Populism in Venezuela

It's a familiar tale. A new leader emerges in a poor country that has lots of wealth but a highly unequal division of income. He pledges to transform the society with generous social programmes, and by using the state to take much of the economy out of the hands of private capitalists, orienting it to the people's needs. But within a few years, the economy stutters, shortages spread, and those goods which can be obtained sell at inflated prices. Poor people suffer. Disappointed by the revolution, they turn against it.

This time, it's Hugo Chávez's Venezuela. But the story has played out countless times before elsewhere, and no doubt will play out countless more times in other lands. Indeed, some readers might even have read the narrative of Jamaica in the 1970s in this story.

Venezuela is a country rich in oil, riding the commodity boom. But try telling that to residents of Caracas, where water is now rationed and power cuts are common. President Chávez is telling his compatriots just to be snappy in showers, saying he can do it in only three minutes. He blames the water and electricity shortage - Venezuela has the world's third-largest hydroelectric dam - on El Nino. That seems a bit rich in a country with such a large river system.

There are probably more banal forces at work. As I once argued in one of my books, stable political systems are founded on two overlapping regimes: an accumulation regime, and a distribution regime. The first refers to how an economy's output is generated, the second to how it is distributed.

Citizens expect to get their fair share out of the system - distribution. But that means the system must deliver a growing economy, to satisfy a growing population's rising demands - accumulation.

Balance

Chavez

Too much investment means too little spending and vice versa. A balance has to be struck. When it breaks down, a political crisis develops.

One could argue that Venezuela was ripe for the Bolivarian revolution because years of rising oil prices hadn't translated into popular gains. The regime was too focused on accumulation. But Mr Chávez has arguably bent the stick too far in the other direction. By distributing oil-price windfalls in the early years of his revolution, he certainly made himself popular. But the resultant under-investment in capacity and infrastructure (previously, profits were being reinvested) has created a situation in which supply can't keep up with rising demand. There results inflation, and shortages.

Defenders of such revolutions will often blame capitalist scheming for undermining a socialist revolution. That's often too crude an analysis. Socialism concerns itself primarily not with the management of distribution, but with the management of accumulation itself. At its heart lies the belief in some form of common ownership.

Noble though the intentions may be, rushing to distribute the profits of a capitalist economy arguably does not amount to socialism, but populism. It is inherently unstable as a political strategy. Ultimately, it fails the very people it is intended to benefit. Not surprisingly, Mr Chávez's approval ratings are falling.

With legislative elections due next year, Mr Chávez may face a dilemma. Should voters turn against his party, he could accept their verdict. Or, as is often the temptation for populist leaders in these circumstances, he could stiffen his resolve and harden the revolutionary stance of his government. The last stage of a doomed revolution is all too often authoritarianism.

One can only hope that if, and when, that moment comes, Mr Chávez will prove to be as good a democrat as Michael Manley was when his electorate terminated his revolution.

jamaica-gleaner

Bahamas Caribbean Blog International

Newly selected Haitian Prime Minister Jean-Max Bellerive vows to further Haiti's pro-business stance

PORT-AU-PRINCE, Haiti, November 11, 2009 - Newly selected Haitian Prime Minister Jean-Max Bellerive has vowed to further Haiti's pro-business stance, as the country looks to capitalise on the domestic and international outpouring of business interests looking at investment opportunities in Haiti.

That's according to the newly-formed Haitian Economic Development Foundation.

And President Youri Mevs says the business community is pleased with Bellerive's focus on continuing to further the pro-business direction encouraged by President René Préval.

"Humanitarian assistance to our country is indeed crucial, but expansion of the business sector in order to create jobs is the long-term solution that will most impact the future of our people," Mevs said.

Haiti has recently seen an up-swell in both domestic and international investments, with organisations such as Royal Caribbean Cruise Lines increasing their visibility on the island and announcements from local major enterprises such as WIN Group, which in coordination with the Soros Economic Development Fund, plans to build a US$45 million new Free Zone.

The capital was also recently the host of a conference organised by the Inter-American Development Bank, aimed at encouraging investment in the garment, agricultural and energy sectors. The conference was attended by hundreds of potential investors, including companies of the stature of Gap, Levi Strauss and American Eagle Outfitters.

A major catalyst to this activity has been the involvement of US President Bill Clinton, whose tireless work as the United Nations Special Envoy to Haiti has not only brought awareness to the country's plight, but has manifested itself in actual investments.

"We believe that the opportunity before us with the international community as it relates to investment in Haiti is unprecedented," Mevs said.

