Photo Jonathan Blair

Tuesday, November 20, 2012

Forget gaz exports for Brazil

There is just too too much out there. The latest gaz power? Brazil's best friend South Africa...

Wednesday, August 8, 2012

Colombia on a war path?

I just learned from Stratfor that Colombia's President Santos just announced that the army would be expanded by 20,000 and will get better equipment and technology.

Now, explain that to me:

Colombia is wining its war against increasingly weak guerrillas.

For almost a decade now, it has been able to reduce and contain the danger represented by drug trafficking organizations.

Santos and Hugo Chavez act like best friends every time they meet.

The tensions with Ecuador are said by all to have been dealt with...

With Brazil's largish military manoeuvers on its Southern border (on which more later), this new move does not augur well for all the confidence-building that has been talked about so much in recent years.

Wednesday, May 2, 2012

Flaherty and the IMF: taking the "emergent" side?

This one could be bigger than it looks. Jim Flaherty, Canada's Finance Minister, has just published an op-ed in the Daily Telegraph where he directly targets European governments. Title: The eurozone should sort out its own mess.

He bluntly criticizes their excessive weight in IMF decisions, and the special treatment they get as a result, which he frames primarily as a question of fairness: "We cannot avoid the question of fairness. Eurozone members benefit from increased exports and price stability. Spreading the risks of the eurozone around the world, while its benefits accrue primarily to its members, is not the way to resolve this crisis. We cannot expect non-European countries, whose citizens in many cases have a much lower standard of living, to save the eurozone."

There may be consequences for Canada in Europe--beginning with the Free Trade agreement currently in negotiation-- but Flaherty's feistiness also opens up interesting possibilities for new alliances in global governance circles, because he explicitly links Europe's excessive weight with the need to give more power to emerging countries: "Emerging markets play an increasingly important role in global economic issues. Canada has been a leader in recognising changing international dynamics and advocating greater representation of emerging markets at the IMF. In this context, we believe that measures should be taken to ensure that major decisions about resources dedicated to Europe require more than a simple majority.” With Stephen Harper telling his caucus, at roughly the same time, that Canada should align with the economic winners, you almost have the basic tenets of a major reorientation of the country's foreign policy.

At the forthcoming G20, next June in Los Cabos, Mexico will be inviting two of Canada's closest partners in the Americas, Chile and Colombia. The current flare over the IMF will certainly be on the minds of the European governments present. A little push from them, and more pull from Mexico and Latin friends and suddenly, the whole emphasis of this government towards Asia and Latin America could start to have concrete diplomatic implications.

A turning point?

Tuesday, May 1, 2012

Disciplining pseudo-private companies in Brazil: After Vale, Embraer...

Last Spring, the Brazilian government god rid of mining giant Vale's CEO Roger Agnelli. The government, keen on keeping employment high, disagreed with his attempts to cut costs, including through workforce reductions. Now, Vale used to be state-owned, but it was privatized in 1997, to the dismay of many Brazilian nationalists. As with many of the privatizations that took place during Brazil's liberal turn, however, things were not quite what they looked like: the government, directly through equity ownership, or indirectly through the pension funds it controls and through its national development bank (the BNDES), kept effective control of the company.

Since January, a similar clean-up has been under way in another of Brazil's half-privatized industrial jewels. No less than eighteen of Embraer's top executives have left the company over the last six months, including its President since 2007, Maurício Botelho, the man widely credited with turning the little loss-making local aircraft producer into the third largest aeronautic company in the world. Once again, disagreements with the government about company strategy appear to have been behind the changes. Apparently, as push came to shove, the government used its various channels of ownership to get the changes it wanted.

Monday, April 30, 2012

Look out for CSI Tegucigalpa (NOT a joke)

For the latest on the forthcoming series, check that recent  news release from the Prime Minister's Office:

"Specialised Equipment to Support Law Enforcement in Central America
Implementing Partner: Canadian Commercial Corporation
Funding announced: $3,160,500
Timeframe: March 2012-June 2012

This project supports an ongoing Canadian-funded project in Honduras, El Salvador and Guatemala that aims to develop advanced technical capabilities to strengthen their criminal justice systems. Training is being provided on Special Methods of Investigation through specialised equipment to police and investigation units, including advanced wiretapping, ballistic forensics, surveillance, and intelligence analysis capabilities."

Neat, no? Soon, Central American police forces will be able to track down criminals with the same technology used in Toronto and Montreal. Watch out drug traffickers and maras members: your days are counted!

Now, I hope that technology will work its magic and when I say magic, I mean Magic, as in Harry Potter "Magic," because so much else is missing.

