Photo Jonathan Blair

Thursday, March 13, 2014

Venezuela: Dark present, darker future

Venezuela is in bad shape. Daily demonstrations, barricades and fights with the police are adding yet more chaos to the country’s economic mess and violent crime wave. But if you assume that things can’t get worse, just wait. Here is a grim, and unfortunately quite likely scenario.The political dynamics in the country are intractably poisoned. The two sides are deeply entrenched while hatred, not rivalry, rules. Even the start of a dialogue is made difficult by the internal divisions that plague each side, with radicals ready to denounce compromise as treason. Leopoldo Lopez, the now jailed opposition leader that led the early demonstrations in Caracas, has become the face of the street protests and he wants nothing less than President Maduro’s resignation. This leaves no room at all to manoeuvre for Henrique Capriles, the opposition candidate in last year’s elections. In the government’s aggressive campaign against the “fascist” opposition, the President, Nicolas Maduro, tries not to be outdone by National Assembly, President Diosdado Cabello, who has been keeping some distance since the very night of the Maduro’s disastrous and razor-thin electoral victory.

Economic problems complicate developments even more. High inflation (already greater than 50 percent in 2013), decaying infrastructure, regular power blackouts and shortages of a wide range of basic commodities cannot be tackled without deep economic reforms. Most of these issues emerged under Chavez, but growing oil revenues previously enabled the government to patch things up. The problems are now much worse, and  oil revenues are not keeping up as prices do not increase anymorewhile production—given chronic under-investment and continuing brain drain at PDVSA, the national oil company—declines. This will leave the government in Caracas increasingly powerless to protect its political base among the poor, especially if anything is done to tackle inflation and address shortages.  Both already hit the poor the hardest: they are the ones with little access to dollars, the worst protection against financial inflation, and the narrowest range of options for buying basic necessities. But government action to fight these plagues will hurt them even more. Higher interest rates and lower government spending, critical to reducing inflation, will make unemployment, still remarkably low, shoot up, while dropping price controls, a crucial step to address shortages, will make inflation worse for a while at least, something the poor can ill-afford.

The current discontent, in other words, will likely seep into the chavista base. Given the polarization between the two sides, however, this won’t reinforce the opposition. Expect instead a growing, amorphous and violent mutiny, expressing itself in spontaneous looting and haphazard acts of violence, very much along the lines of the 1989 Caracazo. This will aggravate an already frightful security situation with, once again, the most vulnerable as the primary victims of the unrest.

Here, too, government action is more likely to make things worse than better: as a consequence of past and current policy, the country is rife with guns, gangs and poorly controlled chavista militias. Even government forces appear to be only notionally under control as demonstrated by the recent arrest of state security agents following the killing of demonstrators. Reestablishing any semblance of monopoly over the means of violence, in the context of growing popular discontent, necessitates a massive use of force and a degree of unity and coordination among government and military leaders that is clearly not present at this time.
Amid such deepening tensions and anarchy, the most logical exit is a military coup. Given years of chavista cleansing within the armed forces and with the opposition essentially bereft of weapons, the game would play out within the regime itself. In such a scenario, options are many but two look most likely: Maduro himself could find inspiration in Alberto Fujimori’s “auto-coup,” closing the political system to introduce harsh reforms and clean up the security mess. With that said, National Assembly President Diosdado Cabello, a former lieutenant widely felt to have much tighter links with the military, is in a better position, especially as he could blame Maduro for the crisis and, given the reservations he has expressed in the past, present himself as a true alternative. In either scenario, foreign players, especially Cuba, will likely play an important role. This is another story, however. For now, the domestic game is most prominent, and prospects most depressing.

[This commentary was first published on the CIC blog:]

Wednesday, February 19, 2014

There is no "Beyond NAFTA"

IN 1994, NAFTA was as much integration as the needs and politics of its three member countries could afford them. Twenty years later current politics are less amenable than they were to deeper integration, and needs are fewer. Treaties are tougher to undo than to do, and NAFTA won't disappear. But a sequel --better, bigger, deeper--will just not happen. We are back to bilateral agendas, and we should focus on them.

North-American integration had two pillars: the auto industry, with truly North-American production chains, and the energy dependence of the United States on its two neighbours. Only the first was really a trilateral agenda and as the industry is now reconsolidating along a US-Mexico axis, with Canada an increasingly marginal partner, a core rationale for regional integration is withering. Energy proved crucial to the Canada-US deal, but was left out of NAFTA because of nationalist qualms in Mexico. Still, the US's unquenchable thirst for energy, and the reserves and investment needs of its neighbours created a sense of regional interdependence. This second pillar is now crumbling as shale oil and gas transform the US into a self-sufficient energy behemoth.

