Lat-Am Watch

News and views on and from Latin America.

Tuesday, December 23, 2008

Correa cries wolf once too often

Ecuador’s voluntary default sees the wily gambler lose

If public opinion is anything to go by, Rafael Correa is either incredibly brave or incredibly stupid. Ecuador’s president recently announced his country would default on interest payments on its foreign debt. Not because Ecuador couldn’t afford the 30,6 million dollars due to holders of the Global 2012 bonds.

The reason Correa isn’t coughing up is because at least some of that debt is illegitimate, according to a government committee tasked with investigating Ecuador’s 10 billion dollar foreign debt.

“The contracts (outlining part of the debt) do not comply with legal norms of our country, nor do they live up to the norms and rules of international law. As a result that debt that is now denominated in Global bonds basically amounts to an illegal debt,” claimed Ricardo Patiño, who heads up the auditing committee that spent the last year sifting through three decades of public debt. He insists 3,6 billion dollars worth of that debt is questionable and so for now Ecuador refuses to pay.

Defaulting on foreign debt has far reaching consequences – Argentina is still a long way from recovering credibility after its spectacular default 7 years ago, as a particularly active New York judge will tell you. Ecuador is no stranger to harsh reprisals, either. In fact it’s still recovering from a default of its own in 1999.

So why force another default in less than a decade? Especially when you don’t have to. Ecuador has 5,700 million dollars in foreign reserves and the total foreign debt amounts to only 20 percent of GDP compared to 80 percent in 1999.

Correa claims – and has been for the past two years - that his country is up against “monsters” both foreign and domestic who have plundered Ecuador’s coffers in the past. Previous governments had begotten debt illegally, the investigating committee writes. Now there are even calls for ex-presidents to be prosecuted.

Critics say the default is politically motivated, but there may be some truth to the claims of illegal dealings. In his 2004 best-seller Confessions of an Economic Hitman, John Perkins writes that as a consultant for a US firm he was involved in misleading the Ecuadorian government into contracting huge debts from the World Bank to finance white elephant infrastructure projects meant for US contractors. In this case though, it’s bondholders and not the multilateral lenders who are getting targeted.

According to president Correa a similar pattern lays at the heart the current stand-off with neighbouring Brazil. Last month Ecuador disputed the legitimacy of 286 million dollar loan from a Brazilian development bank (BNDES). That money was used to pay for a hydroelectric plant constructed by the Brazilian firm Odebrecht, which was also sent packing last month. The plant was inaugurated in mid 2007 but stopped working in June of this year due to structural errors. Brazil recalled its ambassador to Quito over the dispute.

So after Brazil, Correa now seeks to defy all international holders of Ecuador’s debt over the legitimacy of those loans, never mind the consequences.

At a time when oil prices are below 35 dollars, scaring off foreign investors and making Ecuador even more dependent on oil revenues hardly seems like a good idea. Meanwhile remittances, Ecuador’s other source of foreign currency, are dwindling as the world crisis worsens.

The first to be hit by this default will be the credit-needy exporters of the country’s three other main currency earners; bananas, shrimps and flowers.

The fact that Ecuador has no currency of its own, but instead uses the US dollar makes the situation even more difficult. Interest rates will soar even further, as the dollar becomes increasingly scarce.

All in all, a scary scenario that threatens to plunge Ecuador deeper into economic turmoil.

Would all that be worth it on the off chance that at some point an international court will find a part of Ecuador’s foreign debt to be illegitimate?

There are suggestions that Correa may have an ace up his sleeve. His promise to default may be an attempt to push down the market value of the Global 2012 bonds in the hope of snapping them up at bargain prices.

As a major holder of it’s own debt the Ecuadorian government would be in a better to position to force the kind of easy-going debt restructuring that it seeks. So instead of brave or stupid, perhaps Correa is really a sly gambler.

But even if that where the case and wily reasoning is behind the threats to default, why go all the way and actually announce a default. The economic fall-out from a default looks certain surpass any money saved on a benign debt restructuring.

My guess is Correa has overplayed his hand. After threatening to default on several occasions, he finally found himself with no alternative.

If he hadn’t refused to pay, two things would have happened. First of all his claim and Patiño’s that Ecuador’s foreign debt was largely illegitimate would have lost all credibility, damaging his bid for the upcoming presidential elections in April.

Secondly, had he not defaulted, the international legal system may well have turned against his government, punishing it for putting out rumours that seriously damaged bondholders and investigating claims that it was buying back those bonds.

In the fable, the boy who cried wolf was finally ignored and left to fend for himself. In the hands of Rafael Correa, Ecuador awaits a similar fate.

Tuesday, December 9, 2008

The man who would free us all

After a decade, Chávez is anything but a liberator

Published December 9, Buenos Aires Herald.

Venezuelan president Hugo Chávez would like us to think that over the past decade he has been playing a pivotal role in uniting Latin America. Who knows, perhaps late at night, as he watches reruns of his speeches on any of a range of state-run TV-channels, Chávez may well be wondering if he isn't already a latter day Simón Bolívar, liberating his fellow Latin Americans from the yoke of Yankee Imperialism.

Although the former coup plotter can certainly be credited with putting the plight of the poor firmly on the political agenda, that hardly makes him a symbol for regional harmony. In fact, a number of experts in the region, consulted for this column agreed that since first winning elections on December 8 1998, Chávez has done more to foment discord and division among states in the region than he ever did to unite those freed by Bolívar´s sword.

