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How Correa Weathers Quito’s Economic Strom AS/COA Online 02/27/09
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| President Rafael Correa. (AP Photo) |
Ecuador, facing declining remittances and low oil prices, finds itself confronted with financially tough 2009. But the upcoming presidential elections present an opportunity to redirect voters’ attention to other quarrels picked by the administration of President Rafael Correa. His style of governing has mustered ample support for his political party Movimiento Pais while sparking multiple controversies abroad. Along with his Vice President Lenin Moreno, Correa will get another chance to put his formula for government up for a reelection test, thanks to a revamped constitution approved last August. The presidential campaign begins March 10 with the election following on April 26.
Quito’s short-term financial forecast appears bleak. The Economist Intelligence Unit predicts Ecuador faces negative growth of 3.2 percent and, from 2010 up to 2013, experience half the growth rate of the past four years. In addition, the bond default announced by the Finance Minister María Elsa Viteri on February 16 unnerved investors, on guard since December over whether Correa’s government would make payments on what the president called “illegitimate” external debt.
Like most of the countries in the Western Hemisphere, Correa may have to drastically cut spending in 2009 as a result of the global crisis decreasing his popularity levels. Statistics prepared by Ecuador’s Central Bank confirm the downward slope in oil and non-oil related exports, gross domestic product, and remittances. El Comercio reports that international reserves have dropped significantly in the last six months thanks to lower oil demand and prices. Lower inflation rates starting in October stand as one bright spot.
Yet, despite these financial trials, Ecuadorians continue to favor Correa’s administration. A poll by Cedatus/Gallup show that Correa’s approval ratings remain at a solid 70 percent in January. Some of the initiatives undertaken by his government include his calls against renewing the lease for the U.S. air force base in the port of Manta, breaking diplomatic relations with Colombia after Bogota’s unauthorized military raid against guerrillas last year, and threatening Repsol to freeze its assets for non-tax compliance. The Latin American Thought blog offers an explanation of how the initiative to turn the town of Manta into a megaport developed by Hong Kong-based Hutchinson Port Holdings may turn sour as a result of sinking manufacturing numbers in China. On bilateral relations with Colombia, World Politics Review says that after a year “[B]oth sides’ failure to make progress on reconciliation may be politically motivated.” The article explains that while Correa gains support by defending Ecuador’s sovereignty at all costs, Uribe has other matters deal with so that restoring diplomatic ties with its neighbor may not stand as a top priority. To defuse the Repsol affair, a prompt visit by Spain’s Foreign Minister Miguel Angel Moratinos on February 25 forged a compromise to repay 20 percent of the $444 millions demanded by the government by a March 12 deadline, Hoy newspaper reports.
In spite of a new occupant in the Oval Office, Quito’s relations with Washington remained strained after Ecuador’s decision to expel the U.S. Embassy’s First Secretary Mark Sullivan, accusing him of meddling with internal affairs. The move was preceded by the expulsion of U.S. official Armando Astorga on February 7 after Washington ended support for a police support program. In a daily press briefing on February 19, U.S. Department of State Acting Deputy Spokesman Gordon Duguid expressed concern and suggested that the United States is weighing whether or not to engage in diplomatic retaliation.
The Instituto Latinoamericano de Investigaciones Sociales in Quito unveiled an analysis of Ecuador’s state of the economy in 2008.
Read this article as originally published at the AS/COA website.
Chávez Clears the Road for Reelection AS/COA Online 02/18/09
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| Chávez will run for his second reelection in 2012. (AP Photo) |
In a decisive electoral victory on February 15, Venezuelan President Hugo Chávez won the right to run for his second reelection and possible third presidential term after voters approved an end to term limits. This is a political rebound for Chávez, who lost a proposed constitutional reform in December 2007 and important mayoralties in municipal elections last November. With this renewed mandate, he faces the daunting task to deal with rampant insecurity and corruption, rising inflation, and imminent economic adjustments to his vast social programs and fiscal expenditures.
Venezuelan electoral authorities announced that the “Yes” vote won by 54.86 percent of the “No” vote received 45.13 percent with a participation of more than 70 percent. International observers gave the referendum high marks for transparency and underlined the trustworthiness of the referendum’s official tally. But Chávez’s use of all state institutions and media at his disposal to push the amendment strained the process since the beginning. Chávez exerted pressure by emphasizing the lack of political alternatives and warning that Venezuela would crumble without his leadership, said pollster Luis Vicente León.
