That Awful Economy

Via Sam, That awful economy

A dark day in history: Nancy hands out 'the Chavez Rule'

UPDATED
Wednesday night I wrote an article for Pajamas Media explaining the consequences if Nancy Pelosi delayed a vote on the Colombia Free Trade Agreement.

Yesterday Pelosi, who I now consider an enemy of America, changed the voting timeline rule on trade pacts from 90 days to whenever.

This is the first time in history that Congress failed to approve a major trade pact.

Monica Showalter of Investor's Business Daily yesterday afternoon describes why this is an evil move (yes, I am choosing my words carefully - it is an evil thing Pelosi has done). I post the editorial in its entirety (emphasis added):

Pelosi's War
Congress: The cowardly start more wars than the courageous. Nancy Pelosi's craven altering of House rules to kill off Colombia's trade pact brings that danger to the Andes. If war breaks out, her name will be on it.

April 10 may end up as a date which will live in infamy. The Speaker of the House not only refused to step forward and be counted on approving the vital Colombia free-trade agreement, she ran away from letting anyone else vote on it.

After President Bush submitted the pact to a vote under fast-track rules, she changed them to ensure it wouldn't go anywhere anytime soon. By a 224-195 House vote, the voting timeline rule on trade pacts was changed from 90 days to whenever. Pelosi now can hold up Colombia's treaty however long her caprice dictates.

"The message Democrats sent today," a bitter Bush warned after Thursday's vote, "is that no matter how steadfastly you stand with us, we will turn our backs on you when it is politically convenient."

Pelosi's move leaves Colombia, an ally, in limbo and uncertainty. She may think her clever maneuver was done in a vacuum, but it wasn't. In Venezuela's capital of Caracas, where Hugo Chavez holds forth, and in the jungles of Colombia, where drug terrorists hide out, Pelosi's move was watched closely.

Indeed, within hours of the vote, Latin American media already were calling Pelosi's maneuver the "Chavez Rule."

The Venezuelan dictator is no doubt fascinated at how Pelosi could do this to America's best ally in Latin America, punishing a vibrant democracy by isolating it from all the other nations that have sought and won free trade.

Unlike, say, military aid, this deal costs the U.S. nothing, is too small to have much impact on the U.S. economy and is mainly about ending tariffs on U.S. goods sold in Colombia, matching the no-tariff trade that Colombian firms already get here.

Free trade was what Chavez's enemy, Colombian President Alvaro Uribe, considered his best weapon. And Pelosi knocked it right out of his hand, just to placate her party's union supporters.

Only a month ago, Chavez sent 10 tank divisions to the Colombian border after Colombia's army blew away a FARC terrorist kingpin. He warned he would bring war inside Colombia.

Encircled by tanks not only in the East by Venezuela but also in the South by Chavez's cat's paw, Ecuador, Colombia asked the U.S. for just one thing: to pass the free-trade agreement. No tanks. No jets. Just free trade.

Now without it, Chavez might be emboldened to strike. After all, he'll hear from congressional sources that Pelosi probably won't bring up a vote on the trade pact for at least several months. He'll use that time to pick fights with its now-forsaken neighbor. The fact that Colombia can't get even a trade pact tells him all he needs to know about American commitment.

So even though the pact was not rejected outright, its absence will be inherently destabilizing. There's nothing Chavez or his FARC allies dread more than Colombia armed with trade rights that will boost its economy beyond the allure of Chavista populist promises.

At Argentina's 2005 Summit of the Americas in Mar del Plata, Chavez made his enmity toward free trade known by hurling insults at the president of Mexico and vowing to "bury" free trade.

Now, thanks to Pelosi's bid to shunt Colombia off to trade limbo, the potential for war in a tinderbox Andean region — over any border incident or FARC terrorist attack — has been heightened.

The world and its dictators don't sleep. The cowardly number that Pelosi did on Colombia likely will prevent the soft power of free trade from working, instead opening the gates to the hard power of war — and pulling in the U.S. whether Pelosi likes it or not. If so, we'll have the her to thank.

Nancy Pelosi has covered herself in a cloak of shame and infamy. Unfortunately for us, everybody in the hemisphere will have to pay the consequences.

The message Pelosi has sent the world is that in America, the only superpower in the world, political squabbles take precedence over security interests.

I expect she'll be paying Hugo a visit soon.

UPDATE
Drop Dead, Colombia
Democratic Speaker Nancy Pelosi blocks a trade deal with America's closest South American ally

That political turf-staking, and the Democrats' decreasingly credible claims of a death-squad campaign against Colombia's trade unionists, constitutes all that's left of the case against the agreement. Economically, it should be a no-brainer -- especially at a time of rising U.S. joblessness. At the moment, Colombian exports to the United States already enjoy preferences. The trade agreement would make those permanent, but it would also give U.S. firms free access to Colombia for the first time, thus creating U.S. jobs. Politically, too, the agreement is in the American interest, as a reward to a friendly, democratic government that has made tremendous strides on human rights, despite harassment from Venezuela's Hugo Chavez.

Read the rest, at that arm of the vast right-wing conspiracy, the Washington Post.

At that other arm of the VRWC, the Boston Globe, Edward Schumacher-Matos adresses the "killing union organizers" meme:

While the murder of even one union organizer is deplorable, the numbers being used are so misleading that they should not be cited in opposing the agreement.

All sides agree that the killings are dramatically down, and no one accuses the government of orchestrating them. By the unions' own count, the killings dropped from a high of 275 in 1996 to 39 last year. The government says 26.

The assumption by the Democrats is that all were killed for union organizing. It is an assumption implied in reports they cite from groups such as Human Rights Watch and Amnesty International. Those groups, however, rely on Colombian unions for their numbers, instead of collecting their own. The number of convictions now being won in the union's own cases reveals that perhaps one-fifth, and almost certainly less than half, of the killings had to do with unionism.

Of convictions won in 87 cases since the first one in 2001, almost all for murder, the ruling judges found that union activity was the motive in only 17, according to the attorney general's office. The judges found 15 of the cases had to do with common crime, 10 with passion, and 13 with being guerrilla members. No motive was established in 16 of the cases.

The unions don't dispute the judicial findings, and deep in their reports say that they, in fact, have no idea of suspect or motive in 79 percent of their cases going back to 1986. The killings, in other words, are isolated and not part of a campaign against unionizing. The unions further benefit from the reduced paramilitary and guerrilla violence. The convictions have cut impunity. The government provides protection, from free mobile phones to bodyguards, for nearly 2,000 union leaders.

But hey, Nancy can't be bothered with the truth.

More at SwordsCrossed and Red State

Not satisfied with cement, Chavez has now set his sights on nationalizing steel, and his armed forces are now occupying 32 sugar plantations. Apparently, Chavez is so afraid of getting whacked with a sugar cane that he's decided to make a preemptive strike. We have a golden opportunity to strengthen a relationship with an improving Democratic nation that unfortunately is next door to a president who is a socialist kook. Too bad our Democratic "leaders" would rather let that opportunity pass.

But fear not, the Dems are not too proud to scalp Colombia off some bucks, Is Hillary Running on Colombian Cash? Does the bear poop in the woods?

Via Maggie
The WSJ reports Nancy's doublespeak:

Mrs. Pelosi herself spoke with the Colombian ambassador to the U.S. to offer assurances that the House action wasn't meant as a show of disrespect and could ultimately lead to passage, according to an aide to the congresswoman. Mrs. Pelosi said the deal could still come before the House this year, if Colombia takes steps to stem violence against labor organizers and if the White House moves to accept Democratic demands for action on competing priorities, such as expanded food assistance to the poor.

