Analysis Beyond the Echo Chamber
The Americas Blog seeks to present a more accurate perspective on economic and political developments in the Western Hemisphere than is often presented in the United States. It will provide information that is often ignored, buried, and sometimes misreported in the major U.S. media. For more information, sign up for our Latin America News Roundup or visit the archives.
- Written by Mark Weisbrot and Jeffrey Sachs
In our paper, “Sanctions as Collective Punishment: The Case of Venezuela,” we looked at some of the ways in which the sanctions on Venezuela imposed by the US government curtail access to essential and life-saving imports, and some of the data on impacts such as mortality. We concluded that US economic sanctions since August 2017 have likely caused a dire rise in mortality and a grave aggravation of Venezuela’s economic crisis. We concluded that the sanctions imposed since January will be much more devastating in terms of increased hunger and mortality, and of economic losses, than have the prior US executive orders and other economic sanctions.
The fact that these sanctions cause extreme suffering and deaths should not be a matter of dispute. If you cut off access to medicines, medical equipment, imports needed to maintain water and sanitation infrastructure, and for spare parts, and you prevent an economy that is in a deep depression from recovering, a lot of people are going to suffer diseases and premature mortality.
Economists Miguel Angel Santos and Ricardo Hausmann have challenged our claim that the sanctions dramatically worsened Venezuela’s crisis of oil production and exports, and therefore of the ability to finance food and medical imports.
In what follows, we look at their arguments, which are based on easily identified errors.
- Written by Alex Campbell
On January 23, the United States recognized Juan Guaidó as president of Venezuela. As CEPR Co-Director Mark Weisbrot has pointed out in The Nation, this is not a merely diplomatic maneuver:
On January 23, the Trump administration announced that it was recognizing Juan Guaidó, currently head of the Venezuelan National Assembly, as “interim president” of the country. By doing so (together with politically allied countries), Washington basically imposed a trade embargo against Venezuela. This is because any revenue from oil sales to about three-quarters of Venezuela’s export markets―the United States and its allies―would no longer go to the government but to the “interim president.”
On Tuesday, the International Crisis Group’s Ivan Briscoe wrote in Foreign Affairs that around 90 percent of the Venezuelan population receives food aid from Maduro’s government, a crucial lifeline currently endangered by US policy:
The state now provides citizens with monthly boxes of subsidized rations that offer high-carb sustenance—pasta, rice, and flour—along with a few tins of tuna. According to a recent independent social survey, these boxes are now provided to more than seven million households, or around 90 percent of the population; a high-level government source estimates the cost at more than $400 million a month.
But the state’s food supply is now in peril. At the end of January, the United States sanctioned Venezuela’s state-run oil firm, PDVSA, which until then had been the Maduro government’s single largest source of hard currency. By freezing the proceeds on its purchases of Venezuelan oil, the United States hoped to starve the regime and convince factions within the government to abandon Maduro, making way for Guaidó and free elections.
In the Financial Times, noted Venezuelan economist Francisco Rodríguez wrote that humanitarian aid was inadequate to make up the shortfall resulting from Venezuela’s economic collapse:
- Written by Alex Campbell
Last week, humanitarian aid was at the center of discussion of the Venezuela crisis in the US, and evidently at the center of Juan Guaidó’s plans to challenge the Maduro government’s hold on power in the country. The New York Times noted that:
The battle over the legitimate leadership of Venezuela — which has included rallies of thousands, international diplomacy and oil sanctions — is now focused on a single heavily guarded shipment of humanitarian aid.
Venezuela’s opposition, which has relished a month of victories in its effort to challenge President Nicolás Maduro and take over as the country’s legitimate government, brought the donated supplies of food and medical kits to the country’s border with Colombia.
Its goal was to bring the supplies into Venezuela, forcing a confrontation with Mr. Maduro, who has refused the help. This would cast Mr. Maduro in a bad light, opposition leaders said, and display their ability to set up a government-like relief system in a nation where the crumbling economy has left many starving, sick and without access to medicine.
- Written by Alexander Campbell
Last week, the US formally adopted sanctions on Venezuelan national oil company PDVSA, as well as on CITGO, its US-based distribution arm, as part of its press for regime change in Caracas. National Security Advisor John Bolton estimated the actions would affect some $7 billion in assets and would block $11 billion in revenue to the Venezuelan government over the next year. The State Department was quick to add, “These new sanctions do not target the innocent people of Venezuela…”
But of course they do. The Wall Street Journal reported:
The sanctions could create deeper gasoline shortages in Venezuela. The country’s refineries are already operating at a fraction of their capacity, crippled by a lack of spare parts and crude. Venezuela only produced a third of the 190,000 barrels of gasoline it consumed a day as of November, according to Ivan Freites, a leader of the country’s oil union.