Twenty years go, moreover, there was no China factor. Yes "Asia-Pacific" was seen as the world's forthcoming engine of growth, but nobody could sensibly bet the house on Asian markets or see them credibly as an alternative to America's. How things have changed. China's share of Canada's trade is increasing as fast as the US' share is declining. The simple fact that Obama could dither for so long on Keystone shows how weak Canada's hand has become on what used to be the central strategic vulnerability of its neighbour. Obviously, killing Keystone will precipitate Canada's turn to Asia, but approving it would not alter the fundamentals: the two countries' economies are drifting apart and soon, the old joke about Canada getting the flu each time the US coughs will need to be "chinezed."

Mexico has been moving in the same direction, as China has become the country's second largest trade partner. The movement, however, is much slower and likely to be much less radical than for Canada. The degree of economic, social and cultural integration of the border area, now reinforced by the redeployment of the auto-industry, has created a level of interdependence that has probably never existed between Canada and the US.

With trilateral stakes so low, there is no logical reason for current administrations to spend scarce political capital on deeper integration and, surprise, surprise, they don't. Meanwhile, however, bilateral agendas pile up: infrastructure, security, environment, water, migration, visas, standards, and so on. The best way to address those challenges is to frame them from the outset as bilateral issues. 

In that new landscape, the US remains Canada's most important partner, especially, if anything, as its increasingly resource-dependent economy is now hooked--both literally and figuratively--on China. Mexico, moreover, matters for Canada and it is just ridiculous that some progress on travel restrictions had to wait for a trilateral meeting to take place. As a significant trade partner, an important link in the value chains of major Canadian companies, and a society with which increasingly close links have been built over the years, it merits more attention from "the Centre" than it has received. That attention should be freed from the NAFTA shackles in which it is still stuck in much public discussion and policy development.

Continentalism and North-American integration made lots of sense a generation ago and clever political leaders seized the day. The very same ideas have now become blinders. We should drop them.

[This post was first published on Open Canada.] 

Monday, October 21, 2013

Do No Harm (or at least try): Canada, Latin America, and international drug policy

More than a million people have been murdered in Latin America and the Caribbean over the last ten years, many and possibly most of them in fights over drugs, drug turf or drug trafficking routes. Violence, and by implication, drug trafficking, preoccupies the public and has become a priority in the region’s policy debates. Now, having trod the bloody path of prohibition and law enforcement for decades, the governments of the region are exploring new avenues. Some are toying with decriminalization and even legalization. In doing so, they join several European countries and various American states.

Standing in the way of this trend toward experimentation, however, are the international arrangements that currently govern drugs policy. For more than 50 years, a global drug regime centred on prohibition has tried to reduce consumption by eliminating production, and by punishing producers, traffickers, and consumers. Success has been elusive, to say the least. Global consumption of illegal drugs is at an all-time high; unregulated consumption of injection-drugs has been, and continues to be, a major vector of HIV and hepatitis; tens of thousands of mostly young men are dying in the trenches of the drug war; and hundreds of thousands more are spending their most productive years behind bars.

 Now a movement is under way to modify the current international drug prohibition regime, for instance by reclassifying cannabis as a less dangerous substance, or by formally enshrining harm reduction – like heroin substitution or safe-injection facilities­ –within existing treaties. A report commissioned by the Organization of American States and launched in May 2013 called for a more flexible approach involving systematic experimentation and suggested that decriminalization and even legalization should be considered, given the disastrous effects of current policies. Brazil, Colombia, and Mexico have decriminalized possession for private consumption of all illegal drugs and, in November 2013, following a vote by the country’s senators, Uruguay will  become the first country to legalize the commercialization of marijuana.

While the international organizations charged with enforcing the drug conventions have predictably criticized liberalization measures, they would have to change their tune if the legal regime were made more flexible. Resistance, however, is fierce; a number of countries oppose taking any steps toward liberalization, domestically or internationally. Japan, Thailand, Russia and China, as well as Saudi Arabia lead this group, but their position is strongly supported by many other states in Asia, the Middle East and Africa, all regions where many states still threaten and carry out the death penalty to deal with drug traffickers.

