The Americas Blog

El Blog de las Americas

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.

Spanish description lorem ipsum dolor sit amet, consectetur adipiscing elit. Nunc in arcu neque. Nulla at est euismod, tempor ligula vitae, luctus justo. Ut auctor mi at orci porta pellentesque. Nunc imperdiet sapien sed orci semper, finibus auctor tellus placerat. Nulla scelerisque feugiat turpis quis venenatis. Curabitur mollis diam eu urna efficitur lobortis.

En español | Em português

In their latest article on U.S. government spying for The Intercept, Ryan Devereaux, Glenn Greenwald and Laura Poitras review and publish leaked documents that show that the U.S. government may have used the Drug Enforcement Administration (DEA) to aid the National Security Agency (NSA) to spy on U.S. citizens and non-citizens in foreign countries. The NSA is shown to have assisted the DEA with efforts to capture narcotraffickers, but the leaked documents also refer to “a vibrant two-way information sharing relationship” between the two intelligence agencies, implying that the DEA shares its information with the NSA to aid with non-drug-related spying. This may explain how the NSA has gathered not just metadata but also the full-take audio from “virtually every cell phone conversation on the island nation of the Bahamas.”

The authors write,

The DEA has long been in a unique position to help the NSA gain backdoor access to foreign phone networks. “DEA has close relationships with foreign government counterparts and vetted foreign partners,” the manager of the NSA’s drug-war efforts reported in a 2004 memo. Indeed, with more than 80 international offices, the DEA is one of the most widely deployed U.S. agencies around the globe.

But what many foreign governments fail to realize is that U.S. drug agents don’t confine themselves to simply fighting narcotics traffickers. “DEA is actually one of the biggest spy operations there is,” says Finn Selander, a former DEA special agent who works with the drug-reform advocacy group Law Enforcement Against Prohibition. “Our mandate is not just drugs. We collect intelligence.”

What’s more, Selander adds, the NSA has aided the DEA for years on surveillance operations. “On our reports, there’s drug information and then there’s non-drug information,” he says. “So countries let us in because they don’t view us, really, as a spy organization.”

While the documents accompanying the article reveal detailed information that has never before been available to the public, this is not the first time that the DEA has faced allegations of spying.

In 2005, President Hugo Chávez of Venezuela stopped cooperating with the DEA after accusing it of espionage in his country. At the time, a State Department spokesperson responded by saying, “the accusations that somehow the Drug Enforcement Agency is involved in espionage are baseless. There’s no substance or justification for them.” Using arguments that would change very little over the next nine years, a State Department official said at the time, “I think it’s pretty clear to us that the motivation for this is not the accusation itself or not what they state is the problem. The motivation is an effort to detract from the government’s increasingly deficient record of cooperation.”

Three years later, President Evo Morales expelled the DEA from Bolivia saying, “there were DEA agents who worked to conduct political espionage.” He also said, “we can control ourselves internally. We don’t need any spying from anybody.” The State Department spokesperson said in response, “the charges that have been made are just patently absurd. We reject them categorically”, and the news agency EFE reported that “Washington has repeatedly denied that the DEA has been involved in any activities in Bolivia apart from the war on drugs.”

Few of the press reports from 2005 or 2008 took these accusations seriously, and the State Department dismissed the allegations categorically, but in 2008, CEPR’s co-director Mark Weisbrot wrote that “To the Bolivians, the U.S. is using the “war on drugs” throughout Latin America mainly as an excuse to get boots on the ground, and establish ties with local military and police forces.” To this list, we can now add access to national phone and communication networks, and storage of the content of phone calls.

En español | Em português

In their latest article on U.S. government spying for The Intercept, Ryan Devereaux, Glenn Greenwald and Laura Poitras review and publish leaked documents that show that the U.S. government may have used the Drug Enforcement Administration (DEA) to aid the National Security Agency (NSA) to spy on U.S. citizens and non-citizens in foreign countries. The NSA is shown to have assisted the DEA with efforts to capture narcotraffickers, but the leaked documents also refer to “a vibrant two-way information sharing relationship” between the two intelligence agencies, implying that the DEA shares its information with the NSA to aid with non-drug-related spying. This may explain how the NSA has gathered not just metadata but also the full-take audio from “virtually every cell phone conversation on the island nation of the Bahamas.”

The authors write,

The DEA has long been in a unique position to help the NSA gain backdoor access to foreign phone networks. “DEA has close relationships with foreign government counterparts and vetted foreign partners,” the manager of the NSA’s drug-war efforts reported in a 2004 memo. Indeed, with more than 80 international offices, the DEA is one of the most widely deployed U.S. agencies around the globe.

But what many foreign governments fail to realize is that U.S. drug agents don’t confine themselves to simply fighting narcotics traffickers. “DEA is actually one of the biggest spy operations there is,” says Finn Selander, a former DEA special agent who works with the drug-reform advocacy group Law Enforcement Against Prohibition. “Our mandate is not just drugs. We collect intelligence.”

What’s more, Selander adds, the NSA has aided the DEA for years on surveillance operations. “On our reports, there’s drug information and then there’s non-drug information,” he says. “So countries let us in because they don’t view us, really, as a spy organization.”

While the documents accompanying the article reveal detailed information that has never before been available to the public, this is not the first time that the DEA has faced allegations of spying.

In 2005, President Hugo Chávez of Venezuela stopped cooperating with the DEA after accusing it of espionage in his country. At the time, a State Department spokesperson responded by saying, “the accusations that somehow the Drug Enforcement Agency is involved in espionage are baseless. There’s no substance or justification for them.” Using arguments that would change very little over the next nine years, a State Department official said at the time, “I think it’s pretty clear to us that the motivation for this is not the accusation itself or not what they state is the problem. The motivation is an effort to detract from the government’s increasingly deficient record of cooperation.”

Three years later, President Evo Morales expelled the DEA from Bolivia saying, “there were DEA agents who worked to conduct political espionage.” He also said, “we can control ourselves internally. We don’t need any spying from anybody.” The State Department spokesperson said in response, “the charges that have been made are just patently absurd. We reject them categorically”, and the news agency EFE reported that “Washington has repeatedly denied that the DEA has been involved in any activities in Bolivia apart from the war on drugs.”

Few of the press reports from 2005 or 2008 took these accusations seriously, and the State Department dismissed the allegations categorically, but in 2008, CEPR’s co-director Mark Weisbrot wrote that “To the Bolivians, the U.S. is using the “war on drugs” throughout Latin America mainly as an excuse to get boots on the ground, and establish ties with local military and police forces.” To this list, we can now add access to national phone and communication networks, and storage of the content of phone calls.

Sunday, May 11 marked the grim two-year anniversary of a tragic incident that CEPR has investigated and frequently blogged about: the DEA-related killing of four indigenous villagers in the northeastern Moskitia region of Honduras.  The victims – two women, a fourteen year-old boy, and a young man – were in a small passenger boat headed to the town of Ahuas when they were shot dead by a counternarcotics team made up of DEA and Honduran agents.  Four other boat passengers were injured.  When Honduran police authorities described the drug interdiction operation as “successful,” local authorities and human rights groups protested, pointing out that those killed all had legitimate reasons for traveling on the river and that there was no evidence that police agents had fired in “self-defense” as the DEA alleged.  

Congressman Hank Johnson (D-GA), who initiated a congressional letter demanding a full U.S. government investigation of the incident back in January of 2013, has authored an opinion piece for Al Jazeera America that was published on the two-year anniversary date.  The piece laments the DEA’s response – or lack of response – to the congressional letter, which was signed by 58 members of the House of Representatives:

Sadly, the response we received from the DEA failed to address key questions about the U.S. agents’ role in the incident and showed no indication that measures would be taken to avoid future accidents of this kind. Though the official reply to the letter made no reference to our request for an investigation, an anonymous DEA official told the press that there would be “no separate investigation.”

Most appalling, though, was the news months later that the DEA had ignored Honduran investigators’ requests to interview the U.S. agents involved in the operation and perform forensic tests on their weapons. Given that Honduran police told the investigating team from the Public Ministry that the DEA had led the mission and ordered a helicopter gunman to fire on the passenger boat, this lack of cooperation could only heighten suspicions of DEA responsibility for the deaths.  

Johnson’s op-ed also notes that the “persistent call for a U.S. investigation of these tragic killings may have finally been heard.”  Concretely, the Department of Justice’s Office of Inspector General (OIG) has announced that it is joining the Department of State’s OIG in carrying out a review of the U.S. government response to three counternarcotics missions in Honduras in 2012 that involved the use of deadly force.  Aside from the Ahuas killings, the DEA was involved in two other controversial and deadly incidents during a two-month time period, during which DEA agents shot and killed alleged drug traffickers.   The wording of the OIG announcement, which mentions the issue of “cooperation of DEA personnel” and “information provided to Congress,” suggests that the Ahuas killings will be a big focus of the review.  Here is the full DOJ OIG statement, under “Ongoing Work”:

Post-Incident Responses to Missions in Honduras Involving the Use of Deadly Force

The Department of Justice (DOJ) and Department of State OIGs are conducting a joint review of the post-incident responses by the Department of State (State) and the U.S. Drug Enforcement Administration (DEA) to three drug interdiction missions in Honduras in 2012, all involving the use of deadly force. The missions were conducted jointly among the Government of Honduras, the DEA, and State pursuant to an aerial interdiction program known as Operation Anvil. The joint review will address, among other things, pertinent pre-incident planning and the rules of engagement governing the use of deadly force, the post-incident investigative and review efforts by State and DEA, the cooperation by State and DEA personnel with the post-shooting reviews, and the information provided to Congress and the public by DOJ and State regarding the incidents.

In his op-ed, Johnson refers to the review as an important “first step”, one that has been “late in coming.”  But, he says,

further steps are necessary. To begin with, it’s time for the DEA to come clean about the Ahuas operation and release all relevant documents, including any transcripts and videos that can shed light on how the killings occurred. Going forward, we need to maintain transparency and accountability around U.S.-backed counternarcotic operations, whether or not U.S. agents are directly involved. Never again should we allow a young, promising life like [fourteen year-old] Hasked’s to become the collateral damage of the war on drugs.

