Oil prices have hit a record low falling below $60 per barrel. Although for gasoline consumers the drop in prices are accompanied with happy bank accounts, other production sectors and countries are starting to feel the effects.
From oil fields in places like Texas to those in Saudi Arabia and Russia, along with extraction plants and businesses, are being affected by the fall in prices. Countries like Venezuela and Russia, whose economies greatly depend on oil extraction and exportation are some of the hardest hit as they try to maintain production quotas in the face of a saturated market.
“Russia’s rouble went into free-fall in Tuesday trading, falling repeatedly to hit record lows, despite the central bank’s dramatic decision to raise interest rates from 10.5% to 17%,” according to BBC.
Why are oil prices down?
The simple answer is that there is a surplus in the supply of oil, but a decreased demand for oil in the global market. This problem has been perpetuated by the exploration and the energy independence revolution in the United States and Canada. The extraction of shale oil in the United States has boomed and created alternative energy sources that are messing with the natural flow of oil trade (Boston Globe).
A wave of marches and protests continue in Latin America. Haiti faces protests from unsatisfied citizens, marching against corrupt and useless governmental system.
Thousands gathered in Haiti this past week, clashing with police. The protesters that remained were met with tear gas, in an effort to subdue the masses.
Originally the protests arose in a plea to hold long overdue elections. Dissatisfied sentiments have led citizens to march to the National Palace, a place that has been restricted for years, according to BBC. Regardless of police force, citizens made it to the National Palace in Port-au-Prince protesting against incumbent President Michel Martelly.
Martelly was supposed to hold elections in 2011, but because of a disagreement between the executive and other legislative branches, elections have yet to take place…three years later.
Many Haitians accused the United States of supporting the country’s incumbent president. Due to this they have turned to Russian President Vladimir Putin for support in initiating actions and governmental transition. Protesters gathered in streets holding up poster with Putin’s face, asking for his aid.
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OP-ED: In economics, from day one you are taught the “Principles of Economics.” One of these principles, is that trade is always beneficial. Trade allows diversity into the market, trade leads to international interactions and trade leads to economic growth. But, in analyzing trade the variables behind what is specifically trade are left out. It as if economics assumes that in the trading system all are equal, when in fact they are not.
The material economy of: production, cultivation, processing, packaging, delivery and consumption…the perfect system of a world with free trade is not all that it seems. Although a linear model of production is easier to comprehend, “we live in a finite world, not in one of a linear system,” as said by the speaker of this capitalism-questioning video.
“La vida real no ocurre en una pagina en blanco; interactura con sociedades, culturas, economias, el ambiente…”
The economic system is not one that can be easily drawn on paper, because it is interacting with all sorts of variables such as different societies, cultures, economies and environments. Another thing too, is that at every step there are limits. In writing down an economic system and international trade and production, variables such as people that are in the mix of the “production, cultivation, exportation,” process are forgotten.
In analyzing this video, it is saying that with one of the biggest populations in the world, the United States has cultivated most of its own resources. The answer therefore is for it to turn to other countries for resources to survive off of. However, the system takes advantage of the weak infrastructures of other countries and inevitably exploits them. However it is not just the United States, it is developed countries over those that are struggling to develop, that become ensnared in the facade of a free market. As said, a free market and free trade is not always beneficial for everyone.
Hay que ver que todavía son “países de la cosecha,” es decir que, hay países quien están atrapados en el sistema del libre comercio. Bajo el sistema del libre comercio estés países son como esclavos quien producen cosas necesarias con sus recursos, pero todo no vale la pena, porque reciben menos dinero de los quien al final venden los productos a un precio más alto. Los productores originales no reciben los beneficios reales del mercado libre.
Group Twenty, known as the G20, is a summit held among the world’s economically developing elite. The forum is made up of the following 19 countries + the European Union: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Republic of Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the United Kingdom, and the United States. Depending of the location of the summit per year, the residing president can invite guest countries if wanted.
