing out freebies to the poor people who are their captive voters. The only hope for Venezuela is a change from the Chavista regime. But that change has to come constitutionally and democratically and the opposition needs to be patient. They need to seek support from the poor masses, who are obliged to the Chavistas for their hand- outs. The last opposition Presidential candidate Capriles took this approach and came close to beating Maduro in the 2013 elections. If the opposition continues this strategy systematically, they have a definite hope to come to power and give hope to the country which is simply hopeless at the moment. 

The opposition is accused of having  a hidden agenda behind the protests. The opposition lead a similar series of protests in 2002 which resulted in a military coup in which Chavez was overthrown. But the military which colluded with the opposition, changed sides and brought back Chavez in 48 hours when they got left out in the distribution of spoils by the greedy opposition which grabbed the power too quickly. Chavez took his revenge on the middle class and the business which supported the coup by making their life systematically miserable since then. 

The Opposition should remember the 2002 lesson and avoid any recourse to unconstitutional regime change. The Chavistas are battle-hardened veterans in the fight with the opposition both democratically and otherwise in the last fifteen years. Armed Chavista militants pose danger to the anti-government protestors. The Venezuelan military too is enjoying undue share of power and corruption with the Chavista government and they might not side with the opposition for any coup as  they did in 2002.

Venezuela is the largest trading partner of India in Latin America with 14.4 billion dollars of trade in 2012. Of this 14.1 billion dollars were India's imports of crude oil. Venezuela has emerged as one of the top five sources of India's crude oil imports. Indian oil companies have invested over a billion dollars in the Venezuelan oil sector. Understandably, India follows the political developments in Venezuela closely, although there is no need for any worry at this stage.

Friday, January 10, 2014

"Peace with drugs" could be better than the failed "war on drugs" - Uruguay shows the way

Uruguay was named as " the country of the year in 2013" by the Economist magazine ( 21 december issue) for its bold and pioneering decision to become the first country in the world to legalize and regulate production, sale and consumption of cannabis. "Heroic uruguay deserves a Nobel peace prize for legalizing cannabis", wrote Guardian in its 12 December edition. 

Uruguay passed a law in December 2013 decriminalizing, legalizing and regulating the production, sale and consumption of cannabis. Under the new law, which will come into force from April 2014, consumers can grow up to six plants of marijuana and possess as many as 480 grams for personal use. The National Institute for Cannabis Regulation will provide seeds to those who want to grow and control quality and quantity of production. Marijuana clubs consisting of 15 to 45 members would be granted permission to grow up to 99 plants at a time. The users can also buy cannabis from the licensed  pharmacies. Users would have to register in a national data base which will remain strictly confidential and available only for consultation by pharmacists to enforce the 40g a month limit for each consumer. The use of marijuana is limited to Uruguayan nationals above 18 years of age. 
The government has set a price of one dollar a gram of cannabis, making the drug affordable. The government will get tax revenue from the sale of the drug.
The new Uruguayan law breaks the dangerous dependence of the drug users from the criminal drug traffickers by offering cannabis legally and letting them to grow it themselves. The stronger and more expensive drugs sold by the drug cartels, will be less appealing to consumers who will find the legitimate lighter cannabis safer and inexpensive. The drug cartels will lose consumers and profits. Since the cannabis is affordable, the consumers will indulge less in stealing and other crimes to get money for their addiction. The government will save in policing costs and get some revenue by taxation from cannabis as they do in the case of alcohol and tobacco
The Uruguayan "experiment" as President Mujica of the country put it, is timely and inevitable given the global consensus that the war on drugs is a failure and that there is a need to explore other options to deal with the issue. Despite the enormous resources used against trafficking and imprisonment of millions around the world, the consumption continues unabated. Drug trafficking vitiates the society with crime, violence and corruption while making enormous illegal profits. The clearest example is the failed policy of former President Calderon of Mexico who had made the " war on drugs" as his top priority and put the armed forces besides the police to fight the traffickers. At the end of six years of his term, the situation has gone worse with more crime and violence.
Drug trafficking is a demand-driven business especially by the huge demand from US and Europe. The current way of dealing with the supply side alone can never succeed. Solutions need to be found by recognizing the reality of consumption and demand. It is not just a law and order issue that could be solved by jails and police. Equally, it is a social welfare and public health care issue. It is this logical realization which has lead to calls legalization of the drugs  by political and civil society leaders of Latin America. In their address at the UN General Assembly session in 2013, the Presidents of Colombia, Guatemala and Costa Rica, among other Latin American presidents, called for a review of the war on drugs and look at alternative solutions to the drug issue. They have argued that the effects of drug trafficking on the society  have been worse than the drugs themselves. It is in this background that Uruguay has taken the first step. It may, however, be noted that Uruguay, being a small peaceful country, did not have a serious drug problem or dangerous trafficking cartels as in the case of Mexico or Honduras. Netherlands and the US states of Colorado and Washington have already legalized consumption. From January 2014, Colorado is legalizing even the sale of cannabis.
The demand-driven drug problem of US and Europe is in complete contrast to the supply-driven drug problem created in China by the Europeans in the seventeenth century. At that time opium consumption was illegal in  China while the Europeans had considered their trafficking as legal. The British even started and fought the Opium Wars forcing the Chinese to legalize the opium trade.

The war on drugs bears comparison to the failed policy of prohibition of alcohol in US in the period 1920-33 mandated under a constituitional amendment. The policy of prohibition did not stop consumption but created mafias who supplied the market at huge profit and vitiated the society with criminality, corruption and violence. The US had to repeal the prohibition act in 1933 recognizing the failure of the policy. What Uruguay has done is a similar recognition of the failed policy on drugs. Uruguay will now deal with drugs similar to the way in which the world is dealing with alcohol and tobacco by regulating and taxing the consumption and production. 