“Immediately, it’s going to hurt the average Venezuelan,” Mr. Freites said.
Meanwhile, The New York Times noted:
But just across the street, a group of senior citizens waiting in line to collect their pensions worried that the Trump administration’s actions would further bankrupt their country and deepen the humanitarian crisis that has left so many starving, sick and without basic services.
“The United States has no business meddling in this,” said Aura Ramos, 59, a retiree who can barely afford blood pressure medicine. “It’s the regular people who will be affected.”
The Washington Office on Latin America released a statement criticizing the announced sanctions, writing:
However, we are deeply concerned at the potential for the recently announced U.S. sanctions to intensify the severe hardships and suffering that millions of Venezuelans are enduring. Venezuelans are already facing widespread scarcities of essential medicines and basic goods. Venezuela’s oil exports represent the main source of hard currency used to pay for imports. Without this revenue, it is clear that the importation of food and medicine could be put at risk. In turn, this will further accelerate a migration and refugee crisis that has strained neighboring countries and put many of the over 3 million Venezuelan migrants and refugees at risk.
It appears as though there is increasing acceptance of the basic fact that the US sanctions on Venezuela will have a negative impact on the people of Venezuela, but all this analysis misses two important points. First, the Trump administration had already imposed broad economic sanctions in 2017, though apparently both The Wall Street Journal and New York Times were unaware of this development.
- Written by Kevin Cashman
Puerto Rico’s economy has had considerable problems over the last decade, and Hurricane Maria, which struck the island just over one year ago and was the worst natural disaster on record in Puerto Rican history, greatly exacerbated them.
Despite nearly unanimous recognition of the island’s ongoing economic woes, Governor Ricardo Rosselló touted employment growth last month as the economy gained 100 jobs in July (this was revised down to a loss of 400 jobs). Rosselló was looking at the household survey, which surveys people, rather than the establishment survey, which surveys businesses — and is the standard for reporting month-to-month employment numbers. (The household survey, which Rosselló used, might be better at including the informal sector, but it’s worse at reliably tracking jobs created and lost.) Employment fell in August as well, with another 1,000 jobs lost. Rosselló has claimed the island is seeing an “economic recovery.”
- Written by Harrison Karlewicz
As the fortunes of South America’s “pink tide” have turned and right-wing movements have recaptured power, conservative judiciaries and legislatures, egged on by elite-controlled media cartels, have engaged in dubious judicial procedures against various left-wing figures. In 2015, Argentina elected a right-wing neoliberal president, Mauricio Macri, and former left-leaning president Cristina Kirchner was charged with treason and other crimes. In Brazil, the Senate impeached sitting president Dilma Rousseff ― though her alleged crimes were dismissed by federal prosecutors ― and replaced her with the conservative Michel Temer. More recently, Lula, who polls suggest would easily win reelection, has been convicted of corruption and jailed, despite the absence of material evidence backing the charges against him. This decade has effectively become one of politico-judicial persecution ― lawfare ― against pink tide political figures, as right-wing movements try to ensure that their left-wing rivals won’t return to power.
Ecuador’s former president Rafael Correa appears to be the latest victim of lawfare against left-wing politicians. On July 3, 2018, a court in Ecuador ordered Correa’s arrest and extradition following his failure to serve a subpoena to appear in court. Judge Daniella Camacho of the National Court of Justice alerted Interpol to detain Correa if he tries to leave Belgium, where now resides with his Belgian wife. His offer to depose testimony at the Ecuadorian diplomatic mission in Brussels was rejected.
Originally subpoenaed to appear in court in mid-June, Correa was included in an investigation concerning the attempted kidnapping of lawmaker Fernando Balda in 2012. A former member of Correa’s Alianza PAIS party, and Correa’s supporter in his 2006 presidential campaign, Balda quickly became a political adversary of Correa after criticizing him over what Balda claims was “arbitrary and exclusionary management” of Alianza PAIS’ national board, as well as later accusing Correa of wiretapping his political adversaries and seeking campaign financing from Colombia’s FARC insurgent guerrilla force. By 2009, Balda had left Alianza PAIS and joined the Patriotic Society Party ― led by former army colonel and ex-president Lucio Gutiérrez, a leading figure in the 2000 Ecuadorian coup who oversaw neoliberal reforms as president from 2003 to 2005 until he was removed by Congress for the alleged abandonment of his constitutional duties.
- Written by Mark Weisbrot
I have rarely responded to trolls because ― well, what’s the point? It’s not like they care about facts or logic.