Sunday, May 11 marked the grim two-year anniversary of a tragic incident that CEPR has investigated and frequently blogged about: the DEA-related killing of four indigenous villagers in the northeastern Moskitia region of Honduras.  The victims – two women, a fourteen year-old boy, and a young man – were in a small passenger boat headed to the town of Ahuas when they were shot dead by a counternarcotics team made up of DEA and Honduran agents.  Four other boat passengers were injured.  When Honduran police authorities described the drug interdiction operation as “successful,” local authorities and human rights groups protested, pointing out that those killed all had legitimate reasons for traveling on the river and that there was no evidence that police agents had fired in “self-defense” as the DEA alleged.  

Congressman Hank Johnson (D-GA), who initiated a congressional letter demanding a full U.S. government investigation of the incident back in January of 2013, has authored an opinion piece for Al Jazeera America that was published on the two-year anniversary date.  The piece laments the DEA’s response – or lack of response – to the congressional letter, which was signed by 58 members of the House of Representatives:

Sadly, the response we received from the DEA failed to address key questions about the U.S. agents’ role in the incident and showed no indication that measures would be taken to avoid future accidents of this kind. Though the official reply to the letter made no reference to our request for an investigation, an anonymous DEA official told the press that there would be “no separate investigation.”

Most appalling, though, was the news months later that the DEA had ignored Honduran investigators’ requests to interview the U.S. agents involved in the operation and perform forensic tests on their weapons. Given that Honduran police told the investigating team from the Public Ministry that the DEA had led the mission and ordered a helicopter gunman to fire on the passenger boat, this lack of cooperation could only heighten suspicions of DEA responsibility for the deaths.  

Johnson’s op-ed also notes that the “persistent call for a U.S. investigation of these tragic killings may have finally been heard.”  Concretely, the Department of Justice’s Office of Inspector General (OIG) has announced that it is joining the Department of State’s OIG in carrying out a review of the U.S. government response to three counternarcotics missions in Honduras in 2012 that involved the use of deadly force.  Aside from the Ahuas killings, the DEA was involved in two other controversial and deadly incidents during a two-month time period, during which DEA agents shot and killed alleged drug traffickers.   The wording of the OIG announcement, which mentions the issue of “cooperation of DEA personnel” and “information provided to Congress,” suggests that the Ahuas killings will be a big focus of the review.  Here is the full DOJ OIG statement, under “Ongoing Work”:

Post-Incident Responses to Missions in Honduras Involving the Use of Deadly Force

The Department of Justice (DOJ) and Department of State OIGs are conducting a joint review of the post-incident responses by the Department of State (State) and the U.S. Drug Enforcement Administration (DEA) to three drug interdiction missions in Honduras in 2012, all involving the use of deadly force. The missions were conducted jointly among the Government of Honduras, the DEA, and State pursuant to an aerial interdiction program known as Operation Anvil. The joint review will address, among other things, pertinent pre-incident planning and the rules of engagement governing the use of deadly force, the post-incident investigative and review efforts by State and DEA, the cooperation by State and DEA personnel with the post-shooting reviews, and the information provided to Congress and the public by DOJ and State regarding the incidents.

In his op-ed, Johnson refers to the review as an important “first step”, one that has been “late in coming.”  But, he says,

further steps are necessary. To begin with, it’s time for the DEA to come clean about the Ahuas operation and release all relevant documents, including any transcripts and videos that can shed light on how the killings occurred. Going forward, we need to maintain transparency and accountability around U.S.-backed counternarcotic operations, whether or not U.S. agents are directly involved. Never again should we allow a young, promising life like [fourteen year-old] Hasked’s to become the collateral damage of the war on drugs.

As we’ve described before, there is much controversy surrounding the World Bank’s International Finance Corporation’s investment in palm oil production in the Bajo Aguan, Honduras. Wealthy landowners have been engaged in a violent conflict with campesinos, resulting in the deaths and forced evictions of many campesinos at the hands of security forces both governmental and private. The company at the heart of the investigations and recent media scrutiny is Dinant, owned by the man many consider to be Honduras’ wealthiest and most powerful, Miguel Facussé.

As we have previously noted, Facussé has admitted the killings of some campesinos by his security forces. A 2011 human rights report from the Food First Information and Action Network, the International Federation for Human Rights and other groups details a number of killings, kidnappings, torture, forced evictions, assaults, death threats and other human rights violations that victims, witnesses and others attribute to Facussé’s guards.

Facussé has attempted to clean up his public image before, such as a notable December 2012 interview with the Los Angeles Times in which he made the case that just because he keeps a gun on his desk, and just because he “keeps files of photos of the various Honduran activists who are most vocal against him,” and just because one of his private planes was used to fly the foreign minister out of the country (against her will) during the 2009 coup, and just because he was aware of the coup plans before the coup, he’s really not a “bad guy.” And sure, he admitted he “probably had reasons to kill” attorney Antonio Trejo Cabrera, who worked on behalf of campesino groups in the Aguan, but Facussé said, “I’m not a killer.”

Now Dinant has demonstrated a similar PR savviness. Writing in the Guardian after a series of articles examining the IFC/Dinant controversy, Dinant corporate relations director Roger Pineda Pinel noted among other things that “We have never engaged in forced evictions of farmers from our land; such evictions are undertaken exclusively by government security forces acting within the law and under instruction from the courts.”

Considering what we know about Honduras’ security forces’ respect for human rights and the law –the frequent subject of U.S. congressional concern and human rights organizations’ statements — that should make everyone involved feel better, right?

Update, May 28, 2014: Yassid Kababie, Social Affairs Corporate Manager for Corporación Dinant, sent a response to this post, which we have posted here. [PDF]

As we’ve described before, there is much controversy surrounding the World Bank’s International Finance Corporation’s investment in palm oil production in the Bajo Aguan, Honduras. Wealthy landowners have been engaged in a violent conflict with campesinos, resulting in the deaths and forced evictions of many campesinos at the hands of security forces both governmental and private. The company at the heart of the investigations and recent media scrutiny is Dinant, owned by the man many consider to be Honduras’ wealthiest and most powerful, Miguel Facussé.

As we have previously noted, Facussé has admitted the killings of some campesinos by his security forces. A 2011 human rights report from the Food First Information and Action Network, the International Federation for Human Rights and other groups details a number of killings, kidnappings, torture, forced evictions, assaults, death threats and other human rights violations that victims, witnesses and others attribute to Facussé’s guards.

Facussé has attempted to clean up his public image before, such as a notable December 2012 interview with the Los Angeles Times in which he made the case that just because he keeps a gun on his desk, and just because he “keeps files of photos of the various Honduran activists who are most vocal against him,” and just because one of his private planes was used to fly the foreign minister out of the country (against her will) during the 2009 coup, and just because he was aware of the coup plans before the coup, he’s really not a “bad guy.” And sure, he admitted he “probably had reasons to kill” attorney Antonio Trejo Cabrera, who worked on behalf of campesino groups in the Aguan, but Facussé said, “I’m not a killer.”

Now Dinant has demonstrated a similar PR savviness. Writing in the Guardian after a series of articles examining the IFC/Dinant controversy, Dinant corporate relations director Roger Pineda Pinel noted among other things that “We have never engaged in forced evictions of farmers from our land; such evictions are undertaken exclusively by government security forces acting within the law and under instruction from the courts.”

Considering what we know about Honduras’ security forces’ respect for human rights and the law –the frequent subject of U.S. congressional concern and human rights organizations’ statements — that should make everyone involved feel better, right?

Update, May 28, 2014: Yassid Kababie, Social Affairs Corporate Manager for Corporación Dinant, sent a response to this post, which we have posted here. [PDF]

Last week the Wall Street Journal interviewed Colombia’s president Juan Manual Santos and described his thoughts on the controversial ouster of Bogotá mayor Gustavo Petro:

Mr. Santos said he didn’t want to oust Mr. Petro, but he had to follow the law, even though it hurt him politically. He said he was ready to reinstate Mr. Petro if some judge ordered him to do so.

Well, lucky for Santos, he got his wish. The New York Times reported on April 23:

But a judge in Bogotá on Tuesday found that Mr. Santos had acted improperly when he ignored a request by the Inter-American Commission on Human Rights to suspend the ouster because it could violate the mayor’s rights.

“Some might like it and others not, but my obligation as president of the country is to obey the law and the rulings of judges,” Mr. Santos said, adding that he had no choice but to reinstate Mr. Petro.

All’s well that ends well? Perhaps not. On April 25, the Associated Press reported:

Colombian President Juan Manuel Santos says he’ll appeal a court ruling that forced him to reinstate the capital’s mayor a month after the official was removed for administrative irregularities.

And why would he do such a thing, if he was indeed “ready to reinstate Mr. Petro if some judge ordered him to do so”, as “some judge” had in fact done? The AP explains:

Santos said Friday said that he will appeal the decision because it has put the government’s credibility at risk.

Last week the Wall Street Journal interviewed Colombia’s president Juan Manual Santos and described his thoughts on the controversial ouster of Bogotá mayor Gustavo Petro:

Mr. Santos said he didn’t want to oust Mr. Petro, but he had to follow the law, even though it hurt him politically. He said he was ready to reinstate Mr. Petro if some judge ordered him to do so.

Well, lucky for Santos, he got his wish. The New York Times reported on April 23:

But a judge in Bogotá on Tuesday found that Mr. Santos had acted improperly when he ignored a request by the Inter-American Commission on Human Rights to suspend the ouster because it could violate the mayor’s rights.

“Some might like it and others not, but my obligation as president of the country is to obey the law and the rulings of judges,” Mr. Santos said, adding that he had no choice but to reinstate Mr. Petro.

All’s well that ends well? Perhaps not. On April 25, the Associated Press reported:

Colombian President Juan Manuel Santos says he’ll appeal a court ruling that forced him to reinstate the capital’s mayor a month after the official was removed for administrative irregularities.

And why would he do such a thing, if he was indeed “ready to reinstate Mr. Petro if some judge ordered him to do so”, as “some judge” had in fact done? The AP explains:

Santos said Friday said that he will appeal the decision because it has put the government’s credibility at risk.