Ridiculous little woman. The Colombians aren't buying her line: Colombia is struggling for its life while Nancy gets off playing House: Colombia's Plata Says Rejecting Trade Accord Same as Sanctions

"Not having a trade agreement is almost like having trade sanctions imposed in the sense that you've been downgraded, or are at least now one level below the other comparable economies in the continent" that do have trade deals, such as Mexico, Chile, Peru and Central America, Trade Minister Luis Guillermo Plata said in an interview.

Additionally,

The delay "is a calamity for the world trading system," said Fred Bergsten, the director of the Peterson Institute for International Economics in Washington. "This undermines the whole basis of international confidence in the U.S. as a trading partner."

National Review has more.

Via Judith, Pelosi's bad faith

Via Larwyn, Obama: Trade with Cuba- Good... Trade with Colombia- Bad




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The Kirchners's self-induced farm crisis

The Argentinians tend to vent their political frustration with cacerolazos, where they congregate in public places and bang on kitchen pots, usually cheap tin pots that make the most noise. They all agree on a time of day to hold the cacerolazos so anyone who wants to join in from the privacy (?) of their front yard, their farm, or their apartment in New York City will be banging at their pots at exactly the same hour.

I know Argentinians who have engaged in cacerolazos in Miami, FL, Tokio, Japan, and Montgomery, NJ. The one in Montgomery has Princeton address, so maybe I should say Princeton.

Absurd as this gesture may sound, it points to a chronic situation in Argentinian politics: the choice of Peronist populism over an open economy.

Yesterday I linked to Mary Anastasia O'Grady's article, Tax Rebellion in Argentina

To wit, while a strong peso made Argentines prosperous in the 1990s, it was incompatible with the rigid, closed economy. The situation is the same today: Either the economy is opened, labor markets are made flexible and the business climate improves or the government clings to a weak peso policy as a way to compensate for an uncompetitive economic model and inflation comes back. Take your pick.

By choosing the latter, the Kirchners have won the support of that segment of the Argentine economy loyal to the principles of 20th-century fascist Juan Peron. These include labor militants, government bureaucrats, the Peronist political machine and the likes of Mr. D'elía, whose thugs act as Mrs. Kirchner's informal enforcers. But by generating inflation and provoking shortages Kirchneromics is also fueling widespread discontent.

The Mr. D'Elia the article refers to is Luis D'Elia, described by the Guardian as "a controversial protest leader and former government official." D'Elia was deputy secretary for land reform under the Nestor Kirchner administration. Last week D'Elia's cohorts, apparently sent by the Kirchners, started beating up the hapless crowd engaging in a "cacerolazo" in front of the government palace, La Casa Rosa (the pink house).

(I use the Kirchners in plural. Presidenta Cristina Fernandez and her husband, former presidente Nestor Kirchner are a two-for-one deal, much as Hillary and Bill would be, if we elect her.)

Amateurs with tin pots are no match for professional thugs, so you know how that turned out. You would think the Kirchners would deny any association with D'Elia,

But instead of distancing herself from D'Elia's violent behavior, Fernandez seated him behind her a night later during a speech in which she defending her higher taxes on soy exports and appealed to farmers to respect public order.

What is this particular fuss about?
Argentinian farmers have had to pay a 35% income tax on profits, and a 35% export tax. That's bad enough. What's making it worse is that the current administration has raised the export tax from 35% to 44%. With rising commodity prices,

if the price of soy goes up... the "retention rate" increases until the government can end up taking as much as 95% of any marginal increase in farmers' gross income.

As Anastasia O'Grady explains in her article,

Mrs. Kirchner says the tax increase is a redistribution mechanism, suggesting that growers and ranchers have to be forced to share more of their good fortune with others. But the greater motivation behind the export-tax increase is inflation.

This government, it seems, will do just about anything to reduce inflation except the one thing that would solve the problem: Let the peso strengthen. It has imposed price controls on businesses; frozen, and then subsidized, energy prices; and prohibited the export of beef.

Allow me to point out that Argentinian beef is one of the best in the world. Prohibiting its export is a foolish measure indeed. But I digress.

Planting, harvest, transport and the cost of land eat up another 50%, therefore it's not surprising that the farmers are protesting.

Protesting farmers have stopped trucks carrying farm produce, making them turn back or dump their goods on the side of the roads.

The farmers continue their strike, and Cristina is promising not to cut taxes, but to subsidize small and medium-sized farmers.

Price controls lead to shortages, inflation and black markets, but the Kirchners are not above fudging the numbers, either:

Last year it fired the director of the government's agency for inflation data because she refused to fudge the numbers. Even so, prices rose by an estimated 20% in 2007 and expectations for this year remain high. This would explain the new round of confiscatory export taxes. By discouraging farmers from sending food abroad, the government thinks it can increase food supplies inside the country and damp prices.

While making farmers furious and reducing the incentive to produce, this does nothing to address the causes of the inflation, which are monetary expansion and the failure of the economy to attract investment and expand productive capacity. A strong peso and a commitment from the government to respect private property are what's needed to confront rising prices.

That's not about to happen any time soon. The Kirchners are willing to send in the thugs to prevent it.

Special thanks to Siggy for the links.



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Venezuela: no money for education, healthcare or food

Alvaro Vargas Llosa, writing at TNR, tells the truth about those social programs the Left has praised so highly in the Bolivarian Republic of Chavismo (emphasis added), starting with the "free health care", which was at the hands of Cuban medics working for $200/month:

The Barrio Adentro mission was originally run by about 30,000 Cuban doctors and medics. Many of those health centers are now closed; the rest are seriously understaffed. "The Cubans are leaving," explains Felix, a social worker from Baruta, "because they don't get paid, because they are the victims of rampant crime or simply because they have moved on--they only offered to serve in Venezuela as an excuse to get out of Cuba." In some cases, the government never provided the funds needed to finish the construction of clinics. In Baruta, a desolate construction site reminds the local neighborhood that there is, as Felix puts it, "a gulf separating reality from speeches." I was not surprised to learn that, according to Andres Bello University, 60 percent of the Barrio Adentro health centers are not functioning.

Food and nutrition:

The Mercal mission, a series of supermarkets in which the poor can theoretically acquire food at extremely low prices, is not faring any better. Because of price controls, essential products are missing from the shelves. People stand in line for hours to buy food or milk. In some cases, as I was told in Petare, producers have been put off by price controls; in others, the people who manage the supermarkets sell essential products under the table to those able to pay more.

The soup kitchens, which supposedly have to serve free meals to 150 Venezuelans in each neighborhood every day, are also falling victim to the chronic shortages. Jesus, a Chavez supporter who manages a soup kitchen in Barrio Union Petare, told me that he would not be serving his neighbors until next week, when he expects to get new provisions. The result? "The squalid ones," he concluded, using the term with which Chavez refers to his critics, "are now a majority around here."

Housing payments:

Corruption has eroded the prestige of the Habitat mission through which the government supposedly dishes out checks to poor Venezuelans so they can buy a house. It is not unusual for an aspiring homeowner to find out that a mystery person has cashed the check using his or her name. "The same people who hand out the checks cash them for the benefit of their relatives," explains Eladio, who told me a nephew recently suffered such an experience.

Subsidizing automobiles (Venezuelans pay cents to the gallon of gasoline) has created huge bottlenecks.

Secondary and higher education are suffering too.

Inflation is running at 30%.

Private property is disappearing.