"We want to let the world know that Haiti is truly open for business."

The Haitian Economic Development Foundation was designed to foster economic growth throughout Haiti. It is comprised of some of the nation's most influential enterprises and individuals, with the singular goal of attracting and fostering business in Haiti.

caribbean360

Bahamas Caribbean Blog International

U.S. bases threaten Latin America, confirms Evo

COCHABAMBA, November 9.— Bolivian President Evo Morales affirmed that the installation of U.S. military bases in Colombia is an open provocation to Latin America and, particularly, to those countries that are starting to bring dignity to their peoples and governments.

According to PL, Evo told the press that U.S. bases in Colombia are a threat to revolutionary social movements in the region and the governments of the Bolivarian Alliance for the Peoples of Our America (ALBA), and against Colombia itself, given the total impunity and immunity enjoyed by U.S. soldiers who are not charged according to the laws of the country if they commit a crime against that nation.

For Morales, the empire is looking to establish worldwide hegemony and crush revolutionary countries that are fighting for their liberation, independence and development. He refuted the claim that said bases have the essential mission of combating drug-trafficking, as the governments of the two signatory countries have tried to justify.

In the face of this danger, he called on all social sectors who believe in dignity and sovereignty for Colombia and Latin America to organize and fight against the presence of these bases in the region.

Translated by Granma International

granma.cu

Bahamas Blog Bahamas

Local banks: Vital for the Caribbean's economic recovery strategy

By Dr Isaac Newton

The recapitalization of the banking industry in North America and Europe, which transferred massive wealth from the public sector, to a selected elite cadre of the private sector, is now showing some positive signs in this global recession.


But some economists warn that these early signs offer more hope to political leaders, than the somber reality of the market warrants. Overall, the global economy continues to forecast steady contraction, yet governments in the Caribbean owe their survivability to the generosity, stability and resilience of local banks.

Local banks are best positioned to foster hopeful contrasting scenarios for the Caribbean’s domestic economy, if governments take proactive steps and provide local banks with lighter regulations and fiscal incentives. There are several factors that account for these banks pivotal contribution to local economies.

First, indigenous banks have supported much of the governments’ social and infrastructural programs to the tune of hundreds of millions in loans and credit. But reduced credit lines and liquidity shortage--consequences of the global economy, from which locals banks must recover-- are having an adverse effect on the region’s long-term growth prospect.

Second, local banks are also forced to manage operational challenges, which have impinged on their capital scope. Yet, indigenous banks are part of the answer to point the Caribbean in the direction of economic improvement. By keeping internal customers employed, they continue to lesson the human cost of the impact of this market recession.

Third, typical of a Caribbean mindset that things foreign are superior, local banks are forced to function against a false but widespread belief, that simply because major regional and international conglomerations have failed, local banks are likely to go under. This is not true. What is true historically is that indigenous banks have offered much more support to local businesses than foreign owned competitors. And, they have accomplished this, by tailoring their programs to fit the nuances of the region’s cultural needs.

Fourth, local banks emphasize employment initiatives by keeping small business from going under. For example, in cases where customers are experiencing difficulties servicing their debts, local banks are more likely to help them consider lower payments or identify models that may lead to the early retirement of other current debt. In other instances, local banks help customers consider smaller loans requests to keep their businesses afloat.

Fifth, local banks have extended second life chances to governments in the region. Yet governments have not yet brought forth remedies to address the local financial circumstances by leveraging the resourced intelligence of local banks. Now more than ever, the need for local banks to help their customers get access to finances specific to their unique needs is urgent.

No one is sure how this changed economic landscape will turn out. The free market economy as we knew it has been altered by unethical behaviors of several prominent financial institutions and poor governmental regulations. This means that prudent financial decisions must be pursued by regional governments. If not, they will subject the people to worse forms of economic drag and stagnation than they are faced with today.

But regional governments can use this depressed economic climate as prime-time opportunity to partner with local banks. They could:

• Repay outstanding loans to local banks from funding received from various international agencies and institutions and from tax revenues. This will boost financing and help local banks resume more flexible lending practices. These practices are designed to match individualized needs,
  
  


• Provide innovative tax breaks to local banks so that they can reduce economic inactivity. Governments must be mindful that sound economic recovery will depend on the success of local banks.
  
  


• Inject local banks with confidence-building capital; local banks are likely to become drivers for growth that will facilitate steady economic upswing, ensuring future prosperity for the Caribbean,
  
  


• Reduce security risks to the business environment in general but pay special attention to the explicit security risks that local banks face.
  