French Economist Thomas Piketty, author of the best-selling “Capital in the Twenty-First Century,” came to Washington DC today for a series of discussions with other economists and the public. The book itself, whose author has made enormous contributions over the past 15 years analyzing the distribution of income and wealth, is very rich in historical and data-driven economic analysis and has been widely reviewed. It could very well become one of the most influential books on economics in decades. This is not a review but rather a brief commentary on some of the extraordinarily interesting discussion – not often seen in “This Town” – that Piketty’s visit inspired.

One of Piketty’s main concerns is the increasing concentration of wealth that has characterized the past few decades, in the United States and other developed economies. He describes this phenomenon in great detail but also abstractly and usefully as r > g; in other words, the more that the rate of return on capital exceeds the rate of growth of the economy, the more wealth is concentrated at the top. Piketty noted a number of times, in response to questions, that he sees – as do many Americans – the main problem with inequality reaching what he called “extreme” levels is that it makes it “impossible to have proper functioning of democratic institutions.” His principal proposal for reversing this trend is a progressive tax on wealth.

At the Tax Policy Center, a joint venture of the Urban Institute and Brookings Institution, my colleague Dean Baker strongly agreed with Piketty’s proposal to tax wealth, but argued for a “Plan B,” among other reasons because Plan A may prove to be politically difficult or impossible for some time to come. Baker’s proposals were interesting in that they were designed to lower “r” while at the same time raising “g.” He went through several sectors of the economy where there are large “economic rents” that can be captured through taxation or other reforms, while at the same time increasing the overall efficiency of the economy and therefore the growth of output. The financial sector is obviously target number one, where even a small financial transactions tax could capture tens of billions of dollars of annual revenue while reducing wasteful and even harmful trading (Baker referred to Michael Lewis’ “Flash Boys” as a prime example). Then there are patents, where we in the U.S. pay $380 billion per year for drugs whose price is composed of something like 80 or 90 percent monopoly rents – about 2 percent of GDP lifted from the non-super-rich; plus the impediments to the advancement of medical science and actual harm to human health, as pharmaceutical companies hide their data, lie about their results, and promote the use of patented drugs for inappropriate purposes. (As one critic of the pharmaceutical industry put it, there are a lot more healthy people than sick people out there, so if you are a pharmaceutical company with a patented drug, you want to get some of those healthy people into your market).

Then there are the “too-big-to-fail subsidies” which the IMF recently estimated as 20 percent of after-tax corporate profits in the euro zone. Baker also briefly discussed anti-trust policy, corporate access to resources (such as airplane space at airports) that could be auctioned, and privatization of services such as health care that are more efficiently delivered in the public sector as examples of places where “r” could be reduced as “g” is increased.

Piketty’s response was interesting: first, he agreed with Baker that all these policy recommendations would be good for the world. But, looking at the history of returns to capital, he argued that these are not greatly affected by the overall state of competitiveness of the economy. I do not find this convincing. As Piketty well knows and even demonstrates, the mechanisms, dynamics, and legal basis of returns to capital evolve over time, as do the feasibility of alternatives to any set of current arrangements. When we have 40 percent of corporate profits going to financial sector, and “intellectual property” capturing a growing share of returns at the same time that technology is increasingly making much of consumption available at zero marginal cost, there is a lot of room for slowing or reversing the upward redistribution of income by going after rents. As Baker noted, we are talking about something like 30 -50 percent of after tax corporate profits – a big chunk of “r” and so much the more important if it increases g.

All this is not to detract from Piketty’s great work or his recommendation of a progressive tax on net wealth, which as he pointed out could even reduce the property tax burden on middle-class homeowners, who on average are paying property taxes on homes where their wealth (net of mortgage debt) is very small. Piketty also easily rebutted the arguments of conservative economist Kevin Hassett, who asserted that the Gini coefficient on consumption had not changed all that much, and that the increase in transfer payments had compensated for the upward redistribution of income in recent decades. As Piketty pointed out, Hassett’s data on income distribution, which is self-reported, misses a lot of the income of the highest income groups; even the tax data that Piketty uses is really a lower bound, and Hassett’s is far below that. A rare laugh erupted in the audience when Piketty noted, in French-accented English, that the consumption data of the upper income groups did not include “their consumption of politicians.” Which is of course Piketty’s main reason for focusing so much on wealth in his book. And Baker added that most of the income transfers in the U.S. come from the middle classes, (e.g. Social Security and Medicare) not from the rich.

A note on the morning discussion at the Economic Policy Institute, sponsored by the new Washington Center for Equitable Growth: Nobel prize winning economist Robert Solow (full disclosure: a CEPR advisory board member) was on the panel and made a point of what he called “the endogeneity of (economic) growth. “ In other words, that it is not necessarily determined by factors outside the economy itself. Now, one of the great things about Piketty’s book is that it shows, as he noted today, that there is nothing that would prevent or adjust the divergence between r and g over time that concentrates wealth; we are not looking at a market failure here. However, economic policy can be a very important variable for a long period of time. For example, there was a huge slowdown in per-capita GDP growth in the vast majority of low-and-middle-income countries between 1980-2000, as compared to the prior twenty years, especially if the measure is taken by comparing countries starting at similar levels of per capita GDP in 1960 and 1980. In the 2000’s there was a rebound, to a large extent because one of the few countries that pursued a non-neoliberal policy path – China – became the world’s largest economy and helped pull many developing countries up. In the high income world, the European economy has been drastically (negatively) affected since 2009 by harmful macroeconomic policy, led by the Troika (the European Central Bank, European Commission, and IMF).

And this is looking at per capita GDP, which is what matters for living standards but – as Piketty emphasizes – the slowdown in population growth lowers g, and therefore increases the concentration of wealth. Here is my last disagreement with Piketty: he described the slowdown in population growth as “frightening” because of its impact on wealth distribution. But it is also – especially in the high-income countries — one of the most important changes that is necessary to avert global climate disaster. And it also has a positive effect on living standards and income distribution: all other things equal, lower population (and labor force) growth increases the bargaining power of labor, and in any particular country, it increases the potential for everyone to have higher living standards with given levels of productivity growth.

All that said, Piketty’s book is a masterpiece and everyone should read it.

French Economist Thomas Piketty, author of the best-selling “Capital in the Twenty-First Century,” came to Washington DC today for a series of discussions with other economists and the public. The book itself, whose author has made enormous contributions over the past 15 years analyzing the distribution of income and wealth, is very rich in historical and data-driven economic analysis and has been widely reviewed. It could very well become one of the most influential books on economics in decades. This is not a review but rather a brief commentary on some of the extraordinarily interesting discussion – not often seen in “This Town” – that Piketty’s visit inspired.

One of Piketty’s main concerns is the increasing concentration of wealth that has characterized the past few decades, in the United States and other developed economies. He describes this phenomenon in great detail but also abstractly and usefully as r > g; in other words, the more that the rate of return on capital exceeds the rate of growth of the economy, the more wealth is concentrated at the top. Piketty noted a number of times, in response to questions, that he sees – as do many Americans – the main problem with inequality reaching what he called “extreme” levels is that it makes it “impossible to have proper functioning of democratic institutions.” His principal proposal for reversing this trend is a progressive tax on wealth.

At the Tax Policy Center, a joint venture of the Urban Institute and Brookings Institution, my colleague Dean Baker strongly agreed with Piketty’s proposal to tax wealth, but argued for a “Plan B,” among other reasons because Plan A may prove to be politically difficult or impossible for some time to come. Baker’s proposals were interesting in that they were designed to lower “r” while at the same time raising “g.” He went through several sectors of the economy where there are large “economic rents” that can be captured through taxation or other reforms, while at the same time increasing the overall efficiency of the economy and therefore the growth of output. The financial sector is obviously target number one, where even a small financial transactions tax could capture tens of billions of dollars of annual revenue while reducing wasteful and even harmful trading (Baker referred to Michael Lewis’ “Flash Boys” as a prime example). Then there are patents, where we in the U.S. pay $380 billion per year for drugs whose price is composed of something like 80 or 90 percent monopoly rents – about 2 percent of GDP lifted from the non-super-rich; plus the impediments to the advancement of medical science and actual harm to human health, as pharmaceutical companies hide their data, lie about their results, and promote the use of patented drugs for inappropriate purposes. (As one critic of the pharmaceutical industry put it, there are a lot more healthy people than sick people out there, so if you are a pharmaceutical company with a patented drug, you want to get some of those healthy people into your market).

Then there are the “too-big-to-fail subsidies” which the IMF recently estimated as 20 percent of after-tax corporate profits in the euro zone. Baker also briefly discussed anti-trust policy, corporate access to resources (such as airplane space at airports) that could be auctioned, and privatization of services such as health care that are more efficiently delivered in the public sector as examples of places where “r” could be reduced as “g” is increased.

Piketty’s response was interesting: first, he agreed with Baker that all these policy recommendations would be good for the world. But, looking at the history of returns to capital, he argued that these are not greatly affected by the overall state of competitiveness of the economy. I do not find this convincing. As Piketty well knows and even demonstrates, the mechanisms, dynamics, and legal basis of returns to capital evolve over time, as do the feasibility of alternatives to any set of current arrangements. When we have 40 percent of corporate profits going to financial sector, and “intellectual property” capturing a growing share of returns at the same time that technology is increasingly making much of consumption available at zero marginal cost, there is a lot of room for slowing or reversing the upward redistribution of income by going after rents. As Baker noted, we are talking about something like 30 -50 percent of after tax corporate profits – a big chunk of “r” and so much the more important if it increases g.

All this is not to detract from Piketty’s great work or his recommendation of a progressive tax on net wealth, which as he pointed out could even reduce the property tax burden on middle-class homeowners, who on average are paying property taxes on homes where their wealth (net of mortgage debt) is very small. Piketty also easily rebutted the arguments of conservative economist Kevin Hassett, who asserted that the Gini coefficient on consumption had not changed all that much, and that the increase in transfer payments had compensated for the upward redistribution of income in recent decades. As Piketty pointed out, Hassett’s data on income distribution, which is self-reported, misses a lot of the income of the highest income groups; even the tax data that Piketty uses is really a lower bound, and Hassett’s is far below that. A rare laugh erupted in the audience when Piketty noted, in French-accented English, that the consumption data of the upper income groups did not include “their consumption of politicians.” Which is of course Piketty’s main reason for focusing so much on wealth in his book. And Baker added that most of the income transfers in the U.S. come from the middle classes, (e.g. Social Security and Medicare) not from the rich.