From recent studies of the police in those countries (here, here, here, and here): basic training in all three is minimal; recruit vetting is irregular and un-systematic; corruption is rife, police violence routine; police involvement in social cleansing un-exceptional; prisons are hellish, overpopulated and with stratospheric levels of violence. As pointed out in this recent article from the Vancouver Sun--which has a neat picture of... the turret that some wealthy citizens had built over their entrance to facilitate the work of their private guards-:

"In recent months in Honduras, evidence has turned up of police units involved in murder-for-hire plots, drug trafficking, extortion, auto theft and kidnapping. Distress over police corruption has grown only more intense in the three months since the dean of Honduras’ national university fingered police in the murder of her son and the widow of a slain national drug czar blamed police for his assassination. Deep-rooted police corruption is just one reason for the deterioration of public security that’s shredding the social fabric of Honduras, El Salvador and Guatemala, a region known as the “Northern Triangle” of Central America."

Anyway: at least now, the local police will have high-tech toys to play with when they are not busy working the streets and, I assume, somebody in Canada, hiding behind the Canadian Commercial Corporation, will at least be making money with this one, because that "result" is the only one likely to come out of that initiative.

But it is not even funny: some kind of analysis should be made before investing quite a large amount of money in situations that border on the desperate. The idea that policing is primarily a technical issue should be seen as the ridiculous misconception it is: there were investigations before high-tech ballistics, and effective policing is primarily a matter of trust, professionalism, and hard and careful work. NONE of the best academic analyses of the spectacular drops in crime that recently took place in the US generally, and in New York in particular, identify high-tech tools involving "advanced wiretapping, ballistic forensics, surveillance, and intelligence analysis capabilities" as central components of what made it possible (cf. for example Kennedy --here and here-- and Zimring --here and here). And this is in CSI kingdom...

Tuesday, April 24, 2012

Venezuela: Who can and should do what?

As Venezuela marches towards disaster, it is difficult to identify domestic actors who could usefully bring the very many contending factions together and reach some kind of reasonable arrangement for a transition away from the personalist and chaotic governance of the last few years, for the simple reason that most everybody has a hand in the fight. Over time, obviously, some kind of solution would be found, but this could take months or years, with massive costs to the economy and possibly much blood too.

Somebody from outside should come in, openly or behind the scene, and bring the main players together for some kind of national dialogue. Who can and should do that and what should be on the table?

The perfect "White Knight" will have two key characteristics: it must wield influence over the parties, and, perhaps counter-intuitively, it must also have something at stake in the crisis, preferably a lot. Influence is self-explanatory: there is so much at stake for the contending parties that they will have to be compelled or strongly pushed to compromise. The need for intervenors to be "interested" is not as evident, but no less necessary, as significant resources will be needed to pressure the parties or offer them "side payments" appealing enough to force them to accept a bargain that will necessarily have drawbacks: only those with lots to win or lose will be willing to invest those resources.

Clearly, no single outside party has all those qualities, so a coalition will be needed. The most obvious one include a core of four parties, in the following order: Cuba, the United States, Colombia, and Brazil.

Cuba is most critical. They have the most influence of any outside actor in Chavista circles, as well as in the intelligence and security services, including the military. Their doctors, moreover, have gained them lots of good will in the streets. Most crucially, they have a lot at stake in a smooth transition that would secure as much as possible of the current flow of oil on which their economy literally depends for its survival.

The problem with the Cubans is that, to say the least, their very proximity to the regime and their crucial role in sustaining the regime, severely limit their credibility in the eyes of the opposition. This is wthere the US comes in: behind a simple commitment to due process and clean elections, the American government can critically bolster the opposition's stand and its chances of victory, this time or later, and the opposition knows it. Like Cuba, though by no means to the same extent, the United States also has lots at stake in Venezuela's transition: chaos would impact Venezuela's oil exports which, at roughly 900,000 barrels a day, still represent about 10% of the US' total imports. The impact of any export suspension on global oil prices would be even more consequential for the US economy. In addition, the establishment of some kind of narrow-based authoritarian regime with sympathies in Moscow, Beijing or Tehran, or of a huge and relatively rich narco-state at the Northern tip of South America, certainly makes US military planners nervous.

For Colombia, Venezuela is an important trade partner and, above all, a critical cog in the machinery that Juan Manuel Santos has built to finally get rid of the FARC. The stability and collaboration of the only significant sanctuary for the guerrilla is central to the government's strategy and to its very popularity. The regional and global credibility of Santos, along with his extremely clever rapprochement with Chavez, which does not seem to have burned him with the opposition, makes him a natural figurehead--now that Lula is gone and Dilma clearly does not have the royal jelly--for the initiative, especially if it goes public--which may not be a good idea, by the way, but more on that below.

