Beautiful Horizons

An Utter Failure of Imagination

Alexei Barrionuevo has an article in Saturday's New York Times about a potential energy crisis facing Argentina, Chile and Brazil. What is notable about the article is the utter failure of the leaders cited in the article to look aggressively at alternative methods of generating energy, some of which are under their noses.

Gold - This Year's Diamonds?

Typepad is anything but reliable tonight, so I need to be quick. Accordingly, I urge you to read this article in the New York Times about gold mining and its impact upon a Peruvian town.  As fopr Lawrence Kurlander, a mining executive mentioned in the article, please don't expect us to believe that you got something for nothing from Vladimiro Montesinos. None of us are that stupid.

Speaking of Peru, by the way, former Rio correspondent for the Times, James Brooke has a profile of Montesinos's former boss, ousted president and current fugitive, Alberto Fujimori and his plans to return and run again. Just what Peru doesn't need.

The Costs of Infrastructure and Privatizing in Latin America

There's an article worth reading in today's New York Times by Juan Forero about problems in Latin America with providing for basic needs. Much of it focuses on the case of Águas del Illamani, a French-owned company that was providing water to among other areas in Bolivia, El Alto, a community consisting largely of the Aymara indigenous group. Public sentiment pressured the government to cancel the contract with Suez, the parent company of Águas del Illamani.

Consider this:

The Bolivian government had in fact welcomed Aguas in 1997 to turn around an inefficient public system that provided water to El Alto and the adjacent capital, La Paz. After it arrived, Aguas says it met its contractual obligations and expanded services, and even government officials concede that the company did an admirable job at first. Potable water, offered by the state water company to 152,812 households in the two cities in 1997, rose by 81,180 households in seven years. Sewage service was expanded to more than 160,000 households by last year from 95,995.

But eight years into its contract, Aguas ran into problems.

Profits were never as high as the company would have liked, since the former country people who flocked to El Alto, a mostly indigenous city of 750,000, were used to conserving and never consumed much water.

When company officials asked state regulators for permission to increase monthly fees, their request was rejected. But the company won permission to increase the hookup fees, to $450 from just over $300.

It was a fee most people here - where the average monthly wage is about $55 - could never hope to pay.

As the article notes, clean water is a problem in many poor communities in Bolivia "where a lack of clean water contributes to the death of every tenth child before the age of 5." I'm all for some privatizations. I think that the privatization of Companhia Vale do Rio Doce (CVRD)  was a fine idea in Brazil. I don't think that the government should be in the business of mining and the expansion that CVRD has done since the privatization speaks to the wisdom of that move. I'm for the privatization of CODELCO in Chile for much the same reasons. In addition, with CODELCO, as 10% of the earnings are earmarked for the Chilean military which is a holdover from the Pinochet era, the money could be put to better uses. Chile's relations with its neighbors (with the exception of BOlivia are generally good.

When one starts talking of basic services such as water, however, the profit motive should not rule. There has to be a way for people to be able to get water affordably. About five years ago I was in the town of Catas Altas in Minas Gerais, Brazil. Catas Altas is near Caraça and Santa Bárbara and is surrounded by mountains. I went with some friends to sample the water as it came down from the mountain to the treatment plant. The inescapable feeling was that water is life and without it life will not exist. Without clean water children die. There has to be a better way.

By the way, if you're reading this and you live in Tennessee or North Alabama and you disagree with me, ask yourself if you'd like to trade that inexpensive TVA electricity for the rates I pay Con Edison. Your perspective can be different when the issue hits close to home.

Around the Blogs

My monthly Winds of Change Latin America Regional Briefing is up at Winds of Change. Click over,  check it out and add your thoughts in the comments.

Michael Bérubé  shows in this post why he defines the term rapier wit and why he is one of the best writers putting finger to keyboard.

David Holiday links to a WSJ article about how the IMF hasn't sated its desire to inflcit its remedies on Latin America. Adam Isacson has this detailed look at what he feels may be the 2006 aid request for Colombia (Plan Colombia is due to expire at  the end of this year) and also has this fine takedown of the Colombian government's, AUC's and OAS's tin ears on the impunity demobilization plan for the paramilitaries.

