OAS: Almagro’s Challenges

By Fulton Armstrong and Eric Hershberg

Photo Credit: OEA – OAS / Flickr / Creative Commons

Photo Credit: OEA – OAS / Flickr / Creative Commons

The OAS’s new Secretary General, Luis Almagro Lemes, appears to be steering his organization toward a coordinating role that, he hopes, places it above the fray of hemispheric tensions.  He has not chafed at Washington’s version of democracy promotion, and indeed has embraced elements of it.  He has readily admitted the “inexorable conclusion” that the OAS needs to be “revamped and modernized”; that it needs to “reinforce its legitimacy”; and that its structure and resources need to be better realigned with the four pillars of its mission—democracy, human rights, security, and integral development.  His promises of internal reform so far have not been radically different from those put forth by his beleaguered predecessor, José Miguel Insulza, or even diverged from proposals embodied in U.S. legislation passed in 2013.  They have been articulated, however, in the sort of Washington consultancy language that might help his cause in the U.S. capital, such as references to evolving “from the OAS’s traditional command and control toward an organization that operates like a matrix geared to results in which the hemispheric and national dimensions feed into and enrich each other.”  Elected in March and inaugurated in May, in June Almagro received a mandate from the OAS General Assembly to restructure the General Secretariat, reorganize old offices into new ones, and implement other aspects of his plan.

Regional reactions to Almagro’s election and reform plan have been positive if sometimes not overly enthusiastic.  At the General Assembly meeting, U.S. Deputy Secretary of State Blinken spoke of a “new chapter … in the history of the OAS” and said, “We have a new secretary general, a new strategic vision statement, and renewed attention to genuine reform.”  South America’s preeminent power has been generally aloof toward the OAS, but the Brazilian Senate in mid-July approved a new OAS permanent representative, and last week Brasilia paid $3 million of its $18 million in late dues—modest relief from the slow strangulation caused by dire cash-flow issues because of non-payment by several key countries.  Almagro has also won support in Latin America through his repeated signals of a desire to work more closely with other hemispheric bodies—even CELAC, which was created in 2011 as a direct challenge to the OAS and supposed U.S. influence over it.  He pledged to “seek out areas where we can complement the work of other bodies,” citing by name CELAC, UNASUR, SICA, CARICOM, and MERCOSUR.  According to press reports, his close cooperation with UNASUR as Foreign Minister of Uruguay in 2010‑15 lends credibility to that promise.  Almagro also has won regional praise for pledging to continue efforts for bring Cuba back into the OAS as a full member—building on the success of the Summit of the Americas in April driven by the Washington-Havana rapprochement.

Outgoing Secretary General Insulza was a relatively easy act to follow because, often unfairly, his image was tattered after 10 years in the crossfire between Washington and the countries pushing to undermine U.S. influence in Latin America.  Almagro appears eager to push the re-set button, and the success of the Summit of the Americas and his pledges on democracy, reform, and hemispheric cooperation have given him a good start.  But leading the OAS is going to take more than artful rhetoric, internal restructuring, and a few reforms.  President Obama’s move on Cuba removes one major irritant from hemispheric relations, but an effective Secretary General is going to have to navigate the shoals of longstanding North-South tensions.  The “spirit of genuine and equal partnership” that Deputy Secretary Blinken spoke of wanting with the OAS will be difficult to achieve, and the supporters of CELAC, UNASUR, and other alternatives to the OAS will find it equally tough to accept the OAS as a valid venue for debate and compromise.  Almagro will also have to show that he can run the organization in a professional and modern way to overcome the perception left by his predecessor of weak management of the institution.  He has declared himself a man of practical solutions, not ideology, but pleasing everyone—trying to be a coordinator who threatens no one’s interests—may not be a workable strategy for long.  If the OAS is to fulfill its mission, moreover, the United States and others will have to give Almagro the space to do his job.