For example, Francisco Toro, a blogger who fulminates about Venezuela and appears in the Washington Post, has been trolling me for years and I have almost always ignored him. Dany Bahar, an economist at the Brookings Institution, actually trolled me on a TV show, excitedly holding up to the camera a Guardian article that I wrote nearly five years ago, to castigate me. Cathy Newman, a news presenter for Channel 4 ― one of the top three most-watched TV stations in the UK ― did the same thing in the middle of a newscast in which she was supposedly interviewing me. And now Brian Ellsworth, a journalist for Reuters who reports from Venezuela, has joined the latest avalanche of trolls, bots, and blowhards who swarmed me because I dared to mention on BBC World TV, on Friday night, that Trump’s financial embargo against Venezuela makes it more difficult for any government to stabilize the economy ― a fact that no economist would dispute. Indeed that is the purpose of the embargo.
Let’s start with what all of these trolls ― including the more educated ones noted above ― have in common. They all rely on one article (out of dozens) that I wrote about Venezuela. Not one of them challenges a single fact in that article. That tells you a lot right there about the weakness of their “argument.”
Their glorious “gotcha” is not about any facts but rather a prediction. I wrote that Venezuela was not facing any serious threat of hyperinflation. That was certainly true in November 2013, the date of the article. Economists most often define hyperinflation as a rate of inflation that exceeds 50 percent per month. Although we don’t have official statistics for inflation in Venezuela since 2015, available estimates (from the opposition-controlled National Assembly) do not show Venezuelan inflation at that level until November of 2017, four years later.
The trolls imply that I should have known in November 2013 that Venezuela would eventually reach hyperinflation. At the time, as I noted in the Guardian article, Venezuela was facing a dynamic in which there was a significant parallel market for the dollar, and the price of the dollar in that market was rising. This increased inflation (by increasing the price of imports). The inflation, in turn, drove more people to buy dollars, which pushed the black market price of the dollar up further. If such a spiral is allowed to continue it will eventually lead to hyperinflation.
- Written by Lara Merling and Jake Johnston
With its authority recently upheld by the courts, Puerto Rico’s Federal Management and Oversight Board (known simply as “the Board”) continues to impose harsh austerity measures on the people of Puerto Rico. But while residents face pension cuts, school closures, massive layoffs, and a continued recession, the same austerity does not apply to the Board itself, which is spending hundreds of millions on its own expenses and a myriad of consultants, advisers, and lawyers. Nor does the austerity appear to apply to some of Puerto Rico’s bondholders either.
Last week, the Board, along with the government of Puerto Rico, announced they reached a deal with owners of bonds in Puerto Rico’s Sales Tax Financing Corporation (COFINA), proudly claiming it would save the commonwealth $17.5 billion in debt service. While technically true, the claim obscures the fact that the deal will still see Puerto Rico use its scarce resources to pay these creditors some $33 billion over the next 40 years on what was initially $17 billion in principal. Overall, the bondholders will recover nearly 75 percent of the initial value of their investment, a fairly generous settlement from a bankrupt entity still trying to recover from a lost decade — without economic growth — followed by the devastation of Hurricane Maria.
In fact, judging from the Board’s most recent fiscal plan, Puerto Rico won’t even have the money to pay for the bonds that would be issued as part of the settlement. The board projects the island to have about a $4 billion surplus over the next 40 years, leaving authorities at least $28 billion short of satisfying this deal with creditors. The settlement is actually based on revenue projections from an earlier version of the Board’s fiscal plan, which were revised down in June when the newest version of the plan was certified. This mistake, rather than the overall generosity of the offer, now puts in question the future of this deal. Will the Board revise its fiscal plan yet again to demand even greater austerity in order to satisfy these creditors’ claims?
To make matters worse, a close look at who the current COFINA bondholders are reveals a series of vulture funds that bought the bonds at steep discounts after the initial default, and immediately after Hurricane Maria. Investors now stand to make huge profits from that move, while most Puerto Ricans suffer through continued austerity. One of the largest investors in COFINA bonds, GoldenTree Asset Management, more than doubled its holdings in the aftermath of Hurricane Maria. Court filings show that as of August 1, 2018, GoldenTree owned $1.5 billion in COFINA bonds, up from $587 million in August 2017. The bonds in question traded as low as 20 cents on the dollar during this time period, which means a 75 percent recovery rate could amount to an enormous profit.
