#hotLatinAmericatakes from a busy weekend

It was a busy weekend in Latin America and I have a few quick takes on some of the biggest things that happened.

  1. Last week, as poll after poll showed Daniel Scioli, the presidential candidate for Argentina’s ruling Frente para la Victoria (FPV, Victory Front) coalition within striking distance of winning the 40 percent plus a ten percent margin of victory necessary for a first round victory, I wondered on Twitter what structural factors would be required for a Peronist candidate to not be favored in a nationwide election. Essentially, if 30 percent inflation, rising unemployment and poverty and stagnant growth weren’t enough to prevent the FPV from coasting to victory, what would be? To some degree, Sunday’s results, with Scioli winning less than 37 percent of the vote with only a 2.5 percent margin over his closest competitor, Buenos Aires mayor Mauricio Macri of the center-right PRO party, indicated that the built-in pro-Peronist margin isn’t nearly as significant as the polls seemed to indicated.

    Of course, all of this needs to be taken with a grain of salt. Scioli is still very likely to win, for reasons both above board and not. For one, the Peronist advantage is still significant, and third place finisher, dissident Peronist Sergio Massa’s 22 percent of the electorate is likely to break more than 50 percent toward Scioli, meaning Marcri would need to dominate the swing voters from the other first round candidates to overcome that margin. Additionally, Scioli, who is the outgoing governor, will probably improve his position in the massive province of Buenos Aires in the second round. In the first round, he was probably pulled down a bit by the FPV candidate for governor, Aníbal Fernández, who is among the most unpopular politicians in the country. Fernández lost to PRO candidate María Eugenia Vidal, taking the governorship out of Peronist hands for the first time in 30 years. Without Fernández’s toxic brand on the ballot, Scioli will improve his position at least slightly, pushing his margin even closer to 50 percent. Beyond that, Scioli will benefit from Cristina Kirchner’s willingness to use the full resources of the state to push his candidacy. If she was willing to use a cadena nacional to transparently campaign for her sister-in-law’s gubernatorial campaign in Santa Cruz, there is little reason to imagine that Scioli won’t benefit from a similar treatment.

  2. In Venezuela, Franklin Nieves, one of the prosecutors who led the trial against Leopoldo López that culiminated in a nearly 14 year prison sentence, has fled Venezuela and, in an interview with the Wall Street Journal, denounced the entire proceeding as a sham trial, claiming he was pressured by his superiors. To anyone even vaguely aware of the case, this was obvious from the start. López was convicted of using subliminal messages to incite his followers to commit acts of violence during nationwide protests in February, 2014. Beyond the laughably ridiculous charges, López was not allowed to present evidence in his favor or even call witnesses. Moreover, one of the key prosecution witnesses, a linguist who was supposed to “prove” how his speech calling for peaceful protest actually was inciting violence, testified that was not the case.

    The upshot of this is that it casts into further relief what most anyone paying attention to Venezuela already knew; the Venezuelan judiciary is subservient to the executive and Leopoldo López is a political prisoner convicted in a show trial. That said, it is unlikely to change anything on the ground in Venezuela. The Venezuelan government has already branded Nieves as under the influence of “foreign factors” and it’s unlikely anyone who didn’t already know the López trial was a sham suddenly cares about that more than the economic crisis currently afflicting the country. The more likely effect of this is that it will continue to erode Venezuela’s support abroad. Every time someone from within the government flees the country and confirms the worst things about what’s going on, it becomes harder for Venezuela’s democratic enablers like Brazil to continue backing them and covering for them in organizations like the OAS and Unasur.