July 27, 2015

Brazil: Jailing the Youth

By Paula Orlando*

Brazilian Penitentiary System.  Photo Credit: Marcelo Freixo / Flickr / Creative Commons

Brazilian Penitentiary System. Photo Credit: Marcelo Freixo / Flickr / Creative Commons

A push for legislation to lower the age of criminal responsibility to 16 years could worsen court backlogs and overcrowding in Brazil’s notorious prisons.  According to the International Center for Prison Studies (ICPS), the country’s jails now hold the fourth largest prison population in the world, behind the United States, China, and Russia.  The Brazilian inmate population has doubled in the past ten years – from 296,919 people in 2005 to over 615,000 now – boosted by arrests of young and black people.  The Map of Incarceration, a study released this month by researchers at the Federal University of Sao Carlos (UFSCAR), shows that prisoners are increasingly between the ages of 18 and 29 (54.8 percent) and black (60.85 percent), with a growing presence of females (from 4.35 percent in 2005 to 6.17 percent in 2012).  The study also notes that the main reasons for arrest are crimes against property and “involvement in drug trafficking.”  Further, on average 38 percent – or four in every ten inmates – are awaiting trial.  According to a report by the OAS’s Inter-American Commission on Human Rights, the wait times may vary from months to years – sometimes longer than the actual sentence for the crime committed.  Of the total jail population, over 18 percent would be eligible for alternative sentences, but they either haven’t gone to trial yet or the judges have opted for heavier sentences.

A group of hardline conservative legislators – the “bullet caucus” – is pushing aggressively for a law that would lower the age of criminal responsibility from 18 to 16 and consequently place more youth in the already overcrowded adult jails.  Currently, the Child and Adolescent Statute (ECA) establishes that those between 12 and 17 years of age who committed a crime should be sent to juvenile centers, and for a maximum of three years.  The proposal to lower the age has received overwhelming popular support. This support is generally based on the perception that minors commit more violent crimes because they are not currently accountable as adults – and that harsher sentences would deter them.  However, official data shows that, among those in the juvenile system, only 9 percent committed violent crimes.  On the other hand, homicide is the leading cause of death of young people between the ages of 15 and 29.  Out of the 56,000 yearly homicides, 30,000 victims are young.  By crossing data from the Ministry of Justice and the 2014 Map of Violence, the report also debunks the popular perception that more arrests lead to safer cities.  On the contrary, just as incarceration grows, homicide rates have also steadily risen in the country.  According to press reports and other observers, there’s a good chance the legislation will move forward in the next few weeks.

Since the bill amends the Brazilian Constitution, it must pass both the Chamber of Deputies and the Senate with at least two-thirds of the votes.  In addition to increasing youth incarcerations, if passed, the initiative will undermine the 1990 Child and Adolescent Statute, considered a landmark by children’s rights advocates.  It will further remove the state from its responsibility for the protection and education of the youth, essentially eliminating any chance of youths’ rehabilitation while broadening the “school-to-prison pipeline” that envelopes many.   Moreover, passage of this reform, under the banner of law and order, will strengthen the ultra-conservative sectors – including some religious leaders and representatives of agribusiness – who already dominate the Brazilian Congress in an open crusade against social welfare policies and minority rights. 

 June 29, 2015

*Paula Orlando is a CLALS fellow and a PhD candidate at the School of Communication at American University.

Elite Power and State Strength: A Timely Focus of Academic Studies

By Eric Hershberg

lapidim / Flickr / Creative Commons

lapidim / Flickr / Creative Commons

Insufficient state revenues are one fundamental reason that many Latin American governments fail to provide their citizens with adequate education, health care, public transportation, environmental protection and the physical and technological infrastructure needed to move their countries toward high-income country status.  As a whole, the region’s governments were able to spend only 14.8 and 15.25 percent of GDP in 2013 and 2014, according to the UN Economic Commission for Latin America and the Caribbean (ECLAC).  Rationalization of expenditures is a goal that can only be pursued in practice if there are adequate funds to begin with, and few Latin American states have that luxury.  (To be sure, even where states are well financed, as in Brazil and Argentina, governments typically fail to spend resources efficiently.)  Historically primitive and regressive tax systems have not evolved in a manner consistent with the development needs of the region.  During the second decade of the 21st century this remains a major obstacle for those who strive to build more effective and democratic states across Latin America.

Several ambitious new books in comparative political economy offer insightful and complementary analyses of the political conditions that perpetuate state weakness as well as the dynamics that offer hope of overcoming it.