Latin America has been a victim of the US-lead war on drugs and has suffered more death and devastation than other regions. The US has been fighting the drug war in the Latin

American soil by forcing the Latin American armed forces and police to use destructive chemical sprays of agricultural land to eradicate coca cultivation and helicopter gunships and lethal weapons to fight the drug traffickers. This has resulted in bloodshed, destruction and disaster for Latin America. The Latino drug traffickers kill each other and civilians in order to continue to supply the US consumers. Even militant political and terrorist groups such as FARC of Colombia and Shining Path guerrillas of Peru have used drug trafficking to finance their activities. On the other hand, the drug crime is fuelled by the illegal flow of arms and dollars from US.
The worst example is
Mexico, which is being torn apart by the beheadings, assassinations and other acts of horror unleashed by the drug traffickers day in and day out. The number of people killed in the drug-related violence in Mexico ( estimated to be over 60,000 in the last six years ) should be more than the number of deaths caused by drugs in US.
Colombia almost became a failed state and drug cartels held the country to ransom for many years. S
mall countries such as
Guatemala, Honduras and El Salvador have become the the most violent countries in the world because of the drug traffickers, who use these countries as transit points
. Drug trafficking and related crimes have made many cities and countries of Latin America unsafe.
The US has pumped lot of money, resources and weapons to the armed forces and police of many Latin American countries in the name of aid for the " war on drugs". The US has militarized the issue with linkage to its defense industries and intelligence agencies. The US Drug Enforcement Agency ( DEA), which has offices in many countries and cities of Latin America is believed to continue the work of CIA in the past. It is because of this suspicion that President Evo Morales forced the US to close the DEA office in La Paz. The American pressure on the law enforcement agencies of Latin America to focus excessively on the war on drugs distorts the local law and order priorities. The US had also used drug cartels of Latin America for their dirty wars in the region including in the Contra War against Nicaragua. The US had patronized dictators such as Noriega of Panama and allowed his drug trafficking in return for his support in the Contra War. US provides arms, training and intelligence liaison to the Latin American law enforcing agencies in the name of the fight against drugs. Clearly, such US support to and linkage with Latin American armed forces is seen as politically undesirable given the history of US-inspired military coups in the region. The Honduran armed forces, which overthrew the democratically elected President Manuel Zelaya in 2009, are a large recipient of US aid for the fight against drugs.  This coup, the first in the twenty first century Latin America came as a rude shock and wake up call for the Latin American democracies which had come out of military dictatorships in the nineteen eighties. . There is, therefore, a strong suspicion in Latin America that the so called " war on drugs" by US has a broader political agenda than simple fight against drug trafficking. The US war on drugs is seen as resembling their war on communism which was used to destroy democracies and create military dictatorships in Latin America.
There is another Latin American dimension to the issue of drugs. In Bolivia, Peru and some parts of the Andean region, indigenous people chew coca leaves as part of their tradition. Coca leaves, considered as sacred, are used in religious ceremonies, similar to the use of betel leaves in the Tamil tradition in India. People in the Andean mountains chew coca leaves to prevent altitude sickness,to fight hunger and also for medicinal purposes.  But the UN Convention on Narcotics equates coca leaves with heroin and cocaine and says that" coca leaf chewing should be abolished". The Bolivian government under the indigenous president Evo Morales, who himself  comes from a coca cultivators community, has fought for the rights of his people to chew and grow as part of their tradition. When his demand was not agreed, Bolivia withdrew from the UN Convention in 2011 but has rejoined in 2013 as a party with the right to use coca leaves for traditional purposes. Peru, which has recently replaced Colombia as the largest producer of coca leaves, is also against demonisation of coca leaves.
The new drug law did not pass unanimously in the Uruguayan Congress. In the senate, the bill was passed by a narrow margin of  16 to 13 and in the lower house 50 to 49. There was lot of opposition among the political parties and even the public opinion was divided. Critics hold the view that the new law will encourage and lead to increase in consumption. Critics point out that the users of hard drugs as well as young consumers below 18 years of age will continue to go to the illegal traffickers. The International Narcotics Control Board has criticized the Uruguayan law, saying that it violates the UN treaties on drugs. But the Uruguayan President has upheld the right of his country to try a new solution for the issue and has called for the support of the world in this new policy experiment.

The world will watch closely the Uruguayan experiment. Other Latin American countries might follow the example of Uruguay. The Argentine head of the anti-narcotics agency has already called for a debate on the drugs issue in the wake of the Uruguayan initiative. The Uruguayan experiment could not only lead to a solution for the drug issue but will also free the region from the US interference on the pretext of the war on drugs.

It is, indeed commendable that the small ( population just 3.4 million) Uruguay has had the big vision and boldness to try an alternative approach to the global issue of drugs. This is not surprising, given their past tradition of being in the vanguard of many reforms. For example Uruguay declared itself as secular in 1917; In 1913 it became the first in the region to grant divorce to women who requested them. It introduced voting for women in 1927; It approved abortion in 2012 and same sex marriage in 2013.

Those upset with the initiative of Uruguay should not forget that the tiny Uruguay had caused the biggest upset in World Cup football history by winning against the colossal Brazil in 1950. Uruguay went into the final as an underdog with 3 points while the favorites Brazil with 4 points needed just a draw to win the cup. It had caused an earlier upset in the 1930 World Cup beating the other neighboring giant Argentina.

