China's Unprecedented Investment Offensive in Latin America

While President Obama spars with Democratic critics over fast-track authority to promote free trade in China’s Pacific rim, the Chinese have unleashed an unprecedented investment offensive in South America, Uncle Sam’s erstwhile backyard. The Chinese Communist leaders say they are not seeking to influence political affairs in the region, but the investments they promise are on a scale that will shape the future global relations of Latin America. When China is on the move, big things happen without delays.

The Brazilian Shipwreck

Like the captain of a ship that has hit a jagged reef, President Dilma Rousseff is attempting a salvage operation to prevent the breakup and sinking of her political vessel, the populist Workers Party that has been the champion of the left since electoral democracy was restored in Brazil in 1985. The name of the ship in this metaphor is the SS PT, the Brazilian acronym of the Workers Party. The name of the reef is corruption, which has battered Rousseff’s administration. The chief salvage engineer is Finance Minister Joaquim Levy, an advocate of free markets and fiscal stability named in January 2015, whose desperate efforts to save the Brazilian economy have been met by a rebellion of the PT crew against austerity measures. This led to a breakup of the multiparty coalition that has provided PT governments a safe majority in congress since President Luiz Inácio Lula da Silva first led the PT to power in 2003. These political storms have buffeted Rousseff since her election to a second term in 2014 extended 13 years of PT populist dominance, financed by colossal corruption diverting billions of dollars in public money to finance political payoffs.

Drums of War or Pipes of Peace?

In Venezuela, President Nicolás Maduro has called on his followers to march to the drums of war against a political plot, allegedly backed by the United States, to provoke the overthrow of his increasingly unpopular authoritarian regime. In Colombia, President Juan Manuel Santos is cautiously testing a partial cease-fire in the conflict with leftist FARC guerrillas in the hopes of clinching a peace deal ending five decades of warfare that has cost 220,000 lives. The contrast could not be greater, and the different ways Venezuela and Colombia view the options of war and peace reveal a deep contradiction in Latin America over how to respond to violations of basic human rights and democratic political guarantees.

Brazil's Conundrum: Corruption and Economic Realities

Brazil, the jumbo democracy of Latin America, has been driven into an economic, political, and moral rut so deep that it is going to take profound changes in governance to recover the bright promise this key economy enjoyed until recent setbacks.

Brazil’s crisis is a perverse conjunction of economic stagnation, growing inflation, rampant corruption, unsustainable public indebtedness, and public sector incompetence. This is a homemade crisis brought about by misguided economic policies during the first four-year term of President Dilma Rousseff. During this period, Rousseff followed the advice of her populist advisers from the leftist Workers Party (PT), whose economic choices were guided mainly by the political objective of mustering electoral majorities by dispensing overgenerous, inadequately financed social programs, and by brazen political corruption.

Brazil's President Rousseff and Workers Party Mired in Scandal

When Petrobras, Brazil’s premier national oil company, discovered huge deep-water oil fields along Brazil’s southern Atlantic coast in 2007, there was euphoria in the ruling Workers Party (PT). Then President Luiz Inácio Lula da Silva declared that Brazil had won “the lottery” and embarked on an ambitious strategy to implant the PT as Brazil’s dominant political force for years to come. Today, that strategy is in shambles. A huge corruption scandal has involved Petrobras, the emblem of Brazilian nationalism, in payoffs to politicians and kickbacks in contracts with Brazil’s most prominent contractors. This has shaken, to its foundations, the PT and the national government now headed by President Dilma Rousseff, Brazil’s first woman president. She was selected by da Silva to keep the presidential seat warm until he can run again in 2018. Rousseff was reelected to a second four-year term by a narrow margin last year. She now faces the bleak outlook of a declining economy, beset by foreign trade deficits, high inflation, and soaring public debts accumulated by reckless spending during her first term, as well as the Petrobras downfall.

Murder, Cover Up in Argentina-Iran Deal?

The mysterious violent death of a federal prosecutor investigating alleged Iranian involvement in a 1994 terrorist atrocity has convulsed Argentina’s debilitated democracy, where President Cristina Kirchner presides over an authoritarian populist government that has defaulted on huge debts to its international creditors. The prosecutor, Alberto Nisman, was found dead in his Buenos Aires apartment with a bullet wound in his head and a .22 caliber revolver by his side. This was on January 13th, only five days after he had publicly accused Kirchner and her foreign minister, Héctor Timerman, of negotiating an agreement with Iran in 2013 that would cover up an investigation of the terrorist action in exchange for Iranian purchase of Argentine commodities with advance payments to meet Argentina’s shortage of foreign reserves. Nisman has been the chief investigator since 2010 of the bombing of the Argentine Jewish Community Center in Buenos Aires, the capital. He was scheduled to testify on his charges before the Argentine Congress last week.

China Pledges $35 Billion to Latin America

With relatively little fanfare, China has taken over the inside lane of economic development in Latin America with an ambitious 10-year regional investment plan on the scale of the Marshall Plan. China’s support for a $250 billion fund for largely infrastructure investments in Latin America was announced by President Xi Jinping at a summit meeting in Beijing last week of the Community of Latin American and Caribbean States (CELAC), which represents 33 countries. China has already pledged $35 billion for the fund, which will also require financial inputs from multilateral development banks and contributions from host countries. To coordinate this, CELAC and China will create a forum to design the partnership with the goal of unifying Latin America as a regional economy.