  3. For their story on Guatemala’s presidential runoff on Sunday, The Washington Post has a suitably click-baity headline: “The ‘Donald Trump of Guatemala’ was just elected president”. This isn’t the worst thing you’ll see on Latin America in a US newspaper, but it’s incredibly facile. Jimmy Morales shares some superficial similarities to Trump; a celebrity-cum-politician who has never been elected to office and represents an anti-establishment option. However, while Trump has run on a platform that focus on white resentment politics (anti-immigrant, pro-welfare state for the “right” people, nationalist economic policy), Morales’s appeal comes from his anti-corruption platform and an appeal among Guatemala’s indigenous majority. He certainly has his red flags, especially since the party he represents is closely linked with military officers who fought in Guatemala’s long and bloody civil war, which is considered by many experts to have been a genocide. What he is not is a Donald Trump-like figure and it’s annoying that they’d misrepresent him so badly simply for the “Donald Trump” clicks.

Un “Hail Mary” criollo


On Monday, the head of the Consejo Nacional Electoral in Venezuela, Tibisay Lucena, finally announced that December 6th as the date for this year’s parliamentary election after months of delays. While the CNE delayed its announcement over the past few months, many of the rumors that sprung up had implied that the election would occur much earlier than that–September of October being the most commonly speculated–and as such, the later date has inspired a new round of speculation. Most obviously, December 6th is the same date that Hugo Chávez was elected way back in 1998. This will certainly be a point of emphasis in the chavista campaign as it tries to overcome what is likely to still be an economy in crisis (a music video campaign ad for PSUV released this week prominently features Daniela Cabello–the daughter of Diosdado–and mentions Chávez repeatedly without a single reference of any sort to Nicolás Maduro).

While I think the symbolism of the date is important, and definitely not a coincidence, the more important factor is that the date is about as far back as they could reasonably push it back while still promising an election this year and this illustrates an important tension for the government. On the one hand, barring some sort of miracle, PSUV seems bound to lose any passably fair election by a landslide, thereby losing control of the National Assembly, which could actually become a real check on executive power. So the government has every incentive to not risk an election. On the other hand, chavismo, for all its obviously authoritarian behaviors, still tries to maintain the veneer of being a democracy. This has allowed the region’s leaders to ignore many of the worst abuses in the country (and even to make excuses for them). When the government won every election, this wasn’t an issue. Chavez could always claim electoral legitimacy, even as he decimated the country’s democratic institutions, and that was sufficient for a region that’s never been big on institutions anyway. Skipping an election altogether is something brazen enough that countries like Brazil and Chile would no longer be able to turn a blind eye to the democratic breakdown, yet winning an election is nearly impossible without the kind of massive fraud that would bring a similar opprobrium on the government.

Pushing the elections back is essentially a Hail Mary play for the government. They know they have to have an election this year, or they might start facing external pressure from governments they can’t easily label as fascist. But they also know they can’t win an election this year the way things are going. So the fallback plan is to push the elections as far into the future as possible and hope to raise enough money to inject into the economy to at least slow the economy’s contraction, all while hoping that oil prices recover. This, combined with what will likely be more blatant violations of election laws and quite a bit of voter intimidation as well as outright fraud might be enough to keep the election close enough that the gerrymandering that gives chavista areas more representation will keep the election close enough to maintain a majority.

Is this likely to work? Probably not.

Venezuela’s options for raising money at this point are very limited. While the Chinese did recently sign an agreement for $5 billion in new investments in Venezuela, it appears that there are restrictions on how that money can be used. Moreover, the headline figures announced compared the actual investments often differ dramatically. Beyond that, the government is limited to selling off some refineries and allowing PetroCaibe countries to pay off debts at a discount, but these are all one-off injections that are relatively small compared to the money being hemorrhaged as a consequence the economy’s cornucopia of economic distortions and will make the country’s finances even more dire afterward than they are now. Oil prices could recover, of course. But the general consensus is that prices will remain in the $60-80 range for the next year at least, so it would likely require some sort of supply shock like a war to really push prices up in the next 6 months.