Brazil, finally, has tried and largely succeeded, over the last fifteen years, in carving out South America from the reach of the UN, the OAS or even the US itself--except in the critical case of Colombia--in the management of major domestic or international crises. Strategically, Brazil's inability to manage a major crisis or at least to be heavily involved in its resolution, would be a major humiliation. The PT's entries in Chavista circles, especially around Marco Aurelio Garcia, could usefully be put to work. Above all, however, the Iranian crisis has shown the world that Brazil is ready to go very far in sabotaging international initiatives in which it is not involved. If things have to be public, then bring in UNASUL and friends--including Canada, which could be very useful in the reconstruction of Venezuela's oil industry--but stay regional, and avoid the UN or its Security Council where China and Russia hold a bit too much sway.

So, this is my team: Cuba and the US as the truly critical players, Santos' Colombia as a handy negotiator with broad credibility, and Brazil, as a marginally useful player that could derail the whole thing if left outside and should thus be brought in.

What should be on the table?

This one is trickier and I cannot get in the details, if only because I can't even see at this point who will make up the various sides of the discussion. The basic rule, however, should be the following: forget best practice and the perfect solution, focus on overall gains, in terms of political stability and accountability, and in economic management, while preserving as much of the rents on which those in power depend, as is necessary to avoid their defection. Given current levels of corruption and the sorry state of political and judicial institutions, the range of sustainable compromise may not include many cute ones, but nobody should be too picky, given the stakes.

[I must point out that this note is based in part on informal discussions with very clever and well-informed observers of Venezuelan politics. I think they prefer not to be named, but they should recognize themselves and accept my thanks.]

Sunday, April 22, 2012

The coming crisis in Venezuela

Beyond the sometimes surreal pathos surrounding Hugo Chavez' illness and his increasingly certain death in the coming months lies the largest crisis that Latin America will have seen since the fall of the dictatorships at the end of the 1990s.

The regime Chavez has built depends almost totally on its ability to channel oil rents to various factions of his party and the military and to use what is left to sustain his huge social effort, both with direct transfers and subsidies, and through a massive influx of Cuban doctors paid for with the cheap oil that keeps Cuba running.  Without full control of the state, the whole scheme collapses.

For that reason, the first possible detonator are the October 7 elections, which the opposition appears better prepared to fight better than at any time since Chavez was elected in December 1998, almost 14 years ago.  With him healthy, the outcome would be a no brainer. His sickness makes victory less certain and would probably lead to some attempts to ensure that the results are "right." If he dies before the polls, however, all bets are off and in fact, with nobody around him having much charisma or popular appeal, the system could only save itself by preventing the opposition from winning, using all means, including all-out fraud or a military take-over.

The second problem of Chavismo is, if anything, much worse: behind Chavez, there is nothing but an amorphous and circumstantial conflation of groups and individuals, some ideologically committed, though not united, many more opportunistic, but all utterly dependent on their access to the system and none with the ability to keep the coalition together.

Nobody knows exactly the geography of that political landscape, but some of the peaks are worth mentioning: the military, divided, his own United Socialist Party, also divided, along with the latter's Bolivarian National Militias, which could soon have their own tanks, something that the military itself can not like. To the mix, on also needs to add those, both civilians and especially military, who have helped make Venezuela a haven for drug trafficking and a key hub to cocaine trade to Europe. And don't forget the foreigners: Cuban advisers saturate the President's office and his security and intelligence apparatus, where they are well-placed to protect Cuba's vital interests in the country. The survival of Colombia's FARC, under increasing pressure at home, also hinges crucially on the retaining a sanctuary in Venezuela, along with financial, intelligence and logistic support. Less plausibly perhaps, China, Iran and Russia might also joint the fray, as Roger Noriega recently suggested.

For all of those players, the death of Hugo Chavez is a disaster. They have everything to lose and, as a result, they will likely fight dearly. For Venezuelans, already confronting the worst violence in South America (homicide rates are 67 per 100,000, much worse than Mexico (20), and second only to Honduras (70) in the Western hemisphere--the coming years will be awful.

Ways out are unclear, but some outsiders could play an important role in avoiding the worst. This is fodder for another post, however.

