Sunday, February 23, 2020
Venezuelans react to U.S. sanctions targeting Maduro
AP. February 19, 2020
CARACAS, Venezuela (AP) — The debate over fresh U.S. sanctions aimed at forcing out Venezuela’s Nicolás Maduro played out Wednesday across the crisis-stricken nation — including a bustling Caracas bus terminal.
Residents of a massive slum in the capital city crowded into buses for a bumpy ride across town. The drivers, who say Venezuela’s crisis has left them struggling to earn a living, weighed in on the topic.
Some blamed socialist President Nicolás Maduro for the sanctions. Others, like Joel Cadenas, pointed the finger at opposition leader Juan Guaidó, who is freshly returned from an international tour to gain support to oust Maduro.
“If you go outside the country to look for us to be strangled you should be in prison,” Cadenas, a 54-year-old bus driver, said of Guaidó.
The opposition leader’s trip took him across Europe and into a White House meeting with President Donald Trump.
A week later, Washington hit the Russian state-controlled Rosneft Trading S.A. and its president, Didier Casimiro, with aggressive financial measures designed to cut Maduro off from a financial lifeline.
The once-wealthy nation is in the grips of a historic political struggle. The political and social crisis has divided a nation.
Families have been split up with at least 4.5 million Venezuelans fleeing crumbling public services. Many of those staying behind don’t have reliable running water and electricity.
Bus drivers say their companies often can’t find spare parts to repair broken down vehicles and replace flat tires.
Antonio Salazar, who’s driven buses for 30 years, said he blamed Maduro for Venezuela’s current collapse.
“This is the government’s fault,” Salazar said. “If the government is not responsible for this, who can we blame?”
Across much of the nation, drivers wait in line for two days to fill up. Venezuela has the world’s largest oil reserves, but its production has crashed in the last two decades.
Passenger José Argenis Lopez said he sees no hope for a solution to Venezuela’s woes while the government and its critics remain locked in an impasse.
“We are the ones who suffer,” Lopez said. “Those at the top economically aren’t the ones suffering.”
Where the Ongoing Mass Protests Against Neoliberalism in Chile Came From
ANNA KOWALCZYK. In These Times. February 19, 2020
In recent months, common people in Chile have taken to the streets not to pursue an ideological project or concrete cause—but as the result of the fragility and insecurity of everyday life, and the injustice of the political system. We have seen this with the Occupy Wall Street movement, in the context of the Arab Spring and the Indignados Movement in Spain. Although more than two months of social mobilizations forced the right-wing billionaire Sebastian Piñera government to implement policies it has previously opposed such as the reform of the constitution and the increase in public social spending, none of the major political forces were able to channel the movement giving rise to questions about the durability of these mobilizations in the long term. The political debates have increasingly focused on questions of institutional reforms and transparency, which although important for framing future political struggles, tend to mask more urgent economic reforms such as greater taxation of wealth and universal access to social services. Such policy changes are indispensable for the reduction of Chile’s exorbitant inequalities.
The explosion
The social explosion started in Santiago on October 18 following clashes between the armed police and students who were evading raised metro fares. Mobilizations quickly spread throughout the country demanding justice and change of the highly unequal economic model, bringing together a range of qualms that are typically discussed in isolation: low pensions, highly unequal healthcare, underfinanced education, political corruption and frequent cases of economic collusion between producers to raise consumer prices. The mobilizations boasted unprecedented social support: surveys conducted at the end of October demonstrated that close to 85% of the public supported the protests and after two months of mobilizations, support for them still stood at around 77%.
Pinochet’s legacy
Chile’s current economic model was established during the Augusto Pinochet dictatorship (1973-1989) by a group of Chilean economists educated at the University of Chicago under Milton Friedman. The country’s economy is widely considered to be the first attempt in the world at the introduction of a thorough program of neoliberal restructuring—many of the reforms established by Ronald Reagan in the United States and by Margaret Thatcher in the UK were first “tested” in Chile during the second half of the 1970s. The reforms included unprecedented liberalization of trade, the establishment of a new labor code which practically prohibited collective bargaining, financial liberalization, privatization of public companies, diminished per capita social spending, regressive tax reform and privatization of pensions. When it came to education and healthcare, reforms led to the creation of dual public and private systems, making access to education and healthcare the responsibility of individuals through their participation in the market.
The reforms carried out during the dictatorship (as well as the 1982 economic crisis) contributed to increased inequalities and a ballooning poverty rate (in 1987 close to 45% of the population lived under the poverty line), a greater concentration of wealth, a fall in real wages and an increase in unemployment.
Continuity and change
During much of the post-dictatorship period Chile was governed by center-left coalitions (between 1990 and 2009 and then 2014 and 2017, with the first right-wing Sebastian Piñera government in the interim), which focused on addressing extreme poverty and Chile’s rampant inequalities, but within the framework of the economic model inherited from the dictatorship.
Members of the coalitions have frequently pointed to the 1980 Constitution—written by Pinochet’s advisers and approved in a fraudulent plebiscite—as a structural limitation on any major reforms to the economic model. The constitution limits the state’s absolute ability to provide social services such as health, education and pensions, virtually prohibits strikes of public sector employees, obliges workers to join private pension funds, gives the president substantial control over Congress and makes it extremely difficult to reform the armed forces and the police, as well as the electoral and educational systems, because of extremely high quorum required for the approval of the reforms.
The governments of center-left coalitions did manage to decrease poverty and income inequalities. However, access to quality social services remains highly unequal and the relative poverty rate is very high. Chile’s tax system also features regressive characteristics while public social expenditure is tiny, translating into low quality public social services. In addition, the job market is highly segmented and a high share of the population works with temporary contracts or is self-employed in low skilled jobs, meaning their access to social services is also limited.
What’s next?
The recent mobilizations practically paralyzed the Chilean economy, which helped force the right-wing government of billionaire Sebastian Piñera to make concessions, such as paving the way toward the replacement of the 1980 Constitution (a plebiscite on whether a new constitution should be drafted is scheduled for April), scrapping plans to lower corporate taxes and increasing cash transfers to the poorest including modest cash subsidies to employees earning the minimum wage and those receiving the basic pension. The government also announced projects to increase sentences and fines for corporate collusion and fraud.
Social mobilizations have shaken the political system and demonstrated that the injustice of the neoliberal economic order is felt across Chilean society. But it is so far uncertain how the solutions to this broader issue will be achieved—and who will implement them. After the social explosion, the political Left has emerged highly divided and unable to channel social demands. According to a recent poll, although the president has record low approval rates (only 11%), the most popular political figures are associated with the political right and support has dropped for young left-wing politicians who have won elections by promising to transform Chile’s economic model.
Protesters have continued flowing to the streets but their dissociation from political parties and unions makes their calls increasingly appear as individual demands which can be satisfied through occasional cash transfers and reforms. Without a broader political movement, however, these reforms may simply consecrate the unequal status quo.
Argentina faces race against time to renegotiate debt
AFP. February 21, 2020
Backed by the IMF, Argentina is looking to renegotiate its debt but it faces a race against time to secure short term relief.
Since assuming power in December, President Alberto Fernandez's government has insisted it will not be able to pay off its creditors if its economy -- in recession since mid-2018 -- doesn't resume growth.
And more than $30 billion of debt repayments are due before the end of March.
Faced with unyielding creditors who won't give an inch, Argentina found an unlikely ally when the International Monetary Fund declared that the South American country's debt is "unsustainable" following a week long mission that ended on Wednesday.
"We were accused of being populists, irresponsible, but it turns out that we woke up today with the IMF having said we were right," center-left Fernandez said on Thursday.
Argentina is battling to avoid another situation like 2001 when it defaulted on $100 billion, becoming a market pariah.
The country currently owes $311 billion -- more than 90 percent of its GDP.
It's hoping to renegotiate $195 billion, including the $44 billion it owes the IMF.
"I think we have a good chance to negotiate something reasonable because the IMF wants to avoid a default," Hector Torres, Argentina's former representative to the world finance body, told a local radio station.
- 'Protracted wrangle' -
The IMF's position "isn't encouraging for the Argentine economy but it is for the negotiation. It's a slap on the back for the government," Matias Rajnerman, the chief economist at consultancy Ecolatina told AFP.
"Obviously, the IMF is an authoritative voice in the finance market, and it saying that the debt is unsustainable could make private creditors adapt their positions."
Argentina is struggling with inflation of more than 50 percent, a major currency depreciation and a poverty level that has soared almost to 40 percent.
For the IMF, Argentina needs "a definitive debt operation -- yielding a meaningful contribution from private creditors ... to help restore sustainability."
This "removes any doubt that private bondholders will need to stomach large haircuts in a restructuring," said consultancy Capital Economics.
"But investors are unlikely to accept those anytime soon, and we think that a protracted wrangle is on the cards."
Claudio Loser, a former IMF manager, said that right now "there's no way of knowing the level of debt relief" that could be on the table, but estimated that it could be 30 percent of the capital.
However, he said that unless the IMF comes to a new agreement with Argentina, "its creditors won't need to stick to it, because there's no clear plan."
Capital Economics expects the IMF to "lend Argentina some more money to repay the old loan -– in effect extending the maturities of the obligations."
- 'Urgency' -
In 2006, president Nestor Kirchner, whose cabinet chief was Fernandez, suspended Argentina's relationship with the IMF when he canceled a $9.6 billion debt the country owed the finance body.
That relationship was re-established under the liberal president Mauricio Macri (2015-19) when Argentina agreed a staggered $57 billion bail-out loan with the IMF.
However, Fernandez turned down the outstanding $13 billion when he took over in December.
Time is running out for Argentina as it has $34.3 billion of debt due at the end of March.
Only $4.2 billion of it is denominated under foreign legislation so Capital Economics believes Argentina will be able to meet its 2020 debt repayments.
"Over 80 percent of them are due on local-law instruments, which policymakers could continue to reprofile unilaterally."
That was the approach taken by Macri's government last year.
However, "the urgency on the government's part to thrash out a deal will only ramp up next year."
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