A note on the morning discussion at the Economic Policy Institute, sponsored by the new Washington Center for Equitable Growth: Nobel prize winning economist Robert Solow (full disclosure: a CEPR advisory board member) was on the panel and made a point of what he called “the endogeneity of (economic) growth. “ In other words, that it is not necessarily determined by factors outside the economy itself. Now, one of the great things about Piketty’s book is that it shows, as he noted today, that there is nothing that would prevent or adjust the divergence between r and g over time that concentrates wealth; we are not looking at a market failure here. However, economic policy can be a very important variable for a long period of time. For example, there was a huge slowdown in per-capita GDP growth in the vast majority of low-and-middle-income countries between 1980-2000, as compared to the prior twenty years, especially if the measure is taken by comparing countries starting at similar levels of per capita GDP in 1960 and 1980. In the 2000’s there was a rebound, to a large extent because one of the few countries that pursued a non-neoliberal policy path – China – became the world’s largest economy and helped pull many developing countries up. In the high income world, the European economy has been drastically (negatively) affected since 2009 by harmful macroeconomic policy, led by the Troika (the European Central Bank, European Commission, and IMF).

And this is looking at per capita GDP, which is what matters for living standards but – as Piketty emphasizes – the slowdown in population growth lowers g, and therefore increases the concentration of wealth. Here is my last disagreement with Piketty: he described the slowdown in population growth as “frightening” because of its impact on wealth distribution. But it is also – especially in the high-income countries — one of the most important changes that is necessary to avert global climate disaster. And it also has a positive effect on living standards and income distribution: all other things equal, lower population (and labor force) growth increases the bargaining power of labor, and in any particular country, it increases the potential for everyone to have higher living standards with given levels of productivity growth.

All that said, Piketty’s book is a masterpiece and everyone should read it.

en español

Despite the fact that the New York Times had to run a correction on February 26 for claiming that Globovisión in Venezuela was “[t]he only television station that regularly broadcast voices critical of the government,” Daniel Wilkinson of Human Rights Watch (HRW) repeats the same error in the New York Review of Books yesterday, writing that:

Two of the four private stations voluntarily dropped their critical coverage; a third was forced off the air; and the fourth was hounded by administrative sanctions and criminal charges until the owner sold it last year to investors reportedly linked to the governments, who have dramatically curtailed its critical content.

In fact, the stations he claims have “dropped their critical coverage,” Venevisión and Televen, regularly run coverage that is critical of the government, as documented here.

Since the claim that these stations have “dropped their critical coverage” is demonstrably false, the NYRB, like the New York Times, should run a correction.

The fourth station he refers to is Globovisión. During the run-up to last April’s presidential elections, according to a Carter Center study, Globovisión gave nine times as much coverage to opposition presidential candidate Henrique Capriles as to governing party candidate Nicolás Maduro. Readers who are familiar with right-wing TV in the United States will note that this would not be possible for Fox News, for example, to get away with. So, if Globovisión “dramatically curtailed” its anti-government bias – Wilkinson offers no data — because it was bought by someone who wanted to practice mainstream journalism, the station could still have a lot of room to trash the government.

In fact, on February 17, in the heat of the recent protests, Globovisión ran an interview with opposition leader María Corina Machado in which she denounced the government for a series of alleged crimes and argued that people had the right to overthrow it. This casts a bit of a shadow over Wilkinson’s further claim that “while some news programs have interviewed opposition leaders and government critics, they do so under the legal and political constraints imposed by the government.”

It’s too bad that Wilkinson ignored or perhaps didn’t read the Carter Center’s report on the Venezuelan media during the vigorously contested 2013 presidential election campaign. The data from the report, taking into account audience share, indicate that TV media coverage was pretty evenly split between the two candidates. This contradicts the exaggerated picture that he paints in this article of an “authoritarian” government seeking to “control how the news gets reported on Venezuelan TV.”

The 2,800-word article – which provides few links or sources to back up dozens of allegations – contains a number of exaggerations and inaccuracies. For example, in describing the protests he writes that “Most of these have been peaceful, though in many places protesters have barricaded streets, and some have thrown rocks and Molotov cocktails.” This contradicts daily news reports in the major international media. Some of the large daytime marches have been peaceful, but every night for nearly two months there have been violent protests where the participants throw rocks and Molotov cocktails at security forces and sometimes neighbors who try to clear or pass through barricades. Not to mention the occasional shootings by protesters. He doesn’t mention it, but half of the 39 fatalities he refers to have apparently been caused by protesters.

Now, don’t get me wrong. It is the job of human rights groups to denounce and expose all human rights abuses committed by governments (and non-state actors too), and I would not criticize a human rights organization for being too harsh on any government. And if Wilkinson wants to ignore or pretend he can’t see that this is another attempt to overthrow a democratically elected government taking place, that’s his prerogative too. But why the gross exaggerations and false statements? Aren’t there enough things to complain about without making things up?

HRW can get away with outrageous double standards if they want. They barely lifted a finger when a U.S.-backed coup overthrew the democratically-elected government of Haiti in 2004. The perpetrators of the coup killed thousands of people, and officials of the constitutional government were put in jail. This did not raise a tiny fraction of the concern at HRW as compared to the “independence of the judiciary” in Venezuela, which of course was not more independent before their enemy Chávez was elected.

In 2008, more than 100 scholars and experts signed a letter documenting and “highlighting exaggerations and inaccuracies” in a “politically motivated” report by HRW on Venezuela. It is clear that HRW did not take any steps to correct their bias or carelessness with the facts. That is a shame. Of course, there is no political price to pay in the U.S. for exaggerating or making false statements about a government that Washington wants to destabilize. But it does not serve the cause of human rights; and it undermines the good work that HRW does in other countries when they are seen as a partisan ally of a U.S.-backed attempt at “regime change.”

Really they should stick to the facts.

en español

Despite the fact that the New York Times had to run a correction on February 26 for claiming that Globovisión in Venezuela was “[t]he only television station that regularly broadcast voices critical of the government,” Daniel Wilkinson of Human Rights Watch (HRW) repeats the same error in the New York Review of Books yesterday, writing that:

Two of the four private stations voluntarily dropped their critical coverage; a third was forced off the air; and the fourth was hounded by administrative sanctions and criminal charges until the owner sold it last year to investors reportedly linked to the governments, who have dramatically curtailed its critical content.

In fact, the stations he claims have “dropped their critical coverage,” Venevisión and Televen, regularly run coverage that is critical of the government, as documented here.

Since the claim that these stations have “dropped their critical coverage” is demonstrably false, the NYRB, like the New York Times, should run a correction.

The fourth station he refers to is Globovisión. During the run-up to last April’s presidential elections, according to a Carter Center study, Globovisión gave nine times as much coverage to opposition presidential candidate Henrique Capriles as to governing party candidate Nicolás Maduro. Readers who are familiar with right-wing TV in the United States will note that this would not be possible for Fox News, for example, to get away with. So, if Globovisión “dramatically curtailed” its anti-government bias – Wilkinson offers no data — because it was bought by someone who wanted to practice mainstream journalism, the station could still have a lot of room to trash the government.

In fact, on February 17, in the heat of the recent protests, Globovisión ran an interview with opposition leader María Corina Machado in which she denounced the government for a series of alleged crimes and argued that people had the right to overthrow it. This casts a bit of a shadow over Wilkinson’s further claim that “while some news programs have interviewed opposition leaders and government critics, they do so under the legal and political constraints imposed by the government.”

It’s too bad that Wilkinson ignored or perhaps didn’t read the Carter Center’s report on the Venezuelan media during the vigorously contested 2013 presidential election campaign. The data from the report, taking into account audience share, indicate that TV media coverage was pretty evenly split between the two candidates. This contradicts the exaggerated picture that he paints in this article of an “authoritarian” government seeking to “control how the news gets reported on Venezuelan TV.”

The 2,800-word article – which provides few links or sources to back up dozens of allegations – contains a number of exaggerations and inaccuracies. For example, in describing the protests he writes that “Most of these have been peaceful, though in many places protesters have barricaded streets, and some have thrown rocks and Molotov cocktails.” This contradicts daily news reports in the major international media. Some of the large daytime marches have been peaceful, but every night for nearly two months there have been violent protests where the participants throw rocks and Molotov cocktails at security forces and sometimes neighbors who try to clear or pass through barricades. Not to mention the occasional shootings by protesters. He doesn’t mention it, but half of the 39 fatalities he refers to have apparently been caused by protesters.

Now, don’t get me wrong. It is the job of human rights groups to denounce and expose all human rights abuses committed by governments (and non-state actors too), and I would not criticize a human rights organization for being too harsh on any government. And if Wilkinson wants to ignore or pretend he can’t see that this is another attempt to overthrow a democratically elected government taking place, that’s his prerogative too. But why the gross exaggerations and false statements? Aren’t there enough things to complain about without making things up?

HRW can get away with outrageous double standards if they want. They barely lifted a finger when a U.S.-backed coup overthrew the democratically-elected government of Haiti in 2004. The perpetrators of the coup killed thousands of people, and officials of the constitutional government were put in jail. This did not raise a tiny fraction of the concern at HRW as compared to the “independence of the judiciary” in Venezuela, which of course was not more independent before their enemy Chávez was elected.

In 2008, more than 100 scholars and experts signed a letter documenting and “highlighting exaggerations and inaccuracies” in a “politically motivated” report by HRW on Venezuela. It is clear that HRW did not take any steps to correct their bias or carelessness with the facts. That is a shame. Of course, there is no political price to pay in the U.S. for exaggerating or making false statements about a government that Washington wants to destabilize. But it does not serve the cause of human rights; and it undermines the good work that HRW does in other countries when they are seen as a partisan ally of a U.S.-backed attempt at “regime change.”

Really they should stick to the facts.

En español

A new investigation by the Associated Press into a U.S. Agency for International Development (USAID) project to create a Twitter-style social media network in Cuba has received a lot of attention this week, with the news trending on the actual Twitter for much of the day yesterday when the story broke, and eliciting comment from various members of Congress and other policy makers. The “ZunZuneo” project, which AP reports was “aimed at undermining Cuba’s communist government,” was overseen by USAID’s Office of Transition Initiatives (OTI). AP describes OTI as “a division that was created after the fall of the Soviet Union to promote U.S. interests in quickly changing political environments — without the usual red tape.” Its efforts to undermine the Cuban government are not unusual, however, considering the organization’s track record in other countries in the region.