  


• Draw on the skills of local banks to help them plan for a worst case option, should in case recovery plans fail. Local banks are equipped with the right personnel critical to help governments activate initiatives leading to long-term growth recovery and regional financial strength and,
  
  


• Remove adverse economic policy making barriers to the growth and profitability of local banks.

However, there is not sufficient clarity about the strategic aims of regional governments’ economic recovery plans. On the positive side, governments have at least identified broad recovery areas: lessening expenditure, borrowing from the IMF as a form of fiscal discipline en-route to downsizing the public sector, and intentions to preserve employment.

It is glaring nonetheless, that governments’ revitalization plans do not generally include a radical vision to expand special skills designed to put the right mix of talent in the right places, in order to take advantage of every opportunity for sustainable prosperity.

But with all the uncertainties that exist, another thorny issue irritating regional governments is how to take proactive actions to cut cost, while preserving portions of the social safety network that employment in the public sector represents for the masses.

Given the small, fragile nature of regional economies, local banks must be given the flexibility to support people and businesses without choking growth. I suspect that greater lending capacity by local banks can pull the economy back to satisfactory growth levels.

The Caribbean’s economy is expected to be dismal for the next five years. So whether in Antigua and Barbuda, St Lucia, Dominica, St Vincent, Barbados and St Kitts and Nevis or Trinidad, Jamaica and Guyana, governments will continue to face short, middle and long term challenges to their economies.

To confidently move forward, honest assessments must be undertaken. In retrospect, the region’s economic troubles were not exclusively caused by unbelievable greed and the irresponsible pursuit of power that occurred on Wall Street. Much of the problem is a sobering reminder of gross mismanagement of local economies. Expressions of this include:

• Failure to innovate tourism dependent, financial services and real estate industries
  
  


• Failure to capitalize on global financial trends through research and innovation
  
  


• Failure to explore new alternative energy, global sports and leisure markets
  
  


• Failure to adjust quickly to North America’s and Europe’s protracted economic depression
  
  


• Failure to be more fiscally disciplined while incentivizing productivity in the private sector and,
  
  


• Failure to tighten spending by reducing an already overburdened public sector and to increase credit rating

Regional governments should make sure that the economic climate is beneficial to local banks, especially if public/ private partnerships are going to be used as a credible means to finance important projects. Giving local banks the right mechanism so that they could become a credible alternative to cross-border financing, must be part of the region’s tough task, of pulling itself out of recession. 

November 9, 2009


caribbeannetnews

Bahamas Blog Bahamas

 

Hedge funds move from offshore centres

By Martin de Sa'Pinto:

GENEVA, Switzerland (Reuters) -- Luxembourg could draw hedge funds in their droves as European investors retreat from offshore vehicles and seek to rein in liquidity and counterparty risk in the post-Madoff, post-Lehman environment.

To meet investor demand, managers in Europe's $300 billion hedge fund industry are eyeing Luxembourg listings for eligible funds, even though tough new European Union proposals to only allow EU-registered funds to be sold may be watered down after fierce opposition from the United Kingdom and others.

"It's more the Madoff effect than the legislation effect, funds now want to come onshore, not be dependent on the offshore market," said Martin Kloeck, a director at Zurich-based fund manager Signina Capital, which manages $600 million.

"Asset managers get the Luxembourg-regulated tag, so why wait to see what new laws might tell us to do?" said Kloeck, whose company is already moving funds to Luxembourg from Cayman.

The Grand Duchy has a multi-lingual workforce and high quality fund services, comprehensive investor protection and a vigilant but flexible regulator, said a January report by professional services firm Deloitte.

It is already drawing funds from offshore centers as major asset managers like Brevan Howard and Marshall Wace register eligible funds onshore in regulated structures like UCITS III or Specialised Investment Fund (SIF) to broaden European appeal.

"It is much easier to sell UCITS- or SIF-compliant funds, they are liquid, the strategies are transparent and they provide solid investor protection," said Salvatore Imperatore, head of London-based investment advisory Pareto Capital International.

Investors turned skittish after fraud by US financier Bernard Madoff and the collapse of Lehman Brothers last year, and demand for transparent onshore vehicles has soared, said Hanna Duer, an associate at independent directors' group The Directors' Office.

The Cayman Islands, home to some 80 percent of the world's around 10,000 hedge funds, could be one major loser.

"Hedge funds and other alternative investment vehicles are now more interested in setting up onshore in Luxembourg because strict rules on liquidity and risk management, and strong regulatory oversight are what investors now want," Duer said.

