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.
Yesterday Argentina appealed a ruling by a New York court that could force Argentina to pay holdout bondholders known as vulture funds, reports the Associated Press. Judge Thomas Griesa ruled last week that Argentina must put $1.3 billion into an escrow account by December 15. If Argentina refuses to do so, the court ruling would force Bank of New York Mellon, which distributes payments to those bondholders who did accept a restructuring following the 2001 default, to stop those payments. The ruling is based on the parri passu clause, which the court interpreted as requiring equal treatment to both the bondholders who accepted a restructuring and those that held out. If, as President Kirchner has indicated, Argentina refuses to pay the vulture funds and the appeal is unsuccessful, it could lead Argentina into a technical default. Siding with Argentina in the court case is the US Federal Reserve, commercial banks and holders of restructured bonds. Also, as the AP points out, even critics of Kirchner in Argentina have criticized the judge’s ruling in recent days, as it threatens the successful economic growth that resulted after the default in 2001. For more on the case, click here and here.
Meanwhile, writing in The Guardian, Cambridge economics professor Ha-Joon Chang highlights the need for a sovereign bankruptcy law, similar to what countries offer debt-laden companies. Once a company declares bankruptcy, “the debtor company and its creditors are forced to work together to reorganise the company’s affairs, under clear rules.” Unfortunately, as Chang notes, “no mechanism like this exists for countries, which is what has made sovereign debt crises so difficult to manage.” Chang uses the examples of Greece and Argentina, arguing that the effects of their debt problems go far beyond their borders, noting that “In the Argentinian case, we are risking not just an end to Argentina’s recovery but a fresh round of turmoil in the global financial market because of one questionable US court ruling.”
A new report from the Economic Commission on Latin America and the Caribbean reports on the reduction of poverty in the region over the last few decades, reports the AP. Overall, despite recording the lowest poverty level in three decades, some 167 million people still remain mired in poverty in the region. This is one million fewer than in 2010 and represents some 29 percent of the population. The report, “Social Panorama of Latin America 2012”, released today, also reports on trends in inequality. The report notes that “on average, the richest 10% of the Latin American population receives 32% of total income, while the poorest 40% receive just 15% of income.” Since 2002, the countries that have shown the largest decrease in inequality are Argentina, Bolivia, Nicaragua and Venezuela. In all of these countries the Gini coefficient fell at an annual rate of more than two percent. To read the entire report, which “examines paid employment in care activities, as well as household spending on care services, and proposes a series of policy recommendations,” click here. For more on the reduction of inequality in Latin America, see here and here.
Mexican president-elect Enrique Peña Nieto is in Washington today to meet with President Obama, reports CNN. In an op-ed printed by the Washington Post last week, Peña Nieto lays out his agenda for the meeting with Obama, noting that “It is a mistake to limit our bilateral relationship to drugs and security concerns. Our mutual interests are too vast and complex to be restricted in this short-sighted way.” As CNN notes, Peña Nieto will focus on economic issues as well as security in his visit. Meanwhile, writing in Huffington Post, John Ackerman a professor at UNAM-Mexico City writes that Obama is losing credibility by cozying up to Peña Nieto. Ackerman notes that the recent election in Mexico was “a far cry from normal democratic politics” and warns that Peña Nieto represents a return to the old guard, which “represents the worst of Mexico’s authoritarian past.” Ackerman concludes that by cozying up to Mexico’s new president “Obama sends a clear message that his Latin America policy will be equally as shortsighted in his second term as it was during his first.”
Yesterday Argentina appealed a ruling by a New York court that could force Argentina to pay holdout bondholders known as vulture funds, reports the Associated Press. Judge Thomas Griesa ruled last week that Argentina must put $1.3 billion into an escrow account by December 15. If Argentina refuses to do so, the court ruling would force Bank of New York Mellon, which distributes payments to those bondholders who did accept a restructuring following the 2001 default, to stop those payments. The ruling is based on the parri passu clause, which the court interpreted as requiring equal treatment to both the bondholders who accepted a restructuring and those that held out. If, as President Kirchner has indicated, Argentina refuses to pay the vulture funds and the appeal is unsuccessful, it could lead Argentina into a technical default. Siding with Argentina in the court case is the US Federal Reserve, commercial banks and holders of restructured bonds. Also, as the AP points out, even critics of Kirchner in Argentina have criticized the judge’s ruling in recent days, as it threatens the successful economic growth that resulted after the default in 2001. For more on the case, click here and here.