Over the years, the Bolivarian Revolution has become a byword for confrontation. We've grown used to the way Chávez blasts his enemies with fiery rhetoric, while supplying allies with suitcases full of oil dollars. The toxic combination more often than not results in diplomatic conflicts and frayed relations between Venezuela and her neighbours.

"I´m very critical of the Chavez legacy so far," says Carlos Malamud, leading Latin America investigator for the Elcano Institute in Madrid. He believes that Chávez has done more to divide than to unite people in Latin America and cites as an example conflicts between Venezuela and Chile.

Chávez once called the Chilean senate "fascist" and this year insults were hurled at Chilean ministers while Venezuela expelled the Chilean director of Human Rights Watch.

Peru and Mexico can vouch for Chavez' meddling. In both countries Venezuela's head of state actively supported a presidential candidate during elections. Unfortunately for the candidates Chavez' blessing became a kiss of death, as both Ollanta Humala in Peru and Andrés Manuel López Obrador in México dived in the polls following the Bolivarian endorsement.

The Venezuelan Moises Naím agrees. "Chávez is responsible fragmenting the continent and creating two blocks of nations," says the former minister for Trade and Industry and now editor of Foreign Policy magazine.

On the one hand he sees a group of countries led by Venezuela and including Bolivia, Nicaragua and Cuba and, to a lesser extent, Ecuador, Paraguay, Argentina and several Caribbean states. On the other hand a block consisting of and Chile and Peru and Colombia who want nothing to do with Chávez and Mexico and Brazil who dispute Venezuela´s regional leadership.

In pushing his brand of socialism in other countries Chávez has also done much to undermine the working of democracy, claims Naím. "Chávez method of undermining democracy has been copied by other governments," the former minister explains. "He wins elections with the purpose of undermining the checks and balances of the system, essentially using democracy to subvert democracy. That strategy has been copied almost to the letter by Bolivia and Ecuador."

To aid his allies in power or to help groups that Chávez feels should be in control he has spent billions of Venezuela's oil money. Just how much is still unclear because of the many different forms the financing takes - how many Antonini Wilsons are there that we don't know about? - but estimates range upwards of 10 billion dollars.

To be fair, that massive spending has had some positive results. "In using his largesse to spread regional influence, Chávez has ended up helping some cash-strapped governments and has contributed to the overall drop in poverty levels," Michael Shifter of the Inter American Dialogue, wrote me in an email.

But those generous gifts may also have made poorer nations dependant on Venezuela. According to Carlos Malamud, Chávez has created a clientist system in the region. "Especially Bolivia and Nicaragua have put all their eggs in one basket as far as Chavez is concerned," Malamud says.

Others, such as Cuba, are quickly starting to diversify as they initiate dealings with for instance Russia and China. The aid has done little to adress long term tasks of fundamental reform, according to Michael Shifter

Aside from the opaque motifs for such generosity, there is serious concern the abrupt fall in oil prices – now at less than 40 dollars - will at some point force a severe cut in Venezuela's aid spending, causing a deepening of the economic crisis already being felt in many of the receiving nations.

Such a cut would also reveal the true acceptance of Bolivarian socialism, Naím thinks. "The test for Chavez will be if he can maintain his alliance while the price of oil is so low. We should see whether the popularity his ideas receive abroad depends on the fact that they are accompanied with large subsidies. Will they still remain popular without the oil sponsored subsidy?"

It's too early to tell now, but after ten years of Hugo Chávez the divisive and harmful nature of chavismo has become clear enough. The results of November's regional elections in Venezuela suggest that even at home, many are becoming weary of the former colonel at the helm.
Chávez himself though shows no sign of tiring from his own rule and has announced his plans to rule until 2021. The constitutional rewrite to make that possible will be submitted to referendum in February.

To many across the region that may sound like a recipe for dictatorship, but Chavez too, has his supporters. Many of them, such as Evel Petrini of the Argentine rights group Mothers of the Plaza de Mayo, will be rooting for the man they consider a modern Liberator. "Chávez has shown us that a revolution without weapons is possible," says Petrini. "He´s a beacon of light that proves that a government for the people can exist."

Monday, November 17, 2008

Am I my brother’s keeper?

In Colombia, soldiers kill the innocent to up the body count
Lat-Am Watch for the Buenos Aires Herald

The success of Alvaro Uribe’s government at fighting left-wing insurgency groups in Colombia has boosted the president’s popularity to dizzying heights, at home and abroad. Where so many had failed in the past, Uribe’s policy of ‘Democratic Security’ brought blow after blow to the rebel groups, culminating in the spectacular rescue of the politician Ingrid Betancourt in July of this year.

Colombian president Álvaro Uribe. Photo Antoine Gyori / AGP-Corbis

No wonder then that many of his compatriots hope that Uribe will stay on for a record third term, even if it does require a constitutional rewrite.

But a spree of extrajudicial killings by the army, fueled by a warped incentives scheme to boost body counts, threatens to tarnish president Uribe’s reputation with the blood of innoncent victims.

For among all the reports of military success against the guerrillas, there lies buried one statistic that just doesn’t add up. According the government figures, the FARC has 15,000 men and women under arms.

Yet by those same figures, in the past six years no less than 55,000 rebel soldiers either surrendered or were captured or killed by government forces.

