Book your flights to Cuba, because barriers and travel warnings are now down. For the first time in half a century tensions between the United States and the island off the coast of Florida, which stood as a dark power during the Cold War times on the side of Russia, have been eased.
U.S. President Barack Obama has called for a move to reestablish diplomatic ties with Cuba (Politico). The move and efforts have suddenly been made known to the public as Cuba released a long time U.S. hostage who had been held captive since 2009. Of course U.S. citizen’s lives are important, but what pushed such a big move for friendship after the release of one hostage?
“[Alan] Gross was convicted of espionage by a Cuban court in 2011 and sentenced to 15 years for bringing telecommunication devices into Cuba” (WREG Memphis).
In addition, the United States has released 3 Cuban spies.
Although seemingly sudden, the deals between U.S. and Cuban officials has been culminating over the past year. Obama calls the embargoes on Cuba to be a failure.
What this means:
Travel restrictions eased
Increased exports of U.S. goods to Cuba
U.S. travelers to bring in some items
Embassies will be opened in both countries
While only Congress can formally overturn the five decades-long embargo, the White House has some authorities to liberalize trade and travel to the island,” WREG Memphis.
With the petro dollar value falling, Russia loosing influence and Venezuela’s economy faltering in the midst of falling prices; some of Cuba’s main financial and export partners are withering at the core. It’s no wonder, if Cuba along with other countries is turning its eye to new partners. It’s not about the prices of oil, but petro politics and who’s producing it. The reality is the U.S. and Canada fracking and shale revolutions are changing dynamics. The global economy and relations are switching as can already be seen as almost a 50-year silence is being broken between two former rival countries.
With increased globalization, the creation of trade agreements and non-binding free trade alliances has grown more and more important in recent times. There has now emerged non binding organizations that seek to promote certain goals and ideals. This has been seen with the establishment of the New Development Bank of BRICS (Brazil, Russia, India, China and South Africa), which is basically an agreement among flourishing countries to directly promote trade and investment.
The Organization for Economic Cooperation and Development, OECD, is a prime example of an organization established for the growth and well-being of countries, however in a sustainable matter. It is groups like this that promote change, while also supporting independent development for each signatory. The organization was established in 1961, and has since then been adding signatories.
Chile and Mexico are the only established OECD members from Latin America, but Brazil and Colombia have recently increased involvement with the organization.
Why mention the OECD, what is its importance? The importance of the OECD, is the persistence of certain economic and sustainable reforms that the organization pushes countries to promote. Reforms such as green policies. The OECD and organizations alike are becoming new types of influential/governmental sub-units that help guide the global community. The sovereignty of each nation is being supported, but within the global village each country is now like a city; the organization (OECD) serving as the governing head.
Imagine the United States, there are 50 states and within each of those states, a multitude of cities that have their own local governments. Each state has their own independent state regulations and policies, however when interacting and trading it is easier for there to be a general head that guides the goals and relations among each state. The same is true for examining in the world. Countries are no longer left to their regional relations, but have global relations and ties.
If Colombia and India are not neighbors and are in fact on different parts of the globe, as they are, how can they grow together and become sustainable together? If both countries were able to work towards the same goals, this in turn would promote a better inflow and outflow of goods between these two countries who were once strangers to each other. With an organization like OECD, not only are these relations established, but are pushed to follow a similar doctrine and goal. It sets an international standard. A standard that is needed in order to increase sustainable development without complete chaos.
I used to firmly believe that the United Nations was unable to accomplish anything, a reflection of American government under the Articles of Confederation before the Constitution. The states had more power than the leading governmental head, the governmental head had no income from taxes and therefore no army to enforce the law. So is the story for world organizations like the United Nations. Despite this analysis, specialized organizations like OECD and others are functionally working, they are useful and important. They are useful and important because they tailor to a members specific interests.
Colombia is much more than just drugs and coffee. Although commonly associated with heavy drug production, with the infamous FARQ drug cartel that arose in the 90’s; or to their coffee exports, Colombia has seen great economic growth with their GDP growing more than 4% each year for about the past three years. Current president Juan Manuel Santos Calderon, who graduated from the University of Kansas and later went on to attend London School of Economics and Political Science became president in 2010 who has instigated an economic movement different than those previously observed from countries like Argentina and Bolivia.