  • Aaron Schneider’s 2012 Cambridge University Press volume on State-Building and Tax Regimes in Central America was an initial contribution to this emerging literature, linking that sub-region’s changing relationship to the world economy to aggressive efforts by different factions of the elite to fashion tax systems that reflect their narrow interests rather than a broader agenda of societal development.
  • A book that will be launched later this month in Guatemala City builds on this work by underscoring the importance of political contestation regarding the fiscal arena more broadly – encompassing state expenditure as well as revenue. That study, prepared under the auspices of CLALS and the Instituto Centroamericano de Estudios Fiscales (ICEFI), illustrates the ways in which Central American elites have exercised disproportionate influence to render states ineffective and regressive: they contribute little to state coffers and extract much from them, with consequences that diminish the life chances of a majority of that region’s population.
  • Tasha Fairfield’s conceptually ambitious and empirically rich comparative study of South American cases, to be published later this year by Cambridge University Press, is a landmark contribution to literature on elites and Latin American political economy. It consists of a thorough comparative analysis of Argentina, Bolivia and Chile, revealing that strong business associations tied closely to the state augment elite capacity to block progressive tax reforms.  Conversely, she finds that social movement influence over the state can undermine elite capacity to resist the sorts of taxation needed to redistribute wealth.
  • Evelyne Huber and John Stephens demonstrated previously, in their 2012 University of Chicago Press book on democracy and the left, that there is a clear link between the capabilities of the political left in democratic regimes and the prospects for more equitable social policies in Latin America. Such policies, as this recent wave of publications make clear, will only come about if societies develop systems of taxation compatible with the emergence of effective states.

Scholarship on Latin American economic development has until recently devoted little attention to political power imbalances as drivers of state weakness and the consequent failure of societies across the region to forge pathways toward developed-country levels of income and opportunity.  These studies highlight the centrality of elite collective organization and behavior, as well as the political strength of countervailing forces in society, for determining levels of taxation across the region.  Taken as a whole, this welcome wave of social science research restores Latin American political economy to its rightful place as a domain of scholarship that speaks to the concrete challenges facing the region today and in the future.  Policymakers throughout the hemisphere who speak of democracy and economic growth need the clear analysis to progress that scholarly works such as these provide.

February 5, 2015

U.S. Sanctions on Venezuela: To What End?

By Michael M. McCarthy

Common Cause -Embassy of Venezuela DC / Flickr / CC BY-NC 2.0

President Obama plans to sign the “Venezuela Defense of Democracy and Civil Society Act” into law, but its lack of clear objectives seems likely to muddle Washington’s desired outcome.  The bill, approved last week by voice vote in the Senate and House, calls for punishing Venezuelan government officials involved in human rights abuses, an authority the White House already has.  It includes national security waivers that allow the President final say on which officials will have their visas revoked – denying them entry into the United States – and have any U.S. assets they own frozen.  After initially voicing skepticism about the wisdom of such measures, the Obama administration came around to supporting them.  Senators Robert Menendez and Marco Rubio and Congresswoman Ileana Ros-Lehtinen pushed the bill hard in May after episodes of violent suppression of anti-government street demonstrations painted a grim picture of the human rights situation.  The Venezuelan foreign ministry’s reaction to the legislation has been strident, and President Maduro said, “If the crazy path of sanctions is imposed, President Obama, I think you’re going to come out looking very bad.”

President Obama wasn’t alone in switching positions over the bill.  Senator Bob Corker, who’s expected to become chairman of the Senate Foreign Relations Committee in the new Congress that begins next month, had embraced the State Department’s earlier view that sanctions would undermine international talks engineered by UNASUR and the Vatican.  The Caracas government’s refusal to make concessions in the talks undermined that argument, however, and a three-way diplomatic dustup between the U.S., Aruba, and Venezuela over another issue – Aruba’s refusal to extradite Venezuela’s designated ambassador, a former Venezuelan army official, to the United States on narco-trafficking charges – further frustrated Washington players.  Corker asserted that the incident showed that Venezuela’s “complicity with criminal activity” could not go unchecked since it directly undermined U.S. interests.  Immediately after the extradition episode, the Obama administration imposed unilateral sanctions – travel and visa bans – on a dozen unnamed Venezuelan officials, laying the groundwork for Menendez and Rubio to reintroduce their legislation and drive it home before Congress adjourned for the holidays.  Corker endorsed the bill, although he highlighted that a “regional dialogue” remained the best option for finding a “negotiated, democratic way forward” to address human rights issues.