In this global debate, the United States, despite the increasing liberalization of its domestic policies towards addiction and cannabis consumption, has sided with the hardliners, and so has Canada. In the face of increasingly broad public – and police – support for a softer policy that would focus less on repression than on non-criminal sanctions, treatment and education, both countries are actively engaged in protecting the current regime and maintaining its rigid emphasis on repression.

Arguably, compared to the glaring hypocrisy of the Obama administration, the Harper government is at least consistent, walking the same rigid line in international circles that it does at home, where it is fighting harm reduction initiatives – such as Vancouver’s Insite safe-injection clinic – and, against all evidence and in the face of declining levels of violence, progressively implementing its law and order agenda, with mandatory minimum sentences and increasingly strict guidelines regarding the enforcement of drug prohibition.

More importantly, however, both governments are behaving in an equally callous way. At home, they must answer for their policies and can pay a political price for it. Abroad, they ride free as the horrendous consequences of the current international regime are felt by foreigners to whom they are not accountable. It is these foreigners whose bodies are piling up in the war on drugs across Latin America, and in Iran’s and Asia’s epidemic of injection drugs. They should be the ones setting the international drug policy agenda.

Decriminalization and legalization are certainly not silver bullets and their long-term consequences are still largely unknown. But given the disastrous failure that is the current international drug regime, it is cruel and counterproductive to actively prevent Latin American countries, and others, from asserting their right to try something else.

The decent thing for the government of Canada to do – and the United States, for that matter – is to abstain from pushing their domestic position on drug policy in hemispheric and international discussions. We should let those who are paying the price call the shots or, as they say in Mexico, those who pay the Mariachis pick the tune.

Tuesday, October 8, 2013

The Brazil-Canada spying scandal: What boys with toys have wrought

With their Anglosphere friends, a bunch of irresponsible boys playing computer games with their expensive toys have done lots of damage to Canada's relations with Brazil. After years of childish confrontation around planes, beef and petty criminal affairs and thanks to a large diplomatic effort, the bilateral relationship had become "normal." Two countries with distinct outlooks and increasingly divergent paths in global arenas (Brazil up, Canada down) were finding ways to work together in a variety of fields, while investments and trade, in both directions, were increasing, sometimes significantly. 

The spying scandal matters, but not because that relationship is important for either country. Notwithstanding the hues and cries of the Globe and Mail, trade with Brazil remains marginal for Canada, representing less than 1% of this country's imports and exports (see the graph below). Don't get sidetracked by the big numbers: trade with Brazil was worth $6.5bn in 2012 (down 2.7% from 2011, by the way), but in a sea of $916bn, this is nothing. Investment is a similar story. Don't let the number of companies involved fool you: most of the value is linked to a very small number of investments. Were Vale to sell Inco--which they would do for economic not political reasons--Brazil would disappear from the top ranks of foreign investors in this country. 

In fact, it is the very thinness of the relationship that makes this scandal so damaging: with so little at stake, good will and trust become critical, and this is what has been damaged here. From that standpoint, in other words, tapping Paulo Cordeiro's phone is at least as bad as penetrating the mining ministry's computers, for he was as good a friend of Canada as you would find in Brazil's diplomatic service. If he could be treated like this, everybody is fair game.

Manners matter where stakes are low. Obviously, manners have never been the forte of the gaming crowd…

Friday, August 16, 2013

Hamster Wheel Diplomacy

Over the last eighteen months, Latin America has been one of our ministers’ favorite destinations: Ed Fast spent three days in the region in March 2012, and nine more in April; Diane Ablonczy, on Fast’s behalf, visited for five days in November; John Baird for ten in February 2013; Stephen Harper travelled South for three days in May; and John Baird is just back from another thirteen days trip to the region. Colombia was visited four times, Peru three times, Chile and Mexico twice and Panama, the Dominican Republic, Cuba, Costa Rica, Nicaragua, Argentina, Paraguay, Uruguay and Brazil once each. Of the hemisphere’s significant countries, only Bolivia, Ecuador, and Venezuela were left out, the latter dropped at the last minute as the scheduled visit overlapped with Hugo Chavez’ death. There is clearly nothing flimsy to this government’s commitment to the region, which it identified as a priority almost as soon as it was elected. That simple fact is no doubt welcome in a region that has seen Canada’s interest flutter wildly over the years. But at some point, both Latin Americans and Canadians will be wondering what all these trips are about. And that point may well have been reached.