The opposition accepted their defeat with temperance and asked Chávez to turn his attention to the domestic agenda. Caracas’ Major Antonio Ledezma said that hopefully politicians “have turned that page of the political agenda” and that people “voted yes to solutions for garbage disposal, insecurity, inflation, and anarchy that overshadows governability.” In an interview with the Los Angeles Times, Tal Cual Editor Teodoro Petkoff stressed important inroads made by winning 10 percent of the vote in this referendum in comparison to Chávez’s 2006 reelection victory margin of 64 percent. “And I don’t have the slightest doubt that the deterioration of Chavez’s support will continue through the next presidential election in 2012,” Petkoff adds.
Meanwhile, economists sound the alarm about the dangers laying ahead for the government due to falling revenue from oil exports and inflation. “I would say that Venezuela can count on a sizeable cushion of reserves and foreign exchange liquid assets to help it ride the current economic down cycle. But not for very long. By all accounts, Venezuela is destroying assets much more quickly than it’s been building them, given today’s oil prices,” says Eurasia Group’s Patrick Esteruelas in an AS/COA interview. The Financial Times reports that Chávez announced in his victory speech that he will redouble efforts to face the crisis; he was followed by his Finance Minister Ali Rodriguez, who cautiously referred to a stimulus package to control inflation but said that they are waiting to see at what level crude prices settle at to better determine their revenues for this year.
International leaders greeted Chávez’s victory at the polls positively. Colombian President Álvaro Uribe congratulated Chávez for his “democratic victory” in an effort to strengthen bruised bilateral relations. Spain’s government also praised the electoral outcome in Venezuela and urged for continued dialogue to bridge differences between the political parties, El Nacional reports. Even the U.S. government acknowledged the “civic spirit” displayed by Venezuelans and cautiously hailed Chávez’s accomplishment.
At a February 9 AS/COA panel discussion on the Venezuelan referendum, Barclays Capital Senior Economist for the Andes Alejandro Grisanti said that, even with a victory for Chávez on Sunday, he still must deal with harsh economic realities that could further harm his approval ratings when running for an hypothetical third term in 2012.
Read AS/COA extensive coverage on Venezuela’s electoral process and its oil-based economy.
Chávez Tests Popularity AS/COA Online 02/12/09
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| Venezuelans decide about term limits for elected officials on February 15. (AP Photo) |
As Venezuelan electoral workers set up voting stations and bottles of indelible ink for the February 15 referendum, the battle between the “Yes” and “No” sides heats up. On Sunday, Venezuelans head to the polls to decide whether President Hugo Chávez and all elected officials can run for reelection indefinitely. The referendum serves as a test of Chávez’s popularity at a time when inflation and crime rates have soared while falling oil prices threaten subsidies on food, fuel, and medical care. These social programs have thus far been the backbone of a strong chavista movement. But the opposition has made inroads as the economic cracks begin to show.
Yet the Venezuelan government remains confident on that regard, with Chávez claiming his country’s economy to be so strong that “[n]ot even a hair has been touched” by the global financial crisis. Despite his optimism, restructuring efforts are already underway. Citgo—a U.S.-based subsidiary of Petróleos de Venezuela S.A (PDVSA)—announced that it will cut its workforce of 3,762 by two percent, or approximately 75 employees. Additionally, PDVSA’s exploration and operational budget will be reduced between 30 to 40 percent in 2009, El Universal reports.
A new report by the Center for Economic and Policy Research offers up the country’s economic accomplishments in the areas of poverty reduction and GDP growth. But several experts and analysts take a less glowing view. “Venezuela is destroying assets much more quickly than it’s been building them, given today’s oil prices,” said Eurasia Group’s Patrick Esteruelas in an interview with AS/COA Online. Caracas-based Banco Mercantil recently predict that Venezuela’s economy will freeze and public financing could climb from $6.3 billion from last year up to $31.4 billion in 2009, reports Bloomberg.
The Economist offers a look at the political debate occurring among Venezuelans over the benefits of public services involving healthcare and subsidized food products against a backdrop of rampant crime and ballooning inflation. The lead-up to the vote has involved heavy polarization between the “Yes” and the “No” camps and even some violent outbreaks. On February 7, roughly one million people demonstrated in Caracas in support of the No vote and against an end to presidential term limits. Opposition leader Leopoldo López has urged voters to cast their ballots and repeat the December 2007 defeat of Chávez’s new constitution.