“The G20 heads of government came into being in 2008 because economic catastrophe loomed, and the existing global governance organizations and institutions were unequal to the tasks at hand,” according to CIGI and its report on the future of the G20.
This year the 2014 G20 summit took place in Brisbane, Australia. As stated by the CIGI report, the G20 was started after the 2008 Financial Crisis. The forum has promoted economic stability and has helped to realign the economy in the right direction, by the means of collaboration and communication between world leaders.
“One of the key items on the G20 agenda is new transparency and beneficial ownership requirements that are aimed at fighting money laundering and the financing of terrorism. The requirements also support the OECD’s and G20’s efforts to prevent other serious offences such as tax crimes and corruption,” says The Sydney Morning Herald.
The G20 aims for sustainable growth and development, and since 2008 it has introduced $3 trillion of financial stimulus into its central bank system between the pact countries. G20 also (attempts to) tackle other issues that cause geopolitical friction, this year in Brisbane conflicts such as: the rising tensions between Russia and Ukraine and the looming threat in the Middle East will also be focused on.
“Well, Washington and its string of puppets did try to turn the G20 into a farce. Fortunately the adults in the room had some business to do,” reported Russia Today, satirically addressing the majority of the G20 as a “tiny bunch of Anglo-Saxon political buffoons [attempting] to drown out the Global South.”
In the Russia Today report, the work of the adults, or rather the “G5” BRICS nations, were reunite and discuss matters of real importance. As coined in 2001 by Goldman Sachs, “Building Better Global Economic BRICS,” the countries with rapidly emerging economies: Brazil, Russia, India, China and South Africa make up the BRICS power-pact. Matters such as the BRICS New Development Bank investments and a restructuring of the decrepit IMF were at the top of the list according to Brazilian President Dilma Rousseff.
In 2010, the IMF’s Board of Governors approved a reform that was key to increasing voting power of emerging markets, for example those of Latin America and BRICS nations for a more equal economic trading field, something that is worse for Republicans in Washington than even communism itself, says Russia Today. Putin confirmed that trade between Russia and China and the rest of Asia is planned to increase from 25 percent to 40 percent of Russia’s GDP (2096.78 billion USD).
Russia-China trade investment, which has increased in Latin America, is increasingly in rubles and yuan depreciating the U.S. dollar. For BRICS nations this trade is welcomed with fellow partner countries and companies. Brazil, under the reelection of President Dilma Rousseff, a leftist leaning president, is one of the main countries in Latin America shifting away from U.S. influence.
It began as an insurgency in the sierras and the government figured it would die down, however Sendero Luminoso grew, killing any villages that did not strive for the same violent goals that Sendero did. The Peruvian terrorist group made profit by becoming heavily involved in the manufacturing and trafficking of cocaine within Peru, according to BBC’s profile on the terrorist group.
A group that arose in the 1980’s was famously silenced by controversial president, Alberto Fujimori a decade later, has begun to rise again against recent governmental international contracts and development plans. The group is suspected of possible sabotages against the Camisea Gas Project, an extraction and transportation contract of natural gas that Peru signed that has displaced many people and threatens the Amazon/Urubamba River region in Central Peru (El Comercio).
Sendero Luminoso (Shining Path)
After the second president of Revolutionary Armed Forces (Francisco Morales Bermúdez) had lost power by a coup, underrepresented populations within Peru and in the Andes became restless from government neglect. In Ayacucho, a region in the Andes, Sendero Luminoso was founded by Abimael Guzman.
It originally “began by exploiting the grievances and centuries-old government neglect of impoverished peasant areas,” according to Daniel Fitz-Simons from the Strategic Studies Institute. The groups ideology was a “hybrid” between Maoism, Marxism-Leninism, emphasizing indigenous ideals while adamantly rejecting both Hispanic culture and basic democratic ways.