The Conservatives’ agenda, like the Liberals’ before them, focused mostly on free trade. But now that agreements have been signed with virtually all the governments interested, there is little of substance left to do. Those who haven’t joined the bandwagon won’t do it soon. Indeed, it is hard to see any hint of free trade in the political debates of Brazil and its Mercosur partners, which now include anti-liberal Venezuela and soon Bolivia and Ecuador. Some would like Canada to join the Pacific Alliance, but with free trade agreements already signed with all its members and support from them for Canada’s Asian/Transpacific Partnership strategy already secure, there simply is nothing substantial to gain without a readiness to liberalize immigration, something this government is not willing to contemplate.

Obviously, there is much more than trade to Canada’s relations with the region – a plethora of programs, ranging from technology and student exchanges to peacekeeping, human rights, good governance, public safety cooperation, training, and support have been set up.  In addition, with each visit, a slew of mostly small projects and programs are dusted up, renamed, refinanced or truly introduced. None of those announced recently, however, are really significant for these countries, and none truly matter for Canada.

Both critics and cheerleaders will say that active and visible diplomatic efforts impact Canadian companies present in those countries, sometimes positively, sometimes not. A number of large Canadian firms have become fixtures in the region’s mining and financial sectors but the complicated relations these firms often have with local governments rarely benefit when poorly-informed ministers breeze in for a short stay before returning to Ottawa.

At some point, insisting on progress in the face of paralysis becomes counter-productive. Consider the official press release from the meeting between Baird and Brazilian foreign Minister Antonio Patriota according to which the ministers “initiated work toward the inaugural meeting of the Canada-Brazil CEO Forum”, a forum that was established during Stephen Harper’s visit in… August 2011. One can’t help but conclude that the two countries’ “Strategic Partnership Dialogue” is weaker than it sounds, and that it may struggle when awkward questions pop up about real problems and deeply conflicting views.

Two such delicate themes immediately come to mind: visas and drug policy. The cost and difficulty of obtaining visas is developing into a major impediment to closer economic relations with the region. Indeed, the only article from one of the region’s major papers to mention Baird’s most recent visit, published in Colombia’s El Espectador, points out that trade between the two countries has declined substantially in the last year, and it fingers visas as an important reason for this. The regions’ increasingly liberal view of drug policy, feeding on years of bloody confrontation with traffickers, is also clearly incompatible with the rigid stance of the Harper government on the issue. Without anything to offer on these fronts, Canada’s hyperactive, hamster wheel diplomacy looks at best irrelevant, and at worst counterproductive.

The sustained efforts of the last fifteen years have probably established for good Canada’s credentials as a significant political and economic player in Latin America. Mexico, Chile, and now Colombia, Costa Rica, and Peru have become real and reliable partners. Linkages with Brazil are increasingly deep and diversified, and, although the two countries often don’t see eye to eye, their mature relationship befits their status as serious global players. Canada’s trade, investment, and aid presence in the smaller countries of the region has become “normal,” which means usually welcome, but sometimes criticized. Now, until the government has something substantial to put on the regional table, it would be wise to adopt a lower profile and let the diplomats posted in the region quietly do their job. Repeatedly showing up empty-handed will make even our friends wish we hadn’t shown up at all.

[Originally published in]

Thursday, August 8, 2013

Brazil’s diplomats and the Canadian model

Canadian International Council head Jennifer Jeffs has an intriguing piece in the August 7 Globe. She argues that Canada should look to Brazil for lessons on how to engage the world effectively. I am not sure I agree, when I look at the very few hard results that Brazil got from all its efforts of the last decade. Clearly however, Foreign Minister John Baird, who is arriving in Rio for a two-day visit, will not be impressed with his hosts' "efficiency" when he hears the latest news about Brazil's diplomatic machinery.

Brazil’s Federal Account Tribunal, best thought of as an auditor general with judicial power, has just told Itamaraty, Brazil’s foreign ministry, that the top salary of its diplomats could not exceed $28,000 Reais per month (about C$14,000 or C$ 182,000 dollars a year as Brazilians are paid on a 13-months European schedule). This will come as a shock to Brazilian diplomats, some of whom currently make up to $60,000 Reais per month, or about C$ 390,000 a year...

Perhaps, reversing Jeff’s advice, Brazil's rank-and-file diplomats will be keen to “import” the tactics of their much, much poorer Canadian counterparts, who have been delaying the treatment of visa applications and refusing to take phone calls in foreign countries to get better salaries. For his part, and in keeping with his customary modesty, Baird may well try to sell his rigid stance in the face of those demands.