As CEPR Co-Director Mark Weisbrot described in an interview with radio station KPFA’s “Letters and Politics” yesterday, USAID and OTI in particular have engaged in various efforts to undermine the democratically-elected governments of Venezuela, Bolivia, and Haiti, among others, and such “open societies” could be more likely to be impacted by such activities than Cuba. Declassified U.S. government documents show that USAID’s OTI in Venezuela played a central role in funding and working with groups and individuals following the short-lived 2002 coup d’etat against Hugo Chávez. A key contractor for USAID/OTI in that effort has been Development Alternatives, Inc. (DAI).

More recent State Department cables made public by Wikileaks reveal that USAID/OTI subversion in Venezuela extended into the Obama administration era (until 2010, when funding for OTI in Venezuela appears to have ended), and DAI continued to play an important role. A State Department cable from November 2006 explains the U.S. embassy’s strategy in Venezuela and how USAID/OTI “activities support [the] strategy”:

(S) In August of 2004, Ambassador outlined the country team’s 5 point strategy to guide embassy activities in Venezuela for the period 2004 ) 2006 (specifically, from the referendum to the 2006 presidential elections). The strategy’s focus is: 1) Strengthening Democratic Institutions, 2) Penetrating Chavez’ Political Base, 3) Dividing Chavismo, 4) Protecting Vital US business, and 5) Isolating Chavez internationally.

Among the ways in which USAID/OTI have supported the strategy is through the funding and training of protest groups. This August 2009 cable cites the head of USAID/OTI contractor DAI’s Venezuela office Eduardo Fernandez as saying, during 2009 protests, that all the protest organizers are DAI grantees:

¶5. (S) Fernandez told DCM Caulfield that he believed the [the Scientific, Penal and Criminal Investigations Corps’] dual objective is to obtain information regarding DAI’s grantees and to cut off their funding. Fernandez said that “the streets are hot,” referring to growing protests against Chavez’s efforts to consolidate power, and “all these people (organizing the protests) are our grantees.” Fernandez has been leading non-partisan training and grant programs since 2004 for DAI in Venezuela.”

The November 2006 cable describes an example of USAID/OTI partners in Venezuela “shut[ting] down [a] city”:

11. (S) CECAVID: This project supported an NGO working with women in the informal sectors of Barquisimeto, the 5th largest city in Venezuela. The training helped them negotiate with city government to provide better working conditions. After initially agreeing to the women’s conditions, the city government reneged and the women shut down the city for 2 days forcing the mayor to return to the bargaining table. This project is now being replicated in another area of Venezuela.

The implications for the current situation in Venezuela are obvious, unless we are to assume that such activities have ended despite the tens of millions of dollars in USAID funds designated for Venezuela, some of it going through organizations such as Freedom House, and the International Republican Institute, some of which also funded groups involved in the 2002 coup (which prominent IRI staff publicly applauded at the time).

The same November 2006 cable notes that one OTI program goal is to bolster international support for the opposition:

…DAI has brought dozens of international leaders to Venezuela, university professors, NGO members, and political leaders to participate in workshops and seminars, who then return to their countries with a better understanding of the Venezuelan reality and as stronger advocates for the Venezuelan opposition.

Many of the thousands of cables originating from the U.S. embassy in Caracas that have been made available by Wikileaks describe regular communication and coordination with prominent opposition leaders and groups. One particular favorite has been the NGO Súmate and its leader María Corina Machado, who has made headlines over the past two months for her role in the protest movement. The cables show that Machado historically has taken more extreme positions than some other opposition leaders, and the embassy has at least privately questioned Súmate’s strategy of discrediting Venezuela’s electoral system which in turn has contributed to opposition defeats at the polls (most notably in 2005 when an opposition boycott led to complete Chavista domination of the National Assembly). The current protests are no different; Machado and Leopoldo López launched “La Salida” campaign at the end of January with its stated goal of forcing president Nicolás Maduro from office, and vowing to “create chaos in the streets.”

USAID support for destabilization is no secret to the targeted governments. In September 2008, in the midst of a violent, racist and pro-secessionist campaign against the democratically-elected government of Evo Morales in Bolivia, Morales expelled the U.S. Ambassador, and Venezuela followed suit “in solidarity.” Bolivia would later end all USAID involvement in Bolivia after the agency refused to disclose whom it was funding in the country (Freedom of Information Act requests had been independently filed but were not answered).  The U.S. embassy in Bolivia had previously been caught asking Peace Corps volunteers and Fulbright scholars in the country to engage in espionage.

Commenting on the failed USAID/OTI ZunZuneo program in Cuba, House Oversight and Government Reform Chairman Jason Chaffetz (R-UT) commented that, “That is not what USAID should be doing[.] USAID is flying the American flag and should be recognized around the globe as an honest broker of doing good. If they start participating in covert, subversive activities, the credibility of the United States is diminished.”

But USAID’s track record of engaging in subversive activities is a long one, and U.S. credibility as an “honest broker” was lost many years ago.

En español

A new investigation by the Associated Press into a U.S. Agency for International Development (USAID) project to create a Twitter-style social media network in Cuba has received a lot of attention this week, with the news trending on the actual Twitter for much of the day yesterday when the story broke, and eliciting comment from various members of Congress and other policy makers. The “ZunZuneo” project, which AP reports was “aimed at undermining Cuba’s communist government,” was overseen by USAID’s Office of Transition Initiatives (OTI). AP describes OTI as “a division that was created after the fall of the Soviet Union to promote U.S. interests in quickly changing political environments — without the usual red tape.” Its efforts to undermine the Cuban government are not unusual, however, considering the organization’s track record in other countries in the region.

As CEPR Co-Director Mark Weisbrot described in an interview with radio station KPFA’s “Letters and Politics” yesterday, USAID and OTI in particular have engaged in various efforts to undermine the democratically-elected governments of Venezuela, Bolivia, and Haiti, among others, and such “open societies” could be more likely to be impacted by such activities than Cuba. Declassified U.S. government documents show that USAID’s OTI in Venezuela played a central role in funding and working with groups and individuals following the short-lived 2002 coup d’etat against Hugo Chávez. A key contractor for USAID/OTI in that effort has been Development Alternatives, Inc. (DAI).

More recent State Department cables made public by Wikileaks reveal that USAID/OTI subversion in Venezuela extended into the Obama administration era (until 2010, when funding for OTI in Venezuela appears to have ended), and DAI continued to play an important role. A State Department cable from November 2006 explains the U.S. embassy’s strategy in Venezuela and how USAID/OTI “activities support [the] strategy”:

(S) In August of 2004, Ambassador outlined the country team’s 5 point strategy to guide embassy activities in Venezuela for the period 2004 ) 2006 (specifically, from the referendum to the 2006 presidential elections). The strategy’s focus is: 1) Strengthening Democratic Institutions, 2) Penetrating Chavez’ Political Base, 3) Dividing Chavismo, 4) Protecting Vital US business, and 5) Isolating Chavez internationally.

Among the ways in which USAID/OTI have supported the strategy is through the funding and training of protest groups. This August 2009 cable cites the head of USAID/OTI contractor DAI’s Venezuela office Eduardo Fernandez as saying, during 2009 protests, that all the protest organizers are DAI grantees:

¶5. (S) Fernandez told DCM Caulfield that he believed the [the Scientific, Penal and Criminal Investigations Corps’] dual objective is to obtain information regarding DAI’s grantees and to cut off their funding. Fernandez said that “the streets are hot,” referring to growing protests against Chavez’s efforts to consolidate power, and “all these people (organizing the protests) are our grantees.” Fernandez has been leading non-partisan training and grant programs since 2004 for DAI in Venezuela.”

The November 2006 cable describes an example of USAID/OTI partners in Venezuela “shut[ting] down [a] city”:

11. (S) CECAVID: This project supported an NGO working with women in the informal sectors of Barquisimeto, the 5th largest city in Venezuela. The training helped them negotiate with city government to provide better working conditions. After initially agreeing to the women’s conditions, the city government reneged and the women shut down the city for 2 days forcing the mayor to return to the bargaining table. This project is now being replicated in another area of Venezuela.

The implications for the current situation in Venezuela are obvious, unless we are to assume that such activities have ended despite the tens of millions of dollars in USAID funds designated for Venezuela, some of it going through organizations such as Freedom House, and the International Republican Institute, some of which also funded groups involved in the 2002 coup (which prominent IRI staff publicly applauded at the time).

The same November 2006 cable notes that one OTI program goal is to bolster international support for the opposition:

…DAI has brought dozens of international leaders to Venezuela, university professors, NGO members, and political leaders to participate in workshops and seminars, who then return to their countries with a better understanding of the Venezuelan reality and as stronger advocates for the Venezuelan opposition.

Many of the thousands of cables originating from the U.S. embassy in Caracas that have been made available by Wikileaks describe regular communication and coordination with prominent opposition leaders and groups. One particular favorite has been the NGO Súmate and its leader María Corina Machado, who has made headlines over the past two months for her role in the protest movement. The cables show that Machado historically has taken more extreme positions than some other opposition leaders, and the embassy has at least privately questioned Súmate’s strategy of discrediting Venezuela’s electoral system which in turn has contributed to opposition defeats at the polls (most notably in 2005 when an opposition boycott led to complete Chavista domination of the National Assembly). The current protests are no different; Machado and Leopoldo López launched “La Salida” campaign at the end of January with its stated goal of forcing president Nicolás Maduro from office, and vowing to “create chaos in the streets.”

USAID support for destabilization is no secret to the targeted governments. In September 2008, in the midst of a violent, racist and pro-secessionist campaign against the democratically-elected government of Evo Morales in Bolivia, Morales expelled the U.S. Ambassador, and Venezuela followed suit “in solidarity.” Bolivia would later end all USAID involvement in Bolivia after the agency refused to disclose whom it was funding in the country (Freedom of Information Act requests had been independently filed but were not answered).  The U.S. embassy in Bolivia had previously been caught asking Peace Corps volunteers and Fulbright scholars in the country to engage in espionage.