Meanwhile, writing in The Guardian, Cambridge economics professor Ha-Joon Chang highlights the need for a sovereign bankruptcy law, similar to what countries offer debt-laden companies. Once a company declares bankruptcy, “the debtor company and its creditors are forced to work together to reorganise the company’s affairs, under clear rules.” Unfortunately, as Chang notes, “no mechanism like this exists for countries, which is what has made sovereign debt crises so difficult to manage.” Chang uses the examples of Greece and Argentina, arguing that the effects of their debt problems go far beyond their borders, noting that “In the Argentinian case, we are risking not just an end to Argentina’s recovery but a fresh round of turmoil in the global financial market because of one questionable US court ruling.”
A new report from the Economic Commission on Latin America and the Caribbean reports on the reduction of poverty in the region over the last few decades, reports the AP. Overall, despite recording the lowest poverty level in three decades, some 167 million people still remain mired in poverty in the region. This is one million fewer than in 2010 and represents some 29 percent of the population. The report, “Social Panorama of Latin America 2012”, released today, also reports on trends in inequality. The report notes that “on average, the richest 10% of the Latin American population receives 32% of total income, while the poorest 40% receive just 15% of income.” Since 2002, the countries that have shown the largest decrease in inequality are Argentina, Bolivia, Nicaragua and Venezuela. In all of these countries the Gini coefficient fell at an annual rate of more than two percent. To read the entire report, which “examines paid employment in care activities, as well as household spending on care services, and proposes a series of policy recommendations,” click here. For more on the reduction of inequality in Latin America, see here and here.
Mexican president-elect Enrique Peña Nieto is in Washington today to meet with President Obama, reports CNN. In an op-ed printed by the Washington Post last week, Peña Nieto lays out his agenda for the meeting with Obama, noting that “It is a mistake to limit our bilateral relationship to drugs and security concerns. Our mutual interests are too vast and complex to be restricted in this short-sighted way.” As CNN notes, Peña Nieto will focus on economic issues as well as security in his visit. Meanwhile, writing in Huffington Post, John Ackerman a professor at UNAM-Mexico City writes that Obama is losing credibility by cozying up to Peña Nieto. Ackerman notes that the recent election in Mexico was “a far cry from normal democratic politics” and warns that Peña Nieto represents a return to the old guard, which “represents the worst of Mexico’s authoritarian past.” Ackerman concludes that by cozying up to Mexico’s new president “Obama sends a clear message that his Latin America policy will be equally as shortsighted in his second term as it was during his first.”
Inequality is falling in Latin America as some 50 million people have risen to the middle class over the past 15 years according to a newly released World Bank report. The Guardian reports on the study, which notes that Latin America remains one of the most unequal parts of the world, “but a combination of favourable economic conditions and interventionist policies by left-leaning governments in Brazil and other countries has brought it more closely in line with international norms.” According to the World Bank report, 30 percent of the population is now part of the middle class, similar to the number who are considered poor. Meanwhile, 38 percent are classified as “vulnerable”, living just above the poverty line, but below middle class. Previous CEPR research has shown that, as the Guardian notes, left-leaning governments have performed especially well in reducing inequality. As CEPR’s researcher Juan Montecino has written, “there is a relationship between moving away from the Washington Consensus and reducing inequality.”
The wage gap between men and women in Latin America is decreasing according to a study by the Inter-American Development Bank, reports Univision. Despite obtaining more education than men, women in Latin America receive 17 percent less than their male counterparts, similar to the 18 percent gap in the United States. This is down from 22 percent in 1992. Chile and Brazil have the largest gaps, while Mexico and Central America have the lowest. Reporting on the World Bank study cited above, Inter-Press Service also notes how the increasing role of women in the economy has had a huge impact on the decrease in inequality and the rise of the middle class. Citing World Bank research, Stephanie Leutert, a research associate at the Council on Foreign Relations, writes “Latin American women have been responsible for 30 percent of the region’s extreme poverty reduction in the past decade, as a result of their increased workforce participation and higher earnings.” Adding, “the global economic downturn hit men’s incomes the hardest. In response, Latin American women picked up the slack, causing more than half of 2009’s poverty reduction.”
For the 21st year in a row, the United Nations General Assembly voted overwhelmingly to condemn the U.S. embargo of Cuba, reports the Associated Press. The United States was joined by Israel and Palau in voting against the measure, which was approved by a vote of 188-3. As the AFP notes, this was a record number of countries voting for the measure. Ian Williams, a senior analyst with Foreign Policy in Focus, comments, “The UN vote on the Cuba embargo reminds us yet again that U.S. foreign policy is concocted in a bubble detached from the real world, where most nations recognize that the boycott is designed to pander to the most reactionary Cuban emigres in Florida. Even dissidents in Cuba think that it is counterproductive, giving the Cuban government an excuse for its inefficiencies, while, like most such sanctions, harming more the population than those in power. Obama, embarking on a second term, and winning Florida despite the Cuban vote, owes them nothing. He should use his influence to call off the embargo and allow free travel to and from Cuba.”