That would also favor Ireland and Malta, which have like Luxembourg set up their regulatory and tax regimes to attract funds, Duer said, but Ireland's financial crisis is an issue, while Malta is still a relatively small financial center.

Despite the Grand Duchy's advantages, Association of the Luxembourg Fund Industry (ALFI) data show hedge fund assets administered there fell from $86 billion in June 2008 to under $70 billion a year later. However, the total number of funds actually rose 10 percent to 614. Also, the Lehman/Madoff effect is yet to play out as managers sift through the practicalities of moving funds.

Millennium Global is a Guernsey-based alternative asset manager that may set up several hedge funds on Deutsche Bank's Luxembourg-based funds platform.

"Our systematic macro strategy was packaged offshore and not eligible for many European investors. Now we are moving it to Luxembourg, all Europeans can invest because it is EU-regulated," said Marc Clapasson, a Millennium managing director.

He said the fund is also attracting investors from Singapore and Hong Kong who want liquid funds with transparent oversight.

"The Luxembourg fund has better liquidity and a higher regulatory standard, and it is probable that offshore investors will move onshore in the next five years," Clapasson said.

In a case that will test how robust Luxembourg's rules are, investors are suing UBS over its regulated Luxalpha funds which lost money in the Madoff fraud. They say UBS, custodian, was responsible for the assets.

HSBC faces similar claims over the Thema fund, based in Ireland. Both banks are contesting the claims.

"The responsibility of the depositary bank is quite clear under Luxembourg law, the custodian is 100 percent responsible for the assets even if it uses a sub-custodian," Duer said.

"It is very important that Luxembourg sticks to its guns over the Luxalpha affair, investors will realize the regulator is serious about protecting their assets," she said.

If that hurdle is cleared investors are likely to be even more enthusiastic about Luxembourg-registered funds.

The demands on a fund's directors are also greater than in other jurisdictions, Duer and Kloeck said. The regulator wants to see full background checks, and by law directors must be able to demonstrate good supervision and governance through a wide range of reporting.

Having stopped allocating to hedge funds during the credit crisis, many private and institutional investors say they are ready to get back in, but want safer and more regulated funds.

Says Clapasson: "The move of funds to Luxembourg is accelerating. It's a great opportunity for European asset managers to move assets home, and it's much easier to deal with Luxembourg than with offshore centers."

November 7, 2009

caribbeannetnews

Bahamas Caribbean Blog International

A dirty word or a global opportunity?

By Sir Ronald Sanders:

“Migration not infrequently gets a bad press. Negative stereotypes, portraying migrants as ‘stealing our jobs’ or ‘scrounging off the taxpayer’, abound in sections of the media and public opinion especially in time of recession”. That is the opening sentence of the United Nations Human Development Report 2009.

former Caribbean diplomat who publishes widely on small states in the global community. Reponses to: www.sirronaldsanders.com />The report goes on to say that “fears about migrants taking the jobs or lowering the wages of local people, placing an unwelcome burden on local services, or costing the taxpayer money, are generally exaggerated”. The Report asserts, “when migrants’ skills complement those of local people, both groups benefit” and it makes the point that “the policy response to migration can be wanting. Many governments institute increasingly repressive entry regimes, turn a blind eye to health and safety violations by employers, or fail to take a lead in educating the public on the benefits of immigration”.

Little wonder, then, that immigration in most countries has become a political problem. In the absence of factual information on the benefits of immigration to societies, the view prevails that immigration is harmful.

When some governments release figures on the number of migrants who have entered a country, there is seldom, if ever, a simultaneous release of the number of people who have left.

In many places, if the flow of migrants was mostly out and little in, the economies would soon be in trouble as the population shrinks resulting in fewer skills, a smaller labour force, less demand for goods and services and less money circulating in the economy.

The global flow on migrants is also vastly overestimated by the majority of the world’s people particularly because accurate information is not only sparse; it is simply not made available to the public. For example, the UN Report reveals that the global figure for international migrants in the world’s population has stayed at only 3 per cent over the past 50 years.

However, there are some regions of the world where outward migration has a peculiarly negative impact because of the type of people who migrate, and the Caribbean Community and Common Market (CARICOM) is one such region where there is a heavy outflow of tertiary educated people to the developed countries particularly Britain, Canada and the United States. Commonwealth Secretariat figures show that among the CARICOM countries that have lost more than 75% of their tertiary educated graduates are Antigua and Barbuda, Belize, Dominica, Guyana, Grenada, Jamaica and Trinidad and Tobago.