How to explain that huge discrepancy? One of the possible answers lies in the frightening story of Miller Andrés Blandón.

Miller, a former drug addict and street artist made his living as a human statue in the town of Neiva. On July 17, while lunching at a homeless shelter, two men approached him and asked him if he wanted to earn some money picking coffee. He and two others agreed and were whisked off.

The next day news outlets reported the deaths of three guerrilleros near the jungle town of San José de Isnos. By nightfall, a local prosecutor found a wallet on one of the bodies, containing a phone number and an ID card. The card belonged to Miller Blandón. The phone number was that of Miller’s grandfather’s wife. She vehemently denied he had anything to do with any guerrilla group.

The story, reported yesterday by Spain’s El País newspaper, is one of hundreds, perhaps thousands of cases in which innocent by-standers were murdered by security forces and passed off as slain ‘insurgents’ in a cynical attempt to boost army statistics. Colombia’s national prosecutor’s office is currently investigating the deaths 1,155 alleged victims of these extrajudicial killings.

The list includes homeless people, street children and drug addicts as well as indigenous and peasant community leaders. The victims were often executed after being singled out by paid informants. The evidence and the scene of the crime were then manipulated to make it appear as if the victims were guerrilla members killed in combat.

By inflating the tally of slain ‘enemies’, soldiers and officers received promotions and medals. They may also have shared in the financial rewards paid to informants, according to columnist Alvaro Camacho Guizado of El Espectador newspaper.

The scandal became headline news after 11 boys from the shantytown of Soacha near Bogotá turned up dead half way across the country in September. Their mothers travelled 14 hours to identify their sons, supposedly guerrilla fighters killed in combat.

An investigation ensued as soon as it became clear that the boys were executed, not defeated. The government fired 40 members of the security forces and army chief general Mario Montoya – the architect of Betancourts’ rescue – was made to resign. Prosecutors have tied at least 3000 armed forces personnel to extrajudicial killings.

The Uribe government has tried to present these rogue executions as a new phenomenon, but in fact reports of such killings have been frequent ever since 2002, when Uribe first introduced his policy of ‘Democratic Security.’ The US backed military surge against the rebel groups has been held responsible for a staggering number of over one thousand innocent deaths passed off as combat casualties. What’s even more worrying is that that number is on the rise.

According to the Colombia-Europe-United States Coordination Group (CCEEU), an umbrella that links some 200 human rights organizations, in the past five years, an increase of 67.71% has been registered in extrajudicial executions directly attributed to state security forces. One person a day was killed in these executions between January 2007 and June 2008, compared to only seven in 2002, the year in which Uribe first announced his scheme of rewards for informants.

The killing of innocent Colombians by the very men and women entrusted to protect their lives is horrendous enough. The fact that hundreds of society’s most vulnerable members were killed by soldiers eager to don more stripes is a nightmare scenario that demands a full-scale purge.

Replacing General Montoya was an important first step. His subordinates depict the soldier behind Operation Jaque as a trigger-happy and ruthless man-of-action. The US State Department had been calling for his resignation long before this latest scandal.

But just blaming the soldiers is not enough. Defence minister Juan Manuel Santos should step down as well, accepting responsibility for a policy that was flawed from the outset and that lacked even the semblance of checks and balances.

As for Alvaro Uribe, these killings embarrass him more even than his alleged ties to paramilitaries and to the slain drug lord Pablo Escobar. It’s time he accepted that his role in Colombia’s future is coming to an end despite his soaring approval ratings. Acknowledging his mistakes and announcing his intention to retire in 2010 when his term ends is the decent way to honour the innocent victims of his undeniably successful war on the guerrilla groups.

Tuesday, November 11, 2008

Lawyers on the Inca Trail

Peru threatens to sue Yale over Machu Picchu artifacts

On July 24, 1911, an eight-year-old boy led a 35-year-old Yale University lecturer named Hiram Bingham up a steep path through the Peruvian jungle. Bingham was looking for the city of Vitcos, one of the last Inca strongholds to be sacked by Spanish invaders in 1572.

Instead what he saw were cascading terraces and a clearing bound on two sides by temples, on the third by a view of a snow-capped peak, and on the fourth by the ridge that lent these ruins its name: Machu Picchu.

The boy, who lived with his family among the Inca ruins, could hardly suspect that his kindly service to this ambitious explorer would lead to an international row almost a century later.

This weekend Peru announced it would sue Yale University in order to force the return of 46,000 artefacts it says were taken from the site of Machu Picchu.

It’s the latest chapter in tussle between the university famed for its archaeological collection and the country whose magnificent ruins are the number one tourist destination. The case carries significance because the eventuality of a ruling in favour of Peru would pave the way for other countries such as Greece and Egypt to reclaim their national treasures from the vaults of European and North American museums.

However, everything about the case, even including the actual number of artifacts at stake, is disputed. But things weren’t always like that.

Bingham, the son of famous Hawaiian missionaries and married into money, got all the backing he needed from Peru’s president Augusto Leguía, when starting out on his archaeological expedition. According to the author Christopher Heaney, who is working on a book about the fight over the Machu Picchu treasures, Leguía and the Lima business community backed the explorer with everything from military escorts to free train passages.