Other than punishing reported human rights offenders and making an example of them the new bill is unclear on how it could help resolve the deep political crisis that has given rise to the protests and subsequent abuses.  With Maduros popularity plummeting to new lows, strident rhetoric condemning U.S. intervention could give him a modest boost by bolstering his claim that Washington is part of an economic war against Venezuela.  It is far too early to tell whether that nationalistic narrative will work in the governments favor as the countrys dire shortages have become permanent and economic suffering is increasingly blamed on Maduros policies and declining oil prices.  If human rights really are the U.S. top concern, Washington might want to be more sensitive to the positions of PROVEA and other Venezuelan human rights groups, which have denounced the legislation despite its inclusion of funding for Venezuelan civil society groups. If punishing rights abusers is Washingtons way of pressing for sustainable change in Venezuela, then it needs to state the case that penalizing measures imposed since 2008 have made a difference.  Another option, contained in Senator Corker’s observation about a “negotiated, democratic way forward,” could be to renew support for talks sponsored by South American countries, as these are more likely to reduce tensions, improve rights, and give moderates space to promote electoral solutions.

December 18, 2014

Social Science that Matters: Pérez Sáinz on Latin America’s Inequalities

By Eric Hershberg

Image courtesy of FLACSO-Costa Rica

Latin America has made important advances dealing with income inequality over the past decade, but sustaining this modest progress requires a deeper grasp of its underlying causes.  Since Princeton sociologists Miguel Centeno and Kelly Hoffman in 2003 published their provocative article “The Lopsided Continent” probing Latin America’s infelicitous distinction as the region with the most unequal income distribution, the GINI coefficients – indicators of the gap between rich and poor – have declined in a number of Latin American countries.  Most of the advances, which admittedly appear tenuous and were slowed by the Great Recession of 2008-2009, can be traced to the expansion of secondary education and, particularly in countries governed by the left, unprecedented investments in social programs that have benefited the most disadvantaged sectors of the population.  Even now, however, income distribution in the region remains as unequal as anywhere on the planet – sapping productivity by depriving populations of opportunities to upgrade skills that could be deployed in knowledge-intensive economic activities.  Inequality also provokes social dislocations that undermine the welfare of the poor and non-poor alike, place burdens on over-extended state institutions and generate pathologies, such as crime, that undermine economic performance.  Moreover, the task of sustaining democratic political regimes is rendered much more difficult.

A new book by Juan Pablo Pérez Sáinz, a sociologist at the Latin American Faculty of Social Sciences (FLACSO) in Costa Rica, takes a fresh look at the dynamics of unequal power that influence how the fruits of economic activity become concentrated in some individuals and social groups – and remain beyond the reach of large swathes of a country’s inhabitants.  MERCADOS Y BÁRBAROS: La persistencia de las desigualdades de excedente en América Latina is in my view a landmark contribution to the sociological literature, and it identifies four intertwined processes that account for the disempowerment of important segments of the population, often characterized by subordinate status associated with gender, race, ethnicity or region.

  • The prevalence of precarious employment in labor markets, as a result of which people are condemned to toil endlessly but never enjoy the benefits of having a stable job.
  • The impossibility for most small-landholders or petty entrepreneurs to accumulate capital that might enable them to invest in the future of themselves, their families and their communities.
  • The weakness or absence of state institutions that might contribute to forging social citizenship encompassing all of a country’s inhabitants, the result of which is that vulnerable individuals and communities are left to fend entirely for themselves.
  • The overwhelming weight in Latin America of social categorizations – motivated by pervasive sexism, racism, ethnocentrism and xenophobia – that define excluded populations as less deserving of rights and opportunities than others.

If societies are to be expected to invest in social science, then it is reasonable to expect that social scientists strive to illuminate the underlying roots of their greatest challenges, such as the yawning inequalities in Latin America, and the sources of their persistence over time.  Through his historically informed and empirically rich analysis, drawing on theoretical insights from Marxian traditions and from the work of sociologists such as the late Charles Tilly, Pérez Sáinz has made an invaluable contribution to intellectual debates about inequality which should inform efforts to consolidate the modest gains we have seen in Latin America and thus help the region outgrow its enduring legacy of debilitating inequality.