Brazil's Populist President Taps Free Market Economist

Dilma Rousseff, Brazil’s first woman president, advanced into her second four-year term last week with a full-scale cabinet shakeup designed to overcome a serious economic slump and restore investor confidence in her populist government, shaken by a huge corruption scandal in Petrobras, the state oil company emblematic of Brazilian economic nationalism. The economic slump brought Brazil’s $2.3 trillion economy to a virtual standstill last year, with inflation of more than 6.5 percent contributing to unsustainable levels of public debt. Bowing to the evidence that economic policy was mistaken during her first term, Rousseff dismissed Finance Minister Guido Mantega, a pseudo-Keynesian advocate of deficit public spending for “development,” and replaced him with an orthodox investment manager, Joaquim Levy, who said he would restore fiscal responsibility and rebuild confidence in Brazil as a friendly market for foreign and Brazilian private investors. Levy said increased investment and greater labor productivity were the keys to restoring economic growth in Brazil.

Obama’s Cuban Two-Step

President Obama has launched a new approach to Cuba based not only on the failure of the United States economic embargo to bring down the Castro regime but on a larger vision of more constructive US relations with Latin America. Obama’s re-engagement with Cuba won immediate support from governments all across the Latin American political spectrum. “Fantastic,” said President Dilma Rousseff of Brazil when she heard the news, remarking that the change provided new opportunities for greater cooperation in inter-American relations. It remains to be seen, however, whether this will lead to solid support in the region for a transition in Cuba from a one-party dictatorship to a genuine democracy with political freedoms and guarantees for human rights. Dissidents in Cuba, who live under constant police repression, may have a long wait before the relaxation of US-Cuban relations produces any political liberalization.

FARC Accountability and Prospects for Peace in Colombia

Back home after a successful road show last week in Europe promoting peace negotiations with the country’s FARC guerrillas, President Juan Manuel Santos of Colombia now awaits some positive sign from the leaders of FARC’s heavily armed insurgents. The FARC high command has gathered in Havana, Cuba—the venue for the negotiations that have dragged on for two years—and Colombians await some novelties in a conflict that has lasted 50 years and produced 220,000 fatalities. The moment is critical.

Before taking his message of peace to Europe, Santos authorized the clandestine trips of the FARC commanders to Cuba, all of whom have arrest orders in Colombia for years of criminal violence against security forces, sabotage of public services, kidnappings and extortions, recruitment of minors to serve as combatants, as well as drug trafficking on an international scale. This free pass to Havana was supposed to make possible a negotiated peace settlement by which the guerrillas would demobilize and give up their enormous arsenal of arms in exchange for being accepted as a legitimate political movement, evidently under Colombian law.

Brazil Stays Populist

In a free and well informed election, a slim majority of Brazil’s 142 million eligible voters chose Sunday to reelect President Dilma Rousseff to a second four-year term, during which Latin America’s largest country will continue in the nationalist populist camp. The election was deeply confrontational and nothing in the campaign indicates Rousseff plans to modify her alliance with the Latin America’s leftist regimes, particularly those in Venezuela, Cuba and Argentina. Officials in these countries were jubilant with Sunday’s returns and showered congratulatory messages on Rousseff. President Obama also called Rousseff on Tuesday and, in addition to congratulations, offered an invitation for her to make an official visit to the United States in the near future, her previous visit having been cancelled after revelations that the NSA had recorded her personal communications.

The Inter-American Defense Charade

Secretary of Defense Chuck Hagel made a trip to South America this week that engaged the United States in the murky security problems that destabilize this conflicted region. Some political forces now in power favor cooperation with the United States, such as Colombia and Mexico, but other sectors, led by Venezuela, and backed by Cuba, are openly antagonistic toward US leadership in the region. Hagel’s trip will test the waters and perhaps breathe new life into the Obama administration’s pallid policy toward Latin America.

Brazil's First Round Election Results Are In

Brazil’s two-step presidential election kicked off Sunday with President Dilma Rousseff seeking reelection against a field of 11 contenders offering widely divergent choices to more than 142 million eligible voters. In this test of Brazil’s multiparty democracy, Rousseff, the candidate of the leftist Workers Party (PT), won the opening round, but fell far short of an absolute 50 percent majority, so a second round on October 26th will be needed to decide the election. In this showdown, Rousseff will face the more conservative, pro-business Aécio Neves of the Social Democracy Party (PSDB), who was the runner-up in the first round. The political riddle now is which of the two finalists will attract a majority of the 22 million votes cast in the first round for Marina Silva, an environmentalist who finished third proposing a “third way” against the PT-PSDB rivalry that has dominated Brazilian presidential politics for 20 years.

China and Latin America: Pivots and Rivets

While the United States gropes to reset its foreign policy in a “pivot toward Asia,” China’s practical leaders are putting strong rivets into an ambitious economic partnership with Latin America that will have far-reaching consequences for the region’s international relations. Last week, Chinese President Xi Jinping rolled out the strategic bonding in a four-nation trip to Latin America that included high-level conferences with government and business leaders organized by the region’s top economic group, CELAC, which represents more than 30 countries. The trip began in Brazil, where Xi attended the sixth summit meeting of the BRICS, the five-nation group of large emerging countries, which used the meeting to launch a multilateral development bank and mutual currency stabilization fund with commitments of resources of more than $100 billion dollars. He then announced Chinese financing for railroads and other infrastructure projects in Brazil worth $35 billion.

With Santos’s Reelection, New Chance for Peace

“Peace Wins” was the banner headline across the cover of Semana, Colombia’s leading political weekly, celebrating the comeback victory of incumbent president Juan Manuel Santos in the decisive presidential vote Sunday. It was a clear-cut victory for Santos, who received 51 percent of the votes against 45 percent for his conservative opponent, Óscar Iván Zuluaga. This reversed the first round in May when Zuluaga narrowly bested Santos in an election that had five candidates. Only Santos and Zuluaga remained for the runoff, and Santos won because there was a 10 percent increase in voter turnout, favoring Santos.


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