The one saving grace for the government, is that the only body that will be allowed to monitor the elections in any way will be Unasur, which has hardly shown itself willing to criticize even the government’s most blatant democratic violations. This is further buoyed by the fact that they will not be doing a formal election observation mission, but rather an accompaniment, which is confined to the day of the elections and is largely ceremonial. Safe to say, there will be a lot of room for electoral jiggery-pockery. The question is how much will be necessary to tip the scales of the election compared to the amount that will be too much even for Unasur (and especially Brazil).

Like most Hail Mary attempts, this one seems very likely to fail. But when they succeed:

Of course, I’ve heard that October and November are prime impossibly stupid and unrealistic coup plot-discovering season…

Venezuela, the OAS and the planned obsolescence of democracy promotion

As the democratic situation in Venezuela has deteriorated over the past decade and a half, the Organization of American States (OAS), as the premier multilateral organization in the region, has been harshly criticized by many for not doing more to combat chavismo’s assault on the country’s institutions. No doubt, the OAS has failed to play much of a role since the stillborn mesa de diálogo following the 2002 coup that briefly removed Hugo Chávez from power. Critics question why the OAS hasn’t invoked the Inter-American Democratic Charter in response to the clear democratic breakdown that has occurred. The answer is less fecklessness or a tacit approval of chavismo by many in the OAS, rather it is a consequence of the two fundamental flaws that were built into the OAS and the Inter-American system; that the OAS is a multilateral organization that won’t infringe on its member states’ sovereignty, and that the Inter-American democratic system is accessible only by the executive branch.

Fundamentally, multilateral organizations function by member states agreeing to mutually cede a degree of sovereignty in order to facilitate action on a given topic. For various historical reasons, Latin American states are uniquely jealous of their sovereignty, and as such, the institutions that make up the OAS lack any sort of mechanisms to oblige member states to abide by the agreements reached. As long as every member state participates, this isn’t a problem, but it makes the OAS very ineffective in dealing with any situation where there isn’t unanimous agreement by its members. Member states can refuse to live up to its obligations as defined by the treaties that compromise the OAS, without experiencing any major consequences.

This combines with the executive-centric nature of all of the institutions in the Inter-American system save for the Inter-American Human Rights Commission. Partially as a legacy of the traditional executive-led nature of diplomacy, and partially by design, the OAS permanent council and the Inter-American Democratic Charter are all the exclusive domain of the executive. That means, for example, that the Venezuelan congress has no authority petition for a meeting of the Permanent Council over undemocratic actions by Nicolás Maduro and his goverment. Originally, this didn’t matter much, since the democratic breakdowns of the 50s, 60s and 70s almost always started with the overthrow of the executive–usually by the military–before the other democratic institutions were dismantled by the de facto government. In essence, protecting the executive was effectively the same as protecting democracy.

Looking at the successes the OAS has had in dealing with democratic breakdowns, one can clearly see the way these institutions are effective at dealing with threats to democratically-elected executives. When presidents were overthrown, or there were legitimate threats to sitting presidents, the system was reasonably effective. However, when the presdient has been responsible for the breakdown in the democratic system, the OAS has been very slow to respond, if at all. For instance, Alberto Fujimori was able to launch an autogolpe in which he dissolved the congress and judiciary, yet remained a member in good standing of the OAS. It wasn’t until Fujimori was credibly accused of rigging an election that the OAS’ member states forcefully moved to address the situation.

A similar thing is occurring now in Venezuela. The executive branch, first with Chávez and now Maduro, has totally dismembered the democratic institutions, yet the OAS has done virutually nothing. Some member states have made noises expressing concern, but not enough to invoke the Inter-American Democratic Charter and since only the executive can petition, no one representing Venezuela has been able to force the issue. Because of the premium placed on respecting state sovereignty, the General Secretariat has no authority to punish Venezuela and, for a variety of reasons, no majority of member states exists willing to push the issue.