GoldenTree is far from the only vulture fund that stands to benefit though. Initially, one of the loudest voices against reaching a deal with COFINA bondholders was the group representing General Obligation (GO) bondholders, who claimed that they had priority over other creditors for repayment. However, two of the biggest GO bondholders, Aurelius Capital Management, and Monarch Alternative Capital have recently started buying up COFINA bonds, and now stand to benefit from this agreement themselves. Since the storm, court filings show how the two funds have increased their holdings of COFINA securities to $488 million from $39 million.
- Written by CEPR
Welcome to our live blog of Mexico's historic elections today. See our introductory post here.
All update times are Eastern time zone.
UPDATE 11:12 PM: FEPADE provided an updated tally on electoral complaints received throughout the day. Throughout the country there were 394 complaints at the federal level, and even more concerning local races. 19 people were arrested for federal electoral crimes.
UPDATE 11:08 PM: And now President Donald Trump has tweeted his congratulations to president-elect Obrador.
Congratulations to Andres Manuel Lopez Obrador on becoming the next President of Mexico. I look very much forward to working with him. There is much to be done that will benefit both the United States and Mexico!— Donald J. Trump (@realDonaldTrump) July 1, 2018
UPDATE 11:01 PM: Mitofsky has now released its Senate exit polls, which indicate a possible majority for Morena and allies with 56-70 seats. There are 128 seats in the senate.
UPDATE 10:36 PM: U.S. Congressional Progressive Caucus co-chairs, Rep. Raul Grijalva and Rep. Mark Pocan, have released a statement following Obrador's likely victory.
UPDATE 10:27 PM: Pollster Mitofsky has just released exit poll data estimating Moreno and it's allies in "Together We Will Make History" winning between 256 and 291 seats - a majority.
UPDATE 10:12 PM: Argentina issued a statement congratulating Obrador on his election victory. Again, official results are based on only 0.32 percent of total ballots, but as Richard Ensor of The Economist points out, these early returns indicate a broad-based victory for Obrador:
24 states have started counting votes. Meade is winning in San Luís Potosí. Anaya is winning in Guanajuato and Aguascalientes. AMLO is winning in the other 21.— Richard Ensor (@richardjensor) July 1, 2018
UPDATE 9:45 PM: Official results have just started being posted by INE, but the results appear irreversible. Ricardo Anaya of the PAN has also just conceded defeat to López Obrador.
UPDATE 9:31 PM: More exit polls are giving AMLO around 50 percent of the vote. ADN has AMLO with 51 percent to Anaya's 23 percent, with Meade again at 18 percent. The Washington Post is reporting: "Several exit polls gave Lopez Obrador a double-digit lead over his two closest competitors...."
UPDATE 9:18 PM: El Financiero is also projecting Morena with 38 percent of the vote for the chamber of deputies (the legislative lower house), the PAN with 22 percent, the PRI with 18 percent, the PRD with 6 percent, and the PT (Workers' Party) with 4 percent.
UPDATE 9:16 PM: The ruling PRI's presidential candidate, Jose Antonio Meade, has conceded defeat to Obrador before official results are announced.
UPDATE 9:11 PM: El Financiero's presidential exit poll has been released and it shows Morenas' Obrador with 49 percent of the vote. Anaya of the PAN is in second with 29 percent, and the PRI's Meade is in third with 18 percent, according to the poll.
UPDATE 8:52 PM: The 5:00 pm report from Diálogos por la Democracia is now available. They say they "received and tracked and directed" 198 citizen complaints, of which 52 were for "soliciting votes for payment, promises of money, or other consideration."
UPDATE 8:43 PM: An observer in Tlaxcala reported at 8:20 pm:
[They're conducting the count for] President and diputado at the same time here In Tlaxcala. All mesas/casillas can decide if they are going to take additional security measures. At this casilla, they signed (have to confirm how many / who) as an extra security measure. Most we visited today were not signing. In another area of Tlaxcala they had stolen some ballots previous to the election. In addition to reprinting, they required signatures (2 mesa, 2 partidos) on every ballot. Wind in a tent is complicating working with lots of paper ballots...
UPDATE 8:37 PM: In a series of tweets (ongoing), the #Verificado2018 project reported the confirmed cases of electoral violence and irregularities in Puebla state today. A PRI activist was killed in the municipality of Acolihuia. At the Emiliano Zapata school in Barranca Honda, 8-10 gunmen showed up at around 2 PM and fire off shots, temporarily closing the center. At a voting center in Colonia Fuentes de San Aparicio shots were fired and ballots for president and governor were stolen. Ballots were also stolen in San Sebastián by seven armed individuals.
