Expat News and Information: Fiscal Policy

Showing posts with label Fiscal Policy. Show all posts

Tuesday, January 21, 2014

It Finally Happened: Venezuela Is Admitted to Mercosur

article from August 1, 2012

By Jamie Douglas

On July 31, 2012, the three monkeys, you know, the blind one, the mute one and the one who can’t smell a rat broke the original Mercosur Treaty and, in their greed for energy, allowed Venezuela into the club of dying nations. They are dying because, except for Uruguay, the economies of the other nations are tanking at a pretty good clip. The ride is over for Argentina and Brazil.

Uruguay is getting the better part of the deal, because frightened Argentineans and Brazilians are repatriating their soon-to-be-worthless or, in the case of Argentina, already worthless money into the only safe haven they know of.

The situation in Argentina is so dire that Empress Cristina’s government bought a whole slew of dogs that supposedly can sniff out money being smuggled out of the country. The dogs have never eaten better! Here Fido, have some asada. Sources in Uruguay are stating that there has been no slowdown in Argentinean pesos coming across the border. Perhaps the money would have been better spent to train the dogs to sniff out cocaine and pasta base, which is causing a crime wave in the Southern Cone nation.

So now it is a done deal, illegal as hell of course, but the photo of the four dunces says it all: They should all have oily mustaches (Cristina probably already has one from having her nose up Hugo’s behind).

Meanwhile, Paraguay, where the original document that lays the groundwork for the four-nation treaty lies in repose, was suspended by the other three for having impeached President Fernando Lugo, thereby making the unanimous requirement for the entry of additional nations meaningless.

A little history is in order here: Since the Great Dictator Hugo Chávez took power in Venezuela, human rights, along with freedom of the press and freedom of expression, have gone to hell in a hand basket in Venezuela. Now bring in Paraguay, with the Honorable Field Marshal Strössner also having ruled with dictatorial powers, whose Senate suddenly wants to be the “good guys,” the human rights champions of that landlocked nation, and deny the entry of Venezuela into Mercosur for its violations of the Inter-American Free Press Accord.

A funny thing happened on the way to the impeachment of Bishop Fernando Lugo: The very Senate that had threatened Lugo with impeachment, should he vote for the admission of the Bolivarian nation, found itself without a vote at all after impeaching him. While the Mercosur summit was happening at the Intercontinental Hotel in Mendoza, Argentina, a Paraguayan delegation desperately tried to get into the summit to register their vote but was prevented from doing so by armed Argentinean gendarmes. By impeaching their undesirable socialist president, they had actually facilitated what they were trying to prevent: the admission of Venezuela into the Mercosur.

Oil speaks louder than words and treaties. Until the World Court or the US-run OAS decides that this was an illegal move, Venezuela will enjoy all the benefits of its membership in a useless organization, pouring crude down the throat of the member nations while gaining very little ...except prestige among losers.

Jamie Douglas

At Large in the Southern Cone

[Image of Mercosur Headquarters in Montevideo, Uruguay, via Wikipedia]

I encourage you to write me at cruzansailor [at] gmail [dot] com with any questions or suggestions you may have. Disclaimer: I am not in any travel-related business. My advice is based on my own experiences and is free of charge (Donations welcome). It is always my pleasure to act as a beneficial counselor to those who are seekers of the next adventure.

Thinking of Moving to Argentina? A Word to the Wise

article from April 10, 2012

By Jamie Douglas

Once a favorite destination for expats, Argentina is being turned into a sadly neglected country by nationalistic socialism, rampant political corruption and total economic ineptitude. Que lástima.

The government of Cristina Fernández de Kirchner is currently nationalizing whatever it can get its hands on, starting with YPF-Repsol and Petrobras, the Spanish and Brazilian oil companies that have been doing business in the Southern Cone nation because this country is unable to run its own oil exploration. These exploration companies, rather than dealing with one authority, have to pay off the corrupt local officials of every province they want to do business in, to hell with international treaties.

The nation is racing backwards at supersonic speed, and will soon be back in 2002.

Example 1: We live near a relatively large town with several major supermarkets. During Easter Week, they were out of milk for three days. While orange juice is a luxury here, selling for over US$2 per liter, stores rarely have it. Rice, sugar, flower, cooking oil, and even the beloved mate are all in short supply.

Example 2: Fuel stations are often out of fuel. Many times, the amount of fuel you are allowed to purchase is limited to AR$50, when they have it at all. Of course, if you have the extra US dollars per gallon, you can go to one of the rare Shell or Petrobras stations and pay more to fill your tank.

I actually got to fill up the modest tank on my Renault today. And the wait was only about 20 minutes. During the peak harvest season, many trucks waited in line for days to get fuel while the fruit and produce rotted. Nobody in the government did anything about it. Meanwhile, exports to Chile, Bolivia and Paraguay continued unabated. There are some highly intelligent people at work here, somewhere, but not in the government.

Example 3: The last time the economy tanked, it was because of fiscal mismanagement and the lunatic idea of tying the new peso, called the austral, to the US dollar. And a lunatic idea it was. It led to the biggest sovereign default in the history of the world. It makes Greece look downright attractive in comparison. A lot of it, of course, had to do with high-cost imports of luxury goods. After the catastrophe, the Argentine government decided to set up a free-trade zone in Tierra del Fuego, where they would manufacture air conditioners and assemble computers, fans, microwaves and all kinds of domestic appliances. That would be wonderful, if the consumer would actually save money on these domestic products. I took a close look at the tiniest of microwaves today just to see where it was made because it cost US$250 for the same kind you get at Wal-Mart for $30. Sure enough, it was made in Tierra del Fuego!