December 4, 2014

The Open Veins of Latin America: Disowned?

By Núria Vilanova

tintincai / Flickr / CC BY-NC 2.0

tintincai / Flickr / CC BY-NC 2.0

Forty-three years after its publication, the emblematic and widely read Latin American anti-colonialist bestseller The Open Veins of Latin America has been disowned by its creator, 74-year-old Eduardo Galeano – but its literary message remains vital.  Interviewed last May about the book often called the “Bible of the Latin American Left,” Galeano said, “I don’t regret having written it, but it belongs to a time that to me has been overcome.”  His words left a sense of abandonment and deceit among many, who asked:  What had happened to the bleeding veins of Latin America drained by European and U.S. colonial powers?  Hadn’t the region been sacrificed since Columbus to profit diabolic foreign interests?  When Venezuelan President Hugo Chávez gave President Obama a copy of the book in 2009, was he clinging to an interpretation of Latin American history no longer embraced by the region’s leading thinkers?  Others asked, however well-deserved a denunciation of the exploitation and oppression laid out in the book was, were they to be blamed for all of the damage inflicted in the region?

Galeano’s interview signaled a refocussing of his analysis rather than wholesale rejection of it.  He said Open Veins was too boring and written in a tedious style and with the doctrinal tone of the traditional left.  He added that in those early days of his career he did not know enough politics and economics to write a book of such reach.  What Galeano has demonstrated by this unassuming recognition is that he has evolved through the years and, like many others, realizes that the dependentista paradigm, with its rejection of western capitalism, that fueled his book had important shortcomings, and overlooked other key problems.  He underestimated the impact of weak institutions – anticipated by Bolívar in the early 19th Century – and internal political and economic issues such as government corruption and the unwillingness of the ruling classes to contribute to the development of more democratic and egalitarian societies, as Marx himself would argue when writing about Southern countries.

The real – and not insignificant – value of Open Veins today lies in its literary character.  Its capacity to capture the spirit, the hope and the rage of those turbulent times in the region lives on.  Filled with metaphors and symbolism, it is an essay, whose literary dimension makes it current and ageless.  Stemming from a deep Latin American tradition, the book crosses the blurred borders between literature and history, sociology, politics and other disciplines alike.  Like José Martí, Ricardo Palma and Octavio Paz, Galeano attempted to transgress the boundaries between literature – subjectivity, imagination and hyperbole – and disciplines based on empiricism and factuality.  This practice can lead to challenges over facts, but the messages remain compelling.  Elizabeth Burgos’s testimonial account of Mayan activist Rigoberta Menchú in I Rigoberta Menchú (1984) was criticized for alleged inaccuracies, yet it is difficult for anyone to deny that the suffering of the Mayan Quiché community in the 70s and 80s was at least as cruel as Rigoberta depicted in the book.  Carlos Fuentes once said that reality will always overpower fiction, no matter how hard writers tried.  The intellectual evolution that Galeano has displayed is welcome, and it is also an inspiration to reread Open Veins and Latin America with much-needed fresh eyes.

December 2, 2014

U.S. Elections: Latino Vote Not Decisive

By Eric Hershberg and Fulton Armstrong

Rob Boudon / Flickr / CC BY-NC 2.0

Rob Boudon / Flickr / CC BY-NC 2.0

Preliminary estimates indicate that Latino voter participation and support for Democratic Party candidates on Tuesday were similar to the 2010 mid-terms – but not enough to overcome the Republicans’ gains across the broader population.  Before Tuesday, Latino observers were excited that 1.2 million Latinos had registered to vote since the last mid-term elections (2010) and, with an estimated 66,000 American Latinos turning 18 each day, they would have some new clout.  Latino Decisions, the leading polling organization focused on Latinos, found that two-thirds of Latino voters in Texas supported Democrats in House races on Tuesday, and 74 percent in Georgia supported Democrats.  Their broader impact as a bloc, moreover, is hard to assess because most of the competitive races for the U.S. Senate and House of Representatives were not in states with concentrated Hispanic populations.  Gerrymandering also blunted their impact on House races, and new voter identification laws appear to have discouraged participation as well.  The Dallas Morning News reported last weekend that Texas state officials estimated that the laws would render more than 600,000 registered black and Latino voters unable to cast ballots (without breaking out the size of each group).