Unless these countries can produce enough tertiary educated graduates to retain a sufficient number for their own development needs, not only will the public and private sectors suffer from a paucity of knowledge-based skills and entrepreneurial insights, but their economies will become uncompetitive and will decline. The case for more investment in education and human resource development is therefore compelling.

It is a case that should be developed by the CARICOM Secretariat and jointly advanced by CARICOM countries to the International Financial Institutions, such as the World Bank, and the developed countries that benefit from this migration, to make a significant grant contribution to education in the region.

There is, of course, another side to the immigration story, and that is remittances sent back home from migrants abroad. In the 53-nation Commonwealth, remittances have become extremely important. They are greater than official development assistance and second only to foreign direct investment (FDI). The Organisation for Economic Cooperation and Development (OECD) reckons that total global remittances in 2008 were $328 billion as against official development assistance of $120 billion.

All CARICOM countries benefit from remittances. The leaders in 2008 in terms of remittances per head of population were Jamaica ($826), St Kitts-Nevis ($760), Barbados ($659), Grenada ($603), Dominica ($412), Guyana ($365) and Antigua and Barbuda ($305). But, it is clear that in 2009, the remittance figure declined indicating that immigrants were among the principal sufferers in the countries to which they had migrated. Many of them lost jobs or were constrained to accept lower wages and, thus, had less money to send back home. In this connection, while remittances are important to the economies of many Caribbean countries, active policies for attracting investment from the Caribbean Diaspora have to be developed for the medium term.

Within CARICOM, the problem of migration has become a vexed one in the context of the current global recession. As the 2009 UN Human Development Report stated: “The current recession has made migrants particularly vulnerable. Some destination country governments have stepped up the enforcement of migration laws in ways that can infringe on migrants’ rights”.

It is a human reaction to try to secure the interests of citizens over migrants at a time of crisis, particularly when the migrant community is substantial as in the cases in CARICOM of Antigua and Barbuda, Barbados and Trinidad and Tobago. Even though the CARICOM Treaty acknowledges “Freedom of movement of People”, it is impractical to simply rely on that as a justification for migration. CARICOM ought to be considering a more practical and realistic approach to the issue until such time as a Single Market and Economy is fully completed.

One way of doing this would be to develop a regional mechanism under which there would be a partnership between countries of origin and destination, supervised by a Council of appropriate officials, to manage migration based on labour needs with full respect for the rights of workers and their families by the destination countries.

In early November, the former Prime Minister of Jamaica, P J Patterson, quietly began the Chairmanship of a Commission on Migration and Development. The Commission is an initiative of the Ramphal Centre in London, named after the Caribbean’s former Commonwealth Secretary-General, Shridath ‘Sonny’ Ramphal.

The Patterson Commission is in its fledgling stage and it is still be to be funded fully, but the meeting attended by representatives of the United Nations, the Commonwealth Secretariat and other multilateral organisations displayed every sign of new thinking on the issue.

The task before it is huge, but Patterson has the gravitas in the international community to make the Commission’s report a seminal document in the international discourse on how the issue of migration should be tackled to maximise its benefits.

caribbeannetnews

Bahamas Caribbean Blog International

New report confirms importance of offshore centres to world economy

LONDON, England -- The positive role that offshore financial centres play in supporting growth around the world is highlighted in a new report, International Finance Centers and the World Economy, published today. The report was commissioned by the Society of Trust and Estate Practitioners (STEP) from prominent US economist Professor James R Hines Jr of the University of Michigan and NBER.

Ahead of this weekend’s G20 Finance Ministers’ meeting the report gives a strong indication of the key role well regulated offshore centres now play in the global economy by providing capital to support business activity in neighbouring economies.

The report finds strong evidence from a range of sources that offshore centres play a vital role in the international financial system, improving the availability of credit and encouraging competition in domestic banking systems. The result is a boost in investment in the major economies which ultimately supports job creation and growth.

Professor Hines commented that: “The evidence indicates that offshore centres contribute to financial development and stability in neighbouring countries, encouraging investment, employment, and other aspects of business development. They have salutary effects on tax competition, promote good government, and enhance economic growth elsewhere in the world.”

Chief Executive of STEP Worldwide David Harvey welcomed the report saying: “This report provides further robust evidence of the positive role offshore centres play in the world economy. Post credit-crunch we must ensure capital keeps flowing and Professor Hines’ report demonstrates by every measure credit is more freely available in countries which have close relationships with offshore centres”.

Last week the Foot Review of British offshore financial centres found that they provided net financing to the British banking system of $332.5 billion in the second quarter of 2009.

November 5, 2009

caribbeannetnews

Bahamas Caribbean Blog International