Around the Revolution

  “You know, I’ve always wondered what South America would look like if no one gave a damn about coca or Communism.  It’s always impressed me the way you boys have carved this place up.”

“I’ll take that as a compliment, coming from a Brit.” 

Now that the U.S. election is over and James Bond is officially a friend of Evo Morales, it's time to take a trip around the Bolivarian Revolution.  How is the red banner faring around the continent? 

In Venezuela, the Revolution just won what is either an impressive victory or a debilitating blow in the gubernatorial elections.  On the one hand, Socialist party candidates garnered a total of 53.5% of the vote.  They also took control of most state governments.  On the other hand, urban votes shifted dramatically towards the opposition.  More ominously for Sr. Chávez himself, the biggest Socialist vote margins piled up in three states whose incumbent Socialist governors opposed the President’s constitutional reforms in last year’s referendum.  (Monagas, Anzoátegui and, Lara.)  That bodes ill. 

As does the fact that Venezuelan oil is now heading for $40 a barrel.  (You heard it here first!)  Venezuela’s budget is a mess, and a gigantic hole has just been blown through it.  Unless Chávez intends to try to emulate Plutarco Calles (or, more contemporaneously, Vladimir Putin) and become a behind-the-scenes jefe máximo de la revolución, he will be on his way out in 2012. 

Crossing the Caribbean to Nicaragua, we come to the interesting administration of President Daniel Ortega.  One difference between Nicaragua and Venezuela is that Venezuela has a very well developed system for insuring that elections are free and fair, while Nicaragua does not.  There are reports that President Ortega, it seems, has taken advantage of that lacuna to steal municipal elections.  Several Sandinistas have defected, and violent demonstrations have gripped several cities, including the capital.  Things could easily get worse.  The Russian Federation, I should add, is a non-player here, despite its government’s pretensions.  Venezuela is not a non-player, but given Hugo’s trouble at home, I don’t see him upping aid to Managua.  He’s already called off a $4 billion refinery project.  Anyway, I’m not sure that Ortega is at the stage where aid could help:  fraud charges cross a line, and it will be hard for him to buy support back.

Jinking to the north, Honduras has just joined the Alternativa Bolivariana, and the first shipment of 50 tractors from Venezuela has arrived, along with four million energy-saving light bulbs.  El Universal reports that Caracas stands ready to lend Tegucigalpa about $132 million more, along with $82 million in subsidized oil for agricultural use.  (It isn’t clear whether that subsidy is a standard Petrocaribe credit, or an actual grant of free petrol.)  A nice economic gain for President Zelaya, with the additional benefit of sending a shot across the bow of the new American president-elect.  “Pay attention to me or else!” it says. 

The problem, of course, is that there doesn’t seem to be a whole lot to the “or else” part.  Or else Hugo Chávez will give your people much-needed aid?  Okay.  Latin Americans, like other foreigners, may have some trouble adjusting to a non-hysterical foreign policy coming from Washington. 

Jumping across the Pacific, we come to Ecuador, where President Correa recently shepherded through a new constitution.  Ecuador is currently testing how easy it will be to default on its foreign debts.  As regular readers know, there are cases when I think sovereign default is a great idea.  In this case, I think it is pretty dumb.  First, Ecuador would open itself up to lawsuits.  If successful, and given the structure of the loan contracts they probably would be, then Ecuador could find its export revenues attached, or worse.  With oil prices tanking, interference by the Obama Administration wouldn’t be likely.  Second, Ecuador can pay.  It can probably roll over its outstanding debt.  Now, perhaps all the terrible things that the government claims in its audit are true, and the loans really were odious ... but I’m having trouble believing it.  The claims are just too hyperbolic.  Third, even though the Ecuadorean government can pay, it would have a great case in a rescheduling negotiation, what with some of its bonds trading as low as 24¢ on the dollar.  So why run the risk of default when renegotiation is an option?

But President Correa will do what he will do; I just wish I understood what he is trying to accomplish.  Right now, he’s managed to irritate the Brazilian government by threatening to default on a loan from Brazil’s development bank, and he may be about to blunder into a very unnecessary and potentially expensive default on American creditors.  To be fair, the brinksmanship to date has worked.  The country is not in a technical default despite its recent postponed payment, and I suspect that fortunes may have been made by the debt’s recent dip to 14¢.  But my gut feeling is that default would not be wise at the present moment.  How many foreign assets does Petroecuador hold?

If I am missing something, I would very much like to know what.

One country that is not a member of the Bolivarian axis but which has a government that is sometimes considered to be allied to it is Argentina.  Argentina has just run into a bit of trouble that might be relevant for Ecuador’s energetic head of state:  the (in)famous Judge Thomas Griesa of New York has frozen $2 billion in recently-nationalized pension assets.  Argentina could lose those assets on appeal; they would then be used to pay the American “holdouts” from that country’s debt renegotiation and repudiation.  Ecuador could be headed for a similar problem, and that is assuming that the debtors fail to get ICSID involved. 

(I have no opinion on the Aerolineas Argentinas nationalization.  After all, the firm is headed towards liquidation, and its owners don’t have much of a leg to stand on demanding more compensation.  That said, it isn’t clear to me why Argentina needs a national flag carrier.  Unless there is some reason why the airline’s failure will cause some sort of catastrophic economic knock-on — and I am open to arguments of that type in the case of the Big Three in the U.S. — it seems like a dumb idea to take a dying airline under government ownership regardless of who gets compensated by how much.)

Which finally takes us to Bolivia.  The country is back from the political brink.  A draft of a new constitution has been agreed upon, and goes before the voters on January 25th.  More interesting is the Bolivian government’s aggressive stance towards the U.S.:  expelling the ambassador, the DEA, and the Peace Corps.  Where will that lead?  Some cogent analysis here.  What do you think?

And that has been your latest installment of “Around the Revolution.”  Stay tuned, and hasta la victoria siempre. 

Comments

[Andrew R.]

Since Moscow isn't really making the kind of mischief it did up until 1991, I'm really curious to see if the folks who lean commie can actually learn to behave like democrats. If either Ortega or Chavez lost free and fair elections and went on to become an opposition party, it seems to me (and when it comes to things Latin America, I am pretty much Mr. Dunning Kruger effect himself) that it might be a wonderfully positive step forward not only for central and south America, but humanity as a whole.

And speaking of that earlier post of yours, I'd still like to see your thoughts on why those of us who last summer were saying that the Hubbert Peak meant $150/bbl oil was here to stay were so drastically wrong.

[Noel Maurer]

Hubbert peak post, check. Will come forthwith, holidays permitting.

I agree with you about opposition. One thing to keep in mind regarding Sr. Ortega, at least, is that his party did in fact lose an election and go into opposition back in 1990. That's one of the things that makes recent events in that country so perplexing.

That said, another thing to keep in mind that many Sandinistas are peeling off from Ortega not because he is a man of the left, but because he has been acting like an autocrat.

[Jussi Jalonen]

Speaking of the 007 movie, you may remember that in the original short story "Quantum of Solace" - which is basically a Maugham-style anecdote - Bond is also a friend of Fidel Castro.

There's a passage where Bond silently looks back to his recent mission of torching a number of yachts that the Cuban revolutionaries have used for gun-running. He regards it as a dirty work which he has only done out of his sense of duty, and confesses to himself that he actually sympathizes with Castro's rebels and their goals.

I'm not sure if the cinema makers deliberately decided to preserve this one element; otherwise, the movie obviously has nothing to do with the original short story - unlike _Casino Royale_, which was, mutatis mutandis, actually quite loyal to the novel.

Cheers,

J. J.