Ecuador’s Rafael Correa announced his decision over the weekend to run for another term in office, reports Reuters. The decision, widely expected for some time, paves the way for Correa’s reelection in February. He currently has the highest approval rating in the hemisphere at around 80 percent. A recent survey showed Correa receiving 55 percent of the vote, over 30 points ahead of his closest rival. As the AP recently pointed out, a major reason for Correa’s popularity is that “Ecuador now devotes a greater share of its economy, 10 percent of gross domestic product, to public investment in infrastructure, education and other purposes than any other nation in Latin America and the Caribbean.” Echoing these points, Elma Lincango, an Ecuadorean nurse, told Reuters, “I want all the public works to continue, and he needs another term in office to do that … My grandparents say that in their lifetime, he’s the only president that has worked exclusively for the poor.”
Inequality is falling in Latin America as some 50 million people have risen to the middle class over the past 15 years according to a newly released World Bank report. The Guardian reports on the study, which notes that Latin America remains one of the most unequal parts of the world, “but a combination of favourable economic conditions and interventionist policies by left-leaning governments in Brazil and other countries has brought it more closely in line with international norms.” According to the World Bank report, 30 percent of the population is now part of the middle class, similar to the number who are considered poor. Meanwhile, 38 percent are classified as “vulnerable”, living just above the poverty line, but below middle class. Previous CEPR research has shown that, as the Guardian notes, left-leaning governments have performed especially well in reducing inequality. As CEPR’s researcher Juan Montecino has written, “there is a relationship between moving away from the Washington Consensus and reducing inequality.”
The wage gap between men and women in Latin America is decreasing according to a study by the Inter-American Development Bank, reports Univision. Despite obtaining more education than men, women in Latin America receive 17 percent less than their male counterparts, similar to the 18 percent gap in the United States. This is down from 22 percent in 1992. Chile and Brazil have the largest gaps, while Mexico and Central America have the lowest. Reporting on the World Bank study cited above, Inter-Press Service also notes how the increasing role of women in the economy has had a huge impact on the decrease in inequality and the rise of the middle class. Citing World Bank research, Stephanie Leutert, a research associate at the Council on Foreign Relations, writes “Latin American women have been responsible for 30 percent of the region’s extreme poverty reduction in the past decade, as a result of their increased workforce participation and higher earnings.” Adding, “the global economic downturn hit men’s incomes the hardest. In response, Latin American women picked up the slack, causing more than half of 2009’s poverty reduction.”
For the 21st year in a row, the United Nations General Assembly voted overwhelmingly to condemn the U.S. embargo of Cuba, reports the Associated Press. The United States was joined by Israel and Palau in voting against the measure, which was approved by a vote of 188-3. As the AFP notes, this was a record number of countries voting for the measure. Ian Williams, a senior analyst with Foreign Policy in Focus, comments, “The UN vote on the Cuba embargo reminds us yet again that U.S. foreign policy is concocted in a bubble detached from the real world, where most nations recognize that the boycott is designed to pander to the most reactionary Cuban emigres in Florida. Even dissidents in Cuba think that it is counterproductive, giving the Cuban government an excuse for its inefficiencies, while, like most such sanctions, harming more the population than those in power. Obama, embarking on a second term, and winning Florida despite the Cuban vote, owes them nothing. He should use his influence to call off the embargo and allow free travel to and from Cuba.”
Ecuador’s Rafael Correa announced his decision over the weekend to run for another term in office, reports Reuters. The decision, widely expected for some time, paves the way for Correa’s reelection in February. He currently has the highest approval rating in the hemisphere at around 80 percent. A recent survey showed Correa receiving 55 percent of the vote, over 30 points ahead of his closest rival. As the AP recently pointed out, a major reason for Correa’s popularity is that “Ecuador now devotes a greater share of its economy, 10 percent of gross domestic product, to public investment in infrastructure, education and other purposes than any other nation in Latin America and the Caribbean.” Echoing these points, Elma Lincango, an Ecuadorean nurse, told Reuters, “I want all the public works to continue, and he needs another term in office to do that … My grandparents say that in their lifetime, he’s the only president that has worked exclusively for the poor.”
When Hurricane Sandy ripped through the Caribbean it caused massive damage to the island-nation of Jamaica, but it’s not the reason Jamaica’s economic prospects are so poor right now. A large share of the responsibility for that lies with the International Monetary Fund (IMF), which has been squeezing the country since 2010. The damages caused by Sandy provide just the latest example of the negative effects of the severe austerity policies pushed by the IMF and backed by the Jamaican government. Early estimates are that Sandy has caused over $60 million in damages (some 2 percent of non-interest government expenditure), yet there may be limited action the government can take without cutting important spending elsewhere. That’s because the Jamaican government is trying to reestablish a lending agreement with the IMF, and the lender is demanding an extremely tight fiscal policy. Last week, Finance Minister Dr. Peter Phillips said that despite the massive damage from Sandy, the government will have to keep to “the strict fiscal program.”