UPDATE 8:28 PM: An observer in Jilotepec reports:
Here in Section 2260 in Jilotepec, the counting of blank ballots is finished and now a poll worker is reading out the number of registered voters that have voted on each page of the thick voter registry for casilla contigua 3 while all of the party representatives confirm that his count matches their count, page by page. In a few places there are discrepancies which they resolve. In total, 459 of 650 registered voters deposited ballots in the urns of this casilla.
With that done, on to the tallying, starting with the ballots for the presidential election. They are all dumped on a table by the president of the casilla, and the poll workers begin to unfold each ballot. Another long process. [They're tallying the municipal ballots and the presidential ballots at the same time.]
UPDATE 8:20 PM: At 8:06 pm, observers reported that rain did indeed begin to pour at casilla 0734 in Coyoacán, "forcing a hurried move inside an auditorium next to the casilla."
UPDATE 8:16 PM: Exit polls being reported by El Financiero project the next governor of Jalisco will be the Citizens Movement candidate Enrique Alfaro, and in Guanajuato the "Por Guanajuato al frente" candidate Diego Sinhué. The governor's race in Yucatán is projected to be between the PAN and Citizens Movement candidate Mauricio Vila and the PRI-Green Party candidate Mauricio Sahuí. In Veracruz, the race is projected to be down to the “Together We Will Make History” candidate Cuitláhuac García and the "Por Veracruz al frente" candidate Miguel Ángel Yunes. In Puebla, the race is projected to be between Miguel Barbosa of the "Together We Will Make History" coalition, and the candidate of the "Por Puebla al frente," Martha Erika Alonso.
- Written by David Rosnick
In 1991, Argentina fixed its peso to the US dollar, but the increasing value of the dollar led to a deep recession beginning in mid-1998, and default on dollar-denominated debt in December 2001. The currency board devalued the peso by 29 percent in January 2002, before the peso fell further over the year as the peg was abandoned completely.
The year 2001 also represented a low point in Argentina’s commodity prices. From 2001 to 2011, prices rose 187 percent — much faster than import prices generally, which rose 42 percent over the same period. This was the largest relative increase in commodity prices since 1933, shortly after Argentina abandoned the gold standard.
This has led some observers to attribute Argentina’s rapid economic growth after coming out of recession to a commodity boom, but an increase in commodity prices can cut both ways, increasing the price of purchases as well as sales. Indeed, there was considerable improvement in the terms of trade over 2001–2011, and the price of gross domestic product (GDP) relative to that of domestic demand (domestic consumption and investment) grew only about 7.5 percent. This suggests that the impact on real output was modest — perhaps less than 3 percent over the decade.
- Written by Jake Johnston
For more than a week, Nicaragua was convulsed in protests that were met with heavy-handed repression that has reportedly left at least 30 dead. Tear gas. Rubber bullets. Live ammunition. Barricades and burning buildings. Daniel Ortega, the revolutionary Sandinista leader — and president for the past 11 years — “is suddenly facing a revolution of his own,” The New York Times reported.
“The Nicaragua of a week ago no longer exists,” José Adán Aguerri said to The Times. “The break was really with the [Ortega government’s] social security [reforms],” Aguerri later told The Washington Post. Aguerri is the head of COSEP, “the country’s main business organization, which organized one of the biggest protest marches,” The Post reported.
Based on much of the media coverage so far, it would be fair to think that this “revolutionary” leader has opted to cut pensions — screwing the very base that has kept him in power — and providing the impetus for a broad movement to oust him. But missing from almost all of the international news analysis has been salient information on what those reforms actually are — and perhaps more importantly, what sort of alternative reforms are actually being proposed by many of those, like COSEP, now criticizing the government.
Nicaragua’s social security system, INSS, is facing a budget shortfall — that much is true. The IMF said last year that the institution was broke, and called for urgent reforms. The shortfall is actually running at about $75 million a year, or about 0.5 percentage points of GDP. A potential problem? Yes, but far from the calamitous situation that it has been described as.
- Written by Lara Merling
Months after Hurricane Maria the lights are still not back on for all Puerto Ricans. The extensive damage caused by the storm, along with the slow pace of restoring electricity have highlighted the struggles of Puerto Rico’s Electric Power Authority (PREPA). Prior to the storm, PREPA was already dealing with old and failing infrastructure, and a debt burden of about $9 billion dollars. When the storm hit, the embattled utility was not prepared to respond to the damage.
The Fiscal Plan released by Puerto Rico’s government does not question whether privatizing PREPA is needed, but rather presents it as the only viable option. The plan claims that by privatizing the utility, it will “transform” it into an efficient, reliable, and cost-effective energy provider. The proposed privatization process consists of a mix between selling assets, and offering concessions to private companies to run operations.