Sunday, January 05, 2014

2014 holds promise of better political future and higher economic growth for Latin America

Politics of the region will be more pragmatic and less polarized  and radical in 2014 and in the coming years thanks to the end of Chavism. The death of Chavez in March 2013 is a turning point for the region which was polarized by his virulent ideological warfare in the last fourteen years. He had revived the bad old image of "Caudillos" ( strong men) of the region. He saw his country and the region as a black and white world of either followers or enemies. In the name of his confused " 21st century socialism" he was hostile to private sector business and ruined it in Venezuela. Chavez had divided Latin America with his extreme positions on regional and global issues. With his petrodollar patronage he tried to create a group across the region to follow his example.  Venezuela today is much worse politically, economically and socially than before Chavez came to power. It has the highest inflation in the region, power shortage, huge black market for foreign exchange, import controls, long queues in front of poorly supplied supermarkets, rampant corruption and the worst law and order situation. Although Chavez gave some hope to the poor people with his populist policies, he has damaged the democratic and other institutional framework of the country very severely. This has given a clear message to the other Leftists in the region that this is the path they should avoid. Fortunately, Chavez's successor Nicholas Maduro does not have the charismatic and destructive talents of Chavez. More importantly, he does not have any pretensions to lead the region. He is becoming more flexible and less confrontationist. This is the best news for Latin America.

On the other hand, the Left in the region is likely to be more inspired by the moderate and pragmatic Michelle Bachelet who has come back to power in Chile in the December 2013 elections. She has won against the candidate of the ruling right wing party without resorting to radical rhetoric or threatening capitalism. Bachelet has promised course correction in governance by more inclusive development policies. She attaches as much importance to creation of wealth as much as to distribution with her mix of balanced pro-poor and pro-market policies. Similar models are already working well in Brazil, Uruguay and Peru. This is the model which is setting the long term trend for Latin America.

Mexico has set a new paradigm in the region in democratic functioning by the Mexico Pact under which ruling and opposition political parties have worked together with consensus on fundamental reforms and vital national policies of the country. The Mexico Pact has already delivered in just one year six vital reforms which would not have been possible but for the Pact. This has inspired confidence and optimism of Mexicans about the political system and set an example to democracies around the world which suffer from divisive politics.

Uruguay has set an example to the region and the world on the drug issue by enacting a path-breaking new law decriminalizing, legalizing  and regulating the production, sale and consumption of cannabis. This is, again, a turning point for Latin America which is a victim of the US-lead " war on drugs". More countries from the region are likely to follow the example of Uruguay in future.

The manifestation of people's power expressed through protest movements in Brazil and other countries in the region in 2013 have given a clear message to the political leaders to be more responsive to the aspirations of the people and be more accountable. The empowered middle class of the region might continue with protests from time to time to rein in the political leaders to deliver good governance.

Among the challenges being faced by the region drug trafficking, crime and violence continue to be a major concern in many countries and cities of Latin America. Mexico and Central America have suffered the worst from drug traffickers.The Colombia- Nicaragua maritime dispute flared up in 2013 due to Colombia's refusal to accept the 2012 ICJ verdict which gave a larger part of the disputed area to Nicaragua. This problem has the potential to raise some tensions in 2014 since the two countries have taken rigid stands.

The Colombian government negotiations with FARC guerrilla group has made some progress giving rise to optimism for conclusion next year. The retreat of the guerrillas has opened new business opportunities for oil and gas exploration, mining and agricultural production in the areas previously controlled by them.

Regional integration did not make any significant progress in 2013. Mercosur remained paralyzed due to the issues of suspension of Paraguay and inclusion of Venezuela. Paraguay has now accepted  Venezuela's membership and the two countries have restored diplomatic relations. Argentina's import restrictions and Brazil's protectionism continue to block Mercosur's further integration and external openings. UNASUR had also remained dormant in 2013. The Andean Community and the Central American regional group SICA also did not move much for further integration in 2013. On the other hand the Pacific Alliance has deepened its integration and is reaching out to other countries in the region as well as outsiders. 2013 marked the twentieth anniversary of NAFTA but there were no grand celebrations, since US has been focussed on Trans Pacific and Transatlantic partnerships. There have been calls from trade and industry organizations of the three members to move towards a NAFTA II. Thanks mainly to the rising Chinese wages, Mexico has regained its manufacturing competitiveness and has increased its exports.  Mexico, Chile and Peru are participating in the Trans Pacific Partnership ( TPP) negotiations. Colombia and Costa Rica have expressed interest in membership of TPP.

Despite the absence of significant forward movement in regional integration, the intra-regional and intra-subregional trade have been steadily increasing over the years. Intra-Latin American trade is about 20% of the global trade of the region.

There was revival of  anti-US sentiments in the region following the forced landing of the aircraft of President Evo Morales and the Snowden revelations of US spying on Brazil and Mexico among others. Brazil took the lead in raising in the UN the issue of US spying and is convening a global summit in April 2014 on internet security. President Dilma, as a show of displeasure, canceled her state visit to US scheduled in October.

China continued to strengthen its trade and investment partnership with the region and participated with a large delegation in the sixth China- Latin American and Caribbean Business Summit in Costa Rica in November. China is expected to overtake Europe as the second largest trading partner of Latin America by 2016. Chinese exports to Latin America are already more than those of Europe.

The EU- Central America Association Agreement signed in 2012 became fully effective from December 2013 with the ratification by the parliaments of all the Central American countries. The EU- Mercosur trade negotiations have been postponed due mainly to the Argentine import restrictive policies. Latin American exports to Europe have gone down due to the debt crisis and other economic problems in Europe.

The region will have Presidential elections in seven countries: Costa Rica( February), El Salvador(February), Panama(May), Colombia(May), Brazil(October), Uruguay(October) and Bolivia( December). In the two major countries namely Brazil and Colombia, the incumbents are expected to be reelected.

The biggest show of the year in 2014 will be the World Cup football in June-July in Brazil, the land of the " beautiful game".