However, in 1912 when Bingham returned to Peru, sponsored by the National Geographic Society and with the intention of hauling as much as possible of his discovery back to Yale, the mood in Peru had changed. Only after vehemently lobbying did Bingham manage to get permission to export the artefacts. But with a condition. "The Peruvian Government reserves to itself the right to exact from Yale University and the National Geographic Society of the United States of America the return of the unique specimens and duplicates” read the crucial clause in the congressional resolution.

In 1920 Peru demanded the return of "original and duplicate objects taken from Peru,” citing the 1912 resolution. Months later 47 crates arrived. According to Peruvian experts, these contained “worthless bones and shards of clay which weren’t even found at Machu Picchu.”

There the fight ended for more than eighty years, until a full flung exhibition of the Inca treasures by Yale’s Peabody Museum went on tour in 2003. The exhibition provoked a reaction in Peru, then governed by Alejandro Toledo, the first Peruvian president of indigenous descent.

Toledo, who had been inaugurated at the stunning site of the Inca city, called for the artefacts to be returned. At first the talks took place behind closed doors, but in 2006 things came to a head and Peru threatened to sue.

But Toledo never acted on his threat and after the election of Alan García as president in 2006 and some soul-searching by Yale the two sides drew up a Memorandum of Understanding (MOU). It was hailed by Yale as “a model for resolving cultural disputes, balancing respect for Peru's cultural patrimony with the interests of the scholarly community.”

In September of 2007 Peru agreed to the MOU, which gave the country “legal title” to the 5,700 artifacts Yale claims it has in its possession. Closer inspection revealed that the terms were far from favourable for Peru.

According the MOU Peru receives around 370 “museum-quality” artefacts (the number varies between 384, to 369, to 329, depending on who you talk to), to be displayed in a museum, which is still to be finished as well as part (around 15%) of the “research collection”. Yale will also foot the bill for a travelling exhibition and academic exchange. The rest of the artefacts, however, remain in the United States thanks to the “usufructuary rights” that Yale retains for the duration of 99 years.

That's not all. According to Heaney, the MOU makes no mention of the gold smuggled out of Peru which ended up at Yale – the only gold ever found by the Bingham expedition – or of the almost half million dollars (by today’s money) worth of artifacts the explorer bought from Peruvian antique dealers who smuggled the pieces to Yale.

To make matters worse, in April of this year Peruvian officials inspecting the collection at New Haven, claimed that the Machu Picchu artifacts numbered more than 46,000 instead of the 5,700 Yale stated it had. The university insists that the difference comes down to different ways of counting the same collection of artifacts, often broken into many shards.

Meanwhile, the National Geographic Society sided with the Peruvian government, claiming the artifacts were “on loan” to Yale. “We were part of that deal [of 1912], National Geographic was present there. We know what was said and which objects were on loan and which should be returned,” Terry García, the institute’s vice-president said in an interview in June.

Negotiation in September of this year, headed by Peru’s foreign minister Garcia Belaunde seemed to bring a friendly settlement within reach. But in fact Belaunde’s involvement was short-lived and negotiations soon faltered. So now it’s up to the courts.

But while Peru contacts its high profile Washington D.C. attorney, a local news report from late October raises the question whether Peru's government isn't perhaps more interested in scoring easy electoral points than in preserving its cultural heritage.

On October 20 La Republica newspaper revealed how Peru's Economy ministry has cut resources for Machu Picchu so drastically that it and other major archeological sites are having serious trouble paying for maintenance, let alone new museums. The García government, it would seem, has every intention of exploiting the Inca legacy, but little intention of paying for it.

Wednesday, October 29, 2008

Lat-Am Watch: Poll by proxy in Brazil

Serra trumps Lula in local election battle

Brazilians in 30 major cities went to the polls on Sunday to elect mayors in run-off elections, after the nationwide municipal vote on October 5. The outcome was a clear victory for one man – and he didn’t even have to take part to win.

Sao Paulo governor José Serra waves to supporters. Photo Reuters

José Serra, the governor of Sao Paulo, emerged as the favourite to succeed Luiz Inacio Lula Da Silva as president in 2010, thanks to a political gamble which paid off in Sunday’s ballot. By mastering the complicated world of Brazilian local politics, where coalitions are constantly changing, Serra has come out on top of this year’s elections.

The victory of his former deputy Gilberto Kassab in the Sao Paulo city ballot on Sunday is due in large part to Serra’s handiwork, an effort that should pay off nicely in the next presidential elections. It’s also a firm kick in the teeth for Lula’s Workers Party, which invested heavily to regain a foothold in the city of 8 million voters.

José Serra is an icon of the social democrat PSDB party, which he helped found along with former president Fernando Henrique Cardoso back in 1988. He would have liked to succeed his mentor Cardoso in the presidency and ran against the trade-union leader Lula da Silva in 2002, losing in a now historic election.

Since then he has focused on Sao Paulo, winning the 2004 mayoral elections against Marta Suplicy of the PT. When the 2006 presidential elections rolled around he expected his party to let him to run again. Instead the PSDB picked Serra’s rival and then Sao Paulo governor Geraldo Alckmin to try his luck. Serra decided not to fight the nomination and chose the “consolation prize”; succeeding Alckmin in the governor’s palace, an election that was as good as won.

In hindsight, the turnout of events favoured Serra over Alckmin. For although the first round of the 2006 presidential election was undecided, the bespectacled Alckmin was no match for Lula’s massive appeal and lost by more than 20 percent in the run-off, amazingly getting less votes in the second round than in the first.