Because it was more of a “guerrilla type” warfare there was no uniforms or distinctions between the terrorists and the indigenous and impoverished. Therefore the Peruvian armed forces as well killed many innocents that they thought were apart of the insurgent group. The insurgents have been responsible for about 70,000 deaths within Peru (BBC).
Although the centralized Peruvian government within Lima [Peru’s capital] did not originally take the growing terrorism in the mountains seriously, they eventually did when the killing epidemic spread to Lima. Attacks on the capital consisted of car bombs, two major ones that killed 18 people and wounded 140 as reported by the New York Times in 1992.
Sendero also car bombed two Coca Cola factories within Peru and took shots at an American Airlines plane while it was on the runway. Within the same month in 1993, the group detonated a massive car bomb at the IBM (International Business Machines based) a company based out of New York.
Slow Resurrection of a Dark Peruvian Past
The chaos eventually ended with the capturing of the groups leader, Guzman, in 1992. However, the group has become relevant again today. In the Vraem (Vrae) region, the Valley of the Apurimac, Ene, and Mantaro Rivers, Sendero Luminoso has maintained operations. Recent activity has increased as reported by Peruvian newspaper El Comercio. The Vraem region is also the largest cocaine-producing region in all of Peru. Interestingly enough, Sendero in the 80’s and 90’s funded their groups work through the backward deals of drug trade and production; the black market business still provides funding to their malice today.
The finishing date for a major energy project, Camisea Gas Project, which has been moving Peru forward in its natural gas sector with the construction of pipeline systems within the country has been pushed back about a year, reported by Reuters. The project is said to double Peru’s carrying capacity of natural gas from current 610 million cubic feet, to 1.5 billion cubic feet (Reuters). The slowing of the project is due to insurgents, the growth of the Sendero group, in the nearby Vraem region.
“‘In 2012, the Shining Path kidnapped a few dozen contract employees of TGP [Transportada de Gas del Peru] before releasing them unharmed days later.
“The security problem is still present,” Ferreiro [General Manager of TGP] said at an energy event. “But we have the support of the state, which has put security forces in the area that allow us to work.”‘ -Reuters
“El Nuevo Sendero,” is what the group is now being called, led by fervent leader Martin Quispe Palomino, who spoke against the enslavement of the state and its endorsed companies.
“They will have to face the Peruvian Justice,” said Victor Castro Ramirez, another Sendero leader referring to those who come into invest and develop in Peru, infringing on the land of the people.
In a recent video by Peruvian TV station, Panamericana TV, investigation into the group’s activity exposed the people of the region chanting for the “militarization of Peru’s Communist Party,” against those who come in to develop and displace. The video portrays children shouting “luchar con armas en la mano,” or fight with weapons in hand.
Protests for the deal however, have not stemmed from just the military group, but also from environmentalist groups in London and San Francisco that believe the further development of the pipeline will greatly harm the natural environment. On one hand the project will greatly help Peru, a country where about half of their energy comes from natural gas as reported by Reuters, but on the other, it will have civil and environmental costs.
Brasil has recently faced one of the closest elections in years reflecting on a divided nation, with Dilma Rousseff coming out on top. It has been experiencing an economic flat-lining and high inflation rates, and now the worst drought Brasil has seen in 80 years in Sao Paulo according to Reuters.
Sao Paulo is South America’s biggest metropolitan city and the drought now threatens the water supply of the city and its people.
The drought however is also effecting the global economy, as the biggest coffee producer in the world has had to cut down its exports, causing prices to rise.
Fortunately, within the past week showers have returned back to Sao Paulo. The continued rains will help replenish nutrients to the soil and will help Brasil to catch up.
On the otherhand, with the depletion of coffee exports from Brasil, it has led the global market to invest elsewhere. Elsewhere being Colombia, the second largest arabica coffee exporter. Since 2013, exports of this specific type of coffee have grown by 23%, reported Bloomberg.
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.