Friday, December 27, 2013

Mexico - the 2013 champion of reforms

"If an award could be given in 2013 for Country of the Year, Mexico might deserve it. No other country has done more this past year to put reforms in place to transform a nation – and with startling democratic consensus", wrote Christian Science Monitor on 15 December. It is a rare compliment from the American media which have been obsessed with negative portrayal of Mexico headlining issues such as drug trafficking, illegal immigration and violence. Mexico has brought about more fundamental reforms in the last twelve months than any other democratic country. 

The reforms were initiated by Enrique Penha Nieto, the young and dynamic President of Mexico since December 2012 as part of  the " Pact for Mexico"( Pacto por Mexico) signed by the four major political parties of the country committing consensual support to vital policies and reforms of national importance. He started the negotiations with the other parties as soon as he was elected in July 2012 and  signed the Pact on the second day after his inauguration. The Pact has brought together the ruling centre-left Instituitional Revolutionary Party(PRI) and the three principal opposition parties; the leftist PRD party, the Conservative  PAN ( which was ousted from power in 2012 after two terms) and the Green Party which joined the Pact in January 2013. The political parties came together for the Pact after the realization that the polarization of politics had weakened the country alarmingly especially in the last decade.

The 95- point agenda of the Pact ranges from tax overhaul to barring junk food in schools. The Pact has already helped in passing six major reforms in the last twelve months: (1) reform of the educational system (2) legal reform  (3) a telecommunications law that limits the quasi-monopolistic powers of the biggest companies including that of Carlos Slim, the world's richest man (4) a  tax reform increasing the tax for more social spending (5) Electoral reform  and (6) the energy reform.

The energy reform bill passed by the Congress on 12 December is the most dramatic and historic one, since it was considered as the most difficult to achieve. The Petroleum sector had remained as a holy cow in Mexico since the nationalization in 1938 because of the fear of  domination by the giant US firms. The inefficient monopoly of Pemex has resulted in fall in crude output by a quarter. The new law allows entry of foreign and private investment which will rejuvenate the energy sector with investment and technology. The production of oil is expected to increase by a million barrels by 2020 and energy costs for consumers and the industry will become lower.  
The energy reform of Mexico is good for India which has been importing Mexican crude oil regularly in recent years. In 2012, India imported US $ 2.83 billion worth of crude oil from Mexico. India is Mexico's third-largest market for oil after the US and Spain. As Mexico increases its production capacity, India can count on Mexico as a regular longterm source of supply in future. The reform has also opened opportunities for Indian companies to invest in the Mexican oil sector, as they have done in Venezuela, Brazil and Colombia.
 Every one of the reforms was ferociously opposed by the vested interests, unions and ideological warriors of the country. Mexico city was paralyzed for many weeks by the protestors in the last one year. But the government firmly stood its ground and carried the reforms through. Still, the reforms would continue to face challenges by the forces opposed to them as well as in implementation through secondary legislations. Mexico also faces serious problems of drug trafficking, crime and violence, besides high levels of poverty and inequality as well as slow growth. But what is important is that the reforms have given a new confidence to the people in the political system that it could deliver and have made them more optimistic about the future. 
The reforms have heralded a new paradigm of democratic functioning besides opening a new era of economic and social transformation for Mexico. The manner in which the the ruling party and the opposition parties have worked together and brought about so many reforms under the Mexico Pact is an example and inspiration for other democracies of Latin America and the world. The Economist magazine commended, "Mexico appears to have found the medicine for political gridlock" and commented,"plenty of Americans must have cast a jealous eye south of the border this year".  Wall Street Journal wrote, " At a time when politicians in Washington struggle to agree on anything, their Mexican counterparts sit down almost daily to talk about thorny issues".  The Mexico Pact shines even more brightly against the dark background of the US government shut down in October 2013 and the policy paralysis in Washington DC due to the irreconcilable ideological polarization and fight between the Republicans and the Democrats. The next prime minister of India could start off with a "Pact for India" by reaching out to the opposition parties and forging a consensus on some of the issues of vital national interest.

This article was published by Mint Newspaper on 27 December 

Friday, December 06, 2013

Poverty and Inequality are declining in Latin America

Poverty rate has decreased signifcantly from 48.4 % in 1990  to 27.9 % in 2013 and extreme poverty has declined from 22.6%  to 11.5 % in the same period, according to a report “Social panorama of Latin America” released on 5 December by ECLAC ( Economic Commission for Latin America and Caribbean), a UN organisation based in Santiago, Chile. The other highlights of the report are:

The rate of poverty reduction has slowed down in the region in recent years due to the impact of the global financial and economic cris, the fall in commodity prices and slower domestic growth.,  The per capita GDP growth in 2012 was just 1.9% in 2012 as against 3.2% in 2011 and 4.5% in 2010.

Venezuela tops the list with the largest drop in poverty reduction. Brazil, Peru, Argentina and Ecuador have also seen significant fall in poverty. On the other hand poverty rate has gone up in Mexico.

Inequality in income has reduced in Venezuela, Brazil, Peru, Bolivia and Uruguay  while it has increased in Paraguay, Panama and Costa Rica.

Share of social spending as a percentage of GDP in 21 countries of Latin America and Caribbean has gone up from 12.5% in 1992-93 to 19.2% in 2010-11. The share of social spending as a percentage of public spending has also increased from 50 % in 1992-93 to 65.9 % in 201-11 in the same group of countries.

My comments:

The credit for the reduction in poverty and inequality in Latin America goes to the proactive poverty alleviation programmes of the Leftist governments in the region. Brazil’s Bolsa Familia is a role model for the region and for the world too.