Commenting on the failed USAID/OTI ZunZuneo program in Cuba, House Oversight and Government Reform Chairman Jason Chaffetz (R-UT) commented that, “That is not what USAID should be doing[.] USAID is flying the American flag and should be recognized around the globe as an honest broker of doing good. If they start participating in covert, subversive activities, the credibility of the United States is diminished.”

But USAID’s track record of engaging in subversive activities is a long one, and U.S. credibility as an “honest broker” was lost many years ago.

Nate Silver, who became famous for his use of polling data to accurately project U.S. elections, launched a new blog – FiveThirtyEight.com last month.  It’s been off to a rough start, “something between a disappointment and a disaster” as Paul Krugman wrote soon after its launch, because of some pieces that handled data rather badly. “[S]loppy and casual opining with a bit of data used, as the old saying goes, the way a drunkard uses a lamppost — for support, not illumination,” says Krugman.

I leave it to the reader to decide whether the FiveThirtyEight article on March 17 by Dorothy Kronick on Venezuela fits this description.  While it has become acceptable to publish almost anything about Venezuela, so long as it makes the government look bad, here at CEPR we apply the same standards to all products.

The thesis of the article is strange.  Correctly noting that the political polarization in Venezuela is overwhelmingly along class lines, with the upper income groups tending to support the protests and lower-income Venezuelans supporting the government, she asks  rhetorically “why the divide?” and answers: 

They disagree over a political vision for their country in part because they measure Chavismo against two different benchmarks: Chavistas compare the present to Venezuela’s pre-Chávez past, while the opposition contrasts the current economic situation with more recent developments in the rest of Latin America.

I think what she means to say is that Chavismo looks better as compared with Venezuela’s pre-Chávez era, than it does compared with the rest of Latin America. The first part is a no-brainer: per capita GDP actually fell by more than 15 percent in the 20 years prior to Chávez (1978-1998).   However there is no evidence that the two sides are making any such different comparisons.  Do voters anywhere in the world judge their government based on a comparison to its peers?  If that were the case in the U.S., for example, President Obama’s approval ratings would be very high and the Democrats would be sailing to a landslide victory in November’s congressional elections because the relevant income-level comparison for the U.S. is Europe, which has done vastly worse in the recovery from the Great Recession since 2009.     

Now let’s look at the comparison between Venezuela and the rest of Latin America.  Is it fair or even logical to judge the performance of the Chávez (and Maduro) governments from 1999, the year that Chávez took office? For the first four years, the government did not control the national oil company, which accounted for about 50 percent of government revenue and 90 percent of export earnings.  Rather, it was controlled by the opposition, who used it to sabotage the economy and launch several attempts to topple the government.  As opposition journalist Teodoro Petkoff later wrote [PDF], the Venezuela opposition had a strategy of “military takeover,” from 1999-2003 (which succeeded briefly in the coup of April 2002).  The opposition’s last attempt to use their control of the oil industry in December of 2002 resulted in a loss of GDP of 24 percent, comparable to the worst of the U.S. Great Depression.  It also resulted in a large permanent loss of oil production in Venezuela’s traditional oil fields.

To ask an analogous question for the United States:  If Paul Ryan controlled the Federal Reserve and raised interest rates to 25 percent in order to push the U.S. economy into a severe recession while President Obama was in office, would Obama be responsible for the economic performance of the U.S. economy during that recession?

Now if you are hardcore opposition, you can blame Chávez for all of this damage by saying that if he had just done everything that his political opponents wanted (instead of what the electorate had voted for), there wouldn’t have been this enormous sabotage of the economy.  But I wouldn’t put Dorothy Kronick or Nate Silver in this category.

So, unless she can think of another reason to hold the government responsible for the economic damage caused by its opponents, we cannot start with 1999.  The government finally got control over the oil industry in 2003.  However, starting with 2003 would not be quite fair to the government’s critics, since that would measure growth from a low point.  The fair way to do it is to start with 2004, when GDP caught up with the pre-recession level.  That is a fair measure of the Chávez/Maduro years.

If we look at the growth of per capita GDP from 2004-2013, the picture changes significantly.  Venezuela comes in 12th of the 20 countries, and more importantly for Kronick’s comparison it is tied with Bolivia at 2.7 percent annual per capita GDP growth.  (Kronick uses Bolivia as a comparison to show that Venezuela has not done very well in the Chávez/Maduro years).

Latin America: Annual Growth, GDP Per Capita 2004-2013

 

Source: IMF.

The author notes the reduction of poverty in Venezuela but for some reason does not compare it with that of other countries. However if we do that, we can see that Venezuela comes in fourth of 9 South American countries plus Mexico in the percentage reduction of poverty and also of extreme poverty; note that it is ahead of Bolivia, Kronick’s chosen comparison, and far ahead of the average for Latin America as a whole. This measure includes only cash income; if we were to place a dollar value on the increases in access to health care, education, and housing, Venezuela’s rank would go up significantly. 

Latin America: Poverty Reduction

lacpoverty

Note: Superscripts refer to time periods reflected in graph; (1) 2004-2012, (2) 2004-2011, (3) 2003-2011, and (4) 2007-2012.

Source: ECLAC.

The rest of Kronick’s comparisons do not measure living standards.  Inflation of course has become a serious problem over the past 16 months, and if it were to continue at this rate it could negatively affect output, employment, and possibly income distribution.  However, we cannot assume that this will happen; for example, annual inflation was 39 percent in February 2003 but was brought back down.  So, all we can do right now for a comparison like this is to compare measures of living standards and social welfare from 2004 to the present, with the latest available data.  Many people are not aware of this fact, but inflation is not a measure of living standards. 

Neither is the amount of liquid reserves held by the Venezuela’s central government, which is compared with Bolivia in this article.  It is not clear why we are supposed to think this is an important comparison, or why Venezuelans should care about it.  According to the latest report from Bank of America Merrill Lynch, the liquid and semi-liquid assets of the central bank, PDVSA, and other government holdings sum to more than $50 billion, which is quite a healthy amount of reserves relative to Venezuela’s imports (about a year’s worth).  And especially since Venezuela’s currency is not directly convertible (there are exchange controls), it is not clear why cash reserves would be the most relevant measure for balance of payments purposes.

The author also compares Venezuela’s foreign public debt with that of Bolivia, showing that Venezuela’s is higher, at about 27 percent of GDP, with Bolivia at 16 percent of GDP.  Of course this isn’t a measure of living standards either, but it could be relevant if you think Venezuela is facing some kind of debt crisis.  It isn’t.  And if we are going to make the comparison, it’s important to point out that Bolivia had foreign debt amounting to 10 percent of its GDP – owed to the Inter-American Development Bank – cancelled in 2007.  That accounts for almost all the difference between the two countries’ foreign public debt.  It was Chávez who clinched this deal by pushing other South American governments to agree to the cancellation (which also included debt cancellation for Honduras, Haiti, Guyana, and Nicaragua).

The comparison of infant mortality reduction between Venezuela and the rest of Latin America is also way off-base.  The author measures annual percentage reduction, but of course it is much easier to reduce infant mortality by 1 percentage point if you are at 60 per thousand than if you are already at 18.  As the chart below shows, Venezuela started the period (you can use 1999 or 2004 here, it doesn’t change the picture) with the fifth-lowest infant mortality and ended the period with the sixth-lowest infant mortality.

lac infant mortality

There are more irrelevant comparisons (e.g. Chávez won his 2012 election by “only” 11 percentage points, less than other incumbents), but it is not worth going through them all.  The piece is a good illustration of the problem with this blog that Krugman pointed out, i.e. using (or misusing) numbers without a coherent framework. 

The comparison with Bolivia, for example, could have been instructive in illustrating two important economic policy mistakes made by the Venezuelan government, if the author had a coherent framework.  Although Bolivia did not need anywhere near 50 percent of GDP in liquid reserves to do it, the Morales government has kept the Bolivian exchange rate very stable for seven years.  They used a managed float without a pre-announced target, and accumulated enough reserves (while also using some exchange controls) to maintain the exchange rate within a narrow range.  Venezuela’s fixed exchange rate system, by contrast, has been much less stable and ran into serious trouble in the past year-and-a-half, with a sharp rise in the black market dollar premium and a consequent steep increase in inflation.

The second relevant comparison between Bolivia and Venezuela was their response to the 2008-09 world financial crisis and recession.  Bolivia – partly because of plans already in the works – had a large fiscal stimulus, and ended up with about the best growth performance in the hemisphere in 2009.  Venezuela responded with pro-cylical spending cuts and therefore had a recession that lasted a year-and-a-half (all of 2009 plus the first year of 2010).  If the Venezuelan government had adopted counter-cyclical policies, its growth for the past decade would have come in higher than Bolivia’s and ahead of most of the region.

Of course, if the trends of the past 16 months were to continue, the Venezuelan economy could go down a different path where it would indeed underperform neighboring countries in its stated goals of raising the living standards of the majority of Venezuelans.  But the author is trying to assert that this is what already happened during the Chávez/Maduro years – and for that, the data clearly go against her argument.

Finally, any evaluation of the Chávez/Maduro years should at least note the many billions of dollars of foreign aid that Venezuela has provided to the region – probably unprecedented for an economy of this size.  From the point of view of an opposition politician, of course, there is no credit due here.  But when looking at what happened to the oil revenues of this era that were not spent at home, it is not as if they ended up in some Swiss bank account as in the case of many U.S. allies. From an economic, human, and moral point of view, this is relevant.

Nate Silver, who became famous for his use of polling data to accurately project U.S. elections, launched a new blog – FiveThirtyEight.com last month.  It’s been off to a rough start, “something between a disappointment and a disaster” as Paul Krugman wrote soon after its launch, because of some pieces that handled data rather badly. “[S]loppy and casual opining with a bit of data used, as the old saying goes, the way a drunkard uses a lamppost — for support, not illumination,” says Krugman.

I leave it to the reader to decide whether the FiveThirtyEight article on March 17 by Dorothy Kronick on Venezuela fits this description.  While it has become acceptable to publish almost anything about Venezuela, so long as it makes the government look bad, here at CEPR we apply the same standards to all products.