[Thanks to Fabricio Chagas Bastos for the tip on salaries]

Tuesday, August 6, 2013

Who is bleeding and who notices? Iraq through a Latin American lens

"Iraq is Bleeding and the world has barely noticed" writes Scott Taylor in Embassy Magazine: 500 deaths this month, 3,000 this year.

Awful? Yes, awful. But how awful?

Sorry to get into bleak death accounting, but if the point is for the world to notice, context matters.

Yesterday, Vanda Felbab-Brown sent me a report just published by Brazil's Institute of Applied Economic Research (IPEA) showing that homicides in Brazil between 1996 and 2000 have been under-reported by about 18%. Instead of the roughly 700,000 homicides that we thought had taken place in the country over these fourteen years, Daniel Cerqueira's study suggests that the true number is in fact about 850,000.

So we are talking about 60,000 homicides per year, or 5,000 per month, year after year after year. Obviously, Brazil is larger than Iraq, six times larger. But 6 times 500 is still "only" 3,000. In other words, as bleeding goes, Iraq looks like a mild case. Oh, and by the way, 15 to 16,000 people are murdered every year in the US, or 1250 per month...

The study of civil wars in the last decade has been skewed by a systematic neglect of criminal violence. The division of labour between war and crime specialists and the media prominence of the first has led to a massive exaggeration of the scale and severity of war-related violence and to a corresponding neglect of the ravage caused by criminal violence. 

The sad fact is that the average Iraqi is probably safer than the average Brazilian and also much safer than a poor black male in Cleveland or New Orleans. Time to get real folks.

Thursday, July 11, 2013

The Queen is Naked: Dilma Rousseff and Brazil’s season of discontent

The profound weakness of Brazil’s political leadership is now in full display. For ten or so days at the end of June, angry middle-class citizens took to Brazil’s streets, spewing rage against shoddy and expensive public services, corrupt politicians, a slow and inefficient justice system, and the government’s spending orgy on sport facilities in the lead up to the 2014 World Cup and the 2016 Olympics. Increases in public transportation fares in several cities sparked the protests but the demonstrations quickly became an outpouring of disgust at the abuses of power that have come to define the behaviour of the country’s entire political class.

Governments and politicians were stunned. Mayors and state governors quickly retreated and canceled the fee increase. Reactions at the federal level, however, fed the chaos: President Rousseff immediately committed billions to public transportation. She asked Congress to devote all the forthcoming oil royalties to education (about $140bn). And she announced that a constitutional assembly would be convened to change key components of the electoral system. Legislators also pitched in and Congress rushed through a law that made corruption a grave crime and to a voted—partly against Rousseff’s will—to use oil royalties for education and health care. Meanwhile the Senate even adopted a law making public transportation free for students.

Most of those panicky moves were not really on the political agenda prior to the demonstrations, and none of them are part of a coherent program. Some proposals are no more than pipedreams, while others could end up being counterproductive: most of the oil whose royalties are now pegged to health and education is still extremely deep under the ocean, the effective freeze on transportation fares greatly reduces the net value of any new investment in the system, and the electoral reform is already in limbo. Indeed, the day after Rousseff announced a constitutional assembly, it became clear that such a move would be illegal, forcing her instead to announce a plebiscite whose results would then be used by Congress to modify electoral rules in time for the 2014 elections, i.e. before the end of October 2013 . What will apparently be put to a vote, moreover, looks more like an advanced political science exam than the kind of issue that even an informed citizenry can decide upon: first-past-the post or proportional voting; open or closed list if proportional voting is chosen; full, partial or no public financing of political parties; rules governing electoral party coalitions, and so on, with a plethora of possible—and possibly inconsistent—combinations.

Why such panic and precipitation and why such incoherence in the response? The demonstrations were sometimes large but they rarely reached beyond 100,000, and on average they had less than 400 people – in an extremely wired country of 200 million people in the middle of a football-induced semi-holiday. They were mostly pacific, although significant vandalism at times took place, but always only from small groups. The Brazilian police, the most lethal on the continent, and quite brutal initially, in the end proved shockingly restrained and the three deaths directly related to the demonstrations were all accidental: a participant was killed by a car, another one died of cardiac arrest after inhaling tear gas, and a third one fell from an overpass.  Moreover, and in spite of broad public discontent with the oversize spending on soccer events, the Confederation Cup went ahead without a hitch, and while facilities were obviously well-protected, there were no significant confrontations around the stadiums or disruptions during games. And as Brazil got closer to the final, the whole country appeared to retreat to bars and living rooms to watch the country’s latest soccer sorcerer, Neymar, work his magic.