The region needs to keep up its Leftist orientation in the coming years since even now poverty rate is substantial. The number of people living below the poverty line in Latin America is 164 million accounting for 27.9 percent of the total population. The number of people who are extremely poor in the region is 68 million representing 11.5 % of the total population.

Honduras elections

While the Chilean elections held in November have brought back to power the Left which is a role model for the region, the elections held in Honduras in the same month has returned to power the right wing National Party which colluded with the military coup and overthrow of the democratically elected President Manuel Zelaya in 2009. If Chile is an inspiration for the Twenty First Century Latin America, Honduras is a reminder of the bad old times of the last century of coups and conspiracies.

In the elections held on 24 November 2014, Juan Orlando Hernandes, of the National party has been declared as the winner by the electoral authority of Honduras. Hernandes got 36.8% of the votes while his main rival Xiomara Castro, the centre-left candidate of the Libre party got 28.8 percent. She is the wife of ex-president Manuel Zelaya who was ousted in the 2009 coup. She has alleged irregularities in the counting and has rejected the official results. She has claimed victory and her supporters have been in the streets with protest demonstrations. In response, the electoral authority has agreed to recount in some cases. But the Libre party does not agree with the way the recounting is proposed to be done by the electoral authority. So there is going to be more street protests and uncertainty for sometime. However, the chance of Xiomara winning the election after recount is very slim, given the overwhelming strength of the right wing forces including military which are opposed to the Left.

Honduras is the original " Banana Republic" and is continuing to be true to its derogatory meaning. It is the only Latin American country to have had a coup in the Twenty First Century Latin America. Manuel Zelaya, the President was ousted in a classic military coup in 2009, put in a plane and dropped in Costa Rica as an exile. This came as a total surprise and shock since the twenty first-century Latin America has transformed into a democratic region ( exception-Cuba) having sent the military back to barracks irreversibly. So this was the first and only case of coup in the region in this century. The conservative National party, supported by their US patrons was the villain behind the coup. The reason for the overthrow of Zelaya was that he was trying to seek reelection through a referendum. Such a blatant and untenable excuse! The real reason for the coup was to punish him for being close to Chavez and give a message to other pro-Chavez presidents in the region.

Honduras has the notorious distinction as the murder capital of the world with 82 murders for every 100, 000 of the population and 20 murders a day. The ruthless Mara gangs, said to have tens of thousands of members, strike terror all over the country and are involved in drug and human trafficking. President-elect Hernandez, has promised tough measures to deal with the crime by putting the military and more police in the streets.

Many Hondurans emigrate to escape the terror inside the country. 25% of the foreign exchange comes from the remittances of Hondurans who work abroad. In US alone there are over 700,000 Hondurans, almost ten percent of the total population.

Honduras is one of the poorest countries in the region. About fifty percent of the population are below poverty line. Poverty alleviation is not a priority for the conservative party which has won the election, in contrast to most other Latin American governments which have pro-poor policies and programmes. This means that there is no immediate hope for Hondurans suffering from poverty and inequality.

Honduras is the second biggest coffee producer of Central America and an important banana exporter. The country is diversifying into textiles and exporting to US taking advantage of the FTA with US.

An interesting fact: Honduras has the second largest number of people of Palestine origin( 280,000) in Latin America, after Chile (350,000). Carlos Flores Facussé, who was President of Honduras from 1998 to 2002 was a Palestine descendent.

Monday, November 25, 2013

Chile turns Left again

The Leftist coalition candidate Michelle Bachelet won 47% of the votes in the presidential elections held on 17 November while her rightist rival Evelyn Matthei got just 25% votes. Two more candidates to the far left got ten percent votes each. Since the Constituition requires the winner to get 50% of the votes, the two leading candidates will go for a run-off election on 15 December. Bachelet is expected to win easily. This means the return of the Left after a gap of four years. The Left had ruled Chile for twenty years since the restoration of democracy in 1989 after the Pinochet military dictatorship. Bachelet was the last leftist President in the period 2006-10 and she could not seek reelection since the Chilean Constituition does not permit two consecutive terms.The centre-right coalition government of Sebastian Pinera, which had come to power in 2010 has not been able to sustain the brief right turn beyond a single term. 

In the Congressional elections held on the same day along with the presidential one, the leftist coalition has won 50% votes and the rightist one got 38%. The Left has won a majority in the lower house with 68 seats out of the total of 120  and 21 of the 38 senate seats.The Communist Party, which is a coalition member of the Left has doubled its representation in the lower house to six. Four former leftist leaders of the student agitation including the charismatic Camila Vallejo who was the poster girl of the protest movement in 2011-12, have entered the Congress. 

The outgoing conservative government of the billionaire-President Pinera which delivered on the macroeconomic front with average GDP growth of 5.7% from 2010 to 2012 failed the middle class and poor who felt left out in the growth story. Pinera is ending his term with the lowest popularity rating in comparison to his predecessors since 1989. During the student protests in 2011-12 he and his ministers made insensitive remarks showing their lack of empathy for the lower classes. In contrast, Bachelet is seen as a kind motherly figure who could feel the pulse of the downtrodden and oppressed. She is the daughter of an Airforce General who died following imprisonment and torture by the Pinochet regime while her opponent Evelyn Matthei is the daughter of another senior Airforce officer who was part of the dictatorship. Bachelet herself was detained, tortured and exiled by the military regime. 

The return of the Left does not mean any drastic change of direction. It will be just course correction and more inclusive growth. In her election manifesto, Bachelet has promised free higher education, increase in taxes and constitutional reforms. But Bachelet will be able to do only limited educational and tax reforms and will find it difficult to change the constitution ( vestige of the Pinochet era) since her coalition does not have the two thirds Congressional majority required. But she could still try to negotiate with her right wing colleagues since the moderates from the right have won and the hardliners have lost in the elections.