The thesis of the article is strange.  Correctly noting that the political polarization in Venezuela is overwhelmingly along class lines, with the upper income groups tending to support the protests and lower-income Venezuelans supporting the government, she asks  rhetorically “why the divide?” and answers: 

They disagree over a political vision for their country in part because they measure Chavismo against two different benchmarks: Chavistas compare the present to Venezuela’s pre-Chávez past, while the opposition contrasts the current economic situation with more recent developments in the rest of Latin America.

I think what she means to say is that Chavismo looks better as compared with Venezuela’s pre-Chávez era, than it does compared with the rest of Latin America. The first part is a no-brainer: per capita GDP actually fell by more than 15 percent in the 20 years prior to Chávez (1978-1998).   However there is no evidence that the two sides are making any such different comparisons.  Do voters anywhere in the world judge their government based on a comparison to its peers?  If that were the case in the U.S., for example, President Obama’s approval ratings would be very high and the Democrats would be sailing to a landslide victory in November’s congressional elections because the relevant income-level comparison for the U.S. is Europe, which has done vastly worse in the recovery from the Great Recession since 2009.     

Now let’s look at the comparison between Venezuela and the rest of Latin America.  Is it fair or even logical to judge the performance of the Chávez (and Maduro) governments from 1999, the year that Chávez took office? For the first four years, the government did not control the national oil company, which accounted for about 50 percent of government revenue and 90 percent of export earnings.  Rather, it was controlled by the opposition, who used it to sabotage the economy and launch several attempts to topple the government.  As opposition journalist Teodoro Petkoff later wrote [PDF], the Venezuela opposition had a strategy of “military takeover,” from 1999-2003 (which succeeded briefly in the coup of April 2002).  The opposition’s last attempt to use their control of the oil industry in December of 2002 resulted in a loss of GDP of 24 percent, comparable to the worst of the U.S. Great Depression.  It also resulted in a large permanent loss of oil production in Venezuela’s traditional oil fields.

To ask an analogous question for the United States:  If Paul Ryan controlled the Federal Reserve and raised interest rates to 25 percent in order to push the U.S. economy into a severe recession while President Obama was in office, would Obama be responsible for the economic performance of the U.S. economy during that recession?

Now if you are hardcore opposition, you can blame Chávez for all of this damage by saying that if he had just done everything that his political opponents wanted (instead of what the electorate had voted for), there wouldn’t have been this enormous sabotage of the economy.  But I wouldn’t put Dorothy Kronick or Nate Silver in this category.

So, unless she can think of another reason to hold the government responsible for the economic damage caused by its opponents, we cannot start with 1999.  The government finally got control over the oil industry in 2003.  However, starting with 2003 would not be quite fair to the government’s critics, since that would measure growth from a low point.  The fair way to do it is to start with 2004, when GDP caught up with the pre-recession level.  That is a fair measure of the Chávez/Maduro years.

If we look at the growth of per capita GDP from 2004-2013, the picture changes significantly.  Venezuela comes in 12th of the 20 countries, and more importantly for Kronick’s comparison it is tied with Bolivia at 2.7 percent annual per capita GDP growth.  (Kronick uses Bolivia as a comparison to show that Venezuela has not done very well in the Chávez/Maduro years).

Latin America: Annual Growth, GDP Per Capita 2004-2013

 

Source: IMF.

The author notes the reduction of poverty in Venezuela but for some reason does not compare it with that of other countries. However if we do that, we can see that Venezuela comes in fourth of 9 South American countries plus Mexico in the percentage reduction of poverty and also of extreme poverty; note that it is ahead of Bolivia, Kronick’s chosen comparison, and far ahead of the average for Latin America as a whole. This measure includes only cash income; if we were to place a dollar value on the increases in access to health care, education, and housing, Venezuela’s rank would go up significantly. 

Latin America: Poverty Reduction

lacpoverty

Note: Superscripts refer to time periods reflected in graph; (1) 2004-2012, (2) 2004-2011, (3) 2003-2011, and (4) 2007-2012.

Source: ECLAC.

The rest of Kronick’s comparisons do not measure living standards.  Inflation of course has become a serious problem over the past 16 months, and if it were to continue at this rate it could negatively affect output, employment, and possibly income distribution.  However, we cannot assume that this will happen; for example, annual inflation was 39 percent in February 2003 but was brought back down.  So, all we can do right now for a comparison like this is to compare measures of living standards and social welfare from 2004 to the present, with the latest available data.  Many people are not aware of this fact, but inflation is not a measure of living standards. 

Neither is the amount of liquid reserves held by the Venezuela’s central government, which is compared with Bolivia in this article.  It is not clear why we are supposed to think this is an important comparison, or why Venezuelans should care about it.  According to the latest report from Bank of America Merrill Lynch, the liquid and semi-liquid assets of the central bank, PDVSA, and other government holdings sum to more than $50 billion, which is quite a healthy amount of reserves relative to Venezuela’s imports (about a year’s worth).  And especially since Venezuela’s currency is not directly convertible (there are exchange controls), it is not clear why cash reserves would be the most relevant measure for balance of payments purposes.

The author also compares Venezuela’s foreign public debt with that of Bolivia, showing that Venezuela’s is higher, at about 27 percent of GDP, with Bolivia at 16 percent of GDP.  Of course this isn’t a measure of living standards either, but it could be relevant if you think Venezuela is facing some kind of debt crisis.  It isn’t.  And if we are going to make the comparison, it’s important to point out that Bolivia had foreign debt amounting to 10 percent of its GDP – owed to the Inter-American Development Bank – cancelled in 2007.  That accounts for almost all the difference between the two countries’ foreign public debt.  It was Chávez who clinched this deal by pushing other South American governments to agree to the cancellation (which also included debt cancellation for Honduras, Haiti, Guyana, and Nicaragua).

The comparison of infant mortality reduction between Venezuela and the rest of Latin America is also way off-base.  The author measures annual percentage reduction, but of course it is much easier to reduce infant mortality by 1 percentage point if you are at 60 per thousand than if you are already at 18.  As the chart below shows, Venezuela started the period (you can use 1999 or 2004 here, it doesn’t change the picture) with the fifth-lowest infant mortality and ended the period with the sixth-lowest infant mortality.

lac infant mortality

There are more irrelevant comparisons (e.g. Chávez won his 2012 election by “only” 11 percentage points, less than other incumbents), but it is not worth going through them all.  The piece is a good illustration of the problem with this blog that Krugman pointed out, i.e. using (or misusing) numbers without a coherent framework. 

The comparison with Bolivia, for example, could have been instructive in illustrating two important economic policy mistakes made by the Venezuelan government, if the author had a coherent framework.  Although Bolivia did not need anywhere near 50 percent of GDP in liquid reserves to do it, the Morales government has kept the Bolivian exchange rate very stable for seven years.  They used a managed float without a pre-announced target, and accumulated enough reserves (while also using some exchange controls) to maintain the exchange rate within a narrow range.  Venezuela’s fixed exchange rate system, by contrast, has been much less stable and ran into serious trouble in the past year-and-a-half, with a sharp rise in the black market dollar premium and a consequent steep increase in inflation.

The second relevant comparison between Bolivia and Venezuela was their response to the 2008-09 world financial crisis and recession.  Bolivia – partly because of plans already in the works – had a large fiscal stimulus, and ended up with about the best growth performance in the hemisphere in 2009.  Venezuela responded with pro-cylical spending cuts and therefore had a recession that lasted a year-and-a-half (all of 2009 plus the first year of 2010).  If the Venezuelan government had adopted counter-cyclical policies, its growth for the past decade would have come in higher than Bolivia’s and ahead of most of the region.

Of course, if the trends of the past 16 months were to continue, the Venezuelan economy could go down a different path where it would indeed underperform neighboring countries in its stated goals of raising the living standards of the majority of Venezuelans.  But the author is trying to assert that this is what already happened during the Chávez/Maduro years – and for that, the data clearly go against her argument.

Finally, any evaluation of the Chávez/Maduro years should at least note the many billions of dollars of foreign aid that Venezuela has provided to the region – probably unprecedented for an economy of this size.  From the point of view of an opposition politician, of course, there is no credit due here.  But when looking at what happened to the oil revenues of this era that were not spent at home, it is not as if they ended up in some Swiss bank account as in the case of many U.S. allies. From an economic, human, and moral point of view, this is relevant.

I sometimes complain about U.S. media coverage of Venezuela, which is mostly one-sided and sometimes terribly inaccurate. But compared to most of the Latin American media, U.S. reporting is practically “fair and balanced.” Check out this amazing front page banner headline of Peru’s biggest newspaper, El Comercio, on Sunday, March 16 (photo below). Translation: “94 percent of Peruvians reject the Chavista model”; sub-headline: “82 percent of those interviewed consider the government of Venezuela to be a dictatorship.”

Imagine the New York Times running a headline like this. How ridiculous would they look? People would wonder: is this news in the U.S.? What percentage of the U.S. population knows or cares what the “Chavista model” is, or has an informed opinion on whether Venezuela’s democratically-elected government is actually a “dictatorship?” Not to mention that you would be hard-pressed to find a political scientist who specializes in Latin America who would accept the label ‘dictatorship’ for Venezuela.

Now I know what you are thinking. Peru is a bit closer to Venezuela and is part of South America. Peruvians speak the same language as Venezuelans. So, maybe there is some kind of buzz about “the Chavista model” in Peru or some great concern among the masses about the state of constitutional democracy in Venezuela.

Well, no. Peruvians are no more likely than residents of the United States to know anything about “the Chavista model” or about Venezuela in general. This “journalism” looks pretty much as irrelevant and strange in Peru as it would be if the New York Times had run the same headlines. The only qualifier I would add is that, since the media and right-wing politicians scream about Venezuela as in this headline, they are able to create a certain McCarthyist fear among some sectors. Sometimes they use this fear – without necessarily any real connection — against political opponents (e.g. as they did successfully in defeating the current President Ollanta Humala’s first presidential bid in 2006). But that is not much different from what the Florida Cuban-American U.S. Representatives and their neocon allies are doing in the U.S. Congress right now.