Meanwhile, Serra moved swiftly to fill his rivals post, after an easily won election in October of that year. In his stead in the Sao Paolo mayor’s office he left his deputy, the engineer and economist Gilberto Kassab of the centre-right Democratas party (DEM).

When this year’s municipal elections rolled around, Kassab made it clear he wanted to hang to his job. To do so he had to take on former mayor Mrs. Suplicy and none other than Geraldo Alckmin. Serra saw to it that at least part of the PSDB backed Kassab. He also managed to get Kassab the backing of Brazil’s largest party, the Partido do Movimento Democrático Brasileiro (PMDB).

That not only stunned Alckmin but left the PT reeling as well. Lula’s government forms a coalition with PMDB on a national level and relies heavily on the party’s national presence for support in local elections.

Still, getting Kassab elected remained a long shot. In May of this year the polls put both Alckmin and Suplicy at 30 percent of the vote each, with the incumbent mayor trailing with only 13 percent. Most expected Alckmin to win a second round against Suplicy, thereby strengthening his chances to face-off against Lula’s candidate in 2010.

However, by knocking out Alckmin in the first round, Kassab secured the backing of a large part the PSDB voters for the second round against Suplicy.

The candidate for the Democratas has introduced a number of popular measures in the world’s second largest city. Not least, the controversial decision to ban almost all outdoor advertising and severely restrict signposts, which brought him the anger of the advertising community and the jubilance of paulistas in equal measure.

So, despite president Lula and the PT putting everything they had behind Suplicy, the former mayor lost to the incumbent by 39,2 percent to 60,72 percent on Sunday.

For José Serra, that result yields huge returns for his own 2010 bid. First of all it means that Alckmin is out of the picture as a candidate. The PSDB will certainly pick the Sao Paolo governor who is backed by the city mayor as their candidate over the jobless Alckmin.

Secondly it means Serra can count on the backing of Kassab’s own party for his candidacy. To him the support of the Democratas is crucial. He hasn’t forgotten that it was an identical alliance that secured the presidency for the PSDB’s Fernando Cardoso in 1994 and 1997.

By backing a relative outsider from another party, the wily Serra has laid the foundation for his own potentially very successful candidacy in 2010. An election, need I remind you, in which president Lula is barred from running by Brazil’s Constitution.

Meanwhile, the other results in Sunday’s election have cleared up some of the haze over whom Serra might be running against. Not only is Alckmin out of the picture, but so is Suplicy who needed to win Sao Paulo to have an electoral base.

Seeing as Lula once suggested his successor might be a woman, many speculate that that only leaves his chief of staff, Dilma Roussef. However she faces opposition from within the PT, by the Sao Paulo faction and her backers in Porto Allegre just took a hit as well in these elections.

But with Lula’s popularity for surpassing that of his party, it seems likely that any candidate that enjoys his endorsement will be the one best equipped to take on the experienced José Serra.

Thursday, October 23, 2008

Ecuador, your global utilities provider

Paying for rainforest services is a logical step

The Yasuní rain forest reserve in Ecuador is one million hectares of the most biodiversity territory on the planet. There are less than three months left to keep it that way.

That’s because underneath the Yasuní reserve lie nearly a billion barrels worth of oil.


Last year, in a revolutionary approach to preserving what’s left of our planet, the Ecuadorean government proposed to keep the oil in the ground if the international community was willing to fork out half of the money Ecuador would get if it actually exploited the oil field. That amount was calculated at 350 million dollars a year for ten years.

Worryingly, the deadline for other countries to commit to saving Yasuní runs out in December with hardly any funding in sight. By the beginning of next year oil companies could be staking claims to the underground wealth of Ecuador.

That would be disastrous for the natural habitat of thousands of species of flora and fauna, not to mention the indigenous communities that live in the reserve, some of whom have no contact with the outside world.

Don’t take my word for it, though. Past experience in Ecuador has proven that oil companies aren’t exactly beneficial to the environment. The damage in pollution caused by Chevron-Texaco, which dumped 18.5 billion gallons of highly carcinogenic toxic waste into unlined pits, swamps, streams, and rivers over a 28-year period has been calculated at 16.2 billion dollars.

Oxfam calls it the “environmental crime of the century.” So understandably the communities that live in the Yasuní reserve – and sane people in general– are hoping that the exploitation can be avoided.

What makes Yasuní so special? Here’s a statistic. On one acre of this pristine rain forest there exist, on average, more tree species than in the entire United States. It’s a tropical haven, where flora and fauna took refuge during the last Ice Age, and which today hosts the world’s greatest biodiversity. It’s home to jaguars, giant otters, woolly monkeys and no fewer than 630 types of birds – including the rare harpy eagle – and 25 species of endangered mammals.

But it’s not just an unusually high species count that makes this a place worth saving. The world’s rainforests hold tight tens of billions of tonnes of carbon in vegetation and soils, and continue to take carbon dioxide out of the atmosphere even when the have reached the stage of old and mature ecosystems.

As they breathe they pump out some 20 billion tonnes of water into the atmosphere every day, influencing global rainfall patterns. Deforestation and drought go hand in hand.