However, privatization is no panacea for fixing public utilities, and Puerto Rico’s past experience should ring alarm bells. Two failed attempts at privatizing water services resulted in the government having to retake control of the utility in even worse shape. The disastrous results of Puerto Rico Aqueducts and Sewers Authority (PRASA) contracting with private companies to manage its operations are detailed in this report by Puerto Rico’s Comptroller’s Office.
- Written by Jake Johnston and Jacob Wilson
This interview with Marco Ramiro Lobo, a non-voting member of the Honduran electoral authority (TSE by its Spanish acronym) was published on December 3rd by El Faro. In the days since, the TSE has conducted a partial review of actas in an attempt to satisfy concerns raised by international observers and the political opposition, and has agreed to recount the 5000 actas discussed in the interview. However, both the second and third-place finishers continue to reject the results provided by the TSE, which they say has lost all credibility. Both parties filed legal challenges to the results requesting a full vote-by-vote recount and the annulment of the elections, respectively. More than two weeks since the election, many questions remain about how things went so wrong.
He’s an alternate member but, after the president of the Supreme Electoral Tribunal (TSE in Spanish) of Honduras, he is the most visible of the tribunal’s four magistrates. He doesn’t have a vote, but he has a voice and he has made certain that he is heard. Marco Ramiro Lobo was appointed by the Honduran congress three years ago, and today he appears to be the magistrate most opposed to the decisions of the tribunal’s president, David Matamoros. He’s demanding an in-depth investigation of two system failures by the TSE’s vote-tallying technology. He admits that the TSE bears the primary responsibility for the political and social crisis gripping Honduras a week after its presidential election.
The tribunal consists of a magistrate, President David Matamoros, from the National Party, a representative from the Liberal Party, Erick Rodríguez, a member of the tiny Democratic Christian Party, Saúl Bonilla, and Lobo, a member of the small Party of Democratic Unification (UD). The Honduran congress refused to name a representative from the Free Party or the Party for Innovation and Unity (PINU), which make up the Opposition Alliance headed by Salvador Nasralla and Mel Zelaya, who are currently denouncing the reported results as fraudulent.
- Written by Jacob Wilson and Jake Johnston
It has been eight years since the Honduran military removed democratically elected president Manuel Zelaya from office. The post-coup period was characterized by social turmoil, violent repression by state forces, and a breakdown in the rule of law.
In November 2013, shortly before Honduras’ last presidential elections, CEPR published a report on the country’s economic situation since the 2009 coup showing that economic growth had slowed, social spending had decreased, and unemployment had worsened.
On Sunday, November 26, Honduras will again be holding presidential elections. In this post, we provide a brief, fresh overview of the macroeconomic and social indicators in Honduras since the coup, in order to help understand the economic context in which these elections will unfold.
- Written by Jake Johnston
Last month, a joint investigation by In These Times and the Puerto Rico-based Centro de Periodismo Investigativo revealed the top 10 holders of Puerto Rico’s $74.8 billion debt. The authors write:
The popular narrative of Puerto Rico’s debt holders is that they are “small” individual bondholders—rookie investors who trusted their savings to financial firms. But our investigation reveals that some of the most aggressive players demanding debt repayment in Puerto Rico’s bankruptcy court are so-called “vulture firms.” These hedge funds specialize in high-risk “troubled assets” near default or bankruptcy and cater to millionaire and billionaire investors.
While these bondholders are tied up in court with Puerto Rico and the congressionally mandated Oversight Board, the situation on the ground remains grim after the devastation caused by Hurricanes Irma and Maria. Storm-related damages are estimated to be as high as $95 billion.
If Puerto Rico was unable to pay its debt before the storms, it’s virtually impossible now. But that hasn’t stopped at least one vulture, GoldenTree Asset Management, from doubling down on its Puerto Rico bet.
Number five on the In These Times/Centro de Periodismo Investigativo list, GoldenTree reportedly held $587,253,141 worth of Puerto Rican COFINA bonds (bonds backed by income from Puerto Rico’s sales tax). That figure was based on a court filing from mid-August. On October 26, however, bondholders were required to again disclose their financial interests. That filing showed GoldenTree holding assets valued at $852,578,549, meaning that in the last two months, GoldenTree has acquired an additional $250 million in Puerto Rican bonds.
This is classic vulture behavior ― and exactly why many are now arguing for urgent and significant debt relief for the struggling island.