Santos, former Minister of Defense, took a strong stance against guerrilla groups within Colombia, like FARQ, and has tried to greatly reduce the competition between the government and guerrilla groups over societal influence/control. Under his administration he has pushed for expanding international trade in Colombia while implementing sound policies and promoting free trade agreements; Colombia has become one of the most business friendly environments within Latin America.
Colombia as well, has a low inflation rate of 1.9% and has brought their unemployment rate down to the single digits at about 8%. Colombia has been working within the global market and established alliances in the Pacific realm and with the United States, but Colombia ascended into one of its most important agreements on September 19, 2013. Colombia was a signatory of the OECD, Organization for Cooperation and Development, and has set its eyes on social well-being and economic growth.
Our member countries have used the accession process to improve regulations, address emerging policy challenges and promote further reforms. The process can help Colombia move faster towards its own policy priorities. It is the people of Colombia, first and foremost, who will reap the benefits of Colombia’s membership in the OECD,” said OECD Secretary General Angel Gurria.
As of 2013, Colombia was the fourth nation with the highest GPD in Latin America, and at the same time has the lowest risk perception linked to its economic market.
The 5.1% growth rate confirms our macroeconomic strength and that we are on the right track. We are leaders in employment generation, low inflation and with investment and economic growth in Latin America” stated the president of Colombia, Juan Manuel Santos Calderon.
Colombia, like the majority of Latin American countries, has an economy that depends heavily on energy and mining exports. For example, the exportation of crude oil alone accounts for about 42% of Colombia’s exports, according to the Observatory of Economic Complexity. This dependency on the market of few resources causes the market to become weak. However under Santos agreements, like further involvement with OECD and the creation of various new government agencies, Colombia is in the strive with others to become more independent of its market factors of production.
Recently, all over different customary websites and Youtube, the newly made government agency in Colombia called Proexport has been advertising for the investment in Colombia. The purpose of the company is to promote the trade of non-traditional exports within the country, basically opening up opportunities for new sectors and more market diversity.
Proexport’s new “Invest in Colombia” campaign, is a new and innovative approach to get investors to think about new playing grounds. Unlike populist countries like Argentina and Bolivia, Colombia is openly advertising their resources and what they have to offer to the outside world, with free-market cooperation in mind.
“I voted for Morales,” said Flavia Nunez, a 50-year-old office clerk, in central La Paz. “These other right-wing candidates would take us back in time. I don’t want that.”
Sunday, October 12, 2014, poll booths were up and running in Bolivia. However the elections took a predictable course as current president, Evo Morales, appears to be the clear leader. Morales, famed for his indigenous Aymara descent and the son of a coca farmer, is assumed to win the Bolivian elections for a 3rd term.
Although Bolivia has a system limiting presidents to two terms, in 2009 Morales lead a charter to “ignore his first term, which was under the old dispensation,” says The Economist.
Bolivia, having about 6 million registered voters, was urged to go vote by Morales in an effort to demonstrate the country’s unity. As stated by Flavia Nunez in the above quote, many support Morales’s greater push for nationalism and growth, many Bolivians see this movement as progressive and what they need.
According to the World Bank, the indigenous community makes up about 62% of the country. Bolivia and Guatemala are currently the most populous for indigenous people in all of Latin America, these indigenous groups maintaining the ethnic majority. It is no wonder, that Morales strikes a relatable chord with the people. The Economist noted,
A September survey by Equipos Mori, a pollster, shows that 58% of Bolivians believe the country is “moving in the right direction” and 75% approve of Mr. Morales’s management.”
Many Latin American countries like Venezuela, Peru, Argentina, Brasil, Ecuador and Bolivia (as examples), have emerged as natural gas and crude oil exporters. Within the last couple years, Bolivia’s exportation of gas, minerals and soybeans have enabled the economy to maintain a growth rate of about 5% since Morales took office in 2006.
With similar ideas to Chile and Argentina, Bolivia has begun a nationalization movement,
Semi-nationalizing the hydrocarbons industry enabled him to channel much of this windfall into state coffers. –The Economist
Often times Morales is compared to presidents from Ecuador and Venezuela with his strong pull and almost dictatorship type control within the country, however the people do not paint him in such a light. Political enemies have been prosecuted by Morales before, and his control of about 2/3 of Congress, allows him to easily create and implement new policies.
Bolivia has the resources, but Morales’s “anti-American and anti-capitalist rhetoric” as noted by The Economist foreshadow possible xenophobic problems and an uncooperative market for international trade and investment.