Latino Decisions had warned before the elections that enthusiasm for Democratic candidates was 11 percent lower than it was during the general elections two years ago.  Many Latinos were angry that President Obama backed off his plan to use executive authority to begin immigration reform, while at the same time, ironically, they were frustrated that the Democrats saw them as a one-issue constituency and did not include them on other issues.  Indeed, Voto Latino, a voting rights organization, and others have been warning that Latinos care as much or more about the economy, health care, and women’s rights but feel ignored.  (The polls show that Latinos feel even more shut out by the Republicans.)  The great pool of young voting-age Latinos has been “hardest to reach,” according to Voto Latino, because they are busy and turned off by the stereotyping.  The Democrats also seem to have communicated priorities poorly.  Colorado Senator Mark Udall played up his support for comprehensive immigration reform, but Latino Decisions says only 46 percent of Latino voters there knew it.  On the other hand, Nevada Governor-elect Brian Sandoval – a Republican – attracted Latino voters with a platform emphasizing Medicaid expansion, English-learning education initiatives, while downplaying his party’s rhetoric on immigration.

The margin of Republican victory was wide enough that even high Latino turnout wouldn’t have flipped the outcome in places like Colorado, North Carolina, and Georgia.  Tuesday’s results notwithstanding, however, polls by Latino Decisions and other research indicate that the Latino voice at the polls will grow and, when mobilized, be potentially decisive.  Despite strains with the Democrats, it’s hard to see Latinos jumping to the Republican Party unless it significantly shifts policies on immigration, social programs, voter-ID laws, and the economy.  It would be unfair to blame President Obama alone for the lack of a Latino surge this year, but his decision to back off on immigration clearly hurt his party badly.  He wanted to take heat off vulnerable Democratic senators but helped neither the candidates nor his party’s ability to mobilize Latinos.  Latino Decision’s data on low enthusiasm and dismay about the delay of executive action mean that if the administration doesn’t take real action soon – and work to build Latinos’ enthusiasm over the course of the next two years – it will diminish prospects for the Democrats to have a big Latino edge in the presidential race in 2016.  With a Republican-controlled Senate, Obama faces the same dilemma as before – to risk the Senate’s wrath by taking executive action on immigration or continue to alienate a key constituency – but the answer should be clearer in view of Tuesday’s results. 

November 7, 2014

Argentine Debt and the U.S. Dollar

By Leslie Elliott Armijo

Images Money / Flickr / Creative Commons Attribution-NonCommercial-ShareAlike 2.0 Generic (CC BY-NC-SA 2.0)

Multiple economic and political challenges have called into question the future status of the U.S. dollar as the world’s dominant reserve currency, but backlash from Argentina’s recent spat with the United States over defaulted bonds appears to be fueling interest in reforms that may have beneficial implications.  According to the IMF, some 61 percent of the world’s known foreign exchange reserves held by central banks around the world remain in low-yielding dollar-denominated assets, mainly U.S. Treasury bonds.  The United Nations Conference on Trade and Development (UNCTAD), China, and heavyweights in the Global South, including Brazil, are calling for international trade agreements that would give emerging economies “policy space” – allowing national governments to impose capital controls, fund exports, subsidize local industry, and keep financial services national.  Private U.S. banks, however, claim that continued U.S. dominance of world capital markets – a crucial pillar of continued reserve currency status – requires ever more open trade in financial services.  The BRICS complain about the U.S. government’s “exorbitant privilege” as the reserve currency country, with some of the sharpest complaints coming from joint statements by Brazil, Russia, India, China and South Africa. Chinese officials, though, worried about their own large dollar investments and ambivalent about the implications of renminbi internationalization, more than once have pulled the group toward a softer tone.