It’s impossible to know exactly when or at what cost GoldenTree acquired those additional bonds ― a spokesperson for GoldenTree declined to answer questions on the timing or cost of the purchases. But even before the hurricanes, COFINA bonds were trading at significantly less than face value. After Hurricane Maria, with Puerto Rico’s inability to pay becoming more obvious, prices have plummeted even further. Given that, and based on where some COFINA bonds are currently trading, it appears unlikely GoldenTree would have paid more than 20 cents on the dollar. At that price, if GoldenTree were repaid in full just on these recent acquisitions it would stand to make a tidy 400 percent profit.
- Written by Jacob Wilson
Two weeks ago, the Food and Agriculture Organization of the United Nations (FAO) released a report on food insecurity and nutrition in Latin America and the Caribbean. The report highlighted a regional increase in food insecurity, a first since the agency started collecting annual data for the Millennium Development Goals in 2000. The authors noted that the food crisis in Venezuela was central to this increase. While the percentage of the population in Venezuela experiencing undernourishment was lower than several other countries in the region ― such as Bolivia, Guatemala, Haiti, and Honduras ― in the last three years, Venezuela contributed an estimated 1.3 million newly food-insecure people to Latin America’s total.
The FAO study confirms that the Bolivarian Republic is facing a growing hunger crisis that requires action. For the past year and a half, the media have decried the Venezuelan government for its management of the crisis, but the figures they have cited do not match the FAO’s. Over the past 18 months, it has become accepted fact that the crisis is even worse than the FAO describes: the New York Times writes that “93 percent of the [Venezuelan] population cannot afford food,” and CNN reports Venezuelans “in the past year dropp[ed] an average of 19 pounds.” (In addition, a Jacobin article states: “Almost 90 percent of the population cannot buy enough food,” while The Independent laments that “75 per cent of the country’s population has lost an average of 19 pounds.”) This is because media coverage on hunger in Venezuela has relied primarily on anecdotal evidence and an inconclusive report authored in part by a member of the political coalition trying to remove Venezuelan President Nicolás Maduro from office.
US newspapers and journals often attribute their Venezuelan hunger figures to “a recent survey … by the country’s leading universities.” The survey in question was published on February 27, 2016 by Simón Bolívar University, the Central University of Venezuela, and the Bengoa Foundation. The report, which focuses on Venezuelan nutrition, is part of an annual review covering the state of living conditions in the country. Maritza Landaeta-Jiménez, who as recently as 2013 was a member of the Venezuelan opposition’s Nutrition Commission, headed the 2016 research. The document, based on a survey of 6,413 Venezuelans, reported that 93 percent of Venezuelans felt that they did not have enough money to purchase food, and that 72.7 percent of Venezuelans had lost an average of 8.7 kilograms (19 pounds) in the past year. However, the same survey revealed that 67.5 percent of Venezuelans were eating three meals a day, and only 25 percent of the country felt that their nutrition could be categorized as “deficient.”
- Written by Jacob Wilson
In 2015, the Obama administration announced that Venezuela had thrown the United States into a “national emergency” because Venezuela constituted “an unusual and extraordinary threat to the national security and foreign policy of the United States.” On August 25, the Trump administration cited this ongoing emergency to justify financial sanctions against Venezuela that are likely to deepen the economic crisis there and generate greater human suffering.
How does a country with a fraction of the US’s military budget and a government with no history of international aggression cause a national emergency in the most powerful state in the world? Sure, the short answer is always “politics.” But in this case, there’s a forty-year history of presidential overreach and unaccountability that calls for a closer look.
In 1976, the House and Senate, with Democratic supermajorities in both, were looking to curb executive power in the wake of the Vietnam War. On trial was the concept of the “national emergency,” a term derived from an amendment to the 1917 Trading with the Enemy Act (TWEA). This World War I law gave the president authority to impose unilateral sanctions and restrict trade with warring enemy countries. Initially, it said nothing about national emergencies. But in 1933, President Roosevelt amended Trading with the Enemy to include executive authority over “any transactions in foreign exchange, transfers of credit between or payments by banking institutions as defined by the President” during a time of national emergency. Roosevelt declared the first of the US’s newly defined national emergencies, and promptly froze a majority of bank assets to prevent bank runs during the heart of the Great Depression.
- Written by Lara Merling
As Puerto Rico’s debt saga plays out in court, its Financial Oversight and Management Board continues to push for further austerity measures that directly impact the people of Puerto Rico. In an effort to comply with the demands of the board, the Puerto Rican government cut Christmas bonuses for all its employees. For the board these cuts were not sufficient, and in a letter sent last week to the governor, they are now mandating furloughs for government employees.
In March 2017, the Financial Oversight and Management Board, created through US Congress’ Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA), certified a 10-year fiscal plan for Puerto Rico that called for severe spending cuts along with tax increases. However, all the proposed measures under the plan’s best case scenario only put aside $7.9 billion for debt repayment over 10 years, while the island’s current debt burden is estimated at over $73 billion.