A Prescription for Latin America's Economic Woes

Noted economist Jeffrey Sachs has an op-ed piece in today's Miami Herald with some brief hostorical background as to Latin America's history of economic woes and some good ideas to lead to more prosperity:

Beyond this, a basic failure of economic strategy has largely been overlooked. Whereas Asian governments, for example, relentlessly act to raise their economies' scientific and technological capacities, national policies to promote science and technology rarely gain such prominence in Latin America.

The result is a failure to benefit adequately from the global technological revolutions. Asian developing countries now produce computers, semiconductors, pharmaceuticals and software. By contrast, even Latin America's star performer, Chile, remains largely a resource-based economy, concentrated on copper and agricultural exports. These sectors are technologically sophisticated, but form a narrow base for long-term development.

The situation is far from hopeless. Brazil now exports airplanes and many consumer durable goods. Mexico, too, has begun to mobilize significant technological prowess. Argentina, Chile and other countries could become high-tech agricultural producers in the forefront of agro-biotechnology, for example, if they put their minds to it.

[...]

In short, Latin American societies must invest more in their people, so that they can join the cutting edge of global productivity. If these investments reach all parts of Latin America, rich and poor, the region's prospects will brighten enormously.

In short, spend much more on societal infrastructure, including and especially education. Who can argue with that? The problems, unfortunately, are not easily solved in countries like Brazil for example. Among the best and most difficult universities to gain admission to in Brazil are the Federal Universities. They are tuition free, but not means tested, so if you are the child of a wealthy medical doctor, for example, you pay the same fees as the child of a favela dweller: nothing.

Where the advantage swings rapidly to the side of the wealthy is the series of entrance exams called vestibulares. There is a mini-industry in Brazil of courses to prepare for the vestibulares. The courses, of course, are not free and if one does not have the means to take a course, one must be an extraordinary student to pass the vestibular to qualify for entrance to one of the free Federal universities. If one does not qualify for one of these universities, the only other option is to go to a private college, and, of course pay tuition.

So while I agree with Sachs in principle, in Latin America's largest country, the gap between having people to do research and development and educating each generation to respond to new technology and new trends certainly seems to me to be the very definition of the cliché that the devil is in the details.

Cotton Subsidy Victory

This could be very big:

Brazil won a preliminary ruling at the World Trade Organization on Monday night that could force the United States to lower the subsidies it pays farmers to grow cotton and, eventually, most subsidized crops.

The decision supports Brazil's contention that the subsidies paid to American cotton farmers violate international trade rules. A final ruling against the United States could lead to stiff penalties if it fails to change its practices. In another recent case involving steel, President Bush chose to remove subsidies and therefore did not have to face the penalties.

[...]

As the first successful challenge of a wealthy nation's domestic agricultural subsidies, the Brazilian case could also force the United States, the countries of Europe and other well-to-do nations to act this summer and offer new compromises at global trade talks that have been blocked over this agriculture issue for more than a year.

The $300 billion in annual farm subsidies and supports paid by the world's wealthiest nations have been the bane of Third World farmers. The United Nations, the World Bank and charities like Oxfam have said their elimination or reduction would provide the single biggest possible benefit for the economies of poor countries with many subsistence farmers.

Brazilian officials said they brought the case against the United States out of frustration, saying that all attempts by poorer nations to negotiate a reduction of the subsidies had failed.

As the article notes, the Bush administration will probably appeal this ruling, if for no other reason but to delay the decision until after the election. I'm certain anyone would do the same thing under the circumstances. If the decision stands, this could have major implications for the European Union and the US as both have heavy farm subsidies. Also, as the article notes,

With the United States and Europe vowing to revive those stalled trade talks over the summer, the question of agricultural subsidies and supports, especially now for cotton, will be back on the agenda. A compromise reached in trade talks could be less painful than penalties from the cotton case.

This will certainly level the playing field.