Tuesday, April 17, 2012

Breaking Apart? What Cartagena and surrounding events tell us about the Western Hemisphere

The Sixth Summit of the Americas, which was just held in Cartagena, Colombia, has ended without a final declaration. It is not clear that the next installment of the process, in 2015 in Panama, will ever take place. Following the collapse of the Free Trade Area of the Americas negotiations, and with the creation in December 2011, of the Community of Latin American and Caribbean Nations (CELAC), which includes everybody in the continent but the US and Canada, this fiasco looks very much like the last nail on the hemispheric dream that was revived after the Cold War by George Bush the Elder and Bill Clinton.

Analysts, both in North and South America, have rightly pointed out that the United States and Canada found themselves isolated at the Summit when they refused to seriously discuss drug legalization or decriminalization, to let Cuba join the OAS, and to support Argentina's claim to the Falkland/Malvinas.

From such raw and undeniable facts, commentators may infer that the Anglo powers of North America now find themselves adrift from a continent that "they need more than it needs them," as the University of Ottawa's Carlo Dade, recycling the thesis of the Financial Times' Hal Weitzman, put it in the Globe and Mail.

That conclusion would be a sad mistake, for that Summit has been for the most part a side show. To show that, let's have a look at those "core" disagreements and then consider a few things that were happening in the background of the Summit.

Let's start with the drug file, which matters a lot, particularly for Central American countries who, contrary to Mexico, Brazil or Colombia, are really threatened by drug cartels and gangs whose financial means, corrupting capacity and firepower overwhelms their meager institutional capabilities. Many of the states present apparently wanted Barack Obama to engage  in a serious discussion of legalization. Leaving aside the somewhat naive idea that what legalization would be acceptable politically even in South America could resolve the problem of gangs and criminal violence, any clear concession by Obama on those issues would likely have been suicidal politically in the current US political environment. As to Harper, how could he possibly reconcile any flexibility on drugs at the hemispheric level with his government's growing rigidity on crime and drugs at home? In other words, those seriously seeking consensus commitment on these issues were either utterly ill-informed or brazenly hypocritical.

The two other files are largely though not strictly symbolic, and joining the consensus would have implied major political re-orientations for Canada and the United States. Letting Cuba join the OAS--which, by the way, the Castros have repeatedly said they don't want to do--would have implied significant political cost for Obama, again something he could not afford right now. For both the US and Canada, moreover, doing so would have implied dismissing the Inter-American Democratic Charter, signed by all the states represented at the Summit, and whose Article 2 stipulates that "[t]he effective exercise of representative democracy is the basis for the rule of law and of the constitutional regimes of the member states of the Organization of American States," a detail that other states of the region appear to be worryingly cavalier about. As to the Falkland/Malvinas, clear support for Argentina's claim would have implied taking the side of a volatile and unpredictable nationalistic government who could realistically never be relied upon internationally, over the a fellow member of the tightest politico-military alliance of the last century-and-a-half.

There was in sum nothing unexpected in the fiasco. Now, what does that really mean for hemispheric affairs? Are we moving towards the consolidation of Anglo-less regional governance?

Well not quite, and in fact, far from it, for a variety of reasons.

First, nothing was really at stake at the Summit. Drugs are a  real and important issue, but not one on which there is a consensus South of the Rio Grande. "Many dura" policies may be said to have failed, but they are not being abandoned, not in Mexico, not in Colombia, not even in Brazil.  Colombia's Santos said that something else must be tried, but he admitted that the solution was not clear and that he certainly did not have a straightforward proposal to make. In the end, Calderon's proposal for setting up and inter-american system against organized crime looks like an interesting idea, but certainly not like a big break from the past. And, by the way, it was adopted unanimously and should be set up before the end of the year... The return of the Malvinas to Argentina is a little obsession of Argentinian nationalists that is cheap for its neighbours to support and has no implications whatsoever for them. Cuba, finally, is also a side issue, one way to show some independence from the US, once again cheaply and without any particular obligation and consequence.

Second, the really big strategic issue for the region's states, the one that will force them to do something significant possibly very soon, was not even broached: Hugo Chavez death is likely to plunge Venezuela into chaos and could very much lead to the establishment of a military dictatorship. That crisis, by the way, will cripple Cuba, whose economic health has come to depend on heavily subsidized oil from Chavez. Obviously, this is not an easy thing to discuss among Presidents, but the real test of interdependence and joint action is a crisis, not a diplomatic summit, and this one is very much in the offing. What remains of an hemispheric community, and who will lead it, if anyone, will crystallize in the coming months. Juan Manuel Santos, by the way, looks like he will be the one, buthe may well reach to the Anglos in the North for help, obviously along with Brazil's Rousseff--who by the way did not look at all like a regional leader in Cartagena.