This fiscal plan projects negative real growth until at least 2024, without taking into account the further negative impact the austerity measures would have on growth. Furthermore, the plan does not address many of the underlying issues that caused Puerto Rico’s economic decline. The plan sentences Puerto Rico to yet another lost decade, and despite its rejection by creditors that triggered a bankruptcy-like procedure, the board is continuing to push for the plan’s implementation.
- Written by Jared Flanery
The June 4 governor’s election in the State of Mexico (or Edomex), the most populous state in Mexico, came close to ending the Partido Revolucionario Institucional’s (PRI) nearly nine-decade-long control over the state.
Throughout the campaign and its aftermath, PRI’s illegal election interference, or what the New York Times called “business as usual in the State of Mexico,” 1 was widely documented by independent observers. Even as PRI-controlled election monitors proclaimed their candidate the victor with a slim plurality, evidence of extensive irregularities undermined the results’ legitimacy. The absence of a clear mandate produced a scandal and strengthened the prospects of the leading opposition party ahead of the 2018 presidential elections.
It wasn’t the Partido de Acción Nacional (PAN), the right-wing party that had interrupted the PRI’s grip on the presidency with the elections of Vicente Fox in 2000 and Felipe Calderón in 2006, that threatened PRI’s stranglehold on the state. Rather, a new political force, the Movimiento Regeneración Nacional (Morena), emerged as the most credible challenger to the PRI.
- Written by Lara Merling
In an article about Ecuador’s presidential transition that appeared in Bloomberg View, Mac Margolis claims that “Moreno takes over as Ecuador heads into its second year of recession.” However, this is not true.
Looking at quarterly GDP data for Ecuador, we see a different picture.
- Written by Jake Johnston
In a high-level meeting Friday, the presidents of Honduras, Guatemala and El Salvador will discuss the region’s security with American and Mexican officials. Innocuous enough, you may think. But part of the meeting will be held on a US military base in Miami, Florida ― the headquarters of the US Southern Command, the Pentagon’s regional subsidiary that oversees American military operations throughout Central and South America as well as the Caribbean. Under President Donald Trump, the militarization of US foreign policy is about to stretch more deeply into Central America.
Central America policymaking, hardly an open book to begin with, is set to become more secretive. With the Conference on Prosperity and Security in Central America just days away, there is no official agenda of speakers or publicly listed events and no involvement of civil society organizations, and even press access is extremely limited. What we do know is US Secretary of State Rex Tillerson will be there, as will Vice President Mike Pence, Treasury Secretary Steven Mnuchin and of course, General John F. Kelly, the director of Homeland Security and the previous head of SOUTHCOM.
On Thursday, high-level government officials will be joined by a coterie of elite Central American businessmen, invited to the conference by its hosts, the US and Mexico. Trump’s budget envisions a massive cut in US economic assistance to Central America, and officials will apparently be asking the country’s most rapacious and corrupt economic actors to fill the void.
“We must secure the nation. We must protect our people,” Secretary of State Tillerson told his staff last month in a discussion around the US’ new “America First” foreign policy. “And we can only do that with economic prosperity. So it’s foreign policy projected with a strong ability to enforce the protection of our freedoms with a strong military.” By linking economic success with military operations, Tillerson telegraphed which way the foreign aid dollars will be blowing.
While much has been made of the reduction in the budgets of the State Department and USAID, don’t expect the US to simply retreat. Rather, expect the US military to deepen its involvement in the region. There may be no new official policy announcements, but the shift appears inevitable.
The turf battle between the State Department and the Pentagon over control of foreign assistance ― and more specifically “security cooperation” ― goes back to the Obama administration. Throughout 2016, diplomats fought generals over control of the billions of dollars of US security assistance allocated each year. Surprising few, the Pentagon came out on top and with Trump’s election has been bolstered further.
There are currently more than 80 unique authorizations that allow the Pentagon ― with minimal consultation with the State Department ― to deliver security assistance to foreign nations’ military, police, and paramilitary forces. With development assistance slashed, US diplomacy in the region will more often appear in uniform.
In 2016, the Pentagon distributed nearly $60 million in counterdrug assistance to Central America. Compared to the at least marginally transparent State Department budget, the labyrinthine nature of the Pentagon budget makes it next to impossible to determine precisely how much is spent in Central America ― let alone what it may look like next year. But with Secretary Kelly, the former SOUTHCOM commander, in charge, it appears that an increased Pentagon focus on Latin America is likely.