Populism and governmental intervention in every aspect of the economy is the surest way to bankrupt a country.

Will the readers of The New Republic realize this? Or are we going to hear some more about how Chavez is a-charismatic-leader-helping-the-poor-offering-free-health-care-education-adult-literacy-and-job-training-initiatives-that-help-millions-of-Venezuelans^tm?



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Brits' teeth

Bad teeth - the new British disease

New?

The article points out that

This is a deep-rooted problem that needs a drill taken to it. The Government should start by scrapping the new contract that it introduced for dentists in 2006. Dentists are now paid a fixed fee, in exchange for completing a certain number of units of NHS dental activity a year: the net result is that idle dentists never get round to seeing enough patients - and their funding is subsequently reduced - and energetic dentists are forced to look to the private sector for more work after they fill their quota. In 1990, only six per cent of dentists' income came from private patients; now it's 58 per cent. Worse, NHS dentists now receive the same amount of money for six fillings as for one, so there is no incentive to take on complex cases.

Our dentists are trained at a cost of £175,000 by the NHS, so they should be expected to work within the sector for a number of years. And we need more of them. America has twice as many per head as does Poland - half of whom are here. Britain only has 3.7 dentists per 10,000 people. Even if you find an NHS dentist, it's not all smiles: the cost of a filling has gone up from £14 to £43 in the past few years. The NHS budget has doubled in the past decade while dentistry decayed. The Government has finally started filling the financial gap but, as usual it has gone on bureaucracy.

This appears to be a triple problem - Demand, supply and technology:
1. People have grown accustomed to expecting that all their healthcare needs will be met by the government. The government is not paying enough for NHS dentists to provide adequate care.

2. Dentists are trained at the expense of the public. There are not enough dentists being trained. Once dentists complete their training, they have no option but to work for the state monopoly for several years.

3. The dentists in private practice have no incentive to facilitate payment plans to their patients/customers; medical research companies have no market incentives to come up with new technologies.

Here in the USA most people do not have dental coverage, but manage to have the best dental care in the world. How is that?

Is it because students pondering future carreers have enough choices and economic incentives to enter the profession? Is it because there's enough of a business opportunity for medical research to bring to market new drugs (painless dentistry) and new technologies (invisaligns, for instance) that provide better care? Is it because the patients have enough choice of dentists in their towns that there is a free market of sorts with enough competition that a patient can compare treatments - if you don't like your dentist, you can check out the other dentist?

In addition to these factors, is it because the American patients themselves are more aware that dentistry is not simply cosmetic?



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Optimism vs. pessimism

Pessimism:
The other day ShrinkWrapped was examining the pessimists' view of the world in his post The New Age of Anxiety Cont.

The American Middle Class is anxious in ways rarely before seen. They are anxious about their health, worrying that at any instant the food they eat, the water they drink, and the air they breathe will cause a disease which will not only kill them but worse, will bankrupt them. They are anxious that their life style is under threat by the stagnation and decline in housing prices, the impending, and absolutely necessary, changes in Social Security and Health Care, the collapse of the dollar, and a job market in which traditional jobs seem to exist atop a house of cards which can collapse with alarming rapidity. Like the White Rabbit, they feel like they are running as fast as they can and not getting anywhere.

Optimism:
Alexander Tabarrok writing in Forbes, Dismal Science Sees Upbeat Future

New ideas mean more growth, and even small changes in economic growth rates produce large economic and social benefits. At current income levels, with an inflation-adjusted growth rate of 3% per year, America's real per capita gross domestic product would exceed $1 million per year in just over 100 years, more than 22 times higher than it is today. Growth like that could solve many problems.

In the 20th century, two world wars diverted the energy of two generations from production to destruction. When the horrors ended, the world was left hobbled and split. Communism isolated much of the world, reducing trade in goods and ideas--to everyone's detriment. World poverty meant that the U.S. and a few other countries shouldered the burdens of advancing knowledge nearly alone.

The battles of the 20th century were not fought in vain. Trade, development and the free flow of people and ideas are uniting all of humanity, maximizing the incentives and the means to produce new ideas. This gives us reason to be highly optimistic about the future.

When I read ShrinkWrapped's post a statement stood out, where he said,

At the turn of the 18th century, Thomas Malthus famously described how the industrial revolution was going to lead to an exponential increase in human population; further he stipulated that the increased population would necessarily outstrip our capacity to feed ourselves, since food production would only increase at a mathematical rate. Human ingenuity proved Malthus wrong and continues to prove him wrong today.

I commented that actually, the Industrial Revolution itself proved Malthus wrong. The Industrial Revolution generated the economic impetus that would benefit mankind and sustain man's ability to bring about what man's ingenuity could summon.

Nowadays few people publically discuss the fact that the industrial revolution (that monster that Karl Marx despised while living off its benefits), combined with the rule of law, liberty and commerce, is what has made possible all of the advancements we enjoy in today's world. It is not big government which makes for the betterment of mankind. It is man's creativity encouraged by the profit motive and sustained by the appropriate legal, social and commercial environment.

I also commented at ShrinkWrapped, "On the same vein, perhaps the answer resides in reframing (which I believe is a psychological term - correct me if I'm using it incorrectly) today's image from "Age of Anxiety" to "Age of Opportunity", AND creating a business environment where the problems can be solved through businesses and individuals acting together."

I stand by my words.

More blogging later.


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A happy convergence: When shoes and economics meet

As frequent readers of this blog know, I was an economics major in college, I'm passionate about abolishing trade tariffs, and have an interest in shoes.

Well, imagine my delight when I saw this article at the Heritage Foundation:
Cut Shoe Tariffs to Help Low-Income Families

Excellent idea!

In this age of political strife, it is very good to see a bipartisan effort to make life easier for the poor. The Affordable Footwear Act (AFA) is such an effort. Introduced last month by Representatives Joe Crowley (D-NY), Kevin Brady (R-TX), and Nancy Boyda (D-KS), the AFA would repeal the disproportionate tariffs on shoe imports. High protectionist tariffs on inexpensive footwear hit the poor hardest, raising the price of a basic necessity. Congress should repeal the tariffs and help all Americans save a few dollars on their next pair of work boots, pumps, or sneakers.

Speaking of pumps, I was just mentioning that Steve Madden Women's Luvvy Pump in red patent, are a particularly good choice for the festivities.

But back to the article,

Shoes are the extreme case, with tariffs 10 times the average rate, and cheap sneakers face the highest tariffs the U.S. imposes on any manufactured good. These tariffs, magnified by retail markups and sales taxes, are included in the price families pay for shoes.

Footwear tariffs are simply a hidden, regressive tax on a household necessity. Their sole effect is to reduce the amount of income families have to spend on all other goods and services. This expense is most onerous for low-income families with children, who spend the largest share of their income on the necessities of life. The Affordable Footwear Act, which would eliminate cheap-shoe tariffs, is a straightforward way to help these families stretch their household budgets further.

The High Cost of Footwear Tariffs

Americans bought about 2.4 billion pairs of shoes last year.[1] China, Italy, Vietnam, Brazil, and Indonesia are the top suppliers.[2] The value of these shoes at the border was $19 billion, and the U.S. government collected footwear duties amounting to almost $1.9 billion on the shoes. While the average weighted U.S. tariff rate across all traded goods is 1.6 percent, tariffs on shoes begin at 8.5 percent for leather dress shoes, rise to 20 percent for running shoes, and peak at more than 60 percent for some grades of cheap sneakers.
...
Many tariffs are in place to protect American industries and jobs from international competition. But the shoe tariffs support virtually no domestic shoemaking and protect no U.S. manufacturing jobs, because America's footwear manufacturers today produce specialty and high value footwear, not the kinds of inexpensive shoes that make up the bulk of imports. The inexpensive shoes and sneakers with the highest tariffs have not been made in the United States since the 1970s.