"Rainforests are like a giant global utility right now, like a water utility or a power station, that's providing a service we're not paying for," Andrew Mitchell, director of the Global Canopy Programme, told the Guardian recently. "When you don't pay your electricity bill, you get cut off. We should recognize that these countries [such as Ecuador] shouldn't provide us with a service for free."

That’s what makes the Yasuní plan so attractive. Paying 350 million a year now, will save us billions in the future spent on carbon sequestration and water desalination.

Of course the plan has weaknesses as well. A serious drawback, according to the Yasuní Green Gold non-governmental organization, is that the government’s proposal leaves open the possibility to return the money and exploit the oil field anyway.

Another weakness is that local Yasuní bodies were not invited to participate in the proposal or in any future planning, casting doubt on how much money would be channeled into the development of much-needed local alternative economic activities.

But these issues, and others, can be hammered out in a round of negotiations. The important thing is that rich countries show willingness to embrace this innovative way of preserving our global resources.

In fact, according to the Swedish-born businessman and activist Johan Eliasch, paying other countries not to cut down their forests is the best way to fight climate change.

In a report released last week, Eliasch, who is also special advisor the British prime minister on things environmental, argues that a global carbon market could pay the tropical rainforests' owners, or people living in them to save and maintain the trees, thereby cutting emissions. He himself has bought several thousand acres of rainforest in Brazil and urges others to do the same.

Deforestation contributes about 17% of global carbon emissions, the third biggest source behind power generation and industry, and bigger than either China or the United States, says the report.

Obviously there are concerns about spending money this way. Especially in countries like Ecuador, where corruption is often out of control. Therefore such a plan needs to be executed with full oversight and involving the people whose lives are directly affected.

The time to act is now and saving the Yasuní reserve would be a magnificent first step down a new road of combating climate change.

So far though, only a few European countries have shown interest in the scheme and only Spain has officially committed. The fear is, that as the economic global downturn sets in, countries will be even less inclined to spend on the environment. But not acting now means that sooner or later we’ll be presented with a horrendous utility bill. And getting cut off is not an option.

Tuesday, October 14, 2008

Lat-Am Watch: Ghosts return to haunt Peru

García assailed by familiar troubles from the past

Peru’s image of recent years was one of relative stability and soaring economic growth. The painstaking reforms put in place by president Alejandro Toledo (2001-2006) placed the export economy in a slipstream culminating in some of the best macroeconomic figures for Latin America last year. Meanwhile, the government claimed that the serious social divides were finally being breached.

New PM Yehude Simon takes office today. Photo Andina.

To many, the times when the Andean nation was plagued by rampant corruption, unabated terrorism and a roller-coaster economy seemed to have been put to rest once and for all with the election of the new & improved Alán García to the presidency in 2006 and more symbolically, with the trial of former autocrat Alberto Fujimori.

But in the past few weeks a whole parade of ghosts have come back to haunt Peru, leading to the resignation of García’s entire cabinet last week Friday.

What ignited the recent turmoil is an unfolding corruption scandal involving the state-run oil company Petroperu, the state oil licensing company Perupetro (bear with me) and a small Norwegian oil outfit called Discover Petroleum.

A taped telephone conversation broadcast on October 5 by the investigative reporters of El Cuarto Poder provided damning evidence to show that Alberto Quimper, the head of Perupetro, and Rómulo León Alegría, a prominent member of García's Partido Aprista Peruano, were guilty of influence peddling. They allegedly accepted bribes to ensure that Discover Petroleum won five of the seven oil exploration licenses it applied for in an auction in September.

(What is it about Scandinavian businesses and corruption scandals overseas? Last year Saab was accused of graft to boost jet fighter sales in the Czech Republic, then Skanska doled out millions in “commissions” here in Argentina (whatever happened to that case?) and now these Norwegians. When in Rome, I suppose…)

That scandal first forced out Mines and Energy Minister Juan Valdivia, along with Quimper and the head of Perupetro César Gutiérrez, which handled the auctions. After increasing pressure from the public and the opposition, prime minister Jorge del Castillo, a close ally of president García, stepped down and with him the entire cabinet. On Saturday Del Castillo was replaced by a left-wing independent Yehude Simon, with a reputation for crusading against sleaze.

It seems fair to suppose that García pushed for the rapid resignations. He’s eager to prove he is doing all he can to stem corruption, given that his last stint in office (1985-1990) was constantly plagued by accusations of graft. Nonetheless, his dismal approval ratings mean that the public isn’t about to cut him any slack. The day after the airing of the damning tapes, the streets of Lima swelled with protesters sensitive to decades of pocket-lining politicians.

In fact protestors have been on the streets for a number of other reasons which pre-date the television show and which make up the tinderbox that fuelled the general outcry over this latest scandal.

In July there was a general strike followed by mineworkers protest, followed by Amazonian Indians in August, angered over multinational companies encroaching on their lands. Then came a strike by 20,000 medical professionals in September who demanded the resignation of the then health minister. In November teachers plan another massive rally.

High inflation - although a regional affliction - and the perception that the commodities boom is not ‘trickling down’ has further undermined the popularity of Alán Garcia, whose rating stands at 19 percent, half of what it was in December 2007.

With the return of civil unrest and corrupt politicians a third misfortune has come back to instil fear in the lives of ordinary Peruvians. Last week Thursday 15 people were killed in a bomb attack by the Shining Path (Sendero Luminoso) terrorist group. The attack is the deadliest in years by an organization all but extinguished back in 1992.