In other words, the government’s fearful and confused rush to action should be traced less to the scale and force of the movement than to the weakness of the country’s political leadership, primarily of President Dilma Rousseff herself. Elected “by” Lula, who presented her publicly as “me, with a skirt,” she surfed for a while on her predecessor’s popularity and was able to distance herself from the corruption scandals that involved his closest collaborators. For a while, her calm self-possessed and professional public image and even her aloofness appeared to put her somewhat above the dirty and expensive politics of the Congressional coalition upon which she relied to govern. Slower growth, higher inflation, a large trade deficit, and a growing discomfort with lavish government spending, however, began to undermine her popularity. Her handling of the crisis, the first real political test of her mandate, showed her to be wanting: devoid of charisma, lacking political skills, poorly supported and isolated; her quickly calling Lula for help probably killed any claim she may have had to significant political credibility of her own. By the end of the crisis, her popularity hovered around 30 percent, less than half of what it was barely four months earlier.

Rousseff is now the lamest of ducks. Without public appeal of her own, confronted by slower growth and tied by huge financial commitments, she has few if any cards in hand. Governance will get even trickier from this point on as she will have to pay dearly for any concessions from Congress. The expensive deals that this will involve will feed public despondency and the plebiscite, if it takes place, will only add to the confusion.

So, what’s next? The Queen is dead, long live the King? The most obvious outcome of the crisis is the increasingly loud calls for the return of Lula. The wily man stayed out of the limelight during the chaos and will likely do so for a few more months, letting Dilma take all the hits while little real policy work gets accomplished. He could then arrive as a savior and, given the still strong support he enjoys among the poor, his chances of winning an election would be as good as anyone’s. The Lula that would return, however, would be very different from the one that governed in an earlier age of easy prosperity. With his party just as discredited as the others, his rule would likely be more personalist, populist, and even less transparent and accountable than it had become by the time he left power.  More than the plebiscite on electoral reform currently being debated, the return of Lula under such conditions would strongly shape Brazilian democracy, and not for the good.

As for Congress, its old mores look unlikely to change. In the midst of the crisis, and against all rules, Henrique Alves, the President of the Chamber of deputies, took his family with him to the final of the Confederation Cup on an Armed forces plane (the President of the Senate, Renan Calheiros, had done the same thing two weeks earlier). In the end, in sum, far from truly shaking politicians into substantive reform, the brief Brazilian Spring could very well worsen an already detested political system. But, if Brazil wins the World Cup next summer, the politicians who brought the people to the streets could still get away with it all.  The weakness of Brazil’s leadership may have been revealed, but their grip on the political system looks  strong enough to see them through the current upheaval.

[Originally published on Open Canada as “Brazil’s season of discontent”]

Wednesday, May 29, 2013

Brazil's rough patch

Dilma Rousseff came to power three years ago as the heiress of Brazil's most popular president ever and in the wake of a decade that truly stands as a golden age for Brazil. She remains extremely popular, surpassing in fact the numbers of her mentor at a similar point in his first mandate, and she will most probably win the next elections. And yet, neither her government nor Brazil itself is doing very well right now. In fact, one is left wondering if the past decade will stand as another one-time "miracle" from which the country, in spite of its huge size and tremendous potential, will go back to the mediocre routine that has been the hallmark of most of its XXth Century history.

Rousseff's Workers' Party (PT) remains rattled by the condemnation of Lula's closest advisers in the "mensalão"  scandal, which saw Congress members receive regular payments in exchange for their support for the government's legislative agenda. The fact that those most severely sanctioned--who also happen to be closest to Lula himself--could still escape prison terms feeds a growing disenchantment with the sole major party that truly stood apart from old-style corrupt and clientelistic politics. Current electoral manoeuvering does not help as Rousseff gets ever closer to the old political establishment to contain the threat represented on the left by widely respected--and ex-PT--Marina Silva and by the increasingly credible governor of Pernambuco, Eduardo Campos.