It shouldn’t come as much of a surprise. Tropical Storm Nicole hit Jamaica in the fall of 2010, during the time of the previous IMF agreement, causing damages equal to 1.7 percent of GDP. Yet, because the storm “did not have hurricane-force winds, the government was not eligible for relief under the World Bank-administered Caribbean Catastrophe Risk Insurance Facility (CCRIF).” Rather, the IMF agreed to adjust the fiscal target by 0.2 percent of GDP, just a fraction of what was needed to repair and prepare for the next disaster. In the end, Jamaica increased expenditures to cover the damages but it was entirely offset by cuts elsewhere. (The IMF stopped disbursing money to Jamaica in 2011 for their failure to adhere to the program, yet the Jamaican government still hit the required primary budget surplus target nearly right on. More likely the agreement went off-track because the government decided to honor previous commitments to raise wages and pay back-wages to public sector workers, a big no-no for the IMF.)
As Juan Montecino and I have documented, first in May 2011 and then again in May 2012, the Jamaican government responded to the worldwide recession with austerity policies pushed by the IMF. The result, as anticipated, was slower economic growth and a failure to reduce the debt (the ostensible reason for pushing austerity). Meanwhile, what expenditures Jamaica did make went towards paying interest on their crippling debt, which has absorbed over 30 percent of expenditures the past three years. Jamaica has the largest debt burden in the world, greater even than debt-riddled Greece. The result has been an estimated ten-year period of negative per-capita GDP growth.
Recent IMF research has shown that cutting spending during a recession has greater negative effects on GDP than they had previously estimated. Perhaps this is a reason why the economic downturn for Jamaica was so much worse than the IMF anticipated. Unfortunately, neither the Jamaican government nor the IMF seems to be learning from their past mistakes. While Jamaica needs real debt relief and public investment to spur growth, as they once again approach the IMF, the signs are pointing to more of the same – not even a devastating hurricane can get the IMF to relax their conditions.
When Hurricane Sandy ripped through the Caribbean it caused massive damage to the island-nation of Jamaica, but it’s not the reason Jamaica’s economic prospects are so poor right now. A large share of the responsibility for that lies with the International Monetary Fund (IMF), which has been squeezing the country since 2010. The damages caused by Sandy provide just the latest example of the negative effects of the severe austerity policies pushed by the IMF and backed by the Jamaican government. Early estimates are that Sandy has caused over $60 million in damages (some 2 percent of non-interest government expenditure), yet there may be limited action the government can take without cutting important spending elsewhere. That’s because the Jamaican government is trying to reestablish a lending agreement with the IMF, and the lender is demanding an extremely tight fiscal policy. Last week, Finance Minister Dr. Peter Phillips said that despite the massive damage from Sandy, the government will have to keep to “the strict fiscal program.”
It shouldn’t come as much of a surprise. Tropical Storm Nicole hit Jamaica in the fall of 2010, during the time of the previous IMF agreement, causing damages equal to 1.7 percent of GDP. Yet, because the storm “did not have hurricane-force winds, the government was not eligible for relief under the World Bank-administered Caribbean Catastrophe Risk Insurance Facility (CCRIF).” Rather, the IMF agreed to adjust the fiscal target by 0.2 percent of GDP, just a fraction of what was needed to repair and prepare for the next disaster. In the end, Jamaica increased expenditures to cover the damages but it was entirely offset by cuts elsewhere. (The IMF stopped disbursing money to Jamaica in 2011 for their failure to adhere to the program, yet the Jamaican government still hit the required primary budget surplus target nearly right on. More likely the agreement went off-track because the government decided to honor previous commitments to raise wages and pay back-wages to public sector workers, a big no-no for the IMF.)
As Juan Montecino and I have documented, first in May 2011 and then again in May 2012, the Jamaican government responded to the worldwide recession with austerity policies pushed by the IMF. The result, as anticipated, was slower economic growth and a failure to reduce the debt (the ostensible reason for pushing austerity). Meanwhile, what expenditures Jamaica did make went towards paying interest on their crippling debt, which has absorbed over 30 percent of expenditures the past three years. Jamaica has the largest debt burden in the world, greater even than debt-riddled Greece. The result has been an estimated ten-year period of negative per-capita GDP growth.
Recent IMF research has shown that cutting spending during a recession has greater negative effects on GDP than they had previously estimated. Perhaps this is a reason why the economic downturn for Jamaica was so much worse than the IMF anticipated. Unfortunately, neither the Jamaican government nor the IMF seems to be learning from their past mistakes. While Jamaica needs real debt relief and public investment to spur growth, as they once again approach the IMF, the signs are pointing to more of the same – not even a devastating hurricane can get the IMF to relax their conditions.