Bolivia is another example of the populist movement within Latin America, the question is if they will take the bait from similar socialistic systems like Russia and China, or will they shut down and miss the international opportunities they need to continue their economic growth?
With the previous blog post analyzing the switch from ‘cultivation to privatization,’ recent actions by governments like Chile have proven that a real movement to privatization is taking place within Latin America.
Chile has done a lot to rid itself of poverty, especially extreme poverty, since the return to democracy. But we still have a ways to go toward greater equity. This country does not have a neoliberal economic model anymore. We have put in place a lot of policies that will ensure that economic growth goes hand in hand with social justice, “said Chilean President Michelle Bachelet.
Bachelet intends to do just that, as proven by the carbon tax which has just been passed in Chile that will be implemented in the year of 2017. In 2017, the measurement of CO2 emissions will begin, and the tax will be imposed on companies the following year in 2018.
Chile is the first country within South America to approve a carbon tax, within in regards to Latin America; Mexico was the first to impose a tax on the sale of several fossil fuels. According to Reuters,
Part of a broad tax reform, Chile’s carbon tax will target the power sector, particularly generators operating thermal plants with installed capacity equal or larger than 50 megawatts (MW). These installations will be charged $5 per tonne of carbon dioxide (CO2) released. Thermal plants fueled by biomass and smaller installations will be exempt.”
As of now, about 80% of Chile’s energy is based on fossil fuels, and more specifically their imports of coal and oil. The companies within Chile that are estimated to pay the majority of this new tax are: Endesa, AES Gener, Colbún and E.CL.
Although Chile on some levels is being praised for the new green reform that it will be making, while also planning to use the revenue earned from the tax for new educational programs for the country, there has also been lots of backlash.
Before the implementation Michael A. Hammer, the United States Ambassador to Chile, had “criticized the proposed carbon tax as a measure that would discourage foreign investment in Chile,” according to a Global Environmental Law blog post.
The companies have also complained that the tax will increase the price of electricity and were upset that industrial sectors were not targeted within the tax proposal.
However, the British environmental news website BusinessGreen reports the Chilean reform also features a number of other environmental taxes on nitrogen oxides and sulphur dioxide.
Regardless of criticism, this tax reform sends a message to the international community. Chile, one of the leading economies in Latin America is taking steps for reform, privatization, and a more nationalized economy geared towards success, that isn’t enslaved to the global market and outside investor policies.
It is without a doubt that Latin America is full of resources. Originally when the conquistadors, Hernan Cortes in Mexico and Francisco Pizarro in Peru, arrived in the 1500’s the mineral rich land was immediately exploited. However, the mineral jack pot is not the only resource that Latin America has had exploitation problems with; the regions make-up consists of vast ecological resources, flourishing marine life, agricultural hubs, and the petrodollar.
The Amazon region alone, located in north central South America, accounts for at least 10% of the world’s known biodiversity. The region itself extends across 6.7 million km, which is about twice the size of India, according to the World Wide Fund for Nature (WFF).
Just within the western part of Brasil, there are 3,500 different varieties of plants. 250 different fish species and 650 different types of birds, writes Arturo A. Fox, author of Latinoamerica: Presente y Pasado.
Brasil’s agricultural center also provides the United States with about 50% of its cattle/beef imports, 26% of Russia’s imports, and 9% of Hong Kong’s, reported Brazil Business. Argentina ranks behind Brasil and Australia in beef exportation.
As stated, Pizarro and Cortes originally built their empires of off the land’s mineral deposits. According to reports from 2004 by USGS (United States Geological Survey), Latin America, “is a major producer of mineral commodities like copper (53 percent of world production in 2004), silver (48 percent), zinc (30 percent), nickel (32 percent), molybdenum (43 percent), iron ore (29 percent), gold (21 percent), lead (18 percent), primary aluminum (17 percent), salt (19 percent), and manganese (12 percent).”
Chile as well produces about half of the world’s consumption of iodine, according to Fox.
Lately, however, the petrodollar has spoken the most over other resources, especially in Venezuela. A whopping 90% of Venezuela’s exports alone are its crude oil. Venezuela, being a member of OPEC (Organization of the Petroleum Exporting Countries), accounts for the highest percentage of crude oil reserves out of all of the OPEC countries, an estimated 24.7 percent as reported in 2013.
OPEC itself accounts for 81% of the world’s crude oil reserves, about 1,206 billion barrels.