The state of the economy doesn't help. Brazil, which essentially escaped the throes of the global financial crisis, grew by a meager 0.12% in 2012 while inflation, at 6.7%, was higher than even the soft target set by the government allowed. In spite of government efforts, the country's deindustrialization continues apace and the country's export matrix, increasingly dominated by primary goods, is slowly going back to what it was before the big industrial push of the second half of the XXth century. To make things worse, the awful state of Brazil's infrastructure, particularly its ports, is proving to be a major obstacle to the expansion of its extremely productive agricultural sector. Public insecurity remains a major concern, as progress in Rio de Janeiro, Recife and São Paulo (where violence is increasing again) is perversely compensated by an explosion of violence, particularly in the Northeast of the country: what must stand as the major stain in Brazil's recent record--more than 500,000 people have been murdered since the beginning of the century--continues to defeat government efforts, harming the poor above all.

To make things worse, the forthcoming World Cup (2014) and Olympic Games (2016), both meant to showcase the country's new status as a global powerhouse, are shaping up as major challenges: the reversal is epitomized by the fate of the renovated Maracanã, Rio's famous soccer stadium, which stood in limbo as major structural weaknesses were found and, for a while, felt to be beyond repairs. Under massive government pressure and with no--financial--holds bared, things were patched up in the end and Dilma--as she is called by the public and media alike--herself presided over a star-studded symbolic inauguration game. With construction behind schedule in a number of sites, this kind of last-minute firefighting could well become the model for much of the infrastructure needed for both events, turning them into massively expensive public relations stunts.

Things look no better on the foreign policy front, which, thanks to Lula's marvelously engaging personality and hyperactive travel agenda, contributed immensely to the country's emergence as a global player on most international issues. Rousseff has neither the charisma of her predecessor nor his interest for world issues or, let's be frank, personal stardom. More fundamentally, Brazil is reaping little results from Lula's activism: a permanent seat at the UN Security Council is as far-fetched as it was ten years ago and the BRICs--with Russia India and China--or IBAS--with India and South Africa--as "South-South" groupings in which Brazil has invested heavily, are proving to be either most unreliable "alliances" or marginal vehicles for the country's ambitions. Brazil's foray into global nuclear diplomacy, around Iran's "civilian" program, has not been particularly glorious, and its continuing--and effective--veto on global trade liberalization is being circumvented by new regional and trans-regional schemes, from the Trans-Pacific Partnership to the Latin America's Pacific Alliance.

The formal launch of the latter, in Colombia last week (May 24), is probably most damaging for Brazil's foreign policy outlook. Just as the threat to the country's regional prominence that Hugo Chavez' ALBA represented was fading with the death of its founder and its messy follow-up in Venezuela, the consolidation of the Pacific Alliance emerges as a credible challenge to Brazil's dominance of the region's integration dynamics. The prominence in the Alliance of perennial regional outsider Mexico and of heretofore largely isolated Colombia represent the PA's most troubling aspect from Brazil's standpoint. The facts, moreover, that the Alliance brings together the continent's most dynamic economies, that all of its members have free trade agreements with the United States--and Canada--and that all of them, unlike Brazil, have no qualm whatsoever with engaging Asia, make the challenge to Brazil's regional stature even more powerful. The expanded Mercosur, which is absorbing ALBA's South American remnants, looks by contrast like a club of troubled losers, with Argentina and Venezuela in the throes of economic crisis and both of them, along with Bolivia, confronting massive public discontent. Ecuador's Rafael Correa, who is about to start his third presidential term, stands as an exception, with substantial support and an economy that is doing rather well, but Ecuador is a tiny thing and the man has stature and a mind of himself and, as a result, he is the most unwieldy ally. Little Mercosur member Uruguay's joining the Pacific Alliance launch as an observer, finally, adds insult to injury for a country that still sees Mercosur as the foundation of its regional prominence.

In this context, and rather pathetically for a budding world power, Brazil must content itself with the election of one of its diplomats as Director General of the World Trade Organization. It doesn't mean much in practice, however, and in fact, it should not: the director-general of the WTO is a facilitator, expected to help countries reach agreement on the rules that govern global trade. His personal views must not really matter and he certainly cannot be seen to favour his own country. And yet, the Brazilian government had invested heavily in his election, taking him around the world over the last five months and involving President Dilma Rousseff in heavy lobbying in his favour. Defeating a Mexican candidate that had the support of Colombia, moreover, emphasizes the depth of the continent's division that is embodied in the emergence of the Pacific Alliance. Paradoxically, in other words, this "triumph" gives the measure of Brazil's current predicament, getting little more than crumbs for all its diplomatic activism.