Third, and along the same lines, the breakdown on North-South linkages and the consolidation of South-South solidarity is far from clear. Note first that Obama used his visit to formally sign the free trade agreement between his country and Colombia. Canada's Stephen Harper flew to Santiago to sign an extension of the country's free trade agreement with Chile, one that gives Canadian banks and insurance companies privileged access to Chile's market. On the other side, not only did Ecuador's Correa and Nicaragua's Ortega refused Santos invitation, but Cristina Kirchner left early, shocked by Santos' refusal to formally put the Malvinas on the agenda, but also mad at Chile's Piñera for expressing his disapproval of the Argentinian government's heavy-handed take-over of YPF, the country's oil company.

What the Summit and these side games revealed, in the end, is less the utter fragmentation of the hemisphere or its division between the Anglo North and the Latin South, than its emerging reorganization, not along the simple lines dreamed by Bush and Clinton--walking in James Monroe's steps, by the way--but following new and more complex dividing lines: between the Pacific liberals (Mexico, Colombia, Peru and Chile) and the Atlantic "developmentalists" (Venezuela, Brazil, Argentina); between Argentina and its South American neighbours, between the increasingly desperate Albista and those who do not depend on Chavez' largesses; between small and vulnerable Central-Americans and the big countries who can deal with the drug merchants; and between the stable democracies (Mexico, Brazil, Chile, Colombia, Uruguay and Costa Rica) and those that are in trouble (Venezuela, Ecuador, Bolivia, Nicaragua, as well as Argentina). But this is another story and a real one this time. Unlike the Summit.

Monday, April 16, 2012

A different reason why Brazil's industry may not be competitive

You may have read about Brazil's energy self-sufficiency and the rumours that, as a newly-minted energy superpower, it may soon join OPEC. You probably also heard Dilma Roussef denouncing the protectionism of developed countries, particularly the United States, and imposing restrictions on Mexico's automotive exports.

All cute and largely true: Brazil has huge energy reserves and its production is roughly sufficient to cover its consumption. Moreover, recent "quantitative easing" has indeed led to a depreciation of the dollar, hurting the competitiveness of Brazilian exports. There is more to this problem of competitiveness, however.

Take energy prices, for instance: energy superpower or not, and huge reserves notwithstanding, Brazilian industry is paying more for its electricity than any of  its main competitors among the worlds major economies. The little table below* shows industrial energy prices in a few of them, as a % of the average price charged in Brazil:

Mexico         92%
Germany         65%
China         43%
United States 38%
Canada         33%

No wonder the Estado de Sao Paulo, the voice of Brazil's industry, is complaining.

*Calculations based on a table (p. 5) in a study of this problem by FIRJAN, the Federation of Industries of the State of Rio de Janeiro.

Wednesday, April 11, 2012

Who thinks what in the Americas on drug legalization

Insight Crime has a FANTASTIC map detailing where the countries of the hemisphere stand on drug legalization on the eve of a Summit where it should, but likely will not be discussed.

[By the way: sorry for the long absence. The little crocodile is back.]

Thursday, January 26, 2012

The three North-Americas and their fate

The Canadian International Council asked me "Is North America dead?"

Here is my answer:

First there are three North Americas and their “death” stories are different.

One includes the three countries and was never really born, except in the decaying value chains of the auto sector, whose relative weight for all three partners is declining.

The second includes Canada and the US: it is alive on security issues with NORAD and the new perimeter as anchors. Economically, it is getting weaker as its backbone, the auto sector, in spite of some revival, looks essentially doomed over the medium or long term as a core industrial activity. On the energy front, it is weakening too. With shale gas, the US is becoming more independent from us (and from Mexico too). Keystone is a detail, but it should push Canada to diversify markets in Asia, further exploding northern-North America. Now, it is not dead and won’t die, but its importance will decline.

The third one includes Mexico and the US. It is alive on security, on trade, on migration, but as both countries’ trade patterns diversify away from the region, it is weakening too. Not dead, not about to die, but declining.

Thursday, January 12, 2012

Poor Ahmadinejad

Iranian diplomacy has to be desperate. In the middle of an increasingly tense confrontation with the United States, Mahmoud Ahmadinejad is travelling to Latin America, spending his time drumming up support in... Venezuela, Ecuador, Nicaragua, and Cuba... Even Brazil, now under a more pragmatic leadership with Dilma Roussef, is not on his program.

The sheer scale of the drug trade

The US government has just made a deal with Benjamin, El licenciado (the Graduate), Arellano Felix, a trafficker from one of the largest Mexican criminal families: in exchange for an admission of guilt, the guy is given a setence of 25 years and a fine of US $ 100 million, whereas the US government would have been seeking a sentence of 150 years.