Chávez voiced his disapproval of the march but recognized that his followers should not downplay its importance and has gone as far as to condemn the actions of some supporters. A group of his most fervent followers, known as “La Piedrita,” staged teargas attacks on the Vatican diplomatic mission and the home of RCTV Director Marcel Garnier. They also went to so far as to make death threats against opposition leaders. Chávez responded to these actions with a hardened stance, labeling them terrorists and calling for the arrest of its leader Valentín Santana. Spanish newspaper El Pais published an interview with Santana in which he attempts to explain why his group declared some opposition leaders military targets. Additionally, the Venezuelan police arrested 11 suspects—including seven police agents—after a synagogue was attacked and ransacked by vandals on February 1.
At a February 9 AS/COA panel discussion on the Venezuelan referendum, Barclays Capital Senior Economist for the Andes Alejandro Grisanti said that, even if Chávez accomplishes a victory for Chávez on Sunday, he still must deal with harsh economic realities that could further harm his approval ratings when running for an hypothetical third term in 2011.
Sunday’s referendum may serve as Chávez’s last stand. Agencia EFE reports that Chávez vowed to recognize the electoral results, even in the case of defeat. The Venezuelan National Assembly announced that, should the “No” vote win out, the reelection proposal would no come up for another vote.
The Winter 2009 issue of Americas Quarterly features interviews with three candidates barred from running in the November 2008 legislative elections in Venezuela.
Read AS/COA interviews with Venezuelan opposition leader Leopoldo López and student activist Yon Goicoechea.
FARC Changing Course? AS/COA Online 02/05/09
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| Former hostage Sigifredo Lopez embraces his sons after gaining release. (AP Photo) |
Colombia’s biggest guerilla group appears to be taking contradictory steps. On one hand, the Revolutionary Armed Forces of Colombia (FARC) released several high-profile hostages in the past week. On the other hand, they’ve staged at least one new bomb attack. Starting last week, they began a wave of unilateral hostage releases, sending home three policemen, an army soldier, and two politicians held for more than six years. During the same period, a bomb attributed by the government to the FARC partially destroyed police headquarters in Cali. The divergent moves have been catalogued as ways for the group to regain lost credibility while demonstrating their capacity to carry out military operations. Some reports suggest that the FARC appears to be pushing the matter of the humanitarian exchange of hostages for imprisoned rebels and possible peace negotiations in the lead-up to Colombia’s 2010 presidential race.
On February 5, the FARC freed the last of six hostages it had pledged to release—Sigifredo López, a former legislator from the Valle del Cauca department and the only survivor of 12 lawmakers who were kidnapped at one time. The rebels handed him over to a team led by Senator Piedad Córdoba and the Red Cross. Córdoba remains the top mediator between the FARC and the government. She also faces heavy criticism for her insistence on direct, peaceful negotiations rather than a military solution to the conflict, which spans more than four decades.
Cambio magazine reports that, at the same time as the hostage releases, military intelligence has intercepted communications among FARC members indicating intentions to conduct attacks as a means to show they can still inflict damage at will. Cali’s police force is investigating if the recent bombing at the police command center was in fact carried out by urban FARC commandos or by an organized crime gang that wants to destroy evidence, El Pais reports. Authorities are also investigating a bombing at a Bogota-based Blockbuster that claimed two lives to determine whether the guerilla group carried out the attack.
After a year that left the group devastated, the FARC may be hoping to gain sympathy at home and abroad. A Los Angeles Times editorial describes the release of hostages as “a stunt intended to revive public support for an unworthy cause.” Over the course of 2008, massive protests around the world demanded the release of all FARC captives as well as an end to terrorist activities. Some hostages freed along with Ingrid Betancourt in the Hollywoodesque “Operación Jaque” confirmed that low-ranking guerrillas feel abandoned by their superiors. Another sign of low morale among FARC troops is the high desertion rate; more than 18,000 insurgents have turned themselves in since President Álvaro Uribe took office in 2002. In a new interview with Al Jazeera’s Riz Khan, Uribe said that at the same time that “we are winning the war,” the government remains “totally open and generous” to receiving defectors.
The FARC continues to hold 23 “exchangeable” hostages who could be traded for rebels in prison. It remains to be seen whether the insurgents will stage releases while presidential hopefuls warm their engines for the upcoming electoral race. As a Semana magazine article explains, “The FARC believes that with the liberations they are weakening the policy of democratic security and that if [FARC commander-in-chief] Alfonso Cano extends his arm, negotiation will become a fundamental issue in the 2010 campaign. Obviously, the guerrillas would prefer to negotiate with a president who is not Uribe.”
On January 30, El Colombiano reported that Uribe will not seek a second reelection as president, ending months of speculation. Some voiced concern that a third time in office would damage Colombia’s democratic institutions by focusing power in the figure of just one man.
Read an AS/COA analysis about the FARC’s dwindling numbers.
Carlos Macías Web 