Item 4: Taking your profits out of the country: Forget it. Repatriating your money is forbidden unless you can get that unobtainable permit to send dollars out of Argentina. So what is a multinational company like, say, BMW to do? (It’s not like they sell a lot of their cars here.) In order to repatriate their money, they have to buy rice and export it to someplace that wants it, paying to ship it, warehouse it and broker it. Now that is messed up!

Item 5: As an Argentine citizen, you cannot take or send more than US$300 per person per month out of the country. It is illegal to send money to relatives who may be croaking in a hospital in Bolivia or anywhere else. And effective April 2, Malvinas Day, Argentinean citizens are unable to use their credit and debit cards abroad at all. All the borders and airports now have money-sniffing dogs, and they are quite good a sniffing out the loot, which will then become property of the state.

On the other hand, there are so many properties available all over this marvelous country that if you want to make a go of it, you will have many choices at very affordable prices. The important thing is to come here with family and all and get a feel for it. Having a working knowledge of Spanish is essential. Outside of the major cities, you will not find many fluent English speakers. But do not go down the street loudly proclaiming how this person dresses like a clown (it might be Cristina!) or that one there has a beer gut. You might be surprised at how many people understand English.

Jamie Douglas

San Rafael, Argentina

The Real April Fool: Argentina's Cristina Fernández de Kirchner

article from April 1, 2012

By Jamie Douglas

Many have attempted the colossal feat of making the Southern Cone nation the laughing stock of the world, and finally, the widow of the former president, being La Presidenta in her own right, has succeeded!

The buildup has been anticipated and therefore comes as no surprise. Since her reelection last October, it has been a steady drumbeat to fascism coming from the Casa Rosada, with new financial regulations, import restrictions and less personal freedom to do with your money as you want. Add to that the constant treaty violations with Mercosur’s junior members, Uruguay and Paraguay, her flaky excuse to not attend the Mercosur meeting in Asuncion (had a headache and could not fly) and now, the demands made on Mexico, also breaking an important trade treaty there, whereby Argentina exported about a million automobiles to Mexico and vice versa. But now it just does not suit Argentina anymore. They still want to export to Mexico but don’t want to allow Mexican cars to enter Argentina anymore.

For a long time now, there have been severe import restrictions on any merchandise entering Argentina. There are huge stockpiles of books and publications sitting in warehouses at border crossings between Uruguay and Argentina. Last week, the government of Argentina issued a formal statement that was heartily laughed at around the world: The printing ink has lead in it, and the public could be injured when they lick their fingers to turn the pages. The most embarrassing part of that folly is that both ink and paper are shipped over to Uruguay from Argentina in the first place!

Argentinean customs is also holding up many life-saving medications, as well as car parts, food items and just about anything you can think off. Even items from the Mercosur trade zone are being held back. The one thing that apparently sneaks its way past those eagle-eyed inspectors is makeup; tons of it, from the looks of it, all required in the name of national security, so that La Cristina can maintain that “condor” look.

And in keeping the populace baffled with all her bullshit, her government has spent 1.25 billion pesos on promoting itself in 2010, 25 times as much as was spent under the administration of her husband, Néstor Kirchner. Since she took control, however, she has used the very large funds to declare war on her enemies by diverting government pesos into massive advertising campaigns. Argentina has a national decree that stipulates that the money be spent in a balanced way, but La Cristina has gone out of her way to ignore that.

Just like the blatant vote-buying that was happening leading up to the last presidential election, where she promised everybody a chicken or some pork and flat-screen TVs for the jubilados (retirees).The federal government’s share of advertising in the nation comes to over 9% of all advertising in the country, about the same as the second- and third-largest advertisers in the country – Unilever and Proctor and Gamble – combined. To put it in perspective, that is 6.5 times as much as Canada spends! But then again, Canada does not have that much to lie about to its citizens, probably precisely 6.5 times less.

Some of the latest effluent to emerge lately is a new decree that Argentineans traveling abroad are not able to use their debit cards, as of today, to buy things or withdraw funds from their bank accounts at home, unless they are US dollar accounts. All of these rules and regulations are regurgitated on a daily base from the government’s Official Bulletin. Those of you fluent in Spanish are forewarned!

Being as this is akin to the period when Argentina’s General Galtieri started the unfortunate war against the UK over the Malvinas/Falkland Islands, I do have a serious question for my Argentinean brothers and sisters. Since when does a nation celebrate getting their asses kicked as severely, as they did 30 years ago? We were in Mendoza a month ago for the Vendimia Wine Harvest Festival, and a sad-looking bunch of Malvinas veterans hobbled by in the parade. I had to control myself from committing suicide by lynching by shouting out: “THEY LIED TO YOU!”

I have no recollection of the USA ever celebrating the end of their misfortunate incursion into Vietnam. Yippee, it’s April 30! Let’s celebrate our humiliating defeat at the hands of a peasant army that kicked our asses, B-52s and all.

Now for the hate mail, I thank you in advance.