Chile has already established its distinction as the Latin American country with the most stable and sober democracy with a dynamic and growing market. Chile stands out in the region as the country with the least corruption, crime and violence. It has successfully reduced its dependence on copper exports and diversified its exports and economy. It has signed FTAs with the most number of countries, ranks ahead of other Latin American countries in credit ratings and the World Bank Index of ease of doing business, investor-friendly policy regime, one of the best pension systems in the world and a solid sovereign wealth fund created from windfall profits made by the high prices and demand for its copper exports in recent years.

The victory of Left in Chile is part of the left turn of many countries of Latin America in the last two decades after having suffered rightist military dictatorships in the last century and the neoliberal policies of the post -dictatorship governments which had worsened the problems of inequality and poverty and caused the " Lost Decade" of the region. But the left that emerged was of two kinds: the radical group lead by Chavez; and the moderate and pragmatic group which has come to power in Chile, Brazil, Uruguay and Peru. People have got disillusioned with the radical model after seeing the tragedy of Venezuelans suffering from the highest rate of inflation, scarcity of essential and consumer items, mismanagement of economy, power shortages, foreign exchange rationing, import controls and the rampant crime, violence, kidnappings and corruption while the democratic institutions have been damaged badly. President Maduro, who imitates Chavez, continues the policy of confrontation and class warfare with a daily discourse of crude abuses, insults and threats to opponents, polarizing the society. On the other hand the Chilean Left is enlightened, respectful of opponents and seeks to make changes in a conciliatory and democratic manner. The Latin Americans are attracted more and more by this Chilean model of moderation and pragmatism; balanced mix of pro-poor and pro-market policies: as much emphasis on creation of wealth by the private sector business as on the distribution of wealth among the poor. This constructive model is the dominant trend  in Latin America. This is good for the long term health of democracy and inclusive economic growth of the twenty first century Latin America. 

Friday, November 22, 2013

Book Review of Juan Alfredo Pinto's novel "Atalaya XXI – when Nature Hits back "

"Atalaya XXI – when Nature Hits back" is the novel of Juan Alfredo Pinto Saavedra, Colombia's ambassador to India for six years till mid- November 2013. The book was launched on 23 October 2013 in New Delhi. The book belongs to the new genre " environmental thriller". There is, of course, "magical realism" in the book, in the style of Gabriel Garcia Marquez and other writers of this genre from Colombia. Amb Pinto wrote the book originally in Spanish with the title " cuna marina" which has been translated by Alka Jaspal of India.

The story is about the rescue of nine environmental experts trapped in the debris of the collapsed convention and commercial centre called as Atalaya XXI in Lima, Peru. The experts were participating in a conference on " climate change and coastal cities". The building collapses due to the climate change factors and particularly "marine wedge" caused by the incessant crashing of waves on the coast in which the building is located.  The survivors are rescued through a lateral tunnel made from the sea side. The whole operation is shown on live TV and thereafter the survivors are interviewed on the core environment issues as well on their personal experience and feelings while buried under the debris for ten days. 

The experts include an Indian philologist Dilip Vandrewalh from JNU (Jawaharlal Nehru University) Delhi, an Argentine environmental activist, a Gringo (American ) specialist in carbon bonds, green economy and financing of projects, a Peruvian mining engineer, a microfinance expert (of British and Costa Rican origin) from a multilateral organisation, a Colombian environmental consultant, a Vietnamese woman from the Communist party cadre and a Spanish professor. They are found to be alive sixteen meters under the ground four days after the collapse and rescued after ten days . During the time of their entrapment and trauma they interact with each other on their personal affairs and environmental issues and cheer and support each other physically and emotionally. 

Part two of the novel is the love story of Hipolito a Honduran, born of a Boilivian Mestizo and his Cuban wife. He comes t to study MBA in the National Agricultural University of Molina in Peru, after graduation in veterinary studies from Colombia. He falls in love with Maria Mimi, a classmate from one of the traditional oligarchy of Peru. After a long romance, they marry. While Hipolito is occupied with business, Maria has an affair with another man Norman with whom she starts a new business of establishment of a school of gastronomy, restaurants and jewellery chains based on the theme of asparagus in the Peruvian province famous for its cultivation. Hipolito disocovers the affair and poisons the lovers to death with a venom from the golden frog found in the jungles of Colombia. He disposes the bodies in the water next to the conference building, making it look like part of the tragedy of the building collapse.

The most moving part of the novel is the interactions and exchanges between the nine people from the different countries during the ten days of their entrapment under the ground. It is a discourse of multiculturalism and dialogue between societies with diverse value systems and mindsets. This is where Juan Alfredo Pinto displays his deep understanding of the Asian and Latin American cultures, besides others. 

The Indian explains to the others, in the manner of Gurus, the Indian philosophy, culture and traditions such as arranged marriage, karma,chakras, agni, third eye and even what does Sixer mean in cricket. He  claims that he has extra flexibility in fingers thanks to the habit of eating with hands. The Argentine does all kinds of profound psychological analysis taking his audience through labyrinths of fantasies like Jorge Luis Borges, the famous Argentine writer does in his books. The Peruvian mining engineer sees the world through rocks and fossils and says, "Stones show their age on their own surface unlike the human beings who pretend or tell lies".

Picture- Ambassador Pinto speaks at the launch of his book at Teen Murti Bhavan New Delhi on 23 October 2013

The author elaborates myths and parables from different cultures such as how bats are perceived in Central America, Mexico, Colombia, US, China and Indo-China. His little story of " operation thump" in which the angry termites eat away the desk of the environment minister and make him lose his job as well as the story of birds and sage of Jodhpur are amusing and educative. In the subplot of Hipolito-Maria romance, the author gives us the flavor of Peru's famous cuisine and pisco traditions. In the conversations between the environmental experts as well as in their TV debates after the tragedy, the author brings out many facts, lies, conflicts and contradictions in the approaches to environment and climate change by scientists, vested interests, business and governments.