Argentina’s ongoing sovereign debt negotiations provide a different window onto the dollar’s reserve currency status.  Like most countries, Argentina has held a large chunk of its government’s savings in the U.S. and hired private U.S. financial institutions as its international bankers.  Today it is trying to extricate itself from U.S. markets and do its saving and financial intermediation elsewhere. Iran and Russia are doing the same, but Argentina has no foreign policy quarrel with the Obama Administration – and is not subject to U.S. financial sanctions over nuclear or military adventurism.  Buenos Aires is among those who chafe at U.S. power through the dollar, but it is primarily motivated by the U.S. Supreme Court’s decision in July to let stand a lower court judgment in favor of investors holding bonds from Argentina’s $82 billion sovereign debt default in December 2001.  Although 92 percent of the original bondholders accepted the Argentine government’s restructured (lower value) bonds in 2005 and 2010, New York Federal District Court Judge Thomas P. Griesa ruled that Argentina’s failure to settle with the holdouts means that any U.S. financial institutions, or their international affiliates, that intermediate funds enabling Argentina to stay current on payments to the majority will themselves be in contempt of court.  This has sent Argentina into “technical default.” Argentina is suing the U.S. in the International Court of Justice (whose jurisdiction the U.S. refuses to recognize) and in the court of global public opinion – pushing, for example, a recent proposal for global financial reform before the U.N. General Assembly. It has also welcomed an $11 billion currency swap agreement with China, and Chinese state banks have since pledged $6.8 billion in new infrastructure loans.  Some observers speculate that the very first loan of the New Development Bank, newly organized by the BRICS countries, could go to Argentina.

The Argentine bond case harms the perceived fairness and credibility of U.S. financial markets and, by extension, the strength of the U.S. dollar because the recent legal judgments seem capricious to many.  Senior figures at the IMF have long supported the routine inclusion in all international sovereign bond issues of a so-called “collective action clause,” which would make any restructuring accepted by two-thirds of bondholders binding on all.  The European Union already has ruled that sovereign bonds issued within the EU, including many for troubled Eastern or Southern European governments, must contain such clauses.  Moreover, the International Capital Markets Association, representing more than 400 of the world’s largest private investment institutions, has just issued a position paper endorsing obligatory collective action clauses, placing it on the same side of this issue as non-governmental organizations advocating financial architecture reform such as the New Rules for Global Finance and the Jubilee Debt Campaign.  This would give taxpayers in emerging economies – the ultimate backstop of the creditworthiness of their governments – the same bankruptcy rights as firms and households.  It is not in the interest of Latin American and other emerging economies for U.S. currency and financial dominance to end anytime soon – a tripolar reserve currency system based on the dollar, euro, and reniminbi does not yet appear able to sustain the worldwide growth and prosperity of recent decades and may in fact entail significant risks – but fairer rules for sovereign financing would benefit everyone.

* Leslie Elliott Armijo is a Visiting Scholar at Portland State University and a Research Fellow at CLALS.  She has just published The Financial Statecraft of Emerging Powers: Shield and Sword in Asia and Latin America (London: Palgrave, 2014).

September 23, 2014

El Salvador: The Maras, Community Action, and Social Exclusion

By Mario Zetino Duarte, Larissa Brioso, and Margarita Montoya

Photo Courtesy of FLACSO-El Salvador

Photo Courtesy of FLACSO-El Salvador

Maras and gangs in El Salvador have become social actors with great power in communities suffering from a high level of social exclusion. They have been linked to violence and organized crime, and they have been blamed for the highest number of homicides, organized criminal actions, and the generalized insecurity in which the country lives. They have brought a sense of isolation to the communities in which they live, as well as a reputation that increases the communities’ exclusion. According to a study being conducted in crime-ridden communities of Santa Tecla (near San Salvador) and Sonsonate (64 km. west of the capital), the maras’ power derives from their ability to cause fear and terror among inhabitants as a result of their effective and organized criminal actions. Their influence has a strong psychological impact and broad influence over people’s lives. The criminal activities of the gangs in the community are generally rejected by inhabitants because they put families at risk, make neighborhoods the target of police operations, and taint both the community and its residents socially – making it hard for people to get or keep jobs.

Nonetheless, many citizens in these communities have a positive assessment of the maras when it comes to providing important neighborhood security, due to a lack of national or local authority. In Santa Tecla and Sonsonate, the Salvadoran government, the municipality, international organizations, and other institutions have invested heavily in programs to stem the tide of mara violence, with mixed results. These communities suffer from low levels of employment, education, and social security, particularly among women. Afraid of retribution, citizens in these communities do not turn to state institutions to report crimes or to request protection, and they instead approach the maras to take actions regarding conflicts with neighbors and situations related to domestic violence. The void in institutional services, which has been permanent in some communities, is being filled by the maras and their members, making them the primary support for the local Asociaciones de Desarrollo and implementers of development plans.