Jamie Douglas

Going Totally Insane in San Rafael, Mendoza

[Image of President Kirchner with children, Maximo and Florencia Kirchner at second inauguration via Wikipedia]

Easy Credit in Argentina

article from March 21, 2012

By Jamie Douglas

We live outside a relatively small town southwest of San Rafael in Mendoza province. To say that the area is very poor would be a good description. Out in the country where we live, a few kilometers away from the small dusty town of Salto de las Rosas, many of our neighbors are illegal Bolivian and Peruvian immigrants who make a living from the dirt that they inhabit. Literally! I don’t know if they own the land they live on, as it looks more like they are squatters to me. Almost all the homes are made of mud bricks. It is not much, but to them it is a lot more than they could ever accomplish in Bolivia or Peru. Not much wealth is displayed externally, except for the TV antennas on every shack, and more and more are sporting the US$50 satellite systems being sold in small and large stores alike.

The main sources of income in these latitudes are seasonal fruit picking and year-round brick making. They build these intricate structures out of raw mud bricks, with vent holes and a very unique way of stacking them, and then they stuff it with a special kind of wood and let is smolder for weeks. The end result is that giant trucks from all over the country come to pick up huge loads of bricks. There is some heavy equipment involved, such as forklifts, but it all appears to be communally owned.

I give you all the above information to show just how poor this particular area is. We are just a few kilometers south of the wine belt, so there really is a lot of poverty here for most of the year. You should know that in this region there are also a lot of really poor Argentineans as well as a number of legal Bolivians, Peruvians and Paraguayans. They have documentos to show that they are legal residents.

Now to the point of this message: We have been trying to distribute our meager income to as many locals as we can. We buy fruits and vegetables from La Familia, a sweet, hard-working family of Bolivianos selling great quality fruits and veggies out of their home; Carlito and his family provide us with meat and chicken; and we get our staple foods from the little Atomo minimarket, a branch of a larger chain.

So last Saturday I went to the Atomo to make some purchases, and in the tiny parking lot out front was a car dealer with a brand new Peugeot 207, a very small car he was trying to sell by draping two turbo-vixens over it, bending in the aluminum foil-thin skin (the turbo vixens are optional). I could not help it – I had to go find out how he was going to convince the local populace to get one of them.

“Oh, es muy simple,” he stated. “All I need is for you to come to my office with your documentos and two utility bills in your name, and you can own one with no money down, no payments until six months from now and then you have five years – interest free – and best of all, the loan is in Argentinean pesos.”

Talk about money in the bank! The Argentinean peso is constantly devaluing and nobody can predict what calamities will befall the Southern Cone nation over the next five and a half years, but it will be quite a few. So buying a few cars on these terms, taking them to a barn and shrink-wrapping them for the future should be a very good investment.

This is the economic reality today in Argentina. The banknotes are so old and worn out that you are compelled to wash your hands after handling them. Giving the cars away on these kinds of terms shows how the economic engine, which stalled a couple of years ago, is being fueled. Lies about inflation, poverty, unemployment and anything else a government could lie about led to this situation. It has gotten so bad that the International Monetary Fund is closing their regional office, the nation’s economy has tanked and all Empress Cristina can talk about is “Las Malvinas,” the old nationalistic standby for diverting attention from domestic problems.

But just like in the upcoming elections in France, Greece, USA, Germany, etc, the people will continue to be baffled by all the bullshit and make all the wrong choices, as always.

Jamie Douglas

San Rafael, Mendoza

[Photo from San Rafael Department, Mendoza, Argentina by Jamie Douglas]

Argentina News Roundup Jan 13, 2012

article from January 13, 2012

By Jamie Douglas

Dakar Rally

This year’s Dakar Rally Raid is taking its toll on competitors and spectators both. Day one alone saw three fatalities, one being the Argentinean motorcycle rider Jorge Martinez Boero, who passed away while being transported by helicopter to a hospital after a severe crash. That same day, a father and his 12-year-old son were killed when the ultra-light plane they were using to observe the race crashed onto the highway in Orense.

There have also been several other spectacular accidents with serious injuries. The Czech crew of Aleš Loprais, driving a specially modified Tatra Jamal truck, had great luck, though suffering a very serious multi-rollover accident after the mechanic who was driving, Petr Almáši, fell asleep at the wheel, ran off the tarmac and lost control of the machine, totaling the Total-sponsored vehicle. Two of the three occupants suffered moderate-to-severe but not life-threatening injuries. As Michal Ernst, the team’s navigator explained to the media, “It happened very fast. We were all very tired and probably did not pay enough attention to driving. The truck suddenly went off the road. As we were driving quite fast at the time, at around 100 km/h, the truck plunged headlong into the sand and rolled over twice. The impact was severe, it was nothing pleasant!”

Thursday’s stage ended in Arequipa, Peru, the first time that nation has been visited by the Dakar Rally, which will end in Lima on Sunday, Jan 15, after completing well-over 5,000 miles in each of the four vehicle divisions: bikes, quads, cars and trucks.

The government v the poor hippies

Those who know the Buenos Aires Microcenter’s Florida pedestrian mall are no doubt aware of a number of street peddlers setting up there to sell their merchandise from mid-afternoon until late night. Lately, probably because the pie is getting smaller, this conflagration of “unsightliness” has become a source of friction between the rent-paying merchants and the mate-sucking anarchists of the street. Enter the megalopolis’ Public Space Minister Diego Santilli, and you have an instant confrontation between the federal riot police and undesirables.

After several dozen un-deodorized Peruvians, Ecuadoreans, Brazilians and Bolivians held a protest at the Corrientes crossing, blocking traffic in the time-honored porteño fashion, the public space minister asked for the support of the federales in making sure that these vagrants would not reestablish their clearly illegal selling of goods in public.