Now, this rather bleak portrait should not be read as a dismissal of Brazil's place and role in the world. More than any country of the region except the United States, Brazil has the means to be self-centred, slow moving, and to play gingerly the globalization card. Its population and economy will remain among the planet's largest. It will remain an agricultural and mining superpower as well as a tremendously creative society, and its "gentle giant" attitude towards its neighbours will keep providing the region with an anchor of stability. Slower growth and sometimes nauseating political compromise may be the price to be paid for less volatile economic and social conditions and for the slow and pacific consolidation of its democracy: compared to Brazil's cautious game, the Pacific Alliance's bet on globalization looks a lot like, well, a bet, and one whose ultimate fate is largely unknown. The current undoing of Brazil's regional strategy may also just be what the country's diplomacy needs to put a cross on all those half-baked, unwieldy, poorly-institutionalized and ultimately feckless integration schemes. In spite of its roaring integrationist rhetoric and while never completely dismissive of the continent, Brazil has always turned its back to it and its leaders should perhaps recognize that the world, not South America, is really its playground: leading the likes of Maduro's Venezuela's, the Castros' Cuba or Kirchner's Argentina is not only fiendishly difficult and unrewarding, but also utterly useless.

(This piece was first published on under the title "Off Its Game")

Saturday, April 20, 2013

Why Venezuela matters for Brazil

Some may have been surprised by the swiftness with which the Brazilian government recognized the victory of Nicolás Maduro in Venezuela. Along with Venezuela’s closest allies, from Cuba and Argentina to Bolivia and Ecuador, Brazil congratulated Maduro Sunday night, even before the chavista-dominated National Electoral Council even declared him president-elect, early Monday morning. Why would Brazil, which has in fact been the target of Venezuela’s claims to regional prominence under Chavez, be so keen to secure the sympathy of his successor?

Ideology played its part, with Lula himself openly rooting for Maduro’s victory and the knee-jerk leftism of the Workers' Party's (PT's) core constituency predictably pushing for the a quick and strong affirmation of solidarity, especially once the United States had expressed reservations.  As Paulo Sotero has pointed out, however, most leaders of Brazil’s ruling Workers’ Party were to say the very least measured in their praise of Chavez and the disputed election provided an opportunity to play out the global “seriousness” that the country’s elites, right and left, so strongly strive for.

Security worries may also have been at play. Brazil shares a long border with Venezuela and the prospects of political instability right over a poorly-controlled frontier area must have worried Brasilia. The extent to which an early recognition could help stabilize the country in the face of strident resistance and the mobilization of the opposition, however, is far from clear. Why then move so quickly?

I think the answer lies deeper than ideology or even security preoccupations and reaches to the very core of the Brazilian government’s economic model, which is still rooted in old and increasingly far-fetched dreams of industrialization. The ten-year-long Golden Age of Lula’s presidency was based on low inflation and the effective redistribution of reasonably high growth. The axis of that growth, however, has lied in growing exports of primary products, primarily agricultural. For twenty years now, Brazil has been quickly de-industrializing. The fast decline of its manufacturing sector has taken place in the face of strenuous efforts of the government, particularly under the PT, to shore up and protect what a half-century of state efforts had produced, until the brief neo-liberal opening of the early 1990s triggered a debacle that China’s rise, and the primary goods bonanza it produced, only deepened. 

Much of Brazil’s industry is not competitive globally. Domestic protection and support for national “champions” have consequently been crucial to its survival, but so has regional integration, particularly Mercosur. Hiding its industries behind a common tariff with even less competitive—and even keener protectionist—Argentina, ensured that a market would be found for Brazilian products. Bringing Venezuela on board was an even better deal: with no industry to speak of, Venezuela brought no competition within the bloc but putting its sizeable market behind the tariff wall broadened the reach of Brazil’s uncompetitive manufactured products.

Deepening economic instability in Argentina is now threatening the whole scheme. Cristina Kirchner’s attempts to protect its own industrial sector by imposing barriers to Brazilian products, along with declining demand in Argentina, is hurting Brazilian manufacturing exports to that country which, to take a recent example, have declined by 10% in the first three months of this year. With mass protests against Kirchner in the streets of Buenos Aires and most of the country’s major cities last week, continuing high inflation and falling confidence, things are not looking up.

In such a context, what export market is left for Brazil’s industrial goods but troubled Venezuela, whose oil revenues “protect” from economic collapse? Mercosur is a raw deal for Venezuelan consumers, who would be much better off importing from the cheapest world producers, but the chavista mix of ideological blindness and economic incompetence is proving to be a boon for Brazil. In that context, quickly recognizing Maduro and keeping a clearer-eyed opposition out of power was a no-brainer.