Over the past year Sendero Luminiso has picked up where it left off, claiming a stake in the burgeoning drug-trade and ruthlessly killing peasant farmers and security officials in the Apurimac-Ene River Valley zone. Peru is now the world’s second largest cocaine producer after Colombia.

All of this makes the choice of Yehude Simon for prime minister an interesting one, which reflects a definite change of tack in García’s presidency. Simon’s left-wing credentials make him a much more palpable candidate for the angered unions and demonstrators. His appointment of a left-leaning surgeon to the post of health minister should go down well with the doctors. The fact that he’s not from the corruption-smeared APRA-party is another endorsement.

Garcia’s motivation for fielding him probably has a lot to do with trying to take the wind out of the sails of his political nemesis Ollanta Humala. The radical nationalist and former military officer who enjoys enormous popular support among the rural poor came in a close second in the elections.

The other major opposition force, the right wing Unidad Nacional led by Lourdes Flores, would normally have nothing to do with Humalla. However, the recent scandal saw both groups aligned as they clamoured for the cabinet’s resignation.

By appointing Simon, García hopes to regain some congressional support. If he manages to do just that, it’ll be the first step in a long uphill struggle for the three years that remain of his presidency.

(This column is dedicated to Michael Bond. Yesterday was exactly 50 years ago that he introduced the world to that Wellington-boots sporting bear named Paddington, who of course hails from Darkest Peru)

Tuesday, September 30, 2008

Lat-Am Watch: Correa plays a different tune

Ecuador's magna carta: Leftist not Leninist

Ecuador's president Rafael Correa received the backing of nearly two-thirds of the electorate on Sunday as voters approved a new constitution meant to bring more equality to the small Andean nation. Yesterday evening, with most of the vote counted, Yes was beating No by 64 percent versus 28 far exceeding the prediction of pollsters who put Yes at around 55 percent before the referendum.

Ecuador is the third country in the region to consider a new magna carta in just over a year. In 2007 both the Bolivian and the Venezuelan government rolled out draft constitutions.

In Venezuela, whose president Hugo Chávez is often considered the leader of a leftwing group including Correa and Bolivia's Evo Morales, the referendum ended in a failure for the government. Just over half the electorate disagreed with the constitution drawn up by the Chávez government. Those who voted against the draft were appalled at certain bills, which, for instance, allowed the president to be indefinitely re-elected.

As for Bolivia, Evo Morales was only slightly more successful than his ally in Venezuela. For although a slim majority of the constitutional assembly approved the draft, they had to do so without the opposition present and inside an army barracks for fear of the angry crowds seeking to stop the vote.

That highly controversial bill will be submitted to a popular vote at the beginning of next year, Morales has said, although recent violent clashes between government troops and separatists suggest the referendum might be postponed. The Morales constitution would mean a much more centralized distribution of income from fossil fuels and would allow for the creation of a parallel judiciary based on indigenous customs.

Given these two precedents and given the largely overlapping political outlook of the leaders of all three countries, you'd be forgiven for assuming that the constitution approved in Ecuador is just as extreme and controversial as the other two.

However, if we take a closer look at the bill passed on Sunday, we see that that's not the case. Ecuador's new constitution, although definitely leftist and progressive in its proposals, is a far cry from the anti-democratic charters drawn up by Chávez and Morales.

First and foremost, the power of the executive. Whereas Chávez aimed to be re-elected indefinitely, even promising to remain in power well beyond 2020, in Ecuador presidential ambitions are more restrained. Re-election is allowed only once and a term is set at 4 years, unlike the six-year term enjoyed by Chávez.

To bring the new system into place elections for all branches of government will be held at the beginning of next year. If Correa is elected – which seems pretty likely given Sunday's result – then that means he will remain in power at least another four years, and possibly eight, making his total time as president 10 years. Chávez, even without his new constitution, will have reached his first decade in power this December and still has four more years to go!

Add to that the fact that Ecuador, unlike Venezuela, has suffered from an overbearing and extremely corrupt congress that severely limited executive powers, mainly in the interest of more pork. Even many opponents of Correa agreed that the relation between the two powers needed to be redrawn in a more balanced setup.

Admittedly, the new constitution allows the president to dissolve congress, but only once during his term and elections must be convened immediately.

The Venezuelan draft constitution also awakened much opposition because of the way in which it seemed to undermine private property, by introducing new kinds of 'communal property' and stressing the 'socialist' identity of the state.

Ecuador's new bill of rights is certainly not liberal in any economic sense, earmarking large industries such as oil and telecommunications as "strategic" and therefore to be controlled by the state. The state is dealt the leading role in the economy and has the power to intervene in markets. But that still falls far short of actually dismissing the rights of companies or landowners on principle.

(Considering that the supposedly neoliberal Bush administration just suggested spending over 15 times Ecuador's GDP on nationalizing financial companies, you have admit that current trends are in Correa's favour)

Another marked difference is the way indigenous communities are treated. The charter drawn up by Morales' supporters in Bolivia foresees in a strengthening of Indian legal customs putting them on par with the regular judiciary in what would amount to something like an indigenist sharia.

In Ecuador, nothing like that is about to happen. Although the new bill of rights stresses the rights of indigenous groups and is even themed around the idea of Sumak Kawsay – or "decent living" in Kichwa – the rule of law is still firmly in the hands of trained judges. In fact many indigenous groups objected to the fact that the new constitution considers only Spanish to be the official language and does not add Kichwa as an alternative as is the case in Bolivia with Quechua and Aymara.