IMF v Argentina, round 13

It appears that the Kirchnerist approach to the International Monetary Fund’s silly demands that Argentina make arrangements to repay their loans and stop the disingenuousness with which the nation manufactures its statistics on inflation and unemployment are bearing fruit.

At a press conference on Thursday, Jan 12, in Washington DC, the IMF’s Acting Director of External Relations Gerry Rice reiterated that the organization’s board of directors will meet within a few weeks time to determine what progress, if any, Argentina has made in respect to the Fund’s request of a little bit more transparency and less shuffling of the figures submitted by the Southern Cone nation’s government. He pretty much conceded that whatever decisions the board would come up with, sanctions against Argentina would not be included. I guess that concludes that series of discussions before they start.

Jamie Douglas

San Rafael, Mendoza

South America News Roundup Dec 2, 2011: Chilean Justice, Brazilian Interest Rates, Argentinean Inflation

article from December 2, 2011

By Jamie Douglas

Chilean justice

Chile has been involved in a long-running trial, going back to the years of the shameful overthrow of President Salvador Allende. Judge Jorge Zepeda has just issued an indictment request for US Captain Raymond E. Davis for his alleged involvement in the extrajudicial execution of two US citizens, Charles Horman and Frank Teruggi. Horman was a 31-year-old filmmaker while Teruggi was a 23-year-old student.

Captain Davis was commander of the US Military Group in Chile, answerable directly to the CIA, which, at the time, had their dirty hands in most countries in Latin America under the guise of “preserving democracy,” an effort that ultimately ended up costing tens of thousands of lives in the region and, in fact, helping to pave the way for brutal dictatorships to take the place of democracy.

Captain Davis at last stands accused today, 38 years later, of bearing responsibility for ratting the two US citizens out to the Chilean Secret Police while collaborating with the now-imprisoned Chilean Army Brigadier General Pedro Espinoza Bravo. He was a leader of DINA, the feared secret police, who, in 1976, planned the execution by car bomb in Washington DC of Chilean Diplomat Orlando Letelier, a former member of Salavador Allende’s cabinet.

The bullet-riddled bodies of both of the US citizens were found on a street in Santiago de Chile after they had been executed along with many others in the capital’s National Stadium. The United States did nothing for their citizens, except help to cover up their murder.

Documents declassified in 1999 clearly showed the involvement and contribution of intelligence by Captain Davis that led to the death of the two US citizens. The whereabouts of Captain Davis are currently unknown, and it is very unlikely that the FBI or any other US law-enforcement agency will assist in the detention and deportation of this highly decorated war criminal.

Brazilian interest rates

Brazil has led the world with the highest interest rates for the last 23 months and still does so, in spite of dropping the base rate by 0.5% to 11% recently. Financing any purchase in Brazil is a costly affair, and, like in Argentina, many merchants selling consumer goods are offering interest-free installment credit to anyone with a national ID card. It must be noted that not making payments is a criminal offense, where you get locked up without a trial until the debt is satisfied.

Brazil leads the world with the highest rates, followed by Hungary, Indonesia, Chile, Mexico, China, Russia, Australia, Colombia and Taiwan.

Argentinean inflation

Argentina has been less than forthcoming with their official inflation rate, since former President Néstor Kirchner† replaced all the INDEC technocrats with his handpicked political cronies. The figures that have been released to the public since that time have been rather disingenuous, rarely approaching even one-half of what is taken for reality.

For a while, private consulting firms have issued their own highly academic figures. They arrived at their data with good old scientific methods: Sending hordes of people to all kinds of commercial establishments to ascertain the cost of consumer goods across a wide spectrum of items. Their figures, unlike those of the government-appointed cronies, do not lie.

So to combat the contrariness of those darn truth-sayers, the government of President Christina Fernández de Kirchner had her secretariat of domestic trade file a lawsuit against the private consulting firms. These same firms had already paid heavy fines for the audacity of speaking the truth against the official fiction created by the government lackeys.

Judge Alejandro Catania, a friend of the Kirchners’ who was assigned this case, tried to get the International Monetary Fund involved in this, to show that the wayward Melconian & Santangelo private consulting agency were indeed at fault. The government of Presidenta Cristina is on a collision course with the IMF over the false information disseminated by INDEC, and an agreement signed with the IMF will have to be fulfilled by January 10, 2012. The Argentinean government apparently prefers to be a financial rogue state.

Jamie Douglas

San Rafael, Mendoza

Argentina's New Fiscal Policies

article from November 18, 2011

By Jamie Douglas

Since Cristina Fernández de Kirchner’s sweeping landslide reelection on Oct 23, mainly because of a fractured opposition that failed to form a coalition to oppose her, there have been a number of new regulations dealing with foreign exchange. All foreign mining and energy companies will henceforth be unable to repatriate their income, and the private exchange houses are restricted to buying dollars, being prohibited from selling them.

On Wednesday, Oct 26, the Official Gazette published Special Decree 1722, ordering all revenues created by the mining and energy sectors in Argentina to be negotiated at the local foreign exchange market, a measure aimed to stem capital flight, as well as a forced attempt to flood the market with “fresh” dollars to control the high demand for the US currency by everyone in the country. The measure also aims to control the inflation that is being denied by the Casa Rosada.

Government “economists” mistakenly believe that the funds that the foreign corporations are being forced to retain in Argentina will inject US$3-$4 billion into the economy. I do not make the connection here. How would that money enter the local market? Foreign corporations are unlikely to invest in infrastructure improvements as long as they are unable to take their income home.