Atalaya XXI is the second book authored by Ambassador Pinto during his six year stay in India. He had earlier published a book " Lotus Flower- stories from Asia" in 2010. Each story takes place in a different Asian country including India, Cambodia, Indonesia and Kazhakstan but the main character in the stories are Latin Americans. In these stories also he brings out the culture of the different countries of Asia and weaves a magic carpet by blending them with Latin American culture. This book has been translated into Hindi and English by the Sahitya Academy.

Ambassador Pinto's books have been enriched by his multidimensional personality as a diplomat, academic, politician, economist and entrepreneur.They reflect the perceptive experience of his extensive travels in Asia and knowledge of the cultures of many parts of the world. He has an abiding affection for India and is specially fascinated by the Indian cultural, ethnic, religious and linguistic diversity. In his farewell interview to media on 29 October 2013, he says " I have lived for 2200 days in India and each one of them gave me special memories". His books bridge the millennial cultures of Asia with the magical realism of Latin America.

Friday, September 27, 2013

India could learn from the success of the Brazilian fuel ethanol policy

Here is the link to The Hindu which published the article as an Op-Ed piece on 24 September 2013

The public and media were outraged recently by a suggestion that petrol stations could be closed from 8 pm to 8 am to curb consumption. Oil import is the heaviest burden on foreign exchange, with 144 billion dollars last year. The situation could get worse  given the potential for increase in crude prices with the escalation of the Syrian crisis and further destabilisation in the Middle East. India needs to think beyond 8 pm to 8 am and look for longterm indigenous sustainable solutions.

One of the ways to reduce petrol consumption is by the use of ethanol as a fuel. Brazil has already done it successfully and reduced petrol consumption by thirty percent. All the new cars produced in Brazil have flexifuel engines which run on 100% ethanol or 100% petrol or any combination of the two. In addition, there is a 20 percent mandatory ethanol addition to petrol. Brazil is the global leader with 16 million flexifuel vehicles out of the world total of 27 million in December 2011. Brazil uses ethanol in motor cycles, light commercial vehicles and agricultural aircrafts too. They are now experimenting with ethanol in buses, trucks, tractors and harvestors. They have developed sugar cane diesel which is used in some Sao Paulo buses. They are now moving into cellulosic ethanol technology which uses waste material and bagasse from the sugar mills. The use of fuel ethanol has created a synergy between agriculture and energy sectors and a win-win for the farmers, industry and government. The Brazilians have improved the quality of air in their cities with the use of ethanol which causes less pollution than petrol.

How did Brazil do it? The Brazilian government has brought all the stake holders (the sugar cane farmers, sugar mills, car manufacturers and oil companies besides the ministries of agriculture, industry and energy) together and formulated a policy and oversaw its implementation rigorously as a strategic priority since 1975 after the first oil crisis. They provided three important initial drivers: guaranteed purchases by the state-owned oil company Petrobras, low-interest loans for sugarcane farming and ethanol production, and fixed gasoline and ethanol prices. The policy has evolved over the years through learning from experience. Today fuel ethanol is the centre piece of Brazil's energy, agricultural and industrial strategy and Brazil is a role model for the world.

The success of the policy has encouraged the oil companies to become stakeholders in ethanol production in Brazil. Multinational oil companies such as Shell and traders like Luis Dreyfus and Bunge have invested in  ethanol besides Petrobras, the state oil company.

Conscious of the cyclical nature of the sugar cane production and weather risks, the government has a flexible policy of exports during surplus and imports at times of shortage. Brazil is working quietly to create a global ethanol market with standardization of specifications and market mechanisms in collaboration with US. Brazil is encouraging and collaborating with other Latin American and Caribbean countries to produce fuel ethanol. Brazilian ethanol companies have started investing in other countries. 

As the second largest producer of sugar cane in the world, India has the potential to replicate the success of Brazil. The risk and investment involved in ethanol production are much less in comparison to oil exploration and production. 

The government of India launched a programme of 5% mandatory ethanol blending in 2006. But it does not work because the oil companies have shown the least interest in ethanol. They offer unattractive prices to the ethanol suppliers even when they pay through their nose for the foreign oil suppliers. The ethanol producers prefer better prices offered by chemical and alcohol companies as well as foreign importers. It is a mistake for the government to have left the ethanol policy as a hostage to this conflict of interest between the oil and the sugar companies. Neither of them see the larger picture of nationalinterest. The petroleum ministry is also biased on the side of the oil companies. In view of this, the government needs to take up the matter in its own hands, bring all the stake holders together and evolve a long term policy treating it as a national energy security imperative. The mandatory blending should be increased to ten percent immediately and the target should be 20 percent in the next three years. They should force the oil companies to invest in ethanol production to make them develop a stake. The car manufacturers need to be brought on board to modify the engines. Some of the car makers in India such as Ford, GM, Volkswagen, Honda, Toyota, Renault and Fiat are already producing flexifuel cars in Brazil.

Use of ethanol as fuel has multiple benefits for India besides reducing petrol consumption. Money will go to the Indian farmers and industry in rupees instead of the foreign oil suppliers in dollars. It will help the farmers to sustain their income during the cyclical bumper harvests and consequent lower sugarprices, like the prevailing situation this year. India can reduce trade deficit and cut foreign exchange outflow. Ethanol causes less pollution than petrol. Most importantly fuel ethanol will be a sustainable long term India-centric solution.

Saturday, August 31, 2013

why are the Brasilians protesting?