Alberto Lleras Camargo, the first secretary general is supposed to have remarked that the OAS would be whatever its member states wanted it to be. While each milestone that accompanied the development of the Inter-American democratic system since 1989 featured lofty talk of protecting and nurturing democratic ideals, there was never any impetus to do more than protect sitting presidents while protecting state sovereignty. Chavismo’s descent into outright authoritarianism, in that sense, is not a failure of those entrusted with protect Latin America’s democracy. Instead it is the embodiment of the type of democratic breakdown that the Inter-American was explicitly designed not to prevent. Lleras Camargo had a point, unfortunately.

They’re not rallying around the flag, they’re just standing in line

On Monday, in a bit of a surprise, Barack Obama signed an executive order that labelled Venezuela a an “unusual and extraordinary threat to the national security and foreign policy of the United States” as a legal condition for imposing sanctions on seven Venezuelan officials. Predictably, the Venezuelan government freaked out, calling the actions a grave attack on Venezuela and its sovereignty. Less predictably, many US media outlets ran the story from the perspective that this would provide a boost to president Nicolás Maduro.

A lot of this argument rests on the idea that Venezuelans are likely both to believe that this is an attack on Venezuela and not just officials accused of corruption and human rights abuses and to care. I’m not convinced of either of these things. For one, Maduro has spent most of his presidency, and in particular the last several months, blaming the US for just about everything. In fact, it was not even a month ago that his government “foiled” a US-backed coup, evidence for which he has announced was forthcoming on multiple, fruitless occasions. Maduro has blamed the US so consistently and baselessly for so long, that it’s unlikely that anyone that didn’t already believe him suddenly does just because seven bureaucrats who are either unknown or unloved lost their US visas.

Another argument is that this has strengthened his position by giving him a pretext to request a Ley Habilitante Antiimperialista, which would give him the power to rule by decree for six months. But this sounds like a bigger deal than it really is. Venezuela’s institutions have been hollowed out so much by this point that there are virtually no real checks on the president’s authority to act. More than anything, this is a vestigial impulse to provide a modicum of democratic cover to the government’s authoritarianism. In a country where the president brags on television about his personal role in bringing charges against an opponent and where multiple members of the National Assembly have been summarily stripped of their seats, any Ley Habilitante is just a formality that simply takes the rubber-stamp congress out of the process.

Finally, there is some speculation that this might make other Latin American governments less likely to speak up. This is probably true. However, no major country in Latin America was ever likely to say anything anyway. So, in reality, the choice was between the US acting against Venezuela’s human rights abusers and Latin American countries feeling relieved they had an excuse to not say anything and the US not doing anything, and Latin America countries still finding a reason to not say anything. The strongest reaction in Latin America “against” Venezuela in the past year was Brazil’s foreign ministry, “expressing concern” at the actions of both sides after a Venezuelan police officer shot a 14 year old student in the head and killed him during a protest. That says a lot.

If anything, this move might fire up Maduro’s base. The average Venezuelan, it seems, will probably be making jokes about this while they stand in line hoping to be able to buy toilet paper and milk.

¿Pendejo, jalabolas o ideólogo?

Once again today, the Venezuelan government held a press conference in which major economic announcements were expected, specifically, related to the foreign exchange system. Unsurprisingly to anyone paying close attention to Venezuela since Hugo Chávez died in early 2013, the big announcements amounted to little more than a renaming of the existing system of extensive and complicated capital controls. This included some minor tweaks and a small devaluation and a new “free” rate where people are allowed to sell as many dollars as they want, but limited to buying $300 at a time.

Many people are interpreting this as proof that either Nicolás Maduro and those advising him have no idea what they’re doing or that they’re being overruled by factions within chavismo that benefit from the distortions caused by the current forex system. Outside of the hardcore chavista intelligentsia–who have spent much of the last year attacking Maduro from the left–, there is little consideration to the possibility that Maduro and his advisors are genuinely committed ideologically to these policies and believe that the orthodox reforms most people expect them to implement sooner or later will be counterproductive. This is not to discount the fact that there are definitely powerful members of the government who benefit personally from the current system and are fighting to keep it for reason of personal gain. Nor is it to argue that the current course has any real chance of creating a sustainable, productive Venezuelan economy. It is simply to argue that it’s worth considering it as a possible motivation for Maduro’s decision-making since it could inform how his government behaves in the future.