Other clauses in the document, such as allowing civil marriage for gay partners and free health care for the elderly amount to what many European countries consider basic human rights.

So far from being an anti-democratic and authoritarian, Ecuador's new constitution is in many ways a sensible charter. And although its economic outlook is overtly statist and more often than not clashes with the values defended in this column that still doesn't make it a blueprint for socialism.

Tuesday, September 23, 2008

The Unintentional Champion of Free Trade

Or how Chávez brings Colombia's FTA ever closer

Lat-Am Watch for the Buenos Aires Herald

It's not what you'd call a timely visit. Colombian president Álvaro Uribe showed up in Washington last Friday to pitch the Free Trade Agreement (FTA) between the US and Colombia, which is still pending congressional approval.

Just over a month shy of presidential elections and smack-bang in the middle of Wall Street's worst week since 1930, Uribe didn't exactly get the red carpet rolled out for him. But that didn't deter the Colombian, as he fights to get the deal approved before his ally President Bush leaves office in January.

That approval, however, is said to be more and more unlikely. With a Democratic majority in Congress and the US economy in a tailspin the chances of getting the agreement ratified are slim. If in the end it means that the deal doesn't go ahead, the result would be regrettable. Not only for US-Colombian relations, but also for relations between the US and Latin America in general.

It would send the wrong message to the entire region. After having been neglected by the Bush administration for the past 8 years, Latin America is in need of some reassuring signs from its northern neighbour. As the region's economies veer evermore towards Asia and even the Russians gain a foothold on the continent (look out for that fleet of ironclads headed to Venezuela!), the US really can't afford to sit out another round.

For countries such as Venezuela, Cuba and Bolivia, a US rebuff of Colombia will be seen as a victory against "Yankee Imperialism". As for those countries still sitting on the fence, such as Uruguay, Paraguay, Peru and, yes, Ecuador, a resounding No to the FTA will convince them of the need to enter agreements with countries such as Russia or China or anybody else ready to step in the void.

Obviously, there are many reasonable arguments against the signing of a Free Trade Agreement. One very serious one is the human rights abuses in Colombia, mainly against trade unionists. The killings of peasant-leaders and others have gone almost completely unpunished by the Colombian government. For years advocacy groups such as Human Rights Watch have been lobbying Congress to take these abuses into account when discussing any deal.

The fact that Human Rights Watch is abhorred by Uribe's lack of action is worrying and should be taken seriously. But when it's Democratic congressmen claiming they're against the Free Trade Agreement on human rights grounds, it doesn't ring quite as true.

Let's face it. Democratic congressmen, with the odd graceful exception, have a tendency to object to human rights abuses only in those places where there are few or no US interests at stake. After all, just a year ago 86 Democrats happily joined their Republican colleagues in approving a 120 billion dollar bill for the ongoing idiocy in Iraq, without even so much as a hint of when it would end.

The real concern has more to do with gut-populism than lofty morality. It's about the old fear of US-jobs going to lower-wage countries, a key-issue in the Obama campaign, who of course opposes the FTA with Colombia. Playing to those irrational fears is what an election year is all about. (According to the US Bureau of Labor Statistics both the number and, more importantly, the quality of jobs in the US has increased steadily over the past 25 years).

And think about it. Even if it were true that free trade is the cause of job losses, where would you rather have those jobs go? To Colombia, a friendly neighbour with no geopolitical cards up its sleeve, or to China?

Just in case you're worried that this is some veiled attack on Barrack Obama's candidacy, John McCain's policy on Latin America is equally based on playing to the electoral underbelly. His anti-immigration policies and support for that pharoanic wall on the Mexican border are about as out-of-touch as Obama's defence of tariff walls.

However, all is not lost. There's still a good chance the honourable elected representatives will approve the FTA for Colombia, opening the way for Peru and others. Recent events may be conspiring to convince the Democratic majority of the need to send a positive signal to the region, despite domestic economic woes and electoral rhetoric.

Those events are the expulsion of the US ambassadors by both Bolivia and Venezuela a fortnight ago. "That was a serious incident," Stephen Donehoo, a Latin America analyst based in Washington told BBC Mundo, referring to the harsh measures taken by presidents Evo Morales and Hugo Chávez. "The congressmen will certainly be taking that into account when they decide on the FTA," he added.

And if increasing anti-US rhetoric by the likes of Hugo Chávez is what's needed to push the Democrats into the Yes-camp so that Colombia can clinch its FTA, then Uribe may just be in with a chance. Because the Bolivarian is only just getting warmed up.

Consider this. Human Rights Watch complains about Colombia's record, but Venezuela actually kicks HRW out when they report abuse. How will that go down in Washington? And there's more coming. Chávez must divert attention from the swelling stench of corruption coming out of a Miami-courthouse as we learn more and more about the dealings of Antonini Wilson and the suitcase with 800,000 dollars in cash.

Moreover, he has to shore-up support as Venezuela approaches crucial mid-term elections for governors and municipalities in November. With rising crime staying abreast of sky-rocketing inflation, railing against Uncle Sam is about all Hugo Chávez has going for him. So next time he kicks out a diplomat or runs off an NGO, Colombians should be cheering him on.