Changes in the community philosophy of the National Civilian Police (PNC) in one of the communities of the study offers a useful example of how new approaches can help improve citizens’ lives. The PNC’s new approach to the community and its underlying social and security problems has also led to the evolution of the maras’ role as community actors and their legitimacy in the people’s eyes, primarily based on the fear they instill. This has benefited some communities.  Likewise, international cooperation – which has played an essential role – and the recent implementation of community policing practices as a model within the national security strategy to reduce gang criminality have driven debate on how communities can confront violence and crime in a sustained manner. The problems are far from resolved, but the gangs, the police, and the state each appear to be redefining strategies and roles. It remains to be seen whether these actions are sustainable and applicable in other territories – and whether the maras’ involvement in development programs can help create conditions for citizens to cope with the violence and social exclusion that plague their communities.

* Mario Zetino Duarte, Larissa Brioso, and Margarita Montoya are researchers at FLACSO-El Salvador.  Their study is funded by the International Development Research Centre.

Nicaragua’s Canal: Great Leap (of Faith) Forward?

By CLALS Staff

Mike and Karen / Flickr / Creative Commons Attribution 2.0 Generic (CC BY 2.0)

Mike and Karen / Flickr / Creative Commons Attribution 2.0 Generic (CC BY 2.0)

The Nicaraguan government and a Chinese telecom tycoon took a big step on Monday toward the country’s long-held dream of having its own canal, but their prediction of supertanker traffic starting as soon as 2020 seems a bit far-fetched.  The project will cost $40 billion and, according to government officials, will create 50,000 jobs immediately, 1 million jobs over the life of the project, and will help lift another 400,000 people out of poverty.  President Daniel Ortega’s supporters claim the economy – currently projected to grow at 4.5 percent a year until 2020 without the project – will grow as much as 15 percent a year with it. The Chinese company, HKND, will enjoy a 100-year lease on the canal, with 1 percent of it reverting back to Nicaragua each year.  The proposed route for the canal is 278 kilometers long – about three times longer than the Panama Canal – and will be deep and wide enough to handle ships much larger than the “New Panamax” vessels.  Officials say the canal would “complement” the Panama waterway, which they say will be overcapacity even after its current expansion, and will save shippers some 800 miles on their way to the U.S. east coast.

Opposition from some politicians and environmentalists has been strong.  According to media reports, Nicaragua’s Supreme Council for Private Enterprise (COSEP) and other business organizations are generally positive but skeptical, with one leader calling Monday’s press conference “just an initial flow of information.”  Congressman Eliseo Núñez of the Independent Liberal Party (PLI), however, has been widely quoted as calling Monday’s announcement a “propaganda game” and blamed the media for generating “false hopes for the Nicaraguan people.”  Former Vice President Sergio Ramírez says that handing over national territory for development is a violation of the country’s sovereignty, and other critics claim the project violates 32 provisions of the Constitution.  Concerns about damage to Lake Nicaragua, an important source of fresh water that is already polluted, remain. Chinese investor Wang Jing told the press that avoiding environmentally sensitive areas was a major factor in determining the route, and he has promised that a full environmental impact study will be conducted before construction starts.  Opponents of the project doubt he will make the report public.

Ortega’s statement last year that a Nicaraguan canal “will bring wellbeing, prosperity, and happiness to the Nicaraguan people” may well be right – if the project gets off the ground and so many jobs are created.  However romantic that vision is, construction is still far from certain to begin this December, as claimed, or even within the next year or so.  Wang says that he has lined up “first-class investors,” but none has been identified yet.  In addition, criticism of his business record – opponents say his telecom company is poorly run – has hurt his credibility. And accusations that he’s a stalking horse for the Chinese government, which he says has had “no involvement,” will be difficult to dispel in view of Beijing’s other interests in the region and in shipping.  Equally troubling, as the ongoing expansion in Panama has shown, the shadow that corruption and inefficiency cast over any major project tempers optimism and argues against premature celebration.

Follow

Get every new post delivered to your Inbox.

Join 1,483 other followers