The difference is that you wouldn’t see this bizarre headline in the most important newspaper in the U.S. And the comparison to the New York Times is not quite right: as important as the Times may be, it doesn’t quite compare to a newspaper that owns a breathtaking 78 percent of the print newspapers, in a country where only 28 percent of households have internet access. Who knows how much the polling data they are blasting across their front pages accurately reflects public opinion about Venezuela – but to the extent that it does, guess where the public has gotten its (not very deeply-held) opinions from?

elcomercio201403

I sometimes complain about U.S. media coverage of Venezuela, which is mostly one-sided and sometimes terribly inaccurate. But compared to most of the Latin American media, U.S. reporting is practically “fair and balanced.” Check out this amazing front page banner headline of Peru’s biggest newspaper, El Comercio, on Sunday, March 16 (photo below). Translation: “94 percent of Peruvians reject the Chavista model”; sub-headline: “82 percent of those interviewed consider the government of Venezuela to be a dictatorship.”

Imagine the New York Times running a headline like this. How ridiculous would they look? People would wonder: is this news in the U.S.? What percentage of the U.S. population knows or cares what the “Chavista model” is, or has an informed opinion on whether Venezuela’s democratically-elected government is actually a “dictatorship?” Not to mention that you would be hard-pressed to find a political scientist who specializes in Latin America who would accept the label ‘dictatorship’ for Venezuela.

Now I know what you are thinking. Peru is a bit closer to Venezuela and is part of South America. Peruvians speak the same language as Venezuelans. So, maybe there is some kind of buzz about “the Chavista model” in Peru or some great concern among the masses about the state of constitutional democracy in Venezuela.

Well, no. Peruvians are no more likely than residents of the United States to know anything about “the Chavista model” or about Venezuela in general. This “journalism” looks pretty much as irrelevant and strange in Peru as it would be if the New York Times had run the same headlines. The only qualifier I would add is that, since the media and right-wing politicians scream about Venezuela as in this headline, they are able to create a certain McCarthyist fear among some sectors. Sometimes they use this fear – without necessarily any real connection — against political opponents (e.g. as they did successfully in defeating the current President Ollanta Humala’s first presidential bid in 2006). But that is not much different from what the Florida Cuban-American U.S. Representatives and their neocon allies are doing in the U.S. Congress right now.

The difference is that you wouldn’t see this bizarre headline in the most important newspaper in the U.S. And the comparison to the New York Times is not quite right: as important as the Times may be, it doesn’t quite compare to a newspaper that owns a breathtaking 78 percent of the print newspapers, in a country where only 28 percent of households have internet access. Who knows how much the polling data they are blasting across their front pages accurately reflects public opinion about Venezuela – but to the extent that it does, guess where the public has gotten its (not very deeply-held) opinions from?

elcomercio201403

Bolivia will most likely join Brazil and Argentina (Bolivia’s largest trading partners) by becoming the sixth member of the MERCOSUR group. Since 2006, Bolivian trade with MERCOSUR has grown by 17 percent. A recent study published by Desarrollo de Negocios Internacionales found that over the last 10 years Bolivia has experienced the second highest export growth rate in South America. This is remarkable considering that on average landlocked developing countries (LLDC) trade 30 percent less [PDF] than coastal countries [1]. As a result, for most landlocked countries transportation infrastructure plays a crucial part in facilitating intraregional trade. Since 2005, industrialization has become a key aspect of Bolivian President Evo Morales’ economic policy, particularly in the area of transportation, which in 2013, accounted for 30 percent of total [PDF] public investment [2]. The chart below shows levels of public investment in transportation as a percentage of total GDP since 2005:

nate-bolivia-blog-figure

Source: International Monetary Fund and Ministerio de Economía y Finanzas Pública Estado Plurinacional de Bolivia

Transportation and Road Infrastructure:

According to United Nations Conference on Trade and Development (UNCTAD), on average LLDCs spend almost two times more of their export earnings on transportation and insurance expenses than developing countries and three times more than developed countries. Typically, LLDCs have higher transport costs in foreign trade due to lack of access to seaports and poor transportation infrastructure. According to the United Nations Economic Commission for Latin America and the Caribbean (ECLAC), Bolivia was rated as having the second worst transportation infrastructure in the entire continent. Only 7.1 percent [PDF] of Bolivian roadways are paved (the lowest in all of South America).

However, since 2005, the Bolivian government has constructed 2,407 miles of paved highways, more than the total [PDF] constructed during the entire period from 1948-2000 [3]. In 2014, the Bolivian government seeks to construct an additional 486.7 mi [PDF] in roadways and is projected to invest an additional $244 million dollars [PDF] in the transportation sector. The creation of new roads has played a major role in facilitating export growth. (It is worth noting that heavy state investment in transportation is not unique to Bolivia. In fact, transportation has become an economic priority for many countries throughout the region in order to improve regional integration. In 2011, 80 percent of transportation infrastructure in South America was financed by the public sector.)

However, it is worth pointing out that the Bolivian government has received substantial criticism from some sectors of Bolivian society who feel that the creation of new roads are invasive and pose a threat to fragile ecosystems.

Bolivia was ranked [PDF] by Germanwatch number six of countries most-affected by natural disasters due to climate change in 2007. Each year the Bolivian government spends millions of dollars on road repairs in response to natural disasters. Earlier this year heavy rains rocked the country, resulting in 59 tragic deaths and causing about US$ 38 million in damage to road infrastructure. Environmental disasters are yet another factor that contribute to high levels of public spending on transportation.

Despite some public criticism, transportation infrastructure is seen by the Bolivian government as a necessary evil in order to facilitate trade, reduce inequality, create jobs (the transportation sector created 21,115 new jobs in 2012) and increase economic growth (in 2013 Bolivia recorded a 6.5 percent GDP growth rate. Its highest [PDF] in 38 years.) As Bolivia becomes the newest member to join MERCOSUR it will undoubtedly continue to increase trade relations with other member countries and this will most likely lead to the further expansion of transportation infrastructure.  

 


1 This is partially explained by the fact that Bolivia is a natural gas producing country, which allows them to use pipelines rather then highway transportation methods (the former being a cheaper, effective and less volatile method of transporting goods). Last year the government invested $134 million in hydrocarbons pipelines. However, road transportation is still the primary method of transportation for non-gas exports.

2 Sectors that receive the highest levels of public investment are ranked as follows: transportation, hydrocarbons, housing and education.

3 Since 2006, the government has also built an additional 42 bridges along with four international and two domestic airports. The transportation sector also acted as important source of job creation and in 2012 the industry created 21,115 new jobs.

Bolivia will most likely join Brazil and Argentina (Bolivia’s largest trading partners) by becoming the sixth member of the MERCOSUR group. Since 2006, Bolivian trade with MERCOSUR has grown by 17 percent. A recent study published by Desarrollo de Negocios Internacionales found that over the last 10 years Bolivia has experienced the second highest export growth rate in South America. This is remarkable considering that on average landlocked developing countries (LLDC) trade 30 percent less [PDF] than coastal countries [1]. As a result, for most landlocked countries transportation infrastructure plays a crucial part in facilitating intraregional trade. Since 2005, industrialization has become a key aspect of Bolivian President Evo Morales’ economic policy, particularly in the area of transportation, which in 2013, accounted for 30 percent of total [PDF] public investment [2]. The chart below shows levels of public investment in transportation as a percentage of total GDP since 2005:

nate-bolivia-blog-figure

Source: International Monetary Fund and Ministerio de Economía y Finanzas Pública Estado Plurinacional de Bolivia

Transportation and Road Infrastructure:

According to United Nations Conference on Trade and Development (UNCTAD), on average LLDCs spend almost two times more of their export earnings on transportation and insurance expenses than developing countries and three times more than developed countries. Typically, LLDCs have higher transport costs in foreign trade due to lack of access to seaports and poor transportation infrastructure. According to the United Nations Economic Commission for Latin America and the Caribbean (ECLAC), Bolivia was rated as having the second worst transportation infrastructure in the entire continent. Only 7.1 percent [PDF] of Bolivian roadways are paved (the lowest in all of South America).

However, since 2005, the Bolivian government has constructed 2,407 miles of paved highways, more than the total [PDF] constructed during the entire period from 1948-2000 [3]. In 2014, the Bolivian government seeks to construct an additional 486.7 mi [PDF] in roadways and is projected to invest an additional $244 million dollars [PDF] in the transportation sector. The creation of new roads has played a major role in facilitating export growth. (It is worth noting that heavy state investment in transportation is not unique to Bolivia. In fact, transportation has become an economic priority for many countries throughout the region in order to improve regional integration. In 2011, 80 percent of transportation infrastructure in South America was financed by the public sector.)

However, it is worth pointing out that the Bolivian government has received substantial criticism from some sectors of Bolivian society who feel that the creation of new roads are invasive and pose a threat to fragile ecosystems.

Bolivia was ranked [PDF] by Germanwatch number six of countries most-affected by natural disasters due to climate change in 2007. Each year the Bolivian government spends millions of dollars on road repairs in response to natural disasters. Earlier this year heavy rains rocked the country, resulting in 59 tragic deaths and causing about US$ 38 million in damage to road infrastructure. Environmental disasters are yet another factor that contribute to high levels of public spending on transportation.

Despite some public criticism, transportation infrastructure is seen by the Bolivian government as a necessary evil in order to facilitate trade, reduce inequality, create jobs (the transportation sector created 21,115 new jobs in 2012) and increase economic growth (in 2013 Bolivia recorded a 6.5 percent GDP growth rate. Its highest [PDF] in 38 years.) As Bolivia becomes the newest member to join MERCOSUR it will undoubtedly continue to increase trade relations with other member countries and this will most likely lead to the further expansion of transportation infrastructure.  

 


1 This is partially explained by the fact that Bolivia is a natural gas producing country, which allows them to use pipelines rather then highway transportation methods (the former being a cheaper, effective and less volatile method of transporting goods). Last year the government invested $134 million in hydrocarbons pipelines. However, road transportation is still the primary method of transportation for non-gas exports.

2 Sectors that receive the highest levels of public investment are ranked as follows: transportation, hydrocarbons, housing and education.

3 Since 2006, the government has also built an additional 42 bridges along with four international and two domestic airports. The transportation sector also acted as important source of job creation and in 2012 the industry created 21,115 new jobs.

Want to search in the archives?

¿Quieres buscar en los archivos?

Click Here Haga clic aquí