By Friday, Oct 28, the central bank had begun to regulate the ability of just about everyone to sell their soon-to-be worthless Argentine pesos for US dollars, in order to stop the capital flight of US$100 million per week, or $3 billion per month. The new decrees are a complete mess of rules and regulations requiring potential moneychangers to submit their requests to the tax authorities, who will check the amount against their records of how much money has been declared, and they are sure to work their way up to the supreme court in about 10 years time.

The incoming vice president of the nation, current Economy Minister Amando Boudou, assured his fellow Argentineans on Monday, Oct 31, that the new rules are not meant to hinder transactions, but are intended to show the origin of the monies. He assured the patient that everything is fine and all is in order. That would be a first in the 201 year history of Argentina!

The vice president-elect is also urging Latin American nations to abandon the use of the US dollar altogether and start using local currencies, instead. That is in direct contradiction to an inquiry made by the Uruguayan government and several banks from Uruguay urging the Argentinean central bank to guarantee that it will buy back the hundreds of millions of pesos that Argentine tourists will spend in Uruguay during the vacation season. Many porteños cross the Rio de la Plata with sacks of Argentine pesos, which they exchange at Uruguayan casas de cambio, where the dollar now exchanges at almost 6 pesos, nearly a 50% premium for the Argentines. But the banks and exchange houses in Uruguay are understandably reluctant to buy Argentinean pesos, since there is now no way to turn them back into dollars.

Argentina’s unilateral panic rules are, of course, having repercussions internationally with investment bankers, rating agencies, the IMF and the World Bank, all of whom warned the government of La Cristina of the dire consequences of these actions. The ratings agency Fitch has advised the Argentinean central bank that the nation’s credit rating could become subject to highly undesirable changes in currency exchange policies driven by the high inflation rate that the government is denying.

Jamie Douglas

San Rafael, Mendoza

Latin American Fallout from the G-20 Summit, Elections in Nicaragua and Guatemala

article from November 8, 2011

By Jamie Douglas

War on tax havens

In a classic example of “he said/she said” Panamanian President Ricardo Martinelli rejected French President Nicolas Sarkosy’s suggestion that Panama was a tax haven. The Panamanian president has courteously offered President Sarkozy a few days to “immediately correct himself.”

Pipes up the Foreign Minister of Panama, Roberto Henriquez, “[we] categorically reject that our country is a tax haven [it’s just one of the most corrupt countries in the hemisphere!]. The G-20 nations are merely looking for scapegoats to cover their financial mismanagement on the periphery of this crisis.” Perhaps that is why a country such as Panama has close to 100 banks chartered in the nation, most of which only do business with foreign clients.

In fairness, it must be stated that Sarkozy may, indeed, be looking for any sort of diversion from the utter failure of the meeting held last week by threatening that the nations identified to be tax havens would be shunned by the international community. He announced plans at the close of the G-20 Summit to publish a list of uncooperative tax havens at each of the future summits. At least he made it seem like they accomplished something while wasting millions of euros in tax dollars on the event. For the future meetings, I am sure that the list of those offending nations will be a bestseller to all corrupt government and corporate officials.

The leader of France also urged member states to isolate Uruguay, as it is allegedly also a major offender, according to information given to him. This information was based on the Argentine delegation’s statements at the Organization for Economic Cooperation and Development meeting, where they accused their neighbor country of being a facilitator of tax evasion. But this accusation really carried little weight when it was made, as Argentina’s Presidenta Cristina Fernández de Kirchner, as did her late husband and presidential predecessor, has foreign bank accounts worth millions of dollars. They, like most Argentineans, have no confidence in their homegrown banking system.

Uruguay’s reluctance to cooperate with Argentina and Brazil is rooted in the fact that both of its behemoth neighbors have abysmal record-keeping systems in their tax establishments compared to the Eastern Republic’s sophisticated and accurate record keeping. The more the Argentinians and Brazilians pick on their little neighbor, the more Uruguay questions the wisdom of membership in Mercosur.

Presidential elections in Guatemala and Nicaragua

Turning to election news, Guatemalans went to the polls this past weekend (November 6, 2011) to elect a new president. To no one’s surprise, Generalissimo Otto Perez, a retired right-wing military man, won by a margin of 54.85% vs. 45.14% for his opponent, centrist Manuel Baldizon. This northernmost of Central American Republics has become the new battleground for narcos fighting turf wars over control of the lucrative trade in Colombia’s main export commodity, cocaine. Perez, a former military commander, had better credibility as a person with experience, promising a mano dura in fighting the cartels that have invaded the nation by providing heavily armed military patrols at night, when the regular police are too frightened, undermanned and outgunned to face them.

Baldizon had made his campaign about helping the elderly and poor, a noble gesture, to be sure. But the best way to help them, for starters, would be to make their towns secure again, particularly after dark. Guatemala is a culturally diverse nation where, for the last 500 years, the majority indigenous population has wallowed in the poverty and misery that makes the youth susceptible to gang recruitment. It is very important for the new president to address the needs of these disenfranchised citizens and to include them in future decisions involving their communities. The nation’s national security demands that the nation work more on the integration of the indigenous majority.

On the same date in Nicaragua, voters went to the polls and gave former Marxist strongman Daniel Ortega a resounding majority of the ballots. Counting and tabulating are slow, but as of Monday evening, November 7, 2011, with just under 40% of the votes tabulated, he seems to have a comfortable 64% of the vote. He, of course, had his Sandinista-dominated supreme court void that part of the constitution that limited the holder of the office to only one term.

Ortega’s wife, Rosario Murillo touted the win to be “a victory for Christianity, socialism and solidarity!” Mr. Ortega’s ruling party also gained a majority of the country’s deputy seats, which will allow him and his supporters to change the constitution in any way that they see fit, with perhaps another round of nationalizing foreigner’s landholdings. It looks like we may have him and his handpicked cronies in power for years to come.

Jamie Douglas

San Rafael, Mendoza

Where that Fine Malbec Wine just voted me the Best Sampler!

Four More Years for Kirchner

article from October 24, 2011

By Jamie Douglas

Cristina Fernández de Kirchner, by no surprise, is the winner of Sunday’s Argentinean presidential elections. With over 95% of the votes counted, she garnered a landslide 55% of the vote, giving her four more years to ru(i)n the country. As is customary, the sitting officeholder had the purse strings of the nation to disburse money for flat screen TVs for the elderly and tons of meat for the rest of the population.

Her popularity is so overwhelming that the opposition candidate did not really run. She is expected to try that old trick of having the constitution changed to allow her to run a few more times – after all, she is a relatively young 58 years old. I just hope that she will step down before the grim reaper harvests her in office so she can enjoy the hundreds of millions of dollars she and her deceased husband Néstor “rightfully” earned by their “hard labor.”

At the same time, Cristina’s supports voted for her party to gain control of both houses, making the changing of the constitution unlikely to be contested. Her popularity has been boosted by the booming economy, coupled with the denial of inflation, which currently hovers between 25% and 29%, this according to private consultants who use accurate econometrics, such as the actual prices of a basket of consumer goods, energy costs and other monthly expenses for a family of four. The governments figures are less than half that, but this is Argentina. Don’t cry for Argentina; it is merely business as usual.

Now, with La Presidenta firmly established, being her own woman, not just Néstor’s placeholder in the Casa Rosada, we can expect to see closer ties between Argentina and Brazil, where President Dilma Rousseff has been widely viewed as being the placeholder for Lula da Silva, the wildly popular former president of Brazil. Lula, as he is affectionately known to his fellow Brazilians, recently announced to his compatriots that Dilma was his choice to run for a second term, and that he would stand down.

He would be 72 years old by the time Mrs. Rousseff’s second term expires, and being a sensible man, he will probably enjoy his role as elder statesman more than he would enjoy being president until he is 80, battling a corrupt cabinet, like Mrs. Rousseff is having to do right now.

This closer relationship between the two giants of Mercosur, of course, may lead to the marginalization of the two minor players, Uruguay and Paraguay, both of which have been used and abused by their giant neighbors for a while now. In addition, there is also the unknown of Venezuela’s pending membership, which is only awaiting Paraguayan ratification.

Both Brazil and Argentina currently are heavily dependent on China as their most important trading partners. China however is only buying natural resources, from minerals to agricultural goods, and hardly any manufactured goods are being exported to them. At the same time, Argentina’s protectionism of their native industries has severely limited imports, including inexpensive Chinese products, by enforcing punitive duties. This topic is sure to come up in future trade negotiations with the Chinese.

Jamie Douglas

San Rafael, Mendoza

Where we have to live without cheap Chinese imports!

[Image of Argentinean President Cristina Fernández de Kirchner via Wikipedia]

Monday, January 20, 2014

Brazil’s Future

article from September 28, 2011

By Jamie Douglas

Brazil in the last few years has shaped itself into an economic powerhouse, becoming South America’s own “Wirtschaftwunder.” But there are troubling signs on the horizon: The nation’s currency, the real, has appreciated to such an extent that Brazilian tourists in Uruguay and Argentina are spending like drunken sailors or Americans in 1950’s and 60’s Europe. With their powerful currency, their buying power is nearly double in those countries than it is at home.

In the real world, the rise in the value of the real has created some very unpleasant side effects, such as the loss of exports, inflation and lately, a minimizing of isolation from the shrinking world economy. Since the beginning of 2011, the Brazilian share market, Bovespa, has lost 22%. In other words, the value of traded entities has fallen by over a fifth, which is a staggering loss of wealth.

Brazil’s former president, Luis Ignacio Lula da Silva, AKA Lula, a very popular socialist who reduced abject poverty by about 25 million people, was widely thought to be planning a run for office again when Dilma Rousseff’s first term is up. But he has recently announced that he will stand down and let her run for a second term. He is a sly fox, that Lula. Realizing that, three years down the road, things will be very different that now, he can just play the role of elder statesman without having to take the blame for the possible collapse of the nation’s economy.

Brazil is confronted with several major obstacles in the future, not the least of which are the triple money-guzzling sporting events coming their way. In 2013, Brazil is to host the Confederation Games, then there will be the 2014 FIFA Soccer World Championship and finally, in 2016, the Olympic Games as well as the Para-Olympics. All told, the drain on the nation’s finances will amount to over one trillion US dollars. The improvements to the infrastructure will be permanent, while the influx of foreign currency will be fleeting. On the upside, thousands of jobs will be created in construction and the service industry; on the downside, most of these jobs will vaporize once the festivities are over. Then comes the long hangover of repaying the debt that was accumulated to hold these prestigious events.

Brazil had been a beneficiary of record-high commodities prices in the last few years, from minerals to grains. But in the current downturn, which may last several years, the prices of most of their commodities have slipped, as the consuming nations have cut back on their requirements due to reduced productivity. While some analysts are not worried about Brazil’s economic future, I am not so optimistic. But then again, I am not an analyst; I am just an opinionated observer who is good at math.

Brazil is currently carrying a debt burden of US$1.75 trillion, which may not seem like much compared to the USA’s approaching $15 trillion debt, but Brazil is under the rule of the IMF and is not allowed to recklessly print billions in worthless paper currency like the USA is currently doing.

An additional problem plaguing the Brazilian treasury is that fully half of all collected taxes go toward paying pensions. Economist are advising Dilma to reduce these pensions and reduce interest rates, which currently are at a reduced, but still staggering 12%. The easiest way to create social unrest in Brazil would be to mess with the holiest of sacred cows: the pension system. Should the presidenta decide not to run for that second term, then she may try for that. However, it is very unlikely that she will succeed, as the coalition holding the government together is comprised of 27 parties and a bunch of politicians who do want to get reelected again.

Jamie Douglas

San Rafael, Mendoza

Where that Malbec Wine is Always Fine!

Argentina’s Feuding Inflation Rates

article from Sept 27, 2011

By Jamie Douglas

What is going on in Argentina? That is the question of the day. Expats, please do not worry, as none of this directly affects you; but it is important to understand what is going on in this country, particularly in relation to its neighbors and fellow Mercosur members.

For starters, the International Monetary Fund (IMF) has reamed Argentina for submitting and publishing totally fictitious figures dealing with its inflation. IMF director for Latin America Nicolas Eyzaguirre is demanding that this Southern Cone nation apply major and drastic measures to comply with proper reporting of actual inflation, in lieu of submitting the disingenuous figures, which generally run about half of what the figures actually are.

Argentinean Minister of Economy Amando Boudou has attacked the messenger, as Argentina always tends to do: “The bureaucracy of the fund is watching another movie. They are playing rich kids games in a world that needs fast solutions,” Boudou stated.

Mr. Eyzaguirre, on the other hand, demands that the nation submit correct data because they have to know what is really going on in the world’s eighth-largest country’s economy: “Looking to the world and trying to decipher Argentinean statistics is like the captain of the Titanic going after the violin of the orchestra. (I think something was lost in translation here!) There are far more important things to address and not let political prejudice condition operational views.”

There is no one in Argentina who is not aware of the falsified figures being fabricated by the government. Cristina Fernández de Kirchner is running virtually unopposed in the upcoming October presidential elections, so why the steady stream of disinformation? Is it because the government expects people to be lied to all the time?

As a direct result of the disinformation that the Casa Rosada has planted, the IMF henceforth will not pay any heed to the official figures released and instead will use private consultants to harvest more truthful data in the future.

Meanwhile, in the very scary opposition to a free press in Argentina, the Domestic Commerce Secretary Guillermo Moreno had a friendly judge issue subpoenas to six newspapers for the names and phone numbers of all reporters and editors who have covered the Argentine deception on the economy. Government official are claiming a ridiculously low inflation rate of 9.8% (?) for August 2011, while the real rate is pegged at anywhere between 20% and 25%. Ask anyone shopping in the grocery store which is the correct figure.

The mere fact that the Fernández administration is going after reporters and editors, accusing them of criminally publishing false information to benefit their clients, to the supposed detriment of Argentinean consumers and the state, is a complete admission that freedom of the press is but an illusion. Judge Alejandro Catania, obviously in the pocket of the government, did comply with Moreno’s request, and he issued subpoenas to the newspapers and their employees as well as to the IMF, the tax ministry, the central bank and the stock market.

Moreno has threatened to fine the various consultants 500,000 pesos, or US$123,000, for publishing the truth. The reason for this may be found in the fact that almost all of Argentina’s sovereign debt is tied to inflation, thereby making the government’s falsification of the figures mandatory for saving the central bank billions in interest.

The stench of fascism is in the air again in the long-suffering nation, which once showed such promise on the world stage.

Jamie Douglas

San Rafael, Argentina

Where that Fine Malbec Wine still has freedom of expression!

Does Mercosur Have a Future?

article from September 19, 2011

By Jamie Douglas

Since 1991 Argentina, Brazil, Paraguay and Uruguay have been charter members of what was to become a Southern Cone common market, with a goal of eliminating punitive tariffs and allowing the free flow of commerce and people across international borders. Now, Venezuela has been approved to be a member as well, and all but Paraguay have ratified the motion to allow that Bolivarian nation to join. Excepting the Guyanas and Suriname, the remaining nations of South America – Bolivia, Chile, Colombia, Ecuador and Peru – have associate-member status.

In theory, this was to be an emulation of the European Union’s effort to eliminate borders and tariffs between member nations. But as is usual in the Southern Hemisphere, petty disputes still exist among these nations. The Uruguayan pulp mill dispute, which led to the closure of the southernmost border crossing between Argentina and Uruguay for years, is but one example.

Paraguay and Uruguay, of course, are the two dwarfs squeezed between the giants of Brazil and Argentina, both of them being exploited by their bigger neighbors at every turn and with virtually no recourse. With the worsening economy, inflation, and the Brazilian real having become overvalued to the point of its becoming a major hindrance to exports, Brazil’s leaders suddenly decided that protectionist measures were in order to reduce the importation of vehicles from Argentina and, to a much lesser extent, Uruguay.

On September 15, 2011, Brazilian Finance Minister Guido Mantega unilaterally lifted the industrial product tax by 30% to force domestic automakers to build key components such as engines and transmissions, as well as doing the stamping and painting. In order to stay competitive, Brazil is urging carmakers to locate their production in Brazil. This is particularly hard on Argentina, which has a booming business exporting the various vehicles it assembles, mostly with foreign engines, transmissions, etc.

The new rules went into effect Sept 16 and will stay in force until at least the end of 2012.

Meanwhile, Argentina’s national statistics agency, INDEC, has announced that the nation’s economy expanded by 9.1% in the second quarter compared to a year earlier. But when comparing that to the actual inflation of about 25%, one could easily surmise that, in reality, the economy contracted substantially. What is really driving the economy is the robust sale of durable consumer goods. Argentineans, long weary of saving their money or trusting banks, have taken to buying “stuff” in lieu of keeping money under their mattresses. While the currency is devaluing, the value of their goods is constant, and the easy interest-free payments that are offered by most establishments make that an ever-more attractive way to preserve the value of their money.

Undoubtedly, Argentina is the biggest bully in the Mercosur alliance, starting with Christina Fernández’ snubbing of the summit in June for mysterious medical reasons. Argentina has taken on an air of arrogance that resembles that of its northern brother, the United States of America. The brunt of Argentina’s quasi-imperialistic behavior is being born by the two small members of Mercosur.

On September 14, Uruguayan President José Mujica very carefully had to explain to his country’s manufacturers and farmers that Mercosur is not really working, even though relations between the countries were good, as Uruguayan exporters were facing increasingly difficult conditions to access markets across the Río de la Plata. While the Eastern Nation of Uruguay has been in compliance with the charter and intent of the Mercosur agreements, it has effectively been excluded from entering the Argentinean markets unhindered. As a result of being compliant, today’s Uruguay saw the transfer of control of several important industries, such as rice, soy, cattle and meat processing to Argentinean and Brazilian multinationals.

So does the Mercosur really have a viable future? I give it no more than a 50:50 chance over the long term. While it may continue to exist in the foreseeable future as an institution, its effectiveness depends on the full implementation of the spirit of the treaty, which is to better the lives of all the citizens in the zone by lowering the cost of goods and services provided across international orders.

Jamie Douglas

San Rafael, Mendoza

Where fortunately that Fine Malbec Wine grows right here!

[Image of Mercosur Headquarters in Montevideo, Uruguay via Wikipedia]

The Latest News from Venezuela, Aug 18, 2011

article from August 18, 2011

By Jamie Douglas

The past few days have brought several interesting news items from the Bolivarian Republic of Venezuela to the forefront. Let’s get the one out of the way right away: President Hugo Chávez returned from Cuba after the latest round of chemotherapy, and according to his blog, he is feeling better and his cancer has not metastasized. Personally I am still in the dark as to why he could not find proper treatment in his own country.

The good news about Venezuela’s crude oil industry is the proclamation by OPEC that Venezuela now is sitting on top of the largest proven reserves in the world, exceeding those even of Saudi Arabia. The national oil monopoly, PDVSA, is fourth in the world’s rankings of oil companies.

The country should be sitting on a big pile of cash, but for years of unchecked spending and corruption. Unfortunately, many if not most of the social programs that have been announced to gain the support of the masses never really got off the ground. Added to this lack of proper fiscal planning, with Chávez having promised the Moon to many poorer Latin American nations, is an astonishing level of corruption that, together, have cost the Venezuelan treasury billions of US dollars (half a billion has been stolen from the PDVSA’s pension fund by a Ponzi scheme).

In spite of this wealth in the ground, the nation’s leader has been in direct contact with Russian Prime Minister Vladimir Putin to obtain an express loan worth US$4 billion. Time will tell what that Wiley Russian Fox will extract in concessions from Venezuela in exchange for the loan, but one thing seems certain: It will come with not just strings, but ropes attached. It is a given that the New Russia, while not so much engaged in a “communism vs. capitalism” struggle as during the Cold War, is finding itself playing second fiddle to China in Latin America. Getting a good foothold in Venezuela will at least make for some face saving. While Russia itself has an abundant supply of energy resources, it is never enough in a world of shrinking supplies.

These latest twin announcements from the president also involve the nation’s currency reserves and gold stash. The finance ministry is studying a plan to transfer over US$6 billion in cash away from US and European banks to more allied countries’ financial institutions. Brazil, Russia and China are of prime consideration in the transfer of the cash. They are also considering moving 211 tons of gold that is being held in European banks to the Caracas Central Bank vault, where it would be added to the 154 tons already there, making it a total of 365 tons in local storage.

Then cometh the announcement that President Hugo Chávez wants to nationalize the gold industry, so as to gain complete control of production and increase the output of the mines. He stated that it will be “by a decree to take the gold sector, which still remains in the hands of the mafia and smugglers.”

Chávez is preparing to make some new friends again. Venezuela certainly is a nation in flux. So stay tuned for the next exciting future history episode of the Bolivarian Colossus.

Jamie Douglas

San Rafael, Mendoza

Where the Malbec Wine is Always Fine!

[Image of Venezuelan President Hugo Chávez via Wikipedia]

About Expat News and Information

This site was started by the former editors of Expat Daily News Latin America, of which many articles dating from 2010-2012 have been posted on this site, all with updated links. The intent of this blog is to add new content about issues of interest from around the globe while providing past insights and timeless expat topics with the older articles about the most popular expat region. The "Useful Expat Resources" page continues to offer information for anyone looking at the possibility of living overseas.

Thank you for reading Expat News and Information,

Jamie Douglas and Julie R Butler

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