Venezuela is not the only oil extraction country, companies like Mexico’s Pemex, Peruvian PetroPeru, Argentinian Bridas Corporation, Brasil’s Petrobras, Chile’s Empresa Nacional Del Petroleo, Colombian Ecopetral, and Urugauy’s ANCAP, are examples of progressively growing oil and exploration and productions companies within the region.
The Global Market benefits everyone, right?
Since the inception of these countries, there has been a big problem among government instability, resource management, and a growing globalized economy that eventually ensnared most of these countries into a dependent trend where they become reliant on their fixed export economies. Latin America is an example of a region cultivated and harvested for its resources, however not making sufficient income from the global market to actually stimulate growth from its exports within its countries.
The instability and weakness of the governments causes officials to give in to foreign investment, usually not fighting against the exploitation of their resources, let alone protecting the rights of their citizens. Shady back deals for personal gain between foreign companies and corrupt regional figure heads is normally how most of the work was and still is done in many parts of the region.
Due to market dependence, a term in 1995 was coined after the Mexican Economic Crisis, which inevitably affected international markets around the world. The term is, “el efecto tequila,” or rather “the tequila effect.”
The tequila effect, which became prevalent after the 1995 crisis, showed some of the dangers of such an intertwined global market. If one market went down, especially an economic powerhouse or supplier, like Mexico was to the United States, all the other economies would as well.
A Switch to Populism
After the 2008 Financial Crisis, those countries that didn’t get the picture the first couple times, realized the pain of a recession caused by the tequila effect.
Brasil under President Luiz Inacio Lula da Silva, was one of the first to come out of the 2008 Financial Crisis and slowly began a movement of privatization and populism.
Populist, or neo-populist experiences, have differed with neo-liberalism on the issue of state intervention and social inequality while also promoting non-pluralist forms of political engagement,” according to writers Fabian Bosoer and Federico Finchelstein ofQueries, a European progressive magazine.
Other leftist leaders like, Michelle Bachelet of Chile, Cristina Fernandez de Kircher of Argentina, Evo Morales of Bolivia, Tabare Vazquez of Uruguay and Alejandro Lugo of Paraguay, also began to implement a more populist privatization type system. The switch of various countries to a more leftist system in Latin America has still remained under a democratic scheme as of the 2000’s, but most leaders can permit the perpetuation of their own power under corrupt systems.
These new movements have even lead to rebellions against neoliberal reforms and against multinational corporations dedicated to the exploitation of natural resources, especially resources like petroleum and natural gas. Bosoer and Finchelstein also note,
In Latin America, populist movements have tended to combine authoritarian plebiscitary presidential leadership, elected by popular majorities, and a curtailment of political rights parallel to the expansion of social rights…As a whole, Latin Americans lived through the first grand crisis of neo-liberalism some ten to fifteen years ago and the result was that the region left neo-liberalism behind.”
Although some countries like Chile, with a new carbon tax, are making progress with privatization, most have rather began to create their own new partnerships, as has been seen in past articles with increased trade and aid between Russia and China and Latin America.
Argentina is an example of a country that is trying to turn away from U.S. debts and start anew.
Ironically under these new populist systems, recently Brasil and Argentina have both been in different stages of an economic recession.
Brasil, with the 7th largest nominal GDP in the world, finds itself in a recession. Despite the hosting of the 2014 FIFA World Cup, Brasil’s economic stability has actually gone downhill instead of the reverse.
The Brasil’s statistics bureau reported, “economic output, GDP, fell by 0.6% in the three months to June, worse than analysts had predicted, and revised figures for the first quarter of the year also showed a fall of 0.2%.”
Brasil, recently the star country of Latin America, because of its advancements and initial progressive involvement in the global community, has taken a turn for the worst and hit a wall. Unfortunately, soon to be facing reelections, Brasil’s left-leaning President Dilma Rousseff has been of recent blame for the economic downturn.
“It is a good picture of what the economy is suffering – a slowdown in industry, a fall in investment, rising inventories. The recovery from here will be slight,” noted Eduardo Velho, chief economist at investment firm INVX Global in Sao Paulo. Velho also noted that great reforms would need to be implemented by whoever wins the election in October.
This is having a sufficient effect on interrelations and trade among Latin countries.
This blog is a platform for the investigation of the economic situations and governmental transitions within Latin America and how these factors have increased activities with unusual trading partners.