Why Reform Efforts Are Still Failing

I selected several categories for this post in large part, because this address by Alan Stoga, the President of Zemi Communications, given at the recent Americas Conference is very much on point and on target. It's too long and there are too many key points to mention that I won't excerpt any of it. I really urge you to read it.

While you're reading it, I'll go off in a corner somewhere and deal with the cognitive dissonance resulting from the fact that Stoga was managing director of Kissinger Associates from 1984 to 1996 and is still a Director and consultant to the firm . . .

Ibero-American Summit

The Ibero-American Summit, involving the Spanish and Portuguese speaking countries of the Americas, Spain and Portugal concluded this weekend with some painful acknowledgments:

"Despite our attempts to build something for all, exclusion, intolerance and discrimination are still the order of the day," said Bolivia's new president, Carlos Mesa, at the two-day event that ended on Saturday.

The summit's final declaration echoed the president, saying "economic reforms did not diminish inequality and social exclusion and in some cases worsened the situation."

Leaders said they would help Bolivia stabilize its economy to avert further turmoil in the Andean region. With no money in its coffers, Bolivia has asked for financing and special access to markets for its goods.

Like its neighbors, Bolivia opened markets to imports and foreign investment and privatized industry with the encouragement of the United States and Europe. But more than 60 percent of Bolivians still live in poverty, making it the poorest nation in South America despite its large gas and mineral reserves.

The story repeats itself across the region. The United Nations says 43 percent of Latin Americans live below the poverty line, while the number of poor has risen to 225 million in 2003 from 200 million in 1990.

Anyone care to make the argument that neoliberalism has been a boon to Latin America's most poverty-ridden citizens?

Some good ideas have come out of the summit. I especially like this one proposed by Peruvian President Alejandro Toledo:

Besides Mesa, another person claiming victory at the summit was Toledo, who got his colleagues to support a plan that he says will bring badly needed debt relief to Latin America while at the same time increasing badly needed investment in the region's roads, hospitals and schools.

The plan would allow debtor nations to reduce debt payments by instead investing the money in infrastructure.

Despite the nay saying by some, and although it's not a panacea, I think that is certainly a better plan than demanding repayment of the debt from countries that can little afford it and it will direct resources to parts of their societies that desperately need to improve infrastructure.

This is also an encouraging effort by Toledo, albeit a drop in the bucket:

Peru, for example, will finance $20 million of Peruvian exports to Bolivia and $20 million more for Bolivian imports to Peru, President Alejandro Toledo said Saturday. Peru will also give $1 million -- ''a symbolic gesture,'' Toledo called it -- to poor residents in El Alto, the area outside La Paz where the antigovernment protests originated.

If I recall correctly, that $20 million figure is about twice as much as the Bush administration offered to former president Sánchez de Lozada earlier in the year.

Latin Trade Bravo Business Awards

Latin Trade magazine is one of my favorite reads. It may be truly one of the most balanced and fair publications in this area. The editors and writers cover the business end of Latin America with an eye towards human rights, environmental and development issues.

Every year they give out the Bravo Business Awards in the following categories: Trade Leader of the Year, Most Innovative Policymaker, CEO of the Year, International CEO of the Year, Financier of the Year, Technology Executive of the Year, Environmentalist of the Year and Humanitarian of the Year (which was awarded in 1999 to Baltazar Garzón, the Spanish judge who indicted Pinochet).

In a vote that will no doubt send US Special Trade Representative Robert Zoellick into paroxysms of rage, Lula has been selected Trade Leader of the Year.

In a vote that will annoy drug manufacturers (but I think is great) Paulo Roberto Teixeira was voted Humanitarian of the Year. He's the Director of the HIV/AIDS Department of the World Health Organization and was the man largely responsible for developing Brazil's AIDS treatment program which has become a model for the world. Memorable quote from Teixeira “Training in dermatology with a focus on leprosy made me aware of how sick people are ostracized.”

Check out all the winners and check out the magazine. It's a good way to gain some insight into LatAm issues for the rest of us gringos.