While the massive June protests by over a million Brazilians have subsided, minor protests continue in small scale for diverse causes in various parts of Brazil. For example, the protestors in Rio de Janeiro have announced an agenda of protests for August and September directed against the Mayor, the Governor, the media monopolies and some specific companies. There is also the threat of bigger protests during the world cup in 2014 and the Olympics in 2016.
Why are the Brazilians protesting? Here is a brief analysis:
 It is not a protest of the poor masses who have revolted against an uncaring oligarchic government. The poor never had it so good in the entire history of Brazil as they have now. Over twenty million people have come out of poverty in the last decade thanks to the pioneering poverty alleviation programmes of the centre-left government. These were started by a poor man himself, Lula who became the President and champion of the poor. He had suffered more than most of the protestors and started a series of sincere and meaningful Inclusive Development programmes, which have become models for other developing countries.The rate of unemployment in Brazil is at its lowest ( ever since unemployment measurement was started in Brazil ) level of around 5%. There is job for almost anyone who wants to work. It is an employees' market. While they have ample choice, it is the companies which run after the human resources and work hard to retain them. The salaries are generally high. Consumers have had access to plenty of low-interest credit in the last few years since the government reduced the interest rates and forced the banks to increase lending. 
It is not a protest for freedom or against an oppressive regime. The Brazilian democracy is vibrant and open. The government has been elected in free and fair elections.The media is vocal and has been doing its duty of watch dog overzealously.
It is not against a corrupt and arrogant President. Dilma Rousseff is a clean and straight forward politician who herself is struggling with the corrupt and wheeling and dealing congressmen and senators to pass legislation needed for reforms. In fact, she should be happy that the protests have facilitated her job by putting pressure on many leaders of the Congress and Senate who have already shown some signs of responsibility and cooperation.
It is not against the ruling party. The centre-left Workers Party is the best bet for the poor. In any case no single party gets majority and coalition politics has come to stay as in India. Coalition means less control over corruption. In fact, the Workers Party suffered its biggest scandal called Mensalao because of this coalition logic. The party leaders had to bribe the opposition congressmen and senators with monthly payments to get their legislative support.
It is not a protest against football or stadiums. Football is the religion, opium, pride and passion of the Brazilians. The protestors are only against the over-the-budget expenditure and the priority given to stadiums over hospitals and schools. They are against the collusion between big business, venal politicians, local foot ball organizations and FIFA who enrich themselves disproportionately in the construction of stadiums and organization of events.
Lastly, it is not the outburst of a culturally stifled society. The Brazilians are lively and free-spirited. In general, they are laid back and relaxed people who take things in their stride and manage to find happiness in beaches, football, samba and caipirinha (a sugar cane liquor). They are not known for violent protests to change things. They did not even have to fight for their independence unlike in the case of the other Latin American countries, US or many Asian and African countries. The Portuguese prince in Rio de Janeiro himself declared independence from his father who was King of Portugal. He preferred Rio over Lisbon. Who will not? The Independence declaration was not followed by any violence or serious consequence from Portugal. There is no Father of the Nation in Brazil like Simon Bolivar or Mahatma Gandhi. Brazil was never invaded or threatened by any outside power and the Brazilians never had to rise to defend their country. Of course, they had suffered military dictatorships. But the military dictators were not brought down by public protests, although urban guerrilla groups and trade unions bravely stood up against the army rule. The military turned over power to the civilians after hopelessly messing up the economy and reaching the height of incompetence. 
So what triggered the protests? It was the discontent of the middle class. While the poor and the rich benefited more from the government programmes of poverty alleviation and business promotion, the middle class got squeezed by the high cost of living and poor infrastructure and services. They were angry with the corruption among politicians as well as with the football organizations. In fact those who run the football organizations are more corrupt and less accountable than the political leaders in Brazil. This is true of the rest of Latin America too.
It is an assertion of the middle class which has risen against the commissions and omissions of the political and business leaders. They have shown readiness to spoil the Fiesta of the powerfuls ( Confederation Cup, World Cup and Olympics) with global embarrassment. The threat of the protestors that they will come back to the streets during next year's World Cup is a more serious message than what happened in June. The facility of Facebook and other social media have helped in the mobilization of the people with the slogan of Vem para Rua ( come to the street ).
Such middle class protests took place in recent years in Venezuela, Argentina and Chile. The Venezuelan middle class rose against the authoritarian policies of Chavez in 2002. But he crushed it ruthlesslessly using his Chavista militants.  In Argentina, the middle class has held a number of protests against the outmoded Peronist policies of President Cristina starting from 2009 but she has managed to survive with the captive vote of her constituency of the poor. She is continuing her anti-middle class policies with a vengeance imposing more and more foreign exchange and import controls. The Chilean students and middle class agitated against the high cost of education in 2011 with limited success against the centre-right government of Pinheiro. The students have resumed their agitation recently. Unlike Chavez, Cristina and Pinheiro, the Brazilian President Dilma showed sensitivity and dialogued with the protest leaders and already initiated some measures to meet their demands.
The Brazilian protests will not bring about a dramatic change. But they will result in incremental improvement, as is evident already. Besides withdrawing the bus fare hike, the government has announced a 1.3 billion dollar investment to create 99 kms of express bus lanes and additional investment of billion dollar plus investments for sanitation and low cost housing. The protests have served a useful purpose in the maturing process of the Brazilian democracy and the transition of the country from the Third to the First World. The protesters have given a strong message that the country cannot become a First World if the political and business leaders continue with their Third World ways. The protests are indicative of the empowerment of the middle class, which has been enlarged by the pro-poor policies of the government. The growing and strengthening middle class is the solid new foundation of the young Brazilian democracy.