In his book A Failed Emprie: The Soviet Union in the Cold War from Stalin to Gorbachev, Vladislav M. Zubok notes that one of the most striking things in the declassified minutes from Politburo meetings all throughout the Cold War is the degree to which the leadership in the Soviet Union genuinely believed in Soviet ideology and how reluctant they were to abandon or even modify it. This includes even Gorbachev who was genuinely committed to reforming the Soviet to better fulfill its founding principles and ideologies, not to introduce proto-capitalism.

Similarly Fidel Castro is arguably much more ideological–and consequently, less cynical–than many give him credit for. For example, once the economy had stabilized following the collapse of the Soviet Union, he began rolling back many of the limited market reforms that had been implemented during the Special Period. Moreover, during the 1970s, Cuba maintained its support of lefitst insurgencies in Latin America and Africa, even though it alienated him from the Soviet Union, upon whose protection his government depended.

Of course, Nicolás Maduro and his advisors being ideologically committed does not preclude them from also being incompetent. Nor does any amount of ideological commitment change the simple reality that people respond to incentives and that the Venezuelan political economy creates countless incentives to exploit arbitrage opportunities and few incentives to produce goods and services. Nonetheless, why Maduro is making the decisions he makes matters, both for the opposition and others, because it informs how he might react to new stages of Venezuela’s economic crisis. A Maduro who is ideologically committed might react differently than one who is beholden to the interests of the enchufados or one who is simply too stupid to think of any new course of action.

Losing the war he invented

Last night, I floated on Twitter a question about how many long Nicolás Maduro can blame Venezuela’s troubles on an economic war waged against him before his supporters come to believe that he’s too weak to succeed in winning it. Obviously this question rests heavily on the assumption that there are a good number of Maduro supporters who believe that Venezuela really is the victim of some sort of vast conspiracy, and not just the predicatble consequences of poor policy decisions over the past 15 years. Recent surveys, however, indicate that one in five Venezuelans still supports Maduro and reporters have to problem finding people to interview in the now-ubiquitous grocery store lines who at least claim to believe his claims, so there is at least a bit of a constituency.

The threat in this propaganda line for Maduro isn’t really in the opposition so much as within the chavista coalition. Few people who support the opposition are likely to believe that the problem is anything other than the government anyway. However, things are different among chavistas who continue to believe that chavismo is a path to prosperity. For these people, the country’s continued economic malaise might not demonstrate the failure of the model so much as show that Maduro is too weak to protect the gains brought by Hugo Chávez. This is exacerbated by the fact that the policies Maduro has selected to fight the economic war–currency and price controls, taking over producers and distributors, etc–will mostly only contribute to the problem, whatever positive optics they might give. If anything, those positive optics (fighting contraband on the border, taking over stores, seizing “hoarded” inventories) might simply cast into starker relief how little those efforts are doing to alleviate the shortages and inflation wracking the Venezuelan economy right now.

So what happens if the loyal chavista base decides that Maduro is too weak to win the war he says he’s fighting? The conspiracy-minded might say that this is the machiavellian plan of some high ranking officials who have allowed–or even encouraged–Maduro to founder while enriching themselves off the distortions, only to swoop in and save the day once the situation starts to risk chavismo’s hold on power. Whether that’s someone’s plan or not, any clear-eyed people close to Maduro must be concerned about what happens if the chavista base ends up in the streets protesting. Considering how openly authoritarian the government has become in recent times, it seems difficult to believe that the opposition would be able to end up in power, at least immediately.

Gusanos fleeing a sinking ship

Today, Barack Obama shocked the world by announcing that the United States and Cuba had reached an agreement to begin normalizing relations between the two countries after more than 50 years of conflict. The deal, brokered with help from the Vatican, Canada and Spain, centered around the exchange of the three remaining “Cuban Five” agents for a US spy in Cuba that few had known about. Additionally, Cuba released USAID contractor Alan Gross after 5 years in prison and 53 political prisoners. Obama, for his part, has exercised most of the authority he has as president to loosen the embargo, allowing for closer economic and social links between the two countries, though the embargo itself, codified into law under the Cuban Democracy Act and the Helms-Burton Act, will remain in place until both laws are repealed by Congress.

Beyond the usual acknowledgements that the embargo has been a half-century disaster that has done nothing to achieve its stated goals while executing a significant reputational cost to the Untied Sates, there isn’t much to say about this. It’s an exceptionally important event, but one so obviously necessary, it’s difficult to say anything unique about it.

More interesting, however, is what this says about the situation in Venezuela. Ever since Hugo Chavez took power in 1999, Venezuela has heavily subsidized the Cuban government–to the tune of 100,000 bbl/day of oil–in exchange for doctors, sports trainers and other Cuban experts coming to work in Venezuela. This has been a huge boon to Cuba, and provided the necessary cushion for the Castros to reverse many of the “Special Period” reforms made after the collapse of Cuba’s previous benefactor, the Soviet Union, pushed the regime to the brink in the early 1990s. It also proved useful to Hugo Chávez and Nicolás Maduro, as their close relationship with Fidel Castro provided them with a legitimacy among the Latin American left that would have been difficult to achieve on their own, while helping keep an increasingly irrelevant Castro in the spotlight.

In the past several years, however, the inevitable economic dislocations associated with a socialist revolution began to act as a drag on the Venezuelan economy. Oil production has still never recovered to the level it was at before the 2002 strike and then mass firing of oil workers by Chávez, and increasingly byzantine currency restrictions, labor laws and export licensing choked off most of what remained of Venezuela’s productive capacity. This has left it extraordinarily vulnerable to a price decline, which appears to have struck in force over the past few months. Venezuelan oil, which for a variety of reasons trades several dollars below the benchmark rates, has fallen from more then $95/bbl to less than $55/bbl since the spring.

While the Castros are many things, one thing they most certainly are not is stupid, particularly when it comes to staying in power. They were largely caught off guard by the fall of the Soviet Union at the end of the Cold War, and were forced to take extreme measures to weather the crisis. They were not going to be caught unawares a second time. Like a rat fleeing a sinking ship, the Castros clearly realized that Venezuela is not going to be able to pay for it for too much longer and had to look for other alternatives. Incidentally, most other “anti-imperialist” countries are either unable to help (Iran, Russia), or rather uninterested in helping (China). This left liberalization as the most viable backup plan. Rapprochement with the United States, and the possibility of ending the embargo has finally surpassed the political benefit of blaming the embargo for all of Cuba’s troubles in the Cuban government’s calculations. It doesn’t mean that Cuba is going to be a free-market democracy any time in the near future, but it clearly indicates that Cuba sees some degree of liberalization as its best way forward.

This is doubly bad for Nicolás Maduro. On the one hand, Venezuela appears to have been caught completely unprepared for this agreement. State-run media took hours to even acknowledge what happened, indicating that they did not have any prior warning that would have given them time to prepare their spin. That, in and of itself, shows how little the Cubans value the Maduro government despite all the money they’ve spent. Moreover, it represents a clear indication that the Cubans, who know as well as anyone, think the situation in Venezuela is not worth betting on. Finally, it poses some real problems for Maduro within the fractious chavista coalition. The general consensus is that Maduro’s power base sits in Havana and the radical civilian left of chavismo, as opposed to the more nationalist military wing. Maduro has heretofore done an unexpectedly good job of balancing the forces within chavismo, largely by showering the military with lagresse. However, a clear rebuke like this by the Cubans could undermine his legitimacy.

“Why,” the military chavistas might ask, “should we put up with this guy the Cubans picked if the Cubans don’t respect him at all?”