Support the Affordable Footwear Act.

It's time to repeal the footwear tariff.



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Is Brazil changing its focus from income redistribution to income creation?

Brazil financial tax rejected, handing Lula big political defeat

Brazil's Senate on Thursday refused to renew a financial transaction tax that fills the government's coffers, handing President Luiz Inacio de Silva a big political defeat that could threaten his social programs for the nation's impoverished masses.

The vote held before dawn after months of contentious debate fell four votes shy of the 60 percent majority needed to extend the tax until 2011, meaning Silva's administration stands to lose about 40 billion reals (US$22 billion) in revenue per year.

The money is used to fund programs ranging from health care to the president's famed anti-hunger program aimed at lifting Brazilians out of misery.

The government could try to get the tax levied on everything from checks to bank transfers renewed again next year, but the measure wouldn't go into effect until three months after passage.

As a result of the vote, the tax will be lifted on Dec. 31, creating an immediate budget shortfall.

Today in Business
Fed leads drive to strengthen bank systemNorthern Rock CEO steps down earlier than plannedU.S. and China highlight need for cooperation after trade talks
The tax, known in Brazil as the CPMF, was established in 1993 as a temporary measure to subsidize the country's public health care system. It charges a 0.38 percent fee on all financial transactions nationwide.

The tax extension had already passed in Brazil's lower house of Congress, but senators who opposed the bill argued that the CPFM has elevated the nation's tax burden as government spending rose faster than economic growth.

"The CPMF is a regressive tax that penalizes the poor, without their awareness of it," said opposition Sen. Marco Maciel, a leader of the right-of-center Liberal Front Party. "We need to reject the tax in favor of a true fiscal adjustment that reduces the tax burden so that the country can grow at more robust, sustainable rates."

The CPMf, Bloomberg explains,

The tax has been in place since 1996. It accounts for about 40 billion reais ($22.7 billion) in revenue and is set to expire in December unless it's approved by the Senate. The CPMF is a 0.38 percent levy on financial transactions such as bank withdrawals.

And the problem is that the CPMF allowed the government to continue unsound economic policy:

Virgilio, of the Brazilian Social Democracy Party, said revenue from the tax allows the government to avoid needed cuts in spending and will obligate the next administration to take more drastic measures.

"With the tax, the government will continue to throw hot coals onto the fire, leaving the problems for the next president," he said.

More:

[Roberto Padovani, a senior strategist at WestLB AG in Sao Paulo] said the central bank may adopt a more prudent monetary policy because the end of the tax will increase disposable income, which may end up fueling consumption.

"The impact on domestic interest rates would be very bad," Padovani said yesterday before the vote. "The central bank will have to have a more cautious policy. It will also slow the improvement on the debt level and that would increase rollover costs."

The immediate problem is that the repeal of this tax creates a budget crisis and will affect infrastructure and social services funding.

However, by not renewing the onerous tax on financial transactions, Brazil - one of the BRICs (Brazil, Russia, India and China) four emerging giants - has taken a decisive step towards fostering economic growth and wealth creation.


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What Makes a Terrorist?

Asks Alan Kruger:

the available evidence is nearly unanimous in rejecting either material deprivation or inadequate educa­tion as important causes of support for terrorism or participation in terrorist activities. Such explana­tions have been embraced almost entirely on faith, not scientific evidence.

Kruger explains,

One set of factors that I examined did consis­tently raise the likelihood that people from a given country will participate in terrorism—namely, the suppression of civil liberties and political rights, including freedom of the press, the freedom to assemble, and democratic rights. Using data from the Freedom House Index, for example, I found that countries with low levels of civil liberties are more likely to be the countries of origin of the perpetra­tors of terrorist attacks. In addition, terrorists tend to attack nearby targets. Even international terror­ism tends to be motivated by local concerns.

Additional support for these conclusions comes from research I conducted on the nationalities of foreign insurgents in Iraq. Specifically, I studied 311 combatants, representing 27 countries, who were captured in Iraq. Although the vast majority of insurgents are native Iraqis, motivated by domestic issues, foreigners are alleged to have been involved in several significant attacks. I looked at the char­acteristics of the countries insurgents came from, and, importantly, of the countries with no citizens captured in Iraq. It turned out that countries with a higher GDP per capita were actually more likely to have their citizens involved in the insurgency than were poorer countries.

Consistent with the work on international terrorist incidents, countries with fewer civil lib­erties and political rights were more likely to be the birthplaces of foreign insurgents. Distance also mattered, with most foreign insurgents com­ing from nearby nations. The model predicted that the largest number of insurgents - 44 percent - would have emanated from Saudi Arabia, a nation not known for its protection of civil liberties but with a high GDP per capita.

The evidence suggests that terrorists care about influencing political outcomes. They are often motivated by geopolitical grievances. To under­stand who joins terrorist organizations, instead of asking who has a low salary and few opportunities, we should ask: Who holds strong political views and is confident enough to try to impose an extrem­ist vision by violent means? Most terrorists are not so desperately poor that they have nothing to live for. Instead, they are people who care so fervently about a cause that they are willing to die for it.

Read it all.

The second Carnival of Latin America and the Caribbean

Welcome! This week's posts on Latin America and the Caribbean are:

On Latin America in general:
Wealth and Nations, via Dr Sanity

Latin American Report

SOS: Truth Telling Deeply Needed for Latin America (link now corrected)

ARGENTINA:
Via Eneas of the Hispanic American Center for Economic Research, Corruption in Argentinian election - 28-October-2007 [video]

Via Siggy, Don't Cry For Me, Argentina: Jewish community welcomes new president, who has taken a strong position against terrorism and the Dirty War.

BOLIVIA:
Learning English through avatars

CUBA
Poster relates Che's dark side

"The Victims of Che Guevera" poster, produced by the Young America's Foundation, centers on a collage that uses tiny photos of those killed by Cuba's communist regime to compose the face of the Marxist guerrilla, who has become a popular T-shirt icon.

Via Larwyn, WaPo Writer Waxes Poetic for Castro Regime Control Mechanism

Castro's Cuba

Son: [Oscar Elias] Biscet is "an inspiration"; The unyielding ones

ECUADOR
The Vatican Denounces Chavez-Correa anti-Freedom Constitutional Epidemic

HAITI
Again... UN Troops Involved In Another Child Sex Scandal

MEXICO
Chucha Libre

NICARAGUA
Nica news for Nov 2

VENEZUELA
Venezuela's Constitutional Reform continues the item-by-item review

The New York Times Does PDVSA: The Perils of Petrocracy

EXPOSING THE CHAVEZ NIGHTMARE IN LATIN AMERICA

When Hugo Met Naomi

Troops Attack Venezuelan Protesters - Again

Venezuela Congress OKs ending Chavez term limits; Via Larwyn, Venezuela Circling the Drain

OTHERS LINKING THE CARNIVAL:
A colombo-americana's perspective
Babalu
Dr. Sanity
ECrisis
Heading to Retirement
The Washington Times





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Sunday shoes, a dilemma, and a Carnival

I was at Palmer Square yesterday and noticed that the Nine West store is having a sale. As regular readers of this blog probably have noticed by now, to me the combination of "shoes" and "sale" is essentially irresistible.

Nine West is carrying these,

They are marked down from $79.00, to $49.00

The plastic Nine Wests are made in China and do not make the feet or your legs look attractive. Ugly shoes never do. I tried on a pair and the rough rims of the shoe will cause a blister on your tender skin.

This particular style is an atrociously poor knock-off of the classic Ferragamo Vara style:

The Ferragamos retail for $290.00 at Neiman Marcus and at the Ferragamo flagship store on Fifth Avenue in New York.

The leather Vara is handmade in Italy.

I've had this style of Ferragamos (in black leather, not patent leather) for nearly twenty years. It is the kind of classic shoe that speaks of class, quality and conservative discernment. I believe I paid $120 or so back then, and they have been worth every penny. If there's a woman's shoe that spells "solid respectability", it is the Ferragamo Vara.

More importantly, there are two other advantages: the Vara is a most flattering shoe, and a shoe that can be worn all day.

But there's a greater issue: the issue of slave labor.

The Manolo quotes The Plumcake,

It is the mantra of the Manolo Blogs that instead of buying cheap footwear made with deplorable lack of attention to detail by whatever 8-year old Bangladeshi child was cuffed to that particular table, one must save up for the superfantastic shoes, lovingly made by handsome gruff men named Aldo who drive cool Italian scooters and get 90 minute lunch breaks.

Having had - when I was in Italy - too too many unwelcome encounters with handsome gruff men named Aldo who simply could not believe all I wanted to do was read the newspaper, eat my lunch and have my jolt of expresso by myself when I obviously could have been enjoying a blissful (at least for him) 90 minutes with scooting Aldo instead, The Plumcake has nearly talked me out of buying Italian shoes for the rest of my days.

But that's not the issue. The issue is slave labor and child labor.

We have a dilemma when it comes to child labor: The Bangladeshi economy can not distribute what it doesn't have (wealth), and in order to create wealth it must become a producing economy. At the same time, it is attempting to become a producing economy on a lowest-price-producer basis, and the cheapest labor of all is child labor.

(Please spare me the emails asking me why am I picking on Bangladesh. I am only using that country for the purpose of expedience. The same situation occurs in whatever third-world military regime and/or dictatorship you want to bring up.)

I have no illusions as to whether those children would have better lives if they were not doing factory work. They would not be in school. They would be enslaved in other ways.

At the same time, directly transferring moneys from the developed countries leads to even more corruption and exploitation. The only way for underdeveloped countries to move forward is through economic development. In developed countries child labor was not erradicated until there was a rise in the standard of living brought on by the Industrial Revolution and families could afford to send their children to school.

So I present the question to my visitors: What to do?

Would the answer lie on an emphasis on primary school education? And, if so, where to start?
-----------------------------------------------------------
Today Dr. Sanity has An Ahmadinejadpalooza of a Carnival!



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The new old China

I was reading about the Chinese yesterday threatening

that Beijing may use its $1.33 trillion (£658bn) of foreign reserves as a political weapon to counter pressure from the US Congress

if Congress presses for a yuan devaluation.

Siggy calls it Egg Drop economics, Justin Higgins focuses on China's oil shortfall, while Thomas Barnett says that "we grow up by surviving crises." Of course all of them are right: this kind of threat, absurd as it is, is not to be taken lightly.

Then there's the issue of China's hazardous exports:

I have to wonder if China's rather sudden (threatened) currency aggression is related to the vast number of shoddy and downright hazardous items that are being exported from the mainland.

When Indonesia proposed a ban of certain Chinese imports, China reacted with a small-scale trade war, as it had reacted with the US earlier. Panama, the EU, and others are now banning Chinese products.

Do the Chinese see the uproar as overreacting?

After all, they have been under a command economy for longer than most countries in the world, and they probably find no reason to meet high safety standards. Just a quick glance at how the Cherry failed safety tests (airbag? what airbag?) shows that for China, consumer safety issues hold a very low priority indeed. Very very low.

Dymphna mentioned in our most recent podcast together how the Chinese don't "get" consumer safety; their reaction was to execute the guy in charge of the Chinese Food and Drug Safety Office. It looks like the toy vendors are next.

Does that solve the problem of hazardous goods?

Of course not. But it tells you that the Chinese really are operating under an antiquated mindset. A feudal mindset.

Equally interesting is how the Chinese are buying raw materials companies all over Latin America (I believe it was Siggy who mentioned that during the same podcast). The Spanish empire drove itself to ruin by monopolizing the valuable goods from its provinces though its ill-conceived imperialist and mercantilistic policies.

It is not unreasonable then, to believe that the Chinese still haven't caught on the fact that wealth can be created by providing highly competitive goods and services in a free trade economy, the way many of its neighbors have.

Now the Chinese are lavishly celebrating next year's Olympics. You read it right, next year's. The concrete's not dry yet on all the new buildings, and they're celebrating the Olympics already. All the while, they continue to crack down on dissent.

At the same time, they showcase their modernized army. As you can read in that article, the army's purpose is to serve the Communist Party.

The army, newly modernized while still at the service of the Communist Party, will probably be at hand to prevent vehicular traffic from driving into Beijing for a few months prior to the Olympics. Otherwise the air pollution would not allow any endurance sports to take place in the city.

Be that as it may, if the Chinese believe that the Olympics, and China, will succeed after China uses any kind of 'nuclear" currency scheme and trade wars, they are even more deluded than I ever expected.

(Note: I didn't touch on the deleterious effect protectionist policies against China would have on America. Will deal with that topic some other time.)

If you enjoyed this post, please vote for it at Real Clear Politics.



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Sorry Colombia! Is now on line

Robert Mayer of Publius Pundit has just launched Sorry Colombia!

Why Are We Sorry?
On July 2, 2007, House Speaker Nancy Pelosi, Majority Leader Steny Hoyer, Ways and Means Committee Chairman Charles Rangel, and Ways and Means Trade Subcommittee Chairman Sander Levin issued a statement on Democrat trade policy rejecting a free trade agreement with our closest ally in Latin America, Colombia. According to them, it cannot be approved until "concrete evidence of sustained results on the ground in Colombia" regarding issues such as violence and corruption have been shown.

This is an apology to Colombians for the lies and incompetence of America's Congressional leaders, as well as a resource for the truth on Colombia's remarkable fight for normality.

In the spirit of Pelosi's Hoyer's and Rangel's Congressional idiocy, here's my picture:


Robert and I discussed Colombia and the FTA agreement in last Friday's podcast.

Previous post here.

Special podcast at 3:30PM Eastern: Colombia, Congress and the Free Trade Agreement

UPDATED 7/7/7
Scroll down for Monica's editorial
Monica Showalter of Investor's Business Daily, Robert Meyer of Publius Pundit, and Gateway Pundit talk to Fausta about Colombia, the US Congress and the Free Trade Agreement in this afternoon’s special podcast.

Join us!

You can listen to it here


UPDATE
You can listen to the podcast here
Monica was pressed for a deadline and Gateway Pundit couldn't make it, so Robert and I discussed the ramifications of the FTA, whether it is approved or not.
Babalu has more on the demonstrations.

Update, Saturday, 7/7/7
Here's the editorial Monica was working on (emphasis added):
Congress Holds Colombia Hostage

Free Trade: Congressional Democrats justify scrapping a U.S. trade pact with our best ally in the hemisphere on vague claims its government violates human rights. Last week, Colombia's people saw a different enemy.

It was couched in syrupy language, but it was as bad a blow to Colombia as any dealt by its enemies. The U.S. House Committee on Ways and Means, in a statement by Democrats Nancy Pelosi, Charles Rangel and Sander Levin declared the Democratic Party would deny free trade indefinitely to 46 million Colombians over a few dozen unsolved murders of union activists in the last year.

Hundreds of thousands in Cali demanded the release of kidnap victims.
The trade pact Colombia negotiated in good faith with the U.S. and which it needs to sustain its dramatic economic recovery from the ruins of a 44-year war must wait until Democrats arbitrarily decide they're satisfied with the violence level. This gives every anti-free trade Colombian thug an incentive to keep killing.

How Colombia could satisfy the Democrats was something a Pelosi spokesman told us he had no specifics about and "would have to get back to" us on. (He hasn't.)

Although Colombia critically needs a free trade pact to sustain investment, curb its illicit drug trade and end tariffs for U.S. companies, this didn't seem to matter.

Instead, Congress was looking for excuses to halt free trade. Why? For the sake of its own union backers, of course, and to curry favor with the leftist think tanks which are enraged about the success of Colombia's popular — and conservative — President Alvaro Uribe.

U.S. congressional hearings on June 28 about right wing paramilitary murders of union activists painted Colombia's democracy as a caricature of a 1970s military junta.

Congress focused on gory reports about violence there, singling out unions as martyrs with little context about the biggest detail — that the violence had fallen and 1,500 union officials were being protected by the government.

"There is widespread concern in Congress about the level of violence in Colombia, the impunity, the lack of investigations and prosecutions, and the role of the paramilitary. Issues of this nature cannot solely be resolved through language in a trade agreement," a Democratic Party statement read. "Consequently, we cannot support the Colombia FTA at this time."

Well, here's a little context: This year, the number of union officials killed in Colombia was three. Last year, it was 72. Ten years ago, it was 275, according to Amnesty International.

In Congressional testimony, Human Rights Watch lumped all murders of union officials since 1986 together, dishonestly producing a scary 2,515 total. It gave no indication of progress.

But in Colombia, only 4.3% of workers are unionized, union deaths are barely an issue and paramilitaries have been dismantled.

Millions of Colombians instead issued a people's cry last Thursday against the more serious enemy of their country's well-being — the Marxist FARC narcoterrorists. They marched through the streets of Bogota, Medellin and Cali — calling for an end to the violence from the radical left. Led by Uribe himself, the first million-plus protest in Colombia in decades was triggered by the cold-blooded murder of 11 legislators by FARC, who held the elected leaders for five years before killing them.

In taking to the streets, Colombians sent a message to FARC that its hostage-taking, murder of people of all kinds, narcotrafficking and war were the real enemy. Rallying behind their enormously popular president, they signalled to the world that they are squarely behind his leadership and his fierce struggle against Marxist terror.

This is the real story of Colombia — a nation struggling against the odds to forge a better future through free trade and democracy. Maybe Democrats ought to start thinking about what they really oppose when they try to paint Colombia as a banana republic and deny it the free trade it's earned.

Contact your Congressman/woman and urge them to grant Colombia FTA status.

Sports, drugs, oil, and networks: all in Hugo's trip

UPDATED
While I was away on vacation Hugo's been touring, so it's time for the freshest news on Latin America's biggest tinpot tyrant:

Sports
Venezuelan Fans Embarrass Hugo... Chant "Freedom" at US Match. Let's go to the videotape:

Not Sitting Still For Dictatorship

Drugs
Venezuela Becomes Cocaine Conduit

Of 46 suspected drug flights detected in the Caribbean by U.S. surveillance in the first four months of 2007, all but six originated in Venezuela.
...
But as Mexico cracks down on land shipments, and authorities get better at high-seas interdiction - the helicopters in the May 12 bust came off a British ship in the area - Venezuela is increasingly providing an alternative, counter-drug officials say.

Most Europe-bound cocaine is believed to pass through Venezuela, sent aboard ships and jets - 727s, DC-8s and Gulfstreams - to west African nations where enforcement is often weak and easily bribed, Hathaway said at the command's headquarters in Key West, Fla.

Oil
Venezuela oil loss put at $4.5bn

The Chavez government is taking majority control of operations
US oil giant ConocoPhillips has said that a decision not to accept a minority stake in its operations in Venezuela may cost it $4.5bn.

The Economist: Exeunt Exxon and Conoco

Nevertheless, some Venezuelans worry that their country's oil industry is going the same way as that of Iran, whose government is one of Mr Chávez's closest allies. This week, as Venezuela's president was due to visit Tehran on a tour that also takes him to Russia and Belarus, Iran imposed petrol rationing. Admittedly, Iran faces sanctions, and Venezuela does not. But national sovereignty does not automatically fill the tank.

Investor's Business Daily focuses on how the markets took the news: Chavez's Anaconda Embrace

Venezuelan dictator Hugo Chavez has expropriated $4.5 billion in assets from two U.S. oil firms. It's an ugly loss, but they will live. What's in doubt is Venezuela's future.
...
Markets Wednesday offered a hint of what's ahead, with Exxon's stock ending 2% higher, leading the market upward on a down day, and Conoco ending flat.

Bear in mind that Exxon lost nearly a billion dollars in Venezuelan investments, and Conoco lost four times that much, amounting to 10% of its proved reserves.

Yet credit agency Standard & Poor's declared Conoco's rating undented by the move, and Exxon said it would "move forward," probably signalling a bid to recover some of the value of its assets in U.S. courts.

Suddenly, Venezuela's U.S. Citgo refining and marketing network has become a juicy target.

But Venezuela is another story. Its currency, the bolivar, and its sovereign bonds both plunged as Exxon and Conoco announced they're leaving.

Most Venezuela watchers saw a link. Standard & Poor's, for instance, downgraded the country's outlook, citing "a highly negative climate for investment, which results in virtually no foreign and private investment."

Venezuela has strict capital controls on its currency, so the bolivar trades only in the local black market. Its value to the dollar fell from 4,050 to 4,180 yesterday as dollar demand for capital flight rose, Bloomberg reported.

Even the "official" rate of 2,150 bolivars to the dollar signals ruinous inflation, likely well above the most recent inflation rate of 19%. A lack of dollars has emptied store shelves of imported goods, causing food prices to shoot up.

This is a bad sign for Venezuela. Markets basically shrug when two major investors leave, while brutally punishing Venezuela's government for its treatment of its U.S. investors. Chavez's regime is like one of the country's anaconda snakes, squeezing the very life out of Venezuela itself. Sadly, it's part of a long downward slide that shows no end.

Indeed, Venezuela's Citgoing Nowhere.

And yes, I have mentioned before that the Venezuelan economy collapsed a couple of decades ago when the oil prices dropped.

Hugo's network
Chavez in talks with Iranian ally

This was Hugo's third visit to Iran during the presidency of Mahmoud Ahmadinejad, but he also visited old friends,

During his latest visit, which kicked off on Wednesday, Chavez met with Russian President Vladimir Putin and Belarus counterpart Alexander Lukashenko and urged a global revolution against Washington.

He has also discussed possible purchases of submarines and other defence equipment from Russia, arguing that these are needed to defend his oil-rich country against the United States.

Earlier this month Iran welcomed Nicaraguan President Daniel Ortega, a Cold War foe of the United States. Tehran has also boosted ties with other countries which have frosty ties with Washington, notably Belarus, whose president has been condemned by the European Union for rights violations.

More on the Iran visit:
Iran seeks stronger ties with Latin America
Hosseini says Iran, Venezuela to sign 20 agreements, MoUs
Chavez Prefers Russian Oil and Lenin

Both Venezuela and Russia have revisited contracts signed in the 1990s with major oil companies, and slapped back tax claims on private companies.

While we ponder that, read Austin Bay's post on Putin's anti-missile tantrum - expect to hear similar rumbles from Hugo sometime in the future. It would get him the attention he craves.

Publius Pundit's posts on Russian Hypocrisy Knows No Bounds has a whole photo gallery of Hugo's buddies. Start with this one:

Yup, that's Hugo Chavez and Moscow Mayor Yuri Luzhkov laughing and holding hands like lovers whilst they gaze upon a spectacle of Russian folk dancing as part of Chavez's state visit to Moscow.

Meanwhile, The Devil's Excrement posts that the Putin dominated Duma voted against receiving Chavez.

And then there's this
Via Sigmund, Carl and Alfred, Middle East should look to Latin America: Tariq Ali

The Middle East lacks the social vision of Latin America which is currently undergoing a political revolution and successfully challenging American foreign policy, Tariq Ali told a sold-out audience at Sydney Ideas on Tuesday night.

Pointing to the success of Venezuela's leadership under the seven-times elected President Hugo Chávez, the London-based historian, political campaigner and prolific author said: "Solidarity outside Venezuela is as important as solidarity inside Venezuela."

According to the author of Pirates of the Caribbean: Axis of Hope (2006), a new level of unity lead by radical new leaders has had a "massive impact" on South America, and the region has broken down the isolationist policies driven by the United States through its ban on Cuba.

(For background on Tariq Ali, here's a transcript of his debate with Christopher Hitchens from December 4, 2003.)

Will Hugo outdo his own $1,000,000,000 shopping tour from last year?

We'll find out soon enough.

For now, he's not going to Mercosur, and is even saying Venezuela may withdraw its bid to join the Mercosur trade bloc due to objections from congressmen from Brazil and Uruguay.

Update
Gustavo Coronel writes in Petroleum World,

This situation in Venezuela could trigger other, even more dangerous developments. Hugo Chavez has been losing much ground lately, both inside and outside Venezuela. His “revolution” is doing badly at home and abroad, due to his numerous errors and his undemocratic style of ruling. In Spain, Chile and Brazil he has lost most of the goodwill he had been able to accumulate in the past. The Democratic Party leaders in the United States have recently supported a resolution condemning his aggressions against freedom of expression. He is aligning his regime, more and more, with failed states, such as Cuba, Iran, Belarus, Zimbabwe and Syria. Right now he is in Russia, trying to recruit Putin to form a global alliance against the United States. I consider that Hugo Chavez is, at this moment, one of the most dangerous political leaders in the planet. If he sees that his political situation becomes untenable he could well resort to a Plan "B".

What could this Plan "B" look like? It could consist of provoking a global political crisis by starting a violent, military action against a neighbor or against a U.S. aircraft or ship in the Caribbean area. This could be followed by a cut of oil supplies to the United States, which could be particularly dangerous if Iran decided to join him in a boycott against the U.S., while Russia sat on the fence in apparent neutrality and vetoed or delayed any action in the Security Council of the United Nations. I believe Hugo Chavez is determined to go down in history as someone who went well beyond the limits of his native state of Barinas and made a big impact in the world, and he no longer cares if this impact will be good or bad.

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One-Way U.S. Trade For Ecuador?, asks IBD

Ecuador's president, Rafael Correa, who wants to dissolve his country's Congress by an assembly with powers to rewrite the volatile nation's constitution, a la Hugo, is knocking at our door asking for free trade:

Presidents Rafael Correa of Ecuador and Evo Morales of Bolivia, are both running notoriously anti-American regimes. They have blasted the U.S. as a capitalist oppressor, and said their whole national mission is to slip its imperialist shackles. Needless to say, they've been no friend to the U.S. in the United Nations. Worse yet, they've forged alliances with some of America's worst enemies, like Iran and Cuba. They've also grown increasingly slack and obstructive in even fighting the drug war that plagues the entire Andean region. Morales has increased coca production by 8%, keeping the street price of cocaine steady even as Colombia's production falls 9%. Ecuador has emerged as a major drug transshipment point and money laundering center - something that is evident by its well-developed illegal immigrant smuggling routes to the U.S., which are the region's best. Ecuador has announced "irrevocably" that it will shut down a tiny U.S. military base at Manta port that tracks drug planes, in order to kick out the U.S. imperialists.

But in exchange for fighting the war on drugs, they've both been recipients of large amounts of U.S. aid in 2006 - $120 million in Bolivia's case and $500 million in Ecuador's. Along with this aid, which is both humanitarian and technical, they both have preferential "ATPDEA" trading privileges to sell their goods duty-free in the U.S. without having to reciprocate the favor to American firms.

With a setup like that, they can, in practical terms, reject and obstruct the idea of real free trade, which would ask them to open their markets to U.S. competition, as long as they retain their current trade privileges. Thus, America's generosity to them has provided a platform for them to condemn real free trade with impunity. But under the radar, they feverishly want a continuation of these one-way US trading privileges, which is why they're suddenly telling America they never really meant it about the 'imperialismo' charges and all that as the expiration beckons.

Investor's Business Daily has more:
Foreign Relations: Should the U.S. offer preferential trade privileges to hostile anti-American regimes that view them as cheap handouts? Offering nothing in return, Ecuador thinks so. We are less sure

The U.S. doesn't ask much from Ecuador. Sandwiched between Colombia and Peru, Ecuador has only provided a tiny "forward operating base" at the port of Manta, with 300 U.S. troops conducting aerial surveillance to keep Colombia's FARC Marxist narcoterrorists from bringing war to Ecuador as they have to their own country.

Instead of helping on that front, Ecuador now vows to shut down the Manta base and let the skies there go unpatrolled.

The Manta shutdown ends any rationale for APTDEA. So does Correa's refusal to recognize the FARC as a terrorist organization or to chase its operatives from Ecuadorean soil.

Worse, Ecuador has harassed Colombia with lawsuits as it tries to eradicate coca fields, making Colombia's war that much harder.

Read both.

In other, "Gimme, gimme!" news, Castro Says U.S. Must Change Its Cuba Policy `Unilaterally'.
But, is he still wearing his jogging suit?



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Banks are booming in Venezuela, says the NYTimes

Boom Times for Banks in Venezuela

Record public spending, fueled by high oil prices, is flooding this flourishing economy with cash. Government currency controls are trapping much of that money in the country. The extra cash, in turn, is increasing consumer spending. The banks are taking advantage of that by handing out scores of loans, advertising on flashy billboards across Caracas.

And with interest rates lower than the rate of inflation, "you would be stupid not to take out a loan right now," said Richard Francis, a director of sovereign ratings at Standard & Poor's.

Here's why: If the 19% + rate of inflation is greater than the interest rate on your loan, you're better off using a loan for paying your current expenses; that is even more so if you can find the way around foreign currency controls and investing your money in financial assests in other currencies like the dollar and the euro.

Or, if you can't invest overseas, you'll indulge in discretionary spending: a Rolex, a Mercedes, a boob job:

In the meantime, customers have been taking advantage of the expansion in credit. Betzaida Guerra, 43, for example, said she discovered in a newspaper ad last year that a bank could finance an operation she had long wanted but could not afford. Within weeks, she secured credit for the nearly $5,000 surgery to enlarge her breasts.

"I was excited," said Ms. Guerra, an accountant from a Caracas suburb, who has nearly finished paying off her 12-month loan. "I saw the advertisement and thought, 'The way out has arrived.' "

The expanded use of credit is apparent in upper-middle-class Caracas neighborhoods like Altamira, where Gabriel Jimenez was getting ready to drive his new black Mercedes-Benz C200 sedan off the lot. Mr. Jiménez had bought the same model without financing in 2000, but this time he chose a 48-month loan to pay off most of the cost at 19 percent interest. The Venezuelan-owned Banesco approved his loan in only 72 hours.

"The process is really easy," said Mr. Jimenez, a divorce lawyer, before hopping into the driver's seat, smelling the new car’s scent and playing with its gadgets. "Before, interest rates were so high that it wasn’t worth it."

The problem is:

But bank directors say these advantages and current revenue are more than offset by government regulations that are making the sector more vulnerable. Banks are required to commit 32 percent of their loans to specific areas of the economy, including agriculture, housing and microcredit. Coming changes in the country's banking law may increase that percentage, said Ricardo Sanguino, president of the National Assembly's Finance Commission.

"Here, the norms change," Mr. Sarkissian said. "Every day they give us more news, a new regulation. That is constant."

The central bank, which has lost most of its autonomy from the government, announced in April that it would force private banks to double the amount of cash they deposit in their reserves, to 30 percent, in an effort to curb inflation. In the same week, Mr. Chavez ordered Fogade, the country's bank deposit protection fund, to transfer all its assets to the government, which would then distribute the cash to the poor.

Critics also say that Venezuela's inflation rate of more than 19 percent, the highest in Latin America, could force the government to raise interest rates. That, in turn, could make it more difficult for borrowers to pay back their loans.

There you have it folks:

• bank overregulation,
• currency controls,
• the seizure of the country's bank deposit protection fund by the government,
• the highest rate of inflation in Latin America
• and a large number of unsecured loans

Something tells me I'll be posting bad news about Venezuelan banks sometime in the future. There'll be a bust, and it won't have to do with Ms Guerra's.

The Devil's Excrement has an excellent post on the current state of the Venezuelan economy:

To put the deficit in the balance of payments in perspective, it is the largest of the last ten years, at a time when oil income is booming. What this means is that once again, the economy is being run on the back of the oil cycle and it is simply oil income which is providing growth, while internal variables continue to deteriorate. Nothing new on the mishandling of the Venezuelan economy, all previous recent crisis in ‘82, ‘89, ’94 and ‘02 were not that different. What is probably different this time around is that the huge imports are destroying both agricultural and industrial capacity, as local inflation and fear of controls have limited investment and made local production less competitive.

In the end, the balance of payment numbers indicate that devaluation is looming in the horizon, no matter what the Government says. Unfortunately, the more it is postponed, the larger it will be and the bigger the crisis facing the country as these adjustments always lead to a contraction of the economy and it takes time for people to recuperate their purchasing power and for the economy to settle.

In the separate universe of Venezuelan politics, government officials point to the booming banks as an indicator of a healthy economy, while at the same time Chavez urges his followers to show they are "good socialists" by sharing their riches with the poor, just as he does.

He's setting the example by donating the proceeds from his prize money from the Qaddafi Human Rights Prize. I kid you not.

In other Venezuelan news, Hugo's going ahead with the purchase of Russian subs. Whose engineers and technicians will handle them, one can only guess, but I expect Putin wouldn't sell them to Hugo unless he kept a finger in the pie, so to speak.

Fred Thompson has an article in Townhall, The Castro/Chavez Axis

Last week, when Hugo Chavez officially killed press freedoms, even a big part of Venezuela's far left seemed to realize that they’d created a monster. Unfortunately, it may be too late. He's already packed Venezuela's high court, legislature and military with his loyalists. Right now, he's operating without any check or balance.

During his rise, Venezuelans say that Chavez spent hours a day on the phone with Castro. Additionally, Castro sent thousands of his Communist apparatchiks to help transition Venezuela from a free county to a totalitarian state.

Without Cuban “help,” Venezuela wouldn’t be in the terrible mess it is today. Castro, after all, has been at this since the 1960's and he's given Chavez the benefit of his experience.

There's one big difference between Venezuela today and Cuba then, however. Castro needed Soviet aid to push his so-called "revolution." Chavez does not. One of his first moves was to bolster the Cuban dictatorship with oil subsidies -- a hundred thousand barrels a day to the tune of two billion dollars a year. One of the main factors preventing Cuba's transition towards democracy is Venezuelan oil wealth. On June 26, that wealth could increase significantly, as Chavez says he’ll nationalize the petroleum industry on that date.

The Venezuelan and Cuban axis of influence operates openly in Bolivia, Ecuador and Nicaragua. They meddled in America's free trade negotiations with Costa Rica and support anti-American candidates and movements all over Latin America. Chavez proved and he still believes that democracies can and should be overthrown by force when he led an unsuccessful coup attempt against the democratic Venezuelan government in 1992. After his pardon, he lived in Cuba for two years.

Today, he's building up Venezuela's military strength rapidly -- claiming it’s to prevent a U.S. invasion. Perhaps the biggest reason for concern is that Chavez has formed strong bonds with Iranian President Ahmadinejad.

In this new era, you can't detect missile technologies with U-2 over-flights -- as did the Kennedy administration. No one seriously doubts, though, that Chavez would love to get his hands on nuclear weapons. We should also remember that Cuba sold Iran the means with which to develop biological weapons. Recall that the main suspect in the recent JFK Airport terrorism plot was arrested on his way to Caracas to get an Iranian passport.

America is facing a growing threat from Latin American totalitarianism and we need to call on those who are most familiar with it to lead the resistance. And the least we can do is free Radio and TV Marti and let them fight for freedom in the realm of ideas.

Update: Latinos4Thompson translated the article into Spanish.

The WaPo states that Venezuela is a tier-two country when it comes to human trafficking, which means that its approach to trafficking is deemed deficient but not enough to face immediate U.S. sanctions. Venezuela News and Views posts on the rising crime rate:

The kidnapping industry is flourishing, in particular in the Western area of the country. Now the problem is a calamity in Tachira and Zulia, but other states such as small Yaracuy are reporting monthly kidnappings (not to mention those that are not reported since quite often the families think that they’re is collusion between police and kidnapping gangs and prefer not to say anything and negotiate on their own). When kidnapping becomes almost an open air industry you know that respect for human life and condition is reaching new lows. What else can hide behind that? The Faddul brothers crime is a constant reminder that life in Venezuela is everyday cheaper and cheaper. People willing to collaborate on such activities soon will have no problem selling children and women into prostitution.

Mario Vargas Llosa realizes that Chavez is sinking Venezuela into bankruptcy.

And Vargas Llosa is right. Only that it's not just monetary.



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Gift from the sea, and today's items

John Edwards continues to find out about poverty: John Edwards Stakes Claim on Pirate Booty

Gifts from the sea, alright.
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Irrational Exuberance — Version 2.0
I'd say that right now would be a good time to take some profits...
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Donald Luskin aks WHAT'S THE ULTIMATE UNINTENDED CONSEQUENCE OF ECONOMIC MICRO-MANAGEMENT?
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If China sharply revalued the yuan, as American politicians are demanding, it could actually hurt the United States and help China, says The Economist.
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Via Irwin, Midwest Lutherans Largely Reject Violence
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Via Maria Blanco, TV Liberty has a video tribute to Communism,
Warning: disturbing images

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In the animal kingdom,
The Artic Monkeys are hot, and here are some apes gone wild

More pubescent apes gone wild (h/t Siggy
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Happy anniversary to bRight&Early Blog